Do credit rating agencies matter too much?

It's six days from August second, and the US congress still hasn't passed a bill to raise the debt ceiling.  If the debt ceiling isn't raised by the deadline, the American government won't have the money to pay its obligations, and it may default on bond payments and other financial responsibilities.  This may cause credit rating agencies to lower the debt rating for US debt.  Some agencies may lower America's rating if the debt ceiling is increased but no comprehensive spending solution is passed in congress.  Markets will likely react if the rating on American debt is lowered.

The question is: why?  What do the rating agencies know that the investors and public at large do not?  The answer seems to be: nothing.

• Considering the market is mostly efficient, why would traders change their attitude about US debt simply because a firm like Standard and Poors downgrades its outlook on American debt?
• Investment banks already have their own ratings departments, so if anything, S&P may confirm what the i-banks already know.
• Obviously the credit ratings don't change the fundamental properties of the debt instruments, such as interest rates, maturity dates, etc.
• Can credit rating agencies even be trusted?  Remember the housing bubble and mortgage-backed securities?  How about Enron's top notch rating less than a week before the firm went bankrupt?

It will be interesting to see what role credit rating agencies have on market prices.  Let's just hope we don't have to venture down that path.

New strategy in dealing with spam

Why can't the spam problem be solved?

Each day, I receive roughly 200 pieces of spam in my primary email account's inbox. The messages range from the typical Nigerian scams to those that contain links to online pharmacies.  Each email costs fractions of a cent to send, and the Internet is a large place, so it's easy for spammers to relocate after their IP address is blocked by most popular email services.  Perhaps the spam problem could be solved by taking more drastic measures, and by creating incentives for the operators of networks to be responsible for content originating from their gateways.

When my mail server receives spam (software-based filters mark an email as spam or 'ham'"), it then knows that subsequent messages from that IP address range are likely to be spam.  My mail server has software that will start rejecting email from "spammy" IP address ranges, so then I don't have to see the spam in my email client.  More or less, this is typically how mail servers deal with spam.

What if we took this approach to another level?  Instead of blocking email from spammers at the application level (mail server software), why not put these IP ranges on deny lists in border routers at the transport/network layer?

Blocking large ranges of IP addresses at the network level would help in multiple ways.  First, it would cut down on the need for mail processing, so large ISPs and firms that process millions of pieces of mail a day wouldn't need as many email servers.  Second, it would cut down on the amount of spam that reaches email clients, which results in time saved for users.  Third, and most importantly, it provides an incentive for ISPs and data center operators to get rid of spammers.

Here is how the system currently works.

1. A spammer using Sprint's business-class DSL connection (uncapped port 25) sends unsolicited, spam-like correspondence to multiple Gmail accounts.
2. The Gmail servers mark the emails as spam, and will probably start rejecting all mail from that IP address range for the next week or month.
3. The spammer continues spamming, and months later, after millions of pieces of spam have been sent, Sprint cancels the account due to complaints from various email providers.

Following is a high level example of how my idea could work.

1. A spammer using Sprint's business-class DSL connection (uncapped port 25) sends unsolicited, spam-like correspondence to multiple Gmail accounts.
2. The Gmail servers mark the emails as spam, and send a message to all Google routers to not accept ANY Internet traffic from the IP address range in which the offending DSL connection resides.
3. Numerous Sprint DSL users can no longer access YouTube, Gmail, Google.com, and other sites that are owned by Google.
4. Angry users flood Sprint's support lines, confused as to why they can not access their favorite websites.
5. Sprint technical support representatives discover that part of their network has been blocked by Google's routers.
6. Sprint techs contact Google's techs, determine the offending IP address range, get rid of the spammer, and ensure Google that the spam problem has been solved.
7. Google allows Sprint customers access to its network and services.
8. The spammer, feeling dejected after only being able to spam for an hour or two, is forced to look for another line of work.

Large email providers could band together and share blacklists, resulting in even more pressure on ISPs.

I really believe in my idea and am curious if anything like it has ever been tried.  In time, I would like to develop a proposal for such a system.  For now, I will continue to wear out my mouse by clicking the "Delete forever" button in my Gmail account.

Five Guys and interior design strategy

This last weekend I visited Five Guys Burgers and Fries for one of their choice cheeseburgers.  My favorite thing about the chain is that the burgers can come with mushrooms and thick, savory bacon.  My least favorite thing is that old 80's rock 'n' roll music blares from speakers throughout the restaurant.

Speaking of aesthetics, I noticed the walls were covered with framed magazine stories and newspaper clippings that commend Five Guys as having the best food around.  How did they find such a diverse collection of accolades with which to plaster their walls?

Once upon a time, the first Five Guys opened in Arlington, Virginia, a city that borders Washington D.C.  Food critics were invited in, reviews were written, and the good reviews eventually made their way onto the walls of the restaurant.  In time, new restaurants opened, and when they were, the reviews for the Arlington location were reproduced and hung on the freshly painted walls.  Food critics, like other individuals, are driven by ego needs, and when they visited the new stores, they realized their name could be on the wall if they authored a positive review of a Five Guys burger.  You know what happened next.

This is only a theory of mine, but to sum it up, reviewers are incentivized to create positive reviews of Five Guys.

Price premiums because of social missions

So a man walks into a Starbucks and asks "do you guys have any non-fair trade coffee I could buy?  I don't care about coffee bean farmers and besides taste, only care about the price of my coffee.  And what's up with this Ethos water?  Do you have regular, not-so-caring water for sale?"

Can the social mission of companies create an adverse effect and cause consumers to not purchase their products?  Maybe someone likes a particular pair of Tom's Shoes but while wearing them at a bar doesn't want to be approached by hipsters striking up conversations about poor children in third world countries.

I purchase Ethos water because it's convenient to do so.  Of course I pour it into a less conspicuous bottle, like an Arrowhead bottle, once I get back to my car.  I don't want people thinking I'm trying to conspicuously display my care for a cause.  It's kind of tacky in a "look at me, I'm awesome" way.

Perhaps firms should not be so up front about their social missions.  In reality, I am a socially conscious individual and happen to donate time to good causes.  I just don't need the world to know it.

Bulk quantities and shopping

Like most other men, I don't like shopping. Grocery shopping is a chore. I can't tell the difference between brands and the value of spending more on certain brands. How do otherwise rational individuals justify spending more on branded salt, sugar, or other commodities? On the flip side, would I ever purchase Walmart-brand beer (when is the last time you saw "generic" branded beer anyway)?  Then there is the gray zone in the middle, which is the area where most products fit.

Buying in bulk helps alleviate some of the stress of the shopping experience.

• I buy in bulk quantities so I can put off making a decision about my next purchase of the item. Stress results from having to choose, and having to make fewer choices leads to a less stressful experience, as does having to make those choices less often.
• The salience built by enjoying one product offering of a brand can lead to easier decision making when it comes to purchases of other products.  I enjoy Del Monte canned fruit and honestly believe the fruit is better than store brand offerings.  I would be more likely to purchase a Del Monte fruit juice product, or maybe even a Del Monte motorcycle (okay, I admit that is a stretch, but the fruits have never failed me!).
• Buying in bulk means I don't have to go shopping as much.  This point is obvious.  However, it also means that I will probably have in my kitchen whatever I am hungry for.
• Marketers should love me. By purchasing in bulk, products' brand awareness is further strengthened by virtue of me having to see the product in my fridge or cupboard for a longer period of time.  This also benefits me the next time I go shopping: purchasing choices are easier to make because I have had a long time to experience particular brands.  If I enjoy a  particular product, brand salience is built and the decision to purchase the brand again is an easy one.  If I don't enjoy a product, I will choose another brand the next time I go shopping.  The problem here is that I might become hooked on an inferior product and never know it.
• I like spending money and buying large quantities of products.  There's nothing like marveling at a full fridge and packed pantry after a successful shopping experience.  Who else feels empty inside after leaving the grocery store with only a bag or two?

In other news, my MBA buddies and I have made it to the next round in the Notre Dame McCloskey Business Plan Competition!  Our plan focuses on bringing grocery stores to under-served inner city neighborhoods.

Four Loko and blackouts

While at an area liquor store last week, I decided to pick up a can of fruit punch flavored Four Loko. I just had to try it, give all the hype in the media regarding the beverage and its potent toxicity. I poured half of the 24 ounce beverage in a glass and threw the other half away, just to be safe. At 12% ABV, I could not taste the alcohol whatsoever. The drink tasted like carbonated Kool-Aid.

Light beers usually contain about 4% ABV, so drinking one 24 ounce Four Loko is like drinking six light beers. I would argue that consumers black out because Four Loko is so easy to drink, not because of the caffeine and other stimulants. People are not used to these easy-to-drink beverages. Usually the taste of alcohol is present as a signal to the imbiber of the beverage's strength.

While caffeine may suppress feelings of intoxication, I would blame the 12% ABV first. Any drink that can be chugged that has the alcohol content of wine is dangerous based on its ABV alone.

Handwriting

Why do females seem to have better handwriting than males?

Societal norms promote the spreading of illness

I was in class last week and noticed that a friend appeared to be under the weather.  His face was red, his nose was runny, and he was coughing and sneezing.  So I asked him if he was feeling alright, to which he replied "Man, I have this killer cold.  It really sucks."  If he is sick, what is he doing in a 8' by 12' team room with three other classmates?

The answer is simple.  The rules we live by promote the spreading of illness and disease.

• The person who stays home due to illness is often labeled a wimp and may be considered a deviant.
• Most professors drop a student's letter grade by one letter if the student misses more than one class session, regardless of illness or other factors.  Some professors even penalize MBA students who miss school because of a job interview, though that is a rant best left for another post.
• An individual who is ill may feel forced to go to work or school due to a misguided sense of utilitarianism.  Someone who is sick and works as part of a team may feel that not going to work will harm overall output, though if he gets others sick, those others may get others sick, and then those people will get even more people sick, etc.  It is better to stay home and to telecommute if needed.
• Ethically speaking, someone who is sick may feel they have a duty to perform as normal, though duty-based ethics does not consider outcomes.
• Some people believe that sleeping less than eight hours a night makes them awesome.  I have friends who will proudly declare they only slept for four hours the night before.  I then jokingly explain that my high amount of human capital allows me to be prosperous while sleeping ten hours a night.  In all seriousness, scholars from prominent universities claim that "getting fewer than seven hours of sleep per night has been associated with a risk three times higher of developing an infection when exposed to a rhinovirus, compared to those who sleep more than eight hours per night."

Maybe one day our societal norms will change, and we will scorn those who choose to visit public spaces while ill.

Sources

Sleep habits and susceptibility to the common cold - http://archinte.ama-assn.org/cgi/content/abstract/169/1/62
Stopping the Spread of Germs at Work - http://www.cdc.gov/germstopper/work.htm
Feeling Sick?  Stay Home - http://shiftingcareers.blogs.nytimes.com/2008/02/12/feeling-sick-stay-home/

Parking lot schadenfreude

What a great movie!  The plot was plausible, the guns actually ran out of ammunition after being fired for 15 rounds or so, and the film didn't star Seth Rogan.  As I walk through the parking lot, wait... what is this?  Someone has the audacity to drive 15 feet behind me, matching my speed, and think they will not be noticed?

It's time for parking lot schadenfreude!  Or, as I like to think, it's time to waste someone's time because they are shamelessly breaking what I believe to be a cultural norm!

Have you ever realized you are being followed by someone who wants to park in your spot once you leave the parking lot?  Follow one of these simple steps to turn their pain into your joy.

• Walk very slowly.  This is an easy one.  If you feel insecure about your turtle-like pace, pull out your cell phone and pretend to be text messaging.
• Simply stop walking.  If I happen to be packing, I'll turn around and stare at the driver with a look of confusion or disgust.
• Walk at a normal pace but stop abruptly every n feet.  This technique is similar to one used at stop lights when someone stops right on your tail and where you creep forward a foot, stop, creep forward a foot, stop, etc.
• I call this one the double head fake.  Pull your keys out and pretend to unlock a random car's door.  The driver will think they've hit the jackpot if you do this as soon as you are being followed.  After fiddling around with your keys for a moment, cut through the parking lot to another lane, effectively nullifying all the work the driver had been doing by following you.  This leaves the driver supremely confused.
• Cut through the parking lot to where the driver has to "loop around" to park in your spot.  Then approach a car that is close to the front of the establishment and pretend to unlock the car's door.  Hopefully this will trick the car that was following you into quickly driving through the lot in an attempt to park in your supposed spot.  Once the car is almost to your decoy car, walk back to your original isle and continue heading towards your car.  This is a take on the double head fake and can be repeated as necessary.
• Turn the tables on the driver.  Turn around, walk behind their automobile, and follow the car that was just following you.  That'll show 'em!
• Behave normally, walking to your car at a standard pace.  Once you get to your car, start the engine and simply sit in your car.  What's the hurry?  Sit there until the driver tires of waiting and moves on.  Then you back out and drive off!  Bonus points if, when you first notice them, you wave them on and jog to your car, making the driver think you are trying to give them your parking spot.  Additional Bonus points can also earned if you start the car, wait a bit, and then get out and walk back towards the establishment which you originally left.
• Walk past your car, and then after you have sufficiently advanced beyond your car, turn around, walk to your car, and hop in.  If the stalker backs up to nab your spot, employ the previous method.
• If the parking lot is small, walk slowly down the isle and then straight out of the parking lot.  Pretend you use public transportation.  This usually annoys drivers, as the spent cost of following you could have been used on stalking someone else.  After a while, walk back to your car.  Employ the technique two bullets up if the driver spots you getting into your ride.
• Wave at the driver while smiling from ear to ear.  Pretend the driver is your biggest fan.  Do this while standing still or while walking backwards.
• Walk over to the driver and ask if he needs directions.  If the driver says he wants your parking spot, say "oh, okay", and then follow one of the other steps.
• Start to dance.  A variation of this is moving in front of the car that is following you and dancing, making it impossible for them to drive forward.  Chris Angell or any other contributors of Boundless Contemplation will not be held liable for damages incurred while standing in front of automobiles.
• Walk as if you are incredibly intoxicated.  Sway back and forth, pretending to almost fall.  Stop at a random van or truck and sit on the bumper for a few seconds.  Once you get to your car, pretend you're about to throw up.  Feel bad if the person gets out of their car and cares that you may be ill.
• If you're brave, while facing the stalker, stand in one spot and do that hips-out hips-in movement with your arms outstretched that makes it look like you're having air-sex with a ghost.  Don't forget to occasionally slap the backside of your invisible partner.  Notice the driver's reactions.  Success!

Keep in mind the ethical implications of parking lot schadenfreude.  For example, you shouldn't remove car keys from your pocket in an attempt to trick people into thinking you're about to back out of a parking space unless a driver is already stalking you.

I am eager to hear of other parking lot schadenfreude techniques.  The comments section is open!

Fads

Fads have come and gone. Some fads everyone noticed, where others were experienced only by certain age groups, socioeconomic classes, or otherwise experienced by certain segments of the population. Following a some I remember from my life.

Is it pronounced "stew-sea" or "stuh-sea"? In six grade, we used the former when speaking the brand's name. Stüssy is a clothing line that has been around since the late 80's. Back in 1991, when I was in sixth grade, the last thing on my mind was fashion. What was on my mind? Well, probably rollerblading, video games, and Legos, but definitely not fashion, girls, or my self image. Anyway, the Stüssy brand hit us like a Mack truck. First, a couple influential sixth grades started wearing the brand. The next thing I knew, it was imperative I owned an entire wardrobe consisting of Stüssy shirts. It was the logo that was important. It started off in November with one red Stüssy shirt. Shortly thereafter, I managed to strong arm my mom into purchasing me another. My social status started to climb. However, after Christmas break, everyone came back to school wearing Stüssy shirts. Now the dorky, awkwardly tall girl was wearing Stüssy, and so were her dorky friends. Stüssy was no longer cool. I didn't wear any of my Stüssy gear after I left sixth grade.

You may not have heard of Stüssy until reading this post. However, one brand I bet you have heard of is Von Dutch. Von Dutch Originals, LLC, formally became a corporation in 1999. The founder, Kenny "Von Dutch" Howard, started to establish himself as an icon during the 1950's. He was an influential car customizer and gave much to the hot rod movement as a painter, pin striper, and letterer. In sum, Kenny Howard was a pretty cool guy. He died in 1992, and after that, the Von Dutch name was sold off.

Time passed, the company started selling clothing and accessories, and in 2002, the Von Dutch trucker hat hit the scene. As I recall, rocker Tommy Lee was one of the first celebrities to wear the Von Dutch hat. Fred Durst, Limp Bizkit's front man, was also an early wearer of the brand. Suddenly the Von Dutch brand was associated with famous tough guys. Justin Timberlake, in desperate need of tough-guy-ness, is seen wearing the hat. Then Britney Spears makes her way on the bandwagon, sporting various brand gear. Shortly after the hat was widely adopted by stars of all stripes, the hats started to be seen at parties I attended. They were mostly worn by the bimbo girls that frequented our kickbacks. Then, after a few years, the hat and other brand items are nowhere to be found.

Needless to say, the brand's adoption by every star in Hollywood severely diluted the brand's image. Kenny "Von Dutch" Howard built race cars, machined firearms, and represented a bad boy image, all the way until he died an alcohol-related death in the early 90's. Tommy Lee and Fred Durst were exactly the type of celebrities Von Dutch wanted to see wearing their gear. They were bad boys in their own rights. However, once cast members from the "Friends" television started to wear the trucker hat, well... I am sure you get the point.

What is the latest fad? Silly bandz! No, not those lame "awareness" bracelets (think yellow Lance Armstrong bracelets) that some people still wear, that is, those goofy bracelets that are conspicuously consumedworn in order to alert the universe that the wearer supposedly possesses a shred of compassion.  I'm talking about those multi-colored bracelets young kids wear.  At least they wear them in Indiana, so this may be a local fad.  The bracelets come in different shapes and are formed to look like animals, musical instruments, sports equipment, and other kid-friendly objects.  When I was a kid, the fad was slap bracelets.  Unfortunately my mom would never let me have a slap bracelet; they were made out of metal, and one doltish kid managed to hurt himself by misusing the product, effectively ruining the possibility of an ownership experience for the rest of us.  By the time the bracelets were made using plastic, they were no longer cool.

Nowadays I avoid fads and trends and insist on taking the moral high ground of rejecting overt marketing messages (you must trick me subliminally to earn my dollar!).  I laugh at my bandwagon friends who all seem to wear the same style of clothes and participate in the same trendy activities, despite most of them reaching the ripe old age of 30.  In turn, they mock me for wearing plaid shirts and for refusing to own an iPhone.  Fair enough, I suppose.

What trends do you remember from your childhood?  Are there any fads that were isolated to certain market segments that society at large missed out on?


Sources

Stüssy website - http://www.stussy.com/
Hot Item or Old Hat? - http://www.thenoiseboard.com/lofiversion/index.php?t8395.html
Kenny Howard - http://en.wikipedia.org/wiki/Kenny_Howard
Silly Bandz - http://en.wikipedia.org/wiki/Silly_Bandz
Slap Bracelets - http://en.wikipedia.org/wiki/Slap_bracelet