27 August, 2008

All our eggs in one basket...no thanks

Back in the 1950’s, the idea that what was good for General Motors was good for America was a matter of faith. But I wonder if that’s still the case. The same goes for the rest of the Big Three.

In recent months, the entire North American auto industry—foreign companies included—has been rocked by skyrocketing fuel prices, and the response has been more than a little telling.

Honda, with its lineup of high-quality, fuel-efficient automobiles can't build its vehicles fast enough. Toyota, despite taking an unprecedented hit in terms of profitability, is quickly setting about the business of re-tooling. And the Big Three? Well, GM’s answer to the Toyota Prius is a hybrid Yukon that gets a whopping 21 miles per gallon. Over at Ford, management recently announced that after a generation of playing catch-up, it was finally going to close the quality gap with Toyota—in a couple of years.

Oh yeah, and apparently the Big Three are going to need $50 billion in cheap government loans to accomplish all this, despite years of making money hand over fist producing high-margin SUVs. Whatever happened to American leadership? Ford tough? GM innovation? It’s starting to get embarrassing.

It’s also getting a little scary. Pinning the U.S. economy’s future on unwieldy, shortsighted corporations like General Motors is starting to look a lot like booking first-class passage on the Titanic. For those of us who came of age in the 1970s, the decline of the domestic auto industry has long since been a simple fact of life. The Big Three have been losing market share for decades. Now they want the taxpayer—you and me—to loan them $50 billion.

Of course, at this point we are hardly in a position to say no. An industry analyst recently said a General Motors bankruptcy would be the economic equivalent of setting off a nuclear bomb, and he’s right. But that doesn’t mean the U.S. government can’t take at least some kind of action.

First, any low-cost loans should be predicated on some serious changes in leadership. I don’t know whether running an automotive company is actually rocket science. But it is pretty apparent that in the case of GM’s Rick Wagoner, in particular, whatever it is, the current bunch of people in charge ain’t got it.

Second, if the U.S. government is going to start financing the automotive industry, let’s invest in the entire automotive industry—not just the cloistered bunch running things in Michigan. There are a number of interesting startups out there, companies like California-based electric carmakers ZAP and Tesla Motors. Unlike their more established counterparts in Detroit, these companies are truly lean, hungry and innovative. They have to be to stay in business. GM claims it will have an electric car on the market by 2010, but ZAP and Tesla Motors are building cars right now. Wouldn’t it be nice to actually get a jump on the folks over at Nissan & Mitsubishi for once?

It’s a basic tenant of investing that your portfolio needs to be diverse if you are going to prosper over the long term. The same goes for the domestic automotive industry. It’s time for some truly fresh blood in the domestic auto industry. What’s good for America is no longer just what’s good for the Big Three.

25 August, 2008

Hard to play by the rules when they are a moving target

This is an excerpt from an article on Slate.com that I thought really raised some interesting points. I really want to believe Phelps won that one, but when you really look into the details, I guess it depends on what your definition of "is" is....
Did Michael Phelps really earn eight gold medals in the 2008 Olympics?

In his next-to-last medal race, the 100-meter butterfly, Phelps trailed Milorad Cavic all the way to the wall. Nobody who saw the race in real time, including Phelps' mother, thought he had won. Yet the scoreboard showed him beating Cavic by one-hundredth of a second.
"The scoreboard said I got my hand on the wall first," Phelps declared afterward. The Boston Globe, like other American newspapers, agreed: "Phelps got his hand on the wall first." Cornel Marculescu, head of the world swimming federation, FINA, confirmed the verdict: "There is no doubt the first arrival was Michael Phelps." The race referee added: "There are no doubts. It was very clear that [Cavic] touched second."

Sorry, but none of these assurances holds water. The scoreboard doesn't tell you which swimmer arrived, touched, or got his hand on the wall first. It tells you which swimmer, in the milliseconds after touching the wall, applied enough force to trigger an electronic touch pad. As to whether Phelps touched first, there's plenty of unresolved doubt.
The human eye, in real time and basic video replay, suggests Cavic won. But that could be an optical illusion. Cavic takes one big stroke toward the wall, then glides to it with fingers extended. Phelps does the opposite: He shortens his stroke so he can squeeze in one more truncated stroke. He gambles that the speed he gets from the extra launch will make up for the additional time it requires. Cavic leads but closes the distance to the wall slowly; Phelps trails but closes the distance fast. In ultraslow-motion replays, it looks as though Cavic has reached the wall while Phelps is still closing. But these replays break down Cavic's glide to such short increments that you can't really tell whether he has stopped.
Marculescu says there's ''absolutely no doubt'' who won, because the clock registered Phelps' arrival first, and "the touch stops the clock.'' Not true. A touch doesn't stop the clock. The touch pad is designed to require a certain degree of force, because otherwise, slight pressure from the water would trigger it. "You can't just put your fingertips on the pad, you really have to push it," the race timekeeper explains. A FINA vice president says the crucial moment is "the instant of depression, of activation of the touch pad, not contact with the pad."

On Saturday, a week after the race, FINA tried to squelch the controversy by releasing 4 pairs of digital frames that track the two swimmers side by side as they reach the wall. "In the third set of images, with Phelps on the left, it is clear he is really pushing hard, while Cavic, on the right, is just arriving," the timekeeper told the Associated Press.
Again, not true. In the pictures, Cavic appears to have arrived by the second frame, if not the first—at a minimum, tying Phelps. And Phelps is moving so much faster and more forcefully that you have to wonder: Given the delay between contact and pressure, if the touch pad recorded Phelps' pressure only one-hundredth of a second before Cavic's, how likely is it that Cavic made initial contact before Phelps did?
Technically, the question of who touched first doesn't matter. FINA and the Olympics honchos agreed beforehand to use the touch pads; the touch pads require pressure; all swimmers and their coaches should know this. But that technical argument leaves two ugly, unresolved problems. One is that FINA, the timekeeper, the referee, and the media keep telling us, falsely, that Phelps "touched," "arrived," and "got his hand on the wall" first. "In our sport, it's who touches first," Marculescu told the AP on Saturday. Bull. It's not who touches first. It's who triggers the sensor first.
The other problem is that even FINA isn't sure how much pressure the touch pads require. On Saturday, Marculescu told the New York Times that the threshold was 3 kilograms per square centimeter. But in the same article, a FINA vice president said the threshold was 1.5 kilograms. If FINA's executives don't know the correct number, is it reasonable to expect Cavic to know it? And if he had realized how much pressure was required, would he have shortened his stroke as Phelps did, trying to trigger the sensor first, instead of trying to touch the wall first?
I'm not saying the touch-pad system is fishy. It beats the heck out of the old stopwatch method, not to mention the mysteries of judging gymnastics. It's the fairest, most precise system around. And that's the point: Even the most precise system leaves a gray area. In this case, it's the area between touching and pressing. Did Phelps beat Cavic to the wall? We'll never know.