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Monday, April 26, 2010

Regulating the market is a serous business. It needs great care.

Rationally, perhaps, a command economy ought to work better. Why do we need 22 brands of laundry soap, most of them chemically indistinguishable? We can calculate how much soap is needed, make that much, sell it for what it costs to make, and save all that excess soap that gets marked down and ends up in dollar stores. Same with agriculture, automobiles -- well, you get the idea. That argument appeals to undergraduates and many academicians. It appealed to me when I was young. Capitalism seemed wasteful, it had caused the Great Depression, boom and bust were built in. Smart people like Stuart Chase could explain how things could be so much better if we didn't have all that Renaissance hoopla and old fashioned institutions preventing rational people from fixing the system and ending those business cycles.

It turns out that the command economy doesn't work, and we have run the experiment often enough to know that. We need a market, and capitalism, for all its inefficiencies turns out to be more efficient than its alternatives. The command economy operates under the Iron Law like everything else, and pretty soon commands far more than laundry soap and automobile manufacturing.  Meanwhile, economic theorists have shown -- with good theory anyway -- that even a command economy needs a market to determine prices, and goes on from there. Bottom line on all this: almost everyone agrees that we need a market, and without true markets the economy suffers badly.

And that's the problem with regulations: if you're not careful you kill the goose.

And all that is preliminary to commenting on the Dodd Bill and the general move to "reform" the market by regulating trade in derivatives. The goal is to damp down things down and end the Business Cycle. Obama has said as much. It's an amazingly arrogant thing for a sitting president to say, in my judgment. Perhaps, like Canute the Great, he's exaggerating for effect, claiming a power he knows he does not have? But certainly a major goal is to damp out big bubbles and save us from the effects of banks too big to fail making reckless investments that the taxpayers have to bail them out of.

There are two Wall Street Journals articles today that are quite relevant. One is "Taxpayers and the Dodd Bill" by Peter Wallison. It shows a number of possible -- even probable -- scenarios leading to massive costs to taxpayers once the Bill is implemented, and concludes

These are only a few of the land mines that litter this 1,400-page bill, which Senate Democrats are seeking to rush to judgment with a cloture vote today. Does anyone really know what's in this bill, or what other unintended consequences will flow from its adoption? The American people may detest Wall Street, but imagine what they'll think of senators who vote for this bill because Mr. Obama has told them it will not impose any costs on taxpayers.

One need not agree on the probability of the land mines to suspect that rushed vote on a 1400 page bill that changes the nature of the market is probably not a good idea. It's certainly drastic, and since I doubt that anyone has read it all -- I would bet that Dodd hasn't -- it is nearly certain to have effects no one expects. Unintended consequences.

The other relevant article today is "The Misguided Attack on Derivatives" by L. Gordon Crovitz, which is more technical and gets into the nitty gritty of just what happened with the Paulson-Goldman Sachs derivative affair, and argues that the function of those derivatives was real and useful.

I won't get into that.

My point is that there's a better way. Rather than poke about at the market so that we regulate investors so that those too big to fail can take high flyers knowing that the taxpayers will bail them out, wouldn't it be better not to have institutions too big to fail? If we had forty investment banks rather than the Big Five -- if Goldman Sachs had been fifteen companies rather than one single giant -- we'd never have had the problem in the first place. Not all those mini-Goldman companies would have played the game, and those that did and failed would have simply folded while those that played the opposite game would have thrived.

I agree that breaking up big outfits into smaller ones is a very tricky business, and the power to bust those trusts is an enormous power than needs to be applied with care; but I think we'd be far better off limiting just how big a share of the market anyone can have than intruding in the market rules. I don't come to that conclusion lightly. I don't like the notion that government gets to say just how big a company can be. Alas, the present system has created companies too big to fail, then bailed them out when they did fail. I agree that is not good; but neither is heavy regulation of the market. We need the market. We don't need companies that are too big to fail.


This takes a while to listen to -- there's some stuff to watch but it's primarily an audio lecture, not a visual -- but it says in depth with support some of the stuff I've been saying for years. It adds to fundamental understanding of how the National Government works now.

About an hour long ...

America's Broadband Policy

12 April 2010: Talk given at SNW 2010 about three areas of policy -- broadband, cybersecurity, and copyright, and about the corruption of the process of policy making affecting each. A mix of my old concerns with one section of the new concerns.


Bill Shields

The question of what is the proper remedy is more complicated. Mine is that we need transparency and subdsidiarity -- which is to say, State's Rights, The Tenth Amendment, fragment some of the power centered in Washington. Power can't easily be destroyed. It can be broken up and farmed out to that there is an interest in keeping it dispersed.

The alternative is a truly national government, which will work the way ours does.

The three topics -- broadband, cybersecuirty, and copyright -- are well chosen because it's pretty obvious that our national policy isn't correct, and there's no way to correct it. Now what?


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Tuesday, April 27, 2010   

The current Chaos Manor Reviews mailbag has just been posted. There's discussion of iPad and other matters of interest. Chaos Manor Reviews is the continuation of my old BYTE column that ran from 1979 until after the millennium.

The Senate rejected consideration of the "finance reform" bill yesterday, and although Senator Reid insisted that the Democrats try again, most thought the bill dead for the year. As Republican Senator Mitch McConnell said, "it's not ready yet."

I'd go farther and say that what's in the current bill ought not ever be ready. Were it left to me I'd reform finance regulation all right, but it wouldn't be a hasty process. It certainly would not include the oligarchic legislation in this bill. Adam Smith told us that capitalist would always collude to get government to make it tough for competitors to enter the market place; the current financial reform bill does this in spades with big casino. Of course Sarbanes Oxley already did that; but this make the cheese more binding. If the goal is to lock in big combines and outfits too bid to fail, and be sure no one will compete with them and take some of their market share, the current "reform" bill is a very good continuation of the work started by Sarbanes Oxley.

As I said yesterday, we need to change the system so that companies "too big to fail" can't take great risks with the Treasury as their backer. The question is, is it better to tamper with the market, or limit the size of companies so that none are "too big to fail." If we had 40 major banks instead of the Big Five -- in other words if no bank were too big to fail -- then we could let the market take care of the rest. Some would bet right, some would bet wrong. Some would win, some would lose. The FDIC has worked very well to protect depositors, and there's no reason to change that -- guarantees of deposits up to some reasonable amount - it was $100,000 per account for most of my lifetime but recently raised -- is very reasonable and as I said, it has always worked. One of the really good things to come out of the New Deal.  I'd also go back to the restrictions on investment banks as opposed to commercial banks, but I'm willing to listen to arguments on that.

For a long time, from World War II to just recently, we had boom and bust cycles, but nothing really crippling. Then we started fooling with the system, using what started as FHA to get more people to own homes and ended with "the American dream" being extended to a $45,000 a year (stated income not verified) being able to buy a $450,000 house in Orange County on a variable rate mortgage that he never had any possible chance of paying off. We built a system that injected more and more money into the housing system, creating the bubble, while setting it up so that when it crashed it would crash big time. That needs "reform" but again I say the best reform is to break these monsters up into competitive parts. Fiddling with the market is a path toward a command economy. One needs some regulation, but every regulation makes entry into the market more difficult. The fewer the better. If the concern is that companies too big to fail get public backing for their bad judgment, I agree that's a very bad thing to happen, but the remedy is to see that there are no risk taking financial institutions that are too big to fail.


 Apple is on the do-not-buy list for being a bunch of thugs (See Mail)

We will discuss the Gizmodo Raid tomorrow. See Below


  Windows iPad

Chinese marry Ipad to Windows7





 Wow indeed. You can buy a Windows iPad in a Chinese shop. Today. With Three USB ports. Runs Windows 7. Wonder how well it works? And how long until a Slate here?


I have this on "too big to fail"


   A modest proposal regarding banks.  I agree with your logic that if we have banks "too big to fail" then they are "too big".  I also have grave doubts as to the wisdom of the government deciding which banks are and aren't "too big", and use of antitrust powers to remedy that may be a cure worse than the disease.  However, the government also guarantees deposits and makes other provisions that enable banks to grow big. 

Perhaps all that is needed is to determine a minimum number of first-class banks so that none of them is "too big to fail" -- N banks, let us say.  Then government assistance to any one bank will be capped at "value of banking industry divided by N".  That would include not only government deposit insurance but amount that bank was allowed to borrow from the Federal Reserve.  Then of course if any bank is able, through market forces and mechanisms, to grow bigger -- then that is just fine, as with any success story.  But the idea that the taxpayer should subsidize the growth of the bank, so that the taxpayer can then insure the collapse of the bank that is now "too big to fail" seems silly.

Actually the "We need N banks" bit was what I had in mind, but I am not wedded to it. I agree that anti-trust can be arbitrary and dangerous, but so is TARP and so are bailouts.

The mechanism by which we break apart the too big to fail institutions needs careful and unemotional consideration. At one time banks had to be state chartered, and that took care of much of the problem. I suppose we are long past that.

My proclivity is to tame the consolidation and centralization tendencies of unrestrained capitalism. I agree with Marx that building cartels seems to be a very strong tendency of capitalism; I also agree with David McCord Wright that the US managed to avoid that for a long time by means of Sherman Anti-Trust Act actions.  I think it is time to rethink that.

Too big to fail means inevitable bailouts or oppressive regulation. Neither seems like a good idea.


The worldwide war on baby girls http://www.economist.com/world/

<snip>In January 2010 the Chinese Academy of Social Sciences (CASS) showed what can happen to a country when girl babies don't count. Within ten years, the academy said, one in five young men would be unable to find a bride because of the dearth of young women--a figure unprecedented in a country at peace.

The number is based on the sexual discrepancy among people aged 19 and below. According to CASS, China in 2020 will have 30m-40m more men of this age than young women. For comparison, there are 23m boys below the age of 20 in Germany, France and Britain combined and around 40m American boys and young men. So within ten years, China faces the prospect of having the equivalent of the whole young male population of America, or almost twice that of Europe's three largest countries, with little prospect of marriage, untethered to a home of their own and without the stake in society that marriage and children provide.<snip>




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Wednesday,  April 28, 2010

The Gizmodo Raid

There are several parts to the Gizmodo Raid story. Some parts are simple. At least one is not.

First, the facts seem undisputed. Apple engineer "iLoser" carried what appears to be a prototype (iPrototype) of the newest Apple iPhone to a Silicon Valley bar, sat next to a chap we'll call "iFinder", and after a while departed leaving the iPrototype on the bar. iFinder went through several motions that seem to support his statement that he tried unsuccessfully to return it, including calls to Apple.

Meanwhile it was widely known that Gizmodo would pay well for news information on Apple's upcoming products, no questions asked. I suppose there's an analogy: a number of tabloids will pay for photographs of celebrities, no questions asked. In our case iFinder sold iPrototype to Gizmodo, reportedly for $5,000. Apple at some point requested the return of iPrototype, and Gizmodo at some point gave iPrototype back to Apple. Meanwhile, though, Apple went to the law, and the famous REACT computer expert law enforcement squad raided the home of Jason Chen, a blogger, who writes for Gizmodo and posted some comments about iPrototype in his Gizmodo blog. The REACT squad -- which has a Silicon Valley expert advisory board that includes Apple -- executed what is generally called a raid, seizing Chen's house, car, and his computers. Computers were physically removed from his house. This was done on the grounds that the "the computers and other devices may have been used to commit a felony."

The felony in question would be the sale of iPrototype to Gizmodo. Apparently Apple provided sufficient evidence to the judge who issued the search warrant to establish that Gizmodo was probably in possession of the device, and that Chen probably knew where the device was and how it had been obtained by Gizmodo. I have not seen it asserted that Chen knew he was examining stolen property. I don't know just how close his connection with Gizmodo is.

As of now, no one is under arrest for this felony, no felony has been charged although the district attorney hasn't ruled out that there may be one, the iPrototype was returned, not much of interest about Apple's new iPhone has emerged from any of this, and Apple has generated a lot of publicity for itself. I may not care for some of that publicity (see yesterday's mail).

I have also not seen any evidence on the urgency of this situation. Was Apple in danger of irreparable harm, so that it was justified to raid Chen's house, seize property necessary for him to make a living, and generally disrupt his life? Being raided by the REACT squad is at best a highly traumatic experience.

The Electronic Frontier Foundation predictably condemned everything done by Apple, and added that this may be a preview of "Hollywood's Dystopian Plan" for copyright enforcement.

But here at EFF, we are also wondering if we’ve just seen the future of copyright enforcement. Although the Gizmodo seizure doesn’t appear to be rooted in copyright, having cops kicking in doors over what seems like a private dispute reminded us of recent efforts by the big content industries to get law enforcement to go after “copyright thieves.”


On the other hand, some defend Apple:

The moment money changed hands, Gizmodo & the person who found the iPhone prototype were trafficking in stolen goods.

The person who found that iPhone prototype was right there in the Silicon Valley - instead of looking on Facebook and dinking around w/email in order to try and notify Apple he'd located their missing prototype, all he had to do was to drive or take a bus over to Apple's HQ at 1 Infinite Loop, and turn it in to them. He probably would've received some kind of reward for his honesty; at the very least, he'd have a clean conscience.

Instead, after making a cursory attempt to contact someone at Apple electronically (I suspect this was merely for form's sake), he decide to sell someone else's property for money. In most jurisdictions, this is considered trafficking in stolen property, whether one 'found' the item in question or not.

Since the individual who found the iPhone prototype obviously has no sense of decency nor appreciation of what constitutes civilized behavior, Gizmodo could've either notified Apple, identifying the individual who claimed he had it, or simply acquired the iPhone prototype from him and returned it to Apple, garnering some goodwill and in all probability some kind of exclusive coverage/interviews w/Apple. And Apple certainly would've reimbursed them the $5,000.00.

Instead, Gizmodo trafficked in stolen goods and ended up with what was pretty much a non-story about a remotely-disabled prototype which they couldn't really examine or report on with any depth. By acting dishonorably and selfishly, they blew any chance they had at a real journalistic scoop and in all probability ended up committing a crime in the process.

I shed no tears for Gizmodo nor for the individual who found the iPhone and decided to sell property not his own, rather than doing the right and honorable thing and returning it to its rightful owner. The fact that the moral issue apparently hasn't been mentioned at all in the brouhaha surrounding this shameful incident speaks volumes about the state of our society.

-- Roland Dobbins

It is not established that Chen was iFinder. Since the only felony involved here was the supposed sale of stolen property, namely iPrototype, one presumes that the information that REACT sought with its surprise (one story says they broke into the house; in any event there is no doubting that they seized Chen's computers and took them away) raid was the identity of iFinder, who, so far as I know, is the only one who can be charged with a felony in this case.

That is. While California doesn't incorporate the Common Law, and the code isn't entirely clear on the matter, it's not automatically a felony to buy stolen property. If I borrow your car with your permission and then go sell it, the Common Law says in effect "He who sells what isn't his'n must buy it back or go to prison." It's not at all automatic that the chap who bought your car from me is guilty of anything, although he may be out both the car and his money. It gets complicated when we consider things like pawn shops buying property they ought to know is stolen, and there's a whole raft of law about trade secrets and copyright protection. There's also the question of "Was Chen acting as 'press' within the meaning of the Constitution and the California Journalist Shield Law.

Under the Shield Law, it's very difficult to get a journalist to reveal sources. Had the judge issues a subpoena for information about the supposed felony, it certainly would have required a hearing.  No search warrant with the punishment inflicted by REACT required.

I think it obvious that Chen was acting as 'press' within the meaning of the Constitution. In 1787 the 'press' included pamphleteers, people with a printing press in the basement who put out flyers. One such was Dr. Benjamin Franklin. Small press newspapers were very much in mind when the First Amendment was crafted.

Peter Glaskowsy says

Well, there's no question that Chen was acting as a reporter here, and at least superficially, the combination of California PC section 1524(g) and CA Evidence Code section 1070 rules out serving a search warrant on a reporter to find evidence related to reporting.

http://law.onecle.com/california/penal/1524.htm l http://www.leginfo.ca.gov/cgi-bin/displaycode?section=evid&group=01001-02000&file=1070 

But there could be other laws or precedents that limit the scope of that section 1070 language. For example, it may be that based on the legislative intent behind those laws, reporters who focus exclusively on stories of purely commercial interest (without political or social significance) aren't necessarily entitled to this protection. This issue came up in the Think Secret case but was never resolved.

Or it could be that buying stolen property and revealing company trade secrets has previously been ruled to not be part of a reporter's or publisher's duties-- I've never heard of a newspaper that would do that, and it's pretty easy to see how allowing this would provide a strong incentive for individuals to steal and sell company confidential information.

Personally I don't think we can afford to let people break the law just because they have a website-- or a newspaper, or a national news magazine, or a TV network news show. I do like the idea of protecting reporters when there's a clear social value to it. The Pentagon Papers case, for example, involved acts that would have been treasonous if done for personal gain, but revealed information which was crucial to understanding strategic policy decisions-- and a President's dishonesty.

I'd like to see this case lead us to clearer standards for journalist shield laws, because in any event, the current laws are too broad and too vague. On the face of it, I could start a blog about the security risks associated with selling things on Craigslist, then go out ambushing people based on their Craigslist postings, and when the cops search my garage and find the loot, I could have the evidence suppressed based on the 1524(g) argument. I'm sure that isn't what the legislature intended.

- png -

All of which is very complicated and I don't think it much applies here. I don't believe the warrant shows any irreparable harm to Apple if the warrant isn't issued. The Electronic Frontier Foundation is no friend to authors -- they took the side of big corporation Scribd when when it posted the entire works of deceased authors Poul Anderson and Jack Chalker, with possible considerable harm to their widows -- and I'm not at all sure of the intent here, but the fact is that the REACT raid certainly does look like an augur of a dysfunctional future in which such raids are used as part of copyright enforcement. It's punishment without a trial, and that's scary.

As to the felony: is it certain this was stolen property? I can recall many "leaks" staged by PR firms. BYTE was fooled by more than one of them. I was bitten more than once by "inside tips" that were generated by a company seeking column inches. I doubt anything like that happened here, but it does throw a shadow on the "stolen property" status of a found object.

And I very much doubt the urgency of protecting Apple trade secrets justified a raid on a journalist's home.  Does that justify seizing Chen's computers?

Apple may well have a civil case here. It may be a massive civil case. The press is not immune to the laws. For views on whether Gizmodo ought to have known that iPrototype was stolen, see Dan Spisak in Mail. But civil matters don't usually involve the REACT squad and seizing computers. Again this appears to be punishment without trial -- indeed without a hearing. And that, I submit, is a dangerous thing indeed.

I do not believe Apple will be happy with this. I certainly don't think the rest of us will be happy if Apple is happy with having ransacked a journalist's home because Gizmodo scooped them.

Meanwhile, Gizmodo's parent company, Gawker Media, has described the search warrant as "invalid," highlighting a California law, which prevents the search of the newsroom searches. However, Wagstaffe defended the decision saying police could have lost important evidences, if they would have not acted on time. "I think the people who are saying, 'No, we should have waited' and did it the other way first don't understand that in the world when you're investigating crimes, evidence sometimes gets deleted and destroyed. If you sit there and work by the Marquess of Queensberry rules, then bad guys win," said the prosecutor.


If you follow the rules you sometimes don't succeed, and a dangerous felon gets away with it. Or something. Gollies, once you see it that way, you can understand we don't need no stinking First Amendment or Fourth Amendment, or any of that stuff. It's really important to see that the bad guys don't win. Given that logic, is anything prohibited to a righteous prosecutor?

Peter Glaskowsy adds:

The day after I wrote the above piece, CNET published a very nice article along the same lines:


 in which Declan McCullagh and Greg Sandoval explain that there have indeed been court rulings (such as the 1975 decision by the California Court of Appeals in "Rosato v. Superior Court") that limit the extent of journalist immunity to search warrants. If a journalist is suspected of having committed a criminal act, a search warrant is allowed. This seems to put an end to the claim by Gawker Media that search warrants can't be issued against journalists for any reason.

 The story also makes the point that various legal privileges generally considered to be even stronger than journalist shield laws (the article mentions "the attorney-client privilege, the physician-patient privilege, and the psychotherapist-patient privilege") do not prohibit searches when the persons involved are suspected of a crime.

 It seems to me that this issue is closely related to the "unclean hands" doctrine in law: if you act unethically, you impair your right to demand protection from the legal system.

 .             png

Once again: what information is wanted? And what remedy is asked for? It's not as if having your house searched and your computers seized is a trivial inconvenience. This is a major punishment, made on the presumption that if it isn't done and quickly a bad guy will get away. What bad guy and how will he get away? What is the urgency that could not wait for a subpoena and a hearing?  I fear that the more I think on this the angrier I get with Apple and the REACT squad.

Having your life disrupted like that without a trial should not happen for trivial reasons. This is Apple's revenge, and I do not think the punishment fits the crime. Even it it is fitting is it fitting that it be done without a hearing? Perhaps the information would have been forthcoming if they just asked...

This is a wicked precedent in my judgment, and Apple will regret putting this in motion.


Massive ocean current discovered

With a volume equivalent to 40 Amazon rivers, moving at a 2-year average of 20 cm/sec, I wonder how much faster the models will say the Earth will warm once the climatologists add this newly discovered, enormous ocean current to their models.


It's good to know that we understand our own planet so completely that there are no really big surprises waiting for us here. I mean, now that we've found this one, of course. Surely this is the last piece of data the climate modelers will need to complete their understanding of our complex climate system. Or not.

--Gary Pavek

I steadfastly maintain that I don't know how to predict climate and neither do the consensus model makers.







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Thursday,  April 29, 2010

Good guys and bad guys: this sums it up pretty well for me:

The Daily Show's Jon Stewart on Wednesday night weighed in on the lost iPhone debacle skewering Apple over the police raid on Gizmodo Editor Jason Chen's house. Stewart doesn't delve into the whole lost vs. stolen iPhone issue as justification for the raid, but The Daily Show's sketch does deliver some hilarious moments. Riffing off the Microsoft is evil, Apple is good trope, Stewart says, "You guys are busting down doors in Palo Alto while Commandant Gates is ridding the world of mosquitoes? What the f*$k is going on?"  http://www.pcworld.com/article/195237/

What seems to have happened is that the Lords of Cupertino frowned, and the Silicon Valley police hastened to chastise those who dared. They sent the REACT squad to break in and seize computers and otherwise punish. No need for trial. No need for indictment or preliminary hearing. No need for hearing at all. No need to hear any defense from Chen. There was a possibility that a felony had been committed! The evidence must be preserved! The Lords of Cupertino are unhappy.

The technical term for this kind of cooperation between government and big institutions is Fascism, and there's a considerable literature on how efficient this is as a way to make all the social classes cooperate and work together to solve the problems of society.


And this note:

It took three weeks before iFinder gave up on getting Apple's attention and accepted $5,000 from Gizmodo. Discovery in the upcoming court case might tell us whether that was for the exclusive story, as Gizmodo insists, or for title to the device (dodgy - title would not pass to iFinder for three years under California law).

     From "view" it's clear people think Gizmodo had bought the 4G iPhone. They insist not, though they did get to examine it. It appears an editor personally got possession, not Gizmodo itself. So at that point iFinder was the bailor and the editor (Chen) a voluntary bailee.

Nor could Gizmodo be sure, to a fiduciary certainty, that it was in fact Apple's. Remember iFinder and his friends couldn't get anyone at Apple to take them seriously, and a hoax was suspected.

     Gizmodo's Brian Lam did not give the iPhone prototype back to Apple. He was contacted by Apple's lawyers, who assumed Gizmodo had the iPrototype in their possession. Lam wrote back saying they did not, but their editor personally did, and provided his address, suggesting they organize a time and place for pickup. This is not, on its face, suggest a felony, nor grounds to suspect one.

It may well be that Apple has the right of it in regards to its intellectual property and recovery of the physical iPrototype (which was a brick by the time that the REACT team raided Chen's house). It may well be that Gizmodo was acting both stupidly and illegally in this matter. It may well be that they would lose in any kind of hearing or trial. The point is that there was no hearing. The authorities acted because the Lords of Cupertino wanted them to, and they did so without trial, seizing several computers, servers, thumb drives, and anything else they thought might be relevant. Apparently their writ of assistance allowed them to do that.

I do not see the urgency that requires breaking in doors.


Meanwhile Greece, which is addicted to high wages and high pensions for public employees, is broke, and the sudden realization that it may default on its debts is cascading. Portugal is now under the gun, and beyond that is Spain, and there are others. The Great Recession continues and the waves washed across Europe, and will now return to the United States -- where we have enormous state debts, way over a trillion dollars in unfunded pension obligations for state employees.

The time is coming when half your taxes will go to pay people who retired at age 60 and no longer work. Now surely something will be done before that happens. The question is, what? The usual answer is to raise taxes. Squeeze the orange until the pips squeak.


The good news is that those who didn't get much grounding in the classics have a treat in store for them. It's All Greek To Me by Charlotte Higgins is available in both print and Kindle editions, and is a collection of stories, anecdotes, and other stuff you will enjoy. It's written by a scholar who can write for non-scholars, and the stories are well chosen. It leaves out much, but then it would have to lest it be intimidatingly large. Recommended.


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Friday,  April 30, 2010

Politics in the United States takes first place in American interest, but we mustn't forget England:

Outcome of the Debates   

First look at the results: Clegg and Cameron tie and Brown in third place, but that could change over the next week. Their messages were interesting--Clegg was proposing new approaches, Cameron played to the Tory supporters, and Brown tried to impress everyone with his brains and experience. Since one of the Tory election themes is that Brown is just promising more of the same, I'm not sure his tactic is likely to pick up swing voters. <http://tinyurl.com/35cwp5e>  <http://tinyurl.com/38xyrg9>  <http://tinyurl.com/ygqcsfl>  <http://tinyurl.com/3akzw85>  The Governor of the Bank of England says that whoever wins will be so unpopular with the necessary austerity that his party will be out of office for a generation. <http://tinyurl.com/2csl7dd>  <http://tinyurl.com/3x29vvk> . Labour favours jobs programmes; the Tories favour capital investment; and I'm not sure what the Lib-Dems favour--perhaps themselves. No matter who wins, there will be major cutbacks in government spending.

 One doctor's comments on what ails the NHS: <http://tinyurl.com/2f9m5bw>


"If they do that with marks and grades, should they be trusted with experimental data?"

Harry Erwin, PhD

 One does wonder whether England will ever recover. I note that there are more signs of the collapse of civility as well as the notion of liberty, but it's hard to compare them with similar signs of impending decivilization elsewhere. There is I think nothing quite like Detroit in England, and I doubt that anyplace in England is as deep in unrecoverable debt as California where the ruling aristocracy doesn't even believe the good times are over. We all live in interesting times.

England is now dependent on the ability of the Germans to solve the problems of Greece and Portugal, since they don't have their own currency (didn't I see something about a shop keeper arrested for quoting prices in pence a couple of years ago?). Of course the US economy depends in large part on finding some way to solve the problem of state debt for unfunded pension obligations and other state employee costs including built in salary increases and lowering retirement ages.

[The above paragraph was in error. Britain retains the pound (to their joy, given the Greek crisis). My recollection was in error, and while the collapse of Greece will have an effect all across Europe as it drags money from prosperous countries to pay for retired Greek government workers, it won't directly affect British currency values. The times remain perilous, but that is one peril Britain does not face.]

And a great number of people have used up their 99 weeks of unemployment compensation. One presumes another extension -- funded by borrowing money -- will now happen. We're a long way from the "$26 for 26 weeks helping hand" that this all started with. The remedy to a lagging economy is low cost energy and economic freedom (meaning chopping out regulations that favor existing institutions over new ones so that start ups have a chance to compete). Capitalism's creative destruction will do the rest: look at the German Economic Miracle after World War II for a picture of what hard work and freedom can do.

Of course that's not likely to happen, for the same reasons that we don't do much about broadband reform in the US. So it goes.


Pledge Drive

Today begins the KUSC Spring membership drive, which means that it's time for the Chaos Manor membership drive. They run theirs all day and most of the night. I'll confine my drive to a few nags and reminders. This site (like KUSC) operates on the Public Radio model: Anyone can read what's here, but the place is supported by subscribers and without subscribers it won't exist. We have levels of subscription, and I am grateful to the platinum and patron subscribers. I am particularly pleased that a number of readers began as regular subscribers and over time renewed at higher levels, indicating that they like what they find here. As to what's here, I try to give rational analysis and opinion about anything that interests me, which turns out to be nearly everything. I also run a selective mail section. It seems to work: one may pass over mail because the subject isn't something to read about, but you will not find redundant comments or flame wars or social chatter in mail.

KUSC always has goals. Mine is to raise the percentage of subscribers by 1 point. Surely that's not asking for too much?

So consider this a nag: if you don't subscribe, please consider doing so, and if you haven't renewed for a year or more, this is a good time to do it.


The iPrototype Affair: one legal view

This analysis is the result of several exchanges of mail. It is one legal point of view from a lawyer.

The Missing Word is Bailee

Dear Dr Pournelle,

Concerning the events surrounding Apple's iPrototype loss there's a word I keep hearing; "theft".

This was not theft. It was 'bailment', and iFinder was an involuntary bailee. Since the iPrototype remained with iFinder, that means Gizmodo (Jason Chen) never became a voluntary bailee.

In law theft requires the intention to permanently deprive, and iFinder did try to return it. In fact as an 'involuntary' bailee he can divest himself of it for any reason or no reason so long as he didn't harm Apple. This means he had no obligation to keep the device after Apple bricked it (it became a damaged chattel and arguably quite worthless).

Beyond that it was not necessary in law for him to take any trouble at all. But in fact he did, which means he exercised more than his ordinary duty of care. California might not be a common law jurisdiction but I'd be shocked if the statute finds him liable in any way at all, and the Gizmodo editor should be even less so.

None of iFinder's conduct supports gross negligence, which means no common-law action would succeed against him, not civil and not criminal. Certainly he was not required to visit the Apple campus. Ringing the support people was enough. It's not the involuntary bailee's fault that Apple's agents didn't respond effectively, and he is not required to adopt a high standard of care. If California were a common-law jurisdiction I could go further; he might be able to sue both the state and Apple.

This hasn't anything to do with Journalists' rights. The state will have its work cut out proving any kind of felony. The money is a red herring. It was not paid for the iPrototype but for the exclusive story. This is confirmed by possession of the iPrototype remaining with iFinder (which means Jason Chen never became a voluntary bailee). So I don't expect felony charges will be laid. Expect legal filings for malicious prosecution if they are.

Regards, TC

-- Terry Cole

That seemed sufficiently interesting that I asked for sources, and Mr. Cole was kind enough to expand his analysis:


Gizmodo editor was a voluntary bailee, but that's not a felony.


Dear Dr Pournelle,


    Those are all excellent questions. Let's see if I can nail down the answers. I'm retired and not concerned about repercussions, so have no objection to being quoted.

     Briefly, the evidence for three weeks comes from the timing of blog posts and the known time of loss. The evidence for iFinder's attempts to return comes from Apple support personnel interviewed by Gizmodo.

 Start at the start. It's tempting to call the poor bloody engineer "iLoser" in all of this, but let's use "Powell" instead. Powell was the first bailee, the bailor being Apple. Likewise I'd call Gizmodo's editor, Jason Chen, "iVictim" but till there's a verdict "Chen" will do.

 iDrunk and iFinder were, legally speaking, involuntary bailees. Powell and Chen were voluntary bailees. So there were four bailees; Powell, iDrunk, iFinder, and Chen, in that order. Discussion follows.


*     We call the man who got the $5,000 "iFinder", though by all accounts the first finder was someone we could call "iDrunk". No-one knows who that was, but he was the first bailee. He became the second bailor when he handed the iPrototype to iFinder, thinking iFinder was a friend of Powell. That's reported in Gizmodo.

*     Gizmodo notes that from Powell's last Facebook entry, iPrototype was lost shortly after midnight of Thursday, March 18. See <http://gizmodo.com/5520438/
how-apple-lost-the-next-iphone> , which we could call "Reference 1".

*     PC World's Jared Newman agrees that " Powell lost the phone on March 18". Gizmodo broke cover on the device on April 19th. See <http://www.pcworld.com/article/195185/
gizmodos_iphone_saga_fact_vs_speculation.html/>.  Call that Reference 2.

*     Chen asserts that he, or Gizmodo, had it for a week; see <http://gizmodo.com/5520164
/this-is-apples-next-iphone>.  That is Reference 3.


Regarding dates, examine the blog post time stamps. Subtracting a month from loss to story gives three weeks from the moment iFinder became an involuntary bailee to the time Chen got possession.

 In Reference 1, Chen also describes that interval as "weeks". Later, in <http://gizmodo.com/5520729/why-
apple-couldnt-get-the-lost-iphone-back?skyline=true&s=i>,  Chen calls it "Three weeks during which Apple presumably tried—and obviously failed—to get their phone back." Call that Reference 4.

 Regarding evidence that iFinder tried to return the phone, you have to be a bit careful about who he was supposed to return it to. Bear in mind that he was not, in fact, the finder - iDrunk had foisted it on him.

 That means iFinder's first duty as bailee was to return it to iDrunk or the person with lawful possession (Powell) or the person with title (Apple), in that order. And according to his telephone interview with Chen, that's exactly what he did. This is supported by friends and associates interviewed by other journalists, such as Wired - see <http://www.wired.com/threatlevel/2010/04/dude-apple/>  (Reference 5).

 iFinder made money a condition of access. Other IT journalists were offered the device for money during this time. In the case of Wired, this happened on March 28th, ten days after the loss, but Ref. 5 notes there were ongoing attempts to return it. By his own widely reported account, iFinder had very little to go on. To summarize;


*     After iDrunk had disappeared it dawned on iFinder and friends that the likely owner had also gone.

*     They waited for him to return for some time, during which they fiddled with iPrototype - it wasn't password protected.

*     There was no ownership label but they did get a glimpse of Mr Powell's facebook.

*     Resolving to sort it out in the morning, they were taken aback to find Apple had remotely bricked it. Trying to recall details with a hangover was a major problem.

*     iFinder had no chance of contacting iDrunk.  He tried to get in touch with Apple multiple times (Ref. 1) but "No one took him seriously and all he got for his troubles was a ticket number". That ticket number will come out in court as evidence.

*     In Ref. 4, Gizmodo interviewed Apple help personnel who gave iFinder the support ticket: "the guy working next to me got the call from the guy looking to return the phone. From our point of view it seemed as a hoax or that the guy had a knockoff, internally apple doesn't tell us anything ... because we had so little to go on we pushed it off as bogus."

*     Apple failed to action the ticket. This, in an action for damages, would count as contributory negligence in most Westminster jurisdictions. So would the remote disabling. I've no idea what California law would make of it.


Will this do?

 As an involuntary bailee iFinder was entitled to dispose of the iPrototype in any way he saw fit that didn't harm the bailor - and the only bailor he reliably knew of was iDrunk. I'd add that the legal tag "nemo dat" applies: you can't give someone any rights you don't have yourself.

 Powell was entitled to lawful possession, and Apple had title, but iFinder did have the right of access.

 In the absence of formal notice from either Powell or Apple, as an involuntary bailee iFinder was perfectly entitled to ask for money for access, and Chen was entitled to pay for it. Both assert that the $5,000 was not money paid for stolen goods, it was paid for access and an exclusive story. Neither Apple nor the district attorney seem inclined to dispute this.

 Gizmodo and others, including Apple support, were very concerned about the possibility of a hoax. Formal notice came on April 19th; a scan of Apple's formal letter to Gizmodo is up at Reference 6, <http://gizmodo.com/5520479
/a-letter-apple-wants-its-secret-iphone-back>.  Till then, as a voluntary bailee without notice of titleholder, I'd say Chen had a common-law right to disassemble iPrototype in order to determine provenance and so fulfil his duty of care. Whether this complied with the California statute is a different question; and whether that statute is constitutional, is another.

 Regards, TC

[Emphasis added]

Given that Apple's security is famously severe, the fact that iPrototype was out in the wild and was left in a bar would certainly have raised suspicion with me. As I've said previously, during the decades when BYTE was the leading computer magazine we encountered many hoaxes, some perpetrated by PR firms working for very large companies. The quest for ink can lead down many paths.

Note that once the phone was bricked -- a reasonable precaution by Apple, of course -- returning the phone became more difficult. Social courtesy would suggest that a short trip by car or bicycle to Cupertino would be in order, but the finder had no legal obligation to do that. Note that what iFinder sold was not the device but access to it, sort of like selling tickets for a look.

I am not arguing that Chen and Gizmodo operated responsibly or wisely. I'm not their PR counsel and I'm not giving legal advice. I don't even contend that Mr. Cole's analysis is correct. I do contend that it is arguable, and ought to have been argued before the search warrant was issued. My concern is that there was no hearing, and I can't see any imminent danger or irreparable harm to anyone would have come if there had been a hearing before that warrant was issued and those computers were seized.

My concern is with the precedent this incident sets. Some of my friends argue that serving that search warrant and seizing Chen's computers -- which have yet to be returned as I understand it -- was not "punishment"; this was merely serving a search warrant in pursuit of terrible damage to Apple.

I don't agree with that. Having your home invaded and your property seized is traumatic, and damned well is punishment. And to what end? What damage was threatened? The iPrototype was a brick and had been for weeks. The only information that could be obtained from it was its physical appearance, and that had already been obtained, copied, and  published; there was no danger of further damage to Apple -- or anyone else -- by allowing it to remain for a few more hours or even days with iFinder who had sold access to Gizmodo. I don't believe anyone suspects Gizmodo of having the capability to disassemble the machine and look deeply into the chip structure. Gizmodo isn't Intel.

Which raises what to me is the heart of the matter: what was so all fired urgent that a search warrant had to be issued and executed without talking to Chen? What were they after? The justification was the prevention of a felony. What felony, and how would a search of a journalist's home -- and whatever one thinks of the quality of Chen's journalism he was certainly acting as a journalist, as 'press' within the meaning that would have been accepted by Benjamin Franklin -- what information was expected from a search of the journalists home? The physical machine? Surely one ought first simply to ask for it before breaking down doors. The name of iFinder? But is that not protected by California's Shield Law? At least arguably so? How urgent is it that you know?

So what felony needs such drastic action lest it be perpetrated? What was the urgency here?

Because what happened was the search and seizure, which is pretty severe harm, without trial, indictment, or hearing. And giving the Powers the authority to search a journalist's home and seize his computers because Apple says Apple is about to be harmed when the story has already been published strikes me as a pretty significant power to give Apple.

It seems to me that the Lords of Cupertino were displeased. They frowned and the DA and REACT hastened to inflict harm, and did so without trial, indictment, or hearing. And that's not just wrong but a damned dangerous precedent to let stand.


And more:

And now iFinder is running for cover

Dear Dr Pournelle,

This gets better and better. Now Wired has a quasi-interview with iFinder through his attorney. iFinder turns out to be one Brian J. Hogan; picture and story are up at Ref. 7, <http://www.wired.com/threatlevel/2010/04/iphone-finder/

Salient point: iFinder (Hogan) did not call Apple Support himself. He had his friend(s) do it. "That apparently was the extent of Hogan’s efforts to return the phone".

Even so, it might be enough. It's the reporter who got raided. Apple wasn't quite brave enough to raid Hogan's apartment. Neither faces charges - yet.

Wired interviewed one of Hogan's friends earlier, who claimed to have gone "so far as to search alphabetically through Facebook". Now Wired calls these efforts 'purported'. It's worth remembering Gizmodo was able to track down an Apple support rep when the call was made. I will be fascinated if the audio is exhibited in Court.

It seems Powell came back to the bar, asking about iPrototype several times. Hogan/iFinder did ask around the bar whether anyone claimed it. He did not hand it to bar personnel. Now he regrets that very much not having done so.

Frankly I'd have taken it home too - to leave such a device with the bar people is asking to have it nicked - but now Hogan very much wants to be seen 'co-operating with authorities'. I'd guess Hogan's attorney told him how dimly California law views theft by finding.

Regards, TC

I would run for cover too, but from fear, not from any understanding of law. If Apple can get your computers seized for buying a ticket to see iProtoype, what else might they be able to do? Best to tug the forelock.

The important point to me is that there was no trial, no indictment, no hearing -- and all this in aid of preventing a felony that had already taken place?


In this morning's note on Britain I was in error:

Hi Jerry

Just a quick note, I think you implied in Friday's piece on The UK that our currency was the Euro and controlled by the Franco-German Hegemony-We still have the Pound Stirling(£). Keeping the pound was the one good thing that that idiot Brown did, I think his opposition to the Euro was due to the implications of the common currency to his power, not due to a principled objection to the concept of the Euro. The court case you were thinking of was in regard to the illegal use of Imperial weights as opposed to metric weights, this was due to our civil service gold plating a euro regulation and not due to the regulation its self.


I am pleased to find I was wrong. Perhaps England has a chance after all.




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This week:


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Saturday,  May 1, 2010

We're having technical difficulties. I'll comment on two letters of relevance.

Regarding Gizmodo

iPhone 4 G


I have watched all the emails and speculation concerning the lost and found prototype Apple iPhone 4th generation. Although I am fascinated by legal speculation (and it is speculation since we are not privy to exactly what happened) I have not seen anything on the ethics and morality of the situation.

Your own comments have been restricted, in the main, to concerns about why this event precipitated a police raid on a reporter for Gizmodo. I share your concerns but we are all still speculating as we do not have all the facts. We only have those facts that people have chosen to blog about on the web.

My concern is that nobody wonders why a person who found an item in a bar felt it justifiable to either sell the lost item or provide viewing rights for some, apparently, quite large sum of money. I know I would not do this. All I know is that if I found something that was not mine, I would not care what it was, I would not ask someone to pay or even contemplate asking someone to pay for the privilege of looking at it or even offer it for such a purpose. It is irresponsible, unethical and immoral in my book. I would do everything I could to find its owner and, if I could not, I would hand it to the police so that they could keep it until someone claimed it. Whatever the legal situation taking someone else's property, whether it was found or given to me, and using it to make money is not ethical. But then I am older guy originally from the UK, so what do I know these days?

I see this whole episode as a very sad reflection on society when all we can talk about is the legal and monetary considerations. The question is, what was the morally and ethically right thing to do?

Thanks for the opportunity to vent. I believe you are one of the few people who will understand!!

All the best,

Peter M. Jackson

For the record: I have not been discussing the ethics of the situation, although I did suggest that the smart thing for iFinder to have done was to take it out to Cupertino and deliver it to an executive. I'd rather have Apple in my debt than mad at me, and beside it was the right thing to do.

What has always concerned me is actions without any hearing. Searching and seizing a journalist's computers is a BIG DEAL, or so I would think, and the rush to do that without a hearing seems to me justified only if there is a danger of irreparable harm to someone, and I just do not believe that after three weeks there was any urgency to the situation. There was plenty of time for a subpoena and hearing. It isn't as if there were any secrets: Chen was on public record as having physical (not legal) possession of the iPrototype, and Apple well knew it was a brick so there was no urgent reason to recover it. If the goal was to recover the property, wouldn't it make sense to ask for it before busting in?

If the goal was to prosecute iFinder and all this was to identify him, there is a question of California's Shield Law protecting journalist sources; surely that justifies a hearing?

Morals and ethics are important, but so is abuse of power to punish without hearing, indictment, or trial.


This next doesn't need comment.

Working in a Green Certified Building

Apparently working in a certified "Green Building" might not be all that fun:


No word on strawberries

About 100 or so lawyers at the Federal Energy Regulatory Commission are in the midst of a move and will become the first tenants in a new building a couple of blocks down from the headquarters on First Street NE. Since FERC regulates electricity, natural gas and oil transmission, the commission appears most anxious that its offices meet the independent U.S. Green Building Council's certification standards.

"FERC is subject to unannounced inspections at any time to ensure that all" the standards are met, a move notice explained, so the office site must be "clean and orderly all day, every day." Deviation "from the plan to reduce paper waste and personal items," the instructions say, "will risk our . . . certification."

They assume, correctly, that lawyers are highly skilled deviators, so the "Move Do's and Don'ts Guide" is specific: "Prohibited items: Air Purifiers; clock radios and docking stations; coffee grinders; coffee makers; fans of any size; heaters of any size; humidifiers of any size; lamps of any kind; microwaves; personally owned printers; refrigerators; tea pots of any size; toasters; water coolers."

You're advised not to take personal books and documents with you on the move. And forget about the plants.

"Foliage will be strictly monitored within the [new] space due to requirements stipulated by the level of . . . certification," the instruction says. But a "reasonable amount of small plants are permitted on window sills. Plants are not permitted in common use spaces such as the reception areas." Take home "excess plants." (Loop warning: Small plants have a tendency to grow. You'll want to keep the pruners handy.)

Also, we're told there'll be no electric pencil sharpeners. Switch to mechanical pencils, or maybe bring a small knife to whittle a decent point. "No electronic tea makers will be allowed, tea can be made utilizing water and the microwaves provided." By implication, you're allowed a cup and maybe a saucer, possibly some sugar.

And a long tradition of gathering to gossip at the water cooler is over. "No water coolers will be allowed" in the new space, the guide says, because of certification standards. But "each [approved] refrigerator is equipped with a filtered water spout on the inside to resolve this issue."

So, as soon as that formaldehyde-like smell dissipates, let's meet by the fridge?







Saturday   TOP  Current Mail

This week:


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Sunday,  May 2, 2010

I had forgotten that we had these pages, and some of you will not remember them or have encountered them. Immediately after the September 11, 20o1 attack on New York City, we had considerable discussion of what ought to be done. There are several pages, all referenced in the summary file blackseptember.com. All told these pages make a reasonable summary of how we thought in those days, and some predictions on what was going to happen, One can compare the predictions with the actual outcome.


We saw "How to train your dragon" last night. Good movie. We paid extra for 3D. My impression is that it wasn't worth the extra money, and indeed the 3D was a distraction. The glasses weren't really clean and there was no way to clean them, they were not comfortable over my bi-focals. and all told I'd have watched the movie without them except that wasn't really possible. My experience with 3D is that the glasses interfere with enjoyment of the movie. Your mileage may vary. It's a good movie, and I am not sorry we went.


Catching up. slowly. Good bit of mail posted tonight on various subjects. Lots more tomorrow.






 read book now

 Sunday   TOP        Current View  

 Current Mail

This is a day book. It's not all that well edited. I try to keep this up daily, but sometimes I can't. I'll keep trying. See also the weekly COMPUTING AT CHAOS MANOR column, 8,000 - 12,000 words, depending.  (Older columns here.) For more on what this page is about, please go to the VIEW PAGE. If you have never read the explanatory material on that page, please do so. If  you got here through a link that didn't take you to the front page of this site, click here for a better explanation of what we're trying to do here. This site is run on the "public radio" model; see below.

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