Tax Avoidance & Intellectual Property


Dave writes about Amazon’s controversial one-click purchase patent (many business process patents, are I believe an abuse of the patent process). Evidently, Amazon assigned their patent(s) to Deutsche Bank as part of a credit agreement between 1995 and 1997.
I wonder if there might be a tax shelter angle to this (amazon was generating huge losses at the time, and other firms might wish to do a deal for the tax benefits of those losses)? Years ago, I worked for a major international beverage firm. One of their (this firm was not unique) tax reduction/avoidance strategies was to create the flavors in tax havens (Puerto Rico, Cyprus, Ireland among other places) and sell that essential component back to US entities at high prices (this is of course a rather simplistic analysis). The US entities then generated small margins or losses while the offshore unit generated the large margins. This tax strategy, among many others is discussed in the very enlightening book by NY Times reporter David Cay Johnston: Perfectly Legal.
Deutsche Bank, like many others, has been part of a number of tax shelter strategies.
This abusive patent process is the major reason I do not link to amazon (barnes & noble online is a fine alternative).

Methane Digester: generating electricity from cows


One would think that this type of thing should happen here first….
Maria Alicia Gaura writes:

After 25 years of persistent work, Marin County rancher Albert Straus has figured out a way to run his dairy farm, organic creamery and electric car from the manure generated by his herd of 270 cows.
Cheered on by a small gathering of engineers, environmentalists and fellow farmers, Straus stepped into a utility shed Thursday, switched on a 75- kilowatt generator, then stepped outside to snip the ribbon spanning a spanking-new electrical panel.

Madison is #1?


Forbes Mark Tatge writes about our “Miracle in the Midwest”:

David C. Schwartz is right at home in the dark. That’s where his fluorescent microscopes can do their work, scanning thousands of samples of DNA that make a slow crawl across computer screens and methodically map the human genome. All this activity is packed into a cramped room inside a lab at the University of Wisconsin at Madison. “Most people think I came here because I hated New York,” he says with a boyish smile and a twitch of the mustache that curls over his lip. “I came here to start a company

Interesting sidebar:

Out-of-state venture capitalists complain that most of these hatchlings need better management. G. Steven Burrill, who runs the San Francisco merchant bank Burrill & Co. and has invested $15 million to $20 million in young Wisconsin companies, bemoans the failure to capitalize on opportunities. “We see 100 deals a month in life sciences,” he explains. “But I don’t see even one a month from Madison

Burrill is correct – while there are many opportunities here, it is not generally a risk taking culture…. unfortunately.

Losing our Edge?


Tom Friedman writes about a recent trip to Silicon Valley:

Still others pointed out that the percentage of Americans graduating with bachelor’s degrees in science and engineering is less than half of the comparable percentage in China and Japan, and that U.S. government investments are flagging in basic research in physics, chemistry and engineering. Anyone who thinks that all the Indian and Chinese techies are doing is answering call-center phones or solving tech problems for Dell customers is sadly mistaken. U.S. firms are moving serious research and development to India and China.
The bottom line: we are actually in the middle of two struggles right now. One is against the Islamist terrorists in Iraq and elsewhere, and the other is a competitiveness-and-innovation struggle against India, China, Japan and their neighbors. And while we are all fixated on the former (I’ve been no exception), we are completely ignoring the latter. We have got to get our focus back in balance, not to mention our budget. We can’t wage war on income taxes and terrorism and a war for innovation at the same time.

Curriculum was and is a hot topic in the Madison School District.
Further, the tech industry has been playing footsie with Hollywood (ironic, given the size of the tech industry vs Hollywood) regarding our fair use rights. Dan Gillmor has recently published a draft version of his upcoming book: Making the News. Chapter 11 includes some very troubling quotes:

  • Jack Valenti, head of the MPAA (Motion Picture Association of America): “And he was adamant that technology in the future — including personal computers — will have to be modified to prevent people from making unauthorized copies.. The result: “Give the copyright holders the ability to “fix” all of its perceived infringement problems, and you give copyright holders unprecedented control over tomorrow’s information, over culture itself. Here’s an example: It is currently illegal to copy a snippet of video directly from a DVD to use as part of another work. But you can do this with a piece of text, though the e-book industry is working to prevent even a small cut and paste. If we need permission, or have to pay, simply to quote from other works, scholarship will be only one casualty.”
  • No technology company has done more to curry favor with the copyright cartel than Microsoft, a company that repeatedly ignored copyright law in building its own powerful business. Here’s how Cory Doctorow put it:

    When Microsoft shipped its first search-engine (which makes a copy of every page it searches), it violated the letter of copyright law. When Microsoft made its first proxy server (which makes a copy of every page it caches), it broke copyright law. When Microsoft shipped its first CD-ripping technology, it broke copyright law.
    It broke copyright law because copyright law was broken. Copyright law changes all the time to reflect the new tools that companies like Microsoft invent. If Microsoft wants to deliver a compelling service to its customers, let it make general-purpose tools that have the side-effect of breaking Sony and Apple’s DRM, giving its customers more choice in the players they use. Microsoft has shown its willingness to go head-to-head with antitrust people to defend its bottom line: next to them, the copyright courts and lawmakers are pantywaists, Microsoft could eat those guys for lunch, exactly the way Sony kicked their asses in 1984 when they defended their right to build and sell VCRs, even though some people might do bad things with them. Just like the early MP3 player makers did when they ate Sony’s lunch by shipping product when Sony wouldn’t.
    Unfortunately, Microsoft’s answer has been to build Digital Rights Management — the more appropriate term is “Digital Restrictions Management” — into just about everything it makes.

  • Microsoft, Intel and several other major technology companies are now working on a “Trusted Computing” initiative, putatively designed to prevent viruses and worms from taking hold of people’s PCs and to keep documents secure from prying eyes. Sounds good, but the effect may be devastating to information freedom. The premise of these systems is not trust; it’s mistrust. In effect, says security expert Ross Anderson, trusted computingwill transfer the ultimate control of your PC from you to whoever wrote the software it happens to be running.” He goes on:


    [Trusted Computing] provides a computing platform on which you can’t tamper with the application software, and where these applications can communicate securely with their authors and with each other. The original motivation was digital rights management (DRM): Disney will be able to sell you DVDs that will decrypt and run on a TC platform, but which you won’t be able to copy. The music industry will be able to sell you music downloads that you won’t be able to swap. They will be able to sell you CDs that you’ll only be able to play three times, or only on your birthday. All sorts of new marketing possibilities will open up.

    But now consider the ways it could be used, beyond simple tracking by copyright holders of what they sell. Anderson writes:

    The potential for abuse extends far beyond commercial bullying and economic warfare into political censorship. I expect that it will proceed a step at a time. First, some well-intentioned police force will get an order against a pornographic picture of a child, or a manual on how to sabotage railroad signals. All TC-compliant PCs will delete, or perhaps report, these bad documents. Then a litigant in a libel or copyright case will get a civil court order against an offending document; perhaps the Scientologists will seek to blacklist the famous Fishman Affidavit. A dictator’s secret police could punish the author of a dissident leaflet by deleting everything she ever created using that system – her new book, her tax return, even her kids’ birthday cards – wherever it had ended up. In the West, a court might use a confiscation doctrine to `blackhole’ a machine that had been used to make a pornographic picture of a child. Once lawyers, policemen and judges realise the potential, the trickle will become a flood.

    The Trusted Computing moves bring to mind a conversation in early 2000 with Andy Grove, longtime chief executive at Intel and one of the real pioneers in the tech industry. He was talking about how easy it would soon be to send videos back and forth with his grandchildren. If trends continued, I suggested, he’d someday need Hollywood’s permission. The man who wrote the best-seller, “Only the Paranoid Survive,” then called me paranoid. Several years later, amid the copyright industry’s increasing clampdown and Intel’s unfortunate leadership in helping the copyright holders lock everything down, I asked him if I’d really been all that paranoid. He avoided a direct reply.

I’ve often wondered if our tech industry & hollywood’s attempts to impose their fair use & big brother controls on PC’s will destroy their export business (and our jobs). China and intel recently battled over a wireless security spec.

Knob Gallery – Successful Milwaukee Web/Physical Business


Joan Shelley translated a “knack for knobs” into a fast-growing $1.4m business, according to Doris Hajewski:

Knobs are an unusual foundation for a business, especially for a triage nurse.
The mother of eight children, Shelley turned a flair for decorating cakes into a home business. In rapid succession in the 1990s, that led to assisting with commercial kitchen design and then teaming up as a designer with Amish craftsmen from southern Illinois. They made cabinets, and every one of those cabinets needed a knob or handle.
“Customers, especially the high-end ones, wanted something special in hardware,” Shelley said.
She acquired lots of catalogs, but she wished there was an easier way to find what the customers wanted.
Enter Kristina Shelley, the self-described computer geek of the Shelley brood. At age 16, in the late 1990s, she had mastered the Web design classes at Oconomowoc High School. She started taking college classes and working part-time at Apex, a now-defunct Web development business in Milwaukee.

Wal-Mart – a nation unto itself?


Steve Greenhouse writes a useful article on the economic & cultural implications of the Wal-Mart system:

We already know that Wal-Mart is the biggest retailer. (If it were an independent nation, it would be China’s eighth-largest trading partner.) We also know that it is maniacal about low prices. (Some economists say it has single-handedly cut inflation by 1 percent in recent years, saving consumers billions of dollars annually.) We know that its labor practices have come under attack. (It charges its workers so much for health insurance that about one-third of them do not have it.)

Saving money on your phone bill: VOIP


David Pogue reviews the latest VOIP (Voice over Internet Protocol) services, which allow you to call anywhere in the United States for as little as $20.55/month (plus your broadband internet connection):.

This development is annoyingly called voice-over-Internet protocol, or VoIP, which means “calls that use the Internet’s wiring instead of the phone company’s.” When you sign up, you get a little box that goes between your existing telephone and your broadband modem (that is, your cable modem or D.S.L. box, a requirement for most of these services).
At that point you can make unlimited local, regional and long-distance calls anywhere in the United States for a fixed fee of $20 to $40 a month (plus the cost of your broadband Internet service, of course). Overseas calls cost about 3 cents a minute. These figures aren’t subject to inflation by a motley assortment of tacked-on fees, either; voice-over-Internet service is exempt from F.C.C. line charges, state 911 surcharges, number-portability service charges and so on.

Save money, switch! I’ve been using www.packet8.net for some time.
Two alternatives beyond the phone interface: ichat | skype

Madison Property Taxes: “Everybody’s Richer”


According to city assessor Ray Fisher Friday when 2004 property assessments were released. “My house went up 10 percent this year. I look at it as money in my pocket.” – Beth Williams writes. Interesting perspective…. Can’t say that I agree with Ray on that one. Bill Novak writes:

“Last year, assessments went up 8.6 percent and the local real estate tax was up 7.1 percent, according to the Assessor’s Office. In 2002, assessments were up 8.1 percent and taxes went up 3.2 percent. In 1997 and 1999, assessments went up and taxes went down.” What about 1998, 2000 and 2001?

There has been talk in the state legislature of completely shifting school taxes from the property tax to other sources, such as the sales tax. Wayne Wood, a retiring representative from Janesville and Rep Mickey Lehman (R-Hartford) developed a proposal that would have used a sales tax increase to reduce property taxes for schools.

(more…)

Learning to Expect the Unexpected


Former Wall Street bond trader and author of the quite useful book Fooled by Randomness pens an op-ed piece in today’s New York Times where he describes black swans (an outlier, an event that lies beyond the realm of normal expectations) with respect to 9/11 and the current investigation:

Most people expect all swans to be white because that’s what their experience tells them; a black swan is by definition a surprise. Nevertheless, people tend to concoct explanations for them after the fact, which makes them appear more predictable, and less random, than they are. Our minds are designed to retain, for efficient storage, past information that fits into a compressed narrative. This distortion, called the hindsight bias, prevents us from adequately learning from the past.
Black swans can have extreme effects: just a few explain almost everything, from the success of some ideas and religions to events in our personal lives. Moreover, their influence seems to have grown in the 20th century, while ordinary events ? the ones we study and discuss and learn about in history or from the news ? are becoming increasingly inconsequential.
Consider: How would an understanding of the world on June 27, 1914, have helped anyone guess what was to happen next? The rise of Hitler, the demise of the Soviet bloc, the spread of Islamic fundamentalism, the Internet bubble: not only were these events unpredictable, but anyone who correctly forecast any of them would have been deemed a lunatic (indeed, some were). This accusation of lunacy would have also applied to a correct prediction of the events of 9/11 ? a black swan of the vicious variety.