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I was hanging the other day with some ex-Google folks.  There are more and more of these as the search company matures and the fact that I’m running across a few is, in itself, meaningless.  But without giving away any trade secrets (which the ex-Googlers absolutely refused to do) these chance encounters have opened my eyes a bit to how things actually function inside the Googleplex.  It’s different, really different.

Google isn’t organized like any tech company I’ve ever worked in, that’s for sure.  Peer review seems to be at the heart of nearly everything.  Yes, there are executives doing whatever it is that executives do up in the Eric/Larry/Sergeysphere, but down where the bits meet the bus most decisions seem to be reached through a combination of peer review-driven concensus and literal popularity polls.

The heart of Google is code and all code there is peer reviewed TO DEATH.  The result is absolutely the cleanest code in the digital world, forced into that condition by what can be a torturous process of line-by-comment-by punctuation mark analysis sometimes over-driven by people who take their work WAY too seriously.  You know the type. Peer review wars have apparently been known to break out at Google, though rarely. Usually the pedants are accommodated and, in fact, they for the most part win.  The code is clean as a result, but the process is s-l-o-w, or so I’ve been told.

And the code had better be clean, because at Google developers outnumber testers by 50-to-1.

But peer review at Google goes way beyond looking at the code.  Hiring requires peer review.  Promotion requires peer review.  Presumably even firing requires peer review, though I didn’t have anyone actually tell me that.  All the technical workers at Google are involved in peer review activities a LOT of the time — up to 20 percent, in fact.

Which brings us to the vaunted 20 percent time Google engineers are supposed to get to work on anything they like.  Most of them apparently use that time for corporate housekeeping — for doing all that peer reviewing.  It makes sense: if you want to appear productive in your main job yet are still required to do all this work that would normally be handled by managers, when else can you do it but during time you don’t have to account for?

This may be part of the reason that the Google 20 percent time hasn’t spawned as many new products as I expected it would.

But wait, if all the developers are effectively making management decisions through a peer review process, what are the managers doing? They are going to meetings, I’m told.  The typical Google manager has 50-60 direct reports and has time for nothing but meeting after meeting.  In a typical nerds-versus-suits scenario, the ex-Google developers I spoke with had no idea exactly WHAT their managers actually did.

Someone at Google is buying companies, I’m sure, and those decisions have to take place at an upper management level where checks are written, even at Google. What I find really interesting is what happens after the products are acquired.  Who works on them and what features get changed or modified? That, too, is apparently up to the engineers.

At Google I am told developers bid for what they want to do with their time.  If there’s a big job to be done people commit to parts of it.  And the parts nobody commits to do?  They don’t get done.  Really.  So when we wonder exactly how a JotSpot, which I really liked, turns into a Google Sites, which I really don’t like, that morphology apparently comes from people changing what they want to change.

There is no marketing input.

Effectively, there is no marketing.

I am not making this up.

This approach isn’t without precedent.  I saw much the same thing during the early days at Apple where new products were entirely driven by engineering.  Engineers built whatever they wanted to build and it was up to the company then to sell it.  Google apparently operates in much the same fashion.

All of this helps explain the Google tendency to have almost eternal betas, because there are no marketing-driven deadlines… ever.  And why should there be? Given that most Google products aren’t intended to directly produce revenue, it may not matter.

This explains, too, how Google products — even those popular with their users — sometimes just fade away.  Nobody wants to continue to support it, so the product dies.

Google is not your father’s software company, that’s for sure.  The fact that it works so well (makes so much money) comes down to the realization I had that Google isn’t a software company at all.  It’s an advertising company.

Ah, now THAT makes sense.

I, Cringely readers from the Boston area who want to see if I reflect light in person can run that controlled experiment next Thursday, September 17th, when I speak to the Society for Information Management’s Boston Chapter.  Here’s the link. My topic is Consumerization of IT: Is Corporate IT about to Lose Control Again? The answer of course is “yes,” but the devil is in the details. Please attend if you can.

Today is the Labor Day holiday in the USA, so to honor the more vulnerable parts of our society and economy I’m engaging in this fantasy rethinking of our current economic crisis.  If only……

When the “unsinkable” ship Titanic hit an iceberg and sank on its maiden voyage in 1911, as any teenage girl will tell you, the rich people got nearly all the lifeboats (except for John Jacob Astor IV who ordered another drink, giving up his seat), dooming the lower-class passengers including, of course, poor Leonardo DiCaprio. Much the same thing seems to be happening in the case of the current economic crisis, where the people who are hurting the most seem to be getting the least.  I’m beginning to believe the crisis could have been fixed quicker and cheaper simply by helping the women and children instead of the bankers.

This began as a mortgage crisis.  Lenders dropped their standards on loans, giving them to people who shouldn’t have qualified (yes, they applied for those loans so are also culpable), driving housing prices up in a bubble that eventually popped and here we are with eight percent of all mortgaged houses in foreclosure and home prices down 30-40 percent from two years ago.  The technique our government used to deal with this was to prop-up the bankers, not the borrowers.

Why?

That’s a question I have been asking all over and the smart money answer generally comes down to: 1) that’s the way the system is set-up; 2) that’s the way we’ve always done it, and; 3) it would be too complex to deal with individuals — better to deal, instead, with a few dozen banks.

Why?

The system was widely perverted to deal with the current crisis; it wasn’t “business as usual” at all.  Companies that weren’t (and still aren’t) bank holding companies were declared to be so and got money from the Fed and Treasury as a result.  Same for insurance companies and brokerage firms and car companies that remained as they were but got money still from the Congress or through sleight-of-hand by Fed chairman Bernanke.

Doing things “the way we’ve always done it” is what got us into this mess.

And the miracle of information technology makes it just as easy to send money to people as it is to take it from them in the form of taxes.  Saying that a bank has to be in the middle makes no sense at all. PayPal would gladly assume that function, if it is truly needed.

I’m beginning to realize we could have taken a completely different approach to the problem and simply treated the symptom, inserting what computer jocks call a “wait state” into the mortgage system so panic could subside, rational adjustments could be made, and life could be eased back to normal.

Remember that economies are cyclical and a lot of good financial planning is simply having enough reserves to survive until things get better.  That could have been our major economic tactic in dealing with the crisis in 2008. Instead of pumping $700 billion to $1.3 trillion (nobody knows the real number) into economic stimulus and bail-outs, the U.S. government could have simply paid everyone’s mortgage — EVERYONE’S — for six months.

There are 51 million mortgages in America and the average mortgage payment in 2006 was $1686, so paying everyone’s mortgage for six months would have cost $516 billion — hundreds of billions less than the Bush/Paulson/Obama/Geithner/Bernanke plan, and quicker, too.

The money that people would otherwise have used to make their mortgage payments could have gone in part for other things, making it effectively a huge economic stimulus in its own right.  With mortgages paid in full there would have been no foreclosures OR bank failures during that six month period.  Yes, there would still have been problems with the banking system that needed  correction, but there would have been six months to do the correcting.

Lehman Brothers would still be in business, Bear Stearns, too.  Merrill Lynch would be independent. AIG would not have failed. Even Bernie Madoff would probably still be in business — at least for awhile.

So why didn’t we do it that way?  Because it would have been putting women and children first.

I need a drink.

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Note there is additional new material at the end of this column — Bob

I am old — so old that when I was a college freshman there were dormitories filled with men and others filled with women but no dormitories at all filled with both men and women, at least not where I went to school.  The women had it so bad that there was literally a time clock for signing-in and -out under the stern gaze of an old biddy tending the front desk — a desk she was determined that I, in particular, would NEVER get past.

And yet I did.

There was a public room for meeting visitors at the entrance of the women’s dorm, there was the front desk, and behind it the hated time clock with about a hundred paper cards — one for each resident — for punching in and out.  Women had to be in their dorms (I am not making this up) by 10PM, after which the front desk closed and anyone coming-in later than that presumably went straight to jail — or to Hell — it was never made clear which.

Then one night I stole all the time cards.  The biddy was gone from her post for just a moment, I vaulted the swinging gate, gathered-up all the time cards, and ran outside with my haul, which I later burned.

The cards were never replaced.

Sometimes change requires a catalyst and 39 years ago at a little college in Ohio I was that catalyst.  Social mores were changing, even in Amish country, and it was only a matter of time before these same-sex barriers would fall.  But still something has to happen to MAKE them fall.

I sense something similar coming for higher education in America, but this time it is likely to be the embrace of virtuality and what will go away could be the school, itself.

MIT has all its lectures available for viewing for free over the Internet.  Why hasn’t some entrepreneur yet leveraged this amazing act of generosity?  Some little school could outsource its entire physics department, for example, using MIT lectures and a single professor in-house.  My physics department had only 2.5 professors (the .5 was the department chair who drove a cab on the side) and we didn’t have the benefit of MIT video.

There is enough good material available for free online right now that it would be easy to create a virtual university (WikiVersity?) with the only thing missing being the granting of degrees.  It’s that whole “degree from MIT” thing that allows that school not to worry about sharing its lecture bounty, because in the education system lectures are viewed as worthless unless they lead to a degree.

Why is that?

My friend Richard Miller (he designed the Atari Jaguar video game console eons ago) is one of the smartest engineers I’ve ever met yet he doesn’t have a degree in engineering.  Apple II designer Steve Wozniak got his degree from UC Berkeley only after leaving Apple in the early 1980s.  In both cases their employers couldn’t have cared less.

What drives the education industry is producing degrees while what drives the computer industry is producing products and services.

When was the last time any employer asked to see your academic transcript?  Have they ever?

What’s missing here is the higher education equivalent of a GED.  Someone will come up with one, or they should, because all the other parts of the system are ready to go.

Cushing Academy, a tony prep school in western Massachusetts, is right now replacing its 20,000-volume library with a “learning center” containing 18 eBook readers, three giant TV screens, and a $12,000 espresso machine.  I wonder why they need a building or even a room at all; wouldn’t it be cheaper just to give each kid an eBook reader and a Starbuck’s gift card?

We’re on the cusp of a new era where the marginal cost of insight is low enough to create new kinds of virtual education institutions.  The important concept here is insight, which means more than fact, more than knowledge.  It is the link between facts and knowledge, a true act of understanding that enables thinking people to create something completely new.  Without insight you don’t know jack. But insight generally comes through personal connections — connections that to this point we’ve typically had to create campuses and pay $50,000 per year to enjoy.

That no longer makes sense.

Education, which — along with health care — seems to exist in an alternate economic universe, ought to be subject to the same economic realities as anything else.  We should have a marketplace for insight.  Take a variety of experts (both professors and lay specialists) and make them available over the Internet by video conference.  Each expert charges by the minute with those charges adjusting over time until a real market value is reached.  The whole setup would run like iTunes and sessions would be recorded for later review.

Remember, all lectures are also available online for free. What costs is the personal touch.

Say a particularly good professor wants to make $200,000 per year by working no more than 20 hours per week or about 1000 hours per year.  That gives them a billing rate of $200 per hour.

Now look back at your university career.  How much one-on-one time did you actually get with the professors who really influenced your life?  I did the calculation and came up with about two hours per week, max.  Imagine a four-year undergraduate career running 30 weeks per year — 120 total weeks of school — times two hours of insight per week for a total of 240 hours.  At $200 per hour the cost comes to $48,000 or $12,000 per year.

That’s a huge savings compared to the $200,000+ an MIT-level education would cost today (remember the MIT online degree — there is one — costs the same as if you were attending in Cambridge).  And ideally the pool of insightful experts would be far greater than any one university could ever employ.  And that’s the point of this exercise; it can’t be an emulation of a traditional university, because that would inevitably disappoint — it has to be in at least one way clearly, obviously, stupendously BETTER than what’s available now.

This could happen tomorrow, the pieces are all there ready to be put together.  Ironically it leverages one of the great red herrings of the Internet era — micropayments.  So much could happen, we’ve all said, if only we could build a micropayment system that would actually work.  Well we can, and what makes it work is that the payments at $200 per hour aren’t so micro.  But they are micro enough.

It’s time to vault the gate and burn those cards… again.

Here’s an update as of Sunday night, September 6th — Bob

A number of readers have cited a feature story from Washington Monthly about an online university they see as very similar to the one I proposed above, charging only $99 per month.  The story is here and the school in question is called Straighterline and I found something of a critique of the program here in the Chronicle of Higher Education, which may have an axe of its own to grind.

Straighterline is interesting and cost-effective, but it isn’t exactly what I proposed.  Straighterline is more like online junior college with mainly introductory courses.  this is not to say that it couldn’t become more in time and I hope it does.  But to do so the company will have to take a somewhat different approach.

Straighterline has a problem with accreditation — they can’t get it.  So they cut deals with no-name schools to effectively launder their credits, passing them on to third-party schools.  I see nothing wrong with this but in time Straighterline or schools like it will have to take a more direct approach to the problem of gaining acceptance.  The University of Phoenix did that through the simple expedient of offering real classes all over the place AND charging a lot more than $99 per month for all-you-can-learn.  Exciting as that price is, it is precisely what scares the crap out of many established colleges.

If I were running Straighterline, then, I’d get ready to file a big restraint of trade lawsuit against some big vulnerable school caught up in, say, an NCAA athletic recruiting scandal.  ”Pick your targets carefully,” Pa Cringely always said.

The other thing I would strongly recommend is that Straighterline put some big bucks into recruiting its own stellar faculty.  Spend whatever it takes to get the top people in some discipline to start.  Hire academics if you can and lay practitioners if you can’t.  Most academic contracts don’t prohibit teaching part-time elsewhere and if they do try to stop the practice, well that’s just a further example of restraint of trade.

As for the traditional schools with their red brick overhead, they remind me of a crowd I spoke to years ago in Minneapolis when I tried to explain the Internet to the people who run America’s many state lotteries.

Lotteries, it turns out, are actually run by folks who used to be at the Department of Motor Vehicles.  They have a monopoly in their states on gambling and are determined to pursue it as a form of sin tax.  The idea that I presented in 1998 that Internet gambling could eventually hurt them was laughable: didn’t those Internet folks know the lotteries had a monopoly in their states?

Yeah, right.

My recommendation was to take their games to the Internet and appeal to potential customers outside of Illinois or Iowa, maybe grab some of that easy money from Abu Dhabi.  They looked at me like I had two heads, but history has shown I was correct.

And it will be the same way with my proposed online university or with Straighterline Pro, if that ever comes to be.  Education is a talent business and anyone who can gather the best talent will offer the best service and have the greatest success.  This doesn’t mean that Stanford and MIT will die, far from it.  But it means that some lesser institutions WILL die, while hybrid operations that are entirely new and different may well thrive.

Imagine the various higher education equivalents of drivers schools for people working-off their traffic tickets (remember Comedy Traffic School?).  With a solid curriculum available online to any institution, one point of differentiation can become location (Hawaii, California, France, on ship, etc.) or ambiance (health spa, sports, luxury, religious, etc.).  The classes are identical, but where do you want to drink beer, and with whom?

Maybe this seems silly, but it is also one likely future of higher education.

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What happened to Second Life?  The 3-D virtual world from Linden Lab is still very much around but I don’t spend much time there, do you? Second Life has peaked.  And there is something to be learned from this transition.

Facebook is hot right now and Second Life is not, and some of that comes down to the difference between fantasy and reality.  Second Life is a fantasy environment  — an EverQuest without the quest — and that’s the problem.  It has the heavy processing requirements of a game without the rich textural depth of a Tolkein or even of real life.

Facebook, being tied to the real lives of the people involved in it, never runs out of anything, whether it is server power (minimal requirements there. at least in comparison to Second Life) or stuff to talk about.  Second Life is barren in comparison.  By attempting to imitate life, it pales beside the real thing.

Take dancing, for example.  In Second Life dancing performs the social function that in real life is performed by eating.  You can’t eat in Second Life, yet most of the time when people hang out together in real life eating is what they do.  So in Second Life, if they aren’t fighting or making-out, the avatars dance. But it just isn’t very satisfying.

Facebook doesn’t have a dancing/eating problem because it doesn’t purport to be anything like a 3-D virtual world — just a wacked-out representation of our individual lives for the benefit of our friends.

Another problem with Second Life is real estate.  As many companies have done, you can buy 3-D virtual social prominence, whether you deserve it or not.  What Second Life is actually selling isn’t real estate or even server capacity — what they are selling is us, or at least access to us by people who want something.  I don’t like that. Facebook is not immune to this, either, as we see in stories this week about how to buy Facebook friends. But for the most part the way to get lots of friends in Facebook is by being interesting.  Now there’s a concept.

The best purpose I’ve seen for Second Life is for showing videos to your friends.  Everyone meets at a particular spot, watches an mp4 video (thanks to the iPhone nearly every YouTube video is now available in the H.264 mp4 format), commenting back and forth like Mystery Science Theater 3000. But now DeskTube offers a very similar capability with real faces, not avatars, and in Facebook, too.

There’s less and less drawing me to Second Life, though as long as its around I’ll never leave completely.

Where else would I do my 13 hours of aerobics and 90 miles of running per week?

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Sales of video game consoles and video game software are down this year as are sales of DVDs, none of which are supposed to happen in a recession.  Hollywood thrived during the Great Depression, remember?  And now the U.S. Centers for Disease Control drops a bomb on us that the average U.S. video game player is 35 years old, overweight, and somewhat depressed.  This is news?  Apparently it is, and looking behind these numbers helps make some sense of the economic picture.

In the entertainment industry video games have provided really significant revenue for more than a decade.  If we start with the base movie business the sole revenue source used to be theatrical releases, then in the 1960s came broadcast television distribution of movies. The 1970s brought cable TV distribution and toy merchandising (action figures). The 1980s brought home video distribution through VHS tape sales and rentals, and the 1990s converted those VHS businesses to DVD. In the 2000s the incremental revenue bump was different, coming largely from a new synergy between video games, comic books, and movies augmented by an exploding international market.  Many new movies were based on video games and comic books, while many video games were based, in turn, on movies. Simultaneous global releases became the norm.

To a movie producer, then, the decision to invest an average $100 million in making and marketing a major motion picture comes down to planning for all these different lines of businesses right down to and including Happy Meal toys at McDonald’s.  With enough lines of ancillary income it didn’t matter so much if the film was a critical or even a box office success: eventually it would make a profit.

Then along came 2009.

The film box office is slightly bigger than in 2008, thanks in large part to higher ticket prices, but most of the other sources of income are lower, some of them dramatically so.  DVD sales, for example, are down by 25 percent.  Is this the effect of Red Box $1 movie rentals or maybe video piracy?  Nope. The $60+ billion domestic entertainment industry we thought was based on teenage boys is in trouble because it was actually based on middle-age men pretending to be teenage boys.  And those middle-age men need to support themselves.

That’s what’s going on here: the guys stopped buying games so they could make their car payments, instead.  It took an unprecedented recession — the worst in 70 years — to coax-out this effect but it is clear that if things get bad enough even Hollywood hurts.

Economies are cyclical things and a lot of economic recovery is just surviving to play another day.  We see that in the game console price cuts that just came from Sony and Microsoft and will surely come shortly from Nintendo, too.  These price cuts are intended both to keep the factories running until natural demand can recover and they are supposed to stimulate game sales which in turn pay royalties back to the console makers. And it will work, though at a cost to the companies not just in dollars but also in market positioning.  Just as we’ve seen in PCs, there is a downward trend in product price points for games, too.  Sony is very unlikely to introduce another $399 game console ever, just as the $2000 PC is pretty much an artifact of history.

This is good, right?  Cheaper is better.

It is VERY good for game players and other consumers, I think, for two reasons: 1) in game software there will be an inevitable flight to quality as crappy new titles are killed before they get to market and the game companies put their marketing dollars behind their better games, and; 2) this may be a fantasy on my part, but now that we know the market sweet spot is actually 35, fat, and depressed, maybe the game designers will start to write for their real audience.

We could be about to enter a video game renaissance.

Nah.

Here’s a video just released by the Kauffman Foundation covering their economic bloggers conference from earlier this year.  While I am one of the people in this video, I think it takes a very good look at the emerging role of economic bloggers in both the media and our culture.  It’s also a delight to see such high production values, though I sure need a haircut.

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Readers have lately been asking me to write about IBM.  It seems the BBC has been on the case somewhat over imposed changes to Big Blue’s UK pension scheme.  These mirror similar — though more draconian — changes imposed on IBM’s U.S. workers a couple years ago.  Alas, this just seems to be a trend we’ll be seeing more and more of.  The problem isn’t in IBM per se, it’s in the distorted reward structure perceived by most public companies.

Two years ago when I covered IBM’s yet-to-be-announced layoffs in some detail it sent the company into a tizzy of denial.  Why?  “Because you were right,” said a source who still works at IBM.  “You called them on the big changes they were planning to make, forcing the company to issue denials then drag those changes out over a couple years where they’d intended to impose them all at once. They never thought one blogger could have that much impact.”

Explain that to my kids, who think I type for a living.

What happened two years ago was IBM deciding to move most of its jobs offshore to save money after a sobering look at the life cycle cost of its U.S, workers. If you look at the total future cost of an American employee for the next 15 years — it is a pretty big number.  Then add the double digit inflation cost of U.S. health care and that number becomes bigger still.  The only way companies like IBM see themselves being able to continue to operate is by cutting retirement benefits and/or shipping jobs off shore.  In IBM’s case they are doing both.

This is at the heart of the current health care debate, because the cost of medical care is killing U.S. jobs.

The IBM USA pension plan was nuked a couple years ago.  Many U.S. workers got less than 15 cents on the dollar for the present value of the pension they would have received.  Retirement health care benefits for IBM workers are now down to the equivalent of about 18 months of present coverage. This trend is not limited to IBM.  How many auto workers have just lost pension and retirement benefits?

A few years ago Congress was considering legislation that would separate pensions from companies so the company could not spend or lose it.  We sure blew that one.

This downward trend is continuing. IBM — like nearly all its competitors — is shipping-in workers from India to staff many new projects.  The work could be done as well — perhaps better — by the U.S. workers who were not long ago laid-off.  There is something really wrong when a company will lay off its U.S. workers and then import Indian workers to do the same work on-shore.

Now some of IBM’s American workers are being asked to consider taking jobs in Bangalore and other foreign outposts. This program creates new expatriots, giving each a one-way plane ticket.  Pay will be in local currency, possibly at local pay scales.  IBM is being very elusive about these details.  But it is clear that the transported workers will be off U.S. benefits.

But as I say, IBM is merely one example of how messed up things have become for U.S. companies.

During the recession IBM has done extremely well financially with profits better than forecast every quarter. They did this by relentlessly watching their money.  Not only do they look at the numbers for the next quarter, but for the next several years.

The automotive industry on the other hand has ignored the long term in their business planning.  As a result most car companies were completely blindsided by the recession.

IBM has watched the growing costs of maintaining its U.S. work force.  For years they have been cutting staff and moving work offshore.  The U.S. auto industry on the other hand was dependent on future car sales to cover obligations made in the past. IBM planned ahead and started shifting the business out of the U.S.  Other firms did nothing and have suffered horribly.

What this means is that we should expect more of the same in all industries. Benefits will decrease and jobs will depart.

The new reality at IBM is that if you’re brilliant, work really hard, and earn a world-class degree from a U.S. university, IBM may well have a job for you at one of its U.S. research sites working as a “complementary worker.” But don’t expect that job to last for long. Be prepared to ship out to India or China as a “long-term supplemental worker” after you’ve soaked up knowledge for 13 months.

Newsweek recently reported that IBM, HP, Accenture, and others are finding it profitable to detach from the United States (even patenting the process).

“IBM is one of the multinationals that propelled America to the apex of its power, and it is now emblematic of the process of creative destruction pushing America to a new, less dominant, and less comfortable position,” Newsweek said.

This is the HR equivalent of a neutron bomb, which kills people but leaves structures unscathed. So all these companies will be leaner and meaner — mean enough that there may be nobody left to buy their products.

It comes back to the common perception that the sole function of public companies and their CEOs is to “maximize shareholder value” — a phrase that is interpreted to mean “maximize next quarter’s earnings-per-share.” This philosophy works beautifully with the slightly less than four year average tenure of a U.S. public company CEO.  Long before the effects of these bad decisions can show the CEO has bailed, descending beneath his golden parachute toward some retirement heaven.

Where did this cult of shareholder value maximization come from?  And who says that’s the prime directive and nothing else ought to matter?  Not me. In fact it is bad policy both for the companies and for our society in general.  Here’s a good explanation of this phenomenon and what’s wrong with it.

Companies like IBM that take this position are hurting America.  The kids graduating from college now are the first American generation that is likely to do less well financially than their parents.  My kids will do less well than me.  One reason for this is that we’re eliminating high paying jobs and replacing them with lower-paying service jobs.  IBM towns like Rochester, Minnesota and Armonk, New York thrived economically because Big Blue pumped money into the local economy by creating high-paying tech jobs.  What happens to the local economy when those jobs are exported? It declines, perhaps permanently. That decline does not have to be inevitable unless we make it so.

Companies and countries follow certain life cycles, but we do ourselves and our culture a disservice by thinking those curves aren’t affected by the corporate decisions we make.

If we’re going to be analytical, let’s at least do it correctly.

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This column started out being titled “Is Goldman Sachs Evil?” until I realized the issue is far more broad.  It began with a blog post by my old boss Jim Casella, who now runs Asset International, a financial publisher.  Jim concludes after a review of some recent and very negative press that Goldman isn’t evil, per se, just cocky.  But by comparing the investment bank to sports teams and players I think Jim makes a grave error.  Goldman Sachs isn’t evil, just stupid.  And that stupidity comes in the form of their witless abuse of technology.

Jim’s sports analogies are misplaced because while sporting events must inevitably have winners and losers economies don’t. TRADING has winners and losers but Goldman is an INVESTMENT bank (worse still, they are now a bank holding company) pretending to be on the side of economic growth.  Trading relies on finding and exploiting inefficiencies in the system while investing grows the economy.  Trading is a parasite on investing.  I’m not saying to ban it, I AM saying that technology has enabled outfits like Goldman to be such efficient parasites that they threaten the survival of their hosts.

This is fine if we look at it as a process of evolution.  Maybe what we are going through lately is natural selection that will over time improve our culture and society.  But that’s not the way it is being pursued by Goldman and others: they aren’t envisioning some future after they’ve killed their host, nor do their techniques allow the host to recover before being bitten again.  I’ve talked with these guys and they are clueless about the implications of their work. The deepest they’ll go is to allow that China will likely be the next economic superpower so they’ll just move their operations to Beijing or Shanghai.

That doesn’t do much for Ma and Pa back on the farm.

Economies need a little slack to function smoothly but these companies are removing all of it. All they need to be is a little less greedy, but their greed apparently knows no bounds.

Their techniques usually come down to the application of technology.  Faster computers and bigger pipes allow the relentless application of small advantages that eventually suck profit out of the market.  The answer is bigger and bigger guns wielded by bigger and bigger players, which is fine unless you aren’t a big player, which pretty much describes the rest of us.

This process builds financial bubbles until they pop then it is left to the despised government to fix things.  But what if government runs out of options?  Then there is economic revolution.  That’s what happened in the former Soviet Union in 1989 — a process we in the west cheered at the time.

But what if it happened to us?

We can’t imagine that.  Our economic policy doesn’t imagine it, nor does our foreign policy, because superpowers don’t acknowledge weakness.

But we ARE weak.

It all comes back to technology.  Remember the work of Black and Scholes that underlay the staggering growth of derivative securities was based on thermodynamics. We use principles from one area in another to good effect, but what makes an efficient heat exchanger can make a deadly security.

There’s a sore failing here, I believe, in the application of ethics to technology.

Ethics?  What does ethics have to do with Boyle’s Law?

Maybe nothing, maybe plenty, but the overall problem is that those who claim to understand ethics aren’t so good at the technology parts, and vice versa.  We saw that with Enron, which was technology gaming the market, and we evidently haven’t learned much since.

Google’s corporate motto is “Don’t be Evil.” I thought that was silly when I heard it first.  But now I think it is the height of wisdom.  Because the techiest of techie companies probably knows better than most the power of tweaking systems to death.

It’s possible.  We CAN kill our own culture trying to preserve or defend it.  Understanding that and helping to make change as painless as possible comes down to the best efforts of those few people who really understand the complexity of our society — many of whom are readers of this column.

Everything is interconnected in this era where technology drives society yet few really understand technology.  If someone can take down Twitter because of a petty grudge then ANY information system is vulnerable.  Sometime neglect is all it takes.

And neglect is all around us.

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A couple weeks ago you may recall a column I wrote about how Orbitz, the Internet travel service, lost all my personal data including my on-file credit cards.  Well most of this lost information is now back and I want to update the story.

I’m a long-time Orbitz user with enough frequent flier miles that they ought to care about keeping me happy.  And it turns out a number of Orbitz employees are also my readers, so that helps, too.  After that column appeared the company put some real effort into figuring out what had gone wrong and trying to fix it.

What happened, it turns out, is that I had tried to book a flight without first logging-in to my account.  The way the system works Orbitz would very much prefer if you sign-in first, but if you don’t they don’t require a sign-in, though in retrospect I wish they did.  Forcing me to sign-in would have saved a lot of trouble.

If you try to book without first signing-in, Orbitz will let you go ahead, but wisely won’t allow you to use any credit card data that’s already in the system.  This is intended to keep someone with a little bit of knowledge from using my credit to pay for his or her spring break.

This all makes sense but the way the credit card data is held in encrypted form the only way Orbitz can get rid of it is by GETTING RID OF IT — nuking forever the payment data held in their system for, in my case, maybe 10 years.  It’s gone and they can’t get it back.

I’m not so bothered by this because I now use only a debit card (living in the real world) so there was only one card number to replace, which I had to do personally.

But remember that I lost other information from the system, too, like my seating preferences (window) and frequent flier numbers with four airlines.  Losing THAT data was a bug according to Orbitz.  It shouldn’t have happened.  They are working on it.

So I started the dominoes dropping by trying to make a reservation in a hurry, but among the repercussions of my actions was a real bug that has probably affected other people, too.

My preferences and numbers are all now restored (by Orbitz) though I now seem to prefer aisles.

Things are almost back to normal in my travel world.

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I live in Charleston, South Carolina, which is a regional health care center with a local medical school and a lot of doctors, some of them my neighbors. So I hear a lot of doctors bitching about their professional lives.  And that bitching generally comes down to a single argument: “I’m bringing home less money than I used to: if this medical system is so out of control, why isn’t my income out of control, too?”

One of my doctor neighbors who does a lot of surgery spends $70,000 per year on medical malpractice insurance premiums.  I asked him if an extra $70,000 per year in income would stop his complaining.  He said it would.

So let’s save him the money.  The legal and financial costs of medical malpractice in the U.S. amounted to about $17 billion in 2005.  That isn’t much compared to the almost $2 trillion total cost of healthcare, but divided among the nation’s 700,000 physicians it’s over $20,000 per head.

Ultimately we patients pay the cost of malpractice anyway through medical fees and insurance premiums, which amount to around $50 per patient per year.  Why not handle it, then, the same way we do uninsured motorists on our car insurance policies?  Throw on an extra $30-per-year fee (we’re cutting out the lawyers, remember? so the amount can be less than $50) to handle medical malpractice.

If your surgeon comes to work drunk and takes your wrong kidney, you don’t sue him, you file a claim with YOUR insurance company.  Claims get a medical vetting but awards follow standard actuarial algorithms, which ought to both mean that true costs are covered AND the insurance company makes a small profit on your pain, keeping the system stable.

Lawyers in this system would limited to going after doctors for professional sanctions and non-monetary penalties like having their medical licenses revoked.  As my old dean told me, “When there is no money people fight over turf.” So in a disconnected malpractice system the professional penalties are likely to get more stern, not less.

This is not intended to let the bad docs get away with malpractice, because they’d be quickly blackballed by health insurance companies refusing to do business with physicians who cost them extra money

Politicians like to talk about tort reform, which comes down to limiting lawsuits and victims going uncompensated.  It doesn’t have to work that way.  Let’s just change the game to one where bad doctors — not all doctors — are punished.