On Saving vs. Consumer Spending

I’m not an expert at economics — neither micro-economics nor macro-economics. In fact if anything, I’m slowly and steadily developing the belief that no one really understands the economy, and especially not the overpaid people who run this nation’s, and increasingly the world’s financial system.

I’ve often wondered about the disconnect that exists between the individual and the nation when it comes to economic policies and measures. As an individual, it is in your own personal self-interest to live within your means. While I was growing up (in India), credit for individuals was more or less unheard of. What was more common was “saving” — if you wanted to buy something, you would have to save up enough to make that purchase. Now I’m not arguing that that is the best approach, but a balanced approach is what I am arguing for.

By contrast, at the macro-economic level, the problem you hear the economists talking about is that “Consumer spending” is down and that has a trickle down effect on the economy — well, it does. But, should boosting consumer spending really be the way to improve the economy? Isn’t that at odds with the common sense of what is good for the individual!

In fact given the current supply chain in the US, boosting consumer spending will not necessarily stimulate the US economy as much as it will stimulate the Chinese economy. The current crisis has shown that the global economies are so tightly intertwined that that may indeed be what is necessary at a global level. Apparently, China reinvests all the excess dollars it earns into the US economy by buying up US treasuries, bonds and stocks and that is what makes money readily available in the US. If China stops buying up US assets with their surplus dollars, the US would be in even bigger credit/cashflow trouble.

Paul Kedrosky (@pkedrosky) wrote a great article titled: Watch out, world: Americans are saving again (hat tip to @timoreilly for the link). Having read this article and having recently watched I.O.U.S.A (highly recommended) I am pleased to see that Americans may be saving more again — it’s what they should have been doing in the first place. But that American’s saving again will have a adverse effect on the global economy just means that the micro and the macro are not working to reinforce each other, but against each other.

To summarize this post, in essence, I feel that there is a huge disconnect between “what is good for the individual” vs. “what is good for the United States” vs. “what is good for the global economy” and until these differences can be reconciled and the interests aligned, I fear that we will be pulling in the wrong directions.

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Counting Calories

It is a well known fact that increased visibility or awareness of a phenomenon leads to behavior change. While you may consider this common sense there is real theory and research behind this as I learned when I took (and then helped teach) BJ Fogg‘s course in Persuasive Technology. Taemie Kim and I used this principle in our work on the Dynamic Speedometer. In that case, we hypothesized, and then showed that even an ambient awareness of the current speed limit can result in a change in driver behavior. We did this by showing the current speed limit as a visualization on the speedometer. Our studies showed that drivers drove closer to the speed limit more often when they were more aware of the the speed limit.

BJ’s class and and the principles of designing technology with the intent to change human behavior (for good) is a topic that I think about often. As a hobbyist of observing human behavior, I am fascinated by ways in which people get manipulated — sometimes consciously and sometimes sub-consciously. This happens everyday with marketing and advertising and is one of the reasons I hate being “marketed to” or “sold to” since then I know I am being manipulated. However, when this works to manipulate us in a positive direction, it can be a very compelling approach.

Yesterday, while I was in San Francisco to attend The Crunchies, a friend and I happened to walk into a Chevy’s restaurant on Van Ness Ave (an impulse decision and definitely not a pre-meditated one!). My colleague and I both noticed that their menu’s had nutritional information (calories, fat, carbs, and sodium) for every item on the menu directly below it. We were both shocked to see how most of the items on the menu also happened to be 1500 calories or over. So in one meal, you’re getting close to the entire days worth of calories! (I also noticed the limited number of options for vegetarians, unusual for most California restaurants, but then Chevy’s is a chain).

Turns out that the City of San Francisco, in its usual leading edge wisdom has required chain restaurants to post nutrition information on their menu’s:

“The law requires nutrition information – including calories, fat, carbohydrates and sodium – to be posted on menus or, for restaurants that do not have menus, on prominently displayed posters. Restaurants with menu boards would be required to list the calories per item on the board; other nutrition information could be listed on the posters.”

(Source: S.F. supes require posting of nutrition info)

Likewise, the State of California has also enacted a similar law to go into effect statewide:

“SB 1420 requires restaurant chains with 20 or more locations to post calorie information on their menus and indoor menu boards by January 1, 2011. And beginning July 1, 2009, brochures containing either calorie content information or other nutritional information, such as grams of saturated fat, grams of carbohydrates and milligrams of sodium, will be at the point of sale and drive-thrus for consumers.”

(Source: Gov. Schwarzenegger Signs Legislation Promoting Nutrition and Healthier Options)

This is a brilliant move by San Francisco and California. It really needs to be adopted all across the US. Portion sizes in the US are ridiculously large. I think that this change will have an impact on at least some fraction of the people — those who may be well-intentioned about controlling their diet, but just have a hard time doing it (like me). It is an example of increased visibility and awareness being used to encourage behavior change.

One of my favorite books on the topic of eating behavior is Mindless Eating: Why We Eat More Than We Think — it is a fascinating book about how and why we are not good at controlling how much we eat. The experiments in the book are eye opening, but even though I can read and rationalize them, changing behavior is inherently hard to do. I’m glad to see these laws that are designed to encourage positive behavior change — not with a stick, but with awareness and information.

And you had to read this whole post just because I ordered a salad!

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Bailouts vs. Bankruptcies

A friend of mine just sent me a link to the following article: Former Merrill exec gets $25 million for doing nothing; buys co-op – BloggingStocks. The article talks about one particular Merrill Lynch executive who walked away with a $25M golden parachute after being on the job for a very short while.

Here’s a pretty awesome deal: Work for Merrill Lynch for a few days until it’s acquired by Bank of America Corporation (NYSE: BAC) and receive a $25 million golden parachute.

Now, I realize that the BofA takeover of Merril Lynch was a firesale more than a government bailout, but the article did make me think more about the issue of could this happen in a bailout? Since a bailout doesn’t go through the bankruptcy process, companies cannot invalidate their sometimes ridiculous employment contracts to avoid situations like this. This is one of the reasons why I dislike the bailout process as opposed to a structured bankruptcy.

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iPhone’s Achilles’ heel: lack of background processing

In August 2008 I switched to using the iPhone 3G (courtesy of a bad move by T-Mobile). I’ve now had the opportunity to use the phone for several months. In a lot of way the iPhone is a phenomenal device. It’s the first device to truly usher in the era of hand-held computing. Besides the great design and UI of the iPhone, what is even greater yet is the AppStore. The Appstore became the catalyst for finally loosening (and hopefully) breaking the stranglehold that carriers had on devices and software applications that could be developed on the handsets. It has opened up a whole new segment for iPhone application development and spawned a whole new sector for creativity and entrepreneurship (whether these can be successful businesses of not remains to be seen and can be the subject of a whole blog post in itself).

Apple's iPhone 3G

However, the iPhone as a device has some severe limitations. Limitations, which remind me of the launch of the Palm VII approximately a decade ago. Yes, it was 1999 and the web was abuzz with the coolest new wireless handheld available then, the Palm VII. The Palm VII was a non-multitasking device, like the iPhone.  Right there is my biggest gripe with the iPhone — that the OS doesn’t support multi-tasking and background applications. I understand that this was done for managing the battery life of the device, but the iPhone’s inability to run background tasks prevents it from being used for several rather unique applications.

Location-based services become a whole lot more interesting when they can actually notify the user depending on the users location. I’ve had the Loopt application on the iPhone since the day I got the iPhone. However, an application like Loopt is completely wasted on the iPhone since it cannot do background notification. In addition several tracking and logging applications presently cannot be built/used since they would require exclusive use fo the phone, require that it is on all the time and would totally drain the battery on the iPhone. One rather intriguing application fo the iPhone would be monitoring personal safety (especially in the case of the elderly). There are companies that are building customer devices for doing this and their custom devices have a lot less capability than an iPhone has today. If only the iPhone would allow for background processing for it to monitor the accelerometers and sensors periodically it could be used for this immensely useful task. These are just two examples, but there are several more.

Apple has promiseded that it will provide push notification for the iPhone soon, however, push notification for the iPhone is not sufficient. For the iPhone to be a truly capable platform it will eentually need to provide background tasks and still be able to manage battery life. Conceptually this doesn’t sound like a impossible task. What does make it complicated is the ability for application developers to write applications that could be battery hogs. To overcome this Apple should put together a system that provides users with a “energy efficiency” score for applications and allow auditing to identify any applications that are being battery hogs. The battery life of the device should be a resource that can be managed.

The future of the Palm platform was crippled by many things, but in my opinion, Palm lost the battle when they couldn’t release an OS update for their devices for several years. The OS is a key component of the device and without a proper OS, the usability and future potential of the device is compromised. I sincerely hope that Apple realizes that having a more or less single tasking OS for the iPhone is not the right strategy and they need to address this issue in order to ensure the viability of the iPhone as a platform. Otherwise, it too will go the way of Palm.

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Blogging 2.009

I have had a rocky relationship with blogging over the years. There have been times when I have been blogging actively and others when I have taken down the site altogether. Thinking back, I launched my personal website back in 1996. The original site was at sneaker.pc.cs.cmu.edu and then moved to www.sneaker.org when I got my own domain. Back then I used to have a section I referred to internally as  ‘Sneaker’s Log,’ on the front page where I posted periodic news and updates. Looking back at it now, I guess that could be considered my first blog, except that was well before blogging as a term ever became popular.

I stopped writing here a while ago, and only had a few sporadic posts over the years. However, I’ve still been actively reading various blogs and sharing posts on my Shared Items on Google Reader and as of late also been more active on Twitter (@manukumar).

For 2009, I hope to make a return to blogging more often and resurrect this site. I won’t make any promises, and I don’t really do resolutions, but here’s looking forward to post more often in 2009. Happy New Year!

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