Baruch has already forgotten about the iPad. Whether chick magnet or large print e-Reader for the elderly, any ideas we have about its significance are speculation at this point, and will probably unravel in the face of reality. The most tangible action at the moment is in the iPhone, and the most interesting thing that didn’t happen last month is that Verizon didn’t get their own CDMA iPhone announced alongside the iPad.
This was seized on last week by a number of Wall Street analysts who concluded that poor old Verizon won’t get an iPhone at all this year. Credit Suisse reckons there’s a “75%” chance the iPhone stays with AT&T in 2010. I read the research, which also suggested that AT&T might have made some interesting concessions in order to persuade Apple to play along. Barclays Capital (I haven’t read theirs) thinks the fact that Apple is sticking to AT&T for the iPad is a “vote of confidence” in the AT&T network; that, and the comments Apple have made to the effect that they think the AT&T network is very nice, thanks, and they are very happy with it. They don’t see a VZ iPhone in the works either.
Hey, sell side analysts! Are you totally, like, stupid!? There is no way you can make that conclusion on the facts we have so far. The rudest understanding of what Apple is trying to do here and the opportunity set it faces would tell you that the most mind-bogglingly idiotic thing Apple could do would be to keep the iPhone as an AT&T exclusive a moment longer than it has to. And I am not alone assuming that Apple is not mind-bogglingly idiotic. Continue reading →
The iPad: Bloggers hate it. Investors hate it — AAPL is down 4% in the cold light of the day after. Fake Steve Jobs doesn’t seem to like it much. Even Andrew Sullivan is down on it.
What do all these people have in common? They’re all (mostly) men. What are their complaints? The lack of multitasking; no Adobe Flash; no front-facing camera; it’s just a glorified iPod Touch; where’s HDMI? it doesn’t fit in a conceptual box — it’s not a smartphone, it’s not a netbook; 64 gig NAND Flash isn’t enough, why not 128? Where can I put it? Do I have to carry it under my arm?
Many of these complaints may be justified, but are missing the wood for the trees; we are men. We are nerds and geeks, we love specs, and compete for mastery over each other by comparing the wattage of our hi-fi systems. But we are only half the population. The women I have asked about the iPad (admittedly not a statistically relevant sample) seem to be viscerally enthusiastic.
Bento, you will be surprised to find I totally agree with your post below, even as I am extremely vexed you got yours out in front of mine on the subject and are thus getting all the glory. The iPad is as you say “a complex computer simplified”, and ideal for baby boomers like our parents. I was going to put it slightly differently however, and say it is a complex computer, turned into an internet appliance. Yes, it is to the internet as a blender is to food and as such it will attract the old and decrepit, it is true. But that’s a bit of a sideshow, if you don’t mind me saying so. As an appliance, iPad has the potential to tap a much greater prize, that vast hard-to-reach segment of consumer tech: busy, empowered women.
Men don’t like appliances. We want things that can do lots of different things, that we can tweak and fiddle with, and then argue with each other about which one is better. Women aren’t like this, and because of this I have a feeling that it’s women who actually determine the eventual winners in consumer tech; I believe but can’t prove that Nokia, for instance, came out on top in mobile phones in the 1990s and early noughties because it was the brand of phone women liked the most. It worked. It was simple. It didn’t attempt to wow you with numbers and specs. Nokias had great battery life so it didn’t matter if you forgot to charge it the day before. Nokias were nice to look at, in a non-flashy way. Women can accept and love mobile phones, a way to communicate, much more readily than they do PCs, for instance, which most males have used for solitary gaming or porn. That’s changing now pretty rapidly, but is still probably why almost 1.5 billion mobile handsets will be sold this year, and only 200 million PCs.
Women will like the simpleness of the iPad not because, like an increasingly creaky boomer, they cannot put up with computing complexity; they can. They just don’t see why they should have to. They can’t be arsed. They multitask in their heads; they don’t need it on their screens as well. How many gigahertzes it has is not important — does it do the job it is supposed to? And what is an Adobe Flash anyway? Embarrassingly, I am not sure I know myself. Women do not worship at the altar of technology.
Mrs Baruch often forgets to charge her mobile phone . This often drives Baruch up the wall, especially when he needs to get in touch with her. She knows it needs charging, but trusts that it will last that bit longer when she needs it. Why shouldn’t it? And really, she’s right, it should. The month-long standby time of iPad will mean this is a problem much less often. The large iPad screen should be good for sharing, for doing things together with the kids, showing things she finds interesting to all her friends over lunch, simultaneously, rather than having each of them hunch over an iPhone one by one. Through tied media content, she can buy fashion magazines full of glossy adverts and miniscule amounts of irrelevant content, and keep them on hand for instant recall while shopping. She doesn’t have to worry about carrying the iPad under her arm — she has a handbag it will fit into rather neatly.
For developers, this will be great – iPad has the potential of opening key new demographics, and will keep them working on the Apple OS platform to the exclusion of Android, Windows, and everything else. That’s the key for Apple here, I think. iPad doesn’t need to be a massive 50 million unit hit product for it to work (one hears of a production run of 5 million this year FWIW). It just goes to cement the edifice of Apple’s mobile internet platform dominance even more firmly — something we have written about before.
The other, highly important, meaning of the iPad is that it opens a wholly new battleground; it is the first new category we have seen in tech for some time. It is effectively a smartphone with gigantism– largely all its innards are shared with the iPhone — and as such it is finally signalling the collision of the PC with the mobile phone, with first round to the mobile phone. We are likely to see an explosion of me-too products from PC and smartphone makers, using Intel Atom or ARM-based processors, and a swathe of different yet similar sizes and form factors are likely to emerge. On the platform side, Windows, Windows Mobile 7, Chrome, Android and other Linux-based OS are all going to be vying for supremacy. It’s going to be a very exciting time, and I can’t wait to see what’s going to happen.
Those who are dubious about the iPad’s impending success (and I suspect that you are one of them, Baruch) are of course in danger or repeating history (qv iPod, iPhone). I have no intention of replicating all the arguments pro- and con the iPad, so I will limit myself to just one wholly original observation as to why I think the doubters once again are not getting it:
1. The iPhone was a success from the start, but it really became a ubiquitous device when it proved competent at a whole range of tasks beyond Apple’s original marketing copy. (It was just “a revolutionary mobile phone, a widescreen iPod with touch controls, and a breakthrough Internet communications device,” remember?) Now games rule on the iPhone, and as many parents will attest, the iPhone’s one true calling is as breakthrough child pacification device.
A similar role awaits the iPad. No, not for children; rather, look to the burgeoning end of the demographic curve: baby boomers.
I know many baby boomers who are intimidated by computers. Plenty are not, but a great many spend far too much time wrestling with viruses and drivers, wondering what a DLL is, and generally not knowing the difference between their RAM and a hard disk — all just so they can read emails and check their bank account online. Some boomers have sired offspring who gladly help them with remote tech support sessions, but many others have not, and suffer for it. The reason for all this misery is simple: Computers are still too complex for those not prepared to give them their undivided attention. That’s even the case for Macs.
Not so with the iPhone. I’ve seen that thing understood within minutes by 2 year-olds and 84 year-olds. It does one thing at a time. Your finger is the cursor. There is no need to tap things twice before stuff happens. You are allowed to turn it off with the power button.
But the iPhone isn’t perfect for baby boomers. The screen and text are too small for aging eyes, the keyboard too cramped for confident typing, making it unusable for even basic office productivity tasks.
Enter the larger, faster iPad. It’s a complex computer simplified, which makes it a perfect fit for those whose remaining life is too short to spend it defragging drives. Add the keyboard dock, and the iPad is versatile enough to be a baby boomer’s only computer. The only thing it won’t let them do is videoconference with their grandchildren — which is an omission I hope they fix in next year’s version — but on the other hand, at $500 this much is forgiven.
My prediction: Within 2 years you will be reading articles describing how it was obvious — with hindsight — that the iPad would be a hit with aging baby boomers. But who needs hindsight when you have Ultimi Barbarorum?
Right now active investors and speculators are about as popular as genital herpes. This is unfortunate because I, Baruch, am one of them.
Examples of this anti-speculator animus are everywhere. Paul Krugman has long had in mind the creation of a special level of hell for “Masters of the Universe”, as he calls us, not kindly, in his excellent Return of Depression Economics. He thinks I’m “socially useless”, if not dangerous, and wants to have a special tax levied on me. Alice Schroeder, author of the latest Warren Buffett biography (how clever of her to realise that another biography of Warren Buffet was what the world needed!), has a very maximalist interpretation of securities law. She believes it’s impossible “to make a living on Wall Street without compromising your values,” and goes so far to suggest that when it comes to investing, “It’s hard to make a living legally.” Felix Salmon, sworn enemy of active investing, links to a largely incomprehensible blogpost from profs Fama and French which suggests investing in mutual funds is like buying an index fund but you pay more fees, ie it is a bad idea and thus “alpha-peddlers,” people like me, are snake oil salesmen. AllAboutAlpha (HT Abnormal) put it best last month in an apposite post about the emergence “of a very quiet yet growing subset of individuals who believe that alpha still exists, but that getting it isn’t, dare they say, legal.”
Summing it all up, the charge sheet goes as follows:
institutional investors like me are unable to deliver things we claim we are able to deliver, viz outperformance, alpha, whatever you want to call it.
As such my activities make no contribution to society and perform no useful function. In fact we are positively dangerous, and our widespread use of illegal information makes us unethical to boot.
Society would benefit much more if retirement savings were invested in index funds, which contain all the upside of equity investing but at lower cost, and meanwhile the rest of us who foolishly insist on trading for a living should be taxed.
A lot of this stems from the traditional malice and envy of those who “review” for those who “do”. We can’t do much about that. But there are intellectual assumptions behind some of it which are worthwhile tackling. In my opinion it all boils down to the hoary chestnut of the strength, or weakness, of the Efficient Market Hypothesis. The critics above share a belief in a strong form of EMH, which precludes investors from making returns which persist, and drives the less scrupulous to cheat in order to fulful their promises. Alice Schroeder puts it like this:
There is only so much alpha — that excess return above a baseline average — to be had in an efficient market. The incentive to create some artificial alpha one way or another is very high. Those who bend the rules successfully post good numbers, which adds to pressure on other Wall Streeters to push the gray boundaries of legal information flow.
What I do NOT propose to do here is get into the statistical nitty gritty of whether a strong or weak EMH is provable or improvable by positive hedge- or mutual fund returns, or their absence. I don’t quite know how to do it, and it’s deathly boring anyway. What we can do instead is weigh the intellectual coherence of the charge sheet. Is a financial system re-engineered to discourage speculation a good thing? Would it work? What would it be like?
This is what Baruch thinks: these objections to active investing are not at all coherent: firstly, we really don’t want a truly efficient market — it would be a disaster. Secondly, any restraint on speculation would endanger proper investment. The two are inextricably intertwined. Thirdly, index investing is not a truly scaleable strategy; if all of us do it, it will stop working. Let’s go through each of these points in turn.
Baruch has to join the paean of praise for (all via Abnormal) Paul Krugman’s NYT piece, How Did Economists Get it So Wrong. He’s going to object to bits of it in a second, but first let’s puff it up. It’s fantastic, a great summing up of the state of the art of the dismal science (sic) that is macro-economics, includes a proper skewering of some hapless midwesterners, and a set of prescription for the future that Baruch can only applaud; writing of where macro-economists need to go now, Krugman concludes:
First, they have to face up to the inconvenient reality that financial markets fall far short of perfection, that they are subject to extraordinary delusions and the madness of crowds. Second, they have to admit — and this will be very hard for the people who giggled and whispered over Keynes — that Keynesian economics remains the best framework we have for making sense of recessions and depressions. Third, they’ll have to do their best to incorporate the realities of finance into macroeconomics.
As a broad strategic outline, or a description of the destination we need to get to, it’s great.
But, but, but. Here comes the quibble: 2 problems need to be overcome on the way, and this might make the project a little/even more difficult than most of us think it is. Economics may remain a dismal pseudoscience for a long while to come. Continue reading →
The blogosphere is buzzing with reaction to Jason Calacanis’s epic post on Apple’s uncompetitive practices. Basically, as concerns iPod, iTunes, switching off apps it doesn’t like or who it thinks are a competitive threat, Calcanis thinks that Apple is acting like a monopolist and should probably be investigated by the DoJ. His most telling points come in the comparison between the current behaviour of Apple and the ex-great monopolist Microsoft:
On iTunes:
Think for a moment about what your reaction would be if Microsoft made the Zune the only MP3 player compatible with Windows. There would be 4chan riots, denial of service attacks and Digg’s front page would be plastered with pundit editorials claiming Bill Gates and Steve Ballmer were Borg.
On Apple’s draconian apps policy for iPhone:
Imagine for a moment if every application on Windows Mobile or Windows XP had to be approved by Microsoft–how would you react? Exactly.
On banning other browsers on the iPhone
Apple was more than willing to pile on after Microsoft’s disasterous inclusion of Internet Explorer with Windows. In fact, what Apple is doing is 100x worse than what Microsoft did. You see, Microsoft simply included their browser in Windows, still allowing other browsers to be installed. In Apple’s case, they are not only bundling their browser with the iPhone, but they are BLOCKING other browsers from being installed.
The standard Apple response to all this is that the restrictions Apple places on its products are necessary to ensure the quality of the user experience, that Apple deserves to be paid for the innovations it has brought to the marketplace and the consumer freedom it has enabled to use things like the mobile internet, to make online music easy and fun to use etc. But these remain the classic arguments of all monopolists, and are identical to the ones Microsoft used back in the days it was being investigated.
Baruch has often thought of what would have happened had Apple actually won the market share wars of the early 1990s; its instincts are much more controlling than Microsoft’s. Would we really have had an open-source internet? Would we really have had all the innovation spawned by cheap and ubiquitous computing?
Needless to say, this is not being well received by the hordes of Apple aficionados, the self-confessed fanboys. Baruch is constantly amazed at the level of brand loyalty Apple has managed to instil in its punters. I certainly don’t feel the same way about my crappy old Toshiba (although I would be cross with anyone who disparaged my Subaru).
Count me firmly in the Calcanis camp on this. As every reader knows, I make no secret of my dislike of the company, for very much the same reasons Calcanis does. Reader Verec, in the comments attached to the last post, accuses me of “anti AAPL bias.” But “bias” is a loaded word. Is a well thought out position against something, a consistently held position, bias? For those utterly convinced of the righteousness of the other, the pro, side, it may appear so. And that is probably why it is generally very hard to have a proper conversation about Apple on the interblogs.
At the risk of throwing lighter fluid on the flames, I blogged this on Apple, almost 2 years ago:
. . . I do so very strongly dislike Apple as a company. They sell high quality hardware it is true, but so overpriced; you pay a premium to be unable to use 90% of the world’s software without running some other complex program to do so. I hate the cutsie-coo operating system and the self satisfied “pop” when you close a window. I find the advertising unbelievably irritating, with its “Think Different” slogan, which when you think about it is a pean to its lack of market share; if they had managed to sell more Macs than PCs would they be telling us to “Carry on Thinking the Same” to make us buy more Macs? More than that, I pity the ponytailed, smug, pseudo-individualist, and above all gullible Apple fanboys, who all believe they are part of some greater social movement representing god knows what but who are in fact the victims of some corporate succubus which cares not a jot for them except how much more they can milk them. And the fanboy’s anger at the Wintel axis ignores the fact that the only thing which kept the company afloat during the dark times was Microsoft’s charity; that and the need to pretend that Windows was not in fact a monopoly.
No, Apple is the antithesis of what a Spinozist technology company should look like: closed, not open systems; overly pleased with itself and arrogant; and its advertising and brand values appeal to the grossest of the Passions: envy, pride, confusion and fear. In their defence, the flip side of their arrogance is a certain appealing audacity. The company from time to time (but not as often as we think) creates attractive and innovative products. But net net they have to go in the Stupid Cartesian bucket.
It’s nice to finally have company. And now we have that out of our system, let’s hope that ‘s the last blogpost about Apple here for a while.
Baruch came back from a lovely long holiday to find he may have been totally wrong in his last post about Apple. Embarrassingly, fist-bitingly wrong, in a 100%, black-is-white sort of way. He thought the new iPhone wouldn’t sell, as the new features on the new one weren’t, according to him, worth the upgrade. Wronggg!! Apparently old iPhone 3G is selling so badly that Apple is transferring all production to the 3G S, and taking the old iPhone off exclusivity in certain markets. Business has never been so good. It is early days, to be sure, and perhaps the situation will reverse itself. But right now the conclusions of my last post, however cogently argued, simply don’t hold water. In fact, the opposite seems to be happening.
This is good opportunity to ponder on what it means to be wrong in an investment context.Continue reading →
Baruch was pondering the apparent excesses of the Chinese stimulus package today, and stumbled on what may be a most interesting hypothesis. Possibly, if he is right, the most important investing insight for the next 10 years.
The Chinese stimulus quite incredibly big; $600 billion is 15% of Chinese GDP. But it is being more than matched by “private investment”; for every dollar spent by the government on a project, 3 are being lent by the banks, either willingly or unwillingly. So unlike the US trillion dollar package, it is hugely leveraged. Did you know they will be spending $146 billion over 3 years on their 3G wireless rollout? Bet you didn’t. That’s a lot of money. But it was a dry, contextless datapoint until today, when Baruch found out what that level of network spend actually means: just 1 of the 3 wireless operators there, China Unicom, will be building 125,000 base stations in year one of the rollout. This might bore you but hear me out. That’s more 3G base stations than all the operators in Western Europe have rolled out in the 9 years since the 3G wireless standard has been in existence.
The majority of phones sold in the past 3 years in Europe have been 3G enabled, and Baruch imagines that 60%-70% of EU wireless subscribers are at least partly on 3G networks. That must be like 150-200 million people, and it isn’t like you get a weak signal over here. OK not all of them are heavy data users but this is changing rapidly. That’s more network capacity than Unicom 3G subscribers could possibly want until like, 2014-15, given the rosiest takeup scenario; true, there may be many more Chinese people than there are Western Europeans, but right now there are precisely zero “proper” 3G subscribers in China, ie those that aren’t on operator sponsored trials. This is future-proofing a network taken to an absurd degree. There is no way that this can possibly make any financial sense, in the way we currently understand capital budgeting.
And it struck Baruch; these guys are in a hurry.
Think about it. China and the US are locked in an embrace I discussed here a couple of months ago. China Inc owns the biggest pool of USD assets outside the US that the world has ever seen. It is their nest egg stored away for a rainy day, the reward of 10-15 years of saving and hardscrabble labour, making widgets and assembling them into finished goods for largely American consumers. For their part, American consumers desperately needed someone to backstop their addiction to buying stuff, someone who would lend them the money. It was vendor financing on a epic scale. And while the US consumer junkies needed their fix, their Chinese “pusher man” formed an economy dedicated to supplying it.
This created a mutual co-dependency, which is sadly no longer viable. The Americans now are desperate to reflate their currency and thereby their economy, while the Chinese are equally keen to diversify out of their dollar assets into something else. The problem, the prisoner’s dilemma, is that in doing so each would hurt the other. The US, on losing its lender of penultimate resort, would see their bond yields balloon, potentially choking off any recovery, whereas if the US successfully inflated their debt away, the Chinese would see their nest egg devalued; they would be the neighbours beggared. The more vulnerable partner in the embrace has to be China, however. Inflation is the time honoured tool of the borrower state to weasel out of paying debts; the temptation is eventually irresistible. The US economy is likely more flexible than the Chinese, and likely to better withstand the shock of the breakup better. Finally, the chinese government fears unrest and revolution more than any US administration; there’s many a precedent of the officials deemed responsible losing more than their jobs when things go wrong.
So the Chinese know they have the weak hand. They have a lot of money right now that may well be worth less, far less, in possibly an undefined period of time. It’s a version of the problem faced by Richard Pryor in Brewster’s Millions, but on a galactic scale. Baruch will call it the “Brewster’s Trillions” dilemma (OK, it only bears a very vague similarity to the movie, but I love the clip). And like Brewster, like any sane person would do, Chinese are going to spend it before it goes away, but unlike Brewster, they hope they’ll end up with at least something of value at the end of it.
That’s why they are investing more than they could conceivably need, for example, on a 3G network which under current plans will be simply the very best in the world, and the most under-utilised — a 6 lane superhighway to every town in a country currently without cars (if you see what I mean). That’s why the previously successful rural subsidy for electronic goods, ostensibly in the name of rural development, is now being duplicated in the big cities where there isn’t any developmental need for it except to goose demand. It’s why the latest plan for renewable energy involved a 2000% increase in the production of solar energy in China from 1-2 gigawatts today, to like, 20 in I forget howevermany number of years (or is it 20 to 200? I don’t remember, but a gigawatt is a lot, I think), a plan that dwarves any other national energy proposal in any other country, on technology that for most people just isn’t efficient enough to justify without subsidy. It isn’t a waste, in their mind; it would be a waste not to use it while they have it, to try and turn it into something worthwhile and lasting.
Money just became very cheap in China; their inflation expectations have clearly skyrocketed and it is about to shift from the global lender of last resort to the global consumer of last resort. And as we all know, its consumer expectations of inflation that matter more than the actual expansion of the money supply in an inflationary environment. Previously a deflationist, Baruch wasn’t sure about where he stood on the inflation-deflation debate, but given all of this he may have just become a radical inflationista.
Brilliant post by Baruch’s bloggy chum Cassandra last week about the current rally in shares, and not just because it gives me the opportunity to play this video, which I’ve been humming on and off for a while now:
No, the other reason to appreciate Cassandra’s experience is that it descibes so well the torture of the trapped bear, a torture all the worse for being administered to oneself by oneself in an open plan office in front of your colleagues (the only thing actual physical torture has to recommend it as an alternative is it tends to humiliate in private and doesn’t directly damage your finances. If you’re fortunate enough to be tortured by American subcontractors there’s the small chance you may be able to sue your torturer afterwards and possibly end up with more money than you started with, but that is definitely not the case if you’re waterboarding yourself ). Oh, there’s nothing worse in an investing context than being trapped on the wrong side; it is awful.
In the week since reading the post, three things have struck me :
I don’t know where we are in the rebound, but the maddened mob have clearly started turning on the um cassandras who told them to be short, the Roubinis, the Talebs and in fact gurus in general. One can applaud the sentiment about gurus overall, but being cross at people who are generally more right than wrong seems a bit ungracious to say the least. Nevertheless, I would imagine this sort of thing would happen closer to the end of the rally than at the start.
That said, equity rallies in the Japanese bear market of 1990 to well, now, tended to go much much farther than you would think. At least 4 times in the decade after their bubble burst, Japanese stocks, measured by the Nikkei, popped well over 30%. The median rally over that period seems to have measured about 50% from the low to the high. Think about it; we’re up a bit less than 40% last I looked. We could have 20% more to go. 20%! That’s worth getting out of bed for. And definitely something a trapped bear would want to avoid thinking about.
To make things more complicated, however, it is just not true that fundamentals and the current rally are moving in opposite directions; there is some, actually a lot, of improvement in specifically the companies that Baruch follows oh so exhaustingly closely, and by extension the global economy. To be sure, the improvement is relative to extremely low expectations for revenues and earnings that were set amid the very extremely terrible conditions at the end of 2008; on an absolute basis, measured from this time last year, things still look crap. But stock investing is an expectations game, based on where we are going not where we’ve been, and there’s reason enough, trust Baruch here, for lots of his stocks to have rallied significantly on the basis of the quarters they just printed. At least prima facie.
So where does that leave us? Well, the last point seems to be the killer. Stay long, I guess? The only problem with that, of course, is that much of the improvement in fundamentals in Baruch’s technology names at least comes from what is being called “restocking”, the refill of inventory of finished goods in the retail channel and of components in manufacturers warehouses. On the other side of the “Restockers” stand those who I call the “Double Dippers”. They think this will all end in another overstocking of inventory, that just as we did at the end of september last year, at some point in Q2 or Q3 we will all have to cut our estimates again and that means stocks should start tanking, well about now. Which they sort of are.
We still don’t know much about end demand here; is it down 10%, or 30%? We’ll probably only find out after the summer. How much, and at what speed, will consumers delever themselves? How much of a difference will government demand make? To make it extra difficult we also have George Soros’ big idea of “Reflexivity” to deal with, the idea that an otherwise frivolous restocking cycle and associated stockmarket rally could start a virtuous feedback loop that ends in fundamental improvement in the real economy. Sure, it could just be an oversold rally, but fundamentals don’t just sit there, unchanging. Company earnings can get “oversold” too, or at least stretched to the downside and bounce back. Or they might not.
Basically, no-one knows, no matter how hard they pretend to. And if they did they certainly wouldn’t tell us. Posts like Cassandra’s are excellent aide memoires for mistakes others have made in the past, but in general you’re on your own, dear reader, as is Baruch. The only advice he can give you is. . . be the ball.
Returning to the Spinozist, pseudo-philosphical, tyranny-bashing roots of what was not originally an econo-blog, Ultimi Barbarorum must indict the otherwise incisive Clive Crook of the FT for what is an astonishing op-ed in yesterday’s FT; Stupid Cartesianship beckons. There is moreover a question whether we may need to go further. What do you think, Bento? Are you still there?
Crook does not believe there should be any investigations into torture. Those that argue that there should be investigations make 2 mistakes, he thinks: firstly they fail to see that waterboarding may indeed work as a way of gaining information, and secondly, that it may not be illegal. He mischaracterises the seriousness of the pro-investigation argument.
“In [my] view”, Crook writes, “torture might sometimes work. CIA officers and senior intelligence officials have said that “harsh interrogation” did yield important information.” He doesn’t give any examples, and so far I don’t think anyone has. Certainly, were I to be tortured I would spill the beans as quickly as possible on any secret I might try otherwise to keep; however, one might attain the same result by other means (in my case, asking nicely, offering me money) which don’t incur the same costs, be they moral, reputational or otherwise. Al Qaida fixer Abu Zubaida is said by his interrogators to have given up more secrets though non violent suasion than under the subsequent torture.
Moreover, while I don’t doubt important information may be yielded under torture, Crook fails to see that hostile interrogation through torture surely incurs greater costs than the alternatives. From a purely practical point of view, it creates a much higher percentage of false positives, stuff the victim made up in order to make the pain stop. Extra analytical resources are needed to sort the information, and extra costs in research to check the remaining leads. You need extra torture sessions to check the same story. It’s hard to see how torture as a way of sourcing information can be very efficient against the alternatives, a conclusion the UK, Israel, and even highly tyrannical regimes like the Soviet Union came to. In the latter case, they found it much more interesting to use torture as a way of extracting false confessions, which is clear from a basic reading of the history of show trials in communist countries in the middle years of the last century. That should tell Clive Crook something.
Secondly, is waterboarding actually illegal? “Congress should make waterboarding a crime,” says Crook, “and it has had many chances before and since 9/11 to do so. The fact is, it has chosen not to.” Well, it may not need to; the fact that such convoluted and apparently erroneous legal opinions were needed to justify waterboarding and other techniques in the White House argues that there was some sense beforehand that it might be slightly dodgy. Precedent exists: the US executed Japanese soldiers for it after WW2. Moreover, I believe the US is a signatory to the UN Convention Against Torture, ratified by Congress, which is entertainingly precise:
That would be the Bush administration caught fairly bang to rights, then. It is probable that up until 2004-2005 Congress never passed a law against waterboarding because 1) no-one ever thought it was possible the US government would want to do it to anyone (just as no-one passed a law e.g. against feeding cats too much marmalade), and 2) it was covered by the convention above, and/or the US constitution.
I think opponents of torture investigations like Crook who use this argument misunderstand the nature of common (the basis for US and UK law), versus roman law. The latter is precise, laying out what is possible/impossible in great detail, the former is experiential, based on principle and tests. We do not need a law specifically banning waterboarding for it to be an offence. Weneed someone to be prosecuted for it to see whether it is illegal under US law or not, for it to go through the courts on appeal if need be, ultimately to the Supreme Court. Crook decently seems to worry about the consequence for the US’ standing in the world should any indicted torturers be acquitted. But this is not something we can decently worry about. The rule of law demands its test, for the dice to be thrown. And then we shall know where we are.
There are lots of other things wrong with Crook’s argument, including that it concentrates on waterboarding to the exclusion of more clear-cut forms of torture such as “wall slamming”, and finally, that arguing for prosecution against torture is a “furiously partisan project”. This last is firstly, plain wrong (I am a fricking Thatcherite hedge fund manager for chrissake, not a bed-wetting beardy-weirdy) but primarily a cowardly suggestion, implying that were one side or the other to argue fiercely against say, rape and pillage, it would be proper to find a compromise.
We can talk about this in the comments, if anyone is interested. But frankly I have to admit to a rather unpleasant sense of wonder that the FT, a UK newspaper staffed with many journalists I know personally should entertain this debate at all. I am astonished that these issues have to be discussed in the first place.
UPDATE: missed this — Tyler Cowen (HT Sullivan) opines on torture prosecutions, also understanding that this is a fit subject for an econo-blog. He’s against, worried that it would just prove the US actually likes to torture people, and somehow “lose the chunk of world opinion that Obama has been winning back”. Again, I think this misses the point, for reasons I write above. Then we’d know. And I don’t think sweeping torture under the rug is the courageous stand that will impress world opinion either.
