Clash of the Titans! One Operating System to Rule Them All! Google Drops A Nuclear Bomb on Microsoft!

It is a tribute to Google's extraordinary mindshare that the company's announcement of a new operating system that won't be available for another year spawned an instantaneous outpouring of over-the-top commentary so frenzied that I was immediately flung into a fit of browser-war flashbacks, circa 1995. Google is a much more formidable threat to Microsoft than Netscape ever was, but it is remarkable how similar the contours of the current explosion of hype are to the babble that preceded Netscape's astonishing IPO in August, 1995. The Web, we were told back then, was sure to dethrone Microsoft, and Netscape would be the flagbearer of the revolutionaries.

Netscape got stomped, of course, and Microsoft is still hanging around, dominating the vast majority of computers in use on the planet. So excuse me if I counsel wait-and-see to those who already are imagining Redmond as nothing more than a smoking crater oozing radioactive fallout.

And yet: Anyone old enough to remember the sturm und drang of 1995, but who pays attention to how kids are growing up on the Internet today, has to admit that that while Netscape and scores of other would-be Microsoft competitors lost all their battles, the Web is winning the war. My daughter's first step after turning on the computer is a trip to Facebook. My son's is to a Web-based online gaming network that connects him to all his friends. Both of them have Gmail accounts and neither particularly cares whether they are doing their homework in Google Docs online or Microsoft Word on the desktop. It's all the same to them.

Until the WiFi drops. At which point they become lost souls, cut loose from all online moorings. Dad! The Internet is broken. Fix it! Fix it! Fix it!

No matter what happens to the "Chrome" operating system, Google, so far, is on the right side of history -- provided there's ample Internet connectivity. Microsoft has always tried to figure out how to protect its established business model while venturing onto the Web. But Google is indigenous to the Web. When Microsoft gave away its browser free with every instance of Windows, it was considered an antitrust violation by competitors. But when Google says it plans to give away the entire operating system for free -- no one blinks. The real shocker would be if the company announced plans to charge for Chrome. (And yes, I know, the Justice Department is exploring whether there is a basis for an antitrust case against Google. But not because Google's consumer-facing products are free. That's just taken for granted.)

I will make no speculation as to whether the Chrome OS will succeed in grabbing market share from Microsoft. After all, my daughter wants a Mac Air and my son scoffs at anything that can't run the latest high-end PC game: (Translation: Windows). But they also assume that everything they need should be available to them, for free, when they turn on their computer. If it isn't Google, someone will deliver that to them.

And then there's this, from the original Google announcement:

We hear a lot from our users and their message is clear -- computers need to get better. People want to get to their email instantly, without wasting time waiting for their computers to boot and browsers to start up. They want their computers to always run as fast as when they first bought them. They want their data to be accessible to them wherever they are and not have to worry about losing their computer or forgetting to back up files. Even more importantly, they don't want to spend hours configuring their computers to work with every new piece of hardware, or have to worry about constant software updates. And any time our users have a better computing experience, Google benefits as well by having happier users who are more likely to spend time on the Internet.

I've heard those promises before. I'm still waiting. But if Google delivers, the world is theirs. No nuclear bombs required.

Independent voters, writes Politico's Ben Smith, "who seem to be responding to Republican complaints of excessive spending and government control," are moving away from President Obama. Which means we're going to hear more of the same from the likes of Eric Cantor, R-Va., busily calling the stimulus plan a "failure" for not having already fixed the economy. If the spin is working, why change?

"I think any objective measure would indicate there's a failure when you have a commitment of nearly $800 billion in taxpayer funds and you have the type of job loss we're experiencing," Cantor told the Washington Post.

But Barry Ritholtz points out that the Post includes an interesting chart detailing the stimulus spending so far.

• February: $2 billion
• March: $6.6 billion
• April: $12.3 billion
• May: $30.6 billion
• June: $58 billion

If that trend line continues through the summer, then we will be seeing significant outlays of government spending in the months ahead. A bit too soon, I think, to call the stimulus a "failure."

For the first time all year, the number of new initial claims for unemployment benefits fell under the 600,000 mark, dropping by a substantial 52,000 from last week's revised number of 617,000. The four-week moving average also fell by 10,000, providing further, and seemingly definitive, evidence that we are past the peak in new jobless claims reached some 13 weeks ago.

The total number of continuing claims still hiked up, to 6,724,000, which is bad, but the new jobless claim numbers would seem to be unambiguously good news, one of the few "green shoots" that haven't withered away during a harsh summer.

However, every news report I've read on the new numbers is quick to temper any enthusiasm by noting that this time of year the numbers are typically volatile and uncertain.

From the Wall Street Journal:

Based on historical patterns, government statisticians expect big increases in jobless claims as automobile companies and other manufacturers temporarily idle plants, and adjust their seasonal adjustments accordingly.

But since "Chrysler and GM had plant shut downs over the past few months due to their bankruptcies and just restarted them," writes Peter Boockvar at the Big Picture, "we aren't going to see the seasonal July shutdowns, thus the claims data was skewed lower artificially."

Fair enough. But if the the new claims are skewed lower artificially because of GM and Chrysler's woes, doesn't that mean that the bad numbers for the last couple of months were skewed higher "artificially"? And could that be a reason why the number of new claims hasn't been falling as quickly as historical patterns would suggest should happen after a peak has been reached?

Who knew Pope Benedictine XVI was a crusading social activist? In his newly released encyclical letter, Caritas in Veritate, His Holiness is a blunt critic of modern capitalism.

• Information wants to be free! The Pope attacks "excessive zeal for protecting knowledge through an unduly rigid assertion of the right to intellectual property, especially in the field of health care."
• Workers of the world, unite! He comes out strongly in favor of labor unions, "for the promotion of workers' associations that can defend their rights."
• From the rich, to the poor. He lambastes income inequality both within and between nations, and criticizes a profit-seeking mentality devoid of concern for social welfare, "The dignity of the individual and the demands of justice require, particularly today, that economic choices do not cause disparities in wealth to increase in an excessive and morally unacceptable manner, and that we continue to prioritize the goal of access to steady employment for everyone."

And perhaps most strikingly, he situates his entire social critique in a framework that would not be out of place in the latest essay on globalization from Joseph Stiglitz.

The global market has stimulated first and foremost, on the part of rich countries, a search for areas in which to outsource production at low cost with a view to reducing the prices of many goods, increasing purchasing power and thus accelerating the rate of development in terms of greater availability of consumer goods for the domestic market. Consequently, the market has prompted new forms of competition between States as they seek to attract foreign businesses to set up production centers, by means of a variety of instruments, including favorable fiscal regimes and deregulation of the lab our market. These processes have led to a downsizing of social security systems as the price to be paid for seeking greater competitive advantage in the global market, with consequent grave danger for the rights of workers, for fundamental human rights and for the solidarity associated with the traditional forms of the social State.

Caritas in Veritate or "charity in truth," is an extraordinary document, 30,000 closely reasoned words that, while widely ranging, contain within them a profound critique of unregulated capitalism. This being the Pope, the critique is rooted in a "truth" derived from the Gospel, from Christian moral values to "which Jesus Christ bore witness by his earthly life and especially by his death and resurrection." That framing provides certain challenges to nonbelievers, particularly those who believe not only in social justice and the common good but also in such things as reproductive choice.

Still, even as the Pope reaffirms traditional Catholic dogma, he also evokes a fascinating tension between Christian values and a free market that holds profit-making as the highest goal. In so doing, he presents American politics, as they are currently constituted, with a paradox. The contemporary Republican party constructs its ideology around two foundation stones -- free markets and Christianity. But the Pope places those two building blocks in contradiction to each other. "Every economic decision has a moral consequence," writes the Pope.

Economic activity cannot solve all social problems through the simple application of commercial logic. This needs to be directed towards the pursuit of the common good, for which the political community in particular must also take responsibility. Therefore, it must be borne in mind that grave imbalances are produced when economic action, conceived merely as an engine for wealth creation, is detached from political action, conceived as a means for pursuing justice through redistribution....

...[T]here is nevertheless a growing conviction that business management cannot concern itself only with the interests of the proprietors, but must also assume responsibility for all the other stakeholders who contribute to the life of the business: the workers, the clients, the suppliers of various elements of production, the community of reference. In recent years a new cosmopolitan class of managers has emerged, who are often answerable only to the shareholders generally consisting of anonymous funds which de facto determine their remuneration.

That sounds to me a lot like a liberal critique of Wall Street as currently organized. The timing, needless to say, couldn't be better. Rhetorically speaking, the Pope is sounding a lot like Obama. Wanna be a true Christian? Share the wealth.

Amen.

Can we stop worrying about the fact that 90 percent of the world's big fish, including the prized-by-gourmet-sushi-lovers bluefin tuna, "have almost disappeared from the oceans since the advent of industrial fishing in the 1950s"? According to an extremely enthusiastic report from Bloomberg News' Stuart Biggs and Madeleine Pearson, "Breeding Breakthrough Helps Sushi Baron Create Sustainable Tuna," farmed bluefin is right around the corner!

Hagen Stehr was at home in Adelaide, Australia, on March 12 when his company's chief scientist called with news that their bet of about $48 million on the breeding of southern bluefin tuna in captivity -- a feat never accomplished before -- might finally pay off....

Stehr, chairman of Port Lincoln, Australia-based Clean Seas Tuna Ltd., rushed more than 500 kilometers (311 miles) to his company's fish hatchery outside Arno Bay in southern Australia. With tears in his eyes, he pushed his Toyota Land Cruiser to its top speed of 180 kilometers an hour as he raced to see the fertilized eggs for himself. As the owner of a fishing fleet during the past four decades, Stehr had helped empty the seas of the bluefin tuna used in sushi restaurants from New York to Tokyo. Now, at age 67, he believed he was on the verge of saving the tuna -- and the industry that made him rich -- from the threat of extinction.

What follows is a story of fish breeding perseverance and good old-fashioned human ingenuity. But at the end of the day, it's also a story of triumph and deliverance for those who can't bear the thought of giving up "the rich taste and creamy texture of" bluefin tuna.

To get the bluefin to breed, scientists at Clean Seas designed the tank to simulate conditions in the ocean. Using overhead lights to suggest the sun and moon, saltwater piped in from the ocean, artificial currents and temperature controls, the scientists have tried to re-create the experience of a spawning journey for the fish.

Awesome. Fish breeders rock.

Oh, and to get the reluctant female tuna to produce eggs, they were injected with hormones via spearguns.

There's also the problem of feeding the tuna, notorious predators near the top of the marine food chain. Because, you see, it's not just the bluefin that are disappearing from the oceans, but also the fish that bluefin eat, like mackerel and sardines.

But not to worry: "Clean Seas is developing wheat-based pellets to feed its tuna."

Hm. Call me crazy, but something tells me that the creamy flesh of tuna raised on a diet of wheat pellets from eggs produced by hormone-hopped-up mothers might not be quite as tasty as soon-to-be-extinct wild tuna. What do you think?

Two of the more popular posts HTWW has featured this year were "Poor, Poor Plutocrats," -- my reflections on AIG trader Jake DeSantis' whining in the New York Times over how unfairly the public was treating him -- and "The Man Who (Maybe) Blew Up the Global Economy" -- a post referencing a profile of Joseph Cassano, the boss of AIG's notorious Financial Products division.

Therefore, I'm reasonably confident that readers will waste no time in hurrying over the Vanity Fair, to read Michael Lewis's extended take on all things AIG FP, including extended cameos by both DeSantis and Cassano. Previously available only as a clumsy-to-read PDF file, it is now fully accessible.

As usual, Lewis is excellent, and his story fills in some previously murky holes. But once you wave away the personality issues -- Cassano: Grade A Jerk -- and the complexity of credit derivatives, we are left with a confoundingly basic point. The entire edifice of Wall Street's financial maneuverings was based on the assumption that housing prices would not collapse all over the country at the same time.

Still, Cassano agreed to meet with all the big Wall Street firms and discuss the logic of their deals -- to investigate how a bunch of shaky loans could be transformed into AAA-rated bonds. Together with Park and a few others, Cassano set out on a series of meetings with Morgan Stanley, Goldman Sachs, and the rest -- all of whom argued how unlikely it was for housing prices to fall all at once. "They all said the same thing," says one of the traders present. "They'd go back to historical real-estate prices over 60 years and say they had never fallen all at once." (The lone exception, he said, was Goldman Sachs. Two months after their meeting with the investment bank, one of the A.I.G. F.P. traders bumped into the Goldman guy who had defended the bonds, who said, Between you and me, you're right. These things are going to blow up.) The A.I.G. F.P. executives present were shocked by how little actual thought or analysis seemed to underpin the subprime-mortgage machine: it was simply a bet that U.S. home prices would never fall.

In a complex world, that seems like a pretty simple, stupid mistake.

My son likes to read the labels on food products. From an early age he would report in tones of awe and wonder at just how much sodium or sugar was packed into a Capri Sun juice box or a box of Honey Nut Cheerios.

It does not seem extraordinary to him or unusual in any way that such information is available to him, or that before allowing him to choose a box of cereal at the supermarket, his father will inspect the relevant details. It's just the way things are.

Of course, it didn't have to be that way, which is why a passage from Ezra Klein's very interesting interview with Henry Waxman, the powerful Democratic legislator who chairs the House Energy and Commerce Committee, jumped out at me. Waxman is explaining why he chose to write a book detailing his life as a lawmaker.

I try to portray the forces at play in dealing with legislation and how some things that were big battles at the time are now taken for granted.

It was a big battle to get food producers to put uniform labels advising people about calories and sodium and carbohydrates and other nutrients on food. But I think most people take it for granted that they can see those labels when they go into the store and use them to make their decisions. But the food producers said they were going to go bankrupt if they had to put these labels on, it would be such a burden, it would be excessive. Finally we got it passed. And I don't think most people give it a second thought today. It's just there.

It's just there. As good a definition of "progress" as any, I suppose. As chairman of the Energy and Commerce Committee, Waxman is playing a huge role in shaping both health reform and climate change legislation. What, I wonder, will future generations accept as just being "there" as a result of his current work?

Everybody loves the story of Sergey Aleynikov, the former Goldman Sachs programmer accused of stealing proprietary stock trading software from his employer. Bloomberg's reporting is the most thorough. The Wall Street Journal's treatment is here. The New York Times, here.

But a guest post at Zero Hedge by Joe Saluzzi skips past the juicy details and goes to a more substantive point. Who wins and who loses from high speed automated stock trading?

The proprietary code lets the firm do "sophisticated, high-speed and high-volume trades on various stock and commodities markets," prosecutors said in court papers. The trades generate "many millions of dollars" each year.

Markets are a zero sum game -- somebody wins and somebody loses. Where do you think these "many millions of dollars" are coming from? They are coming from you -- the average retail investor and the large institutional investor. These programs are taking advantage of real order flow and are siphoning off small profits throughout the day that belong in the pockets of the retail investor and the traditional money manager.

I wonder how much the programs are taking advantage of people, and how much they are simply taking advantage of other programs. In the war to grab a nanosecond's worth of advantage on the New York Stock Exchange or any other trading venue, it's the best code that wins. But Saluzzi's point makes intuitive sense on at least one level: Regular old humans just can't compete.

Is our love of salmon hindering the fight against global warming?

Such is the question obliquely raised by energy analyst Geoffrey Styles in a post published today on hydropower, "The Forgotten Renewable."

Styles takes as his jumping-off point a recent New York Times article supporting the demolition of four salmon-run inhibiting dams on the Snake River in Washington state. The key factoid (italics mine):

What is clear, however, is that if the four facilities typically operate at the national average hydropower utilization rate of around 36 percent, their annual power generation would come to about 10 million megawatt-hours (MWh) of electricity, equivalent to the output of 4,000 MW of wind capacity, or roughly 20 percent of the entire US wind power output in 2008. After a banner year for wind turbine installations in 2008, the US might not add much more new wind capacity than that this year, and wind remains the largest-scale technology among our preferred renewable power options. In fact, since 1999 US hydropower output has declined by an amount greater than the entire current contribution of wind power.

Styles is upset that the Waxman-Markey energy bill effectively discriminates against hydropower in favor of solar and wind, by not including it under the category of "qualified renewables." He sees an implicit contradiction between simultaneously attempting to revive fish runs by getting rid of dams and lowering greenhouse gas emissions by promoting renewable energy.

I think most environmentalists (not to mention salmon fishermen or salmon consumers) would deny that these impulses are contradictory. There may be a short-term negative trade-off, but the same underlying principle undergirds both the effort to ensure healthy wild salmon fish runs and a decrease in greenhouse gas emissions. We're striving for sustainable ways for humans to be on this planet. One could well ask: If stopping global warming requires damming up all the rivers and saying goodbye to all the wild salmon, why bother?

Meet Sergey Aleynikov, a character ripped straight from the pages of a classic William Gibson novel: competitive ballroom dancer, computer programmer, free-software enthusiast, Russian emigrant to the U.S. and former employee of Goldman Sachs. On July 3, a month after quitting his $400,000 Goldman job to work for a Chicago firm at three times the salary, Aleynikov was arrested on charges of illegally stealing proprietary automated stock-trading software from his employer and uploading it to a Web server in Germany. (Found via Zero Hedge.)

And not just any software. Reuters' Matt Goldstein, who broke the story, calls the code Goldman Sachs' "secret sauce." An affidavit filed by FBI special agent Michael G. McSwain describes it as follows:

A computer platform that allows the Financial Institution to engage in sophisticated, high-speed, and high-volume trades on various stock and commodities markets. Among other things, the Platform is capable of quickly obtaining and processing information regarding rapid developments in these markets ... The Financial Institution believes that certain features of the Platform, such as the speed and efficiency by which it obtains and processes market data, give the Financial Institution a competitive advantage among other firms that also engage in high-volume automated trading.

So what we're talking about here is the code employed by the most sophisticated financial institution on the planet to execute automated stock trades. Code that could presumably be sold to the highest bidder for a pretty penny. Really -- if one were to pick a candidate for software likely to develop emergent artificial intelligence, this would have to be it, right? Just kidding. Kinda.

Aleynikov told the FBI that he had intended to download only nonproprietary "open source" files but had accidentally included code that was not free to share. Oops! But, at least so far as described in the affidavit, his story doesn't look so good, since shortly after transferring about 32 megabytes of code to the German Web server, he attempted to erase the history of the sequence of commands he had employed to transfer the code from his Goldman computer. Unbeknownst to him, however, Goldman kept a separate backup of each employee's programming history. Double oops! The perils of a network!

Tyler Durden at Zero Hedge offers a wealth of speculation about what the whole saga implies for Goldman Sachs and recent zany stock market behavior. I am in no position to judge whether Aleynikov's shenanigans portend "doom for ... the entire Goldman Sachs program trading group," as Durden hints, but the story sure has movie treatment written all over it. Kevin Spacey is probably a bit long in the tooth to play the lead role. Maybe Edward Norton?

Just for fun, here's a clip of a Serge Aleynikov and his wife, Elina, dancing to "You Light Up My Life."