Citifail

Some background info: In Sept 2011, Citigroup + Bloomberg hired a partnership of two companies, Alta and PBSC/Bixi, to create a bike share program for NYC to be delivered in July 2012. PBSC/Bixi is a private non-profit company started by the city of Montreal to create their bike share program back in 2007. After Montreal's success, PBSC/Bixi started expanding internationally, with the aid of Alta, a US company. In the US, Boston and DC are two examples of successful Alta-PBSC/Bixi systems that went off without a hitch. In all those cases (Montreal, Boston, DC), PBSC/Bixi hired a company called 8D Technologies to develop the hardware (terminals, docks, etc) and most importantly, software to manage the thousands of bikes in a typical large city bike share system.

However, in a surprise move, PBSC/Bixi fired 8D Technologies in 2012 and decided to create its own software from scratch. This is the main reason why the NYC program was delayed for a year, despite what they may claim about the effects of Hurricane Sandy. 

It seems that Mayor Bloomberg knew it was the software that caused the delay. In July 2012, Bloomberg said of Citibike: "its software isn't working yet. And just rest assured we're not going to put out any program here that doesn't work." Well, with an estimated 10% of Citibike docks failing every day (according to WNYC), it looks like they did.

Although NYC officials knew that software was the cause of the delay, they didn't know that the true reason was a complete bait and switch of the promised product: "We thought that there would be a substantial transfer of the Washington/Boston software capabilities, not a total rewrite, which is why we thought a July [2012] launch was feasible. But it turned out it's not just a software upgrade." - Gotham Gazette

Not only was NYC left out of the loop, but it seems that their partner, Alta, was unaware as well. "In January [2013] , records show, Alta filed a lawsuit in an Oregon circuit court against Public Bike System Company [PBSC], saying it delivered 'nonconforming goods and faulty goods' to New York's bike-share program. Alta said this week that the suit was never served and that the groups remained partners." - NYT

The main question is, why was 8D Technologies fired? As in all things business, the answer comes down to money. 8D has sued PBSC/Bixi for $26 billion and in response, PBSC/Bixi has countersued $2.5 billion claiming that 8D overbilled for their products. However, if 8D truly overbilled, why was PBSC/Bixi okay with using 8D for Montreal, Boston and DC? You would think that buying another license for a software you've already used several times would be much cheaper than creating your own code from scratch.

It gets even more interesting when one looks closer at PBSC/Bixi. Although it's a private company, it is implicitly backed by the City of Montreal. In 2012, Bixi "was on the brink of collapse and the City of Montreal provided a $37 million loan and guaranteed $71 million in credit. At the same time, the city auditor told BIXI to sell off its international programs since a Quebec municipality cannot participate in commercial activities." Apparently, PBSC/Bixi has had financial issues for years. thetransitwire

I think I know what's going on.

PBSC/Bixi is bleeding money and thought it could save costs by cutting out 8D. They've been working together for so long, PBSC/Bixi figured it could reverse-engineer 8D's software from their previous projects together. This raises major issues concerning intellectual property, as 8D stated in their lawsuit

In order to meet previously promised deadlines, the new software was delivered before it was a fully functioning product, even with its additional one year of development. Amazingly, it has only been previously launched in one other city, Chattanooga, Tennessee (which also suffered delays), which is hardly comparable in scope to NYC's program, which is the largest in the US. Chattanooga seems to have suffered the bait and switch as well: "In Tennessee, the break between 8D and PSBC caught officials off-guard. 'That was not clear to us when the initial contract was awarded'".

Next month, Chicago will get a very similar version of our bike share program. Unsurprisingly, it has been delayed by two weeks. San Francisco has signed on with Alta-PBSC/Bixi as well.

TL;DR: an essentially bankrupt Canadian semi-public company promised NYC one product, but instead delivered an inferior beta version of an untested clone. Furthermore, it's unsure whether they will commit to fixing anything, since PBSC/Bixi's international operations are being sold off and Alta is being sued for unpaid wages by its employees. The only upside is that, unique to all implementations of bike sharing programs, the costs of our's has been completely privately funded by Citigroup.

Random Thoughts: Desktop Efficiency for Linux

Also see my post on windows desktop efficiency.

I just spent some time making my laptop dual boot ubuntu and windows. While I have played with ubuntu before, I never took the time to customize it for efficiency before. So here are my thoughts.

1. windows shortcuts still work
• win + 1,2,3 etc still calls your applications on the task bar
• I added win + d to show desktop
2. new shortcuts/desktop management tools
• a bunch of ctrl+alt shortcuts for manipulating workspace
• this takes the place of stuff like win + arrow key: presumably you rarely need to tile windows because you can put stuff into different workspaces. There are also windows tiling managers but I haven't looked into that yet. (CompizConfig has a plugin called grid that does this)
3. for autohotkey equivalents
• xmodmap for the basic mappings. I'm thinking that this is actually a lot better than my current windows solution- more below.
• autokey is pretty well developed- you can apparently call python scripts from it

My new ubuntu key mappings maps mode_switch to tab (ie. altgr without the alt). This is a whole new key modifier. (ie. imagine, in addition to ctrl, alt, win, you also have mode_switch) When I was in windows, I had some problems with overloading the functions of the ctrl key For example, I wanted ctrl+l to be right arrow, but then I also wanted ctrl+right to move one word right). My solution then was to differentiate between right ctrl and left ctrl. Rctrl + j -> down, Lctrl + j -> Ctrl + down.

Now, I have my own modifier separated from normal Ctrl functions.This allows you to keep stuff like ctrl + h in your browser to be history (that was a problem before).

Had some installation difficulties along the way, but all-in-all seems quite manageable.

Computer Security

Some thoughts about potential options to secure your computer

1. setup 2 step authorizations (eg: google can send a pin to your phone, or banks have pin generator for a second password)
2. isolating threats. ie: when paying with a credit card, you could
1. use a VM
2. use Tor
3. dual boot to a separate OS
4. setup a computer and remote access into it
3. software: firewall, regular virus scans, regular spyware scans
4. monitors: monitor network traffic here
5. reformat your actual computer periodically

Deflation and Debt

Prem Watsa has the reputation of being Canada's Warren Buffett. Unlike Buffett, however, he has made pretty significant macro call on deflation:

Despite the fact that central banks from all around the world are explicitly trying to create inflation, Prem believes that the forces of de-leveraging are too strong for the money printers to counteract. (Read anything written by Van Hoisington if you want more detail on the deflation trade). As such, Fairfax has entered into large, long-term, CPI-linked derivatives that benefit from deflation. In addition, given that de-leveraging and deflation would likely have a strongly negative effect on the value of financial assets such as stocks, Fairfax has hedged 100% of its equity portfolio.

This is an incredibly pessimistic view of the Fed's monetary powers. He cites Japan's multi-decade deflation as an example of what he envisions for the future:

In Japan, after the bubble crashed, it took 5 years to actually see deflation
- They then saw cumulative deflation for the next 17 years
- It takes time for people to understand that they actually have to de-lever
and that there is no other option
- Prem's view is that there is a possibility of deflation in the US
- Since 2008 we have had a ton of stimulus and Fed monetary
actions
- In spite of that the economy is weak and there is no
inflation in sight

I'm not sure if he's right. Although the Federal Reserve may not be able to control long term real variables such as growth and unemployment (as they are currently attempting to do so with QE3), I do believe that they have absolute power to manipulate nominal variables. Put another way, Bernanke can't force you to spend your dollar, but he does have control over how many dollars are out there and thus the relative value of your dollar.

The idea that too much debt leads to deflation is creatively called debt deflation. The process is simple: the higher your debt, the more likely you are to use your money to pay it off (rather than spend or save your money). You may even begin to sell off your assets to pay off this debt if your income is insufficient (a process known as deleveraging). Systematic selling leads to a decline in prices, as simple supply and demand analysis would have it (more sellers than buyers means lower prices). However, as prices go lower, you receive less for your asset sales, making it harder to pay off your debt, precipitating even more asset sales.

This is analogous to the paradox of thrift you learn in Econ 101 (where if everyone simultaneously tries to save more money, the aggregate level of savings will decline): if everyone tries to pay down debt, the aggregate debt level actually increases. This is why economics is split into micro and macro universes, individual behavior looks very different when aggregated.

Are we seeing this feedback loop between deleveraging and deflation right now in the US?

Inflation is currently running around 2%, right around the Fed's target. What about deleveraging? McKinsey Global Institute (the research arm of the management consultancy) had an excellent report last year which showed that the US private sector is ahead of all other developed countries in its progress of paying down debt. In fact, there are some signs of releveraging (taking on more debt, or the opposite of deleveraging) in the US, which is a sign of increased confidence, as corporations have started issuing debt to take advantage of record low interest rates. Home prices are starting to increase, which makes households richer, and more confident about taking on debt (such as mortgages, which is money borrowed against the value of your home).

The Fed has effectively broken the link between deleveraging and deflation. If anything, we may have to worry about over-inflation (I hesitate to say hyper-inflation), as massive amount of reserves enter the system (but that's a topic for another blog post).

On a different note, once value guys (like Prem Watsa) start making macro calls, maybe that's when macro guys should start making bottom-up security recommendations. In that spirit, here are list of stocks I like.

Consumer Discretionary (2 securities) TARGET CORP OMNICOM GROUP Consumer Staples (3 securities) GENERAL MILLS IN KIMBERLY-CLARK WAL-MART STORES Energy (2 securities) EXXON MOBIL CORP CHEVRON CORP Financials (1 security) PARTNERRE LTD Health Care (1 security) ABBOTT LABS Industrials (4 securities) RAYTHEON CO NORTHROP GRUMMAN CINTAS CORP L-3 COMM HLDGS AMDOCS LTD DST SYSTEMS INC Materials (3 securities) SONOCO PRODUCTS SILGAN HOLDINGS BALL CORP

Disclaimer: this is not to be taken as any form of investment recommendation.

--
Andy Zhang

Government for Sale

1,820 years ago, on this day, March 28th, there was a change in political leadership in the Roman Empire. Normally, this wouldn't be worth commenting on, but what was special about this political transition was how new emperor was chosen: by auction.

After the murder of Pertinax (28 March 193), the Praetorian assassins announced that the throne was to be sold to the man who would pay the highest price. Titus Flavius Claudius Sulpicianus, prefect of the city, father-in-law of the murdered emperor, being at that moment in the camp to which he had been sent to calm the troops, began making offers, when Julianus, having been roused from a banquet by his wife and daughter, arrived in all haste, and being unable to gain admission, stood before the gate, and with a loud voice competed for the prize.

 

As the bidding went on, the soldiers reported to each of the two competitors, the one within the fortifications, the other outside the rampart, the sum offered by his rival. Eventually Sulpicianus promised 20,000 sesterces to every soldier; Julianus, fearing that Sulpicianus would gain the throne, then offered 25,000. The guards immediately closed with the offer of Julianus, threw open the gates, saluted him by the name of Caesar, and proclaimed him emperor.

Interesting system. Instead of millions of dollars being wasted on ad campaigns, give it to the people directly in exchange for political power. Let's LBO the government! (I wonder how the valuation models would work?)