Poker and Investing: Selective Aggression Pays Off

Las Vegas,Navada

I’m quite a poker enthusiast and play tournaments in Southern Indiana and Cincinnati quite a bit, as well as an occasional home game with friends.

One of my favorite players to watch on television is Vanessa Selbst — mainly because she’s managed to parlay an unpredictable, super aggressive style largely based on reading opponents into remarkable results (with well over $10 million in career tournament earnings). She also boasts a law degree from Yale University.

I recently found this 2013 interview with Bloomberg Business in which she discusses the similarities between poker and investing.

Paul vs. Paul: Popular Economic Minds Debate on Bloomberg TV

Ok economic enthusiasts (I’m careful not to say "geeks" here), here is your Super Bowl. Famed libertarian Rep. Ron Paul against popular economist, author and left-leaner Paul Krugman on Bloomberg TV yesterday. In the comments section, let us know who you think wins this debate (and why) on the Federal Reserve and government’s role in the American economy.

Economic Club Speaker was Chided for ‘Outlandish’ Economic Predictions — That Came True

Patrick Byrne, CEO of Overstock.com, was widely criticized by financial professionals and journalists for predicting a global financial crisis more than two years ago. Byrne, a native of Fort Wayne who received his education from Cambridge and Stanford, warned of a market meltdown perpetrated by cheap credit and writing checks on the bank accounts of future generations. The man who took Overstock.com from a half-million dollars in annual revenue to nearly $1 billion annually, takes little pleasure in accurately predicting our current economic situation but continues to advocate for what he feels are positive reforms – specifically to the controversial practice of short selling stocks.

Byrne will appear at the Economic Club of Indiana luncheon in Indianapolis on November 5. Get your tickets today.

Goldsmith: Thinking Differently About Government

In a column for Governing, former Indianapoils Mayor Stephen Goldsmith analyzes how we think about government, and credits public officials who have made strides toward combating homelessness and enhancing school choice in America:

Private companies think about their "value proposition" all the time. What are we doing for our customers that make them happy to pay our price?

Government services usually don’t come with a price, but government managers should examine their value proposition just the same. In fact, revisiting "why" an agency is involved in a particular activity can be a crucial step in finding better, faster, cheaper ways of delivering value to citizens and taxpayers. While mayor of Indianapolis, I witnessed well intentioned public officials outsource an activity with the result that we became more efficient at accomplishing an obsolete process.

Getting the value proposition right unlocks better and cheaper results more than any single other thing government can do. Consider New York City’s effort to address homelessness. At one time, the city saw itself primarily in the business of providing shelter. In 2002, more than 33,000 people were living in city run shelters each month–no matter how many shelters were opened, they always seemed full.

Then Mayor Michael Bloomberg put Linda Gibbs in charge of homeless services. Upon taking over, Gibbs asked herself a simple but powerful question: What is our purpose? What is the value that we are attempting to deliver to citizens?

The answer to that question prompted an insight. Gibbs realized that her job wasn’t to run homeless shelters. Her agency existed to help people who were homeless–to reduce the need for emergency shelter, in fact.

Gibbs looked around and discovered that all her agency’s efforts were directed at running shelters. As Gibbs later observed, "We were smart enough to know how to help the clients’ underlying needs, but you put them in the shelters and suddenly the shelters became the solution, which is turning the world upside down."

Gibbs soon redefined the agency’s goal from serving the homeless to reducing homelessness and redirected resources to prevention. The new approach worked. By 2008, of those receiving this more comprehensive assistance, more than 90 percent had not reentered shelters within one year of being served. (For details about how this was accomplished see the Harvard Kennedy School case study, Overhauling New York City’s Approach to Shelter.)

Is “Pay to Play” the Future of the Internet?

An online company’s CEO claims the future will feature more fees for Internet surfers. Bloomberg has the story of how more media giants are insisting the days of free Internet content are going the way of the dinosaur (or dial-up):

Barry Diller, chairman and chief executive officer of IAC/InterActiveCorp, said Web users will have to pay for what they watch and use, joining the refrain of media moguls who say an era of free Internet content is ending.

The media and technology executive, whose company runs the Ask.com search engine and the Match.com dating service, said it’s “mythology” to view the Internet as a system of free communications.

“It is not free, and is not going to be,” Diller said today at the Fortune Brainstorm conference in Pasadena, California. In addition to IAC, he is chairman of Expedia Inc., the online travel service, and Ticketmaster Entertainment Inc.

Diller, 67, joined a group of media chiefs, from Liberty Media Corp.’s John Malone to Walt Disney Co. CEO Robert Iger, who are challenging the accepted model that consumers pay for Internet access and then content is free. Diller predicted there will be three revenue streams: advertising, subscriptions and transactions.

Disney, the world’s biggest media company, is developing a subscription-based product for the Internet, Iger said on July 22 at the conference.

The Burbank, California-based company has opportunities to increase sales from the Web, Iger said. Online advertising can be improved, and marketers can target consumers by tracking their activities and interests. Subscription products are particularly promising to the company.

‘Willing to Pay’

“We have ample evidence both in traditional and new media that people are willing to pay for quality, to pay for choice and to pay for convenience,” Iger said. “And they are willing to pay for what they perceive as value.”

Companies from Disney to New York Times Co. are seeking ways to get more revenue from the Internet and counter the loss of traditional media subscribers and advertisers.

New York Times said in a survey of print subscribers this month that it’s considering a $5 monthly fee for access to its namesake newspaper’s Web site. The company also asked whether existing print subscribers would be willing to pay a discounted fee of $2.50 a month for access to the site. Nytimes.com, the most visited among newspapers’ sites, is currently free.

Yesterday, the newspaper publisher reported second-quarter profit almost doubled as the company cut jobs and wages to cope with a deepening advertising slump. Revenue declined 21 percent.

News Corp.

News Corp., publisher of the Wall Street Journal and owner of the Fox TV and film studios, plans to increase revenue at its Internet businesses by charging customers for news and entertainment, Jonathan Miller, the company’s chief digital officer, said yesterday at the conference.

Going forward, some companies will have material people are willing to pay for, and others won’t, said Miller, chief executive officer of News Corp.’s Digital Media Group.

Journalism will increasingly become a “paid model” online, said Miller. The Wall Street Journal already charges for online subscriptions.

Bloomberg Takes on Gridlock in NYC: Well, He Has Ambition…

New York City Mayor Michael Bloomberg has tackled some tough issues during his tenure, but now he’s seriously considering taking on the city’s traffic problem, according to Newsweek. If you’ve ever been to the Big Apple, you’ll realize this task is about as easy as riding in a subway car with 150 people in July — and not coming out with your suit smelling like onions.

What’s interesting is that his solution is not to build more roads, but rather, shut some of them down:

In general terms, traffic is caused by too much demand (from vehicles) meeting too little supply (roads). One solution is to increase supply by building more roads. But that’s expensive, and demand from drivers tends to quickly overwhelm the new supply; today engineers acknowledge that building new roads usually makes traffic worse. Instead, economists have suggested reducing demand by raising the costs of driving in congested areas. The best-known example is the "congestion pricing" plan London implemented in 2003. Drivers now pay about $11 a day to drive in the central city. According to one study, the program has reduced traffic by 16 percent.

In 2007 Bloomberg proposed a congestion-pricing plan for New York, but last year state legislators rejected it as an elitist move. In response, Bloomberg began tinkering with the city’s roads in ways that required no legislative blessing. He banned vehicles from Park Avenue for three Saturdays in August 2008. He closed two lanes of traffic on Broadway below 42nd Street. "Bloomberg is taking the position that as long as it’s within the two curbs, it’s [city] property and he can decide how to use it," says Sam Schwartz, the city’s former traffic commissioner.

These pilot projects fit in with a larger counterintuitive theory that’s gaining traction with urban-planning wonks: that closing roads can reduce congestion. During the 1990s, a British transit engineer named Stephen Atkins read about how San Francisco congestion decreased, rather than increased, after an earthquake knocked out a key freeway. He observed the same phenomenon in other cities that closed roads, too. "In a lot of places, the traffic was not just displaced—a lot of it disappeared," he says. In a 1998 study he commissioned, researchers studied 60 cases of road reductions and found that when roads were closed, drivers took steps to avoid the area. In economic terms, closing roads raises the perceived costs of the trip (because drivers anticipate hassles), reducing demand.

Hat tip to Chamber staffer Tony Spataro for the article.