Level 3 Hangs On

   The fiber optic network of Level 3, originally founded in Omaha, Nebraska.  Source of map:  online version of the WSJ article cited below.

 

Ex ante, Level 3 seemed to have a plausible business model.  When they laid fiber optics, they left room to install more, when demand, or a change in technology, made that profitable.  But demand did not rise as expected; and technologists elsewhere found clever ways to cram more bandwidth into existing fiber optics.  So, alas for many in Omaha, ex post, the results are in the graph below.

 

Fiber-optic network operator Level 3 Communications Inc., a high-flyer during the telecommunications bubble, almost went bankrupt after the sector burst in 2000.

Now, it is back, with a stock price that has almost doubled in the past year and bond prices that have risen about 20%.

Behind the gains: Explosive growth in video viewing over the Internet, which requires high-speed networks of the sort Level 3 offers. At the same time, a hearty appetite by investors for risky debt has enabled the company to put itself on firmer footing by refinancing its debt at lower rates. There also are good reasons to believe that Level 3 might be an acquisition candidate, though many feel such speculation is overblown.

But there are reasons to be wary: The company remains saddled with debt, it is in a business that still has excess capacity, and it has reported a quarterly profit just once in its more than 20-year history. With the stock and bonds at lofty levels, it could be that any future possible good news already is priced in.

 

For the full story, see: 

LI YUAN and GREGORY ZUCKERMAN.  "HEARD ON THE STREET; Level 3 Regains Luster Amid Web-Video Boom."  The Wall Street Journal   (Thurs., December 21, 2006):  C1 & C4.

(Note:  the above version is the online version, and differs some from the print version, though not in substance, as far as I noticed.) 

 

 Level3StockPrices.gif   Level 3 stock prices.  Source of graphic:   online version of the WSJ article cited below.

 

Schumpeter’s “Sarcastic Remark” on Mathematics in Economics

Erich Schneider had been a student of Schumpeter’s at the University of Bonn in the late 1920s.  The following sentences are from his lectures on Schumpeter that he published in German in 1970, and that were were translated into English by W.E. Kuhn and published in that form in 1975.

(p. 41) When, after many years of separation, I saw Schumpeter again at Harvard in the fall of 1949 and heard his lectures on economic theory–which he gave at 2 p.m., as in Bonn–I found him to be exactly the same man as before. On that afternoon he talked about the nature of dynamic analysis and about the role of difference equations in the framework of such an analysis.

To the above passage, Schneider adds footnote 3:

(p. 59) He dropped the sarcastic remark: "There are economists who do not know what a difference equation is; but there are also those who know nothing else."

Schneider, Erich.  Joseph A. Schumpeter:  Leben Und Werk Eines Grossen Sozialokonomen (Life and Work of a Great Social Scientist). Lincoln, Neb.:  University of Nebraska–Lincoln Bureau of Business Research, 1975.

Your Tax Dollars at Work: Government Protecting Us from Bling-Bling

DentalGrill.jpg  A dental grill, one form of the hip-hop jewelry sometimes called "bling-bling."  Source of image:  http://www.thesmokinggun.com/archive/0410062teeth1.html

 

If all you want for Christmas is to gild your front teeth, you may have to buy the bling-bling somewhere other than the Gold Plaza II kiosk at Crossroads Mall.

That’s because an employee of that shop, Bhavin Dalal, faces a felony charge of practicing dentistry without a license.  He’s accused of helping customers fit their teeth for glittering mouthpieces known as grills.

It’s the first such case in Nebraska involving the hot hip-hop fashion accessory.  And Dalal and his attorney, James Martin Davis, plan to fight it tooth and nail.

Dalal entered a not guilty plea Friday in Douglas County Court.  Davis blasted the Nebraska Health and Human Services System for its investigation of Dalal and the charge that resulted.

"It’s overzealousness on the part of a bunch of bureaucrats" who don’t want people to wear grills, Davis said.

 

For the full story, see:

CHRISTOPHER BURBACH.  "Dental Grill Seller Feels State Law’s Bite."  Omaha World-Herald  (Saturday, December 2, 2006):  1A & 2A. 

(Note:  the slightly different online title for the article is:  "State puts bite on grill seller")

 

 

“Nebraskans Preparing for the Imminent Arrival of Several Million New York Refugees”

(p. 12) HOUSING prices are falling on both coasts, and bubble panic is around the corner.  The financial magazines are already grabbing their readers by the throat and taunting them with headlines like:  ”U.S. Housing Crash Continues!” ”Where Will Housing Prices Fall the Most?” ”Is It Time to Cash Out?”

What if it is time to cash out?  Where do you go?  If you sell on either coast, then you need to find real estate somewhere that the housing bubble missed.  Guam?  American Samoa?  Wait, how about eastern Nebraska?  Downright frothless when it comes to housing:  the median home price here usually chugs along at the annual rate of inflation and never goes down (up 4 percent last year, up 22 percent over the last five years).

Before you recoil in horror at the thought of living in Omaha, a city of 414,000 souls, consider that this year Money magazine ranked it seventh of the nation’s 10 best big cities to live in, ahead of New York City, which ranked 10th.  O.K., now you may recoil in horror.

These compelling statistics have Nebraskans preparing for the imminent arrival of several million New York refugees (victims of post-traumatic bubble anxiety disorder), who will need emergency real estate and housing triage services.

 

For the full commentary, see:

Richard Dooling.  "Sweet Home Omaha."  The New York Times, Section 4 (Sunday, October 29, 2006):  12.

Is Variety Good?

Chris Anderson has a stimulating and useful chapter in The Long Tail on why having variety and choice is good.

Not all agree.  My old Wabash economics professor, Ben Rogge, with wry amusement, used to refer us to Alvin Toffler’s Future Shock.  Toffler’s view was that choice was stressful—visualize the Robin Williams’ Russian émigré character in "Moscow on the Hudson," when he collapses in panic on not knowing how to choose amongst the variety of coffees in the Manhattan supermarket aisle.

What amused Rogge was the contrast between the old critics of capitalism, who criticized capitalism for providing too few goods for the proletariat, and the new critics, like Toffler, who criticized capitalism for providing too many goods for the proletariat. 

Although Toffler has recanted his earlier views, others, such as Barry Schwartz in The Paradox of Choice, have picked up the anti-choice banner.

Here’s my current two cents worth.  Sometimes we value variety for its own sake, and sometimes not.  I may find the variety of ethnic restaurants exciting, but not the variety of music on I-tunes.

But even when I don’t value variety for its own sake, I still may value it because it increases the odds that the product I can find matches the product I want.  Let me explain.

In the language of Clayton Christensen and co-author Raynor, in The Innovator’s Solution, generally what I want is a good that does well, a "job" that I want or need to get done.

Some critics of mass production descried the loss of the variety of products produced by pre-industrial craftsmen.  But what good did it do the peasants that no two chairs were quite alike, if all of them were too hard and misshapen for the job of comfortably sitting in them?

Mass production reduced variety, but increased quality, in the sense of bringing (cheaply) to market, products that were far better at doing the jobs that most people wanted/needed to get done. 

If the modern varieties of chairs are a response to differences in the jobs that different consumers need to get done, then I might generally, and accurately, presume that variety is usually good, not because I want to constantly sample a lot of different chairs (like I want to sample a lot of different ethnic foods), but rather because variety increases the odds that I will find the one or two particular chairs that allow me to do the job that I want a chair to do for me.  

Specifically, recently, we were looking for a chair that was firm, spill-resistant, would swivel to allow talking to someone in the kitchen, would recline for watching television, would be dog-chew resistant, and would have a color/fabric complementary to the rest of the furniture.  We shopped at Nebraska Furniture Mart, which is the largest furniture store in the U.S., with the greatest selection, because we hoped to find the one chair that would do all of these jobs.

We came close, but I wish there was a store with even greater selection.

   

“If Ethanol Made Economic Sense, It Wouldn’t Need a Subsidy”

 

  Source of graphics:  online version of the World-Herald article cited below.

 

(p. 1D)  LINCOLN – David Pimentel, a Cornell University researcher, has been criticized repeatedly since he questioned the energy value of ethanol in 1980.

In a government-funded report, he suggested that ethanol provides less energy than is used to produce it.  Even though that report has been disputed and rejected by other analysts, Pimentel has not backed down.

He said last week that rural developers, farmers and investors will rue the day they put their money, hopes and dreams into the corn-based alternative fuel.

"It is too bad," he said in an interview, "because it would be a tremendous asset to agriculture if this were a true winner."

Pimentel is among the public critics who raise red flags as momentum gathers for dramatic increases in production, especially in the nation’s top two ethanol-producing states:  Iowa and Nebraska.

While Pimentel is perhaps the expert most often quoted – in part because he presented his analysis more than 25 years ago – others also raise questions about the energy value of ethanol and its economic benefits and environmental effects.

Ethanol backers defend the fuel as a viable way to help stabilize the nation’s fuel supply.  But they haven’t convinced Jerry Taylor, an energy policy specialist for the Cato Institute, a conservative think tank in Washington, D.C.

"If ethanol made economic sense, it wouldn’t need a subsidy," Taylor said.

 

For the full story, see:

BILL HORD.  "High-octane Clash."  Omaha World-Herald  (Sunday, August 6, 2006):  1D-2D.

 

  Source of graphics:  online version of the World-Herald article cited above.

 

Gateway Features artdiamondblog.com

Source of graphic: online version of The Gateway article cited below.

 

The Gateway, the student newspaper at the University of Nebraska at Omaha, ran a nice feature article on artdiamondblog.com on July 18, 2006, as the first installment of a projected series on blogs created by members of the campus community.

 

If you click the citation below, you will arrive at the online version of the feature:

Reed, Charley. "Meet the Blogger: UNO Professor Art Diamond." The Gateway (Tues., July 18, 2006):  3.

 

For your convenience, the text of the feature also appears below.

Continue reading “Gateway Features artdiamondblog.com”