Death of the City? Some NYT Faux Pas: The Size of Some Countries

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TiM GW Bulletin 99/12-9

Dec. 31, 1999

Expect in 21st Century: Death of the Corporation and...

Death of the City, Too?

Some New York Times' Faux Pas Exceed the Size of Some Countries

PHOENIX, Dec. 31 - The answer to the question which Robert Kaplan's Dec. 27 New York Times OpEd piece poses - "Could This Be the New World?" - is: It could. But it won't. That's because the Times' OpEd contributor makes a classic "faux pas" of amateur soothsayers. He uses the past to predict the future.

Kaplan says, for example, that, "cities have been with us since the dawn of civilization." From which historical

fact he makes a giant leap into the abyss of Hegelian dialectic… "while the future of the city is not in doubt…"

Really? Why not? Because Kaplan says so? "Simon says," too. But who's listening, except for kids and morons?

Ancient cities were built to keep the outsiders out, as evident by the walls and moats which surrounded them. Modern cities were built to facilitate a concentration of the work force required to operate the industrial era's factories and offices. In today's and tomorrow's information-driven world, both raison d'êtres for the cities' existence will have disappeared. And silicon will have returned man back to nature (which is what this author said in a 1983 forecast - see "Death of The Corporation").

Of course, that may come as a shock to modern urbanites, like Kaplan - inmates of the steel, glass and concrete industrial era asylums - the multi-story, multi-cultural, multi-ethnic melting pots from which multinational companies have been drawing their dumbed down workers. But a trend away from that is a breath of fresh air for the rest of the humanity. Millions have already voted in favor of it by moving from such cities into the Sun Belts of America and the world.

But Kaplan is still half-right even in his half-baked forecast. Nation-states as we know them, will disintegrate in the 21^st century. Only not the way he would wish them to. They will implode along the demographic lines, leaving in their wake small, but culturally and ethnically homogeneous states (for more on that, check out the "United States of Europe?" section of our 1995 column).

That's bad news, of course, for multinational industrial dinosaurs and their media and political proxies. But it's great news for mankind and free spirit.

By the way, by publishing Kaplan's off-key, yet self-serving piece, the Times has clearly shown its readers for what side it is rooting - for its advertisers, not for free spirit. But even if that's the case, how can one excuse its U.S.-centric myopia?

Someone from Exxon-Mobil, IBM, GM or JP Morgan should give Kaplan and the Times' OpEd and art editors a geography lesson. It's truly amazing that this newspaper's map of the future "New World" did not include London, Paris, Moscow, Beijing, Sydney, Toronto or Tokyo… among some great cities of the world. Yet it did show Boston, New York, Philadelphia, Washington, Phoenix, Tucson, Eugene, Portland and Seattle.

How much more jingoistic can the U.S. media get? It's a wonder the New York daily didn't stick the New York City Hall flag on top of its "New World" globe. Maybe it was saving that for the late city editions?

In short, this Times OpEd was reminiscent of that famous trial lawyer's summation: "And those, ladies and gentlemen of the jury, the conclusions upon which I based my facts."

If the New York Times' Kaplan's OpEd piece reeked of self-serving wishful thinking, its Dec. 26 Business Day front page article "A Company Worth More Than Spain?" demonstrated its business editor's ignorance about business and economics, to go with its OpEd editor's political bias. The best part about this short Market Watch article was a good looking colored map of the world.

And the worst? It was the stories content: nothing short of sheer nonsense. A classic example of an apples and oranges comparison. The Times editors would have failed not only Econ101, but even a simple test of streetwise common sense.

In an effort to try to make a valid point - that equities are grossly overpriced these days (also see "Fluff Championship of the World" - Annex Bulletin 99-35, Dec. 5, 1999) - the Times chose to compare the market cap of some public companies to the GDPs (Gross Domestic Products) of various countries.

Thus its headline, for example, was supposed to make us believe that Microsoft was worth more than Spain. It's not. Not by a long shot. And not even by the Times' faulty yardsticks.

Microsoft's market cap was $593 billion, according to the Times. Spain's 1998 GDP, on the other hand, was $646 billion, according to the 1999 CIA World Factbook.

But what's $53+ billion here; $53+ billion there… if you're a publication which claims to be "the nation's most honored newspaper" (per the New York Times' self-promotion which we have just received).

So let's forgive them the $53+ billion-error on account of being so honored. Not even the dumbest of the dumb Econ101 failures could be forgiven a $625 billion-mistake. Unless perhaps they were first made presidents of the IMF or the World Bank. Or the head of the Federal Reserve.

At least $625 billion. And only in one instance - Microsoft vs. Spain. Overall, the Times "analysis" exaggerated the apples' case by at least a 234-fold average. Without even taking the Apple Computer into it. J Pitty the oranges…

In some case, such as when comparing Internet Capital's market cap to that of Kuwait's GDP, for example, the Times exaggerated it by a whopping 2,750-fold! Yes, ladies and gentlemen, no typos here… "The nation's most honored newspaper" overstated its case by 2,750 times.

The nation hangs its head in shame… Or at least the bozos should, who had honored the Times so on our nation's behalf.

Yet, the reason for such mind-boggling "faux pas" is actually quite simple. Comparing a company's market cap to a country's GDP is an apples and oranges "analysis." It's like pitting one company's assets against another firm's revenues, and then pretending to draw some profound conclusions from it. Instead, such a business "analysis" should draw laughter and derision even from the Econ101 students in a dumbed-down America.

A more accurate, closer to an apples-to-apples comparison, would have been to have taken, say, Microsoft's revenues and compared it to Spain's GDP. But alas, such facts would not have fitted the Times editor's conclusions. It would have fallen short by at least $625 billion.

Or the Times could have tried to list Spain with some Madrid or New York real estate or business broker. Or convince the Spanish government to divest itself of the country through an IPO. And then see what kind of an asking price this country would fetch - bulls and matadors included - we're sure to the delight of the bullish Wall Street.

This amount, however, would be probably in the multi-trillions of dollars, using the market cap/revenue multiples of today's "fluffy" stockmarket. Which means that the Times whacko conclusions would still be off by a considerable margin.

Either way, such analysis would be a complex thing to do. So the Times editors opted for simplicity over accuracy. They chose to try to fit the facts to their opinions.

Would someone, please, change that front page New York Times slogan from "all the news that's fit to print," to "all the news that fits our opinions?"

By choosing simplicity over accuracy, the Times reminded us of an old (1984) IRS tax case against an Arizona taxpayer, in which this writer acted as an expert witness for residual value forecasts of computer equipment.

The federal government's expert witness presented her valuation of the particular computer portfolio in which the taxpayer had invested his money, whose value was being challenged by the IRS. Asked by the judge what method of forecasting future residual values she had used, the government expert replied with a straight face, "a straight line method" (i.e., by extrapolating the values from the past to the future).

"And why did you choose that method?" the judge persisted. "For the sake of simplicity," the government expert replied, still as cool as a cucumber.

By contrast, the TiM editor presented the results of our elaborate computer model valuation which we had developed over a number of years of hands-on, real life computer trading and leasing. What's more important, it was a model with a PROVEN accuracy, which we could demonstrate. But the method was so COMPLEX that this writer spent several hours on the witness stand, explaining it to the judge and the government lawyers.

In the end, unlike the New York Times editors, the judge preferred accuracy over simplicity. He threw out the IRS case.

Maybe the Times readers should do the same with its Dec. 26 Business Day story, "A Company Worth More Than Spain?"

But wait… Maybe not so fast. The Times did have a good idea, after all. It was just too klutzy in making it shtick. J

Perhaps the Times should have taken IBM's $30+ billion stock buybacks, for example, and compared them to some country's GDPs. Were IBM not a major advertiser, and still a living and spending industrial dinosaur, perhaps the Times could have pointed out to its readers that the amount of money the Big Blue had squandered in the last five years on stock buybacks ($30+ billion) - without creating a single product or a job (!). That is bigger than EDS and CSC combined! And more than six Albanian GDP's. Or about one Kuwait's, according to the Times' figures.

Yet, even such IBM financial travesties look like real bargains compared to the costs of the Gulf or Kosovo wars - about $90 and $60 billion apiece - fought by the U.S. government and its allies ostensibly on behalf of Albanians and Kuwaitis.

Actually, they were fought on behalf of the same Wall Street crowd which cheers "humanitarian wars" anywhere on Planet Earth, as long as one of the companies in which it has invested is perpetrating the crimes against humanity. For the sake of commerce, of course.

Or perhaps the Times could have pointed out that half of Wintel (Microsoft and Intel combined) adds up roughly to the NATO-devastated Serbia's GDP? ($25 billion, according to the CIA). Which only goes to show us that the Justice Department's bombing of the Wintel would have to be in the trillions of dollars to cause some discernible damage to the New World Order of the New Millennium.

Or that the much ballyhooed America Online (AOL) is actually no bigger than Albania, Europe's poorest country with a GDP of only $5 billion.

Or… There could have been many other "fun" stories which the Times OpEd or business editors might have done using the same basic facts.

The fact that they didn't, and have instead published two pathetic New Millennium pieces - "Could This Be the New World?" and "A Company Worth More Than Spain?" - only underscores our earlier charge - that "the nation's most honored newspaper" stands for wallets of its advertisers, not for free spirit of its readers. And that we should also "honor" it by gracing our trash cans with them. Or by lighting our New Millennium fire with the "inspirational" Times pieces, like these. J

Meanwhile, the Internet and the e-commerce are quickly changing the business landscape of the world, and facilitating a massive transfer of wealth from the industrial incumbents into the relative upstarts.

In "Death of the Corporation", we pointed out some of the new and old examples of such changing of the guard, mostly using North American cases as guideposts. Twenty years ago, nobody had ever hear of Bill Gates. Today, the Microsoft chairman, and not the CEO of the once omnipotent IBM, is the richest man in America and the world. And not for long, if the Internet upstarts have their say…

In Brazil, a "protectionist" country which IBM of the old spurned in the 1970s, a change of the business elite guards is under way, too. In a Dec. 27 front page article, the Wall Street Journal, for example, highlighted the success which an Internet start-up, Zip.net, founded by Marcos de Moraes, son of the now struggling old money Brazilian business tycoon, Olacyr de Moraes, enjoyed. "The 33-year old… is the Moraes who commands (the) banks' attention," the Journals gloated.

That, by itself, is not a big feat. The bigger the debt, the greater the banks' attention. "If you owe a bank $1,000 - the bank owns you," goes an old saw. "But if you owe the bank $1 million, you own the bank."

Well, multiply the preceding figures by a factor of about 1,000, and then you will begin to appreciate the highlands of the La-La Internet Land of 1999. At least from a skewed La-La Wall Street skyscraper perspective.

No kidding. Unfortunately… Businesses in the La-La Land (Los Angeles) are founded on a ground more solid than some based on the Internet e-commerce hype.

Take Value America, for example. Its market value has plunged from a peak of $3.2 billion, to about $262 million, as of Dec. 29. And this erstwhile Internet stockmarket darling announced it was cutting 47% of its work force. And that it would vacate five of the 13 Charlottesville, VA, buildings it occupies.

And here we all thought… wasn't the Internet and e-commerce all about GROWTH? Certainly it has not been about PROFITS! Right? Anymore than the cabbage-patch dolls were about beauty or common sense.

For, Value America, for example, never made a dime for its shareholders and investors. Yet it once had a market cap of over $3 billion. Which, according to the Times business editors' "simpleton analyst model," would have made it bigger than a country like, Barbados.

Well, given the choice, sensible people would have taken Barbados over Value America any day. And not only because this Caribbean island has more than 13 buildings. Only fools in today's "Ship of Fools" market, where there's a sucker born every day, might be surprised about that.

Take a look at the Journal's Dec. 28 piece, "Internet Start-Ups Revolutionize Korean Economy," for example. Or at its Dec. 20 front page story, "Europe Marks a Year of Serious Flirtation with the Free Market." Each article is written by the suckers for the suckers among the Wall Street La-La Land gamblers, to which this downtown New York casino is now pandering.

It's all reminiscent of the once tragi-comical fools, like Don Quixote and his loyal servant, Sancho Panza, swinging at don-quixote.jpg (103239 bytes)

the windmills, c/o Miguel de Cervantes, (1547-1616). Like today's Wall Street gamblers, Don Quixote was a fool. He believed that, if he just kept bravely swinging at the windmills, he would eventually defeat the vicious giants, steal their booty, and dedicate his victory and the new fortune to his beloved Dulcinea.

It didn't work four centuries ago. It won't work today. Don Quixote and his horse, Rocinante, bit the dust. So will the New Millennium's booty-hunters. Especially since they are trying to slay the market windmills for the sake of personal gains, rather than for nobler causes - to win their would-be lovers' hearts.

And it won't work because neither Don Quixote, nor the modern-day industrial giants, understood who their real enemy was. It was time. Time, which is passing them by. Time, which is enabling their challengers to fight with more powerful weapons, such as the PC and the Internet. Time, as opposed to the Times, which will enable the Homo Sapiens' free spirit to triumph.