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Go West Will presidential candidates say anything to pander to truth about enzyte voters? Last week I took John McCain to task for his dumb idea of spending $300 billion to buy mortgages so that so-called homeowners can be bailed out instead of Wall Street banks. The highlights of the McCain plan are the determination of who is creditworthy as well as a pre-determined, finger-in-the-wind interest rate of 5%, which sounds so attractive to me that I’d like one of those too. Even better would be the ability of those of us who are current on our mortgages to participate in one of Barack Obama’s latest proposals to save the economy, a three-month moratorium on foreclosures for mortgage holders who are trying “in good faith” to pay their mortgages but can’t. I wouldn’t mind skipping three months of mortgage payments, assuming I didn’t face a penalty for doing so. I promise I’d put the money to good use too. Maybe I’d buy a car. Obama has done a relatively good job so far on the pander-meter, such as when he stayed away from the gas-tax holiday McCain and Hillary Clinton advocated last summer. Then there’s this idea, which might buy some votes but isn’t likely to sit right with people who really do own a piece of their homes because they are current on their mortgages. The execution of a moratorium would be interesting. Would borrowers still owe the full amount, including interest, they didn’t pay during their mortgage holiday? How to determine “good faith?” Does Obama plan for the Treasury to compensate banks for the non-payments or for the time the bank loses between foreclosing and attempting to recover something for their seized asset? The good news is that, as far as whose plan wins out, we’ll know soon enough. I’ve been trying hard to understand John McCain’s mortgage proposal. Here are my two favorite elements: 1) that all troubled but heretofore creditworthy mortgage holders would be eligible to participate; and 2) that once the government purchased their mortgage it would then lend the money again, pegged to the “new” value and, importantly, at a 30-year-fixed rate of 5%. Let’s take these one at a time. McCain’s definition of creditworthiness seems to be that the borrower didn’t falsify information at the time of the initial loan and that they “provided a down payment.” This is silly in the extreme. It’s plainly obvious that all sorts of people couldn’t afford the homes they bought, whether or not they told the truth and whether or not they had good credit. Simply having made a down payment isn’t particularly meaningful, either. The size of the down payment and the validity of the appraisal are far more relevant. As for McCain boldly suggesting that 10 million “homeowners” (I use quotes because these poor souls are renters, not owners) should receive a fixed-rate mortgage at 5%, about a full percentage point below the current rates, I repeat my thought when various politicians and policymakers floated a similar idea last year: I want my mortgage rate frozen too. It’d be lovely to get a below-market-rate mortgage, and doesn’t McCain think the folks who acted prudently when they bought their homes would like a break too? I know I would. *** I read an interesting quote in The Wall Street Journal earlier in the week, back when Americans had lost only $2 trillion in their retirement plans in the previous 15 months. The article ended with the following suggestion: Teresa Ghilarducci, a professor of economic policy at the New School for Social Research in New York, said Congress should let workers trade 401(k) assets to the government - perhaps valued at mid-August prices - for a retirement account composed of government bonds. She called the 401(k) a “failed experiment.” My first reaction to this was, ‘What a ridiculous suggestion.’ Re-pricing bad decisions being guaranteed valuations from another time and place? Who wouldn’t take that offer and imagine how much it would cost the government? No way. Then I thought for a moment about all the crazy things the government is doing, and suddenly this idea didn’t quite so ludicrous. *** The Journal had comments today from Sequoia Capital and Benchmark Capital, two prominent VC firms, advising their portfolio companies to hunker down. Ron Conway, a successful and well connected ‘angel’ investor, had this advice earlier in the week for companies in which he has invested: *** And finally, an e-mail from Fortune Managing Editor Andy Serwer, who happened to be in San Francisco at the beginning of the week: “New Wachovia branch .. on the corner of Geary and Market …Big sign in the window: ‘Coming soon!’ … Actually, not.” I have 251 “friends” on Facebook. That’s incredible to me, since I never use Facebook. On my Facebook home page, I also have 103 friend requests I’m not likely to accept, 66 “other requests” I’ll probably never read and four suggestions about which I have no intention of learning. Once, I probably could be accused of not “getting” Facebook. That’s not true anymore. I get it. I think it’s not only a great way for friends (more on that charming concept later) to keep in touch with each other. It’s also a compelling form of entertainment. In “researching” this post, I spent quite a few enjoyable minutes reading about some of the things people I know are doing. So why don’t I use Facebook? First of all, I can barely get through my e-mail inbox each week. I definitely can’t finish the three newspapers I get each day, and I really like to read them. They’re loaded with nontrivial information. When I am in the mood for mush, however, I’d so much rather be watching mindless television than spending even more time in front of a computer. But that’s not the only reason. I’m a really gregarious guy. I have lots of friends and even more acquaintances. But 354 bosom buddies with whom I’d like to share the most intimate details of my life? Definitely not. One thing I’ve considered doing is suggesting to all my business contacts who have attempted to “friend” me on Facebook that instead we be “contacts” on LinkedIn. Then I could manage down my friend list on Facebook to, well, my friends. Incidentally, it’ll be interesting to see how Facebook does in a rough economy. Jeff Segal at Breakingviews.com posted a compelling piece on how the startup, which is leaking top executives, will likely need to raise more money soon. Smart startups are busy conserving cash and Facebook is distributing it. That’s an effect I’d like to read about in my buddy David Kirkpatrick’s book on Facebook next year. Tuesday night’s “town-hall” meeting from Nashville had all the hallmarks of what voters have come to dislike about these non-debates. The candidates often avoided directly answering questions, they broke the rules their campaigns had agreed to, and they speechified rather than engage in a serious discussion of the issues. And yet, for one moment, Barack Obama showed why he is ahead in the polls. He did it by giving the single best explanation I’ve seen from anyone — politician, Treasury Secretary Henry Paulson, the talking heads — of why the rescue plan Congress passed last week is good for the American people. Remember, the conventional wisdom, certainly among angry opponents of the bill, is this is a Wall Street bailout and doesn’t do enough for Main Street. When Oliver Clark asked the candidates what’s in the plan to help ordinary people, John McCain answered first, railing against “greed and excess in Washington and Wall Street,” blaming Obama’s “cronies” at Fannie Mae (FNM) and Freddie Mac (FRE), patting himself on the back for suggesting two years ago that the housing situation needed fixing, all before finally saying, “So this rescue package means that we will stabilize markets, we will shore up these institutions.” McCain then took another swipe at Obama. Here, from the CNN transcript of the debate, is Obama’s complete response, up to the point where he too began congratulating himself for his foresight on the issue: Well, Oliver, first, let me tell you what’s in the rescue package for you. Right now, the credit markets are frozen up and what that means, as a practical matter, is that small businesses and some large businesses just can’t get loans. If they can’t get a loan, that means that they can’t make payroll. If they can’t make payroll, then they may end up having to shut their doors and lay people off. And if you imagine just one company trying to deal with that, now imagine a million companies all across the country. So it could end up having an adverse effect on everybody, and that’s why we had to take action. Nailed it. This is exactly what a leader should do: communicate to the people in clear, truthful terms about important topics. Obama succinctly explained exactly why it’s important to inject liquidity into the system — and why that’s more important now than directly helping individuals. (I wondered, by the way, if it was accurate to refer to “millions” of companies in the United States. In fact, according to the IRS, 5.7 million corporations filed business income tax returns in 2005, the last year the agency provided data. Obama not only knows the price of gas in Nashville, he also knows how many companies there are in America. And he found a way to simplify a complex topic without dumbing down his explanation. McCain wasn’t terrible Tuesday night. But he did whiff a number of times. Why would he mention as a potential Treasury chief Warren Buffett, while also noting that WB supports Obama? As for citing Meg Whitman, the former CEO of eBay (EBAY), because “she knows how to create jobs,” did anyone tell McCain that the company Whitman headed until six months ago, getting badly outmaneuvered by Google (GOOG) and Amazon.com (AMZN) in the process, just announced it is letting go 1,000 employees? His most newsworthy comment, a proposal to spend $300 billion on bad mortgages, came off as a hastily conceived gimmick that if he’s serious ought to have been part of the Senate debate, not a populist grenade tossed on national television. Then there was McCain’s bizarre off-the-cuff comment about how perhaps he needs hair transplants in the context of, if you can follow this, the types of rich folks whose health insurance policies are so good (even hair plugs are covered!) that they wouldn’t benefit from his tax-credit plan. Obama wasn’t perfect. He gave a Clintonian answer when asked if he’d defend Israel from an attack by Iran when a simple “yes” would have sent a more powerful message to Jewish voters. But then brevity and concision isn’t a strong point of either candidate. On balance, Obama more frequently respected the undecided voters in the hall by answering their questions. He’d ask Americans to sacrifice by expanding the Peace Corps; he wouldn’t necessarily take up Social Security reform in the first two years of his administration because there are more pressing matters. McCain, meanwhile, wants a commission to solve the Medicare problem, referred to his “hero,” Ronald Reagan, before referring to “my hero, Teddy Roosevelt,” and more than once talked down to voters, suggesting that they’d probably never heard of Fannie and Freddie before a few months ago. The political pundits all said McCain needed to deliver a knockout punch to get back in this race. Looks more like he swung and missed. This past February an excitable Belgian software executive named Bart Decrem and a quiet Australian ex-McKinsey consultant named Andrew Lacy had an epiphany. A few months earlier, in November, Steve Jobs had said Apple (AAPL) eventually would allow software developers to write programs for the company’s elegant iPhone. Jobs didn’t say when, and he didn’t share details of how Apple would work with outsiders. But it was an exciting prospect because cell-phone makers don’t typically allow anybody but their phone-company customers to place software on phones. By February Decrem and Lacy realized that independent hackers already were finding ways to break into the iPhone and insert their own applications. The duo each had been passing time as entrepreneurs in residence at Silicon Valley venture firms, Decrem at Doll Capital and Lacy at Foundation Capital. Together with a third co-founder, noted Mac developer Mike Lee, they decided to start a company that would position itself for the day Apple opened its doors. That day turned out to be July 10, when Apple debuted its App Store with much fanfare. The company that Decrem and Lacy founded, Tapulous, already is one of the most popular providers of free applications for the iPhone. Jobs told the Wall Street Journal last week that Apple alone would see an additional $360 million in annual revenue as a result of the App Store, if current sales trends persist. Apple keeps about 30% of the revenues its developers collect for their applications. (Not everyone is so enamored with Apple’s endeavor.) It has become cliche to note that Apple is revolutionizing the mobile phone business. Tapulous illustrates why. “This is about a cell phone finally becoming a computer that is always on and always knows where you are,” says Lacy. And because that computer has a gorgeous screen and simple Web browsing, it unleashes endless opportunities for creative entrepreneurs. Though Tapulous, like most App Store developers, so far isn’t generating a cent, its fast rise is a good illustration of where that money will come from — for startups and for Apple. Tapulous has released two free applications, a game called Tap Tap Revenge, modeled after a popular arcade dance game, and Twinkle, an application that lets iPhone users send messasges over Twitter or Tapulous’s own system. In about a month, the game has attracted 1.2 million downloads, while Twinkle has 100,000 users. Tap Tap Revenge started with 20 songs from independent artists that users play for free. App Store rules prohibit Tapulous from linking its game with a user’s iTunes music library. But the startup plans a program to allow music labels to submit their songs directly to Tapulous. Boasts Decrem: “That means we are a whole new distribution channel for music.” Not surprisingly, Tapulous plans to start inserting ads into its games. With more than a million users and growing — and only eight employees — it’s easy to see how such a company could generate profits relatively quickly. (The company also plans to offer a premium version of Tap Tap Revenge in September for $10.) Expect Tapulous to make a mainstream splash. It has raised only $1.8 million, a pittance in Silicon Valley, but its roster of investors is impressive: Software veteran Katrina Garnett, early Google investors Andy Bechtolsheim and Rajeev Motwani, as well as Salesforce.com (CRM) CEO Marc Benioff and Khosla Ventures, whose David Weiden has a hot hand with small consumer-technology startups. |