February 12th, 2009


Okay, enough hand-wringing over the half-million dollar salary cap...

Recent weeks have seen all sorts of panic about the Obama administration's cap of $500,000 per year in salary for the top executives at banks that get rescued by the TARP program. The rationale for the hand-wringing is that these banks are so *terribly* complicated that nobody with the skills necessary to save them would possibly work for so little money.

Enough. This is nonsense, and counter-productive nonsense at that. People are either being careless about the details, or (in best FOX News fashion) deliberately obscuring them.

Let's get it straight: the salary cap isn't a punishment for the greedy, it's incentive. Why do I say that? Because of the other half of the deal: there is no limit to the amount of "restricted stock" that these CEOs can receive. The restriction here isn't trivial: stock that the CEOs receive can't be redeemed until the banks are turned around enough to pay back the TARP money, with interest. But it can be a *lot* of stock.

So if you're a smart, entrepreneurial CEO with a good plan -- the sort of person needed to rescue these banks -- you are going to *run*, not walk, to one of these jobs. And the pay package you're going to ask for is $500,000 per year -- plus $20 million per year in that restricted stock. Now you have plenty of incentive to do your job efficiently, and to get the bank out of the semi-receivership it's now in. Which is, note, the point.

Yes, it's a bit of a gamble, but if you aren't prepared to make sensible high-stakes bets, you probably don't belong in high finance in the first place. And keep in mind that the bank's stock is probably in the toilet right now anyway, so that nominal $20 million you get promised today might well be worth $100 million after you clean up the mess, if you bring confidence back to the bank. Even by CEO standards, that's serious money. And it's money that is well-aligned with the stakeholders: keeping the bank afloat, getting the stock market behind it again, and paying back the taxpayers.

Mind, it's not perfect -- like all such interventions, it will introduce market distortions. For example, it gives the CEOs massive incentive to pay back the TARP funds, possibly at the cost of the bank's longer-term health. So it's no substitute for improved regulatory oversight. But it's a rather effective (and nicely subtle) measure to help make the new TARP funds under Obama, unlike those from Bush, more likely to actually get paid back in a decently timely fashion...

Another reminder that it's not as easy to get rid of information as you think

The tech-business amusement going around the blogosphere today is that Facebook's long-secret company valuation got accidentally revealed. (Thanks to TechCrunch.) The actual valuation isn't all that surprising ($3.7 billion, which is in line with most good guesses), but how it came out was a good illustration of tech-risk.

You see, they've been engaged in a lawsuit for years now, over who actually created the technology. As part of that, the court unsealed some proceedings recently, with broad sections redacted, and published that as a PDF. (The article above links to it.) But if you simply copy the redacted sections (which show as blank white in the PDF) into, say, Notepad, you get to read the original contents.

In other words, *somebody* applied physical-world thinking to the technology: they essentially covered over the secret bits with white-out. (In practice, I suspect they changed the color of the relevant text to the same white as the background.) Which kinda makes sense if you think this is a piece of paper, but none at all if you understand what's going on here -- it's just tweaking a flag about the information. But the old information is still there: even if the copy-and-paste trick didn't work, it would be fairly easy to just read the source of the PDF to find the "hidden" information.

(A number of people are apparently jumping up and down, claiming that this is a bug in the PDF format, but I suspect that's nonsense: the PDF is probably doing exactly what it was told to do, which is to print this text in white.)

Moral of the story is, if you really care about keeping secrets online, it is important to understand what the heck you're doing. Solutions that work in the real world can be comic failures in electronic media...

Google's out-of-print book initiative making headway

Another useful TechCrunch pointer: it's looking more and more each day like Google will be selling out-of-print books online. This is great news by my lights -- over the course of a modest number of years, I expect it to result in virtually every book ever published becoming available for sale in electronic form.

There will probably be exceptions, but I expect them to be a pretty small percentage once the haggling over the details is done -- things are moving in the direction of paying most of the revenues to the authors, as it should be, and I suspect most authors would rather have their works be more available, and make some money from them, rather than have them simply languish out of print.

There's a bunch of work to be done yet, especially to work out the details of the registry that's going to manage all this. But assuming things continue as they're going, and the snags don't prove insuperable, it's looking like a win-win situation: works remain available more or less permanently, and their authors get the lion's share of the revenue generated from them.

Now the question becomes, how do I direct Google to really obscure works that would be useful to get online? We got this question the other week, from someone who desperately wants to get his hands on the long-out-of-print Elf Hill Times Songbook. I don't know if this even exists in any libraries, so it raises the interesting point that, eventually, there needs to be some way to feed the really small-press stuff into the process. (Although I do note that a copy has appeared in LibraryThing, so I should probably see if I can put the requester in touch with the person who has one...)

PalmOS, R.I.P.

Finally, let us take a moment to note the passing of the Palm Operating System, which has officially been put to rest.

It's being replaced by Palm's new webOS, which is trying to go head-to-head with the iPhone and which (based on positive early reports) might just stand a fighting chance. But it's worth pausing and reflecting on its predecessor, which did so much to teach everyone that a simple and halfway-intuitive UI was so useful in the mobile environment...