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Wednesday, August 24, 2011

Google + vs. Facebook

There has been quite a buzz over the last several weeks about Google’s entry into the social media space. Their new product is dubbed simply as Google +. Pundits all over plus many in private conversations are trying to determine if Google + can do to Facebook what Facebook did to MySpace.

There is no question that Google is a formidable contender. Globally, they have over a billion users compared to 700 million for Facebook. In the U.S., the distance is narrower with Google tipping in at 155 million users and Facebook 140 million. On the revenue side, Google is way ahead with close to $30 billion ($25 billion in ad revenue) while Facebook weighs in at $1.8 billion. Given its smaller base, Facebook is growing much faster than Google.

Views on the competition tend to be polarized. A few digital media specialists have told me that Google will pull the plug on Google + by Christmas. Others say that it will be a battle and Google will eventually come out on top.

Talking to users of Google + is interesting. Most really like it. All refer to the “Google Circle” which allows you to put together groups of friends that you can organize by topic. There is a “drag and drop” feature that makes it easy to manage different groups. So, if you have a wide circle of contacts or varied interests it makes it easier than Facebook to manage different groups. You can also exclude individual people from getting updates, which may give you more privacy or perceived privacy.

Others tell me that they like Google + as it does not accept advertising. I have to smile. You can bet that when Google + hits what they consider to be critical mass that can be packaged as a media vehicle, advertising will appear!

Reading between the lines a bit, Google + appears to be greatly assisted by the parent company’s credibility. The whole Google mantra of “Don’t be evil” resonates with many people. And clearly, Mark Zuckerberg, while admired, has far less credibility than Eric Schmidt and Company. Google knows a lot more about you—Facebook only knows what you tell them. Yet, as we all know, perception carries a big stick.

We will watch Google + carefully and you should too. A friend wrote to me today saying “Facebook. That is so 2009. I am a Google + man these days.” Google hopes that millions join him and fast.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Friday, August 5, 2011

Clinton's Balanced Budgets--A Look Back

Today, I am asking you to indulge me a bit. I am going to vent in this post.

The other day, I was walking through a very large building on the way to an appointment. I passed a large meeting room with an open door. At the front on a podium was a fellow complaining about how the debt ceiling negotiations were a circus and how disgusted he was with both sides in Washington. Being a few minutes early for my meeting, I hung out in the hall to listen for a few moments.

Then he said, “What we need is the return of Bill Clinton. He balanced the budget a few times in the late ‘90’s and did it basically on his own. That is the kind of leadership America needs now.” Several people applauded. I imagine that my blood pressure shot up a bit as I walked toward my session one floor up.

Obviously, I do not agree with the analysis that I eavesdropped on that day. Here is my take on how it happened and why even the sainted Bill Clinton would find today’s problems very difficult or impossible to surmount.

Full disclosure—I never voted for Bill Clinton but I admit that he was a very effective politician.

How was the budget balanced on Clinton’s watch? Here are several events that I think came together to make it happen:

1) In 1993, the newly inaugurated Clinton with his party controlling both houses of congress passed an increase in taxes on the upscale without a single GOP vote in support. Despite the protestations of some of my libertarian buddies to the contrary, it really did raise some revenue.
2) Clinton dubbed himself “a new kind of Democrat” in the 1992 elections. This proved true to a certain degree. He did end welfare, as we know it, and was enough of a policy wonk to understand that spending could not go wild long term.
3) In 1985, Congress passed the Graham-Rudman-Hollings act that put in automatic spending cuts if the White House and Congress could not reach established spending targets. The bill was ruled unconstitutional so in 1990 a new version was passed that focused on spending control.
4) In fall, 1994, the GOP took back the House of Representatives with their “Contract for America” that talked loudly about a balanced budget. Clinton was now boxed in. He wanted to get re-elected in 1996 but he now had a bunch of deficit hawks on the other side of the aisle. Speaker Newt Gingrich took and received a lot of the credit. In reality, others did much of the heavy lifting. Congressman John Kasich of Ohio and some other young GOP congressman who pushed for serious cuts and a lot less pork (Kasich left Congress and is now governor of Ohio) carried the day. Clinton could negotiate but he had to play ball.
5) To Clinton’s great credit, he did not get involved in any long-term foreign entanglements. There were not that many American boots on the ground overseas in harm’s way. Of course, he was lucky in that he did not have to deal with a 9/11-style event.
6) During the late 1990’s, the tech bubble was in full swing. It triggered the greatest bull market in history. Billions poured in to the Treasury in the form of capital gains taxes. Note that capital gains taxes averaged 28% then and 15% now.
7) Demographics—as usual they played a role. Demographers will tell you that most people’s prime earning years (discounting inflation and some specific expenses) usually fall around the ages of 46-48. Well, in the late 90’s, more people were 47 years old that at any other time in history as baby boomers hit their best earnings. If you make a lot of money, you pay a lot in taxes so the Treasury benefited significantly.

So Clinton did some good things like keeping us out of war and he worked with the GOP Congress because he had to. Importantly, he was a bit lucky with demographic trends at his back swelling the Treasury coffers and the greatest bull market in US history stoked by the tech revolution. They all came together to balance the budget for the U.S.

Could Clinton do the same thing today? Well, he may have been more successful than the current management but he would face some demographic headwinds that did not exist in 1998. Now, some 5,000 baby boomers turn 65 EVERY day. Social Security has been stunned at how many boomers are taking payments at age 62. They urge people to wait a few years for a higher benefit but many need the money now and cannot wait. So the entitlement bomb of Medicare and Social Security is about to drop on us unless some meaningful changes are made within a few years or some means testing is put in place.

So, yes, Clinton balanced a couple of budgets. It was done by a combination of luck, pluck, and co-operation that is not in place in Washington these days. Don’t believe in luck? Read “Outliers” by Malcolm Gladwell. He illustrates clearly and succinctly about how where and when we are born is a key determinant in our lives.

Thanks for listening—I just felt compelled to try to set the record straight.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com