The University of Chicago "Bump" for iPhone: Innovation Can Be Simple

Today, I read an article in the Chicago Tribune that caused me to experience one of those "slap your head - why didn't I think of it!" moments.

President Obama, a former U of C professor, helped to popularize the fist bump.

Now, two students at the University of Chicago business school developed a company called Bump Technologies. Their iPhone app, called Bump, lets users transfer data from one iPhone (or iPod Touch)to another by bumping them.

You can transfer all your contact info or just some data (like phone numbers).

This shows that there are always simple and elegant opportunities waiting to be capitalized on.

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Nassim Nicholas Taleb, Financial Risk, and Black Swans

The February 2 issue of Forbes featured an article on Nassim Nicholas Taleb, the "Oracle of Doom" who wrote the best selling books "Fooled by Randomness" and "The Black Swan: The Impact of the Highly Improbable".

For years, he has been warning that the world is like the titanic - "sailing at night in iceberg-strewn waters, just a few feet from diaster."

Taleb, an options trader, complains that the financial crisis was caused because Wall Street "is in the business of hiding risk, and greatly underestimates the probability of outsize moves."

The name of the book, "Black Swan", comes from the fact that Europeans had only ever seen white swans - until black swans were found in Australia.

Besides Wall Street, Taleb also blames economists who were "overconfident" that their risk control models falsely showed that banks were profitable and in control.

He is a big believer in "fat tails" - or the idea that events predicted with low probability under the standard bell curve, actually occur more frequently.

As an investor, for both his personal account and his hedge fund, Taleb puts most of his money in Treasurys, and uses the rest to bet on volatility with options. He sells options that pay off with moderate volatility, and buys options that pay off with high volatility.

This strategy "has delivered a string of mediocre results interrupted occasionally with spectacular years" like 2008. He told Forbes that he personally took home "in the low eight figures" last year.

Taleb has been criticized for giving general warnings of doom, but no details about what to do. In response, he offers these suggestions for reforming the system:

1. Complex derivatives (like swaps) should be banned because they are tools for hiding risk.

2. There should be a two-tier financial system. Banks that might need to be bailed out someday should be treated like utilities, and only allowed to invest in simple stuff. Hedge funds that invest with private money could so more sophisticated investing, but with the knowledge that they will never be bailed out.

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Don't Be Too Pessimistic About the Financial Crisis

"The most dangerous words in investing are: 'This time it's different.'"

- the late John Templeton

Usually, investors are warned against excessive optimism during bull markets, but Forbes publisher Rich Karlgaard recently had a column where he cautioned against excess pessimism in bear markets.

He went on to write about 1975. At that time, even Berkshire Hathaway stock had been cut in half. New York City was almost bankrupt, and the mood was extremely pessimistic.

As we all know, New York City and Warren Buffett recovered just fine.

Then, as a further mood lifter, Karlgaard mentioned a long list of successful companies that were started during hard economic times:

1. General Electric - one year before the Panic of 1893

2. Disney - the recession of 1923-24

3. Hewlett-Packard - 1939

4. Hyatt - the recession of 1957-58

5. Intel - 1968 (year of assassinations and political upheaval)

6. FedEx - launched during the Arab oil embargo of 1973

7. Microsoft - 1975

8. Apple and Genentech - 1976

9. Wikipedia - 2001

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Seychelles: Tropical Paradise Files Bankruptcy

The Seychelles Islands, the Indian Ocean archipelago off the African coast, filed for bankruptcy.

Long the playground of the rich and famous, the Seychelles' private and public debt total $800 million - the size of its whole economy. With a population of just 87,000 people, the Islands might now be the most indebted country on earth.

The country got into trouble due to decreased fishing and tourism revenue. Last year, the islands defaulted on a $230 million euro-dominated bond arranged through Lehman Brothers (before its collapse).

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Can Airlines Differentiate Themselves By Managing Ground Delays?

These days, airlines are having a hard time.

First, it was high fuel prices. Then, just when the airlines locked in fuel hedges, oil prices dropped - and the airlines were stuck paying above-market rates.

Now the recession is keeping passengers away, and news of AIG greed is causing companies to cancel trips to retreats and trade shows.

On top of these issues, overcapacity at airports like O'Hare make flight delays inevitable. All it takes is a little bad weather to cause major problems.

Notice that I highlighted the last part in bold. The reason is that, if I was running an airline, that condition would present me with the opportunity to differentiate my airline.

While the in flight experience is governed by strict regulations, airlines are free to innovate and get creative on the ground.

With all things being equal, who wouldn't want to fly out of busy airports with the one airline that takes care of delayed passengers.

The thing I would do is interview the ground crews and customers to find out what goes on during delays. What are the frustrations that come up again and again. My guess is communications, comfort, and ease of making alternate plans would be near the top.

Then, since delays are more common and inevitable, I will organize around this. I would have teams at each airport dedicated to delays.

Since airlines don't have much money these says, I would partner with companies that deal in comfort and want to attract travelers. Hotels, for example.

Suppose my airline partnered with Hilton to create a special lounge at O'Hare - just for passengers on delayed or canceled flights.

The lounge could be set up with sofas, recliners, desks, phones, snacks, and airline reservation people. The bulk of the costs could be picked up by Hilton. In this way, they will have branded advertising in the middle of the airport. This would be "active advertising" - instead of being intrusive, they will be providing a free service which would build goodwill.

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Sean Penn, Jim Carrey, Benicio Del Toro as Larry, Curly, and Moe?

Possible Three Stooges Movie...

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Madoff's Prison Number, Random Coincidences, and Lottery Picks

After Madoff pleaded guilty, 501 people played the last 3 digits of his prison number (61727-054) in the March 15 New York lottery - and won. This is another reminder that random lottery numbers can create a lot of coincidences: On Sept 11, 2002, the first anniversary of the 911 terror attack, the winning NY lottery numbers were 9-1-1. On Nov 12, 2001, American Airlines flight 587 crashed in Queens.  The New Jersey midday lottery drawing was 5-7-8 and the evening draw was 5-8-7.

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