Blood money in Darfur: Harvard divests, Fidelity invests

The 10 pm local news had an alarming story about Fidelity Investments, the Boston mutual fund giant, and some of its overseas activities. According to the report, Fidelity still has about half a billion dollars invested in PetroChina and Sinopec -- two Chinese oil companies which are allegedly propping up the Sudan government by helping it export oil. The government in Khartoum and pro-government Arab militias are responsible for genocide/ethnic cleansing/massacres in Darfur and other parts of Sudan, according to human rights groups and the U.S. government.

Harvard made the decision nearly two years to divest from the Chinese oil companies with activities in Sudan. Fidelity did not. Its response to enquiries from the television station were quite cold: These investments were purely business decisions based on maximizing value for shareholders.

My response to this -- as a Fidelity investor who got started with many of Fidelity's international funds while I was still an employee at Harvard through a 403b retirement plan -- is that there is no justification for investing in companies that are contributing to genocide. It's a disgrace.

I tried to determine which Fidelity funds invest in PetroChina and Sinopec, but the Fidelity search engine seemed to leave out a lot of results, based on my comparison with the listing of Fidelity funds on this website that allegedly highlights the company's investments in the two Chinese oil companies.

I also drilled down in the prospectii and annual reports of several overseas funds that Fidelity operates, but these reports only list the top 10 holdings for each fund, and I did not see Sinopec or PetroChina listed.

My next step is to contact Fidelity directly and ask which funds have holdings in the two companies. Those funds will be sold from my portfolio; I will also ask Harvard to remove from the 403b plans it operates with Fidelity any funds which are investing in the Sudanese genocide.

Or should Harvard also divest from Fidelity?

02138, the Boston Globe, and an HES alumni snub?

A fellow Extension School student pointed me to an interesting page on the 02138 (the new unofficial Harvard alumni magazine) website, which has a feature that lists "alumni in the news", including Extension School alumni. One of them is Paula Bacon, A.L.B. '89, A.L.M. '94, and the name of the paper she was mentioned in, the Herald Democrat in Texas. The Associated Press article is about a local political issue, and notes that she is a Harvard graduate.

Yet the same article on the Boston Globe website omits this reference. That's very unusual -- it's a non-local story with a local connection; one would expect the editors to retain or even highlight this fact.

So is it a snub against the Extension School, because the Globe doesn't think the Extension School degrees matter? Or a snub against Harvard, perhaps because the paper is now sensitive to its hard-to-deny excessive coverage of the school, when compared with other local schools?

Or is it simply a bad editing decision? Editing for space seems unlikely -- the online version doesn't have to be cut down to fit the page. Editing out the reference because they think it might be wrong is also unlikely -- all it takes is a quick call to Harvard to verify the fact, or the Globe can ask one of its alumni staff to log on to Post Harvard (the alumni website) to check out the "Harvard graduate" reference.

Anyone is welcome to share their thoughts/observations/theories in the comments section below.

I also checked out some of the other features on 02138, including the 02138 blogs. Some of them are dormant, but a few are quite interesting, such as this blog by a 40s-era Harvard Law graduate.

The dark side of an emerging free press in China

Edward Cody of the Washington Post describes an ugly trend in China's increasingly freewheeling press corps: Demanding hush money from companies, officials, and other alleged wrongdoers in exchange for not covering bad news. It's supposedly quite common, and has attracted legions of bogus reporters who sometimes mob disaster scenes clamoring for a bribe.

Cody makes a questionable connection about how this system arose, however. He claims that state-mandated news controls and censorship are at the root of the problem:

In many ways, blackmail journalism grew naturally out of a system in which Communist Party censors control the news rigorously, barring reports that could be seen as unfavorable to the party or contrary to the government's political goals. If the ruling party distorts the news for political reasons, blackmailing reporters have concluded, why wouldn't they do it themselves for financial reasons?

While that may be the excuse or theory that he was told by some of his sources, the actual reasons seem to be greed, opportunism, and observation. All it takes is one braggart to say how easy it was to pocket a few thousands remnminbi -- others with no scruples are sure to follow.

Another aspect of greed and compromised ethics in the Chinese press world is the rise of cash for coverage, something I observed in Taiwan when I worked for the China Television Company back in the mid-1990s.

To be sure, not every Chinese journalist is on the take; indeed, many in the Chinese press community seem to have very high moral standards and a sense of journalistic duty to uncover scandals and corruption, and report the truth, despite threats to their livelihoods and even violence.

A new crisis hits Second Life: "[A] giant magnet for the desperate, uninformed, easily victimized"

In the past six months or so, I've had several opportunities to discuss the limitations of Second Life. You can read my summary of the usability and registration issues, and also take a look at my Computerworld writeup of Second Life, which discusses how the PR community is pushing too hard on getting users and media to attend events in Second Life.

But I haven't really explored the financial/economic aspects of Second Life, beyond mentioning that it exists and the credit-card requirement is a nuisance. My main worry with the SL virtual economy and exchange system was that an employee or hacker could cheat the system or empty someone's account of Linden dollars. But another blogger, the anonymous author of Capitalism 2.0, is alleging far more serious problems with the Second Life economy: He says it is a Ponzi/pyramid scheme, and provides a very lengthy description and analysis of how it works:

... In July of 2006 we took a look at two in-game banks which allowed SecondLife residents to deposit their L$, and earn interest on the balance. These are private banks, run by other players, not by the game company itself. I discovered that the interest rates being paid by these banks, when calculate by interest-rate-parity against the USD, were mispriced allowing for a whopping 2,786.32% return arbitrage opportunity. Over some months we sunk the better part of $10,000 USD into SecondLife, borrowing from banks, lending to banks, and entering into various types of virtual financial arrangements with virtual businesses.

The first problem we encountered was one of counterparty risk. Put simply, you can seldom trust those with whom you’re doing business in SecondLife. Even supposedly well established, well regarded business citizens are prone to defaulting on any obligations which prove inconvenient. Whole banks will disappear over night, along with your L$ balance. Private businesses will simply refuse to make good on financial contracts. And individuals, pretty much all of whose real world identities are carefully guarded anonymous secrets, sometimes even will openly default, without recourse.

Justifications for default and non performance are usually wrapped in pseudo-libertarian internet political rants, or SecondLife political hyperbole. The simple fact is, if you arbitrage a bank for over 2,000% return because they don’t understand financial engineering, don’t expect to be able to collect come payment time.

But, that doesn’t mean it’s impossible to make L$. In fact, we were able to make quite a few L$ in a very short period of time, despite disingenuous counterparties.

Enter the second problem, the L$ exchange markets are effectively rigged. Sllrates20070122 At any given time over the past year or so, the SLL/USD exchange rate has hovered between about 250 and 300. That is, for every L$300 you earned, you could expect to get $1 USD. Now recall, there are supposedly hundreds of thousands of real dollars being spent daily; over L$250,000,000. Between Linden's official exchange market and the private exchanges, all appearances suggest a large volume of L$ daily exchange trade.

The catch is, however, these headline rates only apply to small amounts. For small time buyers and sellers of L$ -- be they virtual Johns paying up for sexy avatar escorts, or small time digital jewelry makers cashing out a couple hundred real dollars – this works well. Most of these people will use Linden’s official LindeX exchange, anyway. LindeX is actually not a virtual currency exchange market so much as it is an open auction, anyway. This means LindeX is not particularly useful for big trades.

The private exchanges, however, are owned by the businesses which sit at the top of the SecondLife economic pyramid. The “Virtual Land Baroness” owns the largest such exchange. So it is not surprising that our attempts to trade our L$ for $ USD were met with confiscatory market reflectivity. Or, put simply, every time we attempted to transact more than a couple hundred dollars, the SLL/USD rate would spike to levels approaching or even greater than 500. Example: mid July 2006 SLL/USD was 293.0/279.2 bid/ask on the primary open exchange. Our attempts to trade L$650,000 resulted in settlement bids of 350-450. Interestingly, these trades tended to net returns of right around 4%, which was the prevailing dollar deposit rate.

If this isn't bad enough, his conclusions about what's going are even more frightening:

... the buzz isn’t that Joe Sixpack can sit at his computer and gamble a little before bed with a smashingly attractive avatar. The buzz is that Anshe and others are making real millions. And a short visit to the world of SecondLife will reveal the frighteningly large portion of residents who “know someone who makes his or her living” doing something in SecondLife. Just the other night I had an interesting conversation with someone claiming to be a single mom of three, who spends her days turning virtual tricks and arranging for E-Bay payments through SecondLife L$. She didn’t seem to have any idea why her mysterious benefactor would pay her a commission to simply arrange PayPal transfers. More cynically intelligent readers will immediately recognize these transactions for what they are.

Again, the fact that tax evasion, organized crime and money laundering exist in the virtual world doesn’t distress me all that much; these things exist in the real world, and have for a pretty long time. The distressing part is what this single mom said later; the same thing one will hear over and over from SecondLife residents: she was just doing the cybersex and E-Bay stuff to fund her virtual jewelry store. She was a jewelry designer, and had already opened a little shop in a virtual mall. And, to her amazement, she’d already made over L$50,000 after only a month (about $185 USD). I didn’t bother to point out that she hadn’t counted her expenses for renting her virtual shop or accounted for taxes, let alone the fact that she was earning less than 1/100th of what she could get just flipping burgers in the real world.

There is much, much more in this analysis, I encourage you to read the entire version. And, while his argument is very convincing, I have to say it ignores some of the real potential of Second Life, to enable communication, community, education, and, believe it or not, legitimate commerce. Linden Networks -- and perhaps the government agencies responsible for investigating and prosecuting fraud -- have a lot of work to do, if pyramid or money-laundering schemes are taking place. However, the potential of virtual worlds is real, and should not be discounted.

Shark Bait, Social Media, and PR

Last evening I spoke at a gathering of the Social Media Club (Boston chapter), about a new area on Computerworld that I helped develop and launch this week: Shark Bait.

Shark Bait is a place where visitors to Computerworld.com can talk about IT in a freewheeling atmosphere. Registered or anonymous users submit "baits", which might be an anecdote, question, or comment that relates to technology. Other users can react to the bait by rating it, or leaving a comment. There is a points-based system to encourage participation -- registered users get 1000 points for registering, 500 for leaving a valid bait (i.e., relates to IT, encourages discussion, is not spam, etc.) and 100 for leaving a valid comment. Part of the points system is intended to appeal to "nerd cred", but there are lots of possibilities to tie this into promotions.

Shark Bait also leverages an existing part of Computerworld that has been a fan favorite for years: Shark Tank. Shark Tank contains anecdotes about IT and tech support that are sent in by readers, but are rewritten by "Sharky" (a Computerworld writer who shall remain anonymous). Part of the challenge of launching Shark Bait was letting users know that it's a spinoff of Shark Tank, rather than a copy -- unlike Shark Tank, which consists of rewritten and condensed user submissions, the Shark baits" are pretty much written by users; if we do any editing at all, it's just to correct grammar or punctuation, or make the headline more appealing (I've seen one bait that was simply "Shark Bait submission"). We also open up the funnel for Shark Bait: Almost anything relating to IT that prompts a discussion can be submitted, not just tech support tales.

The baits we've received thus far run the gamut from pleas for advice to Shark Tankish recollections. I've also created a few news-based baits. Here's a list of some of the more interesting baits, that either received high ratings or a relatively high number of comments:

• Female tech workers, negative stereotypes


• Apple's mobile phone: A must-have product, or will it go the way of the Newton?
• 
  
• The Four Curses of the IT Biz


• A networking tech confirms: Miracles can - and will - happen!

A few bloggers have figured out that they can submit baits that link back to their blogs. For now, we're OK with that as long as it has the IT tie-in, prompts a discussion, and is not spam or otherwise offensive (see the Shark Bait FAQ for more information).

The group at the Social Media Club event -- almost all of whom were public relations or marketing pros -- was very receptive and asked a lot of good questions. You can hear the discussion here. I was also impressed by the other speakers, and some of the audience members who are really using some cutting-edge Internet technologies. Journalists, including myself, often gripe about PR and PR promotions. I've specifically criticized the PR community for relentlessly pushing events in Second Life, but the flip side of this is the people in public relations get these technologies. Oftentimes when I speak about the work I do with blogs, podcasts, "feeds", user-generated content, et cetera, I have to explain what these media are and how they are used. Not so with PR folks. They know what they are, what they can do, and, importantly, are ready to try them out.

Censorship in China meets reality of networked communications

Yet another example of networked communications -- this time a mobile phone message containing a poem criticizing corrupt officials -- making a big splash in China, and proving once again that the state has lost control of the message and the people. From Edward Cody of the Washington Post:

... But then Qin did something that would turn it into a big deal. He transmitted the poem to the cellphones of a half-dozen friends. They in turn transmitted it to their friends, in a widening circle. Eventually it ended up in the cellphone of Zhang Fu'An, chairman of Pengshui County's local People's Congress. Outraged, he took it to the county administrator, who was equally upset and asked the Public Security Bureau to identify the author.

Not only did this message manage to circumvent China's traditional media censors, but the belated actions of the authorities to punish the author (Qin Zhongfei of Pengshui, Sichuan) resulted in another wave of networked outrage, this time via blogs and traditional mass media:

... The case, meanwhile, had struck a journalistic nerve with Li. He wrote an article for a blog denouncing Qin's treatment as "a modern-day word crime," harking back to a much-ridiculed Qing dynasty practice of jailing writers who tripped over the intricate Mandarin language of the time.

The historical reference caught people's fancy across the country. Internet comment flourished. A Hong Kong newspaper, not subject to the mainland's censorship rules, published the first article. Then mainland newspapers took up the dare; several carried their own accounts. Eventually, even a Web site run by the official People's Daily allowed someone to post an article.

I've said it before (most notably back in 2005, in "Another reason China should fear the 'Net: A million people with camera phones") and I'll say it again: Networked communications can not be stopped by China's traditional mass media controls, short of pulling the plug on the Internet and cell phone networks, both of which are contributing to China's economic growth. People now accept these networks as a place to read and discuss politics and social trends, and they know the state can't stop them with rules or occasional punishments. The train is out of the station, and it's too late to stop it now.

Real estate moves: Putting our Waltham house out for sale

We're getting ready to move. In the next few weeks we'll be putting our house in Waltham, Massachusetts on the market, and hope to be in a new home by the time spring rolls around.

On this blog, I rarely get into issues involving my personal life, but this news is worth mentioning, for two reasons. First, it directly impacts my graduation timeline at the Extension School -- my original plan was to wrap up my thesis by early 2007 and take my final class this spring, and graduate this June, but it now looks like I will put off the final class until the 2007-2008 school year.

The second reason for mentioning the house sale here is Harvard Extended is a great place to reach out to those readers who live in the Cambridge/Boston area and are either looking for a home, or know someone else on a house-hunting mission. This house is not only ideally located for a quick commute into Harvard Square or Brighton (I used to bike along the Charles River to work at Harvard, it took about 40 minutes; the drive was 20 minutes, and the bus commute via Waltham Center or Watertown Square was about 30-35 minutes), but also is just a few minutes from the Mass Pike (I-90) and Rte 128 (I-95), as well as smaller roads such as 16, 20 and 30. Waltham is a relatively affordable place to buy a single-family home when compared to Cambridge, Newton, Arlington, or Watertown, and our house is a gem -- it's in great condition, and is probably the largest "cape" you've ever seen, and includes four bedrooms (!), two bathrooms, a very large kitchen, and even a playroom for the kids (easily converted into a rec room or study). It has a fenced-in backyard, which is ideal for young kids. My wife also planted a very impressive perennial garden. It's about halfway between West Newton Square in Newton and Moody Street (I can walk to either in less than 20 minutes) and is also close to the Charles River walking and biking paths, which we use all the time for walks and picnics.

I've included a few pictures below from a few summers ago. If you're interested in learning more about the house, shoot me an email at ilamont@fas.harvard.edu

Published in The American

Harvard Extended is occasionally referenced by other blogs and personal websites. I've also had opportunities to write freelance articles for mainstream media publications directly as a result of my blogging activities here -- the most notable example is an opinion piece I wrote for the South China Morning Post back in September of 2005, which was based on the blog entry entitled "Another reason China should fear the 'Net: A million people with camera phones."

This week, The American (a publication of the American Enterprise Institute) posted an essay I wrote about competition between India and China for outsourced software development work. You can read it here.