What is Web 2.0 ?

Web 2.0 is more than technology; it’s about openness, sharing and relinquishing control.   It is a fundamental way of thinking about data, in that the owner of the data, cannot possibly think about all the ways –good or bad- that data can be used, but with enough users, force more good than bad effects from the data source.

Social networking is a very small part of the Web 2.0 schema.  For instance, Social networking is mainly about socializing.  While all data sharing has a social concept; the Department of Defense forum for Lessons Learned for Officers serving in Iraq isn’t about dinner and wine, it is about keeping soldiers alive.  Likewise, the interactive latitude and longitude map of known improvised Explosive Device (IED) locations in Iraq is Web 2.0 application which focuses on not losing vital Intel when solders go off duty and rotate back to the United States.

While many people do not understand twitter (a popular text blogging site) a user using an API is now sending arrest records across twitter using the open sheriff database.  A police officer or detective can now have every arrest sent to his phone, important if he has an informant he’s keeping tabs on.  He can have this same service in his car, but he can’t take his car laptop with him everywhere he goes.  If he could text back instructions on what to do with that suspect, from the field his ability increases immensely. [1]

Harnessing Collective Intelligence.

The lesson: Network effects from user contributions are the key to … dominance in the Web 2.0 era.

·    Hyperlinking is the foundation of the web. As users add new content, and new sites, it is bound in to the structure of the web by other users discovering the content and linking to it. Much as synapses form in the brain, with associations becoming stronger through repetition or intensity, the web of connections grows organically as an output of the collective activity of all web users.

Tim Orielly suggests Web 2.0 strengths lies in the independency of linking and crosses over relationships, the “Drill Down” ability of the endless links.  Why is Wikipedia great? Because each article has multiple links to many other topics. Face book? Click on a friend, click on a birthday, find other people with the same birthday, find interests, find other people with same interest, and so on. What about a site like Politico.com? It aggregates other news sites, and you can follow their links, to other news sites, meaning a story can followed forever in a widening circle.

Ease of User manipulation: Trickle down Smarts.

Part of the Harnessing of intelligence is that someone one has never heard is doing his best to share his ideas with the world.  People who by day go to an office can and often in his spare time goes back to the web and creates a Facebook interface that shows real time location of friends flicker photo’s and locates it on Google Maps, and is able to be shown on any smart phone.  The motivations are many -needed the app himself, thought it was cool, proof of concept effort- but the ability to share it with the masses is what makes the entire project worthwhile.

Web 2.0 would not be possible without companies or project makers willing to make data accessible through API (Application interfaces).  The most popular sites release API’s and tools which allow the sites data to be minded based on rules set up in the interfaces, where interested parties (people, companies, developers) create mini programs to manipulate accessed data itself. 

Most of the users on a site are simply consumers of the world of the coders or programmers, but the shear number of ways and ease of use to manipulate what they find is what draws people to a site.

Web 2.0 benefits from silent people tolling away to enhance the data and then sharing with the masses; consumers who are always seeking ways to manipulate their links and connections to other people or their own data.

Key Drivers

Web 2.0 lesson:

• leverage customer-self service and algorithmic data management to reach out to the entire web, to the edges and not just the center, to the long tail and not just the head.

Web 2.0 principles: Lessons of Technology and Adoption Life Cycles[2]

• The service must share, and keep sharing, even allow its own content off site.
• The service automatically gets better the more people use it.
• Service must be easy to use for everyone interested in using it and allow new users to learn instantly.
• Service must help users interact with other users easily.
• The service content must keep evolving, and become more “robust” and mature.
• Speed of updates is paramount.
• Achieve critical adoption by targeted userbase.

What is not Web 2.0

As mentioned, a supposed Web 2.0 site can quickly fall behind.  MySpace is by all traditional measures a web 2.0 site, but it suffers from lack of use and innovation.  A flooded market can also reduce sites effectiveness still, these are not static.  However for a traditional definition, these are areas where the information is not only static it cannot be added or made, “more useful.”

The key therefore to Web 2.0 is interactivity and access; social networking sites usually lead the way in both these fields, and are usually the first people think off for “Web 2.0” examples; however, one must remember that email would be the 2.0 version of voicemail but it wasn’t until email on the cell phone that messaging achieved true Web 2.0 status, always there, every present.

In effect, anything can be remade to allowing users to work with the data, however, not all things area accessible.

Web 2.0 is itself a meme of the internet age, but it has spawned many others- Government 2.0, and Industry 2.0- which, as defined above, is a transition from the before to something new.  But there is a greater definition which can be surmised and will be defined in this article.

The Innovation Life Cycle[1] 

The 2.0 moniker means innovative, different, Wow! And yet evolving, and filled with potential able to reach past its original function or intent.  Any 2.0 means the system (service or technology et al) has evolved or transitioned to a second phase, an “exciting” every present, “We can’t believe we lived without this” Stage.  It’s also a signal of “reinvention.” The 2.0 moniker fits right between early adapters and early majority.

The Innovation Life Cycle

• Stage 1.0: Creation for Specificity - A system is targeted at a specific group or to fill a perceived need. This comprises of Innovators and early adopters who tend to expand the service by adding and discovering other uses and are the major force of influencing others to use the product. 
• Stage 2:0 Extension – The System achieves a critical mass by extending beyond its core target audience, and targeted users.  It becomes “The next big thing.” And suddenly it is the conversation. This is where Early Majority comes into play.
• Stage 3.0 Ever Present – The system is so ever-present it becomes a verb. (Google, Tweet, Xerox, Phone, Email.) The system is no longer Novel, and is dis-attached from the technology that spawned it and many other systems or technologies are created to support it.   A new category of classification may even be created for it.  This is the state where Late Majority and Laggards adoptors are literally pulled into the massive forward wave.
• Stage 4.0 Reinvention and/or Abandonment – At this stage, innovators again take over, but the system is clearly on its way out.  Laggards only exist here, and branded as “not with it.”  It should be noted that Laggards can sometimes drive the innovation model in an effort to preserve the “idealistic” or cultural feel they had as in Stage 2.0.  (Roller Skates to Roller Blade, VCR to DVR, 8 Track to Tape, Return of Vinyl, and the remodeled PT cruiser car.)
• Stage 5.0 Obsolescence – Few things truly reach this level of obsolesce without force.  The Vacuum Tube for TVs is totally gone, even thou TVs still exist.  8 Tracks are gone, even thou the ability to record and copy Information still exist.  Often times, part of the technology that has been redesigned.

To understand 2.0 moniker as part of the Innovation Life cycle, let’s me first use an example.

Twitter is not a web 2.0 Site by itself. It’s static and rather boring.  If one had to go to twitter web site all the time, it would not be a great website, forever lost in a niche; with the publishing of a twitter API, the ability to interact with twitter and twitter users in many different ways has allowed twitter to grow.

Twitter is now used for more than talking about or describing breakfast. It is now used for Alerts, to deliver news and to garner almost real time views on a subject better than a focus group. I can twitter from my computer.  My cellphone can twitter. My Friends twitter. I can embed twitter on my web site. The news uses twitter. The police use twitter. People expect other people to tweet and wonder why they don’t. I expect that when I tweet someone I get an answer. Twitter is used in warnings and notifications, to aggregate news and for statistical study.

What is interesting about this example is that this is also the definition of email when it started.  This is the pager 10 years ago, this is instant messaging (Aim, Yahoo Messenger, ICQ, and Jabber) 8 years ago, and this is Myspace 5 years ago.  Now those technologies seem either ever present (stage 3.0), tired, or defunct, or no longer “novel.” (  Clearly Stage 4.0 or 5.0)

Innovation Phase definition.

It is during the stage 4.0 that a system fractures, and moves to either a new medium (tape to DVD) or the current medium continues to be reinvented (Telephone to cellphone).  Because of this its is important to note be clear about the boundaries of the Innovation Life cycle we are using.

We can say we are in:

• Email 3.0 (everyone has email, it’ not novel) or instead Messaging 4.0 (after voice mail, email, Aim, and it’s clear twitter is a reinvention of messaging)
• Skiing 4.0 (Skying is clearly being reinvented with the introduction of the snowboard or Snowboarding 3.0 (people are starting to ask, don’t you now board, you should try) or Winter Activities 2.0 (winter activities are fun again, with the X games leading the branding)

Executive Summary

The “2.0” moniker was originally used to draw a line separating the state of the Web before and after the dot-com bubble burst in 2000.  It has since taken on new meme[1], which is “An interconnected Web of services” and data manipulation.[2],  The Term of Art[3], was original crafted in 2003 by Craig Cline, Dale Dougherty, -web pioneer- and Tim O’Reilly -VP of Oreilly- during a conference planning session; that conference became the Annual Web 2.0 Conference. 

Web 2.0 is about sharing first and foremost, and  the term now encapsulates the ways we use, interact and manipulate the information, data, and relational links of the World Wide Web (“Web”) in order to enhance the Web’s delivered contents (such as Wikipedia, where any person can edit the presented information).  Without sharing of the data, no one benefits.  Furthermore, a website once designated as a “Web 2.0” site can transition out of that phase, if it becomes stagnant or its user community abandons it.

In Web 2.0 users don’t just retrieve information, but can also manipulate, delete, add, reduce, comment on, -et al-, data, but more importantly, can also remix (ex. Youtube), re-present (Playlist.com) and even enhance data (Flickr, Yahoo Web Traffic CAM for navigating the morning traffic ported to Tivo DVR[4]), sometimes creating new forms of information (real time California Wild fires information linked to Google Maps).  Users can do this manipulation with data they own, or data they are allowed to access (posting of arrested people on Twitter, accessed from static Police dept. Websites). 

As more people participate in enhancing the data, the usability and usefulness of what is being manipulated increases, forming a neural net of information that is deeply informative, simple to use and encourages its own use.  The potential for increased analysis, worthwhile participation, and enhanced work product of its targeted users is what separates Web 2.0 from forum users of Web 1.0 users who would delete, remove or corrupt the data (Individually inputted Statistics for Fantasy Sports vs Official Feeds).  While data corruption is entirely possible in Web 2.0, the “wisdom of the crowd” eventually overcomes this attempt to undermine the data and in the end produces a superior product.

As more users join in the manipulation of the data, the means of delivering data becomes feature rich, and features begin to anticipate the needs of the users. As the data repository grows, more users enter and begin to use and create more data, generating more content in a never ending cycle.  However adoption by a critical mass of the particular targeted audience[5] does not happen until the data becomes easy to use, and that is when a site has achieved its true Web 2.0 status.

Therefore, the key to naming something Web 2.0 is whether the site or service has made the transition to allow users to interact, access or manipulate the data presented to the user, especially if the user were not able to manipulate the data before, and allow the user to interact –share- with other users of that data and finally extend the new data to the world beyond to even other users who are not on the original accessing site, i.e, the long tail.(ex, Facebook buttons, Trackbacks for Blogs and links on news websites to other web sites.)

I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country; corporations have been enthroned, an era of corruption in High Places will follow, and the Money Power of the Country will endeavor to prolong its reign by working upon the prejudices of the People, until the wealth is aggregated in a few hands, and the Republic is destroyed.” – Abraham Lincoln

Let’s talk about the will of the voter, and their ability to understand.  Many people like to talk about the will of the Voter, yet our founding father didn’t trust the average voter.  They feared the Tyranny of the Majority.  This is one of the why we have an electoral college, so the majority of the large states couldn’t overpower the smaller states. This is also why the Senate has two votes, no matter the size of the state. 

But what about other things were the voter was clearly wrong, but it takes  strong leadership (and very bitter pills) to pass some of of the most controversial laws and rules we’ve had in this 20th century?

The Civil War and Civil Rights Laws come to mind easily.  But race is the easy thing to pick on, sometimes, it takes strength to ignore the Voters and do what’s right.  Some people think this “Rescue/Bailout” is a good idea.  Certainly the treasury think so.  95 Democrats and A 135 Republicans don’t think you should overcome the will of the voters. (btw, incase this is making you confused, the Voters don’t want the bailout)

Let’s get something clear. This page is against the rescue plan or bail out-or whatever you want to call it today. As we stated a while a go, a mass infusion of funds is needed,  stiff policies  and better regulatory rules updated for todays complicated credit markets, and this fascination we have for living beyond our means [debt.]

*and back on track*

IF we are going to continue being a nation who adds debt to our version of capitalism, then this credit crisis needs fixing. Going against the will of the voters is sometimes necessary and better in the long run with careful planning and without partisan bickering. But in this case, the voters are right. Let’s fix this from the root, not fix the corporations.

Let’s get to it.

Many people want the government to protect the consumer. A much more urgent problem is to protect the consumer from the government. – Milton Friedman

In a capitalist society, big companies need to fail.  It refreshes them, it refreshes the market, and it makes us stronger. However, let’s make it clear, these failures does not actually benefit “the individual ” investor.  It does not help the employees of these large companies and it does actually any government.

One of the main point arguments for letting these large companies and business fail is that it is what should happen with the market.  It’s the risk and reward of the Market and when corporations make risky decisions, they are appropriately punished. 

Let’s change track for a moment.

In a perfect world, individual shareholders have a purpose.  They would get together and appoint a Chairman, and board members who would then choose a CEO that would steward the company through bad times and good.  With all the information coming to them, they would keep appointing people, who would keep appointing people, keeping the company on the straight and narrow.

This model works, if and only if the shareholders have the information.  Anyone who has ever read a 10K knows the information isn’t really there for the normal individual, it’s only there for those that have dedicated time and energy into studying it.  Most people don’t have that time, and so they have appointed people, Brokers, to do it form them.  Brokers, who’s incentive is to make money, over the health of the companies.

So yes, the individual investors pay for being greedy, or not even keeping track of what their brokers are doing.  Again, I asked, what about the corporations employees?  The capitalist response (solution) would be employees should be the small investor in their own companies, that way, they are more inclined to better monitor and watch, and would be appropriately punished for the risks they are taking.

Once again, there is what would be right and what would be reality.  As I’ve pointed out, most large companies are not owned by individual investors, but other large investment houses who’s only need or want is to gain more profits even at the extent of the workers of those companies.  It is these large companies, investment brokers and dealers who are taking the risks; and the worker who pays the price.

The Corporation -as an entity- is defiantly punished; It becomes insolvent, ceasing to exist.   However, it also has no feelings; it does not have 40,000 individual stories, nor lives to live, children, or mortgages to pay.  The individual workers of these failing companies will be destroyed, homeless, unable to find new jobs in time to pay their bills.

The above is the argument of saving these companies, but it should be avoided. If one can give 85 Billion dollars to one company, then severing its 40,000 employees, that would still be 2.12million dollars per employee.  It would be easier to give them a severance package of 6 months salary!  And Cheaper.  This is why it’s easier to let them fail.  It’s cheaper to actually give these people unemployment at even 75% to 100% of their previous wage than to keep bailing these companies out.

Better transparency regulation is also needed so shareholders and yes, the individual investor, knows what they hell they are getting into.  The risk and rewards of the market only matter when they make sense.  Capitalist societies need better rules of trnsparency but not more regulation that save bad companies that should die.

The only reason for time is so that everything doesn’t happen at once.” -Albert Einstein

Naturally, there was some confusion with this post; The one about time. What was I really saying? Let me clarify.  The Speed of Light is awesome, but it limits our world and we’ve used it to limit ourselves. We’ve defined it as the benchmark of time when it itself is an artifical measure.  We’ve stated that nothing can move faster than light, there are many reasons but one is that time would slow down. I disagree Time doesn’t slow down…, we just don’t get a return we can observe. In effect, we are trapped at seeing something’s last returned state. 

Light therefore traps our known universe, locking it in the past.   

It gets confusing. So I shall Illustrate. 

I have a Cup, it has two states: red and green.  First it flashes red, then it flashes white, then red, then white, etc every 30 seconds. It’s at the distance of the sun away from me, so its light, or the reflection of light from the cup’s surface takes 8 minutes to get to me, on earth. It’s flashing. I can see the cup flashing and changing colors, but, really i’m seeing what it was 8 minutes ago.

If that cup moved faster than light (let’s just say it could.) and was white. let’s say it takes 35 seconds to travel the “8 min” distance (clearly faster than light)  It would be on my desk  35 seconds later and be red. 

Here i would have a cup, red infront of me. And yet, if i looked out to the sun, i would see a White cup. I would continue to see a white , red, white, red cup for 8 whole minutes!  One could say the cup would exist in two places. But it doesn’t. It really exists on my table.  The one i observe, way out there, is a ghost, not real, and doesn’t exist.  Every instrument I have, would record the cup in both places, until, yes, 8 minutes+” 35 seconds later. 

For the cub here? It has moved into the “future” a time before it has “moved” from the sun.  It could wait another 35 seconds and then go back to the original position and be red.  When observed from our end, it would have disappeared for 70 some seconds. 

This is why i say that things possibly move faster than the speed of light, we have no means to record or measure it.  Nothing we observe is real “time”  The dimension we live in is one of the past, not even current.  The actual “real” locations and state of things in timespace,(4th and 5 dimensions) is generally (without some serious math) unknown to us. 

Until we can tap subspace, we will never be able to accurately find something that moves faster than light. Thou I’m sure we can see the effects of it on our space, and probably do.  One effect is A Black Hole (gravity).  At the Event Horizon, some say Time is stopped.  Well, obviously it isn’t.  In effect, things falling to a blackhole past the event horizon exceed the speed of light, but we can’t see them moving. There is no “return” further more, any method we currently use wouldn’t be able to escape the black hole either. 

Wait, you say, what about that dark matter, that’s stopping Light from moving faster. Well, as I’ve said, gravity of such density as that warps space time. two things can be happening. A) if it stretches it, then the dark Matter is further spread out, allowing more space for light to pass. or B) the Dark matter itself moving faster than light, is accelerated further by gravity of the black hole’s singularity and changes the constant of “c”

Obviously this is all theoretical and one theory among dozens.  But there is still truths.  We don’t have the instruments to observe faster than light travel as it happens. Not yet. But we do have the ability to see the result of it.  We just have to figure out what we are looking for:  Two cups, but only one really exists. 

One key is measuring Gravity.  All things of mass give off a gravity field (and if big enough warp space). By measuring the gravity displacement of space of where the cup was, I would have been able to tell it’s not there anymore,  Just like in water.  But I am back to a problem. From earth, it would take 16 minutes for me to get that reading. Time to send out a reading and for the measurement to return.  We would get a reading of “not there” even thou the cup has returned only 70 seconds after it left.

To be able to figure out that the cup moved and returned, i would have to have been taking a reading of the entire solar system at the time. Yes that’s right, Observe Outside the bubble.  I would see the cup, move locations. Yes it would have moved faster than light but I wouldn’t be guessing at it’s location as I would have been taking a reading of the complete system. So yes, it’s hard to get a accurate reading of our dimension of 3+1 (x, y, z + time) from inside this dimension. 

We never see the universe for what it is, because we are always seeing the past. That is what being beholden to light does to us.

Clocks slay time… time is dead as long as it is being clicked off by little wheels; only when the clock stops does time come to life.  ~William Faulkner

In this plane of existance that we share and inhabbit.. time is the factor.
The fastest thing we know allows us to see ourselves and relativeisticly know when something happens, a state has changed and we can observe it. This is the true theory of time. Change.

When we move at the speed of light, time slows down (The General Theory of Relatively). Time may not stop, but we are moving so fast we (humans) cannot observe a change of state.

Time is therefore a change of state. When a state is frozen, it is “timeless” or unaffected by time. There is also a theory that to change state, something must have mass. further more, things with mass cannot move at the speed of light.

A neutrino blows this apart, in that it move at the speed of light, and has 3 states, which change. Infact, traveling from our sun, it changes states 3 times. Positive, negative and neutral.

I would think then there is a problem with our theory of Quantum Mechanics, or more importantly, our Accepted theory is correct, we don’t have a way to unaccept it. The theory holds An object observed changes it’s behavior. (in the simplest terms). Perfect. The moment I look at something, i bring it to my “relativity.” I look at a ball flying thru the air, and i relate it to something else moving thru the air. Not the faster object of the catcher moving to position himself under it.

Relativity is time based, and we need to stop thinking in terms of “Speed of Light” time. It’ makes all our calculations relative. Every calculation we make on a Speeding bullet train is correct, if you ignore the +100 miles per hour the train is also going. Every observation we make on earth is correct, if you ignore the fact we are hurtling thru the solar system, and so on, and so on. We are hurtling thru space in a soup of Dark Matter, all moving at a speed we can’t identify. Why? We are relating it to Light. I offer this. Dark Matter is moving faster than light and therefore we can’t get a return from it.

Using a theory of Parallelism, to go faster than light, you have to move dark matter, Space itself, out of the way. Understand now this is a big leap. As i previously stated, we are in a bubble, and this bubble has all our “observable universe” especially based on time and space. Here is my belief on Space and Dark Matter

Friction stops things from going as fast as in a vacuum Energy is transferred when a particle hits another particle (conservation of Momentum). A vacuum is simple a place with less particles so that there is nothing (very little) to transfer the energy into. Ergo, light is moving at it’s theoretical fastest speed. However I would postulate that Light cannot go faster, because some of it’s energy is transfered into the Dark matter halting it’s speed. Heat energy. It’s why mass shows up in Light calculations.

Time.

When i Turn on a light in a room, the light is -by my subjective definition.-” Everywhere”. First light is no where, then light is everywhere. I cannot, with my subjective eyes as instruments. ” calculate the time it took for it to spread about the room. With instruments I can see that light moves from the source, out, till it fills the room. But I am observing OUTSIDE the bubble of the room.

One more explanation. I have a cup at the left end of the table. If I move the cup to the right, Time has passed. The only way to make T=0 is to a) have a cup in every location in every part of the room, or have two cups. To move the cup i have to get it out of rest, speed it up, move it, slow it down and return it to rest. To move it faster than it can be observed, I have to make sure no return comes back from it, ergo, faster than light. to do that, I have to convert it into some sort of energy… faster than light. So i can move it, and it will always be observed, unless I can move it faster than anything we currently know, and to do that requires alot of power.

Faster than light travel is possible, we just can’t observe it. Since (at this moment) all instruments involve something going out, and returning with the information (radar waves, our eyes. ) something moving faster than light never shows up. The light goes out and never gets reflected back.). I

As I have postulated, you shall need to change the fabric of space itself. Bend it. now, I others have agreeed. What’s more, i’m still convinced gravity lies in the center of all we need to do. More importantly (and forgive the sci fi term)- Sub Space, or Extra dimensional Space. As 3 dimensional creatures we cannot observe a 4th dimension.. But we can fake it.

let’s not forget that Light is made up of objects with a Mass, neutrino’s with change state. we are not fully understanding the “light, mass, change of state ” thing yes.

Now, drop the cup out of our space time. accelerate it past the speed of light., pop it back in. to be truly instantaneous it would exist in both places at once, so in effect, while faster than light is possible, as of yet, faster than Time isn’t, because we can make t small, but never zero. Not yet.

We have come to use the speed of Light as the clock of time, we need to move past it. Our observable universe is locked at that number, but the universe we are in, isn’t. The march of time is universal, and so far has to be.  The speed of Light is a trap we must escape.

To sin by silence when they should protest makes cowards of men. – Abraham Lincoln

Let us speak of protesting. Protesting is a something i believe in as strongly as breathing, just as a believe some of the things people in protesting are just plain dumb. I believe i have a right to this opinion as much as they have a right to declare civil disobedience as a means of protest.

The reason I think some protest are dumb is because I do not believe at shouting at a wall hoping the wall will move. My voice does not produce enough force to move the wall nor I doubt my voice can be heard on the other side. Adding more protesters to shout does not make the wall any shorter or thicker. I do think it would be better to use all those people to surmount the walls, by climbing, using tools and even, moving using the combined brain power to make the wall crumble.

These examples of getting past the wall are also examples of the art of war; and all successful protests really display these common grounds. The campaign against tobacco involved chipping at the wall piece by piece and removing large bricks. The Campaign to roll back laws start with attacking the most minor “acceptable” behavior which is utterly outrageous: like first placing of a obvious religious symbol in the court house steps (and not in the general architecture fresco of a building).

Publicity is a means of protest. Calling attention to the wall, lets others know it must come down, or that the wall even exists. This page does not assume all publicity is bad -Never should calling attention to an injustice be seen as inane…, unless you are just shouting at the wall.
Of no doubt you are with me so far, yet wondering what has brought about such ferocity to the examples of protest. Let’s just say I am protesting; I am Protesting not protesting. I am advocating civil disobedience, but at no time am I advocating violence. Enough Violence will be done to the protesters to satisfy our thirst for blood.

Pretending the wall isn’t there, and walking away, is however not an option after you see it.

Executive Summary

As the European Union (”EU”) grows to prominence, the European Commission (”EC”) confronts several issues; of the most important is the role of how it handles business within and without the EU’s respective boarders.  One of the main areas of the EC direct oversight of business is Mergers and Acquisitions; and how the EC applies that oversight is a source of direct and constant scrutiny.  But what is the European competition policy with respect to Mergers and Acquisitions?  And how does the European Commission apply these policies? 

Section I – Principles Gleamed from History.

With respect to Mergers and Acquisitions, the European competition policy can be seen an outgrowth of Europe’s long history of warfare and constant struggle.  Unlike in America, where the individual company is paramount, driven by the will of the Independent “everyman must make his own way”, mentality, Europe has developed a social structure to protect its citizens, and to bind countries together so there is less devastating conflicts; a system to avoid its long history of Internal war.  Almost all it’s conflicts has had to do with the suffering or subjection of it’s diverse people, so in  protecting the Masses the EU sees competition as good for and the people and subsequently the economy at the same time.

In the EU, the European Commission is the sole body, and has exclusive rights to investigate and prevent, merger within the community dimension.   When the turnover of companies involved in M&A passes a set world wide threshold, or a EU threshold,  the EC is the single body that reviews these cases.  Otherwise, the member states have their own legislation for investigation.  This regional legislation has been adopted to also be able to investigate and halt mergers and acquisition of local companies.

In the highly capitalistic markets of the West, the words of Milton Freedman ring constantly:

The sole purpose of a corporation is to generate profit for it’s shareholders and those companies who adopt “responsible” attitudes would be faced with binding constraints that would leave them less competitive.

Europe instead has adopted a somewhat Neo-Keynesian model, mixed with Social Democracy, with a strong emphasis of Corporate social responsibility, (even if forced on the company).  For the Europeans, a Merger or Acquisition cannot merely be good for the company and the economy, but must also remain competitive.   There is strong evidence that competition benefits the consumer, and drives innovation and production onward.

The Countries of the EU do not believe in a version of “trickle down economics”, as many do in the West. For them a bigger company does not automatically contribute more to the economy and general welfare by producing better jobs, (even if it loses jobs in the short terms) gains more revenue, expanding wages and expanding partner industries, which completes the loop and therefore creates more jobs.  The EU believes instead, a merger or acquisition has a positive effect on the market, create a companies that will hopefully reduce logistic and distribution cost, and consolidate with restructuring methods that will result in more efficient operations.   These changes leads to a leaner company, that grows and innovates rapidly, expanding outwards into the world market, while protecting its workers with social programs and consumers with products efficiently developed under an economy of scale.  Beyond efficient operations, many firms in the EU are also combining to counter competition from more developed nations and companies, and gain entry into new markets opened by the EMU.  This process improves company and consumer, not just the company at the expense of the consumer.

Section II – Decisions, Decisions

The EU competition policy prohibits a merger that strengthens or creates a dominate position in the market, for fear the dominate mover will abuse their power, or block out new entrants into their market.  In practice, While the EC has been rather firm in dealing with Mergers and Acquisitions they believe violate these rules, and have taken a strong stance towards vigorously promoting competition,  they have, as all political institutions, been forced to give way to some member state interests -particularly French and Germany’s meddling in M&A, and desire to create National/Industrial Champions-  if only to keep these larger members happy and promote stability across the Euro region.  The EC have have blocked Mergers they believe would result in unfair competition even if approved by the West while allowing various Liberalization of Local Industries. Inshort, they have taken a decided European view in the matter of M&A.

Industrial Champions, a company that exist as the preeminent company of it’s type in a region or country, goes against the competition policy in principle.  National Champions are themselves not without merit, if they existed across countries yet independent of government controls, but when the countries band together to create them, then it’s a “Legal Monopoly.” Which is often time not as regulated as a Municipality Monopoly would be.  Furthermore, because its generally been created to counter outside FDI, internally in the EU it sometimes maintains a restrictive practices, blocking out competitors.

Germany and France have taken an active role in creating Industrial Champions, often going on record as to what they would like to happen in a certain industry.  France has enjoyed more success in creating such powerhouse companies; Sanofi-Synthelabo and Avenis merged after France discouraged the Swiss from bidding. Air France merged with KLM Royal Dutch to create a Flag Carrier for France and the Dutch.  Germany has been more unsuccessful, with several of its proposals turning actively against the government, such as Deutsche Bank not accepting a bid by Post Bank, despite government encouragement.

The EC, at the present, has only so much power over local companies, instead relying on the host Government to handle the matter, unless the threshold is crossed.  When the threshold has been crossed, the EC has been encouraged to define the Market world wide (aka, vs others) so as to let the mergers go thru.

Such strong European views can be seen in the case of the GE/Honeywell Merger.  The US had allowed the merger to pass muster with very little changes, however, the Merger would have created a huge powerhouse of a company in Europe, with dynamic horizontal and Vertical Acquisitions.   The EC felt a lot more would have to be done to bring that merger under control.

The EC favors divestment of major shareholdings to Competitors in many of these cases to ensure competition.  It did this with INA’s acquisition of Generali; both insurance companies, and with Totalfina and Elf in petroleum sector.

When it comes to Liberalization created by Mergers and Acquisitions or just Liberalization in general the State Governments have the right to invest certain amount of power in these monopolies.  But to get approval or avoid scrutiny by the EC, they must “serve the general economic interest.”  Even so, the EC also encourages competition in these areas.  Even if the Service itself cannot competitive, it’s use maybe, such as allowing all competitors to use the same power lines to distribute energy.  In a known case, The Spanish government had another telephone company paying for a right to operate in the Spanish market, while its own local Company didn’t have to pay.  This payment was reversed by the EC, for two reasons. It amounted to a service tariff and second, because of the fee, the New company (Airtel Movil) could not compete as effectively against the Spanish indigenous company which didn’t have that fee.

Conclusion

In the end, the Competition Policy of the EU is very strong and applied stringently, but at its core it  is still European biased when it comes to multinational companies.  In 2004 it was revised to make legal proceedings easier, yet move towards a more uniform system.  New rules allow for member states to take a more active roll in direct enforcement of rules and penalties that result from harm to companies or consumers because of unfair competition.   The EU’s merger rules are being revised so a Company may be able to reorganize or merge horizontally with more mitigating factors and allow for the rapid pace of the modern economics.  They however make a distinction where the reorganization then disturbed the competitive landscape.  The EC will therefore always keep pushing the rights of the consumer and competition ahead of company rights, especially when dealing with M&A.

Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration. – Abraham Lincoln

A friend asked me about this post, the flow of invisible money, then asked me, which plan was better, was it, less corporate taxes, to help the people and the economy (the republican plan) or  was it tax breaks for the poor, then for good measure he tossed in the mortgage crisis. (democratic plan)

And the problem is …It’s complex.  We are dealing with what most economist like to pretend doesn’t exist: people don’t have perfect knowledge, and they act irrationally, even with damn good evidence.

Let’s take for instance, the mortgage crisis ( simplified, oh so simplified.)   When a human has allot of debt, or is risking his ability to take care of himself or his family, they horde. This is natural.  If i say, here is $600 dollars, go spend it, it will not be spent.  It will be saved.  There are allot of reasons but let’s just be reasonable here.  If you are in debt, if there are collectors at the door, or you may be faced with not knowing if your next paycheck may be your last, you are going to save money.   Which means business don’t make money.

The Republican Plan

Wall street (or just say Investment houses) want profits, and they don’t want the company to spend money. They don’t want extra capital expenditures.  If the stock market was run by the individual investor, then this wouldn’t be so bad, the same people needing money would get it from stocks, but in truth, (for example) Home depot, Dell and Bed bath and beyond, have a bundled stock plan in an investment house like Myrill Lynch.  The person running that invest plan does not want to lose his job, there fore he will leverage his controlling shares of “GE” To make sure that GE does not spend money on operations.

Did you get that? An Investment house does not want to lose business, a broker does not want to lose his job and an investment account (who could really care less) wants their money (big credit crunch), and because many boards are interlinked (A man on your board, and you may be on his, etc) suddenly, it’s all about keeping cost down, and paying out to to investors, who are usually very large controlling investors plans not individual people or small owners.  And thus, the republican plan now grinds to a halt, not because it wouldn’t work, but because in the end, we are all self serving bastards, who don’t want to lose our jobs. [And my belief that usually it takes 1 man to stop a big plan]

The Democratic Plan.
It’s also a good plan. What do Americans want? They don’t want to be saved, that’s not america, and not the American dream. What they want is the ability to help themselves, the possibility that they can climb out of their debt.
So the democratic plan to freeze the banks from collecting sounds good.  The people are happy, (And let’s be serious, 1 investment banker isn’t going to elect you, but 2000 home owners will.) The Debt collection process is halted for 2 months (or more)

What about the Bank? After all, they now have money to loan out. The bank isn’t going to loan out money. Why?  The bank is really there to make money and really, someone in debt is not a good investment.  Further more, they have to keep more money, just in case there is a bank run, and lastly, The bank does not want your home. It does not want to foreclose.  A house is useless to them, money is better, however, they have investors who want money, they are beating down the bank door for profits too.

2 Months later, you have desperate bankers, who definitely need money NOW, and are not up to negotiating with you (especially if you just got a 2 month reprieve).  They want to be sympathetic, these bankers, but they are losing money by the second, and every time money is pulled to pay someone, pay down bills, they lose more money.  While waiting for all this money, banks need to lay people off, and reduce spending, do only really secure loans.  Corporations are not able to secure funding and to keep solvent, they don’t want to spend money. It’s easier to lay off people,  reduce spending and wait for this crisis to pass.

And thus, the Democratic plan grinds to a halt.  Democrats have helped out the homeowner, or those in debt, and so doing, caused the same problem as the republicans.  But they’ll get re-elected.

A credit crunch is bad for everyone, but money, or the love of money, is the root of this problem. We are all different, and yet, we should still strive to help our fellow man.   Name something that doesn’t have a price in today’s world? The key to get out of this cycle is to work for your better man, yet, as this editorial states, we don’t know when someone’s slacking. Well then, how would one simulate the economy?

A plan has to be comprehensive and multi phasic:  it calls on getting companies and people to basically pretend there is no credit crunch and let people spend or save as they would normally. a) One way get companies to go along is to lower  demands for dividends and allow tax credit if it money goes to investing and employee retention (only). b) To get everybody (companies and people) out of debt lower cost of money including on the discount window, so interest rates are low, easing the rate people have to pay down their debt and some how make fixed rate lower-able.   Lower the poor tax rate, and even triple the “tax credit” amount people get for giving to charities.  Yes charities, a means to help your better man, while helping yourself and the government.

Basically, getting out of the problems we’ve had will require new ways of thinking. Not more welfare, not more blatant taxes or debt freezes.  We can’t know all the consequences of our actions, sometimes, it takes 4 years to see an impact, which is why we need to make small changes and have constant reporting.