Category Archives: Reference

Filing cabinet for a digitized world.

It pays to give

I highly doubt this scheme will work with engineers, we are trained to rationalize our decisions. If free is an option, why pay? Donating the money to the same charity separately yields better return, at least you can get the tax credit.

Economist, Jan 13 2011
Allowing consumers to set their own prices can be good for business; even better if the firms give some of it to charity

IN OCTOBER 2007 Radiohead, a British rock group, released its first album in four years, “In Rainbows”, as a direct digital download. The move drew a fair bit of attention (including from this newspaper) not only because it represented a technological thumb in the eye to the traditional music industry, but also because the band allowed listeners to pay whatever they wished for it. Some 60% of those who seized the opportunity paid nothing at all, but the band seemed pleased with the result; one estimate had it earning nearly $3m from the experiment.

One group outside the music industry taking an interest was a trio of professors then at the Rady School of Management at the University of California, San Diego: Ayelet Gneezy, Uri Gneezy and Leif Nelson (who is now at the Haas School of Business at the University of California, Berkeley). Inspired, they designed a series of experiments to gauge whether pay-what-you-want pricing would work for other businesses. Their most recent experiment, co-authored with Amber Brown of Disney Research and published in Science, also stirred in a new element: would it make any difference if firms donated some of the pay-what-you-want fee to charity?

The authors set up their pricing experiment at the exit of a roller-coaster ride at a large amusement park. Riders were offered a photograph of themselves, snapped mid-coast. The usual price was $12.95, but on one day riders were told they could pay what they wished, including taking the photo for free. A second group was charged the full price but told that half the money would go to a well-regarded health charity. Yet a third group could set the price and see half of their chosen amount donated.

Allowing customers to set the price dramatically increased the percentage of buyers—from less than 1% to 8%. Even accounting for those who took a free photo, the amusement park collected more revenue on the pay-what-you-want day than when selling for the usual fixed price.

The authors also found that of the customers who were allowed to pay what they want, those who were told that half the money would go to a good cause paid substantially more than those who were not told about the charitable donation—to the point that revenue more than tripled. (The charity did, indeed, get its promised cut.) The smallest number of purchases, meanwhile, came the day that customers had to pay the full $12.95 but half was donated.

Therefore more than simple altruism was motivating the customers who gave money for a photo they could have had for free. “One of the quirks about paying what you want,” suggests Mr Nelson, “is that it starts to signal something about who you are. Every dollar you spend is a direct reflection of how much you care about this charity and what kind of person you are. No one wants to go cheap with a charity.” He calls this phenomenon “shared social responsibility”: instead of passively accepting a firm’s assertion of its charitable donations, the customer must actively agree to give money to charity, and determine how much.

But how widespread could shared social responsibility be? Ms Gneezy is the first to point out that customer-determined pricing works best for products with low marginal costs. Since publishing their findings, the researchers have spoken to several companies interested in pursuing similar experiments with their products, including software developers and video-game designers. But offering flexible pricing on a virtual product online, instead of in person at an amusement park, may make it easier for people to “go cheap” even if a charity is involved. Combining customer-determined pricing, corporate social responsibility, and increased profits will be tricky to pull off, and not every company will be able to do it—just like not every band can put their album online for free and still profit.

Google 2.4% Rate Shows How $60 Billion Lost to Tax Loopholes

Corporate tax law just create jobs for tax lawyers and accountants and won’t bring in much revenue to the government. Why don’t they simply scrape corporate tax and tax personal income of the executives instead. The executives cannot move away and any transfer of wealth between the company and individual is more traceable.

By Jesse Drucker, Bloomberg, Oct 21 2010

Google Inc. cut its taxes by $3.1 billion in the last three years using a technique that moves most of its foreign profits through Ireland and the Netherlands to Bermuda.

Google’s income shifting — involving strategies known to lawyers as the “Double Irish” and the “Dutch Sandwich” — helped reduce its overseas tax rate to 2.4 percent, the lowest of the top five U.S. technology companies by market capitalization, according to regulatory filings in six countries.

“It’s remarkable that Google’s effective rate is that low,” said Martin A. Sullivan, a tax economist who formerly worked for the U.S. Treasury Department. “We know this company operates throughout the world mostly in high-tax countries where the average corporate rate is well over 20 percent.”

The U.S. corporate income-tax rate is 35 percent. In the U.K., Google’s second-biggest market by revenue, it’s 28 percent.

Google, the owner of the world’s most popular search engine, uses a strategy that has gained favor among such companies as Facebook Inc. and Microsoft Corp. The method takes advantage of Irish tax law to legally shuttle profits into and out of subsidiaries there, largely escaping the country’s 12.5 percent income tax. (See an interactive graphic on Google’s tax strategy here.)

The earnings wind up in island havens that levy no corporate income taxes at all. Companies that use the Double Irish arrangement avoid taxes at home and abroad as the U.S. government struggles to close a projected $1.4 trillion budget gap and European Union countries face a collective projected deficit of 868 billion euros.

Countless Companies

Google, the third-largest U.S. technology company by market capitalization, hasn’t been accused of breaking tax laws. “Google’s practices are very similar to those at countless other global companies operating across a wide range of industries,” said Jane Penner, a spokeswoman for the Mountain View, California-based company. Penner declined to address the particulars of its tax strategies.

Facebook, the world’s biggest social network, is preparing a structure similar to Google’s that will send earnings from Ireland to the Cayman Islands, according to the company’s filings in Ireland and the Caymans and to a person familiar with its plans. A spokesman for the Palo Alto, California-based company declined to comment.

Transfer Pricing

The tactics of Google and Facebook depend on “transfer pricing,” paper transactions among corporate subsidiaries that allow for allocating income to tax havens while attributing expenses to higher-tax countries. Such income shifting costs the U.S. government as much as $60 billion in annual revenue, according to Kimberly A. Clausing, an economics professor at Reed College in Portland, Oregon.

U.S. Representative Dave Camp of Michigan, the ranking Republican on the House Ways and Means Committee, and other politicians say the 35 percent U.S. statutory rate is too high relative to foreign countries. International income-shifting, which helped cut Google’s overall effective tax rate to 22.2 percent last year, shows one way that loopholes undermine that top U.S. rate.

Two thousand U.S. companies paid a median effective cash rate of 28.3 percent in federal, state and foreign income taxes in a 2005 study by academics at the University of Michigan and the University of North Carolina. The combined national-local statutory rate is 34.4 percent in France, 30.2 percent in Germany and 39.5 percent in Japan, according to the Paris-based Organization for Economic Cooperation and Development.

The Double Irish

As a strategy for limiting taxes, the Double Irish method is “very common at the moment, particularly with companies with intellectual property,” said Richard Murphy, director of U.K.- based Tax Research LLP. Murphy, who has worked on similar transactions, estimates that hundreds of multinationals use some version of the method.

The high corporate tax rate in the U.S. motivates companies to move activities and related income to lower-tax countries, said Irving H. Plotkin, a senior managing director at PricewaterhouseCoopers LLP’s national tax practice in Boston. He delivered a presentation in Washington, D.C. this year titled “Transfer Pricing is Not a Four Letter Word.”

“A company’s obligation to its shareholders is to try to minimize its taxes and all costs, but to do so legally,” Plotkin said in an interview.

Boosting Earnings

Google’s transfer pricing contributed to international tax benefits that boosted its earnings by 26 percent last year, company filings show. Based on a rough analysis, if the company paid taxes at the 35 percent rate on all its earnings, its share price might be reduced by about $100, said Clayton Moran, an analyst at Benchmark Co. in Boca Raton, Florida. He recommends buying Google stock, which closed yesterday at $607.98.

The company, which tells employees “don’t be evil” in its code of conduct, has cut its effective tax rate abroad more than its peers in the technology sector: Apple Inc., the maker of the iPhone; Microsoft, the largest software company; International Business Machines Corp., the biggest computer-services provider; and Oracle Corp., the second-biggest software company. Those companies reported rates that ranged between 4.5 percent and 25.8 percent for 2007 through 2009.

Google is “flying a banner of doing no evil, and then they’re perpetrating evil under our noses,” said Abraham J. Briloff, a professor emeritus of accounting at Baruch College in New York who has examined Google’s tax disclosures.

“Who is it that paid for the underlying concept on which they built these billions of dollars of revenues?” Briloff said. “It was paid for by the United States citizenry.”

Taxpayer Funding

The U.S. National Science Foundation funded the mid-1990s research at Stanford University that helped lead to Google’s creation. Taxpayers also paid for a scholarship for the company’s cofounder, Sergey Brin, while he worked on that research. Google now has a stock market value of $194.2 billion.

Google’s annual reports from 2007 to 2009 ascribe a cumulative $3.1 billion tax savings to the “foreign rate differential.” Such entries typically describe how much tax U.S. companies save from profits earned overseas.

In February, the Obama administration proposed measures to curb shifting profits offshore, part of a package intended to raise $12 billion a year over the coming decade. While the key proposals largely haven’t advanced in Congress, the IRS said in April it would devote additional agents and lawyers to focus on five large transfer pricing arrangements.

Arm’s Length

Income shifting commonly begins when companies like Google sell or license the foreign rights to intellectual property developed in the U.S. to a subsidiary in a low-tax country. That means foreign profits based on the technology get attributed to the offshore unit, not the parent. Under U.S. tax rules, subsidiaries must pay “arm’s length” prices for the rights — or the amount an unrelated company would.

Because the payments contribute to taxable income, the parent company has an incentive to set them as low as possible. Cutting the foreign subsidiary’s expenses effectively shifts profits overseas.

After three years of negotiations, Google received approval from the IRS in 2006 for its transfer pricing arrangement, according to filings with the Securities and Exchange Commission.

The IRS gave its consent in a secret pact known as an advanced pricing agreement. Google wouldn’t discuss the price set under the arrangement, which licensed the rights to its search and advertising technology and other intangible property for Europe, the Middle East and Africa to a unit called Google Ireland Holdings, according to a person familiar with the matter.

Dublin Office

That licensee in turn owns Google Ireland Limited, which employs almost 2,000 people in a silvery glass office building in central Dublin, a block from the city’s Grand Canal. The Dublin subsidiary sells advertising globally and was credited by Google with 88 percent of its $12.5 billion in non-U.S. sales in 2009.

Allocating the revenue to Ireland helps Google avoid income taxes in the U.S., where most of its technology was developed. The arrangement also reduces the company’s liabilities in relatively high-tax European countries where many of its customers are located.

The profits don’t stay with the Dublin subsidiary, which reported pretax income of less than 1 percent of sales in 2008, according to Irish records. That’s largely because it paid $5.4 billion in royalties to Google Ireland Holdings, which has its “effective centre of management” in Bermuda, according to company filings.

Law Firm Directors

This Bermuda-managed entity is owned by a pair of Google subsidiaries that list as their directors two attorneys and a manager at Conyers Dill & Pearman, a Hamilton, Bermuda law firm.

Tax planners call such an arrangement a Double Irish because it relies on two Irish companies. One pays royalties to use intellectual property, generating expenses that reduce Irish taxable income. The second collects the royalties in a tax haven like Bermuda, avoiding Irish taxes.

To steer clear of an Irish withholding tax, payments from Google’s Dublin unit don’t go directly to Bermuda. A brief detour to the Netherlands avoids that liability, because Irish tax law exempts certain royalties to companies in other EU- member nations. The fees first go to a Dutch unit, Google Netherlands Holdings B.V., which pays out about 99.8 percent of what it collects to the Bermuda entity, company filings show. The Amsterdam-based subsidiary lists no employees.

The Dutch Sandwich

Inserting the Netherlands stopover between two other units gives rise to the “Dutch Sandwich” nickname.

“The sandwich leaves no tax behind to taste,” said Murphy of Tax Research LLP.

Microsoft, based in Redmond, Washington, has also used a Double Irish structure, according to company filings overseas. Forest Laboratories Inc., maker of the antidepressant Lexapro, does as well, Bloomberg News reported in May. The New York-based drug manufacturer claims that most of its profits are earned overseas even though its sales are almost entirely in the U.S. Forest later disclosed that its transfer pricing was being audited by the IRS.

Since the 1960s, Ireland has pursued a strategy of offering tax incentives to attract multinationals. A lesser-appreciated aspect of Ireland’s appeal is that it allows companies to shift income out of the country with minimal tax consequences, said Jim Stewart, a senior lecturer in finance at Trinity College’s school of business in Dublin.

Getting Profits Out

“You accumulate profits within Ireland, but then you get them out of the country relatively easily,” Stewart said. “And you do it by using Bermuda.”

Eoin Dorgan, a spokesman for the Irish Department of Finance, declined to comment on Google’s strategies specifically. “Ireland always seeks to ensure that the profits charged in Ireland fully reflect the functions, assets and risks located here by multinational groups,” he said.

Once Google’s non-U.S. profits hit Bermuda, they become difficult to track. The subsidiary managed there changed its legal form of organization in 2006 to become a so-called unlimited liability company. Under Irish rules, that means it’s not required to disclose such financial information as income statements or balance sheets.

“Sticking an unlimited company in the group structure has become more common in Ireland, largely to prevent disclosure,” Stewart said.

Deferred Indefinitely

Technically, multinationals that shift profits overseas are deferring U.S. income taxes, not avoiding them permanently. The deferral lasts until companies decide to bring the earnings back to the U.S. In practice, they rarely repatriate significant portions, thus avoiding the taxes indefinitely, said Michelle Hanlon, an accounting professor at the Massachusetts Institute of Technology.

U.S. policy makers, meanwhile, have taken halting steps to address concerns about transfer pricing. In 2009, the Treasury Department proposed levying taxes on certain payments between U.S. companies’ foreign subsidiaries.

Treasury officials, who estimated the policy change would raise $86.5 billion in new revenue over the next decade, dropped it after Congress and Treasury were lobbied by companies, including manufacturing and media conglomerate General Electric Co., health-product maker Johnson & Johnson and coffee giant Starbucks Corp., according to federal disclosures compiled by the non-profit Center for Responsive Politics.

Administration Concerned

While the administration “remains concerned” about potential abuses, officials decided “to defer consideration of how to reform those rules until they can be studied more broadly,” said Sandra Salstrom, a Treasury spokeswoman. The White House still proposes to tax excessive profits of offshore subsidiaries as a curb on income shifting, she said.

The rules for transfer pricing should be replaced with a system that allocates profits among countries the way most U.S. states with a corporate income tax do — based on such aspects as sales or number of employees in each jurisdiction, said Reuven S. Avi-Yonah, director of the international tax program at the University of Michigan Law School.

“The system is broken and I think it needs to be scrapped,” said Avi-Yonah, also a special counsel at law firm Steptoe & Johnson LLP in Washington D.C. “Companies are getting away with murder.”

The tyranny of choice

Technology should able to solve the problem of choice, we just need AI agent who mimic my mind making decision for us.

Dec 16th 2010, Economist
If you can have everything in 57 varieties, making decisions becomes hard work

THESE are momentous times for the British potato crisp. Little over a generation ago the humble snack came in just a trio of flavours: ready salted, cheese and onion, or salt and vinegar. Today the choice is tongue-tingling: Thai sweet chilli, balsamic vinegar and caramelised onion, Oriental red curry, lime and coriander chutney, vintage cheddar and onion chutney, buffalo mozzarella and herbs, chicken tikka masala. And those are merely the varieties confected by a single crispmaker, Walkers, a division of PepsiCo, which turns out 10m bags of crisps every day for the British market alone. Venture towards the gourmet fringes of the crisp offering, and the choice and exoticism multiply: jalapeño pepper, roast ox, horseradish and sour cream, Ludlow sausage with wholegrain mustard. Crisps these days can be crinkle-cut, thick-cut, ridge-cut, square-cut, hand-fried, reduced fat, sold in six-packs, grab bags, party size or family packs.

Wheel a trolley down the aisle of any modern Western hypermarket, and the choice of all sorts is dazzling. The average American supermarket now carries 48,750 items, according to the Food Marketing Institute, more than five times the number in 1975. Britain’s Tesco stocks 91 different shampoos, 93 varieties of toothpaste and 115 of household cleaner. Carrefour’s hypermarket in the Paris suburb of Montesson, a hangar-like place filled with everything from mountain bikes to foie gras, is so vast that staff circulate on rollerblades.

Choice seduces the modern consumer at every turn. Lattes come tall, short, skinny, decaf, flavoured, iced, spiced or frappé. Jeans come flared, bootlegged, skinny, cropped, straight, low-rise, bleach-rinsed, dark-washed or distressed. Moisturiser nourishes, lifts, smooths, revitalises, conditions, firms, refreshes and rejuvenates. Tropicana, another part of PepsiCo, turns out freshly pulped juice in more than 20 different varieties, up from just six in 2004; it says there could be as many as 30 in the next decade.

Thanks to a mix of modern medicine, technology and social change, choice has expanded from the grocery shelf to areas that once had few or none. Faces, noses, wrinkles, breasts and bellies can be remodelled, plumped or tucked. America in 2008 alone saw 2.5m Botox injections, 355,671 breast implants, 341,144 liposuction treatments, 195,104 eyelid lifts and 147,392 stomach tucks, according to the American Society for Aesthetic Plastic Surgery.

Teenagers can choose to surf, chat, tweet, zap or poke in ways that their parents can barely fathom. Moving pictures and music can be viewed, recorded, downloaded or streamed on all manner of screens or devices. The internet has handed huge power to the consumer to research options, whether of medical procedures or weekend breaks. Even the choice of price-comparison sites to help people choose is expanding.

Offline choices have multiplied too. European Union citizens can move, study, work and live wherever they like within the union. Vouchers and other school reforms in many countries give parents increasing choice over where to send their children. Modular university courses offer students endless combinations. The University of California, Berkeley, has over 350 degree programmes, including Buddhist Studies and Lesbian, Gay, Bisexual and Transgender Studies, each made up of scores of courses.

Choice has come to some of life’s biggest personal decisions as well. In many countries couples can decide whether and where to marry, cohabit, divorce or remarry. Internet dating promises to find a match from a database of potential partners. Women in the rich world can choose when, and whether, to reproduce. “Do I want a baby? Will I find love again? Is this it?” screams the front cover of one recent women’s magazine. Mothers (and sometimes fathers) can choose to work, or not, or take time off to raise children and then go back to their jobs. New life can be created against the odds. For sufferers from many chronic illnesses, life in old age can be prolonged—or ended.

Many of these options have improved life immeasurably in the rich world, and to a lesser extent in poorer parts. They are testimony to human ingenuity and innovation. Free choice is the basis on which markets work, driving competition and generating economic growth. It is the cornerstone of liberal democracy. The 20th century bears the scars of too many failed experiments in which people had no choice. But amid all the dizzying possibilities, a nagging question lurks: is so much extra choice unambiguously a good thing?

Over the past decade behavioural scientists have come up with some intriguing insights. In one landmark experiment, conducted in an upmarket grocery store in California, researchers set up a sampling table with a display of jams. In the first test they offered a tempting array of 24 different jams to taste; on a different day they displayed just six. Shoppers who took part in the sampling were rewarded with a discount voucher to buy any jam of the same brand in the store. It turned out that more shoppers stopped at the display when there were 24 jams. But when it came to buying afterwards, fully 30% of those who stopped at the six-jam table went on to purchase a pot, against merely 3% of those who were faced with the selection of 24.

The researchers repeated the experiment with chocolate as well as student essay topics and found similar results. Too much choice, concluded Sheena Iyengar of Columbia University and Mark Lepper of Stanford, is demotivating. Others have since come up with similar results from experiments with writing pens, gift boxes, coffee and even American 401(k) pension plans. (It is not all that way: German researchers, by contrast, found that shoppers were not put off by too much choice, whether of jams, chocolates or jelly beans—though this may be down to Germany’s price-conscious shoppers and the sheer dreariness of the country’s supermarkets.)

As options multiply, there may be a point at which the effort required to obtain enough information to be able to distinguish sensibly between alternatives outweighs the benefit to the consumer of the extra choice. “At this point”, writes Barry Schwartz in “The Paradox of Choice”, “choice no longer liberates, but debilitates. It might even be said to tyrannise.” In other words, as Mr Schwartz puts it, “the fact that some choice is good doesn’t necessarily mean that more choice is better.”

Daniel McFadden, an economist at the University of California, Berkeley, says that consumers find too many options troubling because of the “risk of misperception and miscalculation, of misunderstanding the available alternatives, of misreading one’s own tastes, of yielding to a moment’s whim and regretting it afterwards”, combined with “the stress of information acquisition”. Indeed, the expectation of indecision can prompt panic and a failure to choose at all. Too many options means too much effort to make a sensible decision: better to bury your head under a pillow, or have somebody else pick for you. The vast majority of shoppers in the Californian grocery store faced with 24 jam varieties simply chose not to buy any. The more expensive an item—a car, say—the more daunting the decision. As the French saying has it: “Trop de choix tue le choix” (too much choice kills the choice).

Surely, though, knowing that lots of choice is out there still feels good? The thrill is in the anticipation of falling upon the perfect Tuscan hotel, or shade of duck-egg blue with which to repaint the kitchen. Or the reassurance that competition to supply all that choice of electricity or telephony is keeping prices down and pushing service up. But not, according to psychologists, if more choice raises expectations too high, which may make even a good decision feel bad. The potential for regret about the options not taken—the faster car, the hotel with the better view—seems to be greater in the face of multiple choices.

Expectations have been inflated to such an extent that people think the perfect choice exists, argues Renata Salecl in her book “Choice”. Consider seduction. Bookshops are crowded with self-help guides and self-improvement manuals with titles such as “How to Choose & Keep Your Partner” or “Love is a Choice”. Internet dating sites promise to find the perfect match with just a few clicks of the mouse. This nourishes the hope of making the ideal choice, she says, as well as the fanciful idea that there are “quick, rational solutions to the complicated question of seduction”.

Confusion, indecision, panic, regret, anxiety: choice seems to come at a price. In one episode of “The Simpsons”, Marge takes Apu shopping in a new supermarket, Monstromart, whose cheery advertising slogan is “where shopping is a baffling ordeal”. “How is it”, muses Ms Salecl, “that in the developed world this increase in choice, through which we can supposedly customise our lives and make them perfect leads not to more satisfaction but rather to greater anxiety, and greater feelings of inadequacy and guilt?” A 2010 study by researchers at the University of Bristol found that 47% of respondents thought life was more confusing than it was ten years ago, and 42% reported lying awake at night trying to resolve problems.

It could be that today’s children, growing up in a world of abundant choice, will find decisions even harder to take when they grow up. Their lives may be packed with instant choices as they zap from one site to another while texting a friend and listening to music on YouTube. But much of this is reflexive activity. The digital generation is doing what Mr Schwartz calls “picking”, not “choosing”: “With a world of choices rushing by like a music video,” he says, “all a picker can do is grab this or that and hope for the best.” Young people have grown up with masses of choice, says Dan O’Neil, a British life coach who helps people overcome indecision, “but they have never learned to make a choice and run with it. In adult life, they aren’t equipped to cope.”

Ever since the 19th century, when Levi Strauss began to stitch denim jeans for Americans and Abram Lyle started to sell tins of golden syrup to the English, brand managers have made it their business to offer shoppers an easier life. Brands simplify choices. They are a guarantee of quality or consistency in a confusing market, and a badge of trust. Companies spend heavily on marketing and legal advice to protect or reinvent their brands and keep customers loyal, exploiting customers’ aversion to choice.

The more that options multiply, the more important brands become. Today, when paralysed by bewildering choice, a consumer will often turn to a brand that is cleverly marketed to appear to be one that others trust.

In Italo Calvino’s novel “Mr Palomar”, the eponymous hero is dazzled by the mouth-watering variety of cheese he comes across at a fine Parisian fromagerie. “Mr Palomar’s spirit vacillates between contrasting urges: the one that aims at complete, exhaustive knowledge and could be satisfied only by tasting all the varieties; and the one that tends toward an absolute choice, the identification of the cheese that is his alone,” writes Mr Calvino. In the end, “he stammers; he falls back on the most obvious, the most banal, the most advertised, as if the automatons of mass civilisation were waiting only for this moment of uncertainty on his part in order to seize him again and have him at their mercy.”
The anti-globalisation and green movements have stirred a consumer backlash against a surfeit of choice

Despite the crisp flavourologists’ best efforts, there is a limit to how many packs can be stacked on a supermarket shelf. What of stuff that is distributed digitally, however, where choice is almost limitless? Technology has cut media distribution costs and made available a vast new array of material that caters to specialised or obscure tastes, in music, video or the written word. In this universe of proliferating choice, demand is said to be shifting from a few mass products (at the head of the distribution curve) towards a great many niche interests (at the tail end), as argued by Chris Anderson in “The Long Tail”.

It turns out, however, that despite the availability of all the extra stuff the hits are as important as ever. In 2009 there were 558 films released in America, up from 479 in 2000, not to mention the gigabytes of videos and film uploaded or shared online. Yet it was also the year in which one film, James Cameron’s “Avatar”, broke all box-office records to become the highest-grossing film ever, beating the director’s own 1997 blockbuster, “Titanic”. However many niches there are, in other words, film-goers or TV viewers still want to watch what everybody else is watching, and musicians still manage to release mega-hits. Indeed, in a world that celebrates individualism and freedom, many people decide to watch, wear or listen to exactly the same things as everybody else.

In small corners of the temples of consumption, business has begun to wake up to the perils of excess choice. Some firms employ “choice architects” to help guide consumers’ decision-making and curb confusion. Tropicana’s extra fruit-juice varieties boosted sales by 23% in Britain in 2009. But now the company puts colour-coded bottletops on sub-categories of juice to help customers “navigate what can be a difficult range”, says Patrick Kalotis, its marketing director in Britain. In “Nudge”, Richard Thaler and Cass Sunstein, two American academics, cite a study of company retirement plans. When a default option automatically selected an investment portfolio, saving employees the chore of picking their own mix of assets, participation shot up from 9% to 34%.

Some firms have pruned their ranges to avoid confusing shoppers. For example, Glidden, an American paint brand, decided in 2009 to reduce its palette of wall colours from an eye-dazzling 1,000 to a mere 282 because of a change in “Americans’ priorities from ‘more is better’ to ‘less is more’”. L’Astrance, a three-star Michelin restaurant in Paris’s swanky 16th arrondissement, offers no choice at all on its menu: Pascal Barbot, the chef, concocts what he fancies from produce picked up in the market that day. And sometimes less really is more. When Procter & Gamble, an American consumer-products company, thinned its range of Head & Shoulders shampoos from 26 to 15, sales increased by 10%, according to Sheena Iyengar in “The Art of Choosing”.

“Traditionally, companies said that it’s all about the customer, and therefore give them everything they want,” says Glen Williams of Bain, a consultancy. “In reality, this can make it difficult to identify which products the customer really wants, and can create problems for managing the business.” Offering too many jazzy options for new cars, say, may not only confuse consumers but add to production costs and increase the potential for factory-floor bungles. A 2006 Bain study suggested that reducing complexity and narrowing choice can boost revenues by 5-40% and cut costs by 10-35%.

At the same time the anti-globalisation and green movements have stirred a consumer backlash against a surfeit of choice. Campaigns urge shoppers to buy locally grown fruit in season, and to shun cherries in winter or green beans flown in from Kenya. A “voluntary simplicity” movement calls on households to do away with excess consumer choice and lead a low-consumption, eco-friendly life. Courses promise to help people shed the distractions and stresses of the consumerist world and journey towards their inner wholeness. Short of turning the lawn over to organic vegetables and selling the car, books with such titles as “The Power of Less: The fine art of limiting yourself to the essential…in business and in life” or “Living Simply: Choosing less in a world of more” suggest practical ideas for cutting down on the effort of decision-making. The advice seems to boil down to shopping less often, keeping less stuff, watching less TV and sending fewer e-mails.

Life coaches offer to help with the perplexity of bigger choices. As recently as the early 1960s, in the world elegantly portrayed by a TV series, “Mad Men”, society gave both women and men far fewer options. Dealing with the strains and expectations of choice is today’s payback. “At a certain age, my clients have this sudden realisation that life hasn’t gone quite the way they intended, and they feel stuck,” says Mr O’Neil, who runs life-coaching classes. In the past they would have just got on with it. Today, he says, “they are paralysed by having too much choice.”

Fifty years after the contraceptive pill was first licensed in America and 37 years after the Supreme Court legalised abortion, women seem to agonise more than ever about breeding. “We’ve grown up with a lot more choice than our mothers or grandmothers; for them, being child-free wasn’t a choice, it was pitied,” says Beth Follini, an American life coach who specialises in the “maybe baby” dilemma. “The anxiety comes from worrying about making the wrong choice.” Having options seems to make people think they can have control over outcomes too. Sometimes, says Ms Follini, choosing is about learning to live without control.

Those in the business of helping people choose offer various tips. Mr O’Neil says the key is taking a decision: “The truth is that it doesn’t matter what we choose, only that we do choose.” Stick to the choices that matter and eliminate the rest, suggests one advocate of simple living, who supplies no fewer than 72 steps to choose from in order to simplify life. Another helpfully explains that “when you approach simple living, sometimes the decision is clear-cut. Sometimes it’s not.” The trouble with simplifying your life, it turns out, is that it involves too many choices.

Automation without abstraction is like a bicycle without pedals

Automation is just transforming information from one format to another format, it won’t make the information any easier to work with. Abstraction drops irrelevant information and keeping only the useful information at the right layer. Abstraction can scale vertical, automation can only scale horizontally.

Design and Reuse, by David Murray

I’ve noticed recently that the word ‘automation’ can be used very loosely in the EDA industry as a presumption of productivity and quality. I’ve recenlly been working with some legacy customer flows on an IP integration process that was 100% ‘automated’ from an Excel sheet. This excel sheet was written to CSV text file which was then parsed with perl to create an RTL output. As the solution evolved however and the requirements grew more complex, another set of perl scripts were deployed which directly manipulated the RTL file. In fact this perl included some snippets of RTL code to insert into the output. So while technically the process was 100% automated, theis type of textmanipulation brought the level of abstraction lower even than the RTL level. I came across similar types of ‘automation’ in my previous life as a design engineers life, where automation was considered the ability to record keystrokes macros within a text editor. Again this automation was at a very granular and low level of abstraction and consisted of no more than creating repeatable, but not very reusable small steps. No matter the claimed level of automation of a process, a simple fact remains; automation without abstraction is like a bicycle without pedals.
A bicycle without pedals!

The Laufmaschine or ‘running machine’, a brilliant concept, was realized by German, Baron von Drais in 1817. Described as “A mechanical machine with two, in-line wheels and the ability to steer”, the Laufmaschine could get you from A to B in a more efficient fashion and it meant keeping both feet on the ground (and probably a new set of shoes every week). At initial trials, the laufmaschine was able to get running speeds at walking efficiency. This laufmaschine was also called a velocipede, meaning ‘fast foot’ as well as swiftwalker (a marketing term if there ever was one). Its goal was to make walking or running more efficient and it successfully achieved this.

In 1863, Frenchman Pierre Lallement modified a two-wheeler in Paris and attached pedals, forever changing the concept. The introduction of the pedal took the fast-walking to a new level . With the advent of gears, the efficiency of man travelling was catapulted way ahead of our counterparts in the animal kingdom. Man on a pedal-enabled bicycle was100 times more efficient than man walking. Man was now CYCLING!

So how does this relate to SoC realization and IP integration? As the number of connections required to assemble a system grew, manual connectivity was replaced with in-house (as well as outhouse!) scripting solutions without really changing the assembly concept. The scripts – be they Excel VBA, perl or python were performing low-level data manipulation rather than high level automation abstraction. There were still trying to deliver better walking efficiency.

These scripted solutions are essentially ‘swift-stitch’, or ‘veloci-wire-up’ style environments performing low-level connectivity manipulation. As the complexity inevitably increases, the levels of efficiency of scripting simply aren’t scaling. A new concept is needed for IP integration; a higher level of abstraction is needed to boost the SoC realization process.

So, what did we learn from the laufmaschine? With pedals, Mr Lallement found a way of synthesizing one motion into another, increasing efficiency by an order of magnitude in the process. Pedals were in fact a very small but highly significant change to the methodology – CYCLING was the result! We need the same paradigm in SoC realization where we replace adhoc IP stitching type of solutions and change to a new methodology called ‘weaving’.

Like pedals, ‘weaving’ doesn’t seem like a massive leap in innovation but it gives a quantum leap in efficiency. Weaver takes what these integration scripts were doing time and time again and abstracts it up to a specification language that defines how to integrate IPs and systems.
Weaving

The key to this solution is a simple but powerful IP integration specification language that allows engineers to specify a high level integration specification as a set of rules that define how IP is integrated. These rules contain powerful assembly instructions and link with formal port/interface definitions, such as IP-XACT.

This rule when run on a sub-system containing multiple IP instances will export any ports that have been formalized through attributes or IP-XACT. The selected ports will be created on the sub-system boundary and connected to the originating instances. It will also maintain any packaging metadata that was stored with the ports e.g. properties, IP-XACT interface mappings etc.

The export instruction has a range of options that control the intended port creation. Other instructions include, connect, tieoff, group/split (for hierarchical manipulation), etc. and work at both the port or interface level. An integration specification can therefore be considered a collection of these rules

How can such a small change in abstraction lead to massive efficiency gains?

A rule can be reused multiple times on many sub-systems and also on multiple projects. Therefore the reuse potential is huge. Also the design intent is very clear and concise and easy to understand review. In a sample peripheral sub-system, 3 rules (with 9 instructions) auto-generates 1434 lines of structural HDL code. Similarly at the top-level of a large chip, 21 rules (120 instructions) gives 11188 lines of HDL, an average of 96 lines of HDL code created, per instruction. (Much like 1 revolution of the pedals giving you 100m in distance!)

Specifications and Scripts

The specification language is easy to understand and familiar to people working in the domain . There are only a handful of instructions to learn. So what is the difference between specifications and scripts?

* Rules are executable, synthesizable specifications whereas scripts tend to be ad-hoc implementations.
* Specifications by their nature captures design intent and raise the design abstraction. The design intent can be very clear. Scripts are low level and design intent cannot be as clear.
* Specifications are more formalised and are more stable than the resulting implementation. Scripts tend to be very implementation specific and implementation sensitive.
* Rules are essentially specifications whilst scripts are code

Scripting will always play a role in design automation and should be considered the essential glue of a process. Scripts should handle corner cases, tweaks and nuances but because of their ad-hoc nature and its resulting instability and unpredictability, script should be kept to a minimum and not form the central part of an integration flow. Scripts offer flexibility and a way to get out of certain holes but long-term, strategic solutions require a more automated AND abstracted solution. Scripting gives a context of what you are trying to do with the data and because of this it provides a pointer as to where the automation is going, probably much like what went through the Frenchman’s mind when he envisaged pedals. He would probably not have come up with a bicycle without first seeing the original laufmaschine.

It is time to raise the level of abstraction and aim to finally become 100 times more efficient at the IP integration process.

The Stuxnet outbreak

Technology is neither good or bad, it all depends on how people use it. Sooner or later, someone will develop Stuxnet. Being the first cyber war virus, Stuxnet is doing a good deed by sabotage a nuclear weapon plant at Iran and at the same time warn us how vulnerable our infrastructure is under similar attack from terrorists.

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Why Money Makes You Unhappy

Everyone knows the law of diminish of return from high school economics textbook. How come the writer sounds like they have discover something now. The more money you have, you will need even more money to give you the same happiness. It’s like exercise, you are happy the the first time you swim 50m non-stop, but if you are contented, you will never about to swim 1500m.

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