The Daily Parker

Politics, Weather, Photography, and the Dog

Daily Parker bait, times 3

Of course I'm going to blog about these three articles.

First, former George W. Bush speechwriter and lifelong Republican Michael Gerson looks at the culture of celebrity that surrounds the President and says "our republic will never be the same:"

The founders generally believed that the survival and success of a republic required leaders and citizens with certain virtues: moderation, self-restraint and concern for the common good. They were convinced that respect for a moral order made ordered liberty possible.

The culture of celebrity is the complete negation of this approach to politics. It represents a kind of corrupt, decaying capitalism in which wealth is measured in exposure. It elevates appearance over accomplishment. Because rivalries and feuds are essential to the story line, it encourages theatrical bitterness. Instead of pursuing a policy vision, the first calling of the celebrity is to maintain a brand.

Is the skill set of the celebrity suited to the reality of governing? On the evidence, not really.

Second, Crain's business columnist Joe Cahill calls out Eddie Lampert's offer to buy Kenmore for $400m as a call to put Sears into hospice care:

There's plenty to worry about in the latest letter from Lampert's ESL Investments. First, Lampert is offering just $400 million for Kenmore, supposedly the company's crown jewel. When he first floated the idea of buying the household appliance brand in April, estimates pegged the likely selling price at $500 million or more. Maybe the lower bid is intended to elicit higher offers from potential third-party acquirers. Or it may signal that nobody else is interested and ESL is angling for a bargain.

Second, the offer is both nonbinding and contingent on ESL finding a third-party equity backer to finance the purchase. The letter says ESL is "confident" it can find such a backer. In other words, billionaire Lampert isn't willing to risk his own money buying Kenmore. This is consistent with his recent reluctance to raise his bet on Sears Holdings as a whole. As I've written before, he could easily take the company private—at the current market capitalization, the 46 percent he doesn't already own would cost less than $100 million—and capture the full upside of a turnaround. He's shown no interest in doing so.

And finally, on a happier note, the Chicago Tribune lists eight bars where people can go to read:

After living in the United Kingdom, freelance book publicist Jonathan Maunder turned to Chicago’s literary greats to connect to his adopted city. He remembered a night last year visiting Rainbo Club, the bar favored by “Chicago, City on the Make” author Nelson Algren.

“As I stepped out of the bar, a little drunk on both a couple of pints and Algren’s beautiful writing, I stood for a moment under the red neon of the Rainbo Club sign, which was reflected on the just rained on street, and felt a powerful connection to the place I was in and its history,” he said.

[He recommends] Kopi, A Traveler’s Cafe
5317 N. Clark St., 773-989-5674

A friendly, relaxed cafe/bar, which always has people and a good atmosphere (and sometimes accordion players) but never feels overly busy and hectic, in a way that might be distracting from reading.

Given that Kopi is a 20-minute walk from my house, I may just stop in this weekend.

I was a little bummed that the Duke of Perth didn't make the list, though.

The state of American craft brewing

The Chicago Tribune reported today that the largest craft brewer in the United States is now...AB InBev, AKA Anheuser-Busch:

Between 2011 and 2017, Anheuser-Busch bought 10 breweries from coast to coast, beginning with Chicago’s Goose Island Beer Co. and ending (for now) with Wicked Weed Brewing of Asheville, N.C. In between, it picked up breweries in Oregon (10 Barrel), Virginia (Devils Backbone), Seattle (Elysian), Los Angeles (Golden Road), Houston (Karbach) and the metro areas of Phoenix (Four Peaks), Denver (Breckenridge) and New York City (Blue Point).

Anheuser-Busch’s shopping spree appears to have paid off. Last month, industry newsletter Beer Marketer’s Insights reported that the beer giant has surged past Boston Beer and Sierra Nevada in 2018 to become the nation’s top craft beer company in terms of dollar sales.

To be clear, Anheuser-Busch’s craft beer supremacy exists in one very specific metric at the moment; IRI tracks sales in grocery, big box, drug and convenience stores. When factoring in draft and liquor store sales, Beer Marketer’s Insights estimates that Boston Beer remains ahead of Anheuser-Busch in terms of both volume and dollar sales. But the passing of that torch is all but an inevitability during the next year or so.

However, it’s not all good news for Anheuser-Busch’s craft effort.

Its lead horse, Goose Island, had a rough 2017, and 2018 is proving just as difficult. In early August, the Goose Island portfolio was down double digits across the previous three months....

I've said before, part of craft beer's appeal is that it comes from actual craft breweries. And big beer companies don't actually like craft beer—because they can't compete with them.

So, mazel tov to InBev, but I'm going to stick with Revolution, Dovetail, Begyle, and Empircal, all of which brew within a 10-block radius of my house.

You're not wrong, voice-command assistant UIs are horrible

The Nielsen-Norman Group has released recent research on user interactions with intelligent assistants like Alexa and Google Home. The results are not great:

Usability testing finds that both voice-only and screen-based intelligent assistants work well only for very limited, simple queries that have fairly simple, short answers. Users have difficulty with anything else.

Our user research found that current intelligent assistants fail on all 6 questions (5 technologies plus integration), resulting in an overall usability level that’s close to useless for even slightly complex interactions. For simple interactions, the devices do meet the bare minimum usability requirements. Even though it goes against the basic premise of human-centered design, users have to train themselves to understand when an intelligent assistant will be useful and when it’s better to avoid using it.

Our ideology has always been that computers should adapt to humans, not the other way around. The promise of AI is exactly one of high adaptability, but we didn’t see that that when observing actual use. In contrast, observing users struggle with the AI interfaces felt like a return to the dark ages of the 1970s: the need to memorize cryptic commands, oppressive modes, confusing content, inflexible interactions — basically an unpleasant user experience.

Are we being unreasonable? Isn’t it true that AI-based user interfaces have made huge progress in recent years? Yes, current AI products are better than many of the AI research systems of past decades. But the requirements for everyday use by average people are dramatically higher than the requirements for a graduate student demo. The demos we saw at academic conferences 20 years ago were impressive and held great promise for AI-based interactions. The current products are better, and yet don’t fulfill the promise.

We're not up to HAL or Her yet, in other words, but we're making progress.

The whole article is worth a read.

Too many things in my inbox

I probably won't have time to read all of these things over lunch:

Share that last one with your non-technical friends. It's pretty clever.

Three items, implicitly related

Item the first: Bruce Schneier discusses how Russian censors have tried to shut down Telegram, an encrypted communications app:

Russia has been trying to block Telegram since April, when a Moscow court banned it after the company refused to give Russian authorities access to user messages. Telegram, which is widely used in Russia, works on both iPhone and Android, and there are Windows and Mac desktop versions available. The app offers optional end-to-end encryption, meaning that all messages are encrypted on the sender's phone and decrypted on the receiver's phone; no part of the network can eavesdrop on the messages.

Since then, Telegram has been playing cat-and-mouse with the Russian telecom regulator Roskomnadzor by varying the IP address the app uses to communicate. Because Telegram isn't a fixed website, it doesn't need a fixed IP address. Telegram bought tens of thousands of IP addresses and has been quickly rotating through them, staying a step ahead of censors. Cleverly, this tactic is invisible to users. The app never sees the change, or the entire list of IP addresses, and the censor has no clear way to block them all.

A week after the court ban, Roskomnadzor countered with an unprecedented move of its own: blocking 19 million IP addresses, many on Amazon Web Services and Google Cloud. The collateral damage was widespread: The action inadvertently broke many other web services that use those platforms, and Roskomnadzor scaled back after it became clear that its action had affected services critical for Russian business. Even so, the censor is still blocking millions of IP addresses.

Whatever its current frustrations, Russia might well win in the long term. By demonstrating its willingness to suffer the temporary collateral damage of blocking major cloud providers, it prompted cloud providers to block another and more effective anti-censorship tactic, or at least accelerated the process. In April, Google and Amazon banned—and technically blocked—the practice of “domain fronting,” a trick anti-censorship tools use to get around Internet censors by pretending to be other kinds of traffic. Developers would use popular websites as a proxy, routing traffic to their own servers through another website—in this case Google.com—to fool censors into believing the traffic was intended for Google.com. The anonymous web-browsing tool Tor has used domain fronting since 2014. Signal, since 2016. Eliminating the capability is a boon to censors worldwide.

Meanwhile, back in the U.S., a Federal judge has cleared the path for AT&T to purchase Time Warner, which will create one of the largest companies the world has ever seen.

All of this is scary to a lot of people. Which is why charlatans are on the rise once again.

We live in interesting times.

Past performance is no guarantee of future results, craft beer edition

Ballast Point, a former craft brewery that sold out to Constellation Brands for $1 billion in 2015, hasn't given the buyers everything they had hoped for:

Ballast Point has plummeted back to earth after its meteoric rise, though, a sales decline that reflects early missteps after the merger and the slowing growth of craft beer in general, according to industry experts and Constellation executives. The San Diego-based brewer of Sculpin IPA faces numerous challenges in its quest to grow as national craft brand, but perhaps none more significant than this: There are almost 6,500 breweries in the U.S. today — at least 2,000 more than when Constellation bought Ballast Point.

“We have a great high-end Mexican portfolio and wanted to get into craft. We entered in a big way with Ballast Point. … This is really an example of where we’re headed right here in terms of executing our strategy,” said Marty Birkel, Ballast Point president, in an interview at the new Chicago brewpub.

Michigan-based Founders Brewing Co., best known for its lower-priced, lower-alcohol All Day IPA, was roughly the same size as Ballast Point in 2015, but could end up shipping twice as much beer to wholesalers this year. Founders CEO Mike Stevens called the Ballast Point decline a “perfect storm” of high price point — a six-pack of Sculpin regularly sold for $15 — and what he believes to be a fading trend in fruit-flavored IPAs.

“They were obviously just screaming to the top of the peak, riding that price point, riding their fruit IPAs. … Right when that (deal) went down, we kind of all knew that they were going to have to fix the price points because the consumers were going to lose interest,” Stevens said.

Given that "small" and "craft" are two of the things people who drink beers from small, craft breweries want, and that these things go away when a conglomerate buys them, none of this should surprise anyone. And yet, the culture at large companies almost compels this kind of behavior.

At least Constellation isn't trying to kill its acquisitions, as InBev and MillerCoors have been accused. And craft breweries continue to flourish, both here and abroad. So all is not lost...just Ballast Point.

Thanks for playing

Richard Florida demonstrates how Amazon's HQ2 competition was rigged:

A detailed analysis undertaken by Patrick Adler, my colleague at the University of Toronto’s Martin Prosperity Institute, and Adam Singer, a graduate student at the university’s Rotman and Munk schools, took a look at how all 238 HQ2 applicant cities and the 20 finalists lined up on Amazon’s RFP criteria. While it can be difficult to measure whether a given city adheres to each criterion, their analysis shows that many of the finalist cities do not even fit the most obvious ones. What’s more, several of the rejected cities seem to fit Amazon’s criteria for its HQ2 city better than some of the finalists.  

[I]t’s worth asking why these 20 cities were selected as finalists, even if others would appear to be better candidates according to Amazon’s own criteria. Our analysis suggests the finalists may have other things in common that are not listed on the company’s RFP.

For one, the finalists are more likely to be farther away from the company’s original home base in physical distance, reflecting the predominance of East Coast cities on the list. Last year, an Amazon executive was quoted as saying that Amazon would like to build HQ2 outside of the Pacific Northwest, to attract a more diverse set of employees.

Finalist cities are also likely to have a larger share of tech workers. And they are more likely to have non-stop flights to the company’s current home base in Seattle.

But one factor is even more interesting. Our analysis found that shortlisted cities had more U.S. senators with considerable seniority.

At the end of the day, none of this should surprise us. Like all corporate site selection, the HQ2 process is a rigged game, where the company knows the answer in advance and sets up a fictitious competition to wrest maximum incentives.

Besides the political advantages, there are many signs that Amazon’s HQ2 is heading to the greater Washington, D.C. region—the fact that its CEO has a multi-million dollar mansion there (currently undergoing a $12 million renovation, with large public rooms for social events) and already owns the Washington Post; the fact that three area jurisdictions made the shortlist; and the fact that the person running Amazon’s search previously ran an economic development agency in the region. Perhaps four other metros on the list are serious contenders—New York, Boston, Chicago, and Toronto—with Philadelphia, Denver, Atlanta, and Dallas having an outside chance.

Chicago, however, will be less likely to play the race-to-the-bottom game.

Eddie Lampert offers to garrote his own company

Longtime readers know how much I loathe Eddie Lampert for what he did to Sears and for how perfectly he demonstrates the dangers of slavishly following a philosophy that owes a lot to the thought processes of adolescent boys.

Well, my longtime predictions seem to be coming true. Lampert has offered to buy the best bits of Sears (i.e., its real estate and Kenmore brand), which would quickly kill the company. Crain's Joe Cahill outlines some of the offal in this awful person's proposal:

It's not clear, however, just what Lampert is willing to pay. The offer letter indicates the transaction should reflect an enterprise value of $500 million for the home improvement and parts businesses, but doesn't put a price on Kenmore or the real estate, beyond confirming Lampert would assume $1.2 billion in real estate debt. The letter further proposes that the asset sale take place in conjunction with offers by Sears to convert some of its debt into equity and buy back or exchange for equity another slug of outstanding debt. Lampert indicates a willingness to "consider participating in such exchange offer and tender offer," which might increase his equity interest in Sears.

The complex and somewhat vague proposal raises questions about Lampert's many hats at Sears—he's the controlling shareholder, CEO, a major creditor, and—if this transaction goes through—a buyer of key company assets. Let's focus on his role as CEO, where his job is to generate maximum returns on company assets, either through business operations or by selling them for the highest possible price. His offer letter implicitly confirms that he's been unable to do either with Kenmore. Yet he evidently believes he could squeeze strong returns out of the brand if he owned it separately from Sears. Otherwise, buying it would make no financial sense for Lampert and any fellow investors in the proposed asset purchase.

Understandably, this disconnect fuels a growing perception that Lampert is cherry-picking company assets ahead of a potential bankruptcy filing that likely would leave Sears shareholders with little or nothing. Already, a real estate investment trust formed by Lampert has acquired many of Sears' store locations with the intention of remarketing them to higher-paying tenants. "There's a very legitimate case to say he's screwed up the company and now he's trying to take the crown jewels," says Nell Minow, a corporate governance expert with Value Edge Advisors.

No kidding. Thanks, Eddie.

What happened to the brand?

Of 19 Trump-branded product lines available in 2015, only 2 remain on the market. One wonders why:

In recent weeks, only two said they are still selling Trump-branded goods. One is a Panamanian company selling Trump bed linens and home goods. The other is a Turkish companyselling Trump furniture.

Of the rest, some Trump partners quit in reaction to campaign-trail rhetoric on immigrants and Muslims. Others said their licensing agreements had expired. Others said nothing beyond confirming that they’d stopped working with Trump. Their last Trump goods are now being sold off, often at a discount: One cologne is marked down from $42 to $9.99 for an ounce.

“Success by Trump,” the website says. And below that: “Clearance.”

“A caricature of what wealth is — as opposed to what real wealth is,” said Milton Pedraza, chief executive of the Luxury Institute, a consultant to luxury brands. Trump sold to those, he said, “who didn’t know the difference,” he said.

However, Pedraza said, Trump began to undermine his own success by “label-slapping” — sticking his name on anything he could, even the farfetched and ridiculous. Emeril Lagasse sold pots. Greg Norman sold golf shirts. Trump sold. . . everything.

“There was no strategy,” Pedraza said.

Seems like a strategy that could work, depending on your audience. Good thing we Americans have strong antibodies against charlatans.

 

In other Chicago news...

Eddie Lampert's reign of terror against Sears continued today when the chain announced the closing of their very last store in Chicago:

Sears, founded in Chicago and facing mounting troubles, is closing its last store in the city.

Employees at the store at Six Corners in the Old Irving Park neighborhood were told of the closure Thursday morning, spokesman Howard Riefs said in an email. The store will close in mid-July after a liquidation sale set to begin April 27. The Sears Auto Center will close in mid-May.

The store was one of 265 properties sold to Seritage Growth Properties in a 2015 sale-leaseback deal.

“For more than 120 years, Sears has called Illinois home and that is not changing,” Riefs said. “Although we are disappointed by this last store closure in Chicago, by no means does this change our commitment to our customers and presence to Chicago’s residents.”

Of course it doesn't change their commitment to Chicago; they haven't had one since 2005.

Howard, Eddie: I'm thinking of a phrase that ends with "...and the horse you rode in on."