I wonder what many wonder, and that is whether Angela Merkel’s insistence with austerity is wise. I think that what Southern Europe needs is not to reduce the overall level of spending. Doing so it risks to make the economy shrink and budget deficits expand without end in sight. What we need to do instead is to keep the level of spending and investment but change its nature. We have to tweak with the economy, not kill the economy. Focus on what works, kill what slows us down.

I agree that in the South of Europe there was a lack of reform and a great deal of waste. In Greece, Italy, Spain, Portugal a lot of privileges were given to people who did not deserve them, growth was built on credit, and the economies collapsed as a result. There was and there is corruption in most of Southern Europe, more than in the North, and many white elephants were built, airports that are not used, high speed train lines that are not needed.

But a drastic stop to a lot of economic activity without reasonable alternatives to generate growth will only exacerbate the problem. This is happening in Spain right now. We are cutting spending, we are not focusing on intelligent credit creation and we are making many viable businesses suffer or die of credit starvation. We need to create emergency credit lines for all businesses who are hiring. We have to find the pockets of growth and support them. We can’t indiscriminately cut spending.We have to move workers from dying industries to growing industries, we have to reeducate the population for the globalized economy of this century.  The challenges of evolving from an industrialized economy to a service economy are not new, but now we have to deal with the challenges of evolving from the service economy to the digital economy.  None of these problems are financial or monetary, they are real and require real intervention.  Fiscal tightening is akin to chemotherapy, we can’t kill all cells because some are bad. We have to have a smart bullet approach to economic intervention.  Which if you think about it this is what Germany did to itself.  Because Germany is making the same mistake as the large shareholders of the IMF did.  They applied for themselves much more elaborate and detailed growth policies that worked and ask Latin America to implement simplistic, “chemo” type policies.  The results were disastrous.

Germany is doing to Southern Europe what the IMF did to Latin America for decades and this is dangerous for Germany and Southern Europe. In Latin America by preaching austerity at all cost the IMF created failed policies and a decade of stagnation. Moreover as its failure became apparent the IMF ended up being mostly hated by Latin Americans and around the world. Germany could end up in the same spot. This would be sad because in the end we all know that Germany means well, it is just applying the wrong economic model as the IMF did.  The USA, closely associated with the IMF lost most of Latin America sympathy in the last 15 years. It is sad to see how many Latin Americans now think that China is a better country and economic model than USA and have emulated China with regimes such as that of Venezuela, Nicaragua, Ecuador and Bolivia. Same could happen to Germany and the German model if it insists in implementing wrong policies. The European Union could fall apart and Southern Europe could end up experimenting with populist political regimes that only make the whole situation for Europe much worse.

There’s an active debate on this post in Google+ you may want to comment here.

One of the reasons Latin America is doing better this decade is because a lot of its elite has been educated at the best universities in the world, mostly in the US. One example is Marcos Galperin who built Mercado Libre into a multibillion dollar market cap Nasdaq giant, something that I think would have been hard for him to do without a US education. And there are many, many others. For decades now the Latin American elites were educated in the US and now they are finally in charge of the most productive sectors of the local economies.

Maybe Spain should do the same. The Spanish education system kills the imagination of the best and brightest students. I know this because we have had to re educate many of these students at the companies I started in this country including Jazztel, Ya.com and Fon. We have companies that are also universities in a sense, whose graduates go and build other companies that are more in tune with the digital era.  There are some exceptions, especially in business studies with IE and IESE ranking very well globally but the average education available to Spaniards is very mediocre with no Spanish Universities in global rankings.

Now it so happens that it is not that expensive to send Spanish students to study abroad. Some Spanish corporations already give grants for this. Indeed just today I signed a recommendation letter for a Fon employee to study at Stanford partly financed by Caja Madrid and I hope they take him. But this could happen at a much more massive scale if the focus was Northern Europe. Studying in the UK with a pound at 1.19 is not as expensive as it used to be. Tuition is low for the quality of education they give. Indeed you can get a whole education in the UK for the cost of a year of studying in the US. Sending thousands of Spanish students to study in the UK, in the Netherlands, Germany and other Northern European countries who are doing better than Spain, could be a way to leapfrog many of the antiquated and dated Spanish professor body who with some notable exception is destroying a generation of Spaniards.  It is also a good investment since education runs a big deficit and an 18 year old who studies abroad gains this education.  Yes, there is a risk that they may stay but if they do it is not brain drain which is what happens when a country invests in a university education, as India many times does, for the graduates to end up in the US or other nations.

We live in an era in which industrialization is being superseded by digitalization, and Spain is not ready to educate its population for this change. The result is the highest unemployment rate in the OECD: 22%. A structural unemployment that is based on a misfit between the skills of the population and the jobs available in the marketplace. There is no unemployment in the tech sector in Spain, but there are not enough highly educated candidates for those jobs. We have to fix that and fix it before this country falls apart. Sending our best and brightest abroad could be part of the solution. We can’t wait for the education system to be fixed. Not with the lifetime jobs that we have provided to the mostly incompetent and untrained professors who populate it. And this is not true of Spain alone but of a lot of Southern Europe.

Belgacom (powered by Fon) has created an awesome campaign to advertise its fonspots. A dog called Fifi whose innate talent is to smell wifi hotspots.  In the middle of 2011, we announced the agreement between Fon and Belgacom and two months ago we reached 100.000 hotspots. Nowadays, we have 300.000,.

Here you can see the video. The story would be as follows: Jean has a dog called Fifi that barks when she finds a wifi hotspot, because of Fon and its agreement with Belgacom, this virtue has turned out to be his worst nightmare as she never stops barking.

In addition, Belgacom also created a game which consists of finding Fifi in one of the 300.000 hotspots Fon has in Belgium through Google Streetview.

Yoko Ono was at DLD Conference in Munich last Sunday and I made room on my agenda to see her. I had heard about Yoko all of my life. Well as it happens it would have been better that I had not gone to see her as I now have a really negative impression of her. I will summarize it in three comments she made:

The first one was that babies born through C-section suffer trauma because they were never hugged and said goodbye to their mother.

Another one was that babies conceived via IVF can never get to love their father and mother. No comment was made about the ones that are both conceived via IVF and born via C section but you can only guess how sorry she feels for them.

So by then she had hurt without reason maybe around 20% of all babies in the planet but that was not enough. She went on to insulting the rest of the planet by saying that we don’t need to wait for nuclear war so only the cockroaches survive because us, humans are the cockroaches. And she went on to explain her point.

In the end she changed her tone and said a lot of positive things about humanity, she even said, “all you need is love“. But I guess if you are an IVF conceived baby love is not enough, as you will not love your parents.

I used to think Israel was different from its neighbors, but lately less and less so. My religion is better than yours is no formula for peace in the region. As a secular Jew I would feel so uncomfortable if I lived in Israel with a government who makes comments like this.

Eli Yishai via Wikipedia

Eli Yishai via Wikipedia

It is also understandable how Europe, which is mostly secular, feels alienated from Israel now and USA which is mostly religious, identifies with the country. Israelis like to say that Europe is just anti semitic but while some of that is true, especially Spain (google “es dificil ser judío en España”) what is also true is that in Europe no politician speaks about God in general and least of all as if God liked Jews and not Muslims. Personally I think there is a very low probability that God exists but even if it did there is a proportionate lower probability that it belonged to any religion. I think that God in itself is an extremely unlikely entity but it did exist what would be the link between God and one particular religion? To me God inside a religion is a flag that some carry to do good but most carry as a symbol of their own tribe against others. In many cases God inside a religion is used to justify murder and that makes religion alien to me.

Long are the days of Israel being led by agnostics or atheists like Golda Meir who when asked if she believed in God she said. I believe in the Jewish people and the Jewish people believe in God. Now Israel is being led by people who think God is on their side. Pretty dangerous.

This moved me. It is a make believe restaurant in Vigo in which unemployed parents in Spain take their children to “eat out”. They take turns as volunteers. It is really a charity that makes children believe that their parents can afford to take them out to a restaurant. I felt so bad for those parents.

If you don’t live in Spain and you come here and go around you would be surprised. Spain is actually a wealthy country in global terms and it doesn’t look poor when you travel around here. But since the construction industry collapsed unemployment grew from 8% to 21%. Basically all of those who worked in that industry are having a very hard time finding a new role in the economy for themselves. The collapse of real estate had a tremendously negative multiplier effect. It is a huge part of the population that is in such bad shape and it will probably take a decade for unemployment to go down to where it was in 2008. In the meantime initiatives like this help alleviate the pain of those who have fallen into poverty.

When Spanair flight 5022 had its fatal accident in which most passengers died I said in my blog that most likely the accident was caused by  the pilots who made the tragic error of forgetting to take off with flaps.  I mentioned that I was a pilot myself and could see how the pilots paid for these horrible mistake with their lives and that of most passengers.  As you can see then some people criticized me with comments like this which argue that I had no business commenting on this tragedy before the official investigation.

Apreciado Martin,
me defraudas con este post. Con opiniones como la tuya nos evitariamos investigaciones de accidentes tan tediosas y ..sin importancia.
Te crei con algo de “sentido comun”, pero ya sabes lo que dicen, que “el sentido”por ser “comun”, nos toca a muy poco a cada uno.
Un poco de rigor y respeto; y no subir el trafico de tu blog a costa de desgracias de este tipo.

But after a long investigation I was right.  The pilots took off without flaps which is an incredible mistake to make, but humans are humans and we make mistakes. Planes should simply not take off without flaps and many don’t. I don’t blame the pilots fully in my post because I think engineering should have prevented this.

Well the same is true with cruise ships.  Engineering should have and could have averted this tragedy by not allowing ships to come close to coast lines without warnings.  Ships should also have ways to turn themselves when they are in collision course with land.

Before the investigation this is what I think happened (and of course I may be wrong).  I believe that the captain of Costa Concordia steered into the Island of Giglio.  You can see this from Marine Traffic.  I think the captain lies when he says he hit an uncharted rock while he was at a safe distance from the coast.  Instead he collided with the coastline either because he was just not at the helm or else because he was at the helm and wanted to show off his steering skills by going very close to the island of Giglio, but he then came too close and ran aground.  You can see the coastline in detail if you download a software called Navionics Mediterranean in your iPhone, Android or iPad. I have it because I sail and I am the skipper of my own sailboat.  That Island is not like the nearby coast between Corsica and Sardinia near the Island of Cavallo which is full of rocks and you can very well have an uncharted rock and collide against it as the skipper says.  The Giglio coast line instead goes down very quickly, to 100 meters or more.  The island of Giglio is like the top of a hill or mountain and most likely Francesco Schettino the skipper just drove into it either because he was “asleep at the wheel” or because he was trying on purpose to sail so close to the coast that he hit it in this tragic incident.

Added later:  I read this article about Showboating and it corroborates that the theory that the captain steered the ship into the coastline.

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This is the year in which Europe will either fall apart or emerged stronger. I give it 75% that it emerges as a stronger union but the risk of collapse is still there. Germany has the key to solve the problem because of the size of its economy, its saving rate and its export volume. Germany has to decide on whether it continues to transfer some of its wealth in order to create markets for its exports or it let’s Europe fall apart and ends up with an overvalued currency and deteriorated markets. Already today it started paying negative interest rates which is a prelude in my view to a huge rise in the DM should it be born again. Tough choice. I think Germany can actually both save Europe and make money by buying underpriced Italian and Spanish bonds and selling them after stabilization. It can do what the FED did with many financial institutions, make a profit by providing much needed liquidity at a critical time.

We are 12 family members at our vacation home in Jose Ignacio, Uruguay, many teenagers. We have WiFi, computers, tablets, smartphone, Kindles, books but no TV. And nobody gives a f….

During this vacation, nobody mentioned that we should buy a TV or that they missed watching TV. And since I don’t watch TV either I did not get one. But a couple of days ago, a broker said we should have a TV for a tenant who comes in February. “A tenant could not rent a house without a TV” he said. So I ordered one online and connected it to DirectTV thinking that somebody in my family may want to watch it. Still nobody gives a f…. about watching TV. The TV is there, turned off, everyone is online in some form or other, or reading, or just interacting with each other, but no TV. People go to the beach, cycling, walking, dancing at night, all sorts of things other than watching TV.

Now I don’t know if there is a global trend towards watching less TV. There are also no newspapers in this house and news are read online, so maybe traditional TV is really going the way of newspapers. But data show that in some families TVs are on 4 hours a day. So here’s a theory of what may be going on in my family.

Communal TV is in a way like telephone calls, which are also disappearing in our family. Telephones have this thing to them that is rude, that they ring and annoy everyone, that one person speaks and everyone has to listen to half of what they say, and they are then disconnected from others while they speak but they are still there. Telephone solved a lot of needs when that is all there was to communicate. But now telephones are smart, different and people rarely talk on them. All types of messengers are taking over, Facebook, email, chats of various kinds. They are more private, you answer when you want to.

TV also has this aspect to it that it’s hard to get everyone to agree to watch the same thing at the same time. It’s great for those who enjoy it, annoying for the rest. We can watch TV content of course, and we do, especially series such as In Treatment, Mad Men, Parks and Recreation, Boardwalk Empire, Big Love, Dowton Abbey, The Pacific and many others. But we don’t use a traditional TV for that anymore. We have tablets, Netflix, etc. So no Big TV always on for the Varsavskys, just tablets, PCs, smartphones, kindles and still a few paper books lying around.

Recently, there has been speculation regarding the security of Fon passwords. Here at Fon, we take security very seriously and we keep all of our customers’ information securely stored at all times.
Firstly, Fon does not hold the password of all of the users in the database. In fact, many of our users who are part of the Fon community through one of our telco partners, have their passwords stored by our partners (their ISP or mobile operator). When this is the case, Fon has no access to the passwords at all, as they are not stored in Fon’s database.
Additionally, the passwords that Fon does manage are divided into numerous systems and platforms that do not share the same database or structure.
Rest assured that Fon does manage its passwords in a secure way. In keeping with industry best practice, we are aware that storing hashes or digests of passwords is considered better than encrypting them. Therefore, Fon has identified this possible improvement some time ago, and has already applied this change to some of its user types. Other users are being migrated gradually. This is by no means a security issue, as regardless of how the information is kept, it is kept safe.
If you have any questions or concerns regarding your password safety, please feel free to contact our customer care team for further information about Fon’s password safety. To further increase your internet safety, we recommend that you always have a different password for each website or online service that you subscribe to.
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