What Trump is doing as a conservative pro business candidate:

Rehash Obamacare without tackling the reasons why health care is so expensive which mainly are outrageous costs and margins for insurance companies, outrageous costs of drugs in the USA, artificially low amount of physicians, inappropriate meddling of liability lawyers into health care.

Attacking China our largest trade partner and biggest buyer of our debt that we need to run the huge deficits we have.

Attacking our third largest buyer of goods Mexico with an irrelevant an expensive project, the absurd wall.

Attacking the government forces that we so need to protect us from criminal activity and terrorism in the USA and abroad, the FBI and CIA.

Degrading our independent judiciary.

Insulting the press we need to keep those in power honest on a daily basis.

Increasing military costs at a time when the biggest threat we face is terrorism that is not solved by the military when the USA already spends more on the military than the next 7 powers combined.

Decreasing the funding of the agency that protects our environment.

Decreasing the funding of the State Department whose diplomacy is needed, in short showing the world that we want to spend more on guns and less on conversations.

Labelling a religion that accounts for one fifth of humanity (there are 330 million Americans and 1.6 billion Muslims) terrorists and banning many of its members from coming to the USA or making it harder for the rest. How is our economy made of 5% of the world´s population going to improve antagonizing 23% of the world´s population?

What Trump could be doing as a conservative pro business candidate:

Promote tax changes that create jobs:

Eliminate capital gains tax for anyone who uses the gains from a sale of real estate or financial assets to invest in private qualifying businesses that create jobs.

Health care changes that require going against the Pharma lobby:

Allow government to negotiate prices from pharma companies similar to those negotiated by European and Asian governments, allow importation of all medication already approved in the USA and manufactured by the same companies operating in the USA who tend to sell the same meds for half in other countries.

Go against certain environmental regulations but for a good reason:

Work with states to reduce environmental regulations for the construction of housing to alleviate the real estate tax that most Americans are paying.

Promote the construction of nuclear plants using newer and safer technologies, the best energy combinations to create a climate change free energy consumption is wind plus solar plus nuclear.

Fight the lawyer´s lobby

Cap lawsuit awards in all areas, litigation, health care.

Fight the medical lobby

Make it easier to become a doctor so in the USA we get to have as many doctors per capita as other developed nations.

Build rational infrastructure:

One example of rational infrastucture would be to build a national energy grid, this would go a long way promoting the development of wind and solar energy.

Legalize all illegal workers in the USA:

There are now 11 million illegal workers in the USA. Declare an amnesty and make those tax paying US residents. At the same time start include pictures into social security cards and turn them into a national id system like other nations have and make it much harder for employers to hire illegal workers. Increase fines for doing so. In short legalize those who are here and make it harder for others to come in not just at the border but as Europe effectively does, at the moment they try to get employed.

Fight crime via cash:

Most criminal activies require cash. A move to 100% electronic money would make the strongest hit on crime and tax evasion imaginable.

Make an alliance with China not Russia

China has a highly complementary economy to that of the USA and is 10x bigger than that of Russia. China and USA share in benefitting from a global free trade agenda.

Give basic health care to everyone, paid health care to those who can afford it

Just like we have a public school system for everyone and private schools for those who can afford it do not promise everyone to get the best level of health care and fail. Come up with a basic level of health care for everyone that will cover the vast majority of treatments but not all and then allow those who can afford it to buy better care. Also make it easier for people to chose to end their lives with dignity as most health care costs consists of end of life treatments many of which would not be chosen by patients or if incapacitated by their families. Promising every American complete choice in health care is something that USA just can’t afford but living some without health care is just criminal.

Note, this post is work in progress, I will be modifying it as I do more research. I do not point out each edit, I just improve the article.

As Columbus Day approaches in the USA and el dia de la Raza o Hispanidad in Spain and Latin America, here are some thoughts on the extermination of Native American cultures.

columbus dayAmericans, both South Americans and North Americans mostly blame Europeans for the genocide of the different cultures that inhabited the continent.  They blame Spain for example for the killing of Aztecs, Incas and the wiping out of their culture. And that is partly right. The colonization of America was an enterprise managed by Spanish emigrants (conquistadores) who moved to what is now Mexico, Peru, Ecuador, Venezuela, Central America, to exploit natives, enrich themselves and send precious metals back to Spain.  But the paradox in the accusation of Americans to Europeans nowadays, is that the descendants of those who exterminated native populations are now those who actually live in America not those who live in Europe. Those who are in Spain or the UK now, are actually the descendants of those who stayed in Europe and therefore did not directly commit those horrible crimes. In other words the descendants of the murderers namely those who are today Venezuelans, US citizens or Argentines, are accusing the descendants of those who were not actually part of the genocide because they stayed home, of genocide. To give an example, Daniel Ortega, of Nicaragua, has changed the name of the Columbus Day festivity from “Dia de la Hispanidad” which means day of hispanic heritage day to “Dia de la Resistencia Indígena” or day of the resistance of native Americans. But Daniel Ortega is a descendant of a Spanish family, not of Indians, thus a descendant of conquerors. His family, his ancestors share the blame.  The extermination of Native Americans is nothing to be celebrated, and it is true that Hispanidad is not a fair term as it does not include native cultures. But as far as responsibility for exploitation and extermination of native cultures is concerned, it belongs more to those who are now in America than those who are now in Europe. They are the victors of that conquest.   Moreover, a lot of the extermination of natives went on in countries beyond independence from European powers. The last armed conflicts with native Americans ended as recently as 1924 and was carried out by the US government. The territory that is now the USA, and in the 1500’s was only inhabited by native Americans, now has a native American population at less than 1% of its total population. This is ethnic cleansing on a scale that has probably never occurred anywhere else. And if you think this article refers to conflicts that are long over, think again.  Here’s an article that describe a possible armed conflict between the Brazilian government and native Americans that is going on right now.


(Photo credit:  Laurel Creativa)

The USA is a great nation for entrepreneurship and innovation, it has the best science in the world, the most creativity in the arts, it is the number one economy in the world, it has an energy unrivaled by other nations and we have chosen to move to this great nation with our family.  So everything that follows must be seen as friendly criticism from a person who loves this country.

Now most of my friends in the USA agree on what is great about this nation. But when I speak to some American friends they seem to be unaware of the shortcomings of the USA compared to others, and this is what I would like to focus on. Here are some quick examples.

The USA ranks 38th in life expectancy which is shocking considering that it has the best medical science in the world.  And this generation is the first one that will live less than the previous generation. The average American is expected to live two years less than, say, the average Spaniard. This is partly because the USA has a medical system that leaves 50 million people uninsured and many others under-insured or worried about losing their insurance (my wife Nina, for example, can’t get medical insurance to have our next baby because pregnancy is considered a pre-existing condition and we moved to USA when she was already pregnant).  It is also partly because the USA is the nation with the highest percentage of its population obese, over 30%.  The WHO studied overall level of health and concluded that Americans rank 72 in the world. Family structure is also weak as the USA has the highest divorce rates in the world. Moreover inequality is on the rise: as this Wikipedia article argues, the top earning 1 percent of households gained about 275% over a period between 1979 and 2007, compared to a gain of just under 40% for the 60 percent in the middle of America’s income distribution.

The USA has a legal system that is extremely expensive and unreliable and tends to favor those with resources to pay for it. The USA spends almost half of what the whole world spends in the military and since WWII (in which the USA did an amazing job), other military interventions have been of dubious value for such a huge investment, especially Iraq and Afghanistan. The USA leads all developed countries in executions by death penalty, it has a love for guns that makes its murder rate unusually high for a developed nation, it has the highest incarceration rates of the developed world mostly focused on one ethnic group, African Americans. The USA has more people in jail or parole than Madrid has people.   And while the USA has most of the best ranked universities in the world, according to PISA scores the USA ranks very poorly compared to other developed nations. The USA is also the largest polluter in the world together with China but a leader on a per capita basis. The American lifestyle is great but not scalable to the world as a whole.  Replicating this lifestyle on a global basis will lead to extreme competition over resources and high environmental damage.

Yes, the USA is great nation. I am happy to be here teaching at Columbia– this country probably has the most educated elite in the entire world. It has incredible business creativity and it is home to the Apples and Googles of this world and in this sense, they are an example for the whole world to follow. It also has individuals who are among the most driven in the world and who want to succeed and do as much as they can.  But it has a number of very important issues to address, many of which were not part of the 2012 presidential debates (climate change for example) and which seem to rarely be part of the conversation with many of my American friends.

This article was also published in LinkedIn. You can follow Martin by clicking below:

As the USA edges closer to the “fiscal cliff”, an automatic mechanism that eliminates Bush tax cuts and mandates across-the-board spending cuts under the Budget Control Act of 2011, a lot has been said on taxing the rich as a possible solution to the $1 trillion US budget deficit. But taxing the rich, this article will argue, is at most 15% of the solution. The rest has to either come with higher taxes for all, or lower expenditures in all key government spending categories.  Let’s start with the current situation of the rich in the USA today.

A rich person in the San Francisco or New York City, say with an income of a million dollars a year and capital gains of another million, pays around 52% income tax and around 27% capital gain tax.  On top of that, a rich person pays taxes every time he/she consumes: sales taxes, taxes on certain luxury goods. And then there are other special taxes on real estate transactions over certain amounts such as the ones in NYC.

It is hard to argue that rich people in America don’t pay enough taxes in terms of proportion of their income, even though there are some circumstances under which they pay less taxes. For example, there are some rich people who pay less taxes because they buy tax exempt securities, but tax exempt bonds were created by governments to pay less interest on them– the government pays less interest but in exchange collects no taxes. It’s a wash, not a gift to rich people. A person who derives most of his/her income from this will be seen as paying no taxes but this is not really so.

Then there are others in the private equity and hedge fund industry that have special treatment of their income as capital gains and a LOT has been said about this because of Romney’s position at Bain Capital. But if this is indeed a loophole and it were closed, it would raise around $2 billion a year– hardly a dent on the $1 trillion dollar 7% of GDP yearly deficit that the USA has.

And then some rich people in America, many in the technology sector for example, reinvest everything they make in their companies, go for capital appreciation, grow their businesses, don’t pay dividends and therefore pay no taxes on income nor on capital gains (because they don’t sell their shares). But society has concluded that reinvesting in jobs and growth is good, and that charging taxes on assets you don’t sell (like Spain does, for example) is counterproductive. And of course these tens of thousands of new employees pay all sorts of taxes and the USA needs a lot of those to close the deficit gap.

So the more we look into this the more we see that the US budget deficit can’t be solved by taxing rich people.  Even President Obama’s plan shows that taxing the rich will only go 20% of the way to solving the budget gap.  How will the current budget deficit will be solved?

A tool that was developed by the New York Times, the budget puzzle tool, provides a series of spending cuts and tax increase options that will help you understand the problem. Here are the steps I took to eliminate the deficit (and I encourage you to do the same exercise to understand how complex the problem is and how there is no magic bullet solution for it):

  • I eliminated earmarks and farm subsidies. I opted to reduce various military spending and programs. I enacted medical malpractice reform and increased the Medicare eligibility and Social Security retirement age to 68. I reduced Social Security benefits for those with high incomes. In all, these spending cuts generated $570 billion in savings by 2030.
  • I returned the estate tax and capital gains tax rates to their level under President Clinton and yes, these are more taxes for the rich as part of the solution. I eliminated tax breaks for companies and individuals while marginally cutting corporate and individual taxes rates for all brackets. I imposed a value added tax on consumption and taxed carbon emissions. Overall, these tax increases and revisions resulted in over $800 billion in savings by 2030.

And what percentage of this $1.4 trillion in combined savings qualifies as taxing the rich? With the return of Clinton-era taxes, which would enact a 20% tax on capital gains for middle and high-income earners, as well as an estate tax of 55% on estates worth above $3 million, savings amount to $150 billion by 2030, or less than 11% of the total solution.

In other words, as we head for the fiscal cliff, relying on to the rich is only part of the solution. The real solution involves many other moving parts.  Now to end on an optimistic note, the Obama administration has already reduced the deficit from a high of $1.4 trillion to $1 trillion but much more is needed.  Hopefully there will be economic growth accompanying this and the deficit reduction effort will be a bit less painful.

(Photo: mith_y, Flickr)

This article was also published in LinkedIn. You can follow Martin by clicking below:

I just spent a week in NYC. What the city did vis a vis crime reduction between the 80s and 90s it did vis a vis start ups between the 00s and the 10s. It’s a whole new tech scene here. And it’s very new.

I remember when I invested in the first round of Tumblr with John Borthwick the tech scene in NYC was minimal. And that was as recently as 2007. On this trip I visited General Assembly and it was buzzing, and they are not the only nurturing grounds for entrepreneurship, there are many as well as many start ups who are making it big.  Also what has happened in the last decade is that now Brooklyn is not a lesser cousin but an integral part of NYC as well and there are a lot of start ups and tech people who live there.  It is interesting to see how Brooklyn has made it and NJ has not considering that they are both a river crossing away, but Brooklyn has a history and beauty that is tough to compete with.

Here’s a short and random list of reasons why I believe NYC is making it:

-when you leave work you have a lot to do.

-NYC is more environmental than the life in your car Silicon Valley. The ecofootprint of a New Yorker in his high rise apartment is lower than that one of a SV techie in his house in Palo Alto.

-NYC is way more than tech.

-NYC is half way between SV and Europe and SV is in theory closer to Asia but flying times are the same.

-Bloomberg, who had his own financial internet before the internet really gets it and is promoting NYC as a tech town every week, indeed this week he was at Tumblr promoting his tech friendly policies.

NYC is now a true rival to Silicon Valley and that is great news. Chicago is also happening I hear, thanks to GroupOn, not my favorite start up but still a force. And then there is London with Spotify, Badoo and many others.  Overall I think that what happened to USA in the last few decades is happening to Silicon Valley now.  SV is still number one but in relative terms shrinking in relevance. NYC, London, Berlin, TelAviv, Tokyo, Shanghai/Beijing/Taipei, Bangalore, all valid alternative places for tech start ups.

I lived in NYC for 18 years, between 1977 and 1995.  Now when I visit I realize that I owe a lot to that city, my education, my first successful ventures.  Would I move Fon to NYC? Well we decided to open our US office there and not in SV.  But for us, the engineering talent we find in Spain would be hard to replicate in NYC.  Spain as troubled as it is, is a great place in which to have your start up.  With 47% youth unemployment and many talented young people if you have a great project you can get the engineers you need for it. It is true that Spanish work ethics are not as good as the American work ethic, but people are realizing that either they truly work or the country will sink.  And the attitude is better now than a few years ago.  So while I won’t move back to NYC for now I will go more frequently.  There are too many admirable people there!

Correction, after writing this post Daniel Ek contacted me to say that NY has become so attractive for Spotify that now they have more employees in NYC than London. I also forgot to mention that large companies like Google and now Facebook have very sizable offices in NYC.


Hell is coming to The Hamptons http://passageweather.com/ I am sailing in the Med these days and use Passage Weather as a sailing web site. Go into this site and track the hurricane, it’s scary! We have a farm in the Hamptons, Luna Farm in Sagaponack. It is a historical farm. I hope it survives. And I hope some miracle makes the hurricane go away from the coast in the next 48 hours.

USA is an amazing country. But it would be way more awesome if:

-it did not spend half of what the whole world together spends in the military.

-it did not have lawyers who leech on business with a “tort tax” adding unnecessary costs to the economy in medicine, patents and tons of other fields.

-it did not spend twice as much as Europe in health care per person leaving many in precarious conditions and ending up with the average American living 3 years less than the average European.

-it regulated guns.

-it educated more and incarcerated less.

-it reduced the environmental footprint and calorie intake per person.

-Americans learn to live within their means (not from the savings of foreigners).

Last week I tweeted that I knew the current President of Spain, Zapatero and I knew the head of the opposition Rajoy and that I thought they were both unable to lead Spain away from moral, business and financial default. That they are mediocre thinkers who speak no English and are not really aware of what works and doesn’t work outside of Spain. In my view anyone who gets news about the world economy in Spanish is getting poor coverage, news in translation are biased, especially in Spain where there is a very bad understanding of the English speaking world. While most people are unaware here, antiAmericanism in Spain is rampant.
A good example is that in Spain everyone talks about the 20% of the people who don’t have medical insurance in USA in horror (and it is horrible) but not about the over 50% of Spaniards who are prisoners of their mortgages since in Spain, as opposed to USA, mortgages have unlimited liability and if you have negative equity you are a slave of the bank for the rest of your life. In socialist Spain you cannot return your home to the bank and walk away free as in capitalist USA. Moreover in USA 20% of people don’t have medical insurance but here over 20% of the whole population and 30% of those under 30 don’t have a job. And the others who do, earn salaries that are pitiful compared to the cost of living (mileurismo). The amount of years people have to work to buy a home here is much greater than that in USA or Germany.

So in my opinion a candidate that really understands the US economy and Northern European economies and who even understands Asian economies and can make deals with top CEOs of foreign companies to invest in Spain is crucial for our future. We also need a president who understands wealth creation, who understands the Silicon Valley quality job machine and how some parts of Spain have actually similar economies. We need a president who understands that social justice can only come after significant wealth creation.

So I am pleased to share that we now have a meeting scheduled with Rubalcaba. It will take place on August 17th at 17 hours. Easy to remember 🙂

Now the key question for Rubalcaba will be how can he be so different to the President he served for: Zapatero. He was in the same government and in charge of the same policies that saw unemployment shoot up from 8% to 20%. Rubalcaba as a candidate is as if Obama resigned because of a huge economic and financial crisis and Biden campaigned against a Republican having been the VP of the government that bankrupted USA. Still I think that before I speak about Rubalcaba I meet with him and then report about the meeting. And that’s what I will do. Maybe Rubalcaba did not have room for action, maybe he does have different ideas. In general I dislike to speak about people I don’t know. So let’s see what he thinks.

Lastly I would like to say that as opposed to my native Argentina, where ruling families like the Menems or the Kirchners, or governors like Scioli make hundreds of millions of dollars in a shameful cleptocracy this is not the case in Spain. It is not that in Spain Zapatero has been a corrupt president. Compared to say Berlusconi, Zapatero is a model of ethics and morals. The problem of Spain is not as many here think, corruption which is very small by the standards of other Latin nations. The problem is lack of imagination, creativity and overall awareness that Spain is part of a globalized economy and can only be saved by learning what works and doesn’t work in globalized economies. With a GDP of $1.5 trillion Spain still matters. And I sincerely hope my adopted nation gets out of the economic crisis it is in to thrive once more in the global economy.

I don’t understand why the Obama administration had to say that Osama Bin Laden was unarmed when he was killed, that he was not threatening the life of the soldiers who were in the compound. Why feed the terrorists with stories that they can use for recruitment purposes? Why not just say that he died in the operation without giving more details than that?

Terrorism is an industry and its main input is angry young men. USA has to realize that certain moves, like Abu Gharb publicized pictures, Guantanamo tortures, air bombings in Fallujah, killing of thousands of innocent civilians in the search terrorists in Afghanistan, and now saying that Osama Bin Laden was unarmed, all these are the stories that feed the terrorists at their key moment, recruitment.

If the purpose is to disengage with terrorism USA should not make it easier for terrorist recruiters to get new people who hate USA.  Al Qaeda’s life used to be much harder when all they had to say was “The infidels are in the holy land so let’s go and murder thousands of them when they go to work”.  Let’s fight them without giving them arguments to multiply and grow.  USA should study the many terrorist movements in Latin America and Europe that ended up completely extinguished.  It was not revenge that did it.  It was careful management of public opinion combined with effective police and judicial efforts.  While my preference would have been to put Osama Bin Laden on trial I can also agree with those who said that capturing him would have made terrorists do all sorts of hijackings and threats to public safety.  But if that is what drove the administration to decide to kill him, then why decrease public safety by confessing that he was murdered and making terrorists even more angry?.

This has been a very good week for Fon. I’m very excited to announce that my lawyer Douglas from Ostrolenk Faber sent me an e-mail telling me that an important patent we filed in 2006, issued on Tuesday.
Simplifying all the legal details, the patent basically boils down to this: it protects the core business model of Fon in the US.

As most of you already know, with Fon “you share WiFi at home and you roam the world for free connecting to like-minded people”. For those of you unfamiliar with our business model, here’s how it works: one user, the Fonero, connects a Fonera WiFi router to his DSL/Cable/Fiber internet source or modem. Thereby he creates a Fon hotspot. If a Fonero wants to connect to another Fonero’s hotspot, he can do so for free in any of our 3.7 million hotspots of the largest and fastest growing WiFi network in the world. If a non-Fonero (at Fon we call this person an “Alien”) is in range of the Fonero’s hotspot and wants to connect to the internet with any WiFi device, he can do so for a moderate access fee.

The good thing about our technology is that it is not tied to the Foneras. Our software can transform almost any standard WiFi router into a Fonera! This makes it easy for most ISPs (like BT) to convert their routers into Foneras and make the Fon community even larger.

What’s special about this patent is that it relies on the community aspect of Fon. It specifically requires at least two users to share their bandwidth through two separate WiFi routers, which seems pretty obvious but is important when it comes down to the legal aspect. This is also what sets Fon apart from other WiFi networks that work without Foneros and offer only paid access to the internet.

In summary, this patent is very good news for us and will give our future business partners in the US even more reasons/confidence to work with us, accelerating our growth. It is also good news for people in the US since the availability of WiFi hotspots will increase dramatically during the next few years. And, of course, this patent means good news for all existing Foneros, who will soon be able to roam more and more parts of the US for free!

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