Exclusive: How Google’s Algorithm Rules the Web

Web search is a multipart process. First, Google crawls the Web to collect the contents of every accessible site. This data is broken down into an index (organized by word, just like the index of a textbook), a way of finding any page based on its content. Every time a user types a query, the index is combed for relevant pages, returning a list that commonly numbers in the hundreds of thousands, or millions. The trickiest part, though, is the ranking process — determining which of those pages belong at the top of the list.

That’s where the contextual signals come in. All search engines incorporate them, but none has added as many or made use of them as skillfully as Google has. PageRank itself is a signal, an attribute of a Web page (in this case, its importance relative to the rest of the Web) that can be used to help determine relevance. Some of the signals now seem obvious.

Early on, Google’s algorithm gave special consideration to the title on a Web page — clearly an important signal for determining relevance. Another key technique exploited anchor text, the words that make up the actual hyperlink connecting one page to another. As a result, “when you did a search, the right page would come up, even if the page didn’t include the actual words you were searching for,” says Scott Hassan, an early Google architect who worked with Page and Brin at Stanford. “That was pretty cool.”

Later signals included attributes like freshness (for certain queries, pages created more recently may be more valuable than older ones) and location (Google knows the rough geographic coordinates of searchers and favors local results). The search engine currently uses more than 200 signals to help rank its results.

…

And Google keeps improving. Recently, search engineer Maureen Heymans discovered a problem with “Cindy Louise Greenslade.” The algorithm figured out that it should look for a person — in this case a psychologist in Garden Grove, California — but it failed to place Greenslade’s homepage in the top 10 results. Heymans found that, in essence, Google had downgraded the relevance of her homepage because Greenslade used only her middle initial, not her full middle name as in the query. “We needed to be smarter than that,” Heymans says. So she added a signal that looks for middle initials. Now Greenslade’s homepage is the fifth result.

…

This flexibility — the ability to add signals, tweak the underlying code, and instantly test the results — is why Googlers say they can withstand any competition from Bing or Twitter or Facebook. Indeed, in the last six months Google has made more than 200 improvements, some of which seem to mimic — even outdo — the offerings of its competitors.

Workplace Law: About to be fired? Read this

These days, when the employee-employer relationship goes sour, the employee knows it. Most companies follow standard protocols for warning employees if they don’t shape up they will be fired. Employees should be careful how they deal with such situations. Here are a few things to heed:

Don’t demand finality. When you are told you have no future with the company, the instinct is to demand resolution and request specifics, including your last day of employment. That is short-sighted. Dismissals must be, as the courts put it, “specified, definite and unequivocal.” It’s in your interest to delay the day of reckoning. The severance clock does not start ticking until you are given a termination date.

Don’t defame your employer, manager or co-workers. It’s imperative you do nothing that provides your employer with an opportunity to fire you for cause and pay no severance. No matter how tempting revenge is, this is when you are most reliant on your employer’s goodwill and generosity regarding severance and references.

Don’t resign to avoid having a “firing” on your record. Ironically if you resign without another job, no employer will believe you were not fired. More significantly, while resigning because the employer demands it is treated by the courts as a dismissal, resigning to avoid the stigma is not.

Don’t sign a release without both legal advice and serious consideration as to your likely length of unemployment.

Don’t lie when questioned. If your employer questions you about conduct that might lead to dismissal and you are caught lying, you create cause for dismissal. I have won many cases for clients, not because of an employees actions but rather because, when asked about it, the employee lied;

Don’t hold your employer’s property as “ransom” against your demands. With most judges, employees are seen as David to the employer’s Goliath. That is a sympathy that should not be squandered, by stealing or refusing to return your employer’s property.

Do Request a letter of reference. Refusing to provide a deserved reference can lead to your employer paying additional damages.

Do ask why you are being dismissed. An employer’s refusal to inform you as to why you are being fired also can lead to additional damages;

Do ask what support the employer will provide while you are unemployed. This often elicits additional assistance;

Do raise any illegal reasons you may think you are being fired for, such as resisting sexual overtures of a manager at the time of dismissal. If you raise it for the first time, only after being dismissed, you will have credibility issues and little chance of obtaining additional damages. By raising such issues before you are fired, the employer has an obligation to investigate and deal with your concerns.

Do say as little as possible. You are trapped by what you say in the heat of the moment.

Santander: The Most Boring Bank in the World

Spend an hour in Santander City and it’s easier to understand Banco Santander’s unlikely march during the last quarter century from sixth biggest bank in Spain to largest bank in the euro zone. Since Emilio Botín took over from his father in 1986, Santander has spent more than $60 billion buying banks in Spain, Latin America, Europe and, more recently, the U.S.

But it’s not just about being the biggest. By sticking to old-fashioned banking practices, while shrewdly employing the firm’s sophisticated banking software, Botín has also made Santander the most profitable bank in the world outside China, earning close to $25 billion in the last two years, even as the world’s economies teetered on the brink.

In Santander City the functional is exalted and the fancy eschewed. The bank runs the same way, thanks to Botín’s commitment to banking’s stodgiest virtues: conservatism, patience and the sort of loans that don’t need to be sliced and diced into nonsensical instruments like those that caused the meltdown on Wall Street.

…

Harry Kamen, retired chairman of Metropolitan Life and a former Santander board member, recalls learning of Santander’s risk-management committee in the mid-1990s. The independent committee reports directly to the Santander board and is charged with reining in managers overeager to drum up new business without looking hard enough at the pitfalls. “I asked who was doing this at MetLife and was told the actuaries were, but no one was looking at the whole picture,” says Kamen, who promptly instituted a similar structure at MetLife. “I learned a lot about risk by watching Emilio in action.”

Santander’s fixation with controlling risk is largely why it came through the recent banking crisis smelling like a Valencia orange. Going into the crisis, Santander had set aside funds to cover 151% of its expected loan losses, compared to 85% for its European peers. Nearly two years on, Santander’s so-called coverage ratio is 72%, compared to 58% for big European banks in general.

It didn’t hurt either that earlier banking crises had led the Bank of Spain to impose punishing restrictions on the kind of high-flying investments that crashed to earth at some U.S. and European banks. Santander expects profits in 2009 to stay roughly even with last year’s $12.8 billion, making it the third most profitable bank in the world. Little wonder Santander is now worth around $137 billion, more than double its market value in 2000.

…

The [Abbey National bank] turnaround came straight from the Santander playbook — and highlights the second key to the company’s incredible success: software. First step, in goes Santander’s proprietary Parthenon software, which organizes a bank’s business by customer instead of by product line, as had been the case at Abbey. “This is the kind of sophisticated information JPMorgan still didn’t have, and I saw it at a Santander branch in Chile,” says Davide Serra, head of the U.K.’s Algebris hedge fund.

The system facilitates cross-selling to existing customers while allowing Santander to cut back-office staff drastically (Santander never cuts the flesh pressers out front). In Abbey’s case, total employees dropped from 25,331 to 16,489, while costs have come down from 70% of income to around 40%, in line with Santander’s overall cost-to-income ratio. The average cost-to-income ratio in this sector of the U.K. banking business is 55%.

Those cost savings translate into lower lending rates, which has allowed Abbey to regain its share of the mortgage market and then some. It now makes 1 in 7 new mortgages in the U.K. and Abbey’s 1,300 branches will sport red Santander logos next year.

Santander would rather be profitable than interesting. Santander’s U.K. profits for the first half of 2009 were up 33% from the year before, if you don’t count acquisitions, and almost 63% if you do. It remains to be seen if Santander can work similar magic at Sovereign. Inciarte says cost-to-income at the U.S. bank has already fallen from 65% to 57%, but that getting down to 40% “will take us quite a while.”

The best investment advice you’ll never get

As Google’s historic August 2004 IPO approached, the company’s senior vice president, Jonathan Rosenberg, realized he was about to spawn hundreds of impetuous young multimillionaires. They would, he feared, become the prey of Wall Street brokers, financial advisers, and wealth managers, all offering their own get-even-richer investment schemes. Scores of them from firms like J.P. Morgan Chase, UBS, Morgan Stanley, and Presidio Financial Partners were already circling company headquarters in Mountain View with hopes of presenting their wares to some soon-to-be-very-wealthy new clients.

One by one, some of the most revered names in investment theory were brought in to school a class of brilliant engineers, programmers, and cybergeeks on the fine art of personal investing, something few of them had thought much about. First to arrive was Stanford University’s William (Bill) Sharpe, 1990 Nobel Laureate economist and professor emeritus of finance at the Graduate School of Business. Sharpe drew a large and enthusiastic audience, which he could have wowed with a PowerPoint presentation on his “gradient method for asset allocation optimization” or his “returns-based style analysis for evaluating the performance of investment funds.”

But he spared the young geniuses all that complexity and offered a simple formula instead. “Don’t try to beat the market,” he said. Put your savings into some indexed mutual funds, which will make you just as much money (if not more) at much less cost by following the market’s natural ebb and flow, and get on with building Google.

The following week it was Burton Malkiel, formerly dean of the Yale School of Management and now a professor of economics at Princeton and author of the classic A Random Walk Down Wall Street. The book, which you’d be unlikely to find on any broker’s bookshelf, suggests that a “blindfolded monkey” will, in the long run, have as much luck picking a winning investment portfolio as a professional money manager. Malkiel’s advice to the Google folks was in lockstep with Sharpe’s. Don’t try to beat the market, he said, and don’t believe anyone who tells you they can—not a stock broker, a friend with a hot stock tip, or a financial magazine article touting the latest mutual fund.

Seasoned investment professionals have been hearing this anti-industry advice, and the praises of indexing, for years. But to a class of 20-something quants who’d grown up listening to stories of tech stocks going through the roof and were eager to test their own ability to outpace the averages, the discouraging message came as a surprise. Still, they listened and pondered as they waited for the following week’s lesson from John Bogle.

“Saint Jack” is the living scourge of Wall Street. Though a self-described archcapitalist and lifelong Republican, on the subject of brokers and financial advisers he sounds more like a seasoned Marxist. “The modern American financial system,” Bogle says in his book The Battle for the Soul of Capitalism, “is undermining our highest social ideals, damaging investors’ trust in the markets, and robbing them of trillions.” But most of his animus in Mountain View was reserved for mutual funds, his own field of business, which he described as an industry organized around “salesmanship rather than stewardship,” which “places the interests of managers ahead of the interests of shareholders,” and is “the consummate example of capitalism gone awry.”

Bogle’s closing advice was as simple and direct as that of his predecessors: those brokers and financial advisers hovering at the door are there for one reason and one reason only—to take your money through exorbitant fees and transaction costs, many of which will be hidden from your view. They are, as New York attorney general Eliot Spitzer described them, nothing more than “a giant fleecing machine.” Ignore them all and invest in an index fund. And it doesn’t have to be the Vanguard 500 Index, the indexed mutual fund that Bogle himself built into the largest in the world. Any passively managed index fund will do, because they’re all basically the same.

…

Financial management firm Aperio Group partner Solli took one look at my unkempt collection of mut­ual funds and said, “You’re being robbed here.” He pointed to funds I had purchased from or through Putnam, Merrill Lynch, Dreyfus, and—yes—Charles Schwab (which referred me to Aperio) and asked, “Do you know that you’re paying these guys to do essentially nothing?” He carefully explained the many ingenious ways fund managers, brokers, and advisers had found to chip away at investors’ returns.

Turns out that I, like more than 90 million other suckers who have put close to $9 trillion into mutual funds, was paying annual fees, commissions, and transaction costs well in excess of 2 percent a year on most of my mutual funds (see “What Are the Fees?” page 75). “Do you know what that adds up to?” Solli asked. “At the end of every 36 years, you will only have made half of what you could have, through no fault of your own. And these are fees you needn’t pay, and won’t, if you switch to index funds.”

All indexing calls for, Solli explains, is the selection of a particular stock market index—the Dow Jones Industrial Average, Standard and Poor’s (S&P) 500, the Russell 1000, or the broader Wilshire 5000—and the purchase of all its stocks and bonds in the exact proportions in which they exist in that index. In an actively managed fund, managers pick stocks they think will outperform a particular index. But the premise of indexing is that stock prices are generally an accurate reflection of a company’s worth at any given time, so there’s no point in trying to beat that price. The worth of a client’s investment goes up or down with the ebb and flow of the market, but the idea is that the market naturally tends to increase over time.

Moreover, even if an index fund performed only as well as the expensively managed Merrill Lynch Large Cap mutual fund that was in my portfolio, I would earn more because of the lower fees. Stewarding this kind of investment does not require a staff of securities analysts working under a fund manager who makes $20 million a year. In fact, a desktop computer can do it while they sleep.

There are always exceptions, of course, Solli says, “a few funds that at any given moment outperform the indexes.” But over the years, he explains, their performances invariably decline, and their highly paid cover-boy managers slide into early obscurity, to be replaced by a new hotshot managing a different fund.

If a mutual-fund investor is able to stay abreast of such changes, move their money around from fund to fund, and stay ahead of the averages (factoring in higher commissions and management fees) it will be by sheer luck, says Solli, who then offers me pretty much the same advice John Bogle and his colleagues offered Google. Sell the hyped but fee-laden funds in my portfolio and replace them with boring, low-cost funds like those offered by Bogle’s Vanguard.

What are the fees?

Every fee that a mutual fund charges should be outlined somewhere in its prospectus. But many people don’t even think to look for it, and you can’t necessarily trust your broker to bring it up. “The first step is simply getting people to pay attention to fees,” says Patrick Geddes, chief investment officer of Aperio Group, in Sausalito. Hang tough in asking your broker for the full breakdown of what those fees will cost you each year.

If you need help, the National Association of Securities Dealers has a useful tool for computing fees, called the Mutual Fund Expense Analyzer, on its website. You put in the name of the fund, the amount invested, the rate of return, and the length of time you’ve had the fund, and it tells you exactly how much you’ve been charged.

You can also compare past fees for different funds before you invest. For example, if you had put $100,000 into Putnam’s Small Cap Growth Fund Class B Shares and held it for the past five years, you would find that Putnam would have charged you $13,809 in fees during that time. Vanguard’s Total Stock Market Index Fund, on the other hand, would have charged only $1,165 for the exact same investment. —Byron Perry

The Iceland rebellion

In many countries, taxpayers are rightly cranky over the idea that their governments are bailing out banks and others — including their own regulators and central bankers — who helped create the 2008 global financial meltdown. Iceland appears to be setting a new standard of taxpayer response that politicians everywhere might want to note.

Under pressure from voters and taxpayers, Iceland’s President, Olafur Ragnar Grimsson, this week refused to sign a bill to reimburse almost $6-billion to Britain and Holland for money paid to depositors who put money into two high-flying Icelandic banks that failed in 2008. The president was responding to taxpayers who are essentially rebelling against being forced to pick up the tab for a financial bailout of depositors, regulators, foreign governments and even their own government and politicians.

It is only a bit of an exaggeration to say that the people of Iceland are refusing to pay for all the schemes of private bankers and public officials who, over the course of the last decade, drove the whole of Iceland into bankruptcy.

…

The Iceland rebellion has been characterized as foolish. Fitch, the credit rating agency, warned of “a renewed wave of domestic political, economic and financial uncertainty” for Iceland and downgraded the country’s main sovereign rating to junk status. Paul Rawkins, senior director in Fitch’s Sovereign ratings team, told a news agency that the standoff “represents a significant setback to Iceland’s efforts to restore normal financial relations with the rest of the world.”

…

The immediate focus of the current Icelandic revolt tells much of the story. Icelanders are being asked to repay money that was deposited in Icelandic banks by mostly British and Dutch residents during a frenzy of fund-raising by Landesbanki, one of Iceland’s hot-shot banks. In 2006, Iceland’s financial condition began to deteriorate, risking a drain on bank funds and a currency run. Rogers Boyes, in his book, Meltdown Iceland, describes how “the Icelandic government … needed the banks to appear more stable.

So a scheme was hatched to set up competitive online banking services that would lure cash from Britain, from the Dutch, and from Germans.” The scheme, a brilliant marketing move, was called Icesave.

Icesave became a cash machine for Landesbanki. “The only thing I have to do is look each day and see how much money came in. Fifty million pounds came in, just last Friday,” said Landesbanki CEO Sigurjon Arnason in 2006. Offering rates of up to 6%, within five months Icesave accounts attracted $10-billion in British deposits from 300,000 people — equal to the entire population of Iceland. These deposits were marketed as if they carried deposit insurance from Iceland. Another Iceland bank also raised money using the same technique.

When the banks collapsed, however, there was no deposit insurance available. Deposit insurance is normally structured to cover the failure of some institutions by taking pooled money from the surviving institutions. But in a systemic failure, when all banks our essentially out of business, who pays the depositors?

2. In this regard, the Parties:

- Commit to take action to mitigate climate change based on their common but differentiated responsibilities and respective capabilities,

- Commit to take action on adaptation including international support assisting the poorest and most vulnerable countries,

- Commit to strengthen the international architecture for the provision of substantially increased finance for climate efforts in developing countries,

- Commit to establish a technology mechanism to promote the development, transfer and deployment of environmentally sustainable technologies in support of mitigation and adaptation efforts.

7. The developed country Parties commit to individual national economy wide targets for 2020. The targets in Attachment A would expect to yield aggregate emissions reductions by X1 percent by 2020 versus 1990 (X2 percent vs. 2005). The purchase of international offset credits will play a supplementary role to domestic action.

The developed country Parties support a goal to reduce their emissions of greenhouse gases in aggregate by 80% or more by 2050 versus 1990 (X3 percent versus 2005).

9. The developing country Parties, except the least developed countries which may contribute at their own discretion, commit to nationally appropriate mitigation actions, including actions supported and enabled by technology, financing and capacity-building. The developing countries’ individual mitigation action could in aggregate yield a [Y percent] deviation in [2020] from business as usual and yielding their collective emissions peak before [20XX] and decline thereafter.

12. Reducing emissions from deforestation and forest degradation is an important aspect of the necessary response to climate change. Developing countries should contribute to enhanced mitigation actions through reducing emissions from deforestation and forest degradation, maintaining existing and enhancing carbon stocks, and enhancing removals by increasing forest cover.

Parties underline the importance of enhanced and sustained financial resources and positive incentives for developing countries to, through a series of phases, build capacity and undertake actions that result in measurable, reportable and verifiable greenhouse gas emission reductions and removal and changes in forest carbon stocks in relation to reference emission levels.

18. Parties commit to enable the accelerated large-scale development, transfer and deployment of environmentally sound and climate friendly technologies across all stages of the technology cycle, respecting IPR regimes including protecting the legitimate interests of public and private innovators. Developed country parties commit to work towards doubling aggregate public investments in climate related research, development and demonstration by 2015 from current levels and quadrupling the efforts by 2020.

20. The Parties share the view that the strengthened financial architecture should be able to handle gradually scaled up international public support.

International public finance support to developing countries [should/shall] reach the order of [X] billion USD in 2020 on the basis of appropriate increases in mitigation and adaptation efforts by developing countries.

21. The Parties confirm climate financing committed under this agreement as new and additional resources that supplement existing international public financial flows otherwise available for developing countries in support of poverty alleviation and the continued progress towards the Millennium Development Goals.

In this regard:

- Developed country parties commit to deliver upfront public financing for 2010-201[2] corresponding on average to [10] billion USD annually for early action, capacity building, technology and strengthening adaptation and mitigation readiness in developing countries as set forth in Attachment C;

- From [2013] The Parties commit to regularly review appropriateness of contributions and the circle of contributors against indicators of fairness based on GDP and emissions levels and taking into account the level of development as set forth in Attachment C.

Cracking the Real Estate Code

What is the agent’s incentive when selling her own home? Simple: to make the best deal possible. Presumably, this is also her incentive when selling your home; after all, her commission is based on the sale price. And so your incentive and the agent’s incentive would seem to be nicely aligned.

But commissions aren’t as simple as they seem. First of all, a 6 percent commission is typically split between the seller’s agent and the buyer’s. Each agent then kicks back half of her take to her agency. Which means that only 1.5 percent of the purchase price goes directly into your agent’s pocket.

So on the sale of your $300,000 house, her personal take of the $18,000 commission is $4,500. Still not bad, you say. But what if the house was worth more than $300,000? What if, with a little more effort and patience, she could have sold it for $310,000?

After the commission, that puts an additional $9,400 in your pocket. Yet the agent’s additional share – her personal 1.5 percent – is a mere $150. So maybe your incentives aren’t aligned after all. Is the agent willing to put out all that extra time and energy for just $150?

Improving Incentives for Real Estate Agents

Suppose that Rick [the real estate agent] were to get 10% of the portion of the sale price above $300,000 instead of 2% of the whole price. Now a $25,000 difference in the sale price makes a $2500 difference in Rick’s commission. This more closely aligns Rick’s interests with Hanna’s [the homeowner] interests.

The big problem with this idea is that it supposes that all parties have a good idea of a fair sale price. With this type of commission structure, Rick is strongly incented to convince Hanna that her house is worth less, say $350,000, and that way the deal will give him 10% of the sale price above $280,000. If Rick then sells the house for $375,000, he gets a $9500 commission instead of $7500.

Library and Archives Canada

Veronica Foster, an employee of the John Inglis Co. Ltd. Bren gun plant, known as “The Bren Gun Girl” poses with a finished Bren gun at the John Inglis Co. plant.

Renouncing Islamism: To the brink and back again

As children and teenagers, the ex-jihadis felt Britain was a valueless vacuum, where they were floating free of any identity.

Ed Husain, a former leader of HT, says: “On a basic level, we didn’t know who we were. People need a sense of feeling part of a group – but who was our group?” They were lost in liberalism, beached between two unreachable identities – their parents’, and their country’s. They knew nothing of Pakistan or Saudi Arabia or the other places they were constantly told to “go home” to by racists.

Yet they felt equally shut out of British or democratic identity. From the right, there was the brutal nativist cry of “Go back where you came from!” But from the left, there was its mirror-image: a gooey multicultural sense that immigrants didn’t want liberal democratic values and should be exempted from them. Again and again, they described how at school they were treated as “the funny foreign child”, and told to “explain their customs” to the class. It patronised them into alienation.

“Nobody ever said – you’re equal to us, you’re one of us, and we’ll hold you to the same standards,” says Husain. “Nobody had the courage to stand up for liberal democracy without qualms. When people like us at [Newham] College were holding events against women and against gay people, where were our college principals and teachers, challenging us?”

Without an identity, they created their own. It was fierce and pure and violent, and it admitted no doubt.

To my surprise, the ex-jihadis said their rage about Western foreign policy – which was real, and burning – emerged only after their identity crises, and as a result of it. They identified with the story of oppressed Muslims abroad because it seemed to mirror the oppressive disorientation they felt in their own minds.

Usman Raja, a bluff, buff boxer who begged to become a suicide bomber in the mid-1990s, tells me: “Your inner life is chaotic and you feel under threat the whole time. And then you’re told by Islamists that life for Muslims everywhere is chaotic and under threat. It becomes bigger than you. It’s about the world – and that’s an amazing relief. The answer isn’t inside your confused self. It’s out there in the world.”

…

Many of the ex-Islamists discovered they couldn’t ignore the fact that whenever Islamists won a military victory, they didn’t build a paradise, but hell.

At the same time, they began to balk at the mechanistic nature of Wahabism. Usman says he had become a “papier-mâché Muslim”, defining his faith entirely by his actions, while being empty inside. “Wahabis are great at painting themselves [an Islamic] green on the outside, but when it comes to that internal aspect, it’s not there. You pray five times a day, but why? Because God’s told you to pray five times a day. You pay your charity – why? Because God’s told you to pay your charity. This God of yours is telling you a lot. And why does he tell you to do that? Because if you don’t do it, you’ll end up in a fire. It’s all based on being frightened. There’s nothing to nourish you.”

Climate ‘debt’ comes due

On “Climate Reparations”

The Kyoto Protocol — which expires in 2012, and which Copenhagen is intended to replace — was in some corners accused of being a covert wealth-transfer plot, since it required rich nations, unable to reach difficult targets, to buy carbon indulgences from poorer ones. “A socialist scheme to suck money out of wealth-producing nations” was Stephen Harper’s assessment, long before he became Prime Minister.

With Copenhagen, however, there is no hidden agenda: Its authors say transferring wealth is exactly what they aim to do. Though its draft form is a menu of optional language and policies intended to be narrowed in the lead-up to the conference, and at the conference itself, the spirit of the document is unmistakable.

It proposes in plain language an arrangement that will see nations such as Canada guarantee to send billions of dollars every year for decades to the developing world as payment of a “climate debt” owed for our long history of emitting carbon dioxide into the atmosphere.

There is, of course, some talk of emission-reduction targets, maximum carbon dioxide concentrations in the atmosphere, limiting global temperature increases, and plans to adapt to inevitable climate shifts, with most of the details remaining to be hammered out. But as much as anything else, the Copenhagen treaty calls for the payment by rich countries of what can probably best be described as climate reparations.

These are some of the understandings proposed in the treaty’s current working version: Industrialized countries should compensate developing nations for not just the cost of preventing and adapting to climate change, but for “lost opportunities, resources, lives, land and dignity” triggered by it; industrialized countries are to commit “at least 0.7%” of their annual GDP, above and beyond existing foreign aid commitments, to compensate the developing world for lost dignity and other distress; and that the money will be deliverable to the United Nations, which will be in charge of handing it all out.

“By 2020,” the treaty insists “the scale of financial flows to support adaptation in developing countries must be [either] at least US$67-billion [or] in the range of US$70-to US$140-billion” every year. And in the end, because it may only shift carbon-intensive production from cleaner countries to less-efficient ones, the entire exercise may do very little to limit emissions.

On A Loss Of National Sovereignty

Copenhagen entrusts these billions [in climate reparations] to the management of the United Nations. Paragraph 200, Annex 3b, for example, requires signatories to submit to the UN their plans to reduce emissions, which “shall be reviewed as part of the annual compilation and accounting of emission inventories and assigned amount,” suggesting that if the UN doesn’t like a certain country’s plan to cut greenhouse gases (GHGs), it has the power to deny assigned emission allowances until it sees a plan it does — potentially, he says, leaving countries without full control of their own environmental policy.

On Encouraging Unfair World Trade

It gets trickier: Under the proposed treaty, developing countries — which would include such Canadian trade competitors as China, South Korea, India, Brazil and Mexico — are under far looser obligations to reduce emissions than wealthier nations like Canada; they are, after all, generally less equipped to modernize their infrastructure.

But under Copenhagen’s paragraph 23, Annex 1, and paragraph 7, Annex 3e, no nation is permitted to impose “any form of unilateral measures including countervailing border measures, against goods and services imported from developing countries on grounds of protection and stabilization of the climate.”

So, although China might impose duties on any Canadian steel it imports, if it can show we have fallen short on carbon dioxide reductions, Canada could not do the same to Chinese concrete imports. And while World Trade Organization rules prohibit any foreign government from slapping tariffs on Canadian exports on the excuse that we refused to sign Copenhagen, if we do sign it, and then don’t live up to our promises, it could well be legal for our trading partners — even our NAFTA partners — to claim that our failure to live up to emission-reduction targets gives us an advantage, permitting them to put barriers up to our goods.

An economic colossus, born in blood

Since 1978, [China's] annual economic growth rate has been a formidable 8% to 9%; and since 1990, per capita annual income has risen from $350 to $3,000. There are the predictable claims of imminent Chinese world economic supremacy, but we have heard all that before from the Nazis, Soviets, and Japanese, and they should be received with caution.

There are still at least 800 million Chinese peasants who live much as they did thousands of years ago. There is a population control plan that will raise the average age by one year every two years for at least two decades, and reduce the worker-to-retiree ratio from 3-to-1 to 2-to-1 in the next 20 years. There are acute shortages of land and water, and most social services.

Government spending on health and education has declined from 25% to 35% in 20 years. The private sector has taken up a lot of this, but about half the population receives no medical care at all. The percentage of middle school students going on to high school has actually declined by a third in the last 20 years.

The state still owns the country’s banks, natural resources, heavy industry and telecommunications, and controls about 35% of all production. Ecological damage is very serious and costly, affecting three quarters of the country’s water courses and most of its air. Distinguished China specialist James Fallows reckons that China suffers 250 deaths in mining accidents every day.

Corruption and arbitrariness in government are pandemic. The state has liberalized, but within limits that were dramatically underlined by the needless massacre in Tianenmen Square 20 years ago (the crowd could have been dispersed bloodlessly with fire hoses and rubber bullets, as they would have been in Western capitals).

The sense of the inexorable rise of China has been heightened by the inexplicable blunders of the United States in the last 15 years, of borrowing trillions of dollars from China and Japan to buy trillions of dollars of non-essential goods from China and Japan, and admitting millions of low-paid undocumented immigrants, while outsourcing millions of low-paid jobs (largely to China), and forcing the private sector to waste trillions more on unsound residential mortgages.

It is not clear that China can persuade its domestic economy to absorb much of the exports that have been lost to the recession and a belated reawakening of thrift in the U. S. But it has played its financial cards cleverly. China is shortening the maturities on its U. S. treasuries; 25% are now short-term. China will not sit with mountains of 3%-yield U. S. bonds, and appears to be preparing to buy large quantities of tangible U. S. assets, probably in the technology sector.

The Chinese cannot be counted upon to overpay wildly as the Arabs and the Japanese did when they squandered the bonanzas that burned holes in their pockets 20 and 30 years ago.

This will soon become a political issue in the United States.

China has more problems than the United States, and is not as rich or well-organized a country. Beijing is not about to overtake Washington, but its growth has been astounding and will continue. The first 30 years of the Chinese Revolution were a sanguinary version of The Gong Show. The last 30 have changed the world, for the better.

I practice too. When he veers too far into therapyspeak, I say, “That just sounds like gobbledygook.” “Thanks,” he replies. “That’s fine.”

“Do you think it’s ever okay to lie?” I ask.

“I advocate never lying in personal relationships. But if you have Anne Frank in your attic and a Nazi knocks on the door, lie. I lie to any government official. I lie to the IRS. I always take more deductions than are justified.”

I start in at dinner with my friend Brian. We are talking about his new living situation, and I decide to tell him the truth: “You know, I forget your fiancée’s name.” (This is highly unacceptable—they’ve been together for years; I’ve met her several times.) “It’s Jenny,” Brian says.

Luckily, Brian doesn’t seem too upset. So I decide to push my luck. “Yes, that’s right. Jenny. Well, I resent you for not inviting me to your and Jenny’s wedding. I don’t want to go, since it’s in Vermont, but I wanted to be invited.” “Well, I resent you for not being invited to your wedding.” “You weren’t invited? Really? I thought I had.” “Nope.” “Sorry, man. That was a mistake.”

A breakthrough! We are communicating! Blanton is right. I’m enjoying this. A little bracing honesty can be a mood booster.

By the end of the week, I’ve slashed my routine lying by at least 40 percent.

One thing becomes quickly apparent, though: There’s a fine line between Radical Honesty and creepiness. It’s simple logic: Men think about sex every three minutes, as the scientists at Redbook remind us. If you speak whatever’s on your mind, you’ll be talking about sex every three minutes.

I have a business breakfast with an editor from Rachael Ray’s magazine. As we’re sitting together, I tell her that I remember what she wore the first time we met and that I’d try to sleep with her if I were single. I even confess to her that I just attempted (unsuccessfully) to look down her shirt during breakfast.

She smiles. Though I do notice she leans back farther in her seat.

When I get home, I keep the momentum going. I inform our nanny, Michelle, that “if my wife left me, I would ask you out on a date, because I think you are stunning.” She laughs. Nervously. “I won’t mention it again,” I say. Now I’ve made my own skin crawl. But I carry on.

While getting my hair cut, I stop my barber short when he starts telling me how he doesn’t want his wife to get pregnant. “You know, I’m tired. I have a cold. I don’t want to talk anymore. I want to read.” “Okay,” he says, wielding his scissors, “go ahead and read.” Later, I do the same thing with my in-laws when they’re yapping on about preschools. “I’m bored,” I announce. “I’ll be back later.” And with that, I leave the living room.

Radical Honesty can save a whole lot of time.

I can say this for Radical Honesty. Whenever I am radically honest, people become radically honest themselves. In fact, all my relationships could take a whole lot more truth than I expected.

But the giddiness I experienced at first wore off pretty quickly. A life of Radical Honesty is filled with a hundred confrontations every day. They’re small, but relentless. “Yes, I’ll come to your office, but I resent you for making me travel.” “My boss said I should invite you to this meeting, although it wouldn’t have occurred to me to do so.” At one point, my wife told me a story about switching operating systems on her computer. In the middle, I had to go help our son with something, then forgot to come back. “Do you want to hear the end of the story or not?” Julie asked. “Well … is there a payoff?” I asked.

“F— you.”

“That’s good,” Blanton says to me when he hears the story. “I like that. That’s communicating.”

Adapted from the book The Guinea Pig Diaries by A.J. Jacobs. ©2009 by A.J. Jacobs.

Leaner times ahead for Mayor

Ralph Lean, the chairman of the Cassels Brock law firm, has a long list of grievances against his Mayor, David Miller. Yesterday, he took time off from golfing in the Justin Eves Foundation charity tournament in Milton to spell those out in detail.

He is upset at Mr. Miller for overspending, for failing to freeze councillors’ salaries, for narrowing Jarvis Street, for fighting with Porter Airlines (“I’m a big supporter of Porter”) and for refusing to examine outsourcing some city functions.

Mr. Miller could shrug this off, except that Mr. Lean is not just any old disgruntled voter: one of the city’s most influential fundraisers, he co-chaired the team that funded Mr. Miller’s runaway victory in the 2006 municipal election. And now Mr. Lean is walking away.

“I quite like David Miller,” Mr. Lean said. But, he adds, “He’s gotten off track. He’s made a lot of mistakes. His supporters on council have pushed him in directions I don’t agree with.”

“Everybody I talked to, 100% of the people, have stopped supporting the Mayor,” he said. “I’ve never seen anything like it in my political career.”

Mr. Lean now says he will support either Mr. Tory or George Smitherman, the deputy premier, in a mayoral bid.

“I guarantee you one of those two will run,” Mr. Lean says, adding, “Both of them told me, ‘Only one of us is going to run.’ ”

Mr. Crombie is also declining to work on another Miller bid for the mayoralty, although he took pains to say he is not opposing the Mayor. He says he signed on in 2006 because it was a multi-party effort with Mr. Peterson and Mr. Miller, to make Toronto better.

A genius wearing a fool’s mask

Abdel Basset al-Megrahi, having served about eight years of a life-sentence imposed on him in 2001 for his role in bombing Pan Am Flight 103 that exploded over Lockerbie, Scotland, in 1988, killing 259 crew and passengers and 11 people on the ground, was set free last month as an act of executive clemency by Scottish Justice Minister Kenny MacAskill.

Well, why did Scotland release him? Those who know the West have a better question. Why did Scotland jail him in the first place?

The crime was heinous; the investigation slipshod, even corrupt. The evidence against the two Libyan suspects, Megrahi and Al-Amin Khalifa Fhimah, was so flimsy it left the Scottish judges no choice but to acquit Fhimah.

The crime was heinous; the investigation slipshod, even corrupt. The evidence against the two Libyan suspects, Megrahi and Al-Amin Khalifa Fhimah, was so flimsy it left the Scottish judges no choice but to acquit Fhimah.

They did convict Megrahi, but defensively, as if they were performing a patriotic rather than a judicial duty. The case against the Libyan rested on the evidence of a single witness, a Maltese shopkeeper named Tony Gauci. If he was mistaken, Megrahi had no tie to the atrocity.

If the trial proved anything, it was that Lockerbie wasn’t Megrahi and Fhimah’s idea. They didn’t order or finance it. At most, they were extras in a horror movie. For the investigators to put two minnows in the dock for a Moby Dick of a crime was itself a mockery.

The initial assumption was that the Pan Am jet was sabotaged by order of the Ayatollah Ruhollah Khomeini. Still the leader of Iran in 1988, the Ayatollah had promised the skies would “rain blood” after a missile from the USS Vincennes mistakenly shot down an Iran Air passenger flight with a loss of 290 lives a few months before.

The focus shifted to Libya later. A theory that Col. Gaddafi wished to get back at the U.S. and Britain for the 1986 bombing of his country seemed feasible. It also suited three U. S. administrations seeking to mend fences with Iran and Syria to build a coalition against Iraq’s Saddam Hussein.

Pan Am Flight 103 – Investigation

The clothes were traced to a Maltese merchant, Tony Gauci, who became a key prosecution witness, testifying that he sold the clothes to a man of Libyan appearance, whom he later identified as Abdelbaset Ali Mohmed Al Megrahi.

However, an official report providing information not available during the original trial stated that Gauci had seen a picture of al-Megrahi in a magazine which connected al-Megrahi to the bombing, a fact which could have distorted his judgment.

A circuit board fragment, allegedly found embedded in a piece of charred material, was identified as part of an electronic timer similar to that found on a Libyan intelligence agent who had been arrested 10 months previously, carrying materials for a Semtex bomb. The timer allegedly was traced through its Swiss manufacturer, Mebo, to the Libyan military, and Mebo employee Ulrich Lumpert identified the fragment at al-Megrahi’s trial.

Mebo’s owner, Edwin Bollier, later revealed that in 1991 he had declined an offer from the FBI of $4 million to testify that the timer fragment was part of a Mebo MST-13 timer supplied to Libya. On 18 July 2007, Ulrich Lumpert admitted he had lied at the trial.

In a sworn affidavit before a Zurich notary public, Lumpert stated that he had stolen a prototype MST-13 timer printed circuit board from Mebo and gave it without permission on 22 June 1989, to “an official person investigating the Lockerbie case”.

Dr Hans Köchler, UN observer at the Lockerbie trial, who was sent a copy of Lumpert’s affidavit, said: “The Scottish authorities are now obliged to investigate this situation. Not only has Mr Lumpert admitted to stealing a sample of the timer, but to the fact he gave it to an official and then lied in court”.