5 Things on a Friday: Death of the Interview

Wow, what a crazy week!  Holy cow!!!

Let’s start with The Interview.  I was really looking forward to seeing it; Sally and I even talked about going Friday on our date night.  Bu that ain’t gonna happen, it seems.

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1.  U.S. Said to Find North Korea Ordered Cyberattack on Sony (NY Times)

Hours before Sony canceled the movie, the four largest theater chains in the United States — Regal Entertainment, AMC Entertainment, Cinemark and Carmike Cinemas — and several smaller chains said they would not show “The Interview” as a result of the threat. The cancellations virtually killed the movie as a theatrical enterprise, at least in the near term, one of the first known instances of a threat from another nation pre-empting the release of a movie.

While intelligence officials have concluded that the cyberattack was both state-sponsored and far more destructive than any seen before on American soil, there are still differences of opinion over whether North Korea was aided by Sony insiders with knowledge of the company’s computer systems, senior administration officials said.

The Interview is dead.

I understand why theater chains decided not to show the movie, and in light of the theaters’ reluctance, there wasn’t much that Sony could do besides sticking the movie on the shelf, at least temporarily.  Bottom line, these are corporations, and they exist to make money.  If the threat from hacking and from potential terrorist attack makes the movie look like an unhealthy business decision, then of course these guys are going to act in their own self-interest.  Sony Pictures is not the American Army.  In fact, Sony itself is not even an American company.

That said, I wish that this country could find some way to better support the free speech of its leading industry.  You don’t have to like all—or even most—of what Hollywood produces, but denying its influence (and profitability!) on the world stage is foolishness.  American culture is a thing because Hollywood has succeeded in making it a thing.  It only makes sense, then, for the country to support the industry’s success in ways that are clearly tied to the common defense.

Fortunately, the story is still evolving.  I don’t think a movie this controversial—and potentially profitable, considering the controversy—will stay shelved.  I suspect it will wind up being the first major studios test-case for Video-on-Demand same-day release.  If that happens, then despite all odds, The Interview may yet trigger a revolution.  It just won’t be the revolution that its makers were hoping for.

2. Ruble Sinks to 80 a Dollar Defying Surprise Russia Rate Increase (Bloomberg)

The ruble sank as much as 19 percent to 80.10, before trading at 78 at 3:14 p.m. in Moscow. That was the biggest drop since 1998, the year Russia defaulted on its local debt. The currency erased a gain of 11 percent as investors shrugged off a surprise Bank of Russia decision to take its key interest rate to 17 percent from 10.5 percent. Ten-year government-bond yields jumped 317 basis points to a record 16.4 percent…

“I am speechless,” Jean-David Haddad, an emerging-market strategist at OTCex Group in Paris, said in a message. “What a failure for the central bank. Russia would need to announce capital controls today. That is the last solution.”

A 500 ruble note featuring Peter the Great, circa 1912.

The Russians tried to print money to pay off a corporate debt denominated in US dollars and Euros, and it wrecked their currency’s exchange rates.  Printing money like that showed both the weakness of the Russian economy and the Russian government’s willingness to flout international economic conventions whenever they become inconvenient.  No one really trusted the Russians before, and now the Russians have shown us exactly why we were always a little leary.

Hyperinflation ensued overnight.  This left the central bank with little choice but to raise short term interest rates to ruinous levels.  17% lending rates may well stem the flow of capital out of the country, but if they do, it’ll be because capital itself is scarcely moving.  To save their economy, the Russians halted it in place, and frankly there’s no guarantee that this cure, though extreme, will even work.  Even with capital controls, stories came out on Wednesday of Russians buying virtually anything that they thought might hold value over time more effectively than rubles.  Washing machines, consumer electronics, etc.  The feeling on the street was that it was better to spend all your money while it was worth something.  Western companies realized what was happening and moved to protect themselves, essentially refusing to take rubles in exchange for hard goods.  Apple went so far as to suspend operations at its Russian storefront, and other companies took similar steps.  

This is what happens when an economy grinds to a halt.

And all of this happened in less than a week.  However, future Russian debts are much, much worse than the ones that caused the crisis, and even without the crisis, experts were expecting Russia’s economy to contract by slightly less than 5% based solely on the decline in oil prices.  In other words, the real pain hasn’t even started.

It seems unlikely that Russia’s occupation of Eastern Ukraine can continue much longer.  The Russians have domestic oil resources, so they can keep their army supplied with fuel, but unless they nationalize their entire economy, I have no idea how they plan to pay their troops or provide essentials like food and munitions.  I mean, yeah, things are bad now, but a year from now they’ll be exponentially worse.  Russian debts will be larger, the price of oil will be lower (if current forecasts hold), and the Western democracies will be growing (again, because of oil) while the Russians will be selling frantically just to keep themselves afloat.  

Sure, Russia could go back to a Communist-style command-economy, but that’s a dead end street that they’ve already explored.  Back in the Bad Old Days, the ruble wasn’t internationally traded, so the Russian government could set its currency’s value via command fiat.  Back then, though, the whole economy was basically hidden underground.  As it is, I expect barter will be the way of the future regardless, but accepting that as a way of life is like accepting a shrinking economy in perpetuity.  Some countries have done that—North Korea, Cuba, and Iran, for example—but it’s a tough road for the long haul.  Moreover, Russia is smaller today that it once was, and the one-time Soviet bloc has largely moved into the Western sphere of influence.

I don’t know what’s going to happen, but I won’t be surprised if Russia’s leaders make a deal with Ukraine’s government and withdraw after declaring victory.  Given the alternatives, that’s the obvious play.  Of course, this analysis assumes a rational actor in Moscow.  That may not be what we’re dealing with.

3.  Hair Metal Interlude: Damn Yankees

4.  New Orleans Saints top Chicago, 31-15, take NFC South lead on strength of revived defense (NOLA.com)

The Saints (6-8) claimed sole possession of first place and earned a chance to clinch the NFC South on Sunday at the Mercedes-Benz Superdome against the Atlanta Falcons.

I’m really rooting for the Saints.  I hope they make the playoffs at 7-9, win three home games, get to the Super Bowl, and win the whole thing.  I’m curious to see whether that would be enough to change the way the playoffs are organized or if the NFL will embrace the chaos with an “anything can happen”-style marketing campaign.

5.  Memo to Staff: Time to Lose a Few Pounds (WSJ)

Seeking to make a dent in the intractable problem of obesity—a condition affecting roughly one-third of U.S. adults and costing companies more than $73 billion a year, according to researchers from Duke University—businesses are experimenting with new measures to encourage workers to slim down.

They are moving beyond healthy snacks in vending machines or discounted gym memberships and taking an aggressive, personalized approach to workers’ weight.

Everything was better in the 80s,
even the gym.

I am so totally behind this.  Corporate America is dead-set on getting every minute it can out of its workers, but I honestly believe it would be a better use of resources to let some of those midnight emails go while simultaneously giving workers time off at lunch or at other times during the day to run, lift weights, and generally take better care of themselves and their health.  Workers need support beyond vague encouragement.  It’s hard to be healthy in an environment where you don’t get enough sleep and where you’re constantly worried about everything.  

Ultimately, unhealthy lifestyles are in no one’s interest.  

We live in a world where corporations pay health care costs as part of the cost of doing business.  It therefore makes sense to consider managing workers’ health to be a part of the business.  By managing health, businesses manage costs.  This is straightforward, no?  

All I’m suggesting is that corporations act in their own self-interest, broadly defined.  Too many managers define their interests narrowly—in terms of minutes, not years—and that’s led us to a place with mismanaged costs over the long term.  It’s not an intractable problem, but the solution requires a new mindset.  

So what?  That’s business in the 21st Century.

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Add this to my list of things to read.

Sally and I started watching Jack Reacher last night.  We're only about halfway through, but so far I'm really liking it.  Tom Cruise is the right age to be a retired U.S. Army military police investigator, and he handles the role appropriately.  The guy might be crazy, but he's a good actor.  Also, I hadn't noticed until last night, but Rosamund Pike is in everything all of a sudden.  

Still, I can see why folks have said that Cruise isn't big enough to play Reacher.  He's not a big guy, and the way that the character acts is manifestly big-guy tough.  The story would come off a little differently if he loomed over the people he's trying to intimidate.  As it is, we only have Cruise's voice and the seriousness of his eyes as clues to let us know that he's a badass.  At 5'6", it makes sense to me that folks would call his bluff and make him show what he can do.