Crow

Crow Island, Latitude 41.0612081 and Longitude -73.3906734, the epicenter of our boating life. This continues the boating thread that began with the following two entries:
http://lacunaemusing.blogspot.com/2008/07/living-on-boat.html
http://lacunaemusing.blogspot.com/2008/08/lake-years.html

At high tide it’s just a small pile of rocks but at low tide it’s part of the Crow bar, connecting two of the Norwalk, CT islands, Copps Island and Chimon Island. This link shows those two larger islands, with Copps in the foreground. Crow bar can be seen connecting to Chimon. http://www.norwalkct.org/PictureTour/IslandsNorth.htm

Aside from the Thimble Islands further east, the Norwalk Islands is one of the largest groups of islands in the Long Island Sound. There are a number of coves and anchorages, which make boating something special there. http://en.wikipedia.org/wiki/Norwalk_Islands We called the water to the east of Crow Island “home” for countless weekends. When anchored there one would think you are in a far away place, with few signs of civilization except for the conspicuous presence of the Manresa Island Power Plant on the mainland in Rowayton (see the stack at the lower right of this photo).

Before the GPS became ubiquitous, Crow’s waters were relatively private as Beers Rocks and other assorted rocks loom just beneath the surface making it somewhat treacherous to find one’s way into the area. Many a boat has damaged its running gears in such attempts, and the word spread quickly, keeping other boaters out.

But, with local knowledge, passage is relatively safe, especially when dead low tide is avoided. So, for years friends and we enjoyed the waters as a private enclave. And, as members of the Outboard Cruising Club, an old local club, we even own the deed to that pile of rocks, called Crow. As the tide recedes, a little sandy beach emerges, a great spot our kids went to in our dinghies and where I dutifully walked our little Schnauzers when we had them, first Muffin and then Treat. One could find me there at dawn (my favorite time of the day) as my family and friends slept.

During the summers, Crow was our community, not the towns in which we lived, and our kids became best friends there. The usual routine was to go out to the island on Friday night. Ann would load up the boat, pick up Jonathan at school, and I would meet them Norwalk Cove Marina after work and off we would go in the setting sun to our anchorage
There, we would meet Ray and Sue, John and Cathy, Richard and Marlene, Tony and Betty, Bob and Bev, and Shel and Naomi (the only stalwart sail boaters in the group). Weather cooperating, we would raft together in groups, and dingy back and forth between boats.

We began our voyage to Crow with just a thought: we wanted an activity our family would enjoy doing together, something to get me away from my all-consuming work. We considered a small vacation cottage on Connecticut’s Candlewood Lake, much smaller than Lake George where we had vacationed before, but closer to our home. We began to get serious about that alternative, but the idea of cleaning more gutters and more home repairs were off-putting.
Our home in Weston was only a few miles from the beautiful Long Island Sound, where I had boated as a child, and that is why we began to consider boating. We initially imagined ourselves as sail boaters, quietly gliding upon the waters of the Sound to the coves and towns near its shores but we first needed to learn more about boating in general and the Sound in particular. So in January 1983 we enrolled in a Coast Guard auxiliary course to learn the basics of boating.

Coincidentally, in the summer of 1981 there was a boating tragedy in our nearby waters off of Port Jefferson, the sinking of the ‘Karen E’ – this became the focus of the course as the captain of the ship, a 36’ Trojan, did everything totally wrong causing untold tragedy for his family and friends. He left Port Jefferson as dark was closing in, for a port in Connecticut and failed to recognize the lights of a tugboat with a barge in tow, piloting his boat between the two. The Karen E ran into the steel tow cable and sunk somewhere between Brookhaven, L.I., and Old Saybrook, Connecticut. His wife and daughter were killed in the accident, along with three friends. Miraculously, the Karen E’s captain made it to shore after swimming half the night.

Studying this case made us acutely aware of the gaps in our knowledge, not only about boating, but sailing in particular, which is yet another skill one must master. We therefore decided that once we earned our Coast Guard Power Squadron certificates, that we would buy a powerboat and perhaps work our way up to a sailboat. So, in the spring of 1983, graduation “diplomas” in hand, we looked for a boat.

Our search ended at Norwest Marine, a small boat yard on the Norwalk River, with a few dozen slips and rack storage. There we bought our first boat, a used 20’ cuddy cabin with a single inboard-outboard engine, which we dubbed the ‘Annie H’ and even ventured to “far off” Eaton’s Neck (only a few miles across the Sound) and to some of the anchorages around the 52 acre Norwalk Island, Sheffield, the only island with a lighthouse, although now deactivated: http://www.lighthousefriends.com/light.asp?ID=786

After only a few weeks though, coming back from a day on the Sound, the boat began taking on water. Ann was bailing out with a bucket as I tried to get the boat back to our slip. We discovered the block was cracked. We had bought a bumboat.

The owner of the marina agreed to take the boat in on trade for a new boat. We would have been better off doing that in the first place, so we traded for a new 22’ “Holiday Express.” It had a little sleeping area under the rear seats in addition to the cuddy cabin and a tiny stand up head, all in 22’ so the three of us could spend an overnight or even more time on the boat. We anxiously awaited delivery of our new Annie H” which was promised for the 4th of July weekend.

Late in the day on June 28, 1983 Ann was driving back from Greenwich on I95. Several hours later, the Mianus River Bridge on I95 in the Cos Cob section of Greenwich, Connecticut – the very span she had just traversed -- collapsed, killing three people and injuring three. Because of that collapse, the delivery of our boat was delayed as it was on a trailer, scheduled to cross the bridge the following day. It had to be rerouted, as did all truck traffic, north to Route 84 and then south to reconnect with I95. As I recall, our new Annie H did not arrive until after the July 4th holiday.

For the remainder of that summer though we were out on the Annie H every weekend and even ventured to a port that became one of our favorites over the years, Essex, CT, some six miles up the Connecticut River. There we discovered the joys of the famous Griswold Inn one of the oldest continuously operated inns in the country, having opened its doors for business in 1776. The original architecture and the marine art in the main dinning room http://www.griswoldinn.com/Pages/Dining.htm conveys the sense of embarking in a time machine, transported to the time the Declaration of Independence was signed.

Coming back from Essex we ran along the old QE2, which was taking a “cruise to nowhere” in the Long Island Sound. Ironically, we had crossed the Atlantic in October 1977on the QE2 when Jonathan was still a baby – here dressed in his sailor’s outfit -- and here we were running alongside this leviathan in our little 22 footer. By today’s cruise ship standards, the QE2 would now be considered a small ship.

Most of that summer we spent around Sheffield Island and at Mt. Misery Cove just to the East of the entrance to Port Jefferson harbor, a sandpit with 60 foot high bluffs which we would climb to view the harbor and the Long Island Sound. We even managed to persuade Ann’s Mom to go out with us when she was visiting from California.

But one afternoon we had taken my Dad and our friend, Arlene, out for the day on the south side of Sheffield. We anchored and the current was running strong. Ann and Jonathan were swimming near the boat and the current swept them away to the west (luckily, Jonathan was in a life jacket). Showing my inexperience and my overconfidence in my swimming ability, I tried to swim to them with an extra life jacket, somehow thinking I could bring them back to the anchored boat. I almost drowned and had to be fished out of the water by a passing vessel. The captain NEVER leaves the ship!

Ann had given me an anniversary gift that year, a modest little book by Janet Groene, How to Live Aboard a Boat, which she inscribed as follows: Honey – Here’s to a “dream come true” one day! Happy Anniversary, Love, Ann. Little did we know at that time where our obsession would lead. The following year there would be a new boat and there would be others after that but more on those and our times at Crow and other cruises in another entry.

Meanwhile, as it so neatly merges my publishing and historical interests with information on our home cruising grounds, I am appending a section from the United States Coast Pilot by the U.S. Coast and Geodetic Survey, published by the Government Printing Office in 1918. This was scanned as part of the Google Books Library Project from a copy at the University of California library.

This passage, written almost 100 years ago, is very detailed (a disclaimer for anyone not interested in boating or the area). Although some features are antiquated, it captures the essence of the Norwalk Islands and its environs:

NORWALK ISLANDS are a group of islands, rocks, and shoals which extend from 1 to nearly 2 miles off the north shore of Long Island Sound and have a length of 6 miles from Georges Rock to Greens Ledge lighthouse. Cockenoe Island Harbor and Sheffield Island Harbor, good at low water for vessels of about 9 and 12 feet draft, respectively, are available anchorages, and are the approaches to Norwalk River. These anchorages are marked by Pecks Ledge and Greens Ledge lighthouses and are easily made. The bottom is very irregular around the islands and rocks in the Norwalk Islands; and, although the area is well surveyed, vessels should, as a measure of safety, avoid all broken ground and proceed with caution when crossing shoal areas.

Cockenoe Island, at the eastern end of Norwalk Islands, is marked on its south side by two knolls, the rest of the island being low and level. A bar, dry in places at low water but with general depths of 1 to 2 feet, connects the island with the north shore at Seymours Point. Cockenoe Island Shoal is an extensive and dangerous area which extends 1.5 miles eastward and east-southeastward and .5 mile southward from Cockenoe Island. The least depths found are shown on the chart, but the entire area is exceedingly broken with boulders and should be avoided by strangers, even in small craft.

Georges Rock, awash at lowest tides, is at the eastern end of the shoal, and is marked off its northeast side by a black buoy. A gas and bell buoy marks the southeast end of the shoal. Vessels rounding the eastern end of Cockenoe Island Shoal should give the buoys a good berth.

Channel Rock, with 2 feet over it, lies 400 yards southwestward of Cockenoe Island, and is marked by a red buoy placed 300 yards south- westward of the rock.

Cockenoe Island Harbor lies westward of Cockenoe Island, and is marked by Pecks Ledge lighthouse. It has anchorage for vessels of less than 9 feet draft, and is also an entrance from eastward to Norwalk River. The best anchorage for vessels is in the deeper part of the harbor, depths 12 to 25 feet, lying northward and northwestward of the lighthouse. Vessels should proceed with caution at low water when crossing the shoal with 12 to 15 feet lying southward and westward of Channel Rock buoy.

Directions, Cockenoe Island Harbor. — From eastward pass southward of Cockenoe Island Shoal gas and bell buoy, steer 254° true (W % S mag.) until Pecks Ledge lighthouse bears northward of 285° true (NW by W % W mag.), then steer for the lighthouse until up with Channel Rock buoy, and then pass eastward and northward of the lighthouse at a distance of 200 to 300 yards. From westward give the edge of the shoals a good berth until Pecks Ledge lighthouse bears westward of 350° true (N mag.), and then steer this course with the lighthouse on the port, bow, passing preferably eastward of the 12-foot spot lying 250 yards southeastward of the lighthouse.

The following islands and rocks are on the northwest side of Cockenoe Island Harbor : Sprite Island is high and has some trees. Calfpasture Island has several houses and a few trees. The island eastward of Calfpasture Island is low and covered with boulders. Sheep Rocks are covered at half tide. East White Rock is a high, white rock. Grassy Hammock Rocks are bare at half tide; the rock at the south end of the group is awash at high water, and is marked by Grassy Hammock light.

Pecks Ledge lighthouse, on the west side at the entrance of Cockenoe Island Harbor, is a white conical tower, middle part brown, on a pier.

Goose Island and Grassy Island are low. The rest of the Norwalk Islands are hilly and are partly settled. Chimons Island is marked by a windmill and water tank. Copps Island has a prominent survey signal. Sheffield Island, the westernmost of the Norwalk Islands, is marked by a disused lighthouse tower (granite building). There is a boat landing on the north side of Sheffield Island.

Great Reef, lying 14 mile southward of the western end of Sheffield Island, is covered at half tide and marked by a spindle. Hiding Eocks, Old Baldy, and Old Pelt, lying northwestward of Great Reef, are bare at low water.

Greens Ledge is a rocky ridge extending from Sheffield Island to Greens Ledge lighthouse. There is little depth and rocks bare at low water in places for a distance of nearly % mile from the island, and thence to the lighthouse there is a depth of about 7 feet on the ledge. Depths of 10 to 15 feet extend about 400 yards westward and southwestward from the lighthouse, and this part of the ledge is marked at its southwest end by a red buoy. A rocky ledge, on which the least depth found is 22 feet, extends 1 mile west-southwestward from the lighthouse.

Greens Ledge lighthouse is a conical tower, lower half brown, upper half white, on a pier. Budd Reef, a small ledge with a least depth of 25 feet, lies % mile south-southeastward of Greens Ledge lighthouse. The bottom is very broken on the south side of Greens Ledge, and deep-draft vessels should pass southward of Budd Reef and the ledge with a least found depth of 22 feet lying % mile south-southwestward of Copps Island.

Sheffield Island Harbor, also known as Norwalk Harbor, is formed by the western Norwalk Islands. It is frequently used in the fall and winter, and by tows. The depths at the anchorage northwestward of Sheffield Island range from 12 to 16 feet. The directions from westward for Norwalk River lead through the harbor. The shoal flats on the north side of the harbor have rocks and boulders in places. A black buoy and a horizontally striped buoy mark the edge of the shoals with depths less than 10 feet on the north side of the harbor southwestward of Tavern Island.

Tavern Island has a number of houses. Little Tavern Island is marked by a prominent, high water tank. A row of piles extends from Tavern Island to Little Tavern Island. A rock covered at half tide lies 250 yards northeastward of Little Tavern Island. A bare rock, marked by telegraph poles, lies westward of Little Tavern Island. A shoal with little depth over it extends 250 yards south-westward of Tavern Island. A rock bare at low water lies about half-way between the southwest end of Tavern Island and the wharf at Wilson Point.

The following are objects near the channel leading from Sheffield Island Harbor to Norwalk River. White Rock shows above high water. White Rock Reef light, northward of White Rock, is located in a depth of about 9 feet on the southeast edge of the channel. Long Beach light is on the east side of the channel, near the end of the reef extending northwestward from Long Beach. Round Beach light is on the northwest side of the channel at the entrance of Norwalk River, and lies 400 yards westward of Hound Beach. The latter is a grassy shoal awash at high water, and is marked on its western side by a private spindle with cask.

NORWALK RIVER is on the north side of Long Island Sound northward of Norwalk
Islands, and is important commercially. The river has been improved by dredging a channel 150 feet wide and 10 feet deep to South Norwalk, and 100 feet wide and 8 feet deep to Norwalk. The principal entrance to the river is from westward, through Sheffield Island Harbor, and is good for a depth of 10 feet at low water. The entrance from eastward, through Cockenoe Island Harbor, is good for a depth of about 7 feet at low water. The deepest draft of vessels going up to South Norwalk and Norwalk is about 14 feet at high water.

Dorlons Point, marked by a clubhouse and wharf, is on the east side of Norwalk River 1/2 mile above the entrance. On the west side of the river abreast Dorlons Point is a shallow creek, crossed by a lift bridge with an opening 30 feet wide, above which are several marine railways to which a draft of 3 feet can be taken at high water.

South Norwalk is an important commercial and manufacturing city on the west bank of Norwalk River about 1% miles above its mouth. The depths at the wharves below the bridges range from about 5 to 12 feet.

East Norwalk, opposite South Norwalk, is reached through a channel dredged 75 feet wide and 6 feet deep, which is used mainly by small pleasure craft. In 1917 the channel had shoaled to a depth of 2.2 feet, and at low water is marked by the flats. Fitchs Point light marks the entrance of the channel at the junction with the main channel leading to South Norwalk. A stake and flag marks the southeast point of the entrance and another stake the turn abreast the lower wharves. The upper section of the channel is marked on both sides by stakes, to which small craft moor. The yacht club is at the head of navigation.

Norwalk is a city on both banks of Norwalk River at the head of navigation 1.1 miles above South Norwalk. There is a depth of about 10 feet at the wharves. The channel from South Norwalk to Norwalk is winding, with extensive flats on both sides, and requires local knowledge, even at low water, to follow it. Bridges. — Two bridges cross the river at South Norwalk. The lower one is a double-leaf lift, with an opening 70 feet wide. The second, or railroad bridge, is a center pier draw, with an opening 60 feet wide on either side…..Freight steamers make regular trips to New York from Norwalk and South Norwalk. The latter is on the main line of the N. Y., N. H. & H. R. R. Supplies. — Coal and water can be had at the wharves of South Norwalk and Norwalk. Provisions, gasoline, and other supplies can be obtained. Ice forms in the river and usually obstructs navigation for about six weeks in winter. Tides. — The mean rise and fall of tides is 6.9 feet. Some local knowledge is required to follow the best water in Norwalk River and approaches. Proceed with caution and preferably on a rising tide.

Black Swan Reveries

As a change of pace – away from my normal interest in literature and biography -- I read Nassim Taleb’s The Black Swan; The Impact of the Highly Improbable. He basically argues that experience and therefore planning counts for little. We are all governed by extraordinary effects of unanticipated extraordinary events and not by planning the minutia from the observed experience of the past. Essentially, our planning tools, the normal statistical methods we use are only effective in “Mediocristan" a world in which extremes are limited, such as the normal height of human beings, and therefore a random selection of that particular universe is anticipatable and measurable. He contrasts Mediocristan with "Extremistan" the world in which chaotic extremes reign and therefore a random sampling will not be representative. Hence, it is fruitless to plan for such extremes. So much for free will.

We are left with a world we can plan for “inside the box” but the true impact to that world occurs outside the box.

It’s sort of an in your face, edgy presentation by Taleb, very cynical in some respects. I empathize with the latter because of years of corporate planning. With the development of, first, VisiCalc, then Lotus 123, and now Excel, this kind of planning has been taken to such an extreme that the process itself probably keeps half of corporate America employed. It always amused me; I used to call it the battle of the spreadsheets – central corporate vs. the operating companies.

Part of that “planning” involves associating or connecting past events and “making sense” out of them. He calls that “naïve empiricism,” a “natural tendency to look for instances that confirm our story or our vision of the world….Alas, with tools, and fools, anything can be easy to find. You take past instances that corroborate your theories and treat them as evidence.” Even more profound is his observation: “We humans are the victims of an asymmetry in the perception of random events. We attribute our successes to our skills, and our failures to external events outside our control, namely to randomness. We feel responsible for the good stuff, but not for the bad. This causes us to think that we are better than others at whatever we do for a living.” Decades of corporate life leave me saying Amen to that.

But, isn’t the existence of the worlds of Mediocristan vs. Extremistan self-evident? Obviously, we can only think within the box when dealing with processes such as sales forecasting, budgeting, etc., basing them on the past statistics from Mediocristan. And a “black swan event” is going to have a profound impact on the world of Mediocristan. We mere humans do not have much control over an asteroid hitting our planet. Taleb’s problem with the foregoing is that we think we do.

Besides being a mathematician and philosopher, Taleb is a hedge fund manager. I was therefore interested in how he translates his philosophy to investment. Essentially, he takes the position that 85% of one’s portfolio should be allocated to “risk free investments,” specifically US Treasury Bills and the remaining 15% into very high risk investments that could have an exponential payoff in a Black Swan event from the world of Extremistan. So after a very convincing and sometimes disturbing philosophical argument the author seems to fall victim to the very blindness he decries. Are T-Bills “risk free,” especially as the US seems to be on a course to guarantee every debt and every major corporate shortfall, not to mention the twin time bombs of Social Security and Medicare/Medicaid as the baby boomers retire and unemployment rises? Now there is a Black Swan.

Fuel Efficient Cars Threaten Our Roads?

The Associated Press reports: “Oregon looks at taxing mileage instead of gasoline.”

Oregon is among a growing number of states exploring ways to tax drivers based on the number of miles they drive instead of how much gas they use, even going so far as to install GPS monitoring devices in 300 vehicles. The idea first emerged nearly 10 years ago as Oregon lawmakers worried that fuel-efficient cars such as gas-electric hybrids could pose a threat to road upkeep, which is paid for largely with gasoline taxes.

Not only are other states considering the same but Congress is as well!

Is this the apex of political stupidity / absurdity? Fuel-efficient cars pose a threat to road upkeep? Why not just mandate that the nation’s highways can only be used by SUVs? Here we are with an ideal opportunity – now that many have “adjusted” to $4.00 gasoline – to implement a federal fuel tax that would:

* support our decaying infrastructure and mass transit
* hasten the conversion to more fuel-efficient vehicles
* reduce our dependence on foreign oil from rogue nations
* promote the development of our nascent alternative energy industry, all domestic jobs

Instead, our backboneless political representatives seek what they think is the path of least resistance, one that has the resonance of big brother watching. The recent decline in oil prices is an opportunity to establish a nationwide gas tax to finally achieve important national objectives, ones that we've postponed for decades because of political expediency.

Another Ponzi Scheme

Tom Friedman made this observation but here’s some more documentation from the New York Times: http://www.nytimes.com/2008/12/18/business/18pay.html?em

While Bernie Madoff was “making off” with his illegal Ponzi scheme, ignored by the SEC in spite of sufficient smoking guns everywhere, Wall Street, the banking industry, and mortgage brokers, went blithely along with it’s own “legal” Ponzi scheme:
* Borrowing cheap money courtesy of the Fed
* Lending it out with exotic mortgage deals, including nothing down zero interest rate loans, the interest being added to the principal, to borrowers of little ability to pay back the loans, except if real estate values pyramid to infinity
* Packaging these subprime mortgages into CMOs to be sold to gullible investors throughout the world – emphasizing their safety because of “diversification” and AAA debt ratings conferred by rating agencies, based on chimerical insurance contracts issued by under capitalized firms.

Everyone in the Wall Street food chain got rich. As the Times article pointed out, in 2008 “Merrill handed out $5 billion to $6 billion in bonuses that year. A 20-something analyst with a base salary of $130,000 collected a bonus of $250,000. And a 30-something trader with a $180,000 salary got $5 million.” The head mortgage trader for Merrill, Dow Kim, had a salary of $350,000 but with his bonus he “earned” $35 million.

But these riches were based on income that really did not exist, the profits that we, as taxpayers are now trying to restore to our financial system via the bonanza bailout program. Meanwhile, Bernie Madoff is allowed to stay out of jail, putting up “his” Manhattan townhouse as bail, bought with funds of his clients, and Wall Street wiz kids walk around with what is really taxpayer money.

“As a result of the extraordinary growth at Merrill during my tenure as C.E.O., the board saw fit to increase my compensation each year.” — E. Stanley O’Neal, the former chief executive of Merrill Lynch, March 2008

On the Mark

Here are two must read entries recently posted by a fellow blogger, someone I’ve mentioned before. As Mark states in his mission statement: “Raise $7M from readers to launch a real mutual fund. By providing a transparent platform for a virtual growth mutual fund, I'll create a mechanism by which readers can view my thought process & results in creating a 3-year return. I'll invest in 30-50 positions with secular growth trends with economic commentary thrown in.” He’s been doing this for more than a year now but the recent economic turmoil has delayed the launch. In the meantime, his readers have benefited from his interesting commentary and frequently prescient predictions.

The posts below were written before yesterday’s Federal Reserve announcement of historic interest cuts to near zero and its pledge to buy stressed securities and perhaps even long-term treasuries. The question is whether this will indeed lead to borrowing and spending, especially if unemployment rates continue to ramp up and if business confidence does not improve. If successful, we then have to deal with the inflationary implications of money creation and a deficit in the untold $ trillions. (Is borrowing good? Isn’t that one of the reasons we got into this mess in the first place?)

In spite of FDR’s attempt to work our way out of the Depression with the New Deal, it finally took the enormous deficit spending of WWII and of course the employment of millions by the military and by the industries needed to support the war effort, thereby ending the worst economic downturn in our history. It also required people to rally, sacrificing, working towards a common goal.

In other words, it takes more than spending. Perhaps that is another distinction between today’s economic crisis and what we faced during the Depression. Can President-elect Obama successfully make our decaying infrastructure and need for energy independence our “war?” Will we pull together or pull apart?

http://www.fundmymutualfund.com/2008/12/13-outlier-2009-predictions.html
http://www.fundmymutualfund.com/2008/12/recovery.html

Madoff Bailout?

Why not? Every other deserving group gets one. Too big to fail! And, according to the WSJ, maybe through the Securities Investor Protection Corporation (SIPC) there may be a back door in covering some of the losses, although the SIPC only has $1.5 billion left in its coffers and there will have to be congressional action to increase the kitty.

When the tide goes out the muck materializes. For years Madoff reported steady returns from the firm’s “split-strike” conversion strategy, one of balancing puts and calls around a basket of large cap stocks and, presto, “steady” returns of some 7-9% no matter what the market does. Hint: when it's too good to be true....

Midas Madoff sucked his friends from the Palm Beach Country Club and Fund of Funds from around the world into the scheme (but, unfortunately many charitable and endowment funds as well). As one skeptical research firm, Aksia, reported to its clients concerning Madoff Securities, “We concluded that Friehling & Horowitz (Madoff’s audit firm) had three employees, of which one was 78 years old and living in Florida, one was a secretary, and one was an active 47 year old accountant (and the office in Rockland County, NY was only 13ft x 18ft large). This operation appeared small given the scale and scope of Madoff’s activities.” The entire audit trail consisted of paper transaction confirmations, which Madoff, himself, closely controlled. It finally took a market downturn of the magnitude of this past year, with redemption requests from Madoff’s clients, to finally expose the Ponzi scheme. The SEC couldn’t see this?

According to the Palm Beach Post, “investors needed at least $1 million to approach Madoff [and] being a member of the [Palm Beach Country] Club also helped. But even with those prerequisites there was little guarantee that Madoff would take the client.” Sort of the same deferential respect as demanded by the Soup Nazi in the Seinfield series.

The incident is yet another regulatory failure and another corrupt Joker in our economic house of cards.
.

Copyright in the Internet Era

It is remarkable to witness the revolutionary changes in information dissemination, just during my working lifetime as a publisher, from the Gutenberg era to the Internet era over the course of only a few decades. I remember attending a conference at the New York Public Library in 1965 about the urgent need to use permanent durable, acid-free paper in all new publications. The NYPL’s collection was rapidly deteriorating, particularly those books and periodicals that were printed on groundwood pulp paper, the same as used in newspapers, and the library was beginning to spend as much on preservation as it was on acquisitions. Microfilm and microfiche (particularly “ultrafiche”) as well as mainframe computers, were being cited as possible solutions to preserving information. At the same time photocopying was becoming ubiquitous and libraries looked upon that as a possible method of disseminating information through library systems.

Today’s ambitious projects – basically Google’s objective to digitize just about everything (more than 7 million books scanned thus far) – makes the related copyright issues I was concerned with at the time, particularly The Williams and Wilkins Supreme Court decision (http://en.wikipedia.org/wiki/Williams_&_Wilkins_Co._v._United_States) look like a trivial warm-up act. I wrote an essay for a special 1974 issue of Confrontation – The Great Copyright Debate on that case (below). Focused on the then relatively “new” technology of photocopying, it seems antiquated, but the fundamental issues of fair use and the extent to which the rights of individuals or corporate authors, the creators of the information, can be usurped by the informational needs of the majority are even more alive in today’s Internet world. One only needs to check out Google’s ambitious project to understand the far-reaching impact the digital world is having on how we access information as well as who “owns” the information. http://googleblog.blogspot.com/2008/10/new-chapter-for-google-book-search.html.


Copyright
A Publisher's Viewpoint
By Robert Hagelstein

Nothing stirs the emotions of the educational and publishing communities more today then the copyright issue. For decades a tacit agreement between librarians and publishers (the "Gentlemen's Agreement" of 1939) had successfully governed photocopying by libraries of copyrighted materials. But that agreement was established before the advent of widespread use of relatively inexpensive electrostatic copying equipment and audio-visual duplicating equipment. It also preceded exponential information growth, increasingly expensive research materials, and higher education for the masses.

These factors have resulted in the large-scale copying of copyrighted audio visual and printed works by libraries, with the approval of the courts to the dismay and general disapproval of publishers and authors. Congress will ultimately decide whether such copying will continue.

On February 16, 1972, the United States Court of Claims found that the federal government was liable for infringement of copyrights held by Williams and Wilkins, a medical publisher. For years the National Library of Medicine had systematically copied, upon the request of researchers connected with those institutions, parts of periodicals (in some cases, complete articles) published by Williams and Wilkins.

On November 27, 1973, the Court of Claims reversed its historic opinion. The Williams and Wilkins Company appealed the reversal to the Supreme Court. Recently, the Supreme Court decided to review the case.

The Supreme Court's decision will undoubtedly influence the copyright revision bill, which for years has been under consideration by Congress. As the Court of Claims stated in its reversal decision, "the truth is that this is now preeminently a problem for Congress: to decide the extent photocopying should be allowed, the questions of a compulsory license and the payments (if any) to the copyright owners, the system for collecting those payments (lump-sum, clearinghouse, etc.), the special status (if any) of scientific and educational needs."

The issue has divided publishers and librarians, creating an adversary position where traditionally there has been one of cooperation. Publishers feel that the Williams and Wilkins reversal demands that they oppose almost any kind of library photocopying, while librarians are reportedly considering the decision as a green light to proceed with wholesale copying.

Robert Wedgeworth, Executive Director of the American Library Association, referred in the May 1974 issue of American Libraries to the Williams and Wilkins reversal as one "of our most impressive triumphs of the century." A letter from a librarian to Library Journal (February 15, 1973) states that "publishers and librarians are in adversary positions ... No amount of discussion will bridge that gap ... If you think you are on the winning side, why offer to compromise?" Publishers have been equally vocal and adamant concerning their position.

Though rights have been aired, there has been little discussion of the need to find a compromise solution-such as a rule for the use of copying equipment, and a means of compensating authors and publishers.

The rhetoric has also obscured recognition of the dissemination of knowledge as a common goal shared by all serious publishers and librarians. This recognition cannot be achieved without understanding of each group's respective roles, and the implications of what the lack of a compromise solution means.

The librarian's role is fairly clear. However, the inside workings of a library-acquisition, cataloging, and circulation of library materials-are complex. One can fully appreciate why--especially in a large academic library-the idea of keeping track of photocopies for the purpose of paying royalties is abhorrent.

Publishers of materials normally acquired by academic libraries must have highly specialized knowledge and formidable financial resources. Making information available in a structured manner so that it can be easily used is not a simple task. To ensure the participation of private industry in such an endeavor, the potential for a reasonable profit must be evident.

The burgeoning costs of research materials may prompt some to question why private industry is needed to publish information and to produce information systems. The Government Printing Office in Washington is capable of handling this responsibility, and libraries, as protectors and purveyors of information, can also be publishers.

The preservation of a truly free society, however, requires a diversity of information sources and opinions. Uncontrolled copying of information without proper compensation to authors and publishers would ultimately reduce the sources of information. Conceivably, more and more publishing would, out of necessity, be taken over by the federal government. Hence, the Government Printing Office, already one of the world's largest publishers, would be encouraged to support and control all kinds of research and writing. Government control of the dissemination of information is not in the best interest of librarians, publishers, authors, or of the public.

To prevent such a trend, a copyright law is needed which protects the rights of authors and publishers as well as librarians, providing for a method of compensation for photocopying copyrighted materials.

If the Court of Claims reversal were upheld and backed by Congress, not all publications and publishers would be equally affected. It is important to make a distinction here between trade publishing and information publishing. Trade publishing is the publication of books intended for a general market of readers, usually reached through bookstore distribution. The product of information publishing, however, is highly specialized and is destined for a relatively limited audience, especially libraries. Included in this category are scholarly and professional journals, information banks on microfilm or computer tape, scientific, technical, professional, and scholarly monographs, and proceedings and symposiums.

Since information materials are exclusively published for educational or research uses, commercial information publishers depend mostly on the education market for financial support. Trade publishers generally derive much of their income from other sources such as the sale of book club, paperback or movie rights. Therefore, any attempt to justify unlimited library photocopying as "fair use" because it is for "educational purposes only" would deprive the information publisher of its sole potential income source.

Although some forms of trade publications may be subjected to photocopying, it is unlikely, even if photocopying were condoned, that a novel or a general historical work would be systematically photocopied. Most libraries want to buy original editions for their collections, anticipating heavy use. Bound printed copies generally last longer than photocopies, bound or unbound. Because trade works are printed in much larger quantities for broader audiences, an original copy would probably be far less expensive than a photocopy. Furthermore, this kind of book is meant to be read in its entirety and does not lend itself to being photocopied in part only.

The converse is true of the information publication, which is especially structured so that it can be used in part. Because the audience for such a product is comparatively limited, unit costs and retail prices are higher; a photocopy, therefore, may indeed be far less expensive than an original copy.

Although the journal that you are reading is not an "information" publication per se, it can be grouped here because it is intended for a limited literary audience. Any kind of publication has certain fixed costs such as typesetting and overhead which are unaffected by the number of copies printed and sold. Confrontation may have cost $10 per page to typeset, yet you or your library may have paid only a few cents per page for it. If Confrontation were to become a casualty of uncontrolled photocopying with a resulting fifty percent circulation drop, that $10 per page would have to be absorbed by half the number of copies. Hence, the price would have to be raised. Photocopies would become less expensive in relationship to the escalating retail price. One can see why certain kinds of publications could become obsolete or prohibitively expensive.

An upholding of the Williams and Wilkins reversal by the Supreme Court and Congress could also indirectly encourage the growth of the cooperative library movement and photocopying of interlibrary loan material. The cooperative library system is a necessary means of dealing with information growth, and interlibrary loans by mail give wider access to little used materials. With photocopying equipment, however, one library could become a duplicator or a "publisher" of materials for another. Cooperative libraries could become publishing centers.

In 1949 ten universities formed a cooperative, which has grown to include seventy-eight institutions in a nationwide system called Center for Research Libraries. Two years ago the Center for Research Libraries received a $450,000 five-year grant from the Carnegie Corporation of New York to develop a national lending library of journals. If copying without restriction is allowed to persist, it is not impossible to imagine that someday the Center could be handling the publisher's traditional printing and distribution functions, purchasing the only copy of each journal issued by each publisher. Of course, the cost of each single copy to the Center would be the publisher's typesetting and overhead costs with a fair royalty for the author, plus a profit margin for the commercial publisher.

Another major cooperative was announced by the Research Libraries Group, which includes the New York Public Library, Columbia University, Yale University, and Harvard University. Joseph Rosenthal, who did the feasibility study on the group, although stating that he thought that publisher's sales loss would be "insignificant," did admit that publications that are "marginally economic will die out," and that those remaining would be more expensive should uncontrolled photocopying be allowed. The April 15, 1974 issue of Publishers Weekly states that "it has been widely reported that the consortium is taking the Court of Claims decision in that photocopying case as a go-ahead signal for wholesale copying."

Obviously, that is not to argue against cooperative library systems. They perform valuable services for smaller institutions, which would otherwise be deprived of access to library collections that only the largest universities can afford. However, by photocopying original materials instead of acquiring them, a library cooperative could compete with a private publisher, reprinting that publisher's materials. To discourage such activity and to compensate the creator of the information, publishers and authors should be in a position to grant reproduction rights and to collect royalties.

There is no simple solution to the problem; the endless discussion on copyright revision in Congress during these past few years attests to that fact. One criteria has frequently been applied to photocopying and possible copyright infringement: if photocopying saves the researcher the trouble of transcribing by hand, there should be no need for him to seek the copyright owner's permission (if such copying is not done for publication purposes). Copying should be prohibited, however, if it is done to enable the user to avoid purchasing the work. The former is an example of "fair use," the latter is not.

In 1968 the National Library of Medicine made 120,000 copies of journal articles, which amounted to about 1,200,000 pages. In 1970 the National Institute of Health made 86,000 copies from medical and scientific journals totaling 930,000 pages. This is what the United States Court of Claims had condoned.

Chief Judge Cowen stated in his dissenting opinion in the Williams and Wilkins reversal that "what we have before us is a case of wholesale, machine copying and distribution of copyrighted material by defendant's libraries on a scale so vast that it dwarfs the output of many small publishing companies… [the] defendant's photocopying ... meets none of the criteria for 'fair use…' While the library may look at the giving of a photocopy as a substitute for a loan, the user and would-be purchaser gets an exact copy of the original article which is a substitute for a purchased copy ... [they] are intended to be substitutes for, and serve the same purpose as the original articles; and serve to diminish plaintiffs potential market for the original articles ... "

A problem which has blocked a compromise solution --- one that has partially vindicated the libraries' position --- is the complex logistics of seeking permissions and processing payments for copying. It would be an overwhelming burden for each library to attempt to deal with each publisher's rights and permissions department. Also, keeping track of the exact number of copies and specific pages is a nearly impossible administrative task, especially when copying is done on a large scale.

It has been suggested that a central clearinghouse be established for processing permissions and payments for photocopying activities. This still could leave a complex bookkeeping function for libraries. Perhaps a more viable solution would be the establishment of an escalating pricing structure. There would be two prices for an order of the same book; the choice of price would be determined by the purchaser's option of photocopy rights. A lower price would be set for libraries and individuals who do not wish the right to photoduplicate the purchased book; a higher price would obtain for libraries which want the right to photocopy the work in whole or in part for their potential users. This latter price would be derived from a formula based on the number of potential users multiplied by the regular list price. (The number of potential users can be arrived at by using student enrollment if an academic library; library cardholders if a public library; or even the size of the library budget.) A cooperative library system would have to consider the multiple institutions it serves.

Representatives of the major library and publishing associations should be able to work out a fair and equitable formula. There is some precedent for such a system. One publisher has sold indexes to certain periodicals, basing the price on the number of periodicals held in the purchaser's collection, or on the library's periodicals budget.

Publishers and libraries must seek compromise solutions and make appropriate recommendations to Congress. If inflationary pressures continue to mount and orders for materials being copied remain static or begin to wane, the retail prices of these publications will undoubtedly rise. Those which are marginal will come under even greater pressure as prices rise. Even a slight loss of orders could condemn a host of journals, symposiums, and technical and reference works to extinction. As these information sources are smothered, pressures for government intercession would mount. Education would lose more than it gained.

The information explosion is indeed a reality. Modern techniques of storing and disseminating this information --- computers, microfilm, and photocopying equipment --- are necessary. Suitable copyright protection and appropriate licensing arrangements would ensure an adequate supply of information for a free society with growing information needs.