IMMI - The best business case for Data Centers in Iceland

[Original Post written@http://startupiceland.wordpress.com]

Many of you know that I don't understand the business case for Data Centers in Iceland. I have written about why Data Centers will not work in Iceland here and here. I was wrong! IMMI or the International Modern Media Initiative is by far the best business case for Data Centers in Iceland. I knew about the initiative but I was not aware of the status of the resolutions that was passed in the Icelandic Parliament. I believe this is one of those rare moments in history where a nation is at a cross road and it chooses to lead the world... Iceland has that opportunity! I am strongly in support of this initiative. I am not political but I believe this initiative is as important as the laws on Human Rights. Freedom of the Internet and information on the Internet has been threatened many times through SOPA, PIPA and ACTA... I am positive there will be future attempts. I believe that Internet Service Providers are similar to those who pave the road, the road should not be shut down just because someone decided to drive at 300 miles/hr and killed someone. That has been the approach so far of every Government in the world. I believe Governments need to provide the proper legal framework to operate in, the Internet is a new paradigm where physical borders don't apply and trying to legislate it just like in the physical world just does not work. We need laws that understands and accommodates how the Internet works. Everyone of us have a role to play in this. The coordinated effort that was demonstrated to protest against SOPA and PIPA is needed to ensure the right kind of laws are passed that protect the freedom of information for the Global Citizen on the Internet.

Related articles

• Verne Global & Colt Industries Show a Zero Carbon Data Center (zdnet.com)
• Nordic Nations Pitch For US Data Centers (it.slashdot.org)

Eliminate Tax Incentive for Leverage

Image by Renegade98 via Flickr

Steve Randy Waldman makes a case for eliminating the tax incentive for corporate and individuals to borrow. I think it is a fair argument but I would not eliminate it but reduce it to a point where the marginal cost of bankruptcy is greater than the marginal benefit to borrow. Of course determining the point of inflection is hard as it is difficult to gauge the ability to quantify the above cost-benefit structure by managers of businesses. Here is a excerpt from his post, which I thought outlined the theory of his argument:

According to canonical financial theory a firm's debt/equity split, or "capital structure", should have no effect on overall firm value. It's just different ways of slicing up the same money pie, in a common metaphor. But if you introduce tax deductions for debt payments, the equation changes. Then the theory predicts that a rational firm should load up on debt financing, in order to capture the benefit of the "interest tax shelter". If bankruptcy were not an issue, rational firms would move to ~100% debt financing in order to extract the largest possible subsidy. With bankruptcy a possibility, a rational firm loads up on debt until the marginal increase in bankruptcy risk outweighs the marginal benefit of the subsidy. But if imperfect managers underestimate bankruptcy risk during periods of stability, they may unwittingly (or purposefully, if there are agency problems) bring firms close to the brink, provoking traumatic failures when the gales of an untamed business cycle blow strong and hard. By covering a large fraction of corporate interest payments, the government effectively subsidizes financial risk-taking that serves no operational purpose but generates real social costs.