The Secrecy at Apple

This is a good piece by Adam Lashinsky outlining the culture of secrecy at Apple.

Apple created an elaborate and unnerving system to enforce internal secrecy. It revolves around the concept of disclosure. To discuss a topic at a meeting, one must be sure everyone in the room is “disclosed” on the topic, meaning they have been made privy to certain secrets. “You can’t talk about any secret until you’re sure everyone is disclosed on it,” said an ex‑employee. As a result, Apple employees and their projects are pieces of a puzzle. The snapshot of the completed puzzle is known only at the highest reaches of the organization. It calls to mind the cells a resistance organization plants behind enemy lines, whose members aren’t given information that could incriminate a comrade. Jon Rubinstein, formerly Apple’s senior hardware executive, once deployed the comparison in a less flattering but equally effective manner. “We have cells, like a terrorist organization,” he told Business Week in 2000. “Everything is on a need‑to‑know basis.”

Perhaps a strong generalization of how Apple differs from other Silicon Valley companies:

Apple’s culture is the polar opposite of Google’s, where fliers announcing extracurricular activities — from ski outings to a high-profile author series — hang everywhere. At Apple, the iTunes team sponsors the occasional band, and there is a company gym (which isn’t free), but by and large Apple people come to work to work. “At meetings, there is no discussion about the lake house where you just spent the weekend,” recalled a senior engineer. “You get right down to business.” The contrast with the non-Apple world is stark. “When you interact with people at other companies, there’s just a relative lack of intensity,” said this engineer. “At Apple, people are so committed that they go home at night and don’t leave Apple behind them. What they do at Apple is their true religion.”

Perhaps one day when I visit the Apple campus I will indulge in getting the shirt that has the following printed on the front: “I VISITED THE APPLE CAMPUS. BUT THAT’S ALL I’M ALLOWED TO SAY.”

Bonus Day at Goldman Sachs

Today is Bonus Day at Goldman Sachs, or as it is colloquillay known: Compensation Communication Day. On this day:

Most employees are called one by one into a managing partner’s glass-walled office, where they are informed of their bonus numbers, as well as any stock awards or deferred cash payments they will get..

In what may seem like a paradox, many Goldman employees will be hoping that the firm’s stock does poorly on Thursday. That is because the firm is expected to give deferred stock to a large number of employees in lieu of larger cash payments. The exact number of shares an employee receives will be calculated based on the firm’s closing price on Thursday, according to a person with knowledge of the bank’s plans, meaning that the lower the price, the more shares employees will get, and the bigger the potential gains if the company’s fortunes improve.

And:

Even the largest bonuses at Goldman this year are likely to be a far cry from those given out during Wall Street’s prelapsarian (Editor’s note: awesome word!) years. As Charles D. Ellis recounts in The Partnership: The Making of Goldman Sachs, employees at the firm were once paid their yearly bonuses in stacks of $100,000 checks ($100,000 being the biggest single-check amount the firm’s payroll system could process).

Can you imagine carrying a stack of checks larger than your stash of cash in your wallet? I can’t.

A World of Parking

“The city of Los Angeles wasn’t built around the car. It was built around the parking lot.”

That quote is from this excellent Los Angeles Magazine piece by Dave Gardetta profiling Donald Shoup, a Yale-trained economist, who decided to study parking (and was called nuts for doing so). The essential question he is tackling: What if the free and abundant parking drivers crave is about the worst thing for the life of cities? The focus of the piece is on Los Angeles and its suburbs, and I pull the highlights below.

L.A. has been a wellspring for a parking guru like Shoup to become self-realized. Our downtown contains more parking spaces per acre than any other city in the world and has been adding them at a rate of about 1,000 a year for a century. 

Ouch

This year Shoup’s 765-page book, The High Cost of Free Parking, was rereleased to zero acclaim outside of the transportation monthlies, parking blogs, and corridor beyond his office door in UCLA’s School of Public Affairs building.

Great trivia about the invention of the Dual-Parking meter:

Carlton Magee was an editor of the Albuquerque Morning Journalwhen in 1920 he helped uncover what would become the Teapot Dome Scandal. A few years later, in a hotel lobby, a judge whom Magee once accused of corruption walked up and knocked him to the floor. The editor drew his pistol and shot wide, killing a bystander. Acquitted of manslaughter, Magee moved to Oklahoma City to run the Oklahoma News, where parking, not vindictive judges, was the big story. Magee invented the Dual Park-O-Meter, filed for its patent, and on July 16, 1935, 174 parking meters were slotted into Oklahoma City.

The revenue that the city of Los Angeles earns from its parking meters:

Today there are 39,440 parking meters positioned along L.A. streets, each one earning on average about a thousand dollars a year. Some 2,537,521 citations were handed out to motorists by the city’s parking enforcement bureau last year. The most expensive ticket—“Parking hazardous waste carrier in residential area”—is almost never written and costs $378. The most common ticket, for parking on a street cleaning day, will set you back $68. Last year fines to drivers totaled $166,700,840—money that was used to pay for parking operations; surplus revenue is handed over to the city council.

One of the major issues brought up in the piece: in many parts of the country (San Francisco, Boston, Seattle, and D.C. are exceptions), parking rates don’t change based on traffic conditions, day of week, etc. But Los Angeles is ready to change things:

This spring the DOT plans to introduce an $18.5 million smart wireless meter system based on Shoup’s theories. Called ExpressPark, the 6,000-meter array will be installed on downtown streets and lots, along with sensors buried in the pavement of every parking spot to detect the presence of cars and price accordingly, from as little as 50 cents an hour to $6. Street parking, like pork bellies, will be open to market forces.

Why don’t cities like New York and San Francisco have so few parking options? Answer:

San Francisco or New York might have ten times the parking each has now if they had buildings like 1100 Wilshire, where the first 15 floors are all garage. But the downtown areas of those cities won’t allow it.

Who knew parking (and its history) could be so interesting?

Is There a Relationship between IQ and Stock Ownership?

Bloomberg reports on an interesting study noting the relationship between IQ and ownership of equities (stocks):

Mark Grinblatt of the University of California, Los Angeles, Matti Keloharju of Aalto University in Espoo and Helsinki, Finland, and Juhani Linnainmaa at the University of Chicago compared results from intelligence tests given by the Finnish military between 1982 and 2001 to government records showing investments the draftees later held. They found the rate of stock ownership for people with the lowest scores trailed those with the highest even after adjusting for wealth, income, age and profession.

It appears the relevant paper is here. However, I am skeptical of the findings. Why look at such a specific populations subset (Finish military, which in this case was only men)? What about confounding factors such as those with higher income having more opportunities to learn about investing in stocks (and hence investing more into equities), or perhaps acting on advice of their peers? Of course, another primary objection is that the IQ exam is highly culture-dependent.

On a related note, some statistics about what percentage of American households invests in stocks:

Economists have debated for decades what they call the participation puzzle, trying to explain why more people don’t take advantage of the higher returns stocks have historically paid on savings. As few as 51 percent of American households own them, a 2009 study by the Federal Reserve found. Individual investors have pulled record cash out of U.S. equity mutual funds in the last five years as shares suffered the worst bear market since the 1930s.

Anyway, I am skeptical of the findings. What do you think?

Why Is China’s Soccer Team So Bad?

You’d think that China, with a population of over a billion people, would be able to field a half-decent soccer team. Unfortunately, you’d be wrong. The only time China qualified for the World Cup finals, in 2002, its side failed to score in any of its three matches. The Chinese soccer team has never won a game at the Olympics. And as this piece in The Economist attests, Chinese players are sometimes too incompetent not only to win matches, but also to rig them:

In a country so proud of its global stature, football is a painful national joke. Perhaps because Chinese fans love the sport madly and want desperately for their nation to succeed at it, football is the common reference point by which people understand and measure failure. When, in 2008, milk powder from the Chinese company Sanlu was found to have been tainted with melamine, causing a national scandal, the joke was: “Sanlu milk, the exclusive milk of the Chinese national football team!

And some interesting trivia from the piece:

With the blessing of the international football body FIFA, China also claims the world’s earliest recorded mention of a sport similar to football, during the Han dynasty in the 2nd century BC. A version of the game cuju, or “kick ball”, involved a single, elevated net and two sides of 12 men.

The declining teenage population playing soccer in China, despite the growing population, is a surprise:

From 1990 to 2000 there were more than 600,000 teenagers in China playing organised football, according to official counts of registered players; from 2000 to 2005 that number dropped to an average of 180,000; today (with statistics kept differently) Chinese football officials estimate the number of teenagers playing some form of organised football to be little more than 100,000.

And some theories on why the Chinese soccer team is so bad:

So whatever ails Chinese football, it is not a lack of passion from the country’s leaders. If anything, the opposite may be the problem. China’s Party-controlled, top-down approach to sport has yielded some magnificent results in individual sports, helping China win more Olympic gold medals in Beijing in 2008 than any other country. But this “Soviet model” has proven catastrophically unsuitable for assembling a team of 11 football players, much less a nation of them.

The first problem is the method of identifying young talent. The sport system selects children with particular attributes, such as long limbs, which could pay off in athletics, rowing, swimming, diving or gymnastics. These youngsters are the genetic wheat. But football’s legends can emerge from the seeming chaff of human physiques: think of stocky Diego Maradona, perhaps the greatest ever player, or his Argentine successor, the tiny genius Lionel Messi.

 

Andrew Sullivan on Blogging

I’ve just stumbled upon Andrew Sullivan’s essay “Why I Blog,” and it is brilliant. The prolific blogger that he is (previously at The Atlanticnow with The Daily Beast), this was a joy to read:

The blog remained a superficial medium, of course. By superficial, I mean simply that blogging rewards brevity and immediacy. No one wants to read a 9,000-word treatise online. On the Web, one-sentence links are as legitimate as thousand-word diatribes—in fact, they are often valued more. And, as Matt Drudge told me when I sought advice from the master in 2001, the key to understanding a blog is to realize that it’s a broadcast, not a publication. If it stops moving, it dies. If it stops paddling, it sinks.

Furthermore, Sullivan explains how blogging is participatory:

To blog is therefore to let go of your writing in a way, to hold it at arm’s length, open it to scrutiny, allow it to float in the ether for a while, and to let others, as Montaigne did, pivot you toward relative truth. A blogger will notice this almost immediately upon starting. Some e-mailers, unsurprisingly, know more about a subject than the blogger does. They will send links, stories, and facts, challenging the blogger’s view of the world, sometimes outright refuting it, but more frequently adding context and nuance and complexity to an idea. The role of a blogger is not to defend against this but to embrace it. He is similar in this way to the host of a dinner party. He can provoke discussion or take a position, even passionately, but he also must create an atmosphere in which others want to participate.

Perhaps my favorite one liner from Sullivan’s piece is this: “A good blog is your own private Wikipedia.” What I post here, for example, I want others to know/learn as well. On at least a half dozen occasions, I have searched through my archives (or via the search box on the right) to find something I linked to that was worth mentioning in a dinner conversation or a friendly dispute with a coworker.

Finally, Andrew’s metaphor for a blogger is spot-on:

There are times, in fact, when a blogger feels less like a writer than an online disc jockey, mixing samples of tunes and generating new melodies through mashups while also making his own music. He is both artist and producer—and the beat always goes on.

The whole piece is a must-read.

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(via Alexis Madrigal)

Green Bay Packers: The Worst Stock in America?

The Green Bay Packers are the only non-profit, community-owned major league professional sports team in the United States. In December 2011, the Green Bay Packers offered anyone the ability to purchase some shares of the team. At a hefty price tag of $250/share, with no dividends issued, and no seller protection — why would anyone purchase the stock?

Before we get to some answers, it’s important to note that the shares have been selling like hotcakes:

More than 250,000 shares have been sold since the first share offering in 15 years was announced on Dec. 6.  Demand has been so great that the team expanded the offering, which runs through Feb. 29, by 30,000 shares.

Although the offering document calls the shares “common stock,” they confer almost none of the advantages of a traditional stock. The document warns that buyers “should not purchase common stock with the purpose of making a profit.” A purchase does not bump buyers higher up the Packers’ 96,000-strong waiting list for tickets or allow them to buy T-shirts and cheesehead hats at a discount. So why bother? Perhaps the pride of being a part owner of this franchise trumps all other factors: return on investment, dividends, etc. (Actually, there is one primary monetary advantage for holding Packers’ stock. Because the purchase meets a condition of worthless stock, the entire purchase may be tax deducted immediately after the shares are bought. )

What happens if the Packers are ever dissolved by the NFL?

The Packers’ Articles of Incorporation specify that if the team is dissolved, “all profits and assets” must go to community programs and charities. Until 1997, the sole beneficiary was one American Legion post in Green Bay. Since then it has been the Green Bay Packers Foundation, which benefits a number of local and state causes.

A bit more about the history of the Green Bay Packers’ stock program:

The organization previously had offerings in 1923, ’35, ’50 and ’97. The first three literally saved the franchise from bankruptcy, and proceeds from the fourth went toward the redevelopment of Lambeau Field, which was complete in 2003. The organization currently has approximately 112,000 shareholders who hold about 4,750,000 shares of stock.

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References: Green Bay Packers, WSJ.

The Downside of Being Internet Famous

Gina Trapani, the founder of Lifehacker, has recently surpassed 200,000 followers on Twitter. In her post “The Flip Side of a Big Audience,” she mentions the benefits of having a large audience:

If I want a lot of people to see something, I can make that happen in a few keystrokes without any help from a PR firm or media outlet. I’ve mentioned my follower counts and blog stats in book deal and paycheck negotiations, because people who hire me are often buying my ability to market my book or project.

But the focus of her post is on the negatives of being/becoming internet famous:

You field a weekly flood of pitches. Having a big audience means you’re a commodity, and you get to constantly field pitches from strangers, acquaintances, former co-workers, and distant family members who you never hear from otherwise asking you to mention their new app, book, Kickstarter project, or MySpace page. People decide how important you are by your Klout score and treat you accordingly. Ad agencies look up how much your tweets are worth and recruit you to tweet on behalf of their clients for money. It’s a bizarre and sometimes awkward crash course in saying “sorry, no” to the requests that just don’t feel right (and most of them don’t).

People who don’t know you make wildly inaccurate assumptions about things you say. If you crack a joke, use sarcasm, or don’t fully explain your 140-character statement, you will be misunderstood, because most of your followers barely know you. Last week I said I have mixed feelings about lesbian contestants in a beauty pageant. A handful of people tried to explain why lesbians are just as worthy of beauty pageants as heterosexual women. Having to explain stinks.

You forget how to share with people who do know you. To avoid misunderstandings, you start dumbing down your posts and only writing things which are literal and mostly non-controversial. (At least I do.) But that means your friends don’t enjoy the connection that comes with hearing you be you, instead of edited-you. In an attempt to fix this problem, I set my Facebook user profile to friends-only access. But by now I’m so ruined by my addiction to the flood of retweets, favorites, and replies I get from public posts to my big audience, I spend less time sharing privately.

You get addicted to the approval of strangers. The addiction to the attention you get from a crowd of strangers turns you into a performer instead of a sharer. You look for cheap laughs, stars, retweets, and replies, instead of meaningful conversation with people you actually care about.

Your view of the world gets skewed. An outsized audience presents problems like the ones listed here that no one else has. When you have a big audience, you’re the 1% of the web, and that means your view of the world is skewed. You get paranoid about privacy, cynical about requests from friends, and impatient about misunderstandings.

I would argue that anyone who is on Twitter and is gaining popularity in the blogosphere can get addicted to the approval of strangers. It’s an odd behavior — we seek reassurance from people we’ve never met rather than the ones close to us.

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(Hat Tip: @cherilucas)

Richard Feynman on Why Questions

I’ve previously written that Richard Feynman is my favorite scientist. In the video below, an interviewer asks Richard Feynman why magnets behave as they do. Feynman, initially perplexed, then goes on to explain what the interviewer observes. But more importantly, with magnificent brilliance, Feynman muses on the dangers and difficulty (not to mention, the inherent assumptions) of so-called “Why Questions”:

Transcript follows:

Interviewer: If you get hold of two magnets, and you push them, you can feel this pushing between them. Turn them around the other way, and they slam together. Now, what is it, the feeling between those two magnets?

Feynman: What do you mean, “What’s the feeling between the two magnets?”

Interviewer: There’s something there, isn’t there? The sensation is that there’s something there when you push these two magnets together.

Feynman: Listen to my question. What is the meaning when you say that there’s a feeling? Of course you feel it. Now what do you want to know?

Interviewer: What I want to know is what’s going on between these two bits of metal?

Feynman: They repel each other.

Interviewer: What does that mean, or why are they doing that, or how are they doing that? I think that’s a perfectly reasonable question.

Feynman: Of course, it’s an excellent question. But the problem, you see, when you ask why something happens, how does a person answer why something happens? For example, Aunt Minnie is in the hospital. Why? Because she went out, slipped on the ice, and broke her hip. That satisfies people. It satisfies, but it wouldn’t satisfy someone who came from another planet and who knew nothing about why when you break your hip do you go to the hospital. How do you get to the hospital when the hip is broken? Well, because her husband, seeing that her hip was broken, called the hospital up and sent somebody to get her. All that is understood by people. And when you explain a why, you have to be in some framework that you allow something to be true. Otherwise, you’re perpetually asking why. Why did the husband call up the hospital? Because the husband is interested in his wife’s welfare. Not always, some husbands aren’t interested in their wives’ welfare when they’re drunk, and they’re angry.

And you begin to get a very interesting understanding of the world and all its complications. If you try to follow anything up, you go deeper and deeper in various directions. For example, if you go, “Why did she slip on the ice?” Well, ice is slippery. Everybody knows that, no problem. But you ask why is ice slippery? That’s kinda curious. Ice is extremely slippery. It’s very interesting. You say, how does it work? You could either say, “I’m satisfied that you’ve answered me. Ice is slippery; that explains it,” or you could go on and say, “Why is ice slippery?” and then you’re involved with something, because there aren’t many things as slippery as ice. It’s very hard to get greasy stuff, but that’s sort of wet and slimy. But a solid that’s so slippery? Because it is, in the case of ice, when you stand on it (they say) momentarily the pressure melts the ice a little bit so you get a sort of instantaneous water surface on which you’re slipping. Why on ice and not on other things? Because water expands when it freezes, so the pressure tries to undo the expansion and melts it. It’s capable of melting, but other substances get cracked when they’re freezing, and when you push them they’re satisfied to be solid.

Why does water expand when it freezes and other substances don’t? I’m not answering your question, but I’m telling you how difficult the why question is. You have to know what it is that you’re permitted to understand and allow to be understood and known, and what it is you’re not. You’ll notice, in this example, that the more I ask why, the deeper a thing is, the more interesting it gets. We could even go further and say, “Why did she fall down when she slipped?” It has to do with gravity, involves all the planets and everything else. Never mind! It goes on and on. And when you’re asked, for example, why two magnets repel, there are many different levels. It depends on whether you’re a student of physics, or an ordinary person who doesn’t know anything. If you’re somebody who doesn’t know anything at all about it, all I can say is the magnetic force makes them repel, and that you’re feeling that force.

You say, “That’s very strange, because I don’t feel kind of force like that in other circumstances.” When you turn them the other way, they attract. There’s a very analogous force, electrical force, which is the same kind of a question, that’s also very weird. But you’re not at all disturbed by the fact that when you put your hand on a chair, it pushes you back. But we found out by looking at it that that’s the same force, as a matter of fact (an electrical force, not magnetic exactly, in that case). But it’s the same electric repulsions that are involved in keeping your finger away from the chair because it’s electrical forces in minor and microscopic details. There’s other forces involved, connected to electrical forces. It turns out that the magnetic and electrical force with which I wish to explain this repulsion in the first place is what ultimately is the deeper thing that we have to start with to explain many other things that everybody would just accept. You know you can’t put your hand through the chair; that’s taken for granted. But that you can’t put your hand through the chair, when looked at more closely, why, involves the same repulsive forces that appear in magnets. The situation you then have to explain is why, in magnets, it goes over a bigger distance than ordinarily. There it has to do with the fact that in iron all the electrons are spinning in the same direction, they all get lined up, and they magnify the effect of the force ’til it’s large enough, at a distance, that you can feel it. But it’s a force which is present all the time and very common and is a basic force of almost – I mean, I could go a little further back if I went more technical – but on an early level I’ve just got to tell you that’s going to be one of the things you’ll just have to take as an element of the world: the existence of magnetic repulsion, or electrical attraction, magnetic attraction.

I can’t explain that attraction in terms of anything else that’s familiar to you. For example, if we said the magnets attract like if rubber bands, I would be cheating you. Because they’re not connected by rubber bands. I’d soon be in trouble. And secondly, if you were curious enough, you’d ask me why rubber bands tend to pull back together again, and I would end up explaining that in terms of electrical forces, which are the very things that I’m trying to use the rubber bands to explain. So I have cheated very badly, you see. So I am not going to be able to give you an answer to why magnets attract each other except to tell you that they do. And to tell you that that’s one of the elements in the world – there are electrical forces, magnetic forces, gravitational forces, and others, and those are some of the parts. If you were a student, I could go further. I could tell you that the magnetic forces are related to the electrical forces very intimately, that the relationship between the gravity forces and electrical forces remains unknown, and so on. But I really can’t do a good job, any job, of explaining magnetic force in terms of something else you’re more familiar with, because I don’t understand it in terms of anything else that you’re more familiar with.

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(Hat tip to Less Wrong for the transcript)

Who Runs America? The Top 0.1 Percent

I’ve read some interesting factoids about the 1% of the American population, but this post by a money manager who works with ultra-wealthy individuals has a perspective on the upper echelons of the top 1%:

Membership in this elite group is likely to come from being involved in some aspect of the financial services or banking industry, real estate development involved with those industries, or government contracting. Some hard working and clever physicians and attorneys can acquire as much as $15M-$20M before retirement but they are rare. Those in the top 0.5% have incomes over $500k if working and a net worth over $1.8M if retired. The higher we go up into the top 0.5% the more likely it is that their wealth is in some way tied to the investment industry and borrowed money than from personally selling goods or services or labor as do most in the bottom 99.5%. They are much more likely to have built their net worth from stock options and capital gains in stocks and real estate and private business sales, not from income which is taxed at a much higher rate. These opportunities are largely unavailable to the bottom 99.5%.

Recently, I spoke with a younger client who retired from a major investment bank in her early thirties, net worth around $8M. We can estimate that she had to earn somewhere around twice that, or $14M-$16M, in order to keep $8M after taxes and live well along the way, an impressive accomplishment by such an early age. Since I knew she held a critical view of investment banking, I asked if her colleagues talked about or understood how much damage was created in the broader economy from their activities. Her answer was that no one talks about it in public but almost all understood and were unbelievably cynical, hoping to exit the system when they became rich enough.

Folks in the top 0.1% come from many backgrounds but it’s infrequent to meet one whose wealth wasn’t acquired through direct or indirect participation in the financial and banking industries. One of our clients, net worth in the $60M range, built a small company and was acquired with stock from a multi-national. Stock is often called a “paper” asset. Another client, CEO of a medium-cap tech company, retired with a net worth in the $70M range. The bulk of any CEO’s wealth comes from stock, not income, and incomes are also very high. Last year, the average S&P 500 CEO made $9M in all forms of compensation. One client runs a division of a major international investment bank, net worth in the $30M range and most of the profits from his division flow directly or indirectly from the public sector, the taxpayer. Another client with a net worth in the $10M range is the ex-wife of a managing director of a major investment bank, while another was able to amass $12M after taxes by her early thirties from stock options as a high level programmer in a successful IT company. The picture is clear; entry into the top 0.5% and, particularly, the top 0.1% is usually the result of some association with the financial industry and its creations. I find it questionable as to whether the majority in this group actually adds value or simply diverts value from the US economy and business into its pockets and the pockets of the uber-wealthy who hire them. They are, of course, doing nothing illegal.

So who runs America? The author’s conclusion is damning:

A highly complex set of laws and exemptions from laws and taxes has been put in place by those in the uppermost reaches of the U.S. financial system. It allows them to protect and increase their wealth and significantly affect the U.S. political and legislative processes. They have real power and real wealth. Ordinary citizens in the bottom 99.9% are largely not aware of these systems, do not understand how they work, are unlikely to participate in them, and have little likelihood of entering the top 0.5%, much less the top 0.1%. Moreover, those at the very top have no incentive whatsoever for revealing or changing the rules.

Full post here.