links of the day

Warren Buffett: Embracing the 21st Century

readingbyeugene Leave a comment

The news that Warren Buffett’s company, Berkshire Hathaway, bought a $10.7 billion stake in IB (64 million shares, a stake of roughly 5.5% of the company) surprised me this morning. This is a man who once explained “Technology is just something we don’t understand, so we don’t invest in it.”

What’s more? In his letter to his shareholders in 2000, Buffett wrote:

We have embraced the 21st century by entering such cutting-edge industries as brick, carpet, insulation and paint. Try to control your excitement.

So yes, let’s all collective welcome Warren Buffett to the 21st century.

I am skeptical on this purchase of IBM compared to other technology stocks such as Google and Apple. What has IBM done that’s really innovative lately? Yes, their Watson project was incredible (winning the Jeopardy! tournament against Brad Rutter and Ken Jennings was quite impressive), but nothing else that they are doing readily stands out, in my mind. What do you think?

###
(hat tip: Dealbook)

Google X, a Top Secret Lab

readingbyeugene 3 Comments

I’ve known that Google has a lot of secret projects up its sleeve, and this New York Times piece provides some further guidance:

It’s a place where your refrigerator could be connected to the Internet, so it could order groceries when they ran low. Your dinner plate could post to a social network what you’re eating. Your robot could go to the office while you stay home in your pajamas. And you could, perhaps, take an elevator to outer space.

These are just a few of the dreams being chased at Google X, the clandestine lab where Google is tackling a list of 100 shoot-for-the-stars ideas. In interviews, a dozen people discussed the list; some work at the lab or elsewhere at Google, and some have been briefed on the project. But none would speak for attribution because Google is so secretive about the effort that many employees do not even know the lab exists.

The driverless cars are a number of years away from formal introduction into the marketplace…But until then, this sounds like a bad idea:

Google could sell navigation or information technology for the cars, and theoretically could show location-based ads to passengers as they zoom by local businesses while playing Angry Birds in the driver’s seat.

Apparently, Google X operates both at Google’s campus in Mountain View, CA and in an undisclosed top-secret location. Hmm.

So who’s involved with Google X?

A leader at Google X is Sebastian Thrun, one of the world’s top robotics and artificial intelligence experts, who teaches computer science at Stanford and invented the world’s first driverless car. Also at the lab is Andrew Ng, another Stanford professor, who specializes in applying neuroscience to artificial intelligence to teach robots and machines to operate like people.

I received an email from Thrun over the weekend, regarding my progress in the online Artificial Intelligence course. Unfortunately, I ended up pursuing other interests in the last couple of weeks and had to drop the course. It was excellent from the three weeks in which I actively participated in it, however.

On Early Employees and the Google Chef Situation

readingbyeugene 4 Comments

A recent Wall Street Journal article caused controversy regarding Zynga’s path to an IPO. Did Zynga have any right to declare that early employees give up their stock options?

The quote below also caused a stir in the blogosphere:

Built into that arrangement [stock options] is the chance that … some very early employees will end up with bigger windfalls than latecomers who contribute more to the company. Many in Silicon Valley cite an early-hired Google Inc. cook whose stock was worth $20 million after the firm’s 2004 IPO.

Zynga attempted to avoid such pitfalls. In meetings last year, Zynga executives said they didn’t want a “Google chef” situation, said a person with knowledge of the discussions.

The Google chef situation refers to an early employee at Google, Charlie Ayers, who made $20 million from his stock options at Google. Does this seem fair/right to you? Well, if you read this former Google engineer’s response, you’ll understand why the chef was important to the company. This software engineer argues that what Charlie contributed to Google on a daily basis was more than he (the software engineer) ever did. It’s a must-read post:

Working at a startup is hard. The hours are long, the stress can be brutal, and there is no guarantee of success. In fact, the odds for a raw startup (which is what Google was when Charlie joined) are very much against you. I have no idea what Google’s deal with Charlie was, but typically you take a pay cut for a shot at the brass ring. Charlie didn’t make $20M for cooking, he made $20M for taking the risk that the company he was joining would fail and that he could end up five years older, unemployed, and with nothing to show for his trouble.

But it is not Zynga’s failure to grasp this basic fact of startup economics that bothers me, it is their singling out of Charlie in particular because he’s a chef. As someone who was there in the early days I can tell you that Charlie Ayers contributed more to Google’s success that I did, and I was a senior software engineer.

Providing quality food to an ever-growing roster of hungry engineers is not an easy task. Charlie and his staff worked harder on a light day than I ever did (or probably ever will). If you doubt me, take a job in a restaurant kitchen some time. Not only that, but the stakes are higher than most people realize. Feeding a few hundred people in a professional setting is not just taking the process of preparing a home-cooked meal and multiplying. If a software engineer screws up, the site goes down. But if a chef screws up, people get sick. In extreme cases, they die.

If I were to point out that no one ever got sick from eating Charlie’s food most people would consider than to be damning with faint praise, but that is just a testament to how well Charlie did his job. Not only did he keep us well feed and free from salmonella, he inspired us. When I said that the best restaurant in town was Google’s cafeteria that was no exaggeration. Charlies food was outstanding, day in and day out. (It still is. If you’re in the Bay Area, do yourself a favor and have a meal at his restaurant.)

But Charlie’s contribution to Google’s early success went even well beyond that. Charlie was a friend and a cheerleader. Everyone at Google got to know him because everyone went through the lunch line, and Charlie was always there making sure everything was ship-shape. And Charlie got to know us, got to know our individual tastes and preferences, and bent over backwards to accommodate them, but never at the cost of compromising on his principles of making his offerings healthy and sustainable, principles he still adheres to. Being fed by Charlie was a privilege. It was inspiring. It was cool. It kept us going.

Don’t tell me Charlie deserved his payday any less than the rest of us.

What a compelling blog post. The lesson? Don’t dismiss a particular employee of a company: they may be doing more to keep the company going than you realize.

Why is U2 So Popular?

readingbyeugene 2 Comments

Ever wonder why the band U2 is so popular? Here’s Quora to the rescue, with an elegantly awesome answer:

Big Market

Imagine you’re a middle-aged, upper-middle-class male. You live in a large metropolitan area. You have a good job. Your wife does Pilates. Your oldest just started kindergarten. Yes, you’re an adult, but you’re still cool! Your jeans cost $125. Sometimes you wear sneakers with a blazer! 

You like the idea of being a guy who’s into live music, but the last few concerts you’ve been to were (a) too loud, (b) too crowded, (c) too foreign (you were lucky if you recognized one song). You’ll snap a few photos with your smartphone and tell your bros about it to get some street cred, but let’s face it: you didn’t enjoy yourself. There are millions of you. And you’re willing to drop cash to have a concert make you feel cool again.

Product Market Fit  

Then you learn that U2 is coming to town—U2!  Earnest, melodic, Oprah-endorsed U2! $200 a ticket? No problem. You get a sitter. Your wife is excited—this is going to be great! You invite some friends from college to join you.   

On the way, you listen to the “early stuff.” The Joshua Tree pumps through the speakers of your Lexus SUV (no judgment—you have two kids!). The harmonies soothe. The lyrics are straightforward. You recall a simpler time before car seats and prostate exams. The nostalgia is so thick you have to wipe it from your face. You haven’t looked at your phone in nearly 11 minutes.

You arrive at the show and see yourself everywhere. Tasteful North Face and Patagonia jackets abound. The stands are awash in earth tones. No one is shoving. No one has a nose ring. These are your people.  

Usability

The band begins with A SONG YOU RECOGNIZE! You’re on your feet. You’re drinking “craft” beer. Everyone is singing terribly.  

And the best part—YOU CAN DANCE HERE! 80,000 people surround you and there’s not a coordinated movement in sight. Even the band sets a low bar. Bono doesn’t so much dance as lunge and bounce. The other guys seem content to nod and rock. All around you, middle-aged people are rocking and lunging and bouncing and singing badly. Is that guy wearing Tod’s loafers and a Barbour jacket? Yes, he is. And he’s in the zone.

The set is basically a greatest hits playlist. The band graciously performs two new songs that no one recognizes to give you a few minutes to use the john and grab another IPA. They might as well flash an intermission sign.  

Even the political statements go down smooth: “Democracy!” “Fight AIDS!” How could you possibly disagree? You’re not only dancing and reminiscing—you’re spreading freedom and reasonably-priced medicines to distant lands! 

And the kicker: not one, but TWO encores, the ones you know best—the ones you first heard that summer you painted houses or kissed Katie at the beach party. You’re closing your eyes now. This is sad and sweet. You put your arm around your wife. You’re wondering if Katie ever got married. A third of the crowd departs after the first encore. It’s no big deal; some of us have work in the morning! Anyway, the traffic will be better if everyone doesn’t leave at once.

So, so awesome. Kudos to Daniel Rosenthal for the whimsical answer. Hat tip goes to Paul Kedrosky.

Ten Lessons from Gian-Carlo Rota

readingbyeugene 1 Comment

I’d never heard of Gian-Carlo Rota before today, but I stumbled upon his “Ten Lessons I Wish I Had Been Taught,” and it is fantastic.

From Wikipedia:

Rota was one of the teachers at Massachusetts Institute of Technology (MIT). He taught a difficult but very popular course in probability, 18.313, which MIT has not offered again. He also taught 18.001 (Applications of Calculus), 18.03 (Differential Equations), and 18.315 (Combinatorial Theory). His philosophy course inphenomenology was offered on Friday nights to keep the enrollment manageable. Among his many eccentricities, he would not teach without a can of Coca-Cola, and handed out prizes ranging from Hershey bars to pocket knives to students who asked questions in class or did well on tests.

Excellent advice on what it takes to give a good lecture:

The following four requirements of a good lecture do not seem to be altogether obvious, judging from the mathematics lectures I have been listening to for the past forty-six years.

a. Every lecture should make only one main point The German philosopher G. W. F. Hegel wrote that any philosopher who uses the word “and” too often cannot be a good philosopher. I think he was right, at least insofar as lecturing goes. Every lecture should state one main point and repeat it over and over, like a theme with variations. An audience is like a herd of cows, moving slowly in the direction they are being driven towards. If we make one point, we have a good chance that the audience will take the right direction; if we make several points, then the cows will scatter all over the field. The audience will lose interest and everyone will go back to the thoughts they interrupted in order to come to our lecture.

b. Never run overtime Running overtime is the one unforgivable error a lecturer can make. After fifty minutes (one microcentury as von Neumann used to say) everybody’s attention will turn elsewhere even if we are trying to prove the Riemann hypothesis. One minute overtime can destroy the best of lectures.

c. Relate to your audience As you enter the lecture hall, try to spot someone in the audience with whose work you have some familiarity. Quickly rearrange your presentation so as to manage to mention some of that person’s work. In this way, you will guarantee that at least one person will follow with rapt attention, and you will make a friend to boot.

Everyone in the audience has come to listen to your lecture with the secret hope of hearing their work mentioned.

d. Give them something to take home It is not easy to follow Professor Struik’s advice. It is easier to state what features of a lecture the audience will always remember, and the answer is not pretty. I often meet, in airports, in the street and occasionally in embarrassing situations, MIT alumni who have taken one or more courses from me. Most of the time they admit that they have forgotten the subject of the course, and all the mathematics I thought I had taught them. However, they will gladly recall some joke, some anecdote, some quirk, some side remark, or some mistake I made.

On proper blackboard technique (I wish more professors did this when I was in school):

a. Make sure the blackboard is spotless It is particularly important to erase those distracting whirls that are left when we run the eraser over the blackboard in a non uniform fashion.

By starting with a spotless blackboard, you will subtly convey the impression that the lecture they are about to hear is equally spotless.

b. Start writing on the top left hand corner What we write on the blackboard should correspond to what we want an attentive listener to take down in his notebook. It is preferable to write slowly and in a large handwriting, with no abbreviations. Those members of the audience who are taking notes are doing us a favor, and it is up to us to help them with their copying. When slides are used instead of the blackboard, the speaker should spend some time explaining each slide, preferably by adding sentences that are inessential, repetitive or superfluous, so as to allow any member of the audience time to copy our slide. We all fall prey to the illusion that a listener will find the time to read the copy of the slides we hand them after the lecture. This is wishful thinking.

On using the Feynman method (my favourite scientist):

Richard Feynman was fond of giving the following advice on how to be a genius. You have to keep a dozen of your favorite problems constantly present in your mind, although by and large they will lay in a dormant state. Every time you hear or read a new trick or a new result, test it against each of your twelve problems to see whether it helps. Every once in a while there will be a hit, and people will say: “How did he do it? He must be a genius!”

On the importance of giving lavish acknowledgements:

I have always felt miffed after reading a paper in which I felt I was not being given proper credit, and it is safe to conjecture that the same happens to everyone else. One day, I tried an experiment. After writing a rather long paper, I began to draft a thorough bibliography. On the spur of the moment, I decided to cite a few papers which had nothing whatsoever to do with the content of my paper, to see what might happen.

Somewhat to my surprise, I received letters from two of the authors whose papers I believed were irrelevant to my article. Both letters were written in an emotionally charged tone. Each of the authors warmly congratulated me for being the first to acknowledge their contribution to the field.

Do read the entire thing. It’s excellent.

Why Are American Universities Failing?

readingbyeugene Leave a comment

There’s no easy answer. Unmotivated students. High student debt. Too much emphasis on athletics versus academics. Declining emphasis on teaching (versus doing research). And so on. In this post in New York Review of Books, Anthony Grafton cites eight different sources (books and papers) and provides some clues:

Vast numbers of students come to university with no particular interest in their courses and no sense of how these might prepare them for future careers. The desire they cherish, Arum and Roksa write, is to act out “cultural scripts of college life depicted in popular movies such as Animal House(1978) and National Lampoon’s Van Wilder (2002).” Academic studies don’t loom large on their mental maps of the university. Even at the elite University of California, students report that on average they spend “twelve hours [a week] socializing with friends, eleven hours using computers for fun, six hours watching television, six hours exercising, five hours on hobbies”—and thirteen hours a week studying.

For most of them, in the end, what the university offers is not skills or knowledge but credentials: a diploma that signals employability and basic work discipline. Those who manage to learn a lot often—though happily not always—come from highly educated families and attend highly selective colleges and universities. They are already members of an economic and cultural elite. Our great, democratic university system has become a pillar of social stability—a broken community many of whose members drift through, learning little, only to return to the economic and social box that they were born into.

This paragraph sounds more depressing than what my first year in college was actually like (there was no Facebook yet):

Is the higher education bubble about to pop? I don’t know. The more thoughtful writers warn against monocausal explanations. Bowen and his colleagues, for example, test the effects of student loans on attrition rates. They conclude that it is not clear that debt is a primary cause of student failure. Still, these developments are interwoven, in the experience of many students if not in the intentions of legislators. Imagine what it’s like to be a normal student nowadays. You did well—even very well—in high school. But you arrive at university with little experience in research and writing and little sense of what your classes have to do with your life plans. You start your first year deep in debt, with more in prospect. You work at Target or a fast-food outlet to pay for your living expenses. You live in a vast, shabby dorm or a huge, flimsy off-campus apartment complex, where your single with bath provides both privacy and isolation. And you see professors from a great distance, in space as well as culture: from the back of a vast dark auditorium, full of your peers checking Facebook on their laptops.

The summarizing piece is worth reading. I just wish the author made some effort to break down graduation rates, debt levels, etc. by public/private universities, household income, and race.

Official School Portraits as Mug Shots

readingbyeugene 2 Comments

It seems to me that this type of article has been published before, but I am not surprised that many parents are starting to feel that official school portraits resemble “mug shots.”

So why don’t schools innovate and hire photographers who would be willing to spice things up and do something fun/unique with the school portraits? The Wall Street Journal reports:

It can be difficult for small companies to compete for business against bigger, established players that dominate school photos, in large part because public school systems often ask the portrait companies they commission to give them a percentage of the parents’ spending on photo packages. Sometimes, schools bill “Picture Day” as a fund-raiser, alerting parents that they will benefit from money paid to the photography companies.

Companies like Lifetouch National School Studios, which photographs about 20 million students around the country each year, gives schools anywhere from 10% to 25% of parent payments. Each arrangement is individually negotiated. “There may be a commission that a school is requiring or sometimes a school calls it a fundraiser,” says Kelvin Miller, corporate vice president of Lifetouch Inc., Lifetouch National School Studio’s parent company.

Seems like this business is ripe for disruption. What say you?

On Moral vs. Contractual Obligations

readingbyeugene Leave a comment

From a very good personal story in The New York Times, about a financial planner who ended up losing his house:

Borrowing that much had seemed to make sense when the value of the home was still rising substantially every year, taking our net worth higher with it. But at that point, there was no way we could sell the home for anywhere near what we owed. Some of my friends were already doing short sales, where the bank agrees to let you sell the house for less than your loan balance. I was also aware you had to be three months behind in your payments before the bank would talk to you about the possibility.

At first, I dismissed the idea of a short sale. Late that summer, I sat down with a really close friend in Las Vegas, someone I looked up to. He cut to the heart of the matter right away: Why, he wanted to know, were we still making the payments?

Because I have a moral obligation, I said. You pay your debts.

He proceeded to explain that I didn’t have a moral obligation to the bank. I had a moral obligation to my family. I had a contractual obligation to the bank, along with a clear moral obligation to be honest in my dealings. What he was asking was this: Which is more important? Your contractual obligation to the bank or your obligation to your family to preserve your ability to make a living?

I had never thought of it that way. But it made sense. I summed it up to myself like this: I have a contractual obligation to the bank (as well as a moral obligation not to skirt the consequences of breaking it: losing my house and wrecking my credit score). But my moral obligation to my family trumps the contractual obligation to the bank.

I found this paragraph particularly enlightening. Do not be quick to judge others’ financial habits:

For one thing, I am less quick to judge other people’s financial behavior. I’m also more inclined to take into account personal factors that determine how people behave around money.

I have a friend who is going through a tough time financially. He has a high income, but is burdened by debt from a few real estate deals that went south. He continues to take fairly expensive ski trips. That would seem irresponsible in his situation, and maybe they are.

But I now realize that it is not that simple. Maybe those trips are keeping the guy alive, or saving his marriage or keeping him sane enough to work.

The author of the piece, Carl Richards, is coming out with a book The Behavior Gap: Simple Ways to Stop Doing Dumb Things With Money early next year.

The Upside of Facebook Use

readingbyeugene Leave a comment

How is being active on Facebook and other social media sites affecting your friendships in real life?

According to Matthew Brashears, a Cornell University sociologist who surveyed more than 2,000 adults from a national database and found that from 1985 to 2010, the number of truly close friends people cited has dropped (even if we’re more active in socialization than ever before). On average, participants listed 2.03 close friends in Brashears’ survey. That number was down from about three in a 1985 study.

Here’s the gist:

Does that mean we’re more isolated in these times when we seem to meet more people online than in person? (How many of your Facebook “friends” are really friends of yours?) Defying some of the stereotypes of the digital age, social scientists say Facebook may actually be healthy for us. Keith Hampton at the Annenberg School for Communication at the University of Pennsylvania wrote a report for the Pew Research Center in which he found that “Internet users in general, but Facebook users even more so, have more close relationships than other people.”

“Facebook users get more overall social support, and in particular they report more emotional support and companionship than other people,” wrote Hampton in a blog post. “And, it is not a trivial amount of support. Compared to other things that matter for support — like being married or living with a partner — it really matters. Frequent Facebook use is equivalent to about half the boost in support you get from being married.“

That last sentence is both encouraging and frightening at the same time.

###
For one personal perspective on virtual friendships, please check out Cheri’s five-part series, beginning here. Then move on to Part II, Part III, Part IV, and Part V. Highly recommended reading.

Nassim Nicholas Taleb on Banker Bonuses

readingbyeugene Leave a comment

In today’s New York Times, Nassim Nicholas Taleb has a good op-ed decrying banker bonuses. He argues:

Instead, it’s time for a fundamental reform: Any person who works for a company that, regardless of its current financial health, would require a taxpayer-financed bailout if it failed should not get a bonus, ever. In fact, all pay at systemically important financial institutions — big banks, but also some insurance companies and even huge hedge funds — should be strictly regulated.

Critics like the Occupy Wall Street demonstrators decry the bonus system for its lack of fairness and its contribution to widening inequality. But the greater problem is that it provides an incentive to take risks. The asymmetric nature of the bonus (an incentive for success without a corresponding disincentive for failure) causes hidden risks to accumulate in the financial system and become a catalyst for disaster. This violates the fundamental rules of capitalism; Adam Smith himself was wary of the effect of limiting liability, a bedrock principle of the modern corporation.

Bonuses are particularly dangerous because they invite bankers to game the system by hiding the risks of rare and hard-to-predict but consequential blow-ups, which I have called “black swan” events. The meltdown in the United States subprime mortgage market, which set off the global financial crisis, is only the latest example of such disasters.

If you’ve never read The Black Swan, I highly recommend it. In it, Taleb goes into detail about the low-probability, high impact events that can derail individuals, institutions, and governments.

Taleb goes on to say:

What would banking look like if bonuses were eliminated? It would not be too different from what it was like when I was a bank intern in the 1980s, before the wave of deregulation that culminated in the 1999 repeal of the Glass-Steagall Act, the Depression-era law that had separated investment and commercial banking. Before then, bankers and lenders were boring “lifers.” Banking was bland and predictable; the chairman’s income was less than that of today’s junior trader. Investment banks, which paid bonuses and weren’t allowed to lend, were partnerships with skin in the game, not gamblers playing with other people’s money.

Of course, the big question is: how do we get banks to follow this no-bonus policy? Can it become a law?