quote of the day

On Hating Dreams

readingbyeugene Leave a comment

Michael Chabon, in New York Review of Books, writes on why he hates dreams:

Dreams are the Sea Monkeys of consciousness: in the back pages of sleep they promise us teeming submarine palaces but leave us, on waking, with a hermetic residue of freeze-dried dust. The wisdom of dreams is a fortune on paper that you can’t cash out, an oasis of shimmering water that turns, when you wake up, to a mouthful of sand. I hate them for their absurdities and deferrals, their endlessly broken promise to amount to something, by and by. I hate them for the way they ransack memory, jumbling treasure and trash. I hate them for their tedium, how they drag on, peter out, wander off…Dreams are effluvia, bodily information, to be shared only with intimates and doctors. 

Fun musings, but I think Chabon should dream more.

The Compounding Returns of Intelligence

readingbyeugene Leave a comment

Stephen Cohen, co-founder of Palantir, in a conversation with Peter Thiel and Max Levchin:

We tend to massively underestimate the compounding returns of intelligence. As humans, we need to solve big problems. If you graduate Stanford at 22 and Google recruits you, you’ll work a 9-to-5. It’s probably more like an 11-to-3 in terms of hard work. They’ll pay well. It’s relaxing. But what they are actually doing is paying you to accept a much lower intellectual growth rate. When you recognize that intelligence is compounding, the cost of that missing long-term compounding is enormous. They’re not giving you the best opportunity of your life. Then a scary thing can happen: You might realize one day that you’ve lost your competitive edge. You won’t be the best anymore. You won’t be able to fall in love with new stuff. Things are cushy where you are. You get complacent and stall. So, run your prospective engineering hires through that narrative. Then show them the alternative: working at your startup.

(via Dustin Curtis)

David Foster Wallace on Arts and Television

readingbyeugene Leave a comment

This is David Foster Wallace talking about TV and the arts:

You teach the reader that he’s way smarter than he thought he was. I think one of the insidious lessons about TV is the meta-lesson that you’re dumb. This is all you can do. This is easy, and you’re the sort of person who really just wants to sit in a chair and have it easy. When in fact there are parts of us, in a way, that are a lot more ambitious than that. And what we need… is seriously engaged art that can teach again that we’re smart. And that’s the stuff that TV and movies — although they’re great at certain things — cannot give us. But that have to create the motivations for us to want to do the extra work, to get those other kinds of art… Which is tricky, because you want to seduce the reader, but you don’t want to pander or manipulate them. I mean, a good book teaches the reader how to read it.

The quote appears in David Lipsky’s Although Of Course You End Up Becoming Yourself: A Road Trip with David Foster Wallace, published about ten years after his interview with DFW.

###

(via Brain Pickings)

Ben Horowitz: Venture Capital Investor, Proponent of Rap

readingbyeugene Leave a comment

Ben Horowitz is a prominent venture capital investor. He started the venture capital firm Andreessen Horowitz with Marc Andreessen, the co-founder of Netscape, and the firm made vast amounts of money on investments in companies like Groupon and Skype (and will make even more when Facebook files for IPO).

But it’s his stance on the importance of rap in teaching business lessons that is intriguing. Throw business classes and books out the window, Mr. Horowitz says, and listen to rap lyrics instead:

Mr. Horowitz uses rap as an introduction as he philosophizes about business challenges like how to fire executives, why founders run their companies better than outside chief executives and how to stand up to difficult board members.

“All the management books are like, ‘This is how you set objectives, this is how you set up an org chart,’ but that’s all the easy part of management,” Mr. Horowitz said in an interview in his spacious office here on Sand Hill Road, the epicenter of tech investing.

“The hard part is how you feel. Rap helps me connect emotionally.”

How to deal, for instance, with the stress of the 11th-hour, late-night auditing mishap that almost stymied the $1.6 billion sale of Opsware?

Listen to the Kanye West song “Stronger”: “Now that that don’t kill me/Can only make me stronger/I need you to hurry up now/’Cause I can’t wait much longer/I know I got to be right now/’Cause I can’t get much wronger.”

Much of rap is about business, whether the drug business, the music industry or work ethic, said Adam Bradley, an associate professor specializing in African-American literature at the University of Colorado at Boulder who wrote “Book of Rhymes: The Poetics of Hip Hop” and co-edited “The Anthology of Rap.”

Read more at The New York Times.

Tim Cook on the Apple Culture

readingbyeugene Leave a comment

Earlier this week, the CEO of Apple, Tim Cook, spoke at a conference put on by Goldman Sachs. For his final question during the the Q&A session, Cook was asked how his leadership might change Apple, and what aspects of the culture he might try to preserve. Here’s what he had to say:

Apple is a unique culture and unique company. You can’t replicate it. I’m not going to witness or permit the slow undoing of it. I believe in it so deeply.

Steve grilled in all of us, over many years, that the company should revolve around great products. We should stay extremely focused on a few things, rather than try to do so many that we did nothing well. We should only go into markets where we can make a significant contribution to society, not just sell a lot of products.

These things, along with keeping excellence as an expectation of everything at Apple. These are the things that I focus on because I think those are the things that make Apple a magical place that really smart people want to work in and do, not just their life’s work, but their life’s best work.

And so we’re always focused on the future. We don’t sit and think about how great things were yesterday. I love that trait because I think it’s the thing that drives us all forward. Those are the things I’m holding onto. It’s a privelege to be a part of it.

###

(via Dustin Curtis; full audio here)

Apple Results Distorting S&P 500 Earnings

readingbyeugene Leave a comment

Quote of the day concerning Apple earnings from last quarter:

The world’s largest company by market capitalization said on Jan. 24 that profit in the quarter ended Dec. 31 was $13.1 billion, 36 percent more than the average analyst projection, while revenue beat forecasts by $7.3 billion, the most ever. The Cupertino, California-based company single-handedly erased a drop in S&P 500 earnings for the October-to-December period, turning a 4.2 percent decline into a 4.4 percent gain.

(source: Bloomberg)

Robert Walser on the Artistic Individual

readingbyeugene Leave a comment

The passage below is from Robert Walser’s Berlin Stories, which have been translated into English for the first time by Susan Bernofsky, and just published in a new edition by New York Review Classics. Walser arrived in Berlin from Switzerland in 1905 and wrote hundreds of short reflections about the city’s charms. This passage on the successful artist is excellent:

The artist who is crowned with success lives in the metropolis as if in an enchanting Oriental dream. He hastens from one elegant household to the affluent next, sits down unhesitatingly at the opulently laden dining tables, and while chewing and slurping provides the entertainment. He passes his days in a virtual state of intoxication. And his talent? Does an artist such as this neglect his talent? What a question! As if one might cast off one’s gifts without so much as a by-your-leave. On the contrary. Talent unconsciously grows stronger when one throws oneself into life. You mustn’t be constantly tending and coddling it like a sickly something. It shrivels up when it’s too timidly cared for.

The artistic individual is nonetheless permitted to pace up and down, like a tiger, in his cave of artistic creation, mad with desire and worry over achieving some output of beauty. As no one sees this, there is no one to hold it against him. In company, he should be as breezy, affable, and charming as he can manage, neither too self-important nor too unimportant either. One thing he must never forget: he is all but required to pay court to beautiful, wealthy women at least a little.

Featured in full here.

Nye Lavalle, Mortgage Sleuth

readingbyeugene Leave a comment

From my own personal experience and 20 years of research and investigation, nothing — and I mean nothing — that a bank, lender, loan servicer or their lawyer says or puts on paper can be trusted and accepted as true.

The quote above comes from Nye Lavalle, who after his personal experience of losing his home to foreclosure, set out to learn all he could about the mortgage industry, traveling nationwide to dig into records. In 2003, he compiled a dossier of practices at Fannie Mae.

For two years, he corresponded with Fannie executives and lawyers. Fannie later hired a Washington law firm to investigate his claims. In May 2006, that firm, using some of Mr. Lavalle’s research, issued a confidential, 147-page report corroborating many of his findings.

And there, apparently, is where it ended. There is little evidence that Fannie Mae’s management or board ever took serious action. Known internally as O.C.J. Case No. 5595, in reference to the company’s Office of Corporate Justice, this 2006 report suggests just how deep, and how far back, our mortgage and foreclosure problems really go.

“It is axiomatic that the practice of submitting false pleadings and affidavits is unlawful,” said the report, a copy of which was obtained by The New York Times. “With his complaint, Mr. Lavalle has identified an issue that Fannie Mae needs to address promptly.”

What Fannie Mae knew about abusive foreclosure practices, and when it knew it, are crucial questions as Congress and the Obama administration weigh the future of the company and its cousin, Freddie Mac. These giants eventually blew themselves apart and, so far, they have cost taxpayers $150 billion. But before that, their size and reach — not only through their own businesses, but also through the vast amount of work they farm out to law firms and loan servicers — meant that Fannie and Freddie shaped the standards for the entire mortgage industry.

Almost all of the abuses that Mr. Lavalle began identifying in 2003 have since come to widespread attention. The revelations have roiled the mortgage industry and left Fannie, Freddie and big banks with potentially enormous legal liabilities. More worrying is that the kinds of problems that Mr. Lavalle flagged so long ago, and that Fannie apparently ignored, have evicted people from their homes through improper or fraudulent foreclosures.

According to the report, Fannie held about two million mortgage notes in its offices in Herndon, Va., in 2005 — a fraction of the 15 million loans it actually owned or guaranteed. Various third parties owned the rest of the notes. At that time, Fannie typically destroyed 40 percent of the notes once the mortgages were paid off. It returned the rest to the respective lenders, only without marking the notes as canceled. According to Mr. Lavalle, Fannie Mae lacked a centralized system for reporting lost notes. And so the the potential for confusion and abuse became rampant. The piece explains that anyone who gains control of a note can, in theory, try to force the borrower to pay it, even if it has already been paid.  Or that someone might try to force homeowners to pay the same mortgage twice. Or that loans could be improperly pledged as collateral by some other institution, even though the loans have been paid. All of these things happened during and and after the financial crisis of 2006-2008. It’s refreshing to read that there were some people who took matters into their own hands and fought for the consumer.

The Case Against Private Equity Firms

readingbyeugene Leave a comment

James Surowiecki has a brief but illuminating post about private-equity firms. He explains that while some private-equity firms do make the companies that they purchase better off, they do so by gaming the system:

Given the weak job market, it makes sense that the attacks have focussed on layoffs. But the real problem with leveraged-buyout firms isn’t their impact on jobs, which studies suggest isn’t that substantial one way or the other. A 2008 study of companies bought by private-equity firms found that their job growth was only about one per cent slower than at similar, public companies; there was more job destruction but also more job creation. And, while private-equity firms are not great employers in terms of wage growth, there’s not much evidence that they’re significantly worse than the rest of corporate America, which has been treating workers more stingily for about three decades.

The real reason that we should be concerned about private equity’s expanding power lies in the way these firms have become increasingly adept at using financial gimmicks to line their pockets, deriving enormous wealth not from management or investing skills but, rather, from the way the U.S. tax system works. Indeed, for an industry that’s often held up as an exemplar of free-market capitalism, private equity is surprisingly dependent on government subsidies for its profits. Financial engineering has always been central to leveraged buyouts. In a typical deal, a private-equity firm buys a company, using some of its own money and some borrowed money. It then tries to improve the performance of the acquired company, with an eye toward cashing out by selling it or taking it public. The key to this strategy is debt: the model encourages firms to borrow as much as possible, since, just as with a mortgage, the less money you put down, the bigger your potential return on investment. The rewards can be extraordinary: when Romney was at Bain, it supposedly earned eighty-eight per cent a year for its investors. But piles of debt also increase the risk that companies will go bust.

This approach has one obvious virtue: if a private-equity firm wants to make money, it has to improve the value of the companies it buys. Sometimes the improvement may be more cosmetic than real, but historically private-equity firms have in principle had a powerful incentive to make companies perform better. In the past decade, though, that calculus changed. Having already piled companies high with debt in order to buy them, many private-equity funds had their companies borrow even more, and then used that money to pay themselves huge “special dividends.” This allowed them to recoup their initial investment while keeping the same ownership stake. Before 2000, big special dividends were not that common. But between 2003 and 2007 private-equity funds took more than seventy billion dollars out of their companies. These dividends created no economic value—they just redistributed money from the company to the private-equity investors.

As a result, private-equity firms are increasingly able to profit even if the companies they run go under—an outcome made much likelier by all the extra borrowing—and many companies have been getting picked clean.

I also highly recommend reading venture capitalist Fred Wilson’s post “Why Taxing Carried Interest as Ordinary Income Is Good Policy.”

On Shyness

readingbyeugene Leave a comment

“If you want to do something big in your life, you must remember that shyness is only the mind…If you think shy, you act shy. If you think confident you act confident. Therefore never let shyness conquer your mind.”

The quote above is advice for life from Arfa Karim Randhawa, the computer programming prodigy who became the world’s youngest Microsoft Certified Professional at 9 years old. Sadly, she has passed away at the age of 16 after reportedly suffering an epileptic seizure and cardiac arrest.