tag:blogger.com,1999:blog-31936301629778725292024-03-08T02:46:57.197-07:00Gates on "Stuff"A glimpse into the brains of the "less famous Gates".Gates VPhttp://www.blogger.com/profile/13840555181094178187noreply@blogger.comBlogger64125tag:blogger.com,1999:blog-3193630162977872529.post-11264980757508043672011-11-16T11:04:00.001-07:002011-11-16T11:50:18.327-07:00Inflation and Black FridayPlanet Money's Adam Davidson has a interesting post comparing <a href="http://www.nytimes.com/2011/11/20/magazine/adam-davidson-inflation-solution.html?_r=2&pagewanted=all">Black Friday and inflationary policy</a> decisions.<br />
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His basic premise is that the US may have to resort to inflation as an "economic boost". This gets around parliamentary deadlocks around spending increases by simply forcing more money into the economy.<br />
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The goal here would be simple (emphasis mine):<br />
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<i>With, say, 5 percent inflation — a bit more than double the current rate — $100 today will only buy $95 worth of stuff next year. That's frightening, which is the point. <b>We actually want consumers to realize that prices are rising and that money in their bank accounts is losing value if they don't start spending. The same goes for companies too, which will be compelled to build and hire rather than sit on earnings, as many are now</b>.</i></blockquote>
It's classic inflation, we steal value from the savers and make them generate more to reclaim that value. Obviously this sucks for people on fixed incomes and people close to retirement who now need a lot more money to retire. But that's frankly a necessary trade-off, we can't afford to give everyone a 20 year retirement on 40 years of work.<br />
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Instead let's tackle the two major problems Adam doesn't address:<br />
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<ol>
<li>Flight of money.</li>
<li>China (and other debtors)</li>
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<b>#1: Flight of money</b></div>
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The premise of inflation is that <i>"companies will be compelled to build and hire rather than sit on earnings"</i>. But it's not clear that this is really the case. Frankly, companies are already compelled to do this by their investors. If companies felt they could make healthy margins by investing some of their cash, they would be doing that right now.</div>
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<b>At best</b>, inflation may encourage companies to invest where they could make "unhealthy" margins. This may put <i>some</i> people to work. But businesses with unhealthy margins generally don't pay very well and they don't tend to be a good store of permanent jobs.</div>
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<b>At worst</b>, it would scare companies away from US dollars all together. If companies responded to increased inflation by simply ridding themselves of US dollars, it would increase circulation, but it's not clear that it would actually increase jobs.<br />
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<b>#2: China and other debtors</b><br />
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The US has lots of debtors who have been promised a relatively low return on their government bonds.<br />
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Let's say you bought a 10 year, 3% government bond in 2006. Target inflation at the time was 2%, so you're expecting to make 1% real return on the bond.<br />
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Now it's 2011 and the US Fed says that target inflation is now 5%. All of a sudden, you're losing 3% / year in real value. In fact, that loss for the next 5 years is so big it's going to wipe out all real gains.<br />
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Put differently, you gave the US government an ounce of gold in 2006 and it gives you back slightly less than an ounce in 2016. You were expecting slightly more than ounce and you actually got less. The US government actually stole your gold while using it for 10 years.<br />
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<b>This is a really terrible and poisonous feeling.</b><br />
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Now imagine that you're China and you have $1,000,000,000,000 in government bonds. Imagine how betrayed you feel now.<br />
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<b>Summary</b><br />
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While #1 is not an absolute problem, it's definitely a gamble. However, #2 is a complete show-stopper.<br />
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Screwing over your lenders is a great way to kill an economy.Gates VPhttp://www.blogger.com/profile/13840555181094178187noreply@blogger.com30tag:blogger.com,1999:blog-3193630162977872529.post-81209495591536540022011-11-04T17:27:00.002-06:002011-11-04T17:27:53.972-06:00Fixing The Education System<span class="Apple-style-span" style="font-family: arial, sans-serif; font-size: 13px;">This article by <a href="http://curiouscapitalist.blogs.time.com/2011/11/03/why-the-u-s-is-no-longer-the-land-of-opportunity/">Time</a>, brings up a great question of what priorities we need to make in our education system.</span><br />
<span class="Apple-style-span" style="font-family: arial, sans-serif; font-size: 13px;"><br /></span><br />
<span class="Apple-style-span" style="font-family: arial, sans-serif; font-size: 13px;">What should we train for in the "new economy"?</span><br />
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Well, basically everything :)</div>
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But if we want to get specific, let's start with the easy, universally applicable skills.</div>
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<b>#1: Math</b></div>
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People in the Ukraine graduate high school at 16 having done Integrals and Derivative (what we call first year university calculus). And then there's first-year stats, which is pretty straightforward.</div>
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The standard for "high school" math should really be closer to what we currently think of as "second-year university" math.</div>
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Tools like Khan Academy are trying to do exactly this.</div>
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Solid math & stats skills are key component of everything from healthcare to science to engineering to sales & marketing to construction to politics, etc... Basically every well-paying white collar job has some essential math component.</div>
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<b>#1a: Science training</b></div>
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Everyone should be equipped with the mental tools to both perform and evaluate scientific tests. In theory we learn all of this stuff, but we don't really practice it. How many people can say that they had performed even 50 controlled scientific tests before graduating from high school?</div>
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In University, most classes will do things like weekly labs, but most high schools I've known do not do this or do it to the level where it's "mastered" rather than just "known".</div>
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Lack of access to well-understood scientific method and stats is a major societal barrier. From politics to business to health, humans consistently demonstrate poor math/science reasoning skills.</div>
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This is a major barrier to top-level employment.</div>
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<b>#2: Communication skills</b></div>
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Both written and spoken.</div>
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In the age of communication, this is more important than ever (not less). Whole businesses fail solely because of poor communication. People lose their jobs because of such nebulous things like "e-mail tone".</div>
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Relationships are fraught by poorly worded text message or just complete misunderstanding of word meaning.</div>
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Communications really has two parts:</div>
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<ol>
<li>Composition construction: this goes beyond just spelling / grammar, beyond confusing homonyms. When you spend your life sending words (and not sending body language), you are bound by those words. We really need to walk people through major parts of the dictionary so that they can understand these words clearly</li>
<li>Literature reading and comprehension. Humans communicate heavily through shared story and it's really up to us as educators and parents to expose children to those stories. </li>
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<b>Other stuff</b></div>
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Honestly, I would to teach a lot of other stuff do. Basic construction, soldering, electronics, programming, cooking, personal finance, etc.</div>
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But I really think the things above are the core features. You can work something like soldering into a good "science training" plan.</div>
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As always, I'm open to and would love to hear other thoughts on priorities :)</div>Gates VPhttp://www.blogger.com/profile/13840555181094178187noreply@blogger.com24tag:blogger.com,1999:blog-3193630162977872529.post-23140694970188956622011-10-09T01:39:00.001-06:002011-10-09T01:39:05.360-06:00Coming around to new economic realitiesSometimes, I think I give too much traffic to Time magazine's economics blog. But every once in a while I catch a nugget like <a href="http://ti.me/pIK59W">this one</a>:<br />
<blockquote>
<i>Perhaps the most disturbing thing about the jobs report is that it is clear we are no longer in an economy where a rising tide lifts all boats.</i></blockquote>
I've saying for a while that this whole economic crash was about much more than just a depression. It was an overdue correction towards a new reality. Throughout the 2008 news year, press people pushed on about <i>"when does the economy recover?"</i>, <i>"when do things go back to normal?"</i>, as if somehow 2006 was "normal".<br />
<br />
I said then and continue to stand by the fact that we're in a new economic reality. The quote above really summarizes this problem.<br />
<br />
Policy makers and economists and much of the populace have been operating under the assumption that the US is simply suffering from a demand crisis. If big companies just spend more money and hire more people, unemployment will drop, profits will rise and everyone will be happy again.<br />
<br />
But this is not what's happening. Companies took a brief dip in 2008, laid off a bunch of people and now profits are rising again. But US corps are holding on to that money, they're not hiring.<br />
<br />
Let's take a look at one current example of this problem. Here's NPR's broadcast on <a href="http://n.pr/rdEJBU">"The Economic Realities of Tough Immigration Laws"</a>.<br />
<br />
As with most stories there are two sides to this coin and the Senator backing the bill argues his point and his side impeccably. This isn't just blind jingoism, he clearly understands the economic risks and implications.<br />
<blockquote>
<i>"There may have to be some differences in pay scale ... but Alabamians and Americans will do those jobs," he says.</i></blockquote>
The flip side is far less encouraging though, especially from the farmer:<br />
<blockquote>
<i>"Since this law went in to effect, I've had a total 11 people that were Americans come and ask for work," Boatwright says. "A total of one of those actually came back the next day."</i></blockquote>
And that guy didn't make it through day two.<br />
<br />
And this is where the shift comes in. Picking tomatoes is not only a very difficult job, it really doesn't pay very well. We can definitely force documented Americans to do this job, but it's going to be a struggle to make this change and for many workers it may be the single worst job they've ever had.<br />
<br />
And this is not just the new reality for immigration laws, I think this is the new reality for the US as a whole. Stagnant wages for most and a stagnant quality of life for most. But hey, this is what they <a href="http://n.pr/p3lrXq">voted for</a>.Gates VPhttp://www.blogger.com/profile/13840555181094178187noreply@blogger.com0tag:blogger.com,1999:blog-3193630162977872529.post-71112590285534202862011-10-03T16:10:00.002-06:002011-10-03T16:10:43.472-06:00Obama's Plan, American RealitySo first, a link to the very good Vanity Fair article, <a href="http://t.co/78nvsKXd">"California and Bust"</a>.<br />
<br />
I think the real key is his last paragraph that really sums up the current debt problem.<br />
<blockquote>
<span class="Apple-style-span" style="background-color: #f8f8f8; color: #333333; font-family: Georgia, Palatino, 'Palatino Linotype', 'Times New Roman', Times, serif; font-size: 15px; line-height: 21px;">When people pile up debts they will find difficult and perhaps even impossible to repay, they are saying several things at once. They are obviously saying that they want more than they can immediately afford. They are saying, less obviously, that their present wants are so important that, to satisfy them, it is worth some future difficulty. But in making that bargain they are implying that, when the future difficulty arrives, they’ll figure it out. They don’t always do that... </span></blockquote>
Lots of future promises have been made, but there's really no way to pay for them all.<br />
<br />So Obama has come out with a plan hoping to tackle both the unemployment crisis and the debt crisis. On the surface, this is really a "give up nothing" plan. And the problem here, as evidenced in the Vanity Fair article, is that <i>something</i> has to be given up <i>somewhere</i>.<br />
<br />
Politicians are in the process of playing this shell game of needing to cut while pretending that everything is important. They're doing this in an attempt to keep their jobs and submarine fiscal change without forcing cultural change. But the problem here is cultural that is driving the fiscal. Until the culture starts driving fiscal change, all of these proposals are unlikely to work.<br />
<br />Gates VPhttp://www.blogger.com/profile/13840555181094178187noreply@blogger.com0tag:blogger.com,1999:blog-3193630162977872529.post-14783627262387704712011-09-11T01:02:00.001-06:002011-10-03T16:11:12.193-06:00Fix the economy - Step #1b more retirementOK, so I've asked our older populace <a href="http://gatesvp.blogspot.com/2011/08/fix-economy-step-1-retirement.html">to take a hit and accept a later start</a> to SS. What about the younger populace?<br />
<br />
Well, I think the first big thing to recognize is that we're looking to live even longer than our parents. (<i>I'm 30</i>) So if 65 is too young for our parents to retire, then it's going to be <i>way</i> too young for us to retire. Fortunately, I know lots of people my age who seem to inherently understand this conundrum.<br />
<br />
But understanding doesn't necessarily solve the problem. Lots of people my age are also graduating with record student debts and have spent a decade being priced out of homes. Retirement savings are not just low with 60-somethings, it's low with 20-somethings.<br />
<br />
There have already been proposed plans for "<a href="http://www.accountingweb.com/item/107107">mandatory retirement accounts</a>" to be offered by employers and I think this is a step in the right direction. However, I think it's "too little" in a couple of directions.<br />
<br />
<b>Mandatory Retirement Accounts - Improvement One</b><br />
<br />
First off, the proposed plan creates forced IRA accounts to be set up by employers. These are not the people you want managing this process. Employers are already over-burdened with major benefits like healthcare, dental, disability, etc. On top of that, the average worker will cycle through multiple employers in their lifetime, especially with my generation. If each employer is setting up a new IRA with their provider of choice, you create a giant paperwork mess.<br />
<br />
In fact, it's already a paperwork mess. I still haven't rolled over my 401k from 2 jobs ago and pulled it in with the current one. It's all just a pain, shouldn't I just own the 401k and let the employers plug in to <i>my</i> provider of choice? <b>Why does my employer choose <i>my</i> 401k provider?</b><br />
<br />
So this needs to go the other way.<br />
<br />
Each person needs to "own" their 401k and government-mandated transfers should happen directly to those portfolios. If the employee doesn't have an IRA, then those dollars are thrown into a government account in their name/SSN to be invested in government notes.<br />
<br />
In the electronic era, this whole process is relatively simple.<br />
<br />
<b>Mandatory Retirement Accounts - Improvement Two</b><br />
<br />
The second fix here is really to fix the whole [Roth] IRA / 401k / Defined Benefit mess. Why do we have these all of these confusing options? Why do we have the choice between Roth or non-Roth? Do we really want people guess between "tax now" and "tax later"? Does it make anything better?<br />
<br />
I think the US needs to look towards a system like the Canadian RRSP for retirement savings. The RRSP system is simple to set up and simple to envision / manage.<br />
<br />
The basic premise is that you have two investment "buckets", one bucket registered for retirements and the other bucket for "regular" investments. Money going in to the retirement bucket goes in un-taxed and gets taxed on the way out. To avoid people from "churning" money, the RRSP bucket has a growing lifetime max based on your income. To avoid tax cheaters, withdrawals have some % held back.<br />
<br />
And yes, we should have the usual "out of work" or "back to school" allowances for withdrawals.<br />
<br />
In either case, the tax retirement mess should not require a book to explain. It all be explainable in a 5-minute video. In fact, the government should actually produce this 5-minute video :)<br />
<br />
<b>Isn't this all Socialist?</b><br />
<br />
Did I mention I'm from Canada? It depends on your take here. Isn't Social Security socialist?<br />
<br />
Yes, my whole proposal is "government meddling".<br />
<br />
But there's a clear trade-off here. People are notoriously bad at thinking for the long-term and saving for a rainy day. We currently have a entire generation of voters who don't have anywhere near enough money for retirement, so we have living proof of our capacities here.<br />
<br />
The goal of my proposal is to set small measures now to prevent larger problems later. If you don't think this is a good thing, then it's easy to call this socialist. But that same measure could apply to lots of existing programs that help provide stability.<br />
<br />
<b>I firmly believe that what the public seeks from government programs is some basic form of stability</b>. This program is the type of program that actively promotes that stability, which is why I think it's important.Gates VPhttp://www.blogger.com/profile/13840555181094178187noreply@blogger.com0tag:blogger.com,1999:blog-3193630162977872529.post-83816362528817246482011-08-13T02:19:00.000-06:002011-08-13T02:19:11.770-06:00Fix the economy - Step #1: RetirementSo we know the US economy has major problems. High unemployment, likely structural, definitely hurting the youth. Aging infrastructure. Large debts + a large deficit. Very large unfunded liabilities like medicare and social security.<br />
<br />
Oh yeah, and let's not forget that whole housing thing. The one where the banks are only solvent because they <a href="http://www.nytimes.com/2009/04/03/business/03fasb.html">changed the</a> <a href="http://www.bloomberg.com/apps/news?pid=newsarchive&sid=alC3LxSjomZ8">accounting rules</a> while they slowly liquidate their losses. It's clear that stuff needs to change, but where do we start?<br />
<br />
Obviously, the Tea Party has made this whole "brouha" about a "balanced budget", but there's no clear plan to deal with any of the issues above. So it's time to start making some serious decisions. So this is the first of several steps I suggest for repairing the US economy.<br />
<br />
Why trust me? Well you are reading my blog :) But frankly, I just live here. I can't vote, don't make campaign contributions and will probably leave in a few years (bad economy or no).<br />
<br />
My only vested interest is that I don't like to see people suffer needlessly. Don't get me wrong, people are going to suffer as part of "fix the economy", I'm just trying to avoid the "needlessly" part.<br />
<br />
<b>Step #1: Retirement</b><br />
<br />
Here's the deal, we cannot all retire at 65 if we plan to die at 85. We cannot have a population that spends 20+ years getting educated and 20 years "doing nothing" with only 40 years in between. 20 years of "nothing" is far too long for the average person, it's just too much "unproductivity".<br />
<br />
It especially won't work with the upcoming Baby Boomer crisis. We can't have a giant chunk of people are retiring at once and we can't have them retiring for 20 years. The economy will suffer heavily from the productivity loss and the social security system will simply "run out" of money (<i>i.e.: need to print money</i>).<br />
<br />
Of course, we may avoid the "rush of retirees" simply because many people near their sixties are <a href="http://www.retirement-income.net/blog/retirement-savings-statistics/average-retirement-savings-all-measurements-lead-to-the-same-conclusion/">nowhere close to retirement</a>. We're talking about boomers with $50-110k to their name (including home equity). That either means stretching social security and praying for the best with inflation, or it means working longer.<br />
<br />
For the country as a whole though, we don't have enough money to support Social Security at current levels. Especially when the big boat of baby boomers beat a path to the SS offices. So let's fix a couple of problems.<br />
<br />
<b>#1a: increase Social Security age</b><br />
<br />
The US should definitely push this back to 67 or 68 ASAP. Several other countries have already done this, so it's not really ground-breaking.<br />
<br />
Yep, this is going to be unpopular, but I think it's the least painful way to curtail the debt crisis. It's also kind of fair. The people who are losing a few years of SS are also the same people who voted throughout the period leading up to the whole crisis. They were an entire generation born into and raised with the possibility of receiving SS. The current under-funding is the result of years and decades of poor fiscal planning, so at the least the planners are "reaping what they sow" here.<br />
<br />
<b>#1b: consider "rolling down" SS</b><br />
<br />
SS is a neat concept, but it's basically a pyramid scam. It's unlikely that my 20 & 30-something will ever see any SS payments come our way, the whole system is going to implode long before then. Most of my peers have already accepted that.<br />
<br />
So maybe it's time to draw a line and start a new program for people under 40... but that's the next post :)<br />
<br />
Any thoughts on changing retirement / SS age? Should it be higher (70)?Gates VPhttp://www.blogger.com/profile/13840555181094178187noreply@blogger.com5tag:blogger.com,1999:blog-3193630162977872529.post-60253099399862902502011-08-09T07:20:00.001-06:002011-08-13T01:31:06.819-06:00Is inflation the answer?The <a href="http://curiouscapitalist.blogs.time.com/2011/08/09/stock-market-plunge-can-the-fed-do-anything/">Curious Capitalist</a> explores the Fed's options, including having the Fed raise "target inflation" from 2% to 4% or even 6%.<br />
<br />
So pushing up "target inflation" rates may seem like a good idea, but there are definitely a few hazards here.<br />
<br />
<b>Hazard #1: Seniors</b><br />
<br />
Pushing up inflation means raiding those who have cash. The goal is to raid the coffers of big companies just enough to push them into spending that cash. You're basically trying to "scare" people into spending to produce.<br />
<br />
The side effect here is that inflation affects all cash.<br />
<br />
Targeting 5% inflation hurts people planning to retire soon (<i>i.e.: baby boomers</i>), but it also really hurts those who are already retired. These people already live off of cash and they've stopped producing. They have way to counter the effects of such growth, they cannot grow their income.<br />
<br />
It also sucks for the unemployed who were already falling behind.<br />
<br />
<b>Hazard #2: Anger investors</b><br />
<br />
Investors are not stupid, they can calculate the effect of inflation. The 10-year treasuries are currently under 3%. Investors are honestly accepting that this is basically zero growth. You're not moving forward much, but at least you're not losing ground.<br />
<br />
Changing the inflation plan to 5% means that 3% investment is effectively losing ground. What's more, everyone who bought these sub-3% bonds in the last 3 years is going to end their 10-year holding at a real loss.<br />
<br />
China will not be happy about this move. Forcing inflation is raiding cash. This would be raiding China's coffers in a very real way.<br />
<br />
<b>Hazard #3: The gig is up</b><br />
<br />
The long term plan has always been to inflate away some portion of the debt. Everyone is doing it, but there's definitely an aspect of "chicken" going on. No one wants to inflate <i>too</i> much.<br />
<br />
Well jumping inflation to 4% or 6% on purpose pretty much ends the game. Then everybody knows the plan. Fiat currency is all about trust. Raiding the savings of hundreds of millions of people is not a great way to engender further trust.<br />
<br />
Maybe I should buy gold... or bitcoins... or both :)Gates VPhttp://www.blogger.com/profile/13840555181094178187noreply@blogger.com2tag:blogger.com,1999:blog-3193630162977872529.post-5034022281976927502010-02-18T22:53:00.003-07:002010-03-28T22:03:28.543-06:00How much to make you happy?<div><b>UPDATE: the </b><a href="http://www.ted.com/talks/daniel_kahneman_the_riddle_of_experience_vs_memory.html"><b>video is here</b></a><b>. </b>If you skip forward to 17:15 or so the announcer walks on to the stage and he brings up the 60k number. Of course, the whole video is probably worth watching.<br />
<br />
So I'm really looking forward to this <a href="http://www.boingboing.net/2010/02/12/cnn-ten-big-ideas-fr.html">TED talk</a> from <a href="http://en.wikipedia.org/wiki/Daniel_Kahneman">Daniel Kahneman</a>.</div><div><br />
</div><div>The choice quote from the link:</div><div><span class="Apple-style-span" style="color: #444444; font-family: Verdana, sans-serif; font-size: 14px; line-height: 22px;"></span><br />
<span class="Apple-style-span" style="color: #444444; font-family: Verdana, sans-serif; font-size: 14px; line-height: 22px;"><blockquote>Psychologist and Nobel Laureate Daniel Kahneman says millions of dollars won't buy you happiness, but a job that pays $60,000 a year might help. Happiness levels increase up to the $60K mark, but "above that it's a flat line," he said.<br />
<div style="margin-bottom: 1.6em; margin-left: 0px; margin-right: 0px; margin-top: 0em; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">"Money does not buy you experiential happiness but lack of money certainly buys you misery," he said. But the real trick, Kahneman said, is to spend time with people you like.</div></blockquote><div style="margin-bottom: 1.6em; margin-left: 0px; margin-right: 0px; margin-top: 0em; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"></div></span></div><div>So why $60k? My initial suspicion (having not seen the presentation yet, it's not up), is that this has to do with some 80/20 math. In particular, that above $60k / year puts you into the top 20% of income earners which is probably all it takes to make most people happy. It's enough.</div><div><br />
</div><div><div>The numbers from Wikipedia.</div><div>http://en.wikipedia.org/wiki/Personal_income_in_the_United_States</div><div><br />
</div><div>A US job that pays $60k puts you almost exactly in the top 20% of US income earners. (assuming that you have a job and are over 25) In fact, it puts you in the top 40% of household incomes. So if you make $60k+ and your husband stays at home and watches the kids, you're still making more than the average family. And you probably have a University degree or better.</div><div><br />
</div><div>If you exclude some of the outlandish parts of the country (NY, LA), then $60k + health benefits provides you a very comfortable quality of life. And if you're like most earners in this category, there's a very good chance that your spouse also works which bumps you up even higher. If you make 60k and your spouse makes even $10 / hour (i.e.: 20k), that puts your family into the top 20% of US households.</div><div><br />
</div><div>So is that going to make you happy? Why don't we "imagine the life"?</div><div><br />
</div><div>You can probably afford to travel once / year, own a relatively new car, maintain a mortgage (at 2000 rates), kids a pet and a hobby or two (if you have time).</div><div><br />
</div><div>You go to a church with 100 families and you're in the top 20 for income. In fact, your top 20 group probably makes up 50 to 75% of the church funding b/c you have more disposable income. It sounds selfish, but living in such a peer group is very comfortable feeling.</div><div><br />
</div><div>Your kid is likely one of the richest 4 or 5 kids in their class. When the kids want to hang out, they want to hang out at your place b/c you have the good TV, the good games, the good snacks and the space. Your kid gets the coolest presents or at least nobody get toys that are significantly cooler. That tends to make a parent happy.</div><div><br />
</div><div>I know these are shallow definitions. But these things would probably make most people happy. </div><div><br />
</div><div>Is 90k better than 60k?</div><div><br />
</div><div>Again, I haven't seen the presentation, but I have some postulations as to why it isn't. Mathematically, the 90k is 50% "better", but it doesn't necessarily "give you more". Remember that at 60k, you're making more than 80% of the working population (let alone those out of work). At 90k you're making more than 85 or 90% of the population, but you've really only jumped a few "notches" in the "final rankings".</div><div><br />
</div><div>In most parts of the US you already have access to a very good and healthy life at 60k. You've pretty much covered everything commonly deemed as a necessity and you probably have some money left over for "entertainment". So the jump to 90k really just gives you a little more "entertainment" and maybe some bigger stuff, but that's it.</div><div><br />
</div><div>And if you're the type who's not happy with being in the top 20%, then how much further do you need to go? Top 10%? Top 5%? </div><div><br />
</div><div>Really, 60k for one job is far enough "ahead of the game" to keep happy those that can be kept happy. And that's probably why this is true.</div></div>Gates VPhttp://www.blogger.com/profile/13840555181094178187noreply@blogger.com15tag:blogger.com,1999:blog-3193630162977872529.post-50780055618263902082009-12-29T16:26:00.004-07:002009-12-29T16:39:03.704-07:00Where the stimulus money is coming fromI've said this to many people in several different ways, but what this recession really means for most North Americans is that they won't retire as early as planned or that they'll have to continue working at least part time to buffer their savings.<div><br /></div><div>Well, here's some talk from <a href="http://www.calculatedriskblog.com/2009/12/doubling-your-money-while-earning-001.html">Calculated Risk</a> with a great quote courtesy of the <a href="http://www.nytimes.com/2009/12/26/your-money/26rates.html?_r=1">NY Times</a>.</div><div><span class="Apple-style-span" style="font-size: 15px; line-height: 22px; "><blockquote>“What the average citizen doesn’t explicitly understand is that a significant part of the government’s plan to repair the financial system and the economy is to pay savers nothing and allow damaged financial institutions to earn a nice, guaranteed spread,” said <a href="http://topics.nytimes.com/top/reference/timestopics/people/g/william_h_gross/index.html?scp=1-spot&sq=William%20H.%20Gross&st=cse" title="More articles about William H. Gross." style="color: rgb(0, 66, 118); text-decoration: underline; ">William H. Gross</a>, co-chief <a href="http://topics.nytimes.com/your-money/investments/index.html?inline=nyt-classifier" title="More articles about investing." style="color: rgb(0, 66, 118); text-decoration: underline; ">investment</a> officer of the Pacific Investment Management Company, or Pimco.</blockquote></span></div><div>Of course, this basically screws over fixed-income retirees, but it also damages prospects for those close to retirement. If you're 60 and planning to retire at 65, you're basically making no money in safe investments, but you also don't have any time to "ride out" highly volatile investments like stocks. Unless, of course, you wait until 70 or 75 to retire.</div><div><br /></div><div>It sounds absurd, but what else are you going to do? We've put ourselves into a really tight spot here. The Obama plan (for better or worse) is to inflate the money supply, which is going to be done at the expense of those people who want to retire. To be fair, the McCain plan wasn't really any different.</div><div><br /></div><div>I guess the big question is really if this is simply to be expected? Personally I think the whole concept of everyone retiring at 65 and living to the ripe old age of 90 is also pretty absurd, so though I blame the US for making some pretty bad financial decisions over the last 3 decades, I also think that we have to get over our delusions of multi-decade retirements for everyone.</div>Gates VPhttp://www.blogger.com/profile/13840555181094178187noreply@blogger.com0tag:blogger.com,1999:blog-3193630162977872529.post-61372488085297545292009-04-04T17:59:00.002-06:002009-04-04T18:11:32.010-06:00Classic fluff<div> Here's a recent ZDNet article: <a href="http://news.zdnet.com/2100-9595_22-284491.html">10 ways to make your boss love you</a></div><div><br /></div><div>This is pretty must a classic fluff piece. Filled with specious comments and even contradictory.</div><br /><span class="Apple-style-span" style="font-style: italic;"><blockquote>"Simply doing your job isn't enough anymore..." </blockquote> </span><div><br /></div><div>Huh? My job is to bring in more money than I cost my employer (i.e.: to provide profits). If I continue to provide direct profits for my employer how am I "not doing enough"? </div><div><br /></div><div>"...- you have to make sure your boss knows how well you're doing it." </div><div><br /></div><div>No really? Wait a second, isn't it my boss's job to know how well I'm doing? If my boss doesn't know how well I'm doing and I don't know how well I'm doing, am I actually doing my job? </div><div><br /></div><div>If you and your boss don't know how well you're doing then you have problems way beyond these tips. </div><div><br /></div><div>If you really dig into these tips, most of them <span class="Apple-style-span" style="font-style: italic;">are</span> your job. </div><div><br /></div><div><span class="Apple-style-span" style="font-weight: bold;">#1: Make your boss look good</span></div><div>Your job. </div><div><br /></div><div><span class="Apple-style-span" style="font-weight: bold;">#2: Do more with less </span></div><div><span class="Apple-style-span" style="font-weight: bold;">#9: Automate it </span></div><div>IT <span class="Apple-style-span" style="font-style: italic;">is</span> automation. Automation is fundamentally "doing more with less". </div><div><br /></div><div><span class="Apple-style-span" style="font-weight: bold;">#3: Be positive, proactive and professional </span></div><div><span class="Apple-style-span" style="font-weight: bold;">#5: Get back to basics </span></div><div>Be professional = Behave as if this was your profession = Do your job </div><div><br /></div><div><span class="Apple-style-span" style="font-weight: bold;">#4: Talk the talk </span></div><div><span class="Apple-style-span" style="font-style: italic;"><blockquote>"Speak the language of the business...Make sure you are seen as involved in activities that lead to revenue generation" </blockquote></span></div><div>Language of the business = Your job </div><div>Generating revenue = Your job </div><div><br /></div><div><span class="Apple-style-span" style="font-weight: bold;">#7: Stay informed</span></div><div> Welcome to IT. </div><div><br /></div><div><span class="Apple-style-span" style="font-weight: bold;">#8: Become a collaborator </span></div><div>Your job in IT is to solve other people's problems. Failure to collaborate is a failure to do your job.</div><div><br /></div><div><span class="Apple-style-span" style="font-weight: bold;">#10: Be special</span> </div><div><span class="Apple-style-span" style="font-style: italic;"><blockquote>"If your existing skills don't match up with the needs of the business then make sure you develop some news ones."</blockquote></span></div><div>Does this quote even make sense? If your skills don't match up with the needs of the business, what the heck are you doing? I mean *your job* is to meet the needs of the business, but if you don't have the skills to do that what the heck are they paying you for? </div><div><br /></div><div>So like I said, the piece is really fluffy. Basically tells the reader to do their job.</div>Gates VPhttp://www.blogger.com/profile/13840555181094178187noreply@blogger.com1tag:blogger.com,1999:blog-3193630162977872529.post-26398582867759086862009-03-31T23:31:00.002-06:002009-04-01T00:14:32.737-06:00The Times they are 'a-changingWell, we know that Newspaper are going to die, and we'll have to see about print media in general. In fact, my current guess is that the next decade of iPhones and Blackberries and Kindles and podcasts and audiobooks will signal a "paper reversal". In no way do I expect "paper" copies to go away, instead I expect them to slowly be limited to only specific, revered content.<br /><br />But hey, I'm already receiving my bank statements and pay stubs electronically. So the amount of paper-only content is fast diminishing.<br /><br />However, I have two great links about paper today.<br /><br />Time Magazine talks about the <a href="http://www.time.com/time/nation/article/0,8599,1887728,00.html">End of Excess</a>. Which opens with a great line:<div><span class="Apple-style-span" style="font-family: georgia; font-size: 15px; line-height: 23px; "><blockquote><span class="Apple-style-span" style="font-style: italic;">Don't pretend we didn't see this coming for a long, long time.</span></blockquote></span>A few other choice quotes:</div><div><span class="Apple-style-span" style="font-family: georgia; font-size: 15px; line-height: 23px; "><span class="Apple-style-span" style="font-style: italic;"></span></span><blockquote><span class="Apple-style-span" style="font-family: georgia; font-size: 15px; line-height: 23px; "><span class="Apple-style-span" style="font-style: italic;">We cannot just hunker down, cross our fingers, hysterically pinch our pennies, wait for the crises to pass, blame the bankers and then go back to business as usual...</span></span><span class="Apple-style-span" style="font-family: georgia; font-size: 15px; line-height: 23px; "><span class="Apple-style-span" style="font-style: italic;">This <span class="Apple-style-span" style="font-style: normal;">is</span> the end of the world as we've known it. But it isn't the end of the world.</span></span></blockquote>Which echoes things I've been saying for a long time. The US is going to change and it's going to change very dramatically. The "middle-class" is no longer going to be the center of this giant bell curve, things will tier much more. The US will need a broader base of producers, of people working dirty jobs.</div><div><br /></div><div>Of course, with such a small population (on a global scale), the only way the US can stay ahead of the curve is to become an intellectual mecca for the new generation of problem solvers and thought leaders. Of course, with such a small realy population base and an underfunded education system, there will be a need to import these people.</div><div><span class="Apple-style-span" style="font-family: georgia; font-size: 15px; line-height: 23px; "><span class="Apple-style-span" style="font-style: italic;"></span></span><blockquote><span class="Apple-style-span" style="font-family: georgia; font-size: 15px; line-height: 23px; "><span class="Apple-style-span" style="font-style: italic;">Further increases in productivity and prosperity require ingenuity and enterprise applied at the micro scale... As China and other developing countries finally achieve the industrial plenty that we enjoyed 50 years ago, the U.S. can stay ahead once again by pioneering the next-generation technologies that the increasingly industrialized world will require...</span></span><span class="Apple-style-span" style="font-family: georgia; font-size: 15px; line-height: 23px; "><span class="Apple-style-span" style="font-style: italic;">And no other nation assimilates immigrants as successfully as the U.S.</span></span></blockquote><span class="Apple-style-span" style="font-family: georgia; font-size: 15px; line-height: 23px; "><span class="Apple-style-span" style="font-style: italic;"></span></span>Those are just my choice quotes, the whole article is a good read.</div><div><br /></div><div>And here's a good summary about the <a href="http://www.shirky.com/weblog/2009/03/newspapers-and-thinking-the-unthinkable/">death of the newspaper</a>. I think this one quote really sums it up nicely:</div><div><span class="Apple-style-span" style="color: rgb(34, 34, 34); line-height: 16px; "><span class="Apple-style-span" style="font-size: medium;"><blockquote><span class="Apple-style-span" style="font-style: italic;">It makes increasingly less sense even to talk about a publishing industry, because the core problem publishing solves — the incredible difficulty, complexity, and expense of making something available to the public — has stopped being a problem.</span></blockquote></span></span></div><div>He goes on to mention that we don't really have a good replacement model for all of these journalists we're putting out of work. Personally, I get the feeling that between ease of publisher, ease of search/aggregation and ease of rating, it's quite probably that the future of news will be a truly distributed network. Not an Associated Press style of "distributed network", but rather a loose network of data collectors and aggregators and researchers. Each of which can produce data for the next set.</div><div><br /></div><div>In the article he makes a mention of reporters attending a town hall meeting "just in case". But in this new era of data, it's quite possible for one to film the event, have it edited for highlights, transcripted and then reviewed, blogged, twittered & pod-casted by multiple people all within hours. And unlike the previous model, these people don't even have to be the same the same people or the same group.</div><div><br /></div><div>Of course, none of this is very conducive to being done with paper, which may be why Time is calling for changes and the Times will be changing.</div>Gates VPhttp://www.blogger.com/profile/13840555181094178187noreply@blogger.com0tag:blogger.com,1999:blog-3193630162977872529.post-69479388796372911912009-03-30T02:17:00.004-06:002009-03-30T02:28:04.126-06:00Irrational PessimismThis is in reply to a post on <a href="http://www.milliondollarjourney.com/irrational-pessimism.htm">MillionDollarJourney</a>.<br /><br /><b>@Ed</b>:<i>This recession is, of course, not over yet and may deepen, but none of these statistics are expected to get as bad as the prior recessions.</i><br /><br />There are several logical flaws in the comparisons here:<br /><br />#1: The interest rate on today's mortgages <b>cannot</b> reach the level of those previous recessions. There is already an excess of available homes and lots of people still on ARMs. Interest rates that high would absolutely destroy the economy.<br /><br />#2: The interest number in 1981 was high b/c of inflation. Volcker, the Fed Chairman, wanted to <a href="http://en.wikipedia.org/wiki/Early_1980s_recession">wring out inflation</a> by slowing the growth of money. He basically raised interest rates until the stagflation stopped.<br /><br />#3: Your S&P 500 and TSX lines are both based on nominal differences. For a fair comparison you should calculate net change <i>plus</i> inflation. Either way, it's still pretty clear that the drops last year are in line with the drops in the other to recessions.<br /><br />#4: Inflation, what models do we have stating that this isn't going to sky-rocket?<br /><br />Clearly, the 0% inflation is due to the fact that the gvmt "printed" money approximately equal to the amount of money that was simply lost via bankruptcies. Of course, the 0.1% number dates back to January, but the most recent number that we have is from <a href="http://inflationdata.com/inflation/Inflation_Rate/CurrentInflation.asp">February</a>.<br /><br />Since the end of February, Obama has agreed to a trillion dollars. <br /><br />The US is likely going to run a <a href="http://www.npr.org/templates/story/story.php?storyId=102128234">$2,000,000,000,000 deficit this year</a>. That's two Canadian GDPs. Much of that money is going to come from <a href="http://www.npr.org/blogs/money/2009/03/fed_decoder_ring_1.html">Quantitative</a> <a href="http://marketplace.publicradio.org/videos/whiteboard/quantitative_easing.shtml">Easing</a>, <i>i.e: simply inventing money</i>. In fact, that's the goal, the government <i>wants</i> to create inflation. From <a href="http://krugman.blogs.nytimes.com/2009/03/20/fiscal-aspects-of-quantitative-easing-wonkish/?apage=3">Paul Krugman</a> of the NYT:<br /><br /><i>...having some inflationary effect — is what the policy is all about</i><br /><br />So we're going to have inflation. We have to, but you haven't seen it yet b/c the money is being invented right now.<br /><br />What's more, Obama has promised <a href="http://seattletimes.nwsource.com/html/politics/2008898165_obdeficit21.html">more trillion dollar deficits</a>. Without a dramatic increase in US production, these deficits are going to cause significant inflation.<br /><br />#5: The numbers are still getting worse.<br /><i>An average of 55 forecasters in the January 15 Wall Street Journal survey expect real GDP to eventually reach only -2.1%</i><br /><br />January 15 predates the enstatement of the Obama administration. Obama has likely seen the most active 100 first days of any president ever. He has produced several plans that simply did not exist in any way on January 15. You need to get more recent data than this.<br /><br /><i>Industrial production appears to have bottomed in September 2008.</i><br />Industrial production in 2009 has been down for <a href="http://www.actionforex.com/fundamental-analysis/daily-forex-fundamentals/u.s.-industrial-production-tumbles-for-fourth-consecutive-month-2009031682002/">4 months</a>.<br /><br />The numbers I'm reading are <a href="http://www.forextv.com/Forex/News/ShowStory.jsp?seq=259162&category=Market+Updates,Day+Ahead,Top+News">even lower</a>: <i>From February 2008, industrial production has declined by 11.2%.</i><br /><br /><i>The news is full of stories of massive lay-offs, but unemployment is only expected to rise to 8.9%</i><br />Unemployment numbers are <a href="http://www.bls.gov/news.release/empsit.nr0.htm">currently at 8.1%</a> (from 7.6% the previous month). And across all sectors:<br /><i>In February, job losses were large and widespread across nearly all major industry sectors.</i><br /><br />The US national debt is into <a href="http://zfacts.com/metaPage/lib/National-Debt-GDP.gif">record highs outside of WWII</a>.<br /><br />The US is operating a tremendous trade deficit and has been for 25+ years. That number will not turn around.<br /><br />The only politically feasible way out of the mess is (sadly) <a href="http://www.globalpolicy.org/socecon/crisis/tradedeficit/2009/0120brink.htm">the printing of money</a> combined with real economic growth. Of course, China's not really happy about the part where the government prints away its debt (and Canadians should be pretty peeved as well).<br /><br />But the US has to find a way to convert their dollars into real assets and frankly they have some of the most expensive assets in the world, so they're not doing really well in that category.<br /><br />#6: <i>Everyone is wondering how low the stock market will get, while trillions of dollars sit in cash on the sidelines waiting for the right time to jump back in.</i><br /><br />Where does this data come from? <br /><br />From what I can see, the banks and insurance companies are tragically under-capitalized (i.e.: lacking in cash). The banks don't want to mark their assets to real market values b/c they're complaining that there is a lack of liquidity in the market. The current US plan with the "private/public partnership" is founded on the concept that these assets would be under-valued if sold at current market prices b/c of a lack of competition and liquidity. So the US government is betting a 500 to 1,000 billion bucks and providing massive leverage to private investors in an attempt to heal the banks. And while this is happening you're claiming that many trillions of dollars are sitting around just waiting to be invested.<br /><br />If these trillions are waiting to be invested, why does the US government have to cook up plans with <a href="http://www.treasury.gov/press/releases/tg65.htm">12:1 leverage</a>?<br /><br /><b>@ED</b>, I don't think that you've made a very good case for yourself with one chart, old data and zero hyperlinks. It's obvious that your data doesn't add up. It's also clear that you're missing something really key about the US economy.<br /><br />If they do not reverse the trade deficit, the economy <b>will</b> collapse. It's very key that we understand the <a href="http://www.mint.com/blog/finance-core/visualizing-one-trillion-dollars/">size of the deficit</a>. The US has been on a 25-year <a href="http://www.mint.com/blog/finance-core/visualizing-uncle-sams-debt/">credit card spending spree</a> and they don't have an easy way to even start paying back the money without dramatically "tightening their belts".<br /><br />Even then a trillion dollars represents $33,000 for every US citizen. That's one median income here in Kansas City. That's a lot of debt, it's not going to be easy to pay off.<br /><br />I'm going to posit that we're actually under-estimating the breadth of this financial crisis but that we'll have to wait until 2010 for it to widely understood.Gates VPhttp://www.blogger.com/profile/13840555181094178187noreply@blogger.com0tag:blogger.com,1999:blog-3193630162977872529.post-781269050380936712009-03-12T23:20:00.006-06:002009-03-13T01:31:54.206-06:00The "Time" has yet to comeLast week Time Magazine ran a special on the US financial crisis. The first article is <a href="http://www.time.com/time/business/article/0,8599,1881854,00.html">House of Cards: The Faces Behind Foreclosures</a>. The article is centered on two Kansas City homeowners both facing foreclosures. I think that a few choice quotes from the article really speak to the root of this US financial crisis. People simply don't <span class="Apple-style-span" style="font-style: italic;">get</span> "it".<div><br /></div><div>The crisis is fundamentally about wanting too much at once. But the face it has consistently shown is one of over-leverage. Over-leveraged people, over-leveraged companies and an over-leveraged government (ostensibly all the same thing). </div><div><br /></div><div>This article tries to paint a picture of those getting those getting the short end of the stick, but all I see are over-leveraged people out of time.</div><div><br /></div><div>A few choice quotes:</div><div><span class="Apple-style-span" style="font-family: georgia; font-size: 15px; line-height: 23px; "><blockquote><span class="Apple-style-span" style="font-style: italic;">We have entered the one-strike-and-you're-out era. One lost job. One medical emergency. One bad risk or misjudgment of the heart...</span></blockquote><blockquote><span class="Apple-style-span" style="font-style: italic;">We're geared to believe that risk begets reward and our tomorrows are brighter than our todays. One-strike-and-you're-out is a neck-snapping reversal for a culture accustomed to assuming that fate is a welcome friend...</span></blockquote><blockquote><span class="Apple-style-span" style="font-style: italic;">People like Paula Stevens and Joseph Zachery weren't flipping houses or lying on their loan applications. They didn't pile up mountains of credit-card debt. They worked hard for what they had and shared their modest portions with others...Their bitterness stems from a feeling that they've held up their end of the social contract, but now the terms of the deal have been rewritten by malign forces....<br /></span></blockquote><blockquote><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-style: italic;">Not everyone who has fallen behind on a mortgage is a loser complicit in the housing collapse.</span></span><br /></blockquote></span></div><div><span class="Apple-style-span" style="font-size: 15px; line-height: 23px;">That last line is from the closing paragraph. (emphasis mine) So the big question here is "are these two people 'losers'?" Are these two really innocent bystanders in the housing collapse? I think the answer is <span class="Apple-style-span" style="font-weight: bold;">no</span> and the reason should be clear simply by analyzing the risks under-taken by both parties.</span></div><div><span class="Apple-style-span" style="font-size: 15px; line-height: 23px;"><br /></span></div><div><span class="Apple-style-span" style="font-size: 15px; line-height: 23px;"><span class="Apple-style-span" style="font-weight: bold;">Joseph Zachery</span></span></div><div><span class="Apple-style-span" style="font-size: 15px; line-height: 23px;"><span class="Apple-style-span" style="font-style: italic;">Occupation:</span> Firefighter from 1986 to recent. Ended at $60k / year. </span></div><div><span class="Apple-style-span" style="font-size: 15px; line-height: 23px;"><span class="Apple-style-span" style="font-style: italic;">House: </span>$100k house, needed renovations</span></div><div><span class="Apple-style-span" style="font-size: 15px; line-height: 23px;">Worked a second job: <span class="Apple-style-span" style="font-family: georgia; "><span class="Apple-style-span" style="font-style: italic;">Like most firefighters, he always had a second job...he started his own business, demolishing houses condemned by the city.</span></span></span></div><div><span class="Apple-style-span" style="font-size: 15px; line-height: 23px;">He used the equity from his house to buy demolition equipment, resulting in a mortage where <span class="Apple-style-span" style="font-style: italic;">"</span><span class="Apple-style-span" style="font-family: georgia; "><span class="Apple-style-span" style="font-style: italic;">he owed nearly twice the original purchase price."</span></span></span></div><div><span class="Apple-style-span" style="font-size: 15px; line-height: 23px;"><span class="Apple-style-span" style="font-style: italic;">Crisis:</span> he gets into an accident on the job.</span></div><div><span class="Apple-style-span" style="font-size: 15px; line-height: 23px;"><br /></span></div><div><span class="Apple-style-span" style="font-size: 15px; line-height: 23px;">He's shuttled around between hospitals, he gets full disability from the fire department (plus some electroshock treatment?) and he's now living on pension. He get $50k / year. It costs him $800 / month for medical, leaving him with $2,400 for everything else. But get this, his mortgage is $1,600! On a 100k loan that doesn't make any sense. But the problem here is that he actually owes 190k which he's paying off at 9%.</span></div><div><span class="Apple-style-span" style="font-size: 15px; line-height: 23px;"><br /></span></div><div><span class="Apple-style-span" style="font-size: 15px; line-height: 23px;">So why did he end up here? Was it the work accident? What did he do wrong? What are the risks he took?</span></div><div><ol><li><span class="Apple-style-span" style="font-weight: bold;">Leveraging non-existing home equity:</span><br />He didn't pull out just the home equity he "actually had" from his down payment or his mortgage payment. He pulled out "speculative" equity that the bank extended based on the prevalent housing prices at the time. He wasn't borrowing "his own" equity, he was borrowing equity that he hoped the house would have.<br />Rather than taking out a business loan for his small business, he took out a loan against his home meaning that a crisis in his life would likely cause his to lose his home.<br /></li><li><span class="Apple-style-span" style="font-weight: bold;">Leveraging his ability to fix the home:</span><br />As stated, the home was a fixer-upper. He was banking on his ability to fix the house in order to prop up the value of the house. Of course if he wasn't able to fix the house for some reason, it's value would bleed from lack of maintenance.</li><li><span class="Apple-style-span" style="font-weight: bold;">Leveraging his second job:</span><br />He knew his pension income and he knew his medical payments, he knew the money he had to work with. Based on the fact that he's losing his home, it's pretty obvious that he wasn't going to be able to keep his home on just his pension. He needed that second job to keep him going.</li><li><span class="Apple-style-span" style="font-weight: bold;">Under-insuring:</span><br />This is a really big point.<br />There is no indication that he has disability insurance on his second job. Here he has a second job that he <span class="Apple-style-span" style="font-style: italic;">needs</span> to keep in order to remain solvent. He's dependent on his own mobility and capacities. But he's not insured if he loses them.<br />Yes he had disability from the fire department, but that was only for his fire department salary. Where's his insurance for his other business?<br />He buys 100k in equipment, but doesn't buy 100k+ in disability to cover his potentially catastrophic liabilities.</li></ol>So if you look at the risks, he was basically gambling that this wouldn't happen. He's unmarried, he's supporting his mother, his kid is in college, he's has no "backup support". </div><div><br /></div><div>He's a firefighter, he runs into burning buildings for a living and he's gambling his livelihood and his home on the fact that he won't be injured.</div><div><br /></div><div>So he got injured and lost his home.</div><div><br /></div><div><div><span class="Apple-style-span" style="font-size: 15px; font-weight: bold; line-height: 23px;">Paula Stevens</span></div><div><span class="Apple-style-span" style="font-size: 15px; line-height: 23px; "><span class="Apple-style-span" style="font-style: italic; ">Occupation:</span> Gateway tech support. No college degree, serial "entry-level" worker. In her best year she grossed 42k </span></div><div><span class="Apple-style-span" style="font-size: 15px; line-height: 23px; "><span class="Apple-style-span" style="font-style: italic; ">House: </span>3,000 sq ft, purchased in 1994. Re-financed 3 times, now owes 159k (@ 9%!)</span></div><div><span class="Apple-style-span" style="font-size: 15px; line-height: 23px; "><span class="Apple-style-span" style="font-style: italic; ">Crisis:</span> lost her job at Gateway and can't find one that pays as much.</span></div><div><br /></div><div><span class="Apple-style-span" style="font-size: 15px; line-height: 23px; ">So the obvious risks:</span><br /></div><ol><li><span class="Apple-style-span" style="font-weight: bold;">Living without a buffer:<span class="Apple-style-span" style="font-weight: normal;"><br /></span></span><span class="Apple-style-span" style="font-family: georgia; font-size: 15px; line-height: 23px; "><span class="Apple-style-span" style="font-style: italic;">"It takes $14 per hour for me to meet my bills...That's what I was making at Gateway when I was laid off. But no one wants to pay that much..."</span><br />If you're making $14 / hour, you need to be living off $11 or $12. How else are you going to save up cash for retirement or even just emergency expenses like job losses?</span></li><li><span class="Apple-style-span" style="font-size: 15px; line-height: 23px;"><span class="Apple-style-span" style="font-weight: bold;">No professional development:<br /><span class="Apple-style-span" style="font-weight: normal;">She made it to 56 and somehow doesn't have the skills that she can market for $14. There's no sign that she took college night courses or professional training.</span></span></span></li><li><span class="Apple-style-span" style="font-size: 15px; line-height: 23px;"><span class="Apple-style-span" style="font-weight: bold;">Where did the equity go? the savings?:</span><br />She's 14 years into a mortgage and she owes 159k. The median home price in Kansas City during the last recent peaks was <a href="http://www.housingtracker.net/asking-prices/kansas-city-missouri">just under 190k</a>.<br />But she bought in 1994, close to the bottom, 14 years ago. She most likely owes more on the house than its original asking price. And she's paying 9% on it to the tune of $1,400 / month.<br />And where are her savings? It doesn't seem like she had retirement plans of she would have money right now.</span></li><li><span class="Apple-style-span" style="font-size: 15px; line-height: 23px;"><span class="Apple-style-span" style="font-weight: bold;">Family Obligations:</span><span class="Apple-style-span" style="font-family: georgia; "><span class="Apple-style-span" style="font-weight: bold;"> </span><br /><span class="Apple-style-span" style="font-style: italic;">...but her oldest daughter, Maggie, 28, has a new baby and is enrolled in nursing school. "I just have to get her through that," Stevens explained</span></span></span></li></ol><span class="Apple-style-span" style="font-size: 15px; line-height: 23px;">To put #4 in context. I am currently living in the heart of Kansas City in a luxury apartment in a premium location. I have 1100 square feet, 2 bedrooms and 2 full baths. In-suite washer/dryer/dishwasher and a few other luxuries. You could very comfortably have two people and child here.</span></div><div><span class="Apple-style-span" style="font-size: 15px; line-height: 23px;"><br /></span></div><div><span class="Apple-style-span" style="font-size: 15px; line-height: 23px;">I pay less than $1,400 after utilities. That's less than her mortgage and this is a luxury suite. You can get an older apartment or a townhouse down the street for $600 to $900. That would make it a lot easier to balance the bills.</span></div><div><span class="Apple-style-span" style="font-size: 15px; line-height: 23px;"><br /></span></div><div><span class="Apple-style-span" style="font-size: 15px; line-height: 23px;">So where does that leave Paula? She's obviously over-extended, but all of the signs are pointing to her basically not having savings. Her telling quote is this defeatist line: <span class="Apple-style-span" style="font-style: italic; ">"</span><span class="Apple-style-span" style="font-family: georgia; "><span class="Apple-style-span" style="font-style: italic; ">That's how it works. You just keep starting over." <span class="Apple-style-span" style="font-family: Georgia; font-style: normal; ">Rather than spending her life accumulating, she just kept starting over.</span></span></span></span></div><div><span class="Apple-style-span" style="font-size: 15px; line-height: 23px;"><br /></span></div><div><span class="Apple-style-span" style="font-size: 15px; line-height: 23px;">My personal opinion (because it's my blog): neither of these people should be in their homes. They should both be renting, either really close to family or really close to public transit.</span></div><div><span class="Apple-style-span" style="font-size: 15px; line-height: 23px;"><br /></span></div><div><span class="Apple-style-span" style="font-size: 15px; line-height: 23px;">Disagree? I'd love to hear other thoughts.</span></div>Gates VPhttp://www.blogger.com/profile/13840555181094178187noreply@blogger.com0tag:blogger.com,1999:blog-3193630162977872529.post-74497155659359564792009-03-07T22:32:00.003-07:002009-03-08T01:29:13.696-07:00The US labour problemHere's a great quote from the founder of <a href="http://mint.com/">Mint.com</a> on the <a href="http://www.mint.com/blog/updates/obama-administration-seeks-economic-advice-from-young-entrepreneurs/">mint blog</a>.<div><div><blockquote><span class="Apple-style-span" style="font-style: italic;">While the downturn in the economy has meant a flood of resumes for sales, marketing, and general business positions, the engineers, scientists, and researchers who actually make the next innovations possible are still in very short supply.</span></blockquote></div><div>I think that he really captures the fundamental US problem. All of the job futures are in sciences & engineering. But the US has been a services economy for decades. Bankers and financial analysts don't actually "make" anything. Lawyers and Accountants don't really "make" anything. They are fundamentally just business overhead. Sales people help connect people and products, but a year in the US will show that we clearly already have more than enough people in Sales and Marketing.</div><div><br /></div><div>Yeah, maybe I'm biased b/c I work in the computer industry. But if you look around at the "future jobs" boards, they're all centered around "making stuff". And that's what the US needs to do become financially solvent again. They need to "make stuff" that they can export. You can build a better battery and export that to China. You can build windmills and power stations and ship them across the world. You can train great scientists and have other countries license their technology. But you can't export Lawyers and Accountants. And you certainly can't export US bankers :)</div><div><br /></div><div>Of course, the US has had some serious educational issues over the last couple of decades, especially in the realms of education in "Math and Sciences". So we have a populace that's ill-prepared to tackle the new problems.</div><div><br /></div><div>The mint.com founder (Aaron Paatzer) suggests an increase in the H1Bs and other foreign visas. And he has a point. Smart people from around the world can migrate to the US and enjoy a US quality of life. It would make a lot of US citizens unhappy and importing "the rich" would definitely "make the poor poorer", but I strongly suspect that's going to happen anyways.</div><div><br /></div><div>Maybe making the US into a mecca for brains will provide it a means of conquering its financial crisis. It's not a great deal for the "average American" who will still see a decrease in quality of life, but they're going to see that anyways. Maybe salvaging lifestyles for the top 20% of earners will at least provide reason for continued US solvency.</div></div>Gates VPhttp://www.blogger.com/profile/13840555181094178187noreply@blogger.com0tag:blogger.com,1999:blog-3193630162977872529.post-69185732042559148602009-03-02T14:25:00.005-07:002009-03-02T14:40:49.009-07:00Big vs. Small in ITPosted this to <a href="http://www.hanselman.com/blog/HanselminutesPodcast150UncleBobMartinThisTimeWithFeeling.aspx">Hanselman</a> over the weekend, and it's probably worth a redux in my own blog.<br /><br />The underlying issues being discussed is that <a href="http://joelonsoftware.com/">Joel Spolsky</a> ripped in to <a href="http://objectmentor.com/">Uncle Bob Martin</a>. A couple of <a href="http://blog.rwendi.com/UncleBobVSJoelSpolskyDoesQualityMatter.aspx">summaries</a> <a href="http://www.infoq.com/news/2009/02/spolsky-vs-uncle-bob">are available</a>.<br /><br />On to the reply:<br /><b>@Scott</b>, I think a valuable read relative to this topic is Malcolm Gladwell's book <a href="http://www.amazon.com/Outliers-Story-Success-Malcolm-Gladwell/dp/0316017922/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1235605551&sr=8-1">"Outliers"</a>. Bob makes that comment that <i>"it takes 5 years for a developer to really become experienced"</i>, which is a statement backed up by the research in this book (10,000 hour rule). A lot of this podcast felt like "dancing" around the subjects discussed in the book.<br /><br />The core of your podcast is dancing around the question of <b>"What is good <i>enough</i>?"</b><br /><br />The definitions of <b><i>enough</i></b> vary quite dramatically from project to project and person to person.<br /><br />In particular the definitions will vary by the size of the project / company. And this is where Joel and Bob really work at odds. They are coming from two completely different realms of project / company. Let's say there are 4 classifications:<br /><ol><li>Small / Micro / Start-up</li><li>Medium, established niche</li><li>Large, thousands of users, typically a legacy base</li><li>Web-scale, millions of users (Google, MS)</li></ol>Now Joel clearly comes from world #1.<br />Bob is from world #3 or 4.<br />Scott, you're from world #3 (& now #4).<br /><br />For most developers in world #1 or 2, Bob's SOLID principles are at best guiding lights for solving the "next big bottleneck". (And there's a lot to be said about first having bottlenecks worth solving) There is simply not enough value generated by writing interfaces for the large mass of internal layers that are never exposed. Lots of objects simply don't need a "single responsibility", because the cost to change is very low. In my simple DB app, I don't extend more than 1% of my classes, so why do I worry about the <a href="http://www.objectmentor.com/resources/articles/ocp.pdf">OCP</a>? In "Fog Creek" world, there's a lot of leeway in the term "Quality".<br /><br />The cumulative sum of generating unit test for vast swaths of Maintenance screens simply doesn't justify the time spent on this screens. In fact, most people in world #1 & #2 seek out tools (like CSLA) quite specifically to generate Maintenance screens b/c they just don't justify any custom functionality.<br /><br /><b>Let's flip this into a practical application.</b> (with no offense to Jeff Atwood here)<br /><br />I can tell you right now that StackOverflow will not scale to 100x as it is currently architected. If the number of StackOverflow users grows by 100x the entire architecture will need to change. No, I've never seen the codebase, I've just listened to the podcasts (Hanselminutes and their own) but just listening to the problems it's obvious that things would need to change.<br /><br />For example, to achieve 100x:<br /><ul><li>They would need multiple databases.<br /></li><li>They would need specialized services to push data back and forth.<br /></li><li>Your rep score would be updated every 60 minutes by a service (not in real time).</li><li>There would be a server responsible for updating RSS feeds. Data about updates would be pushed to the DB and replicated to bulk insert files on the RSS server to manage the reads against the primary.</li></ul><br />As I said above the SOLID principles would be a guiding light in solving these problems.<br /><ul><li>They would need to break out interfaces for "high-communication" features and build standard interfaces for communication (Web Services, Bulk Insert files, etc.).</li><li>They would need to reduce connectivity dependence. Web servers would read from local DB copies and update themselves periodically.<br /></li><li>LINQ-to-SQL would suffer as tables became stored on different DBs. They would need an IOC model for managing connections at a table level so that they could point connections at the right spots.</li></ul><br />Of course, in the process of growing by 100x, they would move from world #1 into #3. And the nature of these SOLID principles is that they become more valuable as the scope of the project grows and the available resources to build that project also grow.<br /><br />I work for an ad network, so I live in world #2 & #4.<br /><br />In one world we serve 100s of millions of impressions in a day. In another world, we operate a user interface with 100s of users. The definition of "Quality" varies dramatically between these worlds. In one world, we can build drag & drop UIs with MS AJAX and leverage the servers for good response times. In another world we write these massively scalable and distributed apps with lots of interfaces and IOC and robust, error-resistant code.<br /><br />When Joel talks about Bob having "never written much code", he's talking about Bob not having written very much of the <i>type</i> of code that Fog Creek writes.<br /><br />When Bob lays out the framework for a new project he simply has too many tools that do not provide value in Joel's world.<br /><br />When Joel lays out the framework for a new project he ignores many of the tools in Bob's framework because he's never really needed them before.<br /><br />And that's OK... I mean look at StackOverflow, it already has every dev on its mailing list :). It doesn't actually have to grow 100x to cover its potential market.Gates VPhttp://www.blogger.com/profile/13840555181094178187noreply@blogger.com0tag:blogger.com,1999:blog-3193630162977872529.post-37759374933443483502009-02-01T01:42:00.003-07:002009-02-01T02:17:57.257-07:00IT misunderstood againSo found this off the wire:<div><span class="Apple-style-span" style="font-family: Arial; font-size: 12px; "><h1 style="margin-bottom: 0px; line-height: 1; "><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: medium;"><a href="http://www.infoworld.com/archives/emailPrint.jsp?R=printThis&A=/article/09/01/29/IT_pay_up_in_three_areas_down_elsewhere_1.html">Study finds IT pay up in six areas, down elsewhere</a></span></span></h1><h2 style="margin-bottom: 0px; line-height: 1; "><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: medium;"><span class="Apple-style-span" style="font-weight: normal;"><a href="http://www.infoworld.com/archives/emailPrint.jsp?R=printThis&A=/article/09/01/29/IT_pay_up_in_three_areas_down_elsewhere_1.html">Research firm's CEO says 'we've never seen anything like this before'</a></span></span></span></h2></span></div><div><br /></div><div>Here are the six areas:</div><div><ol><li>Management / Methodology / Process</li><li>Database</li><li>Messaging and Communication</li><li>Architecture</li><li>Security</li><li>Networking</li></ol><div>Now for skills that are down:</div><div><ol><li>Application Development</li><li>SAP & Enterprise Development</li><li>Operating Systems</li><li>Web / e-commerce</li><li>Systems Networking</li></ol></div><div><br /></div><div>So in classic fashion, those trying to research the industry have fundamentally misunderstood the industry. And I think that the problem is obvious, <span class="Apple-style-span" style="font-weight: bold;">how do you actually "track skills"</span>?</div><div><br /></div><div>The report claims to track over 354 IT skills. That's a lot of skills, of course, it could also just be a lot of fluff. Anyone who's looked for a job in IT knows that the market is acronym-crazy. It's also short on any form of acronym meaning. </div><div><br /></div><div>I mean, what the heck is the difference between "Networking" & "Systems Networking"? According to the stats, that difference is worth 3%+ in pay. </div><div><br /></div><div>What counts as "Web / e-commerce"? It's obvious that general e-commerce is becoming commodity, that's to be expected. But is "web" really worth less? Facebook app development, Google App Engine, Microsoft's Azure, Amazon's AWS... these are all "Web" technologies. Where do they fall? Heck, Azure and AWS are also Operating Systems technologies.<br /></div><div><br /></div><div>So get that, skills in AWS have actually dropped in value. Right.... Huh?!?</div><div><br /></div><div>I think the reason the CEO has "never seen anything like this before" is really that he's asking the wrong questions. Trying to track IT pay by grouping across these massive skill sets is doomed to fail. In fact, trying to track IT pay by <span class="Apple-style-span" style="font-style: italic;">any</span> grouping of skill set is seriously flawed.</div><div><br /></div><div>And the reasons are simple:</div><div><ul><li>There are too many IT skills and new skills are constantly being created</li><li>Each skill has a lot of gradients</li><li>Skills with different names can be very closely related</li><li>Skills are constantly being picked up by experienced people</li></ul><div>So how anyone plans to track that is beyond me. Last year's "Database skills" are not this year's and they're not next year's. Why you would group them under the same category each year and then pretend that they correlate demonstrates a misunderstanding about the way this industry works.</div></div></div>Gates VPhttp://www.blogger.com/profile/13840555181094178187noreply@blogger.com0tag:blogger.com,1999:blog-3193630162977872529.post-68359561740416792182008-11-12T14:33:00.001-07:002008-11-12T14:34:15.553-07:00Enough to Retire?Just came across the 10/10/4 model as presented at <a href="http://blog.mint.com/blog/finance-core/how-can-you-be-sure-you-have-enough-to-retire/">Mint.com</a>. It demonstrates a pretty tenuous grasp of reality.<br /><br />Comments below.<br /><br /><b>Jess</b>:<i>the life expectancy in the US is only 77 years according the the CDC</i><br /><br />Is the current life expectancy or the life expectancy for people who are currently 20 and won't hit 77 for another 50+ years? Do we have a link for this?<br /><br />Even if we change the model to 80 years (let's give medical science a little credit), that still leaves us with 45 years of working to 35 years of not working. That leaves us with 45 people working for 35 people not working.<br /><br />Imagine that you're living in a (global) village with 80 people. 45 of those people do <b>all</b> of the hunting / gathering / farming / house-building. The other 35 people are either non-productive children or old people who sit around smoking pipes and eating food brought in by the other 45 people.<br /><br />Either way.<br /><br />If you save 10% / year for 45 years, and receive no effective pay raise between 20 & 65 (i.e.: pay raise = inflation). Then you would need ~3.25% real returns (that's returns above inflation) for basically the entire 45 years to meet the goal of having 10x your annual income. That doesn't sound like much, but here's some perspective.<br /><br />Right now TIPS bonds are offering 0.7% real returns (they were offering 0.0% returns just a few months ago). Real Stock market returns over the last decade are into the negative. If you earn 0% real returns one year you have to make 7.5%+ real returns the next, just to make it up, that's not easy.<br /><br />What's more, you're subject to a very critical period. At year 30 you have about 5x of your 10x. From year 30 to 45, you're only going to save 1.5x (putting you at 6.5x), which means that you're relying on 15 years of solid returns to make up that other 3.5x. If you have a 5 or 10-year drought, you could end up way short. And a 5 or 10-year drought is going to happen somewhere in those 45 years.<br /><br />Finally, we made the very unsafe assumption that your "real income" doesn't change. Realistically, your income increases over time.<br /><br />According to the 10/10/4 model: <i>"...by the time you are 65, you will need 10x your income immediately prior to retirement to retire at the level you want.."</i><br /><br />So you need 10x your final income, not your starting or even your average income.<br /><br />Let's say you're 20 and making 30k today. Your "10x" number is 300k. You save 10% for 10 years and save just over 1 year's worth of income (say 31k). At the end of 10 years you make the big switch and find a new job earning 45k (again, no inflation). Awesome for you!<br /><br />However, now your "10x" number is 450k, but you only have 31k in the bank. You're behind, right? You're at year 10, you should have at least 10% of your target number, but you only have 6.8%. So what if you continue to plow along for another 10 years and then get another pay raise to 60k? Now your 10x number is at 600k, you're 20 years in to the plan but you're way behind the curve. You <i>should</i> have saved 120k (+ interest), but you're nowhere close to that number.<br /><br />And then you have to account for medical. If you're earning 60k but receiving 10k in medical benefits (may be low-balling in the US), you now need 700k in savings (not 600k).<br /><br />You can see where I'm going with this. If you follow the 10% savings route and you also follow a normal pattern of increasing income throughout your career, the 10x goal is very difficult.<br />- Your increasing income makes previous savings insufficient.<br />- High medical expenses inflate your "10x" number.<br />- You need consistent returns well above inflation and you need them at the right times.<br /><br />Don't get me wrong, I'm a savings advocate. I save 10% and then some in tax-advantaged accounts.<br /><br />But I make no pretenses of making it to 10x without saving more, getting lucky or making some savvy investments.<br /><br /><b>Again, the model presented above is very broken. Readers can follow this at their own risk.</b>Gates VPhttp://www.blogger.com/profile/13840555181094178187noreply@blogger.com0tag:blogger.com,1999:blog-3193630162977872529.post-63571829779454362022008-10-03T08:34:00.001-06:002008-10-03T08:34:01.765-06:00Extra Code Worst Software Waste?<span style="font-style: italic;">Please Note: this is an older post I found in my archives. Originally dated August 13.</span><br /><br />Another blog reply, this time to a devlicious blog post by <a href="http://devlicio.us/blogs/derik_whittaker/archive/2008/08/06/unused-code-is-the-worst-of-the-7-wastes-of-software.aspx">Derek Whitaker</a>.<br /><br /><i>re-creating massive amounts of code is expensive and time consuming</i><br /><br />Umm... no. If codegen is expensive or time-consuming, you're doing it wrong. If members of the team have a difficult time using code, you're doing something wrong.<br /><br />You're simply attributing the problems to the wrong source. Godegen is clearly not the issue here. The issue is implementation and training.<br /><br />So you come up with this as a substitute:<br /><br /><i>Code you create now, but do not have a direct, immediate need for NOW is waste.</i><br /><br />But the NOW timeline is really short-sighted.<br /><br />Here's a classic. We've rigged our generated entity code to have special handling on any columns named "CreatedDate" and "ModifiedDate". Of course, lots of the primary entity tables we created simply didn't have these columns.<br /><br />Now, to start with, we don't have a reporting interface or any business logic associated with these columns, so according to your logic adding these columns (i.e.: adding code) is a waste. And of course, that continues to be true until a problem arises that is solved by having these columns (except that they don't exist). I can't now go back and add these columns and suddenly get the data, but hey at least I didn't waste any time, right?<br /><br />The problem with only handling immediate needs is that it opens the door to ignoring common failures.<br /><br />Take my example. I know from experience that having these columns on specific tables <b>will</b> be useful. Maybe not now, but definitely soon. And we're not talking about full table-auditing, just a couple columns. We can get that information for a time usage so small that it's basically free and you're telling me that it's a waste because we're not going to use those columns now?<br /><br />As always, good judgment and experience must be applied when making decisions about what code and features to build. I've spent a lot of time "paying for" mistakes that were wrought from the "we don't need it now" mentality.<br /><br />In the case of our two dates (Created and Modified), we had to fight through support issues that relied on the non-existent data. A year ago, our product didn't have a support team, so nobody put them in, we didn't need them NOW. That cost us time and money for what should've been a "free" feature.<br /><br />Turns out we'll likely need a full change history on a couple of the tables.. That's fine, we can't get that "for free", so it's OK that we didn't "waste time".<br /><br />And what about features that don't get used? If I build 5 features and only 1 gets used, is that waste? Technically it is, but realistically, not every feature is going to be a hit. In fact, it's generally acknowledged that failures are a very important component of success. Maybe it just takes the implementation of 5 features to find one that "sticks", all of that "unused code" may be a "success" in some people's book.<br /><br />I think you can get my point here, waste is not as simple as defining code that does or does not get used. You also have to factor opportunity costs for the code that is written and the "timing of the time". Hours are not equal, the hour when your datacenter is down has a very different value than the hour I spent writing this post.<br /><br />Calling unused code the "Worst of the wastes" is difficult to swallow without a little deeper comparative analysis. But given the difficulty of even analyzing the value of unused code, I think you'd be in for a challenge there.Gates VPhttp://www.blogger.com/profile/13840555181094178187noreply@blogger.com0tag:blogger.com,1999:blog-3193630162977872529.post-17308518497968563962008-08-12T13:44:00.002-06:002008-08-12T13:44:57.671-06:00Housing illusionsMillionDollarJourney had a post about <a href="http://www.milliondollarjourney.com/cash-back-mortgages-are-a-bad-idea.htm">Cash Back Mortgages</a>.<br /><br />Instead of the usual comment, I've devolved into one my blog replies, original comments included.<br /><br /><b>@Nolan</b>: <i>However it does not change the fact that if you buy a house to live in it, and the payments are reasonable for your income, then you are better off owning than renting in the long run.</i><br /><br />This has been hashed and re-hashed on this forum and elsewhere. The data in no way supports your thesis and I would urge not to spread such dangerous information. <b><br /><br />At best, owning a home is a lifestyle decision with a set of associated risks</b>. We can argue this elsewhere, but there are a dozen guys who've run the spreadsheets. You've successfully listed a few of the risks:<br /><i>... the ones who can’t afford their payments, speculators (like you said), and the ones who panic and sell when housing prices fall.</i><br />but there are more:<br /><ul><li><b>Risk - People with jobs that are heavily dependent on some local resource</b> (<i>mill-towns, mining towns, etc</i>). This is actually doubly risky, b/c if you're losing your job it's likely that nobody else is moving in which means that your housing "investment" won't be doing well at the very time you need to sell.</li><li><b>Risk - People working in highly transient / mobile fields</b>. If you're in IT and changing jobs every 3-5 years (quite common), being tied to a location can be quite costly. If you're an athlete, a long-haul trucker, etc. similar logic would apply.</li><li><b>Risk - purchasing a high-maintenance house</b>. Even if you can "reasonably afford the payments", you still need to afford the maintenance. A 20k basement repair on a 120k house is a realistic risk and would definitely wreck your financial plans.</li><li><b>Risk - property tax increases.</b> As independent homeowners you're still on the hook for these taxes, Yes there are processes, but it takes personal time (read "money") and you don't necessarily have a lobbyist group on your side.</li><li><b>Risk - school district changes:</b> This is primarily in the US where people pay premium home prices for "top-rated" school districts. A certain % of value is actually tied to the continued school district prosperity. Buying a house for your 5-year old could be a liability by the time they're 18 and it's time to "downsize".</li><li><b>Risk - Energy Costs:</b> once you buy a place you're locked in to paying the energy required to keep that place running. If your rental place sucks up too much energy (due to size or just poor maintenance), you can move at the end of the lease or request changes (you're income, you have a good bargaining chip). If your own home leaks heat (or cold), you're on the hook for this cost. I don't know if you've noticed, but energy costs are going up almost universally. Right now, 50% of the earth's population is using about 4% of the world's energy, and we still haven't figured out that whole "cold fusion" thing. That's a lot of pressure for energy costs to continue to rise.</li><li><b>Risk - Politics:</b> don't like that new factory that's being built just around the corner? Think it will influence your house price? Well, the ball's in your court now, b/c it won't be easy to move, especially with that factory weighing down on your home value. (also, see property taxes)</li></ul>I want to echo one of <b>Jordan</b>'s comments here: <i>...ignorant customers just desperate to get in before they’re “priced out forever” or other such non-sense.</i><br /><br />If you are making above-average income you will not be "priced-out forever". The rules of supply & demand still apply. Either house prices will deflate drastically or the salary prices will rise to match the growing cost of living. House prices do tend to be stubborn, but since 1990 we've since house prices grow well beyond the rate of inflation, with people re-investing the money from their first place into the second (and third and so on). Barring government interference they're going to dip like every other investment.<br /><br />Personal aside: I expect this dip to happen when the average baby boomer retires and "downsizes". But it may be happening sooner, check out this blog on <a href="http://www.edmontonrealestateblog.com/my_weblog/2008/08/edmonton-real-1.html">Edmonton housing market</a> (with lots of pretty charts). Notice the <span style="font-style: italic;">Supply vs. Demand</span> and the <span style="font-style: italic;">Price and Inventory Comparisons</span>?<br /><br />If you want a home and can't afford one, just keep saving your ducats and investing elsewhere. Especially the 20-somethings and 30-somethings with "good jobs" (i.e. average or above-average income).<br /><br />Did I miss any home-owner risks?<br />There are definitely some renters risks, but that's a different post.Gates VPhttp://www.blogger.com/profile/13840555181094178187noreply@blogger.com6tag:blogger.com,1999:blog-3193630162977872529.post-55317544257617431312008-08-04T12:04:00.002-06:002008-08-04T12:06:27.100-06:00Why I avoid "the news"<a href="http://www.flickr.com/photos/500hats/2730217375/"><br /></a>I think <a href="http://500hats.typepad.com/500blogs/2008/08/dnn-the-death-n.html">Dave McClure</a> from 500 hats, basically summed up CNN in one succinct diagram and comment.<br /><span style="font-style: italic;">out of a possible 20 "news" items on </span><a style="font-style: italic;" href="http://us.cnn.com/" rel="nofollow">CNN.com</a><span style="font-style: italic;">, a full 15 focus on death (usually violent death), crime, weather, religion, or celebrity.</span> <span style="font-style: italic;"> of the remaining 5 items, 2 are related to politics, 1 is related to business / entertainment, 1 is science, and 1 is random.</span> <span style="font-style: italic;"> in other words, about 80% of news is simply death, weather, or fame.</span><br /><a href="http://www.flickr.com/photos/500hats/2730217375/"><img style="width: 423px; height: 339px;" src="http://farm4.static.flickr.com/3252/2730217375_27186858ee.jpg?v=0" alt="DNN: The Death News Network by davemc500hats." title="" onload="show_notes_initially();" class="reflect" /></a><br /><br />Thanks Dave, couldn't have put it better, of course YMMV.Gates VPhttp://www.blogger.com/profile/13840555181094178187noreply@blogger.com0tag:blogger.com,1999:blog-3193630162977872529.post-25014862014326879672008-07-16T09:24:00.005-06:002008-07-16T09:41:48.930-06:00Consumer confidence vs House PricesI for one believe that most housing in the US is way over-priced. I'm currently living in KC and I'm seeing some "reasonable" prices. But I think it's worth noting that I'm making twice the median income and I can't see buying anything out here.<br /><br />That's right, my wife doesn't work, so together, we make the median income for a two-person family and the cost of owning our own place is prohibitive. Of course, house prices are dropping, which makes me feel great, maybe I'll be able to afford one soon, but it looks like people aren't. I just found this graph on swivel (which is a pretty cool site BTW).<br /><br /><span style="text-decoration: underline;"><a href="http://www.swivel.com/graphs/show/28758010"><img alt="Case-Schiller Home Prices and Consumer Confidence Index" src="http://www.swivel.com/graphs/image/28813498" style="border: solid 1px #rgb(0.6,0.6,0.6);" title="Click to play with this data at Swivel" /></a></span><br /><br />Of course, in the grand world of causation vs correlation, I'm going to chalk up the drop in confidence to more factors than just dropping house prices. If anything, it's likely the economy in general mixed with a healthy dose of "back-to-reality". For great helping of "back-to-reality", check out <a href="http://www.milliondollarjourney.com/oprah-suze-orman-and-debt.htm">this post on MDJ</a>:<br /><br />California couple, family of 8, 100k / year:<i><br /></i><ul><li><i> No medical insurance for the themselves OR the kids.</i></li><li><i>$135,000 in credit card debt.</i></li><li><i> Two mortgages totaling $658,000.</i></li><li><i> Large mortgage with payments of $1800/month, but payments will increase to $3300/month in a few months.</i></li><li><i> They have 3 cars, 2 of which are leased, the other one they own. The cost is $1700/month.</i></li><li><i> Wife spends $300-$400/month at Starbucks (It was the wifes morning routine).</i></li><li><i> $60/week on tanning and manicures</i></li><li><i> $4k on hair extensions in the past 2 years.</i></li><li><i> Constantly shopping.</i></li><li><i> The wife would regularly buy brand new clothes for the kids, then have a garage sale a month later to sell the “used” items at pennies to the dollar. (This one blew me away)</i></li></ul>Scary stuff.<br /><br />Maybe it's time to practice "positive cash-flow techniques". Of course, YMMV.Gates VPhttp://www.blogger.com/profile/13840555181094178187noreply@blogger.com1tag:blogger.com,1999:blog-3193630162977872529.post-18485678691108796032008-07-02T23:26:00.000-06:002008-07-02T23:26:18.658-06:00MS Office by subscriptionHere's the news link from ZD NET:<br /><a href="http://blogs.zdnet.com/microsoft/?p=1469">New Microsoft Office subscription bundle to hit in mid-July</a><br /><br />Basically they're bundling several basic services together. Some are comparing it to Google's free stuff, but it's also comparable to Mac's "paid-for" stuff:<br /><blockquote>includes a version of Office Home and Student 2007; Windows Live OneCare,<br />Microsoft’s PC management/security bundle; a few Windows Live<br />communication/collaboration services; and Office Live Workspace, Microsoft’s<br />online-collaboration add-on to Office.<br /></blockquote><br />I talked about this <a href="http://gatesvp.blogspot.com/2007/10/sofware-is-service.html">previously</a>. And I honestly think that subscriptions are the future of all. Obviously, the "talkback" forum was filled with open-source people who don't "get it".<br /><br />But I think that the populace is finally ready for the concept that everything on their computer is comprised of "services" and that software is alive.<br /><br />Unfortunately, MS missed one big piece here: <strong>Outlook</strong>. The early adopters who will want this service are the same type of people who will also want Outlook.Gates VPhttp://www.blogger.com/profile/13840555181094178187noreply@blogger.com0tag:blogger.com,1999:blog-3193630162977872529.post-10977680435992145572008-06-24T23:05:00.005-06:002008-06-24T23:15:07.622-06:00Counter offers when leaving?<p>Inspired by a couple of good links, original post <a href="http://cashmoneylife.com/2008/05/15/should-i-accept-a-counter-offer/"><span style="text-decoration: underline;">here</span></a> with further thoughts at <a href="http://www.thewisdomjournal.com/Blog/10-reasons-i-wont-accept-a-job-counter-offer/">Ron's wisdom</a> and <a href="http://frugaldad.com/2008/02/05/accepting-company-counter-offer-can-be-risky-move/">Frugal Dad</a>.<br /></p><p>Lots of great links and all kinds of neat ideas and lists of reasons “not to accept a counter-offer”.</p> <p>But I think the reason is simple.<br /></p><p><span style="font-weight: bold;">You don’t want to work for anyone who feels that the counter-offer is a good idea.</span><br /></p><p>Sure it’s an ego boost for you, but it’s really desperate management decision. Do you want to bank your future on desperate management?</p> <p>The game is simple, an employee generates X revenue and the company pays that employee Y, where Y is X minus expenses and a risk-adjusted profit margin. In fact, it’s a lot like the stock market (actually, it is the stock market, but that’s a different discussion). Either way, the goal of the employee is to maximize the hourly yield for the work they’re willing to do, they want to maximize Y. The goal of the employer is to maximize profit, they want to maximize X and minimize Y.</p> <p>The problem of course is risk. If you “over-minimize” Y, then you drain X (lower productivity) or you lose X all together (employee leaves). In the grand scheme, employers have been doing a lot to minimize Y: reduction in pension, reduction in health care allowances, no more 20-year gold watches or 10-year sabbaticals, etc. But many employers still insist on making some silly decisions with Y.</p> <p>In Patrick’s case (the original poster), the competition was willing to pay 30% more Y. Assuming that Patrick could generate an equivalent X, the company felt that Patrick was a small enough risk to pay him 30% more.</p> <p><b>That’s a very big difference in evaluation.</b> That’s the same thing as me thinking a stock is fairly-priced at $100 when you think it’s fairly-priced at $130. Of course, we commonly hear about 20 & 30-somethings jumping jobs to make these types of pay raises because it's the only way to get a raise.<br /></p> <p>There are typically three reasons this happens:<br /></p><ol><li>The company is doing poorly and cannot afford to pay the employees more. Or they’re likewise not generating money from having the employee around.</li><li>The company is trying to extract as much profit as possible from the employee or using the employee’s profits to fund a different venture.</li><li>The company really has no clue (typically poor management). Any/all of: they don’t know the market rates, they don’t know which employees are generating money or losing money, they don’t have a growth plan, they don’t have a succession plan, they don’t understand what the employee really wants…etc</li></ol> <p>In a case like Patrick’s I’m sensing a heavy dose of <span style="font-style: italic;">#2</span>, with a little <span style="font-style: italic;">#3. </span></p> <p><i>What I don’t understand is why they suddenly perceived me as valuable as soon as I mentioned leaving?</i></p> <p>It’s up to management to manage and mitigate risks and they really blew this one. (And remember the profits they make are their “risk-adjusted” piece of the pie) Not only did they underestimate your value by 30%, they also underestimated the value of their counter-offer by another 10%. That they would even go back to “up the ante” again means that they were still suffering from a #2 brain fart.</p> <p>So back to the original thesis. You don’t want to work for these guys. </p> <ul><li>If they suffer from <span style="font-style: italic;">#1</span>, then they’re likely laying people off and even if you don’t lose your job, you won’t be getting a good pay raise.<br /></li><li>If they suffer from <span style="font-style: italic;">#2 </span>and they’re underpaying by 30% (or more), then they’re not showing a lot of foresight.</li><li>If they suffer from <span style="font-style: italic;">#3</span>, then you’re resting the fate of your next raise, your next promotion and even your next paycheck on the back of someone who doesn’t have a clue.</li></ul> <p>You don’t want to be working for these guys. You want to be working for proactive managers. You want people who have vision, who can see problems before they arrive. You want people who lead, people who hire more staff before everyone gets too busy, people who give pay raises before you have to ask for them, send you to training before you need it.</p> <p>So if your employer makes a counter-offer, they are not one of these people. They’re one of the hordes of reactive managers. Just because they’ve finally realized they’re behind and can afford to pay you more doesn’t mean that they’ve changed their ways and stopped being bad managers.</p> <p><b>So don’t accept a counter-offer when resigning your job, you don’t want to work for the type of people who make counter-offers.</b></p><p>Of course, ymmv.<b><br /></b></p>Gates VPhttp://www.blogger.com/profile/13840555181094178187noreply@blogger.com4tag:blogger.com,1999:blog-3193630162977872529.post-89723597423277334762008-04-29T12:44:00.002-06:002008-05-04T23:51:56.867-06:00Backlash starts against 'sexy' databases<a href="http://www.regdeveloper.co.uk/2008/04/25/rdbms_simpledb_replacement/print.html">Backlash starts against 'sexy' databases</a><br /><br />Wow, actually a good summary of this new "anti-database" movement. Of course, the whole controversy all comes back to one guy: Michael Stonebraker. He started the storm in a few different places (and seems totally misguided).<br /><br />But they, it's big enough that it reached the <a href="http://highscalability.com/search-source-data-how-simpledb-differs-rdbms">high scalability site</a>. Link has lots of useful information and one great quote:<br /><blockquote>SimpleDB shifts work out of the database and onto programmers which is why the SimpleDB programming model sucks: it requires a lot more programming to do simple things...Programmers like problems they can solve with more programming.</blockquote>I think that last line needs to be modified: <i><b>Inefficient</b> programmer like problems they can solve with more programming</i>. I don't like making a bunch of problems for myself, especially when it comes to useless optimization. The goal here is to program solutions that require less programming in the future. You build tools that extend your thoughts and write more code for you.<br /><br />That's what an RDMS does, it's just a collection of code that manages data so that you don't have to. Seems kind of foolish to pretend that we can do better at this than the pros.Gates VPhttp://www.blogger.com/profile/13840555181094178187noreply@blogger.com0tag:blogger.com,1999:blog-3193630162977872529.post-72945772475837605212008-04-22T10:49:00.002-06:002008-05-04T23:35:47.813-06:00What That Car Really Costs to OwnWow, MSN Money actually has a decent piece about Money... Oh look, it's sponsored by Consumer Reports.org. That helps with the explanation:<br /><a href="http://editorial.autos.msn.com/article.aspx?cp-documentid=473957&topart=newcarresearch">What That Car Really Costs to Own - MSN Autos</a><br /><br />I can't really argue with many of their points. Consumer Reports seems to know what they're doing. I am annoyed with one thing, though it's purely philosophical. It's the concept of factoring in the resale value of the car.<br /><br />Yes we have historical data, but who wants to be the one trying to sell a Honda on the year they start making lemons? Plus the resale value is only good if you plan on selling the car. Otherwise, you just drive all cars until they're worth some irrelevant amount of money and you call it a day. At that point you want the car that cost you th least to get to the end of the line. Of course, the cars that require the least repair also tend to be the cars the highest resale value.<br /><br />So you're kind of "double-dinging" certain cars. Especially when they all become basically worthless after a certain time.Gates VPhttp://www.blogger.com/profile/13840555181094178187noreply@blogger.com0