ataussig.com

Declining unemployment may be a red herring.

Thu, 23 Feb 2012 09:00:05 -0500

I had dinner last night with an old friend who trades foreign exchange at a hedge fund in NYC. Because Forex traders tend to be very “macro” focused, I always take the opportunity to get his views on where the global markets are heading.

Our discussion this evening eventually found its way to unemployment. My understanding was that unemployment has declined significantly from its recent peak of 10.0% in October 2009 to 8.3% this past January. I saw that as a somewhat positive sign for the economy.

He had a different view. He argued that the unemployment rate is not as relevant as another ratio: the employment rate. To be clear, the employment rate is not equal to one minus unemployment. There is a subtle difference.

While unemployment is the ratio of the number of unemployed to the total number of Americans in the labor force, employment is the ratio of the number of employed to the total population. The denominator matters! Why? Because there is a difference between the labor force and the total population. Not all Americans are in the labor force.

Picture a society with 100 people. Maybe 20 of them are retired, and 10 of them are children. So that makes 70 people in the labor force. Then, say 4 of them are unemployed. The unemployment rate would be 5.7% (=4/70) but the employment rate would be 70%. Interestingly enough, even with 0% unemployment (all 70 people working), the employment rate would still be less than 100%.

It makes intuitive sense that the higher the proportion of a society’s population contributing to the labor force, the higher the output of that society. To the contrary, every person not in the labor force is a cost on society that the other laborers must cover. I’m just stating fact here, not passing judgement; but it follows that, all else equal, improving employment is probably a good thing, to a point, just as declining unemployment is a good thing, to a point.

Now back to the comparison. Yes, unemployment has fallen quickly since its peak. But, employment has gone almost nowhere. Based on Bureau of Labor Statistics seasonally averaged data, here are the two measures of productivity graphed with each other (1) from 1948-2012 and (2) from 2007-2012:

Clearly, despite the precipitous drop in unemployment, overall employment hasn’t budged recently. In fact, the huge run-up of employment starting in the late 1970’s when more women entered the workforce has basically been erased.

It’s entirely possible that unemployment will continue to decline, but that the productivity of our economy will continue to remain stagnant, simply due to the large number of people who have removed themselves from the labor force.

Viewed in this way, unemployment is a red herring. The real headline is that Americans aren’t just leaving their respective jobs; they’re leaving labor altogether.

Louis C.K. hates Twitter. Valid points all.

Fri, 17 Feb 2012 14:00:49 -0500

Louis C.K. hates Twitter. Valid points all.

3 ways to land a job in VC

Wed, 15 Feb 2012 11:59:05 -0500

It’s that time of year when I get about 2-3 weekly requests to meet for “coffee” with current students or recent grads who want to get into venture capital. I’ve found myself giving the same advice time and time again (as have others), so I decided to write a quick post with a few words of guidance.

#1. Build an orthogonal network.
The value of a junior person at a venture firm is that he/she often has an orthogonal (meaning, in this case, non-redundant) network, compared to the aggregate of the firm. Unless a partner is looking for someone to simply execute on his/her own deal flow (which can be the case), that partner is really looking for someone who can bring in net new deals.

What that means is that you need to start building an orthogonal network immediately. Think about your unique advantage: where you grew up, where you studied, where you worked, how old you are, etc. As Malcolm Gladwell says in Outliers, “Who we are can not be separated from where we’re from.” Use where you’re from to your advantage.

#2. Build an expertise and develop an opinion.
The wonderful thing about technology is that something new is always popping up that no one fully understands. We backed a CEO who told me a little while ago that someone applied to his company with “4 years of iOS development experience,” to which he responded: “Either you’re lying, or you’re Steve Jobs.” iOS had only existed for 3 years at that point.

Start following all the blogs in your industry of interest and get to know all the key players. Talk to entrepreneurs in that space (use the old “I’m a student” excuse) and ask them who they compete with and how they see the market evolving. Develop an insight that is 50% gleaned from the market and 50% your own.

#3. Come bearing gifts.
Like the Greeks, if you want to open the gates of Troy, it’s helpful to come bearing gifts. The currency of the venture industry is introductions to exciting entrepreneurs. Take the results of #1 and #2 and generate a source of warm leads for a couple VCs you want to work with.

I guarantee that an offer to introduce an entrepreneur will get a higher hit rate in terms of VCs returning your call. 60% of the time, it works every time.

So, happy job hunting. And if you land a job in the venture industry, let me know. I’d enjoy welcoming you to the fold.

Photo

Tue, 14 Feb 2012 10:26:19 -0500

APIs continue to accelerate. The WWW is quickly becoming a place...

Fri, 10 Feb 2012 15:33:06 -0500

APIs continue to accelerate. The WWW is quickly becoming a place where machines talk to other machines, not people.

"Would you ever buy an electric vehicle?"

Mon, 06 Feb 2012 13:06:18 -0500

Thank you @douglaswray and @threeshipsmedia.

Sun, 05 Feb 2012 10:46:49 -0500

Thank you @douglaswray and @threeshipsmedia.

Davos #3: more big ideas

Sat, 28 Jan 2012 12:12:05 -0500

The last couple days have been a whirlwind in Davos. So, my post frequency has dropped a bit. To make up for it, I’ve collected a few learnings from workshops I’ve participated in and panels I’ve attended.

Because of the World Economic Forum’s social media rules, I can not attribute the below stories to specific individuals because I didn’t ask their permission explicitly. I don’t think that changes the impact of these takeaways, however.

#1. The talent gap

I attended a panel entitled “A Smart Growth Solution.” I have no idea what that title means, so don’t ask. Actually, most of the panel sort’ve rambled on because the topic was so poorly defined. I attended simply because one of the panelists is on my list of top 5 most admired technology people.

When the time arose, I got up and posed the following question:

It is difficult for a business to have “smart growth” without people who are qualified to build the products necessary for that growth. As the US economy has shifted away from manufacturing and towards services and software, the gap between demand and supply for qualified knowledge workers increased even more. The K-12 system, and its inability to match education with the future needs of its students, is most to blame here.

As a leader of a tech company who is confronted with a massive talent gap hindering growth, who could probably hire 3x the number of engineers that you are today, what are you doing to address this issue, both at your company and at the policy level?

I won’t share the company-level specifics, as it would give away the company, but the policy answer was very straightforward. “The long-term solution is to fix K-12 education in the US, but the short-term solution is to fix H1-B visas.”

I agree. Immigrants are the stop-gap solution here. It is absolutely insane that we are turning away the smartest people in the world to go build careers in their own countries, simply because of a quota and some nebulous xenophobia.

#2: Going long Brazil…I think.

One of the more interesting sessions was a mock fund raise game entitled “Investment Heat Map.” We split into 6 teams, each of which was tasked to form a fund. Our type of fund (e.g. venture capital, private equity, macro hedge) was chosen at random, as was our geographical and sector focus. Other rules restricted us further, but I will skip over them for the sake of brevity.

At the end, each team came up with a pitch to raise money for our fund. The winning fund focused on…Brazil. Not too surprising, given that, of the BRIC countries (Brazil, Russia, India, China), Brazil was felt by the group to be the most politically stable.

The big surprise was just how much in favor of Brazil people were. In fact, in the history of this exercise at Davos, no team has ever taken a larger percentage of the total dollars to be allocated as the Brazil team did here.

Food for thought. Does this mean we should go long Brazil? Or, to the contrary, is it overhyped and should we stay away?

#3: Universal expansion explained…finally!

Just in case you didn’t get the memo, the universe is expanding. Actually, it’s not just expanding…the rate of expansion is accelerating. So says the Nobel Prize winning physicist who proved this experimentally, and whom I asked a question of at the end of his panel.

My question, for which I have never received a satisfactory answer (until this week), was the following:

If the universe is expanding, what is it expanding into?

His answer was essentially that my mental model of the universe was wrong. An expanding universe does not look like a balloon whose radius is constantly increasing. Instead, an expanding universe is defined as the distance between any two points getting greater. Put simply, it’s like someone’s shoving more space into all the nooks and crannies in space itself.

In that mental model, every point in the universe moves away from every other point. The universe is indeed infinite and does not need a “boundary” like a balloon would. The whole notion of the universe expanding into anything is bumpkis.

Davos Part Deux: email everyone!

Wed, 25 Jan 2012 09:04:00 -0500

My second day in Davos was full of activity. The conference itself still hadn’t officially started, so the day was filled with bonding activities with my fellow Global Shapers. We attempted to ski in the morning, but some of us were foiled by total white out conditions. I was told that this year has seen the most snowfall in Davos in 40 years! While we were recovering from our ski adventure, the topic of networking came up. Incidentally, someone in management decided it was a good idea to give the email addresses of major global leaders to 20 year olds. And, every one of us came to Davos with a list of 3-5 people we would love to meet. (As I mentioned, I’d wager Sheryl Sandberg took the #1 slot.) So, the question arose: “Should I do it?” We had several interesting discussions about how many people it was ok to cold email, and how to do so. Finally, one of my bolder colleagues shouted, “Email everyone! This is Davos; they should expect it.” We have started to get a bit more aggressive about meeting the folks we want to. After all, for many of us, this is a once in a lifetime opportunity. Wish us luck!

Davos: The first 24 hours

Mon, 23 Jan 2012 17:18:26 -0500

I’ve spent my first 24 hours getting to know the 70ish other members of my cohort here at Davos for the World Economic Forum. As I mentioned before, I’m part of a group called the Global Shapers, which is new this year and contains only those under the age of 30. How I ended up here, I have no idea. The past day or so seems like a dream…probably because I haven’t slept much.

Davos is, in general, totally overwhelming. And I’m only on Day #1 of my trip! So, to focus myself, I’ve decided to share with you 3 observations each day I’m here. Let’s see if I can stick to my own goal…

#1. The leaders of the world want to hear the voice of our generation.

50% of the world’s population is under the age of 27. The board of the World Economic Forum identified this as a big problem last year, as they looked in the audience and saw a sea of grey (or grey-ing) hair. While it’s easy to feel like the youngster who is expected to misbehave in this gathering of global high society, we were instead told explicitly today: “You are not just kids at the adult table. You are expected to contribute to the discussion. People want to hear your voice.” I found that to be very reassuring.

#2. Entrepreneurship is the norm for our generation. So is multiple jobs.

About half of those I met today were currently running an organization they have started. And about half of those I met were working for multiple organizations. I met at least 3 people who are working for 4 organizations, simultaneously!

The takeaway here is that our generation is not necessarily career oriented, but they definitely are mission driven. They don’t think that hard about jumping from one job to the next, but rather approach opportunities as they arise from their mission; as such, they often find themselves multitasking. They are more comfortable with the uncertainty that arises from this lifestyle, and even thrive on it.

#3. Most sought after celebrity at Davos? Sheryl Sandberg.

Not Bono. Not Bill Clinton. Sheryl Sandberg seems to represent all that’s good in the business world, and she is especially inspiring to the women in our group, who see her as an amazing role model.

I’ll use this as an excuse to post her TED talk. If you haven’t seen it, stop what you’re doing right now and take the time to watch. Great stuff.

Heading to Davos

Fri, 20 Jan 2012 13:53:00 -0500

Tomorrow evening, I’m headed to Switzerland to spend a week in the beautiful town of Davos for the World Economic Forum’s Annual Meeting. I feel fortunate to have been invited to attend this amazing gathering of people as part of a sub-organization called the Global Shapers.

This year, the Forum recognized that the majority of the people who live on this planet are under the age of 30. So, while the Forum claimed to be carrying on a discourse on behalf of the citizens of the world, it was really underrepresenting the majority of its inhabitants. The Global Shapers was created as an attempt to bring to Davos the voice of a younger community.

I’m excited to head to Davos next week and represent my generation. If you are under the age of 30 and have a message you would like me to deliver when I’m out there, please @reply me on twitter at @ataussig, and I will do my best to make sure your voice is heard. I’ll also be updating this blog frequently while I’m out there, so follow ataussig.com via RSS or on Tumblr for updates!

Oh, one more thing. I recorded a video as part of my application to attend Davos. It contains some of my thoughts on some of the key issues facing young people today.

"What is the biggest waste you know of?"

Thu, 19 Jan 2012 17:13:09 -0500

"How do I get a job in VC?"

Wed, 18 Jan 2012 14:54:44 -0500

George Lucas' Doppelganger

Sun, 15 Jan 2012 11:00:05 -0500

I spent the last week in Silicon Valley, and on Friday grabbed drinks with some folks over near the Presidio in San Francisco. Unbeknownst to me, we were within a stone’s throw of the headquarters of Lucasfilm, which I later found out is host to a particularly amusing urban legend. In recounting this, I’d like to reiterate that I have no idea if this is true, but given the peculiarities of the movie business I certainly wouldn’t rule it out.

So the legend goes that George Lucas hired a look-a-like (maybe more than one) to roam the office when he’s not around, in order to put pressure on his employees to work harder. The idea is that seeing your boss in the office makes you less likely to goof off, and more likely to put a new cover sheet on those TPS reports, etc. I was told that this fairly brilliant management ploy was pioneered by none other than Saddam Hussein, although I’m sure other dictators before him used it as well.

Even if this story isn’t true, I have to believe the economics behind it would work. How much could it possibly cost to hire a Doppelganger to act busy in an office for 8 hours a day? I bet it’s small compared to the collective increase in productivity for all the higher paid creative types that I’m sure Lucasfilm employs.

So, next time you see your boss in your periphery, strolling nonchalantly by your cubicle, you may want to take a second look. That might be wool over your eyes.

"If my job was to spend money, I’d be good at it too."

Thu, 12 Jan 2012 20:22:58 -0500

““If my job was to spend money, I’d be good at it too.””

- Overheard in an (nameless) sales department, regarding the marketing department.

Visiting the Internet today

Thu, 12 Jan 2012 11:23:55 -0500

Visiting the Internet today

Of euphemisms and rental cars

Tue, 10 Jan 2012 17:15:49 -0500

Renting a car has to be one of the worst customer service experiences still around. It’s not just the waiting in line at odd hours of the night (or morning, depending on when your plane lands), or the inexplicably broken (always broken!) self-checkout terminals, or even the seemingly redundant number of steps it takes the clerk to complete a transaction.

What bothers me most about the car rental process is, instead, the insurance. Not that it’s expensive (although that is irksome), but that selling it involves blatant fear mongering. And, it’s gotten worse.

Until this morning, every time I’ve rented a car from Hertz I am asked the same question: “Do I wish to decline the supplemental insurance?” The answer is almost always “yes” because I already have insurance, and so does my employer. For a lot of people, this insurance is simply unnecessary, or so I’m told.

Today, I was asked a slightly different, more ominous question, however: “Do you wish to accept full responsibility for the car?”

Now, that’s a guilt trip! We’ve gone from declining something extra, supplemental even, to accepting full responsibility. Upon probing, I discovered that the same underlying decision is involved; the difference is just in the words they use, but they laying it on real thick.

Someone needs to pull a Zappos or Virgin America on the car rental industry, and do it soon. I’d switch tomorrow to a service that didn’t attempt to pull the wool over my eyes time and time again and treated me like a valued customer.

A few thoughts on 2011 IPOs

Mon, 09 Jan 2012 23:13:00 -0500

The nice folks at Raymond James recently sent me their 2011 Technology IPO Year-End Review. As usual, it contained some interesting takeaways, two of which I will share with you here.

#1. The IPO window is strongly correlated with low overall market volatility.

Check out what happens below when the VIX (an index which is a measure of anticipated volatility in the S&P500 over the next 30 days) goes above 30, as it did in Aug-Oct:

It’s also worth noting that Apr-May saw the largest IPO activity, exactly when the VIX was lowest.

#2: 2011 internet IPOs had all the sizzle out of the gate, but less sexy sectors (software, systems, components, IT) have performed better in the long-run.

Compare the right side of the first graph (lots of orange) below to the second (not so much), and you’ll get my drift:

My most interesting classes

Mon, 09 Jan 2012 09:47:00 -0500

My most interesting classes:

"The mouse is a bug, not a feature."

Fri, 06 Jan 2012 15:11:26 -0500

““The mouse is a bug, not a feature.””

- Evan Doll, Co-founder at Flipboard