Thought Factory

10 things that The Social Network taught me

2011-05-18T19:38:00.000-07:00

So, sorry about that last post. Boring as hell, I know. It was even boring for me to re-read, but I guess writing practice is writing practice, even if the subject matter is dry. On to more interesting topics...

Christy and I got The Social Network out of RedBox about a week ago. For those of you who don’t know, it’s the story of the founding of Facebook. If you don’t know what Facebook is, well, Google it. We’re both pretty nerdy and into anything technology related, and I’m also a sucker for learning how people get rich. It turned out to be pretty good. Even N’Sync guy didn’t do a bad job. It also gave me a handful of insights that I thought might be of interest to the world. Those insights are found below. Note that this may not all make sense if you haven’t seen the movie, but I did try to explain things in places where I directly reference the film.

1. Parasites are everywhere. And it can pay to be a parasite.

Before I watched the movie, I had no idea that Sean Parker (one of the original Napster guys and involved in a lot of other Internet stuff) was involved in Facebook at all. Apparently he was. He was even president of the company for a while until he got caught with some drugs or something. And why was he involved? Why did he get 6% of the company? Why did he get an executive job? I guess you could argue that he set them up with the venture capitalists. I'm not sure whether or not that should be claimed as a benefit (see #2 below). Did he do anything else substantive? From what I saw, it looked like he bought a few lunches, took Zuckerberg out on the town a few times, and that was about the extent of it. What he did do, though, was act important and confident, give Zuckerberg some friendly advice, and just hung around Facebook central all the time. He made himself a part of the company simply by flirting with Mark Zuckerberg. And for this, $2 billion. Lesson: you don't have to add value in order to get someone to think that you add value.

Of course, there's also the other side of that coin - when you come up with something big, there will ALWAYS be someone there wanting to help you, for a nominal fee. If they really have help to give, great. But don't let a parasite fool you into thinking that they are doing something valuable when all they are really doing is running game on you.

2. Never trust a banker.

There are 2 (non-mutually exclusive) classes of banker. There is the stupid retail banker - these are the people who got killed in 2008 because they thought real estate would never go down. Then there is the tear-out-your-jugular-vein-with-their-own-teeth-banker - these are the people who convinced the stupid retail bankers that they had safe investments, then put a gun to the heads of 535 congressmen in 2008 and demanded that taxpayers fix the problems that their retarded cousins created. They want to take your money at gunpoint, urinate on you, then put a knife to your throat and demand that you thank them for doing it. Not all bankers work for banks. Some are hedge fund managers. Some are “investment bankers” - basically hedge fund managers inside of actual banks. Some are venture capitalists. But at their core they all have the same philosophy, the same core - keep as much of the money for yourself as possible. Lying, cheating, and stealing be damned.

Eduardo (Zuckerberg’s early partner, made the initial financial investment in exchange for 30%) got screwed by a banker because he didn’t read what he was signing. Now, to be clear, I’m not blaming the banker. The banker philosophy has a certain beauty. If everyone behaved like a banker, nobody would ever get screwed because nobody would trust anyone. It would likely create a pretty optimal economic system. But everyone does not behave like a banker. Eduardo trusted a banker. Eduardo got what he deserved for that little misstep. But in his misstep, you get to learn a valuable lesson. If a banker ever gives you something to sign, make sure at least one lawyer reads it. If you’re securing venture capital funding, you should probably have multiple independent law firms both read it. Twice. Because they are trying to screw you. In their minds, one of you is going to get screwed, and they want to make sure it’s not themselves. Your job is to make sure that when you get screwed (because you will), it’s at least a fair and just amount of screwing.

3. Social networking is mostly about sex.

I ran across a great quote a few months ago from some guy (I presume it’s a guy) named Jamie Zawinski - “The most important question for anyone writing social software should be, how will this software get my users laid?” It is, I think, a good point. There’s a scene right before Facebook goes live for the first time where Zuckerberg runs across campus back to his dorm room to add the “relationship status” feature before they turned it on. Even then, sex was central to what they were doing. The whole thesis behind the site that the Winklevoss brothers were working on (and that Zuckerberg “stole” the Facebook idea from) was that sex partners from Harvard were more desirable than those from other schools. I know, I know, YOU don’t use facebook to try to get laid. At this point, people use facebook because other people use facebook. But when nobody was using facebook, why did the first adopters use it? I’d be willing to bet that most of the time, it was a means to get laid.

4. Go after 1 marlin, not a bunch of trout.

In the early stages of Facebook, Sean Parker apparently ran across the site and fell in love. He proceeded to track down Zuckerberg and Eduardo and had dinner with them. Eduardo, at the time, is trying to convince Zuckerberg to start monetizing the site. They wind up asking Parker what he thinks. As part of his explanation of why they should wait to monetize until it's grown bigger (I think they had like 100,000 users at the time). Parker asks, "When you go fishing you can catch a lot of fish, or you can catch a big fish. You ever walk into a guy's den and see a picture of him standing next to fourteen trout?". If you have a really big idea - one that has the potential to have hundreds of millions of customers - don't be satisfied to catch a few trout and go home. The whole freaking point is to catch the big ass marlin.

I think, though, that there's an even more important point here - don't waste your time on projects that are trout. If you are going to invest the time and effort that will be required to turn an idea into reality (see #10 below), make sure the idea is worth that time and effort. If you're satisfied with trout, you may as well just work for someone else. It's a lot more secure and there's a lot less heartburn.

5. Harvard isn’t about learning.

Places like Harvard aren’t about the education, they are about the good-ole-boys’ club that you join. I’ve sorta known this for a while; I suspect I’m not alone there. The new nugget that I got from the movie was that it’s far more important to make a splash at those places than it is to have good grades. All press is good press. In 5 years, nobody will remember what your GPA was. But they will remember if you are on the front page of the school newspaper for hacking the school network and making it crash. If that newspaper is at LSU, that memory might be worth a couple of bucks - your classmates aren’t going to wind up running Goldman Sachs. But if that newspaper is at Harvard, you will have impressed a lot of people who are going to grow up to have a lot of money and a lot of power. At the end of the day, that’s what is important.

6. Nerds are often perceived as assholes simply because they have no social graces.

“...you're going to go through life thinking that girls don't like you because you're a nerd. And I want you to know, from the bottom of my heart, that that won't be true. It'll be because you're an asshole.” - Zuckerberg’s girlfriend at the beginning of the movie

Poor misunderstood Mark. What spawned this? He had just told her that by joining some club or other at Harvard would enable her to meet people that she would never otherwise be able to meet. Most likely a very true statement. But in modern America, you’re not an asshole for knowing the truth, you’re an asshole for speaking the truth. Part of being a nerd is a complete inability to know what not to say. Nerds have zero social graces. They live their lives surrounded by ideas that are either true or false. If something is true, why not say it? Unfortunately, that’s not ok in most interpersonal interactions. So next time a nerd offends you, realize that it’s probably because he’s right.

7. Spam everyone you know - even people you like or people that you are afraid won’t like you if you do.

There was one point in The Social Network when my heart stopped. Facebook had just gone live for the first time. Mark turns to his partner Eduardo and asks for the email list for the exclusive fraternity that he had just joined. I couldn’t believe it. Mark Zuckerberg was going to launch Facebook with a wave of spam.

I don’t really believe in karma, but I do believe in the golden rule. Email spam (and junk snail-mail for that matter) is against my religion. The idea that I would ever have to do that in order to launch a website gives me chills. I guess I need to get over it. Facebook would never have even gotten off the ground if not for spam. And this wasn’t just a blast to everyone on campus. It was Eduardo spamming the one group of people from whom he wanted admiration and respect. I guess I could bring myself to spam the general populace. But spamming my friends? On purpose? Yikes. I guess you don’t get to keep self pride if you want to get rich.

8. If you’re going to lie, cheat, or steal, make sure you’re insanely rich before anyone is able to call you on it.

This is really a lesson learned in the 2008 banking crisis, but this movie reinforced it. If the Winklevosses had moved earlier with their lawsuit, they probably could have stopped Facebook in its tracks. Who knows, you might even be posting your status updates today on ConnectU.com instead of facebook. Heh, ok, probably not. This really isn’t even a commentary on whether or not they were right. The point is that they had no shot simply because they waited too long and Facebook was too big by the time they tried to extract their pound of flesh. When they finally got around to suing Zuckerberg, he was too big to fail. Being too big to fail grants the owner of that title all sorts of superpowers, among them the right to get away with anything. If you plan on doing something that you will need to get away with, make sure you get too big to fail with a quickness.

9. Always sue. It’s the American way.

I actually learned this one a few years ago. A drunk driver hit me from behind. I wasn’t injured and their insurance repaired my car, so I took the high road. Stupid. In hindsight, I should have sued her into oblivion, if for no other reason than to get her 10 AM drinking ass’ insurance cancelled. But I digress.

I left mid-5 figures (possibly even 6 figures) on the table with that mistake. 5 figures isn’t chump change, to be sure, but I can live with losing it. But what if it wasn’t 5 figures? What if it was 8 or 9 figures? Losing out on $100 million might make you want to jump off of a bridge. So, if you have even the most dubious remote claim against $1B, you almost have to sue. The payoff to risk ratio is too high to do otherwise. At the end of the day, it doesn’t matter whether you’re right or not, especially if the person you’re suing has a reputation for being an asshole. It’s a funny thing about the American legal system: truth is basically unimportant. The question is not, “who is right?” the question is, “who can make the jurors more emotional?” People are stupid. When you go to court, the outcome is entirely dependent on what 12 morons think. Nobody wants to expose their billion dollar fortune to the whims of 12 morons. So they will write you a check instead. It’s an amazing system.

10. I will never be worth a billion dollars.

In order to become a Bill Gates, a Larry Page, a Sergey Brin, or a Mark Zuckerberg, you have to be completely obsessed with your work. To the point of having no friends, no life, no family, and no sleep. You have to turn on your friends. You have to go multiple days of writing code without stopping (there’s that sleep thing again). You have to leave people who you were supposed to pick up at the airport at crazy hours of the morning because you were to engrossed in what you were doing. You will probably have to move. You will have to invest every dime that you have, and then borrow some. Self pride - out the window. Did I mention that you have to lose sleep? Yea, lots of it.

Becoming super-rich is largely about luck. So even if you do all of those things, you probably won’t ever be worth a billion. But to even have a shot, you have to give up all of that stuff, and more. I’m not sure I’d give it all up even for the billion. But for a lottery chance at a billion? No thanks.

Fixing Google Finance

2011-05-10T19:26:00.000-07:00

So yea, it’s been a while. And this list is uber dry and boring. It needs doing, though, so I may as well get a boring one that nobody wants to read out of the way after the masterfulness of my first list.

Trying to use Google Finance for anything worthwhile has gotten irritating. It’s to the point that I use it only because it’s there and doesn’t suck so badly that it’s completely unusable. So this list is really just me venting. It has become apparent to me that the people who put together Google finance (and yahoo finance too, for the most part) don’t ever actually use the tools that they’re implementing. In an effort to make their product more useful (and make my investing life easier - I hate having to open up ThinkOrSwim any time I want to look at a decent chart), I present 10 things that Google Finance needs:

1. More data.

When I pull up a daily chart of Apple, the farthest back I can go is 12 months. If I switch to a weekly chart, I can go back as far as the beginning of 2000. Seriously? You are Google, aren’t you supposed to gods of data? I expect you to have market prices as far back as there have been markets. When I pull up a chart of the S&P 500, I want to be able to see AT LEAST back to the beginning of the depression.

Where time & sales data exists, Google should have it and it should be available for as long as possible. And it should be available for download - I would really love to analyze a time & sales data set on something like the SPY. Again, Google’s stated mission is to organize the world‘s information and make it universally accessible and useful. When you take a day’s (or minute’s) worth of time and sales data and reduce it to a stick or line on a chart, you have just lost a LOT of information. I want it back.

It would also be nice if you would maintain various historical economic data - GDP, CPI, bond yields, etc, and make it viewable in different formats (charts, tables, etc.) It would be nice to lay a chart of the S&P 500 on top of a chart of GDP, inflation, and bond yields from the depression in order to see how various sectors behaved then.

At the end of the day, I simply want access to every piece of historical (i.e., prior to right this second) financial information available. And I want to be able to format it, view it from different angles, analyze it, whatever.

2. Bigger list of standard market indicators

How to I look up the VIX in google finance? No, VXX or any one of the daily tracking ETFs doesn’t count - the all do a miserable job of actually tracking the VIX. As of yet, I’m unable to find it. Nor am I able to find the US Dollar index. There are lots of little indicators like this that make any major finance site incomplete. Google needs to add them ASAP.

3. More and better chart tools

Stop trying to copy Yahoo and Marketwatch finance pages - theirs suck too. Go download the ThinkOrSwim client. Copy that. Specifically, I need:

Fibonacci retracements - I pick a high and low price, you draw lines at the “Fibonacci levels” (generally 23.6%, 38.2%, 50%, 61.8%, 78.6%) between those 2 prices.
Chart expansion - I need to be able to increase the “margins” of the chart. As in, more clear space above/below/to the left of the price data so that I can extrapolate price movements into the future.
Live updating of the current candlestick - I don’t know why, but on candlestick charts all I see is the last completed candlestick, not the one in progress. That’s dumb. Today’s information has meaning too, and it can’t just be ascertained by going to a different time level.
Ability to draw & annotate on charts - Mostly I want to be able to draw arbitrary lines and make arbitrary notes on a chart. It’s nice to be able to check a chart pattern that you think you see by putting an actual line on the page.
Higher candlestick density - apparently you have implemented a maximum candlestick density. Whatever that is, it needs to be higher. The more price data I can get on 1 sheet, the better, even if it means that I lose the the ability to actually see the inside of a given candlestick.
Store drawings on a per-security basis - All of the above should be saved when I change securities. If I draw a bunch of crap on the AAPL security, then go look at GOOG, when I come back to AAPL I’d like all of my previous drawings to still be there.
Allow arithmetic charts - This one is pretty easy to explain: given stocks A&B I would like to be able to chart A+B, A-B, A/B, A*B. Of everything in this post, this is probably the highest payoff/lowest work implementation available.
Market Depth - Looking at the daily volume of a given security is nice. What’s better, though, is to know what the volume has been at each price point over some arbitrary length of time. The chart winds up looking something like this:

Notice the horizontal bars on the left. That’s what I want.

4. Stock screener improvements

I like the idea of a stock screener. And I even like the basic way that Google has implemented it. But it still needs some improvements. Such as:

More granularity in sector selection - Sometimes I want to look up investment banks. But the most detailed I can get is “Finance”. That sort of thing is all over the place. Finance means a lot of things. So does Technology. What if I wanted miners of precious metals? How do I get that screen? I can’t. Maybe the solution is to make it a searchable thing instead of drop-list based, I don’t know. What I do know is that what’s there isn’t real useful.
Filter by technical indicator or indicator formula - Maybe I want every security whose 20 day moving average is above its 50 day moving average. That’s a pretty useful thing to look at in a stock chart, but there is no way to filter all of those securities out. In fact, there are lots of times that sort of thing happens. A user might want stocks trading close to their 52 week high or 52 week low. You can imagine the permutations, especially if you allow criteria based on some sort of custom indicator (see #5 below).
Make it a “security screener” - This is pretty simple. Add fixed income and preferred stocks to the world of things being screened. I would LOVE to be able to search the world of preferred stocks. I don’t know of a good way to do it right now.
Allow criteria (sectors especially) to be excluded - Right now, it appears that every additional selection criteria is ANDed with the previous ones. I would like for any given criteria to be NOTed before it’s ANDed. I.e., I want to search all stocks, but I refuse to invest in banks. So I need to be able to add banks as a criteria to exclude from the search.

5. Build your own indicator

There are a gazillion technical and fundamental indicators out there. How great would it be for Finance to allow a user to make up new ones? Or to just build known ones that Google hasn’t implemented yet? You could even build some sort of indicator repository to allow users to submit the indicators that they’ve built. They might not all submit their new ones, but people would almost certainly build the well known ones and submit them to the repository. It seems like all this would take would be the building of a rudimentary sort of scripting language that gave the user access to company data, price & volume data, and other technical indicators. Even better would be if a user could include things like Google Trends data. It might be a little bit more of an undertaking than some of the stuff I’ve mentioned already, but it would be worth it.

6. Build your own Algo

This is sorta similar to #5, but it adds in the ability to place pretend trades (automated or manual) in the past and to see how they work on a pretend pile of money. It could be built on the same scripting engine as #5, just with a few added tweaks.

7. Futures and bonds quotes

It kinda sucks that I have to go to another website in order to see off-hours quotes for basic things like S&P500 futures or gold futures. And yea, I know, it’s a pain in the ass to get bond quotes in general. Investment banks have a vested interest in keeping those opaque so that they can screw investors. Who better than Google to make it more transparent? I don’t really have any suggestions on how to do this one, but I know it would be useful.

8. Theoretical option pricing & spread modeling

Option quotes are nice; I’m glad that you finally have those. What would be even better, though, is if I could see a picture of what the price of an option might do over time given a change in the price of the underlying security. Or a change in volatility or interest rates. Once you can do that, it won’t be a huge leap to allow a user to define an option strategy (spread, straddle, butterfly, whatever) and show the same sort of picture. This is another piece that you need to steal from ThinkOrSwim - download it and play with the Analyze tab. That’s what we’re looking for.

9. Build your own forecast model

Amateur investors like myself don’t have a quick and easy way to build a forecast set of financial statements. It would be great if you had a basic spreadsheet that would allow a user to define whatever basic form they want their forecast to take, and then have Finance grab all of the relevant financial statement info and dump it into the model that the user has created. I can envision a lot of complications with this, but nothing that can’t be worked around. The basic idea is that I don’t want to have to create a brand new spreadsheet every time I want to forecast a company’s financial statements. I want to have some basic form that will let me stick in a ticker symbol and a few relevant pieces of information (say, sales growth rate) and then just create the spreadsheet for me.

10. Buy the Billion Price Project

A few weeks ago, the Billion Price Project http://bpp.mit.edu/ was in the news a lot. In a nutshell, it’s an MIT project that tracks global prices of, well, everything. In as close to real time as possible. From that, they were able to extract a bunch of useful economic data, particularly a real (read: not government filtered) inflation number. It has since been shut down, supposedly due to resource constraints. Well, Google has resources. This is another one of those things that seems to marry perfectly with the Google mission. The amount of global economic efficiency that could be gained from making this kind of information free and globally available is staggering. Companies (especially small ones without huge resources to track this sort of thing themselves) could watch prices of inputs, looking for intelligent places to buy and/or hedge future price increases of those inputs. Sellers could tweak production better. And the public could get a picture of an important piece of the economy without government filters.

Indoctrination, part deux

2011-04-07T16:37:00.000-07:00

So like I said last time, 10 things quickly became 24. As I was writing this one, it became apparent that several of the items overlapped so as to allow me to actually cut several of them. Which put me back at 21 total. This is the sum total of this list for now. I will continue to make mental notes when I come up with new ones, and if I get to 10 more I may write a part 3.

On a totally unrelated note, I have obviously not kept to doing 2 of these a week. The lists themselves have been pretty easy to do so far, but the narratives take more time than I appear to have handy. Hopefully I can keep to at least a once a week posting rate.

So here you go, Philosophies that I want to pass on to my kids, items 11-21:

11. Keep a long view of things. Understand the power of time.

“God’s gears grind very slowly, but they crush every kernel.”

I don’t know who said that, but it’s one of my favorites. Your life is an infinitesimal blip in the history of civilization, much less the solar system or the cosmos. That’s not to say that you can’t affect the world - you can. And probably will. The point is, though, twofold: First, everything that you accomplish will be done on the shoulders of those before you. Don’t think that you have to re-invent every wheel. And don’t think that the things you do to affect the world have been done in a vacuum. Secondly (and really the point here) is that you will be the shoulders of those who come after you. Their path will be made much more easy if you understand that fact. Sometimes the world does change in an instant. Most of the time, though, it’s changed over multiple generations. If you come across an opportunity for instant change, certainly seize it. But don’t be discouraged if the change doesn’t happen as quickly as you expect. And more importantly, don’t waste your life waiting around for those opportunities. Whatever change it is that you want, grind those gears. You might not see that change in your lifetime, but you will have brought it one generation closer for those who come after you.

12. Keep a wide view of things. Understand ripples.

This one kinda piggybacks on to #11. Or maybe that one piggy-backs on this one, I’m not sure. Either way, the overriding theme is that you may not always see the effects of the actions that you take. Sometimes it will be because you are dead when the effects happen. Other times, it will be because you initiated a chain of events that culminated so far away from you that you can’t possibly know that you had anything to do with it. Even so, understand that you affect people and the world around you, even if you don’t intend to. What all of that means is, act intentionally. If every one of your actions has the potential (and even the likelihood) of affecting the people and world around you, then you should never let an action just happen. This kinda goes back to #7 (use your brain). Everything you do will shape the world. Shape it the way you want it to be shaped.

14. People are stupid.

It’s rule #1. I’m not sure how it fell all the way down to #14. Anytime in life you find yourself asking “why?”, there’s a decent chance that this is the answer.

If one were to order the human population by raw IQ, then divide that ordered list into equal population 1/10ths (1-10, 1 being dumbest, 10 being smartest), you would easily be a 10. Odds are, everyone that you will consistently interact with on a daily basis will also be 9s and 10s. Maybe an 8 here or there. You will most likely have zero concept of the actual intellectual capacity of a 5. But here’s the crappy part - there are far more people in the 1-7 slots than there are 8-10. By definition. All of which means, the world is FULL of people who are dumber than you can imagine.

Recognize that when you’re dealing with a member of the general public, he is most likely dumber than a brick. Do not expect more; you will be consistently disappointed (and/or angered) if you do.

15. Decide what your world view is and what you believe in before you have to.

Avoid making decisions under pressure any time you can avoid it. Making decisions under stress sucks. It’s always better to have made the decision before you’re put in a position to have to implement it. Life is full of choices (see tradeoffs and risk asymmetry). You are going to have to make them every day. The difficult choices will inevitably be the ones that you have to make right now. If you have time to examine the issue, take into consideration all tradeoffs, and make a rational choice, it’s not difficult. So why not examine the difficult issues before they become an imperative decision? Decisions made on a moment’s notice without the opportunity to consider are high risk. Remove the risk - decide early. You won’t always think of everything (or rather, you won’t think of every possible tough decision early enough to make an ‘early’ decision), but for each time you’re able to figure something out before life forces your hand, you will have gained a huge advantage on life.

16. Life is far easier if you play from ahead.

This is kinda self explanatory. It applies to your physical body - it’s always easier to get in shape when you’re young and then stay there when you’re old than it is to try to get in shape when you’re old. (Or so I’ve been told - I’m still young). It applies to money - the borrower is slave to the lender, and the deeper the debt hole is, the tougher it is to get out. It basically applies to everything. A small sacrifice early in life in comfort or fun or even just an hour of extra work when you’d rather be lazing on the couch will pay dividends later in life. So get ahead early.

17. Think, don’t feel.

It’s one of my pet peeves. “I feel that <pick your favorite personal belief>”. No you don’t. You think that. That simple misstatement, though, is indicative of a widespread problem - people have a very difficult time distinguishing (or even understanding the difference between) thoughts and emotions. Thoughts at least presume to be rational. Thoughts can be the basis of a discussion or a debate. Thoughts are a pretty good basis for making a decision. As soon as think turns into feel, though, all basis for the use of reason ends. Emotions don’t have to be rational. Most of the time, they’re not.

People switch from thinking into feeling when they lose all reasonable support for thinking whatever they do. It’s an unassailable fallback position when reasonable thinking arguments fail. I can explain to you why your thinking is wrong; it’s pretty hard to make an argument that you are having an incorrect emotion. And it doesn’t just work that way in arguments with other people. People pull this trick when arguing with themselves (also known as making a decision) all the time. You might know that you’re about to do something stupid, but you do it anyway because it feels good. The point is not that feeling good is bad, the point is that whether it feels good or bad is not relevant. The argument (internal or external) should be won based on what you think, not how you feel.

18. Be honest with yourself. (Continually self examine and never be afraid to admit that you were wrong).

Paths to success are wide and varying. Most of the time, they involve a good bit of luck too. Paths to failure, on the other hand tend to be pretty consistent. But failure isn't all bad. Failure can be a learning experience - if you let it be so. Success rarely teaches anything or gives an kind of insight. There’s no such thing as “success analysis”.

But how can you learn from your mistakes if you don’t ever realize that you made them? How can you make sure next go-round works if you insist that last time’s failure was completely the fault of someone else? Here’s a tip - there is ALWAYS something that you did wrong. There there are missteps in the course of any endeavor, even when you ultimately succeed. Why would failure be any different? Realization of guilt, though, is the second step. Before you get there, you have to have examined your thoughts and actions. Lots of times this is the scary part, because you know you won’t like what you find. But when you make it a habit and get good at it (I haven’t done either), you will find that you catch mistakes earlier and earlier. Early enough at least to cut your losses and move on, hopefully even early enough to alter your decision making path before you incur any major sunk costs.

The other option, of course, is to continually lie to yourself. It usually feels pretty good (or at least, doesn’t feel bad like realizing fault would). The problem is, you will eventually start to believe your own lies. When you start believing your own lies, you effectively do the opposite of the failure analysis above. So instead of improving, you always stay in the same rut. While playing in the mud can be fun at times, I would still suggest option A.

19. If you are not part of the solution, you are part of the problem.

There’s no such thing as a moderate. It’s become popular in American politics circa 2000 A.D. to label one’s self as having this mythical ideology. You may as well label yourself a unicorn. Doing nothing might seem like you’re just not participating in the fight. But if you recognize an existing problem for what it is and refuse to be a part of solving it, you are simply aiding and abetting those who are “fighting” for the status-quo. In fact, that’s what status-quo is - stagnation. Refusing to push change is equivalent to working for stagnation. Sometimes stagnation is good - don’t take this to mean that something always needs doing. Quite often the opposite is the case. Or worse yet, the remedy is worse than the disease. There can even be situations wherein you believe that the disease will eventually implode on itself, so it’s better to let it be until it simply dies. But in any case, realize that you are taking a stand for one side or the other. Sitting around and watching (or even sticking your head in the sand) doesn’t absolve you of participation, it just puts you on the side of those who want to keep things the way they are.

20. Don’t waste emotional energy on anger. (The red-ass only hurts the one who has it).

As I basically implied in #17, emotions in general serve little rational purpose. But not everything in life is about reason. Sometimes you might need an irrational reason to go do something that you don’t really want to. Positive emotions can be good for their own sake (lower stress, makes you a nicer person, stuff like that). But anger is something that I have yet to find a purpose for. It doesn’t affect the object of your anger one iota. It simultaneously makes you miserable. And tired. And unfun to be around. It’s basically a lose-lose. -lose-lose-lose. Generally, you should avoid situations with all cost and no benefit.

21. Pass it on

I have no idea whether any of this will stick in your brain. I hope that I do a good enough job as a dad to at least pass some of the core of who I am on to you. But if I could have you absorb one thing, it would be this - pass your core on to your kids. And make part of that core be the passing on of your core. Be intentional about teaching them the things that you think are important. And make your kids understand that they should do the same with their own kids.

I’m still young, but I’ve learned (I think) a lot in the relatively few years since becoming an adult. If I can send you out into the world already knowing all of what I’ve learned, then you will already be ahead of the game. You can spend your life tweaking, augmenting, or discarding from a pile of worthwhile ideas rather than starting with a blank slate (or even worse, a bunch of garbage).

Your kids will learn from you. The question is, will they learn what you want them to learn? Before they can learn what you want, you have to figure out what you want to teach them. Then once you’ve figured it out for yourself, you have to go about teaching it to them while at the same time making sure that you don’t confuse them by behaving in a way that conflicts with that teaching. It’s not easy (or at least I presume it’s not - David is only 8 months old as of this writing), but I do think it’s worth it. Part of you will live on after you are gone. What part will it be? Make sure it’s what you want it to be.

Indoctrination

2011-03-25T20:05:00.000-07:00

OR 10 ideas that I want to pass on to my children

This list started with 10 items. As I went through it, I kept coming up with more. The current count is 22, but I'm going to keep the posts to 10 items. Part II of this one will come sooner or later. Some of these are related to one another, some are related to items that haven't been posted yet, and vice versa. Note that these are written as if written to my kids. So without further ado, brain washing items 1-10...

1. There are no solutions, only tradeoffs.

Any time you make a choice, you give up all of the things that are not that choice. It’s the economic concept of an opportunity cost - taking any one opportunity always forgoes another. When you inevitably encounter a problem in your life, understand that the problem is there precisely because there is a rational tradeoff to be made. If the cost/benefit was so out of whack that the answer was obvious, the problem would never be there in the first place. The house is dirty and needs to be cleaned. The lawn needs mowing. David needs some attention. The bills need to be paid. I need a nap. Which one to do? The car died, what kind should I buy? Should I buy a new one at all? Should a person buy a house? What should the world’s primary energy fuel be? None of them have a solution, only a tradeoff to be picked. And understand that the tradeoff that you might choose to make is not the tradeoff that someone else might choose to make. Different people have different priorities and different goals. Your mom decided to not have a career and to stay home with you instead. It wasn’t right or wrong, it was just a choice that she made based on what she wanted from life. Never accept the idea that there is a single solution to something. Any time you are presented with a “solution”, immediately start asking yourself what will be lost if that “solution” is adopted. You may ultimately agree, but at least make sure that you have weighed the costs.

2. Pick your spots.

I have hopes that you will live a long life. The problem with living a long life is that you will have many opportunities to screw up. And the longer you live, the more opportunities you will have. I fully understand this. I do not expect perfection (although you are genetically predisposed to it.) All I ask is that you make an effort to contain your screw-ups to things that do not endanger your own health or your own future.

3. If you're not on the inside, you're on the outside (If you cant find the sucker at the table, it’s probably you.)

It took me 30 years to learn this one. I used to think that everyone was greedy, but that stories of mass cheating were simply kooky conspiracy theories. It’s since become apparent that I was wrong. People are not out to create a world in which merit rises to the top and where being right is important. In the end, he who has the gold will make the rules, and the #1 rule of those with money is “keep the money.” If that requires cheating, lying, bribery, it doesn’t matter. Don’t live life under the mistaken impression that anyone will willingly lose money, power, or influence to you simply because you are smarter, more right, or just generally better than them in any way. Or even in every way. I’m not saying you should cheat - in fact, I don’t think you should. Unless you are on the inside, you won’t even be allowed to. I just want you to understand that everyone else probably is. And even if they’re not technically cheating, they’re still probably trying to screw you.

4. Life isn't fair (see #3).

I wasn’t sure whether or not to include this in #3 as a corrolary, but I decided not to, as it’s more of a broad-scope idea. I never want to hear the words, “that’s not fair” come out of your mouth. I’d prefer if they didn’t even cross your mind. Lots of things will happen in your life. Sometimes you will be lucky, other times not. But do not live life under the assumption that you are owed fairness or equity. Whether or not you believe that fairness is your right, it will never be something that you will always get. Your destiny is your own to create. It will not come about because it came about for someone else.

5. Understand randomness (Shit Happens).

Not everything happens for a reason. You don’t have to figure out why everything that happens, happens. Even if you try, you will probably be wrong. In the most likely case, you will convince yourself that you are right, regardless of whether or not you are. Because the truth is that most of what goes on in the world around you is randomness - or at least, indistinguishable from randomness. Maybe not random in the strict “has no underlying cause”, but definitely random in the sense of “could not possibly have been predicted or expected”. Humans have an inexplicable need to explain everything. If a friend dies in a car accident, we need to come up with a story about why the person at fault was driving crazy. If there’s a warm day in the middle of winter, we want to have a reason as to how that happened. It’s called narrative bias - coming up with a made-up story to explain something that happened after it has already happened. It gives us a feeling that maybe we could have done something differently or at least could have seen it coming. It’s closely tied in with hindsight bias - the propensity to see an event that you didn’t expect and to believe in hindsight that it was predictable. Don’t be afraid to attribute things to randomness. And understand that things will happen that you didn’t expect.

6. Understand Risk; Seek Positive Asymmetry.

Every time you decide to get out of bed in the morning, you undertake risk. You could fall and break your arm; you could fall and break your neck. When you drive down a 2-lane road, any one of the oncoming cars could cross the yellow lines and leave you in a head on collision at a 70mph speed differential. Risk is a part of life. As it turns out, it’s quite intertwined with #1 above - you engage in tradeoffs with risk every day, and you probably don’t even realize it. Just like any other cost involved in a potential tradeoff, risk is something that you should be compensated for taking on.

The interesting thing about it is, despite what financial types will want you to believe, risk and reward very rarely match up. Either you are being under-compensated for your the risk you are taking (say, the fun of drinking and then joyriding compared to the significant likelihood of killing yourself) or you are being wildly overcompensated for the risk that you are taking (getting out of bed in the morning compared to the extremely unlikely possibility of falling to your death). The key is to seek out the latter and avoid the former. Heads - I win; tails - I don’t lose much. Those are the scenarios that you want in life.

7. Use your brain (think before you act and speak).

Very rarely in life will you have to literally and simply react. The vast majority of the time, you will have the opportunity to think before you act or speak. Words and actions cannot be recalled. You are smarter and more intellectually capable than at least 90% of the population - use your advantage. If someone can make you speak or act without your using your most powerful tool, they have beaten you. If you lose because someone just beat you, that’s fine. But don’t beat yourself.

8. Trust nobody; question everything.

People lie. And most of the time it’s not even on purpose. People lie to themselves more frequently and more terribly than they do to other people. Even worse and more prevalent than the outright lie is the tricks our memories play on us. There is actual research showing that people’s memories of events will change over time based on their own personal biases toward the event in question.

Much of what passes for science these days is biased (or outright fraudulently represented) based on what results various funding organizations want to see. A significant portion of research is simply badly done - ridiculously small sample sizes, peer review that amounts to an awful joke (after all, if you want funding, you have to agree with the scientist who says what the funding agent want to see), badly misinterpreted statistics, the list goes on. And history, ugh. Go read a few primary sources on something as basic as the American revolution, and see if it agrees with what you were taught in school.

The point is, there’s a decent chance that most of what you hear - unless it’s hard, laboratory repeatable science, has a decent chance of being utter bullshit. Feel free to listen and read, regurgitate as necessary, but never discount that it might be completely incorrect.

9. Be a contrarian. (Don't do what everyone else does; winding up like everyone else sucks.)

Unless you want to be like everybody else, don’t do what everybody else does. The definition of insanity is doing the same thing over and over again while expecting different results every time. If you act like everybody else, you’re going to wind up like everybody else. Look around. You are already better than those people. Why in the hell would you want to be more like them?

One of the most productive things that you can do in life is to consistently fade the herd. When a crowd turns into a herd where there is no longer any opposition, it’s most likely that that crowd is doing something insane. Remember, people are stupid. Most crowds (and it becomes more true the more they all agree with each other) are the stupid leading the stupid. Don’t participate in stupidity.

10. There are no selfless acts.

Human nature is self-seeking. There's no escaping it. Even people who appear to be selfless are doing so out of self interest. At the very least, they are either acting out of some sense of guilt (avoidance of pain) or due to the fact that it makes them feel good. Whatever the reason, the motive for EVERY action is selfish in some way or other. It's not good or bad, it just is. And that's sorta the point - selfishness IS NOT bad. You should never feel bad about being selfish. Guilt is only as powerful as you allow it to be. When you refuse to agree that acting in your own interests is wrong, you can no longer be emotionally bullied or manipulated. Come to terms with the truth about the motivation of all human behavior, and you will be MUCH happier.

to be continued...

A Metalist

2011-03-22T20:01:00.000-07:00

Metalist, as in list of lists. Not as in someone who does metals.

For my first introductory exercise, I thought it might be productive to come up with ideas for lists. It will hopefully allow me to focus future energies on coming up with subject-specific thoughts rather than having to spend a few hours coming up with a subject for which I'd then have to come up with thoughts. Not all of these are groundshaking or even all that interesting. I may not even do all of them. One is, itself, another metalist. And I have no idea whether I can come up with anything for any of them. I've named the lists in terms of "10 things", but not all will wind up with 10 items. Some will be more, probably broken up into multiple posts if I get rolling too much. The plan is to do 2-3 of these a week, at least initially. Some of them are lists that will result from items in other lists (this will make more sense when I actually do it below). So, without further ado, 13 lists that I plan to make...

1. 10 ideas/philosophies that I want to pass on to my children.

This one has kinda been brewing for several years. I think I may even have a google doc in which I started it. It was inspired by a sermon a few years ago about The Next Generation and how to make sure that what we believe doesn't die when we do. I can see this one being more than 10, but I'll try to condense it down to essentials. And if I can't, I'll do another iteration later on.

2. 10 lists of how to fix the world.

This could also be called, My plans upon being elected supreme dictator. Obviously, this is the other metalist. We all (I presume) have water-cooler discussions wherein we solve the world's problems. These lists will coalesce all of my ideas on such. Obviously very little of this will be strictly original material - it's somewhat tough to have opinions that aren't influenced by other people. Hopefully I'll have something to add.

3. 10 ways to get rich with minimal effort or expense to myself.

This is something I ponder a lot. I have criteria in mind, but I don't think I have 10 items yet. This will be the first serious mental challenge, and will probably spur additional lists.

4. 10 things that I would do if I had access to all of Google's information and all of Google's computing resources.

I think I've seen this phrased as a google interview question, but I can't find it at the moment. I've always thought it an interesting question, because it's a completely unique problem. You basically have access to infinite information and infinite processing power. What would you do with it? I have one or two ideas, but I'm hoping that I come up with more.

5. 10 Android/iPhone/iPad apps that need to be written.

This is a spin off of #3. I've been contemplating the question for several weeks, but I have no idea what needs writing.

6. 10 subjects for books to write.

Another spin off of #3. I can't imagine having to write a book, even a non-fiction one. I feel like I'm kinda a jack of lots of trades and a master of none. In order to write, it seems like you'd have to be either a master of a subject (non-fiction) or creative (fiction). I am neither. This will be interesting.

7. 10 things that could be done if internet bandwidth to the home went up by a factor of 10.

So, 100MBps service to your house instead of 10. How would that change things? Obviously the impact would be dramatic, but how? I'm not sure I know yet.

8. 10 investment theses for the next 5 years.

Those of you who know me know that I am a money nerd. This list could hardly go by without SOMETHING investment related. I have lots of thoughts here, it will be a challenge to sift through the garbage and find something worthwhile.

9. 10 boys-only things to do with David when Christy is not around.

Obviously, we need daddy-son bonding time. And right now, he can't walk or talk. I need to come up with something to do with him.

10. 10 educational trips to take our children on as a part of their homeschooling.

As many of you know, we will be homeschooling our kids. We will take the money we would have spend on private schools and take them around the world to actually learn about it. Question is, where?

11. 10 new Apple/Google products.

Apple and Google are both black swan factories. They aren't afraid to try new things and see what works. But for apple at least, I don't see the next new thing for them. Seems to me that their pipeline is dry. If I was Steve Jobs, what would I have them working on next?

12. 10 things that Baton Rouge needs.

This city seems like it has lots of potential. But we've always stagnated. I'm not sure I know what the problem is, but I want to take a stab.

13. 10 things that the Texas Children's Hospital Cardiology department needs to do to go from #3 to #1.

Obviously, we've spent some time there. I already have a list of complaints pulled together, but this is a slight deviation from that. Rather than just complaining, I want to be constructive. I may even email them this list when I'm done.

So thats it. Hopefully these will get better. This one was pretty lame. Plus, Christy is nagging me to get to bed. But it's just a warm up.

What the heck is this? Intro to the Thought Factory

2011-03-21T19:09:00.000-07:00

Spam, basically.

This past weekend, I found a new great blog. It may even take the top spot away from Karl Denninger. It's another finance guy, this one named James Altucher. But his blog is unusual. Unlike most garbage out there, the stuff he posts is useful. One of the more popular posts appears to be How to be THE LUCKIEST GUY ON THE PLANET in 4 easy steps. One of the daily exercises that he suggests undertaking is a mental exercise - write down lists of ideas. Preferably original ones. Exercise one's idea muscle. Then as I began reading more of his posts, I realized, this guy is posting his lists. And most of it is surprisingly worth reading. I figure, if he can come up with lists that I want to read about, maybe I can come up with lists that someone else wants to read about. And if nothing else, Christy and I can have a common place to do our brain exercising. So the Thought Factory was born.

I'm an INTP. I don't remember which personality test that comes from nor do I remember what it stands for, but I do remember that the gist is that I'm great at big picture stuff, crappy at minutiae. Which makes sense to me - I love coming up with an idea, but I hate actually having to execute it. Basically anything more detailed than the idea itself is minutiae to my brain, so I hate it. And I suck at it. So the idea of coming up with lists of ideas that never actually have to be implemented (by me at least) appeals to me a lot. Altucher claims that after 3 months of this, the ideas got really good and that he started to feel compelled to implement some of the better ones. We'll see if that happens here, but I'm not holding my breath.

So yea, basically this blog is a place for Christy and I to let our brains write spam to ourselves. I will say at the outset that I don't expect every list to be one of awesomeness, nor will they even be all original ideas or all even ideas at all. I'm sure a lot of it will be easily debunkable for a myriad of reasons. Retorts will be welcome in the comments section, although it will be a crap-shoot as to whether or not I actually read them. Hopefully they won't just be bulleted lists - I'd like for this process to make me a better writer too. So, some commentary will most likely go along with the lists, although I can't promise that said commentary won't offend everyone who reads it at one point or another. Some will be just lists of things that have been rattling around in my brain that I'd like to get out so that I can have room for something else. I'm sure Christy's will all be awesome though, I don't think she wants to publish the non-awesome ones.