cwan

The problems in mark to market accounting wasn't so much in the accounting itself which generally should prove irrelevant given that the disclosure ends up being in the notes. The problem is because of regulatory accounting which requires that you need a certain threshold of regulatory capital - and the writedowns (even on bonds that companies intended to hold for their full maturity) meant that they were immediately undercapitalized or overcapitalized based on the whims of the market - an almost perfect storm at the time because these were relatively new regs.

Granted, you could make the argument that these banks should have had greater reserves, but it is also useful and relevant to note that many of these banks may not have failed if they were not forced to sell of some of these assets at their lows as a result of regulatory requirements that did not exist only a year or two earlier (I forget the date).

While I can agree with the first part of the statement, the global meltdown was not "largely caused by US deregulation-driven con games". Regulation however well intentioned and in how it was implemented played a decisive if not the decisive role. Attempts to maneuver around regulation creating less transparency was causal. Government sponsored agencies also contributed heavily to the meltdown.

I also don't think it is true to say that there was a massive shift of assets from middle class to already very well off given that it is the rich who largely suffered the most from this meltdown (given that it was an asset pricing bubble and it is the rich who tend to be the ones who hold more assets). One thing you also notice that's really different about the US (and in many ways Canada as well) and the rest of the world is that the rich are pretty much the same people elsewhere, whereas there at least seems to be a lot more movement/mobility or the potential to be in the US.

Hmmm that I didn't know. That could be complicated if they moved in the last year (e.g. deemed disposition of shares and all that). I guess as long as they're reporting to whoever the appropriate reporting authority is though I doubt Italy's tax department is as sophisticated as the IRS (they're known to have checked out facebook profiles).

Virtual goods are entertainment. Granted, I don't play Farmville or any other game (and I do find all those updates on fb annoying). I assume the pricing is pretty transparent. Just as I find buying tickets to sports games to be a waste of my time (with a particular net negative on baseball), to each their own.

Affiliate marketing however, is where the assignment of value somewhat more arbitrarily/discreetly decided as it depends on actions of third parties. Besides, it's about pointing out an opportunity that exists - and in that light, even if I were take your position, you could make the argument that it's one that he's very qualified to make.

We all tend to be hypocrites in one way or another and whether Fred Wilson is one, to me at least, isn't relevant. You've just posted a completely ad hominem attack while completely overlooking the premise of an interesting post (granted, "interesting" is a subjective statement). I also don't think it's terribly surprising that he would promote/give a platform for his portfolio companies - that's almost expected.

As for affiliate marketing - why wouldn't he? Aside from a smaller argument that every penny counts, it would seem like it's a useful little experiment which broadly speaking ,suggests a significant opportunity in ecommerce given what he's saying is that it's a mispriced asset. Whether or not it's a mispriced asset that can be monetized is what should be up for debate.

Not sure if he'd thought it through that far, but it seems like a pretty good and calculated risk that's paying off. The fact that he is as open as he is (though hopefully he knows better than to report numbers that appear worse to the IRS), I think makes his customers want him to succeed that much more.

Broadly, it's a tool that enables others to build their own sites but also their own businesses (and I think entrepreneurs like supporting each other as it helps prove that the rewards do indeed exist). It lets users share, in a sense, in the success to be associated with a product they've used while also being inspired.

Of course, there can be a thin line between sharing and bragging/offending his user base, but I think he treads it quite well.

One additional note that I'd also make is that intercompany shareholdings (keiretsu used to promote stability and prevent takeovers) were in essence financed by the government and in turn made the mess even more difficult to ultimately deal with given the incestuous crossholdings and restructure firms.

I agree with you on the obstacles facing China to becoming a superpower which are far greater than others imagine. Working there, you see how inefficiently resource allocation has been for state owned enterprises which in turn have propped up stock prices and real estate. How they're able to deal with any bust politically is what scares me.

The government is already largely hated/strongly disliked in many quarters (there are many who have long memories not to mention the obvious and very visible corruption). It bears mention that that China liberalized not because they wanted to, but because they had no choice given how poor their people were. When the bust happens, the increased civil unrest and the government's overriding resolve to maintain power will be a volatile combination - one that Japan didn't have to deal with.

I also agree that the parallel of Japan seems more relevant to China than the US. China's non performing assets in their banking sector has likely grown quite significantly with the push for lending in the last year. The average Chinese aren't stupid either - which makes it a potential catastrophe if certain world leaders get their wish that the RMB is allowed to float. Capital will rush out of China and its domestic banks causing a financial crisis and ironically potentially a RMB that is worth substantially less than it is today.

Japan never actually dealt with the bust - and instead of taking the short term hit, they spread it over two decades. This was the problem - not the loss of confidence - which is an effect rather than the cause of the current malaise. When asset prices ultimately collapsed following the bubble, the government chose to prop up zombie banks instead of writing down grossly overvalued assets and restructuring debts - an issue that I worry about myself in the US though I think (and hope) American policymakers are wary of similar consequences.

This goes back a bit to the debate over whether or not it's possible to have economic growth without dynamism. That yes, you do have booms but you also have busts but that the net benefits of the booms (in productivity and innovation) far outweigh the consequences of any bust. Governments who attempt to dampen busts (e.g. minimum wage, stimulus, propping up businesses that should otherwise die off) as a corollary also tend to dampen recovery and growth (e.g. resulting higher interest rates, slower hiring, stagnant growth of new businesses as zombie firms squeeze resources that would have otherwise been reallocated).

That's an unfair comparison. It was at historically low levels of job growth because the US was experiencing below average unemployment rates to begin with (ie it's tough to grow additional jobs when people are employed - you will always have a certain percentage of unemployed just because of friction). You can chart/see historicals here: http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?series_i...

If unemployment fell much further there would be significant concern over inflation (because the only way to fill jobs would be to keep increasing pay for the same amount of work).

Not sure what you're calling spurious or anonymous by way of blog posts but do you have any references with respect to UN definitions? According to Wikipedia - depending on how reliable you consider them to be (http://en.wikipedia.org/wiki/Infant_mortality):

"The exclusion of any high-risk infants from the denominator or numerator in reported IMRs can be problematic for comparisons. Many countries, including the United States, Sweden or Germany, count an infant exhibiting any sign of life as alive, no matter the month of gestation or the size, but according to United States Centers for Disease Control researchers,[6] some other countries differ in these practices. All of the countries named adopted the WHO definitions in the late 1980s or early 1990s,[7] which are used throughout the European Union.[8] However, in 2009, the US CDC issued a report which stated that the American rates of infant mortality were affected by the United States' high rates of premature babies compared to European countries and which outlines the differences in reporting requirements between the United States and Europe, noting that France, the Czech Republic, Ireland, the Netherlands, and Poland do not report all live births of babies under 500 g and/or 22 weeks of gestation.[6][9][10] However, the report also concludes that the differences in reporting are unlikely to be the primary explanation for the United States’ relatively low international ranking.[10]"

An additional datapoint (pdf): http://repository.upenn.edu/cgi/viewcontent.cgi?article=1012...

Low Life Expectancy in the United States: Is the Health Care System at Fault? Samuel H. Preston & Jessica Ho

Abstract: "Life expectancy in the United States fares poorly in international comparisons, primarily because of high mortality rates above age 50. Its low ranking is often blamed on a poor performance by the health care system rather than on behavioral or social factors. This paper presents evidence on the relative performance of the US health care system using death avoidance as the sole criterion. We find that, by standards of OECD countries, the US does well in terms of screening for cancer, survival rates from cancer, survival rates after heart attacks and strokes, and medication of individuals with high levels of blood pressure or cholesterol. We consider in greater depth mortality from prostate cancer and breast cancer, diseases for which effective methods of identification and treatment have been developed and where behavioral factors do not play a dominant role. We show that the US has had significantly faster declines in mortality from these two diseases than comparison countries. We conclude that the low longevity ranking of the United States is not likely to be a result of a poorly functioning health care system."

A response to the graphic suggests that while "this was evidence of an insane and inefficient healthcare system", "if [they] really wanted a chart that captures what’s wrong with America’s healthcare system, [they] should have gone to the Centers for Medicare and Medicaid Services’ national health expenditures data website and downloaded the figures showing how rampant third-party payment has resulted in consumers directly paying for less than 12 percent of healthcare costs. And when people are purchasing something with (what is perceived to be) other people’s money, it’s understandable that they don’t pay much attention to cost." (http://biggovernment.com/2009/12/29/the-real-healthcare-char...)

I'm sympathetic to this argument given that the American healthcare system is considerably different than many healthcare systems globally in that private insurers acting on behalf of employers (not the users of healthcare) pick up a significant portion of the pie (even if, on a per capita basis, Medicare spending is more than most countries like Canada - though this fact alone begs the question of why the US government wouldn't first seek to fix Medicare).

As a Canadian, the one thing I don't quite understand is how many of my countrymen are so quick to condemn the American system despite all the obvious signs that the Canadian system is unsustainable and failing (http://network.nationalpost.com/np/blogs/fullcomment/archive...). Further, you read about Animal farm like anecdotes (to be fair, I've seen first hand some of this in Canada as well), and you wonder whether or not healthcare systems abroad can really be distinctly categorized between those that are "universal" and "non-universal" given how radically different implementation is - an example from Japan here: http://biglizards.net/blog/archives/2010/01/my_family_the_v....

There are at least 2 other big problems with this graph if presumably it's being used to argue for changes in policy:

(1) The measurement of life expectancy "at birth". The US spends a considerable amount of money aggressively attempting to treat what would otherwise be considered stillborns. (2) The lifestyles of Americans that may have nothing at all to do with healthcare implementation (http://www.usnews.com/health/family-health/articles/2008/04/...) - ie this could very well mean that if the US miraculously grew an entirely public and universal healthcare system as modeled against XYZ country, US life expectancy might not necessarily get any cheaper or better - it is entirely possible that it would become more expensive and worse.

Forgive my ignorance, but can you explain how Microsoft games the system with H1-B's?

re: tax breaks for increasing the number of employees, here's a fairly balanced posting on the subject: http://business.theatlantic.com/2009/10/would_a_payroll_tax_... - of course on a more fundamental level, payroll taxes always has struck me as odd considering essentially it's a tax on companies for hiring folks.

For me, a permanent reduction would be a far greater incentive to hire people because at least for me, I hope that I am hiring someone for more than a year or two which is when presumably the tax breaks would expire.

The problem with this is the potential for massive gaming. The argument of non-startups would be why should they be penalized for having hired people before this period or are considering laying them off and would not otherwise be viable without the tax advantage?

Ideally they would make the tax incentives permanent - ie reduce payroll taxes if the goal is to increase employment, but I think the startup visa is a much more interesting alternative as it seeks to attract talent that traditionally is difficult to define but is so important to how vibrant an economy is. In theory, just the fact these people bring viable ideas that people want to fund should be sufficient irrespective of jobs they create.

One thing the stats don't show, and I'm quite curious about, are those who are wealthy but seek greater (or even continue to seek) opportunities. The bulk of taxes don't tax wealth - they tax income (and gains on wealth like capital gains, interest and dividends get treated differently depending on where you go). Perversely, the rich have the luxury then to be subsidized for certain parameters because they don't need to pay for what they see as the benefits of living in that given place.

For this reason, you can get some remarkable statements like the year that Warren Buffett said something to the effect that there is something wrong with a system when his secretary gets taxed as a percent more than he does. Of course, we later learned this was somewhat disingenuous given most of his income wasn't personal income at all but dividends (http://www.timesonline.co.uk/tol/money/tax/article1996735.ec...).

This being said, how is your comment relevant to the startup visa? The idea as I understand it would be to attract those without money but who need it from VC's - and as you say, the US is often the destination of choice for those like that. The point being to attract great entrepreneurs from countries that don't welcome them - at least a number of countries being a case in point: http://www.foreignpolicy.com/story/cms.php?story_id=4095&... - "In one 2005 poll, just 36 percent of French citizens said they supported the free-enterprise system, the only one of 22 countries polled that showed minority support for this cornerstone of global commerce. In Germany, meanwhile, support for socialist ideals is running at all-time highs—47 percent in 2007 versus 36 percent in 1991."

In the US, all you pay is the inheritance/estate tax - you don't get double taxed on the actual inheritance that you file. In Canada, while there isn't an estate tax, you get taxed on the gain as if it is income and so you pay the income tax.

If you're going to compare apples to apples, the top marginal tax rates are about 45-50%+ in Canada (http://www.aurorainternational.net/Maximum_Personal_Marginal...) - and given the estate taxes in the US apply to anyone inheriting above a million, it's relatively equivalent for those people while it's considerably worse in Canada for everyone else given that considerably more people inherit less than a million. Another point of comparison - highest marginal tax rates start at 126K (Canadian) while you have to make over 370K USD to start getting charged the highest marginal tax rates.

Addendum - re: gifts - http://en.wikipedia.org/wiki/Estate_tax_in_the_United_States - "the gift tax prevents avoidance of the estate tax should a person want to give away his/her estate."

Sure the cost of living might be higher, but the opportunity for making money is also higher - or that's how it's supposed to work. One of the problems in California is that the benefits are now beginning to under weigh the costs which is why you have a outflow of migration towards surrounding states like Texas. Many of the problems are now structural like higher state and municipal taxes - so that despite getting ever fewer benefits, taxes are ever increasing.

That'd be a more reasonable argument if say Californians' taxes were used to fund the progressive policies of other states (though it is true that Californians get something like 80 cents per dollar sent to Washington). Californians however at an individual level are subject to the same federal tax rules as people in other states (and if they were poorer I'm sure the pendulum would swing the other way).

This being the case, it is even more remarkable the financial straits that California finds itself in. It has some of the biggest advantages geographically and started with and still generally has a wealthy and high income tax base.

The state of California also chooses to tax well above that of other states - stats here: http://www.taxfoundation.org/research/topic/15.html - and still manages to run a massive deficit.

Not in the US so I don't really know how the plans are like but this seems expensive: "- If you want it subsidized, you’ll have to sign up for a 2 year mandatory contract - There’s only one rate plan: $39.99 Even More + Text + Web for $79.99 total". It would seem that if you want the phone that badly it would be cheaper just to cough up the $530.

Incidentally, given that we sort of know what the pricing is (I suppose they could be aggressive about dropping the price later), what's the strategy here for Google? Just worried about cannibalizing sales of other firms that use Android? Why even bother putting out their own phone or being so involved with Motorola in the development of the iDroid?

While I can't say why others voted it up to the top page I will say that I did find this interesting. From the guidelines: "Anything that good hackers would find interesting. That includes more than hacking and startups. If you had to reduce it to a sentence, the answer might be: anything that gratifies one's intellectual curiosity." (http://ycombinator.com/newsguidelines.html)

I'm pretty sure I'm not alone in finding the origins of popular things/products/services interesting - and in this case, it's about the origins of a pretty common and national dish as a result of an odd series of ethnic and economic events. More broadly you could say it also speaks a bit to how and why ideas spread.

Not knowing the details of the judgement, a shut down seems a bit heavy handed and only more likely to bring scorn/attention to Apex (this despite the fact, I disagree with what these opposition groups are advocating).

On one hand I sympathize with Apex in that it seems fundamentally wrong that there are those who can attack you with impunity and anonymously online - particularly if they're lying about it. On the other, pursuing court action especially since it is unlikely that those running these sites have deep pockets seems like a PR disaster in the making (not to mention the fact that I think most readers take anonymous postings with a big grain of salt anyway - the legal suit for some will lend legitimacy to those false claims with many suspecting that 'the lady doth protest too much' and that their point may just be about revealing who those posters are to take retribution).

That video of the Amazon facility would be extra special if this were true (from the article): "When we told people were going to do this, someone said 'Whenever I click the order button on Amazon, I always imagine a chorus of happy, singing Oompa-Loompas riding around on Segways and shipping my stuff.'

More seriously, the idea of using traveling RV nomads as workers definitely qualifies as a hack. Who would have known that they'd make reliable employees given that based on the article you'd think they're effectively being paid an amount that would make them volunteers compared to their previous jobs? As an aside have you seen the systems made by http://www.kivasystems.com/? They have a number of videos on youtube.

"There are very few examples that you could point to where privatizing a public good has been successful." I suppose that depends on how a public good is defined. After all, airlines for some countries were considered to be in the national interest to the point that many were owned by their national governments - ditto for steel plants, etc.

These days, I'm not sure the issue is black and white what with quasi public/private partnerships where an infrastructure project is owned by the public but leased to an infrastructure firm, or capital is raised using bonds sold to the public.

I think it's a bit naive to think that in the hands of government, rent seeking behavior doesn't happen - it is possibly even worse with contracts developed and awarded based on political connections/favor or in building roads/infrastructure in places that neither need it or even want it in some cases. There are however good and bad ways to privatize as well. I live in Ontario and the privatization of the 407 has been highly successful (both profitable and useful for private users and performs its function admirably). I try to avoid it during rush hour because of the cost (as is encouraged) but it's quite well maintained and built. Can you provide a few examples where roads have been privatized but made public again because "rent-seeking behavior and slow decay while the current owners try to wring every last possible nickel and dime out of users before reselling the husk down the line to someone else who thinks they can squeeze a few more pennies"?

I (mostly) agree. It would seem that to do infrastructure especially in the middle of a recession (when you might be able to get it done cheaper) is the time to do it. That being said, you have to layer on the inevitable inefficiencies/corruption when such projects are rushed in order to have any impact to a recession.

I wonder if there are more creative ways to go about it like encouraging private firm participation through road privatization (which means that you get the same impacts without the government spend from private firms that are incentivized to be more efficient to maximize ROI). There are also creative experiments like congestion pricing that have the potential to greatly recoup costs while improving productivity.

There also obviously environmental impacts though of cheap free roads which have also been blamed for enabling urban sprawl. Again, it would just seem to me that yes, infrastructure is important (and much of the existing infrastructure is aging and needs to be replaced) but the way that we've gone about building it in the past and in how it's being proposed to build out now as stimulus, is less than optimal.

Here's one: http://reason.com/archives/2008/05/13/kidneys-for-sale

Another thought if you're still thinking about this and monitoring this discussion - give people a limited number of "show stopper" flags intended to draw the attention of moderators. They only get say 1 or 2 over the course of a month - much like dating sites to indicate importance (e.g. plentyoffish with their 2 roses).

These could be used either to reward or punish depending on how they're designed but people would use them sparingly if they're given after a certain criteria is reached (e.g. age of account, karma points, etc.). The purpose would be to cut down the noise that moderators/you have to deal with. Thus there could even be karma points and a red flag/green flag score.

The red flags might only be visible when you click in to their profile for example so as not to draw attention to their presumably highly offensive postings while the green flags are visible highlighting extraordinary comments.

PS I hope you figure out a solution to this as I'm sure I'm not the only one who was alarmed by your comment "I occasionally find myself thinking lately that I just don't want to be here anymore."

In the US: "In 2000, the top 25 percent of all taxpaying filers paid a whopping 83.6 percent of all income taxes. By 2005, they paid 85.6 percent of all taxes. So in spite of tax rate cuts for the well-off, the share of taxes paid by the well-off has risen." http://www.dallasnews.com/sharedcontent/dws/bus/columnists/s... - The irony is that tax cuts for the rich under the Bush Administration made taxation more progressive as it grew the overall tax base.

More here: http://taxprof.typepad.com/taxprof_blog/2007/10/top-1-pay-mo... "The new data shows that the top-earning 25% of taxpayers (AGI over $62,068) earned 67.5% of the nation's income, but they paid more than four out of every five dollars collected by the federal income tax (86%). The top 1% of taxpayers (AGI over $364,657) earned approximately 21.2% of the nation's income (as defined by AGI), yet paid 39.4% of all federal income taxes. That means the top 1% of tax returns paid about the same amount of federal individual income taxes as the bottom 95% of tax returns."

I'm sure one of the many lawyers who lurk can elaborate but I'm pretty sure that limited liability doesn't shield managers who commit criminal acts.

Recognizing and monetizing value isn't something that I'd snub my nose at. The basic idea is that there are often other suitors who can build a company better than you - why should there be any shame in this?

I suppose the question of long term value can be pretty subjective, but in a world where the average age of a Fortune 500 company is less the work life of an average worker, and the immensely greater access to markets with ever smaller amounts of capital, it's also fairly easy to see why many of these companies deserve the valuations they get. As someone who likes to drink the "koolaid" I tend to think that those who build companies to flip have a much greater likelihood of failure - and it's those who aim to build sustainable and great companies who are often the same ones that create the luck to be bought out at a significant premium. Besides those who do the entrepreneurial thing quickly learn that business is a marathon not a sprint.

As for the original quote, I'd disagree. I think it's incredibly important to understand your weaknesses and let's face it, not all entrepreneurs are great managers. Heck, there's practically an entire field of academic research that considers the differences between leaders and managers. Creating an organization and having the ability to come up with the initial ideas does not generally use the same skill sets as building, running and maintaining an organization.

These exist: e.g. http://www.lgwasherdryer.com/

The first time I'd ever seen one of these things was in Dubai at a hotel/apartment. I'm surprised they aren't proliferating through Asia given the limited amount of space but I figure give it time.

Incidentally, the cost on these washer dryer combo's aren't excessively high... in fact probably just a relatively small premium above what a good washer or dryer cost.

Given how rarely it happens (though it does happen) and the volume of links, I suspect there just aren't enough moderators. It might therefore be more ideal to give the community the tools to enforce.