Curt Doolittle

Theme: Incentives

  • ON SILICON VALLEY BUST —“Right now you’ve got private companies raising $200,

    http://online.wsj.com/articles/venture-capitalist-sounds-alarm-on-silicon-valley-risk-1410740054GURLEY ON SILICON VALLEY BUST

    —“Right now you’ve got private companies raising $200, $400, $500 million. If you’re in a competitive ecosystem and you raise that amount of money, the only way you use it—because these companies are all human-based, (they’re not, like, building stores)—is to take your burn up. … And I guarantee you two things: One, the average burn rate at the average venture-backed company in Silicon Valley is at an all-time high since ’99 and maybe in many industries higher than in ’99. And two, more humans in Silicon Valley are working for money-losing companies than have been in 15 years, and that’s a form of discounted risk. … In ’01 or ’09, you just wouldn’t go take a job at a company that’s burning $4 million a month. Today everyone does it without thinking.”—

    Well, I have been through the 69, 73, 81, 91, 01, and 07 cycles as a youth through my business-owning parents, a young entrepreneur, and a mature entrepreneur. I have ‘muscle memory’ – I have not forgotten these experiences. And I am highly sensitive to the effect on businesses (my own included) of overheated markets, which, as Gurley states, drive up costs (rents in San Francisco), as well as the impact on myths (“Startups do this so we should too”).

    Although as an Austrian (Hayekian, not Misesian), I also understand that some of these misallocations of capital distort the labor market in positive ways such as encouraging the education of and attracting engineers, while in other cases they are negative, such as attracting men to home construction (which is enjoyable but unskilled labor) instead of skilled labor which may be less enjoyable but is both independently sustainable, and internationally competitive. Once a man loses the opportunity to enter a field at a young age he can never recover it.

    I am hoping to do a capital rase in 2015, and this overheated market is making me very nervous about selling into a cold investment cycle. On the other hand, I built a business wherein all I will ask of investors is to fund going to market, not research and development. And I have intentionally engineered the organization to operate on eastern european costs, rather than San Francisco costs. As such it will be impossible for us to burn money at San Francisco rates (the $4m a month number Gurley refers to). Human capital and physical plant costs are just not the same here, and the distribution of our product (as Atlassian has demonstrated) is not one that requires a large sales force. Yes, Oversing, for any large organization, may require some consultation, consisting mostly of configuration and training, but that is also a benefit, because services in the ERP space are highly profitable. It is hard to invest in service organizations but very easy to invest in combined product and service organizations. So hopefully, even if I have played the cycle poorly by expecting to be done with version one earlier than I thought, I think we should be fine. I mean, at the top end, we will burn in a year what a lot of startups are burning in a month, and our potential for success is reasonably ascertainable, and the exit strategy is obvious and controllable.

    Source date (UTC): 2014-09-15 09:29:00 UTC

  • is what I expect to happen if any digital currency is successful. Ecuador create

    http://hosted.ap.org/dynamic/stories/L/LT_ECUADOR_DIGITAL_MONEY?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2014-08-29-08-28-04This is what I expect to happen if any digital currency is successful.

    Ecuador creates it’s own fiat digital currency. Which is good for the third world. Becuase digital currency is traceable and hard for corrupt politicians to steal.

    Source date (UTC): 2014-08-29 13:58:00 UTC

  • THE “WHAT IF” OF UNIVERSALISM What if all companies compete in the market with t

    THE “WHAT IF” OF UNIVERSALISM

    What if all companies compete in the market with the same strategy? Those with the most credit will eventually accumulate the talent and other resources to defeat the rest. So companies specialize in market tactics.

    What if all states compete in the market with the same strategy? If everyone competed on meritocracy, the most technologically advanced state would capture a disproportionate amount of the wealth. If on violence, the strongest would capture a disproportionate amount of the wealth, territory, and control. The most vocal the most influence. This is why states specialize in different tactics. Because meritocracy is only beneficial to the meritocratic. war is most beneficial to the strong. and everyone else engages in criticism and complaint as moral rebellion.

    What if all tribes compete in the market with the same strategy? If all compete on meritocracy, the smartest, strongest, most trustworthy, and most technologically advanced will capture a disproportionate percentage of the wealth. If on strength, the strongest, and fastest, willing to make the greatest sacrifices will capture it. The rest will rely on gossip criticism and complaint and negotiate whatever possible ends they can. So tribes specialize in reproductive and social tactics.

    What if all families compete in the market with the same strategy? if families competed in the polity using the same strategy the wealthy would prosper under meritocracy and the poor would prosper under communism, and the powerful would prosper under authoritarianism. This is why families politically compete using different political preferences: it is in their interests to do so. Classes vote as classes because classes share reproductive strategies. As much as we do not like it, humans use three different strategies (gossip/criticism/guilt, violence, remuneration) to compete, and they do so because the upper classes are literally genetically superior to the lower classes in both intelligence, ability, and reproductive value.

    An homogenous polity, an homogenous moral code for a political system, is a disadvantage to some and an advantage to others. The state isn’t the only monopoly that’s ‘bad’. As an artifact of an extended family of aristocrats, it is adequate for the representation of their interests. A multi-house government is merely a market for constructing social contracts – as long as they are contracts that expire, rather than laws that do not. The mistake we made was in not adding the church as the lowest house of the state, and requiring that aristocracy(the land), merchant and banker (commerce), the common folk (the church and care-taking) were not separated into individual houses. Each with their own requirements for entry, and taxes paid, and all of which participated in exchanges.

    Even as such, a division of those preferences does not solve the problem of the demand for totalitarianism on one end and demand for liberty at the other. The problem is that property rights must exist as universally atomic (private) but that we can use those rights under a political contract, to construct whatever political order best suits our reproductive interests.

    Any order that constructs a market for exchange between those of us with dissimilar interests and abilities is a moral one. However, any order which favors one house or the other through parasitism rather than exchange does not.

    The fallacy of the enlightenment is that of equality, since equality is a code word for monopoly, and monopoly is a code word for tyranny, and tyranny is a code word for parasitism. And under no condition is cooperation rational under parasitism. And if we are not cooperating then violence is on the table.

    Source date (UTC): 2014-08-29 04:31:00 UTC

  • I invest in my staff – a lot. When it doesn’t pay off I move on. When it does pa

    I invest in my staff – a lot. When it doesn’t pay off I move on. When it does pay off I’m always absolutely thrilled. The best way to invest in your staff is to negotiate decisions with them, until their decisions are as good or better than yours. You must never lose control in the sense that decisions are ‘deals’ between you and your staff. The deals must persist. But at some point they begin to understand the overall deal structure (they have adopted your goals) and you are really able to rely on them for stopping you from making mistakes rather than you stopping them from making mistakes.

    So, the best approach is to constantly consider how to spend your time. It is much more time consuming to negotiate (train) your staff so that they make good decisions, but it is a much larger long term payoff to try to train everyone to make good decisions. When they do, they have sovereignty, and are in control of their lives and we all desire that. They feel respected, and are respected, because they participate. I dont do this for purely warm and fuzzy reasons – even though the sociology of the work place is something very important to me. I do it because I am, at all times, trying to invest now, so that I can tackle other problems later without the fear of absorbing risk by doing so.

    My staff has hit a sort of critical mass since the spring, but particularly since we sent them to work together in a villa for the spring and summer. When you are that close to people, all sorts of external influence and posturing eventually disappears from the daily work and a level of trust develops that is something beautiful to behold.

    Managers can really be separated into those who do such things and those who either don’t or can’t, because they aren’t craftsmen. This is one of the things I’ve learned from the ‘good to great’ research: that you really must build people from within, and from craftsmen, mature them into managers.

    Otherwise nobody respects those managers, and they are right not to. They’re just bureaucrats. And no trust can develop in that environment. And thats why it doesn’t.

    Source date (UTC): 2014-08-28 05:42:00 UTC

  • The Mere Mortal's Journey To Economic Literacy

    1) -The Single Idea-
    Economics in One Lesson, by Henry Hazlitt : Economic thought, unlike Moral thought, asks us to think about equilibrating consequences, and opportunity costs. If you understand the “one lesson” of the broken window fallacy, then that teaches you economic thinking in a nutshell.

    2) –The Application of The Single Idea To The Civic Society–
    Basic Economics, by Thomas Sowell : Basic Economics applies this single principle.

    3) –The Application of the Single Idea To Production Distribution and Trade–
    Principles of Micro Economics, by Greg Mankiw : Micro Economics textbooks deal with patterns of cooperation (business).

    4) –The Application of the Single Idea To Monetary, Fiscal, Industrial and Social Policy–
    Principles of Macro Economics, by Greg Mankiw : Macro economic textbooks deal with the impact of fiscal policy (government spending) and monetary policy (issuance of new money or credit) on the economy, in the government’s effort to keep us all busy.

    5) –The “Missing Link”: The Operations of the Financial System that connects political policy with production, distribution and trade.–
    Rothbard’s Mystery of Banking, and;
    Nial Ferguson’s History of Money

    The book that is missing between Micro and Macro, I do not think has yet been written, which is how the financial sector services the relationship between micro and macro. I think that book has not been written. In the meantime Rothbard’s Mystery of Banking, and Nial Ferguson’s History of Money, are the best and most accessible works. (Others might disagree). Rothbard was a terrible philosopher, but his works on money and banking are still the best I have found.

    6) –The Study Of Applications, Eddy’s And Flows-
    Most advanced (niche) applications of economics are useful for professionals, but not terribly meaningful for citizens.

    Personally, I don’t understand why we don’t get this stuff in high school.

  • The Mere Mortal’s Journey To Economic Literacy

    1) -The Single Idea-
    Economics in One Lesson, by Henry Hazlitt : Economic thought, unlike Moral thought, asks us to think about equilibrating consequences, and opportunity costs. If you understand the “one lesson” of the broken window fallacy, then that teaches you economic thinking in a nutshell.

    2) –The Application of The Single Idea To The Civic Society–
    Basic Economics, by Thomas Sowell : Basic Economics applies this single principle.

    3) –The Application of the Single Idea To Production Distribution and Trade–
    Principles of Micro Economics, by Greg Mankiw : Micro Economics textbooks deal with patterns of cooperation (business).

    4) –The Application of the Single Idea To Monetary, Fiscal, Industrial and Social Policy–
    Principles of Macro Economics, by Greg Mankiw : Macro economic textbooks deal with the impact of fiscal policy (government spending) and monetary policy (issuance of new money or credit) on the economy, in the government’s effort to keep us all busy.

    5) –The “Missing Link”: The Operations of the Financial System that connects political policy with production, distribution and trade.–
    Rothbard’s Mystery of Banking, and;
    Nial Ferguson’s History of Money

    The book that is missing between Micro and Macro, I do not think has yet been written, which is how the financial sector services the relationship between micro and macro. I think that book has not been written. In the meantime Rothbard’s Mystery of Banking, and Nial Ferguson’s History of Money, are the best and most accessible works. (Others might disagree). Rothbard was a terrible philosopher, but his works on money and banking are still the best I have found.

    6) –The Study Of Applications, Eddy’s And Flows-
    Most advanced (niche) applications of economics are useful for professionals, but not terribly meaningful for citizens.

    Personally, I don’t understand why we don’t get this stuff in high school.

  • The Mere Mortal's Journey To Economic Literacy

    1) -The Single Idea-
    Economics in One Lesson, by Henry Hazlitt : Economic thought, unlike Moral thought, asks us to think about equilibrating consequences, and opportunity costs. If you understand the “one lesson” of the broken window fallacy, then that teaches you economic thinking in a nutshell.

    2) –The Application of The Single Idea To The Civic Society–
    Basic Economics, by Thomas Sowell : Basic Economics applies this single principle.

    3) –The Application of the Single Idea To Production Distribution and Trade–
    Principles of Micro Economics, by Greg Mankiw : Micro Economics textbooks deal with patterns of cooperation (business).

    4) –The Application of the Single Idea To Monetary, Fiscal, Industrial and Social Policy–
    Principles of Macro Economics, by Greg Mankiw : Macro economic textbooks deal with the impact of fiscal policy (government spending) and monetary policy (issuance of new money or credit) on the economy, in the government’s effort to keep us all busy.

    5) –The “Missing Link”: The Operations of the Financial System that connects political policy with production, distribution and trade.–
    Rothbard’s Mystery of Banking, and;
    Nial Ferguson’s History of Money

    The book that is missing between Micro and Macro, I do not think has yet been written, which is how the financial sector services the relationship between micro and macro. I think that book has not been written. In the meantime Rothbard’s Mystery of Banking, and Nial Ferguson’s History of Money, are the best and most accessible works. (Others might disagree). Rothbard was a terrible philosopher, but his works on money and banking are still the best I have found.

    6) –The Study Of Applications, Eddy’s And Flows-
    Most advanced (niche) applications of economics are useful for professionals, but not terribly meaningful for citizens.

    Personally, I don’t understand why we don’t get this stuff in high school.

  • The Mere Mortal’s Journey To Economic Literacy

    1) -The Single Idea-
    Economics in One Lesson, by Henry Hazlitt : Economic thought, unlike Moral thought, asks us to think about equilibrating consequences, and opportunity costs. If you understand the “one lesson” of the broken window fallacy, then that teaches you economic thinking in a nutshell.

    2) –The Application of The Single Idea To The Civic Society–
    Basic Economics, by Thomas Sowell : Basic Economics applies this single principle.

    3) –The Application of the Single Idea To Production Distribution and Trade–
    Principles of Micro Economics, by Greg Mankiw : Micro Economics textbooks deal with patterns of cooperation (business).

    4) –The Application of the Single Idea To Monetary, Fiscal, Industrial and Social Policy–
    Principles of Macro Economics, by Greg Mankiw : Macro economic textbooks deal with the impact of fiscal policy (government spending) and monetary policy (issuance of new money or credit) on the economy, in the government’s effort to keep us all busy.

    5) –The “Missing Link”: The Operations of the Financial System that connects political policy with production, distribution and trade.–
    Rothbard’s Mystery of Banking, and;
    Nial Ferguson’s History of Money

    The book that is missing between Micro and Macro, I do not think has yet been written, which is how the financial sector services the relationship between micro and macro. I think that book has not been written. In the meantime Rothbard’s Mystery of Banking, and Nial Ferguson’s History of Money, are the best and most accessible works. (Others might disagree). Rothbard was a terrible philosopher, but his works on money and banking are still the best I have found.

    6) –The Study Of Applications, Eddy’s And Flows-
    Most advanced (niche) applications of economics are useful for professionals, but not terribly meaningful for citizens.

    Personally, I don’t understand why we don’t get this stuff in high school.

  • Is It Good To Do A Ph.d. In Theoretical Computer Science (e.g. Complexity) If You Intend To Go To Work In The Industry?

    As far as we know, a PhD does not increase you earning capacity or your credibility and demonstrably harms it. The value of a PhD is either entirely personal (and expensive) or necessary as entry into the teaching field.  In practice a PhD is certification by a board of specialists that they can treat  you as a relative equal in the field – of teaching.

    Nearly all problems in computer science are not complicated, but instead, are bounded by hardware costs tolerable by the end consumer of the application (the imputed price).  Most innovation takes place in either adapting to new hardware capacity (software generations) or adapting to new hardware capability (user interface improvements). But the number of ‘problems’ we solve in computer science is still a manageable set, small enough to roughly refer to as design patterns.

    Furthermore the value of your earning capacity (working in the industry) is determined by your ability to learn and dispose of ideas, not by your expanding specialization in ideas. 

    (Personally, I would do it anyway. lol)

    https://www.quora.com/Is-it-good-to-do-a-Ph-D-in-theoretical-computer-science-e-g-complexity-if-you-intend-to-go-to-work-in-the-industry

  • Why Is It Many Times Cheaper To Send Physical Mail Across The Ocean Than An Electronic Money Transfer?

    Because the government subsidizes and insures physical mail that is hard to steal, and less desirable to steal, using low skilled labor when handling mail, while private industry absorbs risks and the cost of semi-skilled manual labor to manually process wire transfers that are unprofitable, and easily fraudulent, and highly desirable to steal, but without which they cannot continue business operations. 

    In other words, wire transfers are both more desirable and easier to steal than physical goods, and once stolen are unrecoverable. And they don’t want to process them so they keep the cost as high as possible.

    The cost of wire transfers is due to the insurance cost of theft by retailers.  Imagine instead that the post office shipped and delivered envelopes of money, and how the behavior of the post office would change. 

    That is why it is cheaper to send hard-to-exchange goods, than exchange goods.  And why it is more cost effective to steal money than stuff you have to sell or pawn.

    This is why Bitcoin (BTC) are better and cheaper means of wire transfers.  The intermediaries in the chain of handling are not exposed to risk – just you.

    Everyone argues that BTC is helpful for the high end of the market, and I totally disagree. The primary virtue of BTC is in its application to solutions for the poor – who pay high costs because the marginal value of each unit of currency is more expensive for them than for everyone else.

    https://www.quora.com/Why-is-it-many-times-cheaper-to-send-physical-mail-across-the-ocean-than-an-electronic-money-transfer