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Cecily Cecily

Writing Worth Reading

Money Talks: The Language Of Finance

Financial language baffles outsiders with its jargon and density. Such opacity is not necessarily sinister: sometimes words are complicated because reality is complicated. But we should make a special effort to understand. “Incomprehension is a form of consent. If we allow ourselves not to understand this language, we are signing off on the prospect of an ever-widening gap between the rich and everyone else” (3,500 words)

A Dollar A Day

Apple’s stock-market valuation assumes that it continues on its present course for another decade. “The forward price to sales ratio is about 2.5. Each sale yields a certain net profit, which for Apple is on average 21%. Multiplying 2.5 by (1/.21) gives 12 which is about the P/E ex cash. This exercise summarizes Apple’s valuation nicely. Apple is expected to keep its current customers for about a decade and then disappear” (260 words)

Structural Change In Venture Capital

Changes in the structure of the venture capital industry mirror changes in the fundamentals for tech start-ups. It’s got much cheaper to launch per the past decade because Amazon, Google, Apple et al offer shareable infrastructure that start-ups can rent instead of building their own. But it’s much more expensive to break out as market leader, because the market has grown at least ten-fold (1,580 words)

Musical Gold

Portrait of three thirty-ish New York siblings, the Carpenters, who deal in rare stringed instruments. They can find you a good Stradivarius “in the low millions”. They seem pretty accomplished at selling themselves, too: “The combined effect of their personalities can feel overwhelming, like an elixir that is more potent than anticipated”. Their aim is to create “the Gagosian gallery of the fine-instrument business” (6,960 words)

Airbnb’s Weird Corporate Nationhood

Airbnb’s new corporate branding urges users to join the “Airbnb nation”. There is some logic here: If owners and renters believe they are part of the same community, they are likely to behave better towards one another. But Airbnb also seems to be taking a lead from Facebook, another “nation”, in prompting for user affection and trust. Perhaps Airbnb is planning to morph into full-function social network (1,345 words)

Global Inequality Is Falling

Rising income inequality is a problem within many nations. But global inequality has been falling for 20 years thanks to rising prosperity in developing countries, China especially. True, China’s industrial growth has held down the wages of middle-class American workers, probably enriched the 1%, and thus worsened inequality within America. But still: “The world is headed in a fundamentally better direction” (Metered) (980 words)

Target The Planning Laws, Not The One Per Cent

Some 40% of UK national wealth is illusory. It consists of the premium in house prices due to planning and zoning restrictions. This artificial wealth has been created “not by improving our living standards but by making them worse; by building too few houses, not too many”. The effect is a transfer of money from the young and poor to the old and rich. “This is not wealth, this is plunder” (Metered) (850 words)

The New Jet Age

Portrait of Dubai International Airport and Emirates airline. Some froth on top, lots of interesting stuff underneath. Aviation accounts for 30% of Dubai’s GDP, up from nothing 20 years ago. DIA is busier than London Heathrow. Location and investment have allowed Emirates to capture fast-growing long-haul routes connecting Asia and Africa with Europe and the Americas, thanks in part to US airlines’ retrenchment (2,860 words)

Fireside Chat With Larry Page And Sergey Brin

Interesting throughout. Larry Page: “We feel like right now, computers are still pretty bad. You’re just messing around. You’re scrolling on your touchscreen phone, and trying to find stuff. The actual amount of knowledge you get out of your computer versus the amount of time you spend with it is still pretty bad. So I think our job is to solve that, and most of the things we’re doing make sense in that context” (6,100 words)

Free Markets Killed Capitalism

Interview with Barry Lynn of the New America Foundation, on how monopolies and the reaction against them have shaped America since independence. The Boston Tea Party was not a revolt against taxation but against the East India Company, which Americans feared would monopolise their commerce. A basic problem of capitalism is the relative ease with which monopolists can capture free markets (8,220 words)

Has GDP Outgrown Its Use? Pick of the day

GDP gets far too much respect as an economic indicator, given its fuzzy and shifting nature. It’s pretty good for measuring production of raw materials and simple manufactured goods, but much less reliable with complex manufactured goods, and “atrocious” at capturing services — which account for two-thirds of rich-world output. “Our societies have been somehow hijacked by pursuit of a single data point” (3,300 words)

The PayPal Mafia

The team that founded PayPal, and dispersed after its acquisition by Ebay, went on to become Silicon Valley’s new A-team of founders and investors. Peter Thiel, Max Levchin, Elon Musk and Reid Hoffman are all PayPal vets. Companies founded by PayPal alumni include at least seven billion-dollar “unicorns”: Tesla Motors, LinkedIn, Palantir, SpaceX, Yelp, YouTube, Yammer. What was in the water at PayPal? (3,880 words)

Peak Globalisation

Globalisation as a trend may well have peaked over the past twenty years. The reasons: Services are rising as a share of GDP, and they are harder to trade; China’s economy is becoming less resource-intensive; wages are converging across borders; robots & artificial intelligence are making it more attractive for richer nations to manufacture locally; the next twenty years may be less peaceful than the past twenty years (314 words)

The IPO Is Dying

Interview with venture capitalist Marc Andreessen, who argues that excessive regulation has closed the IPO market to growing companies; only big firms can afford the legal and accounting costs. “Gains from the growth accrue to the private investor, not the public investor”. Andreessen also has harsh words for Thomas Piketty: “He has a lot more faith in returns on invested capital than any professional investor I’ve ever met” (2,870 words)

Bailing Out Banks

Excellent interview, clear and intelligent, with Cornelia Woll, author of The Power of Inaction, comparing how different countries bailed out their banks in the 2008 financial crisis. The American policy of cheap money for everyone was better for stabilising the industry right away. The British policy of expensive money for those in dire need was better for changing future behaviour, and so improving future stability (1,970 words)

The Disruption FAQ

Explanation of disruption theory, rebuttal of Jill Lepore’s recent recent take-down. “Most asymmetric challenges are not taken seriously because they initially benefit the incumbent. The side-effect is that it lulls them into a sense of security resulting in a lack of response. Challengers have the child-like advantage of rapid growth and learning while incumbents are encumbered by their size and lack of flexibility” (2,014 words)

Amazon At 20: Relentless Dot Com

Here’s the key point: “Though by far the biggest online retailer in America, [Amazon] is still growing faster than the 17% pace of e-commerce as a whole”. In other words, Amazon is already the best at what it does, and it is still getting better. As to its global virtue, the jury is still out. For every business partner that Amazon bankrupts or bullies, another finds itself “selling to places it never imagined” (Metered) (2,900 words)

Dear Marc Andreessen

When workers oppose new technology, they are protesting not against the technology as such but against its effect on their lives — which is, almost invariably, to increase the efficiency with which they are exploited, driving down their wages and depersonalising their jobs. It isn’t technology which frightens most of us, but the capitalists — and, yes, Dear Marc Andreessen, the venture capitalists — behind it (1,250 words)

I’m Just Now Realizing How Stupid We Are

Finance writer distils the lessons learned in the course of producing 3,000 columns. “I’ve learned that there’s no such thing as a normal market or a normal economy. Some people spend their lives ‘waiting for things to get back to normal’ without realising that stocks and the economy are always in some state of craziness … I’ve learned that ‘do nothing’ is the best advice for almost everyone almost all the time” (880 words)

Post-Crash Economics

“Mainstream economics is a pitifully thin distillation of historical wisdom on the topics that it addresses. It should be applied to whatever practical problems it can solve; but its tools and assumptions should always be in creative tension with other beliefs concerning human wellbeing and flourishing. What students are taught today certainly does not deserve its imperial status in social thought” (900 words)

Post-Money Evaluations

How to be a venture capitalist. Lessons learned from two years as an analyst with Union Square Ventures. “VC is about story recognition. Remember the anecdotes (and how they’re resolved), because history often repeats itself”. “If your investment thesis can’t be summarized in 140 characters, you’re being too prescriptive”. “Avoid companies where there are diminishing marginal returns to data” (2,220 words)

Does Geithner Pass The Test?

Former US treasury secretary Timothy Geithner claims in his memoir, Stress Test, to have steered the American economy successfully out of the 2007-2008 financial crash. Which is true to the extent that the country avoided another Great Depression. But the Geithner years were still a disaster — a “Lesser Depression” — in which trillions of dollars and millions of jobs were lost. If the crisis was a test, America failed it (3,630 words)

The Four Stages Of China’s Growth

China’s economic miracle has passed through three phases, and needs a fourth. First came the decade of liberalisation which legalised wealth creation. Next, a necessary investment boom to overcome infrastructural constraints. The current phase is marked by surplus investment and illusory growth. The next phase should focus on social and institutional development to improve law, government and education (2,900 words)

The Disruption Machine Pick of the day

Clayton Christensen’s theory of disruption, accepted across American industry as “the gospel of innovation”, is wobbly at best. It rests on a group of handpicked case studies that prove little or nothing. The first of them gets the disk-drive industry quite wrong: “Most of the entrant firms celebrated by Christensen as triumphant disrupters no longer exist, their success having been in some cases brief and in others illusory” (6,000 words)

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