Investigating what it might take to succeed as a scenariste, I came across the following analysis of the role of the artist and the producer in David Mamet's Bambi vs. Godzilla: On the Nature, Purpose and Practice of the Movie business
"The artist is, in effect, a sort of gangster. He hitches up his trousers and goes into the guarded bank of the unconscious in an attempt to steal the gold of inspiration. The producer is like the getaway driver who sells the getaway car and waits outside the bank grinning about the deal he's made."
Artists, craftspeople and directors
CV: Experience as a ne'er do well
Medical history: Preferably Asperger's Syndrome. Surprisingly, Mamet fails to mention the inherent potential of manic depressive, obsessive compulsive and insomniac diagnoses
Motivation: Pleasure in creating something, doing the job well. Like a terrier gnawing on a bone, it's fundamentally what you do, an expression of who you are; you wouldn't be happy doing anything else.
Mythological archetype: The Trickster -- "characters who express or intuit the propensity to upset and so reorder the world on a different level of abstraction"
Paid your dues: "i.e.been seduced and abandoned sufficiently to tire of it"
Producers
Education: "The American educational system prepares those with second-rate intellects to thrive in a bureaucratic environment...the bureaucratic rigors of the studio system probe the neophyte's threshold for boredom, repetition, sychophancy and nonsense."
Origin/Family Values: "So let us assume someone's brother-in-law showed up in the palmy presound days of Hollywood, and his brother-in-law, a power on the lot or on the set, hoping to avoid a "touch," said "People, this is Bob and he is a producer." Bob was then, entitled, under the family flag, to all the sex, drugs and fun he could wrangle and to whatever he could hypothecate. Time went by and Bob stayed on. He, or another of his ilk, caught, stole, or otherwise achieved power in some niche of the industry and, having learned a good trick, one day appointed footmen of his own."
Modus Operandi: "This power exists, and can exist, only in potential--for should the committee ever come to conclusions, its task and so its operation as a bureaucratic fiefdom, would cease."
Growing Savvy: learning that success comes not from pleasing the audience, but from placating one's superiors, until such time as it is expedient to betray them.
Pinnacle of Success: getting rid of the artists and craftspeople; achieving the "art of producing nothing at all."
Nostalgia..."It is not that the fox has taken over the henhouse but, if I may, that the doorman has taken over the bordello. In the golden days of the madam (Harry Cohn et al.), the lives of the girls may not have been better, but the lives of the customers were. Why? Because the owner-proprietor knew that her job was simply and finally to please the customer. "
Saturday, September 29, 2007
Friday, September 28, 2007
Behold! The Crepe Maker Cometh.
As part of the health section of my third grade daughter's IB unit of inquiry, her teacher sent out a request to parents to help with a French-themed breakfast. It seemed a simple enough request. Bring in crepe batter. Come into class and make them.
How could I go wrong? I had fond memories of gorging myself on sugar-filled crepes that my French-raised grandmother would make for Mardi Gras. My mother was a chef. I remember her riding the subway to work, her army-issue carrying case filled with cooking knives jauntily swinging from her shoulder. Surely such can-do spirit might have rubbed off on me.
One reason for doing this was the extra brownie points needed to redeem myself from the "What do people do for a living?" unit. I had signed up for the "Creative" section, on the heels of so-and-so's gastroenterologist mother who came into class to talk about how the digestive systems works. In contrast, my presentation would be something along the lines of
"Hello, boys and girls. My name is Nathalie Mason-Fleury and I make things up for a living. That's actually a figure of speech because, so far, nobody pays me to do this. Today my colleague and I researched how to fake your own death. I don't have any medical, forensic or criminology degrees, but it only took me a few minutes to look this up on the Internet. Why would I bother with professional references when I read the National Inquirer? Look at how long it took Lacy Peterson's body to come floating back up. And they knew exactly where to look.
Things started to go wrong from the very beginning:
1) I doubled the batter proportions. However this caused the batter to overflow in the Cuisinart as the liquid level went higher than the middle blade attachment.
2) I then decided to guesstimate how much of the milk and water to replace, but probably didn't add enough flour, which made the batter a little runny.
3) Worse, we had to cook on these horrible plug in electric eye units that were underpowered and didn't heat enough. A Bunsen burner would have been better, as at least I'd have gotten some heat. It took an average of five minutes per side for each crepe to cook and I know that's not normal.
This confirmed what I had always suspected, that I would rather stand for eight hours at a software trade show with cheap carpeting in three inch heels, than deal with a class of cynical nine year olds.
"You're not very good at this are you?" "I'm a picky eater, I don't want the broken ones" "My dad is a great crepe maker," "how come they keep falling apart" "When is this going to be ready?" and proceeded to literally go down the toilet, as two of them starting singing: "Bob Marley, Jim Dandy, R. Poopy..."
The veteran teacher gave me some advice and consolation: "Next time, make them all ahead of time and bring some token batter. Send them off on some distracting activity. Then, 15 minutes later: Voila! 30 perfectly formed TurboCrepes. But don't worry, it's the weekend. That way if they get sick it will be at home with their parents and we won't have to deal with it."
I appreciated his wisdom and told him that if, one day, the teaching thing didn't pan out, he really should consider putting on software demos.
How could I go wrong? I had fond memories of gorging myself on sugar-filled crepes that my French-raised grandmother would make for Mardi Gras. My mother was a chef. I remember her riding the subway to work, her army-issue carrying case filled with cooking knives jauntily swinging from her shoulder. Surely such can-do spirit might have rubbed off on me.
One reason for doing this was the extra brownie points needed to redeem myself from the "What do people do for a living?" unit. I had signed up for the "Creative" section, on the heels of so-and-so's gastroenterologist mother who came into class to talk about how the digestive systems works. In contrast, my presentation would be something along the lines of
"Hello, boys and girls. My name is Nathalie Mason-Fleury and I make things up for a living. That's actually a figure of speech because, so far, nobody pays me to do this. Today my colleague and I researched how to fake your own death. I don't have any medical, forensic or criminology degrees, but it only took me a few minutes to look this up on the Internet. Why would I bother with professional references when I read the National Inquirer? Look at how long it took Lacy Peterson's body to come floating back up. And they knew exactly where to look.
Things started to go wrong from the very beginning:
1) I doubled the batter proportions. However this caused the batter to overflow in the Cuisinart as the liquid level went higher than the middle blade attachment.
2) I then decided to guesstimate how much of the milk and water to replace, but probably didn't add enough flour, which made the batter a little runny.
3) Worse, we had to cook on these horrible plug in electric eye units that were underpowered and didn't heat enough. A Bunsen burner would have been better, as at least I'd have gotten some heat. It took an average of five minutes per side for each crepe to cook and I know that's not normal.
This confirmed what I had always suspected, that I would rather stand for eight hours at a software trade show with cheap carpeting in three inch heels, than deal with a class of cynical nine year olds.
"You're not very good at this are you?" "I'm a picky eater, I don't want the broken ones" "My dad is a great crepe maker," "how come they keep falling apart" "When is this going to be ready?" and proceeded to literally go down the toilet, as two of them starting singing: "Bob Marley, Jim Dandy, R. Poopy..."
The veteran teacher gave me some advice and consolation: "Next time, make them all ahead of time and bring some token batter. Send them off on some distracting activity. Then, 15 minutes later: Voila! 30 perfectly formed TurboCrepes. But don't worry, it's the weekend. That way if they get sick it will be at home with their parents and we won't have to deal with it."
I appreciated his wisdom and told him that if, one day, the teaching thing didn't pan out, he really should consider putting on software demos.
Tuesday, September 25, 2007
Glassfish?
Douglas, a SUN employee, from the comments asks: "Marc, what do you think about Glassfish?". And I am thinking to myself: not much.
You know I am a bit out of the flow these days, in fact I am looking forward to traveling to EU this week to catch up with a lot of my old JBoss friends on the development side. They have their great mass going on and it is also time for "fetes des vendanges" which is a world class opportunity to get drunk with some of my favorite peoples.
The bad news: with all due respect, I do not think it matters much to JBoss or even the market frankly, what Glassfish does. For the foreseable future (5years) no market share movement will unseat JBoss from leadership. Things just don't move that fast in middleware as you know.
The good news: within the realm of what is possible however, it looks like you guys haven't completely embarassed yourselves yet again with an application server offering. I will believe that grass-root activism within JAVA is probably responsible for what seems to be a well executed strategy. Pat yourself on the back and you get an A for perseverance.
Look at this way: you can have at it all you want with Geronimo and IBM. I think you get to claim a clear #2 position, do you? Good for you. Watch out for IBM though, you know they are big and all. The fact that JAVA employees have outsmarted IBM in building a semi-credible OSS alternative speaks for itself. This is something you should collectively take pride in.
marcf
You know I am a bit out of the flow these days, in fact I am looking forward to traveling to EU this week to catch up with a lot of my old JBoss friends on the development side. They have their great mass going on and it is also time for "fetes des vendanges" which is a world class opportunity to get drunk with some of my favorite peoples.
The bad news: with all due respect, I do not think it matters much to JBoss or even the market frankly, what Glassfish does. For the foreseable future (5years) no market share movement will unseat JBoss from leadership. Things just don't move that fast in middleware as you know.
The good news: within the realm of what is possible however, it looks like you guys haven't completely embarassed yourselves yet again with an application server offering. I will believe that grass-root activism within JAVA is probably responsible for what seems to be a well executed strategy. Pat yourself on the back and you get an A for perseverance.
Look at this way: you can have at it all you want with Geronimo and IBM. I think you get to claim a clear #2 position, do you? Good for you. Watch out for IBM though, you know they are big and all. The fact that JAVA employees have outsmarted IBM in building a semi-credible OSS alternative speaks for itself. This is something you should collectively take pride in.
marcf
Monday, September 17, 2007
Activist investor targets BEA
It is all over the news this morning, private investor firm Icahn & Co filed a SEC report disclosing a 8.5% stake in BEA, with an activist investor agenda to follow.
From MarketWatch:
Investor activists identify targets who they believe hold a lot of potential value, that has not been realized. Reasons may include lack of governance by ineffective board, mediocre and complacent management team, wrong or poorly executed strategy, whatever. They acquire a significant stake in the company and try to bring about the change they believe is needed.
BEA's shares are up 5% on the news. Which, for Icahn & Co, amounts to a cool $20m, not bad for a month's work. That's a real business model, one with high margins. I bet most of their operations are PR, IR, research.
What do they have on BEA then? Well frankly, nothing new... which is also probably the strength of their case. They reason that because of consolidation, and pressure from competition, their business model is profoundly fucked at a sales and marketing level. Hey, don't look at me or my friends at JBoss. We have been saying this since, oh, 2001. Icahn & Co. believe BEA's assets would be better exploited by a "strategic" acquirer.
I kind of agree. Selling BEA is probably the right thing to do. As a standalone entity, carrying all the operational cost of marketing and selling proprietary software becomes increasingly cumbersome. That fact alone fuels the consolidation fire. It also points to one of the main advantages for the OSS business model: lower cost of customer acquisition.
From a buyer's perspective, consolidating subscription revenue streams is a tried and true business model of growth, think IBM, Oracle and CA. Even dying businesses have a half life in their maintenance phase that is measurable. Think Novell, zero in new licenses, 500 mil in maintenance, or think CORBA--people will be using that stuff for another ten years at least. Estimate the present value of the future streams until they decrease to zero, and you have what the business install base is worth to you. Any discount (or future growth) from that is free money.
But selling BEAS is going to be hard. Founders can be notoriously difficult to dislodge :) In this case, they've got that crazy car-racing Chinese dude who won't let go. This is the guy who told an acquaintance that he believed I was going to physically harm him, this coming from the guy who brags about being such an ANIMAL that he has to be driven around by a lackey so he won't harm himself...That is probably why Icahn are talking about proposing their own directors for the board.
What doesn't gel for me, in reading the coverage, is Icahn accusing BEA's management of actively avoiding a sale. Is that truly the case? Is there an outstanding offer from Larry that Alfred is doggedly refusing? Maybe Icahn's team knows something we don't. It's possible, but I doubt it. Or, maybe Icahn figured they weren't going out on a limb since BEAS has been rumored to be on the block many-many-many times over the past few years and nothing has happened.
The recent price bump is not going to help. Last I heard Oracle believed they could take away most of BEA's installed base by investing a fraction of the $5b it would take to buy it. Sure it is a cocky approach and one that will take time and could backfire badly. Remember, however, Larry is the lunatic who went after Linux all by himself, BEA he will do before lunch. He'll fuck up a deal just for the fun of it.
At the end of the day, with the press coverage, Icahn & Co. got a 5% gain on their money already. True, an acquisition premium can go as high as 30%. But a 5% jump is already a 5% jump. I don't know what I don't know, but from the outside, it looks like they could run it up 15% on PR alone. At that point, since a white knight buyer who's going to swallow a 30% premium on BEAS' existing market cap is unlikely, they should count their winnings and walk away from the table.
Then again, I am not in the business of investor activism.
From MarketWatch:
Icahn, known for forcefully pushing an agenda at companies where he acquires ownership, disclosed his stake in a filing with the Securities and Exchange Commission. In the filing, he suggested that BEA Systems should put itself up for sale.
"A sale of the Issuer [BEA Systems] to a strategic acquirer will maximize the price of the shares," Icahn said in the filing, adding that he intends "to seek to meet with management of the Issuer to discuss the potential for such a transaction, as well as the Issuer's business and operations generally."
Shares of BEA Systems rose 57 cents to $13.32 before the market's close.
Icahn also notes in the filing that San Jose, Calif.-based BEA Systems has not held an annual shareholder meeting in over a year. Icahn "may seek to have such a meeting held and may also seek to nominate individuals for election as directors of the Issuer," according to the filing.
Icahn tends to seek out companies with promising assets that have nonetheless encountered difficulties. He is best known for taking high-profile stakes in companies such as Imclone Systems, and more recently mobile phone company Motorola Inc., where he unsuccessfully sought a seat on the company's board of directors earlier this year after acquiring a large number of shares.
Investor activists identify targets who they believe hold a lot of potential value, that has not been realized. Reasons may include lack of governance by ineffective board, mediocre and complacent management team, wrong or poorly executed strategy, whatever. They acquire a significant stake in the company and try to bring about the change they believe is needed.
BEA's shares are up 5% on the news. Which, for Icahn & Co, amounts to a cool $20m, not bad for a month's work. That's a real business model, one with high margins. I bet most of their operations are PR, IR, research.
What do they have on BEA then? Well frankly, nothing new... which is also probably the strength of their case. They reason that because of consolidation, and pressure from competition, their business model is profoundly fucked at a sales and marketing level. Hey, don't look at me or my friends at JBoss. We have been saying this since, oh, 2001. Icahn & Co. believe BEA's assets would be better exploited by a "strategic" acquirer.
I kind of agree. Selling BEA is probably the right thing to do. As a standalone entity, carrying all the operational cost of marketing and selling proprietary software becomes increasingly cumbersome. That fact alone fuels the consolidation fire. It also points to one of the main advantages for the OSS business model: lower cost of customer acquisition.
From a buyer's perspective, consolidating subscription revenue streams is a tried and true business model of growth, think IBM, Oracle and CA. Even dying businesses have a half life in their maintenance phase that is measurable. Think Novell, zero in new licenses, 500 mil in maintenance, or think CORBA--people will be using that stuff for another ten years at least. Estimate the present value of the future streams until they decrease to zero, and you have what the business install base is worth to you. Any discount (or future growth) from that is free money.
But selling BEAS is going to be hard. Founders can be notoriously difficult to dislodge :) In this case, they've got that crazy car-racing Chinese dude who won't let go. This is the guy who told an acquaintance that he believed I was going to physically harm him, this coming from the guy who brags about being such an ANIMAL that he has to be driven around by a lackey so he won't harm himself...That is probably why Icahn are talking about proposing their own directors for the board.
What doesn't gel for me, in reading the coverage, is Icahn accusing BEA's management of actively avoiding a sale. Is that truly the case? Is there an outstanding offer from Larry that Alfred is doggedly refusing? Maybe Icahn's team knows something we don't. It's possible, but I doubt it. Or, maybe Icahn figured they weren't going out on a limb since BEAS has been rumored to be on the block many-many-many times over the past few years and nothing has happened.
The recent price bump is not going to help. Last I heard Oracle believed they could take away most of BEA's installed base by investing a fraction of the $5b it would take to buy it. Sure it is a cocky approach and one that will take time and could backfire badly. Remember, however, Larry is the lunatic who went after Linux all by himself, BEA he will do before lunch. He'll fuck up a deal just for the fun of it.
At the end of the day, with the press coverage, Icahn & Co. got a 5% gain on their money already. True, an acquisition premium can go as high as 30%. But a 5% jump is already a 5% jump. I don't know what I don't know, but from the outside, it looks like they could run it up 15% on PR alone. At that point, since a white knight buyer who's going to swallow a 30% premium on BEAS' existing market cap is unlikely, they should count their winnings and walk away from the table.
Then again, I am not in the business of investor activism.
Thursday, September 13, 2007
SUNW to JAVA and Behavioral finance.
John Authers in the FT this morning has an excellent editorial on they psychology of ticker symbol names.
I don't know, the trick didn't work too well for Red Hat, they went from RHAT to RHT. True the first one rolls off the tongue nicely.
Why do some stocks do better than others? There can be many reasons but one, it appears, could be a change to a new and catchier ticker symbol.
On August 24, Sun Microsystems announced that it was changing its ticker from SUNW to JAVA - a catchy name that ties in with its history of developing Java technology.
Since then, it has outperformed the S&P 500 by more than 15 per cent and has outperformed the tech sector.
There are other examples. Since August of last year, Big Lots, the discount retailer, is up more tahn 60 per cent - far in excess of the market. OVer the previous decade, its stock had declined: but then it changed its ticker from BLI to BIG.
Academic research confirms that there is a pattern. A study of flotations on the New York Stock Exchange by Adam Alter and Daniel Oppenheimer, of Princeton University, shows that stocks whose tickers could be pronounced as a word beat stocks with unpronounceable tickers for up to a year after flotation, by a small but statistically significant margin.
Perhaps this expalins why an agribusiness exchange-traded fund launched last week opted for the ticker symbol, MOO
Paul Hickey, of Bespoke investment, suggests executives at Sun might also have read the Princeton research.
None of this is surprising to followers of behavioural finance, which substitutes psychological insights for economists' assumption that people are rational. When bombarded with complex information, it is human nature to look for short cuts. This, in turn, offers the opportunity for profit.
As Richard Thaler, the University of Chicago academic now regarded as a founder of behavioural finance, once put it: "People are not blithering idiots but they are a long way from hyperrational automatons."
I don't know, the trick didn't work too well for Red Hat, they went from RHAT to RHT. True the first one rolls off the tongue nicely.
Tuesday, September 11, 2007
TF3: All Hail Tony Wilson!
Click here for Podcast running time: 26 min.
(Ableton timeline is above)
Tony Wilson passed away earlier this summer due to complications from Cancer. Too much partying did leave a toll on the man. As covered in a previous blog entry, Tony Wilson was the boss of Factory Records and owned the mythical “Hacienda” in Manchester, UK.
In more ways than one, then, him and the “24 hour party people” cohorts gave birth to EU’s techno and house movement riding on the music that was coming out of Detroit (techno) and Chicago (house).
I dedicate this to Tony Wilson by trying to showcase some of the old Joy Division pioneering work and exploring the indie/electro-pop/post-punk sounds of today.
Putting this together was a bit like working on a puzzle. It was fun. I spend countless hours (>20-30) on this TF set. This “excercice de style” starts with the mandate to mix 3 Joy Division classics: Transmission, Love and Control with modern music. I started there, looked for harmonic matches in the bpm range (140), and just started mixing from there.
Playlist:
1- Transmission, Joy Division, 1979
Wikipedia entry:
“Transmission" was a single by post-punk band Joy Division, released on Factory Records November 1979. It is also seen in the film 24 Hour Party People in which Ian Curtis has an epileptic attack on stage.
In May 2007, NME magazine placed "Transmission" at number 20 in its list of the 50 Greatest Indie Anthems Ever, one place below "Love Will Tear Us Apart".”
I really like this track, so do my 4 year olds that run around chorusing “Dance, Dance, Dance to the Radio!”. The track is about 30 years old but still sounds very avant-garde, garage style. For rythm support I mix the second track, take a walk, with a typical fast detroit techno beat. The sound is superb (Martin Hannett, producer) the melody engaging and with ‘structural support’ from the moderns, this particular version could even pass off as a remix.
“Listen to the silence, let it ring on.
Eyes, dark grey lenses frightened of the sun.
We would have a fine time living in the night,
Left to blind destruction,
Waiting for our sight.”
I think this passage sounds new when overlaid on techno.
2- Take a Walk, DJ Bone, 2007
This is modern and “theoretical” Detroit techno. I am a huge fan of DJ Bone’s mix work, actually I prefer his mixing to his somewhat minimalist producing. He is the “keeper of the flame” when it comes to that Detroit Techno sound.
His latest mix album, “Parts Unknown III”, complete with flying saucer aliens on the art cover is a fantastic showcase of the underground sound that still thrives in Detroit. As mentioned above, I include the track here as “rythmical support” for Transmission. Transmission is getting long in the tooth when it comes to the drums, I think the drummer of Joy was, like, gasp, a human and all.
3- Weather Girl, Shiny Toy Guns, 2007
I truly like this track. This is modern electro-pop at its best. My younger sister, Carmela, turned me on to this this summer and I immediately liked it. Apparently I heard this morning from Nathalie’s assistant that it is featured in the latest motorola Raz-R commercials. That’s money!
If you keep in mind that Tony Wilson was a TV presenter, just like this “weather girl” here on TV, the following lyrics are eerily appropriate (except tony was a man :)
Girlfriend...I really need you
Don't go
Girlfriend...I really miss you
Don't go
Weather girl where's your forecast?
Set the signal
Raining fire from the angels
Through the eye of a needle
Making moves making stars
Falling faster than the start
Of the end of the world
You're the breaking girl
Channel X channel 7
Super static television
We're waiting for
The first broadcast from you
You'll never go too far
There's no stopping the show
With your pretty pink bow
Where did you go?
4- City, Lo-Fi-Fnk, “Punks jump up” remix, 2007.
Still in the “indie-electro-pop” category, here is lo-fi-fnk (pronounced Low-fi-funk?). This was released this summer. I heard this on a mix-mag compilation last month. I immediately loved the energy. This is a manic track, a "teen energy" track. 140 bpm is the natural rythm. Also, “punks jump up!” I love the name, how appropriate.
5- I would die 4 U, Prince, 1985.
Another timeless. Plays for 30s by itself, bridging back to Joy Division. Melodies overlap nicely here.
6- Love will tear us apart, Joy Division,1980
From wikipedia entry:
Love Will Tear Us Apart" is the best known song by the band Joy Division. The lyrics were written and sung by the band's vocalist, Ian Curtis, who committed suicide a month after the song was released in April 1980.”
I love this song of course but by now I am a little bit “joyed-out”... too many words :)
7- She’s lost control, Joy Division, 1978
Supposedly Ian curtis here is talking about his own epilepsy.
This is Area 51 as far as I am concerned. Very alien sounding. Out-there type of melody.
8- Protecting my Hive, UR, 2003
Alright, at this point, I just went back for a treat. Straight back to detroit techno with 2 tracks from the mythical “Underground Resistance” (gotta love the name).
When I grew up in Paris, listening to the radio, we didn’t speak english and so we couldn’t give a rat’s ass about the lyrics, to us it was all melody. The way people talked was part of the melody. If you listen to Daft Punk and the whole ‘french house’ movement you hear some of this at work. All music was supposed to sound like ‘wah-wah-wonk-wonk’ because we didn't speak english.
This particular track I caught on a Underground Resistance (UR) compilation a couple of years ago. I call it the “ta-ta-ro” song, because that is what it sounds to me, like a japanese bee protecting its hive. I really like the actual mix it came from, and tried to capture the intensity, so I copied it “verbatim” from that compilation. I was lazy but it ended up being a lot of work.
9- Black Strategy, DJ Dex, UR, 2003
On the original UR compilation, it was called “Prayer Stick”. Another quirky name, they really add something to the mix, don’t they?. In any case I couldn’t find that particular remix for the longest time, I just didn’t have the right name. Also the original clocks at jam like 120 bpm. At 140, it is a different track, one with renewed intensity. I gotta admit, on these last three, this is me having fun for me.
10- Fill 15, Speedy J, 1993
Speedy J is one of my all-time favorite techno artists. This Netherlands native wrote the seminal “pepper” in 1993, I remember walking through MIT with this song literally on a tape loop and I listened to it until the tape wore out. He then went completely crazy, I will showcase “Pannik” one day. Maybe, just like Tony Wilson and his partying, eventually “she’s lost control”.
Remember we love you, Tony Wilson!
Thursday, September 6, 2007
Houston, We have a central-bank-run!
Judging by the comments, it seems many of you share my interest in understanding the recent economic news, at least Juha does. So I will continue covering that.
Yesterday, my brother Carlos, who works for BNP in Europe sent me this story: Apparently we are seeing a dumping of US related assets by what is speculated to be... the Chinese..
Forget the computer attacks, Asia's sovereign funds dumping US assets would have a real impact on the economy.
Credit and liquidity crises are not new and, when they turn bad, they turn bad. In 1929, the liquidity scare sparked a bank run. Banks didn't have enough cash and were defaulting, accelerating the mad dash and "bank-run" to get your money out while there was still liquidity. Then, the real economy wound up with no credit, and we all know the sad story from there.
2007 isn't like 1929. It isn't an "end-consumer" bank run. You and I are not going to the corner bank to take our savings out. Our confidence in the markets isn't shaken to that core. People are not freaking out yet. Even the equity markets have recaptured most of their summer losses. However, it would be a mistake to discount the close relationship between the equity and debt markets.
And, right now, the confidence in the credit markets seems seriously shaken. Already heads are rolling at credit rating agencies. Banks in Germany are defaulting. The heads are calling for "transparency in accounting" and "pricing balance sheets to market," per yesterday's FT. Meanwhile, the constipated credit markets are still not pricing. In other words, no one knows what the damage is and, more alarmingly, no one wants to know what the damage is.
So the subprime mess has gone nuclear, Chernobyl style, with fallout still to be determined. Meanwhile, the good, if edgy, mood prevails. Hedge funds are raising money, shrugging off their losses and appealing to our greed by saying: "Look, blood on the streets! Don't you want some?" The Quants' models are being re-tooled with a technological zeal that must dwarf the human genome project. Until the new math predictions come out, old skool is back in on the street. Experience is in vogue and experience with a math background says you are sexy. Period.
To be fair, reasons to remain optimistic include small data points such as global growth (+95% in a Chinese index for the year!)and the fact no one wants to see America Inc. default, not the EU, not Asia and certainly not the US of A.
But what are the police doing? The Fed is engaged in a game of "chicken" with Wall Street. The debate is raging over what the proper role for the Fed should be. From a distance, it looks something like:
The Feds: "We won't bail you out"
The Street: "Oh yes you will"
The Feds: "Oh no we won't, wink-wink,"
...effectively setting the futures market bet on "The Fed will cut interest rates."
But many are not so convinced. The Fed's main tool is interest rates, which is a rather blunt tool and many people point out that there is a limit to what monetary policy can achieve in this particular crisis.
Short of buying the debt and effectively setting a clearance price, the Fed is not helping the markets set a price for many of the debt assets sitting on balance sheets. Worse, as mentioned above, many market participants are actively avoiding price discovery for fear of establishing a market price that would be to their disadvantage. Meanwhile the Chinese are dumping assets? Are they the first ones to say "Gimme my money?"
Will Wall Street pay the price? Well, part of it, as balance sheets of the financial players lose their value due to a market repricing of the paper...if and when it happens.
Many point the fingers to Wall Street and argue that Wall Street's greed is the culprit for the subprime mess: burn them and their fancypants mechanisms for repackaging debt! But, frankly, aside from those who originate the loans, Wall Street was just spreading the risk not adding to it. They were a vehicle of risk, not a source. Arguing whether they add to stability or instability by spreading the risk is an academic discussion. There is, however, a certain Robin Hood morality to this mess by having the Hedgies funding the 'hoods.
But really, all of America participated in the debt binge. Cash-out refinancing of houses turns out to be half of what is considered subprime debt, I read somewhere. If that is the case, that right there is a straight link to the economic jugular and a path for the crisis to spread over the next 18 mos. Mainstream America will stop treating its real-estate as an ATM. It is a good thing, but one that may impact growth of end-consumption.
Many on Wall Street point out that the aftermath of the US debt binge was quietly supported by the political ambition of "Ownership America". Much like Communist Russia, it is an ideological place where everyone owns a house. So, fingers point back at the Fed, at Greenspan, and, gasp, at the complacent and slightly goofy administration in Washington. If the damage was politically underwritten, then it is fair that the bill fall back on the lap of the US tax payers. The morality here is that the ideology had economic consequences that now have to be paid for.
Hmmmh, I wonder what the future holds,
marcf
Yesterday, my brother Carlos, who works for BNP in Europe sent me this story: Apparently we are seeing a dumping of US related assets by what is speculated to be... the Chinese..
Forget the computer attacks, Asia's sovereign funds dumping US assets would have a real impact on the economy.
Credit and liquidity crises are not new and, when they turn bad, they turn bad. In 1929, the liquidity scare sparked a bank run. Banks didn't have enough cash and were defaulting, accelerating the mad dash and "bank-run" to get your money out while there was still liquidity. Then, the real economy wound up with no credit, and we all know the sad story from there.
2007 isn't like 1929. It isn't an "end-consumer" bank run. You and I are not going to the corner bank to take our savings out. Our confidence in the markets isn't shaken to that core. People are not freaking out yet. Even the equity markets have recaptured most of their summer losses. However, it would be a mistake to discount the close relationship between the equity and debt markets.
And, right now, the confidence in the credit markets seems seriously shaken. Already heads are rolling at credit rating agencies. Banks in Germany are defaulting. The heads are calling for "transparency in accounting" and "pricing balance sheets to market," per yesterday's FT. Meanwhile, the constipated credit markets are still not pricing. In other words, no one knows what the damage is and, more alarmingly, no one wants to know what the damage is.
So the subprime mess has gone nuclear, Chernobyl style, with fallout still to be determined. Meanwhile, the good, if edgy, mood prevails. Hedge funds are raising money, shrugging off their losses and appealing to our greed by saying: "Look, blood on the streets! Don't you want some?" The Quants' models are being re-tooled with a technological zeal that must dwarf the human genome project. Until the new math predictions come out, old skool is back in on the street. Experience is in vogue and experience with a math background says you are sexy. Period.
To be fair, reasons to remain optimistic include small data points such as global growth (+95% in a Chinese index for the year!)and the fact no one wants to see America Inc. default, not the EU, not Asia and certainly not the US of A.
But what are the police doing? The Fed is engaged in a game of "chicken" with Wall Street. The debate is raging over what the proper role for the Fed should be. From a distance, it looks something like:
The Feds: "We won't bail you out"
The Street: "Oh yes you will"
The Feds: "Oh no we won't, wink-wink,"
...effectively setting the futures market bet on "The Fed will cut interest rates."
But many are not so convinced. The Fed's main tool is interest rates, which is a rather blunt tool and many people point out that there is a limit to what monetary policy can achieve in this particular crisis.
Short of buying the debt and effectively setting a clearance price, the Fed is not helping the markets set a price for many of the debt assets sitting on balance sheets. Worse, as mentioned above, many market participants are actively avoiding price discovery for fear of establishing a market price that would be to their disadvantage. Meanwhile the Chinese are dumping assets? Are they the first ones to say "Gimme my money?"
Will Wall Street pay the price? Well, part of it, as balance sheets of the financial players lose their value due to a market repricing of the paper...if and when it happens.
Many point the fingers to Wall Street and argue that Wall Street's greed is the culprit for the subprime mess: burn them and their fancypants mechanisms for repackaging debt! But, frankly, aside from those who originate the loans, Wall Street was just spreading the risk not adding to it. They were a vehicle of risk, not a source. Arguing whether they add to stability or instability by spreading the risk is an academic discussion. There is, however, a certain Robin Hood morality to this mess by having the Hedgies funding the 'hoods.
But really, all of America participated in the debt binge. Cash-out refinancing of houses turns out to be half of what is considered subprime debt, I read somewhere. If that is the case, that right there is a straight link to the economic jugular and a path for the crisis to spread over the next 18 mos. Mainstream America will stop treating its real-estate as an ATM. It is a good thing, but one that may impact growth of end-consumption.
Many on Wall Street point out that the aftermath of the US debt binge was quietly supported by the political ambition of "Ownership America". Much like Communist Russia, it is an ideological place where everyone owns a house. So, fingers point back at the Fed, at Greenspan, and, gasp, at the complacent and slightly goofy administration in Washington. If the damage was politically underwritten, then it is fair that the bill fall back on the lap of the US tax payers. The morality here is that the ideology had economic consequences that now have to be paid for.
Hmmmh, I wonder what the future holds,
marcf
Wednesday, September 5, 2007
Facebook, I don't get it.
When it comes to keeping up with what's in, in social networking technology, I am lost. I rely on my nannies to know what is hot. I call it the tech nanny-dar. If the nannies say it is in, it is in.It started two years ago I noticed that the two nannies we took to Majorca, both in their early 20's couldn't wait to log onto MySpace in their free time. Meanwhile for the younger generation we took this year, it was all "Facebook, Facebook, Facebook!" Clearly MySpace was passé. Stuff for porn-stars and musicians, and, like, really ancient people, like, if you're older than 26 and all.
I tried to remember the first time I had heard about Facebook. Then, I remembered, it was Peter Fenton, one of our VCs. He mentioned it to Nathalie and me back in 2004 over dinner. He was all excited and hyped up on it, probably because Accel had just signed on as their lead investors. At the time, I drew a complete blank. I just didn't get it. I thought it was a passing fad, whose hotness was due to an average user profile closer to Girls Gone Wild rather than your typical IT software developer. The very fact that I thought software plumbing was more exciting than Mindy from Chico State, whose interests are "beer pong, beer pong and weed", is probably why I didn't get it in the first place...
Recently Facebook is trying to position itself in the application infrastructure space, closer to my middleware background. According to the founder of Facebook, it is not "just" a social networking site anymore, it is this whole, uh, big, uh, unified, new API thing. You know it's a platform for the future, the web operating system, and whatnot. Hmmmh, where have I heard that before... First of all I always think "uh oh!" when companies start claiming they are no longer "just" what they actually are. That just tells me they do not know what they are anymore. Second, I have seen enough of these to not get too excited quite yet .
Maybe the kid has an API for modern applications, maybe... I haven't looked at it. Remember, I don't really give a shit. But Billionaire Marc has. From Marc Andreessen's blog, it appears that the APIs from Facebook have gone from "hip" to "passe" in a matter of 4 weeks. Obviously the internet's middleware layer would have to show more stability than that for it to be considered "the internet's middleware layer"... no?
Whether Facebook's APIs are indeed real or not is somewhat irrelevant. Facebook is a phenomenon, a phenomenom that has already attracted a Billion dollar offer from the likes of Yahoo! The 20 something founder and CEO turned down the offer.
My instinct would be to "take the money!" and come to think of it, it would also be my advice even without knowing anything about the company or the market... I don't know, turning down $1Bill... is a ballsy move. I wouldn't do it.
Whether the company is worth 1, 2, 4 bill or frankly $40 mill, selling your company is the difference between a personal net worth of zero and a lot of money. That binary step is a lot of mental pressure. Nobody wants to wake up when they are 40, thinking "I coulda, shoulda".
Meanwhile the latest from the nanny-dar is that the girls have graduated and have started cleaning up their Facebook walls, what with finding their first jobs, looking more professional, and what not. And so I wonder, what will the new-new generation nanny-dar say next summer?
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