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Comment Re:All according to plan (Score 5, Insightful) 256

This benefits all shareholders, of which the Waltons are the largest.

Do you own index or mutual funds in a 401(k) account to fund your retirement? If yes, the "blood" is on your hands, too. You proportionally benefit as much as the Waltons when jobs are cut and money is freed up for other purposes, including returning it to the people who own the enterprise.

Anyone here a California public employee counting on a pension? How do you think CalPERS is going to achieve those rosy 7% returns to fund the payments to future retirees? Dividends, share repurchases, and growth from allocating retained earnings -- the shareholders own this money, after all -- in value-additive projects. Cutting the fat is one way of freeing up additional free cash for these purposes.

I think it's interesting how millions of Americans are shareholders who benefit from these moves as much as the fat cats.

Comment Re:Wage pressure (Score 1) 256

Yes, the benevolent, all-knowing central planners have signaled the following over the past three decades: the central banks will collude to keep interest rates extremely low, and minimum wages will continue to increase in many jurisdictions. After all, these planners are more qualified than market participants to determine who should get paid what.

Regardless of one's political inclinations, I find it interesting how these factors (along with the ones you mentioned) interact to move the goalposts, i.e., when automation makes financial sense. Money is cheap and labor, especially at the low end, is comparatively expensive, assuming it's on the books. (To your list I would also add licensing requirements for all sorts of professions and trades.) But at the end of the day, if you use the power of the state to make it difficult to hire, employ, and fire people, enterprises will just figure out how to avoid employing them in the fist place, starting with the bottom of the ladder first. Then everyone can be on the dole and vote for the politicians that keep the handouts flowing!

Comment Re:Nope, and missing the point (Score 3, Insightful) 77

You're absolutely correct. Bemoaning the loss of these "jobs" is like fretting that indoor plumbing will put the "night soil" collection crew out of business. Inane busywork is not a particularly lofty goal for any wise civilization.

Besides, think about how preposterous and decadent pizza delivery is: you pay someone $X/hour to deliver a 1 lb package in a vehicle that weighs ~3000 pounds and is powered by oil, a finite resource that took literally millions of years for nature to create. In Critical Path, Bucky Fuller argued that one gallon of gasoline should really cost $1 million, given the time and energy (solar, geothermal) required to create petroleum [1].

Entrepreneurship is about discovering and eliminating inefficiencies in the economy's production structure as much as creating or inventing Shiny New Things. In fact, efficiency improvements are paramount if we want to support 7+ billion human beings on this planet.


Comment Re:Kellogg had a 30-hour work week in 1930s (Score 1) 193

Thanks for sharing. Just from reading about that era, I picked up vibes that shortening the work week was taken seriously by a lot of eminent people, but had no idea about that bill.

One of the reasons I enjoy studying history is that you see lots of sensible ideas and movements that were somehow lost or abandoned along the way. For example, Colonial America was probably the most literate society in history up to that point, and without a massive education bureaucracy. That's interesting to me -- how can we learn from that experience and outcome? How can we educate people without an Education System per se? You don't want to idolize the past or fall into Lost Cause-type romanticism, but you also don't want to discard it, either.

Comment Kellogg had a 30-hour work week in 1930s (Score 5, Interesting) 193

There's an interesting book called Kellogg's Six Hour Day by Hunnicutt. Here's the synopsis:

"Kellogg's six-hour day was the pinnacle of a hundred-year process that cut working time virtually in half. Kellogg Management, propelled by a vision of Liberation Capitalism, insisted that six hours would revolutionize society by shifting the balance of time from work to leisure--from economic concerns to the challenge of freedom."

The employees grandfathered into the 30-hour week stayed on it until they retired in the 1980s. A 30-hour week gave employees more time for clubs, gardening, sports, family, etc. When you think about how wealthy we are in, say, energetic terms (useful work extracted from an ox vs cubic meter of natural gas), it's amazing how much time and capital we spend on destructive bullshit like sitting in traffic or paying people to do our taxes because the system is too complicated (we're paying a tax on paying taxes ffs). Just unbelievable how needlessly dumb the world is in light of automation, nuclear power, blah, blah, blah.

The ancient Greeks viewed labor as a necessary evil that got in the way of more enlightened pursuits [1]. This is not to say they condoned laziness, but TPS reports, patent lawsuits, and $ModernBullshit are not the highest forms of civilization. Why we focus on metrics like GDP -- which in no way accounts for quality, or whether the "work" should even be done -- is absolutely beyond me. In the end, complex, industrial civilization is still relatively new compared to the species' time on the planet, so we're still trying to figure this out.

[1] =

Comment Re:The losing side must automatically pay (Score 2) 242

This is the chief argument against complex regulations, however well-intentioned. The perfect example is Dodd-Frank here in the United States.

Citibank's CEO noted that Dodd-Frank would "widen the moat" -- that is, give them a competitive advantage because Citibank's large enough to pay lawyers and compliance staff without much impact to the bottom line.

Regional banks -- and we need them to thrive because economic centralization is as bad or worse than political centralization -- have to comply with this regulation too, only it's proportionally more costly to them. Here's what the CEO of M&T Bank in Buffalo, NY said about it:

"Rapidly changing technology in combination with the need for continued expenditure on compliance infrastructure is creating a dual challenge for regional banks. ... Traditional banks are increasingly caught in a vise—they cannot afford to shortchange investment in the mobile and online banking technologies that their clients want, as well as in the cybersecurity that will keep their customers’ information and assets safe from global criminals. Yet banks also have to simultaneously bear the higher regulatory and compliance expenses and decreased revenues brought about by legislation and regulation meant to address the ills of the last crisis. The largest banks, on the other hand, are able to take advantage of their massive size to shrug off the impact of compliance costs, fines and penalties, and still have the wherewithal to invest in the latest technologies. As a result, they are increasingly gaining a competitive advantage over these smaller banks."

There's a provocative and interesting book called The Triumph of Conservatism: A Reinterpretation of American History by Kolko, a socialist. His thesis is that the famous "progressive" regulations of the early 1900s benefited large, established corporations -- essentially they used Congress to create favorable regulatory regimes to stifle competition and upstarts.

This is why you should be extremely skeptical of dense "regulations" drafted by lobbyists working for entrenched companies. If you benefit, it's usually by accident.

Comment Re:Definition of a broken system. (Score 1) 242

Why not? The central bank cartel is conjuring money out of thin air and suppressing interest rates, so "investors" have to seek returns *somewhere*. We tried make-believe internet companies, housing, bonds, commodities, so why not this is, too? Let's also turn them into securities, sell them to public pension funds (which face a massive funding gap and thus desperately need returns), and then have the government bail us out when the whole thing explodes, because moral hazard is missing from your original idea. MURICA!

All snark aside, I'm counting on the computer scientists and engineers to save us from the legal carter, which, like banks, exists to serve its members at the expense of productive society. Hence the bloated tax codes, legal codes, etc. Algorithms seem like the best way to beat the useless rent-seeking bastards at their own game.

Comment No surprise - same erorrs in finance & ops (Score 2) 349

In the year 2016, a disturbing amount of human activity is run through Excel instead of proper databases.

A similar study from 2009 tested for errors in various operational spreadsheets and concluded, "Our results confirm the general belief among those who have studied spreadsheets that errors are commonplace." The Financial Times commented on the prevalence of spreadsheet errors in business, saying it's probably a function of training and organizational culture.

I've heard from a few salespeople in the software industry that their biggest competitor in the SMB space isn't $BigCRMCorp, but Excel spreadsheets that have acreted over the years.

Comment Batten down the hatches - a bubble's bout to burst (Score 1, Interesting) 177

The central banks of the world are conjuring money out of thin air and using it to buy stocks, which are ownership claims on real businesses with real assets, made of real materials in a universe dominated by the laws of thermodynamics [1]. Think about this absurdity and the implications for holders of fiat currency.

Therefore, the marginal buyer is increasingly a central bank that can create as much money as it wants, consequences be damned. When this ends, I suspect equities, like most other asset classes, will have a long fall back to reality.

Concurrently, interest rates are artificially low, leading to all sorts of chicanery and malinvestments. Shares of dividend-paying blue chips, such as Microsoft, are bid higher and higher as income-seeking investors search for yield wherever they can. However, the price you pay for future cash flows absolutely matters and determines your return; at current valuations, I suspect there will be a lot of tears for equity holders.

Between the third central bank-induced financial bubble in less than 20 years and Trump/Clinton, I'm starting to think I'm on a bizarro Earth 2 or something.


Comment Re:Up to date? (Score 3, Informative) 332

Lots of people are incapable of thinking like the owner of a business, and are therefore surprised when things happen, despite it being obvious or inevitable from the perspective of a shrewd businessman. As a corollary, employees of public companies should get in the habit of reading financial disclosures and earnings call transcripts -- management often telegraphs what they're going to do, including outsourcing or layoffs. This puts you in the position of being one of the first passengers to learn that the Titanic has struck an iceberg, so make your way to the lifeboats before the rush.

A few months ago, there was an article about how the IT department at a car rental company was outsourced. Not that I'm glad or anything, but someone paying attention should *never* make a career out of working in the back office of a business like that. The car rental business is tough enough as it is, but Uber/Lyft have added additional pressure.

I work in a compliance function, so "infrastructure as code," Docker, and the rest of that shit make my life so much easier since we can automate large chunks of our security controls and audit work. That's progress. As an owner, having fewer admin grunts means more money to reinvest in higher-return activities (which as an employee you can help drive, if you're so inclined) and/or return to shareholders, who, after all, own the damn business and expect something from it.

But this hard-nosed perspective, for some reason, strikes people as cruel, or you're viewed as the villain or whatever. It's just how the world works and you have to adapt accordingly, even if it's annoying and extra work at times.

Comment Re:Blame Craigslist (Score 5, Interesting) 213

Yep, the whippersnappers probably don't realize how profitable local newspapers used to be. Indeed, they were one of Buffett's favorite investments in the early days. From a 1977 WSJ article: "Warren likens owning a monopoly or market-dominant newspaper to owning an unregulated toll bridge. You have relative freedom to increase rates when and as much as you want." [1] When the economics are like that, you can afford prestige journalism and professional reporters.

The WSJ article also notes how Buffett made a killing buying the Washington Post Co. at a significant discount to book value; the company's huge investment portfolio wasn't factored into the stock price at the time. Fast forward several decades, and now Bezos owns the actual newspaper and WaPo brand.

While there are legitimate *technology* companies in Silicon Valley, the ad-delivery/social media "it's 1999 all over again!" outfits for some reason get all the attention. Looking at some of the large employers in the area, you realize a huge number of people earn a paycheck from firms that sell ads, make CRM software, and run social media services (in the red quarter after quarter). It's sort of like the West Coast Wall Street: too many overpaid assholes doing stuff of no useful value to human civilization. (And both groups are enabled by the torrent of easy money from the central banks, which makes all sorts of bullshit possible.)


Comment Got to try something (Score 1) 98

Retail is a brutal industry. Just look at retailers in the U.S. over the last century -- it's like the rise and fall of great empires. Again and again, dominant incumbents are unable or unwilling to innovate and stay ahead...or they blow money on expensive but useless projects like the Sears Tower.

While I don't follow Walmart closely, a few business sources I read summarized the company's recent strategy as cost-cutting and aggressive inventory management (keep fewer items in-store) to generate more free cash for share repurchases.

Share repurchases can absolutely be a productive use of free cash relative to other options, but Walmart needed to aggressively pursue ecommerce and other innovations *years* ago. Some ideas: improved self-checkout, better in-store navigation, easy way to order shit automatically and have it ready for pickup in-store, RFID tags, etc. Creating a hassle-free and brutally efficient way for customers to buy boring shit at good prices -- and defending that position against Amazon and the like -- seems like a better use of shareholder dollars than share repurchases, or Johnny-come-lately-oh-shit-let's-overpay-to-get-something-going acquisitions like At least they're trying something.

Walmart already has the hard parts in place: stores, logistics, leverage over suppliers. But they couldn't handle the pile of front-end code and in-store operations? (And by operations I mean designing stores for order pickup. Reflecting on my visits to Walmart, there's nothing that screams, "Hey, you can order shit online and go to this clearly-marked area in the front of the store for pickup!")

The strategy of aggressive share repurchases seems like slow capitulation in an industry like retail, especially when cost-cutting creates shitty in-store experiences for customers. I used to shop at Walmart, but in recent years the lines have ballooned and there's a non-trivial chance an item I want won't be on the shelf. WHAT'S THE POINT OF B&M STORES IF YOU DON'T KEEP SHIT ON-HAND? Simply put, any dollar savings I get from shopping there are wiped out by the cost in sanity and time.

Comment Re:What's the point of Twitter? (Score 1) 637

Exactly. The current SaaS/social media/ bubble is apparent when you examine these companies. In one ear you hear about how "cloud" makes IT operations cheaper. But then a glorified ad delivery platform like Twitter still burns through cash at alarming rates. The business has no moat -- it's a fad at best -- and I think everyone from Google to Twitter will be stung once the impact of widespread adblocking is fully priced into ad rates.

(My gut tells me a correction in the spyware/ad tracking/clickbait ecosystem/cesspool is overdue. This could be recency bias, though: I helped two of my older relatives install uBlock Origin last week. Google has the brains and balance sheet to weather a correction -- Twitter doesn't. Outside of ads, Twitter's only other source of revenue is "analytics," i.e., selling your data to others. But even if the "adblocking effect" doesn't materialize, Twitter probably couldn't survive a drop in ad spend during a recession. My guess is scarce ad dollars are more productively deployed outside of Twitter; as Warren Buffett says, when the tide rolls out we see who's been swimming naked.)

An enterprise is value-destructive to owners if all the sales, R&D, G&A, etc. never amounts to free cash for profitable reinvestment in the business or disbursement to owners in the form of dividends and/or share buybacks. Add to that continued dilution of shareholders and IMHO you're looking at one poorly-run enterprise.

That being said, if an acquirer can bolt the Twitter service onto its existing sales and ops teams, it can probably generate real free cash. Working at Twitter as a peon seems like standing on thin ice -- an acquirer thinking about turning Twitter into a cash flow engine will probably fire 2/3 of the employees, consolidate data centers, etc.

Root cause analysis: central banks and their terrible monetary policies make money too cheap and easy, which leads to grotesque misallocation of resources, bubbles, and painful implosions. Instead letting the market constantly course correct, we effectively subsidize bullshit for a few years, feel good about it, but then have everything explode catastrophically.

Comment What's the point of Twitter? (Score 2) 637

Can someone explain to this ol' fogey why anyone wants to own Twitter at $18/share?

A cursory look at the company's recent financials shows it's still losing money. The number of shares outstanding is also increasing, so even if the company manages to generate (real) free cash at some point, you're entitled to a smaller share of it. The entire thing is bizarre -- it's not like Twitter's in a capital-intensive business like aluminum or shipbuilding.

I wouldn't be surprised if Twitter is sold in the not-too-distant future. I suspect a grown-up management team could probably make Twitter profitably generate cash.

Comment Corporate Governance (Score 2) 176

Public companies, like republics, end up with the leaders they deserve.

I think the more interesting question is, "Why do boards of directors hire and overpay mediocre CEOs who actively destroy shareholder value?" And why do the shareholders elect board members who do this?

A strong antidote is to a) pay board members minimal cash compensation for their duties and b) ensure board members have a significant portion of their net worth invested in the company they oversee. This rather simply aligns board members’ interests with that of other shareholders. Sitting on a board should not be a cushy job -- it should be a privilege to oversee the management team responsible for making you richer and richer. If enough board members own chunks of the company, then bring in "outsiders" for their perspectives, but always make sure the board collectively has enough skin in the game.

With respect to compensation, I frequently see executive pay associated with bullshitty metrics that are not tied to owners’ total returns or increasing the enterprise’s per-share intrinsic value. When executives are compensated with stock, the cost to owners (share dilution) is frequently obfuscated in the financial reports, or considered income through the use of legal but creative accounting. (Adobe and others were notorious for this chicanery before the dot-com bubble imploded.)

When I consider purchasing shares, I always look at "corporate governance," CEO attitude, and board composition as important qualitative indicators of quality. Frankly I’m shocked by the number of publicly traded enterprises that retain significant earnings, and then piss the money away on failed acquisitions, ostentatious headquarters or skyscrapers, or, in the case of Bethlehem Steel before the bottom fell out of the industry, three separate corporate golf courses -- one for management, middle management, and employees.

This is one of the reasons I’m fond of dividends: I don’t trust many CEOs to smartly allocate capital to generate satisfactory rates of return. It takes a special sort of person to either sit on cash for extended periods until a truly outstanding opportunity presents itself, or just admit that the enterprise has exhausted sensible options for capital redeployment, so time to bust out the dividends and share repurchases.

The topic of corporate governance seems to be in vogue at the moment. Just last week, several CEOs and asset management firms released an open letter advocating for public companies to adopt "commonsense" governance principles [1]. And the large asset management firms like Vanguard are starting to become more vocal about how the companies they own are managed, if this letter is any indication [2]. Vanguard and other "passive" asset management firms have enough weight (literally trillions of dollars under management) to force change, and boards know it.


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