Archive

Monthly Archives: February 2013

Hacking Apprenticeship

February 4, 2013
Business, Economics, Startups
Leave a comment

Great quote about modern age apprenticeship from the book Mastery.  I haven’t read the book but will add it to my ever growing to-read list.

***

Each age tends to create a model of apprenticeship that is suited to the system of production that prevails at the time. In the Middle Ages, during the birth of modern capitalism and the need for quality control, the first apprenticeship system appeared, with its rigidly defined terms. With the advent of the Industrial Revolution, this model of apprenticeship became largely outmoded, but the idea behind it lived on in the form of self-apprenticeship—developing yourself from within a particular field, as Darwin did in biology. This suited the growing individualistic spirit of the time. We are now in the computer age, with computers dominating nearly all aspects of commercial life. Although there are many ways in which this could influence the concept of apprenticeship, it is the hacker approach to programming that may offer the most promising model for this new age.The model goes like this: You want to learn as many skills as possible, following the direction that circumstances lead you to, but only if they are related to your deepest interests. Like a hacker, you value the process of self-discovery and making things that are of the highest quality. You avoid the trap of following one set career path. You are not sure where this will all lead, but you are taking full advantage of the openness of information, all of the knowledge about skills now at our disposal. You see what kind of work suits you and what you want to avoid at all cost. You move by trial and error. This is how you pass your twenties. You are the programmer of this wide-ranging apprenticeship, within the loose constraints of your personal interests.
You are not wandering about because you are afraid of commitment, but because you are expanding your skill base and your possibilities. At a certain point, when you are ready to settle on something, ideas and opportunities will inevitably present themselves to you. When that happens, all of the skills you have accumulated will prove invaluable. You will be the Master at combining them in ways that are unique and suited to your individuality. You may settle on this one place or idea for several years, accumulating in the process even more skills, then move in a slightly different direction when the time is appropriate. In this new age, those who follow a rigid, singular path in their youth often find themselves in a career dead end in their forties, or overwhelmed with boredom. The wide-ranging apprenticeship of your twenties will yield the opposite—expanding possibilities as you get older.

***

Found via Value Investing World

One Way Trigger

February 1, 2013
Culture
Leave a comment

Lyrics and artwork for the latest from The Strokes – One Way Trigger.  Their new album Comedown Machine is dropping in March.  Get excited.

Note: at first I didn’t like this song but it quickly got stuck in my head and grew on me.  Definitely not for everyone but worth a listen.  Starts off like a Nintendo game with Julian hitting some high notes, the break is classic Strokes though.

Music: The Strokes, Artwork: Warren Fu (I think).

Calm Before The Storm?

February 1, 2013
Finance, Investing
Leave a comment

Yesterday Bloomberg ran a great op-ed piece by Dean Curnutt of Macro Risk Advisors called Be Very Afraid of When Fear Disappears From Markets.  Observing the growing complacency in the markets today, he offers a word of warning – mainly that prices are failing to reflect the underlying financial reality and risks.  In other words, prices are too high to offer an investment return sufficient to offset the associated risk.  And why is that?  Well, it’s a complicated answer but there is a group of culprits that stand out: The Federal Reserve / Central Banks of the world.

* * *

Quantitative Easing (QE) In a Nutshell – The price of US Treasuries is being manipulated by the Fed to keep interest rates low.  The Fed buys massive amounts of US Treasuries which drives the price of them up and the interest rate on them down.  This has the effect of driving up prices and lowering interest rates in other assets as well.  This is why you can buy a house with a <4% interest rate (when my Dad bought his first house in the 1980s his interest rate was 16%!).  So, what is a pension fund to do if they can no longer buy 10 Year Treasuries that yield 5-7% interest (they currently yield 1.95%) and they have to grow their fund at 8% just to make ends meet?  That pension fund has to buy riskier assets that promise (but don’t always deliver) higher returns such as stocks or high yield bonds.  This has the effect of raising prices and lowering yields for these assets.  This effect of rising prices is essentially transmitted into every asset there is.

* * *

When risk is “under priced” bad things happen (ex. the dot com bubble of the early 2000s, the housing bubble of 2007, and now government debt).  As we all know the US owes A LOT of money, and generally when someone already owes a lot of money they have a hard time borrowing more money.  If you were lending money to a friend who was already in a lot of debt you’d recognize how risky the loan is and either (i) not loan them the money or (ii) demand a really high interest rate to compensate you for the risk you’re taking.  Not so with the US government.  People keep lending them more and more money at a lower and lower rate (keep in mind when you buy a US Treasury bond you are loaning them govt. money).

How does this end?  Good question, nobody’s sure.  It seems everyone can agree it’s not sustainable.  There used to be  “Bond Vigilantes” that would keep government borrowing in check – if a government started borrowing more than they could afford, the bond market would turn against them and start demanding higher interest rates as opposed to lower interest rates.  The Fed has effectively killed the Bond Vigilantes because nobody wants to fight the Fed.

Because US Government debt is being mispriced (overpriced), that means just about every other asset out there is being mispriced (overpriced).  Paraphrasing the article, “the prices are lying to you”.  So the trillion dollar question is, when does this end?  Nobody knows for sure but the people that can figure it out will make a lot of money at the expense of those who cannot.