Biting Off More Than You Can Chew

Posted on by David Wright

Here are two related posts on entrepreneurship.

The second discusses why startups fail. The biggest cause is one that plagues companies everwhere: too much scale too fast. Too much investment before you’re ready.

The first article discusses the reason why this happens:

We’re all plagued by this defect of human nature — thinking we know more than we do — which then causes us to miss opportunities to actually learn something.

And causes us to take opportunities to fail. Learning is boring and hard and embarrassing. You feel stupid, you procrastinate. You probably feel guilty about procrastinating. The smallest things are impossible to figure out.

Then you give up learning and building stuff and just lash out in activity. Bang, you’re dead.

Warning, personal rant directly ahead:

I’m still working on the weekend project and it seems that every time I turn around there’s some other super basic, super simple new thing I don’t understand that takes me forever to figure out.

For example, I’ve been completely hung up for two weeks trying to get a web server going. I have to learn how to configure Apache with Windows. Then php with Windows and Apache. None of it friggen works properly.

TWO WEEKS! And basically nothing to show for it.  Meanwhile, tweaks and improvements on the basic engine of my project languish incomplete.

But the rest works, if barely. This is the bottleneck. This where I need to spend my time.

It is an indescribably frustrating process to not even be able to SET UP my tools, much less learn to use them. I’m looking forward to learning another programming language, actually. It should go much faster this time because I’ve got the basics down fairly well.

But working in the old comfort zone isn’t going to help me, is it.

On China

Posted on by David Wright

Wow, a lot to digest here.

I’m way too tired after 12 hours of driving to think hard enough to sound coherent on that piece. Instead, I’ll just list my biases about China and hopefully have the presence of mind to check back in when I’ve learned more:

  1. China is poorer than Mexico (per capita)
  2. Never take futurists or medium/long term forecasts seriously (as a test, I offer some below)
  3. Talk of China’s GDP in 2030 (or whatever) is ridiculous
  4. China has an economic growth profile that is radically different than any developed country
  5. Therefore China’s economy will undergo a radical change when it approaches developed status (was that a forecast?! Watch it, now!)
  6. Informal economic and information channels are the only reliable ones. (ie Official China is more Kafkaesque than capitalist).
  7. Chinese consumers have thus far accepted a lower standard of living than they ‘earn’ (ie high inflation and a depressed currency)
  8. Nevertheless, Living standards are rising rapidly. This makes folks feel good.
  9. In spite of their lack of control, Incumbent politicians are blamed for economic malaise. The capacity for a bloodless purge, however senseless, is of course democracy’s strength.
  10. China isn’t a democracy.
  11. And booms always end.
  12. Michael Mandel has taught me to (selectively) mistrust productivity stats and GDP figures for the USA. I chuckle at the skeptical feeding frenzy he’d have with China’s data (ie it’s possibly all complete BS and will perhaps have a Greece-style reckoning)
  13. Nevertheless, living standards have recently been rising rapidly. This makes folks feel good.

Hurricane Irene

Posted on by David Wright

I’m watching this situation pretty closely for all kinds of reasons. It’s not often my professional and personal interests coincide.

Best resource, hands down, is Jeff Masters’ blog. The source of all the raw analysis is the National Hurricane Center.

The latest modeling is annoyingly inconclusive.

I’m going to focus on New York, because that’s where I live. (In general I’d say the Carolinas are effed and most of Jersey is in for a beating)

There are three scenarios for New York, all of which seem plausible from that modeling output.

  1. If the storm stays inland and heads over the Pocono mountains, we get some serious flooding and damaged countryside, but nothing too crazy. The storm weakens considerably and the wind dies off.
  2. Toss up over which of the next two is worse: if the storm goes straight across the Carolinas and streaks along the coast, we’ve got a problem in the city. This means that all of the coastal areas (ie the most vulnerable to storm surge) get battered and (AND) the warm water keeps the storm strong. NY will probably get flooded right up to 14th street, I get evacuated from Battery Park City and it takes days for the Subway system to drain.
  3. Door #3 has the storm veer off into the ocean, really really power up and hammer (absolutely clobber) Long Island. This will have the worst wind damage, though Jersey and NYC will probably be spared. Next up is Cape Cod and Nantucket. These probably get a big helping of Hurricane winds, too.

Using this, I’m trying to handicap the models and am having some serious trouble. I’ll probably keep updating this post as the day wears on.

Edit 1:

I keep saying Carolinas, but I really mean North Carolina and Virginia

Edit 2:

Wowee. Jeff Masters gives us lots to think about. A few key points:

  • They eyewall has collapsed, which means higher pressure and a less powerful heat engine. We’re in the endgame, so rapid, massive intensification is unlikely now.
  • Wind shear, hurricane Kryptonite, is moderate (note on pic: red line is direction relative to storm track, I think, and blue is speed) but doesn’t seem to be having a big effect.
  • This sucker is a monster, which means more storm surge, damage potential measured at an eye-popping 5.1/6.
  • Masters gives a 20% chance of topping Manhattan’s flood walls and filling the Subway system with seawater.
  • Wind damage likely won’t be a big deal, now. The heaviest winds are East and out to sea (sorry, Long Island!), but aren’t crazy-strong, just strong.
  • Probability of big winds in NYC has plummeted
  • Get ready for blackouts

Personally, I’m scheduled to fly to Florida tonight for a wedding in the Jacksonville area tomorrow. 20% chance of complete flooding is probably high enough to evacuate and fleeing to the Hurricane’s wake is probably my best bet.

How and in what manner I get back is the trick.

Edit 3:

Well, looks like I’m outta here. From my building management:

The NYC Office of Emergency Management is strongly advising all residents of Battery Park City to evacuate today.  While the evacuation is not mandatory at this time, it seems clear that it will become mandatory at some point today or tomorrow.  Since the MTA is going to shut down at some point tomorrow, we strongly urge everyone to make immediate arrangements to evacuate now.

To JAX!

In Which I Am Sucked Into The Abyss

Posted on by David Wright

Paul Krugman suggests a purely state-run network of hospitals and clinics:

The public option would be required to spend significantly less per risk-adjusted recipient than traditional Medicare. And if it couldn’t provide care that seniors wanted given that restricted budget, it would have no takers and would close.

There are two elements to the strategy: first, that the government run a network of care facilities; and, second, that they be asked to execute the very specific strategy of offering a low-cost alternative. Continue reading In Which I Am Sucked Into The Abyss

John Paulson Bets on Inflation

Posted on by David Wright

I went to a talk today by John Paulson who has a big bet out on gold.

His logic:

1. inflation is related to money supply (proof? He never mentioned Milton Friedman for some reason)

2. Gold is related to inflation

3. Money supply is increasing, therefore gold will go up

I want to look into it some more, but judging by the graphs in his fancy pamphlet here (take my word for it), there wasn’t anything like today’s spike in the money supply during the last gold run up.

And, um, there isn’t any inflation today.

So has something changed?

Again, I want to do a bit of research here but the short answer is… who knows!? Who cares!? He has a gold fund and it’s up 60% or something.

Take your fancy pants ‘analysis’ and go write some blog posts about it, Poindexter. Those boys might even read it on their way to the bank.

“Some Day I’m Going to Start My Own Company” – Douchebag

Posted on by David Wright

Perhaps surprisingly, there is a vibrant startup community in the insurance world. In any sales-driven industry, those who can start a business that locks in a distribution channel get rich.

In insurance, these businesses are called Managing General agents (MGAs). They are to insurers what hedge funds are to pension managers.

Anyway, the part about successful MGA owners making big money isn’t lost on many. Predictably, there’s a multitude of frustrated middle managers harboring a deep desire to put their shingle out and strike it rich.

Easier said than done, of course, but it can serve to salve a beaten down ego for a while.

Obviously, I eagerly count myself among these despondent douchebags.

Interestingly, most MGAs are only barely viable. They typically identify some market micro-segment with only enough scale to make a little money; the rest is hopes and dreams stuff that never comes true (but proven by hockey stick growth targets!). Economists would say price equals marginal cost here, and go to bed happy with the state of the world.

At scale, the insurance market is a commodity business, but at the local level it’s a relationship business. Different skills.

Those with the best view of the big picture are the corporate types and they just aren’t entrepreneur material. Too secure, too much to lose. They overthink and do things like write blogs about entrepreneurs while having started nothing at all in their lives.

The local shark is often a champion salesman but runs out of gas when he runs out of hours in the day to sell. No scale.

When lightning strikes and you get the natural entrepreneur with a solid grasp of the whole thing?

That dude gets rich.

Where’s the Romance?!

Posted on by David Wright

A dose of reality is always nice, but yikes:

It’s hard to capture the linked-to post in an excerpt, and even harder to gut-check yourself through sentences like this (particularly in the context of insight like this):

I don’t care who you are or how strong your ego is, you will have these moments — perhaps a continuous stream of moments — when you can’t take it anymore.

You see, I’m a mild idealist with a deep-seated desire to BUILD SOMETHING. A common sentiment among self-regarding 30-ish professionals with lots of ego and few prospects at the next margin of success.

The thought that taking the plunge into the entrepreneurial deep end is terrifying, risky and impoverishing isn’t pleasant. Most of the time these thoughts are easily swatted away by some ego-insulating doublethink (either: oh, but that wouldn’t happen to ME; or, yeah, but I can handle that shee-it – bring it on!).

But let’s not kid ourselves. What sacrifices is one really willing to make?

Probably fewer than we’d think.

Douchebag Alert!

Posted on by David Wright

Man do I hate this post. Let me count the ways:

Basic Math:

I’d say I correctly broke down how a dollar  of insurance premium gets distributed, but I made two errors. I stand by the main cost being claims and brokerage. I glossed over the breakdown of the rest, though. There’s profits (5%), Reinsurance (5-10%) and internal expenses (5-15%).

Different Reality:

The internal expense portion is massively dominated by one function: regulation. In the US, there are fifty regulators a nationwide carrier needs to cozy up to. FIFTY. Insurers are NOT just pools of capital. They are money + regulation passing machines. That function is pretty resilient to ‘streamlining’.

No Balls:

So why did I decide that the smallest share of premium is the one to automate? The fat is in the brokerage because they have the power over the business.

Facile Business Fantasy (I really hate this part):

‘Silicon Valley’? WTF are they going to do for you? Social networking or cloud computing? You going to improve our process by outsourcing it? The key problem here is that if someone else has an idea that’s great for insurers, they should just start an insurance company. All you’d bring to the table is regulatory expertise and work flow systems. Not very impressive is it?

All the money is in the distribution network. Forget insurance. Find a way to take out the broker and let the insurers play with the regulators.

This is why I was worried about writing more. I start slinging stuff out the door and only later realize it’s shit.