Comments (0)

By dottow, February 2, 2010 12:18 pm

Etsy is “your place to buy and sell all things handmade.”  It’s a wildly successful startup that basically open sources the exchange of goods.   I must admit I haven’t spent much time there, but I think it’s a good concept.   Really, though, what’s been tickling my fancy is Umair Haque’s Manifesto for the Next Industrial Revolution.  Umair is basically calling for a revolution in 21st century Capitalism.  I won’t even begin to paraphrase his argument because it wouldn’t be fair to his brilliant writing.  Suffice it to say that if you’re not following Umair, you’re seriously missing out on a brilliant new voice of our generation.

My take on this whole thing is that we’ve moved from a society which bartered and exchanged and, due to physical and technological limitations, forced us to socialize and interact with others, to a society where there’s very little need for interaction with others anymore.   The concept of currency greatly facilitated things, surely, by defining a system of value.   A dollar is worth a certain amount of food, or can be used to buy a certain amount of time from someone else.   Most important, it’s fungible and allows for that value to easily be transported from one place to another.   This has removed a lot of frictions in the economy, made capital more liquid, and facilitated technical innovation.   Unfortunately, it’s also put way too much value in currency itself.  It has now become more important to acquire currency than to cultivate relationships or share time with others.  Most of the interactions we still do have with others are adversary in nature:  transactions at the checkout counter, customer service for product repair, coworker politics to try and get the corner office.   Is it any wonder our society has become so agressive with one another?

While I’m certainly not the most social individual, I was blown away when living in L.A. by the fact that I did not know my neighbors.   I knew they were there and I recognized their cars.   Garage doors would open in the morning and at night and cars would enter and exit.   Whatever happened to the people?   I told my wife a few days ago that this longing for interaction might explain why people cling to smoking, especially here in California.  It affords them the ability to go out and share a smoke and a conversation.   Has the price to pay for a nice conversation with a fellow human being become lung cancer?

The Great Recession may be inadvertently bringing about a great awakening.  One out of ten American is now unemployed.   One out of four Spaniard is too.   This brings about, of course, a lot of suffering and anguish.  It does too, however, bring about a lot of people with free time.  Instead of focusing on the negatives of this forced time off, why not try and facilitate its use?

So I’ve been thinking about Umair’s manifesto in this context.   While there’s no doubt all of these people are eager to get back to work, why not create a platform to organize all the world’s services?  Perhaps you’re an out-of-work graphic designer who’d love to trade a couple of business card designs for an evening of babysitting and a nice romantic meal with your spouse?   There are all kinds of services out there that, other than the acquired expertise, costs no more than just time and, perhaps, basic supplies:   babysitting, massages & facials, house cleaning, cooking, gardening, moving, handyman jobs…  The list goes on.

Why not create an open source service exchange with a new unit of value: the hour.   If you’re not working, why not let your hour of graphic design equal one hour of babysitting.   In an hour, an unemployed Chef could whip up a wonderful culinary meal.   Why not exchange it against an hour of electrical work wiring up a new lamp in the living room?    In short, why not provide the Etsy of services, allowing people to accumulate time units that they can redeem against other services.   Certainly with a tight budget, there’s no way I’m going to go get a massage at a spa for $150.   I still would love to get a massage, however, and would gladly trade for an hour of my expertise.

Why not?  I understand the reluctance… Some will say that it is a much bigger investment to become a Java expert than an auto mechanic, but if the programmer and mechanic are both unemployed, what they both have to offer that doesn’t cost anything is time.   Hence, this exchange would basically allow for people to buy and sell their time.   Any additional supplies or goods necessary could be supplied by either the buyer or the seller.   There you go:  you’ve got a platform to organize the world’s services.

What do you think about this?   Am I missing a huge piece that makes this idea completely unrealistic?

Comments (0)

By dottow, February 12, 2009 5:06 pm

I’ve had a Web host for over 10 years now and until now what they’ve offered has been sufficient: they hosted my web address and offered static HTML and handled my email for me. While they certainly didn’t offer a rich set of services,Pair.com charged me about $15 a month for this service, and that was that.

I’ve just recently started playing with Groovy and Grails and actually wanted to host a Grails App that would send a tweet broadcasting the ferry schedule, which I take daily.   We’re not talking rocket science, but I thought this would be a quick task that would get me to learn Grails.    Now, of course, I needed to find a host.   Enter slicehost.

Yes, the service will now cost me closer to $40 a month, but I get to run my own box.  I pwn root!   Anyway, long story short I’ve set up Apache, MySQL, my own e-mail server, and I figured I might as well migrate to Wordpress since I now can run whatever I want on this box.

Anyway, I’ve imported all my old posts from Blogger, but I need to fix the format and all, so… errr… pardon my dust!

Comments (0)

By dottow, February 5, 2009 5:05 pm

I actually got my first email address in 1989 when I was an EECS Freshman at Cal. Before that, I would interact with others via BBS’s. So yeah, I was using the Internet regularly in the early 90s, actually, and at the time it was lots of usenet, gopher, and ftp.

What a trip when Mosaic finally came out and brought along a graphical browser for data stored on the Web… In fact, it’s amazing how little innovation there’s been in how we interact with data online. It’s still HTTP silos with HTML either in static form or generated on the fly by processes collating the data based on cookies and stuff in their relational databases….

I think in 10 to 15 years our kids will laugh at our primitive our way of interacting with the Internet is… Ask a 15 year old kid on Facebook if she knows about Gopher, Finger, and Ping… Quite frankly she couldn’t give a shit… In 15 years, I figure URLs, IP addresses, and even the whole concept of HTML and databases will have been abstracted out… It’ll all be in the cloud. Sun didn’t execute well but their motto was dead on: The network *is* the computer.

Comments (0)

By dottow, September 21, 2007 5:04 pm

I’m baaaack! This is an aerial view of the Carquinez bridge, near our home.

Actually we’ve been back for a few weeks now, but it’s been so crazy busy I haven’t had time to blog about it until now. My wife and I had talked about moving back up here for a few months but the idea became concrete when I received an offer from Calypso, my former employer. So here I am now, development manager for the FX and Treasury group. Simply put, I’m totally psyched!

As far as timing is concerned, it truly was impeccable. Within a month of my giving notice at Countrywide, the bad news started rolling in. I’m not too concerned for the team I worked with there, though, since they’re pretty well insulated from the layoffs. It’s a very small and solid team of IT professionals that are supporting the Calypso implementation for the whole organization. Countrywide Securities is actually one of the few subsidiaries that’s making serious money, and as they’re moving more and more financial products onto Calypso, I can’t imagine them getting rid of the IT team that keeps this all going!

We’re back in our house… You have no idea how happy we are!

Comments (0)

By dottow, September 21, 2007 5:04 pm

Why is everyone apparently so surprised with the current housing crisis in the United States, and what brought it about? The short answer is collective stupidity, but I suppose that’s not nearly as entertaining as understanding the pieces of the puzzle.

One important catalyst is securitization. Securitization, as defined in wikipedia, is the process of homogenizing and packaging financial instruments into a new fungible one. Acquisition, classification, collateralization, composition, pooling and distribution are functions within this process. Simply put, some financial alchemists found a way to sell stuff on Wall Street that couldn’t easily be sold there before.

The way mortgages used to work was Joe Blow would walk into his local bank and talk with his banker, with whom he’d had a relationship since he first opened his savings account at age 12. Joe would explain to Mr. Banker that he needed a loan for his house. Mr. Banker could borrow the money at 6% so, taking in his cut (the spread), he loaned the money to Joe Blow at 7%. Everybody happy. The problem was that traders couldn’t really get in on the action. The overhead to handle such petty loans made it unmanageable. BSDs don’t care about Joe Blow’s pathetic $125,000 30-year 7% loan. In order to make their fat bonuses to buy a new yacht, they need to handle lots and lots of loans but they don’t want to deal with individual accounts. They trade stuff. That’s what they do. So how can they get in on the action?

Well, in the US we have the perfect tool for this job… the FICO score! This magic number tells you all about a person’s credit worthiness. So you can bucket mortgages by FICO score, mortgage type and maturity… 750+ 30-year fixed maturing August 2035 all go into one bucket. That’s a whole bunch of assets right there… Now the mortgage lender creates a subsidiary, probably offshore, that becomes the rightful “owner” of all these assets. This subsidiary issues some bonds based on expected cashflows coming in every month from all the people in that bucket. Let’s say, for simplicity, that there’s 10,000 mortgages in that bucket bringing in an expected $2.5 million a month in payments. Now, statistically, you’re dealing with 750+ FICO scores, so these people are extremely creditworthy… Still, assume that $100K won’t get paid every month… that leaves $2.4M. Of course, there’s operational costs, vacations, hookers,… so that leaves maybe $1.5 million per month. Now whatever bonds you issued pays $1.5 million per month over 30 years… Voila! Bonds is the kind of thing traders understand.

So that’s the first piece of the puzzle. The geeks on Wall Street found a way to let traders in on the game of mortgage. So far, so good.

Let’s go back to FICO scores… It’s easy enough to bucket 750+, 700-750, 650-700 mortgages. Those are some pretty solid credit scores. The odds are pretty good that those homeowners will make sure to pay their mortgage every month. But what about some poor shmuck with no income and a credit score of 525? How can you get him to play the housing bubble game? The geeks on Wall Street thought long and hard and decided that maybe you could slice the buckets horizontally.

They call it tranching in structured finance. The idea in so doing is to provide more reward for more risk taken. So the lower tranches will still get securitized and make their way onto the Street… but those are serious junk bonds. They may bring in 18% annually but they’re backed by a bunch of mortgages that were handed out to homeless trolls living in shopping carts in Berkeley. Let’s say that the risk of default is high… Aha! But not quite… because a shopping cart in Berkeley will cost you $500,000 and you can probably sell it tomorrow for $600,000, so at that point in time you’ll have built up some equity and you can refinance… No no…you don’t need any income. In fact, you don’t even need to give us any money at all. We’ll just tack on the interest at the end of your loan. Actually I diverge… we’ll discuss mortgages further below. For now, back to tranching. So basically, the top tranche is given a grade of AAA because, despite the fact that it only pays 5% annually, it is the first tranche to get paid. So the top tranche of the 500-550 bucket (read: serious subprime) still manages to get a AAA rating… As long as it’s BBB+ or above, it’s investment grade so the traders can happily tap into it… Ok, look let me get graphic for a minute… Yo, Einstein…If you fill a bucket with shit, does the cream rise to the top? Investment grade? Sheesssh

So now you have the big mortgage lenders who have a way to offload their mortgages onto Wall Street…. Sah-weet! The way to make a lot of money is to take in as many loans as you can, grab your cut, “securitize” them, and send them off to Wall Street. Thus, the creative mortgages were born: No points. No fees. 3/1 ARM. Negative Amortization. Hybrid Interest Only. HELOCs… “Come one, come all!!! Get your loan right here!!! Get ‘em now while they’re hot!”

So now we have it… Wall Street and large mortgage lenders have created a very large need for lots and lots of loans, which means we need lots and lots of new houses for people to buy. No income? No problem… Come and get your house and you can ‘flip it’ in a year or two and make $200K. See? Now you got income!

In places like Vegas, build houses they did like there was no tomorrow. Here in California, they pushed well into the central valley and, of course, prices in large metropolitan areas skyrocketed. “Build it, and they will come?” Damn straight they did!!!! Everybody was buying and demand was far outpacing supply.

Interest rates were low, too, making it much easier to borrow money for cheap. Traders, too, borrowed money to trade these bonds… They borrowed Yen at 0% and traded them into dollars so they could buy these bonds. They even have a name for this, the Carry Trade.

Well, we’re now in the days of reckoning… Ultimately the people who are paying today are those greedy bastards on Wall Street and those who bought a house without following the fundamentals. I’m fairly certain that those of us who bought in the last 3 or 4 years at 3 times annual income, like the rule-of-thumb suggests, aren’t really sweating it right now. Those with a $75,000 household income who bought a place in SF for $850,000? Well, good luck to you. I hope you make it out of this mess unscathed, but I wouldn’t hold your breath.

Comments (0)

By dottow, July 27, 2007 5:03 pm

On July 26, 2007, in Pomona, CA, I took the oath of allegiance and, at long last, I am now a naturalized U.S. Citizen! Woohoooooo! I can finally help vote these fools in the White House out of office!

Comments (0)

By dottow, June 26, 2007 5:00 pm

I’m wrapping up a truly enjoyable read, Traders, Guns, & Money. The book talks about the going abouts in the world of financial derivatives and it’s a fun read. I’ve even managed to actually learn a thing or two about what all the greek symbols in Financial engineering actually mean. In other words, it’s pretty accessible as well.

In light of that book, I chuckled when reading this quote today by Richard Marin, Chief Executive of Bear Stearns Asset Management:

“We have brought in additional resources with expertise in these asset classes to facilitate the orderly deleveraging process,” said he, speaking of an ailing fund with $1.2 billion in debt.

Orderly deleveraging?!? It’s way up there with collateral damage and corporate restructuring as far as rhetoric is concerned, ain’t it?

Comments (0)

By dottow, June 22, 2007 4:59 pm

I’ve had 2 real experiences with startups, but I’ve written 3 or 4 business plans. All these experiences were failures. Which is totally ok, because you pick yourself up, dust yourself off, and start again. Still, after all these failures I understand why serial entrepreneurs typically succeed more and get funding easier. If you’ve succeeded once, you’ve already proved to an investor that you can handle all the stress and even if you’re just a geek, if you’ve founded a startup and you’ve succeeded, then you probably have way better people skills than 99% of the other geeks out there.

I’m just thinking about that after reading Marc Andreesen’s latest post: The Pmarca Guide to Startups, part 1: Why not to do a startup. Marc has been lucky enough to succeed repeatedly. I haven’t. Nevertheless let me tell you that a lot of the things he mentions ring absolutely true: Startups are a Bitch with a capital ‘B’!

Frankly, although I still very much have the entrepreneurial bug, I don’t know if I’ll ever launch another startup again. It’s brutal, and it’s hard, and it’s painful. The day after we closed the doors on didgets, the startup I helped cofound back in 2000, I found myself in the ER with an anxiety attack. Thanks, but no thanks.

If I were to do it again in the future, I’ll be doing it by myself, organically, in my home office. I would definitely stay within the realm of what I’m familiar with. What inefficiencies have I seen over and over, and how can I facilitate the processes?

Do I regret having given blood, sweat, and tears to my dead startups? No, not really… I’ll take the Pepsi Challenge on a Stanford or Berkeley MBA any day of the week.

Comments (0)

By dottow, May 10, 2007 4:57 pm

We’re releasing a new version of our code today so the last week’s basically been a free-for-all as far as fixing bugs and implementing enhancements. I had to push some additional Swaption data onto TIBCO for Blackrock to consume. So I had the pleasure of modifying an interface I’ve never worked on before. So I come across this:

if (product instanceof Swap) {
    ...
} else if (product instanceof TotalReturnSwap) {
    ...
} else if (product instanceof CDSABSIndex) {
    ...
}

Dude, are you kidding me? You ever heard of an interface? I think that right there tells me whether or not the person who wrote this code is a seasoned developer with good refactoring skills. I should remember to use that as an interview question. Frankly I wouldn’t hire a guy who codes like that…. It shows a complete lack of programming fashion sense.

Work’s been keeping me quite busy lately, actually. We are finally going live with CDS on ABX next week and I’m pretty pleased since I did pretty much 95% of the development for that. I got to get very intimate with the various credit events that can occur and how they should be handled. Actually Calypso’s not quite up to par in how it models CDS on ABX, at least as far as accounting is concerned. For accounting to get what it wants, a separate transfer needs to be created for each individual credit event. So if MarkIT says on a given month that ABX.HE.BBB-.06-1 has got an interest shortfall of 59.2, an interest reimbursement of 12.5, and a fixed correction of 15.1, Calypso needs to generate 3 individual transfers. As of 8.0.3, Calypso doesn’t even handle corrections at all. (Maybe they fixed that in 9.0?) Of course, the individual transfers can and should be netted together, but each one should generate its own transfer type and, further downstream, its own posting.

Anyway, it was interesting making this enhancement and seeing it trickle all the way down to Peoplesoft.

Comments (0)

By dottow, April 12, 2007 4:56 pm

“When a Tralfamadorian sees a corpse, all he thinks is that the dead person is in a bad condition in that particular moment, but that the same person is just fine in plenty of other moments. Now, when I myself hear that somebody is dead, I simply shrug and say what the Tralfamadorians say about dead people, which is ‘So it goes’.”

–Slaughterhouse Five–