My Culinary Internship

Culinary Internship

One of the perks at Google is that if you like the food enough (and trust me, you will!), you can volunteer for a Culinary Internship at one of the cafes. (Yes, you get to choose which one) I've been a big fan of Jeff Freburg's Cafe-5IVE for as long as it's been open, so when the time came, I chose that Cafe.

Being a kitchen newbie, I only had to work half a shift. So I reported to Jeff at 8:30, and after we discussed what was going on, I was assigned to help Kristen with the pastries. Under Kristen's direction, I zested some lemons, then mixed huckleberry, lemon juice, and agave to make huckleberry sauce for the souffle. I then put the sauce on the souffles and racked it in preparation for lunch. I then helped put together the soup for the pineapple dessert cups, scooped ice cream, and loaded the cookie jars (a dream job, if you ask me!).

After that, I got reassigned to the hot line, and helped make some vegan cheese, started heating some cream for tomorrow's macaroni and cheese, and generally got in the way while Fish and Chips were being fried. Then I stood behind the soup station and served visitors for an hour before the rest of my group caught up with me and I took lunch with them.

This was definitely a highlight of my career at Google. I really got to appreciate how hard the kitchen staff worked --- I didn't get to sit down from 8:30 to 12:30, and I was amazed by how hot the kitchen got, and how much got done in so little time. Yet the staff stayed calm, as though they did it every day --- which of course they did! And the equipment. Sure, million dollar data centers are cool, but $100k ovens have an immediate, direct, visceral feel to them that just yell "COOL!"

And of course, nothing beat the satisfaction of having Chef Freburg come to me afterwards and invite me back to the kitchen any time. I'll definitely take him up on it!

Review: The Trouble with Islam Today

I met Irshard Manji when she visited Google to give a talk. She seemed to be a very brave woman with a major goal, which is to bring about a Reformation, as it were, to modern Islam. As others have pointed out, the kind of reformation that she espouses is a requirement before the many Islamic cultures in the middle east can begin to consider having a successful economy or development beyond what has turned out to be The Curse of Oil in the recent century.

Manji points out that there was a period of time in the Islamic empire when open discussion and questioning of tradition was welcome --- during which ijtihad flourished. The period was relatively short (about 500 years or so) before the Islamic empire collapsed and Islam (or perhaps just the middle-eastern variant) retreated back towards tribal traditions and the desert.

She further points out that both the United States and Israel, whom many Arabic Muslims blame for their humiliation, both tolerate and support dissent within their countries --- it is the Arabic countries that do not have a free press. All through the book, her pleas are impassioned (especially her complaint about Foundamentalism, the Arabic view of Islam being held supreme over other views), and her history well-researched. In person, I asked her why she thought fundamentalism had become more popular throughout the world, not just in troubled countries. Her response was a very straightforward, "Globalism. When the world becomes smaller, you lose what you think you used to have, and you try very hard to cling to traditions which you think you might be losing." I would have appreciated further development of that theme, but did not find that in this book.

All in all, I'm convinced that a Reformation of some kind is necessary before the middle east can make progress. I am not sure what form it will take, however, and perhaps a little disappointed that Manji ultimately veers away what I consider would be the ultimate destination of her religious exploration, which is secular humanism, a philosophy that is more fruitful and less condemning of human reason than even a reformed Islam would be. But ultimately, that is a religious choice, and as it is, I would not want to condemn her for standing out there in the face of death-threats --- in her position I would probably not be as brave!

Review: Schulz and Peanuts

I will confess to being a far bigger fan of Bill Waterson than I am of Charles Schulz, but any understanding of comic strip history will have most understand that without Peanuts, there would have been no Calvin and Hobbes.

With as beloved a subject as the creator of Snoopy, I expected the book to be a love-fest, about the genius of Charles Schulz, at it were. Nothing could have been further than the truth. If indeed David Michaelis the author were a big fan of Peanuts, he understood that the hero, the creator of Peanuts himself had "feet of clay." Schulz grew up the only child of an under-educated couple: neither parents graduated High School, and his mother did not finish fourth grade. His father, a fastidious barber who always put his customers first, was interested in neither the news nor philosophy, admonished that a barber should never descend into heavy talk with his customer. Schulz's childhood, where both parents did not appear to believe that he would succeed in making a career out of his drawing appear to have left an indelible impression of the young Schulz.

His mother died just as he was drafted into World War II, saying with her last words to him as he were to leave, "Good-bye, Sparky. We'll probably never see each other again." As if to make up for this lack of confidence from his parents, the world turned in his favor --- he did well in the military, and he was by chance was held back enough to arrive in Germany only after the worst of the war was over, fired on only a few times by the enemy.

After the war, Schulz went right back to art, and by the end of 1950 had sold what was to become Peanuts to United Features Syndicate. The book, however, glosses over his success there, and focuses on what Schulz considers his failures --- chiefest of which seems to be his inability to attract women. He pursues one after the other, but gets repeatedly spurned over what he believed to be his mediocre looks (which apparently wasn't true) or his lack of prospects (which made him vow that he'd show them what he was made of). He thus approached the rest of his life with a big chip on his shoulder.

He did eventually get married, of course, to a beautiful divorcee who gave him 4 more children. But the marriage was by many accounts an unhappy one --- Joyce Schulz with her sharp wit would take down Charles Schulz as often as she could, despite his being the material provider of exceptional capability. Michaelis would illustrate this with strip after strip from Peanuts, with Joyce obviously being the Lucy who would continually taunt and hurt Charlie Brown. In his own response, Schulz would retreat back into his world of drawing comics (which Joyce never bothered reading), much as Schroeder ignored Lucy to play with his child's piano.

Another interesting topic for me was how autobiographical Peanuts was. Schulz's thoughts, relationships, history with his family, and philosophy would all show up on it. Michaelis cleverly even shows how his love affairs made their way to the strips.

As Schulz got more and more successful, one would think that he would find his way to happiness. Well, let this be a warning to those who seek happiness through wealth: Schulz never did find it through wealth. Not even when he finally tried to leave Joyce to woo a much younger lady friend did it help him:
Just then, a towering sailboat drew up alongside, and her heart froze, because she could see in his eyes that the yacht embodied a new way to break open their stalemate. "If you married me," he said, "you could have anything you want. I make four thousand dollars a day."
The lady, of course, refused, despite Schulz's desperation.

What about religion? Schulz was an extremely religious man, having converted in his early 20s and tithing 10% of his income well into his adulthood. It was clear on reading the book that while he held on to his Christianity, the religion never did bring that much meaning to his life either. Perhaps if your entire tenet in life is that nobody could love you because you're a nobody, it's hard for you to believe that even God could do so.

But his work saved him right? Yet it appalled me to see him use his status as a mentor to attempt to influence Lynn Johnson when she needed a way to kill the aging family dog, Farley, in her strip (unlike Schulz's strip, Johnson's strip actually moved forward and aged her characters):
...when she was finished explaining how Farley was going to die trying to save the Pattersons' youngest daughter, April, from drowning in a spring-freshened river, there was silence on the phone, and then Schulz said: "If you do this story, I am going to have Snoopy get hit by a truck and go to the hospital, and everybody will worry about Snoopy, and nobody's going to read your stupid story." As if to prove that Snoopy was still the biggest newsmaker, he added, "And I'll get more publicity than you will! So there!"

Ultimately, Schulz life becomes very much like that of his favorite movie, Citizen Kane: he did not have to be alone, but he made himself alone anyway, and all because he refused to acknowledge that others might love him, so despite all the profession of love from others (his wife and his children) he never needed to reciprocate and make himself vulnerable.

This book is clearly a masterpiece. The strips chosen to illustrate Michaelis' points were well-selected (there are a couple of repeats, but those were infrequent), the notes and bibliography excellent, and points come across clearly but are not hammered home as if the reader had no mind. All in all, this book is a great lesson on the limits of wealth, talent, hard work, and religion. More people should read this book. Highly recommended.

My thanksgiving present

I felt a little funny on Sunday morning right after posting my last entry. I went for a hike anyway, but found my energy low. That afternoon, I took a nap, but started feeling really cold. Come Monday morning I woke up drenched in sweat. A temperature check found my temperature near 100, not yet a fever, but my throat felt a little itchy.

I went to see my doctor, and he thought it was viral. So he gave me some TamiFlu in the hopes that it would nix it in the bud. That night, I went in and out of shiver mode all night. I went back to see my doctor again, and he found what seemed to be an infection in my ear and throat, so now he added antibiotics to the mix. Lisa added a bunch of Chinese herbs and some acupuncture to this medical cocktail, just to make sure I got due representation from all sides of the East/West debate.

Last night was the worst. I had periods of 103 temperature, but I got myself fully hydrated and woke up only a few times. Still, I was so light headed I would just topple back to bed after using the bathroom.

This morning though, my fever appeared to break and I felt better, though I still can't seem to eat much and my throat now hurts more (or maybe it's that I now notice it more!). So hopefully all this medical stuff I'm on kicks in soon.

You might think that 'flu is not a serious illness, but I've been sick with 'flu a few times in my life, and it always felt really really bad. It's not hard to believe that it causes 1.2% of total deaths in my age group. And yes, we did get 'flu shots this year. All I can say is, medical science just can't progress fast enough. I'd take immunity to all diseases over a faster car (ok, maybe for me that'll be a lighter bike), movie star good looks, or a trip to outer space any day!

Ok, I will now return you to the regularly scheduled book reviews and commentary.

Review: Bicycling and The Law

Bob Mionske is a cycling lawyer, and writes the Legally Speaking column for VeloNews.

In addition to being a collection of all the columns in the magazine, this book collects many additional tit-bits about cycling that you might not have known before.

For instance:

• If I were to put together a bike ride to the coast with a bunch of friends, am I liable if anyone was injured?
  
• Supposed my bike was stolen and then found in a pawn shop. Am I legally obligated to pay the pawn shop for my bike?
  
• If I get pulled over by a cop for riding on the road too slowly, can I fight the ticket?
  
• Am I obligated to wear brightly colored clothing on my bike? If I'm not and am involved in a crash, what happens to me legally?

This book answers all these questions in eight parts. First, Mionske introduces you to your rights as a cyclists, then he explains what the legal definitions of duties and rights are. He then covers cycling accidents and hazards. This is the biggest portion of the book, and he breaks it down with an analysis of all car-bike collisions, what you can do about preventing them, and how cycling infrastructure may or may not lead to such crashes. The analysis is detailed, for instance, telling you that 1.3% of all car-bike collisions are caused by the motorist overtaking the cyclist, and that 11% of the motorists involved had elevated blood alcohol levels (unfortunately, 17% of cyclists involved also had elevated blood alcohol levels). As a league cycling instructor (LCI#1040), I have seen the data presented before, but the level of detail is excellent, and Mionske's legal perspectives are very welcome. I will try to integrate this information into my Road 1 class the next time I teach it.

Following those last two chapters, Mionske covers insurance and how much you need (most people are under insured, which means that your insurance might be forced to pick up the slack, so you should at least be adequately insured). He rails (rightly so) against the insurance industry for only offering automobile-oriented insurance, and not insurance that covers cyclists specifically. He then goes on to discuss forms of harassment to cyclists (a surprising amount of it done by law enforcement officers, in his experience), what cyclists can do about it (it turns out that lobbying and publicly embarrassing those involved is surprisingly effective). The last three chapters cover bicycle theft, defective products, and liability waivers.

All through the book, Mionske does not hide his biases --- he believes cyclists are blatantly discriminated against (something that most cyclists will agree with), and that the legal system can be an effective recourse, though getting law enforcement officers, courts, and juries to work effectively for a discriminated-against minority would seem to be a big challenge. He writes very effectively in his advocacy of these positions, and to my mind, I think he has succeeded. He's even convinced me that tort-reform is something extremely anti-consumer, which given the prevailing opinion of lawyers that most people have, is no mean feat.

The entire book is written in a clear, precise, and easy to comprehend fashion. At no point does Mionske descend into legalese without providing you with the context and an explanation of what is going on. The case studies in particular are fantastic. Some of them are funny, some of them are sad, but all of them are instructive. Where the law has been undefined, Mionske doesn't hesitate to say so, and one gets the impression that he would relish an opportunity to test those areas, if an appropriate case ever turned up.

I paid Amazon.com prices for this book, but now that I've read it, I would have willingly paid full price. This is a book that should be on every cyclist's bookshelf. Read it once to get an idea of what is covered, and keep it easily accessible as a reference. Highly recommended!

Obama Visits Google

I got a chance to see senator Obama first hand today when he visited Google to give a speech and take questions from Eric Schmidt and other Googlers. My current approach to politics is anybody but a Republican. Both the Republican front-runners are extremely distasteful to me --- both seem to promise more tax cuts for the already wealthy, are in denial about global warming, and have no concern for budget deficits or getting out of the morass that is Iraq.

My concern with Obama was borne from reading Paul Krugman's blog entry. The concern there was that Obama had bought into the right-wing attacks on social security as the biggest fiscal problem facing the country. The truth is that it is not. Medicare/Medicaid is. My concern was alleviated slightly today, when asked about the deficit, Obama said that he would first get out of Iraq (saving $192 billion), and then try to attack the next biggest deficit problem, which was Medicare/Medicaid. Social Security was not mentioned.

Compared with the other big candidate I saw in person, Hilary Clinton, Obama seemed a lot less like a politician, lot more earnest. I liked it that he said that what he learned from watching prior Democratic candidates lose was that if you don't stand for something people won't vote for you. Listening to Clinton talk, one just got the impression that she had spent too much time as a politician --- she refused to promise anything, and refused to make a stand on policies.

All in all, I could definitely see this man as the next President.

Review: Argonautika

Lisa and I visited the Berkeley Rep on Saturday to see Mary Zimmerman's Argonautika. The story is the well-trod story of Jason and the Argonauts.

Since the play was only two and a half hour long (with a fifteen minute intermission), the story had to move fast. Narration is performed by the two goddesses involved in the story: Hera and Athena. Special effects abound. Actors descend from the ceiling suspended by wires, the trapdoor under the stage is used to good effect, and the stage itself was extremely well constructed.

I love how miniatures are used on stage to depict the larger picture, while the action on the stage shows a close up of what's going on. The cast seemed well rehearsed, though one still catches a flub or two here and there. A lot of the motion on stage seemed particularly strenuous, with rope climbing and flipping off the raised platform being quite common.

What amazed me was how well the action scenes were handled. In particular, when King Amycus challenges the heroes to a boxing match and Pollux accepts, the actors move in a simulated slow motion fashion which was just absolutely hilarious. Clearly, this is not a play an audience would be able to watch without the context and prevalence of modern action films.

The scenes that were made a big deal out of in the liner notes, the ones where Medea betrays her family for Jason because the gods made her fall in love, however, seem just a bit contrived. However, that does not detract from the overall quality of the play.

All in all, we definitely got our money's worth, and it was great fun for two hours. Recommended.

Review: The Age of Turbulence

Alan Greenspan is perhaps the last of a dying breed, the reality-based Republican. As chairman of the Federal Reserve, he presided over the Clinton boom. As part of the Reagan administration, he was responsible for raising payroll taxes (yes, an extremely regressive tax) to "save social security".

The first part of this book is largely autobiographical, describing his childhood, his interest in economics, and eventually his appointment as a technical economist in the Ford, Reagan, and Bush administrations. The most entrancing portions of this books are the descriptions of his time as chairman of the Federal Reserve. Obviously, he had access to data and analysis that nobody else had, but nevertheless, had to rely very much on his instinct in guiding the world's largest economy. It was amazing how often he got it right.

Of course, he gets it wrong as well, mostly on the political side. His excuse for giving Congress and the Bush administration permission to grant giant tax cuts and destroy the hard fought surplus built up over the 1990s was that he gave a nuanced policy recommendation to an extremely partisan congress that was determined to misread him. While Brad DeLong might be willing to forgive him that, I doubt that future historians will be so kind.

The second half of the book focuses on topics near and dear to Greenspan: what the causes of economic growth are (where he is surprisingly close to Bernstein's The Birth of Plenty at least, with respect to the rule of law and property protection), a tour of the world's economic geography and what the problems each area has, globalization, retirement, corporate governance, and the shortage of oil.

As a reality-based person, I think he is very good and correct in his analysis. He is definitely gloomy about the prospect of the human race being able to contain global warming, and seems to have resigned himself to mitigation based solutions rather than prevention --- given that he is already in his 70s, that is perhaps a suitable view to take. Those of us who are younger might not wish to be so sanguine.

All in all, I learnt quite a bit from this book --- from how the federal reserve works to what the explanation is behind the current high oil prices. I disagree with many of his views (e.g., his solution for "saving social security" involves increasing an already highly regressive tax, rather than expanding the tax to all incomes; his observations of the medicare problem conveniently leaves out how inefficient our medical system is, because it is one of the few failures of capitalism that have been analyzed to death)

A challenging book, but worth the time.

You cannot outsource financial work part II

A few days ago, I was talking to someone at work, and he said, "I'm going to have to fire my financial adviser. I started working with them 3 months ago, and they're providing negative returns."

There are a few issues with this statement. First of all, financial planning is a multi-decade process. Judging the results of an adviser after 3 months is a lot like judging the results of a marathon after the first 300 meters. Secondly, it is very important not to confuse process with outcome. The decisions and the reasons behind the decisions are more important than the immediate outcome. Let's say you decided, based on your analysis of certain macro-economic factors, that an unusually large bet on say, Vanguard Energy Fund was desirable. If someone suddenly invented a cold fusion reactor the size of a car's engine thereby eliminating the need for gasoline, the result would be bad for your portfolio, but there was no way to have anticipated that outcome without knowing the future.

Finally, it is very easy to get carried away with making short term decisions. For instance, in one of his rare errors, the man behind pfblog writes about switching away from Vanguard's Value Fund to the Fidelity Contra Fund because of the poor recent performance of the former. The two funds are so different that he was comparing apples with oranges! The ContraFund is at its heart a Growth fund, and this has been a great year for Growth. Value funds have recently taken a hit over the last few months. When Bill Bernstein made that observation, he followed up with a comment: "this reflects the additional risk of the value strategy. And that's a good thing, because if there was no risk, there would be no reward."

That is why you won't get me posting my portfolio performance numbers here on this blog (and wouldn't you like to know!). Even a five year performance number wouldn't be really representative, since we've been fortunate this last five years to have a great bull market. As the old saying goes, "When the tide goes out, that's when you find out who's been swimming without shorts."

Despite my statements about how you cannot outsource financial work, some people keep insisting on asking me for recommendations on financial advisers. When they do that, I point them at the Vanguard Financial Advisers page. These are the only guys I've talked to who don't come across as sleaze balls. They're conservative (which is a good thing --- you want your financial adviser to be more conservative than you are), and they know what they are doing. That said, in the middle of my interview with one of them about 3 years ago I realized that I knew more than the guy who was talking to, and that was that.

There is one guy I am using to get access to DFA funds. But we don't have an advisory relationship. He does seem like quite a reasonable fellow, but you won't get me recommending people unless I've interviewed them extensively, and so far, no one who's asked me for a recommendation for a financial adviser has been willing to pay my hourly rate to interview someone extensively enough for me to provide an evaluation.

Warren Buffett Interview

I love it. He challenges anyone in the Forbes 400 to see if they pay higher taxes than their receptionist (I bet there'll be an exception, but that's because maybe one of them married their receptionist, *smirk*)

I will admit that I pay federal taxes at a very similar rate to Warren Buffet. (See my prior posts on Tax Planning) And yes, I actively vote Democratic, against my own economic self-interest. Why? Because in the long run, a society where people can get ahead by working hard will generate more prosperity than a society where the rich get richer and everyone else gets screwed. And we are unfortunately headed in the direction of the latter.

There are plenty of countries with such severe inequalities that kidnappings of the wealthy (or murder, etc) are common in the news. I would not wish the US to become one of them.

Outsourced: The Movie

This is the third movie I've seen at Google as part of a special engagement...The previous two being King of Kong, and the other A Moment with You.

This movie deals with outsourcing as its main topics and the very first few minutes of the film sets it up. A manager of a call center finds out that his group is to be laid off and he is to go to India to train his replacement. He goes reluctantly, and eventually integrates into the society that he's supposed to train to at least sound more American.

Its a romantic comedy, and it doesn't fail on either the romance or the comedy. The movie works quite well on both levels and the pacing was just right. At about 2 hours, the story, though simplistic has enough meat to make you feel satisfied without boring you at any point.

The producer stayed at the end of the movie for questions and to relay several cute statistics:

1. They spent 30 days in India, and 2 days in Seattle. They also apparently didn't run into many production problems other than a few times when the cops said they couldn't film for a particular day.
2. They invented a name for the city the outsourced call center is based in because Indians are very particular about the correctness or incorrectness of an accent. So if they had said the call center was based in Mumbai, folks in Mumbai would watch the movie and deride the inaccuracy of the accents. So they invented the name of the city, thus disallowing this criticism. =)
3. The producer did this film because of his time spent as a student in India. His wasn't a story of a job outsourced, or a romance struck up while in India. He was just a foreigner who was fascinated while he was in India and decided to make a movie out of it to explain to people asking "just what is India like?" and this was the result.

As a freshman effort, I must say I'm very impressed at this film and certainly recommend people either catch it in theatres if they can, or buy the DVD. Its certainly worth the time!

Greg Mankiw keeps digging his hole

As Krugman pointed out yesterday, I hope Republican candidates parrot Mankiw. When someone like me (always had health insurance, in good general health) gets denied health coverage due to "pre-existing conditions", you know the system is screwed up beyond help and radical reform is needed. Note that I can afford health insurance (and I'm covered currently through my employer's group health care). It's the individual health insurance market that's all messed up.

Maybe the radical reform can be as simple as: "You must provide a single quote to all your customers, young or old, rich or poor, healthy or not. You are not allowed to deny anyone coverage if they ask and are willing to pay that single quote." But something has to be done, and the candidate that has a concrete plan to do it will get my vote.

Seriously, even if you're care only for economic development, portable universal healthcare makes sense. By guaranteeing healthcare even if you run off to join a startup, you've reduced the risk of joining startups or starting your own businesses, and those are the engines of economic growth.

A must read for would-be investors

The way I see it, there are at least seven traits great investors share that are true sources of advantage because they can't be learned once a person reaches adulthood. In fact, some of them can't be learned at all; you're either born with them or you aren't.

Trait #1 is the ability to buy stocks while others are panicking and sell stocks while others are euphoric. Everyone thinks they can do this, but then when October 19, 1987 comes around and the market is crashing all around you, almost no one has the stomach to buy. When the year 1999 comes around and the market is going up almost every day, you can't bring yourself to sell because if you do, you may fall behind your peers. The vast majority of the people who manage money have MBAs and high IQs and have read a lot of books. By late 1999, all these people knew with great certainty that stocks were overvalued, and yet they couldn't bring themselves to take money off the table because of the "institutional imperative," as Buffett calls it.

Steve Levy Reports on the APM World Tour

This sort of enterprise was exactly what Google was hoping for when it began the APM program five years ago. Earlier attempts to hire veterans from firms like Microsoft had awful results. "Google is so different that it was almost impossible to reprogram them into this culture," says CEO Eric Schmidt. The difficulties led Google VP Mayer (employee No. 20) to wonder whether experience was way overrated. The earliest Google employees were distinguished by an abundance of brain cells as opposed to a fat r?sum? or a stint at McKinsey. Why not replicate the phenomenon?

Compare and contrast with the CEO of Pure Software (and later, Netflix):

Startups are a great place to do, not to learn.

Dead iPod

My ipod, after about 3 years, has died with a clicking noise. MTBF for a hard drive is about 5 years, but my guess is that portable applications see a lot of abuse (and I will admit to not treating my ipod too kindly), so I'm guessing that I'm smack in the middle for iPod life. At the time, ipods cost $400, so it'll be more than $100 a year for the privilege of listening to my music on the go.

I doubt if I'll replace it with another ipod, when an 8GB Sansa can be had for $115. It's probably not worth repairing, either, since a replacement disk would cost around $130.

Here are my requirements:

• Long enough battery life for a flight to Zurich (about 10 hours or so, call it 15 hours to be safe)
  
• Must play MP3s (I don't have music in any other format, so I'm not locked into the iPod economy)
  
• Light enough to carry on bike trips.
  
• Good sound quality.
  
• Enough music for a 3 week bike trip.
  
• Tough. I will use this on hikes, and being carried in saddlebags is not good for most electronics.
  

Features I don't need:

• Games. If I want games, I'll get a dedicated game machine.
  
• Video. Most players don't have enough storage for a decent amount of video. Those that do, don't have screens that I consider satisfactory.
  

Use patterns:

• Solo hikes, about once a week or so.
  
• Feeding the home stereo, 3 days a week.
  
• Planes: Twice a year
  
• Long trips (about 3 weeks each), possibly disconnected from civilization, about twice a year, but with increasing frequency.
  

If you have recommendations, let's hear them!

Why Financial Planning is Important

In 1995, I was working at Pure Software when the company went public. One of the very early engineers said to me that day, "I've achieved the American Dream. Millionaire before 30." At that time, his net worth was easily into the mid single digit millions.

Fast forward a little more than a decade later, and I'm trying to recruit the same person to my company. We eat lunch, and we chat. I ask if he even needs to work anymore, given what I knew of his finances, and he said, "Actually, no, I do need to work." The house he lived in was paid off, but his finances weren't in as good condition as I had assumed.

Before you think, "What an idiot. This can't happen to me." Consider this:

• In 1995, financial information was hard to find. The list of good financial books worth reading for non-experts was down to Burton Malkiel's A Random Walk Down Wall Street, which while it is as good then as it is today, was a bit of a read. (My mom still doesn't understand the book)
  
• Vanguard did not have a web presence then. The web brokerages were dominated by folks like eTrade, which did terrible things in executing your trades that you wouldn't want.
  
• Financial advise on the web was limited to The Motley Fool, which back then touted Rule Breakers, Rule Makers, and a bunch of high risk strategies.
  
• John P. Greaney's fabulous Retire Early Home Page, which I recommend to anyone, did not exist until 1999.
  
• In person financial advisers were just as ignorant and sleazy as they are today. It is common, in my experience, for even sophisticated, intelligent people to fall prey to them.
  

I would like to think that I would have done better, the truth is, financial information is so much better and available today, and with a decade of experience, my financial life is better organized than it ever has been, despite still needing improvement. Nevertheless, I find it difficult to fault someone who might have fallen into the easy trap of "I'm wealthy. I can get better advice that less wealthy people get." The truth is, while being wealthy can open up opportunities that the less wealthy won't get (chiefest of which is access to Vanguard's Admiral Shares), it won't get you better advice, by and large, which means that you still cannot outsource your financial life.

I'll close with a reflection on John Greaney's page on retirement planing:

The time I spent ... learning about financial markets were undoubtably the most highly compensated hours of my career.

Not only does the learning help you avoid pitfalls that others fall into, the learning leverages all the money you'll make in your career, giving you a double whammy as your career grows. If you're Jack Welch, John Chambers, or similar CEO/entrepreneur material, you might not need such an education, but for the rest of us, learning this stuff isn't nearly as hard as programming in C++, and is easily as lucrative.

Highly Concentrated Portfolios: A Case Study

I know a lot of people with concentrated portfolios. Most of these people don't need my advice. The reason, as laid out in this excellent article by John P. Greaney, is that if you can live on less than 1.5% of your portfolio, your need for diversification is lower. (Note that it's not riskless --- for instance, if you had a concentrated porfolio in Enron stock, you would not be happy come 2002 if you had not diversified! Diversification is still advisable!)

Here's a case study of a purely hypothetical person who took a drastic step outlined in a previous article and moved to a tax haven for retirement. One of the things they don't always tell you about these moves is that some tax havens may not have well developed financial services, so you may be stuck with the limited investment choices provided by Vanguard Global Services.

Let's say this person divested partially out of his concentrated position by selling about half his concentrated portfolio. What should he do with the money, given the limited investment choices? I'm a big fan of simplicity, so I can see a few good choices:

• Global Stock Index Fund
  
• Emerging Market Fund
  
• Various bond funds
  

In general, when looking at Vanguard funds, anything managed by Gus Sauter is likely to have the superior transactional skill exhibited over the past 30 years or so.

So what is our hypothetical friend supposed to do with the cash portion of his portfolio? My general thinking would be: 40% developed world markets, 10% emerging markets, 40% bond funds and 10% cash. The reason is that this gives him an overall 75% equity and 25% fixed income (remember, half his assets is still in that highly concentrated portfolio!). If you want to get more sophisticated you can slice and dice and eliminate the US components of the index, since that's already taken care of by the concentrated position (though I don't generally think that's a good idea, since if you have all your US holdings in one stock, it's quite possible for that one stock to do badly while the rest of the US goes on merrily on its way).

This should grant reasonable protection against a crash in equity markets or rampant inflation. Given that such a person is already able to live off of less than 1% of his assets, this makes his already relatively safe position even safer. Comments on this analysis is welcome.

John Doerr Visits Google

I had the pleasure on Thursday of listening to John Doerr talk about global warming when he visited Google. This was a rehash of his TED talk linked to in the title of this post. He goes through many of the things we already know: getting the consumer to do the right thing without price signals is next to impossible (hence the need for a carbon tax), how Brazil transitioned to a largely fossil-fuel free transportation system, and what the upcoming technologies are.

Just as John Lovelock was, John Doerr is pessimistic. This is important, because by nature, venture capitalists are pretty much the most optimistic people on the planet. They have to be --- at least 50% of the companies they fund are outright failures. So if he's pessimistic, then I think Lovelock is right: the chances of Earth having an environment that human beings will find pleasant in 2050 is less than 50%.

Nevertheless, I had a few questions in my head as I left the talk:

• When the partners at KPCB flew around the world to observe the effects of climate change first hand, did they fly coach? Or did they fly in their private jets, adding to the problem?
  
• Did Mr. Doerr change his lifestyle when he learned of the problem? Or does he still drive a big fast car to work?
  

(These aren't my only questions, but my other questions are not appropriate on a public blog)

If someone as aware of the problem as Mr. Doerr is can't change his lifestyle despite knowing of the problems, what hope do we have of convincing the world that we have to do something about this?

Tax planning II

Hoisted from the comments, Brad Delong style:
i was just thinking about your "tail wagging the dog" thing and wondering if that is true, why does it makes sense to put money in tax-exempt funds?

I have been slashing my savings in CA tax-exempt MMF but I am confused if that is the right thing to do. Any suggestions?

Thank you for your question.

There's a difference between tax aware investing and "tax tail wagging the investment dog" thinking.

Here's a good example of tax aware stock selling. The author clearly has thought through the issues and understands the risk of selling late. An example I can think of is the "tax tail wagging the investment dog" thinking is that of a conversation I had recently with someone who had a majority of her wealth tied up in her company stock options, which had hit a record high. Despite her awareness of that, her reason for not selling was: "I don't want to pay the capital gains tax." Given that a majority of her assets were in the form of NSOs, she would have to pay those taxes sooner or later, while the consequences of a 50% drop in a high flying stock on her wealth would be substantial.

Back to the your question. Putting money into a CA tax-exempt fund makes sense when your marginal tax rate is high enough that the reduced yield of the CA tax exempt fund after taxes is higher than that of the best non-tax exempt fund you can find.

To do this, first find your marginal tax rate, then visit the Vanguard after-tax equivalent yield calculator. You probably already know your marginal tax rate for your state (CA), but in case you don't, here's the table.

Here now is a puzzler for you financial gurus: A person I know just quit his job to move to another (income-tax free) state. His reasoning: "I have enough money in my stock stash to retire (barely), but my margin of safety goes up by about 9.3% if I move to a state with no income tax when I sell. So I'll change residency and do my selling then." Note that again, his portfolio is highly concentrated in one stock. Would this be considered tax-aware stock selling? I have my opinion, but I'm interested in what others might think.

Farseer Trilogy

Over the years, these books' have been staring in my face, daring me to actually read them and me always putting them off because well, they looked utterly boring. Oh boy, yet another fantasy trilogy about assassins...big whoop.

I think I must have read one of them a few chapters and got utterly bored. Because I think the second book have sat on my bookshelf for at least 3 years or so.

Well, I was out of reading material and decided to try it again. And well...2 weeks and close to 1,200 pages later, I'm done with the Trilogy.

There are two things that I'm particularly concerned about when I read any fantasy novels, and that's basically writing style, and story pace. Story content is a given, but I'm far more forgiving of a story content that's been retold multiple times but in a different manner than say, of weak writing or weak pacing. I won't bother with story content because you can get the summary from Amazon.com, and frankly, its not particularly original nor unique.

So at least in the two categories I care about, the Farseer trilogy is pretty good.

The writing style of Robin Hobbs is a little peculiar, if a bit verbose. She tends to love describing things, going on and on about the lushness of a particular forest, or the fragrance of a particular dish. She doesn't have any pet remarks like Robert Jordan did (tug braids, smooth skirts...), but all the same, you do start glossing over her verbosity when it comes to descriptions after the first 200 pages or so. Some editing would probably have helped as the first book weighs in around 300 pages, the second at 500 pages, and the last close to 600 I believe.

The entirety of the trilogy is also written in the first person, from the point of view of the protagonist. As it is, it serves quite well for the high fantasy world she's put the protagonist in . The reader finds out information at pretty much the same time as the protagonist. Hence you get to see that the world building is quite well done, and the magic system reasonably believable.

The pacing of the story is quite intense. I found myself flipping the pages as there's rarely a dull moment unless she got into the mood to start discourse on the lushness of a certain area.

The one major gripe I have about the series is that characters do fairly retarded things. Trusting characters are often potrayed as little more than idiots when it comes to trusting the wrong people...Clearly, her characters never learned the proverb "once bitten twice shy"

All in all, a trilogy that I found worth reading...it didn't radically change the landscape of high fantasy, but its still a good series in its own rights and i don't regret at all the time I spent on it.