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.

Berkeley Hills Ride

Joining Matt Blain and I at the start was David Reiss and Greg Merritt. Matt went to use the restroom, and we got started because I wanted to go use a porta-portee instead. Matt and Sandor met us at the park with the porta-portees and we rode up together to Tunnel road.

Sandor set a blistering pace up Tunnel road and soon we had dropped David and Matt. The weather was clear and beautiful, but the haze (probably from the SD fires) restricted visibility. Nevertheless, it was a big improvement from the fog that greeted us on this ride.

At the intersection with Alhambra Valley Road, we opted for the longer ride, and Greg pulled us for a bit before taking off to do some shopping with his daughter. We then made our way over to Pinole and Richmond, riding by the ugly refineries before coming over along the Carquinez Straits to climb McEwen road.

It had been 2 years since I last climbed McEwen Road, and I'd forgotten how pleasantly shaded it was, and we made our way over to Franklin Canyon road. Franklin Canyon road is rough enough to provide a gratituous butt massage, and then we ended up rejoining the "C" route on Reliez Valley road. By this time I was feeling the effort or the ride, and had slowed considerably. Fortunately, Sandor was happy to slow for me.

At Moraga Center, I knew I was in trouble when after sitting down for 3 minutes I tried to get up again and saw stars instead. Fortunately, a bit of food and water and all the endurolytes I could eat cleared my vision. Nevertheless, the climb up Pinehurst was slow, and the climb along Skyline to Tunnel road took all that I had left. The descent down Tunnel road, however, with the gorgeous bay views and the
easy riding re-energized me, and we made it down to the car at 4:30pm. Matt had been waiting for a couple of hours and told me that the "easy 35 miler" had turned out to be closer to 45. Since Matt's the first person to have ever completed that ride, I'll have to fix the route sheet for next time. David had gotten onto the BART at Lafayette after just 24 miles. Of course, those 24 miles had probably clocked in at 4500' of climbing.

Is it too late to join this hot startup?

I occasionally get questions like: "Is it too late to make a lot of money by joining company X?" This is very silly, because if you've already interviewed with the company, you'll know the situation better than I would, and therefore, you'll know better than I would.

Having said that, there's a very old adage, which is that it's better to have a small piece of a big pie than a big piece of a small pie. Too many people forget that, thinking that they'd rather join a smaller startup (or one that has a smaller valuation) than to join one that's already rather established. Believe it or not, even in early 2004 pre-IPO, I had a hard time persuading engineers that no, it wasn't too late to join Google and still make a lot of money.

And of course, if you do really well at Google, the founder's awards, bonuses, and so on will make you wealthy, so if you're really really smart, joining a big company like Google even at a very late stage makes a lot of sense. You'll work hard and climb the ladder, and Google has the resources to reward you at levels most startups can only dream of.

I joined Google in 2003. When I joined, I was told the company was valued at $X. I called up one of my VC friends and asked if he thought Google was worth that much. He said, "No matter how much the valuation, trust me, it is far below what the market will actually pay." That VC friend, by the way, is now at a certain hot Silicon Valley startup with what many would consider insane valuations. And that's typical of most Silicon Valley startups. So no, if the company you're talking about is a pre-IPO company, no matter how lofty the valuation you might have been told or talked about, if the company is successful, it is not too late. The key, of course, is whether the company will be successful (which is in the long term more important than anything else). And if I could predict that, I probably would have had a career doing things other than writing software.

There is another secret about startup stock options that not many know, and I won't say much about it because then it'll become common knowledge, but suffice to say, it's one of the few games where the game is actually rigged in your favor, if only you had the courage to take advantage of it.

Review: Acacia Book One: The War Against the Mein

I was first turned onto Acacia through John Scalzi's blog. In it, he mentioned he had an interview with David Anthony Durham in which the following caught my eye:
...I’m quite confident that if readers think about it for a while – or remember to think about it as they read in the future – it won’t be long before they’ll come across numerous examples of white-only fantasy worlds, or white-mainly future worlds, or note current prejudices appearing in different guises…

Consider if that would ever happen in the work of a black writer. The prejudice part might, but the one race only world likely wouldn’t. As a person of color he/she would have spent a lifetime being aware of race on a day by day, hour by hour basis. If this black writer did create an all-black future or fantasy world white readers (if there were any) would likely find it improbable, limited, some sort of minority wish-fulfillment, or think it suggestive of some deep-seated racial animus – perhaps called racism...

And gosh darn it he is absolutely absolutely right. Lord of The Rings was 100% lily-white in its heroes, down to the Elves and Dwarves, as is a lot of even pretty modern fantasy. So I put Acacia down on my to-read list, to see if a black author would do better.

Acacia starts with an perhaps archetypal plot: the old King is assassinated, the foreigners have invaded the land, and the children have been scattered to the winds, only to return later to take revenge for their now dead parent. The twists, however, are very very entertaining. First, Durham makes the villains of the tales white people with fair skins, blond hair, and blue eyes. It's one thing to think about it in abstract, but the first time you realize it you're thrown a bit for a loop, because it is so infrequently done in fantasy literature.

Then, as the plot unfolds, the barbarians at the gate turn out to have an old score to settle for themselves. The children do turn out as you might expect, each of them developing into very strong adults and characters, with Alivier, the oldest of them all becoming as much a prophet as he is a warrior, seeking to not only return his family to power, but to rebuild the empire to redeem the ills of Acacia's past: an empire support by drugs, slavery, and not a little bit of oppression. The ending of the book is also altogether unexpected, and one should not expect the typical hero's quest.

All this would be for naught if Durham was not a writer of exceptional skill. His prose is a dream to read. Here's an action sequence:

Thasren drew his dagger from hiding. He sliced it diagonally away from his body, a movement so fast it drew many eyes. The blade reflected shards of lamplight, a sharp thing in a hand that should bear no sharp thing. He dashed the last few steps forward. The king's eyes turned towards him, puzzled, mouth puckered as if about to pronounce the ambassador's name.

This rhythm and the clarity of phrasing runs throughout the entire novel. It is a very seductive voice, and it carries you in, page after page.

The world building is also excellent, with a creation myth that echoes of Ursula Le Guin's Earthsea quartet. And of course, there's a lot of diversity in the characters. Brown people, olive people, black people are all there in the book, something not often seen in fantasy literature. Whatever else you can say, Durham has definitely achieved his goals.

Highly recommended, and worth buying at full price if your local library does not carry this book.

Interview with Paul Krugman

This is a great interview with Paul Krugman. I think he is one of the best thinkers/political columnists of our generation. He has been right about so many things --- inequality, George Bush, the Iraq war, and now his latest book, about the recent success of the Republicans (mainly due to racism) will probably be vindicated in a few years. It must have been tough being the only guy in popular media to be constantly writing about what a shambles Bush's policies were back in 2001 at the height of Bush's popularity, but once again, being right trumps everything else.

James Lovelock thinks global warming is irreversible

Lovelock's pessimism mirrors my own. Again and again, we see humans take the easy, convenient solution over the tougher ones. It's easier to drive the car than to walk or ride your bike. It's easier to drive your kids to school than to teach them to walk to school. Lovelock might be right, but it's not going to stop me from doing what I can, and ultimately, what else can we do?

Articles like this remind me why I decided years ago that the proper recipient of any charitable donations from me should to environmentalism rather than humanitarian aid. Without an environment that can support human life, no amount of developmental aid will help the human condition. Environmentalism isn't about saving the planet --- it's about saving the human race, which I think is the ultimate humanitarian aid.

Lovelock knows that predicting the end of civilization is not an exact science. "I could be wrong about all this," he admits as we stroll around the park in Norway. "The trouble is, all those well-intentioned scientists who are arguing that we're not in any imminent danger are basing their arguments on computer models. I'm basing mine on what’s actually happening."

Sailing on the Bay (again)

An absolutely gorgeous day on the bay yesterday. Stunning visibility. Not too much wind at first, but it picked up at the end. What a lovely weekend it's been! So warm and lovely.

Fall Ride

Pardo, Brian Wickman, Zoran and I met at 9:15 at my place, and rode up McClellan, Stevens Canyon, and then Redwood Gulch. Fall was in full swing as trees were shedding leaves all around us. A gentle wind would swirl them around us as we climbed the slightly damp pavement. Highway 9 was a cinch after that, and we started down the cold side of Saratoga gap. I was quickly passed by both Brian and Zoran, both spinning hard to stay warm, but soon enough, we started climbing Hwy 236. It was cool enough that I kept my shell and knee warmers on for the climb, and soon we were in Big Basin where after a brief discussion we decided to eat lunch in Boulder Creek. The climb out of Big Basin was lovely as usual, with the smell of redwoods in the air, and a few open camp fires granting us that rustic feel. The drop into Boulder Creek was fast and fun, and there we bought lunch and ate at the usual city park around the corner.

Bear Creek road had unusually light traffic during the initial bumps and swoops before crossing over the bridge for the start of the real climb. Past the first winery, however, the road levels out and you start getting clear glimpses of the coast. On Saturday, the visibility was so high that we could see all the way to Monterey Bay and Big Sur from the summit of Bear Creek road. At the junction of Skyline we made a left and went up the rolling climb to Black Road, where we eschewed
the descent to the Los Gatos Creek trail and kept going back towards Saratoga Gap, stopping only at the view point for another inspection of Monterey Bay from a distance. We then descended to Saratoga Gap where Brian left us to descend Page Mill and the rest of us descended Highway 9, Pierce, and back to my place. Zoran had a flat just 2 miles from the end, but it was fixed and we had Mexican dinner at the
Burrito factory.

70 miles, approximately 7000' of climb.

How to be lucky

This is a great article, and I think it really demystifies the connection between luck, success, and ability. I'll provide a few anecdotes:

• When I first joined Google, I spoke to many people about the smartest thing they could have done right away when they joined: exercise their stock options. Many folks, despite my explanation of why it made sense, chose not to do so. They just couldn't grasp the idea that they could be financially sophisticated and be successful.
  
• I will discuss my trips with some people. Many of them would tell me, "What a wonderful trip!" Yet the next time I invited them along on a trip, they would say, "No. Too busy."
  
• I called a friend of mine several years ago hoping to recruit him for Google. His first words were, "Darn it! I should have called you once I decided to start interviewing. I've already accepted an offer at Amazon."
  
• A few years ago, I started up a D&D game and met a bunch of folks at random to play. Three of them turned out to work at Google, and after a year or so of gaming with these folks, I ended up working there as well.
  

My social network of friends and people I know have been priceless to me over the last years. Opening yourself up to these opportunities and leaving your comfort zone is essential to both becoming lucky and successful. Even Scott Adams agrees, so it must be true.

Review: Take a Nap! Change your life.

Sleep is critically important, and Americans are frequently sleep deprived. I know this not just from the scientific studies that are frequently published, but from personal experience --- I started college as a "normally smart" student, but at the end of four years, I was doing far better than I expected --- most of my cohorts regularly pulled all nighters to study for exams while I got myself a good night's sleep and ended up doing better (there's an argument that maybe they were all drunk on alcohol, but since I was studying computer science the number of party animals I could compare myself with was limited). My long term memory was better, and hence I did better.

Sara Mednick's thesis in this book is that humans naturally have bi-phasic sleep. In other words, left to ourselves, we'll get in two sleep cycles in a day, one long one at night, and one shorter one at mid-day. The evidence she marshals to convince us that napping is natural and good for us is considerable: the studies basically show that the increased alertness, memory, and learning are considerable after the nap, quite possibly more than making up for the lost time spent napping. These studies are convincing, but in her presentation at Google, she reminded us that sleep is a very young science --- there is also some evidence that exercise can also result in the same increase in productivity, so we don't know if it's the state change in your head that causes the increase in mental alertness, or whether sleep itself does something.

There are a few gimmicks in this book, one of which is the sleep wheel on the cover. You turn it to when you woke up this morning, and it tells you when to sleep for an optimum mix of stage 1 sleep, stage 2, sleep, and deep, slow wave sleep, with a reminer of what each stage does. Scattered throughout the book are also a bunch of case studies of how people use napping (and what kind of napping is used) to change their lives for the better.

I did ask a question when Sara visited, which was whether napping was recommended for people with sleep apnea. Apparently, no studies of napping for people with apnea have been done, so it might even be dangerous for people with apneas. Such a young science that even I can ask unanswered questions! Clearly, more funding is needed for this.

Obviously, the ultimate test of this book is whether or not it works. And unfortunately, I can't tell you. I work in a fantastic environment by most standards, but privacy and enough time to sleep is definitely not one of them. This would be a worthwhile experiment for those who are self-employed, or who have offices with doors they can close. Hm... Maybe Microsoft engineers can make this experiment. But seriously though, for athletes, the benefits of napping are not in doubt whatsoever.

Recommended with the above caveats.

Tax Planning and other financial matters

I do occasionally help people out with financial planning. A surprising number of folks at work seem to already have one (I can't imagine justifying the expenditure on one, given that by the time you're knowledgeable enough to interview one you know enough to do it yourself), and I only do it for friends (liability reasons), but once in a while a topic will come out that I think is worth repeating.

The most important principle is that the tax tail should not wag the income dog. There is no such thing as a 100% tax rate in industrial world, so you'll always keep quite a bit of what you make. The best advise I was given by a tax accountant was: "Sell high. No matter what you do with your taxes, you can never beat selling high." I paid the guy $250 in 1995 to explain the AMT, and capital gains taxes to me and it's been worth every penny and saved me and some of my friends gobs of money. In fact, one day I ran into Niniane and one of her beaus and she introduced me as "the guy who saved her lots of money in taxes."

That said, it's surprisingly how little you can actually do to save on taxes:

• Join a pre-IPO company and exercise all your stock options. This usually involves substantial risk --- I've written off thousands of dollars in bad stock. But a college professor in Computer Science and I were comparing compensation and it turned out that he got paid about the same as I did, and the big difference was that I was able to convert most of my income into capital gains through this maneuver while he couldn't do so through his consulting business.
  
• Move to a low state tax. For me to give up California weather, that would be silly. I have friends who have done so, but if I wouldn't consider myself wealthy if I couldn't live some place with good weather. The folks I know who've done this don't consider an outdoor life important to them. If you're not a US citizen you can even move somewhere with zero capital gains taxes (like Singapore) and pay no capital gains on US stock. Pretty nice, huh? Except I've lived in Singapore and I moved away for very good reasons that are still valid.
  
• Use tax managed funds and indexed funds whenever possible for your taxable portfolio when investing
  
• Max out your 401(k) plans
  
• Buy a house (but not too much house that it destroys your finances). But frankly, buying a house is a consumption decision, not a tax decision. Do not let people talk you into owning a house because of tax savings! Someone I know had this happen to her and deeply regrets it. Fortunately, she won't be affected financially by this, if at all, but many others will not be as lucky!
  

And that's it! There are a few other minor things you can do (such as playing around with when you pay state taxes if you have a year that's going to be huge on AMT due to one time gains), but those are very minor and don't actually save that much money compared to the above.

You cannot outsource financial work

One of my favorite financial bloggers, PFBlog writes about spending 10 hours a year on his taxes despite his employer, Microsoft, paying for KPMG to file his taxes for him (what a great perk!). I have lots of friends who pay accountants despite not having taxes as complicated as his.

Like him, I always do my taxes (I also do a few other people's), and I find that it is essential in order to understand the overall picture behind taxes, how they work, and what changes year after year. On top of that, by doing taxes yourself in TurboTax, you also gain access to the wonderful tax audit protection service provided by Tax Resources, Inc at an amazing price.

My aunt is an accountant, and despite her years spent preparing taxes for corporations, TurboTax outperforms her in terms of getting money back. Outsourcing your taxes is a lot like outsourcing your financial planning: without a clear understanding of what you are doing, you will not get satisfactory results.

US Productivity Slowing

People like Paul Graham are big fans of inequality. Reading his essays, one feels like if we could only return to the levels of inequality found in the gilded age (or in India or Argentina or Brazil of today), productivity would improve dramatically and we'll generate more wealth than ever before.

Modern economics research, however, gives the lie to this sort of right wing propaganda. (Modern happiness studies too, show that countries where the Gini coefficient is low are happier societies)

Even worse: The productivity numbers are likely even worse than they look. The most important reason is that the official productivity figures don't handle the rapid depreciation of new technology very well.

As Paul Krugman writes in his latest blog entry, you have to squint to spot the so-called lagging of the European socialist economies with respect to U.S. productivity.

Review: Order of the Stick Print Comics

D&D players have always been insecure. My favorite example is that over in the Enworld Forums, every so often there'll be a thread about how D&D or Role Playing Games (RPGs) are losing players and becoming an extinct species.

The evidence, however, is that D&D is going strong, and the number one exhibit for that case has to be the Order of the Stick web-comics, which make so many D&D references (right down to edition changes) that most geeks wouldn't even bother reading it unless they were D&D players.

The Order of the Stick has become so popular that it has spawned two print-only books:

• On the Origin of the PCs
  
• Start of Darkness
  

On the Origin of the PCs introduces the player characters, or rather, the protagonists. In black and white (to lower costs, and to reflect the flash-back nature of the story), it provides the back story behind each of the protagonists and their coming together. Along the way, it makes fun of the usual D&D tropes (dark strangers in taverns anyone?), as well as the usual jabs at the D&D rules. While I think it falls short of being as funny as the web-comic, it is still very funny.

Start of Darkness details the villains, and surprisingly enough, was more interesting than the protagonists. Though as any DM who has spent gobs of time detailing the backstory of his villains who rarely survive more than one encounter with the PCs will tell you, this is all too common. In particular, the goblin known as "Redcloak" has a tragic story and this makes the web comic even more entertaining.

As you might have guessed, you can read most of these on-line, but you're not going to enjoy these comics unless you like D&D, and if you are not a current player, you will miss many jokes and references. But yes, Scarlet, I expect you are current enough to get most of the jokes.

1:57:26 for 13.1 miles

Wow. Its been one year since I started on this journey of "lets see how many events I can do in a year" spree, and this is pretty much the last event I wanted to do. It started from last year's Rock n Roll San Jose and ended with this year's Rock n Roll San Jose. In between, I did a full marathon, a Europe bike trip, and was supposed to do a tri, but got sick the weekend of, so I skipped that.

But still, 3 events, and 1 long bike ride later, I can say I'm quite satisfied with my physical achievements this year. I believe I ran a slightly faster time last year, but this time I had a running partner, and that made a huge difference in the amount of fun I had.

This year's event was quite packed, and it'll be interesting to see exactly how many registered runners there are...I estimate around 12,000, but could be slightly more.

We started with the 2:00 pace group, who did not start at a 2:00 pace, I believe they were going at a closer to 1:50 pace, but around mile 6 or so, they slowed down while we sped up. Had a gel at the mile 6 water station and felt buzzed enough that mile 7 through 10 felt like a breeze. Mile 10 through 13 was a bit more painful and I started to feel a slight pain in my left feet while my partner's calves were starting to lock up a little.

In the end, we finished within 20 seconds of one another! And for her very first 1/2 marathon its an incredible achivement! Props to her!

Next up....I don't know whats next up, but I plan to keep on running 1/2s for a while to come.....Fulls, not so much. They're not as fun, and although more than twice the achivement, I think I might just be satisified with running a single full in this lifetime. =)

Until I convince myself otherwise of course. =)

The contrast between this year and last years is mostly in the matter of training. Last year I overtrained, and this year, I trained just right. Last year at the end, I felt like I could run another 6 miles, this year, around mile 13, I was very glad I only had one tenth of a mile to go...

I'm not sure if its a great thing or not, but I'm very very happy I finished under 2:00 still....

Feeling wealthy

I've never felt wealthy. Not when I paid cash for my first car back in 1999 (near the height of the internet bubble). The benefit of that was that when the bubble burst in 2001, I didn't feel poor either.

I didn't feel wealthy when I wrote Google a check to exercise my stock options, a month after I started at the company, wiping out a couple of years worth of savings. (Yes, some loved ones did raise an eyebrow, but it was a safe investment, as safe as any such investment can be)

I didn't feel wealthy at Google's IPO. I did write a check to pay off my mom's mortgage, which was a rather smart move I was making the monthly payments anyway, and the mortgage was at 8% or so and refinancing was impossible since nobody wanted to refinance for so little money.

I didn't even feel wealthy when I started shopping for a custom frame. For someone who rides much more than he drives, even a new custom bike every year doesn't come close to the cost of a car.

But a few weeks ago Lisa and I decided to engage a cleaning service --- we were just overwhelmed by all the housework that we had to do that we just didn't enjoy doing. We weren't good at it, and we weren't good about it. And I looked at my assets and thought: "Ok, let's find out how much a cleaning service is, and throw money at the problem to make it go away." We asked the concierge at work for a recommendation, called him up, and he showed up to give us a quote last week, and they came by today and cleaned up the house.

Lisa's reaction at the results when she came home was one of amazement. She got on the phone with the housecleaning service and raved at the owner with praise for a good 20 minutes. I was pretty impressed. It felt like coming to a B&B, everything all laid out, the sinks polished, etc. So for the first time in our lives, at least, we felt wealthy.

The thing is, we live in a small Silicon Valley apartment. The quote for the service was embarrassingly small. We could have afforded it ages ago, but it always felt like a luxury, and indeed it is one. This little luxury, more than any object we've ever purchased, wasn't just an object, it was time away from doing things we didn't enjoy doing, yet done with amazing professionalism. So if you want to feel wealthy, treat yourself to a really good cleaning service.

Review: The Other Boleyn Girl

This is a story of sibling rivalry and ambition, told through the lens of Mary Boleyn, the sister of the historical Anne Boleyn, the second wife of Henry VIII, and the first to be beheaded.

The story portrays Mary Boleyn as the heroine of the story, whom at the age of fourteen was the King's mistress. Unlike the historical Mary Boleyn, the fictional one is portrayed as the pawn of her family's ambition, to be bedded and wedded as the family needs and as the men design.

When Mary's sister Anne shows up in court, she demonstrates her ambition, first by seducing Henry Percy, getting exiled from court for her troubles, and then upon her return, upending her sister's claim on the King by displaying a shrewd manipulation of Henry VIII. The book portrays Mary Boleyn's maternal instincts as opposed to Anne Boleyn's intelligence, temper, and ability to manipulate others. It is quite obvious what values Phillipa Gregory (the author) holds dear.

The novel succeeds in manipulating us to feel that the downfall of Queen Anne was deserved and that the place of a woman is in the home and in bringing up children, not in working on her ambitions. Being a period piece, obviously I cannot fault Gregory for bringing in all the homophobia, the feeling of scandal when the King divorces his former Queen, etc., but I suspect those of us who live in the modern age will read it and be thankful that we were born quite a bit later.

Building a custom bike, Part III

This is the final revision. What happened was that my fork builder, Black Sheep Bikes gave Carl different dimensions than the actual fork itself, so when the fork itself showed up, Carl measured it and revised the drawing. Everything looks good (now the head tube is longer), and it's almost time for me to start buying parts for the new bike. Since the parts are mostly coming off the Fuji Team SL, I'll really only need a new stem and some spacers. (Carl's also selling me a silver Chris King headset to go along with the frame)

If this is a replacement for my touring bike, why am I putting the Fuji's parts on it? The theory is that this will really be my do-everything bike. The Fuji's parts are lighter, and I'm not looking at any major bike tours in the near future, so I might as well make this the light day riding bike first. For daily commuting, STIs work just fine, and I can swap in the seat post, wheels and lights from the Heron. On weekends, lighter wheels on the bike, the lights come off, and I put on the carbon seat post instead of the B-17. The entire transformation should take 10 minutes.

For touring, I'll swap in a triple chainring crank, a bottom bracket to go along with it, bar-end shifters (a whole new handlebar set, actually, with carbon brake levers, etc), and the bike will be ready to go! If I have to do this a lot I'll work out some cable splitters and find a way to switch between double and triple cranks easily (this can be accomplished with the external bearing integrated cranksets, but unfortunately a move like that will cost a lot!). Either that, or learn to live with a 27" gear, which might be feasible if the bike is light enough. I will have to run a light tour in February or March to figure that out.

Review: The Birth of Plenty

This is William Bernstein's book analyzing the development of economies in nations and regions, the pre-requisites, and the implications for modern economies. Why did the industrial revolution happen? What are the pre-requisites? Why do modern economies appear to have a flat 2% growth rate? Is this sustainable? What about the Bottom Billion?

Bernstein's thesis is that there are four requirements for a modern, industrial economy:

1. Property Rights (including intellectual property rights such as patents and copyrights)
   
2. A Rational Worldview (access to the scientific method)
   
3. A large and efficient capital market
   
4. Communications and transportation infrastructure
   

The first part of the book describes the rise of these properties in Western civilization, and why they are important. The second part describes the history of the industrial revolution and explains why it happened in England and Holland but not in Spain and France. The last part explores the consequences of this idea in relation to aid, development, and how economies should be managed.

I think anyone would find it difficult to argue with the first 2 requirements of prosperity. The experiments with Communism have found that without property rights, human nature just does not have the intrinsic motivation to work to produce what others want. An examination of modern contributions to well being also demonstrates that without the scientific world view, it is difficult to come up with new theories or technologies that truly improve the human condition (when was the last invention to come out of a fundamentalist mindset?).

The last 2, however, seem to me to be natural consequence of the first two. Once you've set up a good incentive system, human ingenuity will come up with good capital markets and transportation system. I am not a historian, so I won't say much about part 2 of the book, but I found it to be good reading and an illustrations of the principles involved.

The last part of the book will be more controversial, and is part of the argument between William Easterly and Jeff Sachs about development and aid. If Bernstein's thesis is right, then not only is aid in the form of food and medical improvements not helpful for developing countries, but they are harmful. A nation caught in the Malthusian trap with an increasing population just increases the number of miserable people without improving prospects for growth. This is something very important to understand: without economic development, all you get when you improve mortality rates and health is a lot more miserable people. Instead, what Bernstein prescribes is first establishing the rule of law so that incentives for people are directed towards improving productivity rather than attempting to undermine the system or corrupting it by becoming rent-seekers (gate keepers, or government bureaucrats living off bribes). Only after the rule of law has been established, with independent judiciaries can more education (providing the modern mindset), more AID (money to prime the capital markets), or more infrastructure help.

This is an extraordinary claim, and of course would be difficult to prove, but Bernstein provides two examples, both dictatorships that imposed a rule of law first, and the resulting economic prosperity eventually led to the overthrowing of the dictators themselves. (Hint to future dictators: keep your people miserable --- happy and prosperous people apparently demand democracy!) Bernstein demonstrates with statistics that democracy is not a precondition for economic success, and its correlation with prosperity is because the latter causes the former. (So observing free elections isn't all that useful if what you want to do is to eliminate poverty) What this means is that any attempt for us to reform the Middle-East is doomed to failure. None of the four properties Bernstein proposes should exist before prosperity exist in the Arab countries, and there's no sign that we're successful at imposing them on Iraq. Lawrence Wright also noted that the country of Norway created more exports than all of the Arabic countries combined, so at least with this regards, Bernstein is right.

I think it would be interesting to see what happens if we actually tried to apply this model for helping the "bottom billion." It definitely runs against what everyone else I've read recently says (except William Easterly), and is great food for thought.

Finally, Bernstein explores happiness and economic development. It seems quite clear that economic development by itself does not make people happy. All the studies show that people compare themselves relative to others for happiness, so countries like the Scandanavian countries with a low Gini Coefficient are happier than possibly wealthier countries like the United States. (A visit to the relevant countries will demonstrate this to be true)

When Bernstein visited Google, I asked him this question (not addressed in the book): "There is an argument to be made that our prosperity for the last 200 years has been due to the abundant supply of fossil fuels, which when they run out will make an end to our prosperity. What do you think?" His response was that he believed that this prosperity is largely dependent on human ingenuity, and that while fossil fuels might have helped a lot, he thinks that once on this treadmill, we'll managed to make ourselves wealthier even without fossil fuels, albeit at a slower rate.

In any case, this book is thought provoking, intelligently written, and well worth your time, especially if your first reaction when you see an article about third world poverty is to reach for your checkbook. The possibility not frequently considered is that your financial assistance may not help, but would make the very people you are trying to help even more miserable. You might not agree with Bernstein's assessment, but at the very least you should consider his very cogent arguments. As one of my colleagues said, "It is extremely pleasant when somebody whose books are so intelligent comes across as even smarter in person." I agree.

Note: Bernstein's talk that he gave at Google is now up on youtube.

Fall Riding

Today, I had a hankering for a decently long ride. I went up Page Mill Road in the morning from Moody Road, and the weather was very nice. Near the top, I ran into someone riding up the hill with no shirt, flat pedals on an old Trek 1000 bike. He was incredibly strong, proving once again that equipment is no match for great legs and lungs. At the intersection with Page Mill road, I eschewed mixing with Wes's group, however, and headed up to the true summit on West Alpine road, where I pulled off and enjoyed a cliff bar with a view of the Ocean.

Descending Alpine road, I soon overtook the tail end of the group and road along the cold Redwood forest. It was gorgeous. Sunlight came through little spots in the trees and gave the road surface a dappled look. Leaves came down from the redwoods above me, and the air smelled like fall. Turning left onto Pescadero road, the wind picked up a bit and threw down more leaves, swirling around me and enveloping me in nature's glory. Wes passed me once again, and upon reaching the summit of Haskin's hill, turned right around and went back to pick up his group's stragglers. I rode on rather than mix in, since I enjoy descending by myself with no pressure behind me and no one in front to chase.

The solitude was broken several miles later as the lead group passed me and I hopped onto their wheels, as we pace-lined together towards the coast. The group turned off at North road while I kept going towards Pescadero and headed for Norm's market. There I bought a loaf of freshly baked (still warm) artichoke garlic bread, and went over to the benches at the back of the store just as Wes's group as they arrived from their detour. Not being able to eat the entire loaf by myself, I broke the bread and shared it with them, enjoying the unusually clear and lovely day on the coast.

After eating, relieving myself, and refilling my bottles, I left Wes's group behind and went on ahead. Soon enough, a cyclist on a GT bike passed me and I again hopped on his wheel. He was exceedingly strong but as we slowed down to chat I found out why --- he raced mountain bikes for GT, Oakley, and a few other sponsors. As stage road sloped up I was left behind on the climb but with such a nice day and the road being out of the wind once the climbing began, I did not mind at all riding by myself.

After the intersection with 84, I rode up next to a young lady on a Scott Contessa. We struck up a conversation: Stephanie was a mechanical engineer who worked on power-trains. We discussed training, traveling, and various events, and bone density --- she lifted weight so frequently that her bone density was off the charts --- clearly, I need to lift more too, though I am never motivated enough in the gym. She was recovering from a skiing injury, hence the riding.

Time passes fast when you have conversation on a ride, and soon enough we were at the top of Tunitas Creek. The descent down Kings was disconcerting, as I hit no less than 3 gravel patches on the way down. Both of us made it to Woodside with no problems, however, and from there we made it over to Sand Hill Road where Stephanie had parked. I said farewell to my recent companion and headed home the direct route, for a 76 mile ride in 6 hours.

Review: The Looming Tower (Al-Qaeda and The Road to 9/11)

This book won the Pulitzer prize award last year, and covers the origins and creation of Al-Qaeda, the fumbling of the ball by America's intelligence and law enforcement agencies, and the people involved in it.

The first part of the book chronicles the rise of Islamic fundamentalism in Saudi Arabia and the life of Osama Bin Laden. This part of the book is extremely well researched, getting details like his initial forays into Afghanistan, his marriages, as well as certain other important characters in Al-Qaeda, such as Ayman Zawahiri, the Egyptian who joined forces with Bin Laden later.

It is amazing how good Bin Laden was at taking credit for things he didn't do, and creating a myth around himself. Lawrence Wright, when he visited Google, said that the Muslim countries have in general created a place that is difficult for young men to live without boredom: there is no music, no dating, no movies, hence the attraction of matyrdom and becoming a freedom fighter.

The second half of the book covers the CIA and the FBI's investigation of major cases, including the bombing of the USS Cole, the initial failed bombing of the World Trade Center, as well as the failed attempt at the Los Angeles airport. With the benefit of hindsight, you can't help but wince at every missed opportunity, that perhaps with a more competent administration, would have foiled the ultimate tragedy that followed.

There are several colorful characters here as well, including John O'Neill, the FBI operative who was obssessed with hunting Al-Qaeda, only to be foiled by diplomats, the CIA, and his own appetites (he had 3 girlfriends in different cities and a wife, and was juggling all of them, and lived life well beyond his means). Though it made for a great story, I wish Wright could have spent more time on other parts of this narrative.

All in all, a very deserving Pulitzer prize, and required reading for anyone who's life was touched by the tragedies 6 years ago. Ultimately, however, I suspect that the war against terrorism is a cultural war, not one that can be won by counter-terrorism, law enforcement, or military action. Whether we can win over entire cultures into enlightenment and liberalism (or in fact, even our own culture) will ultimately decide how history plays out in the Middle East.

Practical Bikes

10 years ago, when Rivendell Bicycles was new, they stood for practical bikes. Bikes that could take wide tires, fenders, racks, but wouldn't actually be any slower, and wouldn't cost an arm and a leg because they were factory production frames.

Fast forward 10 years, and now we have a whole new generation of bike frames. Velo-Orange, for instance, makes a French Randonneur bike for $1650. Jitensha Studio makes an Ebisu bicycle for $1400.

By contrast, Bill Davidson's custom frame costs $1200. Put on a $300 custom fork and it's at $1500, the same price as a production Rivendell Rambouillet frame and fork! Carl Strong's pricing isn't that much higher.

I don't understand the logic of people paying more for a production bike than a custom frame. It makes no sense. If you want lugs, Bill's prices are $100 more, but for most people the advantage of going custom would be too large to ignore.

Today, when someone wants an economical bike, I point them at the Soma Smoothie ES. At $500 for a frame and fork with long reach caliper brakes, this is the practical bike that Rivendell no longer produces today.

And yes, I have test ridden the Kogswell P/R. It's not a nice handling frame. 650B wheels feel sluggish to me, and make the bike feel like a lopsided turtle on level ground. I think Jan Heine's taste is contrary to mine, and I am sad that the bicycle fashionistas have moved away from the quick handling, practical light riding bikes that I learned to love so much over the last 10 years or so, and I definitely blame it all on the pernicious influence of Jan Heine. Fortunately, folks like Craig Calfee keep turning out beautiful riding bikes just like the ones I rode 10 years ago, and judging from how popular his bikes are, these bikes are winning in the market over the fashionistas, which is all the satisfaction I need. Now if only someone made a light steel frame with that geometry...

Retirement calculators

I had another e-mail conversation with William Bernstein again about one of my favorite topics, the safe withdrawal rates. I've already seen what a conventional financial adviser provides. I wanted to know what one of the modern Gurus of asset allocation thought. Here's his reply (typos and errors in punctuation are all mine):

As you hinted at, and as Paul Samuelson famously said, we only have 200 years of history to go on, and the experience of the rest of the world, as well as current expected returns suggest, going by those 200 years are overly optimistic.

Forget all the sophisticated methodologies: GIGO, and what goes into these black boxes is most assuredly G.

Here are 2 simple ways of looking at it:

1. Start with 3.5% real for stocks, and 2.5% for bonds. that's about 3% for a mixed portfolio. if you're going to retire at 50, your time horizon is for all practical purposes "forever," so you can only withdraw your real return, or about 3%. but it's worse than that, since you have to adjust for uncertainty and a bad initial draw. so figure 2%.
2. Even simpler: since in the long term, to stay hedonically adjusted you don't just have to keep up merely with inflation, but with the living standard of your nonretired peers, which increases at the productivity growth rate, or 2%. add in a soupcon of uncertainty and your hedonically adjusted rate of return is zero. so . . .you have to save one year's living expenses for every year you plan to live, or 50 years, "worst case," or . . .2%
   

2% is grim, but that's only if you want to be bullet proof. In the real world, if you need 3% or 4%, you're trading off safety for a reasonable standard of living, which is OK, as long as you understand the tradeoff.

Myself, I plan to live what passes for a "frugal" standard of living in today's society (I'm fortunate to have been raised in the 50s, and to have sense of appreciation of what I have now) and spend only 2%, maybe a tad more as i age, with the knowledge that I'll most likely be leaving my kids, grandkids, and charities a nice chunk of change. which provides its own rewards.

Note that a 100% safe rate is pretty much redundant, since as history shows, you are likely to get caught up in historical events that makes worrying about your financial assets the last thing on your mind. We don't live in a super safe world, if history is any guide, so all the retirement studies have an precision that don't live up to its accuracy. John Greaney is well aware of this, and lives on 1% of his assets. It would be wise to do as he does.

Conversation with William Bernstein

Thanks to Karl, a bunch of us got to meet William Bernstein today, and the conversation was far more interesting than I expected. Here's a quick summary:

• Do you consider Berkshire Hathaway a separate asset class? I consider Berkshire Hathaway a closed end fund. Yes, the P/E of BRK is 10, but if you ask private businesses around the country, they'll tell you that they'll have a hard time selling their business for 5 times book value, let alone the 10 that Berkeshire Hathaway is getting. This means that there's a premium for Warren Buffett to be running the fund, and I do not expect him to be running the fund 40 years from now. But if you were to put together a fund that invested in private companies that can't be bought on the market, I would consider it a separate asset class.
• Why do you suggest using fixed asset weightings for regions, but market cap weighting for stocks, sectors within a region/country? For countries, there have been countries where the market cap has gone to zero. For instance, the rate of return in Peru for the last century has been -99.5%. So for you to rebalance in those cases would be a bad idea. But within regions, the risk is low, and certain countries like the US, Japan, or Britain can be considered regions because their markets are so mature. We then debated between fundamental weights and market cap weights *with* value/small tilts. At the practical level, on the market cap side you have Vanguard, DFA. On the fundamental side you have folks like Rydex and PIMCO. If you were to ask me there's no contest. (Somewhere in there he also mentioned that he was willing to consider REITs and precious metal equity as separate asset classes you rebalanced against)
  
• Isn't re-balancing just market timing? There was a paper written quite a while back about this precise issue. The authors were very coy about it. They postulate a world in which nearly everyone was a convex investor (i.e., when something went up they bought more of it, and when something went down they sold it or bought less of it). In that world, you'd make more money if you were a concave investor (i.e., buy more when it's down and sell when it's up). It turns out the model works both ways --- if most of the world is concave, you'd actually make money by being a momentum investor. But of course, the majority of the world is made up of convex investors, which is why rebalancing works. In fact, if you were to buy more of stocks when dividend yields were high, and less of them when dividend yields were low, you'd do very well. Just because you believe in the efficient market does not absolve you of the responsibility to do the math and look at what makes sense.
• How do you get the data to do this computation? You can subscribe to Morningstar. Or use the Wall Street Journal. Or if you're a DFA advisor you get the data as part of the package.
• Interest rates dropped 50 basis points. How does that affect you? It shouldn't affect you at all. It's a no-op.

A fascinating discussion, and I was glad to be in the room with such a smart guy and ask him questions.

Review: Mint.com

I was one of Mint.com's private beta users, so I'll give it a quick review now that the press embargo is over.

The traditional approach to personal finance is epitomized by Quicken or Microsoft Money: basically, a double-entry book-keeping spreadsheet made to look like a checkbook register to help you reconcile, categorize, and balance your accounts.

The main reason why most people don't use financial software (despite all the bundling deals that Intuit and Microsoft do) is because it's difficult, tedious, and real work. If you enter the data manually, it takes a while, and if you don't enter it manually, it won't categorize your expenses properly, and you don't actually get accurate reporting. There are all these problems where buying and selling stock don't actually track properly, and the whole thing is a morass. I say this as a long time user of Quicken (I've been using Quicken for 15 years --- I bounced a check once and I never did so again because of Quicken).

Mint.com takes the fresh graduate's intuitive approach to money: I can't be bothered to track every cent --- as long as my bank account goes up, I'm doing something right, and if it can categorize 90% of my expenditures correctly, that's more than good enough.

The premise of the site is that you'll register for on-line access to all your credit cards and banks. You will then provide your user name and password to them. That should sound really dangerous to you, but Mint's security advisory is reassuring. They then get all your up to date statements and poll your financial institutions and download your transactions continuously. New transactions are categorized by an AI-like algorithm (which can be easily improved once they get enough widespread adoption that they can apply statistical analysis), and you set thresholds for alerts to be sent to you (for instance, e-mail can be sent if expenditure exceeds a certain amount, or if large transactions occur, etc).

There are a number of weaknesses. First, they don't do brokerages. So your transfers to your brokerage will show up as "Business Purchase." Oops. In my case that thoroughly skews my reports. Secondly, without double-entry book-keeping, you will not detect bank errors! There's no forced monthly reconciliation, and no way for you to notice, "Hey wait a minute, I didn't shop there", unless you scrutinize each item yourself. For me, this is why I use Quicken. I've caught bank errors, identity theft, bad merchants, and many other problems because the forced reconciliation feature forces me to really look at each statement. By relying on the "as long as my bank account goes up" method, you won't catch any of these.

There are a number of strengths I don't find in Quicken, though! First of all, your Mint.com account is always up to date, including your latest expenditure. Their approach to budgeting is awesome: they basically average your spending in all the categories, and alert you when your spending is out of whack. Very automated, very slick, and very intelligent. If only Quicken was this smart. Finally, when they see suboptimal use of financial institutions, they'll tell you what a better move is (say, by recommending a better credit card, or a bank that pays higher interest rates), and they will quantify how much money you'll expect to save or get by making the move. Are their recommendations good? Well, for credit cards, they recommended the same one that PFBlog recommends as the credit card of the year. He does these analysis a lot more than I do, and I trust his recommendations, and if Mint.com comes up with the same thing, that says a lot.

Am I likely to keep using Mint? Probably not. I definitely am addicted to the reconciliation feature --- the fresh grad. approach to personal finance isn't anything close to what I want. The reporting fails for me as well, since if most of my money goes into investing, giving me 70% expenditure on "Business Purchasing" is of no use. But the budgeting and alerts system and the recommendation system is so good that I fervently wish that Intuit will adopt this for Quicken (the auto-categorization is already there in the latest version of Quicken, though it doesn't save me as much time as I would expect).

All in all, if you're a fresh graduate or you are currently not using Quicken or Microsoft Money, Mint.com is way better than nothing. For tightwads like me or the financially sophisticated who have a lot of investments, I'm afraid that Mint.com will not save you too much work.

Recommended if you fall into one of the above-mentioned categories.

[Recently, mint.com introduced the new investment tracking feature. I've reviewed that feature here.

Review: The Blind Side

I will confess to not being a big fan of American Football; I am fond of quoting George Will: Football combines the two worst things about America: it is violence punctuated by committee meetings. I am, however, a fan of Michael Lewis. His first book, Liar's Poker was funny, well-written, and had great insight to the Wall Street scene. His next book, Moneyball, made baseball, a game I often compare with watching paint dry, actually made the statistics interesting, and gave me an understanding of why my friends who were baseball geeks were obsessed with the game, even though I still found myself unable to watch it. His more book, The New New Thing, I didn't find nearly as interesting, mostly because I work in technology, and his worship of Jim Clark seemed premature. (I did manage to sneak onto Jim Clark's sailboat, The Hyperion when I was in New Zealand in 2000. That's a story for another time)

The Blind Side is two stories at once. First, there's the hero's journey, complete with danger, wise mentors, a rescue, and obstacles to overcome. The hero's journey is about Michael Oher, an inner-city kid who somehow makes it into Briarcrest High School, a religious private school and there he flounders, being viewed by all his teachers as a hopeless cause, until a white family literally finds him on the street, adopts him, and pushes the school to recognize his talent as a left tackle in football, a sport he is born to play.

The other story is the story about football strategy. Everybody knows who the quarterback is on the team, but the other players were not highly paid until relatively recently, where a shift in football rules and strategy encouraged a playing style that reduced the time a quarterback had to think, and made the position defending his blind side a highly lucrative one. The statistics and data Lewis marshals to defend this point of view is highly convincing, and one believes him when he says that the lack of a Sabermetrics equivalent in Football really made it evolve a lot more slowly than it would otherwise have.

The book reads fast and easily, and the story is fascinating. I do question the premise (held by many, it seems), that the way out of the ghetto for black people is sports and for their talent to be recognized. In the book, for instance, Michael Oher's GPA was the gating factor for his financial future --- the NFL is barred for players who do not attend college. If the premise of this book is to be believed, the best thing one could do for inner-city kids is to remove this impediment and allow anyone to play. Michael Oher's adopted father, Sean, spent quite a bit of time manipulating the system to get Michael's GPA acceptable in school --- he gets Michael declared to have a learning disability, and then uses BYU's distance learning program to toss out a bunch of Fs in Michael's report card.

The truth is, however, that even were all the barriers to inner-city talent in sports removed, the number of folks the market can handle with such high salaries is limited --- there are only so many sports stars that can be created. The true path out of the ghetto is more education, where economic productivity can be increased indefinitely, but I guess that is beyond the scope of this book.

Even though I still have no idea what the line up of an American Football team looks like after reading this book, I found it incredibly fascinating and could not help but keep turning page after page. Highly recommended. Michael Lewis is back on form.

[Addendum: Michael Lewis gave a talk at Google about this book. You can now view it on Youtube: Michael Lewis at Google]

Joel figures out how to beat Google

I try not to comment much about technology trends, especially since I am so often wrong. But when I read Joel's article, I couldn't help thinking to myself, "Did he not know about Google Web Toolkit?"

Review: The Dynamic Path

Disclosure: The copy of The Dynamic Path I read was a review copy provided by the author's publicist.

The Dynamic Path is properly categorized as a self-help book, much in the vein of Seven Habits of Highly Effective People. Jim Citrin is an executive search consultant (in other words, a CEO-only head-hunter). I don't know what his background is, but he definitely seems to worship sports and sports heroes to the degree typified in American culture.

The book attempts to provide a guiding road-map to life, from individual achiever to leadership to building an enduring legacy. The examples he provides are almost all drawn from athletes who've built a major legacy, from Joan Benoit, Billie Jean King (the person who instigated Title IX), Lance Armstrong, Tony Hawk, and Tiger Woods.

I'm not sure this book brings anything to the table that other self-help books haven't already: commitment, belief in yourself, focus, practice, and hard work. It is doubtful that if you don't already have those, reading this book will help you gain any. In fact, in one of his sections, he describes mental toughness as having the discipline to keep hitting shots and controlling the ball while allowing your opponent to screw up. His example here was Bjorn Borg. But later, you find out that Bjorn Borg retired right after being defeated by John McEnroe. This isn't uncommon in sports (Miguel Indurain retired right after his defeat by a doped up Bjarne Riis), but it does bring home that perhaps sports heroes aren't the best examples to use for inspirational leadership, even if there are a few exemplars that prove the exception.

As for leadership, I'm not sure leadership can be learned. I've attended lots of leadership seminars, but none of them really tell you how the best leaders do what they do effectively, and neither does this book (seriously: platitudes like "work hard", "focus on the success of others", and "deliver on your commitments" aren't all that useful --- in the complex universe we live in, making the right decision trumps all the others). So what we are left with are the interviews.

While the interviews are the parts of the book most worth reading, it is not clear to me that the interviews are terribly enlightening. The questions are too soft-balled, the replies too generic --- I feel like I've read these interviews all too often in sports magazines (not that I've read many).

All in all, this book could have been a lot shorter and still made its point. A casual airplane read, but seriously, if you want to read material like this, Seven Habits of Highly Effective People is still the standard and you should read that first.

Too little, too late (Republicans are Evil, Part VII)

(The above link is only good for the next 7 days)

Alan Greenspan's memoir apparently criticizes Bush and his administration:

Mr. Greenspan, who calls himself a "lifelong libertarian Republican," writes that he advised the White House to veto some bills to curb "out-of-control" spending while the Republicans controlled Congress. He says President Bush's failure to do so "was a major mistake." Republicans in Congress, he writes, "swapped principle for power. They ended up with neither. They deserved to lose."

But Mr. Greenspan, where were you when you had the power to nip the policy in the bud? I remember when you testified in front of congress saying that Tax Cuts were the preferred way to deal with the coming budget surplus. At that time you had so much respect from Congress that if you had pointed out that the surplus was a result of saving for the baby boomer's retirement the fiscal wreck that was the result of the Bush tax cuts might not have happened. Of course, it would be too much to expect the Wall Street journal to point this out. And I am willing to bet the New York Times won't hold Greenspan's history of abetting the raid of the treasury by the wealthy class up to light, either.

As it is, your comments are too little, too late. I definitely don't trust libertarian Republicans: they have never stood up for the rights of the individual against government intrusion, nor do they stand for fiscal responsibility. By consistently voting for people who shift the burden of taxes away from today's wealthy Americans into future generations, they have given up all their principles in favor of class warfare. And as Warren Buffett says, “There’s class warfare, all right,” Mr. Buffett said, “but it’s my class, the rich class, that’s making war, and we’re winning.”

Building a Custom Bike Part II

Changes from last time:

• 3rd water bottle cage (mounted on the wheel side of the down tube). I asked Carl to draw in a 28mm tire just to make sure it would clear with room for renders. (Looks like it does!)
  
• 43mm offset on the fork. The Bridgestone RB-1 had a 45mm offset. I've test ridden a fork with a 40mm offset on the same geometry, and to be honest I cannot tell the difference. I simply might not be sensitive enough to feel 3mm difference. The 43mm works fine on the Fuji (though the Fuji has never seen a load), but it handles just fine. I sent my Bruce Gordon low rider rack to Black Sheep for mounting and sizing, so that the low rider mounts will work exactly on the fork as specified. The built fork will be sent to Carl directly for final verification and building.
  
• Not seen in the diagram: spoke holders for spare spokes! A nice feature on touring bikes but never seen on stock frames. This is another reason we buy custom.
  

Carl and I also explored having a horizontal top tube and a head tube extension, but it appears that this wouldn't work as I don't have enough room on the head tube. I can put up with a 9 degree top tube to ensure that my soft tissue doesn't get hurt when I put on 32mm tires, and to have good frame integrity.

Things to explore in the future: finish of the bike (Satin? Polished? Shot-peened?), possible head tube extension so I use fewer spacers? Pardo suggests that I go for a 72 degree seat tube so I can use a no-layback seat post, but the road feel is important to me, and I'm not sure I want a seat tube that slack, having ridden one like that on the Heron Touring bike, which feels unnecessarily sluggish to me when I put power to the pedals.

So far, Carl's been a pleasure to work with. There's a 5 week wait to delivery, but everything looks good. One note is that Carl is raising his prices for custom frames, so if you want one built by him, take note!

Follow up: More Dinotte Nastiness

In April, I wrote a review of the Dinotte Tail-light, pointing out the weaknesses of the product, mostly the mounting options, which works if you're a night racer or luggage-less rider, but not if you're a user of Carradice-type saddlebags, the best solution for randoneuring or light touring today.

That article must have touched a nerve, since I received e-mail today from Dinotte asking me if I would retract my negative article if they sent me one of their new seat post mounts. Ethical issues aside, a look at the new mount would show you that it negates none of the weaknesses I had pointed to in the earlier article.

As a follow-up, I ditched my Dinotte light recently and went back to my ancient Vista-lite, a 10 year-old design that while not providing as much light, provide enough for others to see me, can be mounted on my seat stays, and is extremely pleasant to use. I will very likely sell my Dinotte light to someone who doesn't use saddelbags, or to a night racer.

I hope Cat-eye will start using higher powered LEDs in their lights. Their line of lights already feature superior mechanical linkage to the Dinottes, and it would not displease me to see a line of products clearly designed with thought for the utility cyclist beat out a line of products designed for night racers.

Review: Making Comics

Making Comics is perhaps the logical sequel to Scott McCloud's Understanding Comics, a really great book deconstructing comic books, how they work, and what the medium is about.

Having done so, McCloud sets out to write a book for practitioners, showing how to construct comics. Obviously, the most important construction tool is the story, but nobody can really teach you how to be a great story teller like Alan Moore, so he focuses on the tools you have available to you.

McCloud gave an hour talk about this book at Google, and it was a great talk (unfortunately, it will not be out on video any time soon). He explores sequence construction, drawing humans, faces, and body language, how to integrate words with pictures, and world building. The penultimate chapter is probably the only chapter that non-comic book writers would read and find interesting, which is a taxonomy of comic book creators, and what they are about.

The construction process is interesting, and well laid out for a course about comics. I doubt, however, that someone like Alan Moore would need it, so I scratch my head thinking about what the audience for this book is. Probably the fanboy, or the aspiring comic book artist in school. As with writing, having an understanding of novel construction doesn't mean that you'll construct a great novel, while great novelists do not necessarily spend a lot of time thinking about novel construction, but the book itself is entertaining and perhaps when I read a comic book next time, I'll analyze it differently because of what I learnt in this book.

I enjoyed this book, but think that most people are better off with McCloud's prior book, Understanding Comics. Not because this book is bad, but it's for a specific audience, and if you're not a fanboy, you probably won't be interested.

Worth picking up at the library.

Engrish

Lisa & I spent at least 20 minutes laughing at the pictures on the above site. This is really great stuff.

One of my favorites:

Review: The Fall of Kings

Kushner & Sherman wrote this book before the recent Privilege of the Sword, but the book takes place a good forty years after that book and sixty years after Swordspoint.

The novel involves a University professor, Basil St. Cloud, and of course, a scion of the Tremontaine, Alec Campion, the heir to the duchy. The two are involved in a romantic gay affair (nearly everyone in Kushner's novel is gay or at least bisexual), while St. Cloud's position as a professor revolves around some seemingly innocuous politics.

The politics takes a sinister turn when Basil St. Cloud challenges another professor to an academic debate revolving the ancient kings of the land and their wizards. The political authorities are not amused, as there has been recent uprisings in the North and trouble-makers from the North have come to the city asking for a return to the Monarchy.

St. Cloud comes across an ancient spellbook, and wheels begin to move, as St. Cloud and Campion re-enact the ancient relationships between Wizard and King, and St. Cloud learns the truth behind the land he lives in.

The prose is well-written, and the characters if a little wooden, quite compelling. Though I suspect that Kushner has only a few templates for the male characters --- all her men seem either treacherous, feckless, or mad, the story seems competently handled.

So why did I feel this book to be a disappointment? The book reminds me of the ancient days of American television, where the goal was that each episode returned the universe to status quo, so that script writers could all write episodes independently knowing that everything will be untouched. Characters could get married in TV shows as long as their spouses got killed off at the end of each episode, resulting in a staleness to the long running shows, as nobody ever seemed to remember events between each episode.

Similarly, The Fall of Kings seemed determined to leave Kushner's lovely toy set and stage reset by the end of the novel, rather than taking the story to its natural conclusion. This veering away from substantial change in the setting and landscape left the novel with a bad taste in my mouth, and diminished my opinion of Ellen Kushner's serial works by a notch.

Not recommended.

Queuechup is unethical

Spamming my address book? Not cool. Even though I took precautionary steps (e.g., using my spam trap address), it still spammed my address book. If you received an invite from me, delete it. It wasn't really from me. Others have reported similar experiences. Please don't make the same mistake. No wonder social networks have a bad name.

http://blogcritics.org/archives/2007/09/03/185547.php
http://mashable.com/2007/09/02/quechup/
http://blogs.chron.com/techblog/archives/2007/09/spam_alert_just_say_no_to_quechup_1.html
http://www.boingboing.net/2007/09/04/quechup-is-rotten-do.html

Review: The Bottom Billion

Karl Pfleger raved about this book, and he's a pretty smart guy, so I ordered it from my library and read it. This book is essentially a response to both William Easterly's White Man's Burden and The End of Poverty, a ridiculously over-optimistic tract by Jeff Sachs.

Paul Collier examines the problems of most of the third world countries (mostly African) and looks at the causes of their continual poverty. He pins it down to a few problems: conflicts (including wars), being land-locked and unable to trade, having a lot of natural resources (like oil), and bad governance.

He also explains, as many others have recently, that China's success has actually made it harder for other emerging countries to compete by exporting manufactured objects at lower cost, since China and India both have sufficiently large numbers of people to keep wages depressed at a global level for many years.

He then examines instruments for assisting countries out of poverty. These are targeted aid (expert advise right after a revolution, and money later if a new regime is judged not to be corrupt). military intervention (using the British in Sierra Leone as a model), setting up international laws and charters (like the ones that prevent bribery in the US) so that foreign companies that exploit resources are obligated to try to use the cash in good ways, and better trade policies, much like those espoused by Joe Stiglitz's book last year, Making Globalization Work (Last year's Book of the Year) That last bit shouldn't be a surprise because Collier was one of Stiglitz's proteges at the World Bank.

What does that leave the individual? The problem with most of these solutions is that there's not a ton you can do. Targeted aid isn't something an individual (unless you're Bill Gates) can fund. Neither is military intervention or fixing international law. So while Collier spends page after page imploring the public in rich countries to understand how their governments aren't working to help out developing countries, there's ultimately not much you can do. I can't get myself worked up enough about development to lobby my congressman when I've got so many other priorities, and I'm one of the few who will care enough to read this book. I doubt if others will even bother to read this book, which while not technical is a slog at times.

Hopefully, enough technocrats in positions of power will read this book and make the world a better place for the bottom billion. But I'm not holding my breath.

I recommend this book as good reading for those who genuinely want to help the bottom billion. It should be considered a good start before heading into the specifics (like Easterly's book, and even Jeff Sach's). But I will say I am not optimistic about the outcome. There just isn't enough incentive for folks in rich countries to care about the poor in other countries when for instance, we can't even get health insurance for everyone in the US. Let's fix that first, and then the citizens might have enough largesses to fix the problems the rest of the world has.

First sail of the year

Sailing on the Bay

So it begins. My next trip will be a sailing cruise in the Virgin Islands! We're flying there to first get our SCUBA certification, and then we'll sail around the islands on a sloop. My previous long sailing trip was in 1998, with a week sail in the Pacific Northwest. I enjoyed it, but I really really really wanted warm water. The Virgin Islands has that in spades, and in December, I'll be ready for an escape from cold weather!

One of my previous crew members, Lea will be returning as first mate (should I fall off the boat). I still have room for a couple more. We'll see how it goes. Maybe Scarlet and I have learned our lessons from our last trip --- we probably shouldn't be on the same boat for more than a couple of days. Though who knows. It's been 9 years, and maybe a sufficient quantity of board games will distract us from ourselves.

I was really afraid that I'd become rusty, since I'd not been sailing more than once a year. But yesterday reminded me that I'm good enough, and a couple more trips to polish me up will be what the doctor ordered.