Textura and Its Ties to the Real Wolf of Wall Street

February 23, 2015December 25, 2019 ~ loganfrederick

Disclosure: I am short Textura as of January 20th, 2014.

A lot of companies are overvalued in the stock market these days. Not many of these companies have distant ties to Stratton Oakmont, the very real and very shady brokerage firm featured in last year’s Oscar nominated hit The Wolf of Wall Street. The title of this research may be click-bait, but it’s not wholly untrue. I’ll explain the movie tie-in shortly after introducing the company under inspection: Textura.

Textura provides software applications for various parts of construction industry paperwork management, including (from their November 2014 10Q):

1. “Construction Payment Management (“CPM”) enables the generation, collection, review and routing of invoices and the necessary supporting documentation and legal documents, and initiation of payment of the invoices.”

2. “GradeBeam supports the process of obtaining construction bids, including identifying potential bidders, issuing invitations-to- bid and tracking bidding intent.”

3. “Greengrade facilitates the management of environmental certification.”

4. “BidOrganizer helps contractors save time and money by providing a central, online location to prioritize, track, and schedule all bid invitations.“

5. “PlanSwift, a take-off and estimating solution used in preparing construction bids, and Contractor Default Claims Management, which supports the process of documenting a subcontractor default insurance claim.”

Textura classifies these products and others under two types of revenue:

Activity-Driven: “Owners/developers, general contractors and subcontractors using our CPM, Submittal Exchange, Greengrade and LATISTA solutions pay us fees that are dependent on the value of the construction project or contract.”

Organization-Driven: “Participants using our GradeBeam, PQM and BidOrganizer solutions pay us subscription fees. These fees are dependent on a number of characteristics of the organization, which may include size, complexity, type or number of users.”

I first found this company through Citron Research, a notorious short-seller and investigator into fraudulent publicly-traded companies. Since Textura’s stock went public in June 2013, it has been Citron’s most heavily researched stock, with over five different research reports published on the company. If a quote is not attributed in this essay, then its source is included in this downloadable zip folder containing Citron’s research reports, Textura’s own investor presentations and SEC filings, and some additional documents from my own research.

Textura’s Business: Construction Payment Management (CPM)

Textura’s products are relatively straightforward: They are software applications for managing contractors and payments for construction companies. As of 2013, 62.8% of came from Textura’s primary CPM app which allows for the signing and submission of “Lien Waiver Forms”.

I am admittedly not an expert on the construction industry in any capacity. According to its research reports, Citron reached out to its own advisors and construction industry experts to help explain what Textura’s products are used for:

“Lien Waivers are one-page signature forms that all subcontractors on all typical construction projects need to sign in order to get paid…. There’s an opportunity for a niche workflow software solution here. In 2013, this need should be filled with a modest app. CPM’s lack or relevance can be seen right in their numbers… just $22.3 million in revenue generated by this app in 2013.”

“Subcontractors sign on to the Lien Waiver system when the general (or the master subcontractor) who engages them for the project commits to the software – in essence, forcing the subs to subscribe as conscripts, for the master contractor’s own convenience. But these signups are most often limited only to the lifespan of a particular project…. As soon as the project is over, perhaps 6 or 9 months later, are most of them churning right out? Why would they stay subscribed? If their next project has some other method of managing Lien Waivers, or no method, why would they continue to pay fees to Textura?”

This paragraph leads into discussion about Textura removing hyperbolic statements following SEC questioning. Textura tried to claim “high retention” of customers to the Securities and Exchange Commission and quite likely backed away because it’s customer relationships, by the nature of the business, are temporary and project-based.

Lying to the SEC in its Initial Filings?

In its December 29, 2013 report, Citron unveiled unusual banter between Textura and the SEC prior to Textura going public.

When it filed to go public in January, 2013, Textura claimed: “Recurring revenue model with high visibility. Our solutions historically have exhibited a predictable pattern of fee generation from projects managed on our system; our large portfolio of clients has resulted in a predictable number of projects; and we have experienced high client retention.” (emphasis mine)

The SEC contested this claim, saying: “You state that you have experienced
high client retention. Please provide specific quantitative disclosures in this regard, here and elsewhere in the registration statement where you discuss client retention.”

Instead of providing data to support its assertion to the SEC of “high client retention”, Textura instead chose to remove the disclosure.

And this happened a second time. Textura claimed to have “growing demand from our increasingly multinational clients” but removed the claim after the SEC questioned it.

Citron summarizes this back-and-forth: “In over 13 years of publishing and reading SEC comments we have NEVER seen a company make two bold claims as above, but simply turn and run from them without even an attempted defense when challenged by SEC staff.”

What executive would try to slide hyperbolic statements past a government regulator?

The Wolf of Wall Street History of CEO Patrick Allin:

From Textura’s website: “Prior to co-founding Textura, Mr. Allin served as a senior client delivery partner, Chief Operating Officer and Chief Financial Officer of the Global Consulting Practice at PricewaterhouseCoopers LLP. Earlier in his career, Mr. Allin served in a number of executive positions, including President, at Moore Business Forms North America and as an audit partner at PriceWaterhouse.”

Citron notes in its December 2013 report that, “Mr. Allin recently sold 230,000 shares in the follow-on offering at $38.00, cashing in an $8.74 million payday without disclosing the skeleton in his closet.”

On page six of the same report, Citron discusses Patrick’s job prior to Textura:

“As early as January 15, 2003, Mr. Allin was appearing in press releases as the CEO of Patron Holdings (later Patron Systems), promising a bright future of ‘driving growth and
profitability’. In fact, during 2002, Patron was purportedly engaged in a strategy to buy various security technology companies such as TrustWave Systems, and roll them into an OTCBB shell company called Combined Professional Services…. The share exchange transaction (disclosed to SEC on October 22, 2002) was signed by Patrick J. Allin as CEO of CPFS.”

Presumably an auditor would know the consequences of misrepresenting a company’s financial state. Patron’s accounting firm resigned, citing “it could no longer rely on Patron’s representations and, as a result, Grant Thornton is unwilling to be associated with the financial statements prepared by Patron,” and that it, “was withdrawing its audit reports and those audit reports could no longer be relied upon.”

That same year the Department of Market Regulation started to recognize that Patrick and CPFS were running something closer to a stock pump-and-dump: “In late July 2002, the staff of the Department of Market Regulation (the “staff”) saw an article on the Internet about CPFS. The article asked how a shell company with no cash, no revenues, no business, and no immediate prospects could be selling at prices above six dollars a share. Searching the public filings on the SEC website, the staff learned that CPFS was indeed a shell with no operating history, no revenues, minimal assets, and no financial resources.”

Naturally, this shady business led to jail-time for many involved who weren’t Patrick Allin: “Mr. Allin’s counterpart in these transactions with Patron Holdings and CPFS was Jeffrey Spanier of Florida Discount Brokerage, and an associate of Paul Harary, both penny stock promoters. By the time Allin resigned from Patron Systems in 2004, his CFO had already jumped ship. Meanwhile, FINRA exposed the blatant pump-and-dump operation operated by Spanier, Harary and others with CPFS stock. Harary and Spanier are both currently in Federal Prison for stock fraud-related charges.“

Another associate of Mr. Allin’s during his time running Patron was a Mr. Thomas Prousalis.

In December 2013, Prousalis’s daughter wrote a dark open letter in LA Weekly to her father, a former lawyer for Stratton Oakmont, the all-too-real firm which is now famous for inspiring the book and movie “The Wolf of Wall Street”. A 2004 Washington Post article elaborates on Prousalis’s role in the now defunct-yet-infamous brokerage firm.

As listed in two SEC Filings, Patron Systems and Patrick Allin issued Prousalis 1.5 million shares of stock for “Legal Services”. Not much later, Prousalis was in jail and Patron Systems was bankrupt.

Patrick Allin proceeded to co-found Textura.

Did Patrick Allin Run Patron Systems From a House?

I do not know for a fact whether the house in the picture is Mr. Allin’s house. This is the suburban neighborhood given to the SEC as Patron System’s address.

Google Maps URL to this location as of February 22, 2015:

Did Textura’s Financiers Also Participate in a Pump-and-Dump?

William Blair and Barrington were the two leading investment banks which offered Textura’s stock to the public. This wouldn’t be a problem if their employees weren’t using their companies to line their own pockets.

As Citron found in an amended SEC filing, a group of William Blair and Barrington employees, specifically Mr. Richard Kiphart and Mr. Arthur Simon, were members of an investment group called ACPP Capital LLC which owned shares (specifically “159,062 shares of common stock and warrants to purchase 16,556 shares of common stock”) of Textura before their employers sold it to the public.

Citron comments on the incredulity:

“Ok so check this out: There was an undisclosed LLC shareholder, owned by individuals from two different underwriters? This is a direct conflict of interest, and the failure to even include this information in the IPO prospectus is like a Wall Street version of a brown paper bag….

Let’s factor in the head of Corportate Development at Textura, who used to be an analyst at William Blair. As a matter of fact he was the boss of the current analyst at Blair who covers the stock – with an ‘Outperform’!”

From Textura’s own SEC S-1 Filing: “Franco Turrinelli has been our Executive Vice President of Corporate Development since January 2010. Prior to joining Textura, from July 1996 to December 2009, Mr. Turrinelli was at William Blair & Company LLC, an investment banking firm.”

So for my less-financially inclined readers, what does this mean?

The bankers themselves owned shares in money-losing company, recommended the company to the general public, sold the stock to them, and got hired by the company in executive-level positions. When/if the company runs out of money to lose, the bankers will have made their millions for bending the truth to the public, who will have lost all its investment.

Michael Nemeoff of the investment bank Credit Suisse First Boston refuted Citron’s analysis of Textura, stating: “We base our opinion on our own research, performed over the last few days, as much of the innuendo that suggests impropriety is based on publicly available information that anyone can find using Google.”

To which Citron and I reply, if you are suggesting we don’t use publicly available information, I guess all that’s left is insider information and listening to whatever the CEO says. Of course, you would expect this kind of response from one of the investment banks which sold Textura’s stock to the public.

“One of its most hilarious ‘disclosure moments’ is how Textura reports the total amount of construction reported in the Lien Waiver system as though it is a meaningful number. They disclose “Client-reported construction value added (billions)” as though it meant anything, boasting of 55.7 billion in “construction value” reported as released from claims using their software. The reality is that the company’s CPM “solution” generated a whopping 22.3 million in topline revenue for 2013.

To offer an example of just how stupid this is: Suppose you ran a pen company. And at the end of the year, you reported, “A Trillion dollars in contracts were signed with our pens!!!” That number is irrelevant at best, or intentional promotional misdirection at its worst.” – Andrew Left, Citron Research

While talking about how a company like Textura even gets funded in the first place, it’s worth noting that during this company’s history, it has received no significant venture capital investment. This is during a time when enterprise software and software-as-a-service companies are raising hundreds of millions of dollars. Hell, even my previously researched company Castlight Health got top-name technology investors. Textura only has a handful of old Wall Street types involved. It’s not like Silicon Valley has anything against the construction industry. In 2012, not too long before Textura’s IPO, a startup named Plangrid raised $1 million in funding from a few of the Valley’s elite.

And while we’re comparing construction-industry technology companies, Plangrid’s website looks a heck of a lot more modern compared to the larger Textura. Not every company needs a modern website, but it looks better to have one if you’re in the software business. Even more disconcerting is that Textura’s “Investor Relations” page looks better than it’s company homepage (this is me speaking subjectively on February 22, 2015), which suggests they are more interested in pitching investors than customers.

Disregarding Executive Sketchy Dealings and Taking Textura at Face Value, How Do the Company’s Finances Look?

Quoting Citron, “You’re telling us that all that money went to build a lien waiver processing system? That’s all they have to show for it? A small software company with 385 employees and revenues well lower than $100K per employee?”

From page 11 of the September 10, 2013 S-1 Filing:

“We have incurred significant losses in each period since our inception in 2004. We incurred net losses of $15.9 million in the fiscal year ended September 30, 2010, $18.9 million in the fiscal year ended September 30, 2011 and $18.8 million in the fiscal year ended September 30, 2012. We incurred a net loss of $31.3 million in the nine months ended June 30, 2013, and as of June 30, 2013, we had an accumulated deficit of $169.9 million. These losses and accumulated deficit reflect the substantial investments we made to acquire new enterprise client relationships and develop our solutions. We expect our operating expenses to increase in the future due to anticipated increases in research and development expenses, sales and marketing expenses, operations costs and general and administrative costs, and, therefore, we expect our losses to continue for the foreseeable future.“

That looks kind of bad but it’s from an older filing. What’s the most recent November 2014 10Q quarterly report have to say?

Revenues For the First Nine Months of 2014: $45.106 million
Total Operating Expenses During That Time: $65.759 million
Net Loss to Stockholders In Nine Months of 2014: -$20.978 million.

Compared to the first nine months of 2013 where Textura lost $42.896 million, last year’s $21 million loss is a slight improvement. But it’s still not a great sign for a company with dwindling cash reserves.

Cash and Cash Equivalents Available as of September 2014: $66.035 million
Accumulated Deficit in Company’s History: -$205.512 million.

I am listing only the first nine months of 2014 because Textura does not announce results from the end of 2014 until this upcoming Tuesday, February 24, 2015.

Examples of Management Mistakes

“Investors could overlook all that if the real Textura was in fact a rapidly growing SaaS outfit, gobbling up substantial market share in a huge addressable market, by offering an integrated suite of software poised to rapidly [sic] that market at very low cost of sales. But the current company is the opposite of a real SAAS company: It offers only one narrow solution (CPS, the lien waiver/payment solution), plus a hodgepodge of small software acquisitions that don’t integrate well, if at all,” Citron explained.

An example of an arguably bad acquisition is Latista. As disclosed in the November 2014 10Q filing, Textura paid $34 million for Latista Technologies in December 2013. In the nine months since the acquisition, Latista earned only $2.172 million in revenue and lost $4.571 million.

It was also revealed the company has some decent severance packages for an unprofitable software outfit:

“In September 2014, two co-founders retired from full-time employment with the Company, and two other non-executive members of management were terminated from the Company. Pursuant to the severance arrangements provided in their respective employment and separation agreements, we recognized severance-related expenses of approximately $1,488 during the three months ended September 30, 2014. This severance expense includes salary, payroll taxes and bonus payments to which the former employees were entitled under their respective arrangements. We expect to pay the severance expense, of which $1,460 was accrued as of September 30, 2014, over the next twelve months.”

Those dollar amounts are in the millions (as in $1,000 is a thousand-thousands). They expect to pay $1.460 million in severance over the next year.

Additionally, page 16 of that SEC filing states that stock-based compensation for employees was $6.405 million in the first nine months of 2014.

How can I get a job, then fired, from there?

Looking Through the Glassdoor

Speaking working at Textura, I hopped over to Glassdoor to see what former employees had to say. For those who don’t know what Glassdoor is, it’s a website where workers can review the companies they currently or previously worked for.

To its credit, as of February 22, 2015, Textura sports an average score of 3.8 out of 5 from 38 employee reviews.

Even the positive reviews reveal insights into problems with the company:

Valuation

Most of the time when I’m trying to value a company to buy or short, I’ll attempt a full discounted cash flow model so I know approximately what the business is worth. Considering Textura’s vast history of losing money and it’s only very recent attempt to lose slightly less money, projecting any future free cash flow would be unrealistic.

Much like I did with Castlight, I would use some metric, like the market-valuation-to-revenue multiple, from companies similar to Textura and apply those in this situation. One publicly traded leader in the construction industry accounting software market is Sage Software, a $5 billion dollar company traded on the London Stock exchange. Sage is profitable with $1.3 billion in annual revenue and $187 million in profit. This implies a valuation of about 3.8 times annual revenue.

If we applied this to Textura, who had revenue of $45.106 million in the first nine months of 2014 and is expected to announce Tuesday fourth quarter revenue of $17.06 million for a total of $62.166 million in revenue for the year, then we get a value for Textura of $236.231 million ($9.28 per share). The company currently trades at a valuation of about $691.72 million ($27.16 per share).

If one wanted to claim the company is growing at a faster rate than Sage (which is true regarding revenue), and despite it’s lack of profitability, large continuing losses, and questionable management practices, it justifies using a higher multiple, we could double the multiple to 7.6 times annual revenue for a value of $472.462 million ($18.56 per share).

Either valuation, $9.28 or $18.56 per share, represents at least 33% drop from its current price.

Books Read in the Second Half of 2014

February 8, 2015February 14, 2019 ~ loganfrederick

Three Stars

Foundation by Isaac Asimov: Despite being one of the canonical science-fiction works, I found Foundation to be disappointing. Upon opening the Amazon package, I was surprised by how thin the book is. Once I began reading, I realized the characters and plot were equally non-existent. The book does not get a lower rating for one reason: Considering it was written in the 40s and 50s (originally published in serialized form in a magazine, as so many novels were at the time), the two central themes of psychohistory (predicting social phenomena via mathematics) and interstellar travel were ahead of their time. Asimov was a great thinker, not a great writer.

Big Data: A Revolution That Will Transform How We Live, Work, and Think by Viktor Mayer-Schonberger and Kenneth Cukier: A solid non-technical discussion of the currently popular “Big Data” buzzword. There is actually less discussion of the cultural impact of “big data” than I expected. Instead, the authors mostly highlight a dozen or so companies and government agencies that have used the improved digital storage hardware and software of the past decade to build original business and learn new things about humanity. It was worth reading just for one insight I had not mulled over enough: What “Big Data” means is that one can achieve his or her goals better with naive algorithms and lots of data versus complex algorithms on smaller data sets.

Not That Kind of Girl by Lena Dunham: I didn’t know that the young creator of the hit HBO show “Girls” had a book out until I saw it prominently pimped at an airport bookstore. Her first published book, Dunham’s collection of essays cover what I think of as standard fare for girls who were unpopular kids in school. None of the essays really spoke to me personally, yet I finished the book due to its short essay/memoir format and Dunham’s clever but conversational writing style.

The New New Rules by Bill Maher: Whether you love or hate him, Bill Maher is (and has been for decades) one of the country’s standout political commentators. The “New Rules” segment of his HBO talk show Real Time (where he explains his satirical rules for improving society) is the show’s highlight and this book is a compendium of those segments. Despite this being a collection of previously-aired television segments, there are enough witty observations here worth reading.

Console Wars by Blake Harris: Alternatively titled “A SEGA CEO’s Memoirs”, Console Wars follows Tom Kalinske in his battle against the Nintendo monopoly of the early 90s, creating the first videogame “console war” since the 70s. The author is clearly biased in his dedication to the narrative that Sega of America was the tenacious upstart against a conservative, complacent Nintendo. In Mr. Harris’s defense, he admits his longtime acquaintanceship with Tom Kalinske. While the bias hurts the story’s depth (it focuses primarily on marketing moves and high level business politics, as opposed to deeper discussion on the state of entertainment in the 90s or the games themselves), it’s still a hell of a fun story.

The Alliance by Reid Hoffman: The founder and alumni of LinkedIn propose their alternative theory for ongoing employee-employer relationships. The Alliance establishes an honest dialogue for employees to align their career goals with companies, even if they are short-term by historical standards, and for companies to improve employee retention and productivity in our increasingly volatile work environments. It’s a thin book, as the primary points are pretty simple to explain. These points are valuable enough, along with anecdotes of these ideas in practice at LinkedIn, to spend an afternoon reading.

If This Isn’t Nice, What Is? by Kurt Vonnegut: I hadn’t read any of Vonnegut’s works, and he’s famous in American literary history, so I figured I should. I started with this collection of his graduation commencement speeches. These short insights into his mind were alone to convince me that, yeah, Vonnegut was a unique kind of genius. Although the content of some of the talks overlap, there is a lot of wit and wisdom in these 100-or-so large fonted pages.

Four Stars

Hatching Twitter by Nick Bolton: This short biography of Twitter focuses on it four cofounders: Ev Williams (the creator of Blogger and original supporter of Twitter), Jack Dorsey (the first developer of Twitter), Noah Glass (the co-originator of the idea with Dorsey and developer friend of Ev’s) and Biz Stone (the operational cofounder and sanity-checker of the chaotic startup). The Twitter story is really made by the sensational growth of the company and the characters that tried to corral it. Worth noting is how poorly Jack Dorsey comes across; A narcissistic, ineffective Steve Jobs wannabe who hijacked the company and media attention from the other founders.

No Matter the Wreckage by Sarah Kay: From the leading spoken word poet of our times comes a collection of poems about young love and growing up in New York City. I don’t personally relate to most of the poems due to my personal half-cynical personality. However, the half-optimist side can’t discount her ability to make intimate, clever, and effortless wordplay. I’m also slightly biased after having seen her perform in person. Anyone who has will read this book with her energy and voice.

Lolita by Vladimir Nabokov: Nabokov is brutal and beautiful in his writing. The first quarter of this fictional autobiography of a pedophile swiftly pierces the soul with imagery of underage prostitution and immoral nubile lust. The ending is a somber conclusion to a wholly believable illicit love. Unlike, say, F. Scott Fitzgerald, who can say more than most authors while using fewer words, Nabokov’s strength is effortlessly writing flowery prose. The only weakness of this classic is the slowly paced midsection.

Slaughterhouse Five by Kurt Vonnegut: If anyone ever asks me to define “dark humor”, I’ll hand them Slaughterhouse Five. I now get why Vonnegut is famous. The closest comparison that came to mind is observational stand up comedians. Reading Vonnegut feels like listening to Jerry Seinfeld or Louis CK commentary on humanity’s worst depravities.

Dataclysm: Who We Are When We Think No One’s Looking by Christian Rudder: One of the founders of OkCupid uses the statistics and the large data generated by the burgeoning online dating scene to understand people. From his unique vantage point, Rudder mostly reveals things you’d already assume. There’s a lot of reaffirming stereotypes here, but perhaps it’s because stereotypes are true and most of us don’t admit it publicly? Or will having data to confirm our preconceptions change how individuals think of themselves and others in the future? These are some of the questions I walked away from Dataclysm wondering.

How Adam Smith Can Change Your Life by Russ Roberts: I wrote previously about Russ Roberts being one of my biggest influences, but this is the first book of his I’ve read. Roberts updates Smith’s less famous book, “The Theory of Moral Sentiments”, for the modern age. The Theory of Moral Sentiments is Adam Smith’s philosophy book. It’s his pursuit to the answers of what morals are, what morals people should have, and how morals are an innate part of humanity. Smith’s original book, published in 1759, is hard to read. Roberts makes it accessible to everyone with modern language, examples, and length. The only reason this doesn’t get a five is that it’s tough to give the top score to a summary of someone else’s ideas. But don’t let that from deter you; this is highly recommended reading to anyone interested in bettering themselves and society.

So We Read On: How the Great Gatsby Came to Be and Why It Endures by Maureen Corrigan: “Forget great. It is the greatest.” So begins Corrigan’s defense of The Great Gatsby as the Greatest American Novel (whose sentiments I agree with). Corrigan, a lecturer in the English department at Georgetown and NPR show host, discusses the life of F. Scott Fitzgerald, the making of The Great Gatsby, it’s lack of popularity upon its release, its mid-century revival, and its canonization in American Culture. Like the Russ Roberts book reviewed earlier, it’d be hard to give a five out of five to a book about another, greater book. However, I’ve been asked many times what my favorite fiction book is. Corrigan explains the greatness of Gatsby more eloquently than I could. She’s written the definitive defense of Gatsby as the greatest English novel.

I Wear the Black Hat: Grappling with Villains (Real and Imagined) by Chuck Klosterman: I’m not sure how one becomes a paid cultural essayist, but Chuck makes me want that job. “I Wear the Black Hat” is Chuck’s collection of thoughts on the concept of “villainy” in Western/American culture. He loosely presents a cohesive thesis while trying to answer the question: How do we classify someone or something as “villainous”? Chuck presents an answer, kinda sorta, and the ending is pretty anti-climatic (not that essay collections need to have a conclusion). Yet, due to Klosterman’s ability to make the mundane riveting, I read through this in a handful of days. When I can’t put a book down, even when I’m not sure why I like it so much other than the author’s style, I have to give it a great rating.

The Physics of Wall Street: A Brief History of Predicting the Unpredictable by James Weatherall: There’s been a great debate the past century about whether using highly complex mathematics can improve the stock market and investing versus older business fundamentals. I generally fall toward the latter based on what I perceive as very little value provided to financial markets by “economists” misguided by “physics envy”. But if there was ever a great counterargument to my side of the debate, Weatherall has written it. The Physics of Wall Street chronicles the history of physics’s influence on finance and concludes with his manifesto on improving and increasing the use of math in finance. His stance, which is that much of the math has been naive and that continued mathematical creativity will only improve our understanding, is compelling and even-keeled. While I haven’t been drawn to the quant dark side, and a lot of the historical figures and events have been told in other books, Weatherall (himself a physicist) has done a thorough research job. I learned new things, and the things I already knew are accessible to newcomers to the field.

Five Stars

The Tragedy of the European Union: Disintegration or Revival? by George Soros and Gregor Schmitz: In this series of interviews in 2013 between the German report Schmitz and famous investor Soros, Soros prescribes his solutions to the European Union’s political and economic woes. His primary ideas: Germany needs to worry less about following existing treaties, lighten it’s forced austerity upon debtor nations, and move all European Union country’s debts from national issues to one “eurobond”. The book is short but filled with insight as Soros elaborates on these points and includes a paper of his published in an economics journal on his “Reflexivity” philosophy of financial markets. Regardless of how closely you follow Euro-zone politics, any insight into Soros’s thinking is worthwhile.

Zero to One by Peter Thiel and Blake Masters: Based on his lectures at a startup class at Stanford, entrepreneur and investor Peter Thiel has published (with the help of student/employee Blake Masters) his critical insights he’s learned from a lifetime in the technology industry. It’s short and every line is filled with business wisdom. Anyone going into business or economics needs to read Zero to One.

The Best Book I’ve Read in the Last Six Months

Zen and the Art of Motorcycle Maintenance: An Inquiry Into Values by Robert Pirsig:

I could write my own review of this masterpiece. However, in the afterword for the ten-year anniversary of its publishing, Pirsig commented on why he believed the book became, according to The London Telegraph, “the most widely read philosophy book ever”. I feel his description of his work is more insightful than anything I would add:

“There is a Swedish word, kulturbärer, which can be translated as “culture-bearer” but still doesn’t mean much. It’s not a concept that has much American use, although it should have.

A culture-bearing book, like a mule, bears the culture on its back. No one should sit down to write one deliberately. Culture-bearing books occur almost accidentally, like a sudden change in the stock market. There are books of high quality that are a part of the culture, but that is not the same. They are a part of it. They aren’t carrying it anywhere. They may talk about insanity sympathetically, for example, because that’s the standard cultural attitude. But they don’t carry any suggestion that insanity might be something other than sickness or degeneracy.

Culture-bearing books challenge cultural value assumptions and often do so at a time when the culture is changing in favor of their challenge. The books are not necessarily of high quality. Uncle Tom’s Cabin was no literary masterpiece but it was a culture-bearing book. It came at a time when the entire culture was about to reject slavery. People seized upon it as a portrayal of their own new values and it became an overwhelming success.

The success of Zen and the Art of Motorcycle Maintenance seems the result of this culture-bearing phenomenon. The involuntary shock treatment described here is against the law today. It is a violation of human liberty. The culture has changed.

The book also appeared at a time of cultural upheaval on the matter of material success. Hippies were having none of it. Conservatives were baffled. Material success was the American dream. Millions of European peasants had longed for it all their lives and come to America to find it…a world in which they and their descendants would at last have enough. Now their spoiled descendants were throwing that whole dream in their faces, saying it wasn’t any good. What did they want?

The hippies had in mind something that they wanted, and were calling it “freedom,” but in the final analysis “freedom” is a purely negative goal. It just says something is bad. Hippies weren’t really offering any alternatives other than colorful short-term ones, and some of these were looking more and more like pure degeneracy. Degeneracy can be fun but it’s hard to keep up as a serious lifetime occupation.

This book offers another, more serious alternative to material success. It’s not so much an alternative as an expansion of the meaning of “success” to something larger than just getting a good job and staying out of trouble. And also something larger than mere freedom. It gives a positive goal to work toward that does not confine. That is the main reason for the book’s success, I think. The whole culture happened to be looking for exactly what this book has to offer. That is the sense in which it is a culture-bearer.”