Paul Graham Essays Categorized by Theme

Since I live in a different town from my family, the holidays are the majority of the time I get to spend with my twelve year-old brother (we have a 17 year age gap).

Now that he’s nearly a teenager, he’s almost the age I was when I started thinking independently from family and friends. For me, a big part of that was discovering Paul Graham’s essays. Hopefully one day my brother reads through them (but I won’t force him).

This got me thinking: if I were to recommend them to him, would I want him to read them chronologically? Or should I point him to specific essays based on his interests?

Alternatively, if one were to compile all of Paul’s essays into a collection or a Hackers and Painters sequel, how would it be organized?

So below is my attempt at tagging Paul Graham’s essays by subject matter.

Continue reading “Paul Graham Essays Categorized by Theme”

The Legacy of Jack Lambert

Everyone has had some hero, or at minimum an influencer, in their life at some point. For a lot of entrepreneurs and technologists of my generation, that inspiration has been Paul Graham. The follow-up question I ask, like reading source papers referenced in an author’s bibliography, is: who was my inspiration’s inspiration?

Graham documented his heroes in an essay in 2008. This was right around the time I first started getting interested in the NFL, primarily due to a ten hour video series NFL Films created documenting the Top 100 Football Players of All Time.

It’s interesting to me that, like many men, one of Graham’s earliest heroes was an athlete.

Jack Lambert, ranked 29th on the NFL Films list of the greatest players in football history, was the middle linebacker behind the 1970s “Steel Curtain” defensive line that won four Super Bowls in six years.

The impact that those 70s Steelers had on America is slowly receding from culture, which tends to happen over time. However, the spirit of players like Lambert influenced Paul Graham who in turn influenced the modern world in ways that are hard to overstate.

Graham wrote of Lambert:

“I grew up in Pittsburgh in the 1970s. Unless you were there it’s hard to imagine how that town felt about the Steelers. Locally, all the news was bad. The steel industry was dying. But the Steelers were the best team in football—and moreover, in a way that seemed to reflect the personality of the city. They didn’t do anything fancy. They just got the job done.

Other players were more famous: Terry Bradshaw, Franco Harris, Lynn Swann. But they played offense, and you always get more attention for that. It seemed to me as a twelve year old football expert that the best of them all was Jack Lambert. And what made him so good was that he was utterly relentless. He didn’t just care about playing well; he cared almost too much. He seemed to regard it as a personal insult when someone from the other team had possession of the ball on his side of the line of scrimmage.

The suburbs of Pittsburgh in the 1970s were a pretty dull place. School was boring. All the adults around were bored with their jobs working for big companies. Everything that came to us through the mass media was (a) blandly uniform and (b) produced elsewhere. Jack Lambert was the exception. He was like nothing else I’d seen.”

Fast forward a decade later. Readers of my book reviews will notice I’ve been on a Chuck Klosterman kick, reading through his collected works. Klosterman also happened to be the narrator for Lambert’s entry into the NFL’s Top 100 of All Time list.

I paired Graham’s and Klosterman’s thoughts on Lambert together because I find it exciting and a bit amazing when two people I consider great in their separate fields both took inspiration from a seemingly unrelated third forebearer.

Below is Chuck Klosterman’s commemoration of Lambert for the NFL Network:

“Over time now there’s kind of become this understanding that small running backs have an advantage because a lot of times linebackers can’t see into the backfield. His height at middle linebacker may have been a positive in the reverse. He may have had a better view of what the offense was doing and that might explain why he seemed to be one step ahead of things. He just seemed to make every tackle.

If the best player in the middle of the field is making all of the plays on the best team, maybe this is the best defender in the league?

On a “Team of the Decade”, I don’t know even who is number two for the idea of being the middle linebacker on that roster.

He was an extremely intellectual linebacker, which I don’t think was the association with him at the time probably because he was toothless, and probably because he looked kind of like a madman. His greatest strength was his mind, so he’s like John Rambo I guess.

He was certainly the most intimidating player on a pretty intimidating team.

It’s possible that Jack Hamm was a greater outside linebacker than Jack Lambert was as a middle linebacker. But I don’t imagine opponents fearing Jack Hamm the way they would fear Lambert. Pretty much every play, the quarterback was staring directly at Lambert, who had not only this very scary appearance, but this incredibly active appearance.

Pittsburgh likes to sort of perceive itself as having a certain kind of toughness, having a certain kind of team. Lambert really represents that, and there’s never going to be a guy that replaces that in Pittsburgh. He will always be perceived as the greatest personification of what Steeler football is supposed to be like. That’s what Lambert represents: the Steelers at their highest point.”

Windy City Rails 2014 Notes

These are notes I took during the two days of Windy City Rails 2014 Conference. Since I attended on behalf of my employer, Springleaf Financial, my notes are skewed towards ideas that may be applicable in a enterprise setting. For anyone who might randomly find this post, keep this in mind, as the speakers had plenty to say on topics outside of the enterprise application development domain.

Rubinius X by Brian Shirai

  • Get slides
  • Promises in JS in Rubinius / New Concurrency
  • Logan Note: An article on explaining Javascript’s Promises
  • Ruby functions as first-class functions versus “module_functions”
  • Use dynamic or static typing with static type checking if desired
  • Immutable String Type
  • Clarity in the Behavior of object changes. “to_s” vs “to_str” example.
  • Character encoding standardization.
  • All APIs use keywords, no position-significance

Recommendation Engines with Redis – Evan Light – Rackspace

Devise by Lucas Mazza

Upfront Design by Mark Menard

Legal Talk by Daliah Saper

  • Useful for non-corporate work. Advice for freelancers.

Domain Driven by Yan Pritzker of Reverb

Go for Rubyists by Ken Walters

  • Mostly Go, not much for Ruby/Rails
  • Watch if you’re interested in Go or Concurrency ideas

Local Government on Rails by Tiffani Bell

  • Code for America work with Atlanta and Detroit
  • A discussion on sample projects with government, but no big takeaways for corporate work

Functional Languages with Rails by Sean Griffin of thoughtbot

  • Get his slides
  • IO should always be concurrent
  • Concurrency ideas from Scala could go into Ruby/Rails
  • “Rails API is too far removed from HTTP”
  • “We will break Rack”
  • The Matz Tweet agrees with Sean’s point on future of Ruby
  • “Promises” in JS == Futures in Scala
  • Monadic gem

The New Era of Orchestration: From Docket to BOSH to Cloud Foundry by Dr. Nic Williams

  • Orchestration: Automated arrangement, coordination, and management of complex computer systems, middleware, and services
  • Book Recommendation: The Phoenix Project: A Novel about IT, DevOps, and Helping Your Business Win by Gene Kim, Kevin Behr, George Spafford
  • In his consulting experience, CIO concerns for the next 10 years:
    • Reduce time to value
    • Unify access among applications to all data
    • Mobile access
  • Goals for Orchestration:
    • Deploy Quickly
    • Deploy Framework/Language of Choice
    • HTTP Routing to Web Processes
    • Integrate DBs/Services/APIs
    • Logging
    • Simple, fast scaling
    • Automatic Recovery
    • Package assurance/Version control
    • Reproduce production environment for debugging
    • Auditing who/what did what change?
    • Access controls
    • Internal billing/accounting
  • Orchestration should let you focus on being valuable and engineering
  • Use Pivotal Web Service and Heroku until someone says you can’t!
  • Beware DIY Orchestration: No Unix app for the whole list
  • Orchestration is a system, not an app
    • Docker is good, but doesn’t cover the whole list
  • Where Docker is Good:
    • Package control
    • Process monitoring
    • Port and data binding to host machine
    • Dockerfiles, community involvement
  • Weakness of Docker: Across clusters of servers that change is hard
  • Try CloudFoundry: trycf.starkandwayne.com

Meet the SLAs: Rails at Constant Contact by Dinshaw Gobhai

  • Slides at: http://dinshaw.github.io/meet-the-slas/#/
  • Building for Scale from Scratch
    • Don’t Do it
    • Don’t Over-Architect
    • Don’t Prematurely Engineer
    • Don’t Solve Problems You Don’t Have Yet
  • Measure: Ruby-prof and DTrace for Profiling Apps
  • Rails and N+1
    • preload(:association) – Separate Queries for Associated Tables
    • eager_load(:association) – One query with all associations LEFT OUTER joined
    • includes(:association) – Picks one of the above
    • joins – One query with all associations ‘INNER’ joined
  • aRel Gem
    • aRel on Github
    • Example usage and Youtube video in slides
    • Shows how to do anything in SQL in Rails!
  • Serialization: Skip your ORM
  • include? Causes variables to be downcased!
  • Excessive Logging:
    • Don’t log in loops!
    • Logger messages are generated even if your logging levels mean it isn’t saved! Something to be mindful of if speed is an issue.
  • Use Delete instead of Destroy. Destroy instantiates objects, delete just erases the record.
  • Move “Unique” validation to database, not in models. This uses one less Read to the DB.
  • dgobhai@constantcontact.com

Greenscren: Digital Signage Powered by Chromecast

  • http://greenscreen.io
  • Not Ruby/Rails related, but came out of a hackathon at Groupon
  • Could be useful if we want to have apps or pages displaying on TVs in office

Charming Large Databases with Octopuses

  • If application is read-centric, replication can help you get more performance.
  • Replication: Split up database with master and Slaves. Write to master, read from slave. Balances traffic.
  • Sharding: Take a database or table and split among many physical instances.
  • Db-charmer gem:
  • BUT DB CHARMER ONLY MYSQL AND NO RAILS 4 SUPPORT
  • This is where the Octopus gem comes in: Octopus Gem on Github
  • Provides examples of DB Charmer and Octopus in slides

More TDD by Jessica Kerr

RubyLisp by Dave Astels

  • One of Authors of RSpec
  • bitbucket.org/bastels
  • daveastels.com/rubylisp
  • Scheme for Ruby/RubyMotion
  • Interesting but nothing immediately useful for us

Developing Developers by Dave Hoover of Dev Bootcamp

  • Two Pronged Approach to Growing a Company
    • Hiring Already Great People
    • Training People
  • At old company obtiva, started an apprencticeship program
  • Elements of Good Apprenticeship Program
    • Mentor, Team, Owner
    • Sustainable Ratio of Senior-to-Junior People
    • Culture of Learning+Collaboration > Curriculum: Encourage customized learning
    • In the Trenches: Get apprentices doing real work with team
    • Pet Project: Can fill time if team busy, educational, allows for mistakes
    • Milestones: Keep people on track
    • Feedback loops: Most important, should include pairing
  • Company must support Learning > Demanding Immediate Competence

Cucumber Still Relevant?

  • Answering the question: How Does this legacy app work?
    • Docs?
    • Tests?
    • Cucumber!
  • Scenario/Given/When/Then syntax
  • Cucumber bridge between devs and biz
  • Setup->Action->Assertion
  • A shared language between biz and devs. The language words should be decided by BIZ.
  • I was unconvinced.

A Casual Conversation on Tech Valuations

“The Bubble Question” is the title of a recent Fred Wilson blog and the frequently asked question: “Are we in an stock market and/or technology company valuation bubble?”

Fred Wilson is a managing partner at Union Square Ventures, prolific venture capital blogger, and (from what I’ve gathered reading his blog for years) a pretty smart guy. Given his position, he gets asked the aforementioned question quite often and laid out his current conclusive response via blog. The gist of his explanation for the bubble is:

“valuations are at extreme levels because you cannot get a decent return on your money doing anything else…. really just one factor (cheap money/low rates)… is the root cause of the valuation environment we are in. And the answer to when/if it will end comes down to when/if the global economy starts growing more rapidly and sucking up the excess liquidity and policy makers start tightening up the easy money regime. I have no idea when and if that will happen. But until it does, I believe we will continue to see eye popping EBITDA multiples for high growth tech companies…. It’s been a good time to be in the VC and startup business and I think it will continue to be as long as the global economy is weak and rates are low.”

After having read Fred’s blog and my recent analysis of Castlight Health, my good friend and old Heyzap coworker Micah Facebook asked me for my thoughts on the tech bubble discussion. With his permission, I’ve posted the transcript from our April 24th conversation which contains my simplified explanation of the outrageous tech company valuations we are currently seeing and other thoughts on the internet industry.

Note: After the transcript I’ve included some further references related to points in the discussion. I also realize some comments in the conversations are over-simplified, but my friends/readership fall all along the spectrum of economics knowledge, so I usually opt for over-simplifying and clarifying details for those who ask. Any comments, critiques, or elaborations are welcome at loganfrederick@gmail.com.


Part One: Shortly Before Leaving Work, Micah Asks Me a Question

4/24, 5:10pm – Micah Fivecoate: So, does Fred’s post explain Castlight?

4/24, 5:10pm – Logan Frederick: I haven’t read through his post yet
But Just from the comments
It is a big part of it
I will respond tonight
After I read his article

4/24, 5:10pm – Micah Fivecoate: I don’t understand yet how it’s tech-specific

4/24, 5:10pm – Logan Frederick: Basically the simplified chain is
Fed lowers interest rates -> Means it’s really cheap to borrow money -> So everyone starts borrowing money -> That money is expected to be put to work to earn a return -> But given the economy now, a lot of industries and assets do not look that appealing -> Tech/internet sector looked pretty strong coming out of financial crisis with increased usage and actual revenues/profits from the giants -> Investors with cheap cash view that as the best place to get a return -> All the money goes into tech

4/24, 5:13pm – Micah Fivecoate: Ah, okay

4/24, 5:13pm – Logan Frederick: Even more basic, it’s just two factors: Tech companies look like the biggest growth opportunity compared to all other asset class, and the Federal Reserve policy makes it very easy for investors to get money to invest in tech

4/24, 5:13pm – Micah Fivecoate: So, it’s a combo of free money + tech looking good

4/24, 5:13pm – Logan Frederick: Yeah
That’s really it
If/when Fed rates rise
It will surely hurt tech company valuations
Even as some commenters said it would be a signal the economy is stronger or inflation is higher
But regardless, less money would be available for investment
So some companies might do better with higher interest rates, but overall valuations will be lower in real terms

4/24, 5:15pm – Micah Fivecoate: Wonder what would do better with higher interest rates
I guess any co with lots of cash
or that facilitates loans

4/24, 5:16pm – Logan Frederick: Well assuming rates go higher because of a strong economy, you could reasonably expect that the large tech companies would be doing well

4/24, 5:16pm – Micah Fivecoate: Oh

4/24, 5:16pm – Logan Frederick: The fed interest rate moves
Are more a trailing indicator
“Oh, economy is strong? Then we raise rates”
But your point was right as well to a degree, a company with a lot of cash can weather a rate increase better because it does not need to borrow

4/24, 5:18pm – Micah Fivecoate: So, is the effect to slow change when things are strong, and accelerate change when the economy is weak?

4/24, 5:18pm – Logan Frederick: Yep
That’s the basis of Monetary Policy

4/24, 5:18pm – Micah Fivecoate: cool

4/24, 5:19pm – Logan Frederick: You can continue down the rabbit hole of Monetary Policy theory, but all the research and debates are about what is the best mechanism for maintaining/finding the right equilibrium of economic strength or growth in relation to interest rates
The libertarian/anti-Fed Reserve crowd’s argument boils down to: The Fed does more to deviate us from the right equilibrium than help
In the pre-modern Federal Reserve era (pre-1917 if I have the year right)
Individual banks set their interest rates
I could go on and on, but I am packing up at work
Will respond more after reading Fred’s blog

4/24, 5:22pm – Micah Fivecoate: Cool, I’ll read up a bit on monetary policy in the meantime

4/24, 5:22pm – Logan Frederick: lol Good deal, see ya in an hour

4/24, 5:22pm – Micah Fivecoate: later


Part Two: An hour later with a glass of wine and dinner at Logan Bar and Grill


4/24, 6:16pm – Logan Frederick: I did not realize that this blog post
Was the same one posted a month ago

4/24, 6:17pm – Micah Fivecoate: Oh

4/24, 6:17pm – Logan Frederick: I didn’t fully read it then either
Halfway through, don’t see anything I disagree with and is pretty simple finance
I like Fred
It’s pretty simple finance but his readership is tech folk
So it’s good to post this kind of analysis
So Finished his post
Agree with it all, but it’s only half the story
Which is disappointing

4/24, 6:20pm – Micah Fivecoate: Yeah, it wasn’t clear from his post why the money would be going in to tech

4/24, 6:21pm – Logan Frederick: Well that’s not what I meant by half the story

4/24, 6:21pm – Micah Fivecoate: oh

4/24, 6:21pm – Logan Frederick
But that’s also true
But I filled in that part for you
That you can draw, from his post

4/24, 6:21pm – Micah Fivecoate: yeah
4/24, 6:21pm – Logan Frederick:
If you judge things by growth rate
Tech offers the best right now
And always, really
I don’t like “tech” as a sector term
I prefer “software” or “internet”

4/24, 6:22pm – Micah Fivecoate: oh, makes sense
“tech” isn’t necessarily the same sort of low-marginal cost business

4/24, 6:23pm – Logan Frederick: Well I just mean it as tech is too vague a term
In a recent copy of Intelligent Investor, editor Jason Zweig overlays one of the tech stocks of the 80s (IBM I think) on top of General Motors in the 1920s and it’s the exact same. Because General Motors was the “tech” of that era

4/24, 6:23pm – Micah Fivecoate: hah, yeah

4/24, 6:23pm – Logan Frederick: But that’s semantics

4/24, 6:24pm – Micah Fivecoate: barnes and noble isn’t doing too well with their printing press tech

4/24, 6:24pm – Logan Frederick: Your point is valid too, in that different “tech” companies have different business models
Barnes and Noble has a lot of issues and I should look again at shorting them maybe
It’s scary now that they keep decreasing in market cap, someone will take them over before they go bankrupt (possibly)
Hard to short in that situation

4/24, 6:25pm – Micah Fivecoate: Oh, yeah

4/24, 6:25pm – Logan Frederick: I can guarantee some PE firm has run numbers on them
If it’s a takeover candidate or not

4/24, 6:26pm – Micah Fivecoate: Yea, it’s pretty high-profile

4/24, 6:26pm – Logan Frederick: High profile, really the only monopoly in the space left, even if it is a shitty industry of bookstores
But that’s the job of a PE guy, run the numbers of what their debts are, do they own their real estate locations? What’s the value there?
How many costs can be cut?
If we can get them for $100 or $200 million, can we reconfigure them to spit out enough free cash flow to cover whatever debt they have/we add AND give us a private equity level return?

4/24, 6:35pm – Logan Frederick: I should turn this into a blog post
And write a blog post in response to Fred’s
I did not elaborate on what I meant as “the other half of the story”, which is what happens when interest rates rise again to the levels he suggests in the post

4/24, 6:36pm – Micah Fivecoate: Oh, yeah

4/24, 6:36pm – Logan Frederick: And that’s the sound of the bubble popping
The high valuations will end either when the Fed decides to raise interest rates (by their indications 2016 I think?) or when companies with high valuations fully realize that they can not earn returns on their investments
Whichever comes first

4/24, 6:37pm -Micah Fivecoate: the giant sucking sound of all the money leaving SV

4/24, 6:37pm – Logan Frederick: At least some of it, yes
I’m still a big believer in tech and think software still has a lot of room to run

4/24, 6:38pm – Micah Fivecoate: Oh, are they planning to raise rates in 2016?
looks like
maybe going to 2%ish in 2016?

4/24, 6:42pm – Logan Frederick: But I think people forget that software is meant to improve things and that largely means taking process which cost $100 using humans to cost $10 using machines, but that generally speaking means a lot of software companies don’t need to be as big as companies of old
Paul Graham says as much in one of his essays
The goal should be maximizing profit per employee. Can you have a billion dollar company with only 10 people?
Software shouldn’t require a business to need to be valued at $100 billion
You can replace General Motors with new high tech cars…at a lower valuation
I’m kind of shooting ideas from the hip, but you could vet them out and qualify them where need be, but the general point stands I think

4/24, 6:43pm – Micah Fivecoate: What principle does the rev/employee metric maximize?

4/24, 6:44pm – Logan Frederick: Well from the PG essay he was just talking about software leveraging human talent, that was his point there
I’m sort of adding on that you could make the link that PG’s point implies valuations don’t need to be as big to have as significant an impact/be as disruptive
A five person, $10 million company could hypothetically replace a 10,000, $10 billion company
Craigslist versus the newspapers as an example

4/24, 6:45pm – Micah Fivecoate: Yeah, i guess it’s how you define disruptive

4/24, 6:45pm – Logan Frederick: So then why, taking it a step further, are investors and tech entrepreneurs *seeking* valuations larger than the company is intrinsically worth

4/24, 6:45pm – Micah Fivecoate: Oh, and the profits of the $10B company just dissipate into the market at large

4/24, 6:45pm – Logan Frederick: Intrinsically judged by how much money they actually make over a future time span
Exactly

4/24, 6:46pm – Micah Fivecoate
Shouldn’t the smaller company be able to keep profits as high?
like, costs could go down
maybe the profits would fall because the competition could implement the same software, and there wouldn’t be as much room for differentiation
or just it’s harder to justify to customers such a large profit margin
or is valuation tied in some way to gross revenue rather than net

4/24, 6:49pm – Logan Frederick: If a new software startup has costs of revenue (cost of providing the service) much lower than an old non-software company in the industry, the company won’t keep their price point at the same as old company because their customer’s substitution costs wouldn’t be affected. Their disruption will lower the costs to customers, and then depending on the industry, competition could drive those lower over time
Yeah, I typed that as you typed, but basically you as a new disruptive company would have higher profit margins, but lower prices than your old incumbent

4/24, 6:50pm – Micah Fivecoate: yeah
So you can initially keep the same profit, but lower price due to lower costs
but then other people start competing with you with software
and that’s what takes the valuation down

4/24, 6:52pm – Logan Frederick: Well valuation goes down even before your second step of competition

4/24, 6:52pm – Micah Fivecoate: because they know it’s coming?

4/24, 6:52pm – Logan Frederick: Well no, I take my last statement back
This would be an empirical question, but I would guess most software that very directly replaces an old manual task
Does not have gross profits greater than the old manual business
That’s hard to test empirically I think because most software replaces a cost of an old manual task
So you’d have to say, what were people spending on process A that was replaced with software product B
And cost of B is probably less than A
So in terms of valuation
It’s odd to word it this way
But what was the “valuation” of the dollars spent on A versus the valuation of company B
But I would guess if you did that kind of test
B is significantly lower
And that’s my point of valuation being naturally lower

4/24, 6:55pm – Micah Fivecoate: Weird
It seems like if one company can provide the same service at a lower cost
they should have a higher valuation
Might be running in to some sort of efficient-market fallacy

4/24, 6:56pm – Logan Frederick: I always view valuation in terms of return on investment
If the cost and price are lower
You can have a high ROI and still come up with a valuation number lower than the old incumbent
And then like you said earlier
If the ROI is *that* good
Then competition comes in and keeps everything in check like prices, cost, valuation

4/24, 6:58pm – Micah Fivecoate: Yeah
I guess, I’m thinking if the incumbent charges $100 for a product that costs them $90 to produce
and the disruptor charges $90 for $10 cost
then disruptor should have a higher valuation

4/24, 6:59pm – Logan Frederick: That is true

4/24, 6:59pm – Micah Fivecoate: but it probably just rarely works out so well
and then competition

4/24, 7:00pm – Logan Frederick: And that’s where it’s a case by case basis and where I think the tech industry screws up
I agree with your statement
Maybe half of software companies are like that
And another half, the bad ones, think they are doing that but are really only charging $20 at a $10 cost or charging $90 at an $80 cost, and so shouldn’t have a higher valuation
But because they are “tech” they and others think they should have the same multiples

4/24, 7:01pm – Micah Fivecoate: Hah, yeah

4/24, 7:01pm – Logan Frederick: And that’s part of why you get bubbles
Businesses thinking they can achieve a level of profitability and margins that similar-ish companies have
But really the business is not the same
And they don’t achieve it
And I guess my larger point would be
There is nothing wrong with *not* having the best margins
You just have to accept your okay margins and profits and accept that your valuation will be okay
But in a bubbly environment, every company thinks they will have the best margins, profits, and a valuation that their real margins and profits do not justify

4/24, 7:04pm – Micah Fivecoate:
Makes sense
So, is that purely because there’s too much money that wants in on this market

4/24, 7:06pm – Logan Frederick:
Yeah, so companies raising money can get away with it
If there wasn’t as much money available, investors would be more picky

4/24, 7:07pm – Micah Fivecoate: Doesn’t seem like the risk tolerance would shift with the amount of $ available
maybe it does though

4/24, 7:08pm – Logan Frederick: I could be wrong, but I think it does, although long-term it has been trending toward high valuations and more entrepreneur control, specifically in the computer software and hardware industries. Over decades that may continue.
But I say the risk tolerance does shift
Because VCs, the main drivers of these valuations, have investors themselves
And in weaker economic climates
There is a real possibility of VC investors, the big funds, saying they won’t do as much VC investing
And if VCs are worried about bad returns
They will get more choosey when it comes to investing

4/24, 7:09pm – Micah Fivecoate: Oh, interesting

4/24, 7:09pm – Logan Frederick: I can think of some counterarguments on both the high and low end though
On the high end, you could argue that VCs will still pay whatever it takes to get into the clear winners, the “next Google”
And on the low end, the dollar amounts are so low it doesn’t hurt them to continue this
And that leads into what people have been saying about Series A and B crunches
Companies in the middle of these two places who haven’t proved their worth to VCs that they can earn big returns but need more money than seed rounds can provide
I dunno how valid the Series A or B crunch is based on a few articles I’ve read, but that logic I just laid out would explain why it exists
VCs are just increasingly worried about investments in those stages

4/24, 7:11pm – Micah Fivecoate: Yeah

4/24, 7:11pm – Logan Frederick: Series D is safe
Seed is safe
By VC math

4/24, 7:11pm – Micah Fivecoate: right

4/24, 7:12pm – Logan Frederick: Any other thoughts/questions for me?
That I can come up with half-assed, on the spot answers for


Notes:

  1. Regarding my comment about wanting to maximize revenue per employee from Paul Graham, I tried finding the exact PG comment I had in mind. My memory of it may have been off. His essay “How to Start a Startup” has the closest passage to what I was thinking that I could find quickly:

    “If hiring unnecessary people is expensive and slows you down, why do nearly all companies do it? I think the main reason is that people like the idea of having a lot of people working for them. This weakness often extends right up to the CEO. If you ever end up running a company, you’ll find the most common question people ask is how many employees you have. This is their way of weighing you. It’s not just random people who ask this; even reporters do. And they’re going to be a lot more impressed if the answer is a thousand than if it’s ten.

    This is ridiculous, really. If two companies have the same revenues, it’s the one with fewer employees that’s more impressive.”

  2. My comments at the end about Seed funding and late stage funding being safe for venture capitalists is based on discussion in the past six months on what the media called the “Series A” and “B” crunches. There was debate on whether there was a trend in venture capital of increasing investments in really young or really old companies, but a lack of investment for companies in the middle. Google “Series A Crunch” or “Series B Crunch” for more details.

Is California's Budget Endangering Silicon Valley?

Meredith Whitney isn’t well-known in the technology community, but she’s made a name for herself in the financial world. I personally first learned her name from Michael Lewis’s fantastic book The Big Short. Lewis, along with most of Wall Street, was struck by Whitney’s foresight when, on October 31, 2007, she announced that Citigroup’s dividend payments exceeded its profits and would have to be eliminated. Four days later, Citigroup CEO Charles Prince resigned. Anyone interested in how Whitney rose to become one of Fortune’s “50 Most Powerful Women in Business” should read Lewis’s short biography of her on Bloomberg.

After slaying the banks in 2008, Whitney has come out decrying an even greater financially mismanaged beast: The coastal states. Her first, recently released book, The Fate of the States, uses research from the Meredith Whitney Advisory Group to reveal the terrible financial condition of these highly leveraged states. The primary target? California.

The Fundamental Problems: Debt and Pensions

California has about 12% of the total US population, but contributes 13% of GDP and generates $100 billion in annual state and municipal tax receipts. As if you needed more evidence, California is a big state in every sense of the word.

Sadly, Whitney is quick to point out that California made the same gamble on housing that banks and consumers did; the state bet that property tax revenues would never decline, and borrowed and spent money accordingly. It’s no surprise that the state has suffered the same consequences since 2008 as individuals and banks which bought into the housing market.

By 2011, the average Californian had consumer debts of $73,000 and $11,000 in tax-supported state obligations while only earning $43,000 in income. Since 2008, home prices in California have fallen almost 40 percent and nearly 30 percent of mortgages in the state are underwater. In the last decade, debt-per-capita increased 100% in California, 88% of this debt tied to real estate.

These debts and those held by the municipal governments cripple the ability for the state to function. As personal and governmental debt increases, at some point consumer spending and government services have to be cut to cover debt payments. This begins a negative feedback loop where private business growth slows or declines, tax revenues fall, the government must raise taxes to compensate, and economic growth drops further. It’s important to remember that the tax base is the revenue source for a city, state, or country. If citizens make less money and are given reason to leave, government revenues fall.

From 2008 through 2010, California’s tax receipts fell from $118 billion to $105 billion, with total state and local receipts dropping from $781 billion to $702 billion. In an attempt to compensate, California already raised income and sales taxes in 2011 and 2012.

One of the biggest debts many states, especially California, face are unfunded pension liabilities for retired and current public employees, particularly in the prison and education systems. In 2009, new Government Accounting Standards Board rules forced states to disclose unfunded pension and health-insurance obligations. What California unveiled when forced was not a pretty picture. From 2000 to 2010, state spending grew 72% to $107 billion annually. State government spending as a percentage of state GDP was 25.3%. Most horrifying, this spending outpaced the government’s revenues by 224% in 2009 and 92% in 2010, and increased by 50% in the past year. Over 20% of this spending (over $21 billion) goes toward state liabilities including general obligation debts, unfunded pensions, and other post-retirement benefits.

Pensions are particularly challenging for states to manage because they are given special legal protection or “seniority” over other liabilities and expenses. These, as part of pension contracts, can be enforced in court. The pecking order has pension obligations and municipal debt required to be paid before everyday expenses like education, police, roads, and public services. “The fight is not just political but constitutional too: Courts are now deciding whether municipalities can use ballot measures and bankruptcy laws to void or change public-employee pensions,” writes Whitney. “At the heart of the problem is a difficult truth: There’s not enough money to pay for everything, and by law, pension payments trump most other types of spending.”

Employees contribute little to their government pensions (generally less than 10% of the total contribution). The rest is covered by taxpaying citizens. At the same time, pensions are given embedded cost-of-living (COLAs) which are meant to buffer the pension funds against inflation, except they are not benchmarked to inflation. The average COLA is 3%, but average wage growth has been 2% in the past decade. The COLAs have effectively been pay hikes of 1% over the average for people who are not working.

Before breaking down the liabilities into greater detail, the problem for California is summed up by Whitney early in her book: “California allows a police chief to retire with a pension of over $200,000 after less than a year on the job but doesn’t have enough money to buy new books for classrooms or to keep violent felons in jail. No wonder the state is facing an exodus of employers and employees alike…. With not nearly enough money to go around, the impending war over public-employee pensions threatens to be one of the more vicious political debates this country has seen, pitting Americans against Americans, neighbor against neighbor.”

The Logical Question: How Will This Affect Silicon Valley?

The evidence for California’s impending financial apocalypse isn’t difficult to understand. Given the above numbers showing that, as a state, California owes and is spending more than it earns, the jig is going to have to be up at some point in the future. One could propose that California could try to maintain its spending-more-than-it-earns ways by continuing to borrow money from the federal government, international lenders, or bond markets, but as we’ll show, these cash sources have their own problems and can be wary of investing in something when it’s uncertain whether the state will be able to afford providing a return on the investment.

I am suggesting that, while California simultaneously looks at the above options for money and finds them increasingly unattractive or unavailable in the future, the state government will look to its best internal sources of money to cover its obligations. And California’s most notable and profitable sector is the technology industry in Silicon Valley. Connecting the dots from California’s financial woes to the money generated by the companies and cities in the Valley reveals the question: Are the companies and cities in Silicon Valley going to be asked or forced to assist the rest of the state financially so California doesn’t collapse around it? What form will this “help” take? New, higher taxes for the companies in the Valley? A decrease in federal funding for the municipal governments of San Francisco, Palo Alto, Cupertino, and Mountain View so the money can be used elsewhere?

Further Dissecting California’s Finances

Another problematic industry plaguing the state budget is prisons. In 2010, California spent $6 billion on 30,000 prison guards and other prison system employees. That year, the state’s highest paid employee was the head parole psychiatrist with a staggering $838,706 income. From a 2011 Wall Street Journal story, Californian prison guards could receive $85,000 per year in pensions when retiring at age 55. A 55 year old private sector worker would need $1.63 million in savings to purchase an annuity with similar yield. The insanity of this relationship is that private sector workers must save huge sums of money for their own retirements while covering the taxes that are used to pay for public worker pensions.

By comparison, in 2010 the state only spent $4.7 billion on higher education and has continually cut college funding. In the past 30 years, the state has sunk from being 30% of the University of California’s budget to 11%. In 1980, a Cal student spent $776 in tuition per year. This number was $13,218 in 2011. From 2004 to 2011 alone, university tuition in California rose 80%.

Kindergarten through 12th grade schooling accounts for 20% of state spending and colleges are another 10%. The second largest expense is Medicaid. Given California unemployment at 12%, the Medicaid budget has continued to grow and taking room from education spending. California has cut $6 billion in education spending since 2008. In 1990, California had a 1.3% lead over the USA average for the percentage of its population graduating high school. By 2008, it was 6% below the national average. Only 18% of those high school graduates enrolled in state colleges in 2012. In-state community college enrollment dropped from 2.9 to 2.4 million.

The two primary segments where the federal government gives financial aid to states is for Medicaid and food stamps. These two programs are meant to support for people living in poverty (defined as an annual income of $23,000 or less for a family of four). As of early 2013, the poverty rate in this country was 15%. It was 11% in 2000. One in seven (43 million) Americans live off food stamps. California spent $10 billion in fiscal 2010 on public assistance programs. In 2000, 7% of the California budget was spent on public assistance. While this was down to 4.9% in 2010, the number of unemployed who rely on these programs in the state increased by 2 million.

The results of these debts and the economy have already hit Californian cities. In the early 2000s, Lou Paulson, head of the Contra Costa County, California firefighter’s union, negotiated new contracts for its member which allowed them to retire at age 50 with an annual pension equal to 90% of their final salary for the rest of their life. This same city levied a new $75-per-year-per-home tax in November 2012 to support the current fire department which would otherwise need to close six fire stations due to lack of funds. The ballot failed. Kris Hunt, director of the Contra Costa Taxpayers Association, was outraged at firefighters for raising more taxes and posted online the name of every retired public employee with a pension above $100K. It had 665 names, 24 who exceeded $200,000 per year. 268 of the 665 were firefighters, while there were only 261 firefighters currently employed on the streets.

A local construction worker named Matt Heavy on NPR: “I felt hostage…either pay the extra money or we’re going to start shutting down stations. And the bottom line is the reason that they’re asking for the money is because the pensions are just skyrocketing.”

The Main Competition: Texas

I currently live in Illinois (another debt-burdened state) and interned for a summer in San Francisco, so I have little bias in telling this story. With all California’s financial problems laid bare, the next question is who is in position to take advantage of California’s decline? Whitney’s answer: Texas. Why? Because by a variety of economic metrics, Texas is a better state in which to live and work.

Over the past decade, the life prospects for the typical Californian have gotten significantly more precarious than the average Texan. The average debt-to-income per capita in California is 170 percent compared with Texas’s 80 percent. Since the housing crash, the percent of homes with negative equity has risen to 29 percent in California versus only 9 percent in Texas. In the early 2000s, California’s unemployment rate was 20% higher than the national average and 30% higher by 2010. “By 2010, the last year for which data is available, consumer debt per capita in California hit $74,950, a debt-to-income ratio of 174%. By comparison, the average debt per capita in Texas was $36,000, which translates to a debt-to-income ratio of 89%,” Whitney elaborates.

For an individual deciding where to live, Texas offers the obviously better bang-for-your-buck deal. Texas does not tax individual income. California voted to raise income-tax rates on those earning over $1 million to 13.3% (the highest state income-tax rate in the country) and 10.3% for those making over $250,000. Compared to Texas’s zero rate, that’s an extra $26,000 taken out of your pocket annually.

Along with no income tax, personal income was growing 73% faster annually by 2012 in Texas than in California, and the average home price is 60% lower.

From 2009 to 2010, 12% of people moving out of California moved to Texas, which is astonishing considering that the move is basically across half of the country. By 2012, the problem had piqued the interest of California’s legislature enough that it sent an economic research team to Texas to investigate the population drain. A total of 1.9 million Californians left between 2000 and 2009.

University of Michigan economic professor Mark Perry noted, “In April 2012 the cost of renting a U-Haul truck for a one-way trip from California to Texas was twice that from Texas to California. The price ratios suggest that demand for trucks leaving California is roughly double the demand for trucks coming into the Golden State.”

Whitney added, “The fact is that California’s total obligations – obligations that can be escaped by the simple act of moving – increased by 50 percent in one year alone…. Moving has become an easier decision for businesses too. Consider, for instance, a corporation headquartered in Silicon Valley. The average corporate tax rate in California is over 8.8 percent and the average sales tax is 7.25%. Sure, property taxes are kept in check by Proposition 13, but the cost of living is higher than in most other states and social services are vanishing….

“When a satellite operator like Globalstar moves from California to Louisiana or a food company like Chiquita relocates its headquarters from Ohio to North Carolina, the decision to move often boils down to taxes….

“By mid-2006 the real cost of homeownership in California was more than twice the national average. The ratio of average home price to per-capita income was 9.7 in California versus 4.2 for the United States nationally. The price-to-income ratio in Texas was a mere 2.6. Was it really worth over three and a half times more to live in California than in Texas?”

It’s not just individuals who are moving; companies are too. Major tech companies like Google, eBay, Amazon, Intel, and Apple have all added new offices and invested hundreds of millions in Texas, especially in the city of Austin. According to a study by Joseph Vranich, an expert in studying business relocations, the number of businesses leaving California increased fivefold between 2009 and 2011.

Whitney elaborates, “In 2012, when Apple was deciding where to invest $300 million and add 3,600 new sales and accounting jobs, it chose to build in Austin Texas, instead of near its Cupertino, California headquarters. When San Jose-based eBay and its PayPal subsidiary were looking to add 1,000 new jobs, eBay also chose Austin, Texas. Where jobs go, taxpayers follow: According to the Manhattan Institute for Policy Research, of the 1.1 million Californians who left the state in the 2000s, 225,000 of them moved to Texas, making it far and away the most popular destination for ex-Californians.”

She continues, “The smart money understands that taxes can only go up given the massive sums of bonded debt and unfunded pension and health care liabilities coming due in future years. Thanks to reckless fiscal mismanagement by cities and states, individuals and corporations still residing in those states will all be on the hook. The smart money also understands that with those higher taxes will come a lower level of public services- that the states in the deepest fiscal trouble have far fewer resources to invest in roads, bridges, airports, education, public safety, and all the other things relocating businesses look for in a new home…. No wonder smart money is flocking to states with lower tax burdens and less strained budgets. The dumb money is those left behind to pay high taxes for lesser services.”

Historical Precedents

California is no stranger to having individual cities collapse. The below examples are meant to drive home the point that if these continue, the state government will have to step in (and in some cases already has). If the state government has to continually bail out its bankrupt cities, it may have to take money from the successful cities to prop up the losers.

Orange County went bankrupt on December 6, 1994 when it was the sixth largest county in the country. County Treasurer Robert Citron had used derivative markets and high-yield bond investments to boost county revenues during the early 90s recession. When those trades lost $1.4 billion, the city had to declare the largest municipal bankruptcy in US history. When the muni bond markets responded by raising interest rates on all cities in California, it was cheaper for the state of California government to support an Orange County reemergence in 1996 than pay higher rates on government-issued bonds. One Orange County citizen stated, “I don’t know who will make up the deficit but I really don’t think it should be the citizens.”

In June 2012, Stockton, California became the new largest US city Chapter 9 bankruptcy. A city of only 292,000 residents saw home prices triple to an average of $400,000 from 2001 to 2006. The city officials assumed the area’s economic growth would continue indefinitely and increased its spending habits accordingly, going from $160 million in 2003 to $200 million in 2007. Stockton also had one of the worst pension agreements of any city. California state law requires public employees to contribute between 7-9% of their salary to their pension plans. The city of Stockton agreed to pay this contribution for its public employees! On top of these mounting expenses, Stockton borrowed $125 million through a city bond issue in 2007, only to invest that money in the stock market and lose $25 million of it. From 2006 to 2011, home prices in Stockton fell 58%. The city had to cut public services, slashing the police force by 25% and the fire department by 30%. Now it has the tenth highest rate of violent crime for all cities in the country. As of September, 2012, the city was embroiled in legal battles with two bond insurance companies attempting to force the city to suspend payments to its public employee pensions and redirect the funds to its bondholders. The city has spent at least $4.9 million on lawyers. Stockton City Manager Bob Deis was quoted saying, “We are trying to be responsible in dealing with our creditors, but in the process we cannot destroy a community and its hope for the future.”

Mammoth Lakes, California filed for Chapter 9 bankruptcy on July 12, 2012 after losing a $43 million lawsuit against Mammoth Lakes Land Acquisition for breaching a land development contract. This judgement was three times the small city’s annual budget, which was already $2.3 million in the red.

Two days earlier, San Bernardino filed for its own Chapter 9 bankruptcy. From 2008 to 2012, the city trimmed its public workforce by 20%, and yet the budget gap was still $46 million with another $157 million in unfunded pension and health-care obligations.

How did so many Californian cities get into so much trouble? San Jose mayor Chuck Reed speaks from experience, “Hell, I was here. I know how it started. It started in the 1990s with the Internet boom. We live near rich people, so we thought we were rich.” San Jose is under heavy financial stress. By 2015, San Jose pension costs are expected to be $400 million to $650 million. Once run by 7,450 public workers, the city is maintained by 5,400 employees. Remaining workers have taken a 10% pay cut from a couple years ago. Reed expects that his city of a million people, the 10th largest in the country, will be serviced by only 1,600 public employees in 2014.

What Can Be Done

Thus far we’ve established that the State of California and many of its municipalities are in great financial danger. The thesis of the essay is that these budget weaknesses may force the state to look at Silicon Valley as a source of extra income. But before this happens, are there any other options the state can pursue?

From Fiscal 2008 to 2012, states used the following measures to close their budget gaps (the differences between their large expenses and decreasing tax revenues) based on Bureau of Labor Statistics and MWAG research:

  • Spending Cuts: 45% of money used to close budget gaps
  • Federal Funding from the American Recovery and Reinvestment Act of 2009: 24%
  • Revenue Increases: 16%
  • “Rainy Day” Funds and Other Cash Reserves: 9%
  • Other (Date shifting, on-time/short-term borrowing): 7%

Sadly, Whitney adds, “There is no more money. There are no more stimulus dollars. There are no more rainy-day funds to raid. The emergency options have all been tapped.”

Pensions are huge expense. The state and cities need to renegotiate the pension contracts with public worker unions to decrease benefits owed and lighten the burden on current taxpayers. It’s important to remind ourselves going into these talks that no one is right or wrong and almost nobody at the table is to blame. Government employees were promised benefits and negotiated their contracts. Taxpayers pay taxes with the expectation of certain levels of services: Education for their children, safe streets, and running water. Municipal bondholders lent money to these cities expecting a return. The politicians currently in office are generally not the ones who got the cities into this mess.

Rhode Island provides a bright example of a state grappling its pension problems. In 2012, the state raised its the percentage of its pension liabilities funded from 48% to 60%, reducing its unfunded liability by $3 billion. This was accomplished with bipartisan support from government officials to negotiate concessions from the public employee unions on benefits and cost-of-living adjustments for current and future retirees.

Privatization is the government taking businesses it owns and selling them to private companies. Indiana Governor Mitch Daniels set a controversial precedent when, in 2011, he leased the state toll road for 75 years to private investors for an upfront payment of $3.8 billion. This and other privatizations like it raise cash for the government while losing its long-term revenue-generating assets. Opponents of privatization will ask: Why sell the income of tomorrow for cash today? The answer: Given the heavy debts states carry, they have to raise cash just to survive.

There is also a successful historical precedent for privatizations, particularly in Europe in the 1980s and 90s. To join the European Union, a nation’s deficit had to be under 3% of GDP. Many countries accomplished through selling assets. From 1990 to 2009, $1 trillion was raised by EU countries through these sales, $100 billion from privatizing transportation industries alone. By comparison, the United States government has planned and funded less than $20 billion in similar transportation projects. Given the lack of investment by the US government and states in transportation, a case could be made that infrastructure and transportation would be improved under companies that have a profit motive, rather than government politicians untrained in asset management.

Some parts of California have started to privatize their assets out of necessity. The state has outsourced operations for six of its public parks. The Brannan Island State Recreation Area, outsourced in 2012, used to cost the state $740,000 per year, twice its revenues from fees and concessions. These parks are being privatized either through profit-sharing between the state and the operators or outright sales for cash.

There are numerous other changes state governments need to make: Invest whatever cash they can into improved education and jobs programs, monetize their natural resources, and promote right-to-work laws (job growth in right-to-work states was double the non-right-to-work states from 1977 to 2008). These cost the states little and allow them to grow in the coming decades while using their current cash to cover their short term problems.

Unanswered Questions

While it’s clear that California is one of, if not the, worst managed state financially, what’s still unclear is what exactly this means for Silicon Valley. None of what I’ve presented definitively demonstrates that Silicon Valley will be crushed by California’s mounting debts. To truly answer the original question, we would need more research and answers to the following questions:

What is the political relationship between the local Silicon Valley governments and the state? How much can the San Francisco, Palo Alto, and Mountain View politicians keep their cities siloed from the rest of the state’s problems?

How will Berkeley and Stanford be affected by decreases in state funding? These universities have endowments. Will the be able to easily dip into these funds to continue their operations? Will they need to cut costs? What about the other California universities? The state has a reputation for being leading technology and business schools. Can the local schools continue to feed intelligent, high-income earning and job creating student? It’d be a shame if these programs suffered due to financial mismanagement higher in the food chain.

In the face of increased taxes and even higher standard of living costs, will technology entrepreneurs still gravitate to the Valley? Although Paul Graham’s essays on Startup Hubs and Professor Richard Florida’s “Clustering Force” explain why Silicon Valley has grown into the leading location for the technology industry, there must surely be some structural limit to the pull startup hubs have. Those structural limits are determined by the institutions of the location’s government. Things like regulations and taxes will impact how people perceive a city, and if taxes continue to rise, would-be entrepreneurs around the world will reconsider Silicon Valley when there are other fertile environments.

Despite California’s problems being financial, the solutions will be political. Who will bear the weight of these debts as they continue to be called? Who will volunteer to decrease their standard of living (fewer public services, increased crime, under-performing schools) so the greater system can continue?

I can imagine a defensive reaction from Silicon Valley residents. After all, they aren’t the cause of these problems, they and their cities are still doing well, and the bleak future I’m proposing is in the future. Why worry about something which might not happen?

Because, as the evidence shows, while Silicon Valley might not directly suffer, the rest of the state in which it resides will. It is not a large mental leap to think the rest of the state will ask the technology community for help. It’s better to be aware of these possibilities than to be ignorant of the systemic risks which underlie society.

I do not have all the answers and haven’t completely solved them in this essay. Some of these are hypothetical. But these problems need to be discussed publicly and resolved by those it will affect in the very near future.

If anyone has any questions, comments, or information which would could help with research on these issues, email me at loganfrederick@gmail.com.

How I Self-Taught Programming as a Teen in the 2000s

I’ve gotten plenty of incredulous looks in my life when people have asked me why I program and how I got work as a developer despite not being a traditional Computer Science student.

The answer begins in high school.

The full story of how I found myself programming is a long one which will get its own post at some point. Like a lot of youngsters in the mid-2000s, it involved practicing making my own sites with simple HTML tags on Angelfire. After moving on from static HTML pages to PHP tutorials, I went exploring for a project. I believed, then and now, project-based learning was most effective for me. This led me to Judgify.

What Was Judgify?

One night in Fall 2006, while watching some reality TV show with my parents, I was talking with my dad about the progress I was making through some introductory PHP books. We were discussing the latest news in the web startup world that was growing at the time with the rise of Facebook.

Our startup talk led to us going through some of the ridiculous ideas of the time. Somewhere in the middle of this, my dad came up with the idea for a website like HotOrNot, but instead of people, you would vote on judging anything. Everything would/could be broken down into categories such as songs and movies. Naturally, the easiest way to name a start is to take a verb (to judge) and add a suffix it doesn’t normally have.

I wrote Judgify through the winter to summer of 2007, learning what I need along the way from a variety of PHP, MySQL, HTML, and CSS resources online.

Anyone can recreate Judgify by copying the code from Github, uploading it to a server with PHP and MySQL installed, and running the installation script (Not sure on version compatibility, as PHP 4 was still dominant at the time and MySQL wasn’t yet owned by Oracle).

Resources

HTML: HTML Dog” is one of the simplest, best HTML tutorials I’ve come across in the past decade.

CSS: CSS Zen Garden A great way to learn how to make beautiful designs without images, only CSS.

PHP and MySQL: Practical PHP Programming Tutorial is another easy read that slowly walks you through PHP from knowing nothing to being able to build the basics of programming an interactive website.

A special shout-out goes to the GameFAQs Web Design message board. The community has mostly aged and left since I was a teenager. However, memories of the core group of 15-20 year olds working together to study technology in the evenings after school will stick with me for life.

After analyzing Judgify’s code seven years later, I have jotted down three things I did right and three things I would improve if I were to start this project today.

Things Done Right

A (Rudimentary) Installation Script

In the “config” directory, there is a simple install.php file. Fill out your database information in the config.php file and open install.php in the browser and it will setup up the Judgify database. This allows anyone to easily copy the code and quickly get Judgify set up on their server.

Imageless Design

In the mid-2000s, high-speed internet was hitting its stride. Web developers, on the other hand, were still worried about compatibility with visitors with slow connections. To provide support for those on 1990s internet and as a backlash against the abuse of Adobe Flash sites, a certain section of the web dev community promoted designing websites to not use any images. All the colors and shapes would be drawn by the browsing using CSS (Cascading Style Sheets) code. The Judgify codebase has a “css” folder containing the standard CSS and an “ie7.css” file for users coming from Internet Explorer 7.

Homemade Forums and Blog Integrated with Judgify Accounts

Along with the product as I previously described it, I included some custom forum and blogging code. The forum, based on the GameFAQs format, allowed our tens of users to interact and the blog allowed me to update the homepage. The “forum” folder contains various files for viewing topics and making comments. If you’re going to add forums to your site, I’d probably go with PunBB (I used it before making my own), but the Judgify forum code gives you a sense of how internet forums are structured.

Things I Would Fix

Spaghetti Code

With my aged eyes, the most immediate way to improve the codebase is to clean up all the spaghetti. “Spaghetti” code, for the uninitiated, is code that mixes different control structures and types of code so as to be harder to understand. In this case, the main problem is that the back-end control flows and database queries are intermingled with the code which displays the site to the page.

Movie.php serves as a simple example of what I’m describing:


echo'

';
echo'

';
$query=mysql_query("SELECT `id`,`name`,`date_added` FROM `movie` ORDER BY `id` DESC LIMIT 20");
while ($data=mysql_fetch_assoc($query)) { echo'

';}
echo'

Newest Movies
',$data['name'],' ',date("F j, Y", $data['date_added']),'

';
echo'

';

What’s problem with this block of code? The interaction with the database is right next to the code which displays its result. Why is this bad? Well, an application of this sort makes quite a few calls to the database, as seen in a lot of the files in Judgify’s code. The commonly accepted best practice is to separate code that does database and heavy computing work from the code which displays the results to the user on screen. A popular architecture for organizing code in that fashion is “Model-View-Controller”. Without too much detail, “Views” have code which displays the page, and “Controllers” control the processes of the application. If you were to update or write Judgify today, you’d probably want to use a PHP framework based on MVC such as CakePHP or CodeIgniter.

XSS and CSRF could be improved

Cross-site scripting (XSS) and Cross-Site Request Forgery (CSRF) are two common types of web application attacks. You can research them more at the links. Judgify itself only had limited protection from these kinds of attacks and was not tested extensively. I did add some protection to the application, as shown in the following line from “forum/makepost.php”:


$_POST['text']=mysql_real_escape_string(trim(htmlentities($_POST['text'])));

The function “htmlentities” takes any arrows and quotations marks used to make HTML and converts it into non-html text. This way an attacker can not insert HTML code into your application, as it all gets converted to and from regular, non-HTML text.

“Trim” removes spaces from the beginning and end of text.

“mysql_real_escape_string” escapes special character, like slashes. “Escaping” in a coding context means specifying between where you want to use a character as itself or in the context of programming. As you’ve seen throughout code, the dollar sign acts as a special character in programming context. Add a “” in front of it in some instances would “escape” it so it is no longer special (This is just a top-of-the-head example).

I should note that these were written in 2006 for PHP 4. I know that “mysql_real_escape_string” is considered outdated and better methods of security have been included since PHP 5.

Security Through Obscurity

This is a “technique” toward software security that is almost always a bad idea. So naturally 16 year old me did it. The idea is that if you give something a unreadable name or hide it away in a hard-to-find folder, it’s secure because nobody can find it. Without locking that folder in a cabinet though, if someone does stumble across your files, then you’re defenseless. The “admin” and “security” folders themselves have no security, so if someone knows the address to “security/install.php”, they can open the file and affect your database. This is pretty resolvable at the folder and file level by managing visitor and user access privileges.

Reflections on Getting Started

This pros and cons list was not meant to be comprehensive. Just sharing some brief ideas on issues to look at when writing code as a beginner and things to look back on after programming for a while.

I wrote Judgify originally for one reason: to learn. Videogames and websites had gotten me to question how they work. Judgify was my first little step into the programming world outside of some introductory high school CS classes. For anyone looking to get started, all you need is an idea. Maybe more importantly, you need to be brazen enough to try building the idea yourself. Don’t fear the difficulty of learning how technology works. I understand that it’s a lot easier when you’re a clueless teenager. In many ways, I wish I still was.

Influences – Other and Summary

Shawn Michaels

“He’s like Mozart or like Lennon and McCartney, as far as being an artist, like a Rembrandt. He’s a genius at what he does. And he’s a genius at painting the picture or writing the song. And there’s only a few people in the history of world as an artist have been up to the level of what Shawn Michaels does when he’s in the wrestling ring. That’s his form of artistry, and he’s the best at it.” – Chris Jericho in Heartbreak and Triumph

“He was so anti-establishment, so cutting edge, and so talented, you couldn’t help but watch. In the mid-90s, Shawn Michaels had evolved to the level as an in-ring performer where he was untouchable.” – Jim Ross

I grew up in a family where both sides watched professional wrestling. And when I was growing up, there was no one better than The Heartbreak Kid.

Shawn Michaels was a small guy in an industry dominated by exceptionally large men. His title reign followed the likes of Andre the Giant, Hulk Hogan, and Kevin Nash, each of whom is at least 6’7”, a stark contrast to Shawn’s 5’10”. Yet in 1996, Shawn became the WWE Champion and the first person in WWE history to have won every title in the business.

A lot of people rag on professional wrestling for being scripted. In 1998, after a decade in wrestling, Shawn Michaels crushed a vertebrae in his spine after landing on a casket mid-match. He was out of action for five years while recovering, only to return better than when he left, an astonishing feat in any profession. Had Shawn been healthy in the late 90s, wrestling’s peak years in popularity, he would have been as famous a celebrity as Dwayne “The Rock” Johnson and Stone Cold Steve Austin.

I’m not the only one who admires The Heartbreak Kid. In 2012, past and present wrestlers, his peers and pupils, voted Shawn as the Greatest Wrestler of All Time. I tried to think of praise I could write to convincingly demonstrate Shawn’s greatness, but I’ll leave it to his peers to do the flattering:

“For me, Shawn Michaels, as a total package, is my favorite wrestler of all time. Charisma, match quality, innovation, pioneering, interview style, moves I’ve never seen before, moves I’ve seen every day, all of it. Yeah, Shawn Michaels is the greatest of all time.” – Chris Jericho

“A lot of guys are great athletes, but they don’t have the mind, they don’t have the passion, the heart, the drive. Shawn has all those tools. Guys ask me who the best I’ve ever been in the ring with, hands down, it’s Shawn.” – Paul “Triple H” Levesque

“If you look at all the variables and look at it objectively, how do you not say Michaels is the greatest who ever lived?” – Jim Ross

“I have to say, from an all-around standpoint, I don’t think Shawn has any peers. I think Shawn is, in all likelihood, in a class all his own.” – WWE Chairman Vince McMahon

“He is what the marquee is all about.” – John Cena

Patterns:

As Paul Graham did in his “Heroes” essay, I’ve tried to identify any patterns in the people I’ve picked. I identified three:

1. Unsurprisingly, only two women made the list, a teacher and a writer. I’m going to chalk it up boys naturally having male role models growing up, and not latent misogyny.

2. I encountered most of these figures in high school. The first person was Shawn Michaels, who was wrestling as far back as I can remember in the early 90s. The most recent person is Fischer Black, whose work I didn’t find until it was mentioned in a finance book senior year of high school, and whose biography I did not read until my sophomore year of college. Everyone else falls somewhere into my high school years. I think this is due to high school being a natural learning and maturing stage where our views and ideas are formed. I would also attribute the increase in influences in high school to John Carmack, who I read about at the beginning of my freshman year and jump-started my curiosities for everything else in life.

3. Lastly, the most interesting shared trait among my idols is that they were outsiders. In his youth, Shawn Michaels was considered too short and skinny to be a main-event wrestler. He became WWE champion anyway. Warren Buffett lives in Omaha, Nebraska, not New York, New York. He’s the most successful investor in America anyway. Russ Roberts isn’t given an editorial page in the New York Times, but he teaches thousands of people economics in his spare time anyway. Fischer Black did not win the Nobel Prize despite his co-author winning for their paper and Black worked in industry for most of his career. Finance academics cite his work as the greatest in the field anyway. John Carmack dropped out of college. He became arguably the greatest computer programmer of the past two decades anyway. I admire each of these men for exemplifying that pure, honest love of one’s craft can reap great, hard-earned rewards.

Influences – Teachers

Larry Wolf

My experience with AP US History teacher Larry Wolf is best demonstrated with a story.

One day, early in the fall quarter of my sophomore year, I found myself sitting in the middle of Mr. Wolf’s 80-person A.P. United States History class. On the bus ride to school that morning I had heard Jim Cramer expound on his TheStreet.com podcast about the continually unhindered rise of ExxonMobil’s stock. Back in 2006, oil-above-$100-per-barrel was splashed across the headlines of American media. Mr. Wolf, being the topical man that he was, led our class with a discussion on this topic, which went a little something like:

Wolf: “The media keeps publishing all these reports about record high oil prices. What’s the big deal?”

A student raised his hand.

Student One: “The big deal is that high gas prices make life more expensive for us.”

Wolf: “More expensive? We’re talking about gasoline. You use it every day to go to and from school and those trips cost you maybe a dollar. Maybe it should be more expensive! Maybe $4.50 a gallon! Your parents would still buy it.”

Student Two remarked: “They’d buy it but they wouldn’t be happy about it.”

Wolf: “If they dislike the prices, they should do something about it. And they aren’t going to stop buying it.”

Student Two replied: “What can we do about it?”

Wolf looks at the second student then scans the room: “You tell me. What can you do about high oil prices? ExxonMobil making, what, six billion dollars this quarter? What can someone do about it?”

A third student: “We could ride our bikes?”

Wolf laughed: “Yeah, like everyone in the country will suddenly exercise on their way to work and send their cars to the dump. Come on, I’m looking for a better answer.”

The class sat in silence as 80 students tried to conjure solutions to a major socioeconomic problem in seconds. To me, the answer Mr. Wolf was looking for seemed obvious to me, but before I could answer, Student Four interjected: “You could write your congressmen to do something about oil prices?”

Wolf: “Write Congress? And ask them to do what? You want them more involved in running the oil companies? Come on people.”

I had the chance to raise my hand with what, to me, seemed like the logical answer. Mr. Wolf pointed toward me. “You could start your own oil company.”

Mr. Wolf exclaimed “Bingo!” to the class. I knew this would be a teacher I’d like.

Mr. Wolf fit the stereotype of the grizzled older teacher who shared his worldy wisdom in the most crotchety way possible. He walked with a cane for a few months and would whack students with it in the hallways. He’d tell students with late-homework excuses to “Quit your bitchin’” (spelled on the chalkboard as the school-appropriate “Kwitchurbichen”). He’d been teaching for decades and had a sort of tenure at the school due to the union, so he could get away with it.

Our fresh minds were unaware at the time that his best quotes were borrowed. That didn’t lessen the impact of lessons like “There ain’t no free lunch.” Wolf was bold enough to stretch our minds by expertly playing devil’s advocate. Lectures on World War II would one minute be centered on, “Why does anyone consider FDR a great president? He led us into the war!” and later, “FDR was the best, most universally loved president since Washington.” It didn’t matter which position Wolf believed himself; he wanted us to learn perspective.

His students have a better view of the world having sat in his class.

Merry Guerrera

“Everything I came up with on my own sounded pretty lame or trite, so I’m borrowing from another source. I hope you can forgive the lack of originality, but it best represents how I want students to live their lives, because even though we all have within us the ability to be kind, we don’t always exercise that. I think we should ‘make a new rule of life…always try to be a little kinder than is necessary’ – J.M. Barrie, The Little White Bird“ – Mrs. Guerrera when I asked her for a quote for this essay.

Mrs. Guerrera was the opposite of Mr. Wolf. When I entered her freshman English class in high school, Mrs. Guerrera was still a very young teacher maybe five years into her career. In retrospect, it was her English class which suffered the most from my growing indignation with the education system.

I earned a C or D in the third quarter of her year-long course. Years later, she remarked, “I didn’t want to give you that grade, but you didn’t do the work!” She was right. Up until that point, I had never been given enough work to push me, and here was finally someone who expected her students to learn. Sadly, this wasn’t something I realized until the end of high school.

Her real influence was outside the classroom. While I was in her class she had her first son, retired from teaching and became a stay-at-home mom. It was a loss for Hilliard Darby, but not for her previous students. She continues to take an active interest in the happiness and success of her former students. A core group of us have been continually welcomed in her home since leaving her classroom in 2004. For myself and others, a visit to the Guerrera household is like walking into an old 80s sitcom where the young kids sit down at a dinner table and resolve the problems of life. After leaving, you even feel like you’ve walked away with a happy episode-ending moral.

In juxtaposition to Mr. Wolf, Merry’s approach to teaching was not necessarily to forcibly stretch your mind with new ideas. Her equally effective approach was to make serious emotional investments in her students’ lives. For a student, knowing your teacher wants you to succeed is the best impetus to fulfilling your potential.

Influences – Writers

Gil “Stanley Bing” Schwartz

“To Adam Smith and Joseph Stalin, both of whom have informed my understanding of corporate culture.” – Dedication for The Big Bing

“To all the guys I rolled over to get here. Thanks.” – Dedication for Lloyd: What Happened

“Lloyd knew of an occasion in their San Francisco office where a woman who periodically began morning sales meetings with the announcement that she had ‘fucked her brains out’ the night before later sued the general sales manager for creating an unfriendly working environment where such statements were all too welcome. She won.” – Lloyd: What Happened

“I’m also not interested in hearing that there’s ‘No problem.’ Know what? There better not be.”“Log Off, You Losers”

Stanley Bing is my favorite author. I came across “100 Bullshit Jobs and How to Get Them” on a family trip to Barnes and Noble during my sophomore year of high school. After flipping through a couple of the brief examples in the book, such a one-page tutorial on how to become Donald Trump, I was hooked. My white, middle-class high-school self was drawn to his characterization of corporate-life as a sitcom-esque zoo of Scotch-swilling hedonists. His novels read like a season of Frasier with boardrooms in place of opera houses.

Bing’s identity is the self-titled “worst kept secret in Corporate America”. Gil Schwartz is featured prominently on CBS’s Executive Team page as Chief Communications Officer next to billionaire Sumner Redstone. In the interview below, Bing explains how one man can lead a double-life with a pen name in the modern age.

The only comparable modern business humorist is Dilbert’s Scott Adams. But where Scott Adams was a man of the people, Stanley Bing helps people become The Man. I am grateful for all the humor he has brought to my life and all the Executricks he has taught me.

The Escapist Editors: Shawn Andrich, Joe Blancato, Russ Pitts, Susan Arendt

“Boy how these past two years have flown by! It seems like only seven hundred and forty-five days since I first walked through these doors. Then, I was a relatively inexperienced young man, fresh off the bridge, with dreams of breaking into the fast, glittering world of Technology Television. Now, as you all are probably aware, I couldn’t care less if the entire building spontaneously filled with eagle semen.” – Russ Pitt’s Eagle Semen Email

Most people I’ve met since high school do not know that my first job was as a reporter for The Escapist, a videogame “e-zine”. The Escapist established its reputation by producing print magazine-quality PDFs freely available for download every week. The PDFs have since been discontinued, but The Escapist published one last commemorative edition. The art costs were too high to sustain the weekly releases, which is sad, because I consider the early Escapist issues to be works of internet art which I haven’t seen since.

I wrote for the Escapist for three years. In that time I had four different editors, who each left an impression on my writing and career. An archive of my old articles is still available at The Escapist.

Shawn Andrich:

Shawn originally hired me as a freelancer at The Escapist when he was first put in charge of its new “News Room” in the fall of 2006. The story of how I found Mr. Andrich is a tale deserving of its own essay at some point. It’s a story which crosses through the videogame community GamersWithJobs, which Andrich stil manages.

Shawn had tried to launch an insightful gaming news site in 2006 called the GamersWithJobs Press Pass. His site held open auditions for unpaid news writers based on a writing sample submission. Being a 15 year old male with a lot of time on his hands for playing games and actively analyzing them, I wrote a brief article without revealing my age.

Before the Press Pass could get off the ground, The Escapist picked up Shawn and his team of cheap writers to add daily content in between the weekly magazine issues. At the time, I did not and could not anticipate it would turn into a three-year paying gig. I was just happy to be writing about my passion. I still have a soft spot in my heart for the videogame industry and especially its die hard fans. I haven’t met another community on Earth driven by pure, unfiltered passion as gamers.

The demands of his full time job in IT and having a life outside of games forced him to leave The Escapist. I owe Mr. Andrich more than he’ll ever know for giving me my first job, which happened to be every teenage boy’s dream job.

His insights into the gaming industry can still be heard every week on the GamersWithJobs Conference Call.

Joe Blancato:

Joe stepped in as the editor of the Escapist News Room after Shawn left and was my editor for the majority of my time there.

Joe was the first person with which I got to develop an extended working relationship. During the year and a half he spent managing the News Room, the stable of writers, breadth of coverage, and quality of writing all improved. He built great rapport with his writers. If a major story broke on a weekend (during the era when Joystiq, Kotaku, and other “gaming news blogs” were on the rise) or if someone had an original idea for an article, a quick weekend email or phone call was gladly answered and efficiently discussed. Working for Joe was a great joy and a huge boon for myself and the Escapist.

Joe is currently a Project Marketing Manager for Riot Games, developers of current gaming sensation League of Legends.

Russ Pitts:

After Joe’s departure, Russ Pitts spent a brief period managing the News Room. Russ was the Editor-in-Chief of the site and an old videogame podcast co-host with Shawn Andrich.

Russ is a virtuoso at online video content. His primary coup was signing Ben “Yahtzee” Croshaw, whose Zero Punctuation game review series became an almost overnight sensation. He’s a fantastic writer in his own right, continually pumping out insightful feature stories for the magazine back to its PDF days. Russ’s expansion of The Escapist’s content coverage and distribution mediums did wonders for the site’s relevance in the gaming industry.

Russ Pitts is currently the Features Editor at Polygon, a new videogame publication owned by Vox Media.

Susan Arendt:

Susan took over managing the news room from Russ during a turbulent time for the videogame journalism industry. The financial crisis of 2008 devastated the field, with some of my personal favorite media outlets, such as 1Up.com, going bankrupt or going to new corporate owners in firesales.

Susan, along with Russ and the rest of the staff, helped navigate the Escapist through these turbulent waters by pushing the news team in new directions. She advocated for the team to break more stories, interview direct sources, and focus on articles which promoted pageviews and community commentary.

Susan is currently the Managing Editor of The Escapist.

An honorable mention must also go out to Andy Chalk, a fellow news writer who joined six months after I did and is still writing for the Escapist today. Having to compete against his wit for page views is one of the most challenging tasks I’ve had in my life and I am better for it.

Influences – Investing

Warren Buffett

“I don’t want to buy any stock where if they closed the New York Stock Exchange for five years, I won’t be happy owning it. I buy a farm and I don’t get a quote on it for five years, I’m happy if the farm does okay. I buy an apartment house, don’t get a quote on it for five years, I’m happy if the apartment house produces the returns that I expect. But people buy a stock and they look at the price the next morning and they decide whether they are doing well or not doing well. It’s crazy because they’re buying a piece of a business. That’s what Graham most fundamentally taught me. You’re buying a part ownership in the business. You will do well if the business does well if you didn’t pay a totally silly price. And that’s what it’s all about.” – Warren Buffett talk to University of Florida MBA students

Buffett is an obvious choice for any list of influential investors with good reason. He’s well-known for investing success over the past century, folksy business platitudes and homespun annual shareholder letters. What makes Buffett so remarkable is that he has maintained his convictions over decades where the rest of the financial industry has moved further away from his line of thinking. With the proliferation of technology, the investing community is prone to over-think its collective actions. The regular person is oversold on the concept that financial professionals are that much more knowledgeable than them.

Buffett has derided the financial establishment for these actions. In its place, he has espoused the timeless basics to business: Make more money than you spend. He says, “I am a better investor because I am a businessman and a better businessman because I am an investor.” As an business owner, his job is to run businesses in the preceding manner. As an investor, his job is to find businesses run that way. It’s slightly more complicated than that, but not by much. In this day and age, it feels harder to find than it should.

If more people in business followed his thinking, the economy and society at large would be a much more prosperous place.

Jim Cramer

“I’m not trying to tell you what to buy or sell like an automaton on my show. I’m trying to give you investment ideas and trying to help you understand how I come up with my conclusions so you can do the same.” – Jim Cramer on Mad Money: Know Thyself

Jim Cramer sparked my interest in finance. I came home from school one day to find my dad watching his show. His energy is compelling to youngsters and those unfamiliar with the stock market. His ability to break down financial terminology into layman’s terms is valuable to anyone needing to learn more about how the stock market works.

There are criticisms that his glamorization of the market masks the underlying work to watcher at home and people are prone to blindly following his recommendations. I tend to not hold this against him personally so much as holding it against the format of his show (where having to make money-making recommendations on a daily basis is bound to fail) and naive viewers.

What sealed my respect for Cramer is when I got to meet him at Ohio State. He visited campus to shoot an episode of his “Mad Money” show and speak to a select group of students. Two events happened in his one day on campus:

First, during the midday one-hour session with 50 business school students, I got to directly ask Cramer a question. I asked, in the spring of 2009, if he believed there was a threat of another round of mortgage defaults and further declines in housing prices. He gave a surprisingly detailed, ten-minute answer citing technical metrics used by Bank of America to determine what and how many loans may be at risk and when a market bottom could be found. I was impressed that he did not give a flippant five second answer and showed the in-depth expertise which presumably served him well when he was an active fund manager.

Second, during the filming of his show, he continued to make references to some famous actor whose name I forget. It was a widely recognizable name. During the commercial breaks, when talking about his previous segment to the audience while his stage crew rearranged the set, Cramer continually butchered the name of a seemingly popular celebrity. I don’t remember the exact name, but I remember the feeling that Cramer spent more time researching the stocks to be discussed on his show than any of the soundboard, props, or pop-culture references that go into the script. This reinforcement of his knowledge domain reassured me that he was a great entry point into the financial industry.