Friday, February 28, 2014

Reading Review: Week 6

The Unlikely Tale of How ARM Came to Rule the World

This article chronicles how ARM Holdings arose from the ashes of Acorn Computer and Apple's Newton flop.  It's a nice pleasant read, and while it doesn't go into much detail, the short discussion of the strengths and weakness of Qualcomm, Intel, and ARM are reasonably accurate.  I feel that a lot of investors don't understand how the core competencies of these three companies are really quite different, so it can be a helpful primer in that regard.

Medals Per Capita

Tired of hearing about how many Olympic medals were won by all the big countries?  This site ranks gold medals and total medals per capita.  The Sochi winner from this point of view: Norway.  For the financially minded, you can also rank medals by GDP, in which case Slovenia is the 2014 winner.

Rolls-Royce Drone Ships Challenge $375 Billion Industry: Freight

First, the military invented drone planes.  Then Google made drone cars.  Now Rolls-Royce wants to build drone ships.  My first thought was that drone ships would be an inviting target for pirates, but the article indicates otherwise, since pirates are more interested in hostages for ransom than theft of goods.  Apparently there is potential money to be saved by eliminating the bridge structure and other supporting systems for the crew, such as water, sewage, and air conditioning.  And in theory, computer controlled ships could be safer by avoiding human error from fatigue.  Personally, I don't see this technology coming soon, but I feel that eventually it's going to happen.

How To Say “This Is Crap” In Different Cultures

Parts of this article are hilarious, such as the "Anglo-Dutch Translation Guide", which you may have seen elsewhere.  But there is also a serious discussion of linguistic nuance, such as the explanation of how direct cultures use upgraders while indirect cultures use downgraders.  I had never heard these terms before, but it didn't take much reflection to recognize that I am generally a huge user of downgraders.  How about you?

The Brain's Inner Language

This article and the accompanying video both suffer from lack of focus, jumping from one topic to another far too quickly.  Still, the topic was interesting enough to suggest a quick read.

Tuesday, February 25, 2014

The Best Personal Finance Book I Ever Read

People sometimes ask me if I have any personal finance books to recommend.  Unfortunately, I really don't.  I've read (and skimmed) a large number of personal finance books in my life, but most of them never really did much of anything for me.  And you probably know my writing style by now.  Maybe these books helped a lot of other people, so I'm not here to bash any of them, but they did nothing for me.  However, if you look beyond the traditional classifications, there is one book that completely shaped my outlook on money and finance at any early age.  That book was not a "personal finance" book.  Instead, it was a novel: Robinson Crusoe.

I read an abridged version of Robinson Crusoe when I was about 10 years old.  With its themes of optimism, hard work, self-reliance, and ingenuity, it is not too much of a stretch to interpret it through an economic lens.  Reading that book early in life probably saved me from a lot of trouble: debt, poor work ethic, pessimism, etc.  To this day, reading that book is still one of the earliest vivid memories that I have. It was winter time, and I was reading on the floor of my bedroom, curled up in the corner next to the heating vent.  Of course, it is great book, a classic of literature, and I was enjoying the exciting story of a shipwreck and survival on a deserted island.  But it is the end of the third chapter that is most firmly etched in my mind.

"Each day, I went to the ship and came back with things I could use. I took all the ropes I could find, and all the small pieces of sail. While I was hunting through the ship for these things, I was very happy to find more dry food. Another time, I found some scissors, and some knives and forks. In the captain's room, I found a big bag of money.

This money made me laugh for the first time in many days. It was more money than I had ever seen in my life. But what could I buy with it? I picked it up in my hand and talked to it. "Oh money!" I said, "What good are you? I cannot eat you. You cannot keep me warm. You are no good at all!" But still I took it with me.

It had now been thirteen days since I came ashore on my island. If the weather had stayed nice, I would have been able to take the whole ship apart and bring it ashore, piece by piece. But that very night, I saw big clouds rising in the sky. The wind soon began to blow very hard. The rain fell on my tent, but I was safe and dry inside and I slept well.

When I woke in the morning the ship was gone. Then I was glad I had worked so hard and so fast. The things I had saved off the ship were all I was to have to keep myself alive for many, many years."

When I read those sentences, it was as if a small jolt of electricity went through by body as I understood something very profound about life at an early age.

First, I was completely startled that the ship had blown away.  I had not seen that coming, and it made the impression on me all the more dramatic. 

Second, although I did not use these terms, I understood it as a metaphor for life.  Windows of opportunities arise in life, but they do not last long.  Soon the window closes, and sometimes it closes forever.  You will be forever grateful that you seized the opportunity, or forever remorseful that you didn't.

Third, I purposed in my heart that whenever such opportunities arose in my life, I would choose the correct path, as Robinson Crusoe had done. 

Lastly, I understood that money was only a medium.  To use words I learned much later in life: "it has no intrinsic value."  Money was only useful for what it could buy, and if you couldn't buy what you wanted with it, then it was worth nothing.

Perhaps you think I exaggerate when I say that all of this came to me in only a few minutes at age 10 from reading a novel.  But it is not an exaggeration.  Of course, my 10 year old brain did not verbalize things in the way that I can describe now, but the concepts were the same.

I have read dozens and dozens of personal finance books in the last two decades.  None has had the same effect on me as that simple story that I read many years ago.  Perhaps you, too, read this book as a child, but did not personalize it as I did.  You could do worse than to reread the account and examine the implications for your current life.

Sunday, February 23, 2014

Reading Review: Week 5

WhatsApp Shows How Phone Carriers Lost Out on $33 Billion

Upon hearing of the Facebook purchase of WhatsApp, U.S. readers might have remarked: "Never heard of it."  And it's true that the software is not widely used in the United States, where messaging is often bundled into telecom packages.  However, the app is very widely used in India, Mexico, and many other countries because the free, no-ads experience is a cheap alternative to high text message rates in many parts of the world.  While the article is informative, you have to parse the title very carefully.  WhatsApp doesn't have $33 billion in revenues, nor is Facebook going to see that amount either.  The story is really about technology disruption.  The telecom carriers originally functioned as an oligopoly with regard to communications, but eventually VoIP (Voice over Internet Protocol) broke the cartel with respect to voice communications.  Now the exact same process is happening with text messaging.

The Winners and Losers of the Zero-Sum Game: The Origins of Trading Profits, Price Efficiency, and Market Liquidity

This lengthy paper was written more than 20 years ago and (apparently) was never published, yet it provides a masterful dissection of trading profits and market efficiency.  I would recommend this paper as a sound framework for understanding different trading styles.  The paper also contains a lot of good information even if you have no interest in ever trading securities.  It's useful for understanding the various market players and for evaluating claims of "skill versus luck".  It's also a helpful conceptual guide to understanding the motivation and rationale behind different styles, as well as the liquidity impact of different styles on the market as a whole.

Termites Inspire Robot Builders

This interesting approach to decentralized construction is fascinating to watch!

Mister Donut, Pan Am, and Friendster Found Alive and Well

When I was a young boy, I would ride my bike a couple of miles to a Mister Donut shop to get a snack on the weekends.  I still have fond memories of those rides.  Sadly, all the Mister Donut stores eventually closed a number of years ago.  Or so I thought until I read this article a few days ago!  It seems that Mister Donut lives on in Japan and many other places.  The article discusses how many iconic brands never really died.  They just moved to other locations in the world.

Pat Metheny: Song For The Boys

I'm not sure why, but I love watching music played live in this sort of "back streets" setting.

Monday, February 10, 2014

Reading Review: Week 4

What Are You Hoping to Gain by Checking That Stock Price Right Now

There's some very good advice in this article about the futility of constantly checking stock quotes.  The author provides constructive suggestions for getting out of this mentality, and he also recommends looking at ratios and multiples as a way of taking the focus off of short term price fluctuations.  I would add that simply being organized will also help.  Always keep your holdings and watch lists in some sort of organized tool.  I can't believe how many people still go to financial sites and type in ticker symbols one by one each day to check on things.

Explaining the Magic Yellow First-Down Line

That yellow first-down line you see during NFL games might seem simple, but consider everything that needs to occur.  The idea is that the line should look like it's simply painted onto the field at the right place.  Thus, the imaginary line needs to appear correctly from any camera angle, and when objects cross the line, they need to appear as if they are actually positioned on top of the line.  Pulling off this deception involves a fair amount of technology and logistics.

U2's Natural Logarhythm: Exponential Decay in the Delay of The Edge's Guitar

It is amazing how often the constants pi and e crop up in natural phenomena.  Pi is not just related to circles; it appears in many places.  (Did you know that the total length of a river divided by the straight length from source to mouth is actually pi?)  So here we have an analysis of U2's trademark guitar sound, and we find that the delay is (apparently intuitively) set to the frequency of the music beat divided by the constant e.  We seemingly cannot escape these constants in our everyday lives.

The Leidenfrost Effect: When Water Runs Uphill

This short video illustrates the Leidenfrost effect.  Never heard of that?  Well, take a look.  It's sure to entertain you as you learn.

How to Build a Plant Xylem Water Filter

This is one of these classic "how come nobody every thought of that before" moments.  Since trees and plants naturally filter the water they use, why not just use plant xylem to make a water filter?  The article shows the elegant simplicity of inserting a fresh piece of white pine into a plastic tube.  The resulting water filter had a decent flow rate and excellent filtration of bacteria and protozoa.  Because the concept is so cheap and simple, and the parts are readily available almost anywhere, this invention could have a profound effect on many developing countries.