Financial topics

[Higgenbotham]

Largest "Industries" in the US


Real estate (including renting and leasing)
$2,265.7 billion
GDP share: 13.0%

Professional and business services
$2,098.3 billion
GDP share: 12.0%

State and local government
$1,538.7 billion
GDP share: 9.1%

Finance and insurance
$1,261.2 billion
GDP share: 7.2%

Health care and social assistance
$1,244.2 billion
GDP share: 7.1%

http://bluewatercredit.com/ranking-bigg ... urprise-1/


OK, we're up to 48%. Have we done anything productive yet?

"As a venture capitalist, the majority of money I give to companies is going to landlords. It is going to commercial real estate and even more to urban slumlords." --Peter Thiel

https://www.youtube.com/watch?v=sxWpvgT ... u.be&t=700

The new business gets set up with real estate (including renting and leasing). They procure business and professional services to comply with state and local government. They procure finance and insurance and health care. Now the cash is burning and it's a race against time. Maybe they can manufacture something and make a profit before they run out of money. With the money they have left they try to hire workers at $12 per hour. But all the best workers are making more money in real estate (including renting and leasing), business and professional services, state and local government, finance and insurance, and health care.

[Higgenbotham]

Peter says if rents get too high in Silicon Valley and it won't work there, maybe we can get it to work in Austin. Maybe, but my Dark Age theory would say that if you can no longer afford to build a premier (not second tier) technology company in the premier location for technology companies and can only afford to maintain one there, the center is no longer holding.

In my opinion, that's what counterfeiting money does for a civilization. The productive get backed into a corner by the parasites.

The above-outlined model for manufacturing in the US periphery stopped working a long time ago. Remember when we were told it didn't matter because the US economy would be high tech and technology would save the day.

[Higgenbotham]

http://www.businessinsider.com/oracle-c ... rty-2018-3

Then he decided Class Of employees need state-of-the-art facilities and help with affordable housing.

So in 2015, the story of this Oracle campus began, when Hurd hopped on a plane with Oracle founder Larry Ellison to Austin, and they walked along the river in search of the spot for the live-in campus.

Will they still be convinced when they walk out into the ghastly 100 degree heat?

AUSTIN MABRY MOST 100 DEGREE DAYS IN A YEAR 1898 TO 2010
AS OF AUGUST 7TH...2011 AUSTIN MABRY HAS HAD 54 100 DEGREE DAYS.
1. 69 IN 1925
2. 68 IN 2009
3. 66 IN 1923
4. 50 IN 2008
5. 42 IN 2000

Many cannot be convinced.

I remember the cool summer breezes in the San Francisco bay area and weekend trips down to Santa Cruz to the beach and ocean with my coworkers circa early to mid 1980s. Having lived in both places, Austin along the river is a difficult sell in comparison.

Why too big to fail inevitably fails. The square root of the number of people in an organization do half of the work.

https://www.youtube.com/watch?v=WmdIyHXEonI

To be the best you need the best. Can the best be convinced to go to Austin?

[aeden]

https://blueshift.io/international-trade.html

flow

They have create tax funded agency that have annihilated the small banks and credit unions.
No checks and balances.

http://avalon.law.yale.edu/18th_century/fed64.asp

The agency problem as we discussed.

https://www.gpo.gov/fdsys/pkg/PLAW-111p ... ubl203.pdf

As we witnesses the models had been designed to crush the small banks.
Proof is not needed as much as knowledge is to why.

We rest our case as flyovers since “In Defense of Transracialism,” has them riveted in logical democratic discourse as of late.

Political parties are examples of silos. They are rigid, tribal, hierarchical, and self-reaffirming.
They encourage collective thought, group think and, as a result, concrete confirmation bias.

Anyways this was wood shed lesson for me then.

page 37 The agency problems.
What I mean is consolidations is not always condusive to productive capex. To limit the risk I
select smaller projects for now to invest in since lets get to point alot of the larger firms do
not practise better risk managent. I dialed back a few years ago and as such have found better
premium payments. I will take the smaller bang for the buck since capex is inline with opex
and that why we discussed dunbars number to scope and scale investments back then.
Internalized problems to opex are the agency problems. As we noted here the equity cults
are suffering the dunbar effect from attitude and confirmation bias. We already covered
the left and right hand legal view on actors. The taxpayer does not understand clearly why
the adjectives and alphabet constructs since capital is indeed fungible and top to bottom
the white flag attitude will run the ship aground as we read everyday for some decades now.

I lost 13 percent on that account and mentioned I closed that book.
That other three instructed me to proper risk and how the product was just as bad as any
Asian b stock issue since they still are under the impression that FX is a proxy to equality.

As we know the smash and grab was feature not a mistake.
http://www.breitbart.com/radio/2018/03/ ... h-buddies/

[John]

> OK, we're up to 48%. Have we done anything productive yet?

> "As a venture capitalist, the majority of money I give to
> companies is going to landlords. It is going to commercial real
> estate and even more to urban slumlords." --Peter Thiel

> The new business gets set up with real estate (including renting
> and leasing). They procure business and professional services to
> comply with state and local government. They procure finance and
> insurance and health care. Now the cash is burning and it's a race
> against time. Maybe they can manufacture something and make a
> profit before they run out of money. With the money they have left
> they try to hire workers at $12 per hour. But all the best workers
> are making more money in real estate (including renting and
> leasing), business and professional services, state and local
> government, finance and insurance, and health care.

This reminds me of the rise of Digital Equipment Corporation (DEC), a
company that I used to work for years ago.

They started out as a small company, but when it was time to expand in
the 1960s, they purchased a huge old textile mill in Maynard, Mass.,
and refurbished it. Some of the ceilings were 100 ft high, and I
still recall seeing birds that had somehow gotten into the building
flying near the ceilings back and forth in the huge rooms.

When DEC needed to expand again in the mid-1970s, they acquired a
building in Marlboro that had been built by RCA. RCA was one of the
seven dwarfs -- as in IBM and Seven Dwarfs (Burroughs, NCR, Control
Data Corporation, Univac, RCA, Honeywell and General Electric) of
companies trying to succeed building mainframe computers. RCA did not
succeed.

The RCA building was extremely posh, with lots of expensive fixtures,
but DEC stripped out all the fixtures, and made it as much like the
mill as they could, though it was never as fully utilitarian as the
mill.

I wish I could say that DEC's bare bones real estate investments were
the key to its success, and that's why it's a large thriving company
today. DEC did do very well with its PDP-11 microcomputer in the
1970s, and it's midrange VAX computer in the 1980s, but they didn't
move to the non-proprietary Unix-based computers fast enough, and so
they went out of business and were acquired by Compaq in 1994. Compaq
was acquired by HP in 1998. By contrast, IBM did very well in the
1990s by being nimble enough with new technologies.

So in the end, real estate had nothing to do with DEC's success or
failure. They might as well have built a Trump Tower of office
buildings, and enjoyed the luxury, and perhaps gone out of business in
1993 rather than 1994.

[Higgenbotham]

As you know, there's not a damn thing in the US economy today that I consider worthy of long term investment. But at the same time, we're all being forced to speculate (gamble).

When gambling on a stock, one of the measures I take into account is how much profit the company generates per employee. Let's look at a few numbers:

Novo Nordisk $906,000 annual profit generated per employee
Facebook $634,000 annual profit generated per employee

Western Digital $5,800 annual profit generated per employee
ON Semiconductor $23,800 annual profit generated per employee

These numbers come from here:
https://www.marketwatch.com/investing/stock/on/profile

With companies like Facebook, it shouldn't matter one whit as to what the cost of their real estate is. With $634,000 annual profit generated per employee, a real estate cost of $10,000 per year per employee versus $40,000 per year per employee makes no significant difference. What is critically important is that Facebook find the caliber of employee who can generate that $634,000. Locating in the most desirable spaces makes that possible.

When Peter Thiel made that statement about real estate in his talk, I took notice. He might not be seeing any future Facebooks (or Paypals) out there, because if he did I don't think he'd care about the cost of real estate. He might see some lower tier stuff but it may not be good enough to cross the cash burn hurdles in Silicon Valley to ultimately get to profitability.

[Higgenbotham]

What is average office space cost per employee Silicon Valley?


That’s a tough one. The variance is very high.

For a normal ‘sea of cubes’ arrangement, an average employee requires about 250 sq. ft. This includes aisles, conference rooms, and other overhead. Thus, if you have 100 employees, you’ll want around 25,000 square feet.

If you want to compress this, you can, but at the expense of your employees. Going below about 100 sq. ft. per employee is going to get very painful and impact productivity.

Rents are also highly variable. If you want to hang out in Alviso, even for Class A office space, it’s about $1.50/sq. ft./month. If you want something trendier, you could easily be around $12/sq. ft./month.

While spending on spacious, hip, and trendy space with great amenities may seem like a good idea to some, it is a huge drag on the company and has killed more than a few. Think carefully.

Since I have to actually throw out an answer to this question, I’d guesstimate that most folks are around 200 sq. ft. and $5/sq. ft., so that’s $1k per employee.

Me, I’m more frugal than that.

https://www.quora.com/What-is-average-o ... con-Valley

So for "trendier" office space in Silicon Valley the cost is 250 sq. ft./employee x $12/sq. ft./month x 12 month/year = $36,000 per employee per year, while "most folks" are around $12,000 per employee per year. Seems like a lot.

[John]

> What is average office space cost per employee Silicon Valley?

> That’s a tough one. The variance is very high.

> For a normal ‘sea of cubes’ arrangement, an average employee
> requires about 250 sq. ft. This includes aisles, conference rooms,
> and other overhead. Thus, if you have 100 employees, you’ll want
> around 25,000 square feet.

> If you want to compress this, you can, but at the expense of your
> employees. Going below about 100 sq. ft. per employee is going to
> get very painful and impact productivity.

> Rents are also highly variable. If you want to hang out in Alviso,
> even for Class A office space, it’s about $1.50/sq. ft./month. If
> you want something trendier, you could easily be around
> $12/sq. ft./month.

> While spending on spacious, hip, and trendy space with great
> amenities may seem like a good idea to some, it is a huge drag on
> the company and has killed more than a few. Think carefully.

> Since I have to actually throw out an answer to this question, I’d
> guesstimate that most folks are around 200 sq. ft. and $5/sq. ft.,
> so that’s $1k per employee.

> Me, I’m more frugal than that.

> https://www.quora.com/What-is-average-o ... con-Valley

> So for "trendier" office space in Silicon Valley the cost is 250
> sq. ft./employee x $12/sq. ft./month x 12 month/year = $36,000 per
> employee per year, while "most folks" are around $12,000 per
> employee per year. Seems like a lot.

When you're talking about Silicon Valley, there are a couple of issues
that indicate that the rules are different for other industries,
or even for high-tech industries in rural areas.

First, more and more high-tech development is being done off-site --
meaning that people work from their homes. Employers prefer that
employees at least live in the area, so would have some influence on
real estate effects. But even in that case, large companies will have
offices in multiple cities, and an employee would only have to work
on-site in an office, or from home near an office. Finally, there's a
significant percentage of employees who work in their own homes
nowhere near an office of the employer.

The second issue is mostly specific to Silicon Valley. And I just
found out about this a few weeks ago.

The problem that employers have in Silicon Valley is that it's
crowded with many companies using a variety of technology, and so
a new college graduate does not want to be tied down to a
diet of one company's technology for years, when there's a
feast of other technologies available. So programmers making
career choices want to work at one company for a year, then
another company for a year, and so forth.

The problem for employers is that there's no continuity. Large,
complex software systems really require the same programmers to
be working on them for years.

So, in desperation, Silicon Valley is using "extreme pairing."
Pairing is already a part of "Agile" development, meaning that
programmers work together and help each other, mentor each other, and
understand each other's code and each can fix or update the other's
code. But that doesn't do much good if both programmers are off to
other companies within a year.

In "extreme pairing," two programmers work together for two weeks at a
time. After two weeks, the two programmers are reassigned to be
paired with other programmers (not with each other), and they're
assigned to different sections of code. So at the end of the year, in
the extreme, each programmer has worked on 26 sections of code, paired
with 26 other programmers. The advantage is that each programmer
knows all the code in the system, so can modify or fix any code in the
system. The disadvantage is that it's totally chaotic, with no job
satisfaction, and each programmer is just a cog in a wheel.

This also implies a substantial reduction in office space.
Programmers don't have cubes anymore, and they're not encouraged to
have any "stuff." They're shuffled around from desk to desk, every
two weeks, or more often. In one place I know of in Boston, each
programmer is permitted to keep a little bit of stuff in a locker, but
has no permanent desk. Each morning when he comes in, he has to look
around and find an available empty desk. I think it's a joke, but
others would disagree with me.

So, I've heard that this is being used in Silicon Valley, but I
haven't heard that it's actually working.

[aeden]

They cannot find the global job file anyways.

[Higgenbotham]

So, in desperation, Silicon Valley is using "extreme pairing."
Pairing is already a part of "Agile" development, meaning that
programmers work together and help each other, mentor each other, and
understand each other's code and each can fix or update the other's
code. But that doesn't do much good if both programmers are off to
other companies within a year.

In "extreme pairing," two programmers work together for two weeks at a
time. After two weeks, the two programmers are reassigned to be
paired with other programmers (not with each other), and they're
assigned to different sections of code. So at the end of the year, in
the extreme, each programmer has worked on 26 sections of code, paired
with 26 other programmers. The advantage is that each programmer
knows all the code in the system, so can modify or fix any code in the
system. The disadvantage is that it's totally chaotic, with no job
satisfaction, and each programmer is just a cog in a wheel.

This also implies a substantial reduction in office space.
Programmers don't have cubes anymore, and they're not encouraged to
have any "stuff." They're shuffled around from desk to desk, every
two weeks, or more often. In one place I know of in Boston, each
programmer is permitted to keep a little bit of stuff in a locker, but
has no permanent desk. Each morning when he comes in, he has to look
around and find an available empty desk. I think it's a joke, but
others would disagree with me.

So, I've heard that this is being used in Silicon Valley, but I
haven't heard that it's actually working.

During my recent office experience (not high tech programming), about 2 years ago, I was told out of the blue that I would be sharing a cubicle which was laid out for one person. Employees asked if the furniture would be rearranged so that it would become a shared 2 person cubicle. They were told there was not enough money to move furniture.

Overall, I can see some similarities between what you are describing and what my office was morphing into once that cubicle arrangement was announced. People were being cross trained every which way to the point that people who I would characterize as being in the top 2% on the intelligence scale could not keep up. It was my estimate that only those in the top 0.2% of the intelligence scale would be able to keep up under that arrangement.

Then I was given a new employee to sit with me. I realized that was probably done so that I would answer the new employee's questions. But she pestered me so much that I couldn't get any work done, so I quit for that and other reasons.