Intellectual Ore

Richard L. Florida agrees with me about housing (from Who’s Your City):

In this respect, the way we house people today seems a bit out of sync with other demands of our highly mobile and flexible economy. The United States has long prided itself on being a nation of homeowners. We boast that more than 60 percent of Americans own their homes. We encourage young people to save enough to buy one of their own. We provide all sorts of public incentives — from tax write-offs on mortgage interest to public investments in infrastructure–to encourage home ownership. It is, after all, the centerpiece of the American dream.

I can’t help but wonder whether this dream doesn’t belong to a bygone industrial era. A central element of the creative economy is its flexibility. People change jobs often. Companies outsource tasks. Technology enables us to work from places we never could before. An increasing number of individuals and businesses find their mobility a necessity for taking advantage of new opportunities. Strangely, our system of homeownership dramatically limits mobility, and in a country where nearly two-thirds of residents are tied to their houses, this means that the economy will suffer.

The creative age may well require alternate forms of housing–something between ownership and renting. In many markets today, it makes more financial sense to rent rather than own. But rental options can be limited, and renovating a rental apartment to suit your taste can be pricey. One option might be to follow the lead of commercial real-estate developers and managers who often build out office space to owner specifications in exchange for a long-term commitment. As we’ve seen, there are many reasons to live in a superstar or hotspot city, but wanting to own a home should not necessarily be among them.

Working on Wall St. has its ups and downs.  On the plus side, it’s a very high-energy environment.  Details matter, and much prestige accrues to alumni of the Street’s white-shoe securities and law firms.  A lot of people make a lot of money every day.  The downside?  The outrageous price level, ”dead time” from long commutes, mindless work, and pretty bad hours.

A lot of people worry about their jobs.  I think jobs are important, but the real endgame, as the post’s title suggests, is lifestyle.  Despite endless self-aggrandizement, Tim Ferris’s book “The Four-Hour Workweek” really nails it: job, income, career status, literally everything, is worthless if you don’t like the lifestyle that goes along with it.

A few relevant lifestyle factors:

1. Commutes.  Commutes, as far as I’m concerned, are working hours, and I need to be compensated for them.
2. Who I’m around most of the day (interesting co-workers)
3. “Me time”: I place a premium on reading, study, meditation, and frankly, being alone some of the time
4. The ability to exercise and eat well
5. Proximity to friends and significant others
6. Things to do in my free time (outdoorsy stuff/concerts/cultural events >> bars/clubs)
7. No IT Gestapo.  Where I work, they log every email, message, phone call, and website visit.  I can’t use my own webmail and I can’t look at a lot of websites.  This is unacceptable and I won’t deal with it.

I’m sure there are others, but these are the first that came to mind.  Feel free to add others as necessary.

Consumerist just ran a story entitled “Doctor Holds Patient Hostage Until She Pays Her Bill“.  What happened in the story is bad; nevertheless, it’s easy to see why a doctor’s office would get pretty annoyed by a person that won’t pay for the service they’ve just received.  In the hospitality business, they call this behavior “defrauding an innkeeper”, and it’s illegal.

“Health care entitlement” doesn’t make a lot of sense.  The way I see it, health care is an ecnonomic good, just like food, housing, or gasoline, and if it’s not affordable, I don’t understand how one can feel entitled to it.  The sad reality is that consumers, by virtue of rarely paying out-of-pocket for care, have become conditioned to believe that it’s free, when it’s responsible for some 13% of economic activity in the US (see Krugman).  Instead of leaving resource allocation to the market (India) or government (Canada, England, etc.), the US system has made insurance companies the economic allocators of health care.  It’s a shame that the allocator is pursuing its own agenda (profit), but it would be way worse if individuals had no buffer from the ruinous cost of health care, or if care was subject to the whims of the political process.

I think the best sytem would be to expose individuals to a lot of the costs, say 50%, up to a predefined threshold (say, $10,000 per year) and then have a commercial entity or government step in to insure costs beyond the threshold.  (Basically, a consumer-driven high-deductible plan, but maybe supplied by the government.)  If the insurer provided the right incentives for people to stay healthy, say, by providing free gym memberships, we might move toward more preventative care. 

One thing is certain, though: we’ll never get the total cost of care down, until medicine’s outrageous costs are passed on to consumers more directly.  Only by making individuals pay, will health care providers ever consider cost a first-class concern.

My cell phone reception at home is terrible.  I can’t make calls in my room, and even when the phone shows it’s connected to my carrier (T-Mobile), incoming calls get routed to my voice mailbox.  Yuck.

After hunting down an RJ-11 cable, I connected my room phone last night.  I had to make a call to Citigroup over a charge on my credit card, and when the rep tried to sell me a “Citi Personal Loan” I didn’t need, I just said, “Thanks, I’m not interested”, and judiciously slammed the handset back onto the phone’s base.  There’s something incredibly satisfying about that, slamming down a phone to end a call, that you just don’t get with a cell phone.

Anyway, GrandCentral is awesome.  It’s a (sort of) new service where you can pick almost any area code in the country, and they’ll give you a free phone number in that area code.  After you get a number, you can make it ring all your phones simultaneously, no matter where you are.  This incredibly useful service lets me hand out one phone number, and no matter whether I’m at home, on the go, or at the office, I’m sure never to miss a call.

Over the past year, I’ve debated the idea of ditching my cell phone.  After using a landline phone for the first time in a while as part of my job at Goldman Sachs, I realized just how much I’ve given up by converting to an all-mobile existence.  For one, the ergonomics of landlines phones take mobiles to the cleaners.  Landlines don’t have to be made to fit in a pocket, so they can be made as large as they need to be, without a tradeoff between usability and “fits-in-pocket” factor.  The buttons on landlines are large enough that I don’t have trouble pressing them.  Unlike cell phones, landlines never miss my keystrokes or lag when I press the buttons (Windows Mobile is terrible with this).  There are no dropped calls, “signal quality” is perfect, no “I lost my phone!” Facebook groups, no low batteries, no annoying contract-mongering, hour-on-hold cell phone companies, no junky piece-of-crap subsidized HTC handsets made by junky piece-of-crap manufacturers (e.g. “High Technology Corporation”) that don’t even put their name on the handset (did you really think your carrier made phones?), and no “early termination fees” when your carrier decides to relocate a tower and you can’t even get service.

So I’m really thinking about ditching my cell phone altogether for GrandCentral+several landlines.  That way, when some poor fool at Citi who hates his job as much as I hate talking to him tries to push more of the “credit crack” with the same enthusiasm as a dealer on the corner with half a bag left (you want to fight the real war on drugs?), I can judiciously slam the phone down to cut him off; pressing the “end call” button on a cell phone just isn’t the same.

Today’s Wall Street Journal has a really interesting article covering the first criminal charges from the credit crunch: “Bear Prosecutors Focus on Email”.  The article explains how two Bear Stearns fund managers were uncertain about the future of one of their funds, but were forced to reassure investors that everything was A-OK on a conference call.

Consider for a minute how most hedge funds work:

1. A fund manager figures out a high-probability trade or investment opportunity, often using sophisticated mathematical models in a highly illiquid market.
2. Fund manager convinces a credit counterparty to lend them money to put the trade into “production”
3. The use of credit allows 40-50% returns, or higher.  Fund managers and investors profit, credit counterparties get repaid.  All is well.

Every day in this business is a high-wire act, and here’s why: your investors and credit counterparties can literally will your fund out of existence.  It’s a sort of parody of Napoleon Hill’s classic book: hedge fund investors can “Think and Grow Poor”.  Look at what happened at Bear (described in the WSJ article):

1. Fund managers weren’t sure about future of fund, but market conditions were such that a selloff would lead to huge losses of capital due to distressed market conditions.  Fund managers faced being honest, which would certainly lead to redemptions and a selloff, versus lying, which is dishonest but might right the fund.
2. Investors lost confidence and pulled out, forcing the fund to dump its assets for a song.  Result: massive losses.

Here’s scenario two.  This is basically what happened at Long Term Capital Management back in ‘98 (guess who was LTCM’s prime broker — I’ll give you a hint, they’re no stranger to the mess we’re in today):

1. Fund is levered about 25:1 or so (this level of leverage is considered permissible at a public company like Goldman Sachs — I can scarce imagine what that number is for most hedge funds).
2. Credit counterparties get nervous and tighten their lending standards, requiring either more collateral on their loans or an overall reduction in the fund’s level of lending
3. The fund can’t meet its operational obligations, leading to a disorderly sale of assets and massive losses.

Among all this uncertainty, there is one surefire thing: a disorderly selloff will certainly bring a levered, illiquid fund to its knees, so fund managers have a strong incentive to do whatever is necessary, including lying, to maintain the illusion of things being under control.  And if their lying can chase back investor doubt, the market might turn at just the right time that things work out.  Maybe.

In the middle of all this, I’m reminded of the classic “utilitarianism vs. deontology” debate, whether “the means justify the ends.”  Maybe lying is the right thing to do, if you think it will put the fund back on the right track.  At the bottom, though, you have to be a bit crazy to let these people have your money as an investor or credit counterparty. 

As if enough things haven’t pissed me off this week…

Goldman Sachs doesn’t offer direct deposit; they hand out paper checks to their interns.  This is a real problem, because I don’t have a bank account in New York. 

So I walked over to Bank of America last Friday, and spoke with Cathy, the commercial lending specialist.  For the record, being an almost-customer is just about the only time you’ve got any leverage at all over a bank, so milk it for what it’s worth.  Cathy told me a lot of stories about subprime origination, and told me that “we’ll have to hold all but $100 of your check until next Friday — that’s our new customer policy — but we’ll be able to release the hold by Wednesday, if you ask.” 

So, being diligent, I went back over to the branch yesterday (Tuesday), to confirm that the hold would be released; I need to pay a credit card bill.  Cathy was on the phone, but she told me (through another employee, Mohammed, who interrupted her call on my behalf) that she’d release the hold tomorrow.

I’d withdrawn the $100 the night before to buy groceries, so I wanted to make sure my scheduled credit card payment would clear.  I checked my available balance this morning:

$0.

OK, so she must have forgotten to enter it.  I walked over to the branch just now, at around 3:45pm, and guess where she is?  You don’t know?  Good guess, I don’t know either.  Apparently she’s “out”, whatever that means, nobody else can clear the hold on my account, and having a disinterested third party (Mohammed) bearing witness to her verbal committment to clear the hold just isn’t enough.  So now, I have to trapse my ass all the way from Lower Manhattan to Morningside Heights to get my other damn debit card, so that I can get back to Union Square to pay for two Yankees tickets I’m buying from a guy on Craig’s List. 

All because Bank of America, like every other company whose client:employee ratio is about 10,000:1, can’t get their house in order.  This is ridiculous, and it’s why I only deal with these hulking mega-businesses when there’s absolutely, positively, no way around it.  They would never pull this crap at Busey Bank in Champaign.

Oh, and I almost forgot: that $75 I get for opening a new account?  That’ll take 90 days…

I think there’s a sweet spot for an individual’s level of connectivity in the workplace.  The location of the sweet spot depends on a variety of factors:

• Job function: people whose job it is to communicate with others (sales, marketing, management) need to be more connected than individual contributors doing creative work (scientists, architects, engineers)
• Personal preference: how connected an individual wants to be, likely to align with job function (a person’s temperament probably influences what they enjoy doing)
• Overall level of concentration required to get work done

It seems a lot of firms, especially Wall Street firms, believe that more connectivity is necessarily a good thing.  Up to a point, I agree, but I think information is like food: there’s an appropriate level of consumption, and both underconsumption and overconsumption are harmful.  The character of “information problems” in leading-edge organizations is rapidly shifting from scarcity, to overabundance.

Today, I saw a group of four people out to lunch at Pax on Broad St.  Two of them couldn’t make it through a 30-minute lunch without checking their BlackBerries (”CrackBerries”).  If I was having a conversation with someone and they took out a BlackBerry, I’d be pretty offended.  Frankly, I’d want to rip the BlackBerry out of their hands, throw it as far as I could, and summarily punch them in the face.

For about a year now, I’ve been hosting my own private DokuWiki installation on a server I’ve got at home.  After using it to collaborate with a future roommate about apartments, and to plan a trip, there’s no way I’m going back.  And the best part is, I’ve even got Stephanie to use it for her stuff, too.  Says my friend Colin: “You guys are a high-tech couple.”

If a study was performed to identify the worst possible workspace for a programmer, mine would give a respectable performance.  The office is open-plan, with half-height cubicles, which basically amounts to a bunch of desks in a huge room.  My nearest co-worker is 4 feet away.  Right now, there are three conversations within earshot, and two phones have rang in the past 15 seconds.  They’ve even put me next to a conference room (how considerate of them) with doors that never close and a crystal-clear teleconferencing system.  Oh, and I almost forgot, I’m on an aisle, where 20-30 people walk by each hour, many of them carrying on group conversations. 

Last year, the Economist reported that the mean compensation at Goldman Sachs was over $500,000.  Even with the horrible skewedness of that figure, I can’t understand why this firm doesn’t give programmers private offices.  During my interviews, I asked about this, and some Poindexter in Custody Technology mentioned the “high office rents” in New York City.  Another $1000/month in rent, to enable someone costing the firm over $100,000/year year to double his productivity?  I don’t get it either.

I used to have a hard time believing that workplace layout could affect such vast productivity differences.  After experiencing this, there is not a shred of doubt left that I get about two Goldman weeks of work done for every standard 50ish-hour week I work at UIUC.  Plus, I’m a lot less stressed out, because (1) I can work a lot fewer hours at Illinois and actually enjoy life, and (2) I really hate being interrupted, which happens constantly at GS.

It truly blows my mind how little people can accomplish at their jobs (like writing blog posts) while remaining employable.

Each morning, I wake up around 6am, take a quick shower, and get on the 1 train at 125th St. As I wait for the 2/3 express at 96th, I hear the clatter of passing uptown trains, mixed with the heat, bustle, and general commotion of the New York Subway.

The 2 (it’s typically the 2) makes its way swiftly down Manhattan’s West side, passing Times Square, Penn Station, and Fulton St. From my position standing (it’s standing room only on the 2), a parade of exquisitely-dressed professionals make their way onto the train.

“The next stop is…Wall St.”

It’s time for everyone to put their Journals away, and head to work.

I get off the train. On the way to work, I pass Deutsche Bank, Trinity Church, Pret a Manger, the New York Stock Exchange, Claremont Preparatory School, and Quizno’s. Finally, I arrive at 85 Broad St., the unmarked global headquarters of Goldman Sachs & Co.

Sebastian described New York as having a certain “energy” about it. It’s a very hard thing to describe, the feeling of lower Manhattan, but he’s right. As I ate lunch on Stone Street, the people, conversations, the overall pace of life, was simply intense. I don’t think this is what I want to do for the rest of my life, but it’s a great experience, while I’m here.