San Francisco’s Housing Problem

March 2, 2014 / / 1 Comment
photo credit: Thomas Hawk - cc

photo credit: Thomas Hawk – cc

It is time for fundamental reform of SF’s insane restrictions on residential building. Whenever I tweet about need for more housing supply in San Francisco, people respond that new high-end housing won’t help lower-income people. That is exactly backwards. New high-end housing supply will redirect demand that is currently causing prices of existing housing to rise.

If you want existing SF housing prices to stop rising or fall, you should logically cheer for as much new high-end building as possible. And of course, any/all building restrictions that are holding back BOTH high-end and low-end housing construction should be reformed ASAP.

The root cause of SF’s housing problem is the basic rule of supply and demand. Time to end the madness, including restrictions and price controls. The most effective way to protest SF’s housing problems is to exert pressure on the SF Board of Supervisors. They are the key. “Our approach to housing in San Francisco is very dysfunctional,” said Scott Wiener, a SF supervisor who is a proponent of new housing. “…The system is intentionally designed to make it as difficult as possible to build new housing.”

Source:
Andreessen’s tweets on the SF housing problem: 1,2,3,4,5,6,7,8

Responses:

We Live In John Law’s World

February 27, 2014 / / No Comments

john-lawThe most interesting person in Western history who most people have never heard of is John Law, the inventor of the concept of paper money. Born in Scotland, Law began by killing a man in a duel over the affections of Elizabeth Hamilton, former mistress of King William III. Law fled to the continent, and ultimately — and improbably — became Finance Minister to King Louis XV of France in 1716.

Law believed that money is only a means of exchange that doesn’t constitute wealth in itself, and that wealth flows from trade. As such, Law proposed and implemented paper money issued by the French government, and banned gold and silver currency. Contemporary economists screamed in protest, and yet the paper money plan worked. French economy roared to life.

Sadly, Law’s other project — the Mississippi Company — spectacularly imploded. Law fled France and died broke in Venice in 1729. Law was right. The international monetary system finally fully dropped the gold standard in 1971, 300 yrs after Law was born. We live in John Law’s world.

Schumpeter later wrote: “Law is in a class by himself. Brilliant and profound, placed in the front ranks of monetary theorists of all time.” I am willing to lay odds that Satoshi Nakamoto is John Law’s great-great-great-great-great-great-great-great-great-grandson.

Recommended Reading:

Sources: Andreessen’s tweets on John Law – 1,2,3,4,5,6,7,8,9,10,11,12

America Didn’t Decline. It Went Global

February 27, 2014 / / No Comments

Outstanding piece in Politico by Sean Starrs: America Didn’t Decline. It Went Global

We’ve been obsessing over the decline or persistence of American power [and American economy] for more than three decades now…Debating wrong data…[US economy judged by] national accounts: GDP, trade, debt, world share of manufacturing; versus other nations…This made sense before globalization–production largely contained within national borders; US firms export to compete abroad…Now, as largest companies have vast operations across the globe, equation between national accounts and national power breaks down…Even though China has virtual monopoly on export of iPhones, it is Apple that reaps the majority of profits from iPhone sales…More broadly, more than three-quarters of the top 200 exporting firms from China are actually foreign, not Chinese….National accounts like GDP & trade seriously underestimate American power, and seriously overestimate Chinese [& other] power…Of 25 economic sectors, American firms have leading profit share in 18 sectors, and dominate (w/profit share of 38%+) in 13 sectors…US firms dominate tech with whopping 84% of profit share…plus 89% of health care equipment+services sector, 53% of pharma and bio…US dominance of financial services has increased since 2008 crash, from 47% in 2007 to an incredible 66% profit share in 2013…US companies still ultimately owned by US citizens–of top 100 US transnational companies: average of 85%+ of the shares are owned by Americans. 

Source: Andreessen’s tweets quoting the article: 1,2,3,4,5,6,7,8,9,10,11,12

Responses:

Senator Joe Manchin’s Position on Bitcoin

February 26, 2014 / / 2 Comments

manchinLet’s explore the newly announced positions of American Senator Joe Manchin (D-WVa):

  • Manchin is FOR suppressing pro-consumer and pro-small business innovation in financial services to increase choices, lower fees, and sell globally.
  • Manchin is FOR continuation of 2008-era US financial services industry for the long term; entrenchment of status quo and Too Big To Fail.
  • Manchin is FOR maintaining high credit-card fees for much of American economy, reducing standard of living for many Americans including poor.
  • Manchin is FOR sustaining ~10% remittance fees for hardworking immigrants toiling 60-hour hard labor in US to send money back to families.
  • Manchin is FOR crippling high-job-growth US tech industry in important new field; forcing Bitcoin innovation and jobs to foreign countries.
  • SUMMARY: Manchin is FOR high fees for regular consumers and poor immigrants, 2008’s brittle US financial system, and kneecapping the US tech industry.

Source: Andreessen’s tweets: 1,2,3,4,5,6,7

Responses:

Bitcoin Birthing Pains

February 25, 2014 / / No Comments

photo credit: zcopley - cc

photo credit: zcopley – cc

The market price of BTC (Bitcoin) dropped going into the MtGox shutdown, and then has risen since. This is exactly what one would predict for a normally functioning financial market without systemic risk.

MtGox had to die for Bitcoin to thrive. Its former role from early Bitcoin days has been supplanted by better, stronger entities. People learning about or trading Bitcoin should deal with reputable, well-run, well-backed companies such as Coinbase (our choice).

It’s important to know that Bitcoin protocol and transaction network doing just fine in wake of MtGox shutdown; there are no substantive technical issues. Every important new technology has birthing pains. PC did, Web did, Bitcoin does. Our enthusiasm and commitment remains unchanged.

Source: Andreessen’s tweets on Bitcoin and Mt. Gox shutdown: 1, 2, 3, 4, 5, 6

Responses:

High-Functioning Business Organizations Are Not Disneyland

February 25, 2014 / / No Comments

Disneyland

photo credit: Fotografik33 – cc

I’m torn over this story, Inside the Showdown Atop Pimco, the World’s Biggest Bond Firm. On the one hand, it’s clearly excellent reporting, from top-notch reporters and a world-class newspaper. On the other hand, story implication seems to be Bill Gross is an out of control egomaniac who is going to ruin his firm if left unchecked.

I should start by saying I don’t know Mr. Gross, I’ve never met him, I never deal with him in business, he’s in a totally different domain. But the behavior described is completely typical of any highly successful, high-functioning organization in any field I’ve ever seen.

https://twitter.com/withere/status/438297367075635200

High-functioning business organizations aren’t Disneyland. There’s always stress, conflict, argument, dissent. Emotion. Drama. This exact same behavior or pattern is often found in both the best-performing companies in any space and in the worst-performing.

I often see young people entering business think it’s all going to be patty cake happy land and if not, something must be wrong. So I read this story and I literally think to myself, boy, that sounds like Apple, Oracle, Intel, Cisco, Google, Amazon, and Microsoft. Moral of the story? Business is stressful. There’s constant conflict, emotion, even anger. Building a company is an intense experience, period. Harnessed properly, this is the crucible out of which high performance and great results emerges. Satisfaction of overcoming challenges.

To quote Jim Barksdale:

This isn’t a family and I ain’t your daddy. But together, we can build great things and make our grandkids proud.

Source: Andreessen’s tweets on High-Functioning Business Organizations Are Not Disneyland: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12

Government Regulation

February 23, 2014 / / No Comments

Government regulation that purports to protect ordinary consumers generally ends up protecting large incumbents because government regulation establishes high stickiness for incumbents, vs new entrants that are unequipped to handle regulatory load. Large incumbents in any industry are well aware of this, so they play a 2-sided game: simultaneously complaining about and embracing regulation which ultimately leads to regulatory capture–intertwined regulators and incumbents. Crazy high barriers to entry.

Therefore Dodd Frank equals Big Banks Protection Act of 2010. Raised barriers to new banks. Result: Big banks more powerful than ever. Sarbanes Oxley = Big Companies Protection Act of 2002. Raised barriers to new public companies. Result: Number of public companies fell off a cliff.

Later, everyone wonders why there’s no new competition, incumbents are more powerful than ever, then calls for yet more protective regulation. Then total surprise that regulated sectors of economy languish while more competitive sectors race ahead. Regular consumers are the victims. It’s utterly predictable, yet surprise every single time. Triumph of hope over experience–brought to you by the Good Intentions Paving Co.

Conclusions:

  1. To be pro-consumer is generally to be pro-competition, pro-innovation, anti-monopoly/oligopoly, and anti-regulation.1
  2. The best answer to markets that seem to need regulation is generally to instead create more competition.2
  3. A one time government antitrust strike will generally be far more pro-consumer than an ongoing regulatory regime.3

Source:
Marc Andreessen’s tweet regarding government regulation and his 11 tweets that followed:

Red Queen Hypothesis

February 22, 2014 / / No Comments

Organisms adapt/evolve not only to gain advantage, also to survive vs evolving opposing organisms in changing context. – Red Queen Hypothesis

In many populations, the probability of extinction does not depend on the lifetime of the population. In addition, the probability of extinction is constant over millions of years for a given population. An adaptation of one species may change the selection pressure on another species, giving rise to an antagonistic co-evolution.

https://twitter.com/jonathanglick/status/437386419435474944
Rough Skinned Newt

Rough Skinned Newt

The metaphor of an evolutionary arms race — the description of biological processes with dynamics similar to arms races. The ability of a family of organisms to survive does not improve over time — surprising lack of correlation between age and extinction.

Citation for biological extinction is Leigh Van Valen, 1973.

The Allee Effect On Startups

February 22, 2014 / / No Comments

photo credit: Simon Blackley - cc

photo credit: Simon Blackley – cc

The Allee effect is a biological phenomenon that shows a positive correlation between population size/density and mean individual fitness within population.

Allee’s experiments demonstrated that goldfish grow more rapidly when there are more individuals within the tank.
Classical view: Due to competition for resources, population has a lower growth rate at a higher density and a higher growth rate at lower density.

The Allee effect indicates positive density dependence as well as a positive correlation between population density and individual fitness, resulting in “undercrowding.”

Is there a corollary in startups? Does the number of tech startups targeting an established industry mean higher odds of success for each? Even if they are competing for scarce capital/talent, will they make each other more competitive by sharing a playbook against a common enemy?

It would seem that the Allee effect for startups is deeply counterintuitive and directly opposed to Thiel/Musk theory of “one startup can monopolize the talent.”

Source: Andreessen’s tweets on the Allee effect and startups: 1, 2, 3, 4, 5, 6, 7, 8

The Value of Wikipedia

February 21, 2014 / / No Comments

wikipediaThought experiment: 1. Wikipedia is available to approximately 5 billion people globally (or will be soon). 2. The Print version of Encyclopedia Britannica costs $1,400 per copy. So does the existence of Wikipedia, (economic GDP value = ~zero), add 5B * $1,400 = $7 trillion of new wealth to the world?

Corollary: Are Jimmy Wales (@jimmy_wales) and colleagues the biggest monetary impact philanthropists ever? Does this leave JDRockefeller and WHGates in dust?

Source: Andreessen’s Wikipedia thought experiment tweets – 1, 2, 3