Pathik Shah

The Dumbest Idea In The World: Maximizing Shareholder Value

Excellent argument.

The real market vs the expectations market

In today’s paradoxical world of maximizing shareholder value, which Jack Welch himself has called “the dumbest idea in the world”, the situation is the reverse. CEOs and their top managers have massive incentives to focus most of their attentions on the expectations market, rather than the real job of running the company producing real products and services.

The “real market,” Martin explains, is the world in which factories are built, products are designed and produced, real products and services are bought and sold, revenues are earned, expenses are paid, and real dollars of profit show up on the bottom line. That is the world that executives control—at least to some extent.

The expectations market is the world in which shares in companies are traded between investors—in other words, the stock market. In this market, investors assess the real market activities of a company today and, on the basis of that assessment, form expectations as to how the company is likely to perform in the future. The consensus view of all investors and potential investors as to expectations of future performance shapes the stock price of the company.

“What would lead [a CEO],” asks Martin, “to do the hard, long-term work of substantially improving real-market performance when she can choose to work on simply raising expectations instead? Even if she has a performance bonus tied to real-market metrics, the size of that bonus now typically pales in comparison with the size of her stock-based incentives. Expectations are where the money is. And of course, improving real-market performance is the hardest and slowest way to increase expectations from the existing level.”

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This may be a bit old, but it’s definitely worth a read.

Apparently, fliers with this text were dropped around at #OccupyWallStreet

“We are Wall Street. It’s our job to make money. Whether it’s a commodity, stock, bond, or some hypothetical piece of fake paper, it doesn’t matter. We would trade baseball cards if it were profitable. I didn’t hear America complaining when the market was roaring to 14,000 and everyone’s 401k doubled every 3 years. Just like gambling, it’s not a problem until you lose. I’ve never heard of anyone going to Gamblers Anonymous because they won too much in Vegas.

Well now the market crapped out, & even though it has come back some whatever, the government and the average Joes are still looking for a scapegoat. God knows there has to be one for everything. Well, here we are.

Go ahead and continue to take us down, but you’re only going to hurt yourselves. What’s going to happen when we can’t find jobs on the Street anymore? Guess what: We’re going to take yours. We get up at 4am and work till 10pm or later. We’re used to not getting up to pee when we have a position. We don’t take an hour or more for a lunch break. We don’t’ demand a union. We don’t retire at 50 with a pension. We eat what we kill, and when the only thing left to eat is on your dinner plates, we’ll eat that.

For years teachers and other unionized labor have had us fooled. We were too busy working to notice. Do you really think that we are incapable of teaching 3rd graders and doing landscaping? We’re going to take your cushy jobs with tenure and 4 months off a year whine just like you that we are so-o-o-o underpaid for building the youth of America. Say goodbye to your overtime and double time and half. I’ll be hitting grounders to the high school baseball team to $5k extra a summer, thank you very much. So now that we’re going to be making $8k a year without upside, Joe Main street is going to have his revenge right? Wrong! Guess what: we’re going to stop buying the new 80k car, we aren’t going to leave the 35 percent tip at our business dinners anymore. No more free rides on our backs. We’re going to landscape our own back yards, wash our cars with a garden hose in our driveways. Our money was your money. You spent it. When our money dries up, so does yours.

The difference is, you lived off of it, we rejoiced in it. The Obama administration and the Democratic National Committee might get their way and knock us off the top of the pyramid, but its really going to hurt like hell for them when our fat a**es land directly on the middle class of America and knock them to the bottom. We aren’t dinosaurs. We are smarter and more vicious than that, and we are going to survive. The question is, now that Obama & his administration are making Joe Main street our food supply…will he? And will they?”

An excellent post about ambition, and the drive (or rather, the rush) to make it big when young.

You Are Not Running Out of Time

You know the feeling – the feeling of being left behind in the race for achievement. Of falling back in ‘the game’. For some people, the game is keeping up with the Joneses: marrying a good catch, living in a nice house, driving the right car, having a good job, kids that do well at school. For others, it is enjoying life’s pleasures – the best vacations, the most enjoyable parties, with the most exciting partiers. Then there are people who are forever pursuing harmony and peace in their lives, resolving the discordant threads one by one, and for some the game is living up to their personally defined objective definition of personal development.

For most, it is a combination with a common thread: Am I moving up in the world at an acceptable pace, or am I running out of time? Am I maximizing my potential?

What that quickly meant to me was that wasting time and opportunities were criminal, with my own potential achievements as victims that needed to be rescued from the assault of lost hours and non-productivity. It meant becoming a workaholic. Bill Gates probably felt that way once – looking back at his teenage years and his own obsessive time spent with computers, he said, “it was hard to tear myself away from a machine at which I could so unambiguously demonstrate success.”

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An excellent post by Zed Shaw.

You have finished this book and have decided to continue with programming. Maybe it will be a career for you, or maybe it will be a hobby. You will need some advice to make sure you continue on the right path, and get the most enjoyment out of your newly chosen hobby.

I have been programming for a very long time. So long that it is incredibly boring to me. At the time that I wrote this book I knew about 20 programming languages and could learn new ones in about a day to a week depending on how weird they were. Eventually though this just became boring and couldn’t hold my interest anymore. This doesn’t mean I think programming is boring, or that you will think it’s boring, only that I find it uninteresting at this point in my journey.

What I discovered after this journey of learning is that the languages did not matter, it’s what you do with them. Actually, I always knew that, but I’d get distracted by the languages and forget it periodically. Now I never forget it, and neither should you.

Which programming language you learn and use does not matter. Do not get sucked into the religion surrounding programming languages as that will only blind you to their true purpose of being your tool for doing interesting things.

Programming as an intellectual activity is the only art form that allows you to create interactive art. You can create projects that other people can play with, and you can talk to them indirectly. No other art form is quite this interactive. Movies flow to the audience in one direction. Paintings do not move. Code goes both ways.

Programming as a profession is only moderately interesting. It can be a good job, but if you want to make about the same money and be happier, you could actually just go run a fast food joint. You are much better off using code as your secret weapon in another profession.

People who can code in the world of technology companies are a dime a dozen and get no respect. People who can code in biology, medicine, government, sociology, physics, history, and mathematics are respected and can do amazing things to advance those disciplines.

Of course, all of this advice is pointless. If you liked learning to write software with this book, you should try to use it to improve your life any way you can. Go out and explore this weird wonderful new intellectual pursuit that barely anyone in the last 50 years has been able to explore. Might as well enjoy it while you can.

Finally, I will say that learning to create software changes you and makes you different. Not better or worse, just different. You may find that people treat you harshly because you can create software, maybe using words like “nerd”. Maybe you will find that because you can dissect their logic that they hate arguing with you. You may even find that simply knowing how a computer works makes you annoying and weird to them.

To this I have one just piece of advice: they can go to hell. The world needs more weird people who know how things work and who love to figure it all out. When they treat you like this, just remember that this is your journey, not theirs. Being different is not a crime, and people who tell you it is are just jealous that you have picked up a skill they never in their wildest dreams could acquire.

You can code. They cannot. That is pretty damn cool.

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Startups are Hard

An excellent post on startups and what it means to be an entrepreneur by @jazzychad of Notifo and PicAFight.

Startups are Hard

Startups are hard. No, startups are damn hard.

Contrary to popular belief, there are no clouds of money that float around Silicon Valley and rain on anyone that utters the phrase, “I’m a founder!” Unfortunately, starting a company and raising money is just as hard as ever; it’s just that the investors don’t have as much leverage as they used to, but they still have a lot.

Most reporting on startups suffers from a terrible case of success bias. Nobody wants to report on a dying startup unless it is to highlight another company that has come along to kill them, but that actually turns into a piece about the better company and not the dying one.

Startups that die rarely talk about it publicly because it is frustrating, embarrassing, and most of the time the people involved want to forget the whole mess and move on rather than sit around talking about the fact that they failed.

Most people don’t want to admit that startups are hard, either, because to admit something is hard is to admit that you don’t know everything there is to know about a certain topic and to display weakness. If there’s one thing you do not want to do as a startup, it’s appear weak. Only the strong survive.

But guess what: startups are hard. At times they are soul-crushingly hard. I am not afraid to admit this anymore. I am not afraid to talk openly about it with peers anymore. So, this post serves as a counterpoint to all the recent postings alluding to the fact that anyone can suddenly decide to be a founder and the next week find themselves swimming around in a kiddie-pool full of angel/VC money.

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