patrick.net

Space, that's a good strategy. I would do the same, but I bought my house so cheaply that I hate to lose my prop 13 cost basis so even though the paperwealth is declining, I have no mortgage so I'm happy to hang on to this house. I might let some struggling relative live in it for cheap if I buy something else up when prices really do pop.

Anyone who says luck isn't a big part is a freakin liar. The skill is recognizing the opportunity, but some would rather knock someone else for trying.

Good move Malcolm... Sounds like your in the driver seat..
Very good point on Prop 13... and i agree

Actually,
My start up was valued at $6B back in 1999. Given the vested stock options.
it was not my doing... the actually brains did very well much better than me.
Im actually at the low end.... Oh what a great time that was...

Well Frank you'd be wrong on almost all counts except I did get my MBA in May of 2006, more as a personal achievement.

The start up share price went on IPO from 35 to 600 per share. I managed to cash everything out. The founders and engineers did well. But the valuations the public expected was unreal and they keep overpaying for the "hot stock"
Anyway good luck

Your comments on the scale of global market indicate your ignorance on the subject. This is for two reasons: China alone is going to swamp us, Japan already has.

Secondly these are hybrid models as I propose because their governments listen to industry and provide the infrastructure for them to kick our asses in innovation.

The free market's strength comes from what entrepreneurs do with innovations.

Fine Malcolm, you have the last word.

Space, your gain was a classic failure of the VC model. Good for you, nice going.

LOL, In dont know... I would thank the VC at google same VC at my prior company. He start up Yahoo and Apple...

There are good VCs like Don Valintine, Roger Mac and Michael Mortiz...
but there are lots more bad ones....having a bad model.

Im still in the game...
Looking for my 3 third IPO... just for fun like your MBA...

I agree the Japanese did indeed kill off our Semi Industry, along with the Auto and Electonics..
China will provide still competition. Europe already has a strong stake in Software and Biotech.

Interesting perspective:
http://www.slate.com/id/2161834/

Japan couldn't innovate its way out of a paper bag. Everything done in Japan is a copy of something done elsewhere. And China, an innovator? China is a gigantic Xerox machine. At least Japan follows international property rights laws. The only "innovation" in either of these economies is dirt cheap labor (China) and dirt cheap access to capital (Japan). But what do I know. I'm just another clueless MBA...

"Japan couldn’t innovate its way out of a paper bag. Everything done in Japan is a copy of something done elsewhere."

Thats right... Its was never said Japan was innovate... they make things cheaper and they have no goverment intrusion. The two elements that made our nation number 1 while Europe which was #1 died out.

Space Ace:

Youth pop culture is inundated with Japanese innovation. It is only a culturual phenonemon, But it is also a Japanese innovation. Sailor Moon, Pokemon, Yug I Oh, Naturo, Mario Brothers, Nintendo Dogs, the whole genre of Animae, etc.

I don't know where the hybrid car concept got thought up first. For all I know, it could've come from Detroit. But just thinking of something is not innovation. Innovation involves the funding, the engineering, the marketing and sales, and the patience to see all these through. So while Detroit slept, Japan innovated.

Space Ace:

Youth pop culture is inundated with Japanese innovation. It is only a culturual phenonemon, But it is also a Japanese innovation. Sailor Moon, Pokemon, Yug I Oh, Naturo, Mario Brothers, Nintendo Dogs, the whole genre of Animae, etc.

I don't know where the hybrid car concept got thought up first. For all I know, it could've come from Detroit. But just thinking of something is not innovation. Innovation involves the funding, the engineering, the marketing and sales, and the patience to see all these through. So while Detroit slept, Japan innovated.

Michael Holliday,

I can't really be of much help regarding public service versus corporate careers. Often law enforcement, rescue, teaching, etc. are as much a passionate calling as they are a salary career. If you have a passion, then by all means go into law enforcement as long as you can make enough to be reasonably happy. In the end, a good cop, good paramedic, good teacher is probably worth much more to society than a good corporate middle manager.

I'm very bullish on the Bay Area, and have written about that a lot already. I think in general this is a good place to live, work and raise a family -- current real estate bubble excepted. But this too shall pass.

When you talk about corporate jobs you're really talking about 2 general categories:

1) Corporate jobs.
2) Jobs at smaller companies.

Over time, corporate jobs tend to pay significantly higher salaries, provide more generous benefits, and are more consistent/stable. But you have very little chance of ever "getting rich" working for a corporate. Unless you break the glass ceiling, you can't really get the big payola.

Smaller companies, ranging from startups to mid-sized and growth companies, offset all that by giving you a lottery ticket. If you get acquired (or seldom, go public) then you'll have a chance to share in the payola.

It's all about your appetite for risk. As a general observation, it is also harder to go from 2 -to- 1 than it is from 1 -to- 2. The corporate ladder is often very rigid and unforgiving. If you miss a career window, it's usually gone for good. Not always, but in most cases. I know a lot of people who had very good corporate careers in 1996 who by 1999 had dropped everything to go become millionaires at NeverTurnAProfit.com. Most of them did end up plugged back into their corporate jobs, but now on a lesser career track. At least 2 guys I know now work for people they hired out of college -- and despite their brave faces, they aren't happy about that fact.

I only mention this in regard to startups. Unless you're very young in your career, or you are committed to an "entrepreneurial lifestyle", a startup is *not* the right choice. I've also written about what it really means to be an entrepreneur. Very few people who claim the title really are. The main thing is it's about commitment, which means irreversible decisions. It's my opinion that no one under the age of 26 or older but with future ambitions of climbing the corporate career ladder should consider working for a startup. 15 years of startup experience will not get you a job with IBM or Lockheed when you're 40 years old. Maybe luck still will, but your startup resume won't.

Don't know if that's helpful at all. But if you do come back this way I'll be the first to say 'welcome back'.

* No one _older_ than 26 or _younger_ but with...

* add: "unless you have decided to be an entrepreneur for a living"

Randy,

I'm curious to hear it difficult to go from a startup to, say, Lockheed. Do you mean for managers, or for engineers, or both?

I've had two jobs (both startups) since college, and both have ended up being acquired by larger companies. It seems clear that there is a place for me at the parent company if I'm so inclined (I'm not, though). I've always figured the same would be true if I wanted to work at another large corporation, but maybe I'm overly optimistic.

To clarify though, in both cases I joined when the startups were twenty people and stuck around through acquisition at around sixty people.

Malcolm:

Your desciption of tripling prices - and of those who bought the hype without benefit of understanding fundamentals - sounds right to me.

An interesting parallel: Merchandisers send out professional 'cool hunters' to identify trend setters and, right behind them, early adopters (5-8% of the marketplace) so they're prepared with the right product to meet the 70% who make up a mature trend. By the time late adopters are on board, a fresh trend is already on the horizon.

Our bubble tracks this model pretty well. As does the relatively small number who have anticipated its unwinding to date. I'd say we're late in the early adopter phase.

Boston Transplant - I been in two that went public working on third and did work in large 3B company prior to current position. In a large company you wear 1 hat and your visibilty and responsiblity is limited. In a startup or smaller company your understanding of logistics and issues is so vast, that you have better understanding and ease if you wanted to migrate to a larger company. Its all about how much dept of experience and knowledge you have in common and uncommon situations. If your doing a sideway move you will be bored unless its a juicy position.

As for getting acquired .. LOL that just a good as going public. Tellme just got acquired by Microsoft for 800m - 1B.... thats just as good as if not better than IPO.

Its really hard to generalize about small or large companies from my view. But many are just very unstable, therefore any long term commitment to area should be questioned. As for Lucky Tickets, those days are long gone. My third startup im working at now, is plagued with inexperienced management. The odds of failing is very high compared to 2 prior startups I worked at.

The best start ups had employees who were very old... we are talking 35-55 year olds. They know what they are doing. There are few examples of young guys in their 20s making it big. Those are rare. I can say for every startup that went IPO --- 5 failed. Too much money chasing too few good ideas.

Its really hard to find that sweet spot...

New thread: Fear

China used to be the number one guy in the world. Europeans copied and greatly improved Chinese inventions.

Was pasta an invention or a knockoff?

If it taste great I do not care. :)

Most American inventions were based on theories of physics, chemistry and mathematics developed in the old Europe.

Americans are the best marketers though. Is a product as important as the sale of such product?

If two companies have similar profit margin and market share, I always favor the one will shittier products. :)

GC, ideas are always out there. However, being able to put them into practical uses is arguably more important.

I have nothing against science (cough, cough) but it is simply too anti-intuitive. We need ideas to explore possibilities. We need to constantly change our thinking. We need to improve humanity.

I don’t care whether it was original or derivative.

Exactly. Modern windowing GUI was probably created in PARC. But it was Microsoft that made it great.

Bill Gate's vision of putting a computer on every desktop was an accurate one. He is one of the greatest men in technology history.

I didn't mean to imply that *good* startups require *young* managers. Quite to the contrary. I think the best startups usually have at least a couple of the founders over the age of 40, often over 45.

But these guys & gals are *entrepreneurs*. They seldom have freshly come out of corporate industry. In almost every case they've been on the startup circuit for many many years. That doesn't mean they've had doors-as-desks for all that time. Many take time off to travel, fill exec-in-residence roles with VCs, sometimes even are a VC for a while. Most will do consulting between concept companies or chill while they run up a post-startup growth phase company trying to get it acquired.

But while doing all that, they are diverging from the corporate upper-middle/upper management ladder.

It is easier for pure-engineers/scientists to switch between corporates and smaller companies, hardest for pure-managers. Few are pure either, so there is a range. But keep in mind that pure-individual contributors tend to fall off with age at larger corporates, except in certain industries like telecom and aerospace/defense. In most industries there is more of an up-or-out(-or-stagnate) culture, with "up" being into management. (Not suggesting management is 'above' engineering, just making an observation).

And, of course, there are always exceptions. One can ride through an acquisition and find themselves working for HP when they started with CoolThingsTech. By the same token one can be working for LargeNotMegaPublicCorp only to find themselves LBO'd and shortly thereafter offshored. I was just making general observations.

That’s why one sees greatest technological advances in a capitalist society.

Technology advances faster in a war though. I guess it is all about will power: the greed of more invention and the fear of being overcome.

Fear always wins. And this brings us to the next thread. :)

Just got back from watching Zodiac. I highly recommend it. There were some very interesting posts.

First, all of our current manufacturing techniques are based on Japanese innovations in production managment. I forgot to mention that I am APICs certified, and my undergrad was in Production and Operations Management in 1998. Toyota Motor City is the meca for guys like me, and I'm hoping to visit it soon. I was slated to go to Japan in April but that fell through. The Toyota Pruis Hybrid system is in fact my favorite innovation. We just leased one, and for any critics out there this is the future. I agree with the statements about China being a Xerox, their main challenge will be in the future. They have limited resources, but we have foolishly given them a lot of our manufacturing core competencies. Their government is investing huge amounts of our own trade defecits to make them leaders in just about every industry. Within 10 years the world is going to look very different.

Innovations are most prevelant in capitalist societies. Absolutely true, but the huge quantities are spinoff innovations from public works, that is the concept of public private partnership. Forgive me if I drag on, but this stuff is very interesting to me.

Without public infustion our lives would be totally different. Let's start from today and go back. We are having a fun chat on computers over the Internet. Both of these innovations began with government influence. We would not have low priced computers without a free market, but we would not have I/C chips without the Apollo program. The space program back then only accounted for 4% of the budget and the spinoffs/spillovers are still happening. For those of us on the west coast, take a minute to ponder that it was government that gave us the coast to coast railroad, our freeway system, and yes jet airline transport. Jet engines, and large metal planes came directly from the war efforts on both sides. Sorry San Fransisco, but LA, and San Diego couldn't support more than 100,000 people without us stealing water from Northern California through the aquaduct systems. Thanks for the water.

The concept of a spillover benefit can't be recognized in a business proposal, because the cost/return can only be calculated as the firm's ROI.

There is no profit motive to teach children or treat drug addicts, but businesses benefit from skilled sober employees so they actually do have an interest in something for which they won't pay for.

Another interesting concept is what government can contribute that business just can't. Business can't tax so we wouldn't have water and other types of services without the power of the public to form special districts. Although controversial, the power of eminent domain gives business powers it wouldn't have. Although I was against the funding structure, Petco Park has totally revitalized downtown San Diego. It is a great place to go to. A lot of people say they are for a free market yet don't realize that they don't live in a pure one.

Government should not compete in the free market, and prices should always remain purely market driven. Those are absolute fundamentals in a capitalist system, but times are different in other areas. The public good to have non polluted resources, to have standard weights and measures, consumer protections, and protection of other public interests are legitimate limitations on the free market.

"We would not have low priced computers without a free market, but we would not have I/C chips without the Apollo program."

True and we would not have the internet had it not been for Sputnik.
If you ever get the chance get the DVD --- Triumph of the Nerds?
and get anything from Robert X. Cringely. Also Fire in the Valley is an excellent read. A classic...
http://www.pbs.org/nerds/

However, low priced computers stem from intense competition from Japanese mfg. I assure you many US Semi/Computer companies were not too happy when Japan dumped DRAM IC on US market and sliced into margins. Of the DRAM 11 mfg 1 remained. Companies like National, TI, AMD suffered years of losses an no profits in the 80s. As such many SV mfg moved production to "Asian Tiger Nations" and later sold their FABs to other founders like TSC. Regardless of how much innovation the US has been about to create, prices have continued to errode profit margins. There are no happy faces in corporate offices when this happens. Microsoft is the only company that has any pricing power in the market. Intels competition with AMD and others has hurt profits. Software industry isnt imune either, since power giants like Oracle and other like Peoplesoft compete with SAP and Linux distros.

Its not that easy... its a lot harder these days to maintain pricing power and profits.

Innovations are most prevelant in capitalist societies. Absolutely true, but the huge quantities are spinoff innovations from public works, that is the concept of public private partnership.

Many innovations were originated from wars, hot or cold. So the best case scenario is a perpetual cold war that never goes hot. :)

Peter P,

So the best case scenario is a perpetual cold war that never goes hot.

There are many, many writers, from economic historians to science fiction novelists, who postulate that that is exactly the reason for the big surge in most areas of technology and industry over the last 50-60 years.

It is also true that the original Industrial Revolution covered a period of more-or-less contonuous tension between the then superpowers England and France.

It is also interesting to reflect on the fact that the rise of the US in the 19th century was accompanied by large scale US denial of European, and expecially British, intellectual property rights.

Randy H:

Thanks for the thoughtful and friendly response to my question. I'll ponder your words seriously. You're a class act, man.

Bruceb:

I'm glad you dug my herb...I mean my crumbs in the midst of the key-tossing McDebtor neighbor story. I'll see what else I can cook up. But I think that little vignette may be a cult classic soon...and difficult to top.

Malcolm Says:

"...Instead of shooting the messenger you should go get yours."

Well, I've got mine, and it still doesn't mean sh-t because it's really not all that much and pales in comparison to the housing bubble...

Very true. I was astounded when I sold my houses that I realized I had made more money than if I took all of my paychecks from all of my jobs and added them up. Working for someone else is not the way to do it, you are always subsisting that way. You have to have something else going on the side. Especially if you fall into the standard marketing traps.

Paycheck = 30% housing + 15% car + 35% taxes .......

The good old 80/20 rule. 20% of your expense items are 80% of your costs.

You can't get ahead that way. The masses work and work and don't get anywhere.

Michael, it's not what you earn, it's living within those means. Even earning $10/ an hour I always seemed to have more disposable income than my bosses. You have to simplify, and not be placed in the system.

That was in the mid 90s.

I have been enjoying this blog for about a year now. Given the MENSA qualities of the posters, I've been intimidated to enter the fray (those econ models and formulas freak me out). But what I can offer, as a true lay person and bona fide non-expert, is my own experience and my 'simple', common sense opinion about real estate in the Bay Area.

To CMAC's question about rental rises:

I was recruited to the BA from Southern California in 1997, with all the lure that was so very rampant at that time -- the sign-on bonus, the low strike-price grants, the paid relocation, the silly toys and the dorm like environment, etc. -- and God was I shocked at the rental market! I mean, it wasn't like I was moving from an inexpensive area!

My roommate and I basically took the *first* apartment we could find in Santa Clara. We hadn't even seen it. But given the wait lists we'd encountered, we simply had to take the first place we could find.

Long story short, my company was purchased, I went to another start-up, went IPO and then bankrupt, got purchased, then purchased again by an even bigger fish, and voila, I ended up in San Ramon in 2001. All the while, the H1-B visa holders left en masse. You could easily find a parking spot or leisurely walk the mall at Valco unimpeded. The tech bust became fully realized.

What a lovely surprise to pay less rent for a much nicer apartment deep in the burbs. More shocking, I pay less rent now than I did 6 years ago when I moved in. That's not a type-O folks. My rent fell every six months for the following 5 years. I did experience one increase (5%) last summer, but still, well below the original lease.

It doesn't take an Alan Greenspan or a fancy model to see what was happening/ is happening. Rents have been consistently falling while real estate prices have been going through the roof. This unbelievable trend defies all the fundamentals and all known historical models. If it smells like sh*t, looks like sh*t, even tastes like sh*t (which many FB's are well familiar with), then it is indeed a big, heaping pile of steaming sh*t. Lowly renter that I am, I can move at a moment's notice, which in the M&A craze of the Silicon Valley is a nice option for an American-born engineer to have.

In addition, *every* weekend for the past year, I've seen poor schlubs standing on all the major corners with those ridiculous signs, pointing me, desperately, to the many new developments within the Dougherty valley. For the first time in all these years, I'm seeing "For Rent" signs as well, for the multi-million dollar homes in my subdivision.

I see empty units all around me. I regularly receive flyers from the management, offering discounts on rent to refer friends. And that 5% increase? They returned 1/2 of that increase to me (over six prior months) when I finally signed a 12-month lease.

Rents going up? I think not. At least not in the Tri-Valley area. There are so many new condos and SFHs as well as new apartment complexes, that the increased supply necessarily demands a relative lowering or at least stagnation of rental rates. Considering inflation and my increase in salary (yes, "Uh-Amekican" engineers are still getting courted and paid well in the BA), I am making out very well. Gone are those days of IPOs and VC capital growing from trees. BA software companies have to recruit from the residents who have some how eked by in this area. For sure, foreign investors are still coming to BA to buy, but keep in mind, they aren't workers, they're investors. Somebody still has to write the code and evangelize the product to US clients (the insurmountable logistics surrounding outsourcing are a whole 'nother thread, but not entirely unrelated to RE issues in the BA).

For any FB's or Happy B's out there who look upon my cohort with pity and disdain, save it for yourselves. My savings and investments are doing quite well, thank you very much.

Question for FAB: In your experience, have apartment management companies been able to pull off a 10%+ increase on current residents? I have not seen that succeed myself (i.e. lots of empty units appear suddenly) but given the crazy RE economics of our last 5 years or so, I suppose anything is possible. I'm particularly interested in the large management firms, as they have the foot hold in most residential areas, still.

Thanks much,
-LSR