Cyreenik Says
This 26 Oct 15 WSJ article, The Dangers Ahead if Tech Unicorns Get Gored Some venture capitalists are sounding the alarm about mega-startups and the terms under which these tech companies are financed by Christopher Mims, talks about where the center of the next financial bubble, and bubble pop, may be: the new group of companies called the Tech Unicorns. These unicorns are privately-held companies centered on tech with valuations of a billion dollars or more.
From the article, "“This” is the state of the mega-startups, the privately held tech “unicorns” worth more than a billion dollars, and the terms under which they are financed. From the outside, everything looks great—at least 124 unicorns are, according to their backers, glowing with health, growing their revenue aggressively, if not their profits.
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That is because, while the unraveling of these privately held companies may not directly affect the stock market, I think we have so far underestimated the potential impact of an implosion of relatively large, extremely visible companies that are supposed to be the vanguard of our brave new tech economy."
This unicorn unraveling will be the surprise of the 2010's that will be comparable to the unraveling of CDO's in 2007. In both cases this was a new financial innovation that became white-hot over a few years time. Both are/were popular, but both are/were unproven items as they become white-hot for the first time. This pattern means what happens when unicorns stumble as a group for the first time will be surprising, and scary, and the disruption will spread well beyond just those dabbling in the new invention itself.
This is a situation to watch, there will be surprises when the group stumbles.
Conversely, this 14 Oct 15 Forbes article, What Bubble? The Unicorn Boom Has Just Begun by Miguel Helft, takes the opposite point of view.
From the article, "All fair points, when looking at individual companies this year. But a bubble implies a systemic problem and an existential danger, and when you view these high-growth startups as a long-term portfolio, that’s simply not the case. Taken as a whole, the 93 firms based in the U.S. (Americorns?) are worth $322 billion, 14% less than Microsoft and a bit more than Intel and Cisco combined. Which would you rather own long term? Microsoft or a basket that includes Uber, Airbnb, Snapchat and Pinterest along with scores of others, a few of which will surely emerge as future PayPals, Twitters or Fitbits?"
The eternal questions of what is a bubble and when is it going to pop remain with us.
As the craziness of the presidential campaigns heats up, handling of the 9-11 Disaster is once again getting dragged into the limelight. This 18 Oct 15 WSJ article, Trump, Bush Intensify Fight Over 9/11, Foreign Policy Row highlights Republican rift over wisdom of Iraq war by Devlin Barrett and Stephanie Armour, talks about how Jeb Bush, Donald Trump, and even Ben Carson are getting into second guessing how GW Bush should have handled the US response to 9-11. Trump has gone so far as to say he could have stopped 9-11 entirely.
From the article, "If he had been president then, Mr. Trump said, he might have been able to prevent the attacks by keeping the hijackers out of the U.S. “If I were running things I doubt those people would have been in the country,” he said."
What is not being kept in mind in all this chatter is how novel 9-11 was when it happened. It had never, ever, happened before.
This glossing over the novelty is not surprising. 20/20 hindsight is a very common human thinking pattern. Reflecting on past events is good for learning from mistakes, but it is both sad, and expensive when it leads to bad judgment, not better judgment. In this 9-11 debate, 20/20 hindsight is of zero use in predicting what a person will do when they are faced with their own novel, and very scary, situation. 9-11 was a time of deep panic, and both the Bush Administration, and America as a whole, were responding in classic Blunder fashion.
The scariness and novelty is what needs to be remembered about 9-11.
On 10 Oct 15 Turkey was rocked by a deeply scary event: Two suicide bombers killed 97 people at peace rallies in Ankara, the capital. This happened just three weeks before early elections -- a moderately stressful time compared to something like a deep recession or bank panic, but still stressful.
This 12 Oct 15 WSJ article, Turkey Focuses on Islamic State as Source of Bombing Authorities say they are close to identifying two suicide bombers by Emre Peker, talks about the feelings in Turkey two days later.
From the article, "Authorities are close to identifying the two suicide bombers who struck a peace rally in Ankara on Saturday, the government said two days after twin blasts in the capital killed at least 97 people, wounded hundreds and left scores in critical condition. No one has claimed responsibility for the attack."
One important point to note is that people are still searching for someone to blame, and people are now quite ready to point fingers. Another way of saying what is in this article is, "We are almost ready to guess."
What this is also saying is that both the people of Turkey and the government have been frightened by this. They are scared, and that means -- according to Roger's Panic and Blunder Theory -- they are ready to commit to a Blunder.
What the Blunder will be will be a surprise. And because there is no one obvious to blame, the action taken will be based on something that has already been bothering Turkey's leaders for some time now -- something annoying that they want to see finished, and this scary act is a good excuse to pursue finishing getting rid of the annoyance vigorously.
In the case of the 9-11 Disaster in the US, what was annoying the neo-cons surrounding GW Bush was that Saddam Hussein hadn't been toppled by the First Gulf War. Their Blunder was to start the Second Gulf War to finish that job... Oh, and wipe out a haven for terrorists, too, of course.
For the Turkish government, some action against the Kurds is highly likely. But... the First Rule of Blunders is that they are surprising choices. The Second Rule is that in the long run they turn out to be hugely expensive choices that don't solve the problem they were supposed to solve. Instead, they make things worse, much worse.
We shall see... We shall see...
Update: As I predicted. This 14 Oct 15 WSJ article, Turkish Premier Says Islamic State and PKK Both Played Active Role in Attack Ahmet Davutoglu also says U.S. and Russian support for Kurds fighting in Syria poses threat by Emre Peker, is describing Turkish government officials blaming their chronic enemies for the attack.
From the article, "Turkey’s premier said Wednesday that Islamic State and Kurdish separatists both played active roles in the country’s deadliest terrorist attack, and took aim at the U.S. and Russia for what he said was threatening Turkey’s safety with policies supporting Syrian Kurdish militias."
Update: This 10 Oct 15 Economist article, Why Turkey risks descending into a bloodbath As parliamentary elections near, tensions and violence are increasing, describes the existing stress Turkey is facing, and how it risks slipping into violence against the government, and crackdowns by the government.
Update: This 2 Nov 15 WSJ article, Turkey’s Ruling AKP Regains Parliamentary Majority in Election President Recep Tayyip Erdogan’s party wins back voters worried over security by Dion Nissenbaum and
Emre Peker, describes the unexpected decisive victory of Recep Tayyip Erdogan’s political party in the election. This could be the start of the Blunder.
From the article, "ISTANBUL—Turkish President Recep Tayyip Erdogan’s political party staged a stunning comeback Sunday, winning over voters with its message that one-party rule was the only way to fight a two-front war with Islamic State extremists and Kurdish militants.
Less than six months after losing the majority it had held for 13 years, Mr. Erdogan’s Justice and Development Party, or AKP, regained sole control of Parliament as millions of voters who had been disillusioned with the party returned in force."
Saving, investing and business financing are a perennial favorite place to mix innovation and social justice. Saving and investing are always hit hard with The Curse of Being Important which means Social Justice-type prescriptionist thinking is always ready to lend an opinion-with-teeth. But this is also an arena where innovation and new styles of cooperating are easy to come up with, and this happens regularly too.
The result is constant flux between adding regulations to established investing schemes (making them cumbersome), and ambitious people inventing and moving into newer schemes that take advantage of new technologies and are simpler for the investor and investee to reach an agreement in.
Two 12 Oct 15 WSJ articles are examples of this happening:
Coming Soon From China: A $400 Million Bonanza for U.S. Startups by Christopher Mims, talks about a new company, AngelList, supporting a new financing technique, crowdfunding, for startup ventures, and it is getting hefty funding from a Chinese private equity firm.
From the article, "Thanks to a deal set to be announced Monday, he has a powerful new tool at his disposal, handed to him by one of the largest private-equity firms in China: $400 million.
That might not sound like a lot for a venture-capital firm, but it is the largest single pool of funds devoted to early-stage startups—ever. And it might be the largest-ever single investment by a Chinese private-equity firm in a U.S. fund.
When it comes to investing in early stage companies, $400 million gets you into a lot of them: more than a thousand, by Mr. Ravikant’s reckoning. And any one of them could be the next Uber Technologies. Indeed, one of the first companies on AngelList, in its earliest days, was Uber."
Crowdfunding is an example of coming up with an new financing technique because the existing techniques are too cumbersome.
This second article, Democrats Against ObamaSave Bipartisan opposition builds to Labor’s new fiduciary rule., shows how existing techniques get too cumbersome. This article is about a social justice thinking-inspired plan to make investment advice fairer to the average investor by adding more regulation to financial advising. A noble aspiration, but, as the article points out, it makes the process a lot more expensive and cumbersome, and many advisors and investors are opting out.
From the article, "President Obama’s plan to reform retirement savings could more than double the cost of investment advice for many savers. That’s why Democrats on Capitol Hill are now demanding a rewrite and even Hillary Clinton still hasn’t endorsed it. Meanwhile, Mr. Obama is helping state governments compete against the private financial advisers his rule punishes.
The ostensible pitch for the Labor Department’s rule is that when savers are rolling over money from a 401(k) retirement plan into an Individual Retirement Account, they should be advised only by people committed to acting in their “best interest.” It sounds great, except serving as a “fiduciary” in this manner comes with so many rules and carries so much potential liability that few people will do it unless investors pay them a lot of money."
These two articles are examples of the constant twisting and turning that goes on around how to finance, invest and save. My opinion: this is another area of human endeavor that needs a lot more KISS -- Keep It Simple. Instead of constant new regulations, let people simply learn from experience what works and what doesn't. Have rating systems and advice to help this along, not regulations. Systems that don't have regulatory teeth have a much better chance of staying relevant to what is happening in current times.
This 19 Oct 15 Forbes article, Exclusive Interview: Charles Koch On How To Save America by Daniel Fisher, expresses a lot of sentiments I agree with. Here is an example from the article,
"Q. What are your goals in this election?
A: My view of the political realm, not just now but for many decades, is that the Democrats are taking us down the road to serfdom over the cliff at 100 miles an hour and the Republicans are going around 70 miles an hour. What I want is to reverse the trajectory of this country."
This 24 Oct 15 Economist article, Reinventing the deal America’s startups are changing what it means to own a company, talks about specifics of this investing techniques see-saw in the 2015 business environment. It gets deeply into what is cumbersome about the current formal investing environment, particularly in how 401K's are handled.
One of the dramatic changes in military capabilities in the 2010's is the ability for technologically advanced powers, such as the US, to decapitate the leadership of informal enemy groups, such as ISIS and other terrorist groups.
The military can do this, but is it a good idea to be doing so?
Decapitating the enemy's command structure has been a dream of military leaders ever since there were organized enemies. Doing so adds confusion and demoralization to the enemy's thinking mix. It can be decisive. This dream lead to the invention of assassins.
In response to this threat of being killed, leaders who have violent enemies surround themselves with security detachments. Historically, security detachments plus large distances between enemy forces have been sufficient to protect leaders.
But now we have drones. The drones can both watch and kill. The result is that security detachments have been sidestepped and leaders who are vulnerable to drones can be killed whether they have security detachments, or not.
Now the question "Is this killing leaders a good idea?" takes on real significance -- it is no longer academic for the leaders of smaller groups who oppose established, drone wielding, organizations, or for the military of those groups who have the drones that can do the killing.
The benefits of doing so are the historical ones: adding confusion to the decision making process and demoralizing the enemy troops.
The disadvantage is that people are inventive: If the leadership is under known threat from drone striking, it will learn, and adapt. It will keep its leadership secret in various ways.
One disadvantage of this secrecy is that the leadership can't openly discuss issues, so it can't get full information on them. This means the choices made will be mostly habitual ones -- the same ones made earlier -- and the organization will be slow to adapt to new circumstances. One place this becomes a big problem is when efforts are made to negotiate some sort of peaceful settlement. If you can't talk to the leaders, how can you offer peace?
This drone-striking is a new tool in the tool chest. And, as with any new tool, its pluses, and minuses, need to be discovered before the best ways to use it can be fully determined.
-- The End --