Feels like the Seattle economy is on the cusp of an expansion

I had a great week last week that left me feeling incredibly optimistic about the Seattle economy.

First, Techstars Seattle Demo Day. What a super event, “lots of coverage of it”:http://www.geekwire.com/2011/favorite-pitches-techstars-demo-day-red. Great young companies, enthusiasm, great pitches, good progress in fundraising. Big audience with great energy. Super job by @andysack and everyone involved, a model for everyone else in the Seattle community who wants to nurture startups. We need more of these events, not just in cloud/web. I’ve seen a lot of entrepreneurship events at UW and they are constrained by mentoring, hiring, seed financing — exactly what the techstars guys are providing. One of the companies, “Romotive”:http://romotive.com/, has also done a great job leveraging Kickstarter and have generated a lot of early revenue — the rise of crowd-sourced pre-sales/funding is a fascinating and positive evolution.

Everyone was hiring at the event. As an indicator of how desperate people are to hire, I had two guys try to hire me. If you think I am the answer to your problem, you are pretty desperate.

Then I spent the better part of a day in a meeting with the “UW College of Engineering Visiting Committee”:http://www.engr.washington.edu/mycoe/committees/visit.html. Some great data on the College of Engineering — most programs are massively oversubscribed, turning away students in bunches, doing a great job placing students. Great evolution in programs, great facilities, great staffing. The College could probably push out many more engineers and is constrained by state economic policies; with tweaks to tuition and governance, it seems like the pipeline could open much more broadly. And we also had a chance to listen to President Young speak who seems to have a very open attitude about IP licensing, he seems to recognize that getting IP out of the university and to work is important.

I left the two days feeling like a lot of piece parts are coming together fast. Seed funding. Crowd sourcing. Mentoring. Training/Education. And with iteration and tweaking, we could see an explosion of economic growth in the Seattle area. Exciting times.

We aren’t designing for fairness, we are designing for equality of opportunity

So someone asked me “Hey, with your views on the Occupy movement, how do you feel about the fact that the top 10% pays 70% of federal income tax? Is that fair?”

First of all, this is NOT the Occupy issue that gets me most excited — I am much more interested in limiting corporate political contributions. But I do have a view.

I have no idea if these statistics are accurate, but I assume that the top 10% does pay a much larger share of the total income tax load. So is that fair? Well, I am guessing that the top 10% also own a huge % of the Audis and BMWs in the country, eat a disproportionate share at the finest restaurants, take a huge % of the vacation trips to Hawaii, have a disproportionate share of the nicest houses, etc etc. Gosh that doesn’t seem fair either.

The goal of our market system and society is not fairness in outcomes; there is always going to be variance in outcomes, sometimes due to skill, sometimes due to luck. Some people will earn a lot more, and will get a greater share of the positive benefits as well as costs. Rather, the goal is equality of opportunity — every citizen should have the opportunity to achieve their dreams, no doors should be closed at the start of their life/career.

Thus I don’t get cranked about higher tax burdens or higher tax rates for the wealthy. So someone who is extraordinarily successful has to carry a higher share of the cost of operating our society, well boo hoo. I do get more cranked about issues that affect equality of opportunity — lack of funding for public schools, lack of equal healthcare for all children, lack of access to other education for lower income students (and this is why we give a lot to scholarship programs at OSU, at UW, at the Point Foundation, etc).

Outcomes will never be equal and we shouldn’t try to level them out, the free market system is powerful and we need to nurture it. But we should try to ensure that everyone has an equal opportunity to pursue happiness — and to me that means everyone gets a fair starting point: a reasonable education, good health, and no crushing debt load to start out.

Year end link clean up

* “Poor Halo play prompts stabbing threat”:http://blog.seattlepi.com/seattle911/archives/231642.asp. Doesn’t seem unreasonable. I’ve heard campers threatened with worse.
* “How Secure Is My Password”:http://howsecureismypassword.net/. No idea how accurate, but fun. 17 thousand years for my typical password.
* “Rich on photobooks”:http://www.tongfamily.com/archives/2010/12/photobooks-for-christmas/. I just always use the default in Aperture but perhaps I should branch out.
* “AR.Drone”:http://www.crunchgear.com/2010/12/01/ar-drone-torn-down/. Why don’t I have one of these yet.
* “Declining energy quality as recession cause”:http://www.physorg.com/news/2010-11-declining-energy-quality-root-current.html. An interesting way to look at things. Not sure it actually makes sense tho.
* “Now you can swap useless Amex reward points for useless Zynga crap.”:http://techcrunch.com/2010/11/30/american-express-now-lets-you-swap-rewards-points-for-zyngas-purple-cows/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+Techcrunch+(TechCrunch)
* “Snoopy themed Windows tablet”:http://www.crunchgear.com/2010/11/25/onkyo-announces-snoopy-themed-windows-tablet/. Take that, Apple.
* “Spiders on Drugs”:http://design-milk.com/spiders-on-drugs-by-guillaume-lehoux/?utm_source=feedburner&utm_campaign=Feed:+design-milk+(Design+Milk). We are asking for some serious payback from spider nation some day.
* “Umpteenth article on the death of cable TV”:http://techcrunch.com/2010/10/24/internet-tv-and-the-death-of-cable-tv-really/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+Techcrunch+(TechCrunch), yawn. Until I can watch HD live sports without stuttering I am captive to cable/dish. Going to be a while.
* “Charles on breaking up MSFT”:http://www.platformonomics.com/2010/10/the-baby-bills-are-back/. Good as always.
* “Habitable planet found?”:http://www.marginalrevolution.com/marginalrevolution/2010/09/has-a-potentially-habitable-planet-just-been-discovered.html
* “Languages you’ve never heard of”:http://gadgetopia.com/post/7105?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+gadgetopia+(Gadgetopia). In the future, we will all have our very own programming language.
* “Topologist suggests new form of matter”:http://www.kurzweilai.net/topologist-predicts-new-form-of-matter. For most of our history we’ve used the forms of matter that nature gave us. It is interesting to observe and think about what we can create as we gain mastery over atomic organization.
* “One man’s indictment of iTunes”:http://www.xconomy.com/national/2010/09/03/the-leaning-tower-of-ping-how-itunes-could-be-apples-undoing/. The thing is a giant hairball of software.
* “Exercise and aging”:http://www.nytimes.com/2010/11/28/magazine/28athletes-t.html?_r=1&ref=homepage&src=me&adxnnlx=1290787262-FJGn2RNM8RCjxiaHpyyVDA&pagewanted=all. Crap I need to get after it.
* “Show Me What’s Wrong”:http://www.showmewhatswrong.com/. Super useful.
* “User experience of F1 telemetry”:http://www.solidstateux.com/interaction-design/the-user-experience-of-f1-telemetry/. Always impressed with the amount of money spent on racing.
* “MacPaint and MacDraw source code”:http://www.computerhistory.org/highlights/macpaint/. Nostalgia.

Contrasting Quarters — Apple, MSFT

Apple’s quarter (NYTimes): “We’re making our most innovative products ever and our customers are responding”…”unexpectedly strong sales of Macintosh computers and a surge in iPhone purchases pushed Apple’s profit up 15 percent in the third quarter”…”PC shipments for the industry fell 3 to 5 percent over the last three months. But Apple said it sold 2.6 million Macs in the quarter, up about 18 percent from the 2.2 million it sold in the previous quarter”…”overall gross profit margin grew to 36.3 percent, from 34.8 percent in the year-ago quarter”…”Revenue rose to $8.34 billion, from $7.46 billion last year”.

MSFT’s quarter (NYTimes): “has been humbled, both by the recession and by problems of its own making”…”Year-over-year revenue and full-year sales of Microsoft’s flagship Windows software dropped for the first time”…”29 percent drop in net income”…”17 percent drop in quarterly revenue”…”warned that people should not expect a major bounce-back in technology spending when the economy recovers.”

Hmm. Apparently the economic downturn is worse among PC buyers than among non-PC buyers.

…the group of psychopaths on Wall Street…

Dave Chen pointed me towards The Big Takeover, a great telling of the AIG story.

People are pissed off about this financial crisis, and about this bailout, but they’re not pissed off enough. The reality is that the worldwide economic meltdown and the bailout that followed were together a kind of revolution, a coup d’etat. They cemented and formalized a political trend that has been snowballing for decades: the gradual takeover of the government by a small class of connected insiders, who used money to control elections, buy influence and systematically weaken financial regulations.

The crisis was the coup de grace: Given virtually free rein over the economy, these same insiders first wrecked the financial world, then cunningly granted themselves nearly unlimited emergency powers to clean up their own mess. And so the gambling-addict leaders of companies like AIG end up not penniless and in jail, but with an Alien-style death grip on the Treasury and the Federal Reserve — “our partners in the government,” as Liddy put it with a shockingly casual matter-of-factness after the most recent bailout.

Cassano, by contrast, was just a greedy little turd with a knack for selective accounting who ran his scam right out in the open, thanks to Washington’s deregulation of the Wall Street casino. “It’s all about the regulatory environment,” says a government source involved with the AIG bailout. “These guys look for holes in the system, for ways they can do trades without government interference. Whatever is unregulated, all the action is going to pile into that.”

The most galling thing about this financial crisis is that so many Wall Street types think they actually deserve not only their huge bonuses and lavish lifestyles but the awesome political power their own mistakes have left them in possession of. When challenged, they talk about how hard they work, the 90-hour weeks, the stress, the failed marriages, the hemorrhoids and gallstones they all get before they hit 40.

“But wait a minute,” you say to them. “No one ever asked you to stay up all night eight days a week trying to get filthy rich shorting what’s left of the American auto industry or selling $600 billion in toxic, irredeemable mortgages to ex-strippers on work release and Taco Bell clerks. Actually, come to think of it, why are we even giving taxpayer money to you people? Why are we not throwing your ass in jail instead?”

But before you even finish saying that, they’re rolling their eyes, because You Don’t Get It. These people were never about anything except turning money into money, in order to get more money; valueswise they’re on par with crack addicts, or obsessive sexual deviants who burgle homes to steal panties. Yet these are the people in whose hands our entire political future now rests.

Treasury Maps New Era of Regulation – WSJ.com

“That would drive managers out of the United States.” via Treasury Maps New Era of Regulation – WSJ.com.

So just wondering, why would driving hedge funds out of business in this country be a bad thing? How many inventions have they funded, how many jobs created? What is the biggest success story for the country to come out of a hedge fund? I know that individuals have certainly had some huge positive economic outcomes, but what has been the big positive outcome for the country? I may be completely ignorant about the big positive success stories, I need to learn.

Why is the Journal flubbing its biggest story ever?

“It did good work on the collapse of Bear Stearns a year ago, but for the most part it has done a mediocre job of explaining all that has gone wrong with our economic system.” — I’d have to agree, the Journal is not getting it done for me increasingly. Instead they are wasting pages on crappy sports coverage, movie/book reviews, etc. I can get all that content elsewhere.

via Scott Rosenberg’s Wordyard » Blog Archive » Why is the Journal flubbing its biggest story ever?.

Economists on the bailout

From Marginal Revolution: Economists Speak:

As economists, we want to express to Congress our great concern for the plan proposed by Treasury Secretary Paulson to deal with the financial crisis. We are well aware of the difficulty of the current financial situation and we agree with the need for bold action to ensure that the financial system continues to function. We see three fatal pitfalls in the currently proposed plan:

1) Its fairness. The plan is a subsidy to investors at taxpayers’ expense. Investors who took risks to earn profits must also bear the losses. Not every business failure carries systemic risk. The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise.

2) Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards.

3) Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, Americas dynamic and innovative private capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted.

For these reasons we ask Congress not to rush, to hold appropriate hearings, and to carefully consider the right course of action, and to wisely determine the future of the financial industry and the U.S. economy for years to come.

Hear hear.

Your share of the bailouts

On the today show, the figure $900B was thrown around as the total cost of bailouts so far (Bear, Fannie and Freddie, AIG). That is about $3,000 for every citizen of the US. Congratulations!

We entrusted the financial services sector with a big and important aspect of our economy, and we let them run it with less oversight than historically provided. And they made a hash of it, borrowing money like mad men from overseas borrowers and pouring it into ill-considered and ill-managed investments. And now we have to make the overseas borrowers whole, and it is going to fall on the backs of each of us. Many of the senior people in the financial services sector have escaped the carnage and have extracted millions from all of us.