Code. Money. Literature.

Superstars

I intended to write tonight about the new catchphrase which I predict will sweep the nation with a stickiness that FTW can only dream of—Wheel suck!—but Roger Ehrenberg’s description of geeks vs. businessfolk derailed me.

Ehrenberg dissects Microsoft’s unsolicited takeover bid of Yahoo. (Full disclosure: as a card-carrying Idiot Retail Investor, I made a trade recently that correctly called the takeover bid but I totally botched the execution on the profit-making side. More on this good news/bad news joke later.)

Ehrenberg cites Michael Lewis to compare the geek culture of Yahoo! to the insular baseball clubhouse of skilled craftsmen whose finesse-based talent is not readily apparent to the casual observer, leading to a somewhat exclusive club wary of those not in the show. In contrast, Microsoft is like the football locker room, where muscle mass and physical presence alone asserts dominance, yielding self-confidence and hubris not found in the cliquish Yahoo! ranks, demonstrated by an ability to work with customers and listen to needs and find the problems to solve.

And therein lies the “train wreck” Ehrenberg predicts—a culture clash that inevitably plays out like one of my favorite shows of the 70s—Superstars. In the wintry off-season, Superstars became the best reason for a kid to watch ABC TV on Sunday afternoon in the 70s. Athletes from different sports competed in a decathalon of events. Forbidden to participate in their own specialties, the athletes could choose from such events as rowing, swimming, bowling, weightlifting and several other sports.

The results weren’t pretty for the baseball players. Maybe it hurt that invariably, the role model for the athletic baseball player ended up being some slow infielder like Ron “Penguin” Cey or a past-his-prime 40-year-old Lou Brock. In 28 seasons, football players won the competition 15 times (I count four-time winner Renaldo Nehemiah as a football player even though he won three seasons as a 110 Hurdler before his NFL career began), and only in 1991 did Toronto Blue Jay .259-hitter Kelly Gruber finally represent for the baseball players.

Does this mean that the Yahoo! culture is doomed, much like Ron Cey coming in last in the 100 yard dash in 1978? Or does it signal that Microsoft’s ability to put its business muscle to use will dominate, like OJ’s triumphant performance in 1975?

I tend to go along with Ehrenberg’s conclusion and predict the more dire outcome–it’s going to end up like Joe Frazier nearly drowning in the swimming competition. Frazier, after admitting he didn’t know how to swim, was asked why he entered the event:

How was I to know I couldn’t unless I tried it?

Given the dearth of winning strategies on Ballmer’s watch during the past eight years of MSFT’s 40%+ stock price slide, that quote might well serve as the retrospective logic and epitaph for this most recent bid.

Wheel suck, indeed.

Can literature influence a career?

Tracey Kidder’s The Soul Of A New Machine, published in 1983, follows the engineers who designed and built the Data General Eagle, a 32-bit minicomputer competing not only with the DEC VAX for market share, but with Data General’s own Eclipse project for internal resources and mindshare.

Kidder’s book won the 1982 Pulitzer Prize for general non-fiction. I first read it sometime around 1985 or 1986, trying to figure out what I wanted to be when I grew up. This past winter, I picked it up again, rediscovering all the reasons I loved the book. Back in the mid-80s, I hadn’t programmed much—a few class projects, some home projects, a summer spent mucking around with 65C02 assembly language writing a simple graphical game. What the book captures so well—and what makes software development such a stimulating pursuit—is the satisfaction of making something from nothing, and the engrossing challenge of debugging your creation.

The story follows two groups—the Hardy Boys, Tom West’s hardware engineers who designed and built the Eagle—and the Microkids, Carl Alsing’s software developers charged with writing the 75-bit microcode implementing the Eagle’s instruction set. In one of the chapters, Kidder sits through a marathon debugging session where the microkids and Hardy Boys try to discover the source of flakiness causing the automated tests to fail. Speculation rages as to whether it is a problem with the Instruction Processor (the IP) or the System Cache; a case can be made for either. Step by step they hypothesize, experiment and evaluate results to track down the ultimate source–the need to insert a NAND gate delay the arrival of a signal thrown by the Sys Cache that was causing the timing issue.

Some problems are easy to find and hard to fix; some are hard to find and easy to fix; some go both ways. They have seen and will continue to encounter permutations of all three. This one was hard to find. It happens to be easy, almost trivial, to repair. Now Holberger and Veres know where the failure occurs. They move fast. Seen working at such a moment, they might remind you of a couple of airline pilots, in the cockpit of their big jet, preparing for takeoff—heroes of technique, flicking switches with both hands, reading dials, and talking to the tower all at once.

Still undecided on a major a year or two later, I found myself writing microcode for Doug Jones’ Computer Architecture class and the deal was sealed—I would finish up my computer science degree and try to find a job in the field of software.

The Soul of a New Machine is one of two literary books—Zen and the Art of Motorcycle Maintenance: An Inquiry Into Values is the other—that are essential reading for a developer wanting to get the right mindset for development, debugging and pursuing quality. It’s not that there aren’t great books out there that are just as essential covering the technical side of development or providing a specific methodology for software development. It’s that these two books focus specifically on the mindset, motivations and philosophy necessary to solve problems and find harmony with work. In these books lie the important values associated with valuable work. Soul, zen, values—these are the kinds of spiritual and philosophical terms you rarely find in technical books.

The truth knocks on the door and we say ’Go away, I’m looking for the truth’ and so it goes away. Puzzling.
—Robert Pirsig, Zen and the Art of Motorcycle Maintenance

You come away from TSOANM with the essence of the computer and software business at its best: the deep satisfaction of creation and the challenge of solving puzzles. These same attributes are found in novel writing, when you track and integrate complexity arising from multiple aspects operating at different levels: character , plot, theme, motif, language, pace. The most beautiful code in the world, the most elegant solution to a complex problem—neither are far afield from James Joyce’s Ulysses?

The Nature of Gothic

As the book winds down and the Eagle nears completion, Kidder finally gets to the heart of the matter—what it is that motivates these guys.

“In The Nature Of Gothic, John Ruskin decries the tendency of the industrial age to fragment work into tasks so trivial that they are fit to be performed only by the equivalent of slave labor. Writing in the nineteenth century, Ruskin was one of the first, with Marx, to have raised this now-familiar complaint. In the Gothic cathedrals of Europe, Ruskin believed, you can see the glorious fruits of free labor, given freely. What is usually meant by the term craftsmanship is the production of things of high quality; Ruskin makes the crucial point that a thing may also be judged according to the conditions in which it was built.”

This expository paragraph springs jarringly from Kidder’s narrative, and he elaborates on the specific culture of Data General—an environment where management guides the craftsmen to success at the same time it allows them the freedom to invent. While you can’t coerce the creation of a cathedral without attracting people willing to work for a higher purpose, you can affect the quality and the values in the work by giving the craftsmen the latitude to pursue their craft. Both purpose and latitude are necessary to create something great, and from the result alone can you judge whether these conditions existed during the work’s creation. In the result of the labor, the soul can be found.

From E.M. Forster’s Aspects of the Novel:

Another distinguished critic has agreed with Gide — that old lady in the anecdote who was accused by her nieces of being illogical. For some time she could not be brought to understand what logic was, and when she grasped its true nature she was not so much angry as contemptuous. ‘Logic! Good gracious! What rubbish!’ she exclaimed. ‘How can I tell what I think till I see what I say?’ Her nieces, educated young women, thought she was passée; she was really more up to date than they were.

And Giles Bowkett’s Let the System Design Itself

And it literally happens like that. If you’re building design-first, you’re saying, “The system will do XYZ - I’ll put that here.” But just because you know it’ll do XYZ, you don’t necessarily know how or where, and deciding ahead of time imposes an arbitrary and unnecessary structure on your code. So then you have a file called XyzFile, which is supposed to do XYZ, and then you have other code elsewhere in the system which actually does XYZ, and it’s in some other file, because the design you imagined will always be different from the design which emerges. It’s like coding in Java. There’s the structure of your actual program, and the structure that Java requires you to accommodate. That second structure is just unnecessary mental overhead, and the bigger your system gets, the more wasteful that overhead is. You’ll have a structure that emerges naturally, whether you want to or not. It’s as inevitable as gravity. You might as well just let the macro follow the micro, like it’s supposed to, and get the good design which emerges naturally as a byproduct of that process.

Forster uses the anecdote to point out how the meaning of the work emerges from the act of writing, much in the same way that Bowkett illustrates how good design, if good design exists at all, naturally emerges from the act of writing the code.

And perhaps in this connection exists a new mantra for agile programming: how can we know the software’s design until we see how it’s coded?

One Asian and European mini-crash, a monster fed cut, and one stimulus package later, here’s the carnage for my 2008 contest picks: down -11.05%, and in second place. Of the collective picks in the contest, only one stock–that blue chip of widows and orphans, PetMed Express Inc (PETS)–is up a stunning 3.14%. On my own picks, my best two–Berkshire Hathaway (BRK.B) and Buffalo Wild Wings (BWLD)–are down just a couple of percent.

Here were my 2008 stock picks for this year’s family stock contest. We take the closing price on 12/31/2007, so the current streak of eight straight losing days for the NASDAQ put us all in a big hole.

Stock	Starting Price	YTD
Berkshire Hatha Class B Ord Shs	4736.00	-6.78%
Mindray Medical International Ltd	42.97	-8.03%
PowerShares Water Resource Portfolio	21.40	-6.45%
Buffalo Wild Wings Inc	23.22	-7.97%
Mueller Water Products Series A Ord Shs	9.52	-10.82%
Central European Distribution Corp	58.08	-5.35%
Cognizant Technology Solutions Corp	33.94	-9.81%
Grant Prideco Inc	55.51	-1.44%

YTD: down 7.08%, and the family pickers are down 6.18%.

I picked these with a little less analysis than I normally do before making a trade, and perhaps relied a little too much on the Motley Fool community recommendations as a screening tool to find eight I liked. I had briefly considered ISRG, but passed on it as too pricey (turns out it is in fact down almost 16% YTD). I picked PHO based on Paul Kedrosky’s love of water (and predictions that “blue is the new green” for 2008, meaning that environmental talk will turn from global warming to the implications for water.

BRK.B appears to be a safe port in down years. The rest are just small to midcap stocks that I think have the potential to appreciate significantly if the market does turn around.

In 2007 my extended family had a stock picking contest. Seven of us picked eight stocks over the New Year’s weekend and invested a hypothetical $100,000 per person evenly distributed, with $12,500 split among the stocks.

Collectively, this represented a starting universe of 53 stocks, funds and ETFs (three stocks were picked twice). The complete list of stocks and performance can be found here.

The overall results were fairly impressive based on most vanilla benchmarks. The total return of the portfolio was 15.82%, beating the S&P 500 by 9.9%, the DJIA by 9.39% and the NASDAQ composite by about 6%, but trailing the NASDAQ 100 by 2.85%.

Edwin J. Elton and Martin J. Gruber’s “Modern Portfolio Theory and Investment Analysis says that you can achieve optimal diversification with a portfolio containing 20 stocks, after which adding additional stocks reduces the risk only marginally. The seven of us each did a little diversification within our local universe of eight stocks, and at a higher level, the life situations and demographics of the seven of us—spanning six decades and half the country—appeared to create additional diversification. Although none of this was a rigorous application of modern portfolio theory, in most cases some amateur thought was applied to attempt to diversify.

One question is raised: could you base a fund on the premise of not only diversification of stocks, but diversification of stock pickers each attempting to act rationally? Or is that just the definition of an index fund?

Highlights

Best stock picks: Nintendo, (+145.6%), Amazon (+141.4%), Apple (+132.9%), Southern Copper Corp (+122%) and China Mobile ADR (+103.4%).

Worst picks: Compucredit, (-74.7%), Chicos FAS (-56.1%), Bear Stearns (-44.84%) (2 picks), Citigroup (-46.23%), (2 picks), and McGraw Hill (-33.2%).

Another interesting note is if all the picks that two people had in common—Johnson and Johnson, Citigroup and Bear Stearns—had been rejected based on groupthink, the overall return of the portfolio would have been 21.1%. This is probably just coincidental, but it also might indicate that popularity of a stock in such a contest can indicate a bubble. Or touts finally getting the word out to the typical retail investor.

Selected Returns

Individual Returns of Pickers

Mrs Firebones	+44.25%
The Sis-in-law	+39.76%
Yours Truly	+16.18%
Brother #1	+7.04%
Brother #2	+4.60%
Mom	+4.08%
The Nephew	-5.20%

My 2007 Picks

Berkshire Hathaway Class B	+32.36%
Devon Energy	+36.97%
eBay Inc	+7.83%
Emulex Corp	-17.45%
Vanguard Pacific ETF	+8.75%
Nice Systems Depository Receipt	+10.32%
Tele Norte Leste ADR Reptg 1 Pref Shs	+47.64%
Matsushita Electric Industrial ADR	+3.03%

I missed big-time on Japan and the Pacific, choices all based on punditry and a desire to go global to boost returns (since I thought domestic would only be up 4-5%).

Lessons Learned

Let your winners run. A couple of participants commented about their past common mistake of selling a winner after a small gain, say, selling Apple after a rise from $50 to $80 and missing out on the $80 to $200 run. Taking a look at the portfolio of the winner, you can see this in action:

Abercrombie & Fitch Co	+9.00%
Johnson & Johnson	+2.61%
Boston Scientific Corp	-31.99%
Medimmune Inc	+69.00%
Nintendo Co Ltd Depository Receipt	+145.61%
Apple Inc	+132.90%
Costco Wholesale Corp	+31.70%
Medtronic Inc	-4.85%

Nintendo and Apple more than compensated for the Boston Scientific loss. Had Nintendo and Apple been sold after 60% gains, the actual 44.25% winning return would have dropped to 24.43%. This is something that most investors learn eventually—sell your losers and let your winners run—but retrospectively reviewing a contest like this shows why.

Global matters. Again, hard to draw a conclusion from a single year, but the top 3 pickers had 29% portfolio exposure to international stocks and funds; the remaining 4 pickers had only around 9% exposure.

Eight stocks are not enough to consider yourself diversified. Two of the three poorest performers had significant subprime exposure, with 25% of their stock in financial services. Of the top 3 performers in the contest, the financial services exposure was only 4.17%, and that single stock (Goldman Sachs) was the only one in the collective portfolio to dodge the subprime bullet. This isn’t a hard and fast lesson—the contest rules which mandated equal investment in each pick magnified errors in diversification. For a stock picking contest, this is okay; for creating a real portfolio, it’s not.

In the upcoming year, we have five pickers so far: my, Mrs Firebones, Firebones Jr., The Nephew and The Nephew’s Bride-to-be. Later, I’ll post their 2008 picks (with December 31, 2007 closing price). Given the down market so far this year, this should make for an entertaining ride.

The New York Times opened up its archives this year, allowing access to about 11 million public domain articles from 1851 to 1922 on its website.

The story behind this massive electronic publishing effort, which leveraged Amazon’s S3 and EC2 Web Services as well as the MapReduce algorithm implemented with Hadoop, stands as testament to how the elimination of technical barriers brought about by falling computing costs let single developers solve problems in days that might have previously taken teams months. Starting with 4TB of source data in TIFF image format, the conversion of these files into PDF format took less than 24 hours to complete, running on 100 parallel Amazon EC2 machine instances. At market rates for EC2, this represents about $240 of computing, plus another $410 for upload bandwidth and presumaby another $41 or so to store the original source material for the two days of the run. The resulting 1.5TB of produced PDF data, at Amazon market rates, would cost the NY Times around $8 a day to host with S3, plus bandwidth costs to serve the content. Based on the presented numbers, the average article size is around 146K, which means that their bandwidth costs, when they have to rely on Amazon, are about $0.13 for every 7,200 articles they have to pull (assuming no local caching at the NYT site). Even a ridiculously small advertising rate would cover this operational cost.

Another story lurks here–since all works published in the United States before 1923 are in the public domain, and not tainted by the Mickey Mouse Copyright Protection Act (as coined by Lawrence Lessig), the content contained in this material is free of copyright (although it’s not clear whether the PDF rendering of the articles are).

Browsing articles from a random date 85 or 100 years ago gives you a glimpse into how little what constitutes public debate has changed. In the 1920s, most issues of the Times had numerous stories covering every angle of prohibition, each serving as an echo still heard in the War on Drugs, from illicit stills exploding and burning down apartment buildings, to police warnings about bad batches of hooch (redistilled wood alcohol and kerosene that removed the foul taste but not the lethal formulation) which were attributed to 100 deaths in a single month, to the investment in technology to stop counterfeiting of certificates granted for allowable uses of alcohol. The battle over evolution raged on with op-ed pieces that could be used nearly without alteration today. During WWI, many articles felt straight out of the War on Terror, with announcements of the arrest of enemy aliens, overviews of modern fighting technology (the novelty of the German armored tank merited note), handsome Thanksgiving dinners for the troops overseas. And in almost every issue, you find someone lamenting the fall of civil society or the problems with kids today.

It struck me that the confluence of these forces–dramtically falling computing costs, an unclosed loophole in copyright law (or more accurately, copyright law acting as intended), and the availability of a significant window into the history of the United States–connected me back to an understanding that though technology has evolved dramatically in the intervening years, the evolution of public discourse and of the underlying themes put forth in the media have changed very little.

Less seriously, the fact that these articles are in the public domain also means they’re fair game for reuse. Hilarity ensues.

In that vein, I offer This Day in History:

Montreal Hunts Slackers: 90 Years Ago Today
Apparently, the draft wasn’t popular with some folks in Canada, and police were engaged to round up these “slackers”. Choice quotes:

The big roundup of Slackers in Montreal began today when the police force set its dragnets and started in to sweep the city.

…

The first part of the city to receive attention was the red light district. There has been a big raid in this neighborhood every night for the last week, and many eligibles have been put under lock and key.

Because if you’re going to dodge the draft, what better place to hang out than with hookers?

Yet another evidence of the “tightening up” process is to be seen in the intimation to the officials of a local hockey club that the military authorities will strongly appeal in the case of every hockey player who has been exempted from service, as it is considered that too many of this class of men in the very best of physical condition are trying to dodge their duty through political influence or otherwise.

Who knew that the fastest game on ice could pose such peril to Canadian national security?

My grandfather reportedly loved all manner of business in which the customers did the work and the businessman merely collected the money–perhaps the regret of a small businessman who missed getting in on the ground floor of coin-operated vending machines.

Imagine the pleasure my grandfather would have had if he’d been able to have crows collecting coins for food. From the description of the experiment:

- THE DEVICE -

The first version of the device consists of a box from which protrudes a perch, a food tray, and a funnel. The whole thing is made out of sealed wood so as to minimize noisy clanging which might result from using metal components while retaining the ability to leave the thing out in the rain.

The goal is to be able to deploy the device wherever corvids are found and to have it designed such that it will train the corvids to deposit coins in exchange for food. The device should do said training on its own without human intervention.

Inspired, I’ve decided to apply the same Skinnerian training principles to squirrels and folding money. Hilarity and early retirement ensues.