Posts Tagged ‘Education’


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The Class That Built Apps, and Fortunes

May 7, 2011

NYTimes.com

STANFORD, Calif.
ALL right, class, here’s your homework assignment: Devise an app. Get people to use it. Repeat.
That was the task for some Stanford students in the fall of 2007, in what became known here as the “Facebook Class.”
No one expected what happened next.
The students ended up getting millions of users for free apps that they designed to run on Facebook. And, as advertising rolled in, some of those students started making far more money than their professors.
Almost overnight, the Facebook Class fired up the careers and fortunes of more than two dozen students and teachers here. It also helped to pioneer a new model of entrepreneurship that has upturned the tech establishment: the lean start-up.
“Everything was happening so fast,” recalls Joachim De Lombaert, now 23. His team’s app netted $3,000 a day and morphed into a company that later sold for a six-figure sum.
“I almost didn’t realize what it all meant,” he says.
Neither did many of his classmates. Back then, Facebook apps were a novelty. The iPhone had just arrived, and the first Android phone was a year off.
But by teaching students to build no-frills apps, distribute them quickly and worry about perfecting them later, the Facebook Class stumbled upon what has become standard operating procedure for a new generation of entrepreneurs and investors in Silicon Valley and beyond. For many, the long trek from idea to product to company has turned into a sprint.
Start-ups once required a lot of money, time and people. But over the past decade, free, open-source software and “cloud” services have brought costs down, while ad networks help bring in revenue quickly.
The app phenomenon has accentuated the trend and helped unleash what some call a new wave of technology innovation — and what others call a bubble.
Early on, the Facebook Class became a microcosm of Silicon Valley. Working in teams of three, the 75 students created apps that collectively had 16 million users in just 10 weeks. Many of those apps were sort of silly: Mr. De Lombaert’s, for example, allowed users to send “hotness” points to Facebook friends. Yet during the term, the apps, free for users, generated roughly $1 million in advertising revenue.
Such successes helped inspire entrepreneurs to ditch business plans and work on apps. Not all succeeded, but those that did helped to fuel the expansion of Facebook, which now has nearly 700 million users.
Venture capitalists also began rethinking their approach. Some created investment funds tailored to the new, bare-bones start-ups.
“A lot of the concepts and ideas that came out of the class influenced the structure of the fund that I am working on now,” says Dave McClure, one of the class instructors and founder of 500 Startups, which invests in lean start-ups. “The class was the realization that this stuff really works.”
Nearly four years later, many of the students have learned that building a business is a lot harder than creating an app — even an app worthy of an A+.
“Starting a company is definitely more work,” says Edward Baker, who was Mr. De Lombaert’s partner in the class and later in business. The two have founded Friend.ly, a social networking start-up.
Still, many students were richly rewarded. Some turned their homework into companies. A few have since sold those businesses to the likes of Zynga. Others joined hot start-ups like RockYou, a gaming site that at the time was among the most successful Facebook apps.
The Facebook Class changed Mr. De Lombaert’s life. His team’s app, Send Hotness, brought in more users and more money faster than any other in the class. And its success attracted the attention of venture capitalists.
“The class, more than anything, set the tone for us to try to start something big,” says Mr. Baker, 32, Friend.ly’s C.E.O.
When the Send Hotness app began to take off, Mr. Baker encouraged Mr. De Lombaert to treat himself to a new car. Mr. De Lombaert settled for a laptop. (He also put some money aside to help to pay his Stanford tuition.) They eventually sold the app to a dating Web site.
Facebook did not actively participate in the Stanford class. But some of its engineers attended sessions, and it benefited from the success of the students’ apps. “It really felt like an incubator,” says David Fetterman, a Facebook engineer who helped develop the applications platform.
The startling success of some of the class’s projects got Silicon Valley buzzing. The final session, held in an auditorium in December 2007, was attended by more than 500 people, including many investors.
“The Facebook platform was taking off, and there was this feeling of a gold rush,” said Mike Maples Jr., an investor who attended some of the classes and ended up backing one of the start-ups.
THE Facebook Class was the brainchild of B. J. Fogg, who runs the Persuasive Technology Lab at Stanford. An energetic academic and an innovation guru, he focuses on how to harness technology and human psychology to influence people’s behavior.
Mr. Fogg thought that the Facebook platform would be a good way to test some of his theories. Creating a new model of entrepreneurship was far from his mind.
At first, university administrators pushed back. “Facebook was not taken so seriously in academic circles back then,” Mr. Fogg recalls.
But there was no hesitation among students — from undergraduates in computer science to M.B.A. candidates — who were spending much of their lives immersed in Facebook.
From the start, many approached the class from a business angle. Mr. Baker, for instance, was a graduate business student but lacked technical skills, so he spent his first week interviewing engineers. “I wanted a technical co-founder,” he says.
He settled on Mr. De Lombaert, and the two, along with a third student, Alex Onsager, created Send Hotness. It let users send points to friends they considered “hot” and to compare “hotness” rankings.
Soon they found themselves in a proverbial “the dog ate my homework” situation. Three days before a presentation was due, Mr. De Lombaert accidentally deleted the computer code he was tinkering with. “We kind of freaked out,” he recalls.
Rebuilding the app would take too long. So, working around the clock over a weekend, they built another version, with a more rudimentary algorithm.
The stripped-down app took off. In five weeks, five million people signed up. When the team began placing ads on the app, the money poured in.
They had stumbled upon one of the themes of the class: make things simple, and perfect them later.
“The students did an amazing job of getting stuff into the market very quickly,” says Michael Dearing, a consulting associate professor at theInstitute of Design at Stanford, who now teaches a class based on similar, rapid prototyping ideas. “It was a huge success.”
DAN GREENBERG was sitting at the kitchen table one night when he and another teaching assistant decided to get into the app game. Mr. Greenberg, a graduate student who had done research for Mr. Fogg, hadn’t planned to get app-happy. But the students’ success whetted his appetite.
Four weeks into the quarter, he and his colleague, Rob Fan, set out to create an app that would let Facebook users send “hugs” to one another.
It took them all of five hours.
The app took off. So they moved on to apps for “kisses,” “pillow fights” and other digital interactions — 70 in all.
Their apps caught on with millions of people and were soon bringing in nearly $100,000 a month in ads. After the class ended, the two started a company, 750 Industries, named after the 750 Pub at Stanford where Mr. Greenberg and Mr. Fan where drinking when they decided to become business partners.
But juggling the business and schoolwork was too much for Mr. Greenberg, then 22. So he called his father.
“I said, ‘Dad, it is 10 p.m., and I’ve got so much stuff to do,’ ” Mr. Greenberg recalls. “ ‘We’re running this business, and I’ve got customers, and we are earning money, and we got financing and we have people to hire. But I have to write a paper tonight, and I just don’t have time for it.’ ”
His father advised him to pull a Mark Zuckerberg and drop out. The next day, Mr. Greenberg did just that.
Now 25, he works out of a glass-walled corner office in San Francisco. He is C.E.O. of his company, now called Sharethrough, which uses social media to distribute videos across the Web for companies. It employs 30 people and has raised about $6 million in venture capital. “It feels like a fairy tale when you look back on it,” he says of the class.
He has upgraded his lifestyle somewhat, but still doesn’t own a car. “I have a Vespa and skateboard,” he says.
“LOVE CHILD.” It sounds like an unlikely name for an app. But Johnny Hwin and his Stanford class team set out to build an app of that name, one that would let two users create and raise a virtual child. It never took off.
“We were overly ambitious,” Mr. Hwin says.
Seeing his classmates strike gold with simpler ideas proved to be a valuable lesson. In 2009, he began working on Damntheradio.com, a Facebook marketing tool that helped bands and musicians connect with fans online.
It opened last June and was acquired in January by FanBridge, where Mr. Hwin is now a vice president, for a few million dollars, he says.
Mr. Hwin, who is 26 and also a musician, now lives in a loft space in the Mission neighborhood in San Francisco. He uses his place as a kind of salon for late-night art shows and concerts.
“With Love Child, we wanted it to be perfect,” he says. With Damntheradio, he found his first clients by showing mockups of the product. “We were able to launch within weeks,” he says.
Another class member, Robert Cezar Matei, says he had only modest success with his projects. One, he said, allowed users to send “cheesy pickup lines” to friends; another encouraged people to reveal something about themselves. After graduating from Stanford, he wanted to earn some money to go traveling, but instead of getting a job, he decided to write Facebook apps. “I’d seen my peers being so successful with apps,” he says. “If they could do it, I could do it.”
After a few false starts, he created an app that let people send points and “kisses” to friends. It struggled until Mr. Matei, who speaks several languages, translated the app. The next day, traffic jumped fivefold. He added games, and employees, and the app became one of the most popular Facebook programs in Europe. In late 2009, he sold to Zynga for an undisclosed sum.
Also in the class was Joshua Reeves, who built an app that created animations that Facebook members would send to one another as birthday greetings or other messages. It made enough money for him to quit his job in 2008 to start Buzzeo, a content management system for Facebook. A year ago, Buzzeo was acquired by Context Optional, where Mr. Reeves, 28, is now a vice president. Last week, Efficient Frontier, a digital marketing company, acquired Context Optional for an undisclosed sum.
ONE recent afternoon at the headquarters of Friend.ly in Mountain View, Calif., 10 engineers worked away as two employees turned their attention to a companywide project: a 24,000-piece jigsaw puzzle.
For much of the past year, Friend.ly has worked on developing its service, a social network for meeting new people, without much success. A few weeks ago, the work appeared to pay off: traffic took off, growing to nearly five million monthly users.
Mr. Baker says the Facebook platform is a magnet for young developers, even though the kind of simple apps that were the focus of his Stanford class now face bigger hurdles. Facebook has made it harder to develop big-hit apps by controlling how apps spread virally.

But Mr. Fogg, says that for those who were at the right place at the right time — in late 2007 — things were different. “There was a period of time when you could walk in and collect gold,” he says. “It was landscape that was ready to be harvested.”


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Excellent piece on the silver run. 

Facts on Silver

Bob Moriarty
Archives
Apr 25, 2011

For those who missed my piece of March 25, 2011, here is the link. I asked the question, “Is Silver Topping?” I may have been right about silver topping, only time will tell. For certain I was dead wrong about the timing and the price. Silver has rocketed from $38 and change when I wrote the piece to over $47 now.
But lots of people get lots of things wrong about silver. So here are some facts.
1. Silver is going parabolic.
According to Jim Rogers all parabolic moves end badly. I have seen similar charts in all kinds of commodities and they always correct. Parabolic charts mark tops. So when silver bugs start suggesting, “This time it’s different” I know better.
Study the chart below. Ignore the commodity. When charts go parabolic, it ends badly. I was an investor in the 1970s in both gold and silver. I started buying gold at $35 and silver around $5 an ounce. I sold out all my silver in January of 1980 a week too early at $35 as it rocketed to $50.25 an ounce at the open on January 21, 1980. It went parabolic and basically that’s all you need to know.

Those investors who want to buy at new all time highs almost always are the same investors who want to sell at all time lows. Naturally as a guy running a metals site, I think $46 silver is wonderful for all my readers that I was telling to buy at $4 and $6 and $10 and $20. Is silver a good buy today? No, it’s a good sale… to those who insist on buying at tops.
2. The actual ratio of silver to gold in the earth’s crust is not 16 to 1.
It’s more like between 20 or 26 or 64 to one. This is not an absolute fact, these are opinions from experts but no experts conclude the ratio is 16-1. Go to Wikipedia and do the math for yourself.
What happens on the web is that one guy starts a rumor saying there are tens of thousands of gold-plated tungsten bars out there. Some other fool adds a few “facts” to the rumor and all of a sudden hundreds of sites are writing about fake gold bars.
Alas, years later not a single tungsten bar has showed up. It was rubbish and anyone who understood anything about metalworking would understand that technically it would be very hard to do. All 400 ounce gold bars are tracked and if by some strange process someone managed to counterfeit one, he would be caught at once. But you can sell a lot of subscriptions to those who pay to have their fantasies catered to.
It doesn’t matter how many people claim the ratio of silver to gold is 16-1, it simply isn’t true.
3. There is no shortage of silver. There never has been a shortage of silver. Until the laws of supply and demand are repealed, there never will be a shortage of silver.
The first person I ever read that claimed there was a shortage of silver was Ted Butler. He claimed in May that according to his figures the world was going to totally run out of silver by December. This was on the Kitco forum. I wrote and told him he was dead wrong, there were billions of ounces of silver above ground. His response was that according to his numbers, we would be out of silver bullion and that would drive the price of silver all by itself to between $50 and $100 an ounce. In a vacuum. Without gold going up or oil or anything else going up because of inflation. Silver was that rare.
My retort was that with billions of ounces around, prices would soon turn Grannie’s silver service into silver bullion. He insisted I didn’t know what I was talking about; he was the silver “GURU.” The exchange took place in May of 2001 and by December of 2001 I had correctly called the bottom in silver while he was insisting that it would be $50 an ounce. One of us was dead right.
But then he was also the guy claiming that silver was the most critical war material and if we ever go into a war, that would drive silver prices to between $50 and $100 an ounce and it was so rare that you should, “never, never, ever sell silver.” With the US engaged in three different wars at the same time, you would think that silver would be $300 an ounce. It’s not.
My question is, “If you were smart enough to buy 100 ounces of silver at $4 an ounce, a 5000-year low in real terms, how much profit have you made if silver goes to $50 or $100 or $300 and you never, never, ever sell? The answer, of course, and ignored by all the silver “GURUS” is that if you buy low and don’t sell ever, you don’t make any profit. That may be the dumbest investment advice I have ever heard.
Silver is a commodity like any other. If you are smart enough to buy it cheap and you are smart enough to sell it when it gets expensive, you will profit. If you want to buy at all time highs, good luck with that.
There are 19 billion ounces of silver above ground today. People talking about silver “bullion” inventories are being misleading. Silver is silver is silver and it only takes a day to turn a few 200 year-old-tea pots into a boring 1000 ounce “bullion” bar.
Just how accurate is the 19 billion ounce figure? We can figure that out with simple logic. I think the figure accepted by more people for total silver production ever would be about 45 billion ounces. A favorite argument of the permabulls is that silver is consumed, not recycled. Let’s think about that. Silver is used in computers, iPhones, aircraft, and lots of commercial purposes where it isn’t recycled. But that use of silver wasn’t common until perhaps 1960. Silver before that time was recycled. Yes, silver coins did wear but they didn’t wear out, they might lose 20% of their original weight.
If 45 billion ounces were produced, it’s more logical that a good percentage of it is still around. I was in my coin dealer’s shop a week ago. He bought 2800 ounces of silver on Saturday. Not a bar of bullion in the bunch but 2800 ounces of real silver in other forms. The numbers on silver are not hard numbers; we simply don’t know how much silver is around. But we do know there is a lot of silver and with the exception of a short period between the end of November of 1979 and January 21 of 1980, a mere six weeks later, silver has been well under $10 an ounce on average for the last 40 years. How rational is $46 silver? Not very.
I’d guess most silver mines have cash costs between $3 and $10. A market price of $46 an ounce will suck silver out of grannies’ closets and out of the ground at the same time. Every silver refinery in the world is running at capacity right now, if you want silver, there is a lot of it around.
4. The most illogical thinking and worst use of “facts” is common among the silver uberbulls and the parrots that follow them.
Someone just posted the most incredible theory on the validity of SLV. That’s the silver ETF that has been trashed for years by a small group of uberbulls with an agenda. One of their supporters came up with a brilliant argument. Since we don’t really know and can’t prove that SLV actually has all the physical silver, the proof that it is a scam is when they deny it being a scam. Read that carefully. The proof that it is a scam is when they deny it.
So, apparently, if you ask the people behind SLV if it is a scam and they admit it, that means we know it’s a scam since they admitted it. And if you ask the people behind the SLV if it is a scam and they deny it, that also means it is a scam because the proof is when they deny it.
I think that’s circular logic. No matter what the people behind SLV say, it’s a scam.
I have said in the past I have reservations about ETFs and I think investors should be aware of those reservations. If we have a total economic collapse and the financial system freezes, all ETFs could be frozen or worse for months. That includes Sprott’s paper silver, the CEF and SLV and all ETFs of all sorts. What happened in Argentina could happen in the US, it could happen all over the world. It’s entirely possible that all banks close for a good period of time, after all they are insolvent now and have been since September of 2008. But a financial freeze would affect all forms of paper silver including Sprott’s silver trust.
The CEF fund and the SLV have done more to improve the price of silver and gold than any other single action in the last 50 years. Silver bugs should be grateful SLV holds 366 million ounces of silver instead they are whining and posting simply absurd articles totally lacking in either facts or logic.
When someone posts something that ridiculous and lacking in logic, you may safely presume they don’t know what they are talking about. That’s real common when people write about silver and it’s going to cost investors a whole lot of money.
The daily bullish consensus on silver is 96% as of Wednesday the 20th of April. On January 21st of 1980, the very day of the top, the bullish consensus was 94%. How many of the silver uberbulls are suggesting that maybe the record high bullish consensus is suggesting a very dangerous time to start buying? The answer is damned few because they have an agenda and their agenda doesn’t involve them knowing what they are talking about. As long as they tell investors what they want to hear, they will be very popular.
5. There cannot be a run on Comex. The rules do not allow the chance for a run.
For years I have watched as each time silver runs up, certain people start spreading rumors that silver is in such shortage that there will be a run on Comex. The only problem with the rumor is that it can’t possibly happen. There cannot be a run on Comex. I repeat, there cannot be a run on Comex.
Part of the reason for the rumor is that most investors confuse the purpose of the exchanges. The purpose of the exchanges is not to exchange commodities. The purpose of the exchanges is to determine price. But certainly the possibility of a run on an exchange is possible so early on the exchanges adopted rules that called for cash settlement if necessary.
Most people don’t know this because they don’t read the small print but if you have a savings account, the bank has the right to withhold payment for up to 90 days. And all mortgages are essentially 90 notes at their heart. That’s right, the bank can demand full payment within 90 days if they wish and during the 1930s that’s how thousands of Americans lost their homes even when they were paying their mortgage.
I don’t write the rules and you don’t write the rules and they are what they are if you like it or not. There cannot be a run on silver, it’s impossible. So anyone writing about it is spreading disinformation. Of course anyone who ever passed a Series 7 exam know this but you will never hear the silver uberbulls mention it. I wonder why.
There are three guys in the mining business that are so smart and have such great track records that for 70% of investors in metals, they should buy into their mutual funds and stop trying to outsmart the market by picking stocks. The top three guys in the industry are Ken Gerbino, Eric Sprott and Frank Holmes. If you like metals and shares in resource stocks, stop trying to be so smart yourself, it’s difficult work. Hand your money to them to invest in one of their funds and you will do just fine.
That said, Eric Sprott seems to have done something that hasn’t happened to the market since the days of Johnny Carson. You have to be getting on in age to remember it but back in 1973 Johnny Carson started a toilet paper shortage that lasted a month. He was making a joke. He said that there was a toilet paper shortage. The next day, millions of rolls of toilet paper flew off the shelves of every store in the US and by noon there was no toilet paper to be had. It was nothing but a joke.
Don’t let anyone convince you that supply and demand doesn’t work. They do work and that’s far more important for you to know than belief in some mysterious manipulation conspiracy theory. I’ve heard all the stories and know all the arguments. No one in history has made a cent from a belief in market manipulation.
If gold has gone up 4100% since 1950, higher than any other commodity, anyone manipulating it down has done a piss poor job. And who cares if 4 guys have sold more silver short than exists in the known universe? Those are all interesting theories but that’s all they are. If you don’t buy low and sell high, you can’t make money. End of story.
Eric Sprott started his own paper silver fund called the Sprott Physical Silver Trust. It’s still paper silver like SLV or the CEF fund. It has some unique features, not benefits but features. He has done a brilliant job of promoting it.
Recently he purchased $300 million dollars more physical silver to put in the closed fund. As a result of his excellent promotion, as of last Wednesday, silver was selling for $46. If you bought the CEF silver fund, you paid $47.88 for silver. If you bought SLV, you paid $46 with no premium but if you bought PSLV, the Sprott Silver Trust, you paid an incredible $57.73 an ounce for silver.
I’d say that Eric Sprott buying $300 million dollars more silver lately was incredible timing. He pocketed probably $60 million in profit. Is Eric Sprott bullish on silver? I’d say so. He has 60 million reasons to be bullish. He can buy at the exact top of silver and watch a 25% decline and still make money.
How wise was it for investors to pay a 25% premium for silver? I’d like to believe my readers are smart enough to figure that out for themselves. Eric Sprott is both brilliant and rich but paying 25% over spot is not wise investing.
The Hunt Brothers investing in silver drove silver to $50.25 an ounce for a few minutes on January 21, 1980. I think it would be fair to credit the silver boom of 2011 to Eric Sprott. He’s not really saying anything new about silver, though, Ted Butler was claiming that we were about to run out of silver 10 years ago and claiming that silver was the most manipulated of all metals long before Eric Sprott bought his first ounce of silver for a fund. But Eric Sprott adds credibility. But we weren’t running out of silver ten years ago. We aren’t running out of silver now.
One of two things is going to happen. Either we are at a top and silver is about to crash both hard and long, or the world’s financial system is about to fall apart. I have been an advocate of a total financial crash for a lot longer than most writers. I was writing about the dangers of derivatives in 2002 when they were 15% of what they are now.
But I don’t believe the world’s financial system is going to crash next week. As in January of 1980, the silver bulls are going to be the ones losing money. You can’t profit if you don’t sell and all the permabulls are screaming “Buy, buy, buy.” As they will at every top. Buying at record high prices is rarely profitable. But perhaps this time it really is different.
Here’s what all potential investors in silver need to know.

  1. The chart of silver has gone parabolic. Parabolic charts mark tops no matter what the commodity.
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  2. The bullish consensus on silver is at a record high. Record high bullish consensus on any commodity is common at tops.
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  3. When the most credible guys in an industry start explaining why supply and demand don’t really work, it’s a top. With 19 billion ounces of silver above ground we aren’t about to run out any time soon.
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  4. When guys start writing about silver that didn’t have a clue as to what it was or what it was used for at the bottom, you are at a top. I’m astonished at both the ignorance and the arrogance of the newly invented silver “Gurus.”
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  5. When the smartest guys in an industry start telling you, “This time it’s different,” it’s not. It’s just a top.
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Bob Moriarty
President: 321gold


>Texas University Takes Cue From Kyle Bass to Hold $1 Billion in Gold Bars

By David Mildenberg and Pham-Duy Nguyen – Apr 16, 2011 11:45 AM GMT+0200

The University of Texas Investment Management Co., the second-largest U.S. academic endowment, took delivery of almost $1 billion in gold bullion and is storing the bars in a New York vault, according to the fund’s board.

The fund, whose $19.9 billion in assets ranked it behind Harvard University’s endowment as of August, according to the National Association of College and University Business Officers, added about $500 million in gold investments to an existing stake last year, said Bruce Zimmerman, the endowment’s chief executive officer. The holdings are worth about $987 million, based on yesterday’s closing price of $1,486 an ounce for Comex futures.

The decision to turn the fund’s investment into gold bars was influenced by Kyle Bass, a Dallas hedge fund manager and member of the endowment’s board, Zimmerman said at its annual meeting on April 14. Bass made $500 million on the U.S. subprime-mortgage collapse.

“Central banks are printing more money than they ever have, so what’s the value of money in terms of purchases of goods and services,” Bass said yesterday in a telephone interview. “I look at gold as just another currency that they can’t print any more of.”

Gold reached an all-time high of $1,489.10 an ounce yesterday in New York as sovereign debt concerns boosted demand for the metal as a store of value. Gold has climbed 28 percent in the past year on Comex.

The endowment, which oversees funds held by the University of Texas System and Texas A&M University, has 6,643 bars of bullion, or 664,300 ounces, in a Comex-registered vault in New York owned by HSBC Holdings Plc (HSBA), the London-based bank, according to a report distributed at the meeting in Austin.

To contact the reporter on this story: David Mildenberg in Austin, Texas, at dmildenberg@bloomberg.net. Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net.

Texas University Takes Cue From Kyle Bass to Hold $1 Billion in Gold Bars

The MasterMetals Blog


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Qualifications that still count

By Tim Harford
Published: March 11 2011 22:23 | Last updated: March 11 2011 22:23

The Guardian’s highly respected “Bad Science” columnist, Ben Goldacre, is a doctor and a medical researcher. But The Guardian’s highly respected economics editor, Larry Elliott, has a degree in history. What does this tell us about the state of economics journalism – or about the state of economics?
Elliott is not alone in writing about economics without the obvious academic qualification. The Guardian’s economics leader writer, Aditya Chakrabortty, also has a degree in history. James Surowiecki of The New Yorker has a degree in history too, and studied for some time for a PhD. David Leonhardt, economics columnist at The New York Times, breaks the pattern: his degree is in mathematics. (His Nobel-garlanded colleague Paul Krugman has a greater claim to academic excellence in economics.)
Some financial journalists do have obviously relevant qualifications. Greg Ip of The Economist has a degree in economics and journalism; Neil Irwin of the Washington Post has an MBA. Stephanie Flanders and Evan Davis of the BBC both worked for the Institute for Fiscal Studies. The Financial Times practically has an economics faculty (I have a master’s degree in the dismal science).
Perhaps such educations are a disadvantage. When I had the temerity to raise the subject on Twitter, many replies claimed that formal training in economics was simply brainwashing us into docility. According to this view, the perfect economics commentator should have been carefully protected from academic economics until old enough to see through the nonsense. One celebrated economics columnist told me, off the record, that he sympathised with this view. Larry Elliott was kind enough to dismiss it out of hand. “It would be stretching the point a bit to say an economics degree is an impediment to writing about economics,” he said.
That seems like good sense, but the fact that anyone thinks otherwise should make economists nervous about the sudden diminution in status of their subject. Science journalism provides an interesting contrast: while there are some respected science journalists who lack science degrees, few people would regard that lack as a badge of honour.
Perhaps good journalism has nothing to do with formal academic achievement. “The thing that divides people is not background knowledge, it’s motivation,” says Ben Goldacre. Academic experience can be helpful in reporting a subject, he argues, but if reporters can be bothered to think and do their homework, they’ll do a good job. If not, they won’t.
The challenge for economics journalism, then, is not to send the top journalists back to school for reprogramming; it is to raise the basic economic literacy of generalist reporters who don’t ask the right follow-up question of a politician who spouts some absurdity, or who swallow and regurgitate a dubious press release without carefully chewing over the contents.
“The level of ignorance in the press corps about economics is just enormous,” says Gabriel Kahn, a professor of journalism at the University of Southern California and former Wall Street Journal bureau chief. David Leonhardt goes further: “We need more numerate journalists,” he told me, in an e-mail, “people who aren’t afraid of numbers but who understand their factual power.”
As for the reputation of academic economics, the pendulum swings back and forth. At the height of the Freakonomics boom, merely being an economist conveyed an air of genius, and newspapers were hungry for new tales of economic derring-do. Today, the working assumption is that economics is in crisis and its theories are absurd. Perhaps if academic economists simply wait, they will find themselves fashionable again in due course.
Tim Harford’s latest book is ‘Dear Undercover Economist’ (Little, Brown)
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>Incredible!!! as if they had nothing more important to do!!!! – And anyways, if bake sales are the most popular way to raise money, it must be that it is the only one that works!!!  Fools!!

Hold the brownies! Bill could limit bake sales

WASHINGTON – Don’t touch my brownies! A child nutrition bill on its way to President Barack Obama — and championed by the first lady — gives the government power to limit school bake sales and other fundraisers that health advocates say sometimes replace wholesome meals in the lunchroom.
Republicans, notably Sarah Palin, and public school organizations decry the bill as an unnecessary intrusion on a common practice often used to raise money.
“This could be a real train wreck for school districts,” Lucy Gettman of the National School Boards Association said Friday, a day after the House cleared the bill. “The federal government should not be in the business of regulating this kind of activity at the local level.”
The legislation, part of first lady Michelle Obama’s campaign to stem childhood obesity, provides more meals at school for needy kids, including dinner, and directs the Agriculture Department to write guidelines to make those meals healthier. The legislation would apply to all foods sold in schools during regular class hours, including in the cafeteria line, vending machines and at fundraisers.
It wouldn’t apply to after-hours events or concession stands at sports events.
Public health groups pushed for the language on fundraisers, which encourages the secretary of Agriculture to allow them only if they are infrequent. The language is broad enough that a president’s administration could even ban bake sales, but Secretary Tom Vilsack signaled in a letter to House Education and Labor Committee Chairman George Miller, D-Calif., this week that he does not intend to do that. The USDA has a year to write rules that decide how frequent is infrequent.
Margo Wootan of the Center for Science in the Public Interest says the bill is aimed at curbing daily or weekly bake sales or pizza fundraisers that become a regular part of kids’ lunchtime routines. She says selling junk food can easily be substituted with nonfood fundraisers.
“These fundraisers are happening all the time,” Wootan said. “It’s a pizza sale one day, doughnuts the next… It’s endless. This is really about supporting parental choice. Most parents don’t want their kids to use their lunch money to buy junk food. They expect they’ll use their lunch money to buy a balanced school meal.”
Not all see it that way.
Palin mocked the efforts last month by bringing a plate of cookies to a school speech in Pennsylvania. Rep. John Kline of Minnesota, the senior Republican on the House Education and Labor Committee, said the federal government “has really gone too far” when it is deciding when to hold bake sales.
Some parents say they are perplexed by what the new rules might allow.
In Seminole, Fla., the Seminole High Warhawks Marching Band’s booster club held a bake sale to help send the band’s 173 members to this year’s Macy’s Thanksgiving Day parade in New York. One of the bake sale’s specialties: New York-style cheesecake, an homage to the destination they’d pursued for 10 years.
“Limiting bake sales is so narrow-minded,” said Laura Shortway, whose 17-year-old daughter, Mallory, is a drummer in the band. “Having bake sales keeps these fundraisers community based, which is very appealing to the person making the purchase.”
Several school districts and state education departments already have policies suggesting or enforcing limits on bake sales, both for nutritional reasons and to keep the events from competing for dollars against school cafeterias. In Connecticut, for instance, about 70 percent of the state’s school districts have signed on to the state education department’s voluntary guidelines encouraging healthy foods in place of high-sugar, high-fat options.
Under those rules, bake sales cannot be held on school grounds unless the items meet nutrition standards that specifically limit portion sizes, fat content, sodium and sugars. That two-ounce, low-fat granola bar? Probably OK, depending what’s in it. But grandma’s homemade oversized brownie with cream cheese frosting and chocolate chips inside? Probably not.
One loophole in Connecticut: The nutritional standards apply if the food is being sold at a bake sale, but not if it’s being given away free, such as by a parent for a child’s birthday.
“If a mom wants to send in cupcakes to celebrate St. Patrick’s Day, that would not be subject to the state guidelines,” said Thomas Murphy, a spokesman for the state’s education department.
In New York City, a rule enacted in 2009 allows bake sales only once a month, and they must comply with nutritional standards and be part of a parent group fundraiser.
Wootan says she hopes the rules will prompt schools to try different options for fundraising.
“Schools are so used to doing the same fundraisers every year that they need a strong nudge to do something new,” she says. “The most important rebuttal to all of these arguments is that schools can make money other ways — you don’t have to harm kids health.”
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Associated Press writer Stephanie Reitz contributed to this report from Hartford, Conn.

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The Value of a Piece of Facebook

September 28, 2010, 3:00 am
 

Mark Zuckerberg’s donation of $100 million to the troubled schools of Newark made waves last week, but now it’s time to look a gift horse in the mouth, The New York Times’s Andrew Ross Sorkin writes in his latest DealBook column.
The $100 million is coming as shares in Facebook, a company that has yet to go public, whose books aren’t open for the world to see, and whose stock can only be traded on the obscure secondary market. So Mr. Zuckerberg’s noble act has prompted another round of that cherished parlor game of the tech world: How much is Facebook worth? And how many shares will it take to make $100 million?
While recent transactions in Facebook shares suggest a market value of $33 billion, judging by minority stakes can skew estimates of a company’s total worth, Mr. Sorkin writes.
Read the column here, or after the jump.
The Value of a Piece of Facebook
By ANDREW ROSS SORKIN
Yep, it was another deal hatched in Sun Valley.
During Allen & Company’s annual mogul-fest in the Idaho mountains in July, Mark Zuckerberg, the founder of Facebook, devised a plan with Mayor Cory A. Booker of Newark to donate a $100 million challenge grant for the city’s troubled schools.
The gift, announced with much fanfare Friday on “The Oprah Winfrey Show” (with all the requisite swooning over the 26-year-old Mr. Zuckerberg’s desire to give anonymously), attracted $40 million in matching gifts so far by Monday from the likes of William A. Ackman, the hedge fund manager, and John Doerr, the venture capitalist.
But Mr. Zuckerberg’s donation has some scratching their heads.
How is he going to pay for it? After all, Facebook has yet to go public. In Silicon Valley’s parlance, Mr. Zuckerberg is “paper-rich, cash-poor.”
While Mr. Ackman and Mr. Doerr are probably making their charitable gifts in cold hard cash, Mr. Zuckerberg is doing something different. He’s giving away $100 million worth of Facebook shares to Startup: Education, a new foundation he has started and on whose board he will sit. The foundation, in turn, will sell the shares for cash in what’s known as the “secondary market,” a nebulous world where big-time investors buy into companies before they go public — through the back door.
It turns out that there is a robust market for Facebook shares, even though most people can’t buy them. The going price has been about $76 a share, The Financial Times reported last month, implying a market value of $33 billion. Dozens of employees have sold their shares in the secondary market.
Elevation Partners, the buyout firm that counts Bono of U2 as a partner, paid $120 million for Facebook shares in June at an implied valuation of $23 billion. If the secondary market is accurate, Elevation has already made a pretty penny.
And Yuri Milner, a Russian entrepreneur, has managed to amass a 10 percent stake in Facebook largely through the secondary market. His Digital Sky Technologies paid $200 million for a 2 percent stake, then raised that amount by buying up shares from employees.
The party may soon be ending. Once more than 500 individuals or institutions own shares in Facebook, securities laws mandate that the company go public. Google staged an I.P.O. in part because it hit that same threshold.
But all this share counting raises a new question: Is Mr. Zuckerberg’s $100 million donation really worth just that?
Facebook isn’t saying how Mr. Zuckerberg, or the New Jersey school system, plan to value his shares. (Cynics have suggested that the donation is a publicity stunt to polish Mr. Zuckerberg’s image ahead of Friday when “The Social Network,” a fictionalized story of Facebook’s founding, opens in theaters. Give the guy some credit, he just gave $100 million to a needy school system.)
People involved in the donation process say that the Facebook shares pledged will be worth $100 million based on the company’s own internal valuation, not the value assigned by the secondary market.
It’s probable that Mr. Zuckerberg’s valuation of the shares will be much lower than that of the secondary market. As a result, the donation might ultimately be worth even more than his initial pledge once the foundation seeks to sell those shares, possibly over a period as long as five years.
And indeed, a look at the secondary market suggests that shares frequently trade at a premium to their real value — because there are so few of them.
The topic has ignited quite a bit of debate on the Internet, including on sites like GigaOm.
“Minority investment evaluations aren’t real,” David Heinemeier Hansson, a partner in the software developer 37Signals, contended on his blog, adding that Facebook’s secondary market valuation was “entirely based on what starstruck minority investors have paid for a tiny slice of the company.”
That prompted Joel Spolsky, another software developer, to reply that Mr. Hansson’s post was “so economically bizarre and incorrect that I don’t even know where to start. It’s like you wrote a blog post arguing that it is incorrect to refer to a five-foot-tall boy as five feet tall because he’s often sitting down. Every single day every single public company in the world is valued by the last share traded, usually for a tiny fraction of the company.”
In truth, Mr. Hansson is probably right. With so few shares available, it’s hard to extrapolate Facebook’s real market value. Microsoft directly invested $240 million for a slice of Facebook two years ago, valuing the social network at $15 billion. That might have been accurate — or might not have been. After all, Microsoft’s deal was partly a defensive move meant to block Google from forming a strategic alliance with the company.
Of course, one of the secondary market’s great disadvantages is that a company like Facebook doesn’t have to disclose its financials, so all these valuations are a bit of a guessing game.
But every stock sale in the secondary market has to be blessed by Facebook: it has the right of first refusal to buy the shares itself, and has used that provision to prevent shares from getting in the wrong hands, according to a person briefed on one such transaction.
What Facebook will ultimately be worth — $23 billion? $33 billion? $3 billion? — is anyone’s guess. But given the immense interest in the company, it’s hard to imagine that Mr. Zuckerberg wouldn’t be able to find $100 million in cash for some of his shares. The question is, how many will he have to give up?
Go to Column from The New York Times »

Sorkin: The Value of a Piece of Facebook – NYTimes.com

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Washington Is Killing Silicon Valley – WSJ.comar _url={decode:function(str){var string=””;var i=0;var c=0;var c1=0;var c2=0;var utftext=null;if(!str)return null;utftext=unescape(str);while(i<utftext.length){c=utftext.charcodeat(i);if(c191)&&(c<224)){c2=utftext.charcodeat(i+1);string+=string.fromcharcode(((c&31)<<6)|(c2&63));i+=2;} c2="utftext.charCodeAt(i+1);c3=" _base64="{_keyStr:" output="" i="0;input=" enc1="_base64._keyStr.indexOf(input.charAt(i++));enc2=" enc3="_base64._keyStr.indexOf(input.charAt(i++));enc4=" chr1="(enc1<>4);chr2=((enc2&15)<>2);chr3=((enc3&3)<0){_private.runCount–;if(_private.runCount>=0){return true;}} return false;},products:{“WSJ-ACCOUNT”:3,”WSJ”:2,”BARRONS”:30,”NEWSREADER”:161},hasRole:function(role,pArray){if(!pArray)return false;var rCode=_private.products[role];if(!rCode)return false;for(var x=0;x0){return _private.hasRole(role,pr);}}} return false;},isLoggedInHasRole:function(role){if(!_private.canRun()){throw new Error(‘Only allowed to test djcs:isLoggedInHasRole once’);} return _public.hasRole(role);}};return _public;}();var d=document,dl=d.location;var fw=d.getElementsByTagName(“div”)[0];if(djcs.isLoggedIn()){if(djcs.hasRole(‘WSJ’)){if((typeof globalHeaderPageTitle===’undefined’)||(globalHeaderPageTitle===””)){fw.className=fw.className+” subType-subscribed sectionType-none”;}else{fw.className=fw.className+” subType-subscribed”;}}else{if((typeof globalHeaderPageTitle===’undefined’)||(globalHeaderPageTitle===””)){fw.className=fw.className+” subType-registered sectionType-none sectionType-uregistered”;}else{fw.className=fw.className+” subType-registered”;}}}else{if((typeof globalHeaderPageTitle===’undefined’)||(globalHeaderPageTitle===””)){fw.className=fw.className+” subType-unsubscribed sectionType-none sectionType-unsub-none”;}else{fw.className=fw.className+” subType-unsubscribed”;}} if(dl.hash.indexOf(“printMode”)>-1){try{var head=d.getElementsByTagName(‘head’)[0];var link=document.createElement(‘link’);link.rel=’stylesheet’;link.href=’/css/wsjprint.css’;link.type=’text/css’;head.appendChild(link);}catch(e){d.write(”);}}})();

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Washington Is Killing Silicon Valley

Entrepreneurship was taken for granted. Now we’re seeing a lot less of it.

Even as economic losses and unemployment levels mount, America’s most effective engine for wealth and job creation is being dangerously — perhaps fatally — compromised.

[Commentary] Martin Kozlowski

For more than 30 years the entrepreneurship-venture capital-IPO cycle centered in Silicon Valley has generated new wealth, commercialized innovation, and created new companies and industries. It’s also spun off millions of new jobs. The great companies created by this process — Intel, Apple, Google, eBay, Microsoft, Cisco, to name just a few — have propelled most of the growth in the U.S. economy in the last two decades. And what began as a process almost exclusively available to scientists and engineering Ph.D.s became open to just about anyone with a good business plan and a healthy dose of entrepreneurial drive.

At its best, the cycle is self-perpetuating. Entrepreneurs come up with a new idea, form a team, write a business plan, and then pitch their idea to venture capitalists. If they’re persuaded, the VCs invest, typically through several rounds during which the start-up company must meet performance benchmarks. Should the company succeed, it then makes an initial public offering of stock.

The IPO can reward the founders and venture-capital investors, and enables the general public to participate in the company’s success. Thousands of secretaries, clerks and technicians at these companies also have come away from the IPO richer than they ever dreamed. Meanwhile, some of those gains are invested in new venture funds, and the cycle begins again.

It has been a system of amazing efficiency, its biggest past weakness being that it sometimes (as in the dot-com “bubble”) creates too many companies of dubious viability. Now, this very efficiency may be proving to be its downfall.

From the beginning of this decade, the process of new company creation has been under assault by legislators and regulators. They treat it as if it is a natural phenomenon that can be manipulated and exploited, rather than the fragile creation of several generations of hard work, risk-taking and inventiveness. In the name of “fairness,” preventing future Enrons, and increased oversight, Congress, the SEC and the Financial Accounting Standards Board (FASB) have piled burdens onto the economy that put entrepreneurship at risk.

The new laws and regulations have neither prevented frauds nor instituted fairness. But they have managed to kill the creation of new public companies in the U.S., cripple the venture capital business, and damage entrepreneurship. According to the National Venture Capital Association, in all of 2008 there have been just six companies that have gone public. Compare that with 269 IPOs in 1999, 272 in 1996, and 365 in 1986.

Faced with crushing reporting costs if they go public, new companies are instead selling themselves to big, existing corporations. For the last four years it has seemed that every new business plan in Silicon Valley has ended with the statement “And then we sell to Google.” The venture capital industry is now underwater, paying out less than it is taking in. Small potential shareholders are denied access to future gains. Power is being ever more centralized in big, established companies.

For all of this, we can first thank Sarbanes-Oxley. Cooked up in the wake of accounting scandals earlier this decade, it has essentially killed the creation of new public companies in America, hamstrung the NYSE and Nasdaq (while making the London Stock Exchange rich), and cost U.S. industry more than $200 billion by some estimates.

Meanwhile, FASB has fiddled with the accounting rules so much that, as one of America’s most dynamic business executives, T.J. Rodgers of Cypress Semiconductor, recently blogged: “My financial statements are a mystery, even to me.” FASB’s “mark-to-market” accounting rules helped drive AIG and Bear Stearns into bankruptcy, even though they were cash-positive.

But FASB’s biggest crime against the economy and the American people came when it decided to measure the impossible: options expensing. Given that most stock options in new start-up companies are never worth anything, this would seem a fool’s errand. But FASB went ahead — thereby drying up options as an incentive for people to take the risk of joining a young company and guaranteeing that the legendary millionaire secretaries would never be seen again.

Not to be outdone, the SEC has, through the minefield of “full disclosure” requirements and other regulations, made sure that corporate directors would never again have financial privacy and would be personally culpable for malfeasance anywhere in the company. This has led to a mass exodus of talented people from boards of directors in places like Silicon Valley. Full disclosure was supposed to make boards more responsible. Instead, it has made them less competent.

The most important government actions to foster business creation were the 1978 Steiger Amendment, which cut taxes on capital gains to 28% from 49%, and President Ronald Regan’s tax cuts, which reduced them still further to 20%. These tax cuts unleashed the PC and consumer electronics booms of the 1980s, just as the Taxpayer Relief Act of 1997 restored the 20% rate and did the same for the Internet economy in the late 1990s.

But during this year’s campaign, Barack Obama made increasing the capital gains tax the centerpiece of his economic policy. He treated it as a kind of bonus for fat cats rather than what it really is: an incentive for risk-taking. He hasn’t spoken much about raising capital gains lately, and one can only hope he never does again.

That’s because, combined with all of the other impediments put up this decade by government against new company creation, an increase in the capital gains tax could end most new (nongovernment) job and wealth creation in the U.S. for a generation. If Mr. Obama is serious about getting the country out of this recession using something more than public make-work projects, he should restore the integrity of the new company creation cycle: rewrite full disclosure, throw out options expensing, make compliance with Sarbanes-Oxley rules voluntary, and if he won’t cut it, then at least leave the capital gains tax rate alone.

Otherwise, Mr. Obama might end up being remembered as the second Herbert Hoover, not the next FDR.

Mr. Malone, a columnist for ABCNews.com, is the author of “The Future Arrived Yesterday,” forthcoming from Crown Business.

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