Wednesday, June 6, 2018
WhatsApp and Facebook's Broken Promises
The Wall Street Journal published a bombshell story on Tuesday about what reporters Kirsten Grind and Deepa Seetharaman call “the messy, expensive split between Facebook and WhatsApp’s founders.” The dishy piece makes for great reading. (Do the multibillionaire founders of global communications platforms make time to grouse at each other about who gets to pick out office chairs? Yes. Yes, they do.) Behind the dishiness, however, is a very important story that pretty much clears up any doubt as to whether Mark Zuckerberg is a trustworthy man who keeps his promises—or a profit-obsessed machine who’s much stronger on greed than he is on morals.
By the time you’ve finished the WSJ piece, only two options seem possible: Either Zuckerberg is a liar, or he’s a liar with absolutely no concept of the sunk-cost fallacy. When Facebook bought WhatsApp for $22 billion in 2014, the companies rolled out a very clear messaging campaign, based around WhatsApp’s motto of “no ads, no games, no gimmicks.” The messaging service would be owned by Facebook, and Facebook could continue to make as much money as it wanted from ads on its own platform, but WhatsApp would retain its purity of product and even roll out end-to-end encryption. As co-founder Jan Koum wrote in a blog post after the deal was announced:
Thus did WhatsApp retain exactly the independence that it had been promised—until it didn’t.
Today, it seems inevitable not only that advertising will make it onto WhatsApp, but also that the advertising in question will be targeted—which is to say that when you use the app, Facebook will know exactly who you are, where you live, and what kind of products you might be interested in buying. It’s a complete repudiation of WhatsApp’s founding principles, and makes a mockery of its end-to-end encryption.
What’s more, WhatsApp’s two founders both left hundreds of millions of dollars on the table, so keen were they to leave Facebook’s ad-friendly walls. (It turns out that their contractual right to being paid out in full would require them to sue for the money, and, according to the Journal, neither of them had the appetite for that.) Brian Acton resigned in September; Koum stayed on until the end of April. In leaving before November of this year, Acton gave up some $900 million; Koum gave up about $400 million. You need to be really unhappy at work if you’re willing to quit a job that’s effectively paying you some $60 million per month, and from which you basically can’t be fired.
The cause of that unhappiness seems as clear as Koum’s 2012 blog post titled “Why We Don’t Sell Ads”—a post that starts off by saying that “advertising has us chasing cars and clothes, working jobs we hate so we can buy shit we don’t need,” and gets more vehement from there. Koum and Acton really didn’t want ads, but, as the WSJ puts it, Zuckerberg and his number two, Sheryl Sandberg, “grew impatient for a greater return on the company’s 2014 blockbuster $22 billion purchase.” After the two founders left, Zuckerberg installed in their place “a longtime Facebook executive who is tasked with finding a business model that brings in revenue at a level to justify the app’s purchase price.”
by Felix Salmon, Slate | Read more:
Image: Lluis Gene/Getty Images
By the time you’ve finished the WSJ piece, only two options seem possible: Either Zuckerberg is a liar, or he’s a liar with absolutely no concept of the sunk-cost fallacy. When Facebook bought WhatsApp for $22 billion in 2014, the companies rolled out a very clear messaging campaign, based around WhatsApp’s motto of “no ads, no games, no gimmicks.” The messaging service would be owned by Facebook, and Facebook could continue to make as much money as it wanted from ads on its own platform, but WhatsApp would retain its purity of product and even roll out end-to-end encryption. As co-founder Jan Koum wrote in a blog post after the deal was announced:Respect for your privacy is coded into our DNA, and we built WhatsApp around the goal of knowing as little about you as possible: You don’t have to give us your name and we don’t ask for your email address. We don’t know your birthday. We don’t know your home address. We don’t know where you work. We don’t know your likes, what you search for on the internet or collect your GPS location. None of that data has ever been collected and stored by WhatsApp, and we really have no plans to change that.
If partnering with Facebook meant that we had to change our values, we wouldn’t have done it. Instead, we are forming a partnership that would allow us to continue operating independently and autonomously. Our fundamental values and beliefs will not change. Our principles will not change…
Make no mistake: our future partnership with Facebook will not compromise the vision that brought us to this point.WhatsApp wasn’t an easy acquisition for Zuckerberg, because the two apps have very different founding principles. Koum, who grew up in Ukraine, believes deeply in privacy; Zuckerberg thinks that the more open and connected we are, the happier we all become. And so in order to acquire WhatsApp, Zuckerberg not only had to pay a lot of money and give up a board seat to Koum; he also had to make a lot of promises. Some of those promises were even enshrined in the acquisition agreement: If Facebook imposed “monetization initiatives” like advertising onto WhatsApp, its founders’ shares would vest immediately, and they could leave without suffering any kind of financial penalty.
Thus did WhatsApp retain exactly the independence that it had been promised—until it didn’t.
Today, it seems inevitable not only that advertising will make it onto WhatsApp, but also that the advertising in question will be targeted—which is to say that when you use the app, Facebook will know exactly who you are, where you live, and what kind of products you might be interested in buying. It’s a complete repudiation of WhatsApp’s founding principles, and makes a mockery of its end-to-end encryption.
What’s more, WhatsApp’s two founders both left hundreds of millions of dollars on the table, so keen were they to leave Facebook’s ad-friendly walls. (It turns out that their contractual right to being paid out in full would require them to sue for the money, and, according to the Journal, neither of them had the appetite for that.) Brian Acton resigned in September; Koum stayed on until the end of April. In leaving before November of this year, Acton gave up some $900 million; Koum gave up about $400 million. You need to be really unhappy at work if you’re willing to quit a job that’s effectively paying you some $60 million per month, and from which you basically can’t be fired.
The cause of that unhappiness seems as clear as Koum’s 2012 blog post titled “Why We Don’t Sell Ads”—a post that starts off by saying that “advertising has us chasing cars and clothes, working jobs we hate so we can buy shit we don’t need,” and gets more vehement from there. Koum and Acton really didn’t want ads, but, as the WSJ puts it, Zuckerberg and his number two, Sheryl Sandberg, “grew impatient for a greater return on the company’s 2014 blockbuster $22 billion purchase.” After the two founders left, Zuckerberg installed in their place “a longtime Facebook executive who is tasked with finding a business model that brings in revenue at a level to justify the app’s purchase price.”
by Felix Salmon, Slate | Read more:
Image: Lluis Gene/Getty Images
Sleep Radio
John Watson is the first to admit that his DJ skills put people to sleep. Lucky for him, that is the point.
For the past four years Watson, who lives in the tiny New Zealand township of Te Aroha, has been broadcasting to the world. But instead of seeking an engaged listenership, Watson wants those who tune into his station to literally fall asleep. And they do.
People from as far away as Afghanistan, Israel, Russia, Hungary, Taiwan and Puerto Rico log on to Watson’s station Sleep Radio. Someone in Prague has been listening for three days straight.
The idea of a radio station that sends listeners to sleep came to Watson after he had a heart attack 10 years ago. Following five coronary artery bypasses he began to suffer from chronic depression and insomnia.
“I never used to have trouble going to sleep but now I was lying awake watching the sun rise and feeling like a zombie,” he said.
Watson, 62, was treated with medication and started seeing a counsellor who suggested he try relaxing, ambient music to help him sleep. Soon he found there was not a lot out there for sleep music aficionados.
“Even on the radio you would be listening to relaxing music, trying to get to sleep and, all of a sudden, an advert would come on, yelling at you to buy something.”
Watson thought he could do better. He did his research, looking into royalty-free ambient music and taught himself how to set up a digital radio station. Sleep Radio was born.
He said the project is a “hobby and a passion”. He often gets grateful listeners emailing him with their success stories, including a mother whose newborn baby is also seemingly a fan.
However, Watson is quick to say that ambient music does not work for everyone. His wife, for example, finds it too boring. Sleep Radio has now expanded into an app that allows people to set a timer for their listening.
Meanwhile Watson has not had to source new music for over a year. There are ambient music producers lining up to have people fall asleep to their material. However there are rules – no vocals, no piano, guitar or harp solos, and absolutely no ocean sounds or birdsong.
For the past four years Watson, who lives in the tiny New Zealand township of Te Aroha, has been broadcasting to the world. But instead of seeking an engaged listenership, Watson wants those who tune into his station to literally fall asleep. And they do.
People from as far away as Afghanistan, Israel, Russia, Hungary, Taiwan and Puerto Rico log on to Watson’s station Sleep Radio. Someone in Prague has been listening for three days straight.
The idea of a radio station that sends listeners to sleep came to Watson after he had a heart attack 10 years ago. Following five coronary artery bypasses he began to suffer from chronic depression and insomnia.“I never used to have trouble going to sleep but now I was lying awake watching the sun rise and feeling like a zombie,” he said.
Watson, 62, was treated with medication and started seeing a counsellor who suggested he try relaxing, ambient music to help him sleep. Soon he found there was not a lot out there for sleep music aficionados.
“Even on the radio you would be listening to relaxing music, trying to get to sleep and, all of a sudden, an advert would come on, yelling at you to buy something.”
Watson thought he could do better. He did his research, looking into royalty-free ambient music and taught himself how to set up a digital radio station. Sleep Radio was born.
He said the project is a “hobby and a passion”. He often gets grateful listeners emailing him with their success stories, including a mother whose newborn baby is also seemingly a fan.
However, Watson is quick to say that ambient music does not work for everyone. His wife, for example, finds it too boring. Sleep Radio has now expanded into an app that allows people to set a timer for their listening.
Meanwhile Watson has not had to source new music for over a year. There are ambient music producers lining up to have people fall asleep to their material. However there are rules – no vocals, no piano, guitar or harp solos, and absolutely no ocean sounds or birdsong.
by Charles Andersen, The Guardian | Read more:
Image: Supplied
[ed. Sleep Radio here.]
Redux: Fasting – The New Fad Diet?
A couple of weeks ago I found myself in a beautiful rural home that belongs to my parents’ friends, a slim and sophisticated couple who enjoys bird watching and international travel. I was meeting this pair—let’s call them George and Marsha—for the first time. I’m inherently nosy, so while the rest of the group chatted, my eyes scanned the room. On the fridge, I noticed a slip of paper that looked to be George and Marsha’s weekly dinner menu. That night they’d be having polenta and pork roast. The other days had meals written next to them too, all except for Monday and Wednesday. Next to those two days, Marsha (or George) had scrawled “Fast.”
Fast as in not eat? Marsha and George didn’t seem like the type to fall for juice cleanses or fad diets. My parents said the couple had probably seen the same documentary they had. The show follows Michael Mosley, a BBC journalist and former physician, on his quest to become slimmer and healthier through fasting.
I’ve never heard of Michael Mosley, but I’m not sure how I missed him. Lately Mosley is everywhere — on the BBC, on PBS, in the news. In January he launched a bestselling diet book co-authored by journalist Mimi Spencer. Here’s the approach they’re advocating: To lose weight and improve health, dieters should fast two days each week. On fasting days, women should consume no more than 500 calories. Men are allowed 600. The other five days dieters have no restrictions.
In the BBC documentary my parents referenced, a chubby, unhealthy, middle-aged Mosley seeks the secret to weight loss and health. He starts his journey by visiting Joseph Cordell, a lawyer who practices calorie restriction. Individuals who follow this diet, known as CRONies, generally cut their caloric intake by 25%. So a woman who typically eats 2,000 calories a day would consume just 1,500. There’s lot of science to support the benefits of calorie restriction. I wrote about a few studies here. But there’s no doubt it has drawbacks, hunger being among them. Emily Yoffe, who tried caloric restriction back in 2007, had this to say: “Each meal I ate now had the poignancy of a Shakespeare sonnet: how much I longed for each bite, how aware I was of how few there would be.”
Mosley wasn’t convinced he could adopt calorie restriction as a lifestyle. “What I really want to do is try to understand the ways in which calorie restriction works,” Mosley said in the documentary. “Then hopefully I can get all the delicious benefits without actually having to do it.”
In other words, Mosley wanted what the entire human race has always wanted — a shortcut.
Mosley’s search for a shortcut leads him to fasting. Not all fasts are created equal, and Mosley flirts with various forms. He first tries a painful three-day fast. But he wants something a little less intense, so he visits Krista Varady at the University of Illinois. She’s studying alternate day fasting. Participants in her studies fast every other day and on those days Varady’s subjects eat a single meal that’s about 400-600 calories. The other days they can eat whatever they want. Varady has found that alternate day fasting can help participants shed pounds and lower their cholesterol and blood pressure.
“I am now starting to be won over by the idea that a simple pattern of feast and fast can be powerful,” Mosley says after his visit with Varady. “It seems to have an impact which goes beyond simply eating less. And I think it could work for someone like me.”
But Mosley doesn’t adopt alternate day fasting. In the book, he writes that fasting every other day “can be socially inconvenient as well as emotionally demanding.” Instead he chooses to fast two days a week, eating 600 calories those days and a normal diet the other days. And it seems to work. In three months, Mosley loses 19 pounds. His body mass index falls from 26.4 to 24, and his body fat drops from 28% to 21%.
“The results have been absolutely fantastic for me. But that doesn’t mean that intermittent fasting will work for everyone. It’s really important that they do more trials on humans to find out if, in the long term, it is safe and effective,” Mosley says in the documentary.
Yet, early this year, Mosley launched a diet book that advocates the exact diet that he once said needs more research. The book description includes this line: “Is it possible to eat normally, five days a week, and become slimmer and healthier as a result? Simple answer: yes.”
by Cassandra Willyard, The Last Word on Nothing | Read more:
Fast as in not eat? Marsha and George didn’t seem like the type to fall for juice cleanses or fad diets. My parents said the couple had probably seen the same documentary they had. The show follows Michael Mosley, a BBC journalist and former physician, on his quest to become slimmer and healthier through fasting.
I’ve never heard of Michael Mosley, but I’m not sure how I missed him. Lately Mosley is everywhere — on the BBC, on PBS, in the news. In January he launched a bestselling diet book co-authored by journalist Mimi Spencer. Here’s the approach they’re advocating: To lose weight and improve health, dieters should fast two days each week. On fasting days, women should consume no more than 500 calories. Men are allowed 600. The other five days dieters have no restrictions.In the BBC documentary my parents referenced, a chubby, unhealthy, middle-aged Mosley seeks the secret to weight loss and health. He starts his journey by visiting Joseph Cordell, a lawyer who practices calorie restriction. Individuals who follow this diet, known as CRONies, generally cut their caloric intake by 25%. So a woman who typically eats 2,000 calories a day would consume just 1,500. There’s lot of science to support the benefits of calorie restriction. I wrote about a few studies here. But there’s no doubt it has drawbacks, hunger being among them. Emily Yoffe, who tried caloric restriction back in 2007, had this to say: “Each meal I ate now had the poignancy of a Shakespeare sonnet: how much I longed for each bite, how aware I was of how few there would be.”
Mosley wasn’t convinced he could adopt calorie restriction as a lifestyle. “What I really want to do is try to understand the ways in which calorie restriction works,” Mosley said in the documentary. “Then hopefully I can get all the delicious benefits without actually having to do it.”
In other words, Mosley wanted what the entire human race has always wanted — a shortcut.
Mosley’s search for a shortcut leads him to fasting. Not all fasts are created equal, and Mosley flirts with various forms. He first tries a painful three-day fast. But he wants something a little less intense, so he visits Krista Varady at the University of Illinois. She’s studying alternate day fasting. Participants in her studies fast every other day and on those days Varady’s subjects eat a single meal that’s about 400-600 calories. The other days they can eat whatever they want. Varady has found that alternate day fasting can help participants shed pounds and lower their cholesterol and blood pressure.
“I am now starting to be won over by the idea that a simple pattern of feast and fast can be powerful,” Mosley says after his visit with Varady. “It seems to have an impact which goes beyond simply eating less. And I think it could work for someone like me.”
But Mosley doesn’t adopt alternate day fasting. In the book, he writes that fasting every other day “can be socially inconvenient as well as emotionally demanding.” Instead he chooses to fast two days a week, eating 600 calories those days and a normal diet the other days. And it seems to work. In three months, Mosley loses 19 pounds. His body mass index falls from 26.4 to 24, and his body fat drops from 28% to 21%.
“The results have been absolutely fantastic for me. But that doesn’t mean that intermittent fasting will work for everyone. It’s really important that they do more trials on humans to find out if, in the long term, it is safe and effective,” Mosley says in the documentary.
Yet, early this year, Mosley launched a diet book that advocates the exact diet that he once said needs more research. The book description includes this line: “Is it possible to eat normally, five days a week, and become slimmer and healthier as a result? Simple answer: yes.”
Image: uncredited
[ed. I gained 60 lbs. my first year in college (keggers and dorm food and... you know) so I went on a diet very similar to this, except 1000 calories a day - generally a tiny lunch (or light snacks), moderate dinner and one or two beers (I don't think I could fast completely). On weekends I'd eat and drink as much as I wanted, pizzas and beers galore. My appetite shrunk. Even with the opportunity to binge, I just didn't want that much after a while (but it was still important to have that weekend safety valve). Long story short - I lost all the weight I had gained in less than 7 months (I still have the stretch marks to prove it), and have kept it off, 40 years later. (Tip: get a calorie counter so you know what you're eating. After a while, a reduced appetite just feels normal).]
Monday, June 4, 2018
Sunday, June 3, 2018
Getting Down Payment Help Now. Sharing Home’s Gain (or Loss) Later.
For aspiring homeowners, coming up with a healthy down payment has long been the biggest obstacle to owning a home.
With property values soaring in many areas — median prices in San Jose, Calif., and Denver are 60 percent above their prerecession peaks — the barrier is rising. That has some firms promoting unconventional ways to scrape together a down payment, including crowdfunding and using Airbnb rental income.
Now, a small but growing number of home buyers are trying something different: asking an outside investor to put down money alongside them.
It is called shared equity, and Unison, a company based in San Francisco, is the largest of a handful of firms putting it to work. Unison will provide at least half of a consumer’s down payment in exchange for a piece of any appreciation in the home’s value when it is sold. If the home sells at a loss, the company absorbs a share of that, too.
Until the home sells, Unison is mostly a silent partner. The homeowner pays taxes, insurance and all other necessary costs.
The idea behind the program is to provide home buyers with more options. It can help those who are short on down payment funds increase their buying power, though it may also work for people who simply do not want to sink every last dime into their homes. But whether it is right for any individual buyer — upfront cash now versus less proceeds later — is a difficult and highly personal calculation.
Most first-time home buyers put down only about 7.4 percent, on average, according to Inside Mortgage Finance. Although there are plenty of programs that permit small down payments, they can substantially increase monthly housing costs.
Unison and its competitors help increase a down payment to 20 percent of a home’s purchase price — the magic number needed to qualify for the best interest rates and to avoid the added cost of private mortgage insurance.
But relying on an outside investor challenges traditional attitudes about homeownership, even if the conventional approach may be just as risky: Where else in our lives are we encouraged to plunk a huge piece of our net worth into a single asset? The same sort of behavior would be considered reckless in a retirement portfolio.
Shared equity also raises a fundamental question about our overall approach to buying homes, given that the average homeowner moves after about eight years. (...)
For now, shared equity deals are a droplet in the giant pool of new mortgages. Unison, which operates in 22 states, said it had invested alongside 450 home buyers last year, and was on track to invest with roughly 2,500 to 3,000 more in 2018. It has an investment management arm, and its investors — mostly pension funds and university endowments seeking a return slightly above inflation — provide the money for the down payments.
Unison’s costs and approach vary slightly from those of its competitors, including Landed, which offers a similar service for public school employees, and Own Home Finance of San Marcos, Calif.
Here is how Unison’s program works.
THE BACKGROUND. Shared equity started as a way for people with low and moderate incomes to buy homes. The latest incarnation is geared toward those with solid incomes who can qualify for a traditional home loan or even a jumbo mortgage.
Unison began in high-price markets like California, so most people using the program are at least in their 40s with incomes between $75,000 and $150,000. The company said it expected those numbers to fall now that it had branched into different areas.
THE PROCESS. Unison teams up with specific lenders that home buyers must work with. Applicants must qualify for a mortgage, and the home must be one that Unison wants to invest in. That generally means it has to be “typical” for its neighborhood. A McMansion on an acre plot amid more modest homes may not qualify.
The company will invest in single-family and multifamily homes with up to four units, and in townhouses and condominiums. To discourage the quick flipping of properties for a profit, Unison requres buyers to occupy the properties, but they can sell whenever they want.
THE STRUCTURE. Unison’s portion of the down payment is not a loan. No payments are made; no interest accrues. The company’s agreement with a home buyer is structured as an option contract, with its investment effectively giving it the right to buy a stake in the home at a later date, typically when it is sold or after 30 years, whichever comes first. So if the company contributes half of a down payment, it collects over a third of any appreciation in the home’s value (in addition to the original sum it invested).
A homeowner can sell at any time, but Unison absorbs a loss only after three years of ownership. Alternatively, the homeowner can buy out Unison’s share — at a price based on an independent appraisal — although that is permitted only after three years. In such instances, Unison does not share in any losses.
THE RULES. Homeowners generally cannot draw on their home equity beyond the amount of the original mortgage. And they must cover the entire cost of any renovations, although Unison credits the value the work adds to the home’s ultimate sale price. Conversely, there can be repercussions if a home is not well maintained.
In the event of default, Unison — which places liens on the properties it invests in — has the right to foreclose to protect its stake. More often, company executives said, it may step in to help settle arrears and to initiate a more orderly sale — at a price.
by Tara Siegel Bernard, NY Times | Read more:
With property values soaring in many areas — median prices in San Jose, Calif., and Denver are 60 percent above their prerecession peaks — the barrier is rising. That has some firms promoting unconventional ways to scrape together a down payment, including crowdfunding and using Airbnb rental income.
Now, a small but growing number of home buyers are trying something different: asking an outside investor to put down money alongside them.
It is called shared equity, and Unison, a company based in San Francisco, is the largest of a handful of firms putting it to work. Unison will provide at least half of a consumer’s down payment in exchange for a piece of any appreciation in the home’s value when it is sold. If the home sells at a loss, the company absorbs a share of that, too.Until the home sells, Unison is mostly a silent partner. The homeowner pays taxes, insurance and all other necessary costs.
The idea behind the program is to provide home buyers with more options. It can help those who are short on down payment funds increase their buying power, though it may also work for people who simply do not want to sink every last dime into their homes. But whether it is right for any individual buyer — upfront cash now versus less proceeds later — is a difficult and highly personal calculation.
Most first-time home buyers put down only about 7.4 percent, on average, according to Inside Mortgage Finance. Although there are plenty of programs that permit small down payments, they can substantially increase monthly housing costs.
Unison and its competitors help increase a down payment to 20 percent of a home’s purchase price — the magic number needed to qualify for the best interest rates and to avoid the added cost of private mortgage insurance.
But relying on an outside investor challenges traditional attitudes about homeownership, even if the conventional approach may be just as risky: Where else in our lives are we encouraged to plunk a huge piece of our net worth into a single asset? The same sort of behavior would be considered reckless in a retirement portfolio.
Shared equity also raises a fundamental question about our overall approach to buying homes, given that the average homeowner moves after about eight years. (...)
For now, shared equity deals are a droplet in the giant pool of new mortgages. Unison, which operates in 22 states, said it had invested alongside 450 home buyers last year, and was on track to invest with roughly 2,500 to 3,000 more in 2018. It has an investment management arm, and its investors — mostly pension funds and university endowments seeking a return slightly above inflation — provide the money for the down payments.
Unison’s costs and approach vary slightly from those of its competitors, including Landed, which offers a similar service for public school employees, and Own Home Finance of San Marcos, Calif.
Here is how Unison’s program works.
THE BACKGROUND. Shared equity started as a way for people with low and moderate incomes to buy homes. The latest incarnation is geared toward those with solid incomes who can qualify for a traditional home loan or even a jumbo mortgage.
Unison began in high-price markets like California, so most people using the program are at least in their 40s with incomes between $75,000 and $150,000. The company said it expected those numbers to fall now that it had branched into different areas.
THE PROCESS. Unison teams up with specific lenders that home buyers must work with. Applicants must qualify for a mortgage, and the home must be one that Unison wants to invest in. That generally means it has to be “typical” for its neighborhood. A McMansion on an acre plot amid more modest homes may not qualify.
The company will invest in single-family and multifamily homes with up to four units, and in townhouses and condominiums. To discourage the quick flipping of properties for a profit, Unison requres buyers to occupy the properties, but they can sell whenever they want.
THE STRUCTURE. Unison’s portion of the down payment is not a loan. No payments are made; no interest accrues. The company’s agreement with a home buyer is structured as an option contract, with its investment effectively giving it the right to buy a stake in the home at a later date, typically when it is sold or after 30 years, whichever comes first. So if the company contributes half of a down payment, it collects over a third of any appreciation in the home’s value (in addition to the original sum it invested).
A homeowner can sell at any time, but Unison absorbs a loss only after three years of ownership. Alternatively, the homeowner can buy out Unison’s share — at a price based on an independent appraisal — although that is permitted only after three years. In such instances, Unison does not share in any losses.
THE RULES. Homeowners generally cannot draw on their home equity beyond the amount of the original mortgage. And they must cover the entire cost of any renovations, although Unison credits the value the work adds to the home’s ultimate sale price. Conversely, there can be repercussions if a home is not well maintained.
In the event of default, Unison — which places liens on the properties it invests in — has the right to foreclose to protect its stake. More often, company executives said, it may step in to help settle arrears and to initiate a more orderly sale — at a price.
by Tara Siegel Bernard, NY Times | Read more:
Image: Max Whittaker for The New York Times
Saturday, June 2, 2018
Why Read Aristotle Today?
The fundamental tenet of peripatetic philosophy is this: the goal of life is to maximise happiness by living virtuously, fulfilling your own potential as a human, and engaging with others – family, friends and fellow citizens – in mutually beneficial activities. Humans are animals, and therefore pleasure in responsible fulfilment of physical needs (eating, sex) is a guide to living well. But since humans are advanced animals, naturally inclining to live together in settled communities (poleis), we are ‘political animals’ (zoa politika). Humans must take responsibility for their own happiness since ‘god’ is a remote entity, the ‘unmoved mover’ who might maintain the universe’s motion but has neither any interest in human welfare, nor any providential function in rewarding virtue or punishing immorality. Yet purposively imagining a better, happier life is feasible since humans have inborn abilities that allow them to promote individual and collective flourishing. These include the inclinations to ask questions about the world, to deliberate about action, and to activate conscious recollection.
Aristotle’s optimistic, practical recipe for happiness is ripe for rediscovery. It offers to the human race facing third-millennial challenges a unique combination of secular, virtue-based morality and empirical science, neither of which seeks answers in any ideal or metaphysical system beyond what humans can perceive by their senses.
But what did Aristotle mean by ‘happiness’ or eudaimonia? He did not believe it could be achieved by the accumulation of good things in life – including material goods, wealth, status or public recognition – but was an internal, private state of mind. Yet neither did he believe it was a continuous sequence of blissful moods, because this could be enjoyed by someone who spent all day sunbathing or feasting. For Aristotle, eudaimonia required the fulfilment of human potentialities that permanent sunbathing or feasting could not achieve. Nor did he believe that happiness is defined by the total proportion of our time spent experiencing pleasure, as did Socrates’ student Aristippus of Cyrene.
Aristippus evolved an ethical system named ‘hedonism’ (the ancient Greek for pleasure is hedone), arguing that we should aim to maximise physical and sensory enjoyment. The 18th-century utilitarian Jeremy Bentham revived hedonism in proposing that the correct basis for moral decisions and legislation was whatever would achieve the greatest happiness for the greatest number. In his manifesto An Introduction to the Principles of Morals and Legislation (1789), Bentham actually laid out an algorithm for quantitative hedonism, to measure the total pleasure quotient produced by any given action. The algorithm is often called the ‘hedonic calculus’. Bentham spelled out the variables: how intense is the pleasure? How long will it last? Is it an inevitable or only possible result of the action I am considering? How soon will it happen? Will it be productive and give rise to further pleasure? Will it guarantee no painful consequences? How many people will experience it?
Bentham’s disciple, John Stuart Mill, pointed out that such ‘quantitative hedonism’ did not distinguish human happiness from the happiness of pigs, which could be provided with incessant physical pleasures. So Mill introduced the idea that there were different levels and types of pleasure. Bodily pleasures that we share with animals, such as the pleasure we gain from eating or sex, are ‘lower’ pleasures. Mental pleasures, such as those we derive from the arts, intellectual debate or good behaviour, are ‘higher’ and more valuable. This version of hedonist philosophical theory is usually called prudential hedonism or qualitative hedonism.
There are few philosophers advocating hedonist theories today, but in the public understanding, when ‘happiness’ is not defined as the possession of a set of ‘external’ or ‘objective’ good things such as money and career success, it describes a subjective hedonistic experience – a transient state of elation. The problem with both such views, for Aristotle, is that they neglect the importance of fulfilling one’s potential. He cites approvingly the primordial Greek maxim that nobody can be called happy until he is dead: nobody wants to end up believing on his deathbed that he didn’t fulfil his potential. In her book The Top Five Regrets of the Dying (2011), the palliative nurse Bronnie Ware describes exactly the hazards that Aristotle advises us to avoid. Dying people say: ‘I wish I’d had the courage to live a life true to myself, not the life others expected of me.’ John F Kennedy summed up Aristotelian happiness thus: ‘the exercise of vital powers along lines of excellence in a life affording them scope’.
For Aristotle insisted that happiness is constituted by something greater from and different to an accumulation of agreeable experiences. To be happy, we need to sustain constructive activities that we believe are goal-directed. This requires conscious analysis of our goals and conduct, and practising ‘virtue ethics’, by ‘living well’. It requires being nurtured effectively to develop your intellectual and physical capacities, and identify your potential (Aristotle had strong views on education), and also training yourself to be the best possible version of yourself until you do the right thing habitually, on autopilot. If you deliberately respond in a friendly way to everyone you encounter, you will begin to do so unconsciously, making yourself and others happier.
Historically, of course, many philosophers, such as Egoists, have questioned whether virtue is inherently desirable. But, since the mid-20th century, others rehabilitated virtue ethics and focused intensively on Aristotle’s ideas: unfortunately, this academic interest has yet to achieve any real public presence in broader culture in the way that Stoicism has.
Some thinkers today distinguish between two sub-categories of virtue: between virtues such as courage, honesty and integrity, which affect your own and your community’s happiness; and ‘benevolence virtues’ such as kindness and compassion, which benefit others but are less obviously likely to gratify the agent. But Aristotle, for whom self-liking is necessary to virtue, argues that virtues do have intrinsic benefits, a view he shares with Socrates, the Stoics and the Victorian philosopher Thomas Hill Green. (...)
Aristotle says that if happiness is not god-sent, ‘then it comes as the result of a goodness, along with a learning process, and effort’. Every human being can practise a way of life that will make him happier. Aristotle is not offering a magic wand to erase all threats to happiness. There are indeed some qualifications to the universal capacity for pursuing happiness. He accepts that there are certain kinds of advantage that you either have or you don’t. If you have the bad luck to have been born very low down the socio-economic ladder, or have no children or other family or loved ones, or are extremely ugly, your circumstances, which you can’t avoid, as he puts it, ‘taint’ delight. It is harder to achieve happiness. But not impossible. You do not need material possessions or physical strength or beauty to start exercising your mind in company with Aristotle, since the way of life he advocates concerns a moral and psychological excellence rather than one that lies in material possessions or bodily splendour. There are, he acknowledges, even more difficult obstacles: having children or friends who are completely depraved is one such obstacle. Another – which Aristotle saves until last and elsewhere implies is the most difficult problem any human can ever face – is the loss of fine friends in whom you have invested effort, or especially the loss of children, through death.
Yet, potentially, even people poorly endowed by nature or who have experienced terrible bereavements can live a good life. It is possible to undergo even apparently unendurable disasters and still live well: ‘even in adversity goodness shines through, when someone endures repeated and severe misfortune with patience; this is not owing to insensibility but from generosity and greatness of soul.’ In this sense, Aristotle’s is a deeply optimistic moral system. And it has practical relevance to ‘everyone’, implied by Aristotle’s inclusive use of the first personal plural: ‘This sort of philosophy is different from most other types of philosophy, since we are not asking what goodness is for the sake of knowing what it is, but with the aim of becoming good, without which our enquiry would be useless.’ In fact, the only way to be a good person is to do good things and treat people with fairness recurrently.
Aristotle’s optimistic, practical recipe for happiness is ripe for rediscovery. It offers to the human race facing third-millennial challenges a unique combination of secular, virtue-based morality and empirical science, neither of which seeks answers in any ideal or metaphysical system beyond what humans can perceive by their senses.But what did Aristotle mean by ‘happiness’ or eudaimonia? He did not believe it could be achieved by the accumulation of good things in life – including material goods, wealth, status or public recognition – but was an internal, private state of mind. Yet neither did he believe it was a continuous sequence of blissful moods, because this could be enjoyed by someone who spent all day sunbathing or feasting. For Aristotle, eudaimonia required the fulfilment of human potentialities that permanent sunbathing or feasting could not achieve. Nor did he believe that happiness is defined by the total proportion of our time spent experiencing pleasure, as did Socrates’ student Aristippus of Cyrene.
Aristippus evolved an ethical system named ‘hedonism’ (the ancient Greek for pleasure is hedone), arguing that we should aim to maximise physical and sensory enjoyment. The 18th-century utilitarian Jeremy Bentham revived hedonism in proposing that the correct basis for moral decisions and legislation was whatever would achieve the greatest happiness for the greatest number. In his manifesto An Introduction to the Principles of Morals and Legislation (1789), Bentham actually laid out an algorithm for quantitative hedonism, to measure the total pleasure quotient produced by any given action. The algorithm is often called the ‘hedonic calculus’. Bentham spelled out the variables: how intense is the pleasure? How long will it last? Is it an inevitable or only possible result of the action I am considering? How soon will it happen? Will it be productive and give rise to further pleasure? Will it guarantee no painful consequences? How many people will experience it?
Bentham’s disciple, John Stuart Mill, pointed out that such ‘quantitative hedonism’ did not distinguish human happiness from the happiness of pigs, which could be provided with incessant physical pleasures. So Mill introduced the idea that there were different levels and types of pleasure. Bodily pleasures that we share with animals, such as the pleasure we gain from eating or sex, are ‘lower’ pleasures. Mental pleasures, such as those we derive from the arts, intellectual debate or good behaviour, are ‘higher’ and more valuable. This version of hedonist philosophical theory is usually called prudential hedonism or qualitative hedonism.
There are few philosophers advocating hedonist theories today, but in the public understanding, when ‘happiness’ is not defined as the possession of a set of ‘external’ or ‘objective’ good things such as money and career success, it describes a subjective hedonistic experience – a transient state of elation. The problem with both such views, for Aristotle, is that they neglect the importance of fulfilling one’s potential. He cites approvingly the primordial Greek maxim that nobody can be called happy until he is dead: nobody wants to end up believing on his deathbed that he didn’t fulfil his potential. In her book The Top Five Regrets of the Dying (2011), the palliative nurse Bronnie Ware describes exactly the hazards that Aristotle advises us to avoid. Dying people say: ‘I wish I’d had the courage to live a life true to myself, not the life others expected of me.’ John F Kennedy summed up Aristotelian happiness thus: ‘the exercise of vital powers along lines of excellence in a life affording them scope’.
For Aristotle insisted that happiness is constituted by something greater from and different to an accumulation of agreeable experiences. To be happy, we need to sustain constructive activities that we believe are goal-directed. This requires conscious analysis of our goals and conduct, and practising ‘virtue ethics’, by ‘living well’. It requires being nurtured effectively to develop your intellectual and physical capacities, and identify your potential (Aristotle had strong views on education), and also training yourself to be the best possible version of yourself until you do the right thing habitually, on autopilot. If you deliberately respond in a friendly way to everyone you encounter, you will begin to do so unconsciously, making yourself and others happier.
Historically, of course, many philosophers, such as Egoists, have questioned whether virtue is inherently desirable. But, since the mid-20th century, others rehabilitated virtue ethics and focused intensively on Aristotle’s ideas: unfortunately, this academic interest has yet to achieve any real public presence in broader culture in the way that Stoicism has.
Some thinkers today distinguish between two sub-categories of virtue: between virtues such as courage, honesty and integrity, which affect your own and your community’s happiness; and ‘benevolence virtues’ such as kindness and compassion, which benefit others but are less obviously likely to gratify the agent. But Aristotle, for whom self-liking is necessary to virtue, argues that virtues do have intrinsic benefits, a view he shares with Socrates, the Stoics and the Victorian philosopher Thomas Hill Green. (...)
Aristotle says that if happiness is not god-sent, ‘then it comes as the result of a goodness, along with a learning process, and effort’. Every human being can practise a way of life that will make him happier. Aristotle is not offering a magic wand to erase all threats to happiness. There are indeed some qualifications to the universal capacity for pursuing happiness. He accepts that there are certain kinds of advantage that you either have or you don’t. If you have the bad luck to have been born very low down the socio-economic ladder, or have no children or other family or loved ones, or are extremely ugly, your circumstances, which you can’t avoid, as he puts it, ‘taint’ delight. It is harder to achieve happiness. But not impossible. You do not need material possessions or physical strength or beauty to start exercising your mind in company with Aristotle, since the way of life he advocates concerns a moral and psychological excellence rather than one that lies in material possessions or bodily splendour. There are, he acknowledges, even more difficult obstacles: having children or friends who are completely depraved is one such obstacle. Another – which Aristotle saves until last and elsewhere implies is the most difficult problem any human can ever face – is the loss of fine friends in whom you have invested effort, or especially the loss of children, through death.
Yet, potentially, even people poorly endowed by nature or who have experienced terrible bereavements can live a good life. It is possible to undergo even apparently unendurable disasters and still live well: ‘even in adversity goodness shines through, when someone endures repeated and severe misfortune with patience; this is not owing to insensibility but from generosity and greatness of soul.’ In this sense, Aristotle’s is a deeply optimistic moral system. And it has practical relevance to ‘everyone’, implied by Aristotle’s inclusive use of the first personal plural: ‘This sort of philosophy is different from most other types of philosophy, since we are not asking what goodness is for the sake of knowing what it is, but with the aim of becoming good, without which our enquiry would be useless.’ In fact, the only way to be a good person is to do good things and treat people with fairness recurrently.
by Edith Hall, Aeon | Read more:
Image: Alexander Koerner/Getty
Death and the Drug War
There is, of course, a link between Mexico’s murders and America’s overdoses. The murders are rising because of wars between ever-more-brutal drug cartels, who are competing to ship the products on which Americans will overdose. Mexico’s murder rate is slightly deceptive, because it varies significantly across the country, and some areas experience far less crime than many other Latin American countries. But in states like Baja California, the homicide rates match those of the world’s most violent countries. Unsurprisingly, the areas with the highest rates of violent crime tend to be those near major ports or U.S. border crossings, or areas which have some other strategic value for the drug trade. The state of Guerrero, where more than half of Mexico’s opium-poppies are grown, has seen its murder rate escalate over the same period that heroin overdoses have skyrocketed in the U.S. It is strange to think that the deaths of people so far apart geographically—a taxi driver in Acapulco, a struggling addict in Kentucky—could be so intimately connected.
Everyone has heard the gruesome stories about cartel violence in Mexico, which is not just shocking quantitatively but also qualitatively. People beheaded, boiled alive, fed to wild animals: the Mexican notas rojas graphically document the depravity and extremity of cartel killings, which terrify rivals and civilians alike. But the lurid spectacle of border state violence is not something Americans should feel comfortably distant from. One big reason for the ferocity of inter-cartel competition is because Mexico, a highly unequal country where nearly half the population lives in poverty, happens to be situated next to a very rich country willing to pay high prices for an illegal product. There is a certain “logic” to drug violence: if there are fortunes to be made from a commodity that can only be provided through criminal enterprise, people will desperately seek those fortunes through whatever means are necessary. There are political, economic, and cultural forces that contribute to a growth in violence, but while the causes are complex, they are not random or inexplicable.
Before trying to analyze those causes, though, we should make sure we truly appreciate the human toll. As always, behind the statistics are lives, and we can take a moment to think about the level of human suffering that stems from the entire process of manufacturing, distributing, and ingesting illegal drugs. Mexican border cities like Reynosa and Juarez have turned from lively border towns into sad, despondent ganglands where fear rules many people’s lives. Of course, it’s important not to excessively caricature the situation: even cities with high murder rates aren’t continuous gun battles 24 hours a day. The residents of these places still go out in public, throw parties, attend school, and so on; a bold tourist may still visit on the right day and have a more or less normal experience. Nevertheless, in the areas they control, the power of cartels is one of the dominant facts of everyday life. Cartels are the final arbiters of most of what appears in print: a journalist who writes the wrong thing can expect to receive a threatening phone call, or even a summary execution. Many Mexican journals have shuttered, or have been reduced to simply putting out carefully-worded catalogs of daily murders. Bodies are left in public places, clearly as a message to someone, though it is often unclear whom. If you fall afoul of the cartel—and you may well do so without even realizing it, or because they’ve mistaken you for someone else—not only you, but your entire family may be at risk, down to your little children. This past summer—to give just one example—a family of five, including four children aged between 5 and 10, were murdered in Coatzacoalcos because the cartel suspected that the father, an out-of-work taxi driver, had acted as a lookout in an attack by one of their rivals.
All of this is just the suffering that occurs from living alongside criminal trafficking syndicates. Then we have the human consequences of drug use itself, which is felt on both sides of the border. The 70,000 who die annually in the U.S. are people’s parents, children, friends. Many are people who struggled hard to free themselves, to avoid a fate they could see coming, but who were unable to escape addiction. It’s hard to conceive of what the attempt to free oneself is like, the near impossibility of using sheer willpower to overcome a dependency that is chemical in nature. Journalist Ioan Grillo quotes an addict friend: “Imagine the worst flu and multiply it by ten. Then, know you can make it go away with one more hit.” Who could resist a medicine that instantly relieves the most extreme torment? And for many addicts, it’s not simply the physical torment of withdrawal that drugs alleviate: it’s the deep psychological trauma of past abuse, of profound depression, of a consuming, self-annihilating sense of failure. Whole American communities have turned into places of death and dependency.
Repairing the lives of addicts, and ending the carnage caused by the drug trade, is a morally urgent issue that requires a humane, careful, and immediate political response. Sometimes, when we think about U.S. drug policy, it’s easy to get caught up in abstract arguments about whether the government should have the “right” to regulate individual drug use, or cultural debates about whether the use of certain drugs has net positive or negative impacts for society. It’s not that these questions are entirely worthless, but they are, at best, secondary concerns. The overwhelmingly more important question is, what can we do to stop all these deaths from happening? What will actually work?
Undertanding NBA Strategies
[ed. I've been watching the NBA playoffs lately and while I admire the obvious skills, I'm pretty much clueless about the actual strategies involved. It just looks like a bunch of guys running around trying to get open or block shots, even though I know there's so much more to it than that. So I spent some time on a few strategy web sites (like here, here and here), but it seems this is one topic that just can't be conveyed in written form (at least to me). Check out the above video if you're similarly befuddled. It seems to explain a lot about what's going on (although, given the speed and fluidity of the game you may have to pause it now and then to really see the finer details).]
How to Solve the Puzzle
It was in the mid-1980s that the short seller James Chanos first realised he was being investigated. People were ‘going through my garbage’, he says. They didn’t find anything incriminating: Chanos lives a ‘nice quiet yuppie existence’, said one of the private investigators, whose report ended up in the hands of the Wall Street Journal. That didn’t stop Chanos losing his job at an investment house owned by a German bank. The WSJ story fingered him as a central figure in what it called ‘an ad hoc network of short sellers’ in the US, who ‘pick a stock, then sow doubt in an effort to depress it’. Chanos told me he was ‘shown the door by my German masters’.
‘Short selling’ is selling shares or other financial instruments that you don’t own, or own only temporarily – shares, for example, that have been borrowed from another investor. Chanos was – and still is – short selling shares that seem demonstrably overvalued. Perhaps a corporation’s way of doing business has run out of steam, or its managers have surreptitiously been overstating its revenues. Once other investors come to realise this, the price of the shares will fall and the short seller will be able to buy them at the lower price before returning them, pocketing the difference. (The short seller doesn’t have to give back the same shares that were borrowed: except in a few special cases, a corporation’s shares are identical and interchangeable.)
It seems to have been the managers of corporations that Chanos was short selling who paid for the investigation into him. But they aren’t the only ones who don’t like short sellers. In September 2008, Alex Salmond, then Scotland’s first minister, lashed out at the ‘bunch of short-selling spivs’ he blamed for the falling price of shares in Halifax Bank of Scotland. (Alas, the spivs were right: were it not for the takeover by Lloyds and then the taxpayer bail-out, HBOS would probably have collapsed.) As in 2008, when financial crises hit, short selling is often banned, in the hope – usually forlorn – of stemming price falls. Beyond its actual economic effects, there’s also a general feeling that there is something inherently fishy about selling things you don’t actually own, or that it’s morally dubious to profit from misfortune. Both Christianity and Islam have traditionally disapproved of short selling. In 2008 Rowan Williams spoke out against it, and his fellow archbishop John Sentamu compared short sellers to ‘bank robbers’. (In the event it transpired that the Church of England’s pension fund had been earning fees for lending out its holdings of shares to short sellers.) (...)
Even in the relative safety of the US, short sellers seem security-conscious (it’s sometimes hard to find the street addresses of their offices), but their more pressing concerns are economic. A perennial issue is whether they will be lent shares to short sell, and if so at what cost. Although a firm called Equilend has developed a new electronic marketplace for stock borrowing, much lending still goes on by direct negotiation between institutions – ‘over the counter’, as market participants put it. The deals are often made between people who know each other well, but no one lends out shares on a simple promise they will be returned:the borrower has to leave cash (or government bonds, or sometimes other assets) with the lender as surety. Cash is the most common form of collateral, and the norm in the US is to hand over 102 per cent of the market value of the shares. Until the short seller returns them, the lender can earn interest on that cash. In the past, all the interest was kept by the lender, but in recent decades borrowers have usually been able to negotiate what’s called a ‘rebate’: a share of the interest payments.
The fee that the lender earns (the ‘borrow fee’) is the interest on the collateral, minus the rebate. If the borrowed shares are in a big, heavily traded US or UK corporation, and not too many people are trying to short sell its shares, borrowing is easy and cheap: currently, the borrow fee is unlikely to exceed around 0.25-0.3 per cent per year. A fee larger than that often indicates that, as market participants put it, a borrow is becoming ‘warm’, usually because demand from short sellers is growing. Warm can rapidly become very hot indeed, as borrow fees soar to 50 per cent per year or more. In those cases, borrowers are having to make large, explicit payments to lenders, and the shares are said to be ‘hard to borrow’ or ‘on special’. Short sellers also have to be wary of ‘recall’. The lender of the shares has the right to demand them back at any point (with very limited notice). If their price has risen in the interim, even temporarily, a recall can inflict a nasty loss on the short seller. Lenders’ right of recall gives them a further advantage as a borrow becomes warmer: the short seller may get a phone call gently suggesting a higher borrow fee.
To be a successful short seller you need therefore to understand what Chanos calls ‘the plumbing’ of lending. One of the partners in his firm, Kynikos Associates, has ‘been on [Wall] Street for almost fifty years, and he has taught me all that I know about borrow, rebates, sourcing [finding shares, to borrow] … He has a good sixth sense, even if something looks to be quite available and very liquid, that there’s trouble down the pike. He’s kept us out of a lot of situations where that’s happened.’ Short sellers also need to be wary of ‘squeezes’, in which a targeted corporation’s managers, or other investors, deliberately push share prices upwards in the hope of forcing short sellers to liquidate their positions at a loss. One good way for a corporation to engineer a squeeze is to announce a programme of buying back its own shares.
A short seller must be able to identify shares that aren’t simply overvalued but that can credibly be shown to be overvalued: you won’t succeed merely by having a hunch that the high prices of the shares of Google’s parent company, Alphabet ($1095 at the time of writing), or of Amazon ($1590) can’t possibly be justified. Chanos teaches his analysts to think of the information about a corporation as an onion: ‘The outer layer is Wall Street stories and rumours. The next layer in is Wall Street research. The next … is company presentations … [then] company press releases. Then the final core of the onion [is] the mandated financial statements. Most investors work from the outside of the onion in; they never get to the core. I always stress to my people: start from the core, then work your way out.’
The numbers in firms’ financial statements, though, aren’t considered hard facts by short sellers. They know only too well that there are many ways a corporation can tweak its accounting in order to present a flattering view of its finances. Short sellers must have a ‘nose’ for situations in which these tweaks add up to something worse than everyday embellishment. Chanos’s most famous ‘short’ was the energy company Enron, which eventually went bankrupt in spectacular fashion in December 2001. The crucial moment was in September 2000, when a contact in Dallas phoned Chanos to ask if he had read an article in the Wall Street Journal by a journalist called Jonathan Weil, who specialised in accounting. Much of the profit being recorded by energy companies such as Enron, Weil reported, came from their estimates of the current market value of contracts to supply oil, gas or electricity that could stretch many years into the future. The companies, however, were supplying few details of how they were making these estimates. Chanos hadn’t read Weil’s article (it appeared only in the Texas edition of the WSJ since the companies in question were based mainly in Houston) so his contact faxed it to him. Chanos’s nose twitched. As he later told the Yale Alumni Magazine, he spent much of that weekend poring over the details of Enron’s financial statements, becoming increasingly convinced that an apparently highly profitable company with an enviable reputation for innovation was actually steadily losing money.
But there’s a limit to how much you can learn while sitting at your desk reading the footnotes to balance sheets. Sometimes, a short seller has to become a field worker, ‘talking to people at the loading dock’, as Chanos puts it. Photographs, videos, sometimes even recordings of telephone calls can form part of the case that short sellers seek to build. Look at the website of Carson Block’s firm, Muddy Waters Research, for example, and notice the attention it pays to the physical world: precipitous, hairpin mountain roads down which huge volumes of timber would have to be hauled; satellite images of the possibly crumbling walls of a giant opencast mine; a solitary lorry idling outside what one might have expected to be a busy factory.
‘Short selling’ is selling shares or other financial instruments that you don’t own, or own only temporarily – shares, for example, that have been borrowed from another investor. Chanos was – and still is – short selling shares that seem demonstrably overvalued. Perhaps a corporation’s way of doing business has run out of steam, or its managers have surreptitiously been overstating its revenues. Once other investors come to realise this, the price of the shares will fall and the short seller will be able to buy them at the lower price before returning them, pocketing the difference. (The short seller doesn’t have to give back the same shares that were borrowed: except in a few special cases, a corporation’s shares are identical and interchangeable.)It seems to have been the managers of corporations that Chanos was short selling who paid for the investigation into him. But they aren’t the only ones who don’t like short sellers. In September 2008, Alex Salmond, then Scotland’s first minister, lashed out at the ‘bunch of short-selling spivs’ he blamed for the falling price of shares in Halifax Bank of Scotland. (Alas, the spivs were right: were it not for the takeover by Lloyds and then the taxpayer bail-out, HBOS would probably have collapsed.) As in 2008, when financial crises hit, short selling is often banned, in the hope – usually forlorn – of stemming price falls. Beyond its actual economic effects, there’s also a general feeling that there is something inherently fishy about selling things you don’t actually own, or that it’s morally dubious to profit from misfortune. Both Christianity and Islam have traditionally disapproved of short selling. In 2008 Rowan Williams spoke out against it, and his fellow archbishop John Sentamu compared short sellers to ‘bank robbers’. (In the event it transpired that the Church of England’s pension fund had been earning fees for lending out its holdings of shares to short sellers.) (...)
Even in the relative safety of the US, short sellers seem security-conscious (it’s sometimes hard to find the street addresses of their offices), but their more pressing concerns are economic. A perennial issue is whether they will be lent shares to short sell, and if so at what cost. Although a firm called Equilend has developed a new electronic marketplace for stock borrowing, much lending still goes on by direct negotiation between institutions – ‘over the counter’, as market participants put it. The deals are often made between people who know each other well, but no one lends out shares on a simple promise they will be returned:the borrower has to leave cash (or government bonds, or sometimes other assets) with the lender as surety. Cash is the most common form of collateral, and the norm in the US is to hand over 102 per cent of the market value of the shares. Until the short seller returns them, the lender can earn interest on that cash. In the past, all the interest was kept by the lender, but in recent decades borrowers have usually been able to negotiate what’s called a ‘rebate’: a share of the interest payments.
The fee that the lender earns (the ‘borrow fee’) is the interest on the collateral, minus the rebate. If the borrowed shares are in a big, heavily traded US or UK corporation, and not too many people are trying to short sell its shares, borrowing is easy and cheap: currently, the borrow fee is unlikely to exceed around 0.25-0.3 per cent per year. A fee larger than that often indicates that, as market participants put it, a borrow is becoming ‘warm’, usually because demand from short sellers is growing. Warm can rapidly become very hot indeed, as borrow fees soar to 50 per cent per year or more. In those cases, borrowers are having to make large, explicit payments to lenders, and the shares are said to be ‘hard to borrow’ or ‘on special’. Short sellers also have to be wary of ‘recall’. The lender of the shares has the right to demand them back at any point (with very limited notice). If their price has risen in the interim, even temporarily, a recall can inflict a nasty loss on the short seller. Lenders’ right of recall gives them a further advantage as a borrow becomes warmer: the short seller may get a phone call gently suggesting a higher borrow fee.
To be a successful short seller you need therefore to understand what Chanos calls ‘the plumbing’ of lending. One of the partners in his firm, Kynikos Associates, has ‘been on [Wall] Street for almost fifty years, and he has taught me all that I know about borrow, rebates, sourcing [finding shares, to borrow] … He has a good sixth sense, even if something looks to be quite available and very liquid, that there’s trouble down the pike. He’s kept us out of a lot of situations where that’s happened.’ Short sellers also need to be wary of ‘squeezes’, in which a targeted corporation’s managers, or other investors, deliberately push share prices upwards in the hope of forcing short sellers to liquidate their positions at a loss. One good way for a corporation to engineer a squeeze is to announce a programme of buying back its own shares.
A short seller must be able to identify shares that aren’t simply overvalued but that can credibly be shown to be overvalued: you won’t succeed merely by having a hunch that the high prices of the shares of Google’s parent company, Alphabet ($1095 at the time of writing), or of Amazon ($1590) can’t possibly be justified. Chanos teaches his analysts to think of the information about a corporation as an onion: ‘The outer layer is Wall Street stories and rumours. The next layer in is Wall Street research. The next … is company presentations … [then] company press releases. Then the final core of the onion [is] the mandated financial statements. Most investors work from the outside of the onion in; they never get to the core. I always stress to my people: start from the core, then work your way out.’
The numbers in firms’ financial statements, though, aren’t considered hard facts by short sellers. They know only too well that there are many ways a corporation can tweak its accounting in order to present a flattering view of its finances. Short sellers must have a ‘nose’ for situations in which these tweaks add up to something worse than everyday embellishment. Chanos’s most famous ‘short’ was the energy company Enron, which eventually went bankrupt in spectacular fashion in December 2001. The crucial moment was in September 2000, when a contact in Dallas phoned Chanos to ask if he had read an article in the Wall Street Journal by a journalist called Jonathan Weil, who specialised in accounting. Much of the profit being recorded by energy companies such as Enron, Weil reported, came from their estimates of the current market value of contracts to supply oil, gas or electricity that could stretch many years into the future. The companies, however, were supplying few details of how they were making these estimates. Chanos hadn’t read Weil’s article (it appeared only in the Texas edition of the WSJ since the companies in question were based mainly in Houston) so his contact faxed it to him. Chanos’s nose twitched. As he later told the Yale Alumni Magazine, he spent much of that weekend poring over the details of Enron’s financial statements, becoming increasingly convinced that an apparently highly profitable company with an enviable reputation for innovation was actually steadily losing money.
But there’s a limit to how much you can learn while sitting at your desk reading the footnotes to balance sheets. Sometimes, a short seller has to become a field worker, ‘talking to people at the loading dock’, as Chanos puts it. Photographs, videos, sometimes even recordings of telephone calls can form part of the case that short sellers seek to build. Look at the website of Carson Block’s firm, Muddy Waters Research, for example, and notice the attention it pays to the physical world: precipitous, hairpin mountain roads down which huge volumes of timber would have to be hauled; satellite images of the possibly crumbling walls of a giant opencast mine; a solitary lorry idling outside what one might have expected to be a busy factory.
by Donald MacKenzie , London Review of Books | Read more:
Image: via
[ed. See also: Why you should never short-sell stocks]
Image: via
[ed. See also: Why you should never short-sell stocks]
Friday, June 1, 2018
Money for Nothing
A 64-year-old put his life savings in his carry-on. U.S. Customs took it without charging him with a crime.
A 64-year-old Cleveland man is suing U.S. Customs and Border Protection after agents strip-searched him at an airport in October and took more than $58,000 in cash from him without charging him with any crime, according to a federal lawsuit filed this week in Ohio.
Customs agents seized the money through a process known as civil asset forfeiture, a law enforcement technique that allows authorities to take cash and property from people who are never convicted or even charged with a crime. The practice is widespread at the federal level. In 2017, federal authorities seized more than $2 billion in assets from people, a net loss similar in size to annual losses from residential burglaries in the United States. (...)
The searches turned up nothing — no drugs, no contraband, no evidence of any illegal activity, according to the lawsuit. But the agents took Kazazi's money. Even more alarming to Kazazi was that the receipt the agents handed to him did not list the dollar value of his cash.“I began to worry that they were trying to steal the money for themselves,” he said in his court declaration. (...)
The Kazazis have been caught up in a broader struggle over civil asset forfeiture. Defenders of the practice, such as Attorney General Jeff Sessions, say it is a valuable tool for fighting drug cartels and other criminal enterprises in cases in which a criminal conviction is difficult to obtain. But media outlets such as The Washington Post and civil liberties groups such as the American Civil Liberties Union have found that the process is ripe for abuse.
“The government can just take everything from you,” said Wesley Hottot, the Kazazi family's attorney. Hottot is with the Institute for Justice, a civil-liberties law firm working to overturn civil forfeiture. People wishing to challenge a civil forfeiture must essentially demonstrate their innocence in court, Hottot said, turning the dictum of “innocent until proven guilty” on its head.
“You have to affirmatively show you're not a criminal to get your own money back,” Hottot said. “You have to effectively prove a negative.”
Federal authorities haul in billions in cash and property from forfeiture every year, a tally that does not include additional billions seized in state and local forfeiture actions.
by Christopher Ingraham, WaPo | Read more:
Image: Kazazi family/WAPO.ST/Wonkblog
[ed. Do check out: Stop and Seize. The whole concept of civil asset forfeiture is a disgrace to American democracy.]
Age Discrimination is a Real Problem
Older workers are accusing Facebook, Ikea, and hundreds of other companies for discriminating against job seekers in their 50s and 60s through targeted job ads posted on Facebook.
The Communications Workers of America, a labor union representing 700,000 media workers across the country, added the companies to a class-action lawsuit on Tuesday, which was filed in California federal court in December. In its original complaint, the labor union accused Amazon, T-Mobile, and Cox Media Group of doing the same thing.
The case, Bradley v. T-Mobile, has major implications for US employers, who routinely buy job ads on Facebook to reach users. The plaintiffs argue that Amazon, T-Mobile, Ikea, Facebook, and hundreds of other companies target the ads so they are only seen by younger Facebook users.
The lawsuit revolves around Facebook’s unique business model, which lets advertisers micro-target the network’s users based on their interests, city, age, and other demographic information. In the past, equal rights advocates have sued Facebook for accepting ads that discriminate against consumers based on their religion, race, and gender.
Facebook has argued that the company is not legally responsible when other companies buy ads that violate the law. But in a new filing, the CWA has now added Facebook to its complaint as one of the companies accused of violating civil rights laws by targeting its own job ads to younger users.
Facebook has denied that these kinds of ads are a form of age discrimination. Rob Goldman, Facebook’s VP of ads, compared it to posting job ads in magazines geared for young audiences, which the courts have said isn’t inherently a form of age discrimination as long as the company is also posting job ads in media outlets with older audiences or making other recruitment efforts.
“What matters is that marketing is broadly based and inclusive, not simply focused on a particular age group. In addition, certain employers want to attract retirees or recruit for jobs with specific age restrictions like the military or airline pilots,” Goldman wrote in December in response to the original lawsuit and to the ProPublica and New York Times investigation that described the widespread practice.
Facebook came under fire in 2016 when a separate ProPublica investigation showed that companies could buy ads that screened out users based on their race, which is potentially illegal in the context of housing and employment advertising. Facebook announced in February 2017 that it had developed a new system to flag and reject certain ads that screened users based on “ethnic affinity,” but the network still lets advertisers filter out characteristics linked to other protected groups: women, people with disabilities, and religious minorities.
In the age discrimination case, plaintiffs want the court to order these companies, including Facebook itself, to stop posting job ads that filter out older workers. They argue that it’s a violation of the Age Discrimination in Employment Act of 1967, which makes it illegal to discriminate against workers over the age of 40 in employment advertising, recruiting, hiring, and other employment opportunities. (...)
Job discrimination against older workers is a big problem that is often overlooked in civil rights discussions. The number of age discrimination complaints submitted to the US Equal Employment Opportunity Commission (EEOC) has been rising steadily in the past 10 years, with about 18,000 complaints filed in fiscal year 2017 — about 20 percent of all complaints filed with the federal agency.
One 2017 study from economists at Tulane University and the University of California Irvine found that job applicants near retirement age, especially women, were far less likely to hear back from recruiters than younger workers. The study compared response rates to more than 40,000 fake résumés sent in applications to 135 jobs.
by Alexia Fernández Campbell, Vox | Read more:
The Communications Workers of America, a labor union representing 700,000 media workers across the country, added the companies to a class-action lawsuit on Tuesday, which was filed in California federal court in December. In its original complaint, the labor union accused Amazon, T-Mobile, and Cox Media Group of doing the same thing.
The case, Bradley v. T-Mobile, has major implications for US employers, who routinely buy job ads on Facebook to reach users. The plaintiffs argue that Amazon, T-Mobile, Ikea, Facebook, and hundreds of other companies target the ads so they are only seen by younger Facebook users.
The lawsuit revolves around Facebook’s unique business model, which lets advertisers micro-target the network’s users based on their interests, city, age, and other demographic information. In the past, equal rights advocates have sued Facebook for accepting ads that discriminate against consumers based on their religion, race, and gender.Facebook has argued that the company is not legally responsible when other companies buy ads that violate the law. But in a new filing, the CWA has now added Facebook to its complaint as one of the companies accused of violating civil rights laws by targeting its own job ads to younger users.
Facebook has denied that these kinds of ads are a form of age discrimination. Rob Goldman, Facebook’s VP of ads, compared it to posting job ads in magazines geared for young audiences, which the courts have said isn’t inherently a form of age discrimination as long as the company is also posting job ads in media outlets with older audiences or making other recruitment efforts.
“What matters is that marketing is broadly based and inclusive, not simply focused on a particular age group. In addition, certain employers want to attract retirees or recruit for jobs with specific age restrictions like the military or airline pilots,” Goldman wrote in December in response to the original lawsuit and to the ProPublica and New York Times investigation that described the widespread practice.
Facebook came under fire in 2016 when a separate ProPublica investigation showed that companies could buy ads that screened out users based on their race, which is potentially illegal in the context of housing and employment advertising. Facebook announced in February 2017 that it had developed a new system to flag and reject certain ads that screened users based on “ethnic affinity,” but the network still lets advertisers filter out characteristics linked to other protected groups: women, people with disabilities, and religious minorities.
In the age discrimination case, plaintiffs want the court to order these companies, including Facebook itself, to stop posting job ads that filter out older workers. They argue that it’s a violation of the Age Discrimination in Employment Act of 1967, which makes it illegal to discriminate against workers over the age of 40 in employment advertising, recruiting, hiring, and other employment opportunities. (...)
Job discrimination against older workers is a big problem that is often overlooked in civil rights discussions. The number of age discrimination complaints submitted to the US Equal Employment Opportunity Commission (EEOC) has been rising steadily in the past 10 years, with about 18,000 complaints filed in fiscal year 2017 — about 20 percent of all complaints filed with the federal agency.
One 2017 study from economists at Tulane University and the University of California Irvine found that job applicants near retirement age, especially women, were far less likely to hear back from recruiters than younger workers. The study compared response rates to more than 40,000 fake résumés sent in applications to 135 jobs.
by Alexia Fernández Campbell, Vox | Read more:
Image:Mark Boster/Los Angeles Times via Getty Images
Biodegradable Six-Pack Rings
Florida brewery unveils six-pack rings that feed sea turtles rather than kill them
A Florida brewery has a solution: six-pack rings that that can either biodegrade or serve as a snack for wildlife. After years of research and development, the rings - made of wheat and barley - are now popping up in south Florida stores.
Thursday, May 31, 2018
Memes Are Becoming Harder to Monetize
When a new meme explodes, the race to transform it into merchandise is fierce. Within hours of the laurel vs. yanny controversy, for instance, Instagram meme pages were attempting to cash in by selling yanny-and-laurel-themed T-shirts, aprons, and more.
But there was a time, from around 2008 to 2012, when seeing memes out in the world, plastered on books, merchandise, and T-shirts, was still novel. Social media was just catching hold, and memes began to seep out of forums and corners of the internet like Reddit into broader culture.
The literary agent Kate McKean, who has sold several meme-based books, refers to this time in history as the “OH! The Internet Is a Thing!” stage. It was a time when almost anyone could slap a meme onto a T-shirt, mug, plate, book, or poster and cash in. Meme-focused Tumblrs began to get book deals, FunnyJunk.com started carrying “rage face” merchandise, and Urban Outfitters ordered boatloads of T-shirts emblazoned with an image of “Scumbag Steve.”
Just five years later, the landscape has transformed dramatically. Competition is intense, and according to those who make a living selling meme-based products online, it’s harder than ever to make money on a meme.
The biggest threat to meme-focused e-commerce businesses, according to those in the field, is the rate at which people today consume memes.
“One of the biggest factors in a meme dying is if a meme gets overused,” says Jason Wong, the founder and CEO of a meme-focused e-commerce business called Dank Tank that sells merchandise like Tide Pod socks. “People today are consuming more memes than ever. The expiration date for them has shortened more since even last year. Memes used to last for two to three weeks, but recently we’ve noticed they die after just a few days.”
“It feels like the internet is all moving a lot quicker,” says Samantha Fishbein, the co-founder and COO of Betches media.
Brad Kim, the editor in chief of Know Your Meme, has observed this phenomenon firsthand. “In the early days of meme culture, so, late 2008 to early 2012, memes used to go on for months on end,” he says. Memes like the advice dog, for instance, first broke out in 2008 but remained in steady use until mid-2012. More recently, memes like Doge and Harambe stayed popular for nearly a year. “These are memes that would have way shorter shelf life now because they would get mutated into something different or cycled out by the community entirely,” Kim says.
The 24-7 nature of today’s meme cycle has posed problems for businesses that design custom merchandise based on memes. Time is needed to pull together a design, coordinate supply chains, and work with retailers. By the time things all come together, the moment has passed.
“A few years ago, we’d see a phrase and that phrase had a longer shelf life because memes came and went at a lower pace,” Fishbein says.
Today, memes come and go sometimes faster than T-shirts can be printed, and there’s nothing more mortifying than donning a T-shirt with a dated phrase. The Instagram star Tank Sinatra says this is the reason he’s shied away from selling meme-focused merch like other Instagrammers.
“By the time the merch is ready to go, by the time the design is even approved by a shop, it’s not even worth the effort because it’s old,” he says. “You’re going to look out of touch.” The few times he has produced meme-focused items, such as pillows featuring the crying Jordan face and “Hide the Pain Harold,” they have underperformed.
Because timeliness is key, most big meme accounts and websites now use third-party services like Shopify to handle the back end of their stores. This allows them to get products up quickly. Consumers can also create their own custom meme merchandise (often for cheaper) by using sites like Redbubble, Spreadshirt, or Zazzle, which allow you to upload any image and have it printed on a variety of products.
“Those sites are really good at what they do,” says Sinatra. “But even as quickly as they work, you’re still not getting your stuff for three days or five days. By then, the boat has sailed.”
“The shorter lifespan has ... been a big challenge in our company,” says Wong.
It’s also almost impossible for sellers to monetize entire swaths of memes featuring trademarked characters like SpongeBob or Kermit the Frog.
On top of everything, the nature of what constitutes a meme itself is shifting. While early memes followed standardized formats, like white block font plastered on top of a funny photo, today’s memes are more esoteric.
Edward Stockwell who has managed meme-based social-media accounts for sites like theCHIVE and Rooster Teeth says that memes today relative to a few years ago are wildly different, and that makes them more difficult to commoditize.
“A lot of memes today are much more niche and rely on specific reference points to understand, so they’re less marketable to a wider audience,” he says. “Not that long ago there were maybe a handful of memes that everyone knew: Grumpy Cat, Scumbag Steve, etc. They were characters that stuck around.” Today’s memes, he explains, are more nebulous.
by Taylor Lorenze, The Atlantic | Read more:
Image: Shutterstock
But there was a time, from around 2008 to 2012, when seeing memes out in the world, plastered on books, merchandise, and T-shirts, was still novel. Social media was just catching hold, and memes began to seep out of forums and corners of the internet like Reddit into broader culture.
The literary agent Kate McKean, who has sold several meme-based books, refers to this time in history as the “OH! The Internet Is a Thing!” stage. It was a time when almost anyone could slap a meme onto a T-shirt, mug, plate, book, or poster and cash in. Meme-focused Tumblrs began to get book deals, FunnyJunk.com started carrying “rage face” merchandise, and Urban Outfitters ordered boatloads of T-shirts emblazoned with an image of “Scumbag Steve.”Just five years later, the landscape has transformed dramatically. Competition is intense, and according to those who make a living selling meme-based products online, it’s harder than ever to make money on a meme.
The biggest threat to meme-focused e-commerce businesses, according to those in the field, is the rate at which people today consume memes.
“One of the biggest factors in a meme dying is if a meme gets overused,” says Jason Wong, the founder and CEO of a meme-focused e-commerce business called Dank Tank that sells merchandise like Tide Pod socks. “People today are consuming more memes than ever. The expiration date for them has shortened more since even last year. Memes used to last for two to three weeks, but recently we’ve noticed they die after just a few days.”
“It feels like the internet is all moving a lot quicker,” says Samantha Fishbein, the co-founder and COO of Betches media.
Brad Kim, the editor in chief of Know Your Meme, has observed this phenomenon firsthand. “In the early days of meme culture, so, late 2008 to early 2012, memes used to go on for months on end,” he says. Memes like the advice dog, for instance, first broke out in 2008 but remained in steady use until mid-2012. More recently, memes like Doge and Harambe stayed popular for nearly a year. “These are memes that would have way shorter shelf life now because they would get mutated into something different or cycled out by the community entirely,” Kim says.
The 24-7 nature of today’s meme cycle has posed problems for businesses that design custom merchandise based on memes. Time is needed to pull together a design, coordinate supply chains, and work with retailers. By the time things all come together, the moment has passed.
“A few years ago, we’d see a phrase and that phrase had a longer shelf life because memes came and went at a lower pace,” Fishbein says.
Today, memes come and go sometimes faster than T-shirts can be printed, and there’s nothing more mortifying than donning a T-shirt with a dated phrase. The Instagram star Tank Sinatra says this is the reason he’s shied away from selling meme-focused merch like other Instagrammers.
“By the time the merch is ready to go, by the time the design is even approved by a shop, it’s not even worth the effort because it’s old,” he says. “You’re going to look out of touch.” The few times he has produced meme-focused items, such as pillows featuring the crying Jordan face and “Hide the Pain Harold,” they have underperformed.
Because timeliness is key, most big meme accounts and websites now use third-party services like Shopify to handle the back end of their stores. This allows them to get products up quickly. Consumers can also create their own custom meme merchandise (often for cheaper) by using sites like Redbubble, Spreadshirt, or Zazzle, which allow you to upload any image and have it printed on a variety of products.
“Those sites are really good at what they do,” says Sinatra. “But even as quickly as they work, you’re still not getting your stuff for three days or five days. By then, the boat has sailed.”
“The shorter lifespan has ... been a big challenge in our company,” says Wong.
It’s also almost impossible for sellers to monetize entire swaths of memes featuring trademarked characters like SpongeBob or Kermit the Frog.
On top of everything, the nature of what constitutes a meme itself is shifting. While early memes followed standardized formats, like white block font plastered on top of a funny photo, today’s memes are more esoteric.
Edward Stockwell who has managed meme-based social-media accounts for sites like theCHIVE and Rooster Teeth says that memes today relative to a few years ago are wildly different, and that makes them more difficult to commoditize.
“A lot of memes today are much more niche and rely on specific reference points to understand, so they’re less marketable to a wider audience,” he says. “Not that long ago there were maybe a handful of memes that everyone knew: Grumpy Cat, Scumbag Steve, etc. They were characters that stuck around.” Today’s memes, he explains, are more nebulous.
by Taylor Lorenze, The Atlantic | Read more:
Image: Shutterstock
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