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finance

Funded!

I guess I’ll let VentureBeat tell it:

New York startup Profitably recently closed a $300,000 round of funding with a group of New York investors. The company offers an online software application that analyzes data from Quickbooks, a small business accounting package sold by Intuit.

We’re psyched.

Early-stage time

Well, sometimes when you don’t blog for a while it’s cause you have nothing much to say. And other times it’s because your grand desire to say things is getting overwhelmed by your even grander desire to get shit done, and this has been one of those times. Anyway, for those who don’t know: I’ve left Diversion Media to be the co-founder at an early-stage startup. The company is Profitably, and basically Adam Neary, Chad Pugh, and I are going to be building a site that brings automated financial analytics to small businesses.

It’s still early days, and we’re taking on a genuinely hard problem, so unfortunately we’re not fully launched yet. In the meantime, I’m psyched to be helping small businesses. I’m enough of a capitalist to believe the hype about small businesses holding a special role in the American middle class, and maybe my immigrant background has more than a little to do with that. I’m also really excited to be working with accounting—as some people know, I’m actually a bit of an accounting nerd.

I met Adam through the NYC Founder Institute, which I didn’t attend, but a number of my friends did. And I’ll echo here what lots of people are saying: It’s a very interesting time in the NYC startup scene. Among the Rubyists I know, I’m hearing about a lot more job churn than I usually do, almost all of it in a hopeful direction. As to how many of these hit their mark, time will tell.

Cognitive regulatory capture--all the way to the top?

I’m generally a fan, if not a full-throated one, of the Obama administration. I admire and respect his dedication to the issues and his attempts to stay substantive at the center of the chattering pundit maelstrom that is contemporary Washington. I’m willing to give him lots of leeway because he 1) inherited a horribly broken country from his predecessor and 2) has to govern a country where a substantial minority of its citizens are insane, and loudly so. And I don’t agree with every policy direction coming from his White House, but I generally trust that it’s coming from a team of smart, passionate people who are doing their best at the hardest jobs in the world.

But I’m sorry, this interview is fucking horrifying:

Obama Doesn’t ‘Begrudge’ Bonuses for Blankfein, Dimon

The president, speaking in an interview, said in response to a question that while $17 million is “an extraordinary amount of money” for Main Street, “there are some baseball players who are making more than that and don’t get to the World Series either, so I’m shocked by that as well.”

“I know both those guys; they are very savvy businessmen,” Obama said in the interview yesterday in the Oval Office with Bloomberg BusinessWeek, which will appear on newsstands Friday. “I, like most of the American people, don’t begrudge people success or wealth. That is part of the free-market system.”

If Obama actually believes those words, then we are really seriously fucked.

(Via naked capitalism)

I've got a tunnel to sell you

Hamas Finds Gaza Tunnels’ $500 Million Loss Worse Than Madoff

Investment opportunities are rare in the Gaza Strip. So when Nabila Ghabin saw one last year, she pawned her car and jewelry and put $12,000 into a network of tunnels that brought in supplies smuggled from Egypt.

She was one of about 4,000 Gazans who gave cash to middlemen and tunnel operators in 2008 as Israel blocked the overland passage of goods. Then Israeli warplanes bombed the tunnels before and during the Dec. 27 to Jan. 18 Gaza offensive and the investments collapsed.

Now investors, who lost as much as $500 million, want their money back from Hamas, which runs Gaza. Hamas Economics Minister Ziad Zaza says about 200 people were taken into custody in connection with the tunnel investments; most have been released. Hamas is offering a partial repayment of 16.5 cents on the dollar using money recovered from Ihab al-Kurd, the biggest tunnel operator.

Conspiracy or oligarchy?

Food for thought from Nick Paumgarten’s New Yorker article “The Death of Kings”:

A prevailing belief is that there has been some conspiracy on Wall Street to bilk people out of their money. If there was a conspiracy, it was an extremely broad, disorganized, decentralized, and, in some measure, inadvertent one. In other words, there was no conspiracy, unless that’s what you call the establishment of an oligarchy, over several generations and with the assistance of a blinkered populace.

A New Way Forward

I’m cautiously optimistic about A New Way Forward, and its basic platform of how to fix the financial system:

NATIONALIZE: Experts agree on the means—Insolvent banks that are too big to fail must incur a temporary FDIC intervention – no more blank check taxpayer handouts….

REORGANIZE: Current CEOs and board members must be removed and bonuses wiped out. The financial elite must share in the cost of what they have caused….

DECENTRALIZE: Banks must be broken up and sold back to the private market with strong, new regulatory and antitrust rules in place—new banks, managed by new people. Any bank that’s “too big to fail” means that it’s too big for a free market to function….

These aren’t necessarily new thoughts but I’m heartened by the thought that this protest movement might come with a concrete platform. I support protest movements in the abstract, but if you’re just mad about stuff, without having specific actions you’re advocating, then I’m probably not going to bother to show up to support your vague unfocused anger.

The coalition forming around this site would seem to be somewhat left, which makes sense, though I sort of imagine ideally being able to attract some of the center-rightists who’ve been appalled by the Bush years. For example, comments over on Naked Capitalism or Barry Ritholtz’s blog come from a lot of people who mostly are strongly pro-capitalist but for years have been crowing as loudly as anybody else about the problems in the finance sector.

I always end up hoping these movements can be fairly focused on their specifics, so as to make broad coalitions, and then I almost always end up being disappointed. Oh well. There’s a protest in Union Square on Saturday and I’ll most likely go, 90% to support and 10% just to observe. We’ll see how this goes.

Obama and the financial crisis

This morning the Obama administration officially announced Tim Geithner’s bailout plan. You probably won’t be surprised to hear that I’m with Paul Krugman and Barry Ritholtz in opposing this, and insisting that the only solution will come when the government shuts down the bad banks and let new banks rise in their place. What’s particularly criminal is that the FDIC loan guarantees appear to be a backdoor subsidy, enacted through a mechanism that might be complex enough to confuse people while Wall Street slips its hand into the public purse one last time.

Why is this happening? My armchair analyst guess goes something like this:

I’d guess that Geithner isn’t trying to scam the public: He’s just deluding himself. The phrase I keep hearing on this is “cognitive regulatory capture”, a state in which the regulator of an industry starts to believe the worldview of those he or she is supposed to regulate. A lot of Geithner’s Wall Street associates lost tons of money betting that these assets were worth something, and they might still think that. The plan is certainly predicated on the belief that the market is treating these assets unfairly, and Geithner might honestly think the federal government won’t lose that much money by stepping into this market. It’s can be painful to have strong disagreements with your friends.

As for Geithner’s boss, Obama: He’s smart as hell, a phenomenally talented politician, and I was happy to vote for him. I’d vote for him again in a heartbeat. But he’s not an economics or finance nerd—those guys don’t do so well in electoral politics—so he has to listen to his appointed experts and go by his gut. His experts aren’t any good, and his gut reaction might be serving him poorly here.

Most of the time, Obama’s modus operandi seems to be something like this: First, he spends a lot of time listening to everybody in the room. Then, he figures out roughly where the middle ground is, and steers that middle ground towards his own personal proclivities, just a little. That way everybody gets a little of what they want, and trust is built up for future dealmaking. It’s a style that is probably extremely effective 99% of the time, because the right solution is usually represented by somebody in the room, and the consensus solution won’t deviate too much from that (unknown) right solution.

But what if this financial crisis is the other 1% of the time? What if the person who knows what’s happening isn’t anywhere in the room, but actually outside the building, across the street, standing on a soapbox and trying not to sound crazy? The economists who saw this problem coming—Nouriel Roubini is the most prominent example, but certainly not the only one—aren’t exactly loved by Wall Street bankers or by their friends in the Treasury Department. If voices like his are given no representation, then Obama’s conciliatory, consensus-first approach could fail, and fail hugely.

Obama has finite capital, both financially and politically. I’m getting very concerned that this issue is his perfect storm, and that as a result of this the rest of Presidency will not live up to its promise. I hope I’m wrong.

Visualizing the AIG bailout

Designers Nicholas Rapp and Damiko Morris offer this cool illustration of where the $173 billion in AIG bailout money has gone:

And where’s the $165 million bonus money? Oh, yeah, it’s too small to be seen.

(hat tip: Barry Ritholtz)

Axis of Evil

As seen in a Brooklyn bar:

Photo by Alex, who doesn’t have his own blog.

Understructuring your code: Roughly right instead of precisely wrong

“It is better to be roughly right than precisely wrong.”—John Maynard Keynes

Last November at the last RubyConf, I gave a talk called Testing Heresies. One of the many strange ideas in that talk was the argument that understructuring your code can actually be an agile practice. That is, rather than decomposing everything down into small methods and small classes, you might choose to temporarily leave your code in a state of slight sprawl, as long as you’ve got decent test coverage.

The other day it occurred to me that I’m getting some of my inspiration on this one from, of all places, the area of finance.

Continue reading “Understructuring your code: Roughly right instead of precisely wrong” »