Month: September 2016

Peter the Great: His Life and World talks about the challenges of building St. Petersburg:

1703 was late in the history of Europe for the founding of a major city. By then, large towns and cities had sprung up even in Europe’s American colonies: New York was already seventy-seven years old, Boston seventy-three, Philadelphia sixty. And St. Petersburg, for 200 years the capital of the Russian empire, now the second-largest city of the Soviet Union, is the northernmost of all the great metropolises of the world. Placing it at the same latitude on the North American continent would mean planting a city of three and a half million on the upper shores of Hudson Bay.

Even traders who for centuries had used the Neva to reach the Russian interior had never built any kind of settlement there: It was too wild, too wet, too unhealthy, simply not a place for human habitation. In Finnish, the word “neva” means “swamp.”

Most of the new city was built of wood, and fires broke out almost every week. Attempting to contain the damage, the Tsar organized a system of constant surveillance. At night, while the city slept, watchmen sat in church towers looking out over the silent rooftops. At the first sign of fire, the watchman who spotted it rang a bell whose signal was immediately picked up and passed along by other watchmen throughout the city. The bells woke drummers, who turned out of bed and beat their drums. Soon the streets were filled with men, hatchets in hand, running to the fire. Soldiers who happened to be in the city also were expected to hurry to the scene. Eventually, every officer, civil or military, stationed in St. Petersburg was given a special fire-fighting assignment for which he was paid an extra monthly allowance; failure to appear brought swift punishment. Peter himself had such an assignment and received a salary along with the rest. “It is a common thing,” said a foreign observer “to see the Tsar among the workmen with a hatchet in his hand, climbing to the top of the houses that are all in flames, with such danger to him that the spectators tremble at the sight of it.”

One problem was that the region simply could not feed itself. The Neva delta, with its great stretches of water, forest and swamp, seldom produced good harvests, and sometimes, in wet years, crops rotted before they ripened. Wild nature was helpful; there were strawberries, blackberries and an abundance of mushrooms, which Russians ate as a great delicacy with only salt and vinegar. There were small hares, whose gray fur turned white in winter, which provided dry, tough meat, and wild geese and ducks. The rivers and lakes teemed with fish, but foreigners were chagrined to find that they could not buy it fresh; Russians preferred fish salted or pickled. But despite what could be gleaned from soil, forest and waters, St. Petersburg would have starved without provisions sent from outside. Thousands of carts traveled from Novgorod and even from Moscow during the warmer months bringing food to the city; in winter, the lifeline was maintained on a stream of sleds. If these supplies were even slightly delayed along the way, prices immediately soared in St. Petersburg and in the villages nearby, for, in reverse of the normal process, the town supplied its satellites with food. In the forest around St. Petersburg, an endless horizon of scraggly birches, thin pines, bushes and swamps, the traveler who ventured off the road was quickly lost. The few farms in the region lay in clearings reached by unmarked paths. And in these thickets and groves roamed bears and wolves. The bears were less dangerous, for in summer they found enough to eat and in winter they slept. But wolves were plentiful in all seasons, and in winter they appeared in aggressive packs of thirty or forty. This was when hunger drove them to enter farmyards to catch dogs and even attack horses and men. In 1714, two soldiers standing guard in front of the central foundry in St. Petersburg were attacked by wolves; one was torn to pieces and eaten on the spot, the second crawled away but died soon after. In 1715, a woman was devoured in broad daylight on Vasilevsky Island, not far from Prince Menshikov’s palace.

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Peter the Great: His Life and World talks about a 300-year-old attempt to handle some of the problems of poverty:

The Tsar decided to do something about the clamoring hordes of beggars who pursued citizens up and down the streets from the moment they left their doors until they entered another house. Frequently, the beggars managed to blend their pleas with a simultaneous deft picking of the victim’s pockets. By decree, begging was forbidden and so was the encouragement of begging; anyone caught giving alms to beggars was fined five roubles. To deal with the beggars themselves, the Tsar attached a hospital to every church, personally endowed by himself, to provide for the poor. That the conditions in these hospitals may have been stark was suggested by another ambassadorial witness, who wrote, “This soon cleared the streets of those poor vagrants, many of whom chose to work rather than to be locked up in the hospitals.”

Related:

• “Russian welfare: all cash”

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You’ve perhaps heard that Angelina Jolie has sued Brad Pitt to obtain sole physical custody of six children (petition starting the lawsuit) plus a share of money that Pitt earned during the marriage and perhaps before the marriage (“quasi-community assets”). The lawsuit is improperly characterized as primarily seeking a “divorce” due to the fact that California is a no-fault state and Jolie would be guaranteed a divorce per se simply for showing up to the courthouse and filing a form (no attorney necessary).

One interesting angle is press coverage noting “In her filing, Jolie does not ask for spousal or child support” (CNN article specifically titled “What’s at stake”) despite the fact that the Petition plainly states “the court will make orders for the support of the children upon request and submission of financial forms by the requesting party.” Jolie will be entitled to collect child support back-dated at least to when she filed her lawsuit regardless of when in the litigation she gets around to filing the requisite financial forms.

Is Jolie likely to win? As noted in the California chapter of Real World Divorce, the jurisdiction has a winner-take-all character and courts generally seek to promote one parent to “primary” (winner) status while the other is demoted to “secondary” (loser) status. Thus it seems reasonable for her to hope that a judge will decide that one parent should dominate (see this chapter for whether or not running courts this way is a good idea for kids). Census 2014 data show that 94 percent of Californians collecting child support are women and therefore Jolie could expect a high statistical chance of winning custody simply based on her current gender identification.

A Massachusetts lawyer told us that divorce litigators here refer to children as “little bags of money” due to the fact that each one will generate up to 23 years of tax-free cashflow, potentially in excess of the state’s median family income. What are the six “little bags of money” potentially worth to Jolie?

California’s online calculator kicks out a result of roughly $6 million per year, tax-free: the completed calculation. As the youngest children are (twins) are currently 8 years old, California children stop yielding a return at age 18 (Massachusetts is 23; New York is 21), and the total cashflow will taper down as the older children age out of the system, Jolie’s quest to become the primary parent is potentially worth roughly $50 million (tax-free). If we take $7 million per movie as Jolie’s likely earnings going forward (this source says $7-15 million but Jolie is getting older and presumably future contracts are more likely to be at the lower end of the range) and assume a 50 percent marginal tax rate (California state plus federal), she would need to act in 14 movies to earn $50 million after taxes.

Here are the assumptions:

• the defendant’s net worth at $350 million and the plaintiff’s at $275 million (source: Journal of Popular Studies)
• a 5 percent income from investments, either real or imputed by the judge, resulting in $1.46 million of “interest received” for Pitt and $1.15 million per month for Jolie
• earned income for Pitt of $31.5 million per year (Forbes) and $15 million per year for Jolie (tougher to find an authoritative estimate; I used this source)
• six children
• the children spend 20 percent of their time with the loser parent (this is the form default)

[What would “justice” look like in a different jurisdiction? Simply by showing up in court and identifying as a woman Jolie would automatically win primary custody in Denmark or Germany, but her revenue would be limited to $8,000 per child per year, i.e., $48,000 per year instead of $6 million per year. In neighboring Nevada Jolie’s child-related revenue would be capped at less than $13,000 per year per child and, as of October 1, 2015, state law favors 50/50 parenting (see “New Nevada Custody Laws Going Into Effect on October 1, 2015”). Thus Pitt could have saved himself a considerable amount of heartache over losing the kids, legal fees (a divorce litigator I met at the Reno Air Races charges a fixed $3500 to handle a divorce plus an additional $6000 if the case goes to trial), and financial exposure if he had insisted on establishing a primary residence in Tahoe or Las Vegas and Gulfstreaming into Hollywood as necessary.]

Notes:

• the California child support guidelines are presumed to apply but judges can deviate from the guidelines if they can find reasons for doing so
• Jolie’s lawsuit is being handled by Laura Wasser, who was in the news recently for defending Johnny Depp from Amber Heard (Bloomberg says that the unmarried Wasser has out-of-wedlock children with multiple fathers and is thus able to collect child support at California rates but can shield her own earnings from a potential alimony claim)

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Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley by Antonio Garcia Martinez is mostly about his crusade to bring Facebook into the modern world of Internet advertising. He explains why the fight that got him fired wasn’t relevant in the long run:

The Great Facebook Ads Debate of 2013 ended up being moot, or at least, a debate whose import would be more strategic and long-term than tactical and immediate. For all the Sturm and Drang, Facebook’s quarter-saving gold mine, the thing that catalyzed the stock out of the post-IPO doldrums, wasn’t Custom Audiences or FBX. A third product, the only other novel ads product Facebook launched during its harried IPO period, code-named “Neko,” was that savior. The product itself, like so many, was simply the combination of two otherwise disparate domains: Facebook’s ever-addictive News Feed and ads inventory on the Facebook mobile app, instead of the desktop site. That’s it: ads in News Feed, while the user was on his or her mobile device—that’s what saved Facebook.

In retrospect, it’s clear to see why Facebook succeeded on mobile. For starters, data. On desktop, the browser and its cookie pool (that even third parties like data brokers and even Facebook can read from and write to) mean there’s a lot of data sloshing around for every Web browser. The fact you’re pricing your car on the Kelley Blue Book site, or searching movie times on Fandango, is something that’s known not just to Fandango or Kelley, but to an entire world of data brokers and targeters. In mobile, Web browsers generally don’t accept third-party cookies, which means that someone other than the New York Times can’t read or write data about you when you’re on nytimes.com on your mobile browser. Contrast that to the data mayhem that reigns on a desktop browser. Also, that mobile browser typically does not have access to your unique device ID, which, as we’ll see, is the real identifier that matters in the mobile advertising world.

Second, the triumph of apps as the core mobile experience. Think of it this way: from the data perspective (if not the technical one), an app is like a unique browser for a specific company, which that company has built so you can experience its very particular website. You effectively have hundreds of unique browsers on your phone, with which you read content and buy goods or services.

If you’ve gotten to level 47 in Candy Crush Saga, searched for a house on the Redfin real estate app, or bought something on Amazon’s mobile commerce app, that data lives and dies inside those apps, and never leaves. This means that on mobile, at least datawise, you have a first-party relationship with a few apps, and that’s it—there are no data middlemen.

This was confirmed in a big way when Facebook Ads launched the only truly novel thing it’s launched since the IPO: the Facebook Audience Network. AN, as it’s known, is easy to understand: it’s simply Facebook Ads, powered by Facebook data, running on apps other than Facebook. As such, it’s the cleanest test of the value of Facebook’s data. The performance of those campaigns, in terms of both clickthrough rates for advertisers and actual monetized CPM for publishers, was very good, indicating that in the land of the mobile data blind, the one-eyed Facebook man was indeed king.

All this meant that while on desktop high-quality publishers with engaging formats competed with Facebook, on mobile the pickings were very slim indeed. Nonintrusive but stylish ads, which paired well with organic content from your friends, on an app experience like Facebook, which featured supremely focused attention and a crazy-high engagement rate (clickthrough rates on Facebook’s News Feed reached easily into the single-digit percentages), were very competitive with the mobile alternatives. This meant Facebook had the mobile advantage from the get-go. Those two things, data and high-quality formats and placements, meant that Facebook dominated mobile like few other incumbents had managed to, and would dominate for the foreseeable future.

One of the pleasures of Martinez’s book is that it reminds us how unpredictable financial success can be:

None of this, of course, was even remotely apparent in early 2013 (despite whatever Facebook claims now), when the ego pissing matches in Sheryl’s conference room depicted in this book were raging. That’s the nature of Valley success, however: you try ten things, based mostly on random hunches, a few key product insights, and whatever internal mythologies your culture reveres. Seven of them fail miserably, are discontinued, and are soon quietly swept under the rug of “forever today” forgetfulness. Two do OK, for more or less the reasons you thought, but they don’t blow the doors off your success metric. And one, for reasons you discover only after the fact, becomes a huge, transformational success. The amnesiac tech press weaves the narrative fallacy around the proceedings, fabricating a make-believe dramatic arc from steely-eyed product ideation to flawless and unhesitating technical execution. What was an improbable bonanza at the hands of the flailing half-blind becomes the inevitable coup of the assured visionary. The world crowns you a genius, and you start acting like one. When the next usage or revenue crisis hits, you repeat the experiment, rolling your set of product dice on the big Valley table. At some point, you don’t find the crisis-solving winner, the dealer sweeps up your remaining chips, and you’re busted. The company fails and your logo is recycled as a reminder of corporate mortality. Then everyone wonders how such a confirmed genius could have possibly failed, and ruminates on the transience of talent.

[Note that Martinez’s own creation would have been successful when compared to any yardstick other than the rest of Facebook’s revenue:

What about FBX, our baby in this drama? FBX’s revenue, which was just starting to show signs of explosive growth toward the end of my Facebook tenure, hit its stride in the months after I departed, reaching about a half billion in revenue by early 2014, all of that absolutely new. That means FBX was one of the fastest-growing new-revenue products in Facebook history, second only to the billion-dollar News Feed bonanza described above. And it was built with a handful of people at peak development, while News Feed ads required a small army to create and maintain. … Despite that everlasting antagonism, FBX stubbornly holds on, too profitable and too strategic to shut down (for now at least), much to the chagrin of the Bolands and the Bozes of Ads.

]

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Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley talks about a tax situation that seems to apply to the typical employee of a California tech company:

[Reflecting on his startup co-founders’ profits from joining Twitter] We’re still on speaking terms, more or less; Argyris and I more than MRM, but that’s hardly surprising from what you’ve read. They’ve managed to forgive whatever slight they felt at the deal drama I created. After all, it worked out very well for them in the end. And my outcome? Practically nothing by comparison. Recall, the Facebook offer was in restricted stock, which is taxed as common income. Also recall, Facebook’s IPO, unlike Twitter’s, came out at a high price of $38, and then languished for a year around $30, occasionally going so low as $18. That IPO was great for employees and insiders worried about dilution, but not for people wanting to cash out (like me), and walk away from the Silicon Valley casino. With the lockout, insiders weren’t able to sell the stock until months after the IPO, when FB was at $20. Thus I owed taxes at the maximum marginal tax rate (plus whopping California state income tax) assuming a cost basis of $38, when I had really sold at lower, effectively paying taxes on money I hadn’t made. In a smaller way, mine was the plight of the first tech-boom bankruptcies, who paid taxes when prices were dear, but sold stock when prices were cheap.

How does this actually work in practice? Stock given by a Silicon Valley company to an employee is valued on a particular date? Which date? The date on which the employee is hired? The dates on which stock is actually vested and at the market price at the time? Via some other mechanism?

[Separately, Martinez shows the hazards of getting rich via aquihired… you can also become poor when you get acquifired before vesting the shares purported received a part of the deal. On the vesting process:

This is what it feels like to go from a startup to a big company. Even Facebook, whose ability to maintain a fast-moving, always-be-shipping culture well into corporate middle age was admirable and unique, was simply a German-style autobahn, not a racetrack. The days of a few engineers going rogue and launching Facebook Video despite Zuck’s wishes were long gone. Most vehicles moved at the speed limit, lots of trucks hogged the right lane, and a select few drivers traveled at full speed in the left lane (with no-speed-limit passes given out by Zuck alone, and anyone else who dared race ahead did so at peril to his or her career).

As early as a few months into Facebook, once the novelty had worn off, I could feel myself growing bored and frustrated with the speedometer stuck in the middle double digits. Product development in Ads was sluggish and curiously hesitant. The targeting team continued trying to squeeze juice out of the dry data lemon, and Gokul kept on riding the Ads team mercilessly, while offering nothing in the way of direction. The Facebook cast was unfailingly competent but not the race car drivers of my previous startup life, and it seemed I was waiting to get somewhere. Given the nature of technology compensation, I actually was.

I’d have to patiently wait out my vesting schedule; the joke term for doing so in less spirited companies than Facebook was being a “VIP”—that is, “vesting in peace.”

To measure progress, I put a countdown clock app on my MacBook’s dashboard, measuring the time until my first vesting, beyond which I already couldn’t imagine staying. The clock counted in minutes, hours, and days, and I referred to it often, especially after a particularly challenging meeting that reeked of corporate cant and catatonia

Here’s what it was like to be fired:

“You’re a very divisive figure, Antonio. I read the reviews of your team members, and then that of management. They’re completely opposed. One loves you, and the other hates you.” “That’s true, Boz. I’ve certainly made friends and enemies here. But my goal has always been to give Facebook the best ads system possible.” This was, in all seriousness, true. I could barely remember what my life was like before Facebook, and there was a trail of destruction I had caused by spending my entire life there: two children neglected, two different women whose worthy love I’d spurned, two boats rotting in neglect, and anything like an intellect or a life outside campus nonexistent due to indifference and my dedication to the Facebook cause.

There were few women one would call conventionally attractive at Facebook. The few there were rarely if ever dressed for work with their femininity on display in the form of dresses and heels. A fully turned out member of the deuxième sexe in a conference room was as clear an angel of death as a short-barreled .38 Special revolver. Gokul gave an awkward smile, and bolted out the door the moment I sat down. I looked across the table. If her look was supposed to disarm me, she needed either more cleavage or more charm. I glared at her as she read through her script. “We are offering a severance package . . .” Here she switched into the false sotto voce that professional manipulators, like salesmen or politicians, use to make a cheap bid for personal intimacy. “We offer this to very few employees . . .” She slipped a contractual-looking document across the table. Non Disparagement Clause. . . . $30,000 . . . . For one year from the date of this document you will not . . . Ha! I saw the game. This had a unique Gokul stench all over it, like that of roadkill skunk. Knowing my penchant for hyperbolic criticism, and my flair for garnering attention with a well-worded Facebook post, Gokul had decided to bribe me into silence. This additional shut-up clause would strengthen Facebook’s ability to sue me should it choose to.

We reached my desk, which was impeccable for once, positively shining from my weekend ministrations. There was nothing on it except my laptop. “Where’s your laptop?” “Right there,” I said, pointing. “Where’s your phone?” “I forgot it at home.” “Hm, where’s your badge?” “I also forgot it at home.” I, of course, hadn’t forgotten anything. The badge would get me discounts at the Apple store forever. And the phone I hadn’t wiped yet.

]

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Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley by Antonio Garcia Martinez muses on the differences between modern-day Capitalism and old-school Communism (really Socialism, as societies such as Cuba and Soviet Russia were simply on the road to true Communism):

In Havana, my cousins were forced to listen to rambling speeches about maintaining core values inside a one-dimensional cult of personality. In Menlo Park, I was sitting in a tent full of people wearing identical uniforms of Facebook swag and doing the same. Back in Havana, my cousins were eyeing posters of Che and Fidel on crumbling buildings and the sides of lurching, belching buses. Alongside were rousing posters, designed in that wonderfully retro socialist realism only the Cubans still embraced: ¡TODO POR LA REVOLUCIÓN! ¡HASTA LA VICTORIA SIEMPRE! ¡PATRIA O MUERTE, VENCEREMOS! Meanwhile, I was walking around Facebook, surrounded by stenciled portraits of Mark and equally exhortatory posters: PROCEED AND BE BOLD! GET IN OVER YOUR HEAD! MAKE AN IMPACT! At their extremes, capitalism and communism become equivalent: Endless toil motivated by lapidary ideals handed down by a revered and unquestioned leader, and put into practice by a leadership caste selected for its adherence to aforementioned principles, and richly rewarded for its willingness to grind whatever human grist the mill required? Same in both. A (mostly) pliant media that flatters the existing system of production, framing it as the only such system possible? Check! Foot soldiers who sacrifice their families and personal lives for the efficient running of the system, and who view their sole human value through the prism of advancement within that system? Welcome to the People’s Republic of Facebook.

But one can simply quit a job in capitalism, while from communism there is no escape, you’ll protest. As for the actual ability to opt out under capitalism: look at Seattle or SF real estate prices, and the cost of a decent US education, and consider whether Amazon or Facebook employees could really opt out of their treadmill. I’ve never known one who did, and I know many. Ask your average family providers, even those in a two-income family, whether they felt they could simply quit when they liked. They could barely get a few weeks off when they had a child, much less opt out. Switching jobs would amount to nothing more than changing the color of the shackles.

Facebook is full of true believers who really, really, really are not doing it for the money, and really, really will not stop until every man, woman, and child on earth is staring into a blue-framed window with a Facebook logo. Which, if you think about it, is much scarier than simple greed. The greedy man can always be bought at some price or another, and his behavior is predictable. But the true zealot? He can’t be had at any price, and there’s no telling what his mad visions will have him and his followers do.

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Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley by Antonio Garcia Martinez explains some of the typical structures around seed-round investing in Silicon Valley:

This is how Y Combinator works. For three months, the selected startup founders meet weekly for a dinner with some eminent startup personage. The dinners are not relaxed social affairs: they’re competitive demos in which founders try to one-up each other with increasingly developed products, upward-sloping user graphs, or funding news, within a context of technocamaraderie and shared suffering. The weekly cadence imposes order on the always-full-throttle startup chaos, and is a welcome respite from the grinding toil and stomach-churning stress. I always tried to sit directly in the front row to take the speaker’s measure. Marissa Mayer’s hands shook and she spoke at an anxious clip; she arrived escorted by a Google “handler,” the only speaker to do so.

Enter the investor’s great friend: the cap. The cap dictates the maximum number at which the company will be valued, for the purposes of calculating the investor’s stake when the company takes more investment capital. In our previous example, say the initial $100,000 investment had been done at a cap of $3 million. Then, despite the company’s raising later at a valuation of $10 million, the angel’s stake amounts to $100,000 ÷ $3 million = 3.3%, a much bigger slice. The angel’s effective price per share is that of the cap (rather than that of the valuation), giving him a huge discount on the equity compared with investors who just put money in. As a result, this cap is perceived in essence, if not in contractual reality, to be a proxy for the valuation of the company at the time of the angel’s investment. Early-stage entrepreneurs will bandy about their cap number as if it were a real company valuation, when in truth it’s an input to a hypothetical calculation that may or may not play out in the future.

Sacca had a very different attitude toward potential deals. Which is why Sacca, or any VC really, would push you to mimic his own distorted risk profile, which prefers a tenfold return, even if it marginally increases the chance of complete failure. Twofold just ain’t cool enough for the limited partners, and not why they handed over their money to Sacca in the first place. The risk expectations of founders and investors can often be severely misaligned. I hate sports analogies, but here’s one to explain this vital point: most VCs are playing a version of baseball in which the only way to score is to hit a home run when you’re at bat. They don’t care if you disgrace or impoverish yourself and strike out, and they don’t care if you get a solid line drive that lands you on second. To them, strikeouts and getting on base are equally pointless, and so they’ll push to proverbially “swing for the fences” no matter the count or the team you’re up against.

The reason for this all-or-nothing approach is how their funds are structured. VCs (or so-called angels like Sacca) raise a fund, out of which they’ll provision some number of investments. Barring doubling down on the same company, which they might do if the fund still has money when a company raises again, those investments are effectively “fire and forget.” The fund’s total profit will be calculated from whatever those initial bets return. Unlike, say, a hedge fund portfolio manager, who rolls the winnings from one good bet into the next, compounding a series of returns into something truly huge, VCs do not take liquidity from one company’s exit and pour it into yet another’s.* This, at heart, is why the go-big-or-go-home strategy makes the Silicon Valley world turn, and why entrepreneurs push themselves to be either the next Airbnb, or nothing. The entrepreneur who bucks this and creates a long-term business of recurring revenue but relatively slow growth is dismissed as running a mere “lifestyle business,” which is a dirty word among VCs. Of course, the entrepreneurs are quite happy to run a revenue-generating concern that spits out cash as low-tax dividends, and dedicate their lives to skiing or guitar playing or whatever. But their investors will hate them for it, and the entrepreneurs will suffer a loss of social capital as a result, and perhaps find they can’t raise money for their next venture.

What about the larger culture?

As every new arrival in California comes to learn, that superficially sunny “Hi!” they get from everybody is really, “Fuck you, I don’t care.” It cuts both ways, though. They won’t hold it against you if you’re a no-show at their wedding, and they’ll step right over a homeless person on their way to a mindfulness yoga class. It’s a society in which all men and women live in their own self-contained bubble, unattached to traditional anchors like family or religion, and largely unperturbed by outside social forces like income inequality or the Syrian Civil War. “Take it light, man” elevated to life philosophy. Ultimately, the Valley attitude is an empowered anomie turbocharged by selfishness, respecting some nominal “feel-good” principals of progress or collective technological striving, but in truth pursuing a continual self-development refracted through the capitalist prism: hippies with a capitalization table and a vesting schedule.

Characteristics of a successful founder?

What’s it take to do startups? It certainly isn’t intelligence. I was in the lower third of my PhD class in physics at Berkeley, and I had to take my preliminary exams three times before I passed. Most of the founders I know are certainly crafty and quick-witted, but compared with some of the certified geniuses I met in academia, they aren’t going to win any Fields Medals or Nobels. It certainly isn’t technical skill. I’m a crappy programmer, and I can hack crude prototypes of finished products at best. Some founders are technical virtuosos, but I suspect most weren’t the top students in their respective computer science classes (assuming they even had a formal education). It’s not unique product or market vision. Anyone who used Google’s ads-buying tool for all of five minutes, and then registered that that piece of shit was a $70 billion per year moneymaker, could see the need for AdGrok.

In my limited experience, there are two traits that distinguish successful startup founders at whatever level of the game, from the forgettably minuscule (e.g., AdGrok) to the epoch changing (e.g., SpaceX). First, the ability to monomaniacally and obsessively focus on one thing and one thing only, at the expense of everything else in life. I lived, breathed, and shat AdGrok. Thanks to focusing on AdGrok, I watched my daughter grow up through the frame of a Skype window while I was in AdGrok’s Mountain View shit hole. I had no social life outside of schmooze-and-booze tech events, at which I would wear my AdGrok T-shirt and engage in techno small talk with people I didn’t really care about. I had no hobbies or outside activities of any kind, except very occasional trips to the gym. My sailboat, into which I had poured two years of money and weekends to restore, slowly rotted in the sun. I never read anything except the tech press. Movies were out of the question. The ladies? While I was nominally still in a relationship with British Trader, my penis was anatomically equivalent to my coccyx: a purposeless vestige of a bygone era.

Second, the ability to take and endure endless amounts of shit.

The typical exit?

The fact was that even as the wheeler-dealer CEO, I owned no part of AdGrok. Nothing. Not one share. Neither did the boys. As is the case for every early-stage entrepreneur. So to actually see any proceeds from the AdGrok side of the deal, I’d have to have been there at least another couple of months as the deal got finished up. At the end of the day, AdGrok was simply a long, stressful job interview for Facebook (and ditto for the boys at Twitter). We all claim we “sold” AdGrok, but in reality, AdGrok was merely leverage to score the job offers that actually made us the real financial upside, job offers we would not have been able to score otherwise. The corporate-development teams of large companies, insofar as their small-company deals are concerned, are really glorified HR recruiters with fatter checkbooks. That’s another little detail the self-glorifying founders of acquired companies often fail to mention.

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Reno’s casinos aren’t exactly hopping on a Friday night. Atlantic City is presumably doing even worse. Could smartphones, Facebook, etc. be the worst enemies of the casino industry? If people used to come to casinos partly out of boredom, even in an ever-richer world it might be tough for casinos to grow. A bored person can download an app or check Facebook. Separately, Apple, Verizon, and Comcast do a pretty good job of mining out consumers’ entertainment dollars, which also leaves less for casinos to harvest.

Should investors short casino stocks the day that VR is perfected?

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Peter the Great: His Life and World talks about how the tsar saved the Russian treasury a lot of money:

It was Peter himself who carried home another Western practice which simultaneously broadened the sophistication of Russian society and saved the state land and money. The traditional Russian manner of rewarding important services to the tsar had been the bestowal of large estates or gifts of money. In the West, Peter discovered the thriftier device of awarding decorations—orders, crosses and stars. Imitating such foreign decorations as England’s Order of the Garter and the Hapsburg Order of the Golden Fleece, Peter created an exclusive order of Russian knighthood, the Order of St. Andrew, named after the patron saint of Russia. The new knights were distinguished by a broad light-blue ribbon worn diagonally across the chest and the cross of St. Andrew in black on white enamel.

Thus, for over two centuries, human nature being what it is, these pieces of colored ribbon and bits of silver and enamel became worth as much to Russian generals, admirals, ministers and other officials as thousands of acres of good Russian earth.

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Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley by Antonio Garcia Martinez complements the New York Times coverage of Ellen Pao and similar.

How do men and women (or “employees who currently identify as men” and “employees who currently identify as women”) get along at Facebook?

Picture the Facebook corporate scene for a moment: buildings full of young, emotionally inept male geeks, and sprinkled throughout them, maybe a 10 percent population of young women. What could possibly go wrong? Rather than harshly regulate every step of this sexual-legal minefield, Facebook preferred to lay down basic guidelines. Delicately, but unambiguously, our HR Man stated that we could ask a coworker out once, but no meant no, and you had no more lets after that. After one ask, you were done, and anything beyond that was subject to sanction. So you get one shot on goal, do you? I thought. Better use that one shot wisely.

An idle mind is the devil’s playground, as the saying goes, so in the meantime I got down to the serious business, as some product managers do, of trying to bang my product marketing manager. PMMess, as we’ll call her, was composed of alternating Bézier curves from top to bottom: convex, then concave, and then convex again, in a vertical undulation you couldn’t take your eyes off of. Unlike most women at Facebook (or in the Bay Area, really) she knew how to dress; forties-style, form-fitting dresses from neck to knee were her mainstay. Her blond hair was offset by olive skin, and bright blue eyes shone like headlights from her neotenic face. She had a charming perfectionism around email orthography and usage, despite the generally rushed illiteracy that reigned in Facebook corporate communication. We traded flirtarious barbs around whether CPM was an initialism or an abbreviation, and whether a needlessly flowery formulation of mine, written in response to some insipid corporate conversation, was a metonym or a metaphor. Like me, PMMess would lose herself in bouts of louche, ethanolic self-destruction that typically ended in some disinhibited act of carnality. A couple of times already, such behavior had involved me, though only at a relatively PG-rated level of barside making out.

What are employers missing by having more male employees than female employees? [Remember the question of “Should the SEC make it illegal for public companies to employ men?”] Martinez differs from Hillary Clinton here:

Most women in the Bay Area are soft and weak, cosseted and naive despite their claims of worldliness, and generally full of shit. They have their self-regarding entitlement feminism, and ceaselessly vaunt their independence, but the reality is, come the epidemic plague or foreign invasion, they’d become precisely the sort of useless baggage you’d trade for a box of shotgun shells or a jerry can of diesel.

What about after hours?

The runway for its accelerated particles travels alongside Sand Hill Road, under Interstate 280, and into the foothills of the Santa Cruz Mountains, which define the western border of Silicon Valley. Lastly, there’s a high-class brothel: the Rosewood Sand Hill, a posh restaurant and hotel complex wedged in between SLAC and the Sand Hill–Interstate 280 intersection. Thursday nights at Sand Hill are famous for serving as “cougar nights,” where older, lonely women (and younger ones explicitly on the clock) congregate to ensnare Sand Hill’s wealthy denizens.

Martinez chronicles his close association with one particular woman, whom he refers to as “British Trader” due to her former career as an oil trader:

The contemporary honeymoon of a several-week fuck-fest, consummated at the start of a new romantic liaison, played itself out comme il faut. No surprises really, other than British Trader’s taste for being physically dominated in bed, a bit of a surprise given her alpha-female exterior. To a woman, every girlfriend of mine has been intelligent, ambitious, and independent. Until very recently, all were vastly more successful and wealthier than me. And yet, come the pressing hour of physical need, so unfolded the countless boudoir scenes recalling Fragonard’s Le Verrou: a ravished chambermaid, half resisting and half yielding, violently seized in the arms of her predatory lover, who slams shut the bolt on the bedroom door.

She gets pregnant while they are dating and decides to have the child:

I invite anyone with a philosophical bent to witness a human birth and observe as unstoppable forces meet immovable objects, with neither yielding. Modern medicine does little to resolve this paradox made flesh. The only real differences between the bloody, screaming tableau before me and that of, say, my grandmother’s birth a century ago in rural northern Spain by candlelight, were the little plastic packets of mineral oil, like the salad dressing at a Denny’s, that nurses would regularly crack open and pour over the heaving, tumescent mass down south. It was a sweaty, white-knuckle affair shattered by piercing shrieks of pain that resonated across the maternity ward, and which the heavy institutional doors the nurses slammed shut did little to stifle. I quietly entertained bouts of Mad Men–esque nostalgia for a time when men simply paced nervously and smoked in some other room while the dirty business was completed. … After two hours of battle, old flesh yielded bloodily to new, and Zoë Ayala came into the world.

Martinez does not enjoy domestic life:

By the time AdGrok [a Y Combinator-funded startup] had managed to free itself from the existential crisis, my relationship with British Trader was suffering under stress and our mutual friction. I was done with her imperious hectoring and stiff upper lip. Living with her en concubinage with Zoë resembled less some bohemian family sitcom, and more a stint in the Queen’s army. … British Trader’s desire to be absolute captain of the ship was fine, but there’s only one captain of a ship or company. If she wanted the role, she could maintain the house herself.

Right around when the Adchemy drama was winding down to its victorious conclusion in late 2010, I decided I had had enough of the British barracks room I was living in, and announced I was leaving the household, and British Trader.

Out of nowhere British Trader informs me she is once again pregnant; the calendar math takes us right back to my move-out imbroglio in December, our last tryst after a breakup desert of nonintimacy. After a brief debate, British Trader confirms her desire to keep the child, whatever my thoughts on the matter.

It occurred to me that perhaps this most recent experiment in fertility—and the first—had been planned on British Trader’s part, her back up against the menopause wall, a professional woman with every means at her disposal except a willing male partner—in which case I had been snookered into fatherhood via warm smiles and pliant thighs, the oldest tricks in the book.

Perhaps due to the California child support guidelines extending to infinite levels of income and being applied rigidly by judges, the biological parents avoid litigation. Consistent with “Parental Responses to Child Support Obligations” (Rossin-Slater and Wust, 2016), based on Danish data, as the mother’s profits from child-ownership are increased the father’s non-financial investment in the child is decreased:

Informally, British Trader and I worked out a payment schedule that complied with recommended California state child-support levels. Like the Civil War draft, in which the wealthy could pay a commoner to take their spot on the firing line, I paid my way out of fatherhood, mostly out of fear of the compromise to freedom it represented. I retained visitation rights, but those would be conditional on my always rocky relationship with British Trader. It would suck, but I was ambiguous about my suitability as a father anyhow (as was British Trader).

Martinez fits this into a more comprehensive theory:

What’s my big beef with capitalism? That it desacralizes everything, robs the world of wonder, and leaves it as nothing more than a vulgar market. The fastest way to cheapen anything—be it a woman, a favor, or a work of art—is to put a price tag on it. And that’s what capitalism is, a busy greengrocer going through his store with a price-sticker machine—ka-CHUNK! ka-CHUNK!—$4.10 for eggs, $5 for coffee at Sightglass, $5,000 per month for a run-down one-bedroom in the Mission. … That’s the smoldering ambition of every entrepreneur: to one day create an organization that society deems worthy of a price tag. … These are the only real values we have left in the twilight of history, the tired dead end of liberal democratic capitalism, at least here in the California fringes of Western civilization. Clap at the clever people getting rich, and hope you’re among them. … Is it a wonder that the inhabitants of such a world clamor for contrived rituals of artificial significance like Burning Man, given the utter bankruptcy of meaning in their corporatized culture?

[What would the price tag actually have been for the use of British Trader’s body and her services as a mother? Martinez says that she was out of the oil game and earning only a standard MBA’s salary ($250,000/year?). Martinez discloses that his own pre-tax compensation during his best years was close to $1 million (mostly in Facebook stock). If we plug those numbers into the California child support calculator, using the default of 20 percent time with the father, British Trader gets $97,248 per year, tax-free. ADP Paycheck calculator shows that she would have earned $149,945 after taxes. Thus if her pre-tax salary had been $250,000 per year, by obtaining custody of two children British Trader increased her after-tax spending power by 65 percent.]

Martinez is gracious regarding at least two women in the end-credits:

Thanks to British Trader, who not only bore most of the burden of raising our children but also provided invaluable counsel during the most trying times. Shame that a household, like a ship, admits only one captain. Thanks to Israeli Psychologist, my long-suffering mate during the Facebook half of this book, without whose warm ministrations I’d never have survived that infernal experience. As your people once wrote: “A woman of valour, who can find? For her price is far above rubies. She openeth her mouth with wisdom; and the law of kindness is on her tongue.” Your endless kindness deserved a worthier target.

More: read Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley

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