Monthly Archives: October 2004

Determining the market cap of a person

What is a person’s market cap?

Sounds crude, but really — what is the value of a person? Really … what I am asking is … what is the net-present value of a person??

The net present value of a 93-year-old who is worth a billion dollars is probably worth less then a billion (unless, of course, you are Anna Nicole Smith). Whereas the net present value of a smart 23-year-old computer science major in Silicon Valley is a lot higher then her $4000 in savings.

When looking at a person there are growth stocks that are highly volatile and mature stocks that pay dividends. Some people have lots of assets on the books but are stodgy and risk-averse and thus have a low P/E ratio. Other people might have a really high P/E but a really low E.

Henry Ford, before he started Ford Motor Company, was essentially a failure. He tried and failed at numerous businesses. But he still had a high P/E as he was persistent and a good risk.

Obama has a high P/E while Senator Byrd has an extremely low P/E. Some people, like Warren Buffet and Michael Dell and Arnold Schwarzenegger, have had an high P/E ratios all their life — and those are the people you want to invest in.

What makes a person a good investment?

Dare I say it is someone that is ethical? OK … I said it. Ethics matter. You want to invest in someone that isn’t going to sell you out and transfer the funds to the Bahamas.

So does consistency. Erratic behavior causes too much uncertainty. Generally you are looking for someone that stays in the same location for a while, keeps friends for a long time, and has some roots.

Does intelligence matter? Probably not. Joanna Gallanter, one of the top venture capitalists (and Managing Partner at Venture Strategy Partners) likes to say that “smart is like vanilla ice cream.” Meaning — everyone is smart … what else is new? She looks for persistent, driven, honest, hard-working, personable people. And those that have the “leadership gene.”

Something else you might want to look for … loyalty … can make a big difference …

more of this line of thought in the future ….

Books: The Metaphysical Club: A Story of Ideas in America

Books: The Metaphysical Club: A Story of Ideas in America by Louis Menand

read this book. if you are like me and you lack historical perspective of the post-Civil War years (the late 1800’s), read this book. you’ll find a past generation talking about the “sixties” in much the same way we do.

this book was recommended to me by Heather Bergman.

Summation: read The Metaphysical Club

Outsourcing is Good for America

I outsource everything. I outsource repairing my car to my mechanic. I outsource all my legal matters to my law firm. I outsource growing of my vegetables to the local farmer’s market.

Outsourcing is good – we can not and should not do everything ourselves. You don’t need to own a cow anymore if you want milk. The industrial revolution was built on increased specialization.

The recent controversy over outsourcing is massively protectionist and xenophobic. People like Lou Dobbs and John Kerry believe that outsourcing is good as long as it is done by people in America. But they believe it is bad if done by foreigners – especially by people who are yellow or brown. Their xenophobic and borderline racist reactions should have no place in a globalized economy.

When Nike outsources its manufacturing to a plant in Malaysia or Citibank outsources its customer service to a call center in India, the American consumer wins because we get cheaper goods and help create markets for our goods abroad. Remember, America has a gigantic trade surplus in services and in intellectual property. Unlike manufacturing, only people in nations with a growing economy can afford services or IP – so it is in the U.S.’s best interest to help out other economies through trade. Trade, not aid, is the best way to create a worldwide economic expansion.

There is also a myth that American programmers are losing their jobs to people overseas. Nonsense. No good American Java or C++ programmer has had their job outsourced. If you are a COBOL programmer and you haven’t updated your skills in over 30 years, you might be at risk. But you probably would be at risk anyway since the COBOL market is shrinking and the Java market is growing.

Summation: Outsourcing is good for America and also good for the countries that participate as our off-shoring partners.

Rob Reid on The Moral Argument for Free Trade

Rob Reid posted a great article on the Lead21 Blog entitled The Moral Argument for Free Trade.

One of the most depressing things our country does is supply aid rather then free trade. Instead of blanket aid (which ends up going to a few kleptocrats), we should encourage enterprise.

Abe Lincoln once said:
“The worst thing you can do for those you love is the things they could do and should do for themselves.”