Friday, October 21, 2011

Turning 40

Today, I am 40. I write this from a small village in Baja, where I am celebrating the milestone with my wife and best friends.

40 is an iconic birthday and an occasion for reflection.

40 years ago, I was born to a US Air Force Captain and his wife, Kent and Marian, in Wiesbaden, West Germany. From birth, my life has been peripatetic. Six days after my birth, we moved to a small village on the Czech border. By the time I was twelve, we'd lived in Germany, Ireland (sister, Elizabeth, born), Northern Ireland, Nigeria (brother, Richard, born), the Ivory Coast, Taiwan, Hong Kong, and the United Kingdom. My father's job with the military and then with Citibank required frequent moves. True to form, at 14, I left London for boarding school in Connecticut. The moves averaged one every eighteen months and left an indelible mark on me.

First, I became very good at being the new kid. Adapting, making new friends, and dealing with the trauma of change.  Second, my body adapted to the rhythm of major change every eighteen months and I suffer from wanderlust.

The "risks" associated with change were blind to me, as evidenced by my equally peripatetic educational and professional experiences. High school in London and CT, college in LA, China, and Cambridge, banker in NYC, HK, and Singapore, teacher in Indiana, business school student in Chicago, and the last twelve years in venture capital and start-ups.  My childhood blessed me with the ability to adapt, while leaving me with a true sense of restlessness.

Fortunately, my wife, Caroline, helped me understand what I'd missed growing up - the power of community and consistency. While my email address continues to change, I've lived in the Bay Area for twelve years and my children have attended the same public school for seven years. My oldest son, Jack, is 11. By his age, I'd moved eight times to seven countries. I now see through him the importance of reinforced, persistent human relations and my wanderlust has dimmed as I enjoy long-term friendships and a feeling of connection.

In fact, over 40 years, I've come to believe strongly in the following:
  • the value of investing in community
    • I love being part of the Bay Area start-up community, mentoring, coaching youth sports in the Los Altos-Mountain View, playing my Sunday morning soccer game, running into friends at local restaurants, and building rich relationships born of years of common experiences and context.
  • being present for my wife and children
    • While I struggle with presence and mindfulness, I work hard to be fully home and to really listen, hear, and understand the lives of my sons and wife.
    • Nothing gives me greater pleasure than time with my family.
    • Thich Nhat Hanh's book, the Art of Power, is a great book to read and reread to help reinforce the value of mindfulness.
  • pets
    • I've come to love the presence of animals...a hike in the hills with my lab, Sierra, or hanging at home with our bird, Storm. Caring for animals grounds you and children simply love them.
  • routine exercise
    • I work out every morning from 6-7am and then have coffee with four guys. Its a ritual and commitment that makes the start of every day magical.  Every Sunday at 7am, I play soccer with the same eighteen guys, hit Peet's after the game, and head home tired and happy.
  • never acting in fear
    • Being new every 1.5 years at school is a lesson in overcoming fear and insecurity. As I studied mindfulness, I came to realize that I let fear limit my joy of live, which led to poor decisions. Being afraid to fail, to try new things, fear of looking foolish, ignorant, silly....these fears are self-defeating and something I've worked really hard to overcome.
  • nature
    • Simply put, I love being outdoors in the wilderness and work hard to find time every year to spend time with my family off-the-grid.  In my secular life, the church of nature fills a spiritual void and provides solace, energy, and peace. 
  • redefining risk
    • In my early 30s, I was diagnosed with a kidney disorder. At the time, I was told that my kidney would fail by the age of 40 and I would need a transplant. Thankfully, I am in remission and have been for six years. Nevertheless, for a few years, I lived with a heightened sense of mortality and a revitalized commitment to make every day really count.
    • The modern economy is volatile and life-time employment a quaint memory. As I've worked on start-ups, my friends at McKinsey, Merrill, HP and other pillars of stability often remarked that they found my career path too risky. Many of them were later laid off as the economy soured.
    • I've come to believe that greater risks lie in not finding out what you are truly capable of, in  seeking safety at the cost of possibility, and in thinking that there will one day be a "good time" to take a chance.
Here's to the next forty years and to my parents, wife, family, friends, teachers, and colleagues for making my first forty simply wonderful. I love you and thank you.

Thursday, October 13, 2011

How to Fix The Economy

The Way Forward  
Moving From the Post-Bubble, Post-Bust Economy to Renewed 
Growth and Competitiveness 


Daniel Alpert, Managing Partner, Westwood Capital
Robert Hockett, Professor of Law, Cornell University
Nouriel Roubini, Professor of Economics, New York University

Good read.

Abstract of how to fix the problem. Read the paper to better understand their diagnosis for how we got in this mess.

5-7 year plan - a Marshall Plan, if you will, is required

  1. We face an oversupply of capacity and a "demand hole as as the private sector de-levers
  2. Requires sustained and strategically concentrated public investment in infrastructure, domestic energy, and technology.  Need to provide businesses confidence that demand will return.
  3. Need to restructure private sector debt - reduce relative debt burdens. Major program of debt restructuring, refinancing, and relief. Will require recapitalizing banks but will avoid Japanse problem of "zombie banks" with billions in loans where LTV is upside down
  4. Rebalance global trade and address structural deficiencies (best reflected in the US current account deficit), whereby China and growth economies begin to consume. Requires currency appreciation of the Renminbi.
  5. Specifics
    1. US Public Infra Spending
      1. $1.2 trillion/5 year public investment program targeting high return investments in energy, transportation, education, R&D, and water-treatment infra
    2. Debt Relief
      1. Debt restructuring and regulatory capital loss absorption. Drive resolution of trillions in impaired debt where the nominal value of the debt is > asset value. ex. mortgages that are underwater
    3. Increasing domestic demand in current- account surplus nations
      1. Global Rebalancing - currency realignment, domestic demand growth, reduction of current account surpluses. China, Germany, Japan, and petro-dollar economies need to spur domestic demand, allowing local currencies to appreciate against the USD, letting wages rise, etc.  Requires China to develop social safety net, reduce export subsidies, pay out dividends and incomes, and increase wages, and most importantly, allow for currency appreciation

Wednesday, October 12, 2011

Wall Street and the Failure to Prepare Graduates for the Real World

The financial services industry is growing its proportional share of national GDP and has done for decades. The best and brightest flock to Wall St with Goldman Sachs, Morgan Stanley, #hedgefund iconic names that call like sirens to our graduates. Literally, tens of thousands of our best minds work on Wall St inventing new methods of securitization and instruments.

While there are many reasons for our best minds to join Wall St, I believe that universities are failing to prepare students for the real-world and in faling to do so leave them vulnerable to bright shiny objects and paths of least resistance.

 Since 2008, we've come to rue the size and power of Wall St - the leverage, financial instruments, and too-big-to-fail institutions that have been bailed out but not fixed.  Moreover, there is an acute sense of resource misallocation. What are the long-term costs of so many talented young people investing their talents, drive, and innovations in finance?

I graduated from Harvard in 1994. Shortly after graduation, I reported for duty at 1251 Avenue of the Americas, the then-home of Morgan Stanley. Along with scores of my classmates, we descended on Manhattan to begin work as analysts, junior traders, and future financial mavens. Why did so many of us join Wall St?

 I see three key drivers:

  1. Path of least resistance
    1. Banks run incredibly efficient recruiting processes. With young alums driving the process, the banks make it incredibly easy to interview, visit, and ultimately accept banking offers.
    2. Dinners, lunches, senior banker discussions...the recruiting process hoovers up talented young people, mostly unsure of what to do next
  2. Money
    1. Finance companies pay materially above the mean and provide cash-strapped graduates with ready income and a path to income growth
  3. Failure to Educate
    1. Lastly, most colleges to a terrible job preparing graduates for the real world. At Harvard, the career counseling center and the College do very little to educate graduates about options, choices, and career paths.
    2. Education demands preparing students for life and giving them the intellectual tools and frameworks with which to develop and grow. Little emphasis, however, is formally placed on preparing college graduates for life as working professionals.
    3. The liberal arts bias makes such mercenary education an anathema, however, in hindsight the lack of real-work preparation is inexcusable.
    4. The completely random nature of how most people choose their first jobs is shocking. Think of the preparation we place on SATs, AP exams, GPAs, majors, and yet we don't work with our kids to lay out, explore, and select vocations with equal verve and discipline.
Recent research suggestions that the human brain does not reach maturity until ~25 years old. College students are early on the development path, often aimless with respect to major and vocation, and leave school book-smart but far from educated with respect to the super-set of career paths and vocations possible. This lack of education and preparation leaves students vulnerable to the siren song of corporate recruiting processes.

As a father of two boys, I talk to them about gap years - allowing them to live, work, and experience the real world, while continuing to reinforce the importance of education.  We are, I am afraid, not providing a balanced approach to education and the imbalanced focus on academics leaves young graduates truly ignorant about life as working professionals and how best to map their interests, passions, and talents to the wide variety of possible career paths our economy offers.

How can we better prepare students for a life of work?  How can we balance liberal arts educations with greater insight into vocational choices and possibilities?