Mike Industries

If you want to get really educated and infuriated about the current economic crisis, read this lengthy, entertaining, and highly disturbing piece by Michael Lewis on Portfolio.com. Thanks to kottke for the link.

The article is without a doubt, the best rundown of the hows and whys of almost everything about the crisis that I’ve read (this animated primer not withstanding). Just when you think you understand everything, you read something like this and realize how many layers of misdirection are between average investors and their investments. The key paragraph of the article to me was the explanation of how more bets were made on mortgages than the amount of mortgages that even existed (!):

Whatever rising anger Eisman felt was offset by the man’s genial disposition. Not only did he not mind that Eisman took a dim view of his C.D.O.’s; he saw it as a basis for friendship. “Then he said something that blew my mind,” Eisman tells me. “He says, ‘I love guys like you who short my market. Without you, I don’t have anything to buy.’ ”

That’s when Eisman finally got it. Here he’d been making these side bets with Goldman Sachs and Deutsche Bank on the fate of the BBB tranche without fully understanding why those firms were so eager to make the bets. Now he saw. There weren’t enough Americans with shitty credit taking out loans to satisfy investors’ appetite for the end product. The firms used Eisman’s bet to synthesize more of them. Here, then, was the difference between fantasy finance and fantasy football: When a fantasy player drafts Peyton Manning, he doesn’t create a second Peyton Manning to inflate the league’s stats. But when Eisman bought a credit-default swap, he enabled Deutsche Bank to create another bond identical in every respect but one to the original. The only difference was that there was no actual homebuyer or borrower. The only assets backing the bonds were the side bets Eisman and others made with firms like Goldman Sachs. Eisman, in effect, was paying to Goldman the interest on a subprime mortgage. In fact, there was no mortgage at all. “They weren’t satisfied getting lots of unqualified borrowers to borrow money to buy a house they couldn’t afford,” Eisman says. “They were creating them out of whole cloth. One hundred times over! That’s why the losses are so much greater than the loans. But that’s when I realized they needed us to keep the machine running. I was like, This is allowed?”

The article gives more context and clarity around that, obviously, but it’s shocking enough on its face.

On a related subject, another thing that’s been irking me lately is this notion that’s been appearing on CNBC a lot lately that “buy and hold is officially dead”. What a stupid thing for anyone who knows anything about investing to say. Investing is almost by definition buy and hold. Trading is something entirely different. The notion that people won’t be able to buy stocks in companies they believe in and ride them up over the long term anymore is ridiculous. These people point to charts and say things like “if you held onto X stock from 10 years ago until now, you’d be down 10%”, as if this latest huge crash was just another normal, expected event. Nevermind that before the crash, they would have been up big. Corrections are supposed to happen, but crashes like this are the result of things that should never happen. Things from the above article. The perfect storm of manipulations to the system that should have been illegal and will never be seen again.

Sure, we’ll have more manipulators working on different ways to get ahead of the system in the future, but I don’t think something this big will be seen again in our lifetime. That in mind, buy and hold (with proper asset allocation) would still seem to be not just the best investment strategy, but really, the only one. Anything less is just gambling. And if there’s anything we need to see less of in the economy right now, it’s gambling.

The Philadelphia Inquirer will now delay the online publishing of many of their stories until their printed newspaper is already on people’s doorsteps.

This strikes me as the dumbest idea I’ve ever heard out of the news industry. Protect a product on the decline by making a product on the rise intentionally worse?

Mmmmkay.

Why not just shut your website down entirely so that the only way to get Inquirer content is by paying for a paper to be produced and delivered to you?

Whatever happened to the good old days when you could glance quickly through the beverage aisle and tell the diet beverages from the good beverages? We’ve had such a great system for so long: if it says “diet” or “sugar free” it’s DIET, and if it doesn’t, it has some form of super tasty sugar derivative in it, whether it be cane sugar, high-fructose corn syrup, or something else awesome.

I used to be so good at telling the two drinks apart.

Lately, however, I’ve found myself repeatedly hoodwinked by the chemically synthesized impostor known as sucralose… or “Splenda”, its Christian name. The substance is 600 times sweeter than table sugar, and although it’s not as bad as saccharin, aspartame, or any other past cancer-powder, it’s still not sugar, and it still tastes like crap.

As such, I humbly request of beverage companies that you please quit trying to be sly about these DIET drinks and label them just as previous DIET drinks were labeled: with the letters D.I.E.T.

When I see those letters, I know that purchase of the beverage in question will result in palate-shriveling aftertaste and lack of drinking satisfaction. When I see those letters, I know to move right along.

Instead, however, these sucralose-tainted drinks often use small, subtle terms like “lower sugar”, “lower calorie”, and sometimes no marquee labeling at all. This is confusing as there are plenty of legitimate “lower sugar” drinks on the market that simply removed some of the sugar (see Paul Newman’s Lightly Sweetened Lemonade). Often times, you need to read the entire label to know the difference. And to make matters worse, a lot of these drinks contain sugar near the top of the ingredient list and sucralose near the end… so it’s not even sufficient to just “look for the sugar” anymore.

“Noni Berry” for metabolism and “Goji Punch” for immunity. Can you tell which one is the diet one?

To be clear, I have nothing against sucralose itself. It could very well be the best artificial sweetener ever invented. I just resent that marketers, by not clearly labeling it, have blurred the representation of what is and what isn’t a diet drink; and as a front-line soldier in the weekly quest to discover and sample new beverages, I’m just sick of getting hit by all this repackaged, remarketed diet shrapnel.

UPDATE: Literally the very nanosecond I pressed the Publish button just now, a Splenda television commercial came on. It’s everywhere.

True or false: Most major news organizations (e.g. The Washington Post, The Seattle Times, ESPN, etc) would be better off running their entire online publishing operations through a modified blogging platform (e.g. WordPress, Movable Type, Newsvine, or a home-grown solution) than through an enterprise CMS.

In other words, in five years, will mainstream news sites essentially be collections of individual writer blogs tied together mainly with section indexes and cross-linking?

I was standing in the NBC Nightly News studio on a cold Thursday night last January when Brian Williams’ on-air guest sat down for a quick chat with Brian, and the rest of the country. It was Tim Russert, talking with his trademark animation about how the fate of country depended on the results of the upcoming Super Tuesday primaries.

I positioned myself by the swinging glass door such that I could intercept Russert as he left the set during the commercial break. Sure enough, a minute later, he came bounding towards me, smiling like a kid who’d just aced his final exam.

“Hi Mr. Russert. My name’s Mike. I run Newsvine.”, I said, stepping in front of him to shake his hand.

He scanned my face against the hundreds of thousands he’d seen before in his life, trying to decide if he should recognize me, and then raised his hand to meet mine.

“What an election!” he shouted with a big smile, and then continued through the studio at full speed.

That is one of my many lasting memories — and my only personal one — of Tim Russert, who died of a heart attack yesterday at age 58. He was a man who made politics an interesting subject to follow, even for someone like me who is generally put off by the subject. He was known as the most prepared, incisive interviewer in the business, and he will be missed. Best wishes to the Russert family, his closest friends, and everyone else affected by his passing.

A few days ago, my ex-colleagues from ESPN.com launched a new site: Coolspotters.

It’s a soon-to-be gigantic database of public figures and the products they use. Want to see what watch Barack Obama wears? How about what jeans Steve Jobs wears? Or anything at all about Gisele Bundchen…

It’s all right there for your perusing pleasure, but even better, it’s 100% powered by the community (of course) so you can add photos and details if you happen to snap that candid shot of Anna Kournikova pulling up in her Escalade.

The site is interesting to me on many levels:

• Although I’m not generally interested in what public figures buy (although millions of people are), I’m very interested in the concept of how to express your consumer tastes on the web. I’m equal parts salesman, connector, and maven in the Gladwellian sense and product “endorsements” on the web have the ability to touch all three disciplines. Whoever successfully discovers how to get everyone to express their product endorsements on the web without seeming salesy is going to be a huge financial success.
• Coolspotters was created by a very talented group of friends who I’ve worked with for years and funded by the same people who funded us at Newsvine. In that sense, they are a sister company to us.
• The site has really fantastic click appeal. In other words, without registering or otherwise even “getting” the site, you can click around for hours (see previous words re: Bundchen and Kournikova). This is something I always wanted to do better at Newsvine; showcasing content that is a lot lighter on the brain and the attention span.
• The design, courtesy of Aaron Weyenberg and Mark Boulton, is of course fantastic.

So anyway, check out Coolspotters.com and let the fellas know what you think in the comments below.

Normally, I think of The Motley Fool as one of the most worthless financial sites around, spouting off attention-grabbing, sensationalist headlines just to pull readers into their abyss of mediocre financial articles. Here is a sampling of some typical headlines that have popped up over the past few weeks:

• This Mistake Could Cost You a Fortune
• Best. Investments. Ever.
• Turning $1,000 Into $277 Trillion

You get the picture.

However, today, a Motley columnist pointed to what may be the most prescient piece of content ever to appear on the site. Fittingly, it came from a reader on a discussion board and not an actual Motley Fool employee.

Here is the discussion board post. It’s quite amazing. It’s essentially a dead-on calling of the collapse of the bond insurance industry almost exactly five years before it happened. (For those who aren’t following, the bond insurance industry — specifically MBIA and a few other companies — has crumbled over the last few months and is threatening to take other pillars of the economy down with it… mostly because of bad subprime debt).

To have called almost this exact scenario five years before it happened is pretty amazing. I’m sure this person wasn’t the only one waving a warning flag, but it’s an incredibly interesting read.

In looking at the S&P chart below over the last five years, however, it’s clear that as bad as this development is, and as accurate as the prediction was, pulling out of the U.S. economy — at least so far — would have been a bad idea. “So far” being the operative qualifier there. :|

UPDATE: On a related note, this animated primer of the subprime mess is hilarious.

I often hear people say things like “if only I thought of YouTube a year before YouTube did, I’d be rich”, implying that given first-mover advantage, that person could create a company as great as YouTube. A statement like this completely disregards just how difficult YouTube was to build, from having the balls to allow brazen copyright violation, to building a great user experience, to scaling out the ability to serve millions of video streams a day. In other words, 99 out of 100 people who may have had the same idea at the same time would have failed to create anything remotely as successful as YouTube.

Other startups fall into the same class. Companies like Google and Amazon owe most of their success to great engineering, great execution, and great scaling.

But which are the startups of the last ten years which really do owe most of their success to someone simply having a smart idea first and acting on it quickly? Perhaps an easier way to ask this question is “if you could have one business idea from the last ten years as your own, which idea could you most assuredly turn into a success?”

In trying to think of good examples, the best one that came to mind for me was HotOrNot.com. Super simple idea. Developed by two people. Very low expenses. Millions of dollars in revenue per year.

Any better examples out there? What are the most slam dunk ideas of the last ten years?

I gave a talk today at an all-company meeting over at MSNBC on the subject of “news ecosystems” — the main point being that in order to produce the best news experiences in the world, you need to think of your audience as much more than just a passive sponge for your content. Passive news consumers can turn into active news participants if you give them the right environment.

This month, we launched a feature on Newsvine called “The NBC Nightly News Discussion Club” (available at nightly.newsvine.com). In concert with MSNBC’s new video player, the Discussion Club is the first and only example of a network news agency making every single segment of their 6pm national news broadcast available for instant viewing and discussion online. So if you’re watching the news and you see a segment you want to talk about with other people, you’re no longer limited to whoever else happens to be on the couch. There’s now a universe of people to discuss it with online.

It would be interesting enough if that was the end of it. However, we’ve also included the ability for users to submit questions to Brian Williams and have them answered in video form, right on the site. The first example is below:

So what we have so far is:

News agency broadcasts the news -> audience discusses the content -> audience shoots back questions to the anchor -> anchor answers (select) questions right on the site

Maybe I’m biased because this is partly my baby, but I just think that is super cool, and super significant.

I also think it’s great that Brian — probably the most recognized face in U.S. National news — answers all questions off the cuff, with no teleprompter, and with a level of frankness you don’t often see on national news broadcasts. In responding to one of the questions, he even mentions his political affiliation (independent), which is rare for news personalities to do.