Saturday, July 16, 2016

Adventures in Travel

America is in decline, and everything will be okay.  Let me explain.  Donald Trump and Hillary Clinton as presidential candidates look terrible, but not when you understand why they’ve become the nominees. 

Trump’s rise is easy to explain—he's the personification of anti-political correctness and doesn't talk down to non-coastal Americans despite being from New York City.  Uneven federal government spending and concentrated corporate technological and VC investment has helped shift affluence, influence, and higher-paying jobs to coasts and larger cities instead of smaller or non-coastal ones, and no one likes feeling unappreciated in today's winner-take-all economic battles.  Moreover, Trump voters aren’t all racists or xenophobes and resent being seen as such.  A typical Trump supporter may be anti-immigration but may base his or her opinion on valid prima facie data, namely, the increase in prisoners from various groups that are immigrants or recent descendants of immigrants. 

My conversations with GOP voters revolve around immigrants changing the character of their communities and the federal government doing little to help.  A primary perception is that illegal immigrants receive welfare or “free stuff”; and secondly, that newcomers cost more than native-born Americans, whether by diverting school resources to ESL programs not used by their children or their neighbor’s children, or by requiring more work to be done by existing police and jail employees but without additional tax revenue.  Globalization is also an issue in cities that have lost manufacturing jobs, but it’s really the feeling that China is getting the better end of trade deals that riles up the conservative base.  To summarize, Trump is winning because the Establishment and younger Americans have either ignored valid complaints from conservative voters or unfairly decided that such complaints are the result of bigotry or ignorance.  See, for example, the book titled, What’s the Matter with Kansas? (Which causes me to think, “Nothing.  Who wouldn’t want to live in Lawrence?”) “You may not listen to me,” a Trump voter might say, “but you cannot ignore Trump.”

Now, it is true that cities with immigrants, both legal and illegal, have experienced more economic growth than cities without them, and it is the illegal immigrants’ American-born children who receive welfare, not the illegal immigrants themselves.  The positive impact of immigration on economic growth is not restricted to American cities like San Antonio, New York, or San Jose—some studies cite Toronto’s working population as 51% immigrant.  What some liberals fail to consider is whether the average Midwesterner or Southerner wants to pay 650,000 USD for a townhome in a so-so K-12 district, wants to live around neighbors who don’t share his religious values, wants to see his son working as a lawyer rather than a machinist, or wants to see his daughter delaying motherhood until her 40s because two incomes are necessary to buy a home.  (Even coastal voters are starting to acknowledge the problem of constant inflation in essential goods and ever-increasing productivity—witness comedian Ali Wong joking, “I don’t want to ‘lean in,’ okay?  I want to lie down.”).  At the end of the day, when you ignore or mischaracterize complaints, there will be backlash.  Hence, the rise of Trump. 

What of Hillary Clinton, then?  Her rise to power is a logical extension of the Democratic platform--safe positions that provide the perception of diversity and social progress. When you’re winning eight years straight, and your opponent is throwing Hail Marys, there’s no need to rewrite the playbook.  Even the so-called Affordable Care Act required so much compromise, it ended up being a boon to the most powerful lobbyists in D.C.—the insurance companies. Younger voters, of course, will get the shaft—they’ve been getting shafted in almost every democratic country in the world, as high schools and colleges fail to teach economics and basic finance properly and as populations age and senior citizens vote consistently, causing tax revenue to shift to government-provided medical care and retirement programs. 

Meanwhile, what’s a top concern for voters in their 30s and 40s in industrialized nations?  Subsidized childcare.  You’d think such a request would be easy enough to implement--after all, how hard can it be to pass several individual and childcare provider tax credits?--but you’d be wrong.  As young couples marry later and have fewer children, they don’t have a strong enough voting bloc to be given substantial attention at the political table.  Call it the “Curse of Reasonableness,” but studied, incremental reforms require nuanced perspectives and knowledge of the law of unintended consequences, which don't get much play in the age of Kardashians, the six-second Vine, and the Pokemon Go app.  If you’re a Democratic politician, are you going to attract attention by promising childcare tax credits or free college tuition? 

That word, “free”—did you see it?  “Free stuff.”  It’s tantalizing, isn’t it?  A conservative voter will argue that nothing is free. You have to divert tax revenue from existing services if you add new ones; reduce morale by asking government employees to work more for the same pay (in California, during particularly difficult budget negotiations, some government union employees openly bragged about slowing down non-essential work); and/or raise taxes, almost all of which eventually come out of middle class voters’ pockets, because the rich have lawyers and bankers whose jobs revolve around finding loopholes to protect their clients.

If you’re a liberal voter, you’ll probably respond with arguments about income inequality, actual rather than posted corporate tax rates, the 1%, etc.  Even if you’re right, it doesn’t matter, and it won’t change the fact that about half the country doesn’t care as much about effective corporate tax rates as they do about attracting more corporate jobs while making sure they can pay the same taxes on their house today as they did when they bought it ten years ago and preventing haphazard social development that changes their community’s character.  As I like to tell Californians who don’t own Teslas, “You may look down on Southern conservative voters, but where do you think your car was assembled, and by whom?”

Underneath the Democratic Party’s lofty words and promises is a need for tax revenue and job growth.  First, those pensions promised to teachers and government union workers?  They have an assumed interest rate (or rate of growth) established by politicians, usually around 7.5%. Look up where you can increase your assets 7.5% a year, and the correct answers will take you to the stock market and hedge funds, both of which lead you straight to Wall Street.

Second, no political party can escape the reality of politics, which is that if the economy is doing well, the incumbent wins. How are jobs created in the 21st century?  Through debt, which has come from central bank printing. That’s why Hillary Clinton is in bed with the big banks and multi-national corporations, and that’s why Bernie Sanders never stood a chance.  If you live in a mid-sized city where you’re happy with your local mid-sized bank or credit union that keeps its own mortgages; content to see your daughter married at the age of 26 (maybe even with grandchildren already); and realize one reason Walmart invested in your community and created jobs, including well-paying managerial positions, is because of fewer regulations and lower corporate taxes (one Indiana resident with whom I spoke called the new Walmart the "new downtown"), then why would you vote for Hillary Clinton? If you think fewer regulations necessarily lead to a race to the bottom, consider that Walmart executives may have better reputations than Congressional members. (Stated another way, do you trust Apple's Steve Jobs to make the right decision, or Iowa Rep. Steve King?) What about abortion?  If you want one, you can now get that job at Walmart and fly to California or New York to get it. As for freedom, it’s not just about the 2nd Amendment for conservatives—as economist Nassim Taleb writes in Antifragility, “[W]e have never been more in debt ([and] for the ancients, someone in debt was not free, he was in bondage.”) 

In short, both Clinton and Trump are extensions of legitimate political positions and strategies on both sides.  Side A is tired of not being heard, while Side B chooses to hear nothing but bigotry.  I started this essay by saying America was in decline, and I hold that position.  What has changed is that it no longer depresses me.  Cities will stay segregated as voters focus more on observable racism than poverty and segregation as root causes of violence.  Tax revenues will fluctuate and continue to be uneven nationwide.  Central banks will continue papering over structural problems.  Lawyers will continue to find loopholes, both legal and illegal, for their clients. Yet, there is value in realizing both presidential candidates, though far from ideal, are extensions of the current political climate, because it means America has not gone crazy—it’s just lowered its expectations.  Expectations can be modified, even if it takes another 50 to 100 years.  As optimists such as Warren Buffett have written,

“Indeed, most of today’s children are doing well. All families in my upper middle-class neighborhood regularly enjoy a living standard better than that achieved by John D. Rockefeller Sr. at the time of my birth. His unparalleled fortune couldn't buy what we now take for granted, whether the field is, to name just a few, transportation, entertainment, communication or medical services. Rockefeller certainly had power and fame; he could not, however, live as well as my neighbors now do. Though the pie to be shared by the next generation will be far larger than today’s, how it will be divided will remain fiercely contentious. [Italics mine.]  Just as is now the case, there will be struggles for the increased output of goods and services between those people in their productive years and retirees, between the healthy and the infirm, between the inheritors and the Horatio Algers, between investors and workers and, in particular, between those with talents that are valued highly by the marketplace and the equally decent hard-working Americans who lack the skills the market prizes. Clashes of that sort have forever been with us and will forever continue. Congress will be the battlefield; money and votes will be the weapons. Lobbying will remain a growth industry.” [2015 Berkshire Hathaway Shareholder Letter]

One can recognize the absence of psychological well-being (apart from material comfort, anyway) in Buffett’s equation and still appreciate his realism. What does this mean for me, a U.S. citizen and American immigrant who recently told someone, “I hate America,” shortly after the Philando Castile shooting?  It means that I no longer expect as much from America, but just because America has become older and less sturdy, it does not make her less beautiful.  If Tokyo can be the most prosperous city I’ve seen in my travels, despite Japan’s debt-to-GDP ratio of 220%+, perhaps government debt, on its own, won’t cause a country to collapse.  Maybe we’ll adapt, even if it means more segregation, less immigration, more cross-border violence, more divorce, more student loans, more single parents, more incompetent or unaccountable government employees, and more unaffordable housing.  Maybe on the way down, we’ll re-evaluate what it means to have honor as an American. 

Maybe a commonly agreed upon definition of American honor will be related to the ancient Mediterranean ethic, Factum tacendo, crimen facias acrius (He who does not stop a crime is an accomplice—from Taleb’s book, Antifragility.)

Perhaps we’ll adopt a more modern version of honor similar to George Meyer’s, as related by Adam Grant: “(1) Show up. (2) Work hard. (3) Be kind. (4) Take the high road.”

Or maybe cowardice rather than honor will be enhanced by technology, as “society is fragilized by spineless politicians, draft dodgers afraid of polls, and journalists building narratives, who create explosive deficits and compound agency problems because they want to look good in the short term.” (Taleb) 

But maybe things will work out, even as living spaces become smaller, consumerism and materialism continue to rule the day, and countries erect more barriers against foreign workers but not foreign capital. 

As for me, I’m going to keep traveling.  I’ve been to 10 cities in the past four months, increasing my lifetime “countries visited” count to about 30. 

I’ve decided the world is based on academic assumptions that no longer apply, but which have prevailed in large part because central bank spending has maintained the status quo.  For example, most economic theories and approaches are from times when tangible products ruled the day rather than services, which are more difficult to track, more easily manipulated, and more subject to cross-border competition. Adam Grant points out, “In the 1980s, the service sector made up about half of the world’s gross domestic product. By 1995, the service sector was responsible for nearly two thirds of world GDP.  Today, more than 80% of Americans work in service jobs.” (Of course, fraud and manipulation still happened in the “analog” world.  One banker was fooled into guaranteeing a loan to a business by inspecting only the top of a vegetable oil tanker—the rest was water.) Still, there’s an upside to our changing world: even if you didn’t go to college or didn’t pay attention in high school, it may not matter in the long run—the information being taught might be outdated and therefore inapplicable to your life. 

My most interesting conversations have been with women. Educated women worldwide are quietly rebelling against traditional expectations.  (If I faced the prospect of coming home to a man who was content with drinking beer while watching a baseball game, perhaps I’d go shopping more and stay single, too.)  It’s easy to see the future will belong to societies that achieve higher female participation in politics and business through merit-based factors and that manage to encourage career-oriented women to have children.  Whether this means more subsidized childcare, a greater appreciation for introverts, tax credits for each child, and/or social pressure on men to do more housework, I don’t know.  I do know, however, that current and future economic forecasts are based on women continuing to have an average of two consumers—er, children—and those children receiving adequate educations and stable living environments that discourage violent behavior.  Ideally, those two children would not be latchkey kids and would attend college and not graduate with crushing debt and non-existent practical skills, but from what I’ve seen, many educated women are not going to comply with all of the above assumptions.  If uneducated women in poorer countries have more children over the next 100 years than educated women in richer countries, and public education systems are not reformed to increase practical and critical thinking skills, we could be looking at a world where we have a few Japans selling products to the rest of the world, or we could be looking at land and water needs and disputes controlling international relations. There are many in-between scenarios, but none likely without more segregation and walls. 

Let’s hope we figure out how to appreciate ambitious, career-oriented women and not end the human race in the process.  As the folk wisdom goes, “If momma ain’t happy, ain’t nobody happy,” but what happens when there’s no mommas left, or they’re mostly in some countries but not others?

I’m single, 38 years old, debt-free, and childless.  I’ve decided that my new criterion for a relationship is whether a woman believes in character and whether she has it herself.  In the modern world, where everything is negotiable and where outcomes are unpredictable, only character will remain the true constant.  I’ll be visiting Canada and Australia at some point in my travels.  As Paul Coelho wrote in The Alchemist, “[W]hen you want something, all the universe conspires in helping you to achieve it.”

I’m going to find out if he’s right. 

Monday, April 18, 2016

Tower of Babel

As I get older, I look back on my life and wonder what's next.  I've been on this planet a short while--I'd give a number, but it would have too many zeroes after the decimal point to be relevant.

I've learned a few things I'd like to share.

1.  Morality is always key. It doesn't have to come from any particular source, but it should always be the primary consideration in any transaction, whether governmental, commercial, or personal.

The trouble with morality is that it cannot be absolute; otherwise, it wouldn't account for humanity's inherent imperfection.  Thus, the real question is when one must act, on what information, and on what percentage of accuracy.  The only answer I've found so far is that diversity, integrity, and confidentiality are paramount.

As for confidentiality, without some measure of privacy, we may be a safer country, but at such a massive cost of reduced innovation and happiness, we would lose our soul.  Henry Ward Beecher was on point when he wrote, "Liberty is the soul's right to breathe, and when it cannot take a long breath laws are girded too tight. Without liberty, man is a syncope."

The best result in an age of advanced, mobile weaponry and technology so innovative it can be both invisible and imaginary is to have fierce, adversarial competition between all players--unions, corporations, small businesses, and even between government agencies, state, federal and local.  One never knows where one will find morality and integrity, so one cannot eliminate any group entirely.  The one exception might be government unions, such as police and teachers' unions.  There must be some way to reward and appreciate good teachers without being forced to hold onto the bad or lazy ones.  The solution, for now, is competition, namely, charter schools, and a greater reliance on the Socratic method.  (Of course this does not mean charter schools are given a pass if they, too, become corrupt or inefficient.)  Also, let me be clear--the best friend you will ever be lucky to know is a good, honest cop.

2.  We need intelligent diversity, not diversity for the sake of diversity.  Right now, we are in the unfortunate position of promoting visible leaders on the basis of race or some other overt trait while leaving behind the vast majority of people in the organization.  Such an approach is the worst of all possible worlds--it fails to promote based on merit, which disserves the public while antagonizing good employees who favor merit, causing them to leave or become demoralized.  There must be a better way.  I personally admire IBM's Ginni Rometty and Santa Clara County Sheriff Laurie Smith and look forward to learning about their thoughts on this subject in print.

At the same time, I do not believe it is effective for women to speak about diversity--as one of the smartest women in my life once told me, "Don't talk about yourself--if you're good, others will talk for you."  This same woman--who was older than me and who guided me professionally--called herself an "idiot savant."  She was anything but.  Smart people must realize that the reason they have doubts and depressive episodes is because they are smart and their self-doubt is due precisely to their different level of abilities.  In a sense, they are mutants, and how they interact with others will determine whether they go to Magneto or Xavier.  To take a personal example, one heartbreak I had in college caused me to miss dating a wonderful woman later on.  She would have been perfect for me if I had the courage to overcome my own bias, but I was too young.  I call myself young in the brain at the age of 38. While youth has speed on its side, it lacks the experience to fully create unified theories.  (I know now that such a relationship would have been inadvisable, so I have no regrets.)

3.  A young man should date older women.  The Prophet Muhammad was nothing but an illiterate peasant when he met Khadija bint Khuwaylid, fifteen years older than him.  With her support and guidance, he became one of the greatest men in the history of civilization.  He outlawed slavery long after Christ was born.  While Muhammad (PBUH) freed Bilal the slave, earning him the enmity of the Arab establishment, Christ had nothing to say on the topic specifically, at least not in print.  Meanwhile, Christ, a bachelor, meandered around, direction-less, eventually felled by his own people, who could not stand a man smarter than they who had no formal training.

Christ's example was in his willingness to speak out against inconsistencies and hypocrisy regardless of the source.  He was able to rise up because he had more information than everyone else--he went to the dark, unvarnished corners because that's where the most honest and dishonest people in his time were.  In a better time, Christ would have lived.  There's a lesson there for all of us--how do we build a society that would not only not have killed Christ, but would have allowed him to prosper.

4.  Local police partnering with the federal government is one of the worst developments in modern times.  Think about what I said above about diversity of information and confidentiality.  Then think about which government branches and workers need to be the most protected if they are honest.

If you don't get it yet, let me explain.  The federal government will always have more money and technology than local entities.  If local entities partner with the federal government, they will become de facto arms of one agency.  If that large agency is led by a dishonest or incompetent person, it will resemble Sauron.  Such an approach forces the good and competent people to invest in becoming larger as well, creating a limited approach that eliminates diversity and guarantees destruction.  By "limited approach," I mean duality.  With just two large players, one will eventually gain an advantage and eliminate the other, resulting in a singularity.  When people refer to the Judeo-Christian philosophy, I see only a limited duality.  I see a world that currently needs clearer rules and strong people to enforce those rules.  Consequently, I see a world of Shia Islam fused with Rumi's Sufism--compassion, playfulness, and an unequivocal hatred of all kinds of slavery.  Of course I do not say this is the only way to achieve a just world, or that such an approach will be the best one 400 years from now.  I continue to see only two absolute truths: integrity and humility.

4.  Like morality, humility is key.  When I say humility is an absolute truth, I hope you see the contradiction. Being humble means that one can never know whether he or she has discovered the absolute truth.  You just have to keep trying.  Never give up.  Please, if you know you are different, if you know you are smarter than the rest of them, never, ever give up.

5.  "Give me a child until the age of 7, and I will show you the man or woman." (See what I did there?)

6.  I dedicate this post and my life thus far to two people:

Nicanor Amper IV of Westmont High School.  From San Jose Mercury News: "There are five generations of Nicanors in the Amper family, many who served in the military and many who are devout Christians. Nicanor's name comes from the New Testament, as one of the seven 'honest men' in the Acts of the Apostles."  I do not get as easily emotional on any topic except when I think of Nic.  May he rest in peace.  I know if heaven exists, he will be the one to welcome me there.

Kevin McKenney, Judge, Santa Clara County Superior Court.  If I am blessed enough to have children, and if one of them happens to be a boy, I hope my wife will agree to name him "Kavon."

And so it goes.

Friday, June 22, 2012

Google 2012 Annual Meeting, Facestuffing Edition



Welcome!  Above is a pic of the dessert served at Google's 2012 annual shareholder meeting.  (Thank you, Larry, Sergey, and Eric!)  I've attended many Bay Area shareholder meetings (see right hand side of blog, about a third of the way down), and I used to blog in detail about Google's annual shareholder meetings.  The company now uploads them on YouTube, so a blog post seems redundant; however, if you're interested in some older reviews, here is one from 2009 and another review from 2010.  I miss the more informal earlier meetings, when it was just Sergey Brin and Larry Page on two stool chairs answering questions.  Of course, back then, fewer shareholders attended.  

One tidbit you may not pick up from the video--almost everyone who attended is a senior citizen or retired.  (The meeting usually starts around 2:00PM, which means almost no one can attend except for retirees.)  This year, the meeting was fairly uneventful.  Neither Larry Page nor Sergey Brin attended.  We had one shareholder who liked the fact that Google stood up to China, said he used to be in the Air Force, and ended his spiel saying how he would deal with China: "Bomb them."  He didn't look like he was joking.  I asked the executives to better fine-tune the captioning features on YouTube videos.  I've noticed that except for a few Khan Academy videos, the captioning feature is almost worthless.  Most of the words are not consistently transcribed, and over the past two years, the captioning feature hasn't improved much.  I asked Mr. Schmidt to imagine a world where he had a grandchild who was deaf, and the grandchild would one day come to him and say, (paraphrase) "I love the internet, but I can't fully engage with it.  Was there something you could have done back in 2011, 2012, and 2013 to fix this?" I said I hoped he would be able to give his grandchild a satisfactory answer.   

Anyway, if you're interested in more shareholder reviews, scroll about a third of the way down the right hand side of this blog.  You will see plenty of firsthand accounts of various shareholder meetings, including Berkshire HathawayDisneyElectronic Arts, Apple, Starbucks, and more.  The rest of the blog discusses diverse topics, including economics, politics, law, Indialittle-known filmsand even Mark Twain.  

Saturday, November 5, 2011

Justice Ginsburg


California Lawyer (November 2011) has an excellent interview with Justice Ruth Ginsburg.  Below is my favorite part: 

Q. I'd like you to talk a little bit about the cases that I've spent my life studying, the key gender cases that began in the 1970s, which you litigated and wrote amici briefs for. The 14th Amendment, which guarantees equal protection under the law, had been settled interpretation for, I think, 104 years. What made you think that you could get the courts to overrule more than a century of precedent?

A: The times. The Court is a reactive institution. It's never in the forefront of social change. When you think of Brown v. Board of Education, it was not only that Thurgood Marshall was a brilliant lawyer. It was the tenor of the times. We had just fought a war against an odious form of racism, and yet our troops through most of World War II were separated by race. Apartheid in America really had to go. Similarly, by 1970 the women's movement was revived, not just in the United States but all over the world. As a great legal scholar once said, the Court should never react to the weather of the day, but inevitably it will react to the climate of the era, and the climate was right for that change.

Perhaps, at least in a peaceful society, all good things come to those who wait?  I've sometimes wondered whether the Supreme Court's decision upholding Muhammad Ali's conscientious objector status would be the same if the case had arrived at the Court a few years earlier. In one article I read--it was from Men's Journal (Nov 2011)--the author wrote that the Supreme Court was set against Ali until a law clerk gave them a copy of Haley's Autobiography of Malcolm X. After reading the book, the Court allegedly had a change of heart. True or not, the anecdote demonstrates that the law, so long as it relies on interpretation by men and women, necessarily intersects with their bias.

In any case, regarding the efficacy of the Constitution against government tyranny--whether slavery, Jim Crow, Japanese internment camps, Abu Ghraib, etc.--I'll leave you with this Lysander Spooner quote: "But whether the Constitution really be one thing, or another, this much is certain--that it has either authorized such a government as we have had, or has been powerless to prevent it." [Updated on 3/25/12]

Bonus: see also "When Mass Murder and Theft of All Human Rights Were 'Legal': The Nazi Judiciary and Judges," by Hon. Richard D. Fybel, California Litigation, Vol. 25, No. 2, 2012, page 15-21.  He discusses Nazi Germany and the judicial branch's politically-convenient prostration before Hitler.

Update on 6/7/14: The Trials of Muhammad Ali (2013) includes an interview with a Supreme Court law clerk who worked on Ali's conscientious objector case. The Supreme Court almost dismissed the case but sent it back for review because a new wiretap issue arose (the government admitted to spying on conversations between MLK and Ali). Then, when the case returned to the Supreme Court after three and a half years, the preliminary vote was against Ali 5 to 3 until Thomas G. Krattenmaker, Justice Harlan's law clerk, argued--many times to Harlan--that the Nation of Islam should be treated the same as Jehovah's Witnesses who believed that only God may compel the followers to war and no one else. After reading the Autobiography of Malcolm X (1965) and Message to the Blackman in America (1965), he convinced Justice Harlan, who switched his vote, making it 4 to 4.  However, a deadlocked 4-4 vote would have put Ali in jail for 5 years and generated no substantive written opinion explaining the Court's rationale.  Then Justice Potter found precedent to rule in a narrow way that applied only to Ali based on denial of due process, which permitted the government to continue with its draft while allowing only Ali to file for C.O. status (rather than every single Nation of Islam member or prospective member). The revised opinion resulted in a unanimous 8 to 0 decision (Justice Thurgood Marshall recused himself because the NAACP Legal Fund was involved). The Court ruled Ali was denied due process because the government argued that he was insincere in his religious beliefs at the Draft Board yet later told the Supreme Court it believed Ali was sincere. And just like that, history was made. Without Krattenmaker, Harlan, and Potter, Ali goes to jail, never reclaims the title, and never raises the torch at the '96 Olympics.

BonusInterview with California Supreme Court Justice Stanley Mosk (1998):

LaBerge: [H]ow do you think both you and just the court in general can influence social policy, or vice versa, does social policy influence the decisions?

Mosk: Well, theoretically, we should be governed solely by the law and not by individual concepts of rights and duties.  But inevitably, individual rights do enter into opinions that may be written.  Whether that's good or bad, effective or ineffective, is always debatable.  [pp. 84]

Mosk: I have a certain sympathy for individuals in our society.  Our society has grown so large and impersonal that I think we sometimes have the tendency to overlook an individual's rights and obligations. [pp. 85]  

Saturday, October 22, 2011

Movie Quotes

Adam's Rib (1949): "Lawyers should never marry other lawyers. This is called inbreeding, from which comes idiot children and more lawyers."

"What is marriage? Tell me that. It's a contract. It's the law. Are you going to outsmart that, the way you've outsmarted other laws?" (Spencer Tracy to Katherine Hepburn)

"Assault lies dormant within us all. It requires only circumstance to set it in violent motion." (Hepburn's closing argument)

The Art of the Steal (2009): "One man's conspiracy is another man's political consensus."

Cape Fear (1962): "You can't arrest a man for what he might do. And thank heaven for that."

[Bonus: "There is no such crime as a crime of thought; there are only crimes of action." -- Clarence Darrow]

Citizen Kane: (1941): Woman: "I don't know many people." Kane: "I know too many people. I guess we're both lonely."

Dial M for Murder (1954): "[P]eople don't commit murder on credit."

Eat Man Drink Woman (1994): "Eat, drink, man, woman. Basic human desires. Can't avoid them. All my life, every day, that's all I've ever done. It pisses me off. Is that all there is to life?"

Equinox Flower (1958) (not a good movie, but I liked these lines): "Then everyone's inconsistent. Everyone but God. Life is absurd. We're not all perfect. As a scholar said, 'The sum total of inconsistencies is life.'"

The Field (1990):
McCabe: "There's a law stronger than the common law."
Priest: "What's that?"
McCabe: "The law of the land."

Gilmore Girls (2001): Luke, on marriage: "It's a bureaucratic civil ceremony and a pretty pointless one...It's not biologically natural for people to mate for life. Animals don't mate for life. Well, ducks do, but who the hell cares what ducks do? I mean, people grow and evolve their whole lives. The chances that you'll grow and evolve at the same rate as someone else are too slim to take. The minute you say, 'I do,' you're sticking yourself in a tiny little box for the rest of your life. But hey, at least you had a party first, right?" (Season 2, "Red Light on Wedding Night")

Gloomy Sunday (1999):
Schnefke: "But we must be careful not to stray too far outside the law."
Hans: "Of course.  But the beauty and vibrancy of the law lies in its flexible boundaries."
[Two Nazis in Hungary around 1939 discussing their future, indirectly demonstrating that the law, regardless of its substance or intent, usually favors those in power.]

The Jane Austen Book Club (2007): "He looks at me like he's the spoon, and I'm the dish of ice cream."

Juno (2007), from the protagonist, a pregnant high school student: "Oh, I'm a legend. The tale of the cautionary whale, you know?"

Kind Hearts and Coronets (1949) (a very fun dark comedy): "I must admit, he exhibits the most extraordinary capacity I've ever encountered for middle age in a young man of 24."

The Last Kiss (2006) (overall, not a great movie, except for these lines): "Stop talking about love. Every a**hole in the world says he loves somebody. It means nothing. What you feel only matters to you. It's what you do to the people you say you love--that's what matters. [Indeed] It's the only thing that counts."

Lilies of the Field (1963): "To me, it [the chapel] is insurance. To me, life is here on this Earth. I cannot see further, so I cannot believe further. But if they are right about the hereafter, I have my insurance, seƱor."

The Lion in Winter (1968) (a must-see film): "He came from the North to Paris with a mind like Aristotle's and a form like mortal sin. We shattered the Commandments on the spot."

A Man for All Seasons (1966):
Roper: So, now you give the Devil the benefit of law!
Thomas More: Yes! What would you do? Cut a great road through the law to get after the Devil?
Roper: Yes, I'd cut down every law in England to do that!
Thomas More: Oh? And when the last law was down, and the Devil turned 'round on you, where would you hide, Roper, the laws all being flat? This country is planted thick with laws, from coast to coast, Man's laws, not God's! And if you cut them down, and you're just the man to do it, do you really think you could stand upright in the winds that would blow then? Yes, I'd give the Devil benefit of law, for my own safety's sake!

Mario's Story (2007): "[E]ventually good triumphs, but before it triumphs, a lot of people have to suffer."

Miller's Crossing (1990): "All in all, not a bad guy...if looks, brains, and personality don't count."

My Favorite Year (1982): ‎"Comedy? You can't write comedy in California. It's not depressing enough!"

Nashville (1975): "Congress is run by lawyers. A lawyer is trained for two things, and two things only: to clarify and to confuse. He does whichever is to his client's advantage."

Night of the Hunter (1955): "Open the door, you spawn of the devil's own strumpet!"

One Day (2011): "She lit up with you...She made you decent. And then in return, you made her so happy."

Public Enemy (1931): "You're a spoiled boy, Tommy.  You want things, and you're not content until you get them.  Well, maybe I'm spoiled, too."

Quai des Orfevres (1947): "Maurice is my flame. He may not burn bright, but he lights my way."

Revolutionary Road (2008): "No one forgets the truth, Frank. They just get better at lying."

Sabrina (1954):
Linus Larrabee: What’s money got to do with it? If making money were all there were to business, it'd hardly be worthwhile going to the office. Money is a by-product.
David: What’s the main objective? Power?
Linus: Agh! That’s become a dirty word.
Davis: Well then, what’s the urge? You’re going into plastics now. What will that prove?
Linus: Prove? Nothing much. A new product has been found, something of use to the world. So, a new industry moves into an undeveloped area. Factories go up, machines are brought in, a harbor is dug and you’re in business. It’s purely coincidental of course that people who've never seen a dime before suddenly have a dollar. And barefooted kids wear shoes and have their teeth fixed and their faces washed. What’s wrong with a kind of an urge that gives people libraries, hospitals, baseball diamonds and movies on a Saturday night?

The Shop Around the Corner (1940):
Pirovitch: I'm sure she'll be beautiful.
Alfred Kralik: Well, not too beautiful.  What chance does a fellow like me--
Pirovitch: What do you want?  A homely girl?
Alfred Kralik: No, no.  You knock on wood for me.  Just a lovely, average girl.  That's--that's all I want.

Slumdog Millionaire (2008): "Money and women: the reasons to make most mistakes in life."

Starting Out in the Evening (2007): "I find very few men of my age interesting. They're like chewing gum--ten minutes of flavor followed by bland repetition."

10,000 Black Men Named George (2002): "Nobody got anything in this country unless they took it.  Hell, I admire the white man.  He wanted Manhattan Island, gave the Indians a bottle of whiskey, and he took it.  White folks died, suffered, sacrificed.  Took a country and built it up.  Yeah, they brought us here in chains, we know that.  We're still in chains--they're a tad lighter, but they're still chains. And the only way those chains are gonna get broke is if we break 'em.  Ain't nobody else gonna do it for us...We're the same, you and me...I just like money and p*ssy more than you do." -- Milton P. Webster, black Republican (1887-1965), to union organizer and Democratic civil rights leader A. Philip Randolph

To Catch a Thief (1955):
Francie: Money handles most people.
John: Do you honestly believe that?
Francie: I've proved it.
John: You're a singular girl.
Francie: Is that good or bad?
John: Oh, it's good, it's quite good. You know what you want. You go out after it and nothing stops you from getting it.
Francie: You make it sound corny.
John:
Oh no, you're a jackpot of admirable character traits.
Francie: I already knew that.
John: Yes, I will say you do things with dispatch. No wasted preliminaries. Not only did I enjoy that kiss last night, I was awed by the efficiency behind it.
Francie: Well, I'm a great believer of getting down to essentials.


Venus (2006):
"For most men, a woman's body is the most beautiful thing they will ever see."
"What about for women?"
"Her first child."

Wall Street (2010): "Most people, they lose, they whine and quit. Don't run when you lose, don't whine when it hurts. It's like the first grade...Nobody likes a crybaby."

X-Men 2 (2003): 
Storm: Sometimes anger can help you survive.
Nightcrawler: So can faith.

You Can't Take It With You (1938): Lincoln said, "With malice towards none; with charity to all." Nowadays they say, "Think the way I do, or I'll bomb the daylights out of you."

Tuesday, June 28, 2011

Marvell Technology's Annual Shareholder Meeting (2011)

Last year, I attended Marvell Technology Group Ltd.'s (MRVL) annual shareholder meeting and praised President/CEO/Chairman Dr. Sehat Sutardja. Dr. Sutardja is Chinese-Indonesian, one of the most successful entrepreneurs in the world, and seems both calm and dapper at the same time. One doesn't see very many Asian CEOs, even here in Silicon Valley, and I view his success as proof that the American Dream is alive and well. Since last year's shareholder meeting, however, Marvell stock decreased about 14%, even as the NASDAQ increased about 26%. This year, I was looking forward to hearing why the company stumbled. I wasn't expecting epiphanies, but I could not have predicted a lack of direct answers to my questions; the company's VP of Worldwide Legal Affairs essentially cutting me off; and Investor Relations telling me after the meeting that if I published something "incorrect," I would be "liable."

It all began when I walked into the Hyatt Regency Hotel in Santa Clara, California. Like last year, the food was good--granola, yogurt, berries, water, and other healthy options. I appeared to be one of about six people present who were not working for Marvell. Dr. Sutardja handled most of the formal portion of the meeting and sat at a table in the front of the room with the VP of Worldwide Legal Affairs Thomas Savage and CFO Clyde Hosein. There were six shareholder proposals. At no point in time were shareholders given an explicit opportunity to ask questions or make comments about any of them. The polls opened, then closed shortly thereafter, and we were told that all of the proposals passed. (If North Korean government officials were in charge of shareholder elections, I imagine they wouldn't need to deviate much from Marvell's script.)

The lack of comment on the proposals was particularly interesting because several proposals seemed downright Orwellian. Proposal 5 reduces from three years to just one year the time period for a Director's stock/RSUs to fully vest. See pages 63-64, 10K: "[R]emove the requirement that awards of restricted stock, RSUs, and/or performance units/shares granted...shall not be fully vested until a minimum period of 3 years from the date of grant...Section 11(c)(ii) will be amended so that each Annual RSU Award will vest and become exercisable as to one hundred percent (100%) of the shares...on the earlier of the next general annual meeting or the one-year anniversary of the Annual RSU Award grant date." Basically, company Directors get an opportunity to make more money in one year or less, instead of gradually over three years.

Generally speaking, longer vesting periods incentivize longer term outlooks. For example, if you are supervising a company's officers, and you know your shares will fully vest in one year rather than three, you have an incentive to think in terms of one year performance (short term), not three year performance (longer term). The CFO later appeared to defend the shorter vesting period by arguing that the proposal applied only to Marvell's Directors. Presumably, he meant that officers, not Directors, run the day-to-day operations of the company and continued to be incentivized over the longer term. Yet, this change in vesting periods means the Directors are now incentivized differently than the officers of the same company.

Why is any of this Orwellian? Proposal 2 in the same 10K states, "Our primary business objective is to create long-term value for our shareholders." On the same page, Marvell highlights the company's long term focus: "Long-Term Focused: Promote a long-term focus for our named executive officers through incentive compensation." (page 58, 10K) In short, welcome to Newspeak--even as Marvell is changing its compensation policy to incentivize shorter-term performance by its Directors, it claims it cares most about long-term performance.

When the formal portion of the meeting was over, the company CFO, CEO, and attorney in front of the room failed to ask if anyone had questions. They simply got up and started walking off. I piped up--as I am wont to do when I see something unusual--and said I had some questions. I questioned the company's proposal to shorten the vesting period. The CFO said that viewed together with the other shareholder proposals, it was "logical" to shorten the vesting period. I responded that the proposal incentivized the short term over the long term. That's when I got the answer about the proposal only affecting directors, not officers. The CFO also added that stock compensation was not the primary motivator when deciding a company strategy, and stock prices move based on numerous factors--all of which is true, but why incentivize short term performance at all? Why not make directors hold onto options/RSUs/shares as long as possible before being able to cash out? I pointed out that Marvell's stock price had been abysmal compared to both the S&P 500 and the PHLX Semiconductor Index. Page 38 of Marvell's own 10K shows that while the S&P and SOX showed gains, Marvell's stock price declined by almost 50% during the time period shown. (Later, the Investor Relations contact told me I was "cherry-picking" dates--even after I pointed out I was just citing the company's own materials.)

Given the stock's relatively poor performance, I asked about specific plans for the future. I never got an answer that was satisfactory to me. Someone pointed out all the different markets Marvell was involved in. Good for you, I thought, before saying that mere involvement in different markets is different than being able to actually compete in those markets. I again asked for specific plans to turn around the stock price and asked how the company planned to compete. Dr. Sutardja said that Marvell had started out as a small company and had always managed to compete against larger companies and entities. I still hadn't received an answer that was satisfactory to me about specific plans, but Mr. Thomas Savage then told me I had used up my questions and asked if there were other questions from anyone else. No one else raised their hand, so I politely pointed out that no one had answered my question about the company's specific plans to improve the stock price. At this point, Mr. Savage essentially prevented me from asking further questions in the open format and closed the meeting.

Despite Mr. Savage's actions, Dr. Sutardja was kind enough to talk to me after the meeting. The CFO also chimed in, saying that answering my questions could take three hours, i.e., I was not asking questions that could easily be answered in a short period of time. Dr. Sutardja again reminded me that Marvell started out as a small company and was competing against large companies like Qualcomm (QCOM) and would continue to use "efficient implementation" to differentiate itself. Mr. Savage hovered close by while I was listening to Dr. Sutardja and exited the room with him before I could ask him what he meant by "efficient implementation." As I left the meeting, the VP of Investor Relations made a beeline for me and asked me pointed questions, trying to get an idea of who I was and where I was from ("Who do you work for? Are you with the press?"). I said the company's vague responses to my questions about specific plans did not inspire confidence, and I would be writing about my experience. He told me if I published anything "incorrect," I would be "liable." I asked him if he was threatening me, and he said he wasn't threatening me. I then left the meeting.

Marvell's directors, officers, and employees should realize their failure to provide information about specific turnaround plans is unacceptable when their stock price has drastically underperformed the relevant indices. Telling shareholders that the company has little control over its own stock price is no way to win over anyone. I doubt Marvell wants to hear any of this--but I will defer to George Orwell, especially in light of the company's comment that I may be "liable" for incorrect information: "If liberty means anything at all, it means the right to tell people what they do not want to hear."

Disclosure: I own an insignificant number of Marvell (MRVL) shares, and I do not plan on initiating any new positions within the next 72 hours.

Friday, June 17, 2011

Justice Hugo Black on State Secrets

Justice Hugo Black, concurring opinion, joined by Justice William Douglas, New York Times Co. v. United States (1971) 403 U.S. 713, 717:

The guarding of military and diplomatic secrets at the expense of informed representative government provides no real security for our Republic... [P]aramount among the responsibilities of a free press is the duty to prevent any part of the government from deceiving the people and sending them off to distant lands to die...

More here.