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Category: zettel

scraps of paper

The Form of the Question: The Form of the Answer

Published December 6, 2008 by cgerrish

To what extent does the question establish the possible ground from which an answer can emerge? Does the shape of the question determine the shape of the answer? What happens when the question doesn’t match the subject?

Search is a query against a fixed set of data. To achieve depth the volume of data must be enormous. What happens when you search a real time stream? It’s a batch query against a stream of data. There are two common examples:

  • Getting a quote on a stock during market hours on a 15-minute delayed basis
  • Getting a quote on a stock during market hours on a real-time basis

Each is just a snapshot;  a moment in time. The 15-minute delayed quote isn’t information you can trade on. The moment for action has long since passed. The real-time quote is almost time you can trade on– but it’s still just a snapshot. A trader has a live quote that changes as trades hit the consolidated tape. The quote changes in real time without an additional query. The live quote gives additional color, one has a sense of the volatility and direction of price.

Map of the Market

Now think about the difference between search and track. with regard to Tw*tter and the micro-messaging stream. If you’ve ever used track via IM you’ve experienced the difference between a snap quote and a live quote. Imagine if you had a watchlist of your track terms that you could see change in real time. A trader can transact on any ticker she tracks– that means both reading and writing. This gives you a sense of some of the possible user interfaces, as well as the economics, of the micro-messaging stream.

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The Doomsday Machine and The Golden Rule

Published November 26, 2008 by cgerrish

Before the turn of the millenium, back when I was first joining an investment bank, I wanted to do some background reading. One of the must-reads was Michael Lewis’s Liar’s Poker. Of course, we were looking at disrupting the business. But in the over-heated world of the Internet IPO, no one wanted to disrupt anything– there was too much money at stake. Like all bubbles, that one eventually popped.

Our firm had a small part in popping that bubble with a piece of research we produced called “burn rate.” The first crop of Internet companies went public very early in their lifecycles. That meant they had to report their financials quarterly. At a certain point it was a simple matter of looking at cash versus run rate to determine how many months these firms had left. In Internet Bubble 2.0, initial public offerings were not possible, but the principle of burn rate remains the same. If a firm is not at, or close to being cash flow positive, they’re burning cash. This time the fires are behind closed doors, but their burning just as brightly.

Whack-a-mole

But the Internet Bubble is nothing compared to the Real Estate / Sub-Prime Bubble. While trying to get my hands around this Bubble and Collapse, I turned to Michael Lewis again. Lewis’s article, “The End,” in the December issue of Portfolio nails it. The Sub-Prime meltdown is difficult to understand. And when people talk about the “bailout,” it’s hard to understand what exactly needs to be bailed out. Treasury Secretary, Hank Paulson, has come under criticism because he’s perceived to be playing whack-a-mole with the crisis.

Bubblicious

Lewis takes a simple approach to explain the situation. He looks at the other side of the trade. Every trade requires a buyer and a seller. While the vast majority of the nation and Wall Street were buying in to the idea of ever rising real estate values, Steve Eisman, of FrontPoint Partners, was shorting the bubble. The article exposes the transubstantiation of BBB rated debt into AAA rated debt. As Eisman struggles to understand the trades he’s making, we start to understand the Doomsday Machine that Wall Street was constructing. For the bubble to keep expanding, it was important that the emperor was percieved as being fully clothed and regal. People like Peter Schiff were laughed at for trying to seriously address the problem. Risk is at the heart of investing, but in the real estate bubble, risk was grossly misrepresented. The label on the box said it contained wholesome ingredients, higher return with less risk. It was too good to be true, and it was. Bubblicious.

Lewis closes the loop by having lunch with John Gutfreund. Gutfreund was the CEO of Salomon Brothers while Lewis worked there. Liar’s Poker chronicles that time. They were the first i-Bank to go public, created the mortgage-backed security and their BSD’s from the bond arbitrage group went on to found Long Term Capital Management. Investment Banks follow the Golden Rule, he with the most gold makes the rules. Lewis posits that this is the end of investment banking as we know it.

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iPhone: The Street Has Its Own Uses For Things

Published November 19, 2008 by cgerrish

Somehow I can’t even imagine an app like this for the Blackberry. With the advent of Google’s voice-based search and Smule’s Ocarina, the iPhone changes the whole dynamics of human-computer interface. The range of gestures and inputs change dramatically with the microphone, camera and acceleromoter. Machines have learned to understand more than mouse and keyboards. It’s not a phone, phones don’t do this kind of thing. The street, definitely, finds its own uses for things.

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Acoustic Augmentation

Published November 17, 2008 by cgerrish

This is a beautiful example of extending the use of an instrument beyond original intensions. Eric Roche’s arrangements for solo acoustic guitar are a thing to behold.

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