Harry Potter, Book 7: Harry Potter & The Deathly Hallows Cover Art

It’s a little obsessive, I know, but some big news this week on the Harry Potter front. I’ve noticed that interest in my previous posts on Harry Potter & The Deathly Hallows has been getting more traffic lately, so you know something is up.

This week they presented… the book cover art. Yes, believe it or not, that is big news in the world of Harry Potter.

Here is the UK version of the cover:

Here is the American version:

Well, I’ll give them some real marketing credit – as an American I can firmly say I prefer the American cover to the incredibly cartoonish and bizarre UK cover.

Release date is still set for July 21st. You can pre-order the book here.

As usual, Wikipedia has more information on this book than anyone.

If you want to see the longest comment thread ever on my blog, check out the original Harry Potter & The Deathly Hallows post from last year.

On my trips to Orange County & Germany, I re-read Books 5 & 6 cover to cover. I’ll be posting book reviews for them when I have time – the second reading was definitely better in many ways than the first.

Mitch Kapor & Mark Zuckerberg at the Startup School

Nice post on Matthew Mullenweg’s blog on comments made by Mitch Kapor & Mark Zuckerberg at the “Startup School” hosted at Stanford. Matt is the lead developer for WordPress.com.

Mitch was the original found of Lotus, and has been a significant figure in the software industry for the past 20+ years.  He also happened to be one of the venture capitalists who backed my friends at Reactivity.

Here is how Matt described Mitch’s comments:

Mitch’s presentation was one of my favorite of the day, and one of the thing he emphasized was that you should hire for diversity because diverse groups of people innovate more. Diversity here is defined as a function of experience, background, family status, as well as the traditional definitions like gender, et al. He says that one of the most common mistakes entrepreneurship makes is building “mirrortocracies” instead of meritocracies, meaning they tend to hire people like themselves rather than hiring the best people regardless of backgrounds, and the company suffers as a result.

Mark Zuckerberg is the 22-year old founder of Facebook.com, the private social-networking site that is the ultimate destination for every college student (including my sister, a senior at UC Berkeley). Here’s what Mark had to say:

Almost on cue, Mark started out by saying that the two most important things for a company is to have people who are “young and technical,” and his explanation of such was actually the entirety of his prepared remarks. (He arrived shortly before his presentation, so AFAIK hadn’t heard any of Mitch’s.) He made some fair arguments for biasing toward a technically inclined workforce, even in roles like marketing and support, however he didn’t really say anything compelling in support of youth, besides some vague references to many great creators and chessmasters being between 20 and 35 years old. But in no uncertain terms, he said they have a bias toward hiring young people at Facebook.

Sorry to be snarky, but is it really surprising that a 22-year old founder of a company valued at over $1 Billion dollars thinks that people in their 20s are the best?

Truth be told, when it comes to technical prowess, Mark has a point. Young, fresh engineers don’t have a lot of legacy baggage. They are immediately up on the latest trends in the market and in technology. They are pampered in University environments with endless computing power and bandwidth, and that lets them think freely about interesting services that might make sense once the rest of the market has those things. Math & science are also playgrounds for young, flexible minds, and it is true that most great mathematicians and physicists break out in the 20s.

That being said, those strengths are also weaknesses. Young engineers are usually tragically poor at estimating the resources and complexity of engineering effort. They can be excellent individuals, but work poorly on projects that require scale and teamwork. They also, being free from baggage, can lack perspective when the project and/or the company hit inevitable challenges.  They can also be surprised when the market moves more slowly than they expect, because they naturally tend to be several steps ahead in technology adoption than the mass market.

When I was in engineering, I was a big believer in mixed-age teams. One or two solid, senior members of the team to anchor it – add perspective, balance, and mentorship. Surround them with a ratio of around 5:1 really young, super-smart engineers who have the energy and passion to work the long hours and who lack the background to know some things aren’t possible.

Valleywag has a better quote from Zuckerberg on the subject.  My guess is that he’s getting a lot of flack for being 22 & successful.  The truth is, reading the quote, he has a good point, but he’s not really presenting it in a well-polished way.

Don’t worry, Mark.  That’ll come in time.

Big Day for Battlestar Galactica: Season 3 Finale & The Wait for 2008

Wow.

Big day for Battlestar Galactica. Out of respect for those who missed the Season 3 Finale, “Crossroads, Part 2”, I delayed this post until now. Please be careful reading ahead if you are averse to spoilers.

First off, the interest in the Battlestar Galactica finale was pretty amazing, if my blog is any indication. Here is a snapshot that shows my blog as one of the 50 or so that were big enough to be sampled on the homepage of WordPress.com:

This was reflected in the record-setting blog stats for the day. On Monday, this blog saw a record 4,593 page views, almost all of which went to the top posts on my blog for Battlestar Galactica topics. The post on the Final Five was a big winner:

The source of this amazing traffic is simple, and to me, kind of surprising. When you do a search for “Final Five Cylons” on Google, or even Google Blog Search, you get terrible results. In fact, it seems like my posts are one of the few out there on this topic that actually discuss any theories. You can see the search terms that led to my blog on Monday:

One last source of traffic which is a new one for my blog is my favorite information site, Wikipedia. Surprisingly, my blog is now a reference (number 1) in the online encyclopedia, as an example of how fans now think that Starbuck may be a Cylon.

The link to my blog is literally a superscript (1) in the middle of a multi-page post on the topic “Kara Thrace”. Still, that little linked number was the source of over 100 page views to my blog, in just one day, beating out the sampling from the WordPress.com homepage:

I am a huge fan of Wikipedia, and I believe that if the natural search engines aren’t careful, they may be disrupted by wiki-based content aggregators like Wikipedia for the “peak” informational queries on the web. This might be just a single data point, but this tells me that that Wikipedia as a traffic source for information should not be underestimated.

In any case, the long wait is now setting in for Battlestar Galactica fans, as Season 4, which is now 22 episodes, will not kick off until January 2008. The wait for ’08 is on.

Here are a few pieces of information, however, to navigate the gap.

First, this article explains that there will be a 2-hour television movie in the fall, based on the Pegasus and the timeframe between the Cylon attack and the rendezvous with the Galactica. It’s before the timeline of Season 3, but Ronald Moore states that it will be relevant to the arc of Season 4.

Second, this interview with Ronald Moore in TVWeek covers a set of questions about the story, the return of Starbuck, and the softening ratings for the series this season.

Third, this interview with Ronald Moore in the Pittsburgh Gazette answers some questions about Season 4 (including some spoilers!) He actually answers the question on whether or not the 4 crewmembers in the Season 3 Finale are Cylons or not (they are). He also strongly implies that Season 4 may be the end. He has stated on many occassions that he wants to have the creative freedom to wrap up the series properly, and not get cancelled leaving things unresolved. Odds are, the 22 episodes of Season 4 will end the series.

Lastly, this three-page interview with Ronald Moore in Salon covers almost everything.  Some duplicate data here, but I’ve saved the best for last.

OK. I think that’s enough Battlestar Galactica posts for now. You know, this blog was going to be more about personal finance this year. So, back to the real stuff, but boy, what a ride.

Sometimes the Best Birthday Presents are Late

My brother loves me.

How else could you explain the lovely birthday present that he gave me yesterday?

appletv.jpg

I’ve placed my order already to the Apple Store for:

  • Airport Extreme Wireless Hub (802.11N)
  • HDMI to DVI cable
  • DVI to RCA Video cable

The last two are essential because the AppleTV does not ship with any cables to connect the device to your TV.  Even if it did, the TV I’m going to hook up first is the one in the “playroom” for Jacob, which doesn’t have HDMI or Component inputs.  It’s a *gasp* regular, analog television.

There are some exciting hacks already online on how to put a larger hard drive into the AppleTV, install a terminal server, and add support for other codecs like XViD.

I’m obviously very excited to get it up and running.  So…

Thank you, Daniel.  I love you, too.

Goodbye George Washington. Hello John Adams Presidential $1 Dollar Coin.

Well, it’s not quite time for goodbye. But soon.

With all the press about the George Washington dollar, I’m not sure that most people realize that the US Mint has already stopped producing them. That’s right, they’ve already begun production of the second Presidential $1 dollar coin, the coin for John Adams.

The Patriot Ledger in Boston has a really nice article on the new coin, and on John Adams.

There has been so much coverage about the errors on the new George Washington dollar coins that demand for the coins has been surprisingly high. Unfortunately for collectors, I think this means that the market is flush with them which may mean no significant appreciation for the George Washington version.

Personally, I expect that the excitement about the dollar coins to die down rapidly as they march through the Presidents. In many ways, you want demand to be low at the time of issuance, since that means fewer people will be stashing them away. That leads to higher prices down the road.

The US Mint has scheduled the release of the John Adams dollar coins for May, so there is still some time to get your George Washington dollars.

One nuance that is worth noting – it’s only for the 6 weeks after release that the Mint will be providing boxes of dollar coins for a single President. So come May, you won’t be able to go to the bank and get a box of George Washington dollar coins any more. You’ll either be able to get a box of the John Adams’ dollar coins, or a mixed box of golden dollar coins – Sacajawea, Washington, etc.

Update (5/17/2007):  The John Adams dollar coins have been released!  Read more here.

Update (5/24/2007): For a limited time only, I am now carrying unopened, original John Adams Presidential Dollar coin rolls in my eBay Store. Click here to buy them on eBay Express. If you are interested in the other rolls I am carrying, click here for all the coins I am currently selling.

Third Parties Rush to Fill the DVD to AppleTV Gap

Wow.  That was fast.

I’ve previously written about the AppleTV, and how there was significant potential for the idea to work if there were simple ways for people to convert their existing DVD libraries to iTunes.

The problem is, due to legal liability, Apple likely has no intention to integrate DVD-ripping into iTunes.  So much for Rip. Mix. Burn.

Well, it’s the day after the AppleTV shipped, and already there is a third party application available specifically to rip DVDs to AppleTV supported formats.

DVD to Apple TV Ripper by WonderShare

Ironically, it’s Windows-only.  🙂

Books: The Little Book That Beats The Market, by Joel Greenblatt


One of the great things about travel is that it usually offers me free time to catch up on some reading. On my recent trips to Orange County and Berlin (not in the same weekend), I’ve managed to knock a few more off my reading list. As a result, I’m going to try another book review here on the blog for good measure. Let me know what you think.

The Little Book That Beats The Market by Joel Greenblatt

Overall Rating: Definitely worth the quick read. While the schtick got tiring after a while, the author is clearly intelligent and educated, and the content well thought out. Surprisingly, I found the most interesting part of the book not the “magic formula” itself, but the implicit structure the author put in place to try and help the average investor be successful with the strategy over the long term.

Synoposis: This book is an extremely quick read.  Joel Greenblatt is the founder and managing partner of Gotham Capital and currently teaches at Columbia Business School, so he’s definitely educated in both theoretical and practical aspects of finance.  This book is written in extremely simple and plain language, and he clearly goes out of his way to make it folksy and fun.  I think I finished it in under an hour, appendix included.

Greenblatt’s points are pretty simple:

  • The idea that the market is truly efficient is something that only makes sense in theory.  In practice, you can definitely beat the market.
  • The key to beating the market is to buy above-average companies at below-average prices.  Rinse, wash, repeat.
  • The “magic formula” is an updated method, similar in concept to those outlined by Benjamin Graham (one of my must-read investing books).  The formula is as follows:
    1. Every year, begin with a list of the 3500 largest companies that are publicly traded
    2. Rank them 1-3500 based on their return on invested capital (ROIC).  This tells you how good a business they are, as defined by taking invested money and turning it into more money.
    3. Rank them a second time based on their earnings yield, basically the percent of their stock price you get back every year in their earnings.  This tells you roughly how expensive they are per-dollar of earnings
    4. Add the scores from the two lists together, and then invest in the top 20-30 companies based on the combined score.  Voila, a list of “above average” companies at “below average” prices.
  • This formula will not outperform the market every year.  You have to stick to this formula for at least three years if you want a high probability of beating the market average.

Greenblatt has done his homework, using a detailed 17-year history of stock prices to ensure that this formula, based on information actually available at the time, would have outperformed the market handily.  In fact, he goes to some trouble to explain some other variants of the formula.  The one I outlined above returned an average of 30.8% per year.  That’s compared to a 12.4% return for the S&P 500 over the same period, and a 12.3% return for an even investment in all 3500 companies.

I’m guessing that part got your attention.

When I began investing in the mid-1990s, there was a lot of excitement about the Dogs of the Dow strategy.  It basically said, take the Dow 30 stocks, rank them by dividend yield, and buy the 10 cheapest every year.  The Motley Fool took this one step further, and published their own variant called the Foolish Four, based on a similar concept, with some more gaming around the picks.  I actually bought two of those books – I still have them on my shelf, and I actually invested an IRA according to the Foolish Four for 5 years.  (It beat the market during that period, by the way).

If you think about it, all these strategies say: “buy great companies at cheap prices”.  Now, I think Greenblatt’s formula is much more compelling:  ROIC is a much better measure of a “great company” than being in the Dow 30.  And earnings yield is more compelling to me than dividend yield, since a lot of great growth companies don’t pay out dividends proportionally to slow-growth companies.

However, I stopped investing according to the Foolish Four in 2001 largely because of an insight into a common flaw with all of these strategies – data mining.  It turns out that statistically, if you data mine enough for a “winning formula”, odds are that you’ll find some.  I won’t go into the details here, but it is possible using advanced statistics to estimate the likelihood of finding a “winning formula” through data mining.  So, even when you find one, you have to evaluate it’s results against the fundamental odds that if you look at any pattern of data, there will be “winning”  patterns to a certain degree.

In the case of the Foolish Four, to their credit, the Motley Fool published this analysis, and stopped recommending this approach in late 2000.

So, what makes this magic formula different?

First, Greenblatt is clearly more deeply educated about finance than the Motley Fool, thank goodness.  In his appendix, he runs through six or seven of the common flaws with strategies like these, and explains why this approach is still valid.

One of the most compelling pieces of additional analysis he provides is the fact that this formula seems to actually generate linearly predictive results.  In other words, if you take the top 10% of companies ranked by this formula, then the next 10%, then the next, each decile of companies outperforms the groups below it.

That type of consistency is rare for most quantitative approaches to ranking stocks, and is a good sign that this formula may be useful.

In fact, Greenblatt runs through almost all of the critiques I would expect in his appendix.  The only one he doesn’t address, which to me is extremely important, is the time period bias.  Greenblatt has only tested this approach over 17 years of data.  That means he basically just looked at 1988+.  Given that he includes the longest bull market in history, and then a period of outperformance by value over growth, my guess is that there is significant bias in these results.

Still, my guess is that this formula will still generate outperformance over time.  The best thing about this book is that Greenblatt spends a lot of time explaining that in any one year, this formula can and will underperform the market from time to time.  In fact, he advocates a minimum of a three-year window to evaluate its performance.

I think this is great advice, but likely doesn’t even go far enough.  The stock market, in general, is a long term investment.  Investors consistently buy high and sell low, not because they are stupid, but because in the short term, we rationalize investing in the winners (which are bid up because they are popular), and we rationalize selling the losers (which are low because they are not popular).

Buying high and selling low is a very bad investment strategy.

I’m going to check out Greenblatt’s website, and investigate the analysis for this approach further.  In the meantime, I do recommend this book to people who like value investing, or who are thinking about investing in individual stocks.