2007 American Silver Eagle Uncirculated Coin Available June 13

This is hot of the newswire from the US Mint:

WASHINGTON— The United States Mint announced today that the 2007 one-ounce American Eagle Silver Uncirculated Coin will be available beginning at noon on Wednesday, June 13, 2007. Struck on specially burnished blanks, the American Eagle Silver Uncirculated Coins feature a finish similar to their bullion counterparts, but carry the “W” mint mark, reflecting their striking at the United States Mint at West Point.

The American Eagle Silver Uncirculated Coin bears the same designs as the bullion and proof versions. The obverse design features Adolph A. Weinman’s full-length figure of Liberty in full stride, enveloped in folds of the American flag, with her right hand extended and branches of laurel and oak in her left. The reverse design depicts a Heraldic eagle with shield, an olive branch in the right talon and arrows in the left.

Each coin is encapsulated in protective plastic and placed in a blue presentation case accompanied by a Certificate of Authenticity signed by the Director of the United States Mint, Edmund C. Moy.

Containing one troy ounce of .999 silver, the 2007 American Eagle Silver Uncirculated Coin will be available for $21.95.

Last year was the first year that this coin was minted. At first, most people ignored it, largely because uncirculated silver eagles are available from any bullion dealer, and the US Mint markup was substantial. Ironically, this led to extremely low sales volume for the 2006 coin.

Of course, it turns out that this is the only uncirculated silver eagle with the “W” mint mark, and as a result to complete a set every collector has to have one. The price went from $15.95 to $60 almost overnight on eBay when they were discontinued. I’ve seen them selling now for almost $100.

This is common knowledge now, so my guess is that the 2007 will sell briskly, ironically making it less valuable. I’ll still buy a couple, though. Just a sucker, I guess.

The Best Blog Posts on Venture Capital

Sorry, but I couldn’t help providing these pointers.

I’ve been thinking for a while about writing some posts explaining venture capital. While I have a lot of friends who are serial entrepreneurs and venture capitalists, one of the my realizations in the brief time I spent in the industry was how poorly understood it is by 99% of people.

Well, it looks like Marc Andreesen beat me to it.  His posts contain roughly 90% of what I was going to say.

He has three of them:

Marc describes his experience with venture capital as follows:

My experience with venture capital includes: being the cofounder of two VC-backed startups that later went public (Kleiner Perkins-backed Netscape and Benchmark-backed Opsware); cofounder of a third startup that hasn’t raised professional venture capital (Ning); participant as angel investor or board member or friend to dozens of entrepreneurs who have raised venture capital; and an investor (limited partner) in a significant number of venture funds, ranging from some of the best performing funds ever (1995 vintage) to some of the worst performing funds ever (1999). And all of this over a time period ranging from the recovery of the early 90’s bust to the late 90’s boom to the early 00’s bust to the late 00’s whatever you want to call it.

Normally, I’d be skeptical, but as I read his posts further, I found myself really appreciating the perceptiveness of his comments.

For example, here is a brief passage from the first post:

Within that structure, they generally operate according to the baseball model (quoting some guy):

“Out of ten swings at the bat, you get maybe seven strikeouts, two base hits, and if you are lucky, one home run. The base hits and the home runs pay for all the strikeouts.”

They don’t get seven strikeouts because they’re stupid; they get seven strikeouts because most startups fail, most startups have always failed, and most startups will always fail.

So logically their investment selection strategy has to be, and is, to require a credible potential of a 10x gain within 4 to 6 years on any individual investment — so that the winners will pay for the losers and in the timeframe that their investors expect.

All early stage venture capitalists will repeat the above analogy to you, but personally I found that in 2001-2002, very few venture capitalists internalized what that analogy really means. What it means is that you need to take a certain number of “swings” every year, just to make sure your odds of connecting with a winner pan out. In 2001-2002, too many venture capitalists sat on the sidelines, debating whether $4M should buy them 50% or 60% of a Series A company, instead of making sure that they kept investing. After all, any contrarian investor will tell you, you force yourself to put money in when times look grim.

I also really appreciated this quote from Marc’s second article:

Why we should be thankful that we live in a world in which VCs exist, even if they yell at us during board meetings, assuming they’ll fund our companies at all:

Imagine living in a world in which professional venture capital didn’t exist.

There’s no question that fewer new high-potential companies would be funded, fewer new technologies would be brought to market, and fewer medical cures would be invented.

We should not only be thankful that we live in a world in which VCs exist, we should hope that VCs succeed and flourish for decades and centuries to come, because the companies they fund can do so much good in the world — and as we have seen, a lot of the financial gains that result flow into the coffers of nonprofit institutions that themselves do huge good in the world.

Remember, professional venture capital has only existed in its modern form for about the last 40 years. In that time the world has seen its most amazing flowering of technological and medical progress, ever. That is not a coincidence.

This is what made me passionate about venture capital when I was in the industry, and it’s why I will likely return to it in some form again. There is an extremely important role to play for venture capitalists to play in getting money from large, conservative institutions effectively into the hands of risky entrepreneurs who are building the new technologies and businesses of tomorrow. You won’t get there with government funding or small business loans.

My favorite part of Marc’s series, however, is in his third article, when he discusses the current paradox of venture capital, one that has surprised me personally. The question is this:

If venture capital in the past 7-8 years has had such horrible risk-adjusted returns compared to the public markets, why hasn’t the amount invested in venture capital funds decreased dramatically?

The answer is asset allocation.

I remember my Private Equity class at Harvard, where Dave Swensen, of Yale Endowment fame, came to speak. Venture capital has become an asset class that every multi-billion-dollar institution feels like it needs in its portfolio. This is because after 25 years of modern venture capital, it because a proven fact in the 1990s that over the long term, venture capital has returned almost 2x the public market return, with low correlation to the public stock market. That may not sound like much to you, but that’s music to a money-manager’s ears.

This predictably led a significant number of institutions to shift massively into alternative investments and venture capital in the late 90’s, just in time to get hammered by the crash of 2000-2002.

Here’s the interesting part: that hammering — by people who, say, only started investing in venture funds in 1999 — has not resulted in a significant pullback on the part of institutional investors from venture capital.

Instead, venture capital has become an apparently permanent asset class of many large institutional investors — and increasingly, smaller institutional investors.

One element that I do believe Marc missed here is the behavioral finance aspect of why institutions still put billions into venture capital. You see, on average, venture capital has done poorly the last 7-8 years. But there have been some great funds that have performed spectacularly (Google, anyone?) Like hedge funds, many institutions have money managers that believe that the venture capital funds that they have picked will be the few that outperform. (Of course, most of the best venture funds turn away money regularly, but that’s another story.)  Thus, everyone believes that they will be “above average”, even though that’s not possible.

In any case, definitely read Marc’s articles. Bookmark them. Read them and think about them the next time you read some press about venture capital. They are keepers.  I just wish I had written them first.

Is Safari for Windows Part of the iPhone Strategy?

Steve Jobs gave the keynote for WWDC (World Wide Developers Conference) 2007 today, and as usual it was packed with announcements.

There are so many Apple magazines, websites, and blogs, it feels like a waste for me to repeat the “10 Features of Leopard” that Steve walked through.

If you want that walkthrough, here is a good one.  Apple is also hosting the video of the keynote, in case you want to watch it live.

However, judging by the pure volume of headlines, the press have decided to highlight the last announcement in the keynote as the big shocker of the day:  Safari 3.0 for Windows.

It’s not an obvious move.  Now, it’s not that I don’t understand the problem.  Believe me, the relatively small market share for Safari is a real issue.  For most of the time I was at eBay, Safari was not on the official list of supported browsers for eBay, largely because of its unusual implementation of Javascript and DHTML, and because of its minuscule market share.  It wasn’t until 2006 that Safari 2.0 made the list, and that had more to do with the growth of Firefox and the need to target “all modern browsers”.

What non-developers may not realize is that supporting additional platforms always requires more initial thought and a higher level of developer skill.  Originally, when HTML was dirt-simple, there was no real issue with browser complexity.  However, the browser wars of the late 1990s gave birth to incredible complexity in web programming, and that has only gained steam in the past few years as developers struggle to add richer interfaces to their web applications.

As a result, supporting additional platforms and web browsers is a big deal.  Internet Explorer is Windows-only (a move I have long questioned strategically).  Safari is Mac-only (until now).  Thank goodness for Mozilla Firefox, the only real hope of building code once and having it run on a large number of platforms.

Depending on whose numbers you believe, IE has about 80% marketshare, Firefox has 15%, and Safari has 5%.  Different sites have different numbers, because some sites attract different types of audiences.

As a web developer, you could decide to target only IE.  That gets you 80% of the market.  That might work, but it’s not as easy a decision as it was in 2003 when they had 90+% of the market.

Developing for IE & Firefox seems like the right answer, because it gets you 95% of the market, and the nature of developing for Firefox usually means good, clean, standards-compliant code that will also work on Safari.

As a result, Mac users owe a real debt to the growth and success of Mozilla Firefox.  Once developers decide to go “multi-browser”, they usually include Safari for good measure.

So, why does Apple choose to promote “a third option”?  They have no chance of catalyzing the anti-Microsoft, open-source community… they are behind Mozilla (and for good reason).  They have no chance of taking significant share from IE… everyone who can download a separate browser has largely downloaded Firefox.  And if they should take market share from Mozilla, then they have likely hurt the case for non-IE development by fragmenting the market further.

When Apple launched Safari, Firefox was not nearly as robust or successful as it is now.  But I really wondered why Safari 2.0 wasn’t just a Firefox variant… an extension of the Mozilla codebase, hand-tailored for the Mac by Apple (like an official Camino build).

So here is my theory… based on no real information.  I have seen this theory in exactly zero of the articles on the topic I browsed today.

It’s about the iPhone.

It takes a few assumptions to get there, but just ponder the following, and let me know if you think I’m crazy:

  • Let’s say that developing a full-featured web browser for mobile that is differentiated and supported the unique Apple-designed gestures and interfaces for the iPhone required so much customization that you really needed to own the code base.
  • Or, let’s assume that Apple doesn’t want to reveal the source code of some of its browser innovations for the iPhone as a form of proprietary advantage in the mobile space.
  • Let’s also assume that Apple wants a rich set of applications for the iPhone, but wants to bypass the current models for installing applications on cell phones, and WAP-based models for web-application development.  Apple wants rich applications without the strings that come from service providers or the limitations of WAP.

Apple has a bit of a problem now… they need a custom browser, but they want active developer support to build these rich applications.  They need market share… but not PC market share.  They need mobile market share.

Could the answer be a Safari for Windows that runs on Windows Mobile?  Is it possible that Apple would license Safari for Windows Mobile to a broad set of carriers?  It wouldn’t be the iPhone, but it would be a larger audience for web developers to target, and it would be a “stepping stone” for buyers of non-Apple, integrated mobile devices to get a “taste” of the Apple iPhone experience.  Safari for Windows then provides Windows-based developers with an easy target platform for development & testing.

Might be a stretch.  But I wonder if Safari for Windows has more to do with Apple’s non-PC device strategy than some bizarre attempt to take on Microsoft and Mozilla.

Daring Fireball thinks it’s all about the revenue from the search bar… I see that as a perk, but not a major reason to take on this challenge.  $75M in revenue per year is just not a big deal at Apple’s current size… unless they see their growth slowing and are scraping for every dollar.

Guy Kawasaki: 10 Ways to Use LinkedIn

One of the most common questions I get now that I work at LinkedIn is how to best use the site. There is a post on Guy Kawasaki’s blog from earlier this year that highlights his top 10 ways to use LinkedIn, and it’s definitely worth reading:

Guy Kawasaki: Ten Ways to Use LinkedIn

Unfortunately, Guy leads off the post with this little dig at Harvard MBAs:

  • The average number of LinkedIn connections for people who work at Google is forty-seven.
  • The average number for Harvard Business School grads is fifty-eight, so you could skip the MBA, work at Google, and probably get most of the connections you need. Later, you can hire Harvard MBAs to prepare your income taxes.
  • *sigh*. It’s not always easy being a Harvard MBA in Silicon Valley.

    Guy also provides the following useful tidbits:

    • People with more than twenty connections are thirty-four times more likely to be approached with a job opportunity than people with less than five.
    • All 500 of the Fortune 500 are represented in LinkedIn. In fact, 499 of them are represented by director-level and above employees.

    I highly recommend reading the entire article. But, for those of you who like spoilers, here is the bullet list of the ten ways to use LinkedIn:

    1. Increase your visibility
    2. Improve your connectability
    3. Improve your Google PageRank
    4. Enhance your search engine results
    5. Perform blind, “reverse”, and company reference checks
    6. Increase the relevancy of your job search.
    7. Make your interview go smoother
    8. Gauge the health of a company
    9. Gauge the health of an industry
    10. Track startups
    11. Ask for advice

    Yes, there are actually eleven. Guy must be a Spinal Tap fan…

    I’m impressed that he actually added two more that came in from comments since the original post:

    1. Integrate into a new job
    2. Scope out the competition, customers, partners, etc

    So get cracking! Even my Mom is on LinkedIn now…

    ZFS: The New Filesystem for Mac OS X Leopard (10.5)

    Just found this article on CNet:

    Apple will include ZFS with Mac OS X Leopard, Sun confirms

    First thought… Steve is going to be pissed. He hates leaks.

    Now, some information. From the article:

    ZFS, which (sort of) stands for Zettabyte File System and was originally developed by Sun, is a huge step forward from traditional file systems. It protects all files with 64-bit checksums to detect and fix data corruption and, as a 128-bit file system, can handle many orders of magnitude more space than current versions of Microsoft Windows, OS X, or Linux. (There is a movement afoot to port ZFS to Linux but it’s complicated by restrictions in the GNU General Public License.)

    One of the biggest changes ZFS offers is what’s known as a pooled storage model. What that means is that physical drives become even more removed from logical volumes, and getting more free space simply means plugging in more drives. The file system takes care of the rest for you.

    Not that we were hitting the limit on 64-bit filesystems, but it’s worth noting that ZFS is a 128-bit filesystem. It’s always nice to have a filesystem that can support more files than there are atoms in the universe. I like this post entitled 128-bit storage: are you high on the Sun blogs.

    Here are 10 reasons to reformat your hard drive to ZFS.

    Can’t wait for Leopard… should be more news available soon coming out of WWDC 2007.

    Update (6/11/2007):  First Apple said no, now they say they will include ZFS, but only as a read-only file system in Leopard.  Lame.

    Catching up with LinkedIn\’s Reid Hoffman

    From PodTech:

    LinkedIn founder and angel investor Reid Hoffman talks with Mercury News venture capital reporter Connie Loizos about where he sees the social networking space headed, as well as his investment strategy these days.

    Working with Reid is great for a lot of reasons, but one of them is certainly his depth of experience around the consumer internet and social networking in particular. I think this video is a nice way to get some of his insights on his investment in the space, and on LinkedIn.

    [podtech content=http://media1.podtech.net/media/2007/06/PID_011489/Podtech_LinkedIn_Reid_Hoffman.flv&postURL=http://www.podtech.net/home/3223/catching-up-with-linkedins-reid-hoffman&totalTime=695000&breadcrumb=b6865191ba0d41208c0e8a20e4a62100]

    The Bookmakers Have Spoken: Harry Potter Will Die in Book 7

    Don’t shoot the messenger.

    Caught this post today on Paul Kedrosky’s blog and on Marginal Revolution. It included this quote from a Bloomberg piece on a bookmaker has stopped taking bets on Harry Potter dying. Apparently, all the money was going towards him dying – no one would take the other side of the bet.

    William Hill Plc, a London-based bookmaker, is so sure of Harry’s demise that it stopped accepting wagers and shifted betting to the possible killers. Lord Voldemort, who murdered Potter’s parents, is the most likely villain, at 2-1 odds, followed by Professor Snape, one of his teachers, at 5-2.

    “Every penny was on Harry dying, and it became untenable,” said Rupert Adams, a William Hill spokesman. “People are obsessed about this book.”

    “Harry Potter and the Deathly Hallows,” from Bloomsbury Publishing Plc, goes on sale July 21 with a retail price of 17.99 pounds ($35.50). It’s published in the U.S. by Scholastic Corp. for $34.99. Advance orders put the book at the top of online bookseller Amazon.com Inc.’s U.K. best-seller list eight hours after Rowling announced the title Dec. 21.

    Rowling, 41, caused a stir among Potter fans when she said two characters will die in the new book. The six earlier novels about Harry’s adventures at Hogwart’s School of Witchcraft and Wizardry have sold more than 300 million copies, earning Rowling a 545 million-pound fortune and making her wealthier than Queen Elizabeth II, according to the U.K.’s Sunday Times Rich List. “

    This is a pretty typical PR piece, but interesting nonetheless. I am a huge fan of betting & futures markets as excellent barometers and predictors based on the “wisdom of crowds”, to the limits of that wisdom, of course.

    You have to wonder… assuming that JK Rowling has know the fate of Harry since Book 1, then it might be fair to assume that despite her best intentions, she has leaked very minor, subtle clues subconsciously into what she has and hasn’t written into the first six books.  It’s possible that, when exposed to millions of human minds, those subtle clues would lead to a consensus view on the matter that might be accurate.

    Or, the perverse type of person who would bet on Harry Potter just happens to have a bias towards a gory end for the boy wizard.

    You decide.  🙂

    The Price of 20th Anniversary Silver Eagle 3-Piece Sets is Spiking

    Not sure why I checked this today, but I did.  It’s interesting enough to share, and even if you aren’t into coins, you might find this market behavior interesting.

    In 2006, the US Mint celebrated the 20th anniversary of the US Silver Eagle (also known as the American Silver Eagle, or ASE).  They released a 3-piece set of silver eagles, which included the following coins:

    • 2006 “W” Uncirculated Silver Eagle
    • 2006 “W” Proof Silver Eagle
    • 2006 “W” Reverse-Proof Silver Eagle

    They were released late in the year, around Halloween, and while I had pre-ordered two sets, they were sold out on the US Mint website quickly.

    The coins are beautiful, as to be expected, but at $100 a set, you were paying quite a bit for the novelty of the reverse-proof.  The US Mint had not done a reverse-proof before.

    In case you don’t follow coins, a proof coin is pressed twice, with special dies, to give it a mirror-like background and a frosty, well defined image.  The reverse-proof interesting produced a mirror-like image on top of a frosty background.

    Given the sold out status, I wasn’t surprised to see the sets selling for $200-$250 in most coin shops and on eBay by December 2006.  I thought that by itself was a pretty steep markup.

    Turns out I should have bought more at that price.

    Checkout the following chart from eBay Marketplace Research on the last 3 months of prices for the set:

    Look at that surge in mid-April!  Average price, as near as I can tell now, is about $580.  That’s 480% appreciation in 8 months.

    I used the following query to sift out the single coins, the silver/gold sets, and the graded coins, which would muddy the results:

    2006 AMERICAN EAGLE 20TH Set  -no -pr69 -pr70 -ms69 -ms70 -gold -ngc -pcgs -70 -69 

    I also filtered out items above $1000, because those tend to be auctions for multiple sets in a single lot.

    Anyway, I’m not sure what is causing the surge, but maybe its the release of the 2007 proof eagles.  Not sure.  Please comment if you have some insight.  I did find this thread on CoinTalk.

    How to Upgrade Your AppleTV with a 160GB Hard Drive

    I have posted many times about how much I love the AppleTV, and more importantly, how much my son Jacob loves the AppleTV. But after ripping about 20 DVDs, the original hard drive had just run out of room. 40GB is just not enough.

    This afternoon I took an hour and upgraded the AppleTV to a 160GB. The upgrade went pretty smoothly, but I thought it was worth sharing my experience here.

    First, instructions. I found a lot of these on the web, but many dated from the original launch, and I found after investigation that they were overly complex. I ended up using these excellent instructions from Engadget, and for the most part, they were complete and easy to understand.

    Since I’m linking to the instructions, let me highlight some of the things not typically covered. For example, what did I buy?

    I bought the following things:

    I love getting new tools, and the Husky Torx set is finally going meet my needs long term. It’s so cool. And you need a T8 and T10 to open the AppleTV, because there are 2 sets of screws. From my old Mac repair days, I had a T10, but not a T8.

    I spent a little more on a hard drive case for the old drive because I figured a 40GB portable USB hard drive might come in handy, and this case doesn’t require 2 USB plugs for power and had good reviews.

    Step 1: Removing the Old Drive

    This went according to plan, except that I ripped the rubber bottom a little when I was removing it. There was no warning about this, so just be really careful when you peel it off. It actually isn’t a big square – it wraps around the edges more than I first thought.

    The first set of screws actually come in 2 sizes! Make sure to remember where the long ones go vs. the short ones. It’s easy to tell because when you look inside the box, one set of holes is on posts and doesn’t need a long screw.

    Two things are on the original hard drive – a flat, peel off pad between the hard drive and the case, and a small stick-on pad between the hard drive and the internal components. In order to get the hard drive out, it’s best to wiggle the ATA plug free with your fingernails, and then peel the drive free. The instructions didn’t really cover this.

    Step 2: Disk image of the old drive

    This was much easier than I thought. I just plugged the old AppleTV HD into my new case, and plugged it into my PowerMac G5 running Mac OS 10.4.9. Open up the Terminal application, because as they said in Jurassic Park, “Oh, it’s a UNIX system!”

    The drive actually has two partitions: OSBoot & Media. The instructions given by Engadget actually have you back up the entire drive, but since you only need OSBoot, I improvised. OSBoot is only 900MB, and Media is 36GB. Since the copy over USB was handling about 2MB per second, I didn’t have the patience to copy 36GB that I was never going to use.

    So, here is the command line sequence that I used:

    PowerSmash-G5:~ adamnash$ diskutil list

    #: type name size identifier
    0: GUID_partition_scheme *37.3 GB disk6
    1: EFI 34.0 MB disk6s1
    2: 5265636F-7665-11AA-AA11-00306543ECAC 400.0 MB disk6s2
    3: Apple_HFS OSBoot 900.0 MB disk6s3
    4: Apple_HFS Media 36.0 GB disk6s4

    This gave me a much longer list, which I’m truncating here. diskutil list gives you the complete list of mounted drives, and most importantly, gives you the actually volume name for your AppleTV drive (in my case, /dev/disk6)

    I then modified the “dd” command that Engadget recommends, truncating it to the size I needed:

    PowerSmash-G5:~ adamnash$ dd if=/dev/disk6 count=1335 of=/Users/adamnash/Desktop/AppleTV.img bs=1024k

    1335+0 records in
    1335+0 records out
    1399848960 bytes transferred in 1055.788885 secs (1325880 bytes/sec)

    So now I had my AppleTV.img disk image sitting on my desktop. Awesome.

    Step 3: Create New Drive

    This was a lot more command line fun than I thought. Engadget’s instructions here were spot on. Since Engadget actually doesn’t explain the steps in plain english, here’s what you are actually doing:

    1. Moving the old disk image to the new hard drive
    2. Deleting the “Media” partition, since it’s too small
    3. Creating a new “Media” partition that is as big as your new drive will allow
    4. Formatting the new “Media” partition as HFS+ Journaled
    5. Deleting any Spotlight directories from OSBoot and Media

    Through it all, I became really impressed with gpt and diskutil as command line operators. Very powerful.

    Step 4: Install New HD in AppleTV

    This was really easy. The key for me was to put the sticky pads from the old HD on the new HD first, then reattach the IDE cable. Once that was done, I screwed the HD in place onto the base. I then put the base back on the AppleTV, and put in the 4 screws that hold it together. I then re-applied the rubber.

    Step 5: It’s Alive!

    I rushed it back to my bedroom and hooked up the power & HDMI. Worked perfectly, and now has 145GB of space for media. Basically, it acted like a brand new AppleTV, so I did have to walk through setup and connect it with my iTunes. But it just worked.

    Epilogue: Do I recommend this?

    Ironically, Apple started selling a 160GB AppleTV this week for $399. That’s $150 over the $249 for the 40GB version. So why would you ever do this?

    I thought about this today, and basically, the only reason you’d do this is:

    • You already have a 40GB AppleTV
    • You love to play with command lines and hardware

    Fortunately, these both apply to me. Your mileage may vary.

    I’d rate this install as harder than installing a new hard drive in a laptop computer, but only because of the rubber and the command line fun.

    Investment Lessons from 1957

    Wow. Who knew cartoons from 50 years ago were this educational?

    Many thanks to Get Rich Slowly for this one.

    Here’s a 1957 cartoon about the virtues of stock market investing from the New York Stock Exchange (NYSE). Fred Finchley is a family man with a good job, a lovely wife, two rambunctious children, and all the conveniences of modern life. What he doesn’t have, however, is enough money to pay for his dream vacation.

    When Finchley’s boss gives him a raise of $60 a month, he faces a dilemma. Should he use the money for savings? For a couple of nights on the town with his wife every month? The NYSE suggests that Finchley put his money to work in the stock market with a “monthly investment plan”.

    “Working Dollars” does a good job of explaining how dollar cost averaging works. The cartoon makes a case for small, regular investments. Investing isn’t just for tycoons — using a monthly investment plan, even the average family can begin to acquire wealth.

    It may not seem like it, but this cartoon was extremely well thought out, and the personal finance advice it offers is just as applicable today. Of course, I’m not sure how excited anyone would be with a $60/month raise right now, but I’m pretty sure the point is made with $600/month or more.

    The most interesting subtlety is highlighted well by Get Rich Slowly, and I couldn’t agree more. The biggest danger in personal finance is lifestyle inflation, the tendency to increase expenses with any increase in income. The danger is, of course, that income is hardly reliable, but once you get used to a certain lifestyle, it’s incredibly hard to dial down expenses. This is particularly topical for people who work in high risk/high volatility jobs, like technology and sales. Even if you have steady pay, retirement often involves a shock to the system in terms of income.

    A neat find.

    Battlestar Galactica: Season 4 is the End

    Earth or bust.

    There has been a lot of coverage of this, so I’ll just point to the best article on the topic that I’ve read on SyFy Portal. The 22 episodes that will begin in January 2008 will be the last of the series.

    Kudos to the producers and writers for capping this series off with a game plan and a strong finish. With these serial dramas, I’m beginning to have more and more respect for the teams that have the sense to not draw them out endlessly. Check out this quote from Ronald Moore:

    “The temple gave D’Ann (Lucy Lawless) the glimpse of the Final Five that triggers the beacon that points the way to Earth,” Moore said. “At that point, you’re promising the audience that you were moving toward revelation. By the end of the season, we had taken that moment to decide that we were going to reveal four of the Final Five, and one of the characters had been to Earth and seen it.

    “That’s probably the moment when we started feeling it. If we don’t start moving in that direction, you get to a place where you just feel like you’re jerking off the audience or treading water instead of just moving forward and pushing limits. We didn’t want to be in that position.”

    Another interesting tidbit was some additional detail on “Razor”, the BSG made-for-TV movie airing this fall.

    How to Mount your Blackberry Pearl 8100 MicroSD on Mac OS X


    I bought a 2GB MicroSD card for my Blackberry Pearl, so I could store pictures and music on the device more easily.

    I love the Pearl, but as you know, RIM has had a tortured history with Mac-compatibility. Thankfully, the Missing Sync for Blackberry, by Markspace, is a very good solution.

    However, I had one last problem. My MicroSD card was not mounting on my Mac as a USB storage drive. Infuriating! I went through pages of Google search results, and no luck. I downloaded a freeware app, called Mount Me X, and no luck.

    If the drive doesn’t mount, you can’t synch music or pictures. Drat!

    Suddenly I had an epiphany.

    I went the Blackberry and entered the password on it to unlock it.

    Bingo. USB drive mounted, with no problems. Everything works fine now.

    I guess Mac OS X doesn’t know how to get past the unique RIM security feature. The Missing Synch does, however, so it’s strange to me that it doesn’t unlock the phone for you. It asks for the password anyway, when it syncs.

    In any case, I hope this post gets indexed and helps some other poor soul out there, in need of help.

    The answer is – unlock the Blackberry Pearl 8100 manually with your password before plugging it into your Mac.

    This has been a public service announcement.

    Update: I have moved on, and given up on the Blackberry completely.  See this post: Goodbye, Blackberry.  Hello, iPhone.

    Is there a Roth IRA & Roth 401k Paradox?

    I’ve been thinking about the new Roth 401(k) a bit, and running some numbers to figure out whether or not it is a better option than the regular 401(k). Originally, this post was going to be a post about those results, with an eye towards helping people who are making the same decision. Instead, however, I feel like I stumbled on a financial planning paradox.

    Let me explain.

    A Roth 401k is a relatively new option that some employers have started to offer as a retirement benefit to employees. With a Roth 401(k), like a Roth IRA, you do not get a tax deduction from your income on contributions. However, when you retire, you do not have to pay taxes on your withdrawals. In fact, when you leave the company, you roll it over into a Roth IRA, and it behaves just like any other Roth IRA.

    If you exclude the estate planning benefits of Roth IRAs (which are significant in some situations), running the numbers shows that basically the Roth 401(k) is a big bet on your tax rate. With the Roth 401(k) you are betting that your tax rate when you retire will be higher than your tax rate now.

    For example, let’s take an employee, Bob, who is 35-years old and has been able to save $5000 a year in his normal 401(k). In 2007, his company launches a Roth 401(k). Bob has a 31% marginal tax rate. Bob has the uncanny ability to generate exactly 8% on his investments, year-in, year-out. Should Bob switch over?

    Well, Bob has been able to contribute $5000 to his old 401(k), so let’s just assume that’s the pre-tax cash he has available for retirement, period. If Bob contributes $5000 to his normal 401(k), he will have accumulated $566,416.06 by the time he is 65 years old. If we assume Bob can safely withdraw 4% of that per-year in retirement, he will generate $22,656.64 in income per year. However, he needs to pay tax on that income. Assuming his tax rate stays the same at 31%, he’ll get $15,633.08 per year after tax.

    But what if Bob switches to the Roth 401(k)? Well, he no longer gets the deduction from his income, so Bob can’t afford to put $5000 per year into the Roth 401(k). With a 31% tax rate, Bob can only afford to put in $3450 (yes, I am grossly oversimplifying all the payroll taxes for this example). At $3450 per year, Bob will accumulate only $390,827.08 by the time he retires at 65. Sounds like a bad deal, right?

    Wrong! That $390,827.08 is tax-free. If Bob pulls out 4% per year, he will pull out… $15,633.08 per year! That’s right, the same exact number! The Roth 401(k) is a wash.

    Well, as usual, it’s not that simple. If the tax rate at retirement is only 28%, then the regular 401(k) wins. At a 28% rate, Bob gets to keep $16,312.78 per year. If the tax rate is 35%, then the Roth 401(k) wins. At 35%, Bob would only keep $14,726.82 per year.

    So you could argue the Roth 401(k) is a big bet – will your tax rate be higher or lower in retirement? Some young people might believe it will be higher. When you start working, often you are at the bottom of your earning potential, and you might have big plans for your accumulation of assets over the next 40 years. Also, if you’ve read the Ben Stein book, you know that neither the US Government nor individuals are saving enough for retirement. That means higher tax rates in the future as the US Government tries to close the gap.

    But they could be lower too, right? Are you really going to save enough to replace your current income? Do you need too? After all, in retirement, you aren’t paying off a mortgage, you aren’t putting kids through college, and you aren’t spending as much on clothing or consumables.

    Tough call.

    Now, there is a special case that doesn’t come down to this bet. What if Bob actually had $30,000 per year to save, but the 401(k) maximum is only $15,500 in 2007? Well, in that case, the Roth 401(k) is the better bet for sure, because saving $15,500 per year tax-free is better than saving $15,500 per year in an account that will eventually pay taxes.

    But let’s ignore that case for now, because I want to explain the paradox. It’s really bugging me.

    Let’s say you believe your tax rate is going to be higher in retirement. You put your money into Roth accounts to protect them. In fact, you manage to get all of your retirement assets in there.

    Well, in that case, all of your retirement income is tax-free, which throws you into a lower tax bracket. In fact, the lowest tax bracket. And that makes your initial assumption false – you would have been better off taking the tax deduction when you were working.

    BUT if you don’t put your money in Roth accounts, you’re back to square one, where it looks like your future tax rate will be higher than now.

    This loop does have a solution – basically you should put some of your money in Roth accounts… enough to bring your taxable income in retirement down to a level that is equal to your current tax rate. That’s a really complex calculation when you consider issues like Social Security and predicting the tax structure of the US in 2040.

    So, if you are fortunate enough to have high enough savings where you max out your retirement accounts, you probably don’t worry too much about this. Stuff your Roth 401(k) to the brim, and use other savings vehicles to cover the excess.

    But if you don’t have that much money, the right answer is likely a mix of both taxable and non-taxable accounts. What that right mix is will be based on your estimation of how high your tax rate will be when you retire.

    Don’t forget, this logic also applies to that famous 2010 loophole in Roth IRA conversion that I wrote about last year. The question of whether or not to covert is all about this bet on future tax rates.

    If it helps, here are a few more articles I found on this topic. I hope my explanation above helped more than it hurt. 🙂

    Review: Coke Zero VaniLLa

    Blogging is really funny. A lot of people really liked my post on Diet Coke Plus. I think it’s because it turned into somewhat of a rant about how much I loved Diet Coke, and how much I hated Coke for killing my favorite variant, Diet Vanilla Coke.

    Well, I found out I wasn’t the only one ranting about Diet Vanilla Coke. In fact, this guy actually wrote a heart-sick letter to the Coca-Cola Company about the cancellation, back in 2005.

    Anyway. The same guy wrote a review of Coke Zero VaniLLa. It was hilarious, so I had to get it and try it for myself.

    Look, Coke Zero isn’t Diet Coke. It’s not just a branding exercise, the sweetner formulation is a different. Instead of Nutrasweet, Coke Zero uses a blend of Nutrasweet and Ace-K to get a taste that is supposed to be more like regular Coke. In fact, they have a whole ad campaign about this which I think is hilarious. (Since I used to manage a sub-brand of eBay, I find these type of marketing problems really interesting.)

    Anyway, back to the new abomination Coke Zero VaniLLa.

    I should have known what I was getting into when I saw the two capital-L’s in the title.

    Rating: 6. It’s sad, but this is actually worse than Coke Zero. I don’t think I’ll be buying this again, but I would drink it ahead of other variants in a pinch.

    I knew it wasn’t going to get higher than an 8, because the Coke Zero base is just such a bad start. But I was surprised to find out it doesn’t taste like vanilla. It only smells like vanilla! It was so bizarre, I had my wife confirm it. Very strange, and it grows annoying to have this wonderful vanilla smell, and then not have any taste to back it up. It just tastes sweet – but a fake sweet. Too much fake sweet. It over-promises and under-delivers. At least Coke Zero under-promises and under-delivers.

    Update (6/14/2007):  OK, OK.  I’m upgrading this to a 7.  I’ve had a few more of these now, and I think I’m getting used to it.  Not as bad as the first one.

    Coke, just bring back Diet Vanilla Coke already. Own up to your mistake.

    So, here is my updated ranking of the Diet Coke universe:

    • Diet Pepsi (1)
    • Diet Coke with Lemon, discontinued (3)
    • Caffeine-Free Diet Coke (4)
    • Diet Cherry Coke (5)
    • Diet Coke with Lime (6)
    • Coke Zero VaniLLa (7)
    • Coke Zero (7)
    • Diet Coke Plus (7)
    • Diet Coke with Splenda (8)
    • Diet Black Cherry Vanilla Coke (8)
    • Diet Coke (10)
    • Diet Vanilla Coke, discontinued (11)

    Diet Vanilla Coke forever, man.