Derek Scruggs

Lifehacker turned me on to an old but still interesting Metafilter thread about inspirational moments in your lives. Though many of them are uplifting, inspiring and even funny (“Heard Ramones. Everything changed.”), others are downright chilling:

From the age of 2 to 5-1/2, my parents kept me locked alone in a cage. To this day, decades later, I find it impossible to form meaningful social relationships. Frankly, I’m surprised I’m not a serial killer.

Yeesh.

I originally sent the note below to a friend who has back pain, but then I remembered that I’ve repeated this story over and over to people in the past, so maybe some of you could benefit.

I’ve had lower back problems for several years. Also some upper back pain, which chiropractic seems to help (and nothing serious for the last few years). My lower pack pain reached a peak on our honeymoon about two years ago [February 2004]. It was really hard to get up after laying down for just 20 minutes. Chiropractic helped a bit, but I was starting to feel like an old man. I tried chiropractic, network chiropractic (don’t get me started – very woo woo Boulder stuff)physical therapy and acupuncture. None of them made much of a difference in my lower back pain. I also looked into a tested a popular physical therapy method called the Egoscue Method, but it requires 45-60 minutes of exercises every day! Screw that!

During this period I had an X-ray done. It turns out my very bottom disc is compressed to about 60% of it’s normal size. It’s a fairly common condition, but there’s no cure. Bummer.

Eventually, after hearing it advertised on the radio, I tried America’s Back. They use a simple machine-assisted exercise program to target critical back and abdominal muscles to give you better support. Amazingly, the whole workout is only about 10 minutes long, twice a week (once a week after six months).

Within six weeks there was a noticeable diminishment in pain. Now, about eight months in, there is almost no pain at all. I feel terrific. I tried America’s Back in desperation because nothing else worked. I was starting to think I would need surgery. Not anymore. This method fixed it. I still have some minor lower back pain – no surprise given the compressed disc – but it’s not serious at all. I still play soccer, ski, and exercise every day without any problems.

One interesting thing about America’s Back is the business model. It’s a monthly subscription type service. You pay forty-something per month for the first six months (when you use it twice a week), then $20 per month thereafter. Also, they’re located at Wal-Mart, of all places.

Unfortunately I don’t think the business is doing that well. They closed the branch closest to me, so I have to drive about 25 minutes to get to it now. Fortunately it’s only once a week. I hope they stay in business. It’s a great model and the service works exactly as advertised.

A while back I actually met with the former CEO of America’s Back about options for expanding the business. He apparently was forced out by the board, but he’s got other plans that I think will pay off in the long run. (They won’t compete with America’s Back, though.) Maybe one of the thousands of venture capitalists and angel investors who read this blog can help out.  Contact me if you’re interested.

For some reason this post on Andrew Sullivan’s Daily Dish struck a chord with me. I started to send him an email, but the more I thought about it, the more I thought it’s something I should talk about here.

Before I delve into that, I need to put a couple of things on the table.

First, let me be crystal clear. I’m an atheist. Not an agnostic, not a believer that God is revealed to us in nature or in the cosmos or other vague stuff. I thought long and hard about belief when I was younger, and the older I get, the more certain I am that there is no god.

Second, this does not mean I hate Christians (or Jews or Buddhists, Zoroastrians etc) or think they’re stupid. My wife is a Christian. She was raised in an aggressively secular society (China) and only found her spiritual calling when she came to the US. Conversely, I grew up surrounded by Southern Baptists in Georgia, and was even baptised my self. Go figure.

So back to the business at hand. Here’s the quote that stood out:

“…Christianity is about the conquest of death, not its enlightened acceptance, and that in the absence of a resurrection, no pious words can make either the miners’ deaths or our own anything but a horror.”

This was in response to the question, how does one explain the deaths of 12 miners in the grand scheme of things, and to what degree are the owners of the mining company culpable? Far too often, in my opinion, religious people offer up bromides such as “the Lord works in mysterious ways” to explain away tragedy.

Such pieties are especially useful if fingers are pointing at you. The real value of pious Christian bromides is to the owners of the company that has such a rotten safety record. If you believe in an afterlife, all suffering -  whether by miners, tsunami victims or innocent Iraqis hit by stray missiles or fanatic suicide bombers – is relatively small compared to the infinite ecstasy that awaits us on the other side. And thus even the monstrosities of Hitler, Stalin and Mao are diminished relative to the greatness of God.

But if you believe if there is no afterlife, every ignored opportunity to relieve suffering – giving a dollar to the homeless guy at the interstate exit, sending relief aid to tsunami survivors, refraining from dropping bombs on Iraq – is itself a sin against your fellow man. You cannot dismiss these things with piety (”the Lord works in mysterious ways”) or gruff humor (”kill them all and let God sort them out”). You, in some small way, are responsible for continued suffering. And death is not conquered or transcended. Death is final, not a mere stepping stone to ultimate happiness. The dead are dead, and they will never, ever again experience the joy of a beautiful sunset, a home-cooked meal or the birth of a child.

Who can live with such guilt? It’s much easier to believe in God and Heaven, or at least karma.

One final clarification: this is not an attempt to assert moral authority on my part. I’m as guilty as everyone else when it comes to not doing my part to relieve suffering, or being relatively callous in the face of evil and tragedy. It’s not like I volunteered to go fight terrorists, or to help stop genocide in the Sudan, or even to work in a soup kitchen. I’m just pointing out that I believe religious belief has a dark side that is never mentioned in the culture wars.

(And BTW though the post that inspired this little essay wasn’t written by Sullivan, it’s consistent with the kinds of views he holds. He’s a great example of a thoughtful conservative who isn’t just a mindless bullhorn for the Republican party. I wish there were more voices like him in the blogosphere. Likewise for the Democratic side of the aisle.)

One of the few newsletters I read almost every week is Meryl Runion’s PowerPhrase a Week. This week she has a great take on New Year’s resolutions.

What if you wrote your New Year Resolutions in performance review phrases? For example:

• So diplomatic she can tell people when they’re wrong and they are grateful for the information.
• When deciding between the easy thing and the right thing, she chooses the right thing.
• Such a persuasive leader she could herd cats.
• Expects the best and prepares for the worst. Usually gets the best.
• Her writing is so compelling a procedures manual she authored would be a page-turner.

Uber investor Warren Buffet is justly famous for his folksy shareholder letters. Last year I made a vague resolution to go back and read them all, but I never really made the commitment. So this year I’m going to read one per week and blog about any nuggets I find. I’ve even create a category just for Warren Buffet.

In other words, I Warren Buffet.

First up, 1977 (written in 1978). Here’s the high-level summary:

Gross operating earnings: $21,904,000
Per share earnings: $22.54

As we know in hindsight, Berkshire Hathaway, Buffet’s holding company, is one of the most successful enterprises in the history of industry. It has delivered a sustained compounded growth rate of 20% every year over the past 30 years. That’s astounding. He took some hits during the late 90s bull run in tech and internet stocks, and he took a tremendouse hit after 9/11 because Berkshire subsidiaries were some of the most exposed insurers that had to pay for the rebuilding of New York. Nonetheless, here we are years later, thousands of companies having collapsed, New York rebuilt and Berkshire Hathaway still thriving. (It will be interesting to learn the effects of Hurricane Katrina on his businesses in this year’s letter.)

With such an incredible growth rate, it’s obvious that Buffet has delivered record earnings pretty much every year, which any manager would crow about. But back in 1978, Buffet actually downplayed the significance of record earnings:

Most companies define “record” earnings as a new high in earnings per share. Since businesses customarily add from year to year to their equity base, we find nothing particularly noteworthy in a management performance combining, say, a 10% increase in equity capital and a 5% increase in earnings per share.After all, even a totally dormant savings account will produce steadily rising interest earnings each year because of compounding.

Buffet prefers a different metric, one that’s more fitting for bankers and insurers rather than go-go tech jockies:

Except for special cases (for example, companies with unusual debt-equity ratios or those with important assets carried at unrealistic balance sheet values), we believe a more appropriate measure of managerial economic performance to be return on equity capital.

After setting expectations, it’s time to brag a little:

In 1977 our operating earnings on beginning equity capital amounted to 19%, slightly better than last year and above both our own long-term average and that of American industry in aggregate.

Or is it?

But, while our operating earnings per share were up 37% from the year before, our beginning capital was up 24%, making the gain in earnings per share considerably less impressive than it might appear at first glance… We expect difficulty in matching our 1977 rate of return during the forthcoming year.  Beginning equity capital is up 23% from a year ago, and we expect the trend of insurance underwriting profit margins to turn down well before the end of the year.

Buffet practices a great management principal, one that seems especially important today given all the CEOs on trial and in jail (not to mention Sarbanes-Oxley): underpromise and overdeliver.

Here’s another good principle: candor. When you make a mistake, admit it.

The textile business again had a very poor year in 1977. We have mistakenly predicted better results in each of the last two years. This may say something about our forecasting abilities, the nature of the textile industry, or both. Despite strenuous efforts, problems in marketing and manufacturing have persisted. Many difficulties experienced in the marketing area are due primarily to industry conditions, but some of the problems have been of our own making.

(It’s no coincidence that candor is also one of the 22 Immutable Laws of Marketing.)

Insurance has always been a rather opaque business to me. I understand the basic model – be smart enough to invest current premiums well enough to pay future claims – but all the legal gobbledygook makes my eyes glaze over, and the actuarial stuff is way over my head. And competitively speaking, it seems like a nightmare to someone like me who’s used to technology businesses and their proprietary advantages. Buffet is forthright about this:

Insurance companies offer standardized policies which can be copied by anyone. Their only products are promises. It is not difficult to be licensed, and rates are an open book. There are no important advantages from trademarks, patents, location, corporate longevity, raw material sources, etc., and very little consumer differentiation to produce insulation from competition.

And think about the common perception of insurance. For me, at least, it conjures up the image of a slightly cloying sales guy working the room at chamber of commerce events, followed much later by arguing about a claim with some agent at a call center in who-knows-where. I suspect I’m not alone. Buffet concludes that in such an undifferentiated market, and particularly one which includes a lot of human contact, the only sustainable advantage you can create is through hiring good people:

[Th]ere is no question that the nature of the insurance business magnifies the effect which individual managers have on company performance.  We are very fortunate to have the group of managers that are associated with us.

(Although, now that I think about it, Geico – a Buffet company – does about as good a job as anyone when it comes to brand advertising. I suppose you could argue AFLAC is pretty good at basic brand identity, but I have no idea what their unique selling proposition is. I just know they have a goose or a duck or something as a mascot. Conversely, I now solely from hearing their commercials a jillion times that Geico is all about direct sales, and particularly saving 15% or more over other insurers. How’s that for staying on message? Oh yeah, they have a cute lizard or chameleon or something as a mascot.)

My lessons learned

Summing it up, here’s what I learned from this letter:

• Focus on the right metric for measuring operational success (in his case, return on equity), not just the popular one
• The only way to succeed in very competitive markets is to have the right people
• Underpromise, overdeliver
• Practice candor

Most people in business have heard that piracy in China is huge. A visitor there quickly notices a) a lot of products featuring Disney, Snoopy, Ralph Lauren and every Hollywood movie ever made 2) that are incredibly cheap – too cheap – and 3) that are of low quality – like a Polo shirt made of cheap polyester.

But what most people may not know is that logos – even whole businesses –  are often ripped off, too. Starbucks was a victim of this. After Starbucks’ initial foray into China in (I think) 2002, an imitator quickly popped up. It had a very similar logo and practically the same name. The Chinese name for Starbucks is Xingbake, roughly pronounced as “sheen-bah-kuh.” The competitor was called Shanghai Xingbake.

(An interesting side note about Chinese corporate law.  You can’t just call yourself, say, ABC Inc. You have to use the name of the city in which you are based – such as Shanghai ABC or Beijing ABC – or pay a huge licensing fee for the right to use the name throughout the country. Also,you cannot use the word “China” in your name unless you are a state-owned company.)

In any case, it’s a sign of progress that Starbucks successfully sued Shanghai Xingbake. You know capitalist American values are taking root when you can sue the hell out of somebody.

Here’s another example of logo piracy. It’s an ad for a shopping strip in Beijing. Look familiar? (Hat tip: Shanghaist)

I’m looking out my office window into a spooky beautiful morning. There’s a fog in the air, and the just-coming-up sun is diffused into a beautiful glow. Unfortunately I don’t have my camera, so I can’t show you what I see out my window, but a quick Google search for “Boulder web cam” led me to this cam at the University of Colorado’s web site. The image below is from 7:30 MT this morning.

 I don’t have quite as expansive a view, but I see a nice little subset of the Flatirons, including NCAR, which I unfortunately I could not find a good picture of. Designed by I.M. Pei, NCAR is a beautiful building elegantly nestled in front of the Flatirons, slightly to the left of the picture above.

Update

Now there’s a great rainbow. Here’s a picture from the 9 News webcam. The other end of the rainbow seems to come down right behind my back yard. I should go look for the pot of gold.;)

Happy New Year! In 2006 one of my resolutions is to post to my blog on a more regular schedule – at least twice a week and every day if possible. So if you’re groaning at the idea of  hearing from me more than every now and then, it’s probably a good idea to unsubscribe.

Also, the content will make a bit of a shift. In the past I’ve avoided commenting on political issues. That will change. If you’d rather not hear about my political views, now is a good time to unsubscribe.

Here’s a hint of what to expect from me politically:

• I think of myself as a liberal libertarian. That is, I’m sympathetic to libertarian arguments but I nonetheless generally vote Democrat.
• …because in my opinion the Republican party has come to be dominated by primarily religious interests, with a large helping of corporate welfare interests.
• I’m not an ideologue. While I believe principles are important, I also believe the world is complex enough that compromise is usually the best – and often the only – solution.

I can assure you this won’t be a mini Daily Kos or Powerline – analyzing every twist & turn in the news as proof that WE are good and THEY are evil.

That said, let me state up front that I loathe George Bush and am heavily biased against anything his administration says or does. So if you’re a Bush fan, you probably don’t want to hear any more from me.