Inflation as a Compound Annual Interest Rate - <AUTHOR> I was just browsing through "The Economist Numbers Guide," and read the part on inflation. Here's the part that jumped out at me, which I thought the econ geeks here would find thought-provoking:
"Accounting for inflation is easy in a numerical sense. The ugly dragon is nothing more than an interest charge. The annual rate of inflation is compounded yearly." (p.51)
I've heard inflation referred to as a "hidden tax" (which it is), but framing it as compound interest charged to all dollars circulating in an economy is new to me. The beneficiary of this "interest" is the monetary issuer (the central bank) and the member banks that receive the use of this new money first, before the money is devalued due to the increase in supply.
Think of the Fed (or your respective central bank) as the equivalent of a big JP Morgan Chase / MBNA / Bank of America credit card, charging you interest on every dollar in your pocket every second of every day, without your permission or consent. At any time, the central bank has the power to increase the interest rate (by printing more money), and there's no way you can opt-out outside of reverting to bartering for goods directly.
They don't even have to bill you: your money simply becomes less valuable over time, so it takes more currency to buy the same goods. If you're like 99.999% of the human population that holds some form of fiat currency, you're paying compound annual interest to the central bank in exchange for nothing. Eventually, the currency becomes worthless - historically, every fiat currency ever created as eventually lost 100% of its value. It's less a question of "if" and more a question of "when".
Now I have a better idea of what Mayer Amschel Rothschild meant when he said, "Give me control of a nation's money supply, and I care not who makes its laws." <comment><USER2> >> Eventually, the currency becomes worthless - historically, every fiat currency ever created as eventually lost 100% of its value. It's less a question of "if" and more a question of "when".

This is trivially true (all civilizations end, the sun burns out, nothing is permanent) but the relevant timeframe is usually one's lifetime, and the stability of the currency over that timeframe is more important.

>> you're paying compound annual interest to the central bank in exchange for nothing

You're paying that "interest" in exchange for a more stable currency, a supply of liquidity that allows for progress/growth . If the central bank is doing its job reasonably well, that is. You may also be paying for the "feature" of money that allows you to transfer value to your future self with relatively little risk.

<comment><USER3> "This is trivially true (all civilizations end, the sun burns out, nothing is permanent) but the relevant timeframe is usually one's lifetime, and the stability of the currency over that timeframe is more important."

Not sure it is Trivially, fait can go to zero, gold for example can not as there are other uses for it... Perhaps, like good design, the more timeless option might be the better:-)

You're paying that "interest" in exchange for a more stable currency" who pays for whom might be the better question with who is to benefit.

<comment><USER4> Well, a physical dollar bill has intrinsic value as well; if nothing else, you could burn it for energy. The intrinsic value is a minuscule fraction of the "official" value, but still nonzero.

The intrinsic value of gold is a lot greater, but probably still only a small fraction of its general market value; its very reputation as synonymous with tangible wealth serves to paradoxically inflate its value.

<comment><USER5> And the Deutsche Mark made great wallpaper. The intrinsic value of an object created for a lost purpose is worth less than the materials it's made out of.

Gold, on the other hand, has a naturally limited supply and has notable uses. It's reputation as a symbol of wealth is not only because of the cost, but also because there's not enough for everybody. If there was a limited supply of denim, we'd see a big comeback in Storm Riders.

It's like owning a Tesla - it's not just a $100k car, it implies that you're a somebody.

</comment></comment></comment></comment><comment><USER6> I'm so happy this is being discussed - a bit suprised that so many are so quick to jump to the defense of the status quo of a private for-profit central bank - but still happy the subject is gaining some awareness.

I have always thought that a better model would be to call it 'dilution' instead of inflation since this is the primary mechanism in operation. 'Dilution' would draw a natural comparison with shareholder's equity being diluted by a new share issuance. Inflation makes it sound like something that is either inevitable or is a good anti-dote to the notorious 'Deflation'

In the words of the great George Carlin, "The game is rigged! It's a big club and you ain't in it."

<comment><USER7> I'm not happy to see this discussed. The Federal Reserve is not privately "owned" in any capitalist sense of ownership, since the "owners" have no say over Fed policy and only a tiny slice of the profits. Almost all profit made by the Fed is returned to the Treasury, yet the system was deliberately designed to keep the Treasury from having power over the Fed.

The only conspiracy theory mentioned in the original post that survives this analysis is the idea that the Fed, somehow, is taxing people by inflating. Yet steady inflation is an essential ingredient of monetary policy, since it must be possible to have interest rates below the inflation rate. Almost all important economists, including those of the ardently anti-government Chicago school, agree on this point.

It's only fitting that you quoted George Carlin at the end of the post. He's another person who likes to talk about things while displaying no interest in actually understanding them.

<comment><USER8> _it must be possible to have interest rates below the inflation rate_

(economics neophyte question) Why is that?

<comment><USER7> Because the primary function of the central bank is to control the money supply. If inflation is 0, or more generally if short-term interest rates are always higher than inflation, then the central bank's tools are rather one sided. All they can do is decrease the real money supply by making interest rates higher.

That would be bad news in a situation such as, for example, right now, where a massive credit collapse is greatly increasing the demand for money. To keep the economy stable the Fed _must_ print money. They're doing it by buying long-term debt, which is the best they can do but is disruptive to the debt economy.

</comment></comment></comment></comment><comment><USER9> The percentage of the global economy that stores value in a particular currency will change based on the long-term expected inflation of that currency. Large companies hedge currencies all the time.

If you live in zimbabwe, whenever you receive currency, you immediately try to exchange it for something else, either another currency or goods. If you can choose to accept payment in a different currency (ie: by leaving the country), you do.

You can't opt-out of your currency inflating, but you can often choose how much to hold of it. How much currency do _you_ actually have? I bet most of your net-worth is in non-currency. If you own stock and that currency inflates, the amount of dollars you can get for that stock goes up - you don't hold currency. Even savings rates tend to track inflation, if you are a bank and know that the money loaned to you will be worth less in the future, you can offer to pay more interest for the opportunity to use the money now.

It isn't as if the fed can extract interest on all economic value, just all dollars, which is a relatively small fraction of stored economic value.

<comment><USER10> Data Point per wikipedia, and meant in no way to dismiss your observations - the Zimbabwean Dollar officially ceased to exist on 1 July 2009. Zimbabwe is now officially pegged to the United States Dollar.

</comment></comment><comment><USER11> According to your bio, you are _Author of "The Personal MBA: A World-Class Business Education in a Single Volume," editor of<http://personalmba.com>, independent business educator, entrepreneur, former P&G digital analytics global lead._

Interesting as your website is and your forthcoming book sounds to be, I find it hard to reconcile with the rather naive viewpoint expressed in the post above.

To be sure, currencies are only as good as the governments that stand behind them, and many governments have adopted mercantilist monetary policies at different times so as to shield their domestic markets from foreign competition. It is also true that any government administering debts denominated in the country's on currency are tempted to inflate them away, indirectly taxing the citizenry.

On the other hand, ownership of specie (hard currency), although a useful hedge, is no guarantee against economic hardship. In addition to deflation and the resulting economic distortions, at numerous times through history those with large holdings have seen it confiscated by fiat, or quasi-inflation can result from debasement/ seignorage and coin clipping. The Bank of England had a currency crisis back when Isaac Newton was master of the Mint due to disparities between the perceived relative values of gold and silver. I could go on, but my basic point is that you can abuse a hard currency almost as easily as a fiat one.

besides, if central banks issuing fiat currency are so evil as to steal from the pockets of the citizenry via inflation, why do all the largest and most powerful central banks fight against inflation using their control over interest rates? I'm honestly confused by your apparent ideological slant.

<comment><AUTHOR> Not completely naive, I hope: "Human Action" and "The Theory of Money and Credit" by Ludwig Von Mises are excellent, extremely detailed and informative reads. bokonist presents a good overview of the Austrian case against inflation / monetary dilution elsewhere in this thread, so I won't repeat it.

Good point that hard currency is not a guarantee against economic hardship - quite true. Nothing can provide that guarantee, but specie is often a better option than most: hard currencies like gold are impossible to counterfeit or produce out of thin air, and the supply is constrained by real-world production, which limits pricing fluctuations or sudden inflation/deflation. Prices have been relatively stable for centuries: an ounce of gold today and an ounce of gold 200 years ago could buy the same amount of physical goods, be it barrels of oil or a fine suit. Fiat currency devalues quickly: a few short decades ago, a nickel would buy a soda or a candy bar, at a similar margin to the manufacturer and retailer. No longer.

Debt is what banks sell. Deflation hurts the most when you're highly leveraged, and it's hard for borrowers to pay back debt if money becomes more valuable than when the debt was originated, which is bad for the bank. Under the guise of "fighting inflation," these banks are altering conditions that will help sell more debt and ensure (as much as possible) those debts will eventually be repaid. Control over interest rates is beneficial to the banks because it allows them to sell more debt, which tends to inflate asset bubbles, as bokonist mentioned.

There's a reason the founders of the US set gold/silver as the official currency and fought strongly against the establishment of a central bank - monetary debasement is a centuries-old issue. It's not a huge surprise it happened eventually, since there's a huge incentive for financial interests to establish this control if they can. It's telling, however, that it was done quickly and in secret, and the inner operations of the Fed are private to this day.

In the end, most countries sell out their currency in exchange for the promise of stability and certainty, which the central banks ultimately can't provide - their interventions create massive second/third/fourth order effects, many of which make the system less stable. The banks don't care, as long as more debt is sold - they benefit from the system until it collapses, at which point they move to a new one.

As to ideological slant, I have the same view of monetary dilution as I do of debasement / seignorage / coin clipping - it's theft, the taking of property without consent. The argument "it's for your own good," which seems to be the rationale behind allowing this to continue, doesn't hold much water when the parties that do it are the major beneficiaries.

</comment></comment><comment><USER12> Almost everything decreases in value over time, such is the nature of progress. I can have tens of GFLOPS available to me for a couple hundred dollars, in 1984 I would have paid $15M per GFLOPS. That's a decrease of value of over 99.999%, in only a quarter century. Someday gold will be cheap, too, either because the bubble bursts or some researcher makes a gold machine. I don't have a right to value.

Cash has always been a relatively poor investment, useful only because its convenience and liquidity are second to none. Inflation serves both of these purposes. If you don't want to use dollars, you CAN invest in stocks, gold, or just get chickens for bartering.

</comment><comment><USER13> >> The beneficiary of this "interest" is the monetary issuer (the central bank)

Seems like the beneficiary of the "interest" is anyone who holds debt against that currency. For instance, if I borrow $1k from a good friend who charges no interest, and pay him back in a year, the $1k he receives at the end of the year will buy him less than it would have previously.

In practice an lender does charge interest but assuming that interest rates, like any other product, is priced not by cost but by what the market will bear, the lender must bear the cost of inflation.

>> there's no way you can opt-out outside of reverting to bartering for goods directly.

Bartering for goods _can_ carry the same risk of inflation if others are able to flood the market with competitive goods. But in a single-currency system we have a central agency that is able to produce money without producing wealth. And producing money without producing wealth is what leads to inflation.

</comment><comment><USER14> _you're paying compound annual interest to the central bank in exchange for nothing._

No, you get currency. If you don't want to hold fiat currency then you don't have to. The problem is that barter is really really annoying and inefficient, so we came up with something better. A reasonable rate of inflation (e.g. < 2%) is a small price to pay.

</comment><comment><USER15> The real issue of money is control. Even if people want to use the dollar because it's a "stable" currency that "allows for progress/growth" that shouldn't give them the right to force others to use the currency.

Legal tender laws, prohibitions on issuing alternative money/coinage, and taxes on other forms of money are ways in which government forces its citizens to use its currency. If the currency were really so good, people shouldn't have to be forced to use it.

Regarding currency, government apologists are like commissars who, while preventing their citizens from leaving the country, loudly proclaim that they are better off than their capitalist neighbors.

</comment><comment><USER16> Perhaps you could clarify your definition of inflation. As I have not read "The Economist Numbers Guide", I can't say in what context they meant by comparing the inflation rate to an annual compound interest rate.

We need not necessarily be suspicious of the Fed, however, in devaluing fiat currency. It might be easier to think this if you think of interest rates and inflation differently. Interest rates set by the Fed, like the federal funds rate or the discount rate, and inflation are actually negatively correlated. That is, the lower the interest rate, the higher the rate of inflation that will ensue as the monetary supply expands and more goods/services are produced. This is the rationale behind our low interest rate during the recent recession. The interest rate is more of a price on the available credit. A low interest rate makes borrowing more attractive, and thus investing into a new project (rather than borrowing on consumer credit for mere consumption like jewelry or a mortgage for a house that you can't afford) will increase. Instead of thinking of interest and inflation solely as finance charges, think of them as prices of credit/investing and controlling supply/demand of goods in the macroeconomy.

So making the comparison between the Fed and JP Morgan or any private bank in terms of interest rate charging and inflation is misleading. Private, publicly traded banks have the sole goal of high returns to their shareholders. It may help to understand the calculation of the inflation rate as an interest charge, but the intention of the inflation target and the federal funds rates is markedly different than that of private banks. The Federal Reserve is trying to balance inflation with national economic growth and security, and it is a fine line to walk.

And in response to Rothschild, while monetary policy is a powerful tool to regulate the economy, we also have the mechanism of fiscal policy, i.e. government spending in infrastructure and national programs. Fiscal policy is more of a clunker in terms of being slower, since it requires political will of a heterogeneous group of thinkers, but it does present an alternative to pure monetary policy. (When I say monetary policy, I mean anything a central bank does to regulate the amount of currency circulating outside the reserves).

</comment><comment><USER17> I've heard that inflation doesn't actually 'tax' you because all nominal prices adjust so they have similar (previous) real values. If inflation increases, so do your wages, prices at stores, and interest rates (savings rate, loans rate, etc).

> _Think of the Fed... charging you interest on every dollar in your pocket > every second of every day, without your permission or consent._

Like I said before: _ceteris paribus_ , the real value of your money remains the same. A dollar may be worth less, but that is compensated with higher interest rates, wages, etc.

> _At any time, the central bank has the power to increase the interest > rate..._

Yes, and that is part of their monetary policy. HOWEVER, interest rates are used as a _signal_ for the macro economy, not a cause. Let's say there is a sudden upward shift of the demand of money (because of a speculative bubble, for our example; a sudden explosion of investing). This shift in demand would therefore change where the supply of money intersects the demand of money. This point is higher. As I've said before, the interest rate (price level) is a response variable. With this situation, the theoretical price level would increase to where this new intersection takes place. _The FED_ can, as a response, increase the supply of money, shifting the supply to the right, hopefully returning the intersection of the (new) demand and (new) supply curve to a level where the interest rate is constant. That way, a constant price level (might) be maintained.

One aspect you've neglected to mention is the breadth of our _global_ economy. The dollar is _the_ global currency (or so I've heard). Let's say that our currency is weakening (becoming less valuable) compared to the euro. The Europeans would then take their money out of the market for dollars, thus decreasing the supply of dollars (a leftward supply shift). This shift would then cause our _signal_ price level (interest rate) to increase. The change in interest rate is not our doing (partially).

There is a way around inflation. If we back our currency with gold/silver/something whose value is stable and makes good commodity money, then the value of money is much more stable. However, the US won't do that.

<comment><USER18> > I've heard that inflation doesn't actually 'tax' you because all nominal > prices adjust so they have similar (previous) real values. If inflation > increases, so do your wages, prices at stores, and interest rates (savings > rate, loans rate, etc).

What are the odds that each and every one of those will change in exactly the right amount?

For example, fixed interest things won't change. My mortgage payment doesn't change with inflation.

<comment><USER17> I never said 'exactly'. I said 'similar'. Interest rates are a signal, but since the underlying micro economy is constantly changing, the derived macro economy is also changing. Therefore, the (equilibrium) interest rate is constantly changing and always a bit off.

You are right. Some interest rates change; others don't. For instance, you can choose between a fixed and variable annuity IRA accounts. I didn't mean to imply that _all_ interest rates change.

<comment><USER18> > I never said 'exactly'. I said 'similar'.

Actually, you wrote "I've heard that inflation doesn't actually 'tax' you because all nominal prices adjust so they have similar (previous) real values."

Whenever the adjustment isn't perfect, it's either a tax or benefit. Fixed- rate instruments include an inflation expectation. If reality is different, someone takes a hit.

</comment></comment></comment></comment><comment><USER19> This "hidden tax" applies to the government as well. Inflation expectations are baked into the valuation of financial instruments. For example, if investors think inflation is going to be high they'll demand a higher interest rate on their bonds. _Inflation is part of the interest rate_. This includes the interest rates at which the government borrows, so they're not particularly jazzed about a high inflation "tax" either. So if you're sitting on dollars and paying this tax, you can rather easily be compensated for it by lending that money.

</comment><comment><USER20> It gets worse: taxes like the USA's AMT (designed originally to affect only 155 high income households) are not always inflation-adjusted, or the inflation measures are inaccurate or corrupted for political purposes.

Thus incomes taxes other than a flat rate income tax, have a "ratchet" effect over time, snaring more and more people with higher tax rates when in real terms they are not earning any more.

BTW I know a few people who are heavily into gold and silver, they are in a way, boycotting the central bank of the country they live in.

</comment><comment><USER21> It's kind of harsh to say "in exchange for nothing." Monetary policy for all its controversy is still a tool, that at times averts depressions...

<comment><USER22> To be more precise: inflation is a margin of safety against deflation.

Imagine a medieval world where the money supply is fixed. New money is never created, it can only be transferred back and forth. Now imagine somebody invents and rents out a steam engine. The world is now richer by this new technology. Your money's purchasing power just went up, since it can buy something useful that it couldn't before. Since the total amount of money is fixed, other unrelated goods will go down in price. If this becomes a common occurrence people will hoard money rather than buy stuff. This conservatism reduces investment in new ventures, and the overall growth of the economy suffers.

In an ideal world we'd be able to measure just how much the economy grew by and add just that much money into the economy. But we don't know how to do that without avoiding a command economy. And perhaps the question is ill-posed anyway.

Inflation is hard to control, and it can be 'captured' by special interests, leading to tragedy of the commons. We're still looking for a better way to avoid deflation.

<comment><USER23> The problem is that the word "deflation" has been corrupted to refer to two entirely different phenomena:

1) It can refer to generally falling prices due to increasing productivity. This is entirely beneficial. Video game consoles, transistors, etc, experience deflation and it results in consumers getting better products.

2) A contraction in the money supply, or a shock to the demand for money. The classic example is the bank run that wipes out people's deposits. This type of deflation is terrible because it results in falling aggregate demand, idle factories, and unemployment.

The first type of deflation is beneficial is good, and the second kind is very bad.

The Fed and mainstream economists believe that both kinds of deflation need to be stopped. Economists thus argue for constant inflation to prevent even the slight possibility of slipping into deflation.

To me, this is like arguing that a balloon should be constantly inflated to prevent any chance of it ever deflating. That's not a recipe for preventing deflation, its a recipe for blowing a bubble and then having a disastrous popping. Which is exactly what has happened happened.

<comment><USER22> I don't see why the first type is beneficial. It creates the same sorts of incentives to be conservative as the second.

Your technology examples have two properties: they're non-essentials, and they're seldom more than a small fraction of most people's assets. If productivity caused more widespread deflation it would cause the same ill- effects and compromise money's major role: as an enabler of investment.

You're right that too much 'margin of safety' leads to bubbles. My favorite test comes from Keynes: <http://akkartik.name/blog/2009-09-26-02-40-52-soc>

<comment><USER23> Here is my broader case against monetary dilution ( what you call inflation):

1) In the modern U.S. dilution happens as follows: First banks loan out the same money multiple times. Eventually, years later, they get called on this and there is a bank run ( example, the run on the money markets a few months ago). The Fed then steps in and guarantees all deposits. A guarantee by the Fed to print out money to back a deposit is no different than actually printing money. Thus the whole cycle is equivalent to the government taxing savings and spending that money on subsidized loans to borrowers that have been approved by the nationally recognized rating agencies.

2) From 1995 to 2008, the money supply was diluting at ~9% a year. Just look at MZM ( <http://research.stlouisfed.org/fred2/series/MZM> ). This is an extraordinary rate of dilution. As a result, Americans trying to save lost a lot of money in real terms. An investor who ten years ago put their money in 50% CD's/50% stocks would have lost money over the past ten years. Even 100% CD's would have lost money. The only investment that can protect against that kind of dilution is gold. But investing in gold is hardly productive.

3) The actual loans the government printed money to fund, went to McMansions, leveraged buyouts, commodities speculation, and credit card debt. These were neither productive nor in either of our interests. They are the classic case of Austrian malinvestment.

4) The rapid dilution forced people to put their money in any place but dollars. However, this did not produce "investment". It produced massive asset bubbles. People were not carefully considering business fundamentals. They engaged in herd behavior, putting their money where everyone else was putting it. They turned everything from stocks to housing into psuedo-money (ie not valuable because of dividends, but because everyone else thinks it is valuable). Sure there were a few gems that came out of this process, like Google. But most of the money was burned up in Vegas real estate and companies like pets.com.

5) Since I define economic growth as "producing more of what people want", taxing people to pay for subsidized loans does not result in economic growth, even if it increases the GDP numbers. Subsidized loans might result in more oil pipelines being built. But if people wanted more oil pipelines, they could have signaled that to the market by buying more oil. Perhaps what people really wanted to was to retire early and spend more time with family and friends. Taxing their savings to fund oil pipelines would thus make it harder to retire and result in less of what they wanted - that's economic decline, not growth. The government does not know what the people want better than the people, so it should not tax their savings to force them to spend money in certain ways.

6) The asset bubbles have made the prices of everything more expensive, from housing and oil to bushels of wheat. Some of these prices are now starting to come down, but a return to dilution will send them right back up again. As a result, for the past 35 years real standard of living has been stagnant. While Moore's law has brought some new technological gadgets, higher housing and commodity prices have forced us to work longer hours just to make ends meet.

7) Investing is not something that just magically works for everyone. Investing takes skill. A stock market investor is an owner of that company. Most people are not smart enough to be owners of companies. They are not even smart enough to pick out a mutual fund that can properly manage a company. Thus the net effect of the mass entry into the stock market from 1980 to 2008 has been to almost completely destroy it. People make crappy investment decisions, then more regulations are put in place to protected them. These regulations then bring the stock market into a state of permanent stagnation. Just look at SarBox.

8) If a fiat currency could be run with a dilution rate of 2-3%, it would be acceptable to me. We came close to this before Bretton Woods ended. I'd prefer 0%, which would be even better than a gold standard. But I am skeptical that we will ever return to that kind of stable fiat currency. The political pressures to dilute are too great. The U.S. has come perilously close to destroying its currency twice in thirty years ( 1979 and early 2008).

<comment><USER22> You're absolutely right about all those issues with dilution run amuck. I was thinking about McMansions and LBOs when I mentioned the tragedy of the commons.

My major disagreement is with 8. 0% dilution would be bad for the reasons I mentioned before. Some small rate of dilution would probably be the sweet spot, but better people than me need to figure out whether it's 2-3% or something else.

More tentatively and subjectively, I think you're mischaracterizing regulation in 7. There's been bad regulation, yes, but the response isn't lack of regulation.

</comment></comment></comment></comment></comment></comment><comment><USER24> Hacker News is not a blog.

<comment><USER25> You've been here longer than I have, so maybe things are different... but I get the impression HN is about discussion. What is the difference between this guy creating a blog with a single entry then posting it on here for us to read and comment on, and him just creating a long Ask HN post?

</comment></comment><comment><USER26> Inflation is a tax on hoarding.

If you buy assets, they'll generally keep pace with inflation (with some fluctuation, depending on which assets you've bought.)

If you engage in productive investment of some sort, you'll generally beat inflation and acquire wealth, which is certainly a desired effect.

If you try to sit on your money, investing in nothing, doing nothing, it will dwindle away. And most people in society are pretty happy with that, because it really means "if you're rich, that's fine... but if you want to stay rich you need to continue contributing to society, if only by loaning others your money for a return."

<comment><USER27> What about your income? Is that keeping pace as well? I know mine surely isn't.

<comment><USER26> If your real income is decreasing, then your real income is decreasing, no matter what currency is in use. They're essentially unrelated.

The only "benefit" of inflation to employers is that it makes it easier to implement wage cuts without facing resistance. That said, if you took away inflation as a way to hide wage cuts, nominal wage cuts would be the new normal in a lot of fields.

</comment></comment></comment><comment><USER26> One major point you seem to have missed, most people have _very_ little of their wealth held as raw currency.

Most people have wealth held in real estate, stocks, bonds, cars, businesses, retirement accounts, etc... and a comparative few bucks of cash.

So even if you take the view that it's compound annual interest to the central bank, you're only paying it on the amount of money that you float as cash and non-investment accounts. And in return you get a managed, reasonably predictable currency.

<comment><USER28> I don't have too much money (I'm 16), but basically all of my wealth is, though not cash, basically in the same situation. I have a checking account earning 0.1%/year and a "savings" account earning 0.2%. So the interest is negligible, and my money is still depreciating just about as fast as cash.

Yeah, when I get older I'll buy stocks, maybe buy a house, etc. But I have a decent amount of wealth, and I'm "paying interest" on all of it.

If interest rates weren't in the toilet right now, I'd look for a savings account paying real interest, a CD, or something of that sort. Luckily the "interest rate" levied on cash is low right now, so it's not worth it to me to bother.

<comment><USER29> It's not luck that interest rates and inflation are both low. Inflation is a key factor that influences interest rates</comment></comment></comment>


Developer Time - <AUTHOR> http://pydanny.com/developer-time.html <comment><USER3> This is why I created my own alternative to ordinary clocks - Maker Time: <http://willholloway.net/makertime.html>

Clocks get it wrong because they count up, but one day we will all die, so from our perspective time is counting down.

I started thinking about alternative calendar systems when I learned about Post-Revolutionary France's attempt at introducing metric time.

The problem with dividing the year by 1000 is 1000 is divorced from astronomical reality of life on earth. Swatch internet time is the latest attempt at this but I think it misses the mark.

I wanted a time keeping system that matched up with our cosmic reality and the reality of making things vs managing people. We have two important events, the year (one rotation of the earth around the sun) and the day (one rotation of the earth). The moon's cycle is only important for tides (and it's close in duration to the female menstral cycle)

Maker time divides the year into 1095 (or 1098 in a leap year) blocks. Each block is 8 hours. On January 1st the count resets.

This way I don't have to look at the clock and feel the stress it engenders, but also I get to mark the passage of time.

There are 82 maker time blocks left this year and I have big plans for those 82 remaining blocks of time. And one 8 hour block for sleep per day is productive time, thats when my brain encodes the things I learned into long term memory.

<comment><USER4> Nice! I made <http://936months.staticloud.com/> to look at one's life in blocks of months (936 on average). Seems to work well for inspiring someone! :)

<comment><USER3> 936 Months is really good. It sounds trite but this really does put things in perspective.

</comment></comment></comment><comment><USER5> It's up to the entire company to make sure to leave ample time for developers to enter flow. And to reduce any interruptions that will negatively impact flow.

I find it really amusing when companies have "no meeting Wednesdays!" - <USER2> your damn system so that you don't need so many meetings. I know of no actual programming problem that requires so much coordination that a programmer actively needs more than two or three meetings a week. My goal is to get every developer to 1 meeting a week (the weekly 1:1).

Things to remove:

* Meetings

* Interruptions/Noise (this is why open-plan offices are terrible)

* "Can I ask you a quick question?" questions

* High-bandwidth communication for anything that isn't life-or-death emergency

* Fire-drills/"emergencies"

* Fixed work schedule

Things to do instead:

* All meetings (with the exception of 1:1's) are optional

* Async communication wherever possible (chat rooms, email)

* Assume that any person, at any time, can be remote (this changes everything and makes sure that folks prepare ahead of time)

* 100% flexibility in work schedule to allow for folks to find their productive peaks, whether that's at 4am or 4pm

<comment><USER6> Fire drills strike me as an infrequent yet important safety measure. Unless it's some management term I don't understand?

<comment><USER5> When someone else's lack of preparation or planning makes it your last-minute problem. NOT the life-saving kind.

<comment><USER7> I have long wondered how the phrase came to mean this, because when it happens, it's never a drill.

<comment><USER8> The vast majority of business firedrills are arbitrarily caused by someone wanting a deadline met for no particular reason.

Everyone does crunch time not because there is actually a pressing emergency, but because the company wishes to extract additional effort for no additional pay.

<comment><USER7> Hm, ok. That's not been my experience. For example, I have definitely heard it used in Operations contexts to describe broken shit that needs fixing now -- things that are real problems and not drills. "Drill" to me implies preparation for an event in the future like a test or an emergency.

</comment></comment></comment></comment></comment></comment><comment><USER9> As a developer I schedule "surgery time" to avoid distractions. Blocks of 2-4 hours during the day where I go dark - no phone, no email, no chat/IM. The surgery analogy is apt. A good surgeon is amicable, knowledgeable, listens to patients and applies a deft touch to fix problems. But when he's elbow deep inside a patient he sure as hell isn't going to be taking any phone calls.

</comment><comment><USER10> Working from home changed the game for me. I used to sit outside of the busiest conference room on the floor and not only did it affect me, but it opened my eyes to how many meetings people were going to.

I understand PMs being in a bunch of meetings, but I'd see devs and testers in that room multiple times a day. The worst would be how many 3 minute meetings would go on there that started 2 minutes late. People would show up a minute early, leave a few minutes later, then be back to their desk a minute later. They probably tuned out of work five minutes before that, wasted five or so minutes with this "meeting", then weren't back in the flow for another 10 minutes after that. Some useless or empty "status update" cost 25 minutes, and I think that's being pretty generous.

</comment><comment><USER11> Everyone gets interrupted. Why do we (developers) think that we're unique and should be the only ones immune to interruptions in the workplace?

Nearly everyone is going to work better with blocks of time dedicated to their task(s). How about we all (developers + non-tech people) work together to reduce the amount of noise that our companies generate so that everyone can be more efficient?

<comment><USER12> Developers have to have a lot more in working memory than many other types of position.

<comment><USER13> Though the better you get at organizing your code, the less you need to push your working memory. In the first decade of my coding life, it took me a while to 'warm up' and 'cool down', distractions were _extremely_ irritating. In the second decade I started to find it easier to jump in and out of the coding state, by maintaining a more focused problem-space.

<comment><USER12> I am of a similar age to you I am guessing. I think many people have a mythical view of their own ability to escape the typical human experience.

Perhaps distractions don't damage your productivity, but I am guessing you're merely more productive now, so the short bursts you make are more productive than your old longer bursts, therefore your 'Warm up and cool down' periods FEEL shorter. It's not like people do nothing when not in flow, they just do less.

</comment></comment></comment></comment><comment><USER14> The fix: work remotely.

Besides call in meetings you can filter all your communications through electronic means. I check my email only every 4 hours. When I need to not be distracted I turn off my IM. It can be kind of lonely but Im overall much much happier.

</comment><comment><USER15> I wrote about this morning actually! Realized that hating being interrupted by meetings made me feel like a programmer for the first time. [http://tommy.authpad.com/i-apologize-for-every- unnecessary-s...](http://tommy.authpad.com/i-apologize-for-every-unnecessary- second-a-programmer-has-spent-in-a-meeting-because-of-me)

<comment><USER15> My apologies to everyone who read this from this thread, I'm going to put this on HN tomorrow morning. Meant to do it this morning.

</comment></comment><comment><USER16> Headphones, and a reflexive action to punch anyone who touches you when you have your headphones on is a very good way to dissuade people from distracting you and pulling you into meetings.

source: I do this :P

<comment><USER17> Doing this (well not punching people, just saying "not now" and putting the music back on :)) I think it works because there is such a need for programmers. Otherwise, I would probably come across as a candidate with terrible communication skills.

<comment><USER18> I do that, but I always follow it with "sorry I was in the zone", which everyone instinctively gets and understands.

<comment><USER19> Higlight the _was_ part strong enough, and maybe you'll make them feel a bit of healthy guilt about interrupting you.

</comment></comment></comment></comment><comment><USER20> I'm a developer turned product manager, and from first hand experience, I can tell you that distraction is one concern, but easy access to chat with the devs also runs the risk of 'just one more feature', or constantly revising the scope of previously discussed work too. That doesn't just get them out of the zone, it confuses them about what they're meant to build.

Sometimes, it's best to just complete a user story as it was logged and then see where we go from there (or even, shudder, after it's been deployed, and actual users have gotten their hands on it).

</comment><comment><USER21> I'm going to propose a somewhat radical solution: secretaries (or administrative assistants if you prefer).

Seriously, give developers and engineers secretaries/assistants. Even one assistant per 3-5 engineers would be a huge benefit. A good secretary will run interference with people who are coming to provide a distraction, and in many cases will probably be able to answer any questions necessary without bothering the engineer.

It could also provide a good entry level position for someone to get some experience and move up to coding.

<comment><USER22> goodness, the social signals implication that sends would never fly in any company I've ever worked at. You're elevating the developers to the status of "rock stars!". Now, many companies _say_ they want rock star developers, they just don't want to treat them as such.

</comment></comment><comment><USER23> That's why coding at night works so well. No one will bother you at night.

</comment><comment><USER24> I agree that a complete fix is unrealistic; however, identification of the problem certainly leads to potential for mitigation.

My personal favourite was the idea of a day of no interuptions. I think this would be relatively easy to implement and one day of high productivity is still an improvement over zero days of high productivity.

A further solution might be good old fashioned office hours. You have a question for that requires my personal advisement? Great! I'm happy to answer! Anytime between 4:00 pm and 5:30 pm. If it really can't wait, email me and hopefully I lose my flow and check my email in time.

</comment><comment><USER25> Also: build better tools (and get better at using the ones you have).

If you can squirrel away a little bit of time here and there to make hard things easier, then you can eventually start breaking tasks down into chunks that fit better into a day of interruptions.

This has been the only way that I've found to _consistently_ increase my productivity no matter how much I'm procrastinating or being distracted at the time.

<comment><USER26> So when you're deep in focus, or trying to be, and there's an interruption or ad-hoc open-floor brainstorming meeting right next to you, you just blink once or twice and shift over to some easy-pickup task you already have waiting in the back of your brain? Add a zero to your rate.

</comment></comment><comment><USER27> I think this concept is much better described here via a dream analogy:

<http://alexthunder.livejournal.com/309815.html>

(DON'T WAKE UP THE PROGRAMMER!)

<comment><USER27> and also by pg: <http://www.paulgraham.com/makersschedule.html>

</comment></comment><comment><USER28> Headphones: the ultimate "don't talk to me, I'm working" sign.

</comment><comment><USER29> The post is right on, but I also have to repost what laquan jackson said in the comments:

"Programming is for weak and effeminate men. Try carrying bricks up flights of stairs, or collecting rent checks in the inner city. And on top of all this you complain about "being interrupted"? Oh, how awful it must be for you. You need to check to see if you have a vagina down there."

Sure it may be controversial, but it's funny.

</comment><comment><USER30> Meditation is a great way to train one's attention and focus.

A lot of ink is spilled describing what companies and bosses could do to enable programmers to get or stay in the zone, but all of that is immaterial compared to one's intrinsic ability to focus, which is a skill that can be developed.

</comment><comment><USER31> Just get to work early. I used to work on the east coast alone and the rest of the team was west coast which was great since I got about 4 hours every day of being alone. You could do the same thing by switching your start time from say 10:30am to 7am.

</comment><comment><USER32> When I need to be in the zone, knowing that there is a fixed end time can be an obstacle.

<comment><USER33> Why to set a fixed end time for your zone? Your zone will end when you have finished your task and start to look for the next task.

<comment> j-kidd If you do not telecommute, you may want to set an end time to beat the rush hours traffic. One of the many reasons why it is unproductive to work in an office.

</comment></comment></comment><comment><USER34> As a guy in QA, what should I do? I can't ever tell if it's just the developer being nice when they say they want me to tell them about bugs before filing them, or if they actually want me to.

How would you want your QA people to deal with this problem?

<comment><USER35> See, that's part of the problem. We need to interact with you. Do we skip meetings and go to tickets? Except that tickets are often ignored or are misunderstood. Then comes the need for discussion. Of course, interrupting a developer is bad, so you have to schedule a discussion - A.K.A a meeting.

There is no magical solution to this problem. :P

<comment><USER7> Agreed.

What I notice at my current employer is that trying to avoid pulling people into meetings results in what I call "Development by game of Telephone", where software requirements become rumors passed between employees. (Even when requirements are documented -- because the documentation is vague.)

</comment></comment></comment><comment><USER36> Not related to the article but the CSS text selection color is really bad.

<comment><USER35> Ouch. And I just started the css/design refactor today. :P

</comment></comment><comment><USER37> I'm going to inflict some blistering cynicism on this thread.

You don't succeed in most environments based on whether or not you're _productive_ , competent, or expert at what you do. None of that _really_ matters once a company gets to the point where decisions are no longer being made by technical people.

So, you have to suffer. You have to deal with the meetings and the social expectations. Most developers work in an environment where availability matters more than excellence. In at 9:45, when the boss is in at 9:30? Stee- rike one! Miss the daily standup? Stee-rike two!

There is a positive spin you can put on it. Most companies won't actually _fire_ you for skipping those meetings. They're mandatory, but not _that_ mandatory. However, you'll just end up increasingly out of the loop and with a negative reputation... and eventually lose your job, but it will take a long time-- possibly 6 to 12 months, and certainly long enough to get another one. Attending that 15-minute status meeting rather than skipping it probably has as much of an impact on your political standing (and, thus, career) as a 2-hour swing in the overall length of your day. So the efficiency ratio of that meeting to normal ass-in-chair time is 8-to-1. No, it's not what you'd like to be doing with your time, but it's work, and most people deal with a lot worse than status meetings.

The game in most places isn't about getting the most done, or getting into flow and building great software. It's about creating an image so that managerial types, many of whom operate on antiquated emotional metrics of availability and subordination, feel confident in you. It's a game to be played, not a meritocracy.

<comment><USER38> This is excellent advice for when one wants to advance their career working for "the man."</comment></comment>


Ask HN: If we are in a VC bubble, how would the bust play out? - <AUTHOR> In 2007, many people knew housing prices were out of control. But they didn't fully realize how exposed the financial system was and that banks would fail on a massive scale.<p>Today, there is a debate about a startup-SV-VC bubble but I don't have a sense for who is exposed and what the greater ramifications would be, if any. <comment><USER2> It plays out as companies that cannot reduce their costs enough to be operationally profitable will exit the market or be bought for pennies on the dollar. So something like uber getting bought/absorbed by a cab company. Options/stock will be worthless in the dead company. Several VC companies will report large fund losses and investors in those funds, and possibly a LP or two will get out of investing completely. Some folks who thought they were set for life will discover they have to get high paying jobs to support their personal burn rate. They won't be able to and it will change their life, bankruptcy, divorce, suicide.

For most people it will be a non-event, they wondered how people could invest in a company at those valuations and so won't be surprised when they lose their investment.

It will be really really hard to raise money for a while. Perhaps as many as 6 or 7 years. Companies that depended on new startups like digital ocean will have large layoffs as they cut costs to stay profitable.

Anyway, that is my guess. We get to see how it plays out.

<comment><USER3> Well put. I think this time the bubble won't burst but slowly collapse. Insane valuations (ex. Slack) won't be possible and the employees who are making more than their ROI and get the hope of get rich quick option plans will have to dust off their resumes and go work for the companies who handled expenses properly and focused on revenue and profit.

When will this happen? Soon. If you look at the number of seed vs. A vs. B+ rounds, you'll see that A rounds are on the decline. That's important because that's the stage where companies move from a startup to /real/ companies. Lack of A rounds means investors are willing to throw a little money (seed) on potential, or go big on proven success. That's usually great, but lack of A's means they're not willing to take any risk. That's a sign this bubble is deflating.

_FWIW - I'm a technical founder of a non-funded tech company._

<comment><USER4> Wasn't there a "series a crunch" just a couple years ago?

<comment><USER5> It never stopped. It's been growing for some years, but until now, that has been due to a parabolic increase in angel rounds - the frequency of series A rounds has remained flat for a long time. If this has changed, it's a pretty large signal, IMHO.

</comment></comment></comment></comment><comment><USER6> Over-valued companies will have to take down rounds - employees who joined late will get their options roasted. A large number of small and new VC funds will get wiped out. This time, the difference is, its the professional players that get hit (VC's, institutional investors, hedge funds etc).

Last time, tourist investors (newbies and the lay man) invested in stocks that crashed. Private huge rounds are protecting the tourist investors by virtue of lack of access.

<comment><AUTHOR> > A large number of small and new VC funds will get wiped out. This time, the > difference is, its the professional players that get hit (VC's, > institutional investors, hedge funds etc).

This is what I'm getting at. Is that extent of it? Before the housing crash, most institutional investors thought it would be confined to the subprime market... but that wasn't true at all.

Where are the VCs getting all their money? Are mainstream banks exposed? Hedge funds? Corporations? Retirement funds?

<comment><USER7> The numbers (in startups, at least) are much, much smaller than 2008. Total VC funding was about $48B in 2014 [1]. By contrast, the subprime mortgage in 2007 was $1.3T [2]. The current student debt loan burden is about $1.2T [3].

I predict that the coming tech crunch will be a sideshow in much bigger chaos caused by the effects of rising interest rates on newly-minted college grads. We live in a bubble in Silicon Valley; across most of the country, youth employment never really ticked upwards. If interest rates go up, I think we'd start to see widespread non-payment of student loans and possible political unrest. That's much scarier than a few startups going belly-up.

[1] [http://nvca.org/pressreleases/annual-venture-capital- investm...](http://nvca.org/pressreleases/annual-venture-capital-investment- tops-48-billion-2014-reaching-highest-level-decade-according-moneytree- report/)

[2] [https://en.wikipedia.org/wiki/Subprime_mortgage_crisis#Subpr...](https://en.wikipedia.org/wiki/Subprime_mortgage_crisis#Subprime_mortgage_market)

[3] [http://www.forbes.com/sites/specialfeatures/2013/08/07/how-t...](http://www.forbes.com/sites/specialfeatures/2013/08/07/how- the-college-debt-is-crippling-students-parents-and-the-economy/)

<comment><AUTHOR> Upvote for the term "tech crunch"

</comment></comment></comment></comment><comment><USER8> My question is what would be the inflection point for the bubble burst? Would it be one quick event like a failed Uber or Dropbox IPO?

Or would it be something like higher interest rates drying out VC funds leading to startups going out of business left and right?

<comment><USER9> Interesting question. The second one sounds more severe, competition for money from different asset classes.

</comment></comment><comment><USER10> Global collapse. We'll be reduced to different factions struggling to survive in the wastelands.

<comment><USER11> The person with the strongest laptop will prevail.

I better buy more ThinkPads...

<comment><USER12> That sound you hear is the laughter of Toughbook owners.

</comment></comment></comment><comment><USER13> A lot of talk has been going on about this, and a lot of comments start with a few set of presumptions.

One presumption, usually left unexplained, is that there are a lot of "unicorns" that will collapse.

I am most interested in classifying these unicorns, and speculating which will fall and which won't.

Here's my list -- I want your thoughts on it.

1) Uber -- will not go down

2) Dropbox -- will go down

3) Airbnb -- will not go down, unless threat from regulation becomes stronger

4) Snapchat -- will go down

5) Twitter -- will go down

6) Facebook -- will suffer significantly

7) Square -- will go down

8) Apple will be entirely unscathed

9) Google will suffer, but be largely fine

10) Microsoft is suffering already. It will continue to suffer, but will not go down.

<comment><USER14> my 2c on that list. 1): It's questionable whether or not Uber has a network effect that sustains it as a leader in any market. The taxi industry is catching up, and so is regulation, and I suspect that some markets will become very competitive. This is not a defendable monopoly.

2): Dropbox is under attack from free/cheaper equivalents but defending well. It is still the easiest to use and have an incumbency advantage, but has made a few too many missteps (photos) to be comfortable.

3): AirBnB is under attack from booking.com and the like, but is a pleasantly strong business for now.

4), 5) and 6) all are fashion (or nightclub) businesses where the crowds happen to be, and the more they try to monetise the more they upset the crowd. Crowds can leave at any time.

7) Square face competition from Apple Pay and the like for payments, and payments is where they make their money. Out of the USA payment systems are far more advanced.

8) Judgement day will come for Apple when they successively fail to launch things that have an edge on everyone else, and as with RIM the decline could be fast. For now they are well ahead but my own pick is that Huawei will become the giant to beat.

9) Google is fat and happy, but their core revenue base is advertising, and when crashes arrive advertising falls.

10) Microsoft is resurgent, and I believe on the early steps of a long term turnaround program. The switch to the cloud means we are less reliant on any particular OS but Microsoft Office is dominant for business.

<comment><AUTHOR> Smart analysis. I object to your classification of Twitter, though. I was originally a Twitter skeptic, but the truth is, they've built a central hub where Snoop Dogg, the Pope, POTUS and @pmarca all converse. Very powerful. They need to do more, but they own more than a fad, IMO.

I especially agree on Apple.

What Microsoft has done recently is great. I hated them with the passion of a thousand suns when I was in college, but Satya seems to get it. He knows that if you put out a browser that causes devs around the globe to have to program exceptions because it doesn't behave like the others, they will hate you for it. (Doubly. Once for technical reasons and again for acting like a monopolistic ass.) And what you gained from some niche technical benefit, you've lost 1000x in goodwill and, ultimately, bad PR. I'm actually rooting for them now. It's crazy.

</comment></comment></comment><comment><USER15> I propose we change the alleged "startup-SV-VC bubble" term to "cockroach" because it just won't die. People have been predicting bubble for _years_. Coincidentally, people have been predicting the decline of Tesla stock, and when it drops 30 points they claim, "see!" Please.

[https://medium.com/@silicondowneyjr/bloat-not- bubble-a90bb9c...](https://medium.com/@silicondowneyjr/bloat-not- bubble-a90bb9cb461b)

</comment><comment><USER9> I imagine that if the alleged bubble burst, VC funded startups and their immediate environment would be where the most damage was/is. A lot of startups would just fail. Employees would lose their jobs and options/shares would be wiped out. Even otherwise healthy startups could suffer or fail from the mess. If a company is worth $200m one day and $40m the next, all sorts of bad things can happen even if they are profitable.

Beyond the immediate vicinity of VC backed startup land I don't think the fallout would be very severe. VC funded startups are not really a very big employers in the scheme of things. VC as an asset class isn't a big one either. Since VC investments are expected to be high risk, most end user investors allocate only a small portion of their portfolio to the class. It is expected to be high risk and on the whole it is considered very irresponsible to depend on its success. Even startup employees do not generally treat their jobs as highly secure, so at least psychologically they are prepared to one day find themselves looking elsewhere. They are also generally employable in the much large technology fields that are not directly related to VC money.

For an analogy think of the hypothetical bitcoin bubble bursting. Some bitcoin centric businesses would go bust. Some gamblers would too. But I imagine that most people holding large amounts are aware of the risk, they haven't bet the house on it.

I think the "systemic" impact would be minimal. The real dangerous bubbles are asset classes like real estate, bonds, blue chip shares and those esoteric but enormous "instruments" and securities. These are expected to be reliable and safe so money that must not disappear goes into them. They are also much bigger.

I guess you never really know unless it happens, but I doubt the kinds of levers that make big bubbles so bad are present here. A lender wouldn't/shouldn't be loaning out money to be invested in VC, so I don't think you would have the kind of domino effects that make crashes spread.

If it was severe and scary enough with big name "startups" going under, tech stock prices might dip. That might be a good time to buy. I can't see much of a relevance of a VC crash to Google, FB or MSFT's medium term prospects.

EDIT: One more - Since VC is a "professionals only" class of investment, we are not likely to see middle class people directly impacted. This means that macro-demand shouldn't be effected much either, except directly by employees losign their jobs and startups no longer consuming whatever they consume.

</comment><comment><USER16> The real question is, "if we're in a bubble, how do we take advantage of knowing it will pop?" (genuine question)

<comment><USER10> Can you short sell a company that doesn't have a public offering?

<comment><USER17> Yes but you would have to make that deal with the private investor(s).

</comment></comment></comment><comment><USER17> Recent trends in economics leads me to believe the accumulation of wealth and capital from gains in productivity and technology is amassing into huge piles of cash that want & need to invest in something, so now the question is what?

There are other more volatile economic "bubbles" out there to be concerned about.

If you're assuming starting a business based on delivering over priced telegrams or selling rolls of quarters at a 180% markup will lead you to your "exit" than okay be afraid of "the tech bubble".

Start a real business that makes sense, and the bubble is irrelevant.

<comment><USER18> Interesting points. Anyone know any counter-examples? Startups delivering real value which were wiped out regardless?

<comment><USER19> I can't think of any particulars right now, but my feeling is that many of companies the 2000-era bubble would be sound and profitable today, they just got to the market too early. It's very hard to judge an idea in isolation; the key is how that idea is applied to the market under particular circumstances.

If a true bubble burst were to happen, it'd kill startups by percents, not by merit. Some investors will keep money for their portfolio companies, others will sit until the market hits bottom and they can get better deals. It'll kill everything and everyone, not just the bad companies.

</comment></comment></comment><comment><USER20> Likely the evidence for a bubble that would be risky for our economy is the surprisingly large number of recent _unicorns_ , that is, private companies who have a recent funding with a _post money_ evaluation of $1 billion or more.

One reason for so many unicorns, that is, such valuable private companies, is the reluctance of significant private companies to do an IPO. Reasons include (A) having to try to please Wall Street that has a very limited view of real progress for a company and a very short term focus and (B) the overhead of Sarbanes-Oxley.

But I believe that you will find that a surprisingly large fraction of the unicorn fundings are more like traditional private equity instead of venture capital. So, for the unicorns, the high post money evaluation may be at high risk (bubble bursting), but, due to the deal terms, the last investor is relatively well protected and at only low risk.

That high post money evaluation was just something out in the ozone anyway, a long way from that much in actual cash, so that, if such high evaluations suddenly disappeared, that is, the bubble burst, then the effect on the economy would be minimal.

So, why do these goofy late stage fundings and unicorns even exist? The companies may want the cash from the equity funding and not want to attempt an IPO, and the private equity investors see maybe an upside, if the bubble doesn't burst first.

</comment><comment><USER21> 1\. Lots of unicorn corpses. They either get down rounds, fold completely, or get bought for much less than their last round's valuation.

2\. It would be harder for new startups to raise money. The big losses in the unicorns would then lead to smaller B/A/angel rounds.

3\. Lots of unemployed people who formerly worked at startups, scrambling to get jobs and the handful of large survivors.

4\. With money drying up, it would be a good time for bootstrappers or people who don't need much financing.

</comment><comment><USER22> Mark Cuban made some interesting remarks [http://blogmaverick.com/2015/03/04/why-this-tech-bubble- is-w...](http://blogmaverick.com/2015/03/04/why-this-tech-bubble-is-worse- than-the-tech-bubble-of-2000/)

"If stock in a company is worth what somebody will pay for it, what is the stock of a company worth when there is no place to sell it ?"

<comment><AUTHOR> That sounds like a guy who regrets some investment decisions, wants to sell, but can't.

</comment></comment><comment><USER23> I think bubble will not burst but it will start to deflate, when bunch of companies with 1B+ evaluation fail to give the investors huge promised returns. This will dry up seed funding and Series funding for startups. Investors will loose their money and series of layoffs at startups. This may impact the growth of big giants but nit sharply. Lastly, Silicon valley crazy rental could be see decline too.

</comment><comment><USER24> I think the inherit nature of bubbles means that it's almost impossible to accurately predict the fallout. Sure, there were investors that bet against credit default swaps, but it was still a bet, or calculated risk.

If such predictions were easy to make, bubbles wouldn't occur, at least at the scale of the dot com and housing bubbles.

<comment><USER25> What's easy to predict, though, is who will benefit from the burst: Chinese big four will likely be the winners. (Protected on their back by the gov, they also have the lucrative commerce in their hands, and they'll harvest all the engineers from the failed start-ups.)

</comment></comment><comment><USER26> \- Huge bubble where startups valued at almost around $1trillion are not regulated. \- They are not required to report anything to public. \- Eventually, VC will need liquidity that may force these companies to go public. \- Once public, they are required to show significant growth to justify super high premium valuation. \- If few of the top unicorns fail to show that growth, market may tank, VCs may loose money. \- VCs who lost money may be more cautious in future but may also have hard time raising capital. \- Many Unicorns do NOT have higher entry barriers or network effects. For instance, why can't same driver serve users from Uber, Lyft & 10 other apps, cheapest for customers & highest paying for driver - an arbitrage opportunity? Or why can't someone list house on Expedia,Travelocity along with Airbnb?

</comment><comment><USER27> If the tech/ anything bubble pops, what tech companies would be the best to work for preceding this event? Which industries that employ tech workers would be the best to work in preceding the bubble? This under the assumption that getting a software dev job would become increasingly difficult with a rise in unemployment in this sector.

I'm a junior developer, so if there became a huge oversupply of developers I think it would be very hard for me to get a new job. This is actually something that really worries me currently. I'm already having a hard time finding a new job, if there was another economic crisis I feel like I would have to leave the tech industry to get a job.

<comment><USER7> Junior developers do fine as long as they actually have coding skills and can demonstrate their work with a portfolio. Make sure you work somewhere where you can point to stuff you've shipped and you'll be fine. The folks who get tossed out of the tech industry in a recession are those who should never have been in it in the first place, i.e. the folks who heard it was easy money but don't actually enjoy programming or building things.

</comment></comment><comment><USER28> My Guesses are:

1- Facebook: Will go bust and be bought by a conglomerate (non IT Group or Microsoft). They will be the "Lehmans Brothers" of the next crisis.

2- Dropbox: Likely to go bust. No diversification and a lot of competition.

3- Twitter: Will be hurt but can survive,due to appeal to Marketers/News/..etc.

4- Google: Will likely drop a lot of products and concentrate on search and self driving cars.

5- Apple: Will become the new Microsoft.

<comment><USER29> Terrible terrible guesses

</comment></comment><comment><USER18> Has anyone written a good set of articles about the 1999/2000 tech bubble bursting, and which businesses it affected?

Lots of smaller companies, like Redhat, were hit in their valuation, but made it through.

</comment><comment><USER30> Proliferation of SPVs. Retail will get in on it. Eventually will spread to non AAA deals. Private market bust.

</comment><comment><USER31> When interest rates start going up later this year this bubble will pop

<comment><USER32> [Citation needed]

<comment><USER33> I don't have a citation to backup GP/OP, but the school of thought is that because interest rates are so low, capital is chasing increasingly risky investments to get an "acceptable" return (which is $expected_return after any taxes or inflation).

With interest rates rising, other asset classes will see returns rise, reducing the attractiveness of startup/VC investing.

<comment><USER34> Not only that, but the US, Europe and Japan printed a lot of money that is floating in the system (quantitative easing). If interest rates rise, it will mop up a lot of that.

<comment><USER33> Strangely enough, even with trillions of dollars in QE in both the US and Europe, GDP is stagnant (or retreating) and the EU still has negative interest rates.

Welcome to the new normal.

</comment></comment></comment></comment></comment><comment><USER35> I doubt that it's going to be anything like 2008's financial market crash. VC- funded startups just aren't that important. Housing prices and interest rates affect everyone; VC is just a game for rich people playing with other peoples' money by taking bets on young narcissists with big ideas.

So far, when VC flips its products on to the public markets, the markets react fairly rationally and the bad companies tank. Look at Zynga. The market may be overvaluing it still, but it's nothing like the 1990s. Public markets seem to be recognizing shitty tech stocks as what they are. So, we're not at the 1999 level of bubble.

Furthermore, the 2001 crash didn't have a major effect on the economy (although it was bad for the Bay Area, and for many engineers). It wasn't the crash, or even 9/11, but the sluggish ("jobless") recovery in 2002-4 that made the 2000s (except for people on Wall Street or in the slowly recovering Valley) a shit decade.

So, let's assume that the VC bubble ends. Some people will get hurt. The celebrity engineers who make $500,000 and aren't any good will get beefed. Run-of-the-mill engineers, if they're any good, might drop from $140k to $125k; not such a big deal. The ScrumDrone engineers will have a hard time finding work. Unfortunately, this will also hurt self-taught (meaning "no college degree") engineers even if they are good; the ones who are talented are still in a position of low leverage because "everyone knows" (well, employers know) they're more sensitive to a dry-up.

The short answer is that some people will take painful hits-- you're going to have a lot of 25-year-olds who thought they were millionaires, find out that they worked overtime for nothing-- but average people of average-or-better talent will mostly be fine. Bay Area salaries for good engineers might go down 10 to 20 percent at worst.

The bad news: housing in San Francisco's not going to become more affordable. First, the people who actually have money (not a half-million from options) are already diversified and less exposed to dot-com/VC, and the foreign money- launderers aren't exposed to it at all. Second, people hoard rather than sell (a steep positive volume/price correlation) when the market "should" soften. The stupid competitiveness around getting rentals (e.g. competitive open- houses, people cutting checks for a whole year's rent) will go away, but rents and prices will stay about where they are.</comment>


Why are Polynesians so big and strong? - <AUTHOR> https://twitter.com/crimkadid/status/1264783217237909514 <comment><USER2> Very interesting. Anthropometry is fascinating!</comment>


Zuckerberg Doesn't Understand Identity or Integrity - <AUTHOR> http://tech.li/2012/02/zuckerberg-doesnt-understand-identity-or-integrity/

<comment><USER2> In my opinion this is pathetic and intellectually lazy writing. Don't like him? don't use his shit but for the love of sanity can we all stop pretending that we were born fully aware, mentally and emotionally developed adults who made no missteps of character in college? I certainly wasn't perfect and I doubt you were either. People grow up and mistakes, both big and small, are a part of that. I've grown enough between college and now to allow others the room to do the same.

<comment><USER3> <http://www.paulgraham.com/disagree.html>

Your point is valid, but your tone is needlessly negative.

<comment><USER2> I'm familiar with that treatise on how to disagree. While it is a great resource for certain styles of conversation, I stand by the tone of my response. Thank you however for your opinion and concern for the community.

</comment></comment></comment><comment><USER4> In Zuck's defense- he made the nasty comments when he was younger and not as battle tested. Now that he has come along and matured into the role I'd hope he wouldn't do that again.

<comment><USER5> Youth doesn't automatically equate to the type of behaviour he portrayed. Acting a part, to fit a role, doesn't mean anything has been learned except how to be an inauthentic politician.</comment></comment>


Too many files: Reiser FS vs hashed paths  - <AUTHOR> http://ygingras.net/b/2007/12/too-many-files:-reiser-fs-vs-hashed-paths <comment><USER2> FreeDup (<http://news.ycombinator.com/item?id=89078>) can work better than either of these when you have lots of small files which are rarely updated.</comment>


Architectural Katas : Practicing Architecture - <AUTHOR> http://www.architecturalkatas.com/index.html

<comment><USER2> I like the idea and definitely agree with the premise, but I think this could gain more momentum as online events than off. Collaborative diagrams can be drawn up on a number of sites (Google apps being one - too bad diagram.ly is single user) and a regular event would eventually catch on. I'm no architect but I'd love to sit in and add value where I can.</comment>


Show HN: Succinct Team Messaging - <AUTHOR> http://opp.io/

<comment><USER2> Nice and simple design. I like the interactive presentation at the beginning, it is really helpful to understand the product and its cool features. Great work guys!

</comment><comment><USER3> That looks very cool. I like the style of interaction even more for automated reporting from systems.

<comment><AUTHOR> Our idea is to make this messaging format into an actionable messaging protocol as flexible as possible so that it can be used in many contexts.

</comment></comment><comment><USER4> Love it!</comment>


Mark Pilgrim Ask Me Anything on Reddit - <AUTHOR> http://www.reddit.com/r/IAmA/comments/f545e/i_am_a_fourtime_published_author_i_write_free/ <comment><USER2> Somewhat off-topic, but related:

Zed, I wish you were more polite. I bought that the Rails Ghetto thing was an act, but now I'm not so sure. The Mark Pilgrim post was a big turn off.

I wonder how much more of a positive impact you would've made if you had refrained from flaming Mark and just written LPTHW.

You have a lot of valuable insight, and you do great work, that could be distributed a lot more effectively by simply being less offensive.

<comment><USER3> As someone new to Python (at the time), I think he did aspiring programmers a great service by telling them to stay the hell away from DiP.

When you're new to something, and it seems insurmountably difficult, you are faced with the question of whether you are awful at something, or if the teacher - for the sake of politeness - didn't do a good job.

Feelings may have been hurt, but he's prevented some, if not a lot, of people from being scared away from Python and programming.

His style serves a purpose, and it lets him cut the bullshit and reach out to people.

The people who wanted to learn programming and Python were the recipients of Zed's soapbox speech, not Mark Pilgrim.

LPtHW was created in the context, and the story of that context was laid out.

<comment><USER4> I don't understand why it was neccessary to be an asshole though. It's not like Mark went around pitching his book to beginners. The jacket description is pretty clear about who it's aimed at.

</comment></comment></comment><comment><USER5> Mark says _Python 3 is a commercial disaster_. Would someone like to expand on this statement? I don't follow python at all and would like to know the reasons.

<comment><USER6> As other commenters have said, he meant the book was a commercial disaster. However, that's probably at least in part because Python 3 adoption has been really, really slow in general, in large part because it's backwards- incompatible and a lot of the big existing libraries still haven't been ported yet.

One of the biggest offenders is scipy, Python's very good and very widely used statistical computing library. The soon-to-be-released scipy 0.9.0 does support Python 3 [0], but Python 3 was released in 2008, so it's taken quite a while.

Another big problem has been with web applications. Python has WSGI, a standard interface for implementing webapps that allows you to use a lot of different frameworks with a lot of different servers. (Similarly to Ruby's Rack and Java's servelets.) However, the WSGI standard for Python 3 (which has to be changed because the existing specification has encoding-related issues in Python 3) has only just been finalized as PEP 3333 [1].

[0] <http://projects.scipy.org/scipy/roadmap#python-3> [1] <http://www.python.org/dev/peps/pep-3333/>

<comment><USER7> This is essentially everything I would have said on the subject. Python 3 is technically very good, but no one is using it, hence no commercial interest in the book. The optimist would say it was just ahead of its time. The pessimist would say Python 3 is a dead end and I backed the wrong horse. I'd say the jury is still out.

<comment><USER8> When you say a book "earned out", what exactly does that mean, to someone like me who has no clue about writing books and/or publishing deals?

<comment><USER9> He discusses "earning out" on a recent post from his blog[1]:

> The book went on sale in mid-August and earned out almost immediately. > "Earning out" is a publishing term which means that the book has sold enough > copies that my cut of the profits has paid back the advance payments that > O'Reilly gave me during the writing process. Which means that I'm already > receiving royalty checks for real money.

[1]: <http://diveintomark.org/archives/2011/01/09/dive-into-2010>

</comment></comment></comment></comment></comment><comment><USER10> [http://www.reddit.com/r/IAmA/comments/f545e/i_am_a_fourtime_...](http://www.reddit.com/r/IAmA/comments/f545e/i_am_a_fourtime_published_author_i_write_free/c1dco3b)

'I stand by my prediction that, by the end of 2015, Apple will not sell any computing devices with root access available.

'Here's what it will sound like: "iOS has been a runaway success. With 1 million apps now available in the App Store, blah blah blah. We've heard from countless people that their iPad is now their primary computer. And we've heard from developers that they use their iPad for everything except... developing iPad applications! ... Introducing XCode for iOS. With a bluetooth keyboard and mouse, you can now write AND TEST your apps directly on your own iPad. It's free, and it's available right now in the new Developers sections of the iOS App Store."'

You can write an entire Mac application and run it without having root access. In fact you can write an iPad web app inside the ECMAScript sandbox now. For more [http://answers.oreilly.com/topic/1285-ipad-friendly- browser-...](http://answers.oreilly.com/topic/1285-ipad-friendly-browser- based-programming-environments/)

I'm an embedded guy, but it seems like most of Hacker News's readers are just the kind of very-high-level-language (and framework) people who could bring a Commodore 64-style safe intro to computing environment to MobileSafari and Chrome OS. If you want (your kids) to go further like PEEK and POKE let you do on Ataris and Commodores, you can go native and do crazy things like extend the WebView like PhoneGap does.

Remember: you don't need Apple's permission to do perverse things to the JavaScript interpreter. You can even run interpreters on that interpreter.

</comment><comment><USER11> [http://www.reddit.com/r/IAmA/comments/f545e/i_am_a_fourtime_...](http://www.reddit.com/r/IAmA/comments/f545e/i_am_a_fourtime_published_author_i_write_free/c1dcqxa)</comment>


Jitter – A generator of efficient language virtual machines (2017) - <AUTHOR> http://ageinghacker.net/projects/jitter/ <comment><USER2> So basically this takes instructions like

      add %r1, %r2, %r3

along with their C code implementations and generates specialized 0-parameter instructions like

      add%r1%r2%r3

This gets really hefty really fast. While many instructions can be eliminated (e.g., add%r1%r2%r3 == add%r2%r1%r3), the upper bound for an instructions set of m instructions (each taking 3 parameters) and n registers is mn^3. For an architecture with 50 instructions and 15 registers, that's 168750 instructions, which would require 18-bit opcodes. Interestingly, the optimal index-based implementation would use 6 bits per opcode and 4 bits per register, also for a total of 18 bits per instruction.

Something I'm unsure about is how it handles literal parameters. Are unspecialized instructions left exposed in such a case? Do all literals have to be copied to registers? Even _more_ instructions be introduced?

<comment><USER3> > For an architecture with 50 instructions and 15 registers, that's 168750 > instructions, which would require 18-bit opcodes. Interestingly, the optimal > index-based implementation would use 6 bits per opcode and 4 bits per > register, also for a total of 18 bits per instruction.

Wouldn't it have to be the same # of bits/instruction, since it's the exact same information?

<comment><USER2> Sometimes it can actually be more efficient, since more bits are wasted with indexing. Random example: 1234 opcodes, 12 registers.

      1234 * 12^3 = 2132352 (22 bits)
      1234 is 11 bits, 12 is 4 bits
      11 + 3*4 = 23 bits

so in this case, using indexes is less efficient by one bit per instruction.

</comment></comment></comment><comment><USER4> I tried to use it for poke, which uses its expression evaluator to poke bytes into buffers. It's not really workable. [https://lists.gnu.org/archive/html/poke- devel/2019-09/msg000...](https://lists.gnu.org/archive/html/poke- devel/2019-09/msg00001.html) Much better would be to use a simple jit with the same ideas. 10x less code, and esp. much less brittle.</comment>


Tesla improves financial product and lowers monthly payment - <AUTHOR> http://www.teslamotors.com/about/press/releases/tesla-improves-financing-product-best-resale-value-guarantee-and-lower-monthly- <comment><USER2> FTA: "Those who buy the Model S electric car for personal use will now pay a monthly rate of $580 taking only gasoline savings into account."

What does "taking only gasoline savings into account" mean? Does that mean its not $580, its some other price but if you had a normal car you'd be spending X on gas and so our monthly payment is Y - X = $580?

Just tell me what the hell the monthly price is!!

<comment><USER3> Model S

Auto loan amount: $62400 (Cheapest option not including tax)

Auto loan term: 5 yrs

Interest rate: 8%

Monthly auto loan payments: $1265.25

Now this is a basic auto loan calculator. I am not factoring in tax incentivized discounts or overall savings per month on gas payments and no down payment. For now it's a number to start with.

Tool I used: [http://www.bankrate.com/calculators/auto/auto-loan- calculato...](http://www.bankrate.com/calculators/auto/auto-loan- calculator.aspx)

<comment><USER4> Apparently, one of their innovations is a longer loan term - it might be 7 or 9 years.

</comment></comment></comment><comment><USER5> The improvement in the monthly payment is achieved by stretching out the loan period to be greater than five years. How much greater than five years, they don't say. Seven years? Ten years? How much extra interest does one pay on such a loan?

As I've written elsewhere, they can't offer a real lease because they don't have the money to finance their customers, and no bank is willing to place a bet on the resale value of the car in three years (the end of typical lease periods). Tesla and Elon's guaranteed resale value is apparently not good enough for the bankers, leaving no choice but to offer more expensive financing options--real loans. For a variety of reasons, a loan is less risky for a bank than a lease.

<comment><USER6> they don't do a lease because they would lose the tax incentives

<comment><USER5> Not at all--the leasing company (a separate shell entity or a bank) takes the tax credit because they bought the car. This is how both of my electric vechicle leases have worked. The leasing company then passes on the savings in the form of lower lease rates.

</comment></comment></comment><comment><USER7> I'm impressed that Tesla has admitted that they were a bit misleading with the first announcement/offering.

EDIT: From the article '"We appreciate the feedback from a number of journalists and customers that the first version of our financing product wasn't quite right," said Tesla Co-founder & CEO Elon Musk.' Sure sounds like they're admitting it in a "we didn't really do anything wrong" kind of way.

Even though it's not an outright admission, it's still admirable.

</comment><comment><USER8> I love Tesla and I love Elon Musk. I'm going all in on TSLA stocks ahead of their quarterly earnings. Financial YOLO.

<comment><USER9> Kicking myself for not grabbing it while it was in the $30's. Still probably a good buy, but I would recommend at least leaving some money aside for Ramen noodles and rent, just in case it blows up.

</comment></comment><comment><USER10> hahaha "[for high paying jobs] Tesla financial calculator makes it easy to factor in the value of time saved by being able to use the carpool lane or avoid trips to the gas station"

So, if you make lots of $ per hour, they will claim that having a model S will save you time and so they added the money you would be making into the price?!?! that's just crazy!

specially when a gasoline/hybrid car you can get:

\- 300miles per refil

\- each refil takes 5min

with the Model S

\- 200 miles (250 if you buy the expensive one)

\- 4h refil / 1 hour refil (if you buy the expensive superCharger)

<comment><USER11> You never have to "refill" a Tesla in the conventional sense if you charge it overnight like your phone. Also, HOV lane is awesome. It is the future. Also, if you switch to an E-9 plan (in CA) your overnight charge costs $0.03/kwH so that is essentially 1 gallon of gas in cost = 500 miles of travel.

<comment><USER12> > Also, HOV lane is awesome. It is the future.

It's the future as long as the car you're driving is marginal.

Hybrids used to be allowed to use the HOV lane, then they became popular and got kicked out. If electric cars become mainstream enough, they, too, will be prohibited from the using HOV lane.

Being able to use the carpool lane is the main selling point for an electric car to me right now, but be aware that it might not last for more than a few years.

</comment></comment></comment><comment><USER13> It looks like a great car, has plenty of power, range etc, but I still think its too expensive to be a no brainer.</comment>


Snowden is 'not on plane' to Cuba - <AUTHOR> http://www.bbc.co.uk/news/world-europe-23025810

<comment><USER2> Already here: [https://news.ycombinator.com/item?id=5932055](https://news.ycombinator.com/item?id=5932055)

</comment><comment><USER3> There they go again "expecting" counties to do just what they want with Snowden. We've lost so much credibility with the world and now our own people, how can they keep this tone of "expecting" going on? Really? If I had the power to shove people out of office once elected I'd be down at the voting booths doing just that.

<comment><USER4> Not just that. All that has being said by the US media, and all the oficial information released the Govermen is directed to US citzens, without really talking about the world wide implications of the problem.

I'm from Spain. Are we being spyed? Since we have seen too many times that non-american people (even not being in the US) do not "enjoy" the most basic rights in the US... what can we expect?</comment></comment>


Extend the JAR file format to allow multiple versions of class files to coexist - <AUTHOR> http://openjdk.java.net/jeps/238/

<comment><USER2> 404 error on your link.</comment>


Silq: A new high-level programming language for quantum computing - <AUTHOR> https://silq.ethz.ch/ <comment><USER2> Quantum computing isn't complete bunk?

<comment><USER3> No. It's a real thing, only current quantum computers are too small to do anything serious.

<comment><USER4> The emperor's new quantum computer. It exists but it's too small and complicated unless you are super smart</comment></comment></comment>