How do I become a Code Ninja or Rockstar?  - <AUTHOR>

Hello friends,
I am a CS major but somehow I feel my programming skills are not great as to match to that of a code Ninja or Rockstar.
I have read most of the algorithms books, Data structures book but somehow I feel I am still falling short of being a good programmer.
I have the following books in mind to complete: a) Programming Pearls b) Programming Challenges.
I am not sure which one should I pick.
I have been in industry for past 3 years and know coding languages like Java, C and Python but I haven't had the courage to take part in Google code jam. This is I did and due to my silly mistake I uploaded the wrong output to the code. I was able to solve two easy and 1 hard problems.
In short I wan't to code with ease so that I can crack any coding problems in MS, Google, LinkedIn, Facebook etc.
Don't consider this post as a way to crack the interviews of these companies. I just want to be a Code Ninja.
Thanks!
Looking for your suggestions and pointers. <comment><USER2> Spend less time worring about how to be a ninja or doing puzzle books and spend more time coding real projects.

In other words, get to work noob.

Also, most people who call themselves ninjas are full of shit.

</comment><comment><USER3> Gack.

I throw up in my mouth a little bit every time I hear "Code Ninja" or "Rockstar". Whoever coined those terms should be forced to patch legacy cobol code for all eternity.

To better answer your question, you become great through practice and application of skill. All the reading of material in the world won't act as a fill-in for doing.

So do.

Write a webapp. It doesn't have to be a "startup", it doesn't have to be great, you don't need 5000 users and a techcrunch article about it. You just need to pick a point on the horizon and code towards it. And when you reach that point you pick another, and so on. Forever. In 30 years you will be halfway to greatness.

</comment><comment><USER4> 1) Learn some languages that force you to think differently, even if they aren't of an immediate use in the industry. I'd suggest starting with Scheme (Little Schemer + SICP) and then learning an ML family language (Haskell or OCaml). A language that incorporates elements of logic programming (Erlang or Prolog) would be useful too. You may not be lucky enough to use these languages in your day-to-day work, but there are lessons you can take home with you e.g., minimizing mutable state.

2) Remember to work on projects that are something more than algorithmic puzzles. Algorithmic puzzles are fun, great and are brain gymnastics, but you should also learn how to write low-level socket code (Richard Steven's "UNIX Network Programming" books are excellent in that respect), deal with concurrency (switching languages again, Java Concurrency in Practice is a great introduction).

3) Participate in open source projects. Dan Kegel has an excellent guide on how to contribute:

<http://kegel.com/academy/opensource.html>

Even if your contribution to an open source project is small, it will require reading and understanding a great deal of non-trivial code.

Finally, as moonpolysoft said, don't call yourself a ninja or a rockstar.

</comment><comment><USER5> Step 1) copy & paste a JQuery snippet that you don't understand

Step 2) call yourself a ninja

</comment><comment><USER6> Why do you want to be good at programming? You'll only get there if you are driven by your intrinsic interest in the problems you are trying to solve. Becoming a 'rock star' is a side effect, not an end goal. The way you've phrased your question suggests you don't truly have that intrinsic interest in problem solving or building. Ask yourself what your true motivation is and carefully consider whether sitting at a desk coding is really what you want to do every day.

</comment><comment><USER7> I would say that a truly great programmer isn't necessarily technically amazing. For example, a vast knowledge of programming languages is something that anyone can learn with enough time and patience. However, it's the ability to problem solve: to look at what exists already and make something new out of it, that really makes a developer 'great'. It doesn't really matter if they know a language inside out when tackling a project - it's the ability to help themselves: use the language and any tools available / relevant to solve a problem in an innovative way.

It's kind of a hard thing to evaluate, I suppose. I would say that to 'become great' - you can't just sit around programming all day (although this will no doubt help). It's a kind of 'knack' for working problems out, finding new techniques, using tools in new ways etc. These are all the things that make 'great' programmers great imho, and none of them are actually directly related to programming. In my experience, people who are REALLY good at solving programming problems are REALLY good at it outside of the programming discipline too.

</comment><comment><AUTHOR> Thanks guys for your comments. I didn't know Code Ninja and Rockstars were not liked by the developers community per say. I would refrain from using those terms.

Still I think my question remains un answered. May be I should re-phrase it as "How should I become a good programmer able to crack problems easily"?

What books did most of you used to aspire to be a good programmer?

Thanks again!

<comment><USER8> It's not about books; no book is going to make you a better programmer automatically any more than a book on running will make you a runner. Start programming at whatever skill level you're at, start some independent projects, get a part time job...when you hit your wall, then find a good book. You're going to get a lot more out of doing than reading.

</comment></comment><comment><USER9> You get to be a good developer by repeatedly building software that solves problems and creates utility. Heed the advice of others who suggest learning different classes of languages that affect the way you think about problem solving. But pick something and don't toil over it too long.

The other part of the "doing" side of things is finding something to do. A good place to start is by solving a problem you have yourself or that you are interested in. Maybe you think all the todo list managers suck, or maybe you want a tool that helps to organize your porn collection. Great, pick a language and get to work.

Another secret is to hang out with smart people and other good programmers. Talk to others about their work and learn from them. The rising tide raises all ships.

</comment><comment><USER10> These are dumb expressions ("Code Ninja", "Rockstar") but the intent is fine.

My recommendation is to build a bunch of interesting things that are at a higher level than one-off, design-free algorithm puzzles (well, those sorts of things aren't exactly 'design free' but they typically don't make you think about lots of tradeoffs - you find a plausible way to do something and do it).

I suspect that for most people this means finding an employer who solves interesting problems and getting an job there that actually involves participation in the 'good parts', so that you actually do it. My record of self-motivating after my degrees were done is pretty much zero - best to make this your day job.

</comment><comment><USER11> Practice often... and know your language well.

There is a huge difference between knowing and KNOWING. Knowing your tools well enough lets you focus on the problem rather than searching how to hacking your way through. Don't be a copy paste programmer.

Don't be mislead by fast typers either.

Fast turnaround is good, but stable code is better. What's the point of finishing in 1 day instead of 2 if you'll be debugging for a week afterwards? With enough practice you'll be able to get the stable code out in the same time as the fast typer.

Some book recommendations:

-Code Complete 2.

-Refactoring: Improving the Design of Existing Code.

-Clean Code.

-Head first design patterns.

</comment><comment><USER12> "Skill to do comes of doing"

       -- Ralph Waldo Emerson

Also, as others have said, please do not aspire to "rock star" or "ninja."

Constantly test yourself and keep reaching.

</comment><comment><USER13> Hey, you're not Steve Jobs, are you?

First, aspire to be a great engineer. Ninjas are for turtles and Rockstar is caffeinated sugar water.

Second, design and implement software. Write programs in areas that interest you. Then iterate and design something that your friends or family can use.

Finally, do your best and forget the rest. And continually get better doing it.

(It wouldn't hurt to read "Programming Pearls".)

</comment><comment><USER14> I see the problem,

Javascript programmers are Ninjas

CSS experts are Wizards

PHP Developers are Rockstars

I think you are looking to be more of a Java or C Guru, Perl Hacker, or Python Developer.

Not sure why Python experts don't get a "cool" name, that just seems to be the way it is.

</comment><comment><USER15> According to Malcolm Gladwell, which I agree with, it's practice and persistence. How many hours are you coding a day? How many hours are you spending learning to code smarter?

</comment><comment><USER16> If you want to get better, build more things.

And don't use the terms "code ninja" or "rockstar" to describe engineers. Those terms are self aggrandizing crap that inadequate engineers use to stroke their own egos. At best using those terms marks you as being naive.</comment>


Ask HN: Designing via Interface in Java? - <AUTHOR> 	Hi, Often I see experienced Java developers asking us to develop the system using Interfaces rather than starting with classes. Yes, I do create interfaces, I know whats its usecases are etc. However the term "design your system using interfaces" is somewhat confusing to me. Is it a pattern for designing robust application in Java world? How should one learn it?
If so are there any online books / blogs regarding the same?
Note: I had already asked the question in Java Subreddit, but I want to get HN community thoughts as well. <comment><USER2> I'm not clear on what the conceptual hurdle is.

Of course it's a common pattern--that doesn't mean it's always necessary. It _does_ make a lot of things easier, like testing, etc.

It's the same thing as declaring your vars as `List` or `Collection` instead of `ArrayList`. If you do the same thing in your system you give yourself much more flexibility.</comment>


Snapchat Spectacles are now available to buy online for $129 - <AUTHOR> https://arstechnica.com/business/2017/02/snapchat-spectacles-are-now-available-to-buy-online-for-129/ <comment><USER2> Does anyone really want these, or care?

I'm curious because I don't and I don't see any real momentum behind them.

</comment><comment><AUTHOR> I'm really intrigued to see if they hit the same pushback that Google Glass did.

<comment><USER3> The difference is I knew people excited about glass. These, not so much. There was some early scarcity hype, but I feel it was more about reselling and 'exclusivity' than function. Early Lada ownership is exclusive too.</comment></comment>


EU votes in favor of universal mobile charger - <AUTHOR> http://arstechnica.com/tech-policy/2014/03/eu-votes-in-favor-of-universal-mobile-charger/ <comment><AUTHOR> How about a standard DC wall socket?</comment>


Try to digest the Groupon story - <AUTHOR> http://shortlogic.tumblr.com/post/6142108636/groupon-ipo-pass-on-this-deal <comment><USER4> Everyone remembers the Pets.com IPO for example, but no one remembers that it was Merrill Lynch that underwrote it and made most of the profit on the deal.

The problem is the market and VC environment that allows things like these to go down, not that there are unprofitable companies. Those have always existed. But there was a time when people didn't buy into them _because_ they were unprofitable. The way things work now is just wrong and dangerous. But it's been 10+ years since the last dotcom bust, so I guess people will be people and start falling for it again. A fool and his money and all that.

<comment><USER5> I agree. I can't see any investor with half a brain buying any company with a P/E of 2,147 (LinkedIn)

<comment><USER6> I _can_ see an investor with half a brain buying a company with a P/E of 2147 - heck, some newer companies with lots of potential have negative P/E. What you need to make up for it is a really nice growth story.

Now, LinkedIn has an okay growth story, don't get me wrong. The problem is it's just not good enough. Let's do some back-of-the-envelope comparisons. Consider a relatively low-risk investment: an intermediate-term corporate bond fund. You can get about 4% yield these days. At the current market cap of $7.4 billion, that's earnings of roughly $300 million a year. That's _roughly_ in line with LinkedIn's revenue, but they also need to pay for things like engineers and server farms.

In other words, you're going to need a heck of an earnings growth story just to break even against a __safe __investment - and LinkedIn is nowhere near as safe as a corporate bond fund.

<comment><USER5> That's why I prefer to look at PEG instead of P/E. It shows you the price-to- earnings relative to the earnings growth. Quite handy.

</comment></comment></comment></comment><comment><USER7> It's always a big red flashing warning sign to me when investors who've stood by a company from the beginning take a major cash-out _before_ an IPO. Nobody can argue they didn't know an IPO was coming soon.

If you don't believe you'll make more money from an IPO than a private investment, then what does that say about your faith in the company's future profitability?

</comment><comment><USER8> In case anyone didn't notice, this blog post is by DHH.

<comment><USER9> That's interesting given that Jason Fried (his partner at 37signals) was a board member of Groupon and is now an advisor to the company.

<comment><USER10> According to the payout statements Jason was also one of the folks who took money out in the last funding round to the tune of 500k (which seems like a pittance all things considered).

<comment><USER11> I wonder how much of a ding this will make in his credibility among bootstrapped entrepreneurs in general. It's hard to talk down something and have your thumb in the pie at the same time.

<comment><USER12> Some facts here before things get a bit out of control:

The S-1 speaks for itself.

Back in mid-late 2009 Andrew Mason asked me to be on the Groupon board of directors. He wanted my opinions and advice on product development, design, copywriting, software development, and user experience. Andrew (and Brad and Eric) know where I stand on building bootstrapped, profitable businesses. I still stand there. I wasn't asked to be on the board to give them financial advice.

I agreed to be on the board. I like Andrew a lot and I was very happy to help him. I had never been on a board before so I saw it as a great learning experience for me as well.

Groupon compensated me for my involvement with options.

A few months ago when Groupon took a big round, I was asked if I would like to sell some of my shares. I said yes. That sale is listed in the S-1. I still have more shares. I don't see any problem morally or ethically with selling shares that I was granted as part of my involvement with the board. I owned something, someone offered to buy it, and I sold it.

I was asked to leave the board of directors in January of 2011. I serve as an advisor now. Whenever Andrew asks me for product, design, or writing advice, I'm happy to help.

I've never invested my own money in Groupon or any other private company. It's not that I wouldn't invest in a private company, it's that I haven't.

Those are the simple facts.

As for my credibility, I don't see how any of this is relevant. You can make up your own mind about that. I believe today what I've always believed - <USER2> profits rule, bootstrapping is the way to start a business, and spending less than you earn is the only way to have a healthy relationship with money.

As for DHH's opinions, they are his own. I may or may not share them, but we're both grown ups and we respect each other no matter what.

<comment><USER13> Did you ever feel compelled to voice your opinion after you saw the data that indicated Groupon was spending more than they earned? Why did they ask you to leave the board?

Thanks for sharing what you have. It's been said before, but I'll say it again: HN is a remarkable place when intelligent people are having open conversations about the news that directly involves their own business.

<comment><USER12> I was never shy about my opinion. A good board is made up of people with differing opinions. The worst boards are made up of rubber stamps.

And of course a board is made up of people with different strengths and experiences. My experience is not in massive growth, rapid growth, acquisitions, companies with thousands of people, etc. There were and are people on the board that are very experienced in those matters.

My experience is in product design and development. My advice on those matters was my main contribution to the board and the company. I continue to advise, when asked, on product design.

<comment><USER14> Jason, since you are here - may be its a good idea to tell the crowd why you decided to sell some of your shares of Groupon,

as some papers seem to indicate

<comment><USER15> Why would that matter? He was asked, and he said yes. These were options paid to him for his involvement on the board, not money invested by him.

If you did some work for someone, and they paid you with stock instead of cash, wouldn't you feel like converting that to cash the first chance you get?

<comment><USER14> NO. if i would have a successful company like 37signals and enough money - <USER3> would keep the additional startups as long as possible, since there is not much to loose

especially would keep the shares of the "hottest" and "fastest growing" startup groupon

<comment><USER16> What if he needed the liquidity?

There are all sorts of reasons to sell stock at a particular time that have nothing to do with cashing out on a company one believes will flame out.

<comment><USER14> he could have other startups to cash out on then , instead of groupon,

<comment><USER15> sounds like you're just a hater.

</comment></comment></comment></comment></comment></comment></comment></comment></comment></comment></comment></comment></comment><comment><USER17> Pardon my ignorance but how often do insiders get their stakes cashed out after funding rounds like this, as opposed to using the money for operations or growing the business?

My lack of knowledge about corporate finance and the part of that blog post that refers to cashouts is making me see Groupon as more of a DrKoop.com or Webvan than it may be. But nevertheless I can't see how struturing a funding deal like that benefits anyone other than the insiders who got in early enough?

<comment><USER18> The IPO makes investors very, very, very rich. The Groupon executives have built something that is going to make the investors and the bankers very, very, very rich. Why shouldn't they be rewarded for creating all this value?

I am not being sarcastic. That's how business works: If I can make you a lot of money, you need to share some of that with me, or I'll go make someone else a lot of money.

The Groupon deal is a business built to flip to the public. The structure benefits the insiders, but it benefits the VCs who cashed them out invested in the last round even more, and it will benefit the bankers. And that's why they can get away with getting rich right away: Because they're making a lot of other people rich.

<comment><USER19> Making some people very rich is not the same thing as creating value.

If Groupon investors get rich at the expense of retail investors, that's bad. If the Groupon founders get rich at the expense of retail investors and later venture investors, that's also bad. In fact it's worse, because they have more information about the business than the investors do. The closer you are to the center of the business, the more you are implicated if it turns out to be a giant pump-and-dump scheme. The founders are the rotten core of that scheme.

<comment><USER18> I disagree that the founders somehow have a higher and nobler responsibility to retail investors than VCs. The VCs are the professionals, they sit on the board and direct its activities.

These ideas about the difference between management and bankers made sense when IBM or US Steel went to the public markets to raise money in the old days, but where Tech Startups are concerned I am skeptical that founders are pulling the wool over the VC's eyes.

But I suspect we're quibbling over who gets the lion's share of the tar and feathers :-)

UPDATE: But yes, I agree about the word "value."

<comment><USER19> Yes, 'rotten core' was a bit strong. :P I don't know anything about Groupon's specific case, and it's certainly true that in many cases the VC's will be the more experienced and better informed, and therefore more culpable party. Comity!

</comment></comment></comment></comment></comment><comment><USER20> False valuation and poor accounting and financial transparency affects us all. We should do everything we can to discourage these type of shenanigans. A much better proposition would be to build companies that people want, and are willing to pay for, and then raise money based upon the future possibilities of those creations. Raising too much money is just as bad for us, and for Groupon, as raising too little money. Why? because any mis-allocation of capital will lead to market instability, which will lead to inefficiencies. Companies, Societies, Empires, rise and fall based upon these simple tenets.

</comment><comment><USER21> My main concern is: how do I tell my 401k and mutual funds to stay away from Groupon?

I'm a smart investor, I'm strongly deciding to not touch Groupon with a thousand feet pole. But I'm pretty sure bankers in NYC will do it for me. What can I do?

<comment><USER22> Dont buy funds invest it yourself. Move your 401k into a self-directed account.

<comment><USER23> How do you move a 401k to a self-directed account? Can you do it without quiting your job?

My single biggest gripe with my 401k--a very poor selection of high cost managed funds.

<comment><USER22> It may depend on your company and how they set up their 401k. For me it was relatively easy, I just told my company that I want to self-direct the funds - it was an option they gave me if I set up a brokerage account with the 401K's bank

</comment></comment></comment></comment><comment><USER24> Another major challenge Groupon face is: They are competing with major players, companies with considerable more resources. Google, Facebook, Amazon all have competing products and a very large user base. Google has billions in profits and Amazon have billions in revenue and hundreds of millions in profits. Facebook has one of, if not the largest user base in the world. For Groupon to succeed it will have to be beat Amazon, Google, and Facebook. It's hard enough to compete against one giant, but having limited resources and competing against all three will make it too easy to fail. Now more than ever you have to wonder why they did not sell to Google. Perhaps they are hoping Microsoft will want to get in game after they IPO and buy them.

<comment><USER25> Microsoft have made some questionable acquisitions, but there is no way they would want to come in, post-ipo inflation and sweep them up then (unless of course they bomb as hard as everyone is predicting). Like FB, Goog, MS too has millions of users they could turn into customers of Bing Offers. Bet they won't though. This whole market is one giant race to the bottom.

</comment></comment><comment><USER26> I always wondered how Salesforce became so successful. Their saas is janky garbage. Their software is everywhere, but they excel at nothing.

Now I know their success is hype and creative accounting.

<comment><USER27> Adapting a Stroustrup quote: There are two types of CRM/ERP software: the ones everyone complains about and the ones nobody uses. By all means, please build a competitor that does not suck. Thousands of small/medium businesses will make you a billionaire.

</comment></comment><comment><USER28> And while Groupon argues it will be sustainable once it hits a certain threshold, its business is actually decaying in older markets like Boston -

[http://www.betabeat.com/2011/06/03/groupons-business-is- deca...](http://www.betabeat.com/2011/06/03/groupons-business-is-decaying-in- its-established-markets/)

</comment><comment><USER29> They need to move on from low margin stuff like food and physical services.

* Copy AppSumo and sell software/webapp services.

* Try to work out deals on high value items like automobiles where there's lots of wiggle room in pricing.

* Talk to Apple. They have high demand and large margins.

Do anything to get rid of thousands of cold calling sales people.

<comment><USER9> >Do anything to get rid of thousands of cold calling sales people.

If I remember correctly, it sees its sales force as a competitive advantage.

<comment><USER30> Thousands of employees, slim (if any) margins... sounds a bit like Kozmo.com...

</comment></comment></comment><comment><USER31> Whenever a business grows by hiring more and more people it won't scale well and be massively profitable.. People are expensive. They are always going to have razor thin margins.

<comment><USER32> There's always the exception of Amazon, but Amazon has built infrastructure instead of letting insiders cash-out early.

</comment></comment><comment><USER33> I'd be interested in hearing Jason Fried's take on this. Isn't he an advisor for Groupon?

<comment><USER34> If he's an advisor to Groupon, then I'm pretty sure he can't say anything without violating a slew of SEC rules.

<comment><USER35> <http://mixergy.com/jason-fried-sortfolio-interview/>

"Andrew: You're on the board of directors at Groupon. What have you learned from working with them?

Jason: Sure. Well, just a clarification. I'm not on the board of directors anymore.

Andrew: Board of advisors.

Jason: I'm on the advisory board now instead, and that was a smart move by them.

Andrew: Why?

Jason: My main role there on the board was . . . the reason Andrew Mason asked me to be on the board was to help them with product ideas and work on product design and copyrighting and think about products because that's what I think I'm good at.

The board of directors isn't really a place for that, especially at the stage that Groupon is at right now. They need people with international business experience. Howard Schultz came on after I left, the CEO of Starbucks. He knows brand name. He knows big business. He knows that stuff. I don't know that stuff. That's not my role. They need more people like that than people like me.

By moving over to the advisory board, I'm working with Andrew. I was just working with him this morning on some stuff around their new Groupon Now product which is coming out short. Now, I'm doing really what I should be doing, which is working with Andrew and his team on product design and thinking about product copyrighting and that kind of stuff. It's a better place for me, a better fit for me.

That whole process of being on the board was absolutely fascinating, and I really enjoyed it. I feel like it was a bit lopsided because I certainly learned a lot more from them than they learned from me."

</comment></comment></comment><comment><USER36> If the article is correct (future really bad, tricked public going to invest on day 1), wouldn't it make sense to invest and sell very soon?

Is something special about an IPO where you have to hold it for some time?

<comment><USER18> That's a great idea and a lot of people are going to do exactly that. However, think about this: It's a bubble, it will pop, but we don't know when it will pop.

Imagine you want to invest a million dollars and sell when you have doubled your investment. The sooner and cheaper you can buy the stock, the greater your chance to double your million dollars. The longer you wait, the higher the chance that you will be one of the suckers whose investment makes other people rich.

The safest strategy is to buy at the offering price and sell as soon as the stock reaches your target for selling (double in our example). You pay the least and get out the soonest, before the collapse. With every passing minute, the price of the stock rises but the probability of the bubble popping before it reaches your target also rises.

So how do you buy at the offering price? By having a cosy relationship with the investment bank leading the issue, that's how. Do you have a cosy relationship with the investment bank leading the issue? If not, you are playing a game rigged to make other people rich at your expense.

Of course, if you like the fundamentals and plan to buy and hold, that's a different matter. But if you're playing the speculation game, you ought to know that the casino is rigged and that you are not in the business, you are the business.

<comment><USER37> So what you're saying is it's a game of chicken?

<comment><USER18> It's a game of Jenga with gold pieces. If you get a piece out, you win your piece. If the tower collapses, everyone still playing loses their money.

And as you can see, the insiders, VCs, and their customers get to play first and leave the game before you get a chance to pull a piece out.

UPDATE: Man, I'm pessimistic today! Don't forget the converse side of the coin: The game may be rigged, but still you might have a good bet to make!

</comment></comment></comment></comment><comment><USER38> I count 3 negative Groupon articles on the front page this AM.

A quick Google news search finds similarly uniform negative sentiment in the general web.

Brings to mind Warren Buffet's famous quote about investing - "The time to get interested is when no one else is. You can't buy what is popular and do well."

<comment><USER39> That Warren Buffet quote doesn't mean you should buy a company that everyone hates. Buffet meant to go after "un-sexy" businesses (like railroads and insurance) and forgo "hot" fields (like technology or media).

The negativity surrounding Groupon isn't that they're boring; the negativity is that they're over-hyped.

<comment><USER38> I disagree.

This reminds me of the pre-Google IPO arguments.

It became popular in the press to pot-shot Google in the days leading up to their IPO.

Their revenue model was too tied to search.

Their IPO structure wasn't sound.

Their biggest growth was behind them.

Groupon is no Google today, but they do have a visionary founder, an incredible brand, insane revenue growth, and address a real problem for merchants and consumers.

<comment><USER40> > _I disagree._

Based on nostalgic feelings about the 2000s?

Warren Buffet and his daughter wrote a whole book on how to go over a company's P&L statements line-by-line and determine whether or not it's a value. Groupon fails that test. That quote is about buying companies that are doing better than the market thinks they are -- and his methodology is a way to find and prove those cases _on paper_. Not with hunches.

Can you back this sentiment up with anything more than vague comparisons to Google?

<comment><USER38> If you're actually asking:

"Groupon is no Google today, but they do have a visionary founder, an incredible brand, insane revenue growth, and address a real problem for merchants and consumers."

or see my comments here:

<http://news.ycombinator.com/item?id=2618080>

and here:

<http://news.ycombinator.com/item?id=2613546>

</comment></comment></comment></comment></comment><comment><USER41> People are only supposed to get rich _after_ the IPO, and even then, only on paper, for the first few years.

Still, VCs are supposed to be grownups who know what they're doing, if they got screwed it's their own fault.

<comment><USER18> If everyone who invests in the company plays by these rules, I'm all for it. Unfortunately, the true narrative is: "Founders and employees are only supposed to get _actually_ rich a few years after the IPO, however VCs, Investment Bankers, and their cozy clients can get stinking rich immediately."

If you are willing to make the VCs and other bankers wait a few years, I have no problem with founders and employees waiting a few years as well.

<comment><USER18> p.s. _Conjecture_ : if the VCs had to wait for years to cash out, Groupon would be a very different company with much stronger fundamentals and less emphasis on flashy growth.

</comment></comment></comment><comment><USER5> I think it's interesting that this story and the story from 2000 condening Amazon for losing money every quarter are both top stories on HN today[1].

Whenever history repeats itself you'll always hear people say "But this time is different!"

The article Joel Spolsky wrote about the "Amazon model" of growth (back in 2000) really explains why some companies grow the way Groupon and Amazon do[2]. They're in a land grab and they almost have to grow with huge losses and lots of funding or else they'll lose.

Personally, I'm a fan of what Joel calls the "Ben and Jerry's model" which I tend to call the Jason Fried model. Unfortunately, Groupon isn't one of those companies that can expect to win if they aren't growing extremely aggressively, and taking large losses at first is just part of the Amazon model.

[1]<http://www.slate.com/id/1004565/>

[2]<http://www.joelonsoftware.com/articles/fog0000000056.html>

</comment><comment><USER42> I don't know if I agree with this assessment. There's a land rush going on. They need to grab as much of the market's network effects as they can before Google Offers and the like manage to get going. This is definitely one of those extreme first-mover-advantage situations, like online auctions fifteen years ago.

So to answer the author's question: When will Groupon be profitable? When the enormous costs of their explosive growth are no longer counting against their bottom line.

<comment><USER43> Are there network effects in coupons/deals? You mean building the relationships with merchants?

<comment><USER42> Of course there are! Consumers want to join the service that has the best (and most) deals. The service with the most consumers is going to be able to get the most merchants signed up and get the best deals out of them. It's a textbook virtuous cycle.

<comment><USER44> My experience is consumers join as many daily deal sites as they want to. They are not loyal to one. The only cost of joining one more is an email a day.

<comment><USER42> You could say the same thing about auction buyers, and yet 99% of the world sticks with eBay rather than waste time checking a second site.

<comment><USER44> Not true - auction buyers have a network effect. More buyers ==> more sellers ==> more buyers. As someone who wants to occasionally buy something 'rare' or second hand, I would go where the most sellers are when I want to find something! This itself causes a significant moat. Amazon has finally started chipping away at the sellers, by providing an even larger pool of proven buyers.

Local deal sites are by defn focused on many independent local market. Their key promo channel is email to signed up users, since most people won't go to a website to look at deals everyday. What's the barrier to entry for another site - getting the same user signed up?

There will certainly be consolidation, there will be two or three local deals sites left over. They will certainly not enjoy the margins GroupOn currently commands.

<comment><USER42> "More buyers ==> more sellers ==> more buyers" ... just like "more bargain hunters ==> more bargain-offering affiliates ==> more bargain hunters"

</comment></comment></comment></comment></comment></comment></comment><comment><USER45> I told you so:

<http://news.ycombinator.com/item?id=2117952>

<http://news.ycombinator.com/item?id=1968491>

With all the experience of the past 12-15 years, I'm convinced that "local" is a hopeless hole for tech startups.

<comment><USER46> Why do you think that anything "local" in general is a money/energy drain?

<comment><USER45> There seems to be two types of "local" web startups: events and businesses.

Event listing sites are a very small market basically trying to take over the flyer and newspaper advertising. There's no money there. And in the past couple of years Facebook has stepped in and basically made all other event sites obsolete, for now.

Business listing sites are trying to tap into the Yellow Pages market. Yellow Pages were/are huge. This is why people continue trying to get in. The problem is that unlike physical Yellow Pages, which have a regional monopoly, the barrier to entry is very low. This leads to fragmentation, and any single local business directory isn't very valuable. Combine with extremely spotty coverage and out of date listings, and online directories themselves are pretty useless. Even Google can't stay on top.

It gets worse because you have to cold-call small businesses to sell to them. New ones are always starting up and old ones are going out of business. They also don't want to pay very much money and suck at paying their bills.

Then there's the effort to drive traffic to the directories (or in some cases specific businesses listed in them) via AdWords or other advertising. This can work but is hard to pull off, most who try screw it up.

Don't forget that in addition to Google, Yelp etc. the Yellow Page companies themselves all have online directories, and massive existing sales forces and lists of customers. And they are still struggling to turn a profit online.

<comment><USER46> So if I were to sum it up (talking about the local business part), the problem consists of:

\- Fragmented and competitive market due to low barriers to entry

\- High-maintenance, low-yield customers

Thank you for your reply and the food for thought.

</comment></comment></comment></comment><comment><USER47> I've always seen Groupon as a joke. I don't know anyone who has bought anything from there. Maybe I just hang out with the wrong crowd, but meals at random sushi bars, spa treatments, karate lessons...? Random...

</comment><comment><USER48> Why do they need to go public? Are they hoping that more ad buying power is going to provide them economies of scale? Graphic designers aren't that expensive to employ are they?

<comment><USER34> They need money. And the investors would like to cash out before the company runs out of money.

</comment></comment><comment><USER49> Is it possible for Groupon to tell Google I will spend millions on adsense but I need you to make a fake offer of 6 billion?

</comment><comment><USER50> Should they take customer acquisition out of the "fastest growing internet company ever" title? or just the financial analysis.

Great Write-Up.

I have to imagine the wall in their office with biggest internet failure magazines is a self fulfilling prophecy.

</comment><comment><USER51> Completely agree with OP on this comment! I really doubt Groupon's business model, hardly believe that coupon style business could be a main stream of profit.

Would like to short this IPO when it comes to the stock market.

<comment><USER52> I agree. It's just fundamentals. There's no such thing as a free lunch. No company can offer 50% coupons again and again, and be profitable, so the number of repeat merchants will go down, and Groupon will have to continue spending more to get more dumb merchants.

The customers are all looking for deals, they're not loyal. Plus more and more will get sick of the deals being targeted towards them.

In the end, Groupon is like a Ponzi scheme in that it will need to trick more new merchants to join in as old merchants drop out, and it will need to continue paying a premium to attract more consumers as the existing ones drop out. Compare that to companies like Amazon, and Google where ppl will never get tired of shopping online, or searching online.

</comment></comment><comment><USER53> Does anyone else think Groupon has been a huge boost to the economy? They've created 7000 jobs in a few years, without displacing many old ones, and most of these jobs are low-skill.

<comment><USER54> Most of these jobs are low skill? My understanding is that the majority of the people at Groupon are in the sales force. Just because it doesn't require a degree in CS or EE doesn't make a position low-skill. Being an effective salesperson takes a lot of skill.

</comment></comment><comment><USER55> If the suspicion that it's a paid news [http://rajeshanbiah.blogspot.com/2010/12/groupon-hype-or- pai...](http://rajeshanbiah.blogspot.com/2010/12/groupon-hype-or-paid- news.html) they'll have to shut it down when others start following that strategy.

</comment><comment><USER16> This article is full of handwaving.

1) Lot's of businesses run in the red for awhile in order to build up their market share. Just pointing to losses in the first few years of major operations isn't particularly compelling.

2) The adjusted CSOI metric isn't as ridiculous as the author makes it seem. The claim is that their marketing expense is a function of how fast they want to grow. Presumably once they reach a size they want, they scale back that expense, and the revenues turn into profit. The Forbes article says: "The bottom line is that considering the profitability of Groupon without online marketing expenses is silly; Groupon without marketing expenses is not Groupon at all." How is Groupon without marketing not Groupon at all? It's an interesting-sounding statement without any meaning.

<comment> brown9-2 _How is Groupon without marketing not Groupon at all?_

Because Groupon is getting all of their visitors/subscribers through massive amounts of marketing. Without that marketing, it is not proven that they would still have so many visitors/subscribers.

<comment><USER16> Yes, Groupon's userbase might not stick around if they reduce advertising expenditure to shift into profitability. That is unproven, uncertain, etc. However, it's quite a leap beyond that to say that the userbase definitely will leave if groupon doesn't keep up its massive advertising campaign, which is effectively what the Forbes article says: (Groupon isn't Groupon without unsustainable advertising).</comment></comment></comment>


General Motors Is Set to Face Criminal Charges Over Ignition Switches - <AUTHOR> http://www.wsj.com/articles/gm-is-set-to-face-criminal-charges-over-ignition-switches-1432393035 <comment><USER2> I think after the ignition switch fiasco the CEO and company has been cooperative in the investigation and actually admitted fault...which seems very rare nowadays. I think it's something to applaud and I hope other companies follow the footsteps later. I hope the punishment is less for "good behavior"...otherwise other companies will see this and say wth...why cooperate if you will get fined and punished just the same. Might as well not cooperate and hopefully have the lawsuit hit a dead end. This doesn't change the fact that people died and there was a coverup...but to see people actually fired..and the CEO apologize...I mean how many bankers were fired for all the crap they did to the global economy. I know, people didn't die but the reach of screwing up people's lives was pretty broad.

<comment><USER3> Well some engineer noticed the problem, a change order was issued to manufacturing, new production continued with no new part number was issued, so someone seemed to want to conceal this from not only the public but the rest of the enterprise.

As an aside, wasn't this done in "The Old GM" which had its name changed and liquidated into the new company known today as General Motors?

<comment><USER4> That engineer, and apparently the someone who wanted to conceal this from everybody, was Ray DeGiorgio, who also approved the out of spec substandard part in the first place (it _appeared_ to work early on).

All these sorts of human systems have a very hard time with a dishonest engineer.

</comment></comment></comment><comment><USER5> It will be tough for General Motors to adapt to being in jail when convicted.

<comment><USER6> It's OK, they're going after the engineers that designed the switch, GM should be fine... :-(

<comment><USER4> But didn't engineer Ray DeGiorgio completely betray them and everyone else by approving a switch that he, and only he, knew didn't meet specs? While GM no doubt bears more fault in this, there's no system of this sort that I know that doesn't have major trouble when an engineer is dishonest.

<comment><USER7> GM's process is fundamentally flawed if a single engineer can approve his own part and get it into production without anyone reviewing it or even noticing.

</comment></comment></comment></comment><comment><USER8> I had a 6th gen Honda Civic hatchback whose ignition switch started cutting out. It was the subject of a hidden warranty; got it taken care of at a dealership free of charge.

It's pretty scary; one time the engine just cut out while I was completing a left turn in an intersection when the light turned yellow.

<comment><USER9> The 1st gen CR-V had this - turned out it was susceptible to people having a lot of "stuff" on their keychains. Over time it wore the parts inside the ignition switch and the car would shut off randomly. So to avoid problems, have only the minimum on your keyring.

<comment><USER3> Yes! Car keys are so big nowadays, it doesn't make sense to have them on your "main" keychain. It's also bad in a crash situation, because your knee or another body part can hit this area, so having a bunch of ornaments or a key collection like the high school janitor is not a good idea. I keep every vehicle key on its own keyring, with only a tag and its remote if applicable. This also means my "I feel naked without it" primary set of keys is smaller since I am not carrying around giant car keys and remotes when I am just wanking around the farm.

</comment></comment></comment><comment><USER10> > defective switch, which can slip out of the run position and cut power to > safety systems including air bags, power steering and power brakes

Had a similar problem with my Kia Sorento 2011.

The engine would randomly completely stops. When this happened on the highway, at around 90 km/hr, this would cause a huge kick in the automatic transmission as it fell into first gear, surprisingly it survived (try reaching 90 km/hr in first gear..)

Needless to say this could have caused an accident. It was definitely an ignition switch issue, as during that time I also had problem with the car not wanting to start when pressing the button, on a random basis.

Eventually they changed a relay they said and this fixed the issue for good. I realized later that I should have reported the issue to some authority, I feel bad about not having done so now.

<comment> semi-extrinsic Engine stopping at speed/failing to start could also be a faulty crankshaft position sensor. I've heard of that a few times on e.g. Chevy bigblocks. The automatic transmission on the Chevys just slip into neutral though, so you don't get the kick. I imagine you take half a year out of the stall speed converter lifetime every time that kick happens.

But the big difference is that your failure was very noticable, so you wouldn't be surprised you lost power steering and ABS.

</comment></comment><comment><USER11> Did Ray DeGiorgio skip his ethics classes while earning his certified engineering degree? Did he further to wear his iron ring on the day he approved this part?

I'm trying to understand how all these safeguards failed.

</comment><comment><USER12> I don't understand how it even makes sense to file criminal charges against a corporation. It would seem to me criminal charges should have to be files against actual persons.

<comment><USER13> I agree entirely. However, it has been ruled that corporations are people.

[https://en.wikipedia.org/wiki/Corporate_personhood](https://en.wikipedia.org/wiki/Corporate_personhood)

</comment></comment><comment><USER14> You'd think the was some fine print in the manual/agreements saying "any damage caused by adding anything to the key ring is your responsibility".

<comment><USER15> For the unaware, the defect was weak resistance on turning the key from ON to ACC, causing sudden vehicle shutoffs, loss of control, and non-functional airbags. GM only counts incidents which resulted in head-on collisions in which the airbags did not deploy, and deaths only for front seat passengers. [0]

I wonder what force is appropriate. Defective = 9 N * cm, recall = 18 N * cm. [1]

[0][http://en.wikipedia.org/wiki/2014_General_Motors_recall#Quan...](http://en.wikipedia.org/wiki/2014_General_Motors_recall#Quantifying_fatalities)

[1][http://www.ibtimes.com/gm-recall-2014-pictures-tiny- ignition...](http://www.ibtimes.com/gm-recall-2014-pictures-tiny-ignition- switch-part-could-cost-general-motors-dearly-photos-1561011)

</comment></comment><comment><USER16> It's sad to see a company with such engineering capacity to continue down the road of making shit vehicles. Their supply chain us also shit and as a result other manufacturers have to buy from the same shit. It's not all GMS fault, but they do have an immense power over other brands in terms of supply chains. This company will never die and will never reform. Don't buy GM.

<comment><USER3> If you can forget the 70s and 80s, GM isn't really shit. At least not as shit as Chrysler. I held onto this 'They're Shit' opinion I formed because of their 70s/80s production, when Japan was actually beating their ass, and was really surprised when I started taking apart newer models and found a lot of technology and engineering thoughtfulness in them.

While this ignition switch mess - the lack of a recall - is clearly the result of wrongdoing, I'd say it's not characteristic. OTOH, Toyota recklessly developed software that caused loss of human life, even when well-designed examples had been on the market for years. As software isn't like hardware manufacturing, isn't that "worse?"

<comment><USER16> It's definitely not characteristic of gm to build cats that have deadly issus. It ks, however, characteristic of them to build lower quality cars. That's why their resale value is so bad. You did miss the decades of the 90's and 00's. There hasn't really been a decade where in the last 45 years where GM was shined. It merely gets by. Sure, they make some cars that are good. Their average is meh.

It may sound like I hate gm and American cars. Not at all. I've owned (currently own), and have made a living fom them. Cut my racing teeth with American v8s. I drool at corvettes, camaros, mustangs, challengers, etc. Modern and classic versions. Love them. But love won't stop me from comparing and seeing the differences.

<comment><USER3> Yeah, GM and Ford are hit and miss with their models. I really don't like the Malibu and the Korean products GM sells.

I currently own three euro sedans and a Toyota pickup. Probably should have gotten a K1500 instead of the yota. It would rust less, withstand more abuse, and I'd be able to find parts when it did break.</comment></comment></comment></comment>


Are Index Funds Eating the World? - <AUTHOR> http://blogs.wsj.com/moneybeat/2016/08/26/are-index-funds-eating-the-world/ <comment><USER2> As always when articles like this come up, I want to issue the usual reminder to HN to beware of what pg called "submarine stories" ([http://paulgraham.com/submarine.html](http://paulgraham.com/submarine.html)). There are a lot of people who stand to lose a _lot_ of money in fees if "just park it in index funds" becomes more popular advice than it is already. Not to say the analysis above is wrong, but just keep in mind (especially at the WSJ) that it may not be coming from sources with your best interest in mind.

<comment><USER3> "A report this past week from investment firm Sanford C. Bernstein, titled "The Silent Road to Serfdom: Why Passive Investing Is Worse than Marxism," warned that..."

It would be funny if it wasn't so incredibly blatant.

<comment><USER4> A friend worked there as an investment advisor and wound up quitting because so many of their funds were losing to the market.

<comment><USER5> Funny enough, index funds outperform hedge funds, etc, however you can outperform the indices by buying stock at 3:00-3:30pm and selling at 4:00pm every day, because that's when many funds vest, and when most of the daily volume occurs. It's a horrible irony. The "3:30 Ramp" is so well known that there's a Twitter parody account followed by huge swaths of "Finance Twitter."

<comment><USER6> _> > Funny enough, index funds outperform hedge funds, etc_

I'm weary of reading this on Hacker News. Index funds do not beat hedge funds. That statement is devoid of nuance and accuracy, and contributes to a narrative that active managers do not have a skillset or function.

 _Most_ hedge funds do not maintain performance that beats the market, but _many_ do. This is easily verifiable.

<comment><USER7> _> Most hedge funds do not maintain performance that beats the market, but many do. This is easily verifiable._

Yes, it's easily verifiable. It's also completely meaningless without a rational way to predict which ones will be outperforming in the future.

<comment><USER6> It's not at all meaningless, because it is rational to use past performance as a predictor of future performance.

Past performance does not _necessarily_ indicate future performance, and it should not be the _only_ predictor, but to dismiss a fund's history as inconsequential to its future is silly.

A fund's prior performance is a useful signal that can be rationally incorporated into a risk versus reward decision process.

<comment><USER7> _> Past performance does not necessarily indicate future performance, and it should not be the only predictor, but to dismiss a fund's history as inconsequential to its future is silly._

I'm not dismissing it unconditionally, but I'm not going to believe it unless I see the data. What's the probability of a fund outperforming given it has outperformed the year before?

<comment><USER8> If it has been doing it for three of the last four years, good. If it has been doing it for five of the last seven years, dodgy. IANACFA

</comment></comment></comment></comment></comment></comment></comment></comment></comment><comment><USER9> When people wonder what would happen if index funds become too popular, I usually refer them to Warren Buffet's 2005 essay, 'How to minimize investment returns':

[http://www.mymoneyblog.com/how-to-minimize-investment- return...](http://www.mymoneyblog.com/how-to-minimize-investment-returns-by- warren-buffett.html)

It is essentially a thought experiment about what would happen if everyone switched to one big index fund.

But, it glosses over the issue of individual security pricing and corporate management, which would become issues in a 100% pure index environment.

Of course, we won't ever get a 100% pure index environment, because the closer you approach it, the more incentive there is for active managers to exist.

I think what is really happening is that as more people use indexing, the less talented active managers are driven out of business. A small number of very talented active managers may eventually find themselves in a highly competitive market to exploit pricing inefficiencies, and they will end up incidentally providing management oversight and marginal pricing services to the indexers. These active managers will probably look more and more like private equity firms (taking an active hand in management), and less and less like traditional arms-length traders.

As long as this small number of talented firms isn't allowed to collude with each other, or self-deal unethically by controlling management, everything should be fine. In fact, having met some less talented active traders in person, I suspect that the quality of marginal pricing and managerial oversight may go _up_ as the number of active managers decreases, and the less informed and talented among them are eliminated.

<comment><USER10> > As long as this small number of talented firms isn't allowed to collude with > each other, or self-deal unethically by controlling management

... and I've got a bridge to sell you.

More seriously though, the smaller the number of players, the more likely (and easy) collusion becomes. Successful cartels always have relatively few players.

</comment></comment><comment><USER11> One thing I like to point out whenever this kind of discussion comes up, is that there is no single index. Articles like this always seem to assume that everyone will buy the same index, namely the S&P 500 or total US market.

But that's not what a lot of index investors do. Indexers enjoy adding tilts to their portfolios. So some people will buy value funds, others will buy small cap funds, and yet others will buy small value funds. There are people who overweight certain sectors, like REITs or utilities. There are those who invest in international index funds (with all their variations) and those who don't. So there's a huge number of combinations you can think of when it comes to indexing.

Now, with people indexing like that, there would still be market liquidity. Maybe not as much as when there are single stocks being actively traded, but on any given day there will be people buying into different indexes, selling shares, or rebalancing.

Valuation would become troublesome though, but at least people would still get some return from dividends.

<comment><USER12> I guess this is a good place to ask: For someone who knows nothing about the market, what would be a good way to invest their money? From the responses here, I'm guessing "park them in an index fund", but is there a trustworthy company I can talk to that will do that?

<comment><USER11> Quick answer:

You could do a lot worse than parking it in an index fund, so yeah, that's a good approach :) If you have a 401(k) or other retirement account, it is quite common for those to offer an S&P 500 index fund where you could invest your money. If you want to do it in a taxable brokerage account, you should open an account with Vanguard and buy their Total Stock Market index fund (VTSMX, or VTSAX if you have more than $10,000 to invest).

Then stay the course - if the market tanks 50% the day after you put your money in, don't panic. Wait it out. Your investment horizon here is at the very least 10 years.

But that's the quick, the-best-time-to-invest-is-tomorrow-so-just-do-it answer.

There are a number of things you should do if you want to learn more about how to invest your money in stocks (and maybe bonds):

0) A good resource to get started quickly is If You Can, by William Bernstein:

[https://smile.amazon.com/If-You-Can-Millennials-Slowly- ebook...](https://smile.amazon.com/If-You-Can-Millennials-Slowly- ebook/dp/B00JCC5JKI/ref=tmm_kin_swatch_0?_encoding=UTF8&qid=1472318151&sr=8-3)

But you can skip it if you want to dive deeper with the stuff that follows.

1) Learn about what investing in the stock market means, what's the nature of it and what to expect from it. I have two recommendations here:

1.1) jlcollinsnh's Stock Series: [http://jlcollinsnh.com/stock- series/](http://jlcollinsnh.com/stock-series/) He recently released a book (The Simple Path to Wealth) which is supposedly a better-edited version of the Stock Series. He's a rather optimistic guy, but what he says is not wrong. He stays away from investing in non-US markets, which is not the most common position among indexers.

1.2) A Random Walk Down Wall Street, by Burton Malkiel. It's an amazing book that everyone should read if they want to learn about the stock market. Many people recommend Bogle's books (he's the father of index investing), but I find them incredibly tedious to read.

2) Learn about the different investment accounts available to you - 401(k)/403(b)/457(b)s, IRAs, HSAs, taxable brokerage accounts. Each one receives different tax treatment and you should be familiar with that in order to avoid "tax drag" i.e. taxes slowing down the growth of your investments.

3) Another resource I highly recommend is the Bogleheads wiki: [https://www.bogleheads.org/wiki/Main_Page](https://www.bogleheads.org/wiki/Main_Page). In particular, check out the following pages:

[https://www.bogleheads.org/wiki/Bogleheads%C2%AE_investing_s...](https://www.bogleheads.org/wiki/Bogleheads%C2%AE_investing_start- up_kit)

[https://www.bogleheads.org/wiki/Three- fund_portfolio](https://www.bogleheads.org/wiki/Three-fund_portfolio)

[https://www.bogleheads.org/wiki/Tax- efficient_fund_placement](https://www.bogleheads.org/wiki/Tax- efficient_fund_placement)

4) Don't obsess about it once you get started. After you've learned a few things it's tempting to start "tweaking" your investments here and there, but if you do that often you do yourself more harm than good. Invest your money then go have some fun :)

<comment><USER12> Thank you for the detailed answer!

</comment></comment></comment></comment><comment><USER13> From the article: "Funds run by Vanguard hold roughly 6% of total U.S. stock- market value."

So index funds are not eating the world.

Most Wall Street traders underperform the market. Even the hedge fund crowd mostly underperforms the market. "A Random Walk Down Wall Street" is real.

<comment><USER14> > "A Random Walk Down Wall Street" is real. reply

It's a real book, but it doesn't prove the market is random, nothing does as the efficient market hypothesis is just that, an unproven hypothesis lacking even enough evidence to become a working theory.

That certain funds consistently beat the market year in and year out for decades is enough to disprove the notion that markets are random; they're not.

<comment><USER15> That doesn't prove a damn thing.

When so many people are playing, there's bound to be some that consistently win, just by chance alone. The book discusses this.

<comment><USER16> And there are statistics tests one can use to determine if one's performance meets those statistical parameters to be random. Many funds and managers beat it over the long term, such as Warren Buffet, but the vast majority indeed do not.

<comment><USER17> Warren Buffet usually invests to the extent that he has the power to change how the company is run. He usually uses that power.

<comment><USER16> Does that change my thesis at all?

<comment><USER17> I was just drawing the distinction between beating the market through passive investing (simple stock picking) vs. what Warren Buffet does.

</comment></comment></comment></comment></comment></comment></comment><comment><USER18> "Yet Mr. Fraser-Jenkins has a point. Index funds don't set prices; they only accept the prices that active investors have already set. If everyone owned index funds, he says, "no one would be doing" the job of figuring out what securities are worth."

The situation described is clearly not a Nash equilibrium. If you have special, accurate information on the price of a security, then you're going to act on it. Why would no one be doing the work of pricing something if it's profitable? Sounds like actively managed mutual funds are getting antsy because people are starting to realize that they're getting screwed not going with index funds.

<comment><USER19> If everyone invested exclusively in index funds, and no one works to establish a market price for each individual component, the obvious thing to do would be to adjust indices to manage the portfolio based upon actual dividends.

All companies converge on the same P/E ratio, and the ratio of the index depends on how much investor money is chasing the overall productive activity of every [investable] company in the economy.

It wouldn't be the end of the world, by far.

But it is doubtful this will ever get even close to happening, because some investors will always be gamblers at heart, and if they learn that Coca-Cola is releasing a new beverage flavor, they will use the financial markets to make bets on whether it will be insanely popular or a colossal failure.

<comment><USER20> If one company's earnings are growing quickly, and another's is slowly shrinking, and they have the same P/E ratio, I'm likely to skip the index and buy the high-growth company directly.

If a company can reinvest earnings at a high rate of return, it's to the advantage of stockholders if it doesn't pay dividends. How much should the index weight it?

<comment><USER19> ...illustrating why the price system will always be available to value things.

If there is no market trade price for a stock, the only way investors can realize value from owning shares is through dividends. Increasing the value of the company does nothing for the owners individually if shares for a specific company have no individually identifiable price. _Everybody_ is buying and selling through the automated index funds, remember? The only way to get higher capitalization in the opinion of the fund robots is to issue better dividends. There's no one to sell to at a higher price, except the other robots, who all have similar valuation algorithms, and will need to sell the same amount as your fund robot in order to realize any gains.

But that is all absurd and moot, because there will always be a price, as long as two individuals are willing to move differently from the herd. As we are mostly humans in our market, that behavior is practically guaranteed. The outlier who thinks the stock is outperforming the whole market will buy from the outlier who thinks that the stock is underperforming. And their combined beliefs and opinions will create a price for it.

Ergo, index funds are not eating the world.

The fewer people there are that are willing to try to beat the funds or game their algorithms, the easier it will be for any one of them to succeed. So there will always be at least one.

<comment><USER20> Which makes me wonder whether there's a strategy that specifically takes advantage of mispricing by overuse of index funds.

First that comes to mind: small caps historically get better returns, and maybe that difference will be amplified by market-cap-weighted funds.

Picking stocks which are growing but not quite big enough to get into larger cap indexes could be another possibility.

<comment><USER19> An economist and a reporter were walking down the street when a $20 bill blows into their path on the sidewalk. The economist looks at it, smiles knowingly, then steps over it and continues walking. The reporter says, "Why didn't you pick up that $20 bill?" The economist replies, "If it was really a $20 bill, someone would have picked it up already."

By the economist's reasoning, someone already has a strategy to take advantage of index funds. Actually, a lot of someones already have _every possible strategy_ to take advantage of index funds. So none of them really make significant returns, because the dead whale is eaten by a million scuttling isopods, each taking one or two bites before it's all gone. So the real money is in taking advantage of _those_ guys, perhaps with fees or paid reports or little boxes that light up and go "ping".

Of course, just because all the free money is already being picked up, doesn't mean you will never catch a flying $20 bill if you decide to make a grab for it. No market is perfect, and there's always an opportunity to grab some free money _somewhere_.

<comment><USER20> Yep I read Random Walk on Wall Street too, a while back. More recently I read a stack of books on quantitative investing strategies, which referenced a lot of academic work. Turns out quite a few academics don't really believe in the EMH anymore; it's just not holding up to historical evidence. There are all sorts of factors that can make markets less efficient.

</comment></comment></comment></comment></comment></comment></comment><comment><USER21> FULL DISCLOSURE up front - I work in the index/ETF business. I help maintain ~75 indices, many of which have ETFs linked directly to them.

That being said, I fully believe there will always be active investors. As others have mentioned, if there is an opportunity to make money in the market due to something like passive index funds being slower on the uptake, it will be made.

If I had to interpret the core argument being made here, it is basically that there is a fear of a positive feedback type scenario where money keeps getting dumped into companies simply because it always has. But it can be highly profitable to beat out the slow, passive money by doing your due diligence. For this reason, active management will always exist.

Also, I am fortunate enough to work on some of the more complex and interesting products in the industry (at least I believe so, haha). I can tell you that there are definitely sanity checks put in place for this kind of scenario. Most of it revolves around fundamental ratios built into these product methodologies (i.e. P/E ratio must be within a rational range, company must produce stable income for the past 5 years, etc.). More importantly, securities in these portfolios are frequently weighted (at least in part) upon those fundamental ratios. So if a company starts to deteriorate, the size of the position in the fund will be decreased. Much of what the article talks about seems to be negated by this and becomes a non-issue. I think those arguments would apply more to benchmark products which don't have those kinds of requirements. Then again, many benchmarks are used for exactly that - benchmarking - and aren't directly invested in. There are, of course, indices like the S&P 500 that have significant sums of money attached to them, but they are the exception, not the rule. Most index products deemed "investment- grade" are STRATEGY based, not benchmark based.

Basically, there is room in the market for both. I think we are simply seeing the progression towards a new equilibrium, nothing more. That equilibrium is where the new balance of those willing to take a higher risk meet those that want the less risky, low cost products that we provide. There is simply a much smaller portion of the population willing to pay higher fees and have a larger risk (but with possibly greater reward). And that is due in part to the fact that many money managers don't have the returns to keep people coming back. It's also due in part to people's mistrust of the market (and financial industry in general). They are simply allocating their money in accordance with their risk appetite.

<comment><USER22> This comment greatly improved my understanding thanks

</comment></comment><comment><USER23> Doesn't it seem self-limiting? At some point, if prices become totally irrational, wouldn't active investors profit by taking advantage of predictable index fund transactions?

<comment><USER24> This is an under-appreciated point... if 99 people leave money on the table, and the 100th person picks it up, we're back to efficiency in the aggregate.

</comment></comment><comment><USER25> There will always be active investors. People will always think they know a way to succeed in the market that nobody else does. It's human nature. Plus, there will always be VCs, hedge funds, and other high-risk, high-reward investment vehicles used by the wealthy to add some spice to their otherwise conservative portfolios.

There may be fewer active investors than before, but that doesn't mean the market won't function.

</comment><comment><USER26> >warned that index funds might grow to the point at which new investments could be massively mispriced.

This situation will be easy to spot from indicators like P/E ratio. P/E limited index funds will be new hotness and active investors should get better returns.

There is bigger problem than index funds and it's closet indexing. Many portfolio managers that claim to be active investors secretly follow their benchmark index without exactly replicating it. This is fraudulent behavior.

<comment><USER27> > There is bigger problem than index funds and it's closet indexing. Many > portfolio managers that claim to be active investors secretly follow their > benchmark index without exactly replicating it. This is fraudulent behavior.

As long as they can also provide competitive maintenance fees and tracking errors don't play against them, I don't see much of a problem. If they consitently do worse than the ETFs based on the same indexes with a similar risk profile, the market will eventually punish them for under-delivering.

If they only make a few picks that end up doing well, keeping the rest of the benchmark for a balanced risk profile seems sensible to me.

Please explain where the problem lies exactly?

<comment><USER26> >If they consitently do worse than the ETFs based on the same indexes with a similar risk profile, the market will eventually punish them for under- delivering.

The problem is with consistency and eventually. Definition of closet indexing is active share below 60%. These funds are not consistently worse if the observed period is just few years.

Since actively-managed funds usually perform worse than index funds in long term, closet indexing should be able to keep up with actively managed fund with same costs.

Selling funds is mostly marketing. Asset management firms have several funds and they sell the one that randomly performs better than it's benchmark in some short period of time (1-3 years). Very badly performing funds are merged into other funds and new funds are created.

Research shows that 15-20% of European large-cap funds could be labeled as closet indexers and 15% of the net assets in equity mutual funds sold in the United States are closet indexers.

</comment></comment></comment><comment><USER28> This article incorrectly assumes that smart investors would sit around and do nothing if most people invest in index funds.

</comment><comment><USER29> > If businesses are to be able to raise capital by selling shares to > outsiders, "you need a deep market of active investors willing to take a > view on the valuation of the company," Inigo Fraser-Jenkins, head of > quantitative strategy at Bernstein in London and lead author of the "Worse > than Marxism" report, told me this week.

And that's a terrible investment strategy to ask of the average layman, the people who are concentrating on index investing.

</comment><comment><USER30> > Because corporations know that, says Prof. Heemskerk, coziness and > complacency may arise. "If you have only long-term investors, how do you > keep management on their toes?"

We've a ways to go before the pendulum has swung enough in that direction. I'm more concerned about the tendency to seek short-term profits at the expensive of long-term investment in today's Wall Street CEOs.

</comment><comment><USER31> > But, he adds, that would require indexing to grow immensely from today's > levels. Probably not until passive funds are at least 90% of the market > could such chaos arise, he argues.

That's a pretty hypothetical scenario, isn't it? Index funds, ETFs in particular, are a brilliant idea that allows ordinary people to participate in the success of market trailblazers.

If it wasn't for index funds most people wouldn't be able to make reasonable investment decisions because they're not investment bankers who deal with that sort of business on a daily basis. Even investment bankers fail with their investments most of the time. It's usually just the few successful investments or things like arbitrage that balance out the odds.

Ordinary people usually neither have the knowledge nor the resources to do investments this way, so index funds probably are the best option for accumulating wealth over a period of time.

</comment><comment><USER32> > A report this past week from investment firm Sanford C. Bernstein, titled > "The Silent Road to Serfdom: Why Passive Investing Is Worse than Marxism," > warned that index funds might grow to the point at which new investments > could be massively mispriced.

In which case the actively managed funds which identify the mispriced assets would start making money and attract investors again. You know there's trouble brewing in the industry when mutual funds are trying to sell investors on "it's good for the economy!"

</comment><comment><USER29> > That's largely because index funds trade so much less often than active > managers. On a typical day, only 5% to 10% of total trading volume comes > from index funds, says a Vanguard spokesman.

I'm surprised the author omitted it, but can anyone comment whether this is different for robo investors (Wealthfront, Betterment) vs a traditional index fund like Vanguard?

<comment><USER33> Robo advisors are like meta index funds.

They give you the canned advice that your local Financial advisor gives you, minus the quarterly meeting and phone therapy when the market goes down, and plus some automated intelligent handling of capital gains to reduce your tax exposure.

</comment></comment><comment><USER34> "The Silent Road to Serfdom: Why Passive Investing Is Worse than Marxism"

good Lord

</comment><comment><USER35> Can high-frequency traders replace active investors in an ideal world. Ideally, the price should be the best estimate of the value of the company based on all publicly available information. When new information is released, high frequency traders should rush to profit from the discrepancy. Further, they can market make based off their knowledge of the stock's true value. However, this business should face increasing competition until it becomes a low-margin business. I don't see any inherent reason, active investing should be super profitable. In the end, it is just another business like any other.

</comment><comment><USER36> Besides the issue of corporate ownership / concentration, index funds are also increasing the risk of a market crash. One of the selling points for index funds is that they supposedly offer great diversification and this might be true in normal times but in a financial panic people will pull out of index funds and drive correlations to 1. E.g. if there's a crash in health care, panicked investors won't just be pulling out of health care they'll be pulling out of the market as a whole.

<comment><USER37> Yes, but this does not diminish the value of the companies in the long term. Remember that index funds are an investment vehicle for decades, not months.

<comment><USER38> Only if enough people stick with the long term. If everyone tries to hop off the boat for the short term, it can be a self fulfilling prophecy that growth will slow for a decade or more as the market hit effects real business returns.

</comment></comment></comment><comment><USER39> This is probably the best article ever written about the efficient market theory and passive investing. It was written by Warren Buffett in 1984. [http://www8.gsb.columbia.edu/rtfiles/cbs/hermes/Buffett1984....](http://www8.gsb.columbia.edu/rtfiles/cbs/hermes/Buffett1984.pdf)

</comment><comment><USER40> Not an expert but seeing the quick rise in popularity in anything makes me nervous. eg. Index funds and ETFs. When Apple is the Number 1 holding of all index funds, and investors are blindly driving up aapl stock becuase they continue to want 'index' funds.. how do we protect ourselves and our economy from a major reset/correction?

</comment><comment><USER41> Is it accurate to say that the difference between index and non-index funds is that a) index funds don't trade as much and b) index funds publish their components?

Is there any reason an "active" manager cannot behave like a passive manager? Is index investing just outsourcing the stock picking?

</comment><comment><USER42> So people won't be able to make money selling their stocks to other people. Maybe corporations will simply adapt and provide dividends that appropriately compensate for the price of the stock?

</comment><comment><USER43> Isn't the answer an index of hedge funds?

</comment><comment><USER44> Not a big deal. As Index funds trade more, than more opportunity for traders. It'll balance itself out.

</comment><comment><USER45> Active investing serves a valuable purpose.

10 years ago, everyone wanted to be in the hedge fund industry. Today, it's tech startups. Having worked in both fields, you encounter the same folks running from funds to startups.

Hedge fund fees probably move to 1 and 10 over the coming decade, but active investing and price discovery are very valuable. For those willing to do the work, small and midcaps still can generate alpha. However, it will require spending many hours traveling and meeting with management and being engaged in the sector virtually nonstop (trade shows, conferences, reading articles/news).

I think generalist active investing will go away, but sector focused active investing will remain.

</comment><comment><USER46> "warned that index funds might grow to the point at which new investments could be massively mispriced"

Could, he says. lol.

</comment><comment><USER47> no

\-- Betteridge's law

<comment><USER48> Is Betteridge's law of headlines always correct? Click here to find out!

<comment><USER49> It's 99% correct. If something sensational were substantively true, it would be stated, not asked.

</comment></comment></comment><comment><USER50> When a headline is a question the answer is almost always no. This is no exception.

</comment><comment><USER51> From the article: A report this past week from investment firm Sanford C. Bernstein, titled "The Silent Road to Serfdom: Why Passive Investing Is Worse than Marxism,"

"serfdom", "Marxism"... Let me guess: Libertarian Party propagandist.

<comment><USER25> > Let me guess: Libertarian Party propagandist.

Or just someone who is well-read and likes to throw in literary references.

<comment><USER52> > > Let me guess: Libertarian Party propagandist.

> Or just someone who is well-read and likes to throw in literary references.

~libertarian here: don't know him, but I'd bet he is what op thinks</comment></comment></comment>


Valgrind Finds Thousands Of Potential Issues With Mesa [Phoronix] - <AUTHOR> http://www.phoronix.com/scan.php?page=news_item&px=MTQzNjk <comment><USER2> While valgrind finds issues, it's totally unclear if these issues are serious. The explanation of the Mesa developer that responded sounds reasonable (valgrind cannot track past ioctl).

I'm wondering, if this article is more about valgrind than about Mesa: what does it help if only a fraction of the reported issues is an actual issue?

<comment><USER3> Valgrind supports suppression of reports, if valgrind can't track past ioctl, they should add a suppression file to their repo that supresses these warnings, making valgrind output useful again.

</comment></comment><comment><USER4> Well, most of the valgrind errors should be repetitions, so I would say there are probably 5000 error or so.

It is a great idea to use Valgrind or other automatic tools(we make our own), but it is really hard when you had already developed a project without it.

Going from 507,326 errors to 507,325 or 507,310 is not very motivating(0.000029% progress).

</comment><comment><USER5> It's a little unfortunate that the author did not at least try to hunt down a _few_ of them and present a conlclusion about if the warnings are benign or serious.

I don't have the exact version of Mesa that the blog-post ([http://www.americanteeth.org/2013/08/14/valgrind-is-not- opti...](http://www.americanteeth.org/2013/08/14/valgrind-is-not-optional/)) seems to refer to. But the first two functions in the i965 driver code that valgrind complained about basically do something like the following code:

        uint32_t *surf = brw_state_batch(...)
        surf[0] = ...stuff with flags for the GPU-code...
        (...)
        surf[5] = ...even more stuff, encoding coordinates and so on...
        (...)

Unfortunately that pointer "*surf" seems to be allocated by some batch-buffer- memory allocation magic, so (after only greping through the source for 5 minutes) I would not be able to conclude if it's a fake warning (maybe refering to some memory that is allocated by some DRI kernel interface mmap- magic) or indeed serious (say, a mistake when calculating the proper boundaries of allocated pages). But with a library used as regularly as Mesa I'd give the authors the benefit of doubt and guess that to detect the subtle errors, one would first have to educate valgrind about that DRI-specific way of allocating memory.

</comment><comment><USER6> This is completely a non-story. If you're going to write a blog entry about a project's valgrind results at least track down one of the reports that's actually a bug.

</comment><comment><USER7> The joys of safety when using C.

Validation tools and warnings as errors are not optional when using C and its derivatives (Obj-C/C++).

Not everyone is an elite C developer and even those can make mistakes.</comment>


Even more fun with building and benchmarking Firefox with GCC and Clang - <AUTHOR> http://hubicka.blogspot.com/2018/12/even-more-fun-with-building-and.html?m=1 <comment><USER2> This is awesome. I don't have a dog in the GCC-vs-Clang hunt, but I love love love that the two are leapfrogging each other. It would suck if, say, Clang were so much better than GCC that they stopped doing cool work on it (and vice versa). _Everyone_ benefits from this particular friendly competition!

Great job, both teams. Please keep up the great work!

<comment><USER3> FWIW, I doubt the GNU project would stop working on GCC, even if it were rarely used. GNU Hurd and similar rarely used projects barrel on under the GNU banner.

<comment><USER4> The work wouldn't stop, but people would continue to do the same things they know how to do. Friendly competition gives new ideas. Clang basically forced nicer error messages on GCC. Sanitizers started with clang and were ported to GCC.

</comment></comment></comment><comment><USER5> >I was entertained to noice that Clang actually defines __GNUC__. Shall also GCC define __clang__?

Pretty unsurprising. Same reason why Firefox and Chrome still identify first and foremost as 'Mozilla.'

<comment><USER6> The define agent wars have begun

</comment></comment><comment><USER7> Not sure if directly related to the article, but curious, if you compare GCC and Clang and review GCC's logic to improve Clang, have you violated a license? Similarly if you assume API is copyrightable and covered by the license, one wonders about violations just reimplementing GCC extensions. (just spitballing because in general something is not a violation that is not pursued as such)

</comment><comment><USER8> The author has done some excellent work. I would love to make this kind of deep-dive compiler / optimization regression part of my own team's continuous improvement because it is so important to stay on top of, but every time I try to dive into LTO/PGO it ends up getting deprioritized. Articles like this are inspiring and informative.

</comment><comment><USER9> So this may seem like a stupid question, but I have been doing a lot of work on static compilation for an embedded project, and noticed a huge improvement from adding -ffunction-sections and -fdata-sections plus link-time garbage collection with static linking. Would compiling firefox statically against musl and some static nss provider help?

I sorry if this question is phrased poorly, English is not my first language and I am new to build system issues.

<comment><USER10> from my limited understand using LTO is a better alternative to -ffunction- sections and -fdata-sections + gc-sections because the compiler and linker has more information. Size reductions are often a little bit better for LTO than for gc-sections. Check this article series: [https://lwn.net/Articles/744507/](https://lwn.net/Articles/744507/)

</comment></comment><comment><USER11> as someone not familiar with compilation, what's the purpose of moving from GCC to Clang ? especially if performance aren't better ? (I think it's what they are trying to do)

<comment><USER12> Clang has much better error reporting and warnings. It's maybe not enough to switch completely, but worth it to compile in both compilers to catch more bugs. Then you can still release the binaries that are faster and throw away the binaries that are slower.

<comment><USER13> Firefox isn't moving to build with both, though — it's moving to Clang exclusively. It will not get the best of both worlds.

</comment></comment></comment><comment><USER14> Mostly offtopic: I find it ironic this website doesn't render well on Firefox mobile. :(

The page won't let me zoom all the way out.

<comment><USER15> It is Google's blogger.com. I am not very advanced user of it and generally just use whatever it provides for me.

The link is off. This link [http://hubicka.blogspot.com/2018/12/even-more-fun- with-build...](http://hubicka.blogspot.com/2018/12/even-more-fun-with- building-and.html) renders better in general.

PS: I found it too ironic to mention in the blog, but I had to uninstall mobile firefox to get the two-level application needed to submit a patch :)). For some reason Google authentificator requires over 30MB to take a picture of bar code.

<comment><USER14> Well, better published than nothing. I found the writeup very interesting and informative. Looking forward to seeing where this all leads.

</comment></comment></comment><comment><USER16> I've been having too much fun the past week or so with my new computer and gentoo --- ldd as my linker, thin LTO, clang 7.0.1 building everything by default. There's far less breakage than you'd imagine.

</comment><comment><USER17> It's ironic that Mozilla evangelizes against browser monoculture, while at the same time Firefox is increasingly using a language that has supports one frontend (rustc) and one backend (LLVM) only, and it is degrading support for all C++ compilers except one.

<comment> nv-vn This is such an apples-to-oranges comparison that I can't really see how you'd come to that conclusion unless you were already biased against Rust/LLVM/Firefox coming into it. Mozilla is against all browsers, i.e. every single piece of software that can be used to connect to the world-wide web-- the most important and influential piece of technology in the last half century, being based on the same codebase. The fact that a browser is compiled by a single compiler is absolutely meaningless, because it still provides another option over other compilers. This doesn't have any bearing on the browser monoculture, and it has no bearing on C++/gcc's feasibility because there are still a thousand other compilers and projects not affected by this. The fact that Rust only works in one compiler is also pretty meaningless because that's not the problem Firefox set out to fix.

And say Mozilla did care about what compiler they were using because it locks them into one of them. They would go ahead and develop a new alternative Rust compiler with an alternative backend. Oh no! They're all using Glibc still! And GTK+! And the X.org monoculture!!!

The current goal behind Firefox is to provide an alternate browser that isn't based on Webkit, not to make sure that every piece of software is equally competitive.</comment></comment>


Core ML Simplified with Lumina - <AUTHOR> https://heartbeat.fritz.ai/coreml-simplified-with-lumina-745e61035f30 <comment><USER2> Whoa. This is an elegant solution to all the boilerplate that goes into running camera output through neural networks on iOS. Kudos.

</comment><comment><USER3> Really cool!</comment>


Ask HN: Legal implications of launching a file sharing service? - <AUTHOR>

I'm looking towards launching a file sharing service, and I was wondering what I'd be getting myself into, legally.
Am I responsible for users using my service to share illegal and malicious files?
What else should I be worried about? <comment><USER2> Yes, you should know what you're getting into. Especially after the U.S. Supreme Court's Grokster decision. I posted a pseudocode liability IF-ELSEIF- ELSE tree here a few weeks ago (replace "distributing" with "offering"): [https://news.ycombinator.com/item?id=8455648](https://news.ycombinator.com/item?id=8455648)

Note the above only discusses copyright liability, and not other potential legal issues.

</comment><comment><USER3> I'm no attorney, but here are some stories you should look into:

* MegaUpload

* Kazaa

* Limewire

* Napster

* PirateBay

</comment><comment><USER4> (A) a lot,

(B) yes, and

(C) going any further without being an actual paid client of an intellectual property lawyer

(D) see [https://www.eff.org/wp/iaal-what-peer-peer-developers- need-k...](https://www.eff.org/wp/iaal-what-peer-peer-developers-need-know- about-copyright-law)</comment>


Even 25 Years Later, the Iomega Zip Is Unforgettable - <AUTHOR> https://www.howtogeek.com/658287/even-25-years-later-the-iomega-zip-is-unforgettable/ <comment><USER2> I worked in graphic design in the 1990s--and we used a lot of those things. But the article doesn't mention that before the Zip drive, the standard media for transferring large files wasn't floppy drives, but Syquest removable hard drives. (and the Zip itself was a cheaper, smaller version of the Bernoulli drive) The zip drives were cheaper and easier to use, though in the long run, proved not as reliable, so when CDs got cheap enough, Zip was out.

</comment><comment><USER3> Zip and Jazz drives FTW!

I still have my Zip drive and disks somewhere...</comment>