Reacting to the Newspaper

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Reacting to the Newspaper

I can't read the newspaper anymore without getting an incredibly strong urge to post. I need a two way medium and the newspaper (online and offline) is still a one way medium.

So I'd like to start doing short posts with my quick thoughts on stories. Here it goes starting with today's New York Times.

Internet Injects Sweeping Change Into US Politics - Are you surprised? I'm not. "The Internet, they said, appears to be far more efficient, and less costly, than the traditional tools of politics, notably door knocking and telephone banks." The only thing surprising to me is that it took them ten years to figure this out.

Death By Smiley Face - When Rivals Disdain Profit - A story about "the zero billion dollar business" phenomenon is interesting, but it features lala.com, which I doubt disdains profits if it has taken close to $10mm in venture capital from Bain and Ignition (something I've heard but not verified).

Selling Short The Virtues of the Short Seller - Joe Nocera is generally spot on in his columns which don't get nearly the readership they deserve because they are stuck behind the Times Select wall (and thus no link love on this story). Short selling is a critical component of any true market. One of the five things I learned in business school is that a market is composed of speculators and hedgers. You wouldn't be able to hedge a position in a stock if there weren't short sellers willing to take part in the transaction. Anyone who engages in the vilification of short selling should take the time to understand how valuable short sellers are to a properly functioning market. Nocera nails this issue.

Calculating What To Pay For A Home - There were actually two related stories in the paper today talking about the research two professors in Claremont, CA did on the housing bubble. They focused on housing prices as a function of the rental income the homes would command. This approach (as opposed to focusing on comps which is what most brokers want you to do) is the way I've always thought about real estate. It is directly related to the notion that a business should be valued as the net present value of the cash flow it generates. And so a home should be valued at the new present value of the net (after expenses) rental income it would generate if it was rented out instead of lived in. I have generally felt that 20 times annual rental income is a good proxy for what a house should sell for. That number (20x) is obviously a function of interest rates, the tax deductibility of mortgage interest, the real estate tax rates, and a host of other less significant factors. It would be great if Zillow and the other real estate value services would give you rental data for houses in your area. I think that would be a great data point that would help people get a good sense of what to pay for (and what to sell for).

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» "An incredibly strong urge to post" from Meskel Square
Going off topic for just a second. Fred Wilson, the New York-based venture capitalist behind AVC just identified blogging's 'killer app' in one short sharp post: I can't read the newspaper anymore without getting an incredibly strong urge to post.... [Read More]

Tracked on Apr 1, 2006 11:58:33 PM

» Altruistic Disruption from Venture Voice
The New York Times just published a story called Death by Smiley Face: When Rivals Disdain Profit. It describes what we recently referred to as disruptive businesses -- a company that can grow while shrinking margins in its industry. In... [Read More]

Tracked on Apr 2, 2006 12:15:19 AM

Posted April 1, 2006 in Random Posts

Comments

I like this new type of post.

You could also use Delicious for this, might save a little time... add it into your feed and add it along the side as a separate link roll.

Posted by: Rick | Apr 1, 2006 9:57:09 PM

Hi Fred,
I've been reading your stuff here for a while and I just wanted to say that I love your insights. They are truly a great help to me in my work life. I just thought you might like to know about Newsvine and how it might change your life. Think of Newsvine as a slashdot or digg for "regular person" news. They pull in news from AP and all sorts of other sources as well as what people submit to them. You can comment, chat, post new things (they call it seeding the vine), and even have your own column of stuff you are interested in and "seed" yourself. I could go on and on about all of the wonderful features they have put in over there. Plus it is run by Mike Davidson who was behind ESPN's online presence, so it is run by experienced professionals. I'm not paid to do this, I just love what they are doing over there. I thought you might like to join the discussion. I'm sure you would be a great addition to the community. I know I would read. Thanks again for being such a great resource.

Posted by: Joe | Apr 1, 2006 11:44:53 PM

I just had a similar experience with another one way medium - a book. My first instinct after finishing 'Bad Thoughts' by Jamie Whyte was to crank up my Ethiopian dial-up connection and try and find his blog so I could use it to share some of my own bad thoughts. So far, no joy. I may even have to ... gasp ... send him a letter.

Posted by: andrew | Apr 2, 2006 12:02:44 AM

On "Calculating What to Pay For a Home" the article only touches on the impact of the change in the price of the home as part of the decision to buy in the first place. It should have said more about it. Much more. Take a look at the cost of buying, say, a 3 or 4 unit brownstone in Manhattan. In the early 1990s you could simply do the cash flow analysis and that was that. But by 1995 all bets were off and you could never make a rental property work financially. Why? One reason: there was an expectation of price increases that dominated the investment equation. (I specifically didn't include 1 or 2 unit houses which were also influenced by the growing popularity of single family houses.) If and when the real estate market slows, and expectations of future capital appreciation lessens, the future capital appreciation expecation will go away and cash flow will dominate. But the price equilibrium that straightforward cash flow analysis would imply, at least in NYC, is probably 20% or 30% lower than where we are now. It is that change in expectations, (with gentle assists by changes in interest rates and changing demographics) which cause real estate cycles in the first place. The big problem is that rents and building expenses are reasonably predictable but shifts in expectations are influenced by so many different things (including, but not limited to the media musings about "real estate bubbles").

Posted by: jonathan | Apr 2, 2006 8:50:26 AM

Clusterfuck Nation by Jim Kunstler
Comment on current events by the author of "The Long Emergency" (also on www.kunstler.com)
http://jameshowardkunstler.typepad.com/clusterfuck_nation/

Posted by: Dimitar Vesselinov | Apr 2, 2006 9:39:19 AM

From today's NY Times. About technology in Korea.

http://www.nytimes.com/2006/04/02/world/asia/02robot.html?th&emc=th#

I like this point about cell phone etiquette. As much as cell phones are convienient, the manors of people using them bug me.

Such problems have led the government to consider curbing anonymity on the Internet, a proposal that has drawn strong opposition here. In another response, in February, the government released a 256-page "IT Ethics" textbook for junior and high school students. Teachers are expected to spend 30 hours instructing from the textbook, whose chapters include "Healthy Mobile Phone Culture," and "Protecting Personal Privacy."

Posted by: Gadge | Apr 2, 2006 2:16:59 PM

A VC

Musings of a VC in NYC