Mindless Bit Spew

Blockchain and open source

RIP, Mary Jane Proctor Jones

My last surviving grandparent passed away last week. I most recently wrote about her inadvertent introduction of Rush into my life. I wish I had something further to say.


Written by Ry Jones

25 June 2011 at 18:17

Posted in Life

In which the hazy past is recounted, part one

My grandmother Jones took me to see a movie at HQS in, wikipedia tells me, 1981. I went with her and a friend of hers; they enjoyed the movie, and I thought it was cool to watch a boat sink (still think it should have caught fire). The loons! The loons!

Perhaps as penance for subjecting me to this crude torture, she took me to a record store and changed my life. I really didn’t know what kind of music I wanted or liked; I asked mom for KISS, I got Yellow Submarine (looking back, I’d say she made a wise choice; second grade was no time for KISS). Somehow, my grandmother bought a tape of a certain classic album. I knew nothing of Rush, what the lyrics were about, but my ten-year-old self played the ever-living shit out of that tape; In particular, Tom Sawyer, Red Barchetta, and YYZ.

Before ESL, everything was either what my parents listened to or what was on the radio. After ESL, I could leave planet Earth at will (as long as the batteries lasted).

Thanks for that!

Written by Ry Jones

13 April 2011 at 20:55

Posted in Life

David Fincher on copyright clearances

From Director’s Commentary track 1, Fight Club

00:25:35: The book takes place in Wilmington, Delaware, because that’s like a headquarters for a lot of credit card companies. We wanted to make the film take place in Wilmington, Delaware, but there’s some kind of clearance issues if it’s a specific town then you have to get clearances for specific names, streets, you know, apartment buildings. We decided to, in the interest of clearances, which has really become just the bane of my existence, the whole of legal clearances. I think there was actually a situation with Marla Singer. Where when they did the name clearance on Marla Singer, they went and they did this like global search, or at least, you know, continental United States they do a search for Marla Singer. Had they found five or six Marla Singers, or a thousand Marla Singers, it wouldn’t have been an issue because somebody says “hey, I’m being disparaged in this movie, I’m this chain-smoking person addicted to support groups, you’re disparaging me” but if there’s a thousand, you can always say “well, it’s not you, it was meant to be this other person” or whatever. “Prove that it’s you.” So you don’t have to get any kind of clearances.

00:26:50 But there’s only one Marla Singer in the continental United States, in Illinois somewhere, of course, as soon as attorneys get involved, the whole thing gets completely fucked up. Somebody called her and told her there’s this book, and we’re making a movie based on this character that had her name. All of a sudden, her attorneys are calling and we have to pay this person off. So it becomes this big issue, if you set a movie in a specific place you have to get specific clearances based on, like, the Pearson Towers. If they say it’s Wilmington, Delaware, then you have to go and get permission if there’s a Pearson anything in Wilmington, Delaware. So we just said it was any city, any city anywhere. But our homage to Wilmington, Delaware is that the, I believe the Delaware state motto is “Delaware: a place to be somebody”. So, we decided to put, on the Pearson Towers, their little logo on the brass sign is “a place to be somebody”.

00:27:48 We also had the Delaware state flag in the backgrounds, so the property department kept bringing the Delaware state flag and we would put it on the flagpole. In this scene, you don’t see it, because the camera never tilts up high enough to see it; but of course, all the Fox representatives were down there on the set looking, watching the monitors, making sure you couldn’t see the Delaware state flag because then you’d have to go and re-clear everybody’s names. “There might be a Lou’s Tavern in Wilmington, Delaware!”

Written by Ry Jones

28 January 2010 at 1:11

Posted in Life

Wait a second… you want to blame ME for the financial crisis?

Posted by “Austrian” on arfcom.

I currently manage a medium sized hedge fund (long/short equity).

The current populist uproar is absolute insanity. I don’t know how else to say it. You are never going to legislate away greed. Period. It is part of the human psyche. That’s all there is to it. You can either fight it, or use it. Incentives work. This is why.

Let’s step back a minute and think about why and how this happened:

1. Starting back in the 1970s Congress addressed discrimination in mortgage lending (which was really a serious problem) with the Home Mortgage Disclosure Act of 1975. This approach was to open lending statistics by requiring banks to disclose the details of their lending by geography and, eventually, demographics and income level. This was a stroke of genius. Large banks were shamed into good citizenship. The act did have the effect of elevating a number of “civil rights” personalities (Jesse Jackson, for instance) as they used shrewd public relations to expose some rather egregious practices by large banks when it came to mortgage lending. These same personalities, names you doubtless recognize, in some cases, adopted more aggressive tactics, some that borderline on blackmail and extortion today. I leave it to you to determine if this downside outweighs the upside of truth in lending practices. I, for one, think that forcing disclosure like this was enlightened. It was to be the last of its kind.

2. The Community Reinvestment Act really was a serious break with the legislative practice before the legislation. Suddenly, you have a small number of people determining where dollars will flow based on some political definition of who is worthy. The early definition could be right as rain in terms of who is deserving, needs a leg up, has been wronged, etc. etc. but once you go down this path, you are truly fucked. Once you start dictating capital flows based on political worthiness (an entirely subjective and whimsical standard) you have opened the door to all kinds of mess. Play stupid games…

3. …win stupid prizes. In the 1980s and 1990s Congress literally had a hornet’s nest up its ass with mortgage regulation. Almost 400 bills in the 101st Congress contained the word “mortgage.” This doesn’t seem like a big deal until you realize that the housing ranged from 7-20+% of GDP in a quarter. Absorb that. Something like 1/5 of quarterly GDP. Now put in place mechanisms to literally pour trillions of dollars into the system to encourage “The Dream of American Home Ownership.” Think of it. You have a small group of regulators/legislators (less than 100 people are making major decisions about how much Freddie or Fannie will lend, or what their capital ratios will be raised to, or what interest rates should be) controlling a massive portion of the economy. You suddenly have price fixing for a sizable fraction of the GDP. To compete with Fannie and Freddie, their subsidies, their tax breaks, their implied government backstop and their downward pressure on interest rates, you have to take on more risk for less money. Hello Countrywide. (Just a bit of history, Countrywide was explicitly founded to collateralize the only loans left to non-GSEs- those not already being siphoned by Freddie Mac and Fannie Mae). GSEs held 1/3 of all residential mortgages by 2001 or so. ONE THIRD. GSEs were run by political hacks, installed there as a reward for political services rendered. These are facts.

4. Banking and Insurance regulation is, and always has been, daft. The blind focus on capital ratios, reserve ratios and the like, and the pedantic concentration on definitions of risk that results in notional insured figures being counted in capital ratio calculations but credit default swaps not counted in this way was insanity. Of COURSE massive capital is going to flow into the exception you, regulator, have explicitly written into the regs. Now you are shocked and surprised that people wrote Credit Default Swaps like there was no tomorrow? Incentives matter. Period.

5. The market for talent is global, and you can’t legislate it away. Like it or not there is a metric ass-ton of money in finance. The power to create, move or allocate wealth is very valuable. It always will be. You aren’t striking a blow for social justice by enacting the first salary caps in the modern history of the United States. You are guaranteeing that finance experts will flee. The hiring binge going on right now as the likes of UBS suck out talent is just amazing. UBS, with the support of the Swiss Government, is offering 10 year permits to execs and their families who relocate to Switzerland, not to mention the ability to negotiate your personal tax rate for the next 10 years up front in some Cantons. You can’t determine what finance execs will be paid, folks. You can only determined WHERE they will be paid. Who exactly do you think is going to pull the United States out of this mess. Big Auto?

So, let me get this straight, Mr. or Ms. Congressional/Executive Scumbag….

You’ve spent the last two decades pumping trillions upon trillions of dollars into particular segments of the mortgage market, a major portion of the U.S. economy, dictating what risks were appropriate, how much would be paid for assuming those risks and generally underpricing risk in the entire system for years and years. You’ve been inflating a bubble and assuring that the inflation passed to the riskiest portions of the economy. You’ve been passing the buck for four decades. Every time the economy tries to correct itself, you stall, pump borrowed money into the system, and grow the disaster the country will eventually have to face. You buy votes year after year by delivering graft now, to be paid for later (after you’ve long left office). In effect, nearly one third of the American economy has been run by central planning for the last five years. During this inflation, you happily collected taxes on everyone, effectively collecting tax on borrowed money and inflated assets (none of which you propose to repay- what luck would I have asking for the real-estate taxes I have paid for years on appraisals that were pure illusion?) I didn’t hear you complaining when you saw massive, record revenues to the Treasury thanks to the boom the finance community facilitated and delivered to you, year in and year out. I didn’t see you pointing fingers when we dug in and pulled your ass out of two recessions. Finance is a massive portion of the economy because it creates wealth. Period. Your social programs, state and local, are massive bloated vote-buyers because of our hard work, sweat and craft. (New York State, I’m looking at you). We work until mid-May for you and your vote purchasing juggernaut. I accept that. I have for years. This is because what I make from June to December is more than enough to, not just enjoy the American Dream and the promises of success and wealth, but to take the capital I collect over the years and invest it, again and again back into American business, start-ups, and even your fucked up GSE mortgage securities (which my taxes support). We carry the freight. 10% of us pay 70% of all income taxes. 50% of us pay 97% of all income taxes. We tolerate this because this is the promise of America. Work hard, pay taxes, and no one will second guess what you spend your money on in your personal time. No one will tell you how much is a “fair wage.”

Now, now that you have run out of delaying tactics, you want to point the finger at… me?

I came to this country for a reason. I spent 9 years in U.S. universities, which I busted my ass to get into. I didn’t borrow a dime to do it. I paid every cent myself. I’ve never so much as accepted a single unemployment check. I’ve never availed myself of any government largess that I wasn’t forced to take. I have repeatedly declined to challenge some of your more deluded tax claims against my income in court, as was my right. Two of these I clearly could have won, though expensively. What’s more, I consider myself a patriot. I consider it a great privilege to live in the United States and to be called one of her adopted children. I defend this country, and what used to be her ideals, to any European socialist moron who cares to engage me in conversation. I support the troops. Wherever they are. Unconditionally. I create jobs. Aside from two years where I broke even, I have made money for my clients and partners every year since I have been in professional life. This includes 2008 and 2009 YTD. You could house 50 families in reasonable comfort for 10 years on what I have paid in taxes since I’ve been here. Actually, now that I’ve actually done the calculation just now for this post, you are really pissing me off.

Now you want to call me greedy? Are you fucking kidding me? After you fucked this place up? You want to tell me that capitalism failed? What capitalism? You’ve socialized/centralized almost half of the GDP. Now, you want to use me and the paycheck I’ve earned year after year to deflect attention from the basic fact that you have been shoving debt on people who couldn’t hope to find within themselves the character to take responsibility for repaying it? They get a pass and I get… what… a sharp stick in the eye?

And, you want to tell me that $250,000 is “enough?”

I will tell you what is “enough.” Me paying for your power grab for the last decade now. That’s quite enough.

Let me just tell you, Congressional/Executive Branch Scumbag, Esq., if you do this… if you take this turn… I won’t even think twice. I will move my firm to Switzerland, or to London before the year is out. Those employees who do not follow me, I will have to fire. The corporate taxes I pay will no longer be yours. Instead, they will go to something useful, like a nice tunnel through a mountain for high speed trains that actually work. Further, I will dedicate a substantial portion of my personal time, effort and capital to frustrating your every attempt to collect personal taxes on me thereafter- given your draconian anti-expatriation laws. But that’s not all. My job is to make money for my clients, in whatever way I can. I will short your flagging financial firms mercilessly and remorselessly. I will buy QGRI puts to bet against any firm that took bailout money. I will buy credit default swaps on every firm you put your greasy paws on, because I know your fingerprints are laced with poison. For every boneheaded centralist move you make, I will be there, profiting from your lunacy. I will never again take a client who pays taxes in the United States. I will not permit any capital or profit to be diverted to any such. I will do this because in the same way you believe it your divine right to punish “greed,” I consider it my duty to punish the stupidity and arrogance that is central planning, and because I believe in economic freedom. I will divert as many of your resources to my new home and its relative economic freedoms as I can. I will promote free markets in this way, and I will never look back. You will have made it clear that you are my enemy, and I do not forget such declarations.

I take no pleasure in this fight. I did not ask for it. I only asked for liberty, and the pursuit of happiness. Deny me these at your peril. In the end, I can only hope I’m not alone.

Once the “flight to quality” takes place, I wonder where the new center of financial power will be. Certainly not the US.

Written by Ry Jones

22 March 2009 at 3:47

Posted in Life

Why I shop at Pilot Oil

Pilot Oil, Ellensburg, WA

Long story short: they are (or were in the early 90’s) a good company; they treated us well when we made a mistake.

Longer: In the early 90’s, I worked for my dad; my office job was bidding work. One of the jobs I bid was Pilot Oil’s new location in Terre Haute; one unusual point in the bid document was that the brand and color of the exterior finish was explicitly specified. As it wasn’t a brand we usually dealt with, it wasn’t in any of our product notes; Dad called the manufacturer to get the MSDS and product info sheets. They either couldn’t or didn’t fax them over; instead, they gave us the bare minimum data: the coverage rate.

For finishes (paints), the rate is specified in square feet per gallon for each surface type (pdf). For a CMU finish like this, the specs usually include smooth-faced CMU, rough-faced (split) CMU, and the like. The number we got was so many [‘]/g; I remember it seemed really high, but I also remember Dad asking the guy on the phone if that was the rough-faced CMU coverage; the number we worked from was, of course, the smooth-faced CMU number.

The guys on site had no idea about the coverage rates, but they knew the first coat was wrapped up and there was not enough finish to get the second coat done.

There are a couple options here. One is to paint up to a line, say a finish change, and forget the rest. Pilot Oil buildings used to have a band of smooth CMU about eight feet up; paint to this line, and if the customer notices the color difference, you just say it’s a trick of light. Another would be to cut the finish (over-thin it). The risks are leaving too thin a finish; also, the tints and binders will come out of solution at different times, and the paint will streak. Another option is to buy more paint and finish the job correctly.

We chose the third course. While we didn’t need much paint, it was expensive, an odd lot, and we had to have it rushed instead of taking the slow boat; all custom touches that meant the cost of the finish was greater than the profit on the job. These things happen.

Dad wrote a letter to Pilot explaining what happened, and what the cost delta was. I don’t remember the content of the letter much beyond that. The next two events happened in close proximity; the dust of time makes it impossible for me to tell you which happened first.

One, we got a check from Pilot for the overage on paint; two, the roof on Pilot leaked.

That they paid us when they didn’t have to is why I shop there; Pilot Oil was under no contractual obligation to us, yet they treated us well.

To finish the roof leak, story, though:

The leak caused somewhat of a production; the roof shouldn’t leak on a new building. The owner calls the general contractor; the general calls any sub that got anywhere near the roof. Everyone calls lawyers.

When finish schedules are written, they’re written in mils; as in, this surface will be covered with this finish for this many mils. In practice, you look at the product guide; this tells you the number of mils per coat, you find out how many coats you need, and it’s two coats of finish. This sounds risky, because you don’t really know if a finish is so many mils over the entire surface; however, in practice, it works well enough. Nobody checks mils.

Until the roof leaks.

Meeting day, everyone shows up; we all go up to the roof. It is every sub’s ass on the line; someone is paying for this roof, and it isn’t the general. We all carry performance bonds (insurance) on each project; this means the bond agents are there. Having to pay $50,000 for water damage and a new roof would dwarf the profit on an $8000 paint job; if the failure is our fault, we will never get bonded at an affordable rate again. Our ability to be bonded, and therefore bid commercial jobs, is on the line.

The lawyers for the owner brought in an inspector that said “the leak is on the south side. There aren’t any mechanicals in the area (the HVAC guys all sigh relief and leave). There are lights, flashing, roofing, and finish.” That leaves, basically, the electrical contractor, the roofing contractor, and us.

The schedules come out. The roof is to be so thick and of this type material. Up on the roof everyone goes; the inspector cuts out a small section of roofing material from the backside of the CMU. The calipers come out. It passes. It is to be bonded with a failure load of so many pounds. He attaches a spring scale and a clamp and pulls. It does not fail at the design load. This is repeated along the bonding area. The roof passes.

The fixtures (lights) are pulled apart and checked; they’re dry inside, which means water is not passing through them. The seals against the CMU are dry, so they aren’t leaking. Electrical is off the hook.

A drill comes out; the inspector drills into the CMU. A depth gauge comes out. Mils are read. This is repeated along the roofline. The finish passes everywhere. We’re off the hook.

The end of the story was the flashing was installed incorrectly along the cap of the roofline. This, along with heavy rains and driving winds, let enough water in to seep in to wreck stuff.

If we had gone for option 1 or 2 originally, we would have been boned; even though the finish may not of been at fault, we would have been financially culpable for some percentage of the damage caused by the failure.

How often are mils checked on a finish? Only when it really matters.

Written by Ry Jones

27 December 2008 at 5:08

Posted in Life

Welcome to the Bay Area

Coming up on ten years since Tom sent an email which has mutated into more copies than I can keep track of.

From: Tom Pettigrew
Sent: Sunday, March 23, 1997 8:06 PM
To: ‘Paul Williams At Home’; ‘Th’ Rev.’; ‘Ry Jones’
Subject: Welcome to the Bay Area

Care to add to this????

How to tell if you are live in Silicon Valley.
You make $100,000 a year, yet still can’t find a place to live.
Your commute time is 45 minutes and you live 8 miles away from work.
Stop asking how much things cost but, ask “How long will it take?”
Two-Thirds of the people you know are from Boston or New York, but you are living in PST.
Know vast differences difference between Thai, Vietnemese, Chinese, Japanese, Cantonese, and Korean food.
Your home computer contains mostly hardware/software that is not on the consumer market yet.
Go to “The City” on weekends but don’t live there because you like your car.
Think that “I’m going to Fry’s.” is an acceptable excuse to leave the office for a while, and your boss does too.
Lost your alarm clock. You’ll get to work when you get there.
Go to an industrial-heavy-metal bar and see two guys get into a fight over what flavor is unix is better.
Own more than 10 articles of cloathing that have hardware/software companies printed on them. Bonus for embroidered stuff.

From: Ry Jones
To: ‘Paul Williams At Home’, “‘Th’ Rev.'”, ‘Ry Jones’, ‘Tom Pettigrew’,
‘Pete Macko At Home’
Subject: RE: Welcome to the Bay Area
Date: Sun, 03-23-1997 22:07:53 -0800

Half of the items on this list make you laugh, and then say “that’s not funny, it’s true”
You know the nearest 3 Fry’s to where you work.
“Your best buys…” you know the rest.
You know where Woz Way is
You know where Woz is
Streets named “Resistor” and “Floppy Drive” are real places, not jokes
El Camino Real runs north-south, you know this without checking a map.
You know 280N runs west, and 680N runs East.
Even though Microsoft employs quite a few programmers in the Bay Area, they only work on Powerpoint, and the company is still the embodiment of Satan. Even if their stock IS worth more than yours.
Your car is worth less than your computer.

From: “Th’ Rev.”
To: Tom Pettigrew
Cc: ‘Paul Williams At Home’, ‘Ry Jones’
Subject: Re: Welcome to the Bay Area
Date: Mon, 03-24-1997 13:18:06 -0800

You scan the trade journals for discount T-1 prices.
When you need the updated Diamond Monster 3D drivers, you just walk across the street.
You judge high-tech firms by the quality of their lawns.
You own more bandwidth at home than most major universities.
You have to hire security to keep the panhandlers off your terrace (Oakland/Berkeley).
None of the people you work with are Christian (“God? Who *needs* God?”).
Instead of (or, in conjunction with) stealing staplers at the office, you shove rolls of 10baseT in your pockets.
You scan yardsales for back issues of “Dr. Dobbs.”
Your favorite Computer reseller speaks only Cantonese.
Your workplace vending machines dispence “100% natural twig-bars” right next to Jolt cola and Instant Espresso mix.
No one brings radio’s into work – they just use RealAudio and listen to “”
Your co-workers’ hobbies include satelite telemetry, polysorbates, and “Bianca’s Smut Shak.”
Instead of reading magazines or watching TV, your friends trade URL’s.

Written by Ry Jones

21 October 2006 at 12:51

Posted in Life

So you want to work for a startup

So you want to work for a startup?
By Alex St. John – CEO WildTangent

I started my career in Hell. Hell Graphic Systems was a German owned subsidiary of Siemens Corporation in Boston, Massachusetts, where they made “High end” publishing systems. I was 20 when I joined their customer support team. Hell was a big, old, slow company with a lot of gray-haired people ponderously going about managing a well-established business. Most of Hell’s income came from its portfolio of patents on imaging technologies, which generated over 600m/yr for the company in license fees. Its second largest source of income was support and maintenance for ancient mainframe solutions they had sold to giant customers long ago. Nobody worked particularly hard at Hell, there were no dire consequences for failing to get something done in any particular time frame, and everyone generally had a strong sense of job security. Within eighteen months of joining Hell they were all gone.

I have always been a workaholic, so in spite of the environment at Hell, I spent over 100 hours a week at work. If the product Hell was shipping had a bug and I couldn’t get the German engineers to fix it, I’d do it myself or build a work-a-round. When I found or created new solutions I trained the other support engineers in them. When a new product line they built failed disastrously, I took it upon myself to get a new solution made. When the layoffs came, I was one of eight employees left standing. One hundred forty of my highly experienced, entrenched colleagues were gone in 1 day. I used to roller blade around the empty offices and wonder at how strange it was that all of these people who had seemed so important and powerful were gone. You could have heard a pin drop.

Lesson 1: Job security, even at a big entrenched company, is an illusion.
Lesson 2: An empty bank account has no mercy and is not impressed by big job titles, achievements of the past, office politics, ivy league degrees, or blustering.

I joined Harlequin Ltd. In the UK when I was 21. They had 30 employees and missed their first payroll when I got there. There were no “VC’s” with bottomless supplies of cash. At that time, if you wanted to be an entrepreneur you got a loan from a bank. During the two years I worked for Harlequin they built their business from 30 people to 300 on pure sweat and revenue. It was built on pure will power (mostly Jez’s). Harlequin’s Managing Director (CEO) was a very stubborn, very rigid man. He wasn’t well liked, but the company thrived for a short time because we built a very superior product, and he was, for better or worse, a draconian businessman.

Some years after I left Harlequin, the company began to fail. They stopped innovating aggressively, diverted their resources from a successful business to a failing one, and alienated their biggest customers. Jo (the CEO) failed to raise money even in a booming VC community, refused to sell the company to many large suitors for reasons of pride, and ultimately the bank called in “receivers” to liquidate the company. Jo was unceremoniously thrown out of the company he had created. 70% of the employees were immediately laid off, and nearly all of the rest shortly thereafter. The ones that remained were essential to Harlequin’s core money making business. Again the bank had no mercy. Only the money survived.

A lot of Harlequin’s employees were good friends of mine and had been given a paltry sum of Harlequin stock options on the promise that they might be worth something one day. They had invested years of their lives in a company that ultimately become worth nothing. A certain degree of bitterness about the whole experience was to be expected. Ask Jez about it.

Lesson 3: Focus on the businesses that make money.

Lesson 4: An empty bank account has no mercy.

I joined Microsoft when I was 25.

During my time at Microsoft it never failed to amaze me how disassociated the employees were from the company’s business. Customers were a nuisance, everybody was “brilliant” by virtue of working at Microsoft, and everyone felt highly entitled to every perk they were given. The vast majority of people’s time at Microsoft was often spent politicking, arguing, and meeting to resolve “conflicts”. It reminded me of what Hell Graphics might have been like years earlier when they were still rolling in money and just beginning to feel complacent. The correlation between what we did at work every day and how Microsoft made its money was so abstract that most people seemed to assume that the wealth was just their natural reward for being such a clever bunch of people.

While I worked at Microsoft I met with literally thousands of companies – young, old, big, small, US, Israel, Japan, London, you name it. I saw a thousand puffed up presentations about how cool their businesses were, how important they were, the customers they had lined up, the brilliance of their management teams, and I saw a thousand resumes from the same folks a few years later. Some would entreat Microsoft for business; some would insist that they would crush us if we didn’t support them. I used to wonder if their bank accounts were very impressed with all of that stuff. I can think of three that I had dealings with back then that are still around enjoying some modicum of success today. The rest are long gone.

Lesson 5: Bank accounts don’t care how smart, articulate, or promising you are. They just go empty.

Internet insanity hit while I was still at Microsoft. Billionaires were minted overnight. VC’s went insane and funded every absurd thing imaginable. The market went through the roof, and everybody got that Microsoft feeling… “We’re rich, therefore we must be brilliant!” Lots of those self-declared geniuses that had never worked anywhere else left Microsoft to take advantage of the boom. They raised money, hired their friends and went to town. Three years later and all those companies, with few exceptions, are gone or on their way out.

Lesson 6: It really sucks to learn the hard way that your bank account doesn’t give a damn about you.

It’s 2001; I’m CEO of a three-year old technology company called WildTangent with 160 employees. We are not generating a lot of revenue yet. I liked Microsoft’s great work environment, I didn’t like its arrogance or the sense of entitlement that people developed for resources they hadn’t really earned. The money in our bank account is not ours. We haven’t earned it. We aren’t entitled to spend it. It’s a loan from investors who believe in us… specifically, they believe that we will create much more wealth than what they have given us. Our bank account feels merciful for the moment because it has other people’s money in it. That won’t last, and the consequences of letting it run low are very ugly. Friendships, good will, fairness, loyalty don’t matter to an empty bank account.

The people who have lent us million of dollars have done so because they believe they will get 10-30 times that in return. We are entitled to nothing until we have delivered on that promise. We may spend their money as we NEED to, not as we want to. We are also investors in the company, but we are investing our time and our sweat. The rewards we are entitled to come from our success, not from our investors. We have done some good things, but we have not succeeded yet.

A startup is a pirate ship. The pay is negligible, the work is tough and dangerous, and only the really courageous have a chance to get rich. Pirates who can’t accept the risks they must take to get the rewards are eternally disappointed. It’s not a lifestyle for everybody. Microsoft stock options don’t make many millionaires anymore, but they can pay a decent salary to folks who don’t like taking risks.

I have personally promised ALL of this company’s investors that we will return their investment to them with substantial interest. That means that I will take the lessons I’ve learned along the way to heart. Our reward is enjoying what we do, and the value we create in our stock. Neither your managers nor I actually have the power to reward you for your effort. That can only come from real success. If I choose to pay each of you more money, I hasten the day that I have to lay people off because we ran out of time to build our business. If I give away too many options then I cannot recruit more risk-taking talent. None of these things are easy choices, but I’ve clearly seen the very unpleasant consequences for the companies that have failed to make them well.

At a startup company we are not paid what we deserve. We are paid exactly what we earn from our customers. If it were not for the faith of our investors, our average salary would be about $3,000/yr right now. Everything we get above that sum is a loan.

Every dollar we borrow against that loan reduces our share of the reward when it comes. It is a harsh reality of the bank account, no matter what we may think about the fairness of it. We have closed three investment rounds and employees are still the dominant shareholders in this company. (That’s often not the case after the first round.) I turned down half of the first 4 million dollars we raised to maintain our ownership in the company. We spent four months negotiating a good valuation in the worst market conditions in Internet history. At each step I’ve fought to ensure that the upside, the reward, for everything we do here is as large as possible for us. Each dollar we spend or pay ourselves sells a slice of that upside to the folks who lent us that dollar.

We work very hard here, so hard that no salary can ever compensate us for the time we may have given up for this company. The only rewards that can justify the demands we are placing on ourselves are immense personal satisfaction and immense wealth. We can only get those by achieving immense real success. A profitable company like Microsoft can afford to pay above average salaries and provide benefits we can’t afford, but then their stock isn’t growing at 300% annually anymore either.

Now that I’m almost done being brutally practical, the punch line is: Scream, cry, pull out your hair, shout at the gods, threaten, whatever- the bank account just doesn’t give a damn about what we think, and it writes the real reviews, including mine. If you want a safe salary, Microsoft is just up the road. Or you can join another startup that will tell you something different, and you can be shocked by the whole revelation when they mysteriously lay you off one day. I know of a dozen people we offered jobs to at this company who accepted “better offers” and are currently unemployed or have a huge pile of underwater stock options as a consequence (-$60/share in one case). For those of you who understand what it means to be a startup, and who can accept some personal sacrifice for greater rewards in the future, this company is the place to be!

We are a pirate ship. All we have on board is bread and rum. If you want more, please direct your cannons at the Spanish merchant ship yonder.

Finally, and most importantly, you are all good people who are creating the foundation for a great company. Good people always have the opportunity to take good jobs at good, established companies. A startup is an opportunity to test yourself and find out if you are great. A startup is not a place to feel secure or comfortable or generously treated. I don’t expect everyone to share my perspective on things or be able to fully appreciate what it means to commit yourselves to a startup mentality if you have never been through it before. If you’ve never gotten rich on stock options then it can seem like a distant fantasy that such a thing is possible, and if you have never been at a company that failed you may not know how grim an experience it is for the people who lose everything they’ve worked for.

Written by Ry Jones

4 June 2006 at 13:55

Posted in Life