Welcome to Muhr's Must Reads!
I focus on delivering relevant business & finance related articles while occasionally drifting to topics such as sports, art, technology and more! MMR acts as a quasi-personal library and I created it because I'm passionate about sharing what I find interesting.
MMR remains free and takes me hundreds of hours a month to compile, and thousands of dollars to sustain. If you find any value in what I do, please consider becoming a Supporter with a recurring monthly donation of your choosing, between a cup of coffee and a dinner.
How will negative interest rates change the rules of the game for investors and policymakers? ... Traditional economic theory says that a com - bination of massive deficit spending and histori - cally low (not to mention negative) interest rates should produce a rip-roaring boom in which work - ers get generous raises, prices spike, and interest rates follow. Theory also says that, even in the rare case of nominal interest rates turning neg - ative, the rates can’t stay there because beyond this “zero bound,” savers and investors will with - draw their cash and store it themselves, emp - tying banks and crashing the financial system. ... Multiple factors provide possible explanations for this curious situation. Three in particular stand out: demographic changes, the impact of debt burdens, and uncertain implications of monetary policy (especially quantitative easing). ... In a June 2015 report, the Bank for Interna - tional Settlements echoed this sentiment by con - cluding that a policy of persistently low interest rates “runs the risk of entrenching instability and chronic weakness.” Such an environment makes several extreme—and, sometimes, mutu - ally exclusive—scenarios at least conceivable.
Modeled after the wildly popular Japanese group AKB48, Wang’s three-year-old Chinese version similarly auditions young women from across the country, trains them intensively in singing, dancing, and show-hosting for four months, then puts them onstage to perform choreographed routines in live concerts. The regimen—long rehearsals, exercise, and dormitory curfews—seems more akin to the military than to the MTV life. “To make their dreams come true, they need sweat and perseverance,” Wang says. “Most Chinese girls, because the economy is developed and the quality of life is high, lack discipline.” ... During the most recent round of auditions in June, 48 applicants were selected out of 126,000, says Tao Ying, Star48’s chief executive officer. (Applicants can be as old as 22; the youngest band member is 14.) ... Wu is one of the band’s 119 members, who are split into smaller teams, which are rotated in live performances at the band’s 340-seat Shanghai theater, for about seven shows a week. ... plans to start similar girl bands in 10 Chinese cities by 2018. ... Besides keeping up with the band through China’s popular WeChat messaging app and various microblog platforms, fans stay involved through voting for the group’s favorite songs and their favorite band members. That input affects the performer’s career and salary. The most popular ones earn as much as 50,000 yuan a month, and the newest recruits get about 4,000 yuan, Wang says. Fans also meet band members regularly in what Star48 calls “handshake gatherings,” where 10-second individual sessions with their favorite idol are earned after buying a certain number of the band’s songs.
How a ragtag group of young coders skirted the studio and created a pop culture sensation that's still standing two decades later ... The marketing was hitting all the right notes, including on the Internet – even if no one noticed or cared. A few blocks from the flagship Warners store, up on the 29th floor of 1375 Avenue of the Americas, a group of five outcasts, working out of cramped cubicles and closets that doubled as office space, had cranked out what would become, over the next two decades, one of the most beloved websites ever made. At a time when asking to put a web address on a movie poster usually produced blank stares and then exasperated sighs, the site pushed all the limits of web development. There were inside jokes alongside animated GIFs, Easter eggs to be found and virtual reality 360s ahead of their time. It was free-flowing, unsupervised, guerrilla design work, all being done under the umbrella of one of the largest entertainment companies on the planet. ... The site lay more-or-less dormant for the next 14 years. But that changed for good in late 2010, when the Internet, exponentially bigger than it was in 1996, rediscovered the site – almost entirely unchanged from its initial launch. It was reborn as a viral sensation, the web's equivalent of a recently discovered cave painting.
The gliding gadgets are suddenly everywhere, and someone is going to make a killing. Will it be the guy who patented them, the guy who imported them from China, or Mark Cuban? ... The 2-foot-long, two-wheeled, twin-motored plastic board that glided to the forefront of American popular culture this summer could be the skateboard of the young century. The similarities are there. It’s a zeitgeisty short-distance ride that has started to yield its own, self-sustaining viral culture. And you can definitely draw a line from the amateur videos that helped skate culture conquer America to the sudden tide of Vines and Instagram videos that have made the boards a phenomenon. Then again, the so-called hoverboards could simply be the Tickle Me Elmos of 2015 — ubiquitous, overpriced trinkets with a single holiday-season half-life. Time and the collective attention span of America’s teenagers will tell. ... This much is certain: For some weeks or years to come, these devices will be part of the future. Celebrity endorsements on television and social media, enthusiastic word of mouth, and a sudden crop of internet distributors that can barely import the things fast enough to mark them up and meet demand have seen to that. ... As Wired reported earlier this summer, all of the dozen or so tiny American companies that sell the devices, including IO Hawk, buy from Chinese manufacturers like Hangzhou Chic Intelligent Technology (Chic) and make changes to the boards, typically cosmetic, before selling them in the States.
Such “foo-foo coffee,” as he calls espresso and its variants, is partly why he bailed: He loves the taste, but the complexities of making it came to epitomize his disillusionment with McD’s. “The service times went up because of the expansion of the menu,” he says. “I think they went a little overboard. It was difficult in the kitchen. When I would come down Apple Street behind the restaurant and see cars backed up at the drive-thru, my stomach would just knot up. The people were different, the company was different. It became very frustrating.” ... There are 5,000 McDonald’s franchisees around the world. They run 82 percent of the chain’s 36,000-plus restaurants and generate a third of its $27.4 billion in annual revenue. ... it’s not like people are tired of burgers. Smashburger, In-N-Out Burger, BurgerFi, and Five Guys Burgers & Fries are all expanding. ... McDonald’s is also trying to compete with Starbucks, Chick-fil-A, and Jamba Juice. Rare is the food trend that the company won’t try to prefix with Mc.
While the rest of the country has spent the past year debating gay marriage, policing tactics, Obamacare, and Deflate-gate, the inescapable topic of discussion in Silicon Valley is whether we are in a technology bubble. Marc Andreessen, the co-founder of his eponymous venture firm, is perhaps the leading advocate against the bubble chatter. On his Twitter feed, he has referenced the word “bubble” more than 300 times, repeatedly mocking or refuting anyone on his radar who even hints at such a possibility. One of his arguments, as the slides in the Rosewood ballroom suggested, is the exponential growth of mobile phones, which have fundamentally changed the way we buy and sell virtually everything, from groceries to taxi-like services, and created unprecedented disruption. Also, in contrast to the days of the dot-com boom, many tech companies are creating revenue—in some instances, lots of it. ... there may be no greater monument to what’s going on in the Valley than the 1,070-foot edifice under construction at 415 Mission Street. The new, glassy Salesforce Tower is slated to soon become the tallest building in San Francisco, rising more than 200 feet above the Transamerica Pyramid. ... Snapchat has offered Stanford undergrads as much as $500,000 a year to work for the company. Jana Rich, founder of Rich Talent Group, a well-regarded tech recruiting firm, told me that she hasn’t seen such bidding wars since the late 90s. “I’ve seen two of these life cycles, where things are going fabulously well,” she said. “Then we have the bust. We are now, in my opinion, at the height of the demand curve.” ... “You know there’s a bubble,” the saying goes, “when the pretty people show up.” ... All across the Valley, the majority of big start-ups are actually glorified distribution companies that are trying, in some sense, to copy what Domino’s Pizza mastered in the 1980s when it delivered a hot pie to your door in 30 minutes or less. ... Or maybe it’s simpler than that. As one technologist overheard and posted on Twitter, “SF tech culture is focused on solving one problem: What is my mother no longer doing for me?” ... Either you can go public, which is inadvisable without a lot of revenue, or you can sell, which is difficult given the paucity of companies that can afford to make such an offer. So, for many, the choice becomes fairly simple. You continue to raise more and more money, or you die. ... countless people from all over want this to be a bubble and they want it to burst.
The attack raises two important questions for society. One is: Is he right about Herbalife being a pyramid scheme? That’s important because if he is, all but a handful of companies in the now $34.5 billion MLM industry, affecting 18 million distributors, are almost certainly pyramid schemes as well. ... The second and perhaps bigger question is: What if Ackman is wrong? One man’s dragon slayer is another man’s vigilante. Herbalife has had to spend almost $90 million defending against Ackman’s attack so far, according to its SEC filings, while its executives, employees, and distributors have all been villainized, if not defamed. While activist investing was already controversial, Ackman has taken it into new terrain. Is it sound public policy to have freelance, for-profit billionaire regulators roaming the landscape, no matter how well-intentioned? ... There is no federal statute defining “pyramid scheme.” For years MLM critics have begged the FTC to draw some bright-line rules—but in vain. Such schemes are usually prosecuted by the FTC as an “unfair or deceptive act or practice.” If an MLM or its distributors have merely made some misleading claims, the FTC may fine the company and let it live to see another day. But if the commission finds that an MLM is a pyramid scheme—which is considered inherently deceptive—it must shut it down. ... The best definition of pyramid scheme emerged from a 1975 case in which the FTC shuttered a cosmetics marketer called Koscot Interplanetary. The key feature is that a pyramid scheme pays its distributors rewards “for recruiting other participants into the program … which are unrelated to sale of the product to ultimate users.” ... Few MLMs are so foolish as to do that. Instead, they typically pay a distributor—as Herbalife does—based on the products he orders, and on the products ordered by his first three levels of recruits, i.e., his direct recruits, his recruits’ recruits, and his recruits’ recruits’ recruits. ... While judges and economists have proposed other definitions, most boil down to this: The more genuine a company’s product, and the more genuine the consumer demand for it, the less likely it is that the company is a pyramid scheme.
Everyone on SeekingArrangement knows what they're there for, Thurston says. What is so bad about formalizing the arrangement so that we can all just go home happy? And aside from that unpleasantness with that woman who scammed him, all Thurston had to wrestle with, really, was the nagging guilt that maybe this whole sugar-dating thing isn't so okay, particularly since he began before his divorce was even finalized. “I went to church every Sunday. This felt like an ethical dilemma.” But he reminded himself that he was actually helping someone, a poor student, or someone who badly needed the money for, I don't know, medical bills or back taxes or vaping supplies. And that's what it came down to: “The whole concept of a sugar daddy intrigued me, because even if I were dating someone traditionally, I'd give them money anyway.”
I made a commitment to take ownership of my life. I started to get more connected, and then I just kept going with tangible daily goals. It wasn’t about a destination. Getting back to number one was something I was pretty convinced I’d never achieve. But that journey from rock bottom to the summit a second time was a great accomplishment for me. Without it I don’t know if I would believe in myself as much as I do when I face other challenges now. ... regardless of what the score is, the most important point is that next point. ... A great rival is like a mirror. You have to look at yourself, acknowledge where you fall short, make adjustments, and nurture the areas where you overachieve. There were times my rivals brought out the best in me; there were times they brought out the worst. They probably helped me win things I never would have otherwise; they also cost me titles. I don’t know how you quantify what it would have been like without a rival like Pete Sampras. I would have won more. But I think I would have been worse without him.
So the Fed has chosen to hold off on their goal of normalizing interest rates and the ECB has countered with the threat of extending their scheduled QE with more checks and more negative interest rates and the investment community wonders how long can this keep goin’ on. For a long time I suppose, as evidenced by history at least. ... zero bound interest rates destroy the savings function of capitalism, which is a necessary and in fact synchronous component of investment. Why that is true is not immediately apparent. If companies can borrow close to zero, why wouldn’t they invest the proceeds in the real economy? The evidence of recent years is that they have not. Instead they have plowed trillions into the financial economy as they buy back their own stock with a seemingly safe tax advantaged arbitrage. But more importantly, zero destroys existing business models such as life insurance company balance sheets and pension funds, which in turn are expected to use the proceeds to pay benefits for an aging boomer society. These assumed liabilities were based on the assumption that a balanced portfolio of stocks and bonds would return 7-8% over the long term. Now with corporate bonds at 2-3%, it is obvious that to pay for future health, retirement and insurance related benefits, stocks must appreciate by 10% a year to meet the targeted assumption. That, of course, is a stretch of some accountant’s or actuary’s imagination.