Unknowns & Uncertainties: Recent Reading

This past week the world has been in a state of chaotic uncertainty. The financial markets crashed in slow motion while talk of a prolonged recession intensified. With a business, a mortgage about to start adjusting and a girlfriend in college, I’ve been paying attention to the state of the world more than normal. Additional readings on risk, uncertainty, and social interactions have topped off the week.

The result has been a growing sense of uncertainty. A knowledge that I just don’t know. I’m still processing everything I’ve been reading, and the effect it will have on the articles I had planned to write on risk and angel investing. So rather than write about half-conceived ideas, this week’s post details what I’ve been reading.

On The Financial Crisis
Two weeks ago I read the Wikipedia entry on the Subprime Mortgage Crisis. This gave an excellent overview of the different factors driving the crisis. Be sure to read the Subprime Crisis Background Information before reading the article.

To keep up with the crisis, I’ve been following NPR’s Planet Money blog and podcast. The podcast gets recorded at the end of each day around 6pm. This American Life has been following the crisis as well, starting with The Giant Pool of Money back in April, and then Another Frightening Show About The Economy and A Better Mousetrap 2008 this month.

While the Dow dropped 20% last week (and is 42% off from last year), the TED spread and VIX have popped up as two measures to watch on the state of the crisis. Understanding the TED Spread explains how the TED spread measures the willingness of banks to lend to each other. VIX measures the volatility in the market, or in this case, how scared people are. I’m still looking for a good article on that.

Earlier last week I was in Boston sitting in a hotel room and turned on C-Span. I wound up watching an excellent panel called What Comes Next? The Economic and Budgetary Consequences of the Financial Bailout, which gave varying opinions of the impact of the financial crisis on the economy. Since then, I’ve been meaning to read Dean Baker’s blog, but haven’t gotten around to it yet.

Finally, for additional background on the crisis, I found Financial Crisis for Beginners to be very informative.

On The Tech Economy

Technology can be a saving grace in bad economic times, helping companies to become more efficient and survive the downturn. Nonetheless, this week Sequoia Capital, a top-tier venture capital firm, warned their portfolio companies to get ready for the storm while Ron Conway, an investor in over 100 tech companies, did the same. Geoffrey Moore, author of Crossing the Chasm and Inside the Tornado, predicted this downturn was going to be categorically different than the previous tech downturns, and it may take years to recover.

As such, I’m starting to read more articles about how to survive the downturn, though most of them right now are written by consultants wanting to help you, so have a self-serving tone rather than being unbiased advice.

On Risk

Having spent many hours on a plane this week, I caught up on some of my reading. Along the theme of risk and rare events that dramatically alter the world, Nassim Nicholas Taleb’s Black Swan has penetrated my thinking and gotten my head spinning. While I’ve discovered logic mistakes in parts of the book, right now I think the general concept holds. And since we are definitely in a slow motion Black Swan right now, it’s especially pertinent. I’m still digesting what I’ve read, but the one thing I know now is that I don’t know anything.

On Social Interaction Patterns

Now that I’ve made the jump into writing a blog, I’m getting a better understanding of the new forms of social interaction technology allows. My friend Pam has been pushing me to look at Twitter for months now, and I’ve resisted, seeing no reason why I’d want to know the minute details of everyone’s life.

However, I’ve discovered I like the updates I get through LinkedIn. Last week my friend Egg forwarded me an article on the “ambient awareness” created by applications like Twitter and Facebook. Sounds intriguing. I’m still not completely convinced, but I’m ready to explore the idea.

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