We love data

I love the 2×2 matrix: a scatter plot with a four-square grid imposed over it. But as a visual metaphor, the matrix is overused. It’s also laden with jargon. Each square gets its own catchy phrase, like “cash cows” or “problem children.”

Instead of revenue growth vs market share, try pineapples vs seedless grapes. I’ll take easy and tasty. From xkcd, courtesy the heroic and hilarious Barry Ritholtz.

The 2×2 matrix: Popularized by Bible salesman turned management consultant Bruce Henderson, founder of Boston Consulting Group.

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There’s a lot of talk in the world of university endowments about the “David Swenson’s “Yale Model.” It worked pretty well from 1999 to 2009, yielding annual growth of almost 12%. In 2010 the value of Yale’s endowment fell off a cliff. After that horrific year, Yale dropped into the bottom half of its peers (as the scatter chart below shows).

Swenson’s insights were twofold. One, expand the definition of asset classes and diversify broadly across them. So it’s not just a mix of large cap, small cap and bonds; instead, spread your bets across the Wild West of real estate, private equity and hedge funds. Two, long-term investors shouldn’t embrace liquidity. They should avoid it. On average, the more illiquid the asset class, the higher the return. Nobody gets rich buying T-bills.

What went wrong in 2010? Couple of things. When markets go south, everyone runs for the exit at once. A balanced portfolio won’t help you when the correlation across asset classes approaches one. Second, as more money flows into alternative investments, it becomes harder for them to outperform. Hedge funds fell 9% last year when the S&P 500 was flat. The managers still do well – “Where are the customers’ yachts?” as the saying goes – but for many, their days are numbered.

Any system that outperforms the market will eventually be arbitraged back to the mean. That’s the ultimate problem with the Yale Model. In fact, that’s the problem with modern portfolio theory. Fortunately, it’s a very long-term problem. A friend of mine is busy scouting out companies in Cambodia for private equity investments. Want to diversify? Maybe it’s time to look in Cambodia.

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Inspired by Worldmapper, Fedex and its ad agency, BBDO, have created a “Changing World” site with a collection of cartograms driven by data from the Economist Intelligence Unit and content from the EIU and The Economist. (Full disclosure: I’ve been involved in the project since last summer.)

This blobby cartogram showing the 2008 changes in GDP by country is a bit dated, but it’s still striking how much Africa dominates the world in terms of explosive growth. Talk about regional differences: The entire North American continent pales before Burkina Faso, Equatorial Guinea or mighty Djibouti (not to mention zombie economies like Cuba and North Korea, if the economic data can be believed). Or course, there’s growth and there’s growth: Djibouti’s economy is roughly the size of the GDP of Fort Lee, New Jersey, while Equatorial Guinea is more like Roanoke or Green Bay. In dollar terms, Djibouti’s 5.8% growth rate is roughly the equivalent of, say, a new shopping mall opening in Fort Lee – monster growth for a tiny country but a mere blip for an economy the size of New Jersey’s.

Nevertheless, many of the OECD countries would have been lucky to get even that. Look at the map and see if you can find Japan. See if you can find Ireland. It’s easier to find Sri Lanka. Good thing we have a long way to fall, because we’re definitely headed in the wrong direction.

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It’s not a problem when Survivor contestants are narcissists. Nobody’s going to live or die because Richard Hatch has an inflated view of himself. Actors are narcissists; reality-show participants, even more so.

Narcissistic CEOs are different. They surround themselves with sycophants. They spurn tell-it-like-it-is advisers. Instead of trying for incremental improvements, they make dramatic decisions in line with their showboat personas.

And their actions have consequences. Not only for their direct reports, but for shareholders, employees and others in their extended orbits. In the case of narcissists like Bernie Madoff, their behavior can shake up industries and governments, destroy trust within communities and drive followers to suicide.

Let’s create the CEO Narcissism Index. We’ll go on Edgar and troll through the annual reports. How big is the CEO’s footprint? How many times is his name mentioned? How many photos and how big are they? Take it even farther: Count the number of amendments to CEO employment agreements – as documented over the years by Michelle Leder over at footnoted.org – and add up the perks that the CEO has accumulated for himself.  Weigh, mix and try to validate against CEOs who we KNOW are narcissists (Steve Jobs, anyone?). Then, of course, we test it against the stock price.

Yet another project for which there aren’t enough hours in the day.

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Lots of New Year’s resolutions posts and tweets out there. As a serial resolver, I looked over the landscape and compiled this long, redundant and often contradictory list of ways to keep your resolutions. Gretchen Rubin‘s are the most thoughtful, and with her book, charts, groups and site, she’s also probably more responsible for more resolutions being kept than anyone out there.

1. Don’t bite off more than you can chew.
2. One step at a time.
3. Ask yourself: Am I being overoptimistic?
4. Can it be measured?
5. Schedule multiple resolutions over time.
7. Make changes that feel good.
8. Allow for slipping and sliding.
9. Consider 17 days in a row a success.
10. Write it down.
11. Go public. Tell others.
12. Ask: “What would make me happier?” More of something good, less of something bad.
13. Keep it concrete, not abstract.
14. Follow the one-minute rule.
15. Ask: “Am I starting small enough?” Underestimate, don’t overestimate.
16. What is the smallest action you can take in the direction of the resolution?
17. Frame your resolution in concrete actions.
18. Keep a chart
19. Carry resolutions with you. Review. Score. Constantly.
20. Join a group.
21. Work towards something big.
22. Think small. Look close to home for ways to improve and grow.
23. Ask for help.
24. Consider making only pleasant resolutions.
25. Consider giving up a resolution.
26. Keep the resolution every day. It’s easier to do something daily than every few days.
27. Set a deadline, but don’t give up if something interferes with your deadline.
28. Don’t let the perfect be the enemy of the good. Clean your desk, not the whole house.
29. Keep the list short.
30. If you falter, let it go and try again,
31. Stay humble. Overestimating resolve leads to failure.
32. Remove temptations.
33. Post reminders everywhere.
34. Reward yourself for successes.
35. Recalibrate resolutions when conditions change.
36. Choose resolutions carefully (for instance, those with the greatest impact).
37. Create bite-sized portions.
38. Create a time-frame and use it to plot progress and measure success.
39. Take notes.
40. Take responsibility. Put yourself in charge.
41. Keep goals Specific, Measurable, Achievable, Realistic and Time based (SMART).
42. Remind yourself of the benefits of achieving your goals.
43. Try just one resolution.
44. Try a new resolution rather than revisiting an old, failed resolution.
45. Make the resolution a reflection of you, not the crowd.

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When one guy takes up three seats because he can’t keep his legs together, it’s your duty to push back. If he’s obese, that’s one thing – he probably feels like a misfit, and it’s not as though he can drop 50 pounds on the spot. But when he’s small or skinny, that’s different. One man, one seat. That’s the rule. And you’re the enforcer.

On Thursday I put this belief to the test when sitting next to an elderly man at the opening of a play. The theater was filling up, and his left leg was splayed all over the last seat in the row. I asked if the seat was taken, sat down, put my leg up against his and kept it there in a polite but insistent way. There was a silent struggle for a minute or two until he withdrew to his own territory.  He intruded a couple of times during the first act, but I stood my ground. After the intermission my wife and I moved to better seats when the folks in front of us left.

After the play I mentioned this epic struggle to my wife. And she said, “Did you notice that you were sitting next to Ian McKellen?I looked up and there he was, coming out of the theater. Gandolf. Magneto. The new Number Two. I felt a chill. Even without his staff, he could have summoned lightning with a single thought.  Thank God it wasn’t Saruman or Professor Xavier who was trying to take up two seats. I wouldn’t be here to write this.

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He’s Walter Zable, a former player for the New York Giants, and you can see him way out on the right tail of the gorgeous normal distribution below.  Along the horizontal axis are the ages of all of the Russell 3,000 CEOs – youngest is 31, oldest 94 – and the vertical axis shows how many CEOs there are for each age.

Walter’s an anomaly in ways other than his age. As you might guess, he started the company that he runs (Cubic Corp), still owns a big piece of it, and won’t let go until the keys to the executive washroom are pried from his cold dead hands.

Meanwhile, the youngest CEO, 31-year-old Iranian-born Sardar Biglari, is a turnaround investor who started his first company at 14 for $15,000 and sold it at 22 for over $1m. Biglari looks for strong brands that have lost their way (indolent boards, inefficient operations and a general lack of direction).  His first project was Friendly’s Ice Cream, which worked out well; now he’s running Steak n’ Shake, a magnet for the folks you see on the “People of Wal-Mart” site.

It’s hard not to like a CEO who, a la Warren Buffet, quotes from John Maynard Keynes, Isaiah Berlin and Charles Darwin in his most recent letter to shareholders. And Sadar is like Warren in another way: He has used the cashflow from Steak ‘n Shake to buy a 10% stake in a much larger firm, Fremont Michigain Insurance.

The median age of CEOs is 59. Thank goodness I still have a few years left to climb through the last 10 layers of management.

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How is today different from all other days? This morning the scale was 30 pounds below what it was in August. Nobody has noticed that I look like a stalk of bamboo. And whether the weight will stay off, I don’t know. Still, 30 pounds in 80 days – not bad.

I owe it all to public humiliation. Not that anyone reads this blog. But the act of weighing, tracking and displaying has psychological power. Every few days I input my weight into a Google spreadsheet and update the annotated timeline. When it goes down, the world smiles. When it goes up, imaginary fingers wag. The result has been surprisingly effective.

Until my mid-40s, I didn’t have to work to get skinny. My weight would creep up to 210 or 215 pounds. I’d go out and start running again. Make a token sacrifice like quitting soft drinks. Soon I’d be back to the low 180s again, with the belt a couple of notches tighter.

But that era is over. It became impossible to burn enough calories to offset those Coca-Colas and Dipsy Doodles, and I’m too old (and too heavy) to run even 30 miles a week without getting injured.

Here are the rules that worked for me.

The Good Stuff

1. Breakfast is free. Eat a good one. No Cinnabon, but don’t worry about oatmeal, bacon, eggs and buttered toast.
2. There’s nothing wrong with half-and-half in your coffee. Or heavy cream, for that matter.
3. Know what’s nice before bed? A big spoon of peanut butter.

Keeping Track

1. Weigh yourself every day at the same time.  (Cheating is OK. Just be consistent about it.)
2. Make a chart. Look at it. Obsessively.
3. If you weigh less than the day before, no need to do anything. You’re golden.
4. If you weigh more, keep that thought in the back of your mind during the day. Be careful about portions. Walk home from work. Spend more time hungry than full.

Portions

1. Eat a little, see how you feel, then eat a little more. No seconds without a wait.
2. Eat until you’re 80% full.  Don’t eat again until you’re 80% empty.

Eating and Avoiding

1. Eat: Oatmeal, apples, salads, diet soda, rice, any kind of meat, poultry or fish.
2. Avoid: Potatoes, sodas, desserts, anything with Bisquick.

Living in Manhattan requires a good bit of walking. I took a two-day bike trip, a few long walks and short runs, and had to fast for a day before a colonoscopy. But that’s pretty much it.  Once I got momentum, it wasn’t that hard.

One habit I had to break: scarfing down cereal and peanut-butter-and-jelly sandwiches late at night. The solution: that heaping tablespoon of peanut butter before bedtime.

But the key to the change was measuring, displaying and reacting. I could have used a spreadsheet, but the visualization gadget was more fun. And the results weren’t bad at all.

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When I was in junior high school my father got very excited about buying this house, which was on the market for about $30,000. It was part of the plantation called Elizabeth’s Delight, on the site of a land grant dating from the late 1600s (though the house was built around 1850, replacing a log structure dating from the Revolutionary War). The house is about a hundred feet inside the Montgomery County line, but the landholdings extended in all directions to take in parts of DC, the University of Maryland, Takoma Park and Silver Spring.

The house is now divided into apartments, much of the yard is a parking lot, all around are overcrowded duplexes packed with illegal immigrants, and the nearby streets are full of MS-13 gang activity. It’s a weird feeling to walk along Ruatan Street and see a plantation house with a chapel, once surrounded by tobacco fields, now part of a vast suburban slum.

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Look for the outliers – high growth, low risk.

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I see on Google Analytics that my bounce rate is about 80%, which means that 80% of the people who arrive on this page immediately leave. I think I know the reason: They’ve all come to see the only post that has ever gotten much traffic, Barack Obama Embellishes His Resume.  If that’s what you’re here for, click on the link and time-travel back to 2005, when the post first appeared.  Or you can just skip the post and drop your hate mail directly into the comments.

If you look at the pingbacks, you’ll see that the post has been picked up by Obama-haters. That’s certainly not what I intended. If I had worked with John McCain, I would have been happy to talk about his embellishments. I’m sure every politician has them. And whether you call him “the one” or “that one”, it’s a fact that Barack is a politician (albeit a good one) – something that we’ll all understand when inflated expectations deflate, a year or so down the road.

Where I live In New York City, Barack Obama will win close to 100% of the vote, including the votes of my wife and all of my neighbors, co-workers and friends.  He may win my vote, too.  The Republicans certainly don’t deserve to be re-elected, and Obama has a brain trust that includes many people I admire.  Perhaps it’s not delusional to think that he’ll govern from someplace closer to the center. We’ll see. Until that moment in the election booth, I remain undecided.

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Psychologists and political scientists tell us that extremists are happier than moderates. Maybe certainty makes people happy, while a life of questioning brings misery. But what about the certainty that the world is headed for disaster? Are people with “If you’re not outraged, you’re not paying attention” bumper stickers happier than the rest of us?

I doubt it. How about “If you’re not grateful, you’re not paying attention“?

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