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    The Internet of Things… Connected Weather Station

    Posted by Carl from Chicago on 14th April 2015 (All posts by )

    I have been laid up for a little while and like a good shut in I was shopping on Amazon for things to buy. One item that is always of interest to my parents and relatives is the weather. A while ago I bought them an Ambient Device weather forecaster which they still use today and they find very useful (sadly, that company went out of business).

    I recently spent about $150 to buy a Netatmo indoor and outdoor temperature / weather station. It is quite fascinating. Here is the indoor module that tracks temperature, sound (in decibels), CO2, humidity, and other elements. When you push the top button it will glow based on the CO2 levels (green is “good”). I plan to hide it behind a couch so you can’t see it. The indoor unit connected to my phone via bluetooth and then I was able to get it to sign on to my wireless network. It took about 5 minutes.

    Here is the outdoor component. This unit measures humidity and temperature and connects to the “base” station above. The outdoor unit is battery powered and all weather so once you put it outside (on our porch) you can ignore it and it will send readings to the base station.

    The really cool part is that you just download an app onto your phone and voila! you can have updates and graphs and charts and see your temperature in and out of your house anytime. They also have alerts so that you can be notified if there are temperature changes (such as below freezing weather outside or interior temperatures that drop enough to freeze your pipes) and also for CO2 alerts and other customizable features. It is all very easy to understand.
    Read the rest of this entry »

    Posted in Tech | 11 Comments »

    25 Stories About Work – It’s All About Cash Flow (Part I, Small Companies)

    Posted by Carl from Chicago on 12th April 2015 (All posts by )

    I was recently on a plane doodling and thought of some funny / interesting stories from 25+ years of working and traveling. So I decided to write them up as short, random chapters of a non-book with the title of this post. Hope you enjoy them and / or find them interesting. Certainly the value will be at least equal to the marginal cost of the book (zero)…

    The USA, early 1990s to mid 2010s

    Recently I saw this little blurb in the NY Times business section which perfectly encapsulates one of the most important lessons I’ve learned in all my years of working – it is all about cash flow.

    The simplest measure of success for a business is bringing in more cash than you pay out and having a positive bank account balance at the end of the month. When you are in charge of a business and attempting to make your payroll these sorts of concerns should always be “top of mind”.

    Cash Flows in a Smaller Firm

    When we started our consulting firm you had to put up enough capital to pay salaries for a while (we took a small “draw” to keep us afloat, not our former total compensation) until we were able to bring in cash from customers. However, this is a longer process than you might imagine if you weren’t educated in the realities of all the crucial steps in the chain necessary to get paid. Since we were accountants and finance people we went into this with “eyes wide open” but I can only imagine the types of trouble that creative types meet up with when facing this same conundrum.

    Thus our sequence of cash flows at a high level when starting up a consulting firm looked like this:

    – Additions – capital contributions from partners. Based on the equity you wanted in the final firm, you needed to put in capital (that maybe you’d never receive back) to start up the firm
    – Additions – loans. We didn’t take out loans but we could have. Banks generally never loan you money unless you have collateral and we didn’t so it would have been credit card debt at the time
    – Reductions – office space and rent. We needed to start somewhere. Initially we just used a room in our boss’s house, which worked out fine, and later we rented a space near a bowling alley. Note that everyone you are renting from eyes startups with a rueful glance and you can’t expect to get much in the way of credit because they don’t want to end up holding the bag
    – Reductions – insurance, legal fees, taxes, office staff, computers. All the ephemera of an office needed to be purchased but we did it second hand. We also used our own skills rather than hiring third parties whenever possible (almost all of the time)
    – Reductions – payments to core staff. We used “draws” which were minimal amounts to cover life expenses and in a way were payments in advance of what you’d earn, not like a salary that you receive regardless of the end state of the enterprise and your personal contribution. For office staff we picked up later we needed to pay them a normal salary

    All of this happened before we even met a potential customer. Then we needed to fly out and meet customers (we already had a lot of connections; much of our early success came from bringing on existing clients from former consulting firms), convince them to sign us up, agree on a price and contract terms, and then begin doing the work.
    Read the rest of this entry »

    Posted in 25 Stories About Work | 12 Comments »

    25 Stories About Work – New Technology and Productivity

    Posted by Carl from Chicago on 10th April 2015 (All posts by )

    I was recently on a plane doodling and thought of some funny / interesting stories from 25+ years of working and traveling. So I decided to write them up as short, random chapters of a non-book with the title of this post. Hope you enjoy them and / or find them interesting. Certainly the value will be at least equal to the marginal cost of the book (zero)…

    The USA, early 1990s to mid 2010s

    Oftentimes I can remember clearly the first time I was exposed to new technology. Unfortunately these stories don’t have “light bulbs” going off in my head like in a cartoon; it usually involves me being befuddled and trying to determine why this technology is innovative or even useful.

    In the early to mid 1990s I was at a client in Reno, Nevada when the manager on our engagement showed me their “calendar” application. This application let you set up meetings with other employees, or show if you were going to be out of office or unavailable. The interface was very simple (like a mainframe “green screen”) and I kind of stared at it for a while. Why can’t you just call around and set up a meeting at a particular time, I wondered aloud. However, we were consultants, so while we worked all day (and into the night), the client’s staff were forced to attend meetings during most waking hours. It still seemed like overkill to me to have a giant system just to set up meetings, however. Obviously history has proven me wrong and calendar applications are the “killer app” of the modern productivity suite.

    At around that same time I was at a client in Cincinnati, Ohio when another consultant showed me a PDF document format. He explained (very patiently, in hindsight) that if you created a PDF and then had a viewer application it would work on every kind of computer, whether or not they had the software that you created the document in. I was confused. Didn’t everyone have Microsoft office? Couldn’t they just open it in word? Once again I missed the big picture.

    Email was around for a while but it didn’t catch on fire in our profession (consulting). A lot of this was due to the fact that we spent our days at the client site and the client (where we did most of our work) was on a different email system from our consulting company’s email system. Thus the most useful email wasn’t your firm email, it was the client’s email, because this would let you know when meetings were occurring and get important data from the client’s directly (although we usually used shared drives). I do remember my sense of accomplishments when I sent my first marketing email to a known client in the mid to late 1990s… I was waiting like that kid in “A Christmas Story” who wanted his secret decoder package from Ovaltine for a response to my meticulously crafted email… and of course it never came because I was late to the party and the potential customer had already gotten used to be inundated with marketing email (and ignored it).
    Read the rest of this entry »

    Posted in 25 Stories About Work, Tech | 6 Comments »

    25 Stories About Work – When It All Goes Wrong

    Posted by Carl from Chicago on 4th April 2015 (All posts by )

    I was recently on a plane doodling and thought of some funny / interesting stories from 25+ years of working and traveling. So I decided to write them up as short, random chapters of a non-book with the title of this post. Hope you enjoy them and / or find them interesting. Certainly the value will be at least equal to the marginal cost of the book (zero)…

    The USA, early 1990s to early 2000s

    During the course of my career I have been involved in many cases of companies dying, bankruptcy, and other negative corporate events. At times I was there until the bitter end; often I left before the final events occurred but could see evidence of encroaching doom. When you are first starting off as an employee with little experience these signs are harder to understand; as a veteran I can now unfortunately pick them up right away.

    One of my first memories as a public accountant was the day that they fired all the administrative assistants. Not the ones for the executives – the ones that helped the new staff get orientated. These women (they were all women it was the early 1990s) ran each of the floors and it was the first time I’d seen anyone get fired en masse. This was before email I think they left us all some sort of strange voice mail or something (voice mail was big back then). It seemed very sad at the time.

    In the early 1990s there was a lot of tension in the public accounting firms between audit / tax vs. the consulting side. I was a staff person and was invited to one of the partner meetings (because I played bass guitar but that is a different story) and I could see the vitriol between the two groups. When the audit partners’ asked “how could they help” the consultants the answer was to “get out of our way”. This was not the happy story that I was being fed as a staff person, for certain.

    Later that accounting firm went belly up but I was long gone by then. We started up a small consulting firm and it was fantastic for a while. However, it all started to fall apart as key founding members left after a dispute with the main owners over compensation and eventually I was one of those that departed. The departure was even more difficult since many of my friends and family members were also involved with that firm. Unlike most of the other companies in this piece, however, that firm thrives until this day. So we can conclude that I was not indispensable…

    At various points during my career I had a “choice” between two firms. Often I chose the wrong one. At the time I didn’t realize that right before you go public, you shave out all of your costs for a quarter or two and you accelerate all the revenue into the current period (to the extent that this is possible and legal, of course) in order to make your company look great for the IPO process. Living in a company that is doing this is very painful and I left but that was before the company became one of the first successful IPOs of the era (a completely unexpected and unprecedented outcome) and I missed out on an opportunity for those founder stock options.

    As the dot.com era came to a close there was a giant shake-out in the Internet and Consulting sector. I worked with three companies in succession that eventually went bankrupt. The first of them had an IPO (in the era of voice mail plus a bit of email) and I noted that it was odd that most of the IPO funds raised went to pay out one of the primary investors (they took the cash, we retained the stock). In hindsight of course this was another ominous sign.

    Read the rest of this entry »

    Posted in 25 Stories About Work, Business, Chicagoania | 2 Comments »

    NBA Bulls at Bucks Courtside

    Posted by Carl from Chicago on 4th April 2015 (All posts by )

    Recently Dan and I went to Milwaukee to attend a Milwaukee Bucks game against the Chicago Bulls. I decided to splurge for court side seats (the Jack Nicholson type seats) because watching the game is totally different down there. We were right behind the Bulls bench as you can see (there is coach Thibs). I also love this picture because I just happened to snap it as they had entertainment right behind the coach and you can see the guy overhead who jumped off a trampoline and dunks a basketball. Also note the security guy on the right giving me the stink eye.

    Watching the game from that low is a completely different experience. No matter what the score is, the game is interesting. The players move very quickly and it is hard to understand the plays as they develop (unlike when you look from overhead or up in the cheap seats where I would normally reside). While sometimes the fouls seem fake other times they take bona-fide hard fouls; when you are six and a half feet tall and jumping way over the rim and you end up getting thrown down on the court on your back, that’s a long way to fall. The way the players shoot is also very interesting – when they do jump shots they are almost eye level with the rim and as they do layups and dunks in warmups it often seems like they are barely jumping at all.

    Half the fans at the game were from Chicago. They ought to fold that franchise in Milwaukee or find something else to bring in fans; the upper deck was mostly empty vs. Chicago and you’d have to think this is one of their bigger draw games of the year. But there is no way that I am smart enough to explain sports economics…

    Cross posted at LITGM

    Posted in Chicagoania, Sports | 1 Comment »

    25 Stories About Work – Days Gone By

    Posted by Carl from Chicago on 31st March 2015 (All posts by )

    I was recently on a plane doodling and thought of some funny / interesting stories from 25+ years of working and traveling. So I decided to write them up as short, random chapters of a non-book with the title of this post. Hope you enjoy them and / or find them interesting. Certainly the value will be at least equal to the marginal cost of the book (zero)…

    The USA, early 1990s to early 2000s

    For over ten years I traveled mostly five days a week.  Back then we flew out on Sunday night so that we could be on site Monday morning at 8am, and we left the job site on Friday after 5pm which meant that typically I’d get home in the wee hours of the morning on Friday, since often we had to drive for hours to get to the airport before we could even fly home.

    Those years are a blur.  I joined the work force during a recession in 1990 and everyone was happy to have a job; no one was complaining.  Right as the dot-com boom ended in about 2001 we had changed our ways and most of the team was flying out Monday morning and leaving on Thursday and “worked from home” on Fridays.  This was viewed as “the good life”.

    However, for most of those years, life was a blur of travel, packing, unpacking, and working.  It would likely be impossible to motivate staff to work and travel like that nowadays; back then no one thought anything of it and we really didn’t even complain as people got divorced and their personal lives crumbled into dust.

    Going into the workplace in 1990 there were three things that you could count on:

    1. You were going to work all the time, very hard
    2. You were likely going to work for a bad boss who would drive you with a whip
    3. Often times everyone would go out and have some drinks and a good time
    With these expectations, it was hard to be disappointed.  We worked all the time and then we went out for dinner and drinks and then got up the next day and did it over and over again.  From our perspective, this was the way it always had been and the way that it always would be.  These sorts of expectations are built into the name of our blog “Life in the Great Midwest” and it sums up the world view and baseline of our careers.

    Certainly people washed out from this insane grind.  It was mostly a male-dominated profession, although there were a few women consultants and auditors who mostly found roles where they were able to minimize their travel.  This was a zero sum game, however – since they took the roles that didn’t involve much traveling, often you had to travel that much more.  Someone had to service all of the clients and many of them were located in cities with few local staff, and those local staff often didn’t have the skills that the client needed.  Thus the same road warriors showed up and did the work, and every year a few more of them fell off the team due to family reasons (or they just “wised up”) but were always replaced by new fresh faced kids eager to earn what seemed to be top dollar or a wizened ex-corporate type needing to make more money.  The kids often worked out but the older ones didn’t; it was difficult to adjust to a life of heavy travel midway through your career.

    The consulting firms went public – the biggest one was Accenture, but all the big names (with a few exceptions like McKinsey and BCG) eventually monetized and to some extent it was like the Silicon Valley of that era.  Many got rich and I had the opportunity to participate in a couple of the smaller ones but ended up taking the choice that didn’t lead to my own riches; but that’s my own (bad) luck.

    Consulting and auditing pale in comparison to investment banking; I never have seen people that put in more hours than investment bankers.  I have no idea how they do it; a couple of years ago I went out for dinner and a couple drinks with a good friend of mine who is an investment banker in his 40s, and afterwards he went back to his hotel room and worked for a few more hours on a “pitch deck” for a client meeting the next day.  Whether it is practical work or not isn’t for me to judge; but as a long term “road warrior” I can tip my hat to them as being completely off their rocker in terms of how much time they are willing to invest in a client.

    Perhaps the new “road warriors” are the Silicon Valley start up people.  I have been at a few of their companies and I can see the drive and stamina oozing from their pores as they stare at their computer screens, working to make their riches.  They are a bunch of young men as I was once right out of college as an auditor and they are hurling themselves into their careers and trying to make the immense riches of stock options and to be part of something great.  I’m sure that there are many women in there but the vast majority of the staff are men and they are attacking these opportunities like we used to as consultants.

    Cross posted at LITGM

    Posted in 25 Stories About Work, Business | 12 Comments »

    Technology and Mass Transit

    Posted by Carl from Chicago on 29th March 2015 (All posts by )

    I have not seen a formal study of the impact of technology on mass transit but I believe that it has made it profoundly more valuable and useful. And I accidentally participated in an experiment that partially proved this statement in the inverse.

    In Chicago they have a CTA “bus tracker” that tells you when a particular bus will arrive at your stop. Or you can program it so that you can see all the buses from various routes that are coming past your stop (this is useful because in Chicago you can often take many different routes that go to the same place over shorter distances). It works on your phone and many of the newer stops have the bus tracker programmed into the canopy so you don’t even need to look it up on your phone.

    Sadly enough most days rather than looking up the street for buses I check the bus tracker. I can usually get from my condo down the elevator and past the lobby in 2-3 minutes so 4 minutes is the cut off time. One morning I looked and I thought I had missed the bus entirely because the next one was ten minutes away on my phone. However, instead of just trudging off, I looked up, and a bus was right there!

    I got on the bus and it was completely empty! Not a soul was on the bus. While it was a nice day, usually this bus line was crowded during rush hour, often so crowded that I don’t even bother getting on because I have to stand right in the front past the yellow line where you aren’t supposed to stand and then get on and off with every stop (to let people on and off) until the crowd thins out.

    The driver was totally bewildered too. I sat with her up front and I guess they had changed the bus she was driving to this route (from another route) and they hadn’t updated bus tracker. I said that because she didn’t show up on my bus tracker. Thus no one was on the bus – because if it wasn’t on bus tracker, it didn’t exist.

    I am sure that the River North area is one of the most technologically sophisticated areas of the city and probably in other parts of town people just wait at the bus stop for the bus to show up. But in River North – everyone has been trained to use bus tracker and rely on it and they wouldn’t contemplate a bus existing that wasn’t on bus tracker.

    For me, the bus tracker has made the Chicago bus go from something marginally useful to a highly useful way to get around town. When I lived in Bucktown we used to wait for the #50 Damen bus and 3 of 4 times we’d give up and grab a cab after waiting 15-20 minutes and the 4th time 2-3 buses would show up in a big bunch full of angry riders. If you took the bus you weren’t happy about it; it was an unreliable and slow way to get around.

    However, bus tracker is very reliable and now you have visibility of what is coming and you can plan ahead so that you are whiling away your day standing outside in the rain or snow waiting in vain for a bus that seems like it will never come. I don’t have statistics but I would bet that bus tracker increases utilization of assets for the CTA and has become a known and reliable method of transportation for those that give it a chance.

    Cross posted at LITGM

    Posted in Business, Chicagoania, Customer Service, Tech, Transportation | 24 Comments »

    A Brave Author

    Posted by Carl from Chicago on 29th March 2015 (All posts by )

    I remember reading an article a long time ago about advice that an experienced journalist gave a new writer in the newsroom. He said to “never write anything bad about cats” because the paper would be bombarded with letters from irate cat owners in response.

    I thought of this as I read a NYT article titled “Pregnant, Obese and in Danger” by Claire Putnam (a doctor at a Kaiser Permanente hospital). From the article:

    One recent night on my delivery shift, 8 out of 10 of my laboring patients were too heavy, with 2 weighing over 300 pounds… obese pregnant patients are more likely to have elevated blood pressure, gestational diabetes and babies with birth complications. The are more likely to need cesareans. And the are more likely to have serious complications from the surgery, such as infections, hernias, or life-threatening bleeding.

    An extended family member of mine was a medical EMT and he mentioned how many of his co-workers were hurt while moving and assisting the obese and morbidly obese. This doctor agrees.

    In the last year alone, three of the doctors I work with have been significantly injured while treating severely obese women. One even dislocated his shoulder while performing a cesarean on a 400-pound patient.

    This author is incredibly brave because I can only imagine the vitriol that this sort of analysis will generate in the comments and on social media. They will say that you are making fun of women for whom their weight is out of their control! You are contributing to negative body image in the media!

    The story of the negative impact on health care workers of the obese and the extra costs on society should be factually driven and discussed openly. In the same way that the addicts in Drugs, Inc pose huge challenges on the system through their lifestyle choices (which are universally panned, unlike the obese), these sorts of behaviors should be questioned as well.

    Cross posted at LITGM

    Posted in Medicine | 12 Comments »

    “Drugs, Inc.” – the Most Important Show on Television

    Posted by Carl from Chicago on 21st March 2015 (All posts by )

    “Drugs, Inc.” is a television show on the National Geographic Channel that focuses on the business of drugs, from producers to traffickers to users to police. I can’t recommend this show enough and I watch every episode that comes up on my DVR.

    Welcome to the $300 billion industry of Drugs, Inc., where traffickers pocket huge profits, addicts become chained in a vicious cycle and law enforces wage war across diverse battlefields – farmers’ fields, shady labs, urban street corners and suburban schools. How does this business work? Can it be stopped or should it be regulated? What impact does it have on those it touches?

    Drugs Inc somehow gets interviews with drug dealers and drug traffickers. They are always wearing a mask of some sort and often their voices are garbled electronically. It isn’t clear to me why they agree to be on TV or why the authorities don’t follow up on the leads from the program or subpoena their records. I can’t comment on the authenticity but it certainly seems real, especially the interviews with the users or “fiends” as they are described by the dealers on the series.

    The first thing that the show will do for you is change how you look at homeless people. All of the users on the show are either 1) drug dealers themselves likely far down the chain in order to support their habit 2) panhandlers or some sort of schemer / prostitute. There occasionally are recreational users or those with jobs but since they typically interview hard-core drug users many of those individuals can’t do a regular 9 to 5 job.

    The panhandlers are a relentless lot. They wake up in various places, sometimes in their cars, sometimes in a tent, sometimes in an abandoned building, or elsewhere. When they get up, it is time to make some money in order to buy some drugs. They always know exactly what they are doing and have a target amount of money to “earn” in order to score what they need to stave off dope sickness.

    Read the rest of this entry »

    Posted in Business, Chicagoania, Economics & Finance, Film, The Press | 19 Comments »

    Sunset in Chicago

    Posted by Carl from Chicago on 21st March 2015 (All posts by )

    Recently I visited my friend to see their new baby and they had fantastic views of the city looking west and north. Not a bad photo from my iPhone 6… my iPhone 5 and 4 cameras were terrible.






    Cross posted at LITGM

    Posted in Chicagoania, Photos | 7 Comments »

    St. Patrick’s Day and Journalism

    Posted by Carl from Chicago on 17th March 2015 (All posts by )

    I’m going to combine two posts here that don’t sound like they’d go well together – “Day Drinking” and lazy journalism. There was an article by Stanley Bing (the pseudonym of an executive who writes for Fortune magazine) who happens to 1) be an actual business executive 2) writes effectively (and hilariously). While I can’t find the exact post I am paraphrasing below:

    Whenever I see anything written about my company in the popular press, it is generally incorrect. Thus I must conclude that most of what I see written about other companies in the press isn’t right, either.

    Business Insider is a great resource that I read on my iPhone most days when I have a few minutes to kill. They have some original content and re-post from other sources. Recently I read about the “five biggest” St. Patricks’ day celebrations (parties) which was a typical “puff piece” article for them – you can see it here.

    The only problem with this article is… that it is lazy and wrong. Our own correspondent Dan happened to be on the ground in Las Vegas for St. Patrick’s day last year and he said it was “Chicago on an inter-galactic scale” which I believe since Dan has been at a ton of drinking events through being a sports fan forever. I am having trouble verifying this on the ol’ intertubes but it is the kind of event where “hey, the Chicago River is green, we can trot this story out every year, there we are done” but the massive scale of Las Vegas means that if you have a drinking event they can just pour out of the hotels and onto the streets (that they shut down) and go crazy and drink outdoors. Probably the only way to officially verify this is to send Art Mann out to Las Vegas as the ultimate decider…

    Onto Chicago for St. Patrick’s day… we had a beautiful day and so everyone was out in force. People were lining up per usual in the wee hours (many bars open at 6am) for a long day of drinking here in River North.

    I loved this outfit… a drunk gumby up at Paris Club!

    Read the rest of this entry »

    Posted in Chicagoania, Humor | 7 Comments »

    The Game “Doom” and Its Historical Importance

    Posted by Carl from Chicago on 14th March 2015 (All posts by )

    The game “Doom” came out for PCs in the early 1990s. Playing that game was a formative experience for me and its contribution to computers and gaming is very under-rated.

    I recently picked up a copy of the game on my iPad. I immediately was re-immersed in the game, remembering the maps, the monsters, the tactics, and sweating and jerking in my chair as I tried to get through the levels alive.

    Doom was created by Id Software, and it was one of the most successful “first person” shooters. To some extent they invented the genre; their first game was Castle Wolfenstein which was a remake (far superior) of a top-down view game that I used to play on my old Apple II. That (ancient) game was famous for having the characters’ talk – I remember that they would yell “Schweindhund” when you shot the German guards.

    Read the rest of this entry »

    Posted in Personal Narrative, Tech | 7 Comments »

    We’re Getting Closer

    Posted by Carl from Chicago on 7th March 2015 (All posts by )

    In this post I described how Illinois could “fix itself” financially… however my more realistic post here discusses how Illinois is tilted precariously on the edge of a crisis and I believe that one major issue impacting a large entity could kick off the entire process of “going Detroit” and “paging Kevin Orr”.

    Recently the City of Chicago, facing ratings downgrades, almost triggered off some swaps payments that would come due if the credit rating was to fall down to a certain low level. Per the article:

    Chicago drew closer to a fiscal free fall on Friday with a rating downgrade from Moody’s Investors Service that could trigger the immediate termination of four interest-rate swap agreements, costing the city about $58 million and raising the prospect of more broken swaps contracts.

    The city was able to re-negotiate one of the swap agreements and was in talks with Wells Fargo about the other swaps agreement per this article. Apparently the date of reckoning has been pushed out a little further.

    The Chicago Public Schools (CPS) debt is now just one grade above “junk” status per this article.

    In making the downgrade, Moody’s cited the school district’s reliance on reserve funds for “operating expenditures, particularly pension contributions, which will steadily increase in the coming years.”Moody’s also maintained its “negative outlook” on the district’s debt, again citing the rising pension costs. From 2013 to 2016, annual retirement costs will increase to $688 million from $197 million, Moody’s stated in its rating explanation.

    Note that the budget that Rauner proposed for the state of Illinois had additional cuts for state and local government, at a time when each of them are crying to the state for relief. These cuts are also due to Rauner’s choice to let the state income tax surcharge expire rather than renewing it (as Quinn certainly would have done). Per this article:

    Governor Rauner’s office released a statement Wednesday afternoon, saying: “Governor Rauner had to make some hard decisions to balance a $6 billion budget shortfall caused by years of fiscal neglect and bad practices. The amount of money transferred to local governments has ballooned by more than 40 percent in the last decade and the reduction to local governments proposed in the budget puts Illinois in line with neighboring states. In Governor Rauner’s budget proposal, Chicago’s overall revenues are reduced by less than 2.5 percent. Through the local government task force, Governor Rauner is committed to working with local communities to reduce costs and give them increased flexibility. Additionally, as part of his Turnaround Agenda, the governor proposed empowering local residents with tools to control costs at the local level and get more value for their tax dollars.”

    It will be very interesting to see how this all plays out. Today the various governmental units and branches of our legislature and the governor are circling and eyeing each other to see who blinks first.

    Some day hopefully we can move beyond the “funding” discussion into a real discussion of how we can get our state in fiscal order; by encouraging our government to be more productive, by scaling back our obligations to unions, and by unshackling entrepreneurs in the state to create jobs and companies. No one is talking about that yet… except Rauner.

    Cross posted at LITGM

    Posted in Big Government, Chicagoania | 3 Comments »

    25 Stories About Work – Training and Learning on the Job

    Posted by Carl from Chicago on 7th March 2015 (All posts by )

    I was recently on a plane doodling and thought of some funny / interesting stories from 25+ years of working and traveling. So I decided to write them up as short, random chapters of a non-book with the title of this post. Hope you enjoy them and / or find them interesting. Certainly the value will be at least equal to the marginal cost of the book (zero)…

    The Midwest, early 1990s

    When I started out as an auditor I actually had to attend a 2 week class to learn how to create audit work papers.  This was my first “real” job out of college and I was very motivated to do well.

    Looking back, the “teachers” were mainly auditors with a few years of experience.   This worked out fine because they were still immersed in the details while the top executives had long since forgotten about the details of day to day existence.

    I shared a room on their “campus” with another first year auditor.  I was astonished when he brought two pairs of work shoes (wingtips) – he said if you switched every day, your shoes lasted longer.  I never had considered something like that.

    The training was very stressful and I had “dreams” about how to create work papers.  Many of the other students had been interns previously so this was old hat to them but for me it was difficult because it was meticulous and seemingly pointless work.

    At various points we went into formal classes on specific industries; I was in the regulated practice so I attended a one week course on how utilities set their rates and recover their costs. The class was good and I will never forget when I walked up to the guy teaching it afterwards and introduced myself and said my name and he said

    “Who gives a f&ck about who you are?”

    It was a good lesson because from his perspective (and the client’s perspective) we were just low level auditors there to do a job and we should put our heads down, fill out the paperwork, go through the same tests as last year, and get the heck out (and on to the next job).

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    Posted in 25 Stories About Work | 5 Comments »

    A Fantastic Article on Greece

    Posted by Carl from Chicago on 1st March 2015 (All posts by )

    At Business Insider (an app I read every day) I found this great and interesting take on the events in Greece.

    Basically the article says that

    1. The Greeks don’t pay taxes (tax evasion is chronically high)
    2. The Greeks don’t keep their money within Greece (they move it to havens both to protect it from taxation and to earn higher returns)
    3. The Greeks don’t invest in their own governmental debt (it is Euro-zone and international entities)

    The article compares Greece with Japan – while Japan has much higher levels of debt, the Japanese debt is funded by Japanese individuals, companies and government entities and they have only 5% of their debt in the hands of outsiders.

    I never thought about the issues in this manner but it makes sense; the Greek people “know” that it will turn out badly if they trust their poorly run and corrupt government and make their own individual decisions about how to hold their money. Why would other countries and investors “invest” in a government that their own people have no faith in (when it comes to “putting your money where your mouth is”, so to speak).

    Posted in Big Government, Europe | 11 Comments »

    25 Stories About Work – The Difficulty of Verifying Cash

    Posted by Carl from Chicago on 25th February 2015 (All posts by )

    I was recently on a plane doodling and thought of some funny / interesting stories from 25+ years of working and traveling. So I decided to write them up as short, random chapters of a non-book with the title of this post. Hope you enjoy them and / or find them interesting. Certainly the value will be at least equal to the marginal cost of the book (zero)…

    The Midwest, early 1990s

    For a long time many governmental entities did not have audits from outside firms.  Beginning in the 1980s and 1990s it became common-place for them to have to open up their books and bring in third party professional audit firms to review their accounts.  If they had not been audited before, we called it a “first time through” audit because the amount of work was exponentially maybe one and a half to two times higher – you had to document the controls, figure out who was who at the client, validate the opening balances, etc…  Typically after the first audit it was much easier because the 2nd year audit just followed the work papers of the prior year auditors (unless you were like me and asked a lot of questions, which is a story for another “25 stories about work” article).

    Recently I thought about my experience when I read this article about the state of New Mexico while reading this article from Bloomberg (a fantastic news source) titled “New Mexico’s $100 Million Accounting Error”. From the article:

    New Mexico can’t balance its checkbook.
    Cash in the state’s bank account is at least $100 million short of what’s recorded in the finance department’s ledger, pushing officials to adjust reserves by that amount, to about $650 million. The blame, the current administration says, lies with the introduction of a new accounting system in 2006.

    While it would seem astonishing that in this day and age, when you have on-line bank statements and immediate access to data for personal accounts, that a governmental entity could be that far off the mark, it wasn’t shocking to me. As a new auditor at this first-time through audit, I was given what was thought to be the simplest of tasks – auditing the cash on the books and reconciling this cash balance to the bank statement.

    How you and I and almost everyone else operates is that you have a checkbook balance and as you make a payment (write a check), you deduct that amount from your available cash and you then know how much money you have left in your account. Since deductions can come in many forms (ATM withdrawals, auto-payments, and manual checks) you need to balance your checkbook periodically to make sure you don’t miss anything, but other than that it isn’t that difficult conceptually. The same process obviously works in reverse for deposits.

    The governmental entity I was auditing in the early 1990s, however, used a totally different philosophy. They assumed that they HAD the cash forever until you proved that the check was cashed by whomever they sent the payment out to. Thus when you started to look at the bank balance “on the books”, it showed hundreds of millions of dollars. When you looked at bank statement (from the bank), you saw a few million dollars. Thus my nearly insane task was to reconcile out the hundreds of millions of dollars in payments that had been made over the years to get from all the cash deposited back to the few million dollars left on hand. To be fair, staff at the governmental entity had taken a “crack” at this task and there was lots of manual records attempting to bridge the gap, but it was still a giant effort. New Mexico apparently uses the same “model” today – per that Bloomberg article:

    Officials commissioned a study on the variances between the state ledger and its bank accounts from fiscal 2007 through February 2013.
    Contractors could match only 2 percent of 160 million entries to a corresponding bank transaction, according to a Jan. 19 memo to lawmakers from Legislative Finance Committee staff.
    Hundreds of thousands of transactions totaling more than $836 million are absent from the system, the study found. It estimated that the state could have from $76 million to $400 million less than its records reflect.
    Clifford said he requested $3.4 million to create processes to properly record cash balances. It will take about two years to achieve a “clean” annual financial report, he said. Should the imbalance exceed $100 million, the gap would come out of reserves, he said.

    I still remember writing up memos attempting to explain this situation to the partner on the engagement. We did not have a lot of time set aside for auditing cash, which is supposed to be simple, and when you bid out these governmental jobs we were already doing the work at a loss (compared to standard billing rates) so there was little or no tolerance for spending extra work at this unprofitable client. Thus I was not only handed an impossible task my own firm was not pleased with my careful documentation of this situation which caused them to have to spend even more time writing memos to provide credence to the numbers so that we could complete the audit.

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    Posted in 25 Stories About Work, Big Government | 21 Comments »

    The Liquidation of Markets

    Posted by Carl from Chicago on 22nd February 2015 (All posts by )

    Every weekend I read Barry Ritholtz’s recommended reading and there are a lot of gems in there. Recently he posted this Credit Suisse graphic about markets at the turn of the 20th Century by market share and compared it with 2014 on the topic of global equity investing.

    US_stocks

    In his article he mentioned the fallacy one might fall into as a UK equity investor in 1899… why bother investing in the USA when the UK market is so much larger? And then this line of thought ends up missing the huge growth in US market share over the next century.

    However, the real issue here isn’t the relative change in market share by the different countries; it is the fact that almost all of these markets were entirely extinguished at one time or another by political, economic or military events that wiped out the investors.

    Read the rest of this entry »

    Posted in Deep Thoughts, Economics & Finance, Investment Journal | 11 Comments »

    25 Stories About Work – “Don’t Run” and Rental Cars

    Posted by Carl from Chicago on 22nd February 2015 (All posts by )

    I was recently on a plane doodling and thought of some funny / interesting stories from 25+ years of working and traveling. So I decided to write them up as short, random chapters of a non-book with the title of this post. Hope you enjoy them and / or find them interesting. Certainly the value will be at least equal to the marginal cost of the book (zero)…

    The Midwest, late 1990s

    Along with air travel, renting a car is part and parcel of the traveling business person’s experience. Over the years I have rented hundreds if not a thousand rental cars at airports across the USA.

    In the earliest days we’d always get a map from the rental car agency and then use it to navigate our way around town. Rental cars are typically near the airport and kind of tucked away often with lousy signage, so you need to know how to find your way out and how to find your way back. Nowadays most of the airports have a “single system” for rental cars where all the buses drop you off at the same facility, but back in the day each one had their own pros and cons.

    The big innovation in rental cars came when Hertz implemented “Neverlost”. Neverlost was the first in-car navigation system that I was aware of and we started getting it in their cars in the mid to late 1990s. Neverlost spoke to you as a woman in an English accent and she was forever telling me to

    Return to the designated route

    In her peeved manner whenever I made a wrong turn or disobeyed her orders. Any sort of new directions took a long time to take effect, and the system was remarkably clunky compared to what’s available on your smartphone, but back then it seemed like an enormous leap forward. One negative element of this is that I started listening to the machine rather than learning the cities I drove through – in particular Memphis is a city I should have explored with a map but instead sat like a zombie and was told what to do by machine.
    Read the rest of this entry »

    Posted in 25 Stories About Work, Tech, Transportation | 9 Comments »

    Our Need For Categorization

    Posted by Carl from Chicago on 14th February 2015 (All posts by )

    I am an enormous fan of “top lists” and almost any sort of categorization. If it is the top 100 guitarists, the greatest bands, a type of warship, or anything else – I like to see it in a category and classification that can explain trends and try to cut through complexity by organizing the data into different groupings.

    Sirius XM radio stations are a great example of categorizations. Recently on a trip with Dan and our friend Brian we had the station stuck on “Hair Nation” – and then we started thinking through the different stations and how Sirius has chosen to allocate music across each of them.

    Some bands are solidly “Hair Nation” – Poison, Warrant, LA Guns, and everything else with spiky hair and all about having a good time. While Dan is more “Hair Nation” – I am more on the “Boneyard” station, which has a big overlap with Hair Nation but a whole host of songs that aren’t on Hair Nation, such as UFO and older heavy metal like Judas Priest.

    We started to have a mock “debate” in a snooty English style of “Dear Sir – I beg to differ with your classification of the band Skid Row. “Monkey Business” is more of a hard Boneyard song while their ballads of course could reside properly within the confines of Hair Nation.”
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    Posted in Humor, Music | 4 Comments »

    The End of An Industry

    Posted by Carl from Chicago on 14th February 2015 (All posts by )

    When Best Buy first moved into town maybe 15-20 years ago I was excited. I could spend hours in there looking at gadgets, components, routers, TV’s, and had thoughts and dreams of tying them all together. Later, Fry’s opened up, and you could walk through the aisles and buy all the pieces to build your own PC out of parts and make it the hottest gaming platform in town.

    Recently I saw this article in Business Insider (I really like that app / site / etc…) about how to upgrade your MacBook pro (the machine I am writing this blog post on). If you have an earlier model (2011-2), you could spend less than $200 to upgrade your RAM and install an SSD drive (one without moving parts, essentially a big memory chip) and pull out your old (mechanical) hard drive and your machine will then give you many more years of excellent Apple service. Apple’s integrated operating system / hardware plan means that my older machine takes advantage of all the new features in every software upgrade of the operating system (now my Mac “rings” when I get an iphone call and that is a bit annoying but who’s complaining) as long as it has the horsepower to keep up.

    So I took the (minor) plunge and went on Amazon and bought an SSD drive and upgraded RAM and it arrive in a couple of days for less than $200. I am going to take this over to my friend Brian’s house since he’s better at this than me and we are going to take apart the machine and put in the new drive and memory.

    The real point of this story, however, is that the implicit industry of “taking apart devices and rebuilding them” that existed on the consumer side for the last 30 or so years (that I have been part of, at least) is dying. You can’t take apart newer Apple machines and upgrade them. While you can theoretically “jailbreak” your iPhone, fewer and fewer people I know even think of that and instead they are part of the world that views them as integrated devices that you can either use, take to a tech, or replace.
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    Posted in Economics & Finance | 11 Comments »

    The Rise of the Dollar

    Posted by Carl from Chicago on 10th February 2015 (All posts by )

    When I was growing up as a kid I remember they had TV commercials against Jimmy Carter explaining how the dollar declined vs. other currencies over the decades. In the late 1980s the Japanese Yen soared in value until their market crashed in 1989. The Euro was originally near parity with the dollar, then fell to 70 cents on the dollar (I happened to be in Europe at the time, it was great), then rose to over $1.30 against the dollar.

    In general if you keep your portfolio all in US assets you are essentially “100% long” against the dollar. A few years ago the dollar effectively fell almost 40% vs. many of the world’s major currencies – this is the time when the Canadian and Australian dollar almost reached parity with the US dollar. For US citizens who traveled frequently across the border into Canada, it seemed strange to think of the Loonie as being just the same as a US dollar, since for years it was worth substantially less. Thus if your portfolio was all in US dollar denominated assets, your value fell 40% that year vs. the worlds’s currencies, even though you couldn’t “feel” it unless you traveled abroad or tried to buy imported goods.

    Recently, however, this has all turned around. The dollar is soaring vs. most of the world’s currencies, which is good news for travelers and makes imports cheaper. However, those who own foreign stocks are looking at losses regardless of how the underlying stock performs (often many of the underlying foreign businesses IMPROVE when the US dollar rises; for instance Indian outsourcing firms who are paid in US dollars find that this money stretches further when paying their Indian based staff in rupees), just because of the rising dollar.

    Rise_of_dollar

    Read the rest of this entry »

    Posted in Economics & Finance | 16 Comments »

    How To Fix the State of Illinois

    Posted by Carl from Chicago on 19th January 2015 (All posts by )

    In a previous post I discussed the high probability of there being some sort of major fiscal calamity in Illinois in the next two years. Here I propose how to solve the issues in the state. I realize that the chance of any or all of these solutions to be put into place is near zero without unthinkable changes, but in fact they are all obvious and will likely be part of the ultimate solution.

    Consolidate Governmental Entities – Illinois has over 8400 governmental entities, the highest in the USA. These entities need to be drastically curtailed and likely should number in the hundreds, and each should have professional management, strict caps on borrowing capabilities, and an inability to sign up for long term unfunded obligations (pensions, retiree health, etc…) without stringent oversight.

    Eliminate Pensions and Defined Benefit Plans and Move to Defined Contribution Plans – Illinois’s pension and benefits woes are myriad and well documented and extend through every city and county due to firefighters and policemen and governmental workers. Regardless of the one time pain, strikes, protests, and society-shaking impacts of these moves, these unfunded obligations are an impossible burden on the state and it must move to a 401k-like plan (similar to what Nebraska did)

    Reduce State and Local Employee Compensation Pay by 25% or More – The government faces a simple choice between paying its employees what they think they deserve (ever more) and the government’s obligation to provide services to its citizens at a price that does not drive excessive taxation. This deal is broken and a large part of the burden will have to rest on governmental employees. If they do not like this solution they will be free to find employment in the private sector where it is unlikely that they will be able to match the same package of benefits and compensation. We will know that the model is in balance when the turnover rate of government is equal to that of the private sector.

    Outsource 33% or More of Governmental Jobs – There are large opportunities for efficiencies in the governmental sector, through use of the Internet, changes in processes, and injection of competition into areas traditionally done by the government. Even within areas that are generally governmental functions (like the police), a significant portion of the functions such as administration could be done by third-party or online vendors.

    Reform Purchasing By Use of Modern Techniques and Focus on Outcomes Not Political Concerns – Our procurement systems in Illinois are riddled with favoritism, opaque decision methods, and a focus on aiding politically connected firms. In addition, payment of vendors is very slow which rules out many smaller and less capitalized vendors. We need to focus on market based outcomes (quality of service, cost reduction, speed to market), and reward vendors with consistent and timely payments rather than focusing on political connections and long term relationships which favor a few incumbents.

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    Posted in Big Government, Chicagoania, Economics & Finance | 15 Comments »

    Illinois Government, Broadly Defined, Will Have A Major Crisis by 2017

    Posted by Carl from Chicago on 19th January 2015 (All posts by )

    The fact that the State of Illinois has dire fiscal problems is well documented. If you just type in headlines like “Illinois is broke” into your web browser and you can spend hours reading. One of the best is Illinois Policy.org which brings together articles from various news sources into a coherent theme. We have a new governor, Bruce Rauner, who is wealthy and thus unlikely to be entangled in corruption, who is pledging to take on this giant mess, which is a cause for optimism.

    The issues, however, are much larger. It isn’t just the state of Illinois which is in deep crisis – we have an interconnected set of entities all of which are on the verge of facing fiscal woes, who in turn can tip other entities off the fiscal cliff. The city of Chicago also has very significant financial problems, mostly from pensions as well, which it has been papering over for many years with debt and by allowing its unfunded pension issue to get ever larger. Cook County, too, which is one of the largest governmental counties and entities of its nature in the USA, is also facing dire challenges.

    Once you get beyond the state, the city of Chicago, and Cook County, you encounter myriad minefields from our plethora of governmental units. Illinois has more governmental entities than any other state, 8400, as you can see from this article. Most of them have various taxing powers, debt they’ve raised, and liabilities like pensions and health care for workers that are not funded. Look near O’Hare, where the (tiny) city of Rosemont has funded huge shopping malls, convention centers, and even a casino by floating debt. In the end this debt is substantially backed by the state whether that guarantee is implicit or explicit; a city of a few thousand residents can’t normally fund this sort of largess.

    But the challenges are much deeper than this. These entities, much of which are overseen on a local level, invite vast opportunities for institutional corruption. We saw this on Metra, where the scandals caused the prior president to commit suicide (by standing in the way of a train, no less) and cast a light on the squalid pay-for-play decisionmaking process of a typical entity in our state.

    The situation has become so bad that even in a time of record low interest rates, when there are many buyers of debt with any sort of return, that Illinois and the city of Chicago often cannot take advantage of municipally funded debt (which carries a lower interest rate because individuals are not subject to Federal taxes on the interest) because this debt has to be used for capital purposes and can’t just be used to pay day-to-day bills. Thus they are forced to issue “taxable” debt, and pay a higher interest rate. Many of the issues are essentially “scoop and toss” where we just take the entire principal and interest of expiring debt, refinance the whole thing, and just throw it out into the future, growing ever more indebted.

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    Posted in Big Government, Chicagoania, Illinois Politics | 11 Comments »

    The Failure of State Sponsored Capitalism

    Posted by Carl from Chicago on 31st December 2014 (All posts by )

    It is my assertion that over the last few decades since the fall of communism a lack of understanding of how markets actually work has become commonplace around the world. When it was capitalism vs. communism (or socialism, or even fascism), you generally knew where you stood. To wit:

    • Capitalism said that the free market would provide the best outcome for society, while communism / socialism felt that capitalism had to be tempered and / or that key assets should be owned by the state 
    • Capitalism said that government should be small, and stick to a few areas of logical focus such as security and foreign affairs, while socialism / communism celebrated government and government jobs as a way to employ the citizenry and achieve social goals

    Subtly, the growing attraction of jobs that were primarily in the government sector (environmental jobs, education jobs, health care jobs, and outright government work) and the basic thought that you could build a nice, steady career there with assured benefits and pensions while “doing right for the world” became commonplace. These jobs were often seen as “nicer” and “better” than the ruthless corporate jobs that are continually vilified or parodied on television (such as “The Office” or virtually any thriller set in business).

    On a parallel scale, the idea that “State Owned Enterprises” (SOE) could be a significant part of the world economy, and compete effectively with private sector companies, became widespread. Let’s leave aside the companies that fell into the US governments’ hands during 2008-9 like the banks and car companies; I am focusing on the world wide companies, often country “champions”, that are in our midst and whose performance has now been hit with the usual causes of failure of these sorts of entities, including:

    1. Politically motivated investment
    2. Forced government subsidies or protectionist behavior
    3. Corruption
    The “poster child” for this negative outcome is Petrobras, the Brazilian oil company, which is 64% owned by the state.  Petrobras was briefly the 4th most valuable company in the world after their 2010 IPO; now it is barely in the top 100.  Petrobras hits all these typical failure points with a vengeance.  The government forced them to purchase goods and services from inefficient Brazilian suppliers, subsidized their citizens with Petrobras funds, pushed them to invest in deep offshore finds which were risky relative to the company’s capabilities, and finally just engaged in simple corruption to fund their political party candidates.  All of these actions weakened the company and now a downturn in oil prices and a heavy debt load put the company in a seriously bad state.

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    Posted in Business, China, Crony Capitalism, Economics & Finance, Education | 20 Comments »

    Renting Vs. Buying

    Posted by Carl from Chicago on 29th December 2014 (All posts by )

    In the 2007-9 real estate boom and debacle here in Chicago there was a wave of newly built condominiums that swamped the market in River North, River East, the South and West Loop, and even Downtown. For a while the new buildings could do no wrong and then that disappeared into a pool of foreclosures and difficult times for condominium associations as they had to deal with vacant units and those that refused or were unable to pay assessments.

    In the 2012-5 period, that same area of Chicago has seen an enormous influx in new buildings, but this time it is different – they all seem to be rental units. Everyone seemed to learn the same lesson; condominiums can be hard to unload in a down market and the prices are highly variable (units sold for fire-sale prices during the nadir and condominium developers lost their shirts if they were holding inventory during that time), so let’s go with renters instead, who derive consistent returns for the building owner and lender.

    For a bit I even thought I’d try to put my condo on the market since prices have gone up. I figured I’d just rent for a while and not be exposed to future downturns. But as I looked around for equivalent value to my current condo in terms of location, views, bedrooms and bathrooms, I noted that I’d be paying $4500+ / month for an equivalent space, if I could find it at all (inventory of larger condos in modern buildings in good walkable areas was in fact very low). That just seemed crazy.
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    Posted in Chicagoania, Real Estate | 10 Comments »