The origins of our present economic malaise

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Bill Moyers talks with former Citigroup Chairman John Reed and former Senator Byron Dorgan to explore a momentous instance: how the late-90’s merger of Citicorp and Travelers Group – and a friendly Presidential pen — brought down the Glass-Steagall Act, a crucial firewall between banks and investment firms which had protected consumers from financial calamity since the aftermath of the Great Depression. In effect, says Moyers, they “put the watchdog to sleep.”

There’s no clearer example of the collusion between government and corporate finance than the Citicorp-Travelers merger, which — thanks to the removal of Glass-Steagall — enabled the formation of the financial behemoth known as Citigroup. But even behemoths are vulnerable; when the meltdown hit, the bank cut more than 50,000 jobs, and the taxpayers shelled out more than $45 billion to save it.

Senator Dorgan tells Moyers, “If you were to rank big mistakes in the history of this country, that was one of the bigger ones because it has set back this country in a very significant way.”

Now, John Reed regrets his role in the affair, and says lifting the Glass-Steagall protections was a mistake. Given the 2008 meltdown, he’s surprised Wall Street still has so much power over Washington lawmakers.

“I’m quite surprised the political establishment would listen to groups that have been so discredited,” Reed tells Moyers. “It wasn’t that there was one or two or institutions that, you know, got carried away and did stupid things. It was, we all did…. And then the whole system came down.”

Byron Dorgan on Making Banks Play by the Rules from BillMoyers.com on Vimeo.

John Reed on Big Banks’ Power and Influence from BillMoyers.com on Vimeo.

the best goal is no goal | zen habits by Leo Babauta

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http://zenhabits.net/no-goal/

the best goal is no goal

“With the past, I have nothing to do; nor with the future. I live now.” ~Ralph Waldo Emerson

Post written by Leo Babauta.

The idea of having concrete, achievable goals seem to be deeply ingrained in our culture. I know I lived with goals for many years, and in fact a big part of my writings here on Zen Habits are about how to set and achieve goals.

These days, however, I live without goals, for the most part. It’s absolutely liberating, and contrary to what you might have been taught, it absolutely doesn’t mean you stop achieving things.

It means you stop letting yourself be limited by goals.

Consider this common belief: “You’ll never get anywhere unless you know where you’re going.” This seems so common sensical, and yet it’s obviously not true if you stop to think about it. Conduct a simple experiment: go outside and walk in a random direction, and feel free to change directions randomly. After 20 minutes, an hour … you’ll be somewhere! It’s just that you didn’t know you were going to end up there.

And there’s the rub: you have to open your mind to going places you never expected to go. If you live without goals, you’ll explore new territory. You’ll learn some unexpected things. You’ll end up in surprising places. That’s the beauty of this philosophy, but it’s also a difficult transition.

Today, I live mostly without goals. Now and then I start coming up with a goal, but I’m letting them go. Living without goals hasn’t ever been an actual goal of mine … it’s just something I’m learning that I enjoy more, that is incredibly freeing, that works with the lifestyle of following my passion that I’ve developed.

The problem with goals

In the past, I’d set a goal or three for the year, and then sub-goals for each month. Then I’d figure out what action steps to take each week and each day, and try to focus my day on those steps.

Unfortunately, it never, ever works out this neatly. You all know this. You know you need to work on an action step, and you try to keep the end goal in mind to motivate yourself. But this action step might be something you dread, and so you procrastinate. You do other work, or you check email or Facebook, or you goof off.

And so your weekly goals and monthly goals get pushed back or side-tracked, and you get discouraged because you have no discipline. And goals are too hard to achieve. So now what? Well, you review your goals and reset them. You create a new set of sub-goals and action plans. You know where you’re going, because you have goals!

Of course, you don’t actually end up getting there. Sometimes you achieve the goal and then you feel amazing. But most of the time you don’t achieve them and you blame it on yourself.

Here’s the secret: the problem isn’t you, it’s the system! Goals as a system are set up for failure.

Even when you do things exactly right, it’s not ideal. Here’s why: you are extremely limited in your actions. When you don’t feel like doing something, you have to force yourself to do it. Your path is chosen, so you don’t have room to explore new territory. You have to follow the plan, even when you’re passionate about something else.

Some goal systems are more flexible, but nothing is as flexible as having no goals.

How it works

So what does a life without goals look like? In practice, it’s very different than one with goals.

You don’t set a goal for the year, nor for the month, nor for the week or day. You don’t obsess about tracking, or actionable steps. You don’t even need a to-do list, though it doesn’t hurt to write down reminders if you like.

What do you do, then? Lay around on the couch all day, sleeping and watching TV and eating Ho-Hos? No, you simply do. You find something you’re passionate about, and do it. Just because you don’t have goals doesn’t mean you do nothing — you can create, you can produce, you can follow your passion.

And in practice, this is a wonderful thing: you wake up and do what you’re passionate about. For me, that’s usually blogging, but it can be writing a novel or an ebook or my next book or creating a course to help others or connecting with incredible people or spending time with my wife or playing with my kids. There’s no limit, because I’m free.

In the end, I usually end up achieving more than if I had goals, because I’m always doing something I’m excited about. But whether I achieve or not isn’t the point at all: all that matters is that I’m doing what I love, always.

I end up in places that are wonderful, surprising, great. I just didn’t know I would get there when I started.

Quick questions

Question from a reader: Isn’t having no goals a goal?

Quick answer: It can be a goal, or you can learn to do it along the journey, by exploring new methods. I’m always learning new things (like having no goals) without setting out to learn them in the first place.

Another question from a reader: So how do you make a living?

Answer: Passionately! Again, not having goals doesn’t mean you stop doing things. In fact, I do many things, all the time, but I do them because I love doing them.

Tips for living without goals

I am not going to give you a how-to manual for living without goals — that would be absurd. I can’t teach you what to do — you need to find your own path.

But I can share some things I’ve learned, in hopes that it will help you:

  • Start small. You don’t need to drastically overhaul your life in order to learn to live without goals. Just go a few hours without predetermined goals or actions. Follow your passion for those hours. Even an hour will do.
  • Grow. As you get better at this, start allowing yourself to be free for longer periods — half a day or a whole day or several days. Eventually you’ll feel confident enough to give up on certain goals and just do what you love.
  • Not just work. Giving up goals works in any area of your life. Take health and fitness: I used to have specific fitness goals, from losing weight or bodyfat to running a marathon to increasing my squat. Not anymore: now I just do it because I love it, and I have no idea where that will take me. It works brilliantly, because I always enjoy myself.
  • Let go of plans. Plans are not really different than goals. They set you on a predetermined path. But it’s incredibly difficult to let go of living with plans, especially if you’re a meticulous planner like I am. So allow yourself to plan, when you feel you need to, but slowly feel free to let go of this habit.
  • Don’t worry about mistakes. If you start setting goals, that’s OK. There are no mistakes on this journey — it’s just a learning experience. If you live without goals and end up failing, ask yourself if it’s really a failure. You only fail if you don’t get to where you wanted to go — but if you don’t have a destination in mind, there’s no failure.
  • It’s all good. No matter what path you find, no matter where you end up, it’s beautiful. There is no bad path, no bad destination. It’s only different, and different is wonderful. Don’t judge, but experience.

And finally

Always remember: the journey is all. The destination is beside the point.

‘A good traveller has no fixed plans, and is not intent on arriving.’ ~Lao Tzu

REPORT: S&P WILL PUT ALL 17 EUROZONE COUNTRIES ON CREDIT WATCH NEGATIVE

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BREAKING: Bloomberg reports that all 17 eurozone countries will be put on downgrade watch today.S&P will allegedly release a statement on the move after the New York closing bell at 4 PM ET.Markets fell again after that news, with the Dow nearing a complete reversal of its gains this morning.While downgrades of the AAA-rated sovereigns would probably have the most impact on the way EU leaders can handle the crisis, a downgrade of multiple euro area states could still prove a major blow for the eurozone bailout plan.These announcements could change the game for EU leaders, particularly those proving reluctant to take radical steps to fix the crisis.

via REPORT: S&P WILL PUT ALL 17 EUROZONE COUNTRIES ON CREDIT WATCH NEGATIVE.

How US Banks Are Lying About Their European Exposure; Or How Bilateral Netting Ends With A Bang, Not A Whimper | ZeroHedge |

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A little over a month ago, Zero Hedge started an avalanche in the financial sector, and an unprecedented defense thereof by the “independent” financial media and conflicted sell side, by being simply the messenger in pointing out that the gross exposure of one Morgan Stanley to the French banking sector is $39 billion. The firestorm of protests, which naturally focused on the messenger, and not the message, attempted to refute the claims that Morgan Stanley and many others are overexposed to Europe both banks and countries by stating that gross is not net, and that when one nets out “hedges” the real exposure is far, far lower. The logic is that bilateral netting, as the principle behind this argument is called, should always work – no matter the market, and that counterparty risk, especially when it comes to hedges, should always be ignored because banks will always honor their own derivative exposure.

Obviously that this failed massively when AIG had to be bailed out, to preserve precisely the tortured and failed logic of bilateral netting was completely ignored, after all things will never get that bad again, right? Well, wrong. Because the argument here is precisely what the exposure is when the chain of netting breaks, when one or more counterparties go under such as MF Global for example, which filed bankruptcy precisely due to its hedged ? European exposure – luckily MF was not in the business of writing CDS on European banks or else all hell would be breaking loose right now. So little by little the story was forgotten: after all when everyone says gross is not net, contrary to what history shows us all too often, everyone must be right. Today it is time to refresh this story, as none other than Bloomberg pulls the scab right off and while confirming our observations, also goes further: yes, banks are not only massively exposed to Europe, but they are in essence misrepresenting this exposure to the public by a factor of well over ten!

via ZeroHedge | On a long enough timeline the survival rate for everyone drops to zero.

Euro Falls, Pares Weekly Gain as Fitch Says Greek Haircut Would Be Default – Yahoo! Finance

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The euro was headed for a weekly gain after European Union leaders agreed to increase the region’s rescue fund capacity to 1 trillion euros $1.4 trillion and persuaded holders of Greek bonds to accept a 50 percent writedown on the country’s debt.If it’s accepted, “the 50 percent nominal haircut on the proposed bond exchange would be viewed by the agency as a default event under its Distressed Debt Exchange criteria,” Fitch said in a statement today. The accord is “ a necessary step to put the Greek sovereign’s public finances on a more sustainable footing.”This week’s rise in the euro “shows expectations were very low for what would come out of the meeting,” said Geoff Kendrick, head of European currency strategy at Nomura Holdings Inc. in London. “I am relatively skeptical about how long this will last because I think it was just another plan for a plan.” Kendrick expects the euro to weaken to $1.30 by year-end.Italian Prime Minister Silvio Berlusconi conducted the first test of investor enthusiasm for Europe’s debt since the summit’s plan was announced, selling bonds today at euro-era record borrowing costs.

via Euro Falls, Pares Weekly Gain as Fitch Says Greek Haircut Would Be Default – Yahoo! Finance.

The Option Pool Shuffle – Venture Hacks

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If you don’t keep your eyes on the option pool, your investors will slip it in the pre-money and cost you millions of dollars of effective valuation. Don’t lose this game.

The option pool lowers your effective valuation.

Your investors offered you a $8M pre-money valuation. What they really meant was,

“We think your company is worth $6M. But let’s create $2M worth of new options, add that to the value of your company, and call their sum your $8M ‘pre-money valuation’.”

For all of you MIT and IIT students out there:

$6M effective valuation + $2M new options + $2M cash = $10M post

or

60% effective valuation + 20% new options + 20% cash = 100% total.

Slipping the option pool in the pre-money lowers your effective valuation to $6M. The actual value of the company you have built is $6M, not $8M. Likewise, the new options lower your company’s share price from $1.33/share to $1.00/share:

$8M pre ÷ (6M existing shares + 2M new options) = $1/share.

via The Option Pool Shuffle – Venture Hacks.

Beware the trappings of liquidation preference | VentureBeat

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There are three types of liquidation preferences:

  • Straight (or non-participating) preferred – This liquidation preference is most favorable to the company.  Upon the sale of the company (or any other liquidation), the preferred stockholders would be entitled to the return of their entire investment (plus any accrued dividends) prior to the distribution of any proceeds to the common stockholders.Alternatively, the preferred stockholders could choose to convert their preferred stock to common stock and simply be treated the same as the common stockholders (letting them share ratably in the proceeds).
  • Participating preferred – This liquidation preference is most favorable to the investor (and is sometimes referred to as “double-dip preferred”).  Similar to straight preferred, the preferred stockholders would be entitled to the return of their entire investment (plus any accrued dividends) prior to the distribution of any proceeds to the common stockholders.However, the preferred stockholders would then also be treated like common stockholders and would share ratably in the remaining proceeds –in effect, being paid twice (or “double”).  Issuing participating preferred has the same economic effect as issuing a promissory note and shares of common stock (or a warrant) to the investor.
  • Capped (or partially) participating preferred – This liquidation preference is often viewed as an intermediate approach.  The preferred stockholders have the same rights as participating preferred (i.e., return of investment, plus share ratably in the reminder), but their aggregate return is capped. Once they have received the capped amount, they no longer have the right to share in the remaining proceeds with the other common stockholders.

via Beware the trappings of liquidation preference | VentureBeat.

Heres the best way to value your startup | VentureBeat

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A reader asks:  I’m the founder of a mobile apps startup, and we’re starting to get some incredible traction.  I’ve been bootstrapping the venture for the last year, but I’d really like to raise about $2 million to scale this thing.  If a VC invests $2 million, what percentage of the company will he own?Answer: It depends upon the value of your company prior to the investment commonly referred to as the “pre-money valuation” or “pre”.  The VC’s percentage ownership is calculated by dividing the amount of its investment by the post-money valuation of the company which is equal to the pre plus the amount of the investment.For example, if the pre were $4 million, the VC would get one-third $2,000,000 divided by $6,000,000; on the other hand, if the pre were $1 million, the VC would get two-thirds $2,000,000 divided by $3,000,000.The real issue then is — how do you determine the value of your company prior to the investment?  Let’s look at that.I come from the M&A world in New York, where the valuation of target companies was more science than art.  Indeed, targets were typically valued based upon a discounted cash flow method DCF – which basically estimates the net present value of the target’s future cash flow, discounted to reflect risk.In the startup world, however, DCF doesn’t work because there is little or no historical financial data and projected cash flow is thus pure speculation.  Accordingly, the valuation of startups is highly subjective and is more art than science.  To put it bluntly: your startup is worth whatever the market says it’s worth, which was starkly demonstrated during the dot-com bubble.So what does this all mean in practical terms?  It means you need to get out there and effectively pitch a bunch of VC’s in your space and get them excited about your venture.  By doing so,

via Heres the best way to value your startup | VentureBeat.

Deal or No Deal? Europe Getting “Closer and Closer to the End Game,” John Mauldin Says | Daily Ticker – Yahoo! Finance

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As evidence of the “very, very delicate balance” in Europe, the president of Millennium Wave Advisors and author of most recently Endgame, notes estimates of the amount of write-downs banks must take keeps creeping up now at $7 trillion as does the estimate on the size of the haircut on Greek debt 50% and rising.”Were getting closer and closer to the end game,” says Mauldin. “At some point, whether you have a physical Lehman, you have a Lehman Moment. Thats what all of these debt crises end in.”

via Deal or No Deal? Europe Getting “Closer and Closer to the End Game,” John Mauldin Says | Daily Ticker – Yahoo! Finance.

Oscar Pistorius – Page 1 | Outside Athletes | OutsideOnline.com

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Incredible story of an individual challenging perception of reality – in this case human capabilities, disability, and elite athleticism!

“In August, Oscar Pistorius, a 24-year-old South African whose nonfunctioning lower legs were severed below the knee by doctors when he was 11 months old, raced in the 400 at the Track and Field World Championships in Daegu, South Korea. He not only competed, but he beat 22 of the fastest runners on the planet and reached the semifinals. Pistorius also ran the first leg of the 4×400 relay, helping South Africa advance to the finals. Assuming he runs another qualifying time of 45.25 seconds, he’ll be competing at the 2012 Summer Olympic Games in London.”

via Oscar Pistorius – Page 1 | Outside Athletes | OutsideOnline.com.