Author Archives: Dave

About Dave

A student of the markets and life. Seeking to predict the future and failing often enough.

Cycles Matter

It has been awhile since I started this blog…actually almost a decade which is hard to believe.

I’m now building Odin River, after being CIO at Artivest and working for John Paulson at Paulson & Co. before that.

Alas, it feels like the Credit Cycle is turning again. It isn’t as clearly contracting as when this blog began, which means perhaps we are in earlier stages than last Cycle. However, there are reasons to be more concerned now. The main one being that the risks are less obvious and yet the asymmetry across the Credit Markets is perhaps more extreme given the state of the Sovereign Credit Markets today.

I’m likely going to continue to primarily blog on Medium and write on Twitter but I’m contemplating resurrecting this blog. We’ll see.

Thanks for visiting and good luck


Today is a Gift

11 years ago, I sat near the Hudson in the shadows of the World Trade Center with a great friend.

We chatted about life and debated the purpose of all of it. We were analysts in investment banking – working across the street from the towers in groups called M&A and Media & Telecom. We were young – but we thought we had it all figured out.

I stood on the edge of a wall overlooking the river yelling (it was around midnight and noone was around – I was 22):

“The world is ours!  We can be whatever we want! Like Nietzsche says – we can be the Übermensch – we can conquer it all!”

I felt on top of the world. My friend shook his head. He had other things on his mind:

“No…it is all about the Faustian bargain…all we can hope for is to find contentment. The best thing in the world is to be content.”

I thought he was weak. He thought I was a dreamer.

Two weeks later, the towers were falling. The world was shattered. We kept moving.

Tonight we ate steaks.

He has since graduated from law school, works for the City, and is a healthy and happy young professional. I work for a leading hedge fund after graduating with impressive-sounding degrees. We have both had many failures and some successes.

We laughed.

Only blocks away from where we stood a decade ago, it was almost unbelievable to look at the new towers and buildings (including the fancy restaurant where we ate) that didn’t exist years before.

We reconsidered our dichotomy.

At first, he claimed he still believed in the Faustian ideal – but characterized it differently:

“As long as I am learning, striving towards something and growing…I don’t need much.”

To me this sounded importantly different than contentment.

“What you want is to be out in the ocean: in the waves, with new ones coming – catching some, falling, being a part of it…and learning to ride the waves more over time.”

He agreed.

I used to think that it was all about conquering and accomplishment and being the greatest.

But in the decade that has passed, I have had so much failure and life pass by that I now realize the best we can hope for is something similar to what Nietzsche proposes but much more concrete:

We should strive for greatness – aiming high. But life happens – including travesties like 9/11 – and we find ourselves in the same place a decade later, facing similar trials and tribulations.

The world moves forward and we move forward within it – helping it to be better by being our best.

This is closer to Hegel’s idea of the Spirit realizing itself through our actions over time…

Or like my parents always told me in plain english: you should always try our best and treat others as you would like to be treated.

When we do that, we do our part to help make each day a little better than the last.

Before leaving, my friend asked the waiter a riddle:

“What is the greatest day ever?”

The waiter and I smiled. Waited:

“Today. Today is always the greatest day that ever was.”

I am not sure how to explain the miracle of today or all the unbelievable things that have brought us here, but I know that my friend is right about this: today is a gift.


Running for Kids.

I am lucky – and if you have found your way to this corner of the Internet chances are you are also lucky. We weren’t born sick. We got to live our young lives in carefree ways.

In elementary school, I was running races, participating in sports – having the kind of happy healthy childhood that so many kids can’t.  It is heartbreaking and unfair.

The Hole In the Wall Gang Camp is a camp that helps incredibly sick kids have a place where they can, in their words, “enjoy more than they or their parents ever thought possible”: 

“Founded by Paul Newman in 1988, and named for the secret, outlaw hiding-place from his film, Butch Cassidy and the Sundance Kid, The Hole in the Wall Gang Camp has been serving seriously ill children with a remarkably empowering away experience for more than twenty years. 

Activities include archery, mini golf, swimming, boating, fishing, horseback riding, arts and crafts, sports, theater and camping; all are designed to include every child and ensure that no child will fail.

Safety, Respect and Love guide every moment of this haven for seriously ill youngsters. In the words of one young camper, “I love it here. Sometimes you think being so sick gives you limits, but the Camp helps you try anything.” 

I am running the NYC Marathon in support of these kids.

Please help me blow past my fundraising goal to help this incredibly important cause for these kids who aren’t as lucky as we are.

Thanks in advance for clicking here to donate:  my fundraising page.

Or clicking here to learn more: About The Hole In The Wall Gang Camp.



How to Fix “Education”

I don’t know how to fix our educational system…

But I know we can do better.

I just finished watching Waiting for Superman (a movie you should watch if you haven’t). The punchline of the movie is something we all know well: schools in America aren’t doing a good enough job at educating our kids.

If you are reading this, chances are you were lucky enough to have been born in a good neighborhood to loving and supportive parents and likely can’t relate to the challenges that way too many of our kids face. I know I was, and I’m incredibly thankful for what was a quality public school education.

However, there are way too many people who aren’t as lucky as we were, and we owe it to them and our children to give them more.

A good education is so fundamentally important to a well-functioning society it is staggering to me that we aren’t doing better. A democracy can only function if the populous is educated – and the fundamental rights of life, liberty and happiness aren’t achievable if you can’t be an active participatant in society. That a large portion of our population is not able to do so just because of where they were born is morally repugnant.

So what should we do about it?

One starting place mentioned in the movie is that we need better teachers.

I’m not going to quote data, so disagree if you must, but there are a lot of bad teachers out there. In my opinion, truly bad teachers should be fired just like in other professions. Unfortunately, due to the power of teachers unions and concepts like tenure and seniority this is sometimes hard if not impossible. This must change. I’m not suggesting an outsider should come in with a hatchet and start firing all teachers who appear to be struggling. Clearly training and experience are necessary before one can judge performance – in any profession – but after the bad performance is clear, allowing bad teachers to stay is unacceptable.

We should also recruit and train teachers as well or better than Goldman Sachs and McKinsey recruit and train their employees. And teachers should also have the opportunity to get paid as much as they could by working in private professions. Doing so is obviously a challenge given the public nature of our educational system, but plenty of public employees get paid well (judges, elected officials etc). Given the amount of money we spend on education in this country (and on prisons for those who drop out), I think smart people can solve this problem. This would help to attract and retain smart and hard working people to an important job in our society.

What is more complicated than solving the “teacher” problem, however, is solving the “student” problem.

What I mean is that part of the reason kids drop out of school and performance drops so much when kids get into middle school has little to do with the teachers – it is about the students themselves.

Clearly one should not blame a 12 year old for a failing school. So what I mean by “student” is really more about the community and family lives of the most challenged kids in our society.

One of the problems we face in solving this issue is that it involves so much stuff – much of which is very uncomfortable and controversial.

Specifically, generational poverty, lack of role models, community structure, safe neighborhoods, peer support and other issues impacting many kids are bound up in realities of still very-challenging civil rights struggles that were only just fought by our parents’ generation.

More directly: it is not a coincidence that the “achievement gap” in our educational system usually falls along socio-economic and often racial and ethnic lines.

These topics are uncomfortable to think about and sometimes not even possible to discuss, because of the understandable pain and anger that people often feel around such issues. But like it or not, we need to face these issues head on because our kids need us to.

I’m not sure how to do that or even what I think needs to change specifically, but I do think issues of inequality are helping to perpetuate broken communities which make it hard for kids to have better lives.

I think perhaps part of it boils down to the idea that we need to provide people with more opportunities – and jobs – to allow them to be contributing members of our society.

Maybe the intellectual error we are making is in assuming that just because the older kids “dropped out” or even went to prison, that they cant have a chance for a good life.

Maybe if we used some of the entrepreneurial spirit that is currently frothing the angel and VC markets to tackle this issue, we could create business models and alternative career paths that would help give jobs to people currently without hope or dignity … who are in situations where selling drugs is sometimes the most economically rational career path.

This would be difficult because they lack “skills,” but given how powerful and easy to use devices like iPads and the like are, perhaps we could figure out businesses and jobs that leveraged these aspects of the devices to allow currently-disenfranchised people to contribute to society. I have no really concrete idea how this might work, but it just seems like we have a lot of people out there who need jobs and if we could figure out a way to harness them it would kill two birds with one stone.

I’m not sure if this is right, but it does seem that helping communities is likely a mandatory component of any truly comprehensive “reform” program.

Other ideas on the “student” side of the equation are more straightforward – mentorship is one. And providing kids with knowledge of their options is another.

For awhile I’ve noodled with the idea of building a site where people would talk about their career paths in an open format so kids could see what possibilities were out there – think of it like an “open” informational interview site, or an “open” Linked-In, where kids could just see what paths are available to them. I think if you give kids the power to dream and a path to look forward to, it might help.

Who knows if I’ll ever build that or if it is even a good idea but maybe it will serve as food for thought for somebody out there…

I’m not sure how to fix education.

But I do know we can do better and that we absolutely must.

Please let me know if you have any silver bullets.

On the Need for Optimism

It has been a long time since I have written here, but recently I have felt compelled to rejoin the discussion “out here” in the Internets.

The primary reason why I feel like I need to start writing again is because I am frankly starting to get annoyed and tired with all the pessimism that I read in the newspapers and in the “financial” oriented blogs out there.

We need to quit harping on all the negative data out there and start realizing that there are many positive things going on in the world and our economy – and here is why:

First, one of the few truths is that the future does not yet exist.

No matter how much we think we can predict what is going to happen tomorrow (some of us even make a living out of trying to do it), we can’t. It is impossible.

Besides the physics of it, when it comes to things like the “economy” or the “markets”, the reason it is so hard to figure out what is going to happen is because the result is arrived at through a combination of a bunch of individual human beings making decisions about a lot of different stuff. Economists think they can model this behavior and figure out what is going to happen based on theories and math. They can’t. No one can.

Part of the reason this task is so hard is because we are collectively creating a new future each day when we walk out the door and into the world. Now sure there are certain social constructs which are in the background and seem like they are impossible to change – stuff like the concept of ownership, citizenship, relationships and things of that nature – but a lot of what we make out every day depends on our perspective.

For example, when you come to work well rested and in an upbeat mood, you are far more likely to get along with your co-workers than if you are tired, sick and angry. Doing so will make you more productive and allow you to do more stuff. If you do more, your company will do better, make more money and all the sudden you have impacted the economy in a positive way.
The point of this example is that we can influence how things unfold in our lives in a major way just by changing out point of view in little ways.  Because of this, it is difficult to predict how things are going to unfold because this and many other factors about how people are going to act tomorrow can’t be determined a priori. We are humans, not atoms.

Second, the markets are even harder to predict than the future and they are influenced directly by our perceptions.
Anyone who has sat in front of a Bloomberg terminal can tell you that it feels very different when there is “green” on the screen than when there is “red” on the screen. When things seem positive, you feel and act differently and vice versa. This is true not only for price movements but also for the interpretation of economic data.
Last quarter’s GDP result is a great example of this. Few people talked about how net exports were a big impact on the total GDP number (they were up a lot in the last quarter), but that actually shows that we are doing a lot more consuming now than we were earlier in the year. We can argue all we want about whether our consumption-based economy is a good thing, but the reality is 70% or so of our GDP is consumption based. Although buying stuff from abroad isn’t necessarily that great for our local economy, it is a good indicator of the fact that people are consuming again.

I don’t know what that means in the greater scheme of things, but I do know that I am not reading much in terms of positive interpretations of the data that are coming out of late. Most of the headlines and press I have seen over the last few months has been harping on the legitimate concerns that people have.
This is bad because of the above mentioned fact that we influence our world everyday with our perspective and this effect is amplified in the context of the markets. The more negative we interpret stuff, the harder it is for stuff to get better – and the worse things could potentially become.

Many of my more “bearish” friends talk about the mistakes we made in the first half of the last decade by spending and borrowing too much. I think they have a point, but the pain we suffered over the last couple years was enough of a lesson – we get it, housing prices can go down and we have to think about that and other risks more in the future. But this backwards-looking analysis and bearishness that is now in style is getting old. It is time to start looking forward again. 

I am positive that America’s and the world’s better days are ahead of us. We need to stop harping on all the mistakes we have made over the last few years and get out of our own way to let us get there. 

Digital Idealism

In the past, when we looked back on historical events, we were able to decipher correlation from causation after the fact…but those with military, political, or social power controlled the interpretation that became widely known.

This power to determine history, in the short or even longer term, was made weaker by the invention of the printing press and later newspapers.

Now that we have digital media and any one of us can voice an opinion for others to hear, perhaps we will get closer to an ideal world where something approaching truth will emerge for our collective interpretation of past events.

A cynic might say that the masses will be more easily swayed by sentiment or the power of manipulative rhetoric, but it has been my experience that most people are smarter than we give them credit for and often they are limited by their linguistic training.

As our tools of digital interaction, translation and sharing continue to increase, I am excited about the potential for us to enter a more truly democratic world, where we learn from our past through a process of sharing, interpretation and learning through increasingly rapid cycles of feedback.

Perhaps through this process we will not only learn more about our past, but we might even be able to learn more about each other and eliminate some of the fears and misunderstandings that drive much of the negativity and violence that still unfortunately plagues our world.

On Identity and The Internet

This post was spurred by a discussion with @humbertomoreira and another non-twitter friend that overlapped this afternoon.

One of the things we are currently experiencing as a result of the explosion of Internet usage is at once both a deconstruction and an expansion of our conception of personal identity. And this is radically shifting our potential for human interaction – in a good way.


I say deconstruction, or splintering, because we are now able to express and find meaning for various different aspects of our personalities like never before. For instance, if you are really into hollywood gossip, you can find great content on PerezHilton, and if you really like gadgets you can visit Engadget. Either on these sites or on the various social networks you participate in, you can then share and discuss content related to these interests in ways like never before.

In the past, you might have been unable to express a niche interest or curiosity due to its lack of popularity in your physical locale. However, due to the Internet and the increasing avenues through which we can express ourselves, we are able us to connect and express views with one another based on various different aspects of our personalities.

This changes the ways that people perceive us – or how our identities are represented – because people tend to associate personal identity with the things that people say or do. If you are a baseball card collector, it expresses part of who you are in some sense. Thus, as we express more stuff, our identities take different shapes in different forums.


At the same time, the Internet also results in an expansion in the ways that we can express this personal identity through an increased number and kind of social interactions. As my parents always told me, no two people are alike.

Some people think the ability to connect on niche topics will create echo chambers, but they miss the point that individuals represent a set of complex combinations of interests, experiences and perspectives, and as we interact with an increasing number of people, we will by definition be exposed to more potential varieties of combinations.

In other words, in the “good ole” days, the “good ole” boys would connect in one club and discuss the same 5 topics. Today, the “new girls” meet in a variety of different online settings and discuss a variety of ideas based on their naturally varied interests (i.e. one day she may comment on a NYTimes article and the next day comment on a video posted on a FOAF’s blog).

These wider sets of interactions will produce more interactions and connections than the old model based on simple arithmetic.

Transparency and Openness

At the same time as the number and kinds of our interactions are increasing on forums of interaction like Twitter, Facebook, LinkedIn, YouTube, questions of transparency and openness emerge that may be difficult for people to manage.

The more that we discuss stuff online and express more parts of our personality, the more aspects of our personal identity become available for the world to see. I think of this as the modern version of “wearing your heart on your sleeve.”

2 Ways of Dealing With Transparency

Two speakers that I watched at SXSWi highlight two possible ways people try to deal with this increased transparency.

Embrace Transparency

Tony Hsieh, CEO of
deals with this issue by embracing transparency and creating an organization that is aligned with his personal values. He interacts with people in a professional role and personal role through the same “persona” and represents himself and his company in the same way across settings. He also encourages his employees to participate on Twitter and to engage in personal discussions with the people who call Zappos with customer service issues.

This emphasis on creating a culture that promotes transparent personal identity and positive customer service interactions has reaped him huge success and personal happiness.

Managing Multiple Personas

Another speaker mentioned that she manages the challenges of transparency by creating two separate online “identities”. She uses one identity for her “professional” interactions and another for her “personal” interactions. To do this she creates multiple accounts and log-ins for her various conceptions of her social circles, and she shares some stuff in one context and other stuff in the other.

I believe that this second approach may be unsustainable, because as our online environments become more deconstructed and expansive, we will continue to have more coincidental overlaps with people we previously grouped in an unexpected bucket.

Serendipity Makes Multiple Personas Unsustainable

What I mean by this is that conceptions of “professional”, “personal”, “school-friends”, and “work-friends” will consistently be tested as we serendipitously come across people in unexpected ways as our deconstructed and expanded personalities are expressed in new ways across the Internet (and IRL for that matter).

For anyone who spends a lot of time traveling in physical or “cyber” space, you will be able to relate to the phenomenon of increased serendipity that we have collectively been experiencing over the last few years as our worlds increasingly collide in unexpected ways.

As our ability to express and connect on various different dimensions of our personalities increases, this “I didn’t know that you were X” effect will only increase in the future.

Embrace Transparency…It is Inevitable

The upshot of all of this is that I think one should embrace transparency ahead of time and be ahead of the curve in creating and maintaining your “online” persona. While doing so, I think you should also strive to be sincere and consistent because, just as in real life, juggling multiple personalities and personas can be draining and might ultimately be unsustainable.

This move – embracing authenticity and transparency – will not only increase the amount of connections and social interactions you create – which is just super-awesome, but it will also allow you to be sure people see you for who you really are rather than having an incomplete or skewed perception of you.

What Transparency Entails

The great thing about the world we are headed towards is that it implies a destruction of overly simplistic categorizations that are behind vices like racism and other bigotry.

In other words, as we interact with more people in more unexpected ways, we will realize that our old-school and overly-simplified conceptions of personal identity that drive such vices are just plain wrong.

This is why Facebook is old school and Twitter is a step, albeit an incomplete one, in the right direction.

People are a helluva lot more than what school they went to or where they happen to have been born…

And I can’t wait until a not-too-distant future when our online and IRL lives better reflect that simple human truth.

Political Trade-offs

If we gathered the smartest financial and economic minds together and locked them in a room for a week I think we could solve the current economic conundrum…

But instead, our system of representative democracy forces compromise between brilliant ideals and half-baked social plans motivated by re-election cycles. Perhaps this is what the founders wanted – to keep the representatives tied to the local whims of the body politic.

However, in the context of social dislocation like that we are facing today, it seems that the benefit of coordination more than compensates for the potential abuses that might come from a republic led by disconnected philosopher-kings.

This trade-off: between efficacy and representation, is likely less stark in a society where the populous has the benefit of good education and therefore more wide-spread competence. But when a society allows its educational system to fail, when pop-culture and hollywood media replace civic awareness, and more info

when party politics make any debate center around hot-button social issues rather than content, the trade-offs become dangerous.

Our President has sided with Mr. Cheney in attempting to address this issue by seizing more power for the executive. I see this as a rational market reaction to the tensions of our representative form of government in the context of our current challenges. If he uses this power to tap into the brain trust he has accumulated, we should likely look the other way…

But on the other hand, our framers set a system in place that has brought us through generations of war, conflict and change, leaving us standing in a position of strength. So perhaps we should resist urges spouted by intellectuals like yours truly and instead address the educational inadequacies that strain our representative forms.

Either way, I think talking about these civic issues is important in these strained days.

Nature Rules Even The Economy

The Storm Is Back

You may have noticed that we are out of the eye of the storm.

As I mentioned in my last post on the economy (Rules of Nature), the current process of economic unwinding is going to be long and painful, and we are still in the early stages of the process.

The headline issues of the last few weeks – the “stimulus”, the “nationalization of the banks”, and Obama’s “housing plan” – do little to change this reality.

Primary Driver = The Housing Market

The primary driver of our current economic situation remains the housing market. I will not bore you too much data about  where we are, but this article indicative: Housing Prices in 20 U.S. Cities Fall a Record 18.5%.

Unfortunately, these declines are only the beginning.

We must remember that the record mortgage issuance of 2005-06 continued through 2007 and that this was at the end of a massive levering-process at the household level that had been going on for decades. In other words, there is a massive wave of people with underwater mortgages who will continue to default and be foreclosed upon unless something is done to facilitate rational pre-foreclosure restructurings.

Unfortunately, it appears this is not going to happen.

Change Is Not Coming

The primary reasons why proper reform is not happening are: 1) most people don’t understand how important this issue is, 2) most people who do understand the economics let half-baked moral arguments about “bailing out” homeowners get in the way while at the same time talking out of the other side of their mouth about how we need to keep the Banks and GM out of bankruptcy, and 3) when we finally do get a proposal that makes enough people happy to satisfy the lobbyists, it is watered down and ineffectual.

As a result, I am fairly certain that housing prices will continue their steep decline, that this decline will continue to spread to commercial real estate, that the balance sheets banks and other financial institutions (including the Fed) will be even more severely strained, that consumer spending will continue to fall, that consumer defaults will rise, that corporate bankruptcies will spike, and that these results will spur second-and-third order effects around the globe.

Call it a depression or a recession or whatever you want, but it is almost inevitable at this point. But this is nothing new. The writing has been on the wall about this for nearly two years.

Ineffectual Responses Don’t Help

There are so many bad ideas coming out of Washington right now, I am reluctant to even begin dissecting them in specific terms, but the TALF is a good example of governmental attempts to control nature and the markets.

The now $1T package is discussed in this article:
U.S. Tries a Trillion-Dollar Key for Locked Lending

That the credit system needs thawing is obvious, but providing below-market loans, funded by taxpayers, to encourage under-water risk takers to bet the bank in order to get these markets going to me is beyond the pale. And more than that, it just won’t work. It is too small and too late.

Real Hope

All of that being said: I remain optimistic about innovation and the long-term success of the American Economy.

There is a lot of exciting stuff going on in the world of social-networking, medical technology, biotechnology, clean tech and digital media. These and other areas will continue to drive the engine of innovation in this country and subsequently the world.

I am grateful to go to school with entrepreneurs who are taking the plunge to do something creative in spite of the dark reality in which we find ourselves.

But that is unsurprising.

A half-melted, rain-soaked, bloody-mouthed American Dream is still the best promise and hope that the world has ever seen. And years from now, that dream will continue to be worth fighting for.

In the meantime, keep your umbrella handy and be patient. This one will be around for awhile.

Why I Like Twitter

As Twitter grows in popularity, a number of my friends who have heard me talking about it have started asking me why I like Twitter so much. Although I enjoy chatting about the topic and am glad to do so anytime, I thought writing a post on it might be helpful.

Here are a few of the meaningful ways I have integrated Twitter into my life.

1) As a way to interact with and meet a diverse group of people.

I am able to do this on a scale that is impossible with other services – this comes from Twitter’s one-to-many structure (i.e. each one of my “Tweets” is seen by all of my followers). This also creates the ability to have semi-public “conversations” that others can “listen” in on or participate in.
In addition, by reaching out to new people on Twitter (primarily friends of friends) and through the new “followers” I get each day, I have access to an entirely new and diverse source of social connections.

2) As a way to get the News.

It turns out that if something is interesting, people like to talk about it with their friends. Thus, I share and receive all kinds of news through Twitter in a way like never before. The service has virtually replaced my other news services for everything but financial news (for which I primarily turn to mobile Bloomberg and blogs). In addition, Twitter usually has most news stories hours or days ahead of traditional news outlets, which keeps me ahead of the curve in terms of being in touch with the world outside of the HBS-HLS bubble.

3) As a way to keep in touch.

My mother is probably reading this blogpost and so are a number of my friends. In fact, many of you probably stumbled upon this post through Twitter. Thus, you know that I regularly post what I’m up to – ranging from relatively trivial stuff to the places I am traveling. Many of my friends on Twitter do the same, and as a result we are able to keep up to date on what is going on in each of our lives. That I can better stay in touch with my family and friends while maintaining a busy schedule is a great benefit of the service.

4) As a means of self-expression.

One of the things I have enjoyed most about blogging over these last couple of years is that it gives me the ability to express what is on my mind and share it with others. Twitter does the same but on a more real-time basis. As a result, I find myself opening up to an “audience” of friends about the way that I see the world. Of course opening up your life to a new level of transparency is daunting, but I think putting myself out there has brought more than enough good – in conversations, new friends, and insights – to make up for any discomfort that it might create.

If you are new to Twitter.

I suggest giving it a go for a month or so. Like most communities, you reap what you sow, so try to participate in whatever way feels right. There is no one “right” way to use the service. Hopefully my thoughts on it are helpful, and please let me know if you ever want to chat about it more extensively.