Position Yourself to Benefit From Luck

I commute by train to work each day. Every morning, commuters line up along the train platform in clumps, anticipating where the train will stop.

Most of the time, the train will stop so that the doors line up in front of the clumps of people. However, sometimes the train will over or under-shoot the clumps.

There is no way to predict this but, one thing I realized, is that if you line up behind a human clump, you will never have a chance to get on the train first.

So I always line up next to a clump, so that there is nobody in front of me. This way, I sometimes get lucky and the train stops right in front of me.

Today was such a day.

This is a very petty achievement but, I realized that there is a lesson here. We may not be able to predict when somethings happen, but we can position ourselves to take advantage of them if they occur.

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Origin of Term "Yakuza"

Yakuza is the term used for organized crime members in Japan.

I read about the origin of the term in Wikipedia, and it is interesting. The name derives from a Japanese card game called Oicho-Kabu.

This game is like baccarat and blackjack. In this game, players add up the face values of their cards and, if the sum is over 9, they take the last digit as their score (like baccarat). The player closest to 9 without going over, wins (like blackjack).

The hand of 8-9-3 (ya-ku-za) is considered the worst hand, because it adds up to 20, which means a score of 0.

The Yakuza took this name because, to win with this hand, a player has to use a lot of skill, and not depend on luck.

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10 Most Commonly Used Online Passwords

How did the dumb guy handle internet security? He picked one of the 10 most common on-line passwords (according to the May 8 issue of PC Magazine):

1. password

2. 123456

3. qwerty

4. abc123

5. letmein

6. monkey

7. myspace1

8. password1

9. blink182

10. (your first name)

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Your Age By Diner & Restaurant Math

This is pretty neat.

DON'T CHEAT BY SCROLLING DOWN FIRST!
It takes less than a minute .
Work this out as you read ...
Be sure you don't read the bottom until you've worked it out!
This is not one of those waste of time things, it's fun.

1. First of all, pick the number of times a week that you would like to go out to eat.
(more than once but less than 10)

2. Multiply this number by 2 (just to be bold)

3. Add 5




4. Multiply it by 50

5. If you have already had your birthday this year add 1757 ....
If you haven't, add 1756 .





6. Now subtract the four digit year that you were born.


You should have a three digit number


The first digit of this was your original number
(I.e., how! Many times you want to go out to restaurants in a week.)

The next two numbers are

YOUR AGE! (Oh YES, it is!!!!!)

In a post on my math and logic blog, we will analyze this process and we will see why 2007 is the only year this will work.

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Sam Zell Buys Chicago Tribune

Earlier this month, it was announced that Chicago billionaire Sam Zell is buying the Tribune Co. (parent of the Chicago Tribune, Chicago Cubs, WGN radio and TV, Los Angeles Times, Newsday, etc.) for $8.4 billion.

Since I'm interested in business and success, I found the story about both Zell and the deal itself to be very interesting and inspiring.

Here, I will discuss the basics of the deal. In two other posts, I will discuss Zell himself (the "anti-Trump"), and the deal's S. Corp. ESOP structure.

In 2000, the Tribune bought the Times-Mirror company for $8.3 billion. This gave them Newsday and the LA Times. However, it also got them involved with the Chandler family (which founded the LA Times) and stuck them with an unexpected $1 billion tax liability.

After 6 years of the stock going nowhere, the Chandlers, who became the Tribune's largest shareholders, demanded that the company be sold or restructured.

This put the Tribune "in play". It ended up coming down to the "battle of the billionaires", between Sam Zell on one side, and L.A. billionaires Ron Burkle and Eli Broad on the other side.

Zell was seen as the "hometown guy", while Burkle and Broad were the "L.A. guys", who thought that the Tribune treated the L.A. Times as a step child.

The Burkle-Broad bid was for $34/share, while Zell's was $33. The Tribune board ended up favoring the Zell bid as more financially sound, but they made him come up to $34/share before accepting his bid.

The Zell deal will leave the Tribune loaded with more than $13 billion in debt. This will leave it with the most encumbered balance sheet in the newspaper business - at a time when the conventional wisdom is that newspapers are in trouble due to the internet.

However, Zell (the self-nicknamed "Grave Dancer" who specializes in buying stuff nobody else wants) thinks that Tribune has a lot of untapped potential. For example, Tribune's CareerBuilder.com is the #1 job site in the United States, but Monster.com is #1 world-wide. Zell thinks CareerBuilder could be better marketed abroad.

The plan is for the Tribune to sell the Cubs to help pay down the debt, They want to sell the Cubs BEFORE the deal completes, so that Zell does not have to go through the Major League Baseball ownership approval process. However, Zell (the real estate expert) is keeping his options open with Wrigley Field. He may sell Wrigley separately if he thinks that will maximize the return.

The deal will be structured around an S-corp. ESOP to avoid taxes, thus increasing cash flow. For example, in 2006, if the ESOP had been in place, Tribune would have saved $348 million in taxes.

Zell and Tribune management figure that, as long as the Tribune's cash flow at least stays flat, they should be able to pay off the debt in 10 years, at which time the returns should be huge.

There is still some uncertainty with the deal. The deal calls for a relatively small break-up fee of $25 million, which means that other deals, including revised offers from Broad and Burkle, could be considered. Also, there is speculation that the FCC may consider the deal to be a change of ownership, and revoke the Tribune's grandfathered exemption from media cross-ownership rules (i.e. TV, radio, and newspapers in Chicago).

The main thing to remember is Zell's shrewd deal. Now matter what happens, his personal risk in the deal will be capped at $300-500 million. For that investment, he will be chairman and 40% owner (the employees will own the rest) of a multi-billion dollar corporation.

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Age is All in the Mind

Today is my 40th birthday.

I don't feel old or different. Maybe it hasn't sunk in yet ;-)

But, I read a story in the Chicago Tribune a few weeks ago that puts age in perspective.

They interviewed a guy who works 12 hours, Monday through Friday, as a security guard. On Sunday, he is a deacon in his church. Saturday is his only day off.

This man is 102 years old.

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Garbage In, Quality Out

In Unix programming, I learned a great lesson: Write your program to accept anything, but only output what you are supposed to.

For example, if your program reads in numbers and passes along the sum, and someone inputs **, the easy approach is to pass a garbage value down the line and, after the whole process breaks down, blame the input.

Instead, your program should read in anything (including **) without complaint, silently discard the garbage, and pass something legitimate, like 0, for the sum.

This powerful process can be applied in other areas of your life.

If someone kicks you down, you can turn around and kick someone else. The problem with this approach is that you have given up control and put yourself at the mercy of low energy. Worse, you are passing the low energy and misery to others.

The better approach would be to take the kick without complaint and simply discard it. Then, don't kick others, complain to them, or even brag about how you discarded the kick. That is simply fluffing the ego. Instead, pat someone on the back.

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Danish "Flexicurity"

These days, Americans worry about free trade, outsourcing, and layoffs.

However, as demonstrated by most of Europe, protectionism has led to high joblessness and slow economic growth.

I read in Forbes magazine that the Danish system is getting a lot of attention as a middle ground between "cruel capitalism" and "Eurostagnation".

With flexcurity, they combine light regulation (employers can layoff at will) with generous unemployment benefits, and a well-developed education system for people who are laid off or outsourced.

An example they gave is the town of Billund, where Lego employed 4,000 out of a population of 10,000. Lego decided to lay off half its workforce there (2,000). Instead of devestating the town, the former Lego workers had a soft landing and bounced back: the unemployment rate in Billund went below 2%.

The laid off workers collected 90% of their income for 6 months. Before they were even officially let go, they were shuttled to classrooms for a 6 week retraining program. In the program, the employees were taught how to transition from manufacturing to the service industry. The service training was so good that Lego had to discourage the airport and a nearby water park from poaching the trainees until they were officially laid off.

Statistics show that Denmark is doing well. Their employee turnover level is on par with the Unites States, and their 3% real GDP growth rate is the best in Western Europe.

The main drawback is that the benefits are paid for by a high income tax, with an upper rate of 60%. This chases the smartest and most highly skilled Danes to lower taxed places like the U.S. or U.K.

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prescription drug plan on 60 minutes

Today, 60 minutes just did an expose on the perscription drug plan - the most expensive entitlement in 40 years.

Here are some hi (low) lights they reported:

1. The drug industry has two lobbyists for every congressman. They spent over $10 million to lobby for the drug plan.

2. The drug lobby itself wrote the 1,000 page bill. 

3. On the day the House passed the bill, the congressmen received the bill the morning of the voting, so they did not have a lot of time to study it.  The voting took place at midnight, when they knew that most C-Span viewers went to bed.

4. The voting was supposed to take 15 minutes but, when the Republican leadership saw that a lot of republicans were siding with the democrats to vote against it, the voting was kept open for 3 hours, and the arm-twisting began.  The bill was finally passed at 3 am.

5. Congressmen were told that the program would cost $390 billion over 10 years, even though the latest revised estimates were for over $500 billion.  The revised numbers were not released until after the bill passed.

6. Billy Tauzin (R-La) led the passage of the bill.  Afterwards, he left congress and was hired by the pharmaceutical industry for $2 million / year.

7. The bill forbids Medicare from negotiating volume drug purchasing. The Veteran's Administration negotiates drug prices.  Today, an average Lipitor perscription costs Medicare $785/month vs. $520/month for the VA. 

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Google April Fool's Joke

Google had a link on its home page for a new free broadband service:

http://www.google.com/tisp/

It's a clever joke because peopel are used to Google offering new free beta services.

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