Office 2010: The Movie

Hat tip: The Atlantic's James Fallows. Fallows writes,

Thirty seconds in is the part that makes it all worthwhile to me.

Which is an allusion to this humorous anecdote from his brief stint at Microsoft. Enjoy:

A Visitor From Redmond, WA

A few days ago, this blog's Feedjit widget showed that a visitor from Redmond, WA (home of Microsoft's headquarters) clicked on this post, "Algebra Challenge". Seeing that, I wondered if someone an interviewer at Microsoft was binging math questions for the company's notorious interview questions¹. I happen to have middling math skills myself, but I think this could be an decent interview question, as long as the interviewer just asked the interviewee how he would solve the problem, instead of requiring him to actually solve it (since, the arithmetic is messy, andas commenter J.K. noted in that thread, the actual formula is heavily rounded). The key insight here would be to recognize that the problem can be stated and solved as a system of three equations.

This raises a question I've wondered about in the past, which is to what extent these sorts of questions actually measure intelligence. Maybe it doesn't even matter though, if the questions test for a similarly valuable attribute other than intelligence.

Consider, for example, a couple of word problems I remember from tests I had to take as part of the application process for jobs in the past. Without digging up the exact text of the two word problems this was the gist of them: The first asked how many of each type of coin you would have if you had a certain amount of money in change; the second asked how far apart two individuals would be if one walked so far in one direction and then so far to the left, and the other did the exact opposite. I remember these two word problems for two reasons: I know I got them right, and I know that my getting them right wasn't a reflection of my intelligence or math aptitude. I got the problems right because I had seen them before.

I knew that the first problem could be solved with elementary algebra (using 25x for a quarter, 10x for a dime, and so on), and the second one could be solved with elementary geometry (adding the hypotenuses of the two resulting right triangles). Although these questions didn't measure my intelligence or math aptitude, my getting them right did demonstrate something else: that I had paid attention in math class, or perhaps that I had studied this stuff relatively recently while preparing for a standardized test needed for a graduate degree. So getting those problems right demonstrated either intelligence/aptitude, conscientiousness, or ambition, or some combination of those attributes; and whichever of these attributes a test-taker had would reflect well on him, as far as the employer was concerned.


¹I was reminded of this by a conference call I had today with an ABD finance Ph.D. who is doing some consulting for me and one of my web developers. My finance consultant created an algorithm for me, and he was going over it with one of my web developers. My finance consultant assumed that my web developer, who has a bachelors degree in computer science, would have had all the math background necessary to understand the algorithm. My web developer noted that he had a minor in math, in addition to his comp sci degree, but he just wasn't familiar with a particular function the finance consultant specified (an infimum function). I hadn't heard of the function before either, and if a comp sci major/math minor hasn't heard of it, I guess a question based on that function wouldn't be a good one for a Microsoft interviewer.

Small Businessmen Prefer Windows XP

Last week I got a packet of coupons in the mail, triggered somehow by my recent formation of a limited liability company. One of them was from Dell's small business group, and since the computer I'm typing on now dates back to the last century (I added some RAM and installed Windows XP a few years ago), I figured I'd finally buy a new desktop. The deal came with Windows Vista Home standard, and the flyer mentioned the option of upgrading to Windows Vista Business for an extra $99. Having seen Windows Vista in action on a friend's computer last year, I asked how much it would cost to downgrade to Windows XP. That was $99 as well. So I told the Dell sales rep to ship it with XP and, out of curiosity, asked him what percentage of his clients asked for a downgrade to XP. He said about 90%-95%.

Mark Cuban on Stocks

On Megan McCardle's Atlantic blog, a commenter named Devin Finbarr posted a link to a compilation of posts on stocks by the billionaire entrepreneur/investor Mark Cuban, entitled "Talking Stocks". Cuban, famously, was one of the few investors savvy enough to lock in his profits near the peak of the dot-com bubble. After selling his company Broadcast.com to Yahoo! in a stock deal, he used options to lock in his profits on Yahoo! stock. Below is an excerpt from this compilation of posts.

On Buybacks versus Dividends (prompted by the occasion of Microsoft's huge special dividend):

To stock traders, the buyback makes perfect sense. If you buy stock in the open market, you help maintain the stock price. If you buy back shares of stock, you reduce the number of shares outstanding, which in turn increases the earnings per share.

This of course is completely contrary to every message that every company CEO, particularly Microsoft tries to send, that they are not trying to manage earnings or the stock price.

More importantly, it rewards the exact thing that should not be rewarded. It rewards people getting out of their investment, while not rewarding keeping the investment.

Sell the stock, you get paid. Keep the stock, you get nothing. Yes, I know that the stock price is supposed to go up for those who keep it, but there are no assurances that it will. The only certainty is that the seller has cash in the bank. The holder has the same amount of risk.

Shouldn't continuing shareholders be rewarded rather than the sellers?

That's why I am such a big fan of dividends. Dividends are the investors' best friend for several reasons:

1. The obvious, it's cash in the bank

2. It reduces your cost basis and rewards you for being a continuing shareholder

3. It can put a cap on how much the company can dilute your holdings. When a company pays a dividend, it's much more expensive just to issue stock and options to insiders. They have to consider the cash implications of each additional share or option issued. That's a good thing. It keeps companies with legitimate dividends from going nuts.

4. It creates a precedent of rewarding shareholders, hopefully with increasing dividends.

On the flipside, share buybacks are horrid for several reasons

1. It allows companies to manipulate earnings per share. Buy back enough stock, and you will hit your Wall Street expectations.

2. Companies will undertake risky cash management strategies to pay for the share buybacks. Since its one time, they can take greater risks

3. Companies will undertake buybacks with CEO and management incentives and bonuses in mind. Hit those numbers, earn lots of stock and options.

4. Companies will buyback stock so that they can re-issue it to themselves and employees. In essence they use the market as their personal and corporate piggybanks. They Buyback stock to push up earnings in hopes the stock goes up. Then they issue the stock to themselves. Then if the stock goes up, they sell the stock they awarded themselves to unsuspecting shareholders who have no idea the money they are paying for shares is going to insiders.

Stock buybacks are a very bad idea for investors and a very profitable idea for insiders and traders.