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Torn between "I think losing $100 million when someone beats you at security research is pretty much exactly what you signed up for doing yield farming" and "Maaaaaaaybe not the future of finance you were expecting, huh."

 How to put this in regular finance terms...

Suppose hypothetically you have an account at a brokerage with some valuable asset in it. You take a margin loan against that asset to fund your normal spending, or pay a tax bill, or maybe buy something at another brokerage.
For reasons known only to the brokerage, they don't denominate your loan in dollars. They denominate it in shares of a money market fund, which are worth $1 +/- epsilon and basically never deviate from that.

And you think "Hmm, I have a large equity cushion against this loan."
One day, a computer system at the brokerage reports, sorta-kinda erroneously, that the value of the money market fund is actually $1.30 per share. The equity cushion is gone. Your valuable asset is sold, at timing you didn't choose, at wrong price, to pay an inflated phantom debt
And your recourse is... probably tweeting at patio11 saying he finds too much joy in this.

Which I don't; I just feel like this is why you don't trust a CPU built out of redstone to build reliable financial infrastructure on top of.
"Hey patio11 could this happen in traditional finance?"

Ill-timed liquidations can and do, but attacking someone doing something not-risky to force a liquidation is harder, because of many built in safeguards.
One, you can actually borrow in your unit of account (e.g. dollars), and $1 = $1, so you can't convince a brokerage that a $100k debt is actually $130k.

Two, if you regulated financial institution has a goof in your data feeds causes you to mechanically disadvantage retail...
... your most likely outcome is having an internal meeting and saying "Which do we dislike more, covering their losses out of our equity OR getting our knuckles rapped by the regulators, paying a fine, then covering the losses with our own equity?" and choose door #1.
Three, it is enormously hard to pervert the most popular real markets in the world and that is a game you actually don't want to win, because the first prize is frequently go-directly-to-jail.

This is not the consensus viewpoint among engineers, who do not have good calibration.
Like if you somehow did security research against e.g. the monthly Treasury auction and somehow caused it to invert expectations around reality, that would plausibly have $X0 billion in consequences and you could make out like a bandit.
And also literally everyone you had talked to for the last several years would be taken out for tea by friendly serious federal agents.
("Do you really think that would happen?"

For the treasury auction? Oh heck yes I do. Expect a turf war between the money people and the terrorism people over who gets to lead the investigation.)
Crypto enthusiasts would probably suggest me to disagree with them on this, and I actually do not at all:

The financial system is in part of broader systems of state control. Seriously attacking it at scale would be treated indistinguishably from "kinetic" war.
"So is the state going to seriously come after crypto people then?"

While they flatter themselves into thinking they materially challenge the government, following their own logic pretty closely, if this were actually true their conferences would attract precision munitions.

More from Patrick McKenzie

Patrick McKenzie
Patrick McKenzie
@patio11
The payments wars in Japan are heating up and one of the battlegrounds is convenience store coffee.

“Coffee? What does that have to do with payments?” I’m glad you asked.

Convenience stores are low net margin businesses, which sell some high gross margin goods/services but a lot of low ones, and have high fixed costs and a low ticket size. The typical transaction is under 500 yen ($5) and many are about $1.

They need repeat custom.

A few years ago, all of the chains had a good idea for increasing frequency of use: make a minor capital investment in automatic coffee machines. Sell access to them for the price of a cup / ice; customers self-serve with the machine.

The price point is $1 to about $2.

Coffee quickly became one of the most frequently repurchased items at convenience stores, in no small part because it’s the one thing they can sell which is phameceutically habit forming but totally unregulated. (Just telling it like it is.)

But the coffee is not very defensible

The problem, such that it is, is that competing chains are everywhere and *all* of them serve Thoroughly Adequate Coffee at similar prices, so you’re back into the brutal economics of “Who is 3 meters closer to 40 customers at 1 office?”

Enter payment apps.
FINANCE
Patrick McKenzie
Patrick McKenzie
@patio11
A thread on HN about bad code in legacy projects both makes me think how little we've learned as a discipline over the years and, honestly, how little credit we give ourselves for some pretty major

Fun going down this list and thinking: "Hmm, plausible at a well-run modern software shop", "Hmm, possible, but requires implausible tradeoffs", "Literally disallowed by languages", and "If you were to attempt doing that our test suite wouldn't let you merge."

I think we as an industry celebrate (not quite the right word) failure too much and don't celebrate success nearly enough. There is no DailyWTF for competent execution, word of which generally stays pretty local to the source while incompetence passes into legend.

Alrighty let me try to thread the needle on being the change I want to see in the world while not giving away anything that will get me in trouble:

Ruby has wonderful developer ergonomics. Typed languages are easier for machines to guarantee the correctness of. We built a type checker for Ruby (and I believe it is slated for OSS release sometime).

c.f.
TECH
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Patrick McKenzie
Patrick McKenzie
@patio11
This lunch is 500 yen ($4.80) at Sukiya, a Japanese fast food restaurant which belongs to a category with about three big competitors.

I love the aesthetics of this category and they’re under remarked upon.


I think people underestimate QSRs in terms of social utility, but Sukiya et al describe themselves as mission-oriented enterprises. I believe this is largely sincere, and goes back to the 60s and 70s, when the clientele was primarily manual laborers who had migrated to work.

Japan was not a rich nation at the time, and day laborers in particular were both unlikely to be able to cook for themselves and unlikely to have much of a food budget, and so the chains sprung up offering an honest-to-goodness cooked meal delivered in under a minute for cheap.

This heritage continued over the years, even after Japan became a much more wealthy nation, and these chains function as social support and dignity for folks in diminished circumstances.

They also are a wee bit of a cartel, and I appreciate the aesthetics of the cartel:

Back when I was first in Japan, in the mid 2000s, there was an increase in the price of beef.

And the heads of the three chains got together, and decided that the price of the basic beef bowl needed to increase, but given the economic circumstances how could they hold the line.
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Patrick McKenzie
Patrick McKenzie
@patio11
My friends @robwalling and @einarvollset just launched TinySeed, an accelerator for software companies where a successful outcome is a healthy, sustainable business rather than attempting to ride the rocketship trajectory. https://t.co/LSHqZNcVid

I have some thoughts:

As somebody who bootstrapped ~4 companies, I feel like I had to make some clearly suboptimal decisions early in them for lack of what is, in hindsight, not all that much money. But there's a huge gap in the product space for investment options.

It's weird: you can get $25k from Amex trivially, and angels are very willing to write a check for that much, but you have to make representations about your goals/ambitions/market/etc which don't really apply to everyone.

And so you see the traditional angel/VC ecosystem fund companies where honestly the returns are probably not there, and this is knowable pretty early, but the chase of them will wreck what could have been a perfectly happy business.

(To make the math work for traditional VCs the company has to at least have a market-appropriate shot of $100 million a year. There are a lot more $10 million a year companies than $100 million a year companies. That is *not* a bad terminal outcome for founders/employees.)
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Patrick McKenzie
Patrick McKenzie
@patio11
Most software founders, particularly in B2B, need to get radically better at sales. @Steli , who is the best person for explaining the scrappy stages in the beginning and then building out a team with scripts and processes, wrote a guide to:

For technical founders it is irrationally, obscenely hard to reverse years of programming (ba dum bum) that sales is a value-destroying activity. Sales is CLEARLY a value-creating activity, contingent on you have a value-creating product.

The world will not drop what they are doing to adopt your work. This is particularly true in B2B, where simply building a better mousetrap won't overcome the activation energy required to get people with additional non-mice problems to prioritize changing mousetraps today.

This is very non-obvious for founders because founders are not often people who *want* to be sold to. We often come from a background where trying out tools is a bit of a fun hobby. We like looking at all the options, making charts, and ripping out partially complete tests.

"This week I unsuccessfully trialed four software options for automating that thing that has been killing us. Our actual production process remains the same as last week. Don't worry; this was a great use of time." is not a thing you want to write in a progress report to manager.
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Welcome to Greta's 4th edition of #Tesla customers getting used and abused. Because that's the Elon Musk way.
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Dear #Tesla customers: In California, if your vehicle has been out of service for >30 days total, it's a lemon. You can get punitive damages and attorney's fees. Don't sit around and take Elon's abuse. @13arm13arm @cecimar12 @richardson_skip @shootinglee $TSLA $TSLAQ 5/22
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you know how Atari called the Jaguar as a "64bit system", because it had two 32bit CPUs? (or because it had a 64bit bus, but let's not worry about that)
we should apply that logic to the current generation of consoles.
So the Switch is a 256bit console. It's the Nintendo 256.

The Xbox Series X? terrible name.
Better call it the "Xbox 512 Blu-ray".
like the Jaguar CD, the Sega CD... the good old days when consoles had their media type in the name.

Boringly the PS5 is also a Playstation 512 Blu-ray, because both of them are using the same AMD Zen 2 CPU.

The Switch one is weeeird. It's built on an Nvidia Tegra X1, which is an 8 core 64-bit CPU, so that should be 512, right?

Well... no. Four of them can't be used. And later documentation doesn't even mention them.

it's some weird system where the system-on-a-chip has four Cortex-A57 cores and four Cortex-A53 cores but only the A57s are usable?
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Shaun Russell
Shaun Russell
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"I really want to break into Product Management"

make products.

"If only someone would tell me how I can get a startup to notice me."

Make Products.

"I guess it's impossible and I'll never break into the industry."

MAKE PRODUCTS.

Courtesy of @edbrisson's wonderful thread on breaking into comics – https://t.co/TgNblNSCBj – here is why the same applies to Product Management, too.


There is no better way of learning the craft of product, or proving your potential to employers, than just doing it.

You do not need anybody's permission. We don't have diplomas, nor doctorates. We can barely agree on a single standard of what a Product Manager is supposed to do.

But – there is at least one blindingly obvious industry consensus – a Product Manager makes Products.

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Steve Schoger
Steve Schoger
@steveschoger
How to make a "Briefcase" icon in @figmadesign.

🧵 thread 👇


In a 24 x 24 pixel artboard, use the rectangle tool (R) to draw a 18 x 10 pixel rectangle positioned horizontally centered and 6 pixels from the top of the artboard.


Using the ellipse tool (O), draw a 96 x 96 pixel circle and align the top to the center/top of the rectangle. Select both shapes and use the boolean tool to intersect the group.


Using the ellipse tool (O), draw a 48 x 48 pixel circle and align the bottom to the center/bottom of the rectangle. Select both shapes and use the boolean tool to intersect the group.


Flatten the shape (command + E) and double click it to make it editable. Select the top left and right points and give them a 2 pixel corner radius. Select the bottom left and right points and give them a 1 pixel corner radius.
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@GergelyOrosz
The 12 most important pieces of information and concepts I wish I knew about equity, as a software engineer.

A thread.

1. Equity is something Big Tech and high-growth companies award to software engineers at all levels. The more senior you are, the bigger the ratio can be:


2. Vesting, cliffs, refreshers, and sign-on clawbacks.

If you get awarded equity, you'll want to understand vesting and cliffs. A 1-year cliff is pretty common in most places that award equity.

Read more in this blog post I wrote: https://t.co/WxQ9pQh2mY


3. Stock options / ESOPs.

The most common form of equity compensation at early-stage startups that are high-growth.

And there are *so* many pitfalls you'll want to be aware of. You need to do your research on this: I can't do justice in a tweet.

https://t.co/cudLn3ngqi


4. RSUs (Restricted Stock Units)

A common form of equity compensation for publicly traded companies and Big Tech. One of the easier types of equity to understand: https://t.co/a5xU1H9IHP

5. Double-trigger RSUs. Typically RSUs for pre-IPO companies. I got these at Uber.


6. ESPP: a (typically) amazing employee perk at publicly traded companies. There's always risk, but this plan can typically offer good upsides.

7. Phantom shares. An interesting setup similar to RSUs... but you don't own stocks. Not frequent, but e.g. Adyen goes with this plan.
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MAHARAANI TARARANI: THE QUEEN OF MARATHAS

Rani Tarabai was the brave daughter-in-law of Chhatrapati Shivaji and one of the greatest medieval Monarchs India ever had.
She was born in 1675 to one of the bravest commander-in-chiefs of Shivaji's Army named Hambir Rao Mohite.


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