Subject: Re: "I've got more programmers than you"
From: Tom Lord <>
Date: Sat, 6 Oct 2001 08:33:49 -0700 (PDT)

   Thanks for the interesting figures and discussion (and explanation
   of the acronyms). 

   Are the figures you quote available on the web for further reference?

   Thanks a lot

The net is chock full of helpful sources of information.

Since you ask that question I'll assume that, like me, you are not a
financial wizard.  Since I seem to have a bit more state on this than
you, I'll answer with more than just the specific information you
asked for.  Let's see if I can *really* embarrass myself with wrong
vocabulary and not-quite-right details

One nice interface is  I like to get "flash quotes"
for various companies, and then explore all the information linked
from there.

The numbers Larry was quoting can be found in SEC ("Securities and
Exchange Commission") quarterly and annual filings (10Q and 10K).
Those filings also have lots of interesting qualitative descriptions
of the business of each company, as the company currently sees it.
(The "annual reports" sent to share-holders start with the 10K
information and add lots of supplementary information, sometimes with
some cool schwag you can put up in the attic to give to some future

There are at least a few good books on stock trading that have decent
glossaries -- though I haven't found any glossary that has every term
you encounter or that always has good definitions.  There are some
glossaries on-line, though I don't have any specific links to
recommend.  Google is your friend.

If you want to understand difficult economic times, it's helpful to
compare a company's assets and revenues to those of their expenses
that recur from quarter-to-quarter.  Wages are included in those
expenses.  So are loans, rents, materials, etc.  The cold, abstract
numbers impact many lives in very direct ways.  

(The difficulty of managing those numbers, in that context, creates
enormous ethical, philosophical, and practical difficulties for which
nobody has fully worked out and unambiguously right answers.  It
doesn't help that the people who don't manage, but are most directly
effected by those numbers, are often clue-less about them.  It bugs me
a little bit when people rag gratuitously on the likes of Bill Gates,
which is not to say that that class of people never perform clearly
evil acts or should be beyond criticism or resistance.)

There are somewhat mysterious (to me) accounting tricks for
amortizing one-time expenses (such as the cost of buying another
business) over a long period of time.  If someone can give a simple
and clear definition of "good will", for example, I'd appreciate it.
If you are concentrating on the sustainable business that underlies
those kinds of transactions, look at the "adjusted" results.

To understand what the 10K numbers mean in the grand scheme of things,
it's helpful to get some understanding of the money flow from the
federal reserve banks, through the economy, and back again.  Within
that context, get some understanding of what it means to raise money
by issuing stocks or bonds and paying dividends.  Imagine yourself as
a Dutch tulip trader who needs a ship, for example, and then keep
adding layers of subtlety and complexity to the financial
arrangements.  (A lot of basic math was first worked-out simply to
help implement this complexity.)

Keep in mind that even old, mature companies typically have some stock
to sell or pay people with, sometimes buying some back, sometimes
normalizing stock price with splits or reverse splits, sometimes
making special issues of new stocks to fund specific activities,
sometimes just creating new shares out of thin air.  Those tricks help
explain why companies and their creditors care about stock price -- it
isn't just a popularity contest, amateur day-traders notwithstanding.
("Creditors" can include both institutions, such as banks, and the
public, via bond markets.)

In the pre-IPO world, sometimes people issue stock privately to
bootstrap a future public stock -- presumably aiming to create a
company that will one day pay dividends and have a value that at least
keeps up with the overall market, if not out-pace it.  In some other
instances, people issue stock to build a business to be acquired and
assumed into a larger company.  (And you can create a company not
deciding in advance which road to take.)

Investors pick stocks based on various mixtures of two factors: what
they expect the value of the company to do relative to the overall
economy (stock price), and what kinds of surplus profit they expect
the company to produce (dividends).

Some industries, e.g. many commodities, are "easy" to model given
enough information about the modes of production, the state of raw
materials, the nature of demand in the relevant markets, etc.

Software is not one of those industries.  

One criticism that can be directed at a number of contemporary,
software companies is that they are built with business models and
operated with cost control strategies aimed at forcing the hard
modeling problem to be an easy modeling problem.  Labor takes an
increasingly unacceptable amount of abuse by those businesses.
Technology is often driven in, frankly, stupid and dangerous
directions by those businesses.

But anyway, -- that's what you *really* wanted to