You've reached the internet home of Chris Sells, who has a long history as a contributing member of the Windows developer community. He enjoys long walks on the beach and various computer technologies.
Friday, Jul 4, 2003, 8:22 AM
Feedster turns turbo!
Here. I don't know what happened, but suddenly Feedster rocks. It turned up 76 references to the Applied XML Developer's Conference in Google speeds. Plus, the Understanding Your Search section is just cool (although I don't really need to see it on every page of results : ).
Friday, Jul 4, 2003, 8:11 AM in The Spout
Alvio -- a very cool place to order computers
Craig [1] (via Brad) found Alvio, a really cool place to order computers online. My favorite is the page that lets me configure a barebones P4 system from scratch [2] and then they assembly it, test it and guarantee it for a year. The thing that I like most about Dell is how easy it is to configure computers online. To be able to configure one from the ground up w/o any OSes et al is *way* cool. [1] http://staff.develop.com/candera/weblog2/permalink.aspx/9090a88d-dd58-4310-bb33-85cdc0b121b6 [2] http://www.alvio.com/smoreinfo.asp?iid=941
Thursday, Jul 3, 2003, 8:32 AM
I'm with Mike: Gentlemen Prefer SharpReader
Here. Mike Sax says exactly what I was thinking. After having high hopes for FeedDemon [1], I *much* prefer SharpReader. Luke hit it out of the park on his first try and nobody's yet come close. [1] http://www.bradsoft.com/feeddemon
Thursday, Jul 3, 2003, 8:30 AM in Conference
RSS vs. Echo at Applied XML Dev.Conf.
Here. With Dave Winer on the side of RSS [1]giving the Day 1 Keynote and Sam Ruby on the side of Echo [2] speaking the very next day, the Applied XML Developer's Conference is bound to be a rip-roaring good time. I can't wait. : ) [1] http://intertwingly.net/blog/ [2] http://www.scripting.com
Tuesday, Jul 1, 2003, 1:18 PM
Bill Gates on Longhorn
Here. Besides the cool scenarios BillG mentions that that Longhorn will enable, I like his answer to USA Today asking how long it will be before Longhorn is available: "Years. At this time we're doing the prototyping — feasibility studies, performance studies. We don't have a date because what we have is a technological breakthrough that we have to really make sure we refine and get right. Then we'll get to the point where we'll set up an engineering schedule."
Tuesday, Jul 1, 2003, 1:12 PM
Bill Gates' take on subjects from spam to Mozambiq
Here. I really like how BillG answers questions in general and this USA today interview covers lots of interesting ground, including BillG's take on spam, boring companies, Longhorn & Linux. Enjoy.
Tuesday, Jul 1, 2003, 1:07 PM
Microsoft beats Linux in trio of govt contracts
Here. The question isn't which one is cheaper up front. The question is whether which one provides better value overall.
Tuesday, Jul 1, 2003, 1:05 PM
The Danger of Good Debate Skills
Here. The one where I need to be very careful to listen to good ideas from anyone, even if they haven't been a professional speaker.
Tuesday, Jul 1, 2003, 1:04 PM in Tools
Spout: Learning to Learn
Here. The one where I talk about the most important thing I ever learned.
Tuesday, Jul 1, 2003, 12:50 PM in .NET
Registration-less COM to .NET Wrapper Tool Beta
Here. Aurigma has posted the beta for a COM to .NET wrapper generation tool that doesn't require the COM server to be registered, which is nice for hosted scenarios. It also generates the wrapper code for you to see and edit for your own purposes. Interesting.
Tuesday, Jul 1, 2003, 10:31 AM in .NET
VS.NET Project & Solution Converter
Here. I just know that folks are going to need to be able to convert between VS.NET 2002 and 2003 projects and solutions for a while yet, so here's a free, extensible conversion tool to do the job.
Monday, Jun 30, 2003, 10:53 AM in Conference
Applied XML Dev.Conf. Talks Coming In
Here. Today is the deadline for the Applied XML Developers's Conference and almost half of the slides are in already. I like to leave things 'til the last minute so that the conference always has the speakers freshest thinking. Of course, one of the perks of running a conference is that you get a peak at things early. These talks look really fun. Can't wait to see them presented.
Sunday, Jun 29, 2003, 12:00 AM in Money
The "Average Return" Myth
Let's say that you have $1000 to invest. The first year, you invest it and get a 25% return, so you leave your money invested. The next year, the market doesn't do as well and your return is -15%. What's the average rate of return over the two years? You way think that it's 5%, that is, (25% + (-15%))/2. Let's do the math for 25% and -15%:
- Using simple interest, after 1 year, $1000 + $1000 * 25% = $1250
- After 2 years, $1250 + $1250 * -15% = $1062.50
Here we're using Interest = Principle * Rate * Time calculation for yearly aka simple interest (I = PRT and Time is 1 year). Taking the numbers the other way, i.e. -15% the first year and 25% the next year, yields the same result:
- After 1 year, $1000 + $1000 * -15% = $850
- After 2 years, $850 + $850 * 25% = $1062.50
In fact, the result is the same no matter in which order that the rates come or how many there are:
Table 1: From Good to Bad
| year | return | total |
| 0 | 0 | $1,000.00 |
| 1 | 25% | $1,250.00 |
| 2 | 15% | $1,437.50 |
| 3 | 5% | $1,509.38 |
| 4 | -5% | $1,433.91 |
| 5 | -15% | $1,218.82 |
Table 2: Starting Bad to Good
| year | return | total |
| 0 | 0 | $1,000.00 |
| 1 | -15% | $ 850.00 |
| 2 | -5% | $ 807.50 |
| 3 | 5% | $ 847.88 |
| 4 | 15% | $ 975.06 |
| 5 | 25% | $1,218.82 |
Table 3: A Mixed Bag
| year | return | total |
| 0 | 0 | $1,000.00 |
| 1 | 25% | $1,250.00 |
| 2 | -15% | $1,062.50 |
| 3 | 5% | $1,115.63 |
| 4 | 15% | $1,282.97 |
| 5 | -5% | $1,218.82 |
This result surprised me. I found it unintuitive that no matter how the rates vary over time, it doesn't matter if they come first, last or in between. I expected large losses up front to swamp later gains or early gains to make up for late losses, but the change of the underlying principle amount evens things out, e.g. a smaller percentage drop later is against a larger principle if there have been early gains.
When you figure it as a single formula, Future Value = Principle * (1+Rate1) * (1+Rate2) * (1+Rate3) * (1+Rate4) * (1+Rate5) or F = P*(1+R1)*(1+R2)*(1+R3)*(1+R4)*(1+R5), the independence of the order makes more sense, since multiplication is commutative, i.e. it doesn't matter in what order you do it:
f = p* (1+r1)* (1+r2)* (1+r3)*(1+r4)* (1+r5) f = $1000*(1+25%)*(1+15%)*(1+5%)*(1-5%)* (1-15%) = $1218.82 f = $1000*(1-15%)*(1-5%)* (1+5%)*(1+15%)*(1+25%) = $1218.82 f = $1000*(1+25%)*(1-15%)*(1+5%)*(1+15%)*(1-5%) = $1218.82
Having varied rates like in Tables 1-3 in a stock or stock mutual fund investment isn't uncommon (as we've just seen during and after the Internet bubble). On the other hand, if you compare this a fixed yield (like a bond) with our "average rate of return" of 5%, you'll see a different result:
Table 4: Small But Fixed Rate of Return
| year | return | total |
| 0 | 0 | $1,000.00 |
| 1 | 5% | $1,050.00 |
| 2 | 5% | $1,102.50 |
| 3 | 5% | $1,157.63 |
| 4 | 5% | $1,215.51 |
| 5 | 5% | $1,276.28 |
With a fixed interest rate, we can simply our calculations somewhat using Future value = Principle * (1 + Rate)^Number of compounds. So, $1000 at 5% for 5 years is:
f = p*(1+r)^n f = $1000 * (1 + 5%)^5 f = $1000 * (1.05)^5 f = $1276.28
Any way you calculate it, not only does the boring, fixed interest rate bond out-perform the variable rate even for the same average rate of return, but clearly our average rate of return calculation isn't very useful. We're not really getting 5% year to year on our varied stock rates of return, or they'd show the same results as the bond. Instead, if you reverse the formula for Rate, we get:
r = (f/p)^(1/n) - 1 r = ($1218.82/$1000)^(1/5) -1 r = 1.21882^(1/5) -1 r = 4.037%
This gives us a annualized rate of return:
Table 5: Annualized Rate of Return
| year | return | total |
| 0 | 0 | $1,000.00 |
| 1 | 4.037% | $1,040.37 |
| 2 | 4.037% | $1,082.37 |
| 3 | 4.037% | $1,126.07 |
| 4 | 4.037% | $1,171.52 |
| 5 | 4.037% | $1,218.82 |
Taking this further, because the future value of an investment is the same whether you consider a fixed rate of return or a variable rate of return, for any principle, you can calculate the fixed rate of return by deriving from this formula (assuming r0 is the fixed rate of return and r1-r5 are the variable rates of return):
p*(1+r0)^n = p*(1+r1)*(1+r2)*(1+r3)*(1+r4)*(1+r5)
Further, because principle plays the same role on each side of the equation, you can remove it:
(1+r0)^n = (1+r1)*(1+r2)*(1+r3)*(1+r4)*(1+r5)
Solving for the annualized rate of return from the variable rates of return gives you this:
r0 = ((1+r1)*(1+r2)*(1+r3)*(1+r4)*(1+r5))^(1/n) - 1
Applying it in our example:
r0 = ((1+25%)*(1+15%)*(1+5%)*(1-5%)*(1-15%))^(1/5) - 1 r0 = (1.25*1.15*1.05*0.95*0.85)^(1/5) - 1 r0 = 4.037%
So what happens when we increase the variability, but leave the average rate of return the same? The variability adjusted return gets smaller:
Table 6: Extended Variability
| year | return | total |
| 0 | 0% | $1,000.00 |
| 1 | 25% | $1,250.00 |
| 2 | -15% | $1,062.50 |
| 3 | 5% | $1,115.63 |
| 4 | 15% | $1,282.97 |
| 5 | -5% | $1,218.82 |
| 6 | 5% | $1,279.76 |
| 7 | -25% | $ 959.82 |
| 8 | 40% | $1,343.75 |
| 9 | -30% | $ 940.62 |
| 10 | 35% | $1,269.84 |
Notice that we're still got an average rate of return of 5%, but increasing the variability gives us an annualized rate of return of 2.42%.
On the other hand, extending the same average without increasing the variability looks like this:
Table 7: Extended Time, Variability Unchanged
| year | return | total |
| 0 | 0% | $1,000.00 |
| 1 | 25% | $1,250.00 |
| 2 | -15% | $1,062.50 |
| 3 | 5% | $1,115.63 |
| 4 | 15% | $1,282.97 |
| 5 | -5% | $1,218.82 |
| 6 | 25% | $1,523.53 |
| 7 | -15% | $1,295.00 |
| 8 | 5% | $1,359.75 |
| 9 | 15% | $1,563.71 |
| 10 | -5% | $1,485.52 |
In this case, when the variability remains unchanged, the annualized rate of return remains unchanged at 4.037%. In other words, as the variability increases, the annualized rate of return gets further away and lower than the simple average rate. On the other hand, as the variability decreases, the annualized rate approaches the maximum value of a fixed rate of return, i.e. zero variability.
So, while it's comforting that so long as your investment doesn't go to zero, it doesn't matter when the highs and lows come, it's somewhat unintuitive that the average rate of return is not what you want to use to calculate the rate of return that you're actually getting. In fact, the annualized rate of return will always be lower than the average rate as variability increases.
Sunday, Jun 29, 2003, 12:00 AM in Money
Chris's Notes on The Motley Fool Investment Guide
Chris's Notes on The Motley Fool Investment Guide: How The Fool Beats Wall Streets Wise Men And How You Can Too, David Gardner, Tom Gardner, Fireside, 1997. I don't recommend this book for anything but an example of the hubris that was rampant during the Internet bubble and a few chapters that hold the reader's hand making the markets seem approachable.
In general, I recommend Peter Lynch's Learn to Earn for the hand holding instead.
Sunday, Jun 29, 2003, 12:00 AM in Money
Chris's Notes on All the Math You Need to Get Rich
Chris's Notes on All the Math You Need to Get Rich: Thinking with Numbers for Financial Success, Robert L. Hershey, Open Court Pub Co, 2001. I recommend this book for the basics it covers, the slim size, the exercises and the approachable text.
I graduated from high school with all kinds of wonderful math grades (I finished all of my high school math a year early and had to attend a calculus course at a nearby college in my senior year), but managed to get out without a firm grasp of some simple ideas. Specifically, I never learned why it is that when I make a fixed house payment, the actual amount that goes to the interest and to the principle varies each month. The reason this is (as I'm sure all of my readers already know) is because the interest is only paid against the outstanding principle that remains on the total loan each month. It's just like compound interest in reverse (an idea that I always did understand).
I haven't been reading this book cover to cover (I already know how fractions, scientific notation and fractions work), but this one fact alone makes this book worth the price. Plus, it makes a wonderful reference (this is where I got F=P(1+R)^N used in The "Average Return" Myth). The world needs more short, focused, well-written books.