Nathan Lustig

My 2012

Category : Personal Thoughts
Posted on December 31, 2012 by Nathan Lustig

My year end reflections post is always one of my favorite ones to write each year. Here’s a look back at what I did in 2012. Previous versions here (2000s, 2009, 2010, 2011).

Although I started 2012 in the exact same place I started 2011, LA to see the Badgers in the Rose Bowl, it was a year of big changes, a year in flux. Jesse and I were on the verge of selling Entrustet and I was trying to decide what I wanted to do next. I knew I wasn’t ready to start something new, so in January, I moved back to Chile with the goal of finding a job in a startup that would force me to learn spanish and give me the chance to really get to know how the markets work in the rest of Latin America.

rose bowl 2012

After a month long search, I ended up working with Welcu, a fast growing Chilean Startup. Nico, Carito and Seba had the honor of being my first bosses since I worked for a law firm over the summer between my freshman and sophomore years in college. At Welcu, I was forced to really learn Spanish, got to see how Argentina, Colombia, Brazil and Chile’s business culture from the inside out and made some great friends. I also got to be a part of a startup that grew from 6 people in Chile to over 40 in four countries. It was a fun ride.

welcu latam

In April, Entrustet was acquired by SecureSafe and we were featured in tons of international press. My three favorites were being quoted in The Economist, interviewed on Australian national radio and being featured Japan’s national news that went out to more than 10 million people. It felt great to sell a second company and I know I want to start something new again soon.

By October, I’d reconfirmed what I already knew: I am made to be my own boss and decided to off on my own again. Between tinkering with side projects and doing research into new ideas, I wrote a book, Startup Chile 101, about everything you’d want to know about living, working and doing business in Chile and put it on Amazon. It’s been great to hear from people who’ve bought it and see that it’s actually helping them. I also did some consulting work for prospective Startup Chile teams, helping them improve their applications so they’d have a better chance at getting into the program.

On a personal level, I learned more about myself in 2012 than in any year since 2005 when I first went to university. Between being in a foreign country, selling a company, working for someone else, learning spanish, being away from my family, making new friends, going into and out of relationships and generally trying to figure out what I wanted to work on and where I wanted to live, pretty much everything was open for self study and self improvement.

Because I never knew how long I was going to be staying in Chile, I lived in 8 different apartments for short amounts of time. In 2013, that’s going to have to change. I found that although I love flexibility, it’s worth the extra money and potential risk to have a place to call your own. 2012 really drove home how lucky I am to have a great family and an incredible group of friends. Being away from them for 11 months straight, the longest streak in my life, really put it all in perspective. It was too much and I won’t let it happen again if I can help it.

I didn’t travel as much as I would have liked in 2012. I’ll make the excuse that I had a job, but in reality, I let myself down. In the small amount of travel I was able to do, I made it to Los Angeles, Las Vegas, Phoenix, Buenos Aires, New York, Colombia and back to Wisconsin. Colombia and Buenos Aires were special trips because in Colombia I got closer to a group of Chilean friends that I’d know for a long time and Buenos Aires because my friend Jesse came to visit from Wisconsin. When I got back to the US in November, I arrived for the 8th annual friendsgiving with all of my university friends. I’m so glad we’ve kept this tradition going even though we’re on three continents and seven states.

tayrona

I didn’t read as many books as I have in previous years, but really enjoyed Freedom, The Monk and the Riddle, Antifragile, Confessions of an Economic Hitman, Thunderstruck, Unbroken and Steve Jobs’ biography. I also missed riding my road bike in 2012. That’s something I need to get back in 2013. I also didn’t blog as much as I have in previous years and went through multiple droughts of weeks at a time. I think I might have had writer’s block from my first winter in over two years.

In 2013, I’ll be starting the year back in Chile getting ready to teach entrepreneurship at two Chilean universities, while at the same time continuing to develop multiple ideas that I think could be very interesting. In 2012, I eliminated a ton of things that I don’t want to do. I have a feeling 2013 will be the year that my next project becomes apparent to me.

Favorite Posts from 2012

Why I Deleted Twitter and Facebook from my iPhone

Losing our Civil Liberties

A Funny Story About an Acquisition That Didn’t Happen

Why I Will Vote for Obama in November

Who Will be Chile’s Paul Graham or Dave McClure

It’s Time to Have a National Conversation on the 2nd Amendment

Fixing My Relationship with Facebook

The entire What I Learned series

College Advice

The Biggest Problem Starting Up Outside San Francisco or NYC

Taxing and Spending

Category : Political Science & Economics
Posted on December 21, 2012 by Nathan Lustig

On the first day of my freshman year of college I was 5’9 and weighed in at 150 pounds. That’s 1.75m and 68 kilos for my foreign readers. I was in really good shape. By the end of second semester, I was still 5’9, but weighed 166 pounds (75kg) and was in terrible shape. How’d that happen? Easy. I went from an active high schooler who played soccer 3 times a week, lifted weights 5 days a week, and reffed 120+ soccer games each year who ate good, healthy food at my parents house, to an inactive college kid who played soccer or racquetball once a week, reffed 50 games a year, ate pizza, “chinese food”, dorm cafeteria food, desserts and drank heavily 3+ days per week. That was freshman year. Sixteen pounds in nine months.

By the start of sophomore year, 3 months later, I’d lost it all. As soon as I got out of the dorms, I drank less, ate better and started to bike five days a week and played and reffed more soccer. During the stress of selling my first business, I gained more weight from eating poorly and not exercising. This time, I took off the weight by changing my diet, but not increasing exercise. I lost weight, but ended up weak. I wasn’t really in shape. Other times I tried to get back in shape by only doing exercise, but that never worked. I got stronger, but still was heavy. I wasn’t particularly healthy. The only thing that got me healthy was a change in diet and increased exercise in some combination.

The United States government is overweight. We got there the same way I did: eating more (increasing spending) and exercising less (cutting taxes). We have $15 trillion dollars in debt that’s expected to balloon over the next generation. But unfortunately we’re not fifteen pounds overweight, we’re more like 200 pounds heavier than we should be. We’re 5’9 and 350 pounds (1.75m and 159kg).

The Republicans say that we should go on a diet (cut spending) but keep on with our sedentary ways. If we just stopped eating so much and we won’t be fat anymore. Many Democrats say that we should just exercise more (increase taxes) and keep on eating. If we do that we’ll get in shape.

If we follow the Republican play of eating less, we’ll lose weight. But we’ll lose both fat and muscle. At the end of our diet, we’ll be weaker, but weigh less. We’ll be at our ideal weight, but we won’t be in shape. If we follow the Democratic plan of exercising more, we’ll get stronger, but we won’t lose much weight. We’ll still have too much fat along with our newfound muscle. Both plans end up with unhealthy economies. And if we cut food so much, we could starve to death. Our internal organs could shut down. But if we go into an intense exercise plan as a 350 pound 5’8 man, we could have a severe heart attack.

Just like with getting healthy, the only approach that makes sense is a change in diet and exercise in coorinated combination. We need to cut spending, reallocate our priorities and increase taxes. That’s the only way our country gets healthy again. That’s the middle way that our country needs.

Travelogue: Buenos Aires

Category : Travel
Posted on December 15, 2012 by Nathan Lustig

In October I returned from my third trip to Buenos Aires in the last year. This time it was for four short days with my friend Jesse who was visiting from Wisconsin, but other times it’s been for business. There’s so much going on in Buenos Aires that I didn’t feel like it was worth writing a travelogue until I’d had a chance to explore a big portion of the city. What follows is a composite of my three trips to Buenos Aires over the past year.

Buenos Aires is my favorite city in South America and up there with my favorite cities in the world. Although Buenos Aires proper is only 4m, it’s really a huge city of 12m along Mar de La Plata, where the River Plata empties into the sea. Most people in the US assume that since Chile and Argentina share such a long border and are in South America that they have a lot in common. But they’re really different: the accents, clothes, personalities and culture. In reality the two things they have in common are Spanish and a love of asados.

Buenos Aires is a city of amazing food, good looking people, beautiful architecture, wine, beef, culture, nightlife and fashion. It’s the Paris of South America, but with a South American edgy flair. People are generally educated, thanks to good public education and free universities, and love to socialize. Economically, it’s the Italy of South America: fiscal problems, a left wing government that’s nationalized industries and imposed currency controls to try to dedollarize the economy, which has led to rampant inflation and a black market exchange rate. When I first traveled to Buenos Aires in November 2011, the market rate was 4.2 pesos to a dollar and 4.5 to a dollar on the street. One year later it was 4.5:1 officially and 7.5:1 on the street.

People like their leisure time. There’s huge public and private sector unions with massive clout and lots of strikes. While I’ve been in Buenos Aires there have been strikes by truckers, airport baggage handlers and garbage collectors. Theres tons of red tape and bureaucracy and its no coincidence that Spanish speaking LatAm’s biggest entrepreneurial successes have come from Argentina: you learn from a young age how to be entrepreneurial and get things done by bending and breaking the rules. As it stands now, I wouldn’t do business in Argentina, but it is my favorite place to visit.

Contests to prevent tax evasion. Demand your receipt, mail it in for a chance at a free trip.

Argentina has the best food of anywhere I’ve been in Latin America and quite possibly the world. While I’ve had my best meal in Latin America in Mendoza, some of the next best have been in Buenos Aires. And it’s not just at the top end. Buenos Aires is a city where people love and appreciate food. You can walk into just about any little cafe, bakery or restaurant and expect a good meal.

Buenos Aires is know for two things: steak and Italian food, but it’s much more than that. But first, lets start with the steak. Argentina has some of the best beef in the world, most of which is produced by cows that eat grass, walking around on ranches in La Pampa, Argentina’s livestock belt. The most popular cut is the Bife Chorizo, which is certainly not any kind of sausage. It’s most closely related to a sirloin or NY Strip steak in the US. It’s my favorite. They’re also famous for their Malbec, which mostly comes from Mendoza in the north.

We went to La Cabrera, a touristy steak place in Palermo, at about 1030 for dinner. It’s expensive for Argentina, but it was worth it. The 600 gram steak, paired with a full bodied Malbec, was incredible. They gave us free drinks at the end of the meal because they didn’t have a dessert drink I asked about. Buenos Aires has some of the best restaurant service in the world because waiters were a profession up until recently. There’s still guys who have been waiting tables for decades who know everything there is to know about food, wine and service. It’s such a contrast to Chile and many restaurants in the US.

After we finished eating at 1230, we headed out to have a drink. We found a bar filled with interesting people, cheap drinks and interesting decor. After a few Quilmes it was 3am and we decided to go actually go out. We found a club with a line and walked it. Like in Chile people eat and go out late, but Argentina is even later. The place was just getting started. We closed the place at 630 and found our way back to the apartment we rented on Airbnb

OLYMPUS DIGITAL CAMERA — Recoleta Cementery – Wikipedia

Argentina has some of, if not the best, gelato in the world and we couldn’t resist grabbing a scoop for breakfast as we walked from Palermo to Recoleta to check out the cemetery where Buenos Aires’ elite are buried. It’s a labyrinth of extremely decorated mausoleums right in the middle of the city. Its amazing to see how much people spent on a cemetery that occupies prime land! After the cemetery, we stopped for a quick sandwich at La Biela under the shade of one of the more interesting trees I’ve ever seen.

After a quick bite, we wandered around Recoleta, taking in the embassies, old mansions and high end shops on our way down toward Av 9 de Julio, the world’s wides boulevard at 14 lanes. We walked down toward the obelisk, teatro colon and finally casa rosada, the presidential palace. The city just oozes history and architectural brilliance. Buenos Aires was on par with London at one point in the 1800s and they used the wealth to build incredible buildings and one of the oldest subways in the world. Unlike London, Buenos Aires hasn’t done much to update the metro, which we took back for the night. We had dinner at Broccolino, an Italian place with incredible lamb ravioli.

ateno — cc Intelligent Travel NG Traveler Blog

The next day, we took the Subte (subway), down toward La Boca, the area of the city known for the colored houses and of course the soccer team. The walk from the metro station took us through a few rougher areas, but it was great to see the difference in parts of the city. The entire area is dominated by the imposing La Bombonera, where Boca play their matches. When finally we got to the port, it was super touristy with guys trying to steer us into their bars. We left after some beers and empanadas.

We headed back up toward San Telmo and since it was Sunday we wandered across the famous street market where you’ll find just about everything for sale. We had a late lunch at a small Italian restaurant and walked around the old cobblestone streets. As it got darker and the traffic went away, you could almost feel yourself going back in time. We stopped into a small dive bar full of immigrants from eastern Europe for a cheap drink and hung out for awhile taking in the scene, then headed back up toward Palermo to meet some friends.

Our friends decided they wanted to go out in Puerto Madero, the newly developed area of town along the river, which had sat vacant and underdeveloped for decades. Now its revitalized with glitzy clubs, top restaurants and interesting people. It’s expensive compared to the rest of the city, but we had a good time. It wasn’t really my favorite place because it just doesn’t feel much different from any other big city in the world, maybe because its so new, but my friends and the many other tourists who were there loved it.

The next day we decided to walk to el Ateno, an old theater that’s been converted into a bookstore. The inside is beautifully converted and it was packed with tourists and locals alike. We stopped for another ice cream and took it all in. We took a taxi back to Palermo and decided to do some shopping. Palermo has many boutiques and you can watch as Argentines and tourists alike shop for fashionable clothes. Although the sticker prices are high, typically $75-$150 for a button down shirt, if you’re exchanging dollars that you brought with you, you can save up to 60%. One store owner heard me speaking in my accented Spanish and asked if I had dollars to spend and quoted me a 50% discount. After our shopping, it was off to the airport. Luckily we’d booked for Aeroparque, which is in the city, instead of Ezezia, which is a $40, hour long drive outside of the city.

There’s so many more amazing places I missed in this post that you’ll have to discover for yourself. Buenos Aires is an incredible city that should be on your list of places to visit if you have the chance. And right now it’s a great value and likely will keep getting better as their economy continues to have problems. I can’t wait to go back again.

The Biggest Gamble in World History

Category : Political Science & Economics
Posted on December 14, 2012 by Nathan Lustig

The Federal Reserve just announced it would continue its program of buying up US bonds and mortgage backed securities to keep rates low. They plan to buy $85b per month until it’s not needed anymore. That’s $3b per day. Or $283 per month for every man woman and child in the US. Where does that money come from? Our taxes? Borrowing from the Chinese? No.

We just create it out of thin air. We tell people we have it, add some numbers to a spreadsheet and boom, we have $85bn in new dollars! What a great idea! Then we use it to buy debt issued by the United States. This keeps interest rates artificially low because there are fewer US bonds on the open market. People who want to buy bonds compete over the only remaining bonds and drive down interest rates. It works the same way for mortgage backed securities.

Get it? If not, here’s another example. Say I want to buy a $1m house but I don’t have any money. I meet with the seller and say “I have one million dollars in my bank account, give me the house.” The guy believes me and gives me the house. On the way home, by some magical power, I decide that I have $1m in my account and create it out of thin air. Then I transfer it to the seller. That’s what the Federal Reserve is doing.

So why don’t we just print $16 trillion and pay off all of our debt at once? We could do it. But here’s the problem. If we do it, everyone with government debt would be rich and everyone without it would be poor. We’d kill anyone without government paper. And everyone without their newfound wealth would buy up everything else. In otherwords, massive, overnight inflation.

Ok, so why not $8 trillion? Same problem. $4 trillion? Still too much. $1 trillion over a year? That sounds ok. And that’s what we’re doing. $85b*12 months=$1.02 trillion in new money created each year. So we’re just creating money out of thin air, keeping interest rates low and hoping we can slowly inflate our debt away. We’ll keep increasing our money printing until we hear complaints from the rest of the world or the bond market. If nobody complains, we’ll buy $150b/month of our bonds. Then $200b.

That, I believe, is Wall Street and Washington’s master plan to get out of debt. The increased taxes and spending cuts of the fiscal cliff are a mere sideshow to distract the citizens and our investors to make us think that we’re actually serious about reform. For a myraid of reasons, we’re not. So we’ll try to avoid pain and inflate ourselves out of the problem.

Sounds great, right? Don’t really raise taxes, don’t really cut spending and make our debt worthless. Inflation in combination with real reform could be good, but unfortunately this plan destroys certain groups of people:

The poor

The poor spend a huge percentage of their income on food, housing and basic needs. These basic needs go up when we print money. Public assistance payment cost of living increases don’t keep up with inflation. Food, gas, rent increase. Inflation squeezes the poor.

The middle class

The middle class gets hit by rising food and commodity prices, but they also have savings. If they have $10,000 in a CD earning 1%, but inflation is 3%, they’re actually losing 2% each year. Creating money out of thin air erodes their savings and purchasing power.

Anyone on a fixed income

People on social security, retirees, people on disability or welfare are destroyed by persistant inflation. Each time we create $85b out of thin air, that social security check purchases less.

Savers, retirees and pretty much anyone with a net worth of less than ~$50m

These savers planned on being able to live off of their savings. But what are your savings worth when the government can just create money each month? Less and less each month.

So if creating money out of thin air hurts all of these groups, why is it happening? Because we either have to make hard choices to cut benefits and raise taxes. People want to raise taxes on the rich, but when it comes to cutting spending, if they’re affected they scream. And our government appeases us.

Our government is gambling that it can create enough money to keep interest rates low without pissing off our foreign investors or the rich who could affect the bond market. This gamble works until our investors say it doesn’t anymore. At that point, interest rates go up. Potentially from today’s 1% to 7-10% really quickly. And then the US is in trouble.

Short of seriously cutting spending and increasing taxes, this is our only hope. And it’s the hope our government has hitched it’s wagon to. At some point in the future, our investors will call us on our persistant inflation. But if we stop and just massively cut spending, we could go into deflation like Europe. If the gamble doesn’t pay off, we’ll have a bigger bubble than we’ve ever seen in this history of the world, this time in US debt. We need to hope it does. Our third option between printing money and austerity is not any more politically feasible than it was when I wrote about it in April.