Dispatch

By Rowan Oulton

This year I read just shy of a book a week1. For me, that pace is new and surprising. It’s considerably more than any previous year, and owed in large part to audiobooks. 2023 marked a change in lifestyle for me, one with much more motion in it to resolve a long struggle I’ve had with backpain. This motion — usually walking, sometimes running — is usually accompanied by an audiobook of some sort. The result is that half the books I’ve “read” this year were actually listened to.

It’s my experience that the format doesn’t lend itself to every genre, much less every title. Simon Sarris captures it well:

Audiobooks vary tremendously in quality. The performer is almost as important as the author.

So sampling titles (performances?) is a lot more important for the spoken word than written.

I’ve heard it said that audiobooks aren’t absorbed as well as written books and I’d agree. I’m rarely as attentive to the content when I’m going for a run verses reading quietly in bed. But this is easily worked around. Most of the books I’ve listened to are biographies. The kinds of books where missing a little detail doesn’t matter as long as you get the overall picture.

Something I rarely see credited is the way a spoken performance can bring the text to life. My standout read for the year, and among the most impactful books I’ve ever read, was Alfred Lansing’s Endurance, an account of Shackleton’s 1914 expedition to Antarctica. The book is powerful in its own right, but Simon Prebble’s performance of it makes it all the better. The metre, the excitement and the accents all combine to make it so much more thrilling.

With my rant about audiobooks over, here’s some of my favourites from this year:

Irving Stone’s The Agony and the Ecstacy, a biographical novel about Michelangelo Buonarroti. This was the first time I’d read a biographical novel as opposed to a biography and, christ, what a break from the dry and burdened prose of pure fact.

John Steinbeck’s The Grapes of Wrath. I imagine every American reading this was assigned it twice in high school. And the long list of awards and commendations makes it no surprise. But boy, was it good. So good. Steinbeck’s way of exploring the people, the place, and the times is so vivid and immersive.

Paul Graham’s Hackers & Painters, which is a compendium of blog posts. This is a read I’d only really recommend to computer people. Graham is a divisive character in the tech industry so I wasn’t sure what to expect. But he gave shape to a lot of the doubts I’d had about myself throughout my career and delightfully dispelled them:

All the time I was in graduate school I had an uncomfortable feeling in the back of my mind that I ought to know more theory, and that it was very remiss of me to have forgotten all that stuff within three weeks of the final exam.

Now I realize I was mistaken. Hackers need to understand the theory of computation about as much as painters need to understand paint chemistry. You need to know how to calculate time and space complexity and about Turing completeness. You might also want to remember at least the concept of a state machine, in case you have to write a parser or a regular expression library. Painters in fact have to remember a good deal more about paint chemistry than that.

And then:

I was taught in college that one ought to figure out a program completely on paper before even going near a computer. I found that I did not program this way. I found that I liked to program sitting in front of a computer, not a piece of paper. Worse still, instead of patiently writing out a complete program and assuring myself it was correct, I tended to just spew out code that was hopelessly broken, and gradually beat it into shape.

For a long time I felt bad about this, just as I once felt bad that I didn’t hold my pencil the way they taught me to in elementary school. If I had only looked over at the other makers, the painters or the architects, I would have realized that there was a name for what I was doing: sketching. As far as I can tell, the way they taught me to program in college was all wrong. You should figure out programs as you’re writing them, just as writers and painters and architects do.

I can’t tell you how liberating this was to read. I’d worked this way for years and had never drawn the parallel. Irving Stone’s book concurred: Michelangelo didn’t spend long planning his work, he just took chisel to rock and “found” the form within it.

Other notable segments include his summary of schooling:

Public school teachers are in much the same position as prison wardens. Wardens’ main concern is to keep the prisoners on the premises. They also need to keep them fed, and as far as possible prevent them from killing one another. Beyond that, they want to have as little to do with the prisoners as possible, so they leave them to create whatever social organization they want. From what I’ve read, the society that the prisoners create is warped, savage, and pervasive, and it is no fun to be at the bottom of it.

In outline, it was the same at the schools I went to. The most important thing was to stay on the premises. While there, the authorities fed you, prevented overt violence, and made some effort to teach you something. But beyond that they didn’t want to have too much to do with the kids.

Overblown? A little. But certainly some truth. And finally, some excerpts on why being young is a miserable experience these days:

Teenage kids used to have a more active role in society. In pre-industrial times, they were all apprentices of one sort or another, whether in shops or on farms or even on warships. They weren’t left to create their own societies. They were junior members of adult societies.

I’m suspicious of this theory that thirteen-year-old kids are intrinsically messed up. If it’s physiological, it should be universal. Are Mongol nomads all nihilists at thirteen? I’ve read a lot of history, and I have not seen a single reference to this supposedly universal fact before the twentieth century. Teenage apprentices in the Renaissance seem to have been cheerful and eager. They got in fights and played tricks on one another of course (Michelangelo had his nose broken by a bully), but they weren’t crazy.

As far as I can tell, the concept of the hormone-crazed teenager is coeval with suburbia. I don’t think this is a coincidence. I think teenagers are driven crazy by the life they’re made to lead. Teenage apprentices in the Renaissance were working dogs. Teenagers now are neurotic lapdogs. Their craziness is the craziness of the idle everywhere.

If life seems awful to kids, it’s neither because hormones are turning you all into monsters (as your parents believe), nor because life actually is awful (as you believe). It’s because the adults, who no longer have any economic use for you, have abandoned you to spend years cooped up together with nothing real to do. Any society of that type is awful to live in.

While I think this oversimplies, I like the notion that kids need to feel useful. And useful in a real sense, outside the artifice of schooling itself. Probably this is why computer kids typically do well out of school: the barriers to being immediately useful to society are low enough that a high schooler can do it. And there’s rarely any formal qualification required as with other trades and professions.

  • 1.

    It's always struck me as obnoxious when people talk about how many books they've read as if it's a contest. So it's with some reservation that I share the above. Talking about it has helped me reflect on what I enjoyed and why, so I hope you'll forgive my transgression.

Earlier this month MBIE published a report, UpStart Nation, making proposals for how we could improve the startup ecosystem in New Zealand. Among these is the idea that we should change how we tax employee share programs.

Startup employees are taxed when they exercise stock options — that is, when they buy them and “realize” the gain — which they can do long before a company’s value or future is certain. In the eyes of the tax system, though, they owe tax the moment they’ve exercised their options.1

Exercising an option to buy company stock valued at $20 for $10 means you’ve technically made $10 even if you can’t yet sell the stock. You pay tax on that $10, and from then onwards any further appreciation in your shares is treated as a capital gain and thus tax-free. Herein lies the yin and yang of startup risk: the earlier (and cheaper) you exercise, the more of the eventual gain you stand to keep. But likewise, the more risk you take by paying for them before there’s certainty around their value and liquidity.

For many, that risk is too much to bear. Or they simply can’t afford to exercise. In that case, depending on the terms set by the employer, they may be able to exercise at the moment the shares become liquid (whether by going public or by being acquired). This approach is risk-free but means the entire gain is taxed as income.

The report points out that there’s a disparity here between employees and investors. Rowan Simpson makes a good summary of it in his critique of the report:

The current tax system we have in New Zealand means the tax paid by employees and investors in any successful business sale is calculated very differently. This is because investors pay cash to buy their shares in advance, so any gains on that investment are capital gains which are not currently taxed. Meanwhile employees earn their shares by working, which means they are a form of income, and that income is taxed (either immediately or eventually).

The report focuses on the straw man scenario where tax needs to be paid by employees immediately when shares are issued. This is true in theory, but in my experience very rare. Much more commonly these days, employees in high-growth startups are issued long-dated options rather than shares. This means the tax is deferred until an exit occurs. But tax is then due on the full value of those shares at exit, which can be very large amounts.

And then:

It’s difficult to argue that is fair - investors pay 0% capital gains tax on their gains while employees pay 39% income tax on their gains.

This is indeed a problem. Their proposal: either defer taxation until the employee can actually sell for cash or remove that tax altogether.

On the face of it the first option sounds great. But it’s unfeasible for all sorts of reasons. With all the possible twists and turns of an early-stage company, it’s very hard to say when an employee’s shares can really be considered sellable.

As for removing the tax altogether: it’s incredible to me that a group of people, when presented with this problem, would conclude that a reasonable solution is to tax no one. Having the option to own a part of the company you’re helping to build is a privilege very few get. The notion that these lucky few deserve special tax treatment as well is totally unnecessary.

In a follow-up post, Rowan makes the point that ESOP terms set by the employer are what really defines the outcome for employees. As someone who’s been around the block a couple of times now I wholeheartedly agree. I’ve had the fortune to work for two companies that had humane ESOP settings, and in the end that mattered a whole lot more than the taxes I owed2.

Generous ESOP settings should be the norm. Founders might think that restrictive terms will help with staff retention, and they’re kind of right. But often all it serves to do is keep people there in body but not spirit. For an ecosystem to flourish you want talent to have freedom of movement: the freedom to seek out the stage that suits them best. Things like 90-day expiry windows inhibit this freedom, and the people bound by these handcuffs trend toward low morale and productivity. I believe founders have a responsibility to get this right for their employees and the wider startup community. It’s a shame more don’t.

In my mind, the solution to all this is painfully obvious: just tax capital gains and move on. A broader tax base will mean less income tax, evening the burden between employees and investors while simultaneously correcting many of the distortions in our investment economy. It speaks volumes that this wasn’t even mentioned in MBIE’s report. Here’s Rowan again with the final word:

I don’t hear many of the people complaining about tax on ESOP advocating for a capital gains tax.

Everybody just wants to pay less tax.

I can’t help but feel that all this focus on “building the ecosystem” is a distraction. Given time, the ecosystem builds itself out of companies succeeding and spawning new companies. That’s exactly what happened with TradeMe, Xero, and now Vend (to name just a few). I’m now an investor in, consultant for, or co-founder of companies that were started by people I worked with at Vend. Which is ultimately what MBIE wants, right? More founders, more innovation.

You don’t need tax breaks to get there.

  • 1.

    For a thorough explanation of how this works, I recommend Rowan Simpson's Cost vs Value

  • 2.

    As a California resident at the time, I paid 45% tax on all Slack shares and 25% on Vend shares

This walkthrough video of hiking Mt Everest is a revealing look at the reality of the climb today.

Things I found surprising:

  • How large and elaborate Everest Base Camp is now
  • How you're surrounded by other people at all times, both during your hike and at camp
  • How prepared the trail is: steps in the snow are pre-cut, with ladders and ropes in place across the entire length of the trail
  • How blasé Jon Gupta, the author, is throughout the whole process. He might have been reporting in from a walk in his local park

Not pictured here but evident from other videos is the extent of the trash problem. There’s enough debris that Renan Ozturk and his gang were able to dumpster-dive for food rather than carry their own when they went up there looking for the body of Sandy Irvine.

This is so far removed from what I’d consider an enjoyable or challenging hike that I’m amazed people still do it. No doubt it’s hard work but it’s the wrong kind of work: all the creativity and problem solving is gone. And you’ve paid a team of locals to take the risks for you. Where’s the achievement in that?

Yesterday, Lightspeed announced their acquisition of New Zealand startup Vend for about NZ$500 million:

Lightspeed will acquire Vend for total estimated consideration of approximately $350 million, satisfied by way of payment on closing of approximately $192.5 million in cash and the issuance of subordinate voting shares in the capital of Lightspeed valued at approximately $157.5 million.

This marks the end of a 10-year journey for the company, a journey I was a part of for the first four years.

Vend had a profound effect on my life both personally and professionally. It’s how I met my wife Vic and 6 years on we have a 2-year old daughter and another on the way. I grew substantially as an engineer, and this experience helped propel me to Techstars in Berlin, then San Francisco and Slack.

The story is similar for so many others that passed through Vend’s doors. It’s a natural New Zealand success story. And now to see this acquisition reward so many of the people that were integral to the company’s success over the years is just wonderful.

There’s one tweet that stuck out to me, though, amid all the congratulations. This from Simon Pound, also a former Vend employee:

This so perfectly captures my frustration with our country. Vend has paid the salaries of hundreds of people, made all sorts of contributions to society, and made a great return for its investors. And yet, for all its success, it’s eclipsed by our runaway housing market.

In December 2020 alone, almost $10 billion dollars of new mortgages were issued. That’s 20 times the value of Vend, and for what benefit to our country? Arguably none. How many Vends would there be if we weren’t so caught up in buying houses?

I’m celebrating this win, for Vend and for all of us that were a part of it. I hope it serves as a reminder of what we can achieve when we invest in something productive.

Mike Moffett in The Sun this month:

I’m an ecologist, so I think in million-year increments. What we’re going through now is a minor blip in the multi-billion-year history of our planet. The earth is unlikely to live or die based on what happens to humans in the next hundred years. There’s plenty of evidence that species will decline and ecosystems will be compromised, and for our future as a species, we need to take that seriously. But in terms of the long-term ecology of the planet, things are going to sort out. I’m an optimist that way. Even if Earths future doesn’t involve humans, it will have a future.

This outlook is my strategy for emotional survival right now.

Last week, after years of research and speculation, Jacinda Ardern announced the New Zealand Government would not instate a capital gains tax on property:

After forming a government that represented the majority of New Zealanders, we have been unable to build a mandate for a capital gains tax. While I have believed in a CGT, it’s clear many New Zealanders do not. That is why I am also ruling out a capital gains tax under my leadership in the future.

In the context of a mounting affordability crisis, I can’t see this as anything but a momentous display of self-interest. Michael Cullen, a former finance minister who’s spent the last few years investigating tax reform, puts it in plain terms:

The problem we have is New Zealanders seem not to want an inheritance tax, or a wealth tax, or a land tax or a capital gains tax but they still want to complain about growing inequality of wealth.

For me this chart from Jesse Mulligan’s op-ed in 2018 says it all:

Taxation by asset class

When the system so plainly favours housing it’s no wonder so much of our nations wealth is tied up in our homes. Why invest anywhere else when you stand to gain the most from real estate? And here’s the double-whammy: most of our banks are foreign-owned. Not only are we chosing to perpetuate our system’s inequities: we’re collectively agreeing to siphon our countries wealth offshore for generations to come.

The media portrayal of this debate was generational struggle: Millenials desperate for housing verses Boomers hoping to maintain their equity. But that narrative betrays the truth of it, as Mulligan points out here:

For all that this was pitched as a generational battle, the baby boomers’ house price gains were already locked in – the new tax would apply only to gains made after 2021, disproportionately affecting (you guessed it) millennials and first home buyers.

Even an unfair deal wasn’t good enough to change the status quo.

Naval Ravikant on reading:

The genuine love for reading itself, when cultivated, is a superpower. We live in the age of Alexandria, when every book is a fingertip away. The means of learning are abundant — it’s the desire to learn that’s scarce. Cultivate that desire by reading what you want, not what you’re supposed to.

For years I would force myself to read one heaving textbook after another in the hope of self-improvement. Far from sparking a thirst for knowledge, it became a chore and I wound up reading less and less.

It wasn’t until Vic gifted me a book one year that the spell was broken and I rediscovered the joy of reading. Years later what I love most is how, when reading isn’t dictated by any particular goal, one book leads to another in an almost organic fashion. I keep a record of this journey and it’s a delight to look back at the tapestry each turn has weaved. Every book becomes a reminder of a time in my life, like an imprint or tattoo.