I am attempting to record more short synposes of the books I read. These are entirely for me own sake, as reflecting on my list of books I have read, there are some that I have nearly no recollection of even reading.
In January 2021 I read:
- Accelerate: The Science of Lean Software and DevOps by Nicole Forsgren, Jez Humble, and Gene Kim.
Accelerate
Accelerate is effectively a report on the research done via the State of DevOps survey from 2013 to 2017 or so.
The first half of the book explains their findings, and the last half explains their methods.
The bottom line is that the survey followed > 2000 engineering organizations over multiple years on more than 150 dimensions, and as such does allow the authors to actually determine what factors were predictive of organizational success.
A few surprises or aha moments:
There were only four significant predictors - deployment frequency, lead time, change failure rate, and mean time to recovery.
It is surprising what were not predictors - specifically, whether the software being worked on was greenfield or legacy, whether it was deployed to cloud, mainframe, or on-prem, etc.
I will shortly be reading The Unicorn Project with a book club which should prove enlightening, though I expect it to be largely the same message as The Phoenix Project and the other Goldratt books.
I am attempting to record more short synposes of the books I read. These are entirely for me own sake, as reflecting on my list of books I have read, there are some that I have nearly no recollection of even reading.
In December 2020 I read:
- The Victorian Internet by Tom Standage
- The Last Monopoly, edited by Edwrad L. Hudgins
- War Before Civilization by Lawrence H. Keely
- The Misbehavior of Markets by Benoit Mandelbrot
The Victorian Internet
The Victorian Internet is short history of the development, rise, and fall of the electric telegraph. It discusses pre-electric optical telegraphs (french signal towers, known to exist), the development of the electric telegraph, and the eventual replacement by phones. Some already familiar.
A few surprises or aha moments:
“Telegraph hill” is a common place name because of the placement of optical telegraphs on hills.
Surprised by extent of optical telegraphs prior to electric - thousands of towers in Europe.
Surprised by short ‘golden age’ of telegraph operators - electric telegraphs become common in the 1840s, but automated telegraphs put operators out of work (at least as high paid/high status jobs) by the 1870s and 1880s.
Obvious in retrospect, but after undersea cables became common, England build a telegraph network entirely within the empire - so undersea cables from the UK to Africa, instead of going through Europe and hence enemies.
High incidence of pneumatic tube use to move messages without telegraphs or telegaph operators in busy cities. Higher bandiwdth than the telegraph.
Telegraphs in Europe operated by government, so more social use than in the US.
The Last Monopoly
The Last Monopoly is a collection of essays written in the early 1990s regarding the US postal monopoly. Key surprises:
Early postal service only did inter-city mail until as late as the 1900s
Quote - not particularly related to post office - “[Paul David] observed that during the first 40 years after the introduction of electric motors into factories, productivity growth was relatively listless. It was not until the factories themselves evolved … from central steam engines that productivity surged.”
That the postal monopoly was largely expanded at the behest of the post office itself - lots of changing definitions
War Before Civilization
Book on anthropology / archaeology broadly (a) refuting the idea of peaceful pre-state societies and (b) documenting to the best data available just how violent pre-state societies were.
Key takeaways:
Pre-state societies commonly have long periods of low-intensity warfare / raiding
Cumulative injury & death rates can be extremely high compared to modern conflicts, even if there are no large recognizable battles
Pre-state warriors fought wisely, rationally, effectively, given their supply constraints; engaged in total war much more effectively than pre-American-Civil-War western societies.
See: Native Americans expunging Viking(!) settlements in Newfoundland and Greenland, routine defeat of American soldiers against plains Native American tribes, etc.
Many (at least prior to this writing) archaeological analyses simply nonsensical, over-interprets evidence as e.g. “trade” instead of “raid”.
The Misbehavior of Markets
Written in 2004, rebuttal of (then-standard) normal-curve based stock risk analysis. Instead, Mandelbrot proposes a ‘fractal’ model, including an ‘H’ score as a replacement for Beta (?). At this point, 15 years on, the core message of “fat tails” is well-documented, perhaps Taleb gets more credit for popularizing this in The Black Swan than he should have.
There are definitely some very interesting tidbits about Mandelbrot’s life, though, given it is written in the first person. Unclear to me from the reading how much of the work that Mandelbrot alludes to in 2004 went anywhere - as far as I know e.g. GARCH which he opposes is still a commonly used model.
I own a good number of shares of First Choice Healthcare Solutions (OTC: FCHS).
The company has been dark since Q1 2019.
However, through public data, I’ve confirmed that since then they have opened new locations in Florida, up in Cocoa Beach. They’re up to 8 locations, by my count. Expansion is positive.
Since they focus on elective surgery and physical therapy, I don’t need a 8-K to tell me that their business has been shut down for the past 6 weeks or so due to covid-19.
The company is now trading at about a $2m market cap - where they were trading at > $30m some years ago (granted, before the CEO was arrested for illegal stock promotion…), and > $10m before they went dark.
Today, I decided to try tracking the CEO down again. The website just lists one man: Phillip J. Keller.
I got ahold of (I think) Phillip’s father in Kentucky, who kindly took a message; Phillip called me back a few minutes later. We spoke for about 5 minutes. I asked - when is the next shareholder’s meeting? Is the company still operating? And can I inspect the records in person?
Phillip mentioned that there is a court case being decided Thursday in the Delaware chancery court that “relates to” the shareholder’s meeting, so he could not give an answer on that. He did confirm that as of Monday, 2020-05-17, their locations are operating again, with infection control measures in place. This is very positive - it’s hard to believe that any chain of 8+ medical centers can be worth less than $2.5m.
Through the Delaware Court website, so far I’ve only found references to two cases; one suit brought by Via Acquisition Corp in December 2019 and one brought by Steward Health Care in February 2020.
Neither mention any upcoming hearings. I won’t be adding to my position until after Thursday, but I see no reason to cut now.
I believe Creative Learning Corporation (OTC: CLCN) is a good buy at $0.10/share, where it is currently trading.
Creative Learning Corporation is the franchisor of two franchises that provide educational programming and activities for K-12 students - Bricks4Kidz and Sew Fun Studios.
Bricks4Kidz is the only meaningful franchise with more than 400 franchisees; Sew Fun only has one or two franchises. Bricks4Kidz is a series of educational after school programs for kids that use Lego bricks.
The stock traded as high as $3.00 per share in 2015 (market cap of approximately $30m), when the company, under previous leadership, was doing up to $12 million per year in franchise fees.
Today, after years of decline, the company does about $2m per year of revenue, but is trading a hair below $0.10 per share (approximately $1.2m market cap).
The intervening years were not kind to the company - the founder was ousted; the replacement CEO was sanctioned by the SEC. In 2017 a takeover ousted the previous CEO, Brian Pappas, and replaced him.
Under the previous CEO, Blake Furlow’s, leadership, the company fell behind on SEC reporting, which prevented the company from selling new franchises.
Franchisees were not communicated with.
The company moved its headquarters to Idaho from Florida, for unclear reasons.
But on December 18th and 27th of 2019, through Q1 and Q2 2019 10-Qs were filed - giving hope that the Q3 2019 10-Q is on the way shortly.
With the 2019 10-K not due until March or April, the company may be current soon - and hence able to sell franchises again.
Furlow resigned, and one of the other board members, Bart Mitchell, took the helm.
I’ve actually been able to get him on the phone, which is a great improvement.
I bought some shares of CLCN in 2017 for about $0.25 per share, before the company went non-current.
Since then, I’ve called their corporate office at least once per month to make sure that the company is still operating.
During that time the price went as low as $0.03 per share.
With the recent progress, and return of some SEC filings, I’ve picked up many more shares as the market was slow to react to the filings.
So far, so good.
But there’s more room to go here.
Fundamental Value
The Q1 and Q2 2019 10-Qs show positive cashflow of more than $200k per year annualized, and a revenue run rate, while declining, of about $2m per year.
At 10x cash flow, or 1x revenue then, the company is worth $2m - $0.15 per share or so, a 50% premium to current values.
Even if the company continues to lose revenue, it could still throw off a million dollars of cash before it dies, in theory about $0.07 per share.
And that is a real possibility - the curriculum hasn’t been updated in at least 5 years, which is a serious issue for a franchise like this.
There is a group that’s currently attempting to wage a proxy fight, but the proxy group only owns 6% of the shares, and the current board owns about 30%.
For a company that most holders have probably forgotten about, there’s little reason to believe the takeover will succeed.
But things could be so much better than that -
Future Possibilities
The company has been unable to sell new franchises because of the delay in SEC filings.
Now that that is solved, the company can sell franchises again.
That’s a catalyst if I ever heard one.
Second, the company has alluded to some new curriculum and program releases that are coming out soon.
This could be another reason for growth, if they work.
If the company can start growing again, and is already achieving a 10% cash return on equity, fair valuations could be many multiples of current prices.
From speaking to Mr. Mitchell, the board is realistic about the problems and is working on them.
Importantly, they are open to adding an outside board member from the shareholders, and a board member chosen from the franchisees.
It’s a bit of a long shot, but the elements for a real turnaronud are here.
External Catalysts
One final element - if you look at the 10-Qs, the company is reporting a GAAP net income of about $0.14/share.
This is almost entirely because of an accounting rule change that forces the company to recognize long-paid revenue from franchise sales over time.
But anyone who doesn’t read closely may miss this, think the fair value is near $1 per share, and bid up the price significantly.
For a thinly-traded stock like this, just a little extra interest can drive the price high quickly.
Disclosure
I own shares of CLCN and do intend to purchase more over the next several weeks.
This is an incomplete thought.
A fundamental problem with browsing code and doing software product engineering is that there is an insufficient method for handling the simultaneous layers of abstraction that occur.
Consider a workflow, of any kind. As product people, we speak of “the workflow”, generally referring to the highest level of abstraction of that workflow; the “happy path”. There is of course a second, more complex, more complete, “full workflow”, that includes all of those little nitty rules about handling this case or that case. These are the “edge cases”.
But our code - generally - doesn’t distinguish between the “happy path” and the “edge cases”, not when we browse. When we edit a file, we’re editing all of those rules at once. We can’t hide the edges, and manipulate just the big concepts, then fill the edges back in.
This is, of course, what Object Oriented Programming, and every programming discipline, is designed to do in theory. Type systems, automatic compile time checking, all of it, is designed to help us in one way or another manage that complexity.
Code generation tools and scaffolding helps us do this in some way - in that it allows us to generate a lot of code for the “happy path”. But once it is generated, then we’re stuck operating at that lower level of abstraction again.
Why can’t we go back up a level of abstraction and push the shapes around once we’ve filled them in? Why are we stuck shoveling edges around one by one?