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April 30, 2010

Favorite Albums of the Decade (2000-2009) – #5 – Beck – Sea Change

5.  Beck – Sea Change – 2002 

 Breaking up with someone just isn’t fun(ny), especially if you’re still in love. 

So is the case with Mr. Post-Modern wise-ass, Beck, who apparently had a hard time conjuring up anything to laugh about in 2000, after ending a nearly 10 year relationship with designer Leigh Limon.  The result, Sea Change, might be the second best break-up record ever made (after, of  course, Bob Dylan’s Blood on the Tracks, see my great break-up albums list below).  

Reportedly Beck wrote all twelve of the songs for Sea Change in one week after the break-up, songs that express an entirely different side of one of the great, but difficult to characterize, artists of the last two decades.  Go back and listen to Beck’s work of the 1990’s (namely: Mellow Gold, Mutations, Odelay and Midnite Vultures).  Beck is very much the vocal actor, taking on an accent and tone for the part he is playing, be it brit-hipster (The New Pollution), the country bumpkin (Cancelled Check) or, in its most extreme, the neo-Prince impersonation throughout much of Midnight Vultures, his preceeding, slamming 1999 party-satire record. 

Beck Hansen and Leigh Limon Photograph

Beck and Leigh Limon

Beck’s character in Sea Change might actually be himself, and so I imagine we’re experiencing his creative sound, the voice he starts with as he writes, and man is this character in a bad way. 

Sea Change is produced by Nigel Godrich (Radiohead:  Kid A, et al, Paul McCartney:  Chaos and Creation in the Backyard), and no doubt part of the album’s appeal is its sound.  Most tracks start off with acoustic guitar and sad vocal, front and center, with all sorts of ear candy atmospherics surrounding the singer, orchestral strings and effected guitars enter and exit as if tiptoeing into and out of the songs, creating mood and intensity, but never overwhelming the simplicity and sadness of the music.  Beck, with 3 chords and the truth, creates a hipster Hank Williams, visiting from the Lower East Side.  He is sitting in the corner of your living room, playing for therapy, and hoping for direction out of his funk, a new girl, a shoulder to cry on. 

Unlike Blood on the Tracks, where Dylan tells many of his stories of heartbreak through the voices of angry third-party characters, Beck’s break-up record is pure first person.  He is singing to us, but he desperately wants her to hear it, almost as if he imagines mailing her the record and having her come running back into his arms days later asking forgiveness. 

It looks like it might have taken heartbreak to create the best set of songs Beck has ever written.  Sea Change is an addicting monologue on the frustrations of lost love and sadness that I believe will stand the test of time as his true masterpiece. 


My favorite Sea Change track:  “Lost Cause” – check out video below. 

10 Great Break-up Albums 

  1. Bob Dylan – Blood on the Tracks – 1975
  2. Beck – Sea Change – 2002
  3. Fleetwood Mac – Rumours – 1977
  4. Bruce Springsteen – Tunnel of Love – 1987
  5. The Cure – Disintegration – 1989
  6. Ryan Adams – Heartbreaker – 2000
  7. Derek and the Dominos – Layla and Other Assorted Love Songs – 1970
  8. Lucinda Williams – Essence – 2001
  9. Kristin Hoffmann – Divided Heart – 2002
  10. Jason Darling – Monster (unreleased) – 2009

April 29, 2010

Demagogues v. Goldman

Filed under: Finance — Steve Krupa @ 6:36 pm
Tags: , , , , , , , , ,

In 2008, Bear Stearns (founded 1923) and Lehman Brothers (founded 1850) were destroyed, after being in business for 85 and 158 years respectively, because they were not smart enough to reduce their long exposure to RMBS (Residential Mortgage Backed Securities) when there were clear signs of a potential market downturn.  Evidence, once again, that Wall Street plays a high stakes game where proper risk management is essential.   


Oddly, the Senate and the SEC have decided to make the best managed firm on Wall Street, Goldman Sachs, the focus of a witch hunt apparently designed to place Wall Street’s business activities front and center as the primary cause of the 2008 financial crisis (or what is now being referred to as the Great Recession).  The Demagogues (read: the Senate and SEC) seem determined to accuse Wall Street of fraud and unethical behavior designed to profit from a crashing housing and mortgage market.  It is a bold move, brilliantly timed in the midst of congressional debates around financial market regulatory reform.


Back on April 1, I got a little cheeky blogging about Matt Taibbi, the crazy-wonderful Rolling Stone journalist who is as passionate about vilifying Wall Street (and Goldman Sachs in particular) as Wall Street is about making money.  Matt’s claims of conspiracy are interesting (and funny).  On the serious side, I admitted concern over Wall Street’s political power, agreeing that Wall Street needed to take aggressive steps to reform itself, and expressing concern over whether unethical or criminal behavior might be discovered.


W/r/t unethical or criminal behavior, or lack there of, there is more accusing and not a lot of proving going on, especially if the SEC’s recent case against Goldman Sachs is representative of the best evidence gathered.  There is little doubt that Goldman Sachs pursued every possible angle to profit on a housing market run wild without demonstrating public concern regarding the systemic risk being created and its potential burden on society.  But is there any real evidence that they did anything unethical or illegal in the process?


The SEC thinks Goldman committed fraud in the issuance of a synthetic CDO (Collateralized Debt Obligation), called ABACUS AC-1, to ACA Capital and others in early 2007 because they did not disclose to investors the role of Paulson & Co. in the transaction (Paulson bought the short side of the deal and proposed several of the Reference Securities included in the CDO).    


Many in the Senate seem to think Goldman’s trading activities during the advent of the sub-prime mortgage crisis intentionally disadvantaged its clients, raising the specter of ethical violations, at a minimum.


I am not sure the SEC or the Senate can prove anything other than the inherent dog-eat-dog nature of financial trading, a little understood activity that for better or for worse is the bedrock of liquid markets and financial capitalism.


In the sales and trading business Goldman is not giving financial advice to its Clients, it is making a market in securities their Clients want to buy and/or sell.  That means they stand at the ready to provide a price at which they will execute a trade.  Goldman will attract Clients to their sales and trading business if they can be relied on to provide consistent pricing and liquidity.  The Clients, largely very aggressive and sophisticated financial institutions, recognize that Goldman may either be transacting for their own account or acting on behalf of a Client on the other side of the trade, and so it is accepted and known that Goldman is not financially aligned with their sales and trading Clients.  Further, Goldman’s Clients are trying to extract the best deal for themselves from Goldman in the trade.  These are big boys playing a high stakes game of I win and you lose.


So when a Client, like Paulson, comes to Goldman with interest in shorting (profiting from falling prices) RMBS, Goldman’s job is to find another Client interested in going long (profiting from rising prices) RMBS, put a deal together acceptable to both, and execute on the transaction by acting as its underwriter.  It seems to me that this is exactly what Goldman did w/r/t ABACUS AC-1.


Further, daily market making activities are inherently done with either a long or short bias depending on the condition of the trading book and the subjective preferences of the market maker.  Goldman clearly adopted a short trading bias near the advent of the sub-prime collapse, a business decision that seems to have contributed to saving the firm and its shareholder value (applause for the Goldman executives please), and an approach most other financial institutions (like the now dead Lehman) would have been wise to adopt at that time.  To argue that Goldman’s short bias acted against the interest of their Clients is as absurd as it is to suggest that Goldman should have purposely lost money on their trades.  Goldman’s Clients were clearly willing buyers and sellers and thought that they were getting the better of each of their trades with Goldman.  As with any trade, only one side will be right.


So I continue to wait for credible evidence that proves fraud, and given the weaknesses of both the SEC and Senate positions, I am doubtful it exists.  It seems I am left only with the opportunity to wince at the naked demagoguery.

April 23, 2010

Favorite Albums of the Decade (2000-2009) – #4 – The Rising

Filed under: Casual Fridays,Music — Steve Krupa @ 2:00 pm

4. Bruce Springsteen and the E Street Band- The Rising – 2002

“I want a kiss from your lips
I want an eye for an eye
I woke up this morning to an empty sky”

Like the characters in Bruce Springsteen’s The Rising, every New Yorker has a 9/11 story.

At 8:46 AM when AA Flight 11 crashed into the World Trade Center’s North Tower, I was at breakfast with a group of business associates at The Coffee Shop, on the corner of 16th St. and University, around the block from my apartment, and just 2 miles from the World Trade Center.  By the time the attack caught our attention, we were standing by the bar watching live TV as UA Flight 175 hit the South Tower at 9:03 AM.  I remember walking out into the street and staring up at the burning towers that were clearly visible above the stunted skylines of Greenwich Village and SOHO, as groups of people fled the site in panic, up Broadway and through Union Square’s small park.  At 9:59 AM, I watched the South Tower fall to the ground, looking in wonder at the remaining tower and the enormous billow of ruble and dust, and trying to understand how it all could have happened.  I know I never expected to live through anything like that, and the experience, and its aftermath, come to mind daily.


“The sky was falling and streaked with blood
I heard you calling me then you disappeared into the dust
Up the stairs, into the fire
Up the stairs, into the fire
I need your kiss, but love and duty called you someplace higher
Somewhere up the stairs into the fire”

Records indicate that over 2,600 people died in New York in 9/11, over 411 were rescue workers from FDNY (343), NYPD (23), PAPD (37) and local hospitals.  Cantor Fitzgerald, a New York-based investment bank, lost 658 employees, one of them the older brother of a very good friend of mine. She was living in CA.  I got a call from her the night of 9/11, upset that they couldn’t find him.  He had called his mother after the plane hit and told her they were going to try to get out, but Cantor’s offices were on the  top floor, above where the plane hit, and the stairwells were blocked off.  He was too young (31), leaving a wife and new-born son.

Most people pass in private, mourned by their family and friends.  The victims of 9/11 passed as part of a national tragedy and an unprecedented act of terror.  They are mourned often, by a nation annually and by their families continuously as terrorism remains rooted in the fabric of our lives.


“We’ll let blood build a bridge over mountains draped in stars
I’ll meet you on the ridge between these worlds apart
We’ve got this moment now to live then it’s all just dust and dark
Let’s let love give what it gives”

Like many New Yorkers (and New Jerseyans), I’ve actually met Bruce Springsteen, a few times in fact.  The first time was at a Grammy Awards after-party in 2003 (The Rising won the Grammy that year for Best Rock Album).  I was there with a few friends who, knowing that Bruce was a hero of mine since high school, refused to leave until I said hello.  Bruce noticed me leaning around a huge bodyguard and came over without prompting and put out his hands.  I remember telling him how important The Rising was to me, how it got out so much of the emotion of the 9/11 experience, how hard we all worked to move on.  I remember his double fisted grip around my hand, and his response, “that’s why I do it.  That’s why I love music.”


“Now there’s tears on the pillow darling where we slept
and you took my heart when you left
without your sweet kiss my soul is lost, my friend
Now tell me how do I begin again?
My city’s in ruins”

Today my office is two blocks from Ground Zero.  I can see clearly the progress on One World Trade Center out my window on the 51st floor.  It’s expected to be complete sometime in 2013.  It’s designed to be a symbol of our will and determination, and our commitment to freedom.

1 World Trade Center in fall 2009

1 World Trade Center in fall 2009


I spent the last week listening to The Rising again and again.  It’s a great record at any time, but coming out in the aftermath of 9/11 makes it even more vital.  It feels like America and its tales of heartbreak and loss, and its never-ending search for possibility and hope.  It’s a beginning and a remembering, something we all needed back then, and today, from time to time.

April 16, 2010

Favorite Albums of the Decade (2000-2009) – #3 “Youth and Young Manhood”

Filed under: Casual Fridays,Music — Steve Krupa @ 3:15 pm

3. Kings of Leon – Youth and Young Manhood – 2003

I just can’t intellectualize this pick.  It’s no Kid A or Yankee Hotel FoxtrotIt’s not experimental at all.  I am sure it’s an influential rock record, but it certainly falls behind albums like The Strokes – This Is It and The White Stripes – Elephant (and probably White Blood Cells) on most professional critics lists of influential rock records of the decade.

I absolutely love filthy, dirty, southern white trash rock music (give me some Lynyrd Skynyrd or ZZ Top or the Stones’ Exile On Main Street) and this is it, the best of trailer-trash rock that I’ve heard in a long, long time. 

Do you want to see 4 dirtbags play southern rock?

Check out my boys in this live video of my favorite track on the album, Joe’s Head:

Don’t you just love the mustaches and the haircuts?

Here’s another, more spruced-up version of the band, still circa 2003, singing another tune from Youth… called Molly’s Chambers:

Gorgeous.  All this before Sex on Fire.


KOL hails from Nashville, TN and is the “Followill” family band, consisting of brothers Caleb (Vocals/Guitar), Nathan (Drums) and Jared (Bass) and cousin Matthew Followill (Lead Guitar).

In 2003 when Youth and Young Manhood was released, Jared Followill (Bass) was just 16 years old, Jared, the drummer and the oldest member, was 23.

The band has evolved its sound considerably since Youth and Young Manhood and its follow-up, another white trash tour-de-force, Aha Shake Heartbreak (God, I love that name).  In 2006 KOL released Because the Times and in 2008 they released Only By the Night, two excellent albums produced with a cleaner more arena rock sound, and showcasing more melodic vocals from lead singer Caleb.

Here’s the video of KOL’s monster 2009 hit “Sex on Fire“.  I ask, where did these pretty boys come from?

My wife and I love KOL so much we used their song Use Somebody from Only By the Night as part of the wedding party introductions when we got married on Sept. 12, 2009.  We also stopped off to see KOL play at Nassau Coliseum (Uniondale, Long Island) on Sept. 14, 2009 on our way to our honeymoon in Montauk.

Use Somebody won this year’s Grammy Award for Record of the Year.

Next week, at #4, it gets a little more serious as I begin to bring out the singer-songwriters and my rock and roll hero…

April 15, 2010

I Want My Mobile Healthcare (Part 1 of many)

I have long avoided investment in mobile healthcare applications, but I am afraid the time has come to reconsider.   

from the Economist, "Wireless Health Care"

For a long time my pessimism has been propped up by the debacle of e-prescribing (now referred to as mobile Rx or mRx).  In the venture business sometimes you show your chops by what you avoid.  From 1999-2003 we looked at almost every opportunity in the mRx space, but ultimately never pulled the trigger on an investment.   

In that period of time huge amounts of capital went into at least 15 mRx start-ups, with the 5 best-known companies raising over $170 million in venture capital (recall names like: Parkstone, ePhysician, iScribe, and Pocketscript), with only ePocrates (VC-backed) and Allscripts (public company) emerging as survivors, but hardly successes with a pervasive mRx product.   

The idea of mRx is simple.  Doctors prescribe medications using a mobile device.  The mobile device runs a series of applications that confirms the appropriateness of the drug and the dosage and checks for any drug-drug interaction problems for the patient.  If all clears, it sends the script to the pharmacy for fulfillment.  The patient shows up, picks up the initial script, and down the road the doctor can be prompted for renewals delivered by mail order.  The benefits are:  (1) less prescribing errors – which saves money on waste and the potential bad outcomes related to improper medicine and (2) time efficiency for the doctor, the patient and the pharmacy.   

In 1998 mRx ran on PDAs (Palm Pilots – remember those) and today it runs on smart phones.  The application is simple at the mobile device, but super-complicated as an interface.  The number of multi-system interactions necessary to accomplish a transaction are fantastic in number.  We stayed away from the opportunity for precisely 2 reasons:  (1) PDAs were just not that pervasive in the medical community, and frankly the wi-fi capability felt clunky and slow and (2) we just could not quantify the cost of building the systems necessary to interface with the pharmacy, PBM (pharmacy benefit management), Health Plan and provider IT systems, almost all of which were not web-services enabled.

But the times are changing…

Mary Meeker (equity research analyst at Morgan Stanley), predicts that mobile Internet usage is growing so fast it is bound to surpass desktop Internet usage by 2013-14 (chart below).    


(For access to all of Ms. Meeker’s presentation, which is very interesting, click here)

Fred Wilson, a leading edge IT VC and Twitter investor, blogged earlier this week about the ascension of social networking platforms like Facebook and Twitter over general email as the leading communication platforms on the Internet (again, see Morgan Stanley chart below).    

Pithiness and convenience drive much of Twitter’s appeal and its seems we are beginning to see a training ground for mHC emerge, where short, precise interactions will serve as the basis for successful applications, particularly in the area of remote patient monitoring, which I see as one of the more interesting areas of mHC from a return on investment standpoint.   

With the mobile market now beginning to make sense, the question turns to whether the HCIT infrastructure is ready for mHC.  Generally the answer is probably no, but recent trends, including the government’s proposed HC reforms, seem to be on track for stimulating changes in this area.

As we all know there are numerous conflicting issues and confusion around the HC business, including the now imminent expansion of the Department of Health and Human Services (HHS) as the next super-big Washington bureaucracy.  With a little help from consultants and attorneys I am in the process of reading and analyzing our new healthcare law (a/k/a  HC Reform which includes, for our purposes here, the Patient Protection and Affordable Care Act -PPACA or HR 3590 – plus the Health Care and Education Reconciliation Act – HCERA or HR 4872 plus the Health Information Technology for Economic and Clinical Health Act – HITECH ), and I promise to begin publishing my cheat sheets soon.  But so far it seems that HC Reform has the potential to revolutionize HC IT as we know it, an attribute that may countervail the financial crisis spawned by its passage.

Many a future post will deal with the details of this idea (revolution, that is), but generally I believe that HHS reimbursement policies, which under HC Reform are expected to revolve around proper care coordination among primary care, specialist and hospital-based providers, will demand smart applications running accross seemless connectivity among HCIT systems.  This means that existing legacy system configurations will not survive the transition to HC reform because they will need to be replaced with Services-oriented architectures (SOA) that enable low-cost web-services and data transfer.  Once this transition gains steam (and it is already happening at the payer level of the value chain), mHC will be set to explode. 

Please note that when I reference mHC I am really not focused on the consumer market for mHC applications (these are cute and I will talk about them soon).  I am interested in applications that link patients, payers and providers in a way that optimizes HC economics and outcomes.   

In upcoming posts on this subject I will begin to explore specific mHC applications, among them remote monitoring of the chronically ill and care coordination among providers, and whether the timing is right for venture investors.

April 9, 2010

Favorite Albums of the Decade (2000-2009) – #2 “Yankee Hotel Foxtrot”

Filed under: Casual Fridays,Music — Steve Krupa @ 10:14 am

2. Wilco – Yankee Hotel Foxtrot – 2000

Yankee Hotel Foxtrot

I remember being at Don Hill’s, a music bar in the West Village, sometime in 2001/02, waiting for Jesse Malin (a former Miles High Artist, among other things) to go on stage when he (Jesse) came up and said, “I have a problem, I can’t stop listening to this new album I just got.”

“Me too,” I said, “is it Yankee Hotel Foxtrot?”

Of course it was, and we both smiled and spent the next 15 minutes (and lots of time thereafter) talking about all the things we loved about the record.

Indeed YHF is one of those records that once you get it, you just can’t stop listening to it, and my bet is that Jesse, like me, listens to it more often than he can remember.

Wilco comes from a niche area of alternative music often dubbed Alternative country or Americana.  If you are a mainstream radio listener, it’s unlikely that you’ve heard much of their music.  But their founder Jeff Tweedy, and many of the musicians that have performed with Wilco over the past 16 years or so, are among the bona fide heroes of the indie music scene.

Tweedy began experimenting with his musical orchestrations with the 1999 Wilco release Summerteeth, moving away from country sounds toward more lush pop arrangements (or as one reviewer put it, replacing fiddles with violins), and making it, in the opinion of many, Wilco’s most tuneful and sonic album to date.

When they entered the studio in 2000 to make what ultimately became YHF, the pressure was on to create a truly commercial version of Wilco.  The band’s record label, Reprise, believed the mission was clear.  Tweedy and his bandmates holed up in a loft in Chicago and, in line with the initial vision, wrote a phenominal collection of acoustic guitar pop songs.  Through the recording process and, I believe, the influence of an active experimental prodcution scene, spawned in part by Radiohead’s Kid A, the band pulled each of these songs apart, adding experimental beats, riffs and structures, but maintaining the underlying melodies and poetry.  The outcome is a tuneful Kid A-esque Amercana record that’s highly original and listenable.

Reprise (read: evil, stupid record label), did not see the album that way at all, going as far as to say that they believed the record would kill Wilco’s career, refusing to release it and instead selling the record back to the band for $50,000 as part of dropping them from the label’s artist roster.

In an odd twist of fate, Wilco first self-released the record digitally over the Internet, and then released it physically through Nonesuch Records, a division of Warner Bros Records, the parent company of Reprise (meaning Warner Bros actually paid for the record twice).  The album went on to become a fan favorite, selling over 400,000 copies.

Yankee Hotel Foxtrot is number 2 on the list of my favorite albums of the decade because I believe it is simply the most innovative record by a categorized alt-country band that I have ever heard.  It’s catchy, poetic, experimental and memorable.  It launched Wilco’s leader, Jeff Tweedy, into a decade where he felt challenged to try to top it, and, although I believe he never did quite top it, Wilco released 4 other fantastic records this past decade that get regular play in the Krupa household (namely:  A Ghost is Born -2004 – Grammy Award Winner:  Best Alternative Music Album, Kicking Televsion: Live in Chicago – 2005, Sky Blue Sky – 2007 – Grammy nomination:  Best Rock Album and Wilco (the Album) – 2009 -Grammy nomination:  Best Americana Album).

Favorite Track(s):  My favorite track is the opener, “I am Trying to Break Your Heart” because I love the drum beat, the lyrics and the piano riff, but all of the tracks are pretty awesome.  My wife, along with Jeff Tweedy’s son (see video below), loves the more tuneful “Heavy Metal Drummer.”


The indie film I am Trying to Break Your Heart captures the entire drama surrounding the production and eventual release of YHF, including Tweedy’s conflicts with Reprise and the ascension of the tension between Jeff Tweedy and bandmate Jay Bennett that eventually led to Jay’s exit from the band.

Jay Bennett, Jeff Tweedy’s primary collaborator on YHF died on May 24, 2009, at the age of 45, apparently from an accidental overdose of the painkiller fentanyl.  Jay struggled to build a successful solo career in the years following his release from Wilco.

Being There – 1996, Wilco’s other masterpiece of the 1990s demonstrates the essensnse of the Americana sound.  The 1990s is an era some believe to be the band’s best, where lush, catchy, poetic music dominates and production and rhythmic experimentation dwells in the background.

Jeff Tweedy along with Jay Farrar were the original partners/founders of the punk/country band Uncle Tupelo, which disbanded around 1993.  My favorite Uncle Tupelo album, titled simply March 16-20, 1992, and produced by REM’s guitarist Peter Buck , demonstrates the transition from Uncle Tupelo’s punk/country hybrid to the more atmospheric and poetic sound Tweaty ultimately adopted when he left and formed Wilco.  For those interested in exploring Uncle Tupelo, I recommend this album and the 89/93 Anthology collection.  Also, Jay Farrar, known for his outstanding vocal skills, went on to form his own band Son Volt.

As with all great bands, there is a case against Wilco, usually presented by music journalists that believe the band is just not alternative enough.  This piece, titled “What’s So Great About Wilco?,” captures this sentement, for those interested.

I was an investor and board member of my friend Marc Geiger‘s Internet music company ARTISTdirect from 1998 through around 2003.  At the time Wilco lost it’s deal with Reprise Marc advised the ARTISTdirect board to sign Wilco and release the record.  Unfortunately Wilco selected Nonesuch as its new label, but I credit him for knowing a great indie record when he heard it.  Just another one of those “I told you so” moments, so common in the music industry and in investing.

For those interested in a more pure form of alt-country music, this past decade belonged to one Lucinda Williams.  Lucinda released three very special records, World Without Tears, West and Essense, the latter being my favorite of the three.  Also look for alt-country hero Ryan Adams later as this list develops (kudos for those that guess which of his albums makes the list).

Next – my third favorite album of the decade is the ultimate in contemporary southern-fried white trash rock…

April 7, 2010

More Self-interest in MA Healthcare

Filed under: Healthcare — Steve Krupa @ 5:31 pm
Tags: , , , ,

Mr. Adam Smith (again)

On 4/4/2010 I blogged about insurance cycling in Massachusetts.  News reports state that some MA consumers are gaming the system  by purchasing health insurance prior to getting an elective procedure only to drop it after receiving the service.  For many consumers, especially those without chronic illness, it is cheaper to pay the $93/month penalty than a $400/month insurance premium, unless of course the cost of the services you need exceed the short-term cost of  health insurance.  This behavior, which  is allowed by insurance regulations in MA, is economically rational (albeit mean and not for the good of all).  Widespread experience of this type of behavior would certainly increase the individual cost of health insurance for those that maintain continuous coverage. 


Today, 4/7/2010, we have a cadre of Massachusetts insurance companies, led by Blue Cross Blue Shield of MA, suing the state’s department of insurance (DOI) for refusing to approve proposed premium increases, claiming, among other things, that they (the cadre) stand to experience substantial losses if the rate increases are not approved.  Apparently the MA DOI has rejected 235 of 274 applications for premium increases, demonstrating their intention to impose a cap on premium increases.  Traditionally the primary role of the DOI is to protect insurance consumers by monitoring the financial solvency of insurance companies. 

In MA healthcare is now 100% under the purview of politics, with some reports suggesting that MA’s healthcare program is significantly over original budget estimates (did I mention that the proposed rate increases range from 8-32%?).  If you are a politician, bureaucrat or consumer in MA, rate caps initially appear to be the perfect solution to rising medical costs. 

However, it is unlikely that insurers will stay in a market where they are certain to lose money, a reality I am certain the MA bureaucrats (read: DOI) understand.  If the insurers vacate certain markets where will consumers go for their health insurance?  If this situation were to play out to its extreme and insurers were forced to abandon certain markets would this be viewed as a failure of the bureaucracy, the elected politicians or the private insurance system? 

If you were an elected politician would you expect to remain in office if the private insurance system failed under your watch? 

A failed private insurance system would certainly boost the argument for a “public option,” a euphemism for “an insurer of last resort” and a potential transitional step toward a single-payer HC system, which is a rational bureaucratic objective.

April 5, 2010

The Genius of the Healthcare Consumer

On 3/23/2010 in my post, A First Reaction to Our New Healthcare Reform Law,  I wrote that an engaged and accountable consumer would be a necessary element for universal coverage to work. 

Of course, consumers are always “engaged and accountable,” most notably to themselves, and so, I went on to say parenthetically that HC should not be perceived as “free” or a “right,” but as a cost/liability managed by the collective diligence of individual beneficiaries (and I point out here that often some of my better points end up inside parenthesis).

So what did I mean by this?  Well, check out what is claimed to be going on in Massachusetts, as reported by today’s Boston Globe in a piece titled, Short-term Customers Boosting Health Costs:

“Thousands of consumers are gaming Massachusetts’ 2006 health insurance law by buying insurance when they need to cover pricey medical care, such as fertility treatments and knee surgery, and then swiftly dropping coverage…  [According to Blue Cross Blue Shield of Massachusetts] the typical monthly premium for these short-term members was $400, but their average claims exceeded $2,200 per month…  The problem is, it is less expensive for consumers — especially young and healthy people — to pay the monthly penalty of as much as $93 imposed under the state law for not having insurance, than to buy the coverage year-round.”

Here we again have individuals acting in their self-interest, something we have been able to predict perfectly since the origins of economic theory.  The Bay State healthcare law contains perverse incentives and consumers are exploiting them to the detriment of the collective goal.  No doubt, this behavior will be a cause for premiums to rise unless incentives are altered.

Ideally, self-interested consumer behavior, which is a given in all cases, should be leveraged to improve quality and lower cost in HC.  This requires that all individual consumers have a direct economic stake in HC costs.  That is not the case in HC today and it will definitely not be the case under our new reform law, which contains the same moral hazard problems as the Massachusetts law.

April 2, 2010

Favorite Albums of the Decade (2000-2009) – #1: “Kid A”

Filed under: Casual Fridays,Music — Steve Krupa @ 10:01 am

So what is a healthcare venture capitalist doing posting a list of his favorite albums?

Well, if the Pope can do it, why not me?

As some of you know I spent much of the past decade as a partner/investor in an artist management business, Miles High Artists, with one of my best friends (and a great artist in her own right) Diane Gentile.  Diane was the music industry insider of the partnership.  I was just a music fan and businessman that sought to add some value to the careers of up and coming artists.  Over the course of the decade I was involved in the making, recording and/or marketing of 10 studio albums, all of which I am extremely proud of.  Diane and I successfully secured record contracts for five artists and all of the artists we worked with continue to actively write, record and perform music today.  It was a great experience, and some of the artists remain among my best friends.

So, as you might imagine, I listen to a lot of music, and I thought it would be fun to put together a list of my 10 favorite albums of the decade.  Now the list ultimately stretched to over 60 albums, and almost all of the 60 will be referred to in my notes related to the top 10.

The top 10 were chosen from the longer list because not only do I absolutely love them, but I believe they influenced a lot of the music of the decade.

As I have a lot to say about each of these albums, I am releasing the list one at a time as part of “Casual Fridays,” starting today with number 1.

1. Radiohead – Kid A – 2000

Kid A

I was three years old when the Beatles released Revolver and Sgt. Pepper, coming to them as a pre-teen and well after the initial shock and awe.  Despite decades of listening to new music it was not until Kid A’s release that I experienced the incredible energy of hearing something that felt so different and yet so immediately great.  Kid A opened my ears to a whole new way of listening to music and, in retrospect, influenced an entire decade of new music exploration.

In this past decade Radiohead reinvigorated and re-commercialized progressive rock music through the release of three masterpieces, Kid A being the first.  I could easily place the other two (masterpieces that is, the other release of the decade, Hail to the Thief, was not, in my opinion as strong an effort), Amnesiac or In Rainbows, in the number one spot (personally, I listen to Amnesiac more than the others).

Kid A makes my top 10 because it came first, and as such it deserves special recognition for shepherding new production techniques, beats and electronics into alternative rock music and for creating the openings in our ears necessary to accept the experimentation of bands like Animal Collective, The Dirty Projectors and even Wilco.

Kid A is number 1 on my list because I believe it is the most influential rock album of the last decade.

Favorite Track:  “Optimistic” – because “the best you can is good enough” (maybe).


OK Computer and The Bends, Radiohead’s masterpieces of the 1990s provide ample competition in answer to the question: what is Radiohead’s greatest album?  (And yes people ask this question often).

“Pyramid Song,” the second track on Amnesiac, released one year after Kid A, might be Radiohead’s coolest song.  I remember hearing (seeing) them play it live and leaving the show with a complete absence of self-confidence.  Along with its haunting piano riff, the track baffles musicians determined to decode it’s time signature, which Wikipedia posts as 16/8 (which is like 4/4, the most common time signature in rock, nonetheless, the beat is confusing and unique, check it out below).

Icelandic band Sigur Ros is clearly a major influence on Radiohead, both on Thom York’s vocal style and the Greenwood brother’s orchestrations.  Sigur Ros has released two outstanding albums, namely Ágætis Byrjun in 1999 and “( )” in 2002.

Radiohead’s guitar player, Jonny Greenwood, wrote the soundtrack to the Paul Thomas Anderson film, There Will Be Blood, by far the most interesting movie soundtrack I have heard in a long time, and maybe my favorite movie of the decade (another list perhaps?).

Other notable prog-rock records of the decade include: Porcupine Tree – In Abstentia, Tool – Lateralus, Muse – Black Holes and Revelations and The Standard – August.

Next post – number 2 – is an album by one of my favorite Alt-country bands…

April 1, 2010

On Wall Street: Is Matt Taibbi Wrong?

 Talkin’ Wall Street…


 A couple of opening points:

 (a)       I am a Wall Street alum (1994-98), I loved it there and it was my stepping stone to venture capital, my dream profession.

(b)       I believe that historically Wall Street’s financing of corporate growth and innovation has been a huge competitive advantage to the US.

(c)       On the one hand I think that Henry Paulson (as former US Treasury Secretary) is a patriot and helped save our country from economic collapse; on the other hand I think that he (Paulson) aided in creating the conditions for the crisis while he served as CEO of Goldman Sachs.

(d)       Wall Street is all about money, and that will never change.  It attracts extremely smart people who spend all of their time thinking of ways to make money.  Unfortunately many times Wall Street creativity spawns behavior that crosses ethical lines and on occasion becomes illegal.

(e)       Today, Wall Street has gotten completely carried away and needs to reform itself fast.  It is becoming an uncontrolled burden on the stability of its own milieu, the global financial system.


 This post catches me in the middle of reading two books on the financial crisis of 2008: On the Brink, by the aforementioned Henry Paulson, and Too Big to Fail (or maybe too big to carry or read, for that matter, we’ll see) by Andrew Ross Sorkin, a business reporter for the New York Times.  Both chronicle the action of what happened in the days before, during and after the financial crisis, but neither delves into the real causes for the crisis, or the questionable actions of its key participants. 

 This cannot be said for one Matt Taibbi.

Matt is the irreverent, liberally-biased, smart-ass, misanthropic, and, for many, insufferable contributing political editor (sports too) of Rolling Stone magazine.

 And I have grown to love him.

 Not for his technical grasp of Wall Street and all of its acronyms and crazy financial structures (he lacks this), but for his unmitigated, bone-quaking outrage.  As extreme as Wall Street is with its obsession with money for money’s sake, Matt is obsessed with Wall Street and its leader Goldman Sachs, marking it (them) the villain(s) in a calculated plot to control the world.

 The (once?) venerable Goldman Sachs provides Matt Taibbi with not only a villain, but also a synecdoche for Wall Street, which has now, unfortunately, become itself a populist synecdoche for anti-ethical greed, instead of the engine of capitalism and national wealth creation we all hope it would be.

 So let’s have some fun for a moment.

 Here is how Matt describes his villain:

 “The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money…  What you need to know is the big picture: If America is circling the drain, Goldman Sachs has found a way to be that drain, an extremely unfortunate loophole in the system of Western democratic capitalism, which never foresaw that in a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy.”

 – From Rolling Stone – Matt Taibbi – Inside the Great Bubble Machine

And its plot to rule the world:

“The mistake most people make in looking at the financial crisis is thinking of it in terms of money, a habit that might lead you to look at the unfolding mess as a huge bonus-killing downer for the Wall Street class. But if you look at it in purely Machiavellian terms, what you see is a colossal power grab that threatens to turn the federal government into a kind of giant Enron — a huge, impenetrable black box filled with self-dealing insiders whose scheme is the securing of individual profits at the expense of an ocean of unwitting involuntary shareholders, previously known as taxpayers.”

From Rolling Stone – Matt Taibbi – The Big Takeover

 And post-bailout:

 “The question everyone should be asking, as one bail-out recipient after another posts massive profits  – Goldman Sachs reported $13.4 billion in profits last year [2009], after paying out $16.2 billion in bonuses and compensation – is this:  In an economy as horrible as ours… where the hell did Wall Street’s eye-popping profits come?… A year and a half after they were minutes away from bankruptcy, how are [they] not only back on their feet again, but hauling in bonuses at the same rate they were during the bubble?”

 – From Rolling Stone – March 4, 2010 – Matt Taibbi – Wall Street’s Bailout Hustle

Matt’s writing is fun(ny), but his accusations, one being that Wall Street has obtained massive global power, seem pretty close to the truth, even if the details of his analysis bump against errors of nomenclature and the disadvantages of financial inexperience (Many a business reporter revile Matt and his errors.  For example see Megan McArdle  from Atlantic’s diatribe and its many links for a technical debunking of Matt’s work.  For what it is worth I don’t think Matt makes that many technical mistakes, and unlike most conspiracy theories his are worth considering and his writing is well worth reading as long as you can tolerate some cussing here and there.) 

Wall Street used to be about corporate finance, raising capital for corporations by selling debt (corporate bonds) and equity (e.g. IPOs) to public investors and providing liquidity by creating markets for the day-to-day exchange of these securities.  The firms made their profits by charging fees for underwriting new securities and trading in existing ones.

While corporate finance is still a part of Wall Street’s business, it has become small potatoes to its derivatives and proprietary trading businesses, businesses where rather than serve their trading customers, they compete with them.  In this business, not surprisingly, like Vegas, the “house” is set-up to win, and it does, unless your firm gets high-on-its-own-supply of risky underwritings, as was the case with Bear Stearns, Lehman, et al, in which case you go down in flames, unless of course you get bailed out…   

Essentially Matt Taibbi claims:  (1) that these firms have figured out more ways to bilk their clients than their clients could even imagine (again smart people obsessed with making money); (2) that many times these techniques cross ethical lines and might even be illegal; (3) that they are more than willing to bilk each other as well; and (4) that there are so many ex-Wall Streeters with regulatory and legal power that there is no chance for systemic punishment of, and thus no deterrent to, continuous bad behavior.

On this last point, it’s important to remember that it was a huge team of ex-Wall Streeters-in-government that engineered the bail-out and that the bail-out went well beyond the TARP money that was invested in firms like Goldman Sachs.  These ex-Wall Streeters-in-government also engineered: (a)  the bail-out of AIG, which was effectively the bail-out of all of the companies AIG owed money to (yes, Goldman was one) and (b) the conversion of Goldman Sachs and Morgan Stanley into bank holding companies that overnight allowed them to borrow massive amounts of money from the Federal Reserve (read: the US government) without the need for congressional approval, a move that effectively solved any threat to their liquidity.

All for the good of the nation and the world (of which I agree and approve, yes, we needed to save the finanical system).  And all for the continuation of massive profits and pay packages of the banks and their senior management, repsectively (no we did not need to save Wall Street’s plush lifestyle).

It confuses me to this day as to why the government does not own 85% of the equity in most of Wall Street.  Shouldn’t that have been the “market terms” for all of the bail-out investments, a la AIG?  (I will someday calculate how much profit the US government would have made if it would have taken meaningful equity stakes in these firms and sold it at today’s prices.)

You tell me – do you think Matt might have a point or two?  Is this not some kind of conspiracy?

Like most finance guys, I get most of my financial news from the Wall Street Journal, New York Times and CNBC, and I don’t hear any of them pursuing these questions in any meaningful way, and I wonder why?


Today I had coffee with an old hedge fund friend of mine and we came to the same conclusion.  Not different from the horror described by Arthur Jensen (played by Ned Beatty) in Paddy Chayefsky’s 1976 film Network, the world capital markets have become larger than and span well beyond the borders of sovereign nations, and the 2008 financial crisis proved more than ever that they carry much of the weight of the world.  Who do you think buys, markets and trades the debt and currencies of all sovereign nations?


Listen to Matt here:

Meet Arthur Jensen here:

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