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An informal, stream-of-consciousness reflection on business ideas, events and issues in modern business, modern life and with some specifics to the web-software industry by Paul Tomori, Internet Entrepreneur

Are We Losing Our Fundamentals?
Did such a loss lead to the sub-prime mortgage crisis?

By Paul Tomori
Friday, February 06, 2009 at 23:26:12 (EST)

In the operation of my business, I tend to make "principle-based" decisions as opposed to "situational-based" decisions. I come from that school of thought where there are absolutes and where mostly things are black and white with not many shades of grey. A lot of people think that such an approach is naive, that times are always a-changin' and what was true yesterday won't necessarily be true tomorrow.

Fortunately, I have a bit of a mathematics in my toolbox and thus, I don't get too passionate about this way of looking at things. I just look at the numbers and let them speak. More often than not, my principles are already aligned with what the numbers say or I make them so. I find it just makes sense to look for some universal law at work when things get complicated.

I remember having a philosophy classmate in university who wrote an article for the student newspaper about how there are no absolutes in the world. Strangely, he was also in my computer class (where 1's and 0's rule the roost). For those who don't know what I mean by that, at a fundamental level all computers operate on switches that toggle between fully (i.e. absolutely) on or fully (i.e. absolutely) off. You get enough of those switches firing in rapid succession and voila, the webpage you are reading appears before your very eyes. Anyway, just for fun, I cornered the guy in the hallway and asked him:

"About your article... do you really believe there are no absolutes in the world?"

He replied: "Ya, it's obvious".

To which I mischievously asked again:

"Are you 'absolutely' sure about that?"

I think he knew I had busted him at that point and while I was certainly no boy-wonder of intellect, it was occasionally fun to be able to best one of my outspoken classmates. It was a fun time in my life interspersed with moments of grueling intensity as I struggled (and mostly succeeded) to understand the lessons of introductory calculus, physics and computer science.

It seems to me that a distaste for absolutes in the world indicates an affinity for things that are a little bit muddled or a little bit out of focus. Hey - let's face it. There are a lot of complex things in this world that can really befuddle a person and lead one to conclude that there are only shades of grey, but you know, isn't that precisely when you need to sharpen your focus even more? Isn't that when you should look for the fundamentals that are entangled in the complex topic? Then again, reality through a soft focus lense can sometimes be appealing too, if not less stressful in the short-term at least.

In my own self-critiquing, I have always been disappointed in myself whenever I let a vague generality exist where with a little effort, I could get down to the fundamental makeup of something. As a computer programmer, I can't really indulge grayness in my work... thus, such a discipline toward the attempted untangling of complex things carries over to other areas of my life.

Delving further back to highschool days, one of my friends who also had an interest in math asked his math teacher "what exactly is pi?" Apparently, this teacher didn't really grasp the fundamentals about pi. His answer was "well, it comes from a long way back....". Fortunately, my friend's father was a no-nonsense kind of guy who worked in engineering. He stated the REAL answer so much more succinctly: "pi is the ratio of the circumference of any circle to its diameter". In other words, you can always fit 3.141 diameters into the circumference of ANY circle. We were mightily impressed by this. Heck, prior to that, I thought pi was just some funny looking Greek symbol that for some reason always equalled 3.141. It was an important lesson for me though on a deeper level. If a highschool math teacher couldn't give a clear answer to a fundamental question in HIS area of expertise, then were there other adults out there who were so lacking in fundamentals in THEIR areas of expertise? It was a scary notion to consider.

I began to conclude that for the most part, absolutes and fundamentals were flip-sides of the same coin.

A few years later, I was in the working world, but pre-internet... and I was interested in calculating a loan that had compound interest. I tried to remember the formula for compound interest and even tried to derive it, then thought "ah heck, why don't I just call TD Bank and ask them?" I made the call, but to no avail. To my astonishment, no one at the branch could tell me the formula. They said "we just plug the numbers into our computer and we get the needed answer". Of course, THAT is nice and efficient, but really, shouldn't someone at the bank have known (and understood) the actual formula (i.e. the fundamentals)? It was laughable to me. So, I tried another bank and then another and then another. Either it was highly amusing or I am easily amused! NOT ONE BANK COULD ANSWER THE QUESTION. I was truly mystified by this.

I had to resort to that old-fashioned source of knowledge... a textbook. In case you're interested:

The formula for calculating compound interest is:


P = principal amount (initial investment)
r = annual nominal interest rate (as a decimal)
k = number of times the interest is compounded per year
t = number of years
A = amount after time t
Example usage: An amount of $1,500.00 is deposited in a bank paying an annual interest rate of 4.3%, compounded quarterly. Find the balance after 6 years.
Using the formula above, with P = 1500, r = 4.3/100 = 0.043, k = 4, and t = 6:

So, the balance after 6 years is approximately $1,938.84.

I can't help but think that perhaps we are losing too many of the old guard who definitely would have known their fundamentals. Does the world end up with a crisis like the "sub-prime mortgage debacle" because the whole system is like a house of cards built by people who have lost (or never acquired) the fundamentals in order to make good judgments about how to run a loans business? That is a very unsettling possibility, isn't it?

In my business, I insist that all programming and coding be done at a grass roots level. Myself, I write code directly from the command line. It just feels so true and real. And, I am more assured of being at the most fundamental level that is reasonably accessible to a computer programmer.

In terms of coding of websites, we have cleaned up so many websites that were produced by other companies using Frontpage or some other WYSIWYG interface. Those programs produce such bloated code that just reeks of inefficiency.

Further, we even run our name servers and hosting platform from command line tools. We never resort to hands-off management systems that are designed for those without the fundamentals. And, we have prospered because of it. Whenever something goes wrong, we have a huge toolbox to select from. We know where to look and we can do so fearlessly. We don't get intimidated by complex problems - We get excited by them. They challenge us to wield our fundamentals and perhaps learn some new ones.

To me, that's the only way to approach things in a business such as ours.

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