The Powerful Addiction of Variable Rewards: How Silicon Valley Uses This
My friend Nir Eyal introduced this concept to me in 2012. What is now the crucial underpinning of almost all of the most popular products that have come out of Silicon Valley in the last decade. Products that tap into the deeply ingrained human behavior and drive. Variable Rewards.
“B.F. Skinner in the 1950s, called a variable schedule of rewards. Skinner observed that lab mice responded most voraciously to random rewards. The mice would press a lever and sometimes they’d get a small treat, other times a large treat, and other times nothing at all. Unlike the mice that received the same treat every time, the mice that received variable rewards seemed to press the lever compulsively.
Humans, like the mice in Skinner’s box, crave predictability and struggle to find patterns, even when none exist. Variability is the brain’s cognitive nemesis and our minds make deduction of cause and effect a priority over other functions like self-control and moderation.
Source: Want To Hook Your Users? Drive Them Crazy.
This was further illustrated by former CPO of Tinder, Brian Norgard in his interview on the Pomp Podcast.
Tinder was exemplary in utilizing variable rewards into the product. This was the reason Tinder became the juggernaut in the dating space. Apparently they are one of the highest grossing mobile apps of all time. They brought this concept from the gaming industry which is the essence of video games itself.
As Nir writes “Players will agree to almost anything to get rid of distraction and keep playing. Variable rewards seem to keep the brain occupied, removing its defenses and providing an opportunity to plant the seeds of new habits.
Bizarrely, we perceive this trance-like state as fun. This is because our brains are wired to search endlessly for the next reward, never satisfied.”
People are always looking for cheat codes & achievement experience. So for example “Superlike” or “Boost” features in Tinder. These features are always positive & aspirational.
Also these products have to be super simple to understand and use. They have to be “No Mind” because people do not want to go to your product, process and learn. They do not want to think about it, they want it to be consumed passively. We see this on TV, IG, FB, where you use it literally mindlessly.
Personally, I had to delete the Instagram and Facebook apps off my phone because I ended up wasting so many hours every day even though my intention was just to do a quick 5 minute check. It was that easy and mindless it was.
Variable Rewards is a key part of Behavioral Design methodology. Also no surprise that many of the best product people know of this methodology and why it is embedded in many of our favorite tech products. I personally think like most technology, it’s neutral and cuts both ways. It can be used for good and for evil. But regardless of any value judgments on this, as investors, founders, consumers and users we should be aware that this tool is now being used more widely. So the more we understand its power, the better we are able to manage it wisely.
“Be the chess player not the chess piece.”--Raph Charrell
Why Gaming Industry is so interesting (and why it’s difficult to stay on top as AN investor or operator)
I’ve become fascinated by Gaming Industry aka Video Games. And for anyone in the industry, there are few people who write or talk about it with more insight than Matthew Ball (full attribution of any insights below come from him). He is a keen observer of media in general but also states that gaming is its own unique beast.
If you contrast movies versus games, despite massive increase in technological & experience, movies have not changed dramatically in the last 2 decades. But the video games experience progresses every year. Games literally get better every year. Not sure you can say the same thing when it comes to Movies & television.
This has led to two very major factors in Gaming that make it so distinct.
Power Law Differential: Hits driven, Winner take-all dynamics like in most of technology business.
Red Queen Effect: It’s so competitive you have to run twice as fast to stay in the same place.
Gaming legend Yoichi Wada said “All media industries are a product of content, business model and technology. Tech usually comes first, which informs the business model which drives content.”
One of the things that is so unique about this industry is that new technology platforms do not cannibalize or undercut old prior ones. So for example, the arcade industry is now as big as it was 40 years ago. PC and Mobile games did not cannibalize console games growth. Same with Live services gaming. Each new technology platform acts as a new geological strata on top of each other and unlocked new customer segments. The clear counterexample is in Music where Digital replaced CDs, which replaced Cassettes, which had replaced Vinyl.
When we see new technology platforms like Augmented Reality (AR)/Virtual Reality (VR) emerge, we can expect little to no cannibalization. But we will also see new major players take the lead in those segments (like Niantic in AR/VR).
What is not surprising (or maybe it is surprising) is the dominant players in old platforms usually do not lead in the new tech platforms. So for example in Mobile it was Supercell, Rovio or King. In Console Gaming, Sony/MSFT/Nintendo were leaders. For PC Games, Activision & Blizzard were winners. We see Minecraft & Fortnite really own the Live Service gaming space. Based on history, with every new technology, we should expect the rise of new dominant platforms and gaming content studios.
The Gaming industry is expansive and unlike most media sectors, there are a multitude of dominant players that are multi-billion in valuation. Basically there is room for a multitude of players unlike in other sectors. And there is a rich M&A market as these big players gobble up smaller startups.
Cloud gaming as new tech platforms seem to be the new emerging battlefield. I see some big moves from Stadia from Google, Microsoft Live, Sony Playstation Now. But we are probably decades away from mass penetration due to bandwidth costs. Additionally the consumer experience is not as plainly not as good as the present technology platforms. The clear unique experience for cloud gaming is still to be determined but the promise is there.
Why should you pay attention to Gaming industry?
If you have read the Science Fiction book “Ready Player One”, the fully virtual world could potentially be bigger than our offline world. This metaverse or fully digital universe might seem like science fiction but for many of our lives in 2020 pandemic point to some semblance of this. We can only expect that digital will slowly become a bigger part of our world. Many experts believe Gaming will be a key entry point and onboarding to the metaverse.
Net net: Gaming is going to be an exciting place to be and I can’t wait to see all the new developments happening here from both a user and investor perspective.
Marvin’s Best Weekly Reads October 25th, 2020
“We are what we repeatedly do. Excellence, then, is not an act, but a habit.” ―Aristotle
"Nerdy Nuts — the D2C peanut butter company they’d founded just 18 months earlier — had gone viral on TikTok. In the span of a few days, the couple had watched their sales multiply by 20x.
But they didn’t have time to celebrate.
They faced a backlog of $500k+ worth of orders, a depletion of inventory, and thousands of emails from cranky customers. What began as a tiny side hustle at a farmers market in South Dakota had ballooned into a monster.
Nerdy Nuts’ journey is every entrepreneur’s dream: Create a cool product. Find a unique way to market it. Hack your way to expedited growth.
It’s a case study in marketing, which touches on:
The underutilized value of TikTok as an influencer tool
The psychological power of scarcity
The “Holy Grail” of a product feedback loop
But it’s also a cautionary tale about the unglamorous underbelly of overnight success."
How a tiny peanut butter company grew to $500k per month in sales
"Combining mainstream pedigrees & pioneering crypto cred, Ehrsam, 32 and Huang, 31, convinced top institutional investors like Harvard & Stanford to give them $750 million to invest in a market they were too blue-blooded to touch directly.
The vehicle was odd, an open-ended fund with longer than usual to return it back. Then they did something even more unusual: they plowed it all into cryptocurrencies, mostly Bitcoin, at a time when prices languished in post-bubble lows. It was aggressive & it could have backfired badly. But it didn’t. Bitcoin has tripled in value since Paradigm’s investment, meaning aside from any other bets it’s made, Paradigm’s starting bankroll is already worth 3x.
All told, 13 of Paradigm’s 28 investments so far have already raised or circulated tokens at higher valuations. That’s helped the firm establish itself as an elite player alongside the likes of Pantera Capital & A16Z’s semi-independent crypto funds, where early Coinbase investor Chris Dixon says the scene feels similar to when collaborative early-stage VC firms fought their way into the establishment more than a decade ago."
Good to know. I'd favor Portugal and Thailand personally.
https://matadornetwork.com/read/americans-second-passport
This is a super interesting take on Clubhouse. I'm not on it btw just watching from afar.
"Insofar as the Clubhouse app allows for private belief formation among high-status individuals, while also distributing those beliefs semi-publicly in real time, it’s hard to overstate the threat that Clubhouse poses to institutional opinion leaders. Taylor Lorenz’s campaign against Clubhouse is best understood as desperation in the face of an existential threat."
"Clubhouse is unlike any other platform right now insofar as you easily encounter a bunch of previously “canceled” people—unable to tell their story anywhere else—not only telling their story, but to diverse interlocutors who both listen honestly and challenge aggressively. It’s frankly amazing, given the current wave of hypermoralism that started suffocating public intellectual culture since about 2013."
The Meaning of Clubhouse vs. Taylor Lorenz
"There’s a saying in commodities that the cure for high prices is, well … high prices. Because, usually, when prices increase, suppliers are willing to supply more of the goods they produce. This is also true if we think of employees as suppliers of labor — if we pay people more, they’ll likely work more. As prices continue to increase to levels no longer demanded by consumers, suppliers have to cut back to satiate the demand by consumers. Prices end up dropping again, but often drop too low, causing the cycle of increasing and decreasing prices to continue.
But with founders this is not the case. Higher valuations aren’t causing more people to start companies — ie. higher priced rounds are not causing increases in the supply of startups."
"Covid has changed all of these dynamics for category leading brick and mortar retailers. If most e-commerce companies have been pulled 1–3 years into the future in terms of their revenue, then the e-commerce businesses of most category leading brick and mortar retailers have been pulled 5–10 years into the future. Covid has permanently changed their destiny and driven significantly higher long term steady state FCF outcomes for them.
I sometimes think that investors do not appreciate how large and rapidly growing the e-commerce businesses at some of these category leading retailers are. Wal-Mart’s digital revenue in Q2 was an annualized $42 billion, growing 94% — faster than Amazon. Best Buy’s digital revenue in Q2 was an annualized $19.4 billion, growing 242% — faster than Amazon. Some will quibble about the inclusion of BOPIS revenue, but I think this is fair as it is a very different experience than actually going into a store.
Perhaps the simplest way to express what has happened during Covid is to note that Amazon has actually lost share in e-commerce during Covid."
A disaster zone in USA under Trump. Now on foreign intelligence side. #VotehimOUT
"The malt episode, which took place a few months after Trump took office in 2017, became legendary inside the CIA, said three former officials. It was seen as an early harbinger of Trump’s disinterest in intelligence, which would later be borne out by the new president’s notorious resistance to reading his classified daily briefing,... & his impatience with the briefers, current & former officials said."
But what initially seemed like mere boredom — which demoralized intelligence officials but could potentially be managed by including pictures & charts in briefings to hold the president’s attention — later morphed into something the officials saw as more sinister: an interest in wielding intelligence as a political cudgel. Whether selectively declassified by spy chiefs he installed for their loyalty, or obscured from congressional & public scrutiny if it conflicted with his preferred narrative, intelligence became just another weapon in the president’s arsenal.
Trump’s actions, & the endless partisan battles over the Russia probe & impeachment, have left the intelligence community bruised and battered.
https://www.politico.com/news/2020/10/19/biden-revamp-fraying-intel-community-430090
"It reminds me of that Bruce Lee quote, “Be like water.” Or whatever it is. Go with the flow. Once you start asking for more and more ownership, the competition set increases, founders put up their guard, and they expect a ton of platform services as a part of the bargain.
Sure, there are some GPs and even fund franchises who can demand the 20% land and hold it, and founders are happy and will continue to be happy making that trade. But, I don’t think it’s a large group who can lay claim to such a market position. In fact, the number who can is getting smaller. Stretching this out over 10 or 20 years, founders could very easily have more access to vertical-specific crowdfunding, debt financing products, or even low-interest loans backed by predictable revenue streams. These financial advancements will cut at the business model of larger funds, but they won’t eat the whole pie.
As a result, we will see even the largest investment firms (including hedge funds, etc.) going earlier and earlier. It’s already been underway for the last 3-5 years in venture capital. Today’s pre-seed and seed rounds are really the only consistent places to find alpha in a blind-pool portfolio model."
https://semilshah.com/2020/10/18/the-fight-for-ownership/
This is a great framework for evaluating career opportunities at tech startups.
Pick the stage of company, not the company name/brand. Worth a read.
Stage of company, not name of company
Everybody needs a side hustle! :)
Aeroflot Airlines employees charged in $50 million smuggling scheme
This was a crazy good interview. Really educational and entertaining. I'm a big fan of Mr. McConaughey.
https://tim.blog/2020/10/19/matthew-mcconaughey/
"It’s normal to feel frustrated. Even nervous or scared. But giving up is simply not an option.
Just like people back home during World War II, even doing small things to take back control– like Victory Gardens– proved to be enormously beneficial.
Now, I’m not talking about literally growing food… although there’s never any downside in doing so. Being able to produce even a small portion of your own food supply is a very powerful feeling.
What I’m really talking about are small steps to increase your independence.
For example, having some gold and silver locked away in a safe that you control means that you have a form of emergency savings that’s protected from inflation, or any potential problems in the banking system.
Additionally, a second passport means you have at least one other option outside your home country to live, work, and raise a family. It means one single country does not hold total control over your ability to travel."
https://www.sovereignman.com/trends/taking-back-control-one-small-step-at-a-time-29143/
"So to all new fund managers: Remember to be patient. Don’t beat yourself up. Put in the work. Stay focused. Invest in relationships. Invest in good companies. The rest will work itself out."
https://medium.com/parade-ventures/learnings-from-fund-i-time-is-your-best-friend-c4356e367fc4
"We’ve already started seeing a mass exodus from big cities to suburban and rural areas, all over the world.
And this has led many pundits to declare the big city DEAD.
Simon and I both disagree.
Sure, there will continue to be a lot of people who move out of the city; plenty of companies have already moved to online work arrangements, so employees can now live anywhere within reason and work remotely.
We’ve both been writing about this extensively and think that it’s great for people to have the freedom to move wherever they want.
Countless employees are no longer tethered to a place where they HAVE to be. Now they have the freedom to move where they WANT to be."
https://www.sovereignman.com/trends/the-death-of-the-big-city-has-been-greatly-exaggerated-29151/
Actually this is cogent reasoning.
"Yes, we in the commentariat do make mistakes, but analysts weren’t dumb in pointing out all of Quibi’s glaring, red-alert flaws. Those analysts were smart. They were right. They might not be right next time, of course — no analyst should get too overconfident in their predictions. But at the same time, we shouldn’t just collectively throw up our hands and declare every idea that comes our way a brilliant gift from the heavens. Most ideas are dumb, and we and everyone else have every right to point that out.
So respect the hustle. Don’t kick a hardworking entrepreneur down who is just trying to get their project out there and show it the world. But that doesn’t mean you can’t call out stupid when you see it. The best entrepreneurs know that — even at its most vituperative — critical feedback is the necessary ingredient to startup success. Lauding everyone lauds no one."
https://techcrunch.com/2020/10/22/respect-the-hustle-not-the-stupidity/
"When we look forward a few years and ask, “what will be the longest-lasting effect of Covid on homeownership and real estate”, most of the predictions and takes you hear involve people and their preferences: like “People will leave cities when they can work remotely.” But if you ask me, I’ll bet you that the most consequential impact of Covid on homeownership will be the temporary short-circuits and policy circumventions that cities and local governments set up to enact their pandemic agendas.
In the short term, like the next 3-5 years, this change will probably manifest itself in specific developments, rezoning decisions, and civic projects that could never have advanced before - even more likely if we get a round of fiscal stimulus after the election in November. But in the longer term, Covid’s real legacy for homeownership and residential development may be the temporary patches, circumventing local feedback loops, that become permanent."
Covid Kills Inertia: Homeownership Edition
I hope this comes thru. Jetpacks entrepreneurs trying to make the dream come true.
"Most of the jetpack entrepreneurs I spoke to hope that the devices will one day be everywhere. “The way I look at it, we have sedans and SUVs on the roads, just as we have scooters and bicycles,” Mayman says. Until then, their challenge is the same facing every entrepreneur: to find a market for them, so that they can continue to refine the technology. “There is a business [for jetpacks],” says Rossy. “It’s fun. You don’t need a paraglider to go from A to B. It’s just fun. I think the main business will be the fun business.”
https://www.wired.co.uk/article/gravity-jetpacks
"Not recognizing survivorship bias can lead to faulty decision making. We don’t see the big picture and end up optimizing for a small slice of reality. We can’t completely overcome survivorship bias. The best we can do is acknowledge it, and when the stakes are high or the result important, stop and look for the stories of those who were unsuccessful. They have just as much, if not more, to teach us."
https://fs.blog/2020/10/sharks-survivorship-bias/
"So it wasn’t possible to change News Corp from the inside?
“I think there’s only so much you can do if you’re not an executive, you’re on the board, you’re quite removed from a lot of the day-to-day decisions, obviously,” he said. “And if you’re uncomfortable with those decisions, you have to take stock of whether or not you want to be associated and can you change it or not. I decided that I could be much more effective outside.”
So far, Mr. Murdoch has made investments in the Tribeca Film Festival, Art Basel, Vice Media and in a comic book company whose publisher once worked for Marvel. The dream there is to create another Marvel-like universe of characters who could cavort across different platforms.
He is particularly excited about investing in start-ups created to combat fake news and the spread of disinformation, having found the proliferation of deep fakes “terrifying” because they “undermine our ability to discern what’s true and what’s not” and it “is only at the beginning as far as I can tell.” He’s funding a research program to study digital manipulation of societies, hoping to curtail “the use of technology to promulgate totalitarianism’’ and undermine democracies.
“So everything from the use of mass surveillance, telephone networks, 5G, all that stuff, domestically in a country like China, for example,” he said.”
https://www.nytimes.com/2020/10/10/style/james-murdoch-maureen-dowd.html
Vanilla Ice. That brings me back to the good old days.
"The story of Vanilla Ice has long been shrouded in a fog of shoddy reporting, breathless tall tales, and harmless self-deception. A white rap Rashomon, if the bandit battled Bebop and Rocksteady. Everyone’s narrative is slightly askew, which adds to the charm. You would just print the legend if you could figure out exactly what it is."
This is a fascinating framework for empires (implications for business or political). Highly worth reading.
"As an empire grows richer, Glubb noted, wealth becomes an end in itself, and the emphasis moves from national service to personal gain. The old nobility and their sense of virtue are replaced by merchants and the values of the market. With this diminishing sense of duty comes a defensiveness, concerned with protecting affluence for a minimum of shared sacrifice. The United States crossed this line a long time ago, all but codifying it in the Reagan era. Though lip-service is still paid to the pioneer spirit of the Founding Fathers, unchecked individualism has replaced the “united-we-stand” attitude that built the early nation. By the time of the second Gulf war, the middle classes were encouraged to go shopping to support the economy, while the military—drawn largely from the poorest classes of society—made the actual sacrifices. It’s not an exaggeration to say that the defining factor of the richest class of Americans, and their political allies, is the avoidance of all shared national burdens—from healthcare to taxes and the public services that rely on them—in favour of a hyper-individualistic notion of prosperity."
https://quillette.com/2020/09/30/pasha-glubb-and-avoiding-the-fate-of-empires/
"you must produce something (anything) immediately. There is just no way around it. Unless your net worth is increasing by 20-25% a year, you’re going to be falling behind. Why do we think the number is this high? Look at the prices of tech stocks. Since we know that tech is going to drive all the value going forward (or at least the vast majority) it’s the new standard for relativity. Buying something like the Qs (NASDAQ) is a lot more reasonable with a 10-year time frame than a diversified basket of stocks in dying industries.
If you don’t have money, we would go ahead and trade your time for money and work those 60-80 hour weeks. There is just no other way to gain ground. If you have $50,000 to your name, producing even $5,000 of extra income is a 10% move for you. This gives you a shot (at least). Go ahead and start fixing iPhones, repairing watches, doing yard work for money etc. Anything and everything is on the table since the value of assets are going up rapidly."
"There have been several profound consequences of Shopify being a Canadian company, tucked out of the way in Ottawa (and then Montreal, Toronto, Waterloo…) and not in the Silicon Valley limelight. The most important consequences have to do with people.
The first impact is on employee retention. Shopify never competed in the never-ending war for Silicon Valley product and engineering talent, where average employee tenure at some companies is under two years (!) and employees work for a portfolio of high-growth companies over their best years, not just commit to one. Instead, the common complaint about Shopify up here in Canada is that all the good tech talent comes to work here, and then never leaves. There’s a virtuous feedback cycle at work: since Shopify can count on you staying for longer than your average tech company can, they can invest more into you when you start. Reciprocally, having everyone get more up-front investment and more context and tenure means that you can make a lot tactical choices in how you work that people really like, and makes them stick around."
https://alexdanco.com/2020/10/23/six-lessons-from-six-months-at-shopify/
Platform Dependency is No longer Heresy in B2B
Common Wisdom in Silicon Valley is that Platform dependency is a big NO NO. But particularly in the B2B sector, this might not be true anymore.
As backend technology starts to get commoditized thanks to the Cloud, it also becomes abstracted away and arguably less of a competitive advantage to build yourself.
“By using a set of Salesforce services, companies could take advantage of work that SFDC had already done, speeding up building time and reducing time to market…..back in 2007 building atop a Platform as a Service (PaaS) wasn’t a common way of developing software.”
(Source: In the cloud era, building on platforms you don't own is normal)
This has led to the rise and massive growth of Vertical Saas Giants.
“Why are vertical SaaS companies thriving? There are fewer competitors within each industry and early leaders tend to dominate their field. The best SaaS companies that achieve the golden standard for the industry tend to maintain that leadership role.
People in a particular industry network with peers in other companies, attending conferences and events together. People tend to invest in software that others recommend and are likely to remain loyal customers.”
(Source:https://www.trustradius.com/buyer-blog/the-growth-of-vertical-saas-companies-today)
Go-to-Market strategy and speed become critical pieces to winning a market.
The front end is how they win: customer acquisition piece and UX. Something that can only be built with deep customer insight and industry experience. I’ve seen huge companies like Veeva, ServiceMax that were also built on top of Salesforce. But here these are specific for their vertical industry. Big massive industries such as Life Sciences & Field Services in prior examples that have specific nuances that can only be served by expertise from that industry.
Other examples include Procore in the Construction Industry, Clio in the Legal industry or Guidewire in the Insurance industry.
Watch this area of Vertical SaaS as we can expect many more billion dollar giants to emerge here over the next 5 years.
Play Against Rubes
A great perspective from this interview Andy Rachleff had with Pomp.
Institutions and Professional investors used to do well in public equities because they would be taking opposite trades against amateurs. One of the reasons returns have declined because most of the players around the table now are professionals so the edge has disappeared.
This is analogous to the professional poker players, who don’t make their money playing at the Poker World Series where they are competing against other top players. They play there to hone their skills. But they make most, if not ALL, of their money going to lesser known competitions or backwaters where they can play against local “Whales” who have money but have a lot less skill.
This is why I spent so much of my time traveling the world looking for great startup founders. I compete in Silicon valley deals against other Silicon valley investors to hone my skills. But then I go hunt in other overseas markets where there are awesome yet overlooked founders. Ones not being well served by their local investor base. It’s “Geo-Arbitrage” at this best. Or as I prefer to call it “Airplane Arbitrage.”
These local investors for the most part are not bad folks. They just don’t have the skill set, experience, connections and reputation to compete against someone like me. It’s just a fact. The overall awful advice & service I hear these founders get from investors in their region makes me weep for the state of Venture Capital and angel investing there. But assuming I do a good job here advising/helping the local startup founders and sharing best practices with local investors, this raises the bar and forces the other local investors to raise their game too. Co-opetition at work! :)
Peter Thiel says “Competition is for Losers.” I fully agree here. You compete in the top markets to upgrade your skills. But then you apply these skills in a market where you have an unfair advantage. With this unfair advantage you build your monopoly. This is how you win in the long run.
Marvin’s Best Weekly Reads October 18th, 2020
"Don't Complain about the world, Figure out a way to thrive in it."--Michael Mauboussin
I've always been a fan of John Cusack.
"And “you just don’t know” is the primary lesson a long career in Hollywood has taught him. A 30-plus-year veteran of the business, Cusack has known what it’s like to feel hot as an actor, and also what it’s like to feel the icy touch of irrelevance. When I ask about the difference between those two feelings, being hot and cold, Cusack pauses for a good long while and then says: “We-e-e-ell. I haven’t really been hot for a long time.”
https://www.theguardian.com/film/2020/oct/04/john-cusack-i-have-not-been-hot-for-a-long-time
110% agree with my friends at NFX.
"Incumbents are in a (historically) weak competitive position compared to startups
Think of a downturn as a bumpy road full of potholes, and incumbent companies as big cars. They are very efficient at carrying lots of things and people from Point A to Point B on smooth roads. But they can’t easily swerve when the road is bumpy and full of potholes. Startups, by contrast, are more like little, zippy bumblebee cars. They can swerve, adjust, and change direction quickly. They can drive on tiny roads that would be unnavigable for big cars. In a downturn, that small bumblebee can get from Point A to Point B faster and more efficiently."
https://www.nfx.com/post/10x-advantage-of-starting-a-company-now/
This is such a great story. I need to subscribe to his newsletter.
"Mr. Levine wasn’t always a darling of business media and finance Twitter. (The best measure of his audience’s devotion may not be his 112,000 Twitter followers, but rather the 3,000 that follow @MattLevineBot, a fan account describing itself as a bot that mimics his writing style.) He began his post-collegiate career as a Latin teacher, then worked as a lawyer at Wachtell, Lipton, Rosen & Katz before advancing to Goldman. Despite having made more money at white-shoe law and Wall Street firms than he does as a writer, Mr. Levine says he is happier now. He is doing exactly what he has long wanted to do. This is the story of his ascension."
https://www.nytimes.com/2020/10/08/business/matt-levine-bloomberg.html
Very laudable. The former Mrs. Bezos is shaking up philanthropy.
"With that, Scott far outpaced her ex-husband in the giving realm, and rewrote the typical playbook for high-profile tech philanthropists — who often operate as if they know best not just in business, but in solving societal problems, too."
"In July, via a Medium post, Scott announced she’d given away $1.7 billion of her money to 116 organizations, including Point Foundation. “A civilization this imbalanced is not only unjust, but also unstable,” she wrote, as she laid out the areas she’d contributed to, from “empathy and bridging divides” to “functional democracy.” Scott worked with the consulting firm Bridgespan Group to vet nonprofits, and wrote that she tried to choose groups led by people of color, women, or LGBTQ people where possible."
There is so much insight in this excellent interview with Ek, founder of Spotify. Highly recommended read.
"It's been fascinating to see some leaders lead one-to-one; they're the tentpole and everyone goes right to them for certain decisions. That’s not really my style or how I do things, but it's highly effective for some. Because, again, with a singular vision you can accomplish great things. Elon Musk comes to mind. Evan Spiegel actually comes to mind too. Leaders that fit that mold are very consistent and they can move very fast when making big decisions.
Collaborative decision-making is the other end of the spectrum. I have seen some amazing companies operate that way…though I haven't been able to scale group meetings. Facebook is able to have meetings with twenty, thirty people that are still quite effective."
https://www.theobservereffect.org/daniel.html
Talk about a monopoly. So fricking interesting.
"the founder of Nichols Electronics, a tiny Minnesota-based company, Bob supplied the music boxes — preloaded with dozens of jingles — for the vast majority of the country’s ice cream trucks.
In short order, “The Entertainer” was on Nichols music boxes all over the nation. And 25 years later, it has become the country’s ice cream truck song of choice.
That’s according to Bob’s son, Mark, who now runs Nichols Electronics alongside his wife, Beth. Today, Nichols Electronics no longer controls just the vast majority of the music box market; it is the market.
Mark estimates that the company, which he inherited, is responsible for up to 97% of the music boxes in circulation.
How did ice cream truck music become a thing? And how did one tiny family business secure a stranglehold on the market?"
The company that has a monopoly on ice cream truck music
"When you create great products, and people get engaged, you become a show. Shows create their own success: fans create more fans, just like product use creates more of itself. Conversely, if no one’s at your show, no one will go next time. If no one uses your product, it won’t improve. There’s no business on earth with a greater divergence of outcomes between the winners and everyone else.
There’s an old bit of wisdom that nothing is harder to sustain than an emotion. Momentarily putting on a great show is one thing; sustaining that environment and that emotion, not just for the fans but especially for the creators, is incredibly hard to do. Show business, in a nutshell, is the art and science and orchestration that happens around the show that keeps those emotions renewed, and not exhausted.
It feels strange to juxtapose these two kinds of vocations. Making technology seems like a world apart from entertainment and show business. But in this new world, making is show business."
“The hardest thing to do is to create, and then keep creating. The people who make the greatest impact are the people who can keep creating, one thing after another, growing in impact each time. If you look at the world’s great makers - Elon Musk, Beyoncé, whoever you like - they don’t stand apart because of their raw talent. They stand apart because they’re able to sustain their creative output for year after year. They manage to keep shipping and compounding their success while leveraging the show around them.”
https://danco.substack.com/p/making-is-show-business-now
"Few realize it, but the New York City-based organization that offers the SAT and Advanced Placement tests is a nonprofit that operates as a near monopoly. Its tests, which have a stranglehold on their student-customers, fuel more than $1 billion in annual revenue and $100 million in untaxed surplus. It has $400 million invested with hedge funds and private equity, and its chief executive, McKinsey-trained David Coleman, 50, pulls down compensation of almost $2 million a year."
"But it’s the Board’s inability to safely adapt its operations to the pandemic that has prompted customers to opt out in droves. Since March, more than 500 colleges, including every school in the Ivy League, have joined the growing “test optional” movement. All told, more than 1,600 four-year schools will not require scores for admission in 2021, and a growing number are becoming “test blind,” meaning they won’t consider scores at all."
"A common theme we saw regardless of industry / business model was when it came down to certain software costs such as AWS / Azure / DataDog / Okta / Twilio, even If those represented a disproportionate amount of total spend, they were unable to turn those off; as they couldn’t operate their business without them, these systems were the “Central Nervous System” equivalent."
“It is our view that all recurring revenue can and soon be tradable.”
https://medium.com/@John_Street_Capital/recurring-revenue-the-rise-of-an-asset-class-eff0c4be9fa0
"Musk’s car company is now worth five times more than Ford and General Motors combined, and Wood has made a fortune. The nitpicking skeptics, she believes, have missed the big picture: As electric cars go increasingly mainstream, production efficiencies and advances in batteries and other technologies will cut what it costs to make them. And as sticker prices fall, demand will surge, including from businesses like ride-sharing companies. In September, Musk promised a $25,000 car within three years.
Meanwhile, Wood, 64, is perfectly happy to have a chorus of critics: “It almost makes me feel comfortable, to be honest, because it means if we’re right, then the rewards will be pretty enormous.”
Wood’s comfort with going her own way has helped her turn Ark into one of the fastest-growing and top-performing investment firms in the world. Its flagship $8.6 billion Ark Innovation Fund is up a staggering 75% in 2020 and has returned an annual average of 36% over the past five years, nearly triple that of the S&P 500."
“While most star stock pickers treat their work like state secrets, Wood makes Ark’s research freely available online and posts real-time logs of her firm’s trades. Instead of hiring MBAs, she prefers to bring onboard young analysts with backgrounds in subjects like molecular biology or computer engineering, figuring they’re more likely to spot the next trend.
Even the structure of Ark, an acronym for Active Research Knowledge, is original. Wood manages seven portfolios designed to capitalize on breakthroughs in robotics, energy storage, DNA sequencing and financial and blockchain technology, and makes them available to investors, particularly Millennials trading on Robinhood, as tax-efficient exchange-traded funds."
"So when a company has achieved IPO scale, and especially when the company in question doesn’t need money (as TTD did not — they generated mounds of cash and truly built the business on $8m in capital), what’s the motivation for the founder supporting a public exit? Some CEOs embrace it, others don’t.
And when there is a public/private market arbitrage (meaning that while there is abundant capital for private secondaries, I’d argue that the pricing isn’t a true proxy for a public market security, as you’re able to access a much broader array of investors in a public format than otherwise), it can lead to tense discussions where nary friction had been experienced in the prevailing 5, 7, 10 years."
This should be damn useful for founders and investors in consumer social vs. consumer subscription businesses. Good stuff.
https://www.unusual.vc/field-guide-consumer/consumer-subscription
"Financial crises have many causes, but generally they boil down to a few key elements:
-easy money
-poor regulation
-consensual hallucination that the market always goes up
The crisis is preceded by a cocaine-fueled party, where everything and everyone looks and is great. The party creates an asset bubble — a wave of optimism that lifts prices well above levels warranted by fundamentals — ending in a crash. The first documented asset bubble was the Dutch tulip mania in 1636, when speculation drove the value of the rarest tulips to six times the average salary at the time.
Story stocks are the new tulips, and Robinhood is the E*Trade of our age."
https://www.profgalloway.com/tulips-to-tesla?
The irony here.
"Anttonen’s concern is curious for a man in the oil business. A former energy trader, he now runs his own Helsinki-based firm, called St1. The company, which had 2019 revenues of $7.8 billion, refines over a billion gallons of oil each year, operates 1,300 gas stations in Scandinavia and has a 15%-plus share of the diesel fuel market in Norway, Sweden and Finland."
"But Anttonen is determined to move beyond fossil fuels. St1 has put $200 million into renewable energy projects over the last three years, equivalent to 44% of its net profit during that period, or 1% of its revenue. Anttonen is lobbying European governments to charge firms for their carbon output and to restrict short-distance flights. At conferences and EU summits, he shows up with his “energy transformation” PowerPoint in tow. Despite the oil under his fingernails, Anttonen hopes to become a credible engine for change. “It is our responsibility to contribute,” he says."
Nuff said. Relevant to many places in the world ahem....USA is tops here in bad way.
“You can have the best health system in the world,” Gostin says. “You can have the most expert scientists in the world as the UK has. But if you don’t have a leader that can effectively implement good policy and effectively communicate the importance of risk avoidance behaviors, you’re finished.”
https://www.vox.com/2020/10/10/21508165/covid-19-uk-cases-news
"We’ve gone from a world where advertising could largely be on autopilot where once a course is set you can trust your partners to successfully land the plane to one where to succeed you need to make course corrections on a daily basis, collect and rapidly interpret feedback from every instrument that can measure any aspect of a campaign or activity."
"Our current platform era is really built on the back of self-serve advertising. The Top 5 largest advertising businesses are all built on self-serve revenue."
https://sparrowone.substack.com/p/self-serve-ads-and-the-rise-of-diy
No Surprise here.
Back in the Office January 2021? Not so Fast.
https://www.linkedin.com/feed/news/back-in-office-jan-2021-not-so-fast-5200250/
"What does this mean for you? It means this is the right time to focus on asset accumulation. It doesn’t matter what it is (we already gave our big three tech/healthcare/crypto). All that matters if you focus on being an “accumulator” of assets for the next few years. Ownership in anything that uses robotics/high tech should do well as it reduces costs dramatically.
On a final note, this is actually good timing for you as well. If you’re making good money, we wouldn’t recommend showing it at this time. The socio-economic divide has escalated rapidly. In fact, Luxury home sales are up 42%… That is an insane figure.
So you can see that the divide between the rich and poor got a lot bigger this year. So? Adapt to the situation. Accumulate assets, wait for the economy to normalize and socio-economic stability to return. At that point you can go back to flexing on the gram if you feel like it."
https://wallstreetplayboys.com/adapt-or-die-some-things-wont-be-like-the-past/
Neat new VC fund.
"Something really interesting is also happening in venture capital right now — almost a ‘back to basics’ return to the pure essence of venture capital. As established firms grew large in size they were forced to develop ‘platforms’ to justify the management fees of their large AUMs and to create a form of differentiation. In this new era, I question the continued value of expensive platform divisions that provide hiring, HR, or data services to their portfolio companies.
Instead, I am excited to see the rise of the founder-investor who has walked the same path, developed a strong network and can act as the founder’s consiglieri on their own journey. In the era of COVID where so much is being disrupted but personal relationships are ever more valued, I have seen this become far more valuable than anything a large and less-personable VC firm can offer."
https://medium.com/monochromevc/announcing-monochrome-capital-and-our-first-investment-e7a175a56a7a
“the secret to doing good research is always to be a little underemployed. You waste years by not being able to waste hours.”
The same is true for a lot of jobs.
The traditional eight-hour work schedule is great if your job is repetitive, customer-facing, or physically constraining. But for the large and growing number of “knowledge jobs,” it might not be.
You might be better off taking two hours in the morning to stay at home thinking about some big problem.
Or go for a long mid-day walk to ponder why something isn’t working.
Or leaving at 3pm and spend the rest of the day envisioning a new strategy.
It’s not about working less. It’s the opposite: A lot of knowledge jobs basically never stop, and without structuring time to think and be curious you wind up less efficient during the hours that are devoted to sitting at your desk cranking out work."
The Advantage Of Being A Little Underemployed
Everyone needs to listen to this podcast and read this. TWICE.
"Which is, in modern life, what happens is the person who is the best at doing something in the world will get to do it for the entire world through a combination of leverage and distribution, accountability, and specific knowledge.
If you’re the best in the world at doing something, if you’re the best teacher in the world at math, you should be teaching the entire world math. If you’re the best podcast interviewer, you should be doing all the top interviews and their returns will accrue to you, especially in this highly digital world where we live in, where the cost of distributing something is very close to zero. And so what you kind of want to do is, you want to productize yourself into a business, and then you want to own that business."
https://tim.blog/2020/10/15/naval-transcript/
"Most of USV’s big wins have been in companies where we were the first institutional VC to talk to the company or where we had way more conviction about the opportunity than other investors at the time of our investment.
There was no social proof on these investments other than the fact that nobody else wanted to make the investment as much as we did. You can call it negative social proof."
https://avc.com/2020/10/negative-social-proof/
"The world is experiencing incredible turmoil right now. The election in the US. Brexit. Covid lockdowns. Economic recession.
Everything is changing in front of our very eyes.
But this doesn’t have to be darkness. As Simon has frequently written, the world is not coming to an end. We just have to be aware and expect radical change.
Tax laws will change. Business regulations will change. Immigration policies will change.
But just because all these changes are happening doesn’t mean life will be worse.
We’ll need to make adjustments, sure. But we can still take control.
Smart, talented people don’t stress about change. They accept it.
They learn the new rules and use the resources at their disposal to figure out new, creative ways to accomplish what they want to achieve."
https://www.sovereignman.com/trends/the-first-time-we-went-to-see-the-germans-29089/
This was a crazy educational read. Impressive founder grit and so much learning. Every founder should read.
And re: their board member and investor. Cray cray.
https://ryancaldbeck.medium.com/transitions-fa7ce4af435
The Bull case for Airbnb.
"The most valuable private firm in America is Airbnb.
I believe this time next year, Airbnb will be the most valuable hospitality firm in the world and one of the world’s 10 strongest brands. (Note: rankings of “the world’s best brands” are a desperate yelp for relevance from ad agencies begging clients to buy more media and cling to the nineties, the Brand Era.) The SF platform will likely be worth more than the three largest hotel firms, combined."
https://www.profgalloway.com/airbnballer
I sometimes take for granted why its awesome to be in the key center of tech startup world.
But other tech startup communities are growing. Why it's important. Decentralization & spreading the wealth and knowledge.
"Instead of teaching people to cut out “unhealthy” foods, community leaders were able to accomplish successful behavior changes as a result of the framing of the campaigns: Rather than disciplining citizens to eliminate salted foods and shaming them for having too much of it, the focus was on ways to still enjoy their local foods, but in ways that could complement a healthy lifestyle. They encouraged eating pickles and salty noodle broths, but to only have it in moderation, and doubled down on efforts to promote fresh, seasonal vegetables from the area, and taught communities how to cook with it.
But lessons from Nagano can also be applied to the way you approach health at home: Instead of relying on willpower and strict dieting, emphasize moderation with the foods you love, and add fresh fruits and vegetables that you enjoy. The foods we love and enjoy can coexist with the foods that nourish, heal, and build our bodies — this was the key idea in getting Nagano to change for the better."
https://heated.medium.com/how-a-sick-city-became-the-heathiest-place-in-japan-5abf6c7b1c92
The importance of a good partner in business.: A Multiplier or the Voltron effect.
https://justinjackson.ca/multiplier
Good summary of recent VC news. Also good discussion on SPACs and VCs. Expect a lot more VC firms to adopt SPACs.
https://www.protocol.com/newsletters/pipeline/spac-and-going-full-stack?rebelltitem=5#rebelltitem5
This is long overdue and I'm glad this is coming together.
"I decided on the name Hyphen Capital because we are cross-cultural entrepreneurs and investors who bridge both East and West. Many of us grew up in a Western world that values independence and individuality, a culture that promotes and rewards taking risks and being bold.
We also grew up in Eastern families and homes that encouraged filial piety, humility and diligence. The hyphen bridges our two worlds that we straddle every day of our lives and represents who we are as a generation of third culture kids."
https://medium.com/@davelu/announcing-hyphen-capital-8284fd13a744
"There are real reasons to consider locations outside of traditional tech cities like San Francisco and New York. Where a founder chooses for HQ and location (or none at all) sets the tone of the company. The decisions founders make now will have lasting impact on the company’s values and the talent it attracts.
At the end of the day, it comes down to people; the pandemic time period has shown us how unique we all are, whether we prefer working from the office, working from home, living in cities or the suburbs, or hanging in a “hacker house.” Where to set up HQ will be a key consideration for the next generation of founders, and may be less obvious than it was nine months ago — and also, a bellwether of where the startup world is heading."
Many Are Fleeing Cities Like San Francisco and New York. Where Are All the Founders Going?”
This is a crazy good detailed fundraising guide. Must read for founders going down this path.
https://www.lennyrachitsky.com/p/a-playbook-for-fundraising
Really useful for both investors and founders. Good framework for how to build an enduring & VC fundable business.
What Founders can learn from Investors
I’d normally say NOT VERY MUCH but that’s not completely true. For Founders who are running large scaling businesses there actually is a lot to learn from an investor. The top investors are very good at allocating money and building a portfolio of investments that hopefully return excess capital. This is actually no different than what a business owner does. They allocate money, time and resources (people) to the most promising opportunities of the business whether it is international expansion, new customer segments, new products or even acquisition or investment.
A good business owner should be using investor frameworks to evaluate where they put these precious resources and when to double down and when to cut them off. Start with small teams (the Amazon way of not having a team that can eat more than 2 pizzas) and some little bets of time & money. Continue to invest as they prove themselves out.
Then the question is: What is the time horizon of the investment?
Invest in stuff that will drive returns in one year or one quarter, or invest in initiatives that will drive results and returns 5 year or 10 years out? Also when should you do this. Or perhaps it is some balance of both. Publicly traded companies tend to have more constraints here due to a wider number of shareholders versus private companies.
But as the Founder led FAANG tech giants have shown, it is possible to do this and still thrive. I think it’s very clear that companies like Amazon, Oracle, Cisco, Salesforce, or Netflix are masters at this.
Great tech companies really understand this portfolio management of initiatives. Adopting investor frameworks are a good way for managers and founders to discuss and prioritize these initiatives.
Foolishly Trading Time for Money in the Age of Leverage
How do you move from this mindset of trading your valuable time (services) to selling products (or productized services)?
This is something I wrestle with all the time. Trading time for money. This idea of Industrial age legacy mindset is due to a dated 20th century education, and societal indoctrination. This is why the book “Rich Dad, Poor Dad” was such an eye opener for me. Many business owners end up building businesses that are no worse than a job (or even a mental prison) with little freedom. They don’t know how to build systems around them and scale themselves.
You scale yourself by either hiring people to do this for you or building a product.
There is a big element of knowing the time for money works and I can do it all day long (and at really high rates too). I believe my conservatism in knowing and relying on the tried and true is the big problem.
I honestly still have a mental block around this even though I know this is the only way to scale yourself. The big secret of many of the most successful business people in the world is they are able to break the chain of time equaling money.
Easy to say, hard to do.
I see many early stage founders fight this as well. They know they are the best people to do everything, at least in the beginning. But as you scale and or/raise money, you need to bring new people and build out the processes and start focusing on core areas. Also more importantly you need to devolve authority and to get out of your people’s way. Your job as leader is to set the tone and unblock your people from doing their best work.
As uncomfortable as it is in the beginning, this is how you get leverage and freedom. It also allows you to focus on what you are good at and what you enjoy doing (in business or out). This is the GOAL. Independence, Achievement (ie. putting a dent in the universe) & ultimately Freedom.
I hope this acts as a good reminder for founders. Remember WHY you are building what you are building. If you do, this might help you remove that mental block and makes scaling yourself much easier.
Marvin’s Best Weekly Reads October 11th, 2020
“Action Expresses Priorities”--Gandhi
"the idea of Google as a company is just a fictional concept. It only exists because multiple people believe in it. The same is true for legal systems, nations, religion or money. Every large human cooperation system is based on a fictional idea that only lives in our collective minds.
If Hollywood created the fantasy worlds that reality is catching up with today, who is creating the fantasy worlds of tomorrow?
Maçães thinks the answer is Silicon Valley, which he describes as “a fantasy land where engineering talent and capital come together to power the serious project of creating new worlds out of nothing”. It’s one of the most idiosyncratic descriptions of how startups work that I have read. VCs are the new Hollywood studios; founders are the directors and actors.
….it’s not the lack of tech talent or venture capital that explains why Europe hasn’t been able to create a tech ecosystem on par with the US. It’s the absence of religiosity that has kept Europe from creating its own Google or Facebook. The US is able to create larger companies because it’s able to believe in larger and more ambitious narratives."
"Some in the crypto space believe that the slow erosion of the state’s tax powers will eventually determine its final collapse, at least as we know it today.
Others have told me that they expect all nation-states to disappear over the coming decades, with the notable exception of China, which alone, they maintain, has the political & social resources to penetrate or disable fundamental choke points in the crypto system. China is responsible for something between half & two-thirds of global Bitcoin mining, but local authorities have made it clear that they regard the crypto space with enormous suspicion.
The Chinese case does offer a possible template for the ongoing power rivalry between crypto and nation-states. In this scenario, crypto systems would double down on their technological superiority, while states would necessarily appeal to their secret weapon: the monopoly of the legitimate use of physical force. But a second scenario seems much more plausible, at least outside China.
Public authorities and crypto systems could reach a grand bargain or agreement, whereby the state would be able to tax crypto-assets in exchange for security guarantees for crypto."
https://www.city-journal.org/technological-developments-new-systems-of-governance
This is pretty fascinating and seems like a great side hustle.
"It is estimated that roughly ⅓ of the world’s ~15m vending machines are located in the US.
Of these 5m US-based vending machines, ~2m are currently in operation, collectively bringing in $7.4B in annual revenue for those who own them. This means that the average American adult spends ~$35 per year on vending machine items.
What makes the vending industry truly unique is its stratification: The landscape is composed of thousands of small-time independent operators — and no single entity owns >5% of the market."
The economics of vending machines
"Curation businesses — universities, bootcamps, accelerators — are incredibly powerful.
At first glance, they wouldn’t seem to be as powerful as tech companies, in the sense that they don’t have data moats or tech leverage. And yet, when you look at how long these institutions can dominate without being disrupted, they start to look that much more impressive. The last time a new university cracked the top 10 was over 100 years ago, whereas most tech businesses get disrupted every few decades or so. Indeed, curation businesses last centuries.
Curation businesses create socially acceptable context to build close relationships."
https://eriktorenberg.substack.com/p/how-to-build-curation-businesses
This is a cool dude. His secret of longevity: good clean food (he is vegan) and working out a lot.
https://www.menshealth.com/health/a34224449/lenny-kravitz-diet-workout/
"Between April and June, shoppers purchased $346 million worth of masks from Etsy stores, more than 5 percent of which would be pocketed by Etsy itself. It was an enormous surge for the site.
Masks accounted for more than one out of every 10 dollars spent on the platform that quarter. For sellers, it was also a huge opportunity: a lucrative new market that existing shops hadn’t cornered. There was money to be made for anyone who wanted it — and for those who already knew the ins and outs of manufacturing, there was a lot of it."
Well, makes sense these days to have a plan B or C. Canada, Mexico and Georgia are good options for Americans.
It's getting tense on the internets.
"Maybe it’s just that simple: be better. Expect people to be better. Demand something better, for all of us, and from our friends as well as from our rivals. Because we’re the adults in the room now, and I understand that’s scary. But it’s not nearly as frightening as what will happen if we refuse to grow up, and to get a grip."
https://solana.substack.com/p/haha-murder
"the SMBTech stack is the new Main St storefront.
Think about it – if you were launching a new restaurant today, would you do so without mobile ordering, pickup and delivery via Slice, Toast, DoorDash or another technology platform? If you were launching a women’s clothing boutique, would you do so without an ecommerce presence on BigCommerce, Shopify, Etsy or Poshmark? Or if you were opening an outdoor gear rental business would you do without a POS system from Square or a web site from Wix? Today in almost every vertical there are SMBTech platforms like Brightwheel and ServiceTitan offering “operating systems” for SMBs.
Every single new company formed in every single industry will start with the question of “What technology do I need to launch and grow my business?” This is a trend that started a decade ago and will accelerate at an unprecedented pace over the next 6-12 months."
Wow. Go Finbarr Taylor & the Shogun team.
"Shogun, which lets companies build sites that sit on top of e-commerce back-ends like Shopify, Big Commerce or Magento to let them sell goods and services, is today announcing that it has raised $35 million in funding after seeing its business growth 182% over the last year, with 15,000 companies — including Leesa, MVMT, Timbuk2, Chubbies and K Swiss, as well as household Fortune 500 brands that it declines to name — now using Shogun’s tools, up 5,000 in the last eight months."
Shogun raises $35M to help brands take on Amazon with faster and better sites of their own
Talk about catching the Zeitgeist of times in America. Emergency preparation app. I like it!
https://techcrunch.com/2020/10/08/harbor-launches-emergency-preparedness-app/
Woohoo! Batch 20 represent! Go Matt Harris!
https://news.crunchbase.com/news/bloom-credit-raises-13m-to-connect-businesses-with-credit-bureaus/
What a great interview here.
Erik Torenberg: Hustle and Flow
"Of these, a conflict over Taiwan is the key scenario. The defense establishment should focus on preparing the military for a Taiwan scenario above all others. The United States needs to be able to effectively defend Taiwan because it is important to frustrating China’s strategy to achieve hegemony in Asia. Adapting the U.S. military to be able to defend Taiwan will be hard, but it is necessary, and will also allow the United States to defend other allies in Asia against China.
The Trump administration has made this point increasingly clear, but it is a bipartisan one. Taiwan is militarily significant, located as it is in the center of the vital first island chain, and is critical to American credibility in Asia. Other states regard it as the canary in the coal mine — a strong indicator of how far the United States would go to defend them against China. If China were able to suborn Taiwan, the U.S. and allied defense position would be substantially compromised, and U.S. credibility seriously diminished. For these reasons, subjugating Taiwan is very likely China’s best next step toward its strategic goal of regional hegemony."
Why the Pentagon Should Focus on Taiwan
"In the past the game of “scale” was to add headcount. This made sense in the industrial era. Companies want to prove that they are growing. They want to prove that they are adding headcount. Unfortunately, the is a skill-set for the physical realm not the digital realm.
In the 2020s, it is clear that you can build $30-50M+ annual revenue businesses with a handful of people (or less!). This is an amazing opportunity for anyone with a high IQ and limited resources. The resource constraint goes away since digital transactions will have limited friction.
Since you can generate millions of dollars as a solo organization (or a small number of people), the amount of self-sufficiency you receive is also higher.
You’re paid based on what you are delivering. There is no middle man. There is no racism. There is no physical limitation (since no one can tell). &. You don’t even have to work for an organization.
This is also a huge hit to people who were rent-seekers (adding no real value and simply doing nothing at work). This is a big negative because they cannot fake value by knowing the “right” people anymore. You’re flattening the access to clients/customers/consumers. Therefore, be extremely wary of people who are negative on the future (and technology) as they are announcing *publicly* that they are rent seekers in their current positions."
https://wallstreetplayboys.com/obscure-post-on-the-digital-future-a-vr-world/
"Why is Amazon having so much trouble making good video games? Because Amazon's internal structure and culture are optimized to generate mass commercial products, not foster creative entertainment, according to people close to and involved with the company's game efforts."
https://www.protocol.com/amazon-bad-at-games#toggle-gdpr
"By now, folks understand that API-driven businesses are not just viable, but tremendously efficient and value-accruing. There are by my count about 10-20 amazing API startups that don’t get a lot of press or Twitter love, and they will emerge this decade like Twilio did in the previous decade. Twilio and Segment helped pave the way, and it will all come to a head when Stripe goes public."
Quickly Unpacking Twilio's $3.2B Acquisition Of Segment – Semil Shah Blog
"Why protect privacy?
You may be thinking “I’m not doing anything wrong — why should I be concerned about privacy?” It’s important to over-invest in privacy because once it’s lost, it’s really challenging to recover. Consider this: you may not be a target right now — but you may become one in the future as your wealth increases, you endorse unpopular political or religious perspectives or… you make a single post on social media in poor judgment."
A Modest Privacy Protection Proposal
"In order to build conviction, we rely on founders to tell us a compelling story, almost always in the form of slides. We’ve funded companies almost entirely because of the quality of their seed decks. Poor deck? We’ll likely pass on the opportunity."
https://medium.com/@zebulgar/how-to-raise-money-before-launch-a3544ef4dba6
"The bottom line is that SPACs are a very legtimate path to the public markets. They have a lower cost of capital vs a traditional IPO. That cost of capital is falling due to market pressure, whereas it is rising for the IPO. The SPAC has fresh capital whereas the Direct Listing does not (yet), and the SPAC is clearly the fastest path to the public markets (which is a form of risk reduction)."
Going Public Circa 2020; Door #3: The SPAC
This new edition of top tier Silicon Valley led SPACs like Reid Hoffman's, Kevin Hartz's or Chamath's are Venture capital at scale. Very exciting.
"Our vision is that SPACs like Reinvent Technology Partners will be able to take the proverbial startup baton from great venture investors that have spent a decade helping build a great business. Reinvent will take the company public, and then guide it through its next decade of growth and reinvention.
This kind of reinvention is essential, whether in the case of Netflix shifting from mailing movies on DVD to streaming original programing, or Amazon launching AWS and becoming a cloud computing platform as well as “the everything store.”
https://www.linkedin.com/pulse/reinventing-spac-reid-hoffman/
"The vital signs of SaaS are Revenue Growth, Sales Efficiency, Revenue Churn and Cash Burn. Almost everything that matters about the financial performance of a SaaS business is captured in these four metrics."
"Throughout the early 2010s, Cudi cut a fascinating figure in the music industry: an all-purpose player with some of the best melodic instincts hip-hop has ever seen, the hits to match, and a Rolodex of the biggest names in the game. And with those enviable resources, he decided to make the weirdest shit he could. He collaborated with anyone he thought was cool (seriously, anyone: dude has Father John Misty, Kendrick Lamar, Haim, and Michael Bolton on the same album), increasingly pulled from psych-rock influences (he eventually recorded two full-on, ill-advised rock albums), and, essentially, refused to ever think of his art as a commercial venture.
“I think the truth is what brings people to me,” Cudi says. “The fact that they’re going to get something unfiltered from me to them is something that has people so invested in me.” While contemporaries like Drake and Kendrick Lamar became the best-selling artists of their generation, Cudi always seemed content with simply following his own muses. It won him a huge cult following....."
https://www.esquire.com/entertainment/tv/a34196326/kid-cudi-we-are-who-we-are-hbo-interview-2020/
The Future is being Multi-Hyphen
“Travis (Scott) dropped right into the Kanye, Pharrell, Virgil, Drake world,” says StockX cofounder Josh Luber, “this blurred line between fashion, music, sports superstar culture.”
The world and society seems to want to categorize you into one thing or what you do. But I think it’s important that we all realize we can and should live multi-faceted lives.
Crossing different industries, sciences or genres is how you come up with innovations. The most interesting part of anything is the intersection. Let’s go back to Hip Hop music and fashion impresario Travis Scott.
The secret to Travis Scott is that he sees, before anyone else, how everything connects. “He's touching so many different levels and different fields of art,” says composer Ludwig Göransson, who collaborated with Scott for Tenet. “The way that he connects with art is not in a singular form. He has so many tentacles, and they're all electric. So when we talk about feeling, [whether that's] listening to a song or talking about a movie, he can visualize things in so many different fields.
If you look at all the most interesting people in the world these days, they share that trait of being multifaceted. Actors becoming alcohol beverage tycoons, Professional athletes becoming tech and franchise business investors, heck the CEO of Goldman Sachs is a professional DJ. (DJ Sol in case you are wondering).
So sure, start with specializing in one key thing & be great at it. But then, make sure you build out other interests and skills. Then like a great DJ re-mix these. Who knows what magic might come out of this.
Scott Adams, the creator of Dilbert cartoons said it best. “if you want something extraordinary…... Become very good (top 25%) at two or more things.
Capitalism rewards things that are both rare and valuable. You make yourself rare by combining two or more “pretty goods” until no one else has your mix.”
And if anyone tells you that specialization is the only way to success. Frankly in this fast changing world where skills and technology get so outdated so quickly, I'd rebut that with Heinlein’s comment that “Specialization is for insects.” :)
“Action Creates Information”
Heard this quote from an interview with Bryan Armstrong, cofounder and CEO of crypto giant Coinbase. It’s a great play on “For every action there is an opposite or equal reaction.” But it’s totally true.
So many people are stuck in analysis paralysis mode or scared of making a decision. This is not an indictment, all of us do this. Whether it’s making an investment decision, asking someone out for a date or just doing something. This is the only way to move forward in your career, your business and your life. Period. We tend to be our own worst enemies and limit ourselves.
Yes, you have to be thoughtful and think things through. But in a fast changing and fast moving world, you are better off making the decision and executing, seeing how it works out and then adjusting. It’s about learning, seeing what is good and what is bad. So many of us hesitate and hold ourselves back. We all know it.
This is why Nike’s Motto “Just Do It” is so powerful. We should all make it our own daily call to action too.
Marvin’s Best Weekly Reads October 4th, 2020
“A Society that separates its scholars from its warriors will have its thinking done by cowards and its fighting done by fools.”
Very important subject. So insightful. Take Asymmetric Bets!
"Asymmetric opportunities usually have meaningful upside in a success case, and meaningful learning or development in a downside case. If the downside case is still one of the best case scenarios you can imagine, then that’s an easy asymmetric bet to take.
In addition to pursuing things that have meaningful upside (and thus some risk), asymmetric bets can also involve taking a bet in risky spaces that other people aren’t pursuing."
"The irony is that, in failing to take risks, we fail to gain the optionality that comes from doing so.
Risk-taking brings its own optionality. Especially when you’re young, accumulate optionality through the skills you gain, knowledge you acquire, and the unique experiences you undergo.
Accumulate optionality through differentiation, not conformity!"
https://eriktorenberg.substack.com/p/take-asymmetric-bets
"After the buzz of Social Dilemma dies down, the rest of us will still be stuck here with our brains wired to each other in fundamentally uncensorable ways that transcend niceties like national borders or political parties. That startling technological development, the final decoupling of geography from human communication and its democratization to everyone on the globe, will never go away however fervently Luddite nostalgists may wish it so².
Ultimately it’s up to us if the next chapter in our history, to use the printing press/Reformation timeline as a guide, is the Thirty Years’ War—the bloodiest, bitterest conflict in European history until WWII—or the Enlightenment, a period of unprecedented scientific and political progress."
https://pullrequest.substack.com/p/the-social-dilemma-and-the-last-fucking
Incredible talent and character: Lady Gaga.
"What pop spectacles should look like in 2020 is a question mark, as COVID-19 and the nation’s reckoning with systemic racism, sparked by more police killings of Black Americans this year, offer no easy answers for how artists should use their platforms. But if there’s a way to be of service, Gaga is up for the job. To make Chromatica, she had to pull herself out of one of the darkest places she has ever been, and she has a familiar message for anyone trying to do the same: Just dance — it’s going to be OK.
“When I see people struggling like they are right now,” she says, “my brain goes, ‘Put on your superhero suit. Let’s go.’ ”
"The simplest outline of a K-shape recovery is that some industries and companies and individuals will thrive and others will flounder and fail.
The stock market, the labor market, and the housing market are all areas we see this dynamic at work.
Haves and have nots and the way policy shapes the divergence between these two classes in America has been a consistent theme for the last few decades and it seems to be the world we’re barreling towards living in after this crisis ends, too. We choose to support some areas, leave others for dead, and call it the market system when the dust settles."
"And so like almost everything else with this crisis, the “housing boom” is but a mere exaggeration of what had already been in play during the Before Times: single-family homeownership serving as an increasingly unattainable goal. The bull case for homebuilding stocks and the housing market at large is a bear case on affordable availability."
https://mylesudland.substack.com/p/the-top-of-the-k
What a timely profile. I admit I was feeling pretty crap myself the last few months while stuck in lockdown in the Plague States of America aka USA.
"Sometimes it feels like the world is looking at you saying things like, “Come on, man, just get over it. Don’t think like that. Just move on.”
But what people on the outside don’t always understand is that it takes all of your strength and willpower just to exist. Just to keep on going. Battling depression, battling anxiety, battling any mental health disorder … it’s all just so unbelievably exhausting.
That’s been on my mind a lot lately, considering the millions and millions of people around the world who have lost their jobs, or lost their loved ones, or who are just dealing with the unprecedented anxieties of being a human in 2020. I know so many people out there are suffering right now. I’m no different. I’m still going through it. Even after all the work I’ve tried to do on myself over the last two-and-a-half years, some days are just brutal.
Let’s just call it what it is. Some days are total shit, right?"
https://www.theplayerstribune.com/en-us/articles/kevin-love-mental-health
"The merchants who make up this bustling microeconomy — largely immigrants and people of color — work long hours hawking everything from hot dogs to t-shirts, often off-the-books and without permits.
And during the summer, one particular product is king: a fruity, frozen alcoholic concoction called a nutcracker.
From May to September, dozens of nutcracker vendors sling their drinks at festivals, parades, and beaches, selling squat, frosty bottles out of garbage bags and coolers. The most skilled operators can clear upwards of $500 in less than 30 minutes.
But during the pandemic, the street cocktail landscape has seen a shakeup.
While street vendors don’t qualify for liquor licenses and must run their operations illegally, new legislation has allowed restaurants to sell their own take-out cocktails.
While most vendors have continued to operate in the shadows, one of them— 35-year-old Amseshem Foluké — has decided to fight back by attempting to take his illegal operation corporate.
As it turns out, selling these drinks is not so dissimilar from running a startup: it requires top-shelf marketing skills, a keen understanding of supply and demand, & a willingness to occasionally bend the law."
https://thehustle.co/the-business-of-selling-illegal-cocktails-on-the-streets-of-nyc/
"And so one of the planet’s richest medical doctors, who made a $6.7 billion fortune developing breakthrough treatments for cancer and diabetes, seeks to battle the pandemic. The weapons in his arsenal: the cancer treatments he has spent the past decade and a half developing. He’s aiming them at all aspects of the coronavirus, from a vaccine to treatments for mild cases to therapies targeted toward patients on ventilators.
It’s an enormously ambitious plan from a man who has often been accused of being a hype artist. In an earlier incarnation, Soon-Shiong was a respected surgeon and professor at UCLA Medical School, but throughout his wildly successful entrepreneurial second act, he has been derided as more showman than scientist, thought guilty of overinflating results and taking undue credit.
A few years ago, for example, he boasted about using a breast cancer drug to treat a patient with cervical cancer—but other groups were already seeing similar successes. As we wrote in a 2014 cover story, “While he’s undeniably brilliant, Soon-Shiong is equally undeniably a blowhard.”
This is really neat. Amazing scenery. Snowboarding in Ten Sleep, Wyoming!
https://www.youtube.com/watch?v=ao2nvyAPdv0
"Simultaneously, work on yourself. Face your inner demons. Get help. Face mental illness too. Be kind to yourself. Realize you’re doing the best you can. Forgive yourself for your messy past, where you acted like a dictator with too much money. Say sorry to the people you hurt. Forgive people who you banned for life because they violated one of your rules. Forgive people for no reason at all.
Look at what makes you happy now: family, your partner, messages from readers, mending of broken relationships.
Feel what it’s like not to run towards money. Notice how fancy cars, houses and luxury goods have zero appeal to you. Take the simple things in life and let them change your life.
Have money allow you to buy back your time, instead of spending money on things that create a never-ending trail of debt. Make the acquisition of wealth secondary. Focus on how you can be helpful. Get excited by all the people you can meet and do life with.
Learn to make a difference rather than a profit."
https://medium.com/the-ascent/how-to-make-enough-money-to-retire-in-the-next-5-years-6a7683ce5a16
I think this is important & brave (can't believe I am writing this word but we are in stupid WOKE age) for companies to be clear on what they are about, employees and choose to work there or not.
"The narrower interpretation is how I intended the mission to be understood. I don’t think companies can succeed trying to do everything. Creating an open financial system for the world is already a hugely ambitious mission, and we could easily spend the next decade or two trying to move the needle on global economic freedom. We will keep building the most trusted and easy to use financial products that help people access the cryptoeconomy, so everyone can get the benefits of this new technology and we can bring more economic freedom to the world."
https://blog.coinbase.com/coinbase-is-a-mission-focused-company-af882df8804
"Technology will continue to make our lives easier… If true… this means that we should be over-exposed to technology from an investment perspective. Take the S&P 500 and look at the mix of the various industries, oil & gas, real estate, financial services etc. Simply take this mix and buy more of the technology sector. Sure. You may lose money in a particular year, month or week. And. Over the next 10-years you’ll eventually see technology become a more and more important part of the index.
Knowing that technology will continue to push forward at rapid rates (self-driving cars, curing diseases with AI, drones and new automated delivery devices) we can conclude that working in an industry that continues to help technology is a positive as well. For that we have to go “up stream” and move to the supplier side."
https://wallstreetplayboys.com/what-isnt-going-to-change-and-qa-announcement/
"The tragedy of California is not its cacophony of specific failures, but that our “solutions” are all negative, or restrictive, rather than creative. Banning things, and often things that improve the lives of Californians, is presently our entire philosophy of government: no new science or technology endeavors, no meaningful public infrastructure projects (or, at least nothing resembling success here), and certainly nothing so ambitious as terraforming the Salton Sea. But with each of our challenges comes tremendous opportunity."
"What if a state like California, with all of its potential, were run with a long-term plan in mind for abundant energy, fresh water (drought be damned), affordable housing, thriving, growing cities, and first rate science and technology education? What would a California worth following look like? Up until very recently, the impulse of the American political right was to stop the government from doing anything, while the political left, which dominates in California, was ostensibly in favor of using large, expansive government as a tool for progress. But the California government has no coherent strategy for progress, and with its increasingly anti-creative, reactionary legislative impulse, it’s starting to look… well… pretty conservative."
https://solana.substack.com/p/gilded-rage
"Oper8r hopes to fill in the gap between what it takes to be an occasional investor and become a full-time VC who is backed by institutional dollars. The program, which just completed its debut cohort, describes itself as Y Combinator for funds and emerging fund managers. The goal is to teach investors who want to build an institutional fund about the rules and oh-so-many regulations of the game.
Oper8r was started by Winter Mead, who worked as an institutional investor for years at Sapphire Ventures and Hall Capital Partners, and Welly Sculley, who operated at venture capital-backed fintech companies Ripple and Boku. The friends saw that there was no organization focused on next-gen fund managers. Instead of raising capital to create a program, the friends started a program, free of charge, to train investors."
https://techcrunch.com/2020/09/29/y-combinator-for-emerging-fund-managers-oper8r/
Batch 18 represent! Love seeing old portfolio cos thrive!
https://techcrunch.com/2020/09/29/cube-js-raises-6-5m-for-its-open-source-data-platform/
Unclear if this is a good thing or bad thing but here we are.
"But this year, politics, social justice issues, and current events are inextricable from our daily lives. It’s hard to have a conversation about literally anything without the context of everything going on. The coronavirus has us all socially distanced and unsure what the holidays will look like. The racial justice movement is sweeping through workplaces around the nation. The economic collapse is impacting millions of Americans, with hundreds of thousands of people out of work or running even tighter household budgets.
What Bosstick’s case shows is clear: The era of influencers being apolitical online is over. Influencers who continue to post their usual content without acknowledging the realities of this country face the risk of appearing so laughably out of touch that it renders anything else they have to say irrelevant. And as we get closer and closer to Nov. 3, an influencer who remains silent about one of the most consequential US elections in history may risk alienating and angering their followers in such a deep way that would be impossible to recover from."
Lots to debate in this write up for Venture Capital aficionados.
"Is venture capital a risky asset class? No. Most VC funds choose to act in a risky manner by not diversifying, but that does not make the asset class risky. To de-risk venture capital, CIOs simply need to acknowledge that VC math is different from public markets math. The importance of low-probability, excess-return-generating investments means that proper diversification requires a portfolio of at least 500 startups.
It will take work to assemble such a portfolio. It is hard to do by investing directly. Current funds and funds-of-funds are rarely designed with diversification in mind. Instead, they concentrate funding in a small subset of ultra-popular entrepreneurs, sectors, and geographies, which risks driving down returns on capital, leaving higher-return strategies underfunded."
"In a low-growth economy, the gangster way to register a sustainable increase in shareholder value is a move to a rundle (my term for “a recurring revenue bundle”).
Apple boasts the greatest asset in the consumer world, the iPhone. However, the greatest collection of consumer assets assembled under one corporate roof, is also the firm that stands to recognize the greatest accretion in stakeholder value with an aggressive move to a rundle. Simply put, it’s time to unleash the Mouse. Disney+ needs to bust a move to Disney2."
"The best API-first companies give their users “superpowers” that they wouldn’t have otherwise.
While you might not think of them this way, some of the biggest companies of the past few decades originated from easily-implemented APIs that gave their users heightened power, efficiency or accessibility. API-first companies like Stripe, Twilio & Okta either created new markets or dramatically grew existing categories."
https://medium.com/@gisford/the-third-party-api-economy-891b2a774fa5
"Signal is an end-to-end encrypted messaging service, similar to WhatsApp or iMessage, but owned and operated by a non-profit foundation rather than a corporation, and with more wide-ranging security protections. One of the first things you see when you visit its website is a 2015 quote from the NSA whistleblower Edward Snowden: “I use Signal every day.” Now, it’s clear that increasing numbers of ordinary people are using it too."
“Any time there is some form of unrest or a contentious election, there seems to be an opportunity for us to build our audience,” says Brian Acton, the Signal Foundation’s co-founder and executive chairman, in an interview with TIME. “It’s a little bit bittersweet, because a lot of times our spikes come from bad events. It’s like, woohoo, we’re doing great — but the world’s on fire.”
The “Red Test”
I stole this from a business consultant named Niko Canner.
How do you score all the various initiatives or projects you are working on. Red, yellow or green? Green means things are going well. Yellow means things are neutral. Red means things have stalled out or at high risk. These can be used in both a business or a personal context.
In your organization, do you have a culture where it’s acceptable to raise a red status & be willing to discuss this? This is a signal on how open your organization and culture is.
Why is a project Red? Can you talk about this? How do you fix this? How do you get this to Green. It’s a good but simple status report. And helps you understand what’s happening and discuss problems when they come up.
You can also use this for your personal life outside of work. So for example, how would you rate each of the important parts of your life. Parts for example like Family life, Marriage/Love Life, Personal Finance, Health & Fitness.
I’ve personally started using this framework for my life and it has been quite eye opening. I think it will help you as well.
After Hardship Comes Happiness
In 2020 we have been battered by the Coronavirus health crisis, economic challenges of the recession, civil disturbances & riots in many cities. And now wild fires and storms across the United States. No wonder we see so many of the old institutions we used to count on now failing us. It’s been a rough year. They have been hammered by crisis after crisis. Many of these organizations are in paralysis and thus completely ineffective.
I think the reason for this is that we’ve had it so good for so long. Many of us have just gotten too accustomed to good times. Ie. peacetime. We’ve had economic good times, a full job market and overall prosperity for almost 10 years. It’s not a surprise that many of us have gotten soft. And the people at the top of many of our business & governmental organizations have gotten complacent. As the great African proverb says “Smooth seas do not make for skillful sailors.”
But something about a crisis brings out the best (and the worst of us). It’s a shock to the system and wake up call. A crisis calls for us to wake up and take action and fix all the things we should have but did not. It also calls forth a new kind of leadership to step up and take the lead. We would not have Winston Churchill who was ignored during peacetime. But was exactly the right leader at the right time for World War 2 and helped lead the Allies to victory (and was very quickly shelved when the war ended).
We are seeing this slowly happen in many startups, business organizations and even now in some local governments and states. This is what makes me hopeful that despite the painful year we’ve faced in 2020, something good will come out of this. That many of us will have rediscovered & prioritized our values and relationships. And at a minimum we’ll have toughened up to prepare for the next crisis.
Marvin’s Best Weekly Reads September 27th, 2020
“Hard times create strong men. Strong men create good times. Good times create weak men. And, weak men create hard times.”--G. Michael Hopf
"Like a lot of other vacation destinations — the Hamptons, Cape Cod, Aspen and so on — the Truckee housing market is booming during the coronavirus pandemic. It's up over 23% since last year, according to data from Redfin, a real estate brokerage. Truckee is part of a trend that realtors and journalists are calling "Zoom towns," places that are booming as remote work takes off."
Big fan of his work.
“Part of him was just completely untamed. When he sat down with people, he was almost harnessing this madness within him. You get a little of that with Ethan. His antennae are always out, grabbing, catching every little bit of information. He’s an outsider. It’s not like he’s attempting to do it. It’s just that he’s at a different radio station. He’s operating on his own frequency.”
Throughout his career, Hawke has consistently challenged himself to grow. He has appeared in more than eighty movies, predominantly independent films interspersed with Hollywood money-makers. He has directed four films, written three novels, and co-founded a theatre company.The range of Hawke’s roles—a romantic charmer (in the “Before” trilogy), a drug-addled Chet Baker (in “Born to Be Blue”), a guilt-ridden suicidal priest (in “First Reformed”), to name just a few—is also a reflection of his expansive empathy. “Acting, at its best, is like music,” he said. “You have to get inside your character’s song.”
https://www.newyorker.com/magazine/2020/09/21/the-many-faces-of-ethan-hawke
The kids are going to be okay!
“One thing we can all agree on is a willingness to get out there and build things,” said Justin Zheng, 19, one of the founders of the group. “Yeah, we build some meme products, but we also build mission-driven things. We want to build a more positive internet, things that help people.”
"The group was founded as a kind of counterpoint to the Silicon Valley establishment, which its members say is exclusive, elitist and riddled with systemic problems including sexism, ageism and racism. Rather than reinforcing norms and kowtowing to the most prominent and outspoken V.C.s on Twitter, Gen Z Mafia members have tried to cultivate an environment that feels inclusive and aligned with their values."
https://www.nytimes.com/2020/09/15/style/gen-z-tech-mafia.html
A company like Cameo could only have emerged in a celebrity driven place like America.
"The pandemic, in a sense, has only accelerated a process that was already in motion. On apps like Instagram & Twitter, celebrities have always acted as laborers in an atomized, precarious economy, exchanging nuggets of seeming love & attention for money. That exchange, though, is circuitous. You might stream a new single by an artist who posts a picture of herself at the beach, or buy the sweatshirt she poses in & tags, but use of the platform remains free, so our sense of “celebrity influence” hovers fuzzily, eliding the monetary and highlighting the social. Cameo strips away the illusion: celebrity content is always a product. This realization is depressing, but there is also something unburdening about it.
On Cameo, performers can be straightforward about the fact that they are exchanging their attention for money, & this frees them from the faux-authenticity of the Instagram influencer; users don’t have to worry that there is some subtle corporate sponsorship buried in the selfies. The transactional nature is out in the open, & videos swerve between overt, unapologetic shilling & surprisingly earnest sentiment."
https://www.newyorker.com/culture/culture-desk/how-cameo-blew-up-during-quarantine
"Porat is one of the rare corporate executives to have transcended the upper echelons of Wall Street to the highest ranks of Silicon Valley. While the scenery may be different, many of the challenges remain the same: navigating economic downturns, government investigations and regulatory hurdles. Of course, a global pandemic is a new obstacle.
“This environment is more challenging than anything I've seen because you're combining a health crisis with an economic crisis,” says Porat in her first-ever interview with Forbes from her home in Palo Alto, California. “The path forward is less certain.”
"Edward Tenner argues in Why Things Bite Back: Technology and the Revenge of Unintended Consequences that we often have to deal with “revenge effects.” Tenner coined this term to describe the ways in which technologies can solve one problem while creating additional worse problems, new types of problems, or shifting the harm elsewhere. In short, they bite back."
"Before we intervene in a system, assuming it can only improve things, we should be aware that our actions can do the opposite or do nothing at all. Our estimations of benefits are likely to be more realistic if we are skeptical at first."
https://fs.blog/2020/09/revenge-effects/
Try Worthix, they are an awesome alternative & addition to NPS.
"There are certainly some admirable benefits to measuring NPS. To (over-)simplify, tracking NPS:
-Enables a culture of customer obsession
-Helps you see (and address) unhappy customers before they churn
-Creates a conversation across teams/functions to spot and address problems
-Allows you to easily benchmark against peers on an ongoing basis
The problem: NPS does not equal retention
NPS doesn’t have mystical powers and it should not be exalted.
For starters, NPS doesn’t turn out to be very predictive of logo retention or net dollar retention rates across SaaS companies, according to new analysis of OpenView’s 2018 SaaS benchmarking data."
https://openviewpartners.com/blog/cant-we-do-better-than-nps#.X2ez1C2ZOu4
"Before COVID-19, office workers were geographically tethered to their offices, and it was mainly business travellers and the lucky few digital nomads who were able to take their work with them and travel while working. Since the start of the pandemic, many digital nomads had to work in a single location, and office workers have become remote workers – giving them a glimpse of the digital nomad lifestyle."
"The idea of tourist destinations touting themselves as workplaces is not new. Japanese technologist Tsugio Makimoto predicted the digital nomad phenomenon in 1997, decades before millennials Instagrammed themselves working remotely in Bali. He prophesied that the rise of remote working would force nation states “to compete for citizens”, and that digital nomadism would prompt “declines in materialism and nationalism”.
It’s a cool & fun place, fortunate to visit many years ago. Punta Del Este.
"Once known as “the Switzerland of South America”, because of its high quality of life and its former banking secrecy laws, Uruguay has now become its New Zealand.
Its population is only 66% the size of the Kiwi state, but both countries have seen fewer than 2,000 cases and coronavirus deaths in double digits. Thanks to a large testing and contact tracing program, most of Uruguay’s schools, restaurants and sports clubs have remained open throughout the pandemic.
In stark contrast, Uruguay’s neighbors, Argentina and Brazil, currently rank third and fourth worldwide in the daily number of reported new cases, according to WHO figures.
With its wide beaches, luxurious mansions and expensive nightclubs, Punta del Este has for decades been the summer home of South American millionaires – and a smattering of wealthy Europeans."
https://www.theguardian.com/world/2020/sep/20/uruguay-argentina-coronavirus-pandemic
One of the best summaries of VC Rolling Funds I've read.
"AngelList was smart to recognize that emerging venture brands are more often than not a direct reflection of the GP's personal brand.
Several Rolling Funds have launched successfully from managers that have built strong online and offline personal brands. Due to the power of branding online in venture, the product perfectly aligns with the 506c general solicitation rules that allow managers to leverage these same online channels to quickly and continually raise capital.
Currently, the Rolling funds I've seen and heard about have been mainly raised by those from the tech community, but I would not be surprised the product to be leveraged by strong personal brands in other industries (sports, film, media, etc.)."
https://ventureunlocked.substack.com/p/my-thoughts-on-the-rolling-fund-product
"So goes the talent, so goes the innovation. Without this wellspring of brainpower lodging itself in America’s top innovation hubs, where exactly do we think it will go? That former aspiring Stanford or MIT computer scientist with ideas in his or her brain isn’t just going to sit by the window gazing at the horizon waiting for the moment when they can enter the gilded halls of the U.S. of A. It’s the internet era, and they are just going to get started on their dreams wherever they are, using whatever tools and resources they have available to them.
All you have to do is look at the recent YC batches and realize that the future cohorts of great startups are going to increasingly come from outside the continental 48. Dozens of smart, brilliant entrepreneurs aren’t even trying to migrate, instead rightfully seeing their home markets as more open to innovation and technological progress than the vaunted superpower. The frontier is closed here, and it has moved elsewhere."
https://techcrunch.com/2020/09/20/gangster-capitalism-and-the-american-theft-of-chinese-innovation/
This is something I've been thinking about for a long time. Everyone needs to be working on this if they want to thrive in the future.
"You want to build a competitive advantage that will endure over time. You don’t want to build a competitive advantage that is fleeting or that will get commoditized. Some awards, for example, may have been impressive early on, but as they have expanded significantly they’ve become more diluted and thus no longer as impressive. You want to have skills and accomplishments that are undeniably valuable and indisputably impressive.
Some other hacks to build moats include picking something that isn’t big now, but will be in the future (e.g. crypto in 2016), something that relies on exclusive relationships that you can access (e.g. enterprise healthcare, access to LPs), or something that is legibly impressive or valuable but has no playbook. (e.g. Tyler Cowen, Tim Ferris, Elad Gil examples)
If you were magically given 10,000 hours to be amazing at something, what would it be? The more clarity you have on this response, the better off you’ll be."
https://eriktorenberg.substack.com/p/build-personal-moats
"According to Cal Newport, professor at Georgetown University, four hours of deep work is what we can muster on average daily, the rest is for shallow work that is not as demanding (or in my opinion rarely needed).
Deep work compounds over time, create meaning and new opportunities. Deep work is when nothing else matters than your current focus. It takes self-discipline to do deep work, to shut down the outside world, and focus on the inside.
Deep work is being emerged in the moment, creating something with passion and purpose, like writing a book or designing and renovating a new kitchen."
https://mailchi.mp/65a53f76b09d/fewer-better-things-no-9380108?e=f5dfcce6c6
Watch this space: Semiconductors. Critical for technology sector & Geopolitics as whole.
https://aishwaryanagarajan.substack.com/p/my-semiconductor-conspiracy-theories
"And that, I think, reveals the real principle behind the rule. What’s important in Silicon Valley isn’t quite what’s true right now. It’s a different kind of truth; less about factual truth and more about authenticity. That's why the blessing that VCs grant founders is so important: it's a power, but also an acknowledgement of the burden of authenticity that founders have to carry.
It's not so different from the Kayfabe bargain between pro wrestlers and the crowd. Founders will present you with something pre-true, under the total insistence that it's really true; and in exchange, everyone around them will experience the genuine emotion necessary to make the project real. Neither party acknowledges the bargain, or else the magic is ruined.
That bargain, as subtle and as powerful as it might be, only works when it’s in the dark. Shining light on it makes it stop working. And that’s why the taboo around asking, are founders always supposed to tell the literal truth, is such an important social convention. Of course, I’m not in VC anymore, so I can say it. But be careful if you want to talk about it, too. It’s like the game where very time you think about the game, you lose."
https://danco.substack.com/p/are-founders-allowed-to-lie
This is the future of work and I call it the Multi-hyphen world. Writing about this too.
“Could I, as an architect, work on multiple projects at once? Perhaps at different stages? That require different amounts of my attention?”
The answer, it turns out, was not only “yes” but that it was actually professionally prudent to do so. To have multiple clients and bets. The geographic, spatial distance created this question… and smart architects created the precedent that became the convention that has now become the obvious answer (yes).
With the world being thrown into a distributed work-style with Covid-19 two months ago, where every company and executive in the world became more remote than ever before in a 4 week span (!)… My hunch is that the age of remote work will be a catalyst in introducing this freedom of asking this question and the smart executives creating the precedent that will then become the norm. In other words, the catalyst to asking this question and having thoughtful, fundamental answers in the separation of your physical work from other’s physical work.
I use the term catalyst because it’s already happening in pockets. And I think it’s about to go mainstream in the next decade."
https://jjbeshara.com/2020/05/25/the-multi-path-career/
"Near term changes don’t matter if the money printer is on. It means that all companies should be looked at in terms of 2023-2025. Interest rates are going to be 0 for the next 3 years (as already announced) so the real value of money will show up in three years (putting us into 2023 and beyond). Therefore instead of worrying about “cash flows” for the next couple of years, we have to worry about “who is actually going to be around” in 2023-2025? This is a big change in thinking and also explains why ultra-high technology firms are seeing significant increases in valuations/multiples.
For those that want the “gist” you want to take all your cash & buy anything that is scarce/useful & anything extremely high tech that will be used in 3-5 years. The only cash you should have is enough for emergencies at this point since we’ve gone full crazy with the money printing.
.....the simple way to phrase it is you should look at your physical cash & say “This is worthless”. While it is an extreme view, the point is clear. Unless you’re using it to purchase productive assets there is no point in having money in your pocket or under a mattress or in a bank earning 0% (no different than parked under a mattress at 0%). Being responsible is no longer encouraged."
https://wallstreetplayboys.com/the-future-of-money-and-how-to-use-it/
Sutter Hill, the quiet incubation giant. Crazy good returns.
"another, and more important way to judge VC firms is by the value they add above replacement to their portfolio companies. How much do they help their portfolio companies increase their likelihood and magnitude of success? Firms do this most notably by providing capital, but also by other methods like lending their brand or directly helping with operations.
For founders, this value added is what matters. The returns of a VC firm only matter to a startup insofar as they translate into improved brand, network, or access to capital for the startup.
Similarly, Speiser is likely to have more experience in setting up companies and the initial customer development process than the founders will. Perhaps most importantly, he has relationships with customers and an established reputation that can be used to bootstrap the initial pilot conversations, which may be the point of highest leverage for these new startups.
These advantages all compound with every incremental company Speiser originates, and not just because of the typical brand network effects that venture has broadly. In many tangible ways, the spread between Speiser’s process knowledge relative to a new founder should widen with every new company."
https://kwokchain.com/2020/09/22/the-mike-speiser-incubation-playbook/
Two negatives add to more negative not positive. Woke movement meets Influencer....BARF!
"The Wokefluencer isn’t necessarily a new phenomenon. Stephens points out even before social media, alternative spring break gave a certain stripe of (usually white, usually well-off) college students an opportunity to flex their capacity for empathy. These students would return from their trips with photographs of themselves with needy children or in disaster zones as souvenirs. The difference now is how easy it is now for influencers to dip into a protest or a locked-up mail drop and scrape some of that valor for themselves. “The stakes are much lower,” Stephens says."
"If influencers are struggling to meet this moment—and they are!—it is because of the way the moment transcends social media. Instagram is essentially designed to let each user become the subject of any setting, any occurrence, or any calamity.......In 2020, the influencer then has met their match: a moment that can’t be flattened into a photograph."
https://www.gq.com/story/woke-influencers-2020
This is valuable data on "K" shaped recovery. Rich get richer, poor get poorer. America will be getting in "Revolution" territory if this continues. Not good.
"First, it is obvious that high-wage worker employment has basically recovered to pre-COVID levels, but low-wage workers are still suffering significantly."
https://pomp.substack.com/p/the-k-shaped-recovery-is-now-undeniable
It's about time some of the airlines are trying some of this. As testing gets cheaper and easier, I expect this will just become standard & bundled into the price of airplane tickets.
The Democratic Party is broken. So is the Republican Party (maybe more so). It's now voting for the lesser of evils. Politics in 2020.
"The source of this tension: Hoffman’s team thought the Democratic Party was fundamentally broken and in need of well-financed disruption. So he and the donors in his orbit began pushing the envelope and funding risky and unorthodox projects, making mistakes and enemies along the way.
Hoffman has grown to symbolize a bigger debate over whether this Silicon Valley disruptive style has any place in politics. And so the election this fall will offer one answer. If Biden wins, Hoffman is poised to emerge as one of the sages of Silicon Valley’s new political moment. But if Biden loses, it’s not hard to imagine a world in which Hoffman becomes the political poster child for Silicon Valley disruption gone awry, a billionaire who ticked off too many and accomplished too little."
Always wanted to visit Panama. Although I still tend to favor Georgia/Taiwan/Portugal/Ukraine as my bases personally.
Such a huge fan of Richard Koch. His book "The 80/20 Principle" changed my life. This was a great interview.
https://tim.blog/2020/09/22/richard-koch/
Taiwan is critical to the USA. I hope selfishly there is better alignment on policy soon against China's aggression.
"America’s ambiguous posture toward defending Taiwan is decades old, and embracing our recommendations would upset the status quo. However, strategic clarity cuts both ways, and neither American policymakers nor Taiwanese voters can afford to delude themselves into acting like China is a paper tiger that will fold at the first sign of resistance.
Deterrence is costly and talk is cheap. If Washington truly believes that it is in America’s national interest to deter China from attacking Taiwan, Washington should also be willing to pay the price — and assume the risks — associated with credibly enhancing Taiwan’s deterrence posture. Arms sales are only the first step toward this end. The next steps — implementing defense reforms, reinstating military conscription, and holding bilateral training exercises — will be harder.
U.S.-Taiwanese relations are changing, but change takes time. Time, unfortunately, is not necessarily something Taiwan has in abundance."
Fully agree with this. Every successful person I know has mentors.
"we should be shouting: WE ALL NEED MENTORS. Not just one but a tribe of them with a range of achievements, skills, and experiences.
A mentor is simply an experienced and trusted advisor. They instill confidence. They inspire. They share stories. They providing a sounding board. They open their network. They help us see around corners. They push us. They lift us up when we're down. They recommend books. They provide input. They accelerate our learning and development. They make us better. They genuinely care about us.
Who doesn't want or need that?"
"But capitalism also produces large wealth gaps that produce opportunity gaps, which threaten the system in the ways we are seeing now. Wealth gaps give unfair advantages to the children of rich people because they get a better education, which undermines the equal opportunity notion. As the number of people who get equal opportunity diminishes, this reduces the possibility of finding talented people in that population, which isn’t fair and undermines productivity. Then the have-nots want to tear down the capitalist system at a time of bad economic conditions. That dynamic has always existed in history and it’s happening now.
So, capitalism and capitalists are good at increasing and producing productivity to increase the size of the economic pie, but they’re not good at dividing the economic opportunity pie. Socialists are generally not good at increasing productivity and the size of the economic opportunity pie, but they are better at dividing the pie."
"We now have too much emphasis on distributing wealth and getting it from producing debt and printing money, and not enough from increasing productivity."
Really neat story. Surfing in Yemen.
It's true. Great mentors can be found anywhere. Invaluable too.
https://davidcummings.org/2020/09/26/find-your-digital-mentors/
Fintech on the rise. Covid beneficiary.
“Consumer fintech adoption was already strong prepandemic, especially among the 20s to early-40s age group,” says Victoria Treyger, a general partner who leads fintech investing at Felicis Ventures. “The pandemic has become a growth rocket, fueling the rapid acceleration of adoption across all age groups, including 40- to 60-year-olds.”
Several Covid-driven developments are helping specific types of fintech players. For example, consumers’ shift to more online spending and delivery services is a boon to certain companies powering payments."
This is really cool. I miss surfing in the tropics! I just miss the tropics period.
https://www.youtube.com/watch?v=OOVGQdaToaE
The Malloy brothers: polyglot surfing adventurers who do this in remote areas.
The Importance of Personal Brand in VC: How the “Media Company of One” will be the New Standard
Harry Stebbings is probably the best and most recent example of this. What a story: an 18 year old from England uses his podcast to meet & interview some of the best VCs in the business. He built a network and a real podcast business as a launchpad business and started a VC firm (Stride VC) in 2018 and then more recently on the side, Micro VC fund of 8.3M with some of the best VC & angels in Silicon Valley.
“20VC’s tie to the name of the podcast is intentional. The podcast has developed a brand of its own in the world of tech, with some 200,000 subscribers and 80 million downloads to date of the twice-weekly program. And 20VC isn’t just trading on Stebbings’ own experience as an entrepreneur: it has tapped the network of people that have been on the show, or know him because of the show, to assemble LPs.
There are some 64 of them in all, including founders and current and former execs from Atlassian, Yammer (David Sacks), Plaid (William Hockney), Superhuman, Airtable, Calm, Cazoo, Zenly, Alan, Spotify (Shakil Khan) and Tray.io; GPs from Kleiner (Mamoon Hamid), Social Capital (Chamath), Thrive (Josh Kushner & Miles Grimshaw), Atomic, Founders Fund (Brian Singerman), Coatue, Index (Danny Rimer), True Ventures (Phil Black) and Beezer Clarkson, among many others. Having a popular podcast that highlights interesting investors and startups turns out to be a good way of networking to build a fund. Stebbings said that the call out was oversubscribed three times over within four weeks.’
Pretty impressive accomplishment and shows the approach of building an audience first. Or the “media company of one” approach. But if you go back into VC history, this is actually a pretty well paved path to building a personal brand in VC & Angel investing.
Mark Suster, Fred Wilson, Brad Feld, Paul Graham are very representative of the Blogging era of the early 2000s. Andrew Chen was a longtime blogger on growth before he became a VC.
Jason Calcanis (Launch Conference & This Day in Startups Podcast) & Jason Lemkin (Quora/Saastr/Blogging/Conference) have done an amazing job using Social media and building Conferences as a platform.
Semil Shah (Blogging & Twitter), Leo Polovets (Blogging & Twitter), Hunter Walk (Blogging & Twitter), Brianne Kimmel (Blogging & Twitter) are representatives of VCs using social media to build out their network and brand.
In more recent times, we’re seeing investors build strong followings either via social media, podcasts and Substack newsletters like Anthony Pompliano (Twitter & Podcast), Erik Torenberg (Twitter & Podcast), Li Jin (Twitter and Blogging).
Who can forget my dear friend and ex-colleague Sheel Mohnot on Twitter and as the “Zoom Bachelor” who also ended up on Justin Bieber’s music video. (that last bit is incidental but effective).
The Importance of Personal Brand in early stage Venture Capital
Having a personal brand this day in age is important whatever role/position/industry you are in.
I think this has become even more important for investors doing investments especially in the stages up to the series A venture capital. As great as the brand names are, the best founders would rather take money from a specific Partner at the firm. They optimize for it over the firm’s brand name.
Obviously the best case is for both a top brand firm and top specific partner, but we know that is not always the case. I know of founders who have given up an offer from top tier Sequoia Capital to go with another better suited Investment Partner at another firm.
And frankly there are so many great investors out there. With 1000+ pre-seed and Seed funds, maybe at least 100 Series A VC funds that would be considered top tier, founders have a plethora of choices. Top founders have their pick of who they let invest into their company. So i think it’s become incumbent on investment partners at firms to really stand out & build their own brand. This is how you get great deal flow.
And also understanding VC Fund politics, it’s not a bad idea to have your own brand and following. It gives you optionality: go join another firm, start your own or even just be a “Solo Capitalist.”
There are so many successful examples of “Media Company of One” model for up and coming VCs. Yet like many things in life, it looks very simple but it really takes a lot of time & work.
BUT this will become the standard path for the savvy future venture capitalists, if it isn’t already.
Work like a Lion, not like a Cow
This is something I've pondered since I heard it from my friend Shaan Puri a few weeks ago. (attributed to Naval Ravikant)
“The way people tend to work most effectively, especially in knowledge work, is to sprint as hard as they can while they feel inspired to work, and then rest. They take long breaks.
It’s more like a lion hunting and less like a marathoner running. You sprint and then you rest. You reassess and then you try again. You end up building a marathon of sprints.
Don’t work like a cow grazing on the field all day. “People who say they work 80-hour weeks, or even 120-hour weeks, often are just status signaling. It’s showing off. Nobody really works 80 to 120 hours a week at high output, with mental clarity. Your brain breaks down. You won’t have good ideas.”
Source: https://nav.al/work-hard
I think about my time as a manager. I reflect on what many of my founders do and how they manage their teams. Most folks are operating under the legacy of industrial times. Where they equate hard work to showing up on time or working late & being around. Basically grinding like a factory worker, where hours equate to the number of widgets you make.
I’m not saying you don’t need to grind and spend a lot of time on work, especially in the very early stage of startups. There is just so much work to do in this situation.
But most creative work requires thinking, generating ideas and getting insights. The way you do this is from reading a lot, talking with people, resting, relaxing and thinking. Even walking in nature (there are a lot of studies out there showing that this does lead to better ideas). Also no surprise that many people get their best ideas in the shower. It’s warm, relaxing and you can let your subconscious mind work freely.
As naval previously said, grinding like a factory worker when you are tired probably does not lead to any breakthroughs or insights. The author Cal Newport states most people are limited to 4 hours of intense thinking each day, also known as “Deep work”.
Morgan Housel wrote in 2016 (i just found it as i was writing this. It’s so good).
“If you anchor to the old world where good work meant physical action, it’s hard to wrap your head around the idea that the most productive use of a knowledge-worker’s time could be sitting on a couch thinking. But it’s so clear that it is. Good ideas rarely come in meetings, or even at your desk. They come to you in the shower. On a walk. On your commute, or hanging out on the weekend. I’m always amazed at the number of famous ideas that came to people in the bathtub. But tell your boss you require a mid-day soak, and the response is entirely predictable.
Look at famous thinkers who didn’t have to impress anyone by looking busy, and you see a theme: They spent a lot of time doing stuff that didn’t look like work, but in fact was stupendously productive.
I think we are in the transition of a working world where inputs are measured (time spent etc) to a working world of “outputs”. Where the focus is on what you have actually done. A focus on “Real results” not on the time spent. We should be rejoicing about this. This inversion of thinking helps you add more leverage in your life. And you should stop feeling guilty when you are not working all the time.
The reality of being a creative worker this day and age is you are working when you aren’t working. When you read that random science fiction or fiction book. When you are cutting up vegetables for dinner or doodling on a piece of paper. When you are going for a walk with your partner. When you are chatting with a friend on the phone or zoom. When you are taking a nap. When you do all these things, YOU ARE doing real creative work. Let’s not forget this if we are to thrive in the future world of work.
SPAC Attack
There has been a big tidal wave recently. In the first half of 2020, there have been 48 SPAC IPOs completed, with almost $18 billion raised in proceeds. There is another $5.4 billion of SPACs on file to complete IPOs this year.
After Chamath Palihapitiya’s (of Social Capital fame) move with Virgin Galactic, now you see top tech players like Kevin Hartz, Reid Hoffman, Marc Pincus & hedge fund giant Bill Ackman jumping on this trend too.
What is a SPAC aka Special Purpose Acquisition Company?
A SPAC is a blank-check company that raises capital from investors through an IPO for the purpose of finding a private company to acquire. It is basically a new path for tech companies to go public that could compete with the present day ugly IPO process, and win.
Investors get both warrants and common stock, and a set period to find a target, which is usually 2 years. Additionally once this money is raised, the manager can take up to 20% of equity interest.
But this is the trade off for faster time to the public market. The benefit is you are able to get the money quickly and with more certainty versus the traditional IPO method. Also in the new SPAC 3.0, the financial structures tend to be cleaner. Basically they do not have too many weird terms, like it used to be in the 80s & 90s when it was the financing of last resort.
Why are SPACs happening?
The answer is pure supply and demand.
On the supply side there are just a lot less publicly traded companies. In 1996 there used to be 7322 listed companies. In 2017, there were only 3671 publicly listed companies.
So for example in the Mid-70s, there were on average 280 Initial Public Offerings (IPOs) per year. Fast forward now it’s about 115 IPOS. One reason for this beside a higher bar for going Public, the most common exits for Private Equity and VC funded companies used to be IPOs. Now they are acquired either by strategics or financial players.
Add on top of this the massive wave of $$ that has come into public equities from investors from all over. Basically a massive way of demand which has driven the US Stock market’s total valuation to $38 trillion dollars. Yes, trillion with a “T.” (for tech folks, there is $480B invested in Venture Capital as asset class)
From a company perspective why do it? Why not go the IPO route?
Well, IPOs are bloody expensive as it could be up to 3-7% of the proceeds. There are also lots of regulatory hurdles. There is a big time element, a normal IPO process could also take more than a full year. It’s been shown how much $$ companies spend to go public.
Also how much $$ is left on table because of gross and systematic underpricing and un-aligned incentive structures with Wall Street i-Banks. Just look at the crazy spikes of the share price on day one. That means the IPO has been underpriced and that money has been left on the table for the company.
SPACs are happening because it can be a way better deal for founders. Yes, you have to give up 20% “promote” of the shares in the SPAC but at least you are better aligned on long term incentives.
What are considerations a founder needs to keep in mind when choosing a SPAC?
Your partner leading the SPAC ideally needs to have deep operational experience & credibility with public markets. As Alex Danco says “SPACs are highly centred around the cult of personality of the sponsor.” That is why I mentioned heavy hitters in the tech market like Reid Hoffman, Kevin Hartz, Marc Pincus and Bill Ackman previously.
When to do it?
$50M in revenue and high growth, like a series D. It’s a new and very feasible exit as well for founders and Venture capitalists. Queue the most recent SPAC, Opendoor for example.
I’m quite interested in this movement and think this is the one of the most promising new developments in the capital markets. As Marc Pincus describes:
“SPACs as “venture at scale,” letting companies go public in close partnership with experienced growth investors. The “scale” comes from SPAC founders pushing the companies they merge with to maintain a venture mind-set even after they list. “There’s an interesting entry point into a company at the point they’re going public,” Mr. Pincus said, “to help them think, ‘How do you go from $1 billion to $10 billion in revenues? How do you 10X and 100X your business long after you’re public?’”
There is a lot to like about SPACs and a very big difference from the sketchy investment vehicles they were decades ago. This is the future and think they are here to stay. Founders and investors rejoice!
Marvin’s Best Weekly Reads September 20th, 2020
“Life is either a daring adventure or nothing at all.”--Helen Keller
Classic. When this pandemic is over I'm going to travel like mad. I'm going to visit every EDM festival I've ever wanted to go to and visit all the places I've wanted to go to. And return to all the places I miss.
https://www.youtube.com/watch?v=WxfZkMm3wcg
"Rather than breaking even, almost two thirds of financings lost money in the past decade and less than 4% produced 10X or greater returns. Despite the historic market we’ve had in the past ten years and the huge deals often highlighted in the press, venture capital returns haven’t shifted much.
It’s as difficult today to find big winners as it was ten years ago and it remains just as important to find those deals if VC firms and their partners are to stay successful."
Chrissy Teigen is a funny and cool lady.
"The 34-year-old has a full plate running two companies: Cravings by Chrissy Teigen—her lifestyle brand with a cookware and tabletop line at Target and Macy’s, a blog with videos and recipes, and two best-selling cookbooks—and Suit & Thai Productions, her production company, which has a first-look deal with Hulu (including an upcoming show with the working title Family Style, cohosted with David Chang) and the second season of Quibi series Chrissy’s Court with her mom, Pepper. After helping her mom with her Thai cookbook all quarantine, Teigen will tackle Cravings 3, which she describes as “how I eat now: brighter and healthier.”
But, most important, it’s the cookbook she’s having the most fun working on. “While writing the first, I was pregnant, and for the second I was deep in postpartum depression. I’m having a good time, and my confidence has grown. I fully embrace carbs now—like, putting sweet-potato spread on a baguette. A year ago, I would have said you can’t put a starch on bread; now I’m like, who cares? There are no rules.”
https://www.marieclaire.com/celebrity/a33864570/chrissy-teigen-interview-2020/
Good tips here for venture investors. I agree with most of them.
https://www.saastr.com/11-signs-to-tell-if-a-venture-investment-will-or-wont-work-out/
Talk about a shady grifter.
"Oancea is not your typical memorabilia collector. Vegas Dave, as he’s known to his millions of followers on social media, is a notorious gambling influencer, known for selling picks on which team will win a given game. Vegas Dave says he’s the best “sports information consultant” in the world, but if you dig into his past and his picks you’ll find a shady hustler who sells a service that has little, if any, value for his customers."
Love Netflix. Not sure I'd work there but they get results.
"I’ve read many CEO pontification books, and I always wonder what it’s really like in the middle of that organization. I’m always skeptical. That’s why we hired Erin Meyer, who was a business school professor first, [to co-write the book] and come in and interview hundreds of Netflix employees confidentially and then do the point/counterpoint — me pontificating, and then her doing the reality check.
It doesn’t make Netflix out to be perfect. There’s still plenty of issues. But it’s very real in that way. Our big media competitors are not going to be able to take advantage of [the lessons in the book] because they’re too well established… It’s not like some great trade secret and then they’re all going to adapt to it. It’s the younger firms that will."
We've all been here. Some of us get out.
"Show up, do good work and everything would be fine. I worked about 60+ hours per week plus commuting. Work was measured in time spent and perceived value.
The productivity gains I achieved turned into more work as I climbed the ladder. Becoming better resulted in doing more. All my energy went into being a well-greased cog in someone else’s machinery.
On the outside I had ”made it” but on the inside, my soul was quietly screaming in agony. The rewards and benefits started to pale in the light of living someone else’s life. Did I really want all these things and more? Was it worth trading my life for gold?"
https://mailchi.mp/6731318ffbad/fewer-better-things-no-9377732?e=f5dfcce6c6
"While Hollywood measures people’s offices by their totems and grandeur, the analytical Hastings, a Silicon Valley interloper, values functionality over trappings.
Netflix currently functions, by any measure, at a world-class level. As the year of the pandemic upends entertainment companies—Disney’s crippled theme parks, Warner Bros.’ furloughed blockbusters, AMC’s shuttered theaters—Netflix is having a moment.A moment of prestige, with a record 160 Emmy Award nominations, eclipsing the long-dominant HBO, and more Oscar nods than any other media company.
A moment of influence, adding almost as many customers in the first six months of the year as in all of 2019, extending its reach to nearly 200 million subscribers in 190 countries. And a moment of profits, with sales up 25% year over year, earnings more than doubled and its stock up 50 percent, as most of the market gyrates wildly just to scratch back to even. Recent market cap: $213.3 billion."
This is pretty neat.
"The surrounding lands of the Svalbard archipelago are sparse and desolate. It is a place where there is a 1:10 polar bear to human ratio, where the sun doesn’t rise for 4 months per year, and the northern lights dance across the sky.
But on the side of a mountain in Spitsbergen, there’s an abandoned coal mine. And inside — some 250 meters below the Earth’s surface — you’ll find a steel vault that contains an archive of film encoded with hundreds of thousands of open-source projects from around the world.
Run by a for-profit company called Piql, the Arctic World Archive is aiming to preserve the world’s digital materials — music, literature, and lines of code — for 500+ years.
Recently, Github, an open-source coding platform, donated it’s entire trove of code to the archive — some 21 terabytes of data posted by millions of users since 2008.
Most press accounts have dubbed the Arctic World Archive a “doomsday vault.” The archive prefers the term “vault of hope.”
Either way, it’s an effort to incubate our data from human and environmental catastrophes in the long-term. And it may just be our best shot at telegraphing our present-day story to future generations."
https://thehustle.co/arctic-world-archive-svalbard
"The Peloton founder understands the power of software/SaaS to drive return on investment and not surprisingly is focused on that part of his business.
You may be asking at this point: “Why is Peloton making hardware at all if software/SaaS is so valuable? The one-word answer to this question is: distribution. No one is making low cost exercise bike or treadmill “clones” or “blanks” that Peloton can rely on. Bill Gurley described how hardware in some cases can be important for distribution in his 2003 essay: “Software in a Box” which today might be called “SaaS plus a Box.”
https://25iq.com/2018/03/10/peloton-the-saas-plus-a-box-business-case/
Fascinating and absolutely critical in America in 2020.
https://story.californiasunday.com/mail-in-ballots-election
We need more of this.
"Andrew is a partner at Tiny where he starts, buys, and invests in internet businesses. Over the last few years he’s built it into a thriving collection of companies — over 30 with about 600 employees collectively.
What Andrew has built is fascinating because he’s turned himself into a people router. He takes people who arrive in his inbox, and gets to decide where in the Tiny machine to put them. If he does that job well the machine will grow — like magic.
His job is to turn people into opportunities.
But here’s the conflict: even though his job is all about people, he doesn’t like to be on phone with them too often. He only likes to do 2-3 meetings a day — which is surprisingly few for a guy with 600 employees.
That’s where the templates with a hundred different polite ways to say, “No” come from.
But this habit of saying no spreads beyond his inbox. He’s really set up his whole life by saying no. He’s said no to venture capital, he’s said no to living in Silicon Valley, and at his company he’s used delegation to say no to anything that will require him to do work that he doesn’t want to do.
In short, he’s said no to anything that doesn’t fit into his vision of success — and it’s working pretty well."
https://superorganizers.substack.com/p/the-ceo-of-no
All sadly true. Great write up from my friend Pierre. I wish i wrote this!
"Reality Check — There are no ‘mentor’ rules of engagement or code of conduct. Anyone can self-label and become a mentor and there is no litmus test or ‘Start-up’ Angel network to ensure how legitimate a mentor is. Even more troubling, for a lousy mentor, there are no consequences — despite leaving a trail of destruction in their wake.
The reality is that many mentors are charlatans, in it for themselves, and operating a fraud."
https://pierregaubil.substack.com/p/mentoring-sucks
"Mencius, the “second sage” of Confucianism, is believed to have said, “In abundance, prepare for scarcity.” While the philosopher was likely hammering the importance of foresight, if viewed with a squint, read more as koan than dictum, it feels particularly suited to our current era. In our age of tech-endowed abundance, we must still prepare for scarcity. We just need to invent it.
This is an old game. In precious stones, new pharmaceuticals, patents, copyright law, the planned obsolescence of devices, we see the hand of invented or artificial scarcity, dearths created to preserve certain products’ value.
In some, but not all cases, scarcity impacts our sense of status. It is not that “cool” to own a patent, but owning a large diamond may be. The object made scarce influences status earned."
https://thegeneralist.substack.com/p/scarcity-as-an-api
What an interesting accomplished man. I hope this works and he is able to distribute this soon.
I'm still bullish on long run for SF & other big metropolitan areas. Narrative on long term decline here is wrong. (altho SF is really poorly run though).
"Viewed from a macro level, then, cities that achieved near-cartoonish levels of desirability may simply be lurching uncomfortably into the next phase of an eternal boom-and-bust cycle.
Hamalian, however, remains bullish on their enduring desirability as places to live, work, and play.
“I grapple with the theme … that this could be the death of cities, the fear-mongering you hear thrown out there,” he says. “I try to check myself.
Our love affair with cities has waxed and waned many times over throughout history. We fall in love with them and grow to view them as too dangerous, too crowded, too dangerous, the schools aren’t good, whatever it may be that people use as for why cities are going to die and then they flee – and then they make their way back.”
"This is the era of no good choices. Take schooling, for example. Keeping children home robs them of education and socialization. It scars their futures, steals their joys. It makes it impossible for their parents to work, or even to rest. But sending them to school endangers their health, and that of their teachers and their families. The argument is so heated because the choices are all bad, at least by the standards of the lives we used to lead.
"In America, our ideological conflicts are often understood as the tension between individual freedoms and collective actions. The failure of our pandemic response policy exposes the falseness of that frame. In the absence of effective state action, we, as individuals, find ourselves in prisons of risk, our every movement stalked by disease. We are anything but free; our only liberty is to choose among a menu of awful options.
And faced with terrible choices, we are turning on each other, polarizing against one another. YouTube conspiracies and social media shaming are becoming our salves, the way we wrest a modicum of individual control over a crisis that has overwhelmed us as a collective."
https://www.vox.com/21432760/coronavirus-2020-trump-government-response-covid-19-biden-america
"if you’re serious about getting rich you should always choose to work from home at slightly reduced pay. Why? This gives you more than enough time to work on your side projects. While you will likely lose some career progression (office politics), the upside of equity in your own business is 1,000x more valuable. It isn’t even close."
"Are you excited? You should be. 1) better quality of life, 2) more autonomy, 3) more performance based work, 4) easier to control your schedule, 5) ability to cross state lines, 6) ability to maintain better tax structures and 7) significant long-term reduction in office politics if you’re in that position at this time. If we wanted to be ultra competitive about it, we’d highlight loss of competition as a lot of people have to start over but that’s over the top (it is a true statement, many smart people got wiped out). If you thought it was easy to get ahead in 2010 to 2020… Wait till you see 2020-2030."
https://wallstreetplayboys.com/looking-at-the-bright-side-of-the-lock-down/
Color me VERY skeptical. Feels like everyone literally everyone has a VC fund.
But they have some great LPs so what do I know. #PeakVC
So much to admire here from the founder of Duty Free Shoppers & Private Equity giant General Atlantic. Very impressive human being.
"Over the last four decades, Feeney has donated more than $8 billion to charities, universities and foundations worldwide through his foundation, the Atlantic Philanthropies. When I first met him in 2012, he estimated he had set aside about $2 million for his and his wife's retirement.
In other words, he's given away 375,000% more money than his current net worth. And he gave it away anonymously. While many wealthy philanthropists enlist an army of publicists to trumpet their donations, Feeney went to great lengths to keep his gifts secret. Because of his clandestine, globe-trotting philanthropy campaign, Forbes called him the James Bond of Philanthropy."
2 Interesting observations in the latest rant by Prof Galloway.
"The Uncola of a sector gains relevance around the time everyone throws in the towel, all new entrants mimic the leader, and the sector has the variance of your Dockers-wearing dad. The most innovative Uncola of the last decade is Shopify, who became the non-Amazon Amazon. Shopify taps into a reservoir of ill will from third-party retailers, who were forced to surrender data, custody of the consumer, and merchandising options so they could access the largest ecommerce platform in history."
"The analytics firm is attempting to position itself as the “Uncola,” the non-tech tech firm. A more apt metaphor is Zima. Palantir is all of the calories of Facebook (scaled sociopathy) with none of the great taste (profits)."
Totally agree here.
“If anyone says that they have predictive power in this industry and says they know where the future is gonna be, I just question the wisdom of this,” he said during a session exploring how VCs seek out new markets before they even exist. “Because if you could figure it out, you could come up with the idea, you’re capable enough to be able to put all the pieces together, why would you not found the business?”
Instead, the key to betting on the future is to learn to ask the stupid questions. “I think it’s actually perfectly fine in the venture industry to not be the smart person and to kind of train yourself to be stupid and ask the stupid questions,” said Kanji. “I think a lot of people are probably too shy to do that. And a lot of people [are] probably too risk averse to then write the check when they don’t really understand exactly what it is that they’re investing into. But a lot of this stuff is a light bulb moment.”
This is an excellent guide to making your company remote.
https://davidcummings.org/2020/09/19/5-remote-first-principles-from-brex/
"If you want to build a following online you can later convert into customers or advocates for a cause, you need a body of work.
Build first, flex later.
Because anyone can say anything. It’s what you’ve accomplished or survived in their life that gives it significance."
https://edlatimore.com/personal-branding-examples/
Never was a big fan of fish sticks but ate them a lot growing up. Fascinating story.
https://thehustle.co/how-marketers-convinced-america-to-eat-fish-sticks
Silicon Valley Companies should NOT be Role Models for Management Systems
It seems many companies these days use Google or Facebook or whatever well known Tech Giant as a model. I think this is a huge mistake. For most of the FAANG businesses, they tend to be Outlier businesses whose situations are not applicable to most companies.
They have Structural advantages and many tech markets are natural monopolies. They have tremendous moats which could be technical, distribution or whatever. As high margin software driven businesses with an excess of 40+ percent (usually more), they end up throwing off a lot of cash. This is why they end up with higher margin of error, an ability to try more things and have more products fail until they get things right.
In fact, if you want to learn more on good management, do that from companies in low margin businesses that have a lot of complexity, higher cost structures, ie. thin margins. Ie. the very challenging Airlines or retail businesses.
This is why I posit that out of Big 5, Amazon is the best managed organization. They have built an amazing business despite the complexity of their business (different business lines that also include extensive offline operations) and razor thin margins in the beginning. They are also in highly competitive sectors (retail, groceries etc.). I should also note that Amazon Web Services is a massive cash flow business that helps subsidize their other lines of business although it was started 2006, 12 years after Amazon began.
Markets matter a lot. Even if a company is poorly run, they may still succeed in a massive fast growing market despite themselves. High growth also leads Peter Principle at higher velocity. Growth hides a lot, including crappy managers. Especially as many founders mistakenly think they are the next Steve Jobs, acting & managing like jerks but without his talent. AGAIN growth hides a lot. Until it doesn’t but this can take a long time before it shows up.
Most Silicon Valley companies, even the famous ones are grossly mismanaged. Just pick any well known later stage startup or Big tech company and check their Glassdoor reviews. My point should become very clear.
Remember: An amazing business model and growth covers up a lot, so be careful who you make as your management role model.