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.

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.”

Why We Need More Founders

“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.

“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.”

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.

“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.”

“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.”

“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.”

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.”

“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.”

“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.”

“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.”

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.”

“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.”

The Growing Economic Divide

“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.”

Ever curious: Tsundoku, Reader, Aspiring Shokunin, World traveller, Investor & Tech/Media exec interested in almost everything!