Marvin’s Best Weekly Reads Sept 19th, 2021
To be without some of the things you want is an indispensable part of happiness. — Bertrand Russell
- “Why in the world would you want to be involved with ponzis, rug-pulls, ultra high yields and competition with traditional finance? Easy! You want to be ahead of the curve and have a bright future.
Think about it like this. If for some reason lending rates go up 5–6%… all this means is that Traditional finance sees a *slight* increase in Net Income margins. While the profit margins may go up a bit, the distance between the two doesn’t change much.
In a second scenario where rates go negative… this means individuals would begin pulling capital out. As capital comes out it has to go somewhere and you only need a fraction of the pie to move into DeFi.”
2. Kaboom! Batch 18 represent. Congrats to the team at Printify.
3. This looks good. Matrix 4. I’ll watch this reboot.
4. Fascinating character Marc Rich. Amoral but fascinating.
“Fortunes are made when markets open up and old power structures crumble. This could be political (Russian oligarchs), technological (the internet and software eating the world), or geopolitical — such as when Western dominance of the oil trade ended and a free market emerged.
One of the biggest winners of the oil market’s sea change was an enterprising trader named Marc Rich. He and his family had fled Nazi persecution to America. He started as a trader at commodity trading firm Philipp Brothers before building his own trading house (today’s Glencore). Rich’s web of relationships allowed him to spot the breakdown of the oil market’s oligopoly early and he bet aggressively on higher prices.
He entered long-term supply contracts, organized logistics through tankers and pipelines, and in some cases had exclusive buyers. As Byrne Hobart correctly pointed out, he was able to replicate the value creation of an integrated oil company in a synthetic and more flexible way. This way he was able to take advantage of the more volatile market and poorly positioned players.”
5. No surprise: California’s been treating their resident companies like the golden geese for too long. Also forest fires and increasing costs of living + declining quality of life does not help.
6. Interesting case for Tezos. I’m intrigued actually.
7. Great profile & interview on Simu Liu! #Shangchi
8. “The world is awash with capital, and even the most conservative institutional and retail investors are developing an appetite for riskier bets. This is driven by (1) historically low-interest rates and (2) the winner-take-all nature of many technology-powered businesses. In other words: you are guaranteed to lose purchasing power if you keep your money in so-called safe assets, and a handful of extremely successful investments capture most of the available returns. Investors who try to stay safe or even take risks but miss out on the biggest winners end up far behind.
How do you compete in such a world? You think strategically. In the case of venture capital, that means doing things your competitors aren’t doing. And that’s exactly what Andreessen Horowitz (A16Z) is doing. The firm is on a hiring spree, recruiting new partners and former government officials, writers, editors, and more. A16Z is no longer building a venture capital firm; it is building a new type of company with a thick management layer that helps support its multiple portfolio companies with marketing, legal, lobbying, and technical resources. It’s no longer venture capital; it’s a venture corporation.
By doing more things, A16Z becomes dramatically more attractive and valuable to entrepreneurs, increasing the likelihood it won’t miss out on the biggest winners.”
9. Great overview on what’s happening in the Venture Capital industry these days. Worth a read.
10. Awesome Lux reads this week.
11. “An arbitrage takes advantage of a pricing dislocation in markets. When two places value an asset differently it creates an opportunity for someone to buy low in one market and sell higher in the other. But as more market participants catch on to the opportunity, the price discrepancy closes to reflect the true market value of the asset.
This process creates a market equilibrium. An equaling out of the true value of the asset in question. So in a sense, an arbitrage is like a gold rush and a land grab. Its a race to take advantage of the price discrepancy before it gets equalized across the market.
Society’s transition to the digital age is itself, an arbitrage, a land grab, and a gold rush.
As global society adapts to the Digital Age, it reveals a massive arbitrage opportunity. There is a dislocation of the true market value of people, geographies, and new assets unique to the digital age society. And this opportunity is created from stable internet access.
The biggest opportunities, the ones that represent the greatest arbitrage, are formed from the merging of key digital fault lines: remote work, internet access, cryptoassets, and the ease of creating & distributing information capital assets.
They permit anyone, anywhere, to earn a digital age salary in a low cost of living location.”
12. “The trajectory is clear: Coatue is coming for the venture asset class as ferociously as Tiger Global has over the last few years.
Coatue invests all the way as early as seed and as late as pre-IPO, and can of course hold on to positions post-IPO, which is another appeal of raising from Coatue. A common misconception is that Coatue is selling the same product to founders as Tiger Global, but this is far from the case. Coatue take board seats and are significantly more involved with portfolio companies than Tiger Global.
They’ve hired some exceptional investors in Matt Mazzeo (formerly of Lowercase Capital with Chris Sacca, and Creative Artists Agency, which is beginning to feel like a bit of a pattern), Dan Rose (formerly of Facebook and Amazon), Michael Gilroy (formerly of Canaan), and many others.”
13. More on Coatue!
14. “Adding all of this up, we see that China has an astoundingly large quantity of protein to produce and import for its population. Taken together with the ruling Chinese Communist Party’s fears of social upheaval due to food insecurity (and the stain upon the party from the Great Leap Forward), the impetus for much of China’s belligerence in global fishing and crackdowns on commodities trading become clear.
Broadly speaking, the confluence of supply side and logistics disruptions has formed into a perfect storm, where China cannot as readily meet its current food demand through production, trade, acquiring foreign food manufacturers, and even illegal activities such as illicit fishing.”
15. “Time > Money and also Health > Money
This is why rich people spend so much money on comfort items (lay flat business class, private jets, massage, hormone replacement, diet, high quality gym etc.) Therefore, we can take a look at how much damage a few “bad decisions” can make on your life.”
16. “My view, and the view of many in this space, is that web3 will inspire us to return back to the original values of what the Internet should be: decentralized, community-governed, efficient, innovative, accessible, and wildly dynamic. Crypto networks provide us with a cooperative economic model that ensures incentive alignment between platforms and users over time. When users are truly aligned with platforms, the platforms become larger and more resilient, and the users become more incentivized to innovate and create new technology.
It is difficult to overstate the impact digital ownership will have online. Of course, too, it is difficult to comprehend in its early stage. But we are moving towards an entirely new economy built on the foundation of what consumers need. The next era of the Internet, web3, will be defined by software that is not just architected, operated, moderated, and funded by users — but collectively owned by them, too.”
17. This is why you cannot trust the old institutions. #BeASovereignIndividual
“There is no difference between money and a rifle. Both are weapons of force, used for good or evil depending on the person wielding it, so if you are responsible for wielding one, entrusted to use it for the public good, you damn well better make sure everything you do is beyond reproach and avoid even the appearance of corruption, because there is no coming back once the public loses trust in you.
When the public loses trust, that leaves room for an insurgency to gain the moral high ground because the public now perceives you don’t value integrity as a leader and they are not playing on an equal playing field to those entrusted with their protection.
We are already seeing signs of this already.
People feel they are not playing on an equal playing field after all the market interventions by the government. From bailing out banks in 2008 while people lost homes and hedge funds bought them, to in 2020 bailing out companies who paid out billions for share buy backs in years prior.
People are rightfully saying this is not free market capitalism anymore, but a state run economy with billionaires protected by the US government from failure that doesn’t serve the best interests of their families anymore.
Without integrity there is no trust, and without trust there is no rightful leadership.
I’ve seen all this before overseas.”
18. There is so much here. A MUST read.
“Internet and software companies are far less risky than they used to be, even at the early stages: there hasn’t been a venture vintage since 2002 with negative median returns. Big tech is now huge tech. Risk-averse people and money have flooded in. When people have something to lose, they protect their downside — think of wealth managers, encouraging a “safe” mix of stocks and bonds. The tech industry has too much to lose.
Indexing may be the correct default for public investors, but can be dangerous when replicated in other domains. The public markets show us the second-order effects of indexing, so we can learn how it affects the private markets, startups, and culture.”
19. “At the time 1047 Games was founded, about five years ago, free to play (F2P) PC games were a niche genre. While games like World of Tanks and Warframe were seeing success, and of course many mobile games relying on in-app purchases, Fortnite had yet to show the industry that F2P could be so ludicrously profitable.
“Five years ago it was very hit-driven: You spend years developing a product, put all this money into hyping the launch and then hope it’s a success,” Proulx explained. “Our process was, there’s no way we can take that risk — if we spent our entire budget and got it wrong, we’re out of business. So we thought, let’s do a soft launch, put it out there and see what happens, learn, listen, look at the data. Why would I spend money marketing a product that I have no idea about whether it will be a success? If we wanted to spend money, and we didn’t have a lot, I’d rather spend it on a product that has great metrics and KPIs.”
20. Impressive.
“In the last three years alone, Insight has raised more than $15 billion in new capital, ranking it second on The Information’s recent list of the fastest-growing private investment firms. It’s now raising its 12th and largest fund, which is expected to close at nearly $16 billion, according to a person with direct knowledge of the matter.
Backed by this bounty, the firm some employees call the “sleeping giant” of venture capital is taking more aggressive leaps into new sectors, such as fintech and cryptocurrency, taking cues from two of the most active deal makers, Andreessen Horowitz and Tiger Global Management.
In the past, Insight had the reputation of being “more like the PE guys who wanted to buy up underpriced assets and whip them into shape,” said James Cham, a partner at venture fund Bloomberg Beta. “The strategy now is ‘oh, actually we can invest for minority ownership and we can be quite aggressive about it.’”
“That aggressiveness has been impressive,” Cham added.
So far this year, Insight has participated in more than 150 VC investments, double last year’s total. In the second quarter, it was the third most-active U.S. VC investor in older, more mature businesses — behind only Tiger and Andreessen Horowitz, according to financial data firm PitchBook.”
21. “If you were overly focused on track records the past 10 years you would’ve missed numerous promising emerging managers and an entirely new generation of solo capitalists. Put differently, I wouldn’t want to be backward-looking in a forward-looking asset class.
Track records are about assessing process, decision quality, business quality, repeatability, etc. For VCs, both new and emerging, it is important to communicate that to your LPs. In Gil Dibner’s words, “provide evidence of something systematic.”
