The Five Best Things: Sept 26, 2020
The best things in life are free, aka the "Why I love twitter" edition
Hi everyone - a bit astounded at the reaction to the semiconductor post last week! I am grateful for the feedback and inputs I received, and am working on follow up posts about how we got into this situation, and what I think we can do as an industry going forward.
The best things I experienced on the Internet this week -
From Wikipedia: A 2018 American film written and directed by Boots Riley. The film follows a young black telemarketer who adopts a white accent to succeed at his job.
I truly think this movie is the Office Space for our generation. Hard to believe it was written in 2012 and came out in 2018, because it presages so many things about our current moment. Armie Hammer as a Jeff Bezos-Adam Neumann-like figure is just brilliant. The soundtrack has turned me into a fan of The Coup.
Patrick O’Shaughnessy: Hard to copy business featuresCollecting “hard to copy” business features. What business has an element that would be extremely hard to copy, even with lots of money and effort? Bonus points if the answer isn’t the company’s “brand”
Patrick O’Shaughnessy put out a tweet today asking his followers about businesses moats. The 300+ responses so far include - patents, network effects (linkedin, facebook), the Marvel Cinematic Universe, regulatory capture (Altria), hardware/software integration (Apple, Tesla), huge amounts of proprietary data (Blue River, Stitch Fix).
This is a treasure-load of free MBA strategy cases! My contribution to this list is the Indian Railways, the 160-year old network which connects every corner of India. IMO, it’s impossible to replicate any of their land ownership, existing routes, the centuries of investment in civil engineering, and yes, their brand :p !
Portfolio charts: Put your portfolio on autopilot and enjoy the ride
Arriving during a volatile week in the stock markets, this post by Tyler at Portfolio Charts argues in favor of sticking to the boring stuff when it comes to personal investing - well-researched and proven asset allocation strategies (many of which he covers in his regular blog posts). He suggests that passive investing gets a bad rap for being boring, and advocates for it to be renamed “autopilot” investing. Who wouldn’t want an autopilot car v/s a manual?
Tyler’s website is an excellent compendium of various tried-and-true investing portfolios. Plus, the data viz is just phenomenal. I was fortunate to receive a tutorial on index investing in my first week on my first job. If you do have an itch for active investing, I’d suggest what Chamath’s tweetstorm advocates - X% of portfolio in speculative bets that need close monitoring, Y% for follow-ons in the ones that survive, and Z% on set-and-forget low cost index tracker funds.
Vieje P: Taxes on startup stock options
The thread explains the tax implications of exercising startup incentive stock options (ISOs), using Snowflake’s IPO as an example.So back to the case study. Assuming it's mid-2020 and the 409A is $30. Employee A would need to pay $25k to Snowflake for strike price and ~$28k in taxes for total of $53k. 😬 (Assumptions: CA resident, married filing jointly, $200k base income) /5If Employee A waited to exercise until the first IPO pricing of $80 a couple weeks ago. Then the tax bill jumps up to ~$119k. 🤒/6
IMO, one of the signs of a good startup is complete transparency about stock options. My advice to friends who ask is - if they continue to have faith in a good outcome for the company and have cash handy, to exercise and hold long term (2+ years) whenever their stocks vest, and to invest as much as they are willing to stomach going to zero. Here’s a spreadsheet posted by the folks at S3 ventures in Austin that might be helpful in figuring this out.
The article talks about the efforts of a non-profit called CHETNA (Childhood Enhancement through Training and Action) in New Delhi, India in helping street and slum kids continue their schooling in the midst of the pandemic. CHETNA foots the bill for their internet connection, recharging their phones so they stay connected, tutors them via Zoom, sends homework via WhatsApp and provides coaching via phone calls.
A reminder of the power of the Internet in helping some of the poorest kids in the world continue to unlock their potential via education.You can donate to CHETNA here.
Honorable Mentions -
Houston Chronicle Opinion: I’m a Christian, veteran, Texas Republican and I support Joe Biden. I applaud my friend and B-school classmate, JLP for writing this post in the Houston Chronicle. Think about how brave it is for him to take a position like this, in each of his communities - Texan, Republican, Veteran, Christian, White. Take a look at the comments on the article if you need convincing.
If the rest of the cloud providers were valued according to Snowflake’s revenue run-rate, v.s. their parent companies.
Feminism India: Justice Leila Seth Tribute. Leila Seth was the first woman to be Chief Justice of a State High Court in India. She was a remarkable lady and her life has uncanny parallels to RBG’s. In her TED Talk she talks about how difficult it still is for women in India to assert their property rights. The article doesn’t cover the fact that the best fiction novel about post-partition India was inspired by her youth!
Serena Williams’ take on the recent relaxation of rules around who gets to be called an accredited investor. She is going to be a fantastic VC!