Patrick O'Shaughnessy's Blog, page 16
December 26, 2017
The Future of Tech, with Chris Dixon – [Invest Like the Best, EP.69]
My guest this week is Chris Dixon, who has written some of my favorite essays on technology and venture investing. Chris is a prolific investor and thinker, having been an entrepreneur, angel investor, and now partner at the well known venture capital firm Andreessen Horowitz.
Our conversation focuses on major trends in technology, including cryptocurrencies and the future of autonomous vehicles and drones.
Chris has a rule of thumb for technology trends: find out what smart people are working on during the weekend, and you’ll know what other will be doing years in the future. After surveying his old essays, it’s clear you use Chris’s writings as a similar litmus test.
Please enjoy this great conversation with Chris Dixon on the future of tech.
Books Referenced
Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages
Who Controls the Internet?: Illusions of a Borderless World
Links Referenced
How Aristotle Created the Computer
New Yorker Cover on automation
Eleven Reasons To Be Excited About The Future of Technology
Show Notes
0:00 (First Question) – Why did Chris choose to study philosophy
:19 – Douglas Hofstadter
:20 – Daniel Dennett
1:16 – How Aristotle Created the Computer
1:31 – Where has his thinking and viewpoints changed the most having been in the real world
2:38 – What is the real driving force behind all of the technology that we are creating and will automation kill all of the jobs
4:12 – New Yorker Cover on automation
4:53 – The World of Numbers website
6:32 – A look at his history in networks and network design
8:59 – Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages
9:03 – Jerry Neumann podcast episode
10:28 – Who Controls the Internet?: Illusions of a Borderless World
11:02 – What are the market and technological forces that make it difficult to regulate software hardware companies
12:35 – The best features of proprietary centralized networks and open networks
14:36 – What things are better centralized vs decentralized
20:26 – David Tisch podcast
20:59 – When it comes to cryptocurrencies, what are the concerns that the protocols themselves hold value and could this lead to centralization of the system problems
22:00 – Block size debate (topic)
(minus 6 seconds)
24:42 – ERC-20 Token Standard
25:25 – Is the blockchain the answer to the stagnation of the big tech players
30:49 – Does Chris find investment in individual crypto tokens analogous to seed funding in companies
32:41 – How does Chris think about the dichotomy of investing in people vs technologies
33:01 – Eleven Reasons To Be Excited About The Future of Technology
35:47 – What organizational structures of companies are most compelling
39:52 – Any major trends in technology a cause for concern for Chris
40:36 – Any interesting trends by people looking to disrupt the centralization of internet power to a small few
42:11 – What major trends is Chris passionately pursuing
49:17 – If everyone agrees on a future trend of technology, can you still make money investing in them
51:22 – How do you encourage younger people to approach the world and a career differently in this ever-changing world
55:41 – Kindest thing anyone has done for Chris
December 19, 2017
December 12, 2017
World Without Mind, w/ Franklin Foer — [Invest Like the Best, Ep. 67]
My guest this week is Franklin Foer, the author the recently published book “World Without Mind.” The topic of our conversation is one that I’ve been thinking through often this past year: the impact that large technology companies have on our minds and behavior. This conversation is only indirectly related to markets, but given that the companies we discuss are now several of the largest by market cap in the global stock market, what happens to them likely impacts all of our portfolios whether we own them or not. Given that these companies compete for our attention and dollars, they also affect our businesses.
As an example, My friend Brent Beshore and his team at Adventures wrote a long and incredibly thoughtful piece on how they think about Amazon as a force in the market, and how they plan on navigating around such a fierce competitor.
Franklin’s book, especially the early history, is very thought-provoking, so it was no surprise that our conversation was too. Please enjoy our talk on the tech giants.
Links Referenced
Free PDF of The Whole Earth Catalog
Amazon Must Be Stopped (New Republic)
Books Referenced
World Without Mind: The Existential Threat of Big Tech
Show Notes
1:40 – (First Question) – As part of Jonathan’s new book, World Without Mind: The Existential Threat of Big Tech, exploring the idea of the whole earth catalog.
4:09 – The Whole Earth Catalog
4:36 – Free PDF of The Whole Earth Catalog
4:49 – What happened next for Brand and how he laid the early groundwork for today’s modern Silicon Valley
7:43 – Franklin’s personal journey into writing this book
10:00 – Amazon Must Be Stopped (New Republic)
11:48 – Thoughts on the advancement of technology in our world
15:52 – Filling the gap into Brand’s influence on Silicon Valley from the early 80’s to today
18:57 – How does the current state of the free internet without gatekeepers hold up for the next generation
20:53 – Is there a chance that technology’s unlimited mining of our attention is not the horrible thing we often make it out to be
24:47 – What are the ways we can have a free internet and other technologies, but not let them get perverted
28:09 – How will people respond to our tech monopolies
31:54 – The Lessons of History and the rise and fall of centrist powers
33:02 – A look at Franklin’s work and how its impacted by the reliant on a few large tech companies
35:28 – The dangers that tech giants like Facebook, Amazon, etc, have created for us
40:45 – Is there a technology, company, or trend that Franklin is really excited for
42:19 – Will there be movements that emphasis detachment from technology
44:05 – Why most innovations have happened to people thinking in a very separated or contemplative mode
45:58 – What’s the most exciting thing that Franklin is thinking about now
49:30 – What was the most memorable content in researching this book that Franklin would suggest other check out
49:59 – Hannah Arendt Philosophy
52:37 – Are there specific things that Franklin does to be more contemplative
53:26 – Time Well Spent
54:47 – Kindest thing anyone has done for Franklin
World Without Mind, w/ Franklin Foer –[Invest Like the Best, Ep. 67]
My guest this week is Franklin Foer, the author the recently published book “World Without Mind.” The topic of our conversation is one that I’ve been thinking through often this past year: the impact that large technology companies have on our minds and behavior. This conversation is only indirectly related to markets, but given that the companies we discuss are now several of the largest by market cap in the global stock market, what happens to them likely impacts all of our portfolios whether we own them or not. Given that these companies compete for our attention and dollars, they also affect our businesses.
As an example, My friend Brent Beshore and his team at Adventures wrote a long and incredibly thoughtful piece on how they think about Amazon as a force in the market, and how they plan on navigating around such a fierce competitor.
Franklin’s book, especially the early history, is very thought-provoking, so it was no surprise that our conversation was too. Please enjoy our talk on the tech giants.
Links Referenced
Free PDF of The Whole Earth Catalog
Amazon Must Be Stopped (New Republic)
Books Referenced
World Without Mind: The Existential Threat of Big Tech
Show Notes
1:40 – (First Question) – As part of Jonathan’s new book, World Without Mind: The Existential Threat of Big Tech, exploring the idea of the whole earth catalog.
4:09 – The Whole Earth Catalog
4:36 – Free PDF of The Whole Earth Catalog
4:49 – What happened next for Brand and how he laid the early groundwork for today’s modern Silicon Valley
7:43 – Franklin’s personal journey into writing this book
10:00 – Amazon Must Be Stopped (New Republic)
11:48 – Thoughts on the advancement of technology in our world
15:52 – Filling the gap into Brand’s influence on Silicon Valley from the early 80’s to today
18:57 – How does the current state of the free internet without gatekeepers hold up for the next generation
20:53 – Is there a chance that technology’s unlimited mining of our attention is not the horrible thing we often make it out to be
24:47 – What are the ways we can have a free internet and other technologies, but not let them get perverted
28:09 – How will people respond to our tech monopolies
31:54 – The Lessons of History and the rise and fall of centrist powers
33:02 – A look at Franklin’s work and how its impacted by the reliant on a few large tech companies
35:28 – The dangers that tech giants like Facebook, Amazon, etc, have created for us
40:45 – Is there a technology, company, or trend that Franklin is really excited for
42:19 – Will there be movements that emphasis detachment from technology
44:05 – Why most innovations have happened to people thinking in a very separated or contemplative mode
45:58 – What’s the most exciting thing that Franklin is thinking about now
49:30 – What was the most memorable content in researching this book that Franklin would suggest other check out
49:59 – Hannah Arendt Philosophy
52:37 – Are there specific things that Franklin does to be more contemplative
53:26 – Time Well Spent
54:47 – Kindest thing anyone has done for Franklin
December 5, 2017
A Sober View on Crypto, with Adam Ludwin – [Invest Like the Best, EP.66]
My guest this week is Adam Ludwin, the founder and CEO of Chain, a blockchain technology company targeted at large enterprises. Before shifting his career to focus solely on crypto, Adam was a venture capitalist focused on FinTech, which is how he came across the Bitcoin whitepaper earlier than most. I called this episode “a Sober View on Crypto” because Adam’s take is so balanced. He is certainly long crypto, both in his portfolio and career, but he is very skeptical of much of what is happening in the ecosystem today. For example, he offers the best reason I’ve heard for not launching an ICO or investing in them.
If you haven’t read Adam’s widely shared open letter to Jamie Dimon, it has become a must-read piece for crypto-enthusiasts. Read it as soon as you can.
I edited out an earlier chunk of our conversation as it was largely introductory. If you need a broader introduction to cryptocurrencies, I suggest starting with episode one of Hash Power and working your way forward. One key insight from Adam in our offline discussion what how cryptocurrencies function very much like equities or bonds. Just as equity financing enables the activity of joint stock corporations, cryptocurrencies enable activity in decentralized applications. We pick up our discussion with Adam discussing whether anyone really uses these decentralized apps today.
Hash Power is presented by Fidelity Investments
Show Notes
2:35 – (First Question) – Will anyone use cryptocurrency in the real world at a large scale
3:43 – The idea of censorship resistance
12:29 – Will society be accepting of this technology
14:39 – Why decentralized apps can’t be acquired
18:24 – The idea of exponential vs linear improvements on a trend and if there are limits to the growth of decentralized technologies
23:26 – The struggle with early adaption of blockchain
25:41 – Best application for bitcoin, storing value
29:52 – Adam’s introduction to cryptoassets and how his thinking has evolved in the space
36:44 – In this hyper frothy market, is there a situation that makes an ICO exciting to Adam
43:51 – Even though it appears to be easy money, Adam explains why you shouldn’t just create an ICO
50:59 – A look at what Chain is doing and what Adam is excited about
53:23 – How does what Adam is working on help to improve the ledger of his clients
1:02:00 – Why you can easily be an early investor in crypto currency
1:04:27 – Kindest thing anyone has done for Adam
November 28, 2017
Angel Investing and Trend Spotting, w/ Joanne Wilson – [Invest Like the Best, EP.65]
My guest today is Joanne Wilson, a New York City based angel investor, writer, podcaster, trend spotter, and self-described “woman around town.” Joanne has had a multifaceted and winding career, and began angel investing a decade ago when she put money into NYC-based media company Curbed media which we discuss in detail. Since then, she’s invested in more than 90 companies and been pitched by countless more. She is an instantly likeable person, you can literally tell in 10 seconds you are going to have a great conversation, so it’s no surprise that part of what makes her unique among angels is a very close relationship with many of the founders she backs.
We cover a lot of ground. We talk about the personality traits of entrepreneurs, Joanne’s evolving investment style, her focus on female founders, fashion, business models, restaurants and a lot more. Please enjoy my conversation with the Gotham Gal, Joanne Wilson.
Show Notes
2:12 – (First Question) – How does Joanne orient herself towards what’s new, in the context of food in New York city
4:10 – Can that mindset of forward thinking be cultivated
5:18 – Latest thing that got Joanne excited before everyone else
6:57 – Why the new frontier is going niche and local
10:23 – Joanne’s first investment
11:48 – Why do VC’s typically stay away from media
12:55 – How Joanne got into her first investment as a customer
14:11 – What is the skillset of making money that Joanne as
14:45 – Can you sense if a founder has that innate ability to just make money
17:04 – Are there common traits in founders
18:07 – Joanne’s progression into angel investing after her first investment
19:58 – Red flags when looking at investments
20:40 – Impression on growth without goals
23:30 – Trends among Joanne’s investments
25:56 – How much knowledge is transferrable between different industries that Joanne invests in
27:06 – The dichotomy and unique challenges between raising capital with female founders vs male founders
29:07 – How does Joanne balance her time and stay engaged with all of her investments
30:50 – Time when Joanne has helped a founder side step a pothole
31:35 – Most memorable first impression Joanne experienced
35:05 – How often does someone not have the right idea but is still worth investing in
37:19 – Why Joanne won’t start a fund
38:22 – Data on female founders returns and time
40:38 – Criteria for identifying emerging trends, especially in the more creative/artistic fields
43:29 – The changing costs of launching a brand, in the contest of fashion
47:11 – What has Joanne most excited right now
48:11 – Interesting facts about the fashion business
52:01 – Kindest thing anyone has done for Joanne
November 21, 2017
Capital Light Compounders & Reinvestment Moats, with Connor Leonard – [Invest Like the Best, EP.64]
This week’s conversation is an ode to old school, fundamental public market investing. My conversation is with IMC’s Connor Leonard, who spends most waking hours thinking and reading about markets. His mandate is to invest purely as if it was his own money, with no pressure to hug a benchmark, and no pressure to do much of anything other than earn strong long-term returns.
The portfolio that results from this approach is highly concentrated and unique. Connor’s strategy is to sort companies into four categories based on their type of sustainable competitive advantage. As you’ll hear, the vast majority fall into the first category, which means they don’t have such an advantage and therefore should be largely set aside.
We spend the majority of our conversation talking about the other three categories: 1) companies with a legacy moat, 2) companies with a re-investment moat, and 3) an interesting category Connor calls “capital light compounders,” which we explore in detail.
When you step back and think about public markets, you realize how amazing it is that we can, from afar, buy an interest in so many companies around the world. A select few go on to deliver outstanding returns. This conversation highlights how hard that can be, but also how fun and ultimately rewarding. Please enjoy my talk with Connor Leonard.
Books Referenced
Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor
The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success
Links Referenced
Will Thorndike Podcast episode
Show Notes
2:31 – (First Question) – Trends in value investing
2:52 – Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor
4:43 – A look at Connor’s backstory and the history of IMC, parent company of Golden Corral
8:01 – Why Connor loves the public markets so much
9:21 – The concept of intrinsic value when looking at companies
12:36 – How Connor categorizes MOATS
13:21 – Pat Dorsey Podcast Episode
14:27 – Legacy MOATS
16:11 – Reinvestment MOATS
17:58 – Capital light compounder MOAT
20:00 – Why classifieds are an interesting business model
25:12 – Looking at platform businesses
26:56 – Looking at companies in the 500 million to 5 billion range and what makes it so enticing
30:34 – What is the process that gets Connor to find investment opportunities
35:53 – David Tisch podcast
36:15 – How Connor looks at industry classifications
41:30 – Connor’s strategy for running his portfolio
46:36 – The circumstances in which Conno would buy a legacy MOAT company
46:49 – Will Thorndike Podcast episode
46:51 – The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success
49:21 – How do you pick managers that will beat the markets
52:21 – Second reason to buy a legacy MOAT
54:48 – Comparing the reinvestment MOAT and Capital A compounder in Connor’s portfolio
58:16 – Connor’s Mt Rushmore of Capital Allocators
1:00:03 – Impactful mentorships for Connor
1:01:52 – kindest thing anyone has done for Connor
103:04 – What in the discussion with founder of IMC got him the job
November 14, 2017
Adventures in Sports, Business, and Investing, w/ Dhani Jones – [Invest Like the Best, EP.63]
My guest this week is unique. As you will hear early and often, he is programmed to go his own way, to, as he says, go one way when everyone else is going another. His name is Dhani Jones, a name I knew as a Notre Dame football fan, because he won a championship with our arch-rivals, the University of Michigan, in the late 90’s. Dhani went on to a long and successful career in the NFL, but even more interesting has been his many pursuits in business and investing outside of football. Like my conversation with Tim Urban, I’ll remember this conversation as a reminder to use a first principles mindset. Dhani seems to have this fresh mindset baked into his character, and as you’ll hear this has led to many a great adventure. Please enjoy my conversation with althete, businessman, investor, philanthropist, movie buff, and bowtie wearer, Dhani Jones
Show Notes
1:30 – (First Question) – A introduction into Dhani Jones and everything he’s done
5:35 – How did Dhani change throughout his football career
9:55 – The power of your mind in every aspect of life
10:34 – Most memorable experience in the NFL
13:10 – Making the transition from the NFL to the business world
18:20 – Looking at Bowtie Cause
22:40 – The role of creative agencies in Dhani’s ventures and why story telling is so important for him
26:48 – Looking at some of the TV stuff that Dhani has done, particularly around travel
28:21 – Dhani’s favorite movie
30:35 – Back to the joy of travel and “Dhani Tackles the Globe.”
36:54 – How does Dhani think about risk
38:56 – Some of the other sports and activities Dhani did while filming his show
41:45 – The psychological benefit of travel in your personal and business life
44:41 – Looking into the business part of Dhani’s career
51:19 – How to expand diversity in the financial world
54:56 – Kindest thing anyone has done for Dhani
November 7, 2017
How to Value a Cryptoasset, a Hash Power Single, w/ Chris Burniske – [Invest Like the Best, EP.62]
Presented By
This episode is a continuation of the Hash Power series. It is the first of what we will call a Hash Power single—a series of conversations each with a single guest on a specific topic. In this case my guest is Chris Burniske, and the topic is cryptoasset valuation. This conversation is loaded with information, I think you are going to love it.
Chris recently released book called Cryptoassets, which is a must read for those interested in this field. Chris was at one point the only traditional buy side analyst covering bitcoin, and is now a partner at a new crypto firm called Placeholder. Chris has developed new frameworks for evaluating and valuing cryptocurrencies, marrying techniques and ways of thinking for several different asset classes to assess the newest asset class. Chris prefers the term cryptoassets because as you’ll hear, several of these tokens aren’t really currencies at all. We discuss the differences between cryptocurrencies, cryptocommodities, and cryptotokens. We begin our conversation with a deep dive into the equation of exchange, which Chris has been using as a starting point for understanding utility value.
You can see all crypto related conversations at investorfieldguide.com/Hashpower. Please enjoy this conversation with Chris Burniske.
Hash Power is presented by Fidelity Investments
Books Referenced
Cryptoassets: The Innovative Investor’s Guide to Bitcoin and Beyond
Links Referenced
Hash Power Podcast Documentary
Cryptoasset Valuations (Medium)
Show Notes
4:58 – (First Question) – Chris’s overall method for evaluating cryptocurrencies
5:14– Cryptoassets: The Innovative Investor’s Guide to Bitcoin and Beyond
6:47 – The equation exchange
11:19 – Bonding
12:35 – How bonding may represent a more efficient way of representing consensus over proof of work
14:29 – Why the amount being bonded and held should be taken out of the float
16:58 – Using bitcoin as an example to figure out remittances in the PQ side
18:31 – Looking at the velocity of various crypto-assets
21:04 – Chris’s impression of the different way of categorizing various crypto assets
24:37 – Explaining Auger as an example of a cryptotoken
25:38 – How could these networks be impacted by not having any censorship
27:57 – Exploring the gap between expectation vs reality in the value of crypto currency
30:43 – Other ways of valuing these crypto assets
30:50 – Hash Power Podcast Documentary
33:32 – Explaining the idea of billion dollar a day onchain transactions
36:05 – How to measure the value of the underlying network
36:37 – Nic Carter (twitter)
37:13 – What are the variables that matter when investing in cryptocurrency on a long-term horizon
39:24 – Determining when it’s better for a network to be centralized vs decentralized
42:03 – Networks that Chris is most excited about
44:06 – Understanding the consumption side of the steam marketplace
46:01 – Deep dive into the Aragon network
47:27 – How does Chris evaluate existential risk of networks
51:09 – Could these assets really ever go to zero?
54:07 – Is there a scenario in which velocity gets so high that it negatively effects the price
56:10 – What are the unknowns of cryptocurrency that Chris is most interested in
56:24 – Cryptoasset Valuations (Medium)
October 31, 2017
What Happens When You Hit Buy, with Brad Katsuyama [Invest Like the Best Ep.61]
My guest this week is Brad Katsuyama, the founder of the IEX exchange and protagonist of Michael Lewis’s famous book Flash Boys, which chronicled the role of high frequency trading in markets.
This conversation was yet another reminder of how complicated markets can be, and that very few participants know all aspects of the process well. Brad and I get deep into the history behind his company, and the ways in which markets and exchanges have evolved, better or worse. We discuss latency arbitrage, why exchanges make less money on actual trading activity than you might guess, and the two most impactful meetings Brad took while setting up IEX.
One of my favorite parts of this conversation was our exploration of entrepreneurship. Brad’s whole story is one that entrepreneurs will appreciate, and is full of lessons for those aspiring to start their own business.
Books Referenced
Flash Boys: A Wall Street Revolt
Show Notes
1:50 – (First Question) Brad’s original discovery of a latency problem in trading stocks
10:41 – how the business model of the NASDAQ and exchanges and how it may surprise people
12:06 – The edge that exchanges are now monetizing
14:36 – How Brad went from finding a solution to his current firm
18:08 – Types of high frequency traders that there are
22:23 – The formation of IEX
25:36 – Funding IEX
28:38 – What happens to the initial funding
30:20 – Describe what IEX is as it was sold to early buy side investors
32:21 – Explaining the concept of a speedbump
36:08 – Pitching companies so they will be listed on their index
38:27 – Explains maker-taker fees
42:37 – The sources of revenue for IEX vs traditional exchanges
44:43 – Most memorable meeting Brad has had in establishing IEX
47:29 – How did he do this with young kids?
50:28 – Has the pool of potential profits that high-frequency trading firms can earn gone down
51:43 – What has Brad most excited about the future in terms of helping the buyside
53:07 – What was it like to see Brad’s venture get turned into a best-selling book. (Flash Boys: A Wall Street Revolt)
56:50 – Biggest thing that Brad has learned
58:46 – What would Brad do if he couldn’t work in the investing world.
1:00:15 – Kindest thing anyone has done for Brad
