Surf Report: Ambition is a vector and why that matters.
Issue 13: 12.27.2020 (Free Version)
INTRODUCTION
December 27, 2020
Hey everyone—I hope you all had a great, relaxing holiday. This year may have made it tough to spend it with friends and family, but if you managed to find a way to celebrate and smile anyway then chalk it up as a win.
Also: I’m so glad to have you here. What a week.
This time of year is a bit slow in the worlds of markets and marketing, but it’s also a time when people and organizations start laying the course for the year ahead. That said, one of my core principles to life and investing is that I'm not in the prediction business—the world is far too unknowable and surprising for me to play that game. By avoiding predictions I avoid expectations (hard and fast things) but replace them with likelihoods (ranges with room for variance). While I'm not certain in either case, the latter leaves more room for surprises and reduces disappointment. Things become a matter of bets, not plans.
I also like to assess companies, people, and initiatives as vectors, not points. In other words: arrows with direction and magnitude, not static dots.
Vectors are somewhat related to slopes, i.e. rates. “Rise over run” as your high school math teacher might have defined them. (Calculus teachers call them derivatives) Slopes are a visual description of how quickly something is changing, and vectors are a visual description of where something is pointed and how strongly.
Ambition is a vector.
When judging the prospects of a person or company I’ve found that the overarching ambition—mission, purpose, goal—reveals where that person or company is oriented and how forcefully. Orientation matters a great deal. It’s the difference between Amazon wanting to be the best bookstore in the world versus Amazon wanting to be the best everything store in the world. Depending on the ambition, achievements can be seen as either destinations or milestones. Too often, Wall Street analysts fail to value companies accurately precisely because they mistake one for the other.
Peloton recently acquired fitness equipment manufacturer Precor for $420M , (their largest acquisition ever ), revealing ambitions beyond the stay-at-home workout market.
Draftkings CEO Jason Robins just stated specifically that he has Amazon aspirations.
The CEO of freshly minted public company Upstart said that he sees plenty of road ahead and that this year’s IPO was merely a milestone.
Replacing dots with arrows forces you to quantify things like talent, grit, and aspirations when determining the force that certain firms (or people) exert in a competitive landscape. Do they show disappointment at results when others are seeing a win? Are they attracting top talent for unclear reasons? Do they talk about adjacent or completely unrelated industries when describing future plans? All reasons to think twice and consider betting on, or at least having some exposure to, their long-term success.
Not all dots are created equal. Some are large vectors in disguise.
Until next time,
—Mark
“Except our own thoughts, there is nothing absolutely in our power.” —René Descartes
Breaking 🌊
Peloton announced that it intends to acquire Precor, one of the world’s largest suppliers of commercial fitness equipment, for a deal valued at $420 million. This gets Peloton all of Precor’s R&D and adds 625,000 square feet of manufacturing facility in the U.S., which in the near term is expected to help speed up orders. So What?: Peloton saw explosive growth this year as a result of stay-at-home orders due to the pandemic, but this acquisition could allow its users to eventually carry their online workout profiles to commercial and hotel gym equipment as well. This would likely grow its user base further and incentivize more facilities to purchase Peloton equipment.
Apple is planning to manufacture a self-driving electric car in 2024 with ‘next level’ battery technology. So What?: Apple certainly has the cash reserves and facilities needed to pull off such a launch, but CEO Tim Cook has been the target of criticism regarding the vision necessary to actually achieve it. Cook refused to even take a meeting with Tesla CEO Elon Musk about having Apple acquire the company back when it was 1/10th of its current value. (Rare earth metal mining companies, which provide key materials for battery technology, will benefit regardless)
Zoom may launch an email service and calendar app to compete with Google and Microsoft. So What?: Zoom’s stock rose over 500% this year, and this move suggests it’s attempting to capitalize on its newly-familiar user base to become the best “home office” remote software solution overall. It’s certainly possible, as Zoom’s video conferencing software beat all other established competitors at their own game (Skype probably had the biggest head start of all, but Cisco’s Webex is the one that really fumbled the ball.)
U.S. Justice Department sued Walmart, alleging role in fueling the opioid crisis by inadequately screening for questionable prescriptions despite repeated warnings from its own pharmacists. Walmart denies any wrongdoing. So What?: Charges like these force investors to consider how much legitimacy there is and the potential extent of the fallout. The DOJ is suggesting Walmart governance should have been forcing pharmacists to come between patients and their doctors, but it also comes after countless civil suits against the company claiming negligence around opioid distribution. During one six-year period from 2006 through 2012, Walmart's warehouse and distribution network delivered more than 52 billion opioid pills to pharmacies.
Chinese regulators are cracking down on Alibaba and Ant, the two “crown jewels” of billionaire Jack Ma’s business empire, claiming antitrust allegations. Details are still fuzzy but the announcement alone caused Alibaba stock, which trades in the U.S., to tumble 7%. So What?: It’s a reminder that while Alibaba trades in the U.S., it still has to play by China’s rules. This type of thing leads many investors to avoid Chinese stocks altogether since getting trustworthy and accurate information for security analysis can be challenging, if not impossible.
The value of Bitcoin continued to soar to new all-time highs this past week, passing $28k at one point and causing CNN to lose their mind at this historic bull run. It passed $20k for the first time only a couple weeks ago, and its market cap of $500 billion makes it worth more than Visa, Mastercard. So What?: Bitcoin is currently transitioning from speculative to sensible asset, as the Federal Reserve has sent interest rates near zero for the foreseeable future and continues to print money, weakening the U.S. dollar and reducing the purchasing power of cash reserves. Unlike fiat, there will only ever be a finite amount of Bitcoin ever created making it the first effective example of digital scarcity.
From The Tweetbox 🐦
🔗 “How do you pivot, evolve, and grow your brand? Figure out what is irreplaceable.” Great insights from COO and president of North America for Focus Brands, Kat Cole.
🔗 Fundamentals of Poker should be a required class at every business school.
🔗 Top 5 Bitcoin podcast episodes of 2020
For The Pros 😎
Why now is the time to build a LinkedIn audience + the playbook explaining how to acquire customers through LinkedIn. 🔗 (Link available to Pro subscribers)
The inside story of how freshly-minted public company Upstart got built, and what others can learn from its early days. 🔗 (Link available to Pro subscribers)
A list of 60 technologies, tools, APIs, libraries, and apps used to develop, run and maintain a solopreneur’s software product. 🔗 (Link available to Pro subscribers)
Worthwhile Reads ☕️
How the pandemic inspired creative uses of technology in 2020.
Paul McCartney as management study.
“If you are looking to study careers, Paul McCartney’s career is one of the very best and most instructive.”
Check This Out 👀
Startpage is a search engine that uses Google’s results but doesn’t track, share, or sell your data.
Here’s An Idea 💡
GEO (GIF Engine Optimization). Optimize for keywords on Giphy by creating branded GIFs.
PNG 🖼
We have reached e-commerce sales levels that were not expected for another 2 years. Expect this to continue now that reluctant consumers have now grown comfortable with buying online and realized the convenience. (h/t to Andy Gee for surfacing this one)
“The beginnings of all things are small.” —Cicero
Groms 🐣
45 enterprise startups that will soar in 2021, according to venture capitalists.
“Some of these startups are experiencing rapid growth because of the pandemic, others in spite of it.”
“Don’t tell me what you think, tell me what you have in your portfolio.” —Nassim Nicholas Taleb
Drop Ins 🏄
My latest investments & trades
Buy & Hold Investments (I will hold these forever)
This section is only available for contributing subscribers. If you’d like to trade and invest along with me, consider one of the paid tiers!
Swing Trades (1-3 month time horizon)
This section is only available for contributing subscribers. If you’d like to trade and invest along with me, consider one of the paid tiers!
Barrels 🎯
Portfolio Highlights
Winning Trade of the Week: $QS, carved out some more profits this week for an 800% return.
Pods & Schools 🐬🐠
(I clip all my favorite podcasts excerpts on the Bitcast.fm app. Give it a try! You can follow me @markmulvey)
🔊 Cornerstone Investing Insights with Mario Cibelli, on the Invest Like the Best podcast with Patrick O’Shaughnessy. Mario is a killer research analyst, and this convo covers a lot of ground including the value of visiting distribution centers, tequila, Stitch Fix, and WWE.
“[on visiting StitchFix distribution center:] This is not an ecommerce business we just saw, this is a whole different kind of business. And I don’t think anyone—anyone, in the world potentially—is trying to do what they do at scale.”
🔊 Bitcoin & Michael Saylor – A Masterclass in Economic Calculation, an episode from the We Study Billionaires podcast with Preston Pysh.
This is it folks, this is the one must-listen podcast of the year.
It could potentially give you a leg up on some of the most powerful companies and institutional investors on the planet, who can’t make major investment decisions right now and need to wait until January board meetings for discussion, consensus, and approval. It will definitely give you a foundational understanding of inflation, risk premiums, investing principles, monetary policy, and other financial concepts that led billionaire CEO of MicroStrategy, Michael Saylor, to put 70,470 BTC (currently worth over $1.5 billion) onto his company’s balance sheet instead of cash. He reasons up from first principles and delivers a lesson that would otherwise might have been only accessible in advanced graduate programs. It’s 2 hours long but I listened to it twice. Take notes!
“In order to make rational investment decisions you have to first go to first principles, and what I find is 95% of macroeconomists and analysts and the traditional investment community, they rely upon metaphysical abstractions that they learned early in their career, or that are repeated to them over and over again by mainstream media, and because they just repeat these metaphysical abstractions long enough they kinda convince themselves that there’s some veracity to them.”
Tools of the Trade ⚒
Products I use to make money
Wealthfront. ~25% of my portfolio is in Wealthfront, which since 2016 has netted me a time-weighted return of ~53% (~50% money-weighted) at the time of this writing, all while harvesting tax losses like the pros do.
Use this special link to get your first $5,000 managed for free: https://wlth.fr/2ephpyb
Sign up for the first Bitcoin rewards card and get 20,000 sats for using my referral link to sign up for Fold!https://use.foldapp.com/r/N99U7HL3
StockCharts. I easily make back the small monthly subscription fee with the superpowers it gives me.
Carrd. Use this link or referral code 892PYX69 to start your own web empire.
Hypefury. Easily the best tool out their for growing a quality Twitter following.
Disclaimer
Nothing in this email is intended to serve as financial advice. Do your own research.