Posts from March 2009

This is an infomercial for our portfolio company Disqus. And I am proud to say that because Disqus is hands down the best comment system on the web and its getting better every day.

Disqus has some great new features and they've rolled them out first on Mashable, a leading tech blog that now uses the Disqus comment system. The new features include:

1) tweetbacks – when the post is discussed on Twitter, those tweets will be brought back to the comment thread
2) diggbacks – when the post is discussed on Digg, those comments will be brought back to the comment thread

When combined with Disqus' existing support of FriendFeed comments, this provides the triple play of social media. The blogger gets to see all of the discussion in one place and so does the reader. This is a big deal to me and I bet to many other bloggers.

3) Retweet the comment. There is now a checkbox in the disqus comment field to retweet the comment you are leaving. This may be an even bigger deal because so many amazing comments are stuck behind the comment link. Now you, the commenter, can tell the world about your amazing comment and get the traffic to it you deserve.

Disqus partnered with a company called UberVU to deliver these features. Disqus posted about this news and so did Mashable. You can see the new features in action on that Mashable post. I hope they will be available here on this blog shortly.

Alex and Dan have posts up this morning bemoaning the state of technology journalism. I've got a suggestion for the bloggers who increasingly dominate the tech journalism sector – talk to the sources before you post. There are certainly some who do that. Kara Swisher is a great example of a blogger who comes out of the traditional world and in my experience she calls around to get the story straight before she posts. I wish more bloggers would do that.

Here's an example. Last week I gave a talk to a group of execs in the TV business and posted the slides from the talk on this blog and at slideshare.

A few days later, I saw the news that I was touting twitter's new search results page.

Here's what happened. Harrison Hoffman, a cnet blogger, took the time to look through the deck and looked carefully at slide 22 and wrote a blog post about it.


What Harrison did not know, because he didn't take the time to call me, is that I was not in fact showing off Twitter's new search results page. I was showing off the ability to follow the discussion of a TV show in real time via Twitter. I left a comment on Harrison's blog post and thought that was the end of it.

The fact is that roughly 1% of all Twitter users have the integrated search feature turned on right now for testing purposes. Twitter is playing around with look and feel and scaling and will roll out integrated search when it is ready for the entire user base. I happen to be in that 1% and I just did the search and took the screenshot without thinking about it.

But it gets even more nutty. Today I saw a story on louisgray.com that assumes the title of slide 22 "Where We Are Going" implies that the search results page I showed was about where Twitter is going. And then it goes on to evaluate the business model implications of the page I showed. Well the post is pretty interesting, but it's based on a false assumption. The "We" in "Where We Are Going" means TV users and the TV business, not Twitter.

I don't mean to make a big deal about this, because it is not a big deal. But a phone call (or even an email) from these bloggers would have clarified why I was showing that slide and what it means, for the TV business and for Twitter. I think there were at least a half dozen blog posts about that slide and I got no phone calls and no emails at all. That's a sign that it is "shoot first, aim later" in the tech blogs and that's not good.

Speaking of where the TV business is going, check out Paul Graham's blog post on the TV business. I particularly like this part:

I tried to make that point in my slide presentation to the TV execs as well. It's high time that the TV business embraced Internet delivery of TV shows and all that offers; mobile, social, global, playful, intelligent, and open. It's going to happen. It's just a matter of time and who is left standing when it does.

We spent some time last month talking to Jeff Lawson and his company Twilio, which provides a drop dead simple (five api calls) cloud platform for building voice apps on the web. Jeff ultimately went in a different direction from our firm and closed a round with Founders Fund and Mitch Kapor which was announced yesterday.

We really like what Twilio is up to and introduced Jeff to a bunch of companies who might find Twilio useful, including Tumblr, which built its 'call in audio' feature in no time using Twilio.

So I think Twilio is on to something quite interesting and I congratulate Jeff and his team on building a really useful and simple voice platform and I applaud Mitch and Founders Fund for backing this idea.

But I just saw proof that this is going to be a great investment. Yesterday, I noted Warren Buffett's words of wisdom on this blog:

I always wade into the comments on every blog post I read. In the comments to Techcrunch's post on the Twilio investment, I read the following:

Related articles by Zemanta

• Twilio Raises Venture Funding, Looks to Expand Cloud-Based Phone Services (xconomy.com)
• Twilio Closes Funding Round, Lands Major Customers For Its Telephony API (techcrunch.com)

I took some time on Sunday afternoon to read Warren Buffett's annual letter. I don't make it an annual practice to read the Berkshire Hathaway letter as many do (nor have I ever been to the shareholder's meeting which Buffett calls "Woodstock for Capitalists"). But given that 2008 was a year unlike any that I have ever witnessed, it seemed like the thing to do on a cold and snowy afternoon.

Buffett and his partner Charlie Munger are the most successful stock market investors of the 20th century and they have consistently outperformed the public markets as shown by this table of annualized returns that I put together with data from the first page of Berkshire's annual report (I love that Buffett starts with the numbers):

 

It is very interesting to me that the past five decades have seen the S&P significantly outperform the long term average for equities of around 7% per annum. Even with the miserable performance of the public markets this decade, we'd have to be flat for another decade at least for the markets to average 7% per annum from 1965 on.

But Buffett and Munger's performance is something else entirely. While it is correlated to the market for sure, it has been so consistently superior for so long that it is clear that they are doing something right (and better).

So with that in mind, here's my take aways from reading Warren's letter.

1) The economy – It's really bad. Warren says the "freefall in business activity" is "accelerating at a pace that I have never witnessed before."

2) TARP and related efforts to stablize the financial system – The Fed "stepped in to avoid a financial chain reaction of unpredictable magnitude. In my opinion, the Fed was right to do so." But it will "bring on unwelcome aftereffects." One likely consequence is "an onslaught of inflation." And "major industries have become dependent on Federal assistance, and they will be followed by cities and states bearing mind-boggling requests. Weaning these entities from the public teat will be a political challenge. They won't leave willingly." That last line is classic and true and Obama's greatest challenge.

3) Berkshire's two most important businesses are insurance and utilities, sectors that "produce earnings that are not correlated to those of the general economy."

4) Buffet and Munger are value investors and contrarians. Warren says "When investing, pessimism is your friend, euphoria the enemy" and "Whether we're talking about socks or stocks, I like buying quality merchandise when it is marked down" and "Beware the investment activity that produces applause; the great moves are usually greeted by yawns." Words to live by.

5) Housing – Berkshire has exposure to the mortgage and housing market by virtue of its ownership of Clayton Homes, the largest company in the prefab home market. Buffett says "Enjoyment and utility should be the primary motives for [home] purchase, not profit or refi possibilities. And the home purchased ought to fit the income of the purchaser." And "an honest to God down payment of at least 10% [I think 20%] and monthly payments that can be comfortably handled by the borrowers income. That income should be carefully verified."

6) History as a predictor of the future – "If merely looking up past financial data would tell you what the future holds, the Forbes 400 would consist of librarians."

7) Quants – "Beware of geeks bearing formulas."

8) Lean and mean organizations – "BHAC: Who, you may wonder, runs this operation? While I help set policy, all the heavy lifting is done by Ajit and his crew. Sure they were already generating $24 billion of float along with hundreds of millions of operating profit annually. But how busy can that keep a 31-person group? Charlie and I decided it was high time for them to start doing a full day's work." Wow. I'm stunned. And now I have something other than Craigslist to use as an example of a lean and mean profit generating machine.

9) Bubbles and Panics – "The investment world has gone from underpricing risk to overpricing it." And "When the financial history of this decade is written, it will surely speak of the Internet bubble of the late 1990s and the housing bubble of the early 2000s. But the US Treasury bond bubble of late 2008 may be regarded as almost as extraordinary."

10) Derivatives – "Derivatives are dangerous" and "When Berkshire purchashed General Re in 1998, we knew we could not get our minds around the book of 23,218 derivative contracts, made with 884 counterparties. So we decided to close up shop. Though we were under no pressure and we operating in benign markets as we exited, it took us five years and more than $400 million in losses to largely complete the task. Upon leaving, our feelings about the business mirrored a line in a country song: "I liked you better before I got to know you so well."

11) Risk and Responsibility – "It is my belief that the CEO of any large financial organization must be the Chief Risk Officer as well. If we lose money on our derivatives, it will be my fault."

I'll stop there because I really like lists with eleven entries. It's a quirk of my personality. All you have to do is read Warren's letter (or even my cliff notes version) to understand why he's the best investor of the past century. Common sense married with a native understanding of markets and value is what produces the returns at the top of this post. Everyone who invests and manages money for a living can take a lot away from Berkshire Hathaway and Warren and his partner Charlie.