On The Beach
The Gotham Gal and I have spent the winter in LA and are heading back east at the end of this coming week.
This morning I took a walk on the beach and thought about the past three months and how it has impacted the way I’m thinking about life and work. It’s hard to do anything other than grind on what’s in front of you when you are in it. And I’m always “in it” when I’m in NYC and spending the week in the office with back to back to back to back meetings every day. It’s even worse when I fly to the Bay Area for a few days of non-stop meetings.
So getting on the beach this winter has allowed me to clear my head and think a bit about where the VC and mobile/internet business is heading and where and how I want to engage with it.
It’s not like we took the winter off. I was in the bay area every week for at least a day and sometimes two days. But the ability to go in and out quickly provided some context for me that was helpful.
And I worked every day, often starting at 6am or 7am because the west coast starts the day later than Europe and the east coast. I was often done by 4pm and took the opportunity to do a ton of late afternoon yoga, which I highly recommend and will try to continue when I get back east.
But the thing that shifted for me as a result of being out of the office was I read and wrote and thought more (I’ve written more private google docs and google sheets this winter than the entire past year).
I’ve also focused more energy on our existing portfolio companies and less energy on making investments. That has been a thing for me for a while now (I’ve gone from four new deals a year to one or two a year and feeling much better as a result).
I can’t say that I’ve had any big “aha moments” but I do have even more conviction than ever that I want to be investing in what may happen in five to ten years and not commit a lot more time, energy, and money to what is happening now.
I believe the VC business has gotten hyper efficient at spotting what is happening now and it’s really hard to get outsized returns doing that. Plus there is a lot of headfake risk in doing that and when the antes are so big, headfakes cost you dearly.
I’d rather spend the next few years at the bleeding edge and see if we can get a few things right. I think that will cost us less when we are wrong and reward us more when we are right.
The great thing about early stage technology investing and beaches is that there’s always another wave coming and when you catch one right, it’s a thing of beauty.
PS – I wrote this post on my phone sitting on the beach. It’s a great place to write.
I hope you agree with me now. west coast is the best coast
We have beaches in Chicago. But, I will grant you that they are hard to hang out on from November to May : )
Nah. There is no best. It’s all good
My mind is racing wondering what’s in those gDocs. Are you sure they’re private by default? Our gDocs are all viewable by the whole company by default.Betting there’s fodder for many a blog post in those docs.
Sometmes backing up a bit gives you a better view. You were so focused both long and short term when speaking with Jason. Annual trip
You remind me that it’s not only time, but place, that helps us take a different and purposeful perspective on things.
I’d rather spend the next few years at the bleeding edge and see if we can get a few things right. I think that will cost us less when we are wrong and reward us more when we are right. So by “I’d” and “we” do you mean only you or pretty much all of USV?
I can’t speak for them but we are talking about this internally in real time
David Hornik runs The Lobby conference, as you know, based on the premise that the best parts of conferences always happen in the lobby. I think you should start a conference called The Beach…because of what you outline in this post.No shoes allowed.
That would be an awesome conference
Like an Unconference. Call it a beach party, why not.
Not a party, but more like a pop-up think tank, an off-the-grid series of conversions.
In an earlier life I identified something that I called “trade show familiarity”. That’s where if you went to a certain trade show enough times, you eventually felt like you were friends with someone just because you saw them repeatedly and only said hi or smiled. As a result by the “nth” time (let’s call it 4 times) you were entirely comfortable approaching them and actually having a conversation.
Admit it: booth babes… and you spoke to them at the first show.
You know honestly I don’t waste my time with shit like that actually. I’m not going to say I don’t look at “babes” but I don’t pursue something if there is no end goal that I am seeking. What’s the point?Of course keep in mind that I’m not as good looking as you are. If I was perhaps there would be some kind of positive outcome.
Hahaha, flattery will get you…
May be – a stroll on the beach. I think this captures the essence
On the phone? Damn you are a better mobile thinker than I!Since we are sharing epiphanies or the fact that the greatest ones are matters of degree not chasm jumps at points in our career–mine happened last week as I was standing on a peak above copper bowl in the spring sun at 10,000 feet or so, just feeling good and ready to plunge downhill.Been raising a fair bit of mid sized seed for clients and now one for a personal project. I really don’t like doing it but I’ve done it forever.My aha was that if you really have your shit together, this is a gift, an opportunity to your investors and you should approach it as such. No means, not right for me now.And with this approach, with less need as the lead and a true understanding of what you are dreaming for the future, I hear no less often.Thanks for this post Fred.
And how was the run that came after that epiphany?
I was standing on a peak above copper bowl in the spring sun at 12,000 feet just feeling good and ready to plunge downhill.You have to be careful about decisions made after a period of mania from my experience. When you are in that state everything seems so possible.
Really wonderful honestly.I just felt good, about myself, about to head down a long run with multiple generations of my family.Lucky and so fortunate.Both at the top of the world–and–at the top of my game.Life has its moments. This was one Fred.
skiing with family is one of the joys of my life
This statement: that I want to be investing in what may happen in five to ten years and not commit a lot more time, energy, and money to what is happening now. Combined with this:That has been a thing for me for a while now (I’ve gone from four new deals a year to one or two a year and feeling much better as a result).I’m wondering how you can have such a long time frame and make fewer investments with the hopes of “being right”. It would seem to be the opposite. If you are making bets on the unknown (and anything with a longer time frame almost certainly has to be more unknown) it would seem more practical to make more investments, not fewer. Especially since in theory you should be able to use less investment capital to make those investments since there is less competition.Let’s look at real estate investing as one example. Manhattan prices are high and real estate in Manhattan is very valuable. However real estate in Philly is cheap super cheap relative to Manahattan. Ditto for many other cities. If your money goes further in Philly, Detroit and 10 other cities wouldn’t it make sense to invest in many of those “potential future NYC’s”  than it would only one or two? Everyone is thinking “that would never happen” but that is the point of what you are saying in a sense by “something not on the radar and obvious”.
We have five partners at USV. If each of us makes 1-2 investments per year we collectively will make 8-10 investments per year. That’s at the high end of our historical investment pace
Having spent three months in LA, did you pick up on any true competitive advantages of the SM LA tech scene, fashion? Entertainment?
There is a real and vibrant tech sector here. That’s for sure
No doubt, it started 100 years ago with the independents (the disrupters of their time) film producers challenging Thomas Edison’s patent monopoly. google moving into hangers where Howard Hughes built the Hercules seems to be connecting the dots.
Yup, its a good story – Adolph Zukor challenging the Edison Motion Picture Patent Company (or the “Film Trust”) in 1912 to screen “Queen Elizabeth”. Led to the growth of Hollywood and Zukor later became head of Paramount.And before that – Zukor ran a small theatre/penny arcade in Union Square, NYC ! On 14th Street and Union Square.p.s. One of the reasons the ‘independents’ chose LA was that if agents from Edison’s company came out west to track them down, it was a quick hop-and-skip to Mexico !
Yoga does help you think. I took it up seriously last year and now I try never to miss a class. Have done it by myself as well. Getting away from the cold helps too. Doing it next year for sure. I do find that NYC is a different place. It’s probably the most high energy city in the US. My friend said, “I love the juice there”.
i had a solid year run with hot yoga. it was the perfect counter to weight lifting. i need to get back into that.
I tried that (hot yoga), didn’t like it. Love Iyengar Yoga.
I did a 9 year run with Bikram. It was pretty sweet.
Why’d you stop?
I can hear and feel the beach from that photo. There’s nothing like Cali’s gigantic beaches to give a puny little human some perspective.
Its a great beach but still not Miami,
Dude, driving 1 South from SF to LA by road is like having your life unfold in front of you. i bet you never get the same experience in Miami or any other place in the world
That’s a great drive. My family and I did it one year for Christmas. Drive along Lake Superior from Duluth to Canada is pretty beautiful.
Agree, but in terms of the beach and the water, there is nothing like the warm blue miami water
I do love that.
Two very different experiences, with only salt water in common.
Miami beaches are pretty tame. Some of us like our beaches wild. 🙂
i struggle writing blog posts on mobile. with tumblr you always seem to end up in the html editor.
I use WordPress for long form and tumblr for short form
“I believe the VC business has gotten hyper efficient at spotting what is happening now and it’s really hard to get outsized returns doing that. Plus there is a lot of headfake risk in doing that and when the antes are so big, headfakes cost you dearly.”The above is dead on in my opinion.
@fredwilson:disqus I spent the weekend in LA as well. Having been grinding at startup in San Francisco for three years as we have gone from 30 people to 300, I feel the same way the beach does provide clarity around what I should be spending time on. Thanks for posting!
also helped to listen to Kendrick Lamar as I drove from Sunset and Vine back to Santa Monica
Do you like To Pimp A Butterfly? I’ve given it s few listens but it hasn’t grabbed me yet
tried, but not as good as his earlier stuff, I think its a transition album for him, similar to Kanye and 808 who followed it up with My Beautiful Dark Twisted Fantasy
Fred this is a brilliant post. I so agree with you about focusing on the future and not the now. Exciting times ahead!
you have always struck me as someone who lives on the bleeding edge
Thanks Fred, that’s a big complement coming from you! At lest for me, the hardest part of being in the future in venture is convincing other constituencies when they want to be in the present. I think its possible to be in the future and have quicker and better returns than chasing what’s hot today.
now we are talking about something super interestingpartnerships require group conviction which is hard to develop around a thesis or an investmentindividuals can get conviction so much easierwhich is why angels can make bleeding edge bets so much easier than VC firms but the requirement for group conviction is also a very positive thing if done righti have been in partnerships that ranged from two to fivesmaller is better i think
True, Angels (and micro-VCs) can move fast, but they also need the VCs with bigger funds to complete the equation.
Yup. Most of the time its about survival to the next level.
individuals can get conviction so much easierAgree 100%I’ve given a great deal of thought to this. It’s the “camel is a horse by committee” problem.It’s also one of the reasons that strong narcissistic stubborn leaders like Jobs, Ellison or Branson (and I have many examples of small business people who nobody has ever heard of) can do so well. They don’t need as much approval or agreement to do what they want. They have a vision and are hell bent on making it happen. They take the input of others but in the end, and this is super important, as George Bush would say “I am the decider”.smaller is better i thinkNo question about that. You have less people to try and convince of your point of view. And harder for people to gang up on you and oppose you as well.That’s one of the reasons that I made it a point to steer clear of women who involve their mothers or fathers in all their decisions and are tied to the hip. I’m not interested in convincing someone’s family to agree with what I think is the best thing to do.
It is super interesting. Group dynamics are fascinating.
You are totally right. Smaller is definitely better. We were 13 when I joined NB and we will be 4 in our next fund. Only the future survived. I wouldn’t recommend trying to scale. Early stage VC is a cottage business 🙂
“only the future survived”
A little time and space for introspection and contemplative thought is a precursor to a meaningful and fulfilling life. That’s why I recently built doof.com. more a public art experiment then anything else. An oasis of calm. A twitter for the soul. A platform for self-actualisation. All the above or none. Who knows.Will people share their hopes, dreams and fears publicly? Will doing so be cathartic and valuable? Dunno. Could be. Hope so.
i just checked out doof.com it’s an interesting idea. i’m a bit reluctant to be “that honest” on twitter. but i bet that there are many who don’t have that hesitation
living in the future. real names be proof – http://doof.com/@aweissman/
“… more a public art experiment then anything else. An oasis of calm. A twitter for the soul. A platform for self-actualisation. All the above or none. Who knows.”I like that a LOT! To see why, head to keeam.com (me + 2 programmers).
When you have tasted Twitter, Tumblr, Etsy, Kickstarter, LendingClub, Coinbase et al…, then you want to taste the same big waves again. Same with great food. When you have been at the top restaurants and tasted the best of the best, your outlook changes.The beach or the mountains….one can stare at them for hours without boredom, and they reward you by giving you back reflective thoughts that can make a big difference.Here’s a favorite oldie from Alain Barriere, famous French singer. From his song “A regarder la mer” (Looking at the sea)”And I spend hours watching the sea, with a stunned heart and awry thoughts…Whoever doesn’t understand me, doesn’t understand the sea.”https://www.youtube.com/wat…
Nice reflective comment William. Speaks to me. There is something to what you’re saying about how what you are exposed to sets your appetite. It was being away from startups for three years that convinced me that my life is impoverished without somehow being involved with them.I sometimes wonder if I can be truly happy without seeing ocean or mountains on a fairly regular basis. One of the reasons I’m drawn to the area I live in is that there’s both. With woods added it’s a heaven on earth. Somehow the big things of nature help me think bigger. But the woods are good for that too.Yet there is something invigorating about the city, that I also love.
Definitely, there is something soothing about the waters, mountains and forests. Nature is a wonderful thing.
The most interesting public outdoor art work in New York was this:http://www.foodmetres.eu/wh…Artist planted two acres of wheat on what is now Battery Park City and people used to wander around it as something so strange, so natural, so well unlike the concrete of downtown.I was one of the ones wondering about it….
Way before I was an art collector, art was important to me.I remember and internalized my response to this and have held it all these years.I”m good at remembering and memorializing experiences–be they art, a customer epiphany, the taste of any one of hundred of bottles of wines and where I tasted them.Fingerprints of my life I guess.
Soothing, yes. But, often, also inspiring and stirring. Sometimes after a walk on the beach I am ready to change the world.
I understand this completely.I spent a couple of years–actually my son was born–in N. Central British Columbia, mile 16 of Trinity Valley logging road. As close to nature as I could get.Sticks with me. Northern lights. Piles of firewood as big as the cabin i lived in. Cougars in the woods.Good stuff and a great place to write and live for a short time.I’d not trade the experience for anything. I’d not trade the allure of the streets now either.
Sometimes, simple and peaceful moments away, like on the beach that can inspire us to form thoughtful change. Hope you had a nice cup of joe with you…
I think Fred makes two really important points for VCs and entrepreneurs alike.First, it’s critical to disconnect from the non-stop routine that we all fall into. To properly maintain a clear perspective and have the time to process all the exponential change around technology and the way we each live our lives requires taking a step back. I also prefer to do this on the beach.Second, it’s very important to constantly evaluate how we spend time. I know that as a VC it’s easy to fall into the trap of always evaluating the next big opportunity. But I always feel like I don’t spend enough time with the team talking about the next five years or how we are adding more value to existing portfolio companies.
There’s something about NYC that draws you in…that energy is incredibly powerful, but draining at the same time. So hard yet so important to find that balance…Reminds me of a great article from the NYT about the importance of the task-positive network and task-negative network in your brain: http://www.nytimes.com/2014…
Waking up early and taking a walk to the beach (here in Marin) is a beautiful thing. I can squeeze in an early call to Berlin, get the freshest coffee, and then as you say, clear my head and think a bit. Everything looks and feels calm before 6am.
What you say toward the end is profound re: VC current state. How much of that is a function of an LP’s expectation on timeline for returns?
i don’t think LPs drive much of what happens in VCi think, like all financial markets, VC is driven by a mix of greed and fear and that mix ebbs and flows over time
But someone with your track record, you have earned the latitude to be patient on returns, whereas others may not?
I meant from the LP’s perspective…for people starting funds, it may be a different time horizon that’s expected.
It’s great to see someone who absolutely loves what he does; it comes through loud and clear in your writing. You also make VC sound quite appealing, and I’m sure something my students from Villanova would be quite interested in as a career. Do VC firms ever hire right out of college, or is better to first get some experience elsewhere? If you are ever interested in being a guest speaker in one of my classes, I’d be honored to have you, in person or via Skype/Google Chat. Thanks.
Dude u lived my life for a few months. Congrats
i plan to do that every year nowi can watch Max win the California state amateur with you in a few years
Ditto. With the world as my ocean.
What’s great about the stock market is I can read you and other VC’s and just beat the oversized institutions chasing what’s happening today
Just don’t spend 183 days in California, or our “Board of Equalization” (not a joke) will subpoena your calendar (also not a joke) and send you a bill for 13.3% of your 2015 income (surprisingly, still not a joke). 🙂
i’d like to get to a place where i don’t spend more than 100 days anywhere each year
Your tax advisor approves. :)Tax jokes aside, I have a six year old so I’m still 12 years away from being able to be an Internet nomad with my wife.If I didn’t have kids, my travel schedule says “home” might be a hotel.
AirBnB better than the hotel visual, IMO.
Fred in a cowboy hat with spurs to take advantage of 0% taxes in Texas…
Those accessories, and only those accessories, are what it takes in TX?
Now you’re talkin’
Same with me (I was thinking like 4 mos.) My wife’s parents want to retire to the area that we live in. I told my wife it’s not a good idea (she agrees) and I’m working hard to try and find an alternative that isn’t so close. I don’t want to be tied to where I am (anymore than I am already).
well, you know the 21/90 rule? It takes 21 days to create a habit and 90 days to create a lifestyle.
It’s getting easier and easier to do just that. Geometrically rather than linearly, with time. Mostly due to:- the sharing economy ever-improving (easier to get exactly the kind of crib you want to live in, for just the days you want it, without feeling like it’s not home),- the reactions of companies that they displace (rental cars and hotels have never been cheaper or easier, worldwide).- tech advances such as ever-increasing PAYG sim card coverage.- the snowball effect of all the above and other factors combined over time.In my 2015 living in Europe experiment for example, we’ve commuted our “spend the summer in Berlin” idea to instead splitting the time between Berlin Paris and probably one secondary town somewhere that we’ll stumble upon. Life is good, and getting better.
@fredwilson:disqus I have been reading AVC for few years now. And few weeks back I subscribed to the blog and each day I receive your post via Feedburner. Pro – I haven’t missed a single post sinceCon- I miss the commentsBTW is this post related to the post – ‘Some Thoughts On Seed Investing’. Are the things that are hot today, too hot?
The nature of the “hunt” evolves as one matures. I have seen this happen with traders in the market. The willingness to take risk or even the necessity to take risk tends to not be as great. I know for myself I try and spend each day getting back to that place where I was not worrying about as much as one has to when the years pass – family, college, mortgage, etc. Adapting to how quickly things materialize – trading ideas, angel investments, VC seed rounds, etc. – has become a daily version of “the quick and the dead”. While some feel a correction in the public/private markets may be on the horizon, we’re likely not going back to the days where spending a necessary amount of due diligence will be so easily accommodated. Look at the recent example of how quickly things developed for Meerkat, from the initial buzz to $12M in funding within weeks. Doesn’t have a bearing on how successful the company can be, but it sure proves the notion of deals and investments happening faster than ever.
Any good “science projects” come up
This sounds amazing. I have an odd re-charge in August in Miami, but the effect is much the same. You get out of context. You get on the beach. You gain a ton of free time all of a sudden.Just please don’t ever leave NYC for good, Fred.
that’s not going to happen. i’ve got too much invested in NYC personally and professionally to ever leave
Catching waves. I get great inspiration and analogies from watching surfers.This post really speaks to me, Fred. I’ve wondered how being in Southern California for an extended period and particularly the westside of LA would impact/influence you. It’s more than a way of life, it is a way of thinking. Entrepreneurial thinking is built into our culture.Bleeding edge. Only visionaries can live there. But being able to combine vision with execution seems to be necessary in order to live on that particular edge. Is this correct?
You buried the lead.”I’d rather spend the next few years at the bleeding edge and see if we can get a few things right. I think that will cost us less when we are wrong and reward us more when we are right.”Right on…
i do that a lot because i write stream of consciousness and never edit myself
Yup. And it’s why your posts are always worth reading all the way through.
influenced by the beach waves 🙂
Funnily enough, a seasoned tech founder (Chairman of co that employs 3500+ ppl, 15+ years at IBM Research) gave me this cautionary warning about bleeding edge: “You’re so bleeding edge, you may bleed to death before the market arrives where you’re inventing it (human+machine intelligence).”So…I’ve modulated to my lower-hanging-fruit system which we’ve applied to YCombinator with.Plus I spent Pi Day at the Computer History Museum which put into context the fine line between bleeding edge and innovation utility.I’m heading to LA on Wed to spend time with family friends before more SF.
And that is perhaps why you can write posts on a phone. You have bridged the Chat / Write chasm
Today, Marcus Lemonis and The Profit. Coming soon(?) Baywatch-AVC
Would have loved to have hosted you at the Factual office while you were LA. Lmk if it’s not too late. Either way, enjoy your last week. As a former NYer, I have truly enjoyed moving my family to Socal.+1 for my carving out “non-grind time” each day for thinking, writing, and generally being present.
.This blog post could have been titled: “The Benefits of the Empty Nest”.One of the sweetest times of life is when you have an empty nest — not a negative comment — and good judgment, experience, wisdom.Coupled with independence, good health and energy — it is a perfect time to take a deep draught of life that younger persons can’t quite understand.It all culminates in being able to see and think more clearly. To understand what really matters and who you are.Next?JLMwww.themusingsofthebigredca…
Just help me with some regular (very modest) income, please… I have everything else… 🙂
.It will come. Wait on it.JLMwww.themusingsofthebigredca…
I’ve never waited for things to come to me… always went where things were… or were heading (or I thought they were).Or, may be you have in mind the Basic Income thing.
.The Basic Income Thing, one of the truly worst ideas ever floated.Go where the puck is headed, wait on it.JLMwww.themusingsofthebigredca…
As of the puck – yes, that’s what I’ve been always doing – but as in any game, only a few of us have the right combination of vision+luck to get where the puck ends up being.Disagree on the BI thing though (see first paragraph) – I don’t see good alternatives (but let’s save that discussion for Albert’s blog).
One of the sweetest times of life is when you have an empty nest — not a negative comment — and good judgment, experience, wisdom.Except when you remarry and your new wife has younger children. Then it’s groundhog day.
.Yes, but then you might actually know what you are doing.My kids turned out just fine in spite of my parenting. My wife gets all the credit.I was not as good as I was capable of being but I spent huge amount of times coaching them — the only redeeming element of my bad parenting.Now that I have become a writer, my wife urges me to write — “How Not To Parent” which she says would just be a memoir.In some ways you have been blessed with the ability to provide informed and wise parenting. Good luck.JLMwww.themusingsofthebigredca…
Parenting is much easier if you are a parent, and do not try to be friends with your kids, and give in to any and all of their needs. That’s not what it’s all about.I really wish all these people would stop whinning about their parents not seeing their little league games when they were younger and parents would stop thinking that to be a good parent means you have to attend little league games.
LOL. One of the best one liners I’ve ever heard!
Empty nest is fun. But I love having my kids come and hang with me.
.Yes, but they are no longer your “kids”.Now they are these interesting persons who you thought you knew about but who have grown to be excellent people.I cannot put into words how much fun it is to hang with my investment banker son and my startup creative director daughter both of whom think I must have had a brain transplant as I have gotten so much smarter in the last few years.It is a sweet time of life and a huge advantage in working with startups.JLMwww.themusingsofthebigredca…
Agree-except they will always be my kids!
Trial investment thesis: deflation is here to stay, get used to it. Of course we’re used to that in high tech and communication because of Moore’s Law. we don’t model price increases in our business plans. But the rest of the modern economy and the goals of various central banks assume inflation is normal and desirable.I’ll leave aside whether it’s desirable because I’m positing that deflation is going to happen (except in terms of certain debased currencies).Energy prices are going relentlessly down. They drive costs, of course, through the economy. Moore’s law has had an effect on these prices both in the more efficient use of energy and more effective ways to extract or even generate it it and manage it in grids. But historically, if you measure by manhours required to generate a BTU, energy costs HAVE gone way down since the first fire was intentionally lit in dry sticks.Moore’s law will eventually even drive the price of health care down (see Andy Kessler).Food costs are arguable but energy has much effect here as does genetic engineering and computerized farming.Currency devaluation as an instrument of national financing becomes more difficult with globalization and perhaps nation-independent currencies.Obvious losers from deflation are the current banking system (built for inflation), debtors with non-productive assets, and governments both because they are debtors and because they lose the taxes on inflationary portion of interest is there is not interest.The winners are? That’s the investment question I’m thinking about.
I don’t think deflation is here to stay.
why?Not that I’m sure it is but what do you think will driver prices higher? Central banks around the world – starting in Japan – haven’t been able to use monetary policy to drive prices higher. government deficits, even when monetized, haven’t led to the inflation we’ve been trained to expect.
I think there is more to deflation than cheaper tech costs etc. One of the causes is the intense meddling of centralized authorities into marketplaces combined with rules and regulations that cause friction in the flow of capital. Remove the meddling, remove the friction and things would change. They are artificial barriers.
.It is not possible for me to agree more.I agree more with you than you do with yourself.JLMwww.themusingsofthebigredca…
I agree with you that these are causes. along with deliberate currency debasement. But I think it’s arguable that they are being overwhelmed by the pace of technology broadly writ. I’m just making an assertion I can’t prove, though. But I’m looking for ways to invest in the thesis.
Invest in startups and help them succeed. They buck the trend.
done that since I had any money to invest or even before if you count sweat equity and credit card financing. But, as always, the question is which ones. and, in this discussion, which will benefit if my postulate of disinflation as the new normal is true.
.You raise some very interesting thoughts and you are wise to understand them. I don’t mean to sound condescending but I am actually commenting on your age being appropriate to recognize the wisdom of what you say.Anyone who has ever been in the real estate business — large institutional quality commercial real estate — understands the relentless cycle of inflation which is not necessarily a bad thing.The big debtor nations need some inflation to be able to repay their debts when they finally get serious about doing that. The UK still has WWI debt outstanding.The rest of what you say I agree with completely.The big idea is the notion that there is a glut of energy and that the US will achieve complete energy independence — no reliance on foreign energy outside North America being my bastardized definition — creating a massive wave of productivity (the biggest tax cut in the history of the US) but more importantly we will no longer need to engage in gunboat energy foreign policy.The Straits of Hormuz will become irrelevant to the US and will become a trivia question.If we had a coherent energy policy in the US, we would be completely independent within less that 36 months at the outside.JLMwww.themusingsofthebigredca…
I certainly agree we could be energy independent almost immediately… and could be using our energy supply as a bloodless weapon, profiting by reducing the power of Russia, Saudi Arabia, Iran etc instead of having to increase military spending (as I think we must now). But I’m getting distracted.Inflation does have benefits but we are not deciding in this thread whether inflation or deflation is better: just which is more likely.
.Inflation and the absence of inflation are both just part of the business cycle. We don’t have enough respect for normal business cycles thinking that there should be some fictional notion of “stability” when, in fact, the change is the norm.JLMwww.themusingsofthebigredca…
.Further to your point, the potential to “punish” Russia for its bad behavior by letting oil drift so low they cannot survive is a very attractive strategy and one we should be using right now.Russia has a pathetic little economy — it is really a very small country when measured by economic vigor — that cannot survive low oil prices.JLMwww.themusingsofthebigredca…
JLM – Tom … agree with the deflation. Real estate deflation will happen too… and JLM will owe me a reuben when real estate prices (commercial – office and retail at least) are lower in the future. Honestly the current finance driven economic model will be crushed by deflation. However, it is important that we don’t let the govt. bail out the wealthy interests like we did with the I-Banks after 2008.
.Not to be ugly with you, Matt, but I was building high rise office buildings before you were born. I was in the institutional quality commercial real estate business before the invention of the PC.You are getting strangled in your underwear by the difference between business cycles and inflation-deflation.There is no way that real estate values — as you have suggested — are going to tank by 50%. Not. Going. To. Happen.Remember I am talking about institutional quality commercial real estate.One very simple reason is that savvy developers, investors, institutional investors have put low cost 30-year mortgages on very low leverage debt structures.There is a huge amount of equity in front of the debt and therefore the triggering event — the event which is going to require the real estate to be marked to market — is never going to happen.When the REITs came into the market, thirty percent leverage — yes, 30% debt v 70% equity — became the norm. Institutional, high quality commercial real estate is not highly leveraged.You should just buy me a Reuben — Batampte mustard — and cut your losses.JLMwww.themusingsofthebigredca…
Not to be rude (or arrogant) but I know a ton about financial markets and broader credit conditions. And very possible I am right, and possible that it is not. But one thing I am very curious about is you are saying that the average commercial class A and B property has 70% equity??? Any stats on that? I would be SHOCKED. So Cleveland has been on a pretty big downtown building spree last few years and it is continuing. (obviously not on New York scale). So they build about $500 million east banks expansion, and by your definition they have $350 million CASH and only financing for $150 million? I am going to dig here and see what I can find (I know it won’t explicitly say in public docs) but I just can’t by that they put down $350 million.. just hard to believe. Happy to learn new things as well (that’s why I know much 🙂 ) so please give me any links / cites to 70% equity on building or sale of real estate
.The simple fact that you have to ask where to look shows how shallow your knowledge truly is. This is the kind of stuff that professionals in the industry know because they’ve sat across the table from the lenders. This is not book learning.You conflate construction financing with long term mortgages — not the same thing. I said nothing about class B property. Read and comprehend. I am talking solely about high quality institutional commercial real estate.Look at the public REIT filings, Grasshopper.Call me in about 15 years.JLMwww.themusingsofthebigredca…
15 years (probably 5) you will be hoping to get a meeting with me 🙂 (i say that with respect). And I will sure make you buy me that sandwich.. will include it one of my board reports
i think the blockchain and the things it enables (bitcoin, for example) will be ideally suited to this new normal economic environment we are now in
so, classically, inflation comes about either because of an over-abundance of currency or scarcity of key goods. On the other hand, deflation happened when the money supply was very restricted (the argument against a gold standard) or when demand fell (mathematically the same as an oversupply of goods).If we are in an abundance economy as far as “goods” are concerned and the money supply is self-regulating (is it with bitcoin?), then do we price stability? deflation?I don’t know the answer, of course, but think the combination of abundance and non-government, non-bank currencies may have obsoleted even those parts of economic theory which used to have some validity in the real world.
Lucky to get time for reflection. On a selfish note, this whole ‘West Coast’ blogging thing really played havoc with my daily blog reading routine 😉
“There’s always another wave coming and when you catch one right, it’s a thing of beauty.”I might need to turn this into a pretty poster.
As a former surfer, I see it differently. You really need to be in the water in good times and bad to ride the winners.
My version of that relates to both boating and skiing. If everyday was “a good boating” or “a good skiing” day you wouldn’t appreciate it as much. It’s really just another version of intermittent reinforcement in action. Ditto for beach weather.
Married to a surfer — part of the initial attraction. Our kids surf. Not yet on the waves with them, but I will. (I have a friend in her 60s who surfs so this gives me hope.)Meanwhile I get a lot of inspiration and entrepreneurial analogies watching surfers.
While being in LA was a chance to relax, did it raise any thoughts for you about the prospects for LA’s venture scene in the next 5-10 years?
I’d love to see him post on that.A couple of years ago he shared with me that he thought, in 5 – 10 years, LA would be where New York was then. So far we seem to be on track, with the timeline possibly accelerated.But my vantage point is still limited, so would be great to hear the update from his.
With the continued water crisis in California, I would think that this would reduce the amount of investment that would occur in all parts of California. Also with the current costs, it appears that many more are leaving California rather than migrating. (Disclaimer: I am migrating there for 6 months to Palo Alto, but fully expect to leave at the end of the 6 months as the role will be “up and running” and the costs for me are beyond my means long term. Couple this with the lack of water and I think I am doing the state a favor to reduce the population. I’d love to stay, but lack of natural resources scare me more than the costs.
California is a state, not a nation. Any lack of a vital resource will have implications beyond our state borders.
I would be interested in comments on this topic. Given the lack of water in California why would anyone continue to create a company in an area where water is almost extinct?
We are in a serious drought but most of us don’t experience this as a harsh reality on a day to day basis.Extinct is too strong a word.#prayforrain
I am definitely on the rain dance since I move to Palo Alto in April. I want to make this a long term adventure, but the lack of water (not taxes) scares me more than anything. I will do my part to conserve, but we will add the prayer too.
Once again, THANK YOU! Thank you for sharing your personal situation. It is SOO helpful to me as I am getting ready to embark on a 6 month rotation to the corporate headquarters in Palo Alto, CA. and relocating from the Washington DC area. I hope my time will allow me to follow in your footsteps to “read, write and think more”. Now if I can just follow in your footsteps and figured out how you managed your vehicle situation, JJD – Stepping outside his comfort zone.
“I was often done by 4pm and took the opportunity to do a ton of late afternoon yoga, which I highly recommend and will try to continue when I get back east. “Ahhhh. Thumbsup! Anastasia and I are heading west for 3 months at beginning of April to connect with the instructors already using I Live Yoga to tap into their networks – we’ll probably be doing yoga an average of twice per day. Excited!
Love this post.Happy for you and GG you had such a nice “break”. Earned and deserved.Looking forward to a recharged Buster.
recharged and relaxed!
What was your living/working situation in Los Angeles? Did you rent a house? Did you work there or in coffee shops, or did you rent office space too?And did you have meetings in town as well, or just in the Bay Area?
‘It’s a great place to write.’Agree lots. I started ‘Beach Writing’ on Amagansett’s beach during my NYC summers, and would get lost (in a great way). My more favorite spot is writing while in motion (cars, trains, planes), and loved how Amtrak did a campaign to promote writers who chose to use the train because it offered such a great writing experience.Sure ‘the medium is the message,’ but I also like how The Place informs The Content.
I wish there were a button to “upvote” this post.
Great post, Fred, and I hope you enjoyed the summer weather out West. I was curious if you had any thoughts or perspective on startups focused on resources? Given California’s drought and water woes, and the general sense that nature isn’t going to just turn things around, are you seeing any businesses starting or trends in this area that are interesting?
Amen to Brad’s point. The bleeding edge (waytooearly in my parlance) is also the most fun place to be.
There’s a reason Buffett has stayed in Omaha.
Terrific post.Any SoCal beaches you became particularly fond of?
venice is where i live but i love all of them
I originally moved out here in large part because I was working in finance and could work from 5am to 1-3ish and then be fully done for the day. I love the schedule. Glad you enjoyed your time here and found it productive!
Dig the transition and perspective (introspection). You missed a crap ton of cold back east, the snow is finally melting in my yard
I write a very similar way to Fred – I just write. I’ll go back and do one proofread of most posts just to clean up words and grammar, but that’s it. I rarely change anything structurally. It’s great when readers pick up stuff I said and elevate it to the front in the comments.And yes on Zack – he is just dynamite. We love working with him.
Great spot for a long weekend getaway.Love the cat run in the back bowl.Easy access from the airport and for my family out there.
Thx. I’m in the Dulles Airport on my way back from a week in Dubai trying to get to Winnipeg to get started tomorrow!
There will be a next time – I expect I’ll be back in Dubai relatively soon. And, just got your other email – thanks for the kind offer for a room!
Winnipeg, Waterloo, Ottawa, Toronto in 4 days…Not too bad. See you on Thursday.
Montreal on Friday! Looking forward to seeing you.
what’s cooking in winnipeg?
Yup. Likewise! Forgot about Montreal.
If you are like me , that means that you are moved to write something and just do so. So you have an emotional reaction or curiosity which causes the words to flow from the keyboard effortlessly. So does Fred. He writes about what moves him in some way each day. That’s why MBA mondays, while valuable, was probably a big chore to pull off on schedule.This is a long long way from what it was like in high school and college. There you got an assignment and it’s hard to be passionate when you are assigned a task. Nobody could assign me to “answer Brad Feld’s comment” I would draw a blank.This is one of the reasons that there are two distinct types of entrepreneurs. Those who will attempt to think up an idea that they can use for a startup and those that are moved by something and create a startup from that emotion. I don’t have as much hair as you do of course.
Love it. Great analysis. Curiosity – and an intrinsic motivation to learn – is such a big driver for me.
Have you run into this piece yet… http://aeon.co/magazine/tec…If not it really digs into that last point, and some other things you’ve said on previous posts. Really really interesting bit about creating flexibly, and how those who analyze rarely create technologies of the future.
Thanks JZ. I just signed up as an interested party. Please keep me posted. Where will the(se) event(s) take place?
I just scanned it (I’m getting ready to leave and don’t have time to parse it).Arthur C Clarke is often cited as a techno-visionary for his ideas about geostationary communication satellitesWhat it reminds me of (all this futuristic talk) is the old stockbroker game. You call 100 people with stock tips and tell them you aren’t going to sell them anything but they should keep track of the tips that you give them. Then you call back, of the 100 people, those that the stock actually went up with and say “see my prediction was right! now here is my next tip…”. And the rest you ignore.Point being that people who are “cited” for this or that are cited because they were right. After they were proven right. So they look to be visionary. However there is a much greater percentage of people who weren’t right and we don’t know about them.This is also similar to people thinking Xerox was wrong for ignoring certain Parc technologies without knowing the other 1000 things that didn’t become a doable technology that they were right about. (Picture phone failed for At&t is another example of this to consider..)
Oh, yep a long read worth saving for later – and there’s definitely something to naming / glorifying visionaries in hindsight. It takes guts to build something worthwhile but that is also flexible enough to suggest / encourage / demand further innovation, which is how you, over the long term, actually engage in being visionary. Hence Elon Musk’s rocket failures that would have crushed anyone else out of business.
Brad and his co-author Sean Wise are doing a book tour in Canada, starting with Winnipeg.