Posts from May 2018

I backed this photography project earlier this week.

It looks like it may not get funded but that’s a shame because it is a great project.

I’m running an advertisement here today.

I’ve been Chairman of two public companies in my career and the leaders of those two companies sat down and talked yesterday.

I enjoyed watching that very much and hope you do too.

In this nine-minute video, Jim Cramer talks to Josh Silverman, CEO of Etsy, about what makes Etsy “special” and how being special allows them to compete and win against Amazon.

Etsy CEO on Amazon Handmade: It doesn’t really threaten our business from CNBC.

Disclosure: I am the Chairman of Etsy, have been on Etsy’s board for 12 years, and my wife and I own a lot of Etsy stock.

When I was a kid, two of my favorite cartoons were from Hanna-Barbera; The Flintsones and The Jetsons.

I particularly loved The Jetsons.

From Wikipedia:

the Jetsons live in a comical version of the future, with elaborate robotic contraptions, aliens, holograms, and whimsical inventions.^[3][4] The original series comprised 24 episodes and aired on Sunday nights on ABC beginning September 23, 1962, with primetime reruns continuing through September 22, 1963

In the last few weeks, I have been feeling that we are heading into a future that looks quite similar to The Jetsons.

I got a deck last week for an eVOTL company (which is not something we would invest in at USV) and shared it with a few colleagues and said “The Jetsons”.

The Jetson’s family robot Rosie is way better than Alexa but maybe in a decade or so, Alexa will be able to do all that Rosie did for the Jetsons.

George Jetson works for a company that is similar in many ways to SpaceX.

George’s boss is a robot. Maybe we will all be experiencing that too in time.

Anyway, I am going to figure out how to go back and watch all of the 24 original episodes.

I think sci-fi is as good of a crystal ball as we have to see into the future and the writers at Hannah-Barbera did an amazing job of that back in the early 60s.

About a month ago I put all of AVC traffic behind “https.”

This is something you can do with one click of a button if you are behind Cloudflare, as AVC is.

I should have done this a long time ago, but only got around to doing it last month.

In the process, I broke the subscribe via email feature and only fixed it this morning.

So, this is as good of a time as any to mention that you can get this blog delivered via email every morning.

You can subscribe via email (or RSS if you prefer that) here.

One of the best things about having highly appreciated publicly traded stock is that it is the most attractive way to make charitable gifts.

The Gotham Gal and I do this all of the time and I encourage others (founders, early employees, investors, angels, etc) to do it.

Here’s how it works:

Let’s say you have shares of Facebook that you got when you joined back in 2006.

Let’s say that your exercise price was $3/share and that is your cost basis.

Let’s say you want to make a $100,000 gift to a great cause that you are deeply involved with.

Instead of taking out your checkbook (who does that anymore?) and writing a $100,000 check, consider gifting some Facebook shares.

At $175/share, a $100,000 gift would be 571 shares.

So you ask the charity if you can gift shares. Almost every time I do that, the answer is yes. They give you a brokerage account that you can “DTC” the shares to.

And you instruct your brokerage firm to move the 571 shares to the charity’s brokerage account and you have made a $100,000 gift.

But, because you no longer have to pay the capital gains taxes on those shares when you sell them, and neither does the charity, you have a much more tax efficient gift.

I figure that a stock gift costs about 10-20% of the dollar value of the gift if you live in a high tax location like NYC.

Here is how I get to that math, using NYC tax rates:

$100,000 gift

less $50,000 for the tax benefit of the charitable gift deduction

less $38,000 for the capital gains taxes that do not have to be paid on the stock

equals $12,000

So if you have highly appreciated publicly traded stock and are interested in giving to good causes, consider gifting stock instead of cash.

It is a great way to be generous.

There are few investors I have more respect for than Warren Buffett and Charlie Munger. So much of what I believe as an investor has come from watching them conduct themselves over the last thirty-five years (that’s as long as I have been paying attention to investing as a discipline). I believe in fundamental value, I believe in buying when others are selling, I believe in holding positions you find attractive over very long periods of time, and I believe in a lot more that they have espoused and done.

So when I read the two of them disparaging the purchase of crypto assets, it bothers me. Obviously I don’t agree with them, but I am trying to see what they are seeing and disliking.

This interview that Buffett did with Yahoo! Finance is instructive.

Buffet says:

“If you buy something like a farm, an apartment house, or an interest in a business… You can do that on a private basis… And it’s a perfectly satisfactory investment. You look at the investment itself to deliver the return to you. Now, if you buy something like bitcoin or some cryptocurrency, you don’t really have anything that has produced anything. You’re just hoping the next guy pays more.”

When you buy cryptocurrency, Buffett continues, “You aren’t investing when you do that. You’re speculating. There’s nothing wrong with it. If you wanna gamble somebody else will come along and pay more money tomorrow, that’s one kind of game. That is not investing.”

It is clear from those words that Buffett sees crypto assets like a baseball trading card or some other form of collectible. And if that were true of Bitcoin, Ethereum, EOS, Zcash, or many other popular crypto assets, I would agree with him.

But what these crypto tokens are is entirely something else. They are the fuel that powers a new form of technology infrastructure that is being built on top of the foundational internet protocols. Ethereum and EOS are smart contract platforms that allow developers to create decentralized applications (Dapps in the vernacular of crypto). Bitcoin and Zcash are stores of value that allow users to participate in this decentralized application space without the need for fiat currencies.

This is the key phrase of Buffet’s that I feel is incorrect “if you buy something like bitcoin or some cryptocurrency, you don’t really have anything that has produced anything.”

Crypto-assets produce decentralized infrastructure. Bitcoin has produced a transaction processing infrastructure that looks a lot like Amazon Web Services (something I am sure Buffett would agree is extremely valuable). Ethereum has produced a similar transaction processing infrastructure which is also able to run smart contracts. I believe smart contracts are the most important innovation we have yet seen in crypto.

What Buffett and Munger may also be saying is that they don’t know how to value this “fuel” that powers the creation of this decentralized infrastructure. If they are saying that, then I agree with them. I don’t know how to value this fuel either. We cannot use discounted cash flow because this decentralized infrastructure may not produce a lot of cash flow. It is designed to create hypercompetitive networks that are self-commoditizing.

It is much more likely that these crypto assets will trade and be valued like currencies that underpin economies. There has been a lot of research and writing on that. I have recommended Chris Burniske’s Cryptoassets book here before and I will do so again. Chris outlines much of this thinking in that book.

I doubt Warren and Charlie will read this post. But if they do, the one thing I would hope they take from it is that instead of disparaging crypto assets with words like rat poison and dementia, they take a little bit of time to understand that what we are seeing here is the creation of a new internet, built upon protocols that allow for decentralized networks to form and tokens that allow people and companies to be compensated for that formation. And that cryptoassets are the fuel that power and compensate for that formation. And that purchasing these cryptoassets is very much a form of investing. And that this investing is the first time that anyone in the world, independent of wealth and domicile, can participate in venture capital style investing in the next big wave of technology.

There is a new cultural institution being built in NYC right now, the first major new cultural institution built in NYC in quite a while. It is called The Shed and its mission is to be “The first arts center designed to commission, produce, and present all types of performing arts, visual arts, and popular culture.”

I have been fortunate to have had a ground floor seat to watch this come together and observe the team led by the Chairman Dan Doctoroff and CEO Alex Poots make something that is equally ambitious and futuristic.

The CTO of The Shed is Kevin Slavin, who is well known to folks in the NYC tech community. He’s an entrepreneur, academic, and technologist.

In this video, made by Y Combinator, Kevin talks about how to get “brilliant people to surprise themselves” which is something Kevin and The Shed are going to have to do frequently in order to live up to their mission.

I backed this project today. It’s amazing to see what emojis looked like when they first came out in 1999.

I will start this post by stating that I am very much in the “one share one vote” camp.

That said, I have supported founder control provisions, like the one that Mark Pincus put in place when he took Zynga public back in 2011.

Mark wanted to put those provisions into the Series A deal when we co-led the first venture round at Zynga.

I was not a fan of the idea then, but when the Company got ready to head into the public markets, Mark made a convincing argument that a founder would have the long-term interests of the company at heart, whereas the public investors would not. And so Mark has controlled 70% of the voting stock at Zynga for the last seven years while his actual ownership is now around 10%.

I am telling you all of this because yesterday Mark did something that many thought he would never do.

He converted all of his super-voting shares into common stock and returned Zynga to “one share one vote.”

Mark explained his thinking on that decision here.

I am certain many will read more into this move than is actually there.

What I see in this move is a founder who still cares deeply about the company he started deciding that he doesn’t need to control it anymore.

And so he set it free.

Such a beautiful gesture.

Like I said in my tweet about this yesterday, it is a bold move by one of the boldest founders I know.