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Google's AI Assistant Made an Actual Appointment(Must-Watch Video) + More Thoughts on Crypto

May 10, 2018

Good Thursday morning.

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Today | 7 items

1. A Must-Watch Video

My jaw hit the floor. It's under 5 minutes and well worth your time. (h/t Ben Thompson)

2. An IPO Worth Watching

Pluralsight, a technology learning platform, is planning to IPO. They are looking to raise $100 million for a fully diluted value of $1.5 billion. (H/T Pro Rata)

 

 

This is on the heels of a similar company, General Assembly, getting acquired for $412.5 million by Adecco in April of this year.

 

What do they do?

They teach programming skills that will be demanded in the future like cloud, mobile, security and data.

 

Trends

This company fits nicely into two secular trends I believe in.

  1. Software is eating the world.
  2. AI has the potential to replace a lot of jobs and those people will need to be re-trained.

They are teaching skills that will be valuable in the future and they are cheaper than college. I expect options like this to grow in popularity relative to traditional colleges.

3. Xiaomi Cuts Valuation Target for IPO

Who is Xiaomi?

Xiaomi is the worlds fourth-largest vendor of smartphones worldwide. They are headquartered in Beijing. They will IPO later this year on the Hong-Kong stock exchange.

They are looking to raise at least $10 billion which would put them behind only Alibaba and Facebook as the largest tech IPOs ever.

 

My thought bubble...

Lei Jun, the company's CEO, said they sell their phones at almost bill-of-material prices without compromising on quality.

 

The point in doing this is to gain a foothold in which they can sell software and other services in the future. Currently, hardware makes up 94% of their revenue.

 

Hardware has proven to be a brutal business to make a profit in. Apple marries their software(IOS) with hardware and layers on their design and brand. I'm not sure Xiaomi can do the same, but hey, maybe they're not trying to.

4. Cord-Cutting is Crushing Traditional Broadcasters

What's the problem?

Telecommunications, cable and satellite companies that borrowed billions to build their networks are at risk because consumers are dumping traditional cable packages and switching to streaming services faster than expected reports the WSJ.

 

Cable companies that sell internet packages in addition to cable bundles might fare better than companies that rely solely on cable and satellite TV products, such as Dish Network(DISH).

 

Dish Network's bonds and credit default swaps are taking a hit.

Reed Hastings, CEO of Netflix said this back in 2015.

“We will come to see that linear TV declines every year for the next 20 years,” he said, “and that internet TV rises every year for the next 20 years.”

My thought bubble...

As investors, we want to be on the right side of secular trends. Not fads that don't last, but trends. I think it is reasonable that over the next 20 years internet TV will be the dominant platform.

The question then is, which companies do we want to own and bet on?

My best guess; the apps that own prime real estate(i.e, our attention).

5. Job Openings Rose to a Record in March

The entire report is known as JOLTS; which stands for job openings and labor turnover. It is compiled by the Bureau of Labor Statistics. You can check out the whole report here. Source: (WSJ daily shot)

6. A Few Takes on Crypto

Fred Wilson, a VC at Union Square Ventures, wrote a good piece after Warren Buffett, Charlie Munger and Bill Gates disparaged crypto assets at the Berkshire Hathaway annual meeting.

 

First, let's quote Buffett:

“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.”

 

Here is Fred's response,

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.

 

Here is a key point I feel many people miss when trying to compare crypto to other types of investments. Fred again:

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.

 

My bottom line...

I remember hearing Marc Andressen, founder of Netscape Navigator, talk about his experience when he explained the internet's potential to VC's and "wise" people back in the early 90's. They thought he was crazy. Many thought the internet was a fad.

 

I first heard about Bitcoin and crypto from Marc years ago. I don't know if it will work. I try to listen to and read people smarter than me and most of them are the same people that believed in the early internet when nobody else did.

 

As investors, we try our best to gauge the risk/reward of potential investments. When clarity is lacking, as it is now in the crypto space, it is a great time to invest. Even if the probability of it working out is small, the potential reward could be huge.

 

If and when it becomes obvious that the blockchain is here to stay and will produce massive winners on the scale of Google and Facebook, you might have missed the best time to invest.

 

Just something to think about...

*****

How many corporate CIO's are thinking about the blockchain? Not many. Here's a headline from a recent WSJ article:

Amid Blockchain Hype, Few Deployments, Limited Interest, Survey Finds

Perfect...

7. My 5 Money Mistakes

Well, not me, but Kristine Hayes writing a post for the Humble Dollar.

I am going to pull out number 2 & 4.

 

#2- Investing too conservatively when I was younger.

#5- Waiting too long to educate myself about money.

 

Caleb here: It is my firm belief that if you want above average wealth when you get older, you need to invest aggressively in your 20's and 30's. To do that, you must educate yourself and read widely.

 

Good investing ideas aren't obvious, they require hard work. They require learning new things and taking risks that might not work out.

 

But that is ok. Your advantage is time. If you can control spending and work hard to find attractive investment opportunities, I believe you have a shot to have above average wealth in your old age.

Just my opinion...

Thanks for reading, and have a great day,

Caleb | SAM

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