Investment Biker, Jim Rogers

Key take aways

  • Central investment thesis:
    • Always bet against the central banks and with the real world
    • truly down trodden people do not rise, but hell hath no fury like suppressed peoples whose expectations have been aroused
    • people don’t change their ways until their are forced to
    • while it is easy to figure out an investment is cheap, the real work is figuring out if a change is about to occur in the near future. It is important to study markets and their history
    • when seeing a big change coming (the opening of the trans Siberian railway), consider the economic, political and social shift
  • modus operandi
    • Why buy a new sofa when it could be put to work in the markets
    • Only invest in what I can sell quickly
    • do nothing until you can see the money to be picked up around the corner
  • key areas of study
    • geography
    • politics
    • economics
    • history
  • Company assessment criteria
    • Price to book value
    • sound balance sheet
    • pay dividend
    • Price to earnings ratios
    • Viable industries
    • start with largest soundest enterprises
      • banks
      • mines
      • news papers
  • On assessing countries
    • Watch out for statism – governments getting in the way of an organic market
      • democracy does not equal prosperity
      • US government piling more and more regulations
      • SnL crisis of the 1980s
      • Artificially suppressed prices
        • 1970s gold in America
        • 2019 prices of pork in China
      • Foreign aids (IMF, UN and Peace Corps) just props up a system that does not work and delays the actual rebuilding process. Have faith in the locals to rebuild themselves in a configuration that works for them as opposed to a system suited to foreigners liking (hubris)
    • On ethnic strife and separatism
      • Some geographical boundaries don’t make sense.
      • no borders remain stable for long
      • economic hardship will bring to surface these fault lines as they get used as a vehicles to get more
      • Wait till wars are fought and border issues sorted out. It might then become a great investment opportunity to enter at the bottom
      • examples
        • Rise of Islam and Christianity in Siberia prior to Soviet collapse
        • Hong Kong riots
        • Barcelona declaration of independence
        • XinJiang, Tibet
    • black markets as signals: difference between black markets rates and official exchange rates provide an indicator of how much the central bank has propped up the exchange rate. Minimal to no differences are signs of a strong economy
    • major red flags:
      • currency controls, import taxes, export restrictions. Makes it hard to pull funds out
      • is country trying to devalue its way out of its internal problems instead of doing a proper fix?
      • frantic purchase of gold in local jewelry store
    • Positive signal:
      • Is the country trying to get foreign hard currency by making things other people want to buy – quality goods
      • Is the country learning to compete and out innovate its competition
      • an educated population
  • On centrally planned economies
    • the market feedback mechanism is missing
    • resources get ruined due to misuse
    • it would have thrive if it was a sound economic theory
  • On China
    • while Russia abused their resources, China having nowhere to go were more deliberate and took better care of their resources
    • success had a lot to do with economic and political organization
    • example
      • took bees to blooming flowers to work them 5-7 times harder than their foreign counterparts
    • Hong Kong, Guangzhou and Shanghai being captured by the capitalist spirit generally ignores capital’s policies
  • Note worthy collations
    • China (labor) / Siberia (natural resources)
    • Australia (natural resources) / Japan (capital)
    • US (capital) / Canada (natural resources) / Mexico (labor)
  • On commodities
    • most local markets will eventually get assimilated into the global market
    • diamonds have artificially propped up prices that will be hard to maintain in the long run. DeBeers will eventually run out of cash buying up supplies from the black market and it will lead to sudden price collapse. Opt for gem and rubies instead
    • when gold gets too cheap companies will figure out ways to use it thereby depleting its supply driving up price. Same could be said of oil
    • underlying structural issues within a country can stay hidden for long during times of a commodity boom
  • The key to success
    • out of every 1000 people who wants to be rich only 6 can master the discipline to do so
    • stay focus on a single goal for five, ten, twenty years

Related readings

Examples of various networks failing at scale

Most solutions will inevitably break when used at scale. These are two recent examples.

AirBnB’s network scales to extend it starts disrupting entire neighborhoods

https://www.bloomberg.com/news/articles/2019-11-06/miami-beach-airbnbs-top-market-in-u-s-as-charlotte-grows-rapidly

Political campaigning on social media gets way out of control after politicians attempt to scale up the method which got President Obama elected to office 

https://www.bloomberg.com/news/articles/2019-11-07/google-considers-changing-its-political-advertising-policy

Technology eco-system scales up operations in California thereby triggering the housing crisis.

https://www.bloomberg.com/graphics/2019-california-housing-crisis/

Moderation and self restrain is not common when caught up in a winner takes all situation

 

Crypto-currency exchanges

Business model

  • Pricing model
    • USD 80K initial listing fee
    • fees on each transaction
  • Enterprise sales acquisition approach
    • acquisition channels
      • LinkedIn
      • Crypto-conferences
    • Cost
      • USD2500/month for sales staff
      • USD4000/month for engineers

Landscape

  • Over supply of exchanges versus crypto projects
    • Crypto-currencies have tanked in 2019
    • There are more than 2000 exchanges right now
    • 20 new currencies are minted each month
    • There is a lack of differentiation between exchanges
  • crypto projects are reporting an exceeding high level of failure rates
    • due diligence traditionally handled by VCs for traditional startups are left to end consumers for crypto projects
    • most projects do not have a sound use case
    • teams tend to be poorly managed
  • Uneven playing field
    • US media’s extensive distribution network is the primary advantage of US based exchanges
      • Binance is the largest exchange
      • Binance ability to tap into engineering talent in US has allowed it to be the trail blazer helping it garner constant media attention
    • Chinese crypto-currency companies are attempting to penetrate US and Europe by hiring talents with fluent in English

Complementary assets for Biki

  • Parent company’s crypto news portal
  • Parent company’s engineering knowledge in building exchange software

Launch Scale conference with Jason Calcanis Day 2

    Jason does an impression of Trump

Brandon Brown, Grin

The founder needs to sell the product first before bringing onboard any sales representatives. We need to build out the play book first. PlayBook must help uncover the pain and map the pain to the problem and sell the solution to the company

Need to figure out how to spend money in the engine to generate more than proportionate sales. Sales Pods proposed winning by design. Individuals from sales and marketing functions that are depending on each other and grouped together as a team. Around 35K per month to build out a sales pod. Growth rate doubled.

Yosiat Gimbernard, Odoo

Presentation format

  • Describes the difference between traditional ERP and single use case apps.
  • EPR has high implementation cost. Single use case apps are all over the place
  • Describes the pain of managing all the single use case apps.
  • Focuses on product and usability
  • 150,000 companies using Odoo

Roland Ligtenberg, Housecall Pro

The Viral evangelism loop characteristics. Always ask them how they hear about the company?

Once you have a base of users that are interacting more frequently with you, do start thinking about how to implement the evangelist program.

  • buys product
  • loyal customer
  • helps you find other customers
  • and helps find other evangelists.

Components

Written component
  • Title of program
  • Who we are targeting
  • What they need to do to qualify
    • needs to be objective / quantitative
      • 100% profile complete?
    • challenging but not unobtainable. Only the top 10% can qualify
      • minimum 15 reviews with a 4.5 star average
    • hijack the endowment effect
  • Why should they do it
    • exclusive. Its earned and not bought
    • priority access
    • generate status
    • make sure you are listening to them and show them respect
    • make sure you respond fast
Visual component

A soldier will fight long and hard when given a piece of ribbon. Give me enough medals and I will win the war.

  • Need to give them a badge
  • recognition
    • offline: see them face to face so things are more impactful
      • example
        • meetups
        • events
        • Conferences
        • Tradeshows
      • mastermind events
      • recognized in front of their peers
      • small little tokens make it feel real
    • online
      • internal and external communities
      • FB groups
      • Forums
      • Directory
      • Spotlights
      • Case studies
  • Create assets
    • makes it easy for them to brag
    • leverage curiosity to increase virality
    • allows for easy to reuse
    • physical User certificates that is hand signed.
      • they build shrines?
    • give them Stickers they can put on their physical accessories
      • their customers see it
      • their competitors see it
    • Create Facebook and Instagram content they could reuse

Ashley Whitehurst, Syndicates Launch

The investment funnel

  • Online/Written Content
  • In-Person Education
  • Accelerator
  • Syndicate – funding size 100K – 650K
    • Lead
      • 20% carry
    • Backer
      • well connected high network individuals
    • Startup

Syndicates are useful for closing the current round. Flexible investment amount.

Keeps your Cap table clean.

 

  • Fees range from 10-15K so if lower than 250K not suitable
  • Too slow 1month to close
  • If privacy is an issue then don’t use it.

Minimum viable metric

  • has syndicate lead
  • investors lead for the round
  • 50%+ of the current round closed
  • 18-24 months of runway
  • 50K MRR w/50%+ Mom Growth
  • 10,000+DAUs w/5% + WoW growth

Due diligence

  • P&L
    • not tracking revenue
  • Org chart
  • Cap Table
    • Lack of vesting schedule
    • Founders is fully vested
    • Dead weight on the cap table – owns more than 10% of the equity that is no longer contributing
    • founder is the only full time employee
  • Detailed bank statements
    • low bank balance
    • paying personal rent out of the company
    • slow growth
  • Founder Q&A via webinar
    • 70+ investors
    • Need a FAQ documentation
      • 30% about product
      • 25% about performance

Why syndicate investors are passing

  • usually just invest in the founder
  • lack of moat
  • valuation is too high
  • market is not too big
  • not part of his investment thesis

The wire and sign for banks it a painful process. Vacations and burning man get in the way.

Investor qualification

  • making more than USD200K per year or
  • asset has more than USD1million

Aileen Lee, Cowboy Ventures

Worked with Mary Maker who is one of the world’s class research analyst. The willingness to have conviction and willingness to standup on what you think when no one else believes it. The early believer of Amazon.

Current trends

While software is eating the world. A lot of the companies that do not have profit margin structure of software companies are being invested as if they are software companies. WeWork is one of those classic examples. Its becoming hard to raise money for businesses and for certain people. Ratios will collapse.

We are in major tech trend right now. Priorly was social which made marketing easy. Cloud, SaaS and mobile made it easy for people to dislodge competitors. These trends are around 15 years old already. Investors are always ready to deploy cash.

War chest strategy

Real Estate Tech was an up and rising trend which allowed the ability to deploy capital. There is too much money chasing too little opportunity. WeWork has something physical so it feels easier to value, aka real world virality like Uber.

For 5 to 10 years the ecosystem has been in this war chest strategy paradigm. Investors invest in growth. They were willing to fund 20% growth  versus 10% while burning more. It pushes the founders to take the money and promise the moon or blow up trying.

The risk is asymmetrical between investors versus founders and employees, since investors just need to make sure one company makes it while the latter group are all in.

Slow and steady growth

The slow and steady growth examples. Founders firmly believe their products are differentiated and don’t want to pretend to be something they are not.

  • PagerDuty
  • DatatDog

Choice between these two tracks is based on personality of founder and investor expectation.

Due to the prevalence of war chest strategy the environment has became really sharky.

Dollar shave club

What is the biggest risk and who can address the risk. Micheal the cofounder was able to address the risk for the consumer digital marketing company. The category was open for disruption due to the way its currently being sold. Razors were easy to ship. Patents were expiring.

Mindset

Just find one or two of the right investor to invest in the company. Don’t have to waste time listening to how other founders are killing it. Just focus on the batting average.

Need to have a unique insight into the market or a technology twist. A lot of the markets are well understood.

Lack of diversity in the VC

Most funds right now are private and very small.  Most VCs don’t have friends who are not white and not male.

The easiest way to fix the problem was to start her own firm. She was a venture backed CEO. Sales reps report progress and attend a lot of meetings but didn’t close.

Lots of people rejected her while raising money for CowBoy ventures. Most have never invested in a single founder and single GP fund. The three funds are from the same set of LPs so not much need to look for new LPs.

White men are hired on a promise and women/minorities are hired from the past.

Founders need to consider how they signal the market to change this trend.

Lipsyncing

Hiring female partners who don’t have cheque writing ability.

Macro economic trends

Concerned about our industry taking money from Saudi Arabia

Investor assessment criteria

  • tight presentation
  • founder understands product and market
  • Clear revenue model
  • huge potential market

Guillaume Cabane, Growth Advisor at G2

Key to success product and distribution

For distribution, create a distribution moat.

Distribution channel saturation.

Google CTR is dropping

Facebook has finite inventory. Cost per click has increased by 50% within the past 5 years. Not going to be viable comparing against LTV of customers.

Move beyond average. Forecast the value of each customer in the funnel and choose the right acquisition approach.

  • Self service
  • Enterprise
  • Budget per lead

 

Levels of influence in a purchasing decision

  • business colleagues
  • community
  • marketeer
  • sales person

outbound emails need to inject personalization by using their logo, their font, their screenshot.

Use clearbit to predict who is coming to the site. If potential high value customer make chat available. Drive engagement to hijack reciprocity.

Create an engagement that is cheap, qualified and memorable.

If selling complex product, remove pricing to avoid anchoring which makes it hard for sales people.

Test different UVP with very different valuation.

Enterprise B2B hard to use Facebook. Send data back to Facebook to train their ML ad model using our forecast.

Once converted users to dollar, then instead of tracking number of people converted then track how much dollar converted.

Nate Smith, CTO Lever

how to hire people?

Don’t write job description. It’s useless. Candidates just ignore them. Write the impact overtime. 1 month, 3 month and 1 year.

Hiring the candidates for roles once you understand. Helps interviewers evaluate

Saves time.

What they will own. What they will teach. What they will learn.

Really need to horn your pitch and track them via a  CRM. Keep selling them the culture. Make sure to chat verbally before providing a written offer.

Sara Deahpande, Maven Ventures

Levers to optimize funding round

speed:

process is in your control. Leverage momentum. Keep the investors informed in the process. You are always raising.

investor fit:

individual partners and firms reputation/brand as a working partner. stage and sector focus for the investor. chemistry

size of round:

start with how much you need. What milestones you will hit and how long that runway will be.

valuation:

make sure not too high otherwise will be hard to justify the valuation of the next round. They might have ownership level requirements and how much they need to deploy

Example

10% ownership at seed

20-25% ownership at A round

Trade offs.

valuation versus investor fit. Round size vs valuation. Speed versus valuation.

The success of the underlying business is the most critical criteria to even consider raising money.

VC operations

Assuming 50 million USD fund.

Timelines
  • First 3 years to deploy
  • 10 years to generate returns
Fund allocation
  • 20% for operating costs and fees (USD 10 million)
  • 40% reserves for follow on rounds (USD 20 million)
  • 40% for writing initial checks to spread over 20 companies to generate yield for LPs. Aka USD1 million each. (USD 20 million)
Payout
  • LP expect 3X returns on the original 100% investment
  • 20% carry on returns
Industry benchmark

A strong return of an upper quartile VC firm for USD50 million injection will return 175 million which is 4.4X returns.

viable exit scenarios

Scenario 1 for USD50 million returns

  • zero dilution
  • 500 million exit
  • 10% ownership

scenario 2 for USD50 million returns

  • 50% dilution,
  • USD1 billion exit,
  • 10% ownership

 

 

Thoughts on excessive use of leverage

One of worst mistakes I made was during the 2015/6 Oil crash. I bought into shares of oil exploration companies instead of buying the oil directly. 

It was a very painful and expensive mistake. While the price of oil made a nice recovery since then, the exploration companies never made it through to the other side. Majority of them filed for bankruptcy during the height of the crisis. Unfortunately they took on too much debt when the times were good and were unable to finance the debts and ongoing operations through the continued sales of their inventory when situations turned south. 

The lesson learned is that when buying the dip, it’s important to make sure that not just yourself but the underlying assets you hold are resilient to the environment shock. Utilization of excessive leverage reduces the resilience. Over expansion into fancy offices and overstaffing is another form of excessive leverage. Tech startup founders are often caught red handed committing these mistakes. 

With regards to oil, until the world stops relying on plastic, chemical lubricants and switches completely to alternative forms of energy, we should not expect the price of oil to fall to zero anytime soon. 

A simple acid test to figure out the intrinsic value of oil is to ask your neighbor for his tank of gasoline for free. The most likely response you will get from him is a suggestion to go f**k yourself…?!?

Chat with Punit

Private one on one chats over dinner and generally more insightful than listening to talks in conferences.

Areas of focus

Core areas of focus

  • enterprise
  • cloud
  • security
  • SaaS

Exploratory areas for growth

  • healthcare technology
  • fintech
  • gaming

Process

Starts building a model about a space before diving in. After diving in with investments further build out the model. Coefficients for the model include areas:

  • Team processes
  • Product performance metric
  • Market growth

Thoughts on FinTech

Betting on consumerization of the space as opposed to enterprise. Recent move by Charles Schwarb will not likely impact revenue of consumer apps.

Looking for startups focused on the vector that will get them into consumer wallets as well as grow to occupy a much larger portion of the consumer wallet.

When baby happens, need to get baby insurance. Then next would be Will. And then next…

Hedge funds are not suitable for VC investments. Hedge fund managers should look for other types of investors.

On security

CEOs has not much time. Prefer to high a company that is specialized in acquiring security solutions and delegate the problem to them instead. If shit hits the fan, gets to delegate blame. Companies do not remove security solutions but keep on adding on new ones. Its like a bandaid approach. Removing solutions runs the risk of causing bleeding, very dangerous. The recurring revenue is very lucrative.

When it comes to security is not a question of ability to deeply penetrate a system. Its a question of willingness to pay to penetrate the said system.

On machine learning

On public web data, building model based that is based around proven correlations – CxOs tend to leave a company before shit happens.

On offline data, putting in boxes in data centers to track traffic volume in and out of data centers to approximate demands on another company’s servers

Words on the street

VCs are increasingly concerned about governance. WeWork’s founder have basically offload USD500million dollars on the secondary market to other hedge fund managers.

On funding

If the core economic of the business does not work before funding, it will only get worst after funding. This is because the company will need to clear an even higher valuation before new investors will be profitable.

On board operations

Having a lot of big brand name VCs does not necessarily mean that you will have a good board. The board needs to be well round.  The founder needs to be able to align all the members of the board.

Expectation of the fund

Calibrate the needs of the needs of the corporate and the needs of the founders.

Expect governance to be intact. For the founders to truly execute upon what they sold when they raised the money.

Would be happy to even just double their money.

 

Launch Scale conference with Jason Calcanis Day 1

Jason Calcanis on finding investments

Jason like Money. He believes it’s the fuel that make product and services that change the world. Looks for someone understand the customer, the product and the compound annual growth rate. Usually funds USD1 million for USD25K revenue?!? Is concerned about people who are high on the entitlement spectrum. Always prefer founders who are biased towards action instead of procrastination.

When dedicated event is created for under represented demographics, the diversity of founders brought into the pipeline increases.

Always ask how much have you raised and how much did you make last month.

He ensures his operation are cost effective and looks for founders who are equally scrappy.

Stay focus. The founder needs to be relentlessly focused on consumers and product.

Happy to start the conversation when already have 3-4 customers.

Jason Calcanis on PodCast

Create 2 pod cast per week where he interview founders. He builds an audience of startup tech listeners who want to find out how other founders succeed while stroking the ego of the interviewed founders.

Experiment with selling ad placements during within podcast.

Once its been the viability has been proven, hire a sales representative to do the selling.

For every 10 emails sent out 1 company will respond. For every 10 companies that responds 1 will sign up to do an ads placement for USD7500. That equals to a USD120,000 per month cashflow with a by-product of further entrenching Jason into the angel investing network.

Donna Boyer, VP Product Stitch Fix

Always ensure process is set up to allow for inclusion Pixie Dust. A process can scale if as it includes more users, you don’t need to manage larger excel sheets.

Always keep in mind why you are doing something – the vision.

Crystal, CEO Ruby Love

A financial controller by profession. Uses the same approach for interacting with people. Never took on any personal debt.

For bootstrapping use disadvantaged as advantages. Always do the math.

Watch what you are spending on.

Understand that potential users are searching for information on the web so use SEO to acquires users free.

Ignore media coverage on the competition. Everybody has issues. Just focus on ur product and not get distracted.

Focus on you people believes in you and ignore those that don’t.

You don’t need a cofounder if you do feel you need one.

Always think bigger.

Kept the efficiency while driving revenue during the first phase. Once the organization scales you need to build up an organization. Never loss sight of your customers along the way.

Don’t hire someone to interface between you and the customer. Always understand her emotional needs. The chat window she responds 24 hours a day. That is what drives her roadmap.

Hire using Fiverr all the time. First time hire was only done after hitting USD10 million revenue.

  • Potential product video: Voice Jungle

Zander Lurie, CEO, SurveyMonkey

Markets are volatile with trade war and recession coming soon. WeWork is an Enron like environment. Companies with bad governance will be punished by the public markets. IPOs are going to pull back now.

When building the board determine what is the role of the board of directors?

  • for younger companies, maybe use them for marketing plan
  • they play fiduciary type role as you mature

Very important to build trust as the CEO. You are asking people to work for you and people to invest in you.

Founders who ask for total control of board and then subsequently blow up is a failure of governance.

We are in an environment with endless capital for great ideas.

On WeWork

USD47Billion is a valuation that requires 10 plus years of successful execution. USD1 billion is probably a more reasonable IPO valuation

VC payout 2% management fee, 20% carry. That structure requires growth. So the gross profit (revenue – operating cost) is very import.

We need to institutionalize the systematic use of listening. The web is a really efficient place for feedback to surface.

99% of in-house designs within Apple never made it to the public.

Mar Hershenson, Pear VC

Need to show that a product is really sticky amongst a pilot user instead of having a few pilot users that try and leave.

Need to come to the VC with a team with the necessary skill set to execute on

If app is changing UVP to acquire or retain a customer, it is a 0.5% criteria for seed round. The next 0.5% is showing that you have a growth engine that works.

5K-10K revenue MRR to raise USD1million round.

To show a few thousand users that have high retentions. Doing cohort analysis.

Need to have really scrappy operations and iterate fast.

Ignore fake signals

To prove if I spend $X in Ads, I will get Y number of new users and $Z increase revenue.

Series A investors do not want to have product risk. So there needs to be a strong product manager.

Growth alive. If shut down acquisition, then

3-5X growth in the next 18th months. Venture wants to be able to get investment money back within 12months.

Chats with Ilya on hedge funds

  • Management fees are too high to be sustainable for funds sized below 300 million
  • Funds sized above 300 million tend to have a shelf life of 10 years
  • staying motivated and dedicated to the business is hard when you already have a lot of cash
  • funds that last for a long time have founders who are absolutely focused on building up an institution that will sustain beyond the founder
  • it is much more lucrative to build and own the system than to be working in the system
  • Sharpe ratio above 1.5 is acceptable
  • SnP Sharpe ratio tends to be really low
  • important to figure out how to still generate returns in a down market
  • qualitative assessment of the business model is what drives outsized investment returns

Key insights from mooncake festival at house of Jerry and Liza

Technology trends

  • Companies are increasing shifting their service from one-off on premise licensing deployment monetization to cloud based SaaS recurring subscription models
    • revenue hit in the short run
    • increased customer LTV in the long run
    • affected publicly traded companies will experience short term discounts to their shares
  • Artificial intelligence versus Augmented intelligence
    • companies are increasingly shifting away from automatic insight generation to systems that help decision makers simulate and model potential outcomes when specific policies are executed
    • demand is shifting from insight generation to data cleaning services
  • Corporate adoption of artificial intelligence
    • CEOs are increasingly considering how to leverage AI as a tool for their trade
    • primary use case is figuring out how to increase their sales volume
    • experiencing challenge on how to apply AI on in-house data to achieve monetization goals
  • Rise of deep vertical data networks
    • EverString – provides sales lead refresh for all client companies ends up becoming a large database for decision-making executives information, approximately 6 million records
    • StreetSine.sg – cleans up real estate data to help agents better price houses for sale by utilizing in-house agency ends up becoming a large database of high quality real estate data
  • Crypto-currency
    • Bit coin is still the main poster child
    • general population still skeptical about libra
    • main argument is still to remove central bank controls
    • main adoption hurdles
      • writing throughput volume
      • a stable store of wealth
      • starting to be using as a means to facilitate transaction in China
      • Inability to increase or decrease currency supply in times of need is going to be hard as a means to provide much needed stimulation during economic recessions and inflations

US/China trade war

  • sources of conflict
    • technology theft
    • forced technology transfer
    • unfair trade practices like subsidized state owned Chinese companies operating in the export markets
  •  economy
    • China is experiencing inflationary deleveraging
      • local farmers are not growing critical food sources
      • critical food supplies are imported
      • price of imported goods are denominated in US reserve currency
      • shifting of supply chain out of China to
        • Vietnam
        • India
        • Taiwan
      • capital flight
        • Li Ka Shing moved funds out from Hong Kong in 2013 to Europe
        • raising funds for US Venture capital from China was easy prior to Chinese and US government shut down
    • US is experiencing deflationary deleveraging
      • businesses are concerned about macro environment and are reducing fixed investments
      • manufacturing is slowing due to decreased demand both locally and overseas
      • consumer spending and confidence is still strong
  • Chinese domestic concerns
    • Potential US meddling in Chinese domestic affairs – Hong Kong’s demonstration and demands
      • Revoking of National Education
      • Revoking of extradition bill
      • Resignations of HK Chief executive
      • universal suffrage: freedom to elect their own leaders
    • destabilized situation presents a challenge for Xi JinPing’s party to retain control of power over former Jian Zemin’s faction
  • value system
    • US is a highly rule based system
    • China’s system of control is highly subjective to the individual in power.  Direct government intervention in the distribution of wealth is a major source of concern

US/Mexico and world issues

  • NAFTA agreement was too one side and failed to take into account large  imbalance between the two economies
  • US’s arrangement of allowing Mexican tax payers the right to claim dependents ultimately resulted into tax claims and refunds for entire extended families in Mexico. This has the effect of subsidizing Mexican’s at the expense of Americans living along the rust belts
  • Its observed income inequality is becoming prevalent across the entire world not just within US and China.

Related readings

Key insights from weekend with Jerry, Liza, Ada and Dan

On US/China trade war

  • 25% tariff basically wiped out whatever profit margin importing from China could bring
  • China’s labor cost have been increasing over the past few years that it is no longer a competitive advantage
  • China’s main advantage is the expertise they built up over the years. A company can easily spin up 25 manufacturing lines in China very quickly
  • US companies are all rapidly shifting their manufacturing activities out of China
  • New locations are Taiwan, India and Vietnam
  • Chinese staff that were retained by Google are now flying to new manufacturing facilities spun up in these countries to oversee the spin up process

On alternate data

  • Real estate
    • the rise  of platforms like AirBnB has lead investors to seek out alternate data that can help predict short term rental yield as opposed to long term rental yield in a neighborhood
    • government agencies are seeking such data to detect neighborhoods where they should focus their efforts to crack down illegal subletting on AirBnB
  • Sports
    • being able to predict strategy coaches of football teams will employ in real time will help support strategies
    • being able to predict starting line in close to real time and the corresponding outcomes will be valuable for coaches in making play decisions

On HongKong/China protest

  • Public opinion is the agenda for the ongoing protest is now getting really murky
  • Airport has stopped operations, it’s hard to even get in and out of the country
  • Foreign Chinese nationals are supportive of protest in HongKong
  • Topics pertaining to Taiwan, Tibet and TianAnMen massacre are sensitive topics amongst mainland Chinese
  • Funds of funds from Hong Kong are still very liquid