93: Constellation Again, Coinbase, Stripe's $115bn, Jim Keller, Trade Desk Q4, Crowdstrike + Humio, Ford EVs, Citi's Crappy Software, Matt Ball on Twitter, Nvidia, and Pfizer

"just gotta keep yourself in a posture where you can grab optionality"

Reporter: "What's the newest thing in science?" 

Scientist, feigning surprise: "Oh, so you already know all the old science?"

Found a quote that fits well with the part of my intro of edition #92 about how “it’s all obvious stuff, but simple doesn’t mean easy”:

Everything that needs to be said has already been said. But since no one was listening, everything must be said again. 
--André Gid

I wish I had that quote at the time, so just pretend I had added it there, and that it all flowed seamlessly… kthx

🤔 Investors, simultaneously:

-Compound interest is 🤯, it’s all about the long-term, this strong moat business should dominate for at least the next decade, etc.

-”Hey, do you still own that company that you said had a great potential for the next 10 years?” “No, I sold that 6 months ago”

Also investors, simultaneously:

-I think this company will keep compounding rapidly for many many years.

-“Why don’t you own it?” “Oh, I missed it, but I would buy it at an entry point 20% lower than today’s price.”

¯\_(ツ)_/¯

💀 Follow-up on the “decade-death” thing I wrote about in the intro of edition #92.

I got an email from someone (Hey Ariel O.!) that made me wonder if the phenomenon hasn’t always been true, but is even more apparent (or faster) now because the world tends to change faster than it once did, or at the very least, provide more opportunities to change fast than prior.

Another angle: The kind of people who change fast now have a lot more fuel to power their “change” engine.

A lot more information is available thanks to the internet, you can connect with a lot more people (everybody I know online I’d never have gotten to know in a million years in a pre-internet world), you can be exposed to more ways of thinking, sub-cultures, get exposed to more writers and podcasters and thought-provoking art and such, that can all add bits to the substrate of change…

🏈 Someone asked me on Twitter (Hey S.C.!), in the context of my personal investing and my projects generally: “do you see yourself continuing as you are currently forever?”

My reply:

forever is a long time, I don't know. The plan is to do what I'm doing as long as I like it, and when I don't anymore, figure something else
like the newsletter has been a really fun hobby this past six months, didn't expect it would become anything when I tried it out on a whim ¯\_(ツ)_/¯
you never know, just gotta keep yourself in a posture where you can grab optionality

I think it’s all in the last line.

It’s like when Lucy is holding that football, and Charlie Brown tries to kick it.

You just gotta arrange your life in a way that you can try to kick lots of footballs — not just from Lucy — she’s not a very good bet — many will be misses, but some of them will be hits, and even if some of those don’t go very far, it’ll be fun while it lasts and then on to the next one.

Doesn’t matter if you miss lots of them, as long as you also arrange your life to be positioned in such a way that you don’t need to have a hit or you’ll be sleeping in a cardboard box in the street.

It’s why Munger was giving the advice of basically saving every penny and not spending anything when you’re young (and used to not having money anyway, so it’s not a sacrifice) so you can get a decent chunk of capital working for you, and after that you have way more options than if you had spent it all as you went and were always one unforeseen problem away from trouble. Or on the other side, couldn’t afford to gamble on a course-change because you don’t have a buffer to live on while you take a risky startup job or go back to school or write a novel or travel the world.

It also reminds me of this, ie. if you’re not missing enough footballs, you’re probably not making enough attempts in the first place, and timidity is rarely rewarded in this world:


💰 & 🏭

Coinbase Valued at $77 Billion on Secondary Market (Just 1.54 Million BTC… a Bargain)

Coinbase: "shares in the largest crypto exchange in the U.S. are changing hands on the Nasdaq Private Market at $303 a piece.. That implies a total company value of about $77 billion – greater than Intercontinental Exchange Inc., the owner of the New York Stock Exchange." (Source)

🤔

I wonder if Bakkt (owned by Intercontinental Exchange) will get that kind of multiple when it gets listed

‘Investors Are Now Valuing Stripe At $115 Billion’

So Stripe raised money in April of 2020. Can you guess what the valuation was all the way back then?

$36 billion.

That reminds me of Snowflake raising at $12bn a few months before IPO’ing and going straight to $60-80bn…

As I wrote at the time: “Either they basically gave away a chunk of their company to private investors, or there's a massive amount of turbo-FOMO going on... Not saying $12bn is the correct valuation today, but 7 times that [a few months later] may be a little... extreme?”

Investors are valuing Stripe at a $115 billion valuation in “secondary market” transactions [...] Stripe is also planning a new primary funding round at a valuation north of $100 billion [...]

Together, Adyen, PayPal and Stripe make up 10% of all payment processing globally, says Ellis. Yet they’re small compared with the older, more mature processing businesses like Florida-based FIS, Wisconsin-based Fiserv, Atlanta’s Global Payments and JPMorgan Chase, which have a combined 40% market share. (The remaining 50% of global transactions are processed by local companies and regional banks.) (Source)

For a nice primer on the payments ecosystem, see this video I posted in edition #92.

Ellis estimates that Stripe processed $200 - $250 billion in transactions in 2019 and grew roughly 50% in 2020.

Ok, here’s a good line:

What does she think of a $115 billion valuation for Stripe? “It’s nuts in the same way that all private valuations are nuts right now for anything in fintech,” she says. But given their competitive position, “it’s not utterly insane.”

Nuts, but not utterly insane.

Nice.

Put that in your slide deck.

The Trade Desk Q4

So for Q4, revenue grew 48% at a 48% EBITDA margin.

Rule of 96, anyone?

Obviously this is just one quarter and revenue will bounce around, and because of the big operating leverage, whenever revenue surprises to the upside, margin should explode like this (ie. they try to match expense growth with expected revenue growth).

I haven’t had a chance to read the transcript yet, I don’t know if they disclose audio and connected-TV growth there, but it’s not in the press release anymore 🤔

Crowdstrike Acquires Humio for $400m, Moves Deeper in Observability

In early January, I wondered out loud what Crowdstrike was planning to do with all its dry powder. Then the company raised even more cash through extremely cheap debt and the CFO explained that they were looking at M&A, among other things.

Well, it’s here:

CrowdStrike to Acquire Humio and Deliver the Industry’s Most Advanced Data Platform for Next-Generation, Index-Free XDR

CrowdStrike will pay approximately $400 million to acquire Humio

Joining forces with Humio’s best-in-class data ingestion and analytics platform will enable CrowdStrike to provide deep, contextual index-free XDR at a speed and scale that no other vendor can match (Source)

There’s a Humio blog post that explains a bit what index-free logging is and why it can be an interesting trade-off to make vs indexing.

Crowdstrike’s CTO wrote a blog post here that goes into a bit more detail on their interest in XDR, but it certainly sounds like they’re both looking to improve the main security trunk, but also keep branching out in non-security, or at least security-adjacent areas (which is really big if they can pull it off and leverage their existing agent/distribution model to successfully plug a lot more stuff into the machine).

Ford: We’re Electric Too! Kind of…

Ford (F) is vowing to convert its entire passenger vehicle lineup in Europe to electric power by 2030 [...]

Ford expects two-thirds of its European commercial vehicle sales will be electric or plug-in hybrids by 2030.

So there’s a difference between the “entire lineup being electric” and “2/3 electric OR plug-in hybrids” (ie. still has an internal combustion engine), but we’re getting there…

They’re partnering with VW, probably because they should’ve started investing in EVs much earlier and now they’re trying to play catch up:

Ford will spend $1 billion to revamp its factory in Cologne, Germany and make it a base for production of battery powered cars using Volkswagen’s mechanical framework [...]

The agreement with Volkswagen announced Wednesday lets Ford take advantage of VW’s massive investment in electric cars.. The Volkswagen framework uses standard mechanical underpinnings such as the battery, suspension, wheels and axles that can be adjusted to manufacture different vehicle models. (Source)

Crappy Enterprise Software UI is Really Costly, Citibank Edition

I’ll just leave this here. Two links to basically the same story but written in very different ways, so it’s basically a choose-your-own-adventure:

Matt Ball on Twitter’s Cultural Revolution

(Accidental Mao reference — sorry)

Few people can make me read a 24-tweet tweetstorm, but Matt is one. Some highlights:

2/ I'm a huge believer in cultural determinism (see Nintendo essay) - who a company is/been trained ‘to be’ in turn decides who a company ‘will’ or ‘can’ be.
CD is distinct from whether a culture is good, employees talented, committed to change, etc.

3/ By the early 2010s, Twitter began to solidify cultural premises: it was focused on building up ad revenues rather than maximizing reach or users/its network, building a self-contained ecosystem, and in my view, a misplaced obsession with “live”

4/ This contrasted with competitors focused on network growth (FB), product enhancements (Snap), total creators (YT, Unity). Instead, Twitter throttled APIs and 3P devs, ignored opportunity to be a standard protocol for internet comms [...]

6/ This was during a time in which product innovation for Twitter users were modest-to-null. In 2017, Twitter said usernames would no longer count in Tweet counts…. They still do. It took Twitter seven years to add stories (“Fleets”) [...]

16/ @Benthompson talks about the famous “Bill Gates Line”: A platform is when the economic value of everybody that uses it, exceeds the value of the company that creates it. Then it’s a platform.”

17/ For years, $Fintwit joked that Twitter is the best example or a platform (and therefore the worst business) because the value it creates is so, so, so enormously above what it captures. [...]

18/ Anyway, this returns to cultural determinism. I see a lot of evidence of fundamental, cultural beliefs changing in Twitter. This doesn’t change the options available to them, but changes their ability to realize them. Massively.
It takes time to do this - years.

19/ For example, Twitter Spaces are launching MUCH faster (if still too slowly) than Fleets did (Clubhouse:Snapchat). Jack is talking openly about the desire to be a protocol, to invest in decentralized communication solutions [...]

21/ Most importantly, Twitter is embracing subscription/user fees rather than just advertising (e.g. paying for a newsletter, tipping an account, private access to a Space). I can’t highlight the value here enough – advertising is less than half of media revenues, and declining

22/ Twitter focusing on helping creators, thought leaders, influencers, entertainers all to create, memorialize, and build high revenue business on Twitter... is actually a huge shift.

Both because it raises the platform value Twitter creates, AND it's capture

Diving Deep: Constellation Software

Good work by the10thman:

I do like the effort that went into making the graphs, like these, f.ex:

(I enjoyed the Trancite/German shepherds reference, btw, that was also a nice touch)

On a side note, for those who haven't had a chance to attend Constellation Software AGMs in the past, I just noticed that there's 3 transcripts here (2020, 2019, and 2015).

Pre-pandemic, I used to go every year to the AGM, and the night before, I did open-invite drinks for internet people in a pub downtown. If we can ever go back to physical AGMs, I’ll probably try to do that again. Mark your calendars.

I’ll just leave this here…

Not sure I want to get into WSB again quite yet, but I thought this may interesting some:

In case you don’t recognize the name, this is the Reddit artist known as DeepFuckingValue. Saying he’s not a cat and basically pitching his stock to congress. Internet culture has now invaded every corner of society.


🔬 & 💻

Pfizer Vaccine Stability at Regular Freezer Temps

This seems like a big deal:

Pfizer today announced the submission of new data to the U.S. Food and Drug Administration (FDA) demonstrating the stability of their COVID-19 vaccine when stored at -25°C to -15°C (-13°F to 5°F), temperatures more commonly found in pharmaceutical freezers and refrigerators. [...]

If approved, the option to store at -25°C to -15°C (-13°F to 5°F) for two weeks would be in addition to this five-day option to store at standard refrigerator temperature. The vaccine is administered at room temperature by medical staff. (Source)

Interview: Jim Keller 💫

Always good to listen to a man who is objectively one of the greatest semiconductor engineers of all time:

Kudos to Lex Fridman for getting him not once, but twice on his podcast (first time is here, if you had missed it).

I like Keller’s riff early in the podcast about organizations where to climb the ladder you need to “invent” things, which means filing patents, so everybody is constantly coming up with new things that are basically useless, but can be patented.

Sounds a bit like a sub-tweet of places like IBM, where they constantly rank really high in numbers of patents, but where very few important technologies that have a big impact on the world actually are coming from these days.

I also enjoyed the Iain M. Banks reference. Keller is obviously a sci-fi guy.

Also really good stuff on the tension between creative chaos and order inside growing institutions. Very good insight.

COVID19: Ground War vs Air War (And Nukes?)

Too many people imagined the fight against COVID-19 as a land war to be waged with sudsy hand-to-hand combat against grimy surfaces. Meanwhile, the science suggested we should be focused on an aerial strategy. The virus spreads most efficiently through the air via the spittle spray that we emit when we exhale—especially when we cough, talk loudly, sing, or exercise. [...]

Since last spring, the CDC has expanded its guidance to clarify that the coronavirus “spreads less commonly through contact with contaminated surfaces.” In the past month, the leading scientific journal Nature published both a long analysis and a sharp editorial reiterating Goldman’s thesis. “A year into the pandemic, the evidence is now clear,” the editorial begins. “Catching the virus from surfaces—although plausible—seems to be rare.” [...]

To be clear: The fact that the coronavirus is much less likely to spread through surfaces does not mean that it is impossible to get the coronavirus from touching things. (Source)

We definitely should focus a lot more on indoor ventilation, now and for the longer term, as there will be many other benefits that have nothing to do with COVID19.

Meanwhile, we’re still waiting for the nukes (vaccines) to be fully deployed so we can nuke that damn Sars-CoV-2 from orbit.

Nvidia Announces Specialized Crypto-Mining GPUs

NVIDIA has finally conceded to the overwhelming mining demand facing the GPU market right now and launched a lineup of dedicated cryptocurrency mining GPUs (can we even call them that considering they have no display port?) called CMP. [...]

NVIDIA is announcing a total of 4 CMP (GPUs?) out of which two, the NVIDIA CMP 30HX and 40HX will launch in Q1 and CMP 50HX and 90HX will launch in Q2. (Source)

🍞 🦆🦆

Simultaneously, Nvidia is taking some measures to try to avoid all its GPUs ending up in the hands of miners and its gaming customers being frustrated at the company and going for competitors:

With the launch of GeForce RTX 3060 on Feb. 25, we’re taking an important step to help ensure GeForce GPUs end up in the hands of gamers.

RTX 3060 software drivers are designed to detect specific attributes of the Ethereum cryptocurrency mining algorithm, and limit the hash rate, or cryptocurrency mining efficiency, by around 50 percent. (Source)

I’m sure it’ll make many mad, but many were already mad with the supply issues, so it’s another reminder that life is trade-offs. It seems Nvidia just prefers to make some miners mad than make gamers mad ¯\_(ツ)_/¯


🎨 & 📜

RIP Philip Seymour Hoffman

Note: There’s some language that you may not want to play out loud to kids or in a workplace (or both, if you’re doing WFH).

Was randomly reminded of this scene (by a tweet about a bad Palantir powerpoint presentation, of all things).

It’s from the movie ‘Charlie Wilson’s War’ (2007). I haven’t seen it since it came out, so it’s not super-fresh in my memory, but I remember having enjoyed it overall. But PSH is (was 😥) always a standout in whatever he is (dammit, wrote present tense again).

It’s also funny to see John Slattery, the actor who plays Roger Sterling in Mad Men. At the time I saw the film, I didn’t know him, but now, the fanfic about Roger’s post-advertising years at the CIA writes itself…

Anecdote from NASA’s Mercury Project (Pre-Apollo)

I’ve always enjoyed the sense of humor of fighter/test pilots and astronauts.

It was a pleasure to read Tom Wolfe’s ‘The Right Stuff’ and Andrew Chaikin’s ‘A Man on the Moon’ (I highly recommend both). Here’s an anecdote that always makes me chuckle:

[In space,] urine was collected in a receptacle that attached to the body with a condom-like pouch that came in “small,” “medium,” or “large.” Gemini and Apollo astronaut Michael Collins wrote in Carrying the Fire that the gadgets were “always referred to in more heroic terms: extra large, immense, and unbelievable.” (Source)