@Chamath just dropped the 2019 @socialcapital annual letter.
It’s just as riveting as the 2018 letter.
I thoroughly enjoyed digging through it,
Here are key points and my notes in [ ]
Cc: @nlw @grummz @radigancarter
Thread…#investing #markets #entrepreneurship
It’s just as riveting as the 2018 letter.
I thoroughly enjoyed digging through it,
Here are key points and my notes in [ ]
Cc: @nlw @grummz @radigancarter
Thread…#investing #markets #entrepreneurship
1/ Social Capital has outperformed the S&P 500 for 2 years in row.
The 2018 and 2019 letters state different gross IRRs for the years 2011-2018…images below.
@chamath care to clarify?
The 2018 and 2019 letters state different gross IRRs for the years 2011-2018…images below.
@chamath care to clarify?
3/
The gilded age;
The railroad industry led to the expansion of factories, mining and farming..Wall St financed all of it, just like they do today.
The gilded age;
The railroad industry led to the expansion of factories, mining and farming..Wall St financed all of it, just like they do today.
4/ Immigrants flock to America resulting in class divisions.
In the 30yr run of the gilded age, America faced 2 market shocks, the panic of 1873 and the panic of 1893.
both comparable to the Dot-Com Bubble and the Great Financial Crisis.
In the 30yr run of the gilded age, America faced 2 market shocks, the panic of 1873 and the panic of 1893.
both comparable to the Dot-Com Bubble and the Great Financial Crisis.
5/ The railroads were the google and facebook of the day,
the working class began to loathe their power.
The entrepreneur [Zuckerberg] of their time was Collis P. Huntington, society hated him.
the working class began to loathe their power.
The entrepreneur [Zuckerberg] of their time was Collis P. Huntington, society hated him.
6/ The excesses of the Gilded Age led to the progressive era,
political and business reform everywhere,
regulated monopolies, new government rules and administrative offices such as the FDA.
political and business reform everywhere,
regulated monopolies, new government rules and administrative offices such as the FDA.
7/ The Modern Gilded Age;
An unbelievable consumer surplus that came with a hidden cost, our data.
Massive gains in wealth only for a few companies [FB,Goog etc] while we wonder why we aren’t living better than our parents nor able to give better lives to our children.
An unbelievable consumer surplus that came with a hidden cost, our data.
Massive gains in wealth only for a few companies [FB,Goog etc] while we wonder why we aren’t living better than our parents nor able to give better lives to our children.
8/ People are beginning to blare the horns: Stricter Borders! Universal Social Programs! Change!! ANY change!
These changes are represented by political proxies that may be forgotten; however, their ideals will evolve to be better, faster.
These changes are represented by political proxies that may be forgotten; however, their ideals will evolve to be better, faster.
9/ This may be the end of the modern gilded age and the beginning of a new progressive era 🙌
The new progressive era begins with a regulatory noose;
$msft, $apl, $amzn, $goog, $fb need to be reigned in under strict control,
The new progressive era begins with a regulatory noose;
$msft, $apl, $amzn, $goog, $fb need to be reigned in under strict control,
10/ they can’t be allowed to find ways to write new regulation & cement their monopolies.
Regulators will need to convene broad groups of experts with no conflicts of interest who can articulate bigtech business models, their pros/cons and how to limit their impact.
Regulators will need to convene broad groups of experts with no conflicts of interest who can articulate bigtech business models, their pros/cons and how to limit their impact.
11/ eg: Whatsapp and Instagram will need to become distinct companies that aren’t allowed to share data with eachother.
This will allow the demand side of the internet economy to compete with the supply side.
Regulators can achieve this within 10yrs. [IF they want to]
This will allow the demand side of the internet economy to compete with the supply side.
Regulators can achieve this within 10yrs. [IF they want to]
12/ A new progressive era is sustained by taxation on bigtech;
Resilient national economies are a fresh trend, events like the #coronavirus compound the argument for strong local economies.
Resilient national economies are a fresh trend, events like the #coronavirus compound the argument for strong local economies.
13/ Govs. may demand that profits generated by bigtech within their borders need to be subject to local taxes.
[Weren’t we striving for a borderless world?🤨This is sound…but grim]
[Weren’t we striving for a borderless world?🤨This is sound…but grim]
14/ A new progressive era flourishes with a change in market incentives;
Govs. need to do more to allow small businesses to compete and create vibrant ecosystems:
1) Make RSU compensation expensive for companies above a certain size/profitability.
investopedia.com/terms/r/restri…
Govs. need to do more to allow small businesses to compete and create vibrant ecosystems:
1) Make RSU compensation expensive for companies above a certain size/profitability.
investopedia.com/terms/r/restri…
15/
2) Favor remunerative tax treatments for employees who choose to receive stock/income from small companies.
3) Prevent M&A from bigtech as well as acqui-hiring.
Make the engineer expensive for bigtech but cheap for startups and a new wave of entrepreneurship will ensue.
2) Favor remunerative tax treatments for employees who choose to receive stock/income from small companies.
3) Prevent M&A from bigtech as well as acqui-hiring.
Make the engineer expensive for bigtech but cheap for startups and a new wave of entrepreneurship will ensue.
16 /
[Can you name something truly innovative that BigTech has invented in the last decade?
….
….
Neither can I ¯\_(ツ)_/¯ ]
The need for true progress is increasing. Gov's cannot solve these issues alone.
[Can you name something truly innovative that BigTech has invented in the last decade?
….
….
Neither can I ¯\_(ツ)_/¯ ]
The need for true progress is increasing. Gov's cannot solve these issues alone.
17/ The Sterilization of Talent;
STEM grads lured by big pay to work on photo-tagging and ad targeting instead of clean energy and space exploration.
Intellect has been lobotomized just like it was pre 2008 by Wall St.
This practice was taken over by BigTech post 2008.
STEM grads lured by big pay to work on photo-tagging and ad targeting instead of clean energy and space exploration.
Intellect has been lobotomized just like it was pre 2008 by Wall St.
This practice was taken over by BigTech post 2008.
18/ The Space Race;
Tech progress has been declining since we landed on the moon.
Bigtech is fueled by profitability and stock prices instead of altruistic innovation.
In the 60’s a bright engineer worked on fuel cells, thermodynamic systems etc.
Tech progress has been declining since we landed on the moon.
Bigtech is fueled by profitability and stock prices instead of altruistic innovation.
In the 60’s a bright engineer worked on fuel cells, thermodynamic systems etc.
19/ Bright engineers of today work on far less meaningful endeavors
This capital misallocation needs to end…we must demand it.
This capital misallocation needs to end…we must demand it.
20/
[ideally, the cost to buy a home and raise a family need to be lowered if we are to entice engineers to work on big picture missions, until this is done, no1 will give a shit about “the greater good”]
[ideally, the cost to buy a home and raise a family need to be lowered if we are to entice engineers to work on big picture missions, until this is done, no1 will give a shit about “the greater good”]
21/ On Markets;
Cutting interest rates and printing money has flooded the market with capital which = higher stock prices.
Almost free money has resulted in: stock buybacks, poor capital allocation and tax avoidance.
Programmers will love this image:
Cutting interest rates and printing money has flooded the market with capital which = higher stock prices.
Almost free money has resulted in: stock buybacks, poor capital allocation and tax avoidance.
Programmers will love this image:
22/ Case in point: axios.com/new-boeing-ceo…
23/ On @SocialCapital Performance;
SC faces no pressure from limited partners.
Capital allocation is about a few good decisions supported by a lot of thinking and debate with a good team.
SC faces no pressure from limited partners.
Capital allocation is about a few good decisions supported by a lot of thinking and debate with a good team.
24/ Since 2011 Social Capital has compounded its money 997% beating the S&P by more than 3 times.
SC generated $1.7B in cash and equivalents in 2019.
Liquidity focus is important as exogenous events like the #coronavirus are no longer priced appropriately.
SC generated $1.7B in cash and equivalents in 2019.
Liquidity focus is important as exogenous events like the #coronavirus are no longer priced appropriately.
25/ SC invested more than $500M into @virgingalactic, Sir Richard Branson is revered as usual.
SC also invested in another company that they will keep confidential for now.
[Who? WHO?!? J/K…it doesn’t matter]
SC also invested in another company that they will keep confidential for now.
[Who? WHO?!? J/K…it doesn’t matter]
26/ More cash > Options for employees;
The SC stealth acquisition has eliminated all options for employees and simply pays more so that they may focus on living well and caring for their families.
Company equity is made available for purchase by employees each year. 👏👏👏
The SC stealth acquisition has eliminated all options for employees and simply pays more so that they may focus on living well and caring for their families.
Company equity is made available for purchase by employees each year. 👏👏👏
27/ Anti-Correlation of money raised to value created;
VC’s have never done anything important.
Bigger funds and fee-based compensation are their fuel, not bigger ideas.
VC’s have never done anything important.
Bigger funds and fee-based compensation are their fuel, not bigger ideas.
28/ Private companies that raise money with negative unit economics to drive growth are over capitalized and will face harsh valuation resets [See: Wework, Uber, Lyft]
Startups are shipping product features that have no moat.
Startups are shipping product features that have no moat.
29/ Competitors copy the same features with costs paid out by their last funding round.
Work With @Socialcapital and live a life of purpose;
If you’re working on something hard and useful get in touch with them. Change the world (literally)
Work With @Socialcapital and live a life of purpose;
If you’re working on something hard and useful get in touch with them. Change the world (literally)
30/ In closing:
Be coherent and honest with others.
Take the advice of others but carefully consider how it applies to you.
“Put on your oxygen mask before helping others” -Internalize this timeless airline announcement.
cont…
Be coherent and honest with others.
Take the advice of others but carefully consider how it applies to you.
“Put on your oxygen mask before helping others” -Internalize this timeless airline announcement.
cont…
31/
[It broke me to read the last 3 sections of this letter,
while I consider myself to be monetarily stable due to a long stint @ a cushy job and asset investing…neither has armed me with technical skillsets required to do something impactful for the world. it hurts]
[It broke me to read the last 3 sections of this letter,
while I consider myself to be monetarily stable due to a long stint @ a cushy job and asset investing…neither has armed me with technical skillsets required to do something impactful for the world. it hurts]
32/
[It’s consolation to know that you, dear reader, who may be very talented,
you may have the opportunity with a company like SC to make a difference and be compensated accordingly. I’m grateful for that.]
[It’s consolation to know that you, dear reader, who may be very talented,
you may have the opportunity with a company like SC to make a difference and be compensated accordingly. I’m grateful for that.]
33/ This thread needs to be iced with sage advice from Chamath that was stated 7 years ago and holds true even today:
We need more companies like @socialcapital, I’m glad they’re setting an example for others to follow.
cont...
We need more companies like @socialcapital, I’m glad they’re setting an example for others to follow.
cont...
34/ [Bonus Note:
In the video above, @chamath jokes about not really having any backroom negotiations that have led to enormous success,
In the video above, @chamath jokes about not really having any backroom negotiations that have led to enormous success,
35/ However, he also mentions being a large shareholder of @palantirtech which has been given a bad rep for all sorts of data gathering activity.
It seems that they’ve turned the page though. I remain optimistic.
Read the entire letter here: socialcapital.com/annual-letters…
/fin
It seems that they’ve turned the page though. I remain optimistic.
Read the entire letter here: socialcapital.com/annual-letters…
/fin
