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31 Jan, 4 tweets, 2 min read
Many say $GME/RH situation is a "problem in the plumbing," implicating the structural integrity/complexity of our financial systems. If the SEC/government wants to "fix the plumbing" the number one thing they should do is ban Payment for Order Flow. [more] en.wikipedia.org/wiki/Payment_f…
PFOF is a practice that "smells bad" the moment you hear about it. Only through contorted mental gymnastics can one come up with "pro" arguments, but never in a clear enough way that you could pass it along yourself. UK outlawed it in 2012. Illegal in Canada. Why...? [more]
In 2004 letter from Citadel's attorney Jonathan G. Katz to SEC, he makes a a definitive & eloquent list of all the reasons that, "The practice of payment for order flow creates serious conflicts of interest and should be banned." Please read detail. [more] sec.gov/rules/concept/…
PFOF is at the heart of today's retail trading. Some argue PFOF should be OK as "everyone's doing it." You don't have systematic failure because one party did something in the corner. It happens exactly when everyone does it. It "smells bad" because it is bad. We can do better.

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Bill Gurley Profile picture
16 Jan
In 2009, I wrote "However, if a disruptive competitor can offer a product or service similar to yours for 'free,' and if they can make enough money to keep the lights on, then you likely have a problem." This is why Signal vs Facebook is so interesting. abovethecrowd.com/2009/07/15/bil…
Signal has two things most non-profit efforts lack. First, in @moxie, a talented, technical-capable, ambitious, & mission-driven leader. Second, in @brianacton, @jankoum, & likely @jack as well as @elonmusk, you have an endless supply of funding. That's a powerful combination.
For Facebook/WhatsApp this represents a extreme form of what I call "orthogonal" competition. There is no class in business school that tells you how to deal with a formidable, non-commercial player in the market. Your core intuitions about how to attack & respond are likely off.
Read 5 tweets
Bill Gurley Profile picture
22 Dec 20
A wonderful 2020 Xmas present to the founders, employees, & investors at VC-backed startups. SEC just APPROVED the ability to add primary capital (fundraise) to a direct listing. It's very exciting to see the SEC enable innovation in this way. (more) sec.gov/rules/other/20…
This is HUGE & will hopefully end 40 years of mispriced IPOs through an old antiquated process that failed to match supply/demand & wasn't open to all investors. 2018:$6B in underpricing. 2019 $7B. 2020, new record => $34B in one day gains for i-bank customers with allocation.
The SEC properly honed in on the two key advantages of a Direct Listing. The first key point is "open access to all investors." Hot IPO access is limited to a few selected ibank customers. Now anyone can participate.
Read 5 tweets
Bill Gurley Profile picture
30 Sep 20
Congrats to @moskov & team @asana as well as Alex Karp & team @PalantirTech on their respective Direct Listings today. Also thanks to team at Morgan Stanley (big supporter of DLs), @stacey_cunning & team @NYSE who make this work so well, & Citadel (DMM).
Fixing the IPO problem was first championed by icons like Pierre Omidyar (Ebay), & Larry/Sergey (Google) who all felt IPOs should be "open to all." Then Barry McCarthy/@eldsjal (@Spotify) broke open the DL door (w/ tons of hard work), & @stewart (@SlackHQ) widened that doorway.
Our entire industry benefits from the work of these pioneers; we owe them all our gratitude. Michael Moritz said "the choice of a direct listing or a traditional IPO has become a test of two attributes: courage and intelligence." The "courage" part is the hardest of the two. 🙏
Read 4 tweets
Bill Gurley Profile picture
23 Sep 20
Been meaning to make this recommendation for some time, & as with "Range," I am several months late. I really, really loved "How Innovation Works" from @mattwridley It is a very elegant follow up to "The Rational Optimist" - read both if you can. (more) amazon.com/How-Innovation…
One of the most amazing things about both books is Matt's ability to connect the dots across very long time horizons. Very few can. He also has the ability to combine thinking from many fields - most notably science, technology, psychology, & a heavy dose of microeconomics.
Relative to our world in Silicon Valley, Matt shows how "what we do" is not new, but a very old (and critically important) process. He refers to idea generation as "invention," & notes that successful "go to market" (which he calls innovation) is far more important. Agree 10x!
Read 6 tweets
Bill Gurley Profile picture
16 Sep 20
Some encouragement to comment on $SNOW IPO. While it would be easy to do normal post wrt mispricing, it is important to understand what is different here from other IPOs. The most important data is broad (40 years of underpricing, 2020 worst year yet), vs. 1 company. [cont]
First, its important to acknowledge that @SnowflakeDB is an amazing outlier, & proof of the innovation that develops from this great place we call Silicon Valley. Hats off to the employees, Frank Slootman, @laserlikemike, @altcap, @carl_eschenbach, & all those involved. [cont]
Outside of if the company/shareholders "gave up" anything, the hand allocated investors received $4.3B is one day wealth transfer. That's an insane amount of REAL money. That, along with watching the theatre and drama today, it is HARD to say - this is exactly how it should work!
Read 8 tweets
Bill Gurley Profile picture
14 Aug 20
For those of you on the AB5 beat, important to know that the #1 driver behind this legislation is organized labor. "However, the reality is that AB5 was drafted by a union organizer, and this bill was designed as a way to grow union membership." latimes.com/socal/daily-pi…
Today no drivers are unionized, but the SEIU and others want them to be. Vox has a deeper dive here, outlining decades of history behind this push. vox.com/2019/9/11/2085… Important to know that its not actually coming from a large % of the actual drivers themselves.
Here's even more proof. When musicians (who are unionized) wanted out of AB5, they were quickly let out. ocregister.com/2020/04/17/mus… Love the title, "Music industry, lawmakers, unions agree on revamp to AB5." At least it shows you clearly who writes legislation in Sacramento.
Read 4 tweets

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