1/ "The possibility effect in the bottom left cell explains why lotteries are popular. When the top prize is very large, ticket buyers appear indifferent to the fact that their chance of winning is minuscule. A lottery ticket is the ultimate example of the possibility effect." Image
2/ "Without a ticket you cannot win, with a ticket you have a chance, and whether the chance is tiny or merely small matters little. Of course, what people acquire with a ticket is more than a chance to win; it is the right to dream pleasantly of winning.” Kahneman Image
3/ Humans "tend to overweight low-probability events. Imagine you have a 1 percent chance of winning $1 million, and you’ll know the outcome tomorrow. Subjects place a decision weight of 5.5 percent on a 1 percent objective probability." Mauboussin research-doc.credit-suisse.com/docView?langua…
4/ The root cause of the possibility effect is availability bias, which is a tendency to overweight what is easiest to recall (e.g. more vivid and recent).

Does our digital world make the possibility effect stronger today by making the outcomes of lucky people more available?
5/ Do people who are constantly connected to feeds about new millionaires and billionaires have a greater propensity to gamble when trading, even though the bet has negative expected value? Has the possibility effect been fed steroids by modern media? Image

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More from @trengriffin

20 Nov
1/ Humans often don't act independently. We simply don't have the time or resources to make every decision on our own. Nature has programmed humans to herd and fighting that instinct at the right time is a trained response you can get better at. Learning from mistakes helps.
2/ Humans herding can create feedback loops that can amplify like Jimmy Hendrix used feedback with his guitar. That feedback can be good or bad. Businesses work to create beneficial feedback loops. Investors work to spot businesses that create those feedback loops successfully.
3/ "Emergence" occurs when local behavior transforms into global phenomena disconnected from its origins. Unexpected things happen in complex systems. Cause and effect aren't simple to untangle ex post. The best response is to stay humble when making predictions. Weird happens.
Read 4 tweets
20 Nov
1/ My advice on mentoring always starts with "Give to Get.”

Find someone you admire and offer to help them without asking for anything in return. The benefits from this relationship will come back to you often enough that your returns will be better than any other investment
2/ I'm not suggesting you make this offer to help to just anyone. An offer of assistance should be made to someone you admire. Doing research in whether they are trustworthy and may have good chemistry with you is wise. Many times they will offer to pay you, but not always.
3/ My suggestion is the inverse of several things this article on mentors suggests. My approach doesn't involve preparing a job description for the mentor, making a cold ask for mentoring or holding then accountable with a structured mentorship agreement.hbr.org/2020/01/how-to…
Read 5 tweets
18 Nov
1/ OG in SaaS is John Malone. He invented the modern cable business model. Of course he didn't invent the technology.

John talks about churn, ARPU and unit economics factors more than I do. That may be surprising but I learned from him and Craig McCaw.cnbc.com/video/2021/11/…
2/ If you invest in SaaS and listen to the interview, you might want to mentally substitute the word SaaS for cable. How he discusses issues like transfer pricing, bundling, scale, and overbuilding are just as applicable to SaaS.

If you see a transcript please forward it.
3/ Partial Transcript. cnbc.com/2021/11/18/cnb…

Global search and replace the world "cable" and insert "SaaS."

"The biggest threat has always been the stupid competitor with a lot of money coming into your business because they may not end up with much profitability." Malone
Read 5 tweets
13 Nov
1/ When the chips are down, something's got to give. Redesign is inevitable. Cold ass move tho.

autonews.com/automakers-sup…
3/ GlobalFoundries CEO: "We’re sold out of semiconductor chip capacity through 2023"

"The automotive industry accounts for 37 percent of all semiconductor demand in Europe"

allaboutcircuits.com/news/as-lead-t…
Read 4 tweets
13 Nov
1/ A valuation has two parts:

1) normal operations, which represent business as usual. You value these by taking the present value of future free cash flow.

2) real options value.

Some people are better at determining real options value than others.

morganstanley.com/im/publication…
2/ Some people compare investments that are similar and conclude if X is worth $1 trillion then Y must be worth $100 billion. This is pricing an asset rather than valuing it. The value of an asset may be very different from its price. pages.stern.nyu.edu/~adamodar/pdfi…
3/ A difference between then now and 2000 is interest rates. The Fed raised interest rates: three times in 1999 and twice in early 2000. Not just goods and services inflation is being driven by a "demand shock" right now.
Read 4 tweets
11 Nov
1/ Disney streaming customer net additions have slowed from previous quarters. Will they need to increase CAC? Has churn increased?

Do you know what CAC and churn are? How much is churn and return? Disney knows exactly. variety.com/2021/digital/n…
2/ People do detective work to determine Disney's streaming churn rate. The goal isn't to be precisely right, but instead to understand when the market price may create a likely gap between expectation and reality. There's never certainty. For example: hollywoodreporter.com/business/busin… Image
3/ "The company expects its Disney+ additions in the second half of fiscal 2022 will be meaningfully higher than the first half of the year. Average monthly revenue per subscriber for Disney+ came in at $4.12, down 9% year over year."

Will Disney increase COGS and CAC? Image
Read 4 tweets

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