1/ Can’t wait to see the first “incumbent” (in a large software field…like support, CRM, HR, etc) switch from “per-seat” pricing to **per-outcome** pricing.

I’m writing an essay on this now, but consider Zendesk at $115/seat per month…or ~$1.4M/year for 1000 agents: 2/ Let’s say an agent is paid all-in $75,000/year and answers 2000 tickets per year.

This makes the human cost of a ticket $37.50, and the software cost $.69.

1/ We no longer live in the “It’s a Wonderful Life” bank era. Fear can spread at the speed of WhatsApp and iMessage and Twitter, and electronic transfers can instantaneously render a bank insolvent.

Branches and branch-centric thinking are anachronisms. 2/ At the same time, banks in 2023 do MUCH MORE than just lend and deposit money. They provide pipes and technology for *everything.* Payments are mostly electronic, not cash. Payroll goes to a payroll company which…has its own bank.

1/ When starting a company, can you get to *5 customers*? Who are they? Why will they trust YOU?

As a VC, these are questions I always try to ask (selling B2B). I’ll tell my story of how my company got our first 5, and why 5 seems like a good heuristic of “you’ve got something” 2/ I love the term “productize” — it effectively means turn a “service” or “consulting” project into a repeatable widget. Does a large n of customers need/want the same thing, or *roughly* the same thing with few customizations? Then…it *might* just be productizable

1/ What is the “Finance” and “Financial Opportunity” of AI?

If “Bit Manipulation” is a key part of your COGS or SG&A, there’s a huge opportunity or huge disruption coming your way (or a PE firm that might just buy you).

Two sections follow: “Known Knowns” and “Known Unknowns” 2/ Known Knowns: There are companies already doing X, and thus there are two opportunities:
-sell a tool to turn “bit-manipulation-by-people” costs -> GPU usage (AI base marginal cost)
-create a vertically integrated company that competes with a legacy player…by doing the above

1/ The Future of Payments…is Red?

What could disrupt Visa/MasterCard/Amex? How might a new payments Goliath start?

Let’s talk about the Target Red Card. Target did >$100B in revenue last year, 20% of which happened on its own cards: 2/ You’ll see “Target Debit Card” and “Target Credit Cards” (source: Target 10Q)

Many retailers have what are known as co-branded credit cards. Target’s is issued by TD Bank; Amazon => Chase; American Airlines => Citi. Some retailers make more on cards than on their core biz!

1/ Thread: How to sell your company

Companies are (almost always) bought, not sold. This means somebody needs to *want to buy* your company.

Ideally this happens organically. But how do you, as a founder/CEO, expedite this…particularly when you KNOW you’re hitting a wall? 2/ “Planting an idea”



Inception is one of the greatest movies of all time (watch the clip). The whole premise is about implanting an idea in somebody’s mind…the inception of an idea.

“If you're going to perform inception, you need imagination”

1/ “The Goldilocks Zone of Cost Irrelevance”

Some of the most valuable companies provide a crucial service, but don’t charge enough to have customers care enough to switch/think about switching

Janitorial services, payroll services, etc. Hard to be displaced / hard to get in. 2/ At TrialPay I called this the “Janitorial Services Problem” — imagine writing a BigCo CEO: “I will make your toilets 19% cleaner for 7% less cost!”
CEO likely won’t care or even care enough to *find the person who DOES care*
It’s actually possible nobody does!

1/ How a company I co-founded (TrialPay) once exited the Catch 22 of “can’t raise cash without growth; can’t grow without raising cash” which is potentially the most “unsolvable” (Kobayashi Maru) situation a VC-backed company can face 2/ First, a refresher. There are basically three outcomes for a VC-backed company:
-go public/get bought
-go out of business
-become a zombie

Let me explain the third one…because you might be thinking “wait, you mean become marginally profitable forever? That’s good!”

1/ Many areas of financial services have “stochastic margins” per widget, but hopefully (obviously!) positive margins for the whole batch of widgets sold - unlike most manufacturers, with fixed/declining COGS at scale. This means many things when you build a “financial” business 2/ You might make or lose money on the marginal loan, marginal insurance policy, marginal payment processed, marginal market-making trade. Apple makes the same margin on every iPhone 13 Pro it sells.

1/ few thoughts on iBuying in light of ZG news:
Amazon started off stocking every book it sold, but the vast majority of revenue is now 3P marketplace/FBA (Fulfilled by Amazon). Once AMZN aggregated consumer demand, it started aggregating other sellers and charging commissions 2/ So iBuying is not simply “let’s take lots of principal risk by playing market maker.” Opendoor is aggregating a lot of inventory, which in turn aggregates consumer demand (direct to OD), which then would allow OD to aggregate 3P supply since supply follows consumer demand

1/ There have been many attempts to topple payment network effects by paying users to switch. This almost never works, because (a) more people are motivated by convenience than small amounts of money, and (b) those motivated by money will suck up all the promotional budget ASAP 2/ Good case study today is here, with Venmo, straight to my inbox. $10 of $20 at CVS! CVS doesn’t have 50% gross margins, so Venmo is almost certainly paying. But will “normal” people use this? Will it change behavior in a lasting way?

1/ Why is “Buy Now, Pay Later” (BNPL) an early threat to trillions of dollars of market cap - Visa (almost $500B), MasterCard ($350B), card issuing banks, acquiring banks/services (Fiserv, FIS, Global Payments, etc)? 2/ Behind every card transaction there are FIVE parties: consumer -> issuing bank -> network (V/MA) -> acquiring bank -> merchant. The middle three get zero data on what items (“SKUs”) are being bought. Short video I made here:

1/ Covid rules, beliefs, and passions are a 21st century religion, with orthodoxy, heretics, and apologists.

Religion once incorporated “all answers to the unknown.” Why does the sun rise? Where did we come from? What is right and wrong? What happens when we die? 2/ Then came science, which is about falsifiable, testable, reproducible hypotheses. “I like the color blue” isn’t falsifiable/testable, nor are questions of morality. “The earth rotates due to preservation of angular momentum” is. So is “the earth is flat” (it was falsified).

1/ There's been a lot of misinformation about IPOs -- particularly around the narrative of "intentional underpricing" and subsequent IPO pops / "money left on the table." IPOs aren't perfect, but the problem isn't the pop -- a sideshow caused by quirky supply/demand imbalances. 2/ The things to fix are aggregating the most demand, blurring the lines between private and public for a seamless transition to being public, and more thoughtful lockup releases, while also ensuring that a company is sufficiently well capitalized.

Today is August 15, the 49th anniversary of the de facto end of Bretton Woods, creating the fiat currency world we know today. Bitcoin’s birthday is October 31, 2008, but it has a spiritual secondary birthday of today — the widespread beginning of fiat money. Until August 15, 1971, dollars were backed by gold at a fixed rate of $35/ounce. The dollar was the world’s reserve currency, and underpinning this reserve was this gold backing. Any foreign government could convert their dollars to gold.

1/ There’s an opportunity to turn remote education from a weakness to a strength — from a badly rendered “sage on a stage” (constant in education for 100s of years, but *worse* online!) to individualized instruction. To see why, let’s take a trip to 1984 — not Orwell, but Bloom 2/ Prof Benjamin Bloom wrote a seminal work in 1984 showing that individualized instruction lifted outcomes by 2 standard deviations — outperforming 98% of regular students:
web.mit.edu/5.95/www/readi…
But he remarked, it was “too costly for most societies to bear on a large scale”

1/ MasterCard now showing first year over year *increase* (+1%!) in worldwide volume since the pandemic started. But there’s a major confounding variable: the erosion of cash. 2/ In other words, card volume can grow as overall (all tender type) volume shrinks. This was inevitable but just as the pandemic accelerated e-commerce (see second chart above), it’s also accelerating contactless, mobile payments, and even outright bans on cash (virus❤️ paper?)

1/ Two ways of thinking about WFH productivity:

”It’s temporary”: there is NOTHING else to do, people stuck in homes, kids cannot be shipped off to school or daycare, therefore MORE work gets done + people always accessible...but upon opening, people will start playing hooky 2/ “It’s permanent”: the tools for WFH are great (think Slack/Zoom), meeting length gets collapsed to the core substance (1 hr -> 30 mins etc), less travel/commute, accountability via more trackability...

1/ The government *does* have an agency that can remit money at scale. It may surprise you, but it's called the IRS, who pre-COVID had disbursed 37.5 million refunds *this year*
cnbc.com/2020/03/05/her… 2/ PPP is desperately needed, but the process is the least efficient process imaginable. It's like an Easter Egg hunt with the most sinister possible Bunny who hid the eggs. Here's what it looks like, since, unlike your taxes, you don't file with/to the government...

1. I start this thread by unequivocally stating that I am not a lawyer nor a legal expert, but I think the right metaphor for this economic pause (and required resuscitation!) is Eminent Domain. I'd love feedback from experts! 2. When millions of businesses, and therefore commerce and employment, are *forcibly* shut down by the state to keep people safe, it doesn't make sense to think "bailouts." It makes sense to think about Eminent Domain.

Here's how we might get out of this unprecedented economic crisis -- this is highly complex and these are just ideas, but we need fiscal help ASAP targeted at those with fragile balance sheets (small biz, low income Americans, etc) (thread) 1. This is akin to eminent domain of income and solvency -- in the name of public health, a good cause. But when people lose their livelihood, they cease spending, entering a vicious deflationary cycle that monetary policy cannot help.