-
Strategies for a discontinuous future.





Consulting & advisory, research notes, in the press, about bubblegen,
next wednesdays.





Friday, April 30, 2004
 


Spam museum (canned, not digitized). God damn it, I should have written a paper on the strategic history of spam when I was in b-school.

-- umair // 12:10 PM //


 


Politics of the Day

"Patriot Act Suppresses News Of Challenge to Patriot Act". Hello, we are turning into Saudi. Nice to meet you.


-- umair // 12:03 PM //


 


Finally, finally, someone in the corporate world makes the breakthrough - playlists are massively valuable - because they're really just positive externalities which massively reduce search costs. Too bad it's the NYT, which doesn't know about place like musicmobs (which is an absolutely killer idea and highly recommended).

-- umair // 11:37 AM //


 


Outsourcing 'security forces' in Iraq. Recommended.

-- umair // 11:34 AM //


 


14bucks.com. Check it out and then think about how this guy thinks he's investing in low-risk assets (because they're cheap), but he's really investing in massively high-risk assets - which are the only ones who can give him the return he needs.

-- umair // 11:31 AM //


 


GMail

I got an account, it rocks. Really. I think the greatest interface I have used for a mail client is iPlanet Messenger (no kidding) and I don't see that the search features in GMail are revolutionary, but that doesn't matter - it really is light years ahead of the competition.

-- umair // 11:09 AM //


 


Google vs Wall Street Virus

I have very little to say actually. 3 things:

1) It's the fact that they won't issue quarterly guidance and have a two-tiered ownership structure that really counts. I cannot emphasize enough how massively important these steps are by Google - 'earnings management' (which was the death of true corporate governance) meant that firms have basically been like jesters in the Street's court for the last twenty years or so. Skilling and Fastow were the effect of what Google is trying to take on - what I call the Wall St Virus (aka the meme of ultra-short termism as a result of hyper-quantification where analysts value companies solely in the vacuum of spreadsheets). The auction is important as well. Here's why: Ibanking has always been a business that's based on asymmetrical information - in particular, asymmetrical relationships. There's no reason for these asymmetries to be exploited anymore, since they don't create any real value anymore. Look at it this way - buying shares at IPO has for a long time been a sucker's bet - on average, the price always falls in the first few days after IPO. Why is this? At least part of the reason is that the true value has been captured by the underwriters' favoured customers, to whom pre-IPO shares are 'flipped' (or handed to) at extremely cheap prices. Inductive expectations take care of the rest of the bubble - but little value is left on the table for suckers buying shares on the 'open' market. Auction structures begin to defeat exactly these relationship asymmetries that ibanks exploit. As it is, Morgan and CSFB are earning 3% for underwriting. Doesn't sound like a lot - but it's going to work out to a staggering amount, for assuming essentially no risk.

2) There have been a lot of valuation attempts on the Net. No point really. First, the auction structure ensures that people will overpay. This is not a true Vickrey auction (where the second highest bid is accepted as the sale price, removing the winner's curse. Read some theory if you don't know). Second - and this is the important bit that the valuation attempts have missed - it's a lil tough to value Google solely on a multiples basis without understanding the growth path of earnings. I don't understand why no one has gone straight to the financials - if you check the growth path here, I think you get the picture pretty quickly.

3) Forget the noise and commentary, most of it doesn't really add much. Read the registration statement - in particular, the Letter from the Founders and the financials. This is absolutely crucial reading (and it's fun to see how they've become disciples of Buffett).

If you really, really wanna read some commentary, I recommend you go to venturpreneur.



-- umair // 11:05 AM //


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