What’s Happening With Real-Estate Right Now

There’s a story being reported left and right. The story is about commercial real-estate. With the global lockdown happening right now, commercial properties are going to go through a massive setback. Retailers have united to the call of not paying any rents until the businesses open.

Most small businesses have cash that would last no longer than a month. Many of these will have to permanently close down. As a cascading affect, commercial real estate as a whole would be losing value. REITs are already trading much lower.

There’s another story being reported heavily. It’s about the travel industry. No one expected or prepared for travellers to disappear. Many airlines would go bankrupt without financial support from the governments. I can’t imagine how bad hotels are right now. Especially small and medium hotels who are running the show on rented properties. Many of these will permanently close down.

There’s another story but that’s very under-reported so far. It’s about the residential real-estate which I originally thought would stay unaffected but I’m curious whether that’s the case. It’s about the Airbnb’rs. The super hosts. Semi-pros who are in a pretty bad situation. Their odds of coming out of this just as good as someone trading crypto on a 10x leverage. Slim. Let me explain myself.

Airbnb hosts begin by renting a property. They are able to then sublet this property at a 3x higher price. After setting aside profits, they are in a pretty good position to rent or mortgage the second property. Eventually many super hosts are hosting as many as 10 properties. And they have absolutely no one staying at any of their properties. Their cash is evaporating fast and there is a real trouble brewing.

The question that I’m trying to find answer for though is whether this could affect residential prices just as I expect the commercial real estate to suffer.

Citizenship As An Asset

If you’re born in Pakistan (or similar places) even to a rich family, you were born a million dollar poorer to new borns in the developed countries. The reason why I say that is because in order to acquire one of those citizenships such as North American or European, you would need to invest over a million dollars to even qualify to start the residency process, after which in most cases you would still need to spend a certain amount of time inside that country to qualify for citizenship.

If you choose to instead acquire through the pathway processes such as going as as a student or as a skilled worker immigrant, you’d still need to spend many years in the country, paying thousands of dollars in taxes on your income and bearing other costs such as academic costs and higher cost of living in order to acquire such a citizenship. It will still cost you a few hundred thousand dollars.

You were not just born poorer, your freedom was taken away from you at the time of your birth. It was decided when you were born, that you are going to have travel restrictions. That you will not qualify to participate in global trade. That you won’t have access to tools needed to do so such as Stripe or PayPal etc.

Over my life, I was lucky to meet hundreds of smart people who were able to take control of their lives in their own hands. They were able to circumvent many restrictions imposed on them. They were able to get access to many of these tools and were able to get successful in the end.

However there’s no easy fix to avoiding the travel restrictions and I think for those who can, should make their best effort in order to acquire the asset that we call citizenship. It is an incredible asset in a way that it not only enables you, but is transferable to everyone in your future generations. It will ensure that your children and their children are not born poorer or with conditions that worked against them.

You can continue to live in your native country, there’s nothing that stops you from doing so, but have a secondary citizenship is something that we all should seriously consider.

Finding Opportunities in a Recession

As an entrepreneur, it’s very important to stay calm even when the world is breaking apart. Most of the time, when there is a world changing event like COVID-19, people’s consumption behavior change. They buy different things compared with their previous spending habits.

While doing product research for our E-Commerce holding company, I got to know that Hair Clippers was one of the best selling products while China was on lockdown because of COVID-19. Who would’ve thought that people would buy Hair Clippers when hundreds are dying because of an extremely deadly virus.

But when barbershops are closed, you still gotta cut yours and your children’s hair. 3 of the fastest growing Chinese companies from January to March are companies which are either manufacturing Hair Clippers or are leading retailers.

Another great example of this trend is blankets, hand warmers and mini electric heaters. Due to control measures of COVID-19, apartment buildings turn off heating and you have to open windows for fresh air. However, temperature in many parts of the world is still too cold. China’s leading e-commerce marketplace Pinduoduo reported that sales of blankets and hard warmers saw 165% increase during the lockdown.

When you find calm in chaos, you can find opportunities like these and benefit from them. Insights like these coupled with lethal digital marketing can create new companies which capitalize on new purchasing behaviors.

This is a guest post by Socialoholic’s co-founder @SaadBassi

The World Is Working From Home & Distributed Companies Are The Future

If you have read my thoughts before, you may have known that I’m a big supporter of distributed companies and remote work mentality. My favorite part of the remote work is the ability to have a higher quality of life for a much lower cost.

Many tech entrepreneurs and investors feel that remote is not the way to go. That the physical presence within the Silicon Valley is a very important pre-requisite to success. They back this with statistics that over 70% unicorns are born in the bay area, and that less than 10% are born in NYC or LA. With only 3% or so coming out of India or China and 5% from rest of the world.

Their case is strong as far as the statistics are concerned. I’m the numbers guy so there’s no basis for me to refute what they are saying. Despite that, I believe remote work is the way to go. Silicon Valley could be the present, but remote is the future. The statistics that are thrown around only reflect what is happening today, and not what could be happening in the future.

As with the COVID-19 emergency, many tech companies have decided to go remote. The list is a bit too long but here are the ones I’m aware of; Amazon, Facebook, Google, Linkedin, FourSquare, Twitter, Uber, Lyft, Zillow, Bitly, Digital Currency Group, IBM, MongoDB, Airbnb, Grammarly, PostMates, SalesForce, ShutterStock, KickStarter, Silicon Valley Bank, WeWork, Yelp etc. I think when all of this is over, some of these companies, and many other companies will have a part of their work force hired to work remotely.

Remote work is to HR what CloudFlare is to the internet. Remote employees ensure higher uptime, load balancing, no single point of failure. Remote employment means you can hire better talent for cheaper costs. Forget cheaper costs, remote employment ensures you can hire better talent from the talent pool that was previously unavailable to you, even if you want to pay identical salaries as you pay in the SV. For the employees, it’s the ability to get a serious bang for the buck by being in a high quality low cost area.

After the COVID19 is over, the world will retrospect. The world will question the ability of the US to handle health crisis. The world will question if China should be the sole manufacturer of the global goods. The world will question the open borders of the EU and the lack of systems in place to protect against a pandemic. And a small part of the world will also question how can we leverage remote work to build more durable companies.

Are Software Companies Safe from Present Economic Conditions & COVID-19?

What’s happening right now due to coronavirus is a supply-chain crisis. Businesses have buyers but are running out of goods to sell. Once the business profitability is affected due to decline in sales, they will let go some of their employees. This could affect purchasing power of some of the people creating a demand-side crisis.

The pandemic could also affect demand as more and more people stay at home to avoid the disease, they would be spending lesser money on certain products. In addition, their purchasing power could also be affected by additional health related bills. If COVID-19 lasts long enough, which at the moment it is showing signs of, there will be both supply-side and demand-side disruptions.

To improve the situation, Fed has cut down the interest rates. The goal is to sustain the economy by offering cheaper credit to businesses. But I’m wondering how can a supply-side disruption be fixed with cheaper credit. Moreover, cheaper credit could help larger businesses but small and medium sized businesses are likely to suffer the most.

While it is obvious that trade and e-commerce are largely affected, are software companies safe? Some of them might be but I do not believe that they will not have a cascading affect on them. After all, many software businesses are intended to solve real-world problems.

In my industry for example, many software businesses are Shopify apps or WordPress plugins. Shopify store owners use those apps to improve their selling experience. But if there are no sales, or no revenue, the store owners will obviously stop using those apps until situation changes.

Softwares that have nothing to do with commerce, may be relying on advertising as a source of revenue, or may be assisting industries that depend on advertising revenue. They aren’t safe either. Once the commerce is disrupted, the advertising is meant to be disturbed too. In my own case, my e-commerce stores are affected due to supply-chain crisis, but I’m also not spending on Facebook and Instagram ads to drive sales which means the advertising industry is taking the hit too.

As a publisher, I also have data to support this argument as CPMs are going down across the board. So any software business which is dependent on advertising or support customers who drive revenue from advertising will see disruption too.

All other kind of softwares may be safe from this cascading affect, but will still be dealing with users with lower purchasing power.

While pure software businesses are much better off than other businesses, I wouldn’t say that they will not be affected. However, it is still a better time to be running a software business than any kind of traditional business.

Achieving Gender Equality In Tech

It is often statistically reported that women are paid lesser than men in most lines of work. In tech, specifically, it is said that women are paid 5-40% lesser than their male counterparts.

Another striking statistic that is often highlighted is that women make up only about 25% of the tech workers. This particular statistic doesn’t bother me because in comparison, healthcare industry employees 77% women. One gender could be more inclined towards working in a particular industry than the other and there shouldn’t be anything wrong with that.

Coming back to salaries, Fiverr, a freelance platform reported that on their platform women at average earn $96 against their male counterparts who earn $100. This represents a 4% difference and is by far one of the best reported figures I’ve read regarding the gender equality.

I’ve often written on this blog that freelancing, remote jobs or distributed companies have many advantages. I’ve often highlighted the location and time independence as the most major advantages. You could be anywhere at any time living the millionaire lifestyle.

But the data published by Fiverr has given me new reasons to celebrate the digital nomad lifestyle. You could be a man or a women. You could be a Muslim or Jew. You could be in Syria or Romania. You’ll get the equal opportunities and wages as everyone else on the platform.

Distributed companies, remote employment and freelancing is the answer to gender inequality. Not just gender inequality, it is also the answer to racial inequality or any other kind of inequality. Obviously in addition to granting you freedom and wealth.

How To Be Happy The Scientific Way?

I read an interesting research about happiness and how to attain it. Let me assure you wealth and happiness have no co-relation. They are certainly not directly proportional, most likely also not inversely proportional, but aren’t really co-related.

Based on the interesting research I read, happiness is attained by fulfilling 4 fundamentally important things.

The first one is PQ or physical quotient. To be able to stay happy you need to be physically fit. You can not enjoy your wealth, intelligence, relationships without being in good health. So your eating, working out, and sleeping habits will have significant contribution towards your happiness.

The second is IQ or intelligence quotient. If your mental age is ahead of your chronological age, it will contribute towards your happiness. You’ll enjoy being intelligent and stay happy about this.

The third one is EQ or emotional quotient. If you’re emotionally in control and an emotionally stable and sound person, you’ll be moving closer to your happiness goals.

And the last one is SQ or spiritual quotient. What that means is that if the things you do are also done with a higher purpose in your mind, it will make you happier than simply doing the same things with no higher purpose. Compassion and altruism can help you lead a happy life.

I have a flight to catch today and wrote this at the airport. I hope and wish that all of us lead a fulfilling and happy life.

The Incentive To Be On A Platform

Platforms of all sorts incentivize businesses to depend on them. Most of my internet businesses were/are heavily dependent on Facebook, Instagram, Digg, Google etc. You got to drive traffic from somewhere, right?

The influencers making hundreds of thousands claiming to be indie artists are dependent on platforms like Instagram, Facebook & Youtube. It would take one bad email to snatch away their dreams, career, livelihood and fame. Platforms are risky, and the bigger your business is, the less dependent you need to be on a platform.

The list of causalities is too long for me to name. The list of my own business casualties isn’t short either.

It’s okay to be on a platform. We all need them. They are the power houses of the internet and fuel growth for all of our businesses. But it’s one thing to drive business from the platform and it’s another thing to build business on a platform. In an ideal scenario, we shouldn’t be building businesses on platforms. In some situations though the reward is so high that we and others embrace the risk that comes with the platforms.

When I started this blog, my father asked me that why am I self-hosting it. By self-hosting, I need to take care of some small bills, and also need to maintain it myself. In comparison, I could have started writing on Medium instead, which is what my father expected me to do. It can be easier to subscribe, higher email delivery and open rates, free recommendations and surfacing of my content on the platform to other medium users, no cost of hosting content, safe, higher up time, better SEO etc. Their could be many benefits.

But when I see content-locker on Medium that tells me that I like to read a lot and hence have reached my reading limit, it’s a sweet reminder of why I chose not to use a platform like Medium.

I’ve finally decided to share my life stories. It took a long while for me to agree to write and share and I can not leave my breadcrumbs on the mercy of Medium or others. I use platforms because there’s financial incentive. As there is no financial incentive with this blog, I decided to self host it even if it means lesser readership, lower email open rates and everything else that I’ll be missing out. In the long run, I think, I will miss out more on a platform.

Booking.com Is Restricted In Turkey, But There’s Something Interesting Happening

Because I use booking.com to book my hotels, I sometimes ask the hotels I stay in about the percentage of bookings they get from booking.com. The answer varies between 60% for some hotels and 80% for others. But it is safe to say that majority of the bookings.

For the last hotel I stayed in Istanbul, the manager claimed 75%. This is despite the fact that from within Turkey you can not use Booking.com to book properties in Turkey. So it means most of the bookings that hotels in Turkey get from Booking.com are booked from outside of Turkey or by foreigners. But some Turkish people also use booking.com to book properties within Turkey by using VPN.

Those who aren’t tech-savvy, and do not know how to by-pass the restriction, then book the properties using Kayak or Agoda. Hotels claim that after Booking.com, they get most bookings from Kayak or Agoda because they are not restricted from usage in Turkey. My last hotel claimed he gets 15% bookings from Kayak or Agoda. In summary 90% of his bookings are coming from Booking.com, Kayak & Agoda.

The interesting thing is that Kayak, Agoda and Booking.com are all owned by Booking Holdings.

Not just that Booking Holdings also own Priceline, Rentalcars.com, OpenTable, Momondo, Cheapflights and many other travel websites.

Booking.com charges 15% commissions to properties which most hotels are happy to pay as “marketing cost”. The manager I spoke to today says before this network, each hotel employed marketing staff and spent money on internet ads that may or may not always worked.

Booking Holdings posted $15 billion dollars in revenue in 2018. They don’t own any properties or any hotel rooms. Marriott posted $20 billion dollars in revenue in 2018 and it is the world’s largest hotel chain with 10,000+ properties and 1 million+ rooms. Since booking holdings has low operating costs compared to Marriott, their operating income is 2.5 times higher.

Where Are Valuations Heading For Internet Businesses And What Does It All Mean

I believe it’s getting tougher on the internet. All markets are getting more competitive. When I started out, it all seemed too easy. Sometimes I wonder if it’s just me getting older & inefficient or are internet businesses actually getting more competitive? The answer always lies in statistics, so I decided to dive in.

I started off my career by making content sites or blogs. There was a mega estate on desktop screens for ads, and the ad-blockers didn’t exist. It was so much easier to monetize blogs compared to now as the screens have gotten smaller and tech-savvy customers are using ad-blockers. With some browsers such as Brave designed to offer ad-blocking by default, it’s getting tougher to run a content site. Despite this trend, a blog would sell for 3x annual profit multiple now compared to 2008 where 1-2x was considered the norm. I sold my first blog in 2010 for a 1.3x multiple or for 16 months profit but the same blog would easily sell for much higher today.

In theory, such low valuation for an internet businesses appear absurd to me. It appears absurd because real-estate in comparison is sold for 15-20x annual earnings which is commonly known as price to rent ratio. This means, buyers of internet property are willing to pay only 15% of what they would pay for a real-estate if both generated similar earnings per month.

The reason why buyers do that is because they believe that real-estate would generate revenue for a longer time-period than internet businesses. But have internet businesses started generating revenue for longer time-period compared to 2008? If not, how have the valuations gone up? Is that because people trust internet businesses more and are willing to believe that they do and will last long enough.

This multiple, in my opinion, will keep going higher. For large softwares, where this multiple is the highest, it already hoovers around 10x. While small to medium softwares go for around 3.5x to 4.5x.

E-commerce, both stand-alone as well as FBA, also seem to be selling for 3.5x to 4.5x annual profits as long as they have minimum 1 year history.

Why are the multiples getting higher? I think this is a sign of trust in the internet businesses. More and more people realize, trust, and believe that internet and internet businesses are here to stay and hence they are willing to pay a higher price to acquire these. With more trust and better valuations, more people want to start internet businesses. I believe that the valuation multiple and competitiveness on the internet are directly proportional.

This is no more an open field. There is cut-throat competition, and it will keep getting harder to the point that economics will be nearly identical of what it is for offline businesses. Before that happens, I recommend that you hop on and enjoy the journey.