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Tag: Investing

Abundance & Patience

Over the last few years, I transitioned into an investing career. I decided to invest in people that could deliver instead of doing everything myself. I had read tons of content on how the investing is the real way to build wealth. That time is limited and the real progress is made when you use your wealth to make wealth.

But it hasn’t worked out that well so far.

I also read and believed that abundance mindset is the way to go. Resources aren’t limited. Love isn’t limited. Kindness isn’t limited. Making money isn’t a zero sum game. Someone else’s success isn’t your failure. That you need to be happy for success of other people instead of showing resentment. That you need to share more of what you have.

I believed that if I helped more people, I’ll eventually find people worth investing in and so having an abundance mindset will eventually make my investing career a success.

This didn’t work out so well either.

The problems with failures in return of the acts of kindness is that you lose your faith more quickly and start doubting your actions faster.

You are led to believe by your own experiences that investing and abundance is a lie. That things do not work like that in the real world.

At this point you could scrap your learnings about investing and abundance based on your little experiences. Or you could continue to hold them close based on the experiences of many other people who you consider wiser than yourself.

To do the latter, you will need to be patient. Investing, however, has always been a game meant for the patient.

Chasing The Perfection Hype

When investing in any kind of asset (blog, e-commerce store, real-estate, stock etc), do not chase the perfect asset. When you chase the perfection hype, you pay top dollar for acquiring the asset. In the days to come, you realize nothing is perfect and so isn’t the asset that you just purchased.

Then you incur costs for repairs, maintenance, improvements etc for the asset to live up to its perfection hype. This makes your purchase very expensive as not only you paid a higher multiple for purchasing perfection, but also spent more money later on once it didn’t live up to it’s hype.

Instead, you could simply go for assets with visible imperfections. Any asset you buy with visible imperfections will have those priced in too which would get you the asset for a more affordable multiple.

As an example, if there is a niche Amazon FBA store with all relevant products it will sell for a higher multiple than a general Amazon FBA store. I understand why niche stores are better positioned in some cases, but in reality both niche and general stores have imperfections.

Niche stores are less diversified and hence positioned badly to weather a storm like COVID-19 when some categories get hit more than the others. General stores in comparison have visible imperfections such as that many products in the store belong to different categories. Although it may seem as an imperfection to some, it’s also a feature; the store is better diversified to weather a storm.

When buying an asset like a general store, the visible imperfection of having products spread across various categories is priced in. It is why it sells for a cheaper multiple. One could take advantage of this when buying assets and get this general store with visible imperfections. Not only the niche store has imperfections as well, it’s also a lot more expensive. Only in rare cases, it would prove to be a more fruitful purchase such as you sell it later as strategic acquisition.

Assets with visible imperfections can also be improved such that they no longer have any visible imperfections. By doing so, you can quickly increase the value of the asset.

How VC Funding Can Kill Innovation

A few days ago, I published a blog post about my views on the future of the open internet. The post mostly focused around Twitter which went from being a very open platform to becoming a very centralized platform completely killing 3rd party apps that it stole innovation from. I believe all these decisions were financial and were driven by pressure from the investors.

Twitter & 3rd Party Apps

A lot of features that we see today on Twitter were actually originally developed and created by 3rd party apps. In fact, the first twitter client for both Mac & iPhone were developed by 3rd parties. Some of the clients got acquired by Twitter including TweetDeck & Tweetie. TweetDeck’s support was killed from all platforms except for Mac. Thousands of other apps were ruthlessly killed by discontinuing API supports.

Financial Decisions

Twitter said the decisions were made to discontinue support for “legacy APIs” at the same time acknowledging that no new APIs will be created. In my opinion, the decision was a financial one, and largely driven by what the investors wanted off Twitter.

Fred Wilson, a VC who invested early-stage in Twitter said in a blog post he wrote in 2016

In the early days of Twitter, there were third party applications (Summize for Search, Tweetie for iOS client, etc). These were all built on Twitter’s API. If Twitter had imagined itself as a protocol instead of an application, these third party applications would not have had to compete with (or get bought by) Twitter. But at the time, there wasn’t an obvious way for Twitter’s founders and management team to benefit from a protocol-based business model.

Fred Wilson

Posterous & Twitter

But the damage wasn’t limited to Twitter clients. Twitter acquired and closed other services too.

Posterous was an ultra-simple blogging platform with focus on social media integration and ultra-easy mobile blogging using emails with support for many forms of media.

Posterous grew at a very fast rate and had over 15 million users by 2012. They ran a wide-spread campaign asking users from smaller or dying platforms to import their blogs to this new dead-simple platform. Anyone who did that most likely regretted that decision as Twitter acquired Posterous in May 2012 only to shutdown the blogging platform, and all blogs hosted on it in the next 6 weeks.

All for financial reasons.

It’s Not Twitter

I don’t hate Twitter. I love it. But everything that Twitter has done was done in the financial interest. And somehow I don’t think it is what Jack wanted off Twitter. If he did, he would have had built Twitter like this from ground-up. But he didn’t. Because he had different plans for Twitter. Plans that obviously changed as financial concerns got in to the picture.

And it isn’t Twitter alone. I only expressed my thoughts with reference to Twitter in continuity of my original post about the open internet, which was also written with Twitter in mind.

All large tech companies have killed platforms and services, acquiring only to shutdown, for financial gains.

And while it looks sexy to say that we’re trying to change the world, with decisions like these we’re actually just trying to change our own lives and those of our investors’. As killing innovation isn’t how you change the world.

The Lazy Entrepreneur – And Why It Isn’t Bad

I achieved many of my goals by the time I turned 24, and most by the time I turned 28. Of course, my goals weren’t as big as many others have. They were rather small.

I tried to find happiness in things outside of work accomplishments and financial success and also tried to live a modest lifestyle. I also slowed down at 28 because I felt burnt out by working really hard in the past 10+ years. I felt that I don’t have the same kind of energy anymore that I used to have before, and I turned lazy.

I understand this could be a controversial opinion, and others may disagree. But I think laziness isn’t as bad as it sounds. In fact it can be good. Initially I didn’t like the fact that I’ve turned lazy. Even now, sometimes, I don’t like it especially when I FOMO about interesting opportunities. But I’m in a transition to becoming what I call the lazy entrepreneur. I haven’t achieved the status properly, but I wish to.

The lazy entrepreneurs don’t like working actively. They are tired of working. So they find lazy solutions to the problems that need to be solved. They like investing in things to create passive income. Lazy entrepreneurs also build lazy stock portfolios. But my favorite kind of lazy entrepreneurs invest in and empower active entrepreneurs.

Lazy entrepreneurs wish to move from being CEO of 1 company to having CEOs for multiple companies. Unfortunately, I have already achieved being lazy but haven’t yet mastered the art of being a lazy entrepreneur. Although, it’s a journey I’m excited about.

Integrity Vs Intellect

As part of angel investing, I get to meet many interesting entrepreneurs. My general investment mantra is that I need to understand the line of work, I need to have some sort of experience in it and the founders that I’m investing in offer talent which is miles ahead of our own team, of course.

If they have shown the ability to execute that business before and failed for whatever circumstances, that’s even better. I try to help them avoid the circumstances and let them execute the business again. I have had some sort of success with this strategy so far and I have been able to meet my investment goals with it.

In addition, one important quality that all founders should have is integrity. Lack of integrity, even if only outside the work, is a stage set for disaster. As a general rule, I would avoid investment in a team with lack of integrity even if they fit all other investing criteria making integrity a more attractive attribute over intellect.