Mark E. Jeftovic

Author Archives: Mark E. Jeftovic

Patient Capital: Pot stocks are a fad

Received the latest Patient Capital letter this week. This is a boutique Toronto-based value fund run by Vito Maida. One of the few capital managers that didn’t get completely mauled in the 2008 Global Financial Crisis.

In itself, that’s instructive: Maida’s investing career spans over 40 years, he started Patient Capital in 2000 so he’s seen the odd bear market. Contrast with say, a Ross Gerber, who started his fund in 2010. While Gerber was somewhat of a wunderkind prior to co-founding Gerber Kawasaki, since inception his fund has only known one prevailing market condition over its entire history: straight up. So it is understandable why a Gerber would be  überbullish on things like FAANGs, on Tesla, and on pot stocks.

1

The Other Two Kinds Of Debt

(Read on Medium)

“Any corporation, private or governmental, that wishes to provide for a sound and equitable continuity of its business must take steps towards the systematic retirement of debt immediately after it has been incurred. Postponement of all payment for property or privileges by those who presently enjoy their benefits is calculated to bring uncomfortable consequences to them or those who succeed them.”

— Engineering Economics, by  C.R Young. 1949

We frequently hear pundits and talking heads talking about how short-sighted government policies and unfunded entitlements are in essence “stealing from the future” or at best “borrowing from the future” and I found myself thinking about the difference between the two ideas.

1

Get Thee a Backup Payment Gateway

About a week ago I wrote “A Heretic’s Guide To Deplatforming” over on the easyDNS blog (my main business). It was in response to the widespread deplatforming of Gab.ai in the wake of the Pittsburgh shooting spree, in which the perpetrator posted on the social media platform before carrying out the brutal attack. The post rocketed to the first page of Hackernews (despite being flagged as inappropriate by some SJWs there) and was run on Zerohedge.

The TL,TR on that article:

While I still believe that every company has the right to kick anybody off their platform, it ultimately undermines their long term interests to do so in the manner they did to Gab.

The ramifications of the Gab deplatforming rattled me, especially the part where Stripe and Paypal both terminated their relationships with them, cutting off their financial lifeblood.

3

Escape from the BUMMER Machine

(read on Medium)

(A long overdue review of Jaron Laniers’ “10 Arguments for Deleting Your Social Media Accounts Right Now“)

In 1978 a former public relations and advertising exec, Jerry Mander wrote “Four Arguments For the Elimination of Television”. Mander in essence argued that “the problems with television are inherent in the medium and technology itself, and thus cannot be reformed.” In his preface (“The Belly of the Beast”), Mander spoke of:

“learn[ing] that it is possible to speak through media directly into people’s heads and then, like some otherworldly magician, leave images inside that can cause people to do what they might otherwise never have thought to do.”

That was television. At the time it was the killer app of mass manipulation in the tradition of Edward Bernays, the nephew of Sigmund Freud who created the art and science of “public relations” in the first place. As I’ve observed in a much earlier writing, it was Bernays who was among the first figures in modernity to fully grasp the the power of using the technology of the day to create all-pervasive narratives to shape public opinion. He embraced the term “propaganda”:

2

The End Of An Empire in Two Data Sets

[ Read on Medium ]

There is an ever-widening recognition that started some time ago that we are living through an age of transition from a unipolar world that existed after the collapse of the Soviet Union, to a new multi-polar one.  This has been spoken about outside polite company for at least the past decade (I remember William Buckler, the Privateer, was already saying as much as far back as 1998-1999 when I became a subscriber, if not earlier). It was never a matter of “if” as much as “when” and what the ultimate catalyst will be.

3

Memo to Krugman: 7 Problems Cryptocurrency Solves

[ Read on Medium ]

Paul Krugman took time out from his European vacation to write why he’s a cryptocurrency skeptic. This is not surprising given who he is and what his positions have been over his career. Most of the orthodox criticisms against cryptocurrency  I covered previously in my “This Time is Different: What Bitcoin Isn’t” and “What Bitcoin Actually Is” series. But it’s worth recounting how one could easily take many of these criticisms against Bitcoin, search and replace “bitcoin” or “cryptocurrency” for “US dollar” and come out with are more applicable criticism of the modern fiat money system.

“Cryptocurrencies, by contrast, have no backstop, no tether to reality. Their value depends entirely on self-fulfilling expectations — which means that total collapse is a real possibility. If speculators were to have a collective moment of doubt, suddenly fearing that Bitcoins were worthless, well, Bitcoins would become worthless.”

This is more or less a truism that can be said about any fiat currency. Krugman seems to not notice, or care, that for most of recorded history, most currencies were either hard currencies (gold, silver, etc) or hard backed. Elastic, fiat currency, worldwide has only been around since the 70’s, and here’s Krugman complaining that it’s Bitcoin that has a tethering problem (or lack thereof). Further,

“In normal life, people don’t worry about where the value of green pieces of paper bearing portraits of dead presidents comes from: we accept dollar notes because other people will accept dollar notes. Yet the value of a dollar doesn’t come entirely from self-fulfilling expectations: ultimately, it’s backstopped by the fact that the U.S. government will accept dollars as payment of tax liabilities — liabilities it’s able to enforce because it’s a government.”

But people do lose faith in both currencies and governments. There have been 21 hyperinflations over the last 25 years.

It’s happening right now in Venezuela, where the inflation rate is on track to hit 1,000,000% by the end of the year, and Turkey may be next up.

Cryptocurrencies, meanwhile, are tethered to math. While in Krugman’s own words, fiat currencies can be created out of nothing:

“Instead of money created by the click of a mouse, we have money that must be mined — created through resource-intensive computations.”

Yes, that is entirely the point. In a recent Peak Prosperity podcast Chris Martenson quoted Charlie Munger’s observation:  “show me the incentives and I’ll show you the outcome”.

Krugman wonders “What problem does [Bitcoin] solve? I have yet to see a clear answer to that question.” Maybe we can clarify things by starting with the outcome: the fact that cryptocurrencies are here and as the data shows, steadily gaining traction, and then work backwards. (By gaining traction I’m not even talking about price action of any given cryptocurrency, I mean usage-based metrics like transaction volume, active addresses, hashing power, etc)

Via https://medium.com/@mccannatron/12-graphs-that-show-just-how-early-the-cryptocurrency-market-is-653a4b8b2720

When we work backwards we can arrive at what the incentives were that gave rise to this phenomenon. When we do so we’ll understand that they didn’t spontaneously arise out of whim, they came about for a reason, and those reasons are the problems that crypto solves.

Do not reply to this email

I realize I haven’t written anything here for awhile, it’s because I’m in the home stretch of submitting my manuscript for my DNS book, finally, after four years. I’m supposed to submit it today, in fact. Which I won’t because I still have a few chapters left to review. But we’re close.

But in my travels lately I always listen to audiobooks and podcasts in the car. Living in Toronto, you spend a lot of time in traffic. Brian Tracy once wrote that if you listen to audiobooks in the car (instead of listening to some morning DJ barking like a dog and discussing Survivor) you can obtain the equivalent of a university education in about 3 years.

This week I found a couple episodes from James Shramco’s Superfast Business podcast quite interesting to the small business seeking to compete with 800 lb gorillas in their space.

First up was #583 How Artificial Intelligence Can Be Used By Marketers To Enhance Performance. My takeaways here were that:

  1. AI is accessible to the small business. IBM Watson was mentioned in the podcast and while I was making a note to “investigate Watson pricing” I was stunned to find large swaths of the platform are actually free.
  2. The most effective use of AI is as an augment to human intelligence. This makes sense to me, as a former AI skeptic (I will elaborate why and what made me change my mind in another post), I feel as though AI will happen, but it will never become self-aware. Using AI to enhance human intelligence seems to be an unbeatable combination right now, in fact I remember listening to entire book about just that subject but the title escapes me.

The other Superfast podcast was #585 How to Engage Your Community which is very germane to those of us who run businesses and and view our customers as part of a community. What cracked me up here was Shrammie’s rant about businesses who tend to email you messages from addresses like do-not-reply@bigCo.com. He’s absolutely right here. When you send a message from do-not-reply@ the subtext of what you are telling your customer or prospect is… “fuck you”.

It’s laughable how important these people think they are. Too important to have to forward an email to the support team if somebody presses “reply” ? When I routinely send emails to the between 50,000 and 100,000 customers from easyDNS or Zoneedit and I always put my personal email address in either the reply-to or the signature, and my direct telephone extension in the signature. And I make it a point to reply to every single response I get, even if it’s just to tell them I’m forwarding their email over to the support team.

Do I get overwhelmed with so many responses from all my tiresome customers that I can’t do more important work? It’s never been an issue. Most of the time I get a smattering of responses, if it’s a hot-button topic that I know will get a lot of responses I would put in a P.S that even if I can’t respond individually to every email, I do read them all. Which I do.

This is also a great way to connect directly with your client base and get a sense of the state of your company on the front lines. If there is anything blinking bright red flashing lights, here’s where you can find out about it first.

Takeaways:

  • If your business has any automated processes emailing your customers with do-not-reply addresses, switch those to your main support address and funnel replies back into your ticketing system.
  • If you send any personal messages, like welcome sequences, letter from the CEO, etc then definitely do not send them from a do-not-reply email address, send them from your own personal email address, and take a moment to reply to anybody who actually replies to your email.

This is how you differentiate yourself from the 800lb gorillas in your space. They’re impossible to talk to, to connect with a human. Make it easy to connect with your company.

That’s it for now, back to my book.

 

 

1

Growth for Growth’s Sake is a Road to Nowhere

 

A few days ago a long time customer and CEO of a new security start-up came to see me. Ironically, given the way our conversation turned, he was in town to raise an angel round. We talked about how easyDNS will turn 20 years old this year and has never done a funding round or raised money. He promised to send me an article on Medium which talked about “Bootstrapping”, how tech companies have bucked the trend of serial funding rounds and build organically grown, sustainable businesses.

This morning he sent over “How to build a start-up Empire without Selling Your Freedom”, I highly recommend you read it.

Following on this theme it seems worthwhile to repost an article I penned on the easyDNS blog a few years back which anticipated “the bootstrapping” trend and this blog.

(Originally posted May 26, 2014)

The other day I had lunch with a colleague and he brought up Matthew Woodward’s epic rant against WPEngine  and he also mentioned Jason Cohen’s rebuttal post “Growth is Hard”  and that set us off on a long discussion around today’s tech biz climate (which is almost synonymous with the “start-up” culture, because these days everybody expects to sell their companies before they ever “grow up”)

While this post isn’t intended to single out WPengine as typical of what I’m talking about, Cohen’s rebuttal, while earnest, did seem to me to miss a point.

That point is if your growth rate is a big factor impacting your customer experience, then possibly (strictly heretically speaking), you’re growing too fast. (Jim Collins wrote a dynamite series of books, Built to Last, Good To Great, and How the Mighty Fall and Great By Choice in which he found an inverse correlation between overclocked growth-for-the-sake-of-growth rates and what he termed “10X companies” – companies that grew organically and then outperformed their industry index by 10X over a significant window of time).

It’s not that growth is bad per se. I’ve always identified more with value investing than “serial entrepreneurship” and value investors have a phrase called “GARP”, which means “Growth at a Reasonable Price”. To me the words “reasonable price” mean more than just the money.

1

Should You Delete Your Facebook Page?

In 1994 Wired magazine ran a short story entitled “Hack the spew” . This was back when Wired was actually cutting edge and not the insufferable Silicon Valley stroke job it became after Conde Naste acquired it. In it our antihero “Stark” finds himself inexplicably recruited as a kind of data scout, looking for viable consumer trends emerging from the fully immersive, all encompassing data field known as “The Spew”.

“When a schmo buys something on the I-way it goes into his Profile, and if it happens to be something that he recently saw advertised there, we call that interesting, and when he uses the I-way to phone his friends and family, we Profile Auditors can navigate his social web out to a gazillion fractal iterations, the friends of his friends of his friends of his friends, what they buy and what they watch and if there’s a correlation.”

The Spew of course, was the near future analogy of where the internet was headed, and when I went looking to link to it for this post, the piece turned out to be written by none other than Neal Stephenson. That means I read “Hack The Spew” and it made an impression on me before I even knew who Stephenson was or perhaps was on his way to becoming. Few would argue that Stephenson has a gift for seeing the general ambience of our oncoming future.  Cryptonomiconuncannily anticipated the impetus toward crypto-currencies; the current systemic dysfunction of national sovereignty worldwide was foretold in Snow Crash; so it follows that all this will likely culminate in something that resembles The Diamond Age.

1

Welcome to Bitcoin’s “Trough of Disillusionment”

 

The Gartner Group is widely credited with formulating the “Hype Cycle”, a trend curve that is said to model the adaptation of a new technology or paradigm.

Simply put it looks like this:

via: https://en.wikipedia.org/wiki/Hype_cycle

(read on Medium)

It certainly seems to have held sway regarding the Internet revolution, where the Peak of Inflated Expectations culminated in the Nasdaq blow-off-top of 2000 and the ensuing “Tech Wreck” crash. I remember that well, for a number of reasons including that my co-founders and I were still in “start-up” mode with our company, easyDNS.  I remember profoundly misunderstanding what was happening in those final few months.

I remember thinking, literally “this is an entirely new economy, it’s not about running profitable businesses anymore, it’s about running up your stock price.” There was a Sun Microsystems commercial that was near music video length, set to the soundtrack of the iconic rock track “Hocus Pocus” whose sole call-to-action at the end of the ad was the “SUNW” ticker symbol. And then it all imploded. That was when I started seriously learning about economics, history and finance.

I remember sitting in a diner one night having a coffee with a friend, mere months before the crash. Bullshit .COM’s were getting funded all over the place and everybody else, except me it seemed, were becoming millionaires overnight.