mikepmalai's comments

Storytelling is a very effective way to interview job candidates. It's a good way to tear down inflated candidates to get to the truth, but more importantly it's a good way to uncover and find talented high potential people.

Agreed. Charts are narrative.

They are the visualization equivalent of TLDR. It captures the presenter's gist of the data but doesn't tell the whole story.

U.S. could probably address this issue if they moved to a territorial tax regime. It would bring a lot of offshore cash back to the United States (especially in tech) that can later be redistributed back to investors and the economy via buybacks, dividends, and domestic M&A.

The United States currently has a "worldwide" tax system and taxes U.S. companies on income earned both domestically and abroad in foreign countries. The tax on foreign earnings usually isn't assessed until the company brings it back to the United States (you'll hear companies talk about getting hit with a repatriation tax if they bring their "trapped" offshore cash back onshore to the U.S.). Most U.S. companies will try to avoid paying repatriation tax and keep substantial portions of their foreign cash earnings overseas to "reinvest" indefinitely.

At this point, the United States is one of the few advanced economies that still taxes its companies on their active foreign earnings (I believe only 8 of the 34 OECD countries use worldwide tax system) and also has one of the highest tax rates. Most OECD countries use a territorial tax systems that largely exempts active foreign earnings from domestic taxation.

So what parts of the "American Dream" are cut and/or subsidized with debt to fit reality? Median household income is about $50K so there's about a $80K shortfall between the $130K "American Dream" and the $50K "Median American". Assuming $20K of the $80K shortfall are taxes you wouldn't have to pay due to earning $50K instead of $130K, you would still need to cut $60K out of expenses. Looking at the list, the line items most likely to see cuts are:

Housing at $17k per year

Groceries at $13k per year

Car at $11k per year

Medical at $9k per year

Education at $4K per year

Apparel at $2.6K per year

Vacation/Entertainment/Discretionary at $17k per year

Savings/College Investments at $22.5k per year

What's scary is you can completely cut savings, discretionary, and medical (~$50k total) and still need to find another $10k to cut. This is how we end up with people in debt and/or are forced to live without a safety net (no insurance/savings) to fund everyday expenses.

So what's the fix? Tough to say. Near term you're definitely seeing a rise in "sharing economy" type activities to better utilize/monetize assets. Provider gets another revenue stream (to supplement flat/stagnant wages). Consumer gets an end product at an affordable price (since they can't afford it otherwise).

From what I've seen, low churn businesses tend to have 1 or more of the following characteristics:

1. Network effects: Your product is a key (or highly integrated) part of an industry's value chain.

2. Process lock-in: Your product is a key (or highly integrated) part of your customer's work flow/process.

3. High ROI and/or Low Cost of Ownership for the Customer: Use of your product generates compelling economics for the customer.

4. Behavioral lock-in: The network effects are eroding, the work flow is changing, and the ROI is shrinking, but the customer still uses your product out of habit/familiarity/convenience/culture/loyalty/etc.

Here's one way to figure out the valuation of your bootstrapped company.

If you continue running the business and pursue your current operating plan, how much cash will you have in the bank in year 5 and year 10? (Broad estimates are fine)

Generally speaking, your year 5 and year 10 estimate is going to represent a reasonable approximation of your company's valuation range.

For example, let's say you believe you will have $5.5m in the bank in year 5 and $12m in the bank in year 10. Your valuation will approximately be $5.5m to $12m.

Financial buyers will generally offer $5.5m. Strategic buyers will generally be willing to pay $12m or more depending on the prospective synergies/option value of the assets.

That said, you'll need to ask yourself how much money are you willing to accept today to walk away from $12m over 10 years. Are you willing to accept $5.5m in exchange for more freedom/time to devote to other things that may add more personal/financial value over those 10 years.

(Many startups are optimizing for high option value and this approach might not be appropriate for those companies)

TLDR:

1. Still more runway for smartphone usage - 30% mobile penetration

2. Tablets growing with plenty of penetration opportunity - 400M+ tablets vs. 800M Laptops and 1.6B smartphones

3. Mobile internet install base will be 10x desktop install base

4. More mobile, more security problems

5. Things aren't so bubbly when compared to 2000

6. Youtube is teaching your kids and that's a good thing (my words)

7. Healthcare will hopefully get better with technology

8. People love chat apps and sharing videos + pics

9. Apps are unbundling: "There's an app for that..."

10. Turn all your content into lists and you will strike social distribution gold (my words)

11. Apps will save you time, money, find your next love, and do everything else for you same day by removing the friction of human interaction.

12. Any bitcoin based chart looks like a hockey stick (my words)

13. Big data slides - real time, sensors, cloud, data mining

14. Hardware costs down, cloud usage up

15. Online video is big and will be on your TV too

16. China

17. Drones

For those interested in getting a good overview of perpetual vs. SaaS business model I highly recommend Dave Kellog's post on the topic. He discusses both the operational and valuation impacts and walks through an example of a hypothetical startup under both models.

kellblog.com/2011/01/26/perpetual-money-vs-perpetual-license-subscription-saas-and-perpetual-business-models

Summary:

1. Wall Street "sees through" the differences in models and value perpetual and SaaS companies roughly equivalently. SaaS companies are worth 1.8x the revenue multiple of perpetual companies (he walks through the math in the post)

2. There are many good reasons for perpetual companies to move to SaaS models but valuation isn't one of them

3. You get roughly twice the EV/R multiple as a SaaS model but building the revenue stream is just about twice as hard. CEOs who have done the transition from perpetual to SaaS say it takes 3 years to makes the transitions and it must be a top 3 company goal for that entire period.

4. SaaS dampens revenue volatility - for better and for worse. Makes it harder to grow the revenue stream quickly and makes it harder to change once established. (This has an impact on investor psychology and reactions to a bad quarter can be very different in a SaaS model vs. perpetual)

5. Sales compensation is a tricky issue with SaaS model. Sales people still want dollar compensation similar to a perpetual sale despite ratable revenue profile of SaaS.

6. The implicit assumption that an annual subscription to use a service should cost less than equivalent perpetual license can be invalid when looking at the product from a customer Total Cost of Ownership viewpoint. (Companies are also outsourcing the capital intensity of having perpetual software)

Turn off the music and scroll through playing Daft Punk's Recognizer on the Tron soundtrack.

When Facebook first reported strong earnings on Oct. 30, the stock was up ~15% in after-hours trading or ~$18 billion in market value.

Those gains were basically wiped out when the CFO said, "We did see a decrease in daily users specifically among younger teens."

With that one comment $18B in value disappeared.

I have no idea if Snapchat is worth $3B but what happened Oct 30 should give you an idea of how valuable that demographic is to Facebook.

On a side note, Google should buy Snapchat and integrated it into Youtube and use it as their new commenting platform (half kidding)

Many of the emerging enterprise centric companies you hear about today initially got their start selling to SMBs/sole proprietors. Instead of targeting large enterprises from the get-go, start with small business owners and talk to them about their pain points and the issues facing their business. Odds are you'll identify a problem that you can profitably address quickly (enterprise sales cycle sucks) and sell later on to larger enterprises who have the same problem (if that's the eventual direction you want to take).

For example, maybe after talking to a bunch of pool cleaning companies you realize that there's a dire need for a phone app to track where cleaning crews are and what work they've done. They are more than happy to pay you since the app would save them thousands of dollars per year in various losses. After organically growing this business over time, you realize that other industry verticals with distributed workforces have a similar problem so you begin to expand and target larger businesses...you get the point.

Recruiting is a very interesting process. Unless you happen to be pre-IPO Google/Facebook/Hot Start-up, you are typically constrained by the following:

1) The kind of person you want to hire is either too expensive or unattainable. Let's assume this person's output equals 100%.

2) The person you can afford to hire probably grades out at 50% to 75% output of the ideal hire.

3) The minimum output you need to justify paying another person is 40%.

I'm just throwing numbers out there but this is directionally the situation you're dealing with (especially in a hot market). Some would say #1 is a '10x' player and the actual gap between #1 (what you want) and #2 (what you can afford)is much much greater than what I lay out above.

If that's the case, you can begin to see why hiring mangers aren't opposed to hiring #3's (or training someone up to #3 output) who have #1 potential over proven #2's with (perceived) limited upside. Of course the process of identifying candidates with #1 potential is a separate matter.

Ideally you can hire #2's with #1 upside but it's hard to get people like that since more often than not their current employer makes a big counter-offer and/or promotion to keep them. Consequently, you end up in a situation where you can hire someone who is 1) unproven with upside or 2) proven with limited upside.

It seems like with enough time we become institutionalized to a certain way of life and will reshape our happiness to fit perfectly to that world.

Oddly, first time I saw the world this way was after watching Shawshank Redemption as a kid and seeing Brooks killing himself after he was freed. From that point on, a lot of the seemingly irrational decisions people make made a lot more sense to me.

I'd put money on most cleaners not having hobbies =) (Sorry couldn't help myself...I come from a family of very blue collar folks and it's a running joke that your hobby is sleep)

My main point is it's hard to break years of routine/habit. If someone has done the same thing for 20 years, I don't expect them to suddenly change. Even when change would bring greater happiness over the long-term, I'm not betting against the comfort of status quo.

> To each his own, but would someone really want to keep cleaning professionally even if they were wealthy? I could easily seeing less-than-profitable but creative hobbies being way more interesting for hypothetical cleaners who were wealthy and wanted to stay busy.

I felt the same way until I actually met a wealthy cleaner. All I can say is never underestimate the power of habit and the difficulty of breaking routines.

I used to intern at a small investment manager years ago where one of the clients was a cleaning lady. Every couple weeks she would come into the office to deposit a portion of her modest housecleaning income into her investment account. I didn't think much of it until I found out she was actually a multi-millionaire. This cleaner had been investing with the investment manager for years and (at ~20% annual returns) her small contributions compounded into millions of dollars. It was pretty mind blowing. Why didn't she just retire!? She just loved her job and the routine...

Anyway, the best part is she refers her high net worth customers all the time to the fund and they all sheepishly try to explain how they heard about the fund from their cleaning lady. Little did they know that their house cleaner was actually richer than them.

Agree. While it probably wasn't a big financial win, I think Reddit was a big win for the YC brand and highlighted what the program was all about.

Way to turn an entire generation into a caricature.

I think a more important workplace trend is Gen Y managing Gen Y.

You're seeing fewer and fewer Gen Y vs. Baby Boomer culture clashes and more Gen Y employees reporting directly to Gen X-ers/older Gen Y-ers with each passing year. Consequently, we're starting to see more openness and flexibility in the workplace but the demand for quality work is (arguably) much higher.

Maestro looks really interesting.

As an excel power user and fan of spreadsheet innovation in general, I always felt that an excel disruptor would probably look and feel more like a robust post-it note than a spreadsheet.

I think there are a couple interesting issues with self-driving cars.

1. Liability: How does an insurance company properly underwrite a self-driving auto policy? How is fault/liability determined if there's an accident?

2. Privacy: Does it make sense to have self-driving vehicles synced to each other to optimize road safety? Will there be a "black box" recording driving data? Or even a camera? Who will have the right to access that data?

Hybrid. Appears they'll operate separately but All State will play a big role in improving their pricing and claims process.

Should be interesting to see how Allstate balances Esurance pricing versus pricing through their traditional captive agent base.