Who makes money in Facebook’s $2B Oculus Rift Purchase?

April 1, 2014

Facebook bought Oculus Rift, a bit of geeky, Borg-like headgear, for $2B.  Never mind that the company has yet to ship a product.  Their venture backers made more than 50x their initial investments.  The true initial investors, individuals, invested in the company via Kickstarter, which helps companies raise money.  They received T-shirts or discounted pre-release headgear.

And that’s all the initial investors made.  The trouble with Kickstarter is that initial investors aren’t equity owners – they don’t participate in the upside like a venture fund.  And the original Kickstarter investors are fuming over Oculus Rift!

But the real trouble is with the JOBS act, which in theory allows individuals that have no demonstrated financial acumen to invest in start-up companies.  Previously, accredited investor laws limited certain types of investments for those that had sufficient personal financial assets as a proxy for their level of financial sophistication.

Proponents of the act claim that start-ups create jobs and generate financial success, and every American should be able to participate in that.

But this forgets one important, historical lesson.  The laws were created originally because hucksters, shysters, and con-men would take advantage of individuals, sucking their money into “fly by night” schemes.  Start-ups are pretty darn risky.  Full time VC investors see thousands of deals, invest in half a dozen, and still get it wrong 50% of the time.

Kickstarter is not a huckster.  They clearly state that you are not investing in the company, merely giving it money.  The fact that those initial Kickstarter supporters are now up in arms underlines the problem with the JOBS act — these early supporters were not appropriately qualified for this type of investment.

We’ll hear more over the coming years of individuals that are bilked by start-up companies or their fund-raisers.  At some point, when the Bernie Madoff moment arrives, we’ll reinstate the protections lost in the JOBS act.  In the meantime, remember the old adage “if you can’t spot the sucker in the room, it’s you.”

 

Is Russia a threat? Only if we fight back

March 25, 2014

Today I’ve been thinking about Russia and it’s potential invasion of the rest of Ukraine.  Here is how the logic goes:

  1. The US plus EU have a GDP 15 times Russia’s.  Russia’s GDP is about the size of Italy’s
  2. I don’t feel threatened by Italy
  3. But then again, Italy doesn’t all those nuclear weapons
  4. Nuclear weapons matter.

    Does GDP matter like it did in the second world war? Which then sent me off to understand the GDP perspective on the second world war.  It turns out that at the beginning of the second world war, Germany and it’s ally Italy, after neutralizing the USSR by treaty, were fairly evenly matched against France and the UK GDP wise.  So they invaded Poland.  Then they invaded France and fairly quickly finished them off.  At this point, with only the UK’s GDP to fight against, Germany’s victory seemed assured.  Then, of course, the Germans decided to declare war on the USSR, the Japanese on the US, and by 1942 it was clear that any long ground war was going to be won by the Allies and their superior GDP.  So, new point:

  5. GDP only matters in a prolonged ground war.

    And now the rest of the logic:

  6. Russia’s invasion of Ukraine would not be a prolonged ground war.
  7. Russia’s nuclear weapons keep the US and EU from entering into a prolonged ground war.
  8. Russia’s GDP doesn’t matter.

Invade away, Putin!  We’ll slap some sanctions on you.  We’ll downsize the G8 to the G7.  A few years from now, we’ll forgive you (and if you don’t believe that, check out Turkey’s invasion of Cyprus and Morocco’s invasion of the Western Sahara).

Prepare for Financial Armageddon

October 9, 2013

This is a note I’ve started sending to some friends.

Hi!  Short note to say I’ve decided that by Monday I will have as much of my money as I can get my hands on comfortably placed under my mattress.  I’m basically saying the odds of theft from my hiding place are lower than the odds of a banking system lock up.

In the one percent chance (according to Deutsche Bank) that the treasury bill market locks up on October 17th, one thing that locks up with it could be the banking system, including credit card transactions.  I want a number of months cash on hand.  I may delay if the government does a temporary extension.  i’ll monitor it daily through Monday.

In some ways it feels very reactionary of me to do this.  On the other hand, it’s completely reversible, I can just redeposit it when things are settled.  Also on this other hand, I have lots of health, auto, and home insurance to protect me from events whose odds are less this week than the odds of a banking liquidity crunch.  So it seems prudent.

I’m not currently selling stock, but I am debating.  My portfolio is already down 10% so I think I’m going to ride it out.  However, Deutsche Bank also says that partial repayment of America’s previously incurred debt could lead the stock markets to a 45% drop.  That’s more than twice the stock market drop leading the Great Depression.

I wanted you to know what I was thinking.  Depending on the withdrawal size, banks may limit daily withdrawals or require a number of days to fulfill the request.  So I’ll work to understand that today, for me.

Just wanted you to know what I’m thinking so as to get you to think about it as well.  Feel free to pass this along.

Sean

Horner to win Vuelta

September 14, 2013

For most that title is cryptic.  Chris Horner, the best American cyclist you’ve never heard of, is set to become the winner of the Vuelta Espana, the best 21 day stage race you’ve never heard of.  He’s the oldest winner of a grand tour (Giro Italia, Tour de France, Vuelta Espana) in history.  The 20th stage today is one of the best stages ever contested, with Horner and rival Vincenzo Nibali separated by 3 seconds after 19 days, heading into a stage with one of the hardest hilltop finishes ever.

Horner rode for small teams in my neighborhood years ago, and was widely cited not just as a good cyclist, but a great tactician and all around good guy.  He is rumored to be the classic junk food jock, requesting Ho-Hos and Ding Dongs in his feed bags during races.

With this victory, and with the elimination of all grand tour wins by drug addicts Lance Armstrong and Floyd Landis, Horner becomes the first American to win a grand tour since Greg Lemond in the ’80s.

Let’s hope this one stands the test of time, meaning the test of the urine cup.

Why the next generation will raise independent kids

August 19, 2013

We seem to be in a pattern where each generation reacts to the prior.  And specifically, self oriented parents create independent children, and independent children tend to raise their children to be self-oriented.  Let me paint with a broad brush.

The current generation of grandparents grew up in the baby boom of the 60s or late 50s, the beginning of the “me” generation, for gosh sakes.  Sex, drugs, and free expression.  Self-orientation isn’t a bad thing, mind you.  Self-oriented parents create independent kids that can take care of themselves, creating –

The current generation of type-A, independent, “helicopter” parents, hovering around their children to provide for their every need.  This creates –

The current generation of children that are more self-oriented, enabled by their parents.  For instance, the current generation of kids is less interested in getting their driver’s license, in part because their parents already drive them everywhere.

Moving into the future, the current generation of self-oriented children could then create independent kids, that will subsequently helicopter their children, and so on.

This pattern also seems to go back from the current generation of grandparents.  Stick with me here —

Today’s grandparents were raised by parents of the depression – an independent and hardy group, the “finest generation” that fought selflessly in World War II.  They wanted more for their children than they had.

Those depression era parents were in turn raised by self-oriented parents of the “roaring 20s”.  Flappers, the Lindy, speakeasies.  This helped enable the independent “finest generation”.  I told you I was going to paint with a broad brush.

So arguably (and there is plenty to argue with here), we can cover a full century of vacillation in the U.S. between independent generations and self-oriented ones.

You’ll be surprised who has more respect than Congress

June 14, 2013

Congress, those rascals, aren’t very popular, according to the latest Gallup poll.  You know what’s more popular than Congress?

  • Cockroaches
  • Nickelback
  • Carnival workers
  • Traffic jams
  • Donald Trump

At least there’s one thing less popular than Congress — Lindsay Lohan.

Folks interviewed blamed “Partisan bickering and legislative gridlock”.  But one thing they didn’t blame — their congressman.  They apparently aren’t rascals by themselves.  Voters sent 90% of incumbents back to Congress.  Maybe they only get rascally when they hang out together or breathe Washington DC air.

What’s all this mean?  Well, I’ve always liked Albert Einstein’s definition of insanity:  “Doing the same thing over and over again and expecting different results.”  Same congressmen, same results.

Birthdays vs. Near Death days

June 3, 2013

Thanks for all the birthday wishes today.  In addition to birthdays, there’s another day I’m going to start celebrating.  April 10th.

On April 10th, while bicycling at 35 mph, I was struck by a car.  I was lucky, breaking my arm, slicing my patella tendon (good for a dozen stitches) and bruising my back.   Just 6 inches to the right, though, and I would have avoided the collision altogether.

Then again, just 6 inches to the left, and I would have rammed my face into the side of an SUV — at 35 mph.  Imagine running as fast as you can and leading with your face into a brick wall, and you’re about 1/3 of the impact we’re talking about.  I’m pretty sure I’d be left with some combination of coma, paralysis, reconstructive surgeries, or death.

There’s nothing like a brush with death, a burning of one of my nine lives, to bring some things into focus.  For me, I don’t think the universe was trying to tell me something.  But I heard something anyway.

What I heard was that life is damn good.  Regardless of finances, piles of laundry to do, rude salespeople — daily annoyances large and small — this morning I got to watch a woodpecker out my window.  For that matter, yesterday I got to do laundry and deal with rude salespeople.  What a gift versus my alternative!

Birthday celebrations are in essence a celebration of survival.  You made it another year!  But from now on my Survival Day is April 10th.

Big News! We are not alone.

January 8, 2013

So we’ve postponed the fiscal cliff and dodged a mis-translated Mayan prediction.  I guess these things over-shadowed the really big news.

The big news is this: there is probably an E.T. out there somewhere.  According to new data from the Kepler telescope, we can now estimate that, just in our Milky Way galaxy, there are 100 billion planets.  More than 10% of those are thought to be in the “goldilocks zone” which means the star is very sun-like and the planet is a very earth-like distance from the sun.  That leaves 10 bilion chances for carbon based, oxygen breathing, tool using life to exist.  With that many chances, the odds are good for intelligent life.  It’s also 10 billion chances that they may have evolved a Justin Beeber and created reality TV as an entertainment format.  OK, that might not make them intelligent, but they are still “life”.

And of course, the Milky Way is just one galaxy of an estimated 100 billion galaxies in the universe.  That means there are at least as many potentially life-bearing planets out there as there are dollars of US debt and YouTube views of Gangham style, combined.

This is big news.  It helps define our place in the universe.  We are just an incoming radio signal or semaphore from confirming a great mystery.  All those science fiction stories could be true.  If the odds are 1 million trillion to 1 that the Vulcan Mind Probe exists (that’s 1,000,000,000,000,000,000:1 just to give you a sense, and called a quintillion), then odds are that the universe contains 1,000 planets where Vulcans are probing minds all over the place.  Freaky.

 

Fiscal Cliff or Economic destimulus?

December 9, 2012

A recent survey of Americans showed that most believe the Fiscal Cliff will increase the US Debt.  It will not. In fact, it improves the debt by quite a bit.

 

Historic_Federal_Debt

 

 

The reason why folks are concerned is that it is Economic Destimulus.  With a fragile recovery underway, reducing government spending may help us slide into recession.

Just wanted to clarify that.

Next week I’ll talk about how Santa Claus has such great productivity numbers.

Fernando Escartin the best Tour de France rider ever?

October 22, 2012

Even if you follow cycling, you may have never heard of Fernando Escartin. But with the disqualification of Lance Armstrong’s 7 Tour de France titles, perhaps you should know him. During Lance’s 1999-2005 run of victories, Fernando Escartin remains the only rider to achieve the podium at the Tour de France who has not been implicated in a doping scandal.

Even when he didn’t reach the podium, finishing 7th in 2000 for example, he is the highest placed rider not to have been implicated in a doping scandal.

Fernando Escartin may be the best Tour de France rider of the last decade. Or he may be the only one that hasn’t been caught cheating yet.


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