Hey Investors, Every now and then, one of your stock investments will run into trouble. For any of a
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April 29 · Issue #6 · View online
Investors Therapy is a newsletter, from the Silicon Valley Investors Club (svinvestorsclub.com), that helps investors understand their psychology so they can make smarter investment decisions. If you're ready to take the next step in your investment journey, subscribe!
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Hey Investors,
Every now and then, one of your stock investments will run into trouble. For any of a variety of reasons, the market will turn on it and assume the worst. The business press will begin to write doom and gloom pieces, and Wall Street analysts will begin the downgrade drumbeat. It’s very easy to get swept into this fervor. But you need to keep yourself calm and ask yourself the right questions before making any investment decisions based on this activity. During these times, you must ask yourself the following questions:
- Will anyone care about what happened 1 year from now? How about 5 years from now? Or 10 years from now?
- Has the company’s core offering been permanently damaged by this event?
- The company’s product serves a fundamental need for its customers. Has that fundamental need gone away? (McDonald’s serves hamburgers, but on a fundamental level, it provides calories to humans so we can fulfill our caloric need. Starbucks provides expensive coffee, but on a fundamental level, it satiates our desire for a caffeine boost to get us through the day.)
- Has a competitor come into the market and found an irreplicable way to serve your company’s customers at a much cheaper price while maintaining similar or higher service standards?
- Do the vocal people who are canceling their memberships or swearing off of the company’s products speak for the majority of users, or are they a vocal subgroup of the whole? Of those who are vocal, how many have actually followed through on their declarations? For the majority of users, how many are aware of what’s going on? And how many them actually care?
These can be tough questions to answer, but it’s well worth the mental exercise to do so before you make any financial decisions following a shift in public opinion. You may very well find that the public spotlight gets pushed to a new target in a few days or weeks and people forget all about whatever issue befell this company.
Cheers, Jordan
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How most of us learned econ.
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Decision Making – The Waiter's Pad
Supported by Greenhaven Road Capital, finding value off the beaten path. This seems a good point to recap some decision-making advice. 1/ Check your ego at the door. Good decision making means always learning. “Humility,” wrote Tariq Farid, “is never a sign of weakness. Rather, it is a sign of willingness. Unlike seventh-grade history, the world…
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The Difference Between a Bubble and a Cycle · Collaborative Fund
Brace yourself. According to various media sources we now have at least 14 bubbles:
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Paradox Of Skill
“The key to making money is not just proficiency, but also finding games where you can be the best player. In investing, it’s giving a great deal of thought as to why you are on the correct side of the trade. As Napoleon was reported to say, ‘Ability is nothing without opportunity.’”
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Why So Many High-Profile Digital Transformations Fail
“….Finally, when things are not going so well in the existing business, the call of a new business model can become more powerful than it should. Many a person has allowed the excitement of a new relationship to destroy their stable, if less exciting, married lives. Similarly, the prospect of launching a sexy technology-based business is tantalizing. The allure of digital can become all-consuming, causing executives to pay too much attention to the new and not enough to the old. Sears’ investments in analytics were not a bad idea, but the company’s facilities and service needed investment more. Although Nike’s executive team was derided for shrinking the digital unit in 2014, the move allowed them to focus their continuing digital investments on higher-value activities. The company’s recent decision to cut staffing and product variety in the existing business, while continuing to improve digital sales channels, appears to be an effort to optimize across both.”
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Amazon Shareholder letter
The
American Customer Satisfaction Index recently announced the results of its annual survey, and for the 8th year in a row customers ranked Amazon #1.
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Why Financial Statements Don’t Work for Digital Companies
“Yet there is no place in financial accounting for the concept of network effects, or the increase in the value of a resource with its use. This actually implies negative depreciation expense in accounting parlance. So the fundamental idea behind the success of digital companies (the increasing returns to scale) goes against a basic tenet of financial accounting (assets depreciate with use).”
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The Easy Pickings
The Great Northern Expedition was one of the largest exploration endeavors in human history. The grueling state sponsored trip, which lasted ten long years (1733-1743) and covered thousands of miles, cost one-sixth the annual income of Russia.
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Headline Risk
In my old job I spent a lot of time monitoring our stable of money managers. This meant having a deep understanding of their investment process, tracking performance, combing through their portfolios and understanding their risk exposures.
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The Scale Anticipation Fallacy – Andreessen Horowitz
I spit what I feel
Like a n*&@#! reading Braille
Am I rappin’ or talkin’ s$&)!t
I can’t even tell
—Kinfolk Kia Shine, Swag Music
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Jeff Bezos convinced 22 investors to back his new company Amazon in 1994. Their returns? Mind-boggling | South China Morning Post
A group including family and friends each got 1 per cent of Bezos’ firm in return for US$50,000 - and an astonishing 14 million per cent return now makes each of those original shares worth US$7bn
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The Importance of Time Value of Money for Startups
Tomasz Tunguz is a venture capitalist at Redpoint and writes about startups, fund raising, SaaS companies, and best practices for founders.
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Why the Automation Boom Could Be Followed by a Bust
How an aging workforce, technological change, and income inequality fit together.
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America’s new great migration in search of lower property taxes - MarketWatch
Americans may be factoring the cost of property taxes into their home buying decisions more, causing shifts in migration around the country.
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Freddie Mac: Boomers, Gen Xers less interested in buying a home | 2018-04-04 | HousingWire
As affordability continues to be a growing concern, more segments of the population, especially Baby Boomers and Gen Xers, are showing less interest in buying a home, according to Freddie Mac Multifamily’s Profile of Today’s Renter report. About 67% of all renters say renting is more affordable that owning a home, the report showed. And about 73% of Baby Boomer renters said renting is more affordable. And 67% of renters also said they will continue renting for financial reasons, up from 59% two years ago… .
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Zillow Group will start buying and selling homes, taking on Opendoor and expanding real estate footprint – GeekWire
Zillow Group will start buying and selling homes for the first time later this month, expanding its real estate business and creating new competition for real estate agents and companies like Opendoor and OfferPad. Starting in the Phoenix and Las Vegas markets, Zillow announced today that it will…
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California rent-control limits repeal set for November election. - Curbed SF
Supporters of squashing Costa-Hawkins Act say they have enough signatures to make the vote.
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Multifamily Strength, Affordability Issues to Persist in 2018: Freddie Mac
David Brickman, head of the GSE’s multifamily mortgage business, offered his 2018 industry outlook at MBA’s CREF/Multifamily Housing Convention & Expo in San Diego.
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California tax break measure could help ease state's housing crunch
A California voter measure that expands a property tax break for seniors could help ease the state’s chronic housing shortage.
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As Storms Get Stronger, Building Codes Are Getting Weaker - Bloomberg
The Insurance Institute for Business & Home Safety examined building policies in 18 states and found that despite the increasing severity of natural disasters, many of those states have relaxed their approach to codes. or have yet to impose any whatsoever.
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10 Lethal Mistakes to Avoid on Your First Real Estate Investment
Even though your first deal won’t be perfect, you don’t want it to be so bad that it will knock you out of the game. Stay afloat by avoiding these mistakes.
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This cheap 3D-printed home is a start for the 1 billion who lack shelter - The Verge
Food, water, and shelter are basic human needs, but 1.2 billion people in the world live without adequate housing, according to a report by the World Resources Institute’s Ross Center for Sustainable Cities. At SXSW, an Austin-based startup, ICON, will unveil its approach to combat that deficiency by using low-cost 3D printing as a potential solution.
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The Big Sort | The Economist
Americans are increasingly choosing to live among like-minded neighbours. This makes the culture war more bitter and politics harder
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The League and other selective dating apps may worsen inequality - Bloomberg
Swipe right for inequality.
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Understanding Speed and Velocity: Saying "NO" to the Non-Essential
People who say yes to everything have a lot of speed. They’re always doing stuff but never getting anything done. Why? Because they don’t think in terms of velocity. Understanding the difference between speed and velocity will change how you work.
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On Analog Social Media - Study Hacks - Cal Newport
The Declutter Experiment In late 2017, as part of my research for a book I’m writing on digital minimalism, I invited my mailing list subscribers to
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Some Thoughts on "Cradles of Eminence: Childhoods of More Than 700 Famous Men and Women" - Intelligent Fanatics
As an investor interested in leadership development and as a father of two small children, I am fascinated by how the childhood environment and, more specifically, the relationship with one’s close family members, can have a long-lasting impact on character development. Coincidentally, I was reading “Cradles of Eminence” as Ian posted his article “Nurturing the Intelligent Fanatic in our Children“.
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Cisco commits $50 million to Silicon Valley homelessness crisis - Business Insider
Cisco announced a $50 million commitment to Destination: Home, an organization dedicated to providing permanent housing to Silicon Valley’s homeless community.
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North Korea's 'biggest' export - giant statues - BBC News
North Korea doesn’t have much the world wants to buy, but one very successful export has been its art.
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A Moelis & Co staffer sent a brutal email to colleagues - Business Insider
A brutal email sent by a staffer at Moelis & Co, an investment bank, shows how tough it can be for young Wall Streeters.
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Weekly Thoughts: Successories | Chenmark Capital Management
We are a values-driven investor with the goal of fostering long term growth and continual business practice improvement in our portfolio companies.
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Nassim Taleb Says Investors Need 'Insurance' From Market Drops - YouTube
Mar.05 – Nassim Nicholas Taleb, distinguished professor of risk engineering at New York University, discusses his new book “Skin in the Game: Hidden Asymmet…
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