February 14, 2020

Will negative interest rates lead to Marxism?

I got into an email exchange with TP from Shit I Didn’t Know about declining interest rates.

I’ve recently been thinking about this chart of declining interest rates over time:

Down and down they go Chart by Paul Schmelzing at the Bank Of England

  1. Why is it consistently declining? Probably a combination of better technology and increasingly more wealth/capital in the world…

  2. So, now what? Hmmm…

TP sent me this provocative Peter Thiel quote:

There is a Marxist theory that the time for Communism would come when interest rates went to zero because the zero percent interest rate was a sign that capitalists no longer had any idea what to do with their money. And there were no good investments left, which is why the interest rates went to zero, and therefore the only thing to do at that point was re-distribute the capital. It doesn’t mean that zero-percent rates lead us to socialism, but I find it alarming that rates are as low as they are.

Eh, I think that’s over-narrating the fact that there’s just a ton of capital out there in the world. Wealth has increased tremendously over the last 100 and 500 years, but all our scarce resources have stayed about the same.

Capitalism has become a victim of its very success.” Yet I don’t know who the victims are. Let’s say interest rates go negative. Who’s the loser?

Low interest rates are good for poor people and bad for rich people. Low interest rates should theoretically shift power back toward labor, entrepreneurs, and engineers because more capital is being pumped into companies, boosting wages while simultaneously diminishing returns on investment.

I do agree with Thiel’s Where are all the good ideas?” worldview. We’re less bold and less energetic and less full of dreams as compared to 50 or 100 years ago. I often think about what it was like in the 1950’s when everything seemed possible, when every new invention was cheered and welcomed, when we thought that curing cancer was not only achievable but was an eventuality within the living’s lifetimes. Now, nobody thinks cancer is even completely curable. It is an absurdity to think.

A few predictions for a low or negative interest rate world:

  1. Investors will be ridiculed

Determining where to allocate capital gets a lot harder. People rip on startups and VC funds for pouring money into stupid shit like Brandless. But when all investments promise the same meager returns, how do you determine what’s worthy and what’s not? Nobody sane would give Brandless $250 million when you could put $250 million into safe corporate bonds earning 8% APR.

  1. Resource allocation will become more political and more controversial

How long can the system sustain investment stupidity? Managing funds used to be easy: put money where returns are the highest. Now, there are no returns except for outliers. Everybody is chasing the next Facebook. Power laws have never been so extreme.

The market used to guide where to put money: companies and governments with certain risk profiles needed bonds and offered certain rates. Investments could flow through these different tranches and the market dictated money needs.

Now, everybody needs” money and all the returns look the same.

Thus resource allocation will become much more politically fraught, with investments needing moral justifications in addition to economic justifications.

  1. Social mobility will be narrower but more extreme

With fewer economic signals, the economy will become more stagnant. But the winners will be massive winners because valuations will be wild, and those at the top will struggle to grow wealth the way wealthy families grew wealth in the past.

There will be more Zuckerbergs and Bezoses who rose from relative obscurity to massive power overtaking the entrenched political families, yet the average mobility of the average citizen will probably be more static in the next 100 years than in the past 100 years.

February 13, 2020

Cocktail Party Entrepreneurs

I’ve been sick the last few days, hence the dry riverbed of blog posts.

I’m still not 100%, but feeling better. Thankfully I don’t have coronavirus. Just being within one BART ride of SFO gives this amateur hypochondriac all the fuel I need.

I’ve been thinking about how long it’s taken me to learn a simple fact: not everybody is going to like what I build.

In high school, my friends weren’t particularly interested in things I was building. None of my close friends bought the shirts I sold online. None of my close friends were eager to use the (bad) software I built.

I’ve since read stories about Sean Parker meeting all these crazy people online in IRC chatrooms. I didn’t know what IRC was, I’m not sure I knew anyone who knew what it was. But good for him. It’s likely that none of his geographically-close friends thought the hacking he was doing was cool. So he found his community of friends online.

One of the biggest mistakes I’ve repeatedly made is trying to convince everyone that what I’m building is cool. It’s an unrealistic and dangerous path.

I call the chronic sufferers of this illness Cocktail Party Entrepreneurs.”

Most people at cocktail parties run in the same general social circle, have somewhat interesting jobs, and live happy lives commuting to and from work and collecting paychecks and skiing on the weekends. These people are not interested in buying your SaaS. Your SaaS is boring.

When you describe what you do, the best you’ll get is, Oh that’s interesting.” So it goes.

I used to suffer from this illness. And I’ve observed so many others try to impress the cocktail party crowd with their new shiny idea.

Instead of saying we help local businesses resell over text,” suddenly the product serves everyone and solves some deep social problem. It involves Maths and machine learning. Cocktail Party Entrepreneurs lean into the need for validation that this problem is worth solving and that they’re wise to work on it.

This is a terrible path.

Only 1/100 people are going to get it.” You’re better off getting 2/200 people to get” your product than you are spending incredible energy and wasted hot air trying to get 2/100 people to get” it.

The goal isn’t to impress the cocktail party. The sample size is too small.

February 10, 2020

I Exist”

Years ago, Sarah Silverman went on the Howard Stern Show. After chatting about comedy for a while, they started taking listener calls.

One of the callers who made it live onto the air started cussing Sarah out. Whoa whoa whoa, I’m hanging up” Howard said. Just before the line went dead, the caller blurted out in a crazed stuttering voice, I exist!”

Sarah’s takeaway was that people have a need to be heard.

But I think it’s more than that. Why are we so obsessed with validating our own existence?

When men catcall women on the street, do they really think it’s going to lead to a date? Or are they looking for an acknowledgement of any kind?

We snap an ungodly amount of selfies each day. We post them online and are thrilled when people double-tap them.

We put pictures of ourselves all around our own houses. Toddlers love mirrors, and adults never rid themselves of those sideways glances into dark windows and mirrors.

We try to make others laugh at our jokes. We like when people look us in the eyes. We hurt others in order to feel pain - to feel something, anything.

I think our obsession with validating our existence means that deep down we know we don’t exist.

Maybe it’s because we’re living in a simulation or maybe because there is no self - as much as we wish there was.

February 7, 2020

Organizing my thoughts

When I sit down in front of my laptop, I’ll start upgrading our Stripe integration for Bottle to comply with new EU/CA regulations.

And then I’ll get pulled into fixing something with the checkout flow. Then I’ll start thinking about our scheduled action architecture. Then I’ll chip away at our upgrades to Message Templates.” Then I’ll start thinking about the automation UI, how we need to improve the concept of Audiences,” how we need to finish and ship new signup pages for our merchants, how the checkout flow needs to be customizable, how we need to expose more analytics, how PDFs and Excel downloads and reports need to be improved, how we need to give insight into automations that have run, how customer info needs to be highlighted, how shortcodes need to be added, how link tracking is needed, how scheduled message reporting needs to be added, how we need onboarding handholding and signup and plan management and credit card intake and account management and new checkout options and embeddable signup forms and a horizontal nav on the product selection screen and bug fixes for phone calls.

When I circle back to the upgrading of our Stripe integration, I’m out of breath.

Writing here every day has been very cathartic. It’s helped me organize at least one thought every day. And that’s an accomplishment, and it sets me up to be happy about my day.

One of the major things Andy and I have talked about is where to go from here. Should we raise money? Should we stay bootstrapped? Am I good enough to push the product forward? Can we build revenue to hire the next designer and developer?

Writing also helps me work through those questions. Not that I arrive at answers, but it at least organizes my thoughts.

February 6, 2020

Bars need competition in order to get crowds

In Nashville, when I was in college, there was a bar across the street from a bunch of dorms. I can’t remember its name. It constantly changed names. It kept failing.

After a new owner hung a new neon sign out front, the bar’s manager tried hard to attract everyone on campus. One night, we went. He offered penny beers. We got to bring in our own DJ. There were lasers, it was dark, you could feel the bass and couldn’t hear well enough to hold a conversation. We had a great time.

Then we never went back.

A few months later, the bar shut down. Another neon sign replaced the old one.

Somebody, I wish I could remember who, mentioned his theory for why this bar kept failing: it was all alone on the block.

Nowadays there’s a 20-story luxe hotel at the corner of campus and 21st. But back then, there was a fenced-off parking lot. A few hundred yards away there was a Wendy’s. That was about it.

He theorized that we went to Tin Roof and Rippy’s in part because we liked those bars, but also because there were tons of other bars around them. If there was a long line, or there wasn’t enough EDM, or they were charging $5 to get in, then we could go next door.

I’m sure if I opened a bar, and a new bar opened next door, I’d worry they were stealing my Bud Heavy sales. At the micro-level, it’s a valid thought. But two bars is better than one. Three is better than two. At some point everybody ends up splitting the same pie, but at what point? Empirically, lone bars struggle.

Bars need competition in order to get crowds.

I thought back to this theory when I saw a poll Barstool ran the other day. They asked people in each state what their least favorite states were. Pretty much everybody said their least favorite state was a state touching their own. Ohio hated Michigan and Minnesota hated Wisconsin. The funniest was North Dakota saying South Dakota was their least favorite, and vice versa. Really?

We view those closest to us as competition. At the same time, we need each other.

It’s only fun when the Crimson Tide crushes Auburn because Auburn fans hate Alabama.

If we need each other, are we actually enemies?

February 5, 2020

F-150 Mile Equivalents, FMEs”

Americans bought 909,330 F-150’s last year, which is more than the number of Silverado’s (585k), Camry’s (343k), or RAV4s (427k). They outsold everything.

When a gallon of gas is burned, approximately 20.1 pounds of CO2 are emitted into the air. That’s 9,117 grams of CO2 equivalents [CO2e] per gallon of gas.

Since F-150’s average about 18mpg (optimistically), ~536.29 grams CO2e are emitted for each mile driven. (This excludes the cost of building and selling and transporting the car, it excludes upstream costs of gas, it excludes parking and asphalt and everything else that goes along with it.)

I propose using this marginal cost of driving a mile in a F-150 as a metric to express the carbon emissions of everyday life.

We could express the carbon impact of riding in an Uber, taking a flight, drinking a cup of coffee, riding the elevator, or ordering clothes in terms of F-150 Mile Equivalents, or FMEs.”

For example, what’s the FME of charging my laptop?

In California, the grid efficiency is 841g of CO2e per kWh of electricity. Or, 0.841g of CO2 per Wh.

So it takes 48.9g of CO2e to fully charge the 58.2 Wh battery in my MacBook Pro.

My laptop’s FME is 10.97 charges per 1 F-150 mile.

I’m visualizing the exhaust of an F-150 trucking up a hill as I type this out.