The future of the CFA Institute: An interview with Margaret Franklin, CFA

Two Truths and a Take, Season 2 Episode 33

Hello! This week we have another very special interview guest: I’m delighted to share this conversation with Margaret Franklin, CFA. She serves as the President and CEO of the CFA Institute.

Software and the internet haven’t yet made their real impact across the world of professional services, especially when it comes to professional designations and certifications that demonstrate proficiency. On the one hand, the internet has created access we could’ve only dreamed about decades ago, both in terms of access to knowledge and advice, access to financial products like diversification, and access to career opportunities for talented people. On the other hand, that kind of abundant access doesn’t mean there’s less work to do. It just requires a different kind of work.

I’m sure that for many of you reading this newsletter, getting your CFA charter was an important moment in your life. For bright young people around the world who will do the same over the next decade, it will be too - but probably for different reasons than it meant a generation ago. I think you’ll enjoy our conversation about that transformation.


AD: There’s a whole lot I don’t actually know about CFA Institute. When was it founded?

MF: The first charter exams were taken in 1963 at UCLA. But when we think about CFA Institute, we tend to hark back to the New York Society of Security Analysts and Ben Graham who really had the idea that a professional designation for analysts would provide an attestation to knowledge and skills, and it would confer prestige on those market professionals who had it.

So in that context, what was considered the scarce and valuable thing that people were after?

If you think about markets back then, they were inefficient. There certainly wasn't fair disclosure of information. What was rare was the ability to actually analyze securities, and to do that in a professional and standardized way. Investing at that time was dominated by the stock brokerage world, while these pioneers of analysis thought about it from a portfolio perspective. Ben Graham’s Security Analysis book is legendary  -- first  published in 1934 -- and put professionalism into the whole activity. He thought a certification would be a good way to do that. So back in the '40s, a group of them got on a train and went around the country. 

It's such a great story of these deans of Wall Street going around trying to drum up professionalism. But it’s always been a core value and tenet of CFA Institute to focus on investor outcomes, making it better and fairer for investors. 1963 was when the first charter exams occurred. Ironically, now it's early market entrants that tend to be taking the exams. Back then the average age was 45. I think they had 300 people write it, and 33 of them were over 60. These were seasoned professionals. 

As I think about my whole time being involved in CFA Institute through a number of lenses, and now as CEO, and I look at the history, it's remarkable how seasoned, influential market professionals dedicate time, effort, thinking, and whatever resources they have available to making the profession better. 

So what about now though? Because clearly the world has changed a lot since the Ben Graham days and since the '60s, when people started writing the exams, a lot of things are different.

First of all your ability to access information of all kinds has changed a lot. Your ability to access diversification, either as a retail investor or as a professional or anything has changed a lot. But clearly new things are becoming scarce. There are a lot of things that are still valuable here, but they might be different from what they used to be. What do you think those are?

So even thinking about the 30 years I've been in the business, and I guess 23 years since I received my charter, you're right: the availability of instruments in efficient and cost effective ways has changed. We've moved more from individual securities to really thinking about portfolio construction; a total portfolio approach. 

Now we're adding a third dimension. We’ve got risk and return which are the basic measures of investment management, that’s two. Now we think about a third: impact. You’re starting to see material movement towards more environmental, social and governance elements added into the portfolio: the connection to that real stakeholder theory. 

In the last year, we've seen carbon rise to the top of important ESG factors in portfolios. Ways to think about risk from an ESG perspective includes, for example, stranded assets of mining companies:  who pays for those stranded assets? Are there unintended liabilities or undisclosed liabilities associated with environmental factors? These all manifest in portfolios. 

How can one generate returns in an interest rate environment that has really never been present for almost anybody practicing right now. The meaningful impact of central bank activity as it relates to asset allocation and portfolio management is extraordinary in this environment.

That's a good point. So when I think about the timeless lessons of personal finance that I’ve heard, it’s always just: your goal is basically to beat inflation. This is what you're running in place against. This was in a mindset where it's CPI inflation. So, here's what the cost of living is, you're trying to run in place against that. 

Now today, that's not really what my friends and peers are worried about. They're worried about asset inflation, not CPI inflation. A house is getting more expensive, a university degree is getting more expensive, stocks themselves are getting more expensive. It's a very different kind of thing that you're running in place against. At some level it's like, the solution is the same. It's just to generate returns for your customers. But it is a different mindset though. 

So, today's a great day to be talking about it. You may have noticed because you've spent time on the west coast that CalPERS has a target return objective of nominal 7%. That is just becoming harder to do. 

Especially if you have a requirement to have a certain percentage of your assets in fixed income.

Exactly. In 1995, you could do that with 100% high quality bonds. 2005, you could do that in a 50/50 stock bond portfolio, and really without using anything esoteric. Now there’s a kaleidoscope of assets with a significant portion that have real illiquidity built into them. So, you're pushing people further and further out on the spectrum. 

So, you’re right, there's asset inflation, part of which is driven by central banks having such ultra-low rates that, at some point, are going to have some consequences. But other things are actually totally deflationary. So there's a bit of a knife's edge in that, which makes portfolio construction way more complicated. 

It also probably requires investment professionals to have much different conversations with their clients, be they institutional or individual. The pricing of services becomes much more consequential to your ultimate net return. It's a business that has still very healthy profit margins. We're probably going to become an industry with more normal profit margins because the distribution of returns to the investor, versus the provider is skewed. 

Well, speaking of those profit margins, the obvious criticism on all of this is: as you see these big flows into passive management, it's like what exactly are you charging 100+ basis points for? If you’re a retail client, and can get the same returns in a Vanguard target retirement date fund. Then go have a nice life and then go be pleasantly surprised in 30 years when you look at your portfolio. 

On the other hand, you can look at the sticker price of an advisor rather than as a percentage of AUM for your returns, and instead as a price for something like education and engagement. 

So, I think we still see the same human behavior manifest itself in portfolio destruction.

I mean, 100 basis points a year is a huge amount in the context of what compounding does, but it also is small compared to the destructive effects of human impulse.


I’m curious as to how you see software robo-adviser offerings improve and expand - these online services, which started out as simple “we’ll auto-balance a portfolio for you” products, are now getting into all sorts of banking products - they’ll give you savings accounts, they’re getting into tax advice; you’ll be able to get your mortgage through these services before too long. Young people certainly seem to be embracing this trend. Are there any second-order consequences of that adoption you anticipate? 

So here's what I would say about pricing and that is FinTech will change this. Our ability to apply technology, particularly machine learning, natural language processing, all that  artificial intelligence thinking, to financial inclusion will make a difference. If you think about a $5,000 portfolio, you're not able to run that cost effectively with a lot of human intervention, because you can only have so many contact points and so many one-to-one client relationships. But technology really does change that -- it provides cost-effective portfolio management at scale. Generally, people with smaller portfolios don't have the complexity as those with a much bigger pool of assets.

With bigger portfolios, complexity in and of itself generally creates a need for more specialized service and that generally comes with size. Even with those big complex portfolios, what we see is that they have a barbell approach. They can get cheap, passive, exposure for certain things. Then they may concentrate their efforts on those that require much deeper skills. So the portfolio construction becomes more complex.

Complexity is also really multidimensional in the sense that it includes more than the portfolio itself. It's also like the client changes over time.

The rough equivalent for me, I think, is my tax guy Brian. I get so much out of him beyond what he charges me, because not only does he deal with my horrifying taxes every year, but he spends dozens of hours per year teaching me things I need to know. That is like some of the best money I spend on anything.

Yes. So I think there are really two aspects to that. There'll be some people who will say, "I'm really only minimally interested. Here are my key objectives. I want to be able to trust you. I want to be able to trust you to have an honest dialogue, what the competing priorities and trade-offs are.”

All of us want 7%, no variability, no ups and downs. If we had all of that, it would be Nirvana depending on what the inflation rate is. So if you think about the value of advice, it is meaningful. What's charged for that advice though, needs to relate to what investment return can be had. I will say, our Trust study that we recently published shows that investors who have an advisor actually have much more confidence in the financial system, because they're much better educated. Ergo they don't abandon what might be a very well thought out program because they didn't understand it and they panicked in the moment. 

That has mathematically beneficial properties to it. So then you say, "Okay, what do we want from the advice system?" We want to make sure that they're well-educated, they're ethically oriented, and that they pursue professional excellence because things change over time. So that's really where CFA Institute becomes very valuable for those in the system.

It does seem like, especially what you said is there is a professional excellence in getting people to not self-sabotage. Which is a hard problem to do. No amount of robo-advisors are really going to be able to help with that. Unless, software can convince themselves to lock their portfolio for the long term. 

Well, here's what I'll say about active management. I think there is a role for active management in portfolios. So if you have inefficient asset classes, active management generally pays off. There are also spots where in portfolios, the benchmark may not actually be your objective. So here we are in Canada where let's just say bank stocks have historically provided a reliable tax- efficient dividend yield. So if cash flow is important to you and you can count on that cash flow, I've certainly seen people's portfolios where the bank stocks cost-base was absolutely ridiculously low. What ends up happening? So they compound tax-free because they're loath to pay the taxes, so they don't actually ever sell the sucker. They get a tax-efficient dividend.

That's the kind of behavior you want to see so they can withstand the ups and downs. You have to manage the clients to say your objective isn't the broad benchmark, the broad market. You have some quite precise things that you're trying to solve for. The benchmark for the indices tends to be shortcut ways to describe the market. Now, there are definitely moments where you say, "I want market exposure." You might just want cost-effective market exposure. 

We have indices for everything now. Some of those markets are efficient and some of them aren't. So there are opportunities for sure, for active management on both the risk management side and on the return side. It's what you pay for. 

It sounds like what you're saying is just like a lot of active management is just becoming active management of the client. Then just saying "We can do some security selection, but that is mostly based on knowing you."


As opposed to, "Well, my job is to sit here and pick stocks all day and I really think that we should go buy some Amazon today.” Unless you have this born gift to be a stock picker, which few people do, or you sit in an information flow that gives you some unusual information - which as a financial advisor, you're probably not going to have - then what is left is the unique needs of the client. Which are not insignificant, but that really becomes what it's about.

This is getting into the next question I wanted to ask you about, which is the idea of craft. The idea that security analysis and being a good steward of this relationship between owners and their assets really has some craft-like elements.


We’ve spoken about this before, about how many of these industries (like software, for instance) are very much a craft. I like to say, look at the difference between the engineers in Office Space versus in Silicon Valley, the TV show, they're practically from different planets. Just based on the difference between how deeply they care about what they're doing.

CFA Institute is in some sense, a torchbearer for this craft, and you have to figure out how to signal this in a way that is equitable and fair and somewhat codifiable. But at the same time, you can’t lose the magic of the craft. 

So, that's a great question. I do think that the very best of our profession think about it as craft. They think deeply about how they apply their trade. What is it that they're uniquely capable of? What is it that they're trying to achieve? How do they express that to clients where they're investing or using other people's capital, and where they're investing for someone else as a fiduciary?

So if I think about the early roots, which we talked about, with Ben Graham, that's just such apparent craftsmanship. Yes, the tools have changed but if I think about someone like Howard Marks or some of the investors who've had long tenure in their career, we all look to them as masters of their craft. 

Well, Howard Marks can communicate his craft because he writes beautiful essays that everybody reads. But most people can't do that, nor even if they did they don't have the brand for people to go read them. Unless you think that, that's something people should more actively be doing...

You can create some level playing field. That was Ben Graham's original idea, to certify a certain level of knowledge, skills, and ability, which I think the CFA program really does. There's a global standard to it, it's an elite program. Then from there you launch into your craft, which I think is lifelong learning. It’s a lifelong commitment to professional excellence and understanding who you're serving. That can sometimes get lost in translation. So I think the ability to be part of an ecosystem that reminds people of who you're ultimately serving is critically important.

So how do you communicate that though? Because in software, for instance, you can communicate a lot more information about how deeply someone cares about a craft based on what internet forums they hang out on, or what commits they might have to an open source project. Is there an equivalent for this in this world that can be easily understandable by somebody who's not in it?

So I'm totally biased, but I think participation in and commitment to the CFA charter world is one of those things. For somebody like me, I didn't start in the business, but getting the CFA charter gave me an amazing career of almost 30 years. It’s a vibrant, aspirational community. It sees the purpose of finance, and the purpose of investing, in this particular dynamic and context that we're in right now as a social good if done well. 

Who is that community? Because I know that you care a lot about diversity, inclusion and the CFA program as a great opportunity leveler. Anybody can write this exam. It's a lot cheaper than an MBA, it's not completely equal opportunity, but it's pretty good in terms of saying "If you were able to get into the door, here is this path that's available to you." Are you where you want to be in terms of who is represented?

So I would say that the CFA program diversity numbers right now are pretty consistent with the industry, which is absolutely not where it should be. So if we just look at gender diversity, when I wrote my exam, when I got my charter in 1997 there were 19% females. It's largely the same number 23 years later. On the brighter side, our pipeline of candidates looks dramatically different: 40% plus are females. 

So I think there are a couple of aspects to that. First of all, it is a culture that is seen as particularly male-dominated. We haven’t done a good job of positioning what a career could look like to a broader audience. We know many young people entering the job market are interested in careers that are meaningful, fulfilling and challenging.  The investment management industry has all of that.  Financial security is a very important aspect of a well functioning economy, and well functioning individuals. It's necessary and it can be very noble work.

One of the things that we have not done as well, and we are changing, is how we're attracting a diverse set of candidates to the program. You're right, it is by and large very cost effective. I think of it as democratic on the way in and meritocratic on the way out. So unlike many elite programs, MBAs, and finance programs, where the hardest thing is to get into the program but almost everybody gets through it, ours is one where anybody can undertake it, but only one in five will actually successfully complete the program and successfully get their charter.  It’s democratic on access but meritocratic on achievement.

The CFA program, however, does not fit all purposes and I think we have a unique opportunity to expand our credentials and certificates to serve the needs of a broader set of investment professionals. If I think about the investment management industry when I started, our whole ecosystem was largely portfolio managers and research analysts. Now we see data scientists, risk managers, wealth advisors  --  it's a much more complex group of participants. So we're adapting and modernizing to meet the needs of those people where they're at from a learning and professional development perspective.

I opened up my Twitter a few weeks ago and saw that everyone was unhappy about the new online exam format: "When I failed the CFA exam, I had to wait a whole year in agony for writing again. Now kids can just write the entire thing straight through as many times as they want in a year."


It feels to me a little bit like doctors complaining that new residents don't have to do 36 hour call shifts anymore. There's a cult-like experience around the exam, right? Are you getting pushback from your charter holders?

So that's always been the case. Every 10 years we get some sort of a pushback. Computer-based testing does a couple of things. First of all, it does increase our accessibility so we can be in more places, we can offer more windows, and that's more suitable for learning styles. We just know so much more about how people learn, who our candidates are. We can meet them in a better, more effective way. I think you're going to see that change over time.

There were security risks with the old paper-based exams. I mean, getting them to places and  then more importantly, getting those tests back is an extraordinary operation. It increases our accessibility. It does open up more windows for people. Again, it's about attracting the right people and doing a better job in making the exam accessible.  The quality of the exam, and our ability to test and get at those knowledge, skills and abilities actually does not diminish at all under computer-based testing. We've done a tremendous amount of research and testing to validate this.

So it’s true that we have this cult-like experience. Everybody remembers how they studied for the exams and that cult-like experience of getting through it and getting your charter. That does not sustain you through the whole of your career, however. So it has its own half life, that particular experience. CFA Institute is so much more and will become so much more over the next few years. 

So what charterholders should really care about whether they wrote in 1963 or whether they're writing in 2020 or 2021 is our ability to get at and certify that knowledge, skills, and ability. Is it suitable for modern times? I think that improves as we go along.

Do you think that in 20 years the exam will be as central as it has been to the myth, the cult, the idea of the CFA?

I think in our world, the CFA charter will continue to be a really prestigious program. One that is very suitable for particularly the early market entrants. It will distinguish people. If I look 20 years hence, I think we will have a really robust suite of learning strategies that will meet the needs of professionals across their entire career. We know, for example, that the average professional will have six very meaningful changes in their career. For instance, think about a research analyst who goes on to become a portfolio manager, who then takes  on risk responsibility, who may now be in a leadership capacity running an entire ecosystem.

We can see where our ability to develop those really strong learning programs, both experientially and test-based, the rigor and quality with which we’ve done that globally, and if we can capitalize on and leverage that history and legacy into the modern world, we will be able to meet the needs of investment professionals over their entire career. That will be a bit of a game changer for us.

Thank you so much for taking the time for this interview, and for sharing all of this with the newsletter! You can find a permanent link to this interview here:

The Future of the CFA Institute: an Interview with Margaret Franklin, CFA |

Thanks to all of you who wrote in about last week’s post on founders and pre-truth telling. As anticipated, some of you did not like it! In particular, see this Twitter thread about the Microsoft story, which I’d passed on from Byrne’s newsletter but had also understood as commonly accepted tech industry lore.

I do appreciate that Tren is much closer to the real story and certainly knows what factually happened better than I do. I’ve updated the original story with a note on this dispute. But in all honestly, the story has been so widely accepted and retold that it’s here to stay. If everyone says it happened, then you know what, it therefore kinda happened. I have heard this story repeated so many times that it is effectively just part of the background context at this point. It may not have factually happened, but that’s a small detail.

Furthermore, I feel like this kind of just proves my original point: whether or not the deal was based on a complete fabrication or the full truth or somewhere between does not matter, because the point of the story is about what is considered “genuine”, not what happened. Microsoft’s reputation is not diminished in any way by this! And the fact that this is the story now - factual or not - communicates a form of truth that’s a lot more about what’s genuine than what’s factual. You might as well ask a roller coaster enthusiast, “you know that’s not really a runaway mine car, right?” Thanks to Tren for weighing in and for Byrne for the context (see the Twitter thread.)

Another great interview to check out on semiconductors, software, AI, and Taiwan:

“Semiconductors are the closest thing to magic in the modern world”: an interview with Gavin Baker

And here’s a great catchup on our friends at Pipe:

Recurring Revenue: the rise of an asset class | John Street Capital

And finally, this week’s Tweet of the Week:

Have a great week,


Are Founders Allowed to Lie?

Two Truths and a Take, Season 2 Episode 32

Whenever I have a candid conversation with someone interesting in tech, I like to ask: “What are taboo topics in Silicon Valley?”

Unsurprisingly, most of the suggestions I hear are not actually taboo. Controversial, maybe: I hear lots of replies like “Valuations have been too high for years”, or “We’re falling behind China”, or maybe even a dose of self-criticism, like “Venture Capital is a bad asset class” or “Some tech companies are net negative for the world.” 

These are fine topics, but they’re not taboo. If you brought them up at a party, other guests would happily engage in that conversation with you. Tech people are all too happy to debate those kinds of ideas. I’m asking, what’s a real third rail topic - like if you brought it up, you’d be met with silence, or hostility. 

How about: Are founders allowed to lie?

Many of you reading this will reflexively shout back, no! Of course not! Being a founder does not make lying okay! But before you submit your answer, take a minute to think about it. If you are only allowed to tell the literal, complete truth, and you’re compelled to tell that truth at all times, it is very difficult to create something out of nothing. 

You probably don’t call it “lying”, but founders have to will an unlikely future into existence. To build confidence in everyone around you - investors, customers, employees, partners - sometimes you have to paint a picture of how unstoppable you are, or how your duct tape and Mechanical Turk tech stack is scaling beautifully, or tell a few “pre-truths” about your progress. Hey, it will be true, we’re almost there, let’s just say it’s done, it will be soon enough. Here’s Byrne Hobart on Microsoft: 

Microsoft’s march to a $1.54tr market value started with the company selling a product it had not, in fact, built. Bill Gates and Paul Allen contacted computer manufacturer MITS to sell them a BASIC interpreter. They scheduled a demo, and built their interpreter. Or rather, first they built an emulator for the Altair (which they didn’t have) to run on Harvard’s computers (which they didn’t have permission to use) in order to write their interpreter (which Allen finished on the flight to the meeting). Subsequent success turned that from a lie to an endearing exaggeration, although Microsoft’s later successes gave the story a sinister cast once again.

Not everyone does this, of course. Some founders keep on the straight and narrow, and only tell the literal truth at all times. (Good luck to them, honestly.) Other founders bend the truth way too much, and end up as high drama like Theranos or laughingstocks like Fire Fest. Some never get the chance in the first place, like any founder from a less privileged background who doesn’t have the financial or social safety net or the nudge-wink fraternal understanding that this is permitted. But in between, there’s a murky grey area of social contracts and soft power, and it’s where the founder-VC relationship gets really interesting. 

I’ve written before about how the power relationship between founders and VCs today is a lot like the relationship between kings and priests. VCs don’t just give founders money, advice, and introductions. They give founders something powerful, and almost mystical: they bestow on founders a type of blessing. “You are the founder. You stand apart. Now go make the future real."

You Stand Apart is crucial. The most important pillar of the Silicon Valley Social Contract is that founders are not like other people. Founders are not even like CEOs. CEO is a title that is earned; the CEO is peers with everyone else in the company in that anyone, theoretically, could work their way up and become CEO. Founders are not like that. “Founder” is a title that can only be claimed in one way: by founding the company. They stand apart, like kings. 

How do you get to be the King? You get to be king if everyone believes you’re the king. And one powerful way that kings can continually remind their subjects who’s the king is through taboos. When you see the King violate a taboo, but no one else is allowed to, it reinforces that they are different from you. Look at Trump, and how every time some accusation gets bounced off him, his power just grows. Look at Elon, and how every time he breaks some rule and gets away with it, it just reinforces that he is the King of Tesla. 

Founders use this soft power to their advantage. When blessed by their VCs, they are uniquely permitted to “pre-tell” the truth in a way that no one else is allowed to do, so long as they observe all of the unwritten rules in doing so. You can’t push it too much; you can only push it in certain ways and not others; and most importantly, you must genuinely do so in an effort to bootstrap the future into existence. You’re not misleading investors; your investors get it: they’re optimizing for authenticity over ‘fact-fulness’. It’s not fraud. It’s just jump starting a battery, that’s all. 

You’ve all seen this. It doesn’t look like much; the overly optimistic promises, the “our tech is scaling nicely” head fakes, the logo pages of enterprise customers (whose actual contract status might be somewhat questionable), maybe some slightly fudged licenses to sell insurance in the state of California. It’s not so different from Gates and Allen starting Microsoft with a bit of misdirection. It comes true in time; by the next round, for sure. 

Normally, this would be a dangerous game to play. Violating taboos may set you apart as the untouchable King when your stock is high. But if you fall, you are going to fall really hard, because every taboo you broke to be the King is going to make you a scapegoat, and a sacrifice. That’s why there’s zero cognitive dissonance in the hard pivot from “Travis is the greatest founder of our age, because he breaks all the rules” to “Travis was forced out in disgrace because he broke all the rules.”

Fortunately for the tech community, scapegoatings like this only happen rarely. There is a shared understanding that even if you fail in realizing the future you dreamt up (and pre-sold tickets to), so long as you stayed within the guidelines of the social contract, you’ll be supported by everyone with open arms in whatever future career you choose. 

Outside of Silicon Valley, such a social contract does not exist. If you pre-tell the truth too much and get caught, you’re going to be in an altogether different kind of trouble. Nikola is in that kind of trouble

Now, if you’ve been reading this newsletter since the very beginning, you might have already been familiar with Nikola for some time. I wrote about them in the very first issue, back last year: 

[Nikola] is building autonomous hydrogen fuel cell electric semi trucks. I’m not sure how much actual progress Nikola in particular has made in the real world, but I have heard some pretty convincing explanations that the larger the vehicle, the less that batteries make sense (which I’m pretty willing to accept) and the more that hydrogen fuel cells emerge as a perfect technology to fill that gap. The refuelling station problem isn’t that big of an issue for trucks, because as Ubben points out, you can just stack refuelling stations all the way down I-80 and solve a pretty substantial chunk of your problem right off the bat - your feeling station infrastructure problem is massively easier than, say, Tesla’s. (Furthermore, the charging time for one of these things is much closer to refuelling a gas-powered car than recharging a Tesla). Does anyone know about this? Please let me me know if you do because I have questions.

Since then, Nikola has been busy. They went public through a SPAC, trading as $NKLA, under the leadership of chairman Trevor Milton. Then the story really took off, as their stock spiked in a flurry of speculation that they’d built the next Tesla, or the next something. Their market cap briefly exceeded Ford’s, and they subsequently scored a partnership with GM. All with no earnings to speak of (aside from $30,000 in booked revenue for installing solar panels on the founder’s roof), but that hardly mattered. It’s the story that matters. 

Until the story started to fall apart. Last week the short selling firm Hindenburg Research, normally known for forensic research and short cases on penny stocks and pump-and-dump scams, released a report that I honestly want you to read in full because it’s so, so much fun:

Nikola: how to parlay an ocean of lies into a partnership with the largest OEM in America | Hindenburg Research

Normally, when a short seller accuses a company of fraud, the case to make is financial: that they’re fudging numbers, juicing quarters, or doing improper accounting of some sort. But here there are no numbers. There’s only story, and promises. So the report walks us through various promises by the Nikola team over that period of time, which included:

Promising that they’d developed a fully integrated powertrain technology in-house (later clarified that Bosch provided around 85% of the parts, but that "Nikola’s parts were the important ones”)

Promising at a press conference that the starting date of construction for their first factory was “tomorrow” (it wasn’t; they were still missing permits)

Promising they’d signed a deal with Anheuser-Busch for a promise to sell ‘as many as 800’ hydrogen-powered beer trucks (but also as few as zero!), and that they’d deliver the trucks by the end of 2020 (revised quietly to 2023). 

Promising that real trucks were already coming off an assembly line in a German partner’s factory (later clarified that the trucks were built by hand, but near a factory which contained an assembly line). You get the idea.

But the best promise of all wasn’t a promise made in words. It was this video from 2018, which breathlessly showcased a gorgeous Nikola semi truck cruising down a prairie highway:

In what is some of the funniest professional writing I’ve read maybe ever, the Hindenburg team revealed their biggest red flag: the truck never drove anywhere. They rolled it down a hill. 

Of course, nowhere did it actually say that the vehicle was moving under its own power! If you look carefully, it had been advertised as a “road test”. Which, I guess, fair enough! Nikola’s written response to the allegations is pretty great content too:

Hindenburg seeks to portray Nikola as misrepresenting the capabilities of the Nikola One prototype in a 2017 video produced by a third party, as “simply filmed rolling down a big hill.” Nikola never stated its truck was driving under its own propulsion in the video, although the truck was designed to do just that (as described in previous point). The truck was showcased and filmed by a third party for a commercial. Nikola described this third-party video on the Company’s social media as “In Motion.” It was never described as “under its own propulsion” or “powertrain driven.”

So, I mean, look at the bulk of these accusations, and ask yourself: if Elon made any of these not-quite-true claims, would it matter at all in how anyone thought about Tesla? For that matter, if a startup founder showcased their “order for up to 800 product units” (even with none of them hard committed), wouldn’t you just write that off as salesmanship? A lot of these aren’t that bad. I mean yeah, rolling a truck down a hill while filming it from an impossibly upward camera angle to disguise the incline is pretty funny. But is it that different from some demos you’ve seen? Do you think I’m totally innocent here, for that matter? 

The thing is, outside of Silicon Valley - and especially in the public markets - it’s a far less forgiving climate. You’re going to get a phone call from the SEC pretty quickly. And that seems to have happened, although where it’ll end up is anyone’s guess. 

The problem is that now Nikola, and especially Trevor Milton, are in scapegoat mode. So everything they’ve ever said or promised is now seen in a rather different light. Unfortunately for Nikola, you don’t have to dig very far before you start finding quotes like this, from last year

"The Nikola truck is more than just a fuel cell vehicle; it’s a rolling super computer. One of the key elements of Nikola’s advanced system is the Bosch Vehicle Control Unit, which provides higher computing power for advanced functions while reducing the number of standalone units.

'The entire infotainment system is a HTML 5 super computer,’ Milton said. 'That's the standard language for computer programmers around the world, so using it let's us build our own chips. And HTML 5 is very secure. Every component is linked on the data network, all speaking the same language. It's not a bunch of separate systems that somehow still manage to communicate.'  

See, this is what’s not allowed. You cannot just throw out preposterous line items like “The infotainment system is an HTML 5 super computer that lets us build our own chips.” This disqualifies you! It disqualifies you immediately! If you are caught saying anything like this in Silicon Valley your pre-telling privileges get revoked. And the reason why they get revoked is that saying something like this pretty much reveals that you are not, in fact, building the future. You’re just pretending. 

And that, I think, reveals the real principle behind the rule. What’s important in Silicon Valley isn’t quite what’s true right now. It’s a different kind of truth; less about factual truth and more about authenticity. That's why the blessing that VCs grant founders is so important: it's a power, but also an acknowledgement of the burden of authenticity that founders have to carry.

It's not so different from the Kayfabe bargain between pro wrestlers and the crowd. Founders will present you with something pre-true, under the total insistence that it's really true; and in exchange, everyone around them will experience the genuine emotion necessary to make the project real. Neither party acknowledges the bargain, or else the magic is ruined.

That bargain, as subtle and as powerful as it might be, only works when it’s in the dark. Shining light on it makes it stop working. And that’s why the taboo around asking, are founders always supposed to tell the literal truth, is such an important social convention. Of course, I’m not in VC anymore, so I can say it. But be careful if you want to talk about it, too. It’s like the game where very time you think about the game, you lose. 

Permalink to this post is here: Are founders allowed to lie? |

Some reading and listening for the weekend:

Benchmark’s Peter Fenton: ‘10 to 20 years of innovation just got pulled forward.’ | Connie Loizos, Techcrunch Disrupt

Evernote’s CEO on the company’s long, tricky journey to fix itself | David Pierce, Protocol

Ron Howard - the past, present and future of entertainment | Infinite Loops with Jim O’Shaughnessy (podcast)

And finally, this week’s tweet of the week, which made me laugh the hardest, although probably not intentionally:

Have a great week,


The Kids are Alright: An Interview with Eugene Wei and Julie Young (Gift Culture, Part 4)

Two Truths and a Take, Season 2 Episode 31

Welcome to the fourth and final segment in this series on Gift Culture at the Online Frontier. If you missed any of the first three, you can catch up here:

Gift Culture, Part 1: Homesteading the Twittersphere

Gift Culture, Part 2: The SE Suite, An interview with Julie Young

Gift Culture, Part 3: Scarcity Status versus Abundance Status 

Today Julie is back with us to help close things out, along with our second very special guest, coming in to bat cleanup: Eugene Wei

If you’ve spent any time on Tech Twitter (or even just reading this newsletter), you’ve found Eugene’s Tweets, writing and exquisite insight everywhere. (You can read his essays here.) Eugene has worked at the intersection of tech and media at Amazon, Hulu, Flipboard, Oculus, and spent a year in the middle of it in film school. He recently wrote a notable essay on internet status and social networks that helped inspire this series:

Status as a Service | Eugene Wei

Please enjoy as Eugene and Julie chat about the early internet, forums and newgroups, the path to today’s social networks, social status and gift culture, and how teenagers always show us the way. 

Alex: I want to start by asking both of you a question, and this is a question where every time I ask it always ends up revealing something fascinating and interesting. The question is: Where was the first place you Posted?

Eugene: My very very first post was on some BBS a friend of my cousin’s ran when I was in high school. We used these BBS’s to trade shareware or ripped games to play on our PCs. The first time I chatted live with someone was on a BBS, it was as magical as Alexander Graham Bell making the first phone call.

But perhaps my first real public post was in some newsgroup, it may have been rec.arts.comics.misc when I was a junior or senior at Stanford. This was before Mosaic had come out so newsgroups were like the only online communities to hang out in.

The internet population was tiny compared to what it is today, and these communities felt cozy and intimate. A lot of the people who were in these groups were accessing them as students at universities or workers at government agencies. It was a geeky crowd but everything felt more civil.

Julie: I first posted on Xanga (hell yeah), but it wasn’t until I got a Myspace in 6th or 7th grade that I really got into “social networking.” I can remember learning how to copy/paste HTML into my page so I could have a cool background. I spent HOURS looking for the perfect emo song (remember when our profiles could have SONGS?) that would cryptically convey my deep, complicated 7th grade self.

AIM profiles weirdly played a big role in middle school social networking, too. I can remember obsessing over reading through all of my classmates’ AIM profiles. It was the first thing that got updated whenever someone had a new bf/gf lol. It was also really cool when someone made a shout-out to you in there. It was a way to show off that you were friends with someone. I can VIVIDLY remember feeling lame because I didn’t have enough friends to shout out in my profile so I actually MADE SOME UP (“you don’t know them, they go to a different school”). 😂

Alex: Yeah, AIM. AIM was honestly the whole world. I’m floored that no modern messaging service has brought back away messages. For me, though, the first place I ever really posted posted was the Wizards of the Coast online MTG forums, back around 2001-2003. It looks like WotC shut them down several years ago, which is a bummer, although understandable since I’m sure a lot of it had naturally migrated over to Reddit and Tumblr by then. 

Still, there’s something to be said for those intensely domain-specific newsgroups and forums and the real sense of community they created. 

Eugene: A year or two out of college, I really got into the X-Files, but only after two seasons of the show had already aired. DVDs hadn’t launched yet, and those episodes weren’t in syndication, I didn’t know how to find them. So I went on some X-Files newsgroup and asked if anyone had taped the first two seasons and would be willing to transfer them to VHS tapes for me. Someone responded that they would if I sent them enough blank VHS tapes.

I mailed this total stranger a box of blank VHS tapes and a few weeks later the box came back, with every episode taped and labeled. Back then, to transfer episodes, you had to record each one in linear time. At 24 episodes per season, that person had to run two VHS machines for 33 to 34 hours straight. It still might be one of the kindest things any stranger online has ever done for me.

Subreddits are like emergent newsgroups, but the general tone online is higher variance now. There are still acts of kindness and generosity, but also the possibility of much more random violence and trolling. 

Alex: Eugene, you became initiated with the internet in a different time than Julie or I did, but I bet if we went back in time we’d recognize that a lot of the internet culture - so like the words we use for things, the speech patterns, the internet poster shorthand, which since grown and evolved and meme-fied - is pretty much the same. I’m curious what you think are the core tenets of internet posting culture, and internet “abundance culture” if you want to call it that, which we basically figured out early on and have since endured.  

Eugene: That’s a really kind way to say, “Eugene, you are an old geezer.” Haha! At least I’m not a boomer.

Yes, I like to think of the early internet as the Wild West in early America, but even emptier, with no native population, and even more expansive. Just vast open spaces waiting to be built upon and claimed. Recall that this was a time when the leading search engine was Yahoo, with a hand-curated directory of all the sites worth visiting. We joke now about sometimes browsing online for so long that you reach the end of the internet, but back then there actually were days when I felt like I’d visited every website on the planet, waiting to see what Yahoo’s Site of the Day to be announced the next day.

There was no identity graph like Facebook back then, often all you had on someone was their email address. And while you might find a scant few nuggets of information by running their email address through a WHOIS, for the most part the internet consisted entirely of strangers.

So in a low-trust environment with total strangers, communicating predominantly via text, people quickly started inventing workarounds for the limitations of text. For example, one thing we’ve long known is that text often does a poor job conveying tone, especially subtle modes of expression like sarcasm or irony or jest. It took just a few instances of misunderstandings and bruised feelings before people invented emoticons. A well placed =) after what sounded like an insult would turn it into a friendly jibe.

But, more to your point, we did see a lot of the early signs of the gift culture you identify as characteristic of spheres of abundance. In fact, even minus an explicit identity graph, even minus explicit mechanisms of feedback and status like the “like button” or “upvotes” and leaderboards, you already saw, in newsgroups, an explosion of activity fueled by nothing more than intangible rewards like reputation.

In many newsgroups, volunteers would write and maintain an extensive FAQ, a convention borrowed from mailing lists. The more you contributed, the more you could make your reputation as a valuable member of a newsgroup. There were no usernames back then but some people adopted one for their posts and became known for those pseudonyms. All the motivational dynamics that would later allow for the building of something like Wikipedia from the community existed in forums back then.

Alex: Really reminds me of a line from ESR’s The Cathedral and the Bazaar on why open-source software communities produce such great documentation, even though writing documentation is the last thing that hackers themselves wanted to be doing:

Many people (especially those who politically distrust free markets) would expect a culture of self-directed egoists to be fragmented, territorial, wasteful, secretive, and hostile. But this expectation is clearly falsified by (to give just one example) the stunning variety, quality and depth of Linux documentation.It is a hallowed given that programmers hate documenting; how is it, then, that Linux hackers generate so much of it? Evidently Linux’s free market in [gift culture] works better to produce virtuous, other-directed behavior than the massively-funded documentation shops of commercial software producers.

Eugene: I do think we’ve seen a big shift in the internet abundance culture thanks to the commodification of interaction. In the early days of the internet, and even in the blog era, there were no simple one-click feedback mechanisms such as like buttons. To give feedback, to even exist, you had to post something. Even if it was typing out “Thx!” in response to someone’s post on a forum.

In the blog era, there were attempts to build out more systematic connective social tissue, like trackbacks, webrings, things like that, but these were completely trampled by social networks like Facebook which built from the social graph out, rather than from the content out. They built out social feedback mechanisms of unparalleled scale and simplicity. 

But classic economic theory predicts that the costliest signals are the strongest signals, and something about just mashing like buttons as the basic unit of interaction in this attention economy cheapens the connections. You end up with a social graph of very weak ties.

In a way, the more costly signals required in the early gift culture economy of the internet allowed it to feel more harmonious despite being a low trust environment. Modern social networks are at a much larger scale. One might expect that with the more developed identity layer of today’s internet that trust would be higher. However, our largest modern social networks are built around public feeds where many strangers collide, and these companies haven’t solved the interactions between those people with low trust and often divergent viewpoints.

Another critical change from then to now is the rise of the machine learning algorithms that selectively amplify the distribution of certain posts. It’s difficult to describe how different the pre-turbocharged algorithmically determined feed internet felt compared to today’s hyper-accelerated information environment. Back then forums felt like cozy rural communes, today’s social media driven environment is like the urban jungle. To the extent that the feed algorithm is accurate, it feels meritocratic, but a lot of the content that gets amplified today is just clickbait or outrage fodder. This contributes to the sense of living in a high inequality information environment.

Users have so many repetitions on social media, they learn what the algorithms rewards very quickly. The rise of fortune cookie Twitter is in large part because posting pithy if somewhat trite aphorisms really works, many get hundreds of likes. Clickbait titles are commonplace now because they also work.

This is not to just be a “things were better in the old days” rant. But I do think in the era of growth teams running wild with machine learning algorithms, we accelerated distribution incentives to drive engagement before we really knew what incentives were being created in the internet economy. And now the larger social networks are grappling with some of the unintended consequences.

One of the refreshing things about TikTok is that its algorithm ends up being pretty harsh. Many creators may have one video that gets the TikTok FYP algorithmic boost, but then you browse their profile and see all their other videos have only a tiny number of views. These are like one-hit wonders in music. Even if you have one breakout video, if TikTok screens your next video to an initial test audience and they don’t respond, they will drastically reduce its FYP airplay. It’s harder to “game” the TikTok algorithm and that makes it feel like a more meritocratic attention economy.

Alex: When I think about where on the internet gift culture really hit its stride, and found a really resonant form factor for self-expression, the two places that come to mind for me are Tumblr and Snap. 

With Tumblr especially, I feel like there’s an Almost-Fortune-Cookie level sound byte like, “In the year 2060 all of human culture will have descended from Tumblr.” Was Tumblr the very beginning of “post-internet scarcity?” It felt that way sometimes. It was the wackiest place, and yet there were rules, there was a highly evolved culture, that felt, as ESR put it, like “an adaptation to abundance rather than to scarcity.” 

Eugene: I know so many people who’d still tell you that Tumblr is their favorite social network and that they miss its heyday dearly. In music, you might say that digital sampling and remixing mark the modern era in some ways. Tumblr was remixing brought to social media and does predict much of today’s meme-heavy internet.

Tumbling felt like surfing the mental preoccupations of very online people, their brain cells connected in a cultural mesh where text, images, videos, and ideas raced from one Tumblr to the next, mutating and recombining with every hop.

Perhaps because it grew up in an era of abundance, Tumblr was characterized by a deep well of generosity. It was expected that you might grab something from someone and remix it and pass it along for others to play with.

The closest replication of Tumblr’s creative network effects today is on TikTok where every video and meme can be remixed in multiple ways. Still, the bar for creation, despite TikTok’s really powerful camera editing tools, is higher than on Tumblr.

I miss Tumblr, though I suspect some of its spirit will continue to come back in different forms on our way to living in the metaverse, when sheer digitization of so much of our reality removes some of the last forms of real-world scarcity left.

Alex: Snap, also, just instinctively feels to me like a company that would get “new scarcity” right. Snap streaks and scores and Best Friends and all that were just really on-the-nose correct intuitions about what is scarce to us, or at least to teenagers. But the product has also continued to evolve, and still feel really fresh.

Julie: One thing I have always loved about Snap is that so much of the product mirrors the question, “What would this exchange be like if we were IRL?” In real life, pretty much all of our conversations are ephemeral, just like they are on Snap.

It’s also noteworthy that Snap group chats seem to encourage presence above all else. I mean, this is a multibillion dollar company that decided to send a freaking push notification when “someone is typing” lmao - who does that? It’s so ridiculous but also so core to what Snapchat is. I know from experience that it really incentivizes me to have real-time communications with someone.

When I speak to teenagers about Snapchat, a lot of them will say things like, “I add everyone on Snap - I only have someone’s phone number if we are REALLY close.” They’ll also say things like “Snapping someone is very casual. IMessage is very formal.” I’m not sure what exactly Snapchat is capturing here, but it feels scarce. While so many of the other social platforms are permanent and feel like a destination, Snapchat is more of a living, changing thing. 

I do think it’s true that Snap streaks and Best Friends are correct intuitions about what is scarce to teenagers, but it also feels like these things are kind of antithetical to Snapchat. I don’t know why Best Friends got removed, but I’m guessing it was because it incentivized really thirsty behavior. I loved it, but it was honestly so annoying lol. I can remember sending and receiving so many pointless snaps in college just to make it onto people’s Best Friends, stalking people to see who they were chatting with, etc. Just a lot of really unnatural, unhealthy behavior - kind of like Myspace Top 8, except on a device that you have with you literally all the time for 100% of your communication haha.

Streaks are better because they aren’t a public leaderboard, but they’re still pretty unnatural. A lot of people maintain streaks just for the psychological satisfaction of seeing the number go up, not because they have a strong, long-standing relationship with someone. (People would lose their minds if streaks were removed though. My younger cousin has multiple streaks in the 1000’s - when she doesn’t have access to Wifi for some reason (ex: going on a plane), she will give her login to a friend so that she can log in and keep her streaks for her lol.) I truly wonder how this will end for that generation - I felt SO RELIEVED when I lost my one and only long-running streak. Maybe they will, too.

Alex: Would you say that Gift Culture is a part of how Snap works, or how many of these newer social platforms work, particularly TikTok? There’s definitely an element to it that you earn status by doing the work and giving it away, but with a very sophisticated expectation of reciprocation and returns to social status. 

Julie: For the typical user, Snapchat feels more like a messaging platform than anything else. It’s not really designed for giving things away and getting status on a macro-level like Twitter or Tik Tok.

There’re definitely some more micro elements of Gift Culture, especially within group chats. When you capture a particularly funny moment perfectly within a Snap and send it to the group, you are rewarded with “saves” and “screenshots.” It makes you feel special and appreciated. Is this really Gift Culture though? Maybe it’s just what it feels like to have great friends. It’s sort of the digital equivalent to telling a funny story during Wine Night and being rewarded with laughter. There is some status to be obtained, but the cumulative effects are minimal.

Alex: See, to me that’s exactly what I mean by “it’s gift culture that’s found its stride.” Gift culture doesn’t have to be these big grand gestures. It’s the small, little things, like posting something funny and getting screenshots. Screenshotting someone’s snap is like an acknowledgement, “that was really good”. There’s more, though, I’m sure.

Julie: Ah okay, I see what you mean - I guess it’s just the status part that feels less scalable on Snap. Another thing that prompts some interesting discussions about Gift Culture is the Explore Tab under the lens carousel. There is an entire world of lens creators who put in time and effort to create cool lenses for Snapchat users. These lenses are accessible to anyone on the platform and can be added to snaps as a more immersive layer of expression. The Lens Studio platform requires some work to figure out how to use, but it is not an insurmountably difficult tool to work with. Lens creators are rewarded for their creativity and effort primarily with status. They aren’t paid outright through Snap, but a lot of brands will commission the most established creators for promotions and things like that. 

This takes the concept of a “digital economy” to a more explicitly “metaverse-looking” level. It will be cool to see how it grows and matures over time. 

I think Discord could be another company right now that is building around these ideas in the right way. Users can start servers and script user-driven processes within them. Status is explicitly determined by your ranking/categorization on the right side of the screen. Ex - there are huge singing discords where kids organize these huge singing competitions in the voice chat (complete with judges, song requests, etc.). The better you do in the contests, the more you (literally) move up the rankings in the server. 

Alex: Do you think teenagers understand and experience gift culture differently than adults do? 

Eugene: I certainly think teenagers more correctly value digital or intangible goods. I’ve written before about how unlike adults, most children don’t have other easy sources of status like a job, a house, a car, those types of assets. They are more time rich and thus will look to how they can earn status with that time most efficiently.

That’s always been true, but today’s teenagers are growing up with a much more fully developed virtual economy that they can participate in from the moment they are allowed a smartphone or access to a gaming device. Thus the ability to exchange that time for status is much better than previously. In another era, maybe you were the cool kid at your high school. Today, maybe you become Charli D’Amelio with tens of millions of followers on TikTok.

I can’t find this study anymore, maybe someone out there knows what I’m referring to, but there was this study done on Reddit where the payout could be in cash, an Amazon gift card, or Reddit Karma. And by a wide margin, users opted for the Karma, because they recognized it was way more valuable than the other two forms of currency because it had to be earned through a very specific type of exchange in the Reddit economy. 

Alex: How would you describe the power that cool teenagers have? It’s like, they have power because they are able to give away something that no one, not even the richest or most powerful grownups, are able to give away. What is that though? Maybe it’s something so simple as they have time to spare, but it’s more than that I think. Maybe cool isn’t it, because the not cool kids have it too, a lot of them just don’t know it. 

Eugene: I love that speech by Philip Seymour Hoffman as Lester Bangs in Almost Famous, when he tells the protagonist, William, “That's because we're uncool. And while women will always be a problem for us, most of the great art in the world is about that very same problem. Good-looking people don't have any spine. Their art never lasts. They get the girls, but we're smarter.”

And everyone who is or has been a teenager immediately understands just what he means. The teenage economy of cool is a savage yet intricately structured marketplace where humans have to work out how to survive in an open tribal landscape. There’s a reason so much YA fiction is dystopic and horrifying like The Hunger Games or The Maze Runner.

Why is it that cool is so often associated with teenagers? I suspect it’s because teens live at a very particular juncture in life. They’re old enough to be conscious of the dynamics of cool and social status, their tastes are developed enough to have a more refined quality filter on things like music and fashion and other consumer products, but they’re not so old that their tastes have ossified or that they’ve become captive to years of conditioning from the advanced marketing apparatus of capitalism or the sophisticated social conformity pressures of adult society. So we ascribe a more intuitive valence to their judgements of what is cool, what is not. 

Since that confluence of conditions is restricted to that particular era in one’s life, it comes with built-in scarcity. It’s just tough to match that with another form of scarcity. Not impossible, just difficult.

Teenage cool also comes with a somewhat unique overtone of violence. We…errr, maybe I should say I (since I won’t speak for either of you, both of you may have been much cooler than I was in high school) certainly felt the sharp end of exclusion from the cool kids group at some points of my childhood. Teenage cool is equal parts love and hate. Late in life, people tend to embrace the things they love, but it’s your teenage years when the choice of what is cool to you also draws a sharp line around what is uncool. It’s equal parts embrace and negation.

I tend to associate teenage cool with a quality of nihilism. That mix of rebelling against your parents while fighting for survival in the social jungle that is high school while also grappling with the hormonal soup that is your body can give you an edge that is hard to sustain throughout life. At the same time, if you choose to dub something cool despite having to fight through a sustained fog of anger at the world, that is a real gift.

Alex: I was definitely never cool, although my teenage years were probably the local minimum of my relative awareness and social understanding of how the social economy worked, rather than the maximum as it is for many people. Still, you know who the alpha kids were; everyone did. From around age 10-18, between different schools and friend groups, I remained in more or less the same place: I wasn’t cool, and my group of close friends wasn’t either, but I was always close with one or two actually high-status people.

Mostly I feel like the popular kids then would’ve been the popular kids now, and the ones with social gifts and graces then would be the same now. But with one caveat. I wonder whether there’s been a change in how people perceive “trying”, if that makes sense. It used to be that you didn’t want to be seen striving too much. And I wonder if the internet and today’s social media, which is so performance-y, has changed that. 

Julie: The fact that Gen Z grew up with such a mature digital economy makes them so much more skilled at working within it. We laugh about the fact that the most common career aspiration among young kids today is “YouTuber” - but it makes a ton of sense. That kind of career allows you to make content doing what you love, build a company, own your time, and (hopefully) earn a great living while doing it. The younger generation understands this and validates it more so than any generation before it. The concept of a “sell out” doesn’t exist for them - making content and monetizing what you’ve built are all indicators of success that give them status (rather than taking it away).

When thinking about generational differences, I like to think back to the pyramid you mentioned in Part 3. On the bottom of the pyramid, you have self expression (Snapchat), then status (Instagram), and then talent (TikTok). Millennials grew up with a dual expectation of both needing to obtain status online, but also needing to fit into the traditional professional world created by GenX/Boomers. We grew up “rolling our eyes” at the Kardashians’ ability to “be famous for being famous” but also loving to regularly tune in to the show. 

Ultimately, I think forces like this made it so that millennials have trouble differentiating between the middle and the bottom of the pyramid. The average millennial does not see a difference between an Instagram story and a Snap story or a Snap group chat. (This is why we saw so many reporters writing stories about how Snapchat was dead when it wasn’t!) The average millennial sees almost all social media as a way to broadcast. When we “posted on someone’s wall” as a “message,” we pretended like we were “messaging” even though we knew that the “message” was really a broadcast to be seen and consumed by others -- it was a way to gain status. 

Gen Z has a higher bullshit detector, presumably because they grew up with the more mature digital ecosystem Eugene mentioned. They have a much clearer understanding of the difference between messaging someone on Snapchat versus broadcasting on your story. On top of that, it’s well-understood that you will lose status if you confuse the two (after all, that’s what the olds are doing on The Facebook Dot Com!).

This more agile understanding of the digital economy helps explain why Gen Z is so much more prone to Internet entrepreneurship. Instagram, YouTube, and TikTok are incredible tools for broadcast - and for building a business around that broadcast content. When it comes to messaging friends and expressing themselves, they’ll go to Snapchat, iMessage, Discord, and Instagram DMs. 

Alex: As tempting as it is to go on for pages more, I think we’re going to call it a wrap here - thank you so much Eugene and Julie for taking the time to share all of this with us! I had such a great time getting this together and I’m sure our readers will have an equally good time tuning in. 

You can read more from Eugene here, and more from Julie here.  

Permalink to this post is here: The Kids are Alright: an interview with Eugene Wei and Julie Young |

This week, a bunch of news to share from Shopify-side:

First, Dev Degree admissions are now open for Fall 2021. If you’re interested at all in getting a computer science or software engineering degree, or know someone who is, Dev Degree is a pretty remarkable program. You’ll get 4,500 hours of experience over four years, and come out with the same credentials as a four-year undergrad (but with an enormous head start in joining the tech workforce.) You’ll also spend the majority of your time working on actual software projects inside Shopify, contributing actually valuable work. We have some Dev Degree students in Money, and they’re fantastic. 

You know I’m not huge on the “college will collapse in a few years” train, which is fashionable in a lot of parts of tech. I had a great undergrad experience, I learned a lot, and I wouldn’t change it for anything. I don’t think you can flippantly say, “skip college and get some real-world training, it’s the future, go for it.” But Dev Degree is really something special. Oh also, instead of paying tuition, you get paid a salary. As you should! All told, when you add up your salary + vacation + paid tuition for partner programs, you end up getting paid something like $160,000 over 4 years. Anyway, if you or someone you know needs to hear about this, please send them here, Here’s an FAQ

Other news from Shopify: Jon Wexler, formerly an exec at Adidas and best known for running the Yeezy product line (one of the most successful celebrity branded products lines I think ever?) is joining the team as VP of the Creator and Influencer program. Here’s an interview with Wex and Loren Padelford, who runs Shopify Plus:

Former Adidas Yeezy GM Jon Wexler is joining Shopify | Brendan Dunne, Complex

If you want to join us (and Wex), we’re still hiring for lots of roles, including two in particular I want to highlight: Director of SEO and Product marketing lead on Money. If either of those sound like you or someone you know, please check them out.

And finally, if you were curious how Shopify gets stuff done, JML made this video for Austen Allred (who had asked Twitter how big companies deal with internal collaboration and job-tracking), you might find it interesting:

Here is a fantastic conversation on Direct Listings, with Barry McCarthy, Spotify’s SFO, Greg Rogers, who was council on both Spotify and Slack’s direct listings, and Will Connolly from Goldman. It has some fantastic lines in there (especially from Barry) and is generally a great read if you’re at all interested in the recent innovation and experimentation around the going-public process. 

Amazon drivers are hanging smartphones in trees to get more work | Spencer Soper, Bloomberg

And finally, for this week’s Tweet of the week, if you’ve been online in the same places I have this week you know it’s obviously going to have to do with the Nikola short selling story. Read the whole thing, and here is the Twitter thread, but this part in particular just made me laugh so hard:

Have a great week, 


Scarcity Status versus Abundance Status (Gift Culture Part 3)

Two Truths and a Take, Season 2 Episode 30

Welcome back to this multi-part newsletter series on Gift Culture on the online frontier. If you missed them, check out Part One (defining gift culture, and the “homesteading” behaviour exhibited by both open source software programmers and Twitter armchair analysts) and Part Two (an interview with Julie Young, one of my favourite “homesteaders” and gift culture practitioners on Twitter). 

This week, we have another solo issue, setting up our fourth and final instalment in our series, a dual interview between two of my favourite internet people. One of them is Julie, back for another round. You’ll have to wait and see who’s joining her. 

David Graeber passed away on Wednesday this past week. He’ll be remembered for many things: his recent books The Utopia of Rules and Bullshit Jobs: A Theory; his socialist activism and protests (including Occupy Wall Street), and his professorship at the London School of Economics. But for me, and for many, I’ll remember him most for his book Debt: the first 5000 years

Debt: the first 5000 years (which I wrote about in this newsletter several months ago) is an enormous, sweeping look at the human history and anthology of Money, Debt, and their two-sided relationship. (The best books about money theory are written by the communists.) If you never read my original post from a few months back, please do that. 

Debt starts out by comparing two competing theories on the origins of money, and on what were early, fundamental building blocks of commerce. One view, the "Adam Smith View", tells a story about how commerce is fundamentally about the bartering of scarce resources, and metal currency evolved in order to facilitate that bartering by making it easier to solve the coincidence of wants problem. In this view, money exists absolutely in a context of scarcity. Coins are a representation of hard scarcity. That’s why they’re made of gold and silver.

In Graeber’s view, all of that is wrong. He’d argue that if you went back in time 5000 years ago and asked an early villager, “how do you solve the coincidence of wants problem?” they’d look at you strangely: “We don’t have that problem. If my neighbour has grain and I need it, I take some and then I owe him one.” That concept, “I owe him one”, is really powerful. In this paradigm, money is fundamentally an IOU. It is not a representation of hard scarcity; it is a representation of trust between two people. Money, just like trust, can be originated or destroyed. It is local, and contextual. It’s made of reputation. 

Money is both of these things. It is both a unit of scarcity, and a unit of trust. But it’s not always both equally. In some environments, like in prosperous early civilizations or the Asian Middle Ages, the trust side dominated. In other contexts, like the ancient Roman or Chinese empires, or the North Atlantic slave trade, the scarcity side dominated. But it always has both sides. 

You may be wondering where is all leading up to, and it’s to make this point: status is like money

Like money, status is about scarcity. It is an abstract but absolute representation of what you have. It is zero-sum, and backed by something tangible. Status is a flex.

Also like money, status is about reputation. It’s about trust, generosity, and about what you’ve given away, not what you have. It can be originated into existence, or destroyed. It isn’t like a gold coin here; it’s more like an IOU. It’s an adaptation to abundance, not to scarcity. 

Status is both of those things. It’s a unit of what you have, and it’s also a unit of what you’re owed. 

In the first two issues in this series, we’ve talked about Gift Culture as an adaptation to environments of abundance. Pursuit of status - or something like it - can create some pretty incredible things, like the open source software community or the fountain of free knowledge and curiosity you can find on Twitter. In my interview with Julie, we had a great discussion about what an incredible advantage in life you can obtain, for free, by earnestly and generously participating in tech and finance Twitter. 

As Julie put it succinctly: I think your point about Twitter really being a culture of EXCHANGE is key. I used to just follow people on Twitter without tweeting much myself. But to get the most out of Twitter, you have to say things and make your thoughts known. You have to put a little work into it. When you start doing that, the effects compound really quickly. And then all of sudden you’re addicted to the Twitterverse, wow what a life!!!!

Status on Twitter, or at least on the parts of Twitter where I hang out, is not about what you have. It’s about what you’re owed. Same goes for Reddit, forum culture, or Snap Streaks. It’s an adaptation to abundance, like we’ve talked about for the past two issues. Gift culture is rewarding and creates genuine community, but it can also feel incomprehensible, hostile, or passive aggressive for anyone not clued in, or unable to participate. 

That’s not true for status everywhere, or even everywhere on the internet. Instagram certainly isn’t like that. Instagram is very much about what you have. There are no IOUs on Instagram; just I have, I am, I get.

The hard-status and scarcity-mindset of these social networks make them compelling, but vulnerable on the basis of pure engagement: Flex Status is just something most people don’t have a lot of, whereas Gift Status can be originated and nurtured by anyone. This past January, Evan Spiegel of Snap illustrated this point well in his “Triangle metaphor”:

You can imagine a pyramid of internet technology, or communication technology, and at the base of that pyramid - the very broad base - is self-expression and communication. And that’s really what Snapchat is all about. It’s talking to your friends, and that’s something that anyone feels comfortable doing. They just express how they feel. 

And then as the pyramid gets narrower, you get to that next layer, which would be like status. And so social media in its original construct is about status. Representing who you are, showing people that you’re cool, getting likes and comments, those sorts of things. And that’s less accessible to the broad base of humanity, and has a narrower base of appeal, and a more limited frequency of engagement, because only do things that are cool maybe once a week, or once a month, and not necessarily every day. 

And then at the top of the pyramid, which I think is represented by TikTok, is talent. So people who have spent a couple hours learning a new dance, or think about a funny new creative way to tell a story. They’re really making media to entertain other people. And I think that’s even narrower. 

Illustration by Jacob Catalano

TikTok is a fascinating mix of both gift culture and flex culture. There’s certainly an element of gift culture to TikTok: people dedicate so much of their time to making content for others’ pleasure, and your fame increases by how much of that entertainment you’ve successfully ‘given away’. But at the end of the day, it’s also about being beautiful, rich, and having great skin and fancy friends. It’s about scarcity too, and you know it. 

TikTok feels like such a hit to me because it’s nailed the dynamic between online scarcity and online abundance really well. It is a gift culture hybrid model: the status economy of TikTok runs on what you’re owed, and what you’ve given away. But your ability to give something valuable away in the first place often falls back on scarcity and flex culture: you need time, you need good looks, you need friends. That’s why viral TikToks go so viral. More Spiegel:

Talent-based content is often more interesting than status-based content. One of the things that we find very interesting is that, everyone is interested in what their friends are doing. But as you start looking at a broader audience, maybe someone you don’t know very well, or an influencer or something like that; that status-based content - relative to talent-based, more interesting content from that same person - I think can draw people away from more influencer-based, status-based services to content that is simply more entertaining and more fun. 

I can’t tell you how many takes I’ve read about how the most important part of TikTok is this mysterious algorithm that creates engagement; and yeah it’s definitely an important part of TikTok’s success. But you know what’s just as important? The really simple, easy-to-use video editing tools. By getting rid of the last little bits of effort and frustration around creating great video content, TikTok removed the friction between those with talent and everybody else. 

From a status standpoint, TikTok’s social status currency is outcompeting everyone else right now. On the surface, it’s because TikTok’s users are engaging in a lot of high-status, high-engagement behaviour that’s entertaining and valuable. But deep down, none of that behaviour is new. It’s TikTok’s technology, completely below the waterline, that’s new. No one sees the technology, but by removing a certain kind of friction, it’s introduced a new variant (or really, hybrid?) of gift culture at the online frontier. 

Next week, with my two special guests, we’re going to talk more on this topic: how software and the internet’s technology have changed over decades, and in doing so changed gift culture, and changed the way that status works online. 

Permalink to this post is here: Scarcity Status versus Abundance Status (Gift Culture Part 3) |

To be concluded next week; stay tuned.

Have a great Labour Day weekend everyone,


The SE Suite: an Interview with Julie Young (Gift Culture, Part 2)

Two Truths and a Take, Season 2 Episode 29

Welcome back to part 2 of a multi-part series on Gift Culture at the digital frontier. If you haven’t read last week’s post on gift culture as an adaptation to abundance, please read that first. Today, I’m really thrilled to welcome a guest onto the newsletter to talk more about gift culture in the new world of stock picking: the one and only Julie Young

There are two reasons why I really wanted to talk to Julie here. (Well, three; the most important is she’s an absolute riot, as you’ll see if you don’t already know her.) 

First, when I think about who best embodies the idea of “homesteading the Twitterverse”, Julie is one of the first people who comes to mind. She’s established and cultivated this distinct plot of land on FinTwitter that’s very much her own, deeply useful, thoroughly unpretentious, and accessible to anybody. She’s the perfect person to talk to about Stock Picking Gift Culture, and that’s what we’re going to talk about today.

Second, and we’re going to get into this more in part 3, is her experience at Snap, working with Augmented Reality, and generally being someone who understands the concept of value at the digital frontier, and what kind of economies will emerge in these new, strange realms of virtual abundance. Next week we’re going to talk more about this, with a third special guest. So stay tuned for that. 

(You won’t see this often on this newsletter, but for this issue, we should probably issue a disclaimer! This is purely for entertainment purposes. This is not investment advice and shouldn’t be taken as such. Alex and/or Julie may hold positions in some of the companies discussed here.)

AD: So. Julie, for the benefit of readers who might not know you or aren’t on Twitter: What’s the Julie Young story? How did you get interested in this world, how did you end up at Snap, and what’ve you been up to since?

JY: Thank you so much for having me on here! I’ve spent a lot of time reading your newsletter over the years so I am very excited to be here. 

I’ve spent my entire career so far at the intersection of tech and storytelling. My first job out of school was as a producer for a VR filmmaking company. After that, I joined Snap to work on their hardware team.

The reason I wanted to work at Snap was because I felt like they were applying a lot of these 3D concepts in less linear ways. While the rest of tech was trying to figure out how to make a story more immersive by stitching gopro footage together into a sphere (which would be used by the ~4 people who actually own VR headsets), Snap was shipping rainbow vomit lenses that my friends were using every single day. Snap just took all of the 3D technical concepts that were out there and applied them so much more creatively. 

Since Snap, I’ve been consulting independently on all kinds of projects - I do a lot of product and UX (mostly with startups, but sometimes with bigger companies) and I also produce a lot of 3D content.

You’re a person I would describe as fairly online. How would you articulate the overwhelming career and investing advantage that being on Twitter gives you relative to people who aren’t? I honestly don’t do a good job of this myself and I’m sure you can explain it a lot more clearly (or at least a lot more enthusiastically) than I can.

Lmfao yeah I’m essentially addicted to twitter now. I think this really started for me during quarantine because there was so much more free time. But now there’s this whole universe on there and group chats I talk to all day long. (or, in Alex Danco speak, there is a plot of land to tend to in a world of abundance on the internet!).

Twitter is honestly one of the best tools. I get most of my work from Twitter, and just generally meet tons of cool people on there. It’s especially useful if you’re hyper curious about niche interests and you enjoy learning about new things.

Like, you might think you’re the only person in the world who cares about the ethnography of cookbooks. But then you get on twitter and turns out there’s a very active cookbook ethnography twitter scene. Who knew?! 

That said, I think your point about Twitter really being a culture of EXCHANGE is key. I used to just follow people on Twitter without tweeting much myself. But to get the most out of Twitter, you have to say things and make your thoughts known. You have to put a little work into it. When you start doing that, the effects compound really quickly. And then all of sudden you’re addicted to the Twitterverse, wow what a life!!!!

I think a lot of people who read my newsletter know you because they associate you with a few specific stocks: Beyond Meat, Fastly, Etsy, and especially Sea Limited. Your post on $SE from a couple months ago was just legendarily good, not only because it’s great analysis but because it created so much interest into this mysterious monster business that so many people over here had never heard of before reading your essay. Is your brand “insane companies no one talks about” now?  

Thank you for saying that! I have become so fascinated with Sea over the last few months. It got to the point where I was spending my entire weekend reading about them and watching random YouTube videos about their products. So I decided to try writing an article. My post on SE was my first foray into “substack world” but I am so happy I did it! It got a lot of traction and I got added to several Twitter DM groups about Sea and the tech scene in SE Asia. These chats are incredible and I’ve learned a ton from them. (More proof to Part 1 of this series!)

After my first post, I decided to name my substack “Insane Companies No One Talks About” - mostly because I couldn’t come up with a succinct/witty name lol, but also because I love to learn about crazy, interesting things happening in the world. My substack is basically that, but with an emphasis on the business. (Shameless plug: you can read my second post here about the LOL Surprise! Dolls that have done $9+ billion in revenue).

If I had to describe your investing style based on your public takes, I’d probably describe it something like, “stocks that everyone says are overvalued, and where you think the risks are clearly priced in, but the upside isn’t.” Is that fair? 

Lol yeah that’s a critique I get a lot from FinTwit 😂. One of the first things we did in my intro finance class was learn Time Value of Money. We did an exercise where we compared $X put into the S&P per year vs $X dollars put into Berkshire Hathaway per year - over a few decades. When I saw the difference in “today’s value,” I could not believe my eyes! That was the coolest thing I had ever seen in my life. I think that’s what sort of got me interested in “buy and hold” investing strategies, and all of my experiences after that seemed to confirm it. I also tried day trading a little once and it went incredibly badly for me lol.

That said, I’m still in my 20’s and I haven’t really had a lot of time in the market yet. I opened my brokerage account in high school a few years after the bottom of the 08 recession. So basically I am sitting here talking about HoW GrEaT My BuY N H0Ld InVeStMeNt StRaTeGy is for me, even though I’ve only ever had experience investing in the longest running bull market of all time.

I don’t know, it scares me. I haven’t really been through a “recession” yet in the same way that older generations have. It was really hard seeing the market go down during the beginning of quarantine. So I want to learn and grow and become a better investor - but I also don’t want to be full of shit. I keep thinking back to the Berkshire Annual Mtg this year when Buffett said that $1 invested on the day of his birth wouldn’t have been returned until ~20 years later. That’s a reality that I just have absolutely no comprehension of. But it can happen and I want to be cognizant of that. 

I guess my investing style is “tbh no idea but the founder is a genius and the world needs the product, it’s inevitable. so I guess I’ll just hold it for a long time.” Every single company I’ve “missed” so far has been one that I deemed “too expensive.” I keep thinking back to that damn TVM chart lol - and it helps me remind myself that my mental time frame should be sooo long. There are companies that I’ve lost money on over 2-3 years, but I still like enough to hold or even buy more. Over decades of time, if you’re holding a good company, hopefully those dips don’t really matter.

I have stopped trying to make sense of whatever the hell is going on in 2020 with respect to valuations. Nothing makes sense, everyone is insane! It really freaks me out. 

A few days ago, you were blessed with the highest honour in financial twitter: being the person most associated with the “Anti-Scott Galloway Portfolio” (up 150% in less than a year since his famous tweet). That’s real cred right there. 

Bahahaha okay, I feel really bad about this to be honest. I was frustrated with his takes because I felt like they were just pointing out really obvious risk factors without looking at any of the product implications. I jokingly tweeted that you should do the opposite of everything he says. Months later, I went back and ran the math on my original tweet - I couldn’t believe how well you would’ve done if you’d ACTUALLY taken a long position on the public companies he was bearish on.

I tweeted a screenshot of the spreadsheet and it went viral. I had never had something go viral before, and I didn’t really have any followers before that. It gave me a lot of anxiety! I also felt bad that some people used it to really bully him. I’m sure he’s a nice guy. :( 

I feel like there is real signal in this - not “Anti-Galloway” per se, although he’s a great contra, but more this feeling like, “There’s a lot to criticize in these tech growth stocks, but that criticism is definitely not it, it’s wrong and it’s predictably wrong, so I’ll buy some of whatever the opposite of that is.” How would you describe the contra here? 

Yes, I think that’s definitely been true for the last decade. That’s why you saw so many of these value-based hedge funds crumble over the last few years. If you wanted to get a good return over the last 10 years, a great strategy would’ve been “buy every company everyone else says is overvalued.” It’s just a really weird time. 

It’s not like this is new, though. Here’s a fabulous 2012 memo about shorting from Value Investor’s Club (I especially appreciate the thesis for what will catalyze the selloff: “Marc Benioff forgets to use the words "amazing" and "spectacular" in every sentence on the next conference call, causing panic amongst the kool-aid drinking longs”.) Same as it ever was, I guess?

Anyway, the core idea I want to talk about with you is the idea of Stock Picking as Gift Culture. 

Stock picking is obviously a well-established industry, it’s called active management, and it has well-established norms, structure and (especially) fees. One of the funny rules of active management is that it tends to follow the Groucho Marx rule: “You don’t want to join any club that would willingly have you as a member.” Same rule kinda applies for active investing: you probably don’t want the investment advice of anyone who would actually take you on as a client. Stock picking as an exchange economy has its constraints. But stock picking as gift culture feels like an entirely different story. 

To me, stock picking checks off every box for a successful gift culture:

-First, it’s a world of abundance, not scarcity. All of the information you need is in the open; there’s no objective scarcity or tangible friction anywhere. But there’s still work to be done, and it makes sense that people want to be rewarded for that work. 

-Second, it’s a world where great status can accrue to people who a) are very right about a stock call, b) tell other people, and c) make those other people prosperous. (Disclaimer: nothing in this newsletter is financial advice, do not trade on anything I or Julie tell you, ever, if you do that’s your own dumb fault. We own positions in some of the companies mentioned here.)

-Third, it’s genuinely hard to know what calls are actually smart, versus which just sound smart, versus which are plain lucky. So a large part of the Gift Value that someone like you might receive for writing the SE essay, for instance, comes from what other smart people think about it and say about it. 

Yes, that’s totally true. You cannot be a successful investor by believing what everyone else believes, otherwise you would (literally) miss out on every single increase in value. The best investors I know are not necessarily the great spreadsheet makers (no shade to spreadsheets, I love spreadsheets!), they’re the people who have really unique perspectives and strong intuition + conviction. You have to do real analysis and work to make a call about what the future might look like. I think you have to look outside of just “data” too. Like you said, everyone has data.

10000% agree that the value of publishing your thoughts/analysis on Twitter is definitely the smart people that you’re connected with as a result of it. I am in a Sea group chat where we just share interesting Sea articles all day. It’s amazing. There are people in there from all over the globe who have insights and thoughts that never would’ve crossed my mind. It’s really cool - I never would’ve been connected with these people if I hadn’t written an article about Sea in the first place!

Is it called “The Sea Suite?”

Lmfao no i wish. I’ll suggest that.

There’s no right answer for this, since as far as I know no one has ever written this down before, but as you understand them, what are the unspoken rules of stock picking gift culture? What is good form and what is bad form?

I’ve always tweeted about stocks here and there, but I’m still pretty new to FINTWIT fintwit. For me, I really enjoy following people who will question their own opinions openly.

A trend I see on tech twitter specifically is this growing aversion to “fortune cookie” twitter (the growth hack Eugene Wei outlined a few years ago). If you want to gain a lot of followers quickly, the best thing to do is tweet High TAM fluff tweets that sort of don’t even mean anything - something like “The product doesn’t choose its users, the users choose the product.” (They always end with a “period” like that lol.)

These tweets are solely designed for growing follower count. They rub people the wrong way because they exist only for the benefit of the OP, they add nothing of value for anyone else. I’m definitely seeing more and more people openly dismiss fortune cookie twitter. I actually think it could really backfire in a few years, especially for investors who want to be taken seriously by great founders. People def see through BS.

Back to your original point earlier in the series, I don’t even think fortune cookie twitter is getting the full return on their investment. Followers aren’t the only thing that comes out of Twitter. It’s like, we are all out on the homestead trying to sell our organic, locally grown vegetables… and then fortune cookie twitter comes in and just Monsanto’s the whole thing. 

Wait hold up, that is an incredible phrase and I want to make sure I get it right, so when we’re having a good chat about some business, let’s say I dunno, Twilio, and then right on schedule someone shows up with an Emoji-overloaded GMO tweet like  “Thought you understood the API economy? Time for a thread 👇👇” and that’s called getting Monsanto’d? That’s too good. 

LOL okay I don’t hate those ones as much because they usually offer some great analysis. To continue the analogy, those ones are the equivalent of selling high-quality produce with great marketing and logistics optimization. The fortune cookie tweets are just truly a lower quality vegetable 😂

Anyway, you have a certain amount of credibility on Twitter because, for one, you’ve clearly demonstrated that you sit in a different information flow than your average investor does; two, you clearly have a smart perspective on that information flow because your takes have been really good; and three, it makes sense that you have smart takes on them, because you actually have a background in tech; you’ve walked the walk working at Snap and otherwise being part of tech in a very real way. 

That’s why, I think, if you look at people who are doing the best job “homesteading” their little plots of land and creating meaningful gardens of knowledge and hot takes, it’s often people who have backgrounds that are a little askew from mainstream finance or investing or even VC. Is there anyone who comes to mind in particular that does a great job of highlighting some unusual background in a way that’s really useful for investors? Are there any fields you’d love to learn more about, and want to learn who’s claiming that little plot of land as their own?

Daniel Sinclair is one of the best people on twitter. He is super young and equally as in touch with culture as he is with tech. When I drink coffee in the morning, I literally go to his page and just read through whatever is new there. He tweets a lot - summarizing articles and providing his own takes on them. He’s a genius. He pays attention to everything and is thoughtful and balanced. Other people who provide really smart, unique perspectives: Aaron McClendon, Freia Lobo, Max Kreminski, and Turner Novak.

One random thing I’d like to learn more about is the role of serverless computing in data localization. It’s hard for me to imagine a world where data localization and compliance doesn’t just become more and more important across the globe - I mean, we are just at the beginning of the TikTok/globalism/security discussion. What is the plan here? To have every company develop all of their own software products that aren’t used by anyone else in any other countries???? Serverless seems like it could be a good solution for this. There are companies like Cloudflare who are already seeing a significant increase in demand for serverless + data localization across Europe. If someone is plotting this land plz DM me I have 8,233,234,871 questions for you! 

I feel like every year in stocks that goes by reinforces the lesson: 95% of fishing is picking the right pond. If you just picked the right pond (software is eating the world!) 10 years ago, you could be throwing darts with a blindfold on and probably do great. This naturally attracts a fair amount of resentment from people - very smart people! - in other investing fields who just get crushed year after year by a bunch of millennials like us (or Gen Z-ers now, imagine) who’re like, I invest if it’s good, software is good, mmk and just ran away with it. I’m sure you can think of a few Twitter accounts, in particular, who day after day manage to bring that bitterness. 

So I feel like, in a way, stock picking gift culture has molded around that: there’s genuinely a degree of “let me share with you how great this pond is! Anyone can fish in it! Seriously, it’s so great!” that, on its own, is such a valuable gift that it’s become higher-status than actual investing skill or years of experience. Does this make sense? 

I try to remind myself that, when it comes to anyone who is young, we really have no idea who is ACTUALLY a good investor yet. There just hasn’t been enough time. I don’t think people who did well this year, or even in the last 3 years, or in the last week, are “good” investors. We won’t know until decades from now who is ACTUALLY good. Those same people might lose, or do badly for the next 10 years. Short term stuff is mostly luck (especially in the last few months lmfao). I mean, the only metric that really matters is your overall return since inception (vs S&P) at the end of your life.

But to your point, I think it comes back to this idea of unique and thoughtful analysis - people who can provide interesting opinions as to why they are excited about a company or a space. Even if they end up being wrong in the short term, I still want to read more from these people in the future. I am still going to ascribe a higher value to their work. So yeah, I think the analysis is the value/gift, and in return you’ll get much higher status. I don’t think years of experience are as relevant unless you’ve got decades of strong returns.

What do you think about stock picking for non-professionals in general? There’s obviously one conventional view that says don’t ever do it, put your money in Vanguard set-it-and-forget-it funds, and don’t be an idiot. And for some people that’s definitely the right advice. But there’s another kind of person, and I think these tend to be the kinds of people who actively ask for advice about this stuff, for whom I actually do think they ought to buy some individual stocks, not for the promise of superior returns but as a way of engaging and learning about how stocks work. 

(This is not financial advice and shouldn’t be taken as such!) When I was young and didn’t really know what I was doing, I think it was really helpful that I just STARTED. I opened an account and bought some companies that I thought were making good products. Even though I barely had any money, I learned sooo much so quickly because I was seeing my hard-earned money change in value. I also remember buying, like, $50 of Disney stock, and paying an $8 commission on it, which is incredibly stupid LOL. But I don’t know how I would’ve learned how dumb that is without having some time just to make mistakes. You really start to pay attention to the world and to business when you have skin in the game. 

For an aspiring investor, how much relative importance would you place on “you need to learn the rules of investing generally” versus how much would you place on “figure out a pond to fish in that you know and that’s interesting to you, and learn what’s important in that industry”? 

One of the most popular Peter Lynch quotes is “invest in what you know,” so I’m not sure I would necessarily delineate these two things. People should definitely read and learn as much as they can! There are a lot of scammy people and things out there, too. I think the best investors just know themselves and their intuition (and their risk appetite) really well, rather than trying to learn everything they can about whatever is hot or maybe scammy this week hahahaha. 

I’d love to know what you think about Robinhood as this very specific and very zeitgeist-y cultural force right now. There’s no doubt that Robinhood, Dave Portnoy, and Day Trading 2.0 are having this cultural moment and everyone has their take on them. What’s yours? Do you think this is just a phase we’re going through while everyone’s stuck indoors? Or is there a weird kind of new normal to all of this?

Gen Z is definitely much more entrepreneurial than any generation before it. They are super passionate and seem to always be thinking about how to carve their niche out in the world. I don’t see why investing would be excluded from that. I definitely worry about kids shorting though - the amount you can lose is infinite, and it’s pretty confusing. The responsibility is on Robinhood and the govt to protect young people. So yeah, I think it’s a new normal.

Meanwhile, I dunno if you’ve spent any time looking at Pump-and-Dump TikTok, but it’s amazing. It’s also horrifying, like it’s the perfect format for this kind of pump scam - it gets amplified and shared by the Tiktok algorithm, which you know is just going to perfectly figure out how to share it with susceptible people who shouldn’t be investing like this. Do you think people are going to eventually acquire antibodies to this kind of stock promotion? Or is it just baked into our human nature to be vulnerable to this kind of message, on whatever the newest medium might be?

Yeah it’s really horrifying lol. It also feels like it’s the kind of thing that regulation is just going to be SO SLOW to pick up on it. It reminds me of the Zuck interrogation back in 2017 or whenever it was. Our government is supposed to represent and protect us, but they have no idea how social media platforms monetize?!?! They have no idea how our democracy could have been affected by the way they optimize engagement!? It also reminds me of how unregulated ICOs were a few years ago. It took Facebook a remarkably long time to ban ICO ads from its platform. I think we need to generally figure out how to better protect people from manipulation, especially young kids.

OK finally, before we break until next week, now that we have all of your attention, Julie there’s a mystery I want to help solve with you together. So apparently you had a dream? Or a hallucination? Or possibly read it in real life? That I had written a newsletter issue about Beyond Meat and the pea protein industry, and why the whole-greater-than-the-sum-of-its-parts story of $BYND is emblematic of why value investing perennially underperforms? Maybe I’m not getting the story right. But anyway, I did not write this take (although it sounds fabulous!) and neither of us have any idea who did write it. Julie, what am I missing in this story here, and where do you think it came from?

Okay I am desperate to find this article lol. It came out last year. I swore you wrote it but apparently you did not haha. It basically talked about how a company like BYND can be worth more than the entire pea industry, related this back to why value investors had a bad decade, and then related this back to the ongoing availability of cheap money and low rates. It was really fascinating and I’d love to re-read it. But I have no idea how to find it again - seems more relevant now than it was last year. If this rings a bell for any of you, please DM me!

Stay tuned for next week, when Julie and I are joined by another special guest to talk about forums, internet culture and gift culture, rules of engagement and exchange on the digital frontier, AR/VR/XR, and so much more. 

Permalink to this post is here: The SE Suite: an interview with Julie Young (Gift Culture Part 2) |

First up: I had a lot of fun going on Howard Lindzon’s show Panic… With Friends the other day. We talked about lots of things - Shopify, SPACs, Crypto… but most importantly, the relative merit of Schwartz’s versus Main Montreal smoked meat sandwiches. Check it out here:

Alex Danco of Shopify - Panic with Friends, with Howard Lindzon

A quick update this week on Rolling Funds, which I’d written about two weeks ago: thanks to Naval for reaching out and responding to a few things I’d unnecessarily wondered about, including the issue of how carry is handled. (Carry is crossed over on a 2-year period, and not individually sliced up quarter by quarter.)

Here’s Naval on how to think about the opportunity and constraints of rolling funds:

The actual benefits of Rolling Funds are:
• Raise anytime. Old funds are like Enterprise software where you can only sell once every four years during a six month window for a four year contract.
• SaaS means you never have to raise another fund again. Also allows land and expand - we find that existing LPs up their positions as they become more comfortable.
• 506c / public raising

In theory, Rolling Funds can do anything a Legacy Fund can do. You can limit it in size, force a larger capital call up front, cross carry for any amount of time, etc. etc.
In practice, the default configuration means that there is a negative for LPs (balanced by a positive for GPs) but everyone focuses on the wrong "negatives." The actual negative is that GPs don't want a fund cap and Rolling Funds can end up much larger than originally intended - so the manager strategy can subtly shift from what the original LP signed up for. Of course, the LP does have the option to stop subscribing at that point.

Other things to read this week:

The event industry is being confronted with its Napster Moment | Rafat Ali, Skift

A summary and review of High Output Management by Andy Grove | Abi Tyas Tunggal

Uncertain Times: the pandemic as unprecedented opportunity for complex systems science | Jessica Flack & Melanie Mitchell, Santa Fe Institute, Aeon

Are you sure Afterpay is a disruptive company? | Guru Sundaram

And finally, for your enjoyment this week, here’s something I realized on Thursday:

(For real though!)

Have a great week,


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