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

Two Truths and a Take, Season 2 Episode 29

Aug 30, 2020

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 Salesforce.com 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) | alexdanco.com

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.

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

Two Truths and a Take, Season 2 Episode 29