Bitcoin Use Case

There seems to be a little less excitement surrounding bitcoin over the past few months.  The price has been steadily declining since it hit it's peak in November 2013 of $1,145 and transaction volume, which I believe is an incredibly important metric, has been relatively flat over the past few months.  Furthermore there seems to be a lot less discussion in the general press about bitcoin.  Although I can't quantify that metric the marked drop in bitcoin press and open debate is a little troubling.  

I believe that bitcoin is missing the major use case that drives it to the mainstream.  Paypal was able revolutionize online payments, but only after they found a very specific use case.  It was not until they began to focus specifically on eBay that they were able to recognize the growth they were looking for.  Bitcoin faces a similar problem in that it is so unfamiliar to most people that in order to drive mass adoption they need to address a specific problem.  The most logical place to me is international remittances.  In 2012 there was over $123 billion in remittances sent form the United states to other countries alone.  The global market for these types of money transfers is absolutely massive and also suffers from a couple major problems, which bitcoin is uniquely positioned to address.  

First is that fact that most citizens in Third World countries do not have access to modern banking, making international money transfers difficult.  With the number of smartphones expected to be close to 6 billion by 2020, transferring bitcoin would be much easier than than hard currency. 

Second is that fact that the average fee imposed on international remittances is roughly 8.5% but can often be as high as 25%.  Even on the low end that is a huge chunk of money that is taken away from some of the poorest people in the world.  Again bitcoin is a perfect solution to this problem because the cost to transfer it is close to 0%.  While this problem may not touch close to home in the lives of most bitcoin enthusiasts it is certainly a big problem globally.  The 8-25% could be the difference between a family in the slums of Mumbai eating for a week or not.  

International remittances represents a way for technology to truly change the lives of billions of the poorest people on earth.  And although its faces a tough uphill battle I wold love to see more people get behind this specific cause.  

Podcasts

I have recently become completely dissatisfied with the state of radio.  It seems like there are more commercials, less music and little differentiation between radio stations at least in Washington DC.  I can't add satellite radio in my current car, but that is something I will be doing when I buy a new one in a couple years. I've been trying to figure out what to do until then, settled on podcasts and have very impressed.  I started off with a16z, CFR and WSJ and could not be happier with the decision.  

Most of us spend so much time on our cars and for the most part it feels like a complete waste, but with podcasts that's not the case.  I am able to consume the content I wants on my time and with minimal interruption.  Its nice getting out of the car after a 30 minute drive and feeling a little bit more informed.  Even better is the feeling of turning sitting in a car into productive time in my day.

Long on Amazon

A close friend and I have had an ongoing debate over Amazon for quite some time.  He argues its overvalued and is generally short on the stock and I strongly believe they are one of the greatest companies of our generation.  Their revenue continues to grow rapidly year over year while net income has remained at almost zero for the past twenty years.  Who is right? 

Although their multiples are obviously quite high they are still, and will remain, one of the greatest companies on earth. I won't get into my entire argument here, but I do want to bring up one point that is more philosophical than anything else. I believe one of the factors that separates Amazon from the other tech giants is their willingness to ruthlessly reinvest profits to fuel future growth.  Apple is sitting on somewhere around $140bn, Google & Microsoft about $50bn each, leaving me to believe they have lost the ability to allocate their capital efficiently.  A failure of imagination.  These companies have hundreds of billions of dollars earning close to no return, meanwhile Amazon is busy creating the future and putting their money where their mouth is.   

As it so often happens I came across a much better description of Amazon's business model from Benedict Evans.  He is one of my favorite tech bloggers and I highly recommend spending some time reading his overview of the company in addition to any of his other posts.


Technology vs. Food

I was doing some poking around looking into different companies that interested me when I came across something quite surprising.  I noticed that Chipotle has a higher P/E ratio (56), than Google (32), Apple (15), HP (11), and IBM (12).  That means people value Chipotle’s profits more than each of those technology companies.  I did a little more digging and discovered that McDonalds has a higher market cap than Twitter and eBay combined, Panera is valued 4x as much as Zendesk, and Yum Brands (Taco Bell, KFC Pizza Hut) has as P/E ratio that is 2x higher than Oracle.  

I would venture to guess that most food/consumer goods companies are listed at the less risky end of the investment spectrum when compared to technology companies.  Does that really mean that food offers a greater upside and less downside risk than those high growth businesses  everyone loves to talk about?  I guess “changing the world” isn’t as important as eating out.  Now obviously there are thousands of different ways to dissect each of these companies, but I do find it interesting that investors believe food has more potential than technology. After all, it seem's much more difficult to create a new Google than a new Panera.