Cheap Thoughts

For the most part, I have stopped listening to "experts " dissect, predict and analyze the day to day movements of the public markets.  There is not much value in listening to someone try to predict the unpredictable.  I have begun looking at the economy as an elevator, either ascending or descending, improving or declining, while the day to day movements of the markets are like a yo-yo you're playing with while the elevator is moving.  I don't really care whether the yo-yo is going up or down on a given day, it is immaterial to the direction of the elevator.  As long as the elevator is moving up at a comfortable pace and the cables are not at risk of snapping we should rest assured that all is well (for now).

JP Morgan was once asked by a fellow executive what he thought markets would do in the coming months, his response, "It will fluctuate."  Warren Buffett has echoed a similar sentiment throughout his career and I think the world would be wiser if we took their advice to heart.

I saw this GIF recently and thought it was one of the most compelling visuals for why we need innovation in the auto industry.  With the global population expected to grow to over 8 billion people by 2030 and urbanization around the world packing more and more people onto our city streets we're going to need to see some drastic innovation in this sector in the coming years.  Like any other complex global problem there is no silver bullet but there are a number of options that could help create a much more sustainable urban model for coming generations.  

Government's at all levels are going to have top reinvest in public transportation infrastructure but they are also going to have to make it an enjoyable experience if they want to achieve mass adoption.  They should leverage technology to make people want to use public transportation, not use it as a last resort.

Uber, Lyft and other rise sharing services are also well positioned to help solve this problem.  More specifically, services like Uber Pool and Driver Destination have the potential to have a tremendous impact on urban congestion.  While these services continue to face intense scrutiny I expect they will become the norm for my generation as more people become comfortable with the sharing economy.  

I was in a meeting today and one of our employees got frustrated because the screen on his iPhone had frozen, forcing him to shut down his app and reopen it.  In about 30 seconds he was back to where he needed to be, harmless enough.  If you had seen his reaction though you might have thought that Apple had deliberately planned on ruining his entire day.  I found the incident amusing but also began to reflect on how high are expectations are for technology these days.

The iPhone (or any smart phone) is a globally connected supercomputer that fits in our pocket and allows us to to communicate with anyone around the world instantly, for free.  Pretty powerful stuff.  It amazing if you step back and think about how far we've come in the last decade.  So many of us, myself included, forget how lucky we are to be living in a world where we have access to any bit of information we could possibly want at out fingertips at all times. All tech companies should also recognize how high consumer's expectations are and make sure that their product is able to meet or surpass them, or risk being beat by someone who can deliver an almost perfect user experience.   

Protecting the consumer is quickly becoming one of the most frustrating statements I hear on a regular basis.  Uttered by various  regulatory bodies in response to new and innovative companies, it is a popular way for them to portray new companies like Airbnb, Uber or Zenefits and Tesla (as they relate to car dealers) as a threat to the general public as opposed to a threat to their way of life.  It is usually follow by something like, "We welcome innovation but only if it occurs within the existing legal framework everyone else operates within."  These bodies need to understand that that is not how innovation occurs and that if they truly cared about the consumer they would work with new players to help their industries progress and evolve.  To be against this type of innovation is actually to work against the consumer and their interest, because the technology would not exist if it was not being used/bought by people who previously had access to nothing of the sort.

Social Media is one of the most powerful inventions in recent memory, having given billions of people access to instant global communication for free.  It has given voices to people who until now would have gone unnoticed by anyone outside of their direct social circle.  With that said social media has quite a bit of work to do to make it a more reliable and productive asset to society.  

The biggest issue I'd like to see resolved  is the technology's tendency to perpetuate false or misleading information.  We are inundated with breaking news so frequently that we do not wait for those pesky things called facts before drawing a conclusion anymore.  Twitter's ability to relay information to a global audience in a matter of seconds is amazing and great for so many reasons.  Like all great power though it's propensity for good can also be used just as unproductively.  In some cases it has tipped  public opinion regarding an event or person, presuming them guilty until proven innocent.  In this respect that social media has the potential to seriously detract from a well functioning democracy.  Because of this issue I have serious concerns about citizen journalists, who are all most likely working off of second hand information and partial facts.  The upside to this issue is that I, and I suspect others, have begun to appreciate investigative journalism for the first time.   

I'm not sure if the solution to this problem will be technical or societal.  That is, either someone will create a company that's goal is to solve this problem, or society as a whole will reach a tipping point and begin to treat the quality of content we find on Twitter/Facebook/etc. differently.  

There has been a lot of talk about a bubble in tech over the past two years, and it's gotten a little louder in the last six months.  While I'm not convinced we're in a bubble it does seem like we're in the 7th inning and I would expect to see some pretty big vaporization's in the next two years.  While nobody wants to be a part of a failure they are obviously inevitable and a healthy part of any market.  

With that said it's almost a little refreshing to see two very hot start-ups who had both reached billion or close to a billion dollar valuations closing their doors.  Aereo recently filed for Chapter 11 and rumors are the Fab is in talks to be acquired for somewhere around $15 million (they we're valued at $1 billion not too long ago).  I do not think this is a sign of impending doom in the technology sector but rather a natural outcome that we should expect to see in any free market.  While news of both companies demise had been reported for several months it is interesting that everything is crystallizing in the same week. 

JetBlue caught a lot of flack today for announcing that they are adding checked bag fees and less legroom for passengers.  This was done in response to Wall Street analysts who had been hounding them for the past year or two to maximize profits.  The issue reached a tipping point when their CEO, David Barger, was fired.  Barger was said to have spent to much time trying to preserve the brand values that made JetBlue a big success a decade ago. 

Phrased differently, JetBlue fired their CEO because he was trying to maintain the great customer experience that brought them success in the first place, relative to the rest of the airline industry which generally treats passengers like dirt..  

It's situations like these when I can understand why so many tech companies are hesitant to go public.  All of a sudden you have thousands of people telling you how to run your business, a majority of who probably don't even use your product or service.  And for companies that are already fighting intense regulatory battles around the world like AirBnb and Uber I understand why they would raise huge rounds in the private market at massive valuations.  While it is important for theses companies to realize that going public is the next step in the process of building a great long lasting company its also important to make sure they have tons of safeguards in place to make sure they don't lose whatever secret ingredients made them great in the first place.    

I was having a discussion with my roommates last night about the minimum wage.  During the course of our conversation I realized I was having a difficult time articulating my argument, as were my roommates.  Everyone involved is college-educated and relatively well informed, but it became very clear that we had taken a stance without a thorough understanding of our position.  I suspect that is the case for most Americans who take policy stances based strictly on part affiliation.  Minimum wage increases are either terrible for business or a moral imperative as a society, with little room for any middle ground.  

I've said it before, but this is where I think writing is so powerful.  It's an excellent medium for developing a point of view and teaching yourself how to form a position on a subject.  I tend to be more reserved when it comes to minimum wage increases, here is why...

• As technology continues to act as a substitute for human labor it will become more cost effective for businesses to automate jobs rather than employer humans.  A simple example would be cashiers at fast food restaurants, grocery stores, etc.  These are occupations that seem very likely candidates for automation.  If we wants companies like Wendy's or Safeway to continue to staff people in these positions we have to make it economically feasible for them to do so, and raising the minimum wage for these low skill jobs actually creates more incentive to automate.  While it might be politically unpopular/impossible I could see a time when we have to abolish the minimum wage in some cases in order to allow humans to compete with computers.
• People earning the minimum wage represent a fairly small percentage of total US workers, somewhere in the neighborhood of 3%.  Of that 3% more than half are between the ages of 16-24.  This suggests that these workers are most likely employed for the first time and have very few marketable skills and are also not the sole breadwinners of their households.  These are also workers who are most likely part-time workers and are currently attending school.  It is the same people who earn minimum wage today who will earn well-above minimum wage down the road as they increase their earning power.     
• One of the most common arguments for increasing the minimum wage is that there are a large percentage of single parents  who earn minimum wage.  In fact, only 4% of minimum-wage workers are single parents working full time.  Furthermore, the average family income of a minimum wage worker is $53,000, well above the poverty line.
• Most studies suggest that when there is an increase in the minimum wage there is also a decrease in low skilled jobs.  

As I'm writing this its clear that someone on either side of the debate could come out with a laundry list of statistics and studies supporting their stance, which I have no interest in doing.  A fundamental question we're all going to have to answer though is how will technology affect employment?  I believe that a significant percentage of low skilled jobs will be automated in the coming decades.  If you accept that premise then the question becomes how do we ensure there are enough jobs to go around?  It's not logical to argue that making human labor more expensive is the smart move when technology tends to drive costs down exponentially over time.  

There are a number of tools and programs that can be used to combat this trend, I just don't believe raising the minimum wage is the right one over the long term.  The debate ultimately needs to be reframed from "what is fair" to "what is practical in the long run if technology will continue to disrupt traditional forms of employment."

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.  

President Obama came out yesterday and voiced his strong support for net neutrality.  I will be the first to admit that I do not agree with a lot of his policies, however I don't think it's possible to overstate the importance of net neutrality if America want's to remain the most innovative country on earth.  Net neutrality has been on of the fundamental building blocks that has enabled American entrepreneur's to build innovative companies at an astonishing rate, improving the lives of billions of people around the world..

Everybody deserves to be treated the same, which is the way the internet has always operated, net neutrality is just embracing the way it has always been.  To give the large telecoms the ability to prioritize or degrade certain internet services would threaten the internet as we know it.  At the end of the day let's focus on protecting consumers, not corporations.

America ranks 26th in download speeds globally, roughly 1/3 as fast as Hong Kong.  The telcos continue to argue that they cannot afford to invest in their networks and yet Verizon and AT&T have over $20bn in net after tax income cash and Comcast is somewhere in the neighborhood of $7bn.  Maybe if they were investing in their networks so we can have the 100Mbps that people in Hong Kong get, I’d be a little more sympathetic to their argument (Thanks, Fred Wilson).