Meet the Uber Rich

Link to article: Meet the Uber Rich

Uber’s new round of financing values it at $17 billion. So these lucky ones who were in at the start have made 2,000x their initial outlay. 

The valuation of Uber is poised to hit an eye-popping $17 billion in its latest round of funding. That makes the four-year-old black car startup one of the most valuable private technology companies in the world. As a result, the startup’s early investors, whose shares are now worth as much as 2,000x their initial investment, are looking pretty smart. 

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That means even a tiny little $20,000 angel investment is now worth around $40 million. Even investors from the $3.5 billion round have now almost quintupled their money in less than a year. 

There’s one company that is conspicuously not on this list: Universal Music Group, which owned the domain name “Uber.com” prior to 2010. That year, Uber bought the domain from Universal using Uber stock, which Universal Media Group later sold back to the company for a small profit. According to a person familiar with the transaction, if Universal had held onto its stock, it would now be worth more than $100 million. 

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As far as other start-up/venture capital things go, I thought the Paul Graham interview I posted last night was great: Airbnb founder Nathan Blecharczyk interviews Paul Graham

The best book on the subject I've seen is Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist.

And these notes from a class taught by Peter Thiel are also extremely useful: Notes Essays—Peter Thiel’s CS183: Startup—Stanford, Spring 2012

Janet Yellen and hindsight value – by Andrew Smithers

Link to article: Janet Yellen and hindsight value

“Janet Yellen, the Fed’s head, rather bizarrely used the prospective price/earnings ratio, one of the weakest of all measures, to justify a statement that Wall Street was not overvalued. (This was doubly strange since her husband, George Akerlof, co-wrote a book with Robert Shiller, who has championed a much better measure…” I quote from a recent Buttonwood column in The Economist. 

Calling Ms Yellen’s comment “strange” seems very kind. Many people would rate the use of bad data in preference to better as irresponsible rather than strange, particularly when it carries with it the authority of the US Federal Reserve. 

In my first blog I pointed out that, according to both the cyclically adjusted price/earnings ratio and q, the US stock market was overvalued more than 70 per cent and that these were the only valid measures of value that I had been able to find. I also remarked that using prospective PEs was, together with many other measures, demonstrably invalid.

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Related previous post: Andrew Smithers on the McAlvany podcast

Related books:

The Road to Recovery: How and Why Economic Policy Must Change

Valuing Wall Street: Protecting Wealth in Turbulent Markets

Airbnb founder Nathan Blecharczyk interviews Paul Graham

Link to video

Investor Jim Grant on Bubbles And Bargains

Link to video


[H/T GuruFocus]

Buffett's $26 Billion Power Bet in West Seen Paying Off

Link to article: Buffett's $26 Billion Power Bet in West Seen Paying Off

Warren Buffett’s $26 billion bet on western U.S. power plants, transmission lines and wind farms is poised to pay off. 

Buffett’s Berkshire Hathaway Inc., with the help of California’s grid operator, is moving to unite the holdings under a single market capable of dispatching power across seven states every five minutes. The system, designed to handle sudden swings in supply and demand, would revolutionize the markets from Oregon to Nevada, where 38 transmission operators manually balance their territories on an hourly basis. 

The move would be a game-changer for the renewables that Berkshire Hathaway Energy Co. has accumulated over the past decade, including two of the world’s largest solar farms, and for other clean-power producers, according to those who trade in the region’s markets. Berkshire’s plants stand to run for longer periods of time, and its NV Energy Inc. and PacifiCorp utilities will save as much as $63.9 million annually by 2017, Energy and Environmental Economics Inc. reports show. 

“It would be huge if all 38 balancing authorities joined,” Sean Breiner, a market design analyst for San Ramon, California-based energy trader Viasyn, said by telephone June 2. “Instead of having these balkanized regions, you’d have resources from Idaho to Wyoming all flowing into one kind of large spot market.”

[H/T Matt]

Value Investing During Worldwide Quantitative Easing - by Arnold Van Den Berg

Link to presentation and transcript: Value Investing During Worldwide Quantitative Easing

Value Investing During Worldwide Quantitative Easing was the subject of Arnold Van Den Berg’s presentation at the 11th Annual Value Investor Conference in Omaha, Nebraska, on May 2, 2014.

[H/T Will]

A Road Map for Natural Capitalism (HBR, 1999)

Link to article: A Road Map for Natural Capitalism (HBR)

Natural capitalism comprises four major shifts in business practices. The first involves dramatically increasing the productivity of natural resources—by as much as 100-fold. In the second stage, companies adopt closed-loop production systems that yield no waste or toxicity. The third stage requires a fundamental change of business model—from selling products to delivering services. For example, instead of selling lightbulbs, a manufacturer sells lighting services, with both the seller and the customer benefiting from the development of extremely efficient, durable bulbs. The last stage involves reinvesting in natural capital to restore, sustain, and expand the planet’s ecosystem. 

Because natural capitalism is both necessary and profitable, it will subsume traditional industrialism, the authors argue, just as industrialism subsumed agrarianism. And the companies that are furthest down the road will have the competitive edge.

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Related book: Natural Capitalism: Creating the Next Industrial Revolution

Inside Buffett’s Brain

Link to article: Inside Buffett’s Brain

Math-minded researchers are attempting to distill the mind of the world's greatest investor. Even if they fall short of replicating Warren Buffett's craft—and they will—there are good lessons here about what it takes to beat the market.

TED Talk - Dan Gilbert: The psychology of your future self

Link to video: The psychology of your future self

"Human beings are works in progress that mistakenly think they're finished." Dan Gilbert shares recent research on a phenomenon he calls the "end of history illusion," where we somehow imagine that the person we are right now is the person we'll be for the rest of time. Hint: that's not the case.

Profitability and growth...

"For profitability, growth is a double-edged sword. It always requires additional investment, and the prospects of earning more than the cost of capital depend on the position of the firm in its industry. For companies with competitive advantages that they can maintain even as the market gets bigger, growth is an unambiguous benefit. But when markets enlarge, they often allow competitors to achieve comparable economies of scale and thereby undermine a major barrier to entry. Unprotected by barriers, companies do not produce exceptional returns." -Bruce Greenwald and Judd Kahn, Competition Demystified: A Radically Simplified Approach to Business Strategy