In Search of the Perfect Investment

The corner of my eye catches this:

Mother,

Yelp is losing money. Groupon is losing money. LinkedIn and Facebook are actually making a little (a tiny bit of) money. LinkedIn’s P/E is 731. (Read one professor’s take — click here.) Facebook’s is 205. The two with the highest gains are losing money.

You can play this more: Netflix now has a P/E of 385., but continues to skyrocket:

Pandora is losing money. But that hasn’t stopped this year’s remarkable climb.

Amazon is, once again, losing money, but that hasn’t stopped this year’s rise:

TripAdvisor has one of the best earnings and best consistency of steady growth.

Their P/E is only 48.

This whole Internet thing reminds me of the latest nineties when the first Internet bubble exploded. Most everyone was losing money, but they were gaining eyeballs and growth. It all collapsed in 2000.This one is much more focused on earnings — what they call “monetizing.” And many of these companies should make it and maybe even appreciate from here.

Their fate might also flat share price — like the hot ones of an earlier era — Intel, Cisco, Microsoft and Broadcom:

Mary Meeker is the queen of Internet stocks. Each year she unleashes a huge PowerPoint on the industry, which includes slides like:

You can view Ms. Meeker’s entire deck (that’s the new name for a PowerPoint presentation) here.

This time, it’s different. Not that I haven’t heard that before.

The game seems to be: Grab a few of these stocks, pray they go up a little more, but keep your stops tight.

I’ve had Amazon and Google on my recommended list (right column) for some time. They are clearly my favorites. They have a real business. I understand what they and I use them.

Not to miss out, I should buy a little TripAdvisor and Yahoo.

But I’m not touching nosebleed stocks like Netflix and Facebook. I’ve never found a movie on Netflix I wanted to watch — or more precisely everytime I’ve gone there looking for a movie, it wasn’t available. I hate Facebook and LinkedIn. That may be because I’m not looking for friends or a job. Bring a crabby old man crimps your investing style.

I remain fascinated by startups, especially those that use the Internet to scale (i.e. get bigger).

A piece in this week’s New Yorker is indicative. Read the money-raising numbers and be blown away:

Uber Alles by James Surowiecki

For most of the past century, Americans have been the world’s greatest consumers. And usually consumption has meant ownership: just before the Great Recession, the average American household owned 2.28 cars, and had more television sets than people. But these days a host of new companies are trying to disrupt the paradigm-offering the benefits of consuming without the costs of ownership. Ride-sharing companies such as Lyft, Sidecar, and, in some cities, UberX, own no cars themselves. Instead, they sign up ordinary car owners: when you need a ride, you can use their apps to find a driver near you and ask to be picked up. Many other companies are trying to cash in on what’s often called “the sharing economy.” Airbnb now features more than three hundred thousand listings from people making their apartments and homes available for short-term rentals. RelayRides and Getaround let you rent cars from their owners (rather than from Hertz or Avis). Boatbound offers boat rentals, Desktime office space, ParkatmyHouse parking spaces. SnapGoods makes it possible for people to borrow consumer goods from other people in their neighborhood or social network. It may not be too long before you’re able to pay to sit in a stranger’s living room and “share” his home theatre.

Just a couple of weeks ago, Uber (which also runs services allowing you to book livery cars and cabs) disclosed that it had raised more than a quarter of a billion dollars in venture-capital funding, most of it from Google. The flood of new money into all these new businesses feels like a mini-bubble in the making. But beneath all the hype is a sensible idea: there are a lot of slack resources in the economy. Assets sit idle-the average car is driven just an hour a day-and workers have time and skills that go unused. If you can connect the people who have the assets to people who are willing to pay to rent them, you reduce waste and end up with a more efficient system.

In the past, this was hard to pull off, because the transaction costs involved in borrowing and lending were high: there was no easy way to find someone who had what you were looking for and no easy way to know if someone was trustworthy. So if you borrowed a lawnmower it was typically from your neighbor. But digital technology has made it much easier for buyers and sellers to find each other quickly, and to evaluate the people they’re trading with. The effect has been to make sharing a much more plausible business model. “We now have hundreds of millions of consumers who are carrying in their pockets powerful computers that are always connected to high-speed networks,” Arun Sundararajan, a professor at N.Y.U.’s Stern School of Business and an expert on the sharing economy, told me. “That makes it possible for people to rethink the way they consume.”

Sharing has also had a boost from the weak economy. People are leery of making big up-front purchases, and many have had to scramble for ways to monetize their time and their assets. More important, there are signs that the ties between consumption and ownership are loosening, particularly among younger people. Studies suggest that Millennials are less interested in owning cars than previous generations have been, and the success of sites such as Netflix and Spotify show that, at least with some goods, renting can trump ownership. For one thing, people get access to a much wider range of products than they could ever own. “There’s a mind-set that consumers are doing this just to save money,” Sundararajan said. “But I think that what’s really compelling about the sharing economy is the variety and expansion of choices that it offers. Instead of being tied to owning one car, I can drive twenty different ones. So I expect this will expand consumption, rather than shrink it.”

Before that happens, though, there are serious hurdles that the sharing economy has to get over. The most obvious of these is regulation. Cities typically have elaborate rules for cabs and limos that control drivers, vehicles, fares, and so on. These rules in part reflect the desire of vested interests (like cab companies) to protect their businesses and in part consumer concerns about safety and liability. Sharing companies circumvent some of those rules, in effect arguing that, if you choose to pay someone to give you a ride to the airport-or rent you an apartment-the state shouldn’t stop you. That’s an appealing position, but the companies are actually piggybacking on the trust that consumers feel in what is typically a highly regulated economy. If these companies become more established, they’ll have to reach some kind of accommodation with regulators, perhaps along the lines of rules that California’s Public Utilities Commission recently proposed, which would let Sidecar, Lyft, and Uber operate if they implement certain safety and driver regulations.

It isn’t just companies and regulators who will have to be flexible, though. Workers will, too, since the sharing economy requires people to function as micro-entrepreneurs. Uber is just a broker, and the drivers aren’t anyone’s employees, any more than the landlords in Airbnb’s system are. They are all independent contractors, working for themselves and giving the companies a cut of the action. This has certain attractions: no boss, the ability to set your own hours, control over working conditions. It also means no benefits, no steady paycheck, and the need to always be hustling; in that sense, it fits all too well with the free-agent nation we’re increasingly becoming. Sharing, it turns out, is often a hell of a lot of work. 

 In search of the perfect razor. I may have found it. It’s from a startup called Harry’s. It looks like this:

It comes beautifully packaged:

Inside the box is the razor, shaving cream and a couple of spare razors.

I’ve been using it for several days and I love its shave. Much better than my Gillette Fusion.

There’s a story here that appeals: Harry’s is from the people that brought us Warby Parker, the hugely-successful designer eye glass maker. In that case they brilliantly positioned their ultra-attractive $95 glasses (including lenses) between the cheap ZenniOptical ($25 to $30, including lenses) and your ultra-pricey corner retail eyeglass store that peddles glasses at $200-$300, and more.

With Harry’s they’re doing a somewhat similar strategy — a beautifully designed razor, very effective blades (designed by talented engineers in Germany) — and coming in at a price lower than the Gillette — $1.88 versus Gillette’s $3.25 for a Fusion blade. Both Harry’s and Gillette’s Fusion have five blades.

You’ll be thoroughly impressed with Harry’s web site — click here.

Do yourself a favor, spend $25 and buy The Winston Set:

To buy, click here.

Don’t parrot a parrot
A man boards an airliner, takes his seat, and is surprised to find a large purple parrot in the seat next to him.

The aircraft takes off and a pretty flight attendant walks down the aisle past the man and his seatmate.

‘Hey, bitch’, says the parrot, ‘bring me a whiskey and soda, and make it snappy!’

The FA looks annoyed, but walks on. A minute later, she walks back up the aisle and the parrot pipes up again: `God damn it, you lazy whore, where’s my whiskey? Hurry it up!’

Visibly flustered, the FA hurries up the aisle and returns quickly with the parrot’s drink.

Impressed with the parrot’s technique, the man decides to get some quick service for himself. ‘Hey, slut’ says the man, ‘get me a dry martini and don’t drag your sorry ass – I want it right now! ‘

The FA turns red with anger and runs to the front of the plane. In a moment she returns with the First Officer and two burly male flight attendants.

The crewmen seize the passenger and the parrot, jerk open the emergency door and hurl them both out of the airplane at 35,000 feet.

As the two hurtle to the ground, the parrot says to the man, `Ya know, for someone who can’t fly, you got a lotta balls.

Harry Newton who is getting his second eye’s cataract fixed today. I love the operation. They drug me with Versed and do the operation while I’m “awake.”  If only Versed were reality. It’s not. But for 45 minutes that the operation takes, it’s fantastic.