In Search of the Perfect Investment

Get some Twitter pre-IPO? Good deal. Probably yes. Will you get any? No. You have to be a big (read HUGE) client of Goldman Sachs or Morgan Stanley and then you’d better be sleeping with Lloyd Blankfein or Morgan Stanley’s CEO James Gorman — or preferably with both of them.

 

Blankfein on left.

Being serious… there are zillions of funds/institutions/individuals who play the IPO game. They buy every IPO — good or bad — hoping that at the end of the year their good ones will far outnumber their bad ones. They have many accounts with many brokers and spend their lives be-friending and begging g brokers.

Brokers love IPOs also. These days institutions pay brokers a penny or two to trade stocks. But on IPOs, brokers can make 50 cents a share.

Apparently there are three types of underwriters in deals like Twitter — the left book leads (Goldman and Morgan) — the book runners, and the passive selling group. You should be a big client of the left book leads.

In short, you and I don’t stand a prayer. But try a little begging. Miracles happen.

Interesting tweet: Someone did a survey of Twitter and Facebook users, asking them “What social medium do they use most?”

Answer: Apparently Twitter is now used more than Facebook.

Stock tweets have become very popular after Carl Icahn used Twitter to talk about his Apple trades.

My friend, a savvy investment banker, subscribes to these tweeter feeds (I haven’t fully checked the list. I just got it.):

DJPrivate Equity
Reuters world
Breaking News
Financial Times
Techcrunch
Reuters Tech News
Pitchbook data
GS Elevator Gossip
Zachary Prensky
Stephen Colbert
Breaking Politics
@VentureCapital
@Buyouts
PEINews
PrivateEquity&VC

Sometimes you can luck out on IPOs — which have been hot this year. This one, which no one paid much attention to, came recently at $20. Look at it now:

You can learn more about Veeva Systems here.

Learning about sunk cost. Starting a business is a gamble. Sometimes it works. Often it doesn’t.

It’s usually pretty clear whether the business will succeed or not. Amazon has just reported another quarter of losses. But it’s clearly succeeding. Microsoft has just reported another quarter of losses on its online businesses — including its search engine called Bing. It’s clearly not succeeding.

One question for you: When did you last visit Bing to find something on the Internet? Never. Dumb question. You, like me, use Google. And who’s stock is doing better, as a result:

So, why hasn’t Microsoft closed and unceremoniously buried Bing? Beats me. Strikes me that, after $12.36 billion of losses, you’d call it a day.

When you start a new business or make a new investment, typically two things control its success:

1. The price you paid for the building. The amount you’re willing to invest in the new business. The minute you hit that limit, you close it. This requires discipline.

2. The price you can sell it for. This you can’t control.

BusinessInsider looked at Microsoft’s online operations:

One Last Look At The Giant Money Pit That Is Microsoft’s Online Operations

Take a long look at this chart of Microsoft’s online losses, it’s the last time you’re going to see it.

Microsoft is changing how it reports its earnings, killing the traditional reporting lines that revealed losses in the online division. In the future, online losses will be buried in “Commercial Other,” so we won’t see how much money Microsoft is losing on Bing, and MSN. Microsoft reported the Online losses one last time, as part of a transition to the new reporting system.

For the record, since the March quarter of 2006, Microsoft has lost $12.36 billion trying to beat Google.

The story and chart come from here.

 Never, ever listen to your friends. Friends are the absolute worst source of stock information — unless they’re the company CEO and they’re telling you of upcoming higher earnings. In which case you’ll end up richer, but in jail for insider trading.

A London ATM machine ate my friend’s debit card. He had no backup card and no cash — no Yankee dollars. He was screwed. He sought help at a local Citibank, but was told it was a “Citibank franchise.” Citibank now relies on the phone, the Internet.  and, if you’re lucky, and after much questioning they’ll eek you  a dollop of cash. He stormed out and tried American Express. They have travel offices, but no money offices. Want money? They’ll wire it to Western Union.

Hours later he got a few dollars and his temper had subsided.

Lesson: Shit happens. You need backups — from cash, to spare debit cards, to spare hard disk drives, to files in the cloud, to spare underwear and toiletries. Nothing goes smoothly any longer. There are too many people traveling and too much technology to go awry.

Worse, airline seats and the aisles in economy are getting narrower and narrower. The Journal had a piece on this new travel uncomfortableness called

“The Incredible Shrinking Plane Seat: American Airlines, United and Other Carriers Are Wedging an Extra Seat Into Each Coach Row.“

Click here.

The best travel bets are twofers — two business class return tickets for the price of one. American Express Platinum has them. But so do the airlines — if you bargain with them on the phone — not on the Internet.

The hardest word to say in the English language is NO. I’ve harped on this theme endlessly. Hence it was neat when a reader pointed me to an article in The New York Observer:

`No’ Means `No’: The One Word You Need To Make Your Millions;
How I stopped trying to please

By James Altucher

The worst business I ever started: I raised more than $30 million from venture capitalists, and ultimately the business lost $100 million in investor money. I was the CEO.

Here was my pitch: “First there was the Internet, and now there is the wireless Internet.”

This was in 1999. With that one pitch, everyone from CMGI to Henry Kravis to various other billionaires threw money at the business. Yasser Arafat, through a shell vehicle that was uncovered after his death, invested $2 million.

I was so shy about talking to the other employees that I would call my secretary from downstairs and ask her if anyone was in the hallways. I had to be sure they were empty before I came up into my office and then locked the door.

BlackBerry invested in the company. Ericsson invested. Allen & Company invested. One time, I was pitching the company to a group representing billions of dollars of Saudi Arabian wealth, including the Bin Laden family.

I said something like “The signal goes up to the satellite and then comes down to the Earth securely through our software.” Someone brought up the brilliant point, “I thought the signal goes through cellular towers, like a phone call.” I had no answer. “That too,” I said. And then I tried to explain further. “Sometimes, it goes into space, though, like if there are no cellular towers in the area.” They invested $5 million.

Then Merrill Lynch had a slide show about what our IPO would look like. On the last page was what my net worth would be if we IPO’ed: $900,000,000.

I had a very clear idea what I was going to do with that money. I was going to make a Super Bowl commercial of just me playing chess and walking around and hanging out. That’s it. No message. Oh, and I was going to get a divorce, which, as you might know, you need $900,000,000 to do.

Much later, the FBI visited me to find out more about the Bin Laden family’s finances. But that’s another story.

The two most successful businesses I started and then sold I did not raise a dime for. I had profitable customers from day one. Every month had more revenues than the month before. I was friends with all my customers. Venture capitalists were constantly calling, but I didn’t take the money.

Other successful entrepreneurs were calling, because they wanted to be CEO of the company. One guy I said “no” to, but I asked him for all of his ideas, which I promptly stole and used with great success. He knows who he is, so I will say it now: Thanks. (He’s O.K. with it. He just sold his last company for $800 million.)

There’s a big difference between raising a lot of money for a company and building a successful company, and it can be summed up by only one word. No other word will do. “No.”

You have to say “no” hundreds of times to find the right “yes.” I loved my customers. I would say “no” to customers I did not love. I said “no” to investors.

For my customers, I didn’t just sell a service. I sold everything. I gave them advice on their businesses, on their girlfriends. I would take their calls at 3 in the morning when they were depressed. I surprised them with 6-foot-tall trophies on their birthdays. I gave their nephews jobs.

I didn’t do this because I wanted their business. I did this because I now only do business with people I love. Those are the only businesses that work for me.

I only hired employees who were better than me. And I would encourage them to learn enough to start their own businesses. Some would. Some wouldn’t.

I’ve chased money for much of the past 20 years. Almost all of that chasing ended up in misery.

One night, when I’d had enough, I tried to figure out if the following was true: If I put a cigarette in a glass of water and left it over the night, then took out the cigarette and drank the water, would I die of a heart attack within 60 seconds because of the pure poison that would’ve leaked out over night?

I never figured out if it was true.

My therapist said to me, “What can I do to make you happy?” I said, “Write me a check for a million dollars. That’s the only thing.” He said, “That won’t help.” He was right.

Ultimately, I did find one thing that made me happy, and every business endeavor after that has resulted in some degree of success for me. Before, during or after I say, think or do something, I try to figure out if it will harm someone, including myself. If it does, I say, “no.”

I had to learn the power of “no” the hard way after many tears and many years of saying “yes” too many times.

But from that moment on, everything has been like magic: Saying “no” has saved me from the people who have tried to bring me down. Saying “no” has saved my relationships with the ones I love and made them a million times stronger. And saying “no” is, for me, what compassion has brought into my life, so I learn, over the course of thousands of “no’s,” when is the right moment to say “yes.”

I was afraid to write this column. Am I revealing too much? I don’t know. But I said “yes” anyway.

Some Australian “culture.” This is a tourist map of Australia:

Q: I have developed a new product that is the fountain of youth. Can you tell me where I can sell it in Australia ? (USA )
A: Anywhere significant numbers of Americans gather.
__________________________________________________

Q: Do you celebrate Christmas in Australia ? (France) 
A: Only at Christmas.
__________________________________________________

Q: Will I be able to speak English most places I go? (USA) 
A: Yes, but you’ll have to learn it first.

__________________________________________________

Harry Newton who keeps wondering when this might end. For now, earnings are up, the market keeps rising, though the economy clearly could do with a boost and a modicum of intelligence and decisiveness in Washington. Are we really going to go through the shutdown/debt ceiling nonsense again? This time in January. It’s worrying many CEOs. Ted Cruz who is gearing up for a run at the Presidency sees all this stuff as free publicity for himself. Holding the country hostage for personal political ambitions stinks, but works. Yuch.

Hurrah for Australian humor.