Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM EST Monday, April 24, 2006: Another
of my building syndicates got sold. This time for a 14% IRR. A couple
of my hedge funds are doing really well -- so they'll benefit by a little more
investment from me today. It's called re-balancing. I spent much of the last
few days checking out some potential deals -- also called "doing due
diligence." I said no. The deals look so good, I feel sad saying
NO. But my objectives are capital preservation and no warts. I
follow Todd's rule, "When in doubt, stay out." The BIG key
(at least for me) is accepting that all the work on due diligence was really
"work" and not wasted time. I'm learning that doing due diligence
which leads to a "No" is a good use of my time.
To make due diligence simpler, I made a little list:
First, check all
the principals on Google, and then on Lexis/Nexis, Edgar OnLine and the New
York Times archives. It's remarkable how much you can find on anybody online.
The Internet may yet be the one tool that makes the world honest. God, I hope
Second, check the principals out with your friends. The principal's references
are nice. But they're hand-chosen. Think Tarzan. Think leaping from vine to
vine. If you stray too far, you'll fall and be eaten by the hungry alligators
Third, read the materials. There should be four documents -- a PowerPoint presentation,
a term sheet, a private placement memorandum (a PPM) and documents defining
the legal agreements between you and them. The BIG areas to check for: Principals'
track record in this field, or are they straying? What do you get? What
do they get? Who pays for what?
two happiest days in a boat owner's life: When he buys it and when
it sells it. Since a boat is not the perfect investment, the most popular name
for a boat in the United State is "Obsession." I don't make
this stuff up.
and now. A famous comedian remarked:In the 60s when the world was
normal, people took acid to make the world weird . Now the world is weird and
people take Prozac to make it normal.
is going higher and higher and higher. This weekend I paid $3.35
a gallon. Someone told me it hit $4 a gallon Beverly Hills. In Europe, it costs
an average of $4.66 a gallon, with over $6 in some countries.
The news today on oil is awful. The Russian government is taking over
more and more of the the business there. Venezuela's Chavez is talking about
nationalizing the industry there. Thus Russia and Venezuela won't attract the
private investments they so desperately need and their oil production will fall.
How important is Russia? It has a lot of oil. Some months it pumps more
than Saudi Arabia.
All this makes Canadian oil sands companies even more attractive. There is more
oil up in Canada than there is in Saudi Arabia. It's just more expensive to
get it out of the ground in Canada. But as oil stays high, the economics up
in Canada looks fantastic Two companies I own are Penn West Energy (PWTFF.PK)
and Canadian Oil Sands Trust (COSWF.PK). When checking these stocks, be careful.
There is a difference between the Canadian dollar and the U.S. dollar. I"ll
have more on alternative energy in the next few days. Meantime, for my latest
list of alternative energy stocks, click
My son flew to Dubai on Emirates. He says
Emirates is the best airline in the world. On the way non-step from New York
to Dubai, his plane flew over Iran, bypassing Iraq which it considered more
dangerous. America is not popular presently in Dubai. The ports fiasco didn't
go down well. No one likes the mess in Iraq. Dubai is focussed on India where
opportunities are considered immense.
your profession changes your eyesight:
Your house as seen by yourself
Your house as seen by your lender
Your house as
seen by your buyer
Your house as seen by your appraiser
Your house as seen by your tax assessor
my wife's sort of house. I wonder who owns it?
There's a revolution in the kitchen.
I got first entranced by the first rate stuff
made by Oxo. Great handles. Brilliant designs. Creative products. Check
out Oxo. Click here. Now
my wife turns up with this -- a collapsible strainer made by Dexas. It has a
great big comfortable handle and saves oodles of space in your kitchen cabinet.
It comes in gray, the color my wife bought. It's more
handsome. I couldn't find a gray photo. To buy it -- $14.95 -- click
does not have a State income tax. In fact, the Nevada Constitution
states: No income tax shall be levied on the wages or personal income
of natural persons.
Economist's survey of New Media: I got rid of all the newspaper and
old media stocks my brilliant money manager had bought me. And I've been obsessed
since then with just how bad that industry has become. I'm now actively researching
shorting many of the stocks. For now, I was fascinated with this weekend's Economist,
which contains a huge survey of New Media. I recommend you read it in its entirety.
Here's the introduction:
my son does on the Internet: He's in Dubai attending
a finance conference. He's sitting in his fancy hotel with its ultra-highspeed
Internet connection and he wonders... What happens if I open Internet Explorer
and hit www.HotSex.com? And lo, what pops
The era of mass
media is giving way to one of personal and participatory media, says Andreas
Kluth. That will profoundly change both the media industry and society as
THE next big
thing in 1448 was a technology called movable type, invented for
commercial use by Johannes Gutenberg, a goldsmith from Mainz (although the
Chinese had thought of it first). The clever idea was to cast individual letters
(type) and then compose (move) these to make up printable pages. This promised
to disrupt the mainstream media of the daythe work of monks who were
manually transcribing texts or carving entire pages into wood blocks for printing.
By 1455 Mr. Gutenberg, having lined up venture capital from a rich compatriot,
Johannes Fust, was churning out bibles and soon also papal indulgences (slips
of paper that rich people bought to reduce their time in purgatory). The start-up
had momentum, but its costs ran out of control and Mr. Gutenberg defaulted.
Mr. Fust foreclosed, and a little bubble popped.
Even so, within
decades movable type spread across Europe, turbo-charging an information age
called the Renaissance. Martin Luther, irked by those indulgences, used printing
presses to produce bibles and other texts in German. Others followed suit,
and vernaculars rose as Latin declined, preparing Europe for nation-states.
Religious and aristocratic elites first tried to stop, then control, then
co-opt the new medium. In the centuries that followed, social and legal systems
adjusted (with copyright laws, for instance) and books, newspapers and magazines
began to circulate widely. The age of mass media had arrived. Two more technological
breakthroughsradio and televisionbrought it to its zenith, which
it probably reached around 1958, when most adult Americans simultaneously
turned on their television sets to watch I Love Lucy.
In 2001, five-and-a-half
centuries after Mr. Gutenberg's first bible, Movable Type was
invented again. Ben and Mena Trott, high-school sweethearts who became husband
and wife, had been laid off during the dotcom bust and found themselves in
San Francisco with ample spare time. Ms Trott started bloggingi.e.,
posting to her online journal, Dollarshortabout stupid little
anecdotes from my childhood. For reasons that elude her, Dollarshort
became very popular, and the Trotts decided to build a better blogging
tool, which they called Movable Type. Likening it to the printing
press seemed like a natural thing because it was clearly revolutionary; it
was not meant to be arrogant or grandiose, says Ms Trott to the approving
nod of Mr. Trott, who is extremely shy and rarely talks. Movable Type is now
the software of choice for celebrity bloggers.
These two incarnations
of movable type make convenient (and very approximate) historical book-ends.
They bracket the era of mass media that is familiar to everybody today. The
second Movable Type, however, also marks the beginning of a very gradual transition
to a new era, which might be called the age of personal or participatory media.
This culture is already familiar to teenagers and twenty-somethings, especially
in rich countries. Most older people, if they are aware of the transition
at all, find it puzzling.
Calling it the
Internet era is not helpful. By way of infrastructure, full-scale
participatory media presume not so much the availability of the (decades-old)
Internet as of widespread, always-on, broadband access to it.
So far, this exists only in South Korea, Hong Kong and Japan, whereas America
and other large media markets are several years behind. Indeed, even today's
broadband infrastructure was built for the previous era, not the coming one.
Almost everywhere, download speeds (from the internet to the user) are many
times faster than upload speeds (from user to network). This is because the
corporate giants that built these pipes assumed that the Internet would simply
be another distribution pipe for themselves or their partners in the media
industry. Even today, they can barely conceive of a scenario in which users
might put as much into the network as they take out.
however, is starting to happen. Last November, the Pew Internet & American
Life Project found that 57% of American teenagers create content for the Internetfrom
text to pictures, music and video. In this new-media culture, says Paul Saffo,
a director at the Institute for the Future in California, people no longer
passively consume media (and thus advertising, its main revenue
source) but actively participate in them, which usually means creating content,
in whatever form and on whatever scale. This does not have to mean that people
write their own newspaper, says Jeremy Zawodny, a prominent blogger
and software engineer at Yahoo!, an Internet portal. It could be as
simple as rating the restaurants they went to or the movie they saw,
or as sophisticated as shooting a home video.
This has profound
implications for traditional business models in the media industry, which
are based on aggregating large passive audiences and holding them captive
during advertising interruptions. In the new-media era, audiences will occasionally
be large, but often small, and usually tiny. Instead of a few large capital-rich
media giants competing with one another for these audiences, it will be small
firms and individuals competing or, more often, collaborating. Some will be
making money from the content they create; others will not and will not mind,
because they have other motives. People creating stuff to build their
own reputations are at one end of this spectrum, says Philip Evans at
Boston Consulting Group, and one-man superbrands such as Steven Spielberg
at the other.
As with the
media revolution of 1448, the wider implications for society will become visible
gradually over a period of decades. With participatory media, the boundaries
between audiences and creators become blurred and often invisible. In the
words of David Sifry, the founder of Technorati, a search engine for blogs,
one-to-many lectures (i.e., from media companies to their audiences)
are transformed into conversations among the people formerly
known as the audience. This changes the tone of public discussions.
The mainstream media, says David Weinberger, a blogger, author and fellow
at Harvard University's Berkman Centre, don't get how subversive it
is to take institutions and turn them into conversations. That is because
institutions are closed, assume a hierarchy and have trouble admitting fallibility,
he says, whereas conversations are open-ended, assume equality and eagerly
revolution, like others before it, is announcing itself with a new and strange
vocabulary. In the early 20th century, Charles Prestwich Scott, the editor,
publisher and owner of the Manchester Guardian (and thus part of his era's
mainstream media), was aghast at the word television, which to
him was half Greek, half Latin: no good can come of it. Mr. Scott's
equivalents today confront even stranger neologisms. Merriam-Webster, a publisher
of dictionaries, had blog as its word of the year in 2004, and
the New Oxford American Dictionary picked podcast in 2005. Wikis,
vlogs, metaverses and folksonomies (all
to be explained later in this survey) may be next.
words! The inability of the English language to express these new things is
distressing, says Barry Diller, 64, who fits the description media
mogul. Over the decades, Mr. Diller has run two big Hollywood film studios
and launched America's fourth broadcast-television network, FOX Broadcasting.
More recently, he has made a valiant effort to get his mind around the Internet,
with mixed results, and is now the boss of IAC/InterActiveCorp, a conglomerate
with about 60 online brands. Mr. Diller concedes that all of the distribution
methods get thrown up in the air, and how they land is, well, still up in
the air. Yet Mr. Diller is confident that participation can never be
a proper basis for the media industry. Self-publishing by someone of
average talent is not very interesting, he says. Talent is the
new limited resource.
ignoramus! says Jerry Michalski, with some exasperation. He advises
companies on the uses of new media tools. Look around and there's tons
of great stuff from rank amateurs, he says. Diller is assuming
that there's a finite amount of talent and that he can corner it. He's completely
wrong. Not everything in the blogosphere is poetry, not
every audio podcast is a symphony, not every video vlog
would do well at Sundance, and not every entry on Wikipedia, the free and
collaborative online encyclopedia, is 100% correct, concedes Mr. Michalski.
But exactly the same could be said about newspapers, radio, television and
the Encyclopaedia Britannica.
What is new
is that young people today, and most people in future, will be happy to decide
for themselves what is credible or worthwhile and what is not. They will have
plenty of help. Sometimes they will rely on human editors of their choosing;
at other times they will rely on collective intelligence in the form of new
filtering and collaboration technologies that are now being developed. The
old media model was: there is one source of truth. The new media model is:
there are multiple sources of truth, and we will sort it out, says Joe
Kraus, the founder of JotSpot, which makes software for wikis.
benefit of this media revolution will be what Mr. Saffo of the Institute for
the Future calls a Cambrian explosion of creativity: a flowering
of expressive diversity on the scale of the eponymous proliferation of biological
species 530m years ago. We are entering an age of cultural richness
and abundant choice that we've never seen before in history. Peer production
is the most powerful industrial force of our time, says Chris Anderson,
editor of Wired magazine and author of a forthcoming book called The
Long Tail, about which more later. (Mr. Anderson used to work for The
At the same
time, adds Mr. Saffo, revolutions tend to suck for ordinary people.
Indeed, many people in the traditional media are pessimistic about the rise
of a participatory culture, either because they believe it threatens the business
model that they have grown used to, or because they feel it threatens public
discourse, civility and even democracy.
will examine the main kinds of new media and their likely long-term effects
both on media companies and on society at large. In so doing, it will be careful
to heed a warning from Harvard's Mr. Weinberger: The mainstream media
are in a good position to get things wrong. The observer, after all,
is part of the observationa product of institutional media values even
if he tries to apply the new rules of conversation. This points to the very
heart of the coming era of participatory media. It must be understood, says
Mr. Weinberger, not as a publishing phenomenon but a social phenomenon.
This is illustrated perfectly by blogging, the subject of the next article.
So, he emails me. I ask him (inquiring minds want to know) to check www.warmsex.com
and www.nosex.com. All blocked. In desperation we try (my idea) www.IceColdSex.com.
Turns out there is no site called www.IceColdSex.com and the UAE doesn't block
it. Perhaps we've found that perfect sex site? The funny thing in all this is
that none of the three blocked web site actually show unclad pictures of women.
They're all words. They're all links to other web sites. And I suspect they're
all hosted by Google on its servers.
This column is about my personal search for the perfect
investment. I don't give investment advice. For that you have to be registered
with regulatory authorities, which I am not. I am a reporter and an investor.
I make my daily column -- Monday through Friday -- freely available for three
reasons: Writing is good for sorting things out in my brain. Second, the column
is research for a book I'm writing called "In Search of the Perfect
Investment." Third, I encourage my readers to send me their ideas,
concerns and experiences. That way we can all learn together. My email address
is . You can't
click on my email address. You have to re-type it . This protects me from software
scanning the Internet for email addresses to spam. I have no role in choosing
the Google ads. Thus I cannot endorse any, though some look mighty interesting.
If you click on a link, Google may send me money. Please note I'm not suggesting
you do. That money, if there is any, may help pay Claire's law school tuition.
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