Longevity as an Investment Criteria

In the world of startups and new ventures, the central theme seems to gravitate towards growth and scaling. 

When it comes to growth and scaling, learning how to manage an organization that is constantly getting bigger becomes the biggest challenge. 

However, when you look at the oldest companies in the world, these are all small operations in industries that have hardly changed much throughout the lifetime of those companies. 

Build to Last

Two of the oldest companies in the world are a:

  • Japanese Ryokan 
  • German Brewery

When founders start new companies, most of the time their vision is to disrupt an industry. 

But what if the objective would be to create something that was built to last? If you want to build an impenetrable fortress, you don’t want it to be ever-expanding, would you?

So, here’s a question: What if you were asked to build a company and there would only be one constraint: The total size of the organization would not be allowed to exceed 8 people.

What would you build?

Longevity as an Investment Criteria

In the world of startups and new ventures, the central theme seems to gravitate towards growth and scaling. 

When it comes to growth and scaling, learning how to manage an organization that is constantly getting bigger becomes the biggest challenge. 

However, when you look at the oldest companies in the world, these are all small operations in industries that have hardly changed much throughout the lifetime of those companies. 

Build to Last

Two of the oldest companies in the world are a:

  • Japanese Ryokan 
  • German Brewery

When founders start new companies, most of the time their vision is to disrupt an industry. 

But what if the objective would be to create something that was built to last? If you want to build an impenetrable fortress, you don’t want it to be ever-expanding, would you?

So, here’s a question: What if you were asked to build a company and there would only be one constraint: The total size of the organization would not be allowed to exceed 8 people.

What would you build?

CALCULATING BITCOIN (BTC) YIELDS ON GENESIS MINING | AUGUST 2019

Genesis Mining is one of the biggest cryptocurrency mining operations in the world that sells mining-as-a-service contracts. According to our research, Genesis is offering the most profitable mining contracts at the moment.

Genesis Mining Yield Example

  • If you would buy 30 TH of mining power today on Genesis Mining, that will cost you $139 dollars for a contract with a duration of 18 months. 
  • The cost per TH translates to $0.0846 per day or $2.5388 per day for 30 TH. 
  • On August 19, 30 TH contract would have paid out 0.000384 BTC in mining yield for the day or $4.11 per the current exchange rate. 
  • Under these conditions, the contract had a 62% yield on that day. 

Mining is subject to great volatility. BTC to USD exchange rates can change rapidly. Mining outputs are also subject to significant volatility with changes in difficulty rates, total hashpower and the amount of BTC yet to be mined. 

More Thoughts on Crypto

Want to collect interest on your crypto? Sign up for a BlockFi account with this link and receive a $10 bonus in Bitcoin when you fund your account.

Growth Hacker vs Growth Samurai

A growth hacker is a person that is great at identifying and executing tactics that will optimize a sales funnel. They can:

  • Find opportunities that drive traffic to their product
  • Generate leads by incentivising their customer to share personal information or show buying intent. 
  • Convert leads to sales

A growth hacker is very tactical and will do wonders in a startup. 

A Growth Samurai is a person that can grow an operation beyond the startup phase. A Growth Samurai can perform the tactical functions of a growth hacker but has the adeptness to go beyond the startup phase and manage a growing enterprise. 

Many startup founders are very good at startups but lack the skills to transition into a strategic management role once the company outgrows them. A Growth Samurai has the strategic proficiency to manage a growing enterprise. 

A Growth Samurai can: 

  • Position an organization within a competitive landscape
  • Create processes for growth (as opposed to executing on growth hacking tactics)
  • Create a culture within an organization that incentivizes sustainable growth 
  • Make difficult organizational decisions  

All Growth Samurais are growth hackers but not all growth hackers are Growth Samurais.

The Columbo Method of Equity Research

Remember detective Columbo? He was a phenomenal character played by Peter Falk in a 1970s TV series called…you guessed it…Columbo. Detective Columbo was a scruffy and simplistic character, dressed in his signature beige raincoat and crumpy white shirt with a loosely knotted tie.

Colombo is no normal detective series, though. As is you would expect, Columbo’s job is to solve murder mysteries. However, the episodes don’t play out with Columbo delving into each case and eventually discovering who is the murderer, in a sharp twist near the end. Columbo is a detective series without the mystery.

In the case of Columbo, each of the 69 episodes begins with the scene of the murder. So, as a viewer, you know from the beginning who the doer is. The rest of the episode is a mental wrestling match between the murderer and lieutenant Columbo.

The Colombo Technique of Investigation

In each Columbo case, the murder is committed by someone close to the victim. This allows Columbo to approach the suspect as a witness or someone who can help Colombo in piecing together the pieces of the puzzle.

To the assailant, Columbo seems totally incompetent. The scruffiness of his hair and clothing give the impression that he slept in his clothes. He constantly scratches his head and he asks the assailant for help. His questions are simplistic and make him look like he’s totally out of his dept.

But Columbo is playing a part. He’s playing dumb. The perpetrator grows confident and starts to get comfortable, even annoyed. The trap is set. In the final minutes of a Columbo episode, the perpetrator has made a mistake and Columbo wrestles him down for the tap-out.

Stock Research and Colombo 

So, how does this relate to equity analysis? In stock research, there is no crime, there is no murderer. As an analyst, you have a stock and you build your opinion based on fundamental analysis.

But therein lies the caveat. You see, it is you who is the perpetrator because once you start your analysis, you start to for opinions. You will start subjecting your mind to all forms of mental biases. You become overly optimistic. You get anchored. You will start to look for confirmation in the data.

“But that’s me, I’m paranoic. Every time I see a dead body I think it’s murdered. Can’t imagine anyone murdering themselves.”  

– Lieutenant Columbo

As an analyst, you have to put on your mental raincoat and find your inner Columbo. You have to take a step back and start to ask yourself the simple question. The overly naive and borderline stupid questions. You have to confront yourself and find start to look for loopholes in your story.

Just One More Thing…

Lieutenant Columbo bombards his suspects with questions. He’s relentless. He keeps coming back with a question. He’s apologetic, he excuses himself. He just can’t help himself, he says. But he keeps coming back for “just one more thing.” 

3 Great Finance Films Available on YouTube

If you are a finance nut, chances are you already know this. But for the rest of you, I’ll let you in on a little secret: On YouTube – free to view – are three great full-length feature films about finance. And not just some random finance stuff. These are Hollywood quality movies about historic evens in finance.

Here you go:

The Last Days of Lehman Brothers

Written by Craig Warner and directed by Michael Samuels, The Last Days of Lehman Brothers is a British television film, first broadcast on BBC Two and BBC HD on Wednesday 9 September 2009.

A fictional character by the name of Zach narrates the story of how the collapse of Lehman Brothers unfolded and set the financial collapse of 2008 in motion. The film features a sloth of notable character, such Henk Paulson, Dick Fuld, Jamie Dimon and many more.

Barbarians at the Gate (1993)

Barbarians at the Gate is a 1993 television movie based upon the book by Bryan Burrough and John Helyar, about one of the most famous leveraged buyout (LBO) in history. The 1988 buyout of RJR Nabisco.

In this one, you’ll see notable personas such as F. Ross Johnsson, Henry Kravis, George Roberts, Jim Robinson and Peter Cohen. Well written and entertaining account of a crazy era in the history of finance.

Rogue Trader (1999)

Rogue Trader tells the amazing story of Nick Leeson, an ambitious investment broker who singlehandedly bankrupted one of the oldest and most important banks in Britain, the Bearings Bank. It’s a well-executed film, starring Ewan McGregor as Nick Leeson.

Read more on How to Value Stuff

Copying Top Investors and Their Portfolios

When it comes to investing, being a small fish in a big pond isn’t all that bad. Consider the following:

  • All institutional investors need to file a so-called Form 13F. They basically have to tell the Securities and Exchange Commission what they are investing in. Better yet, all this information is made public. 
  • What makes an institutional investor institutional, is that fact that they have clients. An institutional investor manages and invests money on behalf of their clients. And how do they get money from others to manage? Just like any other regular company…by selling. They literally tell how they invest and how they plan to invest. 
  • Some investors, like Carl Ichan, Bill Ackman and Dan Loeb are activist investors. How do they get active? By publishing to the public detailed reports on what they think the value is of the companies that they turn active on and how they think the company needs to do in order to achieve those valuations. 

All of this information is readily available for you as an investor. Big investors with small armies of stock researchers and equity analysts are publishing research in droves and filing disclosures on their positions every day. 

All of this information is available to you for free. 

Not All Growth is Created Equal

To a Growth Samurai, growth is a meaningless term unless is it preceded by an adjective. A Growth Samurai is looking for:

  • Organic Growth
  • Sustainable Growth
  • Profitable Growth

Organic Growth

Organic growth is the strongest indicator that you are doing something right. If traffic numbers or sales are growing disproportionally faster than your sales efforts it means that your sales efforts are getting more efficient. This can mean that you are getting positive word-of-mouth, that your marketing content is getting social engagement or being ranked on search engines or that you are retaining your customers.

Sustainable Growth

Growing sustainable means that you are growing your business without having to finance it externally. Almost all startups require funding in the early stages of the lifecycle but eventually, they will need to become sustainable and able to grow using internal resources.

Profitable Growth

The ultimate goal of any business is to create wealth. A company won’t create wealth unless it captures value. Many companies manage to create a lot of value for their customers but fail to capture the value and turn profits. 

A Growth Samurai understands that growth is meaningless unless it creates value for customers and owners alike. 

Mt. Gox | The Meteoric Rise and Fall of a Bitcoin Exchange

Although the history of the Mt. Gox Bitcoin Exchange is short, it is nothing short of amazing. Mt. Gox is a historic name in the world of cryptocurrencies, as it was one of the first Bitcoin exchanges to take off.

At the peak of its height, Mt. Gox’s customer base represented about 80% of the global trading volume. The rise of Mt. Gox, came to an abrupt end in 2014 when it was discovered that the exchange had become the victim of a large scale hack. Being unable to locate over 850,000 bitcoins that the exchange had in its possession, Mt. Gox was forced to close trading and to subsequently file for bankruptcy. 

Who founded Mt. Gox?

Jed McCaleb founded the Mt. Gox and in 2007, he registered the Mtgox.com web domain with the aim of turning it into a trading site for the famous Magic: The Gathering game cards. He then turned the domain to a bitcoin exchange site. 

After sometimes McCaleb realized he was getting more than he bargained for and he sold the site to Mark Karpeles who is a programmer, foodie, and bitcoin enthusiast and he usually calls himself Magicaltux in numerous online forums. Karpeles then rewrote the back-end software of the site and eventually turned the site into the most popular bitcoin exchange in the world. 

Karpeles was born in France and he spent some time in Israel before settling down in Japan. He got married in Japan and in 2011, he acquired the Mt. Gox exchange from an American entrepreneur known as Jed McCaleb. 

When did Mt Gox open?

Mt Gox was among the first Bitcoin exchange on the web but it was not related to cryptocurrency when it was developed. The mtgox.com domain was bought by programmer Jed McCaleb in 2007 for an online trading platform for virtual cards that are used in the game Magic: The Gathering.

In 2010, McCaleb then saw the opportunity to build a place where people can exchange their fiat currency to and from Bitcoin. This was how mtgox.com was launched as a Bitcoin exchange on July 18, 2010. McCaleb then sold the platform to French-born developer Mark Karpeles after a year.

How did Mt Gox get hacked

Mt Gox was first hacked in 2011 and during the first of the two hacks, the attackers were able to infiltrate into the computer that belongs to an auditor of Mt. Gox. This gave them the chance to change the Bitcoin pricing to a single cent. Afterwards, they then obtained the private keys of Mt. Gox clients which had their precious crypto assets kept in hot wallets which are internet-connected. 

The hackers then went on and create selling orders on the accounts and then bought the Bitcoins at this artificially reduced price and they were able to buy 2000 BTC with this way. This hack was estimated to be about $30.000 theft in Bitcoin and this was then dwarfed by the hack that occurred in February 2014.

The second Mt Gox hack was infamously known as the first major cryptocurrency exchange hack when it happened. The hacked value was an enormous $460 million worth of Bitcoin at the time. Although this may not be the largest hack in terms of the value in fiat money, it is considered to be the largest amount of Bitcoin that was ever stolen. 

More than 850,000 Bitcoins were stolen which includes 750,000 Bitcoins that were owned by its customers. At its peak price, the value of the bitcoin stolen is $17 billion while at the current price this will be about $3 billion.

Although Mt Gox stopped all Bitcoin withdrawals on February 2014, the exchange has already been emptied of its Bitcoins long ago. It was reported that Bitcoins were stolen bit by bit since the beginning of 2011. The group that did this investigation then indicated that by May 2013, the firm no longer held its Bitcoins. Mt Gox then filed for bankruptcy not long after the hack because they were no longer able to continue with the operations.

Will Mt Gox be rehabilitated?

According to TechCrunch, In February of 2019, there is a movement referred to as GoxRising which is working to have an alternative to bankruptcy for Mt Gox. The main idea behind GoxRising is simple and it is that instead of using the bankruptcy courts to give the assets of Mt Gox to the owners of the company, it is making use of civil rehabilitation law so as to return most of the asset to the creditors of the company.

It appears that GoxRising will be successful in these efforts because Tokyo lawyer, Nobuaki Kobayashi has been appointed by the Japanese courts to work on the civil rehabilitation process. This is going to be a piece of good news to those that have lost their assets in the Mt Gox failure because they will likely gain from this deal due to the civil rehabilitation law.

Another potential way this court may end is that the embattled CEO of Mt Gox, Mark Karpeles will likely end up with lots of Mt Gox assets if the bankruptcy process is allowed to move forward. This is because he owned about 80% of the company and when it went bankrupt, it will place him in a great position to get this huge payout under the Japanese bankruptcy law. If this happens, Karpeles knows that his life is in danger as he would receive lots of civil suits from Mt Gox creditors that has lost everything to him. More insults will be added because Bitcoin prices are much higher today than it was in 2014.

With the civil rehabilitation process, it looks like a winning idea to everyone that is involved in this deal and it looks like a way forward. The civil rehabilitation process is expected to take 3-5 years based on the reports from the media. Although civil rehabilitation may be considered to be a time-consuming process, it is still a lot better than bankruptcy.

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CLOUD MINING PROVIDERS | AN HONEST & UNBIASED REVIEW

Long story short, we believe that cryptocurrency mining has the possibility of becoming a major asset class. Somewhat paradoxically, we do not necessarily believe that Bitcoin, Ethereum or [insert cryptocurrency name] will necessarily skyrocket in nominal value. We believe that the mining process, in and by itself, can be a profitable endeavour, irrespective of how cryptocurrency prices and their respective market capitalization develop.

How? Well, imagine a scenario where there would be millions of different cryptocurrencies in circulation, each with its own purpose and use case. We are not saying that is the reality that we are predicting will happen. We are merely saying that is one of the ways this can play out. What we are saying is that in most of those alternate realities, mining and Proof of Work will play an important role. 

What is Mining? 

In all Proof of Work cryptocurrencies, the miners (or workers as they are also called) lend processing power to the system to facilitate transactions. As a reward, they get newly minted units of the cryptocurrency. Therefore, you could say that mining is a form of seigniorage. Seigniorage is basically a term for the profits made (normally by a government) by minting new currency. 

The role of miners is critical to the concept of decentralized currency, or consensus money, as the system does not rely on a central figure, but rather on individual actors that lend their resources to the network in exchange for the profit of seigniorage. 

Cloud Mining

Most ordinary people, we included, are not going to set up our own mining rigs and start negotiating with our electric utility company about favourable rates. Furthermore, if you want exposure to a particular asset class, you want to be able to get that exposure in a passive way. You don’t set up a business because you want exposure to equities, nor do you start underwriting loans to get exposure to the bond market. 

Cloud mining or mining as a service (MaaS) is a great way (at least in theory) to get exposure to the economics of cryptocurrency mining. A mining operation basically rents you a fraction of its hash power and in exchange, you receive the corresponding mining rewards, less a maintenance fee. 

Profitable Mining Contracts

We have tried out a few providers of cloud mining contracts. We have tried reputable providers, such as the Mining Pool of Bitcoin.comHashflare and Genesis Mining

It is worth noting that the profitability of mining can be very volatile from time to time. Irrespective of that, you would expect that the market for these contracts would be relatively efficient. You would not expect extreme differences in the profitability of the mining contracts. 

We find that if you are in the market to buy a mining contract for a modest amount (less than $1,000), you would be better off buying the cryptocurrencies on an exchange. But that defeats the purpose, remember. The aim is to earn a yield from mining. 

Some providers, seem to be outright scams, selling contracts that produce crypto at a steep loss. Hashflare.io, in particular, comes to mind.

Genesis Mining

Note that we are not endorsed in any way by Genesis Mining. The company does offer a referral code that customers can use to get credits, but we have never used it, nor do we ever intend to do. That would make us less objective. 

That being said, it is safe to say, that as these words are written, Genesis Mining has absolute superiority in the market. As far as we can tell, Genesis Mining is offering terms superior that all other providers we have tried out. This applies both in terms of the profitability of the contracts, as well as the fine print in their contracts 

More Thoughts on Crypto

Want to collect interest on your crypto? Sign up for a BlockFi account with this link and receive a $10 bonus in Bitcoin when you fund your account.