71: Thoma Bravo's $900m SPAC, Amazon Other™, Loeb vs Intel, 2020's SaaS IPOs, OpenStreetMap, ❄️ Snowflake Unlocked, and a 209 Megapixel Composite Moon

"haha talking toys!"

Having fun is a performance enhancing drug.


Sometimes the scorecard can hide as much as it reveals, or at least, divert attention away from important things.

Let me back up: A frequent investment conversation in past years is the whole “quantitative vs qualitative” thing. How a lot of the attributes that make a business “quality” may be hard to measure and you have to discover them outside the numbers, etc.

I think the same thing happens elsewhere.

Some people who have great investment track records and/or have gathered huge AUM are still assholes that you should stay away from, or at least, be very careful not to learn the wrong lessons from. And some that have more down-to-Earth CAGRs and/or small AUM can be way smarter than you and have a lot to teach (and not everybody optimizes for absolute returns, as I wrote about in ‘Investment Style and Stock Selection as Lifestyle Design’ in edition #44).

You can transpose this to other fields, where people over-index (if I ever use those words three times in the same paragraph, do I magically turn into Ben Thompson, in a kind of modern take on the Beetlejuice curse?) — where was I? Oh yeah, people over-index (ok, don’t use it again) on the things that are highly visible and easy to measure, meanwhile, there’s a bunch of under-valued intellectual assets lying everywhere that go unnoticed. (that was close)

It reminds me of a book I read a while ago, ‘The Millionaire Next Door’.

The author surveyed a bunch of millionaires (in the mid-1990s, when a million was more than today — thank you inflation), and the take-away is basically that most millionaires aren’t at all like the average person pictures them to be. The ones we notice are those with a glamorous lifestyle and luxury houses and vehicles, but most of them would go unnoticed in most situations. They drive an old minivan and don’t have the best house on the street, but they have millions in the bank.

So whatever the field — investing, chemistry, agriculture, improvisational theatre — it probably pays to look for these discreet people who don’t show up in the traditional “peacock” filters of success for that scene.

Just keep your antenna up for them, I think it’s worth the effort.

❣ I'd rather find a new investor with B+ returns and a process I can learn from than one with A+ returns and a totally opaque, inimitable process. I can still marvel at the latter, but it's more for entertainment.

Investing & Business

Visualizing Money Flows with Actual Liquids

h/t Nick Ellis

Amazon Other™

The surge in online shopping triggered by the Covid-19 pandemic has put Amazon on course for its first-ever $100bn quarter, but it has also boosted an overlooked part of the company’s business: advertising.

As more and more merchants cram on to Amazon’s vast marketplace, brands that want to stand out are spending heavily on ads.

As a result, Amazon’s “other” business unit, which is made up almost entirely of its ads business, is growing faster than its retail, cloud computing and Prime subscription divisions.

According to FactSet, a financial data company, Amazon’s “other” unit will make $21bn in revenue in 2020, a 47 per cent jump on last year. Its rapid growth is helping Amazon to chip away at online advertising’s dominant player, Google.

This is largely the new slotting fees, end-caps displays, etc.

A lot of this budget for advertisers must be coming out of what they would otherwise pay to be at eye-level on shelves or have a little display in physical stores, not necessarily from what they’d spend on TV or online ads.

But compared to traditional slotting fees in the physical world, Amazon does seem to offer a better mousetrap:

Amazon offers advertisers data that is irresistible: a closed loop that shows them how effective every dollar they spend is, and more than two decades of insight on the actual buying habits of consumers, rather than just their web-browsing habits.

I can understand better the value of $1 spent on Amazon because I can literally see the transaction,” said Eric Heller, who runs the Amazon Center of Excellence at WPP, the world’s largest ad agency, which advises on how best to use Amazon’s platform. (Source)

It’s interesting to see the early rumbles of “is it fair for Amazon to charge people to have better placement in their store?”.

I guess it’s from people who have no idea how stores have worked forever — did they think Walmart features some products better than others out of the goodness of their heart?

h/t Jerry Capital

❄️ Snowflake Unlocked

More supply is coming:

the Lock-Up Period will expire with respect to 25% of the Vested Holdings … on the date that is two trading days after the date that the closing price of the Company’s Class A common stock on the New York Stock Exchange exceeded 133% of $120.00, the initial public offering price of the Company’s Class A common stock in connection with the IPO, for at least 10 trading days in the 15-day trading period immediately following December 14, 2020 [...]

On December 29, 2020, the Price Condition was satisfied, and the Early Release Date will be January 7, 2021. As a result, the Company estimates that up to approximately 37.9 million shares of the Company’s Class A common stock will become eligible for sale in the public market at the open of trading on January 7, 2021. (Source)

The rest of the share should come out on March 15, 2021.

OpenStreetMap: The Wikipedia of Maps Now Increasingly Vital to Big Tech

Everybody knows how hard it is to compete with Google Maps, but there’s an alternative that is taking a different approach and is rapidly getting better. Joe Morrison writes (I know a different piece by Morrison on Maps was recently on TechMeme, but I’m more interested by this older one):

OpenStreetMap (OSM) is now at the center of an unholy alliance of the world’s largest and wealthiest technology companies. The most valuable companies in the world are treating OSM as critical infrastructure for some of the most-used software ever written.

The four companies in the inner circle— Facebook, Apple, Amazon, and Microsoft— have a combined market capitalization of over six trillion dollars. In almost every other setting, they are mortal enemies fighting expensive digital wars of attrition. Yet they now find themselves eagerly investing in and collaborating on OSM at an unprecedented scale (more on the scale later).

What likely started as a conversation in a British pub between grad students in 2004 has spiraled out of control into an invaluable, strategic, voluntarily-maintained data asset the wealthiest companies in the world can’t afford to replicate.

So what kind of scale are we talking about?

OSM is incomparable. Over 1.5M individuals have contributed data to it. It averages 4.5M changes per day.

But who’s using that stuff? Nobody goes to OpenStreetMap.org, right? Well, some do, but most of the usage is coming from third parties using the open data:

hundreds of millions of people rely on it during any given month. If you’ve ever opened Snap Maps or Apple Maps or Bing Maps or even just peeked at the dash of your obnoxious neighbor’s new Tesla…you’ve used OSM.

A lot of individuals contribute, but increasingly, big companies too:

While Google may stay ahead for a long time, the competition is getting better every year and the delta between it and the competition is likely to get smaller over time.

"Saturation vs infinite number of niches" in one image


2020 SaaS IPOs

Alex Clayton of Meritech looks back at the year in SaaS IPOs, with a bunch of metrics and charts showing initial vs current valuation, stock performance, growth metrics, margins, CEO ownership, revenue per employee, etc.

As you can see above, it’s interesting that the IPO boom really just started in June, with nothing before.

Thoma Bravo Joins SPAC Craze (Filed $900m S-1)

You can read the filing here, and John Street Capital has some highlights in a thread.

Here’s a few highlights from the S-1, which has some interesting metrics on the software industry as a whole:

The software market offers a large and growing investment opportunity for public investors. The overall enterprise software market, estimated to be about $477 billion in 2019, is anticipated by publicly available industry sources to grow at a compound annual growth rate (CAGR) of 7.9% through 2024. Public sources indicate that there are currently approximately 990 software companies with post-money valuations of $1 billion or above, which we believe represents a sizeable pipeline for our effort. [...]

IDC estimates the size of the SaaS market to be about $184 billion in 2019 and anticipates that the market will grow at a CAGR of 15.4% until 2024. These SaaS businesses have generally highly recurring revenue with the vast majority of that revenue often coming from renewable contracts supporting mission critical business processes. The public markets have taken note of this characteristic as there have been 39 IPO’s of SaaS companies since 2018.

Dan Loeb Going Active on Intel

That’s not the verb of activism? Who cares, it’s terminology to describe what is taking place to begin with, so a little extra weirdening won’t spoil the sauce… Plus, this makes it sound more like it’s a terminator robot that just activated, with the red eyes fading in, which is cooler.

Dan Loeb's Third Point hedge fund has called on Intel to explore strategic alternatives, Reuters reported. The fund wants the company to look at whether it should remain an integrated device manufacturer, according to a letter sent to the chipmaker's chairman.

Third Point has amassed a nearly $1 billion stake in Intel, Reuters reported citing people familiar with the matter. (Source)

This could get interesting, because Intel definitely needs to shake off the cobwebs and find its Beast Mode again. It’s good for everyone to have a lot of competition on semiconductor design and manufacturing.

Loeb said in the letter that Intel's most urgent task was addressing its "human capital management issue", as many of its talented chip designers have fled, "demoralized by the status quo". [...]

“The loss of manufacturing leadership and other missteps have allowed several semiconductor competitors to leverage TSMC’s and Samsung’s process technology prowess and gain significant market share at Intel’s expense,” Loeb wrote.

"Without immediate change at Intel, we fear that America's access to leading-edge semiconductor supply will erode, forcing the U.S. to rely more heavily on a geopolitically unstable East Asia to power everything from PCs to data centers to critical infrastructure and more," Loeb wrote.

The Longest Journey Begins with but a Single Step…

Science & Technology

Amazing Moon Made by Blending 100,000+ Telescope Photos

Splendid work by Andrew McCarthy:

This is a composite image made of over 100,000 individual frames, captured with a special camera designed to shoot exceptionally high framerates to help me conquer the atmosphere's turbulent nature. By stacking the best images, I created a mosaic of the moon in the highest quality I've managed so far. There are mile-wide features visible clearly, something that is difficult to do from Earth.

The full size image is 209 megapixels (including some padding around the moon for the starfield), but it’s been downsized and had bit depth reduced to make it under the 20mb Reddit maximum. The full size uncompressed image file was nearly a GB. I could have potentially gotten it up to 890 megapixels with the right processing settings, but my computer kept crashing when I attempted it.

The gear I used for this shot was an EDGEHD 800 and an asi178mm for the lunar details, and a meade 70mm astrophograph to capture the background starfield, which was captured in the Sadr region and added to the scene as an aesthetic choice. The details on the "Earthshine" portion is actually an image of the full moon, which has been digitally realigned to compensate for the moon's "wobble" to accurately portray the positions of features on the unlit portion.

Make sure you expand the image and zoom in!

Source. You can see large version here (11,000 x 11,000 pixels, or 121 megapixels).

You can see more of Andrew’s work on his Instagram page, and you can buy prints (when they are available) on his store.

Internet Traffic Composition

According to CloudFlare Radar, mobile vs desktop human traffic (minus the bots) is about 50/50 lately.

Food Processing Tech Improvement Curve

I posted this tweet: “Is it my imagination, or has fish-bone detection technology improved a lot in the past few decades? As a kid when we ate fresh fish, I often found bones, but now I almost never do. Does this make me sound like Grandpa Simpson?”

And got this interesting answer from Greg Koenig, who knows his way around manufacturing equipment and process optimization:

The most crazy mechanical engineering in in the world isn't in phones or rockets or nuclear - it is food processing. Those folks do absolutely insane things...

French fries fly down a conveyor, get analyzed by a camera, and automatic water jet knives cut out defects. Thousands of fries a minute...

The process is so good, the company who engineered it (DW Fritz) uses the same tech to do high speed inspection of iPhones

Made me want to go find videos showing various food processing/quality-control machines on Youtube… Another rabbit hole.

Interview: Kristin Neff on Self-Compassion

Good interview. The central point is that a lot of us are hard on ourselves, sometimes unconsciously, and in many situations where we would be compassionate with others — our spouse, our best friend — we beat ourselves up for no good reason.

This insight that we should be as compassionate with ourselves as with other, and use that same compassion-tool that is already available in our minds, but turn it around and use it on ourselves, is powerful.

The Arts & History

Projection Mapping in Bucharest

Projection mapping, similar to video mapping and spatial augmented reality, is a projection technique used to turn objects, often irregularly shaped, into a display surface for video projection. [...] By using specialized software, a two- or three-dimensional object is spatially mapped on the virtual program which mimics the real environment it is to be projected on. The software can interact with a projector to fit any desired image onto the surface of that object. This technique is used by artists and advertisers alike who can add extra dimensions, optical illusions, and notions of movement onto previously static objects. (Source)

h/t Massimo

Pixar’s Soul (More Later…)

Haven’t seen it yet. My son watched it and I caught the beginning. It was really promising (more like ‘Inside Out’ than any of their other films, from what I could see), but I need to really sit down and watch it properly before I can say more.

I did enjoy this tweet about it, though:

Wait! Was I supposed to mark the end of 2020 in this one? Seems a bit late for that now…
Have a puppy: