YouSaid · the spoken record

Alex Danco

lines on the record: 110
first: 2019-02-12
most recent: 2019-02-12
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“Now, in a bubble, this problem goes away. Now, why does it go away? Well, it goes away because I have a real reason to invest in you now if the price is going to be higher tomorrow. If all of a sudden the railroad asset class is booming and the stock prices of these speculative railroad companies being hyped up by promoters are going up and up and up with every passive week, I have an urgent need to invest in you today, which is the price is going up. I can sell it tomorrow for a higher price. Of course I need to do this. So this fear of losing your capital and fear of being out overexposed gets replaced by FOMO, right? Just becomes if I don't do it now, somebody else is going to do it and I'm going to feel like a sucker later.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“Into the territory of entrepreneurship here. Unless we are able to find a way for me to finance you in one shot, which is probably going to be punitively expensive for you if you're trying something really ambitious, or you're going to have to scale back your plans and make your railroad only go from San Francisco down to like Sunnyvale or somewhere like that. So we're stuck. It is a big barrier on our ability to do these audacious new types of problems where there is no blueprint. Unless Unless we are in a bubble”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“Taking on this risk, which is, I know that I have no hope of seeing any return unless you go back and raise more money later. Now, how is this any different from our loan situation before, where I say, I know for any hope of getting any interest payments being paid back, let alone my principal back, you're going to have to borrow more money. This is tricky, right? We're at a bit of an impasse. If I had a guarantee that you had a future lender lined up, then maybe we would do something. But you probably don't because you're doing something very risky and very new and very strange. You're creating something that doesn't exist before, so no future lender would agree to lend you if I won't agree to lend you. We have this problem. And this problem in general is something that you could call coordination failure. If the present and the future could coordinate with one another, we'd be able to find a discount that makes sense. But we can't. I can't talk to the future and I can't know what you're going to do because you're doing something that's unprecedented, right? You're deep.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“Restaurants are. You go to the bank and you say, I want a loan. The bank says, sure, I'm willing to finance this business if I can see that this loan is sufficient for you to get to operating profit. So you can pay me back. I look at your plan and I say, hey, this is good, right? I can understand this. We can do business together because I can understand as the banker that I can finance you in one shot, this is fine. But instead, if you come back to me and you say, I have this wild idea, right? There is currently no railroad today between San Francisco and Los Angeles. I bet you this railroad would make a ton of money. It's a kind of uncharted territory in there. I don't really know what's in the middle, but I bet you this is a good idea. I need $10 million to get started. So I'd look at you and I say, Patrick, your business model looks great. I can't find any problems with this, but I can't fund you. So you say, why? And I say, well, I look at this and I say, $10 million is not enough money for you to get to profitability. Like we both agree it's not, right? You're going to need more money. I look at this and they say, I am”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“Now, if you can contrast this with the second type of bubble that we get much more often in tech or in crypto with Bitcoin or with any of these other more interesting types of asset classes that are more future oriented, where now the future is not this party is going to keep going. I've seen the future and I believe. I've seen the future and it's the World Wide Web. I've seen the future and it's the railroads, whatever it is over all these times, where now what's being swept up is this story of You have to invest now because this particular asset class is going to be some massively important part of the future and it's going to make so much money and you have to get it now before the price goes up. Very different kind of bubble. But there's an important similarity here that I'll get to with those type of bubbles in the venture industry. If you're starting a business, particularly if it's a weird business, actually let's say if you want to start a conventional business and you want to say, I want to make a restaurant, everybody kind of understands.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“Again, the reason why these bubbles perpetuate is because everybody sort of collectively bleeds for all these psychological reasons that reinforce each other that the future is going to keep going the way it is. The music is not going to stop.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“Your operating profit. It's very conservative. That goes on for a little while. We're all making money. Everything's fine. So then I loosen up my standards and you come back to me, you want another loan. You say, hey, I need another loan. You show me your business. I can't pay back my principal, but I can pay my interest. And I look at that and I say, that's fine, right? At the end of the loan, we'll just roll it over. We'll do a new one. But that's fine. Everybody's still making money. It's all fine. Then you come back to me for the third loan. You say, hey, I can't make my interest payment. Would you like me to give it to you in the form of more debt? You can take it in kind. That's when you know you start having some problems. You see too many pick loans. You should maybe run for cover. But nonetheless, this idea sort of phase one, phase two, phase three of these steps where you say, when everybody is paying their interest with more debt, that's when you know it's like, all right, it's about to blow.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“I like to classify bubbles into two kinds of bubbles. And you might be tempted to label these as good bubbles versus bad bubbles, but I like to think of it as there's one kind of bubble that happens because everybody for a little while believes that the future is going to be different. There's another kind of bubble that happens when everybody believes that the future is going to be the same. So you should be thinking, well, is one equity bubble in the second credit bubbles? Yeah, kind of. That's more or less how these things go around. If you look at a credit bubble in things like things like real estate or things like debt or things like whatever, it's when everybody's collectively is like, this party will keep going. If you look at Hai Minsky and the financial instability hypothesis that he had that became very, was unknown for a while and then became very popular in 2007-2008. But he says, look, you know, if you look at the phases of a credit bubble, right, you have these three phases, right? His first is like the conservative phase where I am only willing to lend you money if you can pay back both my interest and my principal out of...”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“Article it's like Yamaha CEO pleased with production of motorcycles, alto saxophones, electric keyboards. It's like, this is not like that. Gmail is deeply tied to Google search. Amazon's third-party retail efforts are deeply tied to their ad business and their financing business and even AWS and even Bezos has this line where it's like we make Emmy winning shows and Oscar winning movies because they help us sell shoes. Who knows how direct that relationship is, but I'm sure it's there somewhere, Fred. I believe them. They all sort of create this way where it's hard to chip away at any one thing because they can make more.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“I think part of this is this idea of if you look at inside Google or inside Amazon or inside Apple or any of these big giant companies or an even better example would be these Chinese super networks like WeChat or Alibaba that do everything these massive things. What they are is they are I call these super networks, which is what they do is they start with one product that's very compelling Google search with that product they develop a big backend that has to feed it the Google Borg and everything that powers Google all this technology that they have there and then they use that to sort of build the next product and then build the next product and each of them reciprocally feeds back into this amount of data usually but also other stuff that accumulates and accumulates and accumulates and creates this very formidable competitive mode around this whole family of products so long as there is actually something tying all these together this is not the same as a conglomerate right that shares a common back office this is not the same as you know looking at the previous generation of general what that onion”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“A good question because if you look at some of these companies, I think Amazon in particular is a great example in that they're constantly mutating and growing new hydra heads and reinventing themselves in this, honestly, at a terrifying rate. You're thinking, how can we compete with something that simultaneously has the discipline of a retailer that is used to the margins of a retailer, but that is operating a web services business at the gross margin of AWS? And that consistently is building new stuff on top of it.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“Like, if you stick with Gmail or if you stick with Amazon Prime, or if you stick with any of these businesses, we promise you that every vendor that you get through us will be the one feeling the pain, not you.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“Think the way to get away with this, and for people to not accuse you of rent seeking is to find a way to arrange it so that the consumer is not the one paying the rent. And this is where we get to the strategy of most of these big modern tech companies today, which is what they have done is that they have all, through various ways, figured out some way to use Ben Thompson's language to aggregate all of the customers by offering them some fantastically useful product and then saying, because we have every customer, now we can force us to fly side to pay the rent as opposed to the demand side. We can say, you know, Amazon can say to the consumer, I promise you, or Google can say to the consumer, I promise you, you will never be the one who has to pay the economic rent.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“Against popcorn and whatever. It's like, well, that's where we are. A new form of scarcity reemerged that had much more to do with the customer and their attention and their wants and their needs that had more to do with sort of curation and placement and this new choke point that was the retailer's ability to influence what you buy by virtue of what they put in front of your face when you walk into the store.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“And if you look at sort of what a categories of emergent scarcity to look for, I think again, if we sort of look at the general trend of what happens when the distribution of something goes from being scarce to being abundant. So again, we can look at one of the big impacts of the railroads was before the railroads, it's like if I made shoes, there was only one shoemaker in the town, and if you wanted shoes, you had to come to me. And maybe there was a second shoemaker that gave me competition, but we'd find some equilibrium. With railroads, all the shoes could get made in one town in Massachusetts. This is Bill Janeway's example. You should read him on this. He's very good. All the shoes could get made in Lowell, Mass in one giant factory, and they could get distributed relatively abundantly in train cars. Then what happened? Shoes then ended up in a department store having to compete against everything else in the department store. And what ended up mattering is this new kind of scarcity, which was placement in the retail environment, right? You got to think these concept like shelf space, which should be unheard of beforehand. You think, why are shoes competing against appliances?”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“So, if we look at this and we say, okay, where should we go looking for new pieces of scarcity, right? Because without this new scarcity, if you don't have a concept of what is the new scarcity you're going to claim, then you're basically just saying, I'd like to go ruin the profitability of some industry and return all of that into consumer surplus and then leave no one with any business profit. It's very altruistic mindset of you. And it's what some people accuse companies like Amazon of doing, although that's not what they do. But nonetheless, I think there's a big upsetness of people in the community is like, oh, all you do is you just go destroy all the profit and the ability of anybody to make any money here except for at enormous scale and in soulless ways, hyper efficiency. It's like, no, no, if you look at these tech companies are not built on the premise that there will be hyper efficiency only because there will be some new incredible inefficiency that they will own. You have to have a concept of what this is.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“Open because some new tech trend, something that was scarce is now abundant, something that was full of friction is now no friction. And I think most importantly, because of that disappearance of friction, consumer behavior is going to change. It's going to go from these normally distributed, I have to consider many variables to this bifurcated distribution of yes, else, no.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“This industry works. Here's the way that let's go disrupt the corporate lunch cafeteria business together. It's currently made of here are the players in it, here are the supply chains in it, here's what people currently pay, here are all the gross margins they get. I propose that we can use the internet to disrupt this and rearrange all the different building blocks where we can get rid of one player. We can cut down the margins of player two and three and we can rearrange it in such a way where the total friction is lower, but the new place of friction is me. And that is what allows me to collect some money and therefore you being my investor. Would you like to bet on this and arbitrage the state of the world today versus the state of the world tomorrow if we can pull this off? If we can do that, then there will be some investor upside for us that is discontinuous and non-obvious, right? You can potentially make attractive profits there. That's really the job of the capitalist in this case is to say before there was a window that was closed, there was no real opportunity to make attractive profits. But now that windows...”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“Is a clever way of looking at tech that I think is a difference between people inside versus people outside. A lot of people outside tech, when they think about what makes a company a tech company, they naturally think about products. This is a tech product because it has technology inside it. When we talk about tech, we're not really talking about products, we're talking about distribution. This is a tech company because it distributes things in a technologically advanced way. So if you look at all of these big tech giants, really they're all distribution companies. Oh, Google is a tech company because it's a tech product. Really it's a way of distributing ads to people in a very, very advanced way. That's what gives them their power. It's all these new ways of creating lower friction around distribution and them being able to claim this new Spotify of friction. If you look at startup financing in general, right, if you look at the entrepreneur who comes to the venture capitalist and you say, I am seeking your funding, I have a proposal for you. I say, I propose that the world right now is arranged in a certain way. Here's the way that...”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“To build. So, if you look today at the venture world, we are once again seeing the split off between, on the one hand, let's look at the venture world where we have these trends towards larger and larger funding cycles, larger and larger investments, the soft banks of the world pumping these hundred million dollar checks into companies trying to be these enormous platforms. And at the same time, we're seeing this new category of entrepreneurs that are really of the let a thousand flowers bloom on top of this. They can't raise venture capital. But there's a Toronto company called Clearbank that you may have heard of that is solving exactly this type of problem, saying, here is a new type of entrepreneur. We would love to be able to do something like equity financing in them. They don't want straight bank debt. That's not really right. But they don't want venture capital either. They want somebody to be able to bet on them using the fact that building these types of internet native low friction distribution businesses have become much cheaper. Surely we must be able to finance this in a new creative way. And they're figuring it out. These are two very different.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“Smaller institutions and establishments that could ride on top of the railroads, that could do something at a much smaller scale than you otherwise would have need to. And simultaneously, a huge bonanza of these enormous companies, the railroads that drove all this financial innovation, they drove the way that the stock market worked to evolve, financing them and dealing with their booms and bankruptcies and all this stuff. So you had these two kinds of financing that started to separate from one another. On the one hand, you had these enormous railroad with network effect businesses where you could speculate on them and they led to bubbles and they led to these large things somewhat similar to the venture capital aspect of having to bet on very, very large network effect businesses. And then simultaneously, you had the rise of these smaller establishments that led to, honestly, I think the most important financial innovation of that cycle, which was things like credit unions, establishments that existed to finance and learn how to support these much smaller but now much easier sorts of establishments.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, so I think that's the right way to phrase it because we are starting to see like we have in technical eras before a bifurcation between these small businesses and these large businesses. Give you another historical example, which is the railroads, which are very analogous to today's internet giants in all sorts of ways. I've written about this before. Think about Union Pacific as like the AWS of his time. If you wanted to settle the American frontier and you wanted to build a new town, this is a little bit like saying I want to build a new company. Am I going to cut down my lumber and build everything from scratch? No, you're going to ship it in on Union Pacific. That's just the way it's going to be. And they turn town building into a much lighter exercise that could sit on top of the railroad's heavy infrastructure. Why this matters is if you look at those sorts of patterns, which is, say, first of all, there was a scarcity. The scarcity was around distribution of people and things and movement. Railroads turned that scarcity into abundance. Now the cost of moving over land went from expensive to being relatively cheap. So what happened? We got a bonanza of settlement around the frontier among many other things, and we saw this explosion of new smaller businesses and smaller towns.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“I like actually light and heavy business. Okay, great. That's the term that I like using for these. But sure, you can call them platforms. You call them platforms is actually fine because it gets at something interesting in terms of a lie that we hear very often get told in Silicon Valley by startups. It's like every startup pitches themselves as a platform. And you can especially tell that they're not really real about this when they say we are a very differentiated platform.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“Increases all of our consumption and increases more demands on the platform to become more undifferentiated and more general purpose. So we have a virtuous cycle, right? We have a three-sided loop that is a positive feedback loop. Customers become more frictionless in their decision making, which drives the underlying platforms to be more general purpose, which drives these solutions to be more pointy, which in turn makes friction go down. It's a really interesting loop.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“This does is again we're saying so more specific applic more pointy stuff on top of more utility infrastructure means that it has an important implication for the customer which is it makes my switching costs go down and it makes my cost of commitment go down I as the customer you know think about in the past let's say enterprise software for example in the past of enterprise software if I agreed to buy into Oracle or something enormous switching costs right just titanic switching costs now if I'm starting out with some free database that runs on top of Amazon Cloud yeah there's still switching costs but they're lower the friction to me of committing is going to be less because I can just buy a much more pointy much more lightweight solution knowing that other ones will be there too with this does is so it decreases the friction around my consumption and it turns my consumption patterns into more is this exactly what I want yes or no else yes yes else no this is exactly what I want what that does is it in terms of”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“Now, what this will do over many, many cycles and many iterative developments of saying you're going to make something very specific and very purpose-built that's going to overpower my hardware. And then I'm going to have to make even more general and even more useful hardware. And this turns over and over and over again from previous iterations where performance meant an Intel chip that could run faster in your box to now it means Amazon EC2 compute cycles get cheaper and cheaper with every iteration, right? It's the same idea of saying if I just trust that what is underneath me will continue to get less and less differentiated and more general purpose platform, I can become more and more specific with what I am building.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“Normal distribution thing. But if you look at this sort of cycle of Moore's law of saying, in general, if I present an abstraction to you, what this will mean is it will say, I am incentivizing you to develop very specific applications on top of this, knowing that you have this generally powerful back-end resource available to you where you are better off not building that back end. And I am better off not trying to build anything for any particular customer. We are each better off if we agree to this bargain.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, we pushed it until it broke. First thing we tried to do is we make an application that will put too much demands on the performance of the underlying thing. But what you do is we say there's demand for this. What that drives you to do, the chipmaker, is to say, well, we better make better chips. Because it's breaking our demand. It's too much. So I make more chips and I have to accommodate more different types of software because they're all coming in. We try all these different things. So the chips get better. And then what do we do? Well, we break them again. We immediately make more software that will drive the chips to break, right? I have too much performance demands on them. This is why if you project all the way forward, it's like computers get better every year, but they still always seem to be breaking all the time, especially printers for some reason. It's like no matter how many turns of performance we get, we will always take that much performance and then one more. That's just the nature of building these things because it's so cheap to do so. It's so trivial to write a new piece of software relative to the cost of developing hardware. Making my way back to this.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“It's tricky. You can't really call it a law because there's no law of nature or even law of business for that matter that says that this will happen. This is an anomaly. How did this happen? What Moore's law essentially was is it said, hey, here's a piece of hardware, right? This hardware is not going to be an IBM purpose-built application specific integrated machine that is very heavy on performance. This is going to be a cheap, affordable, generally programmable and underpowered but flexible chip called the Intel 4004 or the 8008 or any of these chips that came after it is generally programmable. You can write whatever you want on top of this and you can treat this chip like an abstraction. It'll just work. Sometimes it'll break, but you can treat it like a little black box. So on top of that, we started writing things called software. So we write a software program that says, I can just trust that the computer below this will work, and then we'll see what happens. So what happens?”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“If you think about Moore's law, this sort of idea, this hallowed thing in the tech industry that everybody understands, right? Moore's Law was a hell of a drug. Computing just gets cheaper every year. That's just what happens. Every year we can expect the total amount of power available to us to double per constant dollar or whatever two years, whatever it was, something unbelievable that is not supposed to happen for 40 years and yet it did. Now why?”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“And so abundantly available, you would be a fool to start all the way on your own. And that's true. But we got there over many, many, many iterations of this cycle that I think is, I think you can look at Moore's law as an illustration of how we got this. And I'll get back to this idea of normal distributions in a second. But if you look at this question of sort of how do we get to these point of very pointy businesses, very, very differentiated businesses on top of very utility infrastructure, we say.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“This is a really interesting driver of, at least in my opinion, I had this sort of idea this is the series of posts you were talking about around this little theory I have about how the tech industry got to be organized the way it is with very differentiated companies sitting on top of a very, very undifferentiated utility technical stack, right? Which is we look at this today, you know, if you look at almost all startups, not all startups, but almost all startups, share almost all of their technical DNA. They share the same go-to-market techniques. They hire from the same pool of engineers. They raise money in the same way. In a lot of ways, we'll get to this in a second. You can treat them as kind of all the same. Now, how do we, except for one particular point of differentiation, at least facing the customer, which is what is it that you were specifically offering me today? Now, we look at this, we say, well, of course it's that way. Why would you want to build your own tech stack from the very beginning? There's no reason you would do that. What's available to you is so powerful and so cheap.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“Band comes to town, you will probably not notice unless it is exactly the band you care about. So there's a big difference here between if there's a lot of friction associated with getting this thing, I'm going to consider lots of variables. As friction goes away, I will consider far fewer variables down to Now, where I'm going with this is”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“Something important to realize around friction, which is anytime that we face friction in our lives, which is all the time, we face lots of choices about whether we want to spend our scarce money or our scarce time going after this thing that we want. And the more friction there is, the more factors are probably going to go into our decision. And so the example that I give is let's say that you are, if you live in a small town and there are relatively few options for musical entertainment, I'm going back to this music thing again because I used to be in a band, so I know this. This is part of my old life. There are relatively few options, and a band comes to town, and it's $20 cover. Do you go or not? Well, you're going to probably weigh a bunch of factors. You're going to say, well, I could use that $20 for something else, or I could do this other thing, but I might like to go, do I like this music? Do I like the people that are going? Do I like this bar? There will be many factors that you will weigh. If you live in a big city, though, and a”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“Remember them all, yeah. Yeah. And then we got rebundled again into things like Spotify, where now it's like instead of paying for individual packaged albums, I pay a subscription for streaming for everything. And really what I get out of Spotify is the curation.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“Stinks for Giacomo, though. He is facing this new kind of existential competition. To him, he had never had to face before. So you might ask, like, okay, well, what is the new scarcity that's emerging? Well, a new scarcity emerged very predictively, which is around distribution and around curation and the ability to figure out if anybody could record and get their music in front of you, who actually will. That's how we got record labels. New point of friction emerged around distribution, around curation, around finding artists, around putting them in front of you that endured for the next hundred years, only to be sliced up and repackaged with the internet a hundred years later. And now instead of what used to be, you know, like the old record companies that sort of peaked up in the 90s that faced again this existential threat of their own with the internet of like, oh, distribution now became briefly free with Napster and with Kaza and all those, you know, like Kazamorpheus lime wire.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“Something happens which is recorded music happens this new technology that says hey what used to be scarce you know the ability to play music is now abundant you can copy disks at zero marginal cost you can distribute them we'll get to distribution in a second actually but all of a sudden now the townspeople have this great option which is they say hey i can get a record from anybody it's really cheap i don't have to go to jacombo i can go to like the good opera singer in milan right i can go to somebody else So this is great for consumers. They get all this consumer surplus out of this. They get a great deal. Prices come down. Quality goes up.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“The example that I like to give is one that's out of Taleb's book, Black Swan, Giacomo, the Violinist. The story goes in 19th century Italy, there is this job to be done that people have, which is I would like to be entertained. And if I want musical entertainment, the only way to do that is to hire a professional musician to come to my house. So long as people like entertainment, Giacomo, the violin player, will always have a steady job. And there are only a handful of violin players in the town. So long as there isn't a huge number of people who show up, he's got a good gig.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“Becoming abundant through the deployment of this technology. And then there's a period of all this new fruitful innovation and happy chaos where nobody really knows what's going on, but we try new things. And then something interesting happens, which is new scarcity reemerges around some new point of friction. Maybe it's around distribution. Maybe it's around something else.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“Associated with me talking to you if you're in New York and I'm in Toronto into something that became trivially cheap. Computing took math and the ability to do logical calculations and perform rules-based operations on things from something that was relatively expensive to something that is now trivially cheap. Is important because in the past and in the present, but if you look at the impact of technologies on areas of scarcity, what happens is we get this cycle that has repeated over and over throughout history of some resource that was previously scarce and around which many businesses were built”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“I would like to go do work to deliver you this scarce thing, and you're going to pay me money. We figured out trade. We figured out this idea of I'll work on my scarce area of expertise and you work on your scarce area of expertise, and then we can swap using money. Human civilization is sort of these progressive ways of us figuring out how to more effectively manage scarcity. But I think at least from our purposes today, one of the most important ways that we conquer scarcity is technology. Technology is what allows us to transform something that is scarce into something that is abundant. Technology is like electricity or any sort of steam power or oil power meant that horsepower could go from something that was very expensive, it was very scarce, to something that was abundantly available, and in many ways almost too cheap to meter. The printing press, let's go way back, the printing press and then the telegraph and the telephone and now the internet took communication, something that was very scarce. There was a lot of friction.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, it's a lot. Let me order this for you. So we should start by contemplating this idea of scarcity. Scarcity is really fundamental to all aspects of business, particularly if you, you know, the way that I do is you think about what businesses do is they provide access to something scarce for people who want that. We call customers. Now, if you're providing something that isn't scarce, well, then you're not doing something that's particularly useful, probably, and you're probably not going to make very much money. Actually, that's not necessarily true. You could be providing something very useful, but you're not going to make very much money. Your gross margins are going to be small. You're going to be operating at razor thin margins. You're going to face intense competitive pressures because there's nothing scarce about what you're doing. There's no mode. If you look at scarcity in the world, you can say like, well, how is it that we can overcome scarcity? One way we can do it is we can incentivize people through business formation, through markets, through the establishment of saying,”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“So it's cool cloud kitchens is the first branded business of this thing, but the general company is working on something called, I think it's city storage systems. It's like some super boring name that's boring on purpose, right? The job is basically just to figure out this new relationship.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“I'll tell you one company that is a really interesting company that's doing exactly this. And I'll say, I'll ask you this do you know what Travis Kalanik is doing right now?”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“If transportation just gets so much cheaper, it's like, well, it's immediately going to clog everything. Induced demand is, I mean, you can argue about where induced demand does and doesn't apply. Like if you make transportation cheaper, do you just fill up the lanes of the highway? You know, sometimes it depends. And again, people say, oh, well, we'll fix policy, right? Benedict Evans from Andrewsen Horowitz has a very smart opinion, I think, that says the real impact of driverless cars is it moves transportation from circuit switching to packet switching. I think that's very clever, but I think it assumes that the civic infrastructure and government and the way that things are locally run can adapt to this in some meaningful period of time during our lives. And that may be true somewhere like China, where you can actually just like write legislation and put it in place and then say, okay, starting tomorrow, this is the way that our city is going to work. You're going to have a hard time with that in North America.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“The order of consumption of individual things, whether we're talking by drone or by little delivery, carts, or whatever it is. We are getting one order of magnitude smaller in terms of how we can be laid out in terms of everything that we consume. Now, where is this going to be good for and where is it going to be bad for? Well, it's going to be incredible for the suburbs. Driverless cars are going to be a fantastic thing for the suburbs. And in my opinion, that's a good thing because the suburbs are where a lot of the real life force of our cities are coming from now. There were first generation immigrants are. There were people who are building new businesses for the first time, not startups that are in fancy downtowns, but I mean the real small businesses that are the lifeblood of North American cities are all in the suburbs. And I think a lot of the surplus of autonomous vehicles and a lot of the incredible value that's going to get unlocked is going to be in these low-lying decentralized belts around the city. The converse of that is that if we're not careful, driverless cars are going to absolutely destroy what make downtowns of cities work.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“So, if you want to look at what is the biggest trend for what is going to matter for how we are laid out the way we are, it's the way that transportation is changing. So everybody talks about driverless cars, right? What is going to happen with driverless cars? It's like, well, they are going to happen. They're not going to happen on the schedule that we necessarily want, and they're not necessarily going to look the way we want, but they are going to happen. So we should get used to that. And so it's funny, I was just talking with David Perell on his podcast the other day. came to a similar topic, which is what are they going to look like and what is it that they're going to be carrying? I would suggest, this is my belief, that driverless cars are not really going to be cars at first. They're going to be trucks, as in they're not going to be moving people, they're going to be moving stuff. And the impact that they're going to have is going to be similar to what the impact of the truck was, which is going to be easier to move stuff to people than to move people to stuff. So a generation ago, this meant at the scale of factories and of production, now it can move one order of magnitude smaller.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“You get pushed farther out, and then you are literally sitting behind people commuting. So you get something called commuting inequality. People are literally paying with their time the fact that rent is unaffordable downtown. So you've gone to this point where what used to be a more or less self-correcting thing, you could live far and you had to commute farther, but it was nicer to now we are getting something that looks more like Europe, which in many ways I think is worrisome, which is this hyper concentration of wealth downtown and cities that gets poorer and poorer as you move to the outside. And I think that's actually quite dangerous and problematic because this is a tendency to reinforce over time.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“Where we have all these new class of jobs, like these creative class jobs like Richard Florida calls them, where if you are business is creating new forms, not just new forms of art, but if you're a lawyer, if you are a startup person, if you are an accountant, if you are in anything, you have to be around where other people are. The downtown now becomes a very desirable place to live again. And we have another complicating factor, which is now there's lots of traffic and lots of problems with this. So what we've all gone to with this, this is a roundabout answer with saying, in the past, whether it was 100 years ago before cars or 50 years ago at the beginning of cars in the suburbs, there was a negative feedback dynamic at play, which was you want to live close, but you also want to live far. And living close was good, but it was expensive or living far was less good, but it was cheaper or whatever. Now we are having this positive feedback effect, which is the closer you are, the more expensive it's going to be. So if you have less money,”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source
“Then something interesting happened with the car, and also, I think, more importantly with the truck. When trucks came about, it became easier to move goods than it was to move people. They both became easier, but the real transformation was with goods. What happened was that factories, you know, where we make things, like what we do with things moved out into the suburbs where land was cheap, where price per square foot wasn't so high because you no longer needed to be near the railroad line in the center of town. You could be out by the highway. So you got this big inversion where A lot of the jobs sort of moved out and decentralized out from the center and a lot of people, a lot of the attractive places to live sort of also spread out with them. And then we got a similar kind of relationship where where you live was not this acute hyperconcentration downtown either because now it was nice to live out and the downtown's sort of emptied out. That's some really significant social problems. But now this is a roundabout way of answering your question. We're getting back to this third point, which is we have this reinversion again.”
2019-02-12 · Invest Like the Best · Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121] · IDENTIFIED FROM THE TRANSCRIPT · source