What is most interesting to me about Ray Dalio is his decision-making process. This blog post is limited to a discussion of that process and not Bridgewater’s philosophy generally. If you are interested in understanding Bridgewater and Dalio more broadly, Dalio has a book coming out this fall which expands on his widely circulated “Principles” document. I have written a more general blog post about Dalio on this blog, which […]
Freemium describes a business model in which a business gives one product away for free or at a subsidized price and then either: (1) sells another profitable product to this user base; or (2) sells access to that user base to third parties (e.g., advertisers). Three versions of the Freemium approach are: Available Forever- No premium versions are made available. Google and Facebook are examples that monetize with advertising. […]
One of the best illustrations of the many ways a business valuation can go wrong is the pre-bankruptcy story of mobile satellite service Iridium. I knew Iridium well since I did potential acquisition due diligence on Iridium several times and because people who worked for Craig McCaw had a long history with Motorola. We (Eagle River) always passed on buying Iridium no matter how low the price dropped. The […]
1. “They can’t put no more Weezy baby out. That’s that cash money vasectomy.” From the song: Grateful. That there was a feud between Lil Wayne and Birdman and another feud with the record label which has distributed Weezy’s music is well known. The core of the issue is “wholesale transfer pricing” (WTP). Simply put: WTP is the bargaining power of A that exclusively supplies a unique product X to B […]
1.“For me, first of all, dopeness is what I like the most. Dopeness. People who want to make things as dope as possible, and, by default, make money from it.” As everyone who is dope knows, “dopeness” is an adjective used to describe the awesomeness of a person, place or a thing. In these sentences Kanye is in effect repeating the Y Combinator motto as stated by Jessica Livingston: “Make […]
I have previously written about Minimum Viable Product (MVP) and Product/Market Fit (PMF). These are important processes based on the scientific method that can be used to test a value hypothesis. That hypothesis does not just appear via spontaneous generation. Andy Rachleff describes what should be included in a value hypothesis as: “the features you need to build, the audience that’s likely to care, and the business model required […]
1. “The most important thing that we did [at Facebook’s] was I teased out virality and said you cannot do it. Don’t talk about it. Don’t touch it. I don’t want you to give me any product plans that revolve around this idea of virality. I don’t want to hear it.” Chamath Palihapitiya. I have the same concerns Chamath is talking about in writing more about virality than I […]
I have previously written blog posts about (1) growth, (2) product/market fit and (3) minimum viable product. The most logical topic for the next post is: Why does a business need a moat? The answer is simple: even if a business discovers solutions to the value hypothesis and the growth hypotheses without a moat the probability of the business being financially successful over time is remote. Revenue alone is not […]
“It’s only cheap to build 2-3 person companies with sweat equity. The minute you start paying engineers you will realize it is quite expensive.” Bill Gurley. Assume a startup has raised a seed round of ~$2 million. Also assume that what the startup has is a hypothesis that a big market composed of dogs will want to eat the dog food described by the hypothesis. The founders of the startup […]
The world has been fundamentally changed by digital networks and software. Businesses and customers which are connected by networked digital systems create amplified network effects which means the velocity of business and the level of competition and innovation are higher than they ever been ever been. To survive in this new environment every business, from the largest enterprises to the smallest sole proprietor, must accelerate and fundamentally change their customer […]