My guest this week is Bill Gurley, general partner at Benchmark Capital. Our conversation is about one specific issue that has popped up as a topic of interest in the investing community in recent months: the comparison between bringing a company public through a traditional IPO vs. what’s known as a direct listing.
As a third party observer with no real dog in the hunt (as we don’t buy IPOs at O’Shaughnessy Asset Management), I thought this was a small and nuanced issue. I’ve therefore been surprised by the strength of opinions on both sides of this issue as I’ve explored it behind the scenes this past week. It feels almost like I’ve encountered a political third rail, where one side throws a lot of vitriol towards the other.
To be clear, this episode is very much in favor of direct listings instead of traditional IPOs. For those that want a good discussion of the IPO process and its upsides, check out episode 173 of the Exponent podcast with Ben Thompson.
Now please enjoy my very interesting conversation with Bill Gurley
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Show Notes
1:22 - (First Question) – His view on the IPO process
5:42 – Will now be the turning point for IPO’s
6:40 – The engagement between a new company going public and their counterparty and the IPO process
13:38 – The math of capital costs
18:18 – Banks that underprice the IPO’s
20:45 – The psychology of IPO’s
23:14 – The pop in the IPO and the media
24:54 – The value that shareholders give vs VC’s
25:37 – The Green Shoots
28:17 – The lock-up
31:40 – Direct listings vs IPO’s
36:07 – Spotify’s CEO Reveals Why He’s Not Doing a Traditional IPO
38:23 – The capital raised in an IPO and diluting the company
40:18 – Privilege access and buy-side firms
43:33 – What will actually lead to changes in the IPO space
44:48 – Why he became so interested in the IPO space
Learn More
For more episodes go to InvestorFieldGuide.com/podcast.
Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub
Follow Patrick on Twitter at @patrick_oshag
My guest this week is Albert Wenger, a managing partner at Union Square Ventures and the author of the book World After Capital.
Albert studied economics at Harvard and earned a PhD in information from technology, but if you’d asked me to guess before looking those up, I’d have guessed that he studied philosophy because of how widely he has thought about the world and the impact of technology.
Our conversation is about how technology is changing the world from an Industrial Age to a knowledge age. We explore how cryptocurrencies, low cost computing, and regulation will impact our future and why the transition may require delicate care.
I loved this conversation because of my obsession with the concept of scarcity. We explore what has been scarce through time and what may be scarce in the future. Albert is one of the most interesting thinkers I’ve come across and was a pleasure to speak with. I hope you enjoy our conversation.
Hash Power is presented by Fidelity Investments
For more episodes go to InvestorFieldGuide.com/podcast.
Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub.
Follow Patrick on Twitter at @patrick_oshag
Links Referenced
Show Notes
2:16 – (First Question) – Defining what it means to be human
2:58 – World After Capital
3:56 – Trans-humans vs neo-humans
4:37 – The concept of Qualia
5:25 – Albert’s investment philosophy=
8:27 – How Albert began his exploration into cryptocurrencies
12:59 – Most exciting things blockchains could enable
14:27 – How does Albert view blockchain technology from the view of an venture capital investor
17:00 - Why Albert thinks that the dominate cryptocurrency of our time may not exist just yet and what he is looking for in protocols that will become the leader in the space
20:16 – What are the central functions that will be important in cryptocurrencies
21:22 - The state of regulation in the cryptocurrency space
27:37 – What has Albert most excited for the future of blockchain
29:10 – The idea of universal basic income
32:26 – How do you solve the problem of giving money value in a world of universal basic income
35:00 – How scarcity has changed over time
39:01 – Role of financial capital in the last 200 years of civilization
42:39 – Are we as a society only capable of solving problems once they become an immediate threat
44:15 – Explaining the idea of attention as a scarce resource
47:56 – The two key drivers of change; zero marginal cost distribution and universality of computational power
53:13 - What should we as investors and inventors be focusing on as the new objective function
57:24 – Scariest aspect of this transition into the knowledge age
59:45 – Three basic freedoms we all seek; informational, economic, psychological
1:02:13 – Fermi’s paradox and the scarcity of attention
1:02:56 – How Albert thinks about his own day and wellbeing given all of this information
1:05:01 – Kindest thing anyone has done for Albert
Learn More
For more episodes go to InvestorFieldGuide.com/podcast.
Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub
Follow Patrick on twitter at @patrick_oshag
My guest this week are Matt Smith and Ian singer of Deep Basin Capital, a hedge fund specializing in the energy sector.
I first met Matt almost 10 years and, in that time, I’ve grown to respect him as much as any investor that I’ve ever met. Now having spent time with Ian, who specializes in oil and gas field exploration companies and the rest of the Deep Basin team, I have similar respect and admiration for all of them.
Deep Basin does almost the exact opposite of what us quants do. In fact, their entire goal is to build a portfolio of mostly idiosyncratic or stock specific risk, the very thing us quants mostly remove from portfolios. Deep Basin positions the portfolio to make a series of carefully constructed bets, long and short, without taking market risk, style-factor risk, or even commodity risk. They use a hybrid fundamental and quantitative process which we explore in detail. This is definitely another good example of who we are all up against in public markets.
What makes this story unique is that we are investors in Deep Basin’s management company and so have a clear interest in their ongoing success. Listeners know that I want to be as transparent as possible on this podcast so we event spend a little time telling the story about how it all came together a few years ago.
I have learned a ton about investing from my countless hours with this team and hope that this conversation gives you a glimpse into what is happening at the cutting edge of investing in the world of hedge funds.
Please enjoy my conversation with Deep Basin
For more episodes go to InvestorFieldGuide.com/podcast.
Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub.
Follow Patrick on Twitter at @patrick_oshag
Books Referenced
Expectations Investing: Reading Stock Prices for Better Returns
Show Notes
2:47 – (First Question) – Looking at the universe of the energy space that they are focusing on
7:48 – Breaking down the important components and their labels in this space
10:27 – What makes energy companies distinct from the broader market.
12:52 – How the isolate unique value creation
14:58 – Ian’s take on the upstream part of the business where he has spent a lot of time
18:35 – How does Deep Basin use data and what edge do they derive from it.
21:31 – What insight are they looking for from updated well data
23:59 – How do they use combine the business value that they measure with the market price that is being forecasted
24:40 – Expectations Investing: Reading Stock Prices for Better Returns
29:34 – How do they build an actual portfolio
31:51 – Their systematic approach to energy investing
37:53 – What are their thoughts about using leverage when making investments in the energy space
40:53 – A look at the changes to the hedge fund industry over the entirety of their careers
45:46 – Defining the culture of Deep Basin
49:15 – The story of how OSAM and the O’Shaughnessy’s came to be investors in the Deep Basin
54:13 – Kindest thing anyone has done for each of them
Learn More
For more episodes go to InvestorFieldGuide.com/podcast.
Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub
Follow Patrick on twitter at @patrick_oshag