A Tale of Two Stories (that we’ve heard from our neighbors): September 30, 2018 Snippets

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This week’s theme: revisiting our series on bubbles, 2018 edition. Plus SurveyMonkey makes its debut on the public markets.

About a year ago in Snippets, we ran a series about bubbles that’s been on our mind over the past little while. How come? Well, two stories have simultaneously unfolded over the past couple weeks, with an amusing concurrence. On the one hand, stocks in marijuana companies have been soaring in bursts of speculative enthusiasm, as the Canadian federal government prepares to become the first developed country to fully legalize pot, and retail investors are diving headfirst into the opportunity to buy in. In contrast, the cryptocurrency world — which has had a really rough 2018 after last year’s exuberance, appears to be sliding into some trouble that’s even bigger than anything that’s happened yet so far. The stories have been even oddly tied together by the fact that many of the speculators and promoters involved have actually been the same people: some who cashed out at the top of the crypto peak and are now looking to catch the next big thing, and others who, more tragically, bought in at peak crypto, got wiped out, and are now trying to make back their losses with weed stocks, like a gambler deep in the hole at a casino.

Crypto investors get into pot stocks as TLRY soars | Lily Katz, Bloomberg

There’s been no shortage of light shone on the marijuana narrative, given that the prospect of making quick money coupled with the recently de-taboo’d status of weed make for an easy conversation starter and an equally easy speculative story with semi-ridiculous investment value. As of Sunday afternoon, industry darling Aurora Cannabis is currently valued at a price to earnings ratio of 129, while Canopy Growth, which trades under the auspicious ticker $WEED, does not even have a P/E ratio to report seeing as it has only negative earnings to show. That didn’t stop its stock price from rising a cool 490% over the past year, though. But the star of this past week has without a doubt been Tilray, a tiny company operating out of Vancouver Island with hardly any business operations or fundamentals whatsoever. Since August, Tilray has seen their stock price go through a week or two of steady speculative gains, then experience an absolutely wild 72 hours of mania, crashing, and then partial recovery that was reminiscent to many of Dot Com stocks back in the late 90s.

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TLRY over the past few months, source: NASDAQ

In many ways, the speculative enthusiasm over weed stocks is very different from what happened with cryptocurrencies last year. For one, while cryptocurrencies were something that very few people truly understood, marijuana is something that more or less anyone can wrap their head around. And, in fairness, the bull thesis for buying marijuana stocks is pretty straightforward at first glance. It’s an addictive substance that people want, and it’s becoming legal. So unlike with Bitcoin, we’re not hearing the frantic explanations of cab drivers and neighbors and CNBC hosts enthusiastically stumbling through why crypto assets make for a good store of un-censorable value, or why decentralized tokens will reshape the whole world’s economy, or whatever.

But what both stories have in common is that they spread virally, as people look around and realize that their peers seem to know something they don’t, and are getting in on something they aren’t. As Warren Buffett remarked to CNBC the other week: “Bubbles happen when people see neighbors dumber than they are getting rich.” (You can learn an awful lot about markets, investing and human behavior by unpacking that sentence.) It’s almost refreshing, in a “the past is prologue” sense, to hear the same neighbors and friends who last year were spinning together some impossible-to-understand thesis around tokens now going on about their weed portfolio. (As an anecdotal example, my neighbour last night explained to me the investment wisdom behind his idea, “Imagine how rich you’d be if you were the first investor into alcohol”. Seems sound to me!)

Meanwhile, the cryptocurrency ecosystem, nursing a year-long hangover after last year’s exuberance, has seen a remarkable bifurcation of time, attention and rhetoric among its members. The real developers and community leaders have quietly hunkered down to work on technical projects like Lightning, while everyone else has succumbed to an incredible spectacle of finger pointing, name calling and bag holding. We’re beginning to learn, thanks to continuous work by anonymous internet heroes like Bitfinexed, how much of the cryptocurrency ecosystem is propped up by toxic assets like Tether, and how much of last year’s price rise and this year’s desperate efforts by the bulls to keep prices from collapsing, may be the result of market manipulation as opposed to genuine investor positions. (Over the next few weeks, we’ll talk about what has happened, and may in fact be treated to some real-time fireworks: as of Sunday afternoon as I’m writing this, a bona-fide collapse of a notorious crypto exchange may be taking place… check back next week for more details!)

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Anyway, for both of these reasons, now seems like a great time to revisit our theme around bubbles, scams, reflexivity, and human behavior. So over the next few weeks we’re going to do just that, perhaps even requiring some live updates — we’ll keep you posted. In the meantime, don’t do anything Warren wouldn’t do.

In this week’s highlighted reading, Bay Area residents especially — but also anyone interested in urban affairs in general — will enjoy this piece about the history, politics and present-day fiasco that is San Francisco’s housing market. It’s rich with historical examples and gives some good perspective on how the roots of today’s crisis came into being a whole century ago, and that there will be no quick fixes either.

Demolishing the California Dream: how San Francisco planned its own housing crisis | Hunter Oatman-Stanford

For anyone who is uninitiated with how dire the Bay Area’s housing market situation has become, read Kim-Mai Cutler’s classic piece from four years ago, which walks through, step by step, what has happened in the last few decades as the tech industry (which makes up less than 10% of San Francisco’s workforce) through an already skewed housing market into complete disarray:

How burrowing owls led to vomiting anarchists (or: San Francisco’s housing crisis, explained) | Kim-Mai Cutler, TechCrunch

Another piece worth looking at is a scientific study that came out this week in Nature Biotechnology about a very controversial practice called gene drive: releasing genetically modified mosquitos into the wild that are engineered to breed with wild mosquitos and then render their second generation of offspring unviable. The technology strays dangerously close into “Playing God” territory, both in our ability to engineer organisms as well as to dramatically (and indeed, recklessly) alter ecosystems in rapid swoops. On the other hand, malaria kills over a million people every year (a child dies from malaria every thirty seconds), and is one of the leading causes of suffering and death across the world. Give the paper a read if you’re able to follow along, as the science is worthwhile and the follow-up will be fascinating.

A CRISPR-Cas9 gene drive targeting doublesex causes complete suppression in caged Agnopheles gambiae mosquitos | Kyrous Kyrou et al., Nature Biotechnology

Our industrial past and present:

The most important and least-noticed economic event of the decade: the invisible recession of 2016 | Neil Irwin, NYT Upshot

Grimy, glorious, gone: the divergent paths of 7 train stations in the US Midwest that reflect the trajectories of their towns | Mitch Smith, NYT

Living patterns:

A global tipping point: half of the world is now middle class or wealthier | Homi Kharas & Kristofer Hamel, Brookings

The suburbs can’t be blamed for everything | Patrick Brown, American Conservative

Good news for cooling costs in a warming future:

Cooling paint drops the temperature of any surface | Robert F Service, Science

This new coating could help keep buildings cool | Emily Matchar, Smithsonian

Towards cleaner energy:

A solar singularity: a status report on the global clean energy transition | Tam Hunt, GTM

Michael Bloomberg to lead UN green finance campaign | Jason Plautz, Smart Cities Dive

Other reading from around the Internet:

Reimagining of Schrödinger’s cat breaks quantum mechanics — and stumps physicists | Davide Castelvecchi, Nature & Scientific American

“Severe” manipulation found in studies from leading plant lab | Declan Butler, Nature

Selling citizenship is big business — and controversial | The Economist

A 35-year old unknown creates the world’s most valuable startup, Bytedance | Lulu Yilun Chen & Mark Bergen, Bloomberg

Do you know COBOL? With generations of old coders leaving, companies are scrambling | Max Colchester, WSJ

How China systematically pries technology from US companies | Lingling Wei & Bob Davis, WSJ

Blue Origin will now sell rocket engines | Eric Berger, Ars Technica

And just for fun, a quarter-century anniversary worth noting:

“Dazed and Confused” at 25 years old | David Fear, Rolling Stone

In this week’s news and notes from the Social Capital family, some long-awaited news from one of the longest-tenured members of the portfolio: SurveyMonkey has gone public.

SurveyMonkey starts trading on the NASDAQ as $SVMK | Sara Salinas, CNBC

SurveyMonkey raises $180M with upsized, above-range IPO | Alex Wilhelm, TechCrunch

Now trading on the NASDAQ under the ticker SVMK, SurveyMonkey’s journey to get here has been long, rewarding, and bittersweet. Founded way back in 1999, SurveyMonkey grew into a venture-backed startup starting in 2009, when Dave Goldberg took over as CEO. As many of you know, Dave was one of the most beloved and respected leaders of Silicon Valley, and was a close friend of the Social Capital family in particular: his passing in 2015 was an emotional time for the incredible number of people whose lives he touched in our community.

Dave’s generosity, kindness and purpose had a profound influence on SurveyMonkey’s character and values as it grew and matured, and current CEO Zander Lurie credits as much reflecting on their journey since: “A big part of what makes SurveyMonkey different is our people — our strong, dynamic employee base we affectionately refer to as “The Troop.” The strength of our company culture is a tribute, in part, to my late friend Dave Goldberg’s leadership. SurveyMonkey embodies who Dave was as a person — curious, helpful, approachable, and at the same time powerful.”

Dave’s curiosity in particular helped inspire a culture at SurveyMonkey built around data and creativity: in particular, finding the right balance between helping customers discover new insights about themselves, while also respecting the privacy and sanctity of customer data. Lurie notes to CNBC that “We have an incredible amount of data that we use on our platform everyday”, and expands on that mission in his own words: “SurveyMonkey fundamentally changed the way many organizations gather feedback. We created the category for survey software in 1999. We are a later in this growing category today. We have a simple mission that inspires our employees: ‘Power the Curious.’ Our products help curious individuals and organizations measure, benchmark and act on the opinions that drive success.”

SurveyMonkey CEO Zander Lurie on IPO day: We pay ‘great heed’ to protect customer data | Berkeley Lovelace Jr., CNBC

While their IPO represents a momentous occasion on the public markets and for SurveyMonkey’s business, the team still managed to have a little fun on the side that day. They partnered with Arianna Huffington, Draymond Green, Serena Williams, and Jeff Weiner to see what they’d ask in a survey if they could reach a large number of people, and the questions they asked were good ones. Arianna asked about happiness and burnout at work; Draymond asked about whether responders felt comfortable speaking up at work about controversial topics; Jeff asked about people’s dream jobs and whether we believed we’d found them yet; and Serena asked about work-life balance, particularly among working mothers, and how people across all age groups manage to balance kids, careers and their own well-being.

Congratulations to the team at SurveyMonkey for beginning the next chapter in their long and rewarding journey. You can always keep in touch with what the Troop is up to at the SurveyMonkey blog or on YouTube. And if you’re interested in joining the Troop yourself, they’re always hiring: you can find their careers page here.

Have a great week,

Alex & the team at Social Capital

Social Capital

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