Wartime
I ate a salad at lunch today.
But more importantly, I overheard a conversation between the ladies sitting next to me.
They both worked for a small startup and one of them was onboarding the new employee.
At some point, one of them brought up Zoom ($ZM) and *very quickly* it was agreed upon that their team should sign up for a subscription.
Last month, as Zoom was approaching its IPO around the same time as Uber ($UBER), I was singing the videoconferencing company’s praises.
Meanwhile, also today, Uber announced another $1 billion loss for this past quarter:
“Uber’s performance on the public market has been a letdown. Investors, even Wall Street experts, had anticipated an initial market cap in the ballpark of $100 billion. Instead, Uber currently sits at a valuation of about $67 billion, or $5 billion lower than the $72 billion valuation it earned with its last private financing.
Uber’s core business, ride-hailing, is growing much faster than other segments of the massive business. While revenues grew 20 percent from the same period last year, revenues in the company’s ride-hail department grew only 9 percent. Uber Eats revenue shot up 89 percent while its gross bookings grew 108 percent.”
Zoom had all the criteria that would make me break my own rule about not investing in IPOs, which is why I set a limit order to buy on the first day.
Unsurprisingly, Zoom shot up immediately from $36 to $65 in its first minute of trading and then even reached over $90 per share in the past month.
Sadly, I still own zero shares.
The Wall Street Journal made pointed out how software is going strong:
“In the first quarter, American companies for the first time invested more in software than in information-technology equipment. Indeed, outside of buildings and other structures, software surpassed every type of investment, including transportation equipment such as trucks and industrial equipment such as machine tools. Software spending is even higher if the cost of writing original software programs, now classified as research and development, is included.”
One downside to reading and listening to a lot of finance is hearing talking heads worry about the “long bull market” and its inevitable end.
It’s been over 10 years since the financial crisis made the stock market hit a generational bottom and everyone is trying to predict the next downturn.
The Novel Investor blog reminded me of this Benjamin Graham quote:
“I am convinced that an individual investor with sound principles, and soundly advised, can do distinctly better over the long pull than a large institution.”
I have a lot of good friends who right now are at a desk tasked with the job of calculating a company’s discounted cash flow.
There’s nothing wrong with that, but there is certainly more owed to the prospects of a company than one spreadsheet.
Brad Feld has read Ben Horowitz’s book The Hard Thing About Hard Things and likes Ben’s comparison between a peacetime CEO and a wartime CEO:
“Peacetime CEO knows that proper protocol leads to winning. Wartime CEO violates protocol in order to win.
Peacetime CEO always has a contingency plan. Wartime CEO knows that sometimes you gotta roll a hard six.
Peacetime CEO strives for broad-based buy-in. Wartime CEO neither indulges consensus-building nor tolerates disagreements.
Peacetime CEO sets big, hairy audacious goals. Wartime CEO is too busy fighting the enemy to read management books written by consultants who have never managed a fruit stand.”
Even in this “long bull market” good companies are still battling for attention, market share, and investors’ dollars.
Someday, for some reason, global crises will cause the U.S. stock market to collapse by many trillions.
When that time comes, invest with leaders who know how to act like a wartime CEO.
