7 ms·

I don’t know much about the stock market outside of throwing any savings I can muster into a vanguard fund, but articles like this remind me of the scene from S

I don’t know much about the stock market outside of throwing any savings I can muster into a vanguard fund, but articles like this remind me of the scene from Silicon Valley where the Pied Piper team is talking about finding a revenue stream. Their investor, the Mark Cuban caricature, Russ Hanneman butts in and yells at them about the dangers of showing revenue and how it proves you might only be a 2x-er. "It's not about how much you earn. It's about what you're worth. And who is worth the most? Companies that lose money!" He goes on to argue that if you don’t show any revenue then the possibilities are left only to the imagination! Pre-revenue = maybe a 100x-er at some point! Obviously silly and over simplified, but I do think that there is truth in the humor. Once this company gets its act together, it could shoot to the moon! Edit: Here's a link to the scene: https://www.youtube.com/watch?v=BzAdXyPYKQo https://www.youtube.com/watch?v=BzAdXyPYKQo

ralston3 6y ago
Absolutely hilarious scene. Made even more funny by how scarily accurate it is XD
taneq 6y ago
"It's the perfect play!" That show is so on point sometimes.
dmarlow 6y ago
> Their investor, the Mark Cuban caricature, Russ Hanneman I didn't know that's what they had intended. I never once thought that's what they were going for.
- exdsq 6y ago
  Yeah I thought it was just a bro-VC type person rather than anyone specific
- sharkweek 6y ago
  I'm not sure if it was ever explicitly stated by the writers, but IIRC, Russ put "radio on the internet," while Mark Cuban first hit it big with broadcast.com. I believe they based him off of Mark's big personality too, mocking things like "three commas" and investing in a bunch of stinkers over the last 20 years.
- doggosphere 6y ago
  Russ also made his money putting radio on the internet.
- elefanten 6y ago
  1. The character made money selling "Radio on the Internet" -- Mark Cuban sold Broadcast.com to Yahoo for $5.7B in 1999. 2. The character recounts popping a boner when he saw his net worth cross 1B. There's some old Cuban video about watching his stock price while sitting in his boxers. 3. There's a bit in the show about the character showing both rows of teeth when he smiles. Cuban smiles like that.
- glennpratt 6y ago
  I scratched my head too, but I forgot about this detail. > Russ Hanneman is a multi-billionaire who claims to have "put radio on the internet".
- deleted 6y ago
  [deleted]
- fotta 6y ago
  Cuban also owns Three Commas[0] and Hanneman makes it very clear how proud he is of being in the "Three Comma Club" [1]. [0] https://threecommas.com https://threecommas.com [1] https://www.youtube.com/watch?v=xzMUrB-Um1Y https://www.youtube.com/watch?v=xzMUrB-Um1Y
- sharadov 6y ago
  I always thought Russ Hanneman was based on Sean Parker, he had an over the top flashy lifestyle.
JMTQp8lwXL 6y ago
Anything with no record has the potential to be the next FANG. It's far clearer for a company that's existed for awhile, what its potential might be. And that insane growth will only be found early on, typically during a time when the company isn't profitable.
john_moscow 6y ago
>I don’t know much about the stock market outside of throwing any savings I can muster into a vanguard fund. You have just answered your own question. If enough people make financial decisions based on a specific metric, rather than their own understanding, of course they will be a whole industry of companies trying to game the KPI and make sure your uninformed dollar ends up in their coffers.
- bvaldivielso 6y ago
  What question are you talking about? What is your point exactly?
  - john_moscow 6y ago
    The point is that blindly copying the investment strategy used by a majority of other players inevitably leads to what some call a bubble.
jariel 6y ago
There is reality to this, but it's generally for private companies raising money that can hold their cards close to their chest. Pinterest, I believe, would not tell investors the 'results of their ad tests' precisely because they didn't want investors to be able to hard-value the company. Once the 'analyst in the investor' gets enough data, that mind will crunch the numbers quickly to figure out the 'net present value' etc. and come up with a number. If they don't have that data, then some of them can be allowed to 'dream'. With public companies, there should be enough data on the table for people to make reasonable conclusions, but investing is taking a pop-culture angle these days and it's problematic. WeWork valuations were crazy. It's hard to see how Palantir is worth much. Peleton and Tesla should be controversial, but at least the have solid foundations.
tornato7 6y ago
Here's a thought experiment about a theoretical company that can obtain incredible valuation. You start out with some money from friends and family, and you use this money to sell $100 bills for $50. Lots of takers. Soon enough, you go to a VC and show them your revenue stream, and tell them with more capital you can make the margins much better. They hand you a few million, and you start selling more $100 bills for $70 instead. Wow, you're reducing margins and seeing insane sales growth! A few more investments later and you're selling $100 bills for $95 en masse. You have ads everywhere, your IPO and ICO are coming up. You probably have a few billion in funding from SoftBank. Your stock price skyrockets because you're THIS CLOSE to showing profitability and if the trend continues you'll be making billions.
- vasco 6y ago
  You're obviously mocking this whole thing but the fact is that if you can get away with it, you can use that valuation to acquire actual smaller companies and talent and if you're running an online business and acquire a lot of customers (even if selling $100 bills for $95) you'll have huge distribution that you can then sell whatever you come up with next. Or as they use to say, we lose money on each unit but we'll make it up in volume.
  - sequoia 6y ago
    > Or as they use to say, we lose money on each unit but we'll make it up in volume. I believe this is a joke, no? I.e. you can't lose money on each unit and "make it up in volume."
    - lotsofpulp 6y ago
      It's a joke, because the strategy is to undercut or buyout the competition to survive long enough to be the last one standing.
- simonsarris 6y ago
  This is more or less how PayPal started, yeah. (When they sold the $100 for $80 they also onboarded them to do other things, once there were enough of them. Eventually they reduced the payout to selling $100 for $95.)
baron_harkonnen 6y ago
> outside of throwing any savings I can muster into a vanguard fund, I know the popular advice for the last decade has been "stock market always goes up! 8% a year!" but do you really believe it's wise to align your future investment strategy with the general well being of the economic. I'm not saying don't have a 401k (well if you really press me, I will say that), but if all of your savings are directly tied to the market that means that you are most successful when the rest of the market succeeds, but in the case that the market collapses you also collapse. This is leverage, the opposite of hedging. It has always seemed strange to me that Wallstreet has convinced American's to treat their retirement as leverage rather than a hedge. If the market is doing fantastic, then it's not as important to have savings, and if the market is doing poorly it's important have other means of economic stability.
- Slartie 6y ago
  The thinking behind this strategy is: there is enormous incentive to make the market perform well, which is why society will make the market perform well, with whatever means necessary. The incentive to make the market fail is much smaller (and even those shorting the market do eventually have an incentive for a well-doing market, because the money they make is worthless if it's not spendable for stuff, which depends on a well-doing market). You can clearly see this play out right now in terms of current worldwide monetary policy: for the sake of a well-doing market, central banks are printing money like there's no tomorrow.
- ip26 6y ago
  I see it as a hedge against inflation. In boom times with soaring markets, there is (usually) considerable inflation. If you ride the market, you probably won't see outsize returns but you won't lose purchasing power to inflation either. For this reason I frequently wonder whether I should invest HSA funds exclusively in medical stocks. If healthcare gets more expensive, my HSA has probably grown. If healthcare gets cheaper, my HSA might shrink, but that's fine because healthcare is cheap.
  - panopticon 6y ago
    > If healthcare gets cheaper, my HSA might shrink, but that's fine because healthcare is cheap. Isn't the conventional min/max strategy to not use your HSA for any medical expenses? That is, you just treat your HSA as a traditional IRA and don't touch it until 65+.
pc86 6y ago
Stocks are their own product. They have value because people are willing to buy them, which is only incidental to their belief that the value of the underlying company will increase. The price of a stock goes up because people want to buy it.

ralston3 6y ago

Absolutely hilarious scene. Made even more funny by how scarily accurate it is XD

taneq 6y ago

"It's the perfect play!" That show is so on point sometimes.

dmarlow 6y ago

> Their investor, the Mark Cuban caricature, Russ Hanneman I didn't know that's what they had intended. I never once thought that's what they were going for.

exdsq 6y ago
Yeah I thought it was just a bro-VC type person rather than anyone specific
sharkweek 6y ago
I'm not sure if it was ever explicitly stated by the writers, but IIRC, Russ put "radio on the internet," while Mark Cuban first hit it big with broadcast.com. I believe they based him off of Mark's big personality too, mocking things like "three commas" and investing in a bunch of stinkers over the last 20 years.
doggosphere 6y ago
Russ also made his money putting radio on the internet.
elefanten 6y ago
1. The character made money selling "Radio on the Internet" -- Mark Cuban sold Broadcast.com to Yahoo for $5.7B in 1999. 2. The character recounts popping a boner when he saw his net worth cross 1B. There's some old Cuban video about watching his stock price while sitting in his boxers. 3. There's a bit in the show about the character showing both rows of teeth when he smiles. Cuban smiles like that.
glennpratt 6y ago
I scratched my head too, but I forgot about this detail. > Russ Hanneman is a multi-billionaire who claims to have "put radio on the internet".
deleted 6y ago
[deleted]
fotta 6y ago
Cuban also owns Three Commas[0] and Hanneman makes it very clear how proud he is of being in the "Three Comma Club" [1]. [0] https://threecommas.com https://threecommas.com [1] https://www.youtube.com/watch?v=xzMUrB-Um1Y https://www.youtube.com/watch?v=xzMUrB-Um1Y
sharadov 6y ago
I always thought Russ Hanneman was based on Sean Parker, he had an over the top flashy lifestyle.

JMTQp8lwXL 6y ago

Anything with no record has the potential to be the next FANG. It's far clearer for a company that's existed for awhile, what its potential might be. And that insane growth will only be found early on, typically during a time when the company isn't profitable.

john_moscow 6y ago

>I don’t know much about the stock market outside of throwing any savings I can muster into a vanguard fund. You have just answered your own question. If enough people make financial decisions based on a specific metric, rather than their own understanding, of course they will be a whole industry of companies trying to game the KPI and make sure your uninformed dollar ends up in their coffers.

bvaldivielso 6y ago
What question are you talking about? What is your point exactly?
- john_moscow 6y ago
  The point is that blindly copying the investment strategy used by a majority of other players inevitably leads to what some call a bubble.

jariel 6y ago

There is reality to this, but it's generally for private companies raising money that can hold their cards close to their chest. Pinterest, I believe, would not tell investors the 'results of their ad tests' precisely because they didn't want investors to be able to hard-value the company. Once the 'analyst in the investor' gets enough data, that mind will crunch the numbers quickly to figure out the 'net present value' etc. and come up with a number. If they don't have that data, then some of them can be allowed to 'dream'. With public companies, there should be enough data on the table for people to make reasonable conclusions, but investing is taking a pop-culture angle these days and it's problematic. WeWork valuations were crazy. It's hard to see how Palantir is worth much. Peleton and Tesla should be controversial, but at least the have solid foundations.

tornato7 6y ago

Here's a thought experiment about a theoretical company that can obtain incredible valuation. You start out with some money from friends and family, and you use this money to sell $100 bills for $50. Lots of takers. Soon enough, you go to a VC and show them your revenue stream, and tell them with more capital you can make the margins much better. They hand you a few million, and you start selling more $100 bills for $70 instead. Wow, you're reducing margins and seeing insane sales growth! A few more investments later and you're selling $100 bills for $95 en masse. You have ads everywhere, your IPO and ICO are coming up. You probably have a few billion in funding from SoftBank. Your stock price skyrockets because you're THIS CLOSE to showing profitability and if the trend continues you'll be making billions.

vasco 6y ago
You're obviously mocking this whole thing but the fact is that if you can get away with it, you can use that valuation to acquire actual smaller companies and talent and if you're running an online business and acquire a lot of customers (even if selling $100 bills for $95) you'll have huge distribution that you can then sell whatever you come up with next. Or as they use to say, we lose money on each unit but we'll make it up in volume.
- sequoia 6y ago
  > Or as they use to say, we lose money on each unit but we'll make it up in volume. I believe this is a joke, no? I.e. you can't lose money on each unit and "make it up in volume."
  - lotsofpulp 6y ago
    It's a joke, because the strategy is to undercut or buyout the competition to survive long enough to be the last one standing.
simonsarris 6y ago
This is more or less how PayPal started, yeah. (When they sold the $100 for $80 they also onboarded them to do other things, once there were enough of them. Eventually they reduced the payout to selling $100 for $95.)

baron_harkonnen 6y ago

> outside of throwing any savings I can muster into a vanguard fund, I know the popular advice for the last decade has been "stock market always goes up! 8% a year!" but do you really believe it's wise to align your future investment strategy with the general well being of the economic. I'm not saying don't have a 401k (well if you really press me, I will say that), but if all of your savings are directly tied to the market that means that you are most successful when the rest of the market succeeds, but in the case that the market collapses you also collapse. This is leverage, the opposite of hedging. It has always seemed strange to me that Wallstreet has convinced American's to treat their retirement as leverage rather than a hedge. If the market is doing fantastic, then it's not as important to have savings, and if the market is doing poorly it's important have other means of economic stability.

Slartie 6y ago
The thinking behind this strategy is: there is enormous incentive to make the market perform well, which is why society will make the market perform well, with whatever means necessary. The incentive to make the market fail is much smaller (and even those shorting the market do eventually have an incentive for a well-doing market, because the money they make is worthless if it's not spendable for stuff, which depends on a well-doing market). You can clearly see this play out right now in terms of current worldwide monetary policy: for the sake of a well-doing market, central banks are printing money like there's no tomorrow.
ip26 6y ago
I see it as a hedge against inflation. In boom times with soaring markets, there is (usually) considerable inflation. If you ride the market, you probably won't see outsize returns but you won't lose purchasing power to inflation either. For this reason I frequently wonder whether I should invest HSA funds exclusively in medical stocks. If healthcare gets more expensive, my HSA has probably grown. If healthcare gets cheaper, my HSA might shrink, but that's fine because healthcare is cheap.
- panopticon 6y ago
  > If healthcare gets cheaper, my HSA might shrink, but that's fine because healthcare is cheap. Isn't the conventional min/max strategy to not use your HSA for any medical expenses? That is, you just treat your HSA as a traditional IRA and don't touch it until 65+.

pc86 6y ago

Stocks are their own product. They have value because people are willing to buy them, which is only incidental to their belief that the value of the underlying company will increase. The price of a stock goes up because people want to buy it.