When I was little my dad used to sing the Dooley Wilson song As Time Goes By. It starts:

You must remember this

A kiss is just a kiss

A sigh is just a sigh

The fundamental things apply

As time goes by

https://www.youtube.com/watch?v=d22CiKMPpaY

I am not an overwhelmingly sophisticated financial investor, nor am I an expert market prognosticator. I like things that are simple and easy to understand. The past decade of technology investing and valuations has not been simple or easy to understand. But it looks like that is changing now.

As software began to eat the world, many companies made the proclamation that they were software companies. Companies sell things. The type of company you are largely comes down to what you sell and provide to customers. For instance, software companies sell software. As technology became more pervasive, companies and the market largely confused other types of companies for software businesses. But software eating the world means that many industries will be inexorably transformed by technology - they will create more efficiency, move faster, have better margins, etc. - not that they themselves will become the software industry itself.

One of the things that confused me over the recent bull run was companies and investors valuing things that were not software companies like software. Insurtech is one example. Insurance companies sell insurance policies. The promise of insurtech is that companies can use technology to generate better underwriting and risk systems that create more efficiency and better user experiences in the delivery and management of the policies they sell. But at the end of the day, the core thing insurtech does is sell insurance. And at the end of the day they should and likely will be valued like their insurance counterparts in the public markets. And if they don't have better margins and a superior customer experience, then the promise is unfulfilled.

You can extend this to many other industries that have been inflated by the illusion of being tech companies. In a segment of fintech, online lenders sell money. They're in the business of providing people loans. They will be valued like other companies whose core business is selling money. Same goes for companies that sell physical things. If your core business is selling shoes or mattresses, you will be valued like other companies that sell shoes and mattresses. You are likely not a software company (unless they are digital shoes and mattresses!), but hopefully you use technology to deliver a superior product and service to customers, and have a significantly better margin profile. If you do not, the narrative is fiction.

I think what we are seeing and will continue to see is the market come to this realization. Not everything is a tech company, and if tech is the thing that differentiates your business from competitors in your industry, then it better actually manifest in the business. This is not to say that exceptional companies and businesses won't be built and aren't already built in tech-enabled industries. They are and will continue to be. But it is to say that it's important to internalize the new market dynamics which are finally becoming more simple and easy to understand.

At the end of the day, a kiss is but a kiss, a sigh is but a sigh, and the fundamental things apply as time goes by.

Earlier this year I finally read Carlota Perez's Technological Revolutions and Financial Capital. It had been on my shelf for over a decade. It's a masterpiece. It's super academic, but so insightful. I understand why people are obsessed with her work and underlined nearly half the book. (Here's a book summary if you have not read it.)

While reading it I kept asking myself, "Where are we in the Information Age?" and "What comes next?" The Information Age is weird. We've experienced multiple crashes and frenzies, software and computers have come so far and changed so much of our lives, yet software is still eating the world. In some ways it feels like we are approaching the end of the Information Age (I think this is mainly because so much mainstream and visible innovation in software these days feels boring and on the margin), but it also feels like we are just at the beginning. We have yet to see what AI and crypto will do to the society, and those are just the obvious contenders for the next stages of this epoch. Ben Thompson wrote a nice piece about this, and Perez herself has

One of the values we had at Fundera was "Be An Open Book." I used to tell people during new hire orientation that I loved this value because I am a lazy person. As a company, the spirit of being an open book is giving people access to vital information about how the business is performing. It's important to do this for a variety of reason: employees want it, it provides context as to how the company is doing, and with that context people can begin to make independent and well-informed decisions about how to help us grow. If more people are making better decisions, then leaders get to make less of them (especially the smaller ones). Hence, I can continue being lazy.

The value manifests in a variety of ways. We would share company financials during Town Halls (our monthly company All Hands). We would circulate sanitized board presentations after every board meeting (sanitized because there are some discretional and personal things that not everyone needs to know). We'd discuss our unit economics in depth. Sharing details was embedded in the culture. Everyone inside the company had access to the nitty gritty as to how the company was doing. And if for some reason they didn't have it at their fingertips, they could always ask.

I have found that people who join early stage ventures oftentimes do so to learn as much as possible. A great way to accelerate learning is to share information on what's important to the company so people can track it and see how inputs effect outputs. They also want to have some sense of autonomy and feel like they can contribute beyond being told what to do or the confines of a specific role. Being an open book helps steepen the learning curve while improving the way people can contribute.

Being an open book also helps people make critical career decisions. They know when things are good and can get excited about growth trajectory. They also know when things are bad and they can either buckle down and dig through the muck (this is why it's important to hire people who believe in your mission) or they can jump ship and find a more stable environment. Shitty surprises suck for employees. It's a huge disappointment to wake up one morning and be told your company burned through all its cash and now has to shut down. It's an even bigger disappointment to be caught totally off guard by this, or to learn about it from the press. Don't create environments where this can happen to the people that bet a chunk of their career on you.

When I was little my dad used to sing the Dooley Wilson song As Time Goes By. It starts:

You must remember this

A kiss is just a kiss

A sigh is just a sigh

The fundamental things apply

As time goes by

https://www.youtube.com/watch?v=d22CiKMPpaY

I am not an overwhelmingly sophisticated financial investor, nor am I an expert market prognosticator. I like things that are simple and easy to understand. The past decade of technology investing and valuations has not been simple or easy to understand. But it looks like that is changing now.

As software began to eat the world, many companies made the proclamation that they were software companies. Companies sell things. The type of company you are largely comes down to what you sell and provide to customers. For instance, software companies sell software. As technology became more pervasive, companies and the market largely confused other types of companies for software businesses. But software eating the world means that many industries will be inexorably transformed by technology - they will create more efficiency, move faster, have better margins, etc. - not that they themselves will become the software industry itself.

One of the things that confused me over the recent bull run was companies and investors valuing things that were not software companies like software. Insurtech is one example. Insurance companies sell insurance policies. The promise of insurtech is that companies can use technology to generate better underwriting and risk systems that create more efficiency and better user experiences in the delivery and management of the policies they sell. But at the end of the day, the core thing insurtech does is sell insurance. And at the end of the day they should and likely will be valued like their insurance counterparts in the public markets. And if they don't have better margins and a superior customer experience, then the promise is unfulfilled.

You can extend this to many other industries that have been inflated by the illusion of being tech companies. In a segment of fintech, online lenders sell money. They're in the business of providing people loans. They will be valued like other companies whose core business is selling money. Same goes for companies that sell physical things. If your core business is selling shoes or mattresses, you will be valued like other companies that sell shoes and mattresses. You are likely not a software company (unless they are digital shoes and mattresses!), but hopefully you use technology to deliver a superior product and service to customers, and have a significantly better margin profile. If you do not, the narrative is fiction.

I think what we are seeing and will continue to see is the market come to this realization. Not everything is a tech company, and if tech is the thing that differentiates your business from competitors in your industry, then it better actually manifest in the business. This is not to say that exceptional companies and businesses won't be built and aren't already built in tech-enabled industries. They are and will continue to be. But it is to say that it's important to internalize the new market dynamics which are finally becoming more simple and easy to understand.

At the end of the day, a kiss is but a kiss, a sigh is but a sigh, and the fundamental things apply as time goes by.

Earlier this year I finally read Carlota Perez's Technological Revolutions and Financial Capital. It had been on my shelf for over a decade. It's a masterpiece. It's super academic, but so insightful. I understand why people are obsessed with her work and underlined nearly half the book. (Here's a book summary if you have not read it.)

While reading it I kept asking myself, "Where are we in the Information Age?" and "What comes next?" The Information Age is weird. We've experienced multiple crashes and frenzies, software and computers have come so far and changed so much of our lives, yet software is still eating the world. In some ways it feels like we are approaching the end of the Information Age (I think this is mainly because so much mainstream and visible innovation in software these days feels boring and on the margin), but it also feels like we are just at the beginning. We have yet to see what AI and crypto will do to the society, and those are just the obvious contenders for the next stages of this epoch. Ben Thompson wrote a nice piece about this, and Perez herself has

One of the values we had at Fundera was "Be An Open Book." I used to tell people during new hire orientation that I loved this value because I am a lazy person. As a company, the spirit of being an open book is giving people access to vital information about how the business is performing. It's important to do this for a variety of reason: employees want it, it provides context as to how the company is doing, and with that context people can begin to make independent and well-informed decisions about how to help us grow. If more people are making better decisions, then leaders get to make less of them (especially the smaller ones). Hence, I can continue being lazy.

The value manifests in a variety of ways. We would share company financials during Town Halls (our monthly company All Hands). We would circulate sanitized board presentations after every board meeting (sanitized because there are some discretional and personal things that not everyone needs to know). We'd discuss our unit economics in depth. Sharing details was embedded in the culture. Everyone inside the company had access to the nitty gritty as to how the company was doing. And if for some reason they didn't have it at their fingertips, they could always ask.

I have found that people who join early stage ventures oftentimes do so to learn as much as possible. A great way to accelerate learning is to share information on what's important to the company so people can track it and see how inputs effect outputs. They also want to have some sense of autonomy and feel like they can contribute beyond being told what to do or the confines of a specific role. Being an open book helps steepen the learning curve while improving the way people can contribute.

Being an open book also helps people make critical career decisions. They know when things are good and can get excited about growth trajectory. They also know when things are bad and they can either buckle down and dig through the muck (this is why it's important to hire people who believe in your mission) or they can jump ship and find a more stable environment. Shitty surprises suck for employees. It's a huge disappointment to wake up one morning and be told your company burned through all its cash and now has to shut down. It's an even bigger disappointment to be caught totally off guard by this, or to learn about it from the press. Don't create environments where this can happen to the people that bet a chunk of their career on you.