a16z Podcast Notes
October 26, 2018
A continually updated set of notes on episodes of the a16z podcast. I don’t listen to all the episodes, and when I do I don’t always make notes, but when I do I publish them here.
Mellody Hobson and Ben Horowitz Talk Investing, Career, and Star Wars!
At 35:30 Mellody talks about a helicopter company called Bristow Group Inc. They own helicopters for the purpose of ferrying workers back and forth to oil rigs. I note it here because her analysis is very interesting for anyone who is thinking about holding individual stocks. This is the level of detail at which you need to analyze the company in order to determine if it’s a buy or not.
Best I can tell, the podcast was recorded in Nov 2015 at the a16z tech summit. At that time, crude had dropped from 110 dollars a barrel in July 2014 to approximately 40 dollars in November.
If oil prices are down it stands to reason that a helicopter business serving oil companies is going to do badly. Fewer workers going to rigs means less business.
Mellody’s reasons for investing in the helicopter company are as follows:
- The company contracts are “stand and wait” contracts. They wait around in case accidents happen on the rigs and they have to get there quickly. The contracts are not directly tied to the amount of traffic to the rigs.
- The contracts are 3 to 5 years in length and the company still gets paid even when oil prices are down.
- A significant part of the companies business is search and rescue for the British government.
- The stock is trading for less than the value of the helicopters on the books.
- Helicopters don’t depreciate like cars because you have to replace the engine and the rotor every 5 years and you basically have a new helicopter every time you do that.
Since this podcast, Bristow is down ~90% even though oil went back up to $70.
The depth of the analysis is still good to think about. This is how much info you should have on a company before you say they are a buy.
Seeing into the future
- The act of planning by predicting different things that could happen and theorizing on what you might do is called simulation planning.
When simulation planning, it’s best to use three prompts:
- A future where things get better
- A future where things get worse
- A future where things get weird.
- They talk about the shared pool of knowledge in meetings (as mentioned in the book Conflict). It can be difficult to get people to contribute to the pool of knowledge. To break through this barrier, one trick is to simply assign people roles. “Mary is the expert on x, John is the expert on y” and then get them to represent their role.
Tesla and the nature of disruption
Really great breakdown of how to determine if a company or change is disruptive or merely incremental. They break down Tesla to understand whether it has a fundamental advantage or not.
The Basics of Growth: Engagement and Retention
How to measure engagement and retention in apps. Including metrics like DAU/MAU, the “smile”, cohort analysis and others. Interesting discussion on how metrics can prove that there are network effects in your business.
Written by David Tuite who is a product manager at Workday and used to be a software engineer. You should follow him on Twitter