Dumb metrics

I am generally a fan of metrics, but I know metrics are very limiting and only tell part of a story. My general rule of thumb for metrics is that if you measure and report it, then you need to be prepared for the number to be gamed in some way or form.

There’s also a lot of what I call “dumb” metrics for lack of a better term. These are metrics that are reported to measure one thing, but end up have negative effects that outweigh the benefit of measuring that one thing to begin with.

One example of this was the infamous metric, “utilization” often used in large consulting and accounting firms. I spent 5 years at one of these firms and while my experience was largely positive, one of the silliest things that the firm did was put heavy weight on utilization.

In short, utilization is a measure of billable client hours over the total amount of hours you are working. It’s intended to measure how much one contributes to client service (aka revenue) of the firm. Now the metric is innocent enough as on the surface you’d want people who are highly utilized, i.e. generating revenue for the firm.

In practice, this metric ended up being gamed, caused burn out and/or ended up being the luck of the draw.

One metric at review time was always utilization. Given that your promotions and raises were made based on utilization and given that you self-reported time, what ended up happening was people would exaggerate the amount of hours or bill the client more than needed. Yes, it was unethical, but it was such common practice in these firms that nearly everyone did it.

Those who were chasing high utilization ended up slaving away and destroying their work-life balance in chase of this magic utilization number. It was never a good outcome to watch someone be 200% utilized (~80 hours a week) consistently.

Lastly, you had the bunch that just had difficult clients or were on terrible projects that crashed your utilization rates. Sometimes we would have our best people on these projects but they would never get promoted because their utilization was too low.

This “dumb” metric has led to thousands of people quitting the firm, but yet to my knowledge, the firm was still using it to track development. At startups, you need to make sure you’re not tracking dumb metrics. There’s no time for these metrics where the downside outweighs the benefits for your staff and team.

Self-care day

We have the day off at Secfi today intended to give people a personal day. While this wasn’t planned to be on Valentine’s Day, we thought it was a nice overlap and timing worked out nicely.

Self-care means different things for different people. For myself, I am looking to clear my inbox and get caught up on a few things this morning. Once I’m done, I plan on reading, relaxing and possibly going on a quick run. I’ll finish the day off cooking dinner for Sophia for Valentine’s Day.

I know others at the company are looking to binge watch Netflix or go on a hike. Whatever works for each individual is what’s best. The goal is that every does indeed take the day off for self-care.

One shot

For the first time possibly ever, my golf swing is feeling good and I am playing confident. I’m still far from being good, but I shot a 44 on the front 9 today with a few missed makeable putts and two atrocious iron shots that I wish I could have back. It’s fun seeing my practice and effort turn into something positive. Only took about two years.

On a similar note, I have a new appreciation for Olympians. Like many, I thought the Olympics were pretty boring but my fiance loves it. She’s made me watch some of the bigger events and athletes such as Chloe Kim and Shaun White compete.

It’s definitely entertaining but the thing that got me more appreciative of the Olympics is just how fragile the opportunity is. People train for the whole lives (and 4 years between) to compete in the Olympic games. The actual competition in most sports typically means <5 minutes of actually performing. Years of training for less than 5 minutes.

I cannot comprehend that pressure. One screw-up in some events means that the games are completely over for you. Luckily, my job doesn’t force me to train for years for one shot.

Is this time different?

Anyone that pays attention to fintech will know that there has been a meteoric rise in startups bringing alternative investments to retail investors. These alternative asset classes can range anywhere from simple active managed portfolios to the masses all the way to Robinhood for investing in art.

It’s been fascinating to watch as these startups are suddenly allowing retail investors the chance to invest in fractional pieces of art, wine, hand bags, or providing them access to actively managed funds in both equity and real estate. I’m generally a fan of these startups. It’s fun to invest in different asset classes and I’d argue that a lot of portfolios deserve an allocation in these different alternative investments.

One observation that is consistent and somewhat scary is that many of these alternative investment platforms are claiming alpha, i.e. returns that are beating the market right now.

On the surface, 2-3 years of beating the market may look a no brainer to invest, but in reality you don’t judge a fund’s performance based off 2-3 years. The real truth comes over time. Can this fund or investment actually out perform the market over a sustained period of time like 10 years?

History will tell us no. Most hedge funds underperform the market even before fees. History will say that you likely will be better off just investing in the S&P 500. It’s hard to argue with data.

So is this time really different? I have no idea.

I do know one thing and that’s tech is growing at an unprecedented rate which is enabling gains previously unattainable in the past. You can grow a company much faster today than you could 10 years ago simply due to tech advances. Blockchain and crypto is something that obviously didn’t exist over the last 50 years.

We may very well be on a new uncharted path. Maybe this time will be different or maybe history will show that everything will continue back to normal over the long run.

I wouldn’t bet my life savings on either, but I got a feeling that things are going to be slightly different this time around. While I wait to see what happens, I’m going to continue to diversify and ensure I make smart bets that can allow me to participate if this time is truly different, but be safe if things are not.

Raising the bar

I used to work at one of the largest firms/partnerships in the world. Like a lot of companies/firms that make partners, i.e. equity owners of the firm, there was always a unique power dynamic. The firm would only make a certain amount of partners a year so it was competitive all the way up and often decisions were made that would hurt the firm and teams in the long run.

People were always looking to step over each other on their way up. Whenever someone new came onto our engagement team, everyone selfishly looked towards how it impacts them versus the firm and the team. Managers would hate new Directors who were brought in to oversee them because they took their promotion spot. Directors would hate new partners to the firm as it took their spots. I absolutely hated this.

My experience at Secfi has fortunately largely been completely different. We’re constantly looking to raise the bar meaning hiring the best talent to come in at all points. Sometimes this means hiring someone to take over your previous role or hiring someone who is going to be sitting above you on the org chart. I went through both experiences these past few months.

Admittedly, it took a bit of adjustment in either scenario. I have been with Secfi from nearly the beginning and hiring someone to take over what you’ve built, or manage you is a bit weird at times. I am constantly training upwards. Despite the minor awkwardness, everything is largely positive when you bring in new talent.

New talent means perspectives and experience gained that we were previously missing. This new talent if done right will lead to to net positives across the entire organization.

This of course means that early employees at healthy and growing startups will often need to put egos aside for the greater good of the company. It’s not often easy, but something that needs to be done if you want the company to grow. The beauty behind putting your ego aside to acquire talent is that employee is often a direct recipient of the benefits, even from an individual perspective.

In my experience, we continue to bring over highly talented individuals with much more experience than myself. One could look at this as more bosses, but I like to think that I’ve acquired more mentors as I progress in my career. On top of my personal development, my work load and stress levels continue to go down as these new hires get onboarded.

It’s amazing to see what happens when we continually raise the bar. I’m more excited than ever to be at Secfi and I continue to look forward to hiring more talent regardless of where they sit within the org structure.

Market turmoil

When I introduce Secfi to other operators and investors, one of the questions I almost always get is how the market effects our business. Our financing contracts require clients to only pay us back after an IPO or an exit so there are of course market forces in play. A tough market means less IPOs meaning we get paid back less.

It’s a valid concern, but something that we aren’t too concerned about. We know market downturns are going to happen so we’re always prepared for when they come. While we can’t time or predict the market, we know that corrections happen often and prepare for them accordingly.

Furthermore, while we cannot ignore 50%+ drawdowns in tech, we also play the long game. We believe in the companies we partner with in the long run despite what may be happening in the markets today. Innovation does not stop when there is a correction in the market. We are betting in the future and the future is tech.

Our financing is made to protect clients in these downturn events. While it may be stressful to hear that an IPO has been pushed back, clients can rest easy knowing that they’re not on the hook to pay back anything during these periods of correction.

Web3 Communities

I’ve seen a lot of people talking about web3 and one of the key components that people love to mention is the buzz word, decentralized. Sure moving towards a decentralized world is a key benefit of blockchain technology. The decentralized vs centralized debate going on both in between web3 and outside of web3 is an exhausting argument that I won’t rehash at this point.

Instead, I want to focus on writing about one amazing aspect of web3 that is not getting enough love: the community aspect. The concept of creating a community has ingrained roots within web3.

Most NFT projects are the most basic sense are communities. Most people are surprised that people are spending hundreds of thousands of dollars on a JPEG, but those that make the argument are missing the point. That JPEG or token is simply a membership into specific communities. You aren’t buying a picture of an ape, you are buying more of a status symbol and an exclusive membership that others do not have access to.

I do not buy into any NFT projects without checking out the community first. Discord has how these communities communicate and I will lurk in the Discord for a bit before deciding to move forward. The project is only as good as the community that you are buying into.

People criticizing web3 are spending too much time focusing on the prices and speculation happening in web3 and they are missing the amazing community building happening. Let’s take a few examples from my projects recently:

• The LinksDAO community voted to donate to charity and buy back membership passes for users who got previously hacked

• A LinksDAO community member bought a young college kid a membership pass because the college kid couldn’t afford to join

• IlluminatiNFT community organized a group for newcomers to web3 to learn. Experienced web3 members are mentoring and providing critical advice in regards to security in this group.

These are just small examples of amazing things happening day to day in these web3 communities. I love being part of the communities I have bought into and I am planning to stay loyal because of that community.

Corrections

I had coffee with an investor who is also one our biggest partners at Secfi yesterday. She asked me my thoughts on the stock market right now and if I thought this was a permanent correction.

My response was an easy no. My view is that this is a correction from the effects of H2 of 2020 and all of 2021 when we saw money haphazardly flying into companies at ridiculous valuations. It was happening in the private markets and public markets at rates never seen before.

No one should really be surprised that there’s a pullback or a correction. The aspect that caught most people offguard is the severity of the pullback as most tech stocks are down 50-80%.

I think we’ll start to see things settle down quite a bit in the coming weeks. The Fed has signaled that the fun and games of (nearly) free money is over and investors are adjusting for that.

I don’t think we’ll see another V-shape recovery like we did in 2020, but I do believe that tech and growth stocks will rebound eventually. When that will happen is the million dollar question of course.

In times of uncertainty, I like to stick my guns. Tech is the future and I’m still long a lot of my portfolio. There will be better days ahead.

NY, NY

I find it crazy how big of a difference New York is right now compared to San Francisco. New York has effectively gone back to life as it was pre-pandemic. Bars and restaurants are packed. I walked by a few places last night that were packed to the brims. People are back to going to the office full time again.

Meanwhile in San Francisco, everyone is still largely working from home. Masks are required in gyms. Downtown SF is still a ghost town during the work day.

It’s a bit depressing. While I know SF will never be the same as NY, there just feels like a lack of energy in the city. I’m hoping we get back to some semblance of normalcy in SF sooner than later.

I’m in NY for 2 more days. I absolutely love this city, but it’s always exhausting. I’m beat and taking tonight easy before I close out the work week tomorrow.

Panic in the air

The panic meter is back at an all time high probably since the pandemic started. We’re in midst of a 50%+ pullback on a majority of tech stocks. I’m not sure you can technically classify most tech stocks as pandemic stocks, but there’s correlation there. Cloud and SaaS stocks pumped alongside Zoom, Peloton, etc.

Now we’re in the midst of a gigantic pullback. Like many, my liquid portfolio is significantly down this past month and is now down significant in the past year. My retirement accounts are faring much better in the index fund world.

We’re starting to see some ripple effects in the private markets in reaction to the public market pullback. I know some investors are getting much more defensive.

I for one am welcoming this correction. As painful as the public market pullback has been for my net worth, corrections are generally good things and happen. Things were getting too frothy and perhaps millennial investors (including myself) needed a reminder that fundamentals still exist and stocks don’t always go up. The market will recover - the question is how long will it take.

On the private markets - I remain just as optimistic. The amount of innovation and talent in the tech world continues to increase year over year. It’s hard not to be bullish on tech when you look at the long-term. With that said, valuations needed to be brought back to earth a bit. People were raising too much money too quickly. Greed and egos got in the way of common sense cap table math.

Crazy thought, but perhaps $100m valuation seed rounds weren’t such a good idea. As a VC/investor, I do not understand how you can justify that from a portfolio construction viewpoint. From a company perspective, you are severely limiting your future opportunity to fundraise by raising at such a high valuation.

So while panic is in the air, I remain excited that common sense items for investors such as fundamentals and cap table math will start to come back. Our society as a whole will likely be better off in the long run.

No excuses

I’m back in New York for the week. I landed last night at around 7:30, and immediately booked it to one of my favorite restaurants in the city, Szechuan Mountain House. It was fantastic as always. Unfortunately the fun and games ended there as I proceeded to lay wide awake in bed until 3:30am. In some kind of reverse jet lag, I was again wide awake at 7:30am. I don’t know what it is, but I never really sleep well when I travel jet lag aside.

I had a football coach in high school that would always harp “no excuses, next play”. I can imagine most football coaches had some sort of similar mantra. In the world of football, after one play ends, you need to put things aside and focus on the next play, lest you compound a potential mistake or distraction into something bigger.

Today is a no excuses type of day. There’s little to no sympathy for being tired, especially in New York of all places. I’ll power through and look forward to crashing in bed early tonight.

Pay to play

There’s so much FOMO right now in the web3 world of crypto and NFTs. People are minting NFTs and they are promptly 5-10x’ing in price in a short time frame. It’s hard not to have FOMO.

I’m definitely guilty of this myself. I’m part of 4 Discord servers in which I have bought into and another 4-6 at any given moment of projects I’m lurking. Each notification has me jumping up from my seat hoping for the magic word, “whitelist”.

I don’t know how this will all end. I do know that when I’ve seen this happen in the past, things don’t necessarily end well for most. Perhaps this time things will be different as we’re looking into a whole new asset class, or perhaps we’ll all be left holding a bunch of JPEGs that we paid thousands of dollars for.

I’ve come to terms that most of the projects I buy into will likely not end well for me. At least it won’t end up making me rich as I know some others are hoping for. That’s okay - I’m viewing these projects as pay to play. This is similar to how I view a casino… I know the odds are against me, but I still love going there and having fun. Plus there’s the chance that I do win big.

I’m having a lot of fun dabbling in web3. I do need to keep myself in check from time to time. At the end of the day, I’m still spending thousands of real dollars to buy into these projects.

My web3 / NFT update

Since late November, I’ve been deep down the web3 rabbit hole and written about it quite a bit. Lots has happened in the nearly 2 months since I aped into my first web3 project (Knights of Degen). I’ve learned a lot. I’ve made a good amount of money and lost a bit. I’ve made some pretty cool connections and I’ve also been scared shitless at the amount of yolo’ing and scams happening.

Overall, it’s been a rollercoaster ride, but I’ve been having a lot of fun. Here’s a recap of the events of the past 2 months.

• I bought a Knight back over Thanksgiving on OpenSea which gave me access to my first project, Knights of Degen. I was promptly overwhelmed and had to learn that you didn’t need to check every Discord channel and keep up.

• I got to hang out with a few current and former NFL athletes in the Knights of Degen “sports bar” (Discord channel). It was fun being able to ask Ricky Williams and Tiki Barber questions while watching a Sunday Night game.

• I got on my first whitelist for the Illuminati NFT project. I ended up minting 3 NFTs and joined an eclectic but fun “secret” community. The project has been a hit and the pricing of the NFTs keeps going up.

• I missed out on 3 killer projects brought to my attention in the Illuminati NFT discord. It ended up being amazing “alpha” as all 3 projects ended up 2-5x’ing since the info was released. I just didn’t have enough time to do my research, and I’m kicking myself for it.

• I got on the whitelist for LinksDAO whose goal is to purchase a golf course. I ended up minting a Global pass for myself and the value has nearly doubled since. This has been the intersection of both my current hobbies which is golf and web3. I’ve been having a ton of fun hanging in the Discord and plan on golfing with a few other members soon.

• I ended up buying a Cryptojankyz on OpenSea last weekend. It was announced a couple days ago that there was going to be an airdrop which will allow me to mint a new NFT. I have no idea where this will go, but I can’t wait.

• I’ve lost a ton of money in gas and taxes with these transactions. I’ve largely use my highly appreciated ETH to pay a lot of these transactions and that comes with a nice tax bill. Furthermore, I’ve had to learn the hard way when it comes to gas.

I’ll look to write about some of my findings and takeaways later this week.

Time

As I’ve gotten older, my time has become more and more of a premium. I feel like my weeks and weekends are getting busier by the year. My weekdays are getting more planned and structured due to work. My weekends are now also starting to become much more planned.

This past 3 day weekend felt like it went by a bit too quick. I had too many things planned from events to work that I wanted to catch-up on. As I write this, I’ve realized that I’ve only done a portion of my weekend to-do list. It’s not a great feeling.

It’s been a bit of a harsh reality that things will not get easier as I continue to get more responsibilities in life. I’ll need to adapt and adjust. Part of this is lowering my expectations on weekends. I simply just cannot expect myself to recharge over the weekends and be as productive as I want to be and that’s something I need to be okay with.

Secondly, I need to pick my battles when it comes to events. There’s just not enough time to say yes to everything anymore. There’s a balance with sleep/rest, social, and productivity. I need to cut down a bit more on the social and productivity aspect and focus a bit more on the sleep/rest side of things.

My hunch is that cutting back on the social and focusing on sleep/rest will naturally increase my productivity on the weekends and afterwards.

Is it over yet?

I went to happy hour with a few people from the team last night. Naturally the convo started gravitating towards COVID and how we were all sick of having an emptier office and abandoned downtown. My teammate mentioned that it feels like a ghost town and there’s just no energy in the city. It’s hard to disagree.

I’m trying not to get my hopes up as I had thought the vaccine would’ve ended COVID for all of us in 2021. The optimistic side of me sees the numbers and data and realizes that we may actually hit herd immunity after omicron is done.

I sure as hell hope so. I miss a crowded office. I miss a crowded after-work happy hour. It’s just a different energy when everyone is here. It mays the work environment more fun and when I have more fun, I do better work.

I’ll be headed out to New York for a week at the end of the month to meet some new team members and do some training. I’m hoping some of that New York energy starts to pick up back in San Francisco when I get back.

Training

Things are chugging along here at Secfi. I wrote a bit about our record year in 2021 after a record Q4 to close out the year strong. We’re hiring top talent that everyone is excited about.

One area that I look back on that we need to do better on is training as we scale.

We work in a highly regulated and complex financial industry. Our product is not easy to grasp for people with financial backgrounds yet alone people that do not come from the world of finance.

My stance has always been to slow things down with onboarding new hires and ensure that they get proper time to learn and digest all the materials. Candidly, looking back at the second half of last year, we were a bit too eager to get new hires out in front of clients and others. There was a demand and we were very quick to try to meet that demand with new hires.

There’s a level of acceptability especially in the startup world. Things move really quick and we need to hire good talent to figure things out on the job. With that said, I’ve started to realize that a lot of the new hires that came onboard in H2 of 2021 could have used a bit more time when it comes to training and learning.

It’s my job to realize this and get them the proper training so they can be the best versions of themselves. In order to address this, we’ll be holding a lot more training sessions in January and February. In addition, my goal is to set-up a much more rigorous onboarding plan for new hires going forward.

I’m hoping that this new program can ensure that our people get out and hit the ground running rather than letting them limp out of the gates early.

Diamond hands

Yesterday was a great sports Sunday. I was tired so I decided to stay home and watch sports all day. It was a great day to do so. In the middle of yesterday’s 49ers game I wrote about how gritty the Niners and Klay Thompson have been. The Niners ended up pulling out a comeback win in overtime against the Rams to secure a playoff spot. Klay Thompson dropped 17 points in his first game in 2.5 years. It was a great day to be a San Francisco sports fan.

On another note, I woke up this morning to further losses in the stock market and crypto followed suit. It’s been a long month of losses and my liquid portfolio has shrunk considerably.

One of my favorite crypto/web3 phrases is diamond hands. If you have diamond hands, you’re an investor who doesn’t sell despite downturns or losses. In other words, you stick to your guns when things get tough.

Given the way the market has been, a lot of us need to find our diamond hands. Given the day and age, it’s easy to panic sell. Yet no one on the planet knows for sure where the bottom is here. It was only a year and half ago that we saw the market rebound in record fashion after a record drop due to the pandemic.

There will be better days ahead. We all just need to stay in the game long enough to reap the benefits of our diamond hands.

Gritty SF Sunday

I’m writing this as the 49ers are in overtime against the Rams fighting for a playoff spot. No matter how this game turns out, I’m impressed by the grit of this team and Jimmy Garrapolo. With this back against the wall, he led the team back and gave us a chance to win the game.

I still don’t believe he’s the long-term answer at quarterback for the Niners. He has his limitations and he’s injury prone. Regardless, I’ve been impressed all season with the way he’s handled his business despite knowing that we just drafted his replacement. He hasn’t flinched with fans and media calling for him to be replaced. Now he’s put us in a position to make the playoffs with a gutsy week 18 game.

In other gritty sports news, Klay Thompson also makes his debut after two injuries has cost him almost 3 years of his playing career. He hasn’t been shy about how hard it’s been for him to be sidelined for 2 full seasons plus. I can only imagine what it’s been like going through almost 3 years of rehab. I can’t wait to watch his first game back. I’m not sure how he’ll play, but I hope he absolutely crushes it and drops 40.

It’s a gritty San Francisco sports Sunday.

Recruiting

Anyone that has worked at a fast growing early stage startup will tell you that recruiting is the hardest and possibly most important part of growing. This has been my experience so far.

Hiring great talent raises the bar and amplifies your ability to grow by magnitudes you didn’t expect. Hiring bad fits has the opposite effect and can set you back worse than you thought.

I haven’t been actively hiring for the last 6 months since I’ve handed off my previous team. I’ve been interviewing and helping out other departments, but I haven’t served as hiring manager in quite a bit.

I’m now starting the recruiting process again for my new team and admittedly I’m a bit rusty. I’ve had to pump the brakes a bit and do a quick reset as I go through candidates and set-up an interview process.

I learned early on that you need to come up with a set process in order to be as objective as possible on candidates. Humans are naturally emotional and we like/dislike people for various reasons. Some of these reasons may be warranted and some may be a blindspot.

Following a process is much more difficult and takes more time than going with your gut. But everything is worth it when you hire that all-star candidate.

Timing over idea

I had a funny thought this morning as I read about the labor shortages and realized that Zume Pizza may not have been that crazy of an idea, it just may have been too early for our taste.

One thing I’ve come to realize quite a bit as an investor is that timing is just as, if not, more important than picking the right ideas.

A simple example. I can tell you today that self-driving cars will become a thing in the future. When and how long until it takes to become a standard in our lives is a much harder prediction.

We saw Pets.com become one of the poster children of the dotcom bust as the company went bankrupt in the same year it went public and raises $82.5m in it’s IPO. Yet today, we see Chewy which is the modern day version of Pets.com on the public market. The stock hasn’t been doing too hot, but it’s far from going bankrupt like Pets.com.

So going back to Zume Pizza. The company became a bit of a poster child of the SoftBank “capital-as-a-moat” era. There was a lot of media backlash and the company unfortunately became a bit of a joke in the tech world. Yes back in 2019 and 2020, it seemed really bizarre that a company that made robot pizza cars was receiving so much money from VCs. The business model seemed broken and they were burning cash.

Fast forward to 2022 and we are at a severe shortage of labor. Restaurants, yet alone fast food restaurants, cannot hire enough to properly operate. Perhaps the idea behind robot pizza trucks was the right idea afterall, but the company just missed timing by a mere 2-3 years. I don’t know if the company would be thriving in today’s world… they had other challenges of course but if the company was around today, maybe they would have been praised as a fix to the labor shortage rather than a joke in the tech world.

Maybe in 5-10 years, we’ll see the next Zume Pizza go public at a massive valuation.