BPI Keynote: Let’s build a better future

We are extraordinarily privileged to reside in a developed country at the beginning of the 21st century. We are living in the most prosperous and peaceful time in the history of humanity. In 1800 no country had a life expectancy over 40. Today it’s over 80 in many developed countries. In 1820, 94% of the world’s population lived in extreme poverty. Today less than 10% of people do at a global level even though world population went from 1 billion to 7 billion! In 1800, we worked over 70 hours per week to survive. Today we work less than 40 hours per week with a quality of life that would be the envy of emperors 200 years ago.

We communicate instantaneously and often for free globally. We can travel from one end of the world to the other within a day. We expect our jobs to be meaningful and not just a means of survival.

Technology is the reason for this progress. Its magic is that it is deflationary. By making things affordable, it increases people’s quality of life. When I was a kid only the rich took planes, or owned cars or cell phones. Today they are accessible to almost everyone.

This is not to say that “everything is for the best in the best of worlds.” Social mobility is stagnating. Equality of opportunity decreased in many countries. We have not helped the losers of globalization and the technology revolution. We have not addressed the ecological and climate consequences of our presence on this planet. The way we treat livestock is inhumane.

However, we have the means to address the challenges we are facing. We are at the very beginning of the technology revolution. Entire sectors of the economy which account for most economic activity have not yet been disrupted.

In food production, it takes 12 calories of feed to create 1 calorie of cow meat. To address this issue Memphis Meats creates synthetic meat from animal cells without the need to raise, feed and slaughter animals, reducing greenhouse gas emissions and land and water use by 90%. Alternatively, Impossible Foods creates plant based meat with similar benefits. I ate their burgers and could not tell the difference with real ones!

In the restaurant business, we are the very beginning of robotization. Zume Pizza, in which I am an investor, uses trucks with robots to prepare and cook pizzas on the way to your place after you order them from their mobile app. This allows them to be cheaper, given that they don’t have physical locations or personnel, and to be delivered faster while actually tasting better because the pizza arrives warm freshly out of the oven and they can afford to use higher quality ingredients. Likewise, Eatsa is revolutionizing salad bars by automating ordering allowing them to offer healthy, high quality food for less.

In real estate, companies like Cubicco and Revolution Precrafted are building beautiful prefab houses while dramatically reducing construction costs and time.

Countries like Estonia are showing how we can digitize public services. More than 30% of people voted online in the parliamentary elections of 2015. 93% of Estonians pay their taxes online. They can incorporate a company online in minutes. Parents can check their kids’ homework, grades and attendance records online. All medical records are online.

By the way, I don’t worry about the employment consequences of this robotization and automation. If I had told you in 1997 that in 2017 there would no longer be travel agents, bank tellers, that car production would be automated and that $500 billion of commerce had moved online, and I asked you to predict the unemployment rate in 2017, you would have guessed that it would have increased dramatically. It’s in fact lower today than it was then. We lack the capacity to imagine what the jobs of tomorrow will be, but there will be jobs. Let’s celebrate instead the disappearance of boring and mind-numbing jobs which are insults to human intelligence, while helping and retraining those who lose their jobs.

For the entrepreneurs and investors in the room, I would like to point out that most of the opportunities lie in the application of technology, rather than in technology creation itself. For instance, I suspect that narrow AI platforms will be commoditized and offered for free by companies like Facebook and Google. The application of AI is more interesting. For instance, if you are building a marketplace, your application could suggest a title, a description, a category and a price for the good that you are selling based only on a photo.

You can create a drone company in a few minutes. If you go to Shenzhen you can visit factories to pick the engine, remote control and propeller you want. This suggests that the category will be commoditized and that hardware manufacturing is not appealing especially since there are 2 dominant players: DJI and Parrot. Using drones to address problems is once again more interesting. For instance, a company like Betterview uses drones to fly over buildings and inform insurance companies of those that need maintenance.

Self-driving cars are going to be prevalent quicker than most suspect. We can precisely project the decrease in the cost of sensors and GPUs necessary for level 5 autonomy. We can therefore project when it will be economically viable to use a self-driving car, rather than a traditional one.

The first order effects of self-driving cars are obvious. Every year humans have 50 million car accidents killing 1.2 million people. This will end, which is fantastic. What is more interesting are second order effects. What happens when the marginal cost of a mile essentially goes to $0? This has profound implications because, for example, today you would not order a coffee on Postmates because the delivery cost would be greater than the cost of the coffee. But if a drone or autonomous vehicle delivered a drink to your place in 5 minutes, for free, you might not have a fridge or a coffee machine at home. You might not have a kitchen in your place given how expensive real estate is and that you don’t really know how to cook. As a result, restaurants might be designed with larger kitchens to deal with increased delivery demands.

These second order effects are profound and transformational. It’s what we need to reflect on to predict where technology is heading and where opportunities lie.

The good news is that extraordinary progress is being made in robotics, 3D printing, the Internet of Things, micro-satellites, solar and much more. As entrepreneurs and investors, we are truly blessed to have the privilege of helping to bring about this better world of tomorrow, a world of equality of opportunity and of plenty. “Whatever you think or dream you can, begin it. Boldness has magic, power and genius in it.”

Thank you!

Keynote BPI : Construisons un meilleur avenir

Nous sommes extraordinairement privilégiés d’habiter dans un pays développé au début du 21ème siècle. Nous vivons dans l’ère la plus prospère et paisible de l’histoire de l’humanité. En 1800 aucun pays avait une espérance de vie au-delà de 40 ans. Aujourd’hui elle est de plus de 80 ans dans beaucoup de pays développés. En 1820, 94% de la population vivait en extrême pauvreté. Aujourd’hui c’est moins de 10% à l’échelle mondiale alors que la population est passée de 1 milliard à 7 milliards ! En 1800, nous travaillions plus de 70 heures par semaine pour survivre. Aujourd’hui nous travaillons moins de 40 heures par semaine avec une qualité de vie qui serait prisée par les empereurs d’il y a 200 ans.

Nous communiquons instantanément et souvent gratuitement de par le monde. Nous pouvons voyager d’un bout à l’autre de la planète en une journée. Nous nous attendons à ce que nos emplois soient vecteurs de sens et non pas juste le moyen de survenir à nos besoins.

La technologie explique ce progrès. Sa magie est qu’elle est déflationniste. En rendant les choses accessibles, elle augmente la qualité de vie des gens. Même lors mon enfance seuls les riches prenaient l’avion, avaient des voitures ou des téléphones portables, alors qu’aujourd’hui c’est accessible à presque tous.

Ce n’est pas pour dire que tout est « pour le mieux dans le meilleur des mondes ». La mobilité sociale stagne. L’égalité d’opportunité a baissé dans beaucoup de pays. Nous n’avons pas aidé les laissés pour compte de la globalisation et de la révolution technologique. Nous n’avons pas adressé les conséquences climatiques et écologiques des actions de l’homme sur la planète. La façon dont nous traitons les animaux d’élevage est inhumaine.

Mais, nous avons les moyens d’adresser les challenges auxquels nous faisons face. Nous sommes qu’au tout début de la révolution technologique. Des secteurs entiers qui représentent la plupart de l’activité économique n’ont pas encore été touchés.

Dans la production alimentaire, il faut 12 calories d’engrais pour créer 1 calorie de viande de vache. Pour pallier à ce problème la startup Memphis Meats crée de la viande synthétique à partir de cellules animales sans avoir besoin d’élever, nourrir et abattre des animaux, réduisant les émissions de gaz à effet de serre et les besoins en terre et eau de 90%. Alternativement, Impossible Foods crée de la viande à partir de plantes avec des avantages similaires. J’ai mangé leurs hamburgers et je n’ai pas pu faire la différence avec les vrais !

Dans la restauration, nous sommes au début de la robotisation. Zume Pizza, dans laquelle je suis investisseur, utilise des camions avec des robots pour faire cuire les pizzas et les préparer en chemin vers chez vous quand vous les commandez de votre application mobile. Cela leur permet d’être moins cher, car ils n’ont pas de locaux physiques et de personnel, d’être livré plus vite, tout en étant meilleure parce qu’elle arrive chaude sortant du four et que la compagnie peut se permettre de dépenser plus sur les ingrédients. De même Eatsa, révolutionne les salads bar en automatisant les systèmes de commande permettant d’offrir de la nourriture saine et de bonne qualité pour moins cher.

Dans l’immobilier, des compagnies comme Cubicco et Revolution Precrafted, créent des maisons préfabriquées élégantes, écrasant les couts et temps de production.

Des pays comme l’Estonie montrent comment digitaliser les services publics. Plus de 30% ont voté en ligne aux élections législatives de 2015. 93% des Estoniens paient leurs impôts en ligne. Ils peuvent créer une compagnie en ligne en quelques minutes. Les parents peuvent vérifier les devoirs de leurs enfants, notes, et registre de présence en ligne. Tous les dossiers médicaux sont en ligne.

Je ne m’inquiète d’ailleurs pas des conséquences sur l’emploi de cette robotisation et automatisation. Si je vous avais dit en 1997 qu’en 2017 il n’y aurait plus d’agents de voyages, de guichetiers dans les banques, que la construction automobile serait robotisée et que $500 milliards de commerce serait passé en ligne, et que je vous avais demandé de prédire le taux de chômage en 2017, vous m’auriez dit qu’il aurait explosé. Il est plus bas aujourd’hui qu’il l’était à l’époque. Nous n’arrivons pas à imaginer les emplois de demain, mais ils seront bien là. Célébrons plutôt la disparition d’emplois répétitifs et rébarbatifs qui sont des insultes à l’intelligence humaine tout en aidant et reformant ceux qui ont perdu leurs emplois.

Pour les entrepreneurs et investisseurs dans cette salle, je remarque par ailleurs que la plupart des opportunités sont dans l’application de la technologie plutôt que dans la création de la technologie elle-même. Par exemple, je peux imaginer que les plateformes d’intelligence artificielles soient commodisés et offertes gratuitement par les Facebook et Google de ce monde. Ce qui est intéressant est donc plutôt l’application de l’intelligence artificielle. Si vous construisez une place de marché mobile, l’application pourrait par exemple suggérer un titre, une description, une catégorie et un prix pour le bien que vous vendez à partir d’une photo.

Vous pouvez créer une compagnie qui produit des drones en quelques minutes. Si vous allez à Shenzhen vous pouvez visiter des usines et dire quel moteur, télécommande ou hélice vous voulez. Cela suggère que la catégorie va être commodisé et que le hardware ne sera pas intéressant d’autant plus qu’il y 2 acteurs dominants : DJI et Parrot. L’application de la technologie est encore une fois plus intéressante. Par exemple, une compagnie comme Betterview utilise des drones pour voler au-dessus d’immeubles et informer les compagnies d’assurance de ceux qui ont besoin de maintenance.

Les voitures autonomes vont devenir répandues bien plus rapidement qu’on le suppose. On peut projeter avec précision la baisse des couts des capteurs et des GPUs nécessaires pour de l’autonomie de niveau 5. On peut donc projeter quand cela sera économiquement viable d’utiliser une voiture autonome plutôt qu’une voiture traditionnelle.

Les effets de premier ordre de l’autonomie sont évidents. Chaque année les humains ont 50 millions d’accidents de voitures avec 1.2 millions de morts. Cela va disparaitre et c’est génial. Ce qui est plus intéressant, ce sont les impacts de second ordre. Qu’advient-il quand le cout marginal du kilomètre est essentiellement de 0 ? Cela a des implications profondes car aujourd’hui, par exemple, vous ne commanderiez pas un café sur Deliveroo vu que le cout de la livraison serait supérieur au cout du café. Mais si un drone ou un véhicule autonome vous livrait une boisson en 5 minutes, gratuitement, peut-être que vous n’auriez pas de réfrigérateurs ou machine à café chez vous. Peut-être que vous n’auriez pas de cuisine chez vous vu que l’immobilier coute cher et que de toute façon vous ne savez pas cuisiner. Peut-être qu’en conséquence les restaurants auraient des cuisines plus grandes pour faire face à cette demande de livraisons plus élevée.

Ces effets de second ordre sont profonds et transformatifs. C’est ce à quoi il faut réfléchir pour prédire où va la technologie et où sont les opportunités.

La bonne nouvelle est que des progrès extraordinaires sont en train de se faire dans la robotique, l’impression 3D, Internet des objets, les microsatellites, le solaire et bien plus. En temps qu’entrepreneurs et investisseurs nous avons le privilège de créer ce monde meilleur de demain. Un monde d’égalité d’opportunité et de plénitude. Donc quoi que vous puissiez faire or rêvez de faire, commencez-le. L’audace a du génie, du pouvoir, et de la magie.

Merci !

The Bobiverse book series is tons of fun!

After my strong recommendations for Ready Player One, Star Force and Old Man’s War, it’s probably obvious to most than I am a big fan of sci fi and of space operas in general.

The Bobiverse series is an innovative take on the genre. The series centers on Bob, a nerdy successful tech entrepreneur who signs a contract to cryo-store his head in the event of his death. He dies shortly thereafter in a traffic accident. He is woken up a century later, but he’s been turn into AI with the objective of turning him into a von Neumann probe.

From his travails on earth to his exploration of the universe and shepherd of human life, the story is well told, well-plotted, fast paced and fascinating. The tone is witty, thoughtful and introspective. The book is tons of fun even when it ponders philosophical questions.

The book really resonated as I could recognize myself in Bob and his clones. I also appreciated the constant struggle throughout the series between the issues in front of you and other goals. To tread lightly, the Bobs constantly must decide between helping the humans with their latest crisis and heading out to explore the galaxy. Of course, it’s not a binary decision, but it has parallels to innumerable other situations. Fellow nerds will also love all the references to Star Trek, Star Wars and countless cult classic movies of the last 30 years.

Read the Bobiverse series!

It was Bagheera’s world, we just lived in it

My love for dogs is well documented (Farewell Harvard!), but I must admit that no dog meant more to me than Bagheera. In a way, it is odd that it would be the case. She was really my 2005 girlfriend’s dog.

I grew up with Ucla, an extraordinary yellow Labrador, and pined for a similar lab ever since. I knew it would be unfair to the dog to get him while living in a tiny apartment in NY while completely overworked from McKinsey or whatever startup I was running. I bided my time. Finally, post selling Zingy, I could afford to have a country house with a big garden and could indulge my childhood dream.

I wanted a yellow lab and my girlfriend wanted a female Rottweiler that had to be called Bagheera. We wisely compromised and got both. She looked for breeders, read books on how to select amongst all the puppies, while I was tasked with rolling around the mud and playing with them.

Bagheera was born March 4, 2005, two days after Harvard, my yellow lab, and joined our family 6 weeks after that, 1 week after Harvard’s arrival. While I immediately loved her wrinkly face and huge paws, it was not immediately clear at that time how exceptional she was. If anything, in the early days it felt like Harvard was the quicker learner. Only later did I realize that he was an insatiable glutton who would do anything for food. He only learned to reap savory rewards. His learning came to an abrupt halt when he realized it was way easier for him to use his guile, charm, good looks to steal much larger quantities of food than the paltry rewards I offered for learning new tricks.

What most people noticed when they first met her was her poise and grace. She was always calm and deliberate and affected a regal air of detachment. She knew her strength and modulated it to play with kids and babies. She never growled and always looked thoughtful. For all who met her, she singlehandedly rehabilitated the entire Rottweiler breed in one fell swoop. Rottweilers have a reputation as aggressive, dangerous dogs, but her calmness quickly won people over.

Her poise and intelligence meant that I ended up spending much more time with her than Harvard. In Sands Point, I taught her to go biking with me. With or without a leash, she would always run to the right of my bike, safe from traffic, always matching my speed, not distracted by other dogs or squirrels. It’s a feat I never managed with Harvard who would jump on me or start chasing after anything and everything, nearly killing us multiple times in the process. Likewise, in Cabarete, I rapidly had to stop bringing Harvard to Kite Club as I would invariably have to buy the meals of countless people he had stolen from. By contrast Bagheera would roam around, play with the kids and wait patiently for me on the beach. While I kited, she would always watch out for me, always excited for my return.

She slept next to me in bed every night, offering warmth, companionship and love. Harvard would get up at 6 am every day and immediately leave to continue his interminable quest for food, or worse would wake me up to ask for his breakfast. By contrast, Bagheera, while mostly waking up at the same time, would wait patiently in bed watching over me while I slept. When I woke up, she would shower me with kisses and would only leave the bed when I did.

Her grace and agility were also extraordinary. She was aptly named given her feline-like abilities. The first time I noticed it was when she was 6 months old. Like a cat (or black panther), she jumped over the backrest of the couch to get on it, rather than to walk around the couch and merely step on it. It became even more apparent while we played “frisbee monkey in the middle”. It was our favorite game. We would play it for hours every day. Harvard and Bagheera would be the monkeys while we would throw the frisbee between friends. When we missed, a race would occur to get the frisbee, which invariably Bagheera would win. A mix of tug of war and wrestling would ensue to get it back from her before we would start all over again. Pretty quickly, Bagheera realized she could use her agility to grab the frisbee from our hands as we were receiving or throwing it. It was extraordinary to realize she could jump above my head (and I am 6’3”!) and land gracefully every time. We even developed a game where she would run, jump and I would catch her mid-air.

She would also try to goad Harvard, who was much lazier and ran in his distinct bumbling way rather than with Bagheera’s elegant grace, into chasing after and playing with her.

 

 

 

While she appeared detached and regal to most, she had one true north: her unconditional love for me. When we were at the same place we were inseparable. Whether I played, worked, or slept, she was always with me watching over me and loving me. If I was sick, she would lie next to me to comfort me. She would sense if I was working too hard and nudge me to go running or play frisbee with her. She was always there for me and It did not take long for this unconditional love to be completely mutual. I could not imagine life without her and her kisses by my side. We developed a ritual by which she would shower me in kisses every morning when I woke up, several times during the day, especially if we had been separated, and every night before going to bed.

 

Sadly, time catches up with all of us. When I first arrived in Cabarete in 2013 she was 8 years old. While she retained her puppy like look and wrinkly nose, she started to slow down. At first, she ran on the beach with Otilia every day all the way from Embocca to La Boca and back. Within 6 months, she only ran half way there and would walk back. Within 9 months, she would walk for a while before heading back and within a year she stopped going at all, spending more time looking longingly in the distance than running on the beach. While she still loved playing frisbee and playing tug of war, she wisely nstopped jumping as her hind legs started bothering her a little. I replaced the steep staircase at Embocca to make it easier for her to get to my bedroom. At 11 she lost the ability to jump into the trunk of the SUV when I went to kite or play tennis, I started carrying her into the trunk.

Like most of us, she seemed to relax a little and take herself less seriously as she grew older comfortable in the ridicule of every day.

Through it all her love never wavered and she was always the ever-loving companion. In her last years, I am also glad she got to receive and give love to Milo, her loving caretaker in Cabarete. Ultimately, she left us on August 4, 2017, a day after my birthday at the tender age of twelve and half. I know she had an extraordinarily blessed life, but she leaves a gaping hole in my heart and it truly missed. I truly feel like I lost the love of my life and my child at the same time.

Farewell Bagheera. Thanks for twelve and a half years of unconditional love and bliss. You will never be forgotten.

Infinity Born is a timely thriller

I am partial to science fiction books set in the near future where the technological improvements are in a way understandable and expected in light of where we stand today. For anyone who has been following the recent spat between Elon Musk and Mark Zuckerberg about the perils of AI, Douglas Richard’s Infinity Born is extraordinarily timely. It focuses on the quest for ASI (artificial super intelligence) in a fun thriller that covers a lot of the technologies I have been reading and thinking about: mind uploading and emulation, bioprinting, nanites in the brain, asteroid mining, kinetic bombardment, EmDrive technology and much more.

The author successfully takes these technologies to their logical extreme and makes the implausible sound mundane and even inevitable. The book is fast paced and fun and I thoroughly enjoyed it though I would not quite put it on par with the very best thrillers. Despite all its brilliance in presenting the impact of all these technologies, I found the book somewhat predictable. That said, it’s a fun summer read, that is also cerebral and timely. Well worth the read!

 

The Subtle Art of Not Giving a F*ck is surprisingly thoughtful and well written

I was told to check out Mark Manson’s book because it supposedly encapsulates a lot of my personal beliefs, philosophy and approach to life. I was very skeptical of the gimmicky title and the fact that it’s essentially a self-help book, but gave it the benefit of the doubt. I was very pleasantly surprised. Mark Manson combines academic research, personal anecdotes and jokes to make a very compelling argument about what to care about.

The book essentially presents Buddhist learnings in a package appropriate for modern sensibilities. It effectively shows that while you can’t control many of the negative things that happen to you, you can control how you react to them. It jives well with my personal approach of not getting upset about things I can’t control, like a plane cancellation or a traffic jam. It also argues to be judicious about the battles you fight for the things you can control. The strong recommendation in favor of radical honesty and transparency in relationships also resonated.

I am partial to the style of writing that combines theory with individual interesting anecdotes that support the theory – like what Malcolm Gladwell does in Outliers. It’s also very well written. My only gripe is that the first 20% of the book are slower. As a result, it takes a while to get into it, but once it gets going, it’s very thoughtful and fun. Note that parts of it, especially the end which covers death, are quite serious and can be distressing, but remaining insightful and interesting.

Read the book!

Nontraditional approach to wealth management

I realize this blog post might appear douchey as its content only applies to very few lucky entrepreneurs. However, given the amount of bad advice dished out by traditional investment advisors and that every entrepreneur I backed who successfully exited asked me how to manage their funds, I felt the post had to be written.

Most traditional advisors have a model that essentially looks like this: domestic equities 30% (split between large cap and mid cap), international equities 20%, real estate 20%, fixed income 20%, alternatives 5% (private equity and hedge funds), cash 5%. The percentages vary a little bit according to your demographic information and risk profile, but are directionally correct. Interestingly, often the allocations don’t vary all that much between their most aggressive and conservative portfolio recommendations.

These models are based on the historical risk premium and volatility of each asset class. There are times when this allocation might make sense. However, the models take the valuation of every asset class as fair at the time of investment. The valuation at which you enter the market really matters. For instance, in this period of historically low rates it makes no sense to own any fixed income. The yields are so low you might as well be in cash. You are not being compensated fairly for default risk. Worse bond prices are bound to fall as interest rates rise. Likewise, equity prices feel rich. The S&P 500 p/e ratio is 25.5 despite historically high corporate profits over 8%. Historically the S&P traded at a p/e of 14 and corporate profits averaged 5%.

Historically, I did invest in high quality, high dividend paying US stocks. They generated cash and appreciated in value. I did not own any tech stocks, given that I am already over exposed to the sector via my day job. I also did not invest in the equity of any financial companies. Despite improved balance sheets, a crisis can still easily wipe out all the equity. However, I liquidated my equity exposure earlier this year on valuation concerns.

Don’t invest in actively managed funds and hedge funds. Bankers like them because they generate high fees, but net of fees essentially none of them outperform the S&P 500 in the long run. Worse, we often invest in them after they had a good run, which typically only leads to mean reversion. I would also not invest in private equity funds pushed by banks. The asset class does ok from an IRR perspective, but the funds are illiquid forever (10+ years) and fees eat a large portion of the returns. There is also very little correlation between historical and future fund returns in private equity.

In addition, you should NEVER borrow on margin. Every banker I ever met pushes for this. They tell you: “Invest $1 million in bonds that earn 4% and we will lend you $1 million at 2%. Not only do you make money on the trade, you still have the $1 million to spend on whatever!” It sounds like a good idea, but it’s a terrible idea because in a difficult moment (e.g.; 2008/2009 crisis) your assets fall in value. To cover the difference the bank will make a capital call and ask you to give them cash to cover the losses. Those are the very moments where you want the most cash to be opportunistic and buy assets on the cheap. The 2% / year is just not worth it. Keep the money in cash. When crises happen, you can make 100%+ by investing in high quality assets at a low price.

I am more agnostic on personal real estate as I usually consider it to be consumption rather than an investment. In a city like New York, the rental yield is a paltry 2-4%. If you compare total monthly ownership costs (mortgage cost + opportunity cost of your down payment – or just assume you had done a 100% mortgage to make the math simpler + property taxes + maintenance + average monthly expenses of fixing things that break) to your rent, renting can be 2 to 3 times cheaper than owning! That said, many people love owning their primary residence. If it fits in your budget and you are cognizant of the fact it’s consumption and not an investment, do whatever maximizes your happiness (Rent … unless you want to buy)

Real estate is one of the most attractive asset classes right now, if you are not buying real estate you want to live in. If you have a diversified portfolio it’s very safe and you can generate cap rates (net operating income divided by purchase price) of 6-13% at scale depending on the geography you invest in. To get the best deals you typically buy in cash and can refinance later. Jose and I bought several multi-family apartment buildings in Berlin between 2011 and 2013 using this strategy. My brother Olivier, who runs Home61, helps family offices build portfolios of income generating properties in Miami, Florida and Columbus, Ohio with great success. Note that this approach does not work in cities like New York and San Francisco where cap rates are extremely low.

Another successful real estate approach is to do an arbitrage between long-term and short-term rentals. You can buy or get long term leases on apartments, then rent them on Airbnb (or medium-term rental marketplaces used for corporate housing, etc.) for a shorter duration. Even considering the fees of a management company (assuming you don’t want to do all the work yourself) there are several cities where you can generate 15-25% in net yields per year. It’s typically less scalable because many buildings and leases don’t allow subletting and some cities don’t allow having multiple listings on Airbnb or restrict short-term stays (e.g. sub-30 days), but it’s one of the highest yields you can generate in the market.

Not surprisingly, the asset class I like best is early stage technology investments. It’s one of the few sectors of the economy delivering real growth where companies can grow extremely rapidly. At the same time because of the economics of venture funds where they take 2% management fees per year and 20% of the profits, the very best investors have an incentive to raise larger funds and invest in later-stage deals. You can’t really make money with a $30-50 million fund. The economics of an early stage fund only work if you are investing a very large sum of personal money where you get 100% of the profits rather than 20%. As such early stage investing is not a very competitive asset class outside of YC. At FJ Labs, we are mostly competing with less sophisticated angels who do a few deals a year. The very best investors are at A16Z, Sequoia or Greylock doing later stage deals.

In a way investing at an early stage is less about picking winners given the amount of future uncertainty and more about avoiding bad investments. Mix that with a very diversified portfolio of at least 50 investments and you can generate great returns. I generated an average of a 70% IRR with a 6.3x multiple over the last 19 years in this asset class, admittedly starting with a very small asset base. It’s very important to be diversified both in time and in terms of number of companies. Invest over 2-3 years. If you don’t have the deal flow, the easiest way to get exposure to the asset class is invest in multi-company funds, such as those on FundersClub. You can also invest in individual deals, but obviously put much less in the individual deals than in funds. Also note that these are not traditional funds. There is only one upfront capital call and they don’t keep money for pro-rata, which means that when they run out of money they do another fund. If you wanted to invest, take the allocation you would want to invest in a fund and divide it into separate parts to get exposure to multiple funds over 2-3 years or so.

II would also invest a smaller amount of money in a more concentrated fashion in a few pre-IPO companies such as Airbnb. You won’t make a 10x, but it’s a good way to do a 1.5 – 3x in a few years and get a great IRR. You should not invest in “speculative unicorns” that are early stage companies commanding billion dollar valuations, but rather more established startups with valid business models on path to IPO. Airbnb is the best example of that right now.

I recommend holding a large portion, 20-30% of your net worth in cash. Bankers hate this because they think we are leaving money on the table. But often yield chasing in low rate environments is like picking pennies in front of a steam roller. Given how low yields and inflation are, it’s best to keep the cash. The opportunity cost is very low and it provides amazing opportunities for high returns in times of crisis by buying high quality assets at large discounts. Note that for this to work, you need a contrarian temperament. You need to be willing to buy when people are afraid and it looks like the world is going to end. You should also use part of the cash to seed fund your next startup. The first $500k – $1 million is the most expensive and dilutive capital you can get. If you can avoid raising it, all the better. Make sure, however, that you are still diligent in the idea generating process and in the execution of your startup. For most people, I would not recommend putting more than 10% at risk in their next startup.

To give you an example, if you just made $10 million net of taxes, wanted to own your home and followed the aforementioned strategy, you would deploy it the following way:

Buy a $4 million apartment

  • Borrow $3 million of the $4 million at 3.5% interest for 30 years.
  • You can deduct the interest payment from your taxes
  • Net you now still have $9 million in cash

Invest $2.5 million in income generating real estate

  • This is your “safe” investment and should be invested in many properties in several geographies
  • t’s meant to generate cash. The net cap rate you are shooting for is 6-13% and can be as high as 25% with an effective short-term rental strategy
  • You now have $6.5 million in cash

Invest $2.5 million in early stage startups

  • You need to invest in at least 50 startups to make it work
  • This would give you a diversified portfolio
  • The easiest way to do this might just be to back multi-company funds, such as those on FundersClub
  • I would probably put $500k / fund
  • You should also invest in the cool deals that you see of your friends that you have conviction on
  • You now have $4 million in cash – note that the investments are done over time, but it’s best to “allocate” the funds in your mind even though your first check is only $500k.

Invest $1 million in late stage startups

  • I find that this is the easiest way to make 2-3x in a relative safe way
  • I typically invest in the 2 years before the IPO in startups like Airbnb, Coupang etc.
  • Note that you typically have to write bigger checks of $250k each
  • I can invite you to deals when I see them
  • You now have $3 million in cash – but again you keep most of the cash for a long time

Keep $3 million in cash

  • It earns $0, but it’s safe
  • It gives you $$$ to invest in case you come across opportunities: someone needs cash urgently and is willing to sell 50% off if you get him the cash now, you can buy high quality stocks cheaply after a major correction etc.
  • You can fund the first $1 million of your next startup and avoid the pain and dilution of the seed round

If stock valuations reverted to the mean I would trim back real estate and tech investments by $500k each and allocate $1 million to non-tech, non-financial high quality high dividend paying stocks instead.

It’s important to note that the above allocations should vary according to your individual cash needs and net worth. If you were worth $1 million, the allocations would be very different. Conversely, if you were worth a lot more you should dedicate a lower percentage of your net worth to your primary residence.

Your assets should now be safe so you can sleep better at night 🙂

Eve: from launch to IPO in 31 months!

FJ Labs is mostly a marketplace venture investor and startup studio. However, a few years ago, we had a secondary thesis of investing in and building vertically integrated online brands. It makes perfect sense to build online only brands which sell products of similar or higher quality than offline brands at half the price or less given the lower cost structure of online companies. The very first startup we helped create, and the one that led to the genesis of our apprenticeship program, was Adoreme, an online lingerie fashion company. We are also investors in Eloquii, a plus sized fashion brand, Dagne Dover, a handbag brand, and Plae, a shoe brand. Sadly, we missed out on Warby Parker and Casper. We met Casper in May 2014, but they were over-subscribed and dilution sensitive because they were 5 co-founders and we were not able to invest.

In the mattress category, we were a bit worried by the lack of recurrence in purchases, but felt that selling high quality mattresses at a third of the price of Tempur-Pedic was a large opportunity. We briefly considered creating a Casper for Europe taking advantage of Jose’s connection to a large mattress manufacturer. However, given our bias for marketplace businesses, we felt it made more sense to back an existing team.

We talked to various teams, but did not meet anyone we felt we could back. As luck would have it, Jas Bagniewski, reached out by email out of the blue in September 2014. He remembered meeting me a few years earlier about another company. He then went on to build an online mattress company, Zenbedrooms. He grew the business to $8 million in revenues mostly focusing on discounts on Groupon. He realized the mattress category was appealing, but that it made more sense to build a strong brand, rather than just focus on discounts.

We loved Jas and his team, but felt their approach needed work and that we could bring a lot of value to the company. We did not want to be as involved as we are when we build a company from scratch, nor did we want to be as hands off as we are when we are mere investors. We decided to take a hybrid approach. We would not take a board seat and become co-founders, but we would help them with the business plan, fundraising, strategy, marketing and manufacturing in exchange for some advisory equity.

We invested the first few hundred thousand in the company. William Guillouard, a venture partner at FJ Labs, who was my VP of Marketing at OLX started working on their online and offline advertising strategy. We helped them raise their first round introducing them to VCs and notably DN Capital which became their first institutional venture investors. Eve Mattress was born!

Jas and the team executed really well. By the end of 2016, Eve had £12 million in sales operating in 12 countries. When the company first mentioned they were considering going public, I have to admit I was skeptical. It felt early and that liquidity might be limited. However, DN Capital had experience with Purplebricks. The online real estate agent, listed on AIM in 2015 after just 19 months of trading. That IPO raised £58.1 million at a £240 million valuation. The company now has a market capitalization of £929 million.

Jas and the team convinced us that AIM was a viable route to fundraise and help scale the business. On May 18, Eve Sleep plc (LON:EVE) went public raising £35 million at a £140 million valuation. The conquest of the European mattress market awaits!

Venture Capitalists: change your life with Kushim

by Clément Aglietta

Imagine how difficult it was for an empire to keep track of the birth rate, the size of harvests or the spoils from a conquest, with no writing system. In this era, certain people were thus given the task of memorizing the empire’s data. If such a person died, a whole swathe of the economic history of the kingdom disappeared. That is why, 5000 years ago, on the banks of the Euphrates, someone invented a simple and efficient way of transmitting data. The man who signed his name to the earliest written record was Kushim, and his job was to keep the accounts in the kingdom of Sumer in Mesopotamia. Our ambition today is nothing less than to offer clients a management tool that is just as indispensable as Kushim’s in their decision-making and data exchange..

What is Kushim?

Kushim is the first cloud-based portfolio management tool designed specifically for venture capital investors.

Our principal features are:

  • Classification and storage of investment data in a secure manner
  • A news service that provides real-time access to all latest news about your portfolio companies
  • Storage of all legal documents (convertible notes, SAFEs, Cap Tables) on a dedicated page for each startup
  • Reporting tools that analyze performance of each of your funds (and all funds or select funds in aggregate)
  • Tools that allow portfolio companies to communicate with and provide information to their investors
  • Ability to manage several financial vehicles / funds on the same platform
  • More than 60 metrics to monitor the evolution of your portfolio companies
  • Ability to import and restructure financial data from any format (for free)
  • Unlimited number of users

And much more to come…

Kushim allows clients to store and organise all the data from an investment fund through a trustworthy and foolproof method. Once all the data is hosted, then described, it is very easy to extract the statistics and view the totality of a portfolio.

The Story

Everything started in 2013 when I met Fabrice Grinda at Le Web in Paris. After talking at length, he offered me the opportunity to intern at his portfolio company Rebagg.

After proving myself during the internship, Fabrice heard about how I had done and asked me to help him to manage his investments. For more than a year, we spent time developing better ways to keep records, create reports and gain insights from our data. We wanted a clean way to see how portfolio companies were growing, what the real-time portfolio value was, how the cap tables of portfolio companies evolved over time, etc. The trouble was, we couldn’t find a solution that met all of our needs. So, as any entrepreneur would, we decided to build it!

We started by first creating a young and amazing team that had both financial and technologic vision. Not only has the founding team of Kushim has worked in venture capital funds, private equity funds and institutional banks, but they all also went to school for design and technology.

Step 1 create a fantastic team !

We staffed an amazing and young team with both financial and technologic vision. The founding team of Kushim has worked in VC funds, Private Equity firm and institutional banks. But they all from design and technology School.

  • Nicolas, our CTO, created his first company at 18 years old. He is passionate about Finance graduated from the best French internet and technology school
  • Josselin, our designer, has worked as a Product Manager with Alliance Entreprendre and Natixis Bank Groupe, and is a graduate from one of the best European design schools
  • Alexandre, our COO, worked with BPI (a large European investment bank) as an Analyst and with Eurazeo (a $5 billion private equity firm), and also graduated from one of the best European design schools
  • Victor, our tech team manager, worked as a consultant with Alliance Entreprendre Private Equity and graduated from the best French technology school

We also have an additional team of five developers who are working tirelessly to push the limits of what we can do with Kushim.

Why we a created Kushim ?

We love VCs because they give the power to young entrepreneurs to create, innovate, and change the world in better way. Beyond just providing capital, the great value of venture investors is their capacity to take risks and the power they have to help young companies achieve something great.

Our goal is to help them to have the best overview of what they are doing so that they can spend less time on daily administrative tasks and instead focus their mind on what is really important

This is how we do it

VCs invest in the most innovative and creative companies, yet the software they are using looks old and grey. It isn’t intuitive or easy to use, has the wrong features and is insanely expensive. We decided to change that by working very closely with VC’s to understand what their objectives are, and then translating that into features. Our software is evolving every day and getting better. Our long term goal is to improve every aspect of the investment process from deal flow generation to wire. We won’t stop until we can provide the best experience possible!

Interview with Whats Up New York BFMTV!

What’s Up New York: Zoom sur un business angel multimillionnaire – 15/03

Fabrice Grinda, entrepreneur et business angel, était l’invité de Sabrina Quagliozzi, correspondante de BFM Business à New York. Il a livré les secrets et les clés de la réussite de ses investissements. – Tech & Co, du mercredi 15 mars 2017, présenté par Sébastien Couasnon, sur BFM Business.

We are lucky to be alive right now!

In these fraught political times, it’s good to take a step back from the day to day minutia. In the grand scheme of things, global quality of life has dramatically improved. In 1820, 94% of the world’s population lived in extreme poverty. Even in 1910, 82% of the world’s population lived in extreme poverty. Until 1945, less than 10% of the world’s population lived in a democracy.

That is not to say that everything is perfect right now. Social mobility is stagnating and equality of opportunity has receded in many developed countries. We have not done a good job at helping those left behind by globalization and the technology revolution. We can and must do better. However, it’s useful to express our gratitude for how lucky we are to be alive in these extraordinarily prosperous and peaceful times.




2016: an amazing year (really)

I went 0 for 4 on election predictions (Brexit, Duterte, Colombian peace, Trump), and was wrong about the scale of the loss of the Italian referendum, but 2016 was amazing on a personal and professional level.

In the first half of the year I still suffered from the after effects of last year’s severe concussion. However, I started exercising again in June and finally seem to be recovered and to have put my injuries behind me. I started playing tennis and padel again, and did tons of adventure travel.

Highlights were:

  • Exploring Amsterdam
  • Visiting Bali for the first time
  • Climbing Mount Agung in a crazy and exhausting 14-hour night climb that started at 10 pm and ended at 2 pm
  • An 18 day adventure in China featuring trekking, horseback riding, flying ultralights, racing quads, camping on the Great Wall, playing laser tag, doing ropes courses, watching acrobatics shows, walking on glass bridges, volunteering with pandas and much more!
  • Tantric training at Mont Tremblant
  • Heli-hiking in the Bugaboos
  • Survival training for the zombie apocalypse in Canada
  • Watching the leaves turn at The Point in upstate New York
  • Christmas & New Year in New Zealand hiking the Milford Trail, sea kayaking and trekking in Abel Tasman Bay, and Zorbing, jet boating, biking and white water rafting in Rotorua
  • Navigating non-traditional relationships

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On the professional side, Jose and I continued to pursue a hybrid startup studio and venture investor model. I retired from Wallapop in May when we merged its US operations with LetGo. Instacarro, our Brazilian C2B car marketplace, had a banner year growing from nothing to a run rate of $40 million in revenues in 12 months!

I gave a keynote at NOAH in London presenting the latest tech trends and our contrarian approach. I also gave keynotes at the Angel Capital Association in Philadelphia in May and Bits & Pretzels in Munich during Oktoberfest. We hosted a fun marketplace conference in Cabarete. We had an amazing startup idea generating brainstorm with the FJ Labs team in Cabarete. I was also named the top French business angel of 2016 and covered in Forbes France.

Fabrice Keynote2

In a way, FJ Labs grew up in 2016. We got an office in New York near Madison Square Park. The team grew to 10 people. We deployed $52 million, more capital than in any of the prior years. We invested in 42 companies and made 24 follow-on investments. We had 14 exits, 5 successful exits, including Ticketbis and SkipTheDishes, and 9 failures.

FJ team

I read 87 books, reasonably balanced between fiction and non-fiction. The best books I read were:

Hamilton remains a must-see on Broadway. The hip-hop musical is the best piece of theater I have ever seen. If you already saw it, watch Spamilton. It’s both a parody and tribute to Hamilton and to Broadway in general. Les Liaisons Dangereuses with Liev Schreiber was also amazing.

The best movies I saw were:

  • Arrival, a super thoughtful commentary on the nature of time and language masquerading as an alien invasion movie)
  • Zootopia, a super cute, yet very astute commentary on race and prejudice
  • Doctor Strange

My favorite new TV show was Westworld. I loved its nuanced presentation of AI and morality. The Americans and Game of Thrones continued to go from strength to strength.

My best blog posts of 2016 were:

My predictions for 2016 were by and large correct:

  • Interest rates remained lower longer than pundits predicted a year ago
  • The US economy did relatively well
  • There was a healthy correction in late stage investing and renewed focus on positive unit economics
  • Tech remained the sector to be in
  • FJ Labs continued to be very active
  • Uber and Airbnb did not go public

Sadly, I was completely off on my most important prediction of all, which was that construction would finally start on my ever delayed La Boca project in Cabarete. This frustration was only exceeded by my experience as a homeowner in New York, perpetually battling my building’s board to renovate my terrace (which currently looks like a post-apocalyptic landscape). The offline world could certainly use a huge stint of deregulation.

While I had not made public election predictions, I was clearly wrong on my personal expectations. The populist uprising took me by surprise. We are living in the most prosperous and peaceful time in the history of humanity. As such, I was befuddled by votes that essentially rejected the very system that brought about this prosperity. However, I feel that I am starting to understand this popular anger. There is a subset of the population, especially blue collar workers, that has been the loser of both globalization and the technology revolution. Our education system let them down when first educating them. We then failed to retrain them and help with the disruption they faced. We must do better or risk false prophets leading us to our doom.

I am nothing if not an eternal optimist and as such my predictions for 2017 are as follows:

  • FJ Labs will invest in startups trying to better serve blue collar workers
  • Barring an exogenous black swan, the US economy will continue to do relatively well
  • Given low interest rates, investors will continue to yield chase and disproportionally invest in technology startups
  • Marine Le Pen will not be elected president of France
  • Construction will finally start on my La Boca project
  • My New York apartment terrace will be restored to its glorious initial state

Happy New Year!

NOAH 2016 Keynote: Confessions of an Accidental Angel

I had the privilege of giving a keynote at NOAH. I shared FJ Labs’ vision and unconventional approach and some contrarian thoughts on AI, VR, drones and much more.

 

You can also find the slides below.

How to run a company with (almost) no rules by Ricardo Semler

What if your job didn’t control your life? Brazilian CEO Ricardo Semler practices a radical form of corporate democracy, rethinking everything from board meetings to how workers report their vacation days (they don’t have to). It’s a vision that rewards the wisdom of workers, promotes work-life balance — and leads to some deep insight on what work, and life, is really all about. Bonus question: What if schools were like this too?

 

https://www.ted.com/talks/ricardo_semler_radical_wisdom_for_a_company_a_school_a_life?language=en
TEDGlobal 2014 : 21:42 – Filmed :Oct 2014

 

Ricardo f58ce34a948fd3d17cdaa85663b816bf39474a3b_254x191Semler
Organizational changemaker
Two decades after transforming a struggling equipment supplier into a radically democratic and resilient (and successful) company, Ricardo Semler wants organizations to become wise. Full bio

2016 Holiday Gadget Gift Guide

It’s that time of the year again, so I am sharing my recommendations for all gadget lovers of the world to be happy this holiday season. This year I made my most exhaustive list yet!

Notebook: MSI GS63VR Stealth Pro 4K-021

 

Now that Apple has released its new generation of Macbook Pros and Microsoft its new Surface Book, I could make a more informed decision. The new Macbook Pros are disappointing. They are underpowered (especially the GPU) and overpriced. The only real innovation was the toolbar. I was hoping Apple would find a way to make the 15” notebook 3 pounds, perhaps by having an edge to edge OLED screen.

The Microsoft Surface Book is an amazing tablet and notebook computer and a great choice, but it did not quite fit my needs. It’s powerful and has an amazing battery life, but I prefer larger screens and it’s also overpriced.

My recommendation is the MSI GS63VR Stealth Pro 4K-021. It’s amazing! It has a 2.6Ghz i7-6700, a 4K screen, a super powerful NVIDIA GeForce GTX 1060, and weighs only 4 pounds. I bought the $1,999 version with a 512Gb SSD and 1 Terabyte hard drive.

I play Company of Heroes 2 on it in 4K with maximum resolution both on the built-in display and the external 43” monitor I recommend. The battery life is on the low side, but if you put the notebook in low performance you can get 2-3 hours of work done.

Computer Monitor: Philips BDM4350UC

Ecran updated

When it comes to computer monitors I have always been of the thought that bigger is better. Given that it’s not uncommon for high end 32” 4K monitors to cost upwards of $1,500, the Philips BDM4350UC is an absolute bargain. I bought it for $799 on Amazon, though it’s currently selling for $1,029 which is very cheap for a 4K 43” monitor.

The Philips BDM4350UC has a 50,000,000:1 contrast ratio, 5ms response time and supports 3840×2160 at 60Hz. This monitor fixes one the big flaws of the Philips BMD4065UC given that it supports HDMI 2.0. Note that by default the monitor is set for DisplayPort 1.1 and HDMI 1.4. You must manually go in monitor settings and switch them to 1.2 and 2.0 respectively. Once it’s done, it works gloriously!

Working and gaming are amazing on it. Without hesitation, it’s the monitor to get!

Game Console: PS4 Pro

Last year I recommended buying an Xbox One because of the exclusives on that console especially Rise of the Tomb Raider. This year I am recommending the PS4 Pro. It’s the most powerful console on the market. The main reason I am recommending the PS4 Pro this year is Drake Uncharted 4 which is a PS4 exclusive.

Note that if you currently have a PS4 there is no good reason to upgrade to the PS4 Pro, it’s not powerful enough to play games in 4K at 60 fps and the improvements are not that noticeable. If you don’t have a PS4 yet, buy the PS4 Pro. It’s marginally more expensive than the regular PS4, more future proof and plays existing games better.

play4updated

I look forward to seeing what Microsoft comes up with next year with Project Scorpio

Video Games: Drake Uncharted 4 and Company of Heroes 2

I decided to skip out this year’s FPS games: Battlefield 1, Titanfall 2, and Call of Duty: Infinite Warfare. They are well executed, play well and got great reviews, but I am currently tired of the genre. It’s in desperate need of a refresh.

Updated4I love third person action adventure games like GTA V, Rise of the Tomb Raider, The Last of Us, Max Payne 3, L.A. Noire and Gears of War. Drake Unchartered 4 is the best third person action adventure game I ever played. It has amazing set pieces, a compelling story, is incredibly playable and has amazing graphics. Everything in this game feels right – the pace, the action, the story. If you like third person action adventure games, this is a no brainer. Buy this game!

 

 
companyUpd2

On the PC, I am still playing Company of Heroes 2. I am really pining for a rich and complex RTS like Rise of Nations or Age of Empires, ideally one that mixes the tactical unit control of Company of Heroes with the strategic depth of those games (read: Let’s reinvent PC gaming!).

It does not have huge improvements over its predecessor, but it’s gorgeous and I love the game play. Note that I exclusively play it online 2 on 2 or 3 on 3, which I find to be most challenging and rewarding. I don’t typically play the campaign in strategy games as the AI is never challenging enough, unless it cheats. Also, the strategy used to defeat the AI is rarely useful online.

Gaming Headset: HyperX Cloud II

headphone updated

The HyperX Cloud II headset is the perfect companion for the computer and PS4 recommendations above. It’s super comfortable. The microphone noise cancellation is the best I have ever used. People I talk to can’t hear the background noise even when I am in a noisy environment. Likewise, by being closed cup, the headset has amazing noise cancellation and I can work and play effectively from anywhere.

One of my top pet peeves is people not using headsets with built in microphones when doing Skype calls. Especially if you are fund raising it does not reflect positively on you if I can hear you are in a noisy coffee shop and can barely hear what you tell me. If you do a lot of Skype calls get a great headset!

 

Webcam: Logitech HD Pro C920

webcam updated

Given that most of my work entails doing Skype calls, webcam video quality is key and the Logitech HD Pro C920 has the best.

 

 

 

 

Portable Speaker: UE Boom 2

Orangeupdated

The UE Boom 2 has the best, loudest sound of all portable speakers. It’s stain-resistant, shock-resistant and fully waterproof. Battery life is great and it can be paired with a second UE Boom 2 for stereo sound.

 
 
 
 
 
 
Router: Asus RT-AC88U

Routeurupdated

 

It’s expensive but it’s the best router on the market. It’s superfast and the longest usable range of any router I ever played with. It’s also very easy to setup.

 

 

 
TV: Vizio M70-D3

télévizioupdtated

When it comes to TVs I think bigger is better. The Vizio M70-D3 is a 70” 4K HDR TV with an Android tablet remote control for $1,899. Most importantly it has the best picture quality I have seen outside of the LG OLED TVs. Those are amazing but you only get a 65” for $2,999. That said if you are less price sensitive and don’t mind getting a smaller TV, the LG 65B6P is a worthy option.

I look forward to playing with the LeEco uMax85 upcoming TV. It has amazing specs and 85” screen for $4,999.

Digital Camera: GoPro HERO5 Black & Canon Powershot SX720 HS
cabon go pro last
Most people don’t need a digital camera. The current generation of cell phones takes great pictures and are more practical. However, they lack a proper zoom which makes them impractical for taking great sports shots. For those circumstances, I use the Canon Powershot SX720 HS. It’s a compact superzoom camera with a 40x optical zoom, great image stabilization and a 3” LCD. I am not recommending any of the SLR cameras because experience suggests you end up not taking them with you all the time because of their bulk.

The GoPro Hero5 Black is amazing for capturing footage in first person perspective or attached to your kite lines. I usually use joint videos from the Canon (taken by a third party) and the Go Pro to make kite surfing and skiing videos.

I tried the drones which follow you such as the AirDog, but they are not good enough yet. The battery life is way too short and they don’t deal well with high wind or trees both of which are mainstays of the sports I practice.

Foosball Table: Shelti Pro Foos III

babyfoot updated

A startup or venture capital office would not be complete without the requisite foosball table. As we love foosball, we opted for an amazing table. The Shelti Pro Foos III is expensive, but it’s a tournament level table which emphasizes control. The table is much slower than a Bonzini table, but offers way more subtle ball control options. If you love foosball, it’s the table to get!

 

 

 

Chair: Herman Miller Embody Chair
Chaire updated

We spend so many hours sitting at our desks, we might as well be as comfortable and healthy as possible doing it. After years of using Herman Miller’s Aeron chairs, I switched to the Embody Chair and have not looked back.

 

 

 

 

Living Room Speaker: Devialet Phantom Silver

WUpdatedThe Devialet has by far the best sound of any speaker I have ever listened to. It has no distortion, even at high volume, no saturation and no background noise. It’s so powerful, even in its 3,000 Watt silver option, that I only installed one in my living room as a replacement for the various Sonos Play:5 speakers I had. I setup the Sonos speakers in the media room instead with the Sonos sound bar and subwoofer.

BTW Don’t put the Sonos and Devialet on the same system as they have different lag so the sound is not synchronized. The Devialet has a built-in lag of 160ms, while the Sonos has a lag of 70ms.

Media Room Sound System: Sonos

Sans titre-1I always hated all the cables we had to run everywhere to create proper sound in media rooms. Sonos finally solved that problem with a simple, clean and amazing sounding solution. The sound bar, subwoofer and speakers work perfectly together providing amazing sound.

 

 

Home Automation: Mix and Match

First and foremost, do not use systems by Crestron, Control4 and Savant. Their main advantage is that you can control your entire home in

81KGmN-fnNL._SL1500_ one app. However, these bespoke systems are expensive to install and maintain. Moreover, I find the latency unbearable. It drives me nuts when I tell it to turn the Xbox and TV on and it takes 10 seconds to comply. Likewise, with changing channels, controlling the Amazon Fire TV etc.

It’s much cheaper to just buy the best system to control each part of your home separately. You end up with different apps on your iPad or iPhone, but I don’t find that less convenient than having everything in one app. To control everything, I setup a 12.9” Ipad Pro on the wall with the ultimate goal of controlling everything through Apple’s built in Home App.

To control all the AV in the media room, I setup a Logitech Harmony Elite. With one remote, or from my iPhone or iPad, I control the PS4 Pro, Xbox One, Amazon Fire TV, Apple TV, Verizon Fios and external HDMI input. There is still a little bit of lag, but I find it bearable and the remote control works well with all the aforementioned devices.

The blind motors are Somfy. I am using some custom code to control them via SmartThings. Then I setup Sans titre-2HomeBridge to connect SmartThings to Apple HomeKit.

The fireplace is connected to a Remotec ZFM-80 z-wave relay. This relay is controlled Through iOS Home App via Homebridge to SmartThings. Lights are Lutron Caseta wirelessand integrate directly into HomeKit. I am using Ecobee 3 thermostats that integrate directly into HomeKit to control both the HVAC and the floor heating. I am still figuring out the front door system, but am leaning towards the iDor mobile solution.

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Happy holidays!

They’re Made Out of Meat by Terry Bisson

meat

“They’re made out of meat.”
“Meat?”
“Meat. They’re made out of meat.”
“Meat?”
“There’s no doubt about it. We picked up several from different parts of the planet, took them aboard our recon vessels, and probed them all the way through. They’re completely meat.”
“That’s impossible. What about the radio signals? The messages to the stars?”
“They use the radio waves to talk, but the signals don’t come from them. The signals come from machines.”
“So who made the machines? That’s who we want to contact.”
“They made the machines. That’s what I’m trying to tell you. Meat made the machines.”
“That’s ridiculous. How can meat make a machine? You’re asking me to believe in sentient meat.”
“I’m not asking you, I’m telling you. These creatures are the only sentient race in that sector and they’re made out of meat.”
“Maybe they’re like the orfolei. You know, a carbon-based intelligence that goes through a meat stage.”
“Nope. They’re born meat and they die meat. We studied them for several of their life spans, which didn’t take long. Do you have any idea what’s the life span of meat?”
“Spare me. Okay, maybe they’re only part meat. You know, like the weddilei. A meat head with an electron plasma brain inside.”
“Nope. We thought of that, since they do have meat heads, like the weddilei. But I told you, we probed them. They’re meat all the way through.”
“No brain?”
“Oh, there’s a brain all right. It’s just that the brain is made out of meat! That’s what I’ve been trying to tell you.”
“So … what does the thinking?”
“You’re not understanding, are you? You’re refusing to deal with what I’m telling you. The brain does the thinking. The meat.”
“Thinking meat! You’re asking me to believe in thinking meat!”
“Yes, thinking meat! Conscious meat! Loving meat. Dreaming meat. The meat is the whole deal! Are you beginning to get the picture or do I have to start all over?”
“Omigod. You’re serious then. They’re made out of meat.”
“Thank you. Finally. Yes. They are indeed made out of meat. And they’ve been trying to get in touch with us for almost a hundred of their years.”
“Omigod. So what does this meat have in mind?”
“First it wants to talk to us. Then I imagine it wants to explore the Universe, contact other sentiences, swap ideas and information. The usual.”
“We’re supposed to talk to meat.”
“That’s the idea. That’s the message they’re sending out by radio. ‘Hello. Anyone out there. Anybody home.’ That sort of thing.”
“They actually do talk, then. They use words, ideas, concepts?” “Oh, yes. Except they do it with meat.”
“I thought you just told me they used radio.”
“They do, but what do you think is on the radio? Meat sounds. You know how when you slap or flap meat, it makes a noise? They talk by flapping their meat at each other. They can even sing by squirting air through their meat.”
“Omigod. Singing meat. This is altogether too much. So what do you advise?”
“Officially or unofficially?”
“Both.”
“Officially, we are required to contact, welcome and log in any and all sentient races or multibeings in this quadrant of the Universe, without prejudice, fear or favor. Unofficially, I advise that we erase the records and forget the whole thing.”
“I was hoping you would say that.”
“It seems harsh, but there is a limit. Do we really want to make contact with meat?”
“I agree one hundred percent. What’s there to say? ‘Hello, meat. How’s it going?’ But will this work? How many planets are we dealing with here?”
“Just one. They can travel to other planets in special meat containers, but they can’t live on them. And being meat, they can only travel through C space. Which limits them to the speed of light and makes the possibility of their ever making contact pretty slim. Infinitesimal, in fact.”
“So we just pretend there’s no one home in the Universe.”
“That’s it.”
“Cruel. But you said it yourself, who wants to meet meat? And the ones who have been aboard our vessels, the ones you probed? You’re sure they won’t remember?”
“They’ll be considered crackpots if they do. We went into their heads and smoothed out their meat so that we’re just a dream to them.”
“A dream to meat! How strangely appropriate, that we should be meat’s dream.”
“And we marked the entire sector unoccupied.”
“Good. Agreed, officially and unofficially. Case closed. Any others? Anyone interesting on that side of the galaxy?”
“Yes, a rather shy but sweet hydrogen core cluster intelligence in a class nine star in G445 zone. Was in contact two galactic rotations ago, wants to be friendly again.”
“They always come around.”
“And why not? Imagine how unbearably, how unutterably cold the Universe would be if one were all alone …”

Some thoughts on Trump’s surprising win

I had the pleasure of being interviewed by Connie Loizos from Techcrunch yesterday. Unsurprisingly the conversation rapidly veered towards discussing Trump’s surprising win. I am reproducing our discussion below for your reading pleasure.

You can find the original article at:
https://techcrunch.com/2016/11/09/a-serial-founder-on-trump-hes-a-startup-that-disrupted-the-establishment/

trump FJ

Fabrice Grinda, a longtime New Yorker, has helped create hundreds of jobs for Americans and others. Among the companies he has started is OLX, one of the largest free classifieds sites in the world — one that was acquired over time by the African conglomerate Naspers for $250 million.

Grinda more recently co-founded Beepi, the peer-to-peer used car marketplace based in California; Rebagg, a New York-based platform that buys high-end luxury bags from their owners for cash; and Instacarro, a Sao Paulo, Brazil-based car-buying service that will buy individuals’ cars for cash in an hour’s time.

Grinda and longtime business partner, Jose Marin, also plug between $15 million and $20 million of their own capital into startups each year through their joint vehicle, FJ Labs.

But though he sounds it, Grinda isn’t American. He doesn’t have dual citizenship. He’s “pure French.” He just happened to head to Princeton at age 17, and he hasn’t much wanted to leave the East Coast since.

So what does this European make of a new U.S. president who has Silicon Valley on edge? Because he’s a global operator and because he doesn’t live in the Bay Area, we talked with Grinda earlier today about President-elect Trump and whether he’s concerned about what comes next.

TC: How did the U.S. election just change the picture?

FG: Public market investors, limited partners in venture funds and private equity firms — they don’t like uncertainty. What they don’t know is the actual set of policies coming down the line that could impact them going forward. What will be his tax policy? What will his administration regulate and deregulate? It’s not like [Trump’s team] came forward with a well-thought-out set of policy proposals. It was all kind of vacuous. So I think investors will be more cautious until they understand what a Trump presidency means.

TC: Do you think it could impact you personally?

FG: I don’t spend much time thinking about politics. I’m not sure it has a real impact on day-to-day life. It’s a large part of the reason I’m on the internet. I like its deregulated, fast-moving nature.

TC: Yet there could easily be consequences. People worry, for example, that for the sake of creating more American jobs, Trump might somehow slow tech, including self-driving technologies
.

FG: There’s no hard data regarding what is going to be done. My only concerns are around the uncertainty.

TC: What do you make of Trump, the candidate, and soon, the president?

FC: I dislike the guy. I dislike populism and most of the things he said and much of what he stands for. I’m pro immigration and probably more socially liberal than anyone I know. But look, he’s a startup who has disrupted the establishment. He used a lot of the same tactics that a startup would use to get free press, frankly. He created a story that was compelling enough that he garnered press all the time and so had much lower acquisition costs than the other candidates. Jeb Bush was paying something like $5,000 per voter in the GOP primaries, where Trump was paying about $300.

In startup terms, he had an effective distribution and a marketing strategy and messaging that people found compelling. I think he proved the adage that any press is good press. And the establishment only realized this was dangerous once it was too late.

By the way, I think the same is true of jihadists; all the media attention that ISIS receives makes it easier for them to get recruits.

TC: Let’s not go there. What do you think Silicon Valley does now to turn this situation into a win instead of something to suffer through?

FG: Clearly, there’s a percentage of the population that’s been left behind and not listened to and we need to find a better way to deal with that. I am an optimist. I do believe the tide of history is toward more liberalism and the quality of life improving. Sometimes, you have pushback, but in the grand scheme of things, it doesn’t seem to matter. As horrible as the Great Depression must have been to live through, it barely registers in the bigger picture. I think the next four years will be a blip, too.

Has globalization had some losers? Absolutely. If you’re a high school dropout, your relative job position in the job market hasn’t been great over the last 30 years. It’s a class of people who haven’t been heard, and we haven’t been good at retraining or them or integrating them into the success of this country. We need to focus on opportunities to refocus the education system and retrain them and that’s the message that’s been sent and maybe it’ll force us to get our act together.

TC: Should the country, including investors, be more focused then more on educational reforms, education platforms? Where are the biggest opportunities here given the shifting tides?

FG: I think there are things he could do well. The U.S. hasn’t had a good infrastructure program for years. To create jobs, the easiest way isn’t to block technology but to build better roads and bridges and airports and the things that are needed and create lots of jobs. The reality, too, is that we’re crumbling under red tape. We have an outrageously ineffective corporate and personal tax system that are both ineffective and run inefficiently. And we’re under a mountain of regulations. If you’re in the offline world for example, the burden for construction alone is limited to an insane degree by nimbyism. If he could do these things, we might be able to make the best of a bad situation. I know I’d feel better.

Bill The Vampire is hilarious!

The Tome of Bill book series has made me laugh out loud so hard, so much, that I can’t keep track of how many times it happened. That is saying a lot given that I can’t remember the last book that made me laugh out loud!

I was not aware the “horror comedy” genre even existed and it ended up resonating tremendously. I suspect the genre as a whole would not work for me, but it works specifically in the context of our protagonist, Bill who is a huge nerd and remains so after being turned into a vampire.

Bill’s fun bumbling approach, wit and snarky one liners are awesome. I also loved all the Dungeons & Dragons, video game and Star Trek references.

Read it if you are a fellow uber nerd 🙂
 
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The Feedback Loop is the new Ready Player One

I loved Ready Player One. Sadly, Armada, Ernest Cline’s follow-up book proved disappointing. Harmon Cooper fills that void with The Feedback Loop. The book is essentially Groundhog Day meets Ready Player One meets The Matrix.

Quantum Hughes, the protagonist, is stuck in a virtual reality world called The Loop following a software glitch. As in The Matrix, his body is in the real world in a vat, while Quantum’s consciousness inhabits his character in the Loop, unable to escape. The Loop is a Grand Theft Auto-type game set in a noir Sin City-like environment. Quantum plays the game every day until it resets at midnight and starts in the exact same way the next day.

The book is far-fetched and amazing.

Read it!

 

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Ride-sharing is not killing car ownership

By Ale Resnik, Chief Executive Officer of Beepi

Imagine it’s the year 2035. Gasoline engines are a thing of the past—replaced by electric propulsion. Cars no longer feature steering wheels, thanks to tens of millions of lines of code doing the driving for you. And we’re led to believe that we’ll no longer own a vehicle; instead, we all ride in Ubers. If you believe what you read, then, car ownership will soon be dead.

But that won’t be the case.

In the future, owning a car will be more affordable than ever before—even profitable. The same trends that will make car sharing more affordable will also make ownership significantly more affordable.

To learn how, check out Beepi Chief Executive Officer Ale Resnik’s pointed Fortune Magazine piece, where he delves into the future of autos.

The Mercedes-Benz F015 Concept
The Mercedes-Benz F015 Concept

Letters to a Young Contrarian is a must read!

In a simple and elegant series of letters written to a hypothetical student, Christopher Hitchens makes an incredibly compelling argument for thinking independently. While showing how important it is, he also clearly highlights the perils of defying conventional wisdom and popular opinion. In making his case, Hitchens shows off his erudition in sharing a lifetime’s worth of insights and scholarship.

Both the prose and content resonated with me like few books have. The book is both timely and timeless in a world overcome by political correctness and simple minded populism.

Read it!

Letters to a Young Contrarian is a must read!

Technology and the Future of Work

Technological progress continues unabated. The astonishing rate of growth has fueled heated debates about implications on the future of labor and the nature of work. A decade ago, few would have predicted that job categories like iOS development, product management, and search engine marketing would exist today. A world of 3D printed food, virtually free electricity, and unlimited computing power is on the horizon.

But what is the cost of technological revolution? Will it remove humans from the equation? What impact will it toll on incomes, quality of life, and the education of our children? Many worry that the current innovations in automation, robotics, and artificial intelligence forebode economic upheavals of cataclysmic proportions, and that unemployment and starvation will abound.

There is nothing to worry about. Economies adapt. Current jobs will be destroyed, but many more and better jobs will be created. The world will be all the better for it. To give an example from the past, let’s take a step back to 1800. At that time, the vast majority of the population was farming, working 100-hour weeks, seven days a week, just to make ends meet. When the Industrial Revolution came, people feared that the new technology would cause massive unemployment. The Luddites started breaking automated looms, which they thought were taking away their jobs. The irony is that the number of weavers actually quadrupled between 1830 and 1900. The amount of labor required per yard of cloth fell by 98%. This made cloth cheaper and increased demand for it, which in turn created more jobs for weavers. Technology gradually changed the nature of the weaver’s job, and the skills required to do it, rather than replacing it altogether. In general, technology is massively deflationary, leads to radically lower prices, significantly increased demand and new jobs to fill that demand.

At the same time, as jobs get destroyed, new unexpected job categories appear. Whereas 200 years ago there was only one job, farmer, a century later there arose a second, factory worker. As more factory workers entered the labor force, factory jobs became fragmented, creating many more specialty jobs and ultimately advancing the economy. Later as factory jobs moved offshore, or were automated, we got new service jobs. This trend will continue with new job categories being created. Think about the jobs people do today. Many are repetitive, rote and fundamentally uninteresting. Many others are paper-pushing, or rubber-stamping rather than value producing. It’s fantastic for these jobs to be automated freeing up human capital for more interesting and productive work!

Many people look at the number of employees and technology companies and are worried that they are creating many fewer jobs that they destroy. Despite having hundreds of millions of users, Instagram and Whatsapp famously only had respectively 13 and 55 employees when they were acquired by Facebook for $1 billion and $19 billion. While the primary impact of technology has certainly destroyed some jobs, the second-order impact has created new ones on a much greater magnitude. For instance, do online retail platforms like eBay, Amazon Marketplace, and Alibaba have fewer employees than the stores they replaced? Absolutely. But how many people make a living on these platforms? Millions are actually fully employed on them! The way you measure a company’s employment is not just to count its direct employees, but to consider all the services and products that were necessary for it to exist, as well as all the businesses it created.

Those companies are just the tip of the iceberg. Platforms like Upwork have also created millions of jobs. Another case in point is the market opened up by Airbnb. Vacation rentals and apartment sublet have become multi-billion-dollar industries in their own right. The entire subletting market in the US was estimated at $1 billion a decade ago. This year Airbnb alone will do more than $10 billion in bookings! Many people now make a living or supplement their income renting apartments or their room on Airbnb. Despite the company’s success, the hotel industry continues to thrive.

It’s also worth pointing out that transitions are slower than many suspect. It takes a while for regulations and cultural norms to change and adopt the technology. It also takes a while for the technology to reach a price point where it can replace humans in 100% of cases. With self-driving cars for instance, the jobs now held by the 3.6 million drivers in the US will not disappear overnight. Many humans are not yet comfortable giving up driving. It’s still unclear who is liable in the case of an accident by a self-driving car. Most importantly, they are still cost-prohibitive. Once the technology is fully ready, it will first replace humans in cases where it makes the most economic sense, long distance trucking perhaps. It will only seep into the mass market as prices decline and it becomes more culturally and socially accepted.

In spite of all of the evidence, many people cannot wrap their heads around how the destruction of jobs can actually lead to new jobs. They have fallen victim to what economists term the “Lump of Labor Fallacy,” which is the contention that the amount of work available to laborers is fixed. These people conclude that they will become unemployed if their jobs are destroyed or if other people agree to take those jobs at lower wages. But demand for labor is actually not fixed.

When the 35-hour workweek was adopted in France, the French reasoned that, if people now worked 40 hours weekly, and this was reduced to 35 hours, employment would increase. This was totally wrong, and the only result was that demand for labor decreased.

To take an example from immigration, in 1980, Fidel Castro emptied Cuba’s jails and sent all the convicts to Miami, Florida. Between April and October of that year, during the Mariel boatlift around 125,000 Cubans relocated. Miami had a population of 800,000 at that time. Due to the massive increase in Miami’s population, the locals feared that Cuban immigrants would take all of their jobs. In reality, the unemployment rate of Miami actually declined. The Cubans were able to find jobs, many of which never existed before. The increased population created a demand for more housing, grocery stores, hair salons, barbershops, and retail outlets. As the population increased, the demand for new business increased as well.

Idle labor finds a use, whether its cause originates from artificial intelligence, robots or immigration. I cannot tell you what that use will be, the same way that 100 years ago people had no idea that the jobs of the future would include airplane pilot or web developer.

In general, technology leads to the more efficient allocation of labor. If technology replaces people, they suddenly become free and start doing new more productive work. Even if these people do not find a more productive channel for their labor, the benefit to society of their replacement is greater than the cost. Similarly, when US steel industry was being destroyed, the government imposed a high tariff on imported steel. It increased the cost of goods that use steel (such as cars) for everyone else. Estimates suggest that each job saved cost $550,000 annually! It would have been better to just give these people $50,000 and retrain them, and not impose the tariffs at all.

As technology makes things dramatically cheaper, it makes us dramatically wealthier as we can buy much more with the same level of income. As a result, many people will choose to work less, because they will need less in order to live. Technology already allows us to work much less now than our ancestors did in the past. 100 years ago most people took no vacation. They worked seven-day work weeks until the advent of weekends, which first emerged as one-day breaks, before evolving into the two-day weekend we know today. As people became richer, they have increasingly chosen to work less. We no longer work 100 hours/week. In the US, people now work on average 39 hours per week. We have decided to take more vacation time, work less, and our quality of life has dramatically improved. That trend will continue as technology continues to decrease our cost of living across the board.

So ask yourself again. As society continues to advance technologically, is the world at risk of massive unemployment and dire poverty? Absolutely not. Quite the contrary, we are on the eve of an extraordinary revolution where we will all know abundance and where starvation and extreme poverty will be a thing of the past. This future can’t get here quickly enough!

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Grit, Perseverance, and Happenstance: The Genesis of our Apprenticeship Program

Most of you are not aware that FJ Labs has an apprenticeship program. The program has been fantastic. The apprentices have created extraordinary companies, including AdoreMe and Beepi. They have helped us invest in over 250 startups. It has been extraordinarily beneficial all around.

To give you a sense of the genesis of the program, let me take you back to 2010. At that time, I was co-CEO of OLX by day and an angel investor by night. I had already met Jose and we had started our cooperation, but it was not as structured as it is today. I essentially had two full-time jobs and was stretched thinly between both.

By virtue of being the CEO of a successful internet company, many young entrepreneurs kept reaching out to me, either to advise them, or invest in their startups. A third of our deal flow still comes from entrepreneurs applying directly through the Submit Your Startup form on my blog or via my email, Facebook, or LinkedIn accounts.

One entrepreneur, in particular, reached out asking for a meeting. He brought up all the things we had in common: Ivy League School, McKinsey, French. A few weeks later, he showed up at the office door right around lunch time. We went for a sandwich across the street at Cosi. He told me he was operating a more elaborate Chatroulette competitor. He had raised a $300k, but he had not yet found the right product market fit. After spending $75k, he questioned the sustainability of the venture.

I thoughtfully explained why the business was not compelling from either a value proposition or business model perspective. Given that he was in business school at the time, and was operating a startup that did not seem compelling, I told him that he should probably shut it down and return the money to his investors. I thought this would be the last I would hear from him. The same day at 3 am, he emailed me saying he couldn’t sleep. He was excited and troubled. He was delighted by the candid feedback. No one had ever before given him such an appraisal of his startup, especially in such a direct manner without any sugar coating, which he surprisingly loved. He now wanted to work with me to find a new idea.

He kept emailing me, asking for follow up meetings. At this point, had I been a girl, and he a potential date or suitor, I would have been asking for a restraining order. I told him I was too busy, and did not have the time. He kept persisting. Eventually, he mailed me a check for $5,000, and said he would pay me $5,000 a month, every month, to work for me. At this point, I gave up and said that he could keep his money and come work with me for free. In parallel, he offered his investors the choice to take their money back or to follow him on a new journey. Most chose to back his future venture.

As I was working two jobs, there was room for someone to come help me on the investing side. However, I needed to figure out whether I could train him to become a venture capitalist. Could I train someone who had never been a venture investor before to make investment decisions on my behalf? It required me to structure my thinking and formalize my heuristics. The exercise turned out to be personally useful as it made explicit rules that had so far been implicit. It turns out I could teach someone to apply the same rules and my new apprentice turned out to be tremendously helpful. I no longer had to meet 20-30 entrepreneurs a week. He could take the first meetings and eliminate bad and out-of-scope companies. He identified the more promising ones for me to meet.

Seeing all the deal flow was a tremendous source of inspiration for him. The caveat was that he did not have the right to create a company that did the same thing as any company that approached us. By seeing so much deal flow in all these different categories, all these different business models, he was able to think through trends, businesses, and approaches that could be combined into something interesting.

We crossed these trends with the following guiding principle for finding a new startup idea: Find a large market, where the net promoter score of the existing providers, be they online or offline, is very low, and where we can build a business with either better economics or a better user experience, or preferably both.

We then filtered the ideas we came up with through our nine business selection criteria. We started with 50 ideas and whittled them down to 30, then 20, then ten, then two. We then picked one, pivoted, and AdoreMe was born. This first amazing apprentice was Morgan Hermand-Waiche. The company and he are now well on their way to success.

Having an apprentice proved so helpful that I decided to formalize an apprenticeship program to replicate what happened. Every year since then, we have had two to four part-time apprentices. The program has been so effective that we now have three full-time analysts in addition to the apprentices.

IMG_4886

The apprenticeship program works as follows. We hire two to four apprentices from Harvard, Stanford, MIT, and Columbia at the end of their first year of business school. They join us full-time for the summer, working part of the summer as entrepreneurs in one of our start-ups, and the other part learning the basics of venture capital at FJ Labs. During their second year, they work 15 to 20 hours a week, helping us filter all the deal flow that we receive. Starting in January of their second year, to the extent they want to be entrepreneurs, we start thinking through ideas that we can build together. Once they graduate, we co-found a company together, for which we commit the first $1.25 million in funding.

None of this would have happened if it had not been for a combination of happenstance, and Morgan’s persistence in hunting me down and not taking ‘no’ for an answer. There are many skills or attributes that are valued in entrepreneurs, from passion, to intelligence, to specific technical expertise, but ultimately, nothing trumps grit, tenacity, persistence, and just a touch of luck.


Find our email exchanges for your reading pleasure below.

1/ Our first email exchange:

From: Fabrice Grinda
To: Morgan Hermand-Waïche
Date: Fri, Nov 26, 2010 at 10:39 AM

Pas de probleme. Je suis jamais en France, mais je suis a NY en ce moment et serait a NY tout janvier…

From: Morgan Hermand-Waiche
Sent: Wednesday, November 24, 2010 4:59 AM
To: Fabrice Grinda
Subject:Contact avec un jeune entrepreneur francais diplome d’Harvard

Bonjour Fabrice,

Je m’appelle Morgan Hermand-Waiche et j’ai 28 ans.
Apres des passages par des grandes ecoles en France (Mines Paris) et aux US (Harvard Business School) j’ai decide de me lancer dans l’entrepreneuriat sur internet (Industrie du live video) et j’ai leve des fonds angels aux US cet ete.

Je suis sincerement epoustoufle par votre parcours (de McKinsey a Zingy & Olx) et si vous etes ouvert a rencontrer de jeunes entrepreneurs passionne avec de grandes envies de reussir je suis votre homme! Si vous en acceptez le principe je serai honore de partager un cafe a l’endroit et au moment de votre convenance pour faire plus ample connaissance (je voyage souvent a Paris et NY).

A bientot j’espere,
Morgan

2/ The 3:42am email following up on our first meeting:

—–Original Message—–
From: Morgan Hermand-Waïche
Sent: Thursday, January 20, 2011 1:35 PM
To: Fabrice Grinda
Subject: Merci pour tout

Cher Fabrice,

Je voulais simplement te dire a quel point tu a été inspirarionel pour moi
ce midi. Tu es incroyablement brillant, et j’ai enormement appris en
discutant avec toi.

Je serai ravi de lire tes 9 critères de sélection d’idée et les autres
articles que tu as écris tout autant qu’un exemple de document VC !
Merci pour m’avoir proposé de partager cela.

Enfin je te prie de m’excuser. En partant je t’ai propose de prendre part au
capital et en réalité je me suis mal exprimé. Ce n’est pas du capital qui me
rendrait heureux, mais tes conseils si precieux de temps a autres afin
d’avancer dans la bonne direction. Je sais que ton temps est limite, et que
beaucoup d’entrepreneurs revent de t’avoir en advisor, mais sache que je tu
es si inspirarionel pour moi que je payerais pour te donner de l’équity ! Ne
serait-ce qu’une demi-heure chaque mois aurait un impact sans limites. Crois
moi, je saurai bénéficier de ta guidance et la rendre au centuple avec le
temps.

Quoi qu’il advienne je suis enthousiaste et ne manquerai pas de te donner de
mes nouvelles dans 6 mois.

Le chemin entrepreuneurial est long mais c’est grace a des rencontres avec
des garçons qu’il vaut d’être vécu.

Merci encore pour ton temps,
Morgan

From: Fabrice Grinda
To: Morgan Hermand-Waïche
Date: Thu, Jan 20, 2011 at 8:34 PM

Ca me fait toujours plaisir d’aider.

Follow-ups:
1. Liens:
http://www.fabricegrinda.com/entrepreneurship/startup-kit-select-articles-for-first-time-entrepreneurs-to-read/
2. J’ai ci-joint une PPT de levee de fonds
3. J’avais compris ce que tu proposais 😉 Je suis d’accord pour la prochaine
boite, tu me donneras du founder’s equity ou un truc comme ca. En attendant
ping mois de temps a autres.

A bientôt,

Fabrice

P.S. Tu m’as paru bien timide pour un McKinsey / HBS…

From: Morgan Hermand-Waiche
To: Fabrice Grinda
date: Fri, Jan 21, 2011 at 3:42 AM

Bonjour Fabrice,

Merci beaucoup pour ces infos.

Si je t’ai apparu timide, c’est essentiellement parce-que je suis encore en recherche du bon business modele. Alors il est difficile de t’affirmer a ce stade “je vais faire XYZ”.

Par contre, j’ai une profonde determination pour apprendre et reussir. Et vite ! Je pense vraiment detenir le skillset pour maitriser la techno (Mines Paris), le business (HBS), la structuration du travail (McKinsey), et son excution avec une volonte sans limite pour monter une belle entreprise. J’irai la ou il le faudra pour reussir, y mettant corps et ame. J’ai refuse des jobs dans des Hedge Fund pour vivre cette aventure qui a un sens pour moi et qui peut avoir un upside enorme, alors ce n’est pas le moment d’etre timide !

Ce qui est vrai par contre, est que je n’ai pas la connaissance d’internet et que cela me prendra du temps d’explorer par moi-meme. Pour etre au top, j’ai besoin de quelqu’un qui est brillant, qui connait le secteur, et qui pourra me dire “Vas-y, fonce, ca c’est une bonne idee a faire dans ce pays”, et qui m’aiguillera sur les aspects critiques en cours de route. En d’autre mots, quelqu’un comme toi. Je le te promets, si tu me donnes une chance, tu ne seras pas decu. Tu le vois bien, meme la a 3h30 du matin, c’est a toi, a ce que tu m’as dit, et a ce que je peux en tirer pour le business que je pense.

Tu es un garcon extraordinaire Fabrice, et tu es l’unique raison pour laquelle je suis venu a NY aujourd’hui. Si je me suis montre timide, je n’en ai pas moins les dents qui rayent le parquet d’en dessous tellement j’ai envie de reussir dans l’entrepreneuriat ! Quand le porte est fermee, je passe par la fenetre.

Je vais murir notre conversation de ce jour, et si tu acceptes, j’aimerais revenir te voir pour parler plus concretement d’idees concretement actionables (cf. ton modele d’arbitrage international) avant que tu ne repartes de NY, et pourquoi pas te convaincre que prendre de l’equity dans cette boite nouvellement definie pourrait etre une bonne idee. Serais-tu libre a dejeuner jeudi prochain ou celui d’apres? 🙂

Donne moi une chance,
Je ne te decevrai pas,
Morgan

3/ Lots and lots and lots of other emails where Morgan tried to get another meeting 🙂

The Next Evolution: AI-Powered Marketplaces

By Güimar Vaca Sittic and Fabrice Grinda

Online marketplaces are fascinating. Matching demand and supply seems mundane, but it takes a lot of work to actually make it happen.

As we pointed out before in The Evolution of Marketplaces, marketplaces have evolved dramatically from horizontal listing based models like Craigslist to vertical transactional end-to-end marketplaces like Uber today.

Every few years there are technological breakthroughs that allow entrepreneurs to adjust the dynamics of online marketplaces to make them more efficient. Native mobile apps, seamless payments and GPS tracking are just a few of the examples that have improved marketplaces substantially during the last two decades. Today, we are at the beginning of the next evolution: AI-powered marketplaces.

Every marketplace has a chicken and egg problem. Ultimately ever more buyers bring ever more sellers and ever sellers bring ever more buyers, but it’s hard to get the dynamic started. We recommend building supply first as they are financially motivated to be on the platform. The nature of the marketplace dictates the ratio between supply and demand. This ratio varies based on the relationship between buyer and seller (i) one to one (e.g.; Care.com), (ii) one to many (e.g.; Udemy) or (iii) many to one (e.g.; Uber). This ratio often dictates unit economics and how attractive the business is. AI powered marketplaces can change this dynamic.

When talking about AI, it is important to note the difference between AGI (Artificial General Intelligence) and ANI (Artificial Narrow Intelligence). AGI refers to a computer which is as smart as a human being across every single category or task. AGI would include not only problem solving but also abstract thinking, ability to reason, etc. AGI is the AI of Ex Machina, Her and Jarvis. It is still years away. ANI is already present across many different specific tasks. ANI can be as narrow as your spam filter. Gmail learns from your behavior and those of the community what emails are not desirable and sends them directly to spam.

Small AI-powered tasks such as your spam filter might seem insignificant but the aggregation of many ANI applications can be transformative. Many startups like X.ai and Clara Labs have been trying to improve a basic but time consuming task like scheduling. They use a combination of Natural Language Processing (NLP) and machine learning to reduce the number of touch points needed by a human being. Until recently, busy individuals needed to have an assistant to manage their schedules. The assistant checks availability, shares it with other meeting participants, finds convenient times, sets the meeting and sends a reminder. Some parts of the chain need good judgement, but others like sending reminders can be automated. By automating many tasks, the assistant can manage the schedule of several busy individuals rather than one radically decreasing the cost of the service. This can be applicable in many types of marketplaces creating the opportunity for a triple win where consumers pay less while suppliers and the marketplace make more.

There are two big groups of marketplaces: product-based ones and service-based ones. Product-based marketplaces can use AI to improve their internal processes and decrease fixed costs. For instance, AI powered back office tools can improve quality control and customer care. AI can also be used to dramatically improve user experience. AI could identify pictures and suggest descriptions and prices radically simplifying the selling experience.

AI can be even more potent for knowledge-based service marketplaces. There are many marketplaces where the service provided by a human being that has deep knowledge and expertise in one particular topic. UpCounsel is such an example. UpCounsel is a fantastic marketplace that connect high quality lawyers with customers who need their services. If you want to file for a patent and don’t know where to start, you should go to UpCounsel and consult with a lawyer. The lawyer you just hired will certainly be very good but he also needs to pay for his bills and getting a J.D. can cost up to $200,000 in top tier law schools. Thus, hourly rates for great lawyers vary from $150 to $500. Filling your patent might take 10 hours at $200 per hour costing a total of $2000. In the (not so distant) future, UpCounsel can build ANI tools for their lawyers that integrate in their work flow to decrease the amount of work needed from the human being. An ANI tool might decrease the time needed by a lawyer to check if your idea/product qualifies for patent protection. If such tools yield a 3x productivity in time for a lawyer then the marketplace can charge less per hour, yet earn more for lawyers, while having a bigger take rate.

Example:

Imagine you have to file for a patent and need 10 hours from your lawyer to complete the task. The hourly cost for the end consumer is $200.

Scenario A (without ANI):
Cost to consumer: $2,000
Lawyer revenue: $1,600
UpCounsel Revenue: $400 (20% take rate)

Now imagine that same lawyer was a 3x productivity boost and can serve 3 clients instead than 1 during those 10 hours of work.

Scenario B (with ANI with 3x yield):
Cost to each consumer: $1,500 (25% discount)
Lawyer revenue: $3,000 (90% increase)
UpCounsel Revenue: $1,500 (350% increase, 33% take rate)

A lawyer working full time for UpCounsel might serve 20 clients per month. That’s a 20 to 1 ratio between supply and demand. Now imagine what it could be with 60:1 or even 600:1.

There are many categories that can be disrupted by ANI such as tutoring, health, law, mental health, nutrition, programming, transcription, translation and countless others. If you slide and dissect each one of these services into micro tasks you will find out that many of them can be automated by building ANI products. The jury is out on whether the current marketplaces will be smart enough to adapt to these changes or if there will be newer bolder entrants that will leverage ANI to outcompete the current incumbents.

Either way, the future belongs to AI powered marketplaces!

My Rematerialized Life

In October 2014, at the end of my Update on the Very Big Downgrade, I explained that the super high occupancy rates of high end hotels and Airbnbs in New York were forcing me to move location every few days. These high transaction costs defeated the very purpose of the downgrade and pushed me to partially rematerialize.

After an extensive search, I ended up buying an amazing apartment in the Lower East Side in the summer of 2015. It clearly appears antinomic for an avowed minimalist to own such an ostentatious piece of real estate. As such I was approached by Kavitha Surana from Bed and Bowery. She wanted to discuss the seeming incongruousness and cognitive dissonance of my move.

The conversation was lively and fun. I tried to convey that I retain the life lessons from The Very Big Downgrade of valuing experiences, friends and family infinitely more than material goods. If anything the apartment is now a vector to further those experiences and relationships. I can again host visiting friends. I restarted organizing intellectual salons and dinners. Besides in keeping with my minimalism, it remains sparse and I barely own more things than the 50 items I had previously downsized to.

Kavitha details her impressions in a thoughtful article where she captures the ethos of my downgrade, life lessons and subsequent rematerialization much better than last summer’s New York Times article. I am transcribing the article below for your reading pleasure. You can find the original at: http://bedfordandbowery.com/2016/05/meet-fabrice-grinda-the-minimalist-in-the-6-million-les-penthouse/

WHO LIVES THERE?

Meet Fabrice Grinda, the Minimalist in the $6 Million LES Penthouse

Grinda1
(Photo by Kavitha Surana)

 

As he rang in 2015, Fabrice Grinda, a 41-year-old tech entrepreneur from France, took stock of his life. He’d been living out of suitcases for the past four years, globetrotting and swinging between upscale hotels and top-notch Airbnbs. He decided it was time to “partially re-materialize.” Not settle down with a white picket fence (horrors!) — nothing drastic — but simply find a simple New York landing pad he could call his own.

You may have read about Grinda’s “curious midlife crisis” in The New York Times this past summer. A successful internet entrepreneur and angel investor (Alibaba, Lending Club and Delivery Hero are some of his early investments) he reached incredible financial heights, with a 20-acre estate complete with personal butler, an extra $13,000-per-month rental in Manhattan, and a sleek McLaren sports car, only to eventually feel bogged down by “the trappings of success.” So, never one to do things half-assed, he took the new conventional wisdom of valuing experiences and relationships over material possessions to an extreme most millionaires would never contemplate: He sold his home, donated his clothes, and even got rid of the McLaren. His net worth still skews north of $100 million, but he has pared his personal items down to the bare necessities.

2
(Photo by Kavitha Surana)
 

“Because I really downsized my life down to 50 items, it freed up a lot of time that people usually spend A, in a sort of location and B, dealing with admin stuff and paying bills, to focus on more essential things,” he said, padding around his new 3,000-square-foot Lower East Side penthouse, barefoot in jeans and a crisp white button down. Speaking at a relentless elevator-pitch clip, he’s constantly laying out options, examples or test cases in a logical, easily digestible list. Grinda’s personal website is also meticulously detailed–his exhaustive “about me” page lists his age, height, weight, educational history, favorite movies, TV shows, books, and personal interests (which include: his dogs, tennis, debating, theater and, natch, The Economist).

Grinda says limiting his personal possessions was a revelation, giving him more time to concentrate on all the things he loves. “You know, like friends, family, experiences, traveling the world and doing fun things,” he said. “And for the first few years it really worked.”

But being a nomad eventually had its downsides too, especially in a city as popular as New York, Grinda’s frequent home base for work and play. He began his new peripatetic lifestyle in the tailspin recession of 2008, but as the economy began to pick up, occupancy rates in hotels and apartments also spiked, causing frequent headaches. For one, he couldn’t stay in the same room at one of his favorite hotels, like the Mercer or the NoMad, for weeks at a time on a last-minute trip, or book a high-end Airbnb for more than a few consecutive nights.

Then there were the increasingly common awkward conversations: “You can imagine how it looks from a dating perspective. Like, every time you’re in a different hotel room,” Grinda said. “The girl is like, wait a minute, is it because your wife and your kids are at home? And I’m like, no, I live in hotels!”

3 (Photo by Kavitha Surana)
 

So, at the beginning of last year, Grinda decided he would search for a landing pad in the city, where he could stay in between frequent business trips to San Francisco, visits to his vacation property in the Dominican Republic, and retreats to far-flung locations like Nepal and Machu Picchu. That’s how he ended up on the Lower East Side with a view of the skyline.

“I decided I would get a place, not because I am dying to have a place, but really, frankly because I want to decrease these transaction costs of moving around every few days,” he explained. He gestured around at the blank walls of the living room. “So I still keep a pretty asset-light lifestyle. All the decorations you see here, I bought in one hour for $5,000 on Amazon.”

Unique-Downtown-Penthouse-for-sale-11
 

His penthouse is above a Popular community bank on an unassuming block at Houston Street, right at the intersection where Avenue B turns into Clinton. It’s one of the many new high-end developments rubbing shoulders with crowded old tenements and within spitting distance of the largest public housing complex in Manhattan. Across the street is a Pay-o-Matic money center, the perennial tourist favorite, Clinton Street Baking Co., and the new incarnation of Genesis Party Supply, a Latino bridal and party shop recently priced out of its previous location on Clinton Street.

The apartment itself presents a heady mixture of excess and restraint. The outdoor deck, currently under construction, features a wrap-around deck, a grill and a hot tub. On the day I visited, the marble kitchen counter was littered with the detritus of a busy week — Pellegrino bottles, half-eaten Seamless orders, a pair of running shoes, Coronas, a champagne glass, a vase of bursting calla lilies, and an empty carton of Laboratorio del Gelato ice cream. The remnants of a fast-paced life where every whim can be easily satisfied.

4 (Photo by Kavitha Surana)
 

But open up the row of closets on his second-floor hallway and you’ll find nothing but a crumpled pair of underwear. The walls are also bare, the furnishings in the living room sparse: an L-shaped white couch with a coffee table and cream rug and a small wooden table that can expand, surrounded by unremarkable upholstered white leather chairs. Grinda maintains that his personal possessions still hover around 50, despite his ample digs.

After all, Grinda’s philosophy on life aspires to a new kind of abstinence–call it “on-demand asceticism.” It doesn’t mean he can’t enjoy the finer things in life–he just doesn’t own them. Or many of them. (He reminded me that the hot tub on his terrace and a high-end coffee machine came with the apartment.) Otherwise he can easily order up experiences (and luxuries) when he needs them, whether it’s an on-demand massage from Zeel (which he is also an investor of) or dinner from Sprig (another investee). He can catch a ride on Uber (yep, another one) to take him to see Hamilton on Broadway or to a party. Other diverse investments include Palantir, Airbnb, AdoreMe (vertically integrated lingerie brand), GetAround (Airbnb for cars), Reverb (a marketplace for music), and Diapers.com for Germany.

5 (Photo by Kavitha Surana)
 

But how did a man who is seemingly spoiled for options end up on the Lower East Side? Grinda described an impressive act of visualization and summoning. Like a 21st century Goldilocks A/B-testing a new program, he’d tried out many different neighborhoods and types of apartments in New York through Airbnb to find his optimal set-up.

Right off the bat, he deemed the Upper East Side “too gentrified.” He tried staying on the Upper West Side, but it didn’t fit his lifestyle (“stroller central” and “basically Tribeca,” he said). He thought he’d love a townhouse in Brooklyn, but he soon realized there was a fatal flaw. “Vertical living is not super convenient,” he explained, with a rueful smile. Instacart deliveries were a pain, forcing him to travel from the fifth floor to the door and back to the kitchen. The un-optimized space got on his nerves. The layout (garden in the back, rooftop on top) threw off the vibe of his parties, dividing the mingling.

Corner-Terrace Roof terrace before construction
 

A couple months into 2015 he landed on his ideal digs: a penthouse with floor-to-ceiling windows that opened directly onto a wraparound roof deck for seamless entertaining at his famous parties and “salon” evening. So far, the apartment only existed in his head, but that didn’t discourage Grinda. He began to wrack Zillow and StreetEasy until, sure enough, he found a a three-bedroom place IRL that fit his description. It was already occupied, but he made an offer and bought it for more than $6 million.

Terrace-at-Night Roof terrace before construction
 
Unique-Downtown-Penthouse-for-sale-3
Roof terrace before construction
 

Price was not necessarily an object for Grinda, but he has a few thoughts for potential buyers. First off, “crazy arbitrage” makes the East Village much more desirable, financially, than the West. “Why would the cost per square feet, when you’re buying, be so much lower here than the West Village, which is seven minutes away by Uber?” he said. “Ultimately you are going to have convergence pricing here within Manhattan for sure, so it makes more sense to buy– to the extent you are doing it with economic logic, which I wasn’t, to be honest, but to the extent you are– it makes more sense to buy in the LES where you are paying way less on a square-foot basis.”

He says he’s enjoying exploring his new Lower East Side home, when he is in town– “it’s funner, it’s grittier, it’s younger. The best bars, the best restaurants are all here,” he said. I asked about his favorite spots and he pulled out an iPad. “I’m still new to the neighborhood,” he said. “This is where Yelp comes in handy.”

Since buying his penthouse, he has become frustrated with all the regulations he has to deal with, a drag on the fast-moving paces he’s used to in the on-demand world. “My recent experiences with construction and regulation both in the US and the Dominican Republic definitely highlight the differences between the unregulated, fun and fast-growing world of bits, and the regulated, painful and slow, world of atoms,” he wrote on his blog at the start of 2016.

6 Grinda looking at the terrace under construction (Photo by Kavitha Surana)
 

But for someone who appreciates the “grittier” and “younger” vibe and scoffs at what he calls “gentrified” Upper East Side, Grinda is not exactly worried about preserving those qualities in his new neighborhood. While Mayor de Blasio and the City Council have just hashed out rezoning laws in which developers will be required to include affordable housing in new buildings and protesters are fighting against luxury supertalls on the Two Bridges waterfront, Grinda thinks more construction should be encouraged with even fewer regulations, letting all kinds of buildings grow to the sky.

“The problem is, the zoning laws are extraordinarily restrictive,” he explained. “There are things that are completely artificial that, frankly, make no sense. Like air rights, landmarking stuff that doesn’t need to be landmarked, and so it’s much harder to build than it should be. And so as a result, the overall supply of housing in most cities is not growing nearly as fast as demand.”

He swiped through his iPad, showing me before and after photos of Shanghai over a 20-year period. “This is what New York should be doing,” he said, getting excited. “That’s liberal zoning laws. You can imagine what happened to the GDP per capita, to the population, etc., of the city, in that period.”

Grinda contrasted that with Paris (a walking, breathing museum) where there’s been relatively little new housing stock in the past 50 years. “It’s created these ghettos where, when you’re out of the city it’s awful, when you’re in the city prices keep on going up, but there’s no economic dynamism,” he said. “It’s like old money and it’s a stale city. It’s beautiful, but stale. I think New York is way more exciting, way more fun.”

Though he’s opinionated about such issues, he doesn’t really follow local politics. “I find it so petty and corrupt,” he said. “For me, home is where I am, and then I create my own life […] I don’t particularly pay attention to what is going on in the neighborhood.”

At the same time, he can’t imagine a better place to park his suitcase. And he argues encouraging a wave of more construction is actually the best way to keep New York diverse. “I don’t know, it’s like that magical energy in New York. I think it comes from dynamism and economic vitality,” he said. “Socially, artistically, intellectually it’s like the best place to be in the world. And I want it to remain that, so it needs to remain an economic center.”

The Old Man’s War Series by John Scalzi is a fantastic space opera

As you know, I am a huge fan of B.V. Larson’s Star Force and Undying Mercenaries series. While I really enjoy Ryk Brown’s The Frontiers Saga and to a slightly lesser extent Jay Allan’s Crimson Worlds series, they take themselves too seriously and don’t rival the joy created by Larson’s fun light hearted tone.

I realize I am late comer to Old Man’s War, but I loved the series at every level. Scalzi blows your mind with varying imaginative concepts time and time again. The book pushes us to consider whether we would we be willing to sign up to fight for a potentially fascist organization about which we know next to nothing if it meant avoiding certain death from old age and gaining a young new body. It deals intelligently about relations between various sentient species and earth and its colonies. Best of all, it treats all these topics with a great sense of humor which makes the books extraordinarily enjoyable

Of the authors mentioned above, Scalzi is by far the better writer. His protagonists have rich inner lives. I also loved how he changes protagonists and even alternates between first person and third person narrative forms across the various novels.

Read the series, it’s fantastic!
 
Oldmanswar