Welcome to Talk Money Weekly - where I cut through the noise and curate the best money-related topics from the web.
We are officially releasing this newsletter on Wednesdays alongside the TMW podcast, which comes out Wednesday mornings.
TMW Podcast #5: India's Covid Disaster. In today's episode, I give my hot take on what's happening in India and why the US needs to get involved. It's not only a humanitarian issue, it's a good business decision. LISTEN NOW.
On to the Newsletter!
📈 Markets & Business
As we discuss this topic on the podcast, I think it's important to look at the major critique of the US's stance on India's COVID problem. With 1.4B people, and over 350,000 cases PER DAY, the COVID spread in India is not stopping. They need medical supplies to treat patients and raw materials to produce new vaccines.
The US has a massive global PR problem. If it wants to remain the superpower, then it needs to act like one. The US took way too long to react to India's problem and should've sent oxygen along with other supplies (including vaccines) to India as a show of good faith way earlier. It also "does a solid" to one of the largest economic powers in the region. A friend of mine said "they should've sent supplies ASAP and plastered American flags everywhere. It was a wasted opportunity.
Instead, the US is dealing with local politics and possibly some Big Pharma lobbying. This comes down to money. Big Pharma doesn't want to loosen patents to allow other countries to produce at mass scale without getting paid. US really needs to step up its global presence, as China is eating her lunch.
Elon Musk is under criticism for selling 10% of Tesla's Bitcoin position. Dave Portnoy's position is merely trolling. It worked. Elon Musk AND Telsa owning Bitcoin are two different things. Elon Musk can own Bitcoin and hold it forever. He doesn't need the money. He doesn't need to sell it. Tesla owning Bitcoin is different. He's correct that they should prove Bitcoin has liquidity- the ability to buy and sell large chunks easily. Tesla is the first mainstream public company to show that this does in fact work. Also, 10% of Tesla's position is nothing. This could mean that they'll buy more in the future and just trying to prove a point to their shareholders who are skeptical of their Bitcoin position.
The issue is more on how this looks for Tesla's earning. Tesla made around a $100M profit on their sale of 10% of their Bitcoin position. That sale is part of their reported profits, which is a significant chunk. In a business that's dependent on selling cars and batteries, what does it mean when a big part of your profits are from sales of an asset that has nothing to do with your business?
I'm not 100% sure, but I think Wall Street can see through this. On the positive, it does allow Tesla to raise cash when they need it. So as their Bitcoin position continues to grow, they can always sell it for a profit and raise a bunch of money on their balance sheet. Let's see how it all plays out, along with Musk's appearance on SNL this Saturday.
Back with the Youtube videos! Highly recommend you subscribe to Johnny Harris's doc videos. I think he was formerly one of the guys who made the explainer videos for Vox. The quality is AMAZING. In this episode, Johnny explores why McDonald's ice cream machines are never working. Why? The same ice cream machines exist in most fast-food chains.
I don't want to ruin too much because I want you to watch this, but some businesses are simply pieces of shit. They purposely want you to pay for an ongoing service fee. Recurring revenue is great for any business, but when it's dishonest, this is where disruption comes in. There's always another company waiting for a chance to improve something 10X at a fraction of the cost. When will we see the next industrial ice cream maker come out of the startup scene?
Everything is about efficiency in fast food. From the frying itself to the ice cream process. The ice cream machines fast-food chains purchase create efficiency, but when you're dealing with large sales cycles, multiple locations and different franchise owners....it could be a hard industry to disrupt. SO, the question is. In the long run, will we see the lack of ice cream sales reflected in the McDonald's profits?
Highly recommend this thread if you're ever thinking about raising money for your business, or if you're just curious about how it all works. Taking money from Venture funds isn't meant for every business. You as a founder have to know this, and know what's the right move for you. Why? Because VCs want to invest in companies that have billion-dollar outcomes. They're ok with 9/10 companies going to zero. They just need the one or two hits. So they will pump money into companies in order to have that outcome. And if you die, it's all good for them but terrible for you.
Talking scenarios, I would rather own 70-100% of my company, and sell it for $25-40M. It's a good return and I don't have the headache of fundraising and pressure and etc. It also depends on the business. Some businesses need a TON of capital.
I'd also rather have 30% of $100M after 5 years. Again, great return, I still have my whole life ahead of me and don't have pressure to keep going bigger.
Once you get to that $1B range, the game changes. You have a bunch of people with money who are pushing you to go bigger because they need a much bigger return on their investment. It's go big or go broke. You now risk going to ZERO. You could be too big to be acquired and you could be burning through so much cash that you're not in a position to be profitable. You have so much pressure to grow, grow, grow and you now only own 10% of your company, or possibly less. I don't want to play that game, where I either make a lot of money or I make no money. I want financial freedom and I want personal freedom. That's just me.
That's all the news from this past week! If I was to make this newsletter into a Youtube show, would you watch it?
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