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patio11's profile
Patrick McKenzie
Patrick McKenzie
Patrick McKenzie
@patio11

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Patrick McKenzie

@patio11

I work for the Internet, at @stripe, mostly on accelerating startups. Opinions here are my own.

東京都 Tokyo
kalzumeus.com
Joined February 2009

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    1. Patrick McKenzie‏ @patio11 Feb 27
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      Some people believe businesses to be very difficult to determine the quality of ex-ante. I once held this opinion. On the basis of substantial experience, I believe I'd be much better at selecting successful businesses today than I was 15 years ago.

      2 replies 1 retweet 33 likes
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    2. Patrick McKenzie‏ @patio11 Feb 27
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      I also believe that the fundamental insights there are not particularly Deep Magick but rather are teachable. For example: ceteris paribus, if you don't have a billion dollars or the best distribution machinery around to subsidize you, B2B >>>> B2C for software companies.

      1 reply 3 retweets 55 likes
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    3. Patrick McKenzie‏ @patio11 Feb 27
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      I will add, and note that it is extremely socially awkward of me to elaborate further, that of 3+ million words I've written I counterfactually regret few claims more than (approximately) "You should value equity near zero." Believe that when I wrote it; have gotten smarter.

      1 reply 2 retweets 43 likes
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    4. Patrick McKenzie‏ @patio11 Feb 27
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      If the numerator is "companies at which people granted equity do well" and the denominator is "companies at which people are granted equity" -> low %. If the numerator is "people granted equity do well" and the denominator is "people who are granted equity" -> much higher %.

      3 replies 1 retweet 28 likes
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    5. Patrick McKenzie‏ @patio11 Feb 27
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      The difference between the two is that companies which materially derisk their businesses and are seen as doing so by investing professionals (and/or by customers) end up hiring vastly disproportionately to companies which are pre-derisking.

      2 replies 2 retweets 26 likes
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    6. Patrick McKenzie‏ @patio11 Feb 27
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      For a window, and a *shockingly long* window, they build a material amount of their compensation strategy around equity grants.

      3 replies 1 retweet 17 likes
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    7. Patrick McKenzie‏ @patio11 Feb 27
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      "AppAmaGooFaceSoft all build a material amount of their compensation strategy around equity grants, Patrick." I am aware of that, voice in my head.

      1 reply 0 retweets 24 likes
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    8. Patrick McKenzie‏ @patio11 Feb 27
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      I am low-key concerned about geeks treating equity not as a financial instrument with a payoff function attached to it and more as a tribal signifier, because the amount of the cakes geek bake which is denominated in equity is *extremely large.* To reprise yesterday:

      1 reply 0 retweets 28 likes
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    9. Patrick McKenzie‏ @patio11 Feb 27
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      If you loudly advance the opinion "I value equity at approximately zero" then people who have an informational advantage regarding what the equity is worth will say "Got it, in cutting this cake, I hear you want less equity and more flavors of fizzy water at the office."

      3 replies 2 retweets 63 likes
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    10. Murali Suriar‏ @msuriar Feb 27
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      Replying to @patio11

      Equity in a private company has effectively zero value. "When is IPO/acquisition", let alone questions of pricing and whether said company will last that long, make any alleged informational advantage highly theoretical. Equity in a public company is very different.

      1 reply 1 retweet 0 likes
      Patrick McKenzie‏ @patio11 Feb 27
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      Replying to @msuriar

      No, it does not, and you should stop saying that where people can hear you. If equity in a private company has effectively zero value, you should be willing to do a variety of trades with me premised on holding you to that belief.

      10:46 PM - 27 Feb 2020
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      3 replies 0 retweets 2 likes
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        2. Patrick McKenzie‏ @patio11 Feb 27
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          Replying to @patio11 @msuriar

          The less polite way to say this is "A bet is a tax on bullshit." Here's a trade: Airbnb is the well-known private company I'm least directly conflicted about. I will donate $50 to a charity of your choice. If Airbnb IPOs, you donate $500 to a charity of my choice. Want in?

          2 replies 0 retweets 0 likes
        3. Darth Covidious‏ @nycplayer Feb 27
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          Replying to @patio11 @msuriar

          How about I pick an AirBnB employee with equity, and we have an even bet over whether they see a windfall from an exit that recoups the reduction in salary they took for working at a startup? Obviously, some subjectivity there, but nothing that can't be agreed on in advance.

          1 reply 0 retweets 0 likes
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        1. Murali Suriar‏ @msuriar Feb 27
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          Replying to @patio11

          And I will - for example, any trade which will enable me to get a better mortgage. Getting lenders to take account of Google equity vesting schedules was tortuous. I can't imagine what having a conversation about a random startup would have been like.

          0 replies 0 retweets 1 like
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        1. Nate Gunby‏ @NRGunby Feb 28
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          Replying to @patio11 @msuriar

          Would you say there are significant expected value differences between the illiquid equity you have access to now and the illiquid equity someone who needs info from the internet to decide its value has access to?

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