Just came across this http://www.jacksonfish.com/blog/2008/02/04/and-this-is-why-going-public-is-a-non-goal/ and was reminded of a class I took this summer on corporations. I had a good realization in that class that really public markets afford a specialization or division of labor that focuses on capital allocation and leaves management to someone else. If you don’t need that specialization of capital allocation from someone else, and you don’t want to be beholden to that, you really shouldn’t be going public. There’s lots of excitement around IPOs and public companies, so a lot of people assume that’s the only route to go.
It’s also not clear trading publicly in the market is so great anymore. There is so much regulation, that now we’re seeing lots of private acquisitions.
Part of my goal with this blog is to keep better track of ideas I have on businesses I could start down the road.
One of the huge opportunities is personal finance. Here are some observations:
- The national savings rate is getting a lot more attention, and I think people are paying more attention to consumer credit debt
- I meet a lot of people who don’t understand how to make their money work for them and truly appreciate what it’s doing
- One friend owns a condo and is reluctant to take out a home equity loan to pay for improvements in their kitchen
- One friend thinks they should pay down their home loan faster
- Another follows the news in the stock market and feels powerless amidst all the bad news in the press
- Internationally lots of new people are coming onto the playing field of capitalism with little training from their parents who grew up in a totally different political situation
- Lots of boomers are going to start cashing out their 401k and pensions
- It’s hard to see the forest from the trees, a lot of the tools out there today are for paying bills and managing the tactics of finance–not helping me see the big picture
- Apps like Money and Quicken make it seem like the goal is to get things balanaced and accurately account for everything–that’s basically a giant waste of time!
- I have to log into Fidelity, Bank of America, Amex, and Chase all separately to make transactions. Money or Quicken will aggregate data in a one-way approach, but that doesn’t really help me take action
- Whenever I listen to the radio, there is a deluge of ads for refis. This has got to be artificial. There really cannot be that much human value in this. We’ve started to see a correction in this, and we’ll see more I think.
Some companies I want to explore more: Geezeo, Yodlee, Mint, Voyant, BoulevardR, Quicken, Wesabe.
Another way to think of it: what would it mean to “zillow”-ify the finance space.
Finally, and perhaps most interestingly, the advertising industry is going to grow hugely. No one seems to be really cashing in on the notion of pay-per-spend advertising. It’s all about pay-per-click. There are clearly privacy issues, but utlimately their is a HUGE goldmine of information in people’s spending habits.
Forbes has publised a list of the most and least profitable business to start.
“Of the winners, little surprise that professional services–accounting, law, design and medical-related firms–accounted for eight of the top 10. Two big perks here: constant demand (no matter what the economy is doing, people will still get sick and still sue each other) and relatively low overhead. Bean counters trumped all, with a 25% average pretax margin. Next came the legal-service firms, at 21.6%, followed by dental offices (20.9%) and specialty design shops (17.6%).
Looking for causes behind low and high profits, the unstated concept of moat comes up:
Another nice thing about professional services is all the repeat customers. “If someone’s been doing my taxes for 20 years, why would I switch?” says John Czepiel, professor of marketing at New York University’s Stern School of Business. “There’s a perceived cost of switching that keeps customers coming back.”
As for those bleeding red ink, the reasons are myriad. Low barriers to entry, huge fixed and variable costs, lack of product differentiation, and little or no pricing power with buyers and suppliers are but a few.
The most interesting to me: Specialized Design Services (e.g. interior designers, industrial designers, graphic designers). As far as the rest, I was surprised to see banking, accounting and medical care so heavily represented. I don’t think of them as being high margin things. I think it would be interesting to see someon take one of the less profitable ones, especially Amusement and Recreation Services (e.g. golf clubs, ski resorts, marinas, fitness centers and bowling alleys) and make it profitable. The people I meet day-to-day are craving something fun and unique to do. I imagine part of the difficulty there is creating something high value, but also having a margin left over. People have high expectations when it comes to entertainment, and are none the less very frugle.
I just finished watching this week’s show. It looks like this year is shapping up to be a reverse of last year, where now several women get peeled off the team early on. I am pretty sure they’ll be back in the boardroom next week too, because it doesn’t look like they have any real energy on their team.
One thing that was really disappointing this week is that so many of the people on the team kept bashing the leader. I mean it’s great if you can spot weaknesses, but I didn’t see many of them doing something to step up themselves and fix the situation–they were content to just complain about it. I don’t think they showed one clip of the Mosaic team having this kind of infighting. They just focused on the task and got it done.
I will say I was pretty impressed both of the teams set up an entire restaurant in a single day. It wasn’t really clear from the footage how they chose their dishes and figured out the preparation. I am almost wondering if they had a preselected chef who figured that part out.