[HN Gopher] Coinbase (2013)
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Coinbase (2013)
Author : rmason
Score : 48 points
Date : 2021-02-25 19:59 UTC (3 hours ago)
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| 3327 wrote:
| Fred motherfukin Wilson. from being a ball on Castaway to running
| a top vc fund and writing a clean essay with clear conviction
| with clear reasoning.
|
| What a legend.
| wellthisisgreat wrote:
| I wanted to look up Castaway but managed to have the "Oh"
| moment before looking at the first result
| maxrev17 wrote:
| I'm gonna start altbase, get ready for the alt coins! ;)
| rtrdea wrote:
| Binance?
| aqme28 wrote:
| I wonder if he would have done better simply investing in
| Bitcoin. The price in May 2013 was about $115, so that would be a
| 400x+ return.
|
| Of course if Coinbase never got funded, I doubt BTC would be
| worth what it's worth today.
| zeroxfe wrote:
| > I wonder if he would have done better simply investing in
| Bitcoin.
|
| Hindsight's 20-20. Especially when it comes to investment.
| secondbreakfast wrote:
| Conservatively the round here valued the company at $25m. Pre-
| dilution that's a 4000x return, likely 2000x-3000x post-
| dilution.
| koolba wrote:
| Should have taken _that_ money and bought bitcoin, and then
| Tesla, and then bitcoin again, and then...
| PragmaticPulp wrote:
| Given the estimates for their valuation at the time, this was
| probably a significantly better investment than even $100 BTC.
|
| The adage holds true: The best position during a gold rush is
| still to be selling picks and shovels.
| adventured wrote:
| > The adage holds true: The best position during a gold rush
| is still to be selling picks and shovels.
|
| That adage is false. I'm routinely amazed at how unchallenged
| it goes when it's so obviously and demonstrably false. People
| just won't stop repeating it.
|
| You want to own the gold mine (ideally with plentiful
| reserves that you can extract at a competitive cost). You
| want to own the oil / oil rights.
|
| The mining majors do dramatically better than the companies
| selling mining equipment, during a gold rush / commodity
| boom. The comparison isn't close.
|
| The big oil companies do dramatically better than the oil
| equipment sellers/makers during an oil price boom.
|
| When oil hits $120 it's not the equipment makers suddenly
| making the most money. It's Exxon, as they watch their
| annualized profit hit $50 or $60 billion, which is more than
| every oil industry equipment maker on the planet combined.
| And that's just Exxon, you've got a dozen other big oil
| companies rolling around in a similar profit explosion. And
| have you noticed the oil majors very rarely go bankrupt? They
| not only benefit the most during the gold rush, they tend to
| endure.
|
| The so called pick & shovel makers / sellers are among the
| last to benefit during a boom, they have mediocre pricing
| power 99% of the time (except for a five minute peak during a
| commodity boom), and they're among the first to get smashed
| when the gold rush turns against them. They're left sitting
| on inventory they can't move, frequently go bankrupt because
| of it, and most of the time have mediocre margins (they're
| almost always selling a quasi commodity low-value product
| with numerous competitors). If you're going to sell a
| commodity, it's best to be selling a high-value, high-demand
| commodity and be a first tier position (meaning you own the
| commodity). It's also ideal if it's difficult to compete,
| meaning it costs a lot of money to bring new supply on-line
| (which is true in mining and oil extraction); and then if
| there are some cartels that help to regulate over-supply,
| that's a big bonus. You'll find pick and shovel makers /
| sellers have few protections, are far easier to compete with,
| and there are no juggernaut cartels (much less superpowers
| and major nation states) propping up their prices.
|
| Most major industries have tiers of benefit, or pyramids of
| value. You want to be in the first / top tier, which is
| owning the gold mine or oil. The shovel makers are several
| value tiers down.
|
| An example of how this works (and it's pretty similar in most
| industries): the alcohol beverage industry. The top tier is
| Anheuser-Busch InBev and other big makers, they have the
| strongest position, best margins, are able to dictate terms
| to the tiers below them in most cases, and pull the most
| profit out of the system. Next down you have agencies, that
| handle things like marketing, advertising and distribution.
| Then you have suppliers of low-value commodities, the pick &
| shovel makers, that provide eg cans, bottles, cardboard, and
| some manufacturing equipment. Depending on the industry,
| occasionally tiers swap a position (in some industries the
| equipment makers - eg in the semiconductor industry - may be
| more important than helper agencies, but they're never first
| tier regardless). Next down, at the bottom, you have
| retailers (whether Walmart or independent liquor stores),
| they get the final little itsy bitsy crumbs of margin, and
| are constantly under pressure every which way on pricing.
| Margins almost always weaken as you go down the tiers, and
| pricing power does as well.
|
| The oil industry works that way. The mining industry works
| that way. The shovel makers are not anywhere near the top.
|
| If you get to choose, you want to be in the position of Intel
| or TSMC, not Applied Materials or LAM. You want to be Apple,
| not Foxconn or the company selling lower value pieces of the
| phone. You want to be Visa, not the company manufacturing
| plastic card blanks for Visa; you want to be Coca Cola (own
| the brand), not the company selling aluminum cans to them.
| The first tiers in the pyramid extract far more value on
| average than the shovel makers.
| PragmaticPulp wrote:
| The modern oil industry isn't a valid comparison to a gold
| rush. It's relatively mature, stable, and operating at a
| global scale that has been captured by a few dominant
| players.
|
| The adage is specifically about the gold _rush_ because it
| created a frenzy of people rushing into an industry looking
| to get rich quickly. Some of them did, but many of them
| lost more than they gained.
|
| Meanwhile, the people selling the tools to everyone hoping
| to get rich on the gold rush made a lot of money no matter
| what.
|
| > If you get to choose, you want to be in the position of
| Intel or TSMC, not Applied Materials or LAM.
|
| Obviously, if we get to choose with the benefit of
| hindsight then we will choose the winners. This strategy
| will be perfect as soon as we have a time machine
| available.
|
| It's not easy to choose the side of the winners ahead of
| time, though. That's the point.
| tlb wrote:
| Original discussion: https://news.ycombinator.com/item?id=5671088
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