Nikola is overvalued because it chose the wrong technology for road vehicles. The fair market value is cash plus some multiple for engineers.
Disclosure: the author is short Nikola, meaning he financially benefits if the share price falls. Please consider this bias while reading.
Falsifiers: (1) Nikola abandons hydrogen and develops worldclass long-haul BEVs; (2) building hydrogen infrastructure and hydrogen vehicles is cheaper than estimated; (3) battery innovation lags and BEVs struggle to match range and rechargability hydrogen vehicles.
The bull scenario for Nikola is simple and alluring: hydrogen-powered trucks and road vehicles will provide a lucrative on-ramp…
Entrepreneurs often share startup ideas and hear, “Isn’t X doing the same thing?” This is actually the common case as only one company can claim the first-to-market mantle.
It’s natural to feel discouraged or wonder if the window of opportunity passed, but history has proven unequivocally: first-to-market guarantees nothing.
Never abandon an idea because competitors exist. Abandon an idea because it lacks meaningful differentiation, because no one wants it more than the alternatives.
Here are inspiring examples of companies and products that flourished despite entering the market after others:
Steve Jobs is one of the most extraordinary entrepreneurs and CEOs in history. Here are five lessons on entrepreneurship and business learned by studying him from afar (post inspired by Tren Griffin):
WeWork is a hybrid of AWS and Marriott. Because WeWork leverages technology and scale to lower costs, increase flexibility, and improve the office experience, companies across the world will outsource office creation and management to WeWork. Co-working is merely the springboard.
WeWork is an overhyped-Regus with a frail capital structure, no scale benefits, no network effects, and dangerous liabilities. It will likely collapse during a recession.
Although bias is unavoidable, many people unfortunately allow preconceived notions to compromise their WeWork judgments both positively and negatively.
These two questions help expose bias. If someone offers an opinion yet cannot answer fundamental…
Market hypothesis 1: Electric vehicles (EV) are a hyper-growth market.
Market hypothesis 2: Autonomous vehicles are a hyper-growth market.
Product hypothesis 1: Tesla has an advantage in battery, powertrain, and other technologies needed to produce electric vehicles.
Aluminum costs ~$0.05 / ounce while gold costs ~$1.2K / ounce. The disparity is caused not by differences in inherent utility, but by “blind faith,” i.e., people consider gold valuable so it is.
If people can will gold into being worth ~24,000x more than aluminum, why can’t people will Bitcoin into becoming digital gold? And then a global currency? They can, but like tulips, the risk is this blind faith one day evaporates.
The difference between Bitcoin and tulips is Bitcoin may get integrated into digital products the same way gold was integrated into physical products like jewelry.
Is this guaranteed? Of course not, especially since Bitcoin might get surpassed by superior product/technology like Friendster did with Facebook.
Is this not a fair way to reason about Bitcoin’s risk/reward?
Increasing competition generally lowers prices in a free market. This is a fundamental law of industry and not a novel concept.
How can we promote competition in the drug industry? Two ways:
Valid counter-arguments are the first may kill or harm consumers while the second may kill innovation as investors will no longer fund research and development.
Both are reasonable, so how we can mitigate these risks?
Balancing regulation with safety is the key, as regulatory hurdles are what inflate development costs. If we can lower…
Uber believes self-driving cars will mirror air travel. When tech and regulation standardize, this may be true. However, geography and regulation vary much more for cars than planes and thus offer more room for differentiation.
If Waymo doesn’t have a multi-year lead, Uber may be right, and this post is pointless. If Waymo does have a multi-year lead as many insiders assert, Alphabet faces an interesting choice to either vertically integrate like 1960s AT&T or horizontally integrate like 1990s Microsoft.
Both approaches leverage Alphabet’s playbook of cultivating consumer habits and network effects, but vertical integration leaves little room for a…
One of the challenges in developing and releasing a product is what to name it.
It’s expensive and time-consuming to generate awareness of and trust in a new product so many companies reuse an established brand, a tactic called brand extension. Some people use different terms in different contexts, but the fundamental question remains the same: do you assign the product an independent name or do you leverage an existing brand?
The benefits to reusing a brand are reduced costs and increased trust. Consumers are naturally more trustworthy and accepting of an Apple product, for instance, than an unfamiliar company…
Opendoor.com is the latest Silicon Valley startup to attack the real estate industry.
Essentially, the startup buys and resells homes. My initial reaction was the Opendoor founders were smoking something amazing. Buying homes requires a staggering amount of capital, and a startup speculating in real estate seems like a recipe for bankruptcy, not IPO.
Then this thread on Hacker News prompted me to probe deeper.
The greatest startups appear crazy or dumb on the surface, but are actually sane and smart underneath. …