Sunday, August 16, 2020

Trump in Bay Area!

 Summary:

  • Tax cuts massively benefited California’s tech sector.

  • Trump avoided new major conflicts, and focused on ending wars. Californians love it.

  • Bay Area needs serious help with infrastructure and public schools. Trump can cash upon this opportunity.



“And just as I promised the American people from this podium 11 months ago, we enacted the biggest tax cuts and reforms in American history.” It was Feb 2018, when Trump was mentioning his latest accomplishment. I dug into the details of tax cuts, and thought “Yeah, another political gimmick!”


2.5 years later, I must admit that I totally underestimated the sort of impact the tax reforms are going to have - and the sort of lift tech sector will get from these reforms. Besides tax reforms, there were a number of things Trump did which align closely with liberal values and helped Californians. Personally, I think Trump can give Biden a run of his money if he campaigns in California and Washington. 


Here is Trump’s potential speech for Northern California which can turn the tide for GoP in the region:


"Dear Californians,


I am here to talk to you heart to heart, and highlight some important aspects of my presidency which your so called liberal leaders will never want you to realize. I’ve been hard at work to protect the American businesses and hard working employees and entrepreneurs. Not only that, while I’ve always been about America First, I’ve done some important things globally which Obama or Biden can never match. I am going to explain to you why I am the best candidate for your vote based on liberal principles: 


  1. Unlike Obama, who went about killing 10s of thousands of innocent women and kids in Libya, Afghanistan and Pakistan - I DO NOT HAVE BLOOD OF INNOCENT WOMEN AND KIDS ON MY HANDS. Obama and Biden did thousands of drone attacks, aerial strikes and covert operations in Middle East which resulted in civilian casualties and I refrained from such atrocities. Excessive use of force resulted in MORE retaliation and resentment against Americans and made us more unsafe. Biden has BLOOD ON HIS HANDS of innocent civilians, whereas I don't. I eliminated ISIS while protecting civilians and Americans.

  2. From an economic perspective, I gave tax breaks which benefited Silicon Valley and Bay Area the most in the entire country. I understand how hard you guys work to earn your living. My tax breaks enabled most of you to save tens of thousands of dollars in taxes. Not only that, it helped your employers to earn more profits, which resulted in higher pays and higher total comp for you. Compared to me, Obama added Obamacare taxes to your salaries, which does not benefit you in any way. If Biden wins, you can expect taxes to be raised on your salaries and on your employers - leading to lower salaries and even lower take-home pays.

  3. Being an entrepreneur at heart myself, I understand how important is freedom to innovate. This is the reason I’ve asked to remove 2 laws for every single new law being made. I want to give inventors more freedom to innovate, and not to stifle your innovation by putting more regulatory burden on you. I am an advocate of smaller government and more individual and business liberty. Compare me to any liberal leader and you will find that my policies align more closely with interests of innovators and entrepreneurs than anyone else.

  4. For the safety of your families and jobs, I’ve moved strongly against illegal immigration. I understand that Californians are very empathetic and accommodate illegal immigrants as well, it is still important to ensure rule of law in this regard. Think about this: if illegal immigrants can break law in matters of immigration, they can potentially break law in any other matter as well. Therefore it is important to ensure rule of law in every aspect of governance, including immigration. 

  5. For the pandemic control, while I came down heavy handed to block travel from China, I upheld the values of freedom and liberty by not mandating immediate lockdowns or internal travel restrictions. California and Washington were the early states where virus was observed in USA. We live and breathe our values, and while we could have been as draconian as China and forced everyone to stay at homes for months, we chalked out a middle way between personal liberty and virus control. Compared to European countries like Italy and France, California did really well and has a much lower mortality rate. We worked hard to provide the ventilators, tests, masks and other PPE to our front line medical staff. While there is always room for improvement, we’re proud of our efforts in this regard.


Most importantly, as you’ve seen, I am a man of my words. Unlike career politicians, I work very hard to keep my promises. Here is what I am promising you if I get elected again:


  1. World’s best internet and wireless connectivity. In the post Covid world, internet connectivity has become more important than ever and we want Bay Area to be number 1 in innovation and adoption as well. We will invest heavily in not only 5G rollout, but will work on war footing with our top brains to establish American leadership in connectivity and speed. 

  2. World’s best infrastructure for San Francisco Bay Area. While Covid19 has forced adoption of remote work, we are witnessing the in-person work culture returning gradually. It is a shame that Silicon Valley is the innovation capital of the world, yet it has the most pathetic roads and infrastructure ever. The liberal leaders are only busy creating more regulations and hurdles for innovation, whereas you end up spending hours commuting every single day. I guarantee that I’ll work with the best of the brains to reduce door-to-door commute in San Francisco Bay Area to a fraction of what it is today. I will create federal projects to ensure a next level of connectivity between all towns in Bay Area, eliminate the bottlenecks, have speedy public transit systems and create sufficient capacity in infrastructure for growth for the next 50 years. A portion from Bay Area tech giants capital gains and corporate taxes will be dedicated towards these projects and their long term maintenance.

  3. Best schools for your kids. It is yet another matter of shame that most public schools in Bay Area are really below standard. I will make a federal committee to work with state and local governments to raise the standards of these schools and will provide federal funding to uplift the public schooling in Bay Area. I would invest heavily in our coming generations to keep us at world number 1 position in terms of innovation and knowledge.

  4. Environment protection. I understand that the environment is an important issue for Califonians and you guys are passionate about keeping your cities green. I admit that I made mistakes in this regard in past, but I am happy to learn and fix them. I will back EPA to continue with its mission for environment protection while protecting jobs for American workers. 

  5. I understand that the Bay Area needs highly qualified resources to fuel its growth. I will work with top brains in the tech world to create federally subsidized online and in-person education programs to fill in the expertise gaps. We want Americans to be able to qualify for the highly demanding jobs in Bay Area, likewise, we want our tech sector to have a continued growth path. Keeping Silicon Valley at world number 1 spot for innovation will be my top priority. 

  6. Even lower taxes. I will further reduce taxes on American workers and middle class, so that you get to keep more of your hard earned money. I want America to be rich, prosperous and leader in every aspect.


Thank you and God bless America."


Sunday, March 8, 2020

5 Steps to $50 Billion for LinkedIn

I've been using LinkedIn since 2004, and I must say that LinkedIn has so much potential that it has only scratched its surface so far. In FY 2019, Facebook’s annual revenue was $70B, and LinkedIn brought in $6.8B. Is it possible that LinkedIn can get in similar ballpark revenue as Facebook in a reasonable time frame - say, 2 years?

In order to explore the opportunity, let us examine a few stats first:

                                                Facebook       LinkedIn
FY2019 Revenue (USD)
   70.6B              6.8B
Total users                           Unknown         660M
Monthly Active Users       2.27B              310M
Main revenue sources*    Ads                 Talent Sol, Ads
Median connections/user 200              500-999
Daily time/user in min      58                  10

*Revenue sources totaling more than 80% of company revenues have been accounted for. For the purpose of keeping blog focused, smaller revenue streams have not been included in analysis.

Note that Facebook earned almost 10x more than LinkedIn despite being a much thinly connected platform compared to LinkedIn. Given this discrepancy, LinkedIn for sure has the potential to earn in a similar ballpark. If LinkedIn can increase daily user engagement from 10 minutes per user to say 40 minutes, and fix a few things, the author believes that $50B per annum revenue is very much achievable for LinkedIn.

The 5 Steps:

Here is what needs be done:

1. Be a Business Network Platform instead of Job Seeker/Recruiter Platform:
LinkedIn needs to come out of the recruiter/job-seeker mindset and think like a business social network. A more engaged audience from a business perspective will mean a more valuable advertisement platform. Make content front and center of the platform. Make user profiles look like their business (or professional) social networks, not just glorified CVs.
Here are a few tips to consider:

- Make users’ public activity front and center of their profiles so that the content in people’s profiles keep changing frequently. This will invite more people to check each other’s profiles and activities. Limiting to only 3 recent posts makes most of the profile stagnant, and not interesting enough for a revisit.

- Let people tag others in photos and videos. Use face detection technology for auto-suggesting tagging in photos. Let connections suggest tagging in photos. Let the networking effect take new roots.

- Promote LinkedIn Groups, like Facebook is aggressively marketing their groups features. Bring back polls feature, add group search feature, allow users to create events on LinkedIn and let people have a powerful platform for business social collaboration and networking.
- Let people create events from post and invite each other.

- Hire sales people who would pursue businesses focused on creating business content (like Bloomberg, Fidelity etc) to create accounts on LinkedIn and publish content there. Give them an increased default reach of say 10% of page followers per post compared to 6% of Facebook.

- Let people create polls in posts.
- Allow people to import their phone contacts in LinkedIn, and send invites to people imported from phone contacts. This will accelerate the platform growth and will bring in the next 300M users.

- Allow people to invite connections to their business pages. I do not know how I will create a critical mass of followers on my business page!

2. Make Advertising Brain Dead Easy!
If there is one takeaway from this blog, this is it: Make advertising super brain dead easy! This is the area where LinkedIn really under-performs compared to other platforms.
There are number of opportunities which can be availed:

- Allow users to promote their own posts. Add an option for paid promotion while creating posts, and from the pre-created posts. Note that this is a novel idea, and not done before - possibly even patent-worthy.

- Make advertising so easy that it can be done within 1 minute even if a user has never run an ad. Create a simplified version of ad platform with basic options, and let users switch to the full interface for advanced options. Current advertisement platform is a nightmare to use! I gave up on it while trying to advertise - and I am a professional developer!

- Allow businesses and users to promote their posts while creating the post itself!

- Create notifications for the ads run by connections (up to 3rd degree connections, maybe) on LinkedIn. This of course may need to be automatically toned down in case too many notifications start getting created for a user. Note that this is also a patent-worthy, novel idea and has never been done before!

- Allow people to run promotions from phone app! I cannot believe I have to add this point, but I cannot create a LinkedIn ad from the mobile app! I’ve run thousands of dollars worth of ads on Facebook, and every single time more than 97% of the audience viewed my ads on mobile app. This also means that the people publishing the ads are highly likely to be using phones while trying to create ads!

The author believes that a super difficult to use ads platform is blocking over 80% potential of LinkedIn!


3. Skills and Products Marketplace:
Allow people to sell their time for $ amount, making LinkedIn a skills marketplace. Freelancing is $1T market, and LinkedIn has been sitting on the gold mountain and doing nothing about it! All LinkedIn needs is to allow people to publish their hourly cost, mention that they are accepting projects, and let companies find and hire the appropriate freelance resources. With Glassdoor.com and Salary.com, the taboo for pay discussions has been long gone - everyone knows what others are getting paid!

Not to mention, allow people to promote their offerings, and allow companies to promote their freelancing requirements. More promotions will mean more revenue for LinkedIn.

Moreover, LinkedIn can also create a business marketplace. Allowing businesses to sell their products on their LinkedIn pages, and auto-creating marketplaces for different verticals and pooling in products from diverse companies for sales on marketplaces.

4. Fix the search for content:
The content on LinkedIn must be made a first class citizen in order to increase the time people spend on platform. Currently, if I search “10 ways to increase sales” on LinkedIn search, I get shown people’s profiles by default, and I have to click Content to see content results. The UX team needs to think out of the box, and figure out intuitive ways to show both content and profile results in default results list (maybe, side by side). This will also increase revenue for search ads.

5. Enable Developers to Leverage LinkedIn Platform:
Now that LinkedIn is owned by Microsoft, make the LinkedIn API supremely developer friendly. Remember what steveb said: Developers Developers Developers Developers!! It is very important to win the hearts and minds of developers to have a budding community of enthusiasts to drive the growth of platform. Facebook, Salesforce, Amazon, Microsoft, Google, Apple etc all have state of the art developer tools and platforms available, augmenting innovation for their platforms. Each of these company’s developer-facing platform is earning revenue in the range of $2B to $70B.

For example, if LinkedIn can allow my company Socol Corp to use appropriate apis, we’ll be happy to integrate our conference calling product with LinkedIn authentication, and give access to audio, video, conference calling and live webinars to all LinkedIn users for free. This will be superlative to Facebook’s messenger and live videos offering as the professional communication needs to be kept separate from personal, while still keeping it open to the public for a number of scenarios.

Conclusion:
In a nutshell, if LinkedIn can make itself a business-centric platform, it has a much bigger earnings potential. Earning $50B revenue will be a cakewalk for LinkedIn when advertising is easy, marketplaces are developed, and when developers are empowered to fill in gaps for LinkedIn.

After all, almost all money is earned first by businesses, then by professionals!





Full Disclosure: I am long MSFT, FB, CRM, GOOG and S&P 500.






Wednesday, February 5, 2020

Kick Starting Economy!


The Problem: Economy!


In 2020, the single biggest challenge faced by PTI government in Pakistan is economy. The GDP growth rate is down to 2.5%, the tax collection targets are falling short, PSX stock exchange is still in the red since PTI got the government, the inflation is highest in South Asia at over 14% and in general, there is massive unrest in public due to economy.

What if this can be fixed in a manageable way, in relatively short time?

What if there is a fundamental mistake being made by policy makers which is stagnating the economy?

Why is there is no significant movement in market despite the tens of billions of dollars poured in CPEC and other mega projects?

The Key Reason


The answer to above questions can be summarized as follows:
There is no cash available to do business!

In other words: The federal interest rate is so high at 13.25%, that businesses are starved for cash and are dying left and right. Remember: cash is the oxygen for business. If I have to make a payment of Rs 1,000, but my business earned only Rs 500 - I cannot take a loan of Rs 500, meet my obligations and turn around business next month to return loan and keep on going. I’ll have to shut down the business if I cannot earn more than my expenses and I do not have any cushion.

However, if I have credit available on easy terms, I’ll leverage credit to stay afloat and grow my business.

In short:
No cash => No business => No jobs => Low GDP => Poor, hungry public => Everything seems expensive

Cash available => Businesses thrive => Jobs created => GDP growth => Thriving public => Things seem affordable


The Data: Kamyab Jawan Program


While we can look at case studies of USA, European and Japanese economies on how they have low inflation despite having super low interest rates - the single most important data point we have is the data from Kamyab Jawan Program.

The key point to note is that Kamyab Jawan program is offering loans at 6 to 8% interest rates - and over 1 million people applied for it! Compare it with the regular loans, and the demand for bank loans actually declined in 2019. Declining demand for loans is an early indicator of the economic slowdown!

Whereas, Kamyab Jawan Program has demonstrated the extreme desire in Pakistan market for affordable cash. Whereas, the same market is not willing to take loans at rates available from banks.

Instead of restricting the low interest rates to Kamyab Jawan Program only, why not just lower the rates for EVERYONE!

Managing Inflation for Essential Items


But, won’t lowering federal interest rates increase inflation? Not exactly. It is possible to have low inflation *caused* by low interest rates! The key point to understand is that the prices for essential goods can be controlled by matching the supply with demand. This way, the prices will remain in control regardless of interest rates.

Target interest rate


Okay, we agree on lowering interest rates from 13.25%, but what should be the target. My 2 cents will be to have a long term target to match US Federal Interest rate. USA Federal interest rate is 2% currently - and gradually lowering our interest rate to this level can be an ultimate target to go for. However, for intermediate term, the target can be set to 6% and achieved gradually in a time frame of 7 to 8 months (1% reduction per month).

To put things in perspective, Bangladesh’s rate is 6%, India is 5.15%, Japan is -0.1%, UK is 0.75% and Australia is also 0.75%.

Aiming for a super low interest rate like 2% in say, in 3 to 4 years time frame will put Pakistan economy in a growth mode like never before.

To get a historical perspective of impact of low interest rates, the key eras to review are:
  • 2002 to 2005, when the interest rates were in single digits, and GDP was growing at 6.6% annually.
  • 2014 to 2016, when interest rates went as low as 5.75% and economy grew at 5.8%
Lowering interest rate from below 6% will be a challenge as currently Pakistan itself rarely gets external loans at rate lower than 6%. However, I’ll write on it separately as we’re currently a long way from 6%.

An important point here is to stick with this decision consistently month over month for 6 months minimum, so that business community gets confidence in stable economy - and they invest with confidence.

Benefits


Here are the key benefits we can expect to reap from lowering interest rates:

1. Business Activity Spurred:
Affordable cash availability will help businesses as they will be able to leverage cash for growth and for surviving challenging times.

2. Job Creation:
More businesses will mean more jobs being created. Thus a key promise to create 10 million jobs will have a high likelihood of being fulfilled.

3. GDP Growth Compounding Effect
Growth in businesses and in job creation will directly result in GDP growth. A strong GDP growth will result in a compounding effect as growing economy attracts foreign investors and they will invest from fear of missing out (FOMO).

GDP growth => Foreign investment => Even more GDP Growth

4. Marginal Profit Business Creation!
An important issue with high interest rate is that any business with lower yield than interest rate will not be deemed feasible. Once the interest rates are lower, people will do businesses with marginal profit margins as well. This will not only help solve more public problems, but will create employment and economic growth.

5. Leverage using Fractional Reserve Banking
Currently, due to high interest rate, the fractional reserve banking cannot really work in Pakistan for any meaningful multiplier. However, once the interest rates are super low, we will see the leverage in action via fractional reserve banking.

If say we’re able to get 10x leverage by enforcing 10% of capital availability for banks - the net effect will be 10x growth in economy!

6. De-incentivized Money Stagnation
Low interest rates will de-incentivize putting money in National Savings, and will make people to deploy funds to work.

Currently, the flow of funds in Pakistan can be summarized in 2 key ways:

1. State Bank of Pakistan Prints Money -> Govt deploys funds -> Public gets money and puts in banks -> Banks put in National Savings -> Dead End!
2. State Bank of Pakistan Prints Money -> SBP Loans to Banks -> Banks put in National Savings -> Dead End!

Low interest rates will force banks to loan funds to people instead of stagnating funds in National Savings. Thus circulating money in country instead of making it reach dead end!

Summary


The summary of discussion is that an important decision needs to be made to kick start the economy. And the decision is to lower federal interest rates into single digits down to 6%, and stick with the decision for at least 6 months to see its effect.

In a nutshell:
No cash => No business => No jobs => Low GDP => Poor public => Everything seems expensive

Cash available => Businesses thrive => Jobs created => GDP growth => Thriving public => Things seem affordable