Always Day One: The Mantra for Mega Cap Tech (Book Review)

Damon Runyon is famous for saying: "The race may not be to the swift, nor the battle to the strong, but that is how you bet.". And that's the way technology investors have been wagering the past decade, on the swift and strong; companies such as Amazon (AMZN), Facebook (FB), Alphabet (GOOG)(GOOGL), Apple (AAPL), and Microsoft (MSFT). Although household names, retail investors may not have an understanding why these companies have propelled the overall market since 2009, and why they may continue to do so for the foreseeable future. Market participants just stay long because the stocks keep going up. A no brainer. Always Day One: How The Tech Titans Plan To Stay On Top Forever, is a new book by Alex Kantrowitz, and answers all these questions and more. It's about what it takes to remain number one. Part prediction, part computing history, part human resources, and a whole lot of organizational behavior, Kantrowitz sets the record straight about the digital oligopoly with its tentacles in every aspect of our day-to-day lives.

The book's title Always Day One is the current version of a technology motto of yesteryear: only the paranoid survive. It's the mantra of the digerati, fashioned from Amazon's quest to make each and every working moment like the inaugural day of a startup. Don't look back, somebody may be gaining on you. As Kantrowitz states: "In the 1920's, the average life expectancy of a Fortune 500 company was sixty-seven years. By 2015, it was fifteen.". You have to stay hungry. Amazon started the trend years ago with founder Jeff Bezos. He entrenched "Day One" thinking into Amazon's corporate culture. Almost like a cult of personality, only it's the cult of an idea. "Day One" is the name of an Amazon building, it's the title of the company blog, and it's the recurring message in the annual letter to shareholders. Amazon is like the Pied Piper of the mega cap technology elites; it blazed a trail and was so successful, the others followed suit. As a result, instead of experiencing the corporate life cycle of a previous era, these companies have become more powerful as they've aged. Whatever it takes to remain numero uno.

So what is Amazon's secret sauce? For one, open communications in a horizontally structured work force unlike hierarchical silos in the more traditional organizations. Out of the five companies covered in the book, it's only Apple that's vertically organized. Secondly, Amazon, Facebook, Alphabet and Microsoft are all engineering centric. Again, Apple remains the outlier with more of a sales oriented structure. In development and production, Apple begins with a model or rendering created by their design team, then the supporting cast amalgamates the accoutrements including the operating system. Apple tends to work in secrecy. The other four companies don't. They begin with an idea and work backwards. Every person in these companies has a say with their respective internal communications systems that flow from the bottom of the pecking order to CEO. Legacy products and systems can be given short shrift if they don't move the company forward in the rough and tumble world of technology. Microsoft made that mistake by milking Windows under the Steve Ballmer era. His replacement Satya Nadella turned things around.

It's only Apple that Kantrowitz believes may have the toughest time remaining on top. According to the author, "Apple is having its Windows moment. It must leave iPhone orthodoxy behind and reinvent itself again to compete in the age of voice computing.". He makes a valid point with the iPhone thirteen years old. Other Apple products didn't take off or have been put on the back burner. For instance, Apple TV and the HomePod have inferior market share compared to the competition, and Apple Car has yet to come to market. CEO Tim Cook has a background in operations and is not a visionary. He's done a great job of leading the company since the passing of Steve Jobs, but Kantrowitz infers that Apple needs a major overhaul. This structural renovation can happen with or without Cook. The railroads went out of business because they thought they were in the railroad industry, not the transportation business. Apple is a communications company.

One trait the leaders of these organizations have in common is that they're great listeners. Especially Mark Zuckerberg of Facebook. That surprised me because his public persona appears to be more dictatorial. Facebook is vulnerable because they don't have their own operating system. Plus, the nature of social media firms is that it's a zero sum game. You're either on Facebook, or you're surfing the competition such as Snapchat (SNAP) or Twitter (TWTR). MySpace, Foursquare, Tumblr, and Friendster found out the hard way. Zuckerberg took a page from the Amazon playbook with their own company slogan of "One Percent Done" instead of "Day One". The CEO stays one step ahead of his adversaries with continuous feedback from not only the C-Suite, but the rank and file, too. He also likes dissenters to play Devil's Advocate. There's no "Corporate Yes Men" at Facebook as they used to say in the old days. Employee input has saved Facebook's bacon a number of times. Most notably, when they transformed from a desktop to a mobile corporation a decade ago. It was touch and go then, much the same way when they blatantly stole the "Stories" concept from Snapchat five years later. It kept the patrons coming back for more.

If you've been on the Internet since the launch of Amazon, you're probably familiar with the fates of search engines such as Northern Lights, AltaVista, Lycos and Ask Jeeves. You don't find Google in the dead dotcom group. Google rolled with the punches, and seemingly stayed on top under the direction of Larry Page and Sergey Brin. However, current CEO Sundar Pichai was instrumental in jettisoning the company from search, to a juggernaut in AI. Pichai came to esteem within the company with his work with the Chrome browser and Chrome operating system. Google became a formidable opponent to Microsoft that previously had a stranglehold on desktop applications. Under Pichai's direction, core productivity programs run through the browser. He also transitioned the company from a desktop, to a mobile computing organization. The current battlefield is in voice assistance with their product Google Home. Pichai runs the organization like an open source software project. It's a collaborative effort in company communication. As a result, Google Home is the biggest threat to Amazon's Alexa, not Apple's HomePod with the Siri voice recognition software.

Always Day One is a fascinating book. Because you're so familiar with the companies and products in the narrative, it reads a lot like Walter Isaacson's Steve Jobs. If popular music is the soundtrack of your life, then technical innovation is the film that accompanies it. Reading this is like watching a movie of your communications history for the past 15 years. But instead of being just about Apple's iterations as in Steve Jobs, you get the gamut of many of the major players in our digital lives. I believe technology investors will benefit tremendously by reading this. Although there are regulatory threats for all five of the companies covered in the text, they've all been winners from their adaptability. Kantrowitz has no kind words for former Microsoft CEO Steve Ballmer, but praises Satya Nadella. Microsoft is the Lazarus company of the group coming back from the dead under Nadella's leadership. He's not so sure about Apple. Lots of changes could be in store for the Cupertino, California mainstay if Kantrowitz had his way. From the book, it sounds as if Apple co-founder Steve Wozniak would like some changes to the organizational structure, too.

Book Review: The Deficit Myth: A Modern Monetary Theory Primer

Hot off the press is Stephanie Kelton's The Deficit Myth: Modern Monetary Theory and the Birth of the People's Economy. Although an economics manifesto, the writing style makes it easy to read. Nevertheless, it's a difficult book about a difficult subject: Modern Monetary Theory [MMT]. After finishing it, and rereading everything I highlighted, I still can't wrap my head around it. I bought the book wanting to learn more about our deficit, not only how it affects my investments, but my future as a whole. Instead, I got a narrative about MMT, and yes, the deficit is discussed in length. However, in the traditional macroeconomic sense, the only solution to the mounting deficit is for Uncle Sam to utilize MMT. At the outset, I believed that MMT would be an alteration to our current capitalist economic system, but it's not. It upends everything that's been taught in universities, and practiced by economists and politicians for eons.

Dr. Kelton has great credentials in her area of expertise, and currently teaches economics and public policy at Stony Brook University. Back in 2015, she was hired by Bernie Sanders to be the chief economist for the Democrats on the US Senate Budget Committee. Kelton is a crusader for MMT, not just a run of the mill maverick economist. Her beliefs are so far-flung, that Bernie Sanders is considered conventional in her eyes. His Robin Hood approach of tax the rich and give to the poor is yesterday's thinking. Not that she doesn't want to help the poor, she does, it's just the way you go about doing it. This, along with balancing the budget is antiquated in the era of fiat currency, which has been around since the early 1970's. Too many decision makers still have the mindset of the gold standard. According to Kelton, "It's got a folksy, kitchen table feel to it.".

Financier Warren Mosler, who is not an economist, is considered the father of MMT with his seminal book Soft Currency Economics, published in 1995. He believes that with the advent of sovereign nation fiat currency, such as the US Dollar, the government can just keep the printing presses running. This is in the form of hitting a keystroke on the FED's computer to create more money. According to MMT, there's no such thing as a deficit too large, unless inflation grows too fast. Then you have to pump the breaks until you get inflation under control. You do this by increasing taxes and/or decrease government spending. In addition, MMT advocates believe balancing the budget means full employment to insure price stability. Currently, congress looks at balancing the budget as a zero sum game. You need to tax more to offset expenditures. Because the government spigot is usually open in the MMT world, the mantra is spend first, tax later. In our current system, it's just the opposite.

In the MMT model, you always have full employment by creating government jobs when the private sector begins layoffs. The type of jobs Dr. Kelton suggests are in the health care sector for Senior Citizens, infrastructure and anything that helps society. In our current system, there is the FED dual-mandate framework where a certain amount of unemployment is considered beneficial to society as a whole. It's a balance between too much employment and too little to ward against inflation. According to the author: "The FED uses unemployed human beings as a primary weapon against inflation.". With the kinder, gentler MMT, nobody is on the dole, everybody that wants a job will have a job buttressed by a generous federal minimum wage.

There's an old Wall Street quip that astrology was invented so economics would seem like a more accurate science. Ninety-nine percent of economists didn't see the 'Great Recession' of 2008-2009 coming. They didn't forecast the bull market that began in March 2009, either. One economist that benefited from the 'Great Recession" was Hyman Minsky. Considered an outlier for 40 years, until his economic theory was utilized by the Ben Bernanke FED. However, Minsky didn't blow up an entire economic system, he built upon it. Minski believed in the free market economy until asset prices collapse, then you utilize government intervention. What MMT disciples are suggesting is a whole new way of looking at things. It's all government intervention. It's a tough sell.

According to Dr. Kelton, "About half of Americans say that reducing the federal budget deficits should be a top priority for the president and Congress. The book aims to drive the number of people that believe the deficit is a problem closer to zero.". She didn't convince me. A big problem she has is that she is equally critical of both sides of the political aisle. President Obama didn't get it, and President Trump doesn't either. If they don't understand the radical concept, then the masses don't have a clue. The only way you can make changes is through Congress. That's a body elected by the populace. The only elected official that seems to be on the same page as Kelton is Congresswoman Alexandria Ocasio-Cortez. In Philosophy 101 they submit a question to you: If a tree falls in the woods and nobody hears it, does it make a sound?

One thing I liked about The Deficit Myth is Dr. Kelton's stance on social issues. She believes in more assets allocated to healthcare, education, climate change, and infrastructure. One suggestion she has is a "Green New Deal" where we would have a 21st Century Civilian Conservation Corps. A practical solution to a very complex set of problems. What she doesn't address is all the displaced workers coming down the pike in twenty years from the roll-out of Artificial Intelligence. The government can only hire so many people to mow lawns and take care of the elderly. In addition, our current government is inundated with Milton Friedman disciples such as Larry "Lawrence of America" Kudlow and his minions of free market economists. For her ideas to come to fruition, she has to go through Congress, and the Republicans aren't going to have anything to do with MMT. Even if Kelton is correct, it's going to take decades for her ideas to be accepted, if at all.

If we go back a few generations of technology, there was the VHS vs Sony Betamax debate. Although Betamax was the superior product, VHS tapes won the war. Why? Betamax recorders cost more, so people opted for the less expensive product. In the public's eyes, traditional macroeconomic teachings will be perceived as the less expensive option. That's because our current system makes a fleeting attempt to balance the budget. It doesn't matter if intellectually her ideas are sound, it matters what the voters think. Kelton and the MMT crowd needs Congress. They won't get it. Personally, I lean left of center politically, and am still not sold on the idea. That said, I think it's a book about a concept that merits discussion.

It took a lot of courage to go out on a limb and write this. Dr. Kelton, the current public face of MMT, is probably going to get a lot of flak for it, too. It comes off as a Utopian ideal, an economic Shangri-La. Nevertheless, it's very well researched and written. Clear and concise, you will be informed by the plethora of economic statistics throughout the work. If you watch financial networks such as CNBC, and want to understand what talking heads such as Steve Liesman are talking about, this is a good place to start.

Book Review: Billion Dollar Fantasy

If you enjoy business stories about the digital age, then look no further than Albert Chen's Billion Dollar Fantasy. Not only is it a good first book, it's a good book, period. Ranks right up there with the more prolific writings of the current era, books such as Nick Bilton's Hatching Twitter, and Ben Mezrich's Bitcoin Billionaires. Subtitled "The High-Stakes Game Between Fanduel and Draftkings That Upended Sports in America", it's the story of aspiring unicorns duking it out for pole position in the burgeoning world of Fantasy Sports. Because of their global brands, sports fans and investors are probably already aware of the outcomes of the narrative: Draftkings (DKNG) is a recent IPO and Fanduel is controlled by ADR Flutter Entertainment (PDYPY). However, that doesn't take away from the sizzling story of how they got there. If you enjoy Fantasy Sports, investing, or tales of perseverance, this book is for you.

The account is told in chronological order, but also jumps back and forth to shed light on the history of Rotisserie baseball and fantasy football leagues. It's been said that you can't tell the players without a scorecard, and because there are so many major personalities in the book, the author includes a "Cast of Characters" before the preface. I found this beneficial because not only are the founders of both Fanduel and Draftkings highlighted, but some of the minor players which contributed to an interesting read - venture capitalists, professional gamblers and Fantasy Sports pioneers. Without it as a reference, I may have been confused as to who was who as the reporting progressed, except for the two CEO's.

Die-hard sports junkies have been playing handwritten Fantasy Sports games among small groups of friends for fifty plus years. As the Internet evolved, Fantasy Sports evolved, too. Electronic spreadsheets and personal blogs moved the betting pools to cyberspace; a cottage industry on the fringe. The multi-billion dollar industry as we know it today was launched from the loins of the demise of online poker. In the early 2,000's, the double-aughts, online poker was the craze where players could make life changing money overnight. Then the government shut down the industry. Uncle Sam deemed it a game of chance. However, as Chen writes: "Daily fantasy, like poker or blackjack, resided on a grey area on the spectrum: they were games of skill with an element of luck involved.". Fantasy Sports flew under the radar for years. Professional gamblers that made a living in online poker, made the switch to Fantasy Sports where unsuspecting minnows were ripe for the picking.

Although difficult to win consistently, the basics of Fantasy Sports are fairly easy: you pick a team, you make a bet, when your team wins, you get the purse. Between 2010 and 2012, aspiring entrepreneurs took notice, and professional websites for Fantasy Sports began dotting the electronic landscape. Beforehand, Fantasy Sports were occupied by media giants such as ESPN, CBS, and, Fox as tuck-ins to their digital empires. Mom and Pop bloggers working from home were on the other end of the scale. The middle ground was unexplored territory. When developers and avid Fantasy Sports fans discovered YouTube offered no original technology, just a website where you posted things, a land rush to be the next billionaire ensued.

Primarily, Web development is a young person's game and many wannabe Web kings emulated too cool for school Mark Zuckerberg of Facebook fame. It was also a time when the Great Recession of 2008-2009 became a distant memory and venture capital firms began to seed startups again. Now the game was who wants to be the next unicorn. If Zynga and Groupon can do it, why not me? Many Fantasy Sports sites were soon created, but it was DraftStreet and Fanduel that dominated the fledgling industry once the dust settled. Two lean startups before the lean startup rage in Silicon Valley. DraftStreet was the brainchild of Mark Nerenberg and his partner Brian Schwartz. Located in Great Britain, Fanduel was the innovation of Nigel and Lesley Eccles, a husband and wife team. However, that lead didn't last for long. There was a new kid in town, a johnny come lately called DraftKings.

Before DraftKings entered the picture, there was a piece of the pie for everybody. DraftKings, lead by CEO Jason Robins didn't see it that way - it was a winner-take-all game. They went hell bent for destruction. Robbins changed the rules of the game using a scorched earth policy and is described as crazy, reckless and ruthless. While competing executives utilized sensitivity training, Robbins went for the jugular. Draftkings was formed in 2012 by three Vistaprint middle managers including Robins, and by 2014, they were so aggressive that they devoured industry trailblazer DraftStreet. I'd rather be a hammer than a nail. That left two in the game with 90% of the market in tow - Fanduel and DraftKings. They were at the right place at the right time.

In 2015, both companies were worth a billion dollars. That watershed year also catapulted them to the forefront of American product branding as the two combined for $750 million in television advertising. Sandwiched between the GEICO and AT&T commercials, television viewers were carpet-bombed with 30 second spots hawking Fantasy Sports. If the two entities had combined resources, the excessive advertising spending could have been avoided, and the government scrutiny that came with unbridled promotions may have been minimized. A merger was bandied about, but they couldn't agree on who would run the new company. We're talking big egos here. Instead, they were stuck in the paradox known as the prisoner's dilemma where two individuals acting in their own self-interests do not produce an optimal outcome. The squeaky wheels got the grease, but the feds were hot on their tails with all the publicity.

I don't want to ruin the book for you, or make this a CliffsNotes review, so we'll cut to the chase. This is about the winner in today's investing and business environment. That winner is Jason Robbins and DraftKings. You may not like his tactics, but he followed the rules in the digital arena. They play hardball on Wall Street. To the victor goes the spoils. DraftKings went public in late April 2020 with Robbins at the helm. The stock has tripled in a few short months. Fanduel is controlled by an Irish bookmaker now. Both companies are battle tested, but DraftKings won the war. The story contains plenty of government intrigue, smoke filled barrooms off the Vegas Strip, and all you need to know about developing a startup. It's tale similar to Apple overtaking IBM or Facebook demolishing MySpace. If the movie rights haven't been picked up, somebody should get on it. I think you will really enjoy the ride. It's a page turner.

Book Review: Stephen Schwarzman's "What It Takes"

In high finance circles, Steve Schwarzman needs no introduction. He's the chairman, CEO, and co-founder of The Blackstone Group (BX), the world's largest private equity firm. If you aren't familiar with private equity, they deal in alternative assets, anything that's not stocks, bonds and cash. Blackstone buys, fixes and sells companies and real estate to large institutional clients such as pension funds and institutional investors. With the encouragement from former Treasury Secretary Hank Paulson, Mr. Schwarzman recently published What It Takes: Lessons in the Pursuit of Excellence. This is not an autobiography per se, but more of a business memoir. If you are business student, or have an interest in finance, this book is for you. However, because he goes into great depth about specific business deals, the general public may not enjoy it as much.

This is no rags to riches Horatio Alger story. Schwarzman comes from a middle-middle class family from Philadelphia back in the 1950's. A common and comfortable demographic 60 plus years ago. An outstanding athlete, he did his undergraduate studies at Yale and was a member of the Skull and Bones club, the secret society known for powerful alumni. Schwarzman also received an MBA from Harvard. A natural-born salesman, he was a go-getter from day one, and parlayed the enthusiasm and ambition into becoming king of the hill, A-number one.

That's not to say he didn't have his obstacles. In the late 1960's, Wall Street was controlled by white shoe WASP firms. At that time, there was only one Jewish partner in the investment banking universe. Being Jewish, he knew the odds were against him. Despite that, he took a job at Lehman Brothers. There was a glass ceiling, but it was beginning to crack. Schwarzman hit the ground running and broke that glass ceiling. He made partner in 10 years because of his excellent performance in Mergers and Acquisitions. It's a big feat when you consider how rampant Antisemitism was half a century ago. Although the movie Gentleman's Agreement won Best Picture in 1948, a film which is about Antisemitism in America, twenty years later, there still weren't many inclusive promotions. Schwarzman is a pioneer in leveling the field in investment banking where religious prejudices were rampant.

The rich are different than you and me. After 10 years at Lehman, Schwarzman had a house in the Hamptons and an apartment in Manhattan. Tells you a lot about investment banking, but you pay the price. As he reflects on his thoughts after his first assignment a Lehman, "This isn't Harvard Business School. These people don't fuck around. I'm living according to their rules. I had better learn to play by them.". And so he did. A quick learner, he acclimated himself to the rough and tumble world of finance: "Every point in every negotiation was a fight, with a winner and a loser. People in the business weren't interested in carving up the pie so everyone got a slice. They wanted the whole pie for themselves.". They eat what they kill.

With plenty of experience, and being frustrated with the corporate culture at Lehman, Schwarzman and Pete Peterson left the company and formed Blackstone in 1985. According to the author, "I had wanted out of Lehman because the ethics there had become so awful - the greed, the fear, the gutlessness, the hunger for power, the dishonesty.". This is about a third of the way through the book, and this is where he lost me. Much of this had to do with the fact it rehashes details about deal after deal after deal. If you're in finance, or an aspiring entrepreneur, the minutia would be a great value to you. But as a casual reader, I couldn't identify with the narrative. For instance, in Walter Isaacson's Steve Jobs, every page was engaging because most people have lived through the iterations of Apple (AAPL) consumer products. You could relate to it. Likewise, books about old school tycoons such as Howard Hughes have all the gossip about affairs with starlets above and beyond the business success. Despite Schwarzman's accomplishments, very little kept my interest until the last 50 pages.

I thought the book would have been much better if written as strictly a business text, or, as a more in depth look at his personal life. Instead, it's an amalgamation of the two which left many questions unanswered. As an example, his first marriage ended in divorce and he immediately goes into therapy. Schwarzman glosses over it with little explanation. Divorce is a big emotional event in one's life. Throughout the narrative, his two largest losses after founding Blackstone are Larry Fink exiting the company to form Blackrock (BLK), and Blackstone not financing Michael Bloomberg's fledgling firm. Those are missed opportunities, and Schwarzman took the blame for money left on the table, but they aren't life or career altering. I was interested in what made him tick, what motivated him.

Blackstone had the second largest IPO in the 1990's, second only to Google (GOOG). The section about the IPO was instructive, although Schwarzman didn't go into great detail about the corporate "road show". I believe his perspective would be educational to aspiring entrepreneurs. Also, the chapter about the 'Great Recession' of 2008-2009 is enlightening. Although Blackstone foresaw and prepared for the economic free fall as early as 2006, they got hurt, too. However, he doesn't mention the Crash of 1987, and, what implications it had on his two year old company. The Savings and Loan Crisis of the early 1990's (which cost taxpayers a bundle) was just a way to make a buck. But that's the nature of the beast. Investment banking is a grownup's game, and Blackstone is successful at it. As Schwarzman stated: "Deals that used to go to Goldman Sachs were now coming to us.".

Peppered throughout the book are subchapters with common sense advice and business tips. Subjects such as the trials and tribulations of being a startup, interview techniques and life lessons. Many times in the narrative the author emphasizes the network effect in human relations: it's not what you know, it's who you know. Social connect the dots. Schwarzman has a great sense of humor which makes the story more enjoyable than most finance publications. This comes to light when discussing all the pitfalls he faced. He's from the school of grin and bear it, and always seems to land on his feet.

The last section of What It Takes is about Mr. Schwarzman's philanthropic endeavors. I found it uplifting. In 2004, he became chairman of the John F. Kennedy Center for the Performing Arts in Washington, DC. This is in addition to his duties at Blackstone. His Rolodex filled with business contacts now includes the upper echelon in arts and entertainment. Plus, he made many political contacts to expand his investment banking firm. In the field of education, he established the Schwarzman Scholars at a prestigious university in China. An Asian version of the Rhodes Scholarship at Oxford. He's done a lot for investment banking, the arts and education, especially building relationships with China. The world needs more leaders like Stephen Schwartzman, especially with the country divided and burning. Nevertheless, it still doesn't take away from my view that in 200 pages of a 350 page book, the narrative wears you down if you aren't an industry insider.