Goldman unloads another business

I’m a bit annoyed this Monday as I woke up with a small scratchy throat. How one gets sick in the middle of a 80 degree heatwave in San Francisco is beyond me. I don’t feel awful and I’m going to try to run this one off later this afternoon.

I’ve been following Goldman Sach’s moves around retail banking and financial management for awhile. Many years ago, it seemed like the firm was making a big push to retail by launching Marcus. They also acquired United Capital in 2019 which signaled their foray into a tier or two below ultra-wealthy individuals and families.

This has changed recently as Goldman is now looking to get out of the retail side of the business. To my knowledge, Goldman hasn’t said too much about the decision. However, I can imagine they quickly found out that retail and mass market is much harder than just sticking to their ultra wealthy clientele. Retail clients in this world provide a fraction of the revenue and often times just the same amount of work as the ultra net worth clientele.

In other words, it’s not an easy high profit margin business unlike their ultra high net worth business. I suppose at some point Goldman came back and just said, look our strength is in the ultra high net worth area. We’re Goldman and we should probably just stick to doing what we do best which is serving the top 0.5%.

Will they come back and try to make another run at retail clients many years down the road? I wouldn’t be too surprised. These retail clients will one day hopefully be in that ultra high net worth bracket and I’d imagine the hope for growth will one day come back.

Calm before the storm

I’m enjoying a sunny Sunday here in San Francisco. Sophia and I got brunch and then knocked out a grocery run early in the day. I cleaned the apartment a bit and then cleaned up my inbox heading into this week. I’ll probably head to the park and start a new book shortly.

Next weekend, I’ll be in Seattle visiting friends and watching my Huskies take on Boise State. That will wrap up a busy summer of travel.

I expect things to get a bit hectic at work after Labor Day. There are a lot of signs of the IPO market opening and we’ve got a lot of work to do to end the year strong.

For now, I’m enjoying the downtime. This next week should be relatively quiet. I don’t expect that to be the case much longer after Labor Day so I’ve got to enjoy the time I do have.

Dog days of summer

We’re coming on the unofficial last week of summer with Labor Day next weekend. It’s generally a period for people to squeeze the last of their summer travel out. A lot of the Secfi team is out of the office and a lot of our partners are as well.

The tech world isn’t neccesarily out of the office though as both Klaviyo and Instacart have filed to go public today. It’s been almost 2 years since the last notable venture backed tech company to go public. The closed window has been a tough period for many of us.

For me, this feels a bit like 2020 where things were quiet all summer. Then picked up significantly to close out the year. I’m not anticipating the same level of activity like in the fall of 2020 but there is quite a bit of hope on the horizon. I’m cautiously optimistic.

For me personally, I’ll probably take off a bit early on Friday and hit the golf course. Next week, I’ll close out my summer with a short trip to Seattle to watch my Huskies kick off the season. When I’m back, it’s going to be go time.

Focusing on what I have, not what I don't have

I have multiple conversations a day with startup employees and executives to talk about well, money. People reach out either looking for advice on money or to get money for their startup equity. Most of the individuals live in San Francisco or New York, so naturally the conversation usually goes into how expensive everything is.

And yes, it does suck a bit. My wife and I are not “wealthy” by any means. We haven’t gone through a huge financial windfall like an exit, but we make good money. And as two individuals in our mid 30s living in San Francisco, buying a home in the city is likely at best a few years out.

On top of all this, my job is to work with individuals who are close to going through a big windfall like an IPO. I get a first hand look at just who I am “competing” with in the SF housing market. It ain’t pretty for me.

I believe there’s two ways to look at my situation. One is to try to change your life style and do everything you can to make more money to be in the that next tier of wealth. The other is to just change your mindset about wealth and happiness. I aim to do the latter.

There’s always going to be pretty wealthier than you. That have more things than you. That have more free time than you. Chasing that fruitless effort that will lead to a life of unhappiness chasing something that is unattainable.

I’ve been fortunate to live a good life. I have an amazing wife who I love. I have great friends who care about me. I could always have more money, but that’s everyone. Instead, I try to live my life focusing on what I do have.

Wall Street will be Wall Street

I’m finishing Liar’s Poker by Michael Lewis finally. It’s a book that’s been on my read list for sometime and it’s as good as advertised. For those not familiar, it’s a book about Wall Street antics particularly at Salomon Brothers in the 1980s. The book is centered about Michael’s experience as a bond trader at Salomon Brothers during the peak of money making and the eventual downfall of the firm. As you can guess, it’s an inside look into how Wall Street firms such as Salmon prioritized firm and individual profits over their clients’ needs.

The viral talk of the day on FinTwit, ahem X-Twit(?), is on Chamath’s defense of his SPACs. He’s been fairly vocal in defending himself despite nearly all his positions losing the majority of their market cap since they’ve started trading publicly. In one Tweet today, he even mentioned that he didn’t lose money and blamed another individual for losing money for not selling when he did.

On one hand, I suppose you can say that Chamath was trying to do something different and in the age of social media and was a lot more public about things to do some good. You can even say he was trying to do the right thing. On the other hand, it’s hard not to see the similarities between most/all of Chamath’s SPAC deals and a simple pump and dump scheme. One in which retail investors are almost always left holding the bag.

As I see what’s happening today, unfortunately it’s blatantly obvious to me that nothing has changed in today’s Wall Street compared to Michael Lewis’ Wall Street in the 1980s. Institutional investors such as Chamath will always hold the upper hand in these situations. They’ll create or revitalize investment vehicles such as SPACs to line their pockets, and then be able to get out of them ahead of the average retail investor.

It’s not a fair situation and it’s never been a fair situation. Wall Street will always be Wall Street.

The myth of startup equity

I don’t know what percent of people join a startup primary for the potential equity payout, but I’d imagine it’s a good percentage. Everyone knows someone’s friend or cousin who become a millionaire when their company went public. Facebook’s graffiti artist made over $100m in startup equity. Most people won’t say it, but a lot of people join with wide eyes and high hopes of that one day becoming them.

Unfortunately, the reality is that very few startups actually get to an exit. Even fewer get to an exit that results in gigantic paydays that you’ve heard. And when they do, they often take many years longer than what people think. For companies that exit at a $1b valuation which is very difficult to do, very few people comparatively will actually make multi-millions of dollars.

Don’t get me wrong, most employees who go through a $1b+ exit will have a great payday and a lot of people will be financially comfortable for their lives. But it’s probably a far cry from the dream of each person making $10m+ each. In order for that to happen, you’ll have to be a fairly early employee at a company that exits at $10b+ like a DoorDash or Uber. Of course, those are very rare.

For everyone else at a company below $1b, the reality is that your equity likely won’t have any buyers at the moment even if the company is promising and growing. Secondary buyers are mostly interested in later stage companies with larger than a $1b valuation. Unfortunately, I don’t think the majority of startup employees understand that. We get inbound messages all the time from people at early stage companies looking to liquidate their equity.

I’m biased at Secfi, but I think everyone could benefit a bit from more equity education. Companies need to be doing more to educate their people and keeping expectations real. Employees will be better off and they can stay focused on keeping their heads down and grinding.

A splurge of a summer

I was catching up a bit on Sophia and my finances last night before bed. I was far from the early 20s panic of seeing my credit card bill after a long weekend, but it wasn’t pretty.

Sophia and I have been on a bit of a splurge. We started out by taking a fairly expensive trip to Japan for two weeks followed by a trip to Santa Fe. We’ve had a lot of friends and family visit as well meaning lots of expensive dinners as well.

That’s led to some much higher than average credit card bills these last couple of cycles. I don’t feel great about the amount we’ve spent this summer, but at the same time, I’m also of the belief that we need to be enjoying the time and freedom we have now. Things may change in the near future which will include a lot more nights staying in as well as much less travel.

As we wrap up summer, I’ll also be looking to tighten up our spending a little bit as well. We’ve had a great summer, but it’s time to tone things down a little bit before it becomes the new norm.

Friday afternoons

Like pretty much everyone in the working world, I love Friday afternoons. Of course, it’s the end of the work week, but more importantly, it’s my sacred time to catch up on life and start the weekend right.

I’ve had a pretty good routine for the last year or so on Fridays. I usually work from home and get an extra 30 minutes of sleep. I’ll usually do a few calls and then focus on getting stuff done. I’ll block my Friday afternoons off to get stuff done.

I’ll grab a nice lunch somewhere delicious, and then go to the gym for a quick end of the week workout. By 2, I’m usually posted up at a sunny cafe to switch things up. I’ll save most of my admin and creative work on Friday afternoons. Performance reviews, reviewing product designs, and writing newsletters usually fall to Friday afternoon for me. It’s a sacred time where I don’t have many, if any, clients calling and I can focus on my checklist.

Doing the right thing

I’m currently reading “Liar’s Poker” by Michael Lewis. It’s a great look into the 1980s Wall Street world where all the stereotypes were largely born. The book is a somewhat comical view into what happens when there’s a lot of money to be made for the firm and their wallets by taking advantage of their clients. It was a time where not only ethical codes were broken but these firms likely would fall in today’s definition of fraud.

Of course, these Wall Street firms created millionaires of young employees who were okay with navigating the grey and slinging shit products to their clients. I’d be lying if a lot of that was not still happening today. While we’ve gone a long ways since the days of Solomon Brothers in the 1980s, we’re still in a world where money talks. Many will still break ethical obligations in order for short term profit. Despite maybe not being as cutthroat as Wall Street, I’ve heard some horror stories in our world of private company stock.

At Secfi, we operate in a world that is different than the world that Solomon Brothers operates in, but there are still similarities. Our clients are not just large investment firms like Solomon Brothers deals with, but also retail individuals. Our clients trust us to help make the best decisions for them and to provide the best products. That adds an extra element where we need to be extra careful.

One of the big things that has never changed since we started Secfi is that we will always do the right thing for our clients. We’ve gone to great lengths to ensure that. Of course, policies and handbooks exist at Secfi, but we make sure to talk about and celebrate when we do the right thing for our clients, even if it jeopardizes a deal. Culture is what you do, not what you say you do.

It’s not always easy though. We’re in the business of financial services and we make money by selling financial services. Often times, our products aren’t the best fit for a client. Telling them not to do something or sending them to a competitor obviously may hurt short term profits. But that is a trade off we’re always willing to make.

Doing the right thing is always the answer.

Playing the IPO game

I just read that Vietnamese automaker VinFast has just gone public via a SPAC. The initial price was at $23B and the shares jumped up to $85B Tuesday. Things have settled down a bit today but the company is now valued at more than VW, Ford, GM, and BMW.

It seems that speculation is still very much alive despite the pull back in the public markets. Given the recent public market debuts, investors seem to be willing to buy new public market entrants. That generally bodes well for the tech market as perhaps some companies are now more open to going public.

Of course, I don’t think many are expecting VinFast to keep trading at these levels, but who knows. For now, it seems like investors are willing to play the IPO game and there are a ton of companies in the IPO backlog. It’ll make an interesting next couple of months to close out the year.

The quest for perfection

On the drive back from Tahoe, I started to listen to an old podcast I liked in the pandemic times called Work Life by Adam Grant. The podcast covers different tips and tricks from a scientific standpoint on how to make work not suck. While many people can see perfectionism as a good thing, there’s clearly a lot of downsides in chasing something that is unattainable. This particular episode was around battling perfectionism in life and around the work place.

I wouldn’t call myself a perfectionist by any means today, nor when I was growing up. Although I would consider myself someone with perfectionist tendencies at times when I was younger. During my adolescence, I was scared to make mistakes both in school and outside of it. In high school, I played football and felt that one of the things always holding me back was that I played really tight… always scared to make a mistake although that was part of the game.

I don’t know if there was a specific trigger for me that changed, but I suspect that it had something to do with work and grad school. There really is no such thing as perfect in the tax and finance world, and uncertainty is just part of the game. I’ve also worked in a startup for the last 5 years where things often go wrong rather than right. We’re always operating at least a step below optimal.

Adam Grant did bring up a lot of topics that hit close to home though. Although not a perfectionist, I am definitely hard on myself like a perfectionist can be. I often feel that my life and work life needs to be a perfectly linear arrow pointing to the top right or else I’m failing. It’s an awful habit and has caused me a lot of self-confidence just like happens with a perfectionist chasing something unattainable.

Secondly, I’ve also realized how incredibly hard I am on myself on the golf course. In a game of imperfection, I’ve beat myself up time and time again for making mistakes. Beating myself up over making a bad or less than perfect shot usually results in more bad shots. In chasing perfection in golf, I’ve actually talked myself into thinking that I’m an awful golfer when in reality I’m fairly above average.

Grant and his guests he brought on suggested that instead of chasing perfection, you should simply chase constant improvement. I think I’ll be a much happier person both at work and on the golf course if I do that. My performance in both will likely follow suit.

Life is cruel and beautiful

I’ve had a bit of a weird morning to kick off my week.

I spent 5 days up in Lake Tahoe with my best friend catching up and just enjoying life doing things that I love. I played a good amount of golf and spent time at the beach. Being up in the mountains with the sun shining down really made me appreciate life. I was really sad to leave yesterday, but I had a great weekend.

The script flipped a bit this morning as I was scrolling Instagram while eating breakfast. I found out that someone I know through mutual close high school friends just lost his mom and sister in a tragic car crash yesterday. If this wasn’t bad enough, this same person went through another tragedy 15 years ago as he lost his father and brothers on the same day.

For someone to go through something like this once in their lives is tragic and devastating enough. But for someone to go through something like this twice losing all your siblings and parents in your early 30s… I can’t even fathom. Call it luck or fate or just life, but no one deserves this. I feel just freakin’ awful for him and hope he is one day able to find peace in his life. He’s suffered enough for multiple life times.

This is yet another reminder that life can be really cruel at times. Everyone will go through hardships and tragedy at some point in their lives. The optimist in me always tries to focus on the positives in these times. If there’s no mud, there’s no lotus. In other words, there’s no happiness or growth without pain and suffering. I’m trying to stay positive today, but it’s admittedly a bit hard.

Zoom fatigue

Nowadays I spend at least half my working hours on Zoom calls with clients, partners, or internally. If I compare myself to 5 years ago, the average hours in meetings has slowly crept up. I do think that this is part of moving up on the org chart and your career.

As you advance to higher levels of the org chart, you’re naturally going to be spending more time in meetings and doing more strategic work versus just grinding work out individually or with a small team.

Unfortunately a by product of this is Zoom fatigue and it’s a real phenomenon that I’ve experienced a lot, especially recently. I generally like talking to people and like the social interaction. At the same time, after 6+ hours of calls a day, I find myself just absolutely zapped. By the time Friday hits, I’m usually in a position that I don’t want to speak to many people.

I don’t have a good solution to all this. I’ve heard that turning off the camera facing you will help with this and I’ve tried that. But at the end of the day, talking to people for hours upon hours is just exhausting whether it’s in person or via Zoom.

For now, I’ll be trying to limit meetings as much as possible and be focused on my sleep, rest, and recovery. To extent possible, I’m going off camera and taking things via phone call.

Money talks

Partnerships are an incredible accelerator for businesses, but particularly startups in fintech. There’s a large amount of synergies between firms in our space. Relationships are the most important part of any partnership. Like any relationship, whether personal or business, you need to nurture those relationships constantly in order to ensure success.

At the end of the day though, money talks. Most partnerships in business are formed in order to mutual generate revenue or business together. You can have the best 1:1 relationship with any partner, but if you don’t hold your end of the bargain, that partnership will not be successful.

For us, a partnership really begins when we start generating revenue together. I always tell our partners to let’s start small and see what it’s like working together. Once we have a deal or two under our belts, we can start the discussions on a broader partnership and further strengthen the relationship.

The push back to the office

I’m about to take off to South Lake for a couple days of remote work and a weekend up in the sun. I’ve been lucky that my best friend moved up there and has an extra bedroom for me. It’s been a nice vacation home to visit every couple of months.

On another note, it appears that companies are finally forcing employees back to the office. Out of all companies, Zoom is now going back into the office. I’ve seen various other startups of different sizes also asking employees to move to an office or leave the company.

I had predicted that this would start happening more especially as the market turns, but I never would have thought that Zoom would be one of the companies leading the charge.

I am a supporter of the hybrid work model where people come into the office regularly, but have the ability to work from home or elsewhere when they need to. I believe this provides the best balance of making sure employees are collaborating, but at the same time catering to everyone’s expanding.

I do think the straw that broke the camel’s back will be because of low impact employees. There are a lot of people candidly taking advantage of remote work and a lot of people just would be better in an office. I’ve seen and heard some crazy stories over the years.

I expect this trend to continue quite a bit more towards the end of the year. I can see companies setting a deadline starting in 2024 as well.

The PwC farm

I was just reading the news that a fellow PwC alumni had just been promoted to CFO at Tesla. It was really awesome to see one of your own get the nod at one of the top tech CFO jobs. I am still overall a fan of PwC despite the fact I have been vocal in the past that I probably wouldn’t have joined PwC again if I could redo it. I learned a lot from my five years at the firm and met some amazing people there. I’ll always be fond of my time there, but it just wasn’t the right fit for myself.

I can see why that firm is a breeding ground for people in management. You join the firm and are immediately thrown into the fire on many projects. It’s really sink or swim for your first two years. The ones who make it get promoted and the ones who can’t are forced out or take easier jobs for better pay.

Those that can stick around can make Manager in 4-5 years and be in charge of up to 10 direct reports at a given time. You’re immediately thrust into meetings with executives of the biggest company in your vertical. You’re given new client and revenue goals AND have to deliver on the projects that are time sensitive. Those that can make it are given a lot of responsibility by the time they’re 28.

The next years after that are spent on working with more clients. Those that are good with clients and bring in new business will eventually make partner. The technical experts are often given the title of managing director. It’s a fairly lucrative career although many will argue that the pay does not equal the time spent working.

For as much flak I do give PwC from time to time, I do believe they do a pretty damn good job in pumping out motivated business leaders and weeding out the ones who don’t belong. That usually leaves means a solid base of hard working alums and employees.

Recent portfolio moves

I couldn’t have asked for a better Monday here in San Francisco. It’s sunny, 75 degrees and perfect. No matter how much rest I get or how excited I am for something at work, Mondays are always going to be a little bit of a drag. But this weather definitely helps.

I haven’t written much about the public markets lately and that’s largely because I’ve been fairly cautious with my investing there. Most of my portfolios are in index funds given my net worth right now, but I have some allocated to individual stocks.

For the past year and half, I’ve largely been a seller of individual stocks. I have have nibbled on a few positions but given the risk of the markets, I’ve turned towards indexes as a safe haven. I expect to become more of a buyer in the next few months if we see things continue to remain steady.

On the private side, I have become much more active. I’ve largely used my private investing as a way to diversify my positions and take a few moonshots. I’ve focused a lot on defense tech and space when I’ve made individual investments. I haven’t been able to get the exposure to space or defense in the public markets and have supplemented that with investing in startups.

Given the advancements in space tech and the current world environment for defense, I feel really good about some of the shots I’ve taken in the private markets. All that said, I’ve had to display a lot of restraint when it comes to these investments. I’ve been really excited about some opportunities in the past, and where I went wrong was overextending myself on the size of those investments.

At the end of the day, they are still risky private companies and I need to do a better job at making sure it remains a small part of my overall portfolio.

Another weekend in the books

I had a great round today at Corica Park in Alameda right across the bridge. I had a good front 9 and shot a 45 while leaving a lot out there. I lost a bit of focus on the back… or I might have had one too many drinks and ended up shooting a 49 on the back 9.

My swing feels pretty good overall, but I’m consistently pushing my irons right. It was frustrating as I couldn’t put it all together to break 90, but at the same time I can’t be too upset as my miss is consistent. I know what I need to work on and it’s fixable. At some point, it’ll all come together.

I’m fortunate that I have the opportunity to golf with close friends almost every weekend. I’m not taking it for granted as I know that my weekly golf outings may end soon with other priorities coming up. For now, I’m loving being on the course once a week.

I’m tired from a long day in the hot sun, and I’m ready to hit the hay. We’ve got a lot of things going on this week at work and I’m juiced to get back to it. It’s been this long since I’ve been genuinely excited to work. It’s a great sign.

RIP Pac-12

The news broke this morning and I was equal parts relieved and sad. UW and UO will be formally accepting bids to join the Big 10 conference.

As a die-hard UW football fan, I’m really glad that we made it out and got invited to the “big league”. Our athletic department is no longer in jeopardy and we’ll be flush with more cash. At the end of the day, it was a neccessary move in order to stay relevant in major college sports.

Unfortunately, the Pac-12 looks to be dead at this point. Decades of history will be destroyed in the next few weeks as we align to the new age of college football. Everything seemed inevitable once USC made the decision to jump to the Big10 last year.

I feel awful for some of the other schools in the conference that will be left in limbo. Cal and Stanford may still make it to the Big10. The Arizona schools and Utah will move to the Big12 and stay somewhat relevant. But for WSU and OSU, they’ll be in a tough position and likely destined for the Mountain West. They’ll be in a dire financial situation and this all but puts them out of the Power 5 conversation and out of Power 5 money.

It’s really sad. I’ve had a lot of issues with the Pac-12 especially over the last year. It was mismanaged and has largely been a disaster. But there is a lot of history there. College football as we know it is over and we’ve officially entered the new age. I’m glad we get to participate.

The old guard departures

We’re at the point about 5+ years into the startup journey that a lot of the early employees have been hitting their 3+ year mark and have started to branch out to something different. That’s pretty expected as most people nowadays don’t often stick at a company longer than 3 years, but it’s a bit sad nonetheless.

These people were the early believers in Secfi who busted their asses to get us off the ground. They endured a lot of late nights and sucker punches and stuck through it to get us to this point. I’m fortunate to call a lot of these soon to be former colleagues friends as well.

Of course, I would love for them to stick around longer, but people move on and nothing lasts forever. I’m of the belief that good managers know your employees can leave, but great ones expect them to leave. I’ve been expecting and seeing a lot of these departures over the last couple years.

It’s been really sad to see some of the early folks who have built Secfi go, but I’m always excited for their next journeys.