This week’s letter stretches from a simple decision making framework to why I disagree with JP Morgan’s market update.
I’m tempted to share many links in weekly letters, but realize more information doesn’t always help. Rather, I’m going to limit the number of links I share to focus on things I find to be helpful in the work I do with clients and personal side projects.
Enjoy.
Hell yes! Or no.
We’re showered with choices; whether it be looking for a new job or deciding where to spend time. Having the autonomy and freedom to choose is critical to our well-being. It’s a feeling of empowerment and it’s probably the greatest privilege of our generation.
The challenge with having almost infinite choices is that it creates anxiety. Deep down, there’s a small fear of making the wrong decision. Or simply missing out on alternative options when you select one.
A few years ago, I heard Derek Sivers on Tim Ferriss podcast, where he shared his decision framework. It’s as easy as “hell yes or no.” Derek built and sold CD Baby for $22M in 2008 and has since retired to work on things he enjoys like writing, making music and just tinkering and having fun.
I first started applying the “hell yes or no” framework when I was interviewing people at Facebook. Thousands of resumes and hundreds of interviews… it was difficult to select between people that were all highly accomplished. During our debriefs (post-final round), there was an understanding that the interview group has to have unanimous consensus before we extend an offer. When you’re reviewing applications of top candidates, there’s no easy way to distinguish between who’s good and who’s great. So, I simply focused on “hell yes or no” based on how the interview went. Good enough wasn’t actually good enough. Hell yes was good enough when it came to selecting candidates. There are many people that can do the job, but we needed people that can think creatively, operate autonomously while still working in Facebook’s high growth systems and parameters. I still followed the interview criteria that was in-place by the People Operations team, but combining their quant assessment with “hell yes or no” framework made life easier and helped us hire great talent.
I’ve since applied this framework to all important decisions.
So, what exactly is “hell yes or no?”
It’s that gut feeling inside of you. It’s an instinct that’s typically driven by your previous experiences.
I encourage you to lean into that when you’re making decisions. And when you make a decision, commit to it. Often, people are quick to jump when faced with hardships. Remember why you made the decision in the first place and remember why you were a “hell yes” to begin with.
3 Reasons Why the Stock Market Has Shrugged Off the COVID Surge (JP Morgan)
JP Morgan’s recent market update included the following three reasons (and why I disagree with them):
Despite the surge in cases, the rebound in economic activity has been impressive.
The virus surge is accelerating the adoption of digital technologies.
Markets are going to get over this someday, so they might as well get over it now.
You can read the short letter here.
Truthfully, this entire letter is a narrative bias. Here’s why I disagree with JP Morgan:
To the first point, economic activity has not been particularly impressive. Q2 GDP is likely going to be compressed -40%. The reason why economic activity won’t revert back to April is because cities will refuse to shut down; the painful process of closing and reopening was an effort to see what the denominator impact on mortality rate looks like. In other words, if millions of people are infected, how many people can survive COVID. Now that we have a large sample size and improved treatments, the likelihood of a complete shutdown is slim to none.
Setting expectations against a complete shutdown isn’t optimal and any result against that expectation will be positive. Again, this is a narrative bias.
To the rest of the points, the argument against it is simple: liquidity. The Fed’s ability to print money is driving the markets. It has little to do with adoption of digital technologies or markets recovering some day. If we can reverse Fed’s actions, the S&P would likely be trading at 2,100 right now. The fact that The Fed has openly committed to doing “whatever it takes” is a signal that we will continue to see a large delta between real economy and equity markets.
Links worth sharing
What startups can learn from Amazon’s cash machine. Highly recommended read if you work at a startup or run one. This article is from 2017, but it’s forever relevant. A focus on P&L is important because valuations are driven by EBITDA multiples for e-commerce companies. Combining that with smart management of cash conversion cycles (CCC), brands starts to see magic happen. Link.
US TV Upfront Ad Spending Will Fall $5.5 Billion for the 2020-2021 Season. I discussed this briefly in my last letter; primarily focused on UK ad spending. As large companies grapple with the pandemic and the recession, we will see brand budgets continue to be impacted well into 2021. Link.
Why the Most Productive People Don’t Always Make the Best Managers. If you run a team, you’ve likely experienced this. Best engineers don’t always make the best engineering managers. Best sales reps don’t always make great sales managers. And so on. Being a great leader means having strong technical competency in your domain and having a desire to elevate and amplify others. With WFH emerging as a permanent solution for many roles, it’s paramount that companies lead with OKRs and invest in middle management. Link.