107th Edition – February 21, 2021
He who sells what isn’t his’n must buy it back or go to prison.An old Wall Street Jingle
1. What Cryptocurrency is Number 2 Behind Bitcoin?
On any given day on the homepage of Coinbase, we’ll see Ethereum holding strong in the second spot, but lagging far behind Bitcoin.
I think we owe the father of the co-founder of Ethereum a ‘thank you’ for the wisdom he shared with his son while he was a college student. Vitalik Buterin was a boy genius who was a math and computer whiz kid. He became enamored with cryptocurrency when his father introduced him to Bitcoin.
During his college years, he reached a crossroads – stay in college or hit pause on his studies and start learning everything he could about cryptocurrency. His father offered this advice.
You know what? If you stay, you will have a very nice, guaranteed job at Apple, Google, whatever. You’ll make $100,000, probably more. If you drop out, it will be different, more challenging in life. But you will learn so much more than you learn in university.’”Simon, Daniel P.. The Money Hackers (p. 149). HarperCollins Leadership. Kindle Edition.
The rest is history. Vitalik published the Ethereum White Paper in 2013 at the age of just 20. Great story. There’s more in chapter 8 of The Money Hackers which reads easy and makes the world of fintech less intimidating to understand. Great book.
2. GameStop – Nothing New Under the Sun
In the world of stocks, the game of corner involves two parties – the bull and the bears. Bulls buy. Bears sell what they don’t have, but promise to give the stock back to its owner(s), hopefully at a much lower price, on a specified date. Since I’m not a stock exchange expert, I’m not sure if GameStop technically qualifies as a corner, but it sure did look like it over the past 30 days.
Before GameStop, there have been many other corners. Only Shakespeare could have dreamed up the one occurring some 100 years earlier.
Clarence Saunders created the modern-day supermarket, Piggly Wiggly just before 1920. Saunders also licensed the name to small operators to adopt his practices. When some of those small owners (Saunders did not own them) declared bankruptcy, short sellers took notice.
Saunders caught on to these short sellers that were driving the stock price down. He borrowed $10 million and started buying as many shares as available. The stock had been trading for around $50 a share before the short selling started. Afterward, the price dipped below $40.
As Saunders cornered the market, the ploy worked. The stock price topped at $124. But that’s not the end of the story.
3. A Pyrrhic Victory of Shakespearean Magnitude
A pyrrhic victory is a feat where the losses far outweigh the gains.
That’s what happened to Clarence Saunders. He had good counsel, but he acted on his own ignorance. Short sellers came out largely financially unharmed when the stock exchange did two things: 1) they suspended all trading of Piggly Wiggly shares, and 2) delayed the deadline more than once for short sellers to fulfill their obligations.
Short sellers got the last laugh because those extensions to settle up allowed them to find shares over the counter at a discounted price to repay Saunders. Saunders wasn’t expecting shares of stock, he was expecting cash which he badly needed to repay his bank.
You can guess the rest of the story. Saunders was forced out of the company he once started. Ultimately, he would start another chain of grocery stores that would survive the depression.
Intrigued? You can read the rest of the story in Business Adventures by John Brooks – see Chapter 8, The Last Great Corner.
4. Pyrrhic Victories in Growing Businesses
There’s nothing sexier in business than making the decision to start scaling.
Some authors have made millions on the topic and boutique consulting firms can make a bundle in selling Strategic Planning that promises high and fast growth at a limited cost.
I’m naturally a conservative thinker who also happens to be a skeptic until all the facts have been gathered and interpreted. But I’m also human. I could be wrong in my conservatism and skepticism.
Still, the concept of pyrrhic victories applies to all of us working in high-growth, fast-growth companies. Consider using the term smart-growth instead. Smart growth means we’re following a set of beliefs that we adopted and embraced before the growth process. It means we’ll constantly question both the negative and positive consequences during the growth journey.
We’ll find many bumps and craters along the road to growth, but hopefully, we’ll be able to navigate what is invisible to us well before we encounter difficulties. This is the complete opposite of the mindset of Clarence Saunders.
5. The 60% Principle for FP&A Team Members
Every smart-growth company needs an FP&A team. Every FP&A Director needs a strong team to support the management and leadership teams of those smart-growth companies.
When I spoke to the ThoughtWorks Global FP&A Director this past week, Daniele Martins stated that FP&A leaders need to focus more on just technical skills. She stated that 60% of their ongoing learning should be in the areas of learning how to relate, partner with, and even challenge others. Her favorite words in describing a team member are open, flexible, reliant, and the ability to share (insights) with others.
Along those lines, we discussed the beginner’s mind, a mind with no ending to learning and growth which requires a great deal of humility.
We’ve not heard the last of Daniele Martins. She’s the ideal FP&A leader.
Podcast – In my opinion, Stacey Barr is the number one performance measurement specialist around the globe. She’s also the author of 2 books on the topic. Wherever you listen to your podcasts, look up CFO Bookshelf, and wait for our interview with Stacey next week.
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Always be learning and growing.