Digital CAC Problem

With impending recession fears causing growth stage startups to tighten the belt, the problem of rising customer acquisition cost (CAC) and the overdependence on digital ads is growing more apparent. According to @chamath, $0.40 per $1 of venture capital raised by startups is spent on digital advertising on FB, Google and Amazon. Newly funded startups tasked with finding rapid growth have instinctively looked no further than digital ad platforms that take money and spit ROI faster than a slot machine. But when a long line of cash-flushed companies compete online for attention from the same niche customer, the cost per click steadily increases. This ultimately creates a vicious cycle where acquisition cost dwindles any actual margin while leaving the digital ad giants even larger.

The allure of digital ads especially for data-obsessed marketing teams is the quantifiable feedback. Ad platform dashboards that break down $X of spend into an observable Y% conversion rate create an intoxicating positive feedback cycle that rewards the short term gratification of naive ad strategies over other long term sustainable marketing strategies. Sure there are plenty of traditional offline channels (billboards, event promotions, swag giveaways, etc), but the problem is these channels are hard to reliably measure and therefore scale. Companies with larger experimental budgets will throw large $ sums of money at them, but that spend is still a minority chunk compared to the > 50% of marketing spend allocated to FB/Google ads. The trap with digital ads however is that over time, niche target audiences become saturated and all of a sudden a startup looking to scale finds itself spending higher CPM for a worse conversion rate.

Customer acquisition costs are increasing exponentially.

The limitations of digital advertising long term forces startups today to think critically about organic distribution and sustainable marketing channels. The ideal marketing channel must not only offer wide reach and targeting of niche audiences but must be able to attribute and numerically report its own value (downstream conversion %) to justify spend. Granted it could reliably perform below the CPM for the average FB ad, such a service would be able to subsume the large marketing budget traditionally spent on those ads. This is why I’m relatively bullish on influencer marketing as a long-term channel (although not convinced there will be a scalable FB-style software-only influencer marketing platform to provide this). Companies like b8ta and Storefront are offering a return to offline brick-and-mortar stores but are equipped with data to track impressions/conversions that incentivizes brands to increase spend (their big insight is framing rent = CAC). I feel certain there are other similar opportunities to solve both the online conversion problem and the associated attribution problem that could potentially topple the digital ad monopolies.

What I’ve been consuming recently

Innovation Can’t Be Forced, But It Can Be Quashed

America’s Havana

People Are Failing AP Tests Because Of The iPhone’s HEIC Format

Doordash and Pizza Arbitrage


Personal update

busy week. got to spend some time at the beach. so ready to reclaim this summer.

also lana is a kween

Dionysian Impulse

Dionysus | Powers, Personality, Symbols, & Facts | Britannica

The Ancient Greeks knew of an important dichotomy woven into our existence — the Apollonian and the Dionysian. Two opposing forces that refer to the worship of Apollo — the god of light, gentle reason and intellectual order and the worship of Dionysus — the god of wine, ecstatic revelry and the chaotic pursuit of orgiastic pleasure. The Apollonian represents a state of measured restraint where man holds mastery over his emotions and maintains separation from his instinctual self. On the other hand, the Dionysian represents the state of drunkenness where man embraces his inner chaotic emotions and is moved by inspiration and wild passions.

These two forces are said to exist in delicate balance in both man and nature. In the context of art, the Dionysian in his frenzied expression lacks the form and structure to make a coherent piece of art. However without the Dionysian influence, the Apollonian in pursuit of rationalized perfection and logical structure loses the passion and vitality necessary for art to elicit a visceral appeal. Although the spirit of the Dionysian and Apollonian are diametrically opposite, they are intimately intertwined.

Nietzsche held a deep fascination with the Dionysian impulse—the mad impulse to riot, to dance, to sing and to live. The character of Dionysus contrasted with Apollo revealed all that was wrong with Christian morality and scientific mentality that further applies to the state of modernity — the drive to binarily divide the world into good and evil, to value unnaturally imposed order above figurative myth and to disregard all that is whimsical or superfluous beyond logical reason — are all derived from Apollonian ideals. One must embrace Dionysian drunken disorder and wild creative passion in order to attain primordial balance, a state beyond social barriers and narrowed thinking.

“There are people who, from the lack of experience or thick-headedness, turn away from such manifestations as from “folk-diseases,” mocking or with pity derived from their own sense of a superior health.

But of course these poor people have no idea how corpse-like and ghostly their so-called “health” looks when the glowing life of the Dionysian swarm buzzes past them.” - Nietzsche, The Birth of Tragedy

What I’ve been consuming recently

The Birth of Tragedy

On The Phenomenon of Bullshit Jobs

Trump-Balenciaga Complex

How Ludwig Goransson Became Directors’ Secret Musical Weapon

Shoot Up - Kanye West

Personal update

lets dig holes again !!

Seeking Alpha

as we slowly return from lockdown in the upcoming weeks, we find ourselves faced with the consequential challenge of picking up the pieces of a pandemic-stricken economy. the world we return to will look different from when we last left it, many will find their former occupation fading in relevance (like the horse carriage industry after the Model T) while new pockets of opportunity open in their wake. with uncertainty in these job markets we are in a unique time for many to forgo the fragile illusion of stability of these jobs and instead pursue a strategy of seeking alpha.

alpha in the context of finance, measures the active return on an investment relative to the market (beta) as a whole. alpha is a pocket of hidden value, a shot in the dark while beta is a global index sluggishly responding to external forces. when the marginal returns of pursuing a beta strategy fall amidst an inefficient volatile market, it arguably becomes less risky to swing for the fences. when the world moves the market faster than its existing players can catch up, the logic skews from slowly adapting with them on the inside to swiftly surpassing them from the outside. on some level, seeking beta in tumultuous times is either a bet against market change or a bet on the speed of bureaucratic execution — neither of which tends to be reliably true.

with an imminent shuffle in the global markets, empires born in formerly prosperous conditions will come crumbling down. the new empires that rise from their ashes won't come from a return to the status quo. they are by nature sui generis — rising through means unseen in the past. it follows then that you can cannot adapt to a new order unless you poke around at the fringe. seeking alpha means questioning prevailing conventional wisdom, revisiting propositions previously written off as implausible and confronting biases. alpha can manifest itself anywhere on the spectrum of bootstrapping a side project, working in an overlooked domain (eg: consumer social, nuclear, defense) or undertaking a bold, radical vision for the future (a new seasteading type project). if there was ever a time to run such an experiment, now would be as good a time as ever.

What I’ve been consuming recently

BAP book (h/t half of anon frog twitter)

Solitude and Leadership

It’s Time to Build for Good

The Atomic Bomb as Hungarian High School Science Fair Project

Dog vibin to Kylie Minogue

Personal update

launched a cool thing last week. also randomly been playing a lot of online chess recently lol drop your @ im bored

Innovation From The Inside

A general theme that’s been circulating tech circles in the last week is the trend of innovative shortage in the real world. The main criticism here is of a lack of tech involved overhaul in housing, education, medicine, finance, energy — industries with strong regulatory oversight. Tech at least in the last decade has had a particular fascination with ‘exit’ — tech disruption after all fundamentally represents the exit from antiquated incumbents in favor of shiny and efficient startups built in defiance (even in the context of the nation). While tech has managed to usurp many major American industries (entertainment, retail, journalism), it does not appear that we are closer to fully displacing DC through any form of secession or floating libertarian utopia. This pandemic has certainly revealed a deep dependence on government and given its clear deficiencies perhaps it is time to rediscover our loyalty and appeal by voice.

“The large systems created by the giant DC insiders didn't have the infrastructure to integrate all the data necessary, work at scale, properly protect data and enforce civil liberties. It was the worst of both worlds: they were failing morally on data protection without even getting the bad guys. Had a proper technology infrastructure been in place supporting alert investigators, 9/11 would not have happened.

The future of our nation’s security depended on our ability to solve these problems quickly, and it was our duty to take the best and brightest of Silicon Valley and apply early-21st century cutting edge software and data to the intelligence community.” — Joe Lonsdale, co-founder of Palantir on Quora

We find ourselves today in a predicament similar to the aftermath of 9/11 — an unforeseen threat has not only caused destruction but has exposed severe limitations in our country’s essential infrastructure. While Silicon Valley revels in its relative prosperity brought by rearranging parts of the enterprise software stack, back in DC core services of the government are still running on archaic systems of the past. When it costs the govt $10B to give away $350B in PPP funds through the banks or when the US tails Rwanda in medical drone delivery to rapidly send medication and limit the spread of contagion, it would appear we have a shortage of technical talent working with / advising the government on problems that affect the operational ability of our nation. When crises create dependence for a stronger central government we are inevitably forced to depend on the internal infrastructure used by the government. Without smart talent working to modernize and innovate on this infrastructure, in addition to the lack of an ‘exit’ alternative — we are faced with the worst of both worlds.

For tech and government to start working hand in hard, an important first step lies in raising the status of building for government / core infrastructure providers. I’m a fan of companies that follow the Palantir playbook in this regard — they recruit smart technical talent to work on hard government problems through the proxy of grants/contracts while providing the relative status, perks and salary of working at a Silicon Valley tech startup. For founders or technical teams, the SBIR has a list of solicitations for technical products requested by various major government departments. The government of Arizona provisions a fintech sandbox for the live testing of new financial services free from regulatory hurdles. Shift connects military leaders to venture capital to foster the exchange of ideas between the tech and defense community. The Presidential Innovation Fellows and the US Digital Service allow for talented engineers to work on important government problems on a 1-2 year ‘tour of service’.

What I’ve been consuming recently


The Devastating Decline of a Brilliant Young Coder

Suspending WHO Funding Should Be Just the Beginning

Kanye West’s Vision For The Future

The Century Of The Self

Personal update

recently been interested in the role of media and aesthetics in influencing cultural optimism. would love to chat with anyone thinking about this.

Meet the Robinsons (2007)

Parallel Status Hierarchies

A great blog post I often recommend to friends is Scott Adams’s career advice of carving a niche for yourself. A notable feature of such a successful niche is the combination of narrow opportunity (that aligns with personal passion) and communicative skill. Communicability here is an essential trait since progression tends to be consensus-driven — people are deemed good/successful if other people think they are. Since social approval is a crucial function at play here, it made me wonder if there was a better way to interpret this strategy through the lens of status — through the model of a parallel local and global status hierarchy.

Status in the local hierarchy is confined to the consensus of the small group of people in that hierarchy on the dimension that they deem is worthy of status (eg: local baseball team, ability to bake perfect souffles in cooking class). Status in the global hierarchy on the other hand consists of people who have transcended local hierarchies to the point where people around the world recognize that they’re famous sometimes even if no one knows/appreciates why (eg: Gordon Ramsay, Paris Hilton).

Status across local hierarchies is not transitive. For example, a local basketball star in one school district or an actress in a foreign country might not be attributed the same level of status in an adjacent school district or here in Hollywood. In order to ascend their relative status, the person would have to garner the admiration of people in a local hierarchy with a larger scope (eg: hs quarterback would have to be recognized at college level, an underground rapper would have to earn respect from hip hop record labels). This process of leapfrogging to bigger status ponds recurs until the person has achieved enough in their particular domain that they gain global status — the right to be envied by the rest of the world (“famous”).

Global status here is transitive in that a person who’s achieved this state through one dimension (sports, music, business) can carry that status to another without having to bottoms up navigate through local hierarchy again. This is why Joe Montana can be a VC without starting as an associate, Rihanna can start a luxury fashion label without having to be promoted from within LVMH and Donald Trump can become president without a formal political career. Achieving global status offers the leverage to grow horizontally. This abides by the conventional startup wisdom of starting in a niche or growing market since it is easier to traverse local hierarchies that are less dense (fewer players competing for status) to allow you to achieve global status faster. For those who aspire for a career spanning a wide range of domains, the depth-first strategy of seeking global status in one dimension and then moving laterally would prove wiser than the breadth-first strategy of attempting success in all domains across all their respective local hierarchies at the same time.

What I’ve been consuming recently

Stimulus Depends on Fintech

Asking Questions (h/t Jordan)

Why Mom Jeans Reign Supreme in Time of Global Uncertainty

Arnold Talks About the Pump

Rear Window

Personal update

working on a thesis for a new project that should launch this week. reply to this and i’ll send you a draft.

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