Observing Moonshots from Ashtabula

My first 17 years and the last 17 years have been spent in my little hometown of Ashtabula, Ohio.

In between I worked for a national political organization, a couple Madison Avenue advertising agencies and a national restaurant chain. Then I helped start seven companies, three that became very valuable.

So, while I am familiar with thinking big, our town is right for Alice and me. Living in Ashtabula provides perspective. Living on Lake Erie in a small town and knowing people I see on the street soothes my high revving engine. It also creates a distance from which I observe economic and business trends.

The most successful of our business ventures gained value over very long periods of time. Our first business (WorkPlace Media) was essentially worthless (negative net worth) until its 14^th year. My son’s restaurant business did not break even until its 11^th year. Both became extremely valuable.

Moonshots, on the other hand are valued more speculatively, in advance of any long-established patterns and without using traditionally accepted measures. For example:

• Bitcoin – Is today valued at $57,867 per coin. Bitcoin is the most famous of the digital (crypto) currencies and was launched by still-unknown inventors about 12 years ago. Cryptocurrencies operate off the concept of blockchain, decentralized digital ledgers. One year ago, Bitcoin was valued at $7,200. It appears to be valued solely by market forces of supply and demand.
• Tesla – Had an enterprise value of ~$75 billion in December of 2019 on annual sales of $25 billion. Today, Tesla is worth ~$750 billion after their 2020 sales grew to $30 billion. If you calculate that on any traditional manner, each Tesla sold in 2020 would have cost $1.7 million.
• SPACs – Are “Special Purpose Acquisition Companies” which Harvard calls “a clever financial innovation that provides a cheaper, faster and surer path to Initial Public Stock Offerings (IPOs)”. SPACs are also referred to as “blank check” companies since they first raise money as a publicly traded stock with no revenue, then buy private companies and, voila, they are instantly public. In the ten years starting in 2009, SPACs raised $13 billion, the same amount SPACs raised in 2019 alone. In the first four weeks of this year, they raised $23 billion and in the first ten days of February, blank check companies raised $11 billion. Feels like a moonshot to me.

The term “moonshots” comes from Google X research labs’ history of trying out radical technologies. More broadly they’ve become reference for “ventures that are bold and exploratory but may not fully measure or value risk”.    

Technical moonshots are required to become a global leader in innovation. Moonshot labs like X and public/private research projects have proven essential for every breakthrough from cars and planes to personal computing and the internet.

But valuing moonshots seems a very risky hobby. Rather than invest in such things as Bitcoin, Tesla and a SPAC or two, I’d rather take the money to a casino; at least I will get some entertainment value.    

Similar to a casino, a few will make millions on moonshots. I’ll keep watching them from Ashtabula.

Peace.

Tim McCarthy