I write this newsletter to share some of the new ideas I’m thinking about as well as my professional progress. A little about me:
I own and manage an agency in Toronto called August. We design and build digital products. We spend about 80% of our time on client work, and the balance on the internal projects. I also invest in real estate with my two brothers.
some thoughts
Consumer prices are starting to inflate in Canada, and in most of the world, and it looks like that might not be transitory. Asset prices have been inflating for a bit longer, and that too, does not appear to be transitory.
If you had a million dollars to buy a house in Toronto last year, and didn’t buy, you can now only buy a house that’s about 70% as good for the same price.
More and more people are starting to realize that you don’t want to hold too much cash these days. The price of most things is going up which means that the purchasing power of each dollar is going down.
Now, let’s talk about debt.
You know how really rich CEOs tell us that their companies pay them a salary of $1 per year, yet they seem to still live really lavish lives? Do you ever wonder how they do that?
You guessed it: debt.
Lenders (typically big banks) who are confident that their equity will continue to increase in value issue them debt (typically large lines of credit) secured by that equity.
These rich people then spend that debt as they might their income. This helps them avoid a taxable event (good) and preserve their upside (really good).
As long as their equity value increases at a faster rate than they’re able to spend their debt, this could continue indefinitely, and often does. More and more debt against more and more equity value, until they die and it all gets settled.
(Different people handle this arrangement in different ways, of course, but those are the broad strokes.)
This is an especially sweet deal when interest rates are low and inflation is high, as the value of the debt decreases and the value of the equity increases even more than it might otherwise.
In this environment, we should all be accumulating assets, building up our equity, and borrowing against it as needed. We should treat cash like our grandparents treated debt (bad!) and debt like our grandparents treated cash (good!).
Many non-rich middle class people already do this with their homes. They apply for home equity lines of credit, secured against against their equity, to buy even more assets (often, more homes) or to just live their lives. Toronto Life recently featured a pretty wild and infuriating story about this.
Now, let’s talk about bitcoin.
I think we’re going to start seeing a lot more of this in bitcoin-land.
There are an estimated 100-million people around the world holding $1.378-trillion worth of bitcoin.
There are also now several large, well-funded companies offering bitcoin-backed loans, including BlockFi, Celsius, Coinbase, and Ledn.
Those bitcoiners now have a much better alternative to selling their bitcoin if they need dollars. They can borrow against them, avoid a taxable event (good), and preserve their upside (really good).
And again, this is an especially sweet deal when interests rates are low and inflation is high.
This lending market is going to explode.
business stuff
As far as I can tell, it has never been harder to hire good software developers at reasonable rates. At least in the last ten years. At least locally.
Since launching August in 2017, we’ve been heavily biased in favour of hiring people that we can share an office with (even if just for a day or two a week), or grab a beer with (even if just once or twice a year). I think that good corporate culture really matters for recruitment, retention, and frankly, quality of life, and that good corporate culture is forged in large part by hi-fidelity in-person interaction.
The silver lining to this very tight labour market however, is that it has never been easier to hire good software developers remotely.
So that bias is starting to shift.
Our team has been working fully remotely since covid really came into full swing. We’ve gotten really good at managing everything we need to get done day-to-day through Slack, Jira, Notion, and Github.
It wouldn’t be too much of a lift to plug someone into that flow from another city, country, continent, without compromising the current iteration of our corporate culture. In fact, over the past month, we’ve hired our first remote employees.
So far, so good.
I recognize that this is not a new idea but I can now finally envision a future where digital agencies only maintain a local western presence for their business development teams, to the extent that many clients still prefer high-touch sales processes, with everyone else distributed around the world.
investment stuff
I don’t have anything to report on FH1. We’re still waiting on the City for a Zoning Certificate, which will indicate how many variances we’ll need to request at the Committee of Adjustments before we can apply for our building permits.
I also don’t have anything to report on the public property I’m bidding on somewhere in the GTHA (that I mentioned in last month’s newsletter). I’ll know how that goes within the next few weeks.
And I actually don’t know if I should report on the things I’ve been working on this past month to generate increased real estate dealflow. This a tricky one. On one hand, being transparent and comprehensive with my thinking and progress could act as a bat signal that attracts like-minded people and opportunities. On the other, an edge isn’t an edge if it isn’t somewhat of a secret—especially in a hyper-competitive market like Toronto multifamily.
So for now, let me frame that as a question to you: what do you think the right move is here? How should I be thinking about this trade-off?
Reply and let me know. I’ll share all good insights in next month’s newsletter.
stuff I’ve enjoyed
This is some of the content I’ve come across over the past month that I’ve really enjoyed.
Article: Midrise buildings in Toronto generally look like Mayan pyramids that have been cut in half. That is because the City’s Performance Standards for Midrise Buildings require that massings be kept within a 45-degree angular plane to the rear, so as to avoid casting shadows on neighbouring properties. The City’s Urban Design department also, very regularly, pushes architect and developers to incorporate more articulation and variance in their designs. Within that context, I really enjoyed this article mounting a defence for radical simplicity in architecture and development—for “dumb boxes”, which are much more energy efficient and cost effective and less prone to fuck-ups than their alternatives.
Book: I just wrapped up Carl Icahn’s biography, King Icahn. It was a quick and interesting read. Biographies are probably my favourite book genre, especially those of successful businessmen. As with most biographies, the first half—the come-up—was better than the second half. One fun fact from the book is that Carl was, for a time, a newsletter guy. He wrote and distributed the “Midweek Option Report” to market his fledgling options business in his mid to late 20s.
Podcast: I’d generally like to use this section of the newsletter to recommend one piece of content for each one of these categories, but this month, I have two podcast episodes for you to check out. The first is Balaji Srinivasan on Tim Ferris, which runs just under 5-hours and which is really great. The second is a bit more esoteric: Chris DeRose “on the philosophy of demoralization”. Chris is an old-school bitcoiner who fell out of love with the community. He’s also one of the most original and interesting thinkers I’ve come across.
Video: This is going to be a weird one. I love this yogurt commercial. It paints a picture of a bright and hopeful future, and I don’t think we see that often enough. Most recent fictional depictions of the future, as far as I can tell, are cold and dystopian. In just 30-seconds, Chobani shows us a bright alternative. I wish our political parties would adopt this sort of imagery.
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And that’s it for now. I hope you have a great December.
Feel free to reply to this email with comments or questions. I love chatting about everything mentioned above.