Matt Levine’s most recent Money Stuff article is classic Matt Levine. It is both entertaining and informative. This one is on WeWork – the coworking startup that has committed to 14 million square feet of office space around the world and will have $18 billion in rent payments due over the next decade.

Here is an excerpt:

WeWork Cos. is a real-estate company with a couple of innovative twists on the model. First, rather than owning its buildings, it rents them: It leases office space from regular real-estate companies, adds … beer? … or whatever, and then subleases the space to tenants at higher rates. And second, rather than being valued like a real-estate company, it gets valued like a hot tech startup — “the sharing economy,” ping-pong tables, etc. — so it can raise gobs of money from SoftBank Group Corp. at a $20 billion valuation without ever getting particularly close to profitability. And look at all these words:

“Indeed, to assess WeWork by conventional metrics is to miss the point, according to [Chief Executive Officer Adam] Neumann. WeWork isn’t really a real estate company. It’s a state of consciousness, he argues, a generation of interconnected emotionally intelligent entrepreneurs.”

Really, what sort of multiple would you put on a state of consciousness?

Lately I have really gotten into Matt Levine’s daily newsletter about “Wall Street, finance, companies and other stuff.” Maybe that’s how I should describe this blog: Cities, real estate, design, and other stuff.

If you aren’t familiar with Matt’s writing, here is an article that he wrote about Kylie Jenner’s recent tweet concerning Snapchat. You know, the one that wiped out $1.3 billion of market value because she revealed – using only 88 characters, I might add – that she was no longer using the app.

sooo does anyone else not open Snapchat anymore? Or is it just me… ugh this is so sad.

— Kylie Jenner (@KylieJenner) February 21, 2018

https://platform.twitter.com/widgets.js

The article was spurred on by this question:

“Would it be insider trading for Kylie Jenner to buy short term out of money put options on Snap and tweet out that she’s no longer using Snap?”

And this is the start of his answer:

Insider trading, as I am constantly saying around here, is not about fairness; it is about theft. It is not illegal to trade on your own nonpublic knowledge of your own intentions. Warren Buffett can buy stocks before he announces that he’s bought them, even though that announcement will predictably make the stocks go up. 

If I did describe this daily blog like Matt describes his daily newsletter, this post would clearly fall into the “other stuff” camp. But maybe you too will find it interesting. If you do, you can subscribe here. 

Recently I’ve been seeing a number of posts/articles talking about the dot-com bubble. It seems to be driven by talk of a pending crypto bubble. 

Whatever the case may be, the recounts are interesting. In this one by venture capitalist Fred Wilson, he talks about how 90% of his net worth went to zero following the crash. And the only reason it wasn’t all of his net worth was because he was fortunate enough to sell some tech stocks in advance of the crash to buy “two significant pieces of real estate.” The two properties were 10% of his net worth before the crash and 100% of his net worth after the crash.

Fred goes on to talk about how he had to learn about diversification the hard way. And this reminded me of a theory that many of you are probably familiar with called “depression babies”. This is the belief that large macroeconomic shocks – such as the Great Depression and the dot-com boom – create a lasting impact on people’s propensity to take financial risks.

And indeed, there’s evidence to suggest that this is in fact the case. In this 2010 paper by Ulrike Malmendier and Stefan Nagel, they came to the following conclusion: “Our results show that risky asset returns experienced over the course of an individual’s life have a significant effect on the willingness to take financial risks.”

I often think about this with respect to my own career. I started working in real estate before the 2008 financial crisis. I also happened to be living in the U.S. at the time – where it was far worse than in Canada. We got off easy. I remember seasoned real estate professionals telling me that it was going to take at least 20 years before the U.S. would build another commercial office building. It was that bad. And that was the sentiment at the time.

Of course, that wasn’t the case. It didn’t take two decades to resume building. But I like to think that 2008 will remain permanently etched in my mind. It’s my reminder that crashes can and will happen. Don’t forget that. Stay disciplined. At the same time, it’s my reminder that these periodic crashes create opportunities. Because fear invariably makes us overshoot the mark.