Greetings from Vancouver!
Welcome to the first issue of Yi-Chen Lu's Newsletter.
Thank you for being on this journey with me as I explore my curiosity about investing, marketing, and other exciting topics that I am learning from the internet—microeconomics, game theory, psychology, persuasion, healthcare, wellness, technology, and more.
Here's a snapshot of everything in store for this issue:
The Magic of Marketing
Learning about Investing
The Pandemic's Aspirin
Digital Health Trivia
I hope you'll enjoy it!
The Magic of Marketing: Psychological Moonshots
This week, I went through an episode of my favorite podcast show, Invest Like The Best, hosted by Patrick O'Shaughnessy. It caught my attention because, unlike other episodes, this one was about Marketing.
Rory Sutherland, the Vice Chairman of Ogilvy & Mather Group, talked about how marketing is often overlooked in companies because they are continually being framed as a cost, not as a source of value creation. But the reality is if the company knows how to do marketing right, improvements in perception can be cheap and straightforward (psychological moonshot) compared to physical improvements (regular moonshots), which can be expensive and complicated.
Great companies know how to use the magic of marketing to sell people products they don't even know they want and to reframe weaknesses as strengths.
Here’s an example from Rory: When someone can get from point A to point B with a plane in less than a day, why would someone want to go on a cruise ship? The cruise ship company, Cunard, was able to pivot by bringing on-ship entertainment and setting out the romantic age of sea travel. With this reframing process, they could turn their weakness (prolonged duration of transportation) into a strength (the best journey ever).
This is a great alchemy of marketing that by reframing something, by changing the consumer's frame of reference or comparison set, you can turn a weakness into a strength.
You may ask: What does marketing have to do with investing?
So the opportunity here is for investors to look for psychological moonshots and deliberately go for stocks or businesses which are entirely underappreciated and undervalued because of some aspect of how they're presented.
My main takeaway: don’t overlook the importance of marketing when evaluating businesses to invest.
Learning About Investing: SPAC
As I embark on a journey to learn more about investing, SPAC is a new term I learned this week. The term was brought to light by a famous venture capitalist, Chamath Palihapitiya, with his recent showdown on taking Opendoor public.
So what is a SPAC? SPAC has been around for some time, but this year, it is booming. SPAC (Special Purpose Acquisition Company) is disrupting the way companies are taken public.
If you’re willing to pay a massive, up-front, one-time fee to the SPAC sponsor, then they will take you public as your biggest shareholder, with maximal alignment between one another, and zero obligations to do right by anybody else in the ecosystem.
How is it different from the standard IPO process? Instead of leaning on an investment bank to get this process going, you can now turn to a SPAC sponsor to make the process faster, with more certainty, higher valuation, while getting great attention during the whole process, especially if the company is working with a charismatic sponsor.
As Alex Danco puts it, SPAC sponsors work for the company, while banks work for the ecosystem.
Questions to ponder: SPAC can be disruptive with the right people, but how successful can it be? Will banks move away from their legacy approach, allowing us to see the process scale?
If you're interested in learning more about SPAC, it looks like there will be more content coming out on this topic. I will be following this thread to learn more.
Sahil Bloom @SahilBloom@marketsgeek @jimcramer @chamath Maybe @chamath and I should partner up to do a SPAC 101. @chamath - contact me let's do it!
The Pandemic's Aspirin: Telehealth and Virtual Care
During a book club session for Secrets of Sand Hill Road, we talked about this quote:
Vitamins are nice to have; they offer some potential health benefits, but you probably don’t interrupt your commute when you are halfway to the office to return home for the vitamin you neglected to take before you left the house. It also takes a very, very long time to know if your vitamins are even working for you. If you have a headache, though, you’ll do just about anything to get an aspirin! They solve your problem and they are fast-acting. Similarly, products that often have massive advantages over the status quo are aspirins; VCs want to fund aspirins.
What are some examples of aspirin companies? Some companies are clearly aspirins, but some companies became aspirins due to an unexpected event or changes happening in the market.
I gave this example during the book club discussion: Telehealth/virtual care companies were vitamins. They were nice-to-haves but not essential. However, when the COVID pandemic hit, they became an aspirin, allowing for fewer in-person contacts between patients and providers, reducing the risk that SARS-CoV-2 will spread.
To learn more about the state of Telehealth and virtual care, here's an article where I address the following questions:
Why is virtual care booming now when it's been here all this time?
What can be done through virtual care, and what can't?
What are some of the challenges and ways to solve them?
A question for you: In your opinion, what is an excellent example of an aspirin company?
Digital Health Trivia
At the end of each issue, I will include a fun digital health-related trivia question. Check out the first one below:
Read the following three statements and guess: which digital health company is this?
This digital health company went public recently.
The app helps consumers find lower prices on prescription drugs and other medical help.
Don't go to the pharmacy without checking drug prices on the app first.
I will reveal the answer in the next issue. Stay tuned!
Thanks again for reading.
P.S. I love to hear from you. Feel free to hit reply and let me know what you think about this issue.