Debt is coming (to tech) by Alex Danco

[Liberty]

I thought this piece by Alex Danco was really interesting:

 

https://alexdanco.com/2020/02/07/debt-is-coming/

 

Hopefully others here enjoy it.

[StockDuck13]

I've been a subscriber of his writing for a while, always interesting and in-depth writing. There's a lot of really good newsletters today, fascinating how much more writing has come out thanks to tools like Substack.

 

Who else do you read? I'm a fan of Matt Clifford, Trevor McKendrick, Warren Ellis, The Profile, A Media Operator, Divinations, and a few Stratechery articles although I'm not a paid subscriber.

[Cigarbutt]

^Thought-provoking piece indeed.

It’s interesting that a variant of the securitized debt for future recurring revenues looks similar to royalty financing for mining ventures at the exploration stage. It’s interesting because I remember a few exchanges with Linealdin where I was trying to understand the point of view by using the concept that the market was perhaps using hyperbolic discounting (difficulty or tendency to use an excessive discount rates for cash flows far in the future). It’s hard to quantify the future and perhaps the SaaS model is getting closer to that. It may boil down to the question: "Is the cat dead or alive?" and maybe only people like Schrödinger could answer the question.

 

It (future revenue-based investing) also reminds me of the “David Bowie” bonds (many variants here) which securitized version was an innovative way to monetize future royalty streams of revenues based on somewhat intangible and intellectual property rights. Holders of these bonds did OK even if the interim to maturity date was associated with credit rating pressures. The music industry changed to an extent that few could have predicted.

 

David Bowie was a genius (also financial engineering genius it seems) and he was the one behind the Man Who Sold The World even if many people thought it was Nirvana.