Happy Labor Day!

I hope everyone had a safe and healthy holiday!

I read a quote recently that stuck with me:

Success is getting what you want. Happiness is wanting what you get.

                                               ~ Dale Carnegie

Simple, but thought provoking.

Are you successful, happy, both, or neither?

All last week, I thought about how to solve a problem. I felt like I was missing something, but I couldn’t figure out what I was missing or how to solve the problem.

I called a good friend from college to vent and get his opinion. He’s in a totally different field than I am and sees things from a different perspective, which I value. Over the next hour he gave me feedback on my thinking, and we talked through various ideas. Eventually, we landed on an insight that felt significant. We searched for data to support or contradict it. The data supported our thinking, and we realized that we’d uncovered what could be an important insight. Now I’m excited to dig into this key insight this upcoming week.

Knowing credible people with diverse perspectives whom I can call is helpful. These sounding boards can accelerate good thinking, highlight flawed thinking, or help me formulate unique insights.

I’ve been hearing rumblings about commercial office vacancy rates increasing in Atlanta and a few other metropolitan cities, and I’ve been curious about the impact of the vacancies. This morning the title of a Bloomberg article—“Starwood Defaults on $212.5 Million Atlanta Office Mortgage”—caught my attention, and I read it.

Starwood Capital Group is in default of its $212.5 million mortgage backed by a 29-story office building in the Buckhead neighborhood. I’m very familiar with the property: I have friends who work in this building, and I’ve been to the WeWork offices there.

Here are more details from the article:

• The mortgage originated in 2018 and matured earlier this month.
• Starwood didn’t refinance or pay off the debt.
• The property was 87% occupied in 2018. Occupancy was 62% at the end of 2022.
• Starwood and its lenders are negotiating an agreement.

Sounds like this situation is far from over. I’m curious to see how it’s resolved and if any other office buildings in Atlanta will be involved in a default.

A family member recently sent out a group text about suddenly not being able to access their Netflix account. After a bit of back and forth, we realized they’d been “borrowing” the account of another family member . . . for years. Netflix has been cracking down on account sharing by people in different households, which resulted in this family member’s access being revoked. I don’t watch much TV and hadn’t been following this, but this time I got a front-row view.

The whole situation was funny to me given how many years this had been going on, but then I realized something. Netflix had been providing immense value to two households in my family. They were receiving only 50% of the revenue they should have been receiving. Said differently, they were capturing a fraction of the value they were providing.

Netflix is a huge technology company. I assume they’ve known about this sharing issue for many years and have had a fix in mind. I wonder if they waited to deploy it until their growth began to slow, or if another catalyst is driving this crackdown. In the case of my family member, they got them hooked on the value of the service and original content. Now they’re forcing them to pay for that value. Essentially, they’re forcing my family member and everyone else who’s been on a multiyear free trial to put up or shut up. Become a paying customer or stop using the service.

As of the last group chat messages, my family member was in get-my-Netflix-working-again-ASAP mode. Translation: they’ll end up creating their own account and happily begin paying for the service.

I don’t follow Netflix, but I imagine this will have a material impact on their top-line revenue at some point (assuming it doesn’t drastically increase churn). It’ll likely ruffle some feathers in the short term, but I like this move. They’re making sure they’re being compensated for the value they provide.

I have regular conversations with friends about real estate. It’s an asset class that’s always been interesting to me, and I’ve watched it from afar for years. Over the last few years, home prices have climbed rapidly.

Atlanta’s market is one of a few that I watch closely. One way I keep tabs on it is by looking at Federal Reserve Economic Data (FRED), a database of various data that’s often shown in simple graphs. One data point it includes is the House Price Index (HPI), which tracks the price trajectory of single-family homes.

The All-Transactions House Price Index for Atlanta (Metro) was 230.11 in Q1 of 2020. As of Q1 of 2023, the index was 346. That’s an increase of 50.36% in three years. You can see a graph of the index change in Atlanta from 1980 through today here.

A 50% increase in a relatively short period is a material increase. Lots of things happened in that period that drove the increase, which I won’t get into here. Nor will I talk about how this compares to other markets. I just found this data point interesting.

I’m really curious to track this index over the next few quarters.

Listening to a group discuss interest rates, I noticed something interesting. A gentleman in his 70s said that he’d paid an interest rate of ~20% on his home mortgage in the early 1980s. He views current rates as normal, while younger people in the same conversation think today’s rates are abnormally high.

It was interesting to see two groups of people who are experiencing the same reality view it differently because their life experiences have given them different baselines.

This conversation reminded me that there can be value in understanding the history of a topic instead of just what’s happened in my lifetime. It can affect how I perceive the present.

Today I got together with a friend who happens to also be a former founder. We wanted to catch up, get and give feedback on our ideas, and talk investing. Instead of meeting in a coffee shop or office, we decided to go for a walk.

We ended up walking for an hour. During that time, we checked all the boxes for what we wanted to discuss, but we also got some good physical activity. We killed two birds with one stone.

The fresh air, sun, and movement felt great and enhanced our conversation. At the end, we both said we want to do this more often. I can’t do walking meetings year-round given the seasons in Atlanta, but I’m going to try to do more of them.

I hope everyone had a safe Memorial Day with friends and family!

Last night I watched the Miami Heat vs. Boston Celtics Eastern Conference playoff game. The series is a best of seven, meaning whichever team wins four games wins the series. Miami won the first three games, so the probability of Miami winning the series was high. Boston then won two consecutive games and was looking to win a third last night, tie the series, and force the series-deciding game seven. The game was played in Miami, and forcing a game seven in that environment wasn’t an easy task.

In the fourth quarter with three seconds left, Miami was ahead 103–102. Boston shot the ball, which rimmed out. With two-tenths of a second remaining, Boston’s Derrick White tipped the ball into the net. Game over. Boston has won and forced a game seven against seemingly impossible odds with three seconds left. The entire arena is stunned. It was the craziest ending of a game I’ve seen in a long time.

The last three seconds of last night’s game were a great example of what can happen if you don’t give up. The Celtics could have let the probabilities of scoring in three seconds deflate them and given a half-hearted effort. But that didn’t happen. They came out and gave their all for those last three seconds and pushed for the outcome they wanted until the clock read zero. Of course, the ball bouncing into White’s hands was a stroke of luck, but had he not hustled to be in that position under the goal he wouldn’t have gotten the lucky break.  

My takeaway is to never give up prematurely. Keep fighting until the clock reads zero. If you give up too early, you could be out of position and miss your lucky break.