LAWS OF HYPE
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"Without promotion something terrible happens...nothing!" -P.T. Barnum

Laws: Table of Contents

Law #26: Let Their Imaginations Run Wild

4/17/2017

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Tease your following with something distant and abstract yet positive sounding.

If you’ve played your cards right up to this point, due to the sheer force of your social proof (e.g. bubbly market cap, bought Twitter followers, etc.) the masses are already ascribing all kinds of positive character traits onto you, such as saying you are a great showman and salesman, despite the fact that you sound like an incoherent bumbling fool every time you open your mouth. Due to this positive halo effect, everyone will give you the benefit of the doubt for just about anything you say. Now you need to milk this and give your worshippers fodder for even more wild speculation and drive up your stock’s lottery premium. Throw fuel onto the fiery frenzy of speculation.

Drop vague hints about future end markets you can enter that have a large TAM, or promise some future product attributes (that you see all your competition already has), or drop clues about solving some hated world problem (e.g  eliminating traffic with underground transportation...like subway systems). For your supporters, like any totalitarian cult, it is all about the future, never the present. Keep the focus on the future…that is when real life begins…promise merry go-rounds and pomegranate flavored Greek yogurt for your underpaid minions at your factory. What you are trying to do is simultaneously fulfill people’s persistent compulsion to gamble and allow them to fantasize about a better future. 

Take Messiah Musk’s brilliant use of this law when he tweeted that he would reveal his “D”…and something else! A terrific use of sexual innuendo (not even innuendo, just blatant, really) was a cherry on top and it drove the masses wild.




It didn’t even matter that Elon’s D was a let down and nothing to write home about. It was simply another version of Tesla’s dated, failure prone sedan. Delivering or meeting the fantasized expectations of what is hinted at is not necessary, just a vague promise or premonition will do the trick. Like most Laws of Hype this one is more about entertaining your following than it is laying out an actual coherent business opportunity. You don’t have to suck in everyone for these methods to serve their purpose, just the credulous idiots will do.

Need more examples?  When describing the Model 3, Musk stated, “it will be unlike any car you’ve seen before” and “it will be like driving a spaceship.” Ooooo, a spaceship, think of the possibilities! To many industry observers, the Model 3 is indistinguishable from a 2013 Mazda 3 and the interior is on par with Fisher Price's Power Wheels, but people's imaginations have been running wild for months and the hype has reached levels of hysteria not seen since the Tesla Battery Swap demo event. 

There is a genius depiction of this persistent psychological vulnerability that you are trying to take advantage of in a scene from Family Guy. Peter has won a prize and can choose between a boat and a “mystery box.”

“A boats a boat, but the Mystery Box…it could be anything Louis…it could even be a boat!”​

The later you are in a bull market cycle, the more “lottery premium” your stock will bake in with this technique. Investors always and forever will fall over themselves to bid up your stock for the chance of a large payoff, no matter infinitesimally remote it may be.

​To prey on man’s strong faculty of imagination…tease your following with something 
distant, and abstract yet positive sounding…sell them a piece of blue sky…then step back and let their imaginations to run wild!
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Law #22: Bedeck the Banal

7/29/2016

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Embellish descriptions and phrasing of even the most mundane of products, services and metrics you discuss. 

All corporate executives repeat the same phrases day-to-day and everyone sounds the same. You must break this pattern of boring corporate drudgery and separate yourself from the pack by "Bedecking the Banal." Embellish descriptions of the most mundane objects (car doors, barges) and actions you can think of to give the card-carrying members of your idiocracy/cult more reason to have a sense of "us versus them" mentality. It will be as if you all have your own special lingo...a shared secret language, if you will. 

Bedecking the banal will help package your communications in an entertaining way and insinuate that you are different, communicating on a deeper level.

As evidence of just how few people are capable of independent thought, you will witness the power of Bedecking the Banal when you see how many of your lap dogs--from editors of mainstream media outlets, to teenagers on internet message boards--just copy your precise phrasing and echo you in calling your barge a "drone ship" or your idea of a traditional bus a "high people density urban transport vehicle." 

Design your phrases to stir basic emotions and build up your image in your own ideal. If the nature of your charlatanism is that you are a physics genius, put a physics-twist on basic corporate lingo and manufacturing processes to project an air of superior intelligence and sophistication onto your operations. 

Some examples: 

A paperclip could be called a "flexible, metallic business enterprise organization device."

Instead of saying, "Let's schedule a call," perhaps try "Let us organize a "telephonic engagement."

An empty warehouse in the middle of the Nevada desert could instead be called a "Gigafactory." 

A bus could be called a "high passenger-density urban transport capsule." 

A casual reference to traffic could become the "matching acceleration and braking to other vehicles, thus avoiding the inertial impedance to smooth flow of traditional auotmobiles."


Car doors could be creatively titled apertures. Hinges on "falcon-wing doors" can referred to as "actuating at two points as opposed to normal gull-wing doors that have one hinge." When your doors are opening, you can state "Falcon-wings deployed."

If you make a camera on a stick, it could be a "life-capturing happiness device." 

Bedecking the banal is simply another crucial part of your act. To enact a successful hype campaign you must constantly be performing and creating theatrical effects. To become a Titan of Idiocracy, your cult members must be entertained--it is quite possibly their single greatest need. By bedecking the banal, you will be remembered more easily and will further forge your hype and image as a visionary genius. Now go forth and fantasize the mundane. Get creative. Stand out from the crowd and bedeck the banal! As always, do it with HYPE or not at all!












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Law #11: Simplify Your Narrative

6/22/2016

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Weave such a simple narrative that every idiot can regurgitate it and force them to unknowingly disregard any empirical evidence; he who tells the simplest story wins the hype.

Unless you live in the upper Amazon you are well aware that Donald Trump is now the GOP Presidential nominee and Jeb Bush and the rest got blindsided and are out. Ask yourself this one question: Who simplified their message more? It is well understood that Donald Trump speaks at a 4th grade level and Jeb Bush speaks at a 10th grade level. In politics and hype (a bit redundant, I know), less is more. Try to cut your investment narrative down to something will fit on a bumper sticker or a hat. Channel Donald Trump. Think Ronald Reagan: "Less Government", "Lower Taxes." Or Bill Clinton: "It's the economy stupid." And even Bush Sr., "No new taxes."

This soundbite narrative will be judged for its simplicity and mass appeal rather than its logical argument being adequate or it being correct. feasible, or relevant to an investment decision. The conventional view is that investors buy and sell on the basis of fundamental information. In the real world this is rarely the case, they mostly buy based on the simplified narrative or theme. 

It is no secret that future Hall of Fame hypester Kevin Conroy has grand political aspirations (politician in this case defined as professional hypester that wastes other people's money with no accountability, Conroy's has perfected this as CEO of Exact Sciences). Why do you think this is? He has mastered the art of Law #11. Repeated hundreds of times and at dozens of investor conferences every year, Conroy has simplified his companies narrative down to a single line: "Exact Sciences' mission to eradicate colon cancer." This from a company that has an inferior and more expensive test that will never be profitable, but they are winning the hype game as the gullible investors eat up the over-simplified narrative. 

“Tell that story until you can’t stand the sound of your own voice anymore." -Kevin Conroy 10/22/14, two years later still not sick of his own voice.

Think about the oversimplified soundbite narrative and mission of Tesla, it has been repeated public hundreds of times: "Our goal when we created Tesla a decade ago was the same as it is today: to accelerate the advent of sustainable transport." This has been repeated incessantly as a sort of chant. Like Trump, Musk speaks at a third grade level, but has a cult following due to a dumbed down chant. Chants/repeated mantras are one of the best known ways of brainwashing someone, thus you want to cut your narrative down to one single over-simplified line and repeat it as a chant to brainwash the sheeple. 

Netflix's Reed Hastings has also taken Law #11 to heart, with an oft repeated: "all TV will move to the internet within 10 to 20 years."

This simple narrative has been repeated word for word in hundreds and hundreds of articles (if you don't believe me, Google it). There is no thought that goes beyond that quote--that is all a potential investor needs to know. Even if true, the narrative does not prove if NFLX will be the long term winner or ever be able to turn a profit, but the Hype has been set in motion and the rest of the details are noise beyond that one line. 

Dumb it down. Simplify and clarify your narrative down to one short line. Then repeat that line every time you speak in public and the sheep and journalist will go forth and endlessly echo the message word-for-word. 
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Law #31: When the Spell Breaks, Go Nuclear.

6/21/2016

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If people start to snap out of their hypnotic trance and your power to control the stock begins to fade you must go Nuclear.

For example, you just had an analyst day at a fancy hotel and the effects are waning, you must act more boldly so as to not get lost in the competition for attention. It is best if you do this through a surrogate, such as an investment bank. If you dangle the carrot of being the lead book-runner for a large equity offerings in front of a new bank that is not currently covering your stock, you can enact a quid pro quo situation. Your goal is to have someone else toot your horn with an absurdly bullish initiation report. In bull markets sell side reports will have an asymmetrically positive effect on stocks, as the negative ones are usually summarily dismissed.
           
Authority: TherapeuticsMD. As TXMD’s stock price slipped from $9 to $5, they had an analysts day consisting of a panel of “key opinion leaders” with conflicting interest pumping their end market and potential product pipe dreams. As the effects of this waned and the stock slipped even further from $5+ to $3.80 in short order, FBR Capital Markets came out with an incomprehensible sell initiation report that contained zero new information or insights, or near term catalyst cited, with a headline grabbing $34 price target. That price target is full 9x higher than the previous trading day’s low. This caused a 30% pop in the stock the next day, which was good for almost $200 million manifested market capitalization. Insiders were steadily cashing out and getting desperate to maintain the façade, so they had to resort to bolder and bolder moves. Take a page from their playbook and when your hype is fading, you must go nuclear and pull out all the stops. 
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Law #25: Always Take Credit for Positives

6/13/2015

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Take credit for good things you don't cause. Put out a well-timed press release that can be generally vague about anything that can be perceived as a positive business development right around the time your stock price is surging from a short squeeze.

Psychologist Justin Barrett came up with an explanation for most people’s innate desire to “believe” and calls it our Hyperactive Agency Detection Device, which is hard-wired into human brains.  HADD is essentially a tendency for humans to perceive agency or ascribe random actions and ambiguous stimuli to an animate agent when one is neither present nor necessary to explain certain actions and outcomes. For example if there is a rustle in the bushes from the wind, humans will immediately ascribe that movement to an agent, either a dangerous animal or other human being. This is a psychological tendency driven by evolution and likely saved many lives by causing humans to be scared of tigers in the bush. More specifically, the way to take credit for good things that you do not cause is to put out a well-timed press release that can be generally vague about anything that can be perceived as a positive business development right around the time your stock price is surging. If your stock is doing well in a powerful bull market rally, or paradoxically, it is subject to a short squeeze because your prospects are so terrible that your stock has become a crowded short, you want to put out a PR so that people assign the positive stock move/short squeeze to your genius and/or “positive” news, which is in fact meaningless fluff. Human’s HADD will kick in and attribute the move to you or your actions and become conditioned to chase the stock higher anytime a press release is circulated. If you lack the imagination to come up with a new fluffy PR piece, simply re-circulate something that is old news just to reinforce the conditioning. In this environment the market will buy the rumor, and then buy the news, too. 
Release: http://investors.zillowgroup.com/releasedetail.cfm?releaseid=837607
Recirculate: 
http://www.zillow.com/blog/pro/zillow-powers-chinese-site-leju-112990/

For bad news and negative stock price action, utilize Law #13 and blame someone--or better yet--something else. If you are a retailer and have a good quarter, credit your merchandising decisions and tight inventory control. If you have a bad quarter, blame the weather or a weak environment and other competitors for being so promotional. An obvious corollary to Law #25 is to attribute industry strength (or one-time revenue windfalls due to positive black swan/extenuating circumstances completely outside of your control) to your company's specific operating decisions and competitive strengths. Do this even when and especially when your revenue growth is lagging behind other peers in the industry (and thus you are losing market share). 

Authority: Ward Nye, The Aggregates Guy. C. Howard Nye, CEO of Martin Marietta Materials ($MLM for you "home-gamers").  Mr. Nye is one of the best hypesters I am aware of in the market. His public hyping, er...speaking, skills would put Bill Clinton's to shame. Martin Marietta's business is incapable of generating much positive free cash flow over a full economic cycle (Enterprise Value is at 80x last twelve months FCF, and 9.6x cumulative 10-year FCF, 19x cumlative 5-year FCF and 96x trailing 3-year average FCF, so in other words this business is valued at ~100x normalized FCF). An objective look at the financial results demonstrate that the company is simply and hopelessly entirely at the whims of the broader economic cycles.


Nye on MLM's Q1 2015 conference call: "As announced in this morning's release, we reported a first quarter profit for the first time since 2008, another validation of our recent growth initiatives and cost management programs." Here MLM finally achieves profitability just six years into economic expansion and Nye adeptly credits this to his growth initiatives and cost management programs, despite mentioning a focus on costs on every previous conference call also. Never mind the collapse of energy costs (inputs) and improving construction end markets and record Texas Department of Transportation (and other key states) budget. It is their cost management programs that are delivering results. When you have positive results that are due to factors out of your control such as a generally improving economy for your sunset industry that is tied to GDP growth, take credit and attribute them to your own idiosyncratic initiatives. When you have negative results attribute them to those same exogenous factors that drove your positive results. 

Reversal of the Law: If the market has swallowed your hype hook, line, and sinker sometimes it is in your best interest to simply stay radio silent. Imagination is the first faculty of man, thus periodically being silent while your stock price is surging lets investors' collective imagination run wild about what possible good news or positive new developments could be coming (with the implication being that others know something they don't). 
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Law #24: Send False Signals

3/8/2015

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Make a small token purchase of your company's shares as a psychological gesture that gives the lemmings fodder for more blind purchases. 

A small token purchase of your shares can serve as a strong, false psychological signal of confidence. Your buy can have rippling and lasting effects as a gesture that the lemmings can cling to as fodder for more blind purchases of your overvalued equity. One often hears the individual investor say things like "an insider only buys for one reason: they think the stock is cheap." Money talks so a small token purchase, however much of a rounding error it is compared to your ill-gotten net worth from a generous options package, will make the masses believe that you know something they don't. Your purchase can insinuate so many different things to so many different people--perhaps a positive new development is on the horizon, or maybe you are about to unleash a new "secret weapon." Your false signals can have the power to keep the fairy-tale going for a few more chapters. 

An even better false signal methodology to maximize the duration of your cult-like retail investor following is to make a series of small purchases. If you can spread your purchases out over time you can keep your stock showing up on insider buying screens time and time again. This will also keep your ticker in the headlines and the subject of dozens of Tweets for weeks on end every time a small insider purchase is made. Your false signals of a small token buy can also offer a plausible cover for any future lawsuits if your company collapses. 

Observance of the Law

If your business and hopes for substantial long term cash flow generation are floundering and you need to be extra bold in your hype, you should issue a press release hyping your share purchase. This is another tactic to increase the attention your false signal receives and maintain a facade for the blind capital to admire. The lemmings with blind capital should react positively to the press release hyping your false signal, but given that it is a bizarre move and may reek of desperation, it may potentially backfire by drawing attention from seasoned short sellers. Use sparingly and preferably in raging bull markets when your hype is waning. Here is a good example from TrueCar (TRUE):


"Scott Painter, TrueCar Founder and CEO, Buys 70,000 Shares of Common Stock 
Thursday, February 26, 2015 02:00:00 PM (GMT)

SANTA MONICA, Calif., Feb. 26, 2015 (GLOBE NEWSWIRE) -- Scott Painter, chief executive officer and founder of TrueCar, Inc. (Nasdaq:TRUE), purchased a total of 70,000 shares in two open market transactions this week as disclosed in a Form 4 filed by Mr. Painter with the Securities and Exchange Commission.

"We're pleased that Scott is making this statement of support for TrueCar," says Steven Dietz, TrueCar's Lead Independent Director and a Partner at Upfront Ventures. "Upfront is excited about TrueCar's long-term trajectory, and we expect to hold our 10 million share position for quite some time."

Painter continues to rank among the company's top shareholders. Following the purchase he controls approximately 10.8 million shares of TrueCar common stock, including exercisable stock options, which represent more than 12 percent of the company's outstanding shares.

"I believe strongly in the long-term prospects for this company and want to participate financially in its success alongside our other stockholders," Painter said."

There are other ways and times you will be able to cash out. Depending on the cash compensation package you negotiated, your token purchase should be small relative to the size of your annual salary. If the masses swallow your false signals, you can buy yourself years worth of additional exorbitant salary and perks. Another potential way to cash out is the Elon Musk method with margin leverage--send a false signal by purchasing shares in your company's equity-offerings, but take out a loan so large from the investment bank handling the offering that you actually are putting tens of millions of cash into your pocket. This method should be reserved only for the most brazen and delusional Hypesters. 

Law #24 Authority: Philip Frost, CEO of Opko Health

OPK is the quintessential example of sending false signals. Despite blowing more hot air and missing more milestones than even Elon Musk, OPK has garnered a militantly bullish cult lemming following. OPK will be featured in many more Laws of Hype and thus should be studied and scrutinized by enterprising Hypesters in how to conduct a Hype Campaign built upon no fundamental foundation. OPK is run by an individual so hyper-focused and obsessed at defending the illusion of progress, they will go so far as issue press releases to clarify why insiders sell stock. Even as a $6 billion company, OPK's CEO Philip Frost often conducts interviews on retail day trader oriented pump-and-dump websites, to spread the Hype to all corners of internet chat rooms.
One can quickly and easily search Twitter for $OPK to see the pervasiveness of cult shareholders due to Frost's frequent insider purchases. 
Additionally, here is just a small sampling of headlines on various investment websites that could be generated by your false signals: 
 Opko Health's Insider Buying A Rx for Profits?
Opko Health: Frost Resumes His Insider Purchases
Meet Dr. Phillip Frost, The Hypertrade of Opko Health
Opko CEO Adds to Buying
CEO Phillip Frost Increases Stake in Opko
Opko Health Inc: Frost's Binge Keeps Moving
Opko's Frost: The CEO Who Keeps Buying His Company's Stock

With enough false signals generating a higher stock price, ultimately you may be able to buy a real business with your inflated equity currency before your Potemkin Village is discovered as a pure facade of business durability. 

Transgression of the Law:


Kevin Conroy, architect of EXAS' epic hype campaign recently sold shares after his stock had sold off aggressively when the company had to report lack of sales execution for their only diagnostic product. Unless the wheels are imminently about to fall off and you are desperate to cash out, selling directly after a massive decline and showing zero price sensitivity to cashing in your options is the opposite of what you should do to lengthen the duration of your hype's effect--it will portray weakness and can be taken as a sign of panic. Only resort to this when there is little hope of your Hype Campaign resulting in your stock reattaining its previous highs. 

Historical Case Study: It is imperative to not make the amount of capital for your false signal too large for you to handle. You have to understand your false signal is a potentially equivalent to a sacrificial lamb...it is meant to buy you time and infuse a false sense of confidence into the marketplace. If at all possible, you should have a surrogate act on your behalf--encourage the company's executives and board members to send the false signals for you. On October 24th, 1929 (what is known as Black Thursday), Richard Whitney was used precisely as such a surrogate. Whitney was Vice President of the NYSE at the time and one of the most well known and well liked financiers of the era. The leaders of Morgan Bank, Chase National Bank, and National City Bank of New York tried to send a false signal to stem the panic in the market. With much hullabaloo and the resources of the banking cabal, Whitney marched on the floor of the NYSE and bought 10,000 shares of US Steel at $205, an above market price. This was quite a substantial sum at the time. This false signal did help to quell the chaos temporarily...for about one day, but ultimately proved as fruitless as trying to put out a blazing forest fire with a spray bottle. When possible, use a surrogate's capital and refrain from putting your own money in harm's way as your house of cards could come falling down at any moment. The timing of your false signal is everything. Don't step in front of a freight train, or if you must, use someone else's money. 




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Law #10: Spoon Feed the Sell Side

2/20/2015

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Take advantage of the sell side’s feeble minds and group think. Spoon feed them whatever talking points you want parroted to the broader investment community.

This Law should be used in conjunction with Law #5 (Emphasize Meaningless Metrics) and Law #6 (Obscure Data), but is important as a standalone Law given the massive tool the Sell Side can be for your Hype Campaign. 

The Sell Side needs context.  First, they are very insecure people and more akin to an aspiring groupie who might not have found their group yet than an objective researcher of facts.  You need to court them.

Always tell them “great  question” or “really appreciate the question, I’m glad you brought that up” when they ask a question on a conference call, especially if it’s the most bone-headed question you could think of asking.  This will make them think you like them, and they will immediately, subconsciously, begin taking in only the good things you are saying and ignoring the bad (or ignoring what you’ve omitted…as you know from Law #8, you never show weakness on a conference call).  Try to speak to each question at length, even if you stop addressing the original question (see Law #15: Give Non-answer Answers, e.g. ramble).  This not only makes the analyst feel important again, but also gives you another chance to wax philosophical on the disruptive nature of your business and rapidly growing massive TAM.

Understand the sell-side spend most of their days on the phone, talking to their clients, trying to pitch their top long ideas.  They do not have time for a complicated story, and certainly don’t have time to think how to distill a complex story to simpler story. Make their lives easy for them.   

This is most easily accomplished by feeding them data points that sound impressive and achievable at first glance, and can be packaged as digestible sound bites for the sell side to put in their reports and parrot to their clients.  Sometimes the spoon-feeding and parroting can be for simpler items, such as Go-Pro calling their cameras “happiness inducing, universe altering, life capture devices”—no one history has used such a term for a camera. To give you a sense of the level of mindless and absolute parroting by the sell-side word-for-word, many sell side reports will also refer to Go-Pro’s camera as life-capture devices (see Law #22: Bedeck the Banal).

An even better example of this recently is IACI’s Greg Blatt, who oversees The Match Group dating websites Match.com, OKcupid, and Tinder.  Tinder is IACI’s “hot asset” and the “story” behind the stock, even though it is not making any revenue yet and Greg refuses to even give users counts (which would be the standard fluff metric to at least provide:  MAUs and DAUs).  Instead, Greg leaks that Tinder produces a “billion swipes” a day (with Tinder, you either swipe your phone left or right to indicate whether you like a dating profile.)  It is hard to argue with a billion, even though it does not really even say anything about how many people are using it, how that might help it make revenue, or even how many more swipes that was compared to a few months ago.

Blatt then expertly framed Tinder’s revenue/EBITDA generation capability by laying out the following statement on an earnings call (Q2 2014 call):

"If you took Tinder's current user base -- so June, 2014. And, you monetized its North American and European users at the rate that we monetize on OkCupid, and we monetized Tinder's users in the rest of the world at 25% that rate, you would be looking at about $75 million of additional EBITDA this year."


The brilliance of this statement are several fold.  First, he starts with a data point we do not have and he will not provide (Tinder’s current user base), making it impossible for a discerning mind to even start proving or disproving what he is saying (Law #7 Give Un-falsifiable Forecast, increase dependence of your investment thesis on far-off forecasts).  Second, he sets forth a simple (and even conservative) sounding framework for monetization by comparing Tinder to OKCupid, another dating website they have been attempting to monetize the last 4 years.  Finally, he comes up with a large EBITDA number that, if one has already drank his Kool-aid, they may misconstrue as guidance rather than just a hypothetical. This methodology also plays into investors’ natural tendency towards a Saliency Bias, which causes them to be overly influenced by (false) analogy to memorable success (similar to Law #21: Compare Apples to Oranges).

It does not matter that monetizing Tinder at the same rate as OKCupid will be a massive, unachievable Herculean feat. After four years of working desperately to monetize OKCupid IACI is only getting it to about 20% of the level of Match.com, and OKCupid is closer to Match than Tinder is to OKCupid.  It also does not matter how he is thinking about defining EBITDA, as in the same breath just one sentence later in the call Greg claims Tinder is massively hurting Match Group’s profitability as a way to explain the group missing estimates. No nevermind this, as he assures us Tinder will generate 50% EBITDA margins, well above Match Group, and thus will be accretive soon enough.

The only thing that matters in this case is that he has spoon fed the Sell Side an easy way to pitch the stock:  “1 billion swipes, think about that” and “They are actually being conservative and assuming Tinder doesn’t even monetize as well as OKCupid internationally.”  Furthermore, because it was a hypothetical, he can get people excited and shift focus well into the future about something intangible while simultaneously slowly lowering near term expectations. 

This has already happened with IACI, as Tinder has delayed their original monetization plans by at least six months (and counting) while adding unexpected “scaling costs”.  No matter, the eventual vision (whenever it gets there, whether it’s 2016 or 2020) is firmly part of the Match Group conseneus mythology and consensus estimates.

You may think this is overstating things: that people whose lives should depend on being skeptical of abstract goals would not blindly begin forecasting off fluffy hypotheticals, but that is not the case. It is important to reiterate the psychological and professional pressure these people are under…they wwant to find the story with least resistance. They know that other sell side analysts will latch onto the same comments and are terrified of straying from the herd.  Even if the herd is wrong, they will be wrong collectively, they can blame management, and the chance or getting fired will decrease.  Similar to the notion that you “don’t get fired for buying IBM,” do not underestimate the notions of self-preservation and misery loving company. 

It’s usually safer to shoot first and ask questions later when a CEO lays out a grand vision, as the stock could rip past your 18-month price target in a few hours. Whether you are the Bank of America Merrill Lynch analyst who literally plugged in the $75 million EBITDA Blatt referenced into his model for 2015 with no explanation, or the Oppenheimer analyst who took his OKCupid metrics and applied them to Tinder to find a way to raise his estimates and price target, it’s better to latch onto management commentary and be wrong then to fall behind and miss the “big move.”  Understand the psychology of the Sell Side, and exploit it mercilessly to propel your Hype Campaign.

An additional and obvious point to make is that the sell-side mostly exists as the chief propagandists for the parent company investment bank to sell equity and debt securities and milk the fees from companies that are reliant on the generosity of strangers to fund their cash burn. The Law of Hype Corollary  to this law is Law #19: Befriend the Bankers: Maximize the number of investment banks covering your stock. 





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Law #9: Blitzkrieg News cycle

2/17/2015

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In the early stages of your hype campaign, increase the frequency of your press releases.

In these times of incessant sensationalist media bombardment, people have attention spans shorter than...oh look a squirrel! What was I saying? Oh, yes, people have attention spans shorter than two Tweets plus a cute cat Vine video. This has caused media news cycles to become compressed. You may put out a press release that you think will give you days or even weeks of positive coverage and attention, but you're in for a rude awakening when it gets swamped by an avalanche of new Kardashian selfies.  Media outlets have to come up with content to fill 24-hours of coverage and because of this they try to make things appear to change more than they actually do to try in order to hold people's attention. In an effort to combat the slow intellectual erosion of potential investors, you must increase the frequency of your press releases and pseudo-events (events you create to make look like news) dramatically in the early going. Blitzkrieg can be translated into "Lightning War" and a method of warfare characterized by a series of fast and powerful attacks in short succession in a concentrated manner. Like the Germans invading Poland in 1939, you want to adopt a Blitzkrieg PR campaign in the early going. It hardly matters what you have press releases about--it matters more just that you are in the news. When this happens people will generally be seeing your company in the headlines and checking the stock and tweeting about your stocks, this rush of attention in a raging bull market will generally lead to dumb money flooding in and running your stock up--this is the perfect way to kick off your hype campaign. It is important to use creativity in order to come up with enough things to create press releases for in a short period of time (~1 week to ~3 months)--ideally you have news of new partnerships (do not disclose any terms or related financials) and can get positive association with bigger, more well known companies, such as when Elon Musk alluded to Tesla working in partnership with BMW: "We are talking about whether we can collaborate in battery technology or charging stations," Musk was quoted. (Nevermind that a BMW representative responded with this: ""Elon Musk is using us for PR purposes". "BMW can currently not recognize how the company would profit from Tesla because the young EV manufacturer does not have a technological advantage in any single area.")

"The electric car company Tesla gained about $2 billion in market capitalization after Elon Musk's October 1 tweet that it "was time to unveil the D and something else." - Be sure to work in cryptic language and vague references as much as possible, to let the mass' imagination run wild. 

Your Blitzkrieg Hype PR Campaign would be even better if you can also work in some press releases that highlight meaningless metrics, such as Tesla's in regards to opening their 50th Super-charging station in Europe, or Zillow's fluff PR from just one week ago: "More Than 1 Million Real Estate Professional Reviews Now on Zillow."  

Studying Elon Musk's Twitter history can also serve as a good guide. When there is bad news or operating results at your company, you should re-initiate another Blitzkrieg Hype-Cycle to shift investor attention away from your ongoing cash burn and instead dangle something shiny in their faces (just make sure the actual deliverables are years down the road).  In the early going any news is good news--once the gullible sheep believe your story hook, line and sinker and are acting as your Hype surrogates at cocktail parties and on message boards all over the internet, then you will want to slow the news flow to a dead stop. At that point, only positives will be projected upon you. This is akin to the wise saying that it is better to keep your mouth shut and let people think you are a fool than open it and remove all doubts. 



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Law #8: Paint a Rosy Picture

2/17/2015

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Pretend it is all positive, regardless of the actual outcomes and outlook you should eternally forecast rainbows and puppy dogs...always polish your turds. 













Every time you are forced to report your lack of earnings and give an operational update to investors, you should pretend it is all positive data regardless of the actualities. Reality is one of the most subjective concepts ever created and given your rising status as a cult leader, the investment community will mostly just take their price cues from your tone and excitability. Whatever substance (Dr. Pepper, cocaine), routine (yoga, meditation, certain sex act) or song (Bobby Darin "Don't Rain on my Parade) gets you in a good mood and amp'd up you should do this before your earnings call. What is often the case is that the actual lack-of-earnings report will be abysmal, but by the sheer force of will and over the top positivity a CEO can sway investors opinion into thinking the results were decent and not sell-worthy. Generally speaking, people are feeble minded and will parrot whatever you spoon feed them. They generally will not think...especially not for themselves nor expend mental energy on coming to independent conclusions so to take advantage of this you must tell them that your results are phenomenally positive and hence they will be perceived this way. Even when your results are clearly abysmal and there is no end in sight to your cash incineration, you should be relentlessly emphatic about how delightfully incredible they are and how excited your future cash burn due to new opportunities makes you.


In future Laws we will go into depth about how to explain away weakness and twist the facts as much as legally possible to make your results actually seem positive. 




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Law #7: Give 'Un-Falsifiable' Forecasts

12/12/2014

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For a good hype campaign or to create a bubble. you have to increase the dependence of your investment thesis on "unfalsifiable" beliefs. This goes hand in hand with giving vague forecasts that are at a minimum 3+ years in the future. If something is unfalsifiable it creates polarization between those who believe and those who do not. It will generally be easy to find those who "believe" with minimal skepticism, push back, or need for empirical evidence--these are the naive suckers you are targeting at first. For those who do believe, when they are threatened with conflicting data or arguments against belief in whatever your investment narrative is, given that their premise is generally unfalsifiable (at least within the next three years), they will typically "double down" on their belief or increasingly shift their reasons for believing more and more towards whatever is most abstract, distant, or unfalsifiable. 


Tesla's narrative is going from 30k of annual unit production to 500k by 2020 and then will make "every kind of car imaginable." While one may be able to argue against such a narrative using historic case studies, point out that they do not make money and are missing current production targets, or show how much invested capital such dreams would require, it is not necessarily falsifiable within the next few years, which when following the Laws of Hype playbook, is more than sufficient time for the bubble mindset to set in to allow you to cash in on your inflated stock. Biotech as a whole is easily the most abstract industry and many hype narratives within biotech are based purely on pipelines for future drugs that are 3-5 years out, thus making it perhaps the industry most repeatedly susceptible to massive bubbles.  

On February 3rd, 1999 CBS 60 Minutes ran a special on Amazon called Jeff Bezos: The Nerd of the Amazon. In the segment the 60 Minutes anchor Bob Simon states that "the company says its investing for the future."  The company was stringing analysts and investors along then as much as they are now stating they had a multi-year time frame to reach profitability...giving them an edge over other public companies and venture capital backed competitors who needed to show profits.

Fast forward 15 years and Amazon is still not consistently profitable, losing $563 million in net income in just the last two quarters. In December 2013 the unprofitable Bezos was on 60 Minutes again in a masterful hype piece the day before Cyber Monday, unveiling the potential for same-day opto-copter drone deliveries. Once again Bezos was talking about investing for future profits, maintaining a vague multi-year time frame in reaching profitability, which is indeed unverifiable and "unfalsifiable." 

Bezos discussing the same-day drone deliveries: "This is early. This is still years away...It can't be before 2015. Could it be, you know, four, five years? I think so. It will work. It will happen. It's going to be a lot of fun."  This forecast is so vague it's anywhere from 2015-2019 and is thus unfalsifiable within the next three years, allowing gullible investors plenty of time for their imaginations to run wild with all the possibilities. ("can't be before 2015" --remember was said on December 1st, 2013).  

This 60 Minutes segment was a great piece of hype. Amazon got tons of press coverage for unveiling the potential for drone delivery, but were so vague about it actually working or when it would begin that they cannot possibly be pinned down to delivering on any "forecasts" and most likely the drone delivery initiative fades into oblivion over the years, if it hasn't already one year later. 

"In the long run, if you take care of customers, that is taking care of shareholders." - Bezos. Of course, this is absolutely not true, but it sounds good when stated confidently and in conjunction with unfalsifiable forecasts for future profitability. 

"That long term approach is rare enough that it means you are not competing against very many companies because most companies want to see a return on investment in, you know, in one, two, three years. I'm willing for it to be five, six, seven years." In another 15 years from now it is likely that Bezos will be singing the same tune while never giving specific forecasts and statements that can be dis-proven immediately. 


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