After 10 Years, Nathan Myhrvold's $3B of Private Equity Funds Show Big Losses
forbes.com
forbes.com
> They were designed to invest in patents and innovations, not companies or their securities, over a lifespan of 20 years, as opposed to the usual 10 to 13 years. Halfway through their run, the funds are deep in the red...Invention Investment Fund II was the bigger fund that Myhrvold’s firm, Intellectual Ventures, raised in 2008
Intellectual Ventures has always maintained that “traditional accounting rules don’t accurately reflect the value of our patent portfolio.”
Hate when companies not doing well try to dodge by blasting "traditional accounting rules" when these rules have been crafted over the years to accurately reflect the value of said company.
Bottom line - the returns for both funds are in the negative. Can't avoid this by hoping for some 'modernist' version of accountancy that might make the fund look good.
I think accounting rules often cause divergences from reality, but this is 10 years in and this fund has had AWFUL performance.
As for whether the market is "correct" that's a meaningless question since the answer can only ever be determined in hindsight. But so far no one has been able to find a more correct approach.
Even if you're just trying to catch out the unwary (or explicitly ignorant) who don't look for the mines, coverage of most routes is still pretty important.
This joint nature may affect value non-linearly, where A or B on their own are only worth X, but A and B together are worth 100X, or more.
I agree that criticism of traditional accounting methods often points to inherent risks and even corruption, see Enron.
However, as I understand it, measuring firm value is not the primary goal of accounting. The way depreciation is calculated, for instance, may be convenient for other reasons, but it doesn't say much about real values at all. Accounting numbers are quite artificial.
When analysts calculate firm values, through methods like DCF, they use accounting numbers from the financial statements as their inputs to calculate cash flow etc., but that's just for lack of a better alternative. In fact the numbers don't make sense by themselves and many of the accounting rules just make the estimation of firm values more difficult.
At least three of these accounting numbers are very real: revenue, expenses and assets. When the dust from handwaving settles, they ultimately describe the health of a company any given fiscal quarter. Observing their first derivative values would typically show the direction the business is heading. It's this information that the crude corporate PID controllers (aka board meetings) use to steer the enterprise.
Look at the immense scepticism Tesla is met with based on operational stats, despite having actual, in-demand market product. Talk is cheap and accounting has been a great performance predictor many times over.
When that's the majority of your balance sheet, whatever method you chose will have legitimate criticism.
They can be valued with at least their acquisition value, which is a start. For all we know the "true" value (come liquidation) may now be zero, but still it puts a practical cap to how much IV can hype its business model.
They survive on #1 and make return on #2. It is a good way to turn $1M into $100M. It doesn't work if you start with $3B.
At the time he raised the fund, there certainly were plenty of people who thought patent trolling could scale.
I imagine what would it be like to wake up every morning, look at yourself in the mirror and say "Today I am going to troll people with patents".
I would feel probably more satisfaction living in the streets than making money (in theory, since he is apparently losing money) trolling people.
Even Mother Teresa wasn't perfect: https://en.wikipedia.org/wiki/Mother_Teresa#Criticism
"Didn't treat" extended to telling parents of mentally handicapped children to stop bothering. A physician at a charity in Kolkata told me: "We'd persuade the parents to include the children in daily life, speak to them, give them sensory input, then Mother Teresa's crew would come and tell the parents to just stop bothering, to just feed them and otherwise leave them in a corner, and when the parents did that, the children would return to vegetating."
I'd prefer it the other way. Monoculture is almost never good in the long run and neither is too much power in one hand.
The patent trolling sucks, didn't realize that was him...
But honestly and sincerely the man is a true mad other-level genius:
"Elephants Have Fabulous Tits" (I'm not even gonna link it. It's real. It will challenge you. ;-P Search for that at yer own risk kids...)
He's the author of Modernist Cuisine, a cookbook based on science. He has done all the experiments to determine the scientifically best ways to cook things. Instead of making it an affordable book, he priced it at over $600.
yes, he spent millions in the process, but he's a multi-billionaire. He's never going to recoup the $25 million he spent on research, why couldn't he have done that as giving back to the community?
I just don't get that.
He had a choice to make on the book, commodity cookbook or status symbol. With all the hype around it, that book was destined to be a PDF on the pirate bay the day after release no matter what the price. Selling it for $600 so rich half-wits could perch it in their kitchen as a trophy was brilliant.
Now IV and its business model was pure, reactor-grade greedy assholery. Perhaps that's how he understood so well the mentality of the person who would drop $600 for a cookbook. With the taking one to know one and all that...
$600 is not that extreme a price in the 'technical food book aimed at professionals' realm (which is where the book was originally aimed).
There are 4-volume references like Hui and Sherkat's "Handbook of Food Science, Technology, and Engineering" which retail at $1,800 (https://www.amazon.com/Handbook-Food-Science-Technology-Engi... a number of single-volume Wiley handbooks have prices around $290.
Factoring in that Modernist Cuisine is 23kg, 7 volumes, had an initial print run at 6,000 copies and an unusual volume (the kitchen manual is printed on plastic)...it's hard to see how this is a reasonable criticism, especially when Modernist Cuisine at Home (which is targeted at a wider audience and covers many of the same bases) is priced at $112.
Did Myhrvold really think he was going to be bring liquidity and transparency to the patent market? Or was the intention really to be a giant patent troll?