One of the common themes in investing is "what am I missing?" and this piece is a great walk through through a reasoned set of parameters that might make a company or project more or less valuable. The assertion that SnapChat is 'Intrinsicially' worthless is of course false. For something to actually be "worthless" in a free market would require that either no one would offer any value in exchange for partial ownership, or there would have to be outright fraud. We say a 'fake' Van Gough is worthless because it is worth much less than an original, but someone might buy it because they like the painting and they can't afford an original. As a painting it would probably be worth more than a print. But not actually "worthless."
So what is he saying? He says that Snapchat's recent valuation was much higher than he would have put it. And we can ascertain that like the forgery vs. actual painting the difference in the two numbers is large.
So what is the basis for this disconnect? It is this:
" $4bn for an easily replaceable service that is little more than Microsoft Paint duct taped to a disposable camera? A service that voluntarily throws away its own data in the golden age of data hoarding? A service devoid of the nature of competition that is the driving behind every other profitable company in the world?"
The focus here is on the tech and not the market. A pet rock was 'worthless' (the rock was just a rock) but the connection with a generation was valuable. So often in our business we look at something that we feel like we could build (or could be easily built) and a valuation, and focus on those two things. The parts we don't see we give little value to (350M snaps? Seriously? That is a boat load of engagement). Making anything that get 350M 13-23 yr olds engaged is a pretty huge deal. That is what is valuable with Snapchat, not the tech.