Self-Taught MBA Podcast

In this episode I sat down with Hermann Vivier, founder of Bitcoin Ekasi. We discuss the limitations of government handouts in alleviating poverty, and Hermann emphasises the importance of capital accumulation for true empowerment. He highlights how Bitcoin can serve as a tool for financial independence due to its accessibility and ease of use, allowing individuals to store value and save for the future without the barriers posed by traditional banking systems.

Important Links:

• Subscribe to my newsletter: https://selftaughtmba.substack.com/
• Bitcoin Ekasi Website: Ekasi Center Crowdfund
• Bitcoin Ekasi on X: https://x.com/bitcoinekasi?s=21&t=5HLLDw6EWWz5o8_IYRhdvA

• The Bitcoin Bowl Documentary: https://x.com/bitcoinekasi/status/1826286564068164035?s=46&t=5HLLDw6EWWz5o8_IYRhdvA
  

Max Cuvellier, writer of Africa: The Big Deal, joined me to talk about the venture capital ecosystem in Africa. We talked about the next big sectors in venture capital, why it can be important to group African countries together when looking at data, and the importance of the energy, logistics, and fintech categories for investment in Africa.

Links: 

• Africa: The Big Deal — (1) Africa: The Big Deal | Max | Substack 
• Max on LinkedIn — https://www.linkedin.com/in/mcuvellier?utm_source=share&utm_campaign=share_via&utm_content=profile&utm_medium=ios_app

• Read Self-Taught MBA — Self-Taught MBA | Mansa | Substack

In this episode, Minenhle tells us about his exciting adventure while forming NT Media Group, and how he measures success as the Chairman of the Durban Chamber of Commerce Youth In Business Forum. We also talk about The Big Shoutout — an initiative to help grow youth-led small businesses in Durban, what makes a great entrepreneur, and more!

Important links

Minenhle on LinkedIn: https://www.linkedin.com/in/minenhle-nzama-329378229?utm_source=share&utm_campaign=share_via&utm_content=profile&utm_medium=ios_app

NT Media Group: https://www.linkedin.com/company/nt-media-group/

Subscribe to the Self-Taught MBA newsletter: https://selftaughtmba.substack.com 

Follow me on LinkedIn: https://www.linkedin.com/in/mansa-wandile-sithole-1293131b5?utm_source=share&utm_campaign=share_via&utm_content=profile&utm_medium=ios_app

Alex Lutz felt that a lot of potential was being lost when high school learners weren’t able to access quality additional learning material and resources, so she built an online platform to revolutionise learning.

In this episode we talk about her platform, Milani Education, the challenges of studying while building a business, how we could improve education in South Africa, AI in learning and more!

Alex Lutz on LinkedIn: https://www.linkedin.com/in/alexandra-lutz-962554227?utm_source=share&utm_campaign=share_via&utm_content=profile&utm_medium=ios_app 

Milani Education: 

• Website — https://milanieducation.com/ 

• LinkedIn — https://www.linkedin.com/company/milani-education/ 

• Instagram — https://www.instagram.com/milani_education?igsh=MXE1anJjenFoOTUyaQ== 

Subscribe to our newsletter: https://selftaughtmba.substack.com/

Warren Wheatley and I talked about Altvest Capital, their mission to democratise access to great investment opportunities, his unique bid for the Springbok Rugby brand, why he likes China's innovations, his thoughts on bringing bitcoin to South African institutions, and more!

Important links:

subscribe to the newsletter: https://selftaughtmba.substack.com/

https://altvestcapital.co.za/

Warren on LinkedIn: linkedin.com/in/warren-wheatley-13709644

To Investors,

“Capital flows to where it’s treated best.”

I’ve been pondering why the venture capital ecosystem in South Africa isn’t as vigorous as it is in other regions globally. We can talk about politics, demographics, and any of the many social issues; but I think that, although the space has grown significantly over the years, the South African venture capital ecosystem isn’t surging because fund managers aren’t using the right fund structures to effectively attract capital, allocate capital, and update the liquidity & risk profile of venture capital investing.

The current venture capital funding model was created in the 1960s and 70s. I can’t talk about what it was like in that period but I can promise you that it’s very different to today. The typical private equity/venture capital funding model includes a fund structure where you raise “X” amount with a fund duration of 7-10 years. As the fund manager you charge your clients an annual management fee for the duration of that fund, and then take a percentage of the profits in the event of a sale or “exit” from an investment when you return capital to your clients, when the fund matures. So as a fund manager you keep your clients locked in an investment for 10 years, with zero liquidity options whether the markets are booming or busting, and you charge them an annual fee no matter what, while you hope to make them a minimum 15-20% return on their investment. Seems like a hell of a lot of risk for the client for just 15% after 10 years.

While their capital is locked-up, South African investors must particularly worry about political uncertainty, demographic issues, and broader economic uncertainties such as whether this product can scale beyond South Africa’s small economy because it needs to scale beyond South Africa for it to be a viable product.

All of these issues are why experienced venture capital operators say that there isn’t enough risk capital flowing into the venture ecosystem. But maybe it's not flowing into the ecosystem because the liquidity profile needs to change (i.e. fund managers need to make investors more comfortable with taking risk).

I think that it's time for new fund structures across the board, no matter how “experienced” a fund manager you are.

Ninety One, Robert Hersov through African Gold Acquisition Corporation, Gabriel Theron through Cilo Cybin, Sequoia, Coatue Management, Pershing Square, and Social Capital, are a few examples of fund managers that have tried to encourage more of us to use these other fund models that may be better alternatives to the current general fund structure that I described earlier in this letter.

The alternative models I want to talk about today are Interval Funds, Evergreen Funds, and Special Purpose Acquisition Companies (SPACs). These are some of the fund structures that we’re exploring deeply, and I’ve been interested in these funding models for years as these are the special tools that the top capital allocators employ when they want to solve specific problems like liquidity constraints, long-term alignment, regulatory requirements, or even market psychology.

Let’s unpack these through real examples…

Interval Funds

An interval fund is a closed-end fund that does not trade on an exchange but allows redemptions at set intervals (usually quarterly), offering some liquidity while retaining the benefits of long-term investing.

Coatue Management, an ~ $60B tech-focused investment firm, recently launched an interval fund for their clients to allow the firm to manage public as well as private equity investments.

When talking about the reason for this new fund, founder of Coatue Management Philippe Laffont noted two problems that the firm is solving for. One is that they want to be able to create a new equities index that will replicate the success of the “Magnificent 7” stocks, however the basket forming that index must also be able to consider private companies like SpaceX or Stripe, as well as publicly listed companies.

The other problem that Coatue is solving for is the 10 year illiquid lock up that the typical venture model imposes on investors. At times when the markets are down, some fund managers may request an extension of 2 to 5 years because they wouldn’t be able to make a return for clients if they exited investments currently. So Philippe says that that is a difficult constraint because it puts the venture capital industry in a potential death spiral, and may stifle innovation because risk-averse investors = less capital available for new innovation. So Coatue’s interval fund allows a minimum investment of $50 000, and allows investors to withdraw 5% of the fund’s net asset value quarterly to give clients liquidity. However, this is subject to the fund’s overall liquidity and is not a guarantee that every investor can always redeem 5% of their individual investment each quarter if aggregate requests exceed the cap.

One great takeaway with this fund structure though, is that the minimum investment amount allows more participants and therefore draws on a larger pool of capital. The other great takeaway is that the little injections of liquidity to the investor (the people that give Coatue capital to allocate) make the investor more comfortable with taking risk by allocating to venture capital investing. These key features of Coatue’s fund structure give Coatue access to near-permanent capital.

Benefits for Coatue:

* Liquidity: 1) their clients have access to liquidity at intervals, and 2) allowing a minimum $50 000 investment spreads risk and draws from a larger available pool of capital. Both outcomes significantly make “illiquid” investments in private markets more attractive.

* Avoid Forced Selling: Unlike mutual funds, interval funds don’t need to be fully liquid daily. This prevents panic redemptions and allows managers to stay the course.

* This structure is particularly suited to more than just high-net-worth individuals, but also regular (but approved) investors who want access to venture-style returns but with more flexibility than a locked-up 10-year fund.

Evergreen Funds

An evergreen fund is a permanent capital vehicle, meaning there’s no end date to the fund. Profits are recycled, and capital is raised gradually. Think of it as a rolling investment firm rather than a fund with a fixed lifecycle.

Renowned investment firm Sequoia changed their entire U.S. model to an evergreen fund in 2021. The largest problem that Sequoia is solving for with an evergreen fund of this nature is that instead of investing in a startup at the seed stage, then getting the startup to an IPO and being forced to sell their stake to return capital to their clients; Sequoia gets to hold a position in a company from the private stage, into the IPO, and long into that company’s life as a publicly listed company. This matters because a lot of the returns that startups see is when they're actually publicly listed because they are more mature and have greater scale. A few examples of this are Tesla, Amazon, Uber, Apple, and SoFi, among many others.

In this evergreen model Sequoia allows their investors to decide if they want to hold their investment after a company goes public and not choose to call capital, or if they want to withdraw a portion and keep the rest invested in the fund. Alternatively the investor can also withdraw a portion of their capital annually.

Benefits:

* Longer-duration Capital: Sequoia aren’t forced to sell a position after an IPO, and can therefore benefit from upside realised after a company goes public.

* Attracts Additional Capital: the comfortable liquidity profile of an evergreen fund attracts more clients for Sequoia.

* Alignment with Founders: Sequoia sticks with founders for longer.

SPACs

A special purpose acquisition company (SPAC) is a shell company that is created to list a private company on an exchange, without going through the IPO process. How it works is that the shell company raises a bunch of capital, lists on a public exchange like the AltX, NYSE, etc., and acquires a private company.

With a SPAC funding model you are solving for the fact that there’s an important company that needs to be publicly listed to a) draw attention to the importance of that company, and b) attract capital from institutions like pension funds, wealth managers, and government support. The problem is that usually this company would struggle to successfully list through a standard IPO process because perhaps as an example the company is still years away from profitability – longer than most finance firms care to model. An example is when a South African company called Renergen listed through a SPAC in 2015 – a process managed by fund managers Trillian Capital and Integrated Capital Management.

I must reiterate that there are two large benefits to a business becoming publicly listed. One is that the business can start to put processes in place that make it easier to grow market access and attract additional capital from institutions and through government funding/contracts. This is because a publicly listed business must be more disciplined — reporting its audited financial statements periodically and on time, and must be transparent in all of its dealings, especially with regards to the regulatory environment relevant to that company. The transparency allows public scrutiny, which if the company passes, gives the company a clean bill of health to attract more customers and more capital. The other benefit is that all of that brings greater awareness to what the business is doing and gets the company closer to its goal – which should be to sell to every person in the world.

Social Capital also used this model in a number of examples, but one that stands out is when a rare earths mining company called MP Materials was taken public. The deal involved a SPAC called Fortress Value Acquisition Corp (FVAC) acquiring MP Materials through a deal that was estimated at $545 million. At the close of the deal, FVAC was renamed to MP Materials, and this process brought awareness to MP Materials and highlighted the importance of MP Materials in the global rare earth supply chain. With the recent tariff and trade issues raised in the United States, MP Materials is now positioned as a U.S. national champion in the global rare earth materials supply chain.

Additional benefits:

* Faster path to public markets

* Negotiated valuation instead of roadshow

* Allows firms to go public even when markets are shaky

Wrapping Up

In addition to encouraging more capital to enter the startup ecosystem by updating the liquidity & risk profile of venture capital investing, all of these structures also help founders by enabling capital allocators to give founders reassurance that fund managers (and the broader funding ecosystem) are truly with them on their journey.

In addition, these structures also allow investors to support a startup’s growth journey from early stages, to IPO, and maintain that investment long into that startup’s life as a public company.

These updates to the current general venture capital funding model make more sense if you remember that a lot of work goes into helping a startup to come into its own. The founders and their teams pour their lives into an idea and try to turn it into a successful business, so they need the broader capital ecosystem supporting them continuously. Capital allocators also put in a lot of tireless work to understand the intricacies of that business, help the founders recruit management and employees, and help them navigate regulatory environments. The bonds formed throughout this journey can seem like they also become abandoned at the end of an investor’s fund life. Maybe I’m wrong. But I think that these fund model updates may be imperative to injecting more energy in the venture capital ecosystem in South Africa.

If you're a fund manager, capital allocator, or represent an institution thinking seriously about the next generation of investment structures – and would be open to a deeper conversation – I’d welcome the opportunity to connect. We're currently exploring a few ideas in this space and would be glad to share more in a one-on-one discussion.

I hope you enjoyed reading this letter.

On my journey to becoming a master capital allocator, one lesson down, a billion more to go.

Hope you all have a great start to your week

-Mansa

Thanks for reading Self-Taught MBA! Subscribe for free to receive new posts and support my work.

To Investors,

Last year I wrote a letter to this group suggesting that the South African government should intentionally make Eskom smaller, reduce Eskom’s market share in the energy supply chain, for the benefit of Eskom itself – and for the benefit of South Africans. I wanted to re-publish the letter to reach out to more industry insiders and capital allocators for comments on the idea.

I’ve copied and pasted the original letter, but have added a few improvements for better communication.

In 2023 I wrote a short essay about how solar energy could be the answer to South Africa’s energy woes. You can read that note here.

In the same year, the South African government announced a debt relief package of R254 billion for Eskom’s debt and committed to also take up R70 billion of debt from Eskom’s balance sheet to hopefully reduce the debt further to sustainable levels.

Since then, not much has changed in South Africa (SA), with rolling blackouts (or loadshedding) continuing on and off in SA. A state designed monopoly, i.e., a monopoly that is born by decree, is the worst kind of monopoly. The main reason why load shedding persists in South Africa is because there’s no market feedback loop that says “Eskom, you can’t provide me the service I need, so I’m going with another service provider.” So debt bailouts aren’t the way to go because they only cause strain on the fiscal budget – negatively affecting South Africans, and negatively affecting Eskom’s executive team because they aren’t being held accountable as business leaders. I can’t believe I even have to write this last part out, but it's the environment we live in.

Eskom is a systemically important company, yes for the electricity infrastructure, but also because the company supports 40 000 jobs directly, according to Perplexity, and an estimated hundreds of thousands more through contractors, suppliers, and related industries. So it's imperative that the company must be rebuilt to make it more productive, and in my view, action to do that should be more aggressive.

If the government wants to commit to absorbing Eskom’s debt, they can do that, but the government should also pointedly strip market share away from Eskom by supporting residential solar initiatives.

Here's how it could work…

Phase 1: Subsidise Residential Solar Installations

To encourage widespread adoption of solar energy, the government should heavily subsidise the installation of residential solar systems, including battery storage. This could take the shape of tax credits offered if people go solar.

For example, in the United States there’s a tax credit for new electric vehicle buyers through a policy called the Inflation Reduction Act. A similar initiative in SA would significantly reduce the initial cost of adoption of a solar system for homeowners, promoting independence from the national grid should households wish; however, the bigger play would be for households to become net producers of energy.

Phase 2: Implement Net Metering Nationwide

At the same time as subsidising solar, following Cape Town's lead, all municipalities should adopt a net metering system. This system allows homeowners or businesses with solar panels to sell excess energy back to the grid, stimulating economic activity. For instance, in 2023, Cape Town's net metering system generated R26 million for businesses and households.

Additionally, this will lay the groundwork for a peer-to-peer energy sharing network, which could enable homeowners to share or sell surplus energy to neighbours. This model has proven successful in Australia for example, through collaborations with a company called PowerLedger.

Outcomes

By reducing reliance on Eskom, the national grid would be relieved of its current strain as the electricity supply chain becomes decentralised, allowing Eskom to focus on restructuring and upgrading its worn-out infrastructure. Moreover, the proliferation of residential solar systems would ensure energy availability across all regions.

It’s crucial to recognise that, as a state-owned entity, Eskom's loss of market share would not have as severe an impact as it would in a free market. So, to address Eskom’s staggering debt of R412 billion, we need to do something bold and that will benefit future generations.

I ran a few numbers.

To be clear, Eskom is technically solvent, it's just that the business isn’t as efficient as it could be. On financial metrics – over the last five years, Eskom has maintained a solvency ratio of 2x; maintained positive free cash flow since 2020 (although it went negative again in 2024); and kept an interest coverage ratio of over 1x for the last five years.

The inefficiency (beyond the fact that Eskom struggles to provide a consistent service) in terms of the financials is most notable when seeing that Eskom has had a net loss every year since 2018; and the company’s return on assets has averaged -3.25% over the last five years (ROA have never gone beyond 0.68% in the last 10 years).

In a free market a business like this would have naturally lost market share as consumers shift to another service provider, allowing Eskom to either fail completely and become obsolete as a business, or implement competitive strategies to turn the business around. But being a state owned monopoly born by decree, the problems the company faces may continue to compound, which will exacerbate the negative impacts on the South African economy. So to avoid having that rabbit hole of demise manifesting, the South African government should intentionally make Eskom smaller.

This idea to strip market share away from Eskom by supporting residential solar + net metering nationwide may be the answer.

Hundreds of billions of rands in bailouts by the South African taxpayer have been granted to Eskom. South African leaders have already normalised this behaviour, but it's unsustainable because of the reasons mentioned above.

Global success stories – like Germany’s decentralised solar networks and Australia’s thriving net metering systems – prove that the idea for widespread residential solar and net metering is both achievable and transformative. This model offers South Africa a path to energy security, economic growth, and resilience, far surpassing the current system.

Do you think that South Africa’s leaders can unlock new energy markets by reducing Eskom’s dominance through solar and net metering? I’m interested in hearing your thoughts on how this could reshape investment opportunities.

On my journey to becoming a master capital allocator, one lesson down, a billion more to go.

Hope you all have a great start to your week

-Mansa

Thanks for reading Self-Taught MBA! Subscribe for free to receive new posts and support my work.

To Investors,

Today’s letter features a guest post by Ross Jenvey, a former Partner at Kingson Capital, with eight years of experience as an operator in the South African venture capital industry. As an insider who's seen a fair amount in the South African VC space, I asked Ross to answer four key questions that can help someone trying to understand more about venture capital in South Africa and what it would take for the industry to grow.

1. What makes you most excited about VC in South Africa?

Despite attempts by SARS to fast-track the VC industry in South Africa with tax breaks in the 2010s, it is still a fledgling industry compared to the big brother of Private Equity, which is so large domestically that it includes several companies listed on the JSE. South Africa is a small country in terms of global GDP (~0.6%), and yet its education system continues to produce some quality graduates, a potential pool of educated founders who seem to be increasingly keen on starting their own businesses. The current young generation of graduates seem to be inclined to become their own boss rather than work for big companies, which should add to the list of investible startups in future. This is exacerbated by a thriving Incubator / Accelerator industry in South Africa, which is working hard to boost the number and quality of startups. VC in South Africa is an industry ripe for growth.

The other factor to be excited about is South Africa’s greater integration with the rest of Africa as a VC industry over the last decade. Cross-continent conferences, pitch events and networks have sprung up, and South African VC’s and startups are very much part of that. Therefore, macro trends that predict Africa as one of the world’s fastest-growing economic regions – which should attract more investment – will benefit South Africa as well. Africa’s VC investing is only 0.6% of the global total, and yet Africa contributes 5% of global GDP and 18% of the global population (according to “Africa: The Big Deal”). There is therefore huge potential upside to the VC industry in future years, if the VC asset class can become more mainstream.

2. What frustrates you most about venture capital in South Africa?

It is not a well-known or trusted asset class. South African financial companies have a history of stability and generally avoiding major crises (e.g. bank collapses and pension fund scandals), but the root of that is a conservative lending and investing mindset. Institutional investors (e.g. Asset Managers and Pension Funds) are wary of investing in the more mature Private Equity asset class, so are likely many years away from investing in VC (if at all). This is the key to unlocking the VC industry at scale, and ensuring that there are enough VC Funds to fill all the gaps in the maturity timeline (e.g. Pre-Seed, Seed, Series A & B, and then later stage funds). The current gaps in the funding timeline make it difficult for VC’s to co-invest and even exit to more mature funds as their portfolio companies mature, adding risk to the VC investing process over-and-above the usual risks faced with early-stage investing. Building trust usually [takes] time, but it would be helpful if there was greater assistance from other parts of the financial sector or government to accelerate the process.

3. What will it take for the VC industry in South Africa to double in size (interpret that as you’d like)

Although the South African VC market will have its own nuances, it will likely be swept along with the rest of the African VC market. Some catalysts that will be required for VC on the African continent to double in size include:

* Domestic institutional investors are needed, but as noted above, these are likely still some time away. Therefore, international fund flows become critical, and require more established VC investors from developed economies taking a positive macro view on the African continent, and VC in particular. Any incentives to boost foreign investors could bear huge dividends in the long term.

* Government assistance will also be very helpful. In South Africa, since the demise of the Section 12J tax incentive for VC investing, the industry needs legislation that makes it easier for startups to establish and grow. This can be done via a Startup Act, as has been done in a few other African countries, and a process that has kicked off (see here). This Act would create the legislative framework for startups to thrive, including potential tax breaks, cutting of administrative red tape and other assistance.

* Relaxing of exchange control legislation to allow easier transfer of Intellectual Property (IP). The current legislation makes it difficult for foreign investors to invest and move the IP of South African startups to other jurisdictions for commercial purposes. Relaxing this legislation, even if it is housed as part of the proposed Startup Act and ring-fenced for early-stage companies, could open up pools of foreign capital to invest here.

4. What’s one misconception about VC in general or VC in South Africa (or both) that you want to correct?

VC is a long-term game, where investors should think of it as more like running a marathon than a middle-distance event, but the rewards can be worth it. Many VC funds in South Africa have attracted money from private individuals under the assumption that they would close the fund in 5-7 years. Given the current difficult environment globally for VC exits, the reality in the US is that VC funds are priming investors for a 10-12 year timeframe. In South Africa, with the asset class being largely unknown, this timeframe would likely be a deterrent for many investors, but it should not be. In order to fully maximise the return potential of a VC portfolio in a small economy like South Africa’s, including the constrained exit environment via Initial Public Offerings (IPOs), an investor needs to be patient. Given that investments into alternative [asset] classes (like VC) should make up less than 10% of a portfolio, an investor should be able to afford to be patient for this part of their portfolio in order to reap the longer term benefits that early-stage investing can bring.

Personally, these insights give me an understanding of the higher-level nuances required to begin navigating investing and building in the South African venture capital industry. Ross recently re-launched Lamplight Advisory & Investments – providing financial advisory services to companies, focusing particularly on financial analysis, valuation work, due diligence, and strategic investment advice.

You can reach out to Ross on his LinkedIn page here.

On my journey to becoming a master capital allocator, one lesson down, a billion more to go.

Hope you all have a great day

-Mansa

Thanks for reading Self-Taught MBA! Subscribe for free to receive new posts and support my work.

To Investors,

I’m always intrigued by innovative ways of doing traditional things. I’ve increasingly been intrigued by how companies are looking at bitcoin and deciding on how to participate in the bitcoin market. Today I want to talk about what it means to run a company on a Bitcoin Standard.

So, for starters, if a company runs on a bitcoin standard it means that the company adopts bitcoin as its unit of account, store of value, and medium of exchange. Essentially, it means if you conduct your financial operations in rands for example, then you would just use bitcoin instead.

Once a company has made that decision they’ve also decided to operate somewhere on what I’ve thought of as a spectrum of bitcoin adoption. On one end of the spectrum is when a company decides to sell or convert a part of their treasury assets and buy and hold bitcoin as part of their portfolio. On the far end of that spectrum is a company that makes all of its decisions within the context of Bitcoin.

Let’s run through some examples…

1. Holding Bitcoin as a Reserve Asset

Here, when a company decides how to hold its retained earnings the company will choose to buy bitcoin instead of buying government bonds, or investing in a money-market fund, or investing in an equity fund. The most popular example is how in 2020 MicroStrategy took the decision to convert all of its existing portfolio reserve assets into bitcoin.

2. Accepting Bitcoin For Payments

In this scenario a company would allow customers to pay for goods and services using bitcoin. This would then require that the company has bitcoin transactional infrastructure embedded into the business’s financial infrastructure.

3. Paying Expenses or Salaries in Bitcoin

Vendors, suppliers, or employees may be paid in Bitcoin, either partially or fully. Payments that a company receives in bitcoin may need to be converted into fiat currency (rands, dollars, etc) for operational expenses, for example if vendors don’t accept bitcoin. Otherwise, bitcoin can be held in reserve for capital appreciation.

4. Accounting in Bitcoin

The company uses Bitcoin as its unit of account for financial reporting, pricing, and budgeting. Instead of denominating revenues, expenses, or profits in fiat, they’re tracked in BTC or satoshis (Bitcoin’s smallest unit).

5. Bitcoin-First Financial Strategy

The company prioritises Bitcoin in its financial decisions, such as raising capital through Bitcoin-denominated loans, issuing Bitcoin-based bonds, or even mining Bitcoin to generate revenue.

In one more example, depending on how strongly you believe bitcoin will continue outperforming traditional investments, you can run your company at the very last end of the Bitcoin standard/adoption spectrum, where you draw a line to tell your employees, research & development team, and partners that “if a new idea that they have won’t perform better than bitcoin, then we’re not entertaining it”.

Jack Mallers, founder of Strike, takes this extreme position. Listen to his take in this video.

Putting aside the philosophical conversation about bitcoin, as a CEO/CIO/CFO you’d decide to run your company on a bitcoin standard simply because you want as much exposure as you can handle to bitcoin because bitcoin, like gold, is a robust store-of-value asset — except bitcoin outperforms gold over the longer term because bitcoin has stronger network effects compared to gold.

What are other reasons that a company would want to run on a Bitcoin Standard?

For businesses operating globally, traditional cross-border payments can be slow and costly, often taking days and incurring high fees. Using Bitcoin, particularly through the Lightning Network, allows companies to process transactions almost instantly with minimal costs – reportedly often less than 1% compared to over 11% for traditional methods. This can save money and improve cash flow for international operations.

Another reason is that bitcoin has historically outperformed most fiat currencies, for example returning 924% over the last five years. By using Bitcoin as the unit of account, a company’s financials could reflect higher value over time, especially in inflationary environments where fiat currencies lose purchasing power.

I have one more reason for you, that should be very compelling; and that's wealth preservation. Bitcoin has outperformed the JSE Top 40 index, and outperformed returns from South African government bonds over the last 5 years.

With a 59% CAGR over the last 5 years, bitcoin also outperformed the top performing equity funds in the same period, including the PSG SA Equity Fund; Investec Dynamic Equity; Fairtree Select Equity; Steyn Capital Equity; and the Stanlib Enhanced Multi Style Equity (SA).

Now obviously there are risks to such a strategy, and it goes without saying that companies should consider the regulatory environment before making any financial decisions. The other major risk that investors often talk about is that bitcoin remains relatively volatile – but I think that conversation isn’t being addressed with the correct nuance because bitcoin works on Metcalfe’s Law, which when simplified means that the network effects of the asset are what drive the intense upswings and drawdowns as well. So in my view the digital nature of bitcoin will always mean that bitcoin is more volatile compared to traditional assets like gold, bonds, or equities; so no capital allocator should ever present the idea of waiting for bitcoin’s volatility to “go down”. That’s just my take.

What are your thoughts on running a company on a Bitcoin Standard?

On my journey to becoming a master capital allocator, one lesson down, a billion more to go.

Hope you all have a great day

-Mansa

Thanks for reading Self-Taught MBA! Subscribe for free to receive new posts and support my work.

To Investors,

Last week investors and fans gathered for another Berkshire Hathaway Annual General Meeting. Towards the end of the meeting Warren Buffett announced that he’s stepping down as Berkshire CEO and will remain only as Chairman.

This marked the end of an era and I’d be remiss to not note this in a letter to investors as we all ponder why he retired.

But before we get into why I think Buffett retired, a quick recap of Berkshire Hathaway’s performance over the years.

The Kobeissi Letter summarised Berkshire’s returns in a post on X, writing:

Since 1964, Berkshire Hathaway has returned over 5,500,000%. That's 5.5 MILLION percent. A $10,000 investment in 1964 would be worth $550 million today. This compares to a ~39,000% return in the S&P 500.

Extraordinary returns! Most capital allocators can only dream of being able to allocate capital at that level of play with those kinds of returns.

So why did Buffett retire?

I remember an old adage that said: “play ‘till you suck”. Some might say he was maybe too old (he’s 94!) and that maybe he’s not as sharp as he used to be. I don't think that’s the reason because the markets would have called that out a while ago – and they didn't because Berkshire’s stock is up 197% in the last 5 years.

If that’s not enough, here’s a video of Buffet talking about real estate investing vs investing in equities at this past AGM. Still sounds quite sharp to me.

In my view, I think he retired mainly because of two reasons…

The first is that his best friend, brother and confidant of 60+ years passed away in late 2023. The highs probably don’t feel as high and the lows probably feel like they last forever. I don’t wish that on anyone and I think that’s the first big reason Buffett is retiring now. It can’t feel the same up there on that stage, and on a day-to-day at work. This reminds me of a note Warren made about how Charlie lifted Warren’s spirits after Warren had bought a fledgling textiles company out of ego, called Berkshire Hathaway (before Berkshire was Berkshire as we know it today). According to Warren, Charlie said: “Warren, forget about ever buying another company like Berkshire. But now that you control Berkshire, add to it wonderful businesses purchased at fair prices and give up buying fair businesses at wonderful prices. In other words, abandon everything you learned from your hero, Ben Graham. It works but only when practiced at small scale.”

The second reason is Berkshire’s current cash pile which reached a record $348 billion this year as Buffett has been exiting many equity positions. In all honesty, a couple of years ago I saw the accelerated selling as him planning to hand over the reins to his successor – and that makes sense because how do you hand over a portfolio of holdings you’ve had for decades? Your successor is a completely different person with a different way of seeing things so it's best to rather hand him the cash and let him have a go at it, in his own way.

But that aside, when you’re moving hundreds of billions of dollars, there’s not much you can do to compound that amount of money, especially in the public markets. I remember a few years ago when I pitched a business idea to a successful operator of a business doing hundreds of millions of rands in revenue and he asked me: “how does it move the needle?” I can imagine that’s the same question Buffett has been asking himself for the past 3 years when he started accelerating his selling.

I learned a lot from Warren and I still have so much more to study about how he allocated capital.

Over the past year or so I wrote four investor letters about some of my learnings where I was trying to understand why Buffett loves Coca Cola and Apple; why he loves Bank of America and Amex; the Japanese Yen carry trade that he executed to buy stakes in Japanese trading companies; and after that last letter – a realisation that a cultural moat about Japanese trading companies may have been what attracted him to those businesses.

It will be exciting to see how the incoming CEO, Greg Abel, does along with Todd Combs and the remaining operational team. I’m keen to understand how they look for and where they see the 20% compound annual returning assets. Will they look at bitcoin? Will they allocate to emerging markets? Will the new team allocate to more technology opportunities like NVIDIA or Broadcom to ride the AI wave?

My guess is that it's actually more likely that they’ll allocate to more private equity/credit and venture capital opportunities because those are longer return cycles where you could multiply hundreds of billions of dollars if allocated well. For example there will be an investment boom in America from companies looking to set up U.S. based facilities to avoid tariffs — those are private equity/credit (PE/PC) deals. TSMC is looking to stand up a manufacturing facility in the U.S. and the capital to execute that won’t all come from a bank, if at all. The U.S. is also looking to rebuild supply chains in the medical space as well as in the rare earths space – again those are PE/PC deals. It’s also worth mentioning that these deals wouldn’t be far-fetched because Berkshire did do private credit deals around the global financial crisis when businesses were desperate for liquidity.

Private equity/credit in emerging markets is also an opportunity. Billions of dollars in infrastructure investment is required, and those are also longer term return cycles. Models of those types of deals can be seen from Reliance Industries, the Adani Group, Global Infrastructure Partners, and even BlackRock, to name a few case studies. Those are just my thoughts, let’s see how it all plays out. All the best to Greg Abel, Todd Combs, and their teams. I’m personally excited to continue being educated.

On my journey to becoming a master capital allocator, one lesson down, a billion more to go.

Hope you all have a great day

-Mansa

Thanks for reading Self-Taught MBA! Subscribe for free to receive new posts and support my work.