EIEIO...Going Deep
EIEIO...Going Deep
By: Michael Moe, CFA, Brent Peus, Owen Ritz, Catherine Merrick
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“Does College pay? They do if you are a good open field runner.” – Will Rogers
“Gentleman, it is better to die a small boy than to fumble this football.” – John Heisman
“Don’t tell other people your problems. 90% of the people don’t care and 10% of the people will be glad you have them.” – Lou Holtz
I love football. I especially love college football.
What’s better than a Saturday afternoon in September on campus with the band playing, the cheerleaders cheering, alumni reminiscing, the Student Body roaring and the home team winning?
I had the privilege on Saturday to visit Happy Valley to attend a “White Out” at Beaver Stadium with Penn State shutting out Iowa 31-0. I’ve been to many football games but I don’t know that I’ve experienced anything cooler.
College football has never been more popular and even with last week’s thrashing by the Ducks of Oregon, Coach Prime and his Buffaloes have injected some adrenaline into an already vibrant ecosystem. 20 million viewers stayed up until 2:30AM ET to watch the Colorado beat it’s Rocky Mountain rivals Colorado State in Overtime.
Stubhub’s College Football Preview found that ticket demand for 2023 is 50% higher than 2022. Over 60% of Americans aged 18-44 are college football fans, with nearly 1 in 4 being “avid fans.”
The SEC is getting paid $3 billion over the next decade for TV rights. The Big 10 is getting paid $8 billion for the next seven years.
For a different EIEIO, I’ll discuss why I hate the “Transfer Portal” and why I think “NIL’s”(Name, Image and Likeness) need a major revision, but for now, I’ll leave it that while I think both of these new dynamics are bad for the future of college football and the concept of “Student Athlete,” it thus far hasn’t hurt the popularity of the game.
Ironically, as college football’s approval ratings are off the charts, college itself is struggling to meet the market with its “poll numbers” in the tank.
10 years ago, 86% of college students said the investment in college was worth it, and 14% said it wasn’t. Today, 42% students say it’s worth it and 56% say it’s not. That’s a stunning flip flop in a decade.
In terms of KYC…knowing your customer….91% of college students say the number one thing they are looking for from college is getting a good job. Yet, just 15% of professors think that’s the priority for students.
81% of students say they want business-related experience during their education, but only 30% universities have that as an offering.
Over the past 20 years, the price of TV’s has gone down 97%, the price of toys has decreased 72%, and the price of software has decreased 71%. During that same time period, the price of textbook has gone up 163% and the price of college has gone up 181%.
Jeff Bezos said “your margin is my opportunity”. Since he said that in 2000, 1,453 retail stores have been “Amazoned” and no longer exist. Nearly half the banks in the United States are gone and now part of the Wells Fargo’s and Bank America’s of the World.
There are 4500 universities in the United States (and one point of view, but again, I digress). The late great Clayton Christensen made the prediction in 2018 that half of the universities in the United States wouldn’t exist by 2028.
Quick quiz…which university doesn’t belong?
Harvard, Yale, Dartmouth, Columbia, Brown, Penn, Cornell and Rutgers.
The answer: Many people would say Rutgers because the others are all Ivy League Schools.
My answer is Cornell because it was started in 1869 by Eli Cornell…the others were all started before the Revolutionary War! You can’t think of another industry where the leaders 250 years ago are the leaders of today.
Moreover, when you look at the stereotypical university, it’s set up for 18-22 year olds a.k.a. “The traditional student.” Classes during the day. Offered twice a year in a semester system. Dormitories, (the University of Kentucky spent $1 million a day over the past decade on facilities), no parking, football team, marching band etc.
Yet, 75% of the students today are non-traditional. 40% have full time jobs, 25% have kids. 80% of community college students have jobs, and the average age is 27. So in other words, the non-traditional student has become the norm, and there is a mis-match between who the customer really is and what the offering is…much of which is totally irrelevant to the majority of the student population.
Of course COVID accelerated many of the issues that were already in place, and the A.D. world of a hybrid between physical classes and online exacerbates the strain on the old model.
While I don’t know how many colleges and universities will exist ten years from now, what I do know is there is a gigantic opportunity for academic institutions that reimagine how they help people thrive.
In the old system, elite equaled scarcity. In the New World, elite equals excellence.
In the old system, cost equaled quality. In the New World, outcomes equal quality.
In the old system, AI equaled cheating and/or eliminating the instructor. In the New World, AI is a great equalizer where every student will have a personal AI study buddy which will be enhanced by a teachers involvement.
In the old system, online meant inferior to in person. In the New World, some things will be way better online and some will be way better in person.
Which brings me full circle to my weekend at Penn State, like our long time partners at Arizona State, they believe in excellence at scale. The great universities of the future are going to optimize their impact by seeing how many people they can reach, rather than how many they exclude. Giving everybody an equal opportunity to participate in the future.
Introducing…Going Deep
For more on connecting the dots between life, leadership, and Football, check out the first two episodes of our new podcast Going Deep.
Episode 1: Vic Fangio, NFL Legend and the “Godfather” of Modern Defense. Defensive Coordinator of the Miami Dolphins (who won 70-20 today)
Episode 2: Skip Holtz, Head Coach of the Birmingham Stallions, 2x USFL Champs
Market Performance
The Market was messy last week with all the major indices falling and leading stocks breaking down. For the week, NASDAQ fell 3.6%, the S & P was off 1.9% and the Dow was down 1.1%.
Concerning investors was a more “hawkish” stance by the Fed signaling that end of year 2024 federal fund’s rate was likely to be 50 bips higher than currently. Accordingly, the 10 Year Note reached 4.5%.
Cisco plunked down $28 billion for data analytics company Splunk. UK regulators gave approval to an amendment on the Microsoft buying Activision/Blizzard deal.
It was our anticipation that the recent IPO’s of ARM Holdings and Instacart would serve as a catalyst for the Market but alas, both have turned out to be more like wet blankets. To wit, each are struggling to trade above issue price. Also an interesting Market Mood read for us is the fact that 80% of all publicly traded companies are below their 50 day moving averages.
We remain BULLISH on our outlook for high quality growth companies but recognize that investors will be in a holding pattern until there is more conviction that rates will stabilize and inflation is tamed.
GSV Weekly Rap
@maggiemoeyoGSV EIEIO WEEKLY RAP 9/24/23 #biden #zelinsky #missiles #ukraine #menendez #indictment #indict #newyork #rain #weather #covid #rap #news music by @Joshua Vranas | Music 🎶 ⭐️
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Need to Know
READ: Generative AI’s Act Two | Sequoia Capital
LISTEN: Founder vs. VC: The Unfiltered Truth From Both Sides
WATCH: Ron Baron on CNBC: Tesla Growth Outlook, Elon Musk Biography, SpaceX, and Other Top Stock Picks
READ: Are You Ready To Be a Public Company? | Andreessen Horowitz
LISTEN: Fireside Chat with Ori Goshen, Co-Founder of AI21 Labs, & Matt Turck, Partner at FirstMark
WATCH: Is the VC Model Broken? Jason Lemkin, Mike Maples, Eric Paley & Harry Stebbings Debate | E1062
GSV’s Four I’s of Investor Sentiment
GSV tracks four primary indicators of investor sentiment: inflows and outflows of mutual funds and ETFs, IPO activity, interest rates, and inflation. Here’s how these four signals performed last week:
#1: Inflows and Outflows for Mutual Funds & ETFs
Source: Yardeni
#2: IPO Market
Source: Renaissance Capital
#3: Interest Rates
Source: CME
#4: Inflation
Charts of the Week
Chuckles of the Week
EIEIO…Fast Facts
Entrepreneurship: 26% – decrease in average equity package for new startup hires since November 2022 (Peter Walker)
Innovation: 57% – Americans who favor more nuclear power plants to generate electricity (Pew)
Education: 77% – school parents who support Education Savings Accounts (EdChoice)
Impact: 78% – US consumers that say a sustainable lifestyle is important to them (McKinsey)
Opportunity: 68% – global smartphone penetration rate as of 2022 (Statista)
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Connecting the Dots & EIEIO…
Old MacDonald had a farm, EIEIO. New MacDonald has a Startup…. EIEIO: Entrepreneurship, Innovation, Education, Impact and Opportunity. Accordingly, we focus on these key areas of the future.
One of the core goals of GSV is to connect the dots around EIEIO and provide perspective on where things are going and why. If you like this, please forward to your friends. Onward!
Make Your Dash Count!
-MM