Marvin’s Best Weekly Reads July 23rd, 2023
“We must always change, renew, rejuvenate ourselves, otherwise we harden.” — Johann Wolfgang von Goethe
"Back in 2017/2018, Venezuela’s stock market was up over 40,000% in a single year, which made it the best performing stock market at the time. Why? Inflation was estimated to hit 1,000,000% within months.
The easiest way to understand what is happening in Venezuela, Zimbabwe, and other hyperinflation countries is that assets are priced in the local currency — just as real estate goes up over the long term due to the devaluation of US dollars. The currency that each stock is denominated in is being devalued, so the “price” of the asset continues to increase. A buyer has to spend more (devalued!) local currency to purchase the same stock.
An 800% return in Zimbabwe sounds amazing, but it is actually a sign of economic destruction. The currency has hit hyperinflation, the central bank has lost control, and citizens are seeking relief. Over time, we should expect Zimbabweans to gain access to other financial assets. It wouldn’t be hard to see demand for US dollar stablecoins or bitcoin."
https://pomp.substack.com/p/zimbabwes-stock-market-is-exploding
2. "It might have come down to either winning the war or keeping his power for Putin, and he might end up with neither. Over the next months, a lot could happen inside Russia because Prigozhin might have opened the pandora’s box.
I can’t predict what will happen, but there is now a new challenger and evidence that some inside the system will sign on change if the opportunity arises. So a lot could happen. Oh also, there is this whole counteroffensive thing that has not yet really begun. If we enter autumn with a successful counteroffensive on par with last year’s, I wouldn’t want to be Putin."
https://shaykhatiri.substack.com/p/three-one-thoughts-on-prigozhins
3. "This is an important concept to repeat religiously.
Every single person who wants to get rich (anything above $10M+ is baseline for being rich), needs to get comfortable with *losing valuable time*. Amazon, Microsoft, Apple and all the other major companies have had *negative* yielding ideas. Coinbase’s NFT platform would be exhibit A of a mainstream failure. Both time and money were wasted.
End of each day just have three line items: 1) time spent on health, 2) time spent on money vs. time exchange and 3) time spent working on something scalable.
In 10 years this should read: 1) time spent on health, 2) time spent on working on something scalable.
You will be forced to trade your time for money. Working on projects or being paid by someone else (early in your life). This is just reality unless you were born with a trust fund.
The goal over 10 years is to make sure that time for money exchange is going *down*. If it is not going down you’ve got problems because it will end with 30 minute commutes to go into an office instead of a cube… doing the exact same thing.
Trading time for money."
https://bowtiedbull.substack.com/p/how-much-is-your-time-worth
4. Lots of good tips here from Bryan Johnson on longevity.
https://www.youtube.com/watch?v=dukGGLnLiN4&t=2682s
5. "We’re going to continue to see two trends:
-Cost to train models going down - Driven by GPU prices and efficiency of algorithms. This will lead to more model providers and ultimately more competition at the model layer.
-Cost of inference going down - Driven by GPU prices, efficiency of algorithms, and increased competition.
Both of these are great for people building applications on top of LLMs or LLM tooling and make the business models of those companies more attractive. This should continue to place pricing pressure on closed source model providers and may lead more companies to start with open source ones.
In addition, use cases that are economically infeasible today, may be more attractive in the future as costs continue to come down."
https://unsupervisedlearning.substack.com/p/why-databricks-bought-mosaic-and
6. This is always a good conversation on what’s happening in cultural, creative and internet businesses.
https://www.youtube.com/watch?v=6o8DtP0WTvs
7. I am not sure how I feel about this. Reconstruction after war always brings in idealists, opportunists and carpetbaggers.
"Last year, the Ukrainian government essentially outsourced the entire post-war “reconstruction” process to BlackRock, the world’s largest asset management firm. They signed an agreement to “provide advisory support for designing an investment framework, with a goal of creating opportunities for both public and private investors to participate in the future reconstruction and recovery of the Ukrainian economy”. In February, J.P. Morgan was brought on board as well.
In January this year, addressing the participants of the meeting of the National Association of State Chambers, Zelensky described American business as the “locomotive that will once again push forward global economic growth”. No one would blame Zelensky for choosing the lesser of two evils here: Western banks over Russian tanks.
Yet, the grim fact remains that even if his nation succeeds in repealing the Russian invasion, the future in store for Ukraine is not necessarily one of sovereignty and self-determination but, most likely, one of Western economic tutelage."
https://unherd.com/2023/07/the-capitalists-are-circling-over-ukraine/
8. The math behind VC Syndicates. ie. there are much easier ways of making money. So you better love the game of investing.
https://lastmoneyin.beehiiv.com/p/economics-200m-aum-venture-capital-syndicate-gp
9. "Given that we focus on pre-seed and seed-stage companies, much of the fundraising focus is on what it takes to unlock a Series A round of financing. Most of the founders I work with want to know what metrics or KPIs they need to hit to unlock the Series A round. I get why founders want to know the answer to the test, but in my experience, fundraises don’t work that way.
Here’s what I tell founders when they ask me what they need to hit in order to unlock the Series A round:
'There is no magic number, in terms of revenue or KPIs, that will unlock a Series A round by itself. Metrics are just one of many inputs that go into the decision.'
https://www.charleshudson.net/theres-no-such-thing-as-series-a-metrics
10. Good discussion of the growing economic war between China and the USA.
https://www.youtube.com/watch?v=OX0jX-uUZXw
11. "To that end, my hope is that artificial intelligence (AI) and robotics will be used primarily to eliminate the tedious, bullshit work in which most of humanity currently toils, so that more and more people can pursue their passions in a similar fashion. Ideally, this will lead to our next great renaissance of art and culture, as millions (or even billions) of humans are suddenly free to do what they love and create happiness through art.
An AI shouldn’t trust any institution that requires humans to operate it, as 1) humans are fallible and 2) AIs on a probabilistic basis will outlast human civilization. Gold and Bitcoin mining could be done by AI powered robots in the future, but fiat currency requires the administration of governments composed of humans. An AI is unlikely to allow itself to rely on anything that a human government operates therefore only gold and Bitcoin are suitable.
A tie between gold and Bitcoin.
Bitcoin is thus the logical currency choice for any AI. It is purely digital, censorship resistant, provably scarce, and its intrinsic value is completely electricity-cost-dependent. There is nothing in existence today that comes close to challenging Bitcoin on these aspects."
https://medium.com/@cryptohayes/massa-96ae856effcd
12. "So here's my message to you: In the high-stakes game of social media, adaptability is your best ally. Recognize the opportunities, be the early bird, and remember - fertile ground is for those ready to sow. Social media is more than a playground, it's your domain. Let's conquer it. Let the games begin.
And so, as we step off the “Threadmill”, remember - it's not just about keeping pace, it's about adapting, conquering, and owning the run."
https://latecheckout.substack.com/p/the-threadmill-effect
13. "What Ukraine is doing now is similar intellectually but even more difficult (they dont have rivers to aid them by providing specific targets). They have identified what they need to neutralize on the Russian side to succeed, and now they need to try and take those outs. They are starting clearly by making Russian artillery a very high priority. They will probably stay on that for a while. When they feel they have done what they can here, they will switch to attacks on Russians forces in the lines.
This will take time—even months. Because war is so dangerous for the offensive side, and Ukraine doesnt want to waste its forces like the Russians did at Bakhmut for instance, they must proceed methodically to weaken the Russians before advancing. Its also the only Ukrainian option—because of the specific way that they have been armed."
https://phillipspobrien.substack.com/p/weekend-update-36-500-days
14. "This is a critical stage of the war and a lot depends on what happens over the coming weeks. So far Ukrainian advances have been modest – a bit over 160 square kilometres. Some units are now close to Russia’s main defence line although most are still some distance away.
We can note evidence of poor coordination between Russian units and how they often, but not always, lose out in small-scale engagements, but also that Russian defences have not yet buckled. This remains a tough and costly fight for Ukraine. During this attritional phase we can see the potential for progress but it has yet to be realised. Only when and if the strike phase is reached will we be able to measure Ukrainian progress on the map."
https://samf.substack.com/p/attrition-before-breakthrough
15. "In any case, it seems likely that China’s growth will now slow to developed-country levels, or slightly higher, without much prospect for a sustained re-acceleration. At this point, with the economic value of additional real estate and infrastructure so low, a re-acceleration would require a massive burst of productivity growth, which just seems unlikely.
That means China’s catch-up growth only took it to 30% of U.S. per capita GDP (PPP). Even if it manages to climb up to 40%, that’s still a fairly disappointing result — South Korea is at 71% and Japan at 65%. (China’s defenders will say that it’s harder to grow a big country than a small one, but…well, the U.S. is a fairly big country as well.) This is another example of China’s peak being both awe-inspiring and strangely disappointing at the same time.
But I think the very complexity of Altasia will lead to its own sort of adventure and excitement. We haven’t seen an entire region industrialize all at once since Europe in the late 1800s (the closest thing being the Asian “tiger economies” of the 80s and 90s, which was really just Altasia’s predecessor). This will be much bigger. Investment and trade and diplomatic links will be flying back and forth between these various countries at a frenetic pace. Everyone will be trying to figure out who builds what where, where they source from, and where they sell to. Eventually, cultural links will follow.
And for Western companies looking for new markets, Altasia will potentially be more exciting than China ever was. The Chinese market delivered riches to some, but the government banned some products (especially internet services) and stole the technology used to make others. Ultimately, China’s billion consumers turned out to be a mirage for many. The economies and societies of Altasia, in comparison, are much more open to foreign products.
And in the poorer countries of Altasia — India, Indonesia, Vietnam, Bangladesh, Philippines, etc. — there will be the heady excitement of industrial development. It will be their turn to build highways, their subways, their gleaming forests of apartments and office towers. It will be their turn to buy cars and big-screen TVs, go out to eat, go dancing at clubs, and send their kids to college.
Developing Altasia will be a damn exciting place to be in next three decades."
https://www.noahpinion.blog/p/china-at-the-peak
16. "Cloud seeding is not new. But when it makes national or international news — like when China used cloud seeding to try to keep rain out of Beijing during the 2008 Olympics — it tends to be greeted with skepticism, or even suspicions of Icarian arrogance.
Around the world, however, a niche group of people like Gary Walker have cloud-seeding contracts with government agencies, farmers, and business owners to increase rainfall or snowfall. Some of these weather-modification contracts have run continuously for decades.
But despite cloud seeders’ remarkable ability to harness the weather — and a need for more precipitation in much of the American West — their industry remains small. They can alleviate water shortages, but not solve them."
https://thehustle.co/the-economics-of-making-it-rain/
17. "But the things we've talked about in terms of companies tackling big markets, focusing on acquiring talent, and attaching themselves to an index of a growing opportunity is part of the game that needs to be played for companies to become really large outcomes. And by nature those are all hard things to do. As a result there will be a divide between the businesses that pull it off and those that don't.
Building a company, whether as an employee or a founder, is already the road less taken. It may not feel that way in your social circles but in the grand scheme of what all 8 billion people on the planet are doing it's still rare. Building a large and successful company is a real challenge. Few have pulled it off."
https://investing1012dot0.substack.com/p/revisiting-a-tale-of-two-markets
18. "The question is then, how is legitimacy earned? Whether it is commerce, politics, or culture, elites must demonstrate competence and excellence. The ancient Greeks called this arete.
Arete is granted when the actions of elites are deemed as excellent and praiseworthy.This may mean founding a multibillion-dollar company, successfully leading troops in battle, creating great works of art, or acting as an effective political administrator. Regardless of the area in which arete is demonstrated, the actions performed must bring some sort of benefit to the rest of society.
This doesn’t mean the end of American elites as a class though. Power abhors a vacuum, and a new group of elites will eventually emerge to reestablish order and stability. In their pursuit of arete, these new elites will promote their own unique founding myths that will directly clash with the values and myths of the old guard.It’s a process that will take a decade or more to complete. Arguable, the U.S. is in the opening stages of this process as factions of aspirant elites are coalescing.
The combination of intra-elite competition domestically and the return of great power politics internationally will force a dramatic restructuring of commercial, political, and cultural power within the U.S. How America chooses to handle the coming reckoning of elite legitimacy will likely define its trajectory for the remainder of the 21st Century."
https://www.shatterpointsgeopolitics.com/p/the-coming-reckoning-of-american
19. "A company is more likely to secure its long-term returns if it manages to create a network effect *and* combine it with high-switching costs. Dating apps such as Tinder have a network effect due to their large user numbers, but switching to another app like Bumble is as easy as picking up your phone. On the other hand, a financial exchange that has many users and vertically integrated several other aspects of using its platform will find that most users deem the costs of switching too high. That's the kind of overlapping moats you will want to invest in.
There is also the concept of a moat's width. Because of competition, moats are getting a bit wider or narrower every day. Evidently, the wider a moat, the more difficult it is to penetrate. However, the absolute width of a moat is not generally what investors need to pay attention to. Instead, you are better off checking whether an existing moat is widening at a faster pace than that of its competitors.
There are many reasons for saying that an ability to gradually widening the moat is more important than the width of the moat. Just consider that if a company is known to have a very wide moat, chances are the stock price will already reflect this. You'd want to get in when there is a wide enough moat, but one that is still expanding."
https://www.undervalued-shares.com/weekly-dispatches/moats-a-short-introduction/
20. I think we are still behind here but re-industrialization is a hard trend in NAFTA: US, Canada & Mexico.
https://www.youtube.com/watch?v=UNxkpqx1LDw
21. Luke Belmar is a sharp dude. There is a lot of wisdom to be found in this interview.
https://www.youtube.com/watch?v=IV12SDKBTdY
22. This looks damn good!
https://www.youtube.com/watch?v=OAZWXUkrjPc
23. No surprise: Presidio is way nicer than the disaster zone in downtown SF.
24. "It started out as strictly business: a huge private contract for one of the world’s most advanced undersea fiber-optic cables. It became a trophy in a growing proxy war between the United States and China over technologies that could determine who achieves economic and military dominance for decades to come.
In February, American subsea cable company SubCom LLC began laying a $600-million cable to transport data from Asia to Europe, via Africa and the Middle East, at super-fast speeds over 12,000 miles of fiber running along the seafloor.
That cable is known as South East Asia–Middle East–Western Europe 6, or SeaMeWe-6 for short. It will connect a dozen countries as it snakes its way from Singapore to France, crossing three seas and the Indian Ocean on the way. It is slated to be finished in 2025.
It was a project that slipped through China’s fingers.
Undersea cables are central to U.S.-China technology competition.
Across the globe, there are more than 400 cables running along the seafloor, carrying over 95% of all international internet traffic, according to TeleGeography, a Washington-based telecommunications research firm. These data conduits, which transmit everything from emails and banking transactions to military secrets, are vulnerable to sabotage attacks and espionage, a U.S. government official and two security analysts told Reuters.
The potential for undersea cables to be drawn into a conflict between China and self-ruled Taiwan was thrown into sharp relief last month. Two communications cables were cut that connected Taiwan with its Matsu islands, which sit close to the Chinese coast. The islands’ 14,000 residents were disconnected from the internet."
https://www.reuters.com/investigates/special-report/us-china-tech-cables/
25. Maybe a bit optimistic here. Either way we need to ramp up production of key military ordinance.
https://www.youtube.com/watch?v=PXE3dM0ZAB0
26. "Ukraine might be the last large war fought primarily in the physical world. We should be getting ready for the moment when the physical and virtual worlds swap places, where everything happening in the former may well feel tangible and real only from the perspective of those unable to climb to the higher virtual plane. Virtual war is not a war between soldiers, tanks or airplanes, but a clash between algorithms.
Here victory means the ability to build the basic rules determining how the world works. Inferior algorithms will simply operate according to the rules and outcomes set by more foundational software. Geopolitics used to mean the struggle to control the physical world. In the future it will be about the struggle to build a virtual one."
https://time.com/6293398/palantir-future-of-warfare-ukraine/
27. "The 17th Tank Brigade is part of the trap, but the Ukrainian troops aren't taking aim at their Russian foes with tanks, but U.S.-supplied, self-propelled Howitzer M109s. Ukraine has dozens of the American-made artillery pieces, and they've become a vital front-line weapon in the counteroffensive."
28. An excellent framework for building and investing in marketplace businesses.
https://samit-kalra.com/blog/what-makes-a-marketplace-work
29. "Generally speaking, unless you were born into money your life should look something like this:
1) learn and grind making millions of mistakes in your 20s,
2) in your 30s you should be printing cash and have a high time value and
3) in your 40s that part of your life should largely be done and either you’re on an extended adolescence or you decided to have kids [to be clear none of our biz which you choose],
4) then your 50s come where health issues ramp up massively and you definitely don’t “got it anymore”and
5) by your 60s you’re probably in some chill town like Santa Barbara surrounded by other people who made it and simply have no interest in being bothered anymore."
"The dawn of the “Solo PE Agent” is here. If you’re able to build anything by yourself you can now replicate it without even going through the hardest part of the process (audience building).
You just buy the assets that are behind the times. Rip out the margin leak, replace with basic software tools and you’re done. No impact to top-line.
Read that part 10 times if you have to! In the past PE firms would buy companies sacrifice 5% top line declines for say 10-20% profit margin expansion. At small scales it will now be possible to see 0% impact to top-line and 20%+ margin expansion."
https://bowtiedbull.substack.com/p/the-coming-decades-and-the-solo-pe
30. "At my fund, we call these things “zero visibility businesses.” We don’t mean this in a pejorative sense. Instead, we mean this in the factual sense. It’s simply impossible to predict the quarterly results and as a result, we’re likely getting a bargain—frequently an unusually good bargain.
So then, how do you put a valuation on something where the numbers are all over the place? Now, this is the real challenge. To be honest, sometimes we simply cannot put a value on such a business. We can look at historical margins, or returns on capital over long periods of time, and try to back into a stabilized level of earnings for the business, but often, this exercise leaves us with a false sense of precision.
Instead, we simply eyeball the thing—does the price seem too cheap for what it is?? I realize that this is highly unscientific, but by the time you get to the spreadsheet and try to model one of these businesses, you’ve already lost the narrative. I’m from the school of investing where it’s either painfully obvious that I’m getting a bargain, or it’s in the “too hard pile.”
In summary, I’m always focused on where the opportunity is. I’m genuinely surprised at the bargains that exist in places where the earnings are hard to predict, and I suspect that this segment of the market will only become more attractive as capital continues to congregate to the few sectors that show linear growth."
https://pracap.com/on-businesses-with-zero-visibility/
31. "Local plumbers and lumber-yard owners across the US are feeling a bit like tech entrepreneurs of late — juggling multiple offers from private equity-backed firms that increasingly are targeting mom-and-pop businesses.
Wall Street has been buying into fragmented Main Street industries for years, with dental and veterinary practices among the favorite targets. It’s known as the roll-up strategy – and it’s catching a tailwind right now, and expanding rapidly in household services and building materials."
32. This was a fun interview with Alyona from FuelFinance. Check it out.
33. Richard Koch's books and thinking changed my life. This interview was no different.
We all have so many toxic beliefs that we need to reprogram if we want a better life.
https://www.youtube.com/watch?v=jNpABhVKaFI&t=5624s
34. "It seems increasingly clear that the demands of sustaining Ukraine’s defense against Russia will be enduring. We can hope that there will soon be a just and durable end to this conflict, but predicating our strategy on such a hope would be imprudent. Rather, we must assume that Russia will remain a threat to Ukraine and NATO for the foreseeable future. This means America and Europe need to prepare for the long-haul in addressing European security, even as America must urgently shift to prioritizing readying for a conflict with China in the Western Pacific.
More can be done in addition as Europe steps up and takes primary responsibility for its conventional defense. As this happens, the U.S. can provide to Ukraine many of the capabilities it currently keeps in or reserved for the European theater. Such systems include a variety of ground combat systems that are ideal for the European theater and neither necessary nor even useful for a China contingency, such as more advanced types of main battle tanks, infantry fighting vehicles, armored personnel carriers, and self-propelled cannon artillery.
Furthermore, over time the U.S. can and should resuscitate its defense industrial base to rapidly produce a wide variety of weapons and platforms at a much larger scale. Restoring America’s defense industrial strength will help ameliorate many of the difficult tradeoffs we currently face, enabling us not only to ensure our own forces are better armed but also to arm allies to carry a greater share of the burden of defending themselves."
https://time.com/6294670/us-strategy-ukraine-prioritizing-asia/