Marvin’s Best Weekly Reads November 24th, 2024
"Talent is nothing without persistence." —Dean Crawford
We could be seeing nuclear weapons proliferation in Europe soon (and probably Japan & South Korea too).
https://www.youtube.com/watch?v=577hMdf-740
2. "Roll-ups consolidate the players of an industry into one bigger player. The idea is that the resulting company will achieve greater efficiency through economies of scale, synergies, or the implementation of better management.
For a company to deserve being called a roll-up, there has to be sufficient acquisition activity. Buying one or the other competitor doesn't count. To qualify as a roll-up, a company should get > 50% of its EBITDA growth inorganically through acquisitions in a similar vertical (= industry). The acquired companies individually should be < 50% of consolidated EBITDA.
The concept is similar to that of serial acquirers, i.e. financial outsiders that try to exploit a valuation difference between acquisition targets and the stock market. While serial acquirers are closer to valuation arbitrage, the difference between rollups and serial acquirers is not always clear-cut."
3. "We each met with several dozen founders over the course of the day, then got together afterwards to compare notes. Both of us had the same observation: more than half of the founders we spoke with knew virtually nothing about their competition.
Sure, they could all list one or two big-name incumbents. Several name-dropped similar-ish startups that had recently raised well-publicized rounds. But very few actually understood the competitive dynamics at play in the markets they were targeting. It’s a worrisome trend I’ve seen increasingly as of late."
https://chrisneumann.com/archives/know-your-competition
4. "So there you have it: an update on how climate is affecting Japan, a year after my last report. On the positive side, perhaps the ongoing efforts of these holy spots are working, because the forecast predicts temperatures are set to decline, grudgingly (?), over the next few days. But I can now officially say that the answer to those who ask me what to pack for autumn visits to Japan is a resounding “I don’t know.”
https://blog.pureinventionbook.com/p/baby-its-hot-outside
5. "The notion of a Zero-Billion Dollar Market is that it’s something that you can see as an entrepreneur, but no one else believes. As we’ve talked about before, being consensus and correct is wonderful in many parts of life, but not in entrepreneurship. If you’re trying to create something new and valuable then it’s generally down the less traveled path, against the grain, and certainly not wildly obvious to others. Value is located when you’re both non-consensus, or contrarian, and also correct.
My friend Tommy Dyer recently alerted me to the fact that Don Quixote has been taught at Stanford Graduate School of Business (GSB), with particular focus on his “Lessons for Leadership.” Among other lessons, Quixote creates his own reality through action. Though often considered mad, particularly as he begins to see the windmills around himself as monsters, it’s perhaps all only in his imagination, and as Tommy delves into in his recent writings, perhaps it’s even him living in his own “reality distortion field,” to use the Steve Jobs turn of phrase. Indeed entrepreneurs must be Quixotic, or exceedingly idealistic, even impractical or “crazy” to invent new categories. “Here’s to the crazy ones. The misfits. The Rebels...” This is the edge between vision and reality where contrarianism dwells."
https://ideas.everywhere.vc/p/scott-hartley-zero-billion-dollar-markets
6. "Some skeptics believe that the AI boom is reminiscent of hype cycles of the past, often drawing parallels with the dot-com bubble of the late 1990s. Rather than defending AI as fundamentally different from previous waves of technology, Taylor pointed to the dot-com boom as validation. That period, despite its excesses, produced companies like Amazon and Google that dominate the industry to his day.
Taylor is confident that large language models are also transforming our lives. “It’s important not to be cynical—there will be a lot of snake oil, lots of people will lose money, lots of people will make money, and that’s the game of Silicon Valley,” he said. His belief in AI’s continued progress is grounded in its reliance on three factors—algorithms, data, and compute—each benefiting from the brightest minds in tech driving them forward. The three, crucially, can be developed independent of one another, creating multiple pathways for continued progress."
https://every.to/p/inside-silicon-valley-s-most-important-conversations
7. A very insightful conversation with VC vet Mark Goldberg of new Chemistry VC. 3 VCs from various top tier funds coming together. Really interesting new fund.
8. One of the best & quietest investors in Silicon Valley. One of the folks responsible for turning around Kleiner Perkins.
https://www.youtube.com/watch?v=51R322RSwU8
9. “We face in the 21st century a Cold War equivalent — you can call it whatever you like, a ‘great struggle’ or something else – but that’s what we have,” he said. “Until we recognize the massiveness of this problem, I think countries are going to struggle with trying to muster up the ability to communicate the danger to their populations and be able to get organized for success.” Studeman named Iran, North Korea and Russia, but focused on China, which he said is actively growing into a colonial power that wants to seize formerly held territories like Taiwan and force other nations to be more economically dependent on it."
https://www.stripes.com/theaters/asia_pacific/2024-10-25/china-taiwan-cold-war-15621497.html
10. Great episode on what's up in Silicon Valley: More or Less.
https://www.youtube.com/watch?v=ZmdqEG2Shtk
11. "The most important link in this network was the waterways of Eastern Europe. The Norsemen who conquered it became known as the Rus.
The Rus were a great commercial power; linking Northern Europe’s wealth in raw materials to the luxuries & refined goods of the Byzantine Empire, Caliphate, & beyond. The scale of this trade is grossly underestimated & it was one of the busiest trade routes in the world.
The Rus controlled “The Route from the Varangians to the Greeks,” which served as the easiest route for trade between Christendom & the Orient, mainly through the Dnieper and Volga Rivers. By navigating several portages and obstacles, like the famous cataracts on the Dnieper, intrepid Norsemen could access the immensely wealthy markets of Byzantium and the Caliphate.
Adding the natural resource richness of Eastern Europe to this mix offered huge opportunities. The intrepid Norse merchant-raiders brought furs, timber, walrus ivory, metals, wax, honey, & slaves South & returned with silks, spices, jewelry, fine weapons, wine, religious artifacts, and, most importantly, silver."
https://varangianchronicler.substack.com/p/the-silver-volga
12. "For years, Solana played a supporting role in the tech world, serving as the chief marketing officer for Founders Fund, Peter Thiel’s venture-capital firm. Solana calls Thiel his mentor, and says he owes his career to him.
Solana started Pirate Wires during the pandemic and has built it into a small media company covering tech, politics, and culture. After raising money from Thiel and Founders Fund, among others, in 2023, he hired a handful of staff. The Pirate Wires free daily newsletter now has 100,000 subscribers, mostly young men, according to Solana. (He would not disclose how many readers have signed up for paid subscriptions, which provide expanded access to the site.)
It has become a must-read among Silicon Valley’s anti-woke crowd, including some of tech’s most influential figures, and a grudging should-read for journalists and some on the left trying to glimpse the thinking of the masters of the Thiel-verse."
https://www.theatlantic.com/ideas/archive/2024/10/mike-solana-pirate-wires/680355/
13. As a history guy this movie looks amazing.
https://www.youtube.com/watch?v=1B_YB3caN80
14. Saas Go to Market, it's changing fast.
https://www.youtube.com/watch?v=SjM4gFA2AYY&t=5s
15. "Entrepreneurs should consider the example of event attendance yields when comparing free versus paid events. Paid events, as expected, have a higher yield, which implies a greater level of commitment—even if the amount paid is minimal.
Similarly, when entrepreneurs charge for a product, the customer’s seriousness is much greater, resulting in higher-quality feedback. Feedback is the lifeblood of products, and the most valuable feedback comes from customers who are invested, even if minimally."
https://davidcummings.org/2024/10/26/event-attendance-yields-and-quality-product-feedback/
16. "That clear contrast is what struck me most about the announcements from General Catalyst and Chemistry this week. They are exactly built to pursue each of those separate strategies.
Now, I've always been quick to say that I'm not staunchly for or against any particular strategy. I'm more focused on recognizing that these types of firms are, in fact, playing different games. And the only stupid game is failing to recognize that the games are different.
The clearest indicator that someone is failing to appreciate those differences is when they immediately dismiss anyone but the large, established funds. "Nobody can compete with Sequoia, etc." In an industry defined by disruption and competitive upset, nothing could be further from the truth. And don’t point out halo effects or capital retention. I never said its easy. But the reality is that anyone is capable of defeat. Anyone. The question isn't if, but how."
https://investing1012dot0.substack.com/p/different-strokes-for-different-folks
17. "Nonetheless, it is encouraging to see that the German Minister of Defense is at least interested in acquiring these critical missile capabilities and maintaining a cruise missile manufacturing capacity in Germany. The next step will require 350 million euros in the 2025 defense budget to kick off the procurement project."
https://missilematters.substack.com/p/germany-may-get-a-new-cruise-missile
18. "What happens when the core desires of the industry move from diffusion and individual agency to concentration of power and a view of hands of god that steer the market?
Perhaps this is actually the correct approach and the failure and massive inefficiencies of many of our closed-system institutions ranging from healthcare to aerospace and defense necessitate a more heavy-handed intervention from those willing to think from first principles on how to solve problems with novel ideas and large amounts of capital at risk.
With all of this said, the questions feel urgent or at a minimum worth pondering as we watch tech position ourselves as the architects of society rather than its organic enablers. The industry that once prided itself on letting a thousand flowers bloom now seems a bit too obsessed with carefully cultivating a specific garden."
https://mhdempsey.substack.com/p/power-and-technology
19. "The question is not if one is subject to mental biases in decision making—it’s which mental biases. When I’m trying to help a new investor understand this dynamic, I ask them to remember their first love—how certain they were that it was going to be a perfect relationship that would last forever, and how wrong they have likely ended up. This failure means they are capable of having 100 percent conviction in something while also being 100 percent wrong.
Inward-facing study can bring up uncomfortable truths that should prompt us to debug ourselves, rather than dismiss them to protect our egos. If we debug well enough, we can study ourselves at a distance, like an anthropologist, and come to valuable conclusions and workarounds for our internal obstacles. After all, an oracle that’s always wrong is just as useful as an oracle that’s always right.
There is a constant cat-and-mouse game between our rational self and meta-analysis, each vying for superposition. But it’s also where the most alpha as investors comes from and is wholly unique to each individual. The expansive, information-rich canvas of exploration is not built by studying the outside world—it comes from studying yourself."
https://every.to/p/to-beat-the-market-you-have-to-outsmart-yourself
20. "Because taxation isn’t about doing the right thing for our nations and their people.
Our system isn’t designed with the people's best interests in mind. Like the Pharaohs of ancient Egypt, our modern overlords believe themselves to be untouchable gods who can keep the wealth for themselves.
History’s biggest lie is that we need taxation to fund the running of our nations. Instead, taxation is about politicians and the world’s elite hoarding the fat of the land, while stripping the value of our labour from our pockets through taxation."
https://anticitizen.com/p/history-s-biggest-lie
21. "There are no absolutes. But there haven’t been as many defendable first mover advantages as I expected, and I think I leaned into that too much in my early AI investing.
Thankfully, early stage investing is one of the few markets where you can be wrong 80% of the time and still do well if your winner go big enough.
What does this mean for my theses going forward? I’m looking much more at fast follower companies. I’m spending more time evaluating whether supposedly defensible data sets really are defensible. I’m factoring into my probabilities that new model architectures and other innovations could weaken the value of proprietary data.
It’s not about being first to do it. It’s about being the first to do it when the market is ready. It turns out AI isn’t so different than the technologies that came before it."
https://investinginai.substack.com/p/my-biggest-failed-ai-investment-thesis
22. "Elon might not fly around in a robot suit and blast his rivals with energy beams, but his ability to out-manufacture and out-innovate almost all of his rivals is right out of a comic book movie trope.
How does he do it? The exact specifics are probably impossible to pin down, but the general contours are nothing mysterious. Elon isn’t hyperintelligent or hyper-creative. Most of the engineers at SpaceX or Tesla are probably better at their jobs than he could be. His superpower — according to a bunch of people I’ve talked to in the tech industry — is gathering, motivating, coordinating, and setting goals for human talent.
This is the same superpower possessed by Genghis Khan, or Henry Ford, or Vladimir Lenin, or Matsushita Kōnosuke, or any number of other people who built big organizations from scratch. Humanity is a collective organism — directed toward a common goal, we can accomplish incredible things. But our talents are not equal, our motivations are not consistent, and our goals are not naturally aligned. An organization-builder is someone who takes the purposefulness of a single individual and applies it to a group of people.
This, by the way, is why almost everyone in the tech industry — even people who disagree with him politically — hold Musk in such awe. It’s not that he has a lot of money — most tech people couldn’t care less about Warren Buffett, and they don’t even know the names of hedge fund managers. It’s that Musk is superhumanly good at the thing they’re pretty good at. He has built world-beating organizations, and moreover, he did it in the super-tough area of high-tech manufacturing — a field so difficult that most tech entrepreneurs shy away from it and stick to the safer waters of software.
A comic-book world of superheroes and supervillains isn’t necessarily the one we’d choose to live in. But in some ways, it’s the world in which we find ourselves living, and we have to deal with that."
https://www.noahpinion.blog/p/why-americas-future-could-hinge-on
23. Solid conversation with Vinod Khosla.
https://www.youtube.com/watch?v=2VfNXLvPJ8w
24. Luke Belmar is a wise man.
https://www.youtube.com/watch?v=S0VPurjNKls
25. "The damage is therefore not only measured in strict military terms, but also in psychological terms and a clear message was delivered: “when we come back it will be easier for us to hit you even harder”. Tehran’s rulers were humiliated. And it cleverly stayed within, whatever one might think of them, the boundaries that the Biden administration had laid out while avoiding civilian casualties or collateral damage. Perfect and precise."
https://pieterdorsman.substack.com/p/precision-and-perfection
26. Lots of insights on building a sales machine.
https://www.youtube.com/watch?v=uEKd2MP67DM
27. I’m down with this Ukrainian Viking vendetta. Hunt down these Russian war criminals.
"On Oct. 10, Russian marines from the 155th Naval Infantry Brigade overran a team of Ukrainian drone operators in Zelenyi Shlyakh, a tiny hamlet on the western edge of a Ukrainian-held salient in Kursk. The Russians stripped the Ukrainians, ordered them to lie face-down on the ground and then shot them, killing all nine.
In the days that followed, a powerful Ukrainian force began deliberately hunting down and ambushing groups of 155th Naval Infantry Brigade marines—and taking no prisoners. On Oct. 18, 95th Air Assault Brigade paratroopers cornered a clutch of 155th Naval Infantry Brigade armored personnel carriers—and dismantled it with drones, tanks, missiles and mines, reportedly destroying three APCs and killing 30 Russians. “The teleportation of the enemy to Hell took place in a complex way,” the Ukrainian air assault branch boasted."
28. Spacetech is here, thanks to SpaceX.
https://www.youtube.com/watch?v=fuL4tfc10AA
29. "Keep the windows closed so you’re not getting all the outside pollution in your house.
You’d think everyone would be using air purifiers in third world countries because of the insane pollution here but the vast majority of third world people are cheap as hell and do not care about their health.
Even if they can easily afford it, they’d rather keep an extra $150 in the bank than buy an air purifier and pay for electricity even if it means smoking an equivalent of 10+ cigarettes per day.
Of course we have a brain so we aren’t one of them. We have an air purifier for every room and hall of the house. Health is wealth and breathing in pollution just to save money is dumb as hell."
https://lifemathmoney.com/life-advice-buy-an-air-purifier/
30. "If you’re not building a WiFi business and are not invested heavily for long periods of time, there is not much you can do in terms of catching up. You’ll be eaten slowly by inflation (lately? eaten quickly).
Use 10-years: This is probably a better proxy for the real inflation numbers. It does capture the crazy printing in 2021 but it doesn’t include the 0% rate environment and mark everything at the near bottom (2009).
This would mean that Shelter costs are up 35%, Energy up 22%, Food up 45% and CPI is up about 28%.
If you’re building equity in a company, you are destroying inflation if net income goes up. Unlike a job that pays $100,000 a year, you can sell a company.
$100,000 net income goes to $200,000 and that’s all you get
$100,000 net income goes to $200,000 that you can sell for 4x earnings means that you’ve hit $800,000
Once this is drilled into your brain you’ll never take those 3-5% annual wage increases seriously ever again.
You’re beating inflation with your effort (forced equity appreciation), you’re beating inflation with your investing (largely tech/crypto and some stocks/bonds to dampen volaitlity).
Then you’re off to one large race to $4,000,000-$5,000,000 in today’s prices and a paid off house. Then. Poof. Disappear."
https://bowtiedbull.io/p/are-you-beating-inflation
31. "China’s economy, like every other victim, subsequently entered into a liquidity trap or balance sheet recession. Private firms and households hunkered down, decreased economic activity, and saved money in order to repair their balance sheets. When credit demand falls amongst households and businesses, the standard-issue Keynesian economic medicine – i.e., running a modest fiscal deficit and lowering the price of money via central bank policy rate cuts – is ineffective. What is needed to forestall the dreaded deflation is a monetary and fiscal bazooka.
The time it takes to switch into panic mode depends on a country’s culture. But make no mistake – regardless of the economic “-ism” supposedly practiced, every country always comes around to injecting monetary chemotherapy.
I refer to this palliative treatment as chemotherapy because while it might cure the deflationary cancer, it ultimately kills the host. The host is the middle and lower classes, who are ravaged by asset price inflation with no discernible improvement in the real economy. And like modern oncology, this ultimately ineffective monetary chemotherapy is extremely profitable for a small cabal of financial witch doctors whose head offices are in New York, London/Paris/Frankfurt, Tokyo, and now possibly Beijing/Shanghai.
Chinese people are some of the most resourceful people on this planet. They will not allow their precious yuan savings to sit idle as Beijing encourages asset price inflation. Bitcoin is not a foreign concept to middle and high income coastal urban dwellers. While the exchanges were barred from offering a visible Bitcoin/CNY trading pair, Bitcoin and crypto still flourishes in China."
https://cryptohayes.substack.com/p/lets-go-bitcoin
32. Crisis in Cuba, maybe opportunity for detente with USA?
https://www.youtube.com/watch?v=Amikw54-R4Q&t=339s
33. This is an excellent discussion on AI & life of a startup founder in the post ZIRP world.
https://www.youtube.com/watch?v=pGU78Q5tJgA&t=1369s
34. A terrifying overview of the state of AI & Hardware in US and China. US leading in AI, China leading in hardware and drones. We have a lot of work to do.
https://www.youtube.com/watch?v=1_ZB7O_9hlQ
35. "In other words, failed entrepreneurs in Canada risked jail time and stigmatization for decades after America had widely embraced business risk and its long-term economic benefits. And it wasn’t just Canada. Commonwealth countries around the world have similar endemic risk-aversion due to their common historical experiences (thanks Britain 🤦♂️).
Today, risk-taking founders in the United States are broadly encouraged and supported by their communities as they pursue the American Dream. In contrast, most Commonwealth cultures have some form of “tall poppy syndrome,” where successful, ambitious individuals are frequently cut down by their community instead of celebrated."
https://chrisneumann.com/archives/lets-celebrate-risk-taking
36. Eye-opening discussion on the importance of drones & AI in the new world of war. Firestorm Labs is critical to this.
https://www.youtube.com/watch?v=iFv3WaN23S8
37. "Energy is one of the most valuable commodities in the world. Humans need energy to create a more abundant, prosperous future for our children. In fact, there is no high-income country that consumes a low amount of energy.
This trend is not going to reverse. As technology accelerates, so will energy consumption. Because of this relationship, a key investment theme of the future will be selling energy to the businesses willing to pay the highest price.
As a capitalist, I want to be an energy dealer.
It will be very valuable to own energy infrastructure that can service modern society. These energy infrastructure companies will sell their energy to people using GPUs for artificial intelligence, ASICs for bitcoin mining, and many other use cases. The new energy consumption use cases need a new energy infrastructure partner."
https://pomp.substack.com/p/my-plan-to-become-an-energy-dealer
38. Very informative view on what’s happening with AI infrastructure space.
https://www.youtube.com/watch?v=-y5aDmKbEj8
39. "Today - the equation is changing. Fund sizes have ballooned significantly. There are different pools of LP capital available with a lower cost of capital (ie lower return expectations). So much so, that the 2% part of the equation is very meaningful given the size of funds! In the past, to “get rich” as in investor it was all about maximizing the 20%. Today, with fund sizes where they are, many are instead looking to optimize for the 2%. This means raising as much as possible, and deploying as much as possible (as quickly as possible). Remember, the management fee is “guaranteed.” The 20% (the carried interest) is variable. It’s economically rational to look to optimize and maximize the guaranteed portion…
It’s important to call this out because this is where the incentives start to diverge between GPs and Founders. In the past, the only path to “get rich” for GPs ALSO resulted in a “get rich” path for founders. Today there is a “get rich” path for GPs where the outcome of the founders is irrelevant. Doesn’t matter how the underlying companies in a fund perform, you collect the annual management fees regardless.
In summary - the venture ecosystem has evolved significantly in the last 5 years. For founders - ask yourself this question when deciding on who to work with. “Am I working with a 2% or a 20% venture firm?” The 2% firms are optimizing for deployment. The 20% are optimizing for large company outcomes. There’s one path where the incentives are aligned. I’m not meaning to imply big funds = bad. But there is a culture and mindset that starts to creep in the larger and larger funds get, and it’s up to founders to determine which investor falls into which bucket."
https://cloudedjudgement.substack.com/p/clouded-judgement-102524-misaligned