A Few Things.....

April 7 2021

“You put the small thief in prison, but the big thief lives in a palace.”

- Graham Greene

“That all men should be brothers is the dream of people who have no brothers.”

- French journalist Charles Chincolles

“We must be willing to get rid of the life we’ve planned, so as to have the life that is waiting for us.”

- Joseph Campbell

“Keep away from people who try to belittle your ambitions. Small people always do that, but the really great make you feel that you, too, can become great.”

- Mark Twain

A. A Few Things Worth Checking Out

1. Early March, we discussed The Other Side of The Fourth Turning, and the importance of people who can help us see into the future.

I highlighted Balaji Srinivasan, and he was on the Tim Ferriss podcast discussing: The Future of Bitcoin and Ethereum, How to Become Noncancelable, the Path to Personal Freedom and Wealth in a New World, the Changing Landscape of Warfare.

That’s a lot of ground to cover, but it gave me a lot to think about. They cover everything from how BTC and ETH could be killed, to how the internet massively increases dispersion and removes the intermediary across all activities by changing the nature of distribution, and dive into how we can become Sovereign Individuals, a subject we discussed last week.

2. A few weeks ago, we discussed Adam Grant’s new book: “Think Again: The Power of Knowing What You Don’t Know”. Here he is discussing the three big ideas in his own words. Thank you David for the flag.

3. Everyone is talking NFTs, here’s a great summary by the amazing Naval in a few short tweets:

This was a great slide from a recent presentation with a framework to think about NFTs as Sign Value. Thanks Wouter for the flag.

NFTs could be huge for well-known brands. They now get to sell goods with zero marginal cost of production and distribution that exist in the metaverse (more on that in a second).

Do NFTs allow Luxury Brands to get SaaS like multiples?

4. One of the investment thesis I’ve heard on Bitcoin is that it is Digital Gold, this then leads to an analysis called S2F or Stock-To-Flow, a theory that explains and projects the price of BTC using the ratio of how much is mined (flow) vs how much is already available (stock). This leads to certain ratios for Gold, Silver and Bitcoin.

This model, has been used regularly by BTC enthusiasts to predict future prices of BTC.

I found this refutation of the model by a Crypto hedge fund (Strix Leviathan) useful and elegant.

While you are diving into Digital Assets, they also did a useful presentation on the range of digital assets out there including: Digital Currencies, Stable Coins, Computing Platforms, DEFI and NFTs.

5. Every one has heard of Moore’s Law. It’s the basis of the entire semiconductor industry and hence all of AI/ML, but the industry that will likely be more in focus over the next few decades is the intersection of technology and biology.

Something magical happens when a technology allows you to do a task a 1,000,000x cheaper and at 100,000x higher quality.

This chart shows how quickly the cost of mapping the human genome has come down vs even Moore’s Law which theorises a doubling of transistors on a chip every 18-24 months.

This great NYT article dives deep into the genome sequencing industry and the strides made in 2020. Thanks Yaser for the flag.

6. Prof. Scott Galloway interviewedmy old boss Marty Chavez (previously CFO and CIO of Goldman Sachs). They discussed regulating big tech & fintech like big banks, how the future of fintech is actually banks, and how Goldman thought about risk management, which is pretty relevant if you have been following the Bill Hwang and Archegos saga.

If you want to dive into fintech, Marty teaches a Stanford Course. Stanford GSBGEN 544: How Software Ate Finance, also his slides and course videos are here. Super cool!

7. WeWork is going public and not at the $47bn it was valued at a year ago. Scott Galloway did an entertaining summary of the business, but if you want more substance, you should read this one.

8. Roblox went public a few weeks back. It’s CEO said in an interview with Wired Magazine:

“The Metaverse is arguably as big a shift in online communication as the telephone or the internet. Within the next few decades its applications will exceed our wildest imaginations.’”

For those new to the idea of the Metaverse, you will be hearing a lot more in the coming months. Worth checking out this Matthew Ball article on it.

The Metaverse will be one of the things that speeds up the Creator Economy (covered by a16z here). Kids are already building and selling things on Roblox.

9. Given all the advances in technology since the show came out, have been re-watching Westworld Season 1, which is probably the best thought provoking show I have ever seen.

10. On the entertainment front, I finished Ted Lasso, which is a fun show about an American Football coach in English Soccer. Highly recommended.

B. The Great Rupture

Some of the Biden administration’s policies made me think of US policies from 1940-1970. This made me pick up Viktor Shvets book from 2020.

The first half of the book looks back at history to understand prior civilisations and empires, where they failed. Decisions that irrevocably changed their futures.

Viktor cites the fall of three empires in the 1400s – Chinese, Russian and Ottoman – as examples of what might happen to us in the West, highlighting specific decisions:

Chinese banning interactions with foreigners; the subjugation of the Novgorod empire in Russia to the more closed Muscovite way of doing things; the Ottomans banning non-religious education and discouraging the printing and exchange of views.

The lessons of the last five centuries were unequivocal: without freedom, there could be no prosperity or happiness. All these non-western empires had an opportunity to change, but inertia kept them on the doomsday highway.

Viktor believes every element of our existence is being disrupted by digitisation, from work to education, to entertainment, information and social and political interactions. 

Viktor argues that the Information Age is radically different from the Industrial Age. Labour is no longer a critical driver of productivity; some 40% of the jobs created now are irrelevant and the people doing them know this, as they helplessly watch their utility and marginal pricing power fall away. 

Capital is far more abundant, but it is neither evenly nor fairly distributed while most new age industries are nowhere near as capital intensive. 

As a result, neither capital nor labour function the same way as they did over the previous three centuries, and liberal capitalism is rapidly approaching a Black Hole.

He describes our times as the 'age of declining returns on humans and conventional capital'. 

What Viktor calls the Fujiwara effect (originally coined for when two hurricanes spinning in the same direction pass close enough to each other, they begin an intense dance around their common centre, in this case referring to a merger of Information Age and Financialisation) is accelerating our descent towards the event frontier of this Black Hole.

The book then explores what lies on the other side of the Black Hole, and whatever it is, he argues it is unlikely to look anything like conventional liberal capitalism and will most likely approximate an enlightened version of communism, and if we are unlucky, might be closer to feudalism or despotism.

Does this sound like the planned Western Economies we see increasingly today?

Viktor's hypothesis is that capital markets are now too dangerous to be left to individuals or market forces.

Aided by massive QEs and rapid money supply over almost four decades, debt and financial instruments now have five to six times the value of underlying economies, meaning capital markets must be effectively nationalised to control volatility and asset prices, which have morphed into key economic signals.

As we discussed in prior posts on Ride or Die Markets and the Financialization of The Economy, the financial economy is now the dog while the real economy is just a tail, and the objective of state policies is to prevent the dog sitting on the tail.

He also argues that MMT-style policies are the only viable economic policy options that will have a chance of keeping societies intact through this complex two-decades long transition. We will end up mixing monetary and fiscal policies as China does, with the state dominating capital allocation while societies and technologies redefine the nature and function of corporates. The private sector will never again regain its primacy.

Many people (and in particular younger cohorts) will actually welcome change; many want greater state control and help, and that sense of community spirit that comes with it. They won't want things like shareholder value and profit maximisation. It will be a world that values 'fairness and equality' over 'freedom, choice and efficiency'. It is a revolution not dissimilar and arguably even more disruptive then late 1960s-70s, and will have a similarly profound impact on societies, policies and investment strategies. 

Here is Viktor in his own words:

"It's almost always better to learn from peers who are 2 years ahead of you than mentors who are 20 years ahead of you.

Life evolves and most insights get outdated."

"Maintain a margin of safety—even when it’s going well.

Rich people go bankrupt chasing even more wealth.

Fit people get injured chasing personal records.

Productive people become ineffective taking on too many projects.

Don’t let your ambition ruin your position."

- James Clear

"The biggest fear most of us have with learning to say no is that we will miss an opportunity. An opportunity that would have catapulted us to success, or that will never come again. And most of the time, that simply isn’t true.

I’ve found that the first part of learning to say no is learning to accept that offers and opportunities are merely an indication that you’re on the right path—not that you’ve arrived at a final destination you can never find again.

If someone is choosing you, it means you’re doing something right. And that is the biggest opportunity you can receive—the chance to recognize that your hard work is paying off. And if you continue to do good work, those opportunities will continue—and improve—over time."

Author Grace Bonney on how to get better at saying NO.

Disclaimer: This is NOT RESEARCH (certainly not “substantive”) or any kind of INVESTMENT RECOMMENDATION. Just my personal weekly views for fellow financial professional. I keep no data on you, there is no inducement (GDPR) or blasting (all on this list I either met, asked to be added or were recommended).