A Few Things: How Innovation Works, Coinbase 10 Crypto Predictions, Galaxy Digital on L1's, Orlando Bravo on Software Buyouts.....
January 1, 2022
“Hope is being able to see that there is light despite all of the darkness.”
- Desmond Tutu , RIP
“The results of life are uncalculated and uncalculable. The years teach much which the days never know…. The individual is always mistaken…. It turns out somewhat new and very unlike what he promised himself.”
- Ralph Waldo Emerson
“Not inventing, and not adopting new ideas, can itself be both dangerous and immoral.”
- Matt Ridley
A. A Few Things Worth Checking Out:
1. Started reading Matt Ridley’s How Innovation Works last week, detailed write up on it soon.
The book chronicles the history of innovation, and how we need to change our thinking on the subject.
Innovation is the main event of the modern age, the reason we experience both dramatic improvements in our living standards and unsettling changes in our society. It is innovation that will shape the twenty-first century.
Yet innovation remains a mysterious process, poorly understood by policy makers and businessmen alike.
Ridley argues that we need to see innovation as an incremental, bottom-up, fortuitous process that happens as a direct result of the human habit of exchange, rather than an orderly, top-down process developing according to a plan.
Innovation is crucially different from invention, because it is the turning of inventions into things of practical and affordable use to people. It speeds up in some sectors and slows down in others.
It is always a collective, collaborative phenomenon, involving trial and error, not a matter of lonely genius.
3. If you want to geek out on Inflation and where it’s headed. This is the place to start! Thank you Wouter.
4. I might lose some friends for sharing this one, but it’s an important & thoughtful read: Contrarianism; ESG investing; coal; and climate change.
In my opinion, the essence of genuine and effective contrarianism lies in a deeply-rooted belief/understanding that the world is not black and white, but instead shades of grey, and is filled with infinite nuance and complexity, and as a result, future outcomes will routinely surprise mainstream popular opinion informed by overly-simplistic generalisations and thinking in absolutes. Human beings are generally time staved, and also incline lazy. It's an evolved trait to not waste energy and work any harder than one needs to (which is why it can sometimes feel challenging to get oneself to the gym). We therefore vastly prefer simplifying heuristics that distill the world down into binary assessments of good and bad and right and wrong, that facilitate easy decision making. The problem is that although these heuristics result in easier decisions, they often result in poorer decisions as well.
So why is contrarianism so rare? It is rare not only because it is intellectually hard (it requires constant, active open-mindedness), but also because of incentive problems, and the personal costs involved in invoking the ire of the tribe. The stock market is one of the few areas of the world where pure truth always wins in the end, and where being a contrarian can seriously pay off. However, most areas of life are political to at least some extent (and often to a considerable degree), and getting ahead therefore depends as much on social perceptions and personal relationships as it does on truth.
The current climate change hysteria is not only a fascinating example of how dysfunctional our institutions can become, and how widespread mass delusions can spread (even many famed 'contrarian' investment managers fully sign on to climate change orthodoxy) - particularly when issues become politicised, and where bad incentives are involved (as Munger said, he's been in the top 5% of his age cohort his entire life in understanding the power of incentives, and he has always underestimated them). When viewed in combination with recent ESG trends, it also highlights how the general belief in the world being black and white and simple comes with all kinds of attendant risks of poor judgement and misguided actions. ESG-based funds are now eschewing anything seen to be contributing to 'climate change', having consigned it to the evil bucket, even though the state of the science is still unsettled to say the least, and in spite of the very considerable positive contributions the industry makes to global economic and socioeconomic welfare, including global poverty alleviation. And the worst part about it is that it is doubtful they will ever change their minds.
5. An excellent collection of hedge fund activist decks going back two decades.
6. The infamous Raj Rajaratnam of Galleon Group gave a CNBC interview post his 7-year jail sentence.
Unsure what to say after watching it.
B. The Tech and Crypto Section:
1. I enjoy reading predictions from smart players not as a guide for the year but as a cone of possibility for potential futures.
Coinbase Chief Product Officer on his 10 Predictions for Web3 and Cryptoeconomy.
Which is a good reminder of the Daniel Kahneman quote:
“My perspective...is that we’re really not surprised nearly often enough, because one of the things that really happens, as soon as an event occurs, we have a story. That’s automatic, that System 1 generates stories. It looks for causes, it looks for stories, and it generates its tentative stories that, if endorsed by System 2, become beliefs and opinions. But the speed at which we find explanations for things that happened makes it difficult for us to learn the deep truth. And the deep truth is that the world is much more uncertain than we feel it is. We see a version of the world that is...a lot simpler and a lot more certain than the world really is.”
By reading other’s forecasts, you get to read other’s stories.
What are the best crypto forecasts you have read?
2. Mainstream tech is losing senior employees to crypto according to the NYT.
3. Galaxy Digital had a great detailed report on Layer 1 Blockchains and Smart Contracts.
4. One of my favourite VC’s March Capital (Jamie Montgomery ) was on the Capital Allocators - Manager Meetings Podcast.
Disclosure: I am an LP in their funds.
5. Odd Lots Podcast with Mike Demarais (Founder / CEO of Rainbow Wallet) on Design in Crypto and What Web 3.0 Will Look Like.
Disclosure: I am an investor in the company.
6. Orlando Bravo of Thoma Bravo was on Invest Like The Best discussing The Art of Software Buyouts.
7. I love the thesis on how crypto is unleashing the next renaissance. A great listen.
Writer Joan Didion shares some life advice:
"I'm not telling you to make the world better, because I don't think that progress is necessarily part of the package. I'm just telling you to live in it. Not just to endure it, not just to suffer it, not just to pass through it, but to live in it. To look at it. To try to get the picture. To live recklessly. To take chances. To make your own work and take pride in it. To seize the moment. And if you ask me why you should bother to do that, I could tell you that the grave's a fine and private place, but none I think do there embrace. Nor do they sing there, or write, or argue, or see the tidal bore on the Amazon, or touch their children. And that's what there is to do and get it while you can and good luck at it."