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A Few Things: Life Hacks, Global Rotation, Mauboussin on Cap Allocation, War By Other Means, Ridley on Innovation, Smil on How The World Works, Burkeman on 4K Weeks, Pantera on FTX, Explaining AI....
December 17, 2022
I am sharing this weekly email with you because I count you in the group of people I learn from and enjoy being around.
If you missed last week’s edition, you can check it out here: Papic on China, Housel on Life Changing Ideas, How To Build Great Networks, Cezanne, Andor, WEIRD People, Roubini's Megathreats, Stratechry on AI and Doomberg on FTX/SBF
Quotes I Am Thinking About:
“Some things break your heart but fix your vision.”
“Doing nothing is better than being busy doing nothing”
- Lao Tzu
“Most people are other people. Their thoughts are someone else’s opinions, their lives a mimicry, their passions a quotation.”
- Oscar Wilde
"In the depths of winter, I finally learned that within me there lay an invincible summer."
- Albert Camus
“Being negative only makes a difficult journey more difficult. You may be given a cactus, but you don’t have to sit on it.”
- Joyce Meyer
This will likely be the penultimate “A Few Things” of the year, and I wanted to share the three most impactful books I read this year. Looking at them today I see a theme running through them: They are all about how things work, whether that is us, the technologies we use or our energy systems. All the books were about understanding our world better.
I started the year with Ridley’s “How Innovation Works”, then came “Four Thousand Weeks” by Burkeman, and then in the summer “How The World Really Works” by Smil.
I’ve added my notes below.
A. A Few Things Worth Checking Out:
1. Enjoyed these: “The Greatest Life Hacks In The World” by David Brooks of NYT.
The ones I nodded my head on:
When you get invited to something in the future, ask yourself, Would I do this tomorrow?
The thing that made you weird as a kid could make you great as an adult.
Just because it’s not your fault doesn’t mean it’s not your responsibility.
Ignore what they are thinking of you because they are not thinking of you.
Marriage is a 50-year conversation. Marry someone you want to talk with for the rest of your life.
Make the day; don’t let the day make you. Make sure you are setting your schedule, not just responding to invitations from others.
If you meet a jerk once a month, you’ve met a jerk. If you meet jerks every day, you’re a jerk.
Don’t try to figure out what your life is about. It’s too big a question. Just figure out what the next three years are about.
2. Jordi Visser on the In Search of Green Marbles podcast discussed “The Great Global Rotation”. They did a comparative analysis of global markets and suggested why the best opportunities may be found outside of the United States. They dive into how tech and US equities become significantly overweighted in global benchmarks and what catalysts will get the ball rolling for the Great Global Rotation?
Thank you Bjorn for flagging.
3. Michael Mauboussin published a new paper on Capital Allocation:
Here’s a good summary:
4. My friend Michael O’Sullivan and David Skilling wrote a paper titled: “War by other means: positioning for 2023”, which has some overlaps with Marko Papic’s “Buenos Aires consensus” and Pippa Malmgren’s “World War 3”.
Here are the key bits:
At the end of the beginning:
Our core thesis is that the global economy is moving onto a ‘war time’ footing, with increasing, broad-spectrum strategic rivalry between the big powers reshaping the global economic and political system. The key domains for this strategic competition relate to economics, finance, and technology – extending well beyond military competition.
Increasingly, government policy across multiple areas will be deeply shaped by this strategic competition, from macro policy to industrial policy and the net zero transition. In turn, economic outcomes, the business environment, and markets, will also be affected. 2022 was the ‘end of the beginning’ for the new regime, and these realities will powerfully shape 2023. The global economy has been relatively depoliticised – but politics is firmly back.
Globalisation and strategic autonomy:
Although the death of globalisation is exaggerated, globalisation is changing in structural ways. Economic factors are partly responsible, supporting reshoring and nearshoring. But domestic politics and geopolitics are much more disruptive factors in reshaping global flows.
2023 will be a year in which we move into much more explicit political competition and tension in globalisation, with a more fragmented global economy emerging rapidly. The recent G20 meetings put some guardrails around the US/China relationship, removing some of the tail risks, but the logic of strategic competition remains intact. Firms and countries will need to make deliberate choices.
The return of the state:
After a few decades of declining government spending, interrupted by the global financial crisis, the size and role of the state is expanding. The pandemic and energy crisis support packages reflect changing expectations on the role of government and will be difficult to reverse, particularly into a slowing economy.
Given the magnitude of the likely increases in government spending and investment, the quality of those decisions will make a substantial difference. State capability will become a core driver of national competitive advantage.
At the same time, the shift to a war-time economy will challenge the current macro policy regime: fiscal rules with a focus on fiscal sustainability, and independent central banks with a price stability target. Higher government spending and investment will run into the constraints of fiscal rules and central bank inflation targets.
If the choice is between strategic priorities and existing macro policy institutions, it is likely the institutions that will give. There will be a shift from policy rules to policy discretion: a relaxation of fiscal rules and softer inflation targets, perhaps with diminished central bank independence. QE will be difficult to end. Higher trend inflation is likely as macro policy remains accommodating.
The commanding heights: the technology and energy revolution:
Economic sanctions and restrictions are being placed on technology flows and investments between the competing blocs – and this will strengthen through 2023, drawing in a broader range of countries. Choices will need to be made. There are costs to global economic fragmentation due to the push for strategic autonomy. But as in other domains, competition between countries can be a good thing – creating sharper incentives for investment and innovation (as during the Cold War).
Those countries and firms that can combine technology leadership as well as security of supply of critical flows of commodities and energy will out-perform. As technology and energy are increasingly framed in strategic terms, the pace of change will increase markedly, generating significant investment opportunities.
B. How Innovation Works:
Ridley is the author of many great books including: Genome, The Rational Optimist, The Red Queen, Viral, but this might be his best.
It’s actually two different books.
The 1st part discusses the many many key innovations of the human species. Including Newcomen’s steam engine, Salk’s Polio vaccine, the Haber-Bosch Process, Marconi’s work on electromagnetic waves and even our ancestors learning to cook with fire.
It’s a beautiful history lesson of all the innovations we take for granted and the sheer number of innovations we use daily without even thinking about the. I really enjoyed diving into videos like this:
The 2nd part of the book is a discussion on the essentials, the economics and resistance to innovation.
There are a couple of big ideas I walked away with:
Innovation happens slowly, gradually by tinkering and learning by doing. If you keep plugging away, luck, opportunity strikes - mistakes happen that are actually eureka moments.
Most inventions could have happened anyway regardless of who actually found it - when an ideas time has come, it will be done by someone.
Innovation usually leads to fewer resources being used and therefore increasing returns on resources. This is good for our species.
Innovation can’t be regulated, controlled or created top down. It's bottom up people speaking, working together and learning from each other. Govt's can’t create innovation since innovation required serendipity, open ended work. Freedom.
Consumers buy into innovation when they are ready - not all innovations catch on. Not all innovation comes from science or application of science. Sometimes it's just put old ideas together - wheels on suitcases.
Innovation creates interdependency- we all specialise and do specific narrow work - we are all deep knowledge workers. This creates more knowledge and supply of goods at our finger tips.
Here’s a great discussion Matt Ridley had with the Hoover Institute on Innovation in May 2020:
C. How The World Really Works:
Vaclav Smil’s latest, How The World Really Works should be assigned reading for every adult. It’s a simple, no politics, no bias discussion of how the world works.
The 5 big ideas I got out of the book were:
1. Harnessing energy has been the most impactful event for our species. The amount of energy we now use as a species is astounding. That energy is used in things that are usually invisible to us. Think agriculture (fertilisers), cement, plastics, steel. Energy is in everything.
2. The great thing about Oil for our species was that it’s very energy dense. Fossil fuels today are 84% of our energy usage. Substituting that level of energy density is hard.
3. We have also had a tremendous degree of globalisation. This was built on the back of scaled transportation, communication, manufacturing and semiconductors. This was a huge force and has totally changed how the world works today versus a hundred years ago when most of these forces were limited or didn’t exist.
4. We worry a lot about risks like terrorism, viruses, revolutions. But the real risks for most of us are as simple as driving to work (traffic deaths) and gun violence (especially in America). Those are the risks we should worry about.
5. Climate models are complex and have many, many variables. It’s almost impossible to model scenarios for 2040, let alone 2100. If you want to help the environment today, then start with driving smaller cars, insulate your house and reduce food waste.
Here’s a great discussion on Energy Systems: Transitions and Innovations.
D. Four Thousand Weeks
An average human only gets about 4,000 weeks of life on Earth (4,000 / 52 = 77).
There are probably 3-4 books over the last ten years that have really slapped me around and changed how I looked at my life.
Four Thousand Weeks by Oliver Burkeman is one of them, and regular readers have seen me refer to it last September.
I re-read it again this week as a reminder to myself.
There are a few big ideas in this book:
The Efficiency Culture:
We live in efficiency culture, where it’s about doing more and more things. But as we rush to tick things off our to-do list, we are actually doing each thing in a very cursory way. Each task becomes small, irrelevant and something we are just trying to get done to move to the next thing.
None of the actual tasks matter. Only the next task matters. So if nothing that you are really doing matters then does your life really matter?
You Get The Life You Choose:
To give our life meaning, we must choose what stuff will mean to us. We have to choose what we will sacrifice our life for. No choices mean more tedious things will find their way into your life.
Make the choices of what you will do and what you will not do. Commit to what matters to you. And agree to miss out on certain things. Use time rather than let time use you.
His thesis is that we run from tasks to tasks because we don’t actually want to decide what we want to do with our life.
He has a great story about writing down a list of 25 things you want to do with your life. It’s possible many of you have done this exercise. Warren Buffett has talked about it as punch card investing.
Oliver’s thesis is that when you select the top 5 things you are going to do with your life, the problem to watch out for is the other 20, because they are what will take you away from the top 5. The top 20 are dangerous to you achieving the top 5.
All Life is Borrowed Time:
Being busy with stuff is a way to forget our finitude. We don’t have to choose if we don’t ever take a time to think about it. But to live a good life we must choose.
Be in the moment.
We are always preparing, thinking about the future. It’s always about what’s next, what’s in the future. It’s never about being here today. There is no perfect tomorrow. So be here. Today is all that really exists. The rest is just in your head.
“To rest for the sake of rest—to enjoy a lazy hour for its own sake—entails first accepting the fact that this is it: that your days aren’t progressing toward a future state of perfectly invulnerable happiness, and that to approach them with such an assumption is systematically to drain our four thousand weeks of their value. ‘We are the sum of all the moments of our lives,’ writes Thomas Wolfe, ‘all that is ours is in them: we cannot escape it or conceal it.’ If we’re going to show up for, and thus find some enjoyment in, our brief time on the planet, we had better show up for it now.”
—Oliver Burkeman (“Four Thousand Weeks”)
E. The Tech and Crypto Section:
1. Crypto Investment firm Pantera Capital had a great discussion on the FTX Fallout.
2. This is impressive. Have you played with DALL-E or ChatGPT yet?
3. AI guru Andrew Ng had some words of caution on ChatGPT:
4. Invest Like the Best Podcast had a chat Jeremiah Lowin: Explaining the New AI Paradigm. They covered a lot of ground:
[00:03:38] - What a pre-trained transformer is
[00:06:12] - What latent representation means in the context of AI models
[00:11:43] - Whether or not understanding AI complexity in light of the results they arrive at will become a black box scenario
[00:14:13] - A high level history of the companies involved in generative AI
[00:29:44] - The power dynamics and barriers to entry for building AI models
[00:33:38] - Whether or not AI models might one day function as a utility like electricity
[00:49:44] - The secret sauce for defensibility in the AI model space
[00:53:02] - What he’s watching more closely as the story unfolds
I will listen to this twice.
5. The amazing Kevin Kelly had a great article in Wired Magazine titled: Picture Limitless Creativity at Your Fingertips.
The conclusion (emphasis mine):
For the first time in history, humans can conjure up everyday acts of creativity on demand, in real time, at scale, for cheap. Synthetic creativity is a commodity now. Ancient philosophers will turn in their graves, but it turns out that to make creativity—to generate something new—all you need is the right code. We can insert it into tiny devices that are presently inert, or we can apply creativity to large statistical models, or embed creativity in drug discovery routines. What else can we use synthetic creativity for? We may feel a little bit like medieval peasants who are being asked, “What would you do if you had the power of 250 horses at your fingertips?” We dunno. It’s an extraordinary gift. What we do know is we now have easy engines of creativity, which we can aim into stale corners that have never seen novelty, innovation, or the wow of creative change. Against the background of everything that breaks down, this superpower can help us extend the wow indefinitely. Used properly, we can make a small dent in the universe.
6. My personal take: Where are Humans headed in the age of AI?
AI models are another software tool; however, their self-learning capability means that, instead of waiting months/years to upgrade from 1.0 to 2.0, the models are upgrading themselves continously.
We should expect AI tools to effect long-term job creation/evolution and economic growth. We are likely to experience a step function increase in productivity, largely for white-collar information-based jobs, that will create many redundancies. But how significant and widespread is that effect likely to be?
It’s unlikely to be restricted to mundane tasks because these systems will become increasingly contextually aware as they learn, allowing them to perform higher order, and, in many cases, creative endeavours.
On a positive note, one of the broader consequences of the rising intelligence of AI models is that humans will be able to (and, indeed, need to) move to a higher level of abstraction, reasoning, and creativity. All tools that replace manual labor and/or thinking allow us to focus on the next level of challenges and problems to be solved.
The AI Age is essentially once again changing the game of what it means to be human, so the burden is now on us to figure out where to look next to move the species forward. When the cart and wheel became ubiquitous, not only did we spend less time lugging things around on our shoulders, we also invented entirely new ways of living……
In the AI Age, humans should focus attention on developing 3 major skills where we still have an advantage:
Determining which questions to ask rather than trying to answer existing questions
Editing and curating will be much more important to parse the explosion of AI-generated answers/creations and determine what is of practical value
Improve decision making processes by incorporating the surplus of new AI generated content and tools
Katherine May on Seasons of Life:
"We are in the habit of imagining our lives to be linear, a long march from birth to death in which we mass our powers, only to surrender them again, all the while slowly losing our youthful beauty. This is a brutal untruth. Life meanders like a path through the woods. We have seasons when we flourish and seasons when the leaves fall from us, revealing our bare bones. Given time, they grow again."
or maybe better said by Helen Mirren: