A Few Things: Longevity, Capital Allocators, The Psychology of Money, Balaji, Bitcoin Standard and the Bored Ape Yacht Club
November 20, 2021
All this talk from COP26 made me think of these quotes:
“The whole problem with the world is that fools and fanatics are always so certain of themselves, and wiser people so full of doubts.”
- Bertrand Russell
“The best lack all conviction, while the worst are full of passionate intensity.”
- William Butler Yeats”
“To think is easy. To act is difficult. To act as one thinks is the most difficult.”
A. A Few Things Worth Checking Out:
1. David Giampaolo and I hosted Sergey Young and a number of investors for breakfast on Friday to discuss longevity and how to invest in it.
2. Adam Rozencwajg, Partner at Goehring & Rozencwajg Associates (GRA), uses the concept of Energy Return on Energy Invested (EROEI) to demonstrate that assumptions about the transition to a world of alternative energy are unrealistic.
EROEI looks at all-in energy cost rather than dollar cost. GRA have long argued that a change in thinking is required, but recent energy chaos makes the possibility of a shift by governments more relevant for investors. Energy sources will need to have low carbon intensity to fight climate change, but they also will need to be energy efficient.
The picture above shows the all-in energy cost of a solar panel and wind turbine after considering energy-intensive inputs like copper, steel and concrete. These materials and related mining processes are well-established, making it tougher to realise energy savings.
That is bad enough for the raw EROEI. But the more relevant buffered EROEI calculations, which take into account the need for additional capacity owing to the fact that the wind does not blow and the sun does not shine all the time, are even lower.
Natural gas and nuclear power have “favourable comps” using these criteria. Natural gas has a similar EROEI to oil but half the CO2 usage. Nuclear energy triples the EROEI, and is safer than, conventional energy sources.
3. The 60 Minutes video on the U.S. supply chain crisis is a good discussion on what exactly has caused America’s supply chain crunch.
4. THE BEST INVENTIONS OF 2021: According to Time Magazine. I am trying a bunch of these.
5. There is a saying on Wall Street - “price drives narrative”, and this tweet storm summarised well in the context of stock prices in the last year.
Prepared Remarks @PreparedRemarksLast 2 days: $PYPL was overvalued at 40x, it’s legacy payments, squandered first mover advantage w/Venmo. Can’t own it here. Next week after it’s up 15% from lows: Dominant scaled global payment player w/visible earnings growth algorithm. Cheap on 2028 numbers. Clear long. 👍
6. Everyone is in love with Tiger Global, and this article by Mario@The Generalist, outlines why.
7. Great video on how COVID vaccines work.
B. Capital Allocators:
I usually spend the last few months of the year reviewing books I’ve read that year. I’ve found it a good way to make sure the message sticks. One of the books I learnt from in 2021 is Ted Seides Capital Allocators.
My two favourite sections were those discussing the skill of interviewing managers and investment lessons.
Interviewing people is an art and is a core interaction in the investment process.
He breaks interviewing into the following process:
Define the purpose: why are we meeting?
Prepare: do your home work before meeting.
Set the stage: find common ground and ask simple, brief questions, and then let people talk, be humble.
Receive feedback: Look back at your meetings, interviews, interactions. How could they be improved. Ask for feed back from participants.
Some fun questions to ask managers, investors, entrepreneurs to understand them better:
How do you invest your personal capital?
What do you know that you wish you knew 10 years ago?
How do you define success?
If you had to invest all your savings with one of your peers, who would it be and why?
What is your edge and why is it enduring?
The Investment Lessons section is packed with great quotes, these three gave me the most to think about:
“Great bubbles happen around great stories.”
- Michael Novogratz
“When things go bad, they can get much worse than you expect. Things can happen that don’t make sense.”
- Andrew Tsai
“Anyone who thinks nothing lasts forever has never invested in a bad private equity fund”
- Karl Scheer
C. The Psychology of Money
How can we approach our life to optimise for wealth and happiness?
Morgan Housel is a great writer and has written a super book on the Psychology of Money, which is worth reading and then re-reading.
I summarised the 20 chapters into 20 tweets to save you time.
D. The Tech and Crypto Section:
1. Balaji is one of the biggest thinkers I know and at least 12 months early. He was on the Tim Ferriss podcast discussing Wolf Warrior diplomacy, Bitcoin and creating new cities. It’s packed with knowledge.
2. Saifedean Ammous, the author of the Bitcoin Standard (one of the best Bitcoin books) was on the Jordan Peterson podcast discussing Bitcoin vs the Fiat Standard. If you are cynical but curious about Bitcoin then this is a good listen.
3. This week Rolling Stone Magazine featured a big article on the popular NFT avatar project Bored Ape Yacht Club (BAYC). It comes at a time when celebrities and the like are onboarding themselves in the club through ape purchases. There is a plethora of NFT projects out there but some rise above the rest.
What seems to be emerging is that BAYC has the makings of a global iconic or even luxury brand. When viewed in this context, the floor price of around 50 ETH (200,000 USD) doesn’t seems so steep.
The founders of the project have built more than just some cool jpegs. They have created a community and also continuously dropped more stuff to each ape holder giving something of a yield for holders!
4. Web3 Business Breakdowns with Patrick O’Shaughnessy discussing the Bored Ape Yacht Club.
5. If you are not on at least one Discord then what are you even doing your life? Great Packy McCormick piece on why Discord is the portal to the metaverse, why crypto communities are built here and what makes it unique.
Note: MAU’s are monthly active users.
6. Did you listen to the Tim Ferriss show with Chris Dixon and Naval yet? This thread summarised some of the big ideas if you missed it.
Have a great weekend and awesome week ahead.