A Few Things: Malmgren on Geopolitics, Space Race & CBDCs, Papic on Analysing Markets, Huberman on Happiness, Chanos on Frauds, Engines That Move Markets, Berger on Ways Of Seeing, Latest in AI..
November 28, 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: The Satisfaction Trap, Marko Papic on Markets, Niall Ferguson on Tim Ferriss, How To Have Great Meetings, West's Scale Cont'd, The End of Tech Jobs, The Unfolding FTX Saga.....
This week we cover two great books - Ways of Seeing by John Berger and Engines That Move Markets by Alisdair Nairn, and the latest news.
“If we could see the whole truth of any situation, our only response would be one of compassion.”
- Yongey Mingyur Rinpoche
“Be the change you wish to see in the world”
“The task is not so much to see what no one has yet seen, but to think what nobody yet has thought about that which everybody sees.”
- Arthur Schopenhauer
A. A Few Things Worth Checking Out:
1. I’m not a fan of geopolitical experts prognosticating about the world, but Dr. Pippa Malmgreen is different. She’s always got a new angle, something I had never thought of. After listening to her on MacroVoices you will see the world and the news differently.
For example, ever heard of Svalbard? Well, you should have, because it recently was subject to the most off the radar and important bit of military subterfuge in recent times. Svalbard is Norwegian territory in the Arctic and just so happens to be the place on earth with the fastest internet. This is because it is the place where most of the world’s civilian and military satellites and the International Space Station connect to earth.
On January 7th this year (7 weeks before the invasion of Ukraine), a Russian oligarch’s mega yacht parked atop the most important cable for space connectivity and underneath it submarines cut the cable (in 2 spots) to remove around 6.5km of cable. It was done to send a message.
The message was well received as the British Chief of Defence Forces called it “an act of war under ordinary circumstances”. Dr Malmgren’s view is that this began the war, rather than the physical invasion of Ukraine. She also covers China’s covid policy, CBDCs, Trump and much, much more.
This was the best set of original geopolitical ideas I’d heard of in ages.
2. Big fan of Marko Papic at the Clocktower Group and this episode on Top Traders Unplugged is special. Marko does a deep dive on geopolitical analysis and how it can be used to predict the future, based on his book, “Geopolitical Alpha: An Investment Framework for Predicting the Future”.
He discusses why geopolitical analysis should be used and how it can prepare you for the future as an investor, what role politicians play in society and the methods they use to gain voters, how voters are affected by media and the importance of understanding your biases and weaknesses.
3. Looking Stupid
This was an interesting post on the value of looking stupid. If you aren't scared to look stupid, you'll ask more questions others won't, and you'll develop a much deeper understanding of everything. Similarly, if you're willing to experiment despite looking stupid you'll know what works and what doesn't, but more importantly, you'll know the exact line between the two.
I see a lot of very smart people use this technique.
4. Short seller Jim Chanos was on the Bloomberg Odd Lots discussing frauds, crypto, and the pro-cyclical effects of stock-based compensation.
5. Andrew Huberman discussed Science-Based Tools For Happiness in his podcast. He explains the science of happiness, including the different types of happiness and how our actions, circumstances and mindset control them.
Tips to increase happiness:
Give money/effort/time to someone in need in an amount significant to them but manageable for you.
Stay present and focus on what you’re doing, even if it’s not an activity you particularly enjoy.
Build quality social connections.
B. Engines That Move Markets:
Alasdair (Sandy) Nairn is one of the founders of Edinburgh Partners, an independent fund management company which was acquired by Franklin Templeton in 2018. Prior to this, he was the chief investment officer of Scottish Widows investment Partnership.
In 2001, he published the first edition of Engines That Move Markets, with the updated second edition being published in 2018. He has won multiple performance awards for the management of global equity portfolios over his 37-year investment career.
Philippe Laffont, the founder of Coatue called it: “One of the best books ever written on investing - as well as on technology”.
Sandy’s thesis is that the biggest technological innovations in the world have followed similar market and social patterns - scepticism is replaced by enthusiasm: venture capital is supplied; many companies are started and their stocks rise. But as the technology is developed and financial reality sets in, companies disappear, stocks collapse, and naive investors lose money.
This diagram of the Gartner Hype Cycle illustrates it well.
Through detailed research, Sandy captured this pattern and examined the impact of some of the greatest technology inventions of the past 200 years, including the railway boom, the telegraph and telephone, the development of the automobile industry, the discovery of crude oil, rise of the PC and wireless world.
When I think about the invention and subsequent impact of past technologies on our society, they are far more consequential than what we have seen in the last decade.
What can we learn from these historical episodes and where the investment opportunities are in technology. These are my 5 lessons:
Tech investing is hard. It’s difficult to know the winners in advance. It’s hard to know which founders will win, which version of the technology will succeed. It’s much easier to see the impact on the world if the technology works, much harder to see who the winners will be.
There have been many cycles of new technologies, where the technology initially seemed new and ground breaking, and quickly the technology becomes commoditised and competitive. Think about technologies like canals, radio waves, telephones, cars, railways. These were the high tech ideas of their time.
There are a few “dependable” ways to make money in technology:
Have a monopoly
Have a cost advantage
Be first and become the market standard
Out operate others
Questions to ask yourself when investing:
Who will be the losers from this, often the losers from the technology are more obvious than the winners?
Where are we in the hype cycle?
What is the Moat protecting the business? A patent, a monopoly, regulation?
Can this founder / CEO sell through a downturn, can they create investor demand to sustain the capital the business will need?
Societal issues to consider with new technologies: What are the broader structural societal changes that will come from this technology, trend or company? What could it do to society?
Often the story of new technologies is deeply intertwined with individuals. For example Edison and electricity and lightbulb, Rockefeller and oil, Vanderbilt and railways.
His latest episode covers Peter Thiel’s classic book: Zero to One, On Start ups and How to Build the Future.
C. Ways of Seeing:
I’ve been exploring the world of art more closely over the last month, and it’s still early. One of the books that is seminal to art and perception of any kind is John Berger’s Ways of Seeing.
The book was originally written in the 1970’s and is based on a BAFTA award-winning BBC series with John Berger, which rapidly became regarded as one of the most influential art programmes ever made.
The series and book criticise traditional Western cultural aesthetics by raising questions about hidden ideologies in visual images. The series is partially a response to Kenneth Clark's Civilisation series, which represents a more traditionalist view of the Western artistic and cultural canon.
A number of big ideas from this one and maybe like all great books it leads to more questions than answers, some examples.
When you see a painting, where is it being displayed today versus where was it intended to be displayed when the painter created it? Who was it painted for and when was it painted? How has it’s meaning changed overtime?
Photos changed the nature of images. We went from paintings that were unique to images that were easily reproduce-able. We could use images to serve our purposes versus a painting that a painter may have created for a specific purpose. For example: Da Vinci’s Mona Lisa printed on a T-shirt can mean very different things to different people.
The treatment of Women in painting. What is the difference between being naked vs being nude? He argues naked is a state, while being nude is being watched and offering one’s femininity. Male nudes are rare and very different from female nudes. Next time you look at a female nude, replace a man’s face / body and see what it feels like. Paintings and art did a lot to define both man and women’s identities and societal perspectives.
The use of images in publicity to create desire. Creation of images where we come to believe that an object or experience can transform us to a different person, state. All luxury advertising is like this. As a society we create demand by manufacturing publicity for objects and experiences.
The book is just 150 pages and seven short essays with lots of images, but it will change the way you perceive the world.
D. The Tech and Crypto Section:
1. Another breakthrough announced this week in the AI space, this time through Meta Labs announcing that their AI program beat humans at a game called Diplomacy, a game which requires deep negotiation using natural language and also requires a large amount of deception as real politics would.
What’s frightening about this for anyone who believes in ASI (artificial super intelligence) is that the AI, aptly named Cicero, lied numerously in order to achieve the optimal outcome!
Over 40 games the Cicero AI got double the human average score.
2. The founder, CEO of Scale AI had a great piece on The AI War and How to Win it.
The gist of this post is:
AI will disrupt warfare.
China is currently outpacing the United States (for which there are numerous supporting facts).
The United States, both the government and AI technologists, need to start acting.
This weekly email takes a few hours to write weekly and will always be free, but I’d love your help with my wife’s book: The Halfways. It’s now sold over 1,000 copies largely in UK hardback. It’s also in libraries and on Audible.
If you are looking for a great Christmas gift for your favourite reader, please check it out. Here’s a recent Amazon review titled “Must Read!” to give you a flavour for the book:
I just finished reading the Halfways and what a beautiful and enjoyable experience it has been. The story grips you from the start, I could hardly put it down and was even reading during my work breaks. I love the authors poetic, bold and authentic writing style. She makes it easy to see the world through each characters eyes so clearly and vividly, you start to feel how the character feels. The storyline touches upon themes of family, relationships, sibling rivalry, secrets, betrayal, grief, joy, culture, belonging, finding yourself, finally redemption … finding peace and acceptance ! Every person who reads this book will be able to relate in one way or another. From start to finish simply a breathtaking book that is a delight to read. You will love it ! Highly recommend !