A Few Things: Marko on Markets & Geopolitics, Morgan Housel's Big Questions, Nicolai Tangen on Decision Making, Future of Weight Loss, NYT Deal Book Summit, Is A.I. Coming For You, Munger's Wisdom...
December 1, 2023
I am sharing this weekly email with you because I count you in the group of people I learn from and enjoy being around.
Here is last week’s discussion: American Grand Strategy, Ariely on Misbelief, Economist on Investing, The Five Experiments, Brooks On Knowing A Person, Introduction to LLMs, Why Did Altman Really Get Fired?, Biotech...
This week is action packed. I hope you enjoy it.
Quotes I Am Thinking About:
“The best measure of wealth is what you have minus what you want, and by this measure some billionaires are broke.”
- Morgan Housel
"The limits of my language means the limits of my world."
- Ludwig Wittgenstein
“Life is harder when you expect a lot of the world and little of yourself.
Life is easier when you expect a lot of yourself and little of the world.
High standards, low expectations."
- James Clear
“Beware of the difference between prediction and prophecy”
- David Deutsch
"Try to be surprised by something every day. It could be something you see, hear, or read about. Stop to look at the unusual car parked at the curb, taste the new item on the cafeteria menu, actually listen to your colleague at the office. How is this different from other similar cars, dishes or conversations? What is its essence? Don't assume that you already know what these things are all about, or that even if you knew them, they wouldn't matter anyway. Experience this one thing for what it is, not what you think it is. Be open to what the world is telling you. Life is nothing more than a stream of experiences — the more widely and deeply you swim in it, the richer your life will be."
- Psychologist Mihaly Csikszentmihalyi on the value of daily surprises
A. A Few Things Worth Checking Out:
1. Geopolitical analyst Marko Papic discusses the limited market impact of the Russia-Ukraine war and the contained nature of the Israel-Hamas conflict.
He also explores gold's recent rally, the shift away from the US dollar, China's global ambitions, and a potential buying opportunity in China.
Marko also discusses the concept of great powers, China's foreign policy ambitions, its shift from aggression to conciliation, and the future of Taiwan. He suggests that China's current legitimacy does not depend on reunifying with Taiwan and that it may only attempt to unify with Taiwan when it becomes overwhelmingly powerful. He also emphasizes the importance of economic alliances and suggests that China could exert power and influence through economic means rather than through invasion or domination.
Thank you Benjamin P for flagging.
2. Morgan Housel has a new book:"Same as Ever: A Guide to What Never Changes." It is about timeless lessons on wealth, greed, and happiness, and it explores what never changes in a changing world.
His last Pyschology of Money is a must read.
Here are some deep reflective questions from the book:
What do I believe is true only because believing it puts me in good standing with my tribe?
What do I believe the most with the least amount of evidence of it being true?
Who has the right answer but I ignore because they’re a bad communicator? and who is full of it but I pay attention to because they’re a good communicator?
What annoys me about other people that I sometimes do myself?
Is this thing I’m worried about actually a problem, or am I looking for problems to worry about because they make me feel in control?
What was true a generation ago that no longer is, and who is clinging to that old truth?
Do I spend more time defending what I already know instead of trying to learn something new?
4. Fantastic conversation with the CEO of Norges, Nicolai Tangen on Decision Making and Intuition in Investing, the world's largest sovereign wealth fund hosted by prof. Tano Santos and Michael Mauboussin.
We look for companies that can grow earnings, high return on capital and solid moats. The rest is basically a waste of time. The fewer decisions you can make, the better they become. So if you can sit there and compound - it is such a wonderful idea. Is it easy? No, it is super tough. You come home from work, and your wife asks, “What have you done today?” And you say, “Nothing.” Next day - the same. You just feel like a failure. So therefore you feel like you have to trade a bit. But it is mostly not very profitable.
The way to judge yourself in investing is to do ‘Inertia analysis’. Take your Jan 1 portfolio, run it for a year without any changes and see how it ends up. Then you look at your actual results. and it is just awful sometimes. There are years when you go to the office...
A big difference between Art and Finance is that Art is dead, it is on the wall. Finance is alive, it is everything that you eat, wear, drive, consume. It is about people, psychology, culture, greed and fear, geopolitics, wars. And it changes all the time...
The weight loss drug industry, led by Novo Nordisk and Eli Lilly, is undergoing a significant expansion. Novo Holdings CEO Kasim Kutay has projected that their drug Wegovy and similar products could generate over $12 billion in the near future. The global market for these drugs is expected to reach an astonishing $200 billion within the next decade. Jonathan Wolleben, a senior research analyst, emphasized the high demand, stating, “You can’t overstate the demand for these drugs, and there’s still a lot of room to grow.” This growth is driven by the high obesity and overweight rates in the U.S., with about three-quarters of American adults falling into these categories.
A key innovation in this field is Lilly's drug candidate retatrutide, which exemplifies the "triple G" approach, targeting the GIP, GLP-1, and glucagon receptors. This method has shown remarkable results in trials, with patients achieving up to 24.2% weight loss over 48 weeks.
Richard DiMarchi, a molecular biologist, expressed enthusiasm about this new class of medicines, noting, “We’re now achieving things that virtually no one thought were possible—weight loss that previously required surgical procedures.” This triple-receptor strategy represents a major advancement in the treatment of obesity, offering a comprehensive approach to weight management and metabolic health.
Thank you David G for flagging.
6. Andrej Karpathy, an AI OG shared a 1-hour general-audience introduction to Large Language Models: the core technical component behind systems like ChatGPT, Claude, and Bard.
I shared it last week, and it’s so good and important for the future that I am re-sharing.
Here are my top takeaways:
Training models = lossy compression (gestalt of the text on the internet). There is a close relationship between compression and performance. Next word prediction objective forces the neural network to learn about a lot about the world.
Process of building LLM:
1. Pretraining -> train on the internet
2. Fine-tuning -> align model via human-generated Q&A pairings (how the model gets good at following instructions)
3. RLHF -> train on the model on relative goodness of answers by ranking
The performance of LLMs is a smooth, well-behaved, predictable function of N, the number of parameters in the network and D, the amount of text. We can expect a lot of "general capability" across all areas of knowledge. LLMs could use tools (function calling) to augment their abilities.
System 1 vs. System 2: LLM currently only have System 1 fast thinking. LLM doesn't have System 2 (tree search and tree of thought may help with this).
LLMs is the kernel process of an emerging operating system: RAM = working memory = context window. Operating systems had closed and open source, the same applies to LLMs (Llama2 vs. GPT4).
Heavily shared and recommended in AI community.
7. New York Times Deal Book had their summit this week, here are the three most watched videos (in order of views):
8. The Billionaire, The Butler, and the Boyfriend. This three-part French documentary is new to Netflix this month and tells the fascinating story of L'Oréal heiress Liliane Bettencourt and her huge $44bn fortune.
It's a good watch for the story alone, about the hidden intersection of enormous wealth, personal relationships and French politics.
The complex implications of generative AI like ChatGPT on the workforce and society. It contrasts the doom-laden predictions of AI replacing human roles with optimistic views of AI enhancing life, drawing parallels to past technological revolutions. However, it warns that the AI revolution brings unique challenges, particularly in the realm of social power, which will dictate the impact of technological shifts on society.
Humans, specifically men without college degrees, who represented the 'workhorse' of the industrial era, faced a decline in labor force participation and real wages due to diminished social power and erosion of worker rights. This decline in social power has been exacerbated by the evolution of political parties in the U.S., with both major parties increasingly catering to the educated and wealthy, leaving the majority disenfranchised.
Peter argues that AI poses a greater threat to social stability, as it affects highly educated professionals who possess the skills and connections to challenge existing power structures. Lawyers, in particular, are highlighted as a group at risk, given the overproduction of law graduates and the bimodal salary distribution, which creates a class of 'failed elite aspirants.' The rise of AI, capable of automating a significant portion of legal work, may lead to a surge in radical and revolutionary movements fueled by these disenfranchised individuals.
Peter concludes by questioning the ability of current political systems to manage these impending societal shocks, suggesting turbulent times ahead unless proactive measures are taken.
B. The Technology Section
Where are we headed with GPTs and LLMs - a personal view:
The future of technology is poised for a transformative shift with the advent of GPTs (Generative Pre-trained Transformers) and LLMs (Large Language Models). We're on the cusp of an era where these AI tools will become the primary interface for our digital interactions.
Picture a world where AI, deeply integrated with your enterprise applications like Word, Workday or SAP, seamlessly communicates across platforms. Until now, apps have interacted through APIs and middleware layers. However, the emergence of GPT Copilots will revolutionise this landscape. They will serve as intermediaries, enhancing the connection between applications and data. This means the apps or even websites we're used to will fade into the background, replaced by AI-driven chatbots and copilots. The focus will shift from software interfaces to the data itself.
If you’ve asked GPT4 a complex question recently you can already see it querying the internet, running programs in the background and maybe even using the calculator or writing code to answer your question.
As these chatbots and copilots evolve, their role in business processes and workflows will grow, potentially sidelining human involvement in many areas. This shift poses a challenge for large enterprise software companies. They must adapt from user-based to value-based pricing models and leverage their proprietary data to stay relevant.
I’ve seen my personal usage of Google fall for example and the use GPT4 or Perplexity AI go way up.
We’re entering an exciting phase in technology where AI, particularly chatbots and copilots, will redefine our interaction with the digital world. From changing the essence of user interfaces to impacting business models, GPTs and LLMs are set to usher in a new era of technological convenience and innovation.
This evolution will hinge on how well we integrate and adapt these technologies into our existing digital infrastructure. There is a lot to play for.
News And Charts You Might Have Missed
2. According to the WSJ, Young singles are finding love connections outside of traditional dating apps by using platforms that align with their interests, such as exercise-tracking app Strava, language-learning platform Duolingo, film-review hub Letterboxd, and review platform Yelp, for example.
3. Hadn’t realised how big Brazil is!
4. I talk about this with my kids a lot:
Believe it or not, that “♡ Like” button is a big deal – it serves as a proxy to new visitors of this publication’s value. If you got value out of reading, please let others know!
Have a great weekend and go catch that tuna!