A Few Things: Morgan Housel's Rules, Quality Demands Quantity, Clocktower on China, The Chip War On China, Coatue on Fintech, Balaji with Lex Fridman, Meltem on Creation and Monetisation of Culture
October 25, 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.
You can check out last week’s edition here: Napier on Financial Repression, FP on Biden and China, Eating To Death, New World Order, Yergin on Ukraine & Russia, Deep Survival, Charts That Make You Go......
Quotes I’ve been thinking about:
“Democracy is the process by which people choose who to blame.”
- Bertrand Russell
“I never allow myself to have an opinion on anything that I don’t know the other side’s argument better than they do.”
- Charlie Munger
“In all affairs, love, religion, politics or business, it’s a healthy idea, now and then, to hang a question mark on things you have long taken for granted.”
- Bertrand Russell
“One day, in retrospect, the years of struggle, will strike you as the most beautiful.”
- Sigmund Freud
A. A Few Things Worth Checking Out:
1. The talented Morgan Housel had a great article titled: Little Rules About Big Things.
It’s a fun list of ideas, my favourite 10 are:
The only way to build wealth is to have a gap between your ego and your income.
If your expectations grow faster than your income you’ll never be happy with your money no matter how much you accumulate.
Few things are as valuable in the modern world as a good bullshit detector.
Most assholes are going through something terrible in their life. People hide their skeletons, which requires blind forgiveness of their quirks and moods because you’re unaware of what they’re dealing with.
Pessimism always sounds smarter than optimism because optimism sounds like a sales pitch while pessimism sounds like someone trying to help you.
Money’s greatest intrinsic value is its ability to give you control over your time.
There are two types of information: stuff you’ll still care about in the future, and stuff that matters less and less over time. Long-term vs. expiring knowledge. It’s critical to identify which is which when you come across something new.
There is an optimal net worth for most people, after which not only does happiness stop increasing but more money becomes a social and psychological liability. The number is different for everyone, but is probably lower than most people think.
Small risks are overblown because they’re easy to talk about, big risks are discounted and ignored because they seem preposterous before they arrive.
Read fewer forecasts and more history. Study more failures and fewer successes.
What about yours?
2. Quality Demands Quantity. I recently read a eulogy, one section in particular stood out to me, emphasis mine.
My dad never wrote an epic poem or a novel. His masterpiece was the relationships we shared with him and still share with each other. I didn’t appreciate that achievement fully until after he was gone and we took stock of his life.
I sometimes think that my dad really could have been a minor American poet or a more renowned storywriter if he had spent less time with his children and grandchildren. The tradeoff was easy for him.
He chose us.
He had many talents. Being a father was the talent he chose to cultivate. All of us who survive him, his good wife, his children and his grandchildren, are so lucky that we had him for so long.
So if you want to honor my father’s memory, spend more time with your children. Or your parents. Or those you love. For dad, quality time demanded quantity time. It’s harder than it seems. So many things, more tangible, more alluring, with more immediate returns, call for our attention and distract us.
Spend the time. It’s more precious than rubies.
Spending the time is such a simple thing to do. It doesn't require much effort. It only requires priority. Over work. Over hobbies. Over alternatives.
What are you prioritising?
3. My favourite team at Clocktower Group had an update on the Twentieth Party Congress titled: The Final Nail in the Coffin of China’s Collective Leadership.
Here’s Marko on CNBC yesterday:
While President Xi’s work report still kept the landmark phrase “let the market play the decisive role in resource allocation,” further tightening of Party control is inherently incompatible with a market-oriented economy. To effectively maintain the Party’s control over the economy, Beijing will move to expand the influence of the state sector and ensure that critical industries – defense, energy, hard-tech manufacturing, and finance – obey the whim of the Party, not private capital. As a recent People’s Daily commentary points out, the fundamental difference between the Chinese and Western paths to modernization is that capital must not play a central role in China’s development.
While it is difficult to predict specific policies that may emerge out of Beijing’s new development strategy, what is certain over the long-term is that investors should not expect policies that benefit capital owners. Political and economic structures closely linked to capitalism – including private equity, venture capital, investment banks, hedge funds, and even the stock market itself to a certain extent – are likely to face headwinds.
4. Earlier this month, the Biden administration unveiled a new set of restrictions on exporting semiconductors and related technology to China. The actions are seen as a significant escalation of an ongoing effort to constrain China's domestic chip ambitions.
We covered the great new book: Chip War by Chris Miller a few weeks ago and he was on the Bloomberg Odd Lots podcast: This Is What the US Just Did to China on Semiconductors.
Gavekal also had a good piece last week titled: US Chip Sanctions And China’s Options.
It concluded that: The main effects of the new sanctions are to limit China’s chipmaking abilities, and cut off many Chinese companies. The US has turned its dominance of semiconductor technology into an economic weapon. Previous US policy was to aim at keeping China’s chipmaking technology two generations behind the cutting edge. Now US policy is to freeze China’s chipmaking technology at an even lower level.
Outside of chip exports, the ban on US persons will cut off China’s industry from a major source of human capital and expertise. Two potential impact: a) Big US companies in other sectors might have a harder time closing big deals in China and b) Beijing’s best move would be to pick off the allies whose cooperation the US needs to make its sanctions effective.
5. This is beautiful:
B. The Tech and Crypto Section:
1. The investment firm Coatue had a great whitepaper on Fintech.
Thank you Yaser for flagging.
2. Balaji Srinivasan is an angel investor, tech founder, philosopher, and author of The Network State: How to Start a New Country. He was formerly the CTO of Coinbase and General Partner at Andreessen Horowitz.
In my opinion Balaji is one of the widest and deepest thinkers I know (and he’s got a huge ego too), he spoke with Lex Fridman for almost eight hours (spotify link). Which sounds like a lot, but I spend that much time commuting every week, so it wasn’t impossible to get through.
(33:35) – Government
(49:51) – The Network State
(59:55) – Pseudonymous economy
(1:23:41) – Exit
(1:38:23) – Building a network state
(3:03:40) – Fixing science
(5:01:16) – Longevity
(5:49:32) – War
(6:10:40) – Social media
(6:45:44) – Cryptocurrency
(7:03:17) – AI, AR, and VR
(7:15:15) – Advice for young people
3. Meltem Demirors is one of my favourite crypto people - she has a knack to take complex ideas and reduce them down to simple narratives.
She was on the Blockworks Empire podcast discussing the creation and monetization of culture. Meltem discusses using crypto-based market microstructure to be the catalyst for the fusion of a new culture-meets-capital paradigm.
If you are into culture, markets or NFT this is a must-listen.
(01:29) Crypto Is A Market Structure Story
(06:09) Everything Is Perception & Speculation
(36:31) IP, Mimetic Transmission and Community
(45:47) The Biggest Opportunities?
(57:49) Culture Is Not Emergent, It’s Manufactured
On a related theme, I interviewed Alexis Ohanian last week to get his latest thinking on crypto and NFTs in the light of the crypto winter, where he outlined real use cases and investment opportunities.
Reach out if you’d like a link.
Thank you for your time and attention.