A Few Things: Techniques to Evaluate Character, Currie on Commodities, Marko on War, Bill Gurley on Outliers, Humbling of Goldman, Women's Health, Generative AI, Pantera on Crypto....
A Few Things: Techniques to Evaluate Character, Currie on Commodities, Marko on War, Bill Gurley on Outliers, Humbling of Goldman, Women's Health, Generative AI, Pantera on Crypto....
January 27 2023
“You will never be happy if you continue to search for what happiness consists of. You will never live if you are looking for the meaning of life.”
- Albert Camus
“Autobiography is only to be trusted when it reveals something disgraceful. A man who gives a good account of himself is probably lying, since any life when viewed from the inside is simply a series of defeats.”
- George Orwell
“The real voyage of discovery consists not in seeking new landscapes, but in having new eyes.”
- Marcel Proust
“Man is the creature of the era he lives in; very few can raise themselves above the ideas of the time.”
- Voltaire
“Either write something worth reading or do something worth writing.”
- Benjamin Franklin
“A great man is always willing to be little.”
- Ralph Waldo Emerson
“Everyone should be thinking about opportunity cost all the time.”
- Charlie Munger
A. A Few Things Worth Checking Out:
1. My 8 Best Techniques for Evaluating Character. Fascinating article on something we all have to do. How can we reliably trust character and integrity in people we meet?
My favourite three:
Forget what they say—instead look at who they marry.
If they cheat at small things, they will cheat at big things.
Watch how they handle unexpected problems
How do you do it?
2. Jeff Currie, Head of Commodities Research at Goldman Sachs, was on the Top Traders podcast discussing: Commodity Super Cycle in Full Force.
A great discussion on why Commodities are going much higher. Thank you Benjamin P.
3. I recently heard Marko Papic of Clocktower Group discuss his work from January in greater detail. The piece was titled: War Is Good, and had the following summary:
While horrible at a human level, war can be good when it comes to innovation and capital expenditure, especially the bigger structural stuff. Conflict leads to much more state involvement and industrial policies. And in a multi-polar world, trade still goes on even if we are fighting a war.
He recommends using the investing framework from 2001-2011 - which ties with what Jeff Currie is saying also.
I also liked the point that most people use geopolitics as a barometer of risk only - but what if it can hep you make money. He wants to use geopolitics to find winners and losers, and that leads to focus on countries that are geopolitically promiscuous (he likes Indonesia) and take advantage of a multi-polar world.
Borrowing the end of his paper:
The main thesis here is not defense stocks – although yes, we are bullish with some caveats – but that the world’s physical infrastructure, industrial plant, transportation, and energy grids are all about to be updated. The clearest way to express this thesis is to go long kinetic sectors (energy, materials, and industrials) relative to tech. The idea that one company (Tesla) is worth as much as the entire US energy sector – a reality at one brief point in late 2021 – will come to be remembered as the moment that the paradigm shifted.
4. I’ve kept listening to a ton of the Founders podcasts, where David Senra reads and then discusses a biography - this week’s favourite’s were his discussions on:
The Wright Brothers by David McCullough: the most resourceful, hard working, focused individuals.
The King of Madison Avenue: David Ogilvy and the Making of Modern Advertising by Kenneth Roman: what an iconoclast, he changed the advertising industry forever.
5. Bill Gurley was on the The Tim Ferriss Show discussing Investing Rules, Finding Outliers, Insights from Jeff Bezos and Howard Marks, Must-Read Books, Creating True Competitive Advantages, Open-Source Strategies, Adapting Mental Models to New Realities.
6. Enjoyed these 2023 Tech Predictions from Telstra Ventures. Thank you Benjamin G.
Three that resonated, particularly the last one:
With many of the big tech companies laying off staff (10k+ people at each of Meta, Amazon etc.), this will likely create many new start-up companies. History has shown that the years following a market correction make for excellent investment vintages.
Remote work will become an economic decision not a philosophical one. Employers are trying to manage costs considering the economic realities. Employees want more flexibility around where and when they work as long as they get their work done. In 2023, this decision will become black and white.
Companies will discover that they need to be talent makers rather than talent takers. The average company spends $1,071 on training per employee per year (maker) versus $4,000 to get a new employee (taker). In 2023, companies will invest their training spend to “known” employees versus spending more to attract “speculative” prospects to bring on new skills
7. The humbling of Goldman Sachs by the Economist. Thank you Jim M.
Key bits:
Goldman’s struggles point to several lessons. One is that it still excels, but in a bad industry. Investment banking combines the drawbacks of a regulated activity (capital requirements and red tape) with the vices of a speculative one (volatility and capture by employees). The fi rm says it has become more disciplined on pay but last year forked out $15bn, its second-highest salary and bonus bill since the financial crisis, even as profits halved to $11bn and the fi rm barely beat its cost of capital. The real action in finance is outside regulated banking, where a new cohort of stars rules, including Blackstone in private markets, BlackRock in index funds, and Citadel, an investing and trading house that made its clients $16bn in 2022.
Another lesson is that it is hard to compete in winner-takes-all digital markets. Goldman thought that brains and brand were enough. Not true. It has spent billions, but its customer base remains a fraction of that ofPayPal or Amazon. JPMorgan reaches 66m American households, but maintains a vast physical network of branches. Goldman has achieved digital scale by teaming up with Apple to provide a credit card. However,given that the tech giant has almost a billion paying subscribers, Apple holds the whip hand in that relationship.
A final lesson is that the stagnation of globalisation has shrunk Wall Street’s horizons. In the decade after Goldman listed, international revenues provided half of its growth, as its bankers conquered Europe and then broke into Asia. Today they supply a third of growth, as local competitors have emerged and some countries have become wary of foreign financiers. The number-one arranger of shares and bonds last year in China was citic Securities; in India Kotak Mahindra and Axis led the pack. These are names that many on Wall Street may not know.
Raging bulls
Can Goldman recover its swagger? Mr Solomon is wisely laying off staff and shrinking the bank’s proprietary investments. Over time he may be vindicated by prosaic changes—running its asset-management arm better, say, or pioneering new tech to cut exorbitant labour costs—or even by orchestrating a merger.
Yet there is something uniquely hard about reforming elite fi rms whose unwritten code is that they are smarter than everyone else. Just ask McKinsey, a scandal-magnet once known as the world’s most-admired consultancy. Goldman’s culture of self-regard remains at odds with the facts. Instead it now needs to be self-critical. For yesterday’s masters of the universe, that may be the hardest leap of all.
8. Watching my gut health has helped a lot.
9. Wikenigma is the wikipedia of unanswered questions and gaps in human knowledge for the curious-minded. For example, words of unknown origin, the dilemma of free will, or the purpose of the human chin. It's a jumping-off point for the imagination!
B. News and Charts You Might Have Missed:
1. Money is flowing into fertility technology startups, with venture funding surpassing $850 million in 2022 as demand climbs.
The Economist also had a good discussion on the fertility business.
I’m seeing more and more of the VC funds I am invested in, look at the various facets of the IVF market, and I am seeing more and more women I know use IVF as a solution. IVF is a just one part of where I think we will see more dollars flow in the next decade: Women’s Health.
This was a good panel from the Milken Future of Health Summit in December 2022.
I am trying to learn more about this market, have you done anything here?
2. India is buying 33x as much Russian oil now than this time last year. Western sanctions and price caps mean Russia can sell its oil to far fewer places than before. That means remaining buyers can offer lower prices due to lack of competition. India, the world’s third-largest crude-oil importer, is likely getting an “attractive discount” as a result, analysts say.
3. US Defense Secretary has failed to persuade Germany to send German-made Leopard 2 tanks to Ukraine. Berlin’s resistance to pressure from the US and European allies has frustrated the White House and many European governments ahead of what they see as a critical phase of the war.
4. French President has raised France’s military budget by 40%, saying the country's planned 2024-30 budget will alter the military due to the possibility of high-intensity conflicts.
5. Was it as simple as this?
C. The Tech and Crypto Section:
1. Generative AI can already do amazing things. I found this cool.
2. Pantera Capital released their 2023 outlook, here is the summary.
3. What shape will the generative AI market take? The A16Z team does a great job laying out the map of the market, with a breakdown across Applications, Models and Infrastructure.
P.S. I will be in Los Angeles from March 2nd to 8th seeing my parents. If you’d like to meet, please shoot me an email.
This week’s guilty pleasure: Dark but beautiful