A Few Things: Texas Shooting, The Commodity Trade, Climate Change, Mimetic Desire, Sequoia on Venture, Alan Howard on Crypto

May 27, 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.

"Change is never painful, only the resistance to change is painful."

- Buddha

“A hero is someone who understands the responsibility that comes with his freedom.”

- Bob Dylan

“It is a bit embarrassing to have been concerned with the human problem all one's life and find at the end that one has no more to offer by way of advice than ‘Try to be a little kinder.’”

- Aldous Huxley on his death bed

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A. A Few Things Worth Thinking About:

1. The children who were shot in their classroom in Texas this week.

2. This is an unreal number.

3. The Hidden Forces had two great podcasts recently - Brent Johnson on the Revenge of the Dollar and Tony Greer on How to Trade the Great Rotation from Big Tech to Commodities. If you are thinking about getting into Commodities, the one with Tony will be helpful.

4. A few people shared this speech that the HSBC Asset Management’s Global Head of Responsible Investments gave at the FT Summit.

He was suspended after it.

Why Investors Need Not Worry About Climate Risk. Do you agree or disagree with this view?

We had covered a related book: Apocalypse Never, last year.

5. My awesome day job is working with Family Offices on their investments. I was on the Definitely Uncertain podcast 2 weeks ago discussing how Family Offices are navigating this market and why it’s great to work with them.

6. GMO had a good report titled: Growth Trap Snaps Shut.

Executive Summary:  The last several months have been tough ones for growth stocks. While the median growth stock has indeed had a lousy time of it, the pain has been far from indiscriminate. The group that has been far and away the most painful for investors has been “growth traps” – growth stocks that disappoint relative to analysts’ forecasts. Even against the backdrop of lousy overall returns for growth since last summer, growth traps have managed to underperform the broad growth universe by their largest margin for any comparable period in history. As we look at current conditions in the growth universe, we expect growth traps to remain more painful than normal for some time to come. 

7. Given how bearish market sentiment is, and what is being priced in, this bear market rally could run for a few weeks.

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B. Mimetic Desire

I was reflecting on popping bubbles, memes and herd behaviors.

One of the reasons I think we see and will continue to see more bubbles form, intra-group conflicts and rewards to outrage are Rene Girard’s concept of Mimetic Desire discussed in his book: Things Hidden Since the Foundation of the World (recommended by Peter Thiel).

This was actually a reason why Peter Thiel was so eager to invest in Facebook (Facebook was a company that had fully harnessed and weaponised Mimetic Desire). You can see him discuss it here.

The key idea being that man doesn’t know what to want or desire, so he desires what others desire. We learn what to do and desire from those around us - we want what others want, we want what others have.

We are simply mimetic creatures.

This is especially true now, with most of our needs being met, it is increasingly about what we desire, versus what we need.

Mimetic Desire leads to competition, because we are the same and desire the same things, this creates conflict, as we try to differentiate while we all compete for the same things.

This leads to Mimetic Rivalry: We are defined by who we choose to compete with.

This is true as much of for as individuals as it is for companies and start-ups. Because there are few real differences is why we compete so fiercely. 

This Mimetic Rivalry can be seen across societies and can lead to trends, bubbles and even physical conflict. We copy each other, while also competing against each other.

But eventually, we wake up, a scapegoat is found. Someone to blame our rivalry on so society can survive and heal itself.

Once the scapegoat is found, peace is restored.

This is where we are in the market cycle today.

A simple example would be:

You go to a restaurant, because it’s popular with your friends. When it comes time to order, you overhear your neighbouring table ordering the dish of the day, and decide to get it too. But when it’s your turn to order, the waiter tells you that dish is sold out because the table next door ordered the last one. Now you find yourself unhappy with those people and resentful - you are in conflict.

You look for a scape goat - you might resent your partner for delaying you (if you were a little earlier you could have gotten that last dish) or maybe even resenting the person who recommended the restaurant. Once you decide the scapegoat, peace is restored.

Now that this bubble is popping watch for a lot more scapegoats, here are a few examples:

WeWork:

Theranos:

Uber:

But what does this mean for you and me?

Whenever I’m considering a decision or action, I try to ask myself am I being mimetic - are my desires my own or others? John Pfeffer was helpful in thinking about this.

Am I competing with others because I am competing for the same thing - the same totem?

If you want to go deeper on Mimetic desire, check out this episode of Modern Wisdom, with Luke Burgis.

He is the founder and director of Fourth Wall Ventures and author of “Wanting,” a book about the power of mimetic desire and how it impacts our behaviour in markets, politics, and culture.

Back to you and and me.

How do we escape from Mimetic Desire and think for ourself?

1. Seek real innovation and growth not competition. Do what others aren’t doing and think long term.

2. Believe in a bigger vision, take real risks by really committing to something, rather than FOMO’ing or YOLO’ing.

3. Build a differentiated skill set and pursue timeless wisdom

Coming back to the markets today, who or what will be the next scapegoat?

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C. The Tech and Crypto Section:

1. There is a lot of talk about VC’s preparing startups for a harsher fund raising and sales environment. This is a great Sequoia deck to it’s start ups on how to think about the current environment.

2. All-In-Pod had a good session with Bill Gurley (Benchmark) and Brad Gerstner (Altimeter) discussing markets, downturns and investment cycles.

3. Great article in The Block: Alan Howard explains why he’s investing across the entire crypto ecosystem. Thank you David G for flagging.

“In short, this is an important macro trend and a new asset class that can, and likely will, impact the evolution of technology and the economy at large for many years to come,” he said. “As I balance my broad thesis with the reality that digital assets are a nascent asset class, I argue that it’s most prudent to invest across the entire crypto ecosystem in a highly diversified manner.”

Have a great weekend.