Discover more from A Few Things....
The 80/20 Principle, Trillions, Peter Thiel, Billion Dollar Whale, Crypto and Institutions, a16z on web3, GS on Carbon & COP26
October 31, 2021
This week’s A Few Things is action packed. There is so much amazing stuff going on in the world. Thank you for spending some of your time here.
“Don’t be humble; you’re not that great.”
- Golda Meir
“All appears to change, when we change”
- Henri-Frederic Amiel
“Education is a progressive discovery of our own ignorance”
- Will Durant
“Fear defeats more people than any other one thing in the world”
- Ralph Waldo Emerson
“Men's natures are alike, it's their habits that carry them apart”
A. A Few Things Worth Checking Out:
1. One of the most useful mental models in my life has been the Pareto Principle, you might know it as the “80/20 Principle”.
These two pictures some it up:
Richard Koch is the man who re-popularised this idea. Koch was a management consultant, then venture capitalist (he was an early investor in Betfair, Plymouth Gin and Filofax) and author.
What are the 20% of actions in your life that lead to 80% of the outcomes you desire? Find those and then double down on them.
2. The legendary Michael Mauboussin was on the Acquired podcast doing a deep dive into his incredible body of work: untangling skill and luck, base rates, measuring moats, persistence of returns in venture capital, decision making and — particularly timely — expectations investing (revised and updated) and how to think about valuations in the current 2021 market environment.
We covered his paper on Public to Private Markets in the US, last year.
3. Passive Investing, Indices and ETFs are one of the biggest forces in the stock market and one of the big ideas of the last 30 years.
FT correspondent Robin Wigglesworth has written a great book on the industry, its origins and its future.
4. A handful of friends have recommended the new book on Peter Thiel, I haven’t read it yet, but this New Yorker article is a good dive into the enigma that is Thiel.
5. My two favourite investigative journalists are Bradley Hope and Tom Wright. They broke the Jho Low, Billion Dollar Whale story and are now working on Project Brazen.
Here are they are in a brand new Vice documentary: The Man Behind The World’s Biggest Financial Fraud. Thank you David Giampaolo for sharing.
6. A cousin asked me my view on markets and stagflation, here’s what I’ve learned over a 22 year career about making forecasts.
7. Great list of hedge fund letters are posted on Reddit.
B. The Tech and Crypto Section:
1. Super read on Crypto: The point of no return is here for Crypto, and why it’s ready for institutionalisation. Thank you Aron.
2. CoinShares had a piece on Institutional Crypto Adoption: Three Factors to Watch: Regulation, Adoption and the Macro Environment.
They discussed his insights on the macro environment and why he sees crypto as a pathway to a renaissance – but also to a dystopia. He sees a 'quantum' level change underway.
4. Chris Dixon, heads up the crypto fund at a16z, he shared his views on what’s next for web3:
5. Chris also did a great interview on Bankless discussing the 5 Mental Models for web3:
7. Did you catch Mark Zuckerberg’s vision for the Metaverse:
C. The Carbon Section:
You have probably noticed that the COP26 meeting is starting today. A lot is expected from it.
Here are some charts and articles that stood out for me as I think more about carbon emissions and what is required to achieve our goals.
1. There is still a LOT to be done, even in Europe.
2. Goldman Sachs published a great report on Carbonomics: Five themes of progress for COP26. Definitely worth flipping through it.
A quote that stood out from the podcast:
If I look back to ten years ago, whether a company was developing oil, gas or renewable power, the cost of capital was broadly similar, somewhere between 8-10%. We estimate that since then, the cost of capital for oil has risen to almost 20% for long-cycle developments, and for renewable power, it's fallen to between 3-5%. That is an extraordinary divergence in the cost of capital, which is what really is leading to this unprecedented shift in capital allocation, where renewable power will be the largest area of energy investment in the world this year for the first time in history.
Here are some charts that stood out from the report:
We are going to need to do $3 trillion in annual infrastructure investments to achieve Net Zero Carbon by 2050, with the peak investment year in 2035 with a focus on power generation:
$56 trillion of cumulative new investment will be needed by 2050.
One of the issues in dealing with carbon emissions is that cost of carbon emissions is wildly different:
That also means that there is a huge cost of capital difference between renewables vs hydrocarbons, implying +$100 oil to get to the IRRs needed for traditional oil’s cost of capital.
Carbon sequestration will be as important as cutting emissions, but some of this technology is still expensive, but has huge CO2 capture potential.
4. For what it’s worth Larry Fink of Blackrock, says the next 1,000 unicorns will be in climate tech.
5. Stripe (the payments company) is getting involved in carbon removal, according to the WSJ, to accelerate what needs to happen.
Have a great week.