The Curious Mind: Pippa's Unconventional Insights, Marko on Trump 2.0, China Stimulus Reality, Chris Miller on Chips, How To Read A Book, Code Breaker, Blue Ocean Strategy, What To Expect in Crypto...
November 13, 2024
I am sharing this weekly email with you because I count you in the group of people I learn from and enjoy being around.
What did you enjoy learning this week?
If you missed last week’s discussion: Future of War, Bessent on Markets, Secret of Sales, Experiments = Learning, The New Science of Consciousness, Stuart Russell & Sequoia on AI & Investing, Spatial Intelligence.....
This email takes many hours to put together, including hours of sourcing, curating and writing. If it is helpful to you, then do me a favor and hit the “heart” button so I know it’s useful to you.
Quotes I Am Thinking About:
"The truth knocks on the door and you say, 'Go away, I'm looking for the truth, and so it goes away. Puzzling."
"We're in such a hurry most of the time we never get much chance to talk. The result is a kind of endless day-to-day shallowness, a monotony that leaves a person wondering years later where all the time went and sorry that it's all gone."
"We take a handful of sand from the endless landscape of awareness around us and call that handful of sand the world."
"Sometimes it's a little better to travel than to arrive."
"To live only for some future goal is shallow. It's the sides of the mountain which sustain life, not the top. Here's where things grow."
- Robert Pirsig, Zen and The Art of Motorcycle Maintenance
A. A Few Things Worth Checking Out:
1. Unconventional Insights on US Presidential Election: Whenever I want a differentiated and original take on what’s going in the world I listen to Pippa Malmgren, and she was was on Macro Voices discussing where we go next.
The 5 BIG IDEAS:
A Paradigm Shift Beyond Left vs. Right: The election represents not just a political victory but a fundamental shift from the traditional left-right paradigm to a contest between the old establishment and a new anti-establishment force. This new movement combines elements from both traditional parties and appeals strongly to independent voters who don't fit neatly into old categories.
The Fall of Traditional Media Power: The traditional information gatekeepers are failing. Public polls using outdated methods like landline calls are proving unreliable, while the mainstream media has become less focused on investigative journalism and more on maintaining access to power. This has created a dangerous gap between public perception and reality.
The mainstream media's influence is declining rapidly, having failed to accurately report on or predict major political movements. They're being replaced by alternative media sources and tech platforms, with figures like Jeff Bezos already preparing for this transition by restructuring traditional outlets like The Washington Post.
Health Policy as a Central Issue: Bobby Kennedy's "Make America Healthy Again" (MAHA) movement played a crucial role in the election outcome by highlighting issues with pharmaceutical industry influence, vaccine policies, and food quality. This represented a broader pushback against corporate influence in healthcare policy.
The Rise of Tech Leadership: Silicon Valley leaders are emerging as a new force in politics, bringing their expertise in data and artificial intelligence to potentially transform government operations. This "tech bros" coalition aims to use technology to increase transparency and efficiency in government, marking a significant shift from traditional bureaucratic approaches.
Geopolitical Reset Potential: The election outcome could lead to significant changes in international relations, particularly regarding the Ukraine conflict and relations with Russia and China. There's a suggestion that major powers might prefer negotiation and deal-making over continued conflict, potentially leading to what the interview calls "peace dividends" that could benefit financial markets.
2. Trump 2.0 and What Comes Next: If you are a Marko Papic fan, this is a great podcast with him and Jacob Shapiro titled: Trump 2.0 and What Comes Next.
The 5 BIG IDEAS:
Institutional Challenge vs Economic Reality: The 2024 election represents a critical test for American institutions, coming after Trump's attempts to overturn the 2020 results. However, the election wasn't decided by institutional concerns but by economic ones - voters trusted Trump on the economy despite relatively good macroeconomic indicators. This suggests a fundamental disconnect between economic data and lived experience, particularly around middle-class affordability crises in healthcare, education, and housing.
Shifting From Confrontation to Deal-Making: Trump's likely approach to both domestic and foreign policy may be more transactional and pragmatic than his campaign rhetoric suggests. Rather than pursuing blanket tariffs or confrontational policies, he may seek deals that give him concrete wins - like Chinese factory investments in the US or compromises on Ukraine. This reflects his business background of using aggressive negotiating positions to reach eventual deals.
Political Realignment Reality: The election marked a genuine political realignment, with Trump assembling a multiracial working-class coalition while Democrats increasingly became the party of educated professionals. This isn't just about racial demographics but about a deeper restructuring of American politics around class, education, and cultural lines that transcend traditional political divisions. The Democratic Party's attempt to anoint Harris rather than allow an open primary highlighted their disconnect from this realignment.
Market Constraints on Populism: The bond market's reaction (with yields rising sharply) suggests there will be real constraints on populist policies. Like Bill Clinton having to pivot from populism due to bond market pressure in the 1990s, Trump may be forced to moderate his spending and deficit plans. The market is signaling that unconstrained populism carries real economic risks that could trigger a recession if ignored.
Global Trend Toward Charismatic Authority: Trump's victory reflects a broader global shift from bureaucratic/institutional authority toward charismatic authority - seen in leaders like Modi, Erdogan, and others. While American institutions remain stronger than in many countries, this represents a significant challenge to the post-WWII order built on rules-based institutions rather than personal authority. This shift is happening across the democratic world, suggesting deeper structural causes than just American political dynamics.
3. What’s Next In China?
One of my favorite China analysts Leonid Mironov was on the Market Huddle podcast discussing what’s next in China, we also shared his work in May.
The 5 BIG IDEAS:
China is undergoing a fundamental shift from export-driven growth to domestic demand, with President Xi Jinping actively supporting stock market growth to help channel roughly 80 trillion RMB (about $11 trillion) of domestic savings from bank accounts into equities. This represents a major policy pivot that could drive a sustained bull market.
Xi Jinping's earlier reluctance to provide stimulus was rooted in his determination to clean up the corruption that plagued China's response to the 2008 financial crisis. Having made significant progress in anti-corruption efforts, the government is now more confident in deploying stimulus without the same risks of funds being misappropriated.
While Western investors often focus on foreign investment flows into China, the real story is domestic. The Chinese government is less concerned about attracting foreign capital and more focused on mobilizing the massive pool of domestic savings, which is roughly equivalent to the entire market capitalization of Chinese stocks.
China's electric vehicle industry has established a clear technological and cost advantage globally. Despite some consolidation (from 300 to about 120 companies), successful Chinese EV makers like Li Auto are reaching significant scale, with production volumes approaching established global automakers. The government continues to support this sector through subsidies and infrastructure investment.
China's infrastructure modernization, particularly in power grids and electrification, is outpacing Western nations. This extends beyond just EVs to include sophisticated power delivery systems, transformers, and specialized wiring for data centers and renewable energy, creating investment opportunities in companies that supply this infrastructure buildout.
4. The Future of Semiconductors: Andrew Homan is a Managing Partner at Maverick Silicon and Chris Miller is the author of Chip War. They were both on Invest Like The Best to cover the geopolitical implications of the race for superior chip technology, how venture capital is playing the AI-driven boom in the industry, and where innovation is happening beyond just Nvidia.
The 5 BIG IDEAS:
US Export Controls: The United States' implementation of semiconductor export controls to China represents a delicate balance between restricting access to advanced technology while maintaining global trade relationships. While these controls have successfully limited China's access to cutting-edge AI chips, enforcement challenges and smuggling continue to create vulnerabilities in the system.
China’s Strategic Move: China has responded strategically by investing heavily in legacy chip production, focusing on the lower-end semiconductor market that powers everyday devices. This approach could potentially give China significant leverage over global supply chains, as these basic chips are essential components in everything from dishwashers to automobiles.
Platform Shift: The rise of artificial intelligence represents the biggest shift in computing since mobile phones, driving unprecedented demand for specialized chips. This transition requires massive capital investment - up to $100 billion to train a single AI model by 2026 - which means only the largest technology companies and best-funded startups can compete at the frontier. This dynamic favors established players but also creates opportunities for companies that can reduce these enormous costs.
While current attention focuses on data center chips for training AI models, the next frontier will be edge computing - putting AI capabilities into devices like phones, cars, and industrial equipment. This market is still in its early stages but could eventually be larger than the data center market. Unlike data centers where Nvidia dominates, the edge market remains wide open for new players and approaches.
The industry faces significant technical hurdles around power consumption and memory access speeds. Current AI systems require enormous amounts of electricity, and getting data in and out of processors fast enough has become a bottleneck. Companies that can solve these challenges - through new chip architectures, better memory systems, or more efficient designs - could reshape industry dynamics and capture significant value.
5. How To Read A Book.
A classic. This is a great book to read. While the idea sounds simple, of course we all know how to read, but there is actually a fine art to reading well.
B. Code Breaker
Ever wondered how scientific discoveries occur, do scientists compete or collaborate with each other, what is the big deal about CRISPR and how does Gene Editing work?
Finally finished my first Walter Isaacson book: Code Breaker, about CRISPR and the life of Jennifer Doudna. It helps shed light on these questions.
The book chronicles a pivotal moment in scientific history but also delves into the huge implications of gene-editing technology for humanity's future.
The 4 BIG IDEAS:
The Evolution of Gene Editing: The book traces the development of CRISPR technology, from its origins as a bacterial defense mechanism to its transformation into a precise gene-editing tool. It highlights how scientific progress often builds upon seemingly unrelated discoveries, emphasising the interconnected nature of research. Good video on what is CRISPR and Gene Editing.
Women Pioneers in Science: Through Doudna's journey, the book sheds light on the challenges and triumphs of women in science. It addresses systemic barriers and biases while celebrating the contributions of female scientists who have shaped the field of genetics and molecular biology (for example, did you know Watson and Crick’s work on DNA hugely benefited from the work of Rosalind Franklin, who is rarely mentioned)
The Ethics of Genetic Engineering: CRISPR is already leading to complex ethical dilemmas combined with benefits, such as curing genetic diseases. That section reminded me of Jamie Metzl’s book Hacking Darwin: Genetic Engineering and the Future of Humanity".
Scientific Collaboration and Competition: The book also portrays the dual nature of scientific progress, where collaboration drives innovation, yet competition for recognition and patents can create tension. The race to develop and apply CRISPR technology serves as a microcosm of larger dynamics within the scientific community.
Good Isaacson interview if you’d like a flavour for the book.
C. Blue Ocean Strategy
Finally got around to reading this 2005 classic: Blue Ocean Strategy. It has since sold 4mm copies and has been translated into 49 languages.
Packed with interesting lessons for investors, entrepreneurs and business managers.
The 3 BIG IDEAS:
Create Uncontested Market Space: The core principle of Blue Ocean Strategy is to create new, uncontested market spaces rather than competing in existing, overcrowded Red Oceans. This approach allows businesses to:
Make competition irrelevant by offering unique value propositions
Capture new demand instead of fighting over existing customers
Break away from the traditional competitive mindset
Pursue Value Innovation: Value innovation is a cornerstone of Blue Ocean Strategy, emphasising the joint pursuit of differentiation and low cost by satisfying unmet needs. This concept encourages businesses to:
Offer unprecedented value to customers
Reduce or eliminate factors that the industry traditionally competes on
Create new factors that the industry has never offered
Types of Value Innovation:
Alternative Industries: NetJets seeing that flying was either commercial or private, and creating a blue ocean between those industries of fractional private ownership.
Strategic Groups: Competing in the gym market by not offering a full service gym and competing with others but a stripped down basic one open 24/7 or one that just offers group classes.
Chain of Buyers: Changing who in the chain of buyers you sell your product to, for example Tesla selling D2C versus through a distributor network and building its direct to consumer relationship.
Functional vs Emotional Appeal: Often businesses sell on functional vs emotional appeal, this narrows the market to everyone competing in a similar way. Swatch was early in marketing their watches as fashion statement not time pieces.
Macro and tech trends: Better understanding customer behaviour and where its headed. Apple figured out early that music was going digital but its customers were having to illegally download music online, this led them to be early on iTunes.
Here’s a two min HBR video outlining Blue Ocean Strategy:
How can you pursue Blue Ocean Strategy in your business?
D. The Science and Technology Section:
Lots going on in Technology, but given the election, the big news this week is Crypto and Digital Assets.
On Wednesday, November 6th, the Bitcoin and Ether Spot ETFs saw nearly $675 million of positive inflows. The reason for this volume can be attributed to one thing, the confirmation in the early hours of Wednesday morning that Donald Trump was elected, once again, to be President of the United States.
Donald Trump was the clear leader amongst the candidates for setting a pro-blockchain/digital assets agenda, and the ripple effects of that agenda potentially coming to fruition are staggering.
Even before the election, the industry was trending in the right direction. Digital asset adoption rose to over 40% of the U.S. population, nearly 93 million people, in 2024. Leading up to the election, polls showed that 1-in-7 voters viewed digital assets as important to them when casting their ballots.
What Could Change Politically:
The SEC: Gary Gensler may no longer be the Chairperson of the SEC. While he has the option to stay on as a Commissioner, Trump has already stated that he will remove him as chairperson. With a more blockchain friendly chair, the SEC will not be as antagonistic to the industry and the regulation by enforcement strategy will dwindle.
The CFTC: While the CFTC has been more crypto friendly under Biden than the SEC has, there is a common belief that Trump will remove the current chair and replace him with a republican appointee.
Treasury, OCC, FDIC, and DOJ: have all viewed blockchain negatively during the Biden administration. Under Trump’s stated mission to make the U.S. the crypto capital of the world, it must be assumed that each of these agencies will be filled by pro-blockchain, pro-digital assets individuals.
Senate Banking Committee: With the changeover in majority to republicans in the Senate, there will be new leadership on each committee. Senator Tim Scott is set to become the majority leader of Senate Banking, and he is a staunch ally of the industry.
What To Expect:
The BITCOIN Act: This is Senator Lummis’ bill to create a Bitcoin strategic reserve that will be heavily invest in Bitcoin to take advantage of its future gains in order to pay off the debt. There will be much to work out with this bill, but strong enthusiasm exists among Republicans to find a path forward.
IRS SAB 121: How Digital Assets are treated on corporate balance sheets.
Stablecoins: Could be one of the first bills to pace and help blockchain innovation and web3 commerce.
P.S. Could you do me a favor ? This email takes many hours to put together, including hours of sourcing, curating and writing. If it is helpful to you, then do me a favor and hit the “heart” button so I know it’s useful to you.
Wishing you a good and beautiful life.
“ When you think you are too old to do something new, remember you will never be younger than you are right now.”
- James Clear
