The Software of Life, Why Tech is Cheap, How To Negotiate Like A FBI Hostage Negotiator, The Inflation Narrative

June 23, 2021

“When we are no longer able to change a situation, we are challenged to change ourselves.”

- Viktor E. Frankl

“It is better to act and repent than not to act and regret.”

- Niccolo Machiavelli

“Time is a great teacher, but unfortunately it kills all its pupils.”

- Hector Berlioz

“Live as if you were living a second time, and as though you had acted wrongly the first time.”

- Viktor Frankl

“A bird sitting on a tree is never afraid of the branch breaking, because her trust is not on the branch but on it’s own wings. Always believe in yourself.”

- Charlie Wardle

“There ain’t no answer. There ain’t gonna be any answer. There never has been an answer. That’s the answer.”

- Gertrude Stein

“Diplomacy is the art of telling people to go to hell in such a way that they ask for directions.”

- Winston Churchill


A. A Few Things Worth Checking Out:

1. The most mind blowing thing I listened to this week was a Business Breakdown of Moderna: The Software of Life.

They chat to Jason Kelly, CEO of Gingko Bioworks, who gives you a primer on the biotech industry, genetic modification and how Moderna’s platform represents a breakthrough in the industry.

They then have Matthew Harrison, biotech analyst at Morgan Stanley cover the Moderna business model, and what investors and operators can learn from it.

2. My friend Ram at Octahedron Capital was on the Bloomberg Odd Lots podcast discussing: Why the World’s Biggest Tech Stocks are Ridiculously Cheap Right Now and what he’s betting on.

3. One of the continents I have been more active on the investment front is Africa. Many reasons for this, and this Generalist article does a good job covering Tech in Africa.

4. Fascinating article that argues that the brands of the next decade will win with loyalty, not acquisition. Written by someone who has built a large venture funded business based on loyalty. They discuss how any company can build loyalty into its sales and marketing process.

5. What’s the right number of hours to work every day? Wired magazine says it is 5.

6. A great and detailed thread on the Soros & Druckenmiller GBP trade. This is how they really did it.

7. Technology Saves the World - by Marc Andreessen of a16z.

Finally, possibly the most profound technology-driven change of all — geography, and its bearing on how we live and work. For thousands of years, until the time of COVID, the dominant fact of every productive economy has been that people need to live where we work. The best jobs have always been in the bigger cities, where quality of life is inevitably impaired by the practical constraints of colocation and density. This has also meant that governance of bigger cities can be truly terrible, since people have no choice but to live there if they want the good jobs.

What we have learned — what we were forced to learn — during the COVID lockdowns has permanently shattered these assumptions. It turns out many of the best jobs really can be performed from anywhere, through screens and the internet. It turns out people really can live in a smaller city or a small town or in rural nowhere and still be just as productive as if they lived in a tiny one-room walk-up in a big city. It turns out companies really are capable of organizing and sustaining remote work even — perhaps especially — in the most sophisticated and complex fields.

This is, I believe, a permanent civilizational shift. It is perhaps the most important thing that’s happened in my lifetime, a consequence of the internet that’s maybe even more important than the internet. Permanently divorcing physical location from economic opportunity gives us a real shot at radically expanding the number of good jobs in the world while also dramatically improving quality of life for millions, or billions, of people. We may, at long last, shatter the geographic lottery, opening up opportunity to countless people who weren’t lucky enough to be born in the right place. And people are leaping at the opportunities this shift is already creating, moving both homes and jobs at furious rates. It will take years to understand where this leads, but I am extremely optimistic.

8. McKinsey just released its top trends in technology report. They drew on very deep research, looking both at venture financing, patenting and dozens of conversations with technology leaders about where they were placing their bets.

9. Brilliant.org has an amazing idea marketplace and does a nice job visualising ideas.

10. Palantir CEO Alex Karp discusses everything from maintaining Palantir’s engineering culture to their approach to building software of the future.

11. Is Crude Oil the Best Inflation Hedge?

12. These old colorized movies from the earliest days of film are fascinating to watch.

“A collection of high quality remastered prints from the dawn of film taken in Belle Époque-era Paris, France from 1896-1900. Slowed down footage to a natural rate, added in ambiance sound, and colorized. These films were taken by the Lumière company.”


B. How To Negotiate Like A FBI Hostage Negotiator

In Life, everything is a negotiation.

Your Job.

Your Bonus.

Your Promotion.

Your Project.

Your Deadline.

And the negotiation doesn’t stop when you get home either, because life is a just a big negotiation.

But I know I’m usually doing it all wrong.

Couple of signs you’re doing it wrong:

You know exactly what you want and you say it right at the beginning

You think the other party is trying to screw you throughout the negotiation

You have no idea what the other person wants, and don’t think that matters anyway

You want to win the argument more than achieving your goal.

The price of negotiating badly is high.

It means, you’re probably getting paid less than you want, not getting the promotion you are looking for, and not getting your wife to watch the movie you like :-)

I read Chris Voss’ great book, Never Split The Difference a few years back. He spent a lot of time at the FBI, which culminated in him becoming their lead international kidnapping negotiator.

Here are three points on how to become a world class negotiator:

1. BUILD TRUST

The most important part of negotiation is building trust. You can’t let the person you are negotiating with feel threatened. It can’t be you versus them.

That’s never going to work.

Most people who view negotiation as a battle of arguments, become overwhelmed by the voices in their head. They get emotional, they get angry and they get irrational.

Negotiation is not an act of battle it’s a process of discovery.

The goal is to discover as much information as possible. To quiet the voices in your head, make your sole and all-encompassing focus the other person and what they have to say.

With that in mind, remember that when deliberating on a negotiating strategy or approach, people tend to focus all their energies on what they say or do, but it’s how we act and look that is the easiest and most effective thing to focus on.

How we act is so critical, because our brains don’t just process and understand the actions and words of others, but their feelings and intentions too.

The first thing to do when you walk into a negotiation is SMILE.

Smiling puts the other person at ease and puts them in a positive frame of mind, rather than feeling that they are being threatened or attacked.

A positive frame of mind has been scientifically shown to lead people to think more quickly and more likely to collaborate and problem solve with you. Positivity creates mental agility in both you and your counterpart.

Another simple trick for building trust is mirroring — great sales people do it all the time.

Mirroring, is essentially imitation.

It’s a neuro-behaviour displayed when we copy each other to comfort each other. It can be done with speech patterns, body language, vocabulary tempo, and tone of voice.

It’s generally an unconscious behaviour and follows a profound biological principle: We fear what’s different and are drawn to what’s similar. Mirroring is the art of insinuating similarity.

The psychologist Richard Wiseman did an experiment with waiters, to identify what was the most effective method to build a connection with strangers: mirroring or positive reinforcement.

One group of waiters, using positive reinforcements, lavished praise and encouragement in patrons using words such as “great,” “no problem,” and “sure” in response to each order.

The other group of waiters mirrored their customers simply by repeating their orders back to them.

The results were stunning: the average tip of the waiters who mirrored was 70 percent more than of those who used positive reinforcement.

Think about that for a second.

2. LABEL THEM

Most of us enter verbal combat unlikely to persuade anyone of anything because we only care about our own goals and perspective.

But the best negotiators, sales people and leaders are tuned into their audience. They know that if they empathise, they can mould their audience by how they approach and talk to them.

Empathy works wonders in a negotiation, whether with your boss, your girl friend or with someone selling you something. Once they see that you understand them, they will be much more open to listening to you.

Think of labelling as a short cut to intimacy, a time saving emotional hack.

Labelling is a way of validating someone’s emotion by acknowledging it. By giving someone’s emotions a name shows that you identify with how that person feels.

At the beginning of a negotiation with your boss about your bonus, you build trust by smiling and mirroring them, and then you label their emotions by saying something like:

“I’m sure this is probably a pretty stressful time for you and you have a lot to do. You are probably thinking that I am pretty ungrateful for what you already gave me”.

Now be silent and watch what happens.

Highlighting their negative emotions upfront is key because it shows that you understand where they are coming from and diffuses any anger they might be feeling.

In fact you can take this idea further using a system called an accusation audit.

List the worst things that the other party could say about you and say them before the other person can. Because the accusations often sound exaggerated when said aloud, speaking them will encourage the other person to claim that quite the opposite is true.

For example, you could say:

“I’m sure you’re still probably angry about how I screwed up the books in June”, or “I’m still disappointed by how I did in that presentation in August”.

Putting the negatives upfront on your own disarms the situation. Now the other person can’t use them against you and you clearly show that you understand their perspective.

3. GET THEM TO SAY NO

Jim Camp wrote a great book on negotiation called: “Start with NO”.

Most of the time we try to get people to say yes. Yes to more money, yes to a promotion, yes to a deal. But yes makes people unsafe. We’d rather say no. Scientific studies have proven this.

One of the first things to do in a negotiation is to get the other person to feel safe by having them say No.

For example:

“Feels like you thought I did a bad job this year” or “You probably think I didn’t do well this year”.

Most people are going to say “No” to this. And then they will go on to outline why you actually did well this year.

Or more simply, when you call someone, a lot of people say: “Do you have a few minutes?”, whereas it’s better to say: “Is now a bad time.”

Look for the question that allows them to say No.

When negotiating anything, and you hear No, it often means:

I’m not ready to agree yet

I don’t understand

I need more information

I don’t think we can afford it

I want to talk it over with someone

The trick is to train your self to hear “No” as something other than rejection.

A few great questions to ask when someone says “No”:

“What about this doesn’t work for you?” or “What would you need to make it work?”

Negotiation is a high stakes game, so you have to make sure you put the other person at ease. If they get to say “No” upfront, it makes the other party feel safety, security and in control.

When you’re discussing your bonus, rather than being angry, ask a No question. For example:

“Are you trying to tell me to leave the firm?” or “Seems like you guys are trying to push me out of here?” Or when you’re on your 2nd or 3rd interview for a job and want the other party to commit, try asking: “Seems like you guys aren’t sure I’m the right candidate?” or “What about my candidacy for the job aren’t you sure about?”

So there you have it, I hope these three techniques will make your negotiations a lot more successful:

Build Trust — Smile and Mirror there words

Label Them — show empathy by stating how they feel, and put the negatives out there

Get them to say No — Get them to feel safe by being able to say no early on

Here is a Chris Voss MasterClass:


C. The Inflation Narrative

A few weeks ago, we had discussed the Inflation Narrative, at the time I thought there was too much focus on inflation and it was in priced in, in the near term. Since then growth stocks have rallied and US 10-year rates have gone from 1.68% to 1.49%.

Now that pricing has shifted and the FED has shown its hands, it’s important to ask again: How long can we have transitory higher inflation before it becomes anchored in psychology and behaviour?

I think there are at least five questions I’m pondering on inflation.

Here are my questions and concerns:

A. When does transitory inflation become expected inflation? The FED has indicated that they aren’t sure how much of the inflation surge is due to supply chain issues and so they are going to let inflation run a little higher and longer just in case. That’s probably a safe choice, given the COVID recession and unemployment, but for how long do we as workers and consumers need to see 5-6% inflation before that gets anchored in our expectations?

B. It’s not just about goods but labour too. There are a lot of jobs that we just don’t have people for. There are numerous sectors where we have not invested in building out trained labour and we are going to feel bottlenecks - think construction, truck drivers, homebuilders. So wages have to go up. But the problem is that wage structures are more sticky than goods price structures. Humans have memories, goods do not.

Also on the labour front, a lot of it isn’t very mobile nor wants to be. Economist models assume, that labour will move quickly, but in reality labour needs to receive adequate incentives to move from one state to the other and maybe they can adjust their finances in other ways.

C. What is the impact of China on prices? Does China go from exporting deflation to exporting inflation or at best becoming neutral as the society becomes more consumption focused.

D. Years of under-investment across Commodities markets could collide with a drive towards ESG, which on the one hand increases demand for certain commodities, while also potentially limiting capital expenditure for them.

E. How deflationary is technology? and can it continue to keep driving prices lower and push labour costs down?

Where do you come out on the inflation debate?


D. The Crypto Section

Nothing new to add this week, maybe that’s a sign of the bottom!