"Not Even Wrong" Podcast
Investing in fundamentally new concepts and engineering practices with large impact.
What went wrong this year? What were the sings? Inflation. Why? 1/2 Workers want more flexibility which means less productivity. 2/2 Shift towards totalitarian thought across the world. Less freedom means higher risk of even more suppression. Stakeholder capitalism is Bolshevism in disguise. Ownership capitalism is only driver of wealth. Wealth creation is best way to increase freedom.
Tesla first Semi delivery reminds us of the disruptive nature of Tesla. Average estimated savings per truck around 500k. Fuel and maintenance. Expand market. Take share from rail. High margins. Same with Cybertruck. High potential for disruption.
Competitive advantage comes from culture of iteration, culture of not making mistakes (=science and technology focused) and culture of reducing cost of error correction. Culture = people. Natural Sharpe Ratio is driver of wealth creation.
Why is the Fed raising rates now? Because the Fed balance sheet is meant for Wall Street not Main Street. As long as printing money is helping prop up Wall Street, ok. In last two years Fed balance sheet was used to prop up Main Street. Not OK. Now Fed has to stop. Sharing power is not in the interest of Wall Street/DC decision makers. Power over money allocation is not meant to be shared with public. Occupy Wall Street turned into occupy Main Street.
What’s the purpose of a company? Reaction to conversation on Capital Isn’t podcast about book “Woke, Inc.” by Vivek Ramaswamy. Companies deserve limited liability if they do something risky, which is they try fundamentally new concepts and engineering practices to increase value to costumers at lower cost. Yardstick is profit under constraint of R&D expenses. Interestingly most companies associated with crony capitalism spend zero $$ on R&D. Those companies should be treated differently. Woke Inc. is a form of mission creep. It’s dangerous.
Book discussion "Blood Meridian or the Evening Redness of the West". Existentialist. Men in nature, man is nature and nature is men. "War was there before men and found its ultimate practitioner." Purpose is nature + imagination. Conjecture ads to the existentialist and makes him human.
The history of Tesla dying. 1/2 When Model 3 was delayed. Stock dropped 60% from highs. Recovery driven by solving Model 3 manufacturing problems. 2/2 Musk in trouble with SEC following failed attempt to take Tesla private. Selloff 40%. Today stock underperforming due to 1/2 Twitter distraction and 2/2 China risk. Fundamentals good. Stock still not value territory. EPS 3.3, PE 35ish, Stock 120 Value territory = 25% downside.
Rational Choice theory is a good approach to decision making because it allows for parsimonious modeling of complex systems. Refuting it because of behavioral biases (Kahneman/Tversky) is wrong because it doesn't alter the usefulness of rational choice theory. In fact, it augments it. Quiet frankly the so called "behavioral approach to decision making hasn't yielded much useful innovations in decision theory. To the contrary, It made the field more politically charged which is unfortunate. We suggest adding Popperian iterative conjecture to rational choice theory. In other words, it's no just about how we make decisions but also about how we "guess" which is at the core of science and knowledge creation.
Proposal for Twitter. Goal is to develop a decentralized validation platform for tweets. It's not about Free Speech. Free Speech is not a good problem to solve because it's not clear what it actually is. Decentralized validation is good problem because it's clear = find a way to decide in a decentralized manner. Various solutions for decentralized decision making have been developed over time. 1/5 Financial Markets 2/5 Scientific Process 3/5 Democratic Vote 4/5 Bitcoin Protocol 5/5 GitHub Consensus. Blockchain approach: Tweet is posted and validated to be added to block then block gets added to Blockchain. Twitter issues native token or uses Bitcoin through lightning network to incentivize validations. Financial markets approach: Tweets carry value and gain value based on usage, retweets etc. tweets can be shorted, so that bad tweets loose value and get marginalized. Fundamentals of validation network are 1/3 skin in the game, ie validators gain value if tweets proliferate through network and loose value if tweets don't get validated or get marginalized once posted to the network. 2/3 Blockchain is decentralized database where tweets are stored 3/3 legal and moral issues are outsourced to authorities by solving for identity. For example if a tweet is considered illegal, warrant is issued by judge, Twitter assists police and perpetrator is subject to legal persecution.
Exiting TWST. Why? Cost growing higher than sales. Subsidizing sales with high sales and marketing expenses is not a business we want to be invested in. If you don’t know where the profits come from, then maybe you are the profit. Always remember that.
If you don’t understand where the profit comes from, then maybe you are the profit. Investors need to understand where and how companies make money. If they don't, then maybe the only money made is investors financing lavish lifestyles for entrepreneurs and managers. Investing = investing in profits.