"Not Even Wrong" Podcast
Investing in fundamentally new concepts and engineering practices with large impact.
Tesla numbers in China look soft. It’s not because Tesla is weak, it’s because the Chinese economy is weakening. Why is the Chinese economy weakening? Pandemic stress and central government clamp down.
Tesla AI day is in fact a targeted recruiting event. No invitation for investors or press. That’s a good thing. Tesla is iterating on the human resource problem. How to combine technical expertise with culture of risk? The answer is through iteration.
Disruptive technological change is the new macro. Three trends 1/3 computer vision and robotics 2/3 programmable life sciences with Crispr and mRNA and 3/3 blockchain tech and smart contracts lead to internet with identity.
mRNA in conjunction with Crispr delivered through liquid nanoparticles. Double programmable. mRNA encodes for Cas9 enzyme and Cas9 does the work in the genome. In future other enzymes can be delivered. Moderna most likely bid for Intellia or other Crispr stock. We prefer standalone. More value.
Intellia and Editas lead Crispr sector. Strong performance. In vivo delivery technology proof of concept.Shows efficiency and efficacy.
Some things are time reversible and some are not. How come? The more creativity the less time reversible. The more creativity the more potential for wealth creation. Hence, time irreversible processes in business are potential wealth creators. In other words, the more creativity a business has, the less predictable is the future from the past and the higher the change of wealth creation.
Book discussion “Beach Read” by Emily Henry. Dichotomy between frontal cortex thinking and emotional thinking. Writers block and what is creativity? More potential outcomes mean more potential for creativity.
Our investment in Caribou Biosciences. Alpha Fold open sources protein folding database for general research. Small step but huge impact on the ark to engineering life sciences. One of two central themes of our fund.
Three big drivers of our portfolio are 1/3 Computer vision applied to self driving 2/3 In Vivo Crispr cell therapy and 3/3 Allogenic cell therapy through genetic engineering. All areas where founders took big bet on a certain tech and then built innovation stack around it. Why aligning investments with our mission is key.
Investment in Caribou Biosciences. Founded by pioneers in Crispr tech with new guide application combining RNA and DNA. More efficacy, efficiency and lower cost through multiplexing. Allogenic cell engineering applied to cancer immunotherapy.
Early stage VC or publicly listened companies? Where should we invest in to achieve our purpose? Best place for value creation are public companies with strong tech, purpose and founder type culture. Derisking entrepreneurs is an oxymoron.
Discussing conversation between Elon Musk, Jack Dorsey and Cathy Wood about Bitcoin. Main purpose of money is as information tool for labor allocation. In other words, it decides what people should work on. That’s why money should be decentralized so it can help increase freedom. Freedom is necessary to create wealth and wealth is created by freedom. It goes both ways.
Tesla earnings call. 1/5 company fundamentals are great. 2/5 demand strong. 3/5 chip shortage still problem. 4/5 FSD not solved yet and therefore not contributing more to valuation. 5/5 same for 4680 battery.
Netflix is not interesting to us. Why? Because they’re focusing on easier problems and not solving the hard ones.
Interpretation of quantum theory and why quantum computing is interesting. What we consider reality is a small part of what's really out there. Lots of shadow particles in parallel universes make up the rest. Involving those particles in other universes enables novel forms of computation. That's what we call quantum computing. In order to do achieve quantum computation we need to find substrates that interact with parallel universes in a controlled manner. That is what we call a quantum computer.
Talent identification and development in business and sports. Goal is to find optimal point between creativity, try/error and performance. Mindset is the weapon.
What exactly is the potential of blockchain technologies? Become a global register for what is true. Base for smart contracts to interact with each other on the basis of what facts are established within the blockchain. This opens up enormous opportunities. No government official or bureaucrat can interfere with facts.
Podcast discussion Matanya Horowitz, CEO AMP robotics on Robot Brains. Applying Computer Vision to solve sorting problem in the recycling industry. Great example of a company doubling down on vision as key to solve real world problems and evolve AI around it.
Podcast discussion “Embodied intelligence” by Fei Fei Li interviewed on A16Z. Research about embodiment of intelligence shows that meta learning is important. In other words learn how to learn is as important as learning. Learning that enables future learning with little energy consumption is preferred. We strongly believe that AI will be driven by embodied intelligence such as self driving cars.
Book discussion “Leading” by Alex Ferguson. Key to successful leaders is convolution of unique personal style and external technological and cultural developments. In Ferguson’s case it’s his focus on specific skills of players matching his style of football.This coincided with the opening of UK borders for foreign players. Comparison with Ulysses Grant, who’s success is based on personal style and external developments such as telegraph and railway.
Three areas of focus 1/3 Computer vision 2/3 Crispr and 3/3 Blockchain. Space interesting.
Decline of yield in 10 year treasury spooked markets. Good for growth, bad for value. Reversal of March-May trade.
Science is the relentless pursuit of error correction to find better explanations. The purpose of science is to sustain humanity in the pursuit of liberty.
Discussing two recent podcast interviews. 1/2 Missy Cummings criticizes Tesla FSD effort. In particular the omission of radar. This is bad coming from a professor of Engineering. Vanity and ego also show in the second discussion 2/2 about A16Z and the launch of “Future”.
Rotation back to innovation stocks. Copper market started to stagnate in early May which is when growth rotation started. Inflationary pressures are transitory in nature. Three big drivers of disruption and disinflation are 1/3 Computer Vision 2/3 Crispr and digitization of life sciences and 3/3 Blockchain technology and decentralization of services.
Inflation risk? Three factors 1/3 transitory adjustment of supply chains 2/3 deterioration of government and 3/3 rapid innovation. 2 and 3 are opposite forces and innovation will keep inflation moderate.
30% skills, 40% mindset and 30% people. The three key variables in anybodies success history. Focus on skill development and mindset as a weapon. Finally, make sure you surround yourself with the right people.
Why have traditional money managers such as Buffett underperformed since 2009? Money printing by the Fed is the usual answer. But it’s not the whole story. Society has become more vulgar. Social media took off the filters. Vulgar as in “Establishment wouldn’t accept it”. This is showing in the influencer industry, music industry as well as financial markets. Tesla, Amazon and Facebook are vulgar stocks.
US Soccer should stop trying to emulate Europe and create its own culture. This would bring three benefits. 1/3 Kids would embrace the sport in larger numbers 2/3 People would watch local teams much more and 3/3 The level would go up and the National team win international trophies.
How to engineer a career that delivers what you wish while navigating all the incentives life throws at you. Focus on skill building with high compound rate of return. Stay away from short-term gratification.
How to find consensus? In science it’s through peer review which is kind of like proof of work. In the hedge fund business it’s more like proof of stake. You put your money where your mouth is. The more iteration the more solid the consensus.
Anything worth doing is supposed to be hard. Professional athlete or a hedge fund manager. These careers are full of crossroads where the right way to take is usually the harder way. It’s a step into the void with high positive outcomes, lots of uncertainty and potential losses. Zero to One case in point.
No design rules in financial markets. From elementary particles such as capital and companies to the only law, which is “no-arbitrage” complex systems arise. One of them is wealth creation. We use our principle stack to achieve that goal.
Algorithmic trading is like the paper clips economy with small upside and large downside. Technology in financial markets is determined by the time horizon. In the millisecond space AI can make a difference. In the 5-10 year space not so much, yet.
What can be copied can be measured and vice versa. If you can value a stock with high confidence the company can be copied easily and loose value due to competition. High volatility is a signal for hard to measure, which under certain circumstances means the company is hard to copy, has a legal monopoly and will generate wealth.
Discussion Simon Knowles from Graphcore. Trifecta of AI. 1/3 Compute 2/3 Memory 3/3 Low power budget. Human brain has lots of counterfactuals, ie lots of information and found way to coordinate efficiently. The solution for AI is in coordination.
US soccer is a good example of how culture is key to performance. The US is trying to mimic Europe instead of implementing its own soccer culture. Unique American attributes such as specialization, focus on specific tasks with highly specific outmodes like in American Football would be a great enhancement for soccer. It would also help propel US soccer to a real American social phenomenon. Instead US soccer is trying to copy European culture.
Tesla getting rid of radar is great decision. Constrained AI opens new pathways for development. Better than sensor fusion which is a relict from the premature DARPA effort to develop self driving cars prior to Image Net breakthrough in 2012.
Bitcoin and no design rules. The protocol has no implicit design that makes it use less energy or greener energy. Best for Bitcoin is to not tinker with that. Other protocols like Ethereum are better suited for fine tuning and designing an infrastructure for the global financial system. Bitcoin is good for store of value and should stay that way.
Book discussion “The science of can and can’t”. Counterfactuals are key to physics, science and investing. What is possible could happen. Tesla has plenty of counterfactuals and therefore lots of upside.
Is investing harder or easier than before? Does technology help the investment process? Investing is getting harder and harder because technology makes it more of a creative endeavor. But that also opens up the possibility of much higher returns. New modes of explaining higher returns. Lower cost of iteration.
Book Discussion, “The Socratic Dialogues by Plato”. The basis of Western thought is logic reasoning. Shortcomings are Wittgensteinsim and Goedel’s inconsistency. Wittgensteinism refers to the problem of sharp definitions in language and Goedel to the impossibility of defining something from within. Solution is Popper, Deutsch and finding explanations that actually help us solve problems.
Elon Musk skirmish with Bitcoin is good for Tesla and Bitcoin. For Bitcoin to penetrate global finance two problems have to be solved. 1/2 China hash rate concentration and 2/2 energy footprint. Musk can accelerate both transitions.
You’re at a crossroads of continuing mediocrity with sure but unhappy outcomes or you take the path with void, risk and upside. Zero to One says only the latter create wealth and greatness.
What are the kids doing? The youth is often regarded as misplaced and not relevant but eventually the youth becomes the establishment and decides what is actually relevant. Therefore what young people are doing is a good indicator for future developments.
John Danaher reflections. Train to take risk and play to win. Learn how to get out of compromising situations. That way you are sure not be compromised.
Reaction to Niall Ferguson conversation with Sean Carroll. 1/4 History is driven by networks not hierarchical powers. 2/4 History is recorded by hierarchical powers because networks don’t usually keep records. 3/4 We are all paranoid about something. In the US it’s about individual freedom. 4/4 Adaptive organizations are much more useful than hierarchical institutions.
Book discussion Olga Tokarczuk “Flights”. Position and momentum are the underlying variables that describe any system, quantum or human. Olga uses these concepts of physics to draw a line through a number of fragmented narratives. I dropped the book after 2/3 because the narrative doesn’t engage and lacks purpose.
Investing is not about prediction. It’s about explanations. We build our explanations on a principle stack. Investing without explanations is like science that just predicts and has no explanatory power. Useless.
Deep dive into our biotech positions. Digitizing life sciences means creating general explanations for how biology works and developing engineering methods to solve problems. Genome editing is at the core of this technology.
You are what you look at. Present day activities define who you are going to be in the future. Time ticks in a linear fashion. But in the hedge fund business it’s not. Returns are driven by events that happen simultaneously even though they might not have a causal relationship at start. Synchronicity.
What is the trust issue you're solving? This is the question defining leading companies in the coming decade. The combination of blockchain technology and data allows algorithmic execution of smart contracts. Example: Tesla auto insurance can become a global provider of car insurance driven by data and blockchain consensus.
Stick to your guns. Trey Lance shows how determination and clarity of what you are and what you are not gets you eventually to the right place. What works for the NFL works for Hedge Funds, too.
Gustav Klimt and Elon Musk. Both design a new area, one as an artist, the other as entrepreneur and engineer. We expect sensitivities in the art community to reflect the social and economic change that Elon Musk is driving with his companies.
Tesla profitability. Operating income is not what matters. What matters is gross margin and free cash flow and growth. This trifecta is a numerical manifestation of disruption.
Tesla Earnings. 1/5 Model S,X coming one quarter later. 2/5 Cybertruck next year, 3/5 Model S,X volume more than100k , 4/5 distributed solar, 5/5neural network compute and DOJO.
Book discussion “ A Good Neighborhood” Therese Anne Fowler. Justice can deliver kafkaesque irritation and lead to bad and unfair outcomes. Racial injustice in the US bears this risk. The first step is to start a conversation.
Good and bad competition? There is only good competition. Either competition makes you better or it shows your ceiling.
Capital gains tax is punishing capital formation. It doesn’t hurt the rich but all those who need capital to get rich. It’s directly opposing upward mobility.
Tesla apologizes to customers in China. 3 thoughts. 1/3 apology has different character in China. 2/3 Tesla is global brand with homegrown feel. 3/3 Iteration.
Thoughts on leverage? When people invest more than they can chew. In fact, it’s investing without skin in the game. Leverage distorts behavior to the worse. It is a game of chairs. The last one left hanging with leverage is screwed. Everybody else gets away with it.
The mother of wrong timing. Bought Crypto hours before flash crash. Principles are not time sensitive, but it still hurts.
Getting direct exposure thourgh investing in blockchain protocols is a fundamentally new way of wealth generation. Participation in protocols enables network effects with orders of magnitude since value can be generated on top of the protocols. We invest in ETH and ALGO.
Tesla competition from legacy automakers heating up. Copying is not competing. Tesla keeps lead. Eventually differentiating factor will be rate of innovation, not which car at what spec. Tesla narrative will evolve from auto to energy ecosystem.
Blockchain technology highlights the value of network effects squared. First order network effect is when value of network goes up with each individual participant. Second order network effect is when businesses are built on top of network and the underlying protocol benefits. Tesla, Twist Tx and Fate Tx have similar characteristics.
Thoughts on Coinbase, ETH and ALGO. Particularly excited about potential of tokens to grow with protocol adoption.
Coinbase IPO. Building innovation stack. High fees, competition looming. We’re not investing. We are buying ETH and ALGO.
Bitcoin is Jesus, Ethereum is Milton Friedman and Algorand is Leonardo DaVinci trying to bring an elegant solution to a messy problem. The ultimate question about blockchain technology is who's got the power and who's gonna get more of it.
Conversation with Silvio Micali, founder of Algorand. Solving for trilemma in Blockchain tech. How to combine decentralization, security and scalability. Algorand is a protocol that solves for this trilemma. Micali envisions a future with decentralized smart contracts and an economy with lower transaction cost, speed, trust and identity solved for.
Discussion Yann LeCun at Peter Abbeel’s Robot Brains podcast. Video is harder to predict than text. That’s why AI has made more advances in text. Musk was too optimistic about advances in AI when fearing dangers of AI. When applying AI to physics much more difficult.
Book discussion Janelle Brown, “Watch me Disappear”. Love is a process. The main character of this book works himself through emotions to finally end up in a better place. So does his daughter. Love, like everything else, is subject to iteration, improvement, adaptation and conclusion. Never assume you know what’s really going on. The novel is full of suspense and never lets loose.
Tesla Apple deal would be great, benefits companies and customers. Tesla brings manufacturing and AI, Apple brings consumer facing UX expertise.
Conversation with Phnam Bagley, space architect. Key challenges of space exploration from human perspective are gravity and radiation. Space exploration is a key driver of wealth generation in this decade.
Why we don't invest in nuclear but like distributed solar. Wealth creation is progress under certain conditions. New concepts and engineering practices should contribute to more optionality, more decentralized decision making and lower the cost of iteration. In short, they should help society become more popperian.
4 paths to wealth creation. 1/4 Computer Vision 2/4 Crispr tech and digitizing life sciences 3/4 Blockchain tech and solving for trust and identity on the internet 4/4 Space exportation with disruption in space and on earth.
Discussing ARK Invest's new space exploration fund. The holdings are more about terrestrial businesses that will benefit from a disruption of space exploration. In particular names like Deere or JD.com will benefit from cheaper access to the internet in rural areas, wich is a likely benefit of disruptive space exploration due to cheaper and faster satellite deployment.
We don’t iterate, we let the companies iterate. The feedback loop between operation space and finance space is too long, so we choose not to iterate and let the companies iterate. Ultimately iterate and debug is the process of generating wealth. We let the iteration happen in operation space. Traditional hedge funds trade a lot because they choose to iterate.
Elon Musk and reality distortion field. He doesn't want people to drive because he already sees a future of full self driving. Example new Model S Plaid. Controversy over Edmunds range estimates. Our take; it's not about range it's about how do I get from A to B. Tesla has the network and the software to solve that problem best.
Two current drivers of Tesla stock. 1/2 New type of competition. The likes of VW or Ford have caught up with narratives, not the products. 2/2 FSD functionality and ability to monetize.
Quantum Supremacy, Crypto Supremacy, Software 2.0 supremacy. With new technology new problems arise and new set of solutions to new problems are possible. Investing typically discards this potential. That's precisely what Monte Carlo simulation is trying to overcome.
Discussion Andrej Karpathy, director of AI at Tesla. Three take aways. 1/3 Software 2.0 where data curator is programmer, the algorithm is compiler and output is prediction. 2/3 Low cost hardware, commodity software and continuous integration lowers cost and enables scaling and 3/3 AI center at Tesla. Tesla is a lot more like Google than Apple or Amazon.
Space X solves bit switch problem by using low cost hardware, off the shelf software and general engineering talent as opposed to bespoke solution used in the legacy Space industry. Good example of how Musk is attacking problems with low cost software driven solution. Also using continuous integration or iterate and debug culture.
Literature is a technology to condition our mind. Angus Fletcher talks about the function of narratives to help us with emotions, empathy, fear and courage. Literature is way more than entertainment. Like STEM it offers directly applicable skills.
Conversation Eric Berger, author of “Liftoff”, the early story of SpaceX. Musk sometimes jumps the gun, blames and then debugs. Many characters span the story, but Musk weaves them all together. What SpaceX is doing is nothing short of amazing, unheard of in the Space industry. Quality, Low Cost and Speed. This trifecta is pushing SpaceX ahead of competition and even status competition.
European Emissions Trading System, ETS, shows higher prices for CO2 emissions. Supply of ETS is political, hence not a good investment. But great indicator for rising value of anti pollution products. Tesla's mission is decarbonizing energy and transport, so directly correlated with ETS prices.
Book discussion, Eric Berger “Liftoff”. The early days of Space X. Key takeaway from the book is that Musk can do high quality, low cost and iteration at speed. Industrials have not evolved to do that. Musk is doing it.
Architecture space and technology space eventually overlap.In technology space we have blockchain, smart contracts enabling decentralized society. Also, Tesla enabling decentralized energy and transportation infrastructure build out. Architecture will reflect those technological disruptions with decentralized adaptive communities with new decarbonized energy and transportation solutions.
Architecture is a visual manifestation of current culture. Offers clues for future. Vienna in 1850 was at crossroads between modern law driven economy and absolute monarchy. City builds on the one hand monumental buildings (old) and lavish apartments for new class of lawyers and financiers. Today we are witnessing similar shift in society towards decentralized, individualized wealth creation driven by smart contracts. Mobility is key and Tesla offers lower cost,, more convenience and carbon free mobility.
Macro conventional wisdom. The dollar is doomed because of high US government debt. Two scenarios. 1/2 The call is right and we have massive asset inflation and USD debase. 2/2 The call is wrong and we have large deflationary pressures due to 4 disruptive innovations causing wealth generation and higher standards of living. USD supply cannot catch up with wealth creation. We're fine in both macro scenarios.
VW presents battery road map. Copy of Tesla with some twists. Pros of copying Tesla: 1/2 First follower 2/2 Pick up share from other OEMs. Cons 1/3 Can they actually do it? 2/3 In order to fight Tesla you need to apply Tesla method, i.e Iterate and Debug 3/3 Validating Tesla.
Book discussion "No Rules Rules" by Reed Hastings. The culture of Netflix is the key competitive advantage. 1/3 Talent density, 2/3 Relentless feedback and 3/3 Tree structure vs. pyramid. This book is fundamental. We see it as a continuum of "The Beginning of Infinity"by David Deutsch.
Building a Software company requires CEOs to run their firms like a software project. "Iterate and debug". Competing with Tesla means "iterate and debug". Another requirement is to step into "reality distortion field". That's what it takes to not be crushed by Tesla.
Elon Musk gets trolled by VW CEO Herbert Diess and recently even by Ford. The empires are striking back. Elon has always been a wartime CEO. He needs to take these trolls seriously. Fighting back and killing competition is key to Tesla's mission. Accelerating advent of sustainable transport can only happen if Tesla leads the way with very high market share.
Anatomy of investing. 1/3 Fundamentally new technology 2/3 Build a stack on top of that technology 2/3 Entrepreneur can turn this stack into a wealth generating business. Examples Lithium Ion (Tesla), Computer Vision (Tesla), Crispr (Crispr Tx, Beam, Twist), Blockchain (Coinbase, Twitter, Square), Quantum Computation (....?).
Coinbase IPO. Very interesting because first listed company with direct exposure to cryptocurrencies and smart contracts via Ethereum. This is the Ebay of crypto. Ebay was the first native internet IPO since the business of Ebay was only possible on the internet. We expect a boom in crypto IPOs this year and Coinbase to be the leader.
When things are bad, remind ourself why you're in this. 1/3 Wealth through fundamentally new concepts and engineering practices. 2/3 Tesla and digitizing life sciences through Crispr technology, synthetic biology and cell therapy. 3/3 Building innovation stack creates competitive strength.
Book discussion "Livewired" by David Eagleman. Neuroplasticity of the brain allows for adaptive behavior of neurons. Competition between neurons driven by environmental signals. Organisms adapt by rearranging resources according to environmental signals. So does the human brain and body. Inspiration for adaptive behavior in human societies, namely the decentralized planning and development of energy infrastructure as made possible by Ethereum smart contracts.
Goodhart's law in financial markets. When algos start manipulating variables that they use for prediction. This might be happening right now. Attack on ARK could be unintended algo move. ARK put themselves in this position. Unforced error. Tesla and genomics stocks are affected.
Is there an attack on ARK Invest? The ARK ETFs are too big for the underlying stocks they hold. This makes the Fund vulnerable to gamma squeeze attacks. While ARKs research and portfolio selection is top notch, the trading and marketing practice is less so. The current volatile environment with rising interest rates increases the risk on attacks on the ARK Funds.
How to be flexible and adaptive in the market and still maintain integrity? Build your strategy on a solid foundation of principles and then morph with the environment. This is kind of how the brain works. "Livewired" by David Eagleman.
Two advantages active managers have versus algorithmic traders and risk parity funds. 1/2 Use judgement to assess fundamentally new concepts and engineering practices, which by definition is data not available in financial markets. 2/2 Adjust cost structure of fund to reflect idiosyncratic value generation by disruptive businesses.
Treasury market turmoil is caused by plumbing issues in the treasury market. Discussing podcast "Macro Musings" episode with Pat Parkinson. There are too many treasury securities going through the system and brokers cannot take that much paper due to balance sheet constraints. This is reminiscent of March 2020. However, there is a deeper problem in the financial markets caused by too much borrowing and repoing by hedge funds.
Value investing is a concept with constraints. One is, you only invest in companies with predictable cash flows. The second is, you want the intrinsic value to be above market value. This implies that humans are better at judging future cash flows than the market. It also makes it impossible to invest in companies with non linear cash flows and rapid growth in outer years. Both constraints are limits to wealth creation.
Podcast discussion. Bio Eats World by a16z, conversation between Vijay Pande and Jeniffer Doudna. Two key take aways. Doudna says that delivery is still unsolved in Crispr tech. Pande says, focussing on regenerative solutions where biology follows biology to solve problems in areas like health, energy or material science.Two new focus areas. Quantum computing and blockchain technology.
Blockchain technology is the building block of internet 2.0 with trust and identity embedded in underlying protocols of the network. Today Christie's is auctioning a piece of digital art that is tied to an NFT, a non fungible token. That is a smart contract within the Etherum blockchain network that proves uniqueness, proof of origin and identity. Great example of application of smart contract within decentralized trust network that offers real value to real world users. Identity + Trust = Internet 2.0
Largest drawdown in history of fund. Bond market jitters create havoc. We attribute the bond selloff to mal functioning of the primary dealer treasury market. It will be fixed. That's a good thing. Short term volatility is to be expected. Our goal is to hold as many shares of our portfolio companies a possible.
The ARK Invest effect. One player with too much marketing and leverage over stocks. It's a nuisance. You never walk alone, or in more formal terms, the Modigliani–Miller theorem states that the volatility of a stock eventually depends on the behavior of investors, not the company and not the capital structure of the company. We certainly feel that with Tesla and the Crispr stocks. Should we adapt our mission statement to reflect opportunities in macro?
Podcast discussion Michael Levin at Sean Carroll's Mindscape. Living organisms are a collection of information processing individual agents with individual goal seeking autonomy. They are orchestrated by top down bioelectric signaling. What is a robot? What is a machine? What is a machine equipped with human brain cells? When new innovations take hold we lack words to describe. Same applies to Crispr and Tesla.
Large drawdown. Growth stocks yield do oil stocks. Steeper US yield curve signals recovery. Focus shifts from PE to E. Long USD against emerging markets currencies. Fed is being tested by markets, how much inflation will they really tolerate?
We decided to work on a new investment theme. Etherum protocol as base for a new kind of social internet with identity and trust embedded in the protocol and getting better with usage. Applications in finance and accreditation in education come to mind, since identity and trust are key. This is internet 2.0 with Etherum as base protocol.
Book discussion "Brave New World" by Aldous Huxley. Contrast with Orwell's 1984. Both books paint a dystopian picture of society. Huxley's description of a monopolistic scientific dictatorship forging consumerism and addiction to instant gratification and psychedelics is closer to today's reality. But both authors miss the mark. They neglect the pursuit of knowledge and creativity inherent in Western society and the innate rebellion against authority.
The anatomy of disruption. Pacific Bioscience and Twist Bioscience. Create new markets where there is no demand yet, because the markets don't even exist. Then grow and conquer existing markets. Long-read genome sequencing in case of PacBio and antibody engineering at scale for Twist.
Book discussion. "Something Deeply Hidden" by Sean Carroll. The key insight is that reality can be derived from the theory of quantum mechanics. If you stick with the Schroedinger equation and its predictions you can derive things like spacetime, space and super position. The key is to follow the theory and not fit the theory to what we perceive. This is first principles thinking from a first principles kind of guy.
If you wrote a software to create a company that maximizes wealth, would you include the financial markets as a relevant variable? No. Capital is part of the supply chain, like steal, labor or electricity. Investors, like other suppliers, grow with the company at the rate of compound real sales growth, that is, sales growth minus inflation.
Principles are most useful when they are easiest to ignore. This is our answer to why we did not invest in BTC, even though there was money to be made. We stick to our principle stack by investing in companies that apply fundamentally new concepts and engineering practices with large impact. BTC does not fit that.
Rapid innovation depends on the cost of iteration. The lower the cost of iteration, the faster companies can innovate. Tesla is iterating on FSP MIC Battery and jeopardizing its European brand value. Cost of iteration depends on competitive pressure. The more competition the higher the cost of iteration. That's why Tesla has to ward off competition.
Rapid innovation depends on the cost of iteration. The lower the cost of iteration, the faster companies can innovate. Tesla is iterating on FSP MIC Battery and jeopardizing its European brand value. Cost of iteration depends on competitive pressure. The more competition the higher the cost of iteration. That's why Tesla has to ward off competition.
How to organize a company to optimize for wealth generation? 1/3 Build an innovation stack to enable compound knowledge and rapid iteration 2/3 Decentralize problem solving to the most relevant levels of the organization and 3/3 Formulate a relevant and exciting mission with large impact.
Tesla update. Discussing questions on 1/5 What does it mean to reach industry leading margins, which industry? 2/5 What are you doing about Chinese competition 3/5 What does it mean to "get solar cost structure right" 4/5 Is Quantumscape a threat and 5/5 How will you transition into the 4680 architecture?
Accion Systems applies fundamentally new concepts and engineering practices in space propulsion. They're building an innovations stack that could one day lead to Mars. This kind of impact and potential wealth generation matches our purpose.
New ideas in space and quantum computing. We are looking for the convergence of academic achievements, advances in engineering and entrepreneurial ingenuity. Example Accion Systems in the area of space mobility. Carbon sequestration for oxygen production in space.
Elon Musk appearance @Clubhouse was shallow. Three questions we'd like to ask next time 1/3 Why is Space X not going public 2/3 What are you going to do about Chinese EV disruptors and 3/3 Why do you let VW CEO troll you and spread misleading information about EV sales in Europe? Get a degree in material science.
Book discussion "My Year of Rest and Relaxation" by Ottessa Moshfegh. A novel about existential forces driving humans towards purpose or death. Witty, creative and fun. Ottessa is a verbal Black Belt JiuJitsu.
Social train wreck $GME. Algorithmically driven behavior in financial markets coupled with archaic short selling rules and eat or be eaten behavior by hedge funds and/or market makers result in bad pricing. This is just another evolution of algorithmic trading. The results are distorted short term pricing and volume information in equity markets.
Markets are in turmoil due to technical difficulties in the retail brokerage sector. The problem is leverage. It will wash out and create volatility. Our portfolio companies have strong fundamentals. Key in times like this is to manage leverage and make sure we continue to reap the results of compound growth.
Short Squeeze on several stocks creates havoc in financial markets. Lesson for professional short sellers is, don't shit where you eat. Short selling has become a game of narratives and persuasion, very much like politics or art. It shouldn't be like that. This is the backlash.
Tesla earnings for Q4 2020. Automotive Gross Margin is soft. CFO explains why. One discrepancy in the company communication is they talk about industry leading margins. What industry? Are they an industrial company or a tech company?
Why do so few Americans own Amazon shares worth 1Mio. or more while they're happy customers? It's because we are not good at understanding compound interest. It's something that only recently happened. For millions of years humans have grown little if anything at all. For the past 300 years exponential growth has become possible.
Book discussion "Coffeeland" by Augustine Sedgewick. A history of coffee and its world economic significance through the lens of a coffee planter in El Salvador. Perils of monocultures. This doesn't just apply to coffee. It also applies to Silicon Valley.
Why do some companies succeed with difficult engineering projects, such as Tesla? Why do some fail, such as Google X with Loon and others? The answer lies in the mechanics of progress. It's the combination of creativity with Popperian criticism or constant iteration. The lack of self criticism impedes progress.
Taxing wealth is like taking out the soul of the American Dream. Longterm wealth creation is what this country was built on. President Biden must not impede this mission with short term thinking.Please do the right thing.
Some market participants are blaming the Fed for missing out on the market rally. Too much risk appetite due to high liquidity in the markt. This is precisely what the Fed wanted. Blaming the Fed is pointing at "Them" instead of taking responsibility for own strategy. We focus on fundamental prospects of portfolio companies.
How should a hedge fund be paid? Take a percentage of profits. The concept of carry goes way back to the whaling industry and works because it allows for skin in the game. This conversation goes much further as it relates to the alignment problem.
The mechanics of wealth generation. Creative solutions to new problems coupled with Popperian criticism. Replace concepts and engineering practices with better ones. The same applies to science and society at large. This is one of the key principles we derive from "The Beginning of Infinity".
Discussing the book "Ask your Developer" by Jeff Lawson, CEO and founder of Twillio. Software is big business because the supply chain of software is built out. Developers are work horses of the software economy. Focus on them and you have better success. How is Tesla doing with their developer focus?
Why philosophy of investing matters. It's because you need to answer the question, "what should I do next". In our case we focus on new concepts and engineering practices. Best place to start is with academia. Another interesting idea is that the value of resources is a function of knowledge. You can analyze the value of companies by the type of resources they are using.
Intel appoints new CEO Pat Gelsinger. We like the replacement of Bob Swan, but we don't like the choice of the board. Gelsinger is an acronym CEO and lacks clarity and direction. VMW has done worse than INTC in the past 2 years, so how will he be the person for the turnaround? INTC is stuck in inertia and denial.
An interview with Paul Dabrowski, CEO of Synthego on why Crispr technology is poised for a productive future and what the implications are for healthcare, pharmaceuticals and medicine. Key is the merger of software engineering with life sciences.
Why do we accept clients. Other than commercial reasons, the main argument for customers is to retain sharpness, accountability and focus.
Our two contrarian calls for 2021. 1/2 US is going to have moderate inflation in coming 5-8 years. 2/2 China is not nearly as far advanced in AI as many in the West think. Implications for Tesla and Chinese competition. Tesla is far ahead in AI.
What happens when a key employee leaves the company. In short, nothing. It's even a good sign, since a fast growing disruptor should be adjusting the talent base frequently. The challenge is to balance agility with stability. Example Editas, CSO leaving.