Category: What We’re Reading

We’ve constantly been sharing a list of our recent reads in our weekly emails for The Good Investors.

Do subscribe for our weekly updates through the orange box in the blog (it’s on the side if you’re using a computer, and all the way at the bottom if you’re using mobile) – it’s free!

But since our readership-audience for The Good Investors is wider than our subscriber base, we think sharing the reading list regularly on the blog itself can benefit even more people. The articles we share touch on a wide range of topics, including investing, business, and the world in general.

Here are the articles for the week ending 25 July 2021:

1. The Highest Forms of Wealth – Morgan Housel

Money buys happiness in the same way drugs bring pleasure: Incredible if done right, dangerous if used to mask a weakness, and disastrous when no amount is enough.

The highest forms of wealth are measured differently.

A few stick out:

1. Controlling your time and the ability to wake up and say, “I can do whatever I want today.”

Five-year-old Franklin Roosevelt complained that his life was dictated by rules. So his mother gave him a day free of structure – he could do whatever he pleased. Sara Roosevelt wrote in her diary that day: “Quite of his own accord, he went contently back to his routine.”

There’s a difference between working hard because you want to and working hard because someone else told you you had to, and how to do it, and when to do it. Even if you’re doing the same work, the independence of doing it on your own terms changes everything in the same way that sleeping in a tent is fun when you’re camping but miserable when you’re homeless.

To me, the highest form of wealth is controlling your time.

Wealth can lead to time independence, but it’s never assured. It can be the opposite, as whatever created the wealth – whether a company or an inheritance – creates a claim on your time in equal proportion to its financial reward. A great number of CEOs fall into this category: They have an abundance of wealth and not a moment of free time or scheduling control even when it’s desired, which is its own form of poverty.

Charlie Munger summed it up: “I did not intend to get rich. I just wanted to get independent.” It’s a wonderful goal, and harder to measure than net worth.

2. How to Predict a Market Crash – Ben Carlson

I’m not actually sure if Dent believes each one of his predictions but his latest interview provides some clues as to how the most preeminent market soothsayers are able to make market crash predictions over and over again.

Here’s how to predict a market crash without ever admitting you were wrong if it doesn’t come true:…

…Move the goalposts when you’re wrong. Once you’ve gone out on a limb with a prediction for a crash with a specific time frame in mind, eventually you have to pay the piper. Either you’re right or you’re wrong.

And since market crashes are fairly infrequent, if you keep predicting one you’re going to be wrong way more often than right.

You have two options when you make a prediction that turns out to be wrong:

(1) Admit you were wrong.
(2) Move the goalposts.

Let’s see which one Dent went with since he’s been predicting “the biggest crash ever” for years:

[Question] “You told me in an interview this past March that “the biggest crash ever” would likely occur by the end of this June. What are your thoughts on why that didn’t happen?

[Answer] It’s the same old story: We’ve been rebounding since COVID crashed us in March of last year. The stimulus was off the reservation! The central banks said, “We’ll triple down.” But that stresses the system: not letting the economy rebalance, not washing out zombie companies. Twenty percent of large public companies can’t meet their debt service.

So it was massive stimulus and the natural recovery — [Americans] had to hold back [spending] for months. So now we have this bounce.

We’ve been rebounding since COVID crashed us in March of last year. But I don’t think it’s going to last, and the markets don’t think it’s going to last. The bond markets are saying, “Yeah, now we’ve got 3% or 4% inflation, but it’s temporary.”

Governments will keep this bubble going no matter what. So the question is: When does it blow?”

Ah yes, the time-honored tradition of blaming the Fed for your ill-advised predictions. It’s almost like some pundits would like to invest as if central banks don’t exist, when in fact, they do.

3. Mark In The Metaverse – Casey Newton and Mark Zuckerberg

As always, there’s a lot to discuss with you — and the White House is demanding Facebook do more to remove vaccine misinformation, which I know is on a lot of people’s minds right now. I want to get to that, but I want to start with this talk you gave internally at Facebook a few weeks ago, which I recently had a chance to watch. You told your employees that your future vision of Facebook is not the two-dimensional version of it that we’re using today, but something called the metaverse. So what is a metaverse and what parts of it does Facebook plan to build?

This is a big topic. The metaverse is a vision that spans many companies — the whole industry. You can think about it as the successor to the mobile internet. And it’s certainly not something that any one company is going to build, but I think a big part of our next chapter is going to hopefully be contributing to building that, in partnership with a lot of other companies and creators and developers. But you can think about the metaverse as an embodied internet, where instead of just viewing content — you are in it. And you feel present with other people as if you were in other places, having different experiences that you couldn’t necessarily do on a 2D app or webpage, like dancing, for example, or different types of fitness.

I think a lot of people, when they think about the metaverse, they think about just virtual reality — which I think is going to be an important part of that. And that’s clearly a part that we’re very invested in, because it’s the technology that delivers the clearest form of presence. But the metaverse isn’t just virtual reality. It’s going to be accessible across all of our different computing platforms; VR and AR, but also PC, and also mobile devices and game consoles. Speaking of which, a lot of people also think about the metaverse as primarily something that’s about gaming. And I think entertainment is clearly going to be a big part of it, but I don’t think that this is just gaming. I think that this is a persistent, synchronous environment where we can be together, which I think is probably going to resemble some kind of a hybrid between the social platforms that we see today, but an environment where you’re embodied in it.

So that can be 3D — it doesn’t have to be. You might be able to jump into an experience, like a 3D concert or something, from your phone, so you can get elements that are 2D or elements that are 3D. I’d love to go through a bunch of the use cases in more detail, but overall, I think that this is going to be a really big part of the next chapter for the technology industry, and it’s something that we’re very excited about.

It just touches a lot of the biggest themes that we’re working on. Think about things like community and creators as one, or digital commerce as a second, or building out the next set of computing platforms, like virtual and augmented reality, to give people that sense of presence. I think all of these different initiatives that we have at Facebook today will basically ladder up together to contribute to helping to build this metaverse vision.

And my hope, if we do this well, I think over the next five years or so, in this next chapter of our company, I think we will effectively transition from people seeing us as primarily being a social media company to being a metaverse company. And obviously, all of the work that we’re doing across the apps that people use today contribute directly to this vision in terms of building community and creators. So there’s a lot to jump into here. I’m curious what direction you want to take this in. But this is something that I’m spending a lot of time on, thinking a lot about, we’re working on a ton. And I think it’s just a big part of the next chapter for the work that we’re going to do in the whole industry.

4. New cancer treatments may be on the horizon—thanks to mRNA vaccines – Stacey Colino

Molly Cassidy was studying for the Arizona bar exam in February 2019 when she felt an excruciating pain in her ear. The pain eventually radiated down through her jaw, leading her to discover a bump under her tongue. “I had several doctors tell me it was stress-related because I was studying for the bar and I had a 10-month-old son,” recalls Cassidy, who also has a Ph.D. in education. After continuing to seek medical care, she found out that she had an aggressive form of head and neck cancer that required intensive treatment.

After doctors removed part of her tongue along with 35 lymph nodes, Cassidy went through 35 sessions of radiation concurrent with three cycles of chemotherapy. Ten days after she completed treatment, Cassidy noticed a marble-like lump on her collarbone. The cancer had returned—and with a vengeance: It had spread throughout her neck and to her lungs. “By that point, I was really out of options because the other treatments hadn’t worked,” says Cassidy, now 38, who lives in Tucson. “In the summer of 2019, I was told my cancer was very severe and to get my affairs in order. I even planned my funeral.”

When doctors removed the tumor from her collarbone, they told her that she might be eligible to join a clinical trial at the University of Arizona Cancer Center that was testing an mRNA (messenger ribonucleic acid) vaccine—similar technology to the Pfizer and Moderna COVID-19 vaccines—in combination with an immunotherapy drug to treat colorectal and head and neck cancers. Whereas the COVID-19 vaccines are preventative, mRNA vaccines for cancer are therapeutic, and Cassidy jumped at the opportunity to participate. “I was at the right place at the right time for this clinical trial,” she says….

…Some mRNA vaccines for cancer take an off-the-shelf approach: These ready-made vaccines are designed to look for target proteins that appear on the surface of certain cancer tumors. How well they work is a matter of speculation right now, but some experts have concerns. “The question is: What is the target? You always have to have the right thing to target for the vaccine to be effective,” says David Braun, an oncologist at the Dana-Farber Cancer Institute and Harvard Medical School who specializes in immunotherapies. After all, with cancer, there isn’t a universal target the way there is with the coronavirus’s spike protein, and DNA mutations in cancer cells vary from one patient to another.

This is where personalized mRNA cancer vaccines enter the picture—and these may be more promising, experts say. With the personalized approach, a sample of tissue is taken from a patient’s tumor and their DNA is analyzed to identify mutations that distinguish the cancer cells from the normal, healthy cells, explains Bauman, who is also chief of hematology/oncology at the UA College of Medicine-Tucson. Computers compare the two DNA samples to identify the unique mutations in a tumor, then the results are used to design a molecule of mRNA that will go into the vaccine. This is typically done in four-to-eight-weeks—“it’s a technical tour de force to be able to do that,” says Robert A. Seder, chief of the Cellular Immunology Section of the Vaccine Research Center at the National Institute of Allergy and Infectious Diseases.

5. Twitter thread on how the use of Glassdoor could lead to better investing results – Impact Growth 

Glassdoor a worthwhile tool for forecasting stock returns?

🧩 I recorded the following data for all Nasdaq constituents to find out 

– ✨ Current Rating

– 📊 # of Reviews

– 🗣️ Rec to a Friend? 

– 👔 Approve of CEO? 

– 📈 Rating 2yrs ago

1) Do overall ratings correlate with stock returns?

✅ Yes!

📈 There exists a clear relationship between how highly employees rate a company and how well the stock does

2) Do stock returns correlate with 2yr rating changes? 

✅ Yes, but only over the longer-run

Avg 1/3yr returns when ratings are up/down over the last 2yrs:

📈 +35% / +107%

📉 +34% / +77%

3) The better the CEO, the better the stock?

Yes!

A clear relationship between CEO rating and long-run stock performance

6. Infinity Revenue, Infinity Possibilities – Packy McCormick

From an internet cafe in Cabanatuan City, Philippines, a 22-year-old named Howard described the game he plays to make a living as innocent-looking but strategic. That game, Axie Infinity is a Pokémon-like game built on the Ethereum blockchain in which people buy digital pets, called Axies, as NFTs, and breed, battle, and trade them. It’s cute. It’s unassuming…

…Axie’s cuteness obfuscates an absurdly fast-growing business, one counterintuitively trying to vertically integrate in a web3 ecosystem known for composing modularly. Beyond the business, it has a wildly bold master plan to reshape economic policy and local governance by showing what’s possible when people work in the Metaverse. In its whitepaper, Axie developer Sky Mavis explicitly says, “You can think of Axie as a nation with a real economy.”

That’s the grand plan. Right now, most of the focus on Axie centers around its eye-popping growth… Axie Infinity is picking up players and revenue at a nearly-unprecedented clip…

…In April, Axie did about $670k in revenue.

In May, it did $3.0 million.

In June, $12.2 million.

In July, just 18 days into the month, it’s already at $79 million.

Delphi Digital projects that it will close this month at $153 million. 

The Axie protocol generates revenue by taking a 4.25% fee when players buy and sell Axie NFTs in its marketplace, and by charging fees for breeding Axies to create new ones in the form of its tokens, Axie Infinity Shards (AXS) and Smooth Love Potion (SLP). AXS and SLP are denominated in ETH, which has been cut by more than half since May; Axie has grown USD revenue even in the face of falling ETH prices.

7. Software Beyond the Stratosphere: Loft Orbital Launches World’s First Commercial Ride-Share Satellites – Ubiquity Ventures

On June 29, 2021, Loft Orbital activated the world’s first two commercial ride-share satellites in orbit around Earth. The missions were called YAM-2 and YAM-3, where YAM stands for “yet another mission”. Prior to Loft Orbital, it would take 5 to 10 years to design, build, and launch a satellite containing a single dedicated payload to Earth orbit where it can carry out its work such as transmitting signals like satellite TV or internet, snapping photos for Google Maps, etc.

Instead, Loft Orbital’s satellites bring several different customers’ payloads to orbit at the same time. These two particular Loft Orbital satellites are carrying 10 different customer payloads, spanning many different industries:

• Established space: Eutelsat (Europe’s largest satcom provider)
• Government: DARPA and the UAE space agency
• Newspace: Totum and others

These customers are utilizing their sensor payloads for a variety of use cases including IoT connectivity, weather data, flying space autonomy software, precision positioning, and more. Future Loft Orbital missions have already signed up customers including Honeywell, NASA, and the US Space Force.

For each of these customers, Loft Orbital is the fastest and simplest path to space…

…Loft makes it simple and fast for more people to utilize space.

By doing so, Loft is unlocking a massive amount of demand from potential space users who may not have had the knowhow, resources (typically billions of dollars for a sovereign government) or time (typically 10+ years) to get to space. To accomplish this, Loft Orbital designed these satellites leveraging their plug-and-play payload adapter, attached various customer payloads, booked launches on rockets, coordinated regulatory certifications, tested the completed satellite (thermal, vibration, and more), and integrated these satellites onto a rocket. From here, Loft Orbital will manage these satellites in orbit using their Cockpit mission control software and downlink data from these customer payloads for the next few years. Loft Orbital customers get to focus on their payload and leave everything else to Loft.

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Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. Of all the companies mentioned, we currently have a vested interest in Facebook. Holdings are subject to change at any time.

We’ve constantly been sharing a list of our recent reads in our weekly emails for The Good Investors.

Do subscribe for our weekly updates through the orange box in the blog (it’s on the side if you’re using a computer, and all the way at the bottom if you’re using mobile) – it’s free!

But since our readership-audience for The Good Investors is wider than our subscriber base, we think sharing the reading list regularly on the blog itself can benefit even more people. The articles we share touch on a wide range of topics, including investing, business, and the world in general.

Here are the articles for the week ending 18 July 2021:

1. Think different: 10 unconventional lessons from owning Apple shares for 10 years – Chin Hui Leong

3. Unconventional wisdom

The world plunged into a financial crisis in 2008. When it comes to recessions, conventional wisdom suggests that you should rotate out of discretionary into non-discretionary stocks.

Yet, Apple’s strong business performance during this period puts a dent in this belief. Sales of its devices, which are often deemed to be discretionary in nature, propelled the firm’s revenue up by over 52 per cent between 2007 and 2009.

In contrast, non-discretionary stocks such as Proctor and Gamble (NYSE: PG) only managed a tepid 5.6 per cent revenue growth in that period.

Conventional wisdom does not always hold up. Look for real-life evidence.

4. Unimaginable growth

When I bought Apple shares in 2010, the company generated a little under US$43 billion in revenue for fiscal year 2009. By 2012, its topline had exceeded US$156 billion. In just three years, sales more than tripled, a phenomenal feat by any measure.

As investors, we should recognise that we can only project what we can imagine. When it comes to great companies such as Apple, you are better off leaving plenty of leeway to be surprised on the upside. From my experience, they often do.

5. Internet-scale businesses

In 2010, there were no trillion-dollar companies; today, there are five such companies. A big reason is smartphones, which have helped to increase the global population with Internet from 1.8 billion in 2010 to over five billion today.

Connectivity has made it possible to reach billions of customers today, a scale that did not exist a decade ago.

As investors, we should expect to see more trillion dollar, Internet-scale companies in the future.

6. A different future

If you plan to buy an innovative company, be ready for the business to look different a decade from today.

Case in point: At the end of fiscal year 2009, Apple was a product-focused company. Sales of iPhones, iPods and Macs made up well over 80 per cent of its revenue. Software and services accounted for less than 6 per cent.

By fiscal 2020, services had grown to almost a fifth of all its revenue and over a third of its gross profits. For a sense of scale, Apple’s services revenue alone is more than twice what Netflix (NASDAQ: NFLX) makes in a year.

7. Value you can’t see

Apple has introduced new products over the past decade. The Apple Watch was introduced in 2014, followed by the debut of Airpods two years later . In 2017, HomePod was launched.

Thing is, much of its roadmap was not visible in 2010.

Therefore, if you valued Apple’s business a decade ago, you would not have known the future value these products would create.

Again, innovative companies tend to surprise on the upside.

2. What Is CRISPR? – CB Insights

CRISPR is a defining feature of the bacterial genetic code and its immune system, functioning as a defense system that bacteria use to protect themselves against attacks from viruses. It’s also used by organisms in the Archaea kingdom (single-celled microorganisms).

The acronym “CRISPR” stands for Clustered Regularly Interspaced Short Palindromic Repeats. Essentially, it is a series of short repeating DNA sequences with “spacers” sitting in between them. 

Bacteria use these genetic sequences to “remember” each specific virus that attacks them.

They do this by incorporating the virus’ DNA into their own bacterial genome. This viral DNA ends up as the spacers in the CRISPR sequence. This method then gives the bacteria protection or immunity when a specific virus tries to attack again.

Accompanying CRISPR are genes that are always located nearby, called Cas (CRISPR-associated) genes.

Once activated, these genes make special proteins known as enzymes that seem to have co-evolved with CRISPR. The significance of these Cas enzymes is their ability to act as “molecular scissors” that can cut into DNA.

To recap: in nature, when a virus invades bacteria, its unique DNA is integrated into a CRISPR sequence in the bacterial genome. This means that the next time the virus attacks, the bacteria will remember it and send RNA and Cas to locate and destroy the virus.

While there are other Cas enzymes derived from bacteria that cut out viruses when they attack bacteria, Cas9 is the best enzyme at doing this in animals. The widely-known term CRISPR-Cas9 refers to a Cas variety being used to cut animal (and human) DNA.

In harnessing this technology, researchers have added a new step: after DNA is cut by CRISPR-Cas9, a new DNA sequence carrying a “fixed” version of a gene can nestle into the new space. Alternatively, the cut can altogether “knock out” of a particular unwanted gene — for example, a gene that causes diseases.

One way to think about CRISPR-Cas9 is to compare it to the Find & Replace function in Word: it finds the genetic data (or “word”) you want to correct and replaces it with new material. Or, as CRISPR pioneer Jennifer Doudna puts it in her book A Crack In Creation: Gene Editing and the Unthinkable Power to Control Evolution, CRISPR is like a Swiss army knife, with different functions depending on how we want to use it.

CRISPR research has moved so fast that it’s already gone beyond basic DNA editing. In December 2017, the Salk Institute designed a “handicapped” version of the CRISPR-Cas9 system, capable of turning a targeted gene on or off without editing the genome at all. Going forward, this kind of process could ease the concerns surrounding the permanent nature of gene editing.

3. Let the bullets fly for a while – Lillian Li

There’s a symbiotic relationship between old public institutions and rising new digital institutions in China. Didi cleaned up the grey market for black cabs, Meituan and Ele.ma act as de facto restaurant inspectors. Every content platform carries out content moderation on behalf of the party. The government is pragmatic. In the fragmented authoritarian governance structure of China, the agents that can introduce and maintain legibility stay. 

With these hybrid governance structures experiencing hypergrowth, it is not obvious what should be regulated and how. Despite the absence of a blueprint, there is a regulator cadence that I term “let the bullets fly for a while”…

…To fully grok China, one needs to watch the brilliantly dark film called Let the Bullets Fly. Since its release in 2010, the tale about a robber-turned-pretend governor in the feudalist Goosetown has become a Chinese cyberspace meme staple. Ladened with things said and unsaid about the rules and boundaries of power, money and lawfulness in China, it is a cultural touchstone.

In the midst of pivotal scenes —bewildering battles where nothing is clear — subordinates ask the robber-governor what to do. Inevitably, he responds with the infamous line “Let the bullets fly for a while.” Meaning, let the chaos run; who knows what issues resolve themselves without intervention, or when the tide will turn. Inaction is an asset during uncertainty. Calling things too soon shuts down possibilities.

My love of Chinese Internet memes aside, this turn of phrase has resonance amongst regulators and economists. It’s been a favourite catchphrase in conversations when they are asked to describe the Chinese regulatory approach. This is also borne out by macroeconomic theory3, when markets experience high future uncertainty (as is the case in new emerging markets) where regulators have inadequate regulatory tools, bias towards inaction is a dominant strategy.

Deng’s slogan of “crossing the river by feeling the stones” captures the subtle pragmatism needed to navigate brave new worlds. Partly due to imperfect information and partly due to the lack of consensus on the regulatory approaches to take, Chinese regulators have historically taken an-observe-then-act approach. 

4. Scale: Rational in the Fullness of Time – Packy McCormick

When Wang and co-founder Lucy Guo founded Scale out of Y Combinator in 2016, the company was called Scale API and its value prop was essentially that it was a more reliable Mechanical Turk with an API. They started with the least sexy-sounding piece of an incredibly sexy-sounding industry: human-powered data labeling.

Customers sent Scale data, and Scale worked with teams of contractors around the world to label it. Customers send Scale pictures, videos, and Lidar point clouds, and Scale’s software-human teams would send back files saying “that’s a tree, that’s a person, that’s a stop light, that’s a pothole.”

By using ML to identify the easy stuff first and routing more difficult requests to the right contractors, Scale could provide more accurate data more cheaply than competitors. Useful, certainly, but it’s hard to see how a business like that … scales. (I’m sorry, but I also can’t promise that will be the last scale pun).

Scale’s ambitions are obfuscated by its starting point: using humans to build a seemingly commodity product. A bet on Scale is a bet that data labeling is the right starting point to deliver the entire suite of AI infrastructure products.

If Wang is right, if data is the new code, the biggest bottleneck for AI/ML development, and the right insertion point into the ML lifecycle, then the brilliance of the strategy will unfold, slowly at first then quickly, over the coming years. It will all look rational in the fullness of time.

Scale has a high ceiling. It has the potential to be one of the largest technology companies of this generation, and to usher in an era of technology development so rapid that it’s hard to comprehend from our current vantage point. But it hasn’t been all clear skies to date, and the future won’t be easy either. It will face competition from the richest companies and smartest people in the world. It still has a lot to prove.

In either case, Scale is a company you need to know. It’s also an excellent excuse to dive into the AI and ML landscape and separate fact from science fiction. It’s looking increasingly likely that AI will find itself in the technology impact pantheon alongside the computer, the internet, and potentially web3.

5. Lessons in Low Ego Leadership with DocuSign CEO Dan Springer – Mathilde Collin and Dan Springer

Mathilde Collin: Great. I’ve heard from many people that you’re a great leader and I think you’ve already spent twenty five years in leadership positions. And I’m curious if you have any philosophy on leadership that you’d like to share with our audience.

Dan Springer: Yeah, I mean there’s a slightly geeky term that I like to use to sort of simplify how I evaluate leaders in the company or when I’m interviewing people about potentially bringing in a company which is sort of combining three different factors that I think are really critical.

The first one is whether people have the right sort of skills and smarts to be effective in their job. The second one is, are they able to manage their ego and so that they’re able to be manager, you go well, folks on the teams results as opposed to their individual results and credit analysis is simply how hard they work and how much they apply themselves.

And the formula that I like to use with those three things is I take the S or the smarts and skills divide that by the ego. Did you want to do a better job minimizing that and then raise that quotient to the power of how hard you work and you can play around with numbers like one to five and do your own assessment. And so to see this sort of interesting things, you do play around with the math. But the key thing for me is to realize that to some extent you can get smarter and you can develop more skills. But we’re all sort of given some certain level of capabilities that we have and some better for some jobs. Once you have that, the parts you can really control with how you manage your ego and how you really apply yourself and how hard you work. And so I try to encourage people to say that’s where you should put your focus and developing yourself as an individual contributor, but particularly as a manager is are you going to be successful by those two variables you can control?

Mathilde Collin: And I’m curious, how do you teach people or help people work on their ego?

Dan Springer: So that’s the part that’s interesting because sometimes it’s easy for people, some people naturally have high cues. Their personality is to be supportive of other people. They get their joy out of watching people develop. So it’s easy for them to do it. And some people, it’s really, really difficult. And the thing I would tell you is that we’re all on a journey. And when I try to talk to people about ego management, if you will, I try to go back and say, hey, let me tell you, I think today I’ve gotten to a point on a one to five scale, which is I’ve gotten to about four. I think I do a pretty good job of putting the organization first. Customers first. The other employees first over myself.

But when I was twenty three, a young person I go, I probably was a one or two on ego. I you know, I was very focused on my own career. I was competitive, I was ambitious. And, you know, I was not great at that. I had some early management jobs where it wasn’t, I don’t think, very good as a manager and very sensitive. I was managing people much older than I was, and I just didn’t have an awareness of how to do that.

Well, so you sort of start off and say, I’ve been there is someone struggling, I’ve been where you are. It takes some work. But what it mostly takes is awareness and focus. And so that’s what I try to tell them stories about. Here’s places that I wasn’t aware of. So not just me, so I could be other stories of other people. And here’s what they did to be more successful, because that’s one. And the second big thing is giving people feedback. And I would say feedback is a gift and you need to be able to explain to people why you see them underperforming on the ego dimension and say, this is how I saw you interact with your teammates. And this is what other people say when they come out of interactions with you and why they maybe feel bruised or not supported whatever it might be, and giving people that direct, you know, and really critical feedback on how they’re showing up is, I think the only way you can really help if it’s not about book learning. I mean, you can read stories, but it really is about that intensely personal development.

6. Commentary: Chinese fashion giant Shein has taken over the world. It has just met its match – Patrick Reinmoeller, Mark Greeven, and Yunfei Feng

With fast fashion firms under pressure to stay ahead of fashion cycles and entertain customer desire for the newest styles, there’s a growing countertrend that questions its breakneck speed.

The global fashion industry generates about 4 to 10 per cent of total greenhouse gas emissions, more than all international flights and maritime shipping combined.

According to the World Bank, the fashion industry uses 93 billion cubic metres of water every year, an amount that 5 million people could use for consumption instead.

The industry also produces about 20 per cent of wastewater worldwide through dyeing and treating fabrics. It dumps microfibers that amount to about 50 billion plastic bottles into the ocean and disposes 87 per cent of total fibre input annually.

These negative effects of fashion are predicted to increase by 50 per cent by 2030, as more buy into the ethos of fast fashion: Buy fast, buy new, and dispose prematurely. According to the Ellen MacArthur Foundation, the average person today buys and discards about 60 per cent more clothing compared to 2000.

Fast fashion leaders have launched initiatives that boost their sustainability record, though they’ve been met with scepticism. Although H&M has started already in 2010 with its Conscious Collection emphasising organic and sustainable fabrics, the Norwegian Consumer Authority said information provided about the clothing, such as the amount of recycled material in each item, is insufficient.

A rejection of overconsumption in favour of essentials and basics, espoused by brands like Patagonia, fares better with those concerned about fashion’s environmental impact.

New models are emerging fast. Business models of vintage, recycled clothes are quickly losing their stigma in the West.

7. Too Smart – Morgan Housel

What’s boring is often important and the smartest people are the least interested in what’s boring.

Ninety percent of personal finance is just spend less than you make, diversify, and be patient.

But if you’re very intelligent that bores you to tears and feels like a waste of your potential. You want to spend your time on the 10% that’s mentally stimulating.

Which isn’t necessarily bad. But if your focus on the exciting part of finance comes at the expense of attention to the 90% of the field that’s boring, it’s disastrous. Hedge funds blow up and Wall Street executives go bankrupt doing things a less intelligent person would never consider. A similar thing happens in medicine, a field that attracts brilliant people who may be more interested in exciting disease treatments than boring disease prevention.

There’s a sweet spot where you grasp the important stuff but you’re not smart enough to be bored with it.

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Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. Of all the companies mentioned, we currently have a vested interest in Apple, DocuSign, Meituan, and Netflix. Holdings are subject to change at any time.

We’ve constantly been sharing a list of our recent reads in our weekly emails for The Good Investors.

Do subscribe for our weekly updates through the orange box in the blog (it’s on the side if you’re using a computer, and all the way at the bottom if you’re using mobile) – it’s free!

But since our readership-audience for The Good Investors is wider than our subscriber base, we think sharing the reading list regularly on the blog itself can benefit even more people. The articles we share touch on a wide range of topics, including investing, business, and the world in general.

Here are the articles for the week ending 11 July 2021:

1. The Beginning of Infinity – Naval Ravikant and Brett Hall

Brett Hall: Hello Naval, it’s great to be here. You’ve raised so many interesting aspects of The Beginning of Infinity, which has become a real passion of mine. Like a lot of people who enter science, when I was at school I thought, “Well, I want to be an astronomer, so I’ll go to a university and do a physics degree, then do an astronomy degree, and then become a professional astronomer.”

One day I picked up David Deutsch’s The Fabric of Reality in a bookstore and started reading it. The first chapter described what I was trying to achieve in my life. It was putting into words what I felt my university studies and my general outlook on life was about.

Deutsch says that the ancient philosophers thought they could get an understanding of the entire world. As time passed, though, modern science made it seem as though this was an impossible project. There’s no way you could understand everything about reality. There’s too much to know.

How could you possibly know everything?

At the beginning of The Fabric of Reality, David Deutsch presents this idea that you don’t need to know every single fact to fundamentally understand everything that can be understood.

He presents this vision that there are four fundamental theories from science and outside science: quantum theory, the theory of computation, evolution by natural selection, and epistemology—which is the theory of knowledge. Together they form the worldview, or lens, through which you can understand anything that can be understood…

…Brett: Deutsch’s worldview is that reality is comprehensible. Problems are solvable, or “soluble,” as he writes. It’s a deeply rationally optimistic worldview that believes in good scientific explanations and progress.

Progress is inevitable as long as we have these good explanations. Good explanations have tremendous reach. They are acts of creativity.

Humans are problem solvers and can solve all problems. All sins and evil are due to a lack of knowledge. One can be optimistic about constant progress. That’s what the title refers to: We’re at the beginning of an infinite series of progress.

It’s a very optimistic take. It states that we are at home in the universe and the universe is ours as a resource to learn about and exploit; that material wealth is a set of physical transformations that we can affect; that everything that is not forbidden by the laws of physics is eventually possible through knowledge and knowledge creation.

He also writes about how humans are universal explainers, that anything that can be known and understood can be known and understood by human beings in the computation power of a human system.

Everything is knowable by humans. We’re at the beginning of an infinity of knowledge.

We understand things using good explanations and constantly replace old theories with better ones. There’s no endpoint in sight. There’s no perfection. Every theory can be falsified eventually and improved.

We are on our way to being able to do everything that is not forbidden by the laws of physics…

…Naval: Does probability actually exist in the physical universe, or is it a function of our ignorance? If I’m rolling a die, I don’t know which way it’s going to land; so therefore I put in a probability. But does that mean there’s an actual probabilistic unknowable thing in the universe? Is the universe rolling a die somewhere, or is it always deterministic?

Brett: All probability is actually subjective. Uncertainty and randomness are subjective. You don’t know what the outcome’s going to be, so you roll a die. That’s because you individually do not know; it’s not because there is uncertainty there deeply in the universe. What we know about quantum theory is that all physically possible things occur.

This leads to the concept of the multiverse. Rather than refute all of the failed ways of trying to understand quantum theory, we’re going to take seriously what the equations of quantum theory say. What we’re compelled to think about quantum theory, given the experiments, is that every single possible thing that can happen does happen. This means that there is no inherent uncertainty in the universe because everything that can happen actually will happen. It’s not like some things will happen and some things won’t happen. Everything happens.

You occupy a single universe, and in that universe, when you roll the die, it comes up a two. Somewhere else in physical reality, it comes up a one, somewhere else a three, a four, a five, and a six.

Naval: If I’m rolling two dice, then the universes in which they sum up to two is less than the number of universes in which we roll a seven, because that can be a three and a four, a five and a two, and so on. So the number of universes still does correspond to what we calculate as the probability.

2. A Framework for The Metaverse – Matthew Ball

The Metaverse is often mis-described as virtual reality. This is like saying the mobile internet is the iPhone. The iPhone isn’t the mobile internet; it’s the consumer hardware and app platform most frequently used to access the mobile internet.

Sometimes the Metaverse is described as a virtual user-generated content (UGC) platform. This is like saying the internet is Yahoo!, Facebook, or World of Warcraft. Yahoo! is an internet portal/index, Facebook is a UGC-focused social network, World of Warcraft is an MMO. Other times we receive a more sophisticated explanation, such as ‘the Metaverse is a persistent virtual space enabling continuity of identity and assets’. This is much closer to the truth, but it too is insufficient. It’s a bit like saying the internet is Verizon, or Safari, or HTML. Those are a broadband provider that connects you to the entire web, a web browser that can access/render all of the internet’s webpages from a single screen and IP identifier, and a markup language that enables the creation and display of the web. And certainly, the Metaverse doesn’t mean a game or virtual space where you can hang out (similarly, the Metaverse isn’t now ‘here’ just because more of us now are hanging out virtually and/or more often).

Instead, we need to think of the Metaverse as a sort of successor state to the mobile internet. And while consumers will have core devices and platforms through which they interact with the Metaverse, the Metaverse depends on so much more. There’s a reason we don’t say Facebook or Google is an internet. They are destinations and ecosystems on or in the internet, each accessible via a browser or smartphone that can also access the vast rest of the internet. Similarly, Fortnite and Roblox feel like the Metaverse because they embody so many technologies and trends into a single experience that, like the iPhone, is tangible and feels different from everything that came before. But they do not constitute the Metaverse.

3. Twitter thread on how Facebook uses user-data – Jesse Pujji

Is Facebook listening to your conversations? No, they are not. They are doing something MUCH more effective! Here’s how it works

The two most valuable pieces of software on earth are: 1) the $FB pixel and 2) the $FB newsfeed. When you wonder, how come FB is worth $1T and Twitter is only $55BN, those two pieces of software are your answer.

The FB pixel is a tiny piece of code that nearly every website on the planet has embedded. It feeds data back to FB (in aggregate, anonymized) for the list of websites visited, how much time was spent, did you buy or not, etc.

The newsfeed algo looks at that as a signal as well as hundreds of other things (your age, who your friends are, what ads you screenshot) to determine which ad to place in front of you. Again, all of this is done in groupings. Not personal.

When they get it right: right message in front of right person at right time….everyone wins. A brand finds a new customer. You find a product you want. FB makes $.

And this is a good thing. You get value from this all the time. You’re shopping for a mattress. You go to Casper’s website. Then back to FB/IG. You start getting ads for other mattress companies and even a mattress comparison site. You find the right choice, you buy!

4. Money Rules – Morgan Housel

The formula for how to do well with money is simple. The behaviors you battle while implementing that formula are hard.

“Save more money and be more patient” is too simple for most people to take seriously, but it’s the best solution to most financial problems.

Expectations move slower than reality on the ground, so it’s easy to become frustrated when clinging to the economic trends of a previous era.

Everything is relative. John D. Rockefeller was asked how much money was enough and said, “Just a little bit more.” Everyone, at every income, tends to feel the same. 

5. Doing Nothing is Hard Work – Ben Carlson 

If you watch all 10 penalty kicks you begin to notice a theme in the strategy by the goalies — they like to dive. In fact, each goalie dove on every penalty kick attempt. And as luck would have it, this strategy worked on the very last kick.

I’m not exactly a soccer expert, but there are a few obvious reasons the goalies dive like this.

The striker has the advantage since the goal is so large and they get to kick from a relatively short distance. And since they can kick the ball with such force the goalie has to make a split-second decision.

But it also looks really cool.

Saving a ball that’s kicked right at you is boring. A diving save, on the other hand, makes you look like a hero. And so it was in yesterday’s match.

It’s hard to argue with this strategy considering it won Switzerland the game.

There is an alternative to the horizontal diving save, though. The goalie could simply stay put in the middle.

Researchers in Israel studied nearly 300 penalty kicks from various leagues and championship matches over the years to gain a general sense of the strategy for both goalies and strikers.

They found the goalkeeper dove left or right nearly 94% of the time, meaning the other 6% of the time they basically just stayed in the middle hoping the kick would come right down the pipe…

…Strikers were five times more likely to kick it down the middle than goalies were to stay in the middle waiting for a direct kick.

We humans simply have a bias towards action over inaction.

Goalies admitted they felt worse about themselves if they stayed put in the middle and there was a goal kicked to the right or left. It’s easier to stomach a ball kicked right down the middle if they dove left or right because it showed their effort.

We want to have our hands on the steering wheel to give us a sense of control, even when that control is an illusion.

The illusion of control applies to investing as well.

Successful investing tends to be boring and long-term in nature but it’s hard to look cool with a boring, long-term strategy. Where’s the fun in that?

In many areas of life, the harder you work, the more you are rewarded for your efforts. This rule of thumb does not apply to the markets. Much of the time the more you press the worse your results when it comes to the markets.

A bias towards action at all times when investing opens you up to all sorts of mistakes, many of which are of the avoidable or unnecessary variety.

6. David Velez – Building The Branchless Bank – Patrick O’Shaughnessy and David Velez

Patrick: [00:04:26] What do you think are the most important differentiators between what we’ll call the incumbent banks that maybe Berkshire invested in more traditionally, versus Nubank? What are the largest important differences for those out there, listening to understand?

David: [00:04:40] I think the first one is, the consumer obsession and a culture that is based on consumer obsession. I don’t think this is necessarily specific to financial services. I think one common denominator of incumbent industries, either financial services, or if you look at insurance or even in media or transportation, is that after let’s say six, seven decades of traditional capitalism, you ended up with a number of players, oligopolies, where four or five companies effectively own the market. Whenever you see another golf police structure, you find that there are abnormal returns and you also find a lot of complacency among incumbents. That complacency, ultimately ends up translating into taking customers for granted when it should be the actually opposite. Ultimately, you win because customers choose you. What you find in Latin America and a lot of emerging markets and a little bit of the US, is that there are five banks that have won, let’s say banking 1.0, and they will become complacent and they forgot about customers.

There are a number of different things that we’re doing differently. But I would say the number one is having a culture that is obsessed about customers and doing the right thing for the customers, from doing the right decisions, to giving the right customer service, to building products that are really actually good for them. I would say that’s number one. Then there is all the tactical advantages that being a technology company at heart provides. Obviously from being a fully digital company and not needing to have a full offline distribution, very expensive backend branches, that allows us to have about 50X more customers per human, than traditional banks. Just being in total detail, we have one building here in Sao Paulo and have 40 million customers different 5,570 Brazilian cities in the Amazons, in the south, we have customers in Mexico city, obviously, and Columbia. That gives us a huge operational efficiency.

Ultimately, that translates into significant cost efficiency, that we can pass to the end consumer via lower fees. We don’t need to charge so many fees. We don’t charge any fees. Then there’s all the other advantages of being a tech company from a data first, analytics infrastructure, to be able to use a lot of data to make a lot of different decisions. All of these different advantages, add up to building a type of offering that is very hard for the traditional incumbents to match.

Patrick: [00:07:11] Maybe you could just level set for us, today in the markets where you operate, if I was about to become a new Nubank customer, what does that traditionally feel like? What is the model customer doing with you and how do they sort of get on board to begin?

David: [00:07:24] 90% of our customers come through word of mouth, completely referred by other friends. We’ve been really growing fully by word of mouth, no customer acquisition costs since 2014, when we launched. And our latest cohort last month, is exactly the same as our first cohort in 2013. It’s been viral, which is unexpected for a financial services product. You don’t see a credit card has no virality characteristics. There’s no real network effects when you think about it. It’s not Facebook. It’s not Instagram, where if all your friends are there, you want to be there. Here, you will have a loan product that doesn’t necessarily make it better for your friends. I’ll provide a little bit more nuance then later on because in effect that’s one of the things that we’ve done differently. But in general, most people will hear from us through a friend, will download the app or will be invited by a friend. The friend will send you an invitation via WhatsApp or email or Facebook or any type of channel. You accept the invitation. You download the app. And in a few seconds or a few minutes, you have a bank account open. You have a credit card, a virtual credit card working. We’ll send you a physical credit card to your house in one or two days it’s there.

Then you get access to a number of different products that we have. You can get an insurance product, you kind of start investing your money in a number of your funds, and also equities through Easynvest, a company we bought last year. If you have any questions, you can ask any questions via the chat that we have in our app. And all your interaction is fully digital through the app. The last thing I’ll add is, one of the big pains in this market is, over 40% of the population are blacklisted in the consumer bureaus. They are outside of the credit system. If you want to credit, you do not pay the average 500% APR. You pay 1000% APR. Because there are a couple of institutions that will lend you money at that rate. Most traditional institution will not lend you if you are black listed in one of the bureaus. Just because there was no FICO score. There was no positive credit information, only negative.

I’ll give you an example. In my case, I moved apartments and the cable company still send me a bill for $10 and I never got that bill. So I became a delinquent for them. They sent me to one of these credit bureaus. If I needed a loan from one of the big banks, I would have had been rejected. A lot of the opportunity here was for us to build new credit methodologies, build our own FICO, proprietary. Allow us to underwrite most of the population, both the banked and the better. One of the big variables in our model is, who invites you? Since 90% of our customers come through referrals, we use the credit information of their referral as an input into our credit model. It turns out, it is very predictive and it has allowed us to underwrite two people on lower costs that never had access to any type of credit product.

7. The Elon Musk Productivity Email – Elon Musk

– Excessive meetings are the blight of big companies and almost always get worse over time. Please get of all large meetings, unless you’re certain they are providing value to the whole audience, in which case keep them very short.

– Also get rid of frequent meetings, unless you are dealing with an extremely urgent matter. Meeting frequency should drop rapidly once the urgent matter is resolved.

– Walk out of a meeting or drop off a call as soon as it is obvious you aren’t adding value. It is not rude to leave, it is rude to make someone stay and waste their time.

– Don’t use acronyms or nonsense words for objects, software or processes at Tesla. In general, anything that requires an explanation inhibits communication. We don’t want people to have to memorize a glossary just to function at Tesla.

– Communication should travel via the shortest path necessary to get the job done, not through the “chain of command”. Any manager who attempts to enforce chain of command communication will soon find themselves working elsewhere.

– A major source of issues is poor communication between depts. The way to solve this is allow free flow of information between all levels. If, in order to get something done between depts, an individual contributor has to talk to their manager, who talks to a director, who talks to a VP, who talks to another VP, who talks to a director, who talks to a manager, who talks to someone doing the actual work, then super dumb things will happen. It must be ok for people to talk directly and just make the right thing happen.

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Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. Of all the companies mentioned, we currently have a vested interest in Alphabet (parent of Google), Facebook, and Tesla. Holdings are subject to change at any time.

We’ve constantly been sharing a list of our recent reads in our weekly emails for The Good Investors.

Do subscribe for our weekly updates through the orange box in the blog (it’s on the side if you’re using a computer, and all the way at the bottom if you’re using mobile) – it’s free!

But since our readership-audience for The Good Investors is wider than our subscriber base, we think sharing the reading list regularly on the blog itself can benefit even more people. The articles we share touch on a wide range of topics, including investing, business, and the world in general.

Here are the articles for the week ending 04 July 2021:

1. RNAi is Setting a High Bar for Gene Editing – Maxx Chatsko

Although there are many therapeutic modalities in the field of genetic medicines, individual investors have been most excited about gene editing tools such as CRISPR-Cas9. The valuations of publicly-traded CRISPR companies suggest investors have very high expectations — perhaps unreasonably high considering the general lack of meaningful data.

In the second quarter of 2021, three different drug candidates or drug products based on RNA interference (RNAi) have demonstrated the ability to reverse three different diseases — all with convenient dosing…

…Intellia Therapeutics (NASDAQ: NTLA) is initially focused on developing in vivo drug candidates for gene silencing applications. The approach uses CRISPR-Cas9 to “knock out” a gene by disrupting the sequence responsible for its expression. At a high level, the clinical objective of reducing protein levels is identical to that of RNAi.

Not surprisingly, there’s plenty of overlap between the company’s knockout pipeline and those of RNAi drug developers. Intellia Therapeutics’ lead in vivo drug candidate is taking aim at hATTR, while the next most-advanced program is targeting hereditary angioedema (HAE), another Alnylam target. Discovery-stage programs that might use knockouts include PH1, A1AT liver disease, and others that promise to square off with RNAi drug candidates and drug products.

On the one hand, gene knockouts promise to drive deeper reductions in protein levels than current-generation RNAi. They would also represent a permanent, irreversible change to a patient’s genome. Although CRISPR gene editing compounds must be administered intravenously, a single dose is the most convenient dosing.

On the other hand, there are clinical and commercial challenges for investors to consider. First-generation CRISPR gene editing requires making a double-stranded break in the genome, which is repaired with mutagenic (“mutation-causing”) processes. Double-stranded breaks can result in random insertions and deletions of genetic material far from the cut site, while there’s evidence that sections of chromosomes can be rearranged. Each is a hallmark of cancer cells. (It’s important to note that these are on-target effects inherent to CRISPR gene editing, separate from the more familiar off-target effects discussed in the media, which are largely exaggerated.)

The long-tail safety risks from on-target effects might not become evident until years after clinical development is completed. Therefore, drug candidates utilizing CRISPR-mediated knockouts might generate promising safety and efficacy data in clinical trials, but regulators might balk at speedy approvals for knockouts or require long-term patient monitoring. This is especially true considering many indications being targeted by knockouts will likely have safe, effective, and convenient treatments provided by RNAi. In other words, although these indications are called “rare diseases,” regulators probably won’t be under pressure to approve knockout drug candidates for the sake of patients.

Even if knockouts earn regulatory approval, it could be difficult to dislodge RNAi treatments. For example, by the time Intellia’s lead drug candidate reaches the market (assuming it does), most global hATTR patients will be taking treatments from Alnylam. An estimated 3% of global patients are taking the relatively inconvenient Onpattro, although many more could be eligible for treatment with vutrisiran should it earn regulatory approval in 2021 or 2022. That could result in Intellia boasting an approved knockout drug product and frustratingly little opportunity to capture market share. It’s more likely that the market experiences cutthroat pricing competition between RNAi treatments and gene knockouts, which would be great for patients, but perhaps not so great for the drug developers arriving a little too late to the market.

2. The Devastating Decline of a Brilliant Young Coder – Sandra Upson 

In Cloudflare’s early years, Lee Holloway had been the resident genius, the guy who could focus for hours, code pouring from his fingertips while death metal blasted in his headphones. He was the master architect whose vision had guided what began as a literal sketch on a napkin into a tech giant with some 1,200 employees and 83,000 paying customers. He laid the groundwork for a system that now handles more than 10 percent of all internet requests and blocks billions of cyberthreats per day. Much of the architecture he dreamed up is still in place.

But some years before the IPO, his behavior began to change. He lost interest in his projects and coworkers. He stopped paying attention in meetings. His colleagues noticed he was growing increasingly rigid and belligerent, resisting others’ ideas, and ignoring their feedback.

Lee’s rudeness perplexed his old friends. He had built his life around Cloudflare, once vowing to not cut his hair until the startup’s web traffic surpassed that of Yahoo. (It took a few short months, or about 4 inches of hair.) He had always been easygoing, happy to mentor his colleagues or hang out over lunch. At a birthday party for Zatlyn, he enchanted some children, regaling them with stories about the joys of coding. The idea of Lee picking fights simply didn’t compute.

He was becoming erratic in other ways too. Some of his colleagues were surprised when Lee separated from his first wife and soon after paired up with a coworker. They figured his enormous success and wealth must have gone to his head. “All of us were just thinking he made a bunch of money, married his new girl,” Prince says. “He kind of reassessed his life and had just become a jerk.”…

…WHAT MAKES YOU you? The question cuts to the core of who we are, the things that make us special in this universe. The converse of the question raises another kind of philosophical dilemma: If a person isn’t himself, who is he?

Countless philosophers have taken a swing at this elusive piñata. In the 17th century, John Locke pinned selfhood on memory, using recollections as the thread connecting a person’s past with their present. That holds some intuitive appeal: Memory, after all, is how most of us register our continued existence. But memory is unreliable. Writing in the 1970s, renowned philosopher Derek Parfit recast Locke’s idea to argue that personhood emerges from a more complex view of psychological connectedness across time. He suggested that a host of mental phenomena—memories, intentions, beliefs, and so on—forge chains that bind us to our past selves. A person today has many of the same psychological states as that person a day ago. Yesterday’s human enjoys similar overlap with an individual of two days prior. Each memory or belief is a chain that stretches back through time, holding a person together in the face of inevitable flux.

The gist, then, is that someone is “himself” because countless mental artifacts stay firm from one day to the next, anchoring that person’s character over time. It’s a less crisp definition than the old idea of a soul, offering no firm threshold where selfhood breaks down. It doesn’t pinpoint, for example, how many psychological chains you can lose before you stop being yourself. Neuroscience also offers only a partial answer to the question of what makes you you.

Neural networks encode our mental artifacts, which together form the foundation of behavior. A stimulus enters the brain, and electrochemical signals swoosh through your neurons, culminating in an action: Hug a friend. Sit and brood. Tilt your head up at the sun and smile. Losing some brain cells here or there is no big deal; the networks are resilient enough to keep a person’s behaviors and sense of self consistent.

But not always. Mess with the biological Jell-O in just the right ways and the structure of the self reveals its fragility.

Lee’s personality had been consistent for decades—until it wasn’t…

…In mid-March of 2017, Kristin and Lee went to a neurologist to get the results of an MRI. To Kristin, it seemed that the neurologist had initially been skeptical of her concerns. Lee was young, healthy, and communicative.

The MRI told a different story: There was atrophy in the brain inconsistent with the age of the patient, the neurologist reported to them. When Kristin asked her what that meant, she said Lee had a neurodegenerative disease of some kind, but they’d need to do more tests to get a specific diagnosis. One of their doctors suggested they go to the Memory and Aging Center at UC San Francisco…

…The neurologists delivered their verdict: He appeared to have a textbook case of frontotemporal dementia—known by the shorthand FTD—specifically, the behavioral variant of that disease. It targets a network of brain regions sometimes described as underpinning one’s sense of self. As the pathological process advanced, it was carving a different person out of Lee’s raw substance.

The term frontotemporal dementia refers to a cluster of neurodegenerative diseases that affect a person’s behavior or speech while leaving memory largely intact, at least early on. Unlike Alzheimer’s disease, FTD isn’t well known. It is a rare disease, affecting roughly one in 5,000 people, though many of the neurologists who study it believe it is underdiagnosed. What is known is that for people under the age of 60, it is the most common form of dementia. Still, as a man in his thirties, Lee was unusually young to be afflicted. For some patients, one of several genetic mutations turns out to be the likely cause, and a subset of patients have a family history of neurodegenerative diseases. But nothing in the neurologists’ investigations turned up even a hint as to why Lee had been struck down.

Regardless of cause, the prognosis is grim. There’s no treatment. Lee’s doctors warned that his symptoms would grow worse, and that over time he would likely stop talking, become immobile, and struggle to swallow, until eventually an infection or injury would likely turn fatal. The best the doctors could recommend was eating a balanced diet and getting exercise.

The family sat stunned at the neurologist’s words. The brain scans were undeniable. On a wall-mounted screen the doctors showed a cross-section of the four lobes of Lee’s brain. In a healthy brain, the familiar, loopy folds of tissue appear white or gray and push up against the edges of the cranium, filling every available space. Lee’s brain looked nothing like that.

Black voids pocked his frontal lobe, areas where brain tissue had gone dead. Seeing it, Kristin gasped. “There were huge dark spots in his brain,” Alaric says. “That’s what … that made it concrete.”

3. Interview: Marc Andreessen, VC and tech pioneer – Noah Smith and Marc Andreessen

N.S.: One of the themes of my blog so far has been techno-optimism. I have to say that some of that attitude comes from talking to you over the years! Are you still optimistic about the near future of tech? And if so, which tech should we be most excited about?

M.A.: I am very optimistic about the future of tech, at least in the domains where software-driven innovation is allowed. It’s been a decade since I wrote my essay Software Eats The World, and the case I made in that essay is even more true today. Software continues to eat the world, and will for decades to come, and that’s a wonderful thing. Let me explain why.

First, a common criticism of software is that it’s not something that takes physical form in the real world. For example, software is not a house, or a school, or a hospital. This is of course true on the surface, but it misses a key point.

Software is a lever on the real world.

Someone writes code, and all of a sudden riders and drivers coordinate a completely new kind of real-world transportation system, and we call it Lyft. Someone writes code, and all of a sudden homeowners and guests coordinate a completely new kind of real-world real estate system, and we call it AirBNB. Someone writes code, etc., and we have cars that drive themselves, and planes that fly themselves, and wristwatches that tell us if we’re healthy or ill.

Software is our modern alchemy. Isaac Newton spent much of his life trying and failing to transmute a base element — lead — into a valuable material — gold. Software is alchemy that turns bytes into actions by and on atoms. It’s the closest thing we have to magic.

So instead of feeling like we are failing if we’re not building in atoms, we should lean as hard into software as we possibly can. Everywhere software touches the real world, the real world gets better, and less expensive, and more efficient, and more adaptable, and better for people. And this is especially true for the real world domains that have been least touched by software until now — such as housing, education, and health care…

…N.S.: Your most famous quote is probably “Software is eating the world”. How is that likely to manifest over the next decade or so? Will A.I. automate whole business models out of existence? Will old-line companies that try to patch software into their existing operations and business models get outcompeted by companies that start out as software companies and then branch into traditional markets, as my friend Roy Bahat believes? Or something else?

M.A.: My “software eats the world” thesis plays out in business in three stages:

1. A product is transformed from non-software to (entirely or mainly) software. Music compact discs become MP3’s and then streams. An alarm clock goes from a physical device on your bedside table to an app on your phone. A car goes from bent metal and glass, to software wrapped in bent metal and glass.

2. The producers of these products are transformed from manufacturing or media or financial services companies to (entirely or mainly) software companies. Their core capability becomes creating and running software. This is, of course, a very different discipline and culture from what they used to do.

3. As software redefines the product, and assuming a competitive market not protected by a monopoly position or regulatory capture, the nature of competition in the industry changes until the best software wins, which means the best software company wins. The best software company may be an incumbent or a startup, whoever makes the best software.

My partner Alex Rampell says that competition between an incumbent and a software-driven startup is “a race, where the startup is trying to get distribution before the incumbent gets innovation”. The incumbent starts with a giant advantage, which is the existing customer base, the existing brand. But the software startup also starts with a giant advantage, which is a culture built to create software from the start, with no need to adapt an older culture designed to bend metal, shuffle paper, or answer phones.

As time passes, I am increasingly skeptical that most incumbents can adapt. The culture shift is just too hard. Great software people tend to not want to work at an incumbent where the culture is not optimized to them, where they are not in charge. It is proving easier in many cases to just start a new company than try to retrofit an incumbent. I used to think time would ameliorate this, as the world adapts to software, but the pattern seems to be intensifying. A good test for how seriously an incumbent is taking software is the percent of the top 100 executives and managers with computer science degrees. For a typical tech startup, the answer might be 50-70%. For a typical incumbent, the answer may be more like 5-7%. This is a huge gap in software knowledge and skill, and you see it play out every day across many industries.

As for Artificial Intelligence, as an engineer myself, it’s hard to be quite as romantic as a lot of observers tend to be. AI — or, to use the more prosaic term, Machine Learning — is an incredibly powerful technology, and the last decade has seen explosive AI/ML innovation that’s increasingly showing up in the real world. But it’s still just software, math, numbers; the machines aren’t becoming self aware, Skynet is not here, computers still do exactly what we tell them. So AI/ML continues to be a tool used by people, more than a replacement for people.

A famous story from the birth of computer science has Alan Turing, father of the computer, lunching with Claude Shannon, father of information theory, in the AT&T executive dining room near Bell Labs in the early 1940s. Turing and Shannon engage in an increasingly heated discussion about the future of thinking machines when Turing stands up, pushes his chair back, and says loudly, “No, I’m not interested in developing a powerful brain! All I’m after is a mediocre brain, something like the President of AT&T.'”

I think about AI like that — although, for the record, the President of AT&T is a friend of mine, and he’s actually quite bright. I suspect “Artificial Intelligence” is the wrong framing for the technology; Doug Engelbart was probably more correct with what he called “Augmentation”, so think “Augmented Intelligence”. Augmented Intelligence makes machines better thought partners for people. This concept is clearer for considering both the technological and economic consequences. What we should see in a world of rapidly proliferating Augmented Intelligence is the opposite of a jobless dystopia — productivity growth, economic growth, new job growth, and wage growth.

And I think this is exactly what we are seeing. It’s worth remembering that before COVID, only 18 months ago, we were experiencing the best economy in 70 years — rising wages, low and falling unemployment, and essentially zero inflation. The economy was even improving more for lower skill and lower income people than it was for people like us, despite computers everywhere. Unemployment among the most disadvantaged in our society — people without even high school degrees — was as low as it’s ever been. This is far from an automation-driven dystopia; in fact, it’s the payoff from three centuries of increasing mechanization and computerization. As the economy recovers from COVID, I expect these positive trends to continue.

4. Individuals or Teams: Who’s the Better Customer for SaaS Products? – David Sacks

There are three main reasons for the superior economics of Team products:

1. Deal Sizes

Team products have larger initial contract values as a result of the ability to sell multiple seats. By contrast, the small deal sizes of Individual products may be insufficient to justify the cost of a sales team. Unless the Individual product is highly viral, it will be easier to build a distribution strategy for a Team product.

2. Retention

Team products are stickier than Individual products. To use a gaming analogy, multiplayer mode is more engaging than single-player mode. Users can do more interesting things when coworkers are part of the experience; value creation is higher.

Once a team is collaborating in a product, no single user can easily make the decision to leave. The decision to migrate to another tool requires coordination (aka a “rip and replace”). By contrast, a solo user can leave an individual product at any time.

Finally, collaboration provides constant opportunities for reactivation. A subscriber who stops using an Individual product is likely churned whereas an inactive user on a Team product is just one notification away from being reengaged. As long as the team maintains some minimum threshold of engaged users, it will avoid churn at the account level.

For all of these reasons, account-level churn rates for Individual plans are commonly around 5% per month, but only 1-2% per month for Team plans. This translates into much higher revenue retention for Team plans.

3. Seat Expansion 

Team plans have the ability to add new seats as the product spreads within a company, creating revenue expansion. As a result, successful Team products have “net negative churn,” meaning that expansion from retained accounts exceeds revenue lost from churned accounts. 

5. It’s Official: US Government Says Electric Vehicles Cost 40% Less To Maintain – Steve Hanley

In its latest study, the Office of Energy Efficiency and Renewable Energy says,

“The estimated scheduled maintenance cost for a light-duty battery-electric vehicle (BEV) totals 6.1 cents per mile, while a conventional internal combustion engine vehicle (ICEV) totals 10.1 cents per mile. A BEV lacks an ICEV’s engine oil, timing belt, oxygen sensor, spark plugs and more, and the maintenance costs associated with them.”…

…Big deal, you say? Who cares about a difference of a measly 4 cents? Consider this. The light duty vehicles — sedans, SUVs, passenger vans and the like — owned and operated by the federal government traveled nearly 2 billion miles in 2019, according to the General Services Administration. That difference of 4 little cents translates into savings of about $78 million a year, according to Motor Trend.

The one thing that the EERE study doesn’t show is the reduction in fuel costs for those government owned vehicles, which allows us to do a little speculating. Let’s assume the average fuel economy for all of them is 20 miles per gallon. That means it would take about 100 million gallons of gasoline to drive 2 billion miles.  Now lets assume that gas costs an average of $3.00 a gallon (I am math challenged so I like to use round numbers). 100 million gallons at 3 bucks a gallon equals $300 million, does it not?

Now let’s assume further that the cost of electricity is roughly half the cost of gasoline. The end result is that a fleet of electric vehicles would save Uncle Sam about $150 million in fuel costs every year. Add in the $78 million in lower maintenance costs and the total annual savings from switching the entire US government fleet to electric vehicles could be $228 million every year from here to eternity or $2.28 billion over the next decade.

6. Casualties of Perfection – Morgan Housel

So many people strive for efficient lives, where no hour is wasted. But an overlooked skill that doesn’t get enough attention is the idea that wasting time can be a great thing.

Psychologist Amos Tversky once said “the secret to doing good research is always to be a little underemployed. You waste years by not being able to waste hours.”

A successful person purposely leaving gaps of free time on their schedule to do nothing in particular can feel inefficient. And it is, so not many people do it.

But Tversky’s point is that if your job is to be creative and think through a tough problem, then time spent wandering around a park or aimlessly lounging on a couch might be your most valuable hours. A little inefficiency is wonderful.

The New York Times once wrote of former Secretary of State George Shultz:

His hour of solitude was the only way he could find time to think about the strategic aspects of his job. Otherwise, he would be constantly pulled into moment-to-moment tactical issues, never able to focus on larger questions of the national interest.

Albert Einstein put it this way:

I take time to go for long walks on the beach so that I can listen to what is going on inside my head. If my work isn’t going well, I lie down in the middle of a workday and gaze at the ceiling while I listen and visualize what goes on in my imagination.

Mozart felt the same way:

When I am traveling in a carriage or walking after a good meal or during the night when I cannot sleep–it is on such occasions that my ideas flow best and most abundantly.

Someone once asked Charlie Munger what Warren Buffett’s secret was. “I would say half of all the time he spends is sitting on his ass and reading. He has a lot of time to think.”

This is the opposite of “hustle porn,” where people want to look busy at all times because they think it’s noble.

7. Tobi Lütke – Sriram Krishnan and Tobi Lütke

This is a very natural segue to my next question. One of the theories behind this whole set of interviews is diving into the atomic bits of how we spend our time in meetings. This time compounds over the long term and has a massive effect. What does a good meeting with Tobi look like? Alternatively, what does a bad meeting with you look like?

So actually, agendas are not terribly successful with me. I admire how other CEOs I’ve spoken with always have a strict agenda where everyone has a speaking slot. I find that absolutely fascinating. Even if I really set myself to an agenda and say, “Okay, great, this is going to happen,” I can’t get through half of a meeting like this. Partly because a good meeting is, for me personally, when I learn something.

I started a company because I love learning. I went into programming because I found it fascinating. During meetings, I just love to hear the things that teams have discovered. When you’re discussing an idea or a decision, I want to know what has been considered. To be honest, I find myself more interested in the inputs of an idea than the actual decision. I say this because when I have my own ideas, the first thing I tend to do is just try to falsify them, to figure out why what I’m thinking about is probably incorrect. This is actually something that I have to explain to people that I work with. If I like someone’s idea, I tend to do the same thing: I try to poke holes in it.

I usually say, “Well, the implication of this choice means you’ve made the following assumptions. What inputs did you use to make these foundational assumptions?” Effectively, I’m trying to figure out if an idea is built on solid fundamentals. I find that shaky fundamentals tend to be where things often go wrong. The decision being discussed could be the perfect decision according to the various assumptions that everyone came into the room with. But if those assumptions are faulty, the seemingly perfect decision is faulty too. Interestingly, assumptions are rarely mentioned in the briefing docs or in the slide deck. Usually, I’m trying to make sure those are rock solid. Through this process, I invariably end up learning something completely new about a field. That gives me great confidence and comfort both in the decision and the direction…

…You try and design how your company spends time and attention. One particular incident came up recently which I found really fascinating. You wrote a script to delete every recurring meeting at Shopify. Talk about why you did that, and what you ended up learning from it.

[Laughs] So, going back a little bit further there—you know what, I should talk about books. One thing that is interesting is how people have accused Shopify of being a book club thinly veiled as a public company.

We tend to read a lot and talk about a lot of books. We read Nassim Taleb’s books and one person on my team began talking about Antifragile and gave an outline. He said, “I think Nassim is putting a word to the thing that you keep talking about…”

Now, I come from an engineering perspective. One of my biggest beefs with engineers, in general, is that they love determinism. I think there’s very little determinism in engineering left that’s of value. An individual computer is deterministic; once you introduce even just a network connection into the mix, everything becomes unpredictable and you have to write code that’s resilient to the unknown. Most interesting things come from non-deterministic behaviors. People have a love for the predictable, but there is value in being able to build systems that can absorb whatever is being thrown at them and still have good outcomes.

So, I love Antifragile, and I make everyone read it. It finally put a name to an important concept that we practiced. Before this, I would just log in and shut down various servers to teach the team what’s now called chaos engineering.

But we’ve done this for a long, long time. We’ve designed Shopify very well because resilience and uptime are so important for building trust. These lessons were there in the building of our architecture. And then I had to take over as CEO.

When that happened, I made two decisions: one, I’m going to try to learn as much about business as possible. But, if business is very different from software architecture, I’m going to be no good no matter what I do. And so, I ran an experiment to treat engineering principles, software architecture, complex system design, and company building as the same thing. Effectively, we looked for the business equivalent of just turning off servers to see if the system has resiliency. For instance, we used to ask people to use their mouse on their non-dominant hand for a day. We introduced these little nudges to ensure that people didn’t become complacent.

There are a bunch of really fun stories around this. I had a conversation with one of my co-founders, and we were discussing our unique problem: namely, Shopify was a company initially for American customers, built by German founders, in Canada.

[Both laugh]

It’s a very complex thing.

For instance, we talk a lot about how different cultures interact because we couldn’t have built Shopify without the Canadian optimism. These things were not necessarily things that we would recognize, at least when it comes to optimism, coming from Germany. That said, there are also challenges between cultures. For instance, Canadians are unbelievably nice. Like, no one wants to ever say anything to upset anyone. This is why we need to emphasize the importance of feedback. In this way, the uphill battle is more real for us than it would be for a Silicon Valley company.

There’s so much on the theme of how Shopify is not a Silicon Valley company. I think you pointed out one of these themes right here.

Exactly.

For instance, if we had built the company in Israel, this would not have been a challenge. It’s really important to understand that culture is real and multi-layered. The “host” city’s effect on the employees in that local office is very real. To do something world class, you have to show up with a lot of world class skills, and not a lot of downsides.

In this way, pushing people to give feedback is something very important for us.

That was a tangent, but to get back to the question you asked, we found that standing meetings were a real issue. They were extremely easy to create, and no one wanted to cancel them because someone was responsible for its creation. The person requesting to cancel would rather stick it out than have a very tough conversation saying, “Hey, this thing that you started is no longer valuable.” It’s just really difficult. So, we ran some analysis and we found out that half of all standing meetings were viewed as not valuable. It was an enormous amount of time being wasted. So we asked, “Why don’t we just delete all meetings?” And so we did. It was pretty rough, but we now operate on a schedule.

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Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. Of all the companies mentioned, we currently have a vested interest in Shopify. Holdings are subject to change at any time.

We’ve constantly been sharing a list of our recent reads in our weekly emails for The Good Investors.

Do subscribe for our weekly updates through the orange box in the blog (it’s on the side if you’re using a computer, and all the way at the bottom if you’re using mobile) – it’s free!

But since our readership-audience for The Good Investors is wider than our subscriber base, we think sharing the reading list regularly on the blog itself can benefit even more people. The articles we share touch on a wide range of topics, including investing, business, and the world in general.

Here are the articles for the week ending 27 June 2021:

1. Little Stories – Morgan Housel

After years of tests, Lockheed engineers finally built a stealth plane. They could fly their prototype without radar picking it up. It was a miracle.

Then one day, it just stopped working.

“You lit up the radar like a goddamn Christmas tree” an engineer tells a test pilot in the book Skunkworks. “They saw him coming from 50 miles away.”

No one could figure it out. They hadn’t made any changes to the plane’s design.

The cause, they eventually discovered, highlighted the complexity of their work.

A screw hadn’t been secured tightly enough during maintenance, its head extending a few millimeters above the plane’s surface. That was maybe half a drill spin less than ideal. It was more than tight enough for the plane to operate. But on radar, it “appeared as big as a barn door.”

There’s a lot of hidden leverage in the world – tiny things that seem inconsequential but operate in a tightly wound system where one flaw can bring everything down.

It also makes me wonder: How much incredible technology has been abandoned in frustration when we were half a drill spin away from success?…

…Skateboarder Tony Hawk landed a 900 – two and a half spins – at the 1999 X Games. It was the biggest achievement the sport had ever seen, the equivalent of the four-minute mile.

It catapulted Hawk into legend status. His video game came out a year later and sold 30 million copies. Six Flags named a rollercoaster after him.

But here’s the craziest part of this story: fifteen years later, an eight-year-old landed a 900.

Hawk was also the first person to land a 720 (two spins) – a feat later accomplished by a second-grader.

A lot of sports work like that. One person raises the bar over what previously seemed impossible, and that becomes the baseline for a new generation to build upon.

Just qualifying for the Boston Marathon requires a time that, 100 years ago, would put you within nine minutes of a world record.

A gold-medal gymnast 70 years ago would not make the cut in a local competition today.

Same with technology, business, and investment knowledge. One generation builds on the impossible feats of the previous one. It’s like compound interest.

A fifth-grader recently landed a 1080 – three spins, unthinkable in Hawk’s day. Asked what he thought of the achievement, Hawk replied: “It represents everything I love about skateboarding: constant evolution.”

Which is a statement you can apply to just about any field.

2. Tech Companies Discover Hidden Costs of Remote Work – Sarah Krouse

As companies prepare to implement new remote-work policies, they are finding those policies come with a host of unexpected costs. What’s racking up the bills: new time off and financial benefits to boost morale and help with challenges like child care, immigration fees and paperwork for workers who hold visas, and reimbursing employees for home office equipment. Plus there are potential tax costs associated with employees moving to a state where the company doesn’t already have a presence and business registration.

Intuit’s consumer finance app, Credit Karma, incurred an additional 8% to 10% of expenses for new benefits to support remote workers during the pandemic, said Colleen McCreary, the division’s chief people officer. The company added additional mental health benefits such as remote therapy and agreed to cover remote doctor visits that were outside its health plan’s coverage last year—perks that will remain in place as the company reopens its office. It plans to do so fully by September and expects workers to report in person some of the time, but it will not dictate how often or when they must do so.

To limit costs last year, Credit Karma told its 1,300-employee workforce they could only work remotely from certain states like California and North Carolina where the company already has business operations, she said.

A year ago, CEOs or chief financial officers believed their overall costs could fall dramatically if they relied less on real estate and went remote, said John Bremen, a managing director at Willis Towers Watson who advises companies on their work arrangements. But many corporate leaders have come around to a hybrid approach that allows employees to work part time in the office and part time remotely. That means companies aren’t giving up all of their office space as expected…

…More than a year into the pandemic, some tech companies say remote work has improved productivity and morale, in addition to allowing them to hire talent regardless of where workers live. Those benefits, remote work advocates say, surpass any additional financial costs associated with remote and hybrid work.

3. Howard Marks – Embracing the Psychology of Investing – Patrick O’Shaughnessy and Howard Marks

Patrick: [00:09:11] Living through 2020 and now into 2021 has surely been one of the most interesting markets that anyone’s ever seen. You’ve seen a lot of fascinating markets in your career. And I think your memo output in 2020 was prolific. You wrote a lot about the market. How does this 18-month period stack up to your own experience with market history in terms of its uniqueness and the fact that we had a vicious bear market very quickly and then a pretty similarly vicious bull market? It just strikes me as unusual relative to history, and I’m curious your read on it.

Howard: [00:09:43] Mark Twain said, “History does not repeat, but it does rhyme.” And if you look at the cycle of 2020, it doesn’t rhyme with very much. The main reason is because in every other crisis that I lived through, the upcycle, down cycle, let’s say, the cause was endemic. The cause came from within. And most cycles, I think, occur because people become over optimistic and everything departs from the secular trend line in the direction of excess. And as I mentioned, people become excited and enthusiastic and eventually their excitement and enthusiasm take things to an excess. And in the long run, that access is not sustainable. And so you get a correction back toward the trend line. You get a downward correction. But, of course, it goes through the trend line to an excess on the downside, which ultimately turns out to be unsustainable. So you get a correction back up toward the trend line. So I think cycles are best understood not as ups and downs, which sounds kind of random, but as excesses and corrections.

The point is that what happened in 2020 was obviously not the result of excess optimism. It happened because, for an exogenous reason, that is we were hit by a meteor from outer space in the form of a pandemic. That’s what caused the downturn, along with the fact that in order to fight the pandemic the authorities closed business to keep people from infecting each other. So you had, I would say, a manmade recession prompted by an exogenous event. And then you had an upturn which was engineered by the Fed and the Treasury, not because the upturn did not occur because things got so bad that they were unsustainable and there was a natural regression back toward the trend line of the economy. The recovery occurred because the Fed and Treasury did things that caused it. There’s no similarity to past cycles in terms of cause, speed, amplitude, and impact. You had to learn a whole new game plan.

Patrick: [00:11:59] Do you think that that entire new game plan affects all investors going forward? Because you’ve written a lot in the past about the role of liquidity in markets, famously in the Great Depression monetary supply contracted. The toolkit seems to be fight every battle by flooding liquidity into the system, and so how do we adjust our model of the world going forward?

Howard: [00:12:21] I think that there’s every possibility that people will look at the last two experiences, which are 2020 and 2008, the global financial crisis, and say, the Fed obviously has the firepower to prevent every downturn in the economy and they should do so when people think that way. I’m not confident on this subject because I’m not a professional economist or Fed watcher. And you know, you should beware of analogies. But in the forestry business, if there’s a small fire they let it occur and sometimes they even cause some small fires to burn up the fuel that lies on the forest floor. And if you don’t permit any small forest fires, when you finally have one that you can’t put out right away, you’re going to have a doozy because of all the accumulated fuel on the forest floor. I believe that if they prevent every recession, that will give rise to such excesses on the high side, it will be, as I say, unsustainable and will cause a recession and that’s going to be a doozy.

So it just seems to me that if I were running Fed, which I’m absolutely unqualified to do, I would opt for leaving it alone most of the time, the economy, and having it do what it does naturally. All of us in the investment business, I don’t think there are any socialists in the investment business. We’re all in the investment business because we believe in the efficacy of the free market as an allocator of resources. So if you do, then shouldn’t you leave the economy and the capital market alone as much as you can so that it can freely allocate resources? So I guess I would not be an activist.

Now having said that, what they did in 2020 they had to do. And if they hadn’t done it, we’d have a worldwide depression now. And I made the point in one of my memos that just because something has negative possible ramifications doesn’t mean you shouldn’t do it. But in this case, they had to do it. But it did have, in my opinion, negative possible ramifications, so they should try to avoid doing it again anytime soon. And I’m a visual person, so I come up with visual images. And my visual image for the economy is its kind of like a ball at the top of a water spout. And as long as the water spout is strong, the ball stays up in the air, it stays out of the water. So the Fed levitates the economy through the water stock, which consists of liquidity. But it only stays up as long as the Fed is injecting liquidity. And is it appropriate for the Fed to inject incremental liquidity on a permanent basis?

4. What Makes Quantum Computing So Hard to Explain? – Scott Aaronson

The trouble is that quantum computers will not revolutionize everything.

Yes, they might someday solve a few specific problems in minutes that (we think) would take longer than the age of the universe on classical computers. But there are many other important problems for which most experts think quantum computers will help only modestly, if at all. Also, while Google and others recently made credible claims that they had achieved contrived quantum speedups, this was only for specific, esoteric benchmarks (ones that I helped develop). A quantum computer that’s big and reliable enough to outperform classical computers at practical applications like breaking cryptographic codes and simulating chemistry is likely still a long way off.

But how could a programmable computer be faster for only some problems? Do we know which ones? And what does a “big and reliable” quantum computer even mean in this context? To answer these questions we have to get into the deep stuff.

Let’s start with quantum mechanics. (What could be deeper?) The concept of superposition is infamously hard to render in everyday words. So, not surprisingly, many writers opt for an easy way out: They say that superposition means “both at once,” so that a quantum bit, or qubit, is just a bit that can be “both 0 and 1 at the same time,” while a classical bit can be only one or the other. They go on to say that a quantum computer would achieve its speed by using qubits to try all possible solutions in superposition — that is, at the same time, or in parallel.

This is what I’ve come to think of as the fundamental misstep of quantum computing popularization, the one that leads to all the rest. From here it’s just a short hop to quantum computers quickly solving something like the traveling salesperson problem by trying all possible answers at once — something almost all experts believe they won’t be able to do.

The thing is, for a computer to be useful, at some point you need to look at it and read an output. But if you look at an equal superposition of all possible answers, the rules of quantum mechanics say you’ll just see and read a random answer. And if that’s all you wanted, you could’ve picked one yourself.

What superposition really means is “complex linear combination.” Here, we mean “complex” not in the sense of “complicated” but in the sense of a real plus an imaginary number, while “linear combination” means we add together different multiples of states. So a qubit is a bit that has a complex number called an amplitude attached to the possibility that it’s 0, and a different amplitude attached to the possibility that it’s 1. These amplitudes are closely related to probabilities, in that the further some outcome’s amplitude is from zero, the larger the chance of seeing that outcome; more precisely, the probability equals the distance squared.

But amplitudes are not probabilities. They follow different rules. For example, if some contributions to an amplitude are positive and others are negative, then the contributions can interfere destructively and cancel each other out, so that the amplitude is zero and the corresponding outcome is never observed; likewise, they can interfere constructively and increase the likelihood of a given outcome. The goal in devising an algorithm for a quantum computer is to choreograph a pattern of constructive and destructive interference so that for each wrong answer the contributions to its amplitude cancel each other out, whereas for the right answer the contributions reinforce each other. If, and only if, you can arrange that, you’ll see the right answer with a large probability when you look. The tricky part is to do this without knowing the answer in advance, and faster than you could do it with a classical computer.

Twenty-seven years ago, Shor showed how to do all this for the problem of factoring integers, which breaks the widely used cryptographic codes underlying much of online commerce. We now know how to do it for some other problems, too, but only by exploiting the special mathematical structures in those problems. It’s not just a matter of trying all possible answers at once.

5. Twitter thread on the “fighter mentality” of Mark Zuckerberg – Dan Rose

In my experience the best founders develop a fighter mentality. Mark Zuckerberg was a fighter, and without that mentality Facebook would never have achieved its full potential. Here’s what I saw over 13 years working for Zuck:

One of Mark’s first big fights was with his own board + exec team. They tried to convince him to sell the company to Yahoo for $1B in ’06. At the time FB had 5M users (all college) and was 2 yrs old. At the age of 22, Mark stood to gain $300M personally. How could he say no?

Everyone told Mark to sell. Friends said he’d be crazy to pass up $1B. His management team wanted an exit. His board put pressure on him. But Mark knew something they didn’t – FB was on the cusp of launching new products that would completely change the trajectory of the company.

I joined FB in mid-2006, right after Mark made the decision not to sell (I’m glad he did!). He had the courage to go against everyone around him, and he was promptly vindicated the following year when we raised our Series C from Microsoft at $15B.

Within a couple of years after the Yahoo near miss, Mark replaced his entire management team and reconstituted the board. He needed people around him who believed in his vision, people he could trust to fight alongside him. I was one of them…

…The Social Network came out in 2010. Mark had been warned it would portray him in a negative light, and he was appropriately concerned about its impact on team morale, FB’s brand and his personal reputation. His advisors told him to ignore it, keep his head down, stay focused.

In one of the greatest jiu jitsu moves of all time, Mark rented out the Shoreline cinema complex and bussed in the entire company to see the premier of the movie. His first (and probably only) viewing of The Social Network was in a giant cinema with the rest of his employees.

Adding to the surrealness of this scene, Mark’s admin asked me to sit next to him – she thought my positivity would be a calming influence. When the character portraying him was being seduced by a girl, he leaned over and whispered “now this is awkward.” We both laughed out loud!

6. How Software Is Eating the Car – Robert N. Charette

“Once, software was a part of the car. Now, software determines the value of a car,” notes Manfred Broy, emeritus professor of informatics at Technical University, Munich and a leading expert on software in automobiles. “The success of a car depends on its software much more than the mechanical side.” Nearly all vehicle innovations by auto manufacturers, or original equipment manufacturers (OEMs) as they are called by industry insiders, are now tied to software, he says.

Ten years ago, only premium cars contained 100 microprocessor-based electronic control units (ECUs) networked throughout the body of a car, executing 100 million lines of code or more. Today, high-end cars like the BMW 7-series with advanced technology like advanced driver-assist systems (ADAS) may contain 150 ECUs or more, while pick-up trucks like Ford’s F-150 top 150 million lines of code. Even low-end vehicles are quickly approaching 100 ECUs and 100 million of lines of code as more features that were once considered luxury options, such as adaptive cruise control and automatic emergency braking, are becoming standard.

Additional safety features that have been mandated since 2010 like electronic stability control, backup cameras, and automatic emergency calling (eCall) in the EU, as well as more stringent emission standards that ICE vehicles can only meet using yet more innovative electronics and software, have further driven ECU and software proliferation.

Consulting firm Deloitte Touche Tohmatsu Limited estimates that as of 2017, some 40% of the cost of a new car can be attributed to semiconductor-based electronic systems, a cost doubling since 2007. It estimates this total will approach 50% by 2030. The company further predicts that each new car today has about $600 worth of semiconductors packed into it, consisting of up to 3,000 chips of all types…

…How little software is developed by car makers is illustrated by comments made in 2020 by Herbert Diess, then CEO Volkswagen Group and now its Chairman, when he admitted that “hardly a line of software code comes from us.” VW estimates that only 10% of the software in its vehicles is developed in-house. The other 90%  is contributed by tens of suppliers, and at some OEMs, this number reportedly reaches more than 50. 

So many software suppliers, each with their own development approach, using their own operating systems and languages obviously adds another level of complication, especially in performing verification and validation. This is highlighted by a recent Strategy Analytics and Aurora Labs survey of software developers across the automotive supply chain asking how difficult it was to know when a code change in one ECU affects another. Some 37% of those surveyed indicated it was difficult, 31% indicated it was very difficult, 7% indicated that it was pretty darn close to impossible, while 16% indicated that it was not possible.

Car companies and their suppliers are realizing that they must collaborate more to keep tighter control of data configuration management to keep unintended consequences from occurring due to unanticipated ECU code changes. But both admit that there is still a way to go. 

7. Twitter thread on the rise of intangibles and what it means for investors – Eugene Ng

Sharing my key takeaways from @mjmauboussin’s latest piece on “The Impact of Intangibles on Base Rates” and how it should affect us as investors. A must read! https://www.morganstanley.com/im/publication/insights/articles/article_theimpactofintangiblesonbaserates.pdf?1624494283562

1️⃣ Thinking Casually White heavy check mark: Taking the inside view, gathering lots of information of what is of interest, combining with your own input & experience & project into the future and coming up with a narrative trumps…

2️⃣ Thinking statistically Cross mark: Taking the outside view, relying on the past & base rates. Not relying of own experience, but others experience. Outcomes tend to be average, outliers rare, best for bell-shaped distributions, not in stocks where power laws and tails exist.

3️⃣ Intangibles & Growth. Two key characteristics: (1) Grow Faster Chart with upwards trend: Enjoy strong economies of growth, cheap to reproduce and share Rightwards arrow companies can grow much faster & more persistent; (2) Decline Faster Chart with downwards trend: Obsolescence and sunkeness Rightwards arrow companies can decline much faster

4️⃣ Intangibles & Access: The distinction between tangible is access. Only one can use a tangible asset at one time, whereas many can use an intangible asset at the same time. Marginal cost of sharing can be very low. E.g. Software.

5️⃣ Intangibles & Scalability: Because intangibles are much more scalable, companies that rely on intangibles can grow much faster than those built on tangibles. Chart with upwards trendRocket

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Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. Of all the companies mentioned, we currently have a vested interest in Facebook and Microsoft. Holdings are subject to change at any time.

We’ve constantly been sharing a list of our recent reads in our weekly emails for The Good Investors.

Do subscribe for our weekly updates through the orange box in the blog (it’s on the side if you’re using a computer, and all the way at the bottom if you’re using mobile) – it’s free!

But since our readership-audience for The Good Investors is wider than our subscriber base, we think sharing the reading list regularly on the blog itself can benefit even more people. The articles we share touch on a wide range of topics, including investing, business, and the world in general.

Here are the articles for the week ending 20 June 2021:

1. Blink – Michael Batnick

I can’t believe it’s been ten years since my mother passed away. The passage of time felt like the blink of an eye.

I was only 26 when my mother died. She only had 26 years with me. My fingers are shaking while I type because this is the most painful part. It’s not that I didn’t have enough time with her. It’s that she didn’t have enough time with me. She didn’t see me get married. She never got to meet her grandkids. She was robbed of some of the most joyful parts of life.

Even though my mother was the center of my universe, I don’t spend every second of every day thinking about her. It comes in waves. Tidal waves…

…I’m sad that my mother isn’t here, but I’m a better person for it. I would undo this in a second if I could, but losing her gave me a perspective on life that would have been impossible otherwise.

Ten years ago, I was a child in a man’s body. I had no prospects for a bright future. Death was staring me in the face, both metaphorically and literally. Now I’m a successful adult. I don’t mean that in the traditional sense of people equating success with money.

I’m successful because I don’t yearn for more. I have my wife and my boys and my freedom. I’m good. I have a unique appreciation of what I have because I already lost everything when my mother died. Now I have everything I need and everything I want.

Health is the only thing that matters. We all know this. But some people know it more than others. Losing my mother hurt like hell, but I’m grateful for what came of it. It taught me not to take anything in life for granted, especially life itself. Years aren’t promised, so I try to enjoy every day.

2. Technology Saves the World – Marc Andreessen

Only 15 months ago — March 13, 2020 — COVID-19 became a national emergency in the United States. My assumption at the time was that COVID lockdowns could extend as long as five years, the previous speed record for modern vaccine development, with many millions of deaths — a generational cataclysm.

While COVID certainly has been plenty devastating in the U.S. and around the world, with 600,000 Americans dead of and with COVID, and with shockingly broad destruction of American small businesses, it has not been nearly as destructive as it could have been. We are coming out of COVID years early, with many livelihoods and businesses preserved, compared to what we had any right to expect. And overwhelming credit goes to our spectacular technology industry.

The most amazing COVID technology story has to be the vaccines. Moderna, a product of the American venture capital system, created the first mRNA COVID vaccine within two days of receiving the genetic code for COVID by email. It’s hard to overstate the tremendous advance in both speed and effectiveness of this new technological platform — and now that we know how well mRNA vaccines work, we can look forward to decades of new vaccines both for potential COVID variants and for many other health threats. We now have the technological tools to quite literally code nature, and the payoff to human flourishing will be profound…

…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.

3. Stripe: Thinking Like a Civilization – The Generalist (Mario)

The Roman poet Ovid coined that phrase, roughly translatable as “the end justifies the mean.” With that deft turn, Ovid summarized a school of moral philosophy referred to as consequentialism. 

If Silicon Valley’s ethics can be distilled into a coherent ethics, this is it: do what is necessary to change the world, no matter how many toes are trampled, privacy rights violated, or human norms deranged. The method does not matter, consequentialism tells us, the result is what counts. 

This is the ethos of Kalanick and Zuckerberg, and many tribute acts. It could not be further from the morality of the Collisons. 

Though perhaps they would disagree, and could certainly put a finer point on their particular weltanschauung, Patrick and John seem to adhere to a deontological ethics. This school, best articulated by glorious weirdo Immanuel Kant, suggests that the morality of an action is determined independently of its outcome. Though much too simple, deontologists argue that things like intent matter. 

All of which is to say that the Collisons seem to have forged an alternative for elite leadership that does not seek to excuse a noisome, polluting process with a favorable outcome. Just as Patrick notes that the “no jerks policy” companies sometimes apply to restrain themselves from hiring brilliant assholes is “too low a bar,” Stripe’s leadership seems to understand that success alone is not enough. You have to win with grace…

…Above all, Stripe is defined by its commitment (and espousal) of a multi-decade timeline. Leadership constantly reinforces the message that Stripe is in its early innings and that its most defining products are yet to come. 

This is a useful message for nearly every company to advance, but it carries extra weight given Patrick’s intellectual influences and extracurriculars, particularly his service as a Board Member for The Long Now Foundation. The organization, “established in 01996” exists to encourage thinking about humanity over the next 10,000 years. 

Stripe doesn’t have explicit plans for the next several millennia, but the company has succeeded in shifting employee mindset to think further ahead. In an interview with Ken Norton, Business Lead Michael Siliski articulated this trait: 

“We talk a lot about building multi-decade abstractions. I personally like to think 10 to 30 years to get out of the three- to five-year mode, but generally here people do say “multi-decade” a lot. Patrick and John and the entire leadership team are clear that this is a long-term bet and that we’re still very early. That long time horizon comes from the top, and it’s in the culture. And my sense is it’s been like that at Stripe since day one.”

Others make the same note. From Patio11:

“[M]y career success metric is making a large improvement in the lives of a large number of software people. I encourage anyone who isn’t already planning on a 45 year time scale to try taking a stab at this and reviewing the plan every year; the weeks are long but the years fly by sometimes. At present I’m at Stripe because I think it is probably the best option available in working against those long-term goals. 15 years down; 30+ to go; still early innings.”

Even in the visionary world of technology, this extremity of foresight is unusual; it’s even more uncommon to have it effectively distributed through an organization. 

This manifests in the company’s recruiting. Patrick notes that “the biggest thing we did differently…is just being ok to take a really long time to hire people.” 

It took the company six months to hire its first two employees. Describing their “painfully persistent” process of recruiting in his conversation with Lilly, Patrick noted that he could think of five employees that Stripe had taken three or more years to recruit. 

This approach makes sense when you think of it in a decades-long framework. As he notes in that discussion, employees — particularly managers — bring more employees with them over the years. Taking the time to find someone truly exceptional, though painful in the short term, compounds year after year. 

4. Are Inflation Worries Over-Inflated? – Chuin Ting Weber

What happens to markets when inflation becomes a problem? For the US, historically, the worst inflationary period in recent memory was from 1973-1981. CPI started to print consistently in low single digits from 1982 onwards, with the exception of 6.0% in 1990.  Many analysts point to OPEC and the oil crisis as the trigger for cost-push inflation starting in 1973. However, others have put the responsibility for the long drawn-out stagflation and economic slowdown on tightening by the Fed – the same concern being flagged by the worry camp today.

Let us take a look at the historical performance of the S&P500 during this time, for a one-time investment made at the start of each of these “bad” inflation years…

…For the two most unfortunate start points (1973 and 1974), it took 9-12 years for a lump sum investment to break even, net of inflation. This is consistent with MoneyOwl’s guidance for investors who wish to be in a 100% equities portfolio to have a time horizon of 10-15 years, based on the historical performance of markets. These are not magic numbers, but it gives the long-term investor some degree of comfort. In the example, we did not factor in dollar cost averaging, which is a more common way of investing and which could change the breakeven thresholds; nor adjustments to the investor’s personalised CPI or PCE based on his basket of goods.

However, what is counter-intuitive and remarkable, is that despite the inflationary environment, an investment took less than 5 years to break even on a real return basis in 7 out 9 years, or 78% of the time. In 6 out of 9 years, you break even within a year. More intriguing is that in as many as 4 years, investments started at the beginning of those years have not lost money since. This includes investments deployed at the beginning of the worst inflationary year of 1979.

Our little empirical study of US inflation vs. markets tells us that:

• There is no relationship between contemporaneous inflation and an investor’s long-term experience, or even in any single year. In fact, you can be handsomely rewarded by markets even during a period of very bad inflation.
• The odds of a positive return from being invested and staying invested are much higher than trying to time the market. Staying invested is valid even in inflationary and uncertain times.
• Having a line in the water to capture an outsized return if it comes along can cushion you against cumulative losses into the long term. We do not want to miss those years by timing the market, because it matters to our overall, cumulative return.
• There is a case for Dollar Cost Averaging during times of severe economic dislocation, because it means that your total return will not be the worst-case and you will also catch the good years. The regular saving plan (RSP) way of investing out of your monthly income, which is what we recommend for our mass market accumulation clients, has benefits beyond the formation of a good financial habit.

This walk down a “scary” memory lane supports what we already know about markets: that asset prices move quickly to incorporate all expectations and information about inflation and its potential impact on interest rates and equity prices. This is also indeed, a random walk. There is a randomness to year-on-year return and any investment approach built on trying to outguess markets repeatedly is quite futile.

5. He makes up to $3,900 a week racing cars on a blockchain game – Shihan Fang

If you haven’t heard of F1 Delta Time or its publisher, Hong Kong-based Animoca Brands, you’re not alone. It’s a game so new that it doesn’t even have its own Wikipedia page. F1 Delta Time is among a growing category of online games that are leading the “play-to-earn” movement. Built on blockchain technology, these games allow players to make money from in-game assets.

This offers gamers more opportunities to monetize their gaming efforts. Many games currently allow for virtual items to be traded for virtual currency. But unless they are built on blockchain technology, there’s no way to cash out either the virtual currency or items.

As such, gamers who want to turn their hobby into their line of work either have to climb their way up to a professional level or participate in peripheral activity like livestreaming or giving gaming tutorials. Another popular but tedious option is to build up an account and then sell it in an off-game transaction.

The play-to-earn movement has gained tremendous investor interest of late. Two unicorns were minted just last month, with Animoca Brands raising US$88.8 million and San Francisco-based Forte securing US$185 million at a valuation of $1 billion each. Neither of these companies are strictly in the gaming business; instead, they provide the blockchain platform to enable play-to-earn games…

…Besides Revv, F1 Delta Time issues digital assets tied to NFTs. It’s a process known as the “tokenization” of an asset and enables what Animoca calls “true digital ownership,” or having identifiable property rights to unique digital assets.

To race, each player needs a driver, a car, and a set of tires. These can be further customized by gear (suit, helmet, gloves, boots, trinket) and parts (front wing, rear wing, transmission, brakes, turbocharger, energy store, engine block, suspension) to create the best configuration for every race and type of weather.

Each of the aforementioned assets can be bought and sold on game-agnostic NFT marketplaces such as Opensea. Even the segments of each race track are tokenized, allowing owners to make money from entry fees.

Another novel application of NFTs is the in-game “staking” mechanism, a virtual event that allows players to temporarily lock up their cars in exchange for revv. According to its developers, “staking” was designed to increase the value and utility of in-game NFTs, and to allow owners to generate passive Revv income.

All tokenized items come in four levels of rarity: common, epic, legendary, and apex. The rarer the car, the lower the in-game supply, and the higher the earnings from staking.

NFT enthusiasts may want to note that a tokenized asset is made up of two parts: the NFT itself, which resides on blockchain, and the digital asset, which is stored off-chain, usually on a server run by Amazon Web Services. This means that the digital asset could potentially still be lost if its server is damaged or hacked, or if Amazon goes bust.

According to NFT insiders, this dependency is a weakness of the “centralized storage” model. While no one has the solution yet, there are some nascent efforts to create decentralized storage schemes for more “persistent” availability of assets.

“We have people in our team that are not good gamers at all. But they earn more because of other things like staking. If you’re purely investment and money-driven, there is money for you. If you are just a gamer, then there is something for you. If you like motorsports, there are collectibles. If you are across a few of those sectors, this is perfect,” says Brock.

6. Genetic Control of Aging and Life Span – Jill U. Adams, Ph.D

When studying life span, scientists tend to work with organisms that do not live very long; that way, they can observe the entire course of an organism’s existence and obtain relatively rapid experimental results. One organism that researchers frequently employ in their studies of life span is Caenorhabditis elegans, a microscopic roundworm that typically lives to a ripe old age of two to three weeks. Another advantage of using C. elegans is that these worms have a simple physiology and easily manipulated genes.

Over the last several decades, C. elegans has been the subject of many published studies, but perhaps the most famous of these appeared in 1993. In that paper, researcher Cynthia Kenyon and her associates showed that C. elegans with a specific single-gene mutation lived twice as long as members of the species that lacked this mutation (Kenyon et al., 1993). This finding was groundbreaking for a number of reasons. First, it challenged the prevailing concept that aging occurs as the body deteriorates over time. Second, it led to a shift in thinking, even among researchers who already believed that aging was subject to some sort of genetic control. Prior to this point, most such scientists figured that aging, age-related illnesses, and death were consequences of multiple cellular and physiological processes, and therefore under the regulation of a wide and diverse set of genes. Kenyon’s paper, however, suggested that a single gene could dramatically regulate how long an organism lived, thus opening the door to new hypotheses about modifying life span through genetic manipulation.

The responsible gene is called daf-2, and, in 1997, a research group led by Gary Ruvkun finally solved its DNA sequence (Kimura et al., 1997). Scientists were surprised to find that the protein coded for by this gene (designated DAF-2) looked much like the receptor protein within humans that responds to the hormone insulin. In other words, the worm protein is simply a primitive form of our own insulin receptors…

…So, how does a single gene cause such a dramatic effect? It turns out that daf-2 normally controls many other genes, which in turn regulate a variety of physiological processes at different stages in life. For example, in their studies of C. elegans, researchers have found a large set of genes that are either “turned on” or “turned off” in worms that carry two copies of the daf-2 mutation. The genes that show the most change fall into several different classes, some of which line up nicely with existing hypotheses about the mechanisms of aging in other organisms; this includes the belief that various genes encode for proteins that extend life by acting as antioxidants, regulating metabolism, and exerting an antibacterial effect.

One particular gene affected by daf-2 is daf-16; this gene encodes a transcription factor, or a protein that determines when and where hundreds of other genes are turned on. Normally, the DAF-2 protein (which is an insulin receptor) exerts a dampening effect on the DAF-16 protein through phosphorylation, or the addition of a phosphate group. In the mutant worms, however, DAF-16 is not phosphorylated, and it is thus active and present in cell nuclei. Experiments have determined that this activation of DAF-16 (caused by the absence of a phosphate group) is a necessary step toward life span extension (Figure 1).

7. Harder Than It Looks, Not As Fun as It Seems – Morgan Housel

Good advice that took me a while to learn is that everything is sales. Everything is sales. It’s usually framed as career advice – no matter what your role in a company is, your ultimate job is to help sales. But it applies to so many things.

Everything is sales also means that everyone is trying to craft an image of who they are. The image helps them sell themselves to others. Some are more aggressive than others, but everyone plays the image game, even if it’s subconscious. Since they’re crafting the image, it’s not a complete view. There’s a filter. Skills are advertised, flaws are hidden.

A friend recently complained about how inefficient his employer is. Processes are poor, communication is bad. He then said a competitor company had its act together. I asked him how he knew that – he’s never worked there and has never been inside the company. Fair, he said. It just seems that way from the outside.

But almost everything looks better from the outside. I guarantee workers at the competitor find flaws in the way their company operates, because they know about their company what my friend knows about his: how the sausage is made. All the messy personalities and difficult decisions that you only see when you’re inside, in the trenches. “All businesses are loosely functioning disasters” Brent Beshore says. But it’s like an iceberg, only a fraction is visible.

It’s the same for people. Instagram is full of beach vacation photos, not flight delay photos. Resumes highlight career wins but are silent on doubt and worry. Investing gurus are easy to elevate to mythical status because you don’t know them well enough to witness times when their decision-making process was ordinary, if not awful…

…When you are keenly aware of your own struggles but blind to others’, it’s easy to assume you’re missing some skill or secret that others have. The more we describe successful people as having guru-like powers, the more everyone else looks at them and says, “I could never do that.” Which is unfortunate, because more people would be willing to try if they knew that those they admire are probably normal people who played the odds right.

When someone is viewed as more extraordinary than they are, you’re more likely to overvalue their opinion on things they have no special talent in. Like a successful hedge fund manager’s political views, or a politician’s investment advice. Only when you get to know someone well do you realize the best you can do in life is to become an expert at some things while remaining inept at others – and that’s if you’re good. There’s an important difference between someone whose specific talent should be celebrated vs. someone whose ideas should never be questioned. Eat the orange, throw away the peel.

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Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. Of all the companies mentioned, we currently have no vested interest in any of them. Holdings are subject to change at any time.

We’ve constantly been sharing a list of our recent reads in our weekly emails for The Good Investors.

Do subscribe for our weekly updates through the orange box in the blog (it’s on the side if you’re using a computer, and all the way at the bottom if you’re using mobile) – it’s free!

But since our readership-audience for The Good Investors is wider than our subscriber base, we think sharing the reading list regularly on the blog itself can benefit even more people. The articles we share touch on a wide range of topics, including investing, business, and the world in general.

Here are the articles for the week ending 13 June 2021:

1. #023 – The A/B sides of the Internet – China Playbook

What’s the number 1 competitive element in an industry?

It’s the status quo, not the competition between competitors. The US has a long commercial history, so many industries and businesses have developed very well over several generations. If we call the last generation companies as the conservatives, then the conservative forces in the US are very strong. In China, the conservative forces are very weak. 

When I just started working on the food delivery business, I conducted some market research and found something that surprised me.

The largest delivery site in the US is called Grubhub, but they only had hundreds of thousands of orders a day. Domino’s Pizza had more orders than it did! Big chains like McDonald’s and KFC didn’t want to work with Grubhub either because they can offer delivery themselves. The delivery service has become a standard in established F&B chains. Additionally, the Americans eat pretty much the same things every day, unlike the Chinese, we have a lot of varieties.

This led to the last-gen solution being rather satisfactory, leaving very little room the the next-gen solution.

From the research that I did at the time, there were only three companies in China focusing on food delivery. In total, their orders were less than 100K a day. There’s no wide consumer awareness [of this product experience]. Their finances were not great either. If we see them as our last-gen, when we started, they were very weak.

What does this mean? It means when we started, we were not just bringing the Internet to the food delivery industry, we were building the food delivery industry itself. In fact, since we’re building the food delivery industry itself, our impact to the industry is much greater than just digitalizing the industry, our commercial value would also be greater.

This is a core difference between China and the US. This is a core difference between China and the US. Considering all these factors, we can understand why American investors can’t understand Meituan.

Lastly, a simple judgment – for the LBS [location-based services] category, China is a much better market than the US due to our population density, labour cost, population size and generational competition…

…Categorizing also has implications for which products can be made into one app and which can’t.

Taobao and Alipay have huge traffic, but putting Ele.me there didn’t do much.

WeChat and its Moments have such great traffic, but Weibo is still thriving.

It’s also why Meituan is able to consolidate so many things into one app, because most of them are in B2.

Douyin and Toutiao are separate apps. They didn’t incorporate Douyin into Toutiao despite Toutiao’s huge traffic.

All these have to do with categorizing. Categorizing correctly involves core competencies, resource allocation, consumer psychology, and organisational abilities.

2. How SEA Tech Giants Solved The “Cold Start” Problem – David Fallarme

If you’re introducing a radically new operating model to the industry, your primary constraint will be supply. You’ll use high-touch tactics to onboard sellers. You’ll need to go where they are or tap into existing networks, then manually onboard them to make sure they’re good representatives of your platform.

If you’re competing within well-understood industry dynamics, then you’ll be constrained by demand. You’ll use tactics with high scalability. This could take the form of owning digital marketing channels where you have an unfair advantage, riding the wave of a media narrative, or localizing wider and faster than anyone else.

A final lesson not explicitly mentioned here is that the solving Cold Start Problem is already hard, but even harder in a fragmented market in Southeast Asia.

Solving it in one country doesn’t necessarily give you a tailwind to set up in another country, even if those countries are neighbors or can speak the same language. And when you think you’ve got it nailed, your market can suddenly turn into a red ocean.

3. An interview with Patrick Collison – Elad Gil and Patrick Collison

Elad Gil:
Stripe has done an amazing job both in terms of scaling and in terms of attracting people with common values and a shared interest in building infrastructure for the internet economy. I’d like to hear some of your thoughts on how to build a culture, and how to let it evolve.

To start, how do you see culture evolving as an organization scales, and what you think is important early versus later in that evolution?

Patrick Collison:
When it comes to culture, I think the main mistakes that companies make are being too precious about it, being too apologetic about it, and not treating it as dynamic and subject to revision.

Generally speaking, and certainly if a company is working well to some degree— if you’re making progress in building the product you want to build and the service you want to create, and if the organization is growing and customers are adopting—there are empirically some things about your culture that are working well. And I often see companies making a mistake by being too abashed about simply being specific about those.

For example, you might believe firmly in the importance of working hard. Or you might believe firmly in the importance of minute attention to detail to the degree that you’re willing to redo something five times over. What often happens is that companies allude to these things, but in overly oblique fashions. They’ll say, “We believe in the importance of commitment,” but won’t be concrete enough to say that, well, we want people who really want to pour their hearts into this for several years, and we expect this to be the singular focus of your working life.

Similarly, on the attention-to-detail front, it’s easy to describe things in overly milquetoast terms without being really explicit, like: “If you work with us, you’re going to have to be okay with your work being repeatedly designated as inadequate, and okay with it being redone several times over.” These aren’t things that everyone is looking for. And you’re going to have to be okay with some people having that conversation with you and deciding that it’s not for them.

If you aren’t having these explicit conversations about what your culture is, the downsides are threefold: You don’t have the right people joining you, and you’re being unfair to those who do join you, in the sense that they end up being surprised by this emergent friction and tension in work styles. Thirdly, and I think this may be the non-obvious one, people’s disposition with regard to the company is actually a function of what they feel like they signed up for. If they feel like they signed up for an all-encompassing project, they’ll be much more willing to treat it that way than if they discovered it by surprise later on. And so you can actually change the outcome simply by being explicit at the outset…

…Elad:
How do you think about reinforcing or reminding employees about an organization’s cultural values? Do you incorporate it as part of performance reviews, incorporating it into weekly all-hands?

Patrick:
I think the macro thing to bear in mind with a lot of culture stuff is that a rapidly scaling human organization is an unnatural thing. The vast majority of human organizations that we have experience with, be it the school, the family, the university, the local community, the church, whatever, these are not organizations that scale really rapidly. And so the cues and the lessons and the habits you might learn from them are not necessarily going to be sufficient for the kind of human organization you’re building, which is perhaps doubling—or even more—in size, year over year.

As a consequence of that, you’ll often hear people talk about things like using explicit cultural values in performance reviews or in weekly all-hands. And you think, “Well, most of the other human organizations I see don’t do that,” and so it seems sort of contrived or whatever. But the difference is that you actually have a much more difficult challenge, which is to maintain a high degree of cohesion despite the really rapid evolution in the group of constituent participants.

So I’m a big fan of all the things you just mentioned. I think most companies start to explicitly encode and articulate their principles or values too late. I would try to produce a provisional revision literally when you’re just a handful of people. Then continue to update it on an ongoing basis, because assuredly there will be things you realize or come to appreciate are wrong over the course of the company.

But I would start with something right from the outset. And I would absolutely weave it into your product development, your collective communications with each other, your decision-making in general. For example, when you’re choosing the right series A investors, say, I think it would be ideal if the principles by which you ran the organization and the culture internally could help guide you to the right kind of investor for the company…

…Elad:
As you look across the Valley now, it seems like there have been some shifts that have created almost a culture of entitlement. People get enormous benefits, then start to complain about things that may not be that important, like the number of times they can get a free haircut on campus. How do you manage that? As people get bigger and bigger benefits, how do you make sure they don’t feel that they deserve everything?

Patrick:
I think that this is simply a challenge that we collectively have in the U.S. and in the Bay Area in this era of history. Such wealth has been created by our predecessors that we’re short-term benefiting from that it’s easy for that to have spillover effects in the culture and to distract from focus or lead to a loss of determination.

And again, if you just study and read a little about the early days, and ideally talk to people who were around, you see that at the first semiconductor companies and the early software companies and, up to Seattle, early Amazon and Microsoft, there was nothing to be entitled about. People thought that software companies were inconsequential add-ons to the hardware. They were dismissed, they were subject to brutal release cycles, companies were going out of business left, right, and center, there was a lot of concern over competition from Asia. It was a tough market to grow up in. Of course the survivors have done well. But while people are attuned to how successful a cradle for technology Silicon Valley is, they pay less attention to, and are I think less aware of, how densely populated a graveyard it is.

And so while I think that selective pressure was good for the surviving companies, it really kind of screws with our intuitive sense for what’s required to actually build one of these. You have some early success or you raise series A or gain some early traction, and it’s easy, even subconsciously, to start lining up the plots in your head: “Well, Facebook raised its series A in 2005, and went on to be worth $15 billion in 2008 or 2009 or whatever it was,” and so on. And I think the effects of that, in blunt terms, are really pernicious. In many ways it’s harder to create an organization with the kind of focused, determined, disciplined, non-complacent mindset that you need today than it was 20 or 30 years ago. That’s just a structural headwind that we all face.

There are many natural benefits and tailwinds that Silicon Valley enjoys, but I think this is one of the challenges we face. And if Silicon Valley is supplanted by another region, or even just more broadly by a general diffusion, I think this is one of the top contenders as to why that would be the case. It’s because we had too much wealth, we had too much early success, and it caused us to lose our hunger and our edge.

People who’ve spent any time with the great software companies in China— JD, Tencent, Alibaba, and now the next generation of startups—will tell you in no uncertain terms that there is a lack of entitlement, a lack of complacency, and a real determination to succeed that is at least not uniformly present here in Silicon Valley. And so I really think it’s something that should be top of mind for everyone.

4. Boxes, trucks and bikes – Ben Evans

The traditional way to think about ecommerce penetration is to look at share of total retail sales, and then deduct things like car repair, gasoline and restaurants – to get to ‘addressable retail’. On that basis, US ecommerce was at 16% penetration at the end of 2019 and increased to 20% or so in 2020, adding 12-18 months of growth in a year. 

The obvious problem with this analysis is that penetration of different retail categories varies a huge amount – penetration of makeup is different to books, which is different to shoes. This reflects how different the buying journey can be for different kinds of products – we sometimes talk about ‘high touch’ versus ‘low touch’ goods. The chart hides a lot of variation.

However, there’s also another way to split this, that I think is becoming increasingly important – instead of looking at the product category and the buying journey, look at the logistics model.

For Amazon, makeup, books and shoes are all just interchangeable SKUs with the same buying journey that can all be stored in the same fulfilment pod and all go into the same brown cardboard box, but a cucumber, a stove, a bag of cement or a bowl of soup do not fit this model at all – they might need a different buying journey, but they definitely need a different logistics model. So, as well as thinking in terms of hardline versus softline, or high touch versus low touch, we should also think of parcels versus collection or delivery versus bikes.

5. Getting the Goalpost to Stop Moving – Morgan Housel

Paul Graham wrote a few years ago about what happened to the U.S. economy after World War II:

“The effects of World War II were both economic and social. Economically, it decreased variation in income. Like all modern armed forces, America’s were socialist economically. From each according to his ability, to each according to his need. More or less. Higher ranking members of the military got more (as higher ranking members of socialist societies always do), but what they got was fixed according to their rank. And the flattening effect wasn’t limited to those under arms, because the US economy was conscripted too. Between 1942 and 1945 all wages were set by the National War Labor Board. Like the military, they defaulted to flatness.”

Indeed, a few years after the war historian Frederick Lewis Allan wrote:

“The enormous lead of the well-to-do in the economic race has been considerably reduced. It is the industrial workers who as a group have done best – people such as a steelworker’s family who used to live on $2,500 and now are getting $4,500, or the highly skilled machine-tool operator’s family who used to have $3,000 and now can spend an annual $5,500 or more. As for the top one percent, the really well-to-do and the rich, whom we might classify very roughly indeed as the $16,000-and-over group, their share of the total national income, after taxes, had come down by 1945 from 13 percent to 7 percent.”

This went beyond income – even the variation in consumer goods flattened out. Harper’s Magazine wrote something in 1957 that was so important to the era:

“The rich man smokes the same sort of cigarettes as the poor man, shaves with the same sort of razor, uses the same sort of telephone, vacuum cleaner, radio, and TV set, has the same sort of lighting and heating equipment in his house, and so on indefinitely. The differences between his automobile and the poor man’s are minor. Essentially they have similar engines, similar fittings. In the early years of the century there was a hierarchy of automobiles.”

If you look at the 1950s and ask what was different that made it feel so great?, this is your answer. The gap between you and most of the people around you wasn’t large. It created an era where it was easy to keep your expectations in check because few people lived dramatically better than you.

It’s the one thing – maybe the only thing – that distinguishes itself from other periods.

The lower wages felt great because they’re what everyone else earned.

The smaller homes felt nice because everyone else lived in one too.

The lack of healthcare was acceptable because your neighbors were in the same circumstances.

Hand-me-downs were acceptable clothes because everyone else wore them.

Camping was an adequate vacation because that’s what everyone else did.

It was the one modern era when there wasn’t much social pressure to increase your expectations beyond your income. Economic growth accrued straight to happiness. People weren’t just better off; they felt better off.

And it was short-lived, of course.

By the early 1980s the post-war togetherness that dominated the 1950s and 1960s gave way to more stratified growth where many people plodded along while a few grew exponentially. The glorious lifestyles of the few inflated the aspirations of the many.

Rockefeller never yearned for Advil because he didn’t know it existed. But modern inequality mixed with social media has made it so you do know that people drive Lamborghinis and fly in private jets and send their kids to expensive schools. The ability to say, “I want that, why don’t I have that? Why does he get it but I don’t?” is so much greater now than it was just a few generations ago.

Today’s economy is good at creating two things: wealth, and the ability to show off wealth. Part of that is great, because saying “I want that too” is such a powerful motivator of progress. Yet the point stands: We might have higher incomes, more wealth, and bigger homes – but it’s all so quickly smothered by inflated expectations.

That, in many ways, has been the defining characteristic of the last 40 years of economic growth. And Covid-19 pushed the trend into hyperdrive.

The point isn’t to say the 1950s were better or fairer or even that we should strive to rebuild the old system – that’s a different topic.

But nostalgia for the 1950s is one of the best examples of what happens when expectations grow faster than incomes.

And all of us, no matter how much we earn, should ask how we can avoid the same fate.

6. How Startup Founders in Southeast Asia Should Value Their Company – Monk’s Hill Ventures

One of the real challenges Series A founders face is identifying a reasonable valuation for their business before they engage with VCs. At MHV, Peng’s team looks for ‘win-win’ valuation scenarios where both founders and investors agree on valuations that reflect first principles.

Founders need to avoid making the mistake of calling out a company’s valuation upfront. As a founder, you’re typically focused on your own business – and rightly so. However, this means that walking in with a ready-to-go valuation is a mistake. Simply put, you’re going to be wrong when you propose a valuation because you’re not the experienced party. VC’s like MHV see 50 – or more – deals a year in your domain, and see valuations across the board.

Instead, Peng suggests there’s a good way to answer the question about what your company’s valuation is – and that’s to not reference yourself.

“For instance, you could say something like ‘I’ve seen another company get funded at this level and the revenues were X, and the valuation was in Y range’. Give two or three examples. That’s how you answer that question. It shows you’re smart enough not to put forward a number you’re not sure about.” Indicate that you’re fine with what the market offers.

Founders need to take onboard that the principle of a win-win is all about both parties bringing an educated view of a company’s valuation to the table. Being educated means doing your homework and knowing how similar companies in your sector, region, and stage of growth are valued. The idea is to settle somewhere in a range where both parties think it could have been better for them but come out saying ‘it’s reasonable’.

Later in the session, one founder asked Peng whether one approach founders may employ is to establish how much they need to raise based on their strategic goals.

“Absolutely. If I asked what the valuation is for your company, as a founder, that’s something you should avoid answering upfront.”

“But then if I asked how much you need to raise, which is a typical follow-on question, then you’d better have that answer and be able to back it up.”

7. What is Zero Trust? – Muji

Today’s enterprise networks are fractured, moving farther and farther away from a centralized location. Zero Trust is the next-gen security paradigm that is capable of helping to secure today’s scattered networks, but it’s becoming so heavily used a term that the definition is getting blurred.

Let’s look at what Zero Trust is solving, how the ecosystem has evolved, and look at the moves major players like CrowdStrike, Okta, Cloudflare and Zscaler are making within it.

Traditionally, the primary usage of an enterprise network is interconnecting infrastructure which runs services hosted internally, handling traffic from enterprise users who use some type of device to access the network. Remote workers had to use connection tools, like a VPN, in order to get onto the trusted company network to access internal services.

The old method of castle & moat security, where you maintained a trusted network across all of your enterprise infrastructure, apps, devices and users – with a secure perimeter around it all – is becoming a thing of the past, as all of those areas continue to sprawl outside of the perimeter (and IT’s grasp).

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Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. Of all the companies mentioned, we currently have a vested interest in Amazon, Facebook, Meituan, Okta, and Tencent (owner of WeChat). Holdings are subject to change at any time.

We’ve constantly been sharing a list of our recent reads in our weekly emails for The Good Investors.

Do subscribe for our weekly updates through the orange box in the blog (it’s on the side if you’re using a computer, and all the way at the bottom if you’re using mobile) – it’s free!

But since our readership-audience for The Good Investors is wider than our subscriber base, we think sharing the reading list regularly on the blog itself can benefit even more people. The articles we share touch on a wide range of topics, including investing, business, and the world in general.

Here are the articles for the week ending 06 June 2021:

1. The Cost of Cloud, a Trillion Dollar Paradox – Sarah Wang and Martin Casado

However, as industry experience with the cloud matures — and we see a more complete picture of cloud lifecycle on a company’s economics — it’s becoming evident that while cloud clearly delivers on its promise early on in a company’s journey, the pressure it puts on margins can start to outweigh the benefits, as a company scales and growth slows. Because this shift happens later in a company’s life, it is difficult to reverse as it’s a result of years of development focused on new features, and not infrastructure optimization. Hence a rewrite or the significant restructuring needed to dramatically improve efficiency can take years, and is often considered a non-starter.

Now, there is a growing awareness of the long-term cost implications of cloud. As the cost of cloud starts to contribute significantly to the total cost of revenue (COR) or cost of goods sold (COGS), some companies have taken the dramatic step of “repatriating” the majority of workloads (as in the example of Dropbox) or in other cases adopting a hybrid approach (as with CrowdStrike and Zscaler). Those who have done this have reported significant cost savings: In 2017, Dropbox detailed in its S-1 a whopping $75M in cumulative savings over the two years prior to IPO due to their infrastructure optimization overhaul, the majority of which entailed repatriating workloads from public cloud.

Yet most companies find it hard to justify moving workloads off the cloud given the sheer magnitude of such efforts, and quite frankly the dominant, somewhat singular, industry narrative that “cloud is great”. (It is, but we need to consider the broader impact, too.) Because when evaluated relative to the scale of potentially lost market capitalization — which we present in this post — the calculus changes. As growth (often) slows with scale, near term efficiency becomes an increasingly key determinant of value in public markets. The excess cost of cloud weighs heavily on market cap by driving lower profit margins.

2. Twitter thread that rebuts the “The Cost of Cloud, a Trillion Dollar Paradox” article – Zack Kanter

Excellent *financial* analysis of using *commoditized* cloud infrastructure (vanilla servers). It misses: i) the (long-term devastating) cultural cost of recruiting world-class engineers to do undifferentiated heavy lifting; ii) it’s unfeasible to recreate noncommodity infra. 1/n

On i: saving 50% on COGS sounds great – until you realize that it means recruiting & retaining engineers instead of paying an AWS/GCP invoice. Opportunities to buy technical competence with a credit card are extremely rare; you can’t buy core product competence per API call. 2/n

Every sufficiently-funded software CEO on earth will tell you that their constraining factor is hiring great engineering talent – repatriating commodity servers to save on COGS means increasing engineering headcount requirements, definitionally making the constraint worse. 3/n

It follows that the optimal strategy is to do *the exact opposite* of reducing third-party API COGS: fanatically review labor COGS and shift it to third-party API COGS wherever possible – regardless of cost! You’re effectively buying autoscaling, on-demand top talent. 4/n..

…Part ii [it’s unfeasible to recreate noncommodity infra]: if you look at what your cloud provider is doing for you & your takeaway is “we could do this cheaper ourselves,” then your problem is you’re using the cloud incorrectly by choosing lowest common denominator services. 8/n

Instead of saying “we can run servers ourselves for cheaper,” you should be asking: how can we use AWS/GCP in ways that we couldn’t possibly do better ourselves? This is called “servicefull” architecture – using your provider’s cloud-native services to replace server code. 9/n

If you’re using AWS/GCP to run vanilla servers, you’re building software to work the same way it did when companies ran servers in their office 15 yrs ago. That should be a wake up call about your technology choices – not a call to put servers back in your figurative office. 10/n

3. How the World Ran Out of Everything – Peter S. Goodman and Niraj Chokshi

The most prominent manifestation of too much reliance on Just In Time is found in the very industry that invented it: Automakers have been crippled by a shortage of computer chips — vital car components produced mostly in Asia. Without enough chips on hand, auto factories from India to the United States to Brazil have been forced to halt assembly lines.

But the breadth and persistence of the shortages reveal the extent to which the Just In Time idea has come to dominate commercial life. This helps explain why Nike and other apparel brands struggle to stock retail outlets with their wares. It’s one of the reasons construction companies are having trouble purchasing paints and sealants. It was a principal contributor to the tragic shortages of personal protective equipment early in the pandemic, which left frontline medical workers without adequate gear.

Just In Time has amounted to no less than a revolution in the business world. By keeping inventories thin, major retailers have been able to use more of their space to display a wider array of goods. Just In Time has enabled manufacturers to customize their wares. And lean production has significantly cut costs while allowing companies to pivot quickly to new products.

These virtues have added value to companies, spurred innovation and promoted trade, ensuring that Just In Time will retain its force long after the current crisis abates. The approach has also enriched shareholders by generating savings that companies have distributed in the form of dividends and share buybacks.

Still, the shortages raise questions about whether some companies have been too aggressive in harvesting savings by slashing inventory, leaving them unprepared for whatever trouble inevitably emerges.

“It’s the investments that they don’t make,” said William Lazonick, an economist at the University of Massachusetts.

Intel, the American chip-maker, has outlined plans to spend $20 billion to erect new plants in Arizona. But that is less than the $26 billion that Intel spent on share buybacks in 2018 and 2019 — money the company could have used to expand capacity, Mr. Lazonick said.

Some experts assume that the crisis will change the way companies operate, prompting some to stockpile more inventory and forge relationships with extra suppliers as a hedge against problems. But others are dubious, assuming that — same as after past crises — the pursuit of cost savings will again trump other considerations…

…Just In Time was itself an adaptation to turmoil, as Japan mobilized to recover from the devastation of World War II.

Densely populated and lacking in natural resources, Japan sought to conserve land and limit waste. Toyota eschewed warehousing, while choreographing production with suppliers to ensure that parts arrived when needed.

By the 1980s, companies around the globe were emulating Toyota’s production system. Management experts promoted Just In Time as a way to boost profits.

“Companies that run successful lean programs not only save money in warehouse operations but enjoy more flexibility,” declared a 2010 McKinsey presentation for the pharmaceutical industry. It promised savings of up to 50 percent on warehousing if clients embraced its “lean and mean” approach to supply chains.

Such claims have panned out. Still, one of the authors of that presentation, Knut Alicke, a McKinsey partner based in Germany, now says the corporate world exceeded prudence.

“We went way too far,” Mr. Alicke said in an interview. “The way that inventory is evaluated will change after the crisis.”

Many companies acted as if manufacturing and shipping were devoid of mishaps, Mr. Alicke added, while failing to account for trouble in their business plans.

“There’s no kind of disruption risk term in there,” he said.

4. Can Apple Change Ads – Ben Evans

Apple regards itself not just as a platform provider but as a system provider. Your iPhone is a system, and Apple decides how it works and what developers can do on it, and just as Apple controls security, wireless networking, power management or multi-tasking, it also controls privacy. This year Apple started requiring apps to get permission before sharing information to track users across different sites (‘ATT’), just as the EU and California’s cookie laws have required the same on the web. The main reason to do this tracking is to make advertising more relevant (and therefore more valuable for publishers), and ATT, cookie laws, and Apple and Google’s decision to block third party cookies on the web anyway, in Safari and Chrome, all mean that the foundation of a lot of online advertising has collided with privacy and shattered, with very little clarity on what comes next.

In parallel, Apple has built up its own ad system on the iPhone, which records, tracks and targets users and serves them ads, but does this on the device itself rather than on the cloud, and only its own apps and services. Apple tracks lots of different aspects of your behaviour and uses that data to put you into anonymised interest-based cohorts and serve you ads that are targeted to your interests, in the App Store, Stocks and News apps. You can read Apple’s description of that here – Apple is tracking a lot of user data, but nothing leaves your phone. Your phone is tracking you, but it doesn’t tell anyone anything.

This is conceptually pretty similar to Google’s proposed FLoC, in which your Chrome web browser uses the web pages you visit to put you into anonymised interest-based cohorts without your browsing history itself leaving your device. Publishers (and hence advertisers) can ask Chrome for a cohort and serve you an appropriate ad rather than tracking and targeting you yourself. Your browser is tracking you, but it doesn’t tell anyone anything -except for that anonymous cohort.

Google, obviously, wants FLoC to be a generalised system used by third-party publishers and advertisers. At the moment, Apple runs its own cohort tracking, publishing and advertising as a sealed system. It has begun selling targeted ads inside the App Store (at precisely the moment that it crippled third party app install ads with IDFA), but it isn’t offering this tracking and targeting to anyone else. Unlike FLoC, an advertiser, web page or app can’t ask what cohort your iPhone has put you in – only Apple’s apps can do that, including the app store.

So, the obvious, cynical theory is that Apple decided to cripple third-party app install ads just at the point that it was poised to launch its own, and to weaken the broader smartphone ad model so that companies would be driven towards in-app purchase instead. (The even more cynical theory would be that Apple expects to lose a big chunk of App Store commission as a result of lawsuits and so plans to replace this with app install ads. I don’t actually believe this – amongst other things I think Apple believes it will win its Epic and Spotify cases.)

Much more interesting, though, is what happens if Apple opens up its cohort tracking and targeting, and says that apps, or Safari, can now serve anonymous, targeted, private ads without the publisher or developer knowing the targeting data. It could create an API to serve those ads in Safari and in apps, without the publisher knowing what the cohort was or even without knowing what the ad was. What if Apple offered that, and described it as a truly ‘private, personalised’ ad model, on a platform with at least 60% of US mobile traffic, and over a billion global users?

5. Explained: Neural networks – Larry Hardesty

Deep learning is in fact a new name for an approach to artificial intelligence called neural networks, which have been going in and out of fashion for more than 70 years. Neural networks were first proposed in 1944 by Warren McCullough and Walter Pitts, two University of Chicago researchers who moved to MIT in 1952 as founding members of what’s sometimes called the first cognitive science department.

Neural nets were a major area of research in both neuroscience and computer science until 1969, when, according to computer science lore, they were killed off by the MIT mathematicians Marvin Minsky and Seymour Papert, who a year later would become co-directors of the new MIT Artificial Intelligence Laboratory.

The technique then enjoyed a resurgence in the 1980s, fell into eclipse again in the first decade of the new century, and has returned like gangbusters in the second, fueled largely by the increased processing power of graphics chips…

…Neural nets are a means of doing machine learning, in which a computer learns to perform some task by analyzing training examples. Usually, the examples have been hand-labeled in advance. An object recognition system, for instance, might be fed thousands of labeled images of cars, houses, coffee cups, and so on, and it would find visual patterns in the images that consistently correlate with particular labels.

Modeled loosely on the human brain, a neural net consists of thousands or even millions of simple processing nodes that are densely interconnected. Most of today’s neural nets are organized into layers of nodes, and they’re “feed-forward,” meaning that data moves through them in only one direction. An individual node might be connected to several nodes in the layer beneath it, from which it receives data, and several nodes in the layer above it, to which it sends data.

To each of its incoming connections, a node will assign a number known as a “weight.” When the network is active, the node receives a different data item — a different number — over each of its connections and multiplies it by the associated weight. It then adds the resulting products together, yielding a single number. If that number is below a threshold value, the node passes no data to the next layer. If the number exceeds the threshold value, the node “fires,” which in today’s neural nets generally means sending the number — the sum of the weighted inputs — along all its outgoing connections.

When a neural net is being trained, all of its weights and thresholds are initially set to random values. Training data is fed to the bottom layer — the input layer — and it passes through the succeeding layers, getting multiplied and added together in complex ways, until it finally arrives, radically transformed, at the output layer. During training, the weights and thresholds are continually adjusted until training data with the same labels consistently yield similar outputs.

6. Ant Group searches for direction in a new era of Chinese fintech – AJ Cortese

When Ant Group, then Ant Financial, launched its mobile payment service Alipay in 2004, it was meant to be a complementary function to improve shoppers’ checkout experience on e-commerce marketplace Taobao. Few could have predicted the main role it would go on to play in the development of mobile payments in China.

Ant Financial was spun off from Alibaba in 2014, with Alipay as its core business. The mobile payment platform generated the majority of the firm’s revenue until 2018. However, as Ant’s business strategy began to shift in 2019 to cultivate different growth engines based on new digital financial services, Alipay’s central role began to vanish, with the e-wallet generating only 36% of the firm’s total revenue in 2020. At the same time, the company’s credit services alone accounted for a whopping 40% of total revenues for Ant Group in the first half of 2020.

In July 2020, Ant Financial was rebranded as Ant Group to better reflect its role as “an innovative global technology provider” for businesses and financial institutions. Ant leveraged Alipay’s 900 million users to create a one-stop marketplace for financial products, including short and long-term credit loans, insurance products, and wealth management offerings. The restructuring and the new offerings were the special sauce that powered the company to within arm’s reach of the world’s largest IPO.

Leading up to the IPO in March 2020, Ant Group’s former CEO, Simon Hu, unveiled a new horizontal strategy for Alipay, looking to expand the range of services available on the platform, from food delivery to travel bookings. Alipay’s Chinese slogan was changed from the mundane but functional “Use Alipay to make payments” to the broader and catchier “Live well, Alipay.”

However, following the stalled IPO and new regulations severely limiting cash machine loan products like Huabei and Jiebei—which can no longer be offered as direct payment options—Alipay is back at the center of Ant Group’s thinking, also fueled by an announcement from the People’s Bank of China (PBOC) in December 2020, clearly instructing Ant Group to “return to its roots in payments.”

Despite the changes, Ant Group’s range of offerings will not be limited to just mobile payments. The company can still offer a wide range of services as long as it stays away from lending. In fact, the firm is actively onboarding service providers, aiming to reach 50,000 in total by 2023, up from 10,000 in mid-2020. This service-oriented approach represents the next logical development in Alipay’s maturation…

…Just this week, Alipay was incorporated in the PBOC’s digital yuan rollout pilot program, which expanded its scope to include private operators like Ant Group and Tencent. Alipay and WeChat Pay are likely to maintain a prominent position in the future when the digital yuan will be rolled out at scale.

“It is a misconception that the digital yuan is meant to be a direct competitor to Alipay and WeChat. In fact, the expanded rollout of the digital yuan will allow new industries, payment flows, and data to be digitized in areas like employee salaries,” Turrin explained.

Instead of routing worker’s wages through a bank’s system to then be transferred into a digital wallet like Alipay, salaries could be directly integrated into these wallets using the digital yuan, Turrin said. Going forward, the aim is to facilitate more use cases for the digital currency, which is reliant on consumer platforms like Alipay. “The digital yuan will fail without these types of consumer platforms,” Turrin said.

“It is not a zero-sum game where the central bank’s digital currency takes market share away from the payment platforms. Actually, the digital yuan will enlarge the overall size of the digital payment pie,” he added.

If China’s digital yuan isn’t meant to cut into Alipay and WeChat’s duopoly in mobile payments, the two payment platforms will likely retain and even reinforce their dominant positions, especially as other verticals of their businesses face regulatory challenges.

7. Own The Internet – Packy McCormick

What if I told you about a business with strong network effects and 200x YoY revenue growth that was preparing to offer a 25% dividend and implement a permanent share buyback program? Is that something you might be interested in?

That’s pretty much Ethereum. It’s one of the most fascinating and compelling assets in the world, but its story is obfuscated by complexity and the specter of crypto.

Ethereum is so many things at once, all of which feed off of each other. Ethereum, the blockchain, is a world computer, the backbone of a decentralized internet (web3), and the settlement layer for web3. Its cryptocurrency, Ether (ETH), is a bunch of things, too:

• Internet money.
• Ownership of the Ethereum network.
• The most commonly-used token in the Great Online Game.
• Yield-generating.
• A Store of Value (SoV).
• A bet on more on-chain activity, or the web3 future. 

Because Ethereum is so much at once, it’s hard to understand. This post is an attempt to help Ethereum be understood. To a group like us, people interested in technology businesses, finance, and strategy, it’s much more fascinating than bitcoin, but that comes with a tradeoff. It’s much harder to grok than bitcoin, and because of that, it hasn’t gotten the mainstream or institutional attention that bitcoin has…

…Ethereum is so much more than a cryptocurrency. It’s a “world computer,” and the “value layer” of the internet. It lets people build apps and products with money baked into the code. If you believe that web3 is going to continue to grow, then you likely believe that over time, Ethereum will become the settlement layer of a new internet. All sorts of transactions, whether they happen on Ethereum, another blockchain, or even Visa, will turn to Ethereum to exchange funds and keep secure, immutable records. A year ago, I wouldn’t have said that.

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Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. Of all the companies mentioned, we currently have a vested interest in Alphabet (parent of Google), Apple, and Tencent (parent of TenPay). Holdings are subject to change at any time

We’ve constantly been sharing a list of our recent reads in our weekly emails for The Good Investors.

Do subscribe for our weekly updates through the orange box in the blog (it’s on the side if you’re using a computer, and all the way at the bottom if you’re using mobile) – it’s free!

But since our readership-audience for The Good Investors is wider than our subscriber base, we think sharing the reading list regularly on the blog itself can benefit even more people. The articles we share touch on a wide range of topics, including investing, business, and the world in general.

Here are the articles for the week ending 30 May 2021:

1. How to Do Long Term – Morgan Housel

Saying you have a 10-year time horizon doesn’t exempt you from all the nonsense that happens during the next 10 years. Everyone has to experience the recessions, the bear markets, the meltdowns, the surprises and the memes at the same time.

So rather than assuming long-term thinkers don’t have to deal with nonsense, the question becomes how can you endure a neverending parade of nonsense.

Long-term thinking can be a deceptive safety blanket that people assume lets them bypass the painful and unpredictable short run. But it never does. It might be the opposite: The longer your time horizon the more calamities and disasters you’ll experience. Baseball player Dan Quisenberry once said, “The future is much like the present, only longer.”…

…An investment manager who loses 40% can tell his investors, “It’s OK, we’re in this for the long run,” and believe it. But the investors may not believe it. They might bail. The firm might not survive. Then even if the manager turns out to be right, it doesn’t matter – no one’s around to benefit.

The same thing happens when you have the guts to stick it out but your spouse doesn’t.

Or when you have a great idea that will take time to prove, but your boss and coworkers aren’t as patient.

These are not rarities. They’re some of the most common outcomes in investing.

A lot of it comes from the gap between what you believe and what you can convince other people of. Intelligence vs. storytelling.

People mock how much short-term thinking there is in the financial industry, and they should. But I also get it: The reason so many financial professionals stray towards short-termism is because it’s the only way to run a viable business when customers flee at the first sign of trouble. But the reason customers flee is often because investors have done such a poor job communicating how investing works, what their strategy is, what they should expect as an investor, and how to deal with inevitable volatility and cyclicality.

Eventually being right is one thing. But can you eventually be right and convincing to those whose support you rely on? That’s completely different, and easy to overlook.

2. Project Starline: Feel like you’re there, together – Clay Bavor

Through the years, we’ve built products to help people feel more connected. We’ve simplified email with Gmail, and made it easier to share what matters with Google Photos and be more productive with Google Meet. But while there have been advances in these and other communications tools over the years, they’re all a far cry from actually sitting down and talking face to face.

We looked at this as an important and unsolved problem. We asked ourselves: could we use technology to create the feeling of being together with someone, just like they’re actually there?

To solve this challenge, we’ve been working for a few years on Project Starline — a technology project that combines advances in hardware and software to enable friends, families and coworkers to feel together, even when they’re cities (or countries) apart.

Imagine looking through a sort of magic window, and through that window, you see another person, life-size and in three dimensions. You can talk naturally, gesture and make eye contact.

To make this experience possible, we are applying research in computer vision, machine learning, spatial audio and real-time compression. We’ve also developed a breakthrough light field display system that creates a sense of volume and depth that can be experienced without the need for additional glasses or headsets.

The effect is the feeling of a person sitting just across from you, like they are right there.

One of the things we are most proud of is that as soon as you sit down and start talking, the technology fades into the background, and you can focus on what’s most important: the person in front of you.

Project Starline is currently available in just a few of our offices and it relies on custom-built hardware and highly specialized equipment. We believe this is where person-to-person communication technology can and should go, and in time, our goal is to make this technology more affordable and accessible, including bringing some of these technical advancements into our suite of communication products.

3. How Humanity Gave Itself an Extra Life – Steven Johnson

The period from 1916 to 1920 marked the last point in which a major reversal in global life expectancy would be recorded. (During World War II, life expectancy did briefly decline, but with nowhere near the severity of the collapse during the Great Influenza.) The descendants of English and Welsh babies born in 1918, who on average lived just 41 years, today enjoy life expectancies in the 80s. And while Western nations surged far ahead in average life span during the first half of the last century, other nations have caught up in recent decades, with China and India having recorded what almost certainly rank as the fastest gains of any society in history. A hundred years ago, an impoverished resident of Bombay or Delhi would beat the odds simply by surviving into his or her late 20s. Today average life expectancy in India is roughly 70 years.

In effect, during the century since the end of the Great Influenza outbreak, the average human life span has doubled. There are few measures of human progress more astonishing than this. If you were to publish a newspaper that came out just once a century, the banner headline surely would — or should — be the declaration of this incredible feat. But of course, the story of our extra life span almost never appears on the front page of our actual daily newspapers, because the drama and heroism that have given us those additional years are far more evident in hindsight than they are in the moment. That is, the story of our extra life is a story of progress in its usual form: brilliant ideas and collaborations unfolding far from the spotlight of public attention, setting in motion incremental improvements that take decades to display their true magnitude…

…How did this great doubling of the human life span happen? When the history textbooks do touch on the subject of improving health, they often nod to three critical breakthroughs, all of them presented as triumphs of the scientific method: vaccines, germ theory and antibiotics. But the real story is far more complicated. Those breakthroughs might have been initiated by scientists, but it took the work of activists and public intellectuals and legal reformers to bring their benefits to everyday people. From this perspective, the doubling of human life span is an achievement that is closer to something like universal suffrage or the abolition of slavery: progress that required new social movements, new forms of persuasion and new kinds of public institutions to take root. And it required lifestyle changes that ran throughout all echelons of society: washing hands, quitting smoking, getting vaccinated, wearing masks during a pandemic…

…The first life-expectancy tables were calculated in the late 1600s, during the dawn of modern statistics and probability. It turned out to be one of those advances in measurement that transform the thing being measured: By following changes in life expectancy over time, and comparing expected life among different populations, it became easier to detect inequalities in outcomes, perceive long-term threats and track the effects of promising health interventions more accurately. Demographers now distinguish between life expectancies at different ages. In a society with very high infant mortality, life expectancy at birth might be 20, because so many people die in the first days of life, pulling the overall number down, while life expectancy at 20 might easily be in the 60s. The doubling of life expectancy over the past century is a result of progress at both ends of the age spectrum: Children are dying far less frequently, and the elderly are living much longer. Centenarians are projected to be the fastest-growing age group worldwide.

One strange thing about the story of global life expectancy is how steady the number was for almost the entirety of human history. Until the middle of the 18th century, the figure appears to have rarely exceeded a ceiling of about 35 years, rising or falling with a good harvest or a disease outbreak but never showing long-term signs of improvement. A key factor keeping average life expectancy low was the shockingly high rates of infant and childhood mortality: Two in five children perished before reaching adulthood. Human beings had spent 10,000 years inventing agriculture, gunpowder, double-entry accounting, perspective in painting — but these undeniable advances in collective human knowledge failed to move the needle in one critical category: how long the average person could expect to live…

…The decade following the initial mass production of antibiotics marked the most extreme moment of life-span inequality globally. In 1950, when life expectancy in India and most of Africa had barely budged from the long ceiling of around 35 years, the average American could expect to live 68 years, while Scandinavians had already crossed the 70-year threshold. But the post-colonial era that followed would be characterized by an extraordinary rate of improvement across most of the developing world. The gap between the West and the rest of the world has been narrowing for the past 50 years, at a rate unheard-of in demographic history. It took Sweden roughly 150 years to reduce childhood mortality rates from 30 percent to under 1 percent. Postwar South Korea pulled off the same feat in just 40 years. India nearly doubled life expectancy in just 70 years; many African nations have done the same, despite the ravages of the AIDS epidemic. In 1951, the life-span gap that separated China and the United States was more than 20 years; now it is just two.

The forces behind these trends are complex and multivariate. Some of them involve increasing standards of living and the decrease in famine, driven by the invention of artificial fertilizer and the “green revolution”; some of them involve imported medicines and infrastructure — antibiotics, chlorinated drinking water — that were developed earlier. But some of the most meaningful interventions came from within the Global South itself, including a remarkably simple but powerful technique called oral rehydration therapy.

One endemic disease that kept life expectancies down in low-income countries was cholera, which kills by creating severe dehydration and electrolyte imbalance, caused by acute diarrhea. In some extreme cases, cholera victims have been known to lose as much as 30 percent of their body weight through expelled fluids in a matter of hours. As early as the 1830s, doctors had observed that treating patients with intravenous fluids could keep them alive long enough for the disease to run its course; by the 1920s, treating cholera victims with IV fluids became standard practice in hospitals. By that point, though, cholera had become a disease that was largely relegated to the developing world, where hospitals or clinics and trained medical professionals were scarce. Setting up an IV for patients and administering fluids was not a viable intervention during a cholera outbreak affecting hundreds of thousands of people in Bangladesh or Lagos. Crowded into growing cities, lacking both modern sanitation systems and access to IV equipment, millions of people — most of them small children — died of cholera over the first six decades of the 20th century.

The sheer magnitude of that loss was a global tragedy, but it was made even more tragic because a relatively simple treatment for severe dehydration existed, one that could be performed by nonmedical professionals outside the context of a hospital. Now known as oral rehydration therapy, or O.R.T., the treatment is almost maddeningly simple: give people lots of boiled water to drink, supplemented with sugar and salts. (Americans basically are employing O.R.T. when they consume Pedialyte to combat a stomach bug.) A few doctors in India, Iraq and the Philippines argued for the treatment in the 1950s and 1960s, but in part because it didn’t seem like “advanced” medicine, it remained a fringe idea for a frustratingly long time.

4. Gamification of Chinese consumer tech (Abridged version) – Lillian Li

Long-time readers of my newsletter know that I view the Chinese tech world from a set of starting conditions. These are the rules of the game that then affect the actions of the players. In China, these were having mobile as the default installation base, a rich heritage of free-to-play (F2P) developers and a large time-rich but cash-poor population who want to consume entertainment.

For Chinese tech, much derives from the fact that the installation base for technology is mobile versus PC. Being mobile-first means that the user is more attentive as an app is a more immersive experience than a browser. There’s also a rough cut off for the number of apps any sane person can have on their phone. A very general statistic notes that the average person has 40 apps installed on the phone. Out of that 40 apps, 89% of the time is split between 18 apps. We see similar metrics for Chinese users who, on average, open 26 apps a month. About 75% of their time is spent in the ecosystems of Tencent, Alibaba, Baidu, Bytedance and Kuaishou. There’s a natural limit to mobile time, and attention is directed towards the top apps.

This drives a sense of urgency for owning the user — mobile mental real estate is scarce, and every app is looking for more time and attention. Gamifying the user experience in e-commerce platforms or social networking platforms means that, first and foremost, the app can compete for a broader range of the user’s time. If a utility app is suddenly made entertaining, users will mentally switch viewing engagement from being a chore to leisure. App Annie shows the entertainment categories are by the largest after social and communication (which are also somewhat entertainment-related)…

…As Wei mentioned on the NFX podcast, consumers seem to have an infinite appetite for entertainment. In the always-connected mobile phone era, all forms of entertainment are starting to be fungible. In a previous era, different forms of entertainment were more segregated markets with natural structural moats. Those mainly don’t exist anymore. That means companies compete with the best qualities of any form of entertainment now, not just competitors’ strengths in their direct market.

This means that adding entertainment to a product brings it into competition with every other entertainment vice out there. Netflix’s true competitor is Roblox. If you’re in China, everyone’s true competitor is Tencent’s Honour of Kings, aka the mobile version of League of Legend. If you’re Alibaba, rather than try to face-off Cao Cao with faster delivery, why not do it with a cat?

As a product booster, gamification features open up new dimensions for an app, specifically retention, acquisition, monetisation and user segmentation…

…Games and gamification of apps are retention machines when done well; people check in on their progress and make sure their friends haven’t surpassed them. While they are there, they might also utilise other functions in the app too. Gamified features are often used to train users on certain usage behaviours (be it posting more content, using different features sets or inviting their friends), under the guise of points accumulation. This will also train the user to be more sticky to an offering once they grasp the tool’s full capabilities…

…User segmentation – How do you segment users into high capacity versus low capacity to spend? You get them to self-select by seeing who’s willing to trade time for coupons. In playing the games, the users reveal their preferences around time, capacity, and willingness to pay, allowing more accurate targeting. Mini-games and their real-world rewards in the form of coupons or red packets (cash subsidies) are shrewd price discrimination from the platforms. It allows them to sell the same item at different price points to diverse populations.

A tier-one city white-collar worker wouldn’t wait for a sale to get a reusable coffee cup at 50 RMB. Taobao can sell the same cup at 10 RMB to a tier-three city dweller after making the user jump the hoops to acquire the relevant coupons. It doesn’t all have to be price sensitively, Alipay’s tree planting or Meituan’s free lunches for kids appeals to people’s altruism. That also tells you about who is playing. There is utility in the entertainment with Chinese super-apps, just as there’s entertainment in the utility.

5. Inside Gucci and Roblox’s new virtual world – Maghan McDowell

First came the Gucci Garden Archetypes installation in the brand’s Florence palazzo, a physical recreation of 15 of Gucci’s most fantastical advertising campaign sets. Now comes another Garden, open to the world and time-zone agnostic. Behold, a fantastical virtual Gucci Garden to wander through, offering immersion in the everything-goes universe of creative director Alessandro Michele.

The Gucci Garden is unveiling on 17 May on Roblox, the gaming platform initially popular among pre-teens that is expanding into a prominent metaverse platform for all. Like the IRL version, the Gucci Garden on Roblox offers multiple themed rooms that pay homage to Gucci campaigns but also layers on features unrestrained by the laws of physics.

Visitors enter through a virtual lobby in which their avatars can view, try on and purchase digital Gucci items. Once inside the themed rooms, avatars are transformed into blank, genderless, humanoid-like mannequins that look unfamiliar to those who associate Roblox with rectangular, toylike figures. As people progress through the spaces, their avatars absorb visual elements of each. In the Tokyo Tribe-themed maze, colourful zig-zag lights might become a patterned sleeve. A pool room pays homage to the party scenes of Gucci Cruise 2020. At the centre is a garden room. In Florence, it’s capped by a ceiling; on Roblox, it’s open to the sky, surrounded by forest and seeds flowers on visitor avatars.

Roblox randomises the order in which people enter, so each avatar’s appearance is unique to them. Upon exiting, visitors can view their avatars’ canvas and the canvases of others and can take screenshots to share on social channels. The idea is that while everyone starts as the same blank canvas, the experience defines them, says Morgan Tucker, Roblox senior director of product for the social group. “This adds to a level of immersion that would match, if not exceed, what you see in the real world, and really pushes the limits of what the platform is capable of.”…

…The young are used to the metaverse. “Just like you wanted to catch the kids at the mall, it’s the same thing. You build that brand affinity, as they already inhabit the space,” says futurist Cathy Hackl, who advises luxury brands on the metaverse through her role as chief metaverse officer at Future Metaverse Labs. For example, while her first experience of a concert was in a real-life stadium, her son’s first gig was on Roblox. Sometimes, her children will ask for a new (digital) outfit to attend a Roblox birthday party. “Most of these kids aren’t on Instagram or other platforms — this is their social network,” she says.

6. Once hailed as unhackable, blockchains are now getting hacked – Mike Orcutt

Early last month [January 2019], the security team at Coinbase noticed something strange going on in Ethereum Classic, one of the cryptocurrencies people can buy and sell using Coinbase’s popular exchange platform. Its blockchain, the history of all its transactions, was under attack.

An attacker had somehow gained control of more than half of the network’s computing power and was using it to rewrite the transaction history. That made it possible to spend the same cryptocurrency more than once—known as “double spends.” The attacker was spotted pulling this off to the tune of $1.1 million. Coinbase claims that no currency was actually stolen from any of its accounts. But a second popular exchange, Gate.io, has admitted it wasn’t so lucky, losing around $200,000 to the attacker (who, strangely, returned half of it days later).

Just a year ago, this nightmare scenario was mostly theoretical. But the so-called 51% attack against Ethereum Classic was just the latest in a series of recent attacks on blockchains that have heightened the stakes for the nascent industry…

…Susceptibility to 51% attacks is inherent to most cryptocurrencies. That’s because most are based on blockchains that use proof of work as their protocol for verifying transactions. In this process, also known as mining, nodes spend vast amounts of computing power to prove themselves trustworthy enough to add information about new transactions to the database. A miner who somehow gains control of a majority of the network’s mining power can defraud other users by sending them payments and then creating an alternative version of the blockchain in which the payments never happened. This new version is called a fork. The attacker, who controls most of the mining power, can make the fork the authoritative version of the chain and proceed to spend the same cryptocurrency again.

For popular blockchains, attempting this sort of heist is likely to be extremely expensive. According to the website Crypto51, renting enough mining power to attack Bitcoin would currently cost more than $260,000 per hour. But it gets much cheaper quickly as you move down the list of the more than 1,500 cryptocurrencies out there. Slumping coin prices make it even less expensive, since they cause miners to turn off their machines, leaving networks with less protection.

Toward the middle of 2018, attackers began springing 51% attacks on a series of relatively small, lightly traded coins including Verge, Monacoin, and Bitcoin Gold, stealing an estimated $20 million in total. In the fall, hackers stole around $100,000 using a series of attacks on a currency called Vertcoin. The hit against Ethereum Classic, which netted more than $1 million, was the first against a top-20 currency.

David Vorick, cofounder of the blockchain-based file storage platform Sia, predicts that 51% attacks will continue to grow in frequency and severity, and that exchanges will take the brunt of the damage caused by double-spends. One thing driving this trend, he says, has been the rise of so-called hashrate marketplaces, which attackers can use to rent computing power for attacks. “Exchanges will ultimately need to be much more restrictive when selecting which cryptocurrencies to support,” Vorick wrote after the Ethereum Classic hack.

Aside from 51% attacks, there is whole new level of blockchain security weaknesses whose implications researchers are just beginning to explore: smart-contract bugs. Coincidentally, Ethereum Classic—specifically, the story behind its origin—is a good starting point for understanding them, too.

A smart contract is a computer program that runs on a blockchain network. It can be used to automate the movement of cryptocurrency according to prescribed rules and conditions. This has many potential uses, such as facilitating real legal contracts or complicated financial transactions. Another use—the case of interest here—is to create a voting mechanism by which all the investors in a venture capital fund can collectively decide how to allocate the money.

Just such a fund, called the Decentralized Autonomous Organization (DAO), was set up in 2016 using the blockchain system called Ethereum. Shortly thereafter, an attacker stole more than $60 million worth of cryptocurrency by exploiting an unforeseen flaw in a smart contract that governed the DAO. In essence, the flaw allowed the hacker to keep requesting money from accounts without the system registering that the money had already been withdrawn.

As the hack illustrated, a bug in a live smart contract can create a unique sort of emergency. In traditional software, a bug can be fixed with a patch. In the blockchain world, it’s not so simple. Because transactions on a blockchain cannot be undone, deploying a smart contract is a bit like launching a rocket, says Petar Tsankov, a research scientist at ETH Zurich and cofounder of a smart-contract security startup called ChainSecurity. “The software cannot make a mistake.”

There are fixes, of a sort. Though they can’t be patched, some contracts can be “upgraded” by deploying additional smart contracts to interact with them. Developers can also build centralized kill switches into a network to stop all activity once a hack is detected. But for users whose money has already been stolen, it will be too late.

The only way to retrieve the money is, effectively, to rewrite history—to go back to the point on the blockchain before the attack happened, create a fork to a new blockchain, and have everyone on the network agree to use that one instead. That’s what Ethereum’s developers chose to do. Most, but not all, of the community switched to the new chain, which we now know as Ethereum. A smaller group of holdouts stuck with the original chain, which became Ethereum Classic.

7. The Four Desires Driving All Human Behavior: Bertrand Russell’s Magnificent Nobel Prize Acceptance Speech – Maria Popova

“All human activity is prompted by desire. There is a wholly fallacious theory advanced by some earnest moralists to the effect that it is possible to resist desire in the interests of duty and moral principle. I say this is fallacious, not because no man ever acts from a sense of duty, but because duty has no hold on him unless he desires to be dutiful. If you wish to know what men will do, you must know not only, or principally, their material circumstances, but rather the whole system of their desires with their relative strengths.”…

…”Acquisitiveness — the wish to possess as much as possible of goods, or the title to goods — is a motive which, I suppose, has its origin in a combination of fear with the desire for necessaries. I once befriended two little girls from Estonia, who had narrowly escaped death from starvation in a famine. They lived in my family, and of course had plenty to eat. But they spent all their leisure visiting neighbouring farms and stealing potatoes, which they hoarded. Rockefeller, who in his infancy had experienced great poverty, spent his adult life in a similar manner.”…

…”The world would be a happier place than it is if acquisitiveness were always stronger than rivalry. But in fact, a great many men will cheerfully face impoverishment if they can thereby secure complete ruin for their rivals. Hence the present level of taxation.”…

…”Our mental make-up is suited to a life of very severe physical labor. I used, when I was younger, to take my holidays walking. I would cover twenty-five miles a day, and when the evening came I had no need of anything to keep me from boredom, since the delight of sitting amply sufficed. But modern life cannot be conducted on these physically strenuous principles. A great deal of work is sedentary, and most manual work exercises only a few specialized muscles. When crowds assemble in Trafalgar Square to cheer to the echo an announcement that the government has decided to have them killed, they would not do so if they had all walked twenty-five miles that day. This cure for bellicosity is, however, impracticable, and if the human race is to survive — a thing which is, perhaps, undesirable — other means must be found for securing an innocent outlet for the unused physical energy that produces love of excitement… I have never heard of a war that proceeded from dance halls.”…

…”Civilized life has grown altogether too tame, and, if it is to be stable, it must provide harmless outlets for the impulses which our remote ancestors satisfied in hunting… I think every big town should contain artificial waterfalls that people could descend in very fragile canoes, and they should contain bathing pools full of mechanical sharks. Any person found advocating a preventive war should be condemned to two hours a day with these ingenious monsters. More seriously, pains should be taken to provide constructive outlets for the love of excitement. Nothing in the world is more exciting than a moment of sudden discovery or invention, and many more people are capable of experiencing such moments than is sometimes thought.”

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Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. Of all the companies mentioned, we currently have a vested interest in Alphabet (parent of Google), Meituan, Netflix, and Tencent. Holdings are subject to change at any time.

We’ve constantly been sharing a list of our recent reads in our weekly emails for The Good Investors.

Do subscribe for our weekly updates through the orange box in the blog (it’s on the side if you’re using a computer, and all the way at the bottom if you’re using mobile) – it’s free!

But since our readership-audience for The Good Investors is wider than our subscriber base, we think sharing the reading list regularly on the blog itself can benefit even more people. The articles we share touch on a wide range of topics, including investing, business, and the world in general.

Here are the articles for the week ending 23 May 2021:

1. Letter #34: On wanting – Ali Montag

In 1972, banners covered the West Texas town of Odessa, black and white signs painted MOJO WINS. Neighbors held each other and cried. Fathers shook hands and slapped each other’s backs, grins spread wide. That year, their boys had done it: The Permian High School Panthers were state champions.

“We were hoarse from screaming and yelling. We didn’t want to leave the field,” quarterback Jerry Hix remembered years later, long after his high school football career had ended. “Nothing can compare. I miss it.”

It was a moment of indescribable pride for boys who spent the better part of their young lives cracking ribs, ripping tendons, and puking under the Texas sun, working toward a single goal: Excellence at the game of football. It was a moment of pride for the people of Odessa, the few thousand ranchers and oilmen and beauty clerks who scratched out lives in the arid desert, watching and praying over their team.

It was also a moment from which many of those boys would never recover.

“My life’s never been the same since,” said Joe Bob Bizzell, a player who flamed out of college football and retreated to the dirt roads of Odessa. A decade later, he found himself still there, repairing pump jacks on an Amoco oil field.

“You live in a fairy tale for that one year of your life,” said a different player’s wife. “You’re worshipped, and that year is over and you’re like anyone else. We all feel our husbands have been unhappier with everything they got out of it.”

Players fell into alcohol abuse and lackluster home lives. Permian High’s athletic trainer called winning a Texas high school football championship the “kiss of death” for teenage boys.

“They’re popular. They’re in very hot demand, like a hot rock group. No matter what they do, it’s a hit. Everything they do is right,” he said. “And they just can’t find that again. What other job can they find that has that glamour? What’s the substitute? Find the substitute for it. The only consequence of it is a mentally crippling disease for the rest of your life.”

Why am I recounting Pulitzer Prize winner H.G. Bissinger’s reporting in Friday Night Lights? First, because it is a wonderful book. Second, because as I’ve been re-reading it this week, the story feels uniquely relevant.

Bissinger’s nonfiction account of Odessa and its Permian Panthers isn’t just a book about winning football games. It’s a book about the lingering cost of life lived on a pedestal.

Flipping through Twitter last week, this video, “A day in the life of a New York fashion student,” popped into my feed. Watching, it wasn’t memories of NYC, or outfit envy, or nostalgia for my own youth that I first thought of (that came later)—but the boys of Permian High.

2. Daniel Kahneman: ‘Clearly AI is going to win. How people are going to adjust is a fascinating problem’ – Tim Adams

[Admas] One of the key problems seems to have been the widespread inability to grasp the basic idea of exponential growth. Does that surprise you?

[Kahneman] Exponential phenomena are almost impossible for us to grasp. We are very experienced in a more or less linear world. And if things are accelerating, they’re usually accelerating within reason. Exponential change [as with the spread of the virus] is really something else. We’re not equipped for it. It takes a long time to educate intuition…

…[Adams] Some of the examples you describe – the extraordinary variance seen in sentencing for the same crimes (even influenced by such external matters as the weather, or the weekend football results), say, or the massive discrepancies in insurance underwriting or medical diagnosis or job interviews based on the same baseline information – are shocking. The driver of that noise often seems to lie with the protected status of the “experts” doing the choosing. No judge, I imagine, wants to acknowledge that an algorithm would be fairer at delivering justice?

[Kahneman] The judicial system, I think, is special in a way, because it’s some “wise” person who is deciding. You have a lot of noise in medicine, but in medicine, there is an objective criterion of truth…

...[Adams] I was struck watching the American elections by just how often politicians of both sides appealed to God for guidance or help. You don’t talk about religion in the book, but does supernatural faith add to noise?

[Kahneman] I think there is less difference between religion and other belief systems than we think. We all like to believe we’re in direct contact with truth. I will say that in some respects my belief in science is not very different from the belief other people have in religion. I mean, I believe in climate change, but I have no idea about it really. What I believe in is the institutions and methods of people who tell me there is climate change. We shouldn’t think that because we are not religious, that makes us so much cleverer than religious people. The arrogance of scientists is something I think about a lot…

…[Adams] Do you feel that there are wider dangers in using data and AI to augment or replace human judgment?

[Kahneman] There are going to be massive consequences of that change that are already beginning to happen. Some medical specialties are clearly in danger of being replaced, certainly in terms of diagnosis. And there are rather frightening scenarios when you’re talking about leadership. Once it’s demonstrably true that you can have an AI that has far better business judgment, say, what will that do to human leadership?

3. A new book aims to blow up assumptions about the best founding teams – Connie Loizos

There’s a lot of how-to guidance out there when it comes to starting a company, and much of it has reinforced certain beliefs, including that solo founders don’t get very far on their own, that the most successful founders attend a small circle of top schools and that the best companies are created by people who launched them to solve a personal problem into which they had a particular insight.

Ali Tamaseb — who studied biomedical engineering at Imperial College London, attended business school at Stanford and founded a wearable tech startup before joining the venture firm DCVC as an investor in 2018 — says that lot of that guidance is, well, misguided. Tamaseb says he knows this because over the past four years, to improve his own decision-making, he amassed more than 30,000 data points about so-called “super founders,” from their age when their breakout company was founded to how many competitors they faced from the outset; in doing so, he says, he wound up discovering that much of what is espoused in startup circles is off the mark…

…TC: You also found that solo founders aren’t doomed to run smaller companies, despite some earlier thinking by Y Combinator’s Paul Graham that you need at least two co-founders to do something big.

AT: Right, 20% of the founders in both groups — the unicorn and non-unicorn group — were solo founders, so VCs are funding solo founders and they are building billion-dollar companies. Basically, one out of every five unicorn companies has a solo founder. So I think that’s another narrative that gets retold, including on Twitter, but that doesn’t match reality. Flexport, for example, has a solo founder [in Ryan Petersen]. So does CarGurus, which was founded by Langley Steinert, who, by the way, first co-founded TripAdvisor [and more recently founded ApartmentAdvisor].

TC: Your book also asserts that there are plenty of founders of billion-dollar companies that didn’t attend elite American universities.

AT: There are schools that founders attended more than others — Stanford, MIT, Wharton and Harvard — but as many of these founders attended schools that aren’t even at the top 100 [ranked U.S. schools] compared to those who went into the top 10. It’s a barbell distribution. Around 36% went to the top 10 schools, the same percentage went to schools not in the top 100, and there’s another 30% or so in the middle.

TC: Two other observations in the book that are interesting are that half the founding CEOs you researched were non-technical, and only 30% had domain expertise in the industry they were disrupting. The latter may surprise readers particularly.

AT: Yes, 30% of founders in consumer tech and 40% in enterprise tech did not come from the same domain [that their company now operates in]. And I see the same thing in startups that are just now getting funded. What it tells you is that domain expertise is not necessarily correlated to success. Take Nat Turner of Flatiron Health [a cancer-focused startup that sold to Roche Group in 2018]. These guys were serial entrepreneurs and they had a bunch of successes before, and they jumped from one industry to another, starting with a pizza delivery company they started in college, where they learned about the restaurant industry and deliveries and logistics. They also sold an ad tech company to Google. Then they go and start this company in the cancer oncology IP and data space, where they didn’t know anything, but they learned as much as anybody after spending two years going and talking with every oncologist they could find in New York to understand the space. So maybe founders apply their tech background to different industries or they apply soft skills like resources and connections to learn about a specific industry rather than coming from that industry.

4. The Unusual Signs of a Billion Dollar Company, with Elad Gil – James Currier

• It’s a really tough question early on because if something was very obvious that it’s going to be a massive business and market, everybody would already be doing it and there’d be no opportunity for a start-up.
• Definitionally, a start-up has to be doing something a little bit not obvious. It’s hard to estimate TAM. Often when people estimate it, they use a BS number where they say: “Commerce is $20 trillion, and if we capture just one sliver…”
• It’s really hard to actually know what the true size of a market is until you’re far enough along that you’re seeing customer adoption and you kind of extrapolate from there.
• You can also underestimate some of these things. So, for example, when I invested in Stripe, which was at the series A and I think they were only eight or ten people, I thought: “Oh my God, it’d be an amazing success if they were worth a few billion dollars.” Now I think it’s going to be a multi-hundred billion-dollar company over time. 
• I extrapolated the future growth of the internet, but not enough…
  
  
• …Most early-stage investors would say the thing that they care about most is the founders. And obviously, founders are incredibly important to a company. They really drive the success of it. I started two companies myself.
• But I think the market is even more important because I’ve seen great founders repeatedly get crushed by a terrible market. And I’ve actually seen some pretty mediocre people do incredibly well if there’s very strong product-market fit.
• Sometimes the company almost runs on its own, irrespective of what the founders do, as long as they have enough of an advantage or there’s a network effect that will sustain them.
• So ultimately my focus is on product market.
• Technology has become such a big force in society and all the biggest companies by market cap are now technology companies. If you look at every single metric, technology markets are at least 10X, if not many tens of times bigger than they were just 10 years ago. If you look at internet usage, time spent online, the number of people with access to the internet, the penetration of e-commerce, et cetera…
  
  
• …Companies that innovate early to get to a second product line, tend to do that often and build the muscle.
• Companies that innovate late actually never innovate again. If you take five, six, seven years to launch your second area, it usually means you’re not going to ever come up with anything else.
• Caution: Very innovative founders sometimes innovate in places where they really shouldn’t, because it’s both kind of a waste of time, but also, the things that work actually work pretty well. So, it’s this balance…
  

• …The place where people screw it up on the way to $B companies is a lot of founders, when they leave the company as CEO, they’ll promote the person who is the perfect complement to them to become the CEO.
• So, that’d be like Tim Cook at Apple. You really appreciate that operator skillset.
• In reality, maybe what the founders should be doing is hiring somebody more like them to become the next CEO.
• You kind of need that person who’s hungry and paranoid and scared, and willing to try new things and destroy their own business. That’s not the operator. The operator is the stabilizer, their whole career has been stabilizing.
• So, it’s really interesting to see this pattern where CEO transitions keep going bad because they keep hiring that non-entrepreneurial person or that very operation-centered person who’s the perfect compliment, but again, they need somebody who’s more like them, rather than somebody who’s different from them.
• Stabilizers often come in and they invoke conventional thinking, and often, these first-time founders are successful because they’ve broken with conventional thinking.

5. The hybrid work paradox – Satya Nadella

As I meet with leaders across industries, it’s clear there is no single standard or blueprint for hybrid work. Every organization’s approach will need to be different to meet the unique needs of their people. According to our research, the vast majority of employees say they want more flexible remote work options, but at the same time also say they want more in-person collaboration, post-pandemic. This is the hybrid work paradox.

We see the same anomalies when it comes to in-person attendance at our own worksites across the world as regions begin to recover from the pandemic. In China, for example, 81 percent of our employees are going back to the worksite three-plus days per week, compared with pre-pandemic attendance, while in Australia, in-person attendance is just 19 percent of what it was pre-pandemic.

Hybrid work represents the biggest shift to how we work in our generation. And it will require a new operating model, spanning people, places, and processes. Today, we published a playbook sharing some of what we’ve learned to date, including data, research, and best practices designed to help organizations navigate these evolving work norms…

…On social capital, every business must be world class at all forms of synchronous and asynchronous communications, to sustain culture across the organization. In fact, at Microsoft, meeting recordings are the fastest-growing content type. Employees now expect all meeting information — whether that’s recordings, transcripts, or highlights — to be available on demand, and on double speed, at a time that works for them.

We must also maintain everyday connections between employees, as well as between employees, their managers, and the company at large. It’s why with our employee experience cloud Microsoft Viva, for example, we’re bringing together one-to-one and one-to-many communications to keep everyone engaged and informed and maintain that connection between employees and the company and its mission…

…As we think about the design of places themselves, our aim is to maintain consistent person, reference, and task spaces for all employees, whether they are on-site or remote. No matter where people are working, they should have a common view of meeting participants and be able to connect with them. They should always have access to the same shared information. And they should be able to see what everyone in the meeting is collaborating on, whether that is a whiteboard or a document.

Creating equitable, inclusive experiences starts with designing for people not in the room. For example, in large meeting rooms in our campus, we are using Microsoft Teams Rooms with high-quality audio and video to ensure everyone can be seen, be heard, and participate as if they were there in person. We are even integrating social cues through emojis and reactions…

…Every business process will be impacted by the move to hybrid, and every business function will need to transform. From product development and manufacturing, to marketing, sales, customer service, and facilities, HR, and IT, every business process will need to be adjusted. One area that is of paramount importance is security.

The threat landscape has never been more complex or challenging, and security has never been more critical. We intercepted and thwarted a record 30 billion email threats last year and are currently tracking 40-plus active nation-state actors and over 140 threat groups.

As corporate networks are suddenly without firm borders, this is also changing our approach to security. We believe that a Zero Trust architecture is more important than ever as we shift to hybrid work.

6. Twitter thread on the importance of knowing when you’re a “pro” and when you’re an “amateur” – Brian Portnoy

I believe that Charley Ellis’ thesis in “Winning the Loser’s Game” is foundational for understanding investing and life generally: Win by not losing. However, there is an important piece to it that is mostly ignored. A thread… 1/x

If you’re reading this, you likely already know that Ellis uses a tennis analogy to make his point: pro athletes win by hitting harder shots while amateurs win by keeping the ball in play and allowing their opponent to err.  2/x

Same with investing: Most should just try to stay in the game than reach for the next overhead slam. Don’t search for the next Amazon, avoid the next Enron. 3/x..

…So what about the “ignored” part? I think it’s deciding whether to consider yourself a “pro” or an “amateur” (or somewhere along a spectrum) in a particular domain. 7/x

So how to self-assess? It’s really important (!) because much weight of the “less wrong” mental model actually rests on this necessarily prior decision. And has obvious connections to overconfidence, Dunning-Krueger, etc. 8/x

Maybe the easiest thing, sort of, is brute force humility — assume you know very little about everything. That wouldn’t be a bad tilt for some, but it is somewhat spirit-destroying and generally a terrible equilibrium for humanity, as it renders true expertise worthless. 9/x

Okay, so no forced humility. And believing you are a “pro” at many things also seems imprudent. Which leaves us, predictably and unsatisfyingly, somewhere in the middle, where we have to use different forms of judgment to asses pro vs. amateur status domain by domain. 10/x

7. How much Bitcoin comes from dirty coal? A flooded mine in China just spotlighted the issue – Shawn Tully

One of the great Bitcoin unknowns has long been the amounts being produced, or “mined,” in what’s believed to be the top locale for mining the signature cryptocurrency: China’s remote Xinjiang region. We got the answer when an immense coal mine in Xinjiang flooded and shut down over the weekend of April 17–18.

The blackout halted no less than one-third of all of Bitcoin’s global computing power. “We’d seen estimates that high, but this shutdown confirms them,” says Alex de Vries, an economist who runs the website Digiconomist, which tracks Bitcoin’s energy consumption. “We also learned that the area in Xinjiang where all that mining happens is much smaller than previously believed. It underscores China’s dominance in Bitcoin mining, and that dominance raises big security concerns.”

The Xinjiang accident highlights that Bitcoin is a creature of fossil fuels—principally coal, the dirtiest of them all…

…On April 11, the first news reports emerged that the Xinjiang mine had flooded, trapping 21 workers underground. The miners were rescued, but over the following weekend, authorities reportedly halted production while conducting a safety check, stopping shipments to power plants and causing a blackout. By de Vries’s estimates, the “hash rate,” the pace at which miners run algorithms to compete for fresh releases of Bitcoin, plummeted around 35%. Some in the Bitcoin community blamed the upheaval for hammering the price of the cryptocurrency by 14%, from a record $64,000 on Friday, April 16, to $55,000 on Sunday the 18th.

It’s by no means certain that reports of the accident pounded the wildly volatile coin. But the loss of computing power did trigger a sharp drop in the network’s capacity for handling transactions. Over the weekend, the cost of making a payment with the cryptocurrency or receiving a transfer of Bitcoin jumped from around $16 to $52, according to de Vries.

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Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. Of all the companies mentioned, we currently have a vested interest in Amazon, Apple, and Microsoft. Holdings are subject to change at any time.