- Minsky cycles are a concept that has seen its star rise since the financial crisis.
- The idea, often summarised as “stability breeds instability”, is now incorporated into policy maker playbooks around the world.
- This was a brilliant piece bringing the concept to venture.
- “The key Minsky idea is that increasing capital inflows reduce perceived risk“.
- Venture is going through this, driven by “shortening time” which boosts IRR, and the key question is whether true risk has actually decreased, or, we are in classic cycle.
Misc
Miscellaneous is often where the gems are.
100 ways to slightly improve your life
- Nice fun piece from the Guardian on 100 ways to easily slightly improve one’s life.
- Highlights include:
- “If you’re going less than a mile, walk or cycle. About half of car journeys are under two miles, yet these create more pollution than longer journeys as the engine isn’t warmed up yet.“
- “Don’t look at your phone at dinner.”
- “Make a friend from a different generation.“
Perception vs. Reality
- YouGov neatly demonstrate how Americans see small subgroups as much larger than they actually are, while large subgroups are systematically underestimated.
- For example on average people thought that muslims made up 27% of Americans when the true proportion is 1% or that gays and lesbians made up 30%, when the true number is 3%.
- On the other hand “we find that people underestimate the proportion of American adults who are Christian (estimate: 58%, true: 70%) and the proportion who have at least a high school degree (estimate: 65%, true: 89%).”
- Full results here.
Do Founders make good VCs?
- Nearly 7% of venture capitalists (VCs) were previously founders.
- This paper, using the VentureSource database, asks if this group is any good at investing?
- Successful founder-VCs have investment success rates that are 6.5% higher than professional VCs.
- If you are an unsuccessful founder-VC your investment success is actually 4% lower than professionals.
- The reason isn’t down to deal quality but value add – “Using an instrumental variables approach to separate unobservable deal quality from value-add, we find that the outperformance of successful founder VCs is consistent with them adding more value post investment.“
Working Week
- In Europe the average working week has shortened since 2000.
- Spain has seen the smallest drop, while Iceland the biggest (6.4 hours!).
- There is a huge range – “People in some Greek regions work up to 12 hours longer than people in some regions of the Netherlands.“
- Source.
Food’s Environmental Impact
- Chart below (from this paper) is a meta analysis of “globally reconciled and methodologically harmonized” data on the environmental impact (from GHG emissions to eutrophication) of 40 major foods.
- What is interesting is the range – even the best meat farms still outweigh the worst grains.
Compounding
- Compounding is very difficult for human minds to comprehend.
- As the famous riddle goes:
- “Imagine it’s 10:00 AM on a small pond with a single lily pad. If the number of lily pads on the pond doubles every minute, and the entire pond is full of lily pads by 11:00 AM, at what time is the pond half full of lily pads?“
- The answer is here and many get this wrong.
- Morgen Housel brings this up in his conversation with Tim Ferriss (worth a full listen) when he talks about Warren Buffett who’s real talent, when compared to other greats like Jim Simons, was not the level of investment returns (Simons’ are much higher) but their longevity. As he says “if Buffett had retired at age 60, like a normal person might, no one would’ve ever heard of him” (transcript).
VC Valuations Europe vs. US
- Chart from GS showing late-stage venture valuation gap between Europe and US.
- The average has fallen (from 4.0x to 2.0x) the median has remained 5x.
Online Sales Art Sales
- After years of lagging the rest of retail, art is moving online in a big way.
- Source: Art Basel & UBS Report (full of info on the art market for those interested).
Fund Management Teams vs. Individuals
New AI Companies
- Did not expect to see the number of newly founded AI firms actually peak in 2018.
- This is despite private investment hitting a huge record in 2021.
- Perhaps a sign of concentration/winner takes all dynamic forming.
- Source.
Genius
- “Below, we can see the number of acclaimed scientists (in blue) and artists (in red), divided by the effective population (total human population with the education and access to contribute to these fields).”
- Full data source. h/t Astral Codex
Non-Traditional VC Investors
- These investors – corporate VC funds, hedge funds, PE firms and sovereign wealth funds – have slowly been taking over.
- In a way this is hot money and it will be interesting to see how it behaves in a downturn.
Sustainable Infrastructure
- Beautiful read about Kyoto, Japan and the idea of building for the very long term.
- In 1610, a single family (Suminokura) decided to build a canal connecting the port of Fishimi to central Kyoto.
- The article talks about how powerful this decision was – the weight efficiency ratio increased 22.5x, the agricultural footprint was a fraction (no need to feed all those ponies), and there was no noise or other pollution. The list goes on.
- Building should be for the long term – for example did you know that the cobble stone streets of Copenhagen haven’t been resurfaced in 500 years.
Roelof Botha of Sequoia
- Great profile of Roelof Botha, one of three Sequoia partners who steward the firm.
- He is also the man behind the firm’s latest transformation – into effectively a permanent capital vehicle investing cross the company life-cycle whether private or public.
The Technology Bribe
- “Nearly 50 years ago, long before smartphones and social media, the social critic Lewis Mumford put a name to the way that complex technological systems offer a share in their benefits in exchange for compliance.“
- This “bribe” makes it clear that “this is not an offer of a gift but of a deal“
- “the bargain we are being asked to ratify takes the form of a magnificent bribe.”
- A fascinating theory and tool to understand the current world.
- “The danger, however, was that “once one opts for the system no further choice remains.”
Venture Value and Public Markets
- Venture Capital (VC) deals are not immune to public market wobbles.
- This has already started to happen.
Are you Smart enough to work at Google?
- 10, 9, 60, 90, 70, 66 … what is the next number in this series?
- Give it a try.
- This is a question asked during an interview at Google.
- So is this one “You are shrunk to the height of a penny and thrown into a blender. Your mass is reduced so that your density is the same as usual. The blades start moving in sixty seconds. What do you do?”
- Both of these interview questions are taken from this brilliant book which is about difficult interview questions at top companies.
- Once you tried those questions – hit this preview link for the answers.
Crypto network vs. valuation
- Metcalfe’s law – which states that the value of a network increases with the square of the number of users or nodes – works very well in comparing relative valuation differences across cryptocurrencies.
- Source: JPM.
Another 52 Things List
- In the tradition of Tom Whitwell and Snippet Finance, here is another 52 things list.
- For example:
- “The number of people born in Antarctica (11) is fewer than the number of people who have walked on the Moon (12).“
- “Humans have evolved to out-drink other mammals. “Many species have enzymes that break alcohol down and allow the body to excrete it, avoiding death by poisoning. But about 10 million years ago, a genetic mutation left our ancestors with a souped-up enzyme that increased alcohol metabolism 40-fold.”“
- “It takes about 200 hours of investment in the space of a few months to move a stranger into being a good friend.”