- Interesting to see cracks form in cloud computing paradigm.
- In the article a16z make a stark case for repatriating workloads – “We show (using relatively conservative assumptions!) that across 50 of the top public software companies currently utilizing cloud infrastructure, an estimated $100B of market value is being lost among them due to cloud impact on margins — relative to running the infrastructure themselves.”
- “If you’re operating at scale, the cost of cloud can at least double your infrastructure bill.” … “You’re crazy if you don’t start in the cloud; you’re crazy if you stay on it.“
- Good discussion of this article here.
- Computing paradigms do move in cycles but the analysis is missing things like flexibility (cloud is better at flexing workloads up and down) and capital intensity of businesses being a driver of valuation.
Misc
Miscellaneous is often where the gems are.
Fund Management Fees
- Pretty staggering chart on how much of the final value of a portfolio is consumed by fees at various fee rates (x-axis).
- It assume a portfolio returning 7% pa (this could be 0-10% and not change the analysis) over 40 years.
- A 1% fee consumes 31% of the final value.
- Definitely worth reading the full article – which discusses the question of whether fees predict performance.
eRetail 2.0
- The mind boggles at the level of innovation going in ecommerce.
- One major part is entertainment and retail = retailtainment – “shopping as a mass leisure activity”.
- This is a great article on the phenomenon, covering the plethora of ways it is developing.
- As usual one needs to look east where a lot of development is taking place.
- One of the enablers is software that is designed to be addictive – for example infinite scrolling can mimic the bottomless bowl effect leading to 73% more consumption.
Compounding
- Helps to be reminded of this table from Hayden capital Q1 letter.
- Truly the 8th wonder of the world, as they put it “time in the market, beats timing the market”.
Churn Rates by Industry
- Useful chart from the latest Mauboussin note showing churn rates in various industries.
- The piece itself is about valuing customer based businesses – interesting read.
Andreessen Interview
Fire Arms
- Everyone knows the US has the highest civilian gun ownership.
- Somewhat surprising to see which countries come next in the list.
- Source (h/t Big Picture).
Energy Transition and Geopolitics
- Fascinating chart showing the shifting balance of geopolitics as the world transitions from fossil fuels to renewables.
- Interestingly, it is far more geographically concentrated.
- Source.
A Few Short Stories
- A brilliant set of short anecdotes each carrying an important lesson.
- An example – “When we condemn [the past] for slavery, or for Native American removal, or for denying women their full role in the life of the nation, we ought to pause and think: What injustices are we perpetuating even now that will one day face the harshest of verdicts by those who come after us?“
Flights to Nowhere
- Asiana Airlines in Korea has operated 75 flights to nowhere.
- These flights don’t go anywhere but allowed 8,000 passengers to shop duty free, spending on average $1,450 per flight.
Tiger Global
- A fascinating read about Tiger Global’s innovative velocity focussed venture/growth strategy.
- It can be summed up as follows:
- Be (very) aggressive in pre-empting good tech businesses
- Move (very) quickly through diligence & term sheet issuance
- Pay (very) high prices relative to historical norms and/or competitors
- Take a (very) lightweight approach to company involvement post-investment
- Above all, deploy capital, deploy capital, deploy capital
- It is disrupting venture investing and earning high returns in the process.
Interviewing Asset Managers
- Nice excerpt from podcast host and allocator Ted Seides’ book – Capital Allocators – on how asset allocators should grill investors.
- Interesting insights and bits of advice largely on interview technique.
Life Expectancy and Education
- The difference between life expectancy in the US for those with a degree and those without is stark and has been widening.
- Source.
Cherry Blossom
- The Kyoto cherry blossom peak bloom has been recorded since 812 AD.
- March 26th 2021 peak bloom date surpassed the previous record March 27th 1409 (a century before Columbus sailed for America).
- Scientists suggest this is a clear sign of climate change.
- h/t 361 Capital.
a16z Marketplace 100: 2021
- The latest edition of the top 100 private/start-up consumer facing marketplaces using Bloomberg real-time consumer spending data.
- A lot has changed in 2020 for obvious reasons. The full report is here.
- Interesting to see Turo at number 9 (up 5 places), which is an investment (they own ca. 26.8%) by IAC that few talk about.
Luck
- How to make your own luck. Lots of interesting ideas inside re biases and the “serendipitous mindset”.
- Key elements are being “open and alert to the unexpected” and being “prepared”.
Being Negative
- This is an eye-opening essay on The Art of Negativity with useful read-across to investing.
- This was an interesting result from research – “there is a clear “asymmetry in the way that adults use positive versus negative information to make sense of their world; specifically, across an array of psychological situations and tasks, adults display a negativity bias, or the propensity to attend to, learn from, and use negative information far more than positive information.“”
- A nice quote – “An optimist believes we live in the best possible of worlds. A pessimist fears that this is true.”
The Internet
- A thought provoking and contrarian read arguing that the tailwinds from the internet and silicon valley are fading i.e. the industry is maturing.
- This chart shows that growth rates are coming down in most areas of tech.
- Worth noting it was done in early 2020 so missed the pandemic driven acceleration (the unanswered question being whether that was just pull forward or a true step change).
- This type of environment leads to a rebalance of growth away from start-ups towards internet-first incumbents – as the former can’t rely on the market to grow and the latter use vast operational muscle.
- This has profound effects including the financialisation of the technology industry.
Power of a Story
- A really nice piece about the power of stories in academic research, investing.
- And even innovation as seen in these great extracts from Rory Sutherland’s Book:
- “Making a train journey 20 per cent faster might cost hundreds of millions, but making it 20 per cent more enjoyable may cost almost nothing.“
- “The Uber map is a psychological moonshot because it does not reduce the waiting time for a taxi but simply makes waiting 90 per cent less frustrating.“
- “It seems likely that the biggest progress in the next 50 years may come not from improvements in technology but in psychology and design thinking. Put simply, it’s easy to achieve massive improvements in perception at a fraction of the cost of equivalent improvements in reality.“
- Comprehensive and fascinating look at Reddit.
- The article covers its tumultuous founding (YC start-up) and history.
- The undervaluation vs peers – the latest round valued the company at $6bn or $115 per daily active user (DAU) vs. $400 for Facebook and $310 for Twitter.
- And finally possible areas of improvement and expansion.
- All interesting to read ahead of the speculated IPO.