Misc

Miscellaneous is often where the gems are.

Misc

Active Share

  • A very comprehensive look at active share.
  • The bottom line: evidence suggests active share is not correlated to better performance. The reason:
    • Active share means higher dispersion (bigger range of results).
    • Higher fees.
    • Positive skew (the more concentrated the lower chance of owning the few stocks that generate most of the returns).
  • Lots more in the discussion including a really excellent part on the role of luck vs. skill.
  • In many ways supports what Hosking Partners talk about and put in practice.
Misc

Solitude and Leadership

  • A must read essay on what leadership means and what solitude (seemingly a contradictory state) has to do with it.
  • Lessons here for investors – solitude, concentration, introspection, original thought.
  • This quote was also a gem – “I used to have students who bragged to me about how fast they wrote their papers. I would tell them that the great German novelist Thomas Mann said that a writer is someone for whom writing is more difficult than it is for other people.“
Misc

Broken Windows at Scale

  • Bastiat’s broken window fallacy states: breaking a window may seem to generate economic activity through its repair, but it’s actually a loss once you take the opportunity cost into account.
  • But what if things looked different at scale? Does destruction lead to positive effects?
  • What if we all “both underestimate the costs of being stuck in bad equilibria, and overestimate the pain caused by burning down the system.“
  • This article explores this idea, by reviewing several fascinating economic papers.
  • Does the same apply at the company level?
Misc

Cloud is not all Great

  • 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

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.
Misc

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.
Misc

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?“
Misc

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.
Misc

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.
Misc

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.”
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