This week’s links: 24/10/19

Secrets of Greatness: How I Work

The Rise of the New Global Elite – The Atlantic

“For the super-elite, a sense of meritocratic achievement can inspire high self-regard, and that self-regard—especially when compounded by their isolation among like-minded peers—can lead to obliviousness and indifference to the suffering of others.”

How Great Entrepreneurs Think

Upon surveying 45 willing participants that passed the screening criteria of having at least 15 years of entrepreneurial companies, having started multiple businesses (both successful and unsuccessful ones), and having taken at least one of them public, she concluded that master entrepreneurs rely upon effectual reasoning vs. causal reasoning. Effectual: choosing goals based upon the assets at your disposal; causal: choosing goals, and then seeking/building the assets required to complete said goals.

CostCo’s foray into meat production

Costco was willing to sacrifice “$30 million, $40 million a year on gross margin by keeping [their chicken] at $4.99,” Galanti said the following year. “That is what we do for a living.

U.S. chicken production is large and has seen strong and steady growth for half a century; ~60% of the American production is dominated by 5 companies with ever-increasing bargaining power over retailers. In addition, while customers want entire rotisserie chickens at CostCo, only 15% of chicken is produced in full-bird form (down from 50% in the ’80s), since companies like Tyson Foods can earn higher margins on selling individual parts of chicken instead of as a whole. That has led Tyson and others to produce heavier, larger chickens, to the point that the now seven-to-eight pound chickens are too large for CostCo’s rotisserie lines, and place higher pressures on even the slimmest of margins when selling for $5/chicken.

Following their insourcing of hot dog production in 2009, CostCo is bringing their chicken production in-house, building a facility in Nebraska where the primary cost drivers of chicken production (grain, water and labor) are in the cheapest supply. Nebraska is the third largest state by corn production; however, corn prices have fallen in recent years and, compounded by the Chinese trade war, farmers are looking to diversify and answered CostCo’s call.

This could be interesting for many retailers, following other vertical integrations such as Walmart’s Angus beef production, and insourced milk supplies for both Walmart and Kroger.

This week’s links: 29/9/19

Joe Rosenfield – Grinnell College Endowment

The Valeant Meltdown

The Empire Reboots – Vanity Fair

A long piece on Satya Nadella’s assumption of the CEO position at Microsoft. Interesting to see how he’s diversified away from Office and Windows and turned around the business after some very questionable strategic investments in the 2000s. Since Nadella took over in 2014, the company’s share price has risen from ~$40/share to ~$140/share today, or about 23% a year.

Becoming a publicly traded person – HackerNoon

“I am James Gallagher, and I am your latest investment.” He’s offering “shares” of himself as a publicly traded entity, and shareholders get to weigh in on his decisions. I’m not sure what I’m missing, but I’ve got a few questions. Do shareholders get a stake in his future earnings potential? Is he going to issue dividends? How many outstanding shares are being traded? How much voting power is carried per share? To what purpose will the funds raised be applied?

Evernote’s business model struggles

As an avid Evernote user, it’s a real shame that the company was unable to really take off and monetize it’s user base. This article explores the challenges of the freemium model and how a semi-engaged user base stagnates a SaaS business. It’s worth questioning whether the fundamental product – a notes app that competes with native apps developed by Apple, Google and Microsoft as well as Bear and other consumer apps – is one that a large and stable set of customers are willing to shell out more than a few dollars a month for.

“The chief products of the tech industry are (in B2C) developing new habits among consumers and (in B2B) taking a business process which exists in many places and markedly decreasing the total cost of people required to implement it.” – Patrick McKenzie

This week’s links: 22/9/19

32 Thoughts from a 32 Year-Old – Ryan Holiday

Big Mistakes: The Best Investors and Their Worst Investments – Michael Batnick

Super interesting: the mistakes that shaped the investing careers of Warren Buffet, Bill Ackman, Chris Sacca, Jack Bogle, Mark Twain, John Maynard Keynes, and more.

Black Edge: The Story of Steven A. Cohen & SAC Capital – Sheelah Kolhatkar

Really great book on Steven Cohen and his fund SAC Capital, one of the greatest traders of all time, that mirrors the show Billions (or vice versa) in so many ways.

Saudi, Inc. – Ellen Wald

Talking to Strangers – Malcolm Gladwell

David Skok on the right SaaS metrics

Insights on VC Pricing – Aswath Damodaran. Looking at the IPO plans of Peloton, Uber and WeWork, you may notice unrealistically large addressable markets, dangerous governance structures, insufficient detail on their intended paths to profitability, and a variety of adjusted earnings metrics.

Links this week: 9/1/19

Why don’t people talk about breaking up Microsoft?

Stock Picker Bill Miller’s Defeat (WSJ, 2008)

How the prison economy works

A Dozen Lessons for Entrepreneurs

  • Advice from iconic Silicon Valley figures: Steve Blank, Bill Campbell, Eric Ries, Sam Altman, Steven Andersen, Marc Andreessen, Rich Barton, Roelof Botha, Jim Breyer, Chris Dixon, John Doerr, Peter Fenton, Jim Goetz, Paul Graham, Kirsten Green, Bill Gurley, Reid Hoffman, Ben Horowitz, Vinod Khosla, John Koppelman, Jenny Lee, Doug Leone, Michael Moritz, Chamath Palihapatiya, Keith Rabois, Andy Rachleff, Naval Ravikant, Mark Suster, Peter Thiel, and more.

Links this week: 8/25/19

Half the Sky: Turning Oppression into Opportunity: a vivid, comprehensive and cohesive read on how women are mistreated in developing nations (particular focuses on prostitution, slavery, rape, education prohibition and genital mutilation)

The CEO Library: collection of books recommended by CEOs & leaders

Anecdote about the power of recency bias when making career decisions

Podcast on Income Share Agreements – Venture Stories (see also, ISA marketplace edly)

John Paulson at Delivering Alpha 2014 Conference

  • Paulson has a concise and analytical approach to breaking down deal activity and analyzing opportunities, as he demonstrates by diving into merger arbitrage opportunities in 2014 across pharmaceuticals (Valeant, Allergan, Shire, Abbvie), oil (Whiting, Kodiak and Oasis), and media (Fox and Time Warner) industries

This week’s links: 8/18/19

The Great Stagnation in Clothing

Inside the Equinox Hotel at Hudson Yards

Jeffrey Katzenberg’s Quibi

The French are coming for Netflix (who isn’t)

Effect of Potential USD Shortage on Chinese Asset Sales

China’s Economy: What Everyone Needs to Know

What parallels can be drawn between Thailand, South Korea and Japan that could explain why their economic growth has outpaced that of the U.S. and other developed nations? LSE Professor Robert Wade suggests three main pillars of state-led macroeconomic planning:

  1. Land reform: breaking up big estates/plantations and creating a class of rural small holders, thereby raising the productivity/output of the land, especially in areas with unlimited supply of farming labor. This raises capital needed to invest in infrastructure.
  2. Export manufacturing: this helps the technological catch-up of developing nations in two ways. 1) Exports can be exchanged for the necessary foreign currencies to buy the capital equipment to increase productivity per worker (especially given weaker currencies in developing nations). 2) Once the country’s manufacturing base has been established, their exporting capabilities can help compete globally.
  3. Financial repression: controlling financial markets to facilitate the state directing capital to industries best aligned with its developmental strategy. Examples: regulated, low interest rates to reduce rentiers from living off interest income and encourage borrowing for domestic investments. A cheaper exchange rate also boosts exports. Capital controls can curtail capital from moving abroad and further incentivize domestic reinvestment.

This week’s links: 8/11/19

Posting a little early this week…

A Story of Courage – The Life of Charlie Munger

“Charlie was 31 years old, divorced, broke, and burying his young son. It would have been tempting to just give it all up and turn to vices (alcohol, drugs) as so many people around him had done at that time. But Charlie was not that man and he kept going.” Contrast this narrative to today: billionaire partner of Berkshire Hathaway and Warren Buffett, Giving Pledge co-signer, Stanford dormitory designer, and much more.

Peter Thiel’s Religion – David Perell

” At first, two people who share the same desire will be united by it. But if they cannot share what they both desire, their relationship will transform. They’ll turn from the best of friends to the worst of enemies.”

“Prestige-oriented environments can create nasty feuds over little prizes.” – similar to Naval Ravikant’s saying, “play stupid games, win stupid prizes.”

Conversations with Tyler: Peter Thiel

Concept: The “Straussian reading” refers to a form of reading between the lines. For example, the Straussian reading of Thiel’s Zero to One might be, don’t become an entrepreneur, despite the book outlining a playbook for how to become a successful one. One way to improve the skill: watch actions instead of words. A money manager with integrity will put his money where his advice is.

Where Are The Customers Yachts?

“All of these theories are true part of the time; none of them true all of the time. They are, therefore, dangerous, though sometimes useful.”

“For one thing, customers have an unfortunate habit of asking about the financial future. Now, if you do someone the single honor of asking him a difficult question, you may be assured that you will get a detailed answer. Rarely will it be the most difficult of all answers – “I don’t know.” Ask a barber if you need a haircut…

Against Against Billionaire Philanthropy – Slate Star Codex

The Untold Story of Facebook’s Building 8 – and their struggle to develop a hardware business