This week’s links: 7/14/19

When Genius Failed: The Rise and Fall of Long-Term Capital Management by Roger Lowenstein – a documentation of LTCM, a hedge fund made up of highly-qualified quantitative traders which at its peak commanded $100B, but rose to prominence and collapsed within 5 years.

How I Practice What I Do by Tyler Cowen: analogous to how I imagine many athletes practice their sport. He reads and writes every day, and practices laying out points of view that are not his own. He focuses on his competitive advantage, compounding skills that age well, he avoids the tempting distractions.

Inside Walmart’s Fight with Amazon: it’s hard to envision Walmart competing effectively against Amazon, given Amazon’s huge leads in infrastructure, patient capital and product selection. But the article ends with an interesting note: what are the anti-trust implications for Amazon in an e-commerce world devoid of Walmart?

This week’s links: 7/7/19

Lee Kuan Yew interview: strategic thoughts on the future of global geopolitics (U.S. vs China, India’s power rankings, conditions for growth and collaboration between superpowers).

Decision Points by George W. Bush: what if every global leader self-documented their most critical decisions, outlining how their decisions were made and reflecting upon the outcomes?

Premature optimization: it can be tough to choose where to focus your software development efforts, and the stakes can be tremendous. A useful framework: start with the part that is most expensive to change later on.

Preferential attachment theory of complex networks: the idea that the existing distribution of resources (attention, money, talent, etc.) often guides future resource distribution. Implications: to those that have, more will be given; the rich get richer; top talent will cluster with other top talent, etc.

When They See Us (Netflix): the epitome of the power of storytelling. A miniseries based on the 1989 Central Park jogger case in which a woman was attacked, raped and left for dead. The brutalities were wrongfully pinned upon five teenagers who received harsh sentences after being coerced into admissions of guilt despite no physical evidence. Can’t recommend highly enough.

Formula 1: Drive to Survive (Netflix): I’ve never been interested in F1, Motorsport or competitive racing, until now.

Berkshire Hathaway Annual Shareholder’s Meetings since 1994, in podcast format

This week’s links: 23/6/19

Tech and Anti-Trust – Stratechery. Focuses on potential outcomes of anti-trust scrutiny of big tech. FTC defines “monopolization” via two key characteristics: market share (usually 50%+, but obviously contingent upon the definition of the particular “market”), and durability of market power.

Starting with monopoly allegations: 1990s Microsoft was deemed a monopoly on personal computing operating systems given its market share and the lock-in it had due to network effects between Windows API and users. Apple, even in the US (its best market), only has 45% of share with the iPhone. However, in its app store, it charges 30% commission on subscriptions sold on apps, imposing an economic disadvantage upon apps that compete with those offered by Apple, including Spotify. As for Google and Facebook, it seems difficult to define the addressable market for digital advertising; the total advertising inventory on the internet is virtually boundless. Amazon plays in the retail and ecommerce spaces, and does not command 50%+ of either gross merchandise volume.

Where to invest in the next 10/20/30 years – 13D Research: the late-mover advantage suggests emerging markets will be tremendous growth opportunities, highlighting drivers that include demographics, fintech and solar power advancements, improving trust in governance and an undervalued emerging markets index relative to the U.S.

AQR on how pension funds and endowments should think about portfolio allocation to equities. Key thesis: Warren Buffett often recommends investing in low-cost index funds and sit tight while your returns compound. AQR notes, however, that endowments and pension funds have periodic payment obligations that consume most of the returns, specifically for pension funds who’s growing benefit payments are an even larger burden in drawdown years. Conclusion: diversification from pure-equity strategies is necessary to protect the sustainability of these periodic obligations.

Beyond Meat Valuation – Aswath Damodaran.

How Aldi’s Beating Walmart at its Own Price Game – CNN

Amazon seeks to revive its faltering loans business – FT. You’d think with all their transaction, inventory and cash flow data on their SMBs sellers, Amazon would have great data to assess their creditworthiness and generate a smart lending business. But growth has been challenging, jobs have been cut and they’ve stopped issuing loans in some countries. FT notes that new ‘open banking’ rules in the UK and the Payment Services Directive in the EU allow tech companies greater access to banks’ customer data (through a larger initiative to increase European competition in the payments industry), if consumers consent. This could give Amazon repayment information and income data of sellers from other marketplaces, effectively giving them greater access to bank data while retaining their own seller data in private, extending an advantage.

Last month’s links: 6/9/19

It’s been a busy few weeks, both in work volume and reading, starting with this 66 hour behemoth of an audiobook:

The Power Broker by Robert Caro, winner of the 1974 Pulitzer, sheds some light on questions like: how do large-scale, billion-dollar public works like bridges, highways and state parks get built? Who makes the decisions, what causes delays and snowballing costs (see Tyler Cowen and Scott Alexander on cost disease), and how can power be created and wielded to overcome these barriers? Between the lines, the book challenges you to think about what prices cities should be willing to pay, and the consequences (financial, social and humanitarian) when we overpay.

More commentary on high construction costs in the US. Example drivers of construction costs (9 total are listed in the article):
– Tunnels: NYC cost per km is much higher than peer cities; in part because the unwillingness to disrupt traffic flow disallows the otherwise-conventional cut-and-cover tunneling method and requires longer material transport times, higher costs, and potentially rising probabilities of delays.
– Sourcing: contracts are usually awarded in the U.S. solely based on price submitted by a construction firm; however, some firms underbid and then raise change orders, causing cost over-runs. On the flip side, NYC looks to minimize these events by overexacting specs, reducing flexibility, limiting the competitive pool, and increasing the price.

Genghis Khan and the Making of the Modern World by Jack Weatherford. Like the Free Folk from Game of Thrones, the Mongols were historically a fragmented and nomadic set of tribes until united under Genghis Khan (here’s where the metaphor is more aptly suited for the Dothraki), when they conquered 16% of the world’s landmass (the largest contiguous empire ever), and contained 25% of the world’s population. Genghis (born Temujin) had tremendous success in uniting such a large empire under one ruler, no doubt driven by power and reputation for retaliation, but also supplemented by policies like sharing spoils of war with families and converting enemy leaders into followers.

The Economics of the Cloud – Microsoft (2010). Cloud services shift traditional IT economics via three key drivers: large scale data centers reduce costs per server (supply-side savings), server utilization rates are sustainably grown as aggregated user demand smooths variability (demand-side aggregation), and efficiency gains from a multi-tenant model reducing application management and per-tenant server costs – analogous to the AirBnb model (multi-tenant efficiencies).

Why bankers can’t stop running – Financial Times

This week’s links: 5/5/19

Billion Dollar Whale: the crazy story behind 1MDB, what was once-to-be Malaysia’s sovereign wealth fund, which was used as a vehicle for fraud and corruption by Jho Low and his associates who purportedly siphoned upwards of $700M. Jho Low, currently a fugitive, allegedly spent this money on lavish homes, the financing of the Wolf of Wall Street movie, crazy parties with and gifts to Leo DiCaprio, Paris Hilton, Miranda Kerr, etc etc. A fascinating story that’s still unfolding.

Inside the secret team dinners that have built the Spurs’ dynasty: Gregg Popovich, long-time coach of the San Antonio Spurs for each of their five NBA championships, turns out to be an incredible connoisseur of wine and regularly builds his team’s culture and unity through intimate dinners at wonderful restaurants. A great peek into his leadership style.

Berkshire Hathaway’s Annual Shareholder’s Meeting took place this weekend. In addition to the recent WSJ interview with Charlie Munger, this serves as another great resource for picking the brains of two of the top investors, including topics like Berkshire’s share repurchase strategy, the recent Occidental deal, searching for ‘elephants’ outside of the U.S., and a surprising amount of face-time with Ajit Jain and Greg Abel.

USAFacts 2019 Annual Report by Steve Ballmer’s newest organization gives an interesting and pretty comprehensive look into the US population and government spending.

How the Kleiner Perkins Empire Fell: under what situations can high returns be sustained? Kleiner Perkins has sustained a string of missteps and missed opportunities. It’s birthed some new powerhouses of funds, but hasn’t been able to chart an optimistic path for the firm’s own future.