94: Bill Ackman's +70%, Heico to Mars, Cloudflare, Australia vs Google & Facebook, Robert Sapolsky's Brain, John Huber, Barry Diller, Can't Buy Me Love, and Thorny Lily
"Yes! Fly! Fly away! Never look back!"
How poor are they that have not patience!
What wound did ever heal but by degrees.
Thou know'st we work by wit, and not by witchcraft;
And wit depends on dilatory time.
—William Shakespeare, Othello
What’s the worst that could happen?
Just do it!
Yes, I’m talking to you.
📚 Was chatting with a reader about survivorship bias (hey Nick E!), and it reminded me of something that I think may interest many here.
‘The Outsiders’ by Will Thorndike was a huge hit with investors, and chances are good that you’ve read it (I’ve read it twice — it’s like compounder bro fan service). But I think it should be read in conjunction with ‘The Halo Effect’ by Phil Rosenzweig, because they balance each other out.
The combo is more powerful than the sum of the parts (2+2=5), and much better than the alternative I often see: throwing out the 👶🏼 with the 💧 just because there are flaws to ‘The Outsiders’.
Generally in life, it doesn’t pay to be a purist; if you wait for the perfect thing or person to learn from, you’ll wait forever. It’s much better to take the good and leave the bad, or even better, to learn about what not to do from the bad too.
🐦 I think my favorite part of Twitter is when an egg account (ie. an account without an avatar, aka a n00b) attacks the author of a book/study/article without realizing it and says that they're misinterpreting it, tells them what it's *really* about, and concludes "have you even read it?".
🐦 More thoughts on Twitter:
For a while, my biggest fear was that twitter would continue to get in its own way and muddle along and stay small enough to be acquired by someone big that doesn't want to touch 3/4 of twitter culture with a 10-foot pole, so they'd make huge changes and kill what makes it special.
But now that it's getting bigger and having more success, hopefully it can stay independent and remain its own weird self.
💡🏠 A fairly simple way to improve your quality of life, and potentially your productivity/the quality of your ideas/your mood/all those things that are more linked together than we often realize — is to improve the quality of the light where you live and work.
Plenty of bright daylight during the day (if not possible where you are, give it a higher priority the next time you move), replacing harsh omnidirectional lights with more sculpted directional and indirect light sources for the evening, multiple levels so that you can have the “we’re awake” in the evening mode and the “we’re relaxing/cooling down” in the evening mode, etc.
I think it makes a huge difference. I used to think that I could get used to anything and my first home office was in a basement, but I ended up never using it in favor of setting up a tiny desk in front of second-floor bay windows.
We’ve since moved to a different house, and I’m still set up on the second-floor, south-facing, in front of bay windows. It’s glorious.
It’s the whole: “You shape your houses, and then they shape you” thing.
There’s a book I read a while ago on designing living spaces that influenced my thinking on this. You may find it interesting: ‘A Pattern Language: Towns, Buildings, Construction’ by Christopher W. Alexander
👶🏼 Sometimes I wish I could see what the optimal early childhood parenting looked like for most of the past 100k years, just so I could know how much we’re overdoing some things as modern parents, and what important ingredients we’re not sprinkling enough of in the mix.
To be clear, I’m not one of these people with a romantic view of humanity’s pre-modern past — just looking at the stats for infant mortality not that long ago should inoculate against that; I mean, Gustav Mahler1, a composer from the 19th century that I like, has a song cycle called Kindertotenlieder, which is German for “Songs on the Death of Children” because 6 of his 12 children died — and many things are much better today for sure.
But I’m not talking about the average pre-modern childhood, I’m curious about the optimal one. After all, childhood development isn’t a random process. It has evolved in a certain context, so when you change that context a lot, some stuff is probably misfiring or not being given what it needs. It’s that part that I’m curious about.
Investing & Business
So Bill Ackman Did OK in 2020
The Pershing ⬛️ presentation is here with all the details.
2020 was an outstanding year for PSH with NAV appreciation of 70.2% and a total shareholder return of 84.8%
PSH’s 70.2% net return in 2020 is the highest since inception of the strategy and the
sixth year with net returns of 39% or more (on average, every third year)
Interesting to see that the index CDS bet contributed 36.6% to the year’s return.
Heico 🚀 Mars
If you own Heico, a little part of what you own made it to Mars last week (4 Heico subs provided tech for NASA’s SUV-sized Mars rover Perseverance):
HEICO provided details about the mission-critical flight hardware which four different HEICO subsidiaries supplied for the mission. The HEICO subsidiaries supplying mission-critical flight hardware are: Apex Microtechnology, Sierra Microwave Technology, 3D PLUS and VPT, Inc.
More detail here on what exactly each subsidiary made.
I love this little detail (below) in this graph showing the landing sequence:
Yes! Fly! Fly away! Never look back!
‘Researchers in Research and Development vs GDP per capita, 2015’
Research & Development is concentrated in high-income countries. The Nordic countries are particularly strong: Denmark has the highest rate with 7,500 researchers per million people. Then follow Korea, Sweden, Finland, Singapore, Iceland, & Norway.
Free vs Paid — Can’t Buy Me Love
This conversation made me think about the difference between what people will put up with when it comes to “free” (ad-supported) vs paid/premium products and services.
This explains a lot about the difference in how much love people have for companies like Apple or Tesla or HBO vs Facebook or broadcast TV.
The "free" product/service may be full of ads and/or trolls and makes you feel bad and waste your time, but hey, it’s free!
But if you pay for something, especially if you pay premium, you need something a lot more polished that make you feel good to use and that doesn’t treat your time as worthless.
So the business model creates the product, but the product also creates the business model.
If Facebook cost $25 or $50/month to access, I think users would have very different expectations and they’d not put up with certain things, which would lead to a very different product because Facebook would have to meet those expectations, which would probably lead to users feeling more love for the product. But of course, that would sacrifice reach and would leave them vulnerable to a competitor that optimized for reach (ie. was free to use) — everything is a trade-off and every industry/product-type tends to gravitate towards certain stable equilibriums.
Barry Diller on the risk of over-analysis
When an existing company—an acquisition—if you spent too much time on it, and you learn too much about it, you will inevitably be talked out of it.
And I've seen it happen so many times in my company, Hindsight is hindsight—but you go back a year or two later and say, "What was wrong?"
You know, we've got teams of analysts and—same thing you've got. And you get too much data in that, as against a good idea, and you come to the wrong conclusion.
Interview: John Huber, Saber Capital
Friend of the show John Huber has a good interview in the latest G&D:
Graham & Doddsville — Winter 2021 (it starts on p.29)
It covers a lot: how he got interested in investing, early influences, mentors, evolution to higher quality businesses over time, he goes into more detail on his investment in Apple, some commentary on NVR, Verisign, his investment in Etsy, etc.
one thing I've learned – when you have a great business, the best thing to do is sit on it and don't touch it
As I said: It’s all obvious, but simple doesn’t mean easy. This is so true, yet so hard to do…
I think the great reinvestment moats of today are companies that are investing in ways that show up on their income statements in the form of sales and marketing expenses or product development costs, and much less through their balance sheet in the form of capitalized physical assets like store locations and inventory.
In a digital world of ideas, the new capital is created by the neurons on the payroll, not the machines.
When it comes to companies that have benefited from COVID, there's two main categories; those that have pulled forward demand, and then those that have borrowed demand from the future, and have to pay it back.
The latter category might be something likeLowe's or Pool Corp. You might install a deck this year or put in a pool [instead of in the future] [...]
On the other hand, if you have a two-sided marketplace, and you pulled forward five years of demand, then all of a sudden, you’ve fast forwarded into 2025. Your business took a giant leap higher, and now you will grow off of a much higher and stronger base. [...]
If you've acquired five years-worth of customers, thanks to COVID, for very little cost, you've created enormous value because those habits have changed, and that would have taken many years and much marketing expense to achieve those same changes that have occurred.
Australia vs Google & Facebook (aka Murdoch’s Regulatory Capture Flying Circus)
Good conversation between Ben Thompson and James Allworth (who also wrote this on the topic), making a bunch of good points that I agree with for the most part about the ridiculous situation in Australia:
In short: Maybe an argument could be made for some sort of tax on big tech to support actual fact-finding journalism (which isn’t the same as all of what news organizations do, with all the editorializing and partisan lobbying and entertainment), but this isn’t the same as trying to break the open-internet by having people pay for linking and send money directly to a large incumbent that is in competition with big tech (News Corp) rather than to taxpayers.
‘One of my favorite financial history anecdotes, and feels timely.’
Via Jamie Catherwood.
Science & Technology
Cloudflare: Internet traffic patterns — 2020 in Review
Internet use [in the US] really took off in March (when the lockdowns began) and rapidly increased to 40% higher than the start of the year. And usage has pretty much stayed there for all of 2020: that’s the new normal. (Source)
Speaking of Cloudflare, I liked this description of the company by Muji (that elongation joke had run its course…):
Cloudflare is an edge network, currently with 51Tb+ of global network capacity that is interconnecting with nearly 9000 outside networks (ISPs, cloud providers, internet exchanges, and customers). Their edge network is generally accessed via 200 Points of Presence (POPs), strategically situated across 100 countries – putting the vast majority of the world within 100ms of their edge. They handle 18M+ web requests per second on average, hitting 25M+ protected web sites and services -- which means they typically handle ~1.5 trillion web requests a day. The insights gained from handling all that traffic then powers a threat intel system that protects the edge network and its customers, which blocks an average of 72B cyberthreats a day.
If you want a good, very in-depth but still accessible to the not-too-nerdy, overview of where the company stands in 2020, this is excellent.
Interview: Robert Sapolsky on our 🧠
Good discussion/interview between Robert Sapolsky and Sean Carroll (a theoretical physicist specializing in quantum mechanics, gravity, and cosmology):
Warning: You may come out on the other side of this podcast with less belief in free-will and self-determination than you did going in…
I also hear that Sapolsky’s book ‘Behave’ is very good.
I haven’t read it yet — I started it once a few years ago, but wasn’t in the mood and decided I’d come back to it later. That hasn’t happened yet, and with the pandemic, I’ve made very little progress on my book-reading… But hey, tomorrow’s a new day!
h/t Brad Slingerlend
The Arts & History
Beautiful Underside of the Victoria Amazonica Lily Pad
The underside of the pads are covered from one side to the next in thick structural ribs, over and between which jut hundreds of sharp spines to protect the plant from herbivorous swimmers. The cell-like design was actually the inspiration for Joseph Paxton’s famed Crystal Palace in London, which at nearly one million square feet was the largest glass building of the 19th century.
The entire structure is connected to an underwater stalk which can snake over 20 feet down to its base. Together, these features combine to push up a leaf that can support up to 80 pounds on its own. (Source)
Split-screen Showing VFX Sequence Without CGI
Isn’t this amazing? This isn’t some big budget film, this is what people can do at home nowadays.
Here’s a kind of behind-the-virtual-scenes/making of video showing how this specific sequence was made. I find that stuff 🤯
You also think it’s cool? You want more? Ok, ok. Here’s a how-to make Star Wars-style lightsabers in Blender.
If you want to get into it, from memory, Otto Klemperer is a good Mahler conductor. The 2nd symphony, aka Resurrection, is quite epic. I also like Bernstein conducting (I’m listening to his rendition of the 9th as I write this). Let me know how you like them if you give them a try.