Author Archives: Jeremy Hurst

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[VIC – 114] G’day mate!

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At the beginning of this trip, I thought I might take my reflections from the journey, and try to retrofit them into the normal 4-part structure of VIC. It’s now clear that that would not do the trip, myself, or you readers justice. So we’ll approach things like this instead…

Looking back 📖

It’s said that Australia was founded as a penal colony. So when the British ran out of space in their jails for prisoners, they shipped them off to Australia. And while all signs point to that being mostly true, it seems to skew the motivation of the British a bit.

To put things in a temporal context, Australia was colonized immediately following the American revolution. So it seems likely that the British were looking for other strategic prospects. And to that end, workers were needed to build roads, bridges, and other infrastructure to allow industry to come in. And quite conveniently, the prisons back home happened to reach capacity at the same time. Lol

Our first stop on our trip was Sydney. It feels surprisingly like an American city. Tons of white english speakers walking around. Some Asian and Indian people. And a few (very few in this case) blacks sprinkled in.

What surprised me is that the feeling of colonization remains present. Perhaps America isn’t much different, but I’m just used to it. In any case, you have the faces of English queens on the fiat currency. Australia participates in the Commonwealth Games, which seems to be the Olympics for the former British Commonwealth. I guess you might say that the Commonwealth dates back to the mid 20th century with decolonization and increasing self-governance, but there doesn’t seem to be anything comparable to an American Revolution (I need to do some more reading here). Please jump in if you happen to be Australian or are knowledgeable on the subject.

Feeling small 👶🏿

The vastness of the ocean has a way of making a human being feel very small. When you’re on a boat and only see water in all directions, it’s rather humbling. The relentless crashing of the waves was a thing long before humanity. And will continue long afterward.

Mountain ranges have a similar effect. These are the Blue Mountains about an hour west of Sydney.

The beauty of rock formations astounds me. Here’s Bondi Beach in Sydney.

As you can see, the rock is very porous and water fills the small holes. In other places, the rock has smooth flowing white portions juxtaposed with jagged grey areas.

Mosquitos as meditation 💡

The Daintree Rainforest is exquisite.

It also has an exquisite number of mosquitos. I must have gotten 50 or 60 bites in a few hours, despite blankets of repellent. But they offered a great opportunity to practice 2 aspects of mediation.

First, mediation talks about staying present and in the moment. It turns out 50-60 mosquito bites is a great catalyst for this. You’re forced to stay with the pain and discomfort of countless insects drinking your blood in unison. It’s more painful than I would have assumed.

But that said, it’s not so painful that it should be all consuming. There was a period of time where I stopped listening to the guide and was completely flustered by my own scratching and swatting. But when I stopped swatting and focused on what the guide was saying, it turned out that I had a choice as to how much the bites could control my mindset. It turned out that the things I learned about the rainforest and the Gugu-Yalanji aboriginal people was far more interesting and compelling than thinking about the mosquitos.

The Outback 🌵

After Sydney, we traveled to Ayer’s Rock, which is located in the southern part of the Northern Territory. The area is hot, arid, and expansive.

During our time there, we saw the “Field of Light” installation. It’s made of 50,000 lights and over 230 miles of fiber optic cables.

It’s a pretty breathtaking display, and the star-filled sky makes it all the better.

That said, I can’t help but feel like the exhibit is a bit intrusive. This land is purportedly sacred to the indigenous peoples and it feels a bit strange to have a multimillion dollar art installation slapped down in the middle of it. But I’m not sure. Biologically speaking, we are animals like any other animal on the planet, and so it could be said that we come from nature or the natural world. And our inventions, art installations included, come from us. So by that transitive property, one might say that our inventions are also of nature.

“Support our indigenous trainees on the road to success!”

That was a sign in a cafe staffed by indigenous peoples training in hospitality not far from Ayer’s Rock. This one really didn’t sit well with me.

First off, it’s clear who wrote that. And they definitely WERE NOT indigenous. Secondly, the tone is incredibly derogatory. The road to success? You mean working at this cafe for a menial wage serving primarily white tourists? Third, the air of superiority is incredible. As if the indigenous people are being done some massive favor. Finally, while the cafe and restaurant wait staff were often indigenous, who do you think owned the land and the resort? Who was calling the shots? Such a farce!

But then again, who’s to say what someone else’s definition of success looks like. Perhaps success equals maintaining some connection with the land of your ancestors and an opportunity to feed your family.

Kayaking 🚣

You really don’t have much control while kayaking on the ocean. You can paddle or not paddle. Perhaps increase the length or velocity of your strokes. Perhaps just paddle to one side to turn the vessel. But that’s about it. The rest is up to the ocean. You have competing current, apex predators like crocodiles and great white sharks, smaller ones like the Irukandji jellyfish that pose an equal threat, tropical storm systems can show up with a moments notice.

Everyday life is much the same. You can choose to work hard and surround yourself with good people. You can eat well and spend your time wisely. But when you really think about it, luck and chance play an outsized role in how things ultimately play out.

Self-importance 👑

On that same thread, many of us feel very substantial and important (I surely do). But in reality, none of us matter that much.

It’s good to be reminded of that fact. And this trip was one such reminder. I sent a grand total of zero work emails. And at the start of the trip I had this strange idea that I was so critical to everything I do at the office. But in reality, everything kept right on humming in my absence. Perhaps a thing or two got delayed. Maybe a meeting went differently than I would have conducted it. But nothing burned down and no one was killed. Everything is just fine.

Bath time 🛀

Showers are great, but taking a bath is appreciated. Especially for couples. You have two people completely exposed and vulnerable to one another in relatively tight quarters. As a result, you have very little room for the psychological barriers we often erect between each other, even between lovers. So we spent 60 minutes with a bottle of wine, bath salts, and hearts on sleeves. We discussed managing up and down at work, male egos, dealing with psychological trauma head-on, our favorite authors, time management, long-term goals, and many other things. It was, perhaps, the most prized 60 minutes of the entire trip.

(We’ve also decided on a bathtub model for our future home 😉)

Silence 🤭

In many moments, we’re inclined to offer our own thoughts, perspectives, and opinions. But I often found myself remarkably silent while traveling in Australia. The immensity of the ocean. The quiet of the desert. The wonder in observing the Great Barrier Reef. The diversity and adaptability in the rainforest. All inspired profound silence. Perhaps because words just felt inadequate. It’s interesting how our many preoccupations are normally so good at holding our attention, but nature has a way of breaking that.

Blockchain, Facebook, Investing

[VIC – 113] Long Facebook 📈. The internet is always about cats 😺. Pole dancing 🕺🏽. Honey 🍯 .

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Business & Money

Facebook is the 2nd largest position in my portfolio. And as such, I spend a lot of time thinking about it.

FB has been in the news a lot of late and, as a result of the negative press, the stock is down about 15% since it’s peak in February. The negative press centers on a recent revelation that Cambridge Analytica had gotten its hands on data related to about 50 million user profiles, and they subsequently used that data for targeting purposes during the 2016 elections.

The problem relates to a product offering called Facebook Connect, which I believe launched in 2012 and was shut down in 2015. The product allowed other app developers to use a “log in with Facebook” option within their own apps, allowing a faster signup/login process and also, more importantly, allowed those apps to collect user data related to that person and all of their connections on Facebook. FB was giving away a lot, but in return incentivized more developers to build apps on top of its platform. So, to put it simply, for a non-trivial amount of time, FB was being incredibly cavalier about user data and giving it away in droves. This didn’t come to an end until they realized that it was far more lucrative for them to focus on being a digital advertising behemoth as opposed to a platform for developers.
So yes, the above looks pretty bad and plays well into the Facebook undermining democracy narrative.

And while we’re at it, let’s add a couple extra points to the bear case.

FB recently experienced declines in active users within the younger demographic (though they saw growth overall).

There also seems to be more research surfacing every day about how there is an inverse correlation between happiness and time spent on social media platforms.

But, and a very big but, almost everything above is about perception and sentiment. If you flip to the numbers and the fundamentals of the business, it’s hard not to be a bull. The business has never been better.

You have accelerating return on equity over the last 5 years, largely due to constant margin expansion.

When looking at Q417, daily active users and monthly active users were both up 14% YOY.

And what’s interesting to me when I think about Facebook in my own life is that, despite the fact that their losing younger users in the US, it seems my aunts, uncles, and other family members are joining in increasing numbers and posting non stop.

It also allows me to be connected with anyone who has ever mattered in my life. I’m connected with a bunch of friends in Mexico due to an exchange program in 7th grade. I’m connected with my 5th grade math teacher. My dog Dutch was one in a litter of 7. I’m connected with the families who adopted his siblings. And without a phone number or email address, I can reach out to any of those people on a moments notice. Facebook has essentially become a utility.

So, all in all, nothing has changed about my investment thesis. I am long FB and will remain so (unless, of course, it crosses the stop I have in place at $140).

Human Progress

Back in 2010, Paul Graham wrote one of his famous essays called Organic Startup Ideas. In it he wrote,

Don’t be discouraged if what you produce initially is something other people dismiss as a toy. In fact, that’s a good sign. That’s probably why everyone else has been overlooking the idea. The first microcomputers were dismissed as toys. And the first planes, and the first cars. At this point, when someone comes to us with something that users like but that we could envision forum trolls dismissing as a toy, it makes us especially likely to invest.

I’m thinking about this essay in relation to CryptoKitties, a platform that allows people to collect and breed digital cats on the blockchain. Now you’re probably thinking, “why the hell would anyone want to collect and breed digital cats?” Well maybe you’re smarter than I am, but that’s what I was thinking at first read. But this starts to get interesting when you really think about it.

First, we’ve all know collectors. Over the years, I’ve known people that collected beanie babies, stamps, coins, Magic The Gathering playing cards, Jordans, vinyl records, and many other things. For me, it was little model cars. My favorite was a red 1995 BMW Z3.

Whatever the item, it seems that it’s a fundamental human desire to own things that are rare and desirable by other people.

Second, it’s important to note that CryptoKitties runs on an open network with open standards (the ERC721 standard – a standard on the Ethereum Blockchain dedicated to the creation and exchange of non-fungible tokens). That means other developers can build their own digital assets and collectibles using the same standards.

Let me give an example that helps explain this second point. Today, you might be playing Grand Theft Auto (GTA) where you complete missions to buy things in the game (additional maps, guns, etc). But those digital assets are only valuable in GTA. If you switch over to World of Warcraft (WoW), those assets are nontransferable. But what if, instead of each game using proprietary standards to create their own digital assets, both used a set of common standards allowing assets to be transferable between games? Or what if you could sell those GTA maps and guns for Ethereum, then use that to purchase weapons in WoW.

Or think about Amazon and eBay. As a seller, you attain ratings and reviews over time as you sell more things. But there’s no way to transfer that reputation to another platform. What if the reviews and stars were a digital asset built on open standards that could be transferred to any other digital platform?

So, coming back to CryptoKitties, it’s likely that blockchain-based collectibles might be one of those things that initially gets dismissed as a toy (but not by Andreessen Horowitz and USV).

Philosophy

One day this week I was taking a ride on the 1 train. When I got on, there was this guy strangely rubbing his arm against the pole that’s supposed to be for balancing yourself while the train was in motion. I proceeded to walk to the other end of the car to give the crazy guy adequate space for his crazy antics. Once a safe distance away, I glanced back to see if the strange pole grinding was still taking place. At that point. I noticed something that I had originally missed. The guy only has one arm. From this angle, it became clear that he had some sort of itch or discomfort that, in the absence of a second arm, was incredibly difficult to reach. So he was forced to use the pole.

I wonder how many other moments exist where I jump to snap judgments without really understanding the situation at hand, how often I think one thing because I fail to pay close enough attention. It’s probably more often than I’d like it to be.

Still much work to be done on being present and aware of what’s real and true.

My Latest Discovery

Whenever shopping online, I used to check Retailmenot.com and/or coupons.com for discount codes before checking out. Luckily, that’s no longer necessary. If you download the chrome extension for Honey, it automatically applies discount codes across 20,000+ e-commerce sites as you shop so you don’t have to. They’re even integrated with Amazon so that, for any product, they are constantly checking to see if it might be on sale for cheaper from a different merchant. Go download it now!

Insurance

[VIC – 112] Insurance

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Business & Money

One of the things you never think about as a child is insurance. You get sick, you go to the doctor, take some medicine, and (hopefully) get better. Mom gets in a fender bender and somehow the scratches and dents miraculously disappear within a couple weeks. No matter what happens, things just seem to resolve themselves.

Then you become an adult and everything changes.

At work, most get health, dental and vision insurance as part of their employment benefits. And you have to make choices and elections as to what level of coverage makes sense for you and your family.

At home, you then need to seek out insurance for your home, apartment, car, engagement rings, pets, and many other things.

The interesting thing here is that most of these things are just thought of as necessary expenses. It makes sense to pay some nominal amount every month or quarter in order to mitigate risk and protect the things that matter.

But insurance also offers a great investment opportunity, for long-term buy-and-hold investors that is. That’s because they generate money known as “float” in that they collect premiums in advance of when any claims will be paid out. For example, you pay car insurance every month, regardless of whether or not you get in any accidents. Then one day an accident does happen, at which point you file a claim with your insurance company so they can cover the cost. So, during that entire period before the accident occurred, your insurance company can use the revenue generated from your monthly premiums as investable capital. Most of that money usually get’s invested in low-risk fixed income securities (like bonds), but it’s also used to invest in the stock market.

Taking a real life example, Warren Buffet’s Berkshire Hathaway generated nearly $100 billion in float last year, up from about $40 million in 1970.

What’s more, the best insurance companies will also generate consistent underwriting profits. That is, say a company generates $100 in premiums. It might pay out $70 in insurance losses (claims paid), $20 in general administrative expenses (everyday business operations), and is thus left with $10 of underwriting profit. If you can spot insurance businesses that generate consistent underwriting profits, you’re likely looking at a winner.

Berkshire is probably the best and most obvious choice to own in this category. They generate massive float, consistent underwriting profits, and the business has incredibly financial strength.

However, there are also other mid-cap and smaller-cap opportunities that I’d say are also worth a look. RLI and MKL are two I follow closely.

Ps whenever I find interesting business models, my thought process is to look for other markets where a similar structure might work. In thinking about float and insurance companies, wedding registry sites came to mind. For example, we used Zola for our wedding registry. You set up the registry months before the wedding, but you usually don’t want the gifts shipped until after the wedding date (many people move into a new house/apartment after getting married). So Zola might have something like 3-6 months of “float” in the sense that your wedding guests are all paying for the gifts well in advance of when those orders need to be fulfilled. Zola could, in theory, use that capital to make investments. As a startup, they’re likely using the money to fund growth (advertising, hiring, etc), but once the business reaches scale, perhaps they’ll follow the insurance model.

Cryptocurrency, streaming music

[VIC – 111] Spotify IPO. Request for startups. The feelings wheel. A crypto index fund.

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Business & Money

In VIC 89 I wrote about fixed costs vs variable costs as it relates to Facebook and SnapChat. If you missed that issue, the short of it is was that Facebook made a massive fixed cost investment up front in building its own data centers, with basically zero marginal cost as they add more users over time. In contrast, Snap uses Google Cloud for compute and storage, so there was no fixed cost investment up front, but adding incremental users over time means a proportional increase in operational expense.

The reason I bring this back up is because Spotify is preparing to go public via a direct listing. And like Snap, they have a massive problem with marginal costs. For every new user that signs up to Spotify and starts streaming music, that means more royalty payments to the labels. So costs rise in line with revenues and margins don’t improve. This is the opposite of how technology companies usually operate.

So, while the Spotify user base continues to grow at a healthy clip, it’s difficult to see how the economics of the business make any sense. With over a billion dollars in losses, it’s hard to see a road to profitability.

So I’ll do something I never do, make a prediction. (I wouldn’t give much weight to what follows, but an interesting thought experiment nonetheless).

Scenario 1: Spotify goes public and the stock get’s punished over the next 12 months due to crappy economics. When the price falls far enough, Apple acquires them, kills the service, or simply rebrands it as Apple Music while killing their own. This removes the largest competitor in the market and gives Apple more strategic leverage in negotiations with labels, which has the potential to make streaming music a potentially profitable business.

Scenario 2: again, Spotify goes public and the stock get’s punished over the next 12 months due to crappy economics. The major labels see this and recognize an opportunity. They all come together and form some type of joint venture or SPAC (special purpose acquisition company – a publicly traded company who raises money via the public markets with the sole purpose of buying another company) for the purpose of acquiring Spotify (similar to the way Hulu is a joint venture between Disney, Fox, Comcast, and Turner).

There is, of course, a pretty clear bull case for Spotify, but they have their work cut out for them. (perhaps we’ll touch on that next week)

Human Progress

Y Combinator (YC) is the top startup incubator in the land. I’m not sure if that’s the case in terms of realized returns, but it’s basically non-negotiable in terms of paper returns, brand recognition, and prestige. Their portfolio includes the likes of Airbnb, Dropbox, Stripe, Instacart, DoorDash, Twitch, Reddit, Coinbase, and many other household names.

The reason I bring them up is because, given their laser focus on seed-stage investing, they tend to see trends before others do. And as a result, I try to pay attention whenever they call out specific sectors they’re interested in.

As part of the YC application process, they sometimes issue an RFS, or request for startups. It’s an explicit invitation for startups to apply that are focusing on specific challenges or industries of interest to them. There are 25 categories on their RFS list, and they’ve just added 9 new ones. These are:

Brick and Mortar 2.0

Carbon Removal Technologies

Cellular Agriculture and Clean Meat

Cleaner Commodities

Improving Memory

Longevity and Anti-Aging (YC Bio)

Safeguards Against Fake Video

Supporting Creators

Voice Apps

If you’re working in or thinking deeply about any of these areas, perhaps you might want to consider applying.

Philosophy

I know a lot of people that see some form of a therapist. Unfortunately, I think there’s still a bit of cultural stigma associated with seeing a therapist, but I think that’s changing. In the last year alone, I’ve heard a number of people openly talking about their interactions with their therapist. I could not make that same statement 5 years ago. That is a good thing.

From my second-hand knowledge of therapy, it seems that one of the great things is that you get to openly discuss feelings and emotions. That doesn’t happen all that much in everyday life. It’s really easy to catch up with friends at happy hour or over brunch, without really diving deep into our emotional states and “peeling back the onion.” That’s unfortunate.

One person I know that attends therapy was given the below by their therapist as a tool to get to the core of emotional experience.

The outer wheels show the words that we often use to describe our feelings. The idea is to then move inwards in an attempt to understand what those feelings really mean. Are you feeling trapped and confused? Could that mean that you’re scared? If so, what are you afraid of?

Exercises like these seem like they could go a long way in helping us to be emotionally honest with ourselves and the ones we care about.

My Latest Discovery

Coinbase just launched an index fund. This will give investors access to a basket of all digital assets listed on their exchange, weighted by market cap. To start, it is only available to accredited investors in the US, but I imagine it will soon be available to the broader public. This is a great thing for crypto.

In the same way that average investors want access to public markets without the need (skill, desire) to pick individual stocks, this is all about expanding the addressable market for crypto and making it available to everyone.

Convenience, Fitness, Investing, Religion

[VIC – 110] Prediction. Convenience. Religion & science. HIIT-ing the road.

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Business & Money

There’s this classic idea from behavioral psychology about our ability to make predictions (popularized by Philip Tetlock and Daniel Kahneman I believe). It’s the basic idea that more information increases our confidence about a prediction, without a concomitant increase in the accuracy of those predictions.

Take an example: there’s a woman called Monica. She studied English literature at Columbia University. She also wears glasses and greatly enjoys Dickens novels.

Is Monica more likely to a nurse or a librarian?

Any reasonable person might say all the signals point to her being a librarian. However, there are about 1,000 nurses to every librarian. So it’s far more likely that she’s a nurse.

This idea seems incredibly relevant to investing. The more you learn about a given company, the more you think you know and understand it. Biotech takes this to the extreme. It’s easy to get excited about partnerships and early success with clinical trials. But I always have to remind myself, I don’t really understand anything about the underlying technology, the regulatory environment, or much else for that matter.

Buffet would remind me to stay within my circle of competence.

Human Progress

A couple weeks ago, I wrote that “free speech is merely a means to other more important ends… To protect free speech for its own sake is to not understand what is intended to bring about.”

Since I wrote that, I’ve been thinking about what else might fall victim to the same phenomena. It appears convenience might be in the crosshairs.

Convenience is often a great thing.

Airplanes are convenient. I can jump on a six-hour flight to California for a conference, and also get a lot done during the flight. That’s far more convenient and productive than driving cross-country for a week, or riding by horseback.

Washing machines are convenient. I toss a bunch of clothes into a machine with a little detergent and voila, clean clothes 45 minutes later. It’s wonderful!

Convenience even beats out free on occasion. There are ton’s of ways to pirate music for free on the internet. But I can pay $9.99 per month for unlimited streams & downloads on as many devices as I own. It’s just so easy that it’s not worth the trouble downloading pirated files from sketchy websites (not to mention the legality).

But convenience isn’t always a good thing.

The fact that you can trade stocks for free from a smartphone is not a good thing. It encourages terrible investor behavior and psychological tendencies. It’s really hard to take a long-term perspective when you get push notifications about every minor fluctuation.

Fast food sure is convenient, but it’s terrible for you. Convenience shouldn’t out way the damage people do to their bodies from all of the added sugars, salts, and other less than desirable ingredients.

Returning back to the idea of free speech for it’s own sake, convenience for it’s own sake is equally detestable. And it seems so many innovators and technologists have this strange obsession with convenience as if it, in and of itself, should be the ultimate objective in every arena of existence.

In my opinion, convenience is often too focused on outcomes and not enough on the journey. You can drive 26 miles or you can run a marathon. One is more convenient and you end up in the same place with either option, but the two methods are worlds apart.

In fact, it appears to me that those areas of life that require the most patience and concerted effort are those where we find real meaning and fulfillment.

Philosophy

On the one hand, there are billions of people on the planet that practice a religion in some form or another.

On the other hand, you have science which lies at the center of our advancement as a species.

Does not the fact that these concepts exist simultaneously and at incredible scale say something about their relationship with one another. Perhaps these two are not as diametrically opposed as some would have you believe.

But there does appear to be a fundamental conflict. That is, in science, there is this “thoroughly conscious ignorance,” a closeness with uncertainty that must be maintained in order to fuel more hypotheses and experimentation. And that seems incompatible with the unconditional faith that is required in religion.

Thoughts?

My Latest Discovery

My job requires a fair bit of travel, but I hate missing days in the gym. I also don’t like packing a bunch of extra gym clothes and shoes because checking baggage is the worst. As such, I’ve been searching for quick HIIT (high-intensity interval training) workouts I can do in my hotel room when I wake up. This one is great and is sure to give you a good burn.

I recommend clicking the link (as opposed to just glancing at the picture below) and reading through the descriptions of each exercise because there is some added complexity that makes for a tougher circuit (e.g. the decline push-up has two parts, a regular decline push up and pike push-up).

Investing, Suffering

[VIC – 109] Check out my triple axel. Times tables are stupid! Can you weigh human suffering? There’s hope for hipsters.

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Business & Money

Over the last couple of weeks, I’ve caught a few glimpses of figure staking as part of the 2018 Winter Olympics. The interesting thing to me about figure skating is that you get style points and better scores for higher levels of difficulty. 3 spins in the air is better than two and higher elevation during jumps is better than lower.

Investing is not like figure skating. You get no extra points for degree of difficulty. If our portfolios are both up the same percentage over the course of the year, it doesn’t matter if you found some obscure value play while I just held Apple or Amazon.

All you have to do is maximize returns with the lowest possible risk. It’s really that simple.

Human Progress

Times tables are stupid! Or so some people think.

I was recently speaking to my fifth-grade math teacher, and she mentioned an interesting debate happening in educational circles. With a tool like a calculator, which, of course, exists as an app on any smartphone, why would any child need to memorize their times tables? It’s an interesting question.

On the one hand, the calculator is computationally superior to a human being in every way. We’ve built tools as such to augment our own abilities and thus can reallocate our energy to things better suited to us.

On the other, the inability to do simple multiplication in one’s head might lead to problems. The example my teacher gave was, if a student doesn’t know that 5 x 11 = 55, then they might struggle with more complex equations. If for example they were faced with the problem “50 x 11”, they might incorrectly key in 50 x 12 on the calculator yielding an answer of 600. And without the baseline level of knowledge about the simpler equation, they might not immediately know they did something wrong.

The above example is fairly rudimentary, but it points to a larger idea. Having a baseline level of knowledge and understanding seems crucial to higher order thinking. And what’s more important than simply memorizing the answer of 5 x 11, is the process by which students might learn to memorize that result. Back when I was learning my times tables, the easiest way for me was to learn by combinations. 5 x 10 is easy, and 5 x 1 is easy, so I developed the ability to just learn the most basic equations, and quickly sum the totals to arrive at more complex answers.

What I just described is the process of “learning how to learn.” I imagine other students had different methods and approaches to learning various subjects that worked best for them.

With the speed at which we’re developing new tools and technologies to augment our own abilities, it’s so crucial to learn how to learn.

Philosophy

I was recently listening to an episode of Waking Up with Sam Harris. Sam was being interviewed by Russell Brand (yes, THE Russell Brand, the English comedian and actor from “Get Him To The Greek,” interviewing the renowned public intellectual Sam Harris who’s most known as an outspoken atheist).

One particularly intriguing segment had to do with the treatment of women in the Muslim world. Sam, being an atheist and particularly outspoken against the Islamic faith, spoke about how women are “forced to wear bags on their heads” (presumably referring to the hijab) as a result of religious dogmatism.

Brand then comes back with an interesting point of his own. He points out that Sam, having 2 daughters, might be focusing on the wrong issues facing women in today’s society. Issues that are much closer to home.

“Why are you not more concerned by the continual objectification of women and the commodification of female sexuality, the advertising industry using females purely as props?… Which one is more prominent? Which one is more likely to happen to your daughters? That she’s going to be whisked off to Afghanistan to be wife number 5, or that she’s going to have sex with some dickhead because she’s got daddy issues.”

I believe this to be a critically important question (and one that I don’t pretend to know the answer to). It’s basically the question of, “can you weigh human suffering?” Is the suffering faced by women in America more or less important than that faced by women in other parts of the world?

Would it make you cold-blooded or apathetic if you chose to focus on one problem over the other?

My Latest Discovery

If you live in Brooklyn along the L train, you’re fully aware of the impending shutdown coming in spring 2019. But, perhaps all hope is not lost. Check out this Kickstarter.

Misinformation, Social Media

[VIC – 108] Say it to my face. A means, not an end. Elevator etiquette. The Gates Foundation annual letter.

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Business & Money

I’ve noticed that it’s much harder for people to be mean/rude face-to-face, versus over the phone or email. I imagine that is because there’s less humanity when you can’t see the other person. Putting a snarky comment in an email or yelling at someone over the phone doesn’t take much courage. But to look someone in the eyes (especially if you have respect for that person) and say really mean things is hard to do.

The reason I put this in the business & money section is because the idea recently made itself apparent in a business setting. I was on a Zoom call, and the other person was being extremely rude and confrontational for seemingly no reason. Now I don’t want to make assumptions about what might be going on in that person’s life (perhaps a recently lost loved one, rocky marriage, etc), but that still wouldn’t justify speaking to someone the way that I was being spoken to.

So I thought, I’ll turn on my webcam so the person can see my face. So I turned it on, smiled, and reiterated my previous question and the reason as to why I was asking. The other person’s tone and demeanor changed almost immediately.

Fascinating!

Human Progress

The control of information flow has taken on a drastically different appearance of late.

At one time, things were fairly straightforward. A handful of broadcast networks and media companies had a firm grip on the megaphone and popular opinion. If you could control the printing press and the teleprompter, then you basically had a monopoly on information.

And if you wanted to censor or control that flow, simply go to the choke point and apply pressure.

But things look different these days. We still have a few powerful companies controlling the flow of information, both those companies don’t produce any of the content found on their platforms. Instead, they claim to be open and agnostic to all information sources, allowing them to abdicate all responsibility for whatever rises to the top.

And, as a result, censorship has taken on a far more complex form. It shows up as coordinated campaigns of misinformation fueled by content farms and Macedonian teenagers. And due to human nature and our love for all things scandalous, misinformation gets more attention than valid and true information sources. It’s a huge problem when it’s difficult to determine the veracity of information due to the fact that all information sources get the same treatment. If we want a knowledgeable and informed public, it seems obvious that the organizations that control the flow of information should go to great lengths to provide simple and workable tools to distinguish falsehood from truth.

A simple guise of free speech is not enough. Yes, people should be able to say and write whatever they want to say and write, but that is not an end, in and of itself. Instead, free speech is merely a means to other more important ends. Free speech is about encouraging open, honest, and rational debate. It’s about holding people and organizations accountable for their actions. It’s about preserving civil liberties and affording citizens freedom of expression. To protect free speech for its own sake is to not understand what is intended to bring about.

Philosophy

Elevator etiquette is so strange to me. If I had to write the manual based on my observations of other people, it would contain things like:

1. Do not make eye contact (staring at a phone is highly recommended).

2. Greetings and salutations are not permitted (exceptions for when a dog or baby is present).

3. Always press the “door close” button when you get on (despite the fact the door will close on its own within a couple seconds).

And what’s funny is that these rules are the same whether you’re at a hotel or at your apartment building where you see many of the same people every day.

I like to make eye contact and say “hello” when I get on elevators. When others get off, I say “good evening” or “have a nice day.” After I get on, I don’t press the “door close” button. I’m not important enough to the point that a second or two has a large impact on my day.

Why do so many of us let concentrated urban dwelling strip of us our humanity and decency?

My Latest Discovery

Bill and Melinda Gates recently released their annual letter. This year they chose to focus on answering 10 hard questions they’ve received on their website. I think number 5 was my favorite:“Does saving kids’ lives lead to overpopulation?” The answer is so counterintuitive.

“When more children live past the age of 5, and when mothers can decide if and when to have children, population sizes don’t go up. They go down. Parents have fewer children when they’re confident those children will survive into adulthood. Big families are in some ways an insurance policy against the tragic likelihood of losing a son or a daughter.”

Hedonism, Meditation

[VIC – 107] Stepping in puddles. Ars longa, vita brevis. Didn’t need the jacket. The mini-fast.

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Business & Money

Earlier this week I was walking towards Dig Inn, my normal lunch spot. Perhaps 30 yards ahead I noticed a fairly large puddle. Another 30 yards ahead of that, there was a young finance type walking briskly towards me. Apparently he didn’t notice the giant puddle between us. He proceeded to step square in the middle of it which, of course, completely threw his world into disarray. As I passed to the side of him, I heard him mutter, “why does shit like this always happen to me?” As he stormed off, I couldn’t quite make out what else he said, but it was definitely other obscenities and consecrations.

On first take, you might say that anyone would respond in a similar manner. But I’d say that, if you want to be a good investor, you have to let go of that type of thinking. You have to completely eliminate the idea that the world is acting on you or that it has some predetermined nefarious purpose for you. Instead, I believe you have to focus on what you can control (not all that much outside of your behavior/psychology) and realize that the vast majority of market forces are completely outside of your control.

Human Progress

I’ve never had the urge to get a tattoo, but I came across a Latin phrase this week that really spoke to me.

Ars longa, vita brevis. It means “art is long, life is short.” It refers to the idea that, while one human life is extremely brief, we have the opportunity to contribute to a body of knowledge and understanding that persists long after the individual has ceased to exist. And that those contributions can help bootstrap the continual progression of humanity.

It’s the idea that men are small, but mankind is massive. And what a beautiful idea it is!

Philosophy

Earlier today, I flew out of Laguardia for a business trip. As I was walking to my gate, I passed by a Uniqlo vending machine. You could buy jackets and shirts in a few different colors. The jacket was really nice and I contemplated buying it. It was only $70. I decided not to buy it.

I decided not to buy it because I have enough jackets. Sure, the one in the vending machine was nice and different than any other I owned, but that’s not the point. I don’t need a new jacket.

We humans are strange creatures. It seems coded in our DNA to want more stuff. More jackets, more shoes, more food, more everything. I’ll call it hedonic adaptation. No matter how good you have it or how much stuff you have, you simply get used to it and want more and/or different stuff. I’m not sure there are any other creatures on the planet that share this feature. And that’s awesome. For those other creatures that is.

What is the purpose of this mode of thinking?

I guess if you think about it from a purely biological perspective, accumulating stuff might give males a higher likelihood of reproducing and passing on their genes. Gather as much stuff as possible, and the females will be impressed by all my stuff and give me an opportunity to mate. Having lots of stuff proves my fitness. My offspring will have a higher likelihood of survival due to all my stuff, so the female, of course, wants to mate with a male that gives her offspring the best chance at survival.
I mean, the logic makes sense, but as I mentioned before, we humans are unique in that our lives have gotten pretty far away from the purely biological. We don’t really follow the laws of nature. We don’t live in equilibrium with our environment. We don’t have any predators (except maybe other humans).

I think the problem is that, despite having broken from the normal biological system, we actually have not. We still have the “lizard brain” at the core. The only difference is that we’ve buried it underneath a bunch of abstractions.

This brings me back to why meditation has become such an integral part of my life. It’s so valuable for me because it helps to peel back the abstractions. It helps me get closer to what is real and what is true. It helps me realize when hedonism is creeping up in my mind and when I have enough jackets. It helps me realize that, if someone else (spouse, friend, family, etc) is only interested in me due how much stuff I have, that’s likely not a relationship worth maintaining.

My Latest Discovery

Over the last few months, I’ve been taking a new approach whenever I feel as though I might be getting sick. Whenever the feeling arises, I will skip eating lunch for a day or two. So after the post-workout protein shake in the morning, I won’t eat again until dinner, which usually occurs around 8 pm. So basically a 12-13 hour midday fast.

At some point between 12 – 2 pm, I’ll have a Soylent or fruit smoothie so that I’m not skipping out on vitamins/nutrients that are, of course, important for recovery and good health.

I haven’t yet spent much time reading into this, but the thought process is to not waste any unnecessary energy on digestion, and instead allow my system to divert that fuel to support the immune system. I’ll update you guys when I have a chance to do a bit of research.

The results seem promising. Every little bug that has started to creep up has receded quickly before becoming anything substantial (knock on wood).

More broadly, I find it important to do these type of experiments, regardless of the underlying science, to figure out what works for my body. Our biochemistries are all slightly different, so if you can find something that works for you, that seems like a good thing.

Amazon, Berkshire Hathaway, Healthcare, Sharing Economy 2 Comments

[VIC – 106] AHS – Amazon Health Services 😷 . Avoiding exploitation in the sharing economy. To understand > to reply. Hostess with the mostest 🍩 .

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Business & Money

A few days ago there was an announcement that Amazon, Berkshire Hathaway, and JPMorgan Chase are creating a joint healthcare venture. The press release is pretty vague, but intriguing nonetheless.

To start, let’s look at AWS to get an idea of how the Amazon model works. As Amazon was scaling in the mid-2000s, it decided to build an easy-to-use interface that developers across the company could use to spin up cloud servers, build applications, and access the necessary compute and storage resources as-a-service. And once this system got to scale internally, it offered the whole thing as-a-service to external developers. So now anyone in the world can leverage the front end that Amazon has built (aws.amazon.com), leverage all of the back-end technology (servers, data centers, etc) to deploy whatever app they’re working on far faster and far cheaper than would otherwise be possible.

It’s the same story with e-commerce. Want to sell something? Leverage the interface at Amazon.com and all of the back end tech (fulfillment centers, logistics networks, etc) to be up and running in no time.

So I imagine this will be the plan for healthcare. Build a front-end interface for Amazon employees (and those at Berkshire and JPMorgan) to easily access insurance information, pharmacy benefit managers, pharmacies, and any other players in the ecosystem, while also building the back-end infrastructure to make the whole thing possible. And once they have that figured out, of course, open the floodgates by offering that same interface+infrastructure to other employers and maybe even individuals at some distant point in the future.

The really interesting thing to me is that, while this is all playing out, all of the healthcare suppliers (insurers, pharmacies, etc) will likely be modularized in the process. If Amazon becomes the front end, then it won’t matter to the consumer what insurance company is behind the scenes paying the bills or what pharmacy fills a prescription. And I think it’s this idea that explains why healthcare stocks across the board sold off when the announcement hit the wire. The writing is on the wall.

Now if this hypothetical scenario does play out, it would do so over a very long period of time. Maybe 10, 20, or even 30 years. So the short-term selloff is likely a bit of an overreaction in the immediate term. I imagine short-term traders are taking advantage as we speak.

But speaking of how long this will take, I think that explains why the aforementioned companies are partnering on this initiative. Nothing I’ve mentioned to this point requires anything from Berkshire or JPMorgan. The strategy, approach, and time horizon is purely and quintessentially Amazonian.

However, Berkshire brings something interesting and unique to the table. While they do not play in healthcare insurance directly, they are one of the largest reinsurers in the game. That is, they provide insurance for the health insurance companies. So they wouldn’t be at risk of being modularized by this new platform, but would instead provide a vital piece to the puzzle.

And finally, we have JPMorgan. What are they doing here? Well, one of the lines from the press release says that the new venture will be “free from profit-making incentives and constraints.” First off, I think it’s highly unlikely that these guys are building a non-profit (if you disagree, I’d love to hear your perspective). Instead, I think that sentence reflects the long-term perspective of the partnership. This won’t be a money-making endeavor anytime soon. If they can be successful with this, and that’s a massive IF, this will take many many years and many many dollars to unfold. And as such, access to capital markets and financing will be a critical component to the long-term strategy. And who better than JPMorgan to fill that role.

Human Progress

The sharing economy fascinates me. It’s incredible how, over a very short span of time, entrepreneurs across the globe have identified ways to better utilize and monetize existing resources.

On the employment front, this brings many new and exciting opportunities to the table. Workers have a new found flexibility to define the nature of work for themselves. Individuals that may have otherwise had limited opportunities can now easily become market participants. And sharing economy platforms generally have the ability to scale in a way that traditional businesses cannot (low fixed costs, network effects, etc). As such, the net benefit to job creation can be massive.

That said, the moral and ethical implications are also significant. There is a chance that workers become completely commoditized by these platforms. When you think of a company like Uber, it’s hard not to think about the low bargaining power of drivers which leads to serious exploitation. We’ve all read about how drivers can be penalized for shutting off the app, the gamification elements that lead to long hours, and how long it took to get tipping implemented. And given that sharing economy laborers are often contractors (as opposed to employees), their ability to collectively bargains is basically non-existent.

So how can we ensure that we benefit from this incredible new business model, without allowing the negative externalities to run amuck?

To start, I think it’s important to think about how the reputation systems are employed. All sharing economy platforms use them, but all are not created equal. For example, let’s look at Airbnb. If you’re a host with great reviews, your listing gets prioritized in search results and you have the opportunity to make more money. So the platform leverages the system to create more economic opportunity for participants. Uber, on the other hand, leverages their reputation system to remove bad actors. I can’t find any evidence that higher rated drivers are more likely to get more fares. Instead, as long as your reputation is high enough to remain on the platform, you are matched based on location and pick-up times. What if riders could see these rating ahead of time and select drivers based on them? That small change might provide more incentive for safe driving and better reward the top drivers on the platform with more fares and more money.

Another thing to consider is whether these platforms encourage repeat transactions between the same buyer and seller. For example, when I was running DogsterApp, I used LawTrades as my platform for legal services. It matches you with qualified lawyers based on what services you need. And when you find the right lawyer, you can basically pay a flat monthly fee for a block of that specific lawyer’s time. It’s like a dedicated and on-demand general counsel. And over time, I can build a relationship with a specific person based multiple interactions and trust. I think this encouragement of repeat transactions between the same people empowers suppliers (the lawyers in this case) to build reputation, a loyal customer base, and again, increases their earning potential. Contrast that with platforms like TaskRabbit where you are just matched with a different random person each time you use the platform. The latter leads to commoditization of labor and exploitation, just like the Uber drivers.

Finally, I think the ability to set the price has a lot to do with the quality of the experience for workers on these platforms. For example, you can use a platform like Thumbtack to secure local services like house cleaning or carpentry, and the workers have the ability to offer their services at whatever price they decide. That type of flexibility allows greater freedom and agency for suppliers, while not allowing the platform to control their earning potential.

These are just a few things to consider, but perhaps we need some form of regulatory checklist by which to evaluate the merits of these platforms and determine if they will produce a net benefit to society.

Philosophy

For the longest time, when other people would speak, I would always listen with the intention of replying. As I took words in, I was simultaneously figuring out what I was going to say next in response. And it makes logical sense. A conversation is an interchange between two people wherein they take turns speaking.

And in sales, it seemed to make even more sense than in normal conversation. When an existing or potential customer speaks, it’s often about why their current situation is working and why they don’t need any help. It’s about how they made an investment with a competitor and their needs are being met. So logically it was my job to find cracks in the story, respond with how our feature set was superior, or elicit fear, which might encourage them to make a change.

But at some point, in both work settings and my personal life, I made a change. I stopped listening with the intention to reply, but rather listening with the intention to understand. I mean really understand.

And funny things happen when you make that change.

First, the pace of conversations tends to slow down. There are often pauses after the other person stops speaking. And I think that’s a good thing. It makes conversations more thoughtful, deliberate, and insightful. (But the silence does take some getting used to.)

Second, I found that my replies, more often than not, would be another question, rather than an answer or statement of fact. Because in reality, only so much can be said with a couple sentences. Word choice matters. Tone of voice matters. Body language matters. And when you really listen and make a genuine attempt at understanding, you start to get curious about why a person uses one words versus another. You start to get curious about what underlying emotions and drives might be coloring the conversation. And everything in life really comes down memories and motives. To past experiences and future desires. The more you can understand those things, it seems the better you can influence or motivate a desired action.

And finally, you end up with deeper and higher quality relationships, whether business or personal. And things basically boil down to relationships, so this seems to be a good outcome.

My Latest Discovery

Last week I touched on the fact that many companies have been giving out these one-off bonuses in response to tax reform. And every example that I had seen to that point was basically the same. Here’s a $1,000 bonus check, spend it wisely!

But this week, I stumbled upon a press release from Hostess.

“Hostess Brands, Inc. today announced that, following the recently enacted tax legislation, the snack cake maker will be providing bonuses totaling $1,250 to its 1,036 hourly bakery and corporate employees. The bonuses will include $750 in cash and a $500 401k contribution.”

I love the 401k contribution angle. Think about it. For hourly workers in retail or manufacturing, there’s a fairly high likelihood that they might not be the most highly educated employee base. And as such, a $1,250 cash infusion might fly out of their checking accounts just as quickly as it arrived.

This is a great example of long-term thinking from the executive team at Hostess and real investment in its people. Good Stuff Hostess! (That doesn’t mean I’ll be eating any of their manufactured poison anytime soon)

Amazon, Data, Tax 2 Comments

[VIC – 105] One more thing on the tax plan. Bye bye cashiers. The happy man that cleans my office. Our World in Data.

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Business & Money

Reading through the new tax legislation is woefully boring, so I think I’ll give it a rest pretty soon. But before I do, I’ll just say this. The new tax law was sold to the American people as a job creator and a boon for US investment. I’m not so sure.

On the jobs front, unemployment is near record lows hovering around 4.1%. For the uninitiated, that means we’re closing in on what’s termed “full employment.” So even if US firms invest heavily and create a ton of jobs, where will the new workers come from? And if there aren’t many workers to fill the new jobs, will companies really expand US operations and build new factories?

And now we have all of these companies giving out raises and bonuses after the bill was passed. But I’m not sure I buy the idea that companies are just giving away money out of kindness and generosity.  Feels more like well tuned and well-timed work from PR executives.

And besides, how much money are we even talking about? Maybe a couple percentage points of profitability? It seems to me that these bonuses could have been handed out a long time ago without much trouble. But better late than never, I guess.

So PR coverage, rainbows, and butterflies aside, corporations operate to maximize profits. And their motivations won’t be changing anytime soon.

And oh yea, all of these cry babies complaining about our massive deficit, what do tax cuts mean? An even higher deficit.

Human Progress

Earlier this month, the Amazon Go concept store opened in Seattle. It is the quintessential image of technology and innovation. It is sensors, and IOT, and computer vision, and mobile payments, and cloud computing, and who knows what else.

But then you have the detractors. “What about all those cashiers,” they ask. The Bureau of Labor Statistics puts cashiers in the US around 3.4 million. And another 4.6 million working in retail sales more broadly. Safe to say many of those will disappear.

And as much as that sucks, it is simply the way that human progress works.

Karl Marx would probably be rolling in his grave if he knew about Amazon Go. He’d claim this was another case of labor being subjugated by capital. He’d encourage the cashiers and retail workers to revolt and overthrow the tech bourgeoisie. But like the Luddites and factory workers of the industrial revolution, they don’t stand a chance.

But it’s not all bad news. Despite government shutdowns and “my button is bigger than your button” commentary, we can still have hope. In fact, I’d say that 2017 was the best year in human history.

“A smaller share of the world’s people were hungry, impoverished or illiterate than at any time before. A smaller proportion of children died than ever before. The proportion disfigured by leprosy, blinded by diseases like trachoma or suffering from other ailments also fell…. Every day, the number of people around the world living in extreme poverty (less than about $2 a day) goes down by 217,000… Every day, 325,000 more people gain access to electricity. And 300,000 more gain access to clean drinking water.”

Go humanity, go!

Philosophy

There’s this Hispanic man that comes to my office every afternoon to clean. Every day, he waltzes in with a bubbly demeanor and a big smile on his face. If I happen to walk by him in the kitchen or the bathroom, he always makes genuine eye contact followed by a “what’s up buddy, how are you?” And it’s not one of those “just saying hi because you happen to be two feet away from me” greetings. He stands there and waits for a reply. I think he actually wants to know how I’m doing.

I point this out because he doesn’t have to be that away. I won’t guess at his hourly rate, but I imagine it’s not very much. And I also imagine that my office isn’t the only one he cleans on a given day. He probably bounces from office to office mopping floors, cleaning toilets, and emptying trash cans.

Meanwhile, when I think about walking to the office from the subway in the morning, you see so many people with angry and disgruntled looks on there faces. They don’t say excuse me, they bump into you without as much as a glance, and they definitely do everything they can to avoid eye contact. And most of them are not on their way to clean toilets. They are founders of companies, lawyers, investors, VPs of something or another, or otherwise successful people.

I point this dichotomy our for two reasons.

First, human beings have this uncanny ability to magnify the scope of their own problems, while basically ignoring those of others. And that is irrespective of your station in life. The problems might be vastly different, but the emotional and psychological pain caused by them is the same.

Second, and I believe more importantly, it is completely up to you how you choose to respond to a given situation. You often don’t have control over what happens, but you DO have control over your response. You can smile and whistle while cleaning toilets, and you can be completely miserable and empty inside while wearing a $5,000 suit and drinking a $5 cup of coffee. It’s simply up to you.

My Latest Discovery

If you clicked on the link in the Human Progress section, you may have noticed that the article linked to another site called Our World in Data. It’s absolutely fascinating. You can basically find any subject you’re interested in, and the site offers up tons of statistics and data visualizations about that subject.

If you read VIC 102, I wrote about rising costs in healthcare. This chart, and the associated research, captures that pretty clearly: