What We’re Reading (Week Ending 24 August 2025) - 24 Aug 2025
Reading helps us learn about the world and it is a really important aspect of investing. The late Charlie Munger even went so far as to say that “I don’t think you can get to be a really good investor over a broad range without doing a massive amount of reading.” We (the co-founders of Compounder Fund) read widely across a range of topics, including investing, business, technology, and the world in general. We want to regularly share the best articles we’ve come across recently. Here they are (for the week ending 24 August 2025):
1. The deep transformation of China’s consumption structure: a complex picture beyond “downshifting” – Robert Wu and Dongfan Ma
From a macro and traditional industry perspective, China’s consumer market does show signs of weakness:
Growth slowdown: Over the past three years, the annualized growth of total retail sales of consumer goods has fallen significantly compared to the ~10% seen between 2010 and 2020, highlighting weaker macro consumption momentum.
Pressure on traditional sectors: In 2024, the catering industry in Beijing and Shanghai saw profit declines of 80–90%. Hotel average daily rates kept falling, and airline ticket prices dropped consistently between 2024–2025. Together, these figures underpin the concerns about sluggish consumption.
Yet, another set of data paints a very different picture.
Entertainment boom: The concert economy remains in an extremely overheated state, with shows across genres selling out instantly — acting as the “contrarian” force in the consumption market.
Non-essential consumption growth: Products like Pop Mart’s designer toys or Lao Pu Gold’s jewelry — both considered non-essentials — are seeing robust growth, defying the conventional wisdom that such categories should be hit hardest during consumption downgrades.
Segment upgrades: Pet-related spending remains strong, with treats and premium pet food turning into hotspots, suggesting stable or even rising purchasing power among certain groups.
Lower-tier market vitality: Categories like household goods in third- and fourth-tier cities continue to show resilient demand for quality.
This contradiction makes clear that a single pessimistic lens is no longer sufficient to describe the reality of China’s consumer market. At its core lies a deeper structural transformation…
…What China’s consumer market is undergoing is not a simple story of expansion or contraction, but a profound structural transformation characterized by multiple forces:
Channel: Social and livestream commerce is displacing offline and traditional e-commerce.
Supply: Flexible chains and rapid product iteration are overtaking traditional production models.
Market: Downward tier integration reshaping consumption layers.
Corporate Strategy: A shift from “ad-driven + distributor networks” to “private domain operations + digital reach.”
If we focus only on traditional offline retail, distributor-based brands, or oversupplied catering chains, the picture appears bleak — a “consumption winter.” But if we turn to social commerce (already nearly 10% of retail, still growing at 30% annually), new brand growth, and supply chain-enabled rapid iteration, we see instead a “consumption spring.”
2. AI x Commerce – Justine Moore and Alex Rampell
The internet’s most profitable business model has always been simple: running search ads on monetizable queries. When you search “how many protons are in a cesium atom,” Google makes no money. When you search “best tennis racket,” it prints cash…
…Google could lose 95% of search volume and still grow revenue –as long as it retains the valuable queries, which are largely commerce related…
…The nature of an impulse buy means that you won’t be doing research in advance or consulting with an expert, so there’s limited opportunity for AI agents to play a role. However, the algorithms that guide your attention will continue to improve, enabling advertisers to target you with the right product at the right time. And it will be easier for brands to create hyper-personalized marketing materials that draw you in…
…You probably already have brands and SKUs that you know and love when it comes to everyday essentials, so an AI research agent won’t be particularly helpful unless you’re adding a new product to the lineup (like if you get a dog and need to pick their food). But AI should play a role when it comes to sourcing and purchasing items. For example, if you regularly get the same laundry detergent, your AI agent could monitor and buy on your behalf if the price dips below a certain level…
…Lifestyle purchases – when you’re purchasing items that you don’t buy regularly (especially if they’re a bit more spendy, like a luxury handbag), you’re likely going to want to evaluate various options to make sure you’re picking the best one. But researching and aggregating the choices, and ranking them across various criteria, is time-consuming. Imagine deputizing an AI agent to do the grunt work for you and come back with a recommendation that explains why a specific SKU is the perfect choice for you based on your past purchases, what it knows about your preferences, and even things like your body type and what colors look best with your eyes…
…Functional purchases – these items are important because they are typically (1) a meaningful financial investment, and (2) a product you’ll use every day, likely over several years. This means that you want to feel very confident that the product meets your needs and will hold up over time. You may feel comfortable purchasing a product that your AI research agent recommends. But you’ll likely want to have a more in-depth conversation with a subject-matter expert (an AI “consultant”) about different options…
… Life purchases – there are only a few “life purchases” you’ll make (e.g. a home, car, wedding, or college education). These are expensive and meaningful, so you’ll likely spend months – if not years – evaluating options. You’ll do your own research online, but there’s a decent chance that you’ll also speak with experts and try out the options (e.g. touring wedding venues or homes, test driving a car, visiting a college). It’s hard to imagine people fully outsourcing these decisions to AI…
…As agents become the new interface for buying, both platforms are well-positioned — Amazon with end-to-end control, Shopify perhaps more so with distributed ownership across millions of stores and growing consumer touchpoints. It doesn’t matter if a consumer search starts with Google or ChatGPT if the destination merchant is hosted by Shopify…
…AI’s potential is first and foremost bottlenecked by content, not compute. Most product reviews are noisy, gamed, or overly polarized. Agents need access to structured, trustworthy, real-time feedback. Let’s say you’re looking for the “best” blender. In a perfect world, your AI would order every blender, test them all for a week in your kitchen (with your home robot!), decide which one you like best, and then send the rest back. But today AI just summarizes the web, and cannot turn shilled junk into honest analysis…
…The best AI-native experiences will capture data directly in the user journey that contributes to better recommendations. Imagine an AI agent that infers information about what to recommend to you (or others) from data that’s not typically present on product description pages or reviews. This could be direct (e.g. next time you open the app, it asks you a few specific questions about your last purchase), or more passive (e.g. it looks at how long you linger on a specific item or feature and maybe even asks follow-ups if you’re hesitating).
Until these foundations are in place, LLMs will remain clever summarizers — not true commercial agents. But this is happening fast.
3. Why zero-click panic is overblown – Mike Elgan
The idea is that when you want information, you go to an AI chatbot like GPT-5, ask a question, get an answer, and move on with your life without clicking through to the websites that monetize with advertising or subscriptions. And even when you “Google it,” Google’s direct answers, knowledge panels, and AI overviews often give users a zero-click answer.
The crisis: AI companies are getting rich by giving away other people’s content for free. Every time someone gets an answer from a chatbot instead of visiting a website, that’s money being transferred from content creators to AI companies. The media ecosystem will be strangled by this “zero-click crisis.”
But the trend might not turn out as bad as some think.
The reason is that while most people might turn out to be zero-clickers, a minority of people are likely to keep on clicking…
…Most importantly for people who care about quality information — AI provides a narrow, generic and average worldview.
In other words, on that last point, getting your information about the world from AI will make you average, not exceptional. And some people will want to be exceptional.
Many, but certainly not most, information-seeking people will continue to click through to original sources, seek out original sources, follow original sources, pay for original sources and patronize advertising…
…Let’s take a look at the advertising that everyone points to when gnashing teeth about the zero-click crisis.
Well over 99% of Google users who click through to content websites never buy anything from the ads they see on those sites.
Far less than 1% of Google users (between 0.3%–0.6%) do sometimes buy something after seeing an ad.
That tiny minority pays for all the content that every Google user sees. More than 99% get a free ride, subsidized by the people who buy the ads…
…For the past century, advertiser-supported content has been paid for entirely by a small minority of people with the means and desire to buy the advertised products.
I suspect our zero-click future will look a lot like our most-people-don’t-buy-the-advertised-product past.
In other words, the zero-click people are the same majority of people who used to click through to ad-supported or subscription-supported content sites and then never buy or subscribe to anything.
If a non-contributor stays on the ChatGPT website and never pays for the content, or if a non-contributor clicks through to an ad-supported website and never buys the advertised products — what’s the difference?
Content supporters — people who buy ads and especially people who pay subscriptions — will continue to support quality content with their wallets.
The minority who want exceptional, rather than average, information will have to seek out that exceptional information, subscribe to it and (as people who buy things) will be seen as extremely valuable to advertisers.
4. Bitcoin treasuries – Oliver Sung
In case you’ve missed the financial news, Bitcoin treasuries (some call them “digital asset treasuries,” or “DATs”; others dub them “crypto holdcos”; still others abbreviate them to “BTCOs”) are simply companies that buy Bitcoin and park it on their balance sheet. Any company could do this, but the point is that a pure-play Bitcoin treasury shouldn’t have much of an operating business attached, making the entity a vehicle to “invest in” (or rather “hold”) Bitcoin through a corporate wrapper…
…The whale of Bitcoin treasuries is Strategy—formerly MicroStrategy—led by Michael Saylor. He pioneered the model, having now amassed 630k Bitcoin (as of Q22025), or 3% of all Bitcoin ever to be in existence…
…With help from ZIRP and a volatile stock, Saylor discovered he could issue 0% (or close to it) convertible bonds to fund further Bitcoin purchases. If you ask why Saylor wouldn’t just issue equity instead, the answer is that the convertibles were issued at a premium and wouldn’t dilute the share count before they came in-the-money. That’s when he found his masterstroke: To keep being able to raise money to fuel his newly-discovered perpetual motion machine, in marketing newly issued Strategy securities at premiums to the share price, he, ironically, had to borrow a term from conventional finance which Bitcoin certainly lacked: yield.
“Bitcoin yield” is not to be confused with the yield earned on your cash flow-generating assets. No, Bitcoin yield is the period-to-period percentage change in the ratio between the company’s Bitcoin holdings and its diluted shares. In other words, it’s the change in Bitcoin per share. But it’s a smokescreen—another way to say that new investors fund “yield” for old investors. The yield that reaches old investors comes straight from newcomers’ pockets. Because the “Ponzi” label has been thrown around Bitcoin forever, this is easily brushed off by Bitcoiners. But here, it fits not Bitcoin itself. Ponzi, in this case, is the definition of how Strategy and other Bitcoin treasuries operate: publicly boasting Bitcoin yield as shareholder value, while obfuscating the fact that the yield stems not from any operations but from new investors hoping to get a high Bitcoin yield themselves…
…Many of the zombie companies, persuaded by the promise of easy money and good ol’ wealth transfer, pulled it off—perhaps to their own surprise—enriching insiders in the process.
Metaplanet, formerly known as Red Planet Japan, is a former budget hotel operator in Japan turned aggressive Bitcoin treasury. Since pivoting in 2024, it has expanded its share count by some 400%, with the market cap reaching almost $7bn at its peak from $13mn, currently priced at 2x its Bitcoin holdings. Metaplanet counts Eric Trump, the son of the US president, as strategic adviser.
While The Smarter Web Company, a web designer, isn’t the first and only UK-listed company to do this (there are about a dozen), it certainly was a pioneer. Shortly after its shares were admitted to trading on the Aquis Stock Exchange in April this year, the company announced a 10-year Bitcoin treasury plan. From a market cap of GBP3.7mn at the time of listing, shares of SWC quickly exploded past GBP1bn (now sitting at GBP550mn).
And unsurprisingly, the POTUS jumped on the bandwagon too. After minting a monumental amount of money and legalized bribes from launching $Trump coin three days before inauguration, the President wasn’t done squeezing crypto. Trump Media recently raised $2.4bn to buy Bitcoin, modelled after Saylor’s blueprint (and personally recommended to the Trumps by Saylor himself), which followed the President’s establishment of a US Strategic Bitcoin Reserve that currently holds 200k Bitcoins. The President owns 40% of Trump Media with an implied market value of ~$2bn…
…As for Saylor’s Bitcoin treasury valuation model illustrated above (Bitcoin NAV + Bitcoin $ gain x multiple), it’s absurd. The premise—that the appreciation of Bitcoin should be treated like recurring profit and capitalized accordingly—is lunacy. It’s like saying that because you expect the $500k house you live in (let’s say it’s your entire net worth) to appreciate to $550k next year, your net worth is not $500k, and not $550k, but a whole $2mn with a 30x multiple on the appreciation. It doesn’t surprise me that Saylor believes this nonsense, since he, having missed econ class 101 by the evidence of this clip, thinks that cash, which is priced at the risk-free rate, carries a cost of capital of 15% (then proceeding to botch basic math by saying 12% of $325bn is $32bn).
I wish the world would allocate its precious resources and brainpower to more productive pockets of the economy than what we discussed today. I know that’s wishful thinking. Stuff like this happens all the time, but speculation has clearly raised the stakes since the pandemic. The writing on the wall hasn’t dried yet. Saylor et al’s vision for Bitcoin treasuries is that the scheme runs far enough that Bitcoin approaches “hyperbitcoinization”: the point where sponsors believe the price stabilizes (some peg it at $10-20mn per coin). The pools of fiat are so vast that the sponsors aren’t anywhere close to running out of convincing new buyers of these products, and so are willing to floor the pedal to make these things more ingrained in the financial system. (I think you know what that implies.) It sure helps keep the scheme going when people—usually Gen Zs—run around hyping Strategy as an “infinite money glitch” and Saylor himself calling it a “quadratically reflexive engineered instrument”. (You can’t make this stuff up.)
The whole thing raises an odd paradox: How are all of the Bitcoin treasuries going to buy more Bitcoin if every big holder of Bitcoin can cash in bigger by launching their own Bitcoin treasuries? If there’s a massive wealth transfer to be taken simply by moving Bitcoins onto public markets, then everyone with a pile of Bitcoins will want that premium for themselves.
Now for what you’ve been waiting for: how do you bank on this? The answer is, I won’t. I wouldn’t short any type of absurdity in a million years—not even with long-dated options…
…And if you’re already long invested in Strategy or any new shiny Bitcoin treasury, the best action you can take is to copy what the insiders and promoters are doing: sell.
“On the one hand, we’ve capitalized on the most innovative technology and capital asset in the history of mankind. On the other hand, we’re possibly the most misunderstood and undervalued stock in the US and potentially in the world.”—Michael Saylor
5. Constraints, and challenges of value capture in the AI race – Abdullah Al-Rezwan
Another bit that I thought was interesting in the Acquired interview was their point about how they think about creating leverage through AI:
…we always like to say the way we think about an AI first company is we’re building a machine to produce happy customers…And I think that’s important because it’s like if something comes off the assembly line of machine that’s malformed, you don’t just fix that thing. You say what part of the machine broke to produce the malformed item.
And so just as it relates to, for example software engineering, we have this philosophy like when cursor, which is the most popular co-pilot for software engineers to like write code and now having some sort of more agentic flavors of it, if it produces incorrect code, our philosophy is don’t fix the code, fix the context that cursor had that produced the bad code. And I think that’s a big difference when you’re trying to make like a company driven by AI. So essentially, if you just fix the code, you’re not adding leverage. If you go back and say, what context did this coding AI not have that had it had it, it would have produced the correct code. So I don’t want to pretend we’re perfect here, but that’s the way we think about it. I really like thinking of our business as a machine…
…The Information pointed out yesterday how the token price seems to be stable in recent months compared to the last couple of years. The subscription model just doesn’t seem appropriate in many of the use cases. For example, this Reddit post points out how one dev basically consumed $50k worth of tokens while paying $200 for the monthly subscription. This is, of course, a business model problem…
…It may be tempting to think it won’t be that difficult to capture value over time. While I have no doubt that SOTA model developers will get better at it, there is a long list of revolutionary technology which had hard time capturing the value. Let me share a personal example. Recently, I opted for “ChatGPT Pro” subscription ($200/month) just to see if there is a noticeable difference between Plus and Pro subscription. One of my family members asked me to run a query that had important career implications for her. After I sent ChatGPT Pro’s response, she was really glad and was telling me that it would probably cost her $1,000 to get such information if not for ChatGPT. At first, I thought even $200/month could be considered incredible value if it can solve at least one such problem in every couple of months. The only problem is when I ran the same query on Gemini 2.5 Pro for which I pay $20/month, it also came up with a very, very good response. ChatGPT Pro was slightly better in some marginal details, but now I was starting to feel $200/month wasn’t worth for those marginal improvement.
Disclaimer: None of the information or analysis presented is intended to form the basis for any offer or recommendation. We currently have a vested interest in Alphabet (parent of Google and Gemini), Amazon, and Shopify. Holdings are subject to change at any time.
