What We’re Reading (Week Ending 22 August 2021) - 22 Aug 2021
Reading helps us learn about the world and it is a really important aspect of investing. The legendary Charlie Munger even goes 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 22 August 2021):
1. 40 Things I Don’t Know by Age 40 – Ben Carlson
I turn 40 today.
I’ve seen lots of people share the wisdom they’ve gained over the years on their milestone birthdays.
I still have plenty of stuff to learn so here are 40 things I don’t know at age 40:
1. I don’t know why sports losses still put me in a bad mood. You don’t get to pick your sports allegiance as much as you’re born into it. I was born into a Michigan family. I love Michigan football.
I don’t watch sports nearly as much as I once did because little kids don’t have the patience for it but a bad loss (and there have been many) still stings.
It’s a horrible emotional investment yet all sports fans subject themselves to it.
Why do we care about this stuff so much?…
…6. I don’t know what took me so long to start eating healthy. Growing up I never watched what I ate. At all.
I played sports, lifted weights and had a relatively fast metabolism. Well, 2 out of those 3 dropped off as I got older.
I really overhauled my diet once twins were in the picture for us. I knew I was going to need more energy. I still eat junk food and carbs but typically only on the weekends or vacations.
The result is I feel healthier at age 40 than I did at age 30…
…11. I don’t know if the internet has been a net negative or positive on humanity. The internet has been a huge net positive for me personally. It’s changed the trajectory of my career. It’s allowed me to meet new friends, colleagues and business partners.
It’s given me the opportunity to work from West Michigan for a company headquartered in New York City. This would have been impossible 15-20 years ago.
For others, the internet has broken their brains or made their lives miserable.
The internet makes it far easier to communicate, do business, work and connect with people all around the globe.
It also makes it easier to compare yourselves to others, spread hate, troll and say things to others you wouldn’t dare say in normal life.
12. I don’t know what kind of person I’m going to be at age 60. In some ways, I’m the same as when I was 20. In other ways, I’m a completely different person.
Life is bizarre in that the older you get the more you feel like you’re done improving or changing yet it just keeps happening…
…19. I don’t know how much help you can actually provide as a parent when shaping your children. We have boy-girl twins. They have both grown up in the same household, with the same parenting at the exact same time.
Yet they couldn’t be more different, whether it’s their looks or personality or behavior.
Most of us would like to believe we’re shaping lives as parents but I wonder how much control we even have. I guess the best you can do is try to avoid teaching them the worst behaviors and support whoever they turn out to become.
2. Fusion experiment breaks record, blasts out 10 quadrillion watts of power – Tom Metcalfe
Scientists used an unconventional method of creating nuclear fusion to yield a record-breaking burst of energy of more than 10 quadrillion watts, by firing intense beams of light from the world’s largest lasers at a tiny pellet of hydrogen.
Researchers at the Lawrence Livermore National Laboratory in Northern California said they had focused 192 giant lasers at the National Ignition Facility (NIF) onto a pea-size pellet, resulting in the release of 1.3 megajoules of energy in 100 trillionths of a second — roughly 10% of the energy of the sunlight that hits Earth every moment, and about 70% of the energy that the pellet had absorbed from the lasers. The scientists hope one day to reach the break-even or “ignition” point of the pellet, where it gives off 100% or more energy than it absorbs.
The energy yield is significantly larger than the scientists expected and much greater than the previous record of 170 kilojoules they set in February…
…Modern nuclear power plants use nuclear fission, which generates energy by splitting the heavy nuclei of elements like uranium and plutonium into lighter nuclei. But stars can generate even more energy from nuclear fusion, a process of smashing together lighter nuclei to make heavier elements.
Stars can fuse many different elements, including carbon and oxygen, but their main energy source comes from the fusion of hydrogen into helium. Because stars are so large and have such strong gravity, the fusion process takes place at very high pressures within the star.
Most Earthbound efforts to generate energy from fusion, such as the giant ITER project being built in France, instead use a doughnut-shaped chamber called a tokamak to confine a thin plasma of hot, neutron-heavy hydrogen inside strong magnetic fields.
Scientists and engineers have worked for more than 60 years to achieve sustainable nuclear fusion within tokamaks, with only limited success. But some researchers think they will be able to sustain fusion in tokamaks within a few years, Live Science previously reported. (ITER is not projected to do this until after 2035.)
The method developed at Lawrence Livermore National Laboratory is one of a few ways of achieving nuclear fusion without using a tokamak.
Instead, the NFI uses an array of laser-light amplifiers the size of three football fields to focus laser beams on hydrogen fuel pellets in a 33-foot-wide (10 meters) spherical metal “target chamber.” These lasers are the world’s most powerful, capable of generating up to 4 megajoules of energy.
The method was originally designed so that scientists could study the behavior of hydrogen in thermonuclear weapons — so-called hydrogen bombs — but scientists think it could also have applications for generating energy from nuclear fusion.
3. The Metaverse is a Dystopian Nightmare. Let’s Build a Better Reality – John Hanke
As a society, we can hope that the world doesn’t devolve into the kind of place that drives sci-fi heroes to escape into a virtual one — or we can work to make sure that doesn’t happen. At Niantic, we choose the latter. We believe we can use technology to lean into the ‘reality’ of augmented reality — encouraging everyone, ourselves included, to stand up, walk outside, and connect with people and the world around us. This is what we humans are born to do, the result of two million years of human evolution, and as a result those are the things that make us the happiest. Technology should be used to make these core human experiences better — not to replace them.
Some might argue that we ought to ditch technology completely and return to a simpler way of life. But we don’t think that’s the answer either. Technology isn’t going away. The benefits of connecting us with information, friends, and family are simply too great. But over the last decades, those benefits have taken a huge toll, increasingly cutting us off from the experiences that we enjoy the most. It’s all too easy to get lulled into a routine of Zoom calls, online shopping, gaming, and scrolling through our social feeds. It encourages behavior toward one another that we would never tolerate in person, and is dividing our society by algorithmically pushing people into bubbles which reinforce the most extreme views.
At Niantic, we ask the question: what if technology could make us better? Could it nudge us get us off the couch and out for an evening stroll or a Saturday in the park? Could it draw us into public space and into contact with neighbors we might never have met? Could it give us a reason to call a friend, make plans with our families, or even discover brand new friends? Collectively, could it help us discover the magic, history, and beauty hiding in plain sight?
If this fresh perspective is the goal, what are we doing to achieve it? For us, it starts with a technology that connects the real world (the atoms) with the digital one (the bits). You could call it the ‘real world metaverse’ to distinguish it from the virtual videogame version, but honestly, I think we are just going to experience it as reality made better: one infused with data, information, services, and interactive creations. This has guided our work to date, both in terms of our first attempts to incorporate these concepts into products like Field Trip, Ingress, and Pokémon GO, and in terms of inventing critical technology to enable them. The core of this isn’t only the computer graphics challenge of adding annotations and animations to the physical world; it’s also — maybe even mainly — about the information, services, and experiences where digital meets physical.
Building the real world metaverse lies at the intersection of two major technical undertakings: synchronizing the state of hundreds of millions of users around the world (along with the virtual objects they interact with), and tying those users and objects precisely to the physical world. The first exists today in the Niantic Lightship platform, which underpins Pokémon GO and all of our products and supports hundreds of millions of users around the world. It means that those millions of users can create, change, and interact with digital objects in the physical world and that experience is consistent and shared by everyone. In the world of software, we call that a ‘shared state’ — we are all seeing the same thing, the same enhancements to the world. If you change something it’s reflected in what I see, and vice versa, for the millions of participants using the system.
Tying all of that precisely to the physical world is an even bigger project. It requires a new kind of map, similar in concept to something like Google Maps, but different because this map is built for computers, not people. It requires an unprecedented level of detail so that a phone or headset can recognize its location and orientation in a highly accurate way anywhere in the world. It is designed to enable the ultimate kind of digital wayfinding and coordination. Think of it as a kind of GPS, but without the satellites and a much higher level of accuracy. Niantic is building that map, in collaboration with our users. This is one of the grand challenges of augmented reality, and it’s the key to making it work the way we want it to — to make the real world come alive with information and interactivity.
Other big opportunities and challenges lie in semantically understanding the world. What are those pixels: an oak tree, a pond? A park bench, a cafe, or a historical building? Human cartographers have been doing this for hundreds of years. The new twist is in using computer vision to do this more or less automatically. Think of the opportunity as an analog to the web crawlers that search the web for pages to be indexed by Google. Today, computer vision powered by deep learning algorithms can provide a basic version of this in real time. In the future, offline processing can extend this to a much higher degree of fidelity and persistently tie this understanding to an ever-evolving AR map of the world. Niantic is pursuing these and other capabilities within the Lightship platform.
4. Other People’s Mistakes – Morgan Housel
But Daniel Kahneman mentions a more important truth in his book, Thinking, Fast and Slow: “It is easier to recognize other people’s mistakes than our own.”
I would add my own theory: It’s easier to blame other people’s mistakes on stupidity and greed than our own.
That’s because when you make a mistake, I judge it solely based on what I see. It’s quick and easy.
But when I make a mistake there’s a long and persuasive monologue in my head that justifies bad decisions and adds important context other people don’t see.
Everyone’s like that. It’s normal.
But it’s a problem, because it makes it easy to underestimate your own flaws and become too cynical about others’.
I try to stop myself whenever my explanation for other people’s behavior – financial or otherwise – is “well, they’re not very smart.” Or greedy. Or immoral. Yeah, sometimes it’s true. But probably less than we assume. More often there’s something else going on that you’re not seeing that makes the behavior more understandable, even if it’s still wrong.
5. Masters of Scale: Rapid Response Transcript – Francis DeSouza – Bob Safian and Francis DeSouza
DESOUZA: Illumina, for the first decade plus of our existence, we used to sell genomic analysis tools into the research market. And then in 2013, we entered the clinical market for the first time through the acquisition of a company called Verinata that did noninvasive prenatal testing.
Now, the way GRAIL started was, we were processing samples from pregnant mothers in our noninvasive prenatal testing lab. One of our scientists, this incredibly brilliant woman, noticed that although the fetal DNA in the blood was normal and healthy, there was something unusual about the maternal DNA. And so, she alerted us, we alerted the doctors to say, “Look, something seems to be off with the mothers here.” The doctors got back to us and said, “No, all the moms are fine, but we’ll stay in touch with them and see how they do.” In all of those cases, the mothers went on to find that they had cancer and didn’t know it.
I remember clearly the meeting at Illumina, and I still get goosebumps when I think about it, where we realized that we could be seeing the signals of cancer in a blood test. And so, we quickly put a team on it in Illumina. This was in the 2014, 2015 timeframe. They worked for over a year and came back and said, “Yeah, it looks like we’re seeing signals for cancer, but there is a lot of work that needs to be done between where we are now and actually having a safe test that we can bring to market. We need to do some very large clinical studies, and we need to hone the test to understand what specifically are we looking for in the blood.”
We knew that would take huge investment, and so we spun out the technology into a company called GRAIL. We put over 40 Illumina people into GRAIL, and we raised, ultimately, over $2 billion. And that’s one of the reasons we wanted to spin it out, to get access to the capital to move this technology as quickly as it could. The GRAIL team worked for a few years, and in the fall of 2019, they published their results. And the test they developed is truly extraordinary. This is a blood test that can identify 50 types of cancers across all stages.
Now, we know cancer kills 10 million people a year around the world, 600,000 here in the U.S. alone. We also know that if you catch cancers early, the patients have a much higher chance of survival. In a lot of cancers, you’ll see the odds of survival can get higher and up to 90 plus percent if you catch it in stage 1 or stage 2. The challenge is that 71% of people who die of cancer, die from cancers that have no screen. In fact, 45 out of the 50 cancers that GRAIL screens for have no screen today, like pancreatic cancer, for example. And so, there’s no ability to catch it early.
And so, when GRAIL published their data at the end of 2019, we realized this was a huge breakthrough and that this would save a lot of lives. That’s sort of how we initiated the process to acquire GRAIL. What we want to do is bring the GRAIL test to market as fast as possible to people around the U.S. and around the world. GRAIL has a terrific technology, and Illumina, we have the commercial presence in over 140 countries around the world. We have the teams that can work on reimbursement and regulatory approval, and so we can dramatically accelerate getting this test into the hands of people whose lives it could save
6. Enterprise Metaverses, Horizon Workrooms, Workrooms’ Facebook Problem – Ben Thompson
I wrote at the end of Metaverses earlier this month:
This is why I don’t think it is absurd that Nadella was the first tech executive to endorse the metaverse as a strategic goal. There is likely to be good business in building private metaverses for private companies, in a not-dissimilar way to Stephenson’s Franchise-Organized Quasi-National Entities made it easy for small-scale entrepreneurs to set up their own franchise-states.
Facebook’s goal is more audacious: the company already serves 3.5 billion users, which means creating a shared reality for over half of the world is a plausible goal. That reality, though, will likely sit alongside other realities, just as Facebook the app sits alongside other social networks. This metaverse is universal, but not exclusive.
What I am skeptical of is the idea of there being one Metaverse to rule them all; we already have that, and in this case the future is, in William Gibson’s turn of phrase, here — it’s just not very evenly distributed. I speak from personal experience: for two decades I have lived and worked primarily on the Internet; it’s where I experience friendship and community and make my living. Over the last year-and-a-half hundreds of millions of people have joined me, as the default location for the work has switched from the office to online (that “online” is primarily experienced at home does not mean that home is intrinsic to the work — “work from home” is a misnomer). This too is an inverse of Snow Crash, where most jobs are in the real world, and recreation in the Metaverse; the future of work is online, and the life one wants to live in the reality of one’s choosing.
I’ve been looking for an opportunity to come back to this point; much of that article was focused on the fact that while Snow Crash had a dystopian real world defined by walled gardens, along with a universal Metaverse, it is the Internet that is in fact defined by walled gardens, while the real world is our shared universal reality. Snow Crash had it backwards. That wasn’t the only thing that was backwards though: in Snow Crash “most jobs are in the real world, and recreation in the Metaverse”, but, thanks in part to COVID, reality is turning out to be something different.
The reason this matters is that the adoption of new technologies requires some sort of forcing function. PCs, for example, were first adopted by enterprises because of the productivity gains they afforded, and then later on by consumers who had already experienced a PC at work (generally speaking of course; there are always exceptions). This is how Microsoft, which has no real idea of how to build a consumer product, briefly became a consumer computing powerhouse: the PC monopoly gifted to them by IBM meant that Windows PCs were the obvious choice for the home.
Smartphones went in the opposite direction: by 2007 almost everyone had a mobile phone of some sort (usually a dumb phone), then Apple came along and offered a compelling consumer product that, under subsidy, wasn’t that much more expensive, and much more useful and entertaining. Only then did consumers demand to use those phones at work.
To date most assumptions about VR — the most obvious manifestation of the metaverse concept — have focused on the consumer use case, primarily gaming. This is why I have long been relatively bearish on virtual reality, especially relative to augmented reality. I wrote about CES 2016 in a Daily Update:
I think it’s useful to make a distinction between virtual and augmented reality. Just look at the names: “virtual” reality is about an immersive experience completely disconnected from one’s current reality, while “augmented” reality is about, well, augmenting the reality in which one is already present. This is more than a semantic distinction about different types of headsets: you can divide nearly all of consumer technology along this axis. Movies and videogames are about different realities; productivity software and devices like smartphones are about augmenting the present.
I argued in The Problem with Facebook and Virtual Reality that this made VR less valuable:
That is the first challenge of virtual reality: it is a destination, both in terms of a place you go virtually, but also, critically, the end result of deliberative actions in the real world. One doesn’t experience virtual reality by accident: it is a choice…
That is not necessarily a problem: going to see a movie is a choice, as is playing a video game on a console or PC. Both are very legitimate ways to make money: global box office revenue in 2017 was $40.6 billion U.S., and billions more were made on all the other distribution channels in a movie’s typical release window; video games have long since been an even bigger deal, generating $109 billion globally last year.
Still, that is an order of magnitude less than the amount of revenue generated by something like smartphones. Apple, for example, sold $158 billion worth of iPhones over the last year; the entire industry was worth around $478.7 billion in 2017. The disparity should not come as a surprise: unlike movies or video games, smartphones are an accompaniment on your way to a destination, not a destination in and of themselves.
That may seem counterintuitive at first: isn’t it a good thing to be the center of one’s attention? That center, though, can only ever be occupied by one thing, and the addressable market is constrained by time. Assume eight hours for sleep, eight for work, a couple of hours for, you know, actually navigating life, and that leaves at best six hours to fight for. That is why devices intended to augment life, not replace it, have always been more compelling: every moment one is awake is worth addressing.
In other words, the virtual reality market is fundamentally constrained by its very nature: because it is about the temporary exit from real life, not the addition to it, there simply isn’t nearly as much room for virtual reality as there is for any number of other tech products.
The point of invoking the changes wrought by COVID, though, was to note that work is a destination, and its a destination that occupies a huge amount of our time. Of course when I wrote that skeptical article in 2018 a work destination was, for the vast majority of people, a physical space; suddenly, though, for millions of white collar workers in particular, it’s a virtual space. And, if work is already a virtual space, then suddenly virtual reality seems far more compelling. In other words, virtual reality may be much more important than previously thought because the vector by which it will become pervasive is not the consumer space (and gaming), but rather the enterprise space, particularly meetings.
7. Low Rates, More Risk – Michael Batnick
Lower interest rates encourage people to take more risks, in general. There is little question about this.
By taking short-term interest rates to zero, which I had no objection to, the federal reserve “forced” me to find better ways to allocate my cash…
…Okay, wait a minute. If everyone is taking more risk, then who plowed $17 billion into fixed income ETFs in July? And if everyone is taking more risks, then how do we explain this?…
…For years, we’ve seen massive flows into bond funds and ETFs, even with rates low and getting lower. And simultaneously, even with stocks high and going higher, we’ve seen massive flows out of stocks funds and ETFs.
Are lower interest rates pushing up the valuation of stocks? Without a doubt. Are lower interest rates pushing people into SPACs? Eh, I don’t know about this one. People were doing crazy shit with their money in the 90s when the 10-year was at 6%.
I’m taking more risks in an area of my portfolio that I would prefer to have no risk. That’s a direct result of the fed taking rates to zero. But I’m not taking even more risks with areas of my portfolio that are already at risk. I continue to buy index funds every two weeks in my 401(k) and every month in my taxable account. I’m not YOLOing into call options on SPACS. I’m not going all-in on Pudgy Penguins. I’m taking risks, but I’m not sniffing glue.
Disclaimer: None of the information or analysis presented is intended to form the basis for any offer or recommendation. Of all the companies mentioned, we currently have a vested interest in Apple, Facebook, Illumina, and Microsoft. Holdings are subject to change at any time.
