What We’re Reading (Week Ending 25 July 2021) - 25 Jul 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 25 July 2021):
1. The Highest Forms of Wealth – Morgan Housel
Money buys happiness in the same way drugs bring pleasure: Incredible if done right, dangerous if used to mask a weakness, and disastrous when no amount is enough.
The highest forms of wealth are measured differently.
A few stick out:
1. Controlling your time and the ability to wake up and say, “I can do whatever I want today.”
Five-year-old Franklin Roosevelt complained that his life was dictated by rules. So his mother gave him a day free of structure – he could do whatever he pleased. Sara Roosevelt wrote in her diary that day: “Quite of his own accord, he went contently back to his routine.”
There’s a difference between working hard because you want to and working hard because someone else told you you had to, and how to do it, and when to do it. Even if you’re doing the same work, the independence of doing it on your own terms changes everything in the same way that sleeping in a tent is fun when you’re camping but miserable when you’re homeless.
To me, the highest form of wealth is controlling your time.
Wealth can lead to time independence, but it’s never assured. It can be the opposite, as whatever created the wealth – whether a company or an inheritance – creates a claim on your time in equal proportion to its financial reward. A great number of CEOs fall into this category: They have an abundance of wealth and not a moment of free time or scheduling control even when it’s desired, which is its own form of poverty.
Charlie Munger summed it up: “I did not intend to get rich. I just wanted to get independent.” It’s a wonderful goal, and harder to measure than net worth.
2. How to Predict a Market Crash – Ben Carlson
I’m not actually sure if Dent believes each one of his predictions but his latest interview provides some clues as to how the most preeminent market soothsayers are able to make market crash predictions over and over again.
Here’s how to predict a market crash without ever admitting you were wrong if it doesn’t come true:…
…Move the goalposts when you’re wrong. Once you’ve gone out on a limb with a prediction for a crash with a specific time frame in mind, eventually you have to pay the piper. Either you’re right or you’re wrong.
And since market crashes are fairly infrequent, if you keep predicting one you’re going to be wrong way more often than right.
You have two options when you make a prediction that turns out to be wrong:
(1) Admit you were wrong. (2) Move the goalposts.
Let’s see which one Dent went with since he’s been predicting “the biggest crash ever” for years:
[Question] “You told me in an interview this past March that “the biggest crash ever” would likely occur by the end of this June. What are your thoughts on why that didn’t happen?
[Answer] It’s the same old story: We’ve been rebounding since COVID crashed us in March of last year. The stimulus was off the reservation! The central banks said, “We’ll triple down.” But that stresses the system: not letting the economy rebalance, not washing out zombie companies. Twenty percent of large public companies can’t meet their debt service.
So it was massive stimulus and the natural recovery — [Americans] had to hold back [spending] for months. So now we have this bounce.
We’ve been rebounding since COVID crashed us in March of last year. But I don’t think it’s going to last, and the markets don’t think it’s going to last. The bond markets are saying, “Yeah, now we’ve got 3% or 4% inflation, but it’s temporary.”
Governments will keep this bubble going no matter what. So the question is: When does it blow?”
Ah yes, the time-honored tradition of blaming the Fed for your ill-advised predictions. It’s almost like some pundits would like to invest as if central banks don’t exist, when in fact, they do.
3. Mark In The Metaverse – Casey Newton and Mark Zuckerberg
As always, there’s a lot to discuss with you — and the White House is demanding Facebook do more to remove vaccine misinformation, which I know is on a lot of people’s minds right now. I want to get to that, but I want to start with this talk you gave internally at Facebook a few weeks ago, which I recently had a chance to watch. You told your employees that your future vision of Facebook is not the two-dimensional version of it that we’re using today, but something called the metaverse. So what is a metaverse and what parts of it does Facebook plan to build?
This is a big topic. The metaverse is a vision that spans many companies — the whole industry. You can think about it as the successor to the mobile internet. And it’s certainly not something that any one company is going to build, but I think a big part of our next chapter is going to hopefully be contributing to building that, in partnership with a lot of other companies and creators and developers. But you can think about the metaverse as an embodied internet, where instead of just viewing content — you are in it. And you feel present with other people as if you were in other places, having different experiences that you couldn’t necessarily do on a 2D app or webpage, like dancing, for example, or different types of fitness.
I think a lot of people, when they think about the metaverse, they think about just virtual reality — which I think is going to be an important part of that. And that’s clearly a part that we’re very invested in, because it’s the technology that delivers the clearest form of presence. But the metaverse isn’t just virtual reality. It’s going to be accessible across all of our different computing platforms; VR and AR, but also PC, and also mobile devices and game consoles. Speaking of which, a lot of people also think about the metaverse as primarily something that’s about gaming. And I think entertainment is clearly going to be a big part of it, but I don’t think that this is just gaming. I think that this is a persistent, synchronous environment where we can be together, which I think is probably going to resemble some kind of a hybrid between the social platforms that we see today, but an environment where you’re embodied in it.
So that can be 3D — it doesn’t have to be. You might be able to jump into an experience, like a 3D concert or something, from your phone, so you can get elements that are 2D or elements that are 3D. I’d love to go through a bunch of the use cases in more detail, but overall, I think that this is going to be a really big part of the next chapter for the technology industry, and it’s something that we’re very excited about.
It just touches a lot of the biggest themes that we’re working on. Think about things like community and creators as one, or digital commerce as a second, or building out the next set of computing platforms, like virtual and augmented reality, to give people that sense of presence. I think all of these different initiatives that we have at Facebook today will basically ladder up together to contribute to helping to build this metaverse vision.
And my hope, if we do this well, I think over the next five years or so, in this next chapter of our company, I think we will effectively transition from people seeing us as primarily being a social media company to being a metaverse company. And obviously, all of the work that we’re doing across the apps that people use today contribute directly to this vision in terms of building community and creators. So there’s a lot to jump into here. I’m curious what direction you want to take this in. But this is something that I’m spending a lot of time on, thinking a lot about, we’re working on a ton. And I think it’s just a big part of the next chapter for the work that we’re going to do in the whole industry.
4. New cancer treatments may be on the horizon—thanks to mRNA vaccines – Stacey Colino
Molly Cassidy was studying for the Arizona bar exam in February 2019 when she felt an excruciating pain in her ear. The pain eventually radiated down through her jaw, leading her to discover a bump under her tongue. “I had several doctors tell me it was stress-related because I was studying for the bar and I had a 10-month-old son,” recalls Cassidy, who also has a Ph.D. in education. After continuing to seek medical care, she found out that she had an aggressive form of head and neck cancer that required intensive treatment.
After doctors removed part of her tongue along with 35 lymph nodes, Cassidy went through 35 sessions of radiation concurrent with three cycles of chemotherapy. Ten days after she completed treatment, Cassidy noticed a marble-like lump on her collarbone. The cancer had returned—and with a vengeance: It had spread throughout her neck and to her lungs. “By that point, I was really out of options because the other treatments hadn’t worked,” says Cassidy, now 38, who lives in Tucson. “In the summer of 2019, I was told my cancer was very severe and to get my affairs in order. I even planned my funeral.”
When doctors removed the tumor from her collarbone, they told her that she might be eligible to join a clinical trial at the University of Arizona Cancer Center that was testing an mRNA (messenger ribonucleic acid) vaccine—similar technology to the Pfizer and Moderna COVID-19 vaccines—in combination with an immunotherapy drug to treat colorectal and head and neck cancers. Whereas the COVID-19 vaccines are preventative, mRNA vaccines for cancer are therapeutic, and Cassidy jumped at the opportunity to participate. “I was at the right place at the right time for this clinical trial,” she says….
…Some mRNA vaccines for cancer take an off-the-shelf approach: These ready-made vaccines are designed to look for target proteins that appear on the surface of certain cancer tumors. How well they work is a matter of speculation right now, but some experts have concerns. “The question is: What is the target? You always have to have the right thing to target for the vaccine to be effective,” says David Braun, an oncologist at the Dana-Farber Cancer Institute and Harvard Medical School who specializes in immunotherapies. After all, with cancer, there isn’t a universal target the way there is with the coronavirus’s spike protein, and DNA mutations in cancer cells vary from one patient to another.
This is where personalized mRNA cancer vaccines enter the picture—and these may be more promising, experts say. With the personalized approach, a sample of tissue is taken from a patient’s tumor and their DNA is analyzed to identify mutations that distinguish the cancer cells from the normal, healthy cells, explains Bauman, who is also chief of hematology/oncology at the UA College of Medicine-Tucson. Computers compare the two DNA samples to identify the unique mutations in a tumor, then the results are used to design a molecule of mRNA that will go into the vaccine. This is typically done in four-to-eight-weeks—“it’s a technical tour de force to be able to do that,” says Robert A. Seder, chief of the Cellular Immunology Section of the Vaccine Research Center at the National Institute of Allergy and Infectious Diseases.
5. Twitter thread on how the use of Glassdoor could lead to better investing results – Impact Growth
Glassdoor a worthwhile tool for forecasting stock returns?
🧩 I recorded the following data for all Nasdaq constituents to find out
– ✨ Current Rating
– 📊 # of Reviews
– 🗣️ Rec to a Friend?
– 👔 Approve of CEO?
– 📈 Rating 2yrs ago
1) Do overall ratings correlate with stock returns?
✅ Yes!
📈 There exists a clear relationship between how highly employees rate a company and how well the stock does
2) Do stock returns correlate with 2yr rating changes?
✅ Yes, but only over the longer-run
Avg 1/3yr returns when ratings are up/down over the last 2yrs:
📈 +35% / +107%
📉 +34% / +77%
3) The better the CEO, the better the stock?
Yes!
A clear relationship between CEO rating and long-run stock performance
6. Infinity Revenue, Infinity Possibilities – Packy McCormick
From an internet cafe in Cabanatuan City, Philippines, a 22-year-old named Howard described the game he plays to make a living as innocent-looking but strategic. That game, Axie Infinity is a Pokémon-like game built on the Ethereum blockchain in which people buy digital pets, called Axies, as NFTs, and breed, battle, and trade them. It’s cute. It’s unassuming…
…Axie’s cuteness obfuscates an absurdly fast-growing business, one counterintuitively trying to vertically integrate in a web3 ecosystem known for composing modularly. Beyond the business, it has a wildly bold master plan to reshape economic policy and local governance by showing what’s possible when people work in the Metaverse. In its whitepaper, Axie developer Sky Mavis explicitly says, “You can think of Axie as a nation with a real economy.”
That’s the grand plan. Right now, most of the focus on Axie centers around its eye-popping growth… Axie Infinity is picking up players and revenue at a nearly-unprecedented clip…
…In April, Axie did about $670k in revenue.
In May, it did $3.0 million.
In June, $12.2 million.
In July, just 18 days into the month, it’s already at $79 million.
Delphi Digital projects that it will close this month at $153 million.
The Axie protocol generates revenue by taking a 4.25% fee when players buy and sell Axie NFTs in its marketplace, and by charging fees for breeding Axies to create new ones in the form of its tokens, Axie Infinity Shards (AXS) and Smooth Love Potion (SLP). AXS and SLP are denominated in ETH, which has been cut by more than half since May; Axie has grown USD revenue even in the face of falling ETH prices.
7. Software Beyond the Stratosphere: Loft Orbital Launches World’s First Commercial Ride-Share Satellites – Ubiquity Ventures
On June 29, 2021, Loft Orbital activated the world’s first two commercial ride-share satellites in orbit around Earth. The missions were called YAM-2 and YAM-3, where YAM stands for “yet another mission”. Prior to Loft Orbital, it would take 5 to 10 years to design, build, and launch a satellite containing a single dedicated payload to Earth orbit where it can carry out its work such as transmitting signals like satellite TV or internet, snapping photos for Google Maps, etc.
Instead, Loft Orbital’s satellites bring several different customers’ payloads to orbit at the same time. These two particular Loft Orbital satellites are carrying 10 different customer payloads, spanning many different industries:
- Established space: Eutelsat (Europe’s largest satcom provider)
- Government: DARPA and the UAE space agency
- Newspace: Totum and others
These customers are utilizing their sensor payloads for a variety of use cases including IoT connectivity, weather data, flying space autonomy software, precision positioning, and more. Future Loft Orbital missions have already signed up customers including Honeywell, NASA, and the US Space Force.
For each of these customers, Loft Orbital is the fastest and simplest path to space…
…Loft makes it simple and fast for more people to utilize space.
By doing so, Loft is unlocking a massive amount of demand from potential space users who may not have had the knowhow, resources (typically billions of dollars for a sovereign government) or time (typically 10+ years) to get to space. To accomplish this, Loft Orbital designed these satellites leveraging their plug-and-play payload adapter, attached various customer payloads, booked launches on rockets, coordinated regulatory certifications, tested the completed satellite (thermal, vibration, and more), and integrated these satellites onto a rocket. From here, Loft Orbital will manage these satellites in orbit using their Cockpit mission control software and downlink data from these customer payloads for the next few years. Loft Orbital customers get to focus on their payload and leave everything else to Loft.
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 Facebook. Holdings are subject to change at any time.
