194: Tesla vs Facebook, Roper Going Danaher/Teledyne?, Intel Steps on It, Flexport Saves Xmas, Playboy NFTs, Nvidia, Robert Cialdini, Russia's Firewall, and My Thoughts on Dune

"I know *it is*, but *why is it*?"

By definition, all but the last doomsday prediction is false. Yet it does not follow, as many seem to think, that all doomsday predictions must be false; what follow is only that all such predictions but one are false.

—Richard A. Posner, Catastrophe: Risk and Response

🤔 How can you know why you like what you like?

For example, I find myself drawn over and over again to things that could be described generally as ‘infrastructure and tools’.

Many people I know seem very interested in consumer/product companies, but I have little interest in that, with a few exceptions (mostly where there’s a big nerdy tech angle).

Why is that?

I know *it is*, but *why is it*? ¯\_(ツ)_/¯

🛀 Tesla is getting close to being a trillion dollar market cap company... even catching up to Facebook!

Here’s a headline I saw on Friday:

Elon Musk is now worth $230 billion—as much as Bill Gates and Warren Buffett combined

What if you could send that information back in time to the Tesla-Q crowd a couple years ago? Would anyone even have believed you?

Even now that this fact is known, I’m not seeing many post-mortems on the situation that are anything other than “well, I was still right, but he somehow pulled it off… But I’ll be proven right later, it’s just taking a while”.

I don’t have a horse in this race, other than being a fan of EVs generally and wanting the whole industry to move as fast as possible. But I think it’s probably a missed learning opportunity for many investors.

We all make mistakes. I used to own Valeant, and changing my mind on it and thinking back on my thought process, re-reading the notes I was taking in real-time, etc, was an *extremely* valuable experience.

Update: I wrote the above before the news came out that Hertz was making “an initial order of 100,000 Teslas by the end of 2022,” along with charging infrastructure across the company’s footprint. That’s huge. We sometimes see big orders, but usually over many many years. ‘By the end of 2022’ is real close.

Tesla stock is up 5.5% pre-market.

💰 I think more and more “influencers” are going crypto because that’s where there’s the highest return on influence.

Crypto doesn’t run on ASICs and GPUs, it runs on promotion and recruiting. So if you’ve got an audience, you can make a lot of money doing “influence mining”.

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Investing & Business

‘Roper Weighs Process Tech Unit Sale at $3 Billion Value’

In one of these ‘people-familiar-with-the-matter’ pieces, Bloomberg reports that after recently divesting 3 businesses for $3.15 billion, Roper is considering selling their whole Process Technologies segment:

The process technologies unit includes Roper Pumps, which has high exposure to the oil and gas industry. It also includes Cornell, which makes pumps for food and waste-water processing, and PAC, which provides analytical instruments for laboratories in the hydrocarbon industry.

It also includes Compressor Controls Corporation (CCC), which specializes in turbomachinery controls, and Flow Technology Inc. (FTI), which provides “flow meters, flow calibrators, flow controllers, and ancillary electronics” used in aerospace, automotive, industrial, metrology, oil & gas, etc.

You get the idea.

Eyeballing it, the segment did about $155m in EBITDA in the past 12-month, so at $3bn that would be 19.35x. Of course, it’s a more cyclical bunch of businesses that are currently in a nice upswing (after a downswing in recent years), so the TTM may not be representative of the earning power over the cycle.

Management must feel like prices are high for these assets now and not likely to be higher in the future, and that the M&A pipeline for the types of businesses they now prefer looks pretty good...

The idea for Roper is to replace very good but cyclical/lumpy businesses doing mid-30s EBITDA margin with stable/recurring even better businesses doing mid-to-high-40s EBITDA margin. As long as they don’t overpay and are good at evaluating business quality, this upgrading/high-grading of their business, kind of like Danaher did when it spun-off Fortive, should be beneficial (getting rid of whole segments also reminds me of later-Teledyne under Singleton).

Of course, we have to consider taxes when comparing multiples, but they acquired Vertafore for 18.44x EBITDA, and that’s a duopoly vertical market software business with 49% EBITDA margins steadily growing MSD organically…

Intel Going for Broke, Pedal to the Metal…

Friend-of-the-show Dylan Patel has a nice piece on Intel’s plan to try to catch up, and maybe even retake a leadership position in leading-edge semiconductors (if 47 stars align and TSMC somehow stumbles..), under Pat Gelsinger’s captaining:

Intel finally learned their lesson. Instead of continuing to milk the cow, they realize it’s time to put the pedal to the metal. After a decade of poor leadership under investing, they have woken up that technology leadership and investments are the only way forward. These investments are not coming lightly either.
Intel will be spending $25B-$28B in capital expenditure alone plus another ~$15B of R&D each year. This amount will be spent on additional fabs, process technologies R&D, improving the design, and other intellectual property. In just the last 8 months since Pat Gelsinger joined Intel, they have hired an additional 6,000 engineers. Meanwhile every division has been reorganized. [...]

It’s risky for sure, but it seems *riskier* to just cede leadership and stop trying like hell because you’re afraid of hurting margins and the dividend. There’s a much bigger prize in the future than whatever existed in the past, and getting there is worth a lot of pain today.

I hope Intel succeeds — at least partially — because we all benefit when the industry is competitive and innovation on one side ignites innovation elsewhere.

And whatever happens, it’ll certainly be interesting to watch them try to execute this ambitious plan…

Intel could follow the path of many other American goliaths such as IBM and General Electric. A slow slide to irrelevancy, spinning off business, and bringing shame to what was once pride for American ingenuity. In short, failure. Pat Gelsinger and Intel are saying no to this.

Instead of that conservative route, they are going to bet the farm, spend every dime Intel makes on investing in more manufacturing, design, and in general catching up in technology. This is perhaps the riskiest bet in technological history. If it fails, America fully cedes manufacturing of semiconductors to the east. Tens of billions of dollars will be spent with no results, but if it succeeds, Intel is back.

As great as TSMC is at what they’re doing, no company does well for long if they become a monopoly or quasi-monopoly. I don’t mean financially, but culturally and technologically (and so eventually financially…).

You need the heat of competition to temper the steel of an organization. ⚔️

‘’Truth Social’ is seemingly a thinly disguised fork of popular social network codebase Mastodon.’

I almost don’t want to mention this, because giving any attention to the malignant narcissist is exactly what he’s looking for, and we were finally getting to a place where it seemed like the car alarm that had been blaring for 4 years had been turned off… so I’ll focus on the “business” side of this grift:

“Based on the screenshots I have seen, it absolutely is based on Mastodon,” Eugen Rochko, founder and lead developer of Mastodon told Motherboard in an email. He pointed to one screenshot of Truth Social’s error message, which is using the default Mastodon elephant mascot. [...]

Another screenshot shows that the HTML for the Truth Social login screen still mentions Mastodon explicitly. [...]

“The main thing is that Mastodon is free software, released under the AGPLv3 license, so anyone can use it—provided they comply with the license. The main part of the license is making the source code and any modifications to it available to the public,” Rochko told Motherboard. With Truth Social saying that its code is proprietary “that would be a problem, as that would indicate a license violation,” Rochko added. (Source)

SPAC’ing a bunch of open-source code. Sad.

Did Flexport’s CEO just save xmas on Twitter?

Michael Nielsen has a good thread providing extra context.

Playboy Makes Rabbit NFTs (🤦‍♀️)

Can you smell that?

The smell of desperation… Of squeezing everything you can out of an old aimless brand…

The Playboy Rabbitars are a lagomorphic-themed civilization of 11,953 unique, non-fungible rabbits inspired by Playboy iconography, heritage and lore. In the context of the metaverse, the Rabbitars are NFTs that live on the Ethereum Blockchain as ERC-721 tokens. Each Rabbitar is generated from 175+ traits including fur, ears, facial expressions, apparel, accessories, occupation-related characteristics, and more. Some of the rarest Rabbitar traits are inspired by culturally significant aspects of Playboy’s art and editorial history. (And yes, you can tell your friends you officially belong to a Playboy Club!)

Why 11,953? Because a random odd number must be cooler than a nice round number, of course!

You can picture the guys in suits sitting around a conference table thinking, how can we cash in on this thing? What do the kids think is cool these days?

Of course, the fact that it’s totally stupid doesn’t mean it won’t make a ton of money — there’s not much correlation these days — but it’s still dumb, and I won’t be gaslit into thinking it’s brilliant even if it goes to the moon…

h/t my friend Liz

How do you say “NFT” in Elvish?

Artist: Adam Sacks.

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Science & Technology

Nvidia Beefing up GeForce Now Game-Streaming Service

That Darth Vader-style pod above is Nvidia’s new GeForce NOW SuperPOD:

SuperPOD consists of over 1,000 GPUs that deliver more than 39 petaflops of graphics horsepower. Each instance is 35 teraflops of performance, nearly 3x that of an Xbox Series X. [...]

The new GeForce NOW RTX 3080 membership enables games to run at up to 1440p on PC and Mac clients, 4K HDR on NVIDIA SHIELD, and up to 120 FPS in the PC, Mac and Android apps. GeForce NOW RTX 3080 members will also have exclusive access to RTX 3080 cloud gaming rigs — slices of the SuperPOD — configured with AMD Threadripper™ PRO CPUs, 28GB of DDR-3200 memory and PCI-GEN4 SSDs [...]

In the lowest latency mode, these members can experience total latency as low as 60ms — comparable to the latest game consoles. (Source)

That’s a lot of juice in the cloud! 🔥

By distributing these mofos close to population centers, they can keep latency pretty low, in in ideal conditions, it’s pretty easy to imagine that any POS computer with a good internet connection can be turned into the equivalent of a badass gaming rig, running some triple-A title in ultra everything at 1440p@120 FPS…

Interview: Robert Cialdini on the Principles of Persuasion

I wrote recently about how everybody has to learn things for the first time, even Buffett didn’t know what free cash flow was at a certain point and had to learn it…

While I feel like Cialdini’s book ‘Influence’ is probably one of the better-known books among my peer group, I’m also sure there’s many who haven’t read it yet and may get their minds expanded by this excellent interview:

It was conducted by friend-of-the-show Shane Parrish, who was gracious enough to provide this link to the transcript for readers of this steamboat. Merci!

Russia’s Mafia-State Ramps up Internet Censorship

On top of making it safe for Russian nationals — state-backed or not — to do cyber-attacks on the rest of the world, the Putin regime is also taking further control of the net in the country:

The process, underway since 2019, represents the start of perhaps the world’s most ambitious digital censorship effort outside of China. Under President Vladimir V. Putin, who once called the internet a “C.I.A. project” and views the web as a threat to his power, the Russian government is attempting to bring the country’s once open and freewheeling internet to heel. [...]

Russia’s censorship technology sits between companies that provide internet access and people who are browsing the web on a phone or laptop. Often likened to intercepting mailed letters, the software — known as “deep packet inspection” — filters through data traveling across an internet network, slowing down websites or removing whatever it has been programmed to block. [...]

“I was born in the era of a super-free internet and now I’m seeing it collapsing,” said Ksenia Ermoshina [...]

Russia is using the censorship technology to gain more leverage over Western internet companies in addition to other strong-arm tactics and legal intimidation. In September, after the government threatened to arrest local employees for Google and Apple, the companies removed apps run by supporters of Mr. Navalny ahead of national elections.

Roskomnadzor, the country’s internet regulator overseeing the effort, can now go further. It has threatened to take down YouTube, Facebook and Instagram if they do not block certain content on their own. After authorities slowed down Twitter this year, the company agreed to remove dozens of posts deemed illegal by the government. [...]

“A blocking system is installed at the border of every Russian internet provider,” he said.

The technology is now at 500 locations of telecom operators, covering 100 percent of mobile internet traffic and 73 percent of broadband traffic, a Russian official involved in the program said on Wednesday. By next year, the technology will be inside more than 1,000 locations, the official said.

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The Arts & History

I saw DUNE — go see it before reading this *SPOILERS*

Denis Villeneuve is probably my favorite film director, so of course I was going to go see Dune on the big screen (IMAX ftw 🤘).

It was my first theater experience in about 2 years, and I’m so glad I went.

This is the kind of visual feast that deserves a screen measured in tens-of-meters and a sound system measured in thousands-of-watts. Trust me on this one, it just won’t be the same at home.

What did I think of it?

Let’s just say that I’m already planning to go a second time. I also saw Bladerunner 2049 twice on the big big screen, and I’m glad I did. Some experiences are just viscerally and aesthetically a lot more powerful that way, and Dune definitely fits the bill.

Even if you’re paying for HBO Max, just start the movie at home, get in your car and go see it on IMAX (nice way to double-count your support of the film for the execs at WarnerMedia).

I need to see it again to be sure, and to see Part 2 to know if they pulled it off all the way through, but dammit, even with just what I’ve seen so far, this may be one of the best science fiction films of all time.

Denis has clearly been building up to this with Arrival and Bladerunner 2049 — I’m amazed at the level of detail and the sheer amount of design work that went into this film. Every landscape could be a painting, every spaceship is one of the coolest ships I’ve ever seen, and they feel massive and tangible, none of that “zipping around int he CGI world” stuff that is so common.

I can’t think of an actor that didn’t do a great job — I was worried about Chalamet, but like the Paul of the story, he’s easy to mistake for just a kid and to under-estimate, but he delivers.

Every detail is cool. The different movement and fighting styes for the Atreides vs the Sardaukars (the way they drop into battle…) vs the Fremen vs the Harkonen, and from the small-scale acts of violence to the EPIC large-scale ones (never has a sci-fi bombing looked cooler).

I love how the bad guys are hyper-competent, so when the good guys succeed, it really feels earned. Even with some really badass allies helping you out, you barely squeak through when the Sardaukar are after you…

Denis is also really good at seeing the “moment” in something. The first time Paul steps on the sands of Dune, some beam of light, or grains of spice suspended in the air, that strange calm before the storm when Leto sees flashes of the invading force in the distance, etc.

Even the music was on point. Zimmer was on his A-game and didn’t just phone it in, but created something that sounds pretty unique with lots of atypical instruments. He cranks the intensity and beauty, often at the same time.

It’s been over 20 years since I read the book, and I didn’t find the film confusing, but I can understand how it may be a lot for those who aren’t sci-fi fans or have no idea at all about the Dune universe. It’s probably a lot to ask for people to read the book before seeing the movie, but maybe get a quick primer on some of the important aspects of the world by a Dune-head friend before going.

Now how the hell am I going to wait a few years for part 2?! Glass half-full, I guess it’s nice to have one more thing to look forward to… (Warner better greenlight it soon, or I may have to get my pitchfork)