21: Mauboussin Interview, Trillions from Wikipedia, Disney Stunt Robots, TikTok a Car Without Wheels?

"How about a car without an engine, transmission, wheels, roof, doors, seats…"

It is a vast, and pervasive, cognitive mistake to assume that people who agree with you (or disagree) do so on the same criteria that you care about. — Megan McArdle

Random thought of the day: The value created for the world by Wikipedia may ultimately be in the trillions. And it's pretty much all "consumer surplus". What a wonderful institution.

More people should light candles to Jimmy Wales and Larry Sanger, and donate a few bucks (candles alone don't do much).

I used to be a fairly active Wikipedian around the 2003-2008 era (just guesstimating the years, I don’t have a very linear sense of time). I even created a few pages for common words/things on the French Wikipedia, and made thousands of edits on the English one too. That was a fun time.

Separately, in the “good news” department, congrats to Shomik and his fiancée!


Investing & Business

Randomly Finding Lt. Nate Fick!

Ok, this is kind of a convoluted Grandpa Simpsons story that goes nowhere, but this is my newsletter, so I can indulge:

One of my favorite mini-series is ‘Generation Kill’ (HBO, David Simon, from ‘The Wire’ fame). It’s based on a book by a Rolling Stone journalist called Evan Wright, who was embedded with recon marines during the 2003 invasion of Iraq.

I’ve seen the series multiple times (at least 3x, maybe four). The most level-headed, most decent, most competent, best human being on the show is First Lieutenant Nathaniel Fick (along with the main character, Sergeant Brad Colbert).

Well, I was just re-watching an Elastic presentation from last fall about their security offerings and their plans for the Endgame acquisition… During the presentation, Endgame’s CEO (now part of Elastic) comes on stage, and his name seems familiar, but at first I don’t recognize it.

Just to get some background on him, I pause the video and do some research. Oh, he was a marine. Oh, he wrote a memoir of his time in the marines (‘One Bullet Away’), did he see combat?

Then the Wikipedia article says:

Fick and his platoon were the subjects of a series of articles in Rolling Stone and the book Generation Kill by the embedded journalist Evan Wright. The articles won the National Magazine Award in 2003. Generation Kill was adapted by David Simon and Ed Burns into a miniseries of the same name for HBO, in which Fick was portrayed by Stark Sands.

Such a small world! I was excited like a kid on the morning of xmas, but I’m not sure exactly why. But who needs a reason ¯\_(ツ)_/¯

I guess I’m just happy to find out that this really decent person has landed well after the war and is doing cool things.

If he’s anything like his portrayal in the series (and the Evan Wright book, which I’ve also read), I wish him the best. Sometimes we forget that these people keep living and doing things after the credits roll…

TikTok: Do the Confusion Dance

The algorithms, which determine the videos served to users and are seen as TikTok’s secret sauce, were considered part of the deal negotiations up until Friday, when the Chinese government issued new restrictions on the export of artificial-intelligence technology, according to people familiar with the matter.

Now both sides are trying to figure out whether the order means the algorithms need Chinese government approval for transfer, and if so, whether Beijing would sign off. The complexity involved has reduced the chances that a deal could be completed soon.

I guess it's harder to negotiate if, y'know, you don't know what you're buying.

A person close to the talks likened TikTok without its algorithms to a fancy car with a cheap engine. (Source)

How about a car without an engine, transmission, wheels, roof, doors, seats…

Reuters has a bit more details on four different options for a deal:

One possibility being discussed is to sell TikTok without the algorithm it uses to make recommendations to users. [...]

Another option is to negotiate a transition period of up to a year with the Committee on Foreign Investment in the United States (CFIUS), which is overseeing the deal talks [...]

A third option is seeking approval from China to pass on TikTok’s algorithm to the buyer of its U.S. assets, the sources said. [...]

The fourth scenario involves ByteDance licensing the algorithm to the buyer of the TikTok assets, the sources said. However, this could worry CFIUS, which wants ByteDance to forego any relationship it has with TikTok in the United States.

On the topic of TikTok, I thought this way of visualizing different sources of content was insightful:

Source.

‘Mostly Borrowed Ideas’ Deep Dives Launch

Abdullah Al-Rezwan, a great person to follow on Twitter under the username @borrowed_ideas, has just launched a new subscription website called MBI Deep Dives that, as the name implies, delivers a deep-dive research per month.

I will pick a company that I am curious about. I will spend hours on the company going through my research process. I will build financial model to get a better sense of the sensitivity of variables and expectations embedded in the stock price. Finally, I will write a detailed piece on the business.

If I have a position on the stock, I will let you know in the very beginning of the piece. But if you want to subscribe to my website to receive just hot stock ideas, I will discourage you to subscribe to my blog. My objective is to understand businesses. In some cases, after spending weeks on the business, I will conclude I am not comfortable with this business, and I want to write to explain why. Sometimes, the business can be great, but the valuation is perhaps too rich to my taste. [...]

I believe it is impossible to find one great stock every month. So it is possible that in the next 12 months, I may only be “long” in 3 out of 12 stocks I will write about.

Right now it’s free (until November 15, 2020), so there’s no reason not to give it a try. You can sign up here.

If you want to know more on Abdullah and his story and what he wants to do with his site, his about page has a nice overview.

Interview: Mario Cibelli from Marathon Partners

I enjoyed this podcast interview of Mario Cibelli by Andrew Walker.

They talk about various things, including Netflix and Mario’s interactions with Reed Hastings over the years, and there’s a fairly deep-dive into Uber near the end.

How’s the Weather Over There, Zoom?

Interview: Michael Mauboussin

Usually in investing or business, you want to learn from practitioners as much as possible. Investors and operators who are in the trenches, risking their own resources (time, effort, money, reputation).

An exception to this rule is Michael Mauboussin. He’s mostly an academic of finance and investing, but he gets it, and I’m always impressed by the breadth and depth of his knowledge and insights.

All this to say that this recent interview of him by Patrick O’Shaugnessy is worth a listen.

My favorite Mauboussin quote (highlights are mine):

We know that a lot of investments that are made are intangible. The key from a valuation point of view is they are typically on the income statement [...] people lament that companies aren’t investing anymore, and they’re hollowing out their businesses, and using all this money to buy back stock, and so forth… they’re missing a huge component of this which is intangible investments. And if you properly reckon for that not only have investments not gone down, they’ve actually gone up quite materially.

To give you some sense for this, back-of-the-envelope, intangible investments in 2019 for U.S. companies were about $1.8 trillion, capex was about $700 billion, R&D was about $400 billion. We’re talking about very large numbers.

This is a transition that many investors, especially the very old-school ones, but not exclusively, seem to have missed.

Apple Delaying IDFA User-Tracking Change Until 2021

In a developer blog, Apple writes:

We are committed to ensuring users can choose whether or not they allow an app to track them. To give developers time to make necessary changes, apps will be required to obtain permission to track users starting early next year.

This is a change in iOS 14 that I discussed in edition #18 (first item in Investing & Business). I think this delay just strengthens the odds that my intuition about things transitioning to a new, more privacy-focused, way to do targeting and attribution will emerge to replace the old cookie and IDFA model.

Apple has a lot to lose by salting the Earth and going extreme on this. I think they’ll find a compromise that please both users and advertisers and app developers. And I think it’ll be better for users, because the tracking and privacy invasion has gotten out of control.


Science & Technology

Disney’s Stunt Robots for Parks and Films

Very cool stunt robots being developed by Disney “imagineers” to do stunts in films and at theme parks (f.ex. a human actor dressed as Spiderman could run around on a roof and then, after going behind something, be seamlessly replaced by a stunt robot that looks the same but flies through the air and then lands, to be again replaced by a human in costume…). Source.

Study: Vitamin D Impact on Severity of COVID19

I’ve long been saying that if I was in charge, I’d ask everyone to supplement with Vitamin D during the pandemic.

It’s a very asymmetric bet: Worst case, nothing happens, but in the best case, it may save lives and reduce suffering and economic damage. And even if it doesn’t help with this, it may help with health in general (vitamin D acts more like a hormone than a vitamin and helps regulate many many biological processes, as part of the controlling mechanisms for the expression of about 1,000 genes, etc)

I was basing this on a few studies (1, 2, 3) showing that proper levels of blood 25-hydroxyvitamin D can reduce the severity of other respiratory infections (and just generally seems to be good for you, as most of us are getting nowhere near the amounts of sun exposure that our ancestors would’ve gotten in evolutionary times — living at higher latitudes, wearing more clothes, being inside buildings all day, etc).

Anyway, Sarah Constantin brought to my attention this pilot study (warning: It’s small, should be replicated on a larger scale, etc, but it’s still an interesting data point).

Participants

76 consecutive patients hospitalized with COVID-19 infection, clinical picture of acute respiratory infection, confirmed by a radiographic pattern of viral pneumonia and by a positive SARS-CoV-2 PCR with CURB65 severity scale (recommending hospital admission in case of total score > 1).

The patients all received the standard of care for COVID19 at the time, but some were randomized into a group that received calcifediol, a prehormone that is turned into vitamin D by the kidneys. Results?

Of 50 patients treated with calcifediol, one required admission to the ICU (2%), while of 26 untreated patients, 13 required admission (50%) p value X2 Fischer test p < 0.001. Univariate Risk Estimate Odds Ratio for ICU in patients with Calcifediol treatment versus without Calcifediol treatment: 0.02 (95%CI 0.002-0.17). Multivariate Risk Estimate Odds Ratio for ICU in patients with Calcifediol treatment vs Without Calcifediol treatment ICU (adjusting by Hypertension and T2DM): 0.03 (95%CI: 0.003-0.25). Of the patients treated with calcifediol, none died, and all were discharged, without complications. The 13 patients not treated with calcifediol, who were not admitted to the ICU, were discharged. Of the 13 patients admitted to the ICU, two died and the remaining 11 were discharged.

I’ll repeat that it’s a small sample size and there may be other unknown problems with the study, but vitamin D supplementation is cheap and safe and known to be beneficial in other ways, so why not?

I’ve been taking between 5,000-8,000 UIs daily for maybe 15 years now. That’s adjusted for my own circumstances (6’1” male living in Canada and spending a lot of time inside; taking more during winter, less during summer). If you do take some, just make sure you take gelcaps and not dry tablets. It’s a fat-soluble molecule that is much better absorbed with fat (take it with a big meal too). Carlson Labs is a trustworthy brand that has been checked by third parties.

‘Solar & Wind Reach 67% of New Power Capacity Added Globally in 2019, while Fossil Fuels Slide to 25%’

BloombergNEF:

Photovoltaics by far the world’s leading power-generating technology installed in 2019; 45% of capacity added was solar with one third of all countries making it their top choice [...]

The report highlights the enormous strides solar has made in a decade, rising from just 43.7GW of total capacity installed in 2010 to 651GW as of year-end 2019. Solar in 2019 also moved past wind (644GW) to become the fourth largest source of power on a capacity basis, behind coal (2,089GW), gas (1,812GW), and hydro (1,160GW). There is now more wind and solar capacity online worldwide than total capacity from all technologies, clean or dirty, in the U.S.

Of course, capacity isn’t everything. Load factors matter too, but it’s still growing really fast and prices have been falling, giving it a nice tailwind (which matters more to wind power, of course).

In 2019, solar accounted for 2.7% of electricity generated worldwide, BNEF found, up from 0.16% a decade ago. Given the inexpensive nature of the technology and the limited penetration on a generation basis, BNEF expects the market to continue to grow, with 140-178GW of new solar to be built in 2022.

But coal is still going strong too. Can’t wait until we can move away from this relic from a past era:

Global coal capacity surged 32% over the decade to reach 2.1TW in 2019. Over 113GW of net coal retirements in developed nations during the 2010s could not offset the 691GW flood of net new coal in emerging markets. In 2019, the world saw 39GW of net new coal capacity installed, up significantly from 2018 when 19GW of coal was completed.

Distribution of Space Debris in Orbit Around Earth

The information about debris objects smaller than 10 cm is based on a statistical model by ESA.

Number of space debris objects in orbit:
Bigger than 1m: 5 400 objects
Bigger than 10 cm: 34 000 objects (among them are only 2 000 active satellites)
Bigger than 1cm: 900 000 objects
Bigger than 1mm: 130 000 000 objects

Colour code:
Red: satellites (functional or dysfunctional)
Yellow: rocket bodies
Green: mission related objects (covers, caps, adapters, etc.)
Blue: fragments

More information at the European Space Agency


The Arts

This one has always made me laugh…

I think it’s the expressions on their faces… The artist didn’t take the obvious route of winking at the audience and going “look how whacky this is!” with the usual cartoony expressions. Rather, it’s the banality and degradation of it that makes it work so much better, IMO. Source.

Image

The Cat Returns' (2002, original: 'Neko No Ongaeshi')

Kept the Studio Ghibli marathon going with kids.

Recently, we watched 'The Cat Returns', a film directed by Hiroyuki Morita, with some conceptual planning (whatever that means) by Hayao Miyazaki.

Another big hit with the 6yo, and the 2yo liked it too. Not quite a masterpiece, but still great stuff. Very inventive, lots of character details.

Then my wife and I watched the first episode of a 4-part documentary series on Hayao Miyazaki and his creative process. That one followed him around in 2006 as he was creating ‘Ponyo’.