220: Management Quality vs Tangible/Intangible Assets, Growth vs ROIC, Nvidia BlueField-2, Snowflake vs AWS, F-14 Birthday, and Economic Value of Aging

"like saying that only the queen is important it an ant colony"

Al Swearengen wishes you happy holidays 🤬🎄

🎁 You guys & gals didn’t have to do this! I love my gift this year: 6,000 subscribers (based on my yardstick of how many subs Byrne Hobart had when I launched in July 2020, this is half-a-Hobart).

It’s weird because growth is just steady enough that at any one time, I get used to the current level and don’t “feel” it going up much (frogs and slowly boiling water metaphors, etc), but once in a while I zoom out and look back and 🤯

I’m always surprised that my hobby project full of stupid dad jokes and grammatically-dubious shower thoughts has more than twelve readers ¯\_(ツ)_/¯

Thank you, much love y’all 🧡💙💚

📍 🗺 📍 Because I write different sections of this newsletter separately and at different times, sometimes I’m the last one to notice the big picture and connect the dots.. .

That’s why I need readers like Kevin LaBuz who pointed out that in edition #219, these two elements were present:

Hi Liberty - Thanks for all of your great work on these. In case no one has called it out yet, some great juxtaposition in this post:

• Cloudflare says TikTok is #1 in traffic. 

• "This is why every generation wants a new social network. Status becomes ossified on these big social networks." - Gavin Baker

📖 📫 look what I recently got in the mail!

I really liked Jimmy Soni’s previous book on Claude Shannon (one of my heroes), and am looking forward to his latest opus:

In the intro, Jimmy describes what it took to write the book, how many zillions of people he interviewed, how many recorded and written materials he reviewed, etc.

All I could think of: This is why I’ll never write a book like that. Kudos.

📜 Here’s one from the archives, back in the Mesoproterozoic of edition #88. I kind of like it and most of you probably weren’t around back then, so I’m going to reboot it here, like it was some old Hollywood IP:

✍️ When it comes to ideas/information in this interconnected world, most people are a mix of various ratios of:

• creators

• curators

• amplifiers

• appreciators

• and cheerleaders

I’d probably rank myself on the low side on #1, much higher on #2-3-4, and ok on #5.

What’s your mix?

There’s also a different discussion on how culture puts different value on each of these. It’s obvious that creators are the most romanticized and revered. But it’s all inter-connected (the scenius!). It’s like saying that only the queen is important it an ant colony; look at how long the colony survives without workers or fighters or whatever.

Not everybody will be an olympic athlete or a supermodel or a Pulitzer or Nobel winner or billionaire CEO/founder, and feeling bad because you aren’t is unproductive misery. I think it’s more important to strive to be the best version of what you actually are, of what you’re trying to achieve and enjoy doing.

What matters is that you’re happy playing your part, doing it as well as you can. Not that others find it impressive. Chasing this kind of external validation is the road to misery (inner scorecard and all that), in good part because others are too busy thinking about themselves to spend much time thinking about you and validating whatever it is you’re doing.

💚 🥃 You know what I’d *really* like for xmas? For you to become a paid supporter 🎅🏻 (it’s inexpensive and quick). You can also give gift subscriptions to your loved ones!

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Investing & Business

Does management quality shine more with IP/intangible asset businesses?

I jotted down that question in my notes months ago…

I still don’t have a great answer, and I can kind of argue both sides. But even without a clear answer, I think it’s an interesting question, so I’m posing it here. I’m curious what you think.

The idea is that with lots of hard assets, even if you have Henry Singleton as CEO, there’s a rate-limiter on how much stuff he can do, and how fast he can do it, because he has factories to build to forge metals or build electronics and whatever.

What if he had been dealing with something that scaled better/faster like a software business? Would Singleton have done better if Teledyne had been more like Microsoft?

Of course that’s a hard question to answer because you have to imagine only this variable — from tangible to more intangible — changing and not everything else (organic growth, network effect, etc). Everything is always tied together…

It’s hard to disentangle how good a business is from these characteristics, so of course anyone would probably do better with a better business than with a worse one, but if you imagine two equally good businesses, I kind of think that the more “atoms” one will always be rate-limited vs the more “bits” one.

Growth vs ROIC

There’s a neat chart in McKinsey’s ‘Valuation’ book:

A good reminder that high-ROIC companies should prioritize faster growth, and low-ROIC companies should try to prioritize improving their ROIC (faster inventory turns, higher margins)…

The goldilocks situation where you grow fast while maintaining high-ROIC is pretty rare (ie. you find reinvestment opportunities and aren’t just piling up cash).

It reminds me a bit of this great quote by James Clear (🍀):

If you're not working hard, ideas don’t matter. The best idea is worthless without execution.

If you're already working hard, ideas are crucial. Most effort is wasted on mediocre ideas.

‘The economic value of targeting aging’

We show that a compression of morbidity that improves health is more valuable than further increases in life expectancy, and that targeting aging offers potentially larger economic gains than eradicating individual diseases. We show that a slowdown in aging that increases life expectancy by 1 year is worth US$38 trillion, and by 10 years, US$367 trillion. Ultimately, the more progress that is made in improving how we age, the greater the value of further improvements. (Source)

How about the benefits of doing both at the same time? (expanding both lifespan and healthspan)

‘Airlines ordering popular single-aisle jets face a two-year wait for delivery’

despite concerns over the spread of the new Omicron variant of coronavirus, demand was fundamentally being driven by the need for more fuel-efficient aircraft. [...]

“Generally, there has been a realisation by the airline community at large that when people can travel, they will travel and they will do so with a vengeance . . . The Covid crisis has accelerated the realisation that the transition to more . . . fuel-efficient technology is inevitable,” said Scherer.

Just 13 per cent of today’s global commercial fleet is of the latest generation (Source)

Follow-Up: Snowflake vs AWS Redshift

I was discussing what I wrote in edition #217 on the economics for Amazon of Redshift vs Snowflake with reader and supporter (💚 🥃) João Lisboa, and had some additional thoughts:

Because these data lakes/data clouds are usage-based, if — for the sake of argument — Snowflake is a better product than Redshift and makes customers do more than they would on Redshift or some other platform, because it’s faster, easier, more frictionless, whatever, then AWS may make a lower margin but *on a higher total usage*, so the absolute dollar amount could in theory be higher than with that same customer on Redshift.

That’s just a theory, I haven’t seen numbers, so who knows. But these things are always more complex than they seem at first glance.

Not to say that AWS wouldn’t prefer customers to be on Redshift because of all kinds of other benefits (higher stickiness, Snowflake is multi-cloud, etc).

What I’m saying is more about *degrees* to which things are good or bad for AWS when Snowflake takes market share. ie. It may not be as bad as it would seem at first glance.

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Science & Technology

‘Dec 21, 1970 – First flight of F-14 multi-role combat aircraft’ (51 years!!!! 😳)

World of Engineering wrote:

On Dec 21, 1970 – First flight of F-14 multi-role combat aircraft.

Some things are kinda timeless (ageless?).

Can't believe this plane was developed in the late 1960s during the Mad Men era, with slide rules and all that..

Put it next to a F-22 or F-35 and it does look old but — to my eye — it looks like ˜20 years behind, not 50.

Nvidia BlueField-2 Sets Speed Record

On one hand, speed records are constantly broken in tech, that’s just what computing devices do over time…

…but on the other hand, this is still really impressive, and far ahead of the competition (at the moment):

Recent testing by NVIDIA shows that two BlueField-2 data processing units reached 41.5 million input/output operations per second (IOPS) — more than 4x more IOPS than any other DPU.

The BlueField-2 DPU delivered record-breaking performance using standard networking protocols and open-source software. It reached more than 5 million 4KB IOPS and from 7 million to over 20 million 512B IOPS for NVMe over Fabrics (NVMe-oF), a common method of accessing storage media, with TCP networking, one of the primary internet protocols.

On the 50/50 read/write test at 4kb, the BlueField-2 go up to 431 Gb/s (!!!).

Does Omicron appear less severe because it infects people who wouldn’t have gotten Delta?

Yaneer Bar-Yam:

UK data: Omicron is as severe as Delta for cases that would be infected by Delta, and infects people who would not be infected by Delta (due to immunity of prior infection or vaccination). Those cases are less severe. By Simpsons paradox Omicron seems less severe, but is more.

I hope it’s not what’s going on, and that it truly is less severe for anyone getting it, but it sounds plausible 🤔

Here’s Simpson’s paradox, which I wasn’t familiar with:

Simpson's paradox, which also goes by several other names, is a phenomenon in probability and statistics in which a trend appears in several groups of data but disappears or reverses when the groups are combined.

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The Arts & History

My dad still has his 8-track of Dark Side of the Moon 🌙