231: Amazon vs Walmart, Snowflake's Frank Slootman, Increasing Bet Size, Internet vs Datacenter Traffic, Ontario SMR, and WWII Unintended Consequences

"Even gibberish is fine 238y42d3d423byfhfhgkii2dsdf"

Jan 21, 2022

Knew this guy back in high school who "only worked out muscles used for punching"
First semester of college he got into a massive brawl and got kicked out
Whatever you're looking for, you usually find it
—Callicrates

☀️🏠 ❄️ Here’s a way to use incentives on yourself.

Unless it’s very important to have predictable expenses each month, don’t enable ‘equal payments’ for your electricity and gas bills.

If the bill fluctuates a lot each month, it’s a good reminder that how much you use matters, and a bigger incentive for you to not waste energy, or to optimize patterns (ie. if you have time-of-use rates where you live, maybe you run the clothes drier off-peak, etc).

The shorter the delay between actions and feedback, the better.

🙏 You know what would make me happy?

If you left a comment on my site, even if just to say “hi”.

I’m trying to have one edition with as many comments as possible, just because it’ll make me smile, and hopefully it’ll break the seal and next time you have an idea or feedback, you’ll leave a comment.

Over time regular commenters could get in discussions with each other and create a nice little mini-community with win-win exchanges.

Please click this button and leave a comment, anything at all. Even gibberish is fine 238y42d3d423byfhfhgkii2dsdf:

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Investing & Business

Blue is Walmart revenue since 1994, purple is Amazon revenue… (yes it’s a log chart)

Not something I had looked at recently, so my intuition was that Walmart was still much bigger. Live chart on Koyfin here. Those early years at Amazon were just… 🤯

Note that it’s not an 🍎 to 🍎 comparison in many ways, including because Amazon has a very large amount of third-party sales with GMV not captured in these numbers. (thanks to @PaulBieber for pointing that out)

‘Why Increasing Bet Size Is An Investing Superpower’

Bet sizing lessons from card-counting by Jay Vasantharajah:

This lesson in increasing your bet size when you have an edge applies to investing as well. When I refer to “increasing your bet size” here, I mean investing to buy more of an asset you already own. [...]
In order to generate above-average returns in investing over the long run, you need an edge. One of the simplest ways to do this is to be an owner or investor of a specific business. Time increases the knowledge of the asset you own, giving you an edge over outsiders. Having this knowledge/edge allows you to determine if increasing your stake/bet is the best return on investment (versus pursuing a new opportunity).
Knowing the “running count” of the business you’re invested in is an advantageous position to profitably increase your bet size and returns.

This is so true. I’ve been trying to convey the same idea a few different ways over the years, but this is a good formulation.

When I’m selling a business that I know intimately because I’ve been following it for years and years, to replace it with a business that I’ve only been studying for a few months, I may be doing it because the opportunity for good returns looks higher in the new business, but overlaid on top of it all is a necessarily lower confidence level in my own knowledge of the business, and that has to be taken into account.

New Opportunities Are More Exciting
It’s no secret that it’s far more exciting chasing new ideas, deals, and opportunities to invest in compared to assets you already own. Fund managers are often even incentivized to chase new investments opportunities, instead of allocating money to assets the fund already owns.
The default action to allocate money into new opportunities is like leaving your current blackjack table, where the count may be high, to play at a brand new table where the count is unknown.

Bingo. Investors like to tell themselves that they’re all about maximizing risk-adjusted returns or whatever, but there are so many other fuzzier psychological factors at play…

Companies that used to give us a good dopamine hit become boring and stale over time, so we find new shiny objects ¯\_(ツ)_/¯

❄️ Interview: Frank Slootman, Snowflake CEO, leader ⛵️👨‍✈️

Slootman recently did the rounds to promote his new book, Amp it Up, and I particularly enjoyed this hour-long interview he did with Jason Calacanis (while everybody was going nuts about his Chamath interview, I was listening to this).

Snowflake CEO Frank Slootman: victory through taking ownership, increasing velocity & cultivating talent

I’m posting it because it’s good, but also because I got a different feeling listening to it than most other CEO interviews. A lot of the time, I may think “that person’s smart” or “really knows their business”, but I’ve rarely had my “leadership-meter” ping as high as with Slootman.

Listening to him, I almost thought, “I want to work for him”, and I’m not even looking for a job. The way he describes his flat, no-BS organizational culture just makes it sound so much better than at most other places.

What he says about tempo and velocity is so true.

By default, people will do what is comfortable and what is safe, but if pushed/motivated, they can usually do way more — possibly more than they even knew they could.

I’m not talking about just doing way more of the same, grinding it out, because people can fill their days with busywork and meetings and work to the point of burnout without moving forward — but if they have focus and purpose and are part of a team that is similarly activated, and bureaucratic hurdles are removed, they can really fly.

That’s part of what made Steve Jobs so great: If you read about the early days of the creation of the original Macintosh, he was able to take a great team and push it to the next level by constantly raising the bar, raising expectations, and providing a vision of being “insanely great” (don’t get me wrong, Frank is otherwise very different from Jobs, but on that somewhat intangible ‘leadership’ axis, I think there are similarities).

Productivity Matters, Corn edition

Not that I’m a big fan of putting corn in everything (especially HFCS), but it’s still an impressive example of agricultural productivity.

US corn since 1866:
⮕ Production increased more than 20-fold.
⮕ Land use to grow corn increased just 3-fold. Actually lower today than in the 1930s.

h/t Hannah Ritchie

Science & Technology

Internet Traffic Across the US vs Inside Data-Centers

I was listening to this podcast by A16Z about hyperscalers and I thought this line was striking:

If you were to cut a line vertically through the United States, and look at all of the public internet traffic that is passing from right to left, and left to right — we call this the bisectional traffic of the internet, it’s essentially how much capacity the internet has crossing the United States — that is less than the amount of traffic going between a couple hundred servers inside a data-center.

It’s all been inverted. The whole model of how communication takes place has really become dominated by the amount of communication inside data-centers, all the communication for machine-learning and training and inference, it’s all taking place inside.

I guess we know why Nvidia bought Mellanox…

‘the Internet will always be the domain of weirdos, no matter how many regular folks join the party’

Visakan Veerasamy with a good observation on the ‘net (remember when it was cool to call it “the net”?):

it just hit me that the Internet will always be domain of weirdos, no matter how many regular folks join the party
not all weirdos will survive contact with large masses of regular people, (red-dots-plane.jpg)

He means this image, which is most commonly used to illustrate survivorship bias:

but regular people cannot hope to outwit, outlast, outplay the motivated, strategic weirdos. it ultimately becomes a war of attrition. regular ppl are “sensible”. Weirdos are not
Show me who are the people who are committed to posting strategically for 50 years and I will show you the people who will shape the narrative

Phew *wipes forehead*

Good thing I’m a weirdo, I guess ¯\_(ツ)_/¯

‘a 14,360-pound cast-iron skillet said to be the world's largest’

I thought my 12” Lodge was a bit heavy, but this must require pretty strong wrists to flip a creppe…

h/t Brian Sholis

Ontario Selects BWRX-300 SMR Nuclear Reactor for Darlington Build

I missed this one when it was announced last month:

The BWRX-300 is a 300 MWe water-cooled, natural circulation SMR with passive safety systems that leverages the design and licensing basis of GEH's ESBWR boiling water reactor, which has been certified by the US Nuclear Regulatory Commission. It is currently undergoing a Canadian Nuclear Safety Commission pre-licensing Vendor Design Review, or VDR. As well as the BWRX-300, OPG had also been considering Terrestrial Energy's Integrated Molten Salt Reactor and X-energy's Xe-100 high-temperature gas-cooled reactor for deployment at Darlington.

I don’t know if this is how they’re doing it, but to me the sane way to deploy these SMRs (the acronym stands for ‘small modular reactors’) is to make sure that one site can be expanded to host many of them over time.

Building the first one takes a lot longer and is more expensive, but once you’ve got approval on the site and have filed the millions of pages of documentation required, building the next reactors goes a lot faster and costs a lot less per MW of capacity.

What a success story it would be if over the coming decades, Ontario’s power grid went 100% off fossil-fuels and relied only on nuclear + hydro + solar + wind. Hopefully other provinces and US States are looking at doing the same.

The Arts & History

Unintended Consequences, Germany in WWII Edition

I like this historical anecdote as told by Morgan Housel:

Part of the Armistice that ended World War I forced the dismantling of Germany’s military. Six million rifles, 38 million projectiles, half a billion rounds of ammunition, 17 million grenades, 16,000 airplanes, 450 ships, and millions of tons of other war equipment were destroyed or stripped from Germany’s possession.
But 20 years later, Germany had the most sophisticated army in the world. It had the fastest tanks. The strongest air force. The most powerful artillery. The most sophisticated communication equipment, and the first missiles.
A catastrophic irony is that this advancement took place not in spite of, but because of, its disarmament.
George Marshall, U.S. Army Chief of Staff, noted:
After the [first] World War practically everything was taken away from Germany. So when it rearmed, it was necessary to produce a complete set of materiel for the troops. As a result, Germany has an army equipped with the most modern weapons that could be turned out. That is a situation that has never occurred before in the history of the world.
There’s a set of advantages that come from being endowed with resources. There’s another set of advantages that come from starting from scratch. The latter can be sneakingly powerful.

The Be Good Tanyas

Recently discovered this Canadian band (formed in 1999 in Vancouver, B.C., “their influences include folk, country, and bluegrass.”).

Whatever labels you put on them, I really dig their sound. Nice vocal harmonies, crisp and fund finger-picked guitar and banjo, catchy songwriting, nice arrangements.

In short: I like it.

A good place to start is their 2012 ‘A Collection’ compilation album. I started with 2003’s ‘Chinatown’ and that was really good too.