244: Metamates, Constellation Software M&A, Google Deepmind vs Fusion, Carl Icahn, Semiconductors, Masimo, Real Flywheels, and Dev-in-a-box Coding AI
"I had no idea how Alice in Wonderland’s tea party things were"
The utility of living consists not in the length of days, but in the use of time; a man may have lived long and yet lived little.
Make use of time when it is present with you. It depends upon your will, and not upon the number of days, to have a sufficient length of life.
—Michel de Montaigne
🧠 To save money back in the analog days, convenience-store security cameras were often recording on tapes that were looping around, so that the most recent video would erase the oldest.
Sometimes I feel like that’s my memory with the newsletter. I’m starting to forget some of the older stuff that I wrote two years ago… Hopefully I don’t just loop around and repeat all the same things ¯\_(ツ)_/¯
🚨🤞 🎟 📚 🚨 Reminder that you have until 11:59 PM EST tonight if you want to participate in the giveaway of 10 signed copies of ‘The Founders: The Story of Paypal and the Entrepreneurs Who Shaped Silicon Valley” by friend-of-the-show and supporter (💚 🥃) Jimmy Soni (I was very happy to see this glowing review of the book in the NYT — Jimmy’s blowing up!).
Details on how to participate are in the intro of edition #242.
📕 🏋️ Follow-up on the Jocko kid’s book I wrote about in the intro of edition #243:
My 7yo has been doing push-ups, squats, and even pull-ups because of the book. I showed him how to set up a small step-ladder under the bar so he could reach it, and the first time he tried he did 1 pull-up. He was so happy! I think he surprised himself.
The next day he tried again, and he did 3-in-a-row, took a break, and then did 4-in-a-row. The day after that, he did 5-in-a-row and he was so proud, hugged everyone.
Hopefully, this makes him like exercise, something I never had at his age.
♠️♥️♣️♦️ Follow-up to my new hobby from edition #225:
If you’re following along, the cardistry trick that I’m trying to master these days is the ‘revolution cut’. Here’s a tutorial video.
🇷🇺 🇮🇹 Did you know that in 2020, Russia’s GDP was $1.48 trillion USD and Italy’s GDP was $1.88 trillion USD?
The difference is even starker per capita, since Russia has a much bigger population ($11.7k/capita in Russia to $29k/capita in Italy). (numbers vary by source and depending on adjustments, but it seems ballpark correct)
Speaking of Russia, Gary Kasparov had a good line:
“All states have their mafias, but in Russia, the mafia has its state.”
🍽 It’s been too long since I did a multi-day water fast. The most recent one was a 4-day from August 30 to September 2nd, according to my notes.
I’m going for it this week, but I feel a bit lacking in willpower lately, so I don’t know how far I’ll get. Aiming for 4 days.
💚 🥃 If you feel like you’re getting value from this newsletter, it would mean the world to me if you became a supporter to help me to keep writing it.
On most weeks since July 2020, I’ve worked 7 days a week on it.
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Investing & Business
Looking back at the present from the future
I wonder how we'll look back on this market period in the future, once it's a year or two in the rearview mirror 🤔
We have a “few sentences” narrative for most market periods… The Dot-com bubble, the “goldilocks” period before the GFC, the commodities supercycle, the GFC itself, the brexit/PIGS/etc periods, low volatility 2017, the pandemic winners vs losers period.
What is now going to be looked back on as?
If you miss the best days…
Reader Mickey Mendoza has a great follow-up to edition #243, about riding out vs trying to dodge volatility.
It’s a slide by Fidelity that I remember seeing years ago (or someone else’s similar presentation):
Note that we’re talking about a few missed days over 40 years, not just one year.
It’s counter-intuitive, but over these long periods, compounding will also compound errors. That’s why a young Buffett was so frugal; he was looking at every expense and seeing the NPV of the missed compounding over decades…
Masimo buys audio companies because… the CEO is an audiophile?!
This is a strange one. Masimo is a medical technology company known for making advanced pulse-oximetry equipment. Hospitals depend on this stuff, it’s cool tech.
I noticed the stock was down 35% last week, so I had a look at what was going on (expecting bad earnings or something of the sort). I had no idea just how Alice in Wonderland’s tea party things were.
They’re buying Sound United for $1.025bn, a company that owns a bunch of audio companies that make home theater amplifiers, speakers, etc (brands: Devon, Marantz, Polk, B&W, etc — I know that stuff a bit because I used to be into audio gear years ago).
From the earnings transcript:
Q: So what I'd love to hear more from you about the opportunity here for Masimo with the acquisition. Maybe you could give us a sense for some of your vision about how you'll integrate Masimo technology with these brands and how quickly that could evolve to take more of your hospital technology into the home?
CEO: First of all, I want to tell you, since I was a kid, I've been an enthusiast of audiophile equipment and the engineering that is done to create these incredible products that can not only replicate recorded music, but do it in a way without distortion with incredible fidelity. And the companies that are part of Sound United are the best of the best. [...]
Denon is a 100-year brand, Marantz a 50-year brand and so forth, Bowers & Wilkins and Polk English and a U.S. company with the first 2 Japanese companies that have done a remarkable job. [...]
They then make a half-assed attempt to justify it saying it could help with hearing aid tech efforts, but that seems pretty thin.
Oh, and by the way, I still stand by what I wrote in 2019:
‘semiconductor sales totaled $555.9 billion in 2021, the highest-ever annual total and an increase of 26.2%’
The industry shipped a record 1.15 trillion semiconductor units in 2021, as chip companies ramped up production to address high demand amid the global chip shortage. Global sales for the month of December 2021 were $50.9 billion, an increase of 28.3% compared to the December 2020 total and 1.5% more than the total from November 2021. Fourth-quarter sales of $152.6 billion were 28.3% more than the total from the fourth quarter of 2020 and 4.9% higher than the total from third quarter of 2021. [...]
On a regional basis, sales into the Americas market saw the largest increase (27.4%) in 2021. China remained the largest individual market for semiconductors, with sales there totaling $192.5 billion in 2021, an increase of 27.1%. Annual sales also increased in 2021 in Europe (27.3%), Asia Pacific/All Other (25.9%), and Japan (19.8%). Sales for the month of December 2021 increased compared to November 2021 in the Americas (5.2%), China (0.8%), Europe (0.3%), and Asia Pacific/All Other (0.1%), but fell slightly in Japan (-0.3%). (Source)
Metamates 🤨
Facebook employees are now "Metamates". (?)
Can't wait for:
LinkedIn -> Inmates
Amazon -> Primates
Tinder -> Intimates
Jira -> Underestimates
Postmates -> Postmatemates
Interview: Constellation Software ex-M&A Employee
Very interesting to see that even when first going to work for the company, this former Volaris M&A guy didn’t really believe the story:
I ended up at CSI by doing some side work for Constellation, which is very rare as they don't usually hire external consultants to do anything because they're a serial acquirer. I knew the firm back when we did some pre-IPO work at Deloitte and, frankly, I didn't believe in the story. The reputation and understanding of what CSI did among Canadian venture capital, private equity, founders and management teams was that they were a bottom feeder and where software companies went to die. That narrative was primarily created by the Canadian venture capital industry. Mark Leonard worked on a problem set which has been a remarkable multi-decade return on capital for the shareholders. Shame on me for not believing in the stock at $16 a share, and having to come in at around $400 a share. [...]
Leonard and other operating partners used to talk about that 40,000 [VMS businesses] and what is more important than the head line number is the global coverage CSI has, particularly through the many operating units there, but also a very rigorous CRM practice, globally, across all the operating units. [...]
Every year we thought we were going to run out of market, and every year we dug in deeper and panicked about the following year's growth plan, but we found another 150 to 250 companies we never knew the names of. CSI has done that for two decades now, at scale, in every jurisdiction where you would want to buy a software business.
This is just a small excerpt of this interview (sub required for full thing, but there’s a long excerpt).
Chip Shortage, Part #463
Renault made 500,000 fewer cars last year as a result of the chip shortage. [...]
Renault CEO Luca de Meo said the French carmaker expects to make 300,000 fewer units in 2022 than it potentially could have as a result of the ongoing global chip shortage.
So 800,000 fewer cars. That’s almost a Tesla worth of cars (though that’s a fast-moving target, so a 2021 Tesla..)
This book on Carl Icahn’s desk… 😗🥊
It just made me smile. I saw it in a thread on the HBO documentary on Icahn by friend-of-the-show and supporter (💚 🥃) Frederik Neckar.
While at it, also check out this thread on Stanley Druckenmiller.
Science & Technology
Deepmind AI Attacks Fusion: ‘Magnetic control of tokamak plasmas through deep reinforcement learning’
Nuclear fusion using magnetic confinement, in particular in the tokamak configuration, is a promising path towards sustainable energy. A core challenge is to shape and maintain a high-temperature plasma within the tokamak vessel. This requires high-dimensional, high-frequency, closed-loop control using magnetic actuator coils, further complicated by the diverse requirements across a wide range of plasma configurations. [...]
The tokamak is shaped kind of like a donut, and the plasma that forms inside of it gets so hot that you really don’t want it to touch anything, so you have to keep it suspended via very complex magnetic fields.
Our approach achieves accurate tracking of the location, current and shape for these configurations. […] This represents a notable advance for tokamak feedback control, showing the potential of reinforcement learning to accelerate research in the fusion domain, and is one of the most challenging real-world systems to which reinforcement learning has been applied.
Deepmind’s deep reinforcement learning system has simulated control of the 19 magnetic coils inside TCV, the variable-configuration tokamak at the Swiss Plasma Center.
Unlike the turn-based games that Deepmind has worked on, this is a highly complex continuous process, which poses different kinds of challenges.
h/t friend-of-the-show and supporter (💚 🥃) Brad Slingerlend
Flywheels? Flywheels! 𐃏
If you’re an investor, the word “flywheel” has become part of the jargon, but you probably don’t think very much about *actual* flywheels.
This short video gives a good overview of the pros and cons of the tech, and shows how modern flywheels operate (if you’re like me, you mostly had images of early-industrial-era flywheels come to mind).
Coding AIs keep getting better 🦾🤖
Computer code is one of the highest-leverage things in the world, both because of what it can do, and because once you have it, you can replicate it infinitely.
What’s the value to the world of the Google Search source code? Of Amazon’s logistics code? The source code of operating systems like Linux, FreeBSD, MacOS, iOS, Windows, etc..? Of compilers like LLVM or programming languages like C++ or Swift or Python?
Now think about how much more productive the average coder could be with tools that largely automate a lot of the low-value parts of the job — so they can spend more time on the high-value parts — or help them solve problems in ways that they may not have thought about by themselves, improving the code, reducing the number of mistakes, of security holes, improving performance, etc.
The best 100x coder in the world may not get much out of these tools (at least for a while), but the bottom of the pyramid of coders can probably improve the most (kind of like how spellchecking software will help terrible writers the most, not the 0.1% of best writers).
CO2 Monitors in public places (air quality)
File under: What gets measured gets managed.
Long after COVID19 is forgotten, we could still get plenty of benefits from better managing indoor air quality, both for public health (Sars-CoV2 can’t be the only airborne virus, right?) and cognitive performance.
On the left is a CO2 monitor in someone’s workplace, on the right is a Japanese movie theater. Let’s put that stuff everywhere.
🔆🔆 “adaptive driving beam headlights”
U.S. highway safety regulators are about to allow new high-tech headlights that can automatically tailor beams so they focus on dark areas of the road and don’t create glare for oncoming drivers. [...]
The technology uses an array of light emitting diodes that can change where light beams are sent, rather than the current technology of high beams hitting everywhere. “You have the ability to basically create a light pattern on the fly that is optimized for real-time conditions,” Abuelsamid said. “You can cast the light where it’s most useful.” [...]
The headlights, commonly used in Europe, have LED lamps that can focus beams on darkness such as the driver’s lane and areas along the roadside. They also lower the intensity of the light beams if there’s oncoming traffic. Camera sensors and computers help determine where the light should go. (Source)
Yes!!! It’ll take a while before the fleet turns over and this is very common, but better late than never…
The Arts & History
C’mon, C’mon (2021)
I don’t remember who first recommended this film, but it was definitely a reader, so thank you!
I quite enjoyed it. It’s a fairly low-key affair, very character-based, very intimate (the black & white adds to that feeling, IMO). But it resonated for me.
Little moments from life reflected back on screen, the messiness of human relationships between adults, between kids and adults, with ourselves… How hard it is sometimes to communicate and take others’ desires and uniqueness into account.
Joaquin Phoenix is strong-strong in this. Good to see him just play a guy, and make that interesting without too much craziness (I liked him in ‘Her’ (2013) too).
Also impressed by Woody Norman — kids acting can be hit & miss — but he’s quite good, and I was even more impressed when I learned he’s British and was doing an accent the whole time.
They shot the film in chronological order (like Spielberg did with E.T.), which I think is particularly helpful with kids, to help them keep track of where they are emotionally and relationship-wise with other characters. But hey, it’s probably very useful for adult actors too…
Hey Liberty, you can purchase those headlines in some entry level cars in Germany already (< 30K). Surprised they aren´t common in north america yet. Here is a short clip that gives you visuals to the tech: https://www.youtube.com/watch?v=xYSix5r38qY&ab_channel=HELLAGroup
Flywheels 🤘🚀💃🎉🥳