342: Payment Button War, Mauboussin & ROIC, Outsourcing to China MYTHS, Biggest U.S. Lithium Mine, B-21, SpaceX & NASA + Hubble, and Deadwood
"That’d be a lie, and I don’t want to lie to you."
I'm endlessly horrified about the academic system's concept of an A in an easy course contributing to a higher average grade than a B in a hard course, thereby incentivizing everyone to avoid hard courses. –Eliezer Yudkowsky
🎬🍿 Confession/trivia: I’ve never seen Zoolander, Anchorman, Talladega Nights, or Borat. I don’t think I’ve seen Wedding Crashers either, but I’m not 100% on that one.
First, thank you — I *really* appreciate it — keep ‘em coming!
If you’ve been sitting on the fence, meaning to do it for a while but just never pulled the trigger... There’s no day like today!
I’m glad I can share this stuff with you.
I’m not a “brand” and I don’t want anything to be “off brand” — I’m a person. I’m lucky to have a naturally joyful set point in life, but if/when I feel a bit like crap, I want to be able to share it here.
I don’t want to pretend that everything is always perfect and rockin’. That’d be a lie, and I don’t want to lie to you.
Anyway, thanks again to the new crewmembers. Glad to have you on board this steamboat! 🚢
🤔 🛀 ♻️ 🌎🐋👨👩👧👦 I think there’s a missed opportunity in framing certain things as being “good for the environment” or “good for nature”.
It may be true, but I think more people would care if they were framed as being “good for people” and “good for you” too.
We live *in* the environment, we’re *part of nature*. This isn’t just about saving whales and polar bears, it’s about my kids breathing cleaner air, drinking cleaner water, eating food grown in cleaner soil, etc.
It’s also about me not having so much particulate matter lodging deep in my lungs when I walk downtown…
💚 🥃 🐠 ありがとう
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🛒 💳 The Great Button War
I think AmazonPay needs a higher-contrast, bolder logo to stand out from the crowd 🤔
Everybody else is visually louder than they are… Shopify picked a nice purple that really stands out, maybe Amazon needs to go with some kind of green background or something like that.
But then, that probably leads to the visual equivalent of the ‘loudness war’ that went on with music mastering.
How many normal people know that MetaPay is related to Facebook?
More Payments stuff:
‘Silver Peak has been producing lithium since the 1960s, and is currently the US’ only lithium producer’ 🔋🔋🔋🔋🇺🇸
The U.S. used to be a leader in lithium production, but it’s since ceded that position to foreign nations, including China. Now the Biden administration has said that bringing battery supply chains back to U.S. shores is a matter of national importance [...]
Part of the trouble with bringing new supply online, however, is the sheer amount of land required. The scale of Silver Peak is hard to grasp from pictures. It spans 13,000 acres
Here’s a screenshot from Google Maps:
The sun provides most of the extraction labor:
Lithium can be produced from brine, hard rock or clay, and each method requires its own set of conditions and extraction processes. Silver Peak produces lithium from brine tapped from the Clayton Valley basin.
Salty brine that contains lithium is pumped from between 300 and 2,000 feet underground to the surface. Then, over the course of 18 to 24 months, solar evaporation concentrates the lithium.
‘No, the U.S. didn't outsource our carbon emissions to China’ 🇺🇸→🇨🇳 🏭🏭🏭🏭
This one is worth highlighting because it’s a very widespread belief, one I used to hold until recently because it seemed to make intuitive sense. But after looking at the numbers, I’ve changed my mind:
Consumption-based emissions can’t be offshored. Under a consumption-based measure, if an American buys a TV, the carbon emissions that go into making that TV are allocated to the U.S., no matter where the TV is made. If an American TV factory packs up and moves to China, but the TV still gets sold to an American consumer, then consumption-based emissions are unchanged.
The website Our World In Data has a great page with a bunch of data about consumption-based emissions. And what it shows is that accounting for offshoring just doesn’t make a huge difference in the overall pattern. For example, the U.S. offshores only about 7% of our emissions:
Why isn’t the difference bigger? Isn’t there a huge trade deficit?
It’s because the U.S. exports lots of highly carbon-intensive stuff.
It’s also worth calibrating on how much manufacturing left the US and went to China:
The notion that the U.S. offshored most of its manufacturing to China is very widespread. But this is also a myth. In terms of value added, the U.S. manufactures more now than we did in 2005
Industrial production in manufacturing — a slightly different measure — has been basically flat since the late 1990s. But still, that is not a decrease.
And when we look at the actual amount of what we import from China, it’s not actually that huge.
We imported about half a trillion dollars in goods from China in 2021. That’s about 18.6% of the total value added of the American manufacturing sector in that year.
And in fact, that’s not even an apples-to-apples comparison. As Michael Pettis and Matthew C. Klein would be quick to remind you, imports are not measured in terms of value-added. If the U.S. sells China some computer chips and screens and design instructions for $600, and a Chinese factory slaps them together into an iPhone and sells it back to a U.S. consumer for $800, it gets counted as $800 worth of imports, but the actual value added of the Chinese part of the manufacturing process is only $200.
In other words, U.S. imports from China are less than a fifth of the size of the U.S. manufacturing sector. That’s nothing to sneeze at, and it has certainly wreaked havoc on the lives of the American workers displaced by Chinese competition. But to think that we don’t make anything in America anymore is to blow the whole narrative wildly out of proportion.
More from Noah Smith (🐇).
📈📉📊 Great graphs from Michael Mauboussin
In their latest paper on Return on Invested Capital, Mauboussin and Dan Callahan have some pretty neat graphs that I want to highlight (but I recommend checking out the whole thing):
Exhibit 18 plots the top 500 companies in the Russell 3000 based on the drivers of their ROIC.
The solid black line is an isoquant curve that represents the combinations of NOPAT margin and invested capital turnover that equal an ROIC of five percent, which is also an estimate for the cost of capital in 2021.
The companies in the bottom right, with relatively high margins and low invested capital turnover, pursue a strategy of differentiation.
The businesses in the upper left, with relatively low margins and high invested capital turnover, seek to be cost leaders.
Here’s another neat one:
Exhibit 7 shows the ROICs for 52 non-financial industries, as defined by the Global Industry Classification Standard, over the past 30 years.
Look at the range on the biotech, software, internet software & services, and internet & catalog retail categories!
You can probably partially explain it by the fact that these have been more dynamic industries in the past 30 years, with a lot more companies in startup/growth mode that haven’t yet reached maturity on the profitability side.
🧪🔬 Liberty Labs 🧬 🔭
U.S. to unveil B-21 Stealth Bomber in December
The video above provides context on why this is a big deal.
The B-2 Spirit first flew about 34 years ago, so the Raider will incorporate decades of technological advancements. Some things are known (or guessed), but it’ll be interesting to see what it actually looks like and what the aerospace geeks speculate are its capabilities.
I also liked the explanation of why the much older and bigger B-2 is stealthier than the smaller and more recent F-35 & F-22 fighter planes.
🚀 SpaceX & NASA want to give the Hubble Space Telescope a Boost 🔭🛰
[NASA] has signed a "Space Act Agreement" with SpaceX to conduct a six-month study to determine the practicability of Dragon docking with the 32-year-old telescope and boosting it into a higher orbit. The study is not exclusive, other companies can propose similar concepts with alternative rockets and spacecraft. [...]
The principal goal is to boost Hubble's altitude from its current level of 535 km to 600 km, the same altitude it was at when first launched in 1990. Since the fifth and final servicing mission in 2009, Hubble has slowly been losing altitude, and this process is expected to accelerate as the telescope gets lower. (Source)
In theory, this could add 15-20 years to the life of the space telescope, which would be 𝔸𝕎𝔼𝕊𝕆𝕄𝔼.
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🤠 Welcome to Deadwood! 🐴
I’m running out of space in this edition, so I’ll just highlight this new podcast with David Senra in case you missed it: