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370: Constellation & Lumine, OSV, Shopify Hates Meetings, Nvidia, Mining Inflation, DC District Heat, and Project Hail Mary
"Don’t expect any of it to be easy"
If 50 million people say something foolish, it is still foolish. —Rolf Dobelli
⚖️ If you find yourself wishing that *all* your hypotheses are correct, you probably have a blind spot when it comes to negative outcomes. This could mean that more things will go wrong, as one way to avoid or mitigate problems is to anticipate them and prepare accordingly.
I have some hypotheses that I STRONGLY hope turn out to be incorrect, but I also cannot look away and pretend that these things aren’t real possibilities…
🧠🤪🖍️ For any specific task, there’s an infinite number of ways to be dumb and only a few ways to be smart.
If this were not true, success and quality wouldn’t be rare and progress at almost anything would be fast.
There’s an analogy to be made with entropy, which is the default, the game of life’s final boss.
It’s easier to get random noise than a useful, valuable, structured output. To reverse entropy locally requires energy and information.
In the space of all possibilities, only some dots are desirable, and most of the space in between sucks.
Don’t expect any of it to be easy, but at least we know what we have to do to get anywhere… Going in with the right expectations makes it easier to stick with it when it gets tough!
🔥🎥🏦📝🤖👩🔬👨💻 Friend-of-the-show and supporter Jim O’Shaughnessy (💚 🥃) unvealed Jim 4.0 in a special episode of ♾️ 🔁 hosted by Patrick O’Shaughnessy.
(I don’t know how Jim got him, he must be really well connected, I don’t think Patrick hosts podcasts other than his own for anyone else! How do they know each other?)
There’s also a new website for OSV, his new vehicle to basically do whatever he thinks is interesting:
Jim essentially wants to help creative people do more, push forward technologies he considers important in directions he believes will be more beneficial, find promising people in areas of the world with fewer opportunities and help them reach their potential, help create documentaries and films that seed positives ideas in the culture, etc. All through the lens of win-win dynamics, openness, and abundance.
As a “do whatever I think is interesting” person myself, I’m inspired!
I like my canvas, it doesn’t feel too restrictive — but it’s not as big and there are fewer paintbrushes. Maybe someday I’ll get there. 🎨👨🎨
I’m very happy for Jim, he’s making stuff happen. Humans have agency, but it only matters if we use it.
I’m also very happy for another friend-of-the-show, Kyla Scanlon, who became OSV’s first Entrepreneur in Residence (link for details).
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Goodbye, 2022 👋
Most years fall in the top-right quadrant. But this year was solidly in the bottom-left. “Long-term bonds had their worst year since the 18th century” 😬
I think the most psychologically challenging aspect about this year in the market comes down to: Humans get used to things after a while, and over the past many years, we got used to certain rhythms in the market. However, 2022 defied all of these habits and relentlessly knocked us down every time it seemed like maybe it was over.
Another rug pull. Another rug pull…
Because losses are felt more sharply than gains, to get the feel of what 2022 was like, if you look at the year’s stock charts, you can almost erase the upward sections (or shorten them by half or 3/4) and just join all the downward sections together. So while the S&P500 was down 20% and the Nasdaq 34%, it felt like they were down a lot more because over the year, you experienced 8-9 drawdowns of 10%+ while barely noticing the recoveries.
Just for fun, I took the chart on the left (the Nasdaq 2022 chart) and connected all the downward sections end-to-end, then drew over the positive sections in red:
That’s *kind of* how the year felt, even though my own portfolio was -26%. But hey, there are good years and there are bad years, that’s how this works.
I try to look at it this way: If the worst thing in my life right now is a bad year in the market, I’m doing pretty well. Lots of people around the world wish this was their biggest problem, including many in Ukraine.
As a tweet from Luke Metro says:
It’s crazy how the SF vs. NYC vs. LA vs. Miami tech scene rivalries died as soon as no one had any capital gains left to realize
✨ Constellation Software's Lumine Spin-Out 💡
I wrote a bunch about Constellation’s recently announced partial spin-off of the Lumine group in edition #365.
Friend-of-the-show Leandro published a deeper dive into it:
The most obvious difference is that when TSS was spun out, it was one of Constellation’s operating groups and catered to many verticals. Just for context, TSS caters to as many verticals as companies owned by Lumine, 23 […] the TSS spin-out would’ve been much more comparable to a Volaris spin-out, not a Lumine spin-out.
I suspect we’ll see more verticals being spun out rather than whole groups, unless there’s a Topicus 2.0 situation where it’s the only way to make a very large, very attractive acquisition.
Lumine’s story started in 2014, when David Nyland (Lumine’s current CEO) joined Volaris to build a communications vertical. Volaris already had some communications and media assets back then, but they were scattered and there was no common strategy to compete favorably in the industry.
Lumine is not a small company. Since 2014, the company has built a portfolio of 23 companies, averaging 2 to 3 acquisitions per year. It has been able to scale the number of acquisitions successfully, albeit at a much smaller scale than Constellation.
WideOrbit generated revenue of $167 million in 2021 with an impressive 26% operating margin [...] WideOrbit is a US-based media company founded in 1999 by Eric Mathewson with the vision of simplifying the process of buying and selling ads [...]
The company boasts of having a 99.9% renewal rate, and if we dig a bit deeper into the revenue sources, we can also see that it has highly recurring revenue with 94% in maintenance and recurring [...]
Lumine will pay $490 million as total consideration for WideOrbit, with the new company having a combined value of $1.6 billion. [...] Seeing the hefty purchase price, we can start to understand why the spin-out happened: $222 million will be paid with stock, $180 million in cash and the remaining $87 million will go to the debt repayment.
🛒 ‘Shopify Tells Employees to Just Say No to Meetings’ ✋
I love this: “the Canadian e-commerce firm said it’s conducting a ‘calendar purge,’ removing all recurring meetings with more than two people ‘in perpetuity,’ while reupping a rule that no meetings at all can be held on Wednesdays. Big meetings of more than 50 people will get shoehorned into a six-hour window on Thursdays, with a limit of one a week. The company’s leaders will also encourage workers to decline other meetings, and remove themselves from large internal chat groups.”
🪨 ⛏️ Mining Cost Inflation in the U.S. 🇺🇸💸
"Mill and underground capital expenditures are a serious source of inflation as deeper mines and expensive milling equipment are driving up costs. Since 2015, costs have risen 7% on a compound annual growth rate (CAGR) basis or 60% compounded over this period," reports Northern Miner. "When it comes to labour, costs aren’t the problem, at least not yet, CostMine data shows. The hourly rate for labour at U.S.-based mines is only rising at a 2.8% to 3.5% compound CAGR and salaries are growing at a 2.9 to 3.9% CAGR."
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Recovering waste heat from data-centers for district heating..? 🔥 🌡️ 🥵
I don’t think this is as common in North America as in Europe (and maybe Asia?), but district heating is a pretty good idea:
[District heating is] a system for distributing heat generated in a centralized location through a system of insulated pipes for residential and commercial heating requirements such as space heating and water heating.
The heat is often obtained from a cogeneration plant burning fossil fuels or biomass, but heat-only boiler stations, geothermal heating, heat pumps and central solar heating are also used, as well as heat waste from factories and nuclear power electricity generation.
District heating plants can provide higher efficiencies and better pollution control than localized boilers. According to some research, district heating with combined heat and power (CHPDH) is the cheapest method of cutting carbon emissions, and has one of the lowest carbon footprints of all fossil generation plants.
Basically, rather than having a million little furnaces and boilers in every building, have very big, very efficient ones in centralized locations and pump the heat around to where it is needed. Ideally, this heat is waste heat from some other process like generating electricity, which maximizes the percentage of the heat generated doing useful work.
Well, data-centers generate a lot of waste heat. Seems to make sense to do something with it?
I know Apple was looking into this for a DC in Denmark:
Apple’s Viborg data center uses air cooling, but instead of venting the heated air into the atmosphere, the plan is to use it to heat water. That hot water would then be fed into the local power station.
The power station already has a district heating system, which pumps hot water to homes in the nearby town of Viborg. Rather than each home having its own heating furnace, they are instead heated by the hot water pumped through all the homes in the town.
Apple’s heated water – at around 30°C (86°F) – would be further heated in the power station to 50°C (122°F), and form part of the water pumped to the local town. Heat pumps in the town would top up the temperature to 60°C (140°F), before it is pumped through homes, with valves in the home enabling individual temperature control.
By starting out with heated water from Apple, instead of cold water, the power station’s energy costs would be reduced.
But it hasn’t happened yet.
Maybe they couldn’t make the economics work at the time... But with Europe facing higher energy prices, maybe this will be reconsidered.
This probably doesn’t work for a lot of DCs that are far from population centers or industrial areas, but I’m sure there’s a subset where it would make sense. AAPL 0.00%↑
🦾🤖 Nvidia CES 2023 announcements 🚙 🎮💻☁️
Some of my highlights:
The partnership with Foxconn to make autonomous EVs was interesting. I’ll be curious to see how many contract manufacturers will decide that the auto transition to EVs and self-driving is the right time to throw their hat in the ring and try to compete directly. I’m also thinking Pegatron, maybe Magna, and some tier 2 auto suppliers that may feel they have what it takes when combined with Nvidia’s hardware/software and UI from Apple Carplay and Android Auto.
They keep expanding their GeForce Now cloud gaming to more regions and are upgrading the cloud hardware to the latest generation. It’ll be interesting if they can make the economics work without exclusive titles (unlike Microsoft’s cloud gaming approach).
They also keep iterating on Omniverse. It’s still early, but it could be big if it becomes the central hub at the center of a lot of 3D creation.
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👩🏻🚀 Getting back into fiction with Project Hail Mary 🚀 📖
*NO* SPOILERS ANYWHERE BELOW
Hard sci-fi with a MacGyver twist! What a great book, I LOVE it so far (I’m almost done reading it). It’s just up my alley 🎯
If your favorite scene in the film Apollo 13 was the one where they have to make square filters fit in round holes with duct tape, this is for you (though that probably describes The Martian more than this one, but I don’t want to explain why because that may be a spoiler — in any case, I like this better than The Martian).
I *highly* recommend the Audible audiobook version.
The voice actor is great. He does accents for various characters, makes the humor punchy, and generally elevates the work.
Potential next fiction books: The Three-Body Problem by Cixin Liu, or maybe something by Ted Chiang..? The first book of The Expanse? I also have some Greg Egan books that I haven't read. Dark Matter by Blake Crouch also came highly recommended. Or maybe Seveneves by Neal Stephenson 🤔