495: XPEL and Anchoring Bias, Apple + OpenAI & Google, Global Coal Fleet, Helium, Sean Feeney, Music, and The Sopranos

"Great writing is precious"

People want to seem "in the know." They try to signal that they are intelligent and informed. This is often counterproductive. Insecurity is the enemy of learning. A master knows how to be a beginner.

—Stoic Emperor

Lose yourself in it 💚 🥃

🎼 I don’t know why, but this is a music-themed intro. The ideas have a wider reach, but I have music on the brain lately, so it’s the starting point…

A bit of trivia about me: I have synesthesia, so when I listen to music, I “see” shapes and colors.

✍️✂️🎶🎹 One of the interesting aspects of classical music is that the composition and the performances are more separate and modular than in most other genres.

It’s a bit of an accident of history. Before recording technology existed, a performance had to be ephemeral. The notes on the page were the canonical version of the music.

So you’ve got Bach, Mozart, Beethoven, Chopin, and Shostakovich on one side, and various performances of their works by Otto Klemperer, Arthur Rubinstein, Herbert von Karajan, Vladimir Horowitz, and Wilhelm Furtwängler.

I think that’s great.

If I love some composition, like Bach’s Well Tempered Klavier, instead of having only one version of it, I can bounce back between Glenn Gould, Tatiana Nikolayeva, and Angela Hewitt. Each is a different take, like three painters doing the same landscape in their own style.

Sometimes, there are multiple recordings of the same work by the same performer, but at different periods of their lives, leading to very different interpretations. The most famous is probably Glenn Gould’s recordings of Bach’s Golberg Variations at the beginning and end of his career.

What if this was more common? Great writing is precious enough that I wish we had multiple interpretations of most great works. It would be a great way to see the evolution of artists.

Zooming out: What if we could have the same for other genres and mediums?

Sure there are cover songs, and sometimes the cover elevates the original (the Hendrix cover of Dylan’s All Along the Watchtower or Jeff Buckley’s cover of Leonard Cohen’s Hallelujah).

But what if we have the equivalent of that for novels?

Different authors writing their versions of the same story. The same general scaffolding of characters and plot points, but every detail filtered through the lens of a different writer.

I’d read Iain M. Banks’ take on Asimov’s Foundation? Or Nabokov’s take on Master and Margarita? Kurt Vonnegut Jr’s Hitchiker’s Guide to the Galaxy? 🤔

I don’t know, maybe that’s mad.

But what other kinds of covers or reinterpretations should be more common? Films? Video games? 🤔

🎶💿💾🖼️📲 Now that most music is being listened to on streaming services (and vinyl?!), why don’t streamers start to take their product seriously?

You’d think that by now they would offer listeners at least what they had with CD booklet artwork and liner notes… That should be table stakes.

Digital could offer *so much more*.

Are you curious about who the musicians are on an album? Where it was recorded, who produced it, etc? Better start Googling around and checking Wikipedia, because Spotify and Apple Music won’t tell you much.

Apple tried to do something about this a few years ago, creating a format for expanded artwork, but it doesn’t look like they had enough traction and I haven’t heard about it since.

These services are built on music. You’d think that the people building them would be music lovers and demand more.

Even the ability to make artwork bigger to see it properly on a big monitor, or for artists to include more artwork (other than the cover) that listeners could browse through feels like a basic thing.

It should be easy to include whatever else the artist wants to include as bonus content. A podcast interview about the album? A video showing behind the scenes in the studio? Some footage from live performance? Guitar tabs?

Whatever, it’s all bits. Storage and bandwidth are cheap.

Music is now on the most flexible medium possible (software), yet everything around it feels poorer than during the Vinyl or CD days. Even cassettes at least had liner notes and a few pages of artwork…

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⚓️😅📈 Anchoring & XPEL 🚘🎁👨🏻‍🔧

I think I first started following XPEL in 2013. I don’t remember where I first heard of it — maybe from MBB, she’s an all-timer when it comes to finding these early and holding them for the long-term — but at the time I liked what I saw, so I eventually bought a bunch.

The stock was trading in the $2-3/share range.

Not too long after, the company was hit by a lawsuit from 3M, a conglomerate that has been around forever with $30 billion in sales and a market cap of $80 billion.

XPEL’s sales were $40m and its market cap was around $50m, so the opponents were not exactly in the same weight category. For XPEL, the legal fees alone were going to be material, and it was very difficult for me to handicap the outcome of the lawsuit. Was it all BS? Would it be settled relatively inexpensively? Would it drag on for years and bankrupt XPEL? ¯\_(ツ)_/¯

When it comes to the legal system, there’s always a big randomness factor. Much depends on the judge, the lawyers involved, etc.

At the time, this was a material enough change in the thesis that I decided to sell and move that capital to other opportunities.

The lawsuit was settled in 2017, with XPEL licensing 3M’s patent #8,765,263. It’s not clear how much money changed hands, but it didn’t seem too significant. In the end, a lot of barking but not much bite. 🐶

As you can see from the chart above, the stock got killed in late 2015 and not too much happened for a while. It jumped after the 2017 settlement but didn’t move too much for a while after that.

I had plenty of time to get back in at a price similar to where I had exited. If I had been rational, I would’ve seen that the primary reason for my sale was gone and all the reasons why I had been interested were still valid.

I’m not sure why I didn’t re-buy it.

I probably had moved on to other things and wasn’t paying attention. It’s very possible I fell prey to the very common investor fault of being biased in favor of what you own and against what you sold. Suddenly, I was less interested in the business because I had sold it, which probably happens frequently.

I did pay attention when the stock moved up, but I committed another one of the investor’s seven deadly sins: I anchored on price.

It’s hard not to do when you’re looking at a stock that is *thousands of percent* higher than when you first looked at it.

Even *knowing* that this was what was happening still didn’t protect me from it. At the time I knew that’s what was happening and I joked about it with friends.

We don’t fall for biases only because we’re unaware of them. Many are obvious to us, but it’s still not easy to overcome them.

A few of XPEL’s operating metrics over the past 10 years.

For years, every time I looked at XPEL’s stock price, all I saw was a big mistake of omission, and the dominant feeling was “I missed it”. It’s very hard when you owned a stock in the $2-3 range to look at it at $80-100 and be objective about it.

But in recent times things changed. XPEL stock went sideways for a few years, being hit hard like the rest of the market in 2022, and then more recently by a short-seller report that made all kinds of claims about the company.

From a peak of a little over $100 in 2021, the stock fell to about $40. That made me wake up a little and go 🤨

What ultimately decided me to make a move is a great write-up by my friend David Kim (💚💚💚💚💚 🥃 ):

• 📄 Scuttleblurb - [XPEL] Xpel Inc (sub required 🔐)

It contains a great overview of the current state of the business — updating me on some of what I had missed in recent years — but also a lot of scuttlebutt work to debunk most of the short thesis.

David called *70 installers* to learn from people on the ground. He also reached out to XPEL competitors like PPG to verify claims made by the short-seller and found that some of them were fabricated:

I reached out to PPG and asked whether entrotech’s film was being directly integrated into PPG’s OEM paint and whether OEMs could apply this novel coating onto the car as part of their manufacturing process. I asked twice just to be sure. They were adamant: 1) entrotech’s paint protection film technology is not, in fact, being integrated “directly into” PPG’s OEM paint and 2) the JV’s PPF is being applied manually, after the paint job is already complete, after the vehicle has rolled off an OEM’s production line.

I already knew a lot of the things the company had going for it, including Ryan Pape, the former software engineer turned CEO who took the company from the verge of bankruptcy in 2009, making partial payments to suppliers with his personal credit card, and built it into the global leader in automotive paint protection film.

However, the short attack on the company increased my confidence.

If you only listen to bulls, it’s easy to only get one side of the story and be surprised when the wheels fall off later on. Having the thesis be battle-tested like this is very valuable + it can provide a nice entry point.

I recently overcame my anchoring bias and bought a position in the company again. This is not a recommendation to do anything, I just wanted to talk about anchoring and this was the perfect case study.

If you happen to be curious about the company, I’d start with the Scuttleblurb writeup above, but here are a couple of other resources:

• 🎧 The JRo Show - Interview with XPEL CEO Ryan Pape

• 📃 XPEL: Now At The Biggest Inflection Point In 4 Years

🍎 🤖📲 Apple in talks with OpenAI (and Google)

To be clear, this is only a rumor, but Mark Gurman has the best sources in Cupertino (which doesn’t mean he’s always right, but the odds are better than with most other Apple rumors):

The two companies have begun discussing terms of a possible agreement and how the OpenAI features would be integrated into Apple’s iOS 18, the next iPhone operating system [...]

The move marks a reopening of dialogue between the companies. Apple had talked to OpenAI about a deal earlier this year, though work between the two parties had been minimal since then. Apple also remains in discussions with Alphabet Inc.’s Google about licensing that company’s Gemini chatbot.

Apple hasn’t made a final decision on which partners it will use, and there’s no guarantee that a deal will be worked out. It’s possible that the company ultimately reaches an agreement with both OpenAI and Google — or picks another provider entirely.

I wrote my thoughts about what I think Apple’s AI strategy may be in Edition #487. Here’s an excerpt from it:

“In the tradition of commoditizing complements, I expect Apple to view AI as something that makes a product better, not the main course. Their priority is to sell more iPhones.

They should frame it like this:

Others are great at making foundational models. We want to focus on is the *experience* of using these models. So we’ve created Apple Air Control™️, an AI that sits on top of other models, abstracts them away, and picks the best tool for the job, all with a beautiful and intuitive interface!

Do most users care which model is under the hood as long as it is really good and useful? Some tasks could be done by ChatGPT, some by Claude, some by Gemini, some by Llama…

If you doubt that UX can be critical, remember that OpenAI’s breakthrough was taking GPT-3 and creating the ChatGPT UX (partly design, partly tuning the model so it’s more conversational — but it was mostly a product breakthrough, not a technical one).

If I were Apple, I’d go with a constellation of models. Fully modular.”

🗣️ Interview: Visakan Veerasamy 🇸🇬

This ♾️ 🔁 was really fun.

It left me wanting to learn more, build more, and be more excited about the world! 🤘Visa has an infectious outlook on life and he and Jim were vibing well together:

• 🎧 Visakan Veerasamy — Expanding Our Possibility-Space (EP. 210)

🗣️ Interview: Sean Feeney 🍽️ 🍳

Sean Feeney came from the world of finance but had a passion for food. He partnered with a chef friend and helped create Lilia and Misi, two highly-rated restaurants (I’ve never been — but I wish I had!).

His story is interesting, but it’s his approach to problem-solving and following your curiosity that I like most. I recommend this interview by Patrick O’Shaughnessy (☘️):

• 🎧 Sean Feeney - Reinventing the Restaurant Business

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🧪🔬 Liberty Labs 🧬 🔭

🏭🏭🏭🪨 The Global Coal Power Fleet Keeps Growing 😬

This is a big problem.

Countries want reliable baseload power and they want energy security.

If they don’t happen to have abundant natural gas or good hydro sites, the two main things that remain are coal and nuclear power (because you can stockpile fuel for a long time, unlike natural gas, which leaves you at the mercy of your suppliers).

The multi-decade campaign against nuclear power by various groups has directly helped coal. Btw, this campaign wasn’t just from misguided environmentalists. Let’s not forget to include those who benefit from fossil fuels being used for power. Nuclear has fewer natural allies than the very extractive power sources. Once a nuclear power plant is built, fuel is a small fraction of opex, it’s mostly just labor, while for a coal or gas plant, it’s a multi-decade cashflow stream going to whoever extracts and sells that fuel.

We hear a lot about coal being phased out, but on a global basis, more coal gets added than retired:

Data in the Global Coal Plant Tracker show that 69.5 GW of coal power capacity was commissioned while 21.1 GW was retired in 2023, resulting in a net annual increase of 48.4 GW for the year and a global total capacity of 2,130 GW. This is the highest net increase in operating coal capacity since 2016.

A surge in new coal plants coming online in China drove this increase — 47.4 GW, or roughly two- thirds of global additions — coupled with new capacity in Indonesia, India, Vietnam, Japan, Bangladesh, Pakistan, South Korea, Greece, and Zimbabwe.

Coal is truly the worst.

Its combustion emits a lot of smog-causing particulate matter known to trigger asthma and cause lung cancer and heart disease, along with mercury (a neurotoxin). The huge energy-intensive mines scar the landscape and have all kinds of toxic runoff. Among all fossil fuels, coal produces the highest amount of carbon dioxide per kilowatt-hour of electricity generated by far. And then even after you’ve burned it, you still have to store billions of tons of fly ash that contains various heavy metals and hope they don’t leach into waterways or underground aquifers.

More details on the global coal fleet here.

🎈 Helium discovery in Minnesota: potentially “largest in history” 🇺🇸

Tony Morley (an OSV Fellow!) writes:

Pulsar Helium, an exploration company, revealed the discovery of helium reserves in late February 2024, following drilling activities near Babbitt, northern Minnesota, reaching depths of 2,200 feet (670 meters). Initial findings displayed helium concentrations of 12.4%, described by Thomas Abraham-James, the president and CEO of Pulsar Helium, as "a dream" in an interview with CBS News. The discovery represents an unprecedented opportunity to gain access to helium at concentration levels dramatically exceeding the normal 0.3% or 0.5% helium concentration levels that would be considered noteworthy.

This is great because while most of us may think of party balloons, helium has many important medical, scientific, and industrial uses, and supply has been getting tighter and tighter over time.

It’s not something we can just “make more of”:

Unfortunately, helium is about as non-renewable as a resource comes. All the helium available to humanity was formed during the natural radioactive decay of elements such as uranium and thorium, a process taking hundreds of millions of years, deep below the earth's crust.

What little helium that is created typically slips through the crust, eventually finding its way into the atmosphere and out into space; the fate of nearly all helium. Every liter of liquid and gaseous helium civilization has access to was geologically captured under largely impermeable cap rocks

While shortages and declines are newsworthy, we need to remember that the Earth’s a pretty big place and we’re still discovering resources all the time, especially thanks to technology that allows us to do better geophysical analysis and cost-effectively drill places that would’ve been out of reach in the past.

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🎨 🎭 Liberty Studio 👩‍🎨 🎥

🚘 Long Term Parking 🧳 (some spoilers)

My wife and I are still watching ‘The Sopranos’. On Monday night, we saw 'Long Term Parking', the second to last episode in S5.

It was a rewatch for me and first watch for her. She didn't fully realize what was happening until the turn on the backwoods road... 🥲

What an episode!

Certainly one of the most memorable of the show. Great writing and what a performance from Drea de Matteo (she won an Emmy for it).

It marks the signal that the show is on the home stretch for S6 — it’s been so long since I’ve seen it that I don’t remember the details, but I know it gets *dark*.

Johnny Sack's arc is quite something. Compare him in this episode vs the first episodes he appeared in when he was buying that house in Jersey. Great performance by Vincent Curatola.

Terrence Winter admitted that he wrote the episode in a single draft over three days at the end of a two week deadline after procrastinating for the first 11 days under the pressure of writing the most important episode of the season.

Sometimes that's how it happens!

I'm glad to be rewatching. I feel like I appreciate the show much more today than the first time I saw it (and I *loved it* the first time).

If you plan to watch or rewatch it soon, a good companion book is ‘The Sopranos Sessions’ by Matt Zoller Seitz and Alan Sepinwall.