85: Microsoft's 3 Regimes, WSB vs Short Interest, GM to go 100% EV, Roper's R&D, Brandolini's law, RISC-V, more on Vitamin D and COVID19, and Reputation Ransomware
"it's possible to be the wrong person for the job without being dumb."
I used to resent obstacles along the path, thinking, ‘If only that hadn't happened life would be so good.'
Then I suddenly realized, life is the obstacles. There is no underlying path.
You know how they used to talk a lot about the bond vigilantes?
Well, we’re now in the era of the WSB vigilantes.
(Of course, what they are hunting for is totally different)
It's like fleas wagging the tail that's wagging the dog…
Impressive mechanical advantage, if nothing else!
What's crazy with the whole WSB saga is that whole market-cycles and sentiment-waves play within days and sometimes hours... It's like a day-trading singularity. The accelerating pace is getting closer and closer to collapsing into a single point in time.
🤔 I was thinking about the expression “firing on all cylinders”…
I wonder if it will get updated as cylinders get more and more obsolete in an EV world, or if it'll stick around as a vestigial organ, kind of like old handset phone icons, floppy disk icons, tape deck icons, old film camera icons for movies (with the big round reel compartments), etc...
Investing & Business
WSB: Headline Short Interest vs Changes Below Surface
With the caveat that I’ve never studied finance, never worked in finance, am not a trader, and know very little about the plumbing and mechanics of many parts of the market, here’s one thing I’ve been wondering about:
WSB has been paying close attention to the short interest on the names that it’s squeezing.
But is it possible that even if GME’s short interest remains 100%, that under the headline number there’s been a huge change, and that maybe a bunch of hedge funds that were short at a cost base of $10 blew up, they used the massive volumes traded recently to close or mostly close their shorts and other funds started new short positions at much higher average prices (say, in the $300-range).
So the short interest may still look the same from the outside (˜100%), but under the surface, the dynamics are very different and the pressure on the new shorts aren’t the same at all with the redrawn battle lines, so you can’t quite expect them to capitulate at the same point.
Very possible this reasoning is flawed or missing something. If so, please let me know (you can always reply to this email, or leave a comment on Substack).
GM to go 100% EV by 2035
General Motors said Thursday that it would phase out petroleum-powered cars and trucks and sell only vehicles that have zero tailpipe emissions by 2035 [...] G.M. said its decision to switch to electric cars was part of a broader plan to become carbon neutral by 2040. (Source)
This will put a lot of pressure on other automakers. These mammoths move in packs, and once a few of the big ones change direction, you can expect the others to follow because at some point it becomes more dangerous not to change direction than to keep things the same (that’s partly why Tesla matters, btw — its success with buyers and markets gave permission to a lot of people inside the big automakers to lobby more strongly for EV investments and reduce career risk for making bolder moves in that direction).
A spokesman for Ford Motor declined to directly comment on G.M.’s move but said his company was “committed to leading the electric vehicle revolution in the areas where we are strong.”
Yeah, expect Ford and others who haven’t already made commitments to follow…
Hopefully they all drop the old tactic of making EVs that aren’t too attractive to avoid cannibalizing sales in the rest of the lineup where they make more money and really go for it.
Roper on R&D (Q4 call)
when we engage with each of our businesses strategically, we talk to them broadly about how to grow sustainably with CRI-accretive growth over a long arc of time. Answering the 2 questions of where to play and how to win, but then when you get into how to win, it is -- sometimes it's a product answer. A lot of times, it's a go-to-market sort of answer. So our strategic orientation of each business doesn't narrow into innovation from the get-go. That said, obviously, innovation and R&D, more mostly a D shop, mostly development across our software and product businesses. You have seen and likely will continue to see a modest increase in R&D spend as a percent of revenue for years to come. In '19, it was about 7.5%. Last year, it's about a little over 8%. This coming year, probably going to add about 100 basis points, to be a little over 9%
If you compare Roper's, the 8% or 9% of revenue that we spend in R&D compared to other software companies, it appears R&D compared to other software companies, it appears low. When you look at our software businesses, we're right in line with the peers. We're between 10% and 15%, 17% depending on the company. The application businesses tend to be on the higher side of that. The network businesses tend to be on the lower side of that. And the reason the mix for Roper is low is because we have quite a bit of revenue in TransCore, MHA and others that effectively don't have any R&D in our business model.
Also, on this episode of Analysts Gotta Try:
Social Audio 🚀 ?
If real-time social audio really takes off (Clubhouse, Twitter Spaces, Discord, more tk I'm sure), how much does that eat into podcast consumption?
Does that affect Spotify's non-music trajectory?
When do we get Google's social audio app that they'll cancel a year later, but not before releasing two more similar ones with confusing names?
Youtube Convo vs Google Music Talk vs Google AlloAllo?
When do we get Facebook's version of social audio? I guess we probably have to wait for Snap's version first (oh snap!).
That one will 'accidentally' invite your family and coworkers to that audio chat with your private Narcotics Anonymous group...
Random Thoughts on Microsoft’s 3 Regimes
MSFT’s stock price since 1986 on a log-chart shows pretty clearly 3 different trajectories under 3 different CEOs.
Obviously reality isn't that neat and the underlying financials didn't look like that, but I think there's some truth to the market seeing a less rosy future under Ballmer even as the money kept pouring in, so not being willing to pay as much for it... FCF generation over period:
After dot com, of course the stock was not going to do as well for a while, but maybe a better CEO more in tune to the big tech trends would've bought Google in the early 2000s or done better with internet services in general, or positioned itself better for the mobile wave (instead of letting Google be the Yin to Apple’s Yang with Android), etc. Who knows?
No company can do everything well and life is trade-offs, but I do think it's more frustrating to see a company that had all the elements to do well being held back by a CEO that lacks good higher-level strategic vision and nimbleness than for a company that never had a chance to begin with.
Ballmer is a smart guy. But it's possible to be the wrong person for the job without being dumb.
Microsoft still did well under him, but mostly because it was such a good business that it could do well despite the wrong person in charge. If Ballmer had been in charge of a lesser business, his moves like the backwards-looking focus-at-all-costs on Windows, the big M&A for Skype, Nokia, and the $45bn bid for Yahoo in 2008 (62% premium — and I don’t think he had a crystal ball and foresaw Alibaba — who knows, he may have sold the stock after a modest run, like how Microsoft also owned plenty of Apple and Facebook stock in the past but as far as I know didn’t hold), the inability to productize R&D, etc, would probably have been a lot more catastrophic.
Interview: Shomik Ghosh
Another good interview by Bill Booster (I know, it’s a joke between us) with my friend Shomik, going into a lot of the aspects of software/tech/early stage investing. Good discussion on various vertical and horizontal approaches to expanding how companies serve markets:
Science & Technology
In case you aren’t familiar with the B2 and your brain just isn’t parsing what you’re looking at — this thing at the bottom looks kine of like a weird take on a Star Wars land-speeder, right? — this is the side view of a falcon on top and of this plane at the bottom.
Vitamin D Supplementation & COVID19 Risks
Peter Attia has a good update on this thing that I’ve been following for a while (see edition #69 for more of my thoughts on vitamin D). With all the caveats that these are not perfect studies, they still give some interesting data points:
Long-time supplementers had a 93.1% survival rate compared to 81.7% survival rate in the more recent supplementers, and there was a 68.7% survival rate in the group that didn’t take vitamin D. Given the hazard ratio 0.07 in the first group, the study reported a 93% reduced associated risk for those that regularly supplemented vitamin D. In other words, the no supplementation group was associated with 14.3 times the risk of death compared to those who regularly supplemented with vitamin D. [...]
There is one pilot [randomized control trial] that looked at the rate of ICU admission and death for 76 people with and without in-hospital vitamin D supplementation. It reported that 98% of the treatment group did not get admitted to the ICU compared to 50% admission in the untreated group, of which 15% (2 people) later died. After adjusting for confounding variables, patients treated with vitamin D had 0.03 times the risk for ICU admission compared to non-treatment. Put another way, patients not treated with vitamin D had 33.3 times the risk of ICU admission compared to patients treated with vitamin D. [...]
vitamin D toxicity is not easy to come by: a review article noted that all published cases [of toxicity] involved an intake of at least 40,000 IU/day. Even though the Food and Nutrition Board established a conservative dose threshold of 2,000 IU/day, some studies suggest that doses of up to 10,000 IU/day is safe for most adults.
Of course, don’t change how you act based on this — don’t take more risks because you supplement with vitamin D, that would be counter-productive…
‘Lack of sleep, stress can lead to symptoms resembling concussion’
In the national study, between 11% and 27% of healthy college athletes with no history of a recent concussion reported combinations of symptoms that met criteria for post-concussion syndrome (PCS) as defined by an international classification system. Among the nearly 31,000 student-athletes surveyed, three factors stood out as the most likely to predict PCS-like symptoms: lack of sleep, pre-existing mental health problems and stress. [...]
“These are elite athletes who are physically fit, and they are experiencing that many symptoms commonly reported following concussion. So looking across the general population, they’d probably have even more.” [...]
Participants in this study included 12,039 military service academy cadets and 18,548 NCAA student-athletes (Source)
Brandolini's law, also known as the bullshit asymmetry principle, is an internet adage which emphasizes the difficulty of debunking bullshit:
"The amount of energy needed to refute bullshit is an order of magnitude larger than to produce it."
Another earlier version, from Russian physicist Sergey Lopatnikov:
If the text of each phrase requires a paragraph (to disprove), each paragraph - a section, each section - a chapter, and each chapter - a book, the whole text becomes effectively irrefutable and, therefore, acquires features of truthfulness. I define such truthfulness as transcendental.
Interview: Chris Lattner, RISC-V / SiFive Non-Technical Primer
If you’re curious about RISC-V, the open-source instruction set, and SiFive, the leading company designing implementations of it, this interview by Tracy Alloway and Joe Weisenthal with engineering legend Chris Lattner is a good 101:
Reputation Ransomware (Scary AF)
Scary piece about a man who found out one day that when you looked him up online, all you found were lots and lots of references (and photos with captions) to him being a thief, a scammer, a pedophile. And then the same for his wife and extended family members, even the children…
The images were the worst: photos taken from his LinkedIn and Facebook pages that had “pedophile” written across them in red type. Someone had posted the doctored images on Pinterest, and Google’s algorithms apparently liked things from Pinterest, and so the pictures were positioned at the very top of the Google results
There’s an industry for this. It’s like ransomware that encrypts your data and asks you to paid for the decryption key, except that they do it to your reputation:
He started clicking around and eventually found a part of the site where Ripoff Report offered “arbitration services,” which cost up to $2,000, to get rid of “substantially false” information. That sounded like extortion; Mr. Babcock wasn’t about to pay to have lies removed.
Ripoff Report is one of hundreds of “complaint sites” — others include She’s a Homewrecker, Cheaterbot and Deadbeats Exposed — that let people anonymously expose an unreliable handyman, a cheating ex, a sexual predator.
But there is no fact-checking. The sites often charge money to take down posts, even defamatory ones.
Of course, this type of online slander isn’t segregated online. The online world isn’t really separate from the physical world:
Mr. Babcock soon installed a home security system; he’d read about vigilantes going after accused child molesters. [...]
Over the last two years, there have been more than 12,000 defamatory posts [from the woman who targeted him], according to software that Mr. Babcock’s brother-in-law created to track new posts. [...] Mr. Babcock and 43 others who have sued Ms. Atas for defamation [...] There are another 100 or so people who have been targeted but aren’t plaintiffs.
Even the journalist writing this story was a target:
During an interview with Ms. Atas in November, she grew angry that I planned to write this article. A week later, someone started writing posts about me and my husband on Cheaterbot, BadGirlReports and some of the other sites where Mr. Babcock and others had been targeted. The posts claimed that my husband was a drug addict and that I was a plagiarist who slept with my boss in order to get promoted. Ms. Atas said it wasn’t her.
This is from just one crazy person. Multiply that by thousands and thousands around the world, and then there’s probably the non-crazy professional trolls who do industrial-scale extortion. Ugh. There's only one rule that I know of, babies-"God damn it, you've got to be kind.”
The Arts & History
Tokyo from Above
The largest city on Earth, apparently, with about 37.4m population in 2018 and the metropolitan area is spread over 13,452 square kilometers.
I think what you see in the distance on the horizon is Mount Fiji (3,776.24 meters tall, or 12,389.2 ft — wow those are precise numbers).
Anything can Trigger the Imagination