86: Writing, Bezos, 21st Century Pumps & Dumps, DCF Stuff, Google Stadia Studios, Apple Report Card & M1 iMac Wishlist, LSD, a Plea for the U.S. Semiconductor Industry

"I can’t wait to tell all my friends about this on Google+"

“If you can doubt at points where other people feel no impulse to doubt, then you are making progress.”

“How rarely does one meet anyone whose first reaction to anything is to ask “Is it true?”” 

“Loyalty is a noble quality, so long as it is not blind and does not exclude the higher loyalty to truth and decency. But the word is much abused. For “loyalty,” analyzed, is too often a polite word for what would be more accurately described as “a conspiracy for mutual inefficiency.””

Captain B.H. Liddell Hart

If you've never written stuff for general public consumption, you should give it a try, it's a little weird, and I'm not sure it's obvious how until you do it.

When you write something for one person or a small group of people you know, your brain will automatically run a model of the recipient(s) and try to gauge how they're going to read what you're writing (well, it'll do that if you're a decent writer — that's why bad writers are so often misunderstood, or impossible to understand… They don’t properly anticipate how what they’re writing will be interpreted).

But if you're writing to hundreds or thousands of strangers, you can't do that.

You're just left modeling an amorphous blob of consciousness.

Ideally, the readers are part of a sub-group that you're familiar with, so you all have some short-hand and shared knowledge to anchor things (ie. Fintwit, a klezmer music forum, whatever).

Getting feedback from readers does helps make the blob less fuzzy, but not 100% (big thanks Nick, Shane, Jason, Abdullah, Aanand, Michael, Andrew, Eric, Michelle, Geoff, Laurence, Sheji, Craig, Rob, Nicholas, Kamil, Kevin, Elliot, Karthik, Ragunath, Adam, Aditya, Diego, Ram, Gavin, and all the others whose aliases are so distinctive I won’t mention them here or that my feeble memory isn’t remembering right now).

But even with that, a fog remains.

So since the act of writing is hard in part because you don't really know what you think until you've written it, it's also hard in the rewriting because then you start thinking about what you’re trying to say, and start re-reading your draft, your mind is pulled in 74 different directions by the amorphous blob...

Will they get what I mean here? Oh, is that part too obscure for newbies. I like continuity, like on Deadwood, where things don’t reset every episode, so can I do some of that in a newsletter? Keep running themes and stupid inside jokes with readers, but how can that not become too opaque to new readers..? Oh, that part isn't detailed enough, the pros will think I don't know anything about this. Should I spell out that acronym? Will the hipster-cynical crowd think I'm way too earnest here? Am I nice enough? Should I not attack Larry Ellison even if he’s a dick? Do I know the whole story? Everybody must be able to see that I have no idea what I'm talking about and that my dad jokes aren't funny..? I wish I had time to look up that fact and spend more time understanding this thing, but it's 9:30 and there's 5 other things I want to get to...

Writing is never finished. It’s just published.

At some point you just hit that button out of disgust and confusion and move on to the next thing. It never feels “done”.

At least that’s my process.. ¯\_(ツ)_/¯

(Like, right now, I’m thinking about that italics paragraph… It’s too big, but breaking it up messes with the effect I’m trying to achieve with stream-of-consciousness pacing… ugh)

👋 A jolly g’day to all the new subscribers. There was a spike recently thanks to Elliot Turner, Andrew Walker, and Andrew Wilkinson. So if you landed here because of one of them, I’m sorry, I’ll do my best to not disappoint you too completely.


Investing & Business

21st Century Pumps…

Andrew Walker on his excellent blog:

I do think that this month and the massive short squeezes have revealed a ton of underlying structural issues in markets. In particular, our markets are particularly vulnerable to pumps on social media. Just this month, Elon Musk alone was involved in sending three different stocks / assets screaming higher on tweets (Bitcoin, Gamestop, and Signal). Carole Baskin sent a penny stock soaring 230% on a cameo plug.

This vulnerability is an absolute disaster for regulators. If you're a scammer, all you need to make a fortune is for a celebrity to tweet your company's stock. If you're an unscrupulous celebrity, you can make a fortune by tweeting about companies and trading around their stocks. Regulators can't let stocks continue to rise and fall by huge multiples simply on tweets and random plugs. Trust in financial markets will eventually break, and every day people lured into the bubbles will have huge sums stolen by scammers.

What's the answer? I have no idea. Someone smarter than me can figure that out. But our markets clearly aren't equipped for huge surges in volumes on tweets or from people who are willing to throw caution to the wind and buy / pump things for the LOLz.

I have no idea what can be done either. I mean, you can’t stop people from just talking about stuff.

But do you also want people who realize they can move markets at will to start doing it willy-nilly, some for the lolz, and some to profit from pump & dumps by tipping friends & family to buy calls before a tweet?

There’s a lot of reflexivity involved too, because after the first time that something works, even if in a really stupid way (ie. that Signal Advance company going up a ton because of Elon Musk saying that people should use the Signal messaging app), then everybody’s primed for the next time that a stock is mentioned.

Whoever did it once or twice gets the aura of having the ability to move markets, so everybody wants to join on the next one because they know that others know that it’ll likely go up so everybody wants to be early, leading to stampede into a stock that leads to crazy imbalances in supple-demand, leading to these huge spikes.

So everybody’s going to jump on Musk or DFV’s next one because everybody’s ready to jump. Basically:

It’s like that Keynesian beauty contest, except for Twitter influencers.

…and Dumps

Where did all those paper hands come from?

By the time you read this, the stock could be back to the moon, or on the way to Alpha Centauri, or about to be acquired by The Boring Company for its ability to plumb the depths, who knows…

But what's sad is that a bunch of retail people who piled on at the top and went "all in" on leverage will probably only blame it on the game being rigged, not on taking massive risks they didn't understand (I don’t understand options, and I’ve been thinking about markets almost full-time for many years).

It’s the old saying: If you don’t know who the patsy at the table is, you’re the patsy.

I’m worried, a lot of people were in way over their heads.

Some were probably just faking being “all-in” to convince others to buy, but I’m sure some were serious, or were convinced, and piled on with money they couldn’t afford to lose, or even worse, borrowed money. I’m worried that some will feel hopeless if they lose a lot of money and do things that can’t be undone.

These situations seem like all fun and games during the euphoric mania phase on the way up, but it’s just karma building up for the tears and sleepless nights of regret that come later

Addendum: Good short interview that Andrew Walker did with Al Grujic on a lot of the plumbing of the financial markets involved in the recent WSB mania:

Bez00000sss 🤯

Amazon is announcing today that Jeff Bezos will transition to the role of Executive Chair in the third quarter of 2021 and Andy Jassy will become Chief Executive Officer at that time.

I mean, it makes sense, he already wasn’t exactly doing day-to-day stuff for the past few years (at least until the pandemic hit), but it’s still kind of a shock to see it happen.

I’ve always been impressed by Jassy.

Is this like Bill Gates stepping down in 2000, but handing the throne to Satya Nadella instead of Ballmer?

CNBC has the letter he wrote to employees. My highlight:

Being the CEO of Amazon is a deep responsibility, and it’s consuming. When you have a responsibility like that, it’s hard to put attention on anything else. As Exec Chair I will stay engaged in important Amazon initiatives but also have the time and energy I need to focus on the Day 1 Fund, the Bezos Earth Fund, Blue Origin, The Washington Post, and my other passions. I’ve never had more energy, and this isn’t about retiring.

Brad Stone, the author of ‘The Everything Store’ book that I bet over 50% of the people reading this have read, just announced a sequel coming on May 11. It’s called “Amazon Unbound”.

Best meme on all this (and it’s from last April):

Precisions on DCF Thing (Hey Andrew)

So I wrote a little something about DCFs here, and Andrew Walker had some thoughts about it here.

(Hey, I may as well use this to chat with Andrew — it’s like an asynchronous text-version of Clubhouse and you can all listen in. Innovative, right?)

So one danger with tweets is that they’re pretty short, so ideas get compressed and exceptions and pros and cons don’t get mentioned (my DCF thing was originally a couple tweets). So I’ll expand on the idea here:

I was trying to write an intuition pump mostly about the usage of DCFs for valuation.

Andrew makes very good points about using them for understanding unit economics and the moving pieces inside a business, and I think they’re also great as reverse-DCFs to better understand market expectations.

I think that what I was trying to say was more along the lines of: The best ideas should be obvious to you once you’ve done the work.

If after you understand the company and the products and management and the competitors and the unit economics you still don’t know, and then do a DCF and it tells you that it’s undervalued so you buy for that reason, something may be wrong. It shouldn’t be that close.

Or if you do a DCF and you see massive undervaluation, there’s still a pretty good chance that the market is right and you’re wrong. Stocks are usually cheap for a reason, and the way to figure it out isn’t to do a more precise DCF, but to dig into the products and management and competition and unit economics, etc.

That’s what I meant by “if it's too obvious the opportunity probably isn't really there”. That’s the classic value trap that has a really low multiple and just keeps melting faster than any value can be realized because the pitfalls aren’t visible in the numbers and need to be found elsewhere, so it always looks cheap all the way down…

And when it comes to younger, higher-growth businesses, the range of probabilities used as inputs on a DCF mean that the results fan out super-wide, and what’s that really worth? Fiddle a bit with the discount rate and growth rate and margins and CAC and LTV and a few other things, and you can get results that basically range from a popsicle stand to the next Google. How do you use that to invest? ¯\_(ツ)_/¯

I’m sure some can do it, but I’m not that smart:

‘Google is shutting down its in-house Stadia game development studios’

“Creating best-in-class games from the ground up takes many years and significant investment, and the cost is going up exponentially,” reads a blog post from Phil Harrison, a vice president at Google and general manager for Stadia. “Given our focus on building on the proven technology of Stadia as well as deepening our business partnerships, we’ve decided that we will not be investing further in bringing exclusive content from our internal development team SG&E, beyond any near-term planned games.” (Source)

First thoughts are that this probably makes sense for Google, and is also not unexpected from Google. But then @Raganwald made an interesting point that made my cynical-antenna go up:

Me: Yeah, it's basically a euphemism for "we're not as good at it as we thought we'd be", I think

Raganwald: And possibly also, “To lure big studios in, we had to pretend we were investing hundreds of millions into the platform’s success.”

Ooo, was this a bait & switch? I mean, without evidence… probably not, who knows.

But that’d be one of those “we have to bootstrap this service, how are we going to get enough publishers/studios on board… Oh, I know!” situations.

My favorite reactions to the news, via some Reddit comments:

-I am SHOCKED! SHOCKED, I tell you! How could absolutely everybody have seen this coming??

-I can’t wait to tell all my friends about this on Google+

-Most of us already read about this with Google Reader

h/t Jerry Capital

High Quality Classifieds, Colossus Edition

Patrick O’Shaughnessy’s empire is growing and he needs more builders:

We are hiring 5 new roles to bring this vision to reality. We are looking for React Native and full-stack developers, a Head of content, a UX designer, and a BizOps hire.

Job listings here.


Science & Technology

2020 Apple Report Card

For the sixth year, Jason Snell had Apple-watchers vote on various aspects of the fruit company’s performance this year and compiled the results.

The post goes into detail for each category and has graphs of each over time, so that you can see, for example, the Mac bottom out in 2016 and improve a lot in 2020 (the M1!!!!1), while the neglected Apple TV hardware has been getting worse grades every year…

Some highlights:

Mac

John Gruber said, “This one is easy. The M1 Macs mark the best moment in Mac hardware history. Apple silicon is that big a deal.”

John Siracusa said, “If you’re not going to give Apple top marks now, then what are you saving your praise for? Daring new Mac designs will have to wait for 2021 or later, but for now we can all rejoice in the unmitigated good of the M1-based Macs. Hallelujah!”

Apple TV

It’s the first failing grade in the history of the Six Colors Apple Report Card! Last year’s D+ wasn’t great, but now Apple’s aging TV box is going to have to repeat the class in order to graduate.

Jessica Dennis said, “The Apple TV is stagnating. If anyone asked me which box to buy, I would recommend some version of a Roku over an Apple TV just about every time.”

John Gruber said, “It’s very odd to me that Apple clearly cares a lot about TV content, but seemingly doesn’t have a coherent strategy for the hardware.”

Another big turnaround was on ‘hardware reliability’. With the butterfly keyboard gone from the laptops, the main issue that had been annoying many for what seems like eons has been fixed.

Software Quality

Marco Arment said, “iOS 14 and watchOS 7 have been very high-quality releases so far. macOS Big Sur is an improvement over Catalina, which isn’t saying much, but macOS quality still has many years of relative neglect to make up for.”

Paul Kafasis said, “Apple should slow down their OS updates. Apple should recognize that just fixing bugs, and making things work reliably, and more clearly for users, has tremendous value. Constantly changing the operating systems we use year after year is not beneficial. Big Sur seems more solid than Catalina, so that’s good. iOS is solid overall. But the churn is brutal for developers and for users.”

Read the whole thing here.

iPhone FaceID Unlock with Mask, My M1 iMac Wishlist

Speaking of Apple, a little late, but a clever way to have the face-scanning biometric unlock your phone while wearing a mask without compromising security too much:

In iOS 14.5, there’s a new option to unlock an iPhone with Face ID and an Apple Watch paired together, with the Apple Watch’s authentication providing an extra layer of security.

If you’re wearing an unlocked Apple Watch and use Face ID as you normally would, the iPhone will unlock after a partial face scan. When the unlock happens, you’ll feel a haptic buzz and will receive a notification on the Apple Watch informing you that the unlocking procedure was successful, similar to how it works when unlocking a Mac with an Apple Watch.

I kind of wish they had thought of this earlier in the pandemic, especially since they already had built proximity unlock for Macs with the Apple Watch’s auth.

But better late than never, and it’s not like everyone’s about to stop wearing masks any time soon (and hopefully we all become more like Japan and see it as normal in public spaces or for people who are sick).

What I really want to see on the next iMac redesign with the M1 ARM SoC is a FaceID scanner built-in the screen next to the webcam, or at the very least a TouchID fingerprint scanner on the keyboard, so that I can use biometrics to unlock both the computer and Apple’s Keychain for passwords on various sites and in various apps. That’d be a nice quality of life improvement.

h/t John Gruber

A Plea for U.S. Semiconductor Industry to Reconstitute Leading-Edge Fabbing Capability

Good op-ed by Brad Slingerlend and Jon Bathgate. I recommend the whole thing:

LSD 🧠 Study

Typically, “neurons that fire together, wire together.” But the researchers found that LSD decoupled the relationship between structural and functionally connectivity, indicating that brain activity is “less constrained than usual by the presence or absence of an underlying anatomical connection” under the influence of the substance.

“We know that brain structure has a large influence on brain function under normal conditions. Our research shows that under the effects of LSD, this relationship becomes weaker: function is less constrained by structure. This is largely the opposite of what happens during anesthesia,” Luppi explained. [...]

under the influence of LSD, it appears that “the brain is free to explore a variety of functional connectivity patterns that go beyond those dictated by anatomy – presumably resulting in the unusual beliefs and experiences reported during the psychedelic state, and reflected by increased functional complexity.” (Source)


The Arts & History

Retroactively Tainting Early Work, Stranger Things Edition

I thought season 1 of 'Stranger Things' (2016, Netflix) was quite good, but my memory of it can't help but be tainted by what I thought were the progressively worse S2 & S3.

Too bad. Kinda wish I had just seen it as a standalone.

It shouldn't matter, but it kinda does...

Also, the best secondary character is clearly Benny, the restaurant owner that feeds Eleven (the actor who I now recognize from 'This Is Us', but didn't know at the time). Others have voted for Ted and Barb, but Benny’s in my heart.

On Twitter this led to an interesting discussion about other film and TV series where sequels get progressively worse — which is most of them — and about some of the exceptions, like Terminator 2 and Empire Strikes Back.

I even argued that, to me, Bladerunner 2049 is better than the original (without taking anything away from how influential the original was, including on Villeneuve).

Also, apparently I have to watch Sense8 at some point…