Weekend Reading #93

Photo by Claudia Wolff on Unsplash

This is the ninety-third weekly edition of our newsletter, Weekend Reading, sent out on Saturday 14th November 2020.

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What we're doing.

This week was jammed with just simply executing.

Our fund’s period end was yesterday, and this was a hectic week in markets with growth and value factors having a good old tug of war. We have had some excellent deal flow on 3BC, our private deals platform, as interest continues to grow, and we have been also articulating KPIs for our various business lines as well as taking a step back to think about the more strategic view of what we are aiming to achieve and how we plan to get there.

What we're thinking.

This week all the action was in Turkey, as President Erdogan’s finance minister (and son-in-law) fell on his sword after presiding over a pretty disastrous period. The resignation was very weird, coming on a Sunday via his Instagram account, but it turned out to be real. One can never ever know what really goes on behind the scenes, but the drama was high – particularly so as the day before (Saturday), President Erdogan sacked his central bank governor, Murat Uysal. What this all meant was a massive rally in the Turkish Lira and a surge in its beaten down stock market. While we are always hopeful of meaningful policy change, we watch cautiously to see whether this is real or not. As we have written before, eventually real change will come and Turkey will become a generational investment opportunity.

We haven’t written about the world of cryptocurrencies for a few weeks, in particular DeFi. The DeFi subsegment, as we have detailed before, has had a sensational year of price moves and more encouragingly, underlying development activity. We think that out of this segment will come the future of how we invest, lend, save and hold money in whatever form that is. We have also written before that the nascency of the space means that price swings are extreme and after an incredible run up in token prices, many of the best projects (nevermind the rest) all fell around 50-60% from their highs. Over the past 2 weeks, most of them have doubled off their lows, but what has been fascinating has been the divergence between what we would call top tier projects, and the rest. Projects like Aave, Synthetix and yEarn all rallied viciously, possibly showing that they are the leaders of the pack.

Away from this, the much-heralded Ethereum 2.0 upgrade achieved a key milestone over the past 2 weeks also, allowing us to imagine a faster, more scalable protocol. This is critical as Ethereum is by far the most dominant base layer protocol in terms of transactions and developer activity and is the backbone of DeFi. The price of Ether has continued to go up and is approaching its yearly highs. Apart from all the fun in DeFi, Bitcoin continues its march upwards as it crossed $16,000. With all the uncertainty and monetary debasement around, famous investors are announcing their support with every passing week. This week, one of our all-time most respected investors, Stan Druckemiller, announced to CNBC that he is on the Bitcoin train.

And in case no one noticed, Bitcoin and Ethereum are both currently on track to process almost US$1bn EACH of transactions this year. How’s that for “actual” use cases?

Sifted is a relatively new player in the financial media scene. It focuses on European venture capital and is fast becoming a go-to destination for colour on funding rounds and the broader business of VC.

It recently came out with a piece exploring the impact of COVID on VCs, arguing that the pandemic has exposed their vulnerabilities. The piece features a really interesting insight from Vinoth Jayakumar, a partner at Draper Esprit:

“There is tough competition for very few viable assets […] Has Covid made it harder to find great entrepreneurs? Yes. But at the same time it has flattened the landscape because any investor from any part of the world can get onto a zoom call with a founder.”

The upshot of this trend is that European VCs are increasingly getting beaten on deals on their own turf. And there are other challenges mentioned by the article – not only are valuations higher, but investors are increasingly having to back founders based on blind faith rather than objective metrics, given many startups have seen growth stall over the last few quarters.

This creates opportunities for progressive new platforms like 3BC to provide VCs with access to opportunities from outside of their traditional hitting spheres – differentiated deal flow from emerging markets, access to data, and guided introductions can help venture capitalists to source compelling new opportunities and avoid chasing after the same deals from the same sources.

What we're reading.

Matt Ridley’s latest book, How Innovation Works, has been released at an opportune time. This week, with news of a COVID vaccine making us all feel a whole lot better about the state of the world, we were given a timely reminder about the immense amount of hard work, skill and luck it takes to achieve something truly ground-breaking.

How the Pfizer/BioNTech vaccine came to be discovered, especially the story of scientist husband and wife, Ugur Sahin and Ozlem Tureci, is inspiring and encouraging for anyone contemplating whether they should take a risk and try to build something for the good of the world.

How Innovation Works focuses on this subject, meandering through history, teaching us about the rise of heat-melded tools in the Stone Age to the dawn of gene editing. Neglected innovations like the toilet S-bend are given attention alongside humanity’s most celebrated leaps forward, like the aeroplane. Central to Ridley’s theory about how world-shifting inventions come into being is the idea that singular inventors are a misnomer. 21 people worked to invent the lightbulb. No one really knows who invented the computer. But we do know there was a great team of inventors and entrepreneurs who went out of their way to bring its brilliance to light for the benefit of those of us lucky enough today able to write and read these black squiggles on a plastic screen.

Ridley deconstructs what the perfect conditions for innovation look like, drawing on a wide variety of lessons from history to teach us how, if we’re open minded and adaptable, we might be able to recreate some of these conditions, too, in our own work lives today. An inspiring read.

We are great fans of the emerging Metaverse idea and the leaders in establishing the building blocks of this idea are clearly the likes of Fortnite, Minecraft and in particular focus here, Roblox. This teacher has decided if you can’t beat ‘em join ‘em and set up classes inside of Roblox for students to attend. It’s a genius idea to keep students engaged and we are pretty sure this is only the beginning of this type of “experience”.

William Faulkner’s The Sound and the Fury takes the idea of different voices and narratives, and constructs an at times bewildering, but highly immersive, novel in the deep South of the first half of the 20th century. It shows how narrative can enmesh and transport us, at times to places we don’t really want to be in. Somehow, it feels strangely appropriate for the current world.

What we're watching.

This week we revisited Band Of Brothers, HBO’s 2001 miniseries that dramatises the experiences of Easy Company, 2nd Battalion, 506th Parachute Infantry Regiment, of the 101st Airborne Division, during WW2.

This is a sweeping drama that covers jump training in the US and major actions in Europe, right up until Japan's capitulation and the end of WW2. The show was executive produced by Steven Spielberg and Tom Hanks, and it feels like a kind of serialised version of Saving Private Ryan. It’s filmic in quality and helped to launch the modern era of TV miniseries that’s now enjoying its heyday via Netflix and Amazon Prime. It's extremely immersive (and emotive) television, not for the faint-hearted but extremely moving and rewarding. We found it impossible not to focus on the screen, and it was nice to fully invest in a show rather than allow ourselves to be distracted by our phones, laptops and even baby monitors! In a week when many have been commemorating the sacrifices of those who lost their lives in the First World War, Band Of Brothers is a reminder of the eternal recurrence of conflict and the need for eternal vigilance to prevent mass warfare from happening again.

The series is actually based on a non-fiction book of the same name by historian Stephen E. Ambrose, and the events it portrays are based on Ambrose's research and recorded interviews with veterans. The show incorporates these interviews at the start of each episode, a highly effective technique that hammers home the fact that we are following real people. In the series finale, the identities of the interviewees from Easy Company are revealed. It’s extremely emotional. You can probably tell that we love this show – we think you will too.

Whilst on the topic of war, this week marks two years since the release of Battlefield V, still the latest instalment in the much-loved Battlefield gaming series. After a long and stressful day working from home, who doesn’t fancy flicking the desktop monitor over and busting a cap in some Nazis, or roaming around in a Churchill tank?

True to Battlefield's original roots back in 2002, the game is set during World War 2 with maps across the globe from the lavender-lined hills of Northern France to the cobbled streets of Rotterdam, in fact there’s even a full-scale virtualisation of Iwo Jima, a Japanese volcanic archipelago island and wartime strategic outpost. The sights alone are brilliant for the COVID travel blues and our only criticism is that they disappointingly switched it from the British fighting the Germans to the Americans fighting them in a recent patch to the aptly named map, Panzerstorm, at the behest of the game's overwhelmingly US centred fanbase.

What we're listening to.

Loved this interview with David Helgason, founder of Unity.

Unity (which IPO’d in September 2020) gives content creators the tools to create innovative RT3D experiences and deliver better processes for almost every industry. It’s basically a licensed game engine used to create video games and other applications. Unity’s technology is the basis for most virtual reality and augmented reality experiences, and it dominates the virtual reality business.

In the interview, amongst other things, Helgason talks about the “hypergrowth” early days of Unity, why running a company is like a liberal art, and the secret to a successful CEO transition.

We’re big fans of American folk artist Gregory Alan Isakov. Isakov has toured alongside world famous musicians such as Iron & Wine, Passenger, and The Lumineers, and his pared back folk sound is pure Americana.

We recently stumbled across his collaboration with The Colorado Symphony, an eleven track record features songs from Isakov's previous albums, as well as a new track, 'Liars'. His best songs are given a new lease of life, but not overpowered by the orchestra. The video for Liars is hauntingly beautiful and builds to an awesome crescendo.