Weekend Reading #58 — Three Body Capital

This is the fifty-eighth weekly edition of our newsletter, Weekend Reading, sent out on Saturday 7th March 2020. To receive a copy each week directly into your inbox, sign up here.

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What we're doing.

Like everyone else, we continue to observe the impact of Coronavirus on markets – both obvious and obscure. Our job isn’t to disentangle the underlying drivers of price action, it’s simply to envisage (and imagine) the intersection of multiple paths and position ourselves accordingly. Anyone who tells you that investing in these markets is an exact science is lying to you.

Still, certain members of the finance Twitterati have not been shy in claiming credit for calling the Fed’s intervention. As in any period of concerted policy action, there’s a lot of self-promoters trading in confirmation bias, elevating (at best) educated guesswork as prophecy. But any investor who’s dipped into Twitter in recent years knows it isn’t a place to go for answers – just more questions.

Here at Three Body Capital we use Twitter as an indicator, one of many that help us to build a nuanced picture of markets. We keep meaning to write about the consciousness of markets, how they have achieved a level of autonomy one might associate with myopic depictions of artificial intelligence in beautiful, sad films that haunt you long after you are done watching them, and indeed we will at some point, but first we need to touch down in the real world and tell you all about what we’ve been doing this week.

Aside from the commercial threats (and opportunities) posed by the unfolding crisis, we’ve spent much time thinking of those suffering from COVID-19. We hope and pray that the crisis peaks and dissipates quickly, and that our friends and colleagues all over the world stay safe and well. We’re not just saying that because it’s the sort of thing you say in newsletters to your investors and partners – we really mean it.

We spent some time in recent days readying marketing materials for the upcoming launch of our fund, the Three Body Emerging Opportunities Fund. Our latest blog post takes you behind the scenes of our universe, sharing some of the ideas that we will be focusing on.

What we're reading.

Being part of a young business means taking a few detours along the road to success. One of the best ways to avoid dead ends is to borrow advice from those vaunted individuals who have “been there, done that” in your industry. Ben Horowitz, of Andreessen Horowitz, is one of those prize guys, and his meditation on the art of management and business development, The Hard Thing About Hard Things, is one of the most worthwhile books we’ve read in a long while.

There’s so much to learn from Horowitz’s teachings, gleaned whilst building billion-dollar businesses from the inside (Loudcloud, Opsware) and now funding many multi-billion dollar businesses (Facebook, Twitter, Stripe) as a VC. The advice here is grounded in anecdotes from Horowitz’s hard-earned rise. Unlike so many management books and autobiographies nowadays, this is no victory lap. The guy wears the scars from his time in the trenches running young businesses that could quite easily have failed had it not been for his smarts, wit and tenacity. It's a must read for anyone who is either in the business of managing people or just looking to be a part of building a great business. Horowitz's latest book, What You Do Is Who You Are: How to Create Your Business Culture, looks like another must-read, too.

Our Twitter feed this week was dominated by investors who, not content with successfully predicting the (rather obvious) actions of central bankers, have suddenly become experts on Coronavirus and a host of infectious diseases! Tom Nichols shared this cartoon, which says it all:

And speaking of cartoons, this little beauty made us smile somewhat wryly after this week’s rollercoaster on the markets:

Away from the noise of social media, we got excited when we heard that HBO are going to adapt Naughty Dog’s legendary game The Last Of Us into a TV show. Having played the game, we believe it will work superbly well on the small screen. It’s garnered much critical acclaim for its engrossing take on the post-apocalypse genre, portraying the relationship between an adult smuggler and a teenager who may be key to curing a grisly pandemic. What starts as a simple extraction becomes a brutal journey across the North American continent. It’s going to be scary, heart-breaking and impossible to ignore.

Morgan Housel is at it again with an article entitled Death, Taxes, and Three Other Inevitable Things. We particularly enjoyed reading his view on talent – and perceived talent:

“You can believe in meritocracy, and you should. But you should also believe in the Matthew Effect, which is the idea that success tends to snowball independent of skill because perceived talent can be more advantageous than objective talent.”

Like death and taxes, the Matthew Effect is a certainly. So it’s worth considering how to leverage it in your own life.

What we're watching.

We wanted to watch something funny this week, so we turned to recently released Season 5 of Better Call Saul on Netflix. It’s still one of the best things on TV, although it’s becoming increasingly sad in tone, definitely more a drama-comedy than a comedy-drama. Episode one was satisfying; after being teased for several seasons, we finally saw Jimmy McGill become Saul Goodman, lawyer to the misfits and criminals of New Mexico and a legendary character that fans of Breaking Bad will know and love.

We’ve also been watching far too much Poirot. After coming across this documentary on David Suchet’s life playing the idiosyncratic Belgian detective, we couldn’t resist dipping back into the world, which is a favourite from our collective childhoods (a testament to the global reach of the show).

The storylines are utterly preposterous but they are also utterly entertaining, and it’s so much fun trying to guess who committed the crime (mostly murder, sometimes just theft, often theft and murder). Poirot descends from an illustrious lineage of fictional detectives including Edgar Allen Poe’s C. Auguste Dupin and of course, Sir Arthur Conan Doyle’s Sherlock Holmes, and his creator Agatha Christie borrows various traits from these great sleuths, whilst inventing new traditions like meticulous dress, dramatic final speeches and of course, gorgeous locations. If you’re looking for a dose of escapism this weekend, check out the complete collection on Apple TV.

What we're listening to.

This week we tuned into an interesting audio book called Willpower Doesn’t Work, by a chap called Benjamin Hardy. His insight is rather obvious – willpower won't last long if our environment is in conflict with our goals – but the anecdotal examples he uses are beautifully constructed and listening to the book helped to underscore our belief that concerted action is required to mitigate the over-stimulating culture we live in today. We are convinced that winning is mostly about not losing, and by optimising our environment for success, we can cut out a lot of mistakes that hurt our performance as investors and people.

We’ve also been listening to a lot of house music on Spotify. It seems like the algorithm has got better at curating electronic music, as we’ve been liking and shortlisting a lot of very good house music this week. Perfect for writing, exercising, commuting and yes, the odd bit of partying!

Also, it turns out that one of our team is a Eurythmics fan (Kempo take a bow). So we have been listening to this jaunty tune all week. It might be slightly annoying when played on repeat, but these guys certainly knew how to write a chorus!