Weekend Reading #70

Photo by Ethan Sexton on Unsplash

This is the seventieth weekly edition of our newsletter, Weekend Reading, sent out on Saturday 30th May 2020. To receive a copy each week directly into your inbox, sign up here.

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What we're doing.

Markets have continued to grind higher and we have seen the beginnings of the narrative shift to the cyclical trade, which has been dressed up as “value” in pretty much every publication you will read. We watch this with interest and believe that we are approaching the point where, for the first time in many years, there is an exceptional long/short opportunity between sectors and companies. 

This week marks a month since we started trading our Emerging Opportunities fund. In this time, we’ve clocked in our first month of performance (on the 15th of every month), and the capricious nature of markets has been on full display. More than ever, it has become clear that delivering consistent performance for our investors relies on discipline and consistency in execution, much more so than simply finding “the best ideas”. Managing money is an infinite game, and in the face of infinity, nothing is permanent. This brings to mind what we wrote in our piece, "Death of the Core Position": 

“Our job is to deliver alpha and absolute dollar returns. To do that, there can be no single stock attachment, no ideologies, no soft spots, no “core” positions. A change in the investment case for this month’s top buy could make it next month’s top sell. After all, a manager’s success is defined not by a handful of superstar trades, but by consistent overall portfolio returns over time.

What will our investors pay us for? Not for “top pick” stock ideas (call a broker), not for interesting blog posts (call a journalist), certainly not to blindly invest their money and blame the market when things go wrong (call your local ETF provider). An investment management team has ultimate confidence in its process when it can happily say it doesn’t know for sure where the return will come from over the next period, but it knows that wherever opportunity presents itself, returns will come.”

Our private markets deal platform, 3BC, continues to gain momentum as more early adopters sign up and create accounts. Getting live feedback from this group is helping to shape our thoughts about the direction in which we want to take 3BC, feeding into our roadmap for additional functionality we’ll be looking to build in future. The feedback has been great. It’s pleasing to hear that the first iteration of our product is doing what it should and it seems like we’re on the right track.

It was exciting this week to add our first new deal since launch, taking the number of companies listed on 3BC up to 6. We’ve also had a stack of fascinating discussions with a range of companies from all over the world who are seeking to raise capital via the 3BC platform and investor network. We’re certainly getting our money’s worth from our Zoom premium account! 
  
What we're thinking.

The only thinking we did this week outside of work involved a little maths problem...

What we're reading.

It was interesting to read about Spotify’s purchase of Joe Rogan’s podcast, The Joe Rogan Experience. The deal is exclusive, meaning that one of the world’s most popular podcasts will not be available via any platform other than Spotify. The news got bigger when we read Spotify is rumoured to have paid Rogan $100m. 

$100m is likely more than any musician has been paid by Spotify and it shows how important the podcast medium now is to them. Having snapped up podcast production houses Gimlet Media, Anchor, and Parcast last year, Spotify is also working with the Obamas, David Letterman and Amy Schumer on original long form content. This is where they think the action is and Rogan has been drafted in as their star player. 

For those that don’t know, Rogan is a comedian who started a podcast in 2009, back when the medium was in its infancy. His show is engaging and not without controversy, a simple interview format where he chats with actors, politicians and conspiracy theorists about the state of the world. Last year the podcast was downloaded 190 million times a month and Rogan has 8.5 million subscribers on YouTube. Spotify is buying this reach. 

And $100m sounds like a good deal for a podcast host, right? When you consider how Spotify’s market cap jumped $3 billion in the 24 hours after the news of this deal broke, you can see what the market thought of the acquisition and why some believe Rogan short changed himself. This article takes a swing at why Rogan might actually have been blinded by $$$ and the deal might actually only be good for one side: Spotify.

Members of our team who have not already completed Liu Cixin’s monumental Three Body Problem Trilogy (after which our business is named) are working their way through the books one by one. Some of the ideas and scenes are mind-bendingly good. Just when you think it can’t get any better, it does, time and time again. With each retelling the nachas we get grows, and so does our appreciation for the genius of the author.

Magazine subscriptions feel very last century. But pleasures with a little nostalgia attached are often some of the most well received. It turns out subscribing to a print magazine in 2020, when all of the content you’ll ever want to read is right there on the phone in your pocket, is as entertaining as it is refreshing. 

Of the print magazines worth subscribing to, The New Yorker has few competitors. The essays and short stories are almost without parallel in terms of their substance, craft and style. Whilst its extremely varied list of pick-and-mix weekly topics might not always match your immediate tastes, it’s hard to deny the outstanding penmanship of anyone who gets a word printed on its pages. The covers make the print copy worth buying. As do the cartoons. 

That’s what’s interesting about holding a print magazine in your hands. You get the chance to browse it from the first page to last. You can dip in and out when the mood takes you, working your way through a long essay over the course of a weekend, laughing at the cartoons one time, reading nothing and only looking at the photography the next. Flicking through a print copy of a magazine means you have a little time on your hands. That sense of calm is never achieved when scrolling Twitter or browsing an online newspaper. Print is luxurious, done at your own pace, likely in a place of comfort. Online is hurried, rushed.

This reminds us of the great Larry David, who makes a wonderful comparison between smoking cigars and cigarettes. Larry says the difference is time. A man puffing leisurely on a cigar, likely with a long drink in his other hand, has nothing-but-time. A man pulling on a cigarette has 2 minutes before he needs to grab coffee and head back to the desk. Not that we smoke, but the analogy seems to perfectly fit print and online, too. Online is a cheap cigarette – it gives you the hit of information you crave but little pleasure. Print is a Montecristo No 2 – it gives you the information hit and, with a little time to enjoy it, it can give you all the pleasure in the world. 

What we're watching.

An odd but oddly compelling Netflix series that caught our attention this week is Messiah, a series that brings Jesus Christ (or a version of) into the 21st Century. When a mysterious, mystical man gathers a following in the Middle East, the CIA’s attention is drawn to investigate his intentions. It’s a cool concept for a show and it seems to hit a nice sweet spot, landing somewhere between Homeland and House of Cards, which is quite a nice sweet spot to be in. 

Football is back! Hurrah! Well, sort of. It is in Germany, at least, and when you’ve been as starved of competitive sport as we have, we beggars are never going to be choosers and so tuning in to watch Borussia Dortmund v Bayern Munich gave us an incredibly satisfying reminder of what it feels like to watch live sport again. 

The stadiums may be eerily empty and the German league doesn’t quite have the same pull as the English Premier League, but it feels significant to be watching football again. We hope it means a little normality might not be too far away in other areas of our lives. Whilst we know we won’t be packing into football stadiums in the near future, at least we may be able to spend our Saturday afternoons back on the sofa enjoying a little sport. 

If you’re interested, Bayern’s victory took them to within touching distance of the Bundesliga title. Honestly, watching as a neutral, we couldn’t really care less about the result. But watching a competitive 90 minutes felt absolutely fantastic. 
 
What we're listening to.

You’ll have heard an enormous number of modern recording artists singing/butchering Frank Sinatra classics. But if you’ve ever wondered what it would be like for Sinatra (who died in 1998) to cover a modern artist’s work, you had to rely on your imagination. That is until now. 

The artificial intelligence development firm, OpenAI, released a new neural net, Jukebox, which it claims can create original music in the style of over 9,000 bands and musicians. To get a flavour of the potential of what they’ve built, check out Frank Sinatra singing Britney Spears’ “Toxic".

Now there seems no combination beyond reach. John Lennon singing an Ed Sheeran. Jimi Henrix covering Harry Styles. Elvis doing some Beyonce. The possibilities are endless... and mind boggling!  

At the other extreme of geekiness is this conversation from back in March between our favourite theoretical physicist Sean Carroll (whom some of us saw in the flesh - yes he’s real - at the Royal Institution last year) and perhaps one of the most illustrious neuroscientists in the world, Karl Friston (who is normally resident just down the road at UCL’s Institute of Neurology). 

The topic: the idea of “free energy”, and how the brain and any other self-organising biological systems function within the context of information theory to maintain non-equilibrium steady states. Put differently, how is it that more than 30 trillion individual cells come together to form a coherent, functioning system that is the human body? And what happens when things go wrong? (hint: anything from Parkinson’s to Schizophrenia).

Listener beware: put a theoretical physicist and a neuroscience guru together in a conversation about non-equilibrium steady states and the output is heavy stuff. To be honest, our summary barely does the conversation justice. A couple of replays are probably necessary. Additional reading is probably also required.