Weekend Reading #73
Photo by Jason Wong on Unsplash
This is the seventy-third weekly edition of our newsletter, Weekend Reading, sent out on Saturday 20th June 2020. To receive a copy each week directly into your inbox, sign up here.
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What we're thinking.
When we wrote our note about banks turning into utilities, the idea was that such developments weren’t necessarily slow, but at least subtle. It turns out that we got that part wrong, when China this week literally asked their banks to cap profit growth to single digits and instead support the growth of the economy.
Another angle we’ve been thinking about which ties into this above theme is the rise of Decentralised Finance or DeFi. There has been an explosion of liquidity on many of the DeFi protocols this week. Compound released their COMP token to much fanfare and initial success. Upon listing this week it immediately reached the largest market capitalisation of any DeFi token. This iteration of protocols is fascinating. Each protocol has their own nuance, but generally some kind of yield or tie in to cashflows or interest earned is bolted onto the token mechanism which means it is theoretically possible to calculate some kind of valuation. Apart from Compound, platforms like Kyber, Synthetix and Aave have shown material growth and there has been a corresponding rise in the value of each platform’s tokens. This is a trend we are watching closely. The concept of DeFi is fascinating to us, as it is essentially building a completely new, decentralised, open source set of global payments rails. Right now it is still incredibly early, but in time these could well prove a material threat to the incumbent infrastructure upon which the banks of the world are run.
What we're reading.
The US/China trade war has been written about ad finitum. But if a single item sums up what that battle is all about it’s one we all use everyday (you’re using it right now to read this) and you’ve likely never seen it. It’s the semiconductor.
Some believe the invention of the semiconductor is right up there with humanity’s greatest achievements. These tiny items, made of silicon, cobalt, and copper, are central to all modern technology and sit inside almost every electronic device, whether that’s in your car, your phone, your computer, a supercomputer… nearly everything we do in 2020 is based on this tiny construct of metal and metalloid.
Given the role they play, understanding them should be important and this fascinating piece, translated from the original Mandarin, writes up the history of Taiwan Semiconductor Manufacturing Company (TSMC), one of the largest semiconductor manufacturers on earth, and tells the story of its enigmatic founder, Morris Chang. It’s a fantastic read and well worth your time if you’re interested in understanding how the world works.
And if understanding the world makes you tick, we also enjoyed this epic photo essay from the New York Times and American photographer, Christopher Payne, titled How Giant Ships Are Built. As the title suggests, it’s about bloody big ships. Container ships play an enormous role in the modern global economy, making up a circulatory system of trade that carries more than 90% of all traded goods.
As you can imagine, building these behemoths is no easy feat. In an age when so many actions seem to be completed at our fingertips (by semiconductors), seeing how the gargantuan ships that keep our world on track are constructed from the ground up is inspiring and tremendously exciting. It’s an essay that makes you feel small but also astonished by the scale of human accomplishment.
It’s awesome to think about the relationship between the semiconductor, that weighs a matter of grams, and the container ship, that tips the scales at hundreds of thousands of tonnes. Very little and very large, the minnow and the whale, both vital cogs driving the global machine.
What we're watching.
It seems some weeks you just get more spam emails than others. From time to time, you must reach the top of their list and it’s your turn again. Well, that was the week in our inbox this week, and it put us in mind of this classic, hilarious TED Talk about what happens when you choose to hit reply. Writer and comedian James Veitch recounts a weeks-long exchange with a spammer who offered to cut him in on a very hot deal, the type that you can find if you head to your spam folder right now. It’s tempting to have a bit of fun like Veitch, but we suggest simply hitting delete.
Hunters on Amazon Video is awesome! Al Pacino features as concentration camp survivor turned “nazi hunter”, Meyer Offerman. He heads up a nazi hunter squad in 1977 New York City. The show is truly Tarantinoesque as one good friend put it when he recommended it to us so if you are squeamish it may not be for you. It is dark and witty and pure viewing pleasure.
This drama series Philharmonia is far from ‘spam’ but it could be borderline ‘trashy’ and it’s set in an environment that was most foreign to us before we began watching. It’s a glamorous French production about an exiled conductor with (inevitably) a secret past who returns to Paris to take over a troubled small orchestra. Unless you’re a big fan of small broke orchestras, it won’t sound too exciting thus far, but things soon hot up.
The show is soon romping along at vivacissimo pace as it heads off on an exhilarating tour of ambition, love, jealousy, infidelity and, yes, murder-most-horrid. If it’s a decent dollop of escapism you’re after, then this show shouldn’t let you down. Oh, and Paris looks magnifique, so that’s nice to look at, too.
What we're listening to.
An episode of the Invest Like The Best podcast we caught up on this week was host Patrick O'Shaughnessy with Ben Thompson, author of the excellent business newsletter, Stratechery.
If Stratechery’s insights are anything to go by, Thompson is one hell of a business analyst. He proves his mettle in this lively discussion with O'Shaughnessy about Thompson’s ideas, including his well-known aggregation theory, which we’re looking to explore in running our business, especially our private market deals platform, 3BC.
In a nutshell, aggregation theory sets out why companies like AirBnb, Google, and Netflix have successfully disrupted traditional industries by consolidating (aggregating) distribution and suppliers and ‘owning the demand’ by being in control of the relationship with consumers. We are fascinated and excited by this central premise, and it was great to hear Thompson talk in depth about this and more on the podcast.
This week we’ve been getting back into running, with early mornings being the best time in London to put some miles into our legs. We’ve found the perfect accompaniment to some early morning clicks to be Philadelphian grand-scale guitar band The War On Drugs and their 2017 release, A Deeper Understanding.
This is stadium-deserving music, and it gains its edge and substance from the influences the band draws upon. Their melodic riffs come right from Dylan, the big choruses and sax solos from Springsteen, Tom Petty brings the relentless rhythms and it’s all mixed under an epic soundscape sky that seems like it shrouded The Killers not too long ago.
And if that combination of sounds can’t put a spring in your step when pounding the pavement at 6 am on a muggy, drizzly morning, give up, turn around and go back to bed.