Weekend Reading #79

Photo by Masaaki Komori on Unsplash

This is the seventy-ninth weekly edition of our newsletter, Weekend Reading, sent out on Saturday 1st August 2020. To receive a copy each week directly into your inbox, sign up here.

*****

What we're doing.

This week we’ve been working hard behind the scenes on compliance and regulatory cover for our private deals platform, 3BC. This area is often ignored as being the unsexy part of any financial services business, but when you overlay a tech platform on top of it, it can get really complicated, really fast! And there’s no quicker way to slow development or damage your reputation with issuers and investors than being shoddy when laying these foundational building blocks. 

We believe that if we get this part of the process nailed down and functioning properly during the early stages of our development, it will be a major asset and a competitive advantage that will give us fuel for the future. As with everything else in our business, we build from first principles, and it’s why we believe we will be able to grow and scale at lightning speed when we feel the time is right. 

More exciting announcements to come in the next few weeks about what’s been going on with 3BC, and whilst the behind-the-scenes activity may seem a little more mundane, to us, it's no less important. 

What we're thinking.

The highlight of the week from an investment perspective was the continued surge in most digital assets and in particular Ethereum, which finally broke out in spectacular fashion after weeks of threatening to do so. Bitcoin also rallied sharply and we continue to monitor with excitement the developments in the space. For more of our thoughts on this, read this week's blog post!

If, like us, you’re working on compliance or watching markets and stuck in a home office and yearning for some travel, one of the best (and cheapest!) alternatives we’ve found of late has been a cool little website called Windowswap. It’s a simple idea: you go to the site, click to begin and you can scroll through an almost infinite number of views from windows all over the world. In the last five minutes we’ve been in Jaipur, Honolulu, Xanthi, Cordoba and Copenhagen. 

What’s lovely, too, is the sounds that you get to hear from the windows you visit. The sound of the Pacific Ocean, the hustle of Indian streets, the peace of the Greece coastline. Worth a go if you have a spare five minutes… or five hours.

What we're reading.

Here’s a headline for you: “Hedge Fund Fees in Free Fall Is the New Reality For a Humbled Industry.”

Bloomberg recently published this article observing that world’s most prominent managers have come to the stark realisation that they need to upend the 2/20 fee model that’s been a fixture for decades. “For some smaller firms, the goal isn’t growth. It’s survival.” 

We’ve been saying this for some time. In fact, our business – and our performance fee only hedge fund – are built upon this insight, preempting the structural shift in our industry that’s been underway for some time. The brutal truth is that people are increasingly unwilling to pay for access, only performance. So, instead of fighting against the current, we’re embracing it and building a business around where the world is headed, not where it’s been.

This is a highly-charged and somewhat sensitive topic – and we’d love to hear your thoughts on it.

Earlier this week, the big four tech companies, Amazon, Facebook, Google and Apple were summoned to appear in front of congress. The contrasting addresses from the various leaders was fascinating to behold. We read with great delight, Jeff Bezos’s statement which tells of the origins of Amazon and his own early life experiences all the way to building Amazon the way it is today. It was a master class in public relations and we highly recommend everyone take the time to read it themselves. 

Whilst on the subject of big tech, it’s worth checking out this thought provoking essay on regulating technology from Benedict Evans (who BTW has just launched a premium version of his excellent newsletter). 

Technology was a small industry until very recently. When Netscape kicked off the consumer internet in 1994, there were only 100m or so PCs on earth, and most of them were in offices. Today 4 billion people have a smartphone: three quarters of all the adults on earth. In most developed countries, 90% of the adult population is online. 

Tech has gone from being just one of many industries to being systemically important to society. Marc Andreessen liked to say that ‘software is eating the world’ – turns out it did. When something is systemically important to society and has systemically important problems, this brings attention from governments and regulators. 

It is said that those who cannot remember the past are condemned to repeat it. But what of those who recall the past inaccurately? It is commonly believed that the course of the Cold War was turned by the detente deftly engineered by Nixon/Kissinger with the Soviets and the Chinese. Lesser known is how the story was infinitely more complex (and perhaps less laudatory to the efforts of the US), starting with how the British military withdrawal from Singapore unexpectedly hurt Soviet ambitions in Southeast Asia, how ASEAN anti-communism contained Vietnam and China (which Chinese premier Zhou Enlai knew very well) and how ASEAN diplomats, often left out of the story, directly and profoundly influenced the principles of Sino-US detente - and the eventual end of the Cold War. 

More on this from our friend Wen-Qing in his 2017 essay which remains starkly relevant to putting everything we’re seeing on the geopolitical front in firm context.

What we're watching.

We take our compliance advisor’s advice very seriously. And that advice this week extended beyond client categorisation and financial promotions to cover what we should be watching on Netflix. And we were pleased that we did follow his advice in this instance as the documentary he recommended, The China Hustle, is well worth a watch. 

If you enjoyed The Smartest Guys in the Room, Inside Job or even The Big Short then this is a great documentary for you. It tells the story of how in the wake of the 08/09 financial crisis, investors seeking new alternatives for high returns sniffed out a broad range of exciting opportunities in China… and everything was going great until a few key actors discovered a massive web of fraud that called all those all-but-guaranteed potential returns into question. 

Educational, eye opening and pretty jaw dropping, this is a great doc for finance geeks who like to dig deep into the intricacies of global corporate fraud – if you’re into reverse mergers, this is the 90 minutes for you! No wonder our compliance advisor enjoyed it so much. We hope you do too. 

We greatly enjoyed the conclusion of a BBC 3-part documentary on the empire of Rupert Murdoch, The Rise of the Murdoch Dynasty. It was a fascinating insight into the business dealings of a man who has made an indelible impact on the world around us. Whatever your political leanings or personal opinion of how he’s done it, you can’t argue with the fact that Murdoch and his family have shaped what we watch on television, how we consume news and who we vote for in our elections. Much of our reality is his doing.

Layered atop this story of immense business success is a family struggle, with Rupert’s three children vying to be first in the queue to replace the patriarch when the time comes. Fans of HBO’s drama, Succession, will be familiar with the politics and shenanigans in play here, with Lachlan, James and Elisabeth being pretty good imitations of Kendall, Roman and Siobhan. It’s not hard to see where HBO took its inspiration from and this documentary is no less entertaining or dramatic. 

What we're listening to.

We find the Tim Ferris podcast a bit hit and miss. Sometimes it is just too, er, Tim Ferris but we really enjoyed the recent episode with chess grandmaster Maurice Ashley, who chatted with Tim about he became the first African-American grandmaster in history. 

Ashley is like few other grandmasters. He likes to trash talk when in-game and he also is one of the world’s most famous chess commentators. Away from when he’s playing, he’s looking to revolutionise the world of chess by bringing it to the masses with the style of the coverage that he provides when he commentates on the world’s biggest matches. He’s also a big believer in the power of chess and chess strategies, sharing how they can help both on and off the chessboard. 

If you’re a chess player or fan, this is a great podcast as it’s so different from so many of the other chess resources that are out there. Even if you don’t like your chess, this is a fun, inspiring and timely listen and we highly recommend it.