Weekend Reading #143

Photo by Renee Fisher on Unsplash

This is the hundred-and-forty-third weekly edition of our newsletter, Weekend Reading, sent out on Saturday 6th November 2021.

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What we're thinking.

With the melt up in US markets and cryptocurrencies, one could be forgiven for thinking that every single asset is going up but a look deeper under the hood shows that in fact many assets are breaking down. Iron ore has collapsed and so have the equities of the producers. The Turkish Lira has collapsed to (yet another) record low. And one final example - Peloton, one of the darlings of the market over the past few years fell 30% in the premarket (at time of writing) after its third quarter results and less-than-inspiring 4Q guidance. Many complain that the market is irrational. It isn’t. The market is the collective consciousness of all its participants. Spend time understanding what drives each grouping’s behaviour and it suddenly doesn’t seem so irrational!

In our fund’s first investor letter we wrote 18 months ago we referenced a quote from the Liu Cixin trilogy that inspired our business’s name.

“干我们这行的，其实就是把好多看上去不相关的事情串联起来，串对了，真相就出来了。”

“In my line of work, it’s all about putting together many apparently unconnected things. When you piece them together the right way, you get the truth."
This is the answer of police detective, Shi Qiang, to a question from nanotech professor, Wang Miao, desperate to ascertain what was going on in a tumultuous world. Shi Qiang is one of our favourite characters from the book as he is direct and methodical. He isn’t an intellectual, but he is extremely street smart and sharp as a razor.

This quote is more relevant than ever today. There is so much information out there. And so many opinions. The job of an investor today is to bring them all together in such a way that consistently leads to the right outcome.

On that topic this week saw the release of Tencent Video’s trailer for the Chinese language version of The Three Body Problem. It looks awesome! Last week Netflix announced the cast for their version of the trilogy which starts filming this month. It will be fascinating to see the differences between the “Chinese” show and the “American” one over the next year or so.

What we're reading.

This week, inspired by the movie billboards plastered on every street corner and London bus, I took the plunge and started reading, yes, reading Dune. As we all know, Frank Herbert’s 6 book series (Dune; Dune Messiah; Children of Dune; God Emperor of Dune; Heretics of Dune) is hailed as one of the greatest works of science fiction in history and even only 100 pages into the first book, I’m beginning to see why. As is so often the case when you sit down to read any new work of science fiction, I have little clue as to what’s going on at the moment, but the world being created, set thousands of years at some point into humanity's future, is rich, dense and fascinating. Yes, the film might be a quicker fix, but putting in the work with the books seems to be a more immersive and, ultimately, rewarding experience. I’ll see the film in due course, the only question being whether I can get through the book before it stops showing at the cinemas! EJP

Last week I went to a bookshop for the first time since covid. I spent an hour mooching around Daunt Books in Marylebone. After a few non-fiction reads in a row I needed a couple of fiction titles. One I bought is a Nigerian sci-fi which I haven’t tackled yet and the other which I found in the Turkish section I finished in 5 days. It is called Belshazzar's Daughter and is written by Barbara Nadel. It is set in the late 90s and is the first in a series of novels featuring Istanbul detective, Cetin Ikmen. In this case he is called to investigate the gruesome death of an elderly Russian Jew in Istanbul’s dilapidated Balat suburb. Apart from the riveting action it tells of a certain time in Turkey 20-odd years ago. Some things have changed, yet a lot has not. It reaches all the way back into czarist Russia and I couldn’t put it down. The good news is there is an entire series to come for me! DC

To read an epic like Dune takes a lot of concentration and concentration relies on an immense amount of energy. And how to generate energy is one of the mysteries of all our lives. Sleep? Exercise? Coffee? Red Bull? All of us know people who have more energy than we do, and plenty who have less. We may admire or envy or even pity these people who somehow manage to juggle countless projects, eat up self-improvements every week, stay fit and healthy whilst remaining well rested. How do they do it? Well, even if it is only a slight uptick you are after, this excellent article in this week’s New Yorker reveals some of science’s secrets. EJP

What we're watching.

Clickbait is a Netflix show that has more twists and turns than a cheap garden hosepipe. It explores what unfolds around the Brewer family, who live in Oakland, California, when they discover that the father of the family, Nick, is missing. The next we see of Nick is when he appears in a viral online video, which contains a chilling message saying that he will die should the video reach 5 million views. What transpires is a smart, fast paced show that keeps you guessing right up until the very last episode. It’s not The Wire or The West Wing, but it is thoroughly entertaining nonetheless and explores, amongst many dark themes, the way we all interact with social media and our phones on a 24/7 basis. EJP

What we're doing.

As life returns to normal, so to comes the return of in-real-life keynote speeches and conferences. This week we had the pleasure of speaking to the Chief Marketing Officer (CMO), Gareth Dunsmore of the British automotive legend, McLaren. It was a fascinating hearing about the firms’ recent move to the use of blockchain technology to authenticate logbooks and prove vehicle ownership. Aside from the talk, it was also a fantastic opportunity to see a couple of the brands' latest models and talk about all things F1 with some fellow fans. HS

What we're listening to.

Invest like the Best with Patrick O’Shaughnessy has become a bit hit and miss of late as understandably there are only so many high-quality guests one can find! However, this week’s conversation with Roelof Botha of Sequoia fame is most definitely a hit. A fellow South African of mine, Botha, chats about Sequoia’s decision to restructure from its traditional term-based fund structure to an open ended, permanent fund called the Sequoia Fund. It makes sense as you listen to him elucidate the reasons for it. His logic is that the venture capital industry hasn’t changed its structure since the 1970s and in today’s world, a lot (if not most) of the value created by many of their portfolio companies is created after IPO so why should they be forced to exit to the public markets at a time where many companies are just beginning to hit escape velocity? They cover many other topics too and it was a great listen. DC

p.s. Interestingly, public market investors take the opposite view, often suggesting that most of the value is created Pre-IPO with companies listing LATER on than they used to. As a result, their claim is that PE funds extract all the good stuff at the IPO listing, leaving them with bags of overvalued stock. The truth probably lies somewhere in between but the fact that there are opposing views is what makes a market.

This episode of Bankless featuring Chris Dixon from a16z talking about mental models in crypto is definitely food for thought, especially for anyone who looks at crypto and thinks “but this makes no sense!” Chances are a different mental model has been adopted, hence it almost seems like everyone’s talking on different frequencies. One interesting point he raised was the potential for there to exist centralised utilities that make accessing decentralised content easier, without necessarily having the platform own the content: case in point is OpenSea which creates a marketplace for NFTs stored on each user’s individual wallet, without users actually handing ownership or custody of anything over to the platform. The implication: platforms need to “play nice” and strive to be compatible with users’ content and assets, rather than the other way round where users merely “rent” off their existing web2 platforms. No, you don’t own your Twitter handle. Nor your Instagram handle and photos. Nor your Facebook account. Someone else does.

On that note, a16z does what it does best and puts its money where its mouth is, with its latest (of many) crypto investments being a $150m investment in Mythical Games. But it’s more than just another game – Mythical Games also operates a fully compliant, KYC-enabled platform for trading and showcasing NFTs. Think OpenSea (in which a16z is also invested), but with compliance. These guys have all bases covered. EL