Weekend Reading #128

Photo by Sharon McCutcheon on Unsplash

This is the hundred-and-twenty-eighth weekly edition of our newsletter, Weekend Reading, sent out on Saturday 24th July 2021.

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What we're thinking.

The markets this week have been busy dishing out surprises of all sorts: a volatility spike on Monday that saw the S&P clock a sharp decline was promptly reversed on Tuesday, along with a compression in market volatility that took the VIX promptly back to its levels from last week. In that shakeout, however, it wasn’t a case of “Monday never happened” - as expected, dispersion was very much in play, with an “unchanged” headline index number belying the widening gap between winners and losers under the surface. 

Notwithstanding all of that, the Chinese internet space also had a tough week facing down its regulators – not as if they could really do anything to lobby against regulations. The risk here is of a structural de-rating of China’s attractiveness as a market to foreign investors. As we’ve argued before, the rules are different, and failing to understand those rules and imposing preconceived ideas of how markets should operate on China is a recipe for disappointment. There are ways to make money in China – but those ways may not necessarily agree with the textbooks.  

What we're reading.

Jawad Mian’s Stray Reflections monthly and blooming community has become something we simply cannot do without. One of his recent insights is into the parallels of today’s billionaire space race with the race to build the tallest skyscrapers in the late 1920s. For those who don’t subscribe to his monthly piece, this twitter thread sums it up perfectly. DC

The "creator economy" is a phenomenon that needs to be grasped if you want to make sense of the future of the internet. Social-media platforms are embracing the word “creator” as the successor to the internet's most recent obsession, the "influencer". Just last week, Facebook said that it would invest $1bn in content creators for Facebook and Instagram. So, the shift towards a creator focus is clear, but what does the creator economy mean? In short, “creator” is being adopted as a byword for a new generation of social-media spaces purportedly designed to provide support for content producers. Where the ad-driven platforms Facebook and Twitter profit from our data and attention without giving much back, such as Clubhouse and OnlyFans, deliver a larger share of value to users by allowing them to monetise directly. Instead of the company’s selling ads based on factors such as engagement, creators get paid by their viewers via subscriptions, tips, or crowdfunding. The word “influencer” emphasized a person’s effect on their followers. “Creator,” on the other hand, stresses that everyone posting on social media is producing something, pitching into the collective effort of making user-generated platforms compelling and profitable. This idea has proved highly marketable: the creator economy has reportedly seen $1.3 billion in investment funding in 2021 thus far, nearly three times the funding it received in all of 2020. It's on the rise and understanding its future across all internet mediums is crucial. And, for that, this excellent explainer in the New Yorker is a great help. EJP

This interview from The Verge with Mark Zuckerberg really got my attention. In it he describes how he sees Facebook being a “metaverse” company and talks quite a bit about his vision of what the metaverse may look like. One of the things we love about Facebook as a company is Zuckerberg himself. For all his many faux pas he has built arguably one of the greatest companies in history. Sure, Facebook is impressive for its initial social media success but what is impressive to us is how the company has reinvented itself a number of times as the world has changed. From Facebook to Instagram and Whatsapp, there was an evolution and in this interview Zuckerberg makes crystal clear where he thinks the puck is going next. Oculus is the headline-grabbing acquisition with some already cool products but smart acquisitions like Control Labs also begin to populate a clearer picture. At just 38 Zuckerberg is only getting started. Imagine what stories we will be telling about Facebook when he is 50. DC

On the flipside, this piece from John Stokes, covers how he believes Blockchain will break up big tech. It’s a concept we have come across many times before, most notably a couple of years back in George Gilder’s Life After Google, but Stokes’ take reminds us that just as companies seem to be in their prime, unless they are able to adjust consistently and spectacularly, the seeds of their ultimate demise may be simultaneously brewing. DC

As Ed has alluded to, the “creator economy” is a fantastic space where real money is being made. However, an article I read earlier this week shows the somewhat darker side to the sector, rampant piracy. It wasn’t until reading the above section that I was reminded of it, but this Bloomberg article acts as a nice follow on. It discusses the problems that exist with content theft and the struggle creators have to recover it amongst slow-moving tech giants. This is especially tricky in the adult content where rip-offs of pornographic content can have serious real-world consequences for those involved. After all, not only are these platforms a livelihood for these creators, but for those that briefly dabble in it, it is a stark reminder that nothing is truly ever deleted online. HS
 

What we're watching.

We were delighted this week to find that the excellent Baptiste had returned for a second series. The show uses one of the central characters from the first-class (and equally scary/depressing) TV series, The Missing, the detective Julien Baptiste. Baptiste is a tricky fellow who carries the weight of the world on his shoulders and with him every limping step that he takes but he is also, in many respects, a saintly man whose life mission is to find missing people on behalf of their loved ones. The first season was set in Amsterdam, with the excellent Tom Hollander playing the missing person’s relation, and this second season has moved to Hungary where Emma Chambers plays a British diplomat whose family have all gone oddly absent. The drama unfolds from there with Baptiste stepping in to see if he can unpick what happens to the diplomat's family. It’s a brilliant show. Clever. Engaging. Fresh. And it’s all brilliantly written and acted. What’s not to like?! (Other than the fact that it’s an immensely depressing premise!) EJP

The Story of Mauri Prosperi is perhaps one that not so many know, but it’s absolutely fascinating. This week, I came across a YouTube video by chance titled, ‘What if you were Stranded in the Sahara Alone?’ and in just 20 minutes or so, it perfectly explains the tale of former police officer and ultra-endurance marathon runner Mauri Prosperi and his disappearance in the middle of the Sahara Desert back in 1994. Whilst attempting the Marathon Des Sables; a 6 day, 251km run across the desert, Prosperi was forced off track due to major sandstorms. Having been unable to find his way back, he traversed more than 180 miles off track crossing the Jebel Bani Mountain Range and even going across an international border into Algeria. He lived off bats, sucking wet wipes for moisture and drinking his own urine for a week, and when he thought it was the end, he even attempted to end his own life in a selfless act that would result in his body being able to be found and his wife able to claim his police pension. However, he was so dehydrated that this wasn’t even possible, as his blood clotted right away. Despite this, the inability to die gave him a renewed sense of purpose and so he decided to go onwards, determined to continue until he found any signs of civilisation at all. Eventually he found some nomadic tribespeople, where he was able to call for help. He was quickly rushed to hospital and despite losing more than 15kg of bodyweight in the 9 days total missing, he survived. I’m Having recovered over two years, he went on to compete in the Marathon Des Sables race a further 6 more times. After a quick search, I also found that he wrote a book about the whole ordeal, although unfortunately, it seems to only be available in Italian. HS

If I had a £ for every form of cricket that’s now being played around the world, I’d have about £9. Test match, 50-over, T20, day/night... the list goes on and on. Hence, there was a fair amount of cynicism around when another new format was launched this week with the start of The Hundred. This form of cricket, as the name suggests, gives each side 100 balls to get as many runs as possible, making it marginally shorter than a game of T20. But it’s pretty much the same package, just rebranded with some new rules (such as 5 ball overs), shiny graphics on screen (which are largely unreadable and unfathomable even to me and I know a bit about cricket!), lots of loud music throughout, and, here in the UK, regional teams. The same big hitting, chaos and noise abound and the “product” (what a horrible word to describe a sport!) is squarely aimed at a public who don’t necessarily like the idea of dot balls, cricket whites and 5-day Test matches. And fair enough. Sport needs to evolve to stay ahead, indeed, to stay alive, and, having watched some of the opening games which have been broadcast free-to-air on BBC, I’ve been hugely enthused by the cricket. Most importantly, watching the opening match of the women’s competition between the Oval Invincibles and the Manchester Originals, the only thing that you really needed to take away was the number of young girls in the crowd, having fun, being entertained and engaging with some top-quality sporting action. As a father of a daughter, the rule changes, gimmicks and bright lights aside, that was the thing that most stuck with me, and it reminded me how rule changes, gimmicks and bright lights actually bring in a new age and type of supporter and, potentially, new sports players and stars. Stay the same, and middle-aged miseries like me will stay enthused. But shake things up and 5, 6, 7-year-old girls may switch on and like the look of taking part in this bright, shiny sport being played by superhero women. And that thought should silence any cynics. EJP

For any lovers of Chopin’s piano works, there is nothing more satisfying than an unending stream of performances from the International Fryderyk Chopin Piano Competition, with both live streams and recordings available on YouTube here direct from the Warsaw Philharmonic Orchestra’s Chamber Hall. The best part of it is that these are just the preliminary elimination rounds – the ACTUAL competition only begins on the 2nd of October. Chopin is perhaps one of the most influential piano composers, drawing his inspiration from Polish folk dances, as well as the work of Schubert, Bach and Mozart, and is a massive symbol of Polish national pride. Warsaw’s international airport is named after him (always a big thing!), and the Chopin Institute, which hosts this piano competition, was set up to research and promote his work to the world. And so far, they’re doing a great job. EL

What we're listening to.

In these chaotic days we’ve found solace and joy in Mozart. On one hand in the Zauberflöte, especially William Christie and Les Arts Florissants, which even though it’s 25 years old, has a freshness and lightness to it that makes the music feel stunning and new. And we’ve found lots to smile and be intrigued about his variations on Ah! Vous dirai-je madame, also known as Twinkle twinkle little star in this recording with Andrew Schiff. LM

And talking of trying to be calm in the current chaos, I've found great solace recently in the album, Recomposed, by minimalist multi-instrumentalist and film soundtrack guru, Max Richter. This album reimagines Vivaldi's, The Four Seasons, and is a complete re-composition and reinterpretation of the original. Whilst using the original at its core, Richter is on record saying that he discarded 75% of Vivaldi's material. The parts he has retained are used cleverly on repeat and in loop to create a new, ethereal sound and collection of wholly different sounding music. This is a great album for focus and a perfect soundtrack if attempting to engage in what so many now call "deep work". Whether deep or not, with a million-and-one other things going on, it’s helped me work this week. EJP

Back on the podcast scene, this episode of the Market Huddle featuring self-taught quant Harel Jacobson (aka @VolQuant on Twitter) is intriguing to listen to, as he talks of how he found his way into the world of volatility trading and how he thinks about simplifying complex ideas around option greeks into concepts that even his two young daughters can understand. His blog on Medium is also a wonderful read which has helped to elucidate many of the more complex issues around options and is a must read for anyone who wants an easy-to-understand introduction to an increasingly not-to-be-ignored space. EL