Weekend Reading #166

This is the hundred-and-sixty-sixth weekly edition of our newsletter, Weekend Reading, sent out on Saturday 30th April 2022.

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What we're thinking.

It is not an understatement to say that Elon Musk’s proposed Twitter purchase is shaping up to be an epochal battle as politicians and media owners will do everything in their power to keep him from succeeding. Not being an Elon acolyte per se, I tend to take a measured approach to the incredible things he has achieved. His goals and ambitions are admirable and there is little doubt in my head that he takes on the biggest challenges in the world in order to genuinely try to solve them. It's the method I’m on occasion not in agreement with. But as life goes on, I’ve learnt that not everything (or everyone) is black and white, hero or villain. Not everyone is either all good or all bad. In this case, I am absolutely behind what he is seemingly aiming to achieve for Free speech by creating a platform where one can find both sides of the story. Twitter, as it stands, needs change desperatelyif anyone can inspire people to bring it about it is Elon Musk. There are 2 pieces to share on this topic I watched this week. First David Sacks’ take on it here in which he calls it a “Berlin Wall” moment (with Fox news) and second Balaji Srinivasan proposes decentralising Twitter (with a full proposal) for maximum impact. He calls it “The Elondrop”. The latter could be especially interesting and would create something truly global and unique! Either way the action is just beginning. Many times it is written or said that a battle is for the hearts and souls of a nation. This could prove to be one of the most titanic corporate battles America has ever seen with the stakes so high. It is going to be riveting to watch. Winner takes all.

Elsewhere with the action in stock prices yet again creating havoc, I couldn’t help but think once more about Bitcoin and Ether. At just under $40k and $3k respectively in the biggest selloff for “long duration assets” and tech names in years, they have held on to the lion’s share of their multiyear gains. This is instructive to me. Sure, the volatility will continue but, in my mind relative to everything else, it is already a great success story. Only a massive liquidity shock with a rapidly rising dollar could really hurt from here. Problem is that is one of a number of possibilities we are looking at from here in the near term. DC

What we're doing.

As was briefly mentioned in last week’s update, I’d arrived in Amsterdam for a long weekend getaway and now having arrived back, what a weekend it was! In a trip that unexpectedly coincided with ETH Amsterdam, I was able to catch up with friends all whilst able to dine in one of the many ‘Vitalik’-branded restaurants including a pizzeria and a Sichuan-inspired eatery. Many joked that the co-founder of Ethereum had in fact sold half of his ETH in order to become a restaurant tycoon, although the likelihood was that seeing the conference arriving, it was a playful bid by restauranteurs to draw in the roaring tech crowd that filled the once-quiet streets. Following my time in Amsterdam city centre, we escaped to the more rural outpost of Leiden, a smaller city nestled halfway between Amsterdam and The Hague, and often referred to as “Little Amsterdam” due to its quaint canals and traditional Dutch architecture. Despite the countless bottles of Heineken consumed throughout the weekend, the guilt of overindulgence was equally countered by what felt like thousands of kilometres cycled over the trip. All in all, it was a great little getaway that upon my return to London gave me a renewed sense of motivation to crack on and get stuck into work. HS

What we're reading.

This brilliant article was penned by Soner Cagaptay, a director of the Turkish Research Program at the Washington Institute, whose books I have read before, and Rich Outzen, a retired colonel in the US Army and member of the US State Department’s Policy Planning Staff from 2016 to 2018. It goes deep into the history and impact of Turkey’s most famous recent export - its Bayraktar drones. I first started following the Turkish domestic weapons and defence sector many years ago when it became clear President Erdogan wanted to develop a successful domestic weapons program to reduce Turkey’s reliance on foreign weapons systems. I doubt even he could have foreseen the incredible success that would ensue. Not only has Turkey succeeded in changing the terms of engagement for itself in its battle against the PKK and to achieve its ambitions in Syria but also the drones proved to be the decisive factor for Azerbaijan in the recent Naborno Karabakh war with Armenia. Now last week's attack and destruction of Russian flagship missile carrier, Moskva, has also been attributed to Bayraktar drones used by Ukraine to lets its Neptune missiles evade the ship’s radar. The article writes how the drones have bought Turkey some much needed international recognition and a seat back at the table with the US. Technology really does change the world. If you want to learn more about the company that developed the drones, it is the family of Erdogan’s son-in-law, Selçuk Bayraktar, who is the CTO and himself an extremely accomplished engineer. DC

Moisés Naím is a Venezuelan journalist whose writings have been critically acclaimed for many decades all over the world. His 2014 release, The End of Power, was a great read, exploring Naim's prescient view (one that has been proven to be true) that power was shifting, most significantly away from large, stable armies to loose bands of insurgents, from corporate leviathans to nimble start-ups, from presidential palaces to public squares. He also talked in that book about the way power was changing and becoming harder to use and easier to lose. This view has been shown to be especially true in recent elections and referendums all over the world. Change is the new status quo. The follow up to that book is the recently released, The Revenge of Power, which assesses the future of democracy, illuminating one of the most important battles of our time: the future of freedom and how to contain and defeat the popularity of autocratic rule. In this work, Naim focuses on, as he calls them, the three "P"s, namely populism, polarization, and post-truths. This is an enlightening and unsettling read, one that brings together several strands that we all read about and are aware of but, unlike Naim, do not have the intellect to pull together! At least, that is true of me and my minds and why I found this such an enjoyable read. It is wonderful when you read a book that irons out some of the creases in one's own thinking – and this was certainly one of those books for me, providing clarity for a lot of the thoughts and concerns that I have been trying to shape in my own head for some time. Interestingly, with COVID still ever so slightly addling my brain to such an extent that reading long-form is still quite exhausting, I raced through this book on audiobook, which was necessary but actually really enjoyable. I like podcasts and listen to a tonne of them, but there was something different and refreshing about long form audio on long walks. EJP

If you want something quick, fun and easy to read, I'm currently reading “A Del of a Life”. The hilarious and heartfelt new autobiography from the national treasure Sir David Jason. A national treasure and so many good experiences with his humour. DK

What we're watching.

This week I picked up a tweet from Su Zhu, co-founder of the very successful crypto shop, Three Arrows Capital. Zhu and his business partner, Kyle Davies, founded Three Arrows planning to trade EM FX before ultimately building a staggering crypto empire in recent years. He tweeted a link to a documentary on Youtube called “Princes of the Yen”. The documentary is based on a 2001 book of the same name by a German economist named Richard Werner, who rose to fame in the 90s as he accurately predicted the trajectory of Japan’s economic boom, bubble and then bust. It tickled my fancy given what's happening right now with Japan’s central bank policy. This is a must watch for some much-needed historical context. Werner’s name popped up again following the financial crisis once everyone learned about Quantitative Easing from Ben Bernanke. It turns out Werner, coined the phrase Quantitative Easing when he recommended it to the Japanese as a solution to lead them out of the busted bubble depression (they didn’t listen properly). I fell down a bit of a rabbit hole here and ended up watching some of his more recent interviews, including his views on what QE really is and how it SHOULD be implemented (targeted QE with specific applications for bank lending into real-world, productive projects) rather than how it was implemented. I highly recommend watching the original documentary which covers Japan’s post WW2 economic history as well as a two-part interview he gave earlier this month to Renegade Inc. In it he covers several modern-day topics. One of the most interesting bits was about the German banking system and how the deliberate proliferation of small banks is one of the secret ingredients of Germany’s productivity success. And later, how China followed the same roadmap (but this is now reversing in China). He touches on modern day QE, central bank digital currencies and crypto (his Bitcoin thoughts are highly original) and many other things too. The links to parts 1 and 2 are here and here. The documentary is extremely cynical of the motives of central bankers so bear this in mind when watching! DC

Two pieces of content I enjoyed this week both took novel approaches to the spy game...

First, Slow Horses is a strange show in that it is about spies, which is a genre of show that I’ve seen an absolute tonne of, but there is a truly different hook that sets it apart and makes it a thoroughly intriguing watch. The spies in Slow Horses, sequestered in Slough House somewhere in East London, are all spies who have made mistakes in their careers and, therefore, are being asked to do donkey work for Her Majesty’s Government in order to rebuild their reputations. It’s a great entry point to what is proving to be an entertaining series, with Gary Oldman playing the washed-up head of Slough House who dishes out the menial and low-level tasks to his group of repentant sleuths. I’d imagine that as the series progresses a number of these spies will find redemption and perhaps even go some distance to saving the world but for now, in the early part of the series, its fun watching spies being imperfect. Unlike Bond and Bourne, these guys aren’t easily able to crack the code and solve the riddle. They are human, failures in some respects, and it’s from that vantage point that we get a whole new look at the world of espionage. EJP

All The Old Knives is rather more traditional in its approach with a lot of perfect spies trying to solve a mystery. The basic storyline is about how when the CIA discovering one of its agents had leaked information that cost more than 100 people their lives, veteran operative Henry Pelham is assigned to root out the mole, the cause of the problem. This is the opposite of Slow Horses in that it is slick, fast, and very cool, which makes it an enjoyable and easy watch. It's straightforward, and a worthy adaptation of Olen Steinhauer’s novel, which I read many years ago. As with all good adaptations, the film looks like a decent version of what I had in my head when reading the book, so I’d recommend this as a watch. EJP

Where has the year gone...? This week I managed to get stuck into several of my favourites on Netflix. Bouncing along between “Pieces of Her”, “Bridgerton” and “The Flight Attendant”. The latter two are follow-ons from successful first seasons, where Pieces of Her is new to the screens and a pretty good thriller at that. There's enough to keep you going well into the weekend over and above all the phenomenal sport that’s on show at present. My weekend is sorted! DK

What we're listening to.

2 podcasts this week were really good. First up Dmitry Balyasny, founder of Balyasny Asset Management was on Invest Like the Best made a rare appearance to talk about the dynamics of running a multi-strategy, multi-PM model. This is real alpha for industry participants in terms of understanding how risk and return are balanced in the hedge fund format that has dominated the industry for the last decade or so. As a fund manager I really enjoyed it and picked up quite a few useful snippets.

Next was a really good interview in which crypto hero-turned-villain, Andre Cronje, appeared on The Dephi Podcast with Tom Shaughnessy. Cronje is a mercurial (fellow South African) figure who rose to prominence in late 2020 with the invention of the Yearn Protocol which shot to fame rather dramatically. Despite not performing well over the past years it still hovers around $20k a token, which for a token with a fair launch (no pre-mine) is an incredible result. He was also involved in many other projects in the space. He attracted headlines recently when he announced he was leaving crypto development to focus on gaining regulatory traction for the industry as a whole. He announced he is a big proponent of KYC’ed investing for crypto as that is the way that crypto can appeal and provide the necessary protections for the masses. This announcement was met with much anger from the very idealistic crypto community, and he was much maligned. In this interview he talks about all these issues as well as his history and his hero-to-villain journey. DC

I took some time to get into a podcast or two this week. For those who know me (and the rest of us), we really love sports. The current EPL (English Premier League) is coming to a close, and we are experiencing yet another closely contested championship. I find myself listening to a load of football pundits going at it week in week out, talking about the good (Man City and Liverpool) and the rest... ie: where it went wrong for Man Utd, Chelsea, Arsenal and Tottenham this year.. Give “The Sound of Football” a listen. One of the longest running independent soccer podcasts. (Described by the Telegraph as quirky, funny and well-informed). DK

Edward PlayfairMay 3, 2022