Weekend Reading #179 — Three Body Capital

This is the hundred-and-seventy-ninth weekly edition of our newsletter, Weekend Reading, sent out on Saturday 30th July 2022.

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What we're thinking.

Did the Fed pivot? Who on earth knows. What we do know is that the price action in growth tech has been showing signs of strength over the past month or two and if the market decides that the Fed has pivoted or paused or whatever, then there is room to rally as the price action suggests. When it comes to the official recession where many consider this to be the end (i.e.: we have now got recession, let’s move on), what if it's just the end of the beginning and we have a far deeper hole to climb out of. If the Fed is genuinely focused on inflation fighting (still debatable) then we have much pain to come. For us we try not to get too carried away with what we “think” and what we “believe” as most of the time, this changes (just read our newsletters!). We try to get our heads around what is possible either way and let the market guide us from there. As many are puzzled at how with each results miss, stocks have rallied, one remembers that markets are not only about fundamentals but much, much more than that.

The meme galore therefore continues, with this one from @Hsakatrades summing up this week’s moves:

Elsewhere, a debate around the viability of one of the crypto projects we’ve previously written about is brewing. Helium, which we wrote about before as one of the closest specimens of a practical, real-world application of token economics in driving user incentives and bootstrapping networks in a way previously impossible, has been recently under fire for being somewhat lacklustre in terms of revenues and the attractiveness of their token model. Particularly, this twitter thread has dealt a scathing judgement of Helium’s progress so far, asserting that Helium is no more than an overly complicated white elephant. For what it’s worth, these criticisms are valid, especially the fact that network revenues – despite the age and breadth of Helium’s network – remain much lower than many would’ve hoped.

As we’ve often reiterated, for all of the supposed sophistication of crypto and the excitement that this inspires, many if not all of these projects are interesting, fascinating early-stage ventures, just with a token that is publicly tradeable. Reflexivity comes into play too, especially when the rewards for undertaking certain forms of behaviour come in those very same tokens I.e. numba go up = more incentive, numba go down = less incentive. Helium is no exception, even if the realm in which they operate is much more tangible than say a DeFi project. Most importantly, one must never forget that being in the early stages of a business means lots of trial and error, getting things wrong and fixing them again.

What we're doing.

This week marked a big step for Nachas Networks, our trading software business, as it branches out on its own and takes up its first office space. Come by to 30 Churchill Place for beer on tap or a refreshing iced coffee from the comfort of Canary Wharf’s newest WeWork. To us, it seems the perfect place to incubate a young start-up, and given the sort of clients Nachas works with, Canary Wharf seems just right for our growing business. HS

What we're reading.

Common Sense is one of my go-to publications to read about current affairs for its pure search for truth. It is not left or right or anything but rather as its name suggest, just pure common sense. This article from Zoe Strimpel appeared earlier this week on Kemi Badenoch, a rising star who was a finalist in the Conservative Party’s love parade for new leader and PM here in the UK. It tells a rather remarkable story of how someone through sheer desire and intellect has risen to where she has. As someone born in Lagos who worked at McDonalds when she arrived in the UK as a teen, she is not afraid to get her hands dirty. Do yourself a favour and google some of her speeches. A reminder that even in the stuffy boys’ club of English politics, it’s possible to achieve something. She is just getting started, keep your eye out.

What we're listening to.

Lex Fridman’s chat with Lord Martin Rees is another of the plethora of chats he hosts with the best in the world about the mysteries of the universe, consciousness et al. This one was quite fun to listen to as Fridman’s idealism and particularly his awe of Elon Musk met with Lord Rees’s pragmatism. Lord Rees, at age 80, is a veteran cosmologist and astrophysicist at Cambridge University amongst other things and his views are really fascinating. He believes unlike maybe some others, that our progress in seeking an understanding of many of the mysteries of science is capped due to the limitation of our brain. What he does say however is that AI will definitely help us make ground-breaking discoveries that our own brains are not capable of. What we will need to get used to is that the AI can show us relationship and new theories and patterns and maybe even solve major mysteries, for example string theory and dealing with the geometry of ten dimensions. But we will probably not understand why these discoveries hold. We will understand that they work but we won’t know why. And the AI won't be able to explain it. It reminded me of one of the issues that psychedelic drugs have had in getting approval from the FDA. We know what psychedelics can do and how they can heal and help with mental illness. We can see the effects of them on the brain and its rewiring of the pathways. But we don’t know why it does what it does and don’t understand the underlying chemical process or science behind it.

The tales of the 1,001 Nights aka The Arabian Nights have intrigued children and adults for generations, from tales of Sinbad the Sailor to Alibaba and the forty thieves. But the obvious questions in plain sight that somehow I never thought to ask were why the Arabian “Nights” (rather than the daytime), and why 1,001 in particular. Last week at the BBC proms, Prom #9 was titled “The Two Scheherezades”, featuring two compositions from the 19th century inspired by these tales, one by Maurice Ravel and the other by Nikolai Rimsky-Korsakov. Both of these are beautiful pieces of music, but the Rimsky-Korsakov version has to be the better Scheherazade. It also turns out that the answer to these two questions is found in the preface to Rimsky-Korsakov's orchestral score of Scheherazade:

The Sultan Shahriar, convinced of the duplicity and infidelity of all women, vowed to slay each of his wives after the first night. The Sultana Scheherazade, however, saved her life by the expedient of recounting to the Sultan a succession of tales over a period of one thousand and one nights. Overcome by curiosity, the monarch postponed the execution of his wife from day to day, and ended by renouncing his sanguinary resolution altogether.

Listeners will no doubt notice the recurrence of the themes of the Sultan and Scheherazade in the music, interlaced within the tales of Sinbad the Sailor, the Kalendar Prince and the Young Prince and Princess.

What we're watching.

I haven't even finished it yet but Season 3 of The Boys on Amazon Prime is just awesome. Every episode gets better in a sign of a great show. It's got to be one of the best shows on TV for pure entertainment. But what's underappreciated is the satirical angle of how it mocks the world we live in. As a reminder it takes place in a world where superheroes go bad and lust for power. Politics, business and the rotten (and gory) core are fully exposed by some superb characters. The best character has to be Homelander, the malevolently psychotic and (seemingly) omnipotent leader of the “supes” as they are called. He is played by New Zealander, Antony Starr. The other main character and Homelander’s nemesis is Billy Butcher who is played by another New Zealander, Karl Urban. Great fun all round and a bit more. DC

Another item that popped up on Amazon Prime was a set of trailers for the new Lord of the Rings prequel series, The Rings of Power. Set in the prior age before the events of even The Hobbit and the LOTR novels, The Rings of Power promises to tell the story of the forging of the rings, including Sauron’s One Ring. At the same time, the trailers for another prequel series also dropped: House of the Dragon, the prequel to the original GoT saga also released their trailer, starring none other than Matt Smith of Doctor Who and The Crown fame as Prince Daemon Targaryen. Fingers crossed that this release can go some way to rectifying the disappointment that was the end of the original GoT series.