People & Ideas (#13)
Fintwit, Philippe Laffont, Dan Loeb, Dotcom, Jim Loehr, Charles Gave, a dose of techno optimism
I hope you’ve had a great start into the new year. It’s been quiet here in Southern Germany. We had our first snow. Didn’t stick but I’ll take it.
Only one podcast this time. Instead, we’ll take a look at a new dynamic on Fintwit and some interesting readings.
Fintwit goes pro
Dotcom bubble reading
Podcast & readings: Jim Loehr on the inner voice, a perspective on China, and some techno-optimism
Ideas: CLNY, BOO.UK, and macro/dollar
Fintwit goes pro
Fintwit’s latest high profile addition is Philippe Laffont of Coatue, a technology-focused Tiger cub with some $25 billion in AUM (here is a rare and short interview with him). Check out his interaction with Dan Loeb - funny how the social media status games can matter even to billionaires. Human after all.
Why does this matter? Laffont created his account in 2009 but didn’t use it much until now. Fintwit can be an amazing place to learn, to discuss ideas, and build a network with other investors. Look no further than Dan McMurtrie/Supermugatu to see the potential that social media offers the next generation of managers who expertly use it to learn and build in public.
Coatue also had a great year:
Private investing is about imagining the future as there is less data to analyze than as a public company, and that foresight usually compounds the variant perception with time. Imagination is the skill. Uncertainty is the opportunity. Data is important but so is the story. Patience is way underrated.
Historically, private equity firms have been more successful in branching out into other asset classes. Firms like Blackstone, KKR, Carlyle turned from private equity managers into alternative asset behemoths. While hedge funds have invested in private assets and sometimes raised funds for it, I can’t think of a success story on a similar scale.
My pet theory has been that this is due to the respective strategy’s cultural DNA. Private equity firms start as partnerships with an investment committee. Multiple partners are required to source and execute on deals and stay involved with the portfolio companies. Hedge funds on the other hand typically grow around one PM, one final decisionmaker and risk-taker. The former seems more suited to add talent for new asset classes and let them participate in the ownership of the firm. But perhaps we’ll see this dynamic change.
Lastly, there have been a some excellent Dotcom bubble threads on Twitter recently. I finished the book Dotcon (recommended by Jim Chanos) and it’s a really helpful play-by-play account of those years. I’m going to post notes over time on Twitter, such as this 1999 article on Yahoo that gives us a real-time look at how investors coped with out-of-control valuations:
"Do you know why people like me own this stock? We own it because we have no choice. I buy these stocks because I live in a competitive universe, and I can't beat my benchmarks without them. You either participate in this mania, or you go out of business. It's a matter of self-preservation." Roger McNamee
I tweeted about that time Omaha fell in love with a stock that wasn’t Berkshire Hathaway. Level 3, the telecom bubble’s poster child, was incubated in Kiewit Sons, Omaha’s prestigious construction company (remember: Berkshire is headquartered at Kiewit Plaza). Kiewit’s then-CEO Walter Scott seems to have been at least as respected and well-known in Omaha as Buffett.
An important lesson: Level 3 was an encore. Kiewit had already spun off and sold a telecom venture called MFS for a big gain. But the fiber backbone buildout was still going on and they decided to do it again, just bigger and better. But not every successful investment pattern is meant to be repeated.
In the story, Bill Gates gave Scott the idea to pursue internet infrastructure. Gates did so at one of Buffett’s biennial private gatherings. This is something I highlighted in a thread and will write about more. If you’re trying to follow in Buffett’s footsteps, you have to get past his carefully cultivated image today and learn about how he conquered: yes, by reading a lot. But also by being proactive, traveling, meeting a lot of people.
Podcast & Reading
Podcast: Jim Loehr on Tim Ferris (transcript). I liked Jim’s book The Power of Full Engagement and enjoyed the conversation because it touched on one of my personal issues: my inner voice can be fiercely critical and unhelpful. It often holds me back and keeps me from putting myself out there or taking a risk. If you’re dealing with a critical inner voice, check out the podcast.
Everyone has an inner voice that’s speaking to them. Some more than others. And sometimes that voice is extremely harsh, difficult, challenging. And you say things to yourself, you would never say to any other human being and you would be so embarrassed if it was made public.
If you’re looking for a bit of techno-optimism: Notes on technology in the 2020s. H/T Patrick O’Shaughnessy for highlighting this one. It touches on a lot of really interesting ideas that I wasn’t aware of, for example fracking firms pivoting to geothermal, SpaceX’s Starlink, and small scale nucular (part of Fluor).
The legacy geothermal industry is sleepy, tapping energy at traditional volcanic hydrothermal hotspots—forget about it. The next generation of the industry, however, is a bunch of scrappy startups manned by folks leaving the oil and gas industry. The startups I have spoken to think with today’s technology they can crack 3.5¢/kWh without being confined to volcanic regions. With relatively minor advancements in drilling technology compared to what we’ve seen over the last decade, advanced geothermal could reach 2¢/kWh and become scale to become viable just about anywhere on the planet.
Dan Wang on China: after reading this sentence I had to keep going: “This year, I read every issue of Qiushi (translation: Seeking Truth), the party’s flagship theory journal.”
This year made me believe that China is the country with the most can-do spirit in the world.
US elites have abandoned the idea that China would liberalize nicely. They should put another idea to bed: that this authoritarian system, riddled with weaknesses, is on the brink of collapse. The country’s strengths are real and improving while the government becomes more nasty towards its critics and the rest of the world.
As a society turns developed, its main problems become social: an organizational sclerosis, which no technology is sophisticated enough to solve. No great effort is required to identify the comprehensive paralysis in the US.
A few ideas I read about this week.
Colony Capital (by Bizalmanac), an investment manager in transition: from traditional real estate to “digital real estate” (towers, data centers) led by a veteran new CEO.
“I mostly avoid investing in turnarounds. I am skeptical of their chances to succeed and seek very long holding periods. In this case, Ganzi, his team and Barrack are all extremely talented and sufficiently motivated by hundreds of millions of dollars to successfully sell legacy assets and grow Colony’s digital infrastructure business.”
Forager on UK online fashion retailer Boohoo:
“Mahmud Kamani and Carol Kane founded Boohoo in 2006 as an online retailer that designed, sourced and sold its own brand of cheap women’s clothing. The company has increased revenue at an average annual rate of 55% over the past nine years, generating more than £1bn of sales in the past 12 months.
Until 2016, the Boohoo brand generated 100% of group sales. Now there are seven distinct brands under its umbrella, including the wildly successful Nasty Gal. This company is a world class marketing machine with a highly loyal and large customer base.
It is profitable, cash generative and has no financial debt. Exactly what I like to see in a retailer. Management also has a lot of skin in the game, with insiders owning around 20% of the company’s outstanding shares. They clearly have a vested interest in Boohoo’s success.”
Louis Gave on inflation and the dollar.
First, there will be two kinds of countries going forward: countries that massively monetized the Covid shock and those that did not. I’d compare the picture to the late 1970s, where countries like the U.S., the U.K. or France monetized the oil price shock, while Japan, Germany and Switzerland did not. This led to a huge revaluation of the Yen, the Deutschmark and the Swiss Franc.
One year ago, yields were going down, oil was going down, and the Dollar was going up. Today, Treasury yields are going up, oil is going up, and the Dollar is going down. This is a huge reversal. When I see a market where interest rates are rising and the currency is falling, alarm bells go off.
My view is that capital flows into positive real rates, just like water flows downhill. Today, the U.S. has one of the most negative real interest rates worldwide.
I expect a big revaluation of Asian currencies over the coming five years, which in itself is inflationary for the world. I’d say the Dollar will take a 20% hit.
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Disclaimer: this is not investment advice and not a recommendation to buy or sell any of the securities or funds mentioned. Always do your own research before making an investment. Please manage your portfolio and position sizing in accordance with your own risk tolerance and investment objectives.