Late Stage Prisoners Dilemma
In the world of public/private crossover investing, there is a stalemate driven by the existential risk of giant markdowns on illiquid private market investments derailing the mega-funds that bid up the valuations in the first place. Ranjan Roy (writing for the always excellent Margins Substack) explores this dynamic in depth. Compare any group of public market companies to their private market competitors, and the valuations highlight the “illiquidity premium.” Fidelity recently marked their Stripe shares down by 9%. Meanwhile, PayPal shares are down 72%, Adyen is down 52%, and Block is down 67%. Everyone knows Stripe’s valuation (and the rest of the late-stage private book) needs to come down, but the game theory around marking it down to a more rational level is not simple.
Blitzed: Drugs in the Third Reich
This is an entertaining and absurd book that recounts many events of WWII and the Third Reich through the lens of the pervasive drug use and abuse by the German people, the Nazi military, and Hitler himself.
I was unaware of this side of the story, and I will probably seek out more books in the category of “historical event through the lens of X.” It makes me wonder what other seemingly well-documented events were influenced by hidden aspects. Here are a few teasers on what the book covers:
The Blitzkrieg strategy was essentially enabled by meth. The element of speed and surprise can give you a leg up in battle, but it’s difficult to achieve unless you can pull off feats like driving an entire convoy for three days and nights without stopping. Good thing Nazi soldiers were required to take Pervitin (methamphetamine) and even better that it was produced as a pharmaceutical pill by companies that are still around today.
New rubber compounds for soldiers’ boots were tested for their endurance by forcing concentration camp prisoners to ingest a cocktail of uppers and walk for days on end.
Hitler himself, who had others put to death for drug use, was given so many injections of obscure combinations of vitamins, drugs, and painkillers that his personal doctor had trouble finding veins that were not scarred over.
A different way to innovate
Dan Sunheim says that tech company “science projects” like Google’s Other Bets would be better as minority stakes in start-ups. The reasoning makes sense to me:
These companies don’t get much credit for excess cash on their balance sheet anyway. And if they are investing in “internal start-ups” via the income statement, the valuation penalty for operating losses is steep because of relatively high multiples. Too many employees chasing a non-core activity is distracting, and a new venture is more likely to attract talent by offering direct equity compensation. Even if there was a massive success, shareholders would likely be better off with an independent entity.
It begs the question in my mind: what happens to the start-up ecosystem, which is already awash in capital, when corporate balance sheets of cash-rich tech companies are added to the mix?
Formula 1 Rabbit Hole
I am a card-carrying member of the insufferable cohort of people who watched Netflix’s Drive to Survive series and have now started tuning into the races as a casual and highly under-informed fan.
I think the sport is fascinating - specifically the fact that there are multiple competitive frontiers between the driver, the car, the race strategy, etc. The learning curve, however, is steep, and the show includes just enough information to be entertaining, but not enough to really understand what is going on.
Since watching the show, I have been looking for content that essentially takes you from having just watched the series to being able to understand the nuances of the sport.
The best resource I have found for that is a YouTube channel called Chain Bear. This guy goes into crazy detail on the rules and regulations, technology, history, and other more esoteric aspects of the sport. Here are a few good ones:
Another YouTube channel, The Race, has more timely, week-by-week analysis and some great explainers.
This substack, The Qualifier, also has some great analysis and numbers.
Saifedean Ammous Explains Money
Forget the red laser eyes and Bitcoin rhetoric, Saifedean’s ability to explain complex terms from first principles is amazing. I recommend the first half of this interview strongly, but the second half is a bit too Bitcoin-maximalist for me. Regardless, Lex remains one of my favorite interviewers and the fundamental explanations of things like money, economics, the gold standard, the free market, etc. are worth hearing.
Ed Thorp on Tim Ferriss
Ed Thorp is one of the most impressive humans alive, period.
He is the inventor of card counting, a hall-of-fame-level hedge fund manager, a best-selling author, a professor, a mathematician, an athlete, and more.
He wrote Beat the Dealer and revolutionized blackjack and other odds-based casino games. He collaborated with Claude Shannon to also gain an edge in Roulette. His hedge fund had 3 down months in 20 years of operation and compounded at nearly 20%. He was an early investor and believer in Warren Buffett. He arrived at a version of the Black-Scholes pricing model before them. He was the first to spot Bernie Madoff’s ponzi scheme. And he is an impressive athlete. Does the man in the thumbnail above look 89 years old?