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Speed + simplicity = cash
Readers of this newsletter will note my near-endless fascination with incremental improvements to Tesla’s battery manufacturing process—a subject I started writing about in 2018. My core thesis: through a combination of vertical integration and technological and manufacturing efficiencies, Tesla could create a highly scalable (and immensely profitable) EV business. The cash flow from the EV business would then go on to leverage other directional bets on energy storage and distribution, artificial intelligence, and much more.
The crux of this idea, however, centers on necessary improvements to the manufacturing process that will allow for greater cash flow per unit of production—a subject highlighted this week in an excellent video by Jordan Giesige’s The Limiting Factor.
In our Q3 Letter last year, we wrote about how we look for businesses that accumulate marginal gains at scale to reap long-term rewards. Giesige’s breakdown of Tesla’s approach to battery manufacturing is a good example of this theory put into practice. It’s my view that we’re still in the very early innings of growth, and key structural manufacturing and process improvements made today will have immense cash flow (and earnings) implications over the next several years.
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Bridging the disconnect between Washington and Silicon Valley
Katherine Boyle is a former reporter who now works as an investor at Andreessen Horowitz. This week, she spoke with Patrick O’Shaughnessy about her concept of investing in “American Dynamism.” It’s a wide-ranging conversation that hits on the disconnect between DC and Silicon Valley, funding “hard tech” problems, and confronting societal problems—like the lack of housing—through venture capital.
“Some critics of the tech industry believe that software only touches the digital world and that we’re wasting valuable talent ignoring the physical,” she wrote earlier this year introducing the concept of American Dynamism. “But these critics are missing this current movement to the physical sector and the interplay between hardware and software: some of the most disruptive companies are remaking the physical world with software at their core.
A few more links I enjoyed:
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