“There is nothing as mysterious as a fact clearly described.” — Garry Winogrand
Accelerating vs. attenuating innovation
Ben Thompson of Stratechery has a smart piece this week about AI, big tech, and the government’s approach to regulation. As Ben writes, the recipe for genuine innovation ultimately comes down to three factors: “(1) Embrace uncertainty and the fact one doesn’t know the future. (2) Understand that people are inventing things — and not just technologies, but also use cases — constantly. (3) Remember that the art comes in editing after the invention, not before.” He continues:
“We should accelerate innovation, not attenuate it. Innovation — technology, broadly speaking — is the only way to grow the pie, and to solve the problems we face that actually exist in any sort of knowable way, from climate change to China, from pandemics to poverty, and from diseases to demographics. To attack the solution is denialism at best, outright sabotage at worst. Indeed, the shoggoth to fear is our societal sclerosis seeking to drag the most exciting new technology in years into an innovation anti-pattern.”
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Know thyself (and your investment philosophy)
I always enjoy listening to Aswath Damodaran’s take on markets and valuation, but I particularly liked his latest conversation with Patrick O’Shaughnessy, which goes into something a bit more personal: How to truly discover one’s own personal investment philosophy.
As Aswath points out, many investors naturally become fixated on the philosophies of other investors, whether it’s Soros or Buffett or Lynch. But this focus rarely, if ever, produces exceptional results without first reflecting inward. “Spend less time reading about other successful investors,” Aswath says, “[and] spend more time looking inward at the things that make you comfortable and uncomfortable. Because that is at the heart of building a successful investment philosophy.”
“To be a long-term value investor, first, you’ve got to be incredibly patient, which often is not under your control. Warren Buffett has insurance capital he is investing; you and I might be investing our own money or clients’ money. So we’ve got to be able to be patient. And second, you have to be able to withstand peer pressure because you’re often moving against the crowd. Those are psychological factors. If you’re naturally impatient and you’re swayed by the crowd, I don’t care how many books about Warren Buffett you read, you’re not going to be a successful value investor. When I teach the class, I tell people, look, there is no right investment philosophy, but there’s one that’s right for you.”
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Living life at 80 percent
Morgan Housel’s latest book, Same As Ever, is based on a simple concept: Sustainability is the key to all long-term outperformance. This idea applies to all aspects of life, including relationships and health, but it particularly applies to investing and compounding capital. As Morgan says in a recent interview with Tim Ferriss: “The variable that I want to maximize for is, ‘How long can I do this for?’ It’s not, ‘Can I earn the highest returns?’ It’s, ‘Can I maintain this investing strategy for another 50 years?'” He continues:
“Is it something you can maintain? I think I’m not interested in anything that’s not sustainable. Friendships, investing, careers, podcasts, reading habits, exercise habits. If I can’t keep it going, I’m not interested in it. And I think the only way to really do that is if you are going out of your way to live life at 80 percent to 90 percent potential. If you’re always trying to squeeze out 100 percent potential for something, almost certainly it’s going to lead to burnout, whether it’s a friendship or a relationship or an investing strategy. So I think it’s not easy to do, and if you’re a type A person, it’s almost impossible to do. But going out of your way to live life at 80 percent has always been a strategy that I want to do just because I want to keep it going for a long time.”
“Parallel bet strategies have several core advantages, from increasing corporate optionality (especially when it comes to acquisitions) to covering strategic bases, maximizing learnings, and (potentially) neutralizing (or at least moderating the risk of) any potential competitors. But there are costs. More money tends to be spent, but each bet tends to receive less funding than they might have under a more focused approach, which can constrain the would-be ‘winners.’ Overseeing many bets can also lead to mixed signals on what is (and is not) the “right bet” and harm internal morale. Few teams feel good about competing against their colleagues. Worse still, these teams typically hate when their corporate parent funds external competitors that, with a little more funding and support, they might been able to beat but now threaten to put them out of a job.”
“On the spectrum of celebrating after making an investment and feeling like you’re going to puke, err on the side of the latter. An investment should feel uncomfortable when it’s made. There should be some uncertainty. When investing with a cheery consensus, your reward comes at the beginning and not in the future, where money gets made.”
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Reflection doesn’t come naturally to me, but writing—especially for others—makes it non-negotiable. These aren’t just lessons. They’re pieces of a year that shaped me.
