Welcome to The Nightcrawler, a weekly collection of thought-provoking articles and analysis on technology, innovation, and long-term investing. The Nightcrawler is published every Friday evening by Eric Markowitz, Nightview Capital’s Director of Research.

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In this evening’s email… 

Quote of the week: “A good rule to remember for life is that when it comes to plastic surgery and sushi, never be attracted by a bargain.” — Graham Norton

How to focus on the signal

Over the last few decades, the root cause of market inefficiencies have shifted. Pre-internet, inefficiencies typically arose from unequal access to information. Now, in an era of information superabundance, inefficiencies are typically caused by too much information.

My colleague Dan Crowley explores this idea in his essay, The Power of Addition by Subtraction: “The challenge for modern-day investors is no longer access to data itself, but rather choosing the correct information to focus on.” 

The piece explores what specific information investors ought to avoid in order to make smarter decisions over the long-term. “Discernment—knowing what to ignore—is now more important than ever,” Dan writes. “But how does one improve this skill?” He continues: 

• Key quote: “In refining my investment process, I’ve increasingly embraced the idea of removing unnecessary information from my workflow. I believe that a disciplined approach of ‘addition by subtraction’ is vital, as separating noise from signal has become a crucial aspect of modern investing. While this has always been the case, the level of difficulty has scaled higher over time. It now requires an active approach to escape the daily deluge of information. The good news for long-term investors is that, very often, much of what is covered in mainstream media isn’t helpful information for long-term investors. The benefit of selective ignorance is significant: peace of mind, and, in my opinion, a decent chance at outperformance.”

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Is Google the “Apple of AI”?

Ben Thompson of Stratechery recently published an analysis of how Big Tech companies are positioned within the AI ecosystem—and which companies might eventually come out on top.

Ben takes a fresh approach by examining the subject through the integration versus modularization lens. He suggests that while integrated systems may excel in the early stages, they could encounter hurdles as industries evolve.

In particular, Ben focuses on Google’s positioning within this framework. “The first takeaway from this analysis is that Google’s strategy truly is unique,” he writes. “They are, as Nadella noted, the Apple of AI. The bigger question is if this matters: as I noted above, integration has proven to be a sustainable differentiation in (1) the consumer market, where the buyer is the user, and thus values the user experience benefits that come from integration, and when (2) those user experience benefits are manifested in devices.” He continues:

• Key quote: “Google is certainly building products for the consumer market, but those products are not devices; they are Internet services. And, as you might have noticed, the historical discussion didn’t really mention the Internet. Both Google and Meta, the two biggest winners of the Internet epoch, built their services on commodity hardware. Granted, those services scaled thanks to the deep infrastructure work undertaken by both companies, but even there Google’s more customized approach has been at least rivaled by Meta’s more open approach. What is notable is that both companies are integrating their models and their apps, as is OpenAI with ChatGPT.” 

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AI hype vs. reality

This week, the writer Ed Zitron presents his own contra viewpoint on AI: “generative AI isn’t actually able to produce the industry-defining shifts that are being promised,” he writes.

There’s no doubt that the modern discourse on AI has gotten somewhat frothy—pretty much every public company is using the term “AI” on earnings calls. While I don’t entirely agree with many elements of this essay—hey, that’s what makes a market—it’s nonetheless encouraging to see more thoughtful (and sober) appraisals of the hype around AI.  

• Key quote: “What makes generative AI so tantalizing is that it has the hint of utility, the scent of a product, and as a result can be sold to the markets as the next big boom that justifies hundreds of billions of dollars of investment and increased market capitalization. Every single company chasing the generative AI dragon is hoping that it’s the next Amazon Web Services —the ubiquitous cloud product that went from a side project to a bigger revenue driver than Amazon’s store — because it sort of, kind of seems like it’s ‘the next big thing in cloud,’ even if it doesn’t seem to do anything useful, let alone incredible… The use cases they enable are neither exciting nor ubiquitous, nor are they anything like what tech executives are trying to sell us. And the problem might not be that it’s useless, but that as a piece of technology, it just isn’t a hyper-growth market or industry changer, no matter how many hundreds of billions they put into it.”

A few more links I enjoyed: 

At the Money: Lose the Noise – via Barry Ritholtz

• Key quote: “The news itself is not relevant. News doesn’t matter if it’s good or bad. That’s what investors make a mistake. All that matters if it’s better or worse than the market already expected. And if that’s true, then the market moves and now it adjusts. And again, it’s too late to act. You just want to have a plan that’s well thought out and sit there. I’ll give you one other great example from my book. General Motors in the Great Recession announced earnings were down 20% and investors would think the stock should crash.”

Brian Portnoy, CFA, PhD: Geometry of Wealth; The Search for Funded Contentment & Underwriting a Meaningful Life – via  Bogumil Baranowski

• Key quote: “Brian Portnoy discusses the emotional and psychological aspects of money and the pursuit of a meaningful life. He emphasizes the importance of understanding the connection between money and happiness, and how money triggers and amplifies various emotions.”

Lazy Work, Good Work – via Morgan Housel 

• Key quote: “If you anchor to the old world where good work meant physical action, it’s hard to wrap your head around the idea that the most productive use of a knowledge-worker’s time could be sitting on a couch thinking. But it’s so clear that it is. Good ideas rarely come in meetings, or even at your desk. They come to you in the shower. On a walk. On your commute, or hanging out on the weekend. I’m always amazed at the number of famous ideas that came to people in the bathtub. But tell your boss you require a mid-day soak, and the response is entirely predictable.”