Today we are publishing an article that I’ve been working on for the last few weeks: an exploration of the software powering the global transition to renewable energies. Virtual power plants—or VPPs as they are known—are still in their early stages, but over time, they will evolve to become vital to a decentralized grid. In my opinion, we’re nearing the final stages of the extraction era of fossil fuels—and entering what I like to call “Energy 2.0,” where cheap, clean, and abundant energy will disrupt dozens of industries. Here’s a link to the piece, which is available as a PDF as well on our website.
“Right now, many investors are focused on business models built around the hardware or the “hard assets” of the renewables disruption — i.e. photovoltaic solar panels, wind turbines, electric vehicles, lithium-ion and flow battery technologies, and so on. This piece is not about those technologies. Rather, this article is an exploration of what comes after the hard assets of the renewables disruption are deployed at scale: The connective tissue between them. To us, this connective tissue—the software layer that unites a distributed system—is the under-explored, and yet potentially more critical (and lucrative) business model that will lead to a more resilient, efficient, decentralized, deflationary—and thus ultimately cheaper global power system. “
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As an investor, are you an (a) assassin, (b) rabbit, (c) hunter, (d) connoisseur, or a (e) raider?
Gavin Baker, founder/CIO of Atreides Management, this week wrote a thoughtful review of Lee Freeman Shor’s 2015 bookThe Art of Execution. Baker’s article highlights what I found to be a fascinating mental model created by Shor for investor behavior, breaking down the different “tribes” of investors into five different categories: assassin / rabbit / hunter / connoisseur / raider. He explains:
“Investors dealt with losses by being either “Rabbits,” “Assassins,” or “Hunters.” Investors dealt with gains by either being a “Connoisseur” or a “Raider.” To jump ahead, an investor should strive to be either an “Assassin” or a “Hunter” when losing money on a position and a “Connoisseur” when making money on a position. Based on his data, being a “Rabbit” or a “Raider” must be avoided at all costs…. Shor’s most powerful point is that investment performance is largely dictated by what an investor does after they buy a stock, specifically by how they deal with both losing and winning positions over time (obviously an investor needs to be correct in their initial purchase decision at least some of the time). This was interesting to me as was the data he supplied to support his conclusions.”
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The $41 trillion question: Do investment consultants provide value?
Elisabetta Basilico and Preston McSwain at Fiduciary Wealth Partners summarize the eyebrow-raising findings of a recent report regarding investment consultants this week in their article, “Do The Kingmakers Have Clothes?” That study, from researchers at the University of Oxford and UConn, noted that investment consultants advise about $41 trillion in assets across pension funds, endowments, and philanthropic organizations—”investment consultants are the kingmakers of institutional asset management,” they write. The $41 trillion question, though, is whether or not these kingmakers actually add value to manager selection—and, in turn, better performance. According to the report’s authors—err, not so much. “Using data sourced from investment consultants and the UK regulator, we find no such evidence.”
“Based on this, why do so many dollars continue to be influenced by large investment consultants? As we mentioned in our last piece on this subject, Trillions of Influence, unfortunately, researchers from University of Lausanne, Arizona State University, and Purdue University found that these manager selectors seem to be “influencing trillions the wrong way.” In their latest paper, Virtual Reality?, Cookson, Jenkinson, Jones and Martinez, add to the inquiry by looking at how investment consultants present the performance of the mangers they recommend.”
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Can Vimeo become the Youtube-as-a-Service platform for creators?
One of the more underrated business stories of the last year has been the pivot and rise of Vimeo: the sort-of art-house version of YouTube that will be spinning out of IAC later this year to go public. This week, Vimeo CEO Anjali Sud sat down with Nilay Patel of The Verge to talk through how Vimeo is in the midst of creating a “Netflix-like service” for businesses. It’s a fascinating chat for anyone interested in the future of media platforms and software business models. And I think Sud hits the nail on the head: In the future, creators will own direct relationships with their audience; ergo, platforms that provide tools for creators to ease this friction will be the ultimate beneficiaries of the trend.
“We provide a tool set that allows any creator to stand up their own Netflix-like service. They own the brand. They can stand up their own apps, Amazon, Roku, iOS, websites. They can charge whatever they want. They own the customer. They own the email, they own the relationship. And basically, what a lot of YouTube creators are doing is, they reach a certain amount of size and they’re like, “Wow, I can make way more money if I get a subset of my followers on YouTube to actually come and subscribe to my own channel and pay me directly, I can make more money than just purely on an ad model basis.” And so that’s a great example. That product’s called our Vimeo OTT product. It’s on fire right now. It’s growing incredibly fast. And we’re seeing so many creators and brands, everybody from like the yoga instructor to the church starting to do this, and I think that’s awesome.”
“The strategies fighter pilots use in combat apply to investing, business and life! Yet as important as learning how to fight, fighter pilots needed ways to avoid collision. Avoiding collision kept pilots “in the game” and out of catastrophic danger (i.e., death). The same goes for investors. It’s not enough to know what to invest in and what types of companies we should buy. We want to avoid “collisions” with value traps, frauds and missed opportunities. In fact, a fundamental problem faced by all creatures is learning to select actions based on noisy sensory information and incomplete knowledge of the world.”
“Transportation wonks hailed scooter-sharing as the best solution to their “last-mile problem,” when the trip between the train station and home is a little farther than walking distance—around a quarter of a mile, for most people. Futurists saw it as the first transportation mode to incorporate mobile-computing and global-positioning technology in its core design, and touted the e-scooter as a harbinger of the battery-powered, software-controlled car of the future. But to detractors e-scooters were a fad, and scooter-share programs were a tech hustle that exploited a limited public resource—city streets—to enrich private investors.”
“Being an activist short-seller would limit the amount of money he could raise. He probably wouldn’t become a billionaire. Block also knew he could take the Muddy Waters brand and go predominantly long. ‘But it just never appealed to me to really be that,’ he says, telling the story to Institutional Investor in a series of conversations capped by two three-hour Zooms in which he discussed — among other things — the demons that have driven him to become the most brazen, profane short-seller on the planet today. ‘I’m not an adrenalin junkie,’ he decided after leaving Handler’s office. ‘What I do is very, very personal to me.’ He adds: ‘I enjoy fucking with people.'”
“Everything the company does and chooses not to do flows from a single motivation: Zuckerberg’s relentless desire for growth. Quiñonero’s AI expertise supercharged that growth. His team got pigeonholed into targeting AI bias, as I learned in my reporting, because preventing such bias helps the company avoid proposed regulation that might, if passed, hamper that growth. Facebook leadership has also repeatedly weakened or halted many initiatives meant to clean up misinformation on the platform because doing so would undermine that growth.”
“Make it a goal this year to find outlets (like The Profile!) that act as content quality filters, sifting through large swaths of information to provide a range of articles that will make you pause and see things from a different perspective. As author Haruki Murakami said, “If you only read the books that everyone else is reading, you can only think what everyone else is thinking.” Don’t let yourself run on autopilot. Be the one to choose what to feed your brain.”
This information should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any of the investments or strategies referenced were or will be profitable, or that investment recommendations or decisions we make in the future will be profitable. This article contains links to 3rd party websites and is used for informational purposes only. This does not constitute as an endorsement of any kind. While Nightview uses sources it considers to be reliable, no guarantee is made regarding the accuracy of information or data provided by third-party sources. Nightview Capital Management, LLC (Nightview Capital) is an independent investment adviser registered under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about Nightview Capital including our investment strategies and objectives can be found in our ADV Part 2, which is available upon request.
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.
