Week 55
Hi Reader,
This week I've been thinking a couple of things.
Value ETFs. A traditional "index" portfolio allocates investments based on the market cap of each stock. As a result, by definition, an index will over-invest in over-valued stocks and under-invest in under-valued stocks. A Value ETF attempts to change this dynamic by creating a synthetic metric based on measures divorced from price - earnings, growth, margins, etc. At that point the index can be assembled by over-allocating in under-valued stocks instead.
I really recommend this "Super Investors" podcast to learn more about why this could be a good idea.
Compounds. Another concept I've been pondering is something I call "compounds" for lack of a better word. A compound is a resilient, self-maintaining (compound) and self-improving (compounding) system. My realization comes from observing how the definition of boundaries drives our ability to scale processes and technology. Computer science and programming always define implicit boundaries to reusable concepts, but companies only define boundaries implicitly among sub-organizations. Thinking in "compounds" could allow us to better compose processes and assets in companies. This requires a new mindset and appropriate tools to define "blueprints" for these compounds and measure their performance. Thinking of exploring this a bit more.
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"Maybe the Space Program ended in 1975, because if you're just gonna be friends, why do we have to work 80 hours a week? I would like to see us accelerate technological and scientific innovation, but you cannot motivate it by building more advanced weapon systems and it's unclear if we have found a substitute for that."
- Peter Thiel
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📈 Investing
Elad Gil reminds us about the J curve as an explanation for why a16z returns have been low.
🚀 Start-ups
Brianne Kimmel sends a warning to start-up Founders - big cos will waste your time.
Stay profitable at all times argues Balaji Srinivasan.
A taxonomy of moats is a useful aid for anyone thinking about start-up strategy.
✊ Participation
Peter Thiel talks to the Hoover institute on "the Straussian Moment". These are always some of the best researched discussions with Peter Thiel. He argues that as a society we are trying to distance ourselves from external problems by seeking entertainment and mindfulness. It's been difficult to me to reconcile meditation as an instrumental productivity tool as opposed to a life philosophy. One excludes the other, but Peter helps by reducing the philosophical motivation to a selfish retreat from the current context. Indeed - no matter how "enlightened", a decision to embrace mindfulness is always bootstrapped by a person's current natural context, often one they want to escape.
"Game B" is the new trendy thinker movement and community that attempts to evolve beyond rationalism. I've always seen rationality as a really exciting and effective theory - and one whose practitioners are the biggest violators of it. A great podcast to build understanding just came out.