Marvin’s Best Weekly Reads September 15th, 2024
“Problems are guidelines, not stop signs!” — Robert H. Schuller
- This is always an educational conversation. Global macro from the Rebel Capitalist.
2. “Ukrainian production and employment of air and maritime drones has, indeed, been revolutionary — truly path-breaking, in fact. Indeed, the US and other countries need to learn a great deal from what Ukraine has done — and likely will do — even as unmanned ground systems are introduced in larger numbers, as well!
The ability of Ukraine to throw thousands of aerial drones at Russian soldiers on the battlefield every day — and also to strike strategic targets inside Russia nightly, as well — is truly game-changing. And Ukraine’s ability to employ vast number of electronic warfare [EW] “bubbles” of various sizes all over the battlefield and around headquarters and bases and important infrastructure is also hugely impressive.
So have been the ever evolving software components and enablers of all of these technological advances, as their constant refinement and improvement, increasingly involving AI [artificial intelligence], have been the critical element that has enabled the drones to evade Russian EW and air defense systems and engage targets heavily protected by Russian assets. (All of this should suggest, by the way, that Ukraine will be a major exporter of unmanned systems when its domestic requirements are ultimately reduced…)”
3. This is the punch in the face and wake up call that every modern guy needs.
4. “This Ukrainian operation represents a very significant effort on the part of the Ukrainians to reset the status quo in the war, and change narratives about Ukraine prospects in this war.
It is the kind of strategic risk-taking that I don’t think is well understood in many Western capitals anymore. For nearly two generations now, Western nations have been able to cut military spending. None of them have faced existential threats, even though the War on Terror did require a significant response for more than a decade after 9/11.
The slow decision-making cycles in Western military and political circles, an in military procurement, is indicative of institutions that no longer understand the imperative to act quickly and decisively while taking major risks.
This is not the case for the Ukrainians. They have faced an existential threat since February 2022 (and more broadly, for the entirety of their existence as a people) and have a very different political and military decision-making calculus than those of their supporters. A nation and a people who face an existential risk from their neighbour tend to think differently from those who do not.”
5. “Quality water is essential for brewing delicious coffee. Shifting gears to investing, water, or liquidity, is important to stacking sats. This is a recurring theme throughout my essays. But we often forget how important it is and focus on the little things we believe will impact our ability to make money.
It is very hard to lose money investing if you can recognise how, where, why, and when fiat liquidity is being created. Unless you are Su Zhu or Kyle Davies. If financial assets are priced in USD and off US Treasuries (UST), then it stands to reason that the quantity of currency and dollar debt globally are the most critical variables.
Instead of focusing on the US Federal Reserve (Fed), we must focus on the US Treasury Department. This is how we will determine the specifics of Pax Americana’s addition and subtraction of fiat liquidity.
Once the US debt ceiling charade is over, liquidity will gush from the Treasury and possibly the Fed to get markets back on track. Then, the bull market will begin for realz. $1 million Bitcoin is still my base case.”
6. Incredibly valuable discussion on vertical SaaS businesses. And good differences between USA market and other international markets.
7. This is a master conversation with a dual threat top tier operator and investor. Elad Gil.
8. “The funny thing about deterrence is that if you don’t do it properly, or worse balk at it, you create exactly the opposite conditions from what you wanted. You wind up encouraging bad actors, not only the one you targeted, but also bad actors worldwide who are deciding if the risk/reward ratio favors the bold, or signals caution.”
9. “I’ve increasingly come to feel that the destruction of our attention — thanks, in large part, to the combination of smartphones and social media — is one of the biggest threats we face as a civilization, as it compromises our ability to make sustained progress on anything worthwhile. Most people are so immersed in it that they can’t see how bad it is; you can’t ask someone to think clearly when their core operating system is compromised.”
10. “Coast FIRE, which stands for “Coast Financial Independence, Retire Early,” is an innovative approach to retirement that is somewhere between traditional retirement strategies and more extreme FIRE methods. The idea is to front-load your retirement savings early in your career and then allow those investments to grow without needing additional contributions.
This concept is very similar to a post I wrote back in 2021 called Go Big, Then Stop. That post emphasized the importance of saving and investing early, but it more or less describes the core tenet of Coast FIRE.
The purpose of Coast FIRE is to save aggressively in your early working years until your portfolio reaches a point where its expected growth would meet your future retirement needs. This is called hitting your Coast FIRE number. Once you hit this number, you can then reduce or even eliminate how much you save each month. At this point, the only thing you need to worry about is covering your current expenses.
With Coast FIRE, you don’t get to leave the workforce, but you do get the freedom to:
Shift to part-time work
Pursue a lower-paying, but more fulfilling, career
Take extended breaks from work
Coast FIRE is not about completely stopping work at a young age, but, rather, achieving a level of financial security that allows for more flexibility and less stress before traditional retirement. This approach appeals to those who want more financial freedom and work-life balance without the sometimes extreme measures associated with other FIRE strategies.”
11. 50 Years is one of the best Deeptech VCs around. Love Seth & Ela are the best. “Tech is having its Bio moment!”
12. Frightening new wave of cartels, the ultra violent CJNG seems to be first of new scary groups emerging.
13. “This is very concerning, but not for the reason the BCI purports. It is incorrect to blindly equate higher margins with higher taxpayer costs. To spell it out: Companies could be selling products at high margins but lower overall cost. In fact, this is what you would expect from innovative commercial companies amortizing self-funded research and development across a large number of customers.
The best-known example is, of course, SpaceX. The company lowered launch costs and humiliated the United Launch Alliance’s technology and business model in the process. Who cares if SpaceX’s margins are higher? Perhaps the US government, but certainly not China or Russia. Those countries just see that the United States is home to the firm that launched 87 percent of all tonnage to orbit in Q1 2024.
The US government chooses to obsess about profit margins — rather than value delivered — at its own peril. This mindset is the best way to ensure repeated FASA violations, but more importantly, it will doom the United States to failure in the next war it fights.”
14. This is a masterclass in building and running a Holding company. Must listen. There are so many great insights on how to build and operate one.
15. “But if he is perhaps the wildest misfit tech diva of his generation, with a torrid ambition and engineering prowess rivaled only by Elon Musk, Luckey is also, in a way Musk is not and cannot be, the product of something more familiar — the heir to a 100-year revolution in American society that made Southern California the techno-theological citadel of the Cold War, and a one-man bridge between the smoldering American past and an unknown future that may be arriving soon.
Which is why the magnetic poetry version of the life of Luckey that does the story justice goes more like this:
Before the recent preference cascade enabling high-profile tech moguls to violate the taboo against supporting Donald Trump, there was first the lonely figure of Palmer Luckey, the homeschooled, Jules Verne-obsessed, amateur scientist with no money, whose faith in the power of technology was so strong that he worked jobs sweeping ship yards, scrubbing decks, fixing engines, repairing phones, and training to sing as a gondolier for tourists, all in order to spend his nights in a gutted 19-foot camper trailer trying to manufacture dream worlds out of breadboards and lens equipment and accelerometers and magnetometers and a soldering iron — which he did, bringing virtual reality to the masses, burning a hole in his retina with a laser, and losing it all to Zuckerberg over a meme, only to reemerge from his defrocking by Big Tech as a vengeance-seeking icon of counterelite Americana, the aspiring rebuilder of the arsenal of democracy, the black mullet-, chin beard-, Hawaiian shirt-, cargo short-, sandal-clad possible savior of America.
In Luckey’s phrase, the mission of Anduril is to serve as the Western world’s gun store, turning America and its allies into “prickly porcupines so that no one wants to step on them.” Just imagine the political dividend of such an outcome, he told me. “What if instead of a $60 billion aid package [for Ukraine], it was a $1 billion aid package, and it was 10 times as effective? Just imagine that that were possible. If you’re building the right mass-produced, AI robot-produced, very, very cheap loitering munitions that are always able to do the job at a hundredth or a thousandth of the price of an existing system, at some point the justification [for withholding aid] goes away.”
https://www.tabletmag.com/feature/american-vulcan-palmer-luckey-anduril
16. Japan waking up to the growing threat of China and North Korea.
17. “At the application layer, economies of scale aren’t a viable mechanism for defensibility either — because computational costs are an order of magnitude lower compared to the model layer. Your ability to pay for an OpenAI’s API or compute for your app isn’t a sustainable advantage over a future competitor. Some applications like Character.ai have attempted to avoid this problem by vertically integrating, i.e. building their own customized models. Here again, the efficacy of economies of scale is questionable for the same reasons I mentioned earlier.
This leaves network effects and switching costs as the only realistic modes of defensibility for most applications.
So how do you create real, meaningful network effects with an AI application? Based on what we’ve talked about so far, the app needs to have an AI-enabled multiplayer interaction which involves a lot more than AI-generated output created by another user. These applications use AI to enable a (higher friction) multiplayer interaction that was previously impossible.”
18. Quite a good state of Crypto in 2024. Worth watching.
19. A fascinating jaunt about what’s happening in Eastern Europe and their future.
20. Excellent discussion this week. Not Investment Advice.
21. “Innovation also leads to the last trend, autonomy. Today, FPV drone use is limited by the supply of skilled pilots and by the effects of jamming, which can sever the connection between a drone and its operator. To overcome these problems, Russia and Ukraine are experimenting with autonomous navigation and target recognition. Artificial intelligence has been available in consumer drones for years and is improving rapidly.
A degree of autonomy has existed on high-end munitions for years and on cruise missiles for decades. The novelty is that cheap microchips and software will turn the low-end munitions that are saturating the battlefield, into smart weapons. The side that can push autonomy to the edge — that is enabling each of these weapons to close the kill chain independently — will consistently out-tempo the other. Ukraine is the laboratory for this deadly competition.”
22. “I’m mostly concerned that we’ll face a similar fate that is plaguing the Japanese population as it continues to decline. We need to prime the top of funnel with more startups, which you’ll see below is still going down, and as of now unless we do something, wont increase significantly without intervention. We already have a Series A crunch which I believe will last another year or so but then after that the funnel will dry up if nothing changes and later stage growth etc will have less to choose from. Eventually in 7–10yrs we’ll see a major lull in IPOs and M&A because of the lack of investments now.
Emerging managers are the cornerstone of early stage innovation, taking huge risk on relatively unproven ideas and founders. Despite their potential for higher returns, these managers are currently struggling to secure sufficient capital due to LPs’ preference for larger, more established and “safer” funds. As I wrote in a previous newsletter, no one ever got fired for investing in a well established and brand named firm.”
23. “So the more you think about it, it was the First, not the Second, World War that is at the origin of most of the world’s problems today. By destroying high-level supranational and multi-ethnic structures overnight, it created massive problems. By selecting “self-determination” as the solution, without really thinking through what it meant, it ensured that those problems would be insoluble without brute force, and perhaps not even then.
In fact, if you consider where crises and political instability have arisen in the last thirty years, from the Balkans through the Levant to Libya, Algeria and Tunisia, these are all territories of Arab/Ottoman conquest: even Yemen was added to the Empire in 1517.
This is not because the Empire of the Ottomans was especially bad — though there is a tendency to romanticise it — but because of its organisation of the population into religious groups, and the speed and nature of its collapse and the vacuum left behind. In a very real sense, we are still dealing with the consequences of the fall of three Empires in 1918.”
24. “Tension tells us that we need to change. I had to stop in my tracks and acknowledge that certain forces in my life had corralled me into a career which was not ‘me.’
Facing tension, and avoiding a quick fix, what can we move towards? The remedy will be particular to the root of the problem. Recurrent desires or thoughts, of work that energises you, are signs of your true interests and passions. Whenever I took holidays from work, the same old ideas and curiosities tended to arise, and I would begin to think about them, enjoying an energetic shift which would dissipate as soon as I returned to the work environment which was stultifying me.
In my work and personal life, the pattern was similar. There was no point in running away from something unless I had something to replace it. In some cases, the right thing to do was not to leave, but to work through the issues, which can require confronting deep tension.”
25. “As the world shifts to more digital competition, one of the most powerful long-term advantages is addiction. For businesses, this means that services that can grab and hold consumers’ attention for longer will be rewarded. For consumers, it means that we will have to be ruthless in our relationship with technology. Business best practices are not equivalent to consumer best interests. Whether professionally or personally, each of us will need to understand and reconcile ourselves to this phenomenon. In the years to come, whoever responds best will be rewarded.”
26. Building a business around C-Suite communities. I know Greg from back in the day, awesome to see him building something so needed.
27. “If you’re still unconvinced, let me remind you that everything online is fake.
Social feeds are a window to that impossibly desirable living style, exempt from worldly affairs and oblivious to the daily news: wanderlust nomads that live by not living anywhere; chefs cooking succulent meals in the middle of nowhere; and beautiful couples sharing landscapes as enchanting as from God’s dreams.
The trick is that those people spent just as much time, if not more, setting up the camera, preparing the lighting, the angles, the spot, the calculated movements, and taking a gazillion of footage to show us. They need to document everything. They need to be terminally online. They need to design and manufacture their lives for social media likes and engagement.
Ideas flourish in the unplugged places but spread through the wired currents of the internet.
It gotta be both.”
28. Good state of pre-seed. It’s still active but with fewer rounds & ones taking longer from what I see.
29. “Things are turning into positional war there,” he said, meaning static lines of contact on a battlefield defined by artillery fire, similar to what obtains in Donbas. “I believe Ukraine can hold the line there for quite a long time unless Russia dedicates very serious resources to kicking us out.” One person who agrees is Russian parliamentarian Andrey Gurulev, a retired lieutenant general, who said on state-run Russian television: “We must look at this situation with sobriety. We won’t be able to push them out quickly.”
Ed Bogan, a former senior CIA operations officer who follows Ukraine closely, told New Lines that the campaign has already delivered a “heavy psychological blow to the enemy, as it clearly exposes several of Russia’s many military and political deficiencies and challenges our policy assumptions. Now would be a good time to lift the remaining restrictions and let Ukraine move towards finishing this thing on their terms.”
30. An Incredible vision of the future. And a call to action for all of us.
31. “That said, we often discuss that the brush stroke of “venture capital” is far too limited. Our mandate isn’t exclusively to invest in SaaS startups (though that’s certainly part of what we do); it’s to invest in companies that we feel can provide an incredibly compelling return for our LPs. At Equal, not a single one of our last 3 investments sells software. In each case, we diagnosed the value chain of that particular industry and determined that the most transformative impact (and highest value-creating potential) was in developing a service that utilizes technology to disrupt and/or augment the existing stakeholders in the industry.
When we look at an investment opportunity, we don’t just look at top-line revenue and ascribe revenue multiples. Rather, we diagnose the economic benchmarks of that industry segment to determine 1) is there an opportunity for an economic moat, 2) how that company may be valued at scale, and 3) whether the corresponding return to our fund would be sufficient to justify the investment.”
32. This was a fun interview with two smart VCs.
33. Incredible episode if you want to know what’s up in the tech world. IRL versus remote work, body futurism and what the young kids are into.
34. “The question to ask is why Zelensky did not order his troops into this direction earlier as it serves multiple and useful goals for him. First, opening a new arena of hostilities will likely force Russian troops to vacate positions it has in occupied Ukraine and move to the homefront and thereby opening up offensive opportunities for the Ukrainians. Secondly, captured territory can provide a bargaining chip for Ukraine if peace negotiations are to take place.
But the overarching rationale is that this is an incredibly humiliating swipe at Putin and therein also lies a significant risk: it may provoke Russia to ramp up the war and engage in similar and more lethal moves deeper into Ukraine which will escalate the war further. It is not a stretch to argue that Ukraine’s war cabinet’s bold move is therefore a huge gamble.”
35. This is an ambitious initiative. A brand new school. Very interesting.
36. “For Ukraine itself, preserving its own personnel is vital, so the more it can degrade Russian forces with indirect fire, the better. The priorities for support include artillery ammunition, strike drones, and systems for knocking down Russian reconnaissance unmanned aerial vehicles that allow its forces to attack Ukrainian units while they are being resupplied.
Ukraine’s wider military position remains precarious, and the autumn looks to be politically challenging. Kyiv must strike a balance, preparing for the loss of critical supplies without burning its ability to fight on. For Europe, it is vital that Kyiv, if forced to negotiate, is given as strong a hand as possible, and that there is a concrete plan to ensure that any settlement produces a lasting peace.”
37. “The significance of this moment may lie less with events in Kursk than with the change in strategy they reveal. Ukraine may be adopting some elements of guerrilla warfare, looking for weak points anywhere within the Russian forces and taking greater advantage of the element of surprise. The goal would be less to bring about a spectacular victory of the kind Ukraine still dreamed about a year ago than to weaken Russia to the point where it has no alternative but to withdraw.
Ukraine and its partners now hope to keep Russia under increasing pressure — I expect a succession of attacks — and wait for the Kremlin to conclude that the war cannot be won. The terms for a peace negotiation remain uncertain, but Ukraine is convinced that reaching a deal depends on blocking any path to a Russian victory. Kursk is the opening salvo of a psychological war on Russia.”
