The Digest #132
The Fragile Internet, AMC, Serialized Books, Jim Grant on Fed and China, Carvana, Black Holes
Quote of the Week
“It seems, in fact, as though the second half of a man’s life is usually made up of nothing but the habits he has accumulated during the first half.”
The Fragile Internet
Over the past quarter century, the internet has become a necessity for billions of people. High speed connectivity, improved infrastructure, and mobile devices made the internet ubiquitous. However, as time goes on, content that once existed has vanished as if it never existed. It is likely that entropy will eventually prevail and much knowledge that exists today will disappear forever.
Almost all of the articles published on my website, The Rational Walk, link to other websites. The design of the internet is to share knowledge via links. The problem is that websites come and go and there is no way to ensure that a link that works today will work in the future. As time goes on, broken links start to proliferate.
As I wrote my recent profile of BNSF, I referred back to my articles from the period surrounding Berkshire’s acquisition of the railroad in 2010. It is remarkable how many links to other websites have broken. For example, in November 2009, I wrote an article discussing the acquisition on the day it was announced. In the article, I linked to resources such as press releases and webcasts. All of those links are broken today!
It gets even worse. A number of follow-up articles included videos of Warren Buffett and Matthew Rose discussing the acquisition. These videos were published by leading news organizations such as CNBC and PBS. Without exception, all of the videos no longer exist! My transcriptions from the videos now lack verifiable sources.
The Rational Walk is not the only website with old articles containing broken links. If the internet is going to serve as a historical reference in the future, much energy will be required to preserve information as it existed in the past. The Wayback Machine is a useful resource, but it is not comprehensive and doesn’t restore broken videos.
Perhaps it is too much to expect small publishers to preserve content forever. If I am hit by a bus today, The Rational Walk will go offline at some point over the next few years once the credit card on file with my host expires. This might be excusable for a small publisher, but it isn’t excusable for a large organization like CNBC.
A potential business idea: Create a service that allows publishers to make a one-time payment in exchange for a guarantee that their content will live on in perpetuity. Responsible publishers would probably be willing to pay something as insurance against having their content vanish in the future. Offering this service would be a float-based business — payments received well ahead of the service being rendered.
Pilot and Kodiak Robotics Partner to Bring Self-Driving Truck Services to Pilot and Flying J Travel Centers, August 23, 2022. Pilot is making a strategic investment in Kodiak Robotics, a self-driving trucking company. The two companies plan to develop autonomous trucking services at Pilot and Flying J Travel Centers. Berkshire Hathaway owns a 38.6% interest in Pilot and will acquire an additional 41.4% interest in 2023 to become Pilot’s majority owner. Presumably, Warren Buffett or Greg Abel was consulted regarding the strategic investment. Autonomous trucking could be a competitive threat to railroads, so this development is interesting. (PR Newswire)
This company is about to grow new organs in a person for the first time by Jessica Hamzelou, August 25, 2022. This will be incredible news if it works! “LyGenesis hopes to save people with devastating liver diseases who are not eligible for transplants. Their approach is to inject liver cells from a donor into the lymph nodes of sick recipients, which can give rise to entirely new miniature organs. These mini livers should help compensate for an existing diseased one. The approach appears to work in mice, pigs, and dogs. Now we’ll find out if it works in people.” (MIT Technology Review) h/t @jposhaughnessy
Big Beliefs by Morgan Housel, August 24, 2022. Many people have a bias toward action because doing nothing seems irresponsible: “Sitting still feels reckless in a fast-moving world, even in situations where it offers the best odds of long-term compounding. It’s like being told that you should play dead if a grizzly charges you – running for your life just feels more practical. The bias towards action is one of the strongest forces in business investing for three reasons: It can be the only signal to yourself and others that you’re not oblivious to risks. It can be the only signal to others that you’re worth your salary. And it can provide the illusion of control in a world where so much is out of your hands.” (Collaborative Fund)
Hedge-Fund Pioneer Julian Robertson Jr. Dies at 90 by Gregory Zuckerman and Juliet Chung, August 23, 2022. “Mr. Robertson had an incredible talent for synthesizing data, according to Tiger co-founder Thorpe McKenzie, who retired from Tiger in the early 1980s but remained close with Mr. Robertson. In Tiger’s earliest days, when its portfolio consisted of perhaps 100 positions, Mr. Robertson would calculate in his head Tiger’s performance the prior day on his train ride into New York City from Long Island by looking at the stock quotes published in The Wall Street Journal.” (WSJ)
AMC Goes APE by Matt Levine, August 23, 2022. This is a good explanation of the convoluted process that AMC is using to bypass the need for shareholder approval to raise equity capital in the future. Jason Zweig’s article in the Wall Street Journal, Why Investors Went Bananas Over AMC Stock, also provides a good explanation. This “meme stock” situation keeps getting stranger. If you are having trouble with Bloomberg links, I would recommend signing up for Matt Levine’s free newsletter. (Bloomberg)
The Locksmith Paradox, Sparking Creativity, & More by Sahil Bloom, August 26, 2022. If an inexperienced locksmith charges $100 for a task that takes an hour to complete, the customer is satisfied. But if an experienced locksmith charges the same $100 and is able to complete the task much faster, the customer could be upset if he or she loses sight of the value of experience. “Traditional corporate culture has an obsession with input—hours worked, etc.—when what really matters is the output. It seems obvious, but as a manager or employee, always push for a focus on outputs vs. inputs. It takes time to shift cultures, but it's worth it in the long run.” (The Curiosity Chronicle)
10 Reasons Why I'm Publishing My Next Book on Substack by Ted Gioia, August 18, 2022. Publishing a book in serialized form used to be common. It might be making a comeback. This is an interesting list of reasons to serialize a book on Substack. “I initially thought that I would gain some early subscribers and then growth would flatten. In fact, the opposite occurred—my subscriber growth and impact have accelerated over time. I had no idea this would happen, or in such a dramatic way.” (The Honest Broker)
Disaster at 18,200 feet by Kelsey Vlamis, July 22, 2022. There’s a saying in the hiking community: when you start using your hands to make progress, you’ve left the realm of hiking and entered the world of mountaineering. This is a story of adventure and disaster on Denali (formerly known as Mt. McKinley), a mountain soaring 20,310 feet above sea level in Alaska. Although I have reached the summit of Mt. Whitney, the highest peak in the lower 48 states, three times, that adventure is a hike whereas Denali is real mountaineering! I have many items left on my bucket list, but this type of adventure is not one of them. (Business Insider) h/t The Profile
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Fear the Fed w/Jim Grant, August 20, 2022. 1 hour, 51 minutes. William Green covers a range of topics with Jim Grant, the legendary founder and editor of Grant’s Interest Rate Observer. In addition to a wide-ranging discussion of the Federal Reserve, Mr. Grant comments on China: “I’m a seller at zero. No, China’s the worst. I mean, and China is getting its come-comeuppance there as we speak. There is a spreading nationwide strike against paying one’s mortgage interest or and choosing failed promise in some real estate developers. China is the most leveraged, most corrupted marketplace, not just corrupted … Well, let me put it this way. If you ever see a currency with one side there’s a picture of a masked killer, you don’t want to own that country. This is a country with Mao on the currency. They’re telling you something, just don’t do it.” (Richer, Wiser, Happier)
Henry Rearden: The Man Behind The Carvana Short, August 19, 2022. 58 minutes. This is an interview of the pseudonymous Henry Reardon, a short seller who made a prescient call on Carvana prior to the stock’s precipitous decline. I recently read Carvana’s 10-K as part of my research related to the automobile industry in general and America’s Car-Mart and CarMax in particular. I found the backstory of the mysterious related party transactions particularly interesting. (ValueHive)
Les Snead: Building a Champion, August 23, 2022. 1 hour, 21 minutes. I am a casual viewer of NFL football during the season (49ers), but I’ve never paid attention to the business side of the league. This is a very interesting behind-the-scenes interview with the General Manager of the Rams. Although some understanding of football is helpful when listening to this podcast, even those who are not football fans should be able to benefit from the discussion since much of it has to do with leadership and making correct assessments of character. (Farnam Street)
Atlas Copco: Sweden’s Best Kept Secret, August 24, 2022. 44 minutes. This is an interesting discussion of a company most investors in the United States have never heard of. “The company also epitomizes the type of industrial champion that you can find in Europe if you look hard enough. It dominates these niche markets. It has a very unique corporate culture centered around its decentralized organization, which is really important. As you pointed out, it has had the same family ownership for almost 150 years. It's been highly acquisitive. It generates high returns in capital. And of course it's been very successful. So even over the last 20 years, its total return has been about 4000% or a 40 bagger as Peter Lynch would call it. So I think we can learn a lot from it.” (Business Breakdowns)
Talking All Things Value Investing with Tobias Carlisle, 1 hour, 4 minutes. “This week we are joined by our good friend and first three time guest on the podcast Tobias Carlisle. We talk about a wide range of value investing topics, including the current state of value investing and how value looks relative to growth. We also compare the current period for value to the early 2000s period and look at what we can learn from that period. Finally, we take a deep dive into the many issues value investors face when constructing a value strategy in the real world, including using single metrics vs. composites, portfolio sizing, industry concentration, how to handle intangible assets and a lot more.” (Excess Returns)
Tweets of the Week
The sound of a black hole is … pretty much what you think it might sound like:
Another great thread from 10-K Diver:
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