Scale
This is one of the first charts we have come across that truly demonstrates the scale of the AI boom in the IPO market. The current valuations of SpaceX, Anthropic, and OpenAI exceed the combined value of every U.S. tech IPO of the past 45 years!
We are self-conscious about the volume of AI content that has found its way into our writing of late, but hopefully this provides an explanation for that trend.
Powerful
A new piece from Paul Graham on the strategies to make a business more “powerful” (i.e. better). There are many great insights here, including the folly of squeezing your customers instead of giving up margin in the short-term to scale a better model in the long-term. Playing the long game may be the most underrated advantage in both investing and business.
Playing the long game makes you more powerful, because most other people you encounter won’t be. Most startups competing with you will be run by opportunists hoping to be acquired. Most big companies you deal with will be run by executives who don’t expect to be there for more than a few years and are only thinking about this quarter’s numbers. So tradeoffs that only pay off in 10 years will usually be underpriced.
Charlie Munger at the Singleton Prize
The audio quality is horrific, so we recommend reading the transcript over listening to the podcast (unless you have a secret fondness for clinking cutlery). At any rate, the late Charlie Munger was a fountain of wisdom, and this one is well worth reading.
But I don’t think — Warren was around me and he used to say, “You really don’t need to be very smart to be a very successful investor.” And I think Warren was right. It’s a field where the temperament is, it’s good to have the extra mental horsepower that Henry Singleton had. That is helpful, but it’s perfectly possible to do splendidly well if you have the right temperament. Just go at it over a long time. You talked about me. I’m not a polymath. What I am is a guy who has been able to take moderate obsession and a long attention span and turn them into pretty good results.
How to Stay Smart
One of the most intuitive findings of all time will be that AI is making the human population…dumber. Critical thinking is a skill that needs to be honed over time, and the ability to outsource that effort will result in less “sharp” people, perhaps at the exact moment in history when that skill will be most valuable.
Unfortunately, we are running this experiment in real time, and it will take years for comprehensive studies to emerge. In the interim, some early evidence from Nature.
Learning happens as a consequence of cognitive processing. Cognitive processing is typically effortful, and that’s what AI effectively removes
Is it Time to Rebalance Your Portfolio
A positive article on bonds from Gallant MacDonald. Pigs may be flying while the sun rises in the west.
We aren’t suggesting it’s time to completely rethink allocations, but given where rates are sitting today, bonds actually have the potential to live up to the threefold promise of income, liquidity, and portfolio hedging.
Contrary to popular belief, the 60/40 portfolio did not die this decade. Diversification worked. This time it was the stock market diversifying bonds.
The next time you need diversification it might come from the fixed income side of the portfolio.
Gallant MacDonald provides outsourced chief investment officer solutions to a select group of ultra-high net worth families who have made significant contributions to business, public service, and philanthropy.
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