Thinks 592

Sangeet Paul Choudary: “The early promise of Web2 was built around the argument of the long tail. Back in 2006 – the early days of Web2, when Facebook was still a dorm room phenomenon and Yahoo was making fun acquisitions in user-generated content – Chris Anderson published his NYTimes bestseller “The Long Tail”, arguing that the internet would empower niches in the long tail. And that, by extension, business value would shift away from a few ‘fat/short head’ categories and migrate to many niches across the long tail. That future didn’t really play out as expected. Instead, over the next 15 years, we’ve seen large platforms aggregate niche market activity and increasingly centralize value away from these niches. But with the rise of blockchain-based protocols, we may finally have the necessary business architecture and economic incentives to drive value in niche market activity.”

Chris Dixon on crypto: “Today’s negative financial sentiment most closely resembles 2008. If we are headed for a prolonged downturn, there are some tactical lessons from the 2008 era, namely preserving capital and staying focused on your long-term vision. The strategic lesson is to keep your eyes squarely focused on the product cycle. Things that look interesting to smart people usually do so because they are rich with product possibilities. These possibilities eventually become reality. Toys become must-have tools. Weekend hobbies become mainstream activities. Cynics sound smart but optimists build the future.”

Debashis Basu: “Start-ups don’t care that mad-money funding comes to a hard stop after an IPO. Shareholders of listed companies believe in a different approach to valuation; it must be based on profitability and cash flows, and all eyes will be on corporate governance standards. As a listed entity, corporate actions have to take the interests of all shareholders, especially minority shareholders, into account.”

Thinks 591

M R Madhavan writes about the anti-defection law in India: “This law strikes at the core of Indian democracy. The government has legitimacy because it is accountable to MPs. In turn, MPs are accountable to the people who elected them. However, due to this law, MPs (especially of the party in government) can no longer question its actions. As the government, by definition, has a majority in the lower House, it controls all decisions without any checks. Parliament, thus, has become a rubber-stamp for the government, rather than an institution of accountability. The accountability of representatives to their constituents is also weakened. In an electoral democracy, this accountability is maintained through periodic elections, as MPs have to explain their legislative behaviour to the electorate. (Witness the grilling that American candidates face for their voting records.) Indian legislators have an easy excuse — they had no choice but to vote according to the party’s diktat. This also weakens the incentive to examine policy issues and legislative proposals. After all, if the vote is pre-decided, what is the point of doing the hard work of understanding complex matters. The law also centralises power within political parties. The top leadership can dictate terms to all the party legislators. The lack of inner-party democracy in most Indian parties exacerbates the problem. One could argue that this law is a factor towards splintering of political parties as ambitious leaders foiled by a glass ceiling form their own parties.” Sanjay Kumar: “The reason why a poor record on honesty and frequent switching of candidates from one political party to another (defection) hardly concerns Indian voters is simply that a very large section of the electorate chooses the party and not the candidate during elections. If merits and demerits of candidates had any bearing on voting considerations of Indian voters, many defectors and candidates with questionable records would not have made it to the Indian Parliament or the Assemblies of different States.”

Shane Parish: “It almost always seems expensive to act with the long term in mind, which is why so few people do it.”

Mohit Satyanand: “Since the middle of the last century, most rapidly developing nations exported their way to growth, beginning with Japan, then South Korea, and, most spectacularly, China. As it cemented its position as the manufacturer for the globe, China was continuously accused of manipulation to keep the yuan – and hence Chinese goods – cheap. But it takes more than a cheap currency to ignite exports; exporting nations need to develop competence, efficiency and a reputation for quality and reliability. As they climb those ladders, price is no longer the major determinant of demand for their goods, and a thriving export sector survives a strong currency. Think German cars, or French wine.  Closer home, think garment exports from Bangladesh, or Vietnam. At the turn of the century, as Chinese labour became more expensive, many believed that India would become the tailor to the world. Instead, our garment exports have been overtaken by both Bangladesh and Vietnam.”

Thinks 590

WSJ: “Why not abandon elections and replace them with surveys? Surveys turn citizens into “respondents” answering from home by phone or computer. Respondents are scientifically selected to represent a slice of the population. Answering is easy, to please Democrats, and since your qualities and attributes are selected without regard to your name, there’s no risk of fraud, which should please Republicans. Now that we have surveys made reliable by the science of polling, why do we need elections with their hoopla, ceremony, and expense—not to mention their chanciness, rowdiness and unreason?”

Subscribed on how the amazing digital transformation of New York Times: “Seen over the arc of the last decade, it’s clear that The New York Times has been slowly transforming from a newspaper, to an online publication, to a media conglomerate complete with technology-focused employees, apps, and new offerings every few financial quarters. Now The New York Times is effectively a tech company, with data scientists working just as fervently as its journalists. And they’ve done an impeccable job orchestrating several services and offerings into one platform, The Times. So, what can an aspiring subscription business learn from the last 12 years of the New York Timess amazing transformation? Simply put, if you want to keep up with the times (no pun intended), you need to be flexible and use technology, data, subscriptions, and ultimately, make what the subscribers want your main focus. The New York Times thinks of its customers as subscribers, who have subscriptions, and ultimately, assets to the brand.”

Joel Mokyr reviews “How the World Became Rich: The Historical Origins of Economic Growth” by Mark Koyama and Jared Rubin”: “Where the book truly shines is pointing out why the Great Enrichment was relatively late in coming and why the pre-1750 world — with a few exceptions — remained poor. The authors admirably survey the consensus that has emerged on the subject. Three major factors held the economies back. First, as neo-Malthusians such as Galor and Clark have maintained, before 1750 population growth in many cases wiped out the fruits of productivity growth, such as they were. Second, predators of various kinds and extractive institutions (North-Wallis-Weingast’s “natural state”) not only pillaged and plundered the riches of the few places that had been economically successful, they extinguished incentives to invest and innovate. Finally, until institutions had been established to govern and control the accumulation and dissemination of useful knowledge, the opportunities for sustained technological progress remained too limited. As the authors point out in admirable detail, the Industrial Revolution meant that these three brakes on economic progress slowly dissolved to create the Great Enrichment, first in a few economies in the West, then in more and more places around the world.”

Thinks 589

Thomas Sowell in 2002: “Turning out generation after generation of people who do not know what it is to weigh opposing arguments is producing intellectual couch potatoes who know only how to repeat whatever they have been indoctrinated with. They are precisely the kind of gullible people that the Nazis targeted in their years of struggle for power. I think it was Jefferson who said that freedom and ignorance cannot co-exist indefinitely.” [via CafeHayek]

FT: “Paying in cash, for those living in metropolises, is often treated as an anachronism, akin to filing a story with a typewriter or using a payphone. Notes or coins are treated as an inconvenient and dirty product of the past, fit only for tooth fairies and low-level tax avoidance (or in some cases, rather unsophisticated money laundering)…Journalist and author Brett Scott, who previously wrote The Heretic’s Guide to Global Finance (2013), takes a rather different line: “We must vigorously assert our right to use cash, and to see that as a political act,” he writes. Cash is not stopping human progress. Rather, it is a roadblock against a greater concentration of data collection and power within Big Tech and Big Finance companies — a combination of players that is pushing us to adopt its own “cloudmoney”.”

WSJ: “The concept of commutativity explains whether sequences make a difference, from slinging bags over your shoulder to adding ingredients in a recipe…Things are said to commute if it doesn’t matter in what order you do them. For example, 2+3 = 3+2, and the order doesn’t matter. Addition of ordinary numbers is commutative, as is multiplication, and this is very helpful for simplifying computations. When we study more complex concepts, however, things might not commute. Take cooking: It doesn’t usually matter in what order you add things such as salt and pepper, but it matters a lot if you’re making something delicate like mayonnaise.”

Thinks 588

Vinod Khosla: “Every major area has been innovated by high-risk experiments, whose chances of getting off the ground were very low. Take Airbnb. In 2007-08, if you’d said people would just let a stranger into their house, into their spare bedroom . . . give me a break! Luckily for them, what happened was we had the financial crisis in 2008, just when they were getting going. Suddenly, the proposition wasn’t: will somebody let a stranger into their house in their spare bedroom? The choice, for about 10 per cent of the people in the US at least, was: my mortgage is under stress; do I lose my house or let a stranger in? Given that choice, they didn’t want to lose their house. I recently asked [Airbnb co-founder] Joe Gebbia this question and he said: “Absolutely right, people who would never consider letting a stranger into their house did, because the alternative was losing their house and not being able to pay their mortgage right after the crisis.” So luck plays a role, but also innovation plays a role. Almost all societal large progress happens because of some improbable.”

Arthur Laffer and Stephen Moore: “Catalysts for inflation vary—excessive government spending, printing too much money, currency devaluations, specific and general shortages of goods and services. Once embedded in an economy they can create long-lasting inflation. The secret to curing inflation isn’t economic collapse and high unemployment but the opposite: pro-growth policies that create incentives for more goods, more employment, less government spending and sound money. As the economy produces more, prices go down. Conversely, austerity means less goods produced and less employment. How does putting people out of work and reducing the supply of goods cause the prices of goods to fall?”

Rui Ma: “In fast fashion, there’s something known as the “impossible triangle.” It’s the perfect production scenario, where a company can 1) quickly onboard lots of new styles at 2) low prices, while 3) being hyper-efficient in managing massive volumes of inventory. Unlike Shein, those other upstarts didn’t quite crack the third edge of that triangle. And that’s what left them trailing — according to Crunchbase — the fourth most-valuable tech startup in the world, with an estimated $100 billion valuation.”

Thinks 587

NYTimes on 10 years of CRISPR: “The gene-editing technology has led to innovations in medicine, evolution and agriculture — and raised profound ethical questions about altering human DNA.”

WSJ on hypercasual games: “Mobile games that require little brainpower to play are becoming more sophisticated as their publishers try to cling on to fickle—and monetizable—players…“Hypercasual is still in its genesis phase with so much runway to be innovated on around this wonderfully pure notion of essentially a single gameplay loop,” said Clive Downie, senior vice president and general manager at Unity Technologies Inc., a 3-D content development platform that is used by hypercasual game designers. “Developers are looking for additional ways to add complexity and challenge to games.” Hypercasual’s popularity has boomed in the past two years. The number of hypercasual game downloads in 2021 increased to 15.6 billion from 12.6 billion in 2020 and 7.51 billion in 2019, according to Data.AI.”

Adrian Wooldridge: “It’s time to recognize that a new world is here to stay: We are at an early stage of a revolution in the distribution of work, driven by the miniaturization of smart machines and the ubiquity of the internet, that is as fundamental as the one that occurred with the industrial revolution in the 19th century and the office revolution of the early 20th century…It’s also time to recognize that both sides in the debate have a claim to be heard. Workers are right to want to work wherever they can be most productive. Forcing someone to endure a morale-sapping (and sometimes dangerous) commute just to keep a row of office desks filled is counterproductive. But employers are also right to worry that flexible work brings new problems. We need to shift the focus of the debate from the ideological to the practical — from the desirability of a change that is probably inevitable to the question of how to manage a distributed organization.”

Thinks 586

NYTimes on 10 years of CRISPR: “The gene-editing technology has led to innovations in medicine, evolution and agriculture — and raised profound ethical questions about altering human DNA.”

WSJ on hypercasual games: “Mobile games that require little brainpower to play are becoming more sophisticated as their publishers try to cling on to fickle—and monetizable—players…“Hypercasual is still in its genesis phase with so much runway to be innovated on around this wonderfully pure notion of essentially a single gameplay loop,” said Clive Downie, senior vice president and general manager at Unity Technologies Inc., a 3-D content development platform that is used by hypercasual game designers. “Developers are looking for additional ways to add complexity and challenge to games.” Hypercasual’s popularity has boomed in the past two years. The number of hypercasual game downloads in 2021 increased to 15.6 billion from 12.6 billion in 2020 and 7.51 billion in 2019, according to Data.AI.”

Adrian Wooldridge: “It’s time to recognize that a new world is here to stay: We are at an early stage of a revolution in the distribution of work, driven by the miniaturization of smart machines and the ubiquity of the internet, that is as fundamental as the one that occurred with the industrial revolution in the 19th century and the office revolution of the early 20th century…It’s also time to recognize that both sides in the debate have a claim to be heard. Workers are right to want to work wherever they can be most productive. Forcing someone to endure a morale-sapping (and sometimes dangerous) commute just to keep a row of office desks filled is counterproductive. But employers are also right to worry that flexible work brings new problems. We need to shift the focus of the debate from the ideological to the practical — from the desirability of a change that is probably inevitable to the question of how to manage a distributed organization.”

Thinks 585

Siddharth Pai: “The point of a DAO is to act like a company in the blockchain world, one which is controlled directly by its stakeholders with no governance structures such as a board and executive management. DAOs have many of the same needs as today’s modern firms, but must deal with greater complexities, given their ‘virtual’ form of organization, fluidity and technical stack. DAOs are organized in a flat structure led by a group of core contributors. To make decisions, members submit proposals and vote on them using DAO “tokens” in full public view. Unlike in a corporation, where an employee needs to be vetted and interviewed before being hired and then promoted through to the company’s management, which governs the firm, some DAOs let anyone join while others require a minimum number of tokens (often cryptocurrency).”

Steven Horwitz on Austrian economics: “For Austrians, the fundamental issue is not whether markets get it right. True, Austrians think markets are pretty good and governments quite bad in that respect. And even though Austrians might explain things differently from the mainstream, there are plenty of mainstream economists who would agree with those general conclusions. Note, though, that the question here is still about getting it right. Where the Austrian view differs, I would argue, is in understanding that markets are also really good at helping people to know when resources are not optimally allocated and providing the signals and incentives needed to correct the mistakes. Being adept at getting things right at a given point is of course a good thing. But it is probably more valuable — given that we aren’t likely to get things perfectly right on a regular basis — to be able both to know when we are wrong and to have an incentive to do better.”

Matthew Hennessey: “Everybody dreams of a free lunch. Everybody wants something for nothing. Economists remind us that we’ll have to pay eventually because resources are scarce and life is about trade-offs.” [via CafeHayek]

Thinks 584

NYTimes: “Sabyasachi is looking to become not just India’s pre-eminent designer but one of its most high-end exports. As he opens his New York store this fall, he will also be finalizing a beauty line and preparing for next year’s jewelry pop-up (his third) inside Bergdorf Goodman…If his global expansion takes off, Sabyasachi will establish himself as a sort of Indian Ralph Lauren. “He sold the idea of good American living to middle-class Americans,” Sabyasachi said of Lauren, “and I’ve sold the idea of good Indian living to middle-class Indians.” His West Village store will, he hopes, introduce Americans to the painstaking art and exuberance of Indian weaves, embroidery and craft. When a friend fretted to him about the location’s not being near a designer hub, Sabyasachi answered: “I’ll create my destination. When you build something very beautiful, people will find you.””

Mike Novogratz: “You have to put things in perspective. If I told you at the beginning of the pandemic you could buy Zoom stock or bitcoin — today you would have doubled your money on bitcoin and you’d have made nothing on Zoom. So that’s what I think is hard for people to get their heads around. This has been a complete and total old-school ass-beating. But it’s important not to throw the baby out with the bathwater because we had a speculative mania in lots of asset classes. Bitcoin is not going away as a macro asset. Web3 is not going away. We’ll spend more time in the metaverse, therefore companies will sell digital assets, and for digital assets to have value, they have to be unique, and to be unique, they have to live in a blockchain.”

Ishan Bakshi: “There aren’t that many [Indian] consumers with significant discretionary spending capacity, and those with capacity aren’t increasing their spending…Take Zomato, for instance. In 2021-22, 535 million orders for food delivery were placed on the platform. Considering that the company has 50 million annual transacting consumers, this translates to just under 11 orders per customer for the entire year or less than one order per customer per month. Of these 50 million customers, only 15 million transacted at least once a month, while 1.8 million did so once a week. In the case of Nykaa, the average monthly unique visitors range from around 16 million for the fashion vertical to 21 million for the beauty and personal care products. However, the number of transacting customers is only 1.8 million and 8.4 million respectively. Similarly, while Policy Bazaar has around 59 million registered customers, only 11.8 million are unique purchasing customers.”

Thinks 583

Eric Johnson of JSR on the first leadership lesson he learnt: “Decisiveness is important. But it needs to come at the end of the process, after enabling real and open information flow. Good news is always fun to hear, but it’s much more important to enable bad news and criticism to flow freely and quickly.”

Seth Klarman: “A very significant part of my philosophy has to do with managing your psychology. Markets are about the psychology of others. When are they panicking? When are they greedy? But you have those same flaws or those same potential flaws, and managing your portfolio in a way that doesn’t leave you where you’re panicking or overexposed to greed. If you can rule those extremes out, you’ll navigate the markets well.””

Macro Ops has distilled wisdom from Bill Gurley’s writings over 25 years: part 1 and part 2. This is from 1998: “The lifetime value of the customer is equal to the future cash flows (not revenue!) expected over the life cycle of the customer, discounted back by a reasonable discount rate. What we are really doing is treating the customer acquisition as an investment and the lifetime cash flows of the customer as the yield on that investment.”