Top Reads, Listens, Follows & Takeaways of the week
Hero worship & the genius premium
Takeaways:
-Seeing Elizabeth Holmes get sentenced to 11 years in a prison camp, the WeWork Hulu documentary, and the FTX implosion makes me wonder, how? The economic environment of the past decade was certainly a contributing factor to these unique situations. A ~zero cost of capital world led to a growth at all costs mindset among investors, propping up companies with terrible unit economics and a great story. As those growth companies became more “valuable”, less diligence went into the next company with a similarly flawed model and the flywheel picked up speed. Could it really be that on demand food delivery only costs $6? Then $4.5T of liquidity enters the system on the back of a pandemic. Superior storytellers emerged in this environment - Holmes, SBF, Neumann. They convinced some of the most esteemed investors to overlook numerous red flags - hundreds of medical tests with one drop of blood, high returns with no risk, and community adjusted EBITDA are examples. The great Jason Zweig attributes the oversight to a “willing suspension of disbelief” among the so-called elite investors. I think the superior storytellers garnered some combination of hero worship and a genius premium, intoxicating investors and blinding them to the realities of their businesses. As we head towards a recession and the market cap created in the past two years gets vaporized, hopefully investors will be reminded to more closely guard against their biases. Businesses have to produce a good or service that creates value and is physically and economically viable. In a world with a real cost of capital, cash flows look primed to be emphasized over storytellers with promises.
From an Alameda Research Pitch Deck:
Reads:
Why the Investing Pros Were Such Suckers for FTX (here)
Bill Barr on 2024 (here)
World Cup Brings Two Million Visitors and an Epic Culture Clash to Qatar (here)
Is Beyond Meat beat? (here)
AQR: Trend following, why now? (here)
Is the U.S. Economy in a Recession? No. (here)
Morgan Housel with a few good stories (here)
Listens:
Legendary short seller Jim Chanos on frauds and froth (here)
Steph Curry & JJ Redick talk hoops (here)
Bridgewater co-CIOs on how the Fed tightening might play out (here)
Shane Battier - The No-Stats All-Star (here)
Follow, Watch & Other great content:
Internal Tech Emails on Twitter (here)
Pepsi, Where’s my jet? on Netflix (here)
Apple CEO Tim Cook (here)