Top Reads, Listens, Follows & Takeaways of the week
Fraud
Fraud has been top of mind recently as I’ve been following the story of George Santos, the representative for New York's 3rd congressional district. He was elected by touting a fabricated resume and refuses to resign. It seems that other areas of business and society have also seen a dramatic uptick in fraud. One fallout from COVID was record level of filings for business loan1 and unemployment fraud. Global phishing & scam data reveals 2021 levels 2.5x that of 20192 . Last year was the great downfall of effective altruist Sam Bankman-Fried and other crypto companies.
Legendary short-seller Jim Chanos is calling it the golden age of fraud. He says, “The longer you have an expansion, the longer a bull market goes on the more incidents of fraud occur as it matures. And then of course once things turn down you begin to get fraud exposed, because many frauds are at their basis a Ponzi scheme and need to raise new and new capital”. He goes on, “And Silicon Valley has taken this almost to an absurd level. I have companies that are going to report that have 80% of their revenues are share based comp expense, where they’re just issuing stock instead of cash to their employees. And under the current guise companies add that back to their P&L, they say that’s not an expense”.3
Chanos notes that the fraud cycle follows the business and financial cycle with a lag. It all seems to make sense, the good times make for fertile hunting grounds for predators, but things seem to be coming to light. Like Warren Buffett said, “Only when the tide goes out do you discover who's been swimming naked”.
Speaking of Buffett, his annual letter is short this year, and still is a must-read. Check it out below.
Reads:
Berkshire Hathaway Annual Letter (pgs 3-11) (here)
A Christian Health Nonprofit Built an Empire, Saddling Thousands With Debt (here)
ChatGPT Heralds an Intellectual Revolution (here)
Jean-Luc Currie on substitution bias, the Trojan War, and electoral politics (here)
Tens of thousands protest Mexico’s electoral law changes (here)
Listens:
Chris Arnade on Backrow America, McDonald’s, and faith (here)
Capital Allocators Venture Capital Panel, a reflection on how we got here (here)
Jim Chanos on the Golden Age of Fraud (here)
Follow, Watch & Other great content:
NFL Films Presents The Sights and Sounds From Super Bowl LVII (here)
Show recommendation - Make or Break on Apple TV (trailer here)
Tesla’s Growing Competition in China Goes Beyond Just EVs (here)
Campaign of Deceit: The Election of George Santos (here)
