Sunday Snapshots (15th March, 2020)
American Colossus, Social Capital's 2019 Annual Letter, Supply Chains and COVID-19, and F1 Guide
Hey everyone,
Greetings from Chicago!
I hope you’re safe and sound. Things in the US changed on a dime this week because of COVID-19. Schools went online, folks are self-isolating, and businesses are being shut down. With all the disruptions going on, I’m glad Snapshots can still be a part of your routine.
In this issue, I want to talk about:
American Colossus by H.W. Brands
Social Capital’s 2019 Annual Letter
Supply chain disruptions and opportunities due to COVID-19
A newbie’s guide to Formula 1
And more!
Book of the week
In American Colossus, H.W. Brands paints a picture of broader economic expansion in the face of massive social pressures at the sunset of the Civil War – the Gilded Age. The broad brush strokes felt familiar to me, having both read Titan by Ron Chernow about John D. Rockefeller and watched the The Men Who Built America series.
To be honest, I don’t think that the book was very good. It struggled to keep my attention as a reader and I think I know why. Brands uses the general to talk about the specific. So, he’ll talk about how increased concentrations of wealth has always led to perverse political influence and then show how this principle was applicable in this age as well. I like to learn from the specific to the general.
Nonetheless, I think the Gilded Age is an extremely important period of not just American, but world history. To learn more about it, I’d recommend the following books:
The First Tycoon by T.J. Stiles
Titan by Ron Chernow
Andrew Carnegie by David Nasaw
The House of Morgan by Ron Chernow
Since the lives of these robber barons were so tightly connected, reading about even one of them will give you insight into all of them. Specific to general.
Long read of the week
Social Capital’s 2019 Annual Letter [My annotated version]
Chamath Palihapitiya has a true rag-to-riches story. His family moved to Canada when he was six and lived on welfare until he went to college. Today, he owns a stake in the Golden State Warriors.
That makes him worth reading.
This week, he published his firm’s annual letter to investors for 2019. Here were the themes that stood out to me:
Rhythms of history: Just like in American Colossus, Chamath shows how the conditions of the Gilded Age led to the start of the Progressive Era. This era was characterized by anti-trust laws, stronger unions, and overall political reform. He argues that we are at the cusp of a similar change. Economic expansion over the past ~30 years created by the internet, previously characterized as the pinnacle of American ingenuity, is facing increasing social and political resistance. Technology companies are like the railroads. Bezos and Zuckerberg are like Rockfeller and Carnagie. Nothing is ever new.
Big tech and RSUs: The typical view of restricted stock units (RSUs) is that they encourage loyalty to the company and give the employees a bit of skin in the game. Chamath disagrees. He sees this as a contributor to “lobotomization” of “too many smart people” since the pay is too good. The upshot:
After the Great Financial Crisis, STEM grads fled Wall Street in droves but the lobotomization didn’t stop because Big Tech took over the starring role. Carbon sequestration? Resource scarcity? Materials Science? No thanks. Photo-tagging, short form video uploading and ad targeting were the work ad jour.
Personal growth: Chamath offers three implicit learnings from his own personal growth story – be emotionally rich and available, be coherent and honest with other people, and take the advice of others but carefully consider how it applies to you. The one that seems most applicable to most of my peers (and me) is the first one. Too often, we hide behind the veil of fake strength because our egos cannot handle true emotional vulnerability. But when you’re emotionally available, your actions are more compassionate and your relationships are richer. There’s not a better way to live life.
I don’t always agree with what Chamath says and how he says it, but this letter is worth reading.
Business move of the week
COVID-19 and Supply Chains
Now that COVID-19 has probably past its peak in China, supply chains in the country are coming back up online. However, it is unclear to what extent and to what levels of efficiency.
Here are some of my quick thoughts based on reading 50+ articles, interviews, and papers on this:
Apple vs. others: Apple is the poster boy for coordinated supply chains. It is also heavily dependent on China in terms of both, supply and demand. So it makes sense that its stocks have been hit hard in the wake of COVID-19. Many have questioned whether it will be able to launch its next generation of phones on the intended timeline. My view is that Apple will weather the crisis well, and in fact, might even benefit from it. Its biggest advantage is its war chest of cash worth more than $200B. It can deploy this war chest to smoothen out any disruptions – pay a premium for alternative sourcing of components, jumpstart entire factories based on its own volume, and command higher hygiene standards. Local Chinese manufacturers on the other hand do not have hundreds of billions of dollars lying around. Many of them will be forced to shut down. At least a portion of it will be absorbed by Apple. So while it may face some short term hiccups, Apple will emerge a healthy and potentially better company.
Uber/Lyft moment: Another sentiment I heard is how this will accelerate the diversification of supply chains from China to other countries. They argue that Vietnam, India, and others need to use this moment. It’s like Uber and Lyft in 2017. If Uber had not self-destructed in 2017, Lyft might not exist today. I’m not so sure about this narrative. Yes, supply chains should be diversified. But this virus is country agnostic, so Vietnam and India are facing impending public health crises of their own. Unless they have a Dick Cheney-esque figure in the upper echelons of their governments willing to shape the world in their own worldview after a significant event in history, I don’t think they’ll be able to steal enough business from the Chinese. However, it will certainly give those discussions more weight.
Knowledge transfer: Do you know what’s better than money? Knowledge. China doesn’t just have the physical infrastructure to build things, they have also acquired almost three decades worth of specialized knowledge associated with manufacturing. This is native human capital that has to be moved if you want to bite into the Chinese supply chain pie. But movement of these technicians and floor managers can be (and is) controlled by the CCP. So don’t expect them to making trips to Ho Chi Minh or Bangalore any time soon.
If you have read any interesting articles about how supply chains are being affected by COVID-19, please send them my way by replying to this email or DMing me on Twitter.
Random corner of the week
I'm so glad that people are finally getting into Formula 1 – all thanks to the Drive to Survive documentary on the last two seasons. Daniel Zarick wrote a guide to F1 for anyone who is just getting into the sport.
Tim Urban, the author of Wait But Why, has a framework around competence which he measures from 1 to 10. 1 is never heard of it. 10 means you have a PhD on the topic and have spent decades working in the field. He says his aim is to get to a 6 on any topic that he writes about.
This guide gets you to a 6 when it comes to Formula 1.
Meal of the week
The highlight of this week was today’s breakfast made by my friend Raghav. Bread, hummus, and heavily seasoned fried eggs. I call them Quarantine Eggs.
That wraps up this week’s Sunday Snapshots. If you want to discuss any of the ideas mentioned above or have any books/papers/links you think would be interesting to share on a future edition of Sunday Snapshots, please reach out to me by replying to this email or sending me a direct message on Twitter at @sidharthajha.
Until next Sunday,
Sid