Q2 2022 Quarterly Review
White Noise, Stepping Stones, The Guns of August, Inflation
Hi đ - Another quarter is in the books. Below are a few favorite reads and listens from the second quarter. As always, thanks for reading!Â
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Article: Spotify Podcasters Are Making $18,000 a Month With Nothing But White Noise
The internet is bigger and wackier than you think. By removing geographic barriers and eliminating distribution costs, it enables all sorts of markets to flourish that wouldn't work offline. In 1,000 True Fans, technologists Kevin Kelly writes:
If you lived in any of the two million small towns on Earth you might be the only one in your town to crave death metal music, or get turned on by whispering, or want a left-handed fishing reel. Before the web youâd never be able to satisfy that desire. Youâd be alone in your fascination. But now satisfaction is only one click away. Whatever your interests as a creator are, your 1,000 true fans are one click from you. As far as I can tell there is nothing â no product, no idea, no desire â without a fan base on the internet.
Kelly would love this article, which chronicles the rise of white noise podcasts like Calming White Noise, Deep Sleep Sounds and Tmsoftâs White Noise Sleep Sounds, reinforcing his point that thereâs a fan base for everything online. Put something on the internet, get some help from an algorithm, and a new business is born. (This article pairs well with Ben Thompsonâs Never-Ending Niches.)
In 2019, Brandon Reed, a Walt Disney Co. employee who lives in Florida, started using Anchor to host some white noise programming that he hoped would help his baby son fall asleep. Reed wasnât aiming to build a successful podcast, he said, but soon the Spotify algorithm started pushing people to his show, â12 Hour Sound Machines (no loops or fades).â That year, he created three, free episodes filled with hours of static noises. Now, three years later, around 100,000 listeners play his show daily. What began as essentially a cozy sound blanket for his baby, now regularly pops up around the world on Spotifyâs charts of the most popular podcast episodes.Â
Podcast: Kenneth Stanley: Greatness Without Goals, Invest like the Best
Iâm a sucker for paradoxes. In this podcast, Kenneth Stanley, a computer scientist and AI researcher, argues that setting big hairy audacious goals makes them less likely to materialize. Greatness cannot be planned. Goals are great for smaller objectives like running a faster mile or upgrading an app. However, theyâre counterproductive when the intermediary steps are unknown like curing cancer or getting AI to general intelligence. Stanley argues that almost no prerequisite to any major invention was invented with that invention in mind. His insight comes from AI research, but vacuum tubes are a real world example. Without vacuum tubes, we wouldn't have computers, but the researchers working on vacuum tubes in the 1700s had no idea what a computer was. Stanleyâs model of innovation is the stepping stone: someone invents something, someone else takes that discovery and uses it for something else, and this process repeats itself. Over time - and with a little serendipity - you go from the vacuum tube to the computer.Â
A vacuum tube is an electrical device. In the early computers, it was used as a small unit of computation. Early on, they were trying to understand properties of electrical devices in general. They weren't thinking about using it for computers at all. It allowed people to understand what you can do with electricity. It goes back to, I believe, the 1700s, basically glass tubes with vacuums, where they could run electrical currents through them and learn about their properties. If you go back to those times, which is going actually hundreds of years before you get to computers, what you find I think is very interesting, which is that you find people who are interested in electrical properties who were not thinking about computers, but these people are an essential part of the story of computation. That's the part that's left out of the narrative. The hero of the story is partly the vacuum tube researcher, but the vacuum tube researcher has not a single thought about computation.Â
Book: The Guns of August: The Outbreak of World War I by Barbara Tuchman
With Europe embroiled in another land war, I decided to dust-off my copy The Guns of August. Because history rhymes, there are plenty of parallels to Russiaâs invasion of Ukraine: errant expectations for a short war (Germany planned to occupy Paris within 40 days), Russian logistical struggles (meager railroads meant troops often relied on horse-drawn carts for supply), and a tiny nation defiantly holding off a larger force for longer than expected (the Germans expected only token Belgian resistance). Two dominant themes are that predetermined plans create their own momentum and, somewhat paradoxically, that plans, faultless on paper, crack under the pressure of war. Because no battle plan survives contact with the enemy, adaptability is necessary for victory. For example, German infantry initially attacked in dense formations, making them easy targets for French artillery. Similarly, the French at first didnât outfit their forces with entrenching tools because they were thought to sap the offensive spirit. As the body count mounted, this changed. New technology forced adaptation. Machine guns made defense more powerful. Scenes of calvarymen with sabers charging entrenched machine gun nests (talk about disruptive technology) at the warâs beginning quickly transitioned to trench warfare. Like plans, humans are fallible. It's impossible to know in advance how a commander will respond to the pressure cooker of battle. Things that seem easy in training become difficult when live ammunition enters the equation. While hindsight is clear, battle is anything but.
Men could not sustain a war of such magnitude and pain without hopeâthe hope that its very enormity would ensure that it could never happen again and the hope that when somehow it had been fought through to a resolution, the foundations of a better-ordered world would have been laid. Like the shimmering vision of Paris that kept Kluckâs soldiers on their feet, the mirage of a better world glimmered beyond the shell-pitted wastes and leafless stumps that had once been green fields and waving poplars. Nothing less could give dignity or sense to monstrous offensives in which thousands and hundreds of thousands were killed to gain ten yards and exchange one wet-bottomed trench for another. When every autumn people said it could not last through the winter, and when every spring there was still no end in sight, only the hope that out of it all some good would accrue to mankind kept men and nations fighting.
Podcast: Aswath Damodaran: Making Sense of the Market, Invest like the BestÂ
Double dipping on Invest Like the Best. This winding conversation with Aswath Damodaran, a Professor of Finance at NYU, covers a lot of ground. The two best parts are the discussion of inflation (at the beginning of the episode) and environmental, social, and governance (ESG) issues (about an hour in). Damodaran believes that inflation influences everything that happens in markets and that the current inflationary environment poses a larger challenge to risk capital than the Covid-19 pandemic. Damodaranâs view on ESG is controversial. He thinks it's a bunch of baloney intended to help advisors, consultants, and investment managers make money. While slapping ESG on a fund lets investment managers charge an extra 15 basis points, it doesnât do much to make the world a better place. Thereâs also an interesting discussion around valuation and terminal value assumptions. GE was around for over a century. Yahoo was around for 23 years. Damodaran argues that in fast changing industries like technology, the terminal value assumption embedded in many DCFs is outdated.Â
I think an ESG expert is an oxymoron. How can you be an expert on a discipline that has is nothing to it? Are you some kind of Deli Lama and Mother Theresa rolled into one that you can see virtue and recognize when you see it. And in the two years, since of course, I've become more and more convinced that the reason it's taken off is become a money machine for the people involved. Services, S&P, sustained analytics basically are making money measuring ESG. Investment funds, you slap ESG on the tight level of a fund, you can add 15 basis points. That's what BlackRock did for its carbon transitions fund. Almost exactly identical to its regular index fund. But by taking three stocks out, they're able to charge 15 basis points more. You have consultants, experts, running around charging companies for ESG advice. I'd love to be a fly on the wall, listen in on exactly what it is that I can do to become more virtuous.
Most Popular on Below the Line in Q2 2022
Lessons from failure was a key theme this quarter. Winter is Coming, a look at how to survive a downturn, got the most views. The most shared piece was An E-commerce Recession, detailing first quarter e-commerce trends. Thanks for sharing! Lastly, Fast: An Autopsy, which detailed how a high profile one-click startup failed, got the most new signups.Â
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