No.17: The Paradox of Having Fun, Ted Weschler notes, Declining Mineral Concentration in Vegetables, Sriracha Chili Sauce Success Story, Facebook Joins the $T Market Cap Club
A friend and mentor of mine sent me this short video of an Alan Watts recording. The subject of the video is that there is no real destination in life – and that there is nothing that we are sprinting towards. Instead life is comparable to music or dance, which has no destination or meaning – apart from the thing itself. But we aren’t trained to think that way from the beginning!
Most of us start off in school where it gets drilled into us that we do unpleasant things now, and later great rewards will come. For me this carried on way past high school. After all, I traveled back to India every year and saw death and disease in front of me, and relatives who slogged hard just to tread water in the corporate rat race. It’s only after I achieved a certain level of savings and investments that I dropped this existential fear. Having a New Zealand passport made this all easier. After all, it’s harder to fear starvation in a country where even the poor people are generally fat.
When I started enjoying my time more, I researched companies I liked, dealt more with people I liked (a few of these wonderful people are regular readers and supporters of this newsletter), and generally had a better time. Ironically, this spurred more investment success and even more enjoyment. After all, if I enjoy looking at something, I naturally spend more time on it, gain more depth in that subject area, and develop an edge more easily.
On the other hand, when living from existential fear, I unconsciously tended towards companies with high debt on the verge of bankruptcy that were attempting one last roll of the dice. In other words, I was more vulnerable to get-rich-quick schemes and charismatic promoters. The more I feared, the harder I worked, the more I rolled the dice, and the more my bad decisions cancelled out the great decisions I made. Selling Ferrari to buy something mediocre is one of the more painful ones – which I’ve written about here. The “hustle and grind” mindset didn’t really pay off for me – but it might for others.
Removing existential fear changed my investment results. It also obsoleted my traditional beliefs about “hustle” and deferred gratification. It’s not that I undervalue the hard work and grinding that I did early on - after all, in my last post I talked about how I am in some ways coasting on the efforts of my past self. But moving forward, it might serve me better if I enjoyed what I was doing. Doing so would probably free up more cognitive space to make better decisions overall.
But let’s see what happens over time. If we have another Great Depression, my survival angst might come back even greater with a vengeance.
Ted Weschler Notes
I’d be remiss if I didn’t bandwagon onto the latest Twitter trends.
Many have questioned Warren’s Buffett’s hire of Ted Weschler and Todd Combs. They both had good performance in the hedge funds they ran (Ted far better than Todd) – however there was nothing to suggest that they were extremely brilliant.
Then came this letter found by @CundillCapital, where Ted Weschler talked about his IRA – and how he invested $70,000 and turned it into $131 million in around 23 years. That’s a compounded rate of 35%+ per annum!
I also recently pulled out this note from Ted Weschler’s McDonald’s investment just to refresh myself as to his investment style. Here’s a short excerpt:
By now, his investments in DaVita, WR Grace and DirecTV have been pretty well studied. A major theme emerges. The basic thing that Weschler did incredibly well over his 11-12 year career at Peninsula was that he found about 4-5 companies whose core businesses were moaty and growing but profits or valuations or both were severely depressed due to problems that were scary, but that could be fixed.
In his 20s, he worked at the old WR Grace conglomerate in a strategy/finance position and got to understand the various businesses they owned, including a dialysis firm and the core chemicals business.
While running Peninsula, he was able to invest in DaVita (dialysis clinics) after its near death experience from bad billing practices that almost bankrupted the company. The core dialysis business was fine and would basically grow for as long as Americans continued to like sugar.
He made the investment in WR Grace a few weeks after it declared bankruptcy due to asbestos litigation.So two of his 3 best investments were literally from experiences he gained as a 20 something year old working at WR Grace.
Declining Mineral Concentrations in Vegetables
Interesting chart that tells the story of Magnesium and Calcium deficiencies over the years in our crops. And it makes sense too - we as a population have chosen to feed more people with less arable land per capita, rather than expanding arable land in proportion to the population. It’s going to be more important in the coming years to get further productivity from our land - but if mineral content declines further then I guess GE will play a role to increase nutritional content.
Sriracha Success Story
As a massive Sriracha sauce fan, and CPG enthusiast, I’ve admired this immigrant success story for years. Now someone has written a giant Twitter thread about it detailing the story. Love it! Here’s the intro to the thread:
Huy Fong's Sriracha hit revenue of $150m+ a year...with no sales team, no trademark and $0 in ad spend. Its creator is Vietnamese-American David Tran, making the sauce's success a tale of immigrant hustle and a product that literally sells itself.
Facebook Joins the $T Market Cap Club
Despite regulatory headwinds and scandals over the past few years, the company has as of yesterday has passed the $1 trillion market cap mark. It’s hard to believe that Mark Zuckerberg is only 37 years old! He still has many years ahead of him if all goes well. Two things are interesting to me as they move forward into the future to capture the next $1 trillion of market cap:
1) Huge shopping opportunity. Facebook has made key hires according to this ‘The Information’ report (subscription required) – and is pursuing the in-platform shopping opportunity with full steam. If Facebook keeps its take-rate low and makes it easier for online stores and brands to onboard, this could bring a wave of cash and engagement to both FB and IG.
2) Massive bet on AR/VR platforms. According to the same report mentioned above (linked here again), FB has put almost a fifth of its workforce into the AR/VR platform division. They are trying build the platform on top of which AR/VR products get made. I made a small reference to Pinterest in one of my earlier posts. Pinterest probably doesn’t have the cash, skills, or scale to be able to pour outsized resources into creating an AR/VR platform. However, if Facebook makes a very good one which becomes the standard, companies like Pinterest can benefit from using it. Like I mentioned previously, Pinterest users might be able to see furniture in their house using AR/VR, before buying it.
There are criticisms that Facebook is in the milking stage – harvesting assets and taking profits off the table. However, I see them investing deeply into the business, penalizing the P&L in the near term to reap major gains in 10-20 years. In addition to all of this, Mark Zuckerberg is only 37. I’m guessing he’s still in the building stage of his life, and doesn’t need to start milking his own assets yet either.