April 1st Links

• Most readers don't want to spend most of their time reading verbose works by single author, when a greater variety of more relevant and thoughtfully concise works are available from a much larger pool of thinkers. Prior to the Internet they had much less choice: books were just the way educated people learned and taught. (And many people still believe that reading and writing books is the sine quo non of being educated, just as many Europeans in 1500 still lauded the superiority of scribal methods and scholastic thought). [Nick Szabo]
• Dos Passos was very famous. His name is little remembered today, but it was one of the biggest in American letters from the 1920s until, say, midcentury. In fact, that's the title of one of his novels: "Midcentury." Dos Passos was born in 1896. Sartre called him "the greatest writer of our time." But something happened: Dos Passos broke with the Left, where everyone was, and moved right, for he was essentially a liberal, in the old sense. Hemingway told him that, if he persisted in his independence of thought, "the New York reviewers will kill you. They will demolish you forever." They did. [National Review]
• Halifax sent 6,000 sons to the Great War, roughly a quarter of its male population. It seemed almost every home had sent a brother, a husband, a father, or a son. The Great War drained the town of its able-bodied young men and left behind women, boys, girls, and men too old or infirm to fight. [Phil G]
• We've been talking about this lately... price rules. Whenever a business sells for a really low price (e.g. for no price once you subtract current assets minus all liabilities, or for zero or negative enterprise value), the market is already acknowledging the problems people are worried about: a recession, a business that seems to be highly competitive and lacking a moat; or in other cases, bad management, bad capital allocation, unfriendly insiders. Sometimes bad factors win out and a company goes to zero. Or a stock purchase can do really poorly even if they company survives when too high a price is paid. But when companies don't have much debt (and that's what a low or negative enterprise value is telling you), there is a lot more runway to try to improve things. So much more runway, in fact, that most shortsellers are not very interested in situations where there are not financial debts or other fixed liabilities to act as catalysts. [Oddball Stocks]
• Musk uses Mr. Ito's fears of career risk against him and negotiates some sweetheart concessions from Panasonic, promising all along that the extra leeway will let Tesla turn things around. Ito has no choice but to hope Musk can pull it off. In Q1 2019, other members of the Panasonic leadership decide they've had enough. Mr. Ito has clearly failed to take care of Panasonic's interests, and he's forced out of the company. Note that Mr. Ito resigned, not retired. In Japanese culture and at this rarified level, that likely indicates a serious fall from grace. [Perseid Capital]
• Over the years, shipping has been net-destructive of capital (like airlines) but you need occasional brief periods of strong earnings or otherwise the whole industry melts away. Hence, at some point in the cycle, these boats need to earn an acceptable return on capital for long enough to bring new capital into the industry. As this is a highly cyclical industry, those brief periods experience stunning profits, but it is ultimately self-correcting, as new supply comes and crushes everyone. Due to IMO 2020, I think this cycle will be steeper than prior ones and possibly last longer. [AiC]
• In 1702 Queen Anne was able to free the remaining English slaves by agreeing to help attack a Spanish outpost, and it was the first time in 150 years there had not been English slaves held in Morocco. Only a handful of English vessels ever attempted to defend themselves. Salé did a brisk business in European slaves for centuries. European powers would clumsily allow arms to fall into Moroccan hands, e.g. when the Spanish surrendered two different heavily armed forts there without a fight. (Reminds me of the British in Kabul.) Bet you have never heard of the Society of Knights Liberators of the White Slaves of Africa. The Bombardment of Algiers was a big deal that finally ended white slavery by north Africans. Celebrate with a 9,000 piece jigsaw puzzle. [CBS]
• The test of whether you are an electric vehicle "disrupter" is: how many manufacturers are licensing your battery? If you'd actually invented a better electric battery or other EV technology (battery is the only technology that matters though), you could license them and have a 10x book business. Tesla not only did not do a battery licensing model, but they effectively did the opposite. Consider the parts of the vehicle industry that they have decided to in-source versus the ones they have decided to outsource. As we know, they decided to in-source and compete head-to-head on manufacturing. The results have shown that they are worse than their more experienced competition. They decided to in-source the automotive retail, which had not been done before and was not legal in most states. (And still is not legal in eight states). This had been a huge distraction from the manufacturing side and has resulted in abysmal customer service. But of all things to outsource, they outsourced the battery production to a joint venture with Panasonic. What should be the entire premise of an electric vehicle company is not even enough of a competitive advantage to do in house. [CBS]
• I suspect that if Musk could raise $5 or 10 billion (even now at the lower valuation) the stock would probably go UP. He could instill so much hope with cash: avoid layoffs, pay off current liabilities, pay off some long-term debt, build more supercharger locations and add supercharger stalls, keep supercharging free, get people their repair parts, get vehicle buyers their registrations, poach some autonomous vehicle people from Uber or Google, put LIDAR in new models and make noise about gathering that data, make some real prototypes of a new model and have them out getting road tested and photographed, hire enough customer service people to keep the email inbox from filling up, and expand the service network. [CBS]
• How do you know if your local industry is going to dry up and blow away, crushing your real estate value and personal earning prospects? (Also devaluing your social capital because two-thirds of your town is forced to move away.) What if northern Virginia is the next Gogebic Range? They're remarkably good at extracting money from the taxpayer, but what if the taxpayer became more reluctant or simply has less to give? Better people have suffered worse business misfortunes than that. [CBS]
• Imagine a thousand parallel universes beginning in 1920 where high school dropouts drill exploratory wells in Texas based on gut feelings. There would be oil billionaires in every one of the universes, but unless any of them had an intelligent mechanism for predicting the presence of oil, it would be a different group of billionaires in each universe. In other words, if success is based on luck, you can expect outcomes to quickly revert to the mean. [CBS]