Wednesday, March 17, 2021

St Patrick's Day Links

  • In short, today’s start-ups have targeted low-tech, highly regulated industries with a business strategy that is ultimately self-defeating: raising capital to subsidize rapid growth and securing a competitive position in the market by undercharging consumers. This strategy has locked start-ups into early designs and customer pools and prevented the experimentation that is vital to all start-ups, including today’s unicorns. Uber, Lyft, DoorDash, and GrubHub are just a few of the well-known start-ups that have pursued this strategy, one that is used by almost every start-up today, partly in response to the demands of VC investors. It is also highly likely that without the steady influx of capital that subsidizes below-market prices, demand for these start-ups’ services would plummet, and thus their chances of profitability would fall even further. In retrospect, it would have been better if start-ups had taken more time to find good, high-tech business opportunities, had worked with regulators to define appropriate behavior, and had experimented with various technologies, designs, and markets, making a profit along the way. [American Affairs Journal]
  • Volkswagen also unveiled plans to build six battery factories in Europe in joint ventures with suppliers. And by 2025, the company said, it would have 18,000 charging stations on the continent operating in conjunction with energy companies including BP. The British oil producer said it would offer charging at its filling stations. The online event Monday was part of Volkswagen’s effort to position itself as the traditional carmaker making the biggest commitment to emission-free driving — even though it has not yet followed General Motors or Volvo Cars in setting a precise expiration date for internal combustion engines. Volkswagen is the biggest carmaker in Europe and second biggest in the world after Toyota. The subtext of Monday’s presentations by a parade of Volkswagen executives was that the company is deploying its industry and government connections, its financial resources, and its eight decades of manufacturing expertise to keep Tesla from eating its lunch. “Our transformation will be bigger than anything the industry has seen in the past century,” Herbert Diess, the chief executive of Volkswagen, said during the two-hour presentation. The event coincided with the rollout in the United States of the ID.4, an electric S.U.V. that is part of the first generation of Volkswagens designed from the ground up to run on batteries and seen as serious challengers to Tesla’s dominance in electric cars. The first ID.4s, with a starting price of $40,000 before government rebates, began arriving at American dealers this week. [NY Times]
  • Many commentators write off China because it purportedly can’t innovate. This isn’t even true, but it illustrates how the idea of technological innovation has become something of a psychological crutch. We assume we are still great because we can innovate. We hope our seemingly intractable problems can be overcome with some wonderful new technology. But this is a coping mechanism for the loss of ability to pursue real industrial progress. We have plenty of development left to pursue even with only twentieth-century technology. Vast empires were built in the age of wood, wind, and muscle. Much vaster empires than we have yet imagined could be built on aluminum, uranium, and silicon. Real technological growth can only follow on the basis of industrial development. Without a vigorous industrial base, future technologies will be stillborn, or immediately exploited by more industrious rivals. [Palladium]
  • The first point is attested by the remarkable tone of Mr. Biden’s speech.  He clearly sees “democracy” as now on the defensive, with autocracy rising.  This is a monumental sea change in the rhetoric of American leaders from the odious Wilson onward.  Indeed, it marks an astonishing break from the whole Whig interpretation of history, in which inevitable “progress” is marked by ever-greater “democracy” and its pox-ridden whore, “equality”.  If there is one thing people are not, it is equal. The “democracy” fraud is revealed by the fact that only one country in the world today is a democracy: Switzerland.  Only in Switzerland do the people have and regularly use the power to overturn decisions by their government through referendums.  Elsewhere, including in the United States, what the Establishment calls “democracy” is really oligarchy, with the Establishment the oligarchs. [link]
  • The internal contradictions of American martial patriotism (on some level, we are going around bombing places to free them, does that sound right?), most acutely obvious in its conservatives, are like mutational load accumulating in the organs of its bodies politic. There is the sleek, perfectly sculpted, noble Hollywood (often real, too, though) genotype of our national patriotism, and then the median American jingoist; corpulent, riddled with disease, and loud. We want to be the first one; we want to help, we want to protect the country. We grew up on stories of Nathan Hale and Captain Davis of Acton, and GI Joe and Band of Brothers. But the reality is something more like U.S. Soldiers Told to Ignore Sexual Abuse of Boys by Afghan Allies—New York Times. If you intend to enlist in the military, you have to make sure you aren’t exposing yourself to risks that come without upside. [Indian Bronson]
  • Cloud-forest conditions are hard and expensive to replicate in a glasshouse because it is necessary to maintain a very high humidity. This is usually expensive as a high temperature must usually be maintained as well, and a high temperature combined with high humidity calls for good air circulation or else fungi and algae will develop. Such displays usually are quite small, but there are some notable exceptions. For many years, the Singapore Botanic Gardens had a so-called coolhouse. The Gardens by the Bay features a 0.8 hectares (2.0 acres) coolhouse that is simply named "Cloud Forest". The latter features a 35-metre (115 ft)-high artificial mountain clad in epiphytes such as orchids, ferns, clubmosses, bromeliads and others. Due to a relatively mild climate and summer fog, the San Francisco Botanical Garden has three outdoor cloud forest collections, including a 2-acre Mesoamerican Cloud Forest established in 1985. The Buffalo and Erie County Botanical Gardens contains a "Panama Cloud Forest" garden in House 11. [Wiki]
  • If you are incompetent at manufacturing and have to scrap a lot of parts, you can prevent or delay any financial statement impact of this by keeping the parts on the books as inventory even if you have already thrown them away. It is very simple, comically so, and it makes your gross margin and profit figures look better. The only problem is it is a crime! [So, if you were a Silicon Valley company doing this, you would need to provide illegal sex and drugs to accounting firm employees, SEC employees, and journalists. One good time to do this and get them on tape for blackmail would be an "anything goes" festival in the desert, where you could have "boom boom tents". It might also help to learn that trade from a master.] Based on emails that have come out in the Tesla and Martin Tripp litigation (he was a whistleblower whose phone Tesla bugged, and they tried to assassinate him), Tesla distinguished between "physically" scrapping and "virtually" scrapping parts. In an email from Michael Bowling to Chris Lister and Jens Peter Clausen, Michael Bowling wrote to "request permission" to write off an inventory inaccuracy. He said that "during the inventory we realized 1718 modules in WIP that have already been scrapped physically [were] never scrapped virtually." In the email below, it said that for the week of April 2, 2018, scrap for the Model 3 was $1,920 per car! It is strange that "permission" would be needed to do this. If a subordinate tells you that an asset on your balance sheet does not exist, you either write it off or you are a fraud. But Jens Peter Clausen wrote, "We properly want to go deep this quarter?" And Adithya Vijayakumar wrote that Mike was "working with the finance team to get the buy off on scrapping the modules for the second quarter." That makes it sound like actual ground truth is not the final arbiter of what appears in Tesla financial statements. [CBS]
  • No one is helpless. People can take action right now to fight this. Start exercising, hard. Aerobic capacity starts to improve almost immediately, and within a week you will have built a real buffer that could save your life. Second, if overweight start losing weight by eating much less food. All weight loss, regardless of the type of diet, involves burning body fat and putting the body into ketosis at least for part of the day, which boosts immune function. [CBS
  •  Notice how smoothly this chart trends, and how comfortable it would be just to ride such a trend. And because the two instruments have such radically different economic and market related drivers, when the trend breaks you know it is probably real with a very low probability of a whipsaw. Cool, and the weird thing is that nobody seems to want to find pairs that trend smoothly and are non correlated in such a way as to minimize false breakdowns or breakouts. Note that while the pair reduces the gains from a naked IBB position, it reduces the risk while rendering a more reliable timing signal. [CBS]

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