Sunday Finds + 3 Thoughts From Last Week
Dassault Systemes and IAC
Welcome to Chit Chat Money’s Sunday Finds + 3 Thoughts From Last Week. In this newsletter you will find three topics I thought about last week, links to shows we’ve recently released, and links to some interesting articles, podcasts, and tweets. Check out the archive here.
1. Let’s not break Twitter please, Elon.
Longtime listeners of the show know how much I dislike Elon Musk and Tesla. But when it comes to his Twitter deal, I’ve been optimistic about how he could improve the platform (really because of how poorly it has been run in the past).
That optimism is slowly starting to fade as I see Musk and his henchmen working frantically in real-time with no coherent strategy.
I don’t care about firing half the staff (I mean, they had 100 communications employees that were doing god knows what every day), but I worry greatly about alienating advertisers and this new verification tactic.
On advertising, it isn’t necessarily the political boycotts that are concerning. This has happened to Facebook before and typically ended up being more noise than news. However, I do worry that advertisers will realize how ineffective Twitter’s advertising solutions are and never come back simply because they were a waste of money. Check out the Promoted Tweets account to see how ridiculous Twitter advertising can be at times.
Most concerning is this verification subscription for $8 a month. For one, it apparently won’t use ID verification so will not solve the misinformation issue. And second, it shows a lack of understanding of the devious psychological tactics that build successful social media platforms like Instagram. Users want to crave status and superiority, and if you make the blue checkmark a lame subscription that anyone can get, the status symbol gets ruined.
Maybe Twitter is beyond saving. But as someone who loves the fintwit network and thinks it is a great part of the finance industry, I hope Elon Musk does not burn the platform to the ground.
2. Will executive teams finally take the hint?
This is all a hunch, but I feel like a lot of investors are “hate selling” some software stocks where management teams keep ballooning the operating expenses line.
You could possibly argue this for Alphabet and Amazon as well.
Take Twilio. Its report wasn’t that bad (33% revenue growth, solid customer growth) but investors murdered the stock, sending shares down 45% this week. The stock is now down 84% this year.
This has happened to a lot of stocks, and I think the correlation is executive teams unwilling to take the hint and roll back expenses. Show some profitability for a few quarters and I bet investors will start buying back your shares.
Bear Force One summed it up pretty well with this tweet. Many executives think they have free reign to reinvest without showing profitability, but few actually have the blessing from investors right now:
3. Is big tech focusing too much on Asia and not enough on Africa?
The current population of the African continent is 1.3 billion people. By 2050, this is expected to more than double to 2.5 billion. Looking at some of these population pyramids, it is no surprise why:
Over the next couple of decades, there will probably be a billion or so new internet users on the African continent, maybe 1.5 billion. This is a phenomenal opportunity for companies like Facebook and Google (and on a smaller scale, Spotify, Netflix, and other consumer internet companies), but it seems like they would rather focus on Asia and countries like India instead.
I get that those countries have better short-term prospects, but Africa seems to have much better prospects to drive growth from 2030 onward, so why not supplant the seeds of success today?
Instead of spending $10 billion+ a year on these crazy metaverse products, Facebook would almost assuredly get a much better ROI by spending $10 billion on internet infrastructure in Africa, driving people to use WhatsApp, Instagram, and Big Blue.
Plus, it wouldn’t just drive growth for these businesses. Opening up people to the internet economy would likely drive symbiotic growth for these countries as well, enriching people and enabling them to get themselves and others out of poverty.
But apparently, Zuckerberg just wants to slap a phone screen immediately in front of our eyeballs at a $1,000+ price point.
See you next week,
Brett
***Our fund, Arch Capital, may own securities discussed in this newsletter. Check our holdings page and read our full disclosure to learn more.***
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Catch up on Our Shows From Last Week
3 Good Reads
The hustle started like it often does, with a post on Facebook promising job seekers generously paid customer service positions in Cambodia, no experience necessary.
Soraton Charehkphunpol, a Thai cook scraping by in a restaurant in Bangkok, couldn’t resist the offer to earn more than double his $470 monthly salary.
Late one evening last year, after another grueling shift, Soraton answered the ad. Within hours, a man arrived at his door to take him to the Cambodian border city of Poipet.
It wasn’t long before Soraton realized he had made a mistake. Dumped in a high-rise building above a casino, he was turned over to mobsters who seized his passport and put him to work bilking gamblers on a sham sports betting app.
Nuclear Energy: Past, Present, and Future - Julia Dewahl
Nuclear energy has been quietly producing carbon-free energy for decades, but most don’t know that it accounts for 20% of the US’s electricity and over half of its carbon-free electricity. It’s been the underdog energy source—rarely celebrated, or worse, villainized, and deeply underinvested in.
The war in Ukraine and subsequent global energy crisis, alongside longstanding concern around climate change, has policymakers grappling with how to ensure energy is reliable, abundant, and carbon-free. Nuclear energy is the only energy source that solves for all three.
The end of the System of the World - Noahpinion
After the end of the Cold War, the United States forged a new world. The driving, animating idea behind this new world was the belief that global trade integration would restrain international conflict. At first this rested on a Fukuyama-type “end of history” theory that political and economic liberalization would follow globalization, but as it became clear that various bureaucratic one-party oligarchies and petrostates (most notably China and Russia) were resistant to the end of history, the hopes for trade became more modest — at least countries that depended on each other economically would not fall into active conflict.
1 Good Listen
Dev Kentasaria from Valley Forge Capital - Good Investing Talks
Dev Kantesaria is one of the two decision-makers at Valley Forge Capital Management. In his portfolio (https://www.dataroma.com/m/holdings.php?m=VFC) he is focussing on high-quality stocks. In our interview, you can get to know his high-quality approach in detail.
Smart and Funny Tweets:
Your #1 and #2 above were right on the money. Some of your best writings / POVs I have read. Thanks for sharing those perspectives. I could not agree more. RE: Twitter, I needs a major redesign, not incremental tweaks. I am not sure if this is even possible. RE: Q3 earnings, I believe that this quarter stocks that are surviving/performing consistently and also getting aggressive with growth/new products etc are being rewarded. It's all about which companies will be in a better situation at this time in 2023 - those are the companies we want to own. Cheers!