Byrne Hobart
Longreads
- A fantastic essay on Gigamonkeys covering the early technical history of Twitter and the question of whether or not to standardize on one stack. This piece does a great job of capturing the long-term consequences of short-term technical decisions: on the one hand, you can waste an infinite amount of time arguing about which languages to use (since your chosen language affects what you choose to build, you always have a good reason to see it as the more practical choice). And even compromising is hard, for a related reason: "Soon we had three kinds of Scala written at Twitter: Scala written by people who wished it was Ruby, Scala written by people who wished it was Java, and Scala written by people who wished it was Haskell." This is a good piece to meditate on early in a company's life, because the hours you save early on by deferring these choices turn into multi-thousand-programmer-hour investments in fixing them.
Via Kevin Burke. - Anton Howes on how the Dutch financial system was superior to the English system in the 17th century. There are parts of finance that are zero-sum, but when there are new opportunities for real-world wealth creation, being able to raise money to take advantage of them is a big deal. The Dutch were not just good at raising investment capital; they also had a better system for managing working capital, and were more willing to use credit instruments as money so merchants didn't spend all their time chasing down receivables.
- Ken Opalo asks why there aren't more natural resource billionaires in Africa. He comes to an interesting conclusion that ends up being gloomily centrist: big multinationals are good at exploiting small countries to collect most of the profits from resources, and countries with little state capacity and weak property rights are also bad at letting entrepreneurs keep the proceeds of successful businesses. In industries like finance, retail, and phones, it's harder to confiscate assets without destroying most of their value, but in mining that process is straightforward. (The article does note the obvious critique, that there may be plenty of natural resource billionaires with off-the-books fortunes.)
- Vox has a quick history of the modern chicken industry: a farmer ordered fifty chickens and received 500 by mistake, so she raised them for meat rather than eggs. It turned out to be a cost-effective protein source. I've wondered if companies and governments should put together a "10x department" charged with looking into ways to either increase the scale of something by 1,000% or cut its cost by 90%—a group with the mandate to reduce the time Americans spend doing their taxes from 6.5bn hours in the aggregate to 650m might be nice, for example.
- Gord Magill in American Affairs has a good piece on the plight of the modern trucker. Trucking regulations are like a Seeing Like a State case study: truckers used to keep paper records, which they'd sometimes modify when they broke rules. Now they're being monitored electronically instead, for safety reasons. Apparently this has not led to any change in safety, but has hurt truckers' earning power—and led to a world where they're continuously surveilled.
The Diff previously wrote about the Electronic Logging Device mandate and its effects on trucking in this 2020 piece on logistics and this writeup of IOT company Samsara ($). - This week's Capital Gains explainer is on the idea of CEO as capital allocator—what that means, and why it's important. You can sign up for Capital Gains here to get a weekly explainer on finance, economics, or corporate strategy.
Books
- The Normans In The South, 1016-1130: If we're going through a period where older companies are more at risk and new ones can arise, it's fun to reach back and look at other historical analogues: in the eleventh century, the Normans famously conquered England and somewhat less famously conquered Sicily and southern Italy. The latter was in some ways a more impressive achievement, since they were wedged between the Holy Roman Empire, the Eastern Roman Empire, and various emirates that had taken over most of Sicily. But they had hustle; the book starts out talking about Normans as brigands and mercenaries, but eventually they upgrade themselves to dukes, found dynasties, attempt to seize control of an empire, and (gently, politely) kidnap the pope.
- On a completely different dynastic note, The Davis Dynasty covers the story of three generations of successful investors. The first of then, Shelby Davis, turned $50k into a spot on the Forbes 400 almost entirely by investing in insurance companies. Frustratingly, the book doesn't got into much detail on how he analyzed them, other than noting that Davis had worked as an insurance regulator and knew all the accounting tricks. It does talk a bit about his successful forays into Japan, where insurers had conservative accounting and government protection. And it's a good look at the power of other people's money: Shelby Davis compounded fast by using margin loans, and his son ran a fund. These are both ways to use someone else's balance sheet to magnify returns; the former lets good investors keep more of the upside but runs some risks (Davis was appointed ambassador to Switzerland and lost 60% of his money by the time he came back). The book works as a good lesson in compounding, and a good overview of mid-twentieth century market history (though some data points are very clearly lifted from the Lowenstein Buffett bio without, in the Kindle version at least, direct attribution.
Via a recommendation from Philo's excellent newsletter.
Open Thread
- Drop in any links or comments of interest to Diff readers.
- If you were to pick an industry that, Shelby Davis style, would be amenable to long-term compounding, what would you pick? There have been a few other investors who found one industry they knew exceptionally well and could stick with, but you need some combination of 1) stability (insurance has been around for a long time) and 2) variance in managerial talent. But the problem is that high-variance people are less likely to work in stable industries, and even less likely to get promoted fast in them.
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Diff Jobs
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