The best investment analysts embrace uncertainty [podcast]

In investing, there is never certainty—only probability. Stephen Mandel, founder of Lone Pine Capital, explores that fundamental truth (and what it means for analysts) in an thoughtful podcast conversation with Patrick O’Shaughnessy this week [transcript included as well]. One of the insights that resonated most to me was that successful long-term investors are, by nature, drawn to complexity—and comfortable with it. Investing requires a willingness to wade into the unknown and use weighted outcomes, probabilities, and even game theory to inform your decisions—knowing that there is never total certainty.

“One thing that we’ve learned or I’ve learned is, people can be unbelievably smart. But if they’re very linear thinkers, it will never work as an analyst. We are always dealing in shades of gray, probabilities. If somebody has to know the answer to a math problem or whatever, if they have to know the answer, there is never the answer in our world. Those people can be incredibly smart and might be winning Nobel prizes or whatever, but they can’t work in our world because our world is all about probabilities and weighing outcomes. If that makes you uncomfortable, it’s just not going to work.”

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A deep-dive on gallium—the curious metal that could overtake silicon in an electrified world

One of the areas we (I?) love to geek out about is the raw materials—the physical stuff—that is helping to accelerate the global transition to renewable energy. We’ve spent a lot of research hours on lithium, silicon, even nickel—but gallium is increasingly a fascinating one to watch. Chris Mims, a reporter for the Wall Street Journal, dives into the “miracle” metal in this long-form feature that’s packed with fascinating little nuggets. “On its own, it isn’t terribly useful,” Mims writes. “Combine it with nitrogen, to make gallium nitride, and it becomes a hard crystal with valuable properties. It shows up in laser sensors used in many self-driving cars, antennas that enable today’s fast cellular wireless networks, and, increasingly, in electronics critical to making renewable-energy harvesting more efficient.” He continues:

“If you’re reading this on a screen, it’s likely you’re literally staring at the future. Present in most LED screens, as well as the LED lights that now provide much indoor illumination, is the metal gallium. And while not as well known as silicon, it is taking over in many of the places that silicon once reigned supreme—from antennas to charging bricks and other energy-converting systems known as ‘power electronics.’ In the process, it’s enabling a surprising array of new technologies, from faster-charging cellphones, to lighter electric vehicles, to more power-efficient data centers that run the services and apps we use.”

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A front-row tour of the upcoming “epochal upheaval in transportation”

Steve LeVine is one of the most respected technology journalists out there, so I was glad to see he started a new role at The Information, publishing a newsletter called The Electric. As its name implies, Steve will be covering the future of transportation, along with the trillions of dollars of wealth “created by the nascent battery and electric vehicle revolutions over the next two decades.” In one of his first installments, out this week, Steve spends time on the front lines of the battery boom, and walks his readers through a nuanced exploration of the different battery chemistries being pursued—from solid state to LFP—along with their challenges and restraints. (As an aside, I highly recommend Steve’s book from a few years back—The Powerhouse: America, China, and the Great Battery War.)

“Musk’s strategy reflects a distrust of next-gen promises. So far, he has been well served by doing so, since the entire last decade went by without a single major battery breakthrough going commercial. The winner of the competition between the next-gen battery developers, and their collective race against traditional lithium-ion batteries including LFP, may be decided on the factory floor. That is, who can get their chemistry into mass production and into the greatest number of EVs first? ‘It’s not whose breakthrough science works,’ said Sila’s Berdichevsky, ‘but who gets to scale.’ He was speaking about the chances for his own product, but he might as well have been describing the entire colossal contest.”

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A few more links I enjoyed:

Robotaxis: have Google and Amazon backed the wrong technology? – via Financial Times
“Yet the likelihood that driver-assistance systems do keep moving forward, tortoise-like, is high, because as more cars are equipped with the tech, the faster the systems learn. This is where Tesla currently leads: more than a million of its vehicles are equipped with its AutoPilot system that is always on, in “shadow mode”, ready to upload snapshots to Tesla servers whenever the human driver makes decisions different from its own. Tesla is, in effect, outsourcing its real world testing to owners who pay for the privilege. It is a stunningly more efficient model than most Level 4 groups, which bankroll hundreds of engineers to sit behind the wheel of robotic test fleets.”
‘What we need to believe’ for an investment thesis — a case study on Peloton  – via TDM Growth Partners (h/t Tim Le)
“There are many things you probably need to believe for Peloton to be a successful investment at today’s prices. This could range from your beliefs on consumer behaviour, to Peloton’s product strategy and even to macroeconomic conditions. Ultimately these factors (and others) feed into the future number of Peloton’s connected fitness subscribers, which we see as the most important metric in assessing Peloton’s long-term value creation. Thus, we wanted to focus our analysis on this metric.”
The lurking threat to solar power’s growth – via MIT Tech Review
“A few lonely academics have been warning for years that solar power faces a fundamental challenge that could halt the industry’s breakneck growth. Simply put: the more solar you add to the grid, the less valuable it becomes. The problem is that solar panels generate lots of electricity in the middle of sunny days, frequently more than what’s required, driving down prices—sometimes even into negative territory.”
Meet China’s new gaming underclass – via Protocol
“But game companions exist in a corner of the digital gig economy that’s given far less public attention than delivery workers, car-hailing drivers and livestream hosts. It’s a job virtually unique to China, according to Zhao, the Penn researcher, who said she has interviewed more than 60 Chinese peiwan over the past two years. In 2021, the game companions for hire on marketplaces like Bixin were overwhelmingly female and were generally looked down upon by professional esports players and game developers. Most of them live in China’s economic backwaters: rust belts, far-flung regions and small towns. They tend to not have college degrees, which leaves them fewer employment options.”

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