Edison’s most exceptional invention—the idea factory

Earlier this week, I started reading Edmund Morris’s biography of Thomas Edison—the partially deaf workaholic, inventor, and business magnate who famously grilled job applicants with questions like, “What is the weight of air in a room that’s 20x30x10?” and “What is porcelain?” and “Of what kind of wood are axe handles made?” (Here’s the 1921 New York Times article of the interview questions he subjected his victims to.) I picked up the book—which I have to say is really quite good—after stumbling across a very smart 2019 review of the biography in The Atlantic that piqued my interest. The book—and the review—both position Edison not so much as as the solo-inventor-genius commonly portrayed in media, but rather a maniacally-obsessed entrepreneur whose greatest contribution to society was what we think of as the modern-day R&D lab. As both Thompson and Morris highlight, Edison’s greatest ability—beyond his own inventions—was perhaps his knack for recruiting top engineering talent, sticking them in a lab, and encouraging forcing them to come up with inventions and products others thought impossible at the time. “I’ve created nothing,” Edison famously wrote in a provocative passage. “Nobody does. There’s no such thing as an idea being brain-born. Everything comes from the outside. The industrious one coaxes it from the environment.” From The Atlantic:

“This can be read in several ways—as provocative overstatement, as an honest description of creativity’s mechanics, or as a paean to the inventor’s workaholism. To me, its ambiguity highlights Edison’s greatest contradiction. The man who created the team-based R&D lab had a habit of talking about his work in the first-person singular, referring to ‘my so-called inventions’ and anointing himself ‘the industrious one.’ Edison’s life should be a durable lesson in the power of creative teamwork. Instead his surname has become an eponym for individual genius, whether heroic or hyped. Edison reveres its subject, but Morris’s portrait also shows that while ‘the industrious one’ can be a remarkable catalyst, inventiveness truly thrives thanks to the industrious many.”

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What’s next for Netflix?

Reed Hastings famously argued that Netflix’s competition wasn’t just other streaming services, but rather linear TV, movies, social media, YouTube, and even sleep. Gaming, too, presents both the biggest competition—and opportunity—for Netflix going forward. At least, that’s the crux of the argument in Matthew Ball’s recent long-form essay, “Netflix and Video Games,” which I highly recommend for anyone curious about the future of the streaming and gaming industry. Ball—a media analyst and investor—offers one of the better deep-dive analyses (and critiques) of how Netflix plans to enter the gaming industry—and the challenges they will face.

“The most threatening problem for Netflix is the generational changes that are making ‘where to watch’ the second question, not the foundational one. For hundreds of millions, the question is now ‘what to do.’ Leisure, in other words, defaulted to TV for decades. It no longer does. This means that fighting for leisure time via video means losing share one way or another. And it’s likely this share is lost to gaming. Every generation plays games more than the one that preceded it. Generation Y games more than X, Z more than Y, and Alpha more than Z. Everyone born today is a gamer, which means there are 140MM new gamers every year. And every year, more games run on more devices, at higher quality visuals, with greater capabilities and more sophistication. Every constraint is relaxing.”

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Clayton Christensen: “How Will You Measure Your Life?”

This past week I found myself re-reading a decade-old, criminally-under-read essay of Clayton Christensen’s that, in my opinion, should get way more attention in the investing community. In the essay,  “How Will You Measure Your Life?,” Christensen turns many of his most novel and inventive business theories about disruption and innovation inwards—toward himself and his own life’s goals. “More and more MBA students come to school thinking that a career in business means buying, selling, and investing in companies,” he writes. “That’s unfortunate. Doing deals doesn’t yield the deep rewards that come from building up people.”

“Over the years I’ve watched the fates of my HBS classmates from 1979 unfold; I’ve seen more and more of them come to reunions unhappy, divorced, and alienated from their children. I can guarantee you that not a single one of them graduated with the deliberate strategy of getting divorced and raising children who would become estranged from them. And yet a shocking number of them implemented that strategy. The reason? They didn’t keep the purpose of their lives front and center as they decided how to spend their time, talents, and energy.”

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A few more links I enjoyed: 

Investor Letter – H1 2021 – via Joe Frankenfield, Saga Partners
“It is important to appreciate that high-quality is rare. Companies that generate a ton of owner earnings relative to invested capital for a very long time are a business owner’s dream. In a competitive market, however, capital naturally gravitates towards high returns to then compete away excess profits. Only companies that benefit from some type of durable competitive advantage relative to competitors can sustain attractive returns for owners. However, even the best of companies will inevitably get disrupted. The question is not if but when. Companies are in a continual battle for survival. They follow a similar pattern throughout their life cycle. As a company reaches maturity and potentially establishes itself as a winner with strong competitive advantages, management’s decision-making often surrounds trying to protect its existing cash cow and less towards providing value for customers in the best way possible. Companies become more defensive.”
How is Spotify positioned in the audio market? A talk with Jeremy Deal & Sleepwell Capital – via Good Investing Talks [Podcast]
“The audio market might be the last untapped opportunity in social and the internet. Spotify is well-positioned to conquer it. Here we explore the audio market and Spotify’s position in it. This is part one of our conversation about Spotify and the audio market.”
Solana Summer – via Not Boring
“Solana is a Layer 1 protocol, or blockchain, like Bitcoin, Ethereum, or a number of others. I’ve written about Solana in Not Boring before. In Own the Internet, I wrote that Solana is one of the non-Ethereum blockchains I’m most bullish on. Technically, what makes Solana interesting is that its radically different system architecture leads to dramatically higher speeds and lower costs than other blockchains. Whereas Bitcoin can handle about 7 transactions per second (TPS), and Ethereum can handle 30 TPS (until Eth 2.0 dramatically increases it), Solana can currently handle 65,000 TPS. Whereas it costs ~$3 today to do a transaction on the Bitcoin blockchain, and ~$8-40 on Ethereum, it costs $0.0001 to do a transaction on Solana. That’s absurd performance. Solana’s goal is ‘for a decentralized network of nodes to match the performance of a single node.’ If that sounds overly technical, the proof is in the experience. I’ve spent a bunch of time playing around with Solana – purchasing SOL on FTX.US, downloading a Phantom wallet, staking and unstaking, buying RAY on Raydium, and staking that, and I have to say… it’s really fast and really cheap. You don’t need to think twice about doing anything because it moves so quickly and costs so little. That’s the point. It feels like using the internet.”

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