Using time arbitrage to beat the market 

Applying a long-term outlook on a market that often gets caught up in short-term noise is a powerful—but challenging—time arbitrage technique: Concentrate on your best ideas, compound out over time, all while withstanding inevitable short-term volatility. Sounds easy, right? Not at all. Dennis Lynch, head of Counterpoint Global, which manages roughly $100B in assets, talked about this time arbitrage concept, along with a handful of other interesting topics—investor psychology, artificial intelligence, qualitative research, etc.— in a recent podcast with Patrick O’Shaughnessy, which I highly recommend. Much of Lynch’s philosophy and approach mirrors our own, especially regarding the necessity to build out forward-looking frameworks that are at least 3 to 5 years out in the future. “We’re trying to win through patience and longer term holding periods,” he says. Lynch continues: 

“We were just having this conversation the other day and I jokingly said to someone, “When was the last time I asked how the quarterly earnings were?” Do we ever ask that? And we really don’t. We’re really focused on what the earnings power of a company can be at least three to five years out. And that forces you to spend your time and build your days around a lot of very different approach than if you are more focused on the short-term. I understand why people are because it’s most people I think when you first start off especially, you’re just trying to stay at float or stay in the investment business long enough to create a track record. And everyone wants to understand what’s happening in the short term. So it’s hard not to get really focused on some of the short-term trends, but then it’s like any habit, if you practice it long enough, it’s sort of hard to shake it.”


Netflix meets Shopify

The news that Netflix is teaming up with Shopify to sell merch is one of the more curious recent developments across the media landscape. It’s also a sign that digital media companies are experimenting with new approaches to vertical integration of intellectual property. To be clear, this isn’t an entitely new concept: In the olden days of my youth, I recall Power Rangers lunchboxes and  Teenage Mutant Ninja Turtles toys—i.e. media that became consumer products through licensing agreements. But Netflix is taking an even more direct route of vertical integration, selling merchandise for shows like Stranger Things, Lupin, and The Witcher—all shows owned by Netflix with relatively obsessed fandoms—directly on a Netflix-owned channel, powered by Shopify, called Netflix.Shop. It’s still early days for this experiment, but worth asking the question: To what extent can Netflix diversify its business model outside of entertainment to become an international e-commerce retailer? 

“ will allow the company to move faster to meet demand for items related to Netflix shows that trend on social media. “We did that pretty quickly,” Mr. Simon said of the “Bridgerton” sweatshirts, “but I think we’re talking about a matter of days when we have our next unexpected hit.” A desire for quick turnaround times played into the company’s decision to run its store through Shopify, whose technology supports an array of vendors including Allbirds, Kith, The New York Times and Kim Kardashian’s Skims. Harley Finkelstein, the company’s president, said Shopify was experienced in handling “major drops,” everything from Taylor Swift albums to sneaker releases, and it can manage tens of thousands of checkouts per minute. “We’ve been battle-hardened around some of the largest flash sales on the planet,” he said.”


Can human innovation solve our global trash problem?

Never before in human history have humans created so much… junk. Tons of it. Paper packaging, plastics, wrappers, food waste—on average, the EPA estimates Americans dump about 5 pounds of trash per person, per day. It’s crazy. Thankfully, there are a handful of businesses, entrepreneurs and environmentalists tackling this challenge through the “circular economy” movement. What exactly is that? “The new ‘circular economy’ movement is different,” science journalist Robert Kunzig wrote in a longform National Geographic piece that I just discovered this week (but was published last year). “It’s a collection of strategies—some old, such as reducing, reusing, and recycling, and some new, such as renting rather than owning things—that together are meant to reshape the global economy to eliminate waste. The circular economy doesn’t aim to end growth; it aims to bend how we do things back into harmony with nature, so that growth can continue.”

“The “circularity gap,” as de Wit and his colleagues dubbed it when they presented their report at the World Economic Forum in Davos in 2018, is relatively new in human history. It dates to our industrial use of fossil fuels in the 18th century. Until then, most of what humans did was done with muscle power, whether human or animal. Growing things, making things, shipping things took hard labor, which made them valuable. Our limited physical energy also restricted how big a dent we could put in the planet. It kept most of us very poor, however. Cheap fossil energy, concentrated by geologic time and pressure in seams of coal or pools of oil, changed all that. It made it easier to extract raw materials anywhere, ship them to factories, and send the merchandise everywhere. Fossil fuels exploded our possibilities—and the process keeps intensifying. In the past half century, while the world’s population has more than doubled, the amount of material flowing through the economy has more than tripled. “Now we’re reaching the limits,” de Wit said..”


A few more links I enjoyed:  

“One of the great charms of number theory is the existence of irrational numbers—numbers like the square root of 2 or π that can’t be expressed as the ratio of any two whole numbers, no matter how large. The legend goes—probably false, but hey, it makes a point—that the discovery of the irrationality of√2 was so disconcerting to the Pythagoreans, who wanted all numbers to be rational, that they threw the discoverer into the ocean…People have been making a fuss over this number for centuries. In Euclid, the proportion goes by the more mundane name of “division into the extreme and mean.” He needed it to construct a regular pentagon, since the golden ratio is the proportion between the diagonal of such a pentagon and its side. A golden rectangle is one whose length is φ times its width; it has the agreeable quality that if you cut it crosswise so that one of the two pieces is a square, the other one is a smaller golden rectangle.”
“Billions of dollars have poured into research on quantum computers and sensors, but many experts say the devices will flourish only when they are yoked to each other over long distances. The vision parallels the way the web vaulted the personal computer from a glorified typewriter and game console to an indispensable telecommunications portal. Through entanglement, a strange quantum mechanical property once derided by Albert Einstein as a ‘spooky distant effect,’ researchers aim to create intimate, instantaneous links across long distances. A quantum internet could weld telescopes into arrays with ultrahigh resolution, precisely synchronize clocks, yield hypersecure communication networks for finance and elections, and make it possible to do quantum computing from anywhere. It could also lead to applications nobody’s yet dreamed of.”
“The Shopify deal solves another problem for Affirm: its dependence on Peloton. Levchin is quick to point out that Affirm’s non-Peloton sales are growing faster than its Peloton sales, but Shopify’s vast merchant base will quickly diversify Affirm’s payments business if “buy now, pay later” proves popular with merchants and their customers. In an interview with Protocol, Levchin and Nejatian talked about how and why they formed the partnership, how the pandemic accelerated their alliance and how they view the growing call in other countries to regulate “buy now, pay later.”

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