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Circle of Competence Issue #64


"The march of technology is that of the natural being replaced by the efficiently synthetic." - Chris Ip


I've been leaning fairly heavily towards tech related pieces lately, mostly because it is the industry du jour that is in the news the most - from privacy issues to communist vs. capitalist run tech companies to valuation bubbles. I am hoping to bring a little more balance into the newsletter in the next few weeks.

Shady numbers and bad business: inside the e-sports bubble (Kotaku)

Charlie Munger made the point once that it is essential to know how to kill ideas if you want to become wiser. This piece on how the e-sports industry may be experiencing bubble-like symptoms and capital flows represents such a situation - I've been under the impression for quite some time that e-sports' viewership had far surpassed that of some of the most beloved American sports, but it seems that it just ain't so. According to this piece, there is no standardized 'Nielsen's' ratings for e-sports - yet - and the way that 'views' are counted is dubious at best. I won't get into how they differ from Nielsen's standard '6 consecutive minutes' definition, but suffice it to say that they are almost certainly inflated. Not only are viewership numbers potentially inflated, but the economic returns to most of the professional e-sports teams and leagues and arenas have been borderline break even to negative. While the economics may not be extremely positive around the formation of leagues and teams, the bottom line is that gaming is growing into the mainstream. How the business models evolve into sustainable enterprises will be the main question going forward, because as it stands currently, there is more money flowing into the teams/arenas/leagues than is flowing out.

Huawei's rise is littered with accusations of theft and dubious ethics (WSJ)

Ben Thompson and James Allworth on the implications of a Sino-US tech and trade cold war (Stratechery)

I wrote about the Chinese surveillance state and push for technological progress a few months ago and it is becoming increasingly clear that Chinese companies and the communist party will not stop at any length to achieve dominance over its competitors. Despite how pro-free-trade I am (see my piece on it here), it is hard to argue against getting tough on Chinese companies who continue to extort US companies in their own back yard while our laws and regulations favor openness, freedom, and encourage foreign investment even at the expense of competition to native companies. Ben Thompson and James Allworth discuss how integral this governmental clash could be in shaping the world technology markets in the 21st century because of the potential 'iron curtain' that could result from the business bans beginning to take place.

Although these bans do negatively affect US tech companies who count China (the largest consumer market in the world) as part of their revenue stream, Thompson seems to think that the US holds the better hand in this situation given how dependent Huawei is on US tech suppliers. Indeed, what started as a just a little hardball to get China to the negotiating table on trade and business practices looks as if it is beginning to snowball into a clash over much more - a clash over ideologies of control vs. openness, command vs. freedom. The biggest question I have is how the US companies will compete against the Chinese state run companies with their singular vision and resolve. As the Atlantic article below points out, this could be the chance for US tech industry to redeem itself by insisting that it is not an overbearing intrusive force into consumer privacy, but rather a viable alternative to their censored communist competitors.


TOP READ: Huawei's rise is littered with accusations of theft and dubious ethics (WSJ)

How the Huawei drama is a boon to US tech companies (Atlantic)

The legal argument around antitrust price fixing that could destroy Uber (Jalopnik)

Shady numbers and bad business: inside the e-sports bubble (Kotaku)

Impossible Foods' rising empire of almost-meats - a long profile (engadget)

What the full podcast ecosystem looks like in 2019, with lots of data (a16z)

Another deep dive into WeWork's sky scraping $47B valuation - and why it warrants a much lower one (Vox)

John Mihaljevic of MOI Global shares a missive on why family owned companies often espouse longer term investment horizons (Massif Capital)

Upslope Capital Management's core investment tenets on idea generation, knowing oneself, due diligence, and portfolio management (Upslope Capital Management)

As babyboomers downsize, a generational shift in the housing market looms on the horizon (13D Research)

James Shore's letter to PitchBook on why eliminating current carried interest tax treatment would harm pensions (PitchBook)

What Game of Thrones has taught us about war, politics, culture and foreign affairs (Foreign Affairs)


TOP LISTEN: Ben Thompson and James Allworth on the implications of a Sino-US tech and trade cold war (Stratechery)

Azeem Azhar interviews 3 guests on disrupting finance with fintech (Exponential View)

BiggerPockets 332 - how to build a deal-finding machine (BiggerPockets)

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