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What We’re Reading (Week Ending 28 September 2025)

The best articles we’ve read in recent times on a wide range of topics, including investing, business, and the world in general.

We’ve constantly been sharing a list of our recent reads in our weekly emails for The Good Investors.

Do subscribe for our weekly updates through the orange box in the blog (it’s on the side if you’re using a computer, and all the way at the bottom if you’re using mobile) – it’s free!

But since our readership-audience for The Good Investors is wider than our subscriber base, we think sharing the reading list regularly on the blog itself can benefit even more people. The articles we share touch on a wide range of topics, including investing, business, and the world in general.

Here are the articles for the week ending 28 September 2025

1. Is this 1996 or 1999? – Ben Carlson

From 1980 through Greenspan’s speech at the tail end of 1996, the S&P 500 was up more than 1,200% in total or a blistering 16.5% return on an annual basis. Valuations were up, up and away. The Netscape IPO occurred a year earlier. Things felt very toppy.

That didn’t matter…

…From the time of Greenspan’s speech through the rest of the decade the S&P would more than double, good enough for an annualized return of nearly 26% through the end of 1999. The market was up 33% in 1997, 28% in 1998 and another 21% in 1999.

The dot-com bubble finally burst in the spring of 2000, cutting the S&P 500 in half along with a drawdown of more than 80% in the Nasdaq…

…The AI capex spending binge is eerily similar to the telecomm buildout that occurred in the 1990s.

Speculative activity is all over the place too — SPACs, meme stocks, IPOs, leverage, story stocks, high valuations, deregulation, etc…

…Many people are trying to figure out whether this is the early stages of a bubble or the end of the road.

Investing would be a lot easier if there were a simple way to predict these types of markets. Unfortunately, there’s not. No one can predict when human nature will take things too far or when it will stop on a dime. The pendulum always swings; we just don’t know how far in either direction…

…If you had invested in the S&P 500 following Greenspan’s speech in December of 1996 and held on until today, you would be up just shy of 10% per year. You would have had to live through two 50% crashes in the next dozen years or so, 9/11, multiple wars, oil going to $150/barrel then negative, the pandemic, 40-year high inflation, the 2022 bear market and about a dozen other run-of-the-mill corrections…

…If you had invested at the peak of the market just before the dot-com bubble burst at the end of 1999, you would be up a little more than 8% per year. That’s not a terrible outcome considering all of the bad stuff you would have had to live through plus that was the most expensive valuations the U.S. stock market has ever seen.

2. Ethical investing, avoiding blow ups, and salacious indictments $RICK – Andrew Walker

But honestly, saying that “I’ll invest in anything, ethics be damned!” is kind of a trite point. Why do I bring it up?

Because I’m actually interested in the potential wisdom of having ethical limits. I wonder if having “ethical passes” on stocks is actually a way of identifying and passing on stocks with tail risks…

…For example, in the mid-2010s, Valeant was an unstoppable acquisition machine. The business model was truly incredible: Valeant acquired underpriced drugs and brought their pricing in line with what the market would bear. Often that pricing was 10x what the old company was charging. Valeant had kind of discovered the holy grail in pharma: they did no risky R&D, every acquisition was insanely and instantly accrettive, returns on investment were astronomical, the company gushed cash, etc.

Of course, what Valeant was really doing was price gouging. In 2015, Charlie Munger called Valeant “deeply immoral”. Valeant was a hedge fund darling at the time, and Munger’s comments raised a lot of eyebrows. I remember a ton of investors who said Munger had lost it, and some hedge funders3 came out swinging pretty hard against Munger.

Within months of Munger’s comments, Valeant was in deep distress (which continues to this day!). Much like raisins mixed with turds are still turds, when a business is a turd no amount of accrettive acquisitions or clever financial engineering can save it. It’s still a turd and, true to form, Munger called a turd a turd…

…Last night, RICK’s got hit with a pretty salacious indictment from the NY AG (the company denies all wrong doing). And it has me questioning my “no ethics in investing” rule…

…It’s the type of stock I very easily could see myself owning: an asset heavy business (RICK tends to own the real estate under their clubs) operating a sin business with a founder CEO who owned a ton of stock and was openly talking about running an “Outsiders” playbook / was planning to buyback tons of stock when it was cheap while also pursuing extremely accrettive (and low multiple) acquisitions?…

…There were/are a lot of issues at Rick’s that you had to get comfortable with to be long to the stock4; in general, the way you could get comfortable with the issues was something like “it’s a strip club business; the whole industry is shady so you kind of just need to accept that and realize ultimately the cash flow of the business + stock ownership of the CEO pushes this higher.” Given the upside here, I think there was a reasonable chance you could talk yourself into that if you were ignoring all ethics…. but, if you used an ethics based screen, then you wouldn’t have even been tempted by the cash flows / alignment issue. You would have seen the shadiness and instantly passed.

3. How to avoid value traps in Asia – Michael Fritzell

Value traps are stocks that look cheap but end up delivering poor returns.
The main reasons why stocks end up being value traps include hoarding cash, having obsolescent products, selling commodity products in a market with excess supply, related party transactions, aggressive accounting, industry cyclicality, high debt and government interference…

…How do you avoid the value traps that simply do not return cash to shareholders? Check the company’s cash flow statement.

In IMAX China’s case, you can see that they pulled the dividend in 2023 and spent almost nothing on share buybacks in 2024. So US$17 million of cash built up on the balance sheet, unfortunately out of reach for us minority shareholders…

…So how can you know whether the underlying demand for a product is rising or not? First, check the like-for-like volume numbers reported by the company. Second, observe consumer behavior through customer engagement metrics. Third, check alternative data sources such as Google Trends or Similarweb to see whether interest in the product is rising or falling…

…So, how do you know if a company is selling a commodity product or not?

You can check the company’s market share: if it’s greater than 50%, then it probably has some type of competitive advantage.
You can ask customers why they buy the product: is price the determining factor, or are they focusing more on other attributes when buying?
Finally, is there a market price for the product that fluctuates with supply & demand? If so, then you’re most likely looking at a commodity…

…So, how do you check whether a company has a complex corporate structure? Search on TIKR using the company name and then click on the Ownership tab. If the parent is a holding company, ask ChatGPT what business the parent is involved in. Finally, open up the annual report and search for any related party transactions…

…If the accounting is aggressive, that means that profits are partly illusory. Once the market realizes what the sustainable earnings power of the business truly is, the shares will probably trade down.

How do companies play these games? They might adjust their depreciation schedules, push products to customers on looser payment terms, capitalize expenses, under-estimate credit costs, etc…

…In reality, I sometimes struggle to judge whether an industry has hit a bottom. But I like to look at a company’s operating margins over time, to see whether they’re mean-reverting or not. You can also look at the operating margins of companies in the same industry. Property developers, auto companies and chemical companies are famously cyclical. So to avoid value traps in these industries, consider whether margins may one day head lower…

…At one level, I think it’s helpful to invest in countries with a reliable rule of law, just to avoid negative surprises in the future. But if you have to invest in countries with a poor rule of law, it’s helpful to invest in entities that are aligned with the top leadership. Because if any government interference occurs, it will most likely be on the positive side.

4. Arc’teryx Is Cooked in China – Amber Zhang

On September 19, Chinese firework artist Cai Guoqiang and outdoor apparel brand Arc’teryx jointly staged a fireworks display called “Ascending Dragon” (“升龙”) in Relong Township, Gyantse County, in the Tibet Autonomous Region. The display — set at roughly 5,500 meters altitude — consisted of three sequences of fireworks along the Himalayan mountainous ridge, with imagery meant to evoke a dragon…

…Soon after videos of the event circulated online, the display triggered intense backlash over environmental and cultural concerns. Netizens began calling for a boycott of Arc’teryx, arguing that setting off fireworks in such a fragile alpine ecosystem risked disturbing wildlife, damaging slow-growing vegetation, and polluting the high-altitude environment. Many also criticized the spectacle as disrespectful to local traditions, which hold mountains as sacred and discourage loud disturbances. The sponsored firework show is the complete opposite of environmental protection and respect for nature—values that strongly resonate with China’s affluent urban middle class and outdoor enthusiasts, who form Arc’teryx’s core customer base.

Some netizens have even extended the boycott to Anta Sports (2020.HK), the Chinese sportswear conglomerate that acquired Arc’teryx’s parent company, Amer Sports (AS:NYSE), in 2019 and now effectively owns the brand…

…For a long time, corporate references to “environmental friendliness“ or “social responsibility“ were treated as nice-to-have branding or merely compliance with basic regulations, rather than as priorities with real financial impact. For one thing, investment decisions in China were rarely bound by ESG mandates, and it’s common for consumers to choose price and convenience over whether a brand truly embodied ESG values. (Realistically speaking, many consumers simply lacked the awareness, tools, or access to evaluate how a company performed on ESG benchmarks.)

But that is changing. In recent years, China’s urban middle class has begun voting with their wallets, willing to spend real money to support brands that align with their values…

…Arc’teryx, which first won over hardcore outdoor enthusiasts in the 1990s with its technical hardshell jackets, has in recent years faced criticism in China for drifting away from its image as a serious outdoor brand…

…Many outdoor enthusiasts argue that Arc’teryx’s management has lost touch with the outdoor spirit that once defined the brand. They point out that a true outdoor enthusiast would never have approved a fireworks show that risks damaging the very landscapes where Arc’teryx gear is meant to be worn. To them, the backlash over the event felt less like a one-off mistake and more like the inevitable result of a brand now led by people who no longer live and breathe the outdoors.

Apart from environmental issues, China’s urban middle class — especially those born in the 1980s and 1990s — is paying more attention to how socially responsible companies are. For example, this year more and more netizens are boycotting products from companies that follow the “996 schedule,” the notorious work culture requiring employees to work 9 a.m. to 9 p.m., six days a week, often without clear overtime pay. On Xiaohongshu (Red Note), people are sharing lists of companies that mistreat employees and avoiding their products…

…Generational divides are particularly stark. Those in power today—both in government institutions and corporations—were born in the 1960s and 70s, coming of age during China’s fastest industrialization. Meanwhile, the biggest consumers, born in the 1980s, 90s and 00s, have entirely different mindsets and values. The clash between these perspectives shapes much of the friction we see today.

For instance, apart from Arc’teryx’s terrible marketing decision, another major topic discussed among netizens is how this firework show was even approved in the first place. A firework show of this scale in such a fragile alpine ecosystem would not have been possible without prior authorization from local officials. (In fact, Cai had previously applied to hold the firework displays in Japan and France, only to be rejected by both countries.) While China does have environmental protection laws, the lack of awareness among those in power demonstrates how actual social responsibility, such as law enforcement, has lagged behind the rapidly growing economy…

…For some, over time, it became more about the “I”—the ego—and less about the community that upholds those values. For this reason, I believe the Arc’teryx and Cai firework incident is not merely a case of bad PR or environmental infringement, but an important and valuable reminder—especially for those who take consumers for granted and fail to adapt to these social and cultural changes in China today.

The change in aesthetics also reflects the shifting social climate in China. It offers a glimpse into the many differences in values and the conflicts between generations: how the older generation prizes hard work, while the younger generation rejects the 996 culture; how fierce competition and extreme efficiency has morphed into involution; or how the younger generation increasingly regards “grandeur” as “grandiose” and unnatural rather than aesthetically satisfying.

5. The resilience of consumer spending in the US – Abdullah Al-Rezwan

This graph basically helped me understand how the broader economy is chugging along just fine even though “vibecession” has increasingly become part of the conversation. The vibes are not great because a lot of people are indeed feeling the pinch whereas the high income group remains remarkably resilient. It is because of this high income group macro data may continue to be strong for a while:

the fact that credit card debt levels for the highest-income consumers are currently well below the pre-pandemic trend implies that these consumers have room to spend out of unused credit even if their cash on hand has been depleted.

US economy has increasingly been driven by the high income group for a while as half of the consumer spending (vs ~36% three decades ago) basically comes from just top decile of earners.

Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. We currently have a vested interest in Alphabet (parent of Google). Holdings are subject to change at any time.

What We’re Reading (Week Ending 21 September 2025)

The best articles we’ve read in recent times on a wide range of topics, including investing, business, and the world in general.

We’ve constantly been sharing a list of our recent reads in our weekly emails for The Good Investors.

Do subscribe for our weekly updates through the orange box in the blog (it’s on the side if you’re using a computer, and all the way at the bottom if you’re using mobile) – it’s free!

Here are the articles for the week ending 21 September 2025:

1. AI Will Not Make You Rich – Jerry Neumann

Fortunes are made by entrepreneurs and investors when revolutionary technologies enable waves of innovative, investable companies. Think of the railroad, the Bessemer process, electric power, the internal combustion engine, or the microprocessor—each of which, like a stray spark in a fireworks factory, set off decades of follow-on innovations, permeated every part of society, and catapulted a new set of inventors and investors into power, influence, and wealth.

Yet some technological innovations, though societally transformative, generate little in the way of new wealth; instead, they reinforce the status quo. Fifteen years before the microprocessor, another revolutionary idea, shipping containerization, arrived at a less propitious time, when technological advancement was a Red Queen’s race, and inventors and investors were left no better off for non-stop running…

…1. Containerization History: The benefits of the tech are obvious, leading many companies to enter. AI Rhyme: The idea that AI is the next big thing is widespread, and entrepreneurs and tech companies quickly enter.

2. Containerization History: There is immediate government and social attention, leading to pushback. AI Rhyme: The debate over AI that immediately surfaces in society, the media, and government limits experimentation.

3. Containerization History: Shipbuilders and other infrastructure companies get a quick boost, but not a long-lasting one. AI Rhyme: Chip makers, data center builders, and data providers get a quick boost, but not a long-lasting one.

4. Containerization History: Competitive intensity makes it difficult to keep prices high or lower costs, and forces high spending on capex, R&D, and talent. AI Rhyme: Prices start to drop even as companies spend heavily on capex, R&D, and talent. Companies will not be especially profitable.

5. Containerization History: The industry searches for ways to limit competition through cartels and regulatory bodies. AI Rhyme: Investors become alarmed and push for rationalization, resulting in consolidation and convergence on a few business models.

6. Containerization History: The value created by the innovation is zero-sum: who captures it (provider vs customer) determines the structure of the resulting industry. AI Rhyme: Companies vertically integrate into their customers’ businesses. Companies built on another company’s model have their margins or business model subsumed. Model companies become generalized AI providers.

7. Containerization History: The longer-term beneficiaries of increased productivity are existing companies that dramatically reduce prices or open new markets to their products. Most incumbents don’t do this. AI Rhyme: The beneficiaries of increased productivity in “thinking” are existing knowledge-industry service providers. Those that won’t adapt will die.

In the “AI rhymes” column, the first four items are already underway. How you should invest depends on whether you believe Nos. 5–7 are next…

…The high capex of AI companies will primarily be spent with the infrastructure companies. These companies are already valued with this expectation, so there won’t be an upside surprise. But consider that shipbuilding benefited from containerization from 1965 until demand collapsed after about 1973.[19 If AI companies consolidate or otherwise act in concert, even a slight downturn that forces them to conserve cash could turn into a serious, sudden, and long-lasting decline in infrastructure spending. This would leave companies like Nvidia and its emerging competitors—who must all make long-term commitments to suppliers and for capacity expansion—unable to lower costs to match the new, smaller market size. Companies priced for an s-curve are overpriced if there’s a peak and decline.

All of which means that investors shouldn’t swim upstream, but fish downstream: companies whose products rely on achieving high-quality results from somewhat ambiguous information will see increased productivity and higher profits. These sectors include professional services, healthcare, education, financial services, and creative services, which together account for between a third and a half of global GDP and have not seen much increased productivity from automation. AI can help lower costs, but as with containerization, how individual businesses incorporate lower costs into their strategies—and what they decide to do with the savings—will determine success. To put it bluntly, using cost savings to increase profits rather than grow revenue is a loser’s game.

The companies that will benefit most rapidly are those whose strategies are already conditional on lowering costs. IKEA’s longtime strategy was to sell quality furniture for low prices and make it up on volume. After containerization made it possible for them to go worldwide, IKEA became the world’s largest retailer and Ingvar Kamprad (the IK of IKEA) became a billionaire. Similarly, Walmart, whose strategy was high volume and low prices in underserved markets, benefited from both cost savings and just-in-time supply chains, allowing increased product variety and lower inventory costs.

2. Getting Rich on Rocks – Joe Raymond

35% per year for 19 years results in a 300x return.

This is a Hall of Fame result. It’s an incredible feat in only two decades for a single stock…

…But what if I told you there was an obscure OTC stock that returned more than 35% annually from 1993 to its acquisition in 2012?

You almost certainly haven’t heard of this company. Its executives aren’t on the covers of any magazines and haven’t written any bestselling books. And its shareholders quietly made their fortune without anybody noticing.

To make matters even more interesting, this was an aggregates business. That’s right, the company sold rocks…

…Let me tell you about Western Lime…

…Western Lime was an unremarkable business in the ’90s.

Growth was around 5-6% per year, and ROE hovered around 10%. Decent, but not particularly noteworthy.

What was noteworthy was the price.

For much of the ’90s, WLC traded between $150 and $160 per share. Trades were very infrequent. The stock only changed hands a few times a year.

At $155 per share in 1993, Western Lime had a market capitalization of only $2 million. The company earned $1.3 million after-tax that year, good for a P/E ratio of 1.7x.

Shareholders’ equity was $12.7 million, so the P/B was 0.16x.

The company had no debt and paid a small quarterly dividend…

…In addition to being incredibly cheap, the company itself was repurchasing shares in private transactions at $550 (more than triple the OTC price). I don’t know if anyone was arbing this, but I bet somebody was…

…By 2010, Tweedy owned 27% of Western Lime’s outstanding shares…

…By this point, word had started to get out on WLC. It was no longer a completely undiscovered stock selling for less than 2x earnings. It was then trading for $5,600 per share…

…Performance had been solid from 1993 to 2009.

Net income grew at 13% per year, the share count was cut in half, and the P/E multiple more than doubled from 1.7x to 3.7x.

The result was a 25% CAGR before dividends from 1993 to 2009…

…In late 2010, we received a string of correspondence between the company and Tweedy, Browne. It was sent to all shareholders. And it made for compelling reading.

The company had offered Tweedy $7,600 per share to acquire their 27% interest (36% above the prevailing $5,600 share price).

This equated to about 5x trailing earnings and 86% of tangible book value…

…Tweedy pegged the intrinsic value of WLC at somewhere between $24,000 and $33,600 per share. This equated to 8.5x EBITDA (15.9x earnings) on the low end and 11.9x EBITDA (22.0x earnings) on the high end…

…Tweedy ultimately rejected the bid, saying that they would much rather buy shares at $7,600 than sell them…

…What’s interesting is that the company upped their bid to $10,300 per share based on “an independent valuation of WLC’s stock” which includes “a discount for lack of marketability of minority blocks of stock.”…

…WLC traded for less than $200 per share 15 years prior. The current market was around $5,600. The company was offering $10,300. And they showed no signs of getting serious about selling the entire company or uplisting the stock.

In other words, there was no other clear “catalyst” on the horizon, other than this seemingly juicy offer from the company.

But Tweedy stuck to their core principles and refused to sell below intrinsic value.

They declined the bid and continued to hold their shares…

…Western Lime ended up selling to Graymont a little over a year later in March 2012…

…Shareholders received $52,000 per share.

That’s more than 5x the price offered to Tweedy less than two years prior, and a 36% CAGR from the 1993 price of $155 (before dividends).

3. From flops to fortune: How tech’s biggest failures create tomorrow’s winners – Chin Hui Leong

Ever since OpenAI launched ChatGPT in November 2022, Alphabet has found itself in an unfamiliar situation – playing second fiddle to OpenAI’s popular artificial intelligence (AI) assistant.

But with the recent launch of Gemini 2.5 Flash Image, Google is starting to look innovative again. The new image feature (code-named Nano Banana) attracted more than 10 million new users in a week, with over 200 million images edited.

Here’s what most people don’t realise: Nano Banana’s success was about 15 years in the making. The story begins with Google+, the company’s catastrophic attempt to challenge Facebook. Launched in 2011, Google+ burned through hundreds of millions before being shuttered in 2019.

But buried within that failed social network was a gem – Google Photos. When Google Photos became a standalone product in 2015, it brought along the image editing and organisation capabilities developed for Google+. Those capabilities – during its failed social network experiment – would give Google’s image AI the headstart it needed.

Fast forward to today, the technology that couldn’t save a social network now powers Google’s comeback in the AI race. Nano Banana’s overnight success took about 15 years of patient failure…

…For investors, the lessons are:

High-profile failures may signal opportunity, not disaster.
Watch how executives handle failure. Do they admit mistakes openly like Nadella?
Look for companies with “failure labs” – autonomous labs, experiment budgets that embrace Bezos’ brutal math of taking a bet that has a 10 per cent chance of a pay-off of 100 times.

4. The bloom is off: the start of the DAT crash? – Andrew Walker

When I was writing my series ~a month ago, MSTR was trading for ~2x mNAV, and every company that announced a DAT [Digital Asset Treasury] deal with any crypto was seeing their stock price skyrocket.

Today, things have changed dramatically. Yes, you’ll still get an occasional squeeze on a buzzy deal in a company with a tiny float (see: OCTO jumping ~2500% on a worldcoin DAT strategy), but for the most part things have cooled down. Just take a look at the king of DATs: MSTR1 has traded down to ~1.5x mNAV….

… and the market seems to be looking at their strategy with increasing skepticism; most of their preferreds are trading below par (in the case of STRD, well below par), and, despite the drop in MSTR’s mNAV, MSTR has been forced to shift most of their capital raise to their ATM program in order to continue to buy bitcoin…

…And we’re already seeing formerly hot DATs need to pivot their strategy as their stocks trade below mNAV. For example, SBET has announced a share repurchase program as their stock slipped below mNAV, and they’re not alone. My favorite is Empery Digital, which announced a share repurchase program and had their CEO make an impassioned plea to shareholders about buying their stock to get discounted access to BTC…

…Despite the shareholder friendliness of the buybacks, I suspect they are a band aid on a bullet wound for most DATs.

Why?

Most of these DATs have fully deployed all of the proceeds they raised into their underlying assets. SBET, for example, has purchased over $3.5B of ETH and had just ~$72m in cash on their balance sheet at their last update; that’s a pittance versus their >$3B market cap…

…I think what’s really interesting about the bloom coming off DATs (the premiums fading away) is that it’s happened while crypto is still generally in favor. ETH is up ~70% over the past three months, while Bitcoin is up ~5%.

If DATs are starting to go out of favor will the underlying crypto is still doing reasonably well, what would happen if we hit another crypto winter and crypto prices traded down meaningfully?

And, if I might speculate a bit, if a lot of the recent rise in crypto has been caused by the huge rush of capital into DATs (which then gets deployed into the crypto, thus supporting the price), what would happen if that unwound for some reason? What if a bunch of DATs said “we’re trading at a discount to NAV; let’s practice good corporate governance, sell crypto, and buy our stock back (option 3 above)”? Or what if a bunch of DATs practice option 2 (leveraging crypto to buy back stock) and get margin called?

I suspect the underlying crypto could go a lot lower real fast as the same flywheel effect that’s sent crypto up recently unwinds.

5. What the Pentagon’s Rare Earths Deal Gets Right and Wrong – Tracy Alloway, Joe Weisenthal, Arnab Datta, and Peter Harrell

Rare earth elements and magnets manufactured from them are used across defense and industrial applications: An F-35 fighter jet, for example, requires more than 900 pounds of rare earths, and in cars they are used for everything from batteries to power seats. Apple uses a rare earth magnet in the iPhone’s “haptic” engine that makes a user feel buzzes and other vibrations.

China’s dominance of rare earths (it processes nearly 90% of rare earths globally) is relatively recent. For much of the 20th century the U.S. produced both rare earths and rare earths magnets domestically. Indeed, MP’s mine in Mountain Pass, California, located near Las Vegas, started production in 1952.

In the early 2000s, however, low-cost Chinese producers came to dominate global markets, driving most non-Chinese companies out of business: the Mountain Pass mine, for example, stopped operations in 2002. By the time it reopened in 2012, China had built a market infrastructure to dominate all aspects of the trade. The mine closed again in 2015. GM sold America’s leading rare earth magnet manufacturer to Chinese companies in the 1990s. By 2004 it, too, had shuttered U.S. manufacturing. Even after MP acquired the Mountain Pass mine and restarted operations in 2017 it exported most of its product to China to be processed and turned into magnets.

The Defense Department’s deal with MP Materials is designed to end America’s dependency on China with respect to two specific rare earths, neodymium (Nd) and praseodymium (Pr). In addition to expanding mining and processing of the raw metals, the deal is intended to build up America’s capacity to manufacture the metals into magnets, specifically neodymium iron boron (NdFeB) permanent magnets, one of the most important types of rare earths defense and industrial magnets…

…First, MP committed to expand U.S. mining, processing, and magnet manufacturing facilities. The company will increase mining and processing operations, including possibly in heavy rare earths; expand its existing magnet manufacturing facility in California to be able produce 3,000 tons of NdFeB permanent magnets annually (up from 1,000 tons annually currently), and construct a new “10X” facility in Texas that will enable MP to produce a total of 10,000 tons of magnets annually after 2028. Combined, the facilities should be able to meet a substantial portion of U.S. demand for NdFeB magnets, including all of our defense needs.

Second, DoD set a guaranteed price floor of $110 per kilo of MP’s NdPr products, running for 10 years. If the market price, currently below $60/kilo, remains below $110, DoD will pay MP the difference between the market and $110/kilo. If market prices exceed $110/kilo, DoD is entitled to 30% of MP’s extra profits. This ensures that MP can make money on its mining and processing operations even if it has to sell minerals below cost to compete with Chinese producers.

Third, DoD has guaranteed that either it or commercial buyers will purchase all of the 10X facility’s NdFeB magnets, estimated at 7,000 tons a year for the next decade. DoD will pay MP its realized cost of production of the magnets, plus $140 million per year to guarantee MP a profit, with a 2% annual inflation increase in the guaranteed profit figure. With DoD’s consent, MP can sell some of its magnets to commercial buyers, in which case, DoD will take the first $30 million in MP magnet profits exceeding $140 million. Additional profits beyond that will be split 50/50 between MP and DoD. Similar to the price floor, the magnet offtake agreement ensures that MP can profitably make magnets even if low global prices would undercut MP’s manufacturing…

…Beneath the deal’s ambition, its structure raises significant policy design questions. The first is a fundamental question about the extent to which the government (versus the private sector) should bear the costs associated with addressing critical U.S. supply chain risks. The MP deal essentially puts the U.S. taxpayer on the hook for developing a reliable U.S. supplier of rare earths and NdPrB magnets. And while the U.S. government can share in the upside if global prices for rare earths and the magnets exceed expected levels, if the price trajectory looks similar to the last decade, the U.S. government could be on the hook for billions. Potential costs include $1.4 billion in guaranteed profits for MP ($140 million per year, adjusted up at 2% per year). The price floor alone could cost billions over ten years if MP hits their announced capacity of 6,075 metric tons and prevailing market prices stay constant…

…The deal elevates MP Materials as America’s de facto magnet champion, despite having no track record of commercial success in magnet production. By contrast, China’s national champions typically emerge through fierce domestic competition. Firms like CATL did not rise to global leadership through political selection alone; they fought their way to the top by outperforming rivals on innovation and scale: CATL remains one of the top patent recipients globally while leveraging partnerships with major automakers like Tesla and BMW. Government support was structured to spur this competition. Subsidies and pilot programs were spread across multiple firms before consolidating behind the winners.

The U.S. decision to back MP sidesteps this competitive process, effectively granting a monopoly franchise in magnet production. This risks locking the U.S. into a suboptimal path if MP fails to deliver on cost or performance, while crowding out rivals that could prove more innovative…

…The deal also hardwires U.S. fiscal exposure to the same market infrastructure that China uses to determine prices and stifle investment in competitors. Under the price‑protection term, DoD pays the difference between $110/kg and a reference price — specifically the Asian Metal Market price. A substitute ex‑China Index is only allowed at DoD’s election and with the company’s consent. That means core cash flows for a decade depend on a benchmark whose prints reflect Chinese production costs, market structure, trade flows, policy choices, and tax treatment.

This creates three, compounding problems: (1) basis risk; (2) manipulability; and (3) path dependence. NdPr is sold as concentrate, oxide, and metal with varying specs, impurities, tenors, and delivery terms; Asian Metal quotations often embed VAT regimes, logistics premia, and buyer restrictions that diverge from U.S. realizations. Even with upside sharing, those mismatches can cap clawbacks in booms and invite arbitrage in busts. Relatedly, when public payments hinge on a single, quarterly external print, an actor with market power can manipulate spreads, restrict eligible buyers, or flood spot supply to push the index below U.S. breakevens and eat DoD appropriations. And locking federal contracts to Asian Metal deepens liquidity and legitimacy in that price‑discovery ecosystem. The U.S. ends up validating the very benchmark that concentrates market power abroad, raising the fiscal cost of preserving domestic capacity and making future decoupling harder.

Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. We currently have a vested interest in Alphabet (parent of Google), Apple, Meta Platforms (parent of Facebook), Microsoft (its CEO is Satya Nadella), and Amazon (its founder is Jeff Bezos). Holdings are subject to change at any time.

What We’re Reading (Week Ending 14 September 2025)

The best articles we’ve read in recent times on a wide range of topics, including investing, business, and the world in general.

We’ve constantly been sharing a list of our recent reads in our weekly emails for The Good Investors.

Do subscribe for our weekly updates through the orange box in the blog (it’s on the side if you’re using a computer, and all the way at the bottom if you’re using mobile) – it’s free!

Here are the articles for the week ending 14 September 2025:

1. Secular Bull Market Peaks – Are We There Yet? – Tyler Grason

The concentration and valuation of the market today often draws parallels to the tech bubble. We analyzed the Tech Bubble and the nifty fifty period (late 1960s to early 1970s), both of which marked the end of secular bull markets, to assess the similarities. As to the end of this secular bull market, as Mark Twain said, “The reports of my death are greatly exaggerated.”…

…Both the nifty fifty and tech bubble periods both coincided with a Fed hiking cycle. In January 1973, the market peaked 3 days prior to the first hike, and the Fed did not cut until December 1974. During the tech bubble, the Fed began hiking rates in June 1999, or about 9 months prior to the market peak. While the Fed continues to be on pause, fed funds futures prices suggest a 0% probability that the Fed hikes by year-end 2026. Odds now show the Fed is 88% likely to cut rates in September, with 2 expected rate cuts this fall…

…Market today is cheaper than the tech bubble despite better fundamentals. The S&P 500 at 22x forward twelve-month earnings is ~15% cheaper than the peak of the tech bubble at 25.5x despite having 60% higher profit margins and 10% better ROE. When compared to the 10yr which traded at 15.9x at the height of the tech bubble, equities were 10x turns more expensive vs 1x turn less expensive today. On a justified P/E basis, fundamentals and bond yields would suggest the market today should trade at 24x, or slightly above the current multiple of 22x…

…Market concentration today looks much more aligned with fundamentals. During the tech bubble, the concentration of the top 10 largest stocks at 27% was nearly 2x above its earnings contribution. The expected earnings growth that was priced in failed to materialize. Today, the weight of the top 10 stocks relative to their earnings contribution is much more aligned at 35% and 32%, respectively. While the top 10 stocks in the S&P at 38.3x is above the tech bubble at 34.4x, Tesla at 145x is meaningfully skewing the data. Excluding Tesla, the top 10 today trade at 26.5x, or ~25% below the tech bubble peak despite returns on capital that are >2x higher.

2. This Is Why America Is Losing to China – Ross Douthat, Sophia Alvarez Boyd, and Dan Wang

Wang: I decided to take two friends and go on a lengthy bike ride in China’s southwestern province of Guizhou. This is a land where a local said, “Not three feet of land is flat, not three days go by without rain and not a family has three silver coins.”

China’s fourth-poorest province, I was surprised to see, had much better levels of infrastructure than one could find in much wealthier places in the United States, like New York State or California.

We saw very tall bridges all around us. We saw a guitar-making hub. We saw a lot of fancy new roads that were a cyclist’s dream. And it was only afterward when I realized how bizarre it was that China’s fourth-poorest province — about the level of G.D.P. per capita of Botswana, much less than Shanghai or Guangdong — was able to build all of these things.

It is a province with 11 airports, 50 of the highest bridges in the world and brand-new, spiffy highways — and that’s because China was just building a lot in its equivalent of a South Dakota or West Virginia…

…Wang: I think that the first and most important part of China’s technological success has to do with something I call process knowledge.

Process knowledge is also known as tacit knowledge, also known as industrial expertise. In a kitchen analogy, it is something like the recipe, and the hardware is something like the stoves and the pots and the pans.

But let’s say, Ross, we give someone who’s never cooked a day in his life the most well-equipped kitchen, as well as the most exquisitely detailed recipe. Are we sure that this person will be able to do something as simple as frying an egg for breakfast?

I’m not sure if that person will burn the kitchen down in some big way.

Douthat: My children have often given evidence for that hypothesis.

Wang: Yes. And I think the crucial part of technology is actually all of this tacit knowledge, process knowledge that we can’t really write down.

That is the core part of what has been driving China’s technological advantage. It started when China started making pretty simple things — socks, T-shirts, all these things that we think and know are not terribly important — before they get to slightly more complex things, like shoes.

Then they get to everything that now includes iPhones and electric vehicle batteries, and they are really good at climbing this ladder.

China’s hardware capital, Shenzhen, was mostly a backwater — making textiles all the way up until 2008, when Shenzhen started producing Steve Jobs’s iPhones.

iPhones started rolling off the line and you had this enormous work force, hundreds of thousands of people making the most sophisticated consumer electronics in the world, making the next consumer drones, more sophisticated electronics. And I think that is really the basis of China’s technology advantage: It’s just these gigantic investments and work force.

The state sometimes gets in the way; the state sometimes harnesses this work force. You also have a lot of entrepreneurial energy. I’m not sure if I wanted to define it as state capitalism with Chinese characteristics, but I just view it as technological catch-up.

Douthat: Right, but what is the difference, then, between that model and ours? Part of your argument is that America has lost a lot of that knowledge through the process of outsourcing and allowing factories to move overseas and allowing deindustrialization to happen, and becoming an information and financial services and service economy — a very rich one, but not an industrial economy in the way that China is.

I want to understand how much of this is saying there are engineering minds in the Politburo who made these choices that maybe you can only make in an authoritarian society, or maybe we could have made different choices ourselves in the U.S.?

How much of it is that versus some other element of competition or culture in China right now?

Wang: I think the crucial mistake in the U.S. was that it wasn’t even a choice that the U.S. made to outsource a lot of manufacturing. Now, there is this line that politicians like to trot out that China stole all the jobs — and sure, that’s one framing of it.

But I think a more accurate framing is that since the 1990s, big American manufacturers had been actively moving their production to China, and the U.S. government did almost nothing to restrain them.

I’m not sure whether that was actually a really deliberate choice plotted out by the Council of Economic Advisers advising Bill Clinton. Maybe it was, but I think this was just a process of business lobbying saying: Well, we need to tap into this market and produce at these cheaper places.

And something that the Communist Party actively decided was that they were going to import big American manufacturers in the 1990s and 2000s, Apple, Tesla.

If they want to build their products here, we are going to completely welcome Steve Jobs and Elon Musk to train our workers and make them as good as they can be.

That was a more conscious decision, I think, made by engineers who realized they had to catch up to the global frontier. They couldn’t do it with China’s existing level of technology, and they were going to have Americans help them…

…Wang: I think you’re absolutely right that America is highly dynamic, and I don’t want to count out America in this stage of competition. I think at various points the U.S. will look weak. At various points it will look strong.

But what are the stakes here? Because I think there is still a broad view in the U.S. that deindustrialization has been pretty bad — not just for regions like Pennsylvania or Michigan, where the deindustrialization has been felt pretty badly.

There’s also a pretty clear loss of manufacturing expertise that is represented in the declining fortunes of American apex manufacturers. Companies like Intel, Boeing, Detroit automakers and now, increasingly, Tesla.

They’ve had mostly bad news over the last few quarters, last few years. In the case of Detroit, the last few decades. Apex manufacturers are not working very well.

If we take a look at the early days of the Covid pandemic, the U.S. manufacturers were not very good at making simple products either — necessary products, like cotton swabs and cotton masks. And they weren’t able to really rejig their supply lines in order to build out critical materials.

If we take a look at the U.S. defense industrial base, after the U.S. shipped a lot of munitions to Ukraine for its self-defense against Russia, the U.S. hasn’t really been able to rebuild its munition stockpiles.

If we take a look at naval ships with the U.S. Navy, every class of ships is now behind schedule…

…Douthat: As a potential scenario for Chinese success. How could China, how could this model fail? What do engineers get wrong?

Wang: Engineers are meddling extensively in the economy. And maybe we will wake up and find one day that central planning is a ginormous failure and the Chinese will not be able to fundamentally overcome these contradictions in the model of state capitalism with Chinese characteristics.

That is a potential scenario in which the extensive meddling that has scared the living daylights out of a lot of venture capital investors in China, as well as a lot of entrepreneurs who would really prefer not to suffer through a lot of the edicts of the Politburo — they decide to not contribute so much to the great rejuvenation of the Chinese people.

I think that a lot of people have been pretty extensively burned out by the mistakes and some of the foibles of the Communist Party. A lot of what I have seen is that many young Chinese are willing to take leave of the great rejuvenation that is conducted in their name.

We have a lot of data on Chinese entrepreneurs, a lot of wealthy Chinese people who would much rather live their lives in Chinese communities like Irvine, Calif., by buying some property and just having their businesses be established in Singapore, and still not really quite trusting the Communist Party to respect everything that they want to do.

Young Chinese creative types are interested in smoking dope, just as young California types may be. They are smoking dope in Chiang Mai. I’ve spent a little bit of time seeing these people who are just as into marijuana, as well as cryptocurrencies, as folks are in Silicon Valley.

We also see a lot of Chinese migrants who are not necessarily rich, who are not necessarily the creative types, dare to fly to Ecuador, which has been visa-free for a period of time to the Chinese, and try to walk across the Darién Gap — a perilous journey to cross to the southwestern border of the United States.

At its peak in 2024, the U.S. was apprehending something like 30,000 to 40,000 Chinese who were trying to cross over into Texas. It still blows my mind that many people would try to do that to escape the regime…

…Douthat: Let’s end with advice for the United States. What are the actual implications of your analysis — and especially the bull’s case that we started with, the Chinese century case for what the U.S. should do right now? What should we be doing differently if China is poised to be as powerful as you think it might be?

Wang: I think that the U.S. should first and foremost rebuild its manufacturing base. That follows quite naturally from a lot of my analysis of China’s greatest strength, which is that China is a manufacturing superpower and China is poised to further deindustrialize Europe and it is poised to further deindustrialize the United States as well.

I am skeptical that President Trump’s efforts to reindustrialize America through the tariffs have been very effective. I am more positive about the Biden administration’s policies on efforts to reshore through industrial policy. But we can still see a lot of flaws with that approach as well.

Douthat: Do you think tariffs — essentially trade war — can’t work, in your view, because China has become too strong and resilient?

Wang: I think that the trade war, as prosecuted right now through the tariffs, is not going to be very effective. If we just take a look at the manufacturing employment data since Liberation Day in April — with the next jobs release, I’m not sure if we’ll get that data probity back — the U.S. has lost about 40,000 manufacturing workers.

It is not a natural fit if the U.S. is to become a technological, scientific superpower to advance its science by denying a lot of funding to scientific agencies like the National Science Foundation and the National Institutes of Health.

I think that universities, flawed as they are, are still driving a lot of American innovation and scientific advancements, and it also doesn’t make a lot of sense to attack universities in order to save the scientific base.

And it really doesn’t make sense to try to deport a lot of workers who may be working in the construction industry or the manufacturing industry, or to frighten away a lot of high-skilled researchers who may want to be in the U.S. from Europe or Asia to do a lot of their work here. So I think that as prosecuted, the trade war is not making a lot of sense.

The industrial push in the U.S. is not making a lot of sense. Maybe there’s something positive to be said about Trump’s energy agenda in terms of building more nuclear power, in terms of building more facilities online. Maybe there’s something positive about the deregulatory agenda. I can certainly see that case, but I certainly see more headwinds than tailwinds.

3. Are We at Bubble-Level Valuations? – Ben Carlson

Here’s the monkey wrench — Bernstein also wrote about why regression to the mean can be so tricky outside of science:

There are three reasons why regression to the mean can be such a frustrating guide to decision-making. First, it sometimes proceeds at so slow a pace that a shock will disrupt the process. Second, the regression may be so strong that matters do not come to rest once they reach the mean. Rather, they fluctuate around the mean, with repeated, irregular deviations on either side. Finally, the mean itself may be unstable, so that yesterday’s normality may be supplanted today by a new normality that we know nothing about…

…This is the CAPE ratio going all the way back to a time when Francis Galton was still alive: [Average of 17.6x since 1881, and average of 28.3x over past 30 years]

What’s more relevant here — the 150+ year full history or the past 30 years? Which average is more relevant?…

…Last week I wrote A Short History of the S&P 500 which looked at the composition change to the index over time in terms of the types of stocks. The S&P 500 was full of capital-intensive industrials and railroad stocks for much of its history. These were relatively low-margin businesses that required a large number of employees and lots of physical assets that needed to be replaced over time.

Today’s companies have more intangible assets and are far more efficient.

Take a look at average margins by decade going back to the 1990s and you can see this shift happening:

Every decade the average moves a little higher.

This was supposed to be the most mean-reverting series in all of finance. Market historians have been shouting it from the rooftops for the past 15 years. And they were wrong…

…It’s interesting to note that the biggest crash on this list–the Great Financial Crisis–started at relatively muted valuation levels. Stocks were not insanely overvalued heading into the fall of 2007. It’s just that no one saw earnings were about to fall off a cliff.

Picking tops is not easy.

4. Finding Fraud – Farrer 36 Asset Management

One of the first things I do when reading an annual report is search the PDF for the term “Material Weakness” – you’d be surprised how often you get a positive hit. A material weakness is a flaw or combination of flaws in a company’s internal controls over financial reporting that creates a “reasonable possibility” of a significant error occurring in the financial statements. For example, take Evolv Technologies that declared a material weakness in its 2024 annual report.

The discovery of the accounting mishap (it turns out an employee was overstating sales) sent the stock tumbling 50%…

…Many ‘material weakness’ declarations get remedied, or don’t turn out to be much, but their existence is cause for more work…

…Swedish small cap Intellego has been on a tear recently – with the stock up more than 300% this calendar year. The stock is being driven by impressive revenue (+152% yoy in Q12025) and profit growth (+162%). Given this, you would expect that operating cash flow would have also exploded. But would it surprise you that it has instead decreased over the same time?

This is because much of Intellego’s revenue, while recorded, has not actually been received by the company. Receivables have increased 6x over the same period.

The above begs the obvious question – are the revenues real? Let me be clear, I am not stating that this is fraud – the company has explained that some of their older contracts gave too loose of terms to their clients, and newer contracts have stricter terms. However, such a large mismatch between profits and cash should give any investor pause…

…Many of Enron’s troubles lay with CFO Andy Fastow’s creation of SPVs which he and his family owned. These vehicles had the dual purpose of raising billions for Enron (and thus allowing the consolidated balance sheet to appear debt-free) and paying himself millions of dollars…

…Going back to the Enron example, even though they showed positive operating cash flow in three annual reports prior to declaring bankruptcy, their working capital assumptions raised alarms. You can see from the above table that from 1998 to 2000 (read right to left) that both receivables jumped (see the previous example for what that implies), but to compensate, there was also a significant jump in payables…

…For years Yes Bank had posted numbers too good to be true. Their loan book grew much faster than peers, margins and profits were higher than its comparable set, and all this despite exposure to troubled sectors like real estate, airlines, and telecoms. It turns out that Yes Bank was underreporting stressed loans (they reported NPAs under 1%, whereas the RBI showed a 400-500bp difference). When the truth was revealed we saw a 96%+ drop in stock price and jail for the founder.

5. Why retention is so hard for new tech products – Andrew Chen

Just as there’s the laws of physics, weirdly there are some constant patterns that keep cropping up over time. Here are a few that I’ll share:

You can’t fix bad retention. No, adding more notifications will not fix your retention curve. You can’t A/B test your way to good retention
Retention goes down, it doesn’t go up. And weirdly, it decays (oh, does it decay) at a predictable half life. Early retention predicts later retention.
Revenue retention expands, while usage retention shrinks. Good news: You lose people over over time, but the ones that remain sometimes spend more more money!
Retention is relative to your product category. There’s nature, and there’s nurture. Sorry, you’ll never make a hotel booking app a daily use product
Retention gets worse as users expand and grow. The best users are early and organic. The worst users come after that
Churn is asymmetric. It’s far easier to lose a user forever than to re-win them back
Retention is weirdly hard to measure. Seasonality is a real thing. New tests throw things off. Bugs happen. D365 is a real metric but you can’t wait
Crazy viral growth with shitty retention fails. We’ve run this experiment many many times already, across multiple platforms and categories
Great retention is magic. When you see it out in the wild, it’s amazing…

…You might read all of this and still have a big question: So wait, how do you get to great retention? (If I knew the answer in a deterministic way, my job as a startup investor would be so much easier, wouldn’t it?)

But let’s try our best. In my points above, there’s a few clues:

The idea really matters.
If you want a high retention product, you need to pick a category that is high retention already.
You need to pick a product category where you already use an existing product every day.
You’re going to build something that directly competes against that.
If you win, then you’ll stop using that other product and use your product instead.

That’s a high bar, but I think it’s a good start…

…The natural counterpoint is that new markets are often more exciting than existing ones. Isn’t tech about building brand new things rather than innovating 20% on old stuff? Of course this is true, but I think this is the tiny tiny minority of products.

My counterpoint to this counterpoint is that most products actually have some kind of prior lineage, even if those prior products are quickly forgotten.

Before Instagram there was Hipstamatic, which had become the #1 paid photo app in the early App Store. It demonstrated the success of photo filters. Of course Google was not the first search engine, it was actually #10 or whatever, after Lycos, Excite, Infoseek, etc., which demonstrated consumers wanted search but that it was impossible to monetize. Tesla was not the first electric car, nor iPhone the first smartphone. Sometimes it’s the 10th iteration that matters. Some call this “last mover advantage” rather than first mover. I think an important point.

Yet sometimes new things do happen. Uber was created to turn an existing offline action — calling a cab — into an app, not because there was already a hugely successful ridehailing app. (And no, not Lyft — it was a weird bus booking thing at the time). Of course a lot of ChatGPT, with OpenAI’s 5 year journey between inception and v3 which really took off, and without any real blueprints for what it might replace. These types of journeys are remarkable, and the tech industry is better off for it, because they involve real risk as part of new category creation.

What We’re Reading (Week Ending 07 September 2025)

The best articles we’ve read in recent times on a wide range of topics, including investing, business, and the world in general.

We’ve constantly been sharing a list of our recent reads in our weekly emails for The Good Investors.

Do subscribe for our weekly updates through the orange box in the blog (it’s on the side if you’re using a computer, and all the way at the bottom if you’re using mobile) – it’s free!

Here are the articles for the week ending 07 September 2025:

1. The ROI Question – Abdullah Al-Rezwan

A friend recently DM-ed me to highlight one of the quotes from Nvidia’s CFO in their recent earnings: “New NVFP4 4-bit precision and NVLink 72 on the GB300 platform delivers a 50x increase in energy efficiency per token compared to Hopper, enabling companies to monetize their compute at unprecedented scale. For instance, a $3 million investment in GB200 infrastructure can generate $30 million in token revenue, a 10x return.”

10x return? That’s a bit eye-popping number. My friend was understandably a bit skeptical of this claim, so he asked ChatGPT to show the math and some reasonable assumptions behind this claim…

…Clearly hyperscalers aren’t realizing such revenue from their investments in Nvidia chips yet…

…Batch size, which is the number of concurrent user requests processed simultaneously, is the single most important operational factor for maximizing throughput. The highest throughput numbers are always achieved with the largest possible batch sizes.

However, large batch sizes increase latency,..

…To maintain low latency, providers must deliberately use smaller batch sizes. This inherently sacrifices aggregate throughput to ensure a good user experience. The 1M tokens/sec benchmark mentioned in the ChatGPT screenshot above is likely achieved at latencies that would be unacceptable for real-time use…

…While 20% utilization may seem conservative, achieving this average utilization consistently (24/7/365) with monetized workloads may not be super easy in inference. AI inference demand is often “peaky.” Infrastructure built for peak load sits idle during off-hours…

…Hyperscalers do not only run the most expensive models. A likely material portion of their workload involves smaller, cheaper models (often <$1 per 1M tokens), reducing the actual blended revenue shown in my screenshot above. If the average realized price drops to $2/M tokens, the idealized revenue drops from $31.5M to $12.6M in my example (ceteris paribus).

2. AI Agents and the Future of Grocery Delivery – Thomas Reiner

Whether it’s OpenAI, Gemini, Siri, or some other tool, every consumer will have a personal agent in their pocket. It will book travel for you, make dinner reservations, manage your schedule, and for purposes of this discussion it will order your groceries for you.

For the average American family that gets groceries 1x per week it’ll know what you often order, it’ll recommend recipes, it’ll monitor past usage and wastage of food products, and it’ll know your consumer preferences around store loyalty. If you change your plans and tell your agent that you’re hosting a dinner party for 8 people serving it can assist by recommending what to serve and automatically ordering it from the grocery store…

…Looking across these models there’s two key areas where there are middlemen to be disrupted: 1) Grocery Delivery Marketplaces and 2) White Label Solutions. The Age of AI is going to be the age of efficiency and wringing out middlemen from the equation. Grocery Delivery Marketplaces are definitely middlemen and I’d argue that white label solutions from providers like Instacart Storefront sort of are…

…AI agents mean that the importance of brand goes down, while the importance of service goes up, and that’s where all the incremental dollars from both players are going. They can best position themselves to win in a world where AI agents make decisions based on best outcome (cost, quality, speed).

DoorDash with their DashMart concept is trying to take themselves out of the middleman equation and focus on being the 1P provider which is a lot more defensive in an AI agentic world.

The biggest challenge will be on crossing the trust chasm. While consumers have high trust in Amazon for shelf-stable goods, it’s non-existent for fresh goods. Early returns from Amazon same-day perishable trial showed 75% of consumers were first-time perishables shoppers at Amazon but only 20% reordered multiple times within the first month. “U.S. shoppers have shown they prefer to buy fresh goods from retailers that run brick-and-mortar stores, as evidenced by the struggles of online-only grocers like Peapod and FreshDirect.”…

…Generally the rise of AI Agents is a lot more mixed picture for the delivery marketplaces. On one hand, an AI that can spontaneously order anything might increase demand for delivery, on the other hand these services might be commoditized as the consumer UX slowly fades away and the importance is put on the underlying speed, convenience, and price.

3. An Interview with Cloudflare Founder and CEO Matthew Prince About Internet History and Pay-per-crawl – Ben Thompson and Matthew Prince

The reason to talk now, and we’ve talked offline about this a few times, both this year and last year, is your push for this pay-per-crawl concept. Why don’t you give me the high level overview, the pitch from your perspective, which I think has evolved? I would like to think partially based on some of my feedback, but what’s the pitch in September 2025?

MP: Let’s take Cloudflare out for a second and just talk about—

Talk about Matthew, the English student? The student newspaper editor.

MP: This is me channeling inner law professor. Let me give you the history of the Internet and why the Internet exists the way that it does and what’s changing.

This is usually my job, but go ahead.

MP: And you can tell me where I’m wrong, but this is my quick history of the Internet, and apologies to Michelle who hates history lessons.

For the last 25 years, the interface of the Internet has been search, and Google has dominated that space, and Google, their incentives as a company were to have the Internet grow as much as possible because if you have chaos, then the search becomes the organizer of the chaos. But you need incentives for people to actually create content and so Google not only had to create the thing that organized the Internet, but they then had to take the thing that took the traffic of where people went and then helped people monetize that, largely through advertising, although they also helped with subscriptions, and Google was the great patron of the Internet for the last 25 years. The web would not exist the way it does if there were not something like Google out there to create the incentives around.

There were a lot of problems with incentivizing around traffic, we created systems where people would just literally try and create rage-baity headlines to get people to click on things so that they could put ads against them and so not perfect, but we don’t have the Internet that we have today unless we have Google and search funding that.

That is changing. The world is shifting where the interface of the web is shifting from search engines and search engines give you a treasure map and say, “Hey, go figure out what your answer is by clicking on these 10 blue links”, to what are effectively answer engines. So if you look at OpenAI, if you look at Anthropic, if you look at Perplexity, even if you look at modern Google, they are not a search engine, they don’t give you a treasure map. Instead, they give you an answer right at the top of that page. That answer, for most users, 95% of the users, 95% of the time, it’s a better user interface. I’m not anti-answer engines, I’m not anti-AI, I think it’s better in every possible way for that to be what the interface is that we all interact with.

But the problem is that if you get the answer and you don’t get a treasure map, then you don’t generate traffic and if you don’t generate traffic, then the entire business model of the web, which has been based on traffic starts to break down and you can see that, not so much in e-commerce sites, not so much in things that actually sell you the physical thing because if you asked what’s the best camera to buy, even if you get an answer, you’ve still got to go buy it from somewhere. It’s going to take the e-commerce and the people who are selling things that’s going to work but the person who wrote the review—

The great thing about physical products is by definition they are scarce and the problem with text on the Internet is it is not scarce.

MP: It’s not scarce, that’s exactly right, and Google set this expectation that everybody can scrape the Internet for free, but it was never free. The Internet has never been free. Google paid for it for a really long time and the quid pro quo with the content creators was, “We get a copy of your content and in exchange we’ll send you traffic and help you monetize that traffic”.

That quid pro quo breaks down as we shift from search engines to answer engines and so something is going to change. I see three possible outcomes for that. And again, none of this involves — if Cloudflare disappeared tomorrow, this is still happening, one of these three things will happen. One, all of the journalists, academics, and researchers in the world will starve to death and die. And it’s crazy, like when you post this stuff on Twitter, how many people were like, “Well, we don’t really need journalists anymore, we have drones”, and I’m like, “I think we still need journalists”…

…If it’s inevitable though, then why does Cloudflare need to be so aggressive? You’re instituting these policies of doing your best to block bots, putting together protocols for recognizing what it’s worth, payments, etc., all very nascent to be sure, a lot to be figured out. But you are not taking the posture of a company that this is inevitable and it’s going to be great, you are being pretty forceful in trying to make something happen.

MP: Well, I think if we weren’t doing it, someone else would. But what I think we have a unique ability to do is we’re really good at stopping things like bots because we do it every day.

So again, it wasn’t like we were sitting around being like, “Hey, what should we do next? Let’s go change the business model of the web”, it was our customers who were publishers were coming to us being like, “We’re dying and we don’t have the technical wherewithal to step in front of it, but we need to stop this, please help”. And honestly, when Neil [Vogel] at Dotdash Meredith was telling me this, I rolled my eyes and I was like, “Publishers, they’re such Luddites, they’re always complaining about the new technology, they’re always complaining about the next thing, this isn’t a big deal”. And Neil and a bunch of others finally said, “Just go pull the data”, and it was only when we actually saw the data, when we saw that over the course of the last 10 years, it’s become 10 times harder to get a click from Google for the same amount of content on that same kind of basis, it’s now 750 times harder with OpenAI, it’s 30,000 times harder with Anthropic.

The business of traffic on the Internet as being the currency is going away and so something either again, either content creation is going to die, it’s going to become futile, or we’ve got to create a new business model. Again, if our mission is to help build a better Internet, this seems squarely in the line with what we should be working on.

So why does Garry Tan say that you are an axis of evil with Browserbase and you should legalize AI agents?

MP: I really don’t understand. I mean, I’m confused by Garry, I think part of it might be that he’s an investor in Perplexity.

Every story needs four characters, you need to have a victim, you need to have a villain, you need to have a hero, and you need to have the village idiot or the stooge. And if you think about it, any news story has those four characters. Right now, the people who have most been the villains have been Perplexity, where they’re doing just actively nefarious things in order to try and get around content company.

I’ll give you an example of something that we’ve seen them do, which is that if they’re blocked from getting the content of an article, they’ll actually, they’ll query against services like Trade Desk, which is an ad serving service and Trade Desk will provide them the headline of the article and they’ll provide them a rough description of what the article is about. They will take those two things and they will then make up the content of the article and publish it as if it was fact for, “This was published by this author at this time”.

So you can imagine if Perplexity couldn’t get to Stratechery content, they would say, “Oh, Ben Thompson wrote about this”, and then they would just make something up about it and they put your name along it. Forget copyright, that’s fraud, just straight up and that’s the sort of bad behavior of some tech companies that again, I think needs to be called out and punished.

4. Bitcoin TreasuryCos: Lessons From The 1929 Crash – Be Water

The explosive proliferation of Bitcoin treasury companies mirrors that of the 1920s investment trusts, and both gold rushes stem from a perfect storm of greed: intense investor demand for exposure to a scarce asset creates mNAV premiums that promoters rush to monetize. If Goldman Sachs could extract enormous profits from its trust in the 1920s, why couldn’t everyone else? If MicroStrategy can monetize its mNAV premium, why shouldn’t every other company follow suit?

Galbraith documented the explosive growth of trusts in the 1920s:

During 1928, an estimated 186 investment trusts were organized. By the early months of 1929, they were being promoted at the rate of approximately one each business day, and a total of 265 made their appearance during the course of the year…

…The renowned Yale economist Irving Fisher famously declared that stock prices had reached a “permanently high plateau” just prior the 1929 Crash. Fisher’s declaration exemplified the kind of euphoric confidence that typically marks a market top…

… Fisher’s plateau quote is now infamous, but the lesser-known context that gave rise to it tells a more revealing story. He was actually defending investment trusts as a key support for stock valuations, much as Bitcoiners cite built-in demand from Bitcoin treasuries today. The New York Times reported at the time:

Professor Fisher spoke on the subject of investment trusts and presented a defense for them against recent attacks in which they have been charged with responsibility for many present evils.

Fisher defended trusts on the grounds that these vehicles were awakening people to the superiority of stocks over bonds and providing investors with a superior structure for gaining equity exposure—much as Bitcoin treasury advocates today claim MicroStrategy offers turbocharged “torque” over direct Bitcoin ownership, and Bitcoin itself offers superiority over TradFi assets like fiat currency, stocks, bonds, and real estate:

I believe the principle of the investment trusts is sound, and the public is justified in participating in them, with due regard to the character and reputation of those conducting them. Largely through the influence of the investment trust movement, the public has been waking up to the superior attraction of stocks over bonds. And I believe the operation of the investment trusts, as a whole, has acted to stabilize the stock market rather than to make its fluctuations more violent…

…Saylor’s confidence in monetizing NAV discounts—which is perhaps reasonable for MicroStrategy in isolation—mirrors the same logic 1920s trust managers used to justify buybacks—only to find that such support strategies are ineffective when liquidity across the ecosystem vanishes and selling pressure dominates.

The trusts discovered that buying back shares when investors are selling and credit is tightening is vastly different from issuing shares when investors are buying. Desperate to prop up their stock prices, the trusts began buying back shares at a discount to NAV—a strategy Bitcoin treasury companies will likely adopt with equally disappointing results for most:

The stabilizing effects of the huge cash resources of the investment trusts had also proved a mirage. In the early autumn the cash and liquid resources of the investment trusts were large…But now, as reverse leverage did its work, investment trust managements were much more concerned over the collapse in the value of their own stock than in the adverse movements in the stock list as a whole…

Under these circumstances, many of the trusts used their available cash in a desperate effort to support their own stock. However, there was a vast difference between buying one’s stock now when the public wanted to sell and buying during the previous spring—as Goldman Sachs Trading Corporation had done—when the public wanted to buy and the resulting competition had sent prices higher and higher. Now the cash went out and the stock came in, and prices were either not perceptibly affected or not for long. What six months before had been a brilliant financial maneuver was now a form of fiscal self-immolation. In the last analysis, the purchase by a firm of its own stock is the exact opposite of the sale of stocks. It is by the sale of stock that firms ordinarily grow.

As the crisis deepened and the mNAV continued to trade at a discount, trusts depleted their remaining cash reserves in a desperate—and ultimately self-defeating—effort to support collapsing share prices:

However, none of this was immediately apparent. If one has been a financial genius, faith in one’s genius does not dissolve at once. To the battered but unbowed genius, support of the stock of one’s own company still seemed a bold, imaginative, and effective course. Indeed, it seemed the only alternative to slow but certain death. So to the extent that their cash resources allowed, the managements of the trusts chose faster, though equally certain death. They bought their own worthless stock. Men have been swindled by other men on many occasions. The autumn of 1929 was, perhaps, the first occasion when men succeeded on a large scale in swindling themselves.

5. Technology vs Platform Shift, Portfolio Change – Abdullah Al-Rezwan

Casey Winters made this point almost a couple of years ago which I think still holds up pretty well:

What I realized having gone through the internet and mobile platform shifts is that the technological and distribution shifts did not happen at the same time. Platform shifts that create both technological and distribution opportunities happen in a sequence, not all at once…AI has come out and definitely created a technological shift that enables new ways to solve problems that couldn’t be done before. But AI lacks a new distribution channel. ChatGPT is “not it”, as the kids would say. At least not yet…

… Sameer also points out that in a technology shift, users may not even be aware about the tech (it just works) whereas in a platform shift, the change is front and center for the user:

In a technology shift, form factor does not and should not matter. For example, scaling Snapchat’s picture messaging functionality would not have been possible without the shift to cloud computing. While Snapchat’s cloud hosting costs were significant, it would not have been possible to scale it as quickly if it relied on large, operationally complex investments into server infrastructure. The most important part — Snapchat’s end users did not know or care about this in any way. The user interface did not change to call out Snapchat’s “Cloud powered” technology. The biggest changes happened in the backend, not the frontend.

What We’re Reading (Week Ending 31 August 2025)

The best articles we’ve read in recent times on a wide range of topics, including investing, business, and the world in general.

We’ve constantly been sharing a list of our recent reads in our weekly emails for The Good Investors.

Do subscribe for our weekly updates through the orange box in the blog (it’s on the side if you’re using a computer, and all the way at the bottom if you’re using mobile) – it’s free!

Here are the articles for the week ending 31 August 2025:

1. Monetary policy is not about interest rates, it’s about the money supply – Steve H. Hanke and John Greenwood

The ongoing feud between President Trump and Fed Chairman Jerome Powell centers on interest rates. This tells us more about the near-universal view of what constitutes monetary policy than it does about Trump or Powell. While Trump and Powell might quibble over the proper level for the Fed funds rate, they both think monetary policy is all about interest rates…

…Why the obsession over interest rates? One reason hinges on the fact that for over the past 30 years or so, macroeconomic models are neo-Keynesian extensions of dynamic stochastic general equilibrium (DSGE) models. These put interest rates front and center…

…But that’s not what monetarists, who embrace the quantity theory of money, tell us. Unlike the neo-Keynesian macroeconomic models that exclude money, the quantity theory of money states that national income or nominal GDP is primarily determined by the movements of broad money, not by changes in interest rates…

…First, let’s consider the case of Japan between 1996 and 2019. Throughout this period, the Bank of Japan’s (BOJ) overnight policy rate lingered at negligible levels, averaging 0.125%. As a result, most economists concluded that monetary policy in Japan was very “easy”. But monetarists, who focused on Japan’s anemic broad money (M2) growth of only 2.8% per year, concluded that monetary policy was “tight”…

…Japan’s inflation averaged a de minimis 0.2% per year in the 1996-2019 period. It is clear that the monetarists were correct…

…Let’s consider the U.S. between 2010 and 2019. During most of this decade, the Fed funds rate was held down at 0.25%. In addition, the Fed engaged in three episodes of quantitative easing (QE). Many concluded that this amounted to very “easy” monetary conditions. They warned that inflation would result. In fact, broad money growth (M2) remained low and stable at 5.8% per year. In consequence, inflation also remained low, averaging just 1.8% per year between 2010 and 2019. As was the case with Japan, interest rates turned out to be a highly misleading indicator of the stance of monetary policy. The growth in the money supply was a much better guide to economic activity and inflation than the course of the Fed funds rate…

…The reason why central bank policy rates are a misguided mechanism for steering and forecasting the course of the economy is because interest rates are, in large part, symptoms of past money growth, not necessarily drivers of future money growth. Changes in the quantity of money, on the other hand, directly fuel spending, and therefore correctly signal the direction of spending and inflation…

…By ignoring the quantity theory of money and employing neo-Keynesian macroeconomic models, central bankers are often wrong-footed. They think that by managing policy rates, they are controlling monetary policy when in reality, they are just reacting to changes in the quantity of money that occurred in a prior period.

2. Global Crossing Is Reborn… – Praetorian Capital

Let’s start with total datacenter spend for 2025. Insiders think it’s going to clock in at around $400 billion…

…What’s a datacenter made of?? There are three main components; the building and land at roughly a quarter of the cost, all the power systems, wiring, cooling, racking, etc. at about 40% of the cost, and then the GPUs themselves at about 35% of the cost. I am sure I’m off by a few percent in these categories, but I’m relying on AI and we all know it’s still imperfect. I’m assuming that the building depreciates over 30 years, the chips are obsolete in 3 to 5 years, and then the other stuff lasts about 10 years on average. Call it a 10-year depreciation curve on average for an AI datacenter. Which leads you to the first shocking revelation; the AI datacenters to be built in 2025 will suffer $40 billion of annual depreciation, while generating somewhere between $15 and $20 billion of revenue. The depreciation is literally twice what the revenue is…

…With nothing to go on, I’m going to take an optimistic guess here, and say that ultimately, the margins get to positive, and then gradually creep up towards 25%. Why 25%?? I have no idea. It just sounds right because electricity is really expensive and you need a lot of expensive tech nerds to manage the equipment. Honestly, no one really knows where gross margins eventually land, so let’s just run with it, so that we can do some simple math…

…By my math, you need $160 billion of revenue at that 25% gross margin, which gives you $40 billion of gross margin against $40 billion of depreciation. Now, remember, revenue today is running at $15 to $20 billion. You need revenue to grow roughly ten-fold, just to cover the depreciation. Except, no one does anything to break even in business. For a new technology like this, with huge obsolescence risk, what unlevered ROIC would you demand?? Would you want a 20% ROIC?? That’s still dilutive to the ROIC for most of the largest capex spenders. Even at that dilutive ROIC, you’d need $480 billion of AI revenue to hit your target return…

…$480 billion is a LOT of revenue for guys like me who don’t even pay a monthly fee today for the product. To put this into perspective, Netflix had $39 billion in revenue in 2024 on roughly 300 million subscribers, or less than 10% of the required revenue, yet having rather fully tapped out the TAM of users who will pay a subscription for a product like this. Microsoft Office 365 got to $ 95 billion in commercial and consumer spending in 2024, and then even Microsoft ran out of people to sell the product to. $480 billion is just an astronomical number…

…While we all remember Pets.Com and the hundreds of other Dot Com startups that flamed away, it was companies like Global Crossing, spending tens of billions on fiber, that facilitated all of this. That fiber, amazingly, is still in use. Global Crossing went bankrupt along the way, as did many of its peers. They overestimated what people would pay for this fiber, not that it would eventually be used or valuable.

Today, I watch in awe (stupefaction really), as companies continue to throw endless resources at AI, I remember back to the Dot Com bubble and Global Crossing—fiber was the datacenter of that cycle, and Corning was the NVIDIA of its day (it lost 97% of its share price in the two years after it peaked).

3. Bitcoin TreasuryCos & The Roaring 20s – Be Water

The Bitcoin Treasury craze is either genius or madness—and very possibly some combination of both…

…This is not the first time leveraged financial vehicles promised to democratize access to scarce assets using leverage and the accretive magic of mNAV premiums: the 1920s investment trust and holding bubble followed a similar script in the run-up to the 1929 Crash…

…During the Roaring Twenties common stocks occupied a cultural position remarkably similar to Bitcoin (and arguably the S&P) today—they were viewed as the revolutionary investment of their era, and there was widespread belief that supply of stocks was too scarce to meet surging demand.

In the 1920s, mutual funds were introduced under the name “investment trusts,” and—like Bitcoin treasury companies—formed to capitalize on this scarcity. A major difference between modern mutual funds and these trusts was that the trusts were leveraged: like Bitcoin treasuries, they invested using borrowed money that was considered “safe” because—like MicroStrategy—they issued preferreds and long-term debt securities to the public to buy portfolios of stocks. Galbraith:

The most notable piece of speculative architecture of the late twenties, and the one by which, more than any other device, the public demand for common stocks was satisfied, was the investment trust. The investment trust did not promote new enterprises or enlarge old ones. It merely arranged that people could own stock in old companies through the medium of new ones…

…Like Bitcoin Treasuries, the 1920s trusts had the added appeal of mNAV premiums that seemed to offer something for nothing.

Just as Bitcoin treasury companies today boast of their mNAV and ‘bitcoin yield,’ a key feature of the 1920s bubble was the tendency for investment trusts to trade at significant premiums to mNAV during their heyday. Galbraith:

The measure of this respect for financial genius was the relation of the market value of the outstanding securities of the investment trusts to the value of the securities they owned.

Normally, the securities of the trust were worth considerably more than the property it owned—sometimes even twice as much. There should be no ambiguity on this point: the only property of the investment trust was the common and preferred stocks, debentures, mortgages, bonds, and cash that it held. (Often, it had neither an office nor office furniture; the sponsoring firm ran the investment trust out of its own quarters.)

Yet, had these securities all been sold on the market, the proceeds would invariably have been less—and often much less—than the current value of the outstanding securities of the investment company. The latter, obviously, had some claim to value that went well beyond the assets behind them…

…As with today’s Bitcoin TreasuryCos, this persistent mNAV premium created a powerful financial engine for both the trusts and the underlying stocks they were buying: the ability to conduct immediately accretive share issuances. When a trust trades at a premium to its underlying stock values, it can issue new units at the inflated market price and instantly increase the NAV for its existing shareholders.

This reflexive accretion mechanism created a self-reinforcing feedback loop similar to today’s “Bitcoin Leverage Loop”. The cycle worked as follows:

Investor optimism drove a trust’s price to an mNAV premium.
The trust would issue new units at this premium price, which was immediately accretive to the NAV per share.
The new capital raised was used to purchase more stocks, adding buying pressure to the overall market and increasing the value of the trust’s own portfolio.
The rising NAV and apparent success of the strategy further fueled investor optimism, widening the premium and allowing the cycle to repeat.
Meanwhile, investors in the trusts and individual stocks amplified their exposure to a sure thing by using margin loans to leverage their positions, adding extra “juice” to the trade and further driving up NAVs and mNAVs for the trusts…

…Goldman Sachs Trading Corporation (GSTC) was perhaps the proto-MicroStrategy of the day. Launched by the influential Goldman Sachs partner Waddill Catchings in December 1928, it was, at its inception, the largest investment trust yet established—boasting an initial capitalization of $100 million. Its units, offered to the public at $104, was immediately oversubscribed and quickly soared in value, doubling to $226 within a short period and trading at a massive premium to the underlying value of its stock holdings…

…In Brad DeLong and Andrei Shleifer’s The Stock Market Bubble of 1929: Evidence from Closed-end Mutual Funds, they noted:

If [investment trust mNAV premia] indeed reflect excessive investor optimism rather than skill at management, there will be a tendency for funds to pyramid on top of one another. If each fund can be sold for 50 percent more than its own net asset value, promoters can more than double their profits by establishing a fund that owns funds that hold stocks, rather than just establishing funds that hold stocks…

This prediction is confirmed by one of the largest funds: the Goldman Sachs Trading Corporation. This was a closed-end fund organized in December 1928 with a net asset value of around $100 million. In 1929, one of its largest holdings was the Shenandoah Corporation, another closed-end fund organized by Goldman Sachs. Another large holding was in its own stock.

Nor is this all. In the same year, Shenandoah organized a new closed-end fund called the Blue Ridge Corporation and became a large investor in its stock. All these funds traded at premia; at the top of the pyramid, the Goldman Sachs Trading Corporation traded at a premium to a premium to a premium to net asset value…

…If history serves as any guide, we can expect Bitcoin treasury companies to begin investing in other Bitcoin treasury companies before this cycle concludes.

4. Whatever Happened to the Self Driving Semi? – Chris Paxton

There are almost three million semi trucks in the United States alone, to the point that trucker is the most common job in 29 states. Most of these are driving 400-600 miles per day along long, straight, predictable highways — a use case that, at a glance, seem perfect for autonomy.

And yet, on-road autonomy looks guaranteed to start not with semis but with taxis, operating over much shorter distances in much less of the United States…

…Fully-loaded trucks are massive, with a legally-mandated maximum of 80,000 lbs. This makes everything a truck does notably less responsive. Planning becomes more difficult; learning methods are less effective, too, when there’s not a clear, immediate mapping between input and output.

If we want to discuss how serious a problem this is, we should look at stopping distance; i.e. how long it takes a semi truck to come to a complete stop because, say, there was an accident on the road ahead of it.

Stopping distance for a fully-loaded semi truck traveling at 65 mph is approximately 525 feet to about 600 feet. Even though most US highways have higher speed limits, trucking companies usually limit speed to 65 mph for safety and fuel efficiency reasons; it seems reasonable to expect that autonomous truckers would do the same. But note that this is under ideal conditions; stopping distances can as much as double on icy roads.

Now, a good long-ranged lidar could have 1000 feet of range. Aurora has a particularly good in-house lidar, with about 450 meters (~1500 feet) of range – much farther than many other options. But maximum range isn’t effective range, which is far more important. This is hard to estimate — it varies depending on conditions, on objects, and of course on the quality of the particular classifiers being used to interpret objects. This quantity is notably shorter than the maximum range on practically any sensor, by as much as about half; and we’ll also need to classify if this was a spurious detection (a plastic bag blowing onto the road, a cardboard box) or a serious issue.

And that’s setting aside other concerns: what if there’s a patch of black ice ahead on the road? The lidar can’t detect this at all, and it’s a huge issue for highway driving. There was a famously horrific 133-car pileup in Fort Worth, Texas in 2021, caused by black ice, which led to 65 injuries and six fatalities.

5. SITALWeek #459 – Brad Slingerlend

Investing is a form of storytelling. CEOs spin tales about their companies and try to rally the workforce to manifest them over a long time horizon. Investors decide if they too believe the stories or not. Most of the time, the stories are fiction, fantasy, or even fairy tales. Occasionally, visionary entrepreneurs pen a nonfiction, or even a compelling fiction that turns out to be so predictive of the future that it serves as prior art for reshaping reality (think of the Steve Jobs Reality Distortion Field!). There are also stories about economics, politics, and the world at large that influence the stories about companies and investments. Investors create their own stories about businesses as well, and the resulting investment ideas can end up in either a canonized history book or a throwaway dime novel. Even trying to unravel the truth of past stories can be fraught, as hindsight is only as good as the incomplete and unreliable human narratives on which history is based…

…Today, it’s not clear how much, if any, impact investors’ stories have on the daily prices of stocks. And, in some cases, it appears to me companies are losing complete control of their own narratives as well…

…And, now, we have something very different happening: all of that volume in the market, previously programmed in some form or another by humans guiding machine learning algorithms (or retail investor brains programmed by social media news cycles, etc.), is slowly being taken over by LLMs and agentic AI. I suspect autonomous AI trader bots are writing their own signal algorithms and creating their own stories. They are telling those stories to each other and executing trades. We can see clues that this shift is happening in a recent study that found meaningful drops in trading activity during ChatGPT outages. I think that tidbit of information gives us, well, the rest of the story as to what will soon define the stock market on a day-to-day basis (if it’s not already the dominant force, which I suspect it is). This agentic investing evolution will create even more noise and less signal in the daily price of any given stock. Again, this turn of events spells good news for us active investors who still think we can find stories that, with any luck, will turn out to be superior nonfictional investments.

Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. We currently have a vested interest in Microsoft and Netflix. Holdings are subject to change at any time.

What We’re Reading (Week Ending 17 August 2025)

The best articles we’ve read in recent times on a wide range of topics, including investing, business, and the world in general.

We’ve constantly been sharing a list of our recent reads in our weekly emails for The Good Investors.

Do subscribe for our weekly updates through the orange box in the blog (it’s on the side if you’re using a computer, and all the way at the bottom if you’re using mobile) – it’s free!

Here are the articles for the week ending 17 August 2025:

1. Beyond the “Search” Box – Abdullah Al-Rezwan

Semrush tracked 260 billion rows of clickstream data on U.S. desktop users who began using ChatGPT in Q1 2025, comparing their Google Search sessions in the 90 days before and after adoption to a control group that never used ChatGPT. This setup allowed them to isolate whether ChatGPT adoption caused changes in traditional search behavior compared to natural trends over time.

The overall result of the study shows after adopting ChatGPT, users increased their Google Search sessions from 10.5 to 12.6 per week while also adding about 5 ChatGPT sessions weekly, suggesting ChatGPT use complemented rather than replaced Google searches.

Semrush shared some cohort level data by month which all show that despite sustained ChatGPT usage after adoption, Google Search usage remained resilient.

One may wonder if you keep using ChatGPT for longer than a year, perhaps it eventually changes your Google usage. That also doesn’t quite seem to be the case yet since a 500-day study by Semrush of users who began using ChatGPT in January 2024 found that Google search activity remained steady while ChatGPT usage stayed consistent after adoption.

2. Podcast: Amazon’s advertising strategy (with Adam Epstein) (Transcript here) – Eric Benjamin Seufert and Adam Epstein

Adam Epstein: I’ve been working in ad tech for seven plus years, and people have been decrying the end of the agency for as long as I can remember through the use of automated and simple software. But AI adds a new layer of complexity to everything, and complexity is good for agencies particularly. I’m not sure who coined the phrase, but they basically said agencies are cockroaches. And I believe that to probably be the case.

At least for the next three to five years, I actually don’t even think agentic AI will be a headwind for agencies—I think it will be a tailwind on two dimensions. First, the most scaled agencies in the world have been able to scale themselves not through data and technology, but through scaled processes, standard operating procedures, training collateral and docs to create expertise and uniform level of service across all their clients and team members. Well, guess what’s really good for training an LLM? Literally all of those documents.

Every agency I’ve talked to for seven years comes to me and says, “How is your off-the-shelf ad tech different than the off-the-shelf ad tech that you’re going to sell to the next agency tomorrow?” And the answer has always been it hasn’t been any different—it’s been exactly the same. But with agentic AI, you now no longer buy software—you hire software. You hire software, and you train software, and you develop a new teammate that you train and mold exactly as you would a new team member.

Agencies want this level of customization. They’re actually in a perfect position to do so because they’ve invested in collateral that allows them to train an LLM in a very efficient manner. We’re just catalyzing them and giving them the tools to do exactly that.

The other interesting thing with services businesses is that you typically need to linearly scale headcount as you scale customer and revenue growth. But I believe agentic AI will bring in a world for media agencies in particular where they’ll be able to exponentially increase customers and revenue while maintaining a flat headcount. Agentic AI will take all the operational work that teams are currently running and allow these agencies to scale in ways they’ve never been able to scale before. It’ll be a massive tailwind from an operating margin perspective, and I think people will actually start to value agencies on a different multiple than what they have in the past, given the fundamentally different margin profile.

3. Robotaxis & AI | Uncharted Territories Magazine | Tech Update Summer 2025 – Tomas Pueyo

Waymo is destroying the competition. It has surpassed Lyft in rides in SF, and is on track to surpass Uber within 8 months or so.

And this is with Waymo taking 2x longer and costing 70% more than Lyft!!!1 That’s how much better the Waymo experience is: People really care about not having a driver!…

…Uber said ride-hailing could grow by 25x if its price dropped under $1/mile…

…Uber couldn’t make it happen. But in Austin, now Tesla costs $1 per mile.

As a comparison, ride hail customers are currently paying nearly $3/mile.

If Tesla maintains this type of pricing, it won’t make sense for drivers to continue their job, and Uber and Lyft will crash.

8% of US workers are professional drivers…

…I didn’t realize how important this is until I read this article:

Something like 40,000 people die in traffic accidents in the US every year. The number is over one million per year globally.

There are over 5 million non-fatal injuries from car crashes each year that require medical attention in the US.

In 2010, the total costs from these events was $836 billion, or ~$2700 per American per year.

But these costs are just the tip of the iceberg because most of the cost of transportation, at >$2 trillion per year, comes from adjusting to human inadequacies.

Wait, what? Car accidents are costing trillions to the world economy? How?

A big share of the materials in cars are due to safety. Without accidents, you can strip them out, saving all their money. Austin Vernon calculates we could make car weights 10x lower.
Automobile shapes today trade off safety and aerodynamicity. Without safety, they can become more aerodynamic, and move faster at a cheaper cost.
Cheaper transportation costs massively improve the economy.
Lower weights on roads means less road wear, and hence less maintenance cost.

4. What If Money Expired? – Jacob Baynham

More than a century ago, a wild-eyed, vegetarian, free love-promoting German entrepreneur and self-taught economist named Silvio Gesell proposed a radical reformation of the monetary system as we know it. He wanted to make money that decays over time. Our present money, he explained, is an insufficient means of exchange. A man with a pocketful of money does not possess equivalent wealth as a man with a sack of produce, even if the market agrees the produce is worth the money.

“Only money that goes out of date like a newspaper, rots like potatoes, rusts like iron, evaporates like ether,” Gesell wrote in his seminal work, “The Natural Economic Order,” published in 1915, “is capable of standing the test as an instrument for the exchange of potatoes, newspapers, iron and ether.”…

…Gesell believed that the most-rewarded impulse in our present economy is to give as little as possible and to receive as much as possible, in every transaction. In doing so, he thought, we grow materially, morally and socially poorer. “The exploitation of our neighbor’s need, mutual plundering conducted with all the wiles of salesmanship, is the foundation of our economic life,” he lamented.

To correct these economic and social ills, Gesell recommended we change the nature of money so it better reflects the goods for which it is exchanged. “We must make money worse as a commodity if we wish to make it better as a medium of exchange,” he wrote.

To achieve this, he invented a form of expiring money called Freigeld, or Free Money. (Free because it would be freed from hoarding and interest.) The theory worked like this: A $100 bill of Freigeld would have 52 dated boxes on the back, where the holder must affix a 10-cent stamp every week for the bill to still be worth $100. If you kept the bill for an entire year, you would have to affix 52 stamps to the back of it — at a cost of $5.20 — for the bill to still be worth $100. Thus, the bill would depreciate 5.2% annually at the expense of its holder(s). (The value of and rate at which to apply the stamps could be fine-tuned if necessary.)

This system would work the opposite way ours does today, where money held over time increases in value as it gathers interest. In Gesell’s system, the stamps would be an individual cost and the revenue they created would be a public gain, reducing the amount of additional taxes a government would need to collect and enabling it to support those unable to work.

Money could be deposited in a bank, whereby it would retain its value because the bank would be responsible for the stamps. To avoid paying for the stamps, the bank would be incentivized to loan the money, passing on the holding expense to others. In Gesell’s vision, banks would loan so freely that their interest rates would eventually fall to zero, and they would collect only a small risk premium and an administration fee.

With the use of this stamp scrip currency, the full productive power of the economy would be unleashed. Capital would be accessible to everyone. A Currency Office, meanwhile, would maintain price stability by monitoring the amount of money in circulation. If prices go up, the office would destroy money. When prices fall, it would print more.

In this economy, money would circulate with all the velocity of a game of hot potato. There would be no more “unearned income” of money lenders getting rich on interest. Instead, an individual’s economic success would be tied directly to the quality of their work and the strength of their ideas. Gesell imagined this would create a Darwinian natural selection in the economy: “Free competition would favor the efficient and lead to their increased propagation.”…

…Although many dismissed Gesell as an anarchistic heretic, his ideas were embraced by major economists of the day. In his book “The General Theory of Employment, Interest and Money,” John Maynard Keynes devoted five pages to Gesell, calling him a “strange and unduly neglected prophet.” He argued the idea behind a stamp scrip was sound. “I believe that the future will learn more from the spirit of Gesell than from that of Marx,” Keynes wrote…

…That very year, the owner of a dormant coal mine near the Bavarian town of Schwanenkirchen tried in vain to get a loan from a bank to begin mining again. Stymied by the representatives of traditional finance, he went to the Wära Exchange Association, a group that was created to put Gesell’s ideas into practice. The group agreed to give the mine owner 50,000 Wära, a depreciating currency equivalent to 50,000 Reichsmarks.

The mine owner then gathered the unemployed miners and asked if they would go back to work, not for legal tender, but for this new currency. They agreed that any money was better than no money. The mine owner purchased food, clothing and household goods from warehouses that were already using the Wära currency. The miners, now back digging coal, used their wages to buy these goods from the mine owner. Soon, other businesses in town wanted to use the currency to benefit from the sudden influx of cash. Because the currency depreciated at 1% per month, everyone was eager to part with it and it circulated rapidly throughout the economy. Soon, in whole districts, the Wära currency replaced the Reichsmark, which alarmed the bigger banks and the government. Finally, the Reichsbank ended the experiment by banning the currency.

Two years later, in the Austrian town of Wörgl, Gesell’s ideas came to life again. In 1932, Wörgl’s mayor, a socialist locomotive engineer, desperately wanted to get his constituents back to work. A supporter of Gesell’s ideas, he devised a plan where Austrian schillings would be replaced with Work Certificates that depreciated at 1% per month.

The mayor hired townspeople, paid in Work Certificates, to improve roads, install streetlights and build a concrete bridge. Work Certificates circulated rapidly from merchants to tenants, to landlords, to saving accounts. People paid their taxes early to avoid paying for stamps. In one year, the Work Certificates traded hands 463 times, creating goods and services worth almost 15 million schillings. By contrast, the ordinary schilling was exchanged only 21 times.

The experiment was called the Miracle of Wörgl. Vienna newspapers took notice. The government of France expressed interest. Two hundred mayors in Austria devised similar programs in their communities. Again, however, the financial authorities grew uneasy, arguing that these local stamp scrips undermined the currency-issuing power of the national bank. By the fall of 1933, the Austrian Supreme Court had prohibited their circulation.

Gesellian experiments happened in the U.S. and Canada too, inspired by the Great Depression. In 1932, in Hawarden, Iowa, a limited amount of stamp scrip was put into circulation to pay for public works. The same year, a similar program was deployed in Anaheim, California. In 1933, Oregon attempted to print $80 million in stamp scrip, but the U.S. Treasury stopped it. The government of Premier William “Bible Bill” Aberhart in Alberta, Canada, introduced depreciating “prosperity certificates” (which people quickly renamed “velocity dollars”) in 1936.

That decade in the U.S., 37 cities, eight counties and some business groups attempted to issue almost 100 different types of stamp scrip. All these experiments were local, small in scope and short-lived. In 1933, the economist Irving Fisher, who called himself “a humble student of Silvio Gesell,” tried to persuade President Franklin Delano Roosevelt to adopt a national stamp scrip, and even convinced an Alabama senator to introduce a bill that would have issued up to $1 billion in depreciating currency. It never came to a vote. Roosevelt, who was preparing to take the country off the gold standard, worried that any further economic innovations would be too destabilizing…

…Gesell’s idea for depreciating money “runs counter to anything we’ve ever learned about the desirable properties of money,” David Andolfatto, a former senior vice president of the Federal Reserve Bank of St. Louis and the chair of the economics department at the University of Miami, told me recently. “Why on Earth would you ever want money to have that property?”

But during the economic downturn that followed the Covid pandemic, Andolfatto recognized the potential value of an expiring money in times of crisis. The relief checks that the government sent out to U.S. households didn’t immediately have their desired effect of stimulating the economy because many people saved the money rather than spend it. This is the paradox of thrift, Andolfatto explained. What’s good for the individual is bad for the whole.

“Well, what if we gave them the money with a time fuse?” Andolfatto remembers wondering. “You’re giving them the money and saying look, if you don’t spend it in a period of time, it’s going to evaporate.”

In a paper he wrote for the Fed in 2020, Andolfatto called this concept “hot money credits.” He pointed out that when the economy goes into a funk, there is a “coordination failure” where people stop spending and others stop earning. Withholding money in times of fear creates a self-fulfilling prophecy by further stifling the economy. So, could Gesell’s idea of expiring money be the cure?

“The desirability depends on the diagnosis,” Andolfatto told me. “It’s like a doctor administering a drug to a healthy person and a sick person. You administer the drug, and it has some side effects. If the person is healthy, you’re not going to make them any better. You might make them even worse. If they’re sick, it might make them better.”

The problem, Andolfatto said, is that issuing pandemic checks with an expiration date would hurt those with little savings. People with money in the bank would use their expiring money just like normal money. People with no savings, on the other hand, might find that expiring money forced them to spend and did little to stabilize their financial situations…

…Keynes believed Gesell’s expiring money amounted to “half a theory” — it failed, Keynes argued, to account for people’s preference for liquid assets, of which money is just one example. “Money as a medium of exchange has to also be a store of value,” Willem Buiter, a former global chief economist at Citigroup, told me. In a Gesellian economy, he continued, the affluent would simply store their wealth in another form — gold bars, perhaps, or boats — which could be converted into money when they wanted to transact.

Buiter doesn’t believe Gesellian money can really address serious social inequality, but he did note times when it was advantageous for a central bank to drop interest rates below zero, like when inflation and market interest rates are low and should go lower to maintain full employment and utilization of resources. Positive or negative interest rates could easily be applied to digital money in a cashless economy, for which Buiter and others have advocated. But it’s hard to imagine how a government today could practically implement a Gesellian tax on hard currency. “You’d have to be able to go out and confiscate money if it’s not stamped,” Buiter said. “It would be rather brutal.”

5. Intel’s One True Stakeholder is Here – Doug O’Laughlin

There is a rumor that the Trump administration could be taking a stake in Intel…

…And it’s no surprise that the future of American semiconductors has Intel written all over it. But there’s no other way than forward, and I think it’s time to consider what needs to happen realistically, and that’s the death of the Intel we once knew to make room for what’s next. The key is that while CPUs don’t matter, the only American leading-edge foundry left making them is critical.

The problem is that the company that funds it might run out of money, and that’s why they need to publicly threaten to stop financing the future of the foundry, because it’s a problem they can’t do alone. That is why I believe they so publicly announced the ending of future nodes past 14A…

…The calculus for America is pretty simple. In my view, there is very little strategic importance to the Intel CPU business. The x86 ecosystem was once the most incredible compute ecosystem, but AMD designs better chips than Intel could; Intel has the one thing that AMD does not, a Fab. The fabless business at Intel has a real issue in that making a CPU is becoming a relatively commoditized business. ARM has made it possible for almost any hyperscaler to have its ARM-based CPU, while AMD continues to outdesign Intel at its core job, and that’s not even discussing the longer-term RISC-V ecosystem.

Adding up the CPU side, I see a business with massive competition and Intel not at the top of the stack. Intel has to deal with increasing competition in’s core profit center while at the same time covering the increasingly heavy burden of a leading-edge fab. There is only one leading-edge foundry (TSMC), and a second American option is the single highest value-added project of all time…

…We cannot rely on Taiwan for the future of semiconductors. The more capacity we get from TSMC, the more we remain reliant on R&D in Taiwan rather than the US. Intel must be standalone and must have the capabilities to do the two things the US critically needs. High-end logic and military capabilities. I’d argue the second is met chiefly, but the first Intel is hopelessly behind.

What’s worse is that Intel has a bad customer, itself. Intel needs a good customer to be the anchor, and sadly, the core customer is a CPU company that is struggling to find its way in an accelerated compute world…

…Trump can bully Broadcom, Nvidia, Qualcomm, Apple, and AMD to put orders towards Intel, while possibly forcing Amazon, Microsoft, Google, and others to make a large investment in the fab itself (or push orders). Additionally, forcing semicap companies like KLAC, Applied Materials, and Lam Research to invest and give resources in exchange for approved licenses is another example of a carrot and a stick. I think Trump could forge the giant partnership to happen, but then execution is all up to Intel. And LBT is still once again qualified for the job.

What We’re Reading (Week Ending 10 August 2025)

The best articles we’ve read in recent times on a wide range of topics, including investing, business, and the world in general.

We’ve constantly been sharing a list of our recent reads in our weekly emails for The Good Investors.

Do subscribe for our weekly updates through the orange box in the blog (it’s on the side if you’re using a computer, and all the way at the bottom if you’re using mobile) – it’s free!

Here are the articles for the week ending 10 August 2025:

1. How we’re making data centers more flexible to benefit power grids – Michael Terrell

That’s why we’ve been working to bring flexible demand capabilities into our data center fleet, which enables us to shift or reduce power demand during certain hours or times of the year. These capabilities, often referred to as demand response, have several advantages, especially as we continue to see electricity growth in the US and elsewhere. It allows large electricity loads like data centers to be interconnected more quickly, helps reduce the need to build new transmission and power plants, and helps grid operators more effectively and efficiently manage power grids.

We’re pleased to report on our progress in the implementation of these capabilities, including two new utility agreements with Indiana Michigan Power (I&M) and Tennessee Valley Authority (TVA). These agreements represent the first time we’re delivering data center demand response by targeting machine learning (ML) workloads. This builds on our successful demonstration with Omaha Public Power District (OPPD) where we reduced the power demand associated with ML workloads during three grid events last year — paving the way for us to pursue opportunities at other locations…

…Advancing Google’s 24/7 carbon-free energy ambition requires a holistic approach, to both procure clean energy and support the grid through demand-side solutions. Flexible demand is an important piece of this portfolio — it can be deployed quickly, helping bridge the gap between short-term load growth and long-term clean energy solutions, and delivers immediate benefits.

The first data center demand response capabilities we developed involve shifting non-urgent compute tasks — like processing a YouTube video — during specific periods when the grid is strained. Through our ongoing partnerships with Centrica Energy and transmission system operator Elia in Belgium, and Taiwan Power Company in Taiwan, we’ve leveraged this capability to help grid operators maintain reliability during those periods of the year when demand is the highest.

As AI adoption accelerates, we see a significant opportunity to expand our demand response toolkit, develop capabilities specifically for ML workloads, and leverage them to manage large new energy loads. By including load flexibility in our overall energy plan, we can manage AI-driven growth even where power generation and transmission are constrained.

2. Why China is building the world’s largest hydropower station in Tibet – Amber Zhang

On July 19, 2025, Chinese Premier Li Qiang stood in the remote southeastern Tibetan city of Nyingchi and announced the official commencement of the Medog hydropower station—what he termed a “project of the century”…

…The mega project is a hydropower station on the lower reaches of the Yarlung Tsangpo River, a plan of such breathtaking scale that it redefines the very concept of a mega-project. With a projected investment of 1.2 trillion yuan (approximately $167-170 billion) and a planned annual electricity output of 300 billion kilowatt-hours (kWh), the facility is designed to generate nearly three times the power of the iconic Three Gorges Dam, China’s previous “project of the century”.

Its output alone would be enough to power the entire United Kingdom [*(2023 statistics)] and is equivalent to 20% of China’s total residential electricity consumption in 2024 [*], enough for 300 to 400 million people…

…The Yarlung Tsangpo project marks the boldest chapter yet. It is located in Medog County, a remote corner of southeastern Tibet, at a dramatic geographical feature known as the “Great Bend” of the Yarlung Tsangpo River. Here, after flowing eastward across the Tibetan Plateau, the river makes a hairpin turn around the sacred Mount Namcha Barwa and plunges south toward India. In just 50 kilometers (31 miles), the river drops between 2,000 and 2,350 meters (over 6,500 feet) [*], through the world’s deepest canyon—three times deeper than the Grand Canyon in the United States.

It is this staggering vertical drop that has long been viewed by engineers as the single most promising site for hydropower generation on Earth, with a water energy density estimated to be seven times that of the Three Gorges [*].

To exploit the potential of the “Great Bend,” China is employing the “run-of-the-river” design, or, figuratively speaking, the “cut-the-bend” approach. Instead of constructing a single massive dam with a vast reservoir—which would be impractical and even more hazardous in this terrain—the project will consist of a series of five smaller “cascade” hydropower stations. These dams will divert a portion of the river’s powerful flow into a network of four enormous tunnels, each stretching approximately 20 kilometers (12.5 miles) and bored directly through the Himalayan mountains [*].

This “run-of-the-river” approach, which utilizes advanced dam-less diversion technology, means water is not consumed but rather borrowed with a resource utilization rate of up to 85% (*). It plunges down these tunnels, gaining immense velocity, to spin turbines located at a much lower elevation at the bottom of the canyon. After generating power, the water is discharged back into the river just before it crosses the Line of Actual Control into India. This design allows China to harness the massive potential energy from the 2,000-meter elevation drop while minimizing the size of the required reservoirs…

…For instance, the engineering challenges require technical capabilities that China has only developed in recent decades.

Beyond basic infrastructure like building roads and bridges, two key technologies have made this project feasible:

The first is tunnel boring machines (TBM)—used to dig long tunnels through mountains, similar to how a pangolin burrows through soil. These machines were once monopolized by German manufacturers and were prohibitively expensive. But after China localized their production, they became widely available and cost-effective.

In the early planning stages of the Medog hydropower station, several construction proposals were considered. Now, only one remains viable: a “run-of-the-river” approach, which involves digging a tunnel over 30 kilometers long to connect both ends of the river’s U-shaped bend, using the more than 2,000-meter drop in elevation to generate electricity. Such an idea would have been unthinkable in the past—but with TBMs, it has become a realistic option.

In fact, there’s already a prototype for this kind of construction: the Jinping II Hydropower Station on the Yalong River. Its surrounding terrain is nearly identical to that of the Medog section. There, engineers cut through both ends of a similar U-shaped bend, building four water diversion tunnels—each 17 kilometers long. The station has been operational for six years and has proven stable.

With this prior experience as a foundation, taking on the challenge of the Himalayas no longer seems so daunting.

The second breakthrough is ultra-high-voltage (UHV) power transmission. Tibet is vast and sparsely populated, and local demand is far below the project’s potential output. Most of the electricity will need to be transmitted to major power-consuming provinces in the east—or exported to Southeast Asia. The only viable solution for such long-distance transmission is UHV, one of the few technologies in which China is globally recognized as a clear leader. Years of experience from the “West-to-East Power Transmission” program have proven that UHV is both mature and reliable…

…Also, the Yarlung Tsangpo Grand Canyon is one of the most inaccessible places on Earth. Until the completion of the Paizhen-Medog Highway in 2022, the area lacked reliable road access and a power supply, making the logistics of transporting millions of tonnes of materials like steel and an estimated 40 million tons of cement a monumental undertaking.

The resulting power output is staggering. The project is designed with an installed capacity of 60 to 70 gigawatts, producing 300 billion kWh of electricity annually. This is enough energy to meet the needs of nearly 300 million people, making it by far the most powerful hydroelectric facility on Earth.

3. The Imitation Game: Defending against AI’s Dark Side! – Aswath Damodaran

A few weeks ago, I started receiving a stream of message about an Instagram post that I was allegedly starring in, where after offering my views on Palantir’s valuation, I was soliciting investors to invest with me (or with an investment entity that had ties to me). I was not surprised, since I have lived with imitations for years, but I was bemused, since I don’t have an Instagram account and have not posted on Facebook more than once or twice in a decade. In the last few days, those warnings have been joined by others, who have noted that there is now a video that looks and sounds like me, adding to the sales pitch with promises of super-normal returns if they reach out, and presumably send their money in. (Please don’t go looking for these scams online, since the very act of clicking on them can expose you to their reach.)…

…To get a measure of what the current AI scams that are making the rounds get right and wrong, I did take the time to take a closer look at both the Instagram post and the fake video that are making the rounds….

…The good news is that this AI scam gets my language and look right, but it is sloppily done in terms of content and capturing who I am as a person. The bad news is that it if this scammer was less lazy and more willing to put in some work, even with the current state of AI, it would have been easy to bring up the grades on content and message. I will wager that the Damodaran Bot that I mentioned earlier on in this post that is being developed at NYU Stern would have created a post that would have been much more difficult for you to detect as fake, making it a Frankenstein monster perhaps in the making. The worse news is that AI technology is evolving, and it will get better on every one of these fronts at imitating others, and you should prepare yourself for a deluge of investment scams…

…It remains an uncomfortable truth that the people most exposed to these scams are the ones who have read little or none of what I have written, and I wish there were a way that I could pass on the following suggestions on how they can protect themselves against the other fakes and scams that will undoubtedly be directed at them.

1. “Looks & sounds like” not good enough: Having seen the flood of fake AI videos in the news and on social media, I hope that you have concluded that “looks and sounds Iike” is no longer good enough to meet the authenticity test. This remains AI’s strongest suit, especially in the hands of the garden variety scammer, and you should prepare yourself for more fake videos, with political figures, investing luminaries and experts targeted.

2. Steer away from arrogance & hype: I have always been skeptical of the notion that there is “smart” money, composed of investors who know more than the rest of us and are able to beat the market consistently, and for long periods. For the most part, when you see a group of investors (hedge funds, private equity) beating the market, luck is more of a contributor as skill, and success is fleeting. In a talk on the topic, I argued that investors should steer away from arrogance and bombast, and towards humility, when it comes to who they trust with their money, and that applies in spades in the world of AI scams. Since most scammers don’t understand the subtlety of this idea, screening investment sales pitches for outlandish claims alone will eliminate most scams.

3. Do your homework: If you decide to invest with someone, based upon a virtual meet or sales pitch, you should do your homework and that goes well beyond asking for their track records in terms of performance. In my class on investment philosophies, I talk about how great investors through the ages have had very different views of markets and ways of making money, but each one has had an investment philosophy that is unique, consistent and well thought through. It is malpractice to invest with anyone, no matter what their reputation for earning high returns, without understanding that person’s investment philosophy, and this understanding will also give you a template for spotting fakes using that person’s name.

4. Avoid ROMO & FOMO: In my investing classes, I talk about the damage that ROMO (regret over missing out) and FOMO (fear of missing out) can do to investor psyches and portfolio.

With ROMO (regret over missing out), where you look back in time and regret not buying Facebook at its IPO price in 2012 or selling your bitcoin in November 2013, when it hit $1000, you expose yourself to two emotions. The first is jealousy, especially at those who did buy Facebook at its IPO or have held on to their bitcoin to see its price hit six digits. The second is that you start buying into conspiracy theories, where you convince yourself that these winners (at least in the rear view mirror) were able to win, because the game was fixed in their favor. Both make you susceptible to chasing after past winners, and easy prey for vendors of conspiracies.
With FOMO (fear of missing out), your overwhelming concern is that you will miss the next big multi-bagger, an investment that will increase five or ten fold over the next year or two. The emotion that is triggered is greed, leading you to overreach in your investing, cycling through your investments, as most of them fall short of your unrealistic expectations, and searching for the next “big thing”, making you susceptible to anyone offering a pathway to get there.

Much as we think of scammers as the criminals and the scammed as the victims, the truth is that scams are more akin to tangos, where each side needs the other. The scammer’s techniques work because they trigger the emotions (fear, greed) of the scammed, to respond, and AI will only make this easier to do. Looking to regulators or the government to protection will do little more than offer false comfort, and the best defense is “caveat emptor” or “buyer beware”.

4. How has macroeconomic research misjudged China? – Robert Wu and Dongfan Ma

From 2000 to now, China’s economic structure has undergone at least three major transitions:

2000–2010: Export and processing-led growth was the dominant force.
2010–2020: Real estate and household leverage became the drivers, with Total Social Financing (TSF) as the key indicator.
Post-2020: Traditional models started to fail, and new growth drivers began to emerge.

Yet, most macroeconomic analyses remain stuck in phase two—still using TSF and real estate sales as core references. What we observe now is that these indicators have lost predictive value. Their correlation with PMI and corporate earnings is quickly fading…

…Processing trade began tapering off after 2010. But from 2016 onward, general trade has grown steadily and rapidly.

This distinction matters: processing trade mostly reflects contract manufacturing for others, while general trade signals the rise of China’s own manufacturing capabilities, brands, and integrated industrial chains. In 2024, China’s total export volume was already three times the size of real estate investment. Back in 2019, the two were roughly equal.

In other words, China’s new economic engine is no longer real estate, nor low-end contract exports—but rather the international expansion of Chinese brands…

…We’ve studied many outbound brands—MINISO, Pop Mart, Xiaomi, innovative pharmaceuticals, EV makers, short-form video platforms, games—and what we see is not a fleeting opportunity but a fundamental shift. It reflects the rise of talent, capabilities, and global competitiveness.

The era of debt-fueled growth is over. Today, growth comes from improvements in corporate strength, from truly competitive products, and from globalized operations…

…Still worried about China’s government debt? Concerned that the debt expansion of 2010–2020 is no longer sustainable? TSF growth slowing down? PPI still falling? Property prices not yet bottomed? Premium liquor sales still sluggish?

We have data and research to show that many former economic pillars and core assets are undergoing a transition. These variables are no longer fatal risks to the Chinese economy or its markets.

5. Wall Street’s Big, Bad Idea for Your 401(k) – Jason Zweig

Money managers are in a desperate race to stuff illiquid, so-called private-market assets into funds anyone can buy, including your 401(k). They say we all can earn high return and low risk with nontraded “alternatives” like private equity, venture capital and private real estate…

…Bluerock Total Income+ Real Estate is an “interval fund.” This is a structure that generally allows investors to buy as many shares as they wish at any time—but only to sell limited amounts at predetermined intervals, typically 5% of shares per quarter…

…Because private assets don’t trade, it’s the fund managers—not the market—that determine what they’re worth. That enables the managers to report much fewer and lower fluctuations than public funds do. Then they get to declare that private funds are low risk.

That’s ridiculous. In the real world, risk is the chance of losing money, which has nothing to do with how often prices are reported…

…Owning an alternative fund is a lot simpler than selling it. When you own it, you might take the manager’s valuations for granted, even if that’s a bad idea. When you sell it, the valuation matters—a lot. That’s a risk.

Until now, investors have been able to sell their shares back to each of these two funds at “net asset value,” or what the manager claims they’re worth. Even if other investors might disagree with some of those valuations, the manager has stood behind them.

That works until the number of people looking to sell swells and the managers can’t raise money because they are holding illiquid or distressed assets…

…The answer for these two funds, and for the alternative-asset industry writ large, is to move assets to public markets. There, the price will be set by what other investors—not the managers—believe the assets are worth. If that’s less than NAV, that’s mainly a problem for investors in the fund, not the managers…

…Most of the Bluerock fund’s holdings are stakes in other private real-estate portfolios. If it lists and ends up trading at a discount to net asset value, that might signal that the public market doesn’t believe the private valuations on dozens of these funds.

Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. We currently have a vested interest in Alphabet (the parent company of Google). Holdings are subject to change at any time.

What We’re Reading (Week Ending 03 August 2025)

The best articles we’ve read in recent times on a wide range of topics, including investing, business, and the world in general.

We’ve constantly been sharing a list of our recent reads in our weekly emails for The Good Investors.

Do subscribe for our weekly updates through the orange box in the blog (it’s on the side if you’re using a computer, and all the way at the bottom if you’re using mobile) – it’s free!

Here are the articles for the week ending 03 August 2025:

1. The Jamie Dimon Interview – Ben Gilbert, David Rosenthal, and Jamie Dimon

Ben: It seems like your philosophy is that the worst thing will happen. So just plan for it. Don’t say, oh, we’re good as long as this crazy, insane four Sigma event doesn’t happen. You’re like, no. That will happen, and it happens often.

Jamie: Yeah. When I look at it, when I do stress tests and a risk for high yield, I remember getting to J.P. Morgan and going through the risk books. Their stress test was that high yield would move 40%, the credit spread. That time was at 400 or whatever it was. That means 560.

I said, no. Our stress test is going to be worst ever. Worst ever was 17%. They said, that’ll never happen again. The market’s more sophisticated. Well, in 2008, it hit 20% and you couldn’t have sold a bond. There was no market. So those things do happen.

The point isn’t that you’re trying to guess them. The point is you can handle them, so you continue to build your business. I always look what I call the fat tails and manage that we can handle all the fat tails. Not the stress test the Fed gives us, but all the fat tails.

Markets down 50%, interest rates up to 8%, credit spreads back to worst ever. Of course, your results will be worse, but you’re there. The thing about financial services, leverage kills you. Aggressive accounting can kill you, which a lot of companies do. Also, confidence. If you lose money as a financial company—I always knew this too—the headlines are people read that. If they’re a line on putting their money with you, they look at that difference.

Ben: They lose trust.

Jamie: They lose trust, and that’s what’s caused you’ve seen runs on banks. You saw some recently because people take their money out.

Ben: One, there’s a thing that you just said, which is that you might do worse, but you’re there. There’s this trade-off that you make where you’re less profitable in the short-term, but at least you stick around.

If you look back at the companies that you’ve run—Bank One, J.P. Morgan Chase—is that true in the good years that you’ve actually been less profitable than those who are risk on?

Jamie: A little bit. You’re saying that if you look at the history of banks from up until 2007, a lot of banks were earning 30% equity. Most of them went bankrupt. We never did that much. But in 2008 and 2009, we were fine and they weren’t.

But you want to build a real strong company with real margins, real clients, conservative accounting, where you’re not relying on leverage. It’s very easy to use leverage to jack up returns in any business, but in banking it could be particularly dangerous…

…David: And 2006 on Wall Street is like, go, go, go baby. It’s like the 1980s all over again.

Ben: I think you had the same incentives as everyone else, but you behaved very differently. Am I missing something? Did you have the same incentives or did you—

David: You pulled J.P. Morgan back hard on the risk side in 2006.

Jamie: I did. There were cracks out there in 2006. You may remember the quants. There started to be a quant problem late in 2006. We definitely saw subprime getting bad. I pulled back on subprime. I wish I had done more, because if you look at what I did, you say, okay, well you saved half the money, but you would’ve saved more.

David: You still had some losses.

Jamie: Yeah, but we also had, I’m going to say less, maybe a third of the leverage of the big investment banks and a lot more liquidity. So in 2006, I started to stockpile liquidity, and looking at the situation, I was quite worried. You may not remember this, but the leverage, because of accounting rules and Basel III, Basel I, investment banks, particularly the big investment banks, went from 12 times leverage to 35 times leverage. And it was go, go. The CMOs, the bridge loans, the whole thing.

In 2007, the bridge book of Wall Street was $450 billion. Today it’s $40 billion. J.P. Morgan can handle the whole $40 billion today though we’re not the $40 billion today, and they were much more leveraged deals. A lot of them fell apart, collapsed. Of course, and that was before you had the collapse in the mortgage mortgage, which really took down a lot of these banks.

Ben: But you did have the same incentives and you had the same access to information that a lot of these other folks did, but you didn’t blow up. What explains this? Because usually, behavior follows incentives.

Jamie: Well, first of all, if you work for me, I would tell you I don’t care what the incentive is. Don’t do the wrong thing. Don’t do the wrong thing to the client. If you’re the client, how would you want to be treated? I had gotten rid of, I mentioned that one risk thing. There were multiple risk things like that. They were being paid to take the risk.

David: You were telling us about the auto loan business.

Jamie: Yeah, but they’d be being paid. But the second I put in all these new risk controls, all of a sudden you weren’t making money by taking that leverage, because I was looking at how much capital it can actually be deployed if things get bad. So I was looking at earnings through the cycle, but very importantly, all of these investment banks were doing side deals, private deals, three year deals, five year deals, I got rid of almost all of them.

David: This is for comp with senior bankers.

Jamie: Almost all of them. Today at J.P. Morgan Chase, we do do things—and I know some of my partners in the room here—but we all know about it. There are no winks. There are no nods. There are no side deals. There’s almost no one paid on a particular thing, because if you’re paid on a particular thing, you can do the wrong thing, meanwhile not helping the company manage its risk or something like that. So we change the incentive programs.

I’m quite conscious about incentive programs that they don’t create mis misbehavior. But it’s also very important if you’re in a company and you say the incentive programs do that, you should tell the company. This incentive plan is not incentivizing the right behavior versus the customer. And a lot of it was leverage.

If you look at the leverage in some of these securitization and mortgage books, if you have 30 times leverage and you’re getting 20% of the profits, you’ll go to 40 times leverage. It literally will add 25% to your bonus. So I got rid of the profit pool 20% and the leverage. I lost some people too in the meantime…

…[Jamie:] If you look at the financial services, very often it’s the new products that blow up. It takes a while. They haven’t been through a cycle. You had that with equities way back in 1929, you had it with options, you had it with equity derivatives, you had it with mortgages. Even Ginnie Maes at one point blew up, even though they’re government guaranteed.

David: Arguably, you had it with quant and with LT and CM.

Jamie: It happened with quant. It happened with leveraged lending. People then become more rational how they run these balance sheets now they think through the risk.

Ben: I have to ask you, is this private credit today?

Jamie: I don’t really think so. It’s $2 trillion. It’s grown rapidly. That’s an issue. The other thing about Mark is there are some very good actors in it who know what they’re doing. Customers like the product. I always say, well, the customers like it.

But there are also people who don’t know what they’re doing, and it’s grown rapidly. There may be something in there would become a problem one day. I don’t think it’s systemic. That $2 trillion, the mortgage market, when the time it blew up was (I’m going to say) $9 trillion, and a trillion dollars was lost.

David: A trillion dollars was more than a trillion dollars back then.

Jamie: Yeah, a lot of these private credit are not leveraged like that. But that doesn’t mean there won’t be problems. It’s slightly different. You look at the whole system. There are other things out there that are leveraged that can cause problems. Of course, people take secret leverage in the ways you don’t necessarily see it.

Ben: What are some of these in your mind that are potentially problematic today?

Jamie: When you look at asset price, they’re rather high. Now, I’m not saying that’s bad, but if today PEs were 15 as opposed to 23, I say that’s a lot less risk. A lot less to fall, and you have some upside. I would say at 23, there’s not a lot of upside, and there’s a long way to fall. That’s true with credit spread…

…Ben: Silicon Valley Bank and First Republic both fail. You’re there again. Did you see it coming? What lessons did you learn from how 2008 went that you could apply in 2023? Obviously you bought First Republic.

Jamie: Silicon Valley Bank did some very good stuff. They both had something unique that we didn’t know at the time. I’m going to call them concentrated deposits. Not uninsured because people missay that concentrated, so a lot of venture capital.

What happened with Silicon Valley Bank and First Republic is some of these large venture capital companies—hundreds of them, maybe a thousand—told their constituent clients that they invested in, who all banked in the Silicon Valley and First Republic, the banks aren’t safe, get out, and they all removed their deposits.

Silicon Valley Bank (I think) had $200 billion deposits, $100 billion in one day. That caused the problem. But they also had other problems. They didn’t have proper liquidity, they didn’t have their collateral posted at the Fed, and they had taken too much interest rate exposure.

The interest rate exposure was hidden by accounting. It was called held to maturity, where you don’t have to mark even treasuries to market. I always hated held to maturity, but it gives you better regulatory returns and stuff like that. But when that held to maturity, if you said what’s the tangible book value of one of these banks, and you said it was 100, well all of a sudden it was 50 if you just marked that one thing to market.

Now you’re into judgment land. At what point, if you saw a bank where just that one mark had the tangible book value drop to 40 or 30 cents to a dollar, would you panic? I would’ve said, that’s too much risk.

The regulators helped us because they said rates are going to stay low forever. So these banks bought a lot of 3% mortgages. When rates went up to 5% worth 50 cents on the dollar, that was it. They took too much instrument exposure known to management, known to the regulators, and fixable.

2. How Bread vs Rice Molded History – Tomas Pueyo

This means that rice nourishes families on half the land that wheat requires. Which means population density in rice areas can be twice as high as in wheat areas, or four times with double cropping.2 A hectare of land can feed 1.5 families with wheat and 6 with rice.

Yet rice paddies also require a lot of work—twice as much as wheat. And that work is almost year-round: preparing paddies, raising seedlings in nurseries, transplanting every single seedling by hand into flooded fields, managing water, pumping it,3 weeding,4 harvesting, and threshing—often followed by a second rice crop or a winter crop. These tasks peak during transplanting and harvest, creating critical seasons where a huge amount of work must be done in a short window of time…

…Wheat farming historically had a more seasonal rhythm with periods of relative quiet. Wheat is typically sown in the fall or spring and then mainly just left to grow with the rain. Aside from episodic weeding or guarding the fields, there was less continuous labor until harvest time. Harvest itself was a crunch period requiring many hands with sickles—European villages would collaborate during harvest, and farmers might hire extra reapers.

These differences made these regions diverge across politics, culture, and economy…

…Wheat grows in drier, colder areas than rice and requires much less labor, but also produces less calories per unit of land than rice. As a result, rice areas had:

More population density
Stronger centralized states
A psychology and cultures that foster social harmony and collaboration

Meanwhile, wheat encouraged the colonization of the New World, allowed it to grow its wealth through farming fast, and accelerated the development of the Industrial Revolution, which increased the economic divergence between wheat and rice areas.

In other words, climate determined crops, which then heavily influenced our societies. Even decades after most of us have stopped farming, these effects carry into our subconscious cultures.

3. Are Diamonds Even a Luxury Anymore? De Beers Reckons With Price Plunge – Jenny Strasburg and Suzanne Kapner

Now diamonds can be made in labs that mimic the earth’s extreme pressure and temperatures, but for a fraction of the price. A decade ago, such man-made gems were novel. Today they are mainstream, and increasingly challenging the perception of diamonds as a luxury accessory.

Walmart sold its first lab-grown diamonds in 2022, but now the stones make up half of its diamond jewelry assortment.

Signet Jewelers, which says it is the world’s largest retailer of diamond jewelry, with brands that include Kay Jewelers, Zales and Jared, is partnering with De Beers to extol the virtues of natural diamonds in a new marketing campaign. But last month, Signet said it, too, has been adding more lab-grown diamonds to its fashion jewelry, which was among the factors helping to pull the company out of a prolonged sales slump…

…More than half the engagement rings purchased last year in the U.S. had a lab-created diamond, a 40% increase compared with 2019, according to a survey of nearly 17,000 U.S. couples by wedding planning website The Knot…

…Manufactured diamonds are 100% carbon, with the same hardness and sparkle of the original. Nevertheless, De Beers’s future depends on consumers who believe that authenticity can’t be made in a lab…

…De Beers gets its name from two Dutch-Afrikaner brothers, Diederik Arnoldus de Beer and Johannes Nicolaas de Beer, who settled in South Africa and discovered diamonds on their farm in the late 1800s.

De Beers grew to control some 90% of the world’s diamond trade. When diamond demand collapsed during the Great Depression, De Beers hired the advertising agency N.W. Ayer, which convinced Hollywood actresses to wear diamond rings. One of its copywriters in 1947 came up with the now famous tagline “A Diamond is Forever.”

Over coming decades, De Beers broadly succeeded in dictating how much should be spent on a diamond engagement ring: “Isn’t two months’ salary a small price to pay for something that lasts forever?” asked a 1980s De Beers ad…

…Even gem experts need specialized machinery to tell the difference between quality lab-grown and mined diamonds. De Beers is now trying to draw more attention to the hard-to-see differences, by asking jewelers to shell out $9,500 for a new diamond-testing device called DiamondProof.

The device is about the size of an air fryer and designed to be displayed on jewelry-store counters. It takes just a few seconds to show color-coded results: If the stone’s image glows blue, it’s natural—a result De Beers says it can guarantee. If it glows yellow, it’s lab-grown or needs further testing…

…Sales of lab-grown diamonds at Walmart, the country’s second-largest fine jewelry seller behind Signet—according to National Jeweler magazine—soared 175% in 2024 compared with the prior year…

…Signet had been more reluctant to jump on the lab-grown bandwagon than other middle-market jewelers, which some analysts say contributed to a prolonged sales decline, plunging stock price and a large shareholder who had pushed for a sale of the company.

Signet Chief Executive J.K. Symancyk, who took the helm in November, laid out a new strategy in March that includes pushing more heavily into lab-grown diamonds for fashion jewelry like tennis bracelets, earrings and necklaces, while aiming to protect the allure of natural stones for milestone purchases like engagement rings.

Sales of fashion jewelry with lab-grown diamonds increased 60% in the most recent quarter, compared with a year ago, one factor that helped the company’s overall sales return to growth for the first time since April 2022.

He added that nearly two-thirds of Signet’s customers still prefer mined diamonds for special occasions like anniversaries and engagements. “We see natural diamonds as lasting and enduring,” Symancyk says. “Fashion trends change.”…

…The influx of lab-grown diamonds has pushed prices down for both types of stones.

The retail price of a 1-carat lab-grown diamond has plunged 86% since the beginning of 2016, to about $745, Zimnisky estimates. The price of the same size natural diamond is down 40% over that period to $3,925. Back in 2016, there was only about a $1,000 difference between a 1-carat lab-grown and natural diamond. A natural diamond now costs about five times as much as man-made stone.

4. Trump’s Commerce Secretary Loves Tariffs. His Former Investment Bank Is Taking Bets Against Them – Louise Matsakis and Zoë Schiffer

Cantor Fitzgerald, a financial services company led by the sons of US commerce secretary Howard Lutnick, is creating a way for investors to bet that President Donald Trump’s signature tariffs will be struck down in court…

…Lutnick ran Cantor Fitzgerald for nearly 30 years until he was confirmed by the Senate in February, when he turned over control of the firm to his sons, Kyle and Brandon, who are both in their twenties…

…But the investment bank that made Lutnick a billionaire is now letting certain clients wager that Trump’s tariffs will eventually be ruled unlawful, at which point companies that have paid the import duties can apply to get their money back.

In a letter seen by WIRED, a representative from Cantor said the firm was willing to trade tariff refund rights for 20 to 30 percent of what companies have paid in duties. “So for a company that paid $10 million, they could expect to receive $2-$3 million in a trade,” the representative wrote. “We have the capacity to trade up to several hundred million of these presently and can likely upsize that in the future to meet potential demand.”…

…“Secretary Lutnick knows nothing about this decision because he has no insight or strategic control over Cantor Fitzgerald,” wrote Kristen Eichamer, press secretary for the Department of Commerce, in an email to WIRED. “He has fully complied with the terms of his ethics agreement with respect to divesture and recusals and will continue to do so.”

Trump announced in February that the US would put steep tariffs on goods from Mexico and Canada under the International Emergency Economic Powers Act (IEEPA). He widened the trade war in April to include nearly every nation that sells goods to the US, which Trump said would now be subject to “reciprocal” tariffs ranging from 10 to 50 percent.

In response, there was a flurry of lawsuits, including one from a group of small businesses that sued the Trump administration in the US Court of International Trade, arguing that the president exceeded his authority and the tariffs should be ruled illegal. The trade court sided with the plaintiffs, but the Trump administration appealed the decision, and the appeals court allowed the duties to remain in place while the case is pending.

5. Yet Another Munger Masterclass: The 2003 Wesco Financial AGM – Kingswell and Charlie Munger

(7) “The central idea of a margin of safety when you’re making investments will never be obsolete. And the idea of making the market your servant and not your instructor will never be obsolete, either. Those two basic ideas of Ben Graham are basically reality cubed. The idea of being objective and dispassionate, which was also in Graham, that will never be obsolete. So Graham had a lot of ideas that were wonderful.”…

…(8) “I’ve picked up Ben Graham’s main ideas and discarded the practices he used that don’t suit me. I don’t want to go around now buying stocks at a big discount from liquidating value, of businesses that are mediocre or worse, run by people I don’t like, and sit there saying no matter how horrible it is to watch, it will bounce by 25%. I don’t think that approach would work very well given our size of capital. So it’s natural to follow my temperamental attraction toward the better businesses.”…

…(12) “A lot of people rise to power in big corporate bureaucracies who are very nice people and good at doing things in a fairly limited way, but whose general powers of capital allocation are inadequate. And, of course, those who are advising them — the investment bankers, the consultants, and so forth — will mislead you 95% of the time.”…

…(14) “If you could actually sit down and talk to a key manager one-on-one for an hour or so — and if you’re a very smart person — that could be a significant plus. On the other hand, I’m enough of a cynic to believe an intelligent person might be helped 60% of the time and the other 40% of the time he might be misled. So, on balance, whether it’s worth the time, I can’t tell you.”…

…”Years ago”, he said, “we were interested in a particular stock and Warren went and talked to the CEO for two or three hours at lunch — and he thought he was the biggest horse’s ass he’d ever seen. So we sold every share. Well, the thing compounded at 15% per annum for about 20 years thereafter. It finally got a big denouement [and dropped in price], but the idea that meeting the management will always help you… Well, that always amused me — to watch that stock galloping upward.”

Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. We currently do not have a vested interest in any companies mentioned. Holdings are subject to change at any time.

What We’re Reading (Week Ending 27 July 2025)

The best articles we’ve read in recent times on a wide range of topics, including investing, business, and the world in general.

We’ve constantly been sharing a list of our recent reads in our weekly emails for The Good Investors.

Do subscribe for our weekly updates through the orange box in the blog (it’s on the side if you’re using a computer, and all the way at the bottom if you’re using mobile) – it’s free!

Here are the articles for the week ending 27 July 2025:

1. Introducing pay per crawl: Enabling content owners to charge AI crawlers for access – Will Allen and Simon Newton

Many publishers, content creators and website owners currently feel like they have a binary choice — either leave the front door wide open for AI to consume everything they create, or create their own walled garden. But what if there was another way?…

…We believe your choice need not be binary — there should be a third, more nuanced option: You can charge for access. Instead of a blanket block or uncompensated open access, we want to empower content owners to monetize their content at Internet scale…

…Pay per crawl, in private beta, is our first experiment in this area.

Pay per crawl integrates with existing web infrastructure, leveraging HTTP status codes and established authentication mechanisms to create a framework for paid content access…

…At its core, pay per crawl begins a technical shift in how content is controlled online. By providing creators with a robust, programmatic mechanism for valuing and controlling their digital assets, we empower them to continue creating the rich, diverse content that makes the Internet invaluable.

We expect pay per crawl to evolve significantly. It’s very early: we believe many different types of interactions and marketplaces can and should develop simultaneously. We are excited to support these various efforts and open standards.

For example, a publisher or new organization might want to charge different rates for different paths or content types. How do you introduce dynamic pricing based not only upon demand, but also how many users your AI application has? How do you introduce granular licenses at internet scale, whether for training, inference, search, or something entirely new?

The true potential of pay per crawl may emerge in an agentic world. What if an agentic paywall could operate entirely programmatically? Imagine asking your favorite deep research program to help you synthesize the latest cancer research or a legal brief, or just help you find the best restaurant in Soho — and then giving that agent a budget to spend to acquire the best and most relevant content. By anchoring our first solution on HTTP response code 402, we enable a future where intelligent agents can programmatically negotiate access to digital resources.

2. How It’s Done – Doomberg

Among the critical minerals China has successfully cornered are the rare earth metals, and the primary means by which it achieved near-total dominance was by capturing the step at which the mined material—a concentrated mix of many valuable metals—is purified into individual components suitable for use in various military and industrial applications. Copious amounts of waste are produced along that processing journey, and treating such waste to Western standards became economically unfeasible at the market prices that prevailed after China entered the field. Last week, The New York Times caught on to how the game is played:

“Chinese mines and refineries produce most of the world’s rare earth metals and practically all of a few crucial kinds of rare earths. This has given China’s government near complete control over a critical choke point in global trade. But for decades in northern China, toxic sludge from rare earth processing has been dumped into a four-square-mile artificial lake. In south-central China, rare earth mines have poisoned dozens of once-green valleys and left hillsides stripped to barren red clay.”…

…With free markets clearly failing to price environmental and national security concerns—let alone the convergence of both—a completely new approach was needed to address the rare earth vulnerability. Last week brought the announcement of just such a move:

“The Defense Department will become the largest shareholder in rare-earth mining company MP Materials by buying $400 million of its stock and helping it build a new processing facility to sidestep the Chinese market, the company said Thursday. The deal underscores how far the Trump administration is willing to go to subsidize production of high-powered magnets, a field dominated by Chinese firms although the materials are critical for U.S. weapons systems.

Las Vegas-based MP Materials owns the only rare-earth mine in the United States, at Mountain Pass, California, near the Nevada border. MP Materials CEO Jim Litinsky said the company aims to restore the full rare-earth supply chain in the U.S. and eliminate a ‘single point of failure’ in the country’s military-industrial base.”

Perusing the company’s press release and other corporate filings, the details of the creative deal become clear. The Pentagon is taking a holistic approach to the objective, investing the capital needed for MP Materials to construct domestic processing and magnetic facilities while also putting a floor price under the company’s products that accounts for the cost of proper environmental stewardship:

“DoD has entered into a 10-year agreement establishing a price floor commitment of $110 per kilogram for MP Materials’ NdPr products stockpiled or sold, reducing vulnerability to non-market forces and ensuring stable and predictable cash flow with shared upside.

For a period of 10 years following the construction of the 10X Facility, DoD has agreed to ensure that 100% of the magnets produced at the 10X Facility will be purchased by defense and commercial customers with shared upside.”

3. Could AI slow science? -Sayash Kapoor and Arvind Narayanan

It’s a common-sense view, at least among technologists, that AI will speed science greatly as it gets adopted in every part of the scientific pipeline — summarizing existing literature, generating new ideas, performing data analyses and experiments to test them, writing up findings, and performing “peer” review…

…The impact of AI on science could be counterintuitive. Even if individual scientists benefit from adopting AI, it doesn’t mean science as a whole will benefit…

… So far, on balance, AI has been an unhealthy shock to science, stretching many of its processes to the breaking point.

Any serious attempt to forecast the impact of AI on science must confront the production-progress paradox. The rate of publication of scientific papers has been growing exponentially, increasing 500 fold between 1900 and 2015. But actual progress, by any available measure, has been constant or even slowing. So we must ask how AI is impacting, and will impact, the factors that have led to this disconnect.

Our analysis in this essay suggests that AI is likely to worsen the gap. This may not be true in all scientific fields, and it is certainly not a foregone conclusion…

…There’s something suboptimal about the way we’ve structured the practice of science, and so the efficiency of converting scientific inputs into progress is dropping. In particular, one subset of hypotheses flags the increase in the rate of production itself as the causal culprit — science is slowing down because it is trying to go too fast.

How could this be? The key is that any one scientist’s attention is finite, so they can only pay attention to a limited number of papers every year. So it is too risky for authors of papers to depart from the canon. Any such would-be breakthrough papers would be lost in the noise and won’t get the attention of a critical mass of scholars. The greater the rate of production, the more the noise, so the less attention truly novel papers will achieve, and thus will be less likely to break through into the canon…

…Another causal mechanism relates to scientists’ publish-or-perish incentives. Production is easy to measure, and progress is hard to measure. So universities and other scientific institutions judge researchers based on measurable criteria such as how many papers they publish and the amount of grant funding they receive. It is not uncommon for scientists to have to publish a certain number of peer-reviewed papers to be hired or to get tenure (either due to implicit norms or explicit requirements)…

…This completes the feedback loop: career incentives lead to researchers publishing more papers, and disincentivize novel research that results in true breakthroughs (but might only result in a single paper after years of work).

If slower progress is indeed being caused by faster production, how will AI impact it? Most obviously, automating parts of the scientific process will make it even easier for scientists to chase meaningless productivity metrics. AI could make individual researchers more creative but decrease the creativity of the collective because of a homogenizing effect. AI could also exacerbate the inequality of attention and make it even harder for new ideas to break through…

…The AI community often advertises AI as a silver bullet without realizing how difficult it is to detect subtle errors. Unfortunately, it takes much less competence to use AI tools than to understand them deeply and learn to identify errors. Like other software-based research, errors in AI-based science can take a long time to uncover. If the widespread adoption of AI leads to researchers spending more time and effort conducting or building on erroneous research, it could slow progress, since researcher time and effort are wasted in unproductive research directions.

Unfortunately, we’ve found that AI has already led to widespread errors. Even before generative AI, traditional machine learning led to errors in over 600 papers across 30 scientific fields. In many cases, the affected papers constituted the majority of the surveyed papers, raising the possibility that in many fields, the majority of AI-enabled research is flawed…

…Older modeling techniques required coming up with a hypothesis for how the world works, then using statistical models to make inferences about this hypothesis.

In contrast, AI-based modeling treats this process as a black box. Instead of making a hypothesis about the world and improving our understanding based on the model’s results, it simply tries to improve our ability to predict what outcomes would occur based on past data…

…AI-based modeling is no doubt helpful in improving predictive accuracy. But it doesn’t lend itself to an improved understanding of these phenomena. AI might be fantastic at producing the equivalents of epicycles across fields, leading to the prediction-explanation fallacy.

In other words, if AI allows us to make better predictions from incorrect theories, it might slow down scientific progress if this results in researchers using flawed theories for longer. In the extreme case, fields would be stuck in an intellectual rut even as they excel at improving predictive accuracy within existing paradigms…

…Researchers across fields are incentivized to find solutions to scientific problems. But this incentive only leads to progress because the process of proving theorems or finding solutions to problems also leads to building human understanding. As the desertion of work on foliations shows, when there is a mismatch between finding solutions to problems and building human understanding, it can result in slower progress.

This is precisely the effect AI might have: by solving open research problems without leading to the accompanying understanding, AI could erode these useful byproducts by reducing incentives to build understanding. If we use AI to short circuit this process of understanding, that is like using a forklift at the gym. You can lift heavier weights with it, sure, but that’s not why you go to the gym…

…If we use AI to bypass human understanding, or worse, retain only illusions of understanding, we might lose the ability to train new scientists, develop new theories and paradigms, synthesize and correct results, apply knowledge beyond science, or even generate new and interesting problems.

Empirical evidence across scientific fields has found evidence for some of these effects. For example, Hao et al. collect data from six fields and find that papers that adopt AI are more likely to focus on providing solutions to known problems and working within existing paradigms rather than generating new problems.

4. AI Comes Up with Bizarre Physics Experiments. But They Work – Anil Ananthaswamy

In the classical physics that describes our everyday world, objects have well-defined properties that are independent of attempts to measure those properties: A billiard ball, for example, has a particular position and momentum at any given moment in time.

In the quantum world, this isn’t the case. A quantum object is described by a mathematical entity called the quantum state. The best one can do is to use the state to calculate the probability that the object will be, say, at a certain location when you look for it there.

What is more, two (or more) quantum objects can share a single quantum state. Take light, which is made of photons. These photons can be generated in pairs that are “entangled,” meaning that the two photons share a single, joint quantum state even if they fly apart. Once one of the two photons is measured, the outcome seems to instantaneously determine the properties of the other — now distant — photon.

For decades, physicists assumed that entanglement required quantum objects to start out in the same place. But in the early 1990s, Anton Zeilinger(opens a new tab), who would later receive the Nobel Prize in Physics for his studies of entanglement, showed that this wasn’t always true. He and his colleagues proposed an experiment that began with two unrelated pairs of entangled photons. Photons A and B were entangled with each other, as were photons C and D. The researchers then devised a clever experimental design(opens a new tab) made of crystals, beam splitters and detectors that would operate on photons B and C — one photon from each of the two entangled pairs. Through a sequence of operations, the photons B and C get detected and destroyed, but as a product, the partner particles A and D, which had not previously interacted, become entangled. This is called entanglement swapping, which is now an important building block of quantum technology.

That was the state of affairs in 2021, when Krenn’s team started designing new experiments with the aid of software they dubbed PyTheus…

…The team represented optical experiments using mathematical structures called graphs, which are composed of nodes connected by lines called edges. The nodes and edges represented different aspects of an experiment, such as beam splitters, the paths of photons, or whether or not two photons had interacted.

Krenn’s team started by first building a very general graph, one that modeled the space of all possible experiments of some size. The graph had output features that represented some desired quantum state…

…The question, then, was how to modify all the other parts of the graph to produce this state. To figure this out, the researchers formulated a mathematical function. It took in the state of the graph and calculated the difference between the output of the graph and the desired quantum state. They then iteratively modified the graph’s parameters, which represented the experimental configuration, to reduce this discrepancy to zero.

When Krenn’s student Soren Arlt tried to use this approach to find the best way to do entanglement swapping, he noticed that the experimental configuration was unrecognizable — nothing at all like Zeilinger’s design from 1993. “When he showed it to me, we were confused,” Krenn said. “I was convinced that it must be wrong.”

The optimization algorithm had borrowed ideas from a separate area of study called multiphoton interference. By doing so, it created a simpler configuration(opens a new tab) than Zeilinger’s. Krenn’s team then did a separate mathematical analysis of the final design. It confirmed that the new experimental design would in fact create entanglement among particles with no shared past.

In December 2024, a team in China led by Xiao-Song Ma of Nanjing University confirmed it(opens a new tab). They built the actual experiment, and it worked as intended.

5. Get Smart: How to Profit in a Fast-Moving Stock Market – Chin Hui Leong

Here’s the good news: when it comes to investing, the winner is not always the one with the fastest fingers.

While news may reach your eyes faster, the actual change in businesses takes time to materialise.

Thus, even if you react faster, it doesn’t necessarily mean you will be right.

Need an example?

In my Business Time article last Wednesday, I highlighted how the initial hype over DeepSeek in late January 2025 has largely died down.

In the process, those who sold Nvidia (NASDAQ: NVDA) right after the DeepSeek news broke out will be rueing the fact that the GPU provider has delivered revenue gains of 78% and 69% year on year, respectively, for the past two quarters.

In turn, shares have risen by nearly 45% from their January low…

…In other words, slowing down, taking your time to assess the situation, and listening to the contrasting arguments will lead to better outcomes…

…But what if a threat turns out to be real and you were right to sell?

It’s possible, of course.

Here’s a common narrative: BlackBerry’s (NYSE: BB) reign as the go-to device in the corporate world was cut short by the rapid rise in popularity of Apple’s (NASDAQ: AAPL) iPhone and Alphabet’s (NASDAQ: GOOGL) Android…

…It’s easy to assume that the decline was immediate, but the opposite is true.

Between fiscal 2007 and fiscal 2011, the Canadian company’s sales actually soared by over sixfold from US$3 billion to almost US$20 billion.

In other words, Blackberry experienced a period of tremendous growth for over four years before its business began to falter.

Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. We currently have a vested interest in Alphabet and Apple. Holdings are subject to change at any time.

What We’re Reading (Week Ending 20 July 2025)

The best articles we’ve read in recent times on a wide range of topics, including investing, business, and the world in general.

We’ve constantly been sharing a list of our recent reads in our weekly emails for The Good Investors.

Do subscribe for our weekly updates through the orange box in the blog (it’s on the side if you’re using a computer, and all the way at the bottom if you’re using mobile) – it’s free!

Here are the articles for the week ending 20 July 2025:

1. Sweatshop data is over – Tamay Besiroglu, Matthew Barnett, Ege Erdil

Historically, the importance of data has been underrated in the field of AI. Decades ago, many assumed the key to AGI would come from devising the right “theory of intelligence”, which we could then implement by hand; the role of training data was sidelined.

Despite being trained on more compute than GPT-3, AlphaGo Zero could only play Go, while GPT-3 could write essays, code, translate languages, and assist with countless other tasks. The main difference was training data. AlphaGo Zero learned from Go games, whereas GPT-3 learned from natural language. This meant that while Google was playing games, OpenAI was able to seize the opportunity of a lifetime. What you train on matters.

We may soon witness a similar lesson if AI labs continue to scale up their models without similarly scaling up the quality of their training environments. Many have observed that pretraining is already saturating. GPT-4.5, while impressive in its own right, didn’t feel like a major generational leap in the way GPT-4 did over GPT-3.5.

The recent reinforcement learning with verifiable rewards (RLVR) paradigm seeks to revive progress by getting AIs to learn how to perform formally checkable reasoning inside contained environments. What we’ve seen so far is necessary for progress, but it is far from sufficient. Current methods will get us to the point where AIs can prove theorems and solve hard puzzles, but it won’t be enough to get models to deal with the open-ended nature of reality, where the quality of our actions cannot be so easily “verified” as either correct or incorrect.

To make progress, there’s no way around designing better rewards, and ultimately better RL environments.

2. Silk, Porcelain, Tea, Opium: 2000 Years of Trade Deficit with China – Tomas Pueyo

The West has had deficits with China for over 2,000 years, and they have had a massive impact on world history, from the opening of global trade routes, to the establishment of colonies, colonial policies, international wars, the emergence of nation-states, the politics of present-day China and the US…

…Romans loved luxury goods:

India, China and the Arabian peninsula take one hundred million sesterces1 from our empire per annum at a conservative estimate: that is what our luxuries and women cost us—Pliny the Elder, Natural History (77–79 AD).

Of these, silk was the biggest import from China. In 14 AD the Senate prohibited the wearing of silk by men!

To pay for it, Romans traded glassware, amber, wine, carpets, and other goods,2 but they didn’t make up for the value of what Romans bought from China. And in general, Chinese traders preferred money—mostly gold and silver—over other goods…

…Europeans obsessed about producing silk locally, but they didn’t know how to make it and didn’t have silkworms: China had protected its near-monopoly on silk for many centuries thanks to imperial orders to execute anybody caught trying to export silkworms or their eggs. The only way to succeed was by stealing them, and that’s precisely what two Christian monks did around 550 AD, risking their lives to smuggle silkworms hidden inside their canes.

This started silk production in the Eastern Roman Empire, which would slowly permeate through the rest of Europe.

This might have been the first time Chinese manufacturing prowess caused a trade imbalance in the West that required political intervention…

…Porcelain could only start reaching Europe in the 1500s,4 which is not a coincidence either: Porcelain was too heavy and fragile for overland routes, so it needed a maritime route to reach Europe. The Portuguese found a path to the Indies circumventing Africa just around 1500…

…Chinese porcelain was so much thinner, whiter and more translucent than local wares that European nobility really prized it…

…You know how nowadays Westerners design some products and then they send those designs to China for manufacture?

Porcelain is another example of China manufacturing products that Europeans craved, but again it didn’t need anything Europeans produced. Except for silver. So silver flowed from Europe to China. From 1500 to 1800, Bolivia and Mexico’s mines produced about 80% of the world’s silver; 30% of that eventually ended up in China!

Europeans hated that flow, as the silver disappeared as fast as it was produced, so they tried to stop it. Of course, the most incentivized were the countries who didn’t have access to either silver or trade with China. This is why the Italians tried to copy porcelain in the late 1500s with Medici porcelain, although they largely failed. By the early 1700s, Germans succeeded. A few years later, in 1712, the French Jesuit father Francois Xavier d’Entrecolles published the secrets of porcelain making in Europe, which he had read about and witnessed in China. In the following decades, the local production of porcelain increased and the import of Chinese porcelain fell…

…Tea’s ever-escalating trade imbalance with China became a serious economic problem, so much so that the British King George III sent an envoy to the Chinese Emperor to ask for more trade liberalization. These are excerpts of the Emperor’s response:

Our Celestial Empire possesses all things in prolific abundance and lacks no product within its own borders. There is therefore no need to import the manufactures of outside barbarians in exchange for our own produce. But as the tea, silk and porcelain which the Celestial Empire produces, are absolute necessities to European nations and to yourselves, we have permitted, as a signal mark of favor, that foreign merchants should be established at Canton, so that your wants might be supplied and your country thus participate in our beneficence.

So what did the British do to solve the trade imbalance? Two things. One is that the East India Company sent Scottish botanist Robert Fortune to China to purchase and export Chinese tea plants in the 1850s. This kick-started tea production in India, which grew over the following decades, reducing the share of Chinese tea consumed. Here we have, for the third time, a smuggling of Chinese production know-how to reduce trade imbalances…

…When the British conquered India8 in the late 1700s, they were very conscious about their trade imbalance with China, so they looked for any way to reduce it. They found the right tool in opium. They devised a plan to produce it in India and sell it in China. So the British drove local farmers in eastern India out of crop production and into poppies, from which opium is derived.

Then, the British introduced opium smoking in China…

…The Emperor Jiaqing noticed all this so he published an edict to stop it in 1810:

Opium has a harm. Opium is a poison, undermining our good customs and morality. Its use is prohibited by law.

But the government couldn’t enforce it. When the Chinese government finally cracked down on opium in 1839, the opium trade was paying for all the tea trade and then some, so the British reacted to protect the trade and attacked China; this was the First Opium War.

Britain won and bent China’s arm: It would be allowed to sell opium in China. It also took over Hong Kong.

There would be another Opium War, after which the British, and then other Westerners10 could reach far inland in China to sell opium. The deficit to China became a surplus. Over the following decades, opium addiction became widespread. By 1949, 4.4% of Chinese people were addicted. Local farmers replaced their crops with opium. Governments used opium taxes to finance themselves, and this lasted until the Communist Party had a strong enough chokehold on society and culture to finally ban opium.

This is what the Chinese call the century of humiliation, when China went from the richest and most advanced nation of the world to a dirt poor backwater.

3. The Codes AI Can’t Crack – Taras Grescoe

Since 2018, neural networks trained on cuneiform, the writing system of Mesopotamia, have been able to fill in lost verses from the story of Gilgamesh, the world’s earliest known epic poem. In 2023, a project known as the Vesuvius Challenge used 3D scanners and artificial intelligence to restore handwritten texts that hadn’t been read in 2,000 years, revealing previously unknown works by Epicurus and other philosophers. (The scrolls came from a luxurious villa in Herculaneum, buried during the same eruption of Mount Vesuvius that destroyed Pompeii. When scholars had previously tried to unroll them, the carbonized papyrus crumbled to dust.)

Yet despite these advances, a dozen or so ancient scripts — the writing systems used to transcribe spoken language — remain undeciphered. These include such mysteries as the one-of-a-kind Phaistos Disk, a spiral of 45 symbols found on a single sixteen-inch clay disk in a Minoan palace on Crete, and Proto-Elamite, a script used 5,000 years ago in what is now Iran, which may have consisted of a thousand distinct symbols. Some, like Cypro-Minoan — which transcribes a language spoken in the Late Bronze Age on Cyprus — are tantalizingly similar to early European scripts that have already been fully deciphered. Others, like the quipu of the Andes — intricately knotted ropes made of the wool of llamas, vicuñas, and alpacas — stretch our definitions of how speech can be transformed into writing…

…Cracking these ancient codes may seem like the kind of challenge AI is ideally suited to solve. After all, neural networks have already bested human champions at chess, as well as the most complex of all games, Go. They can detect cancer in medical images, predict protein structures, synthesize novel drugs, and converse fluently and persuasively in 200 languages. Given AI’s ability to find order in complex sets of data, surely assigning meaning to ancient symbols would be child’s play.

But if the example of Ithaca shows the promise of AI in the study of the past, these mystery scripts reveal its limitations. Artificial neural networks might prove a crucial tool, but true progress will come through collaboration between human neural networks: the intuitions and expertise stored in the heads of scholars, working in different disciplines in real-world settings…

…Ithaca was trained on ancient Greek, a language we’ve long known how to read, and whose entire corpus amounts to tens of thousands of inscriptions. The AI models that have filled in lost verses of Gilgamesh are trained on cuneiform, whose corpus is even larger: hundreds of thousands of cuneiform tablets can be found in the storerooms of the world’s museums, many of them still untranslated. The problem with mystery scripts like Linear A, Cypro-Minoan, Rongorongo, and Harappan is that the total number of known inscriptions can be counted in the thousands, and sometimes in the hundreds. Not only that, in most cases we have no idea what spoken language they’re meant to encode…

… Two of the greatest intellectual feats of the 20th century involved the decipherment of ancient writing systems. In 01952, when Michael Ventris, a young English architect, announced that he’d cracked the code of Linear B, a script used in Bronze Age Crete, newspapers likened the accomplishment to the scaling of Mount Everest. (Behind the scenes, the crucial grouping and classifying of characters on 180,000 index cards into common roots — the grunt work that would now be performed by AI — was done by Alice Kober, a chain-smoking instructor from Brooklyn College.)

The decipherment of the Maya script, which is capable of recording all human thought using bulbous jaguars, frogs, warriors’ heads, and other stylized glyphs, involved a decades-long collaboration between Yuri Knorozov, a Soviet epigrapher, and American scholars working on excavations in the jungles of Central America.

While the interpreting of Egyptian hieroglyphics is held up as a triumph of human ingenuity, the Linear B and Mayan codes were cracked without the help of a Rosetta Stone to point the way. With Linear B, the breakthrough came when Ventris broke with the established thinking, which held that it transcribed Etruscan — a script scholars can read aloud, but whose meaning still remains elusive — and realized that it corresponded to a form of archaic Greek spoken 500 years before Homer. In the case of ancient Mayan, long thought to be a cartoonish depiction of universal ideas, it was only when scholars acknowledged that it might transcribe the ancestors of the languages spoken by contemporary Maya people that the decipherment really began. Today, we can read 85% of the glyphs; it is even possible to translate Shakespeare’s Hamlet into ancient Mayan.

Collaborating across cultures and disciplines, and carrying out paradigm-shedding leaps of intuition, are not the strong points of existing artificial neural networks. But that doesn’t mean AI can’t play a role in decipherment of ancient writing systems. Miguel Valério, an epigrapher at the Autonomous University of Barcelona, has worked on Cypro-Minoan, the script used on Cyprus 3,500 years ago. Two hundred inscriptions, on golden jewelry, metal ingots, ivory plaques, and four broken clay tablets, have survived. Valério was suspicious of the scholarly orthodoxy, which attributed the great diversity in signs to the coexistence of three distinct forms of the language.

To test the theory that many of the signs were in fact allographs — that is, variants, like the capital letter “G” and “g,” its lower-case version — Valério worked with Michele Corazza, a computational linguist at the University of Bologna, to design a custom-built neural network they called Sign2Vecd. Because the model was unsupervised, it searched for patterns without applying human-imposed preconceptions to the data set.

“The machine learned how to cluster the signs,” says Valério, “but it didn’t do it simply on the basis of their resemblance, but also on the specific context of a sign in relation to other signs. It allowed us to create a three-dimensional plot of the results. We could see the signs floating in a sphere, and zoom in to see their relationship to each other, and whether they’d been written on clay or metal.”…

…A generation ago, most people were taught that writing was invented once, in Mesopotamia, about 5,500 years ago, as a tool of accountancy and state bureaucracy. From there, the standard thinking went, it spread to Egypt, and hieroglyphics were simplified into the alphabet that became the basis for recording most European languages…

…Monogenesis, the idea that the Ur-script diffused from Mesopotamia, has been replaced by the recognition that writing was invented independently in China, Egypt, Central America, and — though this remains controversial — in the Indus Valley, where 4,000 inscriptions been unearthed in sites that were home to one of the earliest large urban civilizations.

4. A 37,000-Year Chronicle of What Once Ailed Us – Carl Zimmer

On Wednesday, a team of scientists unveiled a new genetic chronicle, documenting the rise of 214 diseases across Europe and Asia over the past 37,000 years…

…The researchers examined the remains of 1,313 ancient individuals for the project. The large scale enabled the researchers to do more than just push back the earliest known occurrence of different diseases. They could also track the rise and fall of epidemics across centuries.

The oldest remains the researchers studied belonged to hunter-gatherers. Their bones and teeth contained a host of pathogens, such as hepatitis B, herpes virus and Helicobacter pylori, a stomach-dwelling bacterium.

“As far back as we go, humans have had infectious diseases,” said Eske Willerslev, a geneticist at the University of Copenhagen and an author of the new study…

…Initially, Dr. Willerslev and his colleagues assumed that they would see such diseases rise to prominence starting about 11,000 years ago. That’s when people started domesticating animals, from which new diseases could spread more easily…

…But the ancient DNA defied that expectation. The scientists found that plague and a number of other diseases jumped to people from animals thousands of years later, starting about 6,000 years ago. And those microbes did not jump into early farmers.

Instead, the new study points to nomadic tribes in Russia and Asia. Thousands of years after the dawn of agriculture, those nomads started rearing vast herds of cattle and other livestock.

Why diseases would have attacked those herders instead of earlier farmers, the scientists can’t say for sure. “We haven’t been able to come up with anything conclusive,” Dr. Willerslev said…

…The nomads expanded over the next few centuries across the steppes of Asia and eastern Europe. In that time, their pathogens thrived; the scientists frequently found several individuals in a single grave with DNA from plague or other diseases.

Those epidemics were so intense that they changed the genetic profile of the nomads. Last year, Dr. Willerslev and his colleagues found that the nomads experienced a spike in mutations that boosted their immune system and that may have helped them resist the diseases they contracted. But their active immune systems may have also attacked their own bodies, producing chronic diseases such as multiple sclerosis.

5. AI is killing the web. Can anything save it? – The Economist

Similarweb, which measures traffic to more than 100m web domains, estimates that worldwide search traffic (by humans) fell by about 15% in the year to June. Although some categories, such as hobbyists’ sites, are doing fine, others have been hit hard (see chart). Many of the most affected are just the kind that might have commonly answered search queries. Science and education sites have lost 10% of their visitors. Reference sites have lost 15%. Health sites have lost 31%.

For companies that sell advertising or subscriptions, lost visitors means lost revenue…

…Google has insisted that its use of others’ content is fair. But since it launched its AI overviews, the share of news-related searches resulting in no onward clicks has risen from 56% to 69%, estimates Similarweb. In other words, seven in ten people get their answer without visiting the page that supplied it…

…To keep the traffic and the money coming, many big content producers have negotiated licensing deals with AI companies, backed up by legal threats: what Robert Thomson, chief executive of News Corp, has dubbed “wooing and suing”. His company, which owns the Wall Street Journal and the New York Post, among other titles, has struck a deal with OpenAI. Two of its subsidiaries are suing Perplexity, another AI answer engine. The New York Times has done a deal with Amazon while suing OpenAI. Plenty of other transactions and lawsuits are going on…

…Reddit, an online forum, has licensed its user-generated content to Google for a reported $60m a year…

…The bigger problem, however, is that most of the internet’s hundreds of millions of domains are too small to either woo or sue the tech giants. Their content may be collectively essential to AI firms, but each site is individually dispensable. Even if they could join forces to bargain collectively, antitrust law would forbid it. They could block AI crawlers, and some do. But that means no search visibility at all…

…All of Cloudflare’s new customers will now be asked if they want to allow AI companies’ bots to scrape their site, and for what purpose. Cloudflare’s scale gives it a better chance than most of enabling something like a collective response by content sites that want to force AI firms to cough up. It is testing a pay-as-you-crawl system that would let sites charge bots an entry fee…

…An alternative is offered by Tollbit, which bills itself as a paywall for bots. It allows content sites to charge AI crawlers varying rates: for instance, a magazine could charge more for new stories than old ones. In the first quarter of this year Tollbit processed 15m micro-transactions of this sort, for 2,000 content producers including the Associated Press and Newsweek…

…One of Tollbit’s highest per-crawl rates is charged by a local newspaper.

Another model is being put forward by ProRata, a startup led by Bill Gross, a pioneer in the 1990s of the pay-as-you-click online ads that have powered much of the web ever since. He proposes that money from ads placed alongside AI-generated answers should be redistributed to sites in proportion to how much their content contributed to the answer. ProRata has its own answer engine, Gist.ai, which shares ad revenue with its 500-plus partners, which include the Financial Times and the Atlantic…

…As for the idea that Google is disseminating less human traffic than before, Mr Stein says the company has not noticed a dramatic decline in the number of outbound clicks, though it declines to make the number public. There are other reasons besides AI why people may be visiting sites less. Maybe they are scrolling social media. Maybe they are listening to podcasts.

Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. We currently have a vested interest in Alphabet (the company behind AlphaGo Zero and Google). Holdings are subject to change at any time.