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ESG and Private Markets in Vogue
The graphs above represent two very different asset classes undergoing very similar trends. Like it or not, when a particular asset class or theme is in vogue, sizeable asset flows tend to follow suit – leading to upward momentum in returns as assets get repriced higher.
We are decidedly positive on ESG (environmental, social, governance) investing, but are nonetheless cautious as a fair amount of “greenwashing” is taking place across the investment spectrum. Looking under the hood can reveal more sizzle than steak.
As for private markets, they undoubtedly play a role in an asset mix, particularly given the decline in certain public market opportunities. That said, the flood of capital has pushed valuations to a level where having more portfolio liquidity is almost certainly not a bad thing.
An excellent speech from Clayton Christianson (HBS) on purpose and living a meaningful life:
When people who have a high need for achievement…have an extra half hour of time or an extra ounce of energy, they’ll unconsciously allocate it to activities that yield the most tangible accomplishments. And our careers provide the most concrete evidence that we’re moving forward. You ship a product, finish a design, complete a presentation, close a sale, teach a class, publish a paper, get paid, get promoted.
In contrast, investing time and energy in your relationship with your spouse and children typically doesn’t offer that same immediate sense of achievement. Kids misbehave every day. It’s really not until 20 years down the road that you can put your hands on your hips and say, “I raised a good son or a good daughter.” You can neglect your relationship with your spouse, and on a day-to-day basis, it doesn’t seem as if things are deteriorating. People who are driven to excel have this unconscious propensity to underinvest in their families and overinvest in their careers—even though intimate and loving relationships with their families are the most powerful and enduring source of happiness.
Sam Altman is widely regarded as one of the foremost experts when it comes to angel investing. As President of Y Combinator, Altman shares his thoughts about investing in startups (which also translate well into how we should all think about investing, hiring, and helping others). None of this is rocket science but it is the type of content that doesn’t hurt to revisit from time to time. On aligning with the right founders (or management teams):
I look for founders who are scrappy and formidable at the same time (a rarer combination than it sounds); mission-oriented, obsessed with their companies, relentless, and determined; extremely smart (necessary but certainly not sufficient); decisive, fast-moving, and willful; courageous, high-conviction, and willing to be misunderstood; strong communicators and infectious evangelists; and capable of becoming tough and ambitious.
Some of these characteristics seem to be easier to change than others; for example, I have noticed that people can become much tougher and more ambitious rapidly, but people tend to be either slow movers or fast movers and that seems harder to change. Being a fast mover is a big thing; a somewhat trivial example is that I have almost never made money investing in founders who do not respond quickly to important emails.
Also, it sounds obvious, but the successful founders I’ve funded believe they are eventually certain to be successful.
We skipped sending out the last few memos from Howard Marks for fear of inundating our subscribers. The lessons shared in his latest letter, however, are certainly worth sharing given the current investing climate. The accumulation of good decisions produced via a sound process will, over a reasonable time period, have a dramatically more positive effect on quality of life than relying on chance or short-term trends:
…You make the best decision you can based on what you know, but the success of your decision will be heavily influenced by (a) relevant information you may lack and (b) luck or randomness. Because of these two factors, well-thought-out decisions may fail, and poor decisions may succeed. While it might seem counterintuitive, the best decision-maker isn’t necessarily the person with the most successes, but rather the one with the best process and judgement. The two can be far from the same, and especially over a small number of trials, it can be impossible to tell who is who.
Ben Evans’ annual presentation on macro trends in tech is always a worthwhile read. This edition focuses on the question “what is the next S curve” in tech. There are 5.5 billion adults on planet Earth, of which 5 billion have a phone and 4 billion have a smart phone. It is pretty safe to say that the smart phone has more or less been democratized at this point – so, what’s next? According to Ben, a portion of the next wave will likely include a fair amount of regulation and further management of the incredibly complex ecosystem that has been created. In Ben’s words:
Software ate the world, so all the world’s problems get expressed in software. We connected everyone, including the bad people.
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