All around, the wedding last weekend was a great time. Since graduating college, the only thing that has changed with this group of friends is that we drink fancier beer now.
It’s been a pretty busy fall for the Novem Investment team. We’re in the middle of a big marketing push and it’s also earnings season. Yeehaw.
The corporate lifecycle video by Damodaran is pretty long but he is a charismatic speaker and I think it’s well done. I kept the rest of the weekend reading light so that you can spend more time on the Damodaran piece.
The Corporate Lifecycle by Aswath Damodaran
24:00 Tech companies age in dog-years
40:00 Every number should tell a story and every story should be connected to a number.
1:06:00 Winner-take all businesses where there is easy access to capital (like ride-sharing) are probably a loser’s game with no profits.
1:12:00 Reincarnation (like what Apple did with the iPhone) is very rare and highly unlikely. In attempting to reinvent itself, it’s far more likely that a mature company destroys value (like Kodak) than reinvent itself.
The cover page to an old Goldman research note defending Enron in October 2001 is circulating on Twitter…
- “We strongly reiterate our Recommended List rating on Enron stock.”
- “We spoke recently with top management including the CEO, CFO, chief accounting officer, and the head of wholesale services. We challenged top management on a wide range of investor concerns that have weighed heavily on the shares and believe that the majority of market speculation is groundless, and that which has some truth to it, to be exaggerated.”
- “We view Enron as one of the best companies in the economy, let alone among the companies in our energy convergence space.”
I love to pick on Goldman as much as the next guy but in defense of this poor analyst, he didn’t have good info. The numbers were fictitious and management was lying. In the end, 21 people were convicted and the CEO (Jeff Skilling) and CFO (Andrew Fastow) went to prison.
Smart People and Institutions Make Dumb Mistakes Too
Construction on London’s “Walkie Talkie” building had just started when I was living over there. It came to be known as one of the UK’s ugliest buildings. Aside from aesthetics- there were some other very serious design flaws…
Excerpt from Humble Pi by Matt Parker. In 2013, the building at 20 Fenchurch Street in London slightly melted a parked car:
“A building doesn’t have to fall down to count as an engineering mistake. The building at 20 Fenchurch Street in London was nearing completion in 2013 when a major design flaw became apparent. It was nothing to do with the structural integrity of the building; it was completed in 2014 and is perfectly functioning building to this day, and was sold in 2017 for a record-breaking 1.3 billing pounds. By all measures, it’s a successful building. Except, during the summer of 2013, it started setting things on fire.
“The exterior of the building was designed by architect Rafael Viñoly to have a sweeping curve, but this meant that all the reflective glass windows accidentally became a massive concave mirror — a kind of giant lens in the sky able to focus sunlight on a tiny area. It’s not often sunny in London, but when a sun-filled day in summer 2013 lined up with the recently completed windows, a death heat-ray swept across London.
“Okay, it wasn’t that bad. But it was producing temperatures of around 90 degrees C, which was enough to scorch the dormant at a nearby barber’s shop. A parked car was a bit melted and someone claimed it burned their lemon (that’s not cockney rhyming slang; it was an actual lemon). A local reporter with a flair for the dramatic took the opportunity to fry some eggs by placing a pan in the hotspot.
“There was an easy enough fix, though: a sunshade was attached to the building to block the sun’s rays before they could focus on anyone else’s lemon. And it’s not as if this freak alignment of reflective surfaces could have been predicted in advance. It had never happened to a building before. At least, not since the same thing happened at the Vdara Hotel in Las Vegas in 2010. The curved glass front of the hotel focused sunlight and burned the skin of hotel guests lounging by the pool.
“But can we reasonably expect the architect of 20 Fenchurch Street to have known about a hotel out in Las Vegas? Well, the Vdara hotel was also designed by Rafael Viñoly, so we could probably expect some information flow between the two projects. But, for the record: there are always more factors at play. For all we know, Viñoly was hired specifically because the developers wanted a curved, shiny building.
“Even without a previous building having set something on fire, however, the mathematics of focusing light is very well understood. The shape of a parabola — that ubiquitous curve from whenever you had to graph any variation on y=x2 at school — will focus all directly incoming parallel light on to a single focal point. Satellite dishes are parabola-shaped for this exact reason; or rather they are paraboloids — a kind of 3D parabola.
“If the light is a bit misaligned, a sufficiently parabolic shape can still direct enough of it into a small enough region for it to be noticeable. There is a sculpture in Nottingham, the Sky Mirror, which is a shiny, paraboloid-like shape, and local legend has it that it has been known to set passing pigeons on fire. (Spoiler: it probably hasn’t.)”
- It’s well documented that we are all influenced heavily by behavioral and emotional biases. These sort of institutional failures are just one example.
- Big-name architect, big name construction company, big name developer… one would expect that these successful experts know what they’re doing and, in the event that there was a flaw, someone would speak up. Definitely a bit of a Halo-effect here. Perhaps some overconfidence on the part of the architect who was clearly more enthralled with artistic design than the actualities of his project.
Big grudge match here with Monday Night Football. Thomas is a Titans’ fan while yours truly cheers for the Bills.
Last year, the Titans absolutely demolished the Bills. It was painful to watch. I came into work the next day to find one of those “sorry for your loss” sympathy cards on my desk… The card is still hanging on my wall and I look at it every day and remember how much Thomas annoys me.
In 2019, the Bills snuck by after the Titans kicker missed 4 field goals. Thomas, annoyed yet confident, claimed that he could “hit a 40 yarder, no problem.” Side betting ensued and pretty soon we found ourselves at a local football field over lunch. The over/under was 3.5 if my memory is correct. Thomas took home some serious money.
Bills or Titans? Who ya got? Any good ideas for side-bets please send to RIA.Trading@novemgroup.com
National Boss Day
Just found out that National Boss Day is October 16th. Huge that this falls on a Saturday so we don’t have to do anything.
Go Bills. Have a great weekend.