Ludwig von Mises on how private property and the free market allows non-conformists to exist

In the political sphere, there is no means for an individual or a small group of individuals to disobey the will of the majority. But in the intellectual field private property makes rebellion possible. The rebel has to pay a price for his independence; there are in this universe no prizes that can be won without sacrifices. But if a man is willing to pay the price, he is free to deviate from the ruling orthodoxy or neo-orthodoxy.

What would conditions have been in the socialist commonwealth for heretics like Kierkegaard, Schopenauer, Veblen, or Freud? For Monet, Courbet, Walt Whitman, Rilke, or Kafka? In all ages, pioneers of new ways of thinking and acting could work only because private property made contempt of the majority's ways possible. Only a few of these separatists were themselves economically independent enough to defy the government into the opinions of the majority. But they found in the climate of the free economy among the public people prepared to aid and support them. What would Marx have done without his patron, the manufacturer Friedrich Engels?

~ Ludwig von Mises, "The Rise of Capitalism," Liberty & Property

Jordan Peterson on the right to offend

You're going to come out on stage and you're going to say something important about something vital, and you're not going to offend one person in a thousand?  Well, you can't say anything about anything important ever without offending, probably with the person you're talking to.  Important speech about important issues, especially contentious issues, is instantly offensive.

~ Jordan Peterson, "Free Speech and the Right to Offend, 0:23-0:44 mark, YouTube, March 14, 2018

Bethany McLean on Tesla's Gigafactory 2 boondoggle in Buffalo, NY

In public, Musk doesn’t talk much about Tesla’s factory in Buffalo—a place he once, in better times, dubbed Gigafactory 2. Gigafactory 1, of course, is Tesla’s much-hyped futuristic electric car plant outside Reno. Gigafactory 2, which is shrouded in silence and secrets, was a controversial side venture: a high-stakes move to dominate America’s growing market for solar energy. Tesla bought the factory’s main tenant, SolarCity, for almost $5 billion in 2016. The plan, in true Muskian hyperbole, was to turn the plant in Buffalo into what was billed as the largest manufacturing facility of its kind in the Western Hemisphere. SolarCity would build 10,000 solar panels per day and install them on homes and businesses across the country. In the process, it would create 5,000 jobs in an area that very much needed them. “This is one of the poorest cities in the country,” Scott says. “You get a big company here, and it’s a big deal.”

From the outside, the sheer scale of the Buffalo plant sparkles with promise. At 1.2 million square feet, it stands at the point where the Buffalo River bends through the city. The building is gleaming white, as if to signify its freshness amid a landscape of abandoned grain elevators and sprawling, desolate steel mills. The area around the factory is hardscrabble working class; until SolarCity was built, people only drove through it when the fierce wind off Lake Erie shut down the highway that residents take from the southern suburbs to downtown. Now three flags fly in front of the factory: those of the United States, New York State, and Tesla.

But three years after Tesla bought SolarCity, there are serious doubts as to whether the plant will ever fulfill its promises. The website CleanTechnica, which is mostly supportive of Musk, calls SolarCity “a disaster waiting to happen.” A potentially costly lawsuit alleges that Tesla acquired SolarCity at the expense of its own shareholders. And former employees want to know what happened to the massive subsidy Tesla received. “New York State taxpayers deserved more from a $750 million investment,” a laid-off employee named Dale Witherell wrote to Senator Kirsten Gillibrand. “Tesla has done a tremendous job providing smoke and mirrors and empty promises to the area.”

~ Bethany McLean, "How Elon Musk Fooled Investors, Bilked Taxpayers, and Gambled Tesla in Order to Save SolarCity," Vanity Fair, August 25, 2019

Brian Moynihan: "We have nothing to fear about a recession" (2019)

We have nothing to fear about a recession right now except for the fear of recession.

~ Brian Moynihan, CEO, Bank of America, Bloomberg Television interview, August 16, 2019

Council of Institutional Investors on giving "stakeholders" a seat at the corporate table

Accountability to everyone means accountability to no one.

~ Council of Institutional Investors, "Council of Institutional Investors Responds to Business Roundtable Statement on Corporate Purpose," August 19, 2019

James Kvaal on student debt

We are running a big experiment here: No generation before has carried student debt burdens anything like what today's students are carrying.  There will be substantial amounts of student debt that will never be repaid.

~ James Kvaal, president of the Insitute for College Access & Success and former Obama adviser, as quoted in "The Lasting Burden of Student Debt: Paying off the $1.6 trillion bill for higher education could take U.S. borrowers a lifetime," Bloomberg Businessweek, August 19, 2019

Scott Galloway on the timing of business startups (and WeWork's IPO timing)

I've started nine firms and I'm, generously, 3-4-2 (win-lose-tie). In retrospect, and I think about this a lot, the only reliable forward-looking indicator of our firm’s success or failure was … timing. Specifically, the part of the economic cycle at founding. The firms we started in recessions had an easier time finding talent, controlling costs, and getting immediate feedback about if this thing worked as clients/consumers held their purse strings closed. Then, armed with a battle-tested value proposition, as the recession ended, we enjoyed the afterburner of confidence to spend more and try new things. #disco.

In frothy markets, it's easy to enter into a consensual hallucination, with investors and markets, that you’re creating value. And it’s easy to wallpaper over the shortcomings of the business with a bull market's halcyon: cheap capital. WeWork has brought new meaning to the word wallpaper. This is more reminiscent of the cheap marbled panelling you'd find in Mike Brady's home office — panelling whose mucilaginous coating will dissipate at the first whiff of a recession, revealing a family of raccoons or the mummified corpses of drug mules. 

~ Scott Galloway, "WeWTF," No Mercy / No Malice blog, August 16, 2019

CB Insights: Is WeWork too big to fail?

WeWork currently manages more than more than 5.2M square feet of commercial real estate in New York City alone. This puts the company in a unique bargaining position. Although it may not be healthy for the economics of the business, it’s hard to imagine that WeWork would be allowed to rapidly fail without some external help, according to the New York Times’ Andrew Ross Sorkin.

With so much space under its management, if WeWork were to fail, its sudden departure could cause commercial real estate prices in key markets such as London and New York to plunge. This would be more problematic for investors and other interested parties — like the government — than helping prop up the company.

~ CB Insights, "WeWork's $47 Billion Dream: The Lavishly Funded Startup That Could Disrupt Commercial Real Estate," 2019

Scott Galloway on WeWork's valuation

The last round "valuation" is an illusion. SoftBank invested at this valuation with a "pref," meaning their money is the first money out, limiting the downside. The suckers, idiots, CNBC viewers, great Americans, and people trying to feel young again who buy on the first trade — or after — don’t have this downside protection. Similar to the DJIA, last-round private valuations are harmful metrics that create the illusion of prosperity. The bankers (JPM and Goldman) stand to register flinging feces at retail investors visiting the unicorn zoo. Any equity analyst who endorses this stock above a $10 billion valuation is lying, stupid, or both.

~ Scott Galloway, "WeWTF," No Mercy / No Malice blog, August 16, 2019

Scott Galloway on the cult of personality at WeWork

WeWork's prospectus has a dedication (no joke): "We dedicate this to the power of We — greater than any one of us, but inside each of us." Pretty sure Jim Jones had t-shirts printed up with this inspiring missive. Speaking of idolatry, "Adam" (as in Neumann) is mentioned 169 times, vs. an average of 25 mentions for founder/CEOs in other unicorn prospectuses. Uber’s CEO, Dara Khosrowshahi, is mentioned 29 times in their prospectus. Granted, "Adam" is super dreamy, in sort of an Argentinian polo player way (he's Israeli). But he's not 6x dreamier than Dara, who has a whole “Omar Sharif, if he went to Brown” thing going on. But I digress. We's mission is "to elevate the world's consciousness." Maybe, but it's clear the mission of the prospectus is to dampen our consciousness ahead of the sh*tshow that is "The Story of Us: We."

~ Scott Galloway, "WeWTF," No Mercy / No Malice blog, August 16, 2019

Scott Galloway on mismatched durations at WeWork

The founder of Kohlberg Capital, Jim Kohlberg (total gangster), taught me investment firms go out of business because of "mismatched durations." It’s about raising money short (customers who can stop buying your product service soon/tomorrow) and investing money long (10-year leases). WeWTF is an especially risky business going into a recession, when the ability to variabilize costs is limited, but revenue decline is unlimited. WeWTF has $47 billion in long-term obligations (leases) and will do $3 billion in revenue this year. What could go wrong?

~ Scott Galloway, "WeWTF," No Mercy / No Malice blog, August 16, 2019

Peter Atwater on residents of Hong Kong leaving for Taiwan

Few behaviors express sentiment like voluntary emigration.  We finally flee when we see hopelessness.

~ Peter Atwater, August 20, 2019 tweet

Laurence B. Siegel: "Are investors operating in a zoo?"

In the investment field, we are often told to pay attention to alphas, betas, standard deviations, and correlations – the language of specialized expertise. I’ve argued elsewhere that such knowledge is important. But investors also face the challenges of bull runs and bear raids, snake oil salesmen, black swans, and red herrings (a quasi-sarcastic term for private equity documents promising boundless riches that rarely materialize). Are investors operating in a zoo?

Yes – the human zoo, with all the frailties that human beings have displayed since the beginning of time. To navigate this often unkind environment, one must be a zoologist, or, as we call students of the human zoo, generalists or humanists. First and foremost, we must understand the past and its endless variations on a few themes, notably greed, fear, and ignorance.

But we must also understand the upside, or we could not in good conscience be investors. We must observe that living conditions have been improving for at least two centuries and are likely to keep doing so for many more. Business men and women, scientists, engineers, artists and writers, and many others have contributed immensely to this Great Enrichment. By investing wisely, one can participate in its continuance.

~ Laurence B. Siegel, "The Advantage of Generalists Over Specialists," Adviser Perspectives, August 19, 2019

Robert Hagstrom recalls a talk by Charlie Munger about finance "as part of a larger body of knowledge"

Rather than discussing the stock market, he intended to talk about “stock picking as a subdivision of the art of worldly wisdom.” ...[H]e challenged the students to broaden their vision of the market, of finance, and of economics in general; to see them...as part of a larger body of knowledge...that...also incorporates psychology, engineering, mathematics, physics, and the humanities... [E]ach discipline entwines with, and in the process strengthens, every other.

~ Robert Hagstrom, The Warren Buffett Way