From weight loss pills, trends for 2024, rule of x, Paul Graham's memo, CPU's comeback to Ola IPO
Happy New Year Folks! Hope 2024 be the best year of your life!
Strong Opinions, Weakly Held
Caught My Interest
Science Corner
Random Stuff
Strong Opinions, Weakly Held
Consumer experience follows a steady arc toward more convenient, more affordable, and more enjoyable, with technology acting as the force bending the arc. More enjoyable often means more personalized to our distinct wants and needs. Hyper-personalization is one of the largest decades-long shifts and with AI it’ll be consumerism’s biggest theme of the decade. Imagine having your own personalized healthcare plan, your own personalized learning path, your own personalized shopping recommendations
All the problems that exist in this world are at its core computational problems. From mental illness to cancer to climate change are all the overarching questions for computational superiority! (Therefore, I encourage everyone to read about Quantum computers which will hopefully someday be the answer to majority of the problems)
Technology has been associated with fostering inequality, favoring the 20% of society who are smart and educated enough to take full advantage of it. However, I hold a more optimistic perspective; the influx of new technologies - AI- into our economy might alleviate a significant portion of the skills gap that emerged since the 1980s
Startups are 10x more likely to die from suicide than homicide (I intend to post every opinion since the first newsletter until any of my ever-evolving beliefs mentioned above are challenged or reshaped)
Caught My Interest
Well, we are all likely coming across forecasts regarding the top trends of 2024. However, this prediction stands out because it comes from none other than Ruchir Sharma, an investor whom I truly admire. For context, he has been making these predictions for the past six years, and of the ten trends he predicts, he has a batting average of 8-9. So, yes, this is one of those ten trends that holds significance. (An interview with a detailed discussion of these trends will be out soon)
Here is an intriguing exploration of the Rule of X, providing an alternative perspective to the Rule of 40 commonly used for business evaluations. Unlike the Rule of 40, the Rule of X suggests that, in tight market conditions like today's, investors proposing a shift in focus from growth to margins may be misguided. This mathematically-supported rule contends that this idea is entirely false. Long-term models indicate that, even in challenging markets, growth should be valued at least ~2x-3x more than the FCF margin. While a margin increase has a linear impact on value, an increase in the growth rate can have a compounding effect on value (refer to this post by Bessemer for further insights)
While there's a tendency to attribute the AI frenzy to VCs, the truth is that big tech accounted for two-thirds of total AI investments in 2023. With nearly $0.66 of every $1 invested in AI directed towards foundational models, as VCs, should we solely focus on tools or the application layer for value creation? How do we compete with the fat cheques of big tech?
Here’s another masterpiece from Paul Graham: Do Things that Don’t Scale. The need to do something unscalably laborious to get started is so nearly universal that it might be a good idea to stop thinking of startup ideas as scalars. Instead, we should try thinking of them as pairs of what you will build, plus the unscalable thing(s) you will do initially to get the company going. It could be interesting to start viewing startup ideas this way, because now that there are two components you can try to be imaginative about the second as well as the first
There are various companies that aim to democratize AI by open-sourcing foundational models. Another company is gunning for a similar result by allowing AI functions to run on CPUs. Through techniques such as hashing-based algorithms and quantization, a future may emerge where AI can be run not only on GPUs but also on CPUs. Can the old CPU make a comeback in the AI reign?
In the midst of the debate on whether it’ll be a soft landing here’s an alternative viewpoint worth considering wherein Lawrence Summers thinks that we might be underestimating the inflation risk and overestimating the amount of interest rate cut by FED. I too hold this belief that it’s too optimistic of us to already price in the possibility of a soft landing
Science Corner
Riding the wave of Ozempic's popularity, if its cost or the prospect of prolonged use doesn't appeal to you, an alternative is in development. Enter the vibrating weight loss pill—a new weight-loss pill that tricks the brain into thinking the stomach is full, by stimulating the nerve endings that sense when the stomach expands
Random Stuff
$7.6 trillion worth of debt in the US will mature next year. The trend that’s set below along with the issue of term premium is just piling on the debt problems of the US. In the 2010s, with inflation low and central banks buying bonds by the billions, that risk disappeared. Only now, debts and deficits are much larger than before the pandemic, inflation has not fully retreated, and central banks are no longer big bond buyers. Even if inflation fades further, investors probably will demand something extra to keep absorbing the huge supply of government bonds. US should be prepared to refinance the debt at painful levels
Wait, what’s happening here? Do we call it a coincidence? The S&P 500 rally was already deemed shallow because of the overreliance on big tech and now you're telling me $ devaluation might also have something to do with it
And just a reminder as to how crazy the IPO market has become!
Summary of Open Source vs Closed Source Foundation Models in layman’s terms
Thank you for perusing my newsletter. I'm delighted to engage in discussions about any of the topics mentioned above. Feel free to reach out. Additionally, if you've stumbled upon any intriguing reads, do share them with me. Let's keep the conversation flowing!
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