No. 260 – Entering a New World We Have No Idea About

Source: Guggenheim Partners

We Are All Government-Sponsored Enterprises Now – This is interesting analysis by Guggenheim’s Chief Investment Officer Scott Minerd where he basically says that we’re potentially heading to a situation where the government will be beholden to ensuring companies and markets have access to credit because of how it’s navigating this pandemic situation. A lot of companies are able to access credit because the Federal Reserve and Treasury have offered to back investment grade companies.

If Minerd’s analysis is right then I imagine we have to have a different kind of conversation around the nature of our private sector. The incentives to build must feel different when the Treasury Department and Federal Reserve are guaranteeing they won’t let you hit the floor. My daughter struggles to ride her back to this day because she knows I won’t let her fall.

Howard Marks on Uncertainty – Howard Marks wrote a really interesting piece on how an investor works through uncertainty. He starts off talking about the importance of forecasting and how investors ideally gain an edge and create profits by being able to forecast what others aren’t yet seeing. In the current pandemic, there’s so many unknowns that it’s nearly impossible to predict the future – like you really can.

Marks spends a good bit of time on the role bias plays in forecasting and how it’s important to be aware of your blind spots. He says he knows his but doesn’t know the word for it. In my mind one of the best things you can do to address your bias is to surround yourself with people and points of views that oppose one another. It’s hard for me to believe no one will put a name to your BS in that kind of environment.

I also appreciate his treatment of intellectual humility and its importance for investors—knowing what you don’t now. In the midst of being clear on what you don’t know, I think this highlights the importance of firming up on your first principles and being clear on what your True North is. I hinted at mine yesterday–finding a way for black people globally to connect with one another socially, politically, and economically.

Here’s to us being able to operate in the uncertain, getting clear on what we don’t know, and pushing for greater intellectual humility.

Also, I imagine people like Marks can’t be too thrilled with Minerd’s forecasts about the Federal Reserve and Treasury. He’s raising $15B to find distressed companies whose debt he can buy. The federal government providing support for investment-grade companies makes things more difficult for him to find attractive opportunities.

19 Industry Associations Pen Letter to Congress Asking for Liability Protections – A group of industry associations representing a range of industries from travel to retail to entertainment wrote a letter to Congress asking for liability protection as they implement federal guidelines for maintaining workplaces that keep employees and customers safe. It’s definitely important that companies don’t face unwarranted litigation, but I can’t help but notice in the letter that they work with all sorts of stakeholders excluding their employees and customers. I’m pretty sure that would have gone a long way in building good will to ensure that everyone’s on the same page in reopening the economy while protecting the interests of stakeholders.

Silicon Valley self-driving car unicorn could be reaching the end of the road – A couple years ago, I was excited to see a black woman take on the CEO role at Zoox, a self-driving car start up The company faces a tough situation because of its high cost structure. Their cars are built from the ground up rather than the retrofits their competitors use. It looks like Zoox is looking in parallel for either a buyer or investors from whom they can raise more money. Hopefully the company finds a reasonable deal that keeps CEO Aicha Evans at the helm. I keep thinking about Julia Collins who left robotic pizza maker Zume not too long after the company raised $375M from Softbank Group.

Facebook is quietly helping to set up a new pro-tech advocacy group to battle Washington – Last year, Mark Zuckerberg called for stronger regulation of the technology sector. I’m curious to see how this new group Facebook is helping to set up will be engaging that conversation. My hope is that the company approaches this new world of tech regulation in good faith. The company’s establishment of an oversight board to address its privacy issues the company has been dealing with the past several years was encouraging. It’d be a shame to see the company engaged in other activity that detracts from that progress.

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