Welcome to Stuff I Thought About Last Week, a personal collection of topics on tech, innovation, science, the digital economic transition, the finance industry, and whatever else made me think last week.
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In today’s post: a look at the market dynamics making investing fun again in 2025; startups built on LLM platforms are growing revenues faster than their cloud software predecessors; Amazon's robot diversity; China's leveling fuel consumption; Oura Rings; a few recent celebrity profiles I enjoyed; speculating on the rise of Christianity in young American men; NZS updates; and, much more below.
Stuff about Innovation and Technology
AI startups built on the LLM platforms are growing revenue faster than cloud software companies ever did, according to payment processor Stripe. As the costs of AI decline, developers will rapidly take advantage of the technology’s expanding capabilities.
In their fulfillment centers, Amazon has over 750,000 robots encompassing a diverse set of form factors and purposes. It’s interesting to see the heterogeneity of worker bots, as well as the rising incorporation of computer vision and AI. Did you know that Amazon also offers fulfillment center tours to the public?
The International Energy Agency reports that China’s fuel consumption may have already plateaued, thanks to their rapid adoption of hybrids and EVs. China’s current fuel consumption is “narrowly” above 2019 levels.
Bloomberg profiles smart-ring maker Oura and its dynamic leader Tom Hale. I’ve been wearing an Oura Ring every day for over five years, and I love all the health/fitness insights it provides. You can also export the data and have some fun analyzing seasonal and year-to-year trends using LLMs.
Unemployment for IT workers hit 5.7% in January, presumably in no small part thanks to the impact of AI. The rate jump was significant vs. December’s 3.9%.
Miscellaneous Stuff
The CEO of Ford discusses his famous cousin Chris Farley. Jim Farley recalls growing up in the Farley family and trying to support Chris as he struggled with the pressures of Hollywood fame.
Christopher Walken’s real name is Ronnie Walken and, at one point, he ran away to join the circus as a lion tamer.
Harrison Ford is featured in a long WSJ profile. My favorite Ford character is when he plays “cranky Ford” on talk shows. Here is his most recent performance on Kimmel.
Young Men’s Amen
Pew reports that the steady decline of Christianity in recent decades is showing signs of leveling off in the US. If you dig through the recent data and compare them to the previous survey, the major delta is young men closing the gender gap with women in religiosity (see the table on page 39 of the PDF). Last year, the NYT reported anecdotally on this phenomenon in: “In a First Among Christians, Young Men Are More Religious Than Young Women”. Several years ago, I began exploring possible reasons behind the growing sense of hopelessness in younger generations (which seems to be stronger in young men than women). In Giving Up on the Old College Try in 2021, I tried to connect the dots on this tangible problem. Related, Pew recently reported a large rise in workers uncertain about how AI could impact their jobs. In the very first publicly available issue of SITALWeek in 2019, I wrote the following about Kurt Vonnegut’s prescient novel Player Piano:
Written in 1952, Player Piano takes place in an alternate post-war world where machines have been elevated to all decision making and humans become for the most part increasingly useless. It’s an obvious parallel to the issues facing humans today as AI takes over more and more jobs. One of the book’s insights is that it’s human nature to destroy the things we’ve built, so we can build them back up again. Humans are tool and technology building machines – it’s where the fitness function of natural selection landed our mind-bodies after millions of years. To rail against technology platforms of the 21st century is to rail against the wheel, fire, spears, etc. It’s the same story, different century in human progress – this decade it’s all about AI turning on humans.
Last year saw an encouraging decline in deaths from drug overdoses (although the rate remains well above pre-pandemic levels). It could be that young men have, on the margin, found their savior as the US undergoes a Constantinian Shift.
Stuff About Demographics, the Economy, and Investing
New Hires at NZS
NZS Capital is excited to welcome two new hires in 2025. Alexandra Pope joins NZS as Head of Investor Relations. With prior roles at Avala Global, Calixto, and Trian Partners, Alex will be an excellent resource for current and future NZS Capital clients. If you would like to touch base with Alex, please reply back to this email and I will make the connection. Also, Ethan Bennett recently started as our IT and Analytics Associate. Ethan is working on our technology systems as well as our ongoing efforts to incorporate AI into our research/investment process to decrease cognitive bias.
Cognex’ Vision
Brett recently made a repeat appearance on Business Breakdowns, this time discussing NZS Capital holding Cognex.
Power Hedge
Hedge funds are powerlawing, with BI reporting that the four largest multistrategy firms (Millennium, Citadel, Point72, and Balyasny) employ 71% of the 18,600 people working for 53 multistrategy firms. These four are also around half of the total $366B in hedge fund assets. Bigger appears to be better for the moment as firms with over $10B in assets outperformed all multistrategy hedge funds by around 5% in 2024 (however, all of these firms on average materially underperformed the broader market in the period). As a professional market observer for over a quarter century, I suspect that one of the reasons why the market has become far more interesting for active managers recently (see the next section for more on that) is because of this concentration of assets and, importantly, the shift from traditional algorithmic and high-frequency trading strategies to AI and LLM-based ones.
Active Fun
This week, I would like to take the opportunity to thank President Trump for making investing fun again. Recently, we spent some time reflecting upon the first five years of our performance at NZS Capital (the Q4 2024 letter can be found here). And, it’s not that it hasn’t been a blast this past half decade investing on behalf of our clients, but there were several extended moments in the market where correlations ran high and interest rates were driving the bus. It was a little bit trickier at times to construct a portfolio that could provide uncorrelated alpha in a market whose performance was dominated by a small number of very large companies (it’s also been an especially good time period to employ our Complexity Investing strategy where we hold predictions very loosely). We joke that last year we were ahead of the market, but we did it the hard way by being underweight the group of dominant large cap stocks (more details can be found in the letter linked above). But, then something magical happened in the new year: the market started to feel, perhaps, like it was decorrelating. Uncertainty is on the rise and ranges of outcomes are widening. I do not welcome this uncertainty, nor do I agree with much of the agenda responsible for the current atmosphere or the way it’s being implemented (i.e., with dire consequences for real people’s lives). But, I always do my best to look for the silver lining, so I’ll embrace the fact that it’s a fun time to be an investor again.
One of the (many, many) sources of volatility is the split personality of the economy. I recently came across the University of Michigan’s inflation expectation survey divided by political beliefs. Republicans in the survey had consistently higher, persistent inflation expectations going back to mid-2021, while democrats’ expectations settled down to match the reality of a more muted inflation outlook in 2024 (I do not have a good way of showing these data publicly to readers; if you have a Bloomberg Terminal, the tickers are CONSIN1R and CONSIN1D). In mid-2022, republicans expected 7.8% inflation compared to democrats at 4.3%. The gap steadily closed, with the October 2024 results showing 3.7% for republicans and 1.6% for democrats. The trajectories of these differing expectations are consistent with the campaign messaging of both parties, which steadily bombarded voters with a near-infinite stream of social media nonsense. Since last October, however, the survey stats have gone wild! Republican inflation expectations went from 3.7% to negative 0.1% while democrats’ went from 1.6% to 5.4% (as of February 2025). Not only did the positions reverse, with democrats expecting higher inflation, the delta of 5.5% is greater than the inverse peak delta of 3.8% in October of 2022. The chart makes your eyes cross. For reference, a recent NY Fed survey of corporate managers showed 4% expected inflation in the next 12 months. If you are unlucky enough to have a degree in economics, you might recall the traditional view that inflation is predicated upon people’s expectations of future inflation. In other words, it’s a reflexive cycle whereby people and businesses expecting higher future prices stock up on goods today to lock in lower prices. That drives an increase in current demand, which theoretically would cause near-term prices to rise, thus fulfilling the prophecy. In the Digital Age of rapid information flow, I am not sure expectations of inflation are the actual cause; rather, it’s perhaps unpredictable things like algorithmic collusion by landlords and private equity consolidating industries and raising prices unchecked. Tariffs are inflationary in the short term (and potentially long term if comparatively cheaper foreign goods are replaced by more expensive domestically made stuff). Labor scarcity is also inflationary. (For more on these changing economic winds, see the end of the last SITALWeek titled Economic Shock). If half of the country is expecting all of these things to be inflationary, that might drive inflation via the traditional theory of buying ahead, but if the other half thinks prices are going to fall, then what happens to actual inflation?
How far can this split-personality economy go? Have years of social media brainwashing transformed the perception of two different realities into an actual two-track economy? Will expectations of the two factions drive the fundamentals of two different economies or will they average out to a mediocre middle ground? How are companies supposed to react to all of the pending economic shocks in the US? Should supply-chain managers amass inventory to sell to their inflation-wary democratic consumers eager to stock up, but steadily mete out goods to their republican consumers more likely to wait to buy until they need something? Could there be two economies driven by differing political beliefs? Since the start of 2024, the value of a used Tesla has declined 20% while all other used cars have declined 6%, according to CarGurus. But, I digress. Back in SITALWeek #367, I wrote in Divisive Banking that the US economy was at risk of splitting in two. I suggested we might see companies specifically catering to affiliates of one particular political party or the other; since then, we’ve seen examples of ETFs emerge that are either “woke” or “anti-woke”. Consumers have traditionally voted with their wallets (when it’s convenient to do so!); but, will the two different perceptions of reality cause a legitimate split, one which might manifest state by state, with red states experiencing very different economies than blue ones? Since the election, we have seen almost all of corporate America rapidly chameleon – adopting an entirely different set of beliefs and values to get in line with the new US administration – suggesting that businesses could be adapting in real time to the new landscape of multiple realities their customers inhabit. I don’t know if the Information Age has the ability to actually render perception into reality. As we learned from David Bowie, this choose-your-own-reality trend all started in the 1970s, and we are now perhaps reaching its logical end state. I’ll be on the edge of my seat as I watch the next installment of reality unfold – I can’t wait to see which of the two inflation indices is right. What a great time to be an active investor!
✌️-Brad
Disclaimers:
The content of this newsletter is my personal opinion as of the date published and is subject to change without notice and may not reflect the opinion of NZS Capital, LLC. This newsletter is an informal gathering of topics I’ve recently read and thought about. I will sometimes state things in the newsletter that contradict my own views in order to provoke debate. Often I try to make jokes, and they aren’t very funny – sorry.
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