Rabbi's 🧠 Deli W4 May 2020
🍕Pizza's, Game-Engines and WarToys, Morgan Housel, a Booklist & More
💵 Business 💵
Pizza 🍕
You might not know this but in the past 5 years, Domino’s Pizza ($DPZ) has been a far more profitable stock to own than any of the FANG stocks, Tesla and even the beloved S&P 500 index.
👧How comes Rabbi?
🧔well, I’ll let Adam Keesling explain it to you:
Stores have small / no dining space and are optimized for delivery
Location of real estate is focused on the best routes, not the best foot traffic
Food product travels well and can feed a lot of people for cheap
The Fed (only partly joking here) doesn’t hurt financial engineering
I would say that summarizes it. Adam goes deeper into things like franchising, their decent app and the very neat financial engineering. You can read the whole piece about Domino’s here.
More about Pizza 🍕 🍕
Ranjan Roj wrote about a great story where basically is friend ordered his own pizzas but had to pay less than what they were actually worth, pocketing the profit.
Here is the crust of the story:
Trade 1
We went over the actual costs. Each pizza cost him approximately $7 ($6.50 in ingredients, $0.50 for the box). So if he paid $160 out of pocket plus $70 in expenses to net $240 from Doordash, he just made $10 in pure arbitrage profit. For all that trouble, it wasn't really worth it, but that first experiment did work.
My mind, as a combination trader and startup person, instantly had the though - just run this arbitrage over and over. You could massively even grow your top-line revenue while netting riskless profit, and maybe even get acquired at an inflated valuation :) He told me to chill out. Maybe this is why he runs an "actual business" while I trade options while doing brand consulting and writing newsletters.
But we did realize, if you removed the food costs this could get more interesting.
Trade 2
The order was put in for another 10 pizzas. But this time, he just put in the dough with no toppings (he indicated at the time dough was essentially costless at that scale, though pandemic baking may have changed things).
Now suddenly each trade would net $75 in riskless profit ⇒ $240 from Doordash minus ($160 in costs + $5 in boxes).
To profit from this little loophole you would have to open up a restaurant I guess.
I advise you don’t.
Read Ranjan’s whole 🍕 post here.
I think @Jack must have read these pieces as well:
Joe Rogan
You might know him as the bald guy that comments on the UFC fights. He likes to think you know him for his jokes. But you will most likely know him because of his Podcast. And It’s one of the biggest in the world.
Last week Joe announced the podcast would become a Spotify exclusive. It’s a big deal. While for now, you won’t need to subscribe to Spotify to listen to the show you might have to in the future.
Here is a great 🧵 by Ben Thompson from Stratechery about what difference between open and free podcasting. (I think the same applies to open source software and free software.)
Credit Cards and Inflation
As a consumer, I have a hard time understanding inflation when they talk about it on the telly. The talking heads keep telling us there is none while I find most things are becoming way more expensive. Since I am a simple man with simple tastes I can’t help but notice that the prices of shitty beer have been going up steadily.
Now corona has shaken everyone’s finances. And in the US credit cards, “the plastic money” is a huge part of consumer finance and the most important part of the economy.
In this episode of the Journal they talk about what credit card companies consider to be “valuable clients” and what these companies do during the Corona.
Main takeaways from the episode:
A valuable customer is a person that doesn’t pay the full amount that was charged by the credit card every month. The technical term is a “revolver”.
It’s interesting to the credit card company because they can start charging (very high) interest on the part you still need to repay.Middle-class living has become way more expensive since wages have not risen at the same pace as two major items: Healthcare and Education.
You might not need to pay back that debt for a couple of months but the bank makes sure the interest doesn’t stop. In essence, your debt just sits there growing for 3 months.
Of course, nobody at the credit card companies planned for a Corona-Type scenario, “Fighting the last war”. And so they don’t know themselves what to do.
Sales
Sales is hard. And People that earn a lot of money in it deserve it all for all the shit they need to handle. It’s a constant fight of rejection and pressure to meet quotas. Even if you are not in sales you should know how to sell better. It’s a very useful skill that combines really well with any other skill you have. And you should try to make many of the sorts of combinations of skills that go 1+1=3.
So here is a nice summary of how to get better at it from Hacker News (HN).
I also recommend people read the 1936 classic book “How to win friends and influence people”.
Our technology might change really quickly but our human nature has bearly changed for a thousand years. Know how it works.
ProTip: We humans CRAVE narrative. If you know how to create and shape it you have a type of magic power. Best summarized like this:
Other Great 🧵 that Deserve to be Seen
Gaming Engines:
Epic Games is the Daddy of Unreal Engine and I am sure you all already saw this insane video of how good this engine is.
And Matthew wrote a very nice thread on the business.
Epic Games is private so you can’t go on RH and buy the stock.
Some Big Dogs have bought some share tho, Tencent owns around 30% and Disney $DIS has some venture money in it. My two cents are that if you want a piece of it I think Epic Games becoming big will provide more bang for the buck in the Tencent stock compared to Disney stock. A fun thing to do is own a bit of both.
A Founders Battle Report:
A Founder CEO explains how hard he has been working (no pun intended).
These stories are very powerful for these guys in order to maintain the narrative power of being the founder and to some extent the underdog.
George Mack and the Mysterious @mmay3r
To me, the value of George Mack is his summaries of things he learned from Twitter Big Dogs. Here he is distilling a the distiller mmay3r :
Investing & Expectations with Meb Faber:
The performance of his Cambria investment funds isn’t really great. You are better off in SPY. That being said Meb is a great podcaster and a very transparent investor. Something very nice.
He wrote a four-part piece about investing and I recommend anyone to read it again.
I already showed a bit of the 🧵 liz made before but there is more good stuff check out the whole thing, part for VGR’s 100 tweets about a topic:
Gems From the Youtube📺
Investing
Morgan Housel is a great writer and a really good public speaker. I imagine he is also quite a good investor.
Lots to learn about giving a good talk and investing in this talk he gave to the CFA Society in India.
ORDEEEEEER!
The most famous Ordeeeer sound undoubtedly comes from John Bercow. Who is also famous for his colourful tie collection.
This man can speak the English language the way everyone hopes to speak.
What an orator! Extremely enjoyable to watch and very interesting man for obvious reasons.
Rants I Wrote: 💻
I wrote a quick rants about:
New Follows in Twitter World
BriksBooks Brisk is pretty new to twitter but is one of those accounts that takes quotes from books and gives them a graphic where the effect becomes a picture is worth reading the quote once but a 1000 times more useful.
Another account that uses the same technique is make and market.
This time the source material is startup founders and the result is the same.
A quick side note Tobi has given an interview with @Patrick_Oshag . I didn’t listen to it myself but I’m sure it will be good.
There is a subcult on fintwit I shall dub Vol-Twit (They could have a better name since their stratagies sound amazing; Strangles, Iron Condors, Gamma Scalping even Butterflies). I imagine they have become more popular because of guys like Nassim Taleb and people over at reddit’s notorious r/wsb that trade options on Robinhood. I don’t understand what they talk about 99% of the time but that makes it more fun.
I will count @Sparticuszorro as being part of this sub cult and he/she provided some nice rosetta stones to decipher the cryptic messages from VolTwit.
I still don’t really grasp these things so I keep it in the Too Hard box and lose my money in other ways instead. Nevertheless, it is still a funny subculture.
BTW: I typed in 14 * .4 in my Casio and it said 5.6 so I have no Idea what 99x means 🤷♂️
Books 📖
I found this list on Goodreads that I find just amazing.
Microhistory: Social Histories of Just One Thing.
These books tell the stories of single events that are mostly not mundane day to day.
For example, it contains the book “The professor and the madman” a book about the making of the Oxford English Dictionary (OED). Well, it turns out one of the #1 contributors was a guy in an insane asylum.
If you are into stories like that, this is the booklist you need.
YOLO
I never heard about this before but the name is already promising:
The Cannon Ball Run a type of race has a new record.
The participants need to drive 4507km and they did that in 26h. Pretty wild.
In order to minimize refuelling, these guys just added more gas in the trunk Mad Max-style. I’m pretty sure this is one of the records you can’t beat with a Tesla.
R/WSB suggests a plot for the Big Short Sequal
Hope you enjoyed this,
See you next time 🤓
Spread the 💓and sent this to a friend or let me know if you liked it.