Readers Write

No Comments

From GM re my posts on election fraud and voter interference: 

“Over the past year or so, when I am engaged in discussions about this very subject and its impact on the 2020 election, I find people very quick to dismiss voter fraud as small in number and insignificant. I no longer play that game since, no matter what you present (as you have), it is always pooh-poohed. So, instead, I point to the largest case of election interference I believe history has ever seen. That being the concealment of Hunter Biden’s laptop by the FBI! Poll after poll has shown that upwards of 17% of voters would have voted differently had they known of the legitimacy of the laptop contents and its damning evidence of wrongdoing by the Biden family. Now we know that the FBI had the laptop info in their sweaty hands for at least two years before the election but STILL warned the social-media companies to ignore it and cancel all posts about it since ‘it had all the signs’ of Russian interference in our sacred election process. Yep, they threw the 2020 election… full stop.”

Continue Reading

Friday, July 5, 2024, Kanazawa, Japan


Just One Thing

No Comments

Japan: A Culture of Hierarchy and Egalitarianism 

I’ve always wanted to be one of those people – those self-improvement influencers – who go to bed very early, wake up very early, and accomplish a full day’s worth of work by the time their colleagues and competitors are sipping their first cup of coffee.

That was one of my motivations when, in 2000, I started an email advisory newsletter called Early to Rise.

I believed then that early rising was key to success in every aspect of life, business and personal, and I believe it now. But my ability to follow my own advice is, as it has always been, less than perfect.

Still, I keep trying. And I’m happy to report that, thanks to 13 hours of jet lag between the US east coast and Japan, I’ve finally been practicing what I preach. For all but one of the days since we’ve been here, I’ve been going to bed at about 7:30 pm and waking up at about 3:30.

K is keeping a later schedule by about three hours, which works out well for me. I’m on my laptop by 4:00 or 4:30 am, which gives me about four hours of work time before we have breakfast together.

You can do a surprising amount of work in four hours. Especially when you are working so early that there is no threat of being interrupted by anyone.

On Day One of this current trip to Japan, I wrote about some of the many things I admire about the Japanese way of life. “Clean, quiet, orderly, and civilized,” I said. “Those are my impressions each time I visit.”

A few days later, K and I were able to be not just observers but participants in that culture.

Taking a break from my business-related commitments, we took a one-hour train ride southwest from Tokyo to Hakone, a quaint little town set amidst lush green hills that reminded me of Hawaii, where we spent two days in a ryokan, a traditional Japanese spa. This one was particularly luxurious, providing an exceptional level of serenity, beauty, and comfort.

If you ever have the opportunity to visit a ryokan, I hope you take advantage of it. It will be a cross-cultural experience that you’ll never forget.

This is what you can expect…

When you enter a ryokan, you temporarily leave your native practices at the door and immerse yourself, as completely as possible, in authentic Japanese traditions. (Cultural appropriation is not frowned upon by the Japanese. On the contrary, it is considered a requirement for their guests from other cultures – an indication of courtesy and good breeding.)

There are three traditional clothing options at the ryokan, all of them provided for you to wear during your stay. A yukata (cotton kimono), which can be worn most of the time while enjoying the spa’s amenities. A more formal kimono, which is preferable for dinners – and, I have to say, made me feel like Japanese royalty. And for sleeping, what seemed to be white silk pajamas that made me feel much more important than I do sleeping in my underwear.

Wearing street shoes indoors – anywhere indoors – is strictly forbidden, as is walking barefoot outside of a shower or spa. This is in line with the general Japanese culture of cleanliness, but is just as much a matter of doing everything, and especially the small things, properly.

Dressing in traditional Japanese garments while at the ryokan is a matter of respecting tradition to the max, which you will understand if you’ve ever practiced Japanese martial arts taught by a Japanese sensei. But it is not something to fret over. If you make a mistake, none of the staff will correct you. You are, after all, an honored guest. It would be an insult.

Another custom that courteous guests adhere to is bowing – what the Japanese do not just in place of shaking hands, but every time they come upon someone, on purpose or accidentally.

There is an etiquette to this, too – in particular, the depth of the bow.

How deeply you bow is a function of several things, including whether the situation is casual or formal, or whether one party has erred in some way or even inadvertently inconvenienced or embarrassed the other. But it is also a matter of hierarchy.

Traditional Japanese culture is founded on the principle of hierarchy. There is also a very strong egalitarian aspect to it, which, I would argue, is in some ways stronger than the American idea of equal rights under the law.

A quick example (that I might have written about before): About 20 years ago, I was in Tokyo to meet with the president of the first- or second-largest publishing company in Japan at his headquarters. The entire process of having such a meeting is very involved, as it requires a formula for when and how you meet, an exchange of gifts, and then all sorts of conduct and courtesies on the part of the foreigner if he has any hope of doing business there.

I spent several days meeting with various executives of the company prior to the day I was to meet the president. I was very much aware that we were both CEOs, which means something in business hierarchy. But I was equally aware that his business was ten times larger than mine. Nevertheless, I felt he treated me with the same respect that I conveyed to him.

After the meeting, we had a lunch planned at some nearby restaurant. It was to be him and me, plus two other senior executives. As we exited the elevator, we could see a man sweeping the floor in front of us. A moment later, he noticed us, stood up at attention, and bowed deeply in our direction.

If you were a graduate of Harvard or Brown today, you would say his response was a deplorable vestige of colonialism and hierarchical discrimination.

But something else happened immediately after this simple working man bowed to his company’s president. The president bowed back to him. The president’s bow was not nearly as deep. It was nevertheless an acknowledgement of the floor sweeper’s existence and an appreciation of the role he was playing in the business and, really, in the hierarchy of the world.

Now imagine a similar scenario taking place in America. As the president and his entourage exited the elevator, the floor sweeper would have stopped his work while they passed, but without looking at any of them. And they would not even have noticed him.

So, you tell me: Which of these two scenarios is more egalitarian and respectful?

This curious blend of egalitarianism and hierarchy that I see here in Japan interests me and I’m going to keep looking into it. But it is already clear that respect for hierarchy is a very essential attitude that binds other attitudes, such as human equality and dignity, tightly together in a rational way. (And from what I already know of Japanese history, the Japanese political system, with a parliament and a king, is reflective of that.)

More of my thoughts about Japanese culture next time…

Continue Reading

Wednesday, July 3, 2024, Kanazawa, Japan


Notes From My Journal

No Comments

The Japanese Do It Again! 

We were in Osaka for a few days, where we were filming some interviews and meeting with the senior executives of the company that publishes my books and essays. Later this week, I’ll be sending you more of my general observations about Japan. But before I do, I wanted to tell you one amazing thing that I discovered about this city.

Tokyo is, as I said, a great city – great for denizens and tourists in a dozen fun and practical ways. Osaka is not as large, with less to offer tourists, but it is apparently a great place to raise a family.

K and I discovered this while having dinner with SM, my primary partner in Japan, and his wife KM. They have two small children and one on the way. And they are thinking about moving to Osaka.

They mentioned all the benefits of making such a move, including the cost of housing, the cost of living, the opportunity to live abroad for several years, and the fact that Osaka is kid friendly. In an otherwise business-oriented metropolis, millions of Osaka’s residents are young parents. To accommodate them, there are innumerable little parks and amusements for children all over the city. The food markets are replete with kid food from baby formula to pop tarts. Pediatricians and OB-GYNs are as common as iPhone repairmen, and there are child care centers – very reasonably priced – on nearly every residential block.

But the craziest thing is this: Those child care centers are open 24/7.

Let me repeat that: 24/7. Apparently, if you want, you can drop off your kid on a Tuesday morning and pick him/her up Thursday after work!

Once again, the Japanese have taken a Western invention and improved it!

Continue Reading

The Economy & Investing

No Comments

Chart of the Week: It’s Up! It’s Down! What’s Going on with Nvidia? 

Thanks to my broker Dominick’s recommendation, I was an early investor in Nvidia, and profited very handsomely from it.

From the start, there was all sorts of hype about the company, which Dominick and I discussed several times during our monthly meetings. The result was that we gradually lowered my position size by pocketing a lot of the profits and reinvesting them elsewhere.

Recently, there’s been another public conversation about Nvidia, with some pundits very bullish on it and some quite skeptical.

Last week, I sent an email to both Dominick and Sean, asking them how they see the future of the company and its share price. Their perspectives were largely similar, which gave me some comfort.

Below is what Sean had to say. – MF 

I received Mark’s message about Nvidia at the same moment – literally – that I was finishing a column comparing Nvidia’s and Broadcom’s rise in recent years to Cisco and Qualcomm in the year 2000.

Even if Nvidia has not reached the same insane, anoxic heights of Cisco’s valuation…

The parallels do provide an interesting glimpse into the nature of bubbles and the allure of stocks caught up in a wave of legitimate but extreme exuberance.

Because I do believe that, like the internet in 2000, AI and machine learning services for consumers and businesses is very much the future.

Just as early adopters of the internet created webpages that sent many designers to an early grave…

AI image generators now produce portraits of people that sometimes look like an uncanny tangle of knuckles.

But we can certainly imagine a future when AI writes or generates images that feel more… usable, and not merely a novelty.

And that’s why people are excited about Nvidia. Or, at least, Nvidia’s chip architecture and CUDA platform.

You see, Nvidia makes chips that are quite good at doing lots of linear algebra, calculus, and matrix multiplication very fast – which is all a neural net AI algorithm is, really.

This proved exceptionally useful for calculating vectors in video game graphics, and then running hashing algorithms on block data to mine cryptocurrencies, and then molecular modeling simulations, and then doing machine learning on very big datasets necessary for modern AI algorithms.

The “edge” that Nvidia’s chips possess is their ability to break complex tasks into thousands of smaller operations that can be worked on in parallel.

This is the main reason why I recommended buying Nvidia in June 2022, after it had fallen about -50% in a few months.

But with the explosion of AI, Nvidia’s prospects look nothing shy of extraordinary.

Sources say it took about 10,000 Nvidia A100 GPU processors to train OpenAI’s GPT-3 model.

Nvidia’s A100 chips cost about $10,000 each.

And that’s just one of many AI applications that Nvidia’s chips are being used for.

Do some quick multiplication, and you can see why Nvidia’s revenue and profit in recent years looks like a scythe.

But that, alone, would not justify Nvidia’s insane valuations at the moment.

For that, investors would need to see further growth. Accelerated growth. Sustainable growth.

So here’s why some investors think this growth will continue for years to come:

There are about 10,300 data centers in the world as I write this. By 2030, it’s estimated that we’ll have 2 to 4 times as many.

A medium-size data center can hold about 50 to 100 server racks, while a very large one can hold 5,000 or more.

A standard rack can hold 40 to 50 server computers.

Each server computer can hold up to 10 GPUs or more. (Really, cooling and power are the limiting factors there. So innovations might increase this number.)

Future AI models with more data and more parameters may require 30,000 training GPUs or more to train in a reasonable amount of time.

And while the A100s cost $10,000, Nvidia’s new Blackwell chips will cost $30,000 to $40,000 each.

Once you start multiplying these numbers together… we’re suddenly talking about the potential for trillions of dollars of revenue in the coming years and decades.

If you make some very charitable assumptions, find the net present value of all that future revenue, carry the one, drop some acid, and delude yourself into believing that exponential growth is a real thing…

You can start to imagine why an investor, especially an inexperienced or excessively optimistic investor, might look at Nvidia’s valuations as “fair” or “reasonable.”

So if you want to know why folks have been bidding up the price of this stock… That’s why.

Clearly, I like the stock and have recommended it before. I think they make a great product. And they have amazing future prospects.

But there are a whole host of reasons why I don’t think this will necessarily translate into a whole lot more stock price growth from here.

Let’s start with the most basic facts…

Nvidia was the top play for all these high-tech digital applications, like AI and machine learning, because it controlled a vast majority of the market share for GPUs and TPUs.

For that reason, it commanded a lot of the revenue of this market… up to this point.

But Google and Meta are working with Nvidia’s competitor, Broadcom, to develop their own AI chips in house.

Intel is rolling out its Gaudi 3 AI accelerator chip, which is both cheaper and consumes less power. AMD is launching its MI300 AI accelerator chip, which is being adopted by Meta, OpenAI, and Microsoft.

“The move signals a notable shift among tech companies seeking alternatives to Nvidia’s costly graphics processors,” a reporter for TechWire writes.

Also, there’s a huge presupposition right now that AI tools will continue to be hosted in datacenters, on the cloud. But because AI is so computationally intensive, the cost of – for example – one query in ChatGPT costs 10 times as much as a Google search.

To put that another way, each word generated on ChatGPT costs $0.0003.

So companies like Qualcomm are working on small systems-on-a-chip that have mini-versions of AI models that can fit on individual devices, handling some AI tasks without having to take on the expense of sending data to a data center.

To put it bluntly: Even if Nvidia has the most dominant chips and the largest market share, it has heavy competition on the way, and its customers actively wish to stop paying Nvidia’s prices.

So that’s one thing.

Another thing: Nvidia’s business model is (at the moment) naturally limited.

Microsoft makes money because it collects recurring revenue from Azure customers, from Windows and Office customers, from selling advertising on Bing. Its customers don’t just pay once.

But Nvidia? Only a small fraction of its revenue comes from recurring sources – its Cloud and AI Enterprise services. And these are fairly niche services.

That means that, once Nvidia sells a chip, the only way it makes more money is if it sells another chip.

And at some point in the future, nearer to now than anyone is comfortable admitting, Nvidia is going to run out of customers who want to shell out $40,000 a pop for dozens and dozens of AI server chips… and then get on the perpetual treadmill of upgrading those same chips.

As the CEO of Nvidia, Jensen Huang, once said: “Nvidia is a one trick pony.”

All the companies that approached and breached a trillion-dollar market cap? Apple, Microsoft, Amazon, Google, Meta? They all have more than one trick.

And this might be why, the week that Nvidia’s market cap blew past Microsoft’s to the number one position, just about every single Nvidia executive cashed in on the stock.

The CEO’s stock sales were practically perfectly timed with Nvidia’s recent high.

Not to put too fine a point on it…

I think that Nvidia is worth holding. But I do not think, at these valuations, that it should be any more than 1% to 3% of anyone’s portfolio.

So if you want to initiate a position? Throw a small amount in and prepare to hang on for what will inevitably be a wild ride.

If you have seen tremendous appreciation already and it’s now a significant proportion of your portfolio?

I would take a lesson from Nvidia’s executive team and trim your holdings.

When I ran a DCF analysis of Nvidia’s free cash flow and compared it to its peers in the semiconductor industry…

I can see the stock growing to $140 to $180 by 2030. That gives the company about 20% to 50% more upside over the coming years.

And that’s even if the company manages to maintain the skin-sloughing rapidity of its profit growth for the next 5 years, which it… won’t.

I’m not even going to hedge that claim. Nvidia will not be able to maintain the growth trajectory it’s on.

For anyone who thinks otherwise: I have some tulips to sell you.

– Sean MacIntyre

Check out Sean’s YouTube channel here.

Continue Reading

Fun and/or Interesting

No Comments

Five Quick Bites

* Fun. Is Oslo really a city? This brilliant tourism ad features a resident of Oslo describing – in the most hilariously deadpan manner possible – why nobody should visit.

* Interesting. Why the Atkins diet works for weight loss. I published Dr. Atkins’ newsletter for several years and spent time with him in his NYC clinic. I knew then that he was not just on to something, he was a serious and honest scientist. If you have any doubts, watch this.

* Fun and Interesting. Why monkeys can only count to four. Click here.

* Interesting. Bari Weiss on the new worldview of social hierarchy.
Click here.

* Fun and Interesting. Saved by the whale! Another bit on the humanity of mammals. Click here.

Continue Reading

Photo of the Week

No Comments

“Earthrise” 1968 

You’ve no doubt seen this photo before. It was recently included in a New York Times feature titled “25 Photos That Defined the Modern Age.” Here’s the copy that went along with it:

On Christmas Eve 1968, aboard Apollo 8 during its pioneering orbit of the moon, William A. Anders photographed the Earth “rising” above the lunar horizon. The picture was the first of its kind – and it was also unplanned. Anders, the youngest of the three astronauts on the spacecraft, had been tasked with taking photographs of the moon’s craters, mountains and other geological features. He spontaneously decided, however, to include Earth in the frame when he noticed how beautiful it was. “Here was this orb looking like a Christmas tree ornament, very fragile,” Anders would recall in a NASA oral history. “And yet it was our home.” His first shot was in black and white. For the next, he switched to color, which emphasized the contrast between the moon’s gray surface and the planet’s blue-green vibrancy. “Earthrise” was the first image most of humanity saw of the planet we live on, a nature photo like none before it and a reminder of how small our world really is, in comparison with the rest of the universe.…”

Continue Reading

Readers Write

No Comments

Re the thoughts I’ve been sharing about my trip to Japan:

“Regarding your speech in Tokyo, thanks for being humble and showing vulnerability. Many years ago, I thought that having anxiety for public speaking only happened to me. I remember when Tony Robbins made a difference between those who are paralyzed by anxiety and those who are not paralyzed. The first  say to themselves ‘I can’t’ and the second say ‘I’m ready.’ Good luck Mark, you are more than ready.” – CS

 

“I really enjoyed your piece about the many ways Japanese culture is superior to ours. You will alienate quite a few people because you wrote it so convincingly. Jingoism is a trait of many Americans.

 

“It’s true, Japanese are more consistent in their behavior. And it’s not a wealth or class thing. Those habits are practiced by families of all incomes. In many ways they are more civilized than Americans, but of course I’ll never forget how they treated the Allies in prison camps during WWII.” – AS

Continue Reading