This is a solid article from a16z that goes into some of the unique aspects of Bill.com's business model.  Bill.com recently IPO'd in 2019 and has been off to a fantastic start. Start is actually a bit of a misnomer - the company has been in existence for well over a decade and has a large number of SMBs on the platform. This network, according to the author, is key in driving the company's growth. I tend to agree - like any network-based business, Bill.com becomes more valuable as the number of nodes grows and more customers push others to join the platform. This customer-driven virality is key to growth. Interestingly, towards the end of the article, the author makes a point about the potential upside to building out a data business: "The company doesn't feed data back to its customers, which could be beneficial in providing analytics, intelligence, and forecasting tools. With the invoice data it collects across customers, Bill.com could help its customers to understand which suppliers are more or less likely to pay on time and to benchmark against their peers. That data could help customers forecast their AR and AP, create a map of vendors, or even launch a capital lending product." I'm sure Bill.com has plenty of opportunity to grow its core business, but this extra value add seems compelling.

This article, from a substack blog, examines the current evolution in the semiconductor industry away from Moore's law and towards "heterogeneous compute." In short, Moore's law has been critical in enabling the improvements in things like speed and power consumption. However, over the last couple of years Moore's law has slowed and a common refrain is "Moore's law is dead." According to the author, heterogeneous compute can help sustain improvements in computing through innovations like parallel computing - in a way, maintaining some of the improvements we've become used to from Moor'es law. From the article: "the most striking example of heterogeneous-like compute is the Axx chip line by Apple. Apple's core insight about mobile processors is that while there are a lot of things you do on your phone, at its core there are a few important specialized features that sell them. In the last couple of years that's been better photography. So, they put an ISP (image signal processor)—a specialized chip—to pair with their processor chip to take better photos. This used to stress the hell out of your CPU—remember how hot iPhone 4s got when you took a long video? Specialized chips make the process faster and more energy efficient. That's the power of Heterogeneous Compute." New technologies like 5G, the IoT, and large scale "edge" computing likely all fall under the umbrella of heterogeneous compute and are interesting areas of investment opportunity.

I really enjoyed this article from a former activist investor. In it, the author outlines the importance of good corporate governance and how changes like better oversight over capital allocation and even improved messaging to public equity investors can have a large impact on a company. One of the main points made in the article is that good corporate governance helps align incentives between managers and shareholders - things like concrete performance metrics, vesting, and specific targets help hold management accountable. While this may not seem like rocket science, many companies can do well in spite of poor corporate governance, and then fall apart when fundamentals slow (the author points to Valeant as an example). From the author: "I think the reason [good corporate governance] is not fully appreciated is because the 'value add' of good corporate governance is not clearly attributed in the P&L. It can be hard to quantify the value attributed to good corporate governance. For example, most employees love steady stock returns brought on by sound capital allocation principles, and appreciate clear communication at the top. This creates a lower churn environment where employees know what is expected of them and can buy into the Company's vision. Good corporate governance also attracts thoughtful, long-term orientated shareholders, and improves the talent base as more high-performing talent joins the Company."

Given my role as a public equity investor, I always enjoy seeing comparisons of different approaches (VC, PE, etc.). This may partially be the result of a competitive streak - I hope that public investing adds as much value as any other type of investing. Anyway, this article from the FT compares returns across different investment styles and concludes that the majority of a PE firm's "value creation" is in fact multiple expansion. From the piece: "One of the frequent justifications for private equity is that the model encourages operational excellence. The general partners hire a top-dollar management team, carefully set the incentives, and then watch a business flourish outside of the highly-scrutinised world of public markets. And that is true looking at the above: revenue grows, and margins expand. But what's more true is that if you paid $1.00 for a company in say, 2010, and nothing changed about the business in the time while you were in charge, it would be worth $1.60 when it was sold. A glorious 60 per cent return for doing sweet nothing." While public markets also enjoy multiple expansion, I found this stat staggering.

Yet another article about PE. This one, out of II, includes the thoughts from the author of a McKinsey report that focuses on PE. Instead of zeroing in on what drives returns, I thought I'd share some interesting takes on asset flows: "The number of private equity-owned companies has doubled since 10 years ago, Klempner pointed out, and the number of publicly traded companies is half that of 20 years ago. 'Institutions need to be in private equity if they want exposure to growth companies, regardless of whether they can pick the top managers." This rings true to me - just think about the number of massive, private, late-stage tech companies (e.g. AirBnB). Do fewer companies list because they don't want to deal with the hassle and now have access to easy capital? Will we eventually see the number of publicly traded companies increase again?

I liked this post from Farnam Street - in it, the author frames two different philosophies for living life. The first is to approach life as a "finite game" and the second is to approach life as an "infinite game." The difference between the finite and infinite approaches determines what individuals prioritize in life. From the article: "Finite players have to parade around their wealth and status. They need to display the markers of winning they have accumulated so that other players know whom they are dealing with. Infinite players, in contrast, look to the future. Because their goal is to keep the game going, they focus less on what happened, and put more effort into figuring out what's possible. By playing a single, non-repeatable game, they are unconcerned with the maintenance and display of past status. They are more concerned with positioning themselves to deal effectively with whatever challenges come up." The author goes on to detail how infinite players require education, rather than training, to be successful in life. This is because in an endless game, adaptability is important. I think this article may have some parallels to investing.

This essay from the FT is an interesting ode to books. In the piece, the author describes his father's ever-growing book collection. After his father's death, the author is left wondering what the point of books is - or at least of collecting information in a disorderly fashion only to eventually abandon it. In reflecting on the role of books, the author makes an interesting point about what exactly a library is: "some may look at this obsessive accumulation as a mania. Why buy so many when you surely have no real hope of reading them all? But that is the point of a library, to have more to discover, to have a stock into which to retreat and retire, a longed-for if mythical future of endless time to read. My father complained towards the end of his life that now he finally had all the time in the world to read, he kept dozing off." In light of this quote, I think it is interesting to consider a library as a physical extension of one's curiosity. The point is not to have clean, orderly books that have all been read. Instead, unread books piled up in a certain chaos reflect the learning process - often meandering and uncertain but ultimately deeply individualistic.

Disclaimer: To the extent that Beach Reads discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. The companies and or securities referenced and discussed do not constitute an offer nor recommendation to buy, sell or hold such security, and the information may not be current. The companies identified and described do not represent all of the securities purchased, sold or recommended for client accounts. The reader should not assume that an investment in the companies identified was or will be profitable. Beach Reads does not constitute a recommendation or a statement of opinion, or a report of either of those things and does not, and is not intended, to take into account the particular investment objectives, financial conditions, or needs of individual clients.