Multi-Disciplinary Reading - Book Reviews

Book: The Biography of a failed venture
BY Prashant Desai

There are very few books available on failure; hence I picked this after reading preview in books.Google. It was proved a good read. This is a must-read for entrepreneurs who want to start small businesses like a retail shops or restaurants etc.

The author was MD and CEO of Financial Technology (promoted by Jignesh Shah of 63 moons tech). He was CA by qualification and worked for Future group, Rare and other brokerages etc.

In 2017 he got an idea to be an entrepreneur and developed the business idea of creating a sports shoe brand, a mid-level brand which is cheaper than Nike and costly than local brand.

Interesting he consulted many:
Vinod (managed Tendulkar’s endorsement): Very impressed and called Anil Kumble who was also impressed with sample PD brought from China.
Sanjeev Agarwal: Ex Future group, ex MD & CEO of Skechers – red-flagged the idea, price and quality etc. And want PD to go carefully. PD stopped meeting him.
Kishor Biyani: Red flagged. Think once again. He added that global brand has high power and he himself failed in 2010. Which PD ignored as its matter of past (it was in 2017). A sport was a risky category that has variable sizes, SKU, fashion, time to market etc.
Rajiv Mehta: MD Puma India – Looks interesting, products have potential and become a co-founder.
Santosh Desai: Future group mkt guru behind many leading brands – He said no to assignment. He indicated such mid-priced products are available in India.
Utpal Sheth partner R Jhunjhuwala – It’s high cap-ex, high op-ex and high working cap business. He advised PD to start a small, experiment, make affordable mistakes, keep updating and when you are absolutely sure – step on the accelerator.

PD started with Rajiv as co-founder.

They started by putting 30 Cr own funding. They visited China for manufacturing, the USA for designing and involve celebrities like Hardik Pandya, Anil Kumble and Farhan Akhtar for branding.
20 stores planned operational less than 90 days the largest and fastest rollout.

Patience is an important aspect. Start a small, validate and paddle accelerator like
Big Bazzar started in 2001 and DMart in 2002. In the next 10 yrs big bazzar grew to 250 stores vs 10 for Dmart. Over the next 7 yrs, BZ opened 50 stores whereas DM launched 190 stores.

BZ used capital to grow in WC intensive store network whereas DM buys properties.
BZ inventory turnover was 4x (fashion products moves slowly) whereas DM was 16x (groceries move fast).

Why they failed:

  1. Driven by wealth creation – the main goal is to create wealth.
  2. Speed – want to create big wealth too fast. In most success stories, the most underappreciated attribute is patience.
  3. Team – Hired faithful known people than experienced professionals. No one offered a contrary opinion.
  4. Overconfidence – Refused to listen. Shot the messenger when the answer didn’t confirm biases.
  5. Know your customer – you are not your customer. It’s not necessary to work for others if it works for you and a closed small group.
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If you have a top down perspective in life, say in business if you look primarily at the decisions made by management to judge its future success, or you believe that a country’s economy is chiefly determined by those running the governments and banks, or even if you believe that innovation is a product of genius and inventions would not have happened without their said inventor. If you associate with any of these scenario, then this book will challenge your worldview.

We know of the biological evolution and are amazed by Darwin’s insight to suggest that all the complex life forms around us aren’t designed by some intelligent entity, but is a product of gradual evolution. This book goes a step further to give general theory of evolution. To show that even technology evolves, the social customs, ethics, laws, and even economy and money evolves. We see how many people often discover the same technology at almost the same time, and that even if the first inventor who is credited with the invention is not around, the invention would still have happened at around the same time. We see how these bottom up evolution of economy and technology is driving forward a gradual, but positive, development of human civilization, despite our focus on leaders’ decisions in different domains. Most of us seek the top down explanation of why something happened, but many of those things are the consequences of bottom up evolution. Infact the leaders making decisions themselves are the product of bottom up selection.

It will appeal to bottom up investors, like me, who look for the competitive advantages and growth opportunities that will drive the company’s valuations, instead of taking a macro view of economy and its various sectors to pick businesses in high growth sectors and/or other macro factors.

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Any way to know the book (hard copy) is legal or not?

In the last few months, some books I ordered from Amazon & Flipkart is not to the mark as far as print and font clarity is concerned. I doubt they may not be legal copies.
I even sent back one but received a similar copy. Thanks…

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I have been using Amazon for books purchase on regular basis. I had experienced the same on few occasion . One way out is the seller, cloudtail offers the best solution among others. I hope it may help little. Sometimes I used crosswords bookstore, for better experience, more for content, but don’t offer discounts as Amazon provides.

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Slightly out of context discussion - How do you all take notes? Tool and workflow?

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some one want quick summary of content in good books, below link helps.
https://www.edelweissmf.com/investor-insights/book-summaries

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Thank you for the link

Hacking Darwin: Genetic Engineering and the Future of Humanity (2018) by Jamie Metzl

Central idea of this book is: till a few decades ago the evolution of life was through random mutation, however, now humans have the wherewithal to control a self-directed and self-designed evolution.

Below are my notes (almost all of it has been copied verbatim from the book, all I’ve done is organized the notes around certain themes) –

Genomics, big data and AI

  • Understanding genetic data sets would be complicated enough if all biology was based on gene expression alone, but it is significantly more complicated. The genome is itself an incredibly complex ecosystem that interacts both with other complex systems inside an organism and with the changing environment around it. A small percentage of traits and diseases result from the expression of single genes, but most come from a group of genes working together and interacting with the broader environment.
  • No one really knows the exact number, but it has been estimated that hundreds or thousands of genes play a role in determining complex traits like intelligence, height, and personality style. These genes don’t act alone. Ribonucleic acid, or RNA, once believed to be merely a messenger between DNA and the protein-making machinery of the cell, is now understood to play an important role in gene expression. The epigenetic marks help determine how genes are expressed. Understanding how these overlapping processes influenced complex genetic traits was way too difficult in the first phase of genomics research, but figuring out the relatively small percentage of traits and diseases caused by single gene mutations was more feasible.
  • The launch of companies like San Diego–based Illumina and China’s BGI-Shenzhen have turned genome sequencing into a competitive, fast-growing, multibillion-dollar global industry. Next-generation nanopore sequencers that electrically push DNA through tiny holes in proteins to read their contents like ticker tape have the potential to revolutionize gene sequencing even more.
  • Today, sequencing a full genome takes about a day and costs about $700. Illumina CEO Francis deSouza announced in early 2017 that the company expected to be able to sequence a full genome for about $100 in the not-distant future. As the cost of sequencing falls close to the cost of materials required and genome sequencing becomes commoditized, more data will be available at less expense. Because genomics is the ultimate big-data challenge, more and cheaper data will lay a foundation for more and greater discoveries.
  • The innovative Canadian company Deep Genomics, is bringing together AI and genomics to uncover patterns in how diseases work because, in its words, “the future of medicine will rely on artificial intelligence, because biology is too complex for humans to understand.”
  • Google and a Chinese company, WuXi NextCODE, recently released highly sophisticated, cloud-based AI systems designed to help make sense of the massive amounts of data coming from genetic sequencing. Boston-based Biogen is looking actively at how quantum computing might supercharge the ability to find meaningful patterns from these massive data sets.
  • Iceland is one of the world’s most genetically homogenous societies. Settled by a small number of common ancestors in the ninth century, with relatively few immigrants arriving since, and possessing detailed genealogical, birth, death, and health records going back centuries, the country is an ideal laboratory for genetic research. In 1996, Icelandic neurologist KĂĄri StefĂĄnsson cofounded deCODE Genetics, a company with the ambitious goal of mining the gene pool of Icelanders to better understand and find cures for a range of diseases. To get the data they needed, deCODE convinced Iceland’s parliament to grant the company access to national health records and convinced Icelanders, many of whom became company shareholders, to donate their blood to the company.
  • When Swiss pharmaceutical giant Hoffmann-La Roche bought deCODE for $200 million in 1998, many Icelanders felt betrayed. An ensuing lawsuit denied deCODE access to the national health record system and required each individual to consent to their personal records being shared. But after deCODE and Hoffman-La Roche offered individual Icelanders free access to any drugs developed in the collaboration, many Icelanders signed back up. Today, deCODE holds 100,000 blood samples and has used its genetic and data pool to discover genes linked to various diseases and even came up with novel treatment for heart attacks. Another pharmaceutical giant, AstraZeneca, announced in early 2018 that it planned to sequence half a million genomes from its own clinical trials by 2026. Governments are also very much involved in efforts to amass large pools of genetic data.
  • Creative private-sector models are also emerging that try to balance the societal interest of accessible, big-data pools of genetic information with the interest of many individuals to maintain some level of control over their genetic data. LunaDNA, a young San Diego–based company, is seeking to bring the many small and disparate genetic data sets held by multiple companies and clinics together into a searchable collective by rewarding the individuals willing to share their genetic information with cryptocurrency. This type of approach makes particular sense because people’s sequenced genomes, just like their internet search history, will soon have a very significant commercial value whose benefits deserve to be shared with consumers.
  • The Boston-based Personal Genome Project is trying to build an open-source coalition of national genetic data pools.
  • China has embarked on the most aggressive path for building its big-data genetic pool on an industrial scale. Its recently announced $9 billion, fifteen-year investment to improve national leadership in precision medicine, for example, dwarfs similar initiatives around the world. China’s National Development and Reform’s thirteenth Five-Year Plan for biotech industry development aims to sequence at least 50 percent of all newborns (including prepregnancy, prenatal, and newborn testing) in China by 2020 and support hundreds of separate projects to sequence genomes and gather clinical data in partnership with local governments and private companies.

PGT and future of IVF

  • Since the birth of Louise Brown in 1978 (first test tube baby), more than eight million IVF babies have been born with no discernibly different health outcomes than other babies. In the United States, around 1.5 percent of all babies are born with IVF. In Japan, the number has risen to nearly 5 percent.
  • In 1990, for the first time, scientists successfully screened a preimplanted human embryo for gender and a few sex-linked and single-gene disorders. This screening process became known as preimplantation genetic diagnosis, or PGD. The PGD procedure developed rapidly, particularly for higher-risk prospective mothers. A parallel and related process called preimplantation genetic screening, or PGS, was also developed to screen embryos without a known disease risk to assess their chances of thriving. PGD and PGS have more recently been grouped together semantically under the broader umbrella label of preimplantation genetic testing, or PGT.
  • PGT has been around for nearly thirty years, but these are still the early days of this incredibly significant procedure. At first, scientists used PGT primarily to test for the chromosomal abnormalities that can cause miscarriages. It then started to be used to test for a small number of specific single gene disease-causing mutations. Today, PGT is also used to screen for some of the estimated ten thousand single-gene mutation disorders. Unlike prenatal testing of embryos already in the mother’s womb, PGT can be carried out on multiple, early-stage fertilized eggs, or blastocysts, in a dish.

Mendelian diseases

  • Cystic fibrosis, Huntington’s disease, muscular dystrophy, sickle cell disease, and Tay-Sachs are all examples of single-gene mutation diseases, also known as Mendelian diseases because they clearly follow Mendel’s rules of heredity. Some of these disorders are called dominant because a child will need to inherit just one copy of a mutation from a single parent to have the disease. For recessive disorders, like Tay-Sachs, a child would need to inherit the mutation from both parents to be at risk.
  • Of the approximately twenty-five thousand Mendelian diseases that have so far been identified, about ten thousand are understood well enough to match a specific gene to a specific disease outcome. Today treatments exist only for around 5 percent of these.
  • These Mendelian diseases are very rare. Only one out of every thirty thousand people, for example, is born in the United States with cystic fibrosis; one of ten thousand inherits Huntington’s disease, and one of 7,250 males inherit Duchenne muscular dystrophy. One of every 365 African American children is born with sickle cell disease, a disease more prominent among groups whose recent ancestors lived in highly malarial areas. Other Mendelian disease can be one in millions or even tens of millions or more.
  • Children born with Tay-Sachs, a genetic disease resulting from a single genetic mutation on chromosome 15, often seem fine at birth, but the destruction of their nervous systems begins soon after. By around the age of two, most are experiencing terrible seizures and the decline of mental capacity. Many become blind and nonresponsive. Most die in agony before the age of five. Today almost none do – in 1969 scientists identified the enzyme associated with Tay-Sachs carriers, a blood test was developed to determine carrier status among prospective parents.

Yamanaka factors

  • After years of painstaking research, in 2006 Yamanaka and his team discovered that proteins encoded by just four “master genes” could turn back the clock and transform any adult cell back into a stem cell. Just as a stem cell could differentiate itself forward in developmental time into a skin, blood, liver, heart, or any other of the two hundred types of human cells, these Yamanaka factors could revert any skin, blood, liver, or other type of cell back into the equivalent of an embryonic stem cell. He called these induced pluripotent stem cells, or iPSCs. Yamanaka deconstructed the cell and showed how the biological clock could tick backward.
  • Yamanaka and Gurdon won the 2012 Nobel Prize because their discoveries have the potential to revolutionize much of biology—including how we humans create eggs.
  • In 2012, Japanese cell biologists Katsuhiko Hayashi and Mitinori Saitou announced they had used the Yamanaka factors to reprogram adult mouse skin cells in a dish into iPS cells. They then added more chemicals to turn these stem cells into egg and sperm progenitor cells, the precursors of eggs and sperm. After they placed the same artificial cells into mouse ovaries, the cells matured into eggs. When they put induced sperm precursor into mouse testes, these cells matured into sperm. These induced eggs and sperm were used for mouse IVF, resulting in perfectly healthy baby mice. This was a spectacular breakthrough. Sperm and eggs had been generated from skin cells and used to give birth to healthy mice.
  • Two years later, in 2014, scientists in England and Israel figured out a way to replicate the same finding, but they made human egg and sperm cells out of adult skin cells in a dish.
  • Although the large number of unknowns still makes this procedure not at all safe for humans in the near term, the science is improving fast, and the implications are massive for the future of human reproduction.

Mitochondrial replacement therapy (MRT)

  • Mitochondria are the tiny power packs of the cell. Floating in the cell’s cytoplasm they are the legacy of symbiotic bacteria incorporated into our cells hundreds of millions of years ago.
  • Nearly all our twenty-one thousand or so genes are located in the cell’s nucleus, but a far smaller number, just thirty-seven, are in the mitochondria. Unlike nuclear DNA, which is the combination of the DNA from both parents, mitochondrial DNA (mtDNA) is passed entirely from mother to child.
  • Most people have healthy mitochondria that allow their body to get the energy it needs from their cells. But about one in two hundred people has a disease-causing mtDNA mutation, and about one in sixty-five hundred develop symptoms of mitochondrial disease.
  • These dangerous mutations primarily target children, who often suffer systemic organ failure. The symptoms generally get more severe with age and can increasingly damage cells in the brain, liver, heart, and other bodily systems.
  • In the 1990s, Jacques Cohen and his colleagues at the Institute for Reproductive Medicine and Science in New Jersey pioneered a process of injecting fluid from the cytoplasm of a healthy egg into an egg where problems in the cytoplasm were believed to be causing infertility. This is called Mitochondrial replacement therapy (MRT).
  • Mitochondrial transfer is a heritable treatment. A daughter born with donor mitochondria will pass that mitochondrial DNA to her daughter, and down the line forever. (This is why women who get their ancestral history through DNA tests can learn about their mother’s mother’s mother’s mother, all the way back to our human female common ancestor, “mitochondrial Eve,” from around 160,000 years ago.)
  • Currently MRT is banned in the US. The United Kingdom has done more than any other country to thoughtfully consider MRT.

CRISPR and gene editing (plants and animals)

  • A plant pathologist at Pennsylvania State University used CRISPR to target a whole family of genes that encodes polyphenol oxidase (PPO), an enzyme responding to oxidization. The gene-edited “Arctic apple” can be sliced and left out in the open without browning because scientists have used CRISPR to silence a gene controlling production of an enzyme that causes apples to brown.
  • A virus-resistant Rainbow papaya gene edited to avoid the devastating papaya ringspot virus is already in supermarkets, as is the bruise-resistant Innate potato.
  • Del Monte has received approval to gene-edit a pink pineapple modified to contain more of the antioxidant lycopene than regular pineapples.
  • A waxy corn that makes better cornstarch, wheat with a higher fiber and lower gluten content, tomatoes better able to grow in warm climates, and camelina with enhanced omega-3 fatty acids are all on the way, thanks to CRISPR technology.
  • In our yogurt and in plants like these, we humans are already bringing CRISPR-edited genes into our bodies.
  • The Gates Foundation is supporting efforts by the Global Alliance for Livestock Veterinary Medicines to create genetically modified “supercows” that can withstand very hot temperatures while producing much more milk than traditional cows. One scientist whose daughter is allergic to eggs is using CRISPR-Cas9 to engineer hypoallergenic chicken eggs.
  • Researchers are using CRISPR to genetically engineer virus-resistant and faster growing pigs and parasite-resistant and hornless cattle, which could save commercial ranchers hundreds of millions of dollars per year.
  • A Silicon Valley start-up named Synthego sells custom CRISPR-edited human and other cells lines delivered to researchers within days. Another company, Inscripta, is trying to make all of the tools needed for CRISPR just an easy click away. These new companies, Wired noted in May 2018, are betting that “biology will be the next great computing platform, DNA will be the code that runs it, and CRISPR will be the programming language.

CRISPR and gene editing (humans)

  • According to Harvard’s George Church, a preliminary list of these rare single genes that could potentially be manipulated to give us special benefits might include:
  1. GENE IMPACT
  2. LRP5 Extra-strong bones
  3. MSTN Lean muscles
  4. SCN9A Insensitivity to pain
  5. ABCC11 Low odor production
  6. CCR5, FUT2 Virus resistance
  7. PCSK9 Low coronary disease
  8. APP Low Alzheimer’s
  9. GHR, GH Low cancer
  10. SLC30A8 Low type 2 diabetes
  11. IFIH1 Low type 1 diabetes
  • As of 2018 the CRISPR-based gene editing is not perfect, and many edits lead to off-target edits. This type of off-target cutting has shown up most significantly in the gene editing of human cells. An important 2013 study examined off-target CRISPR edits in human cells and found that CRISPR edits for therapeutic applications would need to be significantly improved to be “used safely in the longer term for treatment of human diseases”
  • A high-profile 2018 study found that a single human gene, p53, blocked CRISPR edits in some human cells, as part of the body’s natural defense mechanism against dangerous mutations like cancer. One way around this would be to deactivate the p53 gene, but this would bring a new danger—increased cancer risk. Another 2018 study published in Nature Biotechnology found 20 percent more off-target DNA alterations than previously expected when making CRISPR-Cas9 edits in mice.
  • CRISPR-SKIP is a new advancement in gene editing. It will increase the precision and the safety of gene editing even further through a process called CRISPR-SKIP. Preliminary indications suggest CRISPR-SKIP could be used to deactivate damage-causing mutations in the genome with far fewer off-target effects than many of the other CRISPR systems

Transplanting organs from animals to humans

  • As of August 2017, there were more than 114,000 people waiting on organ-transplant lists across the United States. Twenty people die every day while waiting for a transplant. A single donor can donate as many as eight organs. But that’s not what’s happening. In the United States, 95 percent of people support organ donation, but only 54 percent are registered donors. A far smaller percentage actually ends up donating because family members can be conflicted about organ donation at the emotionally challenging moments when the decisions are made.
  • Transplanting pigs’ organs into humans has been a scientific dream, however, pigs carry active viruses called porcine endogenous retrovirus, which scientists have given the unfortunate acronym PERV. These viruses can be extremely dangerous and even deadly to humans, particularly those whose immune systems are already suppressed by drugs. Until recently, PERV was essentially a deal-killer for pig-to-human transplants.
  • A group of Harvard scientists is using CRISPR-Cas9 to edit the genome of pig embryos in multiple locations simultaneously to create pigs with their PERVs rendered inactive. Clinical trials for transplanting gene-edited pig kidneys and pancreases to humans are likely to begin soon, potentially saving thousands of human lives per year.

Synthetic biology

  • In 2010, the maverick scientific entrepreneur Craig Venter (who independently sequenced the human genome) announced that he and his colleagues had synthesized the full genome of a bacteria called Mycoplasma mycoides and placed it into the empty membrane of another bacteria—creating the world’s first synthetic cell. This wasn’t just editing an existing cell, like getting a bacterium to produce insulin, but building life from scratch.
  • The exploding field of synthetic biology uses computers and laboratory chemicals to write new genetic code that nature never imagined and make organisms do things they weren’t previously programmed to do. Some of its early applications include current efforts to culture meat in a lab, engineer oil-secreting bacteria, manufacture yeast with spider DNA to make ultra-light silk stronger than steel, or induce bovine collagen to make nonanimal leather. Synthetic biology is being used to create renewable microbes to produce acrylics for paints and custom engineer inexpensive synthetic sugars for biofuel. The preliminary list of these types of synthetic biology applications
  • It is estimated that the global synthetic-biology market will grow from around $3 billion in 2013 to about $40 billion in 2020, with a projected global compound annual growth rate of 20 percent. Not surprisingly, China is expected to be the world’s fastest-growing market for synthetic biology products. According to leading biologist Richard Kitney, synthetic biology has “all the potential to produce a new major industrial revolution.”

Aging and Age Extension

  • The average life span for early humans was only about eighteen. In spite of all the advances, the average life span in Roman times was a mere twenty-five. By 1900, it was only forty-seven in the United States. This increase in average life expectancy in the developed world over the past century averages out to about an additional three months per year.
  • The number of people living past 100 has increased by almost two-thirds in the United States and quintupled in the United Kingdom over just the past three decades. Japan, which recorded only 339 centenarians in 1971, today has over 75,000. Pew estimates the global population of people living past one hundred will increase from around 450,000 today to nearly 4 million in 2050.
  • Heart disease, cancer, and chronic lower respiratory disease account for over half of all deaths in the United States and are three of the top four causes of death globally. These chronic diseases have become a relatively greater threat to us as we’ve learned to better handle the infectious diseases that plagued so many of our ancestors. Because the chronic diseases correlate with age—the older you are, the more likely you are to get them—curing any one does not help all that much. If one disease of aging doesn’t get you, another one soon will. Eliminate all cancer from the United States, and life expectancy only goes up a little more than three years. This leads to the conclusion that if we really want to extend our healthy life spans, we’ll need to start worrying relatively less about countering each disease of aging and more about slowing aging itself.
  • Studies have suggested that epigenetic markers measured in blood, the length of the genetic “caps” at the end of chromosomes called telomeres, walking speed, observable facial aging, and many other factors are preliminary biomarkers of aging that could, in the future, come together to help us solve the riddle of biological aging.
  • The California start-up company BioAge Labs is using AI to make sense of the sequenced DNA from and metabolic analysis of blood cells to identify complex biomarkers of aging in the blood. Blood stored for decades in European blood banks, where the biomarkers and the life and death record of the blood donors can be matched, is proving a uniquely valuable resource.
  • Absence of gene ADIPOQ (common in most people but absent in many of the super-agers) seems to protect super-agers against inflammation of the arteries. Other researchers have identified tens of genes that, in one expression or another, seem to protect against brain disorders and inflated cholesterol levels, provide additional protection against Alzheimer’s, and increase life span more generally.
  • While lifespan of regular rat is 3 years, that of naked mole rat (NMR) is 30 years. One study hypothesized that naked mole rat genetics make their cells produce high levels of a protein called HSP25 that serves almost as an automatic spell-check function, eliminating other faulty proteins in cells before they can cause a problem. Another found that naked mole rats have four pieces of ribosomal RNA instead of the usual three for most other multicellular life forms like us. For a reason that scientists don’t fully understand, the four-part naked mole rat RNA structures makes significantly fewer translation errors.
  • Turritopsis dohrnii is an immortal organism: it is a jellyfish that starts out as a fertilized egg, out of which a larva emerges that then sinks to the ocean floor. There, it grows into a colony of polyps that spawn multiple, genetically identical jellyfish. But when faced with physical adversity or a lack of food, the Turritopsis dohrnii, unlike other jellyfish, turns from being an adult jellyfish back into a polyp, kind of like an adult human turning back into an embryo.
  • Normally, cells use glucose aggressively for growth, but in times of scarcity, our cells shift into repair mode. The animal models showed that when the roundworms, fruit flies, and mice shifted from growth mode to repair mode, they were not only better able to survive hardship but also lived longer and healthier lives. When scientists like biologist Cynthia Kenyon (now with Google Calico) used new tools to turn on and off the genetic switches that these experiments identified, they found that a few genetic changes to the Daf-2 and Daf-16 genes could shift cells from growth to repair mode and double the life spans of C. elegans roundworms. This led to the increasing realization that the aging process is regulated by the equivalent of knobs that can be turned.
  • Telomeres are the stretches of DNA at the end of our chromosomes. The telomeres serve to protect the integrity of the genetic data inside the chromosome, like plastic tips protect shoelaces. Our telomeres get slightly shorter each time our cells divide, becoming less and less able to protect our genetic data from harmful mutations. Although it’s not entirely clear whether shortened telomeres are a cause or an effect of aging, shorter telomeres are associated with faster aging and higher risks of age-related disease.
  • A recent comprehensive study followed more than 650,000 people for an average of 10 years and analyzed nearly 100,000 death records in an attempt to quantify the input versus output benefits of exercise. The study found that 75 minutes a week of moderate exercise, like brisk walking, led to almost 2 years of added life expectancy compared to sitting on your couch. The benefits went up from there. Adding 2.5 to 5 hours of exercise a week added 3.5 years. An hour a day, or 450 minutes a week, added 4.5 years to life expectancy.
  • Our ability to repair damaged DNA declines as we get older is that the levels in cells of a molecule called nicotinamide adenine dinucleotide, or NAD+, decreases as animals like us age. The NAD+ molecules amplify the activity of a group of seven special genes called sirtuins to augment their ability to repair damaged DNA. The more NAD+ in the cells, the better able they are to fix these problems. An obvious approach to potentially fixing this problem might be inserting NAD+ molecules into cells, but the NAD+ molecule is too large to make it through the cell’s outer membrane. Instead, scientists figured out a way to use smaller, precursor molecules called nicotinamide mononucleotide, or NMN, and nicotinamide riboside, or NR, that are small enough to make it through. Once in, the NMN and NR bind with a molecule already inside the cell and make NAD+. When Harvard scientist David Sinclair and his colleagues genetically engineered older mice to express higher sirtuin levels, or used NMN to increase their NAD+ levels, they found the mice had better organ function, endurance, disease resistance, blood flow, and longevity than other mice the same age. In many ways, boosting the NAD+ levels tricked the mouse’s cells into shifting from growth to repair mode. Although human trials are only just beginning, the market for NMN and NR pills, sold in the United States as unregulated supplements, is exploding.
  • Rapamycin’s natural ability to slow the proliferation and growth of targeted cells made it an ideal immunosuppressant, perfect for preventing people’s immune systems from rejecting transplanted organs. But then doctors started noticing that animals and some human transplant patients taking rapamycin seemed to be healthier than similarly situated animals and people taking other drugs. They soon figured out that rapamycin regulated the metabolism of cells and triggered the same kind of shift-to-repair-mode signaling as happens when calories are scarce. They named the protein targeted in this process mTOR, or mammalian target of rapamycin. Researchers are now working hard to try to find way of delivering rapamycin or a derivative that can maximize the compound’s remarkable benefits while minimizing its downsides. Pharmaceutical behemoths like Novartis and start-ups like Boston’s resTORbio and PureTechHealth are racing to develop drugs using rapamycin to help shift our cells toward repair mode and potentially enhance our health and longevity.
  • In biology, senescence is a process by which a cell ages and permanently stops dividing but does not die. These senescent cells (aka ‘zombie cells’) are serving up a rich source of opportunities for innovative therapeutic development in aging and age-related diseases. Pruning the level of senescent cells in our bodies, it now appears, helps us function a bit more like when were younger and healthier. After scientists genetically engineered and then activated a transgenic “suicide gene” to pare senescent cells in mice, the mice not only lived 25 percent longer but also regrew lost hair, had stronger muscles and better functioning organs, and experienced increased insulin sensitivity and lower rates heart disease and osteoporosis. In August 2018, a team of researchers at England’s University of Exeter used three different novel compounds to prune senescent cells in the mitochondria of mice, which then showed significant signs of cellular rejuvenation.
  • With this research as a backdrop, the race is now on to develop and test a new class of drugs called senolytics, designed to prune senescent cells to treat specific diseases of aging and potentially expand both health span and life span. Dutch scientists have designed a chain of amino acids that bump up our body’s ability to clear out senescent cells. Older mice given the compound regrew the luxurious fur of their youth and were able to run twice as far as they could just weeks before.
  • A related potential approach to countering aging involves manipulating the way our cells recycle their own biomass to extract energy and remove harmful proteins, a process scientists call autophagy. Autophagy serves younger organisms well but can malfunction and cause age-related diseases later in life. A new class of potential treatments for some age-related diseases and for aging itself, therefore, involves the targeting of specific steps of the autophagy process to help older cells start behaving as if they are younger.
  • Human clinical trials are now just starting to explore the potential impact of senolytic and autophagic drugs on specific diseases correlated with aging as a first step toward treating aging itself.
  • Parabiosis is a surgical union of two organisms allowing sharing of the blood circulation. The modern age of parabiosis began in 2015, when a husband and wife team of Stanford researchers published a high-profile paper describing how, when parabiotically paired with younger mice, the older mice healed faster and had better liver function than other older mice not Siamese-twinned to anybody. Since then, a slew of studies have shown that when old and young mice are joined, the older ones get functionally younger in many ways and the younger ones get functionally older. The paired older mice’s hearts get healthier, new neurons are formed in their brains, their memory improves, their spinal cord injuries heal faster, their muscles become stronger and their hair thickens.

…NOTES CONTINUED IN THE NEXT POST

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GMO crops

  • In 1973, Stanford’s Stanley Cohen and his professor Herbert Boyer transferred a gene that provided antibiotic resistance from one strain of bacteria to another that lacked this resistance. When the second bacteria became antibiotic-resistant, the new era of genetically modified organisms, GMOs, was born.
  • Soon after General Electric filed a patent for a genetically engineered bacteria designed to break down crude oil, potentially very useful in addressing oil spills. GE’s patent application was rejected because the U.S. Patent Office rules clearly indicated that living things could not be patented. But after GE appealed, the U.S. Supreme Court shocked the world in its 1980 ruling that “a live, human-made micro-organism is patentable subject matter.”
  • In 1982, the FDA approved the sale of insulin made from genetically modified bacteria to diabetic consumers. Two years later, the U.S. Department of Agriculture approved the sale of Calgene’s Flavr Savr tomatoes, genetically modified to ripen more slowly and last longer on the shelves. In the ensuing years, the U.S. market for genetically modified seeds grew exponentially, driven by powerful multinational corporations like Bayer, Dow, DuPont, Monsanto, and Syngenta. By 2000, most of the corn, soybeans, and cotton grown in the United States was genetically modified.
  • Genetically modified crop adoption levels kept growing because farmers believed that planting GM seeds increased yields and profits and reduced the need for pesticides.
  • China has steadily adopted genetically modified crops. With only 9 percent of the world’s arable land but 20 percent of its population, the country has always been food-insecure. For the Chinese government, genetic modification has long-seemed an appealing way to increase the crop yields of smaller and more marginal farms, grow the cotton needed for the country’s massive textile operations, and feed China’s people and massive herds of livestock. Today, around 60 percent of global soybean exports go to China, nearly all of it genetically engineered.
  • An Italian study released in February 2018 reviewed more than twenty years of data from multiple studies around the world and concluded that genetic modification actually increased yields and reduced carcinogenic toxins in corn. Genetically modified corn wasn’t just safe for human consumption, it was according to this study even healthier for us than non-GMO corn.
  • By 2016, 84 percent of Europeans polled had heard of genetically modified foods and a full 70 percent concluded that GM foods were “fundamentally unnatural.” Sixty-one percent believed that the development of GM crops should be discouraged and 59 percent that GM foods were unsafe.
  • In 2016, 109 Nobel laureates issued an open letter calling on Greenpeace to end its anti-GMO campaign, stating: “We urge Greenpeace and its supporters re-examine the experience of farmers and consumers worldwide with crops and foods improved through biotechnology, recognize the findings of authoritative scientific bodies and regulatory agencies, and abandon their campaign against “GMOs” in general and Golden Rice in particular. Scientific and regulatory agencies around the world have repeatedly and consistently found crops and foods improved through biotechnology to be as safe as, if not safer than those derived from any other method of production. There has never been a single confirmed case of a negative health outcome for humans or animals from their consumption. Their environmental impacts have been shown repeatedly to be less damaging to the environment, and a boon to global biodiversity.”

Sports and genetics

  • Finland’s Eero Mäntyranta was one of the most dominant Nordic skiers in history, winning seven Olympic medals between 1960 and 1972. When he and his family were genetically sequenced in the early 1990s, it turned out that Mäntyranta and twenty-nine of his relatives also had a very rare single mutation of the EPOR gene. This mutation made them far better able than others to produce hemoglobin which gave them a far greater endurance capacity.
  • ACTN3 gene is one of the unknown larger number of genes influencing the speed at which muscles contract. Although many athletic performance-related genes have been studied, ACTN3 is so far the only one that correlates with performance across multiple power sports. Having the right ACTN3 variant won’t make you a great sprinter, but multiple studies have shown that if you have two disrupted copies of ACTN3 your chances of making it to the Olympic finals in any sprinting race are virtually nil.
  • If you have a mutation of the MSTN gene impeding the production of myostatin (a protein that halts the production of muscles) your muscles keep growing far beyond most everyone else’s. Liam Hoekstra, a child with this myostatin mutation dubbed “the world’s strongest toddler,” could do challenging gymnastics tricks at five months old and pull-ups at eight months.
  • Companies like Atlas Biomed, DNAFit, Genotek, Gonidio, and WeGene offer parents and others information on whether a tested person’s genetic tests indicate single gene mutations believed to confer one athletic benefit or another. Although these predictions are today generally not that informative, they will become far more operative as our understanding of the genome grows, creating new possibilities for parents.
  • Jiaxue Gene, a private Chinese company based in Beijing reported on its website that it was already working with the Chinese government to screen children for sports-related genes. “The national sports teams and coaches have contacted Jiaxue Gene,” the site noted, “to screen for students with the highest training potential through the company’s genetic decoding technology.”
  • In 2014, Uzbekistan became the first nation to announce it was integrating genetic testing into its national sports program. In conjunction with its national Olympic Committee and several sports federations, Uzbekistan’s Academy of Sciences said it would test children for fifty genes believed to impact athletic potential to help identify possible future stars.
  • In August 2018, China’s Ministry of Science and Technology announced that Chinese athletes aspiring to compete in the 2022 Winter Olympics would be required to have their genomes sequence and profiled for “speed, endurance, and explosive force” as one factor in an official selection process guided by “genetic markers.” This type of testing today has a low probability of success because we still know relatively little about what genes do and because athletic success is such a complex mix of biological and environmental factors.
  • Within the mix of the scores of new direct-to-consumer genetic tests being offered around the world, a small but growing number are being marketed to parents specifically for children. U.S. company BabyGenes offers parents information on about 170 genes with potential health implications. After sending in a mouth swab taken from their children, parents in various countries using these tests are told they can gain insights into their children’s food tolerances, eating habits, sensitivity to second-hand smoke, susceptibility to addiction and hyperactivity, and whether the child is a morning or night person.
  • In China, dubious “health institutes” are now opening across the country claiming to predict the future strengths of children. One growing chain, Martime Gene, offers parents a genetic test allegedly identifying their children’s talents in twenty different activities, including dancing, math, and sports. Some Chinese parents now pay about $1,500 for a genetic test called myBabyGenome that indicates 950 genes associated with disease risks, 200 with drug reactions, and 100 with physical and personality traits.
  • These types of genetic tests are, for now, far more useful for identifying single-gene mutation risks than for accurately predicting any general traits, but the competitive pressure on parents to access this still unproven and, for now at least, still unreliable technology is enormous. Recognizing this, some governments are stepping in to protect consumers. Believing the tests were not sufficiently accurate and that the general public could not handle too much access to genetic data, the U.S. Food and Drug Administration in 2013 temporarily banned the consumer genetics company 23andMe from providing predictive health information to customers about their likelihood of getting genetic diseases. In Europe, France and Germany ban direct-to-consumer genetic testing.

Miscellaneous notes:

  • Although many gene-therapy protocols are now being actively explored, one of the most exciting and widely covered in the media is genetically enhancing the ability of a person’s T cells, white blood cells that play an essential role in the body’s natural immune response. In CAR-T therapy, blood cells are extracted from the body of a person with specific cancers and then engineered to boost the ability of their T cells to express a chimeric antigen receptor (CAR) before being put back into the person’s body with cancer-fighting superpowers.
  • 1.2 million years ago our prehuman ancestors dwindled to a mere twenty-six thousand people. Then, about 150 thousand years ago, our ancestor population may have shrunk to as little as 600 people barely hanging on to life in the southern tip of Africa. After the ash spewing from a massive Sumatran volcano 70,000 years ago dimmed the sun for six years, the number of total humans may have again shrunk to as little as a few thousand souls.
  • Korean students today consistently rank among the highest in global comparative student assessments, and the country is among the most educated in the world. Because competition is fierce to ace the national university entrance exam, suneung, to get into the elite universities seen as stepping-stones to success, preparation starts young. In addition to the excellent schooling the government provides, 75 percent of Korean primary school children are enrolled by their parents in one of the hundred thousand or so cram schools around the country. Based significantly on this pressure, youth anxiety and suicide rates in South Korea are among the highest in the world. In response, the Korean government in 2006 imposed a 10 p.m. curfew on cram schools because so many children were becoming chronically exhausted from working into the wee hours of morning at these schools. Despite government efforts to reduce the pressure on South Korea’s children, the Korean education arms race continues.
  • The race for competitive advantage in South Korea extends far beyond education. Physical beauty is treasured the world over, but Korea takes this to a whole new level. Even though the dangers of plastic surgery are well documented, South Korea has the highest per-capita rate of plastic surgery in the world. A BBC poll estimated that around half of all South Korean women in their twenties have had some type of plastic surgery. Korean parents often pay for these plastic surgeries as high school graduation gifts to give their children an additional means of getting ahead.
  • About three fourths of Kenyan running champions are Kalenjins, a tiny group making up only 4.4 million of Kenya’s 41 million people. Kalenjin runners won 84 percent of Kenya’s sixty-four Olympic and eight world-championship medals between 1964 and 2012 and were responsible for twenty of Kenya’s fastest twenty-five marathon times. The majority of these Kalenjin runners come from the even smaller Nandi subtribe, a group of about a million people in total. While this running success reflects lots of hard work, a national running culture, and other environmental factors, the genetic foundation of Kalenjin dominance is hard to miss. Kalenjin runners have on average longer legs, shorter torsos, thinner limbs, and less mass in relation to height than most everyone else, to which anyone who’s ever watched a competitive marathon over past decades can attest.
  • While the EU is working to prevent genetic data from being used to create a police state, China’s Ministry of Public Security is amassing the world’s largest DNA database as, among other things, an investment in social control. Chinese citizens in the country’s predominantly Muslim Xinjiang region and other ethnic minorities, migrant workers, potential dissidents, college students, and activists are being required to provide samples to be entered into the national database.
  • Today, each American consumes an average of 268 eggs per year, amounting to a total U.S. egg consumption of nearly 87 billion a year, produced by around 270 million hens hatching on average one egg a day. Nearly 1.2 trillion eggs are consumed globally each year, produced by a worldwide army of 50 billion domesticated chickens.
  • A mutation in the FBN1 gene, for example, can cause Marfan syndrome, a condition that usually makes people very tall and thin with an extra-long arm span. (Olympic swimmer Michael Phelps and U.S. president Abraham Lincoln both showed symptoms of this mutation.)
  • The genes that impact us the most are those providing instructions to our cells to create proteins, but nearly 99 percent of the total DNA does not code for proteins at all. These noncoding genes used to be called junk DNA because scientists thought they had no significant biological function. Today we can think of noncoding genes like football players standing on the sideline giving encouragement, tips, and direction to their teammates on the field. These noncoding genes play an important role directing the creation of certain RNA molecules that carry instructions from our genes outside the nucleus and in regulating how the protein-coding genes are expressed.
  • Each of our cells that has a nucleus contains the blueprint for our whole body, but the result would be chaos if every cell were trying to create the whole person. Instead, our genetic DNA is regulated by a process called epigenetics for determining which genes are expressed. A skin cell, for example, contains the blueprint of a liver cell and every other type of cell, but the epigenetic “marks” tell the skin cells to produce skin.
12 Likes

Was about to suggest Dilbert principle. Hilarious book but when you look back they all make so much sense on what usually happens in a corporate.

Hey…great efforts to produce the summary. Enjoyed reading it.

Was there any mention in the book about impact of emotional situation (happy, content, stressed, grief, etc) on genes and eventually on physical health

Thanks once again

@narenarora – thanks for the kind words! Though on second thoughts I feel I should have slimmed down the notes further.

To your question: there was nothing specific about impact of emotions on genes. However, the book did talk about the ‘nature vs nurture’ debate. The book concludes that genetics (nature) don’t determine everything; gene expression is highly regulated by environmental factors (diet, exercise etc.) as well. Though environmental factors don’t change your DNA but they change the expression of your DNA, or more concretely which protein to produce when and in what quantity. So one’s emotions will indeed switch on/off certain genes and alter your gene expression. The book talks about multiple studies done on identical twins who were separated at birth – while the twins had identical DNA but they had different behavioral attributes; current scientific consensus based on these “twins” studies is: nature (genetics) determines 70% of who you are and nurture (epigenetics) determines the rest 30%.

Let me know if this answers your question.

6 Likes

Expectations Investing, Mauboussin/Rappaport, 2001/2021 - This is a classic that had a revised and updated edition in 2021. Having not read it before, and having always believed that expectations always lead to disappointments, in life and in investing, I sort of was in line with the ideas in the book, even before I picked it up.

My notes -

  • There’s a shift from active to passive investing since turn of the century. Trillions of dollars have gone into index/etf funds and over a trillion withdrawn from actively managed funds

  • Since 1990, companies have invested substantially in intangibles than tangibles. Since these are expensed through the income statement, it is important to see which expenses add long-term value and which are required to sustain the business

  • Equity has shifted from public to private since 2001. 1/3rd fewer public companies listed in the US. VC and buyout industries have flourished meanwhile

  • Expectation investing follows cash, not earnings, which allows comparability over time

  • Investors do a poor job of appreciating the structure of market expectations

  • Stock prices express the collective expectations of investors. Rather than forecast cash-flows, expectations investing reads expectations implied by the companies’ stock price

  • Nearly 60 million US households, or nearly 1 in 2, own mutual funds

  • EPS is irrelevant when intangible investments exceed tangible investments (since intangible investments like ad spends that build the brand are expensed - our IT dept. wised to it sometime back)

  • The std. dev. of excess returns, which measures difference between best and worst fund managers has narrowed consistently since 1970s. Absolute skill of investors has risen, the relative skill between investors has declined

  • The surest route to top-quartile returns is bottom-quartile expenses (Bogle)

  • Inability to stomach short-term pains leads managers to obsess for short-term relative returns and consequently portfolios are designed to minimize variance with benchmark

  • Expectations investing doesn’t distinguish between growth and value (market commentators who think these as contrasting are displaying ignorance, not sophistication)

  • When companies announce earnings surprises, mergers and acquisitions, a new drug, or a govt. anti-trust action, the long-term valuation implications are rarely obvious

  • Expectations Investing reveals what the stock price is most sensitive to - sales, costs or capex

  • P/E multiple is a function of value (and not vice-versa)

  • When new investments yield a return below cost of capital, shareholder value decreases even as earnings increase. Reported earning growth, even with inc. in shareholder value can trigger decline in stock price when expectations not met

  • Compounding and discounting are counterparts

  • Bonds have specific dates for cash flows and repayments of principal while stocks have indefinite life, uncertain cash flows and no repayment of principal making them hard to value

  • NOPAT = Op. profit minus taxes. NOPAT - investments in working capital and fixed assets equals free cash flow

  • Operating value drivers - sales growth, operating profit margin and incr. investment rate and one value determinant i.e cash tax rate, determine free cash flow. Two other value determinants i.e CoC and Forecast period, along with FCF, determine the shareholder value

  • A company may be using straight-line depreciation for book purposes and accelerated dep. for tax purposes. AD reduces cash tax, Cash tax rates are typically lower than book tax rates

  • If a company receives cash from customers before it pays suppliers, working capital becomes a source of cash, rather than an investment outlay

  • Est. continual value - 4 methods - perpetuity, perpetuity with inflation, perpetuity with partial inflation or perpetuity with decline (knowing what’s appr. for business is key - depending on moat, disruption risk, price elasticity etc.). perpetuity with partial inflation is better suited for most

  • Price elasticity measures how much demand changes as prices change. Low price elasticity see stable demand as prices rise. Stable industries with low price elasticity of demand are best positioned to keep up with inflation.

  • Perpetuity with inflation model produces higher value than perpetuity model

  • Operating value drivers - sales growth, operating profit margin and incr. investment rate can be further broken down as

Sales [Volume, Price & Mix] → Sales growth
Sales [Price & Mix, Op. leverage, Economies of scale] + Op Costs [Cost efficiencies] → Op. profit margin
Investments [Investment efficiencies] → Incr. investment rate

  • Preproduction outlays dampen op. profit margins

  • Economies of scale and operating leverage are different concepts - former is incr. efficiencies with volume increase, op. leverage is result of spreading preproduction costs over large volumes (fixed costs spread over)

  • Cost efficiency can come from two things - reduced cost within activities, or significant reconfiguration of activities. Focus should be on potential beyond market expectations, rather than quantum of savings

  • Investment efficiency - invest less for given level of sales and op. profit

  • Changes in sales expectations are most likely to present attractive investment opportunities than revisions in expectations due to cost and investment efficiencies (Sales affects 4 of the 6 value factors)

  • Growth can be good news, bad news or no news

  • Threshold margin - margin a company needs to make to retain its value. Margins well above threshold will produce large increases in shareholder value

  • Revisions in sales expectations have insignificant impact on shareholder value for companies that earn returns close to CoC

  • Anticipating competitive dynamic shifts lead to biggest benefits. Substitution threat, buyer power, supplier power, barriers to entry and rivalry among firms (porter’s 5 forces)

  • Value created = Willingness to pay - Opportunity cost. Willingness to pay is the money at which customer is indifferent to having your product or having cash. Key is to improve the willingness to pay (differentiation)

  • Turbo trigger - the value trigger that is likely to have the greatest impact on shareholder value

  • Often changes in interest rates, by virtue of affecting discount rates, change shareholder value and affect stock prices

  • Bright people are particularly vulnerable to confirmation bias as they very good at justifying their beliefs

  • Fortressing strategy - increasing store density to improve customer service, keeping delivery drivers busy, expand carryout sales (Dominos in US)

  • A variant perception is a well-grounded view that is different from market

  • A strong non-consensus point of view is essential for a buy or sell decision

  • Faster price converges to expected value, higher the returns (sometimes convergence happens over longer period, diluting the returns)

  • DCF doesn’t readily explain start-up valuations. Real Options analysis is critical for early life-cycle startups. We should assign value to the idea - “if things go well, then we’ll add some capital”

  • FCF is same whether $1 million is invested in depreciable physical assets or expensed knowledge

  • Three types of businesses -

Physical - tangible assets like factories, equipment, inventories create value
Services - Sales increases based on employee growth and productivity (ads, consulting, financial services, IT)
Knowledge - Uses intellectual capital to produces products that are replicable at negligible cost

  • M&A deals often change company’s strategic and financial circumstances overnight (expectations revisions happen quickly)

  • M&A financed by stock to acquire a company may increase earnings (EPS accretive) but could be destroying shareholder value

  • Value change from a M&A deal = (Present value of synergies - Acquisition premium). Managements that pay a premium over the synergies achievable destroy value. Revenue synergies are easier to achieve than cost synergies

  • Analyzing M&As - Is the deal opportunistic (Weak player sells to stronger one - high success rate), operational (similar operations between buyer and seller - above avg. likelihood of success), transitional (seeking to build market share - wide range of success/failure rates) or transformational (new market - rarely succeed)

  • Many acquisitions fail because terms of the deal set expectations too high

  • Acquisitions create opportunities for competitors to poach talent when uncertainty is high

  • All cash deals - buyer shoulders entire risk and reward. It is shared in stock transactions

  • Imposition of regulation can benefit larger players (Eg. GDPR) - cost of adherence serves as a barrier to entry

  • Buybacks may sometime indicate that management has runout of ideas for value creation

Not many things new in the book if you have read other Mauboussin articles but still its a joy to read a well-written investment book, one that breaks apart the art, examines and assembles it back with scientific precision. 9/10

23 Likes

Loonshots, Safi Bahcall, 2019 - Excellent book that’s full of great ideas on how to build organizations, incentivize people, function effectively while running steady-state business and also nurture future disruptions.

My notes -

• Moonshot - project with ambitious goal and significance. Loonshot - Neglected, written off project, with an unhinged champion

• Small changes in structure, rather than culture can transform groups/organizations - phase transition from ice to water at the melting point

• “My secret is that I know what to ignore” (Crick after winning Nobel)

• Ibrutunib, a cancer drug was initially written off as dangerous but a change in dilution, made it a blockbuster $21b drug

• Amgen - Insiders call it a law firm with a drug. Its one drug erythropoietin or epo brings $10b a year

• 1970s Nokia was famous for rubber boots and toilet paper. In 2000s it was selling half the smartphones on the planet. An extremely innovative team turned down touchscreen displays and high-res camera and online app store. (Loss of risk-appetite)

• Disney had Lion King in 1994, which grossed nearly a billion worldwide but from 1994-2010, not a single Disney film opened #1 at the box office

• Tie-wearing corporate types become risk-averse executives in a big corporation, but same people in a start-up support wild ideas and take risks. Same person can behave differently based on environment

• ‘More is different’ - the whole becomes more than sum of its parts, and also different from its parts (same molecule of water in ice vs water)

• Stake vs Rank - small teams that share benefits of outcome, care more about ‘stake’ whereas large organizations where there’s more in salary increases or job titles, care more about ‘rank’

• Making originals films say toy story or first bond flick or star wars (loonshots) vs making sequels (franchises) require different group dynamics - no group can do both at the same time well. Former requires artists while the latter requires soldiers

• The weak link usually in a high-stakes competition isn’t lack of ideas, but the transfer of those ideas onto the field (weapon in war for eg.)

• Vannevar Bush transformed the military during WW-II, though he was a civilian. He created a new structure, without affecting the discipline, culture and rigidity of military. This was like ice (soldiers) and water (scientists) in a dynamic equilibrium

• People driving early-stage ideas (Artists) need to be sheltered from participating in steady-growth part of the organization (Soldiers). Artists and Soldiers should feel equally loved (Jony Ive and Tim Cook). This phase-separation and dynamic equilibrium is essential for longevity, innovation and growth. The phase sep creates a loonshot nursery

• Invention and innovation can’t be scheduled to meet deadlines

• Bush and Vail managed the transfer, not the technology. They didn’t involve themselves in any one loonshot, this helped them maintain the balance between loonshots and franchises

• Most loonshots fail at least thrice, almost killing the idea (Eg. statins - Death #1 - consensus view was any drug that reduced cholesterol will be fatal. Death #2 - Test on rats was a failure but that was because rats made poor test subjects for cholesterol since they had mostly HDL, Death #3 - They seemed to cause cancer in dogs)

• Artists (innovators) find promotions distasteful and soldiers (franchise) find anyone who doesn’t make stuff useless - project champions fluent in artist-speak and soldier-speak are essential to bridge the gap

• Persistence and stubbornness - when you listen to problems with genuine curiosity to improve the idea/product vs react with anger and defend. When you question the least, you have to worry the most

• P-type and S-type loonshots. P-type loonshots involve surprising breakthrough in ‘product’ that was widely dismissed before triumphing (telephone). S-type - breakthrough in strategy, involve new way of doing business or new application of existing product. P-type loonshots kill competition quickly (netflix killing video rentals) while S-type loonshots are hard to see coming and gradual and less obvious

• Competitive Anger - being angry at your opponent and also with yourself if you don’t win - Crandall (American Airlines). He would leave ‘I was here, where were you?’ notes on desk of employees over weekends. He would reorganize business, organization to be more efficient (S-type innovator)

• American Airlines developed the first computerized reservation system (Sabre) and gave it all booking agents across the country. Though it was open for all airlines, most bookings were made for American. 30 yrs before Silicon valley was into Big Data, American was analyzing booking data to optimize airline load factors (extract max $s per seat which they called ‘yield management’)

• Hub-and-spoke model was first tried in Airlines industry by startups at the time (Southwestern).

• Companies led by P-type innovators invariably get shocked sooner or later - by S-type innovators, regulatory changes etc.

• IBM was #1 in PC ($5b in sales in 1981) but it outsourced software and microprocessors as it assumed it was not key to is business - to Microsoft and Intel. It managed the P-type loonshot - mainframes to PCs but missed the S-type loonshot - irrelevance of PC manufacturer

• Moses trap - where soldiers and artists are separated but ideas advance only at the mercy of the holy leader (loonshots are picked not on strength of strategy but because of bias in the leader)

• ‘Do not undertake a goal unless its manifestly important and its achievement nearly impossible’ - Edwin Land of Polaroid

• If anything is worth doing, its worth doing in excess - Land - inventor of Polaroid sunglasses, 3D stereoscope movies, polaroid instant camera. The principle of polarization of light, based on which the glasses were based form the basis of LCD displays and several other innovations

• Polaroid instant camera sales went from $1.5 million in 1948 to $1.4 billion in 1978

• Polavision - instant home movie system developed by Polaroid at great expense, bombed badly (poor market fit). Land experienced Moses trap as the idea was championed by him being a P-type innovator

• “The only thing that matters is the bottom line?” - Land to analyst on launch of Polavision. Has become an iconic line. Bush and Vail managed the transfer, rather than the technology. That touch and balance between loonshots and franchises is very important to avoid the Moses trap.

• “I wanted you to see what hubris looks like” - Land referring to his warehouse full of Polavision cameras

• Newton and Jobs were great synthesizers - Kepler’s invisible force keeping planets around the sun, Hooke’s idea of universal gravity, Huygen’s idea of centrifugal force, Borelli’s explanation of elliptical movement of Jupiter’s moons, Wallis’ differential mathematics, Leibniz’s calculus - were all precursors to Newton who integrated them all into a coherent whole and we have simplified this as ‘apple falling on newton’s head’ as a easier story to tell

• Academic disciplines tend to flower on different campuses at different times, like flash mobs

• Lucasfilm’s computer division developed the first 3D rendering, digital editing, optical scanning, laser film printing and CGI - all while making Star Wars

• ‘Some days you are the dog, some days the fire hydrant’ (Jobs after struggling with Pixar and NeXT). Jobs fell into the Moses trap at Pixar and NeXT and fixed that problem in his second-coming with Apple

• The weakest teams don’t analyze failures at all. System mindset is carefully examining quality of decisions, not just the quality of outcomes. There are good decisions that lead to bad outcomes and bad decisions that lead to good outcomes as well

• ‘The best innovation is sometimes the company, the way you organize’ (Jobs)

• Emergent properties - properties of the whole, rather than the parts. The macro, not the micro

• As team size crosses a magic number, the focus shifts from loonshots to focus on careers

• Percolation theory - Idea of water dripping through coffee grounds when its loosely packed vs inability when tightly packed. Same principle applies to way fire spreads in a forest of smoke through a gas mask

• Sparking rate - frequency of small fires in a forest. Reducing sparking rate causes inevitable massive fires in the long run

• Synchrony in nature - how do millions of heart cells beat in rhythm? How do crickets synchronize their chirping? (Incidentally, the latter was a fascinating experience when the sun set and the chirping started almost all at once in a recent trek in the western ghats)

• System with mostly local connections but occasional distant ties - small world network (Stragatz and Watts). Whether a neuronal misfiring is harmless or ends up in a seizure, or an idea becomes viral or fads are all governed by similar dynamics - percolation on a small-world network (Math behind this is explored in ‘The Model Thinker’, very fascinating book)

• Trading cliques - small group of traders who behave the same way as ideas percolate into groups. Water near boiling point forms bubbles that either burst. split or merge with others - trading cliques act like those percolating bubbles

• Super-spreaders (of viral ideas) are not always clusters with great number of links. These clusters of influence are unusually robust and unusually fragile. They are robust against accidental failures in the network but fragile when clusters are greatest influence are removed (Terror networks as well are deactivated this way)

• Dunbar’s number - Magic number of people with whom we can maintain stable relationships. Mormons split in groups of 150 when migrating. Its also found to the size of organization around this number did well

• ‘The dignity of movement of an ice-berg is due to only one-eighth of it being above water.’ - Hemingway’s theory of omission. The power of beautiful prose comes from what you leave out. Same thing with, models say, of forest fires

• Management span - Number of direct reports to a manager. Avg. management span in the US has been between 5-7. For a 1000 people company, an avg. span of 3 means 5 layers of hierarchy, whereas S=10 means only 2

• When hierarchy is deep, employees may find it worthwhile to spend time networking, politicking than on contributing productively. The promotion obsession never stops. Flatter organizations with large span (S), low or no promotions, less hikes (G) but with higher equity (E) always perform better - focus is more on project outcomes than politics. G, S and E affect outcomes

• Other than G,S and E, fitness parameters like ‘project-skill’ fit - a person who is skilled for the job to be done, will politick less. Also ‘return-on-politics’ matters - are promotions decided on merit or lobbying? if its latter, return-on-politics is going to be high. Ratio of project-skill fit and return-on-politics provides the fitness (F)

• Intuition - poorly skill-matched employees in a deeply hierarchical organization that rewards employees not on merit but on politics, is a disaster

• Magic Number M = (E * S^2 * F)/G. Higher equity, higher span, better project-skill fit and low return on politics, low salary growth rewards, allows for higher threshold for organization size while still retaining high productivity - people who can still nurture loonshots, instead of focus on careers

• “Soap operas sell lots of soap” - McElroy of P&G who came with the idea of shows that housewives could watch during the day in which P&G could deliver ads directly to their living rooms

• Eisenhower hired McElroy to shake up the military since he was an outsider with no prior ties to the military or federal govt. (Outsiders always have the best view. In my opinion one should never stay in anything until they become an Insider)

• McElroy established ARPA (advanced research projects agency) which later became DARPA (D for defense). DARPA helped found the internet, GPS, Siri etc. Most consumer technology used today have foundations at DARPA’s loonshots. DARPA is run like a loose collection of small startups, with no career ladder

• Soft equity - Recognition from peers is intangible soft equity. A company with great people will always attract other great people. Increase autonomy, visibility and soft equity (things that worked for DARPA)

• “A soldier will fight long and hard for a bit of colored ribbon” - Napoleon

• Did a problem fail because underlying tech didn’t work (Hypothesis failure) or the people running it botched it (Operational failure)

• Leaders who order their employees to be more innovative without first investing in org. fitness are like casual joggers who order their bodies to run a marathon

• Large stock options or cash bonuses at the top and marginal increases at junior levels creates the wrong kind of incentives and creates the dangerous middle

• When archaeologists incentivized bedouin shepherds who gathered dead sea scrolls by each piece of scrap, it encouraged the shepherds to rip what was found into tiny scraps. Pay contractors by the hour and problems multiply. Reward sales and profits may disappear (customers can be bought) - Examples of poor incentive structure

• Free-rider problem - if your project may not move earnings by much, incentive based on earnings make no sense. People may sit and twiddle thumbs and collect bonuses

• Chief Incentive Officer - experts that understand incentive structure, cognitive biases and are skilled at using both tangible and intangible equity

• The right temp. for tea, averaged over the population might be room temp. as half may like iced tea and others hot tea

• Needham Question - Why the scientific revolution didn’t take place in China, despite all the advantages it had? China and India had over half of the world’s GDP for a 1000 yrs from 500 AD to 1500 AD. Western Europe had between 1 and 2% at the same time

• Paper and printing, compass, gunpowder, cannons, crankshafts, deep-well drilling, cast iron, paper currency, sophisticated astronomical observatories were all present in China centuries before Europe. Chinese leaders focused on franchise projects like Great Wall, Grand canal which were franchise projects while Europe invented the steam engine (loonshot)

• Europe had catholic bishops in Toledo hiring Jews to translate Arab critiques of Greek texts into latin for Germans to read, of imported Chinese technologies and Indian math and Islamic astronomy - they believed that underlying everything we see are universal truths that can be determined through measurement and experiment. The radical of all - they believed these truths could be revealed to anyone

• For 10000 years life expectancy barely changed but between 1800 and 2000, it doubled. Avg economic output was constant between $450 and $650, in 1990 dollars. Since 1800, it has increase 1000%

• For loonshot nursery to flourish, phase separation (artists and soldiers separated), dynamic equilibrium (with a free exchange of ideas between them) and critical mass (loonshot group large enough to nurture several loonshots) are three conditions that must be met

• Scrap-metal collectors, fur traders - Mayer, Goldwyn, Warner, Fox etc. stole Edison’s motion picture invention and when Edison sent patent police after them, they created a town on the Mexican border so they could flee the police if needed - that’s how Hollywood was born

• US SC decision that no one producing movies could also own theatres created phase separation between producers and distributors - The producers were numerous (critical mass) and could nurture loonshots, while distribution was with large studios (dynamic equilibrium) - that’s how movies like Star Wars, James Bond etc. were born. (Same can be seen in India with indie productions making better movies distributed on OTT, than what established large production houses can deliver)

• Insulin changed medicine - it was the first time proteins weren’t the target of drugs, but were the drugs themselves. The same way in which govt. regulation broke the market into producers and distributors, genetic engg. did the same for pharma - breaking pharma into bio techs and big pharma (Roche/Genentech for eg)

• When China outlawed astronomy (it was reserved for the emperor), it effectively killed astronomy in China, whereas Tycho Brahe could get support in Prague instead of Denmark. A fragment ecosystem allows for talent to jump from one lilypad to another until they find a home. This is the same reason why silicon valley produces so many start-ups

• Telescopes invented in Netherlands, were pointed at the sky in Italy, elliptical orbits were discovered in Germany and earth motion analysed in Poland, led to ideas of inertia in Italy and geometry in France and into a unified theory of motion in England (Critical mass). England’s setting up of the Royal Society and separation from Church to pursue science, setup the foundation for wild success, of the kind China or India couldn’t pull off

• Loonshots and disruptions are different - The former is prospective while latter is retrospective

This is a well-researched book with a tonne of source notes and a lot of original ideas I had not come across before. The book is extremely readable too and is quite a page-turner because of the wealth of examples across time. 10/10

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Logicomix, Doxiadis and Papadimitriou, 2008 - This book is Bertrand Russel’s life as a graphic novel. I don’t know how people get these strange ideas but it is these strange ideas that make refreshing new ways of making general public get interested in mathematics and some of the popular figures involved in it. The book however takes a lot of liberty into portraying people who may have never met in real life, may not have even existed around the same time the way it is portrayed etc. - so a lot of creative liberty has been taken, similar to what hollywood biopics do - so historical accuracy takes a backseat to making the story readable and the ideas conveyable

Russell is known for his work along with Alfred North Whitehead on Principia Mathematica - an effort to formalise the mathematical system down to symbols and logic, and for his analytic philosophy. The book captures the struggles of Russel post WW-I, with the horrors of war and also the crisis in the foundations of mathematics. Cantor’s set theory also gets featured in the book - to illustrate Russell’s paradox - A set of all sets cannot be a member of itself. Wittgenstein, Russell’s protege who took forward Russell’s ideas and then ultimately Godel who pulled the rug from under with his Incompleteness theorems, complete the mathematical arc of the story.

Frege, Boole, Hilbert also get featured loosely but since mathematics is not the book’s strong point, and neither is historical accuracy, it adds little value. Perhaps just to have fun with the point of self-reference, the authors wrote themselves into the book and the making of the book itself is part of the storyline of the book. This is a book that contains the making of the book in itself - like Italo Calvino’s ‘If on a winter night a traveller’ (super creative book, if you haven’t yet read). This isn’t a book I would re-read but it was fun and different from anything else on the subject. 8/10

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Few takeaways from the book:

  • Poll/questionnaire samples can have in-built biases. For example, imagine you are running a general knowledge magazine, and you want to prove that readers of your magazine are wiser than the general population. So, you ask certain questions on the last page of the magazine and ask the readers to fill in the answers and return them in the postage-paid envelope. You will compare the average number of correct answers given by readers, with non-readers. Did you notice the bias? It is quite likely that there is a significant overlap between those who know the correct answers and those who fill in the answers. It is likely that those who do not know the answers will not bother to complete the questionnaire at all! Of course, you will end up depicting a rosy picture of your readers’ intelligence. In today’s world of virtual meetings, perhaps this will be a better example: consider someone who is asking “am I audible?”. If they were audible, they will get the response “yes”. The bias comes here: if they were not audible, the other participant(s) will not hear them. Hence, whenever they receive a response, it will always be “yes”. Imagine this conversation-
    a: am I audible?
    b: no
  • If the data point has a normal distribution (like a bell curve), e.g. height, the mean, median and mode will be similar in value. However, if the distribution is skewed (a graph with the shape of a children’s slide), e.g. income, the three averages will be significantly divergent.
  • When you hear ‘average’ (e.g., ‘the average man earns…’), always question whether it is a mean, median or mode.
  • Mean is sensitive to highly divergent values (especially on low sample size), hence, the majority of people may be ‘above average’, if average refers to mean. E.g., in the sample of 18, 15, 3- the mean is 12; 18 and 15 are both above 12 i.e., 66% of the samples are ‘above average’ if average refers to mean. This may be a minor flaw in the overconfidence bias explained in “Thinking, Fast and Slow” (e.g. more than half the people rate themselves as ‘above average’ drivers), as the average referred to is not stated clearly.
  • You do not need biased samples to misrepresent figures- a small sample size will do it.
  • A graph without numbers is meaningless.
  • A mean value may have never occurred. E.g., in the above sample of 18, 15, 3- the mean is 12. However, 12 itself is not a part of the sample. The book “Alchemy” talks about doorknobs being built at a height such that it is optimum- in this case, a median or mode will likely be used. If a mean is used, it is possible that the mean is not part of the sample itself, hence it will not be suitable for anyone! Similarly for airplane cockpits (you can read more on why cockpits are not designed for the ‘average’ pilot, here)
  • If you change the scale on the y-axis of a graph, you can artificially (yet legitimately) boost the gradient of the curve, thus making it look steeper than before, even though the numerical values are the same. Readers of the book “Factfulness” can turn to pages 40-41 (for the hardcover edition; kindle may have a different page number), where the authors have openly admitted to using this trick for narrowing the “gap” in average math scores of men and women. (With all due respect and with no offence whatsoever to “Factfulness”, the authors of that book have also used a geometric progression on the y-axis for the graph of the average daily income of US and Mexico; they have used $6, $12, $24, $48 instead of $6, $12, $18, $24…; the “gap” would be much larger if they used the latter)
  • Imagine you are using a pictogram to represent the mean number of pizzas eaten in Delhi and Mumbai per day. Assume the ratio is 1:2, i.e. 1000 pizzas in Delhi and 2000 pizzas in Mumbai. Also, assume that one circle represents 1000 pizzas. The straightforward way to depict this would be one circle under Delhi and two circles under Mumbai. If you wanted to complicate things, you could draw only one circle each, under Delhi and Mumbai, but of varying sizes. Here is where you could play a trick: you could use the ratio of 1:2 as the ratio of the radii of the two circles, which means that the area of the Mumbai circle will be 4x that of the Delhi circle (not 2x), thus making the difference seem disproportionately larger. This is why one should be wary of single-image pictograms, as the ratio of areas is directly proportional to the square of the ratio of radii (plural for radius). Needless to say, the misrepresentation can be magnified if we use three-dimensional figures.
  • A correlation between A and B does not necessarily mean that A causes B; it could also mean that B causes A, or that there is a third factor common to A and B. Consider this: ice-cream sales are higher on sunnier days, and accidents are more frequent on sunnier days (perhaps due to increased frustration). Does this mean that higher ice-cream sales cause more accidents?
  • Data given ‘precisely’ to several decimal points e.g., 8.156 instead of ‘a little over 8’ sounds more convincing, and hence one should be wary of such false accuracy.
  • As in physics, so in statistics: the output cannot be (and hence, should not be) more precise, in terms of the number of significant figures, than the inputs.
  • Calculations can be done in many ways, e.g., some investors consider cash conversion ratio as CFO to EBITDA, while others calculate it as CFO to PAT, and some others use CFO to PBT (there is also a confusion on whether they use pre-tax or post-tax CFO), hence you are obligated to disclose what method you have used.
  • Don’t confuse between % and % points: a rise in a company’s RoCE from 25% to 30% is a rise of 5 percentage points, but can also be stated as a rise of 20%.

The book was filled with insights into how figures can be bent. Investors who closely track promoter’s remuneration will find an interesting example of how the ratio of promoter’s remuneration : median employee salary (given in the annual report) can be deflated. Most interesting for me was a case where the author uses the same set of numbers to argue on both sides! Perhaps it is right to call this book the “Financial Shenanigans” of the non-financial world. Given that the book is only around 110 pages, it was amazing that I derived so much from the book. Highly recommended.

10/10

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The Story of the Earth in 25 Rocks: Tales of Important Geological Puzzles and the People Who Solved Them (2018) by Donald R. Prothero

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This book covers the “greatest hits” of geology, spanning from Ice Age to meteorites to ocean maps to dating the earth (to name a few). Author presents the topics in a puzzle format which makes the book an interesting read. It’s a good read if you are looking for a gentle introduction to geology.

Donald Prothero is an academic with multiple books and scientific papers under his belt.

Notes:

  • For almost 2,000 years, nearly all scholars followed a literal interpretation of the Bible as their guide for the origin and history of the earth. Even as late as the mid-1700s, natural historians still thought the earth was only a few thousand years old.

  • In late 1700s, James Hutton – father of modern geology asserted that the age of the earth must be inconceivably great. As Hutton himself wrote, geologic time is immense and virtually endless, with “no vestige of a beginning, no prospect of an end.”.

  • By 1830 almost all geologists agreed that the earth was immensely old. Most estimated earth to be about 100 million years old.

  • In 1920s, after discovery of radioactivity, Arthur Holmes – a British scientist – used radioactive dating to determine earth’s age to be ~4.5 billion years. His estimate still stands today.

  • “Deep time” refers to the time scale of geologic events, which is vastly, almost unimaginably greater than the time scale of human lives and human plans. It is one of geology’s great gifts to the world’s set of important ideas.

  • In 1969, Russian geophysicist Mikhail Budyko published a paper that showed how easy it is for a planet to freeze over once the ice sheets start to grow. He pointed to a well-known climate effect known as the albedo feedback loop.

  • Albedo (“whiteness”) refers to the proportion of light reflected by a body.

  • The albedo feedback system is very sensitive to small changes, which can transform it from frozen to ice-free and back to frozen very quickly.

  • Croll-Milankovitch cycles describe the collective effects of changes in the Earth’s movements on its climate over thousands of years. It hypothesized (in 1920s) that variations in eccentricity (shape of Earth’s orbit), obliquity (axial tilt; it fluctuates between 22° and 24.5°), and precession (direction Earth’s axis of rotation) resulted in cyclical variation in the solar radiation reaching the Earth, and eventually influenced the Earth’s climatic patterns, including occurrence of Ice Ages.

  • In 1976 Hays, Imbrie, and Shackleton published a legendary “pacemaker” paper, which laid out all the evidence that astronomical cycles of the earth’s motion around the sun dictate how much solar radiation we receive, and those cycles are the major controllers or “pacemakers” of the Ice Ages. This paper confirming Croll-Milankovitch hypothesis is ranked as one of the most important scientific breakthroughs of the twentieth century, and has been considered one of the landmark discoveries in geology

  • For centuries Egyptians had to cope with the annual floods on the Nile in order to reap the benefits of its rich agricultural bounty. The Egyptian calendar is pegged to the Nile, with three distinct seasons: Akhet (“flood”), Peret (“growing season”), and Shemu (“dry season”).

  • Glomar Challenger was a deep sea research and scientific drilling vessel for oceanography and marine geology studies. It drilled 624 holes in the seafloor, recovering 19,119 cores. In the process, it obtained an amazing record of the history of the world’s oceans that solved all sorts of mysteries, from the causes of the Ice Ages to the extinction that killed the dinosaurs to how the oceanic currents had changed and affected climate for the past 150 million years. Many people regard it as one of the most important projects in the history of science, and certainly the most important in marine geology and oceanography.

  • The 1906 San Francisco earthquake was one of the first quakes to be extensively studied by modern scientific methods, and the discoveries made in its aftermath formed the foundation of seismology.

  • Till 1950s one of the great unknowns of science was the shape of the seafloor. This all changed when pioneering geologist Marie Tharp and her partner Bruce Heezen collated all the data from echo sounders collected by ships since the late 1940s and plottted these depth profiles on a map. Tharp and Heezen published the iconic map of the ocean bottom in 1977.

  • On March 26, 2012, James Cameron took 3 hours to descend to 10,898 meters then spent 3 hours exploring before returning to the surface in 2 hours. He holds the record for the deepest manned descent.

  • In late 1500s William Gilbert coined the word “electron” from the Latin word electrum, meaning “like amber,” because it is easy to generate static by rubbing a piece of amber on fabric.

  • In 1946 Walter Elsasser first suggested how movements of the iron fluids in the core might generate the observed magnetic field of the earth. This was followed by the work of physicist Edward Bullard, who first modeled the earth’s magnetic field and core movements mathematically by using geophysical fluid dynamics.

  • The Alvarez hypothesis (after father-son duo of Walter and Luis Alavrez) posits that the mass extinction of the non-avian dinosaurs and many other living things during the Cretaceous–Paleogene (K-Pg) extinction event (~66 million years ago) was caused by the impact of a large asteroid on the Earth. The arrived at this hypothesis after observing an abnormally high concentration of iridium at K-Pg boundary (Cretaceous is “K” from the German Kreide for “chalk). Their 1980 paper has become one of the most cited papers in the history of science.

  • One of the old Roman names for England, Albion, comes from the Latin word “white” and probably refers to the chalk cliffs that the Roman invaders had to skirt when entering England at Dover.

  • Most modern blackboard “chalk” is not made of chalk at all, but powdered gypsum compressed into sticks.

  • Wegener’s continental drift theory was considered fully crackpot by the most powerful American and European geologists of the late 1940s and early 1950s. Discovery of seafloor spreading in 1963 put the plate tectonic revolution in high gear and eventually helped prove the continental drift.

  • Douglas Mawson was a legendary geologist and is also an Australian national hero. Due to his exploratory efforts Australia has claim to 42% of Antarctica (more than any other country). Mawson was trapped in Antarctica for almost 3 years. Edmond Hilary said Mawson’s story is the greatest survival story in the history of exploration

  • The “Cambrian explosion” refers to an interval of time approximately 541 million years ago in the when practically all major animal phyla started appearing in the fossil record.

  • Banded iron formations (aka BIFs) are distinctive units of sedimentary rock consisting of alternating layers of iron oxides and iron-poor chert. BIFs account for more than 60% of global iron reserves and provide most of the iron ore presently mined. Most formations can be found in Australia, Brazil, Canada, India, Russia, South Africa, Ukraine, and the United States.

  • The Great Oxidation Event (GOE): was a time interval when the Earth’s atmosphere first experienced a rise in the amount of oxygen. This occurred approximately 2.4–2.0 billion years ago when biologically-produced molecular oxygen started to accumulate in Earth’s atmosphere and changed it from a weakly reducing atmosphere practically free of oxygen into an oxidizing atmosphere containing abundant oxygen.

  • Zircons (faux diamond) are widely used to produce dates in the uranium-lead or lead-lead method of dating. Zircons are very durable and resistant to nearly every brute force method extract them from granitic rocks – these are extracted using hydrofluoric acid (HF).

  • There are many geologists who specialize in zircons because they can be very powerful tools for all sorts of geological problems. Geochronologists find that they are often the best mineral for dating very ancient rocks.

  • The ZTR index is a method of determining how weathered a rock is. The letters in ZTR stand for 3 common minerals found in ultra-weathered sediments: zircon, tourmaline, and rutile.

  • By the time US Congress canceled the Apollo program in 1973, the six moon missions had landed 12 men on the moon, collected a huge amount of data about the moon, and returned with 381.7 kilograms (842 pounds) of lunar samples.

  • The only scientist ever to walk on the moon was a geologist, Harrison Schmitt, who was on the last mission, Apollo 17, which spent several days on the moon in December 1972

  • Iron-nickel meteorites are a very rare and special kind of meteorite. Only 6 percent of known meteorites are of this composition, stony meteorites and chondrites are far more abundant.

  • Coesite and stishovite are forms of quartz that are only formed by the shock of an impact (like a nuclear explosion or meteor impact).

  • Hoba, an iron-nickle meteorite, in Namibia is the largest single meteorite ever found and the largest piece of iron ever. It has never been moved from its site because it weighs at least 60 tons. The name “Hoba” comes from Khoekhoegowab word meaning “gift”.

  • Tomanowos (an iron-nickle meteorite) is a rock with arguably the most fascinating story on Earth. It means “the visitor from heaven” in the extinct language of Oregon’s Clackamas Indian tribe. The Clackamas revered the Tomanowos – also known as the Willamette meteorite – believing it came to unite heaven, earth and water for their people.

  • Chondritic meteorites are a special class of meteorites that formed from the early solar system and that predate the planets. They are made of the dust and debris of the original solar dust cloud.

  • The Murchison (Chondritic) meteorite was found to contain amino acids which gave credence to the theory that life came on earth by way of a meteorite because amino acids are the building blocks of life.

  • Vetlesen Prize is called the “Nobel Prize of Geology”. It is given with a gap of at least two years

  • People have been digging coal from the ground since as early as 4000 B.C.E. in China, where it was mostly used to create heat in fireplaces and furnaces. But by about 1000 B.C.E., the Chinese were using coal to smelt copper.

  • Since the Industrial Revolution grew up in Great Britain, that country was among the first to undertake large-scale coal mining. By 1800, 83 percent of the world’s coal was mined in Britain,

  • Today, China is the leading coal-producing country in the world, with over 2.8 billion tons produced in 2008, about 40 percent of all the world’s coal production.

  • The Jurassic Taynton Limestone northeast of Oxford produced fossils of the first dinosaur ever named, Megalosaurus, although this fossil was not formally named until 1824, and the concept of “dinosaurs” did not emerge until the 1830s and 1840s.

  • The Apple iPad uses 1 to 3 grams of tin, and in just two of its components there are 7,000 solder points. Tin is still the most important metal in most electronics produced today.

  • Tin changed the course of modern warfare and made the great empires of the 1700s and 1800s possible. The tin container made it feasible for armies and navies to supply themselves during long voyages and campaigns; obtaining sufficient food had always been a problem for military logistics. Tin cans were actually invented at the request of Napoleon Bonaparte himself.

  • Currently, most of the world’s tin comes from Indonesia, China, and Malaysia.

  • The Wilson Cycle explains the process of the opening (beginning) and the closing (end) of an ocean. The processes, is driven by Plate Tectonics.

  • Plinian eruptions are volcanic eruptions marked by their similarity to the eruption of Mount Vesuvius in 79 AD, which destroyed the ancient Roman cities of Herculaneum and Pompeii. The eruption was described in a letter written by Pliny the Younger, after the death of his uncle Pliny the Elder.

  • Unlike most elements and minerals, copper occurs in its pure native element form, as do elemental gold, silver, sulfur, and graphite. Native copper often occurs in huge crystals

  • The Greeks called copper chalchos, and mined it from just a few regions in the Mediterranean. The Romans called copper aes Cyprium, “metal alloy from Cyprus,” because that island was the biggest source of copper at that time.

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This is one of the cool statements I found in connection to your point on the Continental Drift Theory.

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The book starts with Forewords from Howard Marks, Bill Miller & Peter Lynch and Introduction from Kenneth L. Fisher(Phil Fisher’s son) which are all worth reading

Chapter 1 – A Five-Sigma Event. The World’s Greatest Investor

  • Buffett always claims he won an ovarian lottery as he figures out that the odds of him being born in US in 1930 were 30:1

  • Based on his own self-assessment, he is wired in a particular way that allows him to thrive in a big capitalistic economy with a lot of action

  • Buffett’s family briefly were affected due to the great depression in 1930’s and it made a strong impact on his mind even though the tough period was short. His age was less than five when this happened

  • After a chance reading of “The Intelligent Investor” book by Ben Graham he felt like seeing the light and he joined Graham’s class in Columbia University Graduate School of Business

  • Buffett becomes a major share-holder in Berkshire Hathaway which is a textile company. This book is about how he evaluates, manages, and buys businesses under Berkshire as well its stock portfolio

  • The efficient market theory suggests that analysing stocks is a waste of time because all available information is already reflected in current stock price but some minority like Warren Buffett disagree

  • The efficient market theoreticians say that the theory is not flawed but individuals like Buffett are a five-sigma event and so rare that practically never occurs.

Chapter 2 – The Education of Warren Buffett

  • Warren Buffet is influenced by three gurus - Ben Graham, Philip Fisher & Charlie Munger

  • Ben Graham’s definition of investment – “ An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative”

  • The memory of being financially ruined twice in a lifetime led him to embrace an investment approach that stressed downside protection versus upside potential.
    Graham’s 2 rules of investing –

    1. Don’t lose
    2. Don’t forget the first rule
  • Philip Fisher believes that superior profits could be made by

    1. Investing in companies with above average potential and
    2. Aligning oneself with the most capable management
  • The characteristic of a company that most impressed Fisher was its ability to grow sales and profits over the years, at rates greater than the industry average

  • The essential step in prudent investing, he explained, is to uncover as much about the company as possible, from the people who are familiar with the company

  • He believes in focus portfolio of less than 10 companies and usually 75% in 3 or 4 stocks

  • Charlie Munger believes it was far better to pay a fair price for a great company than a great price for a fair company

  • To achieve “worldly wisdom” said Charlie, you must build a lattice work of mental models that unites all the big ideas in the world

To summarise, Graham gave Buffett the intellectual basis for investing – the margin of safety and helped him learn to master his emotions in order to take advantage of market fluctuations.
Fisher gave Buffett an updated, workable methodology that enabled him to identify good long-term investments and manage a focused portfolio over time. Charlie helped Buffett appreciate the
Economic returns that come from buying and owning great businesses.

Chapter 3 – Buying a business. The twelve immutable tenets

Here are the “Tenets of the Warren Buffett Way”.

Business Tenets

  1. Is the business simple and understandable
    In Buffett’s view, investors’ financial success is correlated to how well they understand their investment. This is a distinguishing trait that separates investors with a business orientation
    From most hit and run types – people who are constantly buying and selling

  2. Does the business have a consistent operating history
    Experience has taught him that turnarounds seldom turn. It can be more profitable to look for good businesses at reasonable prices than difficult businesses at cheaper prices

  3. Does the business have favourable long-term prospects
    “The most important thing for me is figuring out how big a moat there is around the business. What I love of course is a big castle and a big moat with piranhas and crocodiles.”
    Management Tenets
    “We do not wish to join with managers who lack admirable qualities”, he says, ”no matter how attractive the prospects of their business. We’ve never succeeded in making good deals with a bad person”

  4. Is management rational?
    The most important management act is the allocation of the company’s capital

  5. Is management candid with its shareholders?
    “What needs to be reported”, argues Buffett that helps the financially literate readers answer three key questions:
    a. Approximately, how much is the company worth?
    b. What is the likelihood that it can meet its future obligations?
    c. How good a job are its managers doing, given the hand they have been dealt?

  6. Does management resist the institutional imperative?
    Buffett isolates three factors as being most influential in management’s behaviour.
    a. Most managers cannot control their lust for activity. Such hyperactivity often finds its outlet in business takeovers
    b. Most managers are constantly comparing their business’s sales, earnings, and executive compensation to other companies within and beyond their industry.
    These comparisons invariably invite corporate hyperactivity
    c. Most managers have an exaggerated sense of their own capabilities
    Financial Tenets

  7. Focus on return on equity, not earnings per share
    “Good business or investment decisions”, he says, “will produce quite satisfactory results with no aid from leverage”

  8. Calculate “Owner earnings”
    Cash flow is an appropriate way to measure businesses that have large investments in the beginning and smaller outlays layer on, such as real estate development, gas fields, and cable companies.
    Manufacturing companies, on the other hand, which require ongoing capital expenditures, are not accurately valued using only cashflow
    Instead of cash flows, Buffett prefers to use what he calls “owner earnings”, a company’s net income plus depreciation, depletion, and amortization, less the amount of capex and any additional working capital
    Quoting Keynes, “I would rather be vaguely right than precisely wrong”

  9. Look for companies with high profit margins
    Buffett says that the best managers attack costs as vigorously when profits are at record levels as when they are under pressure

  10. For every dollar retained, make sure the company has created at least one dollar of market value
    If a company employs retained earnings non-productively over an extended period, eventually market will price the shares of the company lower
    Market Tenets

  11. What is the value of the business?
    “I put a heavy weight on certainty”, he says, “If you do that, the whole idea of a risk factor doesn’t make sense to me. Risk comes from not knowing what you’re doing”
    Growth can add to the value when the return on invested capital is above average, thereby assuming that when a dollar is being invested in the company, at least one dollar of market value is being created

  12. Can the business be purchased at a significant discount to its value?
    Focusing on good businesses – those that are understandable, with enduring economics, run by shareholder-oriented managers – by itself is not enough to guarantee success.
    If we make mistakes, he points out, it is either because of
    a. The price we paid
    b. The management we joined or
    c. The future economics of the business. Miscalculations in the third instance are, he notes, the most common

“The market, like the Lord, helps those who help themselves,” Buffett says, “But unlike the Lord, the market does not forgive those who know not what they do”

Chapter 4 – Common Stock Purchases
This chapter contains the 9 case studies of the businesses Buffett bought discussing the above 12 tenets

Chapter 5 – Portfolio Management – The mathematics of investing

  • He refers to himself as a “focus investor” – “We just focus on a few outstanding companies”. This approach , called focus investing, greatly simplifies the task of portfolio management

  • Decision theory is the process of deciding what to do when you are uncertain what will happen. “Making that decision,” wrote Bernstein,” is the essential first step in any effort to manage risk”.

  • “Take the probability of loss times the amount of possible loss from the probability of gain times the amount of possible gain. That is what we’re trying to do,” says Buffett. “It’s imperfect but that’s what it is all about.”

  • The Kelly optimization model, often called the optimal growth strategy, is based on the concept that if you know the probability of success, you bet the fraction of your bankroll that maximises the growth rate”
    It is expressed as a formula: 2p-1 = x where 2 times the probability of winning (p) minus 1 equals the percentage of your total bankroll that you should bet(x).

  • As Charlie Munger puts it, “The wise [investors] bet heavily when the world offers them opportunity. They bet big when they have the odds. And the rest of the time, they don’t. It’s just that simple.”

  • If the price of a particular stock is going up, we assume good things are happening; if the price starts to go down, we assume something bad is happening, and we act accordingly.

  • It is a poor mental habit, and it is exacerbated by another: evaluating price performance over short periods of time. Not only are we depending solely on the wrong thing(price), Buffett would say
    but we’re looking at it too often and we’re too quick to jump when we don’t like what we see.

  • “In the short run the market is a voting machine but in the long run it is weighing machine”

  • The Jeffrey-Arnott study concluded that to achieve high after-tax returns, investors need to keep their average annual portfolio ratio somewhere between 0 and 20 percent.

Chapter 6 – The psychology of investing

  • To fully understand the markets and investing, we now know we have to understand our own irrationalities.

  • The study of the psychology of misjudgement is every bit as valuable to an investor as the analysis of a balance sheet and an income statement.

  • The pain of a loss is far greater than the enjoyment of a gain. Many experiments have demonstrated that people need twice as much positive to overcome a negative.

  • The impact of loss aversion on investment decisions is obvious, and it is profound. We all want to believe we made good decisions.

  • To preserve our good opinion of ourselves, we hold on to bad choices far too long, in the vague hope that things will turn around. By not selling our losers, we never have to confront our failures.

  • “All of us are vulnerable to individual errors of judgement, which can affect our personal success. When a thousand or a million people make errors of judgement, the collective impact is to push the market in a destructive direction.

  • Then, so strong is the temptation to follow the crowd, accumulated bad judgement only compounds itself. In a turbulent sea of irrational behaviour, the few who act rationally may well be the only survivors.
    In a word, Warren Buffett is rational, not emotional.

Chapter 7 – The value of patience

  • “Humans are cognitive misers,” writes Stanovich, “because our basic tendency is to default to the processing mechanisms that require less computational effort, even if they are less accurate.

  • In a word, humans are lazy thinkers. They take the easy way out when solving problems; as a result, their solutions are often illogical.

Chapter 8 – The World’s Greatest Investor

  • It is wrong to assume that if you are not buying and selling, you are not making progress.
    In Buffett’s mind, it is too difficult to make hundreds of smart decisions in a lifetime. He would rather position his portfolio so only has to make a few smart decisions.

  • As part of finding your own way, I believe we can also make the case that knowledge is what defines the difference between investment and speculation.

  • In the end, the more you know about your companies, the less likely it is that pure speculation will dominate your thinking and your actions.

  • “Our [investment] attitude,” Buffett says, “fits our personalities and the way we want to live our lives”

In the Preface section, the below texts more or else sums up what you are going to learn from this book.

  • At the 1995 Berkshire Hathaway annual meeting, Charlie Munger said, “It’s extraordinary how resistant some people are to learning anything”.
    Buffet added, “What’s really astounding is how resistant they are even when it’s in their self-interest to learn”.
    Then in a more reflective tone, Buffett continued, “There is an incredible resistance to thinking or changing. I quoted Bertrand Russell one time, saying,
    ‘Most men would rather die than think. Many have’. And in a financial sense, that’s very true”

  • Here is a succinct and powerful lesson from the 1996 annual report: “Your goal as an investor should be simply to purchase, at rational price, a part interest in an easily
    understood business whose earnings are virtually certain to be materially higher, five, ten and twenty years from now. Over time, you will find only a few companies that
    meet those standards – so when you see one that qualifies, you should buy a meaningful amount of stock.”

On June 26, 2006, Buffett donated 83%(30 Billion $) of his wealth to Bill and Melinda Gates Foundation and the rest 17%(6 Billion $) to his three children and his wife’s charitable trust.


I have to say, the author used very simple language to engage the reader as much as he can and overall did a commendable job capturing the succinct details of how Buffett evaluates a business.The chapter on psychology of investing is a must read for any investor/trader out there.

Every time, there is a mention of Charlie Munger’s name in the book, you can almost be sure that there is something interesting coming next.

Warren Buffett focused on his learning throughout his life. Majority of his wealth is donated to Bill and Melinda Gates Foundation as he felt, it is the best capital allocation per his rational mind rather than scaling up another foundation. In my view, Buffett demonstrated about how you can reach self-actualisation practising capitalism in professional life and practising socialism in personal life as he was also aware that he is lucky(little) due to fate’s capricious distribution of “long straws”, he donated majority of his wealth to charity.

“It is not enough to have good intelligence”, wrote Descartes; the principal thing is to apply it well”

10/10

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The basics of Bitcoins and Blockchains, Antony Lewis, 2021 - If you were curious to understand the fundamentals behind cryptocurrencies, from a history of money and financial intermediation, public key cryptography, cryptoassets and related ecosystems and stakeholders from an almost unbiased standpoint, this book could be a very good start. It is pretty well-structured and written in a very lucid manner that anyone will be able to understand very easily.

My notes -

• Explaining bitcoin needs a multi-disciplinary approach considering economics, law, computer science, civil society, history, geopolitics etc.

• Bitcoin accounts are technically just addresses to the account

• Cryptoassets - cryptocurrencies and tokens (can be fungible or non-fungible). Token can be like a digital cloakroom ticket or a digital depository receipt (promising access to an underlying product or service)

• Blocks in Blockchains are bundles of transaction data, linked to each other (each block has hash reference of previous block). Blockchains can be public (Bitcoin or Ethereum), private or permissioned

• Cash doesn’t betray identity information and can be spent anonymously

• Digital money is settled by increasing or decreasing the balance in accounts held by trusted intermediaries

• Online card payments are ‘card not present’ transactions vs swiping at the till is ‘card present’ transaction

• Money is a medium is exchange, a store of value, and a unit of account. The three functions need not be fulfilled by the same instrument

• Bitcoin is the first digital asset that doesn’t have a trusted intermediary that can potentially block a transaction

• Bitcoin’s volatility makes it a poor store of value. Inelastic supply and fluctuating demand causes extreme volatility

• Stability is determined more by liquidity (how many people are willing to buy and sell the asset) than the price of the asset

• BTC is the USD of cryptocurrencies

• Bitcoin has been declared dead over 300 times

• Double coincidence of wants - Both parties wanting exactly the thing the other party has in a barter - it is exceedingly rare

• Two books to refer - ‘A history of money from Ancient times to the present day’ and ‘Debt: the first 5000 years’

• Money solving inefficiencies of barter is a myth propagated by Adam Smith. Barter always worked in communities. To overcome ‘double coincidence of wants’, societies always went by ‘reputation’ - ‘have a chicken now but remember it for later’. Debt and credit existing before the invention of money

• Something may be scarce but that doesn’t mean it is, or should be, valuable

• Representative money - money backed by underlying asset - like Gold. So essentially representative money is like a warehouse receipt (counter-party risk exists)

• Fiat money - not backed by anything. It has no intrinsic value and is not convertible

• History of money through the ages - 9000 BCE - Commodity money (Eg. Cattle). 3000 BCE - First banks in Babylon evolved from warehouses where commodity was stored. 2200 BCE - First use of money without intrinsic value (inedible unlike cattle or grain), like lumps of silver. 1800 BCE - Regulation appears - Prices, Tariffs, criminal law, civil law etc. in Hammurabi code. 1200 BCE - Shell money like cowries. 700-600 BCE - Mixed Metal coins. 600-300 BCE - Round coins. Precious metal coins. Alexander even pegged gold coin to 10 silver coins. 323-30 BCE - Representative money. 30-14 CE: Tax reforms by Caesar - sales, land and poll taxes. 270 CE - Debasement of Roman coins - silver content dropped from 100% to 4%! 306-337 CE - Gold for rich, debased coins for poor. 435 CE - British coins were stopped from being used for 200 years. 1300s - King Edward debased pennies twice (debasement is common throughout history of money). 1600s - Goldsmiths become Bankers. 1660s - Central banking with Riksbank. 1913 - Fed! 1999 - Euro. 2009- Bitcoin

• Gresham’s Law - Bad money drives out good. When pure gold and a debased impure gold coin co-exist, though both can buy same goods, the impure gold coin would get spent first - over time, the pure gold coins will cease from circulation

• Just because we grew up with one form money doesn’t mean that it will last forever

• Rai Stones - stones used as currency in island of Yap. Curious case of a large lost stone which was lost in sea which continued to be used though no could see it, and claims on the stone were honored and continued to have value

• It is hard to peg things that trade in markets abroad

• 1934 Gold Reserve act debased the dollar against Gold. It also outlawed private possession of Gold. 1971 Nixon stopped converting dollars to Gold ending the Bretton Woods agreement. 1976 - Abandoned Gold, dollar became pure fiat money

• Fiat currency is backed by the threat of state violence

• Currency peg - lets say apples and oranges are used as currency and are pegged to each other at one apple = one orange. Then you need as many oranges in reserve, as there are apples in circulation and vice versa to maintain the peg. Pegs are hard to maintain and eventually break (as with Soros and Bank of England)

• Quantitative Easing or QE - Central bank increasing money in circulation in order to stimulate flagging economy

• Clearing banks have accounts with central bank called reserve accounts

• The problem with central banks buying risky bonds on its balance sheet - these bonds end up backing the currency in the balance sheet

• Cash doesn’t have double-spend problem as you can’t use same note to pay two different people. Digital assets have to overcome double-spend

• To overcome the double-spend problem, most digital assets like fiat currencies have a trusted book-keeper who maintains a list of who owns what

• Most payments between banks, be it same bank or different banks or cross border or cross border involving foreign exchange are all handled by adjusting ledger entries in the books of participating banks who act as trusted intermediaries

• Same bank transfers are simple ledger entry changes within the bank. Payments involving different banks go through correspondent bank accounts (nostros) or through central bank payment system (because each bank will need to have an account in every other bank for nostro to work but needs to have only one clearing account with central bank)

• Payment through the central bank are done via DNS or RTGS. DNS is a net-settlement system that works periodically. Very capital-efficient but can let credit-risk build up in the system during settlement period. RTGS is real-time settlement of individual payments

• Banks create money when they write loans. When a british bank writes loans in USD, it creates money that exists outside the domestic currency zone (US). This is normal and not all currency is controlled by the respective central bank

• Encryption - turning plain text to cyphertext and decryption the reverse. Breaking the encryption is being able to do the latter without being given the key. Symmetric - Same key used for encryption and decryption. Asymmetric - different keys. Public key cryptography is asymmetric

• Digital Signatures - PGP - Pretty Good Privacy, designed in 1990s - used for signing documents like emails. GPGSuit can be used to generate a public/private keypair. Private key is used to generate a document signature that is attached to the document. The receiver can use the public key to generate the signature and verify it against what’s in the document. If the doc was tampered, the signature wouldn’t match

• ECDCA - Elliptic Curve Digital Signature Algorithm. Uses a elliptic curve to generate public/private keypairs mathematically. Both are very large integers. Bitcoin uses ECDSA extensively. The ECDSA public keys are wallet addresses and the private key are used to sign outbound transactions.

• Hashes - A series of mathematical steps or algos that takes input data and produces an output - a hash or digest or fingerprint. Hashes are deterministic (same input always produces same output). Good cryptographic hashes are deterministic, fast to compute forwards while hard to reverse-engineer without brute-force (trapdoors), a small change in message should produce completely different hash and shouldn’t have hash collisions (diff messages having same hash value). Egs. MD5, SHA-256 (both produce Fixed-length outputs). Hashes are used extensively in cryptoassets - in mining, as transaction identifiers, an blocks ids and for preventing tampering

• Bitcoin is not centrally controlled and no one sets the interest rates. Transactions are self-signed and bundled in blocks and added to the blockchain. As long as majority of CPU power is controlled by nodes not co-operating to attack the network, they’ll generate the longest chain and outpace the attackers. For first time in history, we are able to value from A to B without trusted third-party intermediaries

• In bitcoin blocks are created every 10 mins on avg. The deeper in the ledger your transaction is and more blocks are built over it, the more confirmed your transaction is. When there are discrepancies or competing blocks, the longest chain wins.

• Proof-of-work - Blocks are created with pending transactions by block-creators and hash is computed. The creator with the lowest hash wins - its a game of chance. Since hash funcs are deterministic, a set of transactions will always generate same digest - so creators play with a special field (nonce) to generate new hashes that are lower by trying out diff nonce inputs. This process is called mining

• People making transactions set the fees and this fees goes to the miners creating the blocks that include these transactions. So in peak hours, transaction fees goes up (Gas)

• Coinbase transactions - the first transaction that creates bitcoins. After that they are only moves between addresses (wallets). Rest of the coins are created using block rewards (50 BTC per block in 2009 and keeps reducing over time - was 12.5 BTC in 2018). The overall 21 million is the max number of BTC that will ever reach in circulation

• The network self-corrects and slows down if blocks are created more quickly than target of 1 block every 10 mins. This is done by adjusting the target number above which hashes are invalid.

• Each block refers to previous block by its hash. When there are multiple chains of blocks being mined at same time, the longest chain is considered and the competing chain is discarded and becomes orphan and the transactions in that chain become ‘unconfirmed’ and will have to be included in later blocks (At least 6 blocks deep means transaction is confirmed)

• 51% attack - when over 50% of total hash power in network is used to re-write blocks. Has happened in some unpopular coins

• Bitcoin is digital but works more like physical cash (non-fungible, compared to fungibility of digital money) where you can pay either the $10 note your received in the morning of the $50 you would like to break. You make the choice

• While most digital money thinks in terms of ‘account balance’, in bitcoins, its in terms of transactions - UTXO (unspent transaction outputs)

• Bitcoin mining is not decentralized, top 3 miners control over 50% and can easily orchestrate a 51% attack - 80% of mining power is in chinese control

• Bitmain produces hardware that mines 70-80% of total blocks in Bitcoin. h/w manufacturing is not decentralized either

• 90% of value is owned by less than 0.7% of the addresses (this is true in most asset classes anyway)

• Hardware wallets are simply stores for your private key. When transactions are sent to them, they sign it without revealing the private key. You don’t store your BTC in these wallets, you simply store the private keys

• Hot wallet - exchanges keep wallets connected to the internet to facilitate customer transactions - these are a usual targets of theft

• Satoshi Nakamoto controls about 1 million bitcoins - 5% of BTC in circulation. If these ever move, it is bound to affect price of BTC

• Ethereum blockchain can do more than payments with its support for smart contracts on the ethereum virtual machine.

• Ethereum time between blocks is 14 secs (compared to Bitcoin’s 10 mins). Ethereum operates on the basis of gas fees, charged for searching, retrieving, storing of data or making changes to ledger. Bitcoin block size is around 1MB vs Ethereum’s 15-20kb. Max block size of Bitcoin is specified in bytes while that of Ethereum is specified based on computational complexity

• Orphan blocks in Ethereum parlance are called ‘uncles’ :slight_smile:

• Two types of Ethereum accounts - one that only stores ETH and another that contains smart contracts

• Ethereum smart contracts are ‘turning complete’ - fully functional and can perform any computation that can be done in any other programming language

• Solidity / Serpent, LLL (Lisp like language) are primary languages used to write smart contracts

• DAO - Decentralized Autonomous Organizations are like VC companies where investors get tokens in return for their investment and use them to vote for which startups get funding. The smart contracts govern the voting process and release funds to startups

• In cryptocurrency land it is fine to cheer for censorship resistance, unless you’ve lost money (Ethereum under Buterin has unwound transactions in the past where fraud was involved, leading to form in the blockchain creating Ethereum Classic where these transactions weren’t unwound)

• Forks in crypto world might be fork in the codebase or fork in blockchain (chainsplit)

• Digital tokens - although BTC and ETH and digital tokens themselves technically (blockchain-native tokens), nomenclature is now restricted to things like tokens issued by ICOs (asset-backed tokens that are similar to IPOs where a company raises cash), or utility tokens (claim to a service) tracked on the Ethereum blockchain (ERC-20 standard tokens)

• Tracking real-world items by using digital overlay is difficult. Eg. food from farm to customer as though blockchains are immutable, they only record what someone else tells them

• Permissioned blockchains are private blockchains used for specific purposes - Corda, built by consortium of banks and used for broad purposes. Hyperledger Fabric, built by IBM and Quorum built by JP Morgan

• Most blockchain usecases are simple straight-forward digitization projects but use of “blockchain” piques interest and unlocks budgets, so most people abuse it

This book is easily the best I would recommend on the subject for a thorough understanding of the ecosystem from historical and contemporary perspective. 10/10

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