China’s splendid isolation nurtured a particular Chinese self-perception. Chinese elites grew accustomed to the notion that China was unique—not just ‘a great civilization’ among others, but civilization itself.

On China, Kissinger, 2011

Oops…looks like I didn’t send out the link to the actual podcast. Sorry about that.

Here you go!

We know the internet is simultaneously a recent invention, integrated into every niche of our lives, and difficult to understand fully. I like to anchor theoretical questions—how does the internet actually work?—in specific case studies. Today’s podcast guest, Lev Borodovsky, creator of The Daily Shot, is one of them.

Lev has created a daily email with a pile of macroeconomic charts that thousands of people—myself included—subscribe to. Think of it like a bakery (fresh bread each morning) only the hot rolls are snapshots of macroeconomic conditions. Below is one of today’s charts. (Note the jump in hospital costs, exactly what Mario Schlosser, founder of Oscar, discussed on the previous podcast.)

Lev’s success is a revealing data point. There is an important difference between disruptive inventions and cash flow. Airplanes are a wonderful invention but the cash flow from investing in them isn’t very good. Who makes money on the internet?

We know part of the answer is behemoths like Amazon that use scale to displace Walmart and Costco. Another part of the answer is that consumers enjoy lower prices, what economists call a “consumer surplus.” But there are also individual operators with a niche product and a well-defined audience that otherwise would not exist. That’s Lev.

He created The Daily Shot by accident and his missive hits inboxes at 6 am sharp each day. It is not as widely read as, say, The New York Times, but that doesn’t matter. As long as Lev keeps his expenses contained and quality high, he has figured out how to make a profitable “bakery.” As you will hear, like any exceptional baker, he is obsessed with quality.

I have had others on the show, like Remy Munasifi and J Mintzmyer, who both also found their niches. The recipe is similar—high-quality product, niche audience. I suspect 30 years ago, Lev would have been lodged inside a lumbering media organization or perhaps The Daily Shot wouldn’t even exist. As we gain clarity about how today’s internet works, I try to imagine the future—driverless cars, swarms of drone defenders, robot caretakers. Those are all themes I am researching and looking to position in my portfolio.

Note to readers: I am offering a sale this week. I started these posts as an experiment three years ago. They have now grown into a conversation with thousands of unpaid subscribers and hundreds of paid ones. I am grateful for each subscription. A service that started at $75 now costs $700 a year. If I could offer a sliding scale based on need, I would. But I can’t. So this week, I am lowering the price to $500 a year, or $1.36 a day. Also, I’m at an investment conference this week and won’t be publishing on Friday.

Mario is a fascinating person, a tech guy disrupting the US insurance industry via a company he founded, Oscar Health. For those of us in the US, dealing with health insurance is right up there with visiting the Department of Motor Vehicles or having your toilet overflow in terms of quality experiences. The US system is expensive and of poor quality, a Kia priced like a Mercedes.

“Health care costs have been inflating at twice the CPI for 40 years,” he said.“If your job description is to manage health care costs,” which is what an insurer is supposed to do, “there is no value there.”

As a result, entrepreneurs from Google to Amazon have tried to offer a better option leading them into a thicket of regulations and local providers. Google has taken numerous bites at the apple, all failures. Mario is German, so he understands well why that system is so much more efficient while the Canadian and UK plans are not.

Beyond being an expert on health care, he has experienced the entrepreneurial roller-coaster first hand. What’s it like to IPO and see your stock fall by 90+%? A risk taker needs to be tough to withstand the punches. After all the tussle, he retains a sense of humor and curiosity that I found inspiring.

Summary:

* Keep an eye on Serbia.

* No US easing.

More below:

Over the weekend, the hard-right made gains in European Parliamentary voting. Last week, Senator Tuberville (R. Alabama) said Putin “doesn’t want Ukraine.” That extreme rightwing leaders are gaining even while we can see what the hard right looks like—Putin invading Ukraine—tells you something odd is afoot.

If I had to reduce the rise of the hard right to one cause, I’d point to wildly disruptive technology. Yes, immigration plays a role in some places, but that clearly doesn’t apply to Russia and China where people are trying to get out. More likely is the more we delight in new tech—computers that “think” for us—the more something deeply emotional rebels and seeks to preserve “tradition.” For some those traditions are found in religion for others in fixed gender roles.

The contradiction between a delight in novelty and an affinity for the old is in each of us. It’s just a matter of degree. While I embrace modernity, I’ve also taken to shutting down my phone on Saturdays. The difference is that I do this voluntarily and anti-modernist strictures impose such orders. If forced to turn off my phone, I’d probably turn it on.

How does this tie to a podcast on Serbia?

Serbia is a tiny country—6 million people—on the fault line of this modernism fissure, an ally of Russia but supposedly aspiring to be part of the EU. A belligerent in the 1990s Balkan wars and the home of the person who assassinated Arch-Duke Ferdinand (see my Letter from Sarajevo) to start World War I, Serbia is in a sometimes bloody dispute with Kosovo, which has declared independence from Serbia but which Belgrade does not recognize. It isn’t hard to imagine this conflict spiraling, Russia backing Serbia and NATO and the EU backing Kosovo and, bam, Ukraine squared.

The EU represents money and modernity, Russia past (Soviet) norms. I was researching the sequel to Master, Minion and came upon Mark Montgomery and Ivana Stradner, two people who know a lot about Serbia and US foreign policy and were kind enough to share their insights. Ivana grew up in Serbia and teaches at Johns Hopkins’ SAIS and Mark spent over 30 years in the US Navy, retiring as a Rear Admiral. Both are now with the Foundation for the Defense of Democracies.

Investment Outlook

Man has always asked the question: what is it all about?

J. Krishnamurti, 1969

Stories are intrinsic to being human, a survival mechanism. Some forms of story—poetry—can be created virtually for free and others—movie making—cost millions of dollars. But just because we need something, doesn’t mean it’s easy money.

What’s a good business? Monopolies (toll bridges), massive economies of scale (big tech), products people are addicted to (cigarettes), and services you are legally obligated to buy (insurance) all offer good cash flow even if some of them, like cigarettes, are terrible for you. Making movies is far cooler than any of these businesses but faces a structural challenge. Supply is unlimited and demand (our time) is fixed.

That’s why I wanted to talk to Mike D’Alto, the founder of First Gen Content, a film finance and production company that has made the films Bird, Catch the Fair One, Call Jane, and On Swift Horses. Mike co-founded the company with three others: Claude Amadeo, Randal Sandler, and Chris Triana. Mike and I both share a passion for stories and business. Many storytellers don’t understand finance; many business people don’t understand stories. Mike is the rare person with an understanding of each.

The basic issue is stories and businesses operate on different time frames. You can only measure good art over long time frames, like centuries. Does it have staying power? Yet, we measure business acumen in quarters or years. Any storyteller who is not independently wealthy must navigate these opposing realities.

Also, before turning to the investment update, I want to share that one of the previous podcast guests, George Manahan, testified before Congress, the link to his testimony is here, before the passage of the National Plan to End Parkinson’s Act. I’m hopeful this podcast gave him a platform to share his message.

Investment Update

“In spite of all the farmer’s work and worry, he can’t reach down to where the seed is slowly transmuted into summer. The earth bestows.”

Rainer Maria Rilke, 1875-1926

The difference between the Soviet Union and the United States is the former repelled people and the latter attracted (and continues to attract) them. That’s true despite the US’s many flaws. The attraction is related to an idea that is abstract until you lose it—freedom. That’s what led Rob Koyfman’s parents to leave Ukraine many years ago and come to New Jersey.

An element of liberty is the ability to create a business from scratch. Yes, many of these businesses fail and being an entrepreneur is hard. Yet, the pride in ownership is fundamental, like cooking your own food versus eating in a cafeteria. Still Press Media is a creation out of thin air, ditto Kate Capital. Rob has been an entrepreneur longer than me and created something amazing, Koyfin.

For those not in finance, some context is helpful. In regular life, only two companies create the phones most of us use, Apple and Samsung. In finance, one company, Bloomberg, has a lock on the software many professionals use. A single subscription costs about $35,000 without all the bells and whistles. While many have tried to disrupt this business, little has worked. Mike Bloomberg is worth over $100 billion.

Rob’s product, Koyfin, is making inroads into that cash flow kingdom. I was interested in his path and philosophy so I cold emailed him and he was kind enough to share his story.

A few highlights:

On the balance between ego and humility:

“You don’t have to be an egomaniac, you don’t have to be an a*****e to also be ambitious and confident.”

On choosing what features to add and what to leave out of Koyfin:

“We are so constrained on resources we need to be very focussed in what we deliver.”

A surprising insight:

“Having someone who can communicate well is a superpower.”

I am leaving tomorrow morning for a multi-day wedding. I’ll try to find time to update you with my thoughts on markets, but the post won’t come out Friday. To my US readers, Happy Memorial Day.

We hear about sanctions all the time. Biden just put more on China.

Do they matter? If so, in what way?J provides a framework to help us all understand.

This is J’s second appearance. In our conversation last year, here, you can hear J’s background and how he created his shipping advisory service, Value Investor’s Edge.

He is the perfect guy to discuss s…

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David is former CIA and the author of Damascus Station and Moscow X.

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