I hope you are gearing up for summer and sun wherever you are (or winter for those of you below the equator). I don’t think it’s going to be a sleepy season, but we will see!

Today's Contents:

• Sensible Investing

• Weeklies: Picture & Song

Sensible Investing

After watching the markets surge forward the last two weeks, as companies with already large market caps rip (e.g., Dell up ~60%), Google raises $40B in equity (25% funded by Berkshire), and the march toward the SpaceX IPO continues, who among us didn’t consider liquidating their holdings? Then you remember: “I’m not a market timer.” And, worse, the taxes! After many decades of growth, there are incredible unrealized capital gains in funds tied to these indices. The hit (or revenue from governments in search for more to spend) would be huge.

But if you wanted to be fearful while others are greedy, the time is now.

On SpaceX, I (like you, I’m sure) have read all the stuff (S-1, the CFO’s presentation, Aswath Damodaran’s analysis, the Cathie Wood-esque projections coming from GS and Morgan Stanley (LOL)) and concluded that it’s an incredibly impressive engineering, space, and internet connectivity business with good revenue, decent growth, and reasonable margins. Yet the valuation seems to rest on the slapdash, tacked-on AI business requiring capital investment, unclear payoffs, and last-minute Anthropic and now Google compute agreements with more holes than Swiss cheese to keep the revenue round-tripping number-go-up machine aloft (or, one might say, the infinity and beyond).

Almost all of SpaceX's AI activity has been a series of rapid announcements over the last 6 months, starting with the surprise acquisition of X.ai/Grok. Back in 2024, at $350B, the valuation was high but more reasonable. Today at $1.7T with the extras, what’s the upside? And on what timeline at this price?

The Physics of SpaceX by Blind Squirrel Macro provides a good analysis of the offering's mechanisms and puts on the table a ‘Plan B’: a reverse merger of SpaceX into Tesla.

Even if I’m not an IPO buyer, I don’t want to come off as too negative, because it’s objectively awesome for Austin and many of my venture friends to have this much wealth unlocked. Evan Baehr, CEO of Arena Hall and perpetually in the know on these sorts of things, has estimated (via Chris Powers) that if the SpaceX IPO goes ahead, 12 people in Austin will clear $1B+; 160+ will clear $100M. It’s another catalyst for the Texas Triangle, as The Economist notes, ‘Texas is becoming America Inc’s center of gravity.’

I will, however, offer this: the process of changing the Index inclusion rules has been unsavory. When benchmark rules are adjusted around mega-cap listings, passive investors are validating the price that private markets and bankers already set. There are endless conflicts of interest around these waivers.

Bloomberg Intelligence estimated S&P 500 funds would absorb 19% of SpaceX’s float within 6 months, which is no longer the case, as the committee decided against changing any of their inclusion rules. The Russell 1000 and Nasdaq 100 funds will still absorb 24% and have amended their rules. Nasdaq is taking the allocation faster, which makes more sense because its tech/growth focus - and given the exchange is listing SpaceX.

Beyond SpaceX, we potentially have multiple massive, $1T+ IPOs coming to market from Anthropic, OpenAI, and others, who may be emboldened by the market's openness to absorb large capital needs at exceedingly low cost.

The question is what happens with the credibility of indexes and the returns of passive investors? The market structure, passive/active distortions, and rule changes are transforming how the ETF market functions. It’s been a big month on the topic generally as the Acquired guys covering Jack Bogle and Vanguard and VOO (Vanguard’s ETF that tracks the S&P 500) crossed $1T AUM, an industry first!

The chief investment officer at Vanguard Capital Management and the head of global equity at Vanguard wrote this article in the FT Index Investing Will Evolve With Mega IPOs (PDF), published a few hours before the S&P committee ruled it would not change its criteria. It says little definitively but was intended to shore up support to stay the course amid discontent among passive investors. The comments are scathing.

This is the time for the re-evaluation of passive investing and the acknowledgment that, behind ETFs, there is certainly a set of highly active decisions aimed at broad-based diversification. Some of which you may agree with and some of which you may not. If the passive system becomes gamed by financial engineers, as it seemed poised to do, and no longer delivers for retail investors and retirees, that will be a sad day, but maybe an opportunity for reinvention.

Weeklies: Picture & Song

Picture

I’ve noticed this trend in Austin, where two women go walking the trail together, looking nearly identical! Do you think they planned it? My guess is probably not, which makes it more intriguing.

I really want to make fun of the twinning girls of Austin and their lack of originality, but I also suffer from matchy-matching with my own friend. And the sad fact is that you can’t be cool wearing transitional lenses.

Song of the Week: End Of The Road by Boyz II Men

Here on YouTube.

Boyz II Men are the ultimate 90s R&B group. Their songs should be played more often in our modern times.

End of the Road is an emotional ballad reflecting on a shared love while acknowledging that the relationship has run its course. It's sad, but also respectful and grateful, which is appropriate for how I feel about passive investing and Vanguard. To be clear, I’m not selling my ETFs, but I might use a different platform for direct indexing with more control going forward. If only the fee structure were better…

Thanks for reading, friends. Please always be in touch.

As always,
Katelyn

I like that the Song of the Week has two question marks. No, that’s not a typo. It is demanding your attention through a repeated refrain. Both declarative and appropriate for Memorial Day in the US.

We have good reports and charts to share from this week, so please don’t mind me leaving passive investing, indexes, and massive IPOs for the future.

Today's Contents:

• Sensible Investing

• Weeklies: Pictures & Song

Sensible Investing

AI Eats the World - Latest Ben Evans presentation, though the big questions and trends (e.g., Will LLMs have pricing power?) have not changed in the last few years. It is still dramatic to see the data as presented.

PS. I don’t believe that Anthropic is profitable by any normal accounting standards.

JP Morgan’s Guide to Alternatives is worth a browse. Nothing surprising IMHO.

Priced for Perfection: AI Speculative Mania Is In Full Swing from Verdad. Arguing that semiconductor stocks are overpriced and a large part of the market. I’ve often found Dan Rasmussen compelling, but time has not always proven him correct. Maybe this time.

I liked this interview with a Siemens employee about the high demand for energy equipment, which has led to margin increases from 4-6% to 30-40%. I have seen quite a few founder-types price these forward margins as a go-forward assumption - while I assume it will be a temporary crunch, and many solutions for power and efficiency will come online around the same time.

Given all the market euphoria, the word ‘bubble’ keeps coming up. The way most capital market parties end is with interest rates and bond market activity. This week, the Cleveland Fed’s inflation gauge is coming in at 4.18% annual for May (see below), with many people believing this is an underestimate due to Iran War-related supply constraints and rising energy costs. And there is plenty of hand wringing in the FT, Bloomberg, and other trade press on the outlook for bonds. We’ll watch this space.

EdTech stuff: Thoughts on ‘screen time.’

Pushback against education technology and screen time is fairly cyclical, but we are now in a time of skepticism. I find that most of these pieces are broad-brush strokes of ‘EdTech’. There are several things going on.

First, incumbents with legacy products master procurement processes that have a long checklists of requirements that usually result in the lowest common denominator products (‘one product fits most’), which means it serves no one individual or situation truly well. You need to, instead, have more nimble procurement and use of various tools. I-Ready has been the recent target, as described in ChalkBeat. It’s owned by Curriculum Associates, which was founded in 1969 by four educators creating print instructional materials for K-12 education. Now it’s backed by private equity.

Second, parents will always have strong opinions without much reasoning, like this article in New York Magazine that has an anecdote about Amira Learning, which is not a legacy product, and, although I haven’t looked deeply, seems best in class. The parents have no real objection to it other than the aphorism that ‘screen time is bad.’

Third, much EdTech efficacy research is not replicable. One reason is that academics don’t like to acknowledge the variation between ‘quality of leadership/teaching’, ‘system capacity’, or implementation quality, and their relation to outcomes. They see that as a variable to remove rather than a key driver of the outcome in tandem with a solution. These randomized controlled trials on a narrow intervention never end up being that directionally helpful. That’s why one should focus more on how the product is being used systematically.

Fourth, implementation and nuance are everything, obviously. Screen time, when it happens, needs to count. Watching a YouTube video for gym class isn’t aspirational. Neither are endless iPad games when something social and tactile can do the trick. But that doesn’t mean you throw it all away.

If you are using screens, you should go fully immersive and interactive, like Prisms, which puts pedagogy at the center of its product (an immersive reality science and math curriculum that uses spatial reasoning and real-world scenarios) and focuses heavily on the teacher dashboard.

In 2013, I was a thought leader on effective EdTech implementation and published an index in a paper with Nesta, a UK-based research and innovation foundation, and my co-author, Michael Fullan, is one of the leading academic practitioners in whole-system education reform. Today, in the year 2026, we don’t care about experts anymore, but this is good intellectual work in a field with limited rigor, and it's still highly relevant today.

Lastly, this guy is right, parents really matter. That means they matter in both the tech and non-tech scenarios, too.

Weeklies: Selfie & Song

Selfie

When my grandfather passed a few months ago, the military issued our family a burial flag. These are given to all who have served in the US military, and my grandfather served for a few years in the Navy after college. My mother let me be its guardian. I am well aware that most 40-year-old women do not come into possession of one of these because their grandfather drew his last breath surrounded by family at age 93 in suburban Minneapolis. I am fortunate for that.

When I was last in San Francisco, I decided to walk to a meeting in the Presidio, passing through one of the most beautiful cemeteries in America.

Etched into the stone are the final stanzas from The Young Dead Soldiers Do Not Speak:

They say: We have given our lives but until it is finished
no one can know what our lives gave.

They say: Our deaths are not ours: they are yours,
they will mean what you make them.

They say: Whether our lives and our deaths were for
peace and a new hope or for nothing we cannot say,
it is you who must say this.

We leave you our deaths. Give them their meaning.
We were young, they say. We have died; remember us.

Yes, that’s heavy stuff to think about on the way to some startup/VC meeting.

I recently had a conversation with a successful friend in technology who could retire several times over. He was temporarily stepping into a leadership role at a strong but all-consuming company. There were aspects of his workload he was struggling with, and I asked him what was most important to him. Why was he even doing this? He wanted to be ‘in service’ to others. I was struck because I almost never hear this as the reason for labor. We live in a world of optimization, of securing the bag before underclass doom, of constant competition and consumption. Who has the time or interest to be ‘of service’ anymore?

Packy at Not Boring published a recent essay called Riding the Leopard where he proposes to an audience of technologists that the meaning of life is ‘to experience’ and that fulfilling your personal ‘differentiation is a moral obligation’. That is indeed one way and certainly in the zeitgeist. But it feels incomplete. That’s a solo mission.

However, an important, often-overlooked alternative framework is that the meaning of life lies in being of service to others (including family, friends, community, country). The more successful, the more capable, the wealthier, the more important, and potentially meaningful being in service could be. Maybe one reason people are supposedly unhappy and lack meaning is that being ‘in service’ is out of vogue.

As Roy Spence, a longtime advertising executive, said about Austin: "Here you have the freedom to be me and the responsibility to be us."

Not that I have all the answers, but I hope it’s a point to think about in remembrance of those who served and sacrificed their lives as we give meaning to this Memorial Day in 2026.

Song of the Week: Do You Realize?? By The Flaming Lips

Here on YouTube.

This song, often cited as one of the best in the modern era, is a reflection on the meaning of life. Optimistic and probing.

Do you realize
That everyone you know someday will die?

And instead of saying all of your goodbyes
Let them know you realize that life goes fast
It’s hard to make the good things last

The structure of the song moves between questioning and answering like a conversation with someone who needs to be reminded of what they already know.

Thanks for reading, friends. Please always be in touch.

As always,
Katelyn

One of my favorite things about writing this newsletter is the responses. When Richard responds, it’s often about the music. This time, though, it was that I had not given due credit to the author of last week’s AI article. The author, Tom Slater, is the highly successful manager of Scottish Mortgage, a publicly traded fund with ~£15.54 billion in assets invested in high-growth opportunities. And 15% of Scottish Mortgage is invested in SpaceX. If you've been wanting exposure, you didn’t need to go through SPV. The annual management fee is 0.30% p.a! Nice.

My Berkshire friends (Billings, Gallagher) have been telling me the story of Scottish for years, but I hadn’t followed Tom Slater in particular. Always nice to learn something new and see an example of British excellence.

Today's Contents:

• Sensible Investing: Trends

• Weeklies: Selfie & Song

Sensible Investing - Trends

This is an explanation of recent stock market movement dynamics, with the rapid rise of call options trading in a single session yesterday, as the system has devolved into full-on gambling.

If you take nothing else from this post, understand that $2.6 trillion in daily call volume is not a sign the market is healthy, it is a sign that speculation has overwhelmed investment, and historically that pattern resolves in ways that hurt the people who came late to it.

“Silicon Valley Is Bracing for a Permanent Underclass,” from the NYTimes, was shared with me this week. David George from a16z had a data-driven rebuttal of sorts with The 'AI Job Apocalypse' is a Complete Fantasy.

George's strong points are his data-backed economic examples and theories. But it’s not a full rebuttal of the NYTimes, which focuses more on the transition.

"The doomers are wrong about the destination, the optimists are wrong about the journey,” a remark made in the comments, is the right synthesis.

The biggest issue isn’t if the job apocalypse is true, or on what timeline. It’s that a large and growing group of people feels strongly that ‘a sliver of a segment is getting stupid rich and I’m not.’ This creates a deep emotional appeal from otherwise smart and rational people for bad economic policy ideas and a belief that ‘behind every great fortune there is a crime’. Alternative definitions of crime are where opinions diverge.

Services are still services. And that’s fine. There’s still a lot to be done. Seeing the announcement of partnerships with OpenAI and Anthropic, including PE and banking partners, for AI deployment makes me more skeptical about the job apocalypse, as it’s an admission that last-mile implementation is tricky. And, my friends, that’s where the story is the same as it’s ever been.

Blackstone’s operations group is led by Rodney Zemmel, who spent 30 years at McKinsey and was a runner-up in the last MD election. Again, it’s all the same stuff, packaged differently.

One thing I’ve learned about ‘change management’ is that people don’t upskill themselves en masse unless there is an explicit threat of removal. That includes entry-level consultants. I learned that through pain at my own consultancy, trying to get people who’d spent a few years at Deloitte or Accenture to use Airtable instead of Excel. Finding talent to be ‘forward-deployed’ will require training, and the difficulty of that doesn’t change.

Texas Triangle

I’m going to hand the Selfie slot this week to Vivian Maier, so for my personal picture here is a group shot of a tour I co-led, visiting The Boring Company and Proto Town with a group of investors. People are increasingly bullish on the Texas Triangle, and that is for good reason. More to say here, but not today.

Weeklies: Selfie & Song

Selfie: Vivian Maier, Authenticity, OG Selfie Queen

Vivian Maier was a street photographer who worked as a nanny in Chicago. She took over 100,000 photographs but never showed them publicly. Her work was only discovered in 2007 at a storage locker auction and stunned the art world.

She pursued creativity on her own terms, outside institutions, without permission or validation. Her photos are deeply observant, attuned to gestures, social realities, and people others overlooked. Her self-portraits use reflections, shadows, and fragments rather than direct poses, showing a quiet, ongoing exploration of identity.

Vivian Maier inspires authenticity over recognition. A rare quality today and a sign of maturity.

Song of the Week: “What’s My Age Again?” by Blink 182

Here on YouTube. The band is running naked through town.

The working title for the song was originally “Peter Pan Complex,” which has a certain allure. Blink-182 and this song were popular, and it reminds me of a world and time that’s gone forever. Many Blink songs center on maturity.

I’ve been enjoying the rush of 40th birthdays recently. At the last one, the host facilitated a session where friends sat in a circle and shared their feelings. Tears were shed. Intimacies were revealed. Bonding occurred. Afterward, everyone put themselves back together with a hot shower and dressed up for a nice dinner. I’m absolutely on board for this activity.

During the ritual last weekend, I shared my biggest takeaway from hitting 40, which crystallized last year during a weekend T-Group workshop I attended.

Early on in the session, a guy who was a typical SF profile - ex-YC-founder, 10x engineer, cute guy, etc. - meekly asked what everyone’s impressions of him were.

So I told him straight: all of the above, but I was now surprised by his question, which seemed to indicate he lacked self-confidence and came across as insecure.

What his share prompted me to realize was that I didn’t care what anyone in the group thought of me, because I know who I am and believe I presented myself accurately. I’m happy with who I am and, yes, there is always work to do to be the best version of yourself, but (at least for me at 40) it’s not moving that much.

The implication thus is that I view relationships as a matching process rather than a convincing exercise. In this frame, you don’t have to prove your worthiness to the right people. They’ll get it. Or not. And if not, then you move on, and it’s fine. Great and better even.

After I expressed this view, half the people in the circle thought it was an ideal worth aspiring to. The other half found it threatening and upsetting because they believed I would deem them unworthy of my time.

On the Sunday morning of that weekend, I was feeling emotionally fatigued and still looking forward to another 8 hours in the T-group.

Someone said, “I didn’t think you’d come back.” But I did, and achieved the goal of being present and keeping an open mind.

You never get the full benefits of any process unless you see it to the end. Vipassana, T-Group, The Annapurna, a marathon, whatever. Just finish.

Thanks for reading, friends. Please always be in touch.

As always,
Katelyn

Sadly, I was not at the Berkshire Annual Meeting this weekend, but I got a readout from my die-hard friends on the ground. Despite smaller numbers, true believers were out in force, and the community, as Ted Merz noted, still had a blast. People are happily impressed with Greg Abel, Berkshire's business operating earnings grew 17% last quarter, and the pile of cash remains for finding deals.

Every year, the Berkshire meeting is on the same day as the Kentucky Derby, and there’s little notice taken. But this year, the Derby might reign because who doesn’t love a good “underdog that makes it a big” story? Cherie DeVaux, Jose Ortiz and Golden Temple stole the show this weekend, coming all the way from the back to win it all. To add to the drama: Jose won while his brother Irad earned second place. The New Yorker wrote about them in 2017: “What makes the Ortizes so good has something to do with an ineffable equine intuitiveness which is the key to getting the animals to relax.” That probably won’t be enabled by AI.

Today's Contents:

• Sensible Investing:

• Weeklies: Selfie & Song

Sensible Investing

AI Isn’t Coming for Your Job. It’s Coming for Your Mind. This article, produced by an analyst at Baillie Gifford, takes the idea of AI de-skilling a bit further and with more nuance. Key line includes:

Literacy repurposed neural circuits to create new capabilities at the cost of others. People who learn to read gain the ability to decode written language but show reduced face-recognition capacity in the left hemisphere. AI appears to be making a different trade. It is redirecting cognitive circuits away from deep processing, memory consolidation and effortful reasoning, and towards a new suite of cognitive skills: delegation, verification and interface management.

Also…

Every time AI eliminates the friction from an effortful task, it may be removing precisely the stimulus that builds the neural infrastructure of persistence and self-regulation. AI’s removal of cognitive struggle is not merely a learning problem. It is potentially a problem of brain development itself.

I was telling a non-tech founder who homeschooled his kids that I was the best investor in homeschooling and alternative education. Not in all the deals, just the best ones and the earliest.

My VC friend responded: ‘Why don’t you talk about that more?! It’s really impressive.’

I answer that a few years ago, after having listened to many of my stories, my husband said that being the best venture investor in EdTech is like saying you are the best real estate agent in Haiti.

I get advice like this for free! You only get promoted to the upper echelons of strategy consulting if you can exert strategic influence with a single analogy.

And that he was right! Yes, you can make returns in this sector, but it’s easier to make risk-adjusted returns elsewhere, and the likelihood of truly massive success is much higher in other sectors. Only the naive or a fool would believe the contrary, which is why investment capital has cooled (graph below).

It’s been a bit since we talked about EdTech and education, but the headline is that while there are some big changes in the sector, the change happens slowly, unit economics are hard, and most of the profit pool goes to the big consumer tech companies (OpenAI, Anthropic) or the last-mile delivery mechanisms (well-managed schools, focused online operators like Tonguc, etc.). The US K12 industry avalanche is the pressure on the system resulting from the move toward funding students in alternative educational models, such as microschools and homeschooling.

There has also been a lot of chatter recently about how bad EdTech is for learning and in schools. It’s important to distinguish between what most people talk about when they talk about EdTech, which is sad legacy-industry products or not much-adapted FAANG slop (Chromebooks, YouTube, Fire Tablets), and what EdTech could be - highly-targeted, efficaciously-designed learning accelerators that are implemented into a school setting with fidelity. That basically doesn’t happen unless the school is designed specifically.

There are still some interesting pedagogy-forward companies that are tackling tough problems and gaining traction, but it’s going to take a while. In the meantime, they won’t be household names or need that much capital.

Weeklies: Selfie & Song

Selfie: Wine Country, EdTech, Composition

This is a well-composed photo of friends on a half-day trip to wine country. A wonderful way to spend time and a reminder to enjoy the simple moments.

Featuring on the left is Mehmet Tuğutlu. He is the founder and CEO of Tonguc Academy, the largest education technology company in Turkey with over 16 million subscribers. Mehmet radiates a joyful ease that probably comes from something innate but certainly isn’t hindered by running a highly successful, cash-generating business with no outside investors. His business is one of the winning models in education because it deeply understands its customers and is a trusted, long-term local brand. Mehmet has been an avid adopter of AI tools like ElevenLabs to provide more curriculum and tutoring at a lower cost. That’s a direct relationship and requires no intermediary.

Song of the Week:

Here on YouTube.

This song tells the story of the delusions that we sometimes tell ourselves about former romances. The lesson is more interesting than that narrow case about knowing the truth before allowing yourself to believe. Seek an accurate reality rather than false hope or misread signals.

I was reintroduced to this song recently as I went to Tokyo Record Bar in New York with a friend. The concept is that you have a set dinner with a bunch of other people in a basement, and everyone gets to choose a song. These have gained in popularity, and there are two in Austin on South Congress that have taken the concept even further (Equipment Room and Only The Wild Ones, for the curious).

What A Fool Believes was my friend’s pick. I went with a Carol King classic. Everyone seemed to have good taste until… 99 Problems by Jay-Z hit the system. I hadn’t heard the song in a while, but it was a jarring outlier in a sea of feel-good songs. Of course, it’s a classic, but maybe for a different time and place. A good reminder of the importance of music and framing.

“What A Fool Believes” by The Doobie Brothers

What a fool believes he sees
No wise man has the power
To reason away

Thanks for reading, friends. Please always be in touch.

As always,
Katelyn

‘Boy has our vanguard and chill strat been working,’ my friend texted me this week, which is how I’ve felt for a while investing-wise. Now that Iran-war uncertainty is trending down, it's back to business as usual, although valuations are just as historically high as before. The FT calls this ‘an Earnings Before Iran, Tariffs and Dubious Announcements (ebitda) Mentality,’ which I like.

Since we are all long-term, diversified, buy-and-hold investors, the only fun game left is finding uncorrelated, high-upside additions or something more personal and impactful to invest in.

A good reminder of what we are doing.

Today's Contents:

• Sensible Investing

• Weeklies: Selfie & Song

Sensible Investing

I recently attended a conference on late-stage private software and internet companies in San Francisco, hosted by the research department of a prominent investment bank. These gatherings are great for taking the temperature of pre-IPO companies. The audience is more discerning and analytical than your average VC. Here are my takeaways on four types of companies.

First, is this a science experiment going anywhere? Fusion, Quantum, Photonic-things. I get it, these guys are smart, SMART! Genius maybe. Who knows. But, like, what's the actual revenue here, and am I still taking science risk? Is late capital going to get any return for this? In the current market, it seems like yes. But market timing is tricky, and exits are hard. Look no further than this recent TechCrunch article, ‘Cracks are starting to form on fusion energy’s funding boom.’

Second, war is everywhere, and there is a defense spending bonanza. All the defense tech and many ‘American Dynamism’ companies fall in here. So many drones. Lots of dual use. It’s unclear whether the contracts are recurring and whether there are more than one or two true buyers.

Third, (and often overlapping with #1 and #2) Wow, it’s capital intensive. New chip manufacturing, robotics, newly described ‘physical intelligence’, cloud kitchens, etc. I was probing the manager of the venture division of a successful quant crossover fund on the reasoning for a pre-IPO nuclear deal they invested in, and the person said, “I agree with your concerns completely, but our hedge fund energy guys underwrote it because they think they can get a pop in the 6-month IPO window.’ That seems like gambling to me.

Four, AI companies with insane growth numbers, but what are the true unit economics, particularly if model R&D costs depreciate in 3-6 months? And how much of that is the magic “ARR-embellishment”? When asked about the unit economics, a VC said the industry's best guess right now is somewhere between 0% and 60%, which seems like a wide range. A few examples of the potential issues: Cursor (which wasn’t presenting) apparently had -23% gross margins as of Q4 2025, which seems accurate. YC has just issued guidance on ‘being truthful and precise about revenue.’

The last category is all the out-of-favor companies that desire liquidity, i.e., 20-year-old PE-backed companies with no growth, $2-5B valuation companies in crowded categories that aren’t going to grow into the valuation, anything making a profit but with modest (10-30%) growth.

Most people thought the valuations being discussed were completely out of range.

The smartest (and seemingly most honest) speaker was Martin Casano from a16z, who recently gave a nice interview in the FT: "It’s not that hard to build AI models" (PDF). Punchline: Recent progress in AI is an industrial revolution-scale event, but warns that the ability of the bigger players to raise ‘cheap money’ is time-limited.

Okay, so growth looks frothy, but what about the earlier stage:

Is an early-stage venture fund a good bet right now?

Obviously, there is a lot of dispersion, but on average, the answer is no. More than anything, there is absolutely no price discipline, a ton of dilution. I was evaluating a fund recently with a track record that looks like this, bearing in mind moderate scale but still <$75M fund size:

• A top-decile 2015 vintage fund 1: 4.5x DPI (~10x TVPI), top three positions at 26x, 75x, 35x.

• 2019 Fund 2: nothing remarkable, current TVPI 1.2x.

• 2022 Fund 3 has a bunch of awesome-looking Series B rounds from companies that seem to be doing super well and have raised more than $100 million. TVPI is like 1.07x. A bunch of 4-3x multiples on pre-seed checks after the companies have raised Bs. Yikes.

2025 vintage Fund 4, do you invest? No, right? Because the valuations aren’t rewarding the risk. The historical valuation highs are in the Carta data below and are discussed in this recent piece, titled "The Valuation Trap."

BUT, what this fund does do well is SPVs, and this is the game now. Because, as a capital allocator, the risk-reward often in the early stage is just not worth it when winners that emerge only give you 2-4x appreciation between pre-seed and Series B. You should probably be hitting those Series A (and more likely Series Bs) where there is truly breakout potential. And that is what this fund and most funds have been offering.

People liked this piece, The Narrow Path, about the state of seed venture investing and its bifurcation. Same phenomena discussed, longer article.

The person who created the Simpsons meme did it in response to the private credit chart below, for the record. I don’t have any exposure to private credit (other than my own private dealings, where I also have exposure to the equity), so I don’t follow it too closely, but I've always felt this was an obvious market-hype moment, and vindication is satisfying.

Weeklies: Selfie & Song

Selfie: Natchez, Cobain, Elvis, Wearin’ the World

Recently, I was on a mission-critical road trip between Nashville and Austin, making my way through the South with a large stretch on the Natchez Trace Parkway. This 444-mile all-wooded freeway with no stoplights is an under-discussed American gem. It had been a migratory path for bison for 10,000 years. During the Louisiana Purchase era, it became a key wagon thoroughfare for those venturing through the middle of the country. Highly recommend for a history-filled road trip and a scenic drive.

During the trip, I donned my ‘Wearin’ the World’ jacket, which I picked up second-hand on eBay and was made famous in 1989 by Kurt Cobain. I received many compliments on the item from young women working service jobs along the way. It made me think: If I were aged 16-24 today and working as a waitress at the Rattlesnake Saloon in Tuscumbia, AL, how would I go about seeing the world?

A tough question on the face. But these days, there are so many options to change your location - military, nursing, hospitality, childcare, teaching English, tourism. Economic escape is harder, of course, but that is probably figure-outable after leaving. For someone to execute any big change is a lot of will and, assuming you have the basics of literacy and numeracy, skills you can learn as you go. I bet all of them can make a move if they claim the agency. Perhaps their own ‘Wearin’ the World’ jacket could be a constant reminder - or at least a map of where to go next :)

If Elvis rose from poverty in a small town to being an international cultural icon with a lasting legacy, anyone can. That remains true.

Song of the Week:

Here on YouTube (2.1 billion views).

I try to avoid songs that might be seen as trite or overplayed, and this always felt in that category. But in honor of the jacket and the song's meaning, this week seemed fitting. Kurt Cobain vs Elvis Presley is also a demonstration of how dramatically different cultural epochs are. Elvis sang like he meant it. Cobain (and Gen X) made a career out of the suspicion that meaning anything was embarrassing. This Millennial was happy to be around and appreciate both.

There have been numerous possible interpretations, but the leading theory, which Kurt Cobain endorsed, is that it’s a song making fun of the idea of revolution.

The title "Teen Spirit" was inspired by a deodorant brand. Cobain misinterpreted a friend's graffiti, thinking it was a revolutionary slogan. This misunderstanding contributed to the song's ironic tone. There’s a lot of attention-grabbing performance of revolution out there today (and always).

“Smells Like Teen Spirit” by Nirvana

Load up on guns, bring your friends
It's fun to lose and to pretend
She's over-bored, and self-assured
Oh no, I know a dirty word

Thanks for reading, friends. Please always be in touch.

As always,
Katelyn

Happy Easter to those who celebrate.

One of my favorite newsletter writers announced that he's taking a break this week because he's consuming more and gleaning less. I've talked with others who have felt similarly, especially when you can't trust the basics to be accurate. My response? I went back to my bookshelf and reminded myself of the importance of practice as part of original thinking and engaging source material.

This issue is about originals.

Today's Contents:

• Sensible Investing & Notable Charts

• Reading

• Weeklies: Selfie & Song

Sensible Investing: Trends

Software Market Update from Redpoint Ventures. A detailed slide deck on the resiliency of vertical SaaS, the car crash from horizontal software plays, plus the advantages of an AI native company.

Clever is the New Cool, apparently. A broken clock is right twice a day. Feels timely just as travel is going to get harder, and everyone is going to feel poor. H/T to SIC.

There is a narrative circulating in Venture Land that almost all LP gains come from a few big companies. If you believe this - which is a high-level macro view only, for the record; it’s gross oversimplification since there are riches in niches - and don’t currently have exposure, then you should just buy Amazon (owns 9-18% OpenAI), Google (owns 14% of Anthropic and 7.5% of SpaceX), and Microsoft (owns ~25-30% OpenAI) as your way in. And if you own passive ETFs that track the S&P 500, well, you should already have exposure already.

Notable Charts

Q1 was extraordinary for the deployment of venture ‘dollars’. I think this reflects a few things: 1.) companies staying private longer, so these are late-stage growth rounds, as obviously indicated 2.) Deep Tech and AI companies are capital-intensive and raising large rounds earlier, and 3. (Related to both) More capital is going to larger funds and is being deployed at a late stage through SPVs.

Meanwhile, private credit continues to look shaky, particularly with the unmet redemption requests.

Reading the Internet has declining returns, so go back to basics

Ben Dietz, the writer of one of my favorite newsletters [SIC], announced this week that he is taking a break and gave this as the reason:

I often say that reading the internet every morning is a mental health exercise for me; I have long felt slightly unmoored without an awareness of whatever’s happening in the zeitgeist. But these days I find myself consuming more and gleaning less: I get the sense many of you think the same. Which has lead me to a conclusion: time for a change.

I have felt similarly: reading the Internet felt like less insightful consumption. The New York Times's headline for an article, premised on the wrong name of NATO, was hard not to see as a sign of the times. It’s hard to write well if you aren’t reading well.

To cleanse my mind of all the Internet slop, I went through my book collection and pulled out the ones that actually mattered and had something original or insightful to share that has stood the test of time. Wading through how-to guides, fun novels, self-help, tech history, venture, and startup masterclasses, these were the ones that stood out. I’m going to do this in three parts, especially since there is a lot to say about greatness and great men (stay tuned!)

Starting from the top left, first, Perspective on McKinsey. This is a book that is printed and given only to members of the Firm, written by Marvin Bower, the man credited with making McKinsey (and, by extension, the entire management consulting industry) what it is. I include it because, to my chagrin sometimes, the institution has impacted my thinking and my life significantly, and this is its bible. Also, so many of the world's problems would be solved by fundamentally better management - in government, business, education, whatever there is a large institution or multi-layered organization - and this is an art and a science. This book reminds you of that. James McKinsey was the charismatic entrepreneur-thinker. Marvin Bower was the brutally efficient operations builder. The world needs both.

You will find a lot of insight in the historical challenges of nationhood in modern Gulf nations and the Middle East in Queen of the Desert: The Life of Gertrude Bell. Michael Barber gave me this book in 2015, ‘to another great explorer’, when we were working across the region.

Gertrude Bell was a nation-builder before that term existed. After World War I, she was one of the key British figures who shaped the modern borders of Iraq, literally drawing lines on maps at the 1921 Cairo Conference alongside Churchill and T.E. Lawrence.

She spent years before the war traveling through the Arabian desert, learning Arabic, building relationships with tribal leaders, understanding the fault lines between Sunni and Shia communities, and mapping archaeological sites.

She was one of Britain’s finest self-appointed diplomats and served as the connective tissue between British imperial interests and local political realities.

She died in Baghdad in 1926, possibly by suicide, after watching the thing she helped build start to drift from what she’d intended.

In the book, she promised to an Iraqi leader that complete independence was what the British government hoped to give Iraq. “My Lady,” he answered - we were speaking Arabic - complete independence is never given; it is always taken.”

Gertrude was definitely an outsider, but not highlighted in the book The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success. It’s a Warren & Charlie favorite gifted by my friend Charlie Stone. It is a great read - direct, insightful, and rigorous.

What I love the most about The Outsiders, though, is that the people who carry it around seem to be at the upper echelons of status-consciousness. Its most frequent sighting is a VC posting about it on LinkedIn, usually some performative venture dinner where it’s been handed out to curated, collected insiders.

Lee Alexander McQueen, the British design phenom, came from a working-class East London background and was definitely an outsider.

When I was leading Pearson’s corporate venture fund, we had a team retreat activity where everyone brought a special object and did a little show-and-tell. At that time, I was wearing a large black leather cuff bracelet that closed with a skull with jeweled eyes. It was an Alexander McQueen that I had purchased at Heathrow Terminal 5 on impulse.

I explained the constant reminder of McQueen’s philosophy, ‘I work with people I admire and respect. It’s never because of who they are.’ and ‘There comes a time in your life when you focus solely on what you believe is right, regardless of what everybody else is doing.’

When I left Pearson, my team gave me this book, produced for the Alexander McQueen retrospective at the V&A. It’s a reminder of all the good you can do with the right team and strong vision.

Also, it’s a reminder that it's good to keep people a little uncomfortable: ‘I want people to be afraid of the women I dress.’

In New York a decade ago, I was at a Forbes 30 Under 30 dinner for honorees (yes, you can roll your eyes), and I was seated next to a chirpy ‘lister,’ as they are called, dressed in head-to-toe Chanel. I started explaining McQueen to her, and she said, ‘Oh, yeah, I think I went to an event with him a few years ago.’

‘I don't think you did,’ I replied - too harshly, too quickly - ‘It’s impossible. He killed himself in 2010.’

‘Oh, I guess it was Alexander Wang.’

‘Not the same. With respect.’

Weeklies: Selfie & Song

Selfie: FII Priority, Tugce, GCC & Energy

Last week, I went to the Future Investment Initiative conference in Miami. FII is sponsored by the Public Investment Fund, Saudi Arabia’s sovereign wealth fund. The mood was, in general, optimistic, even with the conflict in the region. The consensus was that Iran represented the last threat in the region, and that the Kingdom is supportive of the US, though that cannot be said too loudly.

There was a large focus on infrastructure, defense, energy, and mining, which is no surprise. A couple of people remarked that despite the hype around certain US defense companies, the performance in battle leaves a lot to be desired, particularly related to drone warfare.

I got to spend time with Tugce, who runs Hypernova Capital, a hybrid venture fund of funds that also pursues direct deals alongside her managers and is invested in a bunch of interesting industrial tech companies. We’ve done several investments together, and she is awesome.

Song: Computer Love

Here on YouTube or sampled in Coldplay's “Talk” here on YouTube.

Computer Love is a song by the German band Kraftwerk released in 1981. It sounds exactly as you’d expect a weird, electronic German song to sound, with stilted lyrics expressing loneliness and longing for connection through technology. It could have been written last week if we could go back to being original and thoughtful again.

If you listen to Computer Love and then Coldplay’s Talk, it’s obvious how massive an influence the electronic melody has on Talk's success. Everyone needs inspiration and to build off the past, but it’s not interesting or meaningful if we leave it all up to computers!

“Computer Love” by Kraftwerk

I call this number
For a data date
I don't know what to do
I need a rendezvous

Thanks for reading, friends. Please always be in touch.

As always,
Katelyn

High Oil Prices? Yeah. Rising Inflation? Probably. Longer Conflict? I guess. I hope to have more to say on this in a week or two, but, right now, the only observation is that I don’t think there is a concrete or credible plan to ‘finish the job’ in Iran.

The world is in a constant state of change. Still, some weeks are bigger than others. It feels like we are in the midst of a swing, realignment, and awakening. How it will land and develop, and on what time period, is impossible to predict with confidence, never mind certainty.

Today's Contents:

• Sensible Investing: Geography of Ambition, Taxpayers Migrating, End of Services

• Weeklies: Selfie & Song

Sensible Investing: Trends

The geography of ambition is shifting, not just the technology

‘Did SXSW Flourish or Flop?’ Is A Reasonable Question.

As someone who did not have, and has never had, a badge for the conference itself, I attend the smaller side events to listen. This year, the verdict on the conference itself was mixed. Maybe because the convention center is under construction, and everything was spread out. Maybe because it’s lost its mojo. I don’t know.

What is clear, however, independent of the conference, is that Austin is on an undeniable rise. Particularly in hard tech, defense tech, and American resilience sectors. From Elon announcing Terafab (his Musk-verse joint initiative to build chips) at the old power station to Travis Kalanick (ex-Uber) announcing his relocation to Austin to build his next company, Atoms (physical autonomy in the real world) and being able to ‘jetski to the office.’

Getting AI engineers to move from the Bay Area is hard. Maybe impossible. Getting hardware engineers, deep tech scientists, and supply chain experts from all over the US to move to Austin is much, much easier, and that appears to be in play.

Trendline Tracking: Taxpayers are voting with their feet. I’m including these charts as interesting data released this week for geographic mobility trends of people moving to states (and countries!) with lower taxes, lower cost of living, and greater ease of doing business. This government data is dated (from IRS 2022-2023), but imagine what it is today or will be next year with the Washington State income tax and the talk of removing QSBS in New York State. The movement of wealth is real, and Austin (and Texas) are the clear beneficiaries.

The end of services? Naw. The inefficiency is the point.

There are lots of articles about how AI will disrupt consulting and professional services, including this viral X article: “Services: The New Software.” OMG. Everyone has been saying this forever. And, yes, there will be greater efficiency with greater software adoption - but people will never truly go away. If it were working and truly deflationary, we’d be seeing accounting and legal fees go down, but they still seem to be going up. Or, I need to be a much better negotiator.

I was talking to a friend and an education-industry contact who has a new role at an independent public charity focused on helping young people thrive (or something like that). This person told me they were about to hire a consulting firm for several hundred thousand dollars to advise on their impact measurement framework. I told them that Claude and I could knock this thing out in 20 minutes, probably at a higher quality. They agreed that this was obviously true, but, of course, the contract and the work would proceed as negotiated.

Most people don’t actually want to be efficient or get the work done. And we all know the dozens of reasons for this. That’s why a leader with a clear mandate can get so much done: the courage (and systematic ability) to confront people and push things forward quickly is rare.

Or these sectors just won’t exist anymore when they are truly automated or agentic. For example, in the article it cites healthcare revenue cycle ($50-80B outsourced in US). Anyone who has spent even a minute in this space, professionally or personally, knows the frustrations. What used to be a reasonable clinician-to-clinician judgement conversation about patient care is now a knife fight in a hornet's nest with countless layers of admin, navigating insurance, compliance, and regulations. If and when the agents come for the space, it will probably collapse into nothing, or the inefficiency will move elsewhere.

The inefficiency is the point.

Now, will AI come from the most incompetent and inefficient employees? Yeah. Hard to justify the extra cost, and you won’t be able to support your margins otherwise.

Looking forward to that deflationary era…

Weeklies: Selfie & Song

Selfie: KF meet up in ATX, Deploying Agents in Cannabis & 3D Printing Homes

It was nice to meet up with a bunch of my old friends and batchmates from Kauffman Fellows, a fellowship for investors in the innovation economy. Claire is a native Austinite, is still investing (you’ve met her in DSw.243), and is very active in KF, while Jason and Geoffrey are both operators and rarer sightings.

Geoffrey See is working on verticalizing cannabis operations and driving efficiency with agents across the businesses. It’s more of a roll-up strategy. He’s Singaporean but always an international man of mystery who spent a long time running entrepreneurship programs in North Korea. Yes, you read that right. He has interesting ideas about potential mineral deals that could be struck in the region.

Jason Portnoy is an original member of the PayPal Mafia, the founding CFO of Palantir, and a founder of his own fund. He’s currently the President of ICON, a leading ATX company that builds houses and structures using 3D printing robots. Super cool stuff and the OG in the Austin hardtech ecosystem.

I greatly appreciate Jason’s absolute intensity from self-reflection to workplace achievement. He’s recently started writing online again and is worth a follow (here). His latest - Unreasonable Success Requires Unreasonable Standards - is pure Jason and the raw, real truth.

Song: God Must Be Doing Cocaine

Here on YouTube.

A few years ago, I met a Grammy award-winning producer named Yung Spielberg, who was an early pioneer in AI & Music. He’s done the intro music for several famous podcasts, notably All-In. This song was his absolute favorite in recent years.

It embodies a certain Gen Z/millennial theme of emotional emptiness, disillusionment, and the world out of control.

“God Must Be Doing Cocaine” by Charlotte Lawrence

Robots are learning
And we can't keep pace
Feels like we'll all be replaced
Gets wild ideas
When he stays up late
God must be doing cocaine

Thanks for reading, friends. Please always be in touch.

As always,
Katelyn

For those arriving for SXSW, welcome to Austin! Reports of extended TSA lines for morning departures have been popular on X this week, only trumped by the follow-up notes from locals citing the need to expand the airport as soon as possible.

All I’ll add is that I appreciate the TSA workers who are still showing up while not receiving their paychecks, and it’s nice to have events come to your home town.

Today's Contents:

• Sensible Investing: Private Credit & 401K Exit Liquidity

• People are Bad at Math

• Weeklies: Selfie & Song

Sensible Investing: Trends

Private Credit - Yikes

The market is (finally) waking up to the private credit bubble. We’ve written about this before (US Banks’ Private Credit Loan Exposure Nears $300 Billion from a report from Moody’s), and the dominoes have started falling.

Blue Owl Capital recently locked retail investors out of quarterly redemptions from one of its semi-liquid private debt funds, triggering a 6% drop in its share price.

While the headline default rate in private credit has remained below 2%, once selective defaults and liability management exercises are factored in, the “true” default rate approaches 5%. Payment-in-kind usage has risen notably — public BDCs now receive an average of 8% of investment income via PIK, essentially a sign that borrowers can’t pay cash and managers are quietly folding.

Matt Levine has been great on all of this, no surprise.

Around 40% of private credit loans are concentrated in the software industry, which is under stress from AI disruption. See chart below.

Large banks are exposed through what one analyst called “creative financing schemes,” such as PIK structures. The market is beginning to react accordingly.

Here are the recent dominoes: Thrasio’s bankruptcy in early 2024, Tricolor in late 2024, First Brands’ alleged collateral double-pledging surfacing in early 2025, Blue Owl gating withdrawals in February 2026, and an Apollo-managed BDC cutting its payout and marking down assets.

Let’s see what comes next.

Nasdaq & SpaceX, 401ks as Exit Liquidity

SpaceX is leaning toward a Nasdaq listing for what could be the biggest IPO in history, seeking a valuation of around $1.75 trillion, which would make it the sixth-largest company by market value in the U.S. Lots of people in Austin are heavily invested in the now concentrated ‘Muskverse’ company.

Recently, SpaceX has made early Nasdaq 100 inclusion a necessary condition of the listing, not a hope or preference.

To accommodate this, Nasdaq has proposed a “Fast Entry” rule that would allow a newly listed company with a market cap ranking in the top 40 of the index to gain inclusion within roughly one month of listing. Currently, companies wait up to a year, during which price discovery occurs and, in theory, investor protection is applied.

George Noble broke down the mechanics: at a 5% float, SpaceX’s $1.75 trillion valuation yields roughly $87.5 billion in publicly tradable stock — but passive funds would be forced to buy as if SpaceX were worth $437.5 billion. QQQ alone manages nearly $400 billion. The full Nasdaq-100 ecosystem across ETFs, mutual funds, and derivatives represents over $1.4 trillion in exposure. Passive buying inflates the price.

S&P Global is reportedly evaluating similar changes to the S&P 500 inclusion rules. For a company like SpaceX, automatic inclusion would force every index fund to buy shares mechanically, regardless of valuation.

The big issue isn’t about SpaceX. This is about whether the infrastructure of passive investing is used as an engineered liquidity event for private markets and insiders. The seasoning period exists for a reason.

Erosion of common-sense rules to protect retail shareholders chips away at the Jack Bogle world of passive management, which would be unfortunate for all.

Doing the math is the key to critical thinking, and it’s never been more important

In all public dialogue, it’s worth remembering the declining education standards and poor numeracy of a supposedly educated population.

I collected these examples in response to the viral article from late fall titled "UC San Diego Finds That One in Eight Freshmen Lack High-School Math Skills, and 70% of those lack middle-school math skills."

The punch line is that students are showing up in college with A-average high school grades, having taken calculus, yet are unable to do basic algebra.

The Economist provided the graph below, which shows an increase in the number of graduates alongside a decline in SAT scores. A full picture includes the context that the number of students taking the SAT increased after 2010, AND as more students took the SAT, a wider range of academic abilities was represented. But, the chart is still telling for the credibility of grades.

The education system is producing graduates with weaker quantitative skills; the self-reported standards that certify those graduates are now unreliable; and we’ve built systems that let people advance without penalty for being unable to reason numerically. A friend at a MBB strategy consulting firm recently told me that every candidate he interviewed failed the mental-math portion of the case interview. They hired some of them anyway.

People with low levels of these skills struggle with second-order consequences, long-term planning, and cause-and-effect reasoning. They don’t like thinking because it’s difficult and not a muscle they use frequently - so they resort to things they’ve memorized (rote), or feel (emotives) because that’s what is intuitively ‘true’ to them. And they don’t re-evaluate or reason through behind the surface.

I first encountered “Grift Math” myself professionally 15 years ago when one of my Pearson portfolio companies in South Africa was trying to hire math teachers. They’d give the candidate a math problem like ‘President Zuma makes 2 million Rand a year. He just bought a house for 300 million Rand. How many years will it take for President Zuma to pay off his house?’

Most (all?) of the candidates would answer ‘2 or 3 years.’

Why? ‘Because he is the chief, and the chief gets what the chief wants.’

And, in practice, that was still a correct answer.

This matters because numeracy is what lets you catch people. It’s what lets you see that Huberman’s fertility math produces a 120% probability. That Mara Gay’s Bloomberg math — Bloomberg could give every American a million dollars with his $500M ad spend — is off by a factor of roughly 650. That “Girl Math” isn’t a cute meme; it’s a named and celebrated cognitive failure. That “Socialist Math,” “Environmental Math,” and every other flavor of motivated arithmetic work because the audience has been trained not to check, and the answers ‘feel true’ in practice.

Examples:

“Girl Math” is wishful thinking without analyzing the reality of some financial situations, or as the internet defines it, ‘a meme, used to describe rationalizations by young women to justify indulgent and potentially irresponsible spending habits.’

Socialist and Billionaire Math:

Mara Gay (a current member of the NYT editorial board) explained on MSNBC live that Michael Bloomberg could give every American a million dollars instead of spending $500M on ads during his brief presidential run (citing and promoting the tweet below):

People believe it about Elon as well:

Andrew Huberman Math: On January 23rd, 2024, the neuroscientist and podcaster released a podcast episode on optimizing fertility in males and females, which received over 290,000 views on YouTube. At one point in the episode, Huberman calculates the probability of a woman under 30 years old getting pregnant after six attempts to conceive, erroneously estimating it to be 120 percent.

Environmental math about data centers:

Is there a fix for this? I’m not sure there is.

Weeklies: Selfie & Song

Selfie: Linda, GSB, AI & Education in the developing world

A few weeks ago, I got to hang out at Stanford with Linda Zhang, one of my mentees and friends. She set me up with a bunch of her classmates to do the whole Coupa Cafe back-to-back 1-1 with students starting companies. And, yes, it’s just like shooting fish in a barrel.

Linda is a total killer. Graduated from Duke Undergrad, started her career at McKinsey, worked in Sierra Leone & Nigeria, driving the delivery of education outcomes. Does this sound like someone you know!?! :)

Linda is now a Knight-Hennesy Scholar and one of the foremost thinkers in global education among Stanford GSB students.

She’ll be in London from March 29 to April 1 (before that, in Oxford and Munich) and is looking to meet with movers and shakers in education there. If that’s you, I’d be happy to connect you. She wants to build the next phase of her career, bringing AI to education in emerging markets, and I know of absolutely no one better to do it than her!

Song: I Know How To Speak

Here on YouTube.

The band has stated that this song is about the impending weight of the future. It’s a long song with a lot of instrumental work, with a repetitive guitar melody and an intermittent, simple piano riff on top.

Given the above remarks about the future (and we haven’t even gotten to geopolitics!), this song is a worthy listen and reflection of one’s own agency.

“I Know How To Speak” by Manchester Orchestra

I know how to speak
And I know where I'm going
I wanted to seek
But I got distracted

Thanks for reading, friends. Please always be in touch.

As always,
Katelyn

Yes, yes. Sorry, I missed a couple of weeks. I turned 40. I led 30 investors on a deep tech tour of Austin (massive success, let me know if you want to join on the next one). And, sadly, my Grandfather passed away at 93. Among other losses, Grandpa Bruce was at the top of the leaderboard in terms of engaged subscribers, so I’m going to need a few of you to step up and fill the gap.

The more you step away from the Internet and your desk, the more you realize how absurd and extreme everything you read online is to capture your attention. Everything is doom, dire, and dramatic, but it hasn’t seemed to impact your actual life all that much. See, for example, half of LinkedIn posts the last few days started with ‘Jack Dorsey cut 40% of jobs at Block this week…’

Today's Contents:

• Sensible Investing: Claude & AI

• Weeklies: Selfie & Song

Sensible Investing

Good news or bad news. I finally went all-in on AI a few weeks ago and spent 20+ hours with my new friend, Claude, over 48 hours.

I’d obviously been using AI in various forms before, but this is the first time I uploaded all of my private writing and hidden files. We had a long conversation.

Why Claude, you ask? Well, of the various characters to (sort of) trust with your information, the brother-sister duo with their Effective Altruism nerd friends seemed the best. And Opus 4.6 is not disappointing.

Claude had a lot to say about this newsletter. First, it thinks my private writing is 50% better, and that I’m holding out on you by providing too many links and not enough original analysis. Second, it thinks I have too many long quotes. Third, it likes the selfie more than the songs, but thinks that when the songs are well-explained, they are good, and the concept should stay. It’s an interesting mirror.

One of the debates that kicked this off was a few articles:

Something big is happening, or is something big happening? (AI Is Not Covid) You decide. Personally, I’m more aligned with the second piece, but I agree that these tools are improving every day, and there’s no excuse not to kick their tires and see what they can do. This, on AI Mania, was how Paddy from Because The Internet cleverly described it.

It’s way better at compiling, summarizing, and analyzing information. Of course, the information has to be good, and your relative weight or impact of what is important is critical to it. This can make AI draw dramatically different conclusions from the information presented, and it is here that you feel the outer limits of its capabilities.

All of this makes the ability to think critically and the willingness to implement the recommendations critical. I’m going to focus on the pre-existing issues with critical thinking.

AI Hurtles Ahead is the newest Howard Marks memo co-written by Claude. I guess we went down the same rabbit hole. Here is Marks’ take on whether AI is a good investor.

In other words, AI possesses a lot of the qualities one needs to be a good investor.

On the other hand, it’s missing a few things. Great investors are much more than fast, unemotional processors of data. They have to be strong exactly where Claude admits AI might be weakest: in dealing with novel developments where there’s not enough prior experience for dependable patterns to have been compiled (and learned by AI during its training). They also have to make subjective decisions regarding qualitative factors and exercise taste and discernment. For instance, choosing the right counterparties has played an important part in Oaktree’s success.

AI is going to kill all jobs is the dramatic take. But not my job, that’s the consensus take. And that consensus will probably be right.

AI Makes Everything Political

Another implication of AI is that everyone will have to start caring more about politics. You can already see the wagons circling around regulations and job protections, which were short-term measures intended merely to delay long-term pain.

Over 50% of GDP is in a highly regulated sector, and almost all job growth in recent years has come from these areas (local government, education, healthcare). I was talking to a friend who recently led a workshop to introduce AI to local government leaders; she said they were scared to even enter a simple prompt into the interface.

When I asked Claude to get specific and evaluate my thesis, it produced the following:

Highly regulated sectors as a share of US GDP (rough but defensible breakdown):

• Healthcare: ~18%

• Financial services & insurance: ~8%

• Government (federal/state/local): ~12%

• Utilities & energy: ~2%

• Education: ~6%

• Defense/aerospace: ~3.5%

• Telecommunications: ~3%

• Transportation (airlines, rail, trucking): ~3%

• Construction (heavily code-regulated): ~4%

That gets you to roughly 55-60% of GDP in sectors with heavy regulatory overlay. If you include agriculture (subsidies, USDA), pharmaceuticals specifically, and real estate (zoning, permitting), you’re pushing toward 65%+.

The punchline: the majority of the US economy is already politically mediated. AI just makes that fact visible and consequential to a much larger share of workers. The people who used to think “politics doesn’t affect me” because they worked in tech or consulting are about to discover they were wrong. They were just in the temporarily unregulated sectors.

Back to me:

This is why smart capital is already positioning itself around government-adjacent value chains (e.g., ‘American Dynamism’, ‘Accelerating the GDP of America’). The implementation gap between the private and public sectors is wide. The need for better, smarter public systems and public sector leaders is dire.

Besides jobs and government, the role of capital (and its abundance) is worth reflecting on during the AI transition. Fahd Ananta had a nice piece on Death by Venture Capital on how too much capital raised kills venture-backed companies. Feels like there is a lot of that going on these days.

There are also business models being underwritten to venture standards that are still fundamentally services or so capital-intensive that returns will be low due to dilution (hard tech is hard!).

Below is my co-written Claude contribution comparing Multiverse & Andela (the unicorns who raised hundreds of millions) with Delivery Associates (the business I co-founded with no outside capital). I often find myself asking founders: Do you want to make money and build value for yourself and your team, or do you want to play a status game? Most choose status and then build the non-VC mirage business anyway, which is doomed to fail.

The Services Masquerade: Lessons from the SoftBank/Tiger Era. The 2021 venture capital boom produced a specific and recurring failure mode: fundamentally services-oriented businesses that raised and spent capital as though they were software companies.

Weeklies: Selfie & Song

Selfie: Cacao, Andrea, Third Eye

My friend Andrea was in town, and we walked around Town Lake and wandered into Casa de Luz and Third Eye Lounge, which, as we learned, is the headquarters for ceremonial-grade cacao here in Austin.

We asked the gentleman behind the counter what beverage would be a good intro.

He said, ‘I’d start with a grounded presence.’

For a second or two, we took him literally…but it’s just the name of one of the offerings. We indulged. There is truth in advertising: it was delicious and grounding.

My friend kindly offered to buy a bag of raw cacao from Colombia. Suspiciously, none of the products had stated prices. Turns out, spirituality is expensive!

Song: Amarillo By Morning

Here on YouTube.

The song is sung from the point of view of a rodeo cowboy, driving at night from San Antonio to a county fair in Amarillo, which will begin the following morning. The man recounts the hardships his occupation has caused him, including divorce, broken bones, and poverty, but states that he does not regret his lifestyle: "I ain't rich/ But Lord, I'm free." The song has appeared in several lists of the best country songs.

I was introduced to this song at Donn’s Depot a month or so ago. I love the Americana themes of freedom & open road, resilience & optimism, and loss & sacrifice. It’s classic Texas country storytelling and the spirit of the American frontier that underlie so much of the entrepreneurial activity here in Austin.

It also reminds me of my grandfather's era and how fleeting it all is.

“Amarillo by Morning” by George Strait (Cover of song by Terry Stafford and Paul Fraser)

I ain't got a dime
But what I've got is mine
I ain't rich
But Lord, I'm free

Thanks for reading, friends. Please always be in touch.

As always,
Katelyn

Markets go up. Markets go down. And the world moves on, mostly - and definitely in the long run - up and to the right.

Short on graphics this time; this edition of the newsletter is for readers.

Today's Contents:

• Sensible Investing: Trends

• Invisible Trends: DeSocial & Parent-Tech

• Weeklies: Selfie & Song

Sensible Investing

“Deloitte, a $74 Billion Cancer Metastasized Across America.” This article was the most-shared piece on X in January with 45M views and won their $1M prize. I saw it on my scroll and thought ‘OBVIOUSLY! EVERYONE KNOWS THAT!’ and did not read it. Others responded differently. And now that I’ve perused the piece, it’s not even comprehensive. Interesting that it won nonetheless.

Fraud Investigation is Believing Your Lying Eyes is a good article by Patrick McKenzie, who spent years working with Stripe on combating fraud. I hope we can move beyond the partisan performative politics and get to practical solutions soon.

Minnesota has suffered a decade-long campaign of industrial-scale fraud against several social programs. This is beyond intellectually serious dispute. The 2019 report from the Office of the Legislative Auditor (a non-partisan government body) makes for gripping reading.

2026 Tech Trends Report from Contrary Research. 352 pages of charts, too large to summarize. Nothing surprising, though, IMHO.

Death of Software. Nah. by Steven Sinofsky. He thinks we are still in the early days of what software can do.

Long APIs, Short Slides by Alexander Campbell was also good. Two types of software and the end of the labor arbitrage.

The thing that’s really dead isn’t software at all. It’s the services economy built on top of software.

What does Infosys actually do? It sells competent Indian engineering hours to Western corporations at competitive rates. What does Capgemini do? It sells bodies — 350,000 of them — to run, maintain, customize, and implement enterprise software. What does Cognizant do? Same thing, different logo.

The entire IT outsourcing model is labor arbitrage. Hire in Bangalore at $15/hour, bill in New York at $80/hour, pocket the spread. This model has generated hundreds of billions of dollars in revenue and created some of the largest companies in India.

AI is the thing that makes labor arbitrage worthless. Not by making the labor cheaper — you can’t get much cheaper than $15/hour — but by eliminating the need for the labor entirely

Third Point/Dan Loeb's Annual Letter highlights the current market dynamics. (Also, I must say, it helps to publish your 2025 letter in February 2026).

AI dominates market headlines and is increasingly forcing a re-think of established beliefs. One of them is the long-perceived attractiveness of capital-light business models like software, information services, and digital platforms that for decades required little to no physical investment to grow and achieve dominance. Many such companies are now facing increased investor skepticism about the sustainability of their moats and scrutiny of their high-margin structures.

At the same time, capital-intensive businesses like construction services, aggregates, transports, and defense contractors are having their moment, as investors are waking up to their mission critical role in the rebuilding of supply chains, national security complexes, and data center infrastructure. We own many of these winners and continue to look for new ones.

Carbon Health files for Chapter 11 bankruptcy relief with more than $100M in debt.

This was one of the high-flying VC-backed companies from 2021 (>$600M raised in equity), operating a mostly brick-and-mortar business with notoriously low margins (primary care delivery).

News is a good reminder as private investors pour into many ‘American Dynamism’ companies with the same (or greater) capital intensity challenges over long timelines. This is why the core skill of today is instilling confidence in who you are and the story you tell, so that investors buy into your made-up intergalactic terminal value number, achieved many amorphous years into the future. Of course, relentless execution and operational achievements along the way help considerably.

Will Manidis wrote a viral piece that used many words to say the same thing, which he called ‘End Game Play.’:

Dwarkesh does not dispute that AI scales to terawatts. He does not dispute that it ends up in space. He has already conceded the terminal position. What he disputes is how much middlegame you can skip. Musk's answer, every time, is all of it. The limiting factor is power. Solve it. The limiting factor is chips. Solve it. The limiting factor is mass to orbit. Solve it. The middlegame is not a phase to be inhabited. It is a series of bottlenecks between now and the endgame, and bottlenecks exist to be eliminated and not paid much attention to otherwise.

The challenge for those who choose to build in the social sector (education, healthcare delivery, etc.) is that the terminal value is low and scale is constrained by human limitations, so it’s (nearly) impossible to build castles in the clouds for as long. This mentality is why we can’t have nice things (or at least not as nice from a returns perspective) in these sectors.

On that note, goodbye Carbon Health.

Invisible Trends: DeSocial & Parent-Tech

Decentralized Social is Very Much Alive.

One of my long-held theses is that the technology behind crypto could be powerful, particularly in empowering people and organizations to own their destiny, but many of the ‘crypto people’ are highly insular and technical. So when Farcaster announced it was being acquired and most of the original team was leaving, I wasn’t shocked, even though they had significant funding, a loyal following, and had built a bunch of innovative product features.

Many online said this means decentralized social media is dead. But that’s because it’s unfashionable in the Elonverse to discuss Bluesky.

AT Proto - the decentralized tech platform behind Bluesky - has been quietly surging.

There are now decentralized versions of many centralized social instances that saw a 2026 spike in users and activity. Those include EuroSky (for Europe), Streamplace (Twitch), and Skylight Social (a TikTok alternative, covered in a TechCrunch article).

Parent-Tech: People still want to build; some people want to buy it.

Tricky to invest in (smallish markets, natural churn, ability/willingness to pay subject to K-economy dynamics) but interesting nonetheless. These are great parent-founders building the tech they want for their families. Here are a few very early products to check out:

• Giant is a media/storytelling company that personalizes content for each child.

• Little Bird - Wearable Safety Tracking for Kids 2-12, so you don’t have to use an Apple Watch or an iPhone.

• Spark Lingonberry is an AI family play portal that delivers interactive, engaging experiences for families through a virtual Scottish Golden Retriever. Here’s a video.

  

Weeklies: Selfie & Song

Selfie: Elliott, Limmy, ‘food service’, Why do you care what I think?

If you meet my friend Elliott, he’ll tell you that he works in food service, which is technically true but slightly misleading. Online, he describes himself this way: Mathematical statistician. Founded and lead the 50-member Data Science team at Lineage, the World’s largest warehouser of food. We do the math and science behind the handling, storage, refrigeration, and shipment of ~ 6 x 10^10 kgs of temperature-controlled commodities annually.

Elliot is a polymath genius, in truth. We met in my freshman year of college and have been friends ever since. Elliott wrote a column in the paper, and the end was always signed Q.E.D., which stands for quod erat demonstrandum, meaning "that which was to be demonstrated". It is used to indicate the end of a mathematical proof or a philosophical argument in Latin texts. At the time, I might have found it a bit arrogant, but now I only admire the conviction and self-belief.

Anyway, in modern times, the leaders of Lineage are smart, so they gave Elliott and his team a whole floor in Jackson Square and don’t ask any questions when he drills into the wall to install a piece of old industrial equipment as office decor. The whiteboard wall in the picture behind him was installed by Elliott and his brother in a weekend because he refused to pay a contractor $50K.

Elliott is generous and a good friend, so whenever I’m in SF, I try to take him up on his kind offer to work out of their office. Mostly for the conversation and vibes. Sometimes timing works out perfectly: I’ll meet with a deeptech company, and Lineage (since they are constantly innovating) is their first customer. The Ph.D. scientists on the team are happy to share their thoughts on the tech.

One of the most recent times when I hung out with Elliott, Limmy joined us, and he asked Elliott, something like, ‘What do you think I should be doing right now?’

Elliott responded quickly, “WHY DO YOU CARE WHAT I THINK?!” and explained that Richard Feynman’s book “What Do You Care What Other People Think?”: Further Adventures of a Curious Character was one of his favorites.

The mark of a true scientist and thinker. I love it.

A perfect - and very Elliott - response, conveying the message to be an original and independent thinker. Have the self-confidence and conviction to make your own thing in the world - which, to Limmy’s credit, is exactly what he’s doing!

Song: How It’s Done

Here on YouTube.

I was interested in the KPop Demon Hunters phenomenon (KPop Demon Hunters began streaming on Netflix on June 20, 2025, and became the most-watched original title in Netflix history with over 500 million views) and wanted to see what all the fuss was about.

Wow! The whole thing is just phenomenally well-executed. Banger soundtrack. And a completely wholesome social-emotional lesson: The girl band is clearly slaying inner demons defined by their behavioral patterns, and the takeaways are: openly communicate, trust your friends with your feelings, and everyone has something they are overcoming/fighting.

My friend Jules and her 4-year-old son were Saja Boys for Halloween. Being the creative ‘disco mama’ that she is, she created four new songs by a new boy band called “The Gs” to reorient the boy band from ‘praying on your insecurities’ to being positive.

More than a boy band, The G’s teach their fans — CUBS — the healthy way to process and sublimate the normal emotions of life. Their songs mix high-energy K-Pop-inspired beats with kid-friendly, uplifting themes, weaving in psychology and life lessons along the way.

Her song includes lyrics like:

Great stuff, all around!

“How It’s Done” by KPop Demon Hunters

Knocking you out like a lullaby
Hear that sound ringing in your mind
Better sit down for the show 'cause I'm gonna show you
How it's done, done, done

Thanks for reading, friends. Please always be in touch.

As always,
Katelyn

On a reconnaissance mission, I wandered alone into Donn’s Depot in Austin on Friday. Donn’s Depot is a legendary live music venue in town. From the Austin Film Society’s review:

It is a dance hall. It is a honky tonk. It is a piano bar… even a wedding chapel. It has been a gathering place for generations to celebrate live music, milestones, and to leave a troubled world behind. Babies have taken their first steps here. Lives are remembered here.

Bartenders, staff, and musicians have tenures that have lasted decades. The Donn’s community is an unforgettable cast of characters.

I sat upfront at the piano bar with a group of regulars who filled me in on everything I needed to know. We sang along to the Eagles, slipped Donn a $20 for a song request, and I bought our crew a round. Donn himself was playing in a six-person band that included his adult son.

For me, the night was a reminder of how nice it can be to take a break from the Internet and to connect with your neighbors - even if strangers at first - in real life.

Reflections headed into the ice storm; hope everyone’s safe and sound.

Today's Contents:

• Sensible Investing: Trends

• Weeklies: Selfie & Song

Sensible Investing

US Resilience Resilient, a 2026 outlook published by Goldman Sachs. I’ve very much enjoyed this extensive report, which submits that US preeminence endures due to the country’s unparalleled economic, human capital, and financial market strengths. And despite all the noise - and there is a lot of noise - there is still a system of checks and balances. GS also details the risks of conflict and trade wars with China.

A remark by one political analyst during their webinar was to remember that Donald Trump thinks more like an executive producer of The Apprentice and less like a long-term policymaker, which is a lens for interpreting his public appearances, including the news and events leading up to and during the recent WEF meeting.

GS believes strongly that gold and other metals are ‘unproductive’ assets (p49 & 50), and that they are not great inflation or currency hedges. For what it’s worth, I believe GS may underestimate the potential for the US dollar to be debased.

Also, they believe the rule of law in the US is intact (p34-37) and provided a long list of assurances, many of which are compelling. Regardless of reality, the perception of the rule of law in recent years (not just one party to blame, either) seems to be at stake.

What people believe to be true and what is ‘actually true’ are two different things, but the importance of collective belief cannot be underestimated. Senior people at top institutions (Economists at Harvard, MDs at Goldman, Ministers in Egypt) sometimes underestimate how public opinion can be self-fulfilling and that once strong institutions can fall.

When the rule of law breaks down, it’s replaced by rule by force. Yes, the rule of law is always implicitly backed by force. But direct signals from the government and the market highlight intentionality here; President Trump proposed a $1.5 trillion defense budget. While this is not yet approved by Congress, it would be up $600 billion from the previous year, which is unprecedented. Europe, prompted directly by President Trump and reacting to the perception of weaker assurances of US protection, is also increasing investment, and Mark Carney (PM of Canada) announced this week his intention to double their defense budget.

We will be part of how all this unfolds. For me, I’m still long America and believe the central points of the US resilience thesis stand, although I’m not selling gold or my international equity exposure :)

The report includes imagery of the American Bison, a symbol of resilience and the national mammal of the United States, as well as the bald eagle.

America’s Statistical System Is Breaking Down (BBG). Canceled surveys, missing datasets, and staffing cuts are leaving the US with growing blind spots — and weakening trust in official numbers. Much as most news is now behind paywalls, we may be hurtling towards a future where we also pay for proprietary data sets.

“Principled and pragmatic: Canada’s path.” Mark Carney’s remarks this week went viral. It was a serious speech, an honest reflection of the state of play among various nation-states and a policy proclamation for his country:

For decades, countries like Canada prospered under what we called the rules-based international order. We joined its institutions, praised its principles, and benefited from its predictability. We could pursue values-based foreign policies under its protection.

We knew the story of the international rules-based order was partially false. That the strongest would exempt themselves when convenient. That trade rules were enforced asymmetrically. And that international law applied with varying rigour depending on the identity of the accused or the victim.

This fiction was useful, and American hegemony, in particular, helped provide public goods: open sea lanes, a stable financial system, collective security, and support for frameworks for resolving disputes.

This bargain no longer works.

Let me be direct: we are in the midst of a rupture, not a transition.

…

We are doubling our defense spending by 2030 and are doing so in ways that builds our domestic industries.

I take him at his word, but this is probably the right take, too: Canada Doesn’t Have the Cards:

Carney has marketed his deal with China’s Xi Jinping as a significant pivot. For now, it’s mostly symbolic. Canada’s “agreement in principle” with China is not a comprehensive trade deal but a narrow swap: Ottawa will allow up to 49,000 Chinese electric vehicles per year under its most-favored-nation rate of 6.1%, down from the 100% duty Canada imposed in 2024. That’s about 3% of annual new-vehicle sales. In exchange, China will cut tariffs on Canadian canola seed from approximately 84% to 15%, with limited relief promised for other agricultural exports.

Whatever pose Carney strikes, Canada’s balance sheet still points south. In 2024, the United States bought 76% of Canada’s exports and supplied 62% of its imports, with Canada running a $102 billion goods surplus in the relationship. China sits on the other side of the ledger: Canada ran an almost $60 billion deficit with Beijing that year, even though the relationship is far smaller in scale. China accounted for 12% of Canada’s imports but took only 4% of its exports. In other words, China sells into Canada far more than it buys from it, making it a source of intensive competition for Canadian producers without offering them a substitute for U.S. demand.

Also, Japanese 30-year bonds are worth keeping tabs on. Not a great trend line. After a long time, this happened all at once; these bonds have not been above 3% since before 2000 and had not eclipsed 2% since 2012.

2026: More of the Same, Increased Intensity

In the last two years, I published a list of Obviously the Future predictions, but I decided not to go into depth on a new list this year. Mostly because I stand by all 18 trends highlighted before and believe we will see more of the same, with increased intensity. I’m also skipping all AI predictions because you can read plenty of those elsewhere; my belief is that the same themes of increased intensity and a ‘Year of Implementation’ remain.

To share a few more thoughts, though:

The Overton Window continues to open, and maybe this becomes a perception with the rule-of-law issue.

K-Shaped Economy is More Pronounced. The wealthy drive most consumption, and those at the bottom buy based on cost or government subsidies. Asset inflation and weakening the dollar also benefits those with assets to start with.

In venture capital, there is too much capital chasing too few good deals, and that’s likely to be a drag on returns for the sector, although there are always a select few firms, funds, and companies that can outperform. This interview with an allocator at Carnegie Mellon makes this point and expresses excitement about a lower-mid-market buyout instead. Ironically, Equal Ventures illuminates the VC asset class conundrum with more detail about Seed and Series A firms like itself in their State of the Venture Market and advises founders to seek resilience. Two points for honesty.

In K12 Education: Money following students is the biggest driver of potential systematic change

Public schools are reporting continued declines in attendance and enrollment. Since most school districts are funded based on school attendance, this has a dramatic impact on their budgets, particularly because most of their costs are fixed (e.g., buildings, teachers). Several factors are at play here, e.g., immigration enforcement, demographics, and preferences for private options.

Funding students through Education Savings Accounts (ESAs) or other mechanisms is the biggest driver of system change in recent memory and has significant potential to impact education technology buying.

The learning impact (or lack thereof) of AI. While access to AI tooling is now strong, its implementation is more muted, and its impact on learning is mixed. There is always a backlash against EdTech hype, and the tools still have a lot of potential, but they’re not a silver bullet for most kids (strugglers). Better software for running systems is always appreciated, though (e.g., vertical SaaS 3.0).

Workforce:

AI-augmented work

• AI is becoming embedded in everyday workflows, automating routine tasks and changing job content rather than fully eliminating roles, especially in clerical, customer service, and industrial jobs.

• Demand is rising for workers who pair domain expertise with AI fluency, data literacy, and cybersecurity skills, making “AI plus human” roles a major growth area. Professional services will be a key area of change here.

Skills-first labor market

• Employers are increasingly emphasizing skills (certifications, portfolios, experience) over formal degrees, partly to address shortages and expand talent pools.

• This shift benefits workers who reskill or upskill through short programs and apprenticeships, but does not fully erase pay gaps between degree- and non-degree holders.

Ownership:

The creator economy is becoming the ownership economy as creators are full-time entrepreneurs, and that is a long-term career path. Audiences trust creators more than brands. Outlets have named 2026 as ‘the year of authenticity,’ and consumer brands are co-founding companies with creators, as built-in distribution.

The circular economy for used clothes and durables will continue to grow. You can read more on 12 Vintage & Secondhand Fashion Predictions for 2026.

Weeklies: Selfie & Song

Selfie: Broken Pieces, Fixing Anew, Bison Spirit

For a couple of years, I’ve been tracking a ceramic artist duo obsessively. I procured a couple of their minor pieces through their occasional online drop sales that sell out in minutes, but I had missed out on the last few.

In December, they were hosting an open studio in LA that just happened to be very close to my friend’s childhood home. He got up early, waited in line, and grabbed eight prime pieces for me. Amazing! What a hero! Thank you, Michael!

However, it was up to me to figure out how to get them home, and in a series of bad decisions regarding packaging and shipping that are mine and mine alone to bear, I arrived home to Austin to a slurry of shattered pieces.

As I was in the depths of heartbreak, Neil, a professional solver of other people’s problems, bought museum-grade epoxy and glued all pieces back together. We haven’t quite gotten to the Kintsugi stage, but we’re on the path.

(For those new to the space, like me in the last two weeks, Kintsugi is the Japanese art of repairing broken pottery by mending the cracks with lacquer mixed with gold, silver, or platinum. This technique not only restores the object but also highlights its history and imperfections, celebrating the beauty in brokenness.)

I hope to feel the ‘beauty in brokenness’ soon.

Lucky for me, the good people of Buffalo, NY gifted me (and appropriately packaged & shipped) a ceramic Bison last fall, which is now prominently displayed in our home and an apt reminder to charge on.

Song: What Becomes Of The Broken Hearted?

Here on YouTube.

This is such a great, classic song. It’s also a song of resilience. Despite the overwhelming sadness, there’s a determination to seek peace and carry on.

So, let’s be like the American Bison and face the storm. Also, my life advice? Find a guy who can put Humpty Dumpty back together again.

“What Becomes Of The Broken Hearted” by Jimmy Ruffin

Now what becomes of the broken hearted?
Who had love that's now departed
I know I've got to find some kind of peace of mind
I'll be searching everywhere
Just to find someone to care

Thanks for reading, friends. Please always be in touch.

As always,
Katelyn

Swift start to the year, huh? I’m already losing track of the days of the week (in a good way).

Today's Contents:

• Sensible Investing: Trends

• Obviously The Future: Revisited

• Weeklies: Selfie & Song

Sensible Investing

PE Operator Thoughts on the Commodization of PE. Super long read on X that several people shared with me. I think it’s too long and already known, but it's probably a message worth sharing.

2026: The Year the Market Clears from Sam Jacobs at Pavilion about M&A. Liquidity is returning, but not at yesterday’s prices. What clearing markets, honest math, and longer time horizons mean for founders in 2026.

JP Morgan Eye on the Market Outlook 2026. Their view:

• Position for the A.I. revolution - The technology is transformative. Capture the upside while avoiding the risks of over-exuberance.

• Think fragmentation, not globalization - A reconfigured economy prioritizes resilience over efficiency. Identify opportunities where security, energy and supply chains converge.

• Prepare for inflation’s structural shift - Inflation is higher and becoming more volatile. Plan with intent to maintain purchasing power and diversify into real assets.

a16z: The Power Brokers: a16k word essay on a16z on the day of a15b fundraise from Not Boring. Take this as marketing material, of course, but it’s an interesting set of information placed in a powerful narrative with enough capital and success that it cannot be ignored.

One firm has now raised 18% of all dollars going into the asset class in 2025, which means everyone else needs to be clear about what investment game they are playing and how they are going to win. Worth noting the dynamic of capital concentration is also true in PE as the FT notes: The 10 biggest funds took nearly half of investment capital as concentration increases for established.

Below is some of a16z's historical performance as reported; it is impressive, but in the context of the broader technology market, you should not feel FOMO. Plus, as we all know, past performance does not guarantee future returns.

Zach Rollins has the right take:

Two things are true regarding A16Z's performance that highlight what they've been able to accomplish and the challenge of allocating to venture over the last decade.

1. It's really hard to get to 3x net DPI in venture. You'll be in business for a long time as an investor if you can consistently deliver this to your investors. Kudos to their team here.

2. AH IV gross performance is roughly in line with the performance of $QQQ over the last decade yielding meaningful net underperformance. They'll need some real value uplift in the portfolio to catch the index on a net basis for the equivalent time period.

Now, what if you aren’t a16z? Someone told me about a long-time VC who is having an epic industry crashout. Not a tier one but top-tier. Here’s what Grok said about them: [name] is a top-tier seed specialist — excellent reputation, strong track record, and very competitive in its niche — but not a classic Tier 1 VC in the broader industry hierarchy.

This person was a successful founder before entering venture 10 years ago and was upset that they hadn’t made money over the last 10 years, that it was a total waste of time, etc. More of these conversations are happening behind the scenes. Much of the industry (particularly large funds!) have to make a case for investment beyond just returns. Maybe it’s networking, taking a view of the future, or diversification for its own sake.

Obviously The Future: Reviewed

Avalanches can take a while to play out, and there are a variety of investing opportunities and entry points along the way. I’ve started this year by refreshing the past, with the goal of publishing updates. In the meantime, here are a few thoughts from the oldest pieces.

Citizens Vote with Their Feet, an essay I wrote in 2020, is mostly about the wealthy's ability and willingness to move across jurisdictions when prompted by government dysfunction.

The news of the last few weeks has been the exodus of several of California’s wealthiest residents in response to a proposed wealth tax on unrealized capital gains. More to say here, but I think Mike Maples made a good point about the bigger issue, which is the declining predictability of the rule of law - and not just in California. This trend has been gaining steam across the board and can also be seen in capital leaving the UK and Norway for similar enacted policies:

Psychedelics as Medicine, another essay I wrote in November 2020. At the time, I invested in a venture fund focused on the sector and have since received >1x DPI from their early bet in Gilgamesh.

Today, we may be on the brink of the next revival of this thesis. A lot has happened in five years, and this view has become more mainstream (one million people watched Bryan Johnson livestream a recent Shrooms trip, which is probably a mixed help). Although the political winds in the White House are also mixed (from Psychedelic Alpha), many believe the FDA will support more approvals in 2026.

This time, you might not need to be a private investor to participate. Compass Pathways ($CMPS) and MindMed ($MNMD) are both publicly traded plays that experienced a massive hype bubble five years ago and have risen slowly over the past year.

**Obviously, this is just an idea worth maybe looking into. I’m not advocating any specific action

Weeklies: Selfie & Song

Selfie: Energy Dominance, Carbon Capture, Korea <> USA

This year started strong with a groundbreaking celebration for Wabash Valley Resources, bringing together our major financing, government, and supplier partners. WVR is a clean ammonia renovation project in Indiana. A friend of mine from Morgan Stanley commodities creatively developed the opportunity, and I’ve been an investor since 2018. I increased my stake and role as a board member in 2025 as we were navigating the final approval process for a DOE Loan. Being a sane, trusted investor with enough liquidity and insider knowledge to move fast creates opportunities.

Through this project, I’ve seen firsthand what it takes to work with the government at every level, the details of financing structures, the importance of international partnerships to rebuilding America, and the impact of various policies on inputs and supply chain issues. If you are excited about any of the hardtech ‘atoms over bits’ mega trends - often called names like American Dynamism, Energy Revolution, On-shore Manufacturing, Supply Chain Resilience, Reindustrialization - the details of implementation matter significantly.

Song: Spin the Wheel

Here on YouTube.

I cannot recommend Arcane enough. It’s a two-season show based loosely on characters from the League of Legends game. Riot Games, the producer, spent a ton of money on production, and it shows. Arcane received numerous awards, including multiple Emmy Awards for Outstanding Animated Program and several Annie Awards, making it one of the most awarded animated series. The show has been praised for its animation, storytelling, and character design, solidifying its status as a significant achievement in animated television.

There are a lot of lessons about society building, the distribution and use of technology, and even some psychedelic spiritualism.

Spin the Wheel is one song from season two that flashes through a series of alternative realities based on different outcomes in the past. I like the sentiment about enjoying the journey.

Over the past year, I would often catch up with my friend Arvind about his work with Astra School (he’s now joined forces with Alpha School and is scaling their GT program, which is exciting!) and various ups and downs across the portfolio. And the way to tell the various updates is through the spinning of a ‘wheel of fortune.’ Sometimes you’re up, sometimes you're down, sometimes what you think should be a win turns into a loss, and an outcome you didn’t want turns into a massive win. The key is just to stay alive long enough to keep spinning the wheel and moving upward.

“Spin the Wheel” by Mick Wingert, Arcane

Wait 'til your brothers and your sisters, see where you been
And if you loved the journey more than the end, go ahead
Just turn that hourglass around and count to ten
This ain't goodbye no more
Nah, it just began

Thanks for reading, friends. Please always be in touch.

As always,
Katelyn

Hope your New Year’s celebrations were enjoyable and resolutions remain on track.

I’ll briefly acknowledge (and be cautiously optimistic about) the international environment with regime change in Venezuela and likely in Iran. Time will tell, and others can comment on those topics more completely than I will.

Apologies in advance for the lack of graphs in this edition.

Today's Contents:

• Sensible Investing: Trends

• Weeklies: Selfie & Song

Sensible Investing

Carta State of Startups 2025 (PDF). 175 pages of data and analytics on all things startups. This is a must-browse for anyone in the industry.

Endowment Eddie probably had the best VC Predictions list.

5) Early reads from AI are inflationary not deflationary. CEOs are reticent to do layoffs and the ability to trust AI remains low resulting in humans and AI duplicating efforts. We see much more recognition from enterprises that they aren’t ready to fully utilize AI due to data quality and data infra.

This fits with my core belief that 2026 is an AI-implementation year for the enterprise. A lot of new tools have hit the market; now, they need to be absorbed and used consistently to drive productivity.

Dan Wang’s 2025 Letter. It’s a consensus recommendation with the Twitterati, but they aren’t usually wrong. Wang published Breakneck: China’s Quest to Engineer the Future. It’s a long letter but worth a read. I like the format.

I appreciated his observations and questions about podcasts:

Again, who is listening to all these podcasts? I don’t much look at my book sales, but it doesn’t feel like podcasts move the needle. And a book might create a lot of social media buzz, with all the right people saying all the right things, but Twitter too doesn’t drive sales. It was two platforms that moved a lot of my books: television and radio.

What is Instagram’s Adam Mosseri Saying in His Year-End Memo?

Individuals, not publishers or brands, established that there’s a significant market for content from people. Trust in institutions is at an all-time low. We’ve turned to self-captured content from creators we trust and admire.

We like to complain about “AI slop,” but there’s a lot of amazing AI content. Even the quality AI content has a look though: too slick, skin too smooth. That will change—we’re going to see more realistic AI content.

Authenticity is becoming a scarce resource, driving more demand for creator content, not less. The bar is shifting from “can you create?” to “can you make something that only you could create?”

2025 Letter from StoneRidge: Great use of excellent and not overused quotations. The founder clearly writes this because the voice is strong.

“Never was a finer canvas presented to work on than our countrymen. All of them engaged in the pursuits of honest industry, independent in their circumstances, enlightened as to their rights, and firm in their habits of order.”

— Thomas Jefferson in a letter to James Madison, 1796

But the best part is the riff near the end about Bitcoin, its use case in Venezuela, and Ross Stephen’s personal connection to the country's human rights cause. Interesting:

In his 1978 essay The Power of the Powerless, human rights activist Václav Havel – leader of the Velvet Revolution, first President of the post-Communist Czech Republic, and HRF’s first Chairman – makes the searing point that though authoritarians can mobilize their heavy artillery of terror, torture, imprisonment, and persecution, they are not equipped to fight the asymmetric battle between lies and truth.

Powered by bitcoin, Machado channels her people’s truth. Venezuela will soon be free, a human rights miracle worth celebrating to tears.

Venezuelan regime change can also be an asymmetric truth domino – the animating spark for revolutionary excitement, heroism, and power among the powerless – that then topples the other nearby dictators in Cuba and Nicaragua. That cumulative outcome would be of immense significance to America, and that possibility has been hugely motivational to me. For American global primacy to continue, which it must, this must be the Western Hemisphere’s century. No authoritarians allowed in the neighborhood.

Video might kill the radio star, but AI is not going to kill teachers.

Here are two good reads on the subject:

Why Most Education Apps Fail. The non-negotiable conditions for learning don’t care whether instruction comes from a teacher, a parent, or an algorithm, but they do care about certain invariants. He’s going to make the same point as my observation below, but sound super fancy and technical.

Instruction has invariants too. There are non-negotiable conditions for learning to occur reliably, conditions that emerge not from pedagogical fashion but from the architecture of human cognition itself. Most educational apps violate these invariants routinely, systematically, and, one suspects, knowingly. They do so because compliance with these invariants conflicts with the metrics that drive their business models: session time, completion rates, user satisfaction, and the holy grail of engagement.

What the Data Actually Told Us, on a KIPP school implementing AI across the school. She spends the first section defending her super-practical research methodology since it’s not from a formal academic research team, which should tell you a lot about the congealed mediocracy in the education research field.

Anyway, her whole piece is excellent and makes a series of thoughtful and poignant insights, which I know several readers here will appreciate.

My own little experiment. Over the holidays, I tested a phonics reading app with my various nieces (ages 2.5, 3, 5). It was a helpful reminder of reality:

1. Everyone gets impatient and starts guessing by tapping and swiping. This happens pretty quickly. “Engagement” and “learning” trade off. Always. You are not going to learn or test conceptually by tapping.

2. Each time, the mother was monitoring nearby and a bit skeptical. A good reminder of why this category is a terrible business: you have to sell to parents, but the kid needs to like it, and parents have a lot of thoughts (and feelings).

3. You have to have a learning facilitator (me in this instance). Stay on track, encouragement. Stop the mindless swiping. Show you care. I don’t think a nanny with limited English skills could do this job. They probably don’t know the words or the sounds well enough.

Weeklies: Selfie & Song

Selfie: HNY friends.

Happy New Year! Ringing it in with my favorite person at one of my favorite restaurants (King). Hope we all have a great 2026.

Song: Video Killed The Radio Star

Here on YouTube.

New Year’s Eve 2025, MTV terminated its 24-hour music channels completely. The final broadcast element was ‘Video Killed the Radio Star’, which was also the very first music video shown by MTV on August 1, 1981.

MTV defined media culture in the pre-Internet age, but it’s out with the old and in with the new!

“Video Killed The Radio Star” by The Buggles

Wait 'til your brothers and your sisters, see where you been
And if you loved the journey more than the end, go ahead
Just turn that hourglass around and count to ten
This ain't goodbye no more
Nah, it just began

Thanks for reading, friends. Please always be in touch.

As always,
Katelyn

I love this time of year as a window when we can collectively step back, review current fact patterns (including technology, demographics, economics), update trend lines, and make predictions or decisions about where to focus. I’ll be doing that over the next week, as many others online are, which should be fun.

Several people have asked me about the multi-billion-dollar Minnesota-Somali fraud fiasco that has gone viral over the last month, culminating in a video released this week from a YouTuber conducting site visits (with 86 million views and growing).

First, whatever you think, the situation is probably much worse.

Second, long-standing citizens of Minnesota feel bewildered and unempowered. Helpless. This situation has been percolating for years, and few have been held fully accountable aside from the 68 convictions from Feeding Our Future. As many have noted, Minnesota has a culture of kindness and generous social benefits. Having your goodwill exploited and manipulated is deeply uncomfortable and upsetting for Minnesotans. Few will go on record saying that, but they are thinking it.

Third, almost all fraud in the public sector happens at the ‘last mile.’ You find it through unannounced site visits, not spreadsheets, as the YouTuber did. This is Management 101. I wrote earlier this year about my experience tightening up service delivery in Ethiopia, but there are dozens of similar instances I’ve encountered.

As a native Minnesotan, it’s frustrating, and the feeling of betrayal is real.

At least there is now a spotlight on this issue. And I won’t let it keep me from having a Good Day.

Today's Contents:

• Sensible Investing: Trends

• Extra Fun Stuff

• Weeklies: Selfie & Song

Sensible Investing

The Prison Of Financial Mediocrity. This piece has gone viral on X. It tours through themes we’ve covered over the last 18 months, e.g., behaviors of GenZ, the non-existence of career pathways, and the death of the American Dream. That said, it is well done and is worth a browse. One thing I think people often miss about the decline of the ‘knowledge worker’ or ‘white-collar class’ is that the globalization of talent has made the job world dramatically more competitive.

Interesting statistic: Legal sports betting revenue went from $248M in 2017 to $13.7B in 2024.

I read this remark recently: We once dreamed of the future, now we dream of the 90s. Or as my friend said, “Can we just go back to the West Wing?”

Periodic reminder that nobody knows anything, and if/when institutions start selling, they won’t tell you until they’ve already sold.

Brutal Year for Stock Picking Spurs Trillion-Dollar Fund Exodus in Bloomberg

• A small group of tech super stocks accounted for an outsized share of returns in 2025, extending a pattern in place for the better part of a decade.

• Around $1 trillion was pulled from active equity mutual funds over the year, marking an 11th year of net outflows, while passive equity exchange-traded funds got more than $600 billion.

The Last Bet. Masayoshi Son’s $500 Billion Wager on the Architecture of Intelligence. Interesting that this happened.

One of the biggest stories this year has been the surge in precious metals. When all three precious metals move together at this scale, it signals institutional capital hedging against currency debasement and long-dated sovereign risk, not chasing returns.

I’ve certainly been chirping about gold, but the metal of the month and year goes to silver.

Why Silver Price Has Been Surging Even More Than Gold (in Bloomberg but dated to early Dec.) The recent four-sigma price jump this week (see chart below) is due to China, the second-largest supplier, announcing it is halting all exports.

The best source to learn more about the surge in silver is Alexander Campbell’s blog, which has been outlining the silver trade for the past year, starting with this post, "The Silver Squeeze: How Solar Threatens a Decade of Deficits” and most recently “10 Silver Days of Christmas.” Campbell was previously a commodity trader at Bridgewater. TL/DR: Supply of silver is basically fixed, and demand is surging from solar panel production.

However, let’s not lose sight of the dollar-debasement trade, with all the metals and gold in the lead.

As X account Finacelot notes, the Dow Jones-to-Gold ratio has broken through a level seen only 3 times in history: 2008, 1973, and 1929.

Jevons Paradox for Knowledge Work from Aaron Levin on X.

Of course, many are wondering what happens to all the jobs in this new world? The reality is that despite all the tasks that AI lets us automate, it still requires people to pull together the full workflow to produce real value. AI agents require management, oversight, and substantial context to get the full gains. All of the increases in AI model performance over the past couple of years have resulted in higher-quality output from AI, but we're still seeing nothing close to fully autonomous AI that will perfectly implement and maintain what you're looking for.

The Impact Mafia: How the Elite Invented a Way to Feel Good While Doing Nothing. Wow, Robert Rubenstein just said a lot of truth. Nice.

Weeklies: Selfie & Song

Selfie: Power Mom, System Steward, LatAm Infrastructure

Thought I’d end the year remembering my dear friend Mariana’s power mom: Leonor Montoya Álvarez.

Leonor was an incredible leader over the last 40 years in Colombia's banking and financial sector. She served as the first female director of Fogafin, a regulatory agency for Colombia's financial sector, in 1986. She was the Vice Minister of Finance during the presidential term of Belisario Betancur in the 1980s, when she was just 28 years old. If you click the link, you can read about her many accomplishments, managing socialized financial entities through fraud and achieving a successful privatized outcome.

She was a key defender of privatization and neoliberal doctrine.

In an article published in June 1990 in the magazine Debates on the economic situation, Leonor Montoya Álvarez analyzed the financial situation in Colombia at the beginning of the nineties and the need to implement privatization policies for national and state-owned companies. According to her, the deep economic crisis that the country went through at the beginning of the eighties caused governments during that period, from the presidency of Betancur to the mandate of Virgilio Barco, to begin to use policies aimed at decentralizing the state, through the concession of public service companies to the private sector, in theory to alleviate the state’s fiscal burdens.

Sadly, Leonor passed away this time last year. Her legacy lives on, but she is sorely missed. Mariana, my good friend for over 15 years, has always been an astute infrastructure investment executive, and now she is a senior investment officer at the IFC, financing major projects across Latin America.

Song: Good Day

Here on YouTube.

Released in 2008, "Good Day" is recognized for its uplifting message and catchy hook, making it a fan favorite. The song reflects the group's ability to create feel-good music that resonates with listeners.

I love all the comments below the YouTube video:

It's impossible to be sad listening to this song.

My 44 year old daughter died March 17. She played this song every morning when she put her makeup on. I listen to it daily now in her memory.

This song is keeping me clean today. Thank you.

I’ve been through the amputation of half my right foot. I’m in hospital fighting to save my leg and life right now. Thank you for this song. It always picks me up.

“Good Day” by Nappy Roots

We're gonna have a good day
And I finna worry 'bout what nobody say
I'm still above ground that's the reason I pray
Got my car cleaned up now I'm ready to play

Thanks for reading, friends. Please always be in touch.

As always,
Katelyn

Merry Christmas, Happy Hanukkah, and enjoy the holiday season however you happen to celebrate.

It’s nice how sometimes the calendar falls just right, and the holidays align with weekdays, making it easy to keep your routines going.

Below are a few end-of-year reads, too.

Today's Contents:

• Sensible Investing: Trends

• Weeklies: Selfie & Song

Sensible Investing

Luminar Files For Bankruptcy. Following up on this from when it was highlighted in DSw.256. A story from the SPAC era.

How Warren Buffett Did It. The most successful investor of all time is retiring. Here’s what made him an American role model by Seth Klarman. One last Buffett read, I promise.

The Role of Doctors Is Changing Forever. Some patients don’t trust us. Others say they don’t need us. It’s time for us to think of ourselves not as the high priests of health care but as what we have always been: healers. A thoughtful reflection in The New Yorker.

2025 LLM Year in Review by Karpathy.

The Decline of Duolingo Should Be a Warning of the Failings of AI. I hate to pick on Duolingo again, but I‘m going to. It’s just the ‘enshittification’ thesis.

In a market that demands constant economic growth, Duolingo did what every other once-hot business did, even as its loyal users revolted: it made its platform actively worse. The exhausting and futile fight for perpetual profit, for ever-growing customer bases and opportunities for growth beyond reason, requires an active contempt for your consumers. It expects you to willingly swallow whatever slop is flung your way because they believe you’ll stick around no matter what. You put in all those months of lessons, and that damn owl has berated you into maintaining an impressive streak, and you wouldn’t want to lose it, would you?

On that note, here is the latest EdTech Market Overview from Oppenheimer.

2026 Food Industry Predictions. Not my space, but interesting to read.

13 2026 Market Outlooks from leading financial institutions. Compiled by Brett Caughran.

This is the list from Apollo, which I think is broadly correct. #5 is the most significant risk for startups that saw hypergrowth in 2025.

1. The 45-Million-Person Headwind Student loan payments restarted. Nearly 20% of the population just saw their disposable income shift. The "spend-at-all-costs" era is cooling.

2. A Widening K-Shaped Economy We're not in one economy - we're in two. Asset owners thriving on record highs. Lower-income brackets are hitting savings exhaustion.

3. Student Loan Delinquency Spike. It's not just about payments. It's about default risk rippling into auto loans and secondary credit markets.

4. The "One Big Beautiful Bill" Starting Jan 1, 2026: 100% immediate deduction on capital expenses. Projected to boost GDP by 0.9% alone.

5. AI Adoption Plateaus Hype cycle over. Adoption rates flattening as companies shift from talking about AI to the grind of actually integrating it.

6. The 60% Capex Concentration Mag 7 now spending 60% of operating cash flow on AI infrastructure. The entire market is betting on AI ROI.

7. Zero Growth in Non-AI Capex outside the AI arms race? Flat. Traditional industries are getting capital-starved as every spare dollar chases GPUs.

8. The S&P 7 vs. The S&P 493 Margins are expanding for tech giants. Declining for everyone else. If you're not an AI provider, you're facing a squeeze.

9. Data Center Construction Slowdown Physical limits reached. Power grid constraints and land scarcity are slowing builds. Power generation is the new bottleneck.

10. The 2026 Maturity Wall Massive wave of corporate debt coming due. A refinancing supercycle is moving billions from banks into private credit.

11. The Death of 10-Year Duration "Higher for longer" is here to stay. Investors are fleeing long-duration bonds for floating-rate private credit and short-duration paper.

12. Institutionalization of Sports No Longer "Alternative." Sports is now a $2.5T institutional opportunity with recession-proof cash flows.

13. Foreign Demand for US Yield Despite trade tensions, foreign capital is flooding US private markets. The US remains the safe haven for AI-linked tech and quality yield.

14. Brief Stagflation Risk The Fed is watching a 1970s-style scenario: tariffs keeping inflation sticky at 3% while growth slows. Active management > passive indexing.”

Crypto is Dead essay on X. I broadly agree with this take.

“Crypto” as a self-contained world is dying.

The technology is about to dissolve into everything else, and the people who mistake the old bubble for the end state are going to get left behind.

So why am I still bullish?

Because that death is the gateway to something bigger than the industry we’ve been defending.

Weeklies: Selfie & Song

Selfie: Nerd Dinners, AI & Marketplaces, Dota 2

It’s been a California week for me, and I spent time with my dear friend, Andrey Fradkin “Dr. Drey”, and joined one of his dinners on Economics and AI. Our theme for the evening was the labor productivity effects of AI - in particular, when and how we might see telltale signs of hyper-productivity in software development. We had an initial discussion of this paper on coding agent productivity effects using Cursor data, which shows that more experienced developers were more productive using Cursor than those less experienced.

My contributions to the discussion were about the continued risk of de-skilling and the declining opportunity for people to ‘learn and earn’ as they develop their careers, and instead, the expectation of immediate productivity. Both are hard to fix and have long-term consequences.

I’ve been friends with Dr. Drey for almost two decades; we were Economics majors together in college and have been friends ever since. He hasn’t left the profession and is now a tenured professor on sabbatical with Amazon. He is the leading thinker on digital marketplaces and AI and has a popular economics podcast called Justified Posteriors. It’s dense material even for nerds.

His recent paper has ‘blown-up’ for its astute framing and initial data on the competitive dynamics for various LLMs (see below) and was re-tweeted by the Chief Scientist at Google.

The Emerging Market for Intelligence: Pricing, Supply, and Demand for LLMs. How much does intelligence cost? How concentrated is the AI market, and is it winner-take-all? When prices fall, how does demand change, and is there a Jevons effect? These questions matter, but actual market data has been hard to come by. We use data from Microsoft Azure and OpenRouter to find out.

Song: What It’s Like

Here on YouTube.

A hit song from the late 90s about having empathy for people experiencing different hardships. Thought it was a nice holiday message without being an explicit Christmas song.

“What It’s Like” by Everlast

I’ve seen a rich man beg, I’ve seen a good man sin, I’ve seen a tough man cry
I’ve seen a loser win and a sad man grin, I heard an honest man lie
I’ve seen the good side of bad and the down side of up and everything between
I licked the silver spoon, drank from the golden cup and smoked the finest green

Thanks for reading, friends. Please always be in touch.

As always,
Katelyn

Hope you are surviving (and thriving) as we enter the holiday season. Two more weeks left in the year, and then we get to start again!

Today's Contents:

• Sensible Investing: Trends

• Decline of Reading - and Thinking

• Weeklies: Selfie & Song

Sensible Investing

Is It A Bubble? Howard Marks Memo. Nothing new here, other than the postscript reflection on the potential for social unrest from AI disruption. Nonetheless, the memos are a helpful distillation to read through.

Private Credit: Fact vs. Fiction. PPT from Apollo. General overview, but clear. Asset management's largest firms serving individual investors want to find a way to provide access to private-market opportunities, so we will continue to see this sort of public marketing material.

Thread to Understand GenZ: The “DoorDash lifestyle” is an artifact of three massive structural shifts that older generations don’t see because they didn’t grow up inside them.

• The marginal cost of money changed for Gen Z

• Consumption is now social currency

• The middle class collapsed, but lifestyle costs decoupled from income

2025: The State of Generative AI in the Enterprise from Menlo Ventures. A lot of what is called ‘Enterprise AI’ is SaaS 3.0. So you could just view this as series of software updates.

Alphabet Poised for Another Paper Gain as SpaceX Valuation Jumps. SpaceX saw a big valuation jump, and Elon said it will go public at a $1.5 trillion valuation in 2026. We’ll see, but anyway, Alphabet (Google) has significant exposure to the company, so you probably do too. It’s a reasonable take that the lowest-cost exposure to the best private tech companies might come through the most prominent public tech companies.

Bloomberg Jealousy List: 2025. One of my annual favorites. Curated list of stories journalists at Bloomberg wish they wrote.

The Decline of Reading… and Thinking

This year (and last), I examined the future of the reading category. While I have still mostly concluded from a venture point of view that it remains uninvestable, there were certainly interesting (and bizarre) findings. Here we go.

The chart above has made the social media rounds over the fall, along with this essay: The Dawn of the Post-Literate Society, and The End of Civilisation. It’s probably the most liked, most shared publication of the year - at least on a medium meant for reading.

“To engage with the written word”, the media theorist Neil Postman wrote, “means to follow a line of thought, which requires considerable powers of classifying, inference-making, and reasoning.”

As Postman pointed out, it is no accident that the growth of print culture in the eighteenth century was associated with the growing prestige of reason, hostility to superstition, the birth of capitalism, and the rapid development of science. Other historians have linked the eighteenth-century explosion of literacy to the Enlightenment, the birth of human rights, the rise of democracy, and even the beginnings of the Industrial Revolution.

The world as we know it was forged in the reading revolution.

Even the NY Times has now written articles on the decline of reading full books in college.

Most people blame the decline in reading on the rise of smartphones and social media. Several people have shared an essay titled "Everything Is Television" with me, which expresses that view with data. It’s preaching to the choir to proclaim the value of reading here. This is certainly not an overly visual publication.

And, often, poor literacy starts early. As we know, reading scores in U.S. K-12 have been declining. I’m not even going to get into how we know that teaching reading using phonics is highly effective. Yet, some members of the education research establishment still contest this and got their preferred policies implemented, leading to devastating learning loss.

You can follow this actively on my friend Niels Hoven’s X feed. Niels founded a company called Mentava that teaches kids to read early on a highly accelerated basis. He (incredibly!) charges $500/month for the app, and many parents love it! Of course, you could do all the exercises using flash cards or books, so there are low-cost methods, too. What’s sadly unsurprising is how much hate he gets for providing this service. This is one of the problems.

All this leads to low adult literacy - 50% of Americans read below a sixth-grade level. Most people I talk to find that unbelievable. But mostly, it’s difficult for anyone who reads at a college level or above to comprehend what it’s like to go through life without reading (or thinking) very deeply.

Literacy rates on social media are low.

When I counsel founders and friends on internet publishing, the first thing I do is paste the text into Hemingway, a text editor that tells you the grade level required to read it and highlights the hard-to-read and very hard-to-read sentences. The lower the grade level, the better! Ideally, as you can see from the data, grade 7 or below.

Here are a few examples:

I recently read the latest Salley Rooney book, Intermezzo. It’s about two brothers who have recently lost their father. Both are inhabited by grief and self-loathing. Half the book is written in a stream-of-consciousness style, perhaps intended to resemble Gen Z speak. By the end of the book, these paragraphs were hurting my brain. According to Hemingway, this is Grade 4.

Swings his legs out of bed finally and plugs his phone into the wall. In and out of the shower, thick soft bath towel, wet footprints on the kitchen tiles making breakfast. Late morning light through the Turkish curtains. After eating he rinses the dishes, hers also. His clothes hanging over the back of the chair in her room. Clean underwear in the zip pocket of his bag. Powers up his phone and pulls his socks on waiting. Home screen finally. Lifts the device and starts scrolling through notifications. Work mostly. New text he sees from Janine’s number. Strange. He thumbs to open.

I’ve seen a lot of hard-to-read prose from friends looking to communicate broadly but missing the mark. An essay a friend posted on LinkedIn about the destruction of the rule of law (excerpt below) took the cake. The previous record was a 12. This is Grade 16.

Dominic Caldwell frames the crisis through coordination game theory. Drawing on Przeworski’s “paper stones” metaphor and Pinker’s common knowledge framework, he shows how rule of law isn’t force but recursive trust—”I know that you know that I know” the rules will be enforced. Break that loop, and constitutional democracy becomes unenforceable theater. The Caldwell paper identifies four failure cascades already underway: institutional decay (unpunished norm violations signaling enforcement has stopped), elite defection (judges and generals calculating that resistance is futile), preference falsification (citizens staying silent when they can’t gauge real opposition), and crisis exploitation (emergency powers becoming permanent). Karthik Subasri takes this framework and does the math.

But some segments of reading have actually expanded!

Specific categories of reading are going way up. In fact, Barnes and Noble has opened 60 new locations this year; BookTox and Romantasy (Romantic Fantasy) are driving it. Austin has a dedicated bookstore for Romantic Fiction - called Flutter.

“A Uniquely Portable Magic”: Why Book Publishing Has Hope. A report from Bain that shows people are reading less, but those who read focus more and are willing to pay for the good stuff—if you give it to them. Some of the venture-backed innovations in this category include Bindery Books, books chosen for publication by ‘tastemakers.’ Another is 831 Stories, a millennial career-woman-focused romantic fiction publisher. In these stories, like Big Fan, which I read as part of diligence on the company, you get lines like this “I’m thirty-five, not twenty-two, I want to tell her. I am too old to be patronized like this and too young to have bought into Lean In. I don’t just have potential; I have success.” Yes, this is inside a romantic fantasy book.

And, yes, I almost fell out of my chair laughing. They certainly have a real niche, but the larger market is for - and this is truly bizarre - books in the romantic fantasy category or ‘monster bait romance’ like Morning Glory Milking Farm.

**Warning** Once you read this verbatim book’s description, it will be something you won’t be able to unsee.

Violet is a typical, down-on-her-luck millennial: mid-twenties, over-educated, and drowning in debt, on the verge of moving into her parents’ basement. When a lifeline appears in the form of a very unconventional job in neighboring Cambric Creek, she has no choice but to grab at it with both hands.

Morning Glory Milking Farm offers full-time hours, full benefits, and generous pay with no experience needed . . . there’s only one catch. The clientele is Grade A certified prime beef, with the manly, meaty endowments to match. Milking minotaurs isn’t something Violet ever considered as a career option, but she’s determined to turn the opportunity into a reversal of fortune.

Morning Glory Milking Farm was rated 3.6 by ~60K ratings on Goodreads. Big Fan was rated 3.75 by ~15K. Both book types are clearly widely distributed and resonate with many readers, although, of course, the bigger market is the most racy. More than the bestiality element, the fact that this story is contextualized in a hopeless economic situation of ‘the typical millennial’ with social work grad-student debt is most interesting. That’s a real issue.

Of course, as investors, the key question is, will it all be AI slop in a few years? My prediction: Not all, but a lot. Indeed, the monster bait romance category.

Good news! Some people are still reading a lot. Bad news! It’s basically porn for women.

Rough trend. How bizarre.

Lots more to unpack. And don’t worry, we’ll get to Math soon.

Weeklies: Selfie & Song

Selfie: Peerage, College Friends, System Stewards

This newsletter celebrates and highlights good stewards of our societal systems: every institution is only as good as the people whose judgment and integrity lead the way. Since it’s the holiday season and it’s good to be positive, we will end the year by featuring several of the best leaders that I have the privilege to know.

This week, we congratulate *Lord* Michael Barber, who was named on Wednesday to a life appointment in the House of Lords by the UK King and the Prime Minister’s Office.

David Pitt-Watson, Michael’s college best friend, was also granted peerage. David was a critical informal advisor to us as we built Delivery Associates over the years. He was also the long-time manager of Hermes Fund Managers (now Federated Hermes) and the commercial director of their newly formed shareholder activist funds:

These funds, known as the Focus Funds, grew to be the largest of their kind in Europe. Pitt-Watson became head of the funds and a director of Hermes in 2004, where he founded its Equity Ownership Service, a service to pension funds which aims to ensure that shares they own are used to promote good management practice and sustainable investment. By 2025, HEOS advised on over $2,000bn worth of assets. Hermes’ interventions in companies have led to the successful turnaround of some of the country’s largest companies.

Big congrats to David & Michael! Makes me hopeful for the future of Britain—also, inspiring life goals for friendship and career achievements.

Song: How Bizarre

Here on YouTube.

Super popular song released Dec 1995 (30 years ago, friends!).

It’s an allegory for the unpredictability of life’s journey. The upbeat tempo contrasts with the narrative's serious undertones, creating a playful yet reflective atmosphere.

The song conveys vivid imagery, contrasting perspectives, and a sense of adventure to convey the message that life is a mix of the bizarre and the ordinary, and that we should embrace its unpredictability with a sense of wonder and curiosity.

What a gem! Enjoy!

“How Bizarre” by OMC

Pele yells, “We’re outta here”, Zina says, “Right on”
Making moves and starting grooves before they knew we were gone
Jumped into the Chevy and headed for big lights
Wanna know the rest? Hey, buy the rights

Thanks for reading, friends. Please always be in touch.

As always,
Katelyn

If you’ll allow me, I would like to take a victory lap. Back in August, I wrote to you about the grift economy (You Get What You Give) before the welfare fraud scandal in Minnesota went national last week. We are just at the beginning of untangling this, and I predict it will remain a feature of much discussion in 2026 as we figure out what ever happened?

Today's Contents:

• Sensible Investing: Trends

• Weeklies: Selfie & Song

Sensible Investing

Be Careful with Late-Stage SPVs. Matt Grimm (Anduril) goes off on a Fund Manager/Broker offering an investment opportunity in Anduril. I’m on a ton of mailing lists, and I was offered this SPV and see ones like it ALL THE TIME. Stay safe out there, friends.

Social Signals 2025 with 441 slides on social media trends. Fun browse.

I liked this slide on Duolingo. I hate to say ‘I told you so,’ but I did! Sort of. In the process, I lost the only Guatemalan reader I cared about.

Luis, you are welcome back anytime!

Is Sentiment Shifting on OpenAI? This chart is from a Deutsche Bank report, posted on X and analyzed by FT Alphaville.

Here’s the theory. Proprietary large-language models like ChatGPT turn out to be not that great for GDP. Core technologies still have value, but their developers’ individual business models marry persistently high operating costs with shallow commercial moats and their innovations quickly become commoditised.

This is fine. Commoditisation is for the common good. The result is better machine learning for all. Companies will die, but the spoils of more than $1tn in capital expenditures can trickle down equitably to a nation’s underfunded labs, studios, factories and faculties. We won’t get Artificial General Intelligence, but we might get improved weather forecasting and some new antibiotics.

People will start running the models locally without paying infinite tokens to the big models. Below was posted to X.

Oracle Credit Fear Gauge Hits Highest Since 2009 on AI Bubble Fears in Bloomberg.

The rising cost of default protection reflects investor angst over the gap between the massive investments already made in AI and when investors can expect to see productivity gains and an increase in corporate profits.

The Tragic Algebra of the MAG7: We Ran Michael Burry’s Math from Quant Signals.

The Takeaway:

1. Nvidia is the trap. The spread between “Street P/E” and “Real P/E” is massive because their buybacks are 100% defensive.

2. Microsoft & Meta are inflated. They look cheap on GAAP, but once you strip out the SBC offset, they trade at a premium.

3. The Surprise: Google (Alphabet).
   Burry noted that Alphabet’s Real Earnings are actually 102% of GAAP. Their buybacks are so massive that they overpower the dilution. Under Burry’s math, Google is the only honest stock in Big Tech.

Vibecession: Much More Than You Wanted To Know by Scott Alexander. This is an incredibly long piece covering many graphics and analyses from this newsletter, without any definitive conclusions. This seems like a response (but not explicitly) to Michael Green’s recent viral and provocative posts about why people feel economically poor (part 1 here, part 2 here). I thought Green did a good job examining various assumptions, and quibbles about exact numbers are beside the point.

TL/DR: Many people feel the economy is bad or their situation isn’t good, but the current economic indicators suggest that’s not the case.

No one really knows.

Weekly Grift: Disabilities in HigherEd

Accommodation Nation in The Atlantic. Sign of the times, really. Play the game or be played, unless we decide to care about collectively enforcing shared judgment of ‘the rules.’

Accommodations in higher education were supposed to help disabled Americans enjoy the same opportunities as everyone else. No one should be kept from taking a class, for example, because they are physically unable to enter the building where it’s taught. Over the past decade and a half, however, the share of students at selective universities who qualify for accommodations—often, extra time on tests—has grown at a breathtaking pace.

- At Brown and Harvard, more than 20% of undergraduates are registered as disabled
- At Amherst: more than 30 percent
- At Stanford: nearly 40 percent

Weeklies: Selfie & Song

Selfie: Hazel Grace ‘HG’, Madison Park, & Investing

Feeling grateful this year for getting to spend time and work with one of my favorite people: Hazel Grace. HG is a former founder turned angel investor. She defines the modern woman shaping both the investing and social scene in Seattle. Recently, I spent 36 hours with HG on her home turf. Our time included lunching with the mayor, downloading the latest gossip from the Seattle Tennis Club, hosting a tech ladies’ brunch, and walking the new Seattle waterfront promenade (which is super lovely, much nicer than expectations).

The ultimate hostess, Hazel, knows EVERYONE. What they are up to, where they are going, what they are interested in, and what they can be convinced to do. She’s a sharp judge of people, quickly assessing and positively resolving social situations. This is a superpower, and she makes it look effortless. Hazel is kind, welcoming, and works every day to make her community better. I’ve learned a lot from her and am glad to call her a friend.

Song: What Ever Happened?

Here on YouTube.

“Whatever Happened?” is a question asked about many famous figures who have dropped out of the public eye.

This song is about oscillating feelings between acquiescence to the eventual decline in fame and defiance to preserve the present.

With the 24-hour news cycle, there are so many stories, narratives, personalities that come to prominence and then, poof, are gone, never to be heard of again, and we are left with ‘whatever happened?’ I think the whole story is far more interesting (and relevant for learning) than the initial glimpse.

“What Ever Happened?” by The Strokes

I wanna be forgotten
And I don’t wanna be reminded
You say, “Please don’t make this harder” 
No, I won't yet

Thanks for reading, friends. Please always be in touch.

As always,
Katelyn

Happy Thanksgiving this upcoming week! It’s my favorite holiday and distinctly American; Canada celebrates it too, so inclusive of North America minus Mexico.

All the best from me to you, your friends, and your family and all that we have to be thankful for. One of my mom’s traditions is for each of us to share our ‘thankfuls’ prior to our Thursday feast. My list is long, but my relationships with many of the readers of this newsletter is near the top.

Today's Contents:

• Sensible Investing: Trends

• Weeklies: Selfie & Song

Sensible Investing

AI Eats the World, a Nov 2025 Presentation from Ben Evans (former a16z research partner). We’ve covered most of this in previous newsletters, but it's always nice to flip through the narrative laid out cleanly in one place.

UK Investors Pull Out of the London Stock Market at Record Pace. Outflows come as inflows from foreign investors help propel the FTSE 100 to a record high.

Important reminder from the article: The FTSE 100, which derives more than three-quarters of its revenue from overseas, is generally not considered by investors to be a barometer of the UK economy's health.

PE Firms Flood Junk Debt Market to Pay Themselves. Grim.

Another driver is collateralized loan obligations, structured credit vehicles that are the largest buyers of leveraged loans. CLOs are financed by issuing bonds. There have been more than $151 billion of the debt backed by syndicated loans sold in 2025, up about 4.7% from the same time last year, according to the Bloomberg data.

“The problem is the deals aren’t performing. And so when they don’t perform, even if I want to sell mine, I’m not going to sell it to the other PE guy that knows that he has his own deals that aren’t performing and he doesn’t want mine,” Mish said. “The easiest thing to do is to do a recapitalization and sell it to a less credit discriminate investor, which is a CLO.”

Bitcoin Heading for Worst Month Since Crypto Collapse of 2022

Just a note on Bitcoin and Crypto. Yes, it’s all down ~20% this month, and BTC is now down 10% for the year. It’s a volatile asset class prone to drawdowns. It trades like speculative tech, not like a risk-off hedge. Long-term buy-and-hold investors know this dynamic. I don’t think it’s dead, but it’s obviously not ‘digital gold’ either.

Pension Growth Has Outstripped Wage Growth in Europe Since 2008

Among other charts, this single image speaks to the generational divide that continues to extend across Western economies.

Interesting Chart on the ‘De-Mortgaging’ of America.

Weeklies: Selfie & Song

Selfie: Eli, Deep Tech, Israel, Global Dialogue

In London, I got to hang out with my dear KaufmannFellows and global explorer friend Eli Novershtern. Eli is an independent investor and investment advisor with his own firm called Morrag Ventures. One of his specialities is matching family office and institutional investor capital with later-stage deep tech direct investment opportunities in Israel.

We always have great conversations about a wide variety of topics and how, in general, people need to ‘wake up and smell the hummus,’ in his words. Sounds downright pleasant to me.

He’s also a long-time leader at the World Jewish Congress. He cares deeply about Israel-Diaspora relations, Israel advocacy, and strengthening the pluralistic and tolerant aspects of Judaism, both internally and externally through outreach and interfaith dialogue.

Eli serves as the President of the WJC Jewish Diplomatic Corps, a program of the World Jewish Congress, where he is also an Executive Committee member and a member of the Investment Committee. He also serves as an active board member of the Reut Institute, Israel’s leading think tank, and was one of the founders of the Jewish Peoplehood Coalition, which aims to strengthen connections between Israelis and Jewish communities abroad. Eli is also the Chairman of Innovation: Africa - Israel, using Israeli technologies to provide access to energy and water to some of Africa’s neediest villages, already affecting over 4 million lives.

In times of global strife and confusion, it’s nice to have friends doing the work to bring people together and find ways forward for humanity.

Song: Soft & Gentle

Here on YouTube.

The Polish Ambassador (TPA) was an experiment, David Sugalski’s sound-art passion project that came to life. An inventive, imaginary character born of humble, humorous beginnings, he found his first audiences through the support of primitive digital radio stations. Today, TPA is among the premier EDM/live-crossover artists in the country, with millions of listeners worldwide.

This is a fun, mostly instrumental song.

“Soft & Gentle” by The Polish Ambassador

Soft & Gentle
Instrumental 

Thanks for reading, friends. Please always be in touch.

As always,
Katelyn

It’s good to be back! Sorry for the skip week between editions. There’s always a lot to think about and discuss. Thanks for reading and responding, as always, and welcome to all the new folks!

Today's Contents:

• Sensible Investing: Trends

• Charts

• Weeklies: Selfie & Song

Sensible Investing

AI Bubble: Don’t Throw the Baby Out with the Bathwater. Watch individual stocks and sell if they are too aggressively valued. Opinion piece in the FT (link is PDF).

I attended the SALT Conference in London last week. It’s for allocators interested in alternative assets. This time, it was sponsored by the crypto ecosystem, so it focused heavily on digital assets, blockchain, and related topics.

One of the sessions had the CEO of one of the large ‘VCs turned Asset Managers’ with rumors of an upcoming IPO. He asked the room ‘Who here thinks we are in an AI Bubble?’ Out of 300 people, only one other person raised their hand (along with yours truly).

I take this as an indication of the room’s discretion rather than a consensus opinion. A financial bubble is defined as an economic situation in which the prices of assets rise rapidly to levels that are unsustainable, often driven by excessive speculation and investor enthusiasm. We have definitely seen a rapid rise in asset prices; the question is just which are unsustainable and on what timeline.

At the event, the CEO continued: ‘hmmm, less than expected’ and then without answering his own question, he says ‘Well, bubbles are good. They build critical infrastructure that moves society forward…’

Which is true. But it conveniently misses any relevant discussion of the best place to allocate TODAY to realize gains from the opportunity. The article linked to above makes the case to be led by valuation - and so, like many, is in Amazon and Microsoft and has sold off Nvidia and Meta. Another angle is to seek underpriced opportunities where there will be productivity gains (he cites healthcare and consumer staples).

You can pay a VC aggregator their 2-and-20 to hold Anthropic or OpenAI directly, or (probably worse) be in hard-to-diligence and zero-control SPVs. Alternatively, you can invest in Microsoft (which has exposure to OpenAI), Google (which owns ~15% of Anthropic), or Amazon (which owns between 12% and 20% of Anthropic). Each are also far more liquid and in the indexes.

Exclusive: Here’s How Much OpenAI Spends On Inference and Its Revenue Share with Microsoft. This Ed Zitron piece is circulating. TL/DR: OpenAI spends a lot (more than most people expect), and this contributes to Microsoft’s revenue. The devil is in the details, and if you are interested, you are welcome to use that link to explore further.

McKinsey’s 2025 State of AI. Report shows enterprises are using AI, but most have yet to scale the technologies.

Warren Buffett’s Thanksgiving Letter. He’s going quiet except for his annual Thanksgiving Letter, which imparts folksy advice.

A key question for many of us is whether we should still hold (or buy) Berkshire Hathaway. The answer is no longer certain. Berkshire has underperformed the market rally this year, but that is to be expected given its high cash position and focus on value. When I asked this question of a long-time Berkshire shareholder and financial advisor, they said that what made Berkshire unique was Warren Buffett’s ability to strike highly advantageous private deals in creative structures and unique situations, and that no one else at Berkshire has shown an ability or aptitude to do the same.

Berkshire’s appointed leaders so far have seemed not to be original and/or bold thinkers and doers (my words and conclusion), so I’d expect average performance in the long-term. However, they may have a good run through this cycle if there are jitters in the equities market.

Cockroaches in the Coal Mine. The latest Howard Marks memo discussing the fraud in private credit.

When asked about private credit, I answered that the investment environment had been mostly benign over the years since 2011, meaning – to echo Warren Buffett – the tide had never gone out on private credit (i.e., it hadn’t been tested). Now, with two high-profile bankruptcies in short order, people thought they might be starting to see cracks.

The tone turned more serious when it became clear that not only were there failures, but also there might be something sinister behind them. There are allegations that First Brands – which had both public and private debt outstanding – used the same receivables as collateral for multiple loans. Tricolor turns out to have made loans to buyers lacking credit scores or driver’s licenses and had been previously cited by regulators for practices such as selling cars for which it lacked titles.

…

He goes on to call the fraud systematic, not systemic. Only time will tell for sure!

Charts

Perhaps now is the time for increased exposure to emerging markets?

Prisons vs Mental Hospitals: A chart that’s been making the rounds and its discussion on X.

NBFIs in Focus: The Basics of Hedge Funds: analysis piece from The Fed.

Weeklies: Selfie & Song

Selfie: Mayfair, Friends, Joanna, & Institutional Investing

I was in London last week for various purposes, including the 30th anniversary summit of Kauffman Fellows, a lifelong learning community for venture capitalists with over 1,000 global members from top firms, such as Emergence, KP, and Creandum.

I started my fellowship in 2016, almost ten years ago, when I was running Pearson’s corporate venture fund, and Kauffman has been an incredible network of mentors, collaborators, and lifelong friends. As part of the program, you are placed in a small group (called a forum) to go deeper on a human level. I was lucky to have been part of our entire class of amazing people, particularly because Joanna Rupp (right side) was in my forum.

Joanna has had a long and successful career in finance, including early stints at Goldman Sachs and the Security Capital Group. She has most recently served as the Managing Director of Private Equity at the University of Chicago endowment for the past 24 years, building out their buyout and venture portfolio and serving as an advisor and mentor to many emerging managers as they approach institutional investors. Joanna is high integrity, incredibly analytical, and always thoughtful. And, more than her professional accolades, she is kind, patient, and genuinely committed to creating a better world.

Joanna left the endowment this summer and has quickly been snapped up in various advisory and consulting engagements (mostly by top managers she’s already worked with). Still, I think she’d add even more value on the allocator side, where manager selection is paramount and stewardship is critical. We’ll see what she does next!

Song: Save This City

Here on Suno.

OMG. Our first song from Suno. I know, I know. Artistically speaking, I prefer this instrumental Egyptian Dance Party. Some is just super dumb, though, like one of the most popular songs - with 3M views - called ‘Cat’, which repeats the word ‘cat’ over and over.

This is a sign of the times, though, because one of the biggest current hits in country music right now is fully AI-generated and called Walk My Walk by Breaking Rust (link to YouTube). It’s…good. Excellent even.

This is obviously the future and here to stay.

Anyway, the point of this song of the week, which has only 9 listens (3 of which are probably mine), was in honor of the defeat of Prop Q (63% to 37%) here in Austin, Texas. Prop Q was a referendum to raise property taxes to fund city services, but what I think is notable is that this time, voters (and a strong bipartisan coalition in town) pushed back hard, forcing the city to examine its spending and focus on delivery.

And, no surprise, I think that’s incredibly exciting and important. Where you live has a huge impact on your life. Many cost-of-living dynamics are persistently local.

Over the last 15 years, our cities have expanded in importance and budget (Austin doubled in 10 years), yet the capabilities of management have not kept pace. The upside of local is that when you start digging into the details (and this is what prompted many in Austin), you can advocate for change quickly and decisively.

There is a huge opportunity to take more informed management decisions that produce outcomes people can see and feel.

It was nice to see this local vote send a clear message to city leaders, and for many around Austin to start getting more involved in the details. And there’s been a lot of Austin love on X this week, starting with Elon.

“Save This City” by Suno & Texas Land Guy

It’s a circus of madness spinning its wheels
Austin’s crying out let’s make this real

[Chorus]
Save this city save it now
Tear the walls of nonsense down
Priorities lost they wear a crown
Save this city save it now

Thanks for reading, friends. Please always be in touch.

As always,
Katelyn

Congratulations to us all for making it through October without a repeat of 1929, despite much bubble talk. This also mean only three more weeks until Thanksgiving, after which the blackout period begins for (almost) everyone fundraising.

I look forward to the US state & local election implication recap next week. If this pertains to you and you are able to, please read up and vote on Tuesday (if you have not already)!

Today's Contents:

• Sensible Investing: Trends

• Weeklies: Selfie & Song

Sensible Investing

One of my favorite culture and advertising newsletters is back! Because The Internet (formerly on Substack, but now it’s only IYKYK, and I know, so you can sign up here.) Along with Nowism by Tom Goodwin, who has an excellent recent post here on AI and his other musings.

Surviving the AI Capex Boom: Big Tech’s AI buildout is transforming markets, but history suggests caution. What should investors do? By Kai Wu at Sparkline.

Lots of great graphs! TL/DR:

The AI boom is transforming the Magnificent 7 from asset-light to asset-heavy, given that asset-heavy firms have historically produced inferior returns. Unfortunately, Big Tech appears committed to this bitterly competitive and costly AI arms race. Given their large weight in stock indexes, this is problematic for many investors.

Finally, we are concerned by rising valuations. We propose a playbook using intangible value to navigate the hype cycle. With AI hype rising, the model has gradually rotated away from the big AI infrastructure providers toward a broader set of AI early adopters with lower valuations and capital requirements. This shift is reinforced by the finding that the long-term beneficiaries of past investment booms are often not the infrastructure builders but their customers.

He recommends these AI-early adopter stocks. He doesn’t talk much about the opportunity in private markets. It seems to me that you can more easily achieve early AI adoption in a privately managed company or start-up because change management from within (among companies already at scale with mature, entrenched processes) is too challenging.

I’m adding this chart for CapEx borrowing information.

Berkshire’s Operating Earnings Jump 34%, Buys Back No Stock and Raises Cash to $381 Billion. Interesting investor sentiment.

For the fifth straight quarter, the firm declined to buy back its own shares, which have fallen nearly 12% since Buffett’s announcement in May that he would step down.

“I think that sends a very powerful message to shareholders,” said Cathy Seifert, an analyst at CFRA Research. “If they’re not buying back their shares, why should you?”

The Ranks of Corporate Zombies Are Growing, in Bloomberg

New York City’s Fiscal Model is Wilting (paywall, The Economist). High taxes irk the rich, and high prices plague everyone else. It’s an issue leading up to and through the elections on Tuesday.

Employment in low-wage industries rose, while it fell nearly 5% for middle-wage sectors from 2019 to 2023. Wages increased for all groups, but the decline in middle-wage jobs skewed the average.

Are Britain and the US Losing Their Allure for Top Talent? Open hostility and high visa fees are a risky bet amid intensifying competition for the world’s brightest and best, in the FT. Canada appears to be absorbing a good share of the difference.

And, let’s be real, the UK is in a much worse shape than the US—at least today.

Weeklies: Selfie & Song

Selfie: Josh, West Nile, NY Marathon

Today, likely as you read this, my friend Josh will be running the New York Marathon in memory of the 10th anniversary of his beloved mother's passing; he raised $15K for the Breast Cancer Research Fund in the process.

In 1999, Dr. Deborah Asnis (Josh’s mom), an epidemiologist and chief of infectious diseases at a hospital in Queens, quickly identified the West Nile Virus and prevented the spread of the disease. Because of her actions, it is not necessarily a memorable event.

Preventing tragedy is easily lost to history, but today we can remember. And if you are friends with Josh, you can often remember because, as you know, this newsletter encourages and appreciates power-mom bragging (past, present, future)!

‘This is my quant.’ Besides being a runner, Josh ‘Kaz’ Kazdin, is also a life-long investor and professional works as the Co-Head of Private Markets Research and Co-Head of Geospatial Research for BlackRock Systematic Active Equities (SAE). Basically, he conducts alpha-generating research on stock selection for a wide-range of BlackRock strategies.

Josh also wants you to know that our friend Rachel’s 40th birthday was ‘mostly’ a girls’ trip - because he also received an invitation. He’s right to be proud of the accomplishment. I think his power mom would be proud of that, too.

Last thing: Several years ago, I attended Shabbat services with Josh, which had the theme of remembering loved ones who had passed away. It included the hymn below, which I thought was an appropriate sentiment.

I’m at the age when friends start losing their parents (👀💔 Tom, Gregg, Michael, Colleen + others), and I’m told that “friends are the family you choose.” That’s more important as you get older.

It’s a fearful thing to love
What death can touch.
A fearful thing to love,
Hope, dream: to be –
To be, and oh! To lose.
A thing for fools this, and
A holy thing,
A holy thing to love.
For
Your life has lived in me,
Your laugh once lifted me,
Your word was gift to me.
To remember this brings a painful joy.
‘Tis a human thing, love,
a holy thing,
to love
what death has touched.

Song: Hear You Me

Here on YouTube.

“Hear You Me” is a tribute song written by Jimmy Eat World for their friends, Mykel and Carli Allan. The Allan sisters were huge fans of the band during their early days and died tragically in a car accident on the way back from a Weezer concert.

“Hear you me” was their signature saying to address their friends. It hasn’t gotten much pickup as a line since then, but I like it!

“Hear You Me” by Jimmy Eat World

Hear you me, my friends
On sleepless roads, the sleepless go
May angels lead you in

Thanks for reading, friends. Please always be in touch.

As always,
Katelyn