Q1 2023

The blog post is edited with the help of ChatGPT.

Personal note

As we enter into the first quarter of 2023, I wanted to start this quarterly blog post with a personal note. This one is different from previous posts, because it begins with an epiphany that I had in the last quarter. Over the years, I’ve had three significant realisations, which have shaped my views on work, investing, and the world more generally. But this most recent one felt a lot more personal.

The first one started when I began managing my own portfolio about seven to eight years ago, same time as I started my working life. Around 2017, I discovered Mr Buffett’s shareholder letters. Reading them changed my views completely about how to handle financial matters and sets a foundation for my learning about business, investing, and all things economic.

My second epiphany came in early 2021, in the thick of Covid and the increasing negative headlines around the world. I read a book called Enlightenment by Steve Pinker, which was recommended by Bill Gates. The book sets a foundational thought in my mind that goes like this: “Never ever underestimate human ingenuity and their capacity to solve problems, all for the benefits of the long term.” This coincides with Buffett’s thinking about the world, the capacity to withstand hardship of humanity, and their ability to solve major problems. Setting this one into context, like dealing with high inflation, a banking crisis, a war in Europe or a global pandemic, or any other hardships in the past, and I can’t help but stay very optimistic about the future.

And then came the third epiphany, which I discovered in the last quarter. This one is a personal note to myself, and it goes like this: “Take REST as or more importantly than WORK.”

Some years ago, David – whom I mentioned in my previous blog posts – recommended a book called “Rest” by Alex Soojung-Kim Pang. I read it, but never finished nor truly understood the recommendation and the science behind Rest. Fast forward to the last year and the recent quarter, I found myself increasingly burned out at work. The effects of this were emotional instability, with lots of negative thoughts, a significant lack of focus, and the inability to concentrate on the tasks at hand. My mind would race and jump from one worry to the next, with a small glimpse of positivity that quickly disappeared. I tried to work even harder to distract myself from negativity, but it only made things worse. At its worst, it affected my sleep significantly. There were 3-4 consecutive days where I only slept 3-4 hours and showed up at work as a complete zombie. All of this was compounded by my attachment to digital life, constantly checking my phone for the next email, the next breaking news, the next text. But sadly, it only worsened my habits of unproductive multitasking and making my mind cluttered with noise and thoughts that distracted me from doing good work. I couldn’t even finish reading an article, and if I did, I would barely remember anything I read. The worst thing, though, was that it made me emotionally unstable and affected my relationships with family and friends.

So, how did I deal with it? I tried taking a long deep sleep one night and set about changing this. That morning, I remember waking up and immediately turning my phone to airplane mode. I would have downloaded the “Rest” audiobook by Alex Soojung-Kim Pang onto my phone and went for a very long walk in London, early in the morning at around 6 am, and I would listen to the book. I knew that this book would help me because the science, the recommendations, and the evidence all made sense the first time I read it, but I lacked the will and the concentration to understand them and to take these ideas seriously at first.

Listening to the book, I learned about many past examples of people who have committed to a life of rest first, then work, without even realizing it. For example, Darwin “worked” only four hours a day and dedicated a lot of his time to rest without acknowledging it. Rest means many things, but all of it should be structured and in intervals to avoid tiring oneself. If rest means going for a walk, then it’s important to also rest from walking for long hours. If rest means watching your favorite Netflix series, then it also means taking a break from binge-watching it. If rest means reading your favorite book, then it’s important to take a break from being engrossed in it. Rest can free up a lot of headspace in the mind and allow us to improve concentration.

After taking up Rest, I found myself having total concentration for whatever I was doing at the time, NOT multitasking and solely focusing on just doing the thing in front of me. I would go on my usual walk around London without listening to anything, and I would just observe things. The result is that all of a sudden London and the landscape in front of me would appear much brighter and more beautiful. I would find myself enjoy a movie like I never experience before, I would find listening to friends’ stories completely undistracted, and surprisingly I would only check my phone 2-3 times a day without it inteferring with work. Even more, I found myself talking to strangers because I just had so much energy reserved in my body, or headpsace reserved in the mind, all thank to Rest. I found myself thinking optimistically, and the occasional negative thought would just appear in my mind like a passerby, but I no longer dwelled on it.

This is THE way to sustain work and life. I never knew that the solution was right in front of me and has been with me all along. Just rest, and take it as or even more seriously than work itself. This epiphany has changed my habits, my views on life, my interactions with friends and family, even with strangers, all for the better of it.


Interest rates continue to hover at around 3-4%, measured based on the 10-year T bill, with the market pricing in rate hikes and future rate hikes of central banks around the world. In light of the recent Collapse of Silicon Valley Bank and the ensuing global banking crisis, the market is now pricing in slower rate hikes to allow central banks to deal with the uncertainties arising from the crisis.

I have faith in the bigger banks and their strong liquidity. This has been noted in the past by Jamie Dimon in his annual letters, multiple times, stating that the larger banks have enough liquidity to effectively bail out the smaller banks. It does mean, however, that stronger regulation is required, even for smaller banks to prevent them from using short-dated deposits to fund long-dated, even safe, assets. The crisis highlights the danger of leverage, even when used on seemingly safe assets.

I continue to bake in my valuation a discount rate of about 8%+, which does limit the opportunity set significantly, from the previous discount rate of about 6%. This means that a 12x purchase is what I should aim for, which does limit the number of potential investments as great companies seldom trade at 12x earnings. That said, there was a big purchase made during the quarter / late 2022, which I will touch on below.

Artificial Intelligence

From an investment standpoint, the last quarter has been all about learning as much as I can about AI, be it the technology, the hardware, the ecosystem, and increasingly the product inflection point of AI, ushered in by ChatGPT by OpenAI. Here are a couple of thoughts:

  1. 2023 is an inflection point in AI product focus. The last inflection point in AI, in a more general way, was in 2017 when Google released the Transformer model that set the foundation for large language models (LLMs) – the foundation of ChatGPT and other generative AI products like MidJourney. But the inflection point on the products themselves is late 2022 and very likely 2023. Now that we have seen multiple demos from Microsoft and Google, with lots of promises from Facebook and the big elephants like Apple and Amazon lurking around the corner, all secretly infusing LLMs more and more prominently into their products (e.g., Apple could have LLMs run locally on your device, or LLM as a service being pushed through AWS at Amazon).
  2. What business model is at risk? This question affected my largest position as of Q4 2022 – Google. The last quarter, I have been thinking a lot about how ChatGPT and LLM will upend the advertising business of Search. Would LLM increase the number of search queries, or no change/down? The latter would mean everything that happens from here with LLM will be negative to Google. It seems increasingly likely that unless LLM expands the number of search queries, Google will get hurt. No analysts have been confidently predicting this with a significant degree of confidence, and the market isn’t pricing in the eventuality of a massive increase in search queries yet, so the upside is not clear. As an investor, I’m not clear myself. LLM does help generate text and images that help with tasks like writing, but would it change the way we search for things in a way that more queries start at the Search bar? I’m not sure. And this “not sure” answer means that a higher probability of a downside case for Google should be considered. I, therefore, raised the probability of Google getting hurt by this higher and, consequently, reduced my Google position size. Google is now the third-largest position.

Portfolio update

As mentioned above, my Google position has now shrunk from the first to the third largest position in my portfolio. The largest position is now Amazon, which has been in the top 3 over the last 2-3 years. I have made no major changes to this position and continue to think that there’s significant upside to Amazon’s valuation as Amazon management embarks on a renewed sense of focus on profitability.

Similar to previous blog posts, I believe the significant upside for Amazon that isn’t priced in includes:

  1. Upside to 1P gross margin, which has been Amazon’s weapon to win market shares in e-commerce.
  2. Upside to AWS profitability, as the optimal margin that can be achieved in the cloud is somewhere around Microsoft’s level, around 40%+.
  3. The ongoing shift to online commerce.
  4. Surprises around profitability of the company as a whole.

The significant adjustment to the portfolio, however has been with Meta Platforms – formerly Facebook. Meta stock price declined significantly during 2022 and touched a low of a 70% decline in market value. At its lowest point, Meta was trading at a single digit multiple including the Reality Labs losses. I considered this an unjustified multiple for a company that had a clear path to resolve its issues, which were indeed multifold but solvable, and detailed in previous blog posts. Therefore, seeing no sense in the multiple, I topped up the position and made it the second largest position in the portfolio.

There have been no other changes to the rest of the portfolio. I continue to see the secular shift to private assets, which should benefit Brookfield and Blackstone, and that readers will continue to pay up, gradually, for a multi bundle at the New York Times.

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