Podcast Blurbs [Freewill, Jerks, Cramer on Switch]

Planet Money, Ep. 795 (Is Record Breaking Broken)

“Companies started coming to [The Guinness Book of World Records] asking if we could fly someone out to their event.  Companies and people were coming to Guinness wanting to break a record for publicity or to draw attention to themselves.  They’ve gotten on to the fact that if they achieve a record title, they get a lot of press for it or shares on social media.  Increasingly, they want to make it more of a marketing event, they want to invite one of our adjudicators and the usage of the logo.  Guinness realized that they could charge for this, a lot.  The price tag for a full service event starts at $12,000 and goes up over half a million…they do hundreds of events like this every year. […]

Guinness’ main customers used to be kids who were just fascinated by the people who were breaking the records and pushing the limits of what it meant to be a human.  Guinness’ customers now are the record breakers themselves.  If you pay Guinness enough money, they will help you figure out a record you can break and they will help you break it….Guinness is now in the business of selling record-breaking events.”

Mad Money w/ Jim Cramer (10/6/17)

Jim Cramer on Switch:

“As technology gets better and better we’ve seen a ridiculous explosion in the amount of digital information out there.  Companies that want to know what’s going on need to keep track of tons of data.  By some estimates, there are going to be 200bn smart devices connected to the web by 2020.  Even now, the average person generates 3GB of data per day.  We use the internet for everything and increasingly store data in the cloud, which means some datacenter somewhere is where it goes.

Your typical datacenter is just a gigantic building, it’s packed with networks, servers, and air conditioning equipment…but Switch is different.  According to them, the kind of datacenter you need to run a low cost consumer service like Apple Music is just not the same as the kind of datacenters that work best for business critical data storage or highly complex work loads with highly sensitive and regulated information.  Switch has actually patented their datacenter design, the layout and cooling systems allow customer to run more power through their machines.  On top of that, Switch’s platform makes it easy for clients to rapidly deploy or replace technology infrastructure.

Switch’s revenue grew at a 17% clip in 1h17 and while that’s a bit of a deceleration from last year’s growth rate of 20%, it’s still pretty darn good.  These numbers can jump around whenever Switch opens new datacenters.  The key here is that 90% of their revenue is recurring.  Switch’s gross margin came in at a rock solid 48.2% in the first half…Switch is actually, yes, profitable here.  And while its operating margin jumps around a lot because of one-time fees, the fact is that it’s a pretty good business.

However…there are some issues we need to address.  For starters, it’s got a complicated corporate structure.  Before the IPO, Switch operated as a partnership. […] The partnership has now established a standard C-Corp including a holding company, Switch Inc., which is the stock that is now trading.  Switch Ltd, the partnership, is now the sole asset of Switch Inc., which is a little troubling…The founder, Rob Roy, now has 67.7% of the voting power in Switch Inc.  Public shareholders have less than 5%.  It’s never a good thing when you have a multi-tiered ownership structure with the owners of the common stock being treated as second or third class citizens.  It’s rarely a good thing when the people who own the asset are different from the people who control it…For example, because of Switch’s transformation, the insiders who used to own the whole thing are racking up some major tax bills, so Switch is helping to pay those taxes for them.

What else is problematic?  The vast bulk of Switch’s sales, more than 95%, come from a single datacenter campus in Las Vegas…on top of that, Switch gets 38% of its sales from just 10 companies.  Ebay alone accounts for nearly 10%.  But the datacenter business tends to be pretty sticky.  I’m not that concerned.

In 1h17, Switch generated $35.3mn in net income.  To be conservative, let’s just double that for the fully 2017.  So Switch is likely to make $70.6mn.  But at $70.6mn, Switch will be growing at a 20.9% clip vs. last year’s numbers when you subtract one-timers…let’s assume that growth rate decelerates to 15% next year.  With $81.1mn in net income divided by the share count and I’m estimating that Switch could earn 28c per share this year, 32c next year…that means it’s selling for 76x earnings and 66x next year’s numbers.  Obviously that’s expensive.  However, I think I’m low-balling…next year, Switch will start selling datacenter space at its new center in Atlanta and remember every time they’ve opened a new datacenter, their sales have immediately surged higher.  It’s like a staircase.  But even if Switch has an earnings explosion next year, it might be too expensive for me.  Nvidia trades at less than 50x next year’s earnings.  But Nvidia’s earnings are growing at a 41% clip.

On the other hand, Switch is the only pure play on the growth of datacenters out there.  CoreSite, Equinix, Digital Realty are all REITs, which means they need to distribute all their income back to investors.  In other words, they can’t invest as heavily in growth.  That means Switch has scarcity value.”

Waking Up, Ep. #27 (Ask Me Anything)

Sam Harris:

“The distinction between voluntary and involuntary action is an important one.  But it’s not one that requires a belief in free will to describe.  There are things we do based on intentions that align with our goals and desires and consciously held purposes.  And there are things that we do automatically or by accident.  When looking at even my most voluntary behavior, I see no evidence of free will.

Let’s say you’re deciding whether to marry your boyfriend or not, it doesn’t matter how long you think about that.  This could be the most deliberative decision of your life.  What finally swings the balance between ‘yes’ and ‘no’ is in principle mysterious, subjectively, and is arising out of causes and conditions that you did not create.  If you love this man’s smile, you didn’t create your love for it.  You love it precisely to the degree that you do, you didn’t create his smile in the first place, you didn’t create it’s effect on you, you didn’t create that this is something you care about.  And so it is with everything else that you like or dislike about this person.  Your association with marriage, how important it is to you, how idealistic you are about it, how urgently you feel you have to enter into it, the advice you get from friends and family and its effect on you…all these dials are getting tuned by forces you can’t see, did not engineer, and cannot control.  And even your moments of apparent control, well that just arises out of background causes that you can’t inspect and which are moving you to the precise degree that they are for reasons that are inscrutable.”

Very Bad Wizards, Ep. #77 (On the Moral Nature of Nazis, Jerks, and Ethicists)

Eric Schwitzgebel:

“In my view, a jerk is somone who culpably fails to appreciate the perspectives of other people around them, treating those people as tools to be manipulated or fools to be dealt with rather than moral and epistemic peers…it’s a kind or moral ignorance and epistemic ignorance.  So you’re ignorant of what you owe to those people and you’re ignorant of what those people, when they differ from you in their opinions, what kind of validity they might have in their perspective that’s contrary to yours…I wanted to make it ‘culpable’ ignorance because I didn’t want it to be the case that babies are jerks.”