Lux Capital’s Q3 Quarterly Letter Highlights
Josh Wolfe has posted highlights of our latest quarterly letter to our limited partners. This quarterly letter centers on “instrumental objectivity,” how the progressive evolution of scientific instruments offers us greater means to comprehend and assess our world (for instance, the James Webb Space Telescope which we covered last year in “Scientific Sublime”). Each new and improved instrument offers us a novel means to see reality more objectively and reduce humanity’s constant flight to bias and error.
Not all instruments are positive, of course: Twitter and TikTok are instruments for seeing our world, but they offer “algorithmic [feeds] that highlights the most heinous activities humanity has ever undertaken even as it suppresses stories of the pervasive goodness radiating from our multitudes of multitudes.” They are instruments that exacerbate bias, and thus, the worst of humanity’s inclinations.
The core theme is one of optimism — which can be a bit surprising. But here’s how Lux sees the world:
Let’s get real. War, death, horrific terror, loss of innocent lives; displaced peoples, refugees from climate and conflict, migrants and immigrants; political dysfunction, rising interest rates, oil prices, inflation, indebtedness. How is it possible amid all the trauma and tragedy, across the never-ending news of negative shocks and surprises and arguably against all reason, that we at Lux are more constructively positive and conditionally optimistic than we’ve ever been?
How? Because we are at a nadir of negativity, where observably everyone we speak to is overwhelmingly and abundantly pessimistic––sands of hope slipping through shaky fingers of despair. The cacophony of chaos overloads our senses with negative inputs, frightening our minds and circumscribing our pursuit of the possible. Yet, the instruments of human progress continue unabated: scientists continue to experiment, engineers find ways to build, and entrepreneurs seek profitable growth. Humanity’s openness to serendipitous discovery is the elusive element in scant supply we’re seizing upon at Lux.
Podcast: Techno-optimism versus techno-pessimism
In addition to the Lux quarterly letter highlights Josh has posted, I also sat down with him for the latest episode of the “Securities” podcast, where we address the furious debate in Silicon Valley between techno-optimism and e/acc against the techno-pessimism of critics that I excoriated last month in “Reckless Regulators.”
Instead of these two extremes, we try to sketch a middle ground of “techno-pragmatism,” taking our lodestar as the optimism of utopian science fiction but mediating it through human experience. Artificial intelligence will have the capability to replace whole categories of jobs (see “Garrulous Guerrilla” earlier this year), but can also be used by governments and terrorists to develop novel pandemic agents. From the invention of fire and bronze to the modern era, humanity has always grappled with the upsides and downsides of new inventions — and has found a reasonable path toward progress.
In finance and foreign policy, a changing of the guard
This week, we marked the passing of two intellectual giants from the American scene: Charlie Munger and Henry Kissinger. Munger, the long-time partner to Warren Buffett at Berkshire Hathaway, transformed his perch next to the Oracle of Omaha into a leading thinker of value investing, engrossing generations of investors all the way to the present day. Similarly, Kissinger, the former national security advisor and Secretary of State who would transition into an extremely lucrative and influential, multi-decade career as a political consultant, transformed the minds of generations of foreign policy thinkers exiting out of American academies like the Harvard Kennedy School.
The two dominated their respective industries with contrasting lifestyles. Munger, the laconic but sharp commentator on finance, left behind a legacy of quips amidst a fabulously wealthy life of relatively deliberate thrift. Kissinger courted the limelight and the luxuries of wealth to the very end, shuttling between foreign capitals and global cities on private jets while, for instance, chatting with Xi Jinping this past summer in Beijing.
Munger’s ideals of value investing have been stressed in recent decades, with rising asset price inflation increasingly making Berkshire’s model a tough proposition. There just weren’t all that many deals to be made, which is why last month the conglomerate announced record cash reserves of $157 billion just waiting for a company to buy. Munger and Buffett’s discipline toward the market was in contrast to the frenzies elsewhere, from WallStreetBets-fueled meme stocks like GameStop and AMC Theaters to the explosion and implosion of crypto to the deflating of SaaS businesses across Silicon Valley.
Munger’s wisdom will stay current, if only because it will always be a reference against the financial trends du jour.
Kissinger, on the other hand, has a much more daunting basis for the legacy of his intellectual ideals. As Yale historian Greg Grandin highlighted in the title of his biography of the power broker, Kissinger’s Shadow, Kissinger held incredible sway over U.S. foreign policy thinking for decades, a miasma of influence that wasn’t persuasive so much as vindictive. Opponents lost their government careers, grad students failed to secure advisors and fellowships, and tenure slots at key universities were repeatedly shuffled toward allies. The penumbra of power around Kissinger was absolute, and reinforced by a lack of willingness of any foreign policy professional looking for a long-term career to rebel against the reign of Kissinger’s realism.
Yet, the eruption of foreign policy debates around Russia’s war on Ukraine and the conflict between Israel and Hamas show that the implacable wall of thought that Kissinger stitched together across institutions and people has already been breached, and is likely to crumble away entirely in the months ahead. The kinds of value-laded foreign policy judgments that Kissinger abhorred — human rights, cooperation, institution building, development, liberal intervention — are back on the table with their chief opponent now sidelined by rigor mortis.
Back in grad school a decade ago, several friends were already ready with their invectives to pounce on Kissinger’s death and annul his record and intellectual achievements. Those takedowns were out within 24 hours this past week, but the real dismantling will happen in the years ahead: with Kissinger unable to personally protect his record, the full effects of his decisions will finally be realized as hushed critics finally release their thoughts publicly.
Yet, Kissinger’s fate in the end is likely to be much the same as Munger’s: a constant referent for the debates in his field. A foreign policy practitioner doesn’t have to agree with Kissinger’s amoral realism any more than an investor has to agree with Munger’s value investing, but either way, they represent a pointed and powerful point of view that can never be eliminated from the discourse.
The passing of both men is a sad bookend to a century of achievement, but it’s also an opening for new intellects to build or dismantle their stances and legacies as appropriate. Finance and foreign policy will never be the same.
Together Funding + Anduril Roadrunner Launch
Two big announcements out of the Lux portfolio this week. First, Together, which develops better infrastructure for generative AI, announced a $102.5 million fundraise led by Kleiner Perkins. We led the $20 million seed check earlier this year in May. Together complements a unique approach to optimized computing with an agnostic stack that can power a range of generative AI models, allowing the company to flexibly adapt to the blistering revolutions of the AI market with alacrity.
Second, Anduril made a major announcement yesterday with the launch of Roadrunner, a multi-year stealth development product designed to respond to the increasing threat of drones to the United States and American allies. As Ashlee Vance writes in Bloomberg:
Developed in secret over the past two years, a Roadrunner is akin to a mini, autonomous fighter jet. Powered by two turbines and equipped with a warhead, it takes off vertically like a rocket and then turns to fly at hundreds of miles per hour like a plane toward its target. And, in a first for this type of weapon, a Roadrunner can return home, land and be reused when it doesn’t engage a target in the air.
We are determined to invest in the realistic balance between the optimism of AI and the defensive pessimism of the coming era of autonomous warfare, and this week’s news was a serendipitous look at that equilibrium.
- I enjoyed Giuliano Da Empoli’s The Wizard of the Kremlin, newly translated from the original French under the title Le Mage du Kremlin, which won a major French literary award last year upon its debut. The book novelizes the events of Vladimir Putin’s rise from the perspective of Vadim Baranov, a substitute for real-life Russian political advisor Vladislav Surkov. The opposite of farce, the novel takes seriously Baranov’s point of view to explain why Putin did what he did and why it worked, cutting through the layers of moral positioning that’s often in the press to elucidate a uniquely cogent Russian perspective. It’s bone-chilling, and must read.
- Tess Van Stekelenburg and a bunch of us here at Lux were entranced by DeepMind’s use of AI to identify millions of potential new materials (the more technical Nature research article is also available). “In the past, scientists searched for novel crystal structures by tweaking known crystals or experimenting with new combinations of elements - an expensive, trial-and-error process that could take months to deliver even limited results. Over the last decade, computational approaches led by the Materials Project and other groups have helped discover 28,000 new materials. But up until now, new AI-guided approaches hit a fundamental limit in their ability to accurately predict materials that could be experimentally viable. GNoME’s discovery of 2.2 million materials would be equivalent to about 800 years’ worth of knowledge and demonstrates an unprecedented scale and level of accuracy in predictions.”
- Our scientist-in-residence Sam Arbesman recommends Adam Kirsch’s book from earlier this year titled “The Revolt Against Humanity: Imagining a Future Without Us.” It surveys a spectrum of philosophies from Anthropocene antihumanism to transhumanism and how they describe the end of man’s reign over the Earth, and what it means for us as a species (mostly not good). Once relegated to side rooms at academic conferences, many of these philosophies now have at least a modicum of mainstream acceptance, forcing all of us to consider them squarely.
- On the topic of books, structural engineer and writer Roma Agrawal’s new book “Nuts & Bolts: Seven Small Inventions That Changed the World (in a Big Way)” is out, joining others in this genre like Ed Conway’s excellent Material World: The Six Raw Materials That Shape Modern Civilization. Agrawal traces the development of civilization through the stories of lenses, springs, wheels, magnets, nails, pumps, and string. These basic parts become the basis for everything from washing machines to semiconductors, and are a brilliant reminder of how extremely small technologies can have civilization-defining effects.
- Sam enjoyed a new research paper and the pile of gorgeous graphics from a trio of researchers at the University of Michigan led by Daniel Geng who use stable diffusion to generate new multi-view optical illusions, which are optical illusions that “change appearance or identity when transformed.”
- Finally, The Financial Times has a new investigation into SMIC and Huawei’s breakthrough 7nm chip, which surprised DC analysts for leaping ahead in node size despite export controls from the U.S. One answer appears to be just gulping down sheer economic pain in the pursuit of self-sufficiency. “Production yields for the Kirin 9000S remain shrouded in mystery, with neither Huawei nor SMIC making any public statements on the matter. One person close to Kirin 9000S production in the early days says that the Kirin 9000S achieved yields of more than 30 per cent during the risky volume production phase, the step before mass production. The person describes that as a ‘positive number under tough conditions’ but notes that it is ‘at least a two times increase in cost compared to a production line with a 90 per cent yield, the ideal benchmark for the mobile chips fabrication.’”
That’s it, folks. Have questions, comments, or ideas? This newsletter is sent from my email, so you can just click reply.