#257: The Heart of Darkness by Joseph Conrad, Apocalypse Now, Intangible Commodities in Business, Espressos Over Coffee, Finishing all Berkshire Letters...
“Ever wonder what God thinks of money? Just look at the people he gives it to.” - Anne Lamott
Hello! This week’s newsletter is packed with essays. It starts with a reflection of Joseph Conrad’s Heart of Darkness and segues into Francis Ford Coppola’s Apocalypse Now.
Then, I share an exploration into finding businesses that buy intangible commodities and sell brands. The commodity I refer to is unrefined human talent. There’s a short advertisement for OMD Journal, last week’s was part 10 and the last of the Berkshire Letters series.
Finally, I write about espressos and coffee. It’s not a technical outlook on them but using them as an analogy to the things worth doing in life.
The ABCs of the OMD learning function are below. Feel free to pick and choose the segments that interest you and I hope they make you think about something you didn’t before, raise an eyebrow, or leave you satisfied.
Art: Books, Movies, Creations
Business: Investing, Systems, Work
Culture: People, the Self, Observations
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Art: Books, Movies, Creations
Book: Heart of Darkness by Joseph Conrad
I started for the inspiration and stayed for the prose. I marveled at a new form of storytelling I didn’t know about. The entire book is in the first-person perspective of a listener hearing the tale through the historic account of the main character who narrates his tale. That meant most of the book was enclosed in quotation marks with a conversational tone instead of clean statements.
I won’t tell you the ending or any of the major events of the story. This is about my interpretation of the book and what it did for me. It’s neither a recommendation nor an invitation for a debate. But that’s the case with most of my writing.
Still, what was the tale about? It was about Marlow, a sailor with a Belgian trading company. He was sent on an expedition through the interior of Africa in search of Kurtz, a famed ivory trader, who was said to have gone “native.” Much of the story revolved around Marlow and his crew sailing up a major river.
I did not care for the Belgian colonization of Africa. I did not care for ivory or any of the cultural significance of the time period. What I cared about was the reflective nature of Kurtz and Marlow. I wanted to understand the indescribable pull that led Marlow to find Kurtz—a similar fashion to all the things we can’t explain but feel compelled to do on the superficial statement of curiosity.
“I don’t like work—no man does—but I like what is in the work—the chance to find yourself. Your own reality—for yourself, not for others—what no other man can ever know.”
It’s through this story that I hoped to have a dialogue with Conrad. I wanted to hear what he thought of the human condition that led him to write this story with these characters.
The bulk of the story revolved around Marlow’s efforts to understand who Kurtz was. He had never met Kurtz. He was learning about the target of his mission through others he met along the journey. But the ‘he said, she said’ were minor to the length of discussion Marlow had with himself as he moved from curiosity, understanding and empathy to Kurtz and why he might move away from his lofty position in the ivory trade to be with the people that were being subjugated.
By the end of the book, I was left feeling eerie. I also felt a calming nonchalance to almost everything around me. Most of the motivations and priorities in the world looked comical and worth ignoring. I would like to think that’s what Conrad intended.
“I found myself back in the sepulchral city resenting the sight of people hurting through the streets to filch a little money from each other, to devour their infamous cookery, to gulp their unwholesome beer, to dream their insignificant and silly dreams. They trespassed upon my thoughts. They were intruders whose knowledge of life was to me an irritating pretence, because I felt so sure they could not possibly know the things I knew.”
I was surprised to feel a sense of utmost freedom after reading the book. Yet, it almost made the escape from the self-imposed and herd-amplified illusions of the modern world to be inescapable. I wondered if it was such dichotomies that left me feeling uneasy. It felt the only solution to uplift this sense of unease required a journey to the proverbial wilderness where I could once again be a foreigner at a foreign place.
“…to this day I am unable to say what was Kurtz’s profession, whether he ever had any—which was the greatest of his talents.”
The way I saw it, Marlow and Kurtz were men on the same journey to find Truth. Truth that is not definable with data or research. They searched for the kind of Truth that could only be seen through the individual’s eyes by diving down the rabbit hole or taking the red pill. It required plowing deep into the heart of darkness, to see what was at the end of that road. The hope for the reader would’ve been to put the self in a state of mind ready to take the plunge and hope to make it out the other side with an inkling of Truth.
Movie: Apocalypse Now Redux
I watched Apocalypse Now Redux as soon as I finished Heart of Darkness. It was actually a stroke of luck. Context is important here.
The first bit of context is that Apocalypse Now is a movie based on Joseph Conrad’s Heart of Darkness. Instead of Africa, the backdrop of the story was the Vietnam War with American soldiers instead of the Belgian sailors. It was created by Francis Ford Coppola—he made the Godfather.
The movie stars Captain Willard, played by Martin Sheen, to play the role of Marlow, the sailor from the Heart of Darkness. Willard takes a crew of U.S. troops on a patrol boat to travel up the Nung River to find Colonel Kurtz, who went rogue, and assassinate him.
It was a depiction of flawed people—basically, humans—in a flawed situation. The entire war appeared to be FUBAR. The characters in the movie knew it and the viewers realized it soon enough.
I had no idea what Apocalypse Now was other than it was a Vietnam War movie and that Coppola was willing to go broke making the movie. It was midway into the movie that I realized the movie was actually an adaptation of Joseph Conrad’s Heart of Darkness. Then, how was it that I found myself sitting through a 3-hour film about something I had a near-zero idea about?
Time for the second bit of context. My favourite book of 2021 was Anthony Bourdain’s Kitchen Confidential. I became obsessed with Bourdain throughout 2020 and 2021, watching most of No Reservations, The Layover and Parts Unknown and every Youtube interview I could find using the “20min+" filter.
On a flight near the end of 2021, I watched the Bourdain documentary, Roadrunner. With it came the references to Bourdain’s love for Apocalypse Now and the Heart of Darkness. Then, it clicked with me that Dan Harmon of Community and Rick & Morty Fame loved Apocalypse Now. Harmon had been my obsession in 2020 as I binged the archives of Harmon Town.
Soon after, I saw that Netflix was going to have Apocalypse Now Redux on January 2, 2022. It was a nice bit of coincidence—or fate if I were to believe the universe was grooming special-ole-me for two years to get ready to watch this movie.
The context was important because my reaction to the movie was: meh.
I understand it’s sinful to say anything but a glowing review for the movie because so many artists love Apocalypse Now. But it’s apparent my influences were often Americans from a certain generation—not just Bourdain and Harmon.
They were (and are) all creators I admire and it was in the hope of getting closer to them that I watched the movie. I had no expectations other than to feel something profound by the end of it. But it wasn’t the emotional swing as I thought it might be given its popularity amongst esteemed creatives.
With such an admission, the artist community might deem me as destined for mediocrity because I can’t recognize greatness. That’s fine. But, given my reaction towards the movie, I started to wonder what the impact the Vietnam War might’ve had on the generation of artists who were born decades before me.
They were a generation that had grandparents who achieved glory in WWII and parents who witnessed America destroying countries unnecessarily during the Cold War. It was generations of opposites. While the U.S. were saviours in WWII, they were invaders in the Vietnam War.
They won a war as the good guys and lost a war as the bad guys. I imagine such a dichotomy would have a large impact on the people of a nation. That’s also why I think Heart of Darkness was such an impactful book for that generation as well—often the same people who loved Apocalypse Now loved Heart of Darkness.
They are both stories of dominance. Whether it was the European superiors entering Africa with their advanced technology, looking to pillage and calling the native inhabitants barbarians and savages, or what the Americans did to the Vietnamese.
The book and movie showed the dark side of such actions. It showed the lack of glory and the raw disgusting nature of these “powerful” people. They were no different than the savages they thought they were superior to. Their motivations and behaviours were flawed and primal. They merely had the arrogance of technology creating an illusion of superiority in intelligence and civility.
I think it’s a movie that hits a unique group of people from a specific time period who were trained to think about a certain ideal and the realization of truth smacking them in the face. After all, doesn’t the power of art reside in the audience’s ability to relate with the creation?
I’m not saying the movie was bad. It had its merits. It tackled similar themes to that of the novel it was based on. There were no heroes or moments of hope.
Seeing the U.S. patrol boat sailing deeper and deeper into chaos in search of Kurtz felt like I was sailing deeper in my mind towards my subconscious. It was one of the reasons why I couldn’t stop the movie.
I wanted it to act as the drug that would take me on a journey to a place I might have a hard time getting to alone. That may also be the reason why I didn’t think the movie was the masterpiece many thought it was. Because, by the end of the movie and my mental journey, what I felt and was left with was nothing to awe and jeer about.
Business: Investing, Systems, Work
Buying Intangible Commodities
What is a commodity? It’s often a raw material that’s lacking in special distinction. Some are tangible like water, coffee beans, corn, silk, or cotton. Some are conceptual like time or promise. But what about a person or something a group of people build?
I understand it’s tricky business referring to people as commodities, but is that any different from how generals treat soldiers or governments the national statistics in front of them? It’s undeniable that as the number gets larger, the individual will be dwindled to the state of a commodity.
Humour me and come along my thought train. Buying commodities, refining them and turning them into brands has been the crux of business success for a long time. It’s no secret.
“'Buy commodities, sell brands' has long been a formula for business success.” - Warren Buffett
With ideas what commodities are, what’re brands? We can think of some easy ones like Starbucks, Nestle, and Lululemon. They buy commodities like coffee beans, water, and cotton, work their magic, and charge a premium with their logo on the products.
But what’s at the crux of a brand? Why does it matter? We know not all brands are equal. Every product has a logo on it but some logos are better than others. Why is that?
I think the value of a brand increases the more they reduce risk. It could be career risk, health risk, social risk, etc.
I’m in Hanoi and looking for a bottle of water. I know the tap water isn’t ideal to drink out of for my soft Canadian body. A Nestle water bottle is a less risky proposition than a brand in Vietnamese I can’t even read. I don’t know if it’s factually true. But I “think” it reduces the health risk of spending the next three days stuck in the toilet in a country where I’m unfamiliar with the medical system.
There’s career risk for the director of a bank who doesn’t hire a consulting firm with a reputable name. The top consulting firms make a living out of selling how unique and special each of them are. But to most executives, they’re all the same and they’re just perceived to be less risky than John Doe Consulting from Saskatoon. At least, if the big consulting firm fucks up, the director can easily blame them and that’s part of the package for why they cost more.
Some might wish to use fashion to depict their status in society. They might want the clothing to say something about them—wealth, health, creativity, etc. An obscure brand might serve one purpose while one with a hundred-year heritage might serve another. Paying a 30% premium on top of a b-class brand to get an LV bag might reduce the social risk of not getting the correct wealth perception.
Some commodities can’t charge a premium for their brands. Consider insurance companies or banks. They sell promises and financing, the same commodities that their competitors sell. The product is interchangeable and it doesn’t really matter what bank or insurance provider. Most will choose the one with the lowest rate and price. While some brands aren’t worth the premium, some charge premiums for mere stamps of approval (i.e. tribal association).
Such is the case for universities, employers, and even investors. Some will pay a far greater premium for a Harvard diploma, receive lower pay for a Deloitte brand, or give up more equity to have Sequoia invest in their company. Buying commodities to sell brands was an easy concept to grasp for companies selling tangible goods but could that model be applied to the world of intangibles like a Harvard or Sequoia?
In accounting lingo, software companies are considered asset-light businesses. It’s because the output software is considered intangible and the raw ingredients are lines of code, even if the people writing the code are very tangible. Still, various tech companies, professional services, or educations will be considered asset-light because the only input is people.
Does that mean software companies buy commodities (i.e. lines of code) and turn them into brands? Maybe the equation should start earlier and the commodity purchased is the army of developers?
Well, it depends. While one all-star developer might make all the difference in a 20 person company, that might not be the case in a company with 5,000. Some developers are better than others, as in all professions, but with layers of bureaucracy, individual abilities may be rendered useless.
Still, an army of developers might be able to band together to sell branded software like AWS or Atlassian that might warrant premium prices. But the question is not on the output of brand but the input.
Can some companies acquire commodity-level developers and sell brands? Some companies will only hire all-star developers. They aren’t commodities and they will demand a premium price tag. The financial equation there isn’t as magical.
I’m sure the data scientists who are paid millions of dollars a year at Google are truly special. But I doubt they were worthy of such high price tags early in their careers. Unlike a car that appreciates as soon as it turns on, developers—and people in general—compound their value over time. They slowly move up the chain from rookies that are commodities to unique gems as they showcase their abilities over and over.
Consider professional service firms (i.e. the big accounting, consulting, and banking firms) that hire armies of university grads. These students hit checkmarks in arbitrary determinants of success like grades, extra-curricular, etc. But most haven’t “done” anything of value for society.
If they did, they would be running a company or something the market would beg them to not stop doing. But the professional service firms ingest these commodities and sell all kinds of services (i.e. advice). They give stamps of approval with their army of commodities—“you’re financial statements look good!” or “Here are three options to improve sales you can take to your board!”.
It’s odd, isn’t it? That a 22-year-old would immediately have something valuable to say because of mere association with a brand? But alas, that became my experience. An army of us, each thinking the self to be better and unique, but are truly indiscernible will pump out slides and models that will be branded and sold at a premium to reduce some risk for the paying executive.
The firms buy commodities (university grads that need the prestige) and sell brands (the stamp of approval of the brand). It’s quite like a rating agency, whether it’s for debt or trading cards.
Universities are the same. They ingest a bunch of kids that fit arbitrary metrics of success and ambition and charge high fees for the environment and stamp of approval.
Consider the Series A venture fund or a prized incubator, they ingest a ton of commodities and sell brands. The Series A venture fund or incubator stamps the unproven startup companies they buy equity in with their brand. Brands like Sequoia or Y-Combinator give value to each startup company, which is an unrefined commodity until it does something useful. The brand helps the companies get future financing and this allows the early investors to exit with high IRRs.
Whether it’s a young person looking to enter a branded university to have a higher chance of getting a great job, a graduate trying to get a great employer to secure their long-term career, or a startup hoping for great early investors to secure them a chance of survival in three years time, all are unrefined raw materials that could be bought by a business that sells a brand.
Whether it’s coffee beans at the earliest stages, water from a river, or a startup with no sales, they are all materials at the rawest forms that are of no value to the end consumer yet. That makes businesses like Y-Combinator, Sequoia, Harvard, or Deloitte great businesses.
In fact, the unrefined talent could be a less volatile commodity to manage as the salary for people isn’t traded on a daily commodity exchange. Salaries and raises don’t happen every day and changes are often long-dated, resulting from changes in economic factors around us. That could make the businesses that can purchase unrefined talent and sell brands a far better business than those that buy physical commodities and sell brands.
Last Week’s OMD Journal
Berkshire Hathaway: Contagious Behaviour & Long-Dated Human Assets via '15 - '20 Letters
"Betting on people can sometimes be more certain than betting on physical assets.”
We’ve caught up! If you stayed on this journey with me since Part 1, we’ve gone through all the Buffett letters from 1957 to 2020. What a journey!
Observed from the 2015-2020 period was Berkshire’s continued evolution with a switch among its businesses. Apple became a new entrant to its Big 4—included are the insurance, Berkshire Hathaway Energy (BHE), and Burlington Northern Santa Fe (BNSF) operations. It came a long way from its textile roots in the 60s.
Berkshire transformed without a master plan. It was an organic process akin to that of any living organism. It shed off deficiencies and emphasized what worked. But all this wouldn’t have been possible without the foundation of admirable values and behaviour set by Buffett. It attracted like-minded leaders and started a virtuous cycle that thrived over 60+ years.
An examination of human behaviour became the crux of the Berkshire letters. While Buffett praised the actions of his team, a fair amount of effort was placed in sharing the misbehaviours that often formed the foundation of many companies. Considering the Mungerism of inversion, we will start by looking at what not to do.
Contagious Misbehaviour
People can’t be forced to change. Any parent, coach, mentor, manager, or lover will have felt the frustration of attempts to change another’s behaviour.
"If you want to guarantee yourself a lifetime of misery, be sure to marry someone with the intent of changing their behavior.” - Charlie Munger
Change must come from within. However, the environment they are in is bound to influence what is acceptable, even if it’s not admirable behaviour. Often, the managers who misbehave aren’t evil, stupid, or ill-intentioned. Misbehaviour hurts another for the benefit of someone else and the root is the incentive structure that awards such actions.
Meeting Targets
Consider the incentive to appease Wall Street. The Street looks at quarterly results—it would look at daily ones if it could. Managers who want to pump up stock prices in the short term may obsess over hitting targets set by these “analysts.”…..
Culture: People, the Self, Observations
Espresso Over Brew Coffee
Less is more. It’s true in both flavour and experience.
Consider the first sip of espresso. Think about how the smooth nectar coats the entirety of the tongue. Notes of acidity and floral accents send bursts of shock from the taste buds to the brain and a tingle past the neck and shoulders.
The seismic wave of flavour doesn’t end there. We merely fail to realize how far the waves roll because we’ve dulled our sensitivities to it.
Think about the gaps in time between each sip. Three or four sips and the espresso is done.
It becomes a ritual. Sip, rest, cleanse with sparkling water, rest, then sip again.
It’s not the kind of companion that can be abused. It’s not a filler to bouts of distraction or a tool for mindless consumption.
Each sip is intentional. The mind is prepared for the taste. It craved the flavour and braced itself to savour the moment for as many seconds as possible.
Each sip has an intensity that can’t be replicated with mere quantity. The intensity elongates time and extends the short experience from seconds to minutes. It creates the kind of awe we experience when we enter a panoramic room covered in Monet or a night-lit canal in Jordaan, Amsterdam.
I’m referring to what espressos do that large-sized brewed coffees don’t. But this applies to all activities.
It’s exactly how I feel squatting 450lbs for 1 repetition over jogging for 10km. It’s the total immersion of a 2-hour movie that took four years to make versus eight hours of 30-second clips. It’s the week spent diving into a captivating piece of literature over a year reading unending streams of 140 characters.
The more it’s done by others, the less it’s worth doing for me. Keeping up with what is easy to do is a losing proposition. The sheer abundance makes that easy to forget.
It’s the scarcity in each micro-step that makes it matter. Each sip, each rep, each book, each movie, and each opportunity.
Each action has to be intentional because of the scarcity. It’s the short bursts of such intense experiences that’ll sustain the years of striving afterward. We mustn’t stop.