Quema Capital

Thank you to everyone who attended my first event at Frontera Grill in Chicago on Wednesday evening. Conversations were with Joe Martinez of Vida Companies, Roland Austrup of Envest Corp., and RICHARD WARBURG of Smartech Topical. I was even able to slip in a quick mezcal lesson! I'll try and remember to get more pictures for the next one.

AI is one of the culprits creating data at a massive scale. Powering that is a challenge. US data center power demand is projected to grow by 15% annually to comprise 8% of total US power demand by 2030, up from 3% currently [Source: Goldman Sachs]. It’s a challenge not only because of the absolute rise in power demand but also because 70% of the existing grid is over 25 years old [Source: White House]. The current infrastructure of public utility is inadequate to support this. One potential solution to this problem is private, on-site, off-grid utilities. These have the potential to satisfy the demand, build higher system resilience (little sympathy is given for data center power outages), and do so in a clean and no or low carbon way. Another big challenge is analyzing all of the data quickly and cost-effectively. Analyzing these massive data sets/flows requires a much different approach than current solutions. Companies like Snowflake, Databricks, Google BigQuery, and Amazon Redshift utilize an architecture in which the storage tier is separate from the compute tier. This limits the speed of the overall system because the throughput in the connection between those two does not allow for a massive flow of data. They might also be using spinning disks, which are much slower than NVMe SSDs. One potential solution to this problem is to redesign the architecture so that the storage tier sits directly next to the compute tier and to connect them in a way that allows for a massive flow of data. And also to use NVMe SSDs instead of spinning disks to massively speed things up. It’s been fun working with companies that are on the forefront of these issues. Let me know if you have any insight or experience with these.

Sam Zell used to take a motorcycle trip every year with his gang, Zell’s Angels. Not a bad tradition to have. Adventure and camaraderie. He was still taking trips up until he passed away last year at 81. I understand the appeal. I went on a few motorcycle trips while in Vietnam 7 years ago. In my opinion, it is the best way to get to know a country. ? There were a couple of highlights: Ha Giang, in the Northern part, on the border of China, which has amazing mountains and valleys, and the Ho Chi Minh Road in the Western part of the country, also very mountainous. My friend James joined me for one of them. We joked that we were in the real-life version of Excitebike (an old Nintendo game for people sub ~35). Thankfully, there were no jumps on our ride. Motorcycle riding can be risky. Though I thought it was pretty safe out on country mountain roads in Vietnam. Less so when there was a truck overtaking another truck, both coming at me on a two-lane road, forcing me to drive off the road. That happened a few times. There are ways to minimize that risk through preparation, practice, and skill. Investing is similar. One of the goals of alternative investments is to obtain higher risk-adjusted returns. This means looking at the ratio of average returns to average volatility. There are metrics like the Sharpe Ratio or Sortino Ratio to measure this. Returns being equal, most people will choose the investment with a lower volatility. Or with volatility being equal, most people would choose higher returns. Take the S&P 500 for example. It has performed well over the long-term. But it has also had volatility ranging from about 15% - 20% annually on average. Many people invest in it, perhaps because they think they don’t have access to something better. It's also tough when that's what Warren Buffett tells you to do. But there are ways to get similar returns with lower volatility. And even higher returns with lower volatility. For example, there are multifamily development managers who have asset-level returns ranging from the mid-teens to high double digits. That is skill, preparation, and practice coming to fruition. On the lower-risk side, there are CLO funds. These can produce equity-like returns with bond-like volatility. Part of my job is recognizing these managers and introducing them to my clients so they can have a nice ride. #alternativeinvestments #riskadjustedreturn #motorcycle #multifamily #cloinvesting