Food for thought: Learning from Bill and Melinda Gates, the Airbnb hedge fund, and musings on risk

On Sundays, I post about interesting content I came across during the previous week. Today’s rundown includes a look at techniques used in the Bill and Melinda Gates Foundation annual letter, the Airbnb hedge fund, and timely thoughts about risk from Morgan Housel.

Content inspiration: The Bill and Melinda Gates Foundation

Bill and Melinda Gates published their 2018 annual letter this week, and while it includes important philanthropic messages, I’m more interested in the letter’s design. It has several style elements which I think would translate well to financial content, including:

  • “Tough questions” format – The letter directly faces difficult issues instead of hiding behind positive spin. I bet readers would be refreshed to see a section called “Why did the fund underperform in 2015?” versus a fluffier option, like “Exploring historical performance patterns.”
  • Notes in the margin – Hand-written comments might be too casual for most financial content, but we can still borrow from the bigger concept. Instead of folding all relevant points into paragraphs of text, I’d like to try calling out small bits in the margins to keep the reader’s eye engaged and moving.
  • Conversational style – Many managers write their quarterly or annual shareholder letters in the first person—that’s nothing new—but Bill and Melinda Gates make it a more personal conversation by denoting the speaker and soliciting questions at the end. In the right context, these personal touches can be valuable without detracting from the seriousness of the message. I have a hunch it’s more difficult to cover financial topics with a conversational yet professional approach than it is to write about them in a traditional way—but the reader engagement results might be worth the extra effort.

Airbnb has a hedge fund?

Yep, evidently Airbnb has enough cash on hand to invest in stocks, currencies and fixed-income securities, according to an article by Bloomberg. The article is largely about personnel drama and the decision whether to go public, but it also reveals that former CFO Laurence Tosi created a hedge fund inside Airbnb’s finance department, much like the treasury fund he ran at Blackstone. According to Bloomberg’s sources, “The side project represented 30% of the company’s cash flow last year, and made about $5 million a month for Airbnb.”

VentureBeat takes note of the detail, pointing out that “it’s unusual for a younger company to have enough cash to invest so aggressively, or to enjoy such nice returns that the fund essentially becomes a secondary business.” VentureBeat also notes that Apple has a giant asset management arm, known as Braeburn Capital—which has been garnering attention for years.

In October 2017, The Economist took a close look at Apple’s financial activities across multiple entities, including Braeburn. Altogether, the authors estimated that the current trajectory of “Apple Capital” has it gunning for $400 billion in assets and $250 billion in debt by 2022. For context, that would be 43% of the total assets reported by Goldman Sachs as of December 31, 2017 (!).

Musings on risk

I recently came across the Twitter feed of Collaborative Fund’s Morgan Housel, which eventually led me to his (prescient) January blog post on risk. Given the weighty sense of risk we’ve all felt in recent weeks—in the markets and beyond—it’s certainly worth a read. Here’s my favorite comment:

Risk is everything that lives outside your ability to endure nonsense, hassle, delay, embarrassment, and setback. All are unavoidable realities of life, so it’s often better to increase your ability to endure than attempt to avoid all trouble.