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Circle of Competence Issue #65


"All of humanity’s problems stem from man’s inability to sit quietly in a room alone." - Blaise Pascal (Naval Ravikant on Joe Rogan's podcast on the importance of meditation)


The Permian basin is booming - but at what cost to West Texans? (Texas Monthly)

I thoroughly enjoyed the story-like journalism in this piece that captured the Permian Basin in life-like detail. It highlights how quickly economics of a geographic area can change when they are attached to a rapid production increase in a commodity product. It is a real-life illustration of economics on the margin, when demand (for food, shelter, and entertainment) skyrockets and supply can't keep up. Huge real price increases due to the supply/demand imbalance. And what is tough from a political perspective is that it disproportionately affects the blue-collar side of the equation. For some people, these oil fields are just spreadsheet calculations, but for others, they are the only current opportunities for work and money.

Buffett always spoke about the importance of investing in companies where the economic ground was very stable, and on a personal finance level, this is probably good advice for most individuals as well - to find work in a field that offers growth opportunities and will still be around in 10+ years. These oil wells represent potential labor opportunities - but for how long? From a national energy independence standpoint, the boom in production from the Permian is a boon to consumers in the US. But make no mistake, there will be real human costs from the simple fact that the industry is as transient as the commodity that it produces and sells. I am not super knowledgeable about the economics of an oil well or fracking site, but it seems that these types of setups eventually run their course - with consumer demand from transient workers drying up in parallel with the oil wells, leaving a trail of dry oil-field-towns in its wake.

A study on 250+ companies details why platform companies failed (Harvard Business Review)

Here are the four main reasons sited in the article and a platform that failed because they did not get it right: