Regarding… Vol 3 no 6 – Language is a virus

Dear Fellow Investors and Friends,

Welcome to this edition of my newsletter, where I share my efforts to understand markets and the world around me.

I do appreciate you taking the time to read this.

Today is Thursday, February 20th, the 51st day of the year. There are 314 days until the end of the year.

Hunter S. Thompson died on this day 20 years ago. He was an American journalist and author known for “gonzo journalism”, a highly subjective and immersive reporting style.

His works included Fear and Loathing: On the Campaign Trail ’72, which provided an incisive look at American politics during the 1972 presidential campaign and reflected his deep disillusionment with the political landscape.

His most famous work, Fear and Loathing in Las Vegas: A Savage Journey to the Heart of the American Dream, chronicled a drug-fuelled road trip to Las Vegas and critiqued the disillusionment with the American Dream during the decline of the 1960s counterculture.

These days, journalism has become bland and cookie-cutter by comparison, politically correct and toeing the line of whoever pays the bills. It’s little wonder no one cares about the media anymore. We need more Hunter Thompsons and less CNN…

Paradise is exactly where you are right now, only much, much better.

– Laurie Anderson, “Language is a virus”

In the song “Language Is a Virus”, Laurie Anderson explores how language can infect and influence our thoughts, actions, and relationships. The opening line – quoted above – suggests that language can shape our perception of reality by contrasting our current state of existence with some idealised perception of it.

The most famous example of how language can be used to shape perceptions was in George Orwell’s book 1984, where the subversion of language served as a tool for totalitarian control. By manipulating words and their meanings, the governing “Party” sought to eliminate dissent and enforce conformity among citizens. The goal was to create a populace incapable of critical thought or rebellion against the regime. As an example, the “ministry of love” referred to a brutal, repressive organisation. The term “goodthink” was used to denote “acceptable” thoughts, thereby eliminating any avenue for independent, critical thinking. Much like the words “politically correct” are used today.

Chapter 11 of Hayek’s excellent book The Road to Serfdom is entitled “The End of Truth” – I reviewed the book in Vol 2 No 46, “Roughing It” – and he starts the chapter by saying:

“The most effective way of making everyone serve the single system of ends towards which the social plan is directed is to make everyone believe in those ends. To make a totalitarian system function efficiently, it is not enough for everybody to be forced to work for the same ends. People must come to regard them as their own ends.”

The best way to achieve this is to use old words – words that people have used in a certain way for a long time – but then to change their meaning. This is why it’s crucial to fight against linguistic manipulation. Once you accept the imposed framing, you can’t win the argument.

Ben Hunt and Rusty Guinn have devoted the last decade at their firm, Epsilon Theory, to uncover the deliberate use of language – what they call ‘narrative’. They have done extraordinary work drilling down into the ‘narratives’ that are (implicitly and explicitly) deliberately being created today to nudge behaviour and influence the paradigm through which we perceive our reality.

Today, a growing mistrust in experts is one outcome of the increasing difference between the words officials use to frame our reality and nudge our behaviour in “desired” directions and what we see going on around us. As Ted Gioia says:

“When choosing between the advice of the “learned” and the vague impressions of people around us, we prefer the latter. The elites still try to pronounce judgments and lead, but fewer and fewer of us down below pay attention.”

Everything they have said in the past has turned out to be (at best) abstractions of the truth, and they have lost all credibility.

But this is not a political piece. The term “official” refers to anyone in a position of so-called authority. Financial markets, where I work, overflow with “officials.” You can’t open your laptop without getting a notification of a new podcast where some financial market “expert” spends an hour telling investors what they should do – right now!

When one listens to these “officials” with their word salad, they will have us believe they genuinely care about our financial outcomes. But they are simply manipulating our perception of reality to coincide with the actions they want us to take – which, unsurprisingly – always boils down to buying whatever the financial product “du jour” might be.

On which they earn a commission, of course.

What are the “tells” of how the experts communicate when trying to nudge us into their product?

• Democratisation. Sounds great, doesn’t it? Democracy is a good thing, isn’t it? Financial markets aren’t a democracy; they never have been and never will be. They are much more like Hunger Games. You will not last very long if you think everyone is playing nice. Instead, play a game you know how to play – a game defined by your long-term investment strategy.
• Financial freedom. What is this “freedom” they speak of? Is it what happens to you after you put 100% of your accumulated savings into what turns out to be a ten-bagger? Or win the lottery? Or buy their product? Because the odds are about the same for all of them – functionally equivalent to 0. No, financial freedom through investing comes only after decades of saving diligently and investing according to a sensible plan. And, hopefully, more good luck than bad.
• Compelling. The only compelling thing about the experts’ advice is the commission they stand to earn on selling their products. In financial markets and investing, compelling only happens with the benefit of hindsight. A priori, most investment propositions are highly uncertain and risky. The best ones are often, at the outset, seen as the most dangerous and least “compelling”.
• Future-focused. Of course, the expert is confident about what will happen. And they have a product for you that aligns exactly with this certainty. What could be better for you than such a future-focused product? Until the future makes a fool of us all – even the experts.
• Unlock opportunities. Experts love helping you unlock opportunities. But before you pay them for the key, you must ask yourself why this opportunity is locked away so tightly. And why does this expert know where to find the key? It could be that it’s locked away for a good reason. Most often, the best opportunities are hiding in plain sight.

What to do?

Set up a sensible plan, ideally working with a good financial advisor. This plan should be based on the “outside view” of markets i.e. what has generally worked over time, bearing in mind that there is no single “correct” financial plan. There are many good ones, but only a few will suit your goals, personality, risk tolerance, and general attitude towards life and markets.

Pick one of those.

Then stick to it, regardless of what the experts think will happen tomorrow.

This lovechild of Frankenstein and an investment banker has been on a tear just lately, hitting new all-time highs regularly:

For a long time – since 2018, in fact – it had been stuck below the 3800 level. I call this the Bob van Dijk ceiling, which it surpassed recently with the installation of a new CEO.

The market no doubt seems to be more optimistic about this CEO than the previous one. However, that is not a very high hurdle. But it has also been helped by the share price of by far its most significant asset, Tencent:

Despite its recent strong run, Tencent is still stuck at 2018 levels due to the travails of its home country, China.

According to Avior, Naspers is still trading at a significant discount to its NAV – approaching 50% – roughly the average over the past 6 years:

Avior also calculates that Naspers is on a forward P/E of 8.

There is tremendous upside if Naspers unbundles Tencent. On the other hand, every time management does a new deal, the discount widens. The scary reality is they have €10bn to deal with! On top of that, you have the risk that China becomes uninvestable, like Russia.

My take: Earlier this year, the MWI Value fund bought a position in Naspers for the first time. The decision is based on a cheap valuation and our optimism around Chinese assets. As they say in the classics, don’t tell me what you think; tell me what’s in your portfolio. Naspers is in our portfolio. We think the upside/downside risk is (somewhat) skewed to the upside. Let’s see.

Initial Public Offerings (IPOs) are detrimental to your financial health. Not every single one, but the vast majority are. Steer clear of them, and you will miss out on far more failures than successes.

There is a good reason for this: most IPOs involve insiders taking advantage of booming markets and elevated prices to sell a portion of their shares to the public. Insiders rarely sell a part of an asset they know intimately at a low price.

Charlie Munger famously said: “Tell me where I will die, and I will avoid that place.”

As investors, we should do the same with IPOs. Here is where they are and where we shouldn’t be:

My take: Any sensible portfolio should avoid exposure to India and the USA or, at worst, trim it. Relative to the size of their economies, IPO activity in China, Japan, and the UK is subdued, likely signalling more attractive investment opportunities.

A few companies used the easy money available during the ZIRP era to scale rapidly and are now benefitting from massive economies of scale. These include Airbnb, Uber, Doordash and Carvana.

They all have pretty hefty ratings, reflecting that they are just about the last men standing in their respective industries. Their high ratings also reflect that they have achieved the special status of being anthimeric. Like Netflix.

These companies (and others like them) built, coordinated, and effectively scaled a three-sided network using cheap funding no longer available to their competitors. Investors are saying spreadsheets are irrelevant; just buy the stock.

This does strike me as being sightly reckless.

Companies like Robinhood, DraftKings and Coinbase operate at the cutting edge of financialisation, where gambling meets markets.

The challenge of running a gambling business is that customer churn makes scaling difficult. The alternative is to become a broader financial services business, and Robinhood is experimenting with both.

Here’s their CEO: “As with any new innovative asset class, we’re pushing the boundaries here, and there’s not regulatory clarity across all of it yet, in particular, sports.”

He is also campaigning for regulatory clarity around asset tokenisation. In a Washington Post opinion last month, he argued that regulators should allow stakes in private companies to be sliced up and distributed as tradeable digital tokens. And not just private companies. They also want to tokenise a Picasso, the Washington Wizards, carbon credits or a musician’s publishing rights.

Here is Robinhood’s share price, finally above its IPO price:

Coinbase is equally optimistic about the potential for prediction markets and tokenisation, aiming to offer a tokenised Coinbase stock on its platform. Here is its share price, also finally getting back to its IPO price:

My take (on parts one and two): When a country is deemed exceptional – like Japan in the eighties, Southeast Asia in the nineties, and China until recently – it typically reflects an abnormally low cost of capital. This, in turn, leads to a misallocation of capital. I believe “American Exceptionalism” will prove to be no different. To varying extents, the companies mentioned above are symptoms of cheap capital and resulting speculative activity.

“The Fourth Turning”, by Neil Howe and William Strauss, presents a cyclical theory of history that posits societal events unfold in a predictable pattern across generations. The final, or fourth cycle, represents a period of significant upheaval, often involving war or revolution. It is characterised by a breakdown of societal structures, necessitating the reconfiguration of civic life in response to existential threats. Previous examples include the Great Depression and World War II. The authors suggest that the current Fourth Turning began around 2005 and may culminate in transformative societal change within this decade.

Although the book is on my shelf, I have not read it yet. I intend to get around to it, but I might have to do so sooner rather than later, as events are speeding up in that direction.

This week, I read a few articles highlighting our predicament.

But let’s start with Hayek’s Road to Serfdom, which I mentioned in the introduction. Ben Hunt uses its lessons in his piece “It Was Never Going to Be Me”. In it, he uses a cartoon summary of the book to describe the road we are on. The road signs are there for all to see.

He also previously posted a companion piece called “The Great Ravine”, which should be read first. In it, he describes how we are experiencing a deliberately mediated transition from sadness to generalised anger to focused anger. According to Hunt, this transition is the optimised algorithmic solution to a duopoly of two political parties and an oligopoly of a handful of giant tech and media companies that aim to minimax regret regarding their status as the most powerful institutions in the world.

Adam Singer, writing on his Substack called Hot Takes, wrote a piece this week called “Modernity’s leadership crisis” – it contained this juicy quote:

“Leadership abhors a vacuum. If legitimate leaders don’t rise, something else will. That ‘something else’ is whoever can be the loudest in media formats optimised for maximum engagement. Earlier, this phenomenon would have been constrained to town squares and tabloids. These people were considered lunatics, low status and mostly ignored. Today, we scale them effortlessly and put clowns on stage 24/7.”

It’s happening everywhere. The media has become optimised for speed rather than truth or moral integrity. In business, exploiters are lionised over creators. The algorithm removes the edges in music, infantilising us and serving up the same old stuff. Finally, the profound value of family life is overlooked; there is no support for legacy creation. Consequently, birthrates are at lamentably low levels.

Social media is pitting us against each other.

Finally, Ted Gioia, in his Substack “The Honest Broker,” wrote a piece called “15 Observations on the New Phase in Cultural Conflict”. In it, Gioia identifies the crux of cultural conflict as increasingly being down-versus-up instead of left-versus-right.

My take: This is not uplifting reading. But it is the reality we face today, and I am dealing with it by spending less time on social media, avoiding algorithms as far as possible, and being less quick to judge others. The world will carry on, fourth turning or not. Our main job should be to make our journey – and the journey of the people around us – as easy as possible.

Here’s an alternative to Spotify’s algorithm – subscribe to my friend Mark Rosin’s “Friday Song”. Every Friday, you get a song with its “backstory” – stories about how it was made, the musicians involved, and even sometimes about their lives. You might not like every song, but Mark knows his music and tells a good story.

Mark is halfway through his third year of sending out a song every Friday; here’s a playlist of his year so far. I am sure you will find something you have never heard before that blows your mind. Enjoy the journey into the unknown!

Apple playlist

Spotify playlist

Once you’ve listened to the playlist and decided you really, really want to be on his distribution list, email Mark at markgrosin@gmail.com. Tell him I sent you!

Saturday Night Live celebrated its 50th anniversary last weekend. The show is probably over the hill right now, but it did attract some good musicians to play at its party.

The highlight for me was when Post Malone (featured in my top songs of 2024) joined the remaining members of Nirvana to sing “Smells Like Teen Spirit”, one of the anthems of the nineties. You can watch a portion of the performance here. I never saw Nirvana live, but Post Malone captured much of the raw anger that Kurt Cobain brought to the song.

This wasn’t the first occasion on which the surviving members of Nirvana reunited in 2025, as Grohl, Novoselic, and Smear performed at FireAid last month. They were accompanied by a range of different female singers, including St. Vincent for “Bleed”; Kim Gordon from Sonic Youth for “School”; Joan Jett for “Territorial Pissings”; and most poignantly, Grohl’s daughter, Violet, for “All Apologies.” For me, this song was the standout moment.

My take: These are raucous, noisy songs – a fitting tribute to the energy Nirvana brought to a music scene dominated by the artificial sounds of synthesisers and electronic drums in the late 1980s.

Last Saturday, I did my first triathlon in a while. It took place in Langebaan, so Amanda and I took the opportunity to stay in Paternoster for the weekend. That town is fantastic! There are more good restaurants than in many much bigger towns, and the look and feel of the place is terrific. I highly recommend it for a weekend (or longer) away.

Who says small-town South Africa is dying off?

That’s it for this week. Remember to always be careful. It’s tough out there! Oh, and watch out for the Berkshire Hathaway Chairman’s Letter out on Saturday!

Piet Viljoen
RECM