When the Heavens Went on Sale; Interview with Seth Klarman; U.S. manufacturing construction hits all-time high; The 'Spruce Goose' at the Evergreen Aviation & Space Museum
1) During my 53-miles of biking yesterday – 38 in the morning and 15 after lunch – around McMinnville, Oregon on the last full day of our Backroads trip, I had the chance to listen to a fascinating new book and podcast...
The former, When the Heavens Went on Sale: The Misfits and Geniuses Racing to Put Space Within Reach, was written by Ashlee Vance, who penned the outstanding 2015 book, Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future. His profile of Musk was so impressive that it was a major reason why I (thankfully) covered my short position in Tesla's (TSLA) stock.
So I was looking forward to reading Vance's latest book – and it didn't disappoint. I was expecting it to mostly be an update, eight years later, about Musk's SpaceX, which is one of the most impressive companies of all time.
But instead, it profiled four different companies: a satellite maker, Planet Labs (PL), and three rocket-launching companies: Rocket Lab USA (RKLB), Astra Space (ASTR), and privately held Firefly Aerospace.
Vance spent years embedded inside these companies, and he tells a rollicking tale of incredible entrepreneurs overcoming enormous engineering challenges to (mostly) achieve remarkable success.
Here's a New York Times review of the book: The Capitalist Generation's Space Race. Excerpt:
Of the three rocket companies profiled, one, Rocket Lab, pulls off a string of launches and seems on track to deliver the goods. Meanwhile, Astra, started by another one of Worden's protégés, is, according to Vance, mostly a flop. Dismissed by competitors as a clownish disaster that plans to lob up barely functional rockets "with the best of luck," in one critic's words, Astra largely lives down to its billing.
When the Heavens Went on Sale is an optimist's book. That alone has value now, when many journalists instinctively extol the virtues of caution and red tape. Even Vance's title is a challenge to the status quo, defying the kinds of earnest experts who can be counted on to profess dismay at the commercialization of space.
In some of its best sections, Vance's book is an exuberant ride, happily hopping around the Pacific Rim from Kwajalein Atoll to California, from New Zealand to Kodiak Island, reveling in the do-it-yourself ethos of the new space business. It may not completely reach its destination; between the narratives here, it's not fully clear that the new industry has reached escape velocity. But Vance makes a good case that the new generation of space entrepreneurs has managed to set up the launchpad. Most of the mission is still ahead – but listen closely and you can start to hear the countdown.
Of the three that went public, all did so by merging with SPACs during the peak of the bubble in late 2020 or early 2021. So not surprisingly, their stocks have been busts... especially Astra, which, at $0.39 per share, is on the verge of bankruptcy.
But I was impressed with what I read about Planet Labs and Rocket Lab USA, so I plan to take a closer look...
2) The second thing I listened to yesterday was a 93-minute interview with my old friend and legendary investor Seth Klarman, founder of the Baupost Group hedge fund.
Author and investor Ted Seides interviewed him recently on an episode of his Capital Allocators podcast, which I really enjoyed: "Timeless Value Investing" (on Apple podcasts, Spotify, and YouTube here, here, and here, respectively).
Seth doesn't do many interviews, so this one was a rare treat. I especially enjoyed hearing about his childhood, how he first became interesting in investing, and his early career prior to starting Baupost.
Here's a summary:
Seth Klarman is a legendary value investor and CEO and Portfolio Manager of The Baupost Group, an investment firm founded in 1982 that manages $27 billion. Seth authored the very out-of-print Margin of Safety and edited the recently released 7th edition of Graham and Dodd's value investing classic, Security Analysis.
Our conversation covers Seth's early experience in business and investing, path to Baupost, timeless value investing principles and those that have changed over time.
We discuss Baupost's application of value investing across sourcing, diligence, portfolio construction, and risk management. We then turn to Seth's thoughts illiquidity, international investing, the weird current environment, positioning portfolios for it, alignment with clients, succession at Baupost, and his updated perspectives on Securities Analysis and Margin of Safety. We close discussing Seth's personal investments in the Boston Red Sox, horse racing, and philanthropy.
Seth generally stays away from the public eye, so I was particularly grateful to share this conversation some twenty-five years after we first met.
Show Notes
05:05 Early experience in business and investing
17:43 Path to Baupost
20:18 Value investing principles over time
34:39 Sourcing
42:47 Diligence
49:07 Portfolio construction
52:49 Risk management
56:04 Illiquidity
58:46 International investing
1:00:50 Current environment
1:09:13 Alignment with clients
1:12:23 Succession at Baupost
1:14:33 Perspectives on Security Analysis and Margin of Safety
1:21:47 Boston Red Sox
1:23:59 Horse Racing
1:25:53 Philanthropy
3) This is really quite extraordinary:
4) As I was finishing biking yesterday, I noticed not far off my route a few large buildings with vintage aircraft out front and signage for the Evergreen Aviation & Space Museum.
I've always been an airplane nut – my father, sister, and two uncles are pilots, and the Air and Space Museum that's part of the Smithsonian in Washington, D.C., was my favorite museum growing up – so I biked over and discovered an absolutely fabulous museum.
I spent nearly three hours strolling among the more than 50 airplanes and spacecraft, ranging from a full-size replica of the first aircraft flown in 1903 by the Wright Brothers in Kitty Hawk, North Carolina, to fighters from every war we've fought since World War I, to the highlight: the one and only "Spruce Goose," built by business magnate Howard Hughes near the end of World War II and only flown once in 1947. Despite being built out of wood, it had a wingspan of 321 feet, six times larger than any aircraft of its time, and was the largest ever built until 2019 when it was surpassed by the Stratolaunch Roc.
Below are pictures from the museum and here's a three-minute video I recorded about the Spruce Goose:
Best regards,
Whitney
P.S. I welcome your feedback at WTDfeedback@empirefinancialresearch.com.