Crony beliefs: “Beliefs that have been hired…for social and political kickbacks”

Loved this Kevin Simler essay on the concept of crony beliefs. And if you like this kind of writing, I also recommend his book Elephant in the Brain (I shared some favorite highlights here).

A few key paragraphs (shared verbatim):

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I contend that the best way to understand all the crazy beliefs out there — aliens, conspiracies, and all the rest — is to analyze them as crony beliefs. Beliefs that have been “hired” not for the legitimate purpose of accurately modeling the world, but rather for social and political kickbacks.

And so we can roughly (with caveats we’ll discuss in a moment) divide our beliefs into merit beliefs and crony beliefs. Both contribute to our bottom line — survival and reproduction — but they do so in different ways: merit beliefs by helping us navigate the world, crony beliefs by helping us look good.

At work, we’re rewarded for believing good things about the company. At church, we earn trust in exchange for faith, while facing severe sanctions for heresy. In politics, our allies support us when we toe the party line, and withdraw support when we refuse.

Going further, crony beliefs actually need to be protected from criticism. It’s not that they’re necessarily false, just that they’re more likely to be false — but either way, they’re unlikely to withstand serious criticism. Thus we should expect our brains to take an overall protective or defensive stance toward our crony beliefs.

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Two Degens: New pods (Evie on leveraged AMMs and TN on yield trading, all very big brain)

As a solid defi middle curver, I had a hard time wrapping my head around these products. But it was immensely educational for me and great to meet such nice and passionate builders.

Evie on unicorn startup investing (including Grab in the early days!) and building Diamond Protocol 💎 which allows you to leverage up your LP positions on Uniswap V3.

TN on the Kyber crew, being a serial entrepreneur, and building Pendle Finance which lets you separate a yield bearing asset into two tokens, financial wizardry 🧙🏼‍♂️.

Jobs replaced by AI, or jobs re-created by AI?

Tweet from @bentossell (I love his daily AI newsletter)

The list got me thinking… instead of framing as “AI replaces X job”, I think the actual outcome is more like “AI recreates X job”, in much the same way that ATMs recreated the bank teller’s job, and personal computers recreated the typist’s job, and Photoshop recreated the graphic designer’s job…

Implicit in this, is that change is inevitable and outcomes will favor those who best adapt.

Just some thinking aloud…

Content creator –> after AI –> Human does more editing, curating, and aggregating (eg, across different media types)

Journalist –> AI –> Human does more primary research (developing sources, interviewing), editing

Teacher –> AI –> Human does more coaching (emotional support), planning (what to learn when), problem solving (when students are stuck)

Customer service rep –> AI –> Human does more complex issue resolution, relationship building, sales development

Social media manager –> AI –> Human does more editing and curation, community and relationship building

Translator –> AI –> Human does more fact checking, editing, research

Musician –> AI –> Human does more mixing, curating, multimedia, live performance, inventing new musical styles

Not insignificant, too, that several of the jobs on the list — such as web developer or social media manager — didn’t exist in their current form as recently as a few decades ago, and were also enabled (or transformed) by similar mega waves of technological change (eg, personal computers, smartphones, the internet).

I do think AI has surprised in the following important way: Even as recently as a year ago, most people would have assumed that the creative fields (broadly, activities like making art, writing fiction, composing music) were less at risk than the more repetitive, linear, analytical fields. Today generative art and LLMs have definitively proven otherwise.

Change filled times ahead!

Podcast notes – Frax with Sam Kazemian – Blockcrunch: “Frax wants to be the Central Bank of the digital economy”

Frax milestones in 2022
-only large stablecoin that didn’t break peg (other than DAI)
-launched Frax Ether – an ETH-pegged stablecoin and liquid staking derivative

Products
-Frax stablecoin (Frax USD) has ~$1B TVL
-FPI – CPI pegged stablecoin
-Frax ETH – ETH pegged stablecoin
-Considering a BTC pegged stablecoin

Only 8 employees at Frax, all engineers (!)
Focused only on building stablecoins

Use Curve and FraxSwap for liquidity

Increasing Frax USD collateral ratio to 100% (currently 90%, 10% is FXS) – still more capital efficient than Maker (130+% collateral)

Believes it’s impossible to have a USD pegged stablecoin at scale ($1B+ TVL) without having at least one single real world asset

No one has solved the stablecoin trilemma

Central Banks don’t lend directly to Apple, Tesla – they create money, give it to commercial banks – and the banks lend it
Frax isn’t a commercial bank – “it wants to be the Central Bank of DeFi, the digital economy”

On-chain, closest thing to risk-free asset is USDC – “call a spade a spade”
Blackrock manages all USDC treasury assets, in money market fund, buys reverse repos from NY Fed trading desk

Should a stablecoin have ONE or MANY real world assets?
Frax believes should just have one – “deposits on the Fed ledger”
Not going to lend to others – too hard to assess that risk
Maker plans to do this – it’s profitable, you take more risk

Goal is:
One entity – Frax DAO
One RWA (Fed deposits), not 50, not many counterparties
Whole stack simple – no intermediaries

Frax ETH – stablecoin pegged 1:1 to ETH, fully backed (100% CR), no interest, like wETH
Can stake in ETH PoS vault to earn interest – separate token from Frax ETH – currently offering 10% yield (but will likely drop as it grows), part of this is because people need to choose between staking Frax ETH or putting into eg Curve pool
Already 4th largest LSD
Frax core teams runs all the PoS validators – commodity hardware, geo-distributed – will eventually allow others to run validators
Protocol takes 10% cut of staking yields – 2% put aside for slashing risk
Lido has whitelist – to become a validator, have to ID and KYC – if slashed, losses are socialized

Measure of currency’s usage = amount of spot demand, amount of spot holdings
Like USDC, Tether, and Dai – they don’t incentivize any stablecoin holders, only way to measure organic demand for currency

Frax USD goal is to get as close to USDC as possible (100% CR, “risk free”, only one real world asset), but without blacklist

If you like anime, would highly recommend Summertime Rendering

I’m 90% through — no meaningful spoilers below — just highly highly recommended, it’s made me feel some strong emotional things

Stream of thoughts…

The main story is a murder mystery with plenty of action, comedy, fantasy thrown in, and a unique structural device that is the best application I’ve seen since Edge of Tomorrow

Though it was somewhere between episode 5-10 when the story finally “hooked” me, the payoff is really worth it, primarily emotional investment in the characters, all because of how patiently the story is told

The characters are very very well developed — full back stories, interesting and unpredictable arcs, complex relationships

There is a fair amount of fanservice which I can only assume is a “Japanese” thing and perhaps a wish of the author / creator — and now I’m wondering what is the female version of fanservice but as I type this, I already kinda know, it’s the extremely beautiful man who is also an impossible gentleman

I’m convinced childhood flashbacks are a way to “hack” the audience’s emotional involvement — we can’t help but feel both nostalgic of our own memories, and people just care MORE about kids

The art is just GORGE — diverse, detailed, hyper realistic with touches of fantasy, really world building — sometimes the art will suddenly switch to a “horror” or “comedic” style and it’s like a sneak attack you don’t see coming