Random notes 3: One Billion Americans, the price of gold, Ray Dalio on macroeconomics, Michael Saylor on bitcoin, and a lot more

Lots of random notes from all the media I’ve consumed over the past week. And here are notes from week 2 and week 1.

First, I recently shared some highlights from an intense book on currency crises, here’s a favorite excerpt:

Although many now-advanced economies have graduated from a history of serial default on sovereign debt or very high inflation, so far graduation from banking crises has proven elusive. In effect, for the advanced economies during 1800–2008, the picture that emerges is one of serial banking crises.

Next, here are some interesting charts I saw on Twitter, starting with a chart on why gold is likely to appreciate (source):

Personally surprised by how little of the US debt is actually owned by Japan and China, despite how much msm talks about it (source):

Onto the random notes!

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Lily Wu, The Crisis of China’s Investment Environment (source)

  • China cos are less profitable than those in US, but more worryingly, gross margins have shrunkg (for example, even as Alibaba has gotten much bigger, its gross margins have declined; one reason is Alibaba entering less and less profitable markets)
  • Another example: GM’s profit in China is $300 USD per car, versus $1K in the US
  • In semiconductors, TSMC has arguably widened its lead over China’s state backed SMIC
  • Chinese companies do well in new / emerging industries, but are most challenged when late to the game, and there are strong global competitors
  • The gov’t recognizes private entrepreneurs and private companies generally perform better
  • There are increasing localization requirements for foreign cos on things like IP transfer, localizing tech and content
  • McDonalds sold its China ops to PE
  • China has world class IP laws, but problem is enforcement, not transparent, and penalties not punitive enough
  • Some similarities to Japan in 80s, but China is 10x larger population, much more unpredictable than Japan
  • Today 75% of HK stock exchange by weighting is China cos! Main reason intl capital goes to HKEX is because denominated in HKD, which is an open currency system and pegged to USD

Some highlights from Matt Iglesias’s new book, One Billion Americans (Kindle)

  • But the United States is not “full.” Many of its iconic cities—including not just famous cases of collapse like Detroit but also Philadelphia and Chicago and dozens of smaller cities like Rochester and Erie—actually have fewer residents than they had decades ago. And virtually all of our thriving cities easily have room to grow and accommodate more people.
  • Right now the United States has about 93 people per square mile. If the aggregate population tripled, then density would too. Many, many countries are far denser than this, including not just city-states like Singapore (more than 20,000 per square mile) or small island nations like Malta (3,913 per square mile) but also poor and arguably “overpopulated” countries like Burundi (1,127 per square mile). Successful developed countries that include a healthy mix of cities, suburbs, and countryside manage to far exceed tripling America’s population density. South Korea has 1,337 people per square mile and Belgium has 976.

And here’s Tyler Cowen podcast chat with Matt. The idea is kinda out there but it’s well reasoned, and inspires me to think bigger.

Ark recently put out an amazing whitepaper on bitcoin. I covered part 1 in the last random notes, and here’s part 2:

Bitcoin As An Investment, Ark whitepaper (source)

  • With little more than a 10-year price history, bitcoin has been the best performing asset of the 21st century. Five years ago, a $10,000 investment in bitcoin would have delivered a 119% compound annual rate of return and would be worth roughly $500,000 today. In fact, during any yearly holding period since inception through September 1, 2020, bitcoin’s return has been positive, significantly so in most cases
  • With daily trading volume of $3 billion, bitcoin’s spot markets are di minimis compared to U.S. equity markets, U.S. bond markets, and global foreign exchange markets. In other words, bitcoin trading is comparable in size to a large cap stock rather than an entire asset class. […] Compared to the “FANG” stocks, bitcoin’s trading volume is higher than that of Netflix and Google but lower than that of Amazon and Facebook, as shown below.
  • We believe that historical growth rates, bitcoin’s daily volume would exceed the volume of the US equity market in fewer than 4 years, and the volume of the US bond market in fewer than 5 years, as shown below.
  • Liquidity as measured by bitcoin-US dollar bid-ask spreads is illuminating. Today, at the largest trading venues globally, spreads can be di minimis at the top exchanges, as low as 0.0001%, as shown below. For comparison, the average US equity bid-ask spread is roughly 0.035%, suggesting that bitcoin often is more liquid than the average publicly traded equity.
  • With hindsight, to construct a portfolio with bitcoin while maximizing the Sharpe Ratio or minimizing volatility at the efficient frontier, an investor would allocate between 0.27% and 6.55% to bitcoin.

Gold expert Marin Katusa on TIP

  • Big fan of Equinox Gold, it’s profitable even at $1100 gold (per oz)
  • 17 rare earths, US used to be big producer, China biggest now, but very hard to buy from China, have it shipped, and have it be good quality
  • Massive stimulus coming after November election
  • Will see $2K+ gold prices soon
  • Gold miners staying disciplined this cycle unlike 2007-2012
  • Japan is MMT case study; covid was excuse for govts do MMT, and it will continue even after covid is gone
  • Barricks (GOLD) is a leader in preaching discipline; it wasn’t Buffett but one of managers that did the research
  • Marin believes people are underpricing geopolitical risk big time re gold miners

Ray Dalio on Bloomberg — among all the financial pundits, Dalio offers perhaps the clearest – yet nuanced – understanding of what’s going on in today’s crazy financial world. But not when it comes to bitcoin. I think he just hasn’t learned enough about it…it’s probably not big enough for him to care (yet).

  • 1. End of the long term debt cycle which started in 1940s
  • 2. Most divided political and wealth inequality
  • 3. Rising global power in China
  • Central Bankers control capital markets now, coordinated with central government. “They’re the market makers”
  • Central Bank balance sheets will explode. They’ll go as far as they need to in order to keep system functioning
  • History shows a perfect track record of doing this
  • Risk premium is driven by amount of liquidity injected, PE ratios going to 40, 50 is no more implausible than zero interest rates
  • Capital markets drive the PE and risk premiums more than the real economy drives the capital markets
  • “You don’t want cash and you don’t want bonds”
  • What is the storehold of wealth? “It’s the reciprocal of the value of money”: Equities, Gold, an alternative currency (eg, mentions China digital currency), “reflation assets”
  • Most analogous period to today is war period of 1930 to 1945 (me: this is similar to Lyn Alden’s writings)
  • US can’t let interest rates rise, because interest payments will rise and asset prices will fall
  • “We’re in a fiat monetary system”
  • Thucydides Trap – in the last 500 years, 16 times a rising power challenged a dominant power, and 12 times there were shooting wars
  • Compared to China, question for US is “how well are we playing the game?”; they’re on other side of chess board, smart, have historical perspective

Why Tokyo, despite significant population growth, has seen far lower increases in housing prices compared to the US:

As FT’s Tokyo bureau chief Robin Harding wrote in the article, the city had 142,417 housing starts in 2014, which was “more than the 83,657 housing permits issued in the state of California (population 38.7m), or the 137,010 houses started in the entire country of England (population 54.3m).” Compare this, also, with the roughly 20,000 new residential units approved annually in New York City, the 23,500 units started in Los Angeles County, and the measly 5,000 homes constructed in 2015 throughout the entire Bay Area

Fascinating book excerpt on how Genghis Khan was able amass so much gold and silver and issue his own paper money:

Let me tell you further that several times a year a fiat goes forth through the towns that all those who have gems and pearls and gold and silver must bring them to the Great Khan’s mint. This they do, and in such abundance that it is past all reckoning; and they are all paid in paper money

Lyn Alden with another clearly argued essay on why fiscal policy will likely drive inflation:

  • So, historically, the difference between a normal short-term deleveraging event and a long-term deleveraging event, is that the long-term version usually includes a significant component of currency devaluation
  • Even an example from 2600 years ago captures today’s situation in an eerily accurate way:
    • In the Athens of 594 B.C., according to Plutarch, ‘the disparity of fortune between the rich and the poor had reached its height, so that the city seemed to be in a dangerous condition, and no other means for freeing it from disturbances seemed possible but despotic power.’ The poor, finding their status worsened with each year- the government in the hands of their masters, and the corrupt courts deciding every issue against them- began to talk of violent revolt. The rich, angry at the challenge to their property, prepared to defend themselves by force. Good sense prevailed; moderate elements secured the election of Solon, a businessman of aristocratic lineage, to the supreme archonship. He devalued the currency, thereby easing the burden of all debtors (although he himself was a creditor); he reduced all personal debts, and ended imprisonment for debt; he cancelled arrears for taxes and mortgage interest, he established a graduated income tax that made the rich pay at a rate twelve times that required of the poor; he reorganized the courts on a more popular basis; he arranged that the sons of those who had died in war for Athens should be brought up and educated at the government’s expense. The rich protested that his measures were outright confiscation; the radicals complained that he had not redivided the land; but within a generation almost all agreed that his reforms had saved Athens from revolution
  • Japan, as the largest creditor nation in the world currently, is the one example out of 52 that has avoided that outcome vs the other 51 examples. Japan didn’t fix their problem; with record debt-to-GDP, they likely just delayed and mitigated it far better than most. Their sovereign debt as a percentage of GDP has continued to increase, pushing the previously-known boundaries on how much debt a sovereign entity can hold
  • It’s like the Titanic hitting an iceberg; once struck, the outcome of sinking became almost inevitable, and yet the ship persisted in a state of being afloat and slowly sinking for quite a while. It became a question of timing, and most importantly, acquiring lifeboats.
  • The economy superficially recovered from those 2009 lows, especially in terms of asset prices, but GDP growth was slow by historical standards throughout the cycle, the labor participation rate among prime age workers never fully recovered to pre-crisis highs.
  • Instead, whether QE is inflationary or not, largely depends on whether it is accompanied by high fiscal spending, since QE’s role in that environment is merely to recapitalize the banking system and monetize those fiscal deficits
  • The long-term structural trend is towards lower inflation or outright deflation, and normally, that would be a good thing. As humanity’s technology progresses and productivity improves, it would be natural for your money to buy more goods and services than it could 5 or 10 years ago, rather than less. However, because we structured our economy around a debt-based system, deflation is viewed by policymakers as the biggest enemy; something to be fought off wherever it shows up, so they seek to counter that inherently deflationary trend with inflationary monetary and fiscal policy
  • If fiscal policymakers realize that the economy is stagnant and banks aren’t lending, they can pass fiscal bills to go around the banks (or through the banks by backstopping loans for them) and get money directly to consumers and businesses, aka “helicopter money”. This could take the form of higher spending, or could take the form of unfunded tax cuts, or both

Michael Saylor goes on the Pomp podcast to explain his decision to invest almost the entirety of Microstrategy’s corporate treasury in bitcoin:

  • Microstrategy (MS) stock went from $330 to 42c after dotcom bubble (!)
  • Would never buy 30yr bond at 2%
  • One of the longest tenured public company CEOs
  • Risk free rate used to be 5%!
  • Asset inflation ~7% but this year it’s more like 25-30%
  • MS business model got better thru covid, reduced cost structure (no travel, no conferences) and customers stuck around (govts, big biz)
  • Limit to how much stock buyback you can do without moving price, would take MS 4 years
  • Hated remote work, but adjusted now
  • Went thru all asset options for investing the $500M:
    • Commercial RE isn’t fairly priced right now, impaired asset
    • FANG tech stocks overpriced now
    • Considered precious metals but bitcoin better
    • Wants something that can be cut in half but also go up 10x
  • All winning cos were tech cos in their time from Nestle to Boeing
  • Looked at defi and other coins but thinks bitcoin’s focus on PoW and SoV and all this energy invested means it’s got best chance
  • “It’s already won”; Believes $100B is this threshold after which you win, if you have a network and a dominant position
  • Vetted bitcoin institutional exchanges, custodians, got to know teams well, then did 1000s or more transactions every day over period of time
  • Confident he didn’t materially move the market, “let the market come to you”
  • “Every CEO had a lot of assumptions shaken this year” from TikTok to remote work to macroeconomy
  • Putting bitcoin in corporate treasury “It’s like the 4 minute mile”. Didn’t think it could be done, now someone has done it and next year dozens will do it
  • A nimble public co takes 6 mos to do what MS did, a rational big public co takes 9-12 mos, expects more to follow late this year and into next
  • “It’s not 10x better than gold, 100-1000x better”
  • 3500 publicly traded cos, $5T in their treasuries
  • “There’s a negative real yield on anything else I can buy”
  • $200T or more of negative real yield on treasuries, precious metals, etc,
    • bitcoin’s upside is not just gold mcap
  • Wonders why Dorsey with $10B between Square and Twitter doesn’t buy $500M?
  • Pomp believes Dorsey has more pressing problems eg dealing with activist investors
  • Amazed at the community ethos

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” – Mises

I learned from Wondery’s Business Wars podcast that when Dominos and Pizza Hut began to offer delivery, there was a legal battle and protracted fight between HQ and franchisees, because franchisees thought it would lower quality of product and cannibalize store sales!

Niall Ferguson and Michael Casey on Laura Shin’s Unchained podcast:

  • Niall Ferguson notes:
    • Son first got him into it, if he had bought bitcoin at that time he’d be retired
    • In developed countries inflation not a problem, only in first decade of existence, problem is actually the opposite (deflation)
    • Monetary policy was often set by merchants in eg Western Europe. State has not always been driving force
    • Bitcoin = option on digital gold for now, eventually will be digital gold
    • US no longer at edge of financial and monetary innovation; leaders have pathology that rejects new innovations like digital currency and ignores China wechat / Alipay
    • KEY: “Present situation is not a steady state”
    • Expectations of US stability and dominance will undergo a step change, and the alternatives are not obvious
    • We are in early stages of pandemic, usually pandemics are 2 year affairs in history
    • Next phase will be how China does with digital currency and digital payment platforms
  • Michael Casey notes:
    • He got into bitcoin because of Argentina, lived there, saw firsthand their history of dysfunction in public finances
    • For him it’s not about scarcity but rather about trust of governance, of transparency

On the importance of focus and presence for productivity and flow:

  • To get things done, you have to do. That’s it. You need sitzfleisch (ZITS–flysh), or “chair glue,” which—as Quartz’s Anne Quito notes—is a German word for the ability to sit through a boring or complex task for a considerable amount of time, however long it takes.
  • Peter Seishin Wohl of the Treetop Zen Center in Oakland, Maine tells a story about watching Soto Zen monks in Japan—who dedicate their lives to cultivating philosophical focus through meditation—cleaning a monastery. They work speedily, practically running as they dust. This demonstrates that slowness isn’t the goal of focus. “Zen has nothing to do with the speed at which we do things and everything to do with the intimacy with which we do things. And by intimacy I mean, not forming a separation between ourselves, our minds, and the activities we’re involved in,” Wohl explains.

Finally, Cass Sunstein on the power of nudge:

A simple intervention is to alter the institution’s default printer setting from “print on a single page” to “print on front and back”. A number of years ago, Rutgers University, in the US state of New Jersey, adopted such a double-sided printing default. In the first three years of the new default, paper consumption was reportedly reduced by well over 55 million sheets, or 44%, the equivalent of 4,650 trees. Similarly impressive results were found at a large university in Sweden.

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That’s it folks. All typos and misrepresentations are 100% mine!

If you want more, here are the last two weeks:
Week 2
Week 1

Til the next one!

Some inspirational quotes translated from Mandarin Chinese

One of my goals for the remainder of 2020 – and beyond – is to become truly fluent in Mandarin. I’d say I’m somewhere between an HSK5 to HSK6, which is to say, I can chat conversationally just fine, and read at around a middle school level, but put a business presentation or bestselling novel in front of me and I’ll break into a sweat – both literally and figuratively. It would be nice to finally get rid of all that Mandarin anxiety :-)

So for starters, here are some inspirational Chinese quotes from Weibo that I’ve translated for fun:

如果你认识从前的我，那么你就会原谅现在的我。—— 张爱玲
Translation 1: If you understood me then, you would forgive me now.
Translation 2: If you understood who I’ve been, then you’d forgive who I’ve become

无论什么困难的事，只要硬着头皮去做，就闯过去了。—— 林海音
No matter the task, just lower your head and rush right through it.

一个人出生了，人们并不知道他的未来，却说：恭喜恭喜。一个人死去了，人们并不知道死去后的世界却说：可惜可惜。—— 三毛
When a child is born, no one knows his future, yet we say: What good fortune! When a man dies, no one knows where his soul goes, yet we say: What a pity.

你在乎谁，你说了算。谁在乎你，你说了不算，时间说了算。—— 郑执
Translation 1: You control who you care about. Fate controls who cares about you.
Translation 2: Who you care about is up to you. Who cares about you is left to fate.

Random notes 2: bitcoin as pure money; inequality between countries is decreasing; “a corporation is like a rogue AI”

I’ll try to share a post like this every week, it’s an opportunity for me to organize and review my notes from what I’ve watched/read/listened to over the past week. Here is the first installment from last week.

My favorite information mediums right now are podcasts and online articles (queued in Pocket), followed by ebooks (Kindle) and YouTube.

First, some art:

Sunshine by Hiroshi Nagai

The piece is called Sunshine, by Hiroshi Nagai.

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Ark’s new paper on “Bitcoin as novel economic institution” [download here]

  • During the last 10 to 15 years, countries have been increasing capital controls rather than decreasing them. Since 2007, the share of countries increasing capital controls has soared 300% to 15%, while the share of countries reducing them has dropped 60% to 5%,
  • In the last century, three monetary policy changes cascaded, cutting the purchasing power of almost half of the world’s currencies by 50%: the creation of the Federal Reserve in 1913 and Europe’s decision to abandon the gold standard in 1918, the US shift from the gold standard to the gold-exchange standard in 1933, and US abandonment of the gold exchange standard in 1971.,
  • Moreover, in the US today the minimum reserve requirement for deposit institutions is zero. Indeed, since 1995 the average bank reserve requirement globally has dropped by nearly 80%,
  • Lowercase ‘b’ bitcoin, the asset, is a standardized unit of value embedded in the network. Its value acts as the signaling mechanism that aligns network stakeholders. In some ways, we believe it is the purest form of money ever created:
  • Since its creation, Bitcoin has settled more than $2.5 trillion in transactions, as shown in Figure 8, the average size of which has been $2,000.

…eagerly awaiting Ark’s part 2.

If you want a better understanding of the global economy and how it relates to your own investment decisions, you can’t do better than Lyn Alden. I’ve been binging her newsletter and writings and podcast appearances. Here are some excerpts:

  • here is how the Bank of England defines QE on their website, in case we want to hear what the Brits would call it: “Money is either physical, like banknotes, or digital, like the money in your bank account. Quantitative easing involves us creating digital money. We then use it to buy things like government debt in the form of bonds. You may also hear it called ‘QE’ or ‘asset purchase’ – these are the same thing.”
  • Currently, the U.S. has about $1.8 trillion in currency in circulation and $16 trillion in broad money supply (which also includes checking accounts, savings accounts, CDs, all sorts of digital cash and cash-like assets).
  • Russia, for example, is buying massive amounts of gold year after year, including buying straight through their 2015/2016 recession. They’ve increased their gold reserves by 5x over the past decade, from 400 tons to 2,000 tons
  • Historically, the bond market has been the “smart money” because it is largely driven by institutional investors rather than retail investors. It tends to be more focused on near-term math than on emotion or long-term projections, and as such tends to front-run the equity market, at least in terms of major transitions.
  • There was a nearly four-decade period from the mid-1930’s to the mid-1970’s where buying and holding Treasuries was a fool’s errand, because they mostly lost purchasing power by failing to keep up with inflation. This was during a period of major long-term debt deleveraging and currency devaluation.

The Foreign Affairs has a very striking article on how global inequality is falling between countries:

  • People in the middle of the global income distribution, whose incomes grew substantially, overwhelmingly lived in Asia, many of them in China. People farther to the right, who were richer than the Asians but experienced much lower income growth rates, mainly lived in the advanced economies of Japan, the United States, and the countries of western Europe. Finally, people at the far right end of the graph, the richest one percent, enjoyed high income growth rates much like those in the middle of the global income distribution.
  • As measured by the Gini coefficient, which ranges from zero (a hypothetical situation in which every person has the same income) to one (a hypothetical situation in which one person receives all income), global inequality fell from 0.70 in 1988 to 0.67 in 2008 and then further to 0.62 in 2013
  • High growth in China, in global terms, is ceasing to be an equalizing force. Soon, it will contribute to rising global inequality. But India, with a population that may soon surpass China’s and is still relatively poor, now plays an important role in making the world more equal. In the last 20 years, China and India have driven the reduction in global inequality. From now on, only Indian growth will perform that same function
  • If China’s growth continues to exceed Western countries’ growth by two to three percentage points annually, within the next decade many middle-class Chinese will become wealthier than their middle-class counterparts in the West. For the first time in two centuries, Westerners with middling incomes within their own nations will no longer be part of the global elite—that is, in the top quintile (20 percent) of global incomes. This will be a truly remarkable development. From the 1820s onward—when national economic data of this kind were first collected—the West has consistently been wealthier than any other part of the world

Thought provoking tweet from Brian Roemmele (his account drops similar thought-provokers on a daily basis):

Apparently, negative emotions can be useful if we believe they’re useful:
The team found that the link between negative mental states and poor emotional and physical health was weaker in individuals who considered negative moods as useful. Indeed, negative moods correlated with low life satisfaction only in people who did not perceive adverse feelings as helpful or pleasant.

Some of my own notes from TechCrunch’s Alex Wilhelm on the Indie Hackers podcast:

  • Their best performing pieces are explainer-y pieces eg how to structure a cap table; insane shelf life but also a lot of planning and work
  • Really important to write about current events because that’s what gets attention and gets shared.
  • If you have a broader point, connect it to a news story that’s happening right now
  • It’s about the “newshook” – the key news event that happened (eg, Tesla shares soared 20% after stock split; father of three killed in 4-way crash)

Are we presently in a fourth turning?
Howe and Strauss observe that American history shows a new era, or “turning” about every 20 years. In simplest terms, the “First Turning” is an upbeat era of strengthening institutions. The “Second Turning” is an awakening, a passionate era of spiritual upheaval, when the old order comes under attack. The “Third Turning” is an unraveling — a time when individualism is strengthened and institutions are weakened. The “Fourth Turning” is a crisis, a decisive era of secular upheaval — the old order is toppled and a new one put in its place.

For me, the concept has echoes of Sovereign Individual.

On the rise and rise of US disability benefits recipients:

  • The federal government spends more money each year on cash payments for disabled former workers than it spends on food stamps and welfare combined
  • “That’s a kind of ugly secret of the American labor market,” David Autor, an economist at MIT, told me. “Part of the reason our unemployment rates have been low, until recently, is that a lot of people who would have trouble finding jobs are on a different program.”

Real estate investor with large YouTube following believes a housing crash is coming in 2021. Here are my notes on his reasons why:
1. There was a temporary supply decline during the pandemic, but a lot of supply is coming back now
2. Interest rates can’t get lower
3. There are millions with no or reduced jobs
Lastly, he believes property taxes will increase in most metros

Luke Gromen on Erik Townsend’s Macro Voices podcast

  • Biggest surplus nations: EU then China then Japan
  • Biggest deficit nations: US then UK
  • Eurodollar market is 60-100T, and Luke believes Fed willing to bail out whole thing if necessary to prevent system collapse
  • Global banks have stopped buying US Treasuries for first time in 70 years…this already started in 2014
  • US true interest payments already more than 100% of tax receipts
  • Luke quoting Marc Faber: when things get really bad, the price of everything goes up
  • Dutch National Bank: If whole thing collapses, we own gold because gold will be used to rebuild the whole thing
  • It’ll be gold at 22K – 10x from here, not 10-20% moves
  • If that happens there will be a debt jubilee. Bond holders and creditors would get burned

Enjoyed this NYT profile of mathematician Eugenia Cheung

  • Deep nonfiction takes longer to absorb, and math books take years. I love the act of turning pages when I’m reading a novel; when I’m studying a math book I might need to spend several weeks on one paragraph.
  • It’s easier to “bridge” science and art when you don’t really think there’s a gap between them in the first place, as I don’t. The boundaries between subjects are really artificial constructs by humans, like the boundaries between colors in a rainbow.

Improve your posture, improve your teeth? from the NYT
If you’re wondering why a dentist cares about ergonomics, the simple truth is that nerves in your neck and shoulder muscles lead into the temporomandibular joint, or TMJ, which connects the jawbone to the skull. Poor posture during the day can translate into a grinding problem at night

From The Confessions of an Economic Hit Man, which I am enjoying in spite of its depressing revelations:
Creating an easy-to-learn language had been President Sukarno’s highest priority after Indonesia won its independence from the Netherlands. More than 350 languages and dialects are spoken throughout the archipelago, and Sukarno realized that his country needed a common vocabulary in order to unite people from the many islands and cultures. He recruited an international team of linguists, and Bahasa Indonesia was the highly successful result. Based on Malay, it avoids many of the tense changes, irregular verbs, and other complications that characterize most languages.

Darius Kazemi’s AI and Art talk on YouTube had me scratching my head in a good way.

  • “A pun is a context switch”
  • “Corporation is like a rogue AI”
  • “Capital is teleological, it has goals, and it’s goal is to increase capital”
  • Humans are really good at enslaving others, which is why we also fear AI will enslave us (in other words, we are projecting)

After watching, I immediately queued several of his YT talks.

Reed Hastings interviewed on The Economist podcast:

  • Netflix key metric is the ratio of total-time-watched-to-cost
  • Has $15B in debts
  • Added 30M subscribers in 1H2020
  • Question he likes to ask: Is the internet going to grow or shrink in next 20 years?
  • Admire and fear Disney, it’s streaming service grew to 60M subscribers in first year, it took Netflix 12 years

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That’s it folks. All typos and misrepresentations are 100% mine! Here’s the first random notes post if you like informational potpourri. Til the next one!

Some 🤯 excerpts from a book on international finance crises

The book is This Time Is Different by Carmen Reinhart and Kenneth Rogoff [Amazon link].

Couldn’t help but share some passages that sound like they could have been written about our present situation.

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Highlights (taken verbatim)

It is notable that the nondefaulters, by and large, are all hugely successful growth stories. This begs the question “Do high growth rates help avert default, or does averting default beget high growth rates?” Certainly we see many examples in world history in which very rapidly growing countries ran into trouble when their growth slowed.

If old people hold most of a country’s debt, for example, why don’t young voters periodically rise up and vote to renege on the debt, starting anew with a lower tax for the young at the cost of less wealth for the elderly?

Although many now-advanced economies have graduated from a history of serial default on sovereign debt or very high inflation, so far graduation from banking crises has proven elusive. In effect, for the advanced economies during 1800–2008, the picture that emerges is one of serial banking crises.

…equity prices typically peak before the year of a banking crisis and decline for two to three years as the crisis approaches and, in the case of emerging markets, in the year following the crisis. The recovery is complete in the sense that three years after the crisis, real equity prices are on average higher than at the precrisis peak. However, postcrisis Japan offers a sobering counterexample to this pattern, because in that country equity prices only marginally recovered to a much lower peak than the precrisis level and have subsequently continued to drift lower.

What is perhaps surprising is how dramatic the rise in debt is. If the stock of debt is indexed to equal 100 at the time of the crisis (t), the average experience is one in which the real stock of debt rises to 186 three years after the crisis. That is to say, the real stock of debt nearly doubles. Such increases in government indebtedness are evident in emerging and advanced economies alike, and extremely high in both. Arguably, the true legacy of banking crises is greater public indebtedness—far over and beyond the direct headline costs of big bailout packages.

When a country experiences an adverse shock—due, say, to a sudden drop in productivity, a war, or political or social upheaval—naturally banks suffer. The rate of loan default goes up dramatically. Banks become vulnerable to large losses of confidence and withdrawals, and the rates of bank failure rise. Bank failures, in turn, lead to a decrease in credit creation. Healthy banks cannot easily cover the loan portfolios of failed banks, because lending, especially to small and medium-sized businesses, often involves specialized knowledge and relationships. Bank failures and loan pullbacks, in turn, deepen the recession, causing more loan defaults and bank failures, and so on.

First, inflation has long been the weapon of choice in sovereign defaults on domestic debt and, where possible, on international debt. Second, governments can be extremely creative in engineering defaults. Third, sovereigns have coercive power over their subjects that helps them orchestrate defaults on domestic debt “smoothly” that are not generally possible with international debt. Even in modern times, many countries have enforced severe penalties on those violating restrictions on capital accounts and currency. Fourth, governments engage in massive money expansion, in part because they can thereby gain a seignorage tax on real money balances (by inflating down the value of citizens’ currency and issuing more to meet demand).

(The reader will recall that fiat money is currency that has no intrinsic value and is demanded by the public in large part because the government has decreed that no other currency may be used in transactions.)

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Random notes from podcasts, YouTube, tweets, and books

Here are notes in no particular order and with no particular focus, just random things I’ve learned and wanted to share, from all the content I’ve recently consumed.

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David Perell with the mind bombs:

Ken McElroy on the Peak Prosperity podcast

  • Property taxes will rise; low hanging fruit and much needed revenue for cash-strapped governments
  • Plenty of opportunities during this recession: Airbnb and Uber were started in the last one
  • Believes campus real estate will be a great investment once universities begin to shutter or reduce their footprint

From the book Nature’s Mutiny:
The improvisational, free form of the essay, which Montaigne invented for himself, was the ideal vehicle for observations not only of the world around him but also of himself and his own thoughts, without pressing them into a fixed system or any grand thesis. For Montaigne, good questions were more important than good answers, and he was mainly interested in describing and understanding the fabric of his own life. “It is many years ago,” he wrote, “that I set myself as the only goal of my thinking and that I am not looking at anything or investigating anything but myself.”

I started using Quad9 as my primary DNS after reading this article:
The total winner of this test is Quad9. Blocking 96% of everything I tested in this review. All 12 phishing domains where block and only one malware domain did it let go through. Very impressive results!

Paul Stamets’s amazing YouTube talk on mycology and mushrooms:

  • Largest organism in world is mycelial network in E Oregon, 200 acres, 1 cell layer thick
  • Fungi generate soil
  • Stoned Apes theory: pre Homo sapiens 200k-2m years ago wandered plains hunting, found psychedelic mushrooms in poop of large mammals / prey, ate them, and stimulated neurogenesis
  • Takes psychedelic mushrooms 1-2x each year
  • Lions mane – stops / slows dementia, promotes neurogenesis
  • Interestingly low dose psilocybin led to faster behavior change in mice than high dose (the behavior change was to dissociate bells from shocks, to remove a learned fear response

From the BBC on why and how people disappear in Japan and start new lives:
In Japan, these people are sometimes referred to as “jouhatsu”. That’s the Japanese word for “evaporation”, but it also refers to people who vanish on purpose into thin air, and continue to conceal their whereabouts – potentially for years, even decades.

And finally, a great presentation for interested newbies on machine learning and the algorithms behind it.

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…all mistakes mine! Til the next notes update!