Recent startup, tech, AI, crypto learnings: “The surest sign of a midcurved institution is its insistence on an ability to control, predict, and dictate to complex adaptive systems”

19/ I have 0 insight if/when Indian policies change but honestly feel like the fact that the most populous country on earth has banned crypto is not discussed enough
Utterly massive opportunity when/if this changes

With a simple meme, you can make millions of people laugh all over the world. I can tweet a joke that gets 15 million views, and I can do it from my toilet. That’s scale. And as every good entrepreneur knows, wherever there’s scale, there’s a chance to turn a massive profit.

If there were one rule to unite all memelords, it would be this: capitalize on the current thing.

Mr. Beast —
Anytime we do something that no other creator can do, that seperates us in their mind and makes our videos more special to them. It changes how they see us and it does make them watch more videos and engage more with the brand. You can’t track the “wow factor” but I can describe it. Anything that no other youtuber can do. And it’s important we never lose our wow.

Let’s say we have 10 minute video about a guy surviving weeks in the woods. Instead of making the first 3 minutes of the video about his first day then progressing from there like a logical filmmaker would. We’d tried to cover multiple days in the first 3 minutes of the video so the viewer is now super invested in the story.

But in general once you have someone for 6 minutes they are super invested in the story and probably in what I call a “lull”. They are watching the video without even realizing they are watching a video.

There were days back in the early 2000s when you would have no idea what to expect from a Bernanke or Greenspan-led Fed. The FOMC meetings were actually quite riveting because you simply had no idea what to expect. But not the Powell-led Fed. They often explicitly tell you what they will do, but in rare cases when they don’t, they leak it to their favorite Wall Street Journal puppet, Nick Timiraos, who spells it out for you.

Lest you think I’m being unfair to our ivory-tower friends, here’s the lore of the term “capitalism”: borne from a socialist French intellectual and popularized by Marx. Lol. Yeah. The guys who don’t like the natural system, named the natural system something that’s kinda pejorative.

I want you to help me build a media empire, where we make (formerly) obscure scholars famous, compile the real time history of ASI, and produce the very best intellectual content in the world.

Content, confidence, and context—these are the three dimensions Shreyas Doshi discovered traditional companies use to promote employees. “This is unfortunately the cause of a lot [of] persistent frustration for otherwise-talented people who are GREAT at content, but repeatedly get passed over for promotion to higher levels… it is usually because they are not projecting as much confidence as they ought to for the next level and they are not as attuned to the context of the org & the company.”

Their SwiftNet private key infrastructure and banking messaging standards like ISO20022 are used by 11,000+ banks globally to facilitate the communication of payment instructions between banks

On Mr. Beast as Buzzfeed 2.0
(he can only sell very generic products like chocolate because his audience is so poor and so broad) — and he is in the most competitive part of the ecosystem / general entertainment.

The best ideas come as jokes. Make your thinking as funny as possible.

Do not address your readers as though they were gathered together in a stadium. When people read your copy, they are alone.

This “secret privatization” of the entire North Korean economy has been incredibly thorough. It’s estimated that around 80 percent of all goods and services in North Korea are provided in secret and in shadow. It’s capitalism as an extremophile species of lichen, colonizing the cracks and crevices of the official society, and keeping the whole system afloat.

“The concern was that 200 phones traveling at 800 kilometers per hour in a plane could rapidly connect to many towers at once, overloading the infrastructure. At least that’s what the FCC thought could happen. So, they banned cell phone use in flight in 1991. But there’s a problem with this theory—a plane is a big metal enclosure, essentially a Faraday cage. So, it should block almost all electromagnetic signals.”

After analyzing value spread throughout his career, AQR Capital cofounder concludes that markets are becoming less informationally efficient. “You’d be forgiven if, like me, your initial whiggish assumption is that markets would get more efficient over time. After all, over the last 20-40 years the ubiquity and speed of available information has continuously grown, and at the same time trading costs have come rapidly down. But like me initially, you’d be mistaking speed for accuracy.”

In the 1950s alone, America built five generations of fighter jets, three generations of manned bombers, two classes of aircraft carriers, submarine-launched ballistic missiles, and nuclear-powered attack submarines.

In 2020/21, very loose monetary conditions + huge money printing combined with two major breakout innovations DeFi & NFTs. People were given stimmies, fiat was massively devalued again, and the prospect of decentralized finance being the genuine future of finance, alongside NFTs being the future of digital property caused enormous retail participation.

“Your highly questionable parenting vision,” responded Nicole, who was a day away from labor. “One, no school or college. Two, separate apartment in childhood. Three, move out at 16. Four, learn to drive all machines as early as possible. Five, leave the family fortune to one child. Six, children have to fly in economy while we are in business.” Luckey also believes strongly in (legally obtained) child labor (permits), that having fewer than 2.1 children would make him a traitor to the nation, and that children as young as 2 are fully capable of walking several miles without a stroller (“History shows it,” he says).

“At some point, in business and in life and in romance, you have to commit to a path,” said the 31-year-old Luckey. “A lot of my peers in the tech industry do not share this philosophy … They’re always pursuing everything with optionality.

By 2023, the cold war between these tribes had escalated into open conflict as hedge fund billionaires led the charge to oust Ivy League presidents and The New York Times sued OpenAI. Incursions into enemy territory are treated with alarm, like when Google’s AI model Gemini was criticized by Riverians for reflecting distinctively Villagey political attitudes.

Villagers see themselves as being clearly right on the most important big-picture questions of the day, from climate change to gay and trans rights. So they view the Riverian inclination to poke holes in arguments and “just ask questions’’ as being a waste of time at best, and as potentially empowering a wake of bad-faith actors and bigots.

Bitcoin is worth a trillion bucks and half of Wall Street owns it at this point. All the rest of crypto is worth another trillion. Tether owns more Treasuries than Germany. There’s been more than $20bn of venture capital poured into this space in the last four years. We’re not that early.

The surest sign of a midcurved institution is its insistence on an ability to control, predict, and dictate to complex adaptive systems. You don’t control them, they control you.

Envision interest rates as futures for dollars.
Interest rates = price of money

I trust GPT4 more than I trust our politicians. In the coming years AI models will become so much more capable that their judgment will start being used to mediate disputes – first inside companies but then legally . Lawyers already use it constantly.

China was The State.
Crypto was The Individual.
It’s the Machine that will overthrow the plutocracy, because the core of the plutocracy – its super bubble was the false insistence it was a machine.

Podcast notes – Edward Chancellor (The Price of Time) on Investor’s Podcast: “Could say today we’re in early stages of a debt jubilee”

Guest: Edward Chancellor – Author of The Price of Time

Even the Bible mentions interest rates and the debt jubilee
Debt jubilee = official forgiveness of debt by the ruler
Common when new ruler took power
Why debt jubilee? Because interest rates compound, led to debt bondage / labor slavery

Modern debt jubilee occurs through inflation (financial repression, where inflation > interest rates)
Could say today we’re in early stages of a debt jubilee

Iceland 2008 financial crisis – borrowed reckless during global credit boom
Much of debt was wasted on poor investments
After 2008 crisis, government put banks into receivership and defaulted on foreign debt
Default is another form of debt jubilee

Seneca the Younger
Advocates stoicism, but also tutor to Nero, earned a great fortune, gave lavish parties – many contradictions
“Time is man’s most precious possession”
Interest = price of time

This notion was revived in Renaissance Italy
How people began to justify interest rates

Time value linked to human’s natural impatience – we prefer having things sooner rather than later
eg, a factory – the earlier and faster you produce things, the more valuable
Should be incentive to use time wisely
Demurrage – medieval ships were charged if they took too long to unload their goods

Efficient economies are driven by a charge on time
If we didn’t have that charge, people would be slower, less efficient

Interest rates are linked to time preference
When young, internal interest rate is higher, more keen to borrow, more impatient, and vice-versa when older

John Law
“Is this guy for real?”
Son of Edinburgh goldsmith (back then, goldsmiths were a form of proto bank)
Law inherits some money
Becomes a dandy / fop in London
Loses fortune gambling
Duels with another dandy, Law kills him
Law arrested, escaped jail, flees to continental Europe
Toured Europe for 20 years
Ends up in Paris
Improved at gambling, very good at probabilities
Develops interest in economics
Proposes a land bank – lend money against land
Argues money (gold or silver) was just a yardstick of value
First “monetarist” economist – can replace gold or silver with paper currency
This will bring rates down, can print more money
This will bring economic prosperity
Starts a private bank in France
Takes over a French trading company, acquires French mint, tobacco monopoly, owned Louisiana Purchase land rights – extensive holding company
Turns private bank into a central bank (the Bank Royale)
He goes broke because he issues paper currency and withdraws gold and silver from circulation
Results in massive increase in money supply
Rates drop from 8% to 2%
His final act – takes over entire French national debt – converts all bondholders credit into his company’s shares (the Mississippi company) – like a QE operation
There’s an extraordinary speculative boom – enormous fortunes are made – the word “millionaire” enters the lexicon
John Law becomes the richest person ever
Considered a great statesman
Then it all falls to pieces – general inflation rises, people sell his company’s shares
Company goes bankrupt, he has to flee, leaving behind his family
Wound up in Venice 8-9 years later, went back to gambling
“A brilliant eventful life”
Too ambitious, moved too quickly, but didn’t have eye for details
His motivation was to bring down interest rates – thus provided framework for modern central banking – was 250 years ahead of his time
Modern lawmakers don’t seem to notice that Law’s experiment ended in resounding failure

Louis 14 – sun king
Huge debt due to wars with Britain, Holland
French debt = 100% of GDP

Modern fiat system is inherently inflationary

“2% tipping point”
Walter Bagehot – Economist editor
Noted that speculative manias coincided with periods of low rates
Current research indicates 3% seems to be threshold

Interest = price of anxiety or price of risk

Policymakers think you can lower rates as lever, but you’re playing with price of risk, and you won’t know where the risk is building
Also encourages misallocation of capital

Concept of “Natural rate of interest”
One definition: “Return on capital of an economy without money”
Observe asset price inflation, credit booms – as indicators whether policy rate is too high or low

Hadley – interest rates encourage natural selection
The higher the hurdle rate, the fewer that survive
Schumpeter – creative destruction – natural process of economic sclerosis, need this destruction to maintain a healthy growing economy

Low rates create low productivity, creates negative feedback loop

Academic economists have too abstract a view of economy, without looking at observed reality

An Assyrian clay tablet dating to around 2800 B.C. bears the inscription: “Our Earth is degenerate in these later days; there are signs that the world is speedily coming to an end; bribery and corruption are common; children no longer obey their parents; every man wants to write a book and the end of the world is evidently approaching.”
// almost certainly an apocryphal quote, but included in book anyway

Final realizations —
Realized how central interest rate was to all of human life, puts price on time, and especially to the capitalist system
If you don’t apply a discount rate to income / cash flow, you can’t price something accurately
“We’ve lost sight of this most important economic variable”
Jim Grant: interest is the universal price
Because we’ve lost sight of it, we’ve gone down a pretty bad route as a result

“Interest is the price of time”

Good interview with author Edward Chancellor on the macro environment and interest rates. I just started reading his book “The Price of Time” which explores the history of interest rates. Interest rates are like water – we just assume it’s there and it works – but when it’s manipulated, it can poison the global economy, which is what we’re seeing now.

Source: https://themarket.ch/interview/edward-chancellor-central-banks-delayed-the-day-of-reckoning-ld.7051

Book: https://www.amazon.com/Price-Time-Real-Story-Interest/dp/0802160069

Some excerpts from the interview:

Interest is the price of time. Time is valuable, or as Ben Franklin would say, time is money. And if you don’t place a proper price on time, then the world will turn upside down.

By aggressively pursuing an inflation target of 2% and constantly living in horror of even the mildest form of deflation, they not only gave us the ultra-low interest rates with their unintended consequences in terms of the Everything Bubble. They also facilitated a misallocation of capital of epic proportions, they created an over-financialization of the economy and a rise in indebtedness. Putting all this together, they created and abetted an environment of low productivity growth.

Going forward, we’ll have more inflation in the stop-go fashion that I described, we’ll have rising interest rates and a lot more volatility in financial markets

Chancellor also mentions Bill White who I’ve shared previously.

Prescient paper from former OECD chair William White in 2012: “Rising inflation along with stagnant demand…would clearly imply other serious problems”

From William White, formerly of the OECD. PDF link here.

A few choice excerpts below, I’ll add more as I finish the paper (it’s slow going for me, I was at best a B+ Econ student in college)

AME = Advanced market economy (eg, the US or Europe or Japan)

Rising inflation along with stagnant demand in AME’s would clearly imply other serious problems for the central banks of AMEs. On the one hand, raising policy rates to confront rising inflation could exacerbate continuing problems of slack demand and financial instability. On the other hand, failing to raise policy rates could cause inflationary expectations to rise. Further, were different central banks to respond differently, as they did in 2008, there might also be unwelcome effects on exchange rates.

One disquieting fact is that these long rates have been trending down, in both nominal and real terms, for almost a decade and there is no agreement as to why this has occurred. Many commentators have thus raised the possibility of a bond market bubble that will inevitably burst.

The famous “Minsky moment” is likely to be shorter, harder to predict, and even more self-fulfilling than Minsky suggested. The failure of Bear Stearns and Lehman provide good examples of these dangers. As well, the shadow banking system has an increasingly international flavor. This not only reduces transparency and the quality of regulatory oversight, but also produces a degree of “balance sheet” exposure that could easily precipitate or aggravate foreign exchange crises.

Third, with central banks so active in so many markets, the danger rises that the prices in those markets will increasingly be determined by the central bank’s actions. While there are both positive and negative implications for the broader economy, as described in earlier sections, there is one clear negative for central banks. The information normally provided to central banks by market movements, information which ought to help in the conduct of monetary policy, will be increasingly absent.

The Japanese crisis of the 1990s began with a very high household saving rate, a very strong home bias for portfolio investment and the world’s largest trade surplus. Contrast this, for example, with the almost opposite position of the US today. A marked shift in market confidence in US Treasury debt would then seem likely to lead to a dollar crisis as well.

Oct 25 addendum: Here’s a September 2022 presentation that he gives on the global economy:
https://williamwhite.ca/2022/09/15/what-next-for-the-global-economy/