Byrne Hobart - Optionality, Stagnation, and Secret Societies

All right. Today, I have the pleasure of speaking with Bern Hobart, who's a writer, consultant, and investor who writes at diff.substack.com.
That's D-I-F-F.substack.com. Here's my first question, Bern.
You wrote an article called Foxes and Hedgehogs, and here's the final line in the article. If it looks like somebody doesn't have a single big idea, they probably do.
And it's a good one. Now you're somebody who writes every single day and you're every single weekday, and you're writing about all kinds of things from in finance, technology, and so on.
And it might seem like you don't have one big idea, but that's exactly why I should expect you to have one big idea. So here's my guess where your big idea is.
And you tell me if I'm wrong or right. Basically, most human decisions, whether they're made by individuals or by institutions, can be boiled down to some simple financial concepts like expected value, optionality, volatility.
And because other people are missing this, they're not reporting on the important trends or they're reporting about them in a way that misses the long-term impact these trends will have? How far off am I? I think that's a good mental model and it's one that I've used a whole lot. I do think that it's definitely true that financial concepts can be usefully applied in a lot of different contexts, but it's like any other model that you want to use the model, but you also want to be aware of the deficiencies in the model.
Like that's like half the, half the point of the

model is to make predictions. Half the point of the model is to say, here's a list of assumptions

you have to make in order to make a reasonable prediction. And if you can't make all those

assumptions, then the model does not actually apply, or like you should at least not be surprised

to be surprised. So, so that is, it is definitely a big part of how I think I, I would say maybe the

Thank you. at least not be surprised to be surprised.
So that is, it is definitely a big part of how I think. I would say maybe the big idea is more of the big question, which is just how do people coordinate

when they're solving complicated problems? Because a lot of the interesting problems in the world,

you can't have one lone genius solve them, and there are various institutions that try to solve

them. But a lot of times the institutional mandate is not to solve that problem.
It's something else. And maybe there's a real mandate and there's a fictional one.
Like a lot of the mission-driven public companies out there, they will have both the mandate of like SpaceX, we're going to go to Mars. But also we're trying to maximize shareholder value.
And it's never clear which one is actually the external story that they're just telling you so that they can really accomplish their internal goals. It's actually not clear which of those is which.
So, and maybe even within SpaceX, there are people who think, okay, the Mars stuff is like, that's how we recruit good engineers. That's how we raise a bunch of money.
When we go public, that's why the stock price will be really high. But that really SpaceX is trying to maximize earnings per share on a 10 or 20 year time frame.
And then there may be other people at SpaceX who are like, yeah, everyone thinks that SpaceX is just this company that's trying to make money. And of course, we will make money.
But the real point is to make humans an interplanetary species. So coordination, it's just a really hard problem to solve.
It's a hard problem to think about. They're like even when you think about how these different institutions have different goals, different stated goals, they may have internal goals that are unstated but exist.
And a lot of a lot of the time those goals are just, you know, whoever's there wants to stay there and wants to get raises and wants to feel important. And if they fail to accomplish their goals, but the problem they're working on keeps getting bigger, they can stay important for a really long time.
So given that there's naturally just a lot of double talk about this, and given that if you're coordinating between different groups of people who have different goals themselves, you sort of need to do some double talk. It's just a really hard problem to study.
And it ends up being a problem that shows up in a lot of different domains. So I've talked about it in finance.
It shows up in tech companies all the time. It shows up in politics and like both the politics in the sense of who gets elected, which bills get passed.
And then in the much broader sense of just how do humans with intractable desires resolve them to one party's favor or another, or just figure out some way that they can all come to an obligation. Okay, so then just to boil that down in terms of the question, is the big idea that you are trying to figure out what the secret goals of institutions are that are, you know, coordinating on a mass scale? Yeah, I guess if you're, if you're thinking about what problem should be solved, the problem of productivity stagnation is really important and it affects everybody and it's dire and it tends to compound over time because different technologies cause other technologies to accelerate.
Different social technologies are kind of invisible until they go away. Like you don't really know, you know, you don't really know that you were working at an effective company, for example, until either it becomes ineffective or you go somewhere else.
You realize, wait, I can't actually trust that if I email someone and ask them a question, they'll actually get back to me with a good answer. Those kinds of things are only visible

when you don't have them.

So between technological stagnation,

which is pretty visible in the productivity stats,

and then social technology stagnation,

which is a lot harder to measure,

but you do get a sense of it

just from looking at, say,

how the US government functioned

in the 30s, 40s, 50s, and 60s

versus how it functions today. It's clear that there's some decline happening there.
And both of those involve a lot of coordination problems. So studying how people collaborate to accomplish goals is a way to figure out how we can all collaborate to accomplish the goal of getting productivity growth back up to where it used to be.
Okay, so let's talk about that. I was planning on asking you about that anyways.
So it's very good that you brought that up. So you wrote an article where you are bullish on the claims that the great stagnation is over based on anecdotal data.
I think the title of the article was stagnation or something, and I'll link it in the show notes. And from what I remember, one of your claims is that even though you have these sort of individual developments like mRNA vaccines, if the regulatory apparatus is not available for them to get approved and scaled quickly, then it doesn't matter as much.
I'm wondering if we can quantify that. So if we look from 1971, how much higher would total factor productivity be right now if all the regulations were perfectly in place to enable productivity as high as possible? Well, I think it's a mistake to take a time period and say if we kept things the same, it's more like if we'd adapted in better ways that we'd have more productivity growth.
I mean, if you just take the gap in measured total factor productivity growth, which is around 1% a year, you compound that over a 50-year time period. So you probably get to something like 60% or 70% higher GDP per capita in the US, which it's kind of hard to imagine exactly what that would look like because it's not like we would all just live in 70% bigger houses and have 70% more cars per household and whatever.
It's more that there would be other additional products or that people would have longer lifespans or hopefully that we'd have longer help spans, which I think is probably more solvable, definitely more pressing in terms of total human disutility, more pressing problem than the lifespan issue for now. So you can sort of ballpark just what things would look like if that mid 20th century productivity boom had gone on forever.
But it is still, you're looking at the data, which the data can tell you the gap between this hypothetical possibility and reality in this aggregate sense, but it can't really tell you what kind of amazing role we would have. And to figure out that, you have to look at specific examples because that whole sweep of productivity growth, it wasn't just that there's a productivity dial and someone was turning it up slightly and then turning it back down.
It was this set of specific inventions that got developed and deployed and continued to get more efficient over many decades. So you'd have to think about the various specific innovations that could have spread around.
So a really good book to start with there is Where's My Flying Car? Which is basically this extended, very detailed, very thoughtful, very well footnoted rant from someone who really wants to have a flying car. And he's interested in them.
And he's flown things that are basically flying cars. And he's done all the math on how they would work.
He's looked at the safety concerns. He has looked at how they would affect things like the layout of cities, how they'd affect the nature of travel.
And he makes a really strong case that we should have them and that they have been not specifically illegalized, but just that the regulatory news has tightened and it's just gotten a lot harder to fly anything and much harder than that to build something totally new and fly it without getting in a whole lot of trouble.

And, of course, the tradeoff there is we don't have very many flying car accidents because we don't have any flying cars. So there would be downsides.
And the early, early innovators will tend to have more accidents. If you look at I'm reading a bit about the early history of the steam engine, lots of explosions, lots of times where we basically learn things about the physical limits of different kinds of materials by building higher capacity boilers and then having them explode.
So there's definitely some downside that we are avoiding, but there's also a lot of upside we're missing. And that downside is easier to see because it is weighted to the very beginning when the new technology doesn't work especially well, but it can kill people.
And we don't see what things would look like in 20 years when it's working really well, it's extremely safe, and you have to try pretty hard to actually kill yourself using it properly. Right, yeah.
He especially blames the green movement and all the government activity it sponsored as being a big culprit there in that book. One of the questions that comes up when we talk about how regulation is slowing progress, though, is obviously there's, you know, like more than 200 countries in the world.
You could you could develop flying cars in any one of them. But what are the odds that you have a sort of correlation that's so exact between countries that, you know, you managed to kill off the avenues to flying cars? Is it just that there's very few countries where something like this is possible and their regulations are correlated? What's going on? Yeah.
So there are a couple of things going on. One is, like you said, the US is a very rich country and that allows us to indulge in a lot of weird hobbies like building flying cars and

before that you know building heavier than air flying machines in general or messing around with the the earliest of regular wheeled cars it it's easier to do that stuff when you're able to eat three meals a day and you can you have shelter stuff like that so so yeah if it doesn't really matter if it's legal to build

something like this in a country where

they don't have the you have shelter, stuff like that. So, so yeah, it doesn't really matter if it's legal to build something like this in a

country where they don't have the spare wealth to build it.

And for aviation in particular,

it seems like the barrier to entry for countries is pretty high.

They have planes have really complicated supply chains. They are,

they're very sensitive to, to the quality of a lot of different components.

You basically like for the larger planes. So, you know,

Thank you. complicated supply chains.
They're very sensitive to the quality of a lot of different components. You basically, like for the larger planes, so for wide body commercial planes, you basically have two entities in the world that make them competitively, Boeing and Airbus.
China has been trying for a really long time to catch up in that business and has not been able to do so just yet. So that is an indicator that it's pretty hard and or that China's GDP per capita is not quite at the level that can support an industry like that.
So it does matter if regulations are strict in the handful of countries that are pretty rich and that also have developed capital markets. That's another thing that you really need for something like this is that once someone has the product, once they've done the proof of concept, once they've shown that it can work, it has to scale up and it has network effects.
That is actually one of the exciting things on flying cars that has started to happen since I read Where's My Flying Car a couple of months ago is that United Airlines has actually been putting in orders for basically flying cars. And they seem to be pretty serious about messing around with that and messing around with supersonic travel and really rethinking the range of speeds at which human beings should fly and the range of distances at which they should fly.
So things could be looking better there. But that's also maybe a sign of how difficult it is to expand in this industry, that you need one of the big four airlines to back you up if you're even going to have a hope of selling these products and actually selling tickets to passengers who will then fly in their flying cars.
hmm yeah one of the mysteries though is why don't western companies with uh you know their capital and their technologies if they're getting stuck in the regulatory process in the west you know

why don't Western companies with their capital and their technologies, if they're getting stuck in the regulatory process in the West, why don't they just do their experiments in Honduras or Senegal or something? And you can imagine this, for example, with human challenge trials with COVID. Some poor country is completely inoculated to COVID by March or something.
And we're still like dealing with the aftermath. It's mysterious why that didn't happen.
I suspect it'll happen next time. I think, like, if there's another big pandemic, I do think that you'll have some people who just say, we're going to do human challenge trials.
And, you know, I'm going to whatever this country is, I'm going to bring some, I'm going to bring all the researchers I can. And we're going to develop a vaccine, we're going to test it.
And, you know, hopefully, hopefully we do a good enough job that we, that it's, it's politically untenable to get us in legal trouble afterwards.

But there is so there's this weird coordination between media on the one hand and regulators on the other hand, where whenever whenever someone is breaking these rules. So rules, so if you try to go around FDA rules, it's pretty clear that that's what you're trying to do.
It's pretty clear that you are saying, I don't actually think these rules should apply, and so I'm not going to follow them. And that gets a lot of attention at the FDA.
And they have a lot of power to make sure that you do not actually, that you're never able to sell whatever the result of that experiment is in the US. Now, it's not like the FDA is going to say, if someone in a different country invents a miracle drug, and it works really well, and then they try to sell it in the US, it's not like the FDA will just flat out refuse to approve it, although they will take a long time.
It's more that if they know that you are specifically trying to ride around the regulations, they take that pretty seriously. And that seems to be just a feature of big institutions in general that if they set up some kind of rule and you thwart it and that gets their attention, then they're very serious about making sure that you don't thwart it again.
So it's not just a public sector thing. Like with Disney, if you try to make knockoff Disney characters, you will hear from disney's lawyers if you try to host um pirated video games you hear from the game publishers a lot of a lot of big institutions are very serious about keeping their rules enforced as much as they can both because that's uh you know they have those rules because it benefits them and because it's a source of legitimacy that they can write the rules and everybody follows them.
Yeah. And it gets pretty sinister.
I read a book by, I forgot her name, but she was, she, she worked on a pharma company and she wrote a book called Death by Regulation. And one of the points she made was, you know, if anybody like actually talked about like how many deaths the FDA causes by, you know, just not approving drugs.
If the company says like, listen, here's the approval process, here's how much it sucked. You know, that really has an effect on whether future drugs that they make get approved.
So there's really a silence on that. Oh, but speaking of the FDA, here's just one technology I've been interested in.
What are the odds that polygenic scores for embryo selection get approved by the FDA? I suspect that it is, I mean, i'm definitely not an fda expert um so i'm probably the wrong person to have a strong opinion on this my my general sense would be if you are testing for genetic diseases and maybe you can broaden the definition of what constitutes a genetic disease over time but that that stuff, that seems to be pretty safe.

And then if you're doing things like, I want my kid to be tall, not just normal tall, but like can play in the NBA tall, and I would pay a million dollars to select the embryos that give me an NBA qualified kid. I suspect that that is going to be very hard to approve.
maybe but Chinese government seems a lot more

open to genetic stuff, both in the genetic research stuff. Like they were very early buyers of a lot of genome sequencing equipment.
And they also believe Yao Ming is literally the result of them telling two very tall people to get married and have a kid. And he turned out to be tall.
So we know this genetic stuff can work some of the time. So that government seems much more open to it.
So I suspect that if that kind of thing does happen and it's legal, it's probably going to happen in China. Right.
Yeah, I didn't think about it that way, that you could just kind of sneak it in through other tests, but like, you can imagine like, oh, we're just testing for some nervous system diseases. And then, you know, oh, wow.
Would you look at that? They correlate with intelligence. The next question I have is, Robin Hanson has written recently, and we talked about this, the idea of just patient long-termism, which is the idea that like, you know, you park some money in a compounding fund.
And then within a few centuries, you will be the wealthiest person in the world, right? If you just assume some sort of like return, compounding return. And in fact, one of the things you I think you said at some point about your blog is like, I'm trying to make your great grandchildren rich by just identifying these long term trends.
As far as we know, this hasn't happened. I mean, it happened in odd cases like

Ben Franklin or something, but on a large scale, this really hasn't been tried. It might be in

a temper right now, but what gives? Why is this not a strategy people are using?

Yeah. So I think it wasn't Piketty's main point, but Piketty does have a point here that

one of the things that resets this is war, famine pestilence revolution those things tend to knock everyone's net worth down pretty substantially and if your net worth is in financial assets that are relatively easy to seize then it goes down a lot faster so that is that's probably part of what's going on i mean there there was that study a while ago that was looking at um wills, I think it was like the wills of Florentines who died in the 15th century, and how the names, the last names that were more prominent then are actually still more prominent today, like the last names that were more associated with being a doctor in 14th or 15th century Florence, those people are still more likely to be doctors. So there is some persistence that actually outlives the direct loss of wealth.
But I think if you're trying to compound money for a really long time, I don't think that the main thing that you want to focus on is your annual returns. I think the thing you want to focus on is what are the once a decade, once a century, and if you're really thinking about it, once a millennium risks that will turn up and that can actually push that return to zero.
So I don't know of any financial asset that you can actually trust in that sense. The U.S.
is a really weird case because we actually haven't had any of these massive catastrophic drawdowns in everybody's wealth that basically every other country has experienced. So if you look at it from a US context, you can actually imagine someone who put some money in a trust and they're just buying mostly treasury bonds and also stocks, and that it compounds over time and ends up being a colossal amount of money.
But there's actually,'s a story in Adam Smith, the pseudonymous financial commentator, not the not the economist, Adam Smith's money game, where he talks about a guy who did that in the 19th century, and he bought a lot of very reliable blue ship stocks. And he, I think he set up his will so that his heirs just could not get the money for several generations.
and Smith says that there were years and years of legal battles. And finally, the heirs were able to get access to the trust.
And everything was worthless. It was all like American Alarm Clock Manufacturing Co.
that had been bankrupt for 20 years by that point. So if you're just picking a set of stocks, for example, over a long time, they'll all go to zero.
Over more intermediate time periods, you can rebalance. And so that keeps the portfolio value above zero.
But if your country goes through a war or there's a revolution, then there's a good chance that all of that value gets wiped out. Yeah, interesting.
This is related to a question that I was talking to with my last podcast guest. You've written an article called Praising Filter Bubbles.
You know, like this is somewhat related to it would be good if there were more cults and more secret societies. I was just wondering, I mean, we wouldn't know this because they're secret societies.
But if and I'm not saying they're, you know, in any way, any way bad or, you know, but they don't have to be evil be evil or anything. But what would you guess? How many secret societies do you think there are that have assets in excess of $1 billion? If any.
Well, that's a tough question because if you, so you would need some kind of legal structure to own the assets, right? And if it's going to persist for a long time, you need some system for figuring out who's going to be in charge and for picking people who are going to keep that secret society going. I mean, I wouldn't be surprised if there were organizations that might have started out trying to be a secret society that accumulates a bunch of money, and eventually they end up being run by people who are just in it for the money i mean maybe maybe a fair number of universe like people who started universities they often had peculiar ideas about how human beings should behave and how to educate people like if you if you have a bunch of money and you're thinking about what to do with your life and you say you know what i'm going to do i am going to exert maximal influence on people at impressionable ages and also make these people really important so that they have a big impact on society.
Like, you're already doing a secret society conspiracy, you're just calling it Harvard or Yale or something. So you could actually look at modern universities as having maybe evolved from something closer to a secret society.
And then they have, of course, their own little secret societies inside of them,

which have also apparently gotten really boring and have just become this kind of career-ish thing that you do if you want to get a good job at an investment bank. It's hard to keep secret societies alive for a long time.
And I think part of the reason for that is you do have to keep secrets, but you also have to reveal secrets. and if people join it because of one narrative

and then you tell them once they're pretty high up okay that narrative is totally fake here's what's really going on um some of them are real believers so you can actually end up with your secret society failing because it uh it recruited people it recruited people who thought they were the right people for it they turned out to be the wrong people for it there's um there's actually a kind of weird example of this happening in reverse with al-Qaeda. So in the book, The Looming Tower, it talks about bin Laden's early life and his early campaigns as a sort of terrorist.
And the impression I got from that was that a lot of the people who worked with bin Laden in the 90s thought he was a loser, but that he had money. And so they were sort of scamming him and just telling him, oh, yeah, you know, next year, we're definitely doing a terrorist attack.
And then somehow he actually organized something and was able to do several successful terrorist attacks. But for a long time, it looked like a lot of the people involved just did not think that al Qaeda was anything other than a way to mooch off the bin Laden portion.
So, so you have you have a lot of, I guess, a lot of just randomness in what institutions try to accomplish and how they try to accomplish it and who they end up recruiting. Now, one way around that is families, because with families, you actually, if you have some familial goal and it's going to take multiple generations, so you can be more honest with your kids than with someone you're trying to recruit from the outside.
And you could sort of work up to telling them what, what the actual plans are. And I think that with, with multi-generational wealth, especially families that got rich first and then got into politics, that there's probably some of that going on where it's, it's not like a huge, you know, it's not like the Kennedy family was some huge, weird secret society.
It was more like there was a conspiracy and the conspiracy was get one of the Kennedy kids, get one of Joseph Kennedy kids elected president, and then they did it. And so mission accomplished.
That might be the more viable model. So if you're trying to count up secret societies that have secretly accumulated money, what I would look at is family fortunes where there's someone who made a bunch of money and then their kids are doing things that are more prestigious and more power-seeking but are not as financially rewarding.
And probably some of those basically count as secret societies

in some approximate sense. I don't have a good way to speculate on how many secret societies

there are, how powerful they are, et cetera. I mean, either there aren't very many or they're

really good at being secretive. So I guess one way to say that the population of them is probably

pretty low is that we don't have a lot of dark matter to explain.

There are not a lot of times where we look at what happens in the world and we have to think, wow, there are really dark forces at work.

There are a lot more times where you can look at the world and say, wow, there are pretty incompetent forces at work and nobody knows what they're doing and there's nobody in charge.

But you rarely see all the chess pieces moving in a really clever way. You just sort of see the chess pieces moving at random.
Right. I mean, the one thing that shapes my view on that is like UFOs, right? It just like either they're aliens or, you know, it's like a military thing or just like an error.
But one of the alternatives, like it slightly nudges your prior on secret societies up because like maybe that's what's confusing the military. One example by the way of like a familiar secret society it's not even secret society um i was reading um andrew roberts biography of churchill and his dad was you know a minister and he was planning on becoming sorry uh uh a parliament whatever somebody in the parliament is called and he was planning on becoming pm he just died.
And basically Churchill, Winston Churchill, just adopted his dad's entire platform even after his dad died. Okay, you wrote an essay called Optionalities for Enumerated Cowards.
And it really reminded me of this little passage from William Dershowitz's book, Excellent Sheep, which he wrote about the caliber of students that are going to college nowadays. Anyways, I just want you to get your reaction to this passage so he writes yale students he said are like stem cells they can be anything in the world so they delay they try to delay for as long as possible the moment when they have to become just one thing in particular possibility paradoxically becomes limitation um i i guess uh i'll get your reaction to that generically but i'm curious to the extent that that quote reflects something true.
Is it post-selection in the sense of the people who get out of Yale are just like become risk averse or is it just the people who go to Yale in the first place and getting generic degrees? Are they risk averse in the first place? They're looking for an option basically in the form of the insurance that Yale University offers. What's going on? Well, I would say it's probably a lot of selection effect because I do encounter a lot of really bright people who did not go to elite schools and did really interesting things instead.
And so I don't actually, I don't know that the schools really make people conformist, but definitely if you can get into a really good school and then you can go straight from there into consulting or banking, or I think at this point, big tech, it is a pretty conformist thing to do. Like no one is going to think you made a bad decision.
Whereas if you have that opportunity and you go do something else, then a lot of people are going to wonder what's really going on. So I do think that it selects for some risk aversion.
And some of that is just that it's incredibly competitive to get into these schools. There's a lot of randomness at the top now.
And that is partly just a feature of competition that the fiercer competition gets. And the more stratified things are, the more likely it is that any one person is where they are because they were a little bit underslept on test day or got a couple answers right or something like that.
It's a lot more skewed to randomness at the high end, which actually would make people more risk averse because they, if they got into a worse school and they really deserve to, then they're stuck with this feeling of, you know, it's hard to, it's hard to attain things. And so it's, it is worth going on the safer path.
Whereas if they get into a really good school that is better than they expected, then they have this sense of as long as I stay on this exact path, I am actually continuing to be 99.9th percentile instead of being stuck at 99.5th. And so that is the best life I could expect to have.
It is really hard to force people to have agency. It's really hard to force people to take risks, except in these kind of simulated fake sort of ways.
But it is an important thing for people to do. And that essay, I'm very happy with it, in part because it was fun to write something bombastic and in part because I think it's true that, and it's like, that's actually a

fun one from a financial modeling perspective, because one of the things that I realized when

I was thinking about optionality and like optionality in, in your life, being able to

choose a lot of different life paths and not having to be stuck with one thing is that in,

in financial markets, you can buy optionality very directly. You buy stock options.
And it turns out that the converse of that, selling people optionality, is a generally profitable strategy. It does have drawdowns during a market crash, but in general, you make more money over time by systematically selling optionality rather than by systematically buying it.
And I suspect that something like that is probably true in the real world, especially because there are very few people who are explicitly saying, I'm trying to minimize my optionality. I'm trying to cut off options and not have choices.
So given that there are some decisions you can make that do require you to forego other decisions, I suspect that those decisions are going to be good, or they're going to be better for you just because so many people are looking for maximum optionality, so they're not taking them.

Yeah, yeah.

One way of reading Tyler Cowen's complacent class is basically just a way of like our preferences.

Our preferences for optionality have grown a lot.

You can think of it in terms of not starting a business, not having a family, early at least.

That's just a way of preserving your optionality.

What is the explanation for, maybe it's because we're wealthier, maybe it's because of the demographics of the society. What reason explains if it's true that we're a society where we value optionality more than we did before? What explains that? Yeah, I think a lot of it is this wealth effect that in general, money is a way to get freedom in individual ways and then in aggregate ways.
And certainly you have a lot less optionality if you're living in a subsistence society where your choices are either do something that gets you fed or starve. So not a lot of optionality there.
So we definitely have more choices as we get richer. And I think one of the issues is that we are partly wired to be more satisfied with actually making choices and pursuing specific goals than with making the choice to not pursue any specific goals.
I don't really know what the deeper, darker meaning of this pursuit of optionality is. I know a lot of people talk about it explicitly.
I know a lot of people talk about it implicitly. And it seems like there's this search for optionality that takes place on a kind of fractal level where not only do people want to choose a job with lots of different kinds of exit opportunities, depending on what they want in the future, but they'll try to make their plans to have lots of different plans so that if they decide they don't feel like going out this night, they have an option to go out the next night and maybe they'll skip that and go out the next night and so on.
And you get less done if you have lots of opportunities and you could easily forego any one of them. But there just aren't that many people who succeeded in a memorable way, because they kept all of their options open.
I think the closest to that you can get is that there have been a number of people who made their money in smart deals where they did manage to control the downside. But to take the optionality example, that is more like being a structured products trader or being an options trader who is trying to construct this pretty elaborate payoff structure where you get to control your losses on one side and then you're maximizing your payoff on some other side.
And that is a lot more complicated than just optionality. That is, you're not buying it wholesale.
You're actually picking and choosing which options you care about and which options you don't. And that's, I think that is something worth keeping in mind.
And maybe I didn't emphasize enough in the essay that I'm not saying you should always choose the minimum optionality choice. Like, you know, you could read that essay and immediately sign up for the military or join a religious order or something and have no more choices in your life for a long period.
I'm not saying you should immediately seize the opportunity to give up options. I'm saying that you should be very judicious about them.
And that going back to the markets example, if markets are not perfectly efficient, but they are pretty efficient, you should expect that you can get a superior payoff, but only if you are actually doing pretty good work and only if you're doing something you're actually pretty good at yeah and i mean it's like some of the risk aversion in society can't be explained by

optionality alone uh it just it just uh somewhat conformity uh you can think in terms of like one of the examples i like is you know i think about think about somebody who becomes a dentist right it takes like what 12 years or something like 500 000 or more in student loans and it's a very specific thing to do. You're getting rid of options.
What if you just spend those 12 years

on that much money,

just trying to start like 12 businesses,

each one every year,

see if it fails or you just move on.

In some sense, that option had,

or that choice, you have more optionality,

but people are still less willing to do that

for some reason.

Oh, you mentioned that, you know,

people trying to get accredited in ways that,

you know, there's a group of people

who are very doing cool things, but they, you know, they're not trying to get accredited by

elite universities. Is that, are people acting irrationally by trying to get accredited from

elite universities? You can look at your example. I mean, you know, you got a well accredited,

but just by being a very excellent SEO writer. And in some sense, maybe more people should be trying to do that, right? Like you're getting a better credential by doing that.
Yeah, I, I would still, I still view elite higher education as probably a pretty good deal for the individuals who are doing it. I just think it's a, it's a bad deal for society that so many people are pursuing it.
So like, yeah, if you have the opportunity to go to a great school and you're considering

just not doing that and figuring out what to do instead, that is probably, you should

probably just go to the school.

But if you are going to a really good school and you see a particular opportunity that

you want to seize right now and you know that that entails dropping out, and like if there's

one specific reason not to go, then that is when you should not go or at least drop out. And you still have optionality there.
Like, I think, I think last time I looked at this, both Mark Zuckerberg and Bill Gates are technically on, they're on some kind of like hiatus sabbatical thing from Harvard, like they could just enroll, I think next semester and start taking classes again, if they wanted to finish. So, um, it, and I guess maybe that is a, maybe that is an example of just how far the preference for optionality goes that even like, once you get into a good school, like they actually won't let you drop out by default.
You have to ask them if you have to ask them if when you leave, they will not let you back in or they just will. But yeah, in general, going to a good school, like it's a good credential.
And it's just, it's hard for someone who is say 22 years old. It is hard for them to do something that they expect to succeed in that is more impressive than getting a bachelor's degree from Harvard.
It is just like you can do things that are more impressive than that, but your expected outcome is probably lower. Your median outcome is lower.
On the other hand, if you do succeed in something else and you also turn down the easy prestige, the easy credential, then that's even more impressive. And it's not just externally.
I think there's something really important internally about having this experience of having an easy way and choosing to do something else, even though it's much more risky, that you know that you have slain the optionality dragon and its other heads are gonna grow back at some point, but you have actually fought it and won and that's gonna stick with you. Yeah.
Yeah. One of my previous guests, Scott Young, he's famous for basically, I don't know if you heard about this, but he did something called the MIT Challenge, where instead of going to MIT, they have an open course.
MIT has all their classes online. He just did a thing.
I'm going to get a four-year bachelor's education in computer science for MIT by just doing the online coursework. and you know, like if I get above an F on the final exam, which I self-administer, then I consider myself passing the class.
And he does this. I mean, in some sense, given the fact that it's shrunk, he did less work than getting an MIT education would be, but he got tons of like job offers from that.
Maybe people just aren't creative enough. There are like getting, getting a good, finding a way to get a good signal to employers to employers is not an efficient market.
It's just that people, 19-year-olds, you wouldn't expect them to pick up $100 bills on the floor. Yeah.
I think one thing to note on that is that a lot of people who try that will actually find that they've really overestimated their willpower. And I think this is actually one of the functions that a school like MIT serves is just to

consistently motivate you both by surrounding you with peers and by giving you professors

who are very smart and whose judgment you respect.

And so if your professor tells you this is C minus work, you actually feel bad and you

try to do better.

Whereas with yourself, it's a lot harder to motivate yourself.

You can do it, but you will often have to pick your own topics to study to do that. And then there's no credential.
There's not even like, I could have gotten this credential, but I didn't go to this particular school. So I'm equipped to do the coursework, but I did it somewhere else.
It's more like this is not really a thing, but it's a thing I'm actually really good at.

And so you have to both do the work and then sell people on treating that work as credible. Yeah, so I mean, speaking of that, you wrote an essay called, I forget the title exactly, but it's basically the idea is that introverts will be more influential in the future.
And if you think about the big five personality traits, like introversion is one that, you know, will be more valuable. I mean, given the fact, I mean, Tyler Cowen makes this point in average is over that he expects conscientiousness to become a highly valuable trait in the future.
In that essay, I think you basically said that actually conscientiousness might become less important, or at least you didn't emphasize it. I mean, comparing conscientiousness to introversion, given you, I mean, obviously, you have things like self-education, but there's just so many other things where given that, you know, you can get more returns by doing clever and more things, you know, scaling them up to a higher level.
And maybe conscientiousness is a more important trait in the new economy. Conscientiousness is really important if you have goals that are set by somebody else.
And it's really what lets you achieve those goals. And so I would rate myself as not very conscientious at all, because I'm pretty bad at fulfilling totally external goals, like almost deliberately bad at it.
But I do work a lot on things that I'm interested in. what and this this may be it may be almost a terminological difference uh on what consciousness is because i i would view it as if someone asks you to do something and it's some arbitrary selected thing an arbitrary thing that they select are you likely to get it done um and maybe that's likely to get it done conditional and promising to, or conditional being expected to, or whatever, but just it's, you know, it's a measure of that expectation.
And that people have low expectations for me on many of those things. But if conscientiousness is just, are you willing to put in effort to accomplish something, then that's something that I am willing to do.
So my view, and this is kind of an averages overview, is that as the cost of communication gets lower, as transaction costs decline, and as more of the economy gets mediated through software, there are just going to be more specialized jobs. And if you are really interested in one of them and you're just're just naturally interested you would do it for free then you don't need to be especially conscientious to succeed in it um there's i guess there's another side to the conscientiousness thing and i i uh wish i knew what tyler count's exact argument is because um another reason that you might actually want uh you might think conscientiousness would pay better is that entertainment is getting so much better and is getting much more addictive and it's getting

better at marketing itself to you. So just being able to resist the siren song of Netflix and

video games is becoming a more valuable skill. But that again, it's, there are, there are times

when I will just be messing around and waste my time and I'll realize that there's something

more interesting I could be working on and it would actually produce something tangible that subscribers would pay for and that I would be proud of. And so I hit Apple Q and get back to work.
Yeah. That's surprising that you wouldn't consider yourself especially conscientious.
I mean, the distinction makes sense, but like given the fact that you produce a, you know, know, lengthy newsletter every day, one of the, I, I, I, the argument that Tyler Cowen makes is, I mean, obviously self-education and other point he makes is that, you know, businesses are bigger now you have global supply chains. So if you have a person who's kind of a rebel without a cause or even a rebel with a cause just being unreliable and, you know, being volatile in some sense makes you much more dangerous than you would have been in the past because you're just, you can mess up more things.
I don't, I don't exactly know what that means because I've never interacted with these like, you know, global supply chains myself, but that's just what I remember. Yeah.
Well, I wonder about that because I suspect that, you know, some of the people at Apple who are managing things like, you you know managing their response to covet or whatever um i suspect that they're doing this in part because it's a really fun challenge like i'm sure they're paid well and everything and i'm sure that's that's a big motivator too but it actually sounds kind of like a fun puzzle to say if um if this if shenzhen shuts down and most of your manufacturing is close to shenzhen what do do you do right now? What do you do in a week? What do you do in a month? And by the way, what is your plan for making sure that we never have this problem again? So there could be just some general appeal. Like Factorio is a very popular video game.
And the whole point of it is managing a complicated supply chain and managing it around both, um, both passively just increasing production and also actively managing to deal with various crises that interfere with it. So I did, I think there are people, I mean, maybe the people who are really into that are all playing Factorio and not actually getting jobs at Apple, but there's, there's some fun to that.
And, um, I think I suspect that they're actually pretty, pretty proud of what they do. And it's probably pretty...
I mean, maybe it's not fun in the moment, but I suspect that when a lot of the Apple supply chain people look back on the first calendar quarter of 2020, they think of that as just a really, really cool experience. Not a fun one, but a gratifying one in retrospect.
Yeah. Interesting.
You wrote an article saying that investing is rationality dojo. I'm curious why then, you know, the subculture of rationality isn't more centered around finance than it is around programming.
Maybe debugging is also rationality dojo. But, you know, it would seem that like if this community were going to be centered in

some industry, it would be finance. That's a good question.
I have noticed, I mean, I was I would hang out with some of the rationalists in New York and a lot of them are in finance. But then again, I'm hanging out with people in New York.
So, of course, a lot of them are in finance. I think the rationalist subculture does skew a little more to finance than just is representative.
But you're right. It's definitely more of a programming thing.

one possibility is that the rationalists are

you know they do talk about

like the center of their

subculture was less wrong

and so they're clearly not saying we're going to be perfectly

right they're saying we're going to identify

these flaws one by one and improve them over time. They're not trying to reach some kind of perfect understanding.
At least I think most of them would say that that's not the end state that they expect to achieve. Maybe this approach, though, of believing that you can solve a lot of these problems and, or believing that you can, you can improve on a lot of these problems.
Maybe that is just more of a programmer kind of attitude. And like, I've, I've definitely, I used to program.
I don't really do it anymore. And it is, it is also very much a exercise in rationality and it's also a more introverted one.
So in finance, part of what you're doing is you are trying to model other people's behavior. You're trying to figure out not just why am I right, but why is the person on the other side of the trade wrong? And that can be sometimes more valuable than knowing, being confident that you're right, especially if they're wrong in the sense that they have some kind of balance sheet constraint or regulatory constraint or some kind of institutional constraint that keeps them from doing the obvious reasonable thing.
So you might think of that, like one example of that would be that small cap stocks tend to have less efficient pricing than large stocks. And one of the reasons for that is that a lot of financial institutions have a size cutoff where they just tell analysts, please don't look at anything that's worth under $5 billion because we won't be able to take a meaningful position.
So it's not worth your time. Whereas you can take a very large position in Google or Amazon.
And if it moves 1%, then that is more money than you make in the tiny, tiny position, the tiny, tiny stock. So there is a market inefficiency there where a lot of the talent is focused on getting more precise valuations for big companies rather than finding pretty obvious opportunities and small ones.
But debugging as a rationality exercise is interesting because when you debug, you're trying to outsmart yourself. You're looking at a situation where you were, I forget what the quote is, line, there's some line about cleverness in code where it's like, if you debugging is twice as hard as, as writing the code in the first place.
So if you write the cleverest code, you can, then by definition, you are not smart enough to figure out what's wrong with it. And that's, that seems largely true.
So it is an exercise in humility and also in self-knowledge. I mean, maybe finance is the extrovert rationality dojo and then debugging is the introvert rationality dojo.
Although all the finance people I knew in less wrong-ish circles, they were much more likely to be quants. I don't think there was a single investment banker in the entire crowd.
Yeah. You wrote an article about rationality that saw COVID coming much more so than other subcultures.
One of the things you wrote in an article, and I really didn't know what this meant, so I really wanted to get a clarification. You said, it's this attachment to the factual consequences of predictions and detachment from their social consequences that makes rationality relatively good at predicting the future, but comparatively worse at influencing it.
They can spend political capital in cost-effective ways, but earning it often requires perversely counter-rational decisions. What did you mean by that? Yeah.
So part of, and this is not something that the rationalist subculture strictly advocates, but it is kind of a cultural norm, is just being honest and direct and blunt. and it's really refreshing that people will just tell you what they're thinking

instead of trying to coddle you or trying to be more polite about it. But it does mean that they're doing something that is orthogonal to politics.
So if it has a political implication, it's usually that they're making something that in political terms is a mistake. So rationalists, I guess it's hard to articulate exactly how this played out with COVID, but I did get the sense, part of the problem is they take ideas seriously, right? They think about, they extrapolate things to their natural endpoint, and they're willing to bite a lot of bullets.

They're willing to say that if something is weird but factually true, then they believe it. And they're also willing to loudly affirm it, which is, again, nice, refreshing.
A lot of people just keep their weird beliefs to themselves, not so with the rationalists. But it also means that the population that was warning about COVID early, it's also the set of people who are talking about, I don't know, Bitcoin is going to save the world and cryogenics is really important and we live in a simulation.
Like they have a lot of weird beliefs. Some of these beliefs are probably true.
Some of them are probably false. They are generally beliefs that make sense if you accept a certain set of premises and they don't if you don't.
And believing that COVID was going to be a big problem made perfect sense if you accepted that it has an R-naught of two or higher. And at the time, we thought the case fatality rate was about 2%.
All you had to do was start compounding some numbers in your head and you quickly realized, okay,, this is going to be everywhere. And it's going to get a lot of people sick.
And if it broke out in a city and it was right after the Chinese New Year that it got shut down, that the city got shut down, that means a bunch of people got exposed and then went all over China. And since flights are still going between China and the US and China and Europe, then it's going to be everywhere.
So they were not making any big inferential leaps. But because they've also they're willing to say things like, if you think it's theoretically possible that a computer can simulate what feels like the real world, and if you think that there's some chance of that happening, and if you know how computers work, then you think that given some nonzero chance of it happening, the odds of you living in the real world versus a simulated world are vanishingly small.
I mean, I guess that assumes that there's only one real world, but I guess it assumes there's one real world where it is possible to do this and not an infinite series of real worlds where it is, for whatever reason, not possible to. Anyway, it's also something that you derive from taking ideas seriously or with cryogenics if you think that there is value to living and continuing to live and you think there's some chance that you can be brought back to life if your head is frozen um you will do it it's uh like given given the upside it's actually kind of cheap um especially if you do the the life insurance thing to pay for it.
So they're being very straightforwardly reasonable. But it means that anyone who was in the rationalist community and is warning about COVID, you could immediately link it to other crazy things that they had told people that everyone just thought were absurd.
And the rationalist will argue against, you know, it's like saying something is absurd is not the same as saying it's false. It's just saying, it's more like saying, if this is true, it's really important.
But the normal heuristic is this is absurd, therefore false. And therefore, you were low status for believing in it.
yeah yeah um you're in an essay called read more where you say that you're more likely to get

valuable content that's you know fitted to your niche or whatever you would find valuable. Because writing has lower production costs.
So people have a higher... It's easier for people to produce good content.
If you extend this logic, Twitter has an even lower production cost than a book. So then should I be reading tweets? Is there like a golden spot of, you know, fixed costs that a newsletter or a book has that, you know, it's not a movie on one end, but it's not a tweet on the other? Yeah, it's it is true that if you if you extrapolate that part of the argument, you do conclude that tweets are tweets are good and that watching live streams is even better.
So there are different kinds of content and there are different production costs. And what I was focused on was the kind of content where someone is trying to deeply understand a topic and explain it.
And in that kind of content, it's hard to do that in a tweet. You can definitely tweet something that is koanic and insightful, but the hit rate on those is pretty low.
So it's partly a comparison of learning, say, history or math or learning about a new technology from watching YouTube videos on it versus or watching documentaries on Netflix or on Disney Plus or whatever versus learning about it by reading. And my argument was that there's a long tail of things where it is actually worth the time and effort to make a book, and it's not worth the time and effort to make a documentary.
And you can also think of it in terms of hours of research required, hours of production required versus hours of content consumption, where making a documentary, it requires a lot of people to spend a lot of time and they're going to cut it down to an hour. And with a book, you, A, books, you will usually spend more time reading a book than you would spend watching a movie.
I guess there are exceptions on both ends, but that's a generalization. And the production time is just typing and that can happen pretty quickly.
There's a lot of reading that goes into it and that can take an arbitrarily long amount of time depending on how thorough you want to be. But you're also that reading process is really a process of winnowing ideas down.
So I'm working on a book with a friend and I've increasingly come to this view that the writing process happens while I'm reading. And then what I'm actually doing when I sit down and start typing is more like, it's more, you know, just taking dictations.
I have the general thoughts in my head, the general connections between different topics. I've highlighted the things I really want to talk about in the books.
And I'm just applying a pretty coherent narrative to it. and that part's not super hard so um the book is going to be mostly most of the effort is reading and learning and then a relatively small fraction of that is actually producing the end artifact whereas with a movie you you can imagine a documentary where there are more person hours spent on the production process including including, you know, filming it and then editing it and managing all the equipment and just getting in all the travel and whatever else that, that, that could actually end up taking more time than the preparatory research to, to come up with the idea and figure out what the narrative of the documentary will be.
Isn't the logic there. I mean, the most of the time that goes into the podcast for me, it's just me preparing and researching my guests.
Is the logic there then say that like podcasts are as valid a medium of consuming content? Well, so podcasts have a totally different dynamic because there's more back and forth. So a book is more analogous to a lecture.
And a lot of these documentaries and YouTube tutorials are also basically a lecture. The podcast is a dialogue.
So there could be tangents and both sides are contributing things. And one person will say something that leads to an interesting question, leads to another tangent, leads to something else.
So it's creating more connections. It's basically, you know, we both have different clusters of ideas in our heads and different things that we want to talk about.
And because they're different clusters, there's some overlap, and then there are some totally separate things. Because of that, the connections that can happen between ideas in dialogue are going to be a lot broader than the connections that could happen with one person writing a book.
But a book will probably get more depth. And that's just, it's a trade-off that different media have.
So it would be hard to do a podcast where you're talking to one person and you're actually trying to develop, you know, a theory of history or you're trying to develop, you know, you're trying to decide, okay, is inflation transitory or not? You could have a really interesting discussion and lead to a lot of ideas. But I think if you wanted to really answer the question of, are we going to have hyperinflation, for example, you probably want to be of the mind that you are writing a book and making the case yes or no.
Yep. Yeah.
Yeah. That makes sense.
I really have a concept that you've talked about is the convexity of knowledge. Basically, there's increasing returns to learning more.
Doesn't that imply that, for example, the next book you're going to read, you're going to derive more value from it than the next book I'm going to read? Where, in fact, it would seem to be pretty clear that I'm probably going to gain a lot more value just because I know a lot less. Or maybe is this the wrong way of thinking about it, that you gain more knowledge, but since you already have so much knowledge, knowledge is worth less to you, so utility is lower.
I mean, so we're sort of trying to apply utility functions to things that are hard to quantify in the first place. What I would say is that it's not just about reading the book, it's also about retaining it.
And that's really where the convexity kicks in, is that there are things that make more sense in context when you have more context. And they also make the context more memorable, and they make it have more sense.
I think Paul Graham actually wrote about this a long time ago, where he's talking about learning history. And he's like, when when you read one history book you just have this series of dates and of names and you don't have any like you have whatever connections the historian is drawing between these things but there's no there's no broader context that you're putting it in but then when you start to read multiple books about the same time period and maybe one of them is a political history and then maybe one of them is a biography of one particular person and then one of them is a history of technology changes at that time you start to see different things connect together and one of the things that makes it really memorable is when you see things that you know were important that someone missed because now you are actually having a little dialogue with the author where you are um i don't know, you're reading about, I read a biography of Deng Xiaoping.

And one of the striking things in that book was that it mentions container ships once. And it's a totally offhand mention.
It's just Chinese delegation went to a German port city. They saw containers being loaded on ships.
But there have been other things I've read that argued that China's industrialization was massively driven by containerization because it meant that you could import intermediate goods, process them, export intermediate goods. You could have these really complicated supply chains because the cost of shipping things on one more hop was a lot lower.
So it meant that countries with cheap labor had more ways that they could start slotting themselves into the supply chain. The book was still really good, but a lot of it was more focused on the political history and internal Communist Party deliberations rather than the broad economic sweep.
But it was memorable to me because it was something where I felt like I actually, the author knew a lot more than me about China. And there was something I knew about China that the author did not know.
And that's a really fun feeling. And it just, it made the rest of the book more memorable.
All right. I'm glad you brought that up because that's relevant to a question I want to ask.
Like say, like, just consider I have like zero knowledge in comparison to you, right? Which is like almost close to true. Then if you're recommending what kinds of books to read, take that example.
Maybe I can read like the box about like, you know, shipping. Maybe, so that's like very contemporary and very specific.
Maybe I can read like a biography of a contemporary figure, like the shopping or like not contemporary, but you know what I mean? Maybe I can read an ancient Chinese classic. Maybe I can read like the three body problem.
Like what are Chinese, what is Chinese fiction like? If I'm trying to understand a topic like China, which of those categories or any topic, which of those categories is like, this is the highest utility and then these are the supplementary text? I don't have a good answer because what I usually do is buy a bunch of somewhat random books. And it's partly a convexity thing that there are things that I'd heard of and that I knew I would read at some point.
And when I decide to read about a topic, that's the time to read them. So it is hard to give a really good answer to that other than just, I would try to buy a smattering of books that take different angles on the same topic.
And fiction that is written in the time period that you are interested in, or that is roughly about the topic you're interested in can also be really effective. Authors just, they have an eye for some details that other people will miss.
And sometimes just the specific tangible things that show up in fiction that don't show up elsewhere, they just add a lot more texture. So you should probably do all of the above, actually.
You should just have a giant stack of books on whatever topic you're getting into right now gotcha um now the favorite essay you wrote the favorite essay of mine that you wrote was the middle income trap uh you know where you compare the process by which countries get stuck in like a middle income you know second class tier and how the career is going to stuck in that place and obviously it's like directly relevant to the considerations I have. In the book, How Asia Works, the author talks about how, you know, many of these countries created terrorists basically to create internal knowledge about how to produce like highly valuable things that were really shitty at first.
Is there an analogous strategy here where you basically like learn to do things that like are not your comparative advantage're really shitty at them, but the goal is eventually this is something that differentiates you. Or maybe is there a better strategy to escape the middle-income trap? What do you think? Yeah, I definitely think that picking up skills that are adjacent to what you do and that you're not good at is really valuable.
If nothing else, if you're successful, you will end up delegating some of those tasks

to other people.

And it is very helpful to know roughly how hard they are

rather than just having to guess.

So if you have a job where you're not doing any programming,

but you're working with programmers,

you should probably learn to program even badly

just so you can have some intelligent opinions

and at least so that you know

which timelines are totally fictional and which ones are not. And it gives you ways to ask better questions.
But a lot of that essay, it was, so one of the escapes from the middle income trap that I think Stubble talks about is that countries either built branded products that were popular around the world, they could export and sell at a premium price, or they developed indigenous technologies

that other places just could not match.

And that's sometimes a process that flops back and forth.

Like there was a time when it was really hard

for US automakers to compete with Japanese automakers.

And everyone seems to be a lot closer to parity right now.

So it was a temporary competitive advantage, but it was a big one for Japan and it certainly helped their economy continue to grow. But then there are all these intermediate industrial goods that Japan produces.
There are just a lot of supply chains that happen to pass through Japan. And the final assembly is in somewhere like China or Vietnam and the end product is sold in the US or Europe.

But there's some essential component that is still only made by a Chinese company or by a Japanese company, and it's hard to match anywhere else. And it's a bunch of random stuff.

There's a lot of stuff in the semiconductor supply chain where there will be – the step is like 100 different things that you have to do or 500 things you have to do to go from here is silicon to here is a chip that actually works and your computer works now. And sometimes one or two or five or 10 of those steps will be monopolized by some company in Japan.
So that is the escape is to have some set of skills that you are pretty confident nobody can match and that people know that you have. And that allows you to compete on something other than price.
And competing on price is fine when you're young because your cost of living is low and you'll learn a lot by getting thrown into jobs that you are only qualified for in the sense that you are far cheaper than everyone else could do it. But you can't get rich being cheaper than average to hire.
So at some point, you have to do something different. Gotcha.
And my final question is usually always, what is one piece of advice you would give to somebody by age? I mean, we already talked about some of the things, so this might be a redundant question. So we talked about avoid that rationality, read more, differentiate yourself, and use that to avoid the middle income trap.
Is there anything else that you would recommend? Yeah, maybe a synthesis of a lot of those things is that because books are cheap and because the internet is such a wonderful distribution mechanism, it is really not hard if you were determined to be, if you pick a narrow enough topic to be close to one of the world's leading experts on it in a fairly short timeframe. So you have to pick a topic that is basically narrow enough that nobody has written a dissertation about it, which can be hard.
But the next best thing is you can be the world's public facing expert on this by just reading a bunch of academic papers from people who know more than you, diving through what they cite, reading that stuff too, and consolidating it into something that you can put on Substack or somewhere. And I think it's a valuable exercise, both because it gives you some body of work you could point to to say, I am willing to work hard on projects.
I'm able to find interesting and insightful things and able to learn a, and synthesize it in a way that helps other people learn too. But it's also just, it's, it's useful because one of the things that I learned from these various deep dives that I've done on different, different industries, different countries, different companies, is that the world is just much more complicated than I thought.
And it's very easy to say that.

And it's very hard to internalize it.

And I think you can really only,

like really the only way to internalize it

is to realize repeatedly that you were wrong about something

because you had oversimplified it.

And often it's not just that you were wrong.

It's that the first source you read had some theory

and that theory was later overturned.

So you want to get to the point where you can look back

Thank you. that you were wrong.
It's that the first source you read had some theory and that theory was later overturned. So you want to get to the point where you can look back three months and realize you were dumb about something that you thought you knew a whole lot about.
And at some point when you're no longer realizing you're dumb, but you're starting to just have more open-ended questions that you can't really get answers to, then that's a good time to move on to the next big topic. But that is a worthwhile exercise.
And there's so much material out there. There are lots of aspects of economic history that I think are worth revisiting right now, because we're either at a time that is strange because growth has slowed down, it's going to keep being slow forever, which hasn't really happened before without some kind of big natural disaster.
Like we've had, we, we basically had growth that continuously accelerated, albeit at a slow pace from pretty much the dawn of time through the 1970s. Yeah.
And then, and then it slowed down. Different countries have had different, differentbs and flows of growth.
But overall, that's been the story. It's just gradual growth, gradual acceleration.
So we're either at a unique time period because that's stopping. And economies, total factor productivity grew and accelerated for a while.
And then it stopped growing so much. And that's just where we are.
That's interesting. It'd be interesting to figure out why that is.
Or we're at an interesting time in history because there will be specific technologies that actually do accelerate productivity growth. And it's really worth it to know what those are.
Because if you go back and you look at the specific technologies that, say, led the first industrial revolution or led the second industrial revolution or led the information technology revolution, they are all associated with people making lots and lots of money. And even the people who didn't get extremely rich, they had really interesting lives.
So it is very worth figuring out if we're in year 10 of another one of those 50-year deployment cycles. Yeah.
Final question. I mean, I kind of asked this earlier when I asked what kinds of books to read, but when you're trying to figure out the answer to that question, which I'm very much interested in, other than reading your newsletter, should you be looking at, you know, like doing a deep dive and how something in the world works today? Are you trying to understand, should you be trying to understand history? Like what is the most relevant lens to be looking at here? History is a lot easier because we've seen how things played out.
If you're looking at things that are contemporary trends, you have a couple of problems. One is that a lot of people writing about them have an agenda because they either want something to happen or they don't want it to happen.
There's also the meta agenda thing where the people who are really busy making it happen don't have time to write books. And the people who got left behind one way or another, they do have time.
So there are a lot of selection effects that make the data noisier. On the other hand, there's a lot more data.
And if you go back and look at earlier historical events, you may not be able to find much at all. Or you'll find a handful of sources and you've exhausted your material.
So you do have that trade-off. I go back and forth.
And it's not a deliberate thing, but I've noticed over time that I will generally spend some time writing about contemporary things, some time writing about historical analogy to those things. Sometimes I will, like right now I'm doing a bunch of reading on central banks, how those came about, et cetera.
And the original reason for that was just trying to figure out some questions I had about quantitative easing for which I don't have good answers. But I'm going back to the beginning and reading about how the Fed was put together, all the debates around that, what the financial system looked like without central banks and how the central banks evolved over time in their powers and their mandate and their institutional cultures.
So that is very much a present-driven but history-focused project. So maybe there's not a good answer.
History is still happening. And so you're technically reading history if you read something that was written yesterday.
If you read it with a, you try to read it with a pseudo-historian's perspective, where you're trying to figure out what people will think about this in 50 or 100 years when the debate

is largely settled, or at least in 50 or 100 years when they're still debating this in

history departments, what will be the main schools of thought and what will be the strengths

and weaknesses of those schools of thought.

That is probably the right attitude to have towards current events.

Awesome.

Vern, thanks so much for your time.

Anytime. Awesome.
Vern, thanks so much for your time. Anytime.

Thanks. Thank you.