Saturday, October 31, 2020

"Building the Venture Capital State"

From American Affairs Journal:

In a 1986 speech, then president Ronald Reagan lamented that “the nine most terrifying words in the English language are: I’m from the government and I’m here to help.” This statement epitomizes the neoliberal view of how Silicon Valley became a global beacon of high-technology ingenuity, entrepreneurship, and venture capital. For followers of Ronald Reagan and Milton Friedman—not to mention staunch libertarians and “tech bros” in the Bay Area today—Silicon Valley is the triumph of the free market and American capitalism.

Sometimes the role of early military investment in radar and other technologies is acknowledged. Silicon Valley’s colocation with leading universities such as Stanford is occasionally credited as well, as is the proximity of Bell Labs. But the U.S. government’s role in the promotion and coordination of technological innovation is typically obscured. This imagined Silicon Valley narrative, as I call it, which lauds the triumph of unencumbered market forces, leaves out the government’s crucial role as financier, profit-enabler, and permissive but intentional regulator.

There is another version of the story, however, that offers important lessons both for American policymakers looking to promote economic growth in other regions and for foreign policymakers seeking to recreate the “magic” of Silicon Valley in their own countries. In the true story, the visible hand of the state is evident behind the veneer of the supposedly laissez-faire Silicon Valley venture capital (VC) market. Long before Silicon Valley became synonymous with tech VC, the U.S. government intervened to support the onset and growth of the venture capital industry, which clustered around Sand Hill Road in northern California and Route 128 near Boston. As Linda Weiss asserts in America Inc.? Innovation and Enterprise in the National Security State, it is a myth that the VC financing synonymous with Silicon Valley is merely “an invention of the U.S. market.”1

The true story, in which the state was a lead protagonist, is more complicated than the libertarian interpretation that has become commonplace. But it is a more complete version and, as a result, one that is more instructive for cities, regions, and countries around the world that are now hustling to foster vibrant innovation ecosystems. The world’s leading venture capital markets did not spring forth fully formed from the invisible hand; rather, they are the product of “venture capital states” acting in accordance with their local context.

Venture Capital, the State, and the Construction of Silicon Valley

The state has been a central, even necessary character in the American tech industry from the beginning. The government’s role in financing the technology underlying today’s Silicon Valley giants (notably Apple and Google) was detailed in Mariana Mazzucato’s book The Entrepreneurial State (2013). For Mazzucato, the growth of these firms is not a product of unfettered capitalism, but rather a case of “When John Maynard Keynes met Adam Smith”: the government initiates what the private

sector cannot, and then market forces can flourish. This necessary role of the state in opening the door to the free market corresponds with Karl Polanyi’s view in The Great Transformation (1944)—the idea of a liberal market utopia is a fallacy, as “even laissez faire is planned.” The most sophisticated neoliberals themselves have been conscious, at least privately, of the primary role of the state in organizing and facilitating markets; but popular neoliberalism has either drifted toward libertarian views or emphasized only neoliberalism’s deregulatory elements.

In America and the UK, the venture capital asset class came into being, in its modern, professionalized form, around the time of World War II. Beginning in 1958, the American brand of venture capital grew as U.S. government money was given in the form of loans to VC managers via the Small Business Investment Company program. These loans provided critical funding to the VC industry in those early days, when limited partners such as pension funds, foundations, and endowments had not yet begun to invest in the asset class. The visible hand of the state ensured that there was money for a venture capital market, and Silicon Valley was to be the epicenter.

Later, in the 1970s, the national government made venture capital more accessible to institutional investors and more profitable for VC managers. Specifically, the Employee Retirement Income Security Act (erisa) reinterpretation of the Prudent Man Rule in 1979 allowed institutional investors (especially pension funds) to invest in the VC asset class. Pension funds could then invest in VC because the Department of Labor’s 1979 reinterpretation of what was a “prudent risk” no longer applied to venture capital. In other words, VC was no longer too risky for public pension funds to invest in. This meant that much more money would be available for the venture capital managers, as public pension assets could now be allocated to VC funds.

In the same year, the capital gains tax rate (to which VC profits are subject) was reduced.2 Like most other alternative investors, venture capital funds make money from two sets of fees: management fees that help to cover operating expenses, and performance fees (referred to as “carried interest” in industry lexicon) charged to investors as a percent of the returns produced. Typically, venture capitalists structure these fees as “2 and 20”: 2 percent on assets under management and 20 percent of the profits produced for their investors. In the United States, the carried interest (carry) of the VC fund is taxed at capital gains rates, rather than at earned income rates. Furthermore, capital gains realized by investors, instead of being “double taxed” at the fund entity level and again at the investor level, are “passed through” to investors and taxed only once at the capital gains rate. In 1979, the U.S. capital gains tax rate to which venture capital profits are subject was lowered from 35 percent to 28 percent for assets held more than one year.

And for what was nearly a triple crown (but a year late), lighter-touch regulations were introduced in 1980 via the Small Business Investment Incentive Act. These three efforts undertaken by the state helped fuel the rise of the VC industry, which was already benefiting from the launch of the nasdaq in 1971, a favorable exit venue for high-growth startups in VC portfolios.

Thus, from the beginning, the road to Silicon Valley VC was paved by conscious state action designed to support innovation and entrepreneurship—at times through deregulation and tax cuts to encourage market activity, but also through direct and indirect subsidies (via public pensions). In the modern narrative of Silicon Valley venture capital, this key element has been written out of the story, and the illusion of a totally spontaneous free-market process persists.

Motivations for Promoting Venture Capital

Today, innovation and entrepreneurship, which have become synonymous with Silicon Valley, are almost universally encouraged in order to propel economic competitiveness and job creation. Unlike other investment classes, such as hedge funds and sovereign wealth funds (which are sometimes criticized for their dubious impact on firms and markets), venture capital is perceived as the part of the financial sector that society cannot afford to live without. In 2014, the Wall Street Journal went so far as to dub venture capital “Humanity’s Last Great Hope” for its purported ability to identify and nurture transformative technologies.3


"The Epigenetic Secrets Behind Dopamine, Drug Addiction and Depression"

So, it's a little more complex than neurotransmitter cascades and our old pals the D3 and D4 receptors.

From Quanta Magazine, October 27:

New research links serotonin and dopamine not just to addiction and depression, but to the ability to control genes.

As I opened my copy of Science at home one night, an unfamiliar word in the title of a new study caught my eye: dopaminylation. The term refers to the brain chemical dopamine’s ability, in addition to transmitting signals across synapses, to enter a cell’s nucleus and control specific genes. As I read the paper, I realized that it completely upends our understanding of genetics and drug addiction. The intense craving for addictive drugs like alcohol and cocaine may be caused by dopamine controlling genes that alter the brain circuitry underlying addiction. Intriguingly, the results also suggest an answer to why drugs that treat major depression must typically be taken for weeks before they’re effective. I was shocked by the dramatic discovery, but to really understand it, I first had to unlearn some things.

“Half of what you learned in college is wrong,” my biology professor, David Lange, once said. “Problem is, we don’t know which half.” How right he was. I was taught to scoff at Jean-Baptiste Lamarck and his theory that traits acquired through life experience could be passed on to the next generation. The silly traditional example is the mama giraffe stretching her neck to reach food high in trees, resulting in baby giraffes with extra-long necks. Then biologists discovered we really can inherit traits our parents acquired in life, without any change to the DNA sequence of our genes. It’s all thanks to a process called epigenetics — a form of gene expression that can be inherited but isn’t actually part of the genetic code. This is where it turns out that brain chemicals like dopamine play a role.

All genetic information is encoded in the DNA sequence of our genes, and traits are passed on in the random swapping of genes between egg and sperm that sparks a new life. Genetic information and instructions are coded in a sequence of four different molecules (nucleotides abbreviated A, T, G and C) on the long double-helix strand of DNA. The linear code is quite lengthy (about 6 feet long per human cell), so it’s stored neatly wound around protein bobbins, similar to how magnetic tape is wound around spools in cassette tapes.

Inherited genes are activated or inactivated to build a unique individual from a fertilized egg, but cells also constantly turn specific genes on and off throughout life to make the proteins cells need to function. When a gene is activated, special proteins latch onto DNA, read the sequence of letters there and make a disposable copy of that sequence in the form of messenger RNA. The messenger RNA then shuttles the genetic instructions to the cell’s ribosomes, which decipher the code and make the protein specified by the gene.

But none of that works without access to the DNA. By analogy, if the magnetic tape remains tightly wound, you can’t read the information on the cassette. Epigenetics works by unspooling the tape, or not, to control which genetic instructions are carried out. In epigenetic inheritance, the DNA code is not altered, but access to it is....


I'm still trying to get my head around what's real and what's hype in epigenetics. In the introductory riff from "Labor Markets: 'Rural America Needs Triage'" I sound more certain than I actually am.

Some concepts, profound in their simplicity, that policymakers will have to internalize before the human toll of current economics—whether fast suicides by firearms or hanging or slow suicides by opioids, self-medicating with carbohydrates and booze leading to epidemic levels of obesity, cirrhosis and diabetes, from first generation poverty leading to  multi-generational epigenetic DNA methylation of genes linked to depression—the policy wonks have to get the basics down first....

See also:

"Do Your Grandmother’s Experiences Really Make It Into Your Genes?"

"It’s now possible to map a person’s lifetime exposure to nutrition, bacteria, viruses, and environmental toxins—which profoundly influence human health"

"How to Escape a Sinking Ship (Like, Say, the Titanic)"

 From Wired, October 30:

First, put on your fanciest clothes. And at 1:15 am, consider heading down to Deck D.

Let’s say you traveled to London, England, in 1912, and bought a ticket on the RMS Titanic for its maiden voyage. But you’re a frugal time traveler, so you elect to travel third class (only £8!).

That would place you on F deck, six levels below the lifeboats, and mere tens of feet from the starboard hull, which a 1.5 million ton iceberg punctures open at 11:40 pm on April 14, 1912.

Eighty-four years later, a scientific expedition to the bottom of the Northern Atlantic ocean recovered a chronometer from the bridge of Titanic. It stopped the moment it hit the water, at 2:11 am.

In other words, you will have 151 minutes to escape.

That seems like it would be enough time, but out of Titanic’s 702 steerage passengers, only 178 survived. That’s for a few reasons. The first is simple logistics. Titanic had lifeboats for only half of its passengers, and in steerage you're not only bunked the farthest from them, but the escape route is a labyrinth of unmarked and heretofore off-limits tunnels and ladders. And even if you do somehow find the way, crew members haphazardly block steerage passengers from ascending to the upper-class decks. Even with the best preparation, your odds of acquiring a seat are low. And if you fail, a long arctic swim awaits. But do not be alarmed. The maze, discrimination, chaos, and cold can be overcome if you make a few bold and counterintuitive choices.

The first days of your voyage will go by unremarkably. To pass the time, you should venture to the back poop deck for games and fresh air, enjoy a card game in the third-class saloon or, if you happen to see a crew member, perhaps suggest the boat slow down. Because as it is, Titanic is navigating icebergs off the coast of Newfoundland at far too great a speed. And on the night of April 14, 1912, just as you’re settling into your bunk in the forward section of F deck, Titanic sideswipes one at 22 knots.

You’ll be one of the closest passengers to the impact, but even so the jolt will feel relatively benign. Perhaps even anticlimactic. One fireman bunked even closer to the collision than you claimed to have slept through the incident entirely. “Dead to the wide [world],” he later told investigators. Other, lighter sleepers describe the sound as a “big vibration,” “a large cable being run out,” “a grinding crash,” “crunching and jarring,” or like “a basket of coals dumped on an iron plate.”

Because the lurch is so mild, few of the passengers will initially suspect a serious problem. Of course, there is a serious problem. You’re six decks below the lifeboats, and seven tons of water are rushing into the lower holds every second. You need to act.

Your first instinct will be to immediately sprint out of your bunk. Don’t.

Instead, change into your finest clothing. Put on a tux, a dress, or at the very least brush your hair.

The lifeboats are on the first-class deck. They are an invitation-only party that you need to crash. It will help if you look the part.

After you’ve changed, put on your life jacket (called a "life belt" here on Titanic). It should be stored above your bunk. You’re likely to need it. Getting dressed will take a few extra minutes, but don’t worry. Titanic is sinking, but it’s doing so slowly.

The great ship takes nearly three hours to finally go below, and it’s almost graceful in its descent. It never capsizes nor even takes on a serious list. It sinks so slowly you could make an interminable movie out of its demise. As a result, you not only have extra time to prepare yourself in your bunk, but when you make it to the decks, instead of the sheer chaos that accompanies most founderings, you’ll find a sociological cocktail of gallantry, cowardice, courage, chivalry, sacrifice, prayer, panic, and even music. The time Titanic takes to founder allows you to escape from even its lowest holds, but it also produces a dramatic story of human drama that partially explains the wreck’s infamy. Shipwrecks don’t always occur this way, especially at the turn of the century, which partially explains why Titanic lacked sufficient lifeboats. Ship designers and passengers at the time didn’t expect to survive a shipwreck long enough to use one anyway. They viewed lifeboats as token nods to safety, like seat cushions-as-floatation devices.

When I asked ship designer and naval architect Jan-Erik Wahl why Titanic sank in this unfathomably sturdy way, he told me it has everything to do with the exact nature of the damage and the design of the hull.

As you’re tightening your tie or adjusting your finest gown, water is rushing in through a series of small slits sliced into the forward starboard hull.

The extent of the damage is relatively minor. The size of the holes, added up, only amounts to the surface area of a small closet door. Unfortunately, the locations of the holes could hardly have been worse.

Like many ships today, Titanic had a series of waterproof walls—called bulkheads or partitions—running across its width. These bulkheads are designed to compartmentalize any flooding so that a single gash doesn’t flood the entire ship, but though these waterproof sections are sometimes called compartments, that’s a bit of a misnomer because these sections don’t have ceilings. Instead, Titanic’s bulkheads extend approximately 50 feet above the water line and then stop. (The bulkheads have watertight doors that the captain of Titanic sealed immediately after impact, but nobody is trapped. There are escape ladders to climb above the bulkheads.)

Image may contain Plot

Because a boat will flood until the water inside the hull levels with the water outside of it, Titanic could float as long as the weight of the inflowing water did not drop the bow more than 50 feet. Titanic’s architects designed the boat such that four of the forward sections could flood and the boat would still float high enough to keep the top of its bulkheads above the waterline.1


"The Ghosts of Newspaper Row"

After the U.S. elections we're going to look at the performance of American media over the last decade  but before we get to that, some (literally) sepia-toned history.

From The Paris Review:

Newsboys and newsgirls on Newspaper Row, Park Row, NYC. Photo by Lewis Wicks Hine from Library of Congress

The reporters would pant up five flights of stairs to reach their dingy, dim newsrooms, where light eked through the dirt-cloaked windows and the green shades over the oil lamps were burned through with holes. They wended through hobbled tables piled high with papers, walked past cubbies so chaotically stuffed with scrolled proofs no outsider could guess the system. The reporters reeked of five-alarm smoke, or had coat pockets bulky with notes and a pistol from the front, or were tipsy from a gala ball, or dusty from a horse race. If they held important news in those notebooks, a copy boy would crowd by their elbow as they wrote, snatch the ink-wet sheets from their hands, and rush them off to the copyholder to “put them into metal.”

The center of news in the nineteenth century lined the streets around City Hall Park, only a short sprint to Wall Street, close to the harbor. News sailed in on the wind. Newspaper schooners cut through the waves and fog to land their men onboard the arriving European steamers before the less affluent New York newspapers could get out there with their rowboats.

Amid recent renovations on Park Row, construction workers discovered artifacts of news reporters inside the walls—papers and typewriters. Who knows what ghosts might lurk there still?

“Journalism is the real Minotaur,” nineteenth-century reporter Stephen Fiske remarked, looking back on his career. “It demands every year a fresh supply of young men and women: devours them, destroys them, and is ready for another batch of tender victims from colleges or country towns.” He had begun as a columnist at age twelve. Other reporters jumped in audaciously in their twenties, such as Henry Villard, a German immigrant who rapidly taught himself English so as to cover the Lincoln–Douglas debates....


HT: Arts & Letters Daily (also on blogroll at right)

Thinking About Science: Feynman's Cal Tech Commencement Address "Cargo Cult Science".

For guidance I often seek out a bongo drummer-slash-raconteur.
We post this once a year, usually around Nobel Prize time.
Here's the musician riffing on science:

During the Middle Ages there were all kinds of crazy ideas, such as that a piece of of rhinoceros horn would increase potency. Then a method was discovered for separating the ideas--which was to try one to see if it worked, and if it didn't work, to eliminate it. This method became organized, of course, into science. And it developed very well, so that we are now in the scientific age. It is such a scientific age, in fact, that we have difficulty in understanding how witch doctors could ever have existed, when nothing that they proposed ever really worked--or very little of it did.

But even today I meet lots of people who sooner or later get me into a conversation about UFO's, or astrology, or some form of mysticism, expanded consciousness, new types of awareness, ESP, and so forth. And I've concluded that it's not a scientific world.

Most people believe so many wonderful things that I decided to investigate why they did. And what has been referred to as my curiosity for investigation has landed me in a difficulty where I found so much junk that I'm overwhelmed. First I started out by investigating various ideas of mysticism and mystic experiences. I went into isolation tanks and got many hours of hallucinations, so I know something about that. Then I went to Esalen, which is a hotbed of this kind of thought (it's a wonderful place; you should go visit there). Then I became overwhelmed. I didn't realize how MUCH there was.

At Esalen there are some large baths fed by hot springs situated on a ledge about thirty feet above the ocean. One of my most pleasurable experiences has been to sit in one of those baths and watch the waves crashing onto the rocky slope below, to gaze into the clear blue sky above, and to study a beautiful nude as she quietly appears and settles into the bath with me.

One time I sat down in a bath where there was a beautiful girl sitting with a guy who didn't seem to know her. Right away I began thinking, "Gee! How am I gonna get started talking to this beautiful nude woman?"
I'm trying to figure out what to say, when the guy says to her, "I'm, uh, studying massage. Could I practice on you?" "Sure," she says. They get out of the bath and she lies down on a massage table nearby. I think to myself, "What a nifty line! I can never think of anything like that!" He starts to rub her big toe. "I think I feel it," he says. "I feel a kind of dent--is that the pituitary?" I blurt out, "You're a helluva long way from the pituitary, man!" They looked at me, horrified--I had blown my cover--and said, "It's reflexology!" I quickly closed my eyes and appeared to be meditating....MUCH MORE 
Long time readers will recognize the words of the bongo drummer as amateur magician and author, Richard Feynman.
He was also a safecracker and lockpick.
He invented the word nanotechnology.
In 1965 he was awarded the Nobel prize in physics for his work in quantum eletrodynamics.
The above snip is from his 1974 Cal Tech commencement address "Cargo Cult Science".

Although Feynman loved to tell jokes the number of jokes about Feynman is rather small.
Here's one he would have liked:
Feynman joke (okay, a bit deep)

If Richard Feynman applied for a job at Microsoft

Interviewer: "Now comes the part of the interview where we ask a question to test your creative thinking ability. Don't think too hard about it, just apply everyday common sense, and describe your reasoning process."

"Here's the question: Why are manhole covers round?"

Feynman: "They're not. Some manhole covers are square. It's true that there are SOME round ones, but I've seen square ones, and rectangular ones."

Interviewer: "But just considering the round ones, why are they round?"

Feynman: "If we are just considering the round ones, then they are round by definition. That statement is a tautology."

Interviewer: "I mean, why are there round ones at all? Is there some particular value to having round ones?"

Feynman: "Yes. Round covers are used when the hole they are covering up is also round. It's simplest to cover a round hole with a round cover."

Interviewer: "Can you think of a property of round covers that gives them an advantage over square ones?"

Feynman: "We have to look at what is under the cover to answer that question. The hole below the cover is round because a cylinder is the strongest shape against the compression of the earth around it. Also, the term "manhole" implies a passage big enough for a man, and a human being climbing down a ladder is roughly circular in cross-section. So a cylindrical pipe is the natural shape for manholes. The covers are simply the shape needed to cover up a cylinder."

Interviewer: "Do you believe there is a safety issue? I mean, couldn't square covers fall into the hole and hurt someone?"

Feynman: "Not likely. Square covers are sometimes used on prefabricated vaults where the access passage is also square. The cover is larger than the passage, and sits on a ledge that supports it along the entire perimeter. The covers are usually made of solid metal and are very heavy. Let's assume a two-foot square opening and a ledge width of 1-1/2 inches. In order to get it to fall in, you would have to lift one side of the cover, then rotate it 30 degrees so that the cover would clear the ledge, and then tilt the cover up nearly 45 degrees from horizontal before the center of gravity would shift enough for it to fall in. Yes, it's possible, but very unlikely. The people authorized to open manhole covers could easily be trained to do it safely. Applying common engineering sense, the shape of a manhole cover is entirely determined by the shape of the opening it is intended to cover."

Interviewer (troubled): "Excuse me a moment; I have to discuss something with my management team."

(Leaves room.)
(Interviewer returns after 10 minutes)

Interviewer: "We are going to recommend you for immediate hiring into the marketing department."

Simply Spooktacular: FT Alphaville's Halloween Reading List (plus the sadocratic impulse and random acts of cruelty)

 A repost from October 30, 2010.

As I was pondering putting together some Halloween linkbait [ooh, the story of "The Monster Mash"! -ed]
I wandered through the back alleys of Alphaville until I came upon:

Further reading, special Halloween meets finance edition

Some financial ghoul links for Halloween:
- 13 money-themed costumes for Halloween.
- Living in a ghost town.
- Six nightmares for Wall Street.
- The average US credit score is 666.
- Ireland’s unfinished developments are ‘ghost towns’.
- Haunted foreclosures.
- For Halloween, I’m going as a MERS Vice-President.

And many MORE

And since real estate was much on people's minds, a mashup of monsters:

Social Sadism and the Sadocratic Impulse

A couple stories about our changing culture.
The first may take some flexing of the memory muscle but it is probable that wary reader saw a version of  it at the time, October 2011. We noted the story in:
"Top US foreclosure law firm threw Halloween party where staff dressed as homeless, foreclosed-upon Americans"
And a month later in "Sleazebag Robosigning Foreclosure Mill Shuts Down".

Here's Salvage Quarterly going a bit meta on the wider picture:

The Sadocratic Impulse 

Two women sit leaning against a wall, wrapped in dirty clothes. Their hair is raddled, their faces filthy. One holds a bottle, the other a cardboard sign on which is scrawled a slogan both plaintive and defiant. But their smiles are arch, and the schmutz on their faces is as artlessly precise as a child’s clown makeup – easy on, easy off.
Halloween. This is a fancy-dress party, and the women have come as the destitute.
Marie Antoinette performed rustic fantasies of peasant life to herself and her sycophants in Hameau de la Reine, her pre-Disney theme park. The privileged have long enjoyed playing at poverty.
The dominant mode of these games shifts. Class spite, always present, stops half-heartedly disguising itself with bowdlerising condescension, as in Versailles. It’s a rampant articulating principle in the venom of TV comedies, in the ‘chav parties’ so in vogue at elite institutions in the late 2000s. At a gathering at Sandhurst in 2006, Prince William talked all common, like, ‘swaggering from side to side’, the Sun reported, in his baseball cap. The Halloween party dress-up was in this tradition, and was also its intensification.

It occurred a little after the high point of the jocular pleb-sneer: two years, instead, into the eruption of the financial crisis, simultaneously with a historic peak in foreclosures. Nearly 2.9 million US properties had foreclosure actions against them initiated in 2010 – huge numbers improperly, even according to the system’s own rules – up 2 per cent from 2009, itself a record. Millions were fighting, and failing, not to lose their homes. These 2010 Halloween celebration occurred at the Buffalo, New York, law offices of Stephen J Baum, a specialist firm acting mainly for banks and lenders. It was what’s known as a ‘foreclosure mill’, the largest of its kind in the state: its expertise was evicting the poor.

This wasn’t, then, some generalised, timeless jeer. It was more specific and pointed, gleeful malice at those whose lives were, at that very moment, being ruined, directed at them by those doing the ruining.

In the photos, props embody favourite ideologemes of the rich: the booze, the misspelt signs denouncing the injustice. The homeless are drunkards; the homeless are stupid; the homeless take no responsibility. But these gestures are perfunctory; they make no attempt to convince. The anonymous former employee who leaked the images in 2011 did so aghast at what she called a ‘cavalier attitude’, but what’s on display is the opposite: not cavalier, but considered. She decried a ‘lack of compassion’, but what’s visible is a swaggering presence – of cruelty.

‘Will worke [sic]’, one sign reads, ‘for Food.’ The sign’s the prop of a comedian waiting for the laugh. The homeless are starving. We made them homeless and now they’re starving. Laugh laugh laugh laugh.
Capitalism’s history might be tracked in a genealogy of the corporate apology. That of Baum’s eponymous head was typical of this sub-epoch of viciousness, mawkishness and entitlement. An initial denial of anything untoward; a rapid U-turn and apology for ‘inappropriate’ behaviour, ostentatiously meeting a homelessness activist; ultimately, parading in the mourning clothes of victimhood. Three weeks after the exposé – of a firm already under investigation – the company closed. ‘There is blood on your hands’, Baum wrote to Joe Nocera, in whose New York Times column the scandal broke. ‘I will never, ever forgive you’.

Baum’s quivering lip should provoke only piss and vinegar. It’s true, too, that the ritual slaying of a designated scapegoat, however just, can serve as exoneration by and for the system that threw up, nurtured, rewarded their behaviour. Our rulers and their media clercs are shocked, shocked by such Baum moments, these cruelties-too-far. As if there hasn’t always been, in capitalism’s marrow, a drive not only to repression but to cruelty, to down- punching sadism. They denounce it, partake of it, propagate it.
Consensual peccadilloes are not at issue here: this is about social sadism – deliberate, invested, public or at least semi-public cruelty. The potentiality for sadism is one of countless capacities emergent from our reflexive, symbolising selves. Trying to derive any social phenomenon from any supposed ‘fact’ of ‘human nature’ is useless, except to diagnose the politics of the deriver. Of course it’s vulgar Hobbesianism....MUCH MORE
But be forewarned: what starts as a screed pretty quickly becomes a rant.
And from Real Life Magazine:

December 17, 2018 
Ambient Cruelty
The ability to ruin a stranger’s life is a feature, not a bug of consumer rating systems
It is a truism, backed with some evidence, that negativity makes a person seem smarter. In the 1980s, Harvard researcher Teresa Amabile took two pieces of literary criticism from the New York Times’ book reviewing section — one positive, one negative — and showed them to 55 students. The students found the writer voicing negative opinions much more intelligent and persuasive than the one voicing praise. In fact, it was the same reviewer, and the two pieces of criticism were adapted versions of the same review. John Stuart Mill wrote, “I have observed that not the man who hopes when others despair, but the man who despairs when others hope, is admired by a large class of persons as a sage.”

In part, this is because blame is actually more rare than praise. In the past 50 years, cross-cultural studies have demonstrated a phenomenon referred to as linguistic positivity bias: human speech is studded with words like “great,” “adorable,” and “amazing,” while words like “dreadful,” “ugly,” or “terrible” show up less frequently. It may be that people use language primarily as a means of drawing closer together, which raises the frequency of words that create a feeling of community. Negative words stick out because they are not the norm, and this in turn signals to readers or listeners a person who is setting themselves apart from the group.

For this reason, negativity as a tonal choice not only lends an air of discernment, but brims with expressive opportunity: the diction of dissatisfaction offers its own satisfactions. On Twitter, a winning persona blends quotidian venting with cultural critique. Hating on things can scratch an individual itch or put a finger on shared experiences — there’s a bond in hating the same stuff, as evidenced by the popularity of the “Gopher Gripes” segment on the Gimlet podcast Reply All (the spiritual heir of a long succession of indie-media rant lines). Yelp offers a platform for individuals to denounce bad service, whether creatively or simply self-righteously. Of the services I use most frequently that are also the most universally hated, Greyhound buses seem to inspire some inventive criticism. In 2012, a user called Sonia B. typed the following ode:
Greyhound, Greyhound
You’re not that fast,
If you were in a race you’d probably finish last.
I use you sometimes when I’m going far,
Even though your service is kind of sub-par.
But when I consider gas prices these days,
You really often are the cheapest way.
(Especially the advance webfare).
I will hazard a guess and say Sonia B. probably doesn’t get a lot of opportunities to publish her verse in the traditional press. This is a major factor that motivates Yelp reviewers: not necessarily to express passionate opinions about products and services, but to express themselves period, and to make themselves visible to others. In a 2014 Fast Company interview, Yelp’s vice president said, “if you’re writing great things on Yelp, you know that a lot of people are going to read them. You’re going to have a voice. You’re going to have a megaphone. Yelp is that megaphone.”

More megaphones means more opportunities to emote. But amplifying negative expression has serious consequences in the contemporary gig economy. The freedom to vent feels empowering, but when unleashed on a reputation-based labor market, where a widespread reliance on reviews and ratings is the primary monitor of quality assurance, negative self-expression allows users of apps like Uber or TaskRabbit to enjoy the benefits of an arbitrary power of punishment free of guilt. By emphasizing the user’s “right” to have their opinions heard, and to dissatisfaction with any less-than-perfect “experience,” platforms encourage users to be cruel without feeling cruel. Normalizing negativity creates a slush fund of data that employers can use at their discretion against employees....MUCH MORE, and much less ranty.

And speaking of random acts of cruelty:

Why Did the Washington Post Get This Woman Fired?
"We blew up this woman's life for no reason." In 2018, Schafer attended a Halloween party at the home of Tom Toles, the Post 's Pulitzer Prize-winning editorial cartoonist. The basis for ...

"The Economics of Dracula"

This ain't no party, this ain't no disco. [social distancing and all that]
If thou art searching for last minute costume ideas we're simply not that kind of place (at the moment)

From, October 31, 2012:

Vlad the Impaler, and his literary incarnation, Count Dracula, are rooted in a dark period of monetary inflation and economic nationalism.
Another Halloween is upon us, bringing its late autumnal burst of costumes, candy, and merriment. Ghosts, witches, mummies, zombies, Frankenstein's monster, film and television characters, and others will make appearances, as will the quintessential Halloween figure: Dracula.

Most people are familiar with Count Dracula's first literary appearance in Bram Stoker's 1897 Gothic horror novel Dracula. And many are also aware that the undead villain was loosely based on a real historical figure, Vlad Tepes III — "Vlad the Impaler" (sometimes "Vlad Dracula") — who ruled mid-15th century Wallachia, a region of modern day Romania.

Incredibly, though, there is a real but lesser-known horror story behind Dracula — a story of the long-term effects of inflationary policies and a consequent campaign of economic nationalism, rather than of a mythic, powerful undead creature: interventionism pursued terrifyingly, diligently, to its logical ends.

The Real Dracula
In 1431, Vlad Tepes III, the man who would become the inspiration for Count Dracula, was born in Transylvania. With his father, Vlad II, on the Wallachian throne, early in life he and his brother were sent to the Ottoman court of Mehmet the Conqueror to act as living guarantors of their father's fidelity ("loyalty hostages"). While his brother, Radu, flourished, Vlad III was insolent and regularly experienced beatings and imprisonment.

Typical for that time, a host of intrigues swirled about the court of Vlad II, compounded by Wallachia's critical location as a buffer kingdom between the Ottoman and Holy Roman Empires; changes in leadership could bring about changes in policy, swiftly impacting trade and fortunes. In December of 1447, Vlad II was murdered during a coup. The Ottomans responded swiftly, appointing young Vlad III to his father's former throne. A Hungarian force in turn responded, driving Vlad to flee to Moldavia where he undertook diplomatic duties alongside his uncle.

In 1453, Constantinople fell, and Ottoman forces surged through the Balkans. When the Hungarian occupiers left Wallachia to support their allies and help staunch the flow of invaders, Vlad III, now 23, leapt into action, organizing and leading a successful invasion of his native land.

On retaking the throne, Vlad was stunned to find Wallachia in a state of utter social and economic decay. Where once a brisk trade in "salt, cattle … honey, wine … wax" and many other goods had prospered, the economy was now utterly destroyed.1

In fact, throughout the century prior to Vlad III's return, the Wallachian economy had been systematically destroyed by liberal use of a well-known policy strategy: currency manipulation. Previous rulers of Wallachia had repeatedly implemented monetary "reform,"
each [of which] led to the introduction of a more debased … lighter weight type of ducat … [in order to] increase of the amount of the coinage needed by … expanding political payments.2
Picture 2
The previous Wallachian leaders' motives were timeworn as well: "Wallachia was confronted, almost permanently, with excessive military expenses … as well as an active international policy."

Thus, there were "serious threats … [to] the monetary stability in Wallachia during the entire 14th–15th century."3
Consistent expansion of the money supply had created insecurity within the realm, and Vlad immediately took action to create security, making his ruling objectives clear:
My sacred mission is to bring order.… There must be security for all in my land.… When a prince is powerful at home, he will be able to do as he wills. If I am feared by the right people, [we] will be strong.4
Over the next six years, he implemented policies according to three rough tenets: class warfare/redistribution, protectionism, and welfare statism. Accounts of Vlad III's murderous efforts in these pursuits rival, in their sanguineous ingenuity, the most nightmarish accounts of both La Terreur of revolutionary France and the concentration camps of Nazi Germany. In Roumania Past and Present, historian James Samuelson notes, regarding the legends surrounding Vlad Tepes III, "if one-tenth of what has been related to him [is] true … [he is] one of the most atrocious and cruel tyrants who ever disgraced even those dark ages."5

However, Vlad III was more than just a sadist; his victims were chosen according to their usefulness with respect to fulfilling his vision for a revitalized Wallachia. Indeed, several historians agree that "it is beyond any doubt that [among other] reasons, Vlad the Impaler was … guided by economic ones."6

Class Warfare
A bulwark of the social and economic landscape of Wallachia — and most of Eastern Europe, at this time — was the boyar class: a social rank of landowners, merchants, and military elites one level below the ruling nobility. Vlad III blamed the merchants and elites for the economic troubles of the time. Consequently, a centerpiece of his plan to right the economic ship of Wallachia focused on persecuting the boyars and seizing their property: leveraging the masses' schadenfreud to harness the considerable power of envy and, in turn, greater breadth to the reach of his throne. 
The implicit message behind Vlad III's policy was an enduring one, as states go: that the wealthy and productive live off and at the expense of the multitude. In fact, governments are the true vampires, clandestinely siphoning the productive output of all citizens while pitting them against each other through propaganda and prevarication.

In Easter 1456, Vlad III invited a number of prominent boyars to his castle, some of whom he suspected of taking part in the conspiracy to murder his father. Suddenly, without warning, the
able-bodied were chained together and forced to march for sixty miles through the rugged countryside to the ruins of Poienari in the Argest valley. Many of them died enroute.… The prisoners were forced to form a human chain under the whip to convey building materials up the mountainside. The restoration work lasted for two months and very few of the captives survived the ordeal.7
Throughout the remainder of his reign, Vlad III decimated the landowning and merchant population and at the same time seized their wealth and property. Throughout his reign, in fact, he devoted extensive time and effort to "systematically eradicate the old boyar class of Wallachia."8 In August of 1459, one account reports that he "had thirty thousand merchants and boyars" killed.9....

"Subscriber City: What happens when you need an app to access anything"

 From Real Life magazine:

At their base, most of the apps on your phone have a simple value proposition: When you want something, you can tap on a screen. Pizza, mortgages, a ride, groceries, you name it — they all can be hailed through the user interface, which commands a mix of information and criminally cheap labor to fulfil your request. You don’t have to go anywhere or talk to anyone.

The ongoing Covid-19 pandemic has opened up new frontiers for this basic business model, as the surging demand for grocery and prepared-food delivery suggests. Typically, pandemics require us to cooperate and compromise until the danger subsides, but apps offer a different approach: They merge the need to isolate with a celebration of convenience, as though having our access to the world mediated by tech companies were the silver lining.

Already, apps excel at offering private, individualized solutions to collective problems that urge us to participate in exploiting one another. As subways crumble and housing prices reach stupendous heights, we get apps that ration car rides and single-bedroom efficiencies. But Covid’s wake may bring a maturation and hybridization of these systems as part of tech companies’ broader agenda: to serve as gatekeepers and toll collectors capable of extracting profit from “identity management,” resource allocation, and access control long after this pandemic has passed. Such systems — which will link insurance, health, financial, and advertising data to profile us against our will (much as credit rating companies have for decades) — already may determine the cost of your car insurance premiums, what job ads you see, and whether or not you will be offered bail. But they may ultimately come to administer our access to everything we associate with the freedom of urban life.

When a 2012 Microsoft patent filing posited a method for taking “the user through neighborhoods with violent crime statistics below a certain threshold,” it spurred a flurry of articles about whether such a project was racist. Yes, it was, but the bigger picture is how crime data may be used alongside data on purchasing histories, demographic information, and land prices to dictate where people live their lives. For example, the patent also described displaying in-car advertisements (“stop at a highway exit for a cup of coffee”) and then monitoring the driver to see if they made that purchase, so that the advertiser could be charged for the ad conversion. It’s easy to imagine a scenario where a driver originating from a poor part of town is steered with ads for rent-a-centers, check cashing, and fast food, or one in which a black-owned business is charged double for an ad conversion because there was an armed robbery in the vicinity two days ago. And so on. The various inputs that go into the value of a location for a particular transaction can be assessed and prices adjusted accordingly in a matter of minutes instead of years.

There are already highway toll lanes with dynamically adjusted congestion pricing, but dynamic pricing can easily move beyond the car. Amazon — an early leader in automating price discrimination — has already bought Whole Foods; how long before different customers are charged different prices for the same goods in physical grocery stores? How soon will a credit card reward system dictate your place in line for the doctors’ office, the DMV, or the breadline? How soon before paywalls go up around the public spaces we are used to crossing unhindered, before services that once seemed available to all on equal terms become subject to priority tiers?....


Friday, October 30, 2020

Who Owns England? "A guide to Modern Domesdays"

 I could have used a Ukrainian Domesday book last week when asking about farmland ownership and avoided tumbling down the neo-Nazis and Victoria Nuland and the Maidan rabbit hole..

From Who Owns England:

“The King [held] a large meeting, and very deep consultation with his council, about this land; how it was occupied, and by what sort of men. Then sent he his men over all England into each shire; commissioning them to find out… what, or how much, each man had, who was an occupier of land in England, either in land or in stock, and how much money it were worth.”

So speaks the Ango-Saxon Chronicle on the compilation of Domesday Book by William the Conqueror – the greatest swag-list ever created. Having seized all England for the Crown after the Conquest, the king was in his counting-house, counting out all his money.

It’s unusual that what is essentially a government tax assessment should still be remembered by the bulk of the population a thousand years after it was carried out. But then, Domesday is unusual. It was an unprecedented piece of documentation, unparalleled in Europe at the time, and to this day remains a legal document that is still valid as evidence of title to land.

Curiously, however, people have forgotten about England’s Modern Domesdays. At least four times in the past two centuries, governments have carried out comprehensive appraisals of who owns England. The record books, maps and valuation tables that make up these surveys are far more relevant to who currently owns this island than the scrawlings of a Norman king. Yet they lie gathering dust in our national archives, hidden from view, forgotten. This is a guide to the Modern Domesdays.

1) Tithe maps (1830s-40s)

Since before the Norman Conquest, it had become customary for peasants to pay to the Church one-tenth of their produce, levied in kind. This continued, despite the Reformation, up until modern times. Then in 1836, the Tithe Commutation Act allowed tithes to be paid in cash rather than in goods. This necessitated the creation of accurate maps of all land, including who owned it and who occupied it.

Some of the tithe maps that were created made use of the earliest series of Ordnance Survey maps, drawn up during the Napoleonic Wars. Others were the first detailed maps of their area in existence. As a result, they varied in quality considerably. About 1,900 of the maps – one-sixth of the total drawn up – were ‘sealed’ by the Tithe Commissioners, denoting them to be very accurate. The rest were a mixed bag, ranging from half-decent maps to sketches. Even so, they remain valuable records, because of what accompanied them: Tithe Apportionments, ledgers setting out the owners and occupiers of each field and parcel of land. Today they reside in the National Archives; a few counties have digitised their tithe maps and put them online, but not many (e.g. Cheshire, East Sussex, Norfolk).


Tithe maps were, therefore, the first attempt since the original Domesday to survey the owners and occupiers of all land in England and Wales. Though to modern ears the concept of Church tithes sounds medieval, the appearance of the Tithe Maps in the 1840s were a sign of modernity: the replacement of feudal dues with the cash economy, the use of modern military cartographic methods to map out the lie of the land. Meanwhile, the Victorian state was taking an increasing interest in monitoring its burgeoning population through ten-yearly censuses, with the 1841 Census being the first to record the names of all individuals in a dwelling. This, unwittingly, was to sow the seeds for the second Domesday of modern times.

2) The Return of Owners of Land (1873-5)

The 1861 Census provoked a commotion amongst radicals, as its records seemed to show there were just 30,000 ‘owners of land’ in the whole country – though without revealing how much each owned.

The 15th Earl of Derby – himself a major landowner, and the son of the former Conservative Prime Minister – sought to disprove these claims. Addressing the House of Lords on 19th February 1872, he asked the Lord Privy Seal, “Whether it is the intention of Her Majesty’s Government to take any steps for ascertaining accurately the number of Proprietors of Land or Houses in the United Kingdom, with the quantity of land owned by each?”

An accurate survey would be a public service, Derby went on, for currently there was a “great outcry raised about what was called the monopoly of land, and, in support of that cry, the wildest and most reckless exaggerations and misstatements of fact were uttered as to the number of persons who were the actual owners of the soil.”

Viscount Halifax, responding for the Government, agreed, opining that “For statistical purposes, he thought that we ought to know the number of owners of land in the United Kingdom, and there would be no difficulty in obtaining this information.” (My emphasis.)

edward_stanley_15th_earl_of_derby 1stviscounthalifax

Above: The 15th Earl of Derby, left; Viscount Halifax, right.

Halifax duly tasked the Local Government Board with preparing a Return of Owners of Land. The Return was not produced by sending out surveyors, like the original Domesday, but by compiling and checking statistics already gathered on land and property ownership for the purposes of the Poor Law. This in itself was no mean feat: as is noted in the preface to the Return, “upwards of 300,000 separate applications had to be sent to the clerks in order to clear up questions in reference to duplicate entries”. No maps were made, but addresses were recorded.

The Return of Owners of Land was finally published, “after considerable but unavoidable delay”, in July 1875. (You can browse the c.1,000 pages of Vol 1 on Google Books, here). Its initial conclusions gave heart to the landed governing classes: there were, in fact, some 972,836 owners of land in England & Wales, outside of London. Yet 703,289 were owners of less than an acre, leaving 269,547 who owned an acre or above. Even this, the clerks pointed out, was likely an overestimate, based on county-level figures: anyone who owned land in multiple counties would be double-counted.

It fell to an author and country squire, John Bateman, to interpret and popularise the Return. In 1876 he published The Acre-Ocracy of England in which he summarised the owners of 3,000 acres and above. It became a best-seller, going through four editions and updates, culminating in Bateman’s last work on the subject in 1883, The Great Land-Owners of Great Britain and Ireland. Bateman’s analysis confirmed the radicals’ worst fears: just 4,000 families owned over half the country. Meanwhile, 95% of the population owned nothing at all. The landed elite had been exposed....


I was going to link to this version of "The Great Land-Owners..." but on second thought the presentation of the version in the text above is easier on the eyes. 

Understanding Commodities: Scarcity, Prices and Revisiting the Simon-Ehrlich Wager 40 Years On

 Commodities are for trading, not investing.

From Quillette, October 13:

Revisiting the Simon-Ehrlich Wager 40 Years On

It is 1980, and you are getting married. Your parents decide to celebrate your nuptials by inviting 100 guests to a wedding reception. The reception cost them $100 per person or $10,000 in total. Fast forward to 2018. Now it is you who is throwing a wedding reception for your child. The guest list has increased by 72 percent (some of the old folk are no longer around, but the cousins have exploded in number). That means that you are now catering to 172 people. The price per guest remained the same (suspend your disbelief and ignore inflation for now), and you expect to get a bill for $17,200. Instead, the bill comes to $4,816, which is less than half of what your parents paid for you. How is that possible, you ask the caterer? The caterer responds that for every one percent increase in attendance, the bill fell by one percent. And so, while the number of guests rose by 72 percent, your bill declined by 72 percent. Surely, things like that don’t happen in real life, or do they?

In fact, that’s exactly what has happened to the affordability of 50 basic commodities between 1980 and 2018. Over those 38 years, the world’s population rose from 4.458 billion to 7.631 billion or 71.2 percent. Over the same time period, basic commodities, including energy, food, materials, and metals became 71.6 percent more affordable on average. For every one percent increase in population, in other words, resources became slightly more than one percent more abundant. Put differently, the time it took to earn enough money to buy one unit in that basket of 50 commodities in 1980 bought 3.62 units in 2018. The compounded growth rate of abundance came to 3.44 percent per annum. That means that the affordability of our basket of commodities doubled every 20.49 years. This relationship between population growth and resource abundance is deeply counterintuitive, yet it is no less true. The facts surprised us, and they will surprise you too.

Generations of people throughout the world have been taught to believe that there is an inverse relationship between population growth and availability of resources, which is to say that as population grows, resources become more “scarce.” That was, historically speaking, true. In the animal world, a sudden increase in the availability of resources, such as grass after unusually plentiful rain, leads to an animal population explosion. The population explosion then leads to the exhaustion of resources. Finally, the exhaustion of resources leads to population collapse. If you take the Theory of Evolution seriously—and we do—you’ll appreciate that human beings evolved from much humbler beginnings and were, as such, much more exposed to vicissitudes of fortune.

Over time, however, humans have developed sophisticated forms of cooperation that increase their wealth and chances of survival. Consider, for example, trade and exchange. As the British writer Matt Ridley observed in his 2010 book The Rational Optimist: How Prosperity Evolves, “There is strikingly little use of barter in any other animal species. There is sharing within families, and there is food‐for‐sex exchange in many animals including insects and apes, but there are no cases in which one animal gives an unrelated animal one thing in exchange for a different thing.” Trade is particularly important during famines. A country struck by drought, for example, can purchase food from abroad. This is not an option available to other animals....


Re: Ridley, yes, yes Northern Rock, he was a greedy idiot that oversaw the first major British bank run in over a century and led yours truly to begin channeling New York tabloid headline style:

Panic on the streets of Britain: Northern rocked, City shocked

Rock, Paper, Scissored

However! That doesn't on its own discredit other observations he might have. For if previous failure was the criteria for dismissing someone out of hand Paul Erlich would not have his comfy endowed chair at Stanford.

June 2015
"UN flags grain price falls as it ups world harvest forecast"
When is science not science? When it's done by Paul -Population Bomb- Ehrlich.
"In ten years all important animal life in the sea will be extinct. Large areas of coastline will have to be evacuated because of the stench of dead fish." Paul Ehrlich, Earth Day 1970
The guy would be an embarrassment a third rate college much less to Stanford of all places.
"I would take even money that England will not exist in the year 2000." (1969)

"Before 1985, mankind will enter a genuine age of scarcity . . . in which the accessible supplies of many key minerals will be facing depletion." (1976)
May 2013 
Last month I tangentially mentioned Paul Ehrlich:
See also: the spectacularly wrong and wrong-headed forecasts made by Paul Ehrlich for which he has been rewarded with an endowed chair at Stanford-definitely a mark against Stanford.
And fully intended to gather some of his wrong-beyond-wrong predictions.
I forgot.
I'll get around to a full post on his doom-mongering but for now here are a couple of his comments on India:

"I don't see how India could possibly feed two hundred million more people by 1980."
-Population Bomb, 1968 

"I have yet to meet anyone familiar with the situation who thinks that India 
will be self-sufficient in food by 1971." 
-Population Bomb, 1968

In the book's 1971 edition, the latter prediction was removed, green revolution and all that.
The World Bank estimates India's population was 511 million in January 1968.
India is feeding 700 million more people than when Ehrlich wrote his 200 mil. line.
Meet M.S. Swaminathan and his students.

There are many, many more examples but for now, you get the point.

"Commodities: 'The Case for Human Ingenuity'":

“When you buy commodities, you’re selling human ingenuity.”
Dylan Grice on why investing in commodities for the long run is a bad idea (SocGen Cross Asset Research, December 2010)

News You Can Use: "Farming the apocalypse"

From Aeon Magazine:

Keith Ferrell was a writer of fiction, non-fiction, and computer games. 
The former editor-in-chief of OMNI magazine, his latest book is History Decoded (2013), 
co-written with Brad Meltzer. 

When my life came crashing down I took shelter on my farm, surviving with 11th-century tools like the sickle and scythe 

When there is a likelihood of even small amounts of snow, sleet or ice, I move my car to the top of the hill that shelters my farm. If I need to run errands during such times, I just walk up the hill to it. The car is old, our drive is steep and close to a quarter-mile long. Depending upon how deep the snow, and how often my attention is caught by something else, the walk can take a few minutes or half an hour. Upon returning, I park in the same place, and walk back down, carrying the day’s mail and my small purchases through the woods. Emerging from the forest at the base of the hill and seeing my farm covered in snow, I think of it as cut free from time – and myself cut free as well.

My car can take me to neighbours, to stores, to town. Across the meadow, my house, a (mostly) converted barn, contains telephone and internet connecting me to friends, relatives, colleagues, a universe of information and distraction, the modern world. Right between them lies the sliver of land I use to try my hand at agriculture, as it was practised 1,000 years ago.

The transition from hunter-gatherer to farmer has always fascinated me. The ability to plant, cultivate and harvest crops stands alongside the emergence of self-awareness, control of fire, the wheel, and the development of mathematics and written language as one of humanity’s transformational events. We became something different once we began to farm.

I have found something like that taking place in me. For a variety of reasons – partly financial, partly intellectual – I have approached my land with tools that, for the most part, would have been available in 1014: scythes, sickles and mattocks recognisable from paintings and tapestries of 11th-century farms. How long would I last if thrust back by time machine or a collapse of the sort popular in apocalypse porn?

Calling my 35 acres a farm is misleading, though not so misleading as calling myself a farmer, something I never do. My neighbours are real farmers: they make their living through agriculture. Their fields and pastures are large and orderly, cultivated and fertilised, tended by workers and machines. My fields, tended only by me, are disorderly, improvised, often overgrown. Yet without saying so aloud, I have, over the past couple of years, come to think of myself more and more constantly as a farmer; as a sort of farmer anyway. An 11th-century (or so) sort of farmer, actually, although I am well aware of how little I would have in common with the real thing, and how poorly my skills would prepare me to live in that time.

I arrived in the 11th century through circumstances in my life and career. Purchased in the mid-1990s as a weekend and summer home, a getaway, part of the farm’s attraction was the old barn, already half-converted into living quarters. The downstairs had electricity, running water from a good well, a water heater, a tub and a toilet, a septic system. There was a range in the kitchen. The place had a phone line, which meant that we had dial-up internet (virtually the only option at the time). The nearest town, Rocky Mount, with just over 4,000 people, was 15 miles away. On clear nights with the lights turned low, the stars came out nearly as brilliantly as they would have a thousand years before.

The first couple of years of ownership had a peaceful pace – peaceful, that is, once I arrived here at the end of a work week or the beginning of a vacation. At the time, I was still editor-in-chief of OMNI magazine, often travelling throughout the country and around the world. My wife was teaching high school....


Shipping Explores Hydrogen As Route To Net Zero Emissions

Our readers know much of this but it's nice to have it in one place.

From Reuters via gCaptain, October 30:

Developers across the world are for the first time testing the use of hydrogen to power ships as the maritime industry races to find technologies to cut emissions and confidence grows the fuel is safe to use commercially.

To reach goals for the shipping industry set by the United Nations, industry leaders say the first net-zero ships must enter the global fleet by 2030. Ships powered by green hydrogen could help meet the target.

Made from electrolysis to split water into hydrogen and oxygen using electricity from renewable energy, green hydrogen is emissions-free.

Oil major Royal Dutch Shell last month reiterated its commitment to hydrogen, which it saw as “advantaged over other potential zero-emissions fuels for shipping”.

While hydrogen’s green credentials make it attractive to industrial users, including ship owners and oil majors, it is far less dense than other fuels, meaning more onboard fuel storage capacity is needed. That makes it more feasible, for now, for use in vessels on short voyages.

Swiss-headquartered technology group ABB is working on hydrogen fuel cell systems, including for passenger and cargo ships. One of its projects involves developing a fuel cell-based power and propulsion system for a new-build river vessel along France’s Rhone river.

“ABB sees short-distance shipping as the first adopters of the fuel cell technology,” said Juha Koskela, division president, ABB Marine & Ports.


Green hydrogen fuel costs around 4-8 times the price of very low sulfur fuel oil, estimates by risk management firm DNV GL find.

Other types of hydrogen are cheaper, but that is because they are produced using fossil fuel, which means they are not emissions free.

Green hydrogen is expected to fall in price over the next couple of decades as the cost of renewable energy and electrolyzers falls.

For companies to invest en masse, however, the associated infrastructure for refueling and transportation, including electrolyzers, compressors, storage, tanks, and pipelines, must also be in place.

Christos Chryssakis, of DNV GL, said it took around 20 years to establish liquefied natural gas refueling infrastructure. He said the process could be quicker for hydrogen, but industry estimates find many billions in investment would be needed....


"Arctic developers present new LNG carrier for year-round shipments on Northern Sea Route"

From the Barents Observer, October 29:

A completely new icebreaking hull form will enable the ships to traverse the most icy parts of the shipping route all through the year. 

These will be the first ships ever designed for NSR year-around shipping, says General Director of Aker Arctic Reko-Antti Suojanen.

The Finnish design and engineering company this week announced that it has developed a new state-of-the-art icebreaking LNG carrier that will be able to operate along Russia’s Northern Sea Route even in the most icy parts of the year.

The ships will have a completely new icebreaking hull form, the company says. It is developed in cooperation with the Daewoo Shipbuilding & Marine Engineering (DSME) and Novatek.

The Korean yard has already signed contracts with shipping companies Sovcomflot and Mitsui O.S.K. Lines on the construction of six Arc7 LNG carriers based on the new design.

Three of the six new vessels will be operated by Sovcomflot. According to the Russian company, the ships “will each feature a propulsion system comprising three Azipod units with a total capacity of 51 MW, which is comparable to that of 50 Let Pobedy, a nuclear-powered icebreaker (55 MW), and is almost 60 per cent higher than that of Lenin, the world’s first nuclear-powered icebreaker (32.4 MW).”

The new propulsion system is expected to provide new vessels with increased speed and manoeuvrability when sailing in ice conditions, compared with icebreaking LNG carriers of the previous generation, the company informs.

According to Aker Arctic, the new ship design is tailored for Novatek’s grand new Arctic LNG 2, the natural gas project that is to deliver 14,7 million tons of LNG by year 2024. Shortly later, the project is due to increase production to 19,8 million tons per year....



Action: "Susquehanna Will Take Your Election Bets, Up to $100 Million"

 From Bloomberg, October 30:

With the onset of an historic U.S. presidential election, a quantitative trading firm has been trying to pique hedge funds’ interest in casting big bets in political-prediction markets.

Susquehanna International Group, based in Bala Cynwyd, Pa., is a big player in options and the exchange-traded fund market, but its founders have long had an interest in the statistical side of gambling. The firm runs its own blog on gaming and poker strategy tips and has been building up a sports-betting operation in Ireland. It’s recently gauged funds’ interest in bets on election outcomes. Although few have gotten involved, Susquehanna is willing to take the other side of wagers on the presidential race for up to $100 million per bet, says a person familiar with the firm, speaking on the condition of anonymity because the plans are not public.

Funds wouldn’t be able to place bets from the U.S., where the practice is banned in most cases, and would have to consult their lawyers to ensure they’re in the clear. Susquehanna isn’t offering a betting service or product: Funds would place wagers at licensed betting platforms in the U.K., which would look for a counterparty to take them up. Susquehanna’s Dublin affiliate could then step in, essentially acting as a behind-the-scenes market maker for the bets.

Investors already express views on political outcomes in the securities they buy. Strategists at JPMorgan Chase & Co., for example, have created a“Trump basket” and a “Biden basket” of stocks expected to do well under each future administration. But traders are often wrong about what elections really mean for stocks. In 2016 futures contracts on U.S. stock indexes plummeted on election night as Donald Trump’s victory became clear. The next day the S&P 500 rallied. So if you want to make a bet, why not just wager directly on the outcome of the election? “It’s just another thing to add to the portfolio,” says Paul Krishnamurty, a professional gambler and freelance political markets analyst for Betfair, a prediction exchange with headquarters in London. “It’s just another hedge.”

A trickier question is what risk you’d actually be hedging. If it’s hard to predict how an election will affect markets, then it’s not clear how a winning political bet might offset a loss elsewhere. That’s one reason the U.S. Commodity Futures Trading Commission in 2012 stopped a company from listing derivatives contracts tied to elections. The CFTC also said such markets could damage the integrity of elections, for example by giving people a direct financial interest in voting for a candidate they wouldn’t otherwise support.

Political betting also faces more mundane objections: Even where it’s legal, fees are often high, and markets tend to be thinly traded, without much opportunity to rake in big winnings—at least in Wall Street terms. Betfair has matched about $266 million in trades on who will win the presidential race.

Markets to bet on U.S. presidential elections operated from 1868 to 1940, according to research by Paul Rhode of the University of Michigan and Koleman Strumpf at Wake Forest University. New York was a hub for it, especially the informal Curb Exchange, which later became the American Stock Exchange. Sometimes, for brief periods, betting on politics would exceed stock and bond trading. Political markets faded as scientific polling ascended and other types of gambling became more accessible....


David Einhorn: "This Is An Enormous Tech Bubble" And It Popped On September 2, 2020

September 2, September 2. There's something about that date.*

Lifted in toto from ZeroHedge, October 27:

For those who have not followed David Einhorn's crusade against central bank money printing, and the epic bubble these cluless academic hacks have created, his views on the "enormous tech bubble" we are currently living through and published in his latest letter to investors of his Greenlight hedge fund (which returned 5.9% in Q3) will provide some unique perspective.

To everyone else who is familiar with how his fund has been hammered by his tech short basket - and especially Tesla - over the past five years, as the most overvalued tech stocks in history continued to rip even higher year after year, we doubt his latest thoughts will come as a surprise, although his observations on the endgame are certainly remarkable, if for no other reason that he has dared to declare the time of death of said "enormous tech bubble" as Sept 2, 2020, the day the S&P500 and the Nasdaq both hit an all time high.

Why is Einhorn confident that this time he has finally timed the exact moment the bubble popped? He explains:

Bubbles tend to topple under their own weight. Everybody is in. The last short has covered. The last buyer has bought (or bought massive amounts of weekly calls). The decline starts and the psychology shifts from greed to complacency to worry to panic. Our working hypothesis, which might be disproven, is that September 2, 2020 was the top and the bubble has already popped. If so, investor sentiment is in the process of shifting from greed to complacency. We have adjusted our short book accordingly including adding a fresh bubble basket of mostly second-tier companies and recent IPOs trading at remarkable valuations

So without further ado, below we excerpt his key thoughts on the biggest asset bubble that the Fed has inflated:

* * *

We are now in the midst of an enormous tech bubble. We prematurely identified what we thought was a bubble in early 2016. Part of our thinking at the time was that the height of the 1999-2000 bubble was a once-in-a-career experience and that investors would not repeat that level of insanity. Clearly, we were mistaken.

Four years later, there is a consensus that we are in a bubble. Barron’s recently ran this on the cover:

All the signs of a bubble are there, including:

  • an IPO mania;
  • extraordinary valuations and new metrics for valuation;5
  • a huge market concentration in a single sector and a few stocks;
  • a second tier of stocks that most people haven’t heard of at S&P 500-type marketcapitalizations;
  • the more fanciful and distant the narrative, it seems the better the stock performs;
  • outperformance of companies suspected of fraud based on the consensus belief thatthere is no enforcement risk, without which crime pays;
  • outsized reaction to economically irrelevant stock splits;
  • increased participation of retail investors, who appear focused on the best-performing names;
  • incredible trading volumes in speculative instruments like weekly call options andworthless common stock;6 and
  • a parabolic ascent toward a top.

There are many anecdotes of toppy behavior. We will share one: We recently received a job application with the email subject, “I am young, but good at investments” from a 13-year-old who purports to have quadrupled his money since February.

Some analysts and commentators are comparing this bubble to the prior one. Have the valuations reached the prior insanity’s? Is the IPO mania just as large? Are the companies better today? Are they growing faster? Have the specific events that popped the last bubble happened? Are they likely to happen soon?

We believe these questions are a fool’s errand. The bubbles will never be exactly the same. In 2000, the Nasdaq peaked at 5,000. Why not 4,000? Why not 10,000? Or 20,000? Would there really have been a difference? If the Nasdaq had peaked at 3,500 instead of 5,000, the losses would have been 65% instead of 80%. Had it peaked at 3,500, it would be easier to argue that this bubble has surpassed that one. Had it peaked at 20,000, it would be easier to argue that there is still a long way to go. This analysis is arbitrary. Is a bubble only dangerous when it has exceeded the prior one on every metric?

What matters in a bubble is market psychology, not valuation. Valuation is irrelevant; that’s what makes it a bubble. Jeremy Grantham has done some of the best work on bubbles and by his criteria this one is a “Real McCoy.” The question at hand is where are we in the psychology of this bubble? On March 10, 2000, nobody knew that it was the top. Even by September 2000, it wasn’t clear. There was no obvious event that marked the top. Only in hindsight do people try to back fit an explanation.

Bubbles tend to topple under their own weight. Everybody is in. The last short has covered. The last buyer has bought (or bought massive amounts of weekly calls). The decline starts and the psychology shifts from greed to complacency to worry to panic. Our working hypothesis, which might be disproven, is that September 2, 2020 was the top and the bubble has already popped. If so, investor sentiment is in the process of shifting from greed to complacency. We have adjusted our short book accordingly including adding a fresh bubble basket of mostly second-tier companies and recent IPOs trading at remarkable valuations.

The post below was published with the S&P futures at 3,546.50 and the DJIA futures at 28,756.00. They were up pre-market but I've forgotten how much. By the end of the day the S&P 500 had set its all-time closing high of 3,588.11.

Writing "we are not there yet" it turns out we were 41 points (1.15%) away.

That is really lucky.

 *September 2, 2020 


Starting To Get Nervous About Equities

This is just a heads-up, we are not there yet.
It would be nice to catch the exact top, to bookend March 20's "It's Time To Buy Some Stocks" but getting lucky twice in one move is a longshot. Here's a line from Warren Buffet in December 31, 2016's "A Quick Victory Lap (and some wisdom from Warren Buffett) NVDA":
...from his letter to shareholders, 1985:
Our gain in net worth during the year was $613.6 million, or 48.2%. It is fitting that the visit of Halley’s Comet coincided with this percentage gain: neither will be seen again in my lifetime. Our gain in per-share book value over the last twenty- one years (that is, since present management took over) has been from $19.46 to $1643.71, or 23.2% compounded annually, another percentage that will not be repeated....
And that's why we take the lap now, it won't happen again before Halley's big rock returns in 2062....
In January 2018 it was the Great Cobalt Trade of '17:
"In 2016 We Had the #1 Stock In the S&P 500, In 2017 We Had the Top-Performing Commodity, In 2018 We've Got.... "
So here's a little victory dance 'til we figure something out.
And after that, a pretty good Warren Buffett story..... 
So, with the S&P futures at 3,546.50 and the DJIA futs at 28,756.00 I'm going to try to figure-out the timing and the next move and leave you with that "pretty good Warren Buffett story":

....Which brings us to today when all I have to offer are a couple snips from Warren Buffett's Letters to the Shareholders of Berkshire Hathaway
The '85 Berkshire letter continues one of my favorite BRK stories.
First the background, from the 1984 Chairman's Letter:
"...Using my academic voice, I have told you in the past of the drag that a mushrooming capital base exerts upon rates of return. Unfortunately, my academic voice is now giving way to a reportorial voice. Our historical 22% rate is just that - history. To earn even 15% annually over the next decade (assuming we continue to follow our present dividend policy, about which more will be said later in this letter) we would need profits aggregating about $3.9 billion. Accomplishing this will require a few big ideas - small ones just won’t do. Charlie Munger, my partner in general management, and I do not have any such ideas at present, but our experience has been that they pop up occasionally. (How’s that for a strategic plan?)..."
And then, the dénouement in the paragraph which immediately preceded the Halley's bit in the 1985 letter:
...You may remember the wildly upbeat message of last year’s report: nothing much was in the works but our experience had been that something big popped up occasionally. This carefully- crafted corporate strategy paid off in 1985. Later sections of this report discuss (a) our purchase of a major position in Capital Cities/ABC, (b) our acquisition of Scott & Fetzer, (c) our entry into a large, extended term participation in the insurance business of Fireman’s Fund, and (d) our sale of our stock in General Foods....

Earlier today: 

Markets: What Changed On August 27?