From The Browser:
Byrne Hobart On Finance And Culture
Byrne Hobart is the author of The Diff, a newsletter about inflections in tech and finance. ADS is the author of Applied Divinity Studies.
Applied Divinity Studies: Is there a Hotelling’s law for newsletters? It doesn’t seem absurd, at face value, to imagine that there’s a Byrne Hobart Prime writing approximately the same newsletter but say, covering a slightly different subset of events.
Or if talent plays a role, maybe a Discount Byrne Hobart who writes a worse version of the same newsletter but offers it for half the cost.
You might argue that the pressure towards homogeneity is eradicated by zero marginal costs to replication, but ultimately, we should still expect to see a lot of imitators, some of which might by slightly better at filling some demand niche, and with enough of these you would expect to lose your lunch.
What’s going on? Is newsletter defensibility driven by network effects?
Byrne Hobart: There are a couple different dynamics here:
- Business writing and pure entertainment have very different demand curves. For business writing, opportunity cost is a much bigger component of the total cost, which makes pricing differences less salient.
Suppose someone makes $1m/year at a private equity firm. Assume they’re working 60-hour weeks. Their time is worth $333/hour. So an hour-a-day newsletter habit has an opportunity cost that’s far higher than the financial cost of the newsletter.
In fact, the opportunity cost of reading half a dozen Diff issues is higher than the subscription cost for this kind of reader. This puts a high premium on 1) making novel points, 2) making points that will help them make more effective decisions, and 3) getting to the point.
A newsletter that is lower quality might have a lower financial cost, but in terms of opportunity cost it’s actually more expensive.- Another dynamic with newsletters is affinity. This is usually a bigger deal at lower price points than mine, but I know of plenty of people who will pay $5 or $10 a month to support someone, even if they’re not getting anything extra. In fact, I do this sometimes. It’s nice to support people.
That said, the business is quite competitive. There are some very smart people out there writing on topics I cover, and when there’s a big story I often assume it’s going to be covered, and covered well, by someone who I like to read.
This doesn’t preclude me writing about it, too, but it does put a premium on writing about topics that aren’t timely and thus don’t have direct same-day competition.
Fortunately, this kind of writing is self-sustaining, because there’s this iterative aspect: see an interesting pattern, write about it; find a case study of that pattern, write about that case study; see other interesting patterns in the case study, write about those.
This often takes the form of turning a footnote into a full article, and sometimes that article will have a footnote worth expanding on, too.
Applied Divinity Studies: 13 years ago you were living in a former crack den eating rice and beans. What was that: a mistake? Instructive? Would you do it again? Recommend it to a colleague?
Byrne Hobart: Some amount of suffering is good for moral development and gives you better stories to tell, but it’s hard to recommend it.
For one thing, maybe that experience is entirely subjective to me, or I’ve been successfully memed into thinking that it Builds Character when it really doesn’t.
For another, it seems like it’s better for you if you choose it, or, even better, if you make choices that inevitably lead to it.
In my case, it was not especially bad. It doesn’t really count as poverty since I wasn’t struggling to pay bills or have enough to eat, just paying very small bills and eating not especially great food. And I was confident it was temporary, which turned out to be justified.
It’s probably healthier to pursue some edifying level of suffering either a) through some kind of structured belief system that tells you when to suffer and what it means, e.g. religiously prescribed fasting, or b) by working out, which is painful but has good physical effects in addition to the character-building ones.
Applied Divinity Studies: What’s the most value a reader has even gotten out of The Diff? A job offer? A particularly lucrative trade? Will you ever know?
Byrne Hobart: I know of at least one very cool job someone got through The Diff, although I haven’t been given permission to disclose it. I’ve heard about trades—including, oddly, one case where I was musing about an interesting situation in oil markets but did not actually come to a firm conclusion. My reader did, and did well at the trade. (Maybe this is why I’m not at a hedge fund any more.)
Other than that, I’ve had readers say that something I wrote nudged them in the direction of creating one more startup (and some things I wrote outside the newsletter apparently encouraged one acquaintance to have one more kid, which is a very big deal!)
Applied Divinity Studies: John Luttig has a great piece about finance’s encroachment on popular culture. In the past, we might have had Gordon Gekko as a villain, or Ryan Gosling in The Big Short as a kind of anti-hero, but now it seems we’ve gone from demonizing Wall Street’s excesses, to demonizing them, but also wishing we could get a cut of the pie.
Have people gotten greedier? Has trading become more democratic? Is anti-capitalist sentiment evolving into a sense that if it’s all just a game, maybe ordinary people can win too? Are we just bored?
Byrne Hobart: There have been finance heroes and antiheroes for a long time. Jesse Livermore was a celebrity in the 20s, as were a few other now-mostly-forgotten traders, like Michael Meehan, the first person prosecuted by the SEC. Before that, you have Dreiser’s The Financier. And Moby-Dick has a scene where Ishmael is negotiating his equity comp package (he gets 33 bps).
So it’s been going on for a long time....
....MUCH MORE
Thanks to an older FT Alphaville Further Reading post put together by David Keohane for reminding me of The Browser.
And if interested, Dreiser and The Financier did a cameo in "Switzerland Begins Two-Year Trial of Driverless Buses" (plus money, art, glory and sex) No Ishmael.
But plenty of Livermore and Meehan if one wishes to use the 'search blog' box, upper left.
