Crypto is one of those topics that calls to mind the parable of the blind men and the elephant – there are so many aspects of how it works and what it means that you can interpret it many different ways and seize on one part or another to make whatever point you want. A lot of people, for example, seize on the money part, and either glorify it as a new kind of monetary system that liberates mankind from the nation state, or crucify it as a danger to economic stability and the ability for governments to tax. All of these are interesting arguments, but I think they all miss a more fundamental point, which is that crypto represents an architectural shift in how technology works and therefore how the world works.
That architectural shift is called distributed consensus – the ability for many untrusted participants in a network to establish consistency and trust. This is something the Internet has never had, but now it does, and I think it will take 30 years to work through all of the things we can do as a result. Money is the easiest application of this idea, but think more broadly – we can now, in theory, build Internet native contracts, loans, insurance, title to real world assets, unique digital goods (known as non-fungible tokens or NFTs), online corporate structures (such as digital autonomous organizations or DAOs), and on and on.
Consider also what this means for incentives. Up until now, collaborative human effort online either took the form of a literal adoption of real-world corporate norms – a company with a web site – or an open source project like Linux that had no money directly attached. With crypto, you can now create thousands of new kinds of incentive systems for collaborative work online, since participants in a crypto project can get paid directly without a real-world company even needing to exist. As great as open source software development has been, far more people are willing to do far more things for money than for free, and all of a sudden all those things become possible and even easy to do. Again, it will take 30 years to work through the consequences of this, but I don’t think it’s crazy that this could be a civilizational shift in how people work and get paid.
“The goal of the non-professional should not be to pick winners.”
Warren Buffett, writing in his 2013 letter to Berkshire Hathaway shareholders:
Most investors, of course, have not made the study of business prospects a priority in their lives. If wise, they will conclude that they do not know enough about specific businesses to predict their future earning power.
I have good news for these non-professionals: The typical investor doesn’t need this skill. In aggregate, American business has done wonderfully over time and will continue to do so (though, most assuredly, in unpredictable fits and starts). In the 20th Century, the Dow Jones Industrial index advanced from 66 to 11,497, paying a rising stream of dividends to boot. The 21st Century will witness further gains, almost certain to be substantial. The goal of the non-professional should not be to pick winners – neither he nor his “helpers” can do that – but should rather be to own a cross-section of businesses that in aggregate are bound to do well. A low-cost S&P 500 index fund will achieve this goal.
That’s the “what” of investing for the non-professional. The “when” is also important. The main danger is that the timid or beginning investor will enter the market at a time of extreme exuberance and then become disillusioned when paper losses occur. (Remember the late Barton Biggs’ observation: “A bull market is like sex. It feels best just before it ends.”) The antidote to that kind of mistiming is for an investor to accumulate shares over a long period and never to sell when the news is bad and stocks are well off their highs. Following those rules, the “know-nothing” investor who both diversifies and keeps his costs minimal is virtually certain to get satisfactory results. Indeed, the unsophisticated investor who is realistic about his shortcomings is likely to obtain better long-term results than the knowledgeable professional who is blind to even a single weakness.
“When we give up on truth, we concede power to those with the wealth and charisma to create spectacle in its place.”
Post-truth is pre-fascism, and Trump has been our post-truth president. When we give up on truth, we concede power to those with the wealth and charisma to create spectacle in its place. Without agreement about some basic facts, citizens cannot form the civil society that would allow them to defend themselves. If we lose the institutions that produce facts that are pertinent to us, then we tend to wallow in attractive abstractions and fictions. Truth defends itself particularly poorly when there is not very much of it around, and the era of Trump – like the era of Vladimir Putin in Russia – is one of the decline of local news. Social media is no substitute: It supercharges the mental habits by which we seek emotional stimulation and comfort, which means losing the distinction between what feels true and what actually is true.
“Sex robots are going to emulate an increase in the ratio of women to men.”
The men who would have been most likely to have access to multiple women throughout history were men high in status, like kings and men high in dominance, like warlords. Video games and social media already undermine the native psychological mechanisms that make us work towards status — they supply more immediate rewards and take far less effort than anything we work towards out in the real world. Sex robots are only going to make that worse, especially for young men. The game Love Plus, in which the ultimate reward is simply getting to know a virtual girl and attaining her virtual signals of approval has already replaced pursuing dating real women for thousands of men. Imagine if winning a video game was punctuated not with just saving the princess but having sex with her. Imagine if men could have the diversity of sexual experience of Genghis Khan, Muhammad, or John F. Kennedy without actually achieving anything. Sex robots are about to make the virtual world even more alluring.
What does this mean for women? When the sex ratio changes, so too do sexual norms; sex robots are going to emulate an increase in the ratio of women to men. Contrary to a prediction based on the idea that men would wield greater patriarchal control if they were in higher numbers, a larger percentage of women relative to men on University campuses is associated with women who are more likely to have casual sex and less likely to be virgins. When there are more men than women, women are much less likely to have casual sex. The majority sex (in this case men) competes for the minority sex (in this case women) and the minority sex calls the shots. When there is a female majority in the population, women compete for access to mates with casual sex. Whereas a male majority competing for access to scarce women compete with long-term commitment.
Sex robots will emulate a majority women ratio, shifting women to compete for men’s attention by requiring less courtship and commitment in exchange for sex. The long-term ramifications are unclear, especially the way long-term technologies and cultural norms will interact. Perhaps women will discover they have to make the costs of courtship both low and transparent to compete with sex robots. Or, perhaps, new technology could enable women to recombine their genes with one another, making men enamored with sex robots (or men generally) totally redundant.
“Having fun is a fine ambition, but it’s not the same thing as eating good food.”
When I’m out looking for food, and I come across a restaurant where the patrons are laughing and smiling and appear very sociable, I become wary. Don’t get me wrong. Having fun is a fine ambition, but it’s not the same thing as eating good food. Many restaurants, especially in downtown urban areas, fill seats—and charge high prices—by creating social scenes for drinking, dating, and carousing. They’re not using the food to draw in their customers. The food in most of these places is “not bad,” because the restaurant needs to maintain a trendy image. The menu will feature some kind of overpriced fusion cuisine, sponsored by a famous or semi-famous chef who is usually absent. There are worse places to eat, but if I’m spending my own money, I’ll usually give these a pass.
I also start to worry if many women in a restaurant are beautiful in a trendy or stylish way. The point is not that beautiful women have bad taste in food. Instead, the problem is that they will attract a lot of men to the restaurant, whether or not the place serves excellent food. And that allows the restaurant to cut back on the quality of the food.
“Any fool can make a fortune. It takes a man of brains to hold on to it after it is made.”
Arthur T. Vanderbilt II, quoted in Fortune’s Children: The Fall of the House of Vanderbilt:
Within thirty years after the death of Commodore Vanderbilt in 1877, no member of his family was among the richest people in the United States, having been supplanted by such new titans as Rockefeller, Carnegie, Frick, and Ford. Forty-eight years after his death, one of his direct descendants died penniless. Within seventy years of his death, the last of the great Vanderbilt mansions on Fifth Avenue had made way for modern office buildings. When 120 of the Commodore’s descendants gathered at Vanderbilt University in 1973 for the first family reunion, there was not a millionaire among them.
“Any fool can make a fortune,” the Commodore had told his son William, whom he still called Billy, shortly before he died. “It takes a man of brains to hold on to it after it is made.”
“Taking temporarily high rates of annual exponential growth as indicators of future long-term developments is a fundamental mistake.”
Vaclav Smil, writing in Growth: From Microorganisms to Megacities (2019):
Taking temporarily high rates of annual exponential growth as indicators of future long-term developments is a fundamental mistake — but also an enduring habit that is especially favored by uncritical promoters of new devices, designs, or practices: they take early-stage growth rates, often impressively exponential, and use them to forecast an imminent dominance of emerging phenomena.
Many recent examples can illustrate this error, and I have chosen the capacity growth of Vestas wind turbines, machines leading the shift toward the de-carbonization of global electricity generation. This Danish maker began its sales with a 55 kW machine in 1981; by 1989 it had a turbine capable of 225 kW; a 600 kW machine was introduced in 1995; and a 2 MW unit followed in 1999. The best-fit curve for this rapid growth trajectory of the last two decades of the 20th century (five-parameter logistic fit with R2 of 0.978) would have predicted designs with capacity of nearly 10 MW in 2005 and in excess of 100 MW by 2015. But in 2018 the largest Vestas unit available for onshore installations was 4.2 MW and the largest unit suitable for offshore wind farms was 8 MW that could be upgraded to 9 MW (Vestas 2017a), and it is most unlikely that a 100 MW machine will be ever built.
This example of a sobering contrast between early rapid advances of a technical innovation followed by inevitable formation of sigmoid curves should be recalled whenever you see news reports about all cars becoming electric by 2025 or new batteries having impressively higher energy densities by 2030.
“It helps sometimes to be a little deaf.”
Another often-asked question when I speak in public: “Do you have some good advice you might share with us?” Yes, I do. It comes from my savvy mother-in-law, advice she gave me on my wedding day. “In every good marriage,” she counseled, “it helps sometimes to be a little deaf.” I have followed that advice assiduously, and not only at home through 56 years of a marital partnership nonpareil. I have employed it as well in every workplace, including the Supreme Court. When a thoughtless or unkind word is spoken, best tune out. Reacting in anger or annoyance will not advance one’s ability to persuade.
“It costs time and money to access a lot of true and important information, while a lot of bullshit is completely free.”
Paywalls are justified, even though they are annoying. It costs money to produce good writing, to run a website, to license photographs. A lot of money, if you want quality. Asking people for a fee to access content is therefore very reasonable. You don’t expect to get a print subscription to the newspaper gratis, why would a website be different? I try not to grumble about having to pay for online content, because I run a magazine and I know how difficult it is to pay writers what they deserve.
But let us also notice something: the New York Times, the New Yorker, the Washington Post, the New Republic, New York, Harper’s, the New York Review of Books, the Financial Times, and the London Times all have paywalls. Breitbart, Fox News, the Daily Wire, the Federalist, the Washington Examiner, InfoWars: free! You want “Portland Protesters Burn Bibles, American Flags In The Streets,” “The Moral Case Against Mask Mandates And Other COVID Restrictions,” or an article suggesting the National Institutes of Health has admitted 5G phones cause coronavirus — they’re yours. You want the detailed Times reports on neo-Nazis infiltrating German institutions, the reasons contact tracing is failing in U.S. states, or the Trump administration’s undercutting of the USPS’s effectiveness — well, if you’ve clicked around the website a bit you’ll run straight into the paywall. This doesn’t mean the paywall shouldn’t be there. But it does mean that it costs time and money to access a lot of true and important information, while a lot of bullshit is completely free.
“If the shoe shine boys are buying stocks, who else is left?”
Jason Alan Jankovsky, writing in Time Compression Trading:
J. P. Morgan tells the story of how he would get his shoes shined every Wednesday at the same shop around the corner from his office. One day the shoe shine attendant asked him if he and his friends could buy some stock through Morgan’s brokerage. The three friends had about $40—a lot of money in 1929. Morgan politely refused, hurried back to his office, and ordered that his company was not to have a single share of stock on its books by the end of the day. Morgan simply asked, “If the shoe shine boys are buying stocks, who else is left?” Of course, the 1929 stock market crash was only a few days away, and Morgan looked like a genius. He was not a genius; he noted that the order flow was likely running out on the buy side. It wasn’t his army of analysts that showed him that. It was a public investor.