Moving Porn

[Meta disclaimer: When I look back at some of the posts I've written that I think I got wrong, they're often in the category of what I'd call "therapy posts" - trying to universalise or rationalise some thought process of my own as a general life lesson, especially if I'm trying to convince myself that my actions make sense. I resolved at some point to try to stop writing those. I don't think this is one, but I'm not always a good judge of these matters, at least at the time.]

As Covid worries seem to fade into the rearview mirror, and life slowly gets back to normal, I find myself reflecting on the the strange way that being at home for a long period of time strongly exacerbated the idea of moving porn. Not as in emotionally touching depictions of sexual acts, but the fantasy, sometimes followed through on, that a better life awaits if only we move to somewhere else. 

This is always a hard one for me to think about. I don't want to say that everyone should just stay where they are. It is obviously, trivially false that every place is as good as every other place. So there really are changes in life happiness to be had for certain people in moving somewhere else. Indeed, I've had at least one myself, that I'm very glad about. 

In my case, after enough months of roaming around the same apartment, I had a strong desire to just get out. Maybe temporarily, but probably permanently. I started writing this post back when these feelings were still there fairly strongly, but already subsiding. From the number of stories about this, I don't think I was alone in this. Covid seemed to really send this urge into overdrive among a certain class of aspirational mobile white collar worker. 

There are two stories that can be written about this. The first, and most discussed, is the role of remote work. Covid made lots of educated people's jobs suddenly remote, so they could now move anywhere, at least temporarily. The big obstacle to moving is generally the coordination aspect - a city you want to live in, where you know people, where you can get a good job, where your husband or wife can also get a good job. Take away two of those conditional statements, and the choice set gets a lot bigger. 

But the second part is the one that I think is more interesting. The professional class were also, as a rule, more likely to comply with lockdowns and general social distancing. The net effect was a whole lot of people who hadn't actually spent any time in person with many (or any) of their friends or relatives, for maybe a year at a stretch. The effect of this was to enormously crank up the background sense of ennui and isolation that seems to be a large part of modernity. 

I remember this being one of the stranger aspects of educated Americans when I first moved here. If you grow up in Europe or South America or Asia, you are generally from somewhere. Your sense of place is typically a city. Whereas I'd meet quite a number of Americans whose story was something like "Well, I was born in Cleveland, and lived there for the first two years, then I was in Chicago until age 8, then we moved to Phoenix, then I went to college in Atlanta...". The typical educated American, by the time they reach graduate school, might be on their fourth set of friends, between high school, college, and first work stretch. Their parents may or may not still be living in the place where they were when they were born. 

In other words, the background feeling for a lot of people in the educated classes is already a vague sense of social isolation. Your friends, even your good friends, might pack up and move in a year or two's time. You have to keep investing in new friendships in order to maintain a steady state inventory. 

I can only guess, but I think this feeling is rather widespread, at least to a certain extent. But if it is, then moving cities to try to escape the sense of ennui you've developed is a very high risk strategy. You feel isolated and unhappy because you don't have enough close friends and family. It might indeed be hard to make friends where you are. But when you move to somewhere new, you go back to square one. Rather like changing lines in the customs queue at the airport, you'd better hope the new one is faster, because you start out at the back. 

I don't know how to balance out these two stories in terms of their prevalence. The first one is just a good news story - people can finally leave San Francisco (a city that is desperate to disprove the Lebowski dictum that the bums always lose) and go somewhere less shambolic, while still keeping their tech job. The latter is much less obvious. If your problem was that being rootless made you unhappy, digging up what shallow roots you currently have is not obviously going to help matters. Ironically, it resembles San Francisco's way of dealing with the homeless - the ameliorative steps to solve the current problem in fact just lead to the problem getting worse.  

In terms of telling these two versions apart, one aspect that is striking is the sense of where all these newly mobile people actually wanted to go. It tended to be the same places. Austin, Miami, or sometimes Nashville.

Don't get me wrong, I like all these cities! But still, it's striking that these form such a focal point for a large number of people who are all starting somewhere quite different. To hazard a guess, the main linking factor seems to be "better weather, some fun nightlife, increasingly trendy so my friends won't look at me too weirdly, but still cheaper than NY, SF, or Boston." They are always cities that are described as fun. Which seems to be a shorthand for sociable and full of interesting people to hang out with.

But if the problem you faced in Dallas or wherever is that you weren't able to meet people to hang out with, how exactly do you plan to find your fun circle of friends once you get to Austin? I'm not saying it's impossible. I'm just saying that most of the credible plans you would implement to solve this problem in Austin could also have been implemented to some extent in Dallas. 

The only exception to this rule is if the place you're moving to already has more old friends and relatives in it than the place you're at (and they're likely to stay there). To me, I think this is generally the only good reason to move to a place to escape ennui. 

The fact that all these people wanted to move to the same places tends to imply that this wasn't what was at stake. Maybe Austin helped a ton of people suddenly solve the coordination problem of where to live at the same time. But I don't think that's what's going on.  

If I'm right (and I'm not sure I am), I suspect a bunch of these people are going to wind up disappointed.

How can one tell if this seems like a credible description of one's mindset? I suspect that one telling aspect is the question of how specific and detailed are the ideas of what exactly you plan to do differently when you get to Austin. It's a Saturday. You're in your somewhat larger house, now that you don't live in the Mission any more. You've got the whole day ahead of you. What are you going to do that you can't do in San Francisco? Next day is Sunday. Same question. Then the weekend after. And so on.

I have a feeling that if you don't have a clear answer to that question, you are probably going to find that Austin does not make you as happy as you imagine. 

I would be delighted to be wrong. Austin, Miami and Nashville are all in fact cool cities. I hope everyone who moved there finds it awesome, and pities us saps that stayed put. But I can't help but wonder about the Last Psychiatrist's description of some of how change is often not really change at all: 

The unconscious doesn't care about happiness, or sadness, or gifts, or bullets.  It has one single goal, protect the ego, protect status quo.  Do not change and you will not die.  It will allow you to go to college across the country to escape your parents, but turn up the volume of their pre-recorded soundbites when you get there.  It will trick you into thinking you're making a huge life change, moving to this new city or marrying that great guy, even as everyone else around you can see what you can't, that Boulder is exactly like Oakland and he is just like the last guys.

Lest this all sound like meandering, there is a concrete prediction that can be made here. If I'm right, I expect the number of relocations to drop fairly quickly as life gets back to normal. If you haven't packed up and moved by now, I'll guess that you're not going to. Because as people actually start hanging out with their friends again, they'll slowly remember that the place they're in isn't actually as bad as it seemed in April 2020 when it felt like we were going to be locked up forever.

If you're still on the fence, take advantage of the warm weather to invite all your friends over for a party first. It did me a world of good. 

The Lessons of Bitcoin

Bitcoin is, without any question, one of the most remarkable financial stories of our lifetimes. Simply by running some code on your laptop back in 2010, or putting a few grand into the earliest bitcoin markets, you could be worth hundreds of millions or billions of dollars today. Even quite a bit later in the process, a bold bet that you hung on to could have easily brought you life-changing amounts of money. 

Did you make life-changing amounts of money from Bitcoin?

I didn't. 

I think about that quite a lot.

I made good money from it, in the category of "moving some moderate financial milestones forward a couple of years", which is great. I bought it around the time I wrote this, which still summarises my thoughts on it pretty well. I sold it in February 2018, not long after I wrote this, which I also still like. Short run, the sale was a good call. Longer run, it was a catastrophe.  

If I'd played my cards better and more boldly, at earlier times, I could have ended up with "fuck you" money. For someone writing a pseudonymous blog in 2021, that sure would be handy.

This may sound like a humblebrag, but I promise it's not meant that way.  Internally it feels much more like failure. Chances to make life-changing amounts of money do not come along very often. This was one, and I missed it.

Bitcoin was almost unique in the sense that, to become fabulously rich:

i) you didn't need to have very much money early on (in fact, at the start, you didn't need any at all, just some kind of computer)

ii) you didn't need to risk very large amounts of your wealth to make it happen

iii) everything you needed to do it was publicly searchable on the internet

iv) chances to wind up happily rich persisted for years, including after you probably first heard of bitcoin.

Assuming you didn't make fuck you money from Bitcoin, it's worth pondering what the lessons of this are.

The most obvious instinct, which I fall into from time to time, is essentially just "if only" fantasies. If only I could somehow travel back in time and tell 2010 Shylock to start mining bitcoin! Or to put his life savings into it as soon as possible (and not sell it, and not store it on Mt Gox).

This is the worst kind of loser mentality, taking nothing but fantasy and daydreams from the story. Imagine I had all the future knowledge! Imagine I won the lottery!

But, as it turns out, you don't need to actually transform the question very much for it to be profoundly useful. 

Instead, one is much better off asking "what changes in behavior, mindset and reading habits would I have needed so that I would have actually discovered bitcoin on my own early on and invested in it?"

The reason is that this might actually help you find the next bitcoin. It's possible that buying bitcoin now will still make you rich, but it probably won't make you life changingly-rich (certainly not without risking your whole life savings on it).

The bad news is that it probably will require some hard work and luck. 

It's useful to break the question into two parts:

1. What realistic changes could I have made that might have caused me to come across bitcoin-like ideas earlier than I did?

2. What realistic changes might have shortened the time between first hearing about it and investing (or investing more, or holding it longer)?

At a high level, the answer to #1 is that you need to be reading weirder, different stuff. If you wait to read about an investment idea in the New York Times, it will be long after all the major gains have been made. 

To have been reading about it really really early, you had to be both technically very adept, and reading widely outside the box. Like this guy. Or this guy. Are your reading lists as varied and out there as blog.jim? Somehow I doubt it.

Strangely enough, you might have done extremely well multiple times over since bitcoin became popular even if you just learned the rather narrow lesson "I should learn up to the absolute cutting edge of cryptocurrency, so that I can meaningfully contribute to the small group conversations about what might be the next development in the crypto space". You might have gotten in at the ground floor on Ethereum, or Polkadot, or Chainlink, or a number of others. You might still get in on the next shitcoin to explode. 

In my case, the thing that tipped me over the edge for investing was in 2017 I finally got around to reading Moldbug's essays on bitcoin. I'd read through most of his archives starting in around 2013, but to my great regret, looked at the vaguely finance stuff and decided "eh, I already understand finance, I'm going to skip it." Ha! If there's a single lesson from Bitcoin, it's that in 2009 nobody much understood how money worked. As it turns out, Moldbug's description of bitcoin was entirely correct, he just seemed to me (certainly by 2017) to be wrong about the likelihood of the US government shutting it all down. It seems like hard work, and it's easier to just tax it and enforce know-your-customer requirements on fiat exchanges (which is what happened). 

A related lesson is "you should read more Moldbug, and consider investing in things he talks about, though still take what he says with a grain of salt". That still might yet be a highly lucrative lesson in the fullness of time. 

But I think the real place to improve is actually in #2. 

There are many people who heard about bitcoin back in, say 2013, and thought it sounded pretty weird, and probably likely to collapse. But if they were pushed on the issue at the time, you could have likely gotten them to agree that it was at least worth a punt for a few hundred bucks. 

The question is, how many people actually had that subsequent thought themselves? And moreover, how many actually followed through on it?

Smart people with all the information in front of them frequently fail at both hurdles. They fail to recognise the investment implications of the things they already know, especially when what they know to be true seems strange and unpopular to most people, and thus less likely to be priced in. And they fail to pull the trigger on it in a timely manner. 

The same is true, incidentally, from Covid. A few days after I wrote the post linked, I bought put options on the S&P 500. The thought process initially was "Huh, Covid could be a huge problem, I should buy N95 masks.". It took a couple of days for the follow-on thought (which should have been obvious) to occur "Wait, why am I hedging extreme left tail outcomes in goods markets, but not also hedging (and profiting from) moderate left tail outcomes in financial markets?". That also made me a decent but not life changing amount of money too, about a quarter of which I lost by holding onto my short positions too long instead of buying back in once I sensed that peak panic was passed (the losses are much larger in alpha terms, since you should include the opportunity cost of not being long in April and May 2020, which was huge).   

The thing that may or may not be surprising to you is that I know a fair number of people who read about Covid in early February 2020 and didn't act on it financially at all. I actually understand this. It took me several days to think of it, and I may easily have not done it, or not had the stones. Even when I did, I did it in a panicked and dumb way, just shorting the market. Not airlines, or cruise lines, or buying Zoom. Or, what would have been even better, credit default swaps (if you were one of the big boys ) or call options on the VIX if you weren't. I also managed to predict the wrong thing about Covid, namely that it was going to have a massively high death rate, and managed to screw up most of the market timing decisions I made over the course of 2020. One big good decision, managed to outweigh a considerable number of smaller bad ones, but I definitely didn't come out of 2020 thinking that I needed to do more market timing.

To be honest, the regular reading of weird twitter feeds is one of the things I miss since giving up twitter. It was a complete sewer, a cesspit of aggravation deliberately made to encourage rage-clicks and anxiety, run by people who hate me, and you, and everyone reading this. And yet, there is still material on there that you just can't find anywhere else. 

If you read the same things as everyone else, you will think the same things as everyone else. Not many of those people acquire life-changing amounts of money, except by pure chance.

Some Thoughts Occasioned Upon Recent Fatherhood

Friends, I’m very happy to report that my daughter and firstborn child recently arrived into this world. The acute feelings of anxiety and then great relief at the birth itself slowly become replaced with the pleasant slight haze of the everyday. But since this journal is as much for myself as for my readers, I wanted to write down the thoughts I recall before they slip away.

Most people are more alike than they think. This is part of the reason why most heartfelt sentiments - whether joy at birth, sadness at the death of a loved one, celebration of someone’s birthday, and many others – end up sounding like clichés. The more important something is, oddly the more likely your feelings are similar to everyone else’s. Because of this, sometimes the repeated forms are okay for the important sentiments. As a friend’s priest said about Christmas sermons – if you’re hearing anything genuinely new in it, it’s probably heresy.

I learned this the hard way when emailing friends about the birth. I said something about how she’d been sleeping well and eating a lot so far, and joked that one could obviously extrapolate this out indefinitely. From one or two slightly snarky responses, I realized too late that, even in jest, this is a little like the newborn equivalent of those ghastly “My child is on the honor roll at XYZ Elementary” bumper stickers, but for a much more emotionally fraught subject. (Which painful door would you rather open? “I’m a bad parent” or “My beloved child is just difficult, and experiencing misery that I can do nothing about”? Por que no los dos!) I’ve refrained from bring up the subject since then, and just instead reflect on the ancient Greek observation that no man should be declared happy until he is dead. You have a well-behaved child once they’re married with children of their own. 

Nonetheless, there was one part about my wife’s period of late pregnancy and birth that was quite striking, in a way that I wasn’t expecting.

There is a certain level of narcissism and egocentrism that is inherent to everybody. The way the Last Psychiatrist put it is quite memorable:

“The essence, the defining characteristic of narcissism is the isolated worldview, the one in which everyone else is not fully real, only part a person, and only the part the impacts you.”

I, like a lot of people, always wake up in my dreams just as I’m about to die. There is some fundamental stumbling block that cannot quite comprehend a world without me in it. If the only part of everything else that is real is the part that interacts with you, then your death is literally the end of the universe.

This much gets commented on quite a lot. One can intellectualise death, and imagine the world going on without you. But one cannot really feel it. It just doesn’t compute.

But the strange part, that I hadn’t really  appreciated, is that something similar happens (at least to me) at the early end too.

Having my own child was literally the first time I’d been forced to contemplate in concrete detail what my parents’ life might have been like around the time I and my siblings were first born. The standard way this is described is that until one has children oneself, one doesn’t quite realise how much thankless work goes into changing thousands of nappies and not sleeping properly for months on end.

But at least for me, it’s more than that. I just hadn’t given much thought to the subject. I have images of my parents’ life before me, pieced together from photographs, and stories they’d tell with my uncle sitting around the dining room table after dinner. But these tended to mostly focus on the period when they first met, before they got married. There were some stories after that, about their lives, living with my grandmother, buying a small shack in the countryside and planting trees there, and things like that. But then there was a large gap, a chunk of the map shrouded in cloud, of what it might have actually felt like when we children were first born.

And I think part of the reason for this (at least with me) is the narcissistic tendency. People are only real to the extent they interact with you. And the part of you that counts is the part you can remember. In my case, the earlies memories are from around age 3. When I’m forced to contemplate it, I simply have no empathetic concept of me before that time. To consider myself as a one-year old, or as a newborn breast-feeding, or while in the womb, is every bit as alien to the actual narcissistic self-conception as to think of myself as being dead. I can imagine it. But there is simply no capacity to relate. Without memory and capacity for self-conception, the chain of "I"-ness gets broken. 

Take away this inherent interest and understanding, and the parts of the characters immediately before I mentally appear on the scene simply don’t quite register. The stories my parents explicitly told me register, and those I feel warmly about. And indeed, I can think about times before I was even an idea, what my parents were like as children or teenagers. But the part that interacts with me, in the period where “me” is not something I instinctively empathise with, tends to be a strange and glaring gap.

Until my own child arrives. Then, I'm forced concretely to imagine all sorts of things I didn’t really consider. The scene of sea and sky suddenly inverts to a dizzying new perspective - one in which my parents are fully real, but I am only partially real, and only the part that interacts with them (since the part that is "me" doesn't yet exist). And one sees the whole path of the same scene repeating again and again. My daughter, currently totally helpless, having not the vaguest clue of what my wife and I do to keep her alive, and no real sense of gratitude or even contemplation, until one day, several decades hence, when (hopefully!) her own time comes to pay it forward with her own children, and the cycle repeats.

Thank you, Mum and Dad. At last, just a teensy bit, I understand. I suspect you knew this already.

Welcome to the world, little one. We’re so glad to have you.

Tether - risky, but probably not for the reasons they keep telling you

I keep being forwarded this article that came out in Medium recently. It poses as a big expose of tether, the stablecoin that powers lots of cryptocurrency transactions. We learn that it's a scam and a fraud, and about to crash the price of bitcoin.

The very short tl;dr on tether is that it's a cryptocurrency whose value is kept at a stable $1 USD. Why would you want this? Well, lots of people want to transact electronically in something that's basically dollars, but without the insanely anachronistic mess that is the actual US banking system. But USG has aggressively gone after money laundering by controlling the interface of the banking system and crypto exchanges. In other words, control the fiat/crypto interface tightly, and the rest of legal compliance will follow (apparently). If you as a company anywhere in the world take money from the banking system, you get aggressive demands from USG officials that you comply with US "Know-Your-Customer" (KYC) anti-money-laundering legislation. 

So some exchanges like coinbase specialize in being places that comply openly with the law, where you can hold your crypto and feel like there's a lower chance that it will be stolen, because coinbase is possibly about to become publicly listed, a good hallmark of establishment reliability. And others specialize in the opposite of this - transact there while being less legible to US regulators, take on massive leverage on your trades, pay lower fees due to regulatory arbitrage of not complying with US financial laws. So far, they've been able to do this, barely, because they follow the golden rule of "never touching actual US dollars". Just exchange one digital asset (e.g. bitcoin) for another (e.g. tether), and you never directly interact with the standard financial system. So tether ends up being the numeraire good, the medium of exchange on lots of these platforms. Hence why there's so much demand for it.

It's important to note that the way tether is priced at a dollar is that tether, the company, will (so far!) redeem them for exactly a dollar. As long as this promise is viewed as credible, they'll trade at $1, and they roughly do. Tether rather speaks out of both sides of its mouth on this - in marketing materials they tend to emphasize that tethers can be redeemed for the same number of dollars, and in practice they pay out your redemptions, but in the fine print they say that this isn't necessarily, technically, something promised.

So far, so good.

Well, what's the claimed problem? Here's the article's summary:

Tether Ltd. also says one Tether is worth exactly one US dollar. Can they do that? Well they say they can, because they hold $1 worth of assets for each Tether. But are those assets actual dollars? No, they are not. So what if the assets go down in value? Don’t worry; they will not. Okay, but can we at least see the assets? No, you may not.

Who in their right mind would use something like Tether? Well, the short answer is that many people use Tethers to buy Bitcoin and other cryptocurrencies. The long answer, though, is astounding — but more on that later.

Because Tether sounds exactly like a currency fraud, it may not surprise you to learn that Tether Ltd. is currently under investigation by the Office of the Attorney General for the Southern District of New York. That investigation was announced to the public on April 25th, 2019.

As an aside, the Office of the Attorney General for the Southern District of New York are a pack of assholes who feel justified in arresting anybody on the planet who so much as looks at a financial transaction in a way they don't like, on the highly compelling theory that a) Manhattan has a lot of banks, and b) Manhattan is the center of the universe. If you are not utterly cynical about their press releases by now, I don't know what to tell you. 

And from there follows a very breathless and interesting read of all the ways that tether has been printing tether coins, and this is pumping up the price of bitcoin, and it's all likely to collapse because it's a giant scam. 

 "Nonetheless, based on this evidence, I concluded my risk was now too great. I was long Bitcoin up to my eyeballs; Bitcoin was clearly correlated with Tether; Tether was clearly being issued at a frantic rate; and that issuance had a high probability of being backed by nothing at all."

Have a read. There are a lot of interesting facts in there. In fact, if you feel yourself well versed in finance, go away and read the article and try and find the big glaring conceptual error in it, then come back.  

I am in two minds about this article. 

On the one hand, the author is likely right that tether has a non-trivial chance of being shut down by USG, that it fuels a large amount of leveraged trades in crypto, and that the loss of tether would likely cause a big deleveraging that would probably be disastrous for bitcoin prices

On the other hand, the reasons he thinks this will happen are moronic, ludicrous and risible. They are a great example of a certain kind of stupidity that is annoying prevalent in crypto communities. 

What is the first order problem with the whole discussion?

The gigantic blind spot is that he, like lots of crypto people, seems to not notice the obvious fact that tether is simply a bank. The tether coin itself is a demand deposit, just transformed into cryptocurrency form. It's hard to think of a cleaner example of the hypothesis that money itself started as debt that began to circulate. The company keeps a certain amount in reserves to fund these possible redemptions, and then invests the rest. This is how basically every bank in the world works.

The reason that so few people spot this is that the world is roughly partitioned into 

-people who like cryptocurrencies and who think that all "fractional reserve banks" are scams, and

-people who like mainstream banking, and think that cryptocurrencies are scams.

So as a result, the number of people who are both knowledgeable and agnostic on both fractional reserve banking and crypto is surprisingly few. 

And when you see it this way, a huge amount of the apparent mysteries immediately get resolved. This comparison ought to be obvious, but it’s not, because guys like this tend to have completely moronic ideas about what a bank actually is, and simply think that all banks of any form are “scams”, regardless of how well capitalized they are. He has some huge hard-on of this idea of himself as the narrator in the Big Short, but somehow never learned how a bank actually works. 

Go back to the quote above. Banks are partitioned into two types. Those where every dollar of deposits is backed by 100% literal cash US dollars in a vault, and those where it is “backed by nothing at all.”

Like…did you consider any other possible bank balance sheets? Are these the only two possible cases? 

His idealized type of bank (assuming he even realizes that this is what he's describing, which I doubt) is called a narrow bank. In practice you should be able to set up a bank that just takes investors deposits, in turn deposits them at the Fed, and earns the interest the Fed pays on reserves. Why can't you do that? Well, the Fed has denied licenses to such banks, with largely spurious reasons given as to why, in ways that smell like corruption, even to very mainstream economists like John Cochrane.

So since we don't have that option, every bank is a fractional reserve bank. To a banking agnostic, the crucial question is not "is it a scam engaged in maturity transformation?". Rather, the question is "given how well capitalized the bank is, how likely is it that there will be a bank run that causes depositors to not get paid back in full?".

Suppose tethers are only backed 74 cents in the dollar by actual USD, a claim that’s floated around here. Here’s the question. They took in 100 cents in the dollar in cash. They now hold 74 cents. What does this guy think they did with the remaining 26 cents? Blew it all on coke?

No, what they very likely did is buy the exact cryptocurrencies that the guy laboriously shows that tethers are being used to purchase.

So at the time they bought it, their portfolio was most likely something like 74c cash, 26c BTC or whatever.

Now, a sensible risk weighting would assign a big haircut to these BTC assets, given how risky they are. Sure. But what this guy does, along with places who should know better like Bloomberg, is downweight every single asset that's not cash to a risk-weighted collateral value of zero. This is, to not put too fine a point on it, imbecilic. 

And the reason this is even more egregious is the following. Ex post, what happened to the price of that BTC? It went up like crazy. 

Assuming this much is roughly true, this would make tether among the best capitalized banks in the world. As a betting man, I’d wager pretty strongly that the value of their crypto is way higher than the missing 26c in the dollar or whatever of liabilities they owe, probably by a factor of 2-10.

Buddy, if you think tether is a scam, let me tell you about Citibank. 

So what do you do if you’re now a bank who's crazily over-capitalized, and holding a lot of crypto assets? Well, one option is to say “sod it, let’s print some more tether liabilities, and use those to buy more crypto”.

Absent government regulations, this is an entirely sensible thing to do. The timeline above explains every single “suspicious” fact that this guy points to.

The risk that tether, left to its own business operations, is about to go bust, seems quite low, as long as they’ve likely been using part of their cash to purchase crypto that’s since risen greatly in price. It's true, there hasn't been a proper audit, so we don't know for sure what they've been buying or holding. Maybe they really have just spent it all on hookers. But the strongest bet to me, for a variety of reasons (including those floated by tether skeptics) is that tether has been buying crypto assets. If they've bought some kind of diversified crypto portfolio before March 2020, happy days. Strongly well-capitalized banks do not tend to collapse in bank runs. I would wager quite heavily that, at current prices, they have way more crypto assets than they need to pay off every possible tether holder (even if, as is true, liquidating said assets all at once would cause a big price drop).

So what’s the actual problem with tether?

First, while they are a bank, they don’t say they’re a bank. They tend to imply, falsely, that they’re more like a money market fund, just holding cash and cash equivalents.

Second, if they are a bank, they run the risk of being regulated like a bank, and they sure as hell haven’t been complying with banking regulations, notwithstanding that they’re probably very well capitalized.

Third, their whole business model smells like know-your-customer violations.

All of this means that there’s a decent chance of them getting boned by some up-and-coming NY DA, running the same playbook as for Tradesports, and World Star Poker, and a bunch of others. Freeze assets. Destroy your business because you can't access any of your assets. You dip into some of the reserve cash to stay afloat. They declare you a ponzi scheme, improperly stealing customer funds, and say you collapsed for this reason. Whether you were or weren’t (and in the case of tether, there’s good reasons to think they have more assets than they need, not less), the proximate cause of the collapse is government.

Where this guy is right, is that tether fuels a lot of the levered bets people make on dodgy exchanges. Take away the tether that fuels these exchanges, and you probably get a massive deleveraging. I’d bet on this being a Mt Gox level event for BTC if it happens. If the only demand is now coming from unlevered, KYC compliant bets on Coinbase, that’s a big reduction in likely demand.

At the end, the big irony is that

a) he's right that you should be worried about tether, about the prospect of it being closed down, and the likely impact of this on BTC prices, but

b) the one thing tether gets the most flack for is the one bit that seems least likely to be true - being massively undercapitalized, and unable to pay back depositors. 

Evidence Suggesting Voter Fraud in Milwaukee

 I posted a version of this on twitter, but a) the writing format there is so ugly, and b) who knows how long that thread might last. So here it is for the record. 

I’ve been looking at the vote counts within Milwaukee, and there’s suspicious patterns in the data that need explaining. Proving fraud is difficult, but there’s a lot of irregularities here that point in that direction. First, the tl;dr, then the main analysis.

1. Democrat votes started increasing massively relative to Republicans after Tuesday night counts. This can’t be accounted for by explanations like heavily Democratic wards reporting later. When we look at the changes *within wards*, 96.6% of them favored the Democrats.

2. Democrats also improved massively against third party candidates, whereas Republicans and third party candidates showed similar changes to each other. Since there’s little incentive to manipulate third party counts, this implies that the big change after Tuesday night is in Democrat votes, not in Republican ones.  

3. When we compare different down ballot races, we find that Democrat increases within each ward were larger in races where the Democrat candidate was initially behind in the overall race on Tuesday night – that is, relatively more Democrat votes appeared in races where they were more likely to alter the outcome.

4. This result is easy to explain by fraud, but is much more complicated to explain by other explanations like Democrats mostly voting by mail. Most such theories predict all Democrat candidates should benefit in equal proportions within a ward, not that more votes come in exactly where they’re most needed.  

Ward-level vote counts are from the Milwaukee County Clerk at 7pm last night  and the archived version from the count as it stood on election night . 

This idea came from Spotted Toad, who’s been doing great work on this too. I’m looking at Presidential, Congress, State Senate and Assembly races. One way to look at what happened is to compare the percentage increase in votes for Republican Candidates versus Democrat candidates within each ward after election night.

For instance, suppose the Democrat candidate vote total went up 200% from initial counting to Thursday night. How much did the Republican vote total go up? If the distribution of votes before and after is the same, the percentage gains for each group should be similar, regardless of who was ahead.

This is very different from the normal reason where candidate totals in the entire state might change as counting goes on, as different reports come in from other parts of the city. That just shows that wards differ from each other. Rather, we’re testing whether the *same ward * should continue to find the same distribution of votes before and after Tuesday night. 

In other words, if the before and after distributions were the same, as votes come from the same pool, you’d expect that half the time, the Republicans got a slightly unlucky draw in the early votes, and end up improving their position (regardless of whether they ultimately win or lose). And roughly half the time, the Democrats should increase their votes by more. 

What actually happens? The Democrat candidate vote increases relative to the Republican candidate a crazy fraction of the time. The variable in question is percentage increase in Democrat vote totals for that ward (that is, the percentage change from Tuesday night to Thursday night), minus percentage increase in Republican vote totals. 

So a value above zero means that Democrat totals went up more than Republicans in that ward/race. A value of 500 means that the Democrats went up 500% in excess of the republicans (e.g. D votes grew 600%, R votes grew 100%). Here’s a graph of the histogram. 

You see an enormously right skewed distribution –tons of large gains for Democrats, very few gains for Republicans. Not only do Democrats very often increase more than Republicans, but when they do, it’s often by a colossal amount. 

Out of the 1217 ward/race combinations with non-missing early votes for both parties, 1037 saw relative increases for the Democrats, 37 saw relative increases for Republicans, and 143 were ties. Excluding the ties, the D “win” fraction here is 96.6%.  A remarkable feat!

Depending on how you assign ties, if this were a 50/50 coin (i.e. D and R were equally likely to gain relative to the other), the probability or p-value for this is between 10^-147 and a number Excel just lists as “0”.

So, this proves incontrovertibly that something about the count skews crazily towards the Democrats after 2am Wednesday. But it doesn’t prove what it is. Maybe they counted different types of ballots or something, but only starting at 4am. 

However, there’s one thing we can test – from which party’s votes is the weirdness coming from? We can answer things by looking at vote changes for other candidates – third party races, write-in candidates etc. 

We can be virtually certain that nobody is bothering to manipulate the vote totals for fringe, no-hope write-in candidates. These form a great placebo group – what might you expect the changes to look like for a group where nobody is manipulating the totals?

So let’s do the same thing as the earlier graph, but compare each part with “Miscellaneous”, which because the count is small, I aggregate together. I also limit the sample here to cases where there’s at least 5 votes for “Misc” in that ward by 2am Wednesday, to make sure that this isn’t coming from rounding (e.g. if you have only 1 vote, the minimum increase is 100%). 

What are we predicting to find? Well, if it’s the Democrat total that’s being wildly inflated, Democrats should also be increasing relative to Miscellaneous. Meanwhile, if Republicans are just being counted as normal, then their changes should look similar to the Miscellaneous Group.

And that’s basically what we find. First, Democrats vs Miscellaneous. Visually, the picture looks even more crazily skewed than the previous one. In terms of counts, Democrats improve relative to Miscellaneous in 520 ward/race observations. They tie 89 times, and Miscellaneous improves in relative terms just 3 times. That’s not a typo.

This corresponds to p-values between 10^-73 and 10^-177. The fraction of Democratic “wins” here (520/523), excluding ties, is a ludicrous 99.4%. 

So how do Republicans compare with Miscellaneous? It turns out that while they’re not exactly the same, they’re far, far more similar to each other than either is to the Democrats . Other than a few outliers (because “Miscellaneous” has very few votes in total, remember), the distribution is fairly symmetric around zero. 

In terms of counts, Republicans improve relative to Miscellaneous 179 times, Miscellaneous improves 251 times, and there are 74 ties. As a result, which p-value you get here depends enormously on how you allocate the ties. Give them to M, and it’s 10^-11. Give them to R, and it’s 0.55, or almost exactly chance (253 vs 251). 

Excluding ties, the R “win” percentage is 41.6%. So under some measures, they look slightly worse, but this ends up being affected by questions of rounding and the small vote totals for M. What’s incontrovertible is that D looks wildly, wildly different from either of them.

This is exactly what the null would predict, if votes before look like votes after. So this *does* roughly hold, but only when comparing Republicans vs Miscellaneous. This story is also inconsistent with the driver being something Trump did, like telling all his supporters to vote in-person. If so, why do changes in Miscellaneous votes look about the same? The important difference after Tuesday night, whatever you think it is, is coming on the Democrat side.

So maybe you’re wondering – are there reasons other than fraud that the ballots might be different before and after? If the ordering is random and they’re drawn from the same pool, no. But if each ward counts different types in a different order (those at 9am versus 4pm, or in-person versus mail-in), then this could happen. 

Whatever is making the vote distributions different before and after, it’s a factor that’s overwhelmingly just impacting Democrats, not Republicans. If you think it’s about in-person versus postal voting, you have to hypothesize that Republicans look kind of similar to Miscellaneous in this respect. This is possible, but not nearly as obvious. 

But there’s another more important aspect we can test here. In particular, if some of these Democrat increases are due to fraud, we would expect that the increases should be larger *when the fraud is more likely to impact the race. And since these include lots of down-ballot races like State Assembly Representatives, we have quite a lot of variation here. 

Sometimes the Democrat is way up after early counting, at which point it doesn’t matter much if they post big relative gains after that. But if the Democratic candidate is down early on, jacking up the total becomes much more important. I’m assuming that if the Party wants to rig votes, they’d also like to win as many races as possible for the least amount of rigging.

In other words, the comparison is now between two different races at the same ward. A Democrat voter comes to the ballot box or mailbox, and sees a number of races. For some, like President, it’s going to be a close call. For others, it might be a heavy favorite for the Democrat. 

The voter is a Democrat, so presumably he’s inclined to vote Democrat for both. We can compare within a given ward which of the two races showed bigger improvement for the Democrats in that particular ward after Tuesday night. 

Sure enough, the increase in Democrats relative to Republicans (the variable in our first histogram) is significantly higher when the Democratic race-wide vote share is lower during the early counting. In other words, within each ward, late vote counts break more heavily to Democrat in exactly those races where the change in votes is likely to affect the result.

How big is this effect? Well, one way to measure it is to see how many races it impacted. There were 8 races where Republicans were ahead on a two-party basis on Wednesday morning. By Thursday night, half of them had flipped to Democratic. By contrast, there were 19 races where the Democrat was ahead, and not a single one flipped to the Republicans. 

And again, let’s recall what we’re observing here. It’s not that the races flipped because suddenly wards that were known to be heavy Democrat strongholds started reporting in. Rather, more votes started coming in for Democrats relative to the ratio that was coming in for that exact same ward the previous night. Moreover, within each ward, the votes also skewed more for races that the Democrats looked like they might lose. 

Importantly, this finding is surprisingly hard to explain with the commonly cited reasons for Democrats pulling ahead overall. For instance, one of the claims is that mail-in ballots are counted late, and these are more heavily Democrat. In general, this doesn’t explain why within the same ward, some races later skew Democrat more than others.

The key part is that for each voter, the decision to take a mail-in ballot is common to all races. In other words, a single voter can’t vote for some races by mail, and others in person. So if your claim is that the overall skew to Democrats is a mail ballot effect, most versions of this explanation predict that all races should be equally affected.

To simplify the logic, consider a stylized example where all Democrats and Republicans vote straight ticket. More Democrats vote by mail, and these are counted late.  This would predict that Democrats overall would improve, but the expected improvement is the same for all races, regardless of whether the Democrat is ahead or behind. 

More ballots come in Democratic, they each vote for every Democrat, so all Democrats increase in the same percentage terms. This isn’t what we find. In the data, within a ward, the important races go up more than the unimportant races.

And this prediction, that all races should be equally affected, holds for a lot of other variations too. Does the answer change if every Democrat voter has a 90% chance of voting for each Democratic candidate, if this attitude is the same between Democrats who vote in-person versus those who vote by mail? No. The increase should be the same in all races.

The answer doesn’t even change if Democrat voters in general can’t be bothered as much voting for shoo-in candidates, and only cast their votes for tight races. As long as this instinct is the same in Democrats who vote by mail and those who vote in person, there should be no difference across races in how much they break late towards Democrats.

What you need is something complicated. Democrat voters can’t be bothered voting for candidates they like but who they know are going to win anyway, AND this instinct is somehow larger in Democrat voters who vote by mail than those who vote in person, AND there has to be a larger share of mail voting by Democrats overall. 

This may sound like a confusing and complicated explanation. And it is! That’s kind of the point. We’re now a long way from the simple explanation that Democrats vote more by mail. It’s not impossible, of course, and we can’t rule it out. There are other variants on this story, but if you think this is all about mail-in ballots, there has to be some difference *within Democrat voters* who vote by mail versus in person.

In other words, the bare fact is that races swung much more towards Democrats exactly for those races where the Democrats were down on Wednesday early morning. To explain this with mail-in ballots needs a very complicated story. To explain it with fraud needs a very simple story – you commit fraud more where the fraud matters more. 

This is why the evidence suggests fraud to me, but your mileage may vary here. I’ve tried very much to stick to the facts, because I don’t have any special ability to interpret the numbers above. Whatever is going in is crying out for explanation, and the simple alternatives don’t do it. To me, it looks pretty suspicious. 

A final question worth pondering. What should our null hypothesis be here? When we say “there’s no evidence of it”, we’re claiming “no fraud” as the null hypothesis. But as I’ve argued (by metaphor), the system of vote counting is so rickety and broken that this is an incredibly difficult null to justify. 

A metaphor for the likelihood of voter fraud, for people who insist that it's a conspiracy theory, or there's no evidence of it.

Suppose Amazon wanted to know how many packages it had. Packages were kept in warehouses all over the country. The system was different in every warehouse.

Some people need to move packages around, and there's a list of who is allowed to do that in each warehouse. But if you go in and say you're that person, nobody checks. If someone else has already done that for you when you arrive, you just get another package.

Some packages get driven around by people in their own cars, some get moved around by the post office, some by volunteers or low paid government employees, and in each case they're largely unmonitored - there's no clear record of which ones left or arrived.

Packages are, by common consent, valuable for people to take. But nobody investigates closely what happens in each place, and very rarely are package thieves caught.

For what package system other than "votes" would this be considered a reliable and acceptable system?

For what important corporate outcome, if you proposed this setup as a manager, would you not be fired?

If someone told you there was no evidence of package fraud, how plausible would that claim be?

I find the possibility of voter fraud entirely plausible, and that belief has nothing to do which party you think is doing it. At a minimum, I feel strongly that this possibility needs to be investigated more seriously than it is, given the evidence above.

The fate of great research

In one of the more poignant remarks to come from stand-up comedians, Conan O'Brien once wonderfully observed that, eventually, all graves go unattended. 

I was reading a while back this fantastic talk by Richard Hamming, "You and Your Research". Byrne Hobart linked to it in one of his newsletters, when describing the nature of remote work:

[Hamming]: "I notice that if you have the door to your office closed, you get more work done today and tomorrow, and you are more productive than most. But 10 years later somehow you don’t know quite know what problems are worth working on; all the hard work you do is sort of tangential in importance. He who works with the door open gets all kinds of interruptions, but he also occasionally gets clues as to what the world is and what might be important. Now I cannot prove the cause and effect sequence because you might say, “The closed door is symbolic of a closed mind.” I don’t know. But I can say there is a pretty good correlation between those who work with the doors open and those who ultimately do important things, although people who work with doors closed often work harder. Somehow they seem to work on slightly the wrong thing - not much, but enough that they miss fame."

[Hobart]: Working remote is a modern analog to Hamming’s closed-door policy: there’s an immediate productivity boost from reduced interruptions, but some of those interruptions are long-term course-corrections, and they’re valuable.

 Hamming's whole talk is fantastic, talking about how to do what he calls "great research"

And for the sake of describing great research I'll occasionally say Nobel-Prize type of work. It doesn't have to gain the Nobel Prize, but I mean those kinds of things which we perceive are significant things. Relativity, if you want, Shannon's information theory, any number of outstanding theories - that's the kind of thing I'm talking about. 

Well I now come down to the topic, ``Is the effort to be a great scientist worth it?'' To answer this, you must ask people. When you get beyond their modesty, most people will say, ``Yes, doing really first-class work, and knowing it, is as good as wine, women and song put together,'' or if it's a woman she says, ``It is as good as wine, men and song put together.'' And if you look at the bosses, they tend to come back or ask for reports, trying to participate in those moments of discovery. They're always in the way. So evidently those who have done it, want to do it again. But it is a limited survey. I have never dared to go out and ask those who didn't do great work how they felt about the matter. It's a biased sample, but I still think it is worth the struggle. I think it is very definitely worth the struggle to try and do first-class work because the truth is, the value is in the struggle more than it is in the result. The struggle to make something of yourself seems to be worthwhile in itself. The success and fame are sort of dividends, in my opinion.

So what happens when you do good research, or even great research? Does everything suffer the Conan O'Brien fate?

Let us start with a simple observation, so basic as to almost be trite.

All knowledge only exists in people's heads. 

In the limit, if great knowledge is written down in a book, and then people never read the book, in some practical sense, it may as well not have existed. Sometimes, it has to be rediscovered again and again, after being forgotten. This happened with the cure for scurvy, until vitamin C was isolated.

How does information get into people's heads? Well, they either have to read something, or get told it, or rediscover it themselves. 

So far, so obvious. 

For all the advances in technology, has our ability to read improved, or our ability to listen to conversation? Not obviously. Reading speed may have variation across people, but I've yet to come across anything indicating that it's improving. So let's assume that people's ability to read new source material is no better than in the past. 

Now, as you look out on the world, you see that ever more people are doing research, and writing books and papers. Even if some large fraction of this is junk, and some proportion is active stupidity and anti-knowledge, the amount of genuine new knowledge is surely going up every year. 

The amount of hours of life you have to read it all, even just the most important bits, in order to make advances at the frontier, is a little higher, but not much. And most of the increase happens at ages long past when you're likely to do any of Hamming's first-class work.

So how do people actually learn enough to advance knowledge? 

Well, one way is to spend longer studying and become more specialised. The number of genuine polymaths making contributions in lots of different areas seems to be a lot less than in the days of the Royal Society. This is not a coincidence. Every now and then you get a Von Neumann or a Frank Ramsey, but they are towering and rare geniuses.

The other fate of great research, which is less discussed, is that if it is not to be forgotten, it must be summarised. 

How much debate and experiment went into establishing that matter is discrete, and made of atoms, rather than continuous? Or that atoms contain protons, neutrons and electrons? These were colossal contributions, made in painstaking ways by very smart people, resolving a debate that had gone back to the ancient Greeks and before. How do we reward such great work? They become the first sentence of a chemistry class. "Matter is made up of atoms". Boom. Next. There simply isn't time. One can go back to first principles, and read the individual experiments of Dalton and others that established this - that certain combinations of gases tended to combine in fixed proportions, for instance. The Royal Society had the wonderful motto of "Nullius in verba" - take no man's word for it. This is a great aspirational attitude to have, but in practice one can't run all the experiments that make up all of human knowledge. You may well want to know what the experimental evidence actually is. But you probably will end up taking someone's word for it, somewhere, about how those experiments proceeded. How could it be otherwise? How many hours are there in a life?

For the true giants like Newton, their names stay attached to the principles they come up with. But even this is rare. Knowledge of authorship is additional bits of information that people have to carry around in their heads. Is it crucial to know who established each experiment? Or could the time spent learning this be better spent learning more actual facts or principles about the world?

In the fullness of time, if you actually do great work, the praise of posterity will sooner or later be that your work becomes a sentence or two in a summary of a textbook, a contribution to the body of research that every scientist must ingest as fast as possible in order to be able to spend the rest of their lives advancing the frontiers of knowledge. Every page you write, every concept you advance, competes for space in the heads of readers, the pages of textbook authors, and the minutes of this short life. The competition is brutal and Darwinian. Knowledge must evolve to get condensed into shorter and crisper forms, or it risks simply being forgotten. As the time increases, and the amount of new work increases too, the probability of one or other of these outcomes goes to one. 

In this respect, one of the great unappreciated works of public service are the efforts of those who do the reading and summarising. Scott Alexander is extremely high on this list - his summaries of other people's books are fantastic, often way more pithy than the original, and include important editorial judgment on strengths and weaknesses. Mencius Moldbug did a similarly great service by reading and synthesizing a huge number of old primary sources that you and I would never have come across otherwise. I have a strong suspicion that over 99% of people currently living who have read Thomas Hutchinson's Strictures Upon the Declaration of Independence are no more than one degree removed from a Moldbug reader.

I think that from this point of view, one should also not be ashamed about mostly reading the abstracts of papers. You can convert the number of hours left in your life, to a number spent reading, to a reading speed, to a total number of pages of text that you will be able to absorb before you die. What shall that text contain? Every paper and book you read in its original and entirety is taking something from the budget available to other great works. Do budget constraints not bind, even for speed readers?

The other point that is worth noting is the disparity between fiction and non-fiction. Science can be summarised. History can be summarised. But fiction and poetry largely cannot, except without stripping out all the art and beauty that made them great. The idea of all of us reading only the cliff notes version of Shakespeare is simply too tragic to bear. But the result of this love is that fiction works stand a much higher chance of being forgotten altogether. 

If a man has a genetic mutation that is reproductively advantageous, in the short run, he has more children, and all his traits get passed on. Then his children have more children, and the advantageous gene and the other tag-alongs also get passed on. But roll the tape forward 100 generations, and the only thing left of the original man is the advantageous gene itself. This gets selected on, and the rest gets forgotten.

So too it shall be with memes. You may bequeath an entire volume, but after 100 generations of re-learning, only the crispest, shortest version shall remain. And that is your final contribution to posterity.

The Dog That Didn't Bark

As with many things in life, it's hard to notice the things that aren't there, but should be.

I remember my own personal experience of a number of US elections. The way I used to characterize them was that once every four years, people who ordinarily got along with each other pretty well had to scream at each other for a whole year, over things that neither of them could have any control over. Then the election would pass, and people would mostly get on with their lives.

There was also the inevitable rolling back of the start of the election cycle ever sooner. It kind of became like Christmas in the Anglosphere outside America - without Thanksgiving as a hard constraint on when the celebrations could start, you'd see Christmas decorations going up in November, then in October. Elections worked the same way. The buzz, then the party debates, then the primaries, then more party debates, then the conventions. Lord, how I hated the conventions. Just ghastly cliches aimed at true believer rubes. And then the presidential debates themselves, perfectly triangulated to sound compelling to 103 IQ midwits tuning in, sure that they'd learn important things about policy in America to help them make up their mind. I couldn't watch any of them, from either party, for more than a few minutes without feeling like I was being marketed to in a very obvious fashion, on the assumption that I was a moron.

When Trump got elected, there was a very temporary deflating on the left, which lasted about a day, mostly due to shock and disbelief. Then it geared up into protest (protesting an election outcome while professing to still believe in democracy? what does that even mean?), and finding a way to impeach him before he'd even taken office. 

And then, the rancor, normally limited to the election run-up, just became 24/7 in perpetuity. If Trump getting elected created a ton of schadenfreude on the election weary outer right, at some point the whole thing started to mostly be draining. All shared goodwill in America seemed to be eaten up by it. 

So given all this, I was utterly dreading the 2020 election.

And yet, here we are, less than three months out from the election, and instead there is... nothing. You could be forgiven for forgetting most days that it's actually going on. The level of energy devoted to the election itself is insanely low. There is a lot of energy about black lives matter protests, which you can take as a surrogate get-out-the-vote for the left. But there is almost nothing about the election itself.

To take a simple example - how many "Biden for President" signs do you see around your neighborhood? I'm in a pretty blue area, and the answer is approximately "zero".  

Crucial, basic questions remain unanswered. Will people be voting by mail? Will polling booths be open? Who knows! 

I don't pretend to know for sure what's going on there, but there are a few aspects to consider.

One is that this is strategic, a decentralised media strategy to conceal the extent of Joe Biden's mental decline, and just hope that dissatisfaction with Trump will carry the day. 

This might work to a certain extent, but I just don't think they could ordinarily help themselves. There's just too many juicy stories, too much power floating around, too many opportunities to land some exclusive injuring one's political enemies.

It's possible that Covid is just drawing too much of the energy away. But I think this hypothesis pretty much died around May, when the George Floyd protests kicked in in earnest. At that point, nobody in America even pretended to give a damn about Covid, and once that seriousness passed, it was very hard to get it back again. So I don't think there's a sense that Covid is so deathly important that we can't possibly consider mundane matters like who the president will be in three months' time.

My best guess, however, is is related to this paper. If your area had rain on the day of the initial tea party protests in 2009, you had significantly lower vote share for Republicans at the 2010 midterms. In other words, the whole monstrous circus of all the election theatre spectacle actually serves to get people fired up. Covid may not be considered important enough to drown out all other news, but it is important enough to stop tens of thousands people getting crammed into stadiums to host political rallies, or put in auditoriums to listen to presidential debates. Could you host the debate over zoom? Of course you could. Just like you can play NBA games to empty stadiums. Yet for some reason, nobody wants to watch either one. 

Every in-person event that drove the presidential news cycle is canceled. Take that away, and it seems the media just doesn't know what to do. How do you get people fired up? It turns out, it's quite hard. 

A final related aspect that's missing, which is probably even harder to spot, is the absence of lots of casual workplace conversations with people who might be of political opinions. If there's a person in America not heartily sick of zoom calls with anyone other than close friends and loved ones, I'd be surprised. Nobody's turning up to get into pointless arguments with friends and acquaintances, and so the whole cycle of disagreement, fury, righteous indignation, and seeking out new people to vent to / agree with / disagree with is also broken. 

All of this means that my priors on what's going to happen this election are probably wider than in any one I can remember. The most important thing is not the issues, or even the candidates. It's the bizarre, de-energising atmosphere the whole thing is taking place in, and whose voters end up being less lethargic on the day. On that question, I have no idea. 

The thorny problem of inconstant judges

One of the periodic themes of this journal is that the reality of power is everywhere and always messy. I have described my conception that the most important high-level problem to be solved is well-defined and secure property rights in the state itself. This is a slightly more formalized way of saying "secure power".  I'm certainly not claiming originality in this idea - Moldbug's formalism is what got me started thinking about this.

In viewing matters this way, I think it's important to know what we're studying. Perfectly secure power in a governing regime seems to be somewhat akin to a perfectly efficient engine. 

In both cases, it's easy to design one on paper. The process is entirely straightforward! Fuel is mixed with air, then inducted into the cylinder, then the spark plug ignites it. What could be easier than that? There's an absolute monarch, and everyone just follows his orders.

And then when you actually implement the thing, you find all sorts of leakages due to annoying complications in details of the machine that you'd largely abstracted away from. Understanding these turns out in many ways to be more of an engineering problem than a pure science problem. 

But even though the perfectly efficient engine or perfectly secure monarch may be a platonic ideal, that doesn't mean that the forces preventing you from getting there should be viewed as mysterious. Indeed, if you do that, you'll have a very hard time improving things. Maybe you can be a menshevik, and slightly improve the design. Maybe you need bolshevism, to start with a new design that doesn't produce these specific frictions (although, of course, it will produce others, perhaps others you hadn't encountered or thought about).

More importantly, in either case you should care very much about how far away you are from the platonic ideal. Otherwise you're just committing Asimov's Relativity of Wrong. Is your government the equivalent of a nuclear power plant, or a coal power plant? And if the latter, how might you change that? Moreover, the messy world of the social sciences makes things hard. Physicists love to mock the social sciences as being unscientific, but there's no escaping the fact that we have to design this particular power plant based on the computational output of a large number of meat sacks, all designed slightly differently, all interacting with each other. 

The modern world presents us with very few serious monarchs to examine. This also liberates us from focusing on the specifics of what went wrong in any one case (what could Louis XVI have done differently? Lots of things, as it turns out). 

A lot of people on the dissident right have thought hard about the problem of delegation, which is definitely a first order problem, probably the largest one. No man rules alone, and the sovereign's decisions have to implemented by his subordinates. What are their incentives to implement it honestly, or competently, or not divert resources to themselves?

But there is another problem that I think gets relatively less focus. Which is the following: how does the monarch prevent himself from being psychologically manipulated or pressured by those around him?

Among the closest modern analogs to an absolute monarch is a US Supreme Court Justice. The analogy is not exact, because there's a very small-scale democracy going on within the nine of them. But this is voting at a level where your vote often might matter, and you know the parties, and it's a repeated game. 

In the court context, the delegation problem is how to make sure the court's decisions get implemented by lower courts, and by other governmental agencies. This is still challenging - what happens if lower courts routinely ignore your precedent, and you have to slap them down over and over (or just let your decision get undermined)? What happens if people just refuse to follow it? That used to be a big problem but is less so these days. 

But if you're on the right, the delegation question is not the central problem with the court today. The Republicans have long made a point of trying to get better, more conservative justices appointed to the court. And yet, as night follows day, maybe half of the supposedly conservative justices turn out to become liberals. Maybe if we vote for Trump, we can get some more rock-ribbed conservative justices like Sandra Day O'Connor, Anthony Kennedy, David Souter, John Roberts, or, increasingly, Neil Gorsuch. 

This problem seems to be wonderfully emblematic of the failures of the mainstream right. They keep losing. They know they keep losing. They are unhappy about the fact that they keep losing. And yet, their state of the art solution is just "push harder!". More of the same should do the trick! More voting. More rallies. More donations to National Review. More Republican Senators and Presidents, so we can get more Republican-appointed judges, just like...the same ones that put us in the unsatisfying position.  For republicans, it's basically a coin flip. Appoint the guy to the court, and maybe he turns out to be a stalwart judicial conservative, like Scalia or Thomas. Maybe he turns out to be mushy, like Roberts. Maybe he turns out to be a complete liberal, like Souter. 

If your best case scenario is a 50/50 chance at being right, congratulations, you getting to appoint every single judge results in a random walk over judicial appointments. Lose a single election, and it's downward drift.

At almost no point does it seem to occur to the mainstream right- why do half the Justices we appoint turn out to be traitors? And more importantly, what can we do to stop this happening? 

Perhaps, dear Republicans, this is a problem you ought to spend more time seriously studying, rather than just turning the same crank over and over and expecting different results

There are a few ways to think about what might be going on.

The first possibility is treachery. Everyone has to hew to a narrow set of Overton Window beliefs to get appointed. Prospective Supreme Court Justices are all skilled at concealing their true feelings, if such feelings should be undiplomatic. They're experts at saying the right thing to get ahead. Republican party chiefs will just never know what a person will do until he's finally unconstrained. Power tends to corrupt, and absolute power corrupts absolutely, as Lord Acton put it. These guys don't get absolute power, but they get enough of it that when you can't force them to do what you want, they do as they please.

The main problem with this hypothesis is that it stumbles on the fact that Democrats never seem to have this problem. When the chips are down, and the issue before the court is politically charged, rather than just some arcane matter of trusts law, Democrat appointees always seem to toe the party line.

So if this is our explanation, we've largely just kicked the can down the road a little. Why is there treachery among Republican appointees, but not Democrat ones? Even if the field is littered with sociopath traitors, is there nobody talented enough to get appointed by a Democrat, then drop the mask and reveal their inner Scalia?

Let us instead consider an alternative. All these justices started out intending to be conservative, but instead buckle under the social pressure brought to bear upon them. 

From the comfortable distance of one's armchair, this seems like a small thing. So what if some law school students don't like you? 

Reader, do you know what it's like to be hated? I mean, viciously hated, smeared in the New York Times, denounced as a stoolie or a rapist or sexual harasser or an Uncle Tom, day in, day out? Publicly stabbed in the back by people you helped and trusted, over and over? Like the pressure brought to bear on people by hostile journalists and the police, this is something that it's easy to sneer at until it happens to you. 

The reality is that most people just aren't good at dealing with being hated in a vicious and public manner. Despite their best intentions, it sways their choices. 

It's tempting to explain this in terms of concrete quid pro quo arrangements. If you switch to writing liberal judgments, you get invited to better parties and events, or have more fun friends or whatnot. This is definitely part of it. But I suspect there's a pure psychology aspect too. 

To pile metaphor on metaphor, look at the home team advantage in sports. Mosokowitz and Wertheim looked at this. The main driver of the home field advantage is not that it makes the players perform better. I was always skeptical of this myself,even before this study. These are professional athletes, with huge amounts of money at stake. Do they just not try their hardest without cheering? As it turns out, no, the effect seems to mostly be on the referees. And this is nothing but pure psychological pressure, on people literally selected and professionally rewarded for impartiality. The referee is anonymous. He's not getting invited to any swank parties. Even if he makes a lousy call, it's very unlikely that he's going to be harassed by name. The cost is just fifty thousand angry people yelling at you if you grant the penalty kick, and the same fifty thousand cheering if you just let it slide. 

And I suspect this is a large part of what's going on with Republican appointed justices too. Most of these people are law school strivers. They've been groomed for success for a long time, told they were the smartest in their class, voted most likely to succeed in high school, all that stuff. Then, they get made into some lower court judge, where they get less power, but almost total deference. Yes, your honor! No, your honor. And if you do something controversial, what happens?  You are mostly just "a federal court judge in Hawaii". You are the epitome of the machine - a cog, implementing something, replaceable with another cog. No sense hating the cog! But once you're on the Supreme Court, you are now Chief Justice Roberts, and your choices reflect on you, not the machine. 

Look at smiling John Roberts in his confirmation hearing:

Do you think that, before he took on the job, this guy had any experience of being hated? To ask is to laugh. The words on everyone's lips were "looks like nice guy". Good luck with that. He's a nice guy alright.

This is part of what soft power is. It's not always just a euphemism for hard power in disguise, the polite note before the US air force crushes your town. The reality is that psychological constraints are real constraints. We can't see them, but that doesn't mean they're not there. Most people simply aren't good at dealing with this pressure, or at a minimum, will be worse at dealing with this pressure than they think they will be if they haven't yet been subjected to it. It's reminiscent of the Randall Collins point about violence. Most people also don't like inflicting random violence on people, except in a limited range of circumstances. 

Most people also don't like being yelled at with curses and hatred, even if that hatred is very unlikely to result in actual violence to them. Monkey brain knows what's going on. Monkey brain knows that an angry crowd yelling at you is highly correlated with you being dismembered. Monkey brain responds, for the same reason that you get queasy when walking on a glass floored skyscraper walkway. 

To solve the problem of the social pressure being brought to bear on Supreme Court Justices is probably a coup-complete or regime-complete problem - something you can't solve without first changing the government. A good giveaway for such things is if at any point they involve the step "next, we reform or replace the New York Times".

But if you were of the menshevik mindset, there is probably still progress that can be made. The petrol engine can be improved, even if we can't yet turn it into a fusion engine. 

In particular, one useful rule of thumb when judging appointees - what experience do they have with being smeared and hated? And do they have a personality likely to be more resistant to this, inasmuch as it's possible to forecast this. Are they naturally combative and devil-may-care, like Scalia? Do they thrive on having haters? Do they have a history of being outspoken? Unfortunately, this tends to make it hard to get confirmed in the first place these days, so that may not be possible.

In an ideal world, they might have some concrete experience with similar jobs. One obvious case - running a medium sized business, and having to fire people. Yeah, you'd better believe that will toughen you up. Can you inflict pain upon people, and deal with their anger and contempt, while keeping your eye on the larger purpose? Have you had to command troops in battle, and know that making the wrong call on whether to breach that door will likely result in either your guys getting shot, or civilians being shot?

Ironically, the main pre-job exposure people have to being hated is from Democratic and media efforts during the confirmation hearings. While you have very small number of observations here, I suspect that Clarence Thomas being viciously smeared before he started probably had a searing effect on his choices. It likely made him permanently bitter, as there was basically no worse smears that could be thrown at him than what he faced before he started the job. But he knew what his enemies were like,  and exactly what their good opinions were worth, and wasn't going to cave to them after that. 

An interesting question will be to see what happens to Kavanaugh. I think it's easy to overextrapolate the Thomas outcome, and ignore the possibility that some people overreact in the other direction - they cave harder sooner in order to make the smearing stop, or they rationalise it. I'll show I'm the bigger man by not being the right wing monster they accused me of being, and instead implement this unprincipled exception for liberalism. 

You may think this doesn't really apply to monarchs. They can just fire the hostile press, or implement lese majeste laws to execute people who insult them. 

But remember, the pain point is psychology. What if you get a monarch who just really wants to be loved, and can't deal with being despised, or even just with causing necessary pain on citizens? 

I don't hold myself out as any kind of expert, but that's certainly the description I've read of Louis XVI. He wore civilian attire, rather than military. A man of the people! That worked out well for him.

Maybe you think this is all old hat. Very well. Here's a simple test. Take the sentence 

"Previously conservative judges are susceptible to public pressure, and probably will end up changing their views to conform to it."

Ask yourself - would this apply to...me? Would I be susceptible to public pressure, and change my views to conform to it?

Ha, no, of course not. Biases for thee, cold-iron robotic logic for me. 

If you are certain that the answer is "no", and yet you've never had any firm experience of resisting exactly such pressure, I suggest that there is a large chance that you may be greatly underestimating the forces at work here. 

To paraphrase one half of my nom-de-plume:

Hath not a judge eyes? hath not a judge hands, organs, dimensions, senses, affections, passions? If you scream in his face, does he not flinch? If you mock him, does he not feel stung? If you slander him, does he not bristle? If you selectively apply pain, does he not learn the lesson?

On the Toppling of Statues

In the latest round of the imbroglio involving the death of George Floyd, the focus has moved from looting stores to toppling statues. This probably serves multiple purposes. First off, some of the stores represent actually important economic interests, and blue city mayors still somewhat know who’s paying the bills. Not so much that they’re willing to stand up to a mob in the process of looting, of course. But enough that if rage can be directed towards more socially useful outlets, like destroying statues of people liked by conservatives, then so much the better. It keeps the mob fired up in the leadup to the 2020 elections, but harms no vital interests of anybody important.

The initial outrage focused on monuments to the Confederates. It’s 2020, so the Civil War that ended in 1865 is of course a pressing political issue. Among the various ironies is that today’s progressive mob takes a far harsher line than the actual men who fought and died to defeat the Confederacy. Lincoln told the band to play Dixie. Grant let the surrendering Confederate officers keep their weapons and horses. Reconstruction may not have been much fun if you were a civilian in the South, but there’s no doubt that there was a genuine attempt to unify the country after the war finished, and respecting each other’s heroes was a way to preserve a cultural truce. If we’re all going to be stuck together in the Hotel California of countries that you can check out of but never leave, we may as well try to rub along together. This is not a very popular sentiment anymore, it suffices to say.

But as has been obvious to anyone paying attention, the people who wanted statues toppled were never going to stop with the Confederates. Eventually they would assuredly come for Jefferson, Washington, and anyone else who owned slaves. Sure enough, Washington statues have been vandalized in New York and Portland. The city of Columbus, Ohio, recently took down their statue of Columbus, proving that the "is this headline from the Onion or the NYT" game gets harder every day. In case you thought this was part of a principled and thought out set of targets, they also vandalized statues of Norwegian anti-slavery crusaders, Catholic saints, and Cervantes, who was himself a slave. 

Like many things that seem obvious in hindsight, statues exist in only two types of societies – those with a very high level of trust, and extremely heavily-policed authoritarian states. This realization is only slowly occurring to people as it becomes obvious that America is no longer a high trust society, and all sorts of institutions that relied on this now fail to work. Accurate political polling is another casualty, for instance. “Hello stranger who we just called! You don’t know who we are, but do you support the government? You’ve got no financial incentive to tell us, and we’re recording your answer in a database!”. The amazing thing is that anybody ever answered truthfully at all.

A statue in a public space is like the cultural equivalent of a foreign embassy. In the face of concerted domestic opposition, it is completely indefensible from a military point of view. In theory, the domestic government could expend huge resources to police it night and day to stop the mob burning it down. But this is rarely worth it, either for an embassy, or a statue. At the point that you have to do this for any extended period of time, you’re facing a losing battle, and you should probably pack it up and go home. A statue is even worse – an embassy is at least trivially protected against minor attacks, because it has to defend the lives of real people who are important at least to the home country. A statue is physically solid, but socially fragile – an undefended object of art and beauty that can only exist with the consent of a huge majority of the populace. This can be because the person is almost universally revered. It can be because people are tolerant of other people’s heroes, even if they’re not their own. It can be because there’s very strong norms against vandalism. Or, like the statues of Saddam, it can be a flex on the populace under threat of being killed or mutilated for disrespecting the sovereign.

Increasingly, none of these conditions hold in modern America. This may seem hyperbolic to say. But let’s put it this way. Suppose you are in charge of an insurance business. Someone comes to you wanting to obtain insurance for their statue. What annual premium, in terms of percentage of replacement cost, would you charge for a randomly chosen statue in America right now? I’d say the lowest would be the Martin Luther King statue in DC. But the rest? If the cost were less than 25% of replacement, I’d be kind of amazed. There'd probably be a considerable number where the premium would be above 100%, on the assumption that if it got rebuilt, it would be torn down again before the year was out. 

The whole thing is strikingly reminiscent of Godwin’s Law:  “As an online discussion grows longer, the probability of a comparison involving Nazis or Hitler approaches 1.” 

Every day, the line between frenzied internet discussion and real life gets blurrier. Social media, which has been a complete poison on society, amplifies and shortens the clickbait/outrage/vindictive response/ schadenfreude/retweet cycle. Americans have become addicted to the pleasure of righteous indignation, and the media, traditional and social, happily provides.

The literal mob has become indistinguishable from the mob of the Facebook feed. And as outrage porn and mob violence goes on, the probability that someone crazy and motivated decides that a given statue is actually comparable to Hitler goes to one.

Eventually, all the statues will get torn down.

If you don’t believe me yet, don’t worry, you will.

And there are many things one could opine about regarding this. The loss of aesthetics. The loss of historical understanding and tradition. The loss of heroes.

But I want to focus on one bit in particular.

When the statues of Washington and Jefferson all get removed, and nobody stands for the national anthem any more so they stop playing it, and cities and towns start deciding they don’t want to celebrate the 4th of July because America’s founding was racist back in 1619, and first the loonie fringe then the New York Times start writing articles wondering if we should rename Washington DC to Kingtown…

…at what point in all this do people realize that there are literally no more symbols that unify Americans as a people anymore?

That there are no more symbols of the general feeling of mutual camaraderie and shared history and purpose as a nation, because there actually is no general feeling of mutual camaraderie and shared history and purpose as a nation?

And if you, like me, think that the above statements already apply, then the current governing arrangements and general social compact may be a great deal more fragile and brittle right now than most people give it credit for.

People think about governmental collapse like death – something that only happens to other people, but never to me personally. Well, one day, for the nation as a whole, it will. And when it did, for nations in the past, it was generally not anticipated by most of the major parties very shortly beforehand, whether it’s the Fall of Rome, the Russian revolution, or the fall of the Berlin Wall. This doesn’t mean it’s going to happen soon in America, of course. But it does mean that your feeling that it probably isn’t likely now is not actually a strong signal one way or the other, because it never seemed likely, even when it was imminent. So you should revert at least to the unconditional probability, which is low, but not that low.

And if you were to start wondering about useful conditioning information, a pretty good place to start would be widespread belief among the elites of the illegitimacy of the governing regime. 

Of course, we struggle to see this in America, because we don’t have clear language with which to express what “the governing regime” is. We can say if people disliked Czar Nicholas II, or even the Communist Party. But what would it mean to dislike the US government as a whole? It certainly doesn’t map to disliking Trump – in that case, there’s near universal elite hatred. Are people still sentimental about elections and the democratic process? The attachment seems to mostly exist as an expression of hate – a way to stick it to the other side. It’s been a very long time since I’ve heard the left express the sentiment that, sure, our guy lost, but they lost in a democratic election, and in the end that’s more important. If Trump loses, I don’t expect much of this on the right either, save the obviously useless grifters of the professional Never Trump class. And if not that, then what? The civil service? Don't make me laugh. Our robust economy creating broad prosperity? Bueller?

In other words, if there is no substantial opposition to the current governing arrangements, this may simply stem from a) a lack of imagination about alternatives, and b) a lack of clear coordination on what would replace the status quo. In East Germany, you had both. Levis and Rock and Roll were on display on the other side of the wall, and collapse just meant handing over the keys to City Hall to those guys. Now, it’s a little thornier. But if you were to characterise USG as a “regime”, the way that Communist East Germany was a regime, or Czarist Russia was a regime – do you see very much love for the USG regime going around at the moment, on either side of the political aisle? It's hard to see this, because a regime is always "them" - the governing, as opposed to the governed. Americans are trained to see themselves as the governing, due to the absurd fiction about the importance, both practical and spiritual, of  the pico-watt of political power they get to exercise at the polling booth every four years. This delusion holds true, notwithstanding that pushing the same button keeps producing the same unsatisfactory results. This delusion, plus sheer inertia, may be the only glue holding this jalopy together. Every year, it gets a little dicier.

At the moment, I don’t see anything dramatic happening before the election at least. I was somewhat nervous on the main Saturday night of protests recently, however, notwithstanding my previous post.

But let’s put it this way. If there were a VIX index for political outcomes, my estimate of the 5 year value just went up substantially this past month.

You cannot have a nation destroy all the symbols of itself and expect everything to just proceed as before.