If you're going to do a post on index funds...

If you follow the financial press at all, be it the Financial Times, The Wall Street Journal, Business Insider, CNBC, CNN Business, Patrick Boyle, or Morningstar, there are two things you've heard over and over about the SpaceX IPO: the current valuation is absolutely insane based on the fundamentals, and a huge number of passive investors are about to be forced to buy the stock.

The potential undermining of index funds, without question the most important innovation of the past 50 years for democratizing investments, has gotten so bad that Burton Malkiel, the author of the 1973 classic A Random Walk Down Wall Street, has, at the age of 93, taken to the pages of The New York Times to argue that, as bad as SpaceX is as an investment and as reprehensible as Elon Musk is as a person, the concept of index funds is still worth saving. 

Given that so many millions of Americans are suddenly having SpaceX shares foisted upon them, I understand why some financial experts are criticizing the practice of index investing itself. Right now, just a handful of A.I.-related stocks represent almost half the value of the total stock market index. If A.I. stocks collapse, so will the worth of your index fund.

There are few individuals more responsible for the popularity of index funds than I am. I wrote a best-selling book about them and have argued for this investment strategy for over 50 years. In this fraught moment, I want to explain what you should do to protect your wealth. And, for the hard-core anti-Musk faction among us, I offer solutions to salve your conscience.

Let’s return to the argument against index investing. Many investment professionals consider SpaceX the poster child of the A.I. bubble. Investor fervor pushed the valuation of the company to approximately $2.1 trillion by the close of trading Friday — far more than even the most generous traditional valuation standards. The more generous the valuation, the bigger share of the stock market it captures, so SpaceX would immediately become one of the biggest holdings in the market.

Unlike prior initial public offerings, SpaceX shares are already so expensive there isn’t a lot of upside potential left. When Facebook, now Meta, went public in 2012 with a valuation of $100 billion, shareholders were able to benefit financially from its growth to a $1.5 trillion giant. Amazon went public with a generous (for 1997) valuation of $440 million, and shareholders profited as it grew into a $2.5 trillion behemoth. Not so SpaceX. Because it was owned by private investors for so long, much of the gain will immediately be handed off to its venture and private equity backers rather than preserved for new investors.

Moreover, unlike other public companies, SpaceX is employing a dual class share structure that gives Elon Musk essentially complete control with no independent oversight. Public shareholders will, comparatively, have no voice in corporate decisions. Mr. Musk controls multiple related corporate enterprises, raising the possibility of conflicted transactions within the Musk ecosystem. Many investors will be uncomfortable giving him so much power and holding an index fund in which he has so large a share.

These are all legitimate reasons to worry. But in my view, it would be a mistake to abandon an indexing strategy. Timing the market is impossible. Yes, the stock market is unusually concentrated today, and it is likely to get even more so over the next period with Anthropic and OpenAI looking to go public soon.

But the market has always been concentrated. If you had invested broadly in the stock market of the late 19th century, a lot of your money would have been tied up in railroad stocks. In the late 1970s, a bunch of it would have been in oil stocks. In the late 1990s, a disproportionate share would have been in internet stocks. The overall market’s generous 10 percent investment returns over the past 100 years have been generated by less than 4 percent of all stocks. The rest have not earned returns any greater than the yield on short-term Treasury bills.

Even when the market is down, index funds outperform. From mid-1999, near the top of the internet bubble, to mid-2000, when the market bottomed out, index funds did better than actively managed funds that try to pick and choose the best stocks to hold. S&P published recent results for its index in March. Last year about 80 percent of actively managed equity funds produced returns inferior to the S&P 500 index. And the few funds that outperform in one year are not the same as those that win the next year. When the results are compounded over five-, 10- and 20-year periods, over 90 percent of active equity funds underperform the stock market index. Indexing has proved to be the best investment strategy for building wealth.

I recognize, however, that investing is an emotional decision as well as a financial one. And some investments, even the financially sound ones, may make people morally uncomfortable, especially if they dislike some of Mr. Musk’s business and public policy activities.

So what can you do if you believe that owning SpaceX is morally indefensible? While there is no perfect replacement for an index fund, there are some alternatives to consider.

 Obviously, I'm reluctant to disagree with the father of index funds (as previously mentioned, probably the best and most important innovation  in investing of the past fifty years) on this, but I am far less sanguine about the near future of these financial institutions in a time of unprecedented market scams and irrationality.

These institutions work in large part because they are supported by public trust, uncompromised regulators, and reasonably high standards. We spent most of the 20th century building these things, and we've spent much of the 21st tearing them down.

While there is blame to go around on both sides, the culprits fall disproportionately into certain groups: the Republican Party, following trends that started with Gingrich and kicked into high gear with Trump; whiny, entitled billionaires, most of whom lucked into their huge fortunes; Silicon Valley visionaries and tech messiahs whose constant flood of self-serving fantasies were passed on by credulous journalists.

 

Paul Krugman has the perfect metaphor for the career of Elon Musk

This pretty much nails it.

Yesterday I took a short trip. I began with a ride on the local Hyperloop, which ran through a tunnel dug by Boring Company. Then I used my neural implant to summon a fully self-driving Tesla robotaxi. While enroute I read the latest news from the Mars colony.

OK, none of that actually happened, because those products don’t exist. There are no working Hyperloops. The Boring Company has not dug any commercial tunnels. Tesla has a few self-driving — though not fully self-driving — taxis in Austin and nowhere else. (Google’s Waymo driverless taxis are operational in several major hubs.) Neuralink, which is purportedly pioneering brain implants, has tested its products in a handful of patients but done no more than that. And of course there is no Mars colony: there have been no manned flights to Mars, nor the prospect of any for the foreseeable future.

Yet at various points over the past decade Elon Musk promised that each of these services would be available by 2025 if not sooner.

Granted, Musk has had some real successes. Tesla was ahead of the EV curve, and Starlink is a critically important service as well as a viable business.

But these achievements weren’t enough to make Musk the world’s richest man. His wealth has, instead, historically rested mainly on self-fulfilling faith — investors believing in Musk’s genius have piled into stocks in Musk-controlled companies, and the rising value of these companies has enhanced his reputation for genius.

We have a term for enterprises that look successful because they keep drawing in new investors and keep drawing in new investors because they look successful. They’re called Ponzi schemes. And Elon Musk is basically a human Ponzi scheme.

The whole post is on target except for one fairly minor detail which I am contractually obligated to bring up.

I think Krugman may be conflating the two definitions of the hyperloop. By making the "no working" distinction he may be suggesting that we could see one eventually, which is true if he's talking about what most people think of when they hear the term: a maglev vactrain. A few years ago there was a big push to develop one of these systems, backed by hundreds of millions of dollars and limitless credulous press. It never got beyond the prototype stage because the design is insanely impractical and prohibitively expensive, but the underlying idea is sound from an engineering standpoint. You could build one of these with enough time and money. Hell, if things stabilize and Saudi Arabia and its allies don't blow all their money on other techno-optimist vaporware, I wouldn't be surprised to someday see a small working "hyperloop" functioning as a tourist attraction someplace like Dubai.

This is not what Elon Musk proposed. His idea was for a high-speed, perhaps even supersonic, train that would run on a cushion of air like, as he put it, an air hockey table. Air casters are a perfectly good technology for a lot of applications, like slowly moving heavy loads across a flat warehouse floor, but as a component in a high-speed rail system, engineers ruled it out as completely unworkable decades ago. As far as I can tell, not a penny of all of that research money from companies like Virgin Hyperloop went to developing Elon Musk's idea. Not only did it never make it to the prototype stage, it appears that real engineers immediately saw how bad the idea was.

Every hyperloop company settled on the same strategy. They would quietly ignore Musk's laughable white paper (which also included, I kid you not, dealing with thermal expansion by putting train stations on rollers and letting them move a few hundred yards on hot days), but they would keep the name because that was the only thing of value.

A repost to commemorate Elon Musk becoming the world's first trillionaire

Hi! I'm Bret Rhett Chet, here to tell you why you should buy and hodl SpaceX stonk. For a mere $135/share, you get pro forma tangible book value of $7.85/share, an immediate 94% dilution. New investors are putting up 48% of all capital ever invested in SpaceX in exchange for 4.2% of the shares. /1

[image or embed]

— Max Kennerly (@maxkennerly.bsky.social) June 10, 2026 at 6:16 AM

Wednesday, July 26, 2017

"A company for carrying on an undertaking of great advantage, but nobody to know what it is."

Another excerpt from Charles Mackay's  Extraordinary Popular Delusions and the Madness of Crowds. I believe "a company for carrying on an undertaking of great advantage, but nobody to know what it is" was an initial business plan for Groupon.

Some of these schemes were plausible enough, and, had they been undertaken at a time when the public mind was unexcited, might have been pursued with advantage to all concerned. But they were established merely with the view of raising the shares in the market. The projectors took the first opportunity of a rise to sell out, and next morning the scheme was at an end. Maitland, in his History of London, gravely informs us, that one of the projects which received great encouragement, was for the establishment of a company "to make deal-boards out of saw-dust." This is, no doubt, intended as a joke; but there is abundance of evidence to show that dozens of schemes hardly a whir more reasonable, lived their little day, ruining hundreds ere they fell. One of them was for a wheel for perpetual motion—capital, one million; another was "for encouraging the breed of horses in England, and improving of glebe and church lands, and repairing and rebuilding parsonage and vicarage houses." Why the clergy, who were so mainly interested in the latter clause, should have taken so much interest in the first, is only to be explained on the supposition that the scheme was projected by a knot of the foxhunting parsons, once so common in England. The shares of this company were rapidly subscribed for. But the most absurd and preposterous of all, and which showed, more completely than any other, the utter madness of the people, was one, started by an unknown adventurer, entitled "company for carrying on an undertaking of great advantage, but nobody to know what it is." Were not the fact stated by scores of credible witnesses, it would be impossible to believe that any person could have been duped by such a project. The man of genius who essayed this bold and successful inroad upon public credulity, merely stated in his prospectus that the required capital was half a million, in five thousand shares of 100 pounds each, deposit 2 pounds per share. Each subscriber, paying his deposit, would be entitled to 100 pounds per annum per share. How this immense profit was to be obtained, he did not condescend to inform them at that time, but promised, that in a month full particulars should be duly announced, and a call made for the remaining 98 pounds of the subscription. Next morning, at nine o'clock, this great man opened an office in Cornhill. Crowds of people beset his door, and when he shut up at three o'clock, he found that no less than one thousand shares had been subscribed for, and the deposits paid. He was thus, in five hours, the winner of 2,000 pounds. He was philosopher enough to be contented with his venture, and set off the same evening for the Continent. He was never heard of again

It turns out that dumb money isn't an unlimited resource...

... and if you need suckers to pony up $75 billion, it has to come from somewhere.  

Hannah Lang writing for Reuters:

SpaceX's much-anticipated $75 ​billion initial public offering, set to be the largest ever, will likely keep cryptocurrency prices in the doldrums as retail investors attracted to new and ‌risky artificial intelligence stocks scramble to get a slice of the action.

...

The company has set aside up to 30%, or $22.5 billion, of shares for retail investors, Reuters and other outlets have reported, in a rare ​move for a blockbuster IPO that historically have been dominated by institutional investors.

That has helped drive rotation out of risk assets like cryptocurrencies, as retail and ​other investors free up cash to buy shares in SpaceX - as well as hotly anticipated IPOs from OpenAI and Anthropic that are expected to ⁠follow this year, said analysts and crypto executives.

...

SpaceX's IPO prospectus shows that the company overall is unprofitable, and its lofty valuation assumes years of rapid growth driven by its plan to become an AI powerhouse, in addition to other futuristic ambitions such as Mars missions ​and launching AI data centers in space.

That makes it the type of risky and speculative AI bet that appeals to the same cohort of retail investors that drive ​sentiment in crypto markets, crypto executives said.

"A SpaceX IPO would likely pull some capital out of crypto, at least initially. Both compete for the same pool of risk capital," said Thomas Puech, CEO ‌of crypto ⁠trading firm INDIGO, adding that relative to crypto, AI is "the 'sexier' trade at the moment."

Ferguson and the deconstruction of late night

I've been meaning to do more posts on late-night talk shows in general and, in particular, Craig Ferguson ever since Colbert and Kimmel brought the genre back into the news.

If you are a fan of Anthony Head's work or are simply curious about the man, this is a charming piece of video. Head and Ferguson co-starred in the London revival of The Rocky Horror Show in the early '90s and are clearly having a great time catching up.


 

Though he was always a strong interviewer (scroll down for examples), like Dick Cavett, Ferguson was at his best when he had some kind of relationship with his guests, such as having dropped acid together 20-plus years earlier. 

 
Or an even closer relationship than that...

 

What we now think of as late-night talk was basically created by three hosts: Steve Allen, the erratic Jack Paar, and Johnny Carson, with considerable input from various producers and writers such as Fred de Cordova. By the mid-'70s, the template was set.

Despite the enormous audience that these shows pulled in over the decades, the demand for syndication and repeats has proven vanishingly small. Arguably no other comparably popular form of programming ages so badly as conventional talk shows.

I've gone back and tried to watch some, but it's next to impossible. A few Steve Allen segments are interesting because Allen was interesting. Selected bits of Jack Paar are worth checking out either because the guest was interesting in retrospect (Richard Nixon obviously jumps to mind) or because Paar himself was so obviously close to one of his notorious mental breakdowns. For me, at least, Carson, despite being the undisputed king, has aged the worst.

The trouble with the format is that, between the desire to keep things under control and the focus on promoting either an actor's brand or their latest project, with the notable exception of Cavett,there was almost no room for genuine, spontaneous conversations.  It turns out that it's the unexpected, the spontaneous, and the real that has the greatest staying power.

The Late Late Show with Craig Ferguson was always a bit subversive, but it still started out as a fairly conventional late-night talk show. It was only after two or three years that Ferguson started openly and gleefully deconstructing the format, symbolized by him tearing up the note cards at the beginning of every interview and giving guests the option of ending the segment with an awkward pause. 

The result was an increasingly chaotic and improvisational show, particularly when something went wrong, such as a power outage...


Late Late Show with Craig Ferguson 11/9/2012 Eric Idle, Emily VanCamp


A leaky roof...

Late Late Show with Craig Ferguson 2/5/2009 Garry Shandling, Ed Alonzo


[It's worth noting that Shandling (no neophyte when it came to talk shows) commented that, if he were producing the show, he would cancel all the guests and just let Ferguson riff on the conditions in the studio for the rest of the show.]

Or a missing guest.

As a footnote to this episode, here is Ferguson years later interviewing that producer on his podcast. One point that comes up in the follow-up is that Ferguson would have killed the original segment had the producer been uncomfortable or had it come off as excessively mean.

Lisa Ammerman (Late Late Show with Senior Producer) | Joy with Craig Ferguson



Ferguson addressed the meanness innate in the culture of talk shows in one of his most famous monologues following the highly publicized breakdown of Britney Spears, where he talked about his own addictions and their toll, including the Christmas morning when he fully intended to commit suicide. It is an extraordinary piece of television.






Ferguson didn't take himself or the medium seriously, but he did take his job seriously, something that came through in probably his most famous interview.


Late Late Show with Craig Ferguson 3/4/2009 Archbishop Desmond Tutu

Admittedly not as entertaining as the George Santos prediction market scandal, but arguably more disturbing.

It's remarkable how the 2020s have made what would once have been shocking seem like no big deal.

From Semafor:

The owners of a top-tier Spanish soccer team had to move fast. Coming into the final game of the season, the club was on the brink of getting kicked down to a lower league, which would have meant millions in lost ticket and broadcast revenue.

So they turned to Kalshi, placing a multimillion-dollar bet against itself, in case the game didn’t break its way. In the end, the club squeaked by, losing its final game of the season by a narrow enough margin, 1-0, to keep its place in the top tier of La Liga.

On one level, this is not that different from the hedge trading that investors have been doing since we've had modern markets. You take an offsetting position to limit your potential exposure to an adverse event. It's not even entirely clear, in this particular case, that this is unethical (assuming the potential payout for winning the bet was less than the revenue hit the team would have taken from losing their top-tier standing. in other words, as long as they had not incentive to throw the game). .

But this very much looks like a slippery slope. It is difficult to imagine that, even if there's no wrongdoing at first, opening this door won't quickly lead to increasing corruption and massive scandals.

What's most remarkable, though, is that as bad as the idea of loosely regulated prediction markets may be, it's not even in the three worst financial "innovations" of the decade.

It's been ten years.

OK, almost ten years. The Gizmodo article was from September, 2016. If you're promising to rid the world of disease, even "attempt" to rid the world of disease, and "dramatically improve" the lives of every child born that year, it seems like you should have eradicated something by now. 

The timeline here is vague, but "make sure we don’t miss a single soul" suggests that the initiative should have eliminated most disease in something like fifty years (or forty years from today). Elsewhere, they said "The goal of the program is to help cure, manage, or prevent all disease by the year 2100."    I don't want to be unreasonable -- it's not like you can expect a 20% or even 10% reduction every decade --  but shouldn't we be seeing something substantial by now? 

Based on some quick searching, the organization appears to have done some good work, but nothing on the scale needed, nor is there much evidence that the money was better spent than NIH dollars are, certainly not better enough to make up for Zuckerberg's fellow tech visionaries government funded research. It's almost like these were never serious, good faith claims.

It's possible that the initiative would have accomplished more with a bigger budget. Over these same ten year, Zuckerberg spent $77 billion on the metaverse which probably would have been just as successful had he diverted some of that money to other causes.

 

 

The Grandiosity/Contribution Ratio

From Gizmodo [emphasis added]

Zuck and Priscilla laid out the schematics for this effort on Facebook Live. The plan will be part of the Chan Zuckerberg Initiative and will be called simply “Chan Zuckerberg Science.” The goal, Zuck said, is to “cure, prevent, or manage all diseases in our children’s lifetime.” The project will bring together a bunch of scientists, engineers, doctors, and other experts in an attempt to rid the world of disease.

“We want to dramatically improve every life in [our daughter] Max’s generation and make sure we don’t miss a single soul,” Chan said.

Zuck explained that the Chan Zuckerberg Initiative will work in three ways: bring scientists and engineers together; build tools to “empower” people around the world; and promote a “movement” to fund science globally. The shiny new venture will receive $3 billion in funds over the next decade.
...

“Can we cure prevent or manage all diseases in our children’s lifetime?” Zuck asked at one point. “This is a big goal,” he said soon after, perhaps answering his own question.

Obviously, any time we can get some billionaire to commit hundreds of millions of dollars a year to important basic research, that's a good thing. This money will undoubtedly do a tremendous amount of good and it's difficult to see a major downside.

In terms of the rhetoric, however, it's useful to step back and put this into perspective. In absolute terms $3 billion, even spaced out over a decade, is a great deal of money, but in relative terms is it enough to move us significantly closer to Zuckerberg's "the big goal"? Consider that the annual budget of the NIH alone is around $35 billion. This means that Zuckerberg's initiative is promising to match a little bit less than 1% of NIH funding over the next 10 years.

From a research perspective, this is still a wonderful thing, but from a sociological perspective, it's yet another example of the hype-driven culture of Silicon Valley and what I've been calling the magical heuristics associated with it. Two of the heuristics we've mentioned before were the magic of language and the magic of will. When a billionaire, particularly a tech billionaire, says something obviously, even absurdly exaggerated, the statement is often given more rather than less weight. The unbelievable claims are treated less as descriptions of the world as it is and more incantations to help the billionaires will a new world into existence.

Perhaps the most interesting part of Zuckerberg's language here is that it reminds us just how much the Titans of the Valley have bought into their own bullshit.

 

"Every fool aspired to be a knave"

[We posted this in 2017, but somehow it still seems timely.]

Today's excerpt from Charles  Mackay's  Extraordinary Popular Delusions and the Madness of Crowds quotes perhaps my favorite line about a time of bubbles, up to and including 2007.

Exchange Alley was in a fever of excitement. The Company's stock, which had been at a hundred and thirty the previous day, gradually rose to three hundred, and continued to rise with the most astonishing rapidity during the whole time that the bill in its several stages was under discussion. Mr. Walpole was almost the only statesman in the House who spoke out boldly against it. He warned them, in eloquent and solemn language, of the evils that would ensue. It countenanced, he said, "the dangerous practice of stockjobbing, and would divert the genius of the nation from trade and industry. It would hold out a dangerous lure to decoy the unwary to their ruin, by making them part with the earnings of their labour for a prospect of imaginary wealth." The great principle of the project was an evil of first-rate magnitude; it was to raise artificially the value of the stock, by exciting and keeping up a general infatuation, and by promising dividends out of funds which could never be adequate to the purpose. In a prophetic spirit he added, that if the plan succeeded, the directors would become masters of the government, form a new and absolute aristocracy in the kingdom, and control the resolutions of the legislature. If it failed, which he was convinced it would, the result would bring general discontent and ruin upon the country. Such would be the delusion, that when the evil day came, as come it would, the people would start up, as from a dream, and ask themselves if these things could have been true. All his eloquence was in vain. He was looked upon as a false prophet, or compared to the hoarse raven, croaking omens of evil. His friends, however, compared him to Cassandra, predicting evils which would only be believed when they came home to men's hearths, and stared them in the face at their own boards. Although, in former times, the House had listened with the utmost attention to every word that fell from his lips, the benches became deserted when it was known that he would speak on the South Sea question.

The bill was two months in its progress through the House of Commons. During this time every exertion was made by the directors and their friends, and more especially by the Chairman, the noted Sir John Blunt, to raise the price of the stock. The most extravagant rumours were in circulation. Treaties between England and Spain were spoken of, whereby the latter was to grant a free trade to all her colonies; and the rich produce of the mines of Potosi-la-Paz was to be brought to England until silver should become almost as plentiful as iron. For cotton and woollen goods, with which we could supply them in abundance, the dwellers in Mexico were to empty their golden mines. The company of merchants trading to the South Seas would be the richest the world ever saw, and every hundred pounds invested in it would produce hundreds per annum to the stockholder. At last the stock was raised by these means to near four hundred; but, after fluctuating a good deal, settled at three hundred and thirty, at which price it remained when the bill passed the Commons by a majority of 172 against 55.

…

It seemed at that time as if the whole nation had turned stockjobbers. Exchange Alley was every day blocked up by crowds, and Cornhill was impassable for the number of carriages. Everybody came to purchase stock. "Every fool aspired to be a knave." In the words of a ballad, published at the time, and sung about the streets, "A South Sea Ballad; or, Merry Remarks upon Exchange Alley Bubbles. To a new tune, called 'The Grand Elixir; or, the Philosopher's Stone Discovered.'"

If you had a writers' room brainstorming prediction market stories, someone would pitch this in the first ten minutes. UPDATED

From NPR: 

DOJ is investigating former congressman George Santos for insider trading on Kalshi

 

In February, four months after being released from federal prison, former Republican congressman George Santos took to social media to express his enthusiasm about attending President Trump's upcoming State of the Union address.

"I'm going to be there for the State of Union in the gallery, guys," Santos said in a video he posted to X a day before the president's remarks.

At the time, traders on the prediction market site Kalshi were placing millions of dollars worth of bets on who would attend. Santos' video confirming his presence sent odds soaring.

But he didn't show up.

"Watching SOTU from an airport tv was not part of the plan! FML," Santos wrote on X, using slang for a more coarse way of saying, "screw my life."

He posted the message as Trump was speaking, making those same odds in the Kalshi market plummet.

What Santos didn't say was that he had already placed bets on Kalshi that he was not going to appear at the State of the Union address, according to three people with direct knowledge of his trades who were not authorized to speak publicly. They say Santos misled the public and turned a profit based on that deception in the tens of thousands of dollars.

This is a fun story, and there would certainly be a certain poetic justice to George Santos returning to jail—in a less corrupt system, he would still be there—but I'm not sure it would be actual justice in the sense that it's not clear that what he did was illegal, based on the current interpretation of insider trading and, more importantly, how absurdly narrow the concept of financial crime has become.

Over the past 45 or so years, we have watered down laws, neutered regulators, and decided as a society that various frauds and market manipulations that would have made the original robber barons blush are now acceptable and even praiseworthy. The world's richest man's fortune was built on schemes like getting his hand-picked Tesla board to buy (or perhaps more accurately, to get the company's stockholders to buy) a money-losing SolarCity for top dollar before the bottom fell out, and that's just one in a long list. The president of the United States has made billions of dollars during a term that is less than a year and a half old.

Personally, I think it would be great if we started passing stronger laws against financial crimes and started aggressively pursuing people who broke those that are currently on the books, but there is something simply embarrassing about going after venial sins while rewarding mortal ones.

I remember a quote from Jonathan Swift to the effect that laws were like spider webs. They were good at catching flies and gnats, but wasps and hornets flew through unbothered.

It is seldom a good sign when current events bring to mind quotes from Jonathan Swift. 

___________________________________

Update from Bobby Allyn:

I was winding down my work day here in Los Angeles when my phone rang at 5:37 p.m. from a blocked number. It was former Congressman George Santos. He was boiling with rage.

The day before, I published a story revealing that the Justice Department and the Commodity Futures Trading Commission had opened investigations into his trading activity on the prediction market site Kalshi.

...

Before the story, I emailed him, and he called me from a blocked number. So when my phone buzzed again from a blocked number, I had a pretty good sense of who it might be.

Santos, whose political rise and fall was characterized by a notorious trail of lies and falsehoods, claimed my story was riddled with errors. He said "my lawyers have been calling the Department of Justice all day, and they can't find any investigation."

As we were talking, I asked if I could record the call. He said no. I was in front of a keyboard, though, furiously jotting down every word.

I asked him who his lawyers are, and he refused to answer. I questioned whether he really does have attorneys. He replied: "I'm George f*cking Santos, of course I have a legal team."

He then proceeded to name-call and attack the reputation of NPR, the kind of invective that's common when reporting on people who try to discredit reporters and news organizations for stories they don't like.

What Santos said next took me aback, even by his outlandish and brazen standards.

"This story is going to get you a gun in your face," Santos said.

I asked him what he meant by that.

"You know what I mean."

It did not exactly feel like an imminent threat to my life that a convicted fraudster expelled from Congress who lives thousands of miles away from me in Pennsylvania's Pocono Mountains was lodging violent words at me.

It felt more bizarre than threatening, but then it grew even stranger and more confusing.

 

 

More feel-good analysis from Patrick Boyle.

From "This Is Probably Fine!" 

Over the past few weeks, people who trade government debt for a living have become somewhat agitated. On May 19th, the yield on 30-year US Treasuries hit 5.2%, the highest level since July 2007, a time when the global economy was doing absolutely spectacularly and nothing bad was about to happen whatsoever.

  

CBS, Byron Allen, and the business of bad television

 This is going to take a while.

Picking up on last week's thread, pretty much everything you've read about CBS replacing Colbert with Byron Allen's Comics Unleashed is wrong. Even by the abysmal standards of television journalism, the reporting here has been god-awful. We can say with a high degree of confidence that there is less here than meets the eye, but since none of the people who are paid good money to dig into these stories bothered to do any work, we are left to speculate about most of the finer details.

The meta-story of the demise of CBS late night is just the latest fodder in our long-standing rant about coverage of the television industry, a corner of the news landscape where huge stories go unreported, demonstrably wrong conventional wisdom is allowed to stand for decades, and the most egregiously distorted corporate spin is credulously reported as fact.

In this case, what has been described as a major change to the CBS lineup appears to have been nothing more than a standard and fairly trivial change to the existing syndication agreement between Allen and the network, applying primarily to, as far as I can tell, 15 of the more than 250 CBS stations in the country.

The key distinction at this point is the concept of an owned-and-operated station.

Normally, when we talk about the CBS network, we include all of the CBS affiliate stations regardless of who owns them. The same applies to ABC, NBC, Fox, and The CW. The relationship between these stations and their parent network can get a little complicated, and they do have a certain degree of freedom about what network programming they choose to air, though, to be honest, you'd need to talk to an expert to get the exact details.

As a general rule, however, the affiliate stations run the programming that is fed to them from the networks in the time slots matching the national schedule. I'm not sure what kind of legal requirements there are behind this, but the main reason is that network feed, even from a bottom-tier company like The CW, is still going to bring in better numbers than you could get with syndicated programming. Which brings us to the next key concept.

These stations have a great deal of freedom as to how they fill those hours not provided by the network. They can, of course, produce their own content, such as local news, but it is generally far cheaper and more profitable to go with something syndicated, be it reruns of The Big Bang Theory and NCIS or some daytime talk show or a game show not produced by CBS, NBC, etc.

The cost of these shows varies with their popularity, with the bottom of the barrel being sold on what is called a barter basis. The programming is provided to the stations for free with the understanding that the ad revenue from that show will be split between the station and the syndicator. In some cases, the syndicator will even pay a fee to the stations, making it something of a hybrid between traditional barter and the infomercial model.

Circa 1990, Saturday Night Live's Weekend Update did a bit on the debut of a cable channel with programming that consisted entirely of unscored, unnarrated footage of tropical fish swimming in a large aquarium. The anchor said that the channel carried fish programming 24 hours a day, seven days a week, except for 4:00 a.m. on Sunday morning when it aired the Byron Allen show.

Most barter agreements required stations to air a program a certain number of times during the week but did not specify what time of day they had to run it. As a result, if you see what appears to be a first-run syndication program airing after 2:00 in the morning, chances are that the show's numbers were so bad that the station was simply burning off its obligation in a time slot that virtually no one was watching.

Byron Allen, a truly gifted businessman, has become a billionaire largely because of his understanding of the television industry in general and the barter model in particular. Probably the best example of this is Comics Unleashed, an almost unwatchable show but a brilliant business model. The standard talk-show formula for interviewing stand-up comics has the host make small talk with the guest for a few minutes, then feed them a prearranged prompt so that they can go into their act. Comics Unleashed maintains only the slightest pretense of an actual conversation. Most of the segments consist of Allen turning to the guest and saying something like, "I hear you've been spending lots of time on the road recently," at which point the comic does a three-to-five-minute excerpt of their routine. As Norm MacDonald said about the show, the comics couldn't be more leashed.

The shows are obviously done as quickly and cheaply as possible, with lineups consisting mainly of C-list comics, with a few B-listers and the occasional former star like Jimmy Walker or David Brenner. The real genius, however, lies in how Allen has made the show almost perfectly evergreen. Comics are instructed to avoid politics and anything else remotely topical. The episodes are absolutely interchangeable. Having debuted in 2006, more than 350 are currently in the can, and for those watching at home it is often impossible to tell whether the one they are seeing is 10 weeks old or 10 years old.

In a sense, the frequent lack of recognizable stars might even be considered a feature, not a bug. With a lineup of comics you've never heard of, it is even more difficult to distinguish the old from the new, unless, like the previously mentioned Brenner, one of the comics has passed away. (Comics Unleashed's companion show, Funny You Should Ask, breaks with the pattern by including A-listers like Louie Anderson and Billy Gardell but otherwise follows the same cheap and interchangeable template.)

Commentators focused on that 85% drop-off from Colbert's finale are missing the bigger and bleaker picture. That debut number was based on a tremendous amount of publicity for a show that, despite a 20-year run, most people have never seen. More importantly, it appears that, due to that publicity and the suddenness of the Comics Unleashed announcement, virtually all CBS affiliates chose to carry the program in the 11:35 slot. While Byron Allen may have some sort of condition in his contract with CBS requiring those 15 owned-and-operated stations to leave him in Colbert's spot for a while, this almost certainly does not apply to the over 200 other CBS affiliates, which will very probably find something more profitable to air in that hour and will send Comics Unleashed back to its natural habitat.

Comics Unleashed has always done terrible numbers and it will return to terrible numbers in the future, but that's what it was designed for. Allen has designed a show that can turn a healthy profit with audiences in the tens of thousands. Both he and the show will be fine.

The local news shows of CBS affiliates (the source of about half their stations' ad revenue) will be screwed, but that's a topic for another post.   

 

I voted this weekend because...

1. I consider it my civic duty;

2. I was concerned about some of the races;

 

3. Voting here is secure, quick, and convenient;

 

4. I wanted the state of California to stop sending me those annoying texts:

Mark, if you live at ________________, records indicate you may not have returned your ballot for the 6/2 election yet. Your closest drop-off location is ____________, Burbank, CA _____. Return your ballot ASAP if you haven't: sos.ca.gov/elections/where-and-how
-OurBallot
Stop to end 

Exponential growth in demand is one of the sustaining assumptions of the AI bubble. This looks like something else

Following up on our tokenmaxing post.

Companies are starting to question whether soaring AI spending is delivering meaningful returns. An AI consultant tells us a client recently spent half a billion dollars in a month after failing to put usage limits on Claude licenses for employees.

[image or embed]

— Axios (@axios.com) May 28, 2026 at 10:15 AM

 


Aditi Bharadewriting for Business Insider: 

In a Rapid Response interview released on Saturday, Uber's operations chief, Andrew Macdonald, said it was becoming harder to justify AI costs within the company.

He said that Uber CTO Praveen Neppalli Naga went viral after telling The Information in an April interview that Uber had already blown through its Claude Code budget for 2026.

The comment led to what he described as a "head-exploding moment," sparking discussions about AI token consumption within the company and the trade-offs it creates, such as on head count.

He said that, based on talks with Uber's senior engineering leaders, he realized higher token usage did not translate into a proportional increase in useful consumer features.

...

Macdonald added that AI can seem free if you're "just a user sitting there coming up with interesting use cases" without paying for it. But ultimately, the company foots the bill.

...

Duolingo, for instance, walked back its decision to include AI usage in performance reviews after employees asked whether they had to use AI for the sake of using it.

"It felt like, rather than being held accountable for the actual outcome, we were trying to just push something that in some cases did not fit," Duolingo CEO Luis von Ahn said in a podcast interview in April.

Coding veteran Carl Brown has long been one of the sanest voices on the subject, so it's not surprising he has one of the best takes.

Apparently insider trading is now illegal

 

from ABC News: 

A Google employee fraudulently made more than $1 million by using inside information to place Polymarket bets on what users were searching for on Google, according to a federal criminal complaint unsealed Wednesday in New York. 

...

Spagnuolo, 36, is charged with commodities fraud, wire fraud and money laundering.

"Unlike the counterparties to his trades, Spagnuolo knew the outcome of these wagers before the trading public did because he had accessed Google's confidential, commercially valuable internal data," the complaint said.  

He correctly bet -- using an account under the name AlphaRaccoon -- that Google's most-searched person in 2025 would be the singer known as D4vd, according to the complaint. At the time he placed that bet, the prediction market Polymarket "assigned a near-zero probability to d4vd being 'the #1 searched person on Google this year,'" the complaint said.

 

A few things surprise me about this story.

Two or three months ago, I was at a neighborhood get-together, and I found myself in a conversation with someone who works for TMZ. The discussion turned to d4vd's case. The tabloid news show had been running with it since early September, when the badly decomposed body of a 14-year-old girl was found in the trunk of his Tesla. This brings up my first question: how was this story assigned a near-zero probability on Polymarket?

Putting aside the insider-trading aspect, which we will get back to, this is a remarkable failure of prediction. Even a fairly cursory bit of research into the big stories of 2025 would have revealed the completely unsurprising fact that lots of people were interested in this incredibly lurid story involving a highly popular recording artist. This is a case of a market failing to price in publicly available, easily accessed data.

While Yogi Berra (or perhaps the even more widely quoted apocryphal Yogi Berra) was largely correct when he said, "It's tough to make predictions, especially about the future," some predictions are tougher than others. This is one of the persistent problems in discussing and evaluating prognostications, be they model-based or otherwise. Sometimes predictions are so easy as to be effectively worthless, and it's important to give credit accordingly. The person who predicts the sun will rise in the east may have 100% accuracy, while the one who predicts it will rise in the west may only be right one in 100 times, but it's the second guy we should be impressed with.

The fact that, if not for the guy with inside information, Polymarket would have apparently gotten an easy prediction this wrong raises questions in the "dog that didn't bark" sense.

The other thing that surprises me is that this particular case of insider trading was illegal. To be clear, I'm not saying that it wasn't wrong—it certainly was—or that the FBI should not have gone after this guy—they certainly should have—but given how incredibly forgiving courts and regulators have become toward insider trading and other financial crimes, I honestly don't see this rising to that level. 

 From Wired:

 According to the complaint, Spagnuolo placed trades on Polymarket from around October 2025 to December 2025 using internal Google data. In one instance, he netted $1.2 million trading on who Google’s most-searched person of the year would be in 2025, correctly predicting that the winner would be D4vd, a once obscure singer who became the subject of intense public scrutiny after he was suspected of murder. (D4vd was ultimately charged in the case in April.) ["Once obscure" is an odd framing for a then rapidly rising young performer, but it is technically true in the vast majority of cases. -- MP]

“Unlike the counterparties to his trades, Spagnuolo knew the outcome of these wagers before the trading public did because he had accessed Google’s confidential, commercially valuable internal data,” FBI agent Brandon Racz wrote in the complaint.

 Given that the courts currently hold that “insider trading is not about fairness, it’s about theft,” why is the FBI even bringing up the counterparties to the trades?

Hello Goodbye

I have some thoughts on the finale of The Late Show with Stephen Colbert. Actually, I have lots of thoughts, but I'm going to save the discussion of what this means for the future of late night and of CBS/Paramount (particularly Paramount+) for a later post—I might even do one specifically on the extraordinary career of Byron Allen and how he fits into all of this—and play TV critic for now.

If you haven't watched the final episode of The Late Show with Stephen Colbert, you should, particularly the last 10 minutes. It was extraordinary television. Even more so if you caught it over the air, because the medium of broadcast television is at least in part the message here.

Perhaps the biggest difference between broadcast and streaming media comes down to the distinction between personal versus shared experience. Watching something at the same time as millions of other people is very much a new idea historically speaking.

Our modern conception of time was largely shaped by two technologies: the railroad and mass communication. Up until less than 200 years ago, time was set and experienced locally. Noon occurred whenever the sun was directly overhead, and the fact that 12:00 in Memphis might be 11:30 in Oklahoma City was a matter of no great concern.

Trains led to time zones; then radios and televisions led to synchronization. The telegraph started the process, but it was the media that streamed directly into people's homes that had the big cultural impact.

That sense of experiencing the same news and cultural events at the same time peaked in the '60s. Soon after that came second-run syndication, home video, satellite, and finally streaming, all greatly diluting that feeling of synchronization. But even now, broadcast television can convey a feeling of sharing a moment, particularly moments of historic importance.

It is, of course, true that these newer technologies, plus things like gaming and social media, have eroded broadcast television's numbers, though it is important to note that the actual viewership estimates are far more complicated than most commentators admit or even realize (for instance, shows that first appear on broadcast television, like High Potential, often score streaming numbers that crush most of the streaming originals), and that this erosion has been far slower than most industry watchers predicted. In the late seventies and early '80s, it wasn't unusual to see people predicting that at least one of the big three networks wouldn't make it to the 1990s. Instead, the next two decades saw that number go from three to five.

It is safe to say that, back in the early '80s, few pundits would have guessed that two of the most consequential stories of American politics and media would involve not just broadcast television but the dinosaur format of the late-night talk show.

The Kimmel suspension was arguably the first time during Trump 2.0 when a major corporation, one that had readily complied, reversed its position and stood up to the administration. Disney realized it had more to fear from its own customers than it did from Brendan Carr.

Kimmel was a humiliating defeat for the administration; Colbert was a Pyrrhic victory. Forcing him off the air greatly amplified his message and burnished his reputation while inflicting considerable costs on the Ellisons and CBS/Paramount. Combine this with the self-inflicted damage that Bari Weiss has done to the once-respected and profitable news division, and it's safe to say that the company is worth considerably less than it was when David Ellison bought it with his father's money. If things continue going the way they have been, Byron Allen might end up owning CBS after all.

In terms of the legacy of both the show and the host, the cancellation was the best possible outcome.

For serious history buffs, the obvious analogy here is that The Late Show with Stephen Colbert is to the anti-Trump resistance as The Smothers Brothers Comedy Hour was to the anti-war movement.

Somewhat unfairly, we remember that latter show almost entirely because of the circumstances of its demise. As long as historians study the anti-war movement and the counterculture, the Smothers Brothers will merit a section in the history books.

I think it was with COVID that Stephen Colbert truly stepped into the "America's dad" role. Every night we could have a Zoom call with a friendly middle-aged family man who openly shared our frustrations and our fears.

If anything, Colbert steered the show into this role of a traditional, reassuring, old-fashioned late-night talk show, sticking with the familiar format and reliably throwing in some dad jokes as the years progressed. This was perhaps best demonstrated by introducing the recurring segment with his wife, Evie. It was the sort of thing that could easily come off as cloying or fake, and I'm sure people who hated Colbert would have had that reaction had they watched the show. For fans, however, the exchanges felt spontaneous and charming.

Viewers and TV critics will inevitably go back and forth over the way the show wrapped up its run, particularly the last two episodes. In many ways, the penultimate episode would have been the more conventional send-off, with a star-studded lineup of guests honoring the departing host. By comparison, most of the actual finale was comparatively goofy and low-key.

The closing musical numbers were indicative of the two approaches. We could argue about where Bruce Springsteen and Paul McCartney rank in the pantheon, but obviously both are very close to the top. But while the caliber of the performers was comparable, the tone could not have been more different. "The Streets of Philadelphia" was and is a gut punch, at least for now the definitive protest song of the second Trump administration. The closing numbers of the finale were something quite different.

While the finale was not free of politics, the focus was on history, nostalgia, and an appreciation of what the show had been and what the theater that housed it meant.

I don't want to get overly nostalgic for the period, but the ability of broadcast television to create shared moments for a nation was probably exemplified by The Ed Sullivan Show more than by any other program. Ed Sullivan strove to make his show a cross-section of the best and biggest in popular culture. From plate spinners to avant-garde rockers, from vaudeville comics to George Carlin, from big Broadway dance numbers to Diana Ross singing "Love Child."

All of this came together perfectly in the last 10 minutes of the show, from its suggestion of the afterlife as a bunch of friends sitting around in the dark singing old songs (complete with an uncredited Jon Batiste and Elvis Costello) to the absolutely perfect number with Paul McCartney returning to the site of his American debut over 60 years ago, performing the apt "Hello, Goodbye," and closing with the image of the Ed Sullivan Theater disappearing and leaving a miniature replica inside a snow globe.