Newport is also the guy who suggested that Anthropic deserved the Nobel Prize in marketing for the Anthropic launch

Something you won't hear me say often (because, as previously mentioned, I despise The New York Times), but this recent op-ed is essential reading. It's essential because computer scientist Cal Newport is one of the most thoughtful and clear-eyed voices in the AI debate. 

Anthropic recently dropped a classic of the form: a scary-sounding report titled “When A.I. Builds Itself” that claims A.I. could be moving closer to the capability of “autonomously designing and developing its own successor.” The company hopes that this recursive self-improvement will bring “enormous good” to the world, but also openly worries it might lead to humans “losing control” of these systems.

The public reaction to this report focused on a section that seemed to call for a worldwide pause on A.I. development. But if you read more carefully, it becomes clear that a pause isn’t actually what Anthropic proposes. Its report says that “if it were possible” to slow down the technology, then we should, but so long as the “least cautious” actors were advancing full speed, it suggests that Anthropic will have no choice but to do the same.

...

Let’s call this strategy “doom trolling.” It’s one of the defining and most arresting properties of our current A.I. moment, and I’ve come to believe that it’s morally indefensible.

There are really only two options for the intentions of A.I. companies when they engage in doom trolling. The first is that they actually believe that the systems they’re building have a nontrivial chance of producing hugely disruptive events — from destroying the economy in the best case to wiping out our species in the worst. If this were true, every reasonable ethical system would argue that there is only one acceptable response: to immediately stop working on any product that might accelerate such a future, and lobby with all of your resources to help force other A.I. companies to do the same. From a moral perspective, any other reaction would be monstrous.

The second option is that these A.I. companies aren’t really concerned about these risks, and that they’re injecting these doses of unresolvable doom for other reasons. They might want to amplify the perceived power of their technology at a time when they’re setting up their initial public offerings. Or they hope their performative reports and somber interviews will help them compete for top engineering talent coming from a Silicon Valley culture that’s steeped in this type of doomerism. The venture capitalist and A.I. adviser David Sacks recently suggested that Anthropic was using fear-mongering tactics as a method of “regulatory capture,” which can impede upstart competitors. Any of these reasons would mean that these companies are laundering the anxiety of millions to improve the financial fortunes of a vanishingly small number of major stockholders. This cynicism would be equally monstrous. 

When it comes to A.I., we’ve become so used to this tone of helpless, stress-inducing prognostication that we’ve lost sight of its strangeness. Imagine if Ford put out a report saying that it feared its popular F-150 trucks might soon start bursting into flames, but that there was nothing the company could do about it because automotive technology was too inevitable and important to slow down. You’re probably struggling to picture this scenario because no reasonable consumer product company would ever act like this.

The A.I. companies could start behaving the same way. To do so would require that they stop treating A.I. like some inevitable force that they’re struggling to steward. It’s not. It’s a collection of specific tools that these companies are choosing to design and sell according to specific business plans. Accordingly, they need to talk about their offerings like any other consumer product. This means explaining clearly whom these products are for, justifying their benefits and, critically, taking full responsibility for any harm they might cause. Just because A.I. currently enjoys a high-tech sheen doesn’t make it exceptional with respect to common-sense safety standards.

If these A.I. companies insist on continuing to pretend that they’re merely stoic observers of an unavoidable dystopian future, then perhaps it’s time to force the issue. As consumers, we can refuse to play the doom-trolling game. Next time Anthropic releases a dire report, or Sam Altman’s voice cracks as he imagines the disruption that OpenAI is unleashing, we can pivot back to the pragmatic: “OK, but what benefits am I getting by spending $1,000 a month on tokens?” If they continue to ratchet up the doom, then perhaps it’s time to transform dread into ridicule: The earnest pseudoscience of Anthropic’s white papers already borders on satire. The aura surrounding A.I. encourages a fretful submission to these tech leaders, but this could rapidly change.

 

 

A few days after the NYT op-ed appeared, Newport made an appearance on the podcast Better Offline, where he explored the same topics (he has an especially good time putting on his professorial hat and tearing apart Anthropic pseudo-academic white papers) and put those ideas in the context of the profoundly dysfunctional culture of Silicon Valley. We will be coming back to this one.

 

The original Cushing oil boom was started in 1912 by a man actually named Tom Slick. Not relevant to the post but I had to mention it.

In  most big stories, there are one or two pieces of absolutely essential context that get reported in major outlets but which no one seems to pay much attention to.

David Goldman reporting for CNN:

Today, neighboring Cushing is the hub of America’s energy market. It literally provides the oil plumbing for the United States. It’s where America’s benchmark West Texas Intermediate oil is priced and warehoused. From there, it’s piped to refineries around the country.

In normal times, Cushing stores around 40 million barrels of oil with capacity of up to 75 million.

These are not normal times.

Cushing’s current inventory is 21.6 million barrels, according to the US Energy Information Administration.

That’s dangerously close to operational stress levels, the tipping point at which Cushing struggles to supply all of its customers with the oil they demand.

When Cushing’s reserves get below 20 million, they effectively hit empty, scraping the bottom of the barrel of what is largely unusable sludge. 

...

Despite the largest crude supply shock the world has ever seen, US oil and gas prices still haven’t hit record highs during the three-plus months of war with Iran. And they’ve been sliding – sometimes sharply – in recent weeks.

That’s largely because the world was historically oversupplied with oil going into the crisis. Those stockpiles have acted as a global shock absorber.

But commercial oil inventories are rapidly dwindling. Oil stockpiles in the world’s wealthiest nations are falling by 6.3 million barrels per day and are sitting at just 2.6 billion barrels, according to the US Energy Information Administration. That’s just 100 million barrels above operational stress levels, said David Oxley, chief climate and commodities economist at Capital Economics.

The oil market can’t run down to the last drop, like your car can. Below a certain threshold, pipelines can’t maintain pressure and refineries can’t deliver all the various fuel grades their customers demand.

“Like blood pressure in the human body, the issue is circulation,” said Natasha Kaneva, head of commodities strategy at JPMorgan. “The system does not fail because oil disappears, it fails because the circulation network no longer has enough working volume.”

At this rate, the world’s oil market could enter the danger zone within a month.

That CNN story ran on 2026/06/12.

 

Here's another piece of context from Bloomberg.

 

 

 

As Nicholas Grossman‬ commented:

Graph of Strait of Hormuz crossings since June 2025. See that little spike all the way on the right? The one that's much lower than the leftward 2/3 of the graph, and immediately crashes back down?

That's what the US government and quite a bit of US media tell us is fully open, with normal traffic. 

Parting shots -- following up on some recent threads

On the AI bubble...

From Paul Kedrosky:

Hyperscaler and data-center investment, negligible through 2022, is now tracking toward $1.5 trillion annually by 2030. At that level, it will surpass, in real terms, the residential construction boom of 2005-06, the 1990s fiber build peak year, and the 1882 railroad peak combined. And it has reached funding escape velocity, with external debt and equity soon financing the majority of the buildout, with that share approaching 90% by 2030. AI infrastructure cycle is dependent on capital markets in a way that no prior technology cycle ever was.

 On the Colbert finale:

 On his last day hosting CBS’s The Late Show, Stephen Colbert played one of the most iconic songs from the Peanuts soundtrack.

“Oh no! I hope this doesn’t cost CBS any money!” he joked, as Louis Cato and the Great Big Joy Machine performed the song, titled Linus and Lucy, on air. It was a final dig at the network, which many fans believe cancelled the show due to Colbert’s criticisms of the Trump administration.

It did, indeed, cost CBS. Lee Mendelson Film Productions, the California company that controls jazz pianist Vince Guaraldi’s famed Peanuts catalog and had become increasingly litigious over unauthorized uses of the music, announced it had reached a licensing agreement with CBS for an undisclosed amount. The production company said it would donate all proceeds to World Central Kitchen, the disaster-relief food non-profit founded by chef José Andrés.

Adding well-deserved insult to injury, WCK is one of Colbert's favorite charities. 

 

On  the SpaceX IPO, Patrick Boyle:




And on the topic of humanoid robots,  Donald Duck:

1999 AD

Some works actually improve because they've aged badly—badly in the sense that they feel dated or that they now work in a very different way than the creators intended.

Though I'll probably get some pushback on this one, I'd argue this is behind much of the appeal of the films of Georges Méliès. Beyond the admittedly still impressive effects work, the charm comes largely from the antiquated costumes and art design, things that probably looked fairly standard at the time. For modern viewers, the combination of fantastic imagery, clever camera tricks, and a tawdry late-19th-century theatrical aesthetic creates something unique.

*1999* is a bit like that. Though no masterpiece, it's a great deal of fun for retrofuture buffs, and it tells us something interesting about the way people viewed technology and progress almost 60 years ago.

If you've ever taken a deep dive into the techno-optimism of the postwar era (very different from that of today), pretty much every detail will resonate. The botanical experiments reflect the excitement over the Green Revolution. The mention of the Mars colony reminds us that 1967 was the height of the Space Race. Talk of casually flying to the East Coast or Mexico City for a round of golf is hardly surprising at a time when the Concorde had just entered its prototype phase. From the school lessons to the automated kitchen to the disposable clothes and dinnerware are topics you will run across when reading the futurists of the 1960s.

For me, the most striking thing is how, once you get past the size of the computers and the crudeness of the displays, the world that people in 1967 expected to see 30 years in the future still seems ambitious in 2026.

We've discussed before how the late 19th and very early 20th centuries (particularly 1875 to 1910) and, to a lesser extent, the postwar era represented huge and unprecedented periods of ubiquitous, explosive technological change, especially in the United States and countries such as Britain, France, and Germany.

Whether you're talking about serious scholars or popular culture, speculation about the future in the decades after these huge spikes consistently tended to overestimate the coming rate of progress. There were exceptions, but where predictions were inaccurate, they were far more likely to be overambitious than conservative.

This bias is all the more noticeable given that one of the axiomatic beliefs of people like Arthur C. Clarke was that the near future would almost certainly exceed our expectations in practically every way.

    Trying to predict the future is a discouraging and hazardous occupation because the prophet invariably falls between two stools. If his predictions sound at all reasonable, you can be quite sure that within 20 or, at most, 50 years, the progress of science and technology has made him seem ridiculously conservative. On the other hand, if by some miracle a prophet could describe the future exactly as it was going to take place, his predictions would sound so absurd, so far-fetched, that everybody would laugh him to scorn. This has proved to be true in the past, and it will inevitably be true, even more so, of the century to come.

    The only thing we can be sure of about the future is that it will be absolutely fantastic.

    So, if what I say to you now seems to be very reasonable, then I'll have failed completely. Only if what I tell you appears absolutely unbelievable, have we any chance of visualizing the future as it really will happen. 

Speaking of camera tricks, take a good look at the car around the four minute mark.
 

Question for the MBAs in the audience, is losiing $21 billion a year bad?

 Ed Zirton has a scoop:

Today, I can exclusively report, based on audited financial documents viewed by this publication that have been independently verified by the Financial Times, that OpenAI lost around $38.5 billion in 2025, as well as other crucial details about the financial condition of the company. 

 ...

2025 — OpenAI Had $13.07 Billion In Revenue, $34 Billion In Costs and Expenses, and $20.92 Billion In Losses, with a net loss attributable to the company of $38.53 Billion

• Revenue: $13.07 billion
• Cost of Revenue: $7.5 billion
• Research and Development: $19.18 billion
• Sales and Marketing: $5.73 billion
• General and Administrative: $1.57 Billion
• Total Costs and Expenses: $34 billion
• Loss from Operations: $20.92 billion

Please note that 2025 was the year that OpenAI converted from a non-profit to a for-profit entity, leading to a $41.55 billion loss due to changes in fair value of convertible interests and warrant liability. 

Taking into account other minor factors like interest income and interest expense, OpenAI is left with a net loss of $60.35 billion, which it lowered to $38.53 billion by removing $17.87 billion in costs via that “net loss attributable to noncontrolling members capital” and another $3.95 billion via a “net loss attributable to redeemable noncontrolling interests.” 

Ultimately, the net loss attributable to OpenAI in 2025 was $38.5 billion. 

[Tje conversion from non-profit to for-profit is a one time thing. Focus on the Loss from Operation.] 

I'm not a finance guy—most of you can probably read these numbers better than I can—but I have been following the AI bubble closely (arguably too closely for my mental health), and I can tell you that not only is it bad when a company loses over $30 billion in a year, but the specifics of how OpenAI lost this money are even worse, directly contradicting some of the main assumptions supporting a bubble many times larger than the dot-com bubble.

It's useful to think of these costs in terms of training and inference, and possibly to break down training into training and post-training. Training is where the models are built. Inference is where the models are used to answer questions. Though corporate accounting can be murky, you can generally think of training as falling under research and development and inference as falling under cost of revenue.

One of the key assertions of the AI bulls is that while these companies do lose money (even the most enthusiastic and simple-minded booster will concede that point), they are making money on inference, and since training costs the same regardless of how often the model is used, while inference scales on a per-user basis, the economics should continue to look better as demand for AI increases.

But even if you completely eliminated R&D spending, OpenAI would still have lost money in 2025. Now it's true that the shift to token-based billing will help—it might even tip the training-excluded numbers into the black—but OpenAI is committed to spending more than a trillion dollars over the next four years, and in order to honor those commitments, it has to become not just marginally but enormously profitable in the very near future. Looking at these numbers, it's difficult to see where you get that kind of money.

Of course, the really eye-popping number is the more than $19 billion spent on R&D, which mostly translates to training and post-training. Any way you look at it, these are deeply disturbing numbers for anyone invested in the viability of OpenAI as a business, but things get much more disturbing when you consider the context.

GPT-4, the model that revolutionized the field and permanently changed the way all of us think about natural language processing and the way we interact with computers, cost a fraction of what any of the 5-series models cost. Hyperscalers and AI boosters are extraordinarily adept at coming up with self-serving benchmarks that put each new model in the best possible light, but even there, it's next to impossible to argue that the graph of capability to investment is not looking more and more like an S-curve.

This is hardly surprising given the state of the training data and the increased reliance on post-training. Large language models have already revolutionized quite a few fields and have provided us with powerful tools for a number of applications. This can hardly be called a failed technology at this point (though it is very possible that something better will push it into obsolescence in the near future).

But for the foundational narrative of the AI bubble, this is cataclysmic. The tens of trillions of dollars that OpenAI, Anthropic, Meta, Google, and particularly xAi/SpaceX are promising to pump into the economy in the next decade are based on visions of exponential curves and recursive self-improvement. If the future of AI over the next few years is one of flattening growth curves and minimum-wage workers in developing countries labeling data, things are going to get very ugly very quickly.

 

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.