Friday, July 31, 2020

Thursday, July 30, 2020

"You know that theory, that the White House makes the man..."

I'm not drawing any analogies here, but the comparisons are interesting.

Wednesday, July 29, 2020

Paul Krugman has no shame -- Wednesday Tweets

You'll want to unmute this one.

Tuesday, July 28, 2020

Implosions don't normally work this way

One of the major failures of imagination we are seeing from almost everyone, including really smart commentators like Jonathan Chait, is the assumption that the basic political structure of the country, particularly that of the Republican Party and the conservative movement will remain more or less the same after the collapse.

A republican loss is far from a foregone conclusion (we live in an age black swans), but a major electoral setback does seem highly probable at this point, possibly a historic one. While this is becoming the consensus view, most analyst seem to be thinking of this as another V-shaped recovery. Trump will go away. Things will go back to normal. And the republican party of 2028 or even 2024 will look a great deal like the republican party of 2012. That may be possible, but I very much doubt things will play out that way.

The success of the conservative movement over the last few decades has been astounding. They have managed to build upon a generally unpopular platform and shrinking demographics and have nonetheless held a remarkably large chunk of political power. There is a tendency of political commentators to want to play armchair sociologist and construct elaborate theories about why various aspects of the movement emerged when the answer is that it was engineered to do so.

There is virtually nothing spontaneous here, nothing that demands explanation. No part of the base that has not been cultivated. There is nothing but Astroturf as far as you can see and if you try to explain it with the language and tools of grassroots, you’ll make a fool of yourself. These attempts to treat social engineering experiments as organic sociological phenomenon leads to analyst and pundits spending a lot of their time mystified at what should be obvious.

Why do main stream news organizations like the New York Times routinely let Republicans like Paul Ryan get by with obvious lies? Maybe it has something to do with decades of working the rafts, message discipline, and playing carrot and stick games with access. Why do members of the Republican base believe they are a persecuted minority living in a socialist nightmare, under attack by other religions and dangerous extremists? Perhaps it has something to do with one of the most massive propaganda campaigns ever attempted outside of a state run media.

Media, of course, is just one part of the system. There is voter suppression and other techniques for making sure that some people count more than others. There is the push to get as much money as possible and maximize its leverage. There is an emphasis on strategically valuable offices and elections, particularly those in years not divisible by four. There is an emphasis on party discipline. All of these components are interconnected and each supports all of the rest. That means that when one is successful, it makes it easier to succeed with the rest. Unfortunately for the movement, however, this same interconnectedness leaves the system vulnerable to cascading failure.

In 2020, almost every component of the system is under stress and most are starting to buckle. If things do start to collapse, the only thing we can say with any certainty is that nothing is certain.

Monday, July 27, 2020

Tales from the V-shaped recovery

Presented without comment.

Summer Concepcion writing for Talking Points Memo:
Kudlow expressed optimism that jobless claims will fall, saying that he thinks “the odds favor a big increase in job creation and a big reduction in unemployment.”

Kudlow went on to claim, without going into specifics, that most economists and Wall Street suggest that the country is in “a self-sustaining recovery” despite how states that have emerged as coronavirus hot spots “are going to moderate that recovery.”

Kudlow then continued painting a rosy picture by saying that it’s “very positive” because he still thinks “the V-shaped recovery is in place,” which will lead to a 20% growth rate in the third and fourth quarters.

Later in the interview, Kudlow doubled down on his rosy sentiment by saying that the economy is improving by “leaps and bounds” due to “more states that are reopening and doing very well.”

Zack Stanton writing for Politico
When the economist Betsey Stevenson looks at the pandemic-era economic crisis, she sees a long-simmering child care crisis that has suddenly surged to the foreground of people’s lives—and whose true scope we’ve barely begun to reckon with. Its potential to inflict lasting damage to the economy is enormous, and it’s getting short shrift in the recovery plans coming out of Washington.

“The work of recovering from it will not end just because we have a vaccine,” says Stevenson, a labor economist at the University of Michigan and former member of President Barack Obama’s Council of Economic Advisers. “We are making choices right now about where we will be as an economy in 20 years, in 30 years, based on what we do with these kids.”

Among those most likely to be affected are working mothers, who shoulder an outsize share of child care responsibilities, and have suddenly had far more work dropped in their laps. Women already need to make difficult choices between work advancement and their family roles, which can bring down their incomes over time; Stevenson expects the crisis to make that conflict sharply worse: “The impact of the child care crisis on women’s outcomes is going to be felt over the next decade.”

The Bureau of Labor Statistics estimates that both parents work in two-thirds of families in which married parents have children — as do the majority of America’s 13.6 million single parents. For all of them, there are major long-term financial repercussions of dropping out of the labor market, even temporarily.

“When you talk about upward mobility,” she says, “this puts families on just a completely different trajectory that’s not about losing two or three years of income; it’s about being on a lower earnings trajectory for the rest of your life.”

And for anyone hoping a vaccine will allow a quick, healthy reopening sometime next year, she says: Don’t count on it. “We are letting the whole child care system erode in such a way that it’s not going to be there for us when we are fully ready to go back. You’re seeing child care centers that can’t stay in business. They can’t figure out how to reopen. They can’t keep their employees on staff. They’re letting people go,” Stevenson says.

“Once we are ready to have all the jobs come back and we’re really ready to recover, even though we’ll have opened the schools, opened the child care centers, the workers aren’t going to be there, the slots aren’t going to be there.”

Friday, July 24, 2020

Misc -- Tolstoy, Fairy Godfather statistics, reactionary ghosts, Lenny on Dmitri

“The most difficult subjects can be explained to the most slow-witted man if he has not formed any idea of them already; but the simplest thing cannot be made clear to the most intelligent man if he is firmly persuaded that he knows already, without a shadow of doubt, what is laid before him.”

Leo Tolstoy 1897

Some wartime panels from Crockett Johnson's classic Barnaby. The strip ran in the influential liberal paper PM and like the political cartoons of Dr. Seuss, often took aim at the right wingers of the era. One of the ghosts' watch runs backward. I believe another may be making fun of Hearst.

For a while now I've been filling in the gaps in my musical literacy.  When looking for an introduction to musical history and theory, there's really only one place to start.

Thursday, July 23, 2020

“If you see that kind of disconnect, it doesn’t go on indefinitely.”

A bubble in the middle of an economic collapse in the middle of a pandemic

Tesla's insane stock price makes sense in a market gone mad by Russ Mitchell

That makes Tesla, which reported second-quarter earnings Wednesday, the world’s highest valued car company — if far from the largest. Of the 90 million cars sold around the world in 2019 Tesla sold 367,000. Take the two top-selling carmakers in the world, Toyota and Volkswagen, toss in Ford; the stock market still values Tesla higher than all three combined.

Hovering near record highs amid a global pandemic and economic catastrophe, the market, like Tesla, highlights the degree to which equity prices have come untethered from current economic reality and future earnings expectations.

In both cases, prices are supported by the infusion of trillions of dollars of new money into the economy and by the steady growth of passive investing, in which money automatically flows in from 401(k) contributions and is put to work buying stocks, pushing prices higher. The potential inclusion of Tesla in the Standard & Poor’s 500 stock index adds upward pressure.

Then there’s the success of Chief Executive Elon Musk in crafting a beautiful-future narrative to explain why Tesla should be even more expensive than it is. Musk’s enormous compensation package is almost entirely tied to share price; on Tuesday, he qualified for an additional $2.1 billion worth of options after Tesla’s average market capitalization over a six-month period exceeded $150 billion.

Narrative aside, there’s little in the company’s recent performance to justify such outsize enthusiasm.

Although Tesla’s sales have grown steadily, there has been no sudden acceleration, and the company has repeatedly lowered prices. Tesla owes its string of small quarterly profits to government credits and aggressive booking of prepaid orders for a “Full Self Driving” technology that does not yet exist. Pay and bonuses — for workers, not for Musk — are being cut.

In the classical analysis, stock prices indicate expectations of a company’s future profits. The cash can be used to reward shareholders through dividend payments or stock buybacks, or reinvested in the company to fuel future growth.

The profit outlook for 2020 looks bleak across the economy. The Wall Street Journal reports 180 companies in the S&P 500 have pulled their earnings guidance, which has led to “the widest dispersion in earnings estimates among analysts since at least 2007.”

Yet the S&P 500, after an alarming plunge in March, is headed again toward record highs. As Robert Kaplan, president of the Federal Reserve Bank of Dallas, put it recently: “If you see that kind of disconnect, it doesn’t go on indefinitely.”

One thing Tesla does have going for it is a constellation of commentators willing to sing its praises to infinity and beyond, though their convictions can appear shallow. Cathie Wood, chief executive of Ark Invest, regularly appears on CNBC to tell viewers Tesla stock will be worth $6,000 in five years. On July 1, Wood tweeted Tesla owners at some point in the future will each earn $10,000 in free cash flow every year by including their cars in a Tesla robotaxi network. But meantime, Ark regularly sells big chunks of Tesla shares. It sold nearly 140,000 Tesla shares the first two weeks of July alone even as Wood touted the company. Ark did not respond to a request for an interview.

Wednesday, July 22, 2020

Wednesday Tweets

Even more than racism, misogyny is the gateway drug of the alt-right.

I'm two posts behind on Netflix.

Tesla with just a touch of sarcasm.

Tuesday, July 21, 2020

A couple of plot turns in the Tesla saga

First, the one that everyone saw coming...

This despite a stunning number of questions about the company. (Here's a good primer to get you started.)

Second, the one that caught everyone by surprise.

Among Tesla skeptics, the fuel-cell semi company Nikola was strictly a punchline, a fake of a fake. The laughter rose to a crescendo when the CEO agreed to have a long form conversation with arguably the leading skeptic, podcaster Tesla Charts.

That laughter dropped off suddenly.

Without taking anything away from Milton, much of the credit for the reception goes to Elon Musk and the extent to which he has lowered the bar. Engaging with tough critics on a forthright and knowledgeable way shouldn't be remarkable behavior for a CEO, but this is 2020.

Monday, July 20, 2020

The Wages of Strauss -- “I think I made a mistake. I thought this was a hoax.”

Monday, March 16, 2020

The wages of Strauss are death (as in this is literally about to kill people)

We've been arguing for about a decade now that the Straussian strategy and tactics has the dominant factor in American politics since the late 90s, both in the undermining of reliable and trusted information sources and the spread of disinformation.

This essential piece from our best press critic points out how costly this disinformation has become.

Rupert Murdoch could save lives by forcing Fox News to tell the truth about coronavirus — right now
By Margaret Sullivan

When Trump says “jump,” the network leaps into action. And what the president hears on Fox News often dictates his own pronouncements and policies — which, in turn, are glowingly represented in Fox News’s coverage and commentary.

That’s never been anything short of dangerous, since the effect has been to create a de facto state-run media monster more devoted to maintaining power than shedding light on the truth. But now the mind-meld of Fox News and Trump is potentially lethal as Trump plays down the seriousness of the coronavirus and, hearing nothing but applause from his favorite information source for doing so, sees little reason to change.

There’s one person who could transform all that in an instant: Fox founder Rupert Murdoch, the Australian-born media mogul who, at 89, still exerts his influence on the leading cable network — and thus on the president himself.

The network’s influence on Trump is clear from the presidential tweets that follow fast on the heels of a Fox News broadcast. He was always a fan of Fox News, but after entering the White House, he made it even more of an obsessive daily habit, Bloomberg News reported in 2017, to the extent of blotting out dissenting voices from other sources.

Trump made specific reference to his reliance on Fox News during his misleading press event Friday, when he offered unwarranted reassurance rather than urging extreme caution and decisive action: “As of the time I left the plane . . . we had 240 cases — that’s at least what was on a very fine network known as Fox News.”

The message: Go about your business, America, and it will all disappear soon.

Days later, 30 deaths and more than 1,000 cases have been reported in the United States, with those numbers expected to grow exponentially. (By contrast, German Chancellor Angela Merkel is telling hard truths: As much as 70 percent of that country could end up being infected.)

Matt Gertz, a Media Matters senior fellow and the foremost chronicler of the insidious Trump-Fox News feedback loop, connected the dots: “Roughly an hour before his comments, a Fox News medical correspondent argued on-air that coronavirus was no more dangerous than the flu; a few hours later, the same correspondent argued that coronavirus fears were being deliberately overblown in hopes of damaging Trump politically.”

He added: “The network's personalities have frequently claimed that the Trump administration has been doing a great job responding to coronavirus, that the fears of the disease are overblown, and that the real problem is Democrats and the media politicizing the epidemic to prevent Trump's reelection.”

On Fox Business Channel, host Trish Regan drew widespread condemnation for her over-the-top rant in Trump's defense: “The chorus of hate being leveled at the president is nearing a crescendo as Democrats blame him and only him for a virus that originated halfway around the world. This is yet another attempt to impeach the president.”

(By contrast, her Fox News colleague Tucker Carlson has taken the threat seriously, though using it as an excuse to stoke anti-China sentiment along the way.)


Even if all that changed today, great harm has already been done. As The Washington Post and others have documented, the administration has repeatedly squandered chances to prepare for and manage the global epidemic.

But every moment still counts. Lives can be saved by prudent practices and aggressive government action — and lost by their absence.

But it takes leadership from the top. And so, let’s acknowledge the obvious: There is no more important player in influencing Trump than Fox News. And no more powerful figure at Fox than its patriarch.

Murdoch might consider, too, that with the median age of Fox’s viewers around 65, they are among the most vulnerable to the virus’s threats.
From Andrew Gelman

Friday, July 17, 2020

Lockdown Jukebox

Working from home I've been burning through a lot of instrumental music. (You come to miss the background noise.) I've been digging into Classical, Jazz and scores (mainly Goldsmith, Morricone, Thomas Newman), even some new stuff.

Around a hundred days, though, you start getting restless so I reached out to my friend Brian Phillips, a sometimes DJ whose knowledge of popular music is beyond encyclopedic, and asked for some recommendations that were eclectic and off the beaten path.

He delivered. Enjoy.

The Sons Of Moses - Soul Symphony

The T-Bones

Shocking Blue - Acka raga

The Black Exotics

The Tornados - Telstar

The Jumping Jewels Africa

Mr Bloe - Groovin` With Mr.Bloe

Santo & Johnny - Sleep walk

Thursday, July 16, 2020

It's a V-shaped recovery if you start with a V that's almost a right angle and you tilt it sharply to one side.

Bullet points from

    32 percent of Americans did not make a full on-time housing payment in July, up slightly from 30 percent in June.
    Missed payments continue to concentrate among renters, young and low-income households, and residents of dense urban areas.
    Compared to last month more Americans are concerned about evictions and foreclosures, even as federal and certain local displacement protections are extended.
    Coronavirus continues to simultaneously encourage and discourage moving. Many are likely to move because of declining affordability, while others are staying put because of the health risks associated with moving during a pandemic.
    Renters in large multifamily apartment buildings show higher payment rates than those living in smaller buildings and single-family homes.

Wednesday, July 15, 2020

There is no argument so dumb it cannot be recycled

This is Joseph

“There has never been a more critical time for Americans of all ages and backgrounds to be aware of the multiple pathways to career success and gain the vocational training and skills they need to fill jobs in a changing economy,” said Ivanka Trump, who graduated from the University of Pennsylvania’s Wharton School.
This led Daniel Drezner to opine "I think we need to consider the possibility that the Trump White House is populated by morons."

And it is not just the white house -- see the NYT! Adam Ozimek has the best take:
Look I am a fan of education and training, but the unemployment rate was 3.5% with the skills workers had five months ago
And this is not a misrepresentation of the campaign. See Ivanka Trump:

I mean this just beggars belief. First of all, we had a very low unemployment rate a few months ago and then a pandemic hit. That is a classic external shock, like the China shock was for trade. You know who isn't to blame for shocks -- the individual workers. Six months ago there were some happy entrepreneurs building restaurant businesses. There were cooks and steak house managers, who had a happy career doing something useful. The issue was not that they lacked skills, it was that their skills were about to rendered obsolete.

This is a very big deal to get wrong. Here is Megan McArdle talking about the China shock:

The reason that this matters is that it shifts blame to the workers (why don't you have skills?) instead of accepting that there is a shock going on and asking if some of the gains from that shock should be redistributed. Remember, a large external shock is not a source of moral hazard if it was reasonably unforeseeable and insuring against these shocks is a natural function of government. Now, it does mean that resources might go into workers instead of into Elon Musk's government subsidy plan. But that is a good outcome.

I think we need to start making fun of this whenever we see it. Yes, everyone could have more skills. But, as an aggregate, if people are unable to obtain the skills they need that is a structural problem and not a personal one. It is never more clear when the skills argument is being rolled out now!

Tuesday, July 14, 2020

We have a major stock bubble driven by hype, fraud, daytrading, and denial in the middle of an economic collapse in the middle of a pandemic. This would seem to be a bad thing.

Probably a good time to revisit this thread.

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

Another except 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

Monday, July 13, 2020

And given that the world's most valuable car company currently sells less than one percent of the world's cars, competition might be something investors should be thinking about.

The arguments justifying impossibly overvalued stocks usually come down to the same basic narrative.

At some point in the near future, the company will achieve an effective monopoly despite currently having a relatively small and in some cases nonexistent share of the market. This will be followed by massive increases in profit margin‘s which will for some reason not attract competitors or bring in the unwanted attention of regulators.

With Tesla, the specific claim was that battery powered EVs are the future and that Musk's company had such a large technological lead and first mover advantage that no one would have any chance of catching up. The first part is probably true (though hydrogen fuel cell are looking like an increasingly viable alternative). The second almost certainly isn't.

Jeremy White writing for Wired.

The Polestar 2's mission is two-fold: to establish the brand as a major figure in the EV scene, and also to take on none other than Tesla and best its Model 3.

Well, considering the impact of the Polestar 1, the announcement of the coming Polestar 3 SUV and Precept as well as the fact that the company (along with Volvo) is owned by the Chinese Geely Auto Group, which also has Lotus and Lynk & Co in its roster of brands, you can cross "establish as a major player" off the list. As for beating the Tesla Model 3? Yes it does. Just.

With prices starting at £49,900, the Polestar 2 costs £7,400 more than the Model 3 at base level. But, as you know, how you choose to configure and spec these cars can quickly raise those figures. A 78kWh battery pack and electric motors on the front and rear axle give the car more than 400bhp split equally between front and rear. This means 0-62mph in 4.7 seconds and a top speed of 127mph (shunning Volvo’s 112mph limit).

So, yes it is fast, and we already expect formidable acceleration from EVs, but what sets the Polestar 2 apart is its sophistication. It is more pleasant to drive than the Model 3, less savage and simpler (in a good way), and so better for urban driving despite having the speed for motorway missions. The driving configuration options are thankfully limited, so no faffing there. And there’s no key or start button either. All you need is the digital key somewhere in the car and you can pull away. Those nagging doubts if you have set the car up right or are getting the most from it are absent. In Apple parlance, it just works.


Much like the fine Mini Electric, the best compliment that can be said of this car is that, if you ignore the regen braking, very quickly you forget you are driving an EV. This is an extremely well developed car that has the kind of quality of finish that Tesla has been aiming for but missing, and from the exterior design to the driving experience to the interior there is very little to disappoint.


This is what happens when those with expertise and a long history of car manufacture catch up with Elon. Tesla had better take note. It has been overtaken. And all the people who have been brave enough to buy the Polestar 2 without even having a test drive – and when I say "all" I mean it as there have been no public drives for customers who have parted with money – they will not be disappointed. This is what EVs should be like. Now we just need to fix the charging system.

And we haven't even gotten to Volkwagen.

Friday, July 10, 2020

Thursday, July 9, 2020

The superpower of 2020 is making parody normal

This is Joseph

You know that I have had strong opinions about childcare. But the current silly situation just keeps getting more and more absurd. Dean Dad is on the case with Florida State University's new policy (comments got disabled just before he started on controversial topics).

From Matt Reed:
One way to handle that dilemma, of course, is just to outlaw it. That was Florida State’s approach. It mandated that parents who are working from home, and whose children are young, provide proof of a nanny or other caregiver, or be fired. It’s a solution that makes sense if you assume that everybody (including the nanny) is independently wealthy and working just to have something to do. If you assume, though, that people need their salaries, then it’s sexist and barbaric. When I read it, I initially thought I had missed the attribution to The Onion. If we had an actual, functioning judicial branch, I’d expect that to get tossed on “differential impact” in a millisecond. Alas, no.
This is the logical endpoint of not wanting to grapple with the joint problems of liability (in a classroom, somebody will get infected with covid-19 -- the US is a large country) and social design. At the same time that people are becoming richer off of the pandemic.

I think I am not unique in noting that removing childcare services shifts the economics of working in ways that really undermine the whole way we organize the economy. It also has the potential to induce large losses in student outcomes; vulnerable groups show disparate losses over the SUMMER. What are 2 years going to do?

But the other is the question of distribution. This has come up with trade. It is axiomatic that trade between the US and China makes both groups better off in aggregate. But it doesn't mean that there will not be losers in this game. There is an allergy to removing some of the wealth from the "winners" to compensate the "losers" as if market outcomes were some sort of ethical or moral process.

In the case of war we totally have concerns about "war profiteers" -- people who get rich in a time of great suffering instead of investing the money back into the common good. How is the pandemic different? A disease is not a moral process and so perhaps we should be thinking about how to distribute wealth and how to cope the shock. Short term cash transfers help (and are a good) but if the job distribution is very different afterwards then that will be bad. How do you square "stay home with your kids for the common good" with "Julie was there during the pandemic and was thus the best person to get the new promotion because of the skills she developed".

Finally, in the United States we link health care to employment. Let that sink in as you think about the FSU policy. If you have kids and are not wealthy then we'll take away your ability to be insured in the midst of a dangerous pandemic that often requires hospital care, even among the young/healthy.

It is a hard problem and it needs an even more serious grappling.

Wednesday, July 8, 2020

Maybe I should just start calling them Wednesday tweets

Start with this exhaustive thread.

Tuesday, July 7, 2020

Another newly relevant old post

Wednesday, September 29, 2010

The heroin's still doing the heavy lifting -- why Ivy League legacies work

From Christopher Shea's Boston Globe column:
Richard D. Kahlenberg, editor of the forthcoming book "Affirmative Action for the Rich: Legacy Preferences in College Admissions," points out that universities in other countries don't give so-called legacy preferences to sons and daughters of their alumni. (Even Oxbridge colleges don't, despite the class-bound history of British education.) So, he asks, why on earth do we do it in America?
Broadly speaking, students go to college in search of four things: certification; instruction; reputation; and connections.

In terms of certification, any well-accredited school would do. In terms of undergraduate instruction, the best deal for the money (and perhaps the best deal period) is the small four-year school. (I'm leaving this as an assertion but I'm fairly confident I can argue the point if anyone wants to debate.)

In the next two categories, however, the Ivy League cannot be surpassed, in part because of the legacy system.

Without loss of generality, look at Harvard. The student population of the school consists entirely of two overlapping groups: people who can get into Harvard; people whose parents can get them into Harvard.

The first group is hard-working, ambitious and academically gifted. Assuming the number of need-based legacies is trivial, the second group comes from families that are wealthy (they're paying for a Harvard education) and well-connected (at least one parent went to Harvard).

Putting aside luck, you can put the drivers of success into three general categories: attitude, drive and work habits; talent, intelligence and creativity; reputation and connections. It is possible to succeed with just one of these (hell, I can think of people who made it with none), but there is a strong synergistic effect. A moderate talent who works hard and has connections will generally go farther than a spectacular talent who's lazy and isolated.

Connections are governed by the laws of graph theory. I'm not going to delve too deeply into the subject (since that would require research and possibly actual work on my part), but as anyone who has read even the cover blurbs on Linked or Small Worlds can tell you, adding a few highly connected nodes (let's call them senator's sons) can greatly increase the connectivity of a system.

It would be interesting to model the trade off between picking a well connected legacy over a smarter, harder-working applicant given the objective of producing the greatest aggregate success. Because of the network properties mentioned above, it wouldn't be surprising if the optimal number of legacies turned out to be the 10% to 15% we generally see.

Optimized or not, this mixture is almost guaranteed to churn out fantastically successful graduates regardless of what the schools do after the students are admitted. I'm certain the quality of instruction on the Ivy League schools is very good, but, like most education success stories, the secret here is mostly selection and peer effects.

Update: For a different interpretation (this time with actual data), check out this post at Gene Expression.

Monday, July 6, 2020

"The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage."

I have a feeling that I'm late to this party (around 21 years late), but I really like this essay by Warren Buffett, particularly his dismantling of one of the most overused and misleading cliches of investing, the buggy whip example.

 Well, I thought it would be instructive to go back and look at a couple of industries that transformed this country much earlier in this century: automobiles and aviation. Take automobiles first: I have here one page, out of 70 in total, of car and truck manufacturers that have operated in this country. At one time, there was a Berkshire car and an Omaha car. Naturally I noticed those. But there was also a telephone book of others.

All told, there appear to have been at least 2,000 car makes, in an industry that had an incredible impact on people's lives. If you had foreseen in the early days of cars how this industry would develop, you would have said, "Here is the road to riches." So what did we progress to by the 1990s? After corporate carnage that never let up, we came down to three U.S. car companies--themselves no lollapaloozas for investors. So here is an industry that had an enormous impact on America--and also an enormous impact, though not the anticipated one, on investors.

Sometimes, incidentally, it's much easier in these transforming events to figure out the losers. You could have grasped the importance of the auto when it came along but still found it hard to pick companies that would make you money. But there was one obvious decision you could have made back then--it's better sometimes to turn these things upside down--and that was to short horses. Frankly, I'm disappointed that the Buffett family was not short horses through this entire period. And we really had no excuse: Living in Nebraska, we would have found it super-easy to borrow horses and avoid a "short squeeze."

U.S. Horse Population 1900: 21 million 1998: 5 million

The other truly transforming business invention of the first quarter of the century, besides the car, was the airplane--another industry whose plainly brilliant future would have caused investors to salivate. So I went back to check out aircraft manufacturers and found that in the 1919-39 period, there were about 300 companies, only a handful still breathing today. Among the planes made then--we must have been the Silicon Valley of that age--were both the Nebraska and the Omaha, two aircraft that even the most loyal Nebraskan no longer relies upon.

Move on to failures of airlines. Here's a list of 129 airlines that in the past 20 years filed for bankruptcy. Continental was smart enough to make that list twice. As of 1992, in fact--though the picture would have improved since then--the money that had been made since the dawn of aviation by all of this country's airline companies was zero. Absolutely zero.

Sizing all this up, I like to think that if I'd been at Kitty Hawk in 1903 when Orville Wright took off, I would have been farsighted enough, and public-spirited enough--I owed this to future capitalists--to shoot him down. I mean, Karl Marx couldn't have done as much damage to capitalists as Orville did.

I won't dwell on other glamorous businesses that dramatically changed our lives but concurrently failed to deliver rewards to U.S. investors: the manufacture of radios and televisions, for example. But I will draw a lesson from these businesses: The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage. The products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors.

Disinformation and dysfunction

Another strand in an old thread.

At this point, I suspect that most people in Trump's circle and possibly Trump himself realize that it is in his best interest and in that of the party to get everyone wearing masks and avoiding super spreader events .


With a few reasonable and inexpensive steps we could see the infection and hospitalization rates drop steadily between now and November with minimal impact on the economy outside of a couple of industries such as travel and dining.

Even with a country facing serious challenges, that’s not a bad place for an incumbent to be. So, if they realize this is overwhelmingly in their best interest, why aren’t they doing it? The answer is that they can’t. Once you’ve gotten your base invested in the belief that the pandemic is not a big deal, possibly even a hoax, and that the attempts of people like Bill Gates to contain it are part of a nefarious plot, it is all but impossible to pivot back to the direction you need to go.



Friday, July 3, 2020

What we were making fun of ten years ago

Saturday, July 3, 2010

Role models

While browsing the business section yesterday, the title and author of one of the books caught my eye so I picked it up and scanned the back cover:

Inspiration. Success. Confidence. Passion.

No one is born with these qualities, but they are the key ingredients for reaching goals, building careers or turning a blueprint into a breathtaking skyscraper.
I learned that the author would share "the life lessons and hard-won insights that made her a rising star in the business world" and that whether the reader was "landing that first job, navigating the workplace,or making a lasting impact," the author would show how to "Step up and get noticed at work -- focus and efficiency will open doors."

The author's name was Ivanka Trump.

The book is the Trump Card.

It's available in paperback.

Thursday, July 2, 2020

When a disinformation bubble designed to constantly ratcheting up fear and rage runs into the genuinely catastrophic...

In chaotic times, you are constantly running across data points that you know are important but because they come at you so fast it's difficult to keep track of them. I find blogs remarkably useful for taking these kinds of notes, particularly if you've been at it for a while and have old posts you can mine for relevant paragraphs.

For example, we've been talking about conservative movement disinformation for years.

The initial purpose of this "noble lie" approach was to use the propaganda to keep the base sending money and showing up for the polls through of a combination of rage and fear. As with all Straussian systems, it was assumed that those in power would be in on the joke while the people who believed the lies would simply serve as electoral cannon fodder.

At some point though (I suspect inevitably), a couple of things happen. First, the believers become leaders. This is become blindingly obvious with Trump, but the children of Fox News have been in control of the party since at least 2010 and the roots go back further. Remember how Dick Cheney insisted while traveling that all hotel televisions be tuned to Fox News?

The second, and possibly more dangerous problem is that a propaganda-fed base has no capacity to self correct, rather it continues follow unsustainable paths that only gain momentum, often exacerbated by ratcheting mechanisms. Soon you reach a point where, even if the leaders accurately perceive the situation and realized the best solution, they can no longer reconcile that reasonable course of action with what the vast majority of their supporters have been told to believe for decades.

In order to maintain these levels of anxiety and anger, the narratives employed increasingly apocalyptic language and imagery, a development we commented on four years ago.

Even in the small chunks of the Republican national convention that I listen to, there were numerous doomsday images and references to the "dark times" the country was facing. The people in the stadium found these statements credible because that's what they had been told on Fox and on the other right wing media sources they got their news from. Once you factor in the state of conservative media, the rise of Trump is neither that surprising nor that interesting.

Things have not gotten better

These are direct quotes from Adams

Wednesday, July 1, 2020

One of these days I'm going to have to write something about the consequences of years of playing along with myths of tech messiahs, unmooring "success" from viability, and generally letting rich people get away with anything-- but for now some totally unrelated deferred Tuesday tweets

Tesla is a company priced one, maybe two orders of magnitude above the fundamentals in the middle of a bubble in the middle of an economic collapse. Other high fliers are starting to implode, revealing fraud and massive regulatory failure.

But there's nothing to see here.

Musk, with the help of a... friendly board, has lined up an unprecedented compensation plan.

But there's nothing to see here.

Accompanied by lots of questionable accounting.

But there's nothing to see here.

The valuation assumes Tesla can achieve and maintain a near monopoly on EVs.

But there's nothing to see here.

Quality control seems to be having some issues. (Remember that question about goodwill?)

But there's nothing to see here.

    Model 3 totaled and the airbags didn't go off. Because the car was built in a tent. $TSLAQ

    — TC (@TESLAcharts) June 30, 2020

And the stock keeps going up.