Byrne Hobart
Longreads
- Steven Levy profiles Microsoft's resurgence over the last decade (disclosure: Long MSFT). Microsoft was an interesting victim of success in several ways: obviously there were the antitrust problems, but also, the company did very well owning both the platform and some of the key applications of the PC era, and it was a struggle to adopt to a world where the OS equivalent was the browser and later the app store, and where software developers' preference for Unix over Windows couldn't be countered by Windows' wider distribution on end users' devices. There's also a nice cameo with Bill Gates, whose contribution to the LinkedIn acquisition was to deliver a brutal takedown of the product and business to Reid Hoffman, who responded with a takedown of his own ("I was just testing," Gates told him. Hoffman retorted, "Do you think everybody responds to that testing really well? Is that your theory of the universe?").
- Andrew Hui on the emergence of the private study. Many people who work from home have a particular location where they work, and a ritual for when it's the start of the workday. And they're all implicitly copying Machiavelli, who once wrote that "When evening comes, I return home and enter my study; on the threshold I take off my workday clothes, covered with mud and dirt, and put on the garments of court and palace. Fitted out appropriately, I step inside the venerable courts of the ancients, where, solicitously received by them, I nourish myself on that food that alone is mine and for which I was born, where I am unashamed to converse with them and to question them about the motives for their actions, and they, in their humanity, answer me."
- Daniel Engber has a delightful piece on the hunt for academic fraud, which, like many counterintelligence operations, has the occasional mole or double-agent. It's a great story, and there are some practical lessons: in at least one cause, fake data is perfectly visible as soon as the datapoints are graphed. Graphs can easily tell a misleading story, but sometimes they reveal that that's what the underlying data were trying to do, too.
- Tancrede Collard on building a handheld video game that simulates market-making and runs on a microcontroller with 256kb of RAM. There are some parts of the financial services industry that exist at the intersection of finance and psychology, and others that thrive in the border between computer science and electrical engineering—when you obsess enough over latency, you can't help but remember that a computer is not a digital abstraction but is instead an elaborate collection of wires with a particular physical location. This piece manages to keep that sense while applying it to the completely different domain of hobby electronics.
- Chris Tapsell tells the story of Studio Projekt Red's near-death experience after the disastrous launch of Cyberpunk 2077. There's a pattern in consumer durables where growth companies keep on making more units as demand ratchets up, and at some point they saturate that demand an end up with too much inventory and not enough cash. The AAA-gaming equivalent might be studios getting more ambitious, and their games getting more hotly-anticipated, until they finally choose a project that's just past the limits of what they're actually able to accomplish. One notable detail from the piece is the precise reason that Cyberpunk 2077 was so disappointing to players, even though reviewers mostly liked it: the game needed to stream a huge amount of data, which is fine if players are using SSDs (as many game reviewers do), but which causes problems with slower hard drives. And those problems were reflected in gameplay through objects and non-player-characters popping in and out of existence as different things loaded. The story has a happy ending, and Cyberpunk 2077's reviews are now quite positive, but it's a reminder that most successful organizations expand the scope of their ambitions until they overshoot their limits.
- In this week's issue of Capital Gains, we cover the idea of loss aversion, i.e. that losing a dollar is more upsetting than making one is gratifying. This is a convenient explanation for investors disliking volatility, but it runs into problems that range from the "lottery ticket" effect in markets (that the riskiest assets in a given category have worse risk-adjusted returns) not to mention the existence of literal lottery tickets.
- And in The Riff, we're talking about whether or not the Department of Government Efficiency can actually cut costs, what we can learn from the early negotiations around OpenAI's structure, prediction markets, and how to think about gut decisions. Listen with Spotify/YouTube/Apple.
Books
The Gambler: How Penniless Dropout Kirk Kerkorian Became the Greatest Deal Maker in Capitalist History: From a strictly commercial standpoint, writing a balanced business biography is a bad business decision. Hagiographies and hatchet jobs are both a straightforward process of looking at every major controversy someone was involved in and choosing the same side every time, but balance means collecting more information, applying judgment, giving credit for some things and condemning other ones, all of which takes time and effort. The Gambler picks a side, which is that Kerkorian, who made his first money in airlines and his biggest fortune in casinos, was a generally good businessman, and an upstanding one, too.
But that's complicated. Consider one anecdote from the book: Kerkorian owned the MGM brand name, and used that to build the MGM Grand. In 1980, the MGM Grand was the site of one of the deadliest hotel fires in US history. Rebuilding the hotel and settling the associated legal liabilities was expensive, and Kerkorian bought a retroactive insurance policy: he'd pay an upfront amount to an insurer, and they'd be responsible for settling claims. But then, per the book, Kerkorian felt guilty that the insurance company was settling too slowly, and with insufficient generosity, so he started settling directly, and then demanded that the insurance companies pay the cost. The resulting lawsuit required so many lawyers that Las Vegas had to build a separate courtroom just to house them all, and in the end the insurers settled with Kerkorian for even more than Kerkorian had settled with the original claimants. Another way to describe this whole transaction is that Kerkorian realized that, if there was litigation and the jury was a Vegas jury trying to divvy up money between the hometown business and far-off insurance companies, he could effectively turn insurers' money into MGM's brand equity, and took the deal.
Many of the other situations described in the book are more even-handed, or at least don't have enough detail to present any fun alternative readings. But the transactions certainly read as contentious. Kerkorian stands out as someone who was good at structuring deals in a way that let him play the cycle: sometimes taking the low-risk slice of a high-risk project, sometimes making a big once it was clear that something was working and the tailwinds were there. (The hedge fund manager Robert Wilson also made plenty of money on Vegas, by buying stocks rather than building casinos. He actually had a tech-adjacent thesis: jet aircraft made gambling more of a national business, and air conditioning meant that it could happen in Vegas.)
One reason the book doesn't spend as much time as it could on deals and business operations is that it also needs to carve out some page count to deal with Kerkorian's personal life. Some of this is a story of being weirdly well-networked (he was best friends with Cary Grant; Andre Agassi's middle name is "Kirk" because of him; he flew Bugsy Siegel to Vegas for a quick meeting just a few days before Siegel was assassinated, etc.). And, especially towards the end, there are fairly grim stories about half-century age gaps, falsified paternity tests, crooked private eyes, etc. Sometimes it's hard to turn the risk-seeking wheeler-dealer instinct off.
Open Thread
- Drop in any links or comments of interest to Diff readers.
- For a future piece, we're going to look at how private companies managed the shift from hypergrowth in 2021 to sustainable growth since. Anyone we should talk to? (Feel free to reply by email rather than a comment.)
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- Ex-Ramp founder and team are hiring a high energy, junior full-stack engineer to help build the automation layer for the US healthcare payor-provider ecosystem. (NYC)
- An AI startup building tools to help automate compliance for companies in highly regulated industries is looking for a director of information security and compliance with 5+ years of info sec related experience at a software company. Experience with HIPAA, FedRAMP a plus. (NYC)
- A well-funded startup that’s building the universal electronic cash system by taking stablecoins from edge cases to the mainstream is looking for a senior full-stack engineer. Experience with information dense front-ends is a strong plus. (NYC, London, Singapore)
- A growing pod at a multi-manager platform is looking for new quantitative researchers, no prior finance experience necessary, 250k+ (NYC)
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