Longreads + Open Thread

Longreads

• Abraham Thomas on markets in time, a meditation on how the venture investing business really works. He points out that what makes futures markets work is that there is some standardized notion of wheat, or aluminum, or oil, and that in venture, investors are doing exactly the same thing, coming up with a fairly standardized way to evaluate which companies are at which stage in order to determine which ones need what kind of funding. Companies are less fungible than commodities, so this is a fuzzier process, but that's part of why venture returns vary so much. In a messier market, there's more room for mistakes, and more room for exploiting mistakes made by other people, especially mistakes of omission.
• From Maxime Merli and Antoine Parent, a look at how late 19th century French investors set up their portfolios, and what commentators thought of their behavior. There are some surprisingly modern ideas in this (and some delightfully Victorian ways of phrasing them: "After the lottery bond, when this small saving still increases, the railway bond and the French rent walk hand in hand in the confidence and choice of the small capitalists."). Many of the fundamental ideas of finance are obvious enough to have been discovered repeatedly, but any time someone has a handwavy understanding of something, there's enormous alpha in more rigorously expressing exactly the same idea.
• Casey Handmer has some excellent career advice, particular for people just starting out but relevant throughout. This piece is a good example of effective reasoning from first principles: it constitutes many different ways to say that if you're getting a paycheck, you should think about why the company is paying you and why your boss thinks that you, specifically, are a person who ought to continue getting paid. It's very easy to define a role in terms of title and then deduce the responsibilities, but that leads to many intellectual traps.
• An old TheStreet.com interview with investing legend Robert Wilson: Wilson compounded what was mostly his money for a very long time, betting on growth on the long side and offsetting this with short bets against companies that just didn't make much sense. Wilson wasn't trying to operate a modern factor-neutral portfolio, but was in the same spirit: Wilson wanted to own growth, and he wanted to juice returns with leverage, so he shorted stocks mostly so he could increase the size of his long positions. Over his career, he says he broke even shorting, but if you run a breakeven strategy that profits when the other things you're doing lose money, you'll come out okay.
• Tracing Woodgrains has an in-depth look at the air-traffic control hiring scandal. The basic outline of the scandal is that ATC hiring had some demographic targets that it had trouble hitting, and settled on the expedient of tying hiring to a biographical questionnaire, and then telling favored groups the right answers. (As it turns out, an essential ingredient in being good at keeping planes from colliding with each other is doing badly in science classes in high school and history classes in college. These examples aren't chosen as particularly egregious—they were chosen, by the test designers, as highly weighted questions!).The quality of statistics matters. Persistence and predictive ability, for the questions you care about, are key. Setting aside the object-level politics, there are two meta lessons. First, if you're trying to use an institution with goal X to accomplish goal Y, and those goals trade off against one another, then you'll both make X worse and make Y seem like a less legitimate aim. Second, the author is not a right-wing firebrand by any means, just someone who wants to see his side do its job effectively. In the short term, people like this are very troublesome for any ideological group, since they constantly criticize their own allies. In the long run, though, they're indispensable.
• In this week's episode of The Riff, we cover tariffs, DeepSeek, the economics of open source, capital allocation, and our inaugural investment challenge. Listen with Spotify/Apple/YouTube.
• In this week's Capital Gains, we're back to basics: why do companies exist in the first place? And that's both "Why do any companies exist, rather than individuals transacting with one another?" and "Why, if there are benefits to people working under a corporate umbrella, is there more than one big company?" The answer comes down to how hard it is to transmit information and to align incentives.

Books

Source Code: My Beginnings: From the perspective of an individual, circumstances of birth are completely random, and the same bundle of personality traits and raw abilities would have very different returns in different times and places. If you were using some real-life version of a video game character designer page, and you cranked up the math skill and ratcheted down the agreeableness, and added lots of ambition, there might have been no more optimal place to be born than in an upper-middle class family in the United States (but in a city where the big industry was sophisticated manufacturing rather than finance, media, raw material extraction, etc.) in the mid-1950s. Then again, there were plenty of other smart kids born at that time, and plenty of kids born into even more comfortable circumstances. Most of them didn't start Microsoft.

This book covers Gates' early life through the first year or so of Microsoft, and it's not a writing assignment I'd envy. Some of his stories are endearing and relatable, some of them are clearly the story of a brilliant kid who rapidly figures out just how brilliant he is, and some of them lead to secondhand embarrassment (especially if you, the reader, also remember being obnoxious and occasionally overconfident in your youth). There are also bits that are very much of their time—at one point in high school he goes to the dentist on LSD.

One of the most interesting ways to read this book is that it's a story about class and low intergenerational mobility. But very much not in the literal sense that Gates' parents had money (as did their parents, and so on), or that they called in favors on their son's behalf (though there is some of that), but in the sense that they model particular kinds of behavior. His grandmother loved card games, and loved winning card games, which was something Gates inherited. Gates' father, a lawyer, seemed to think that insinuating a lawsuit was just not a fair way to help Bill when he ran into trouble, but also liked to calmly ask for details, documentation, etc. in a way that made it clear that his son wasn't going to get railroaded over youthful mistakes. In high school, Gates got in the habit of sneaking out at night to program at all hours, and his parents seemed to know this and to think it was fine so long as his grades didn't suffer. All of these aspects of the home environment are unequally distributed, and they're advantageous. But they're a lot less literal than Gates' mom and dad just bluntly wielding wealth and influence on his behalf.

And, had they done so, he'd probably have turned out to be just one more nth-generation rich guy, who most of us never would have heard of. The path Gates followed was not a legible one; he started a software company when there wasn't such a thing as a software company, just computer businesses that gave away software alongside the real product. Gates didn't major in computer science because Harvard didn't offer a CS major; he did applied math. (And one of the valuable things he inherited from his grandmother was the knowledge of when to fold: he took the famous Math 55 course, which taught him a) a lot of advanced math, and b) that he was not going to make it as a mathematician, physicist, etc.)

This book isn't trying to be a work of sociology or a case study for a policy proposal; it's one man's recollection, filtered through what he actually remembers and what he wants to highlight. (Though I notice that Gates has more detailed school records and more old copies of report cards and essays from the 60s than I do from the 90s and 2000s; conscientiousness correlates with income!) Not everyone can supply their kids with the childhood he had, and of course not everyone with Gates' traits will get the same extraordinary results. But many of the ingredients to his success, the ones that mean he's at least sampling from a distribution that includes richest-living-person, are, if not cheap, at least achievable.

Open Thread

• Drop in any links or comments of interest to Diff readers.
• Something I’ve been wondering about a bit: the supply of GPUs has gone up a lot, with a few obvious applications driving demand. What are some other fields where just being able to crunch lots of numbers is valuable? I.e. if there’s ever a shortfall in demand, and CoreWeave’s hourly rental pricing craters, who will be itching to use up all that excess capacity?

Diff Jobs

Companies in the Diff network are actively looking for talent. See a sampling of current open roles below:

• A well-funded startup that’s building the universal electronic cash system by taking stablecoin adoption from edge cases to the mainstream is looking for a senior full-stack engineer. (Remote, Singapore)
• YC-backed AI company that’s turning body cam footage into complete police reports is looking for a tech lead/CTO who can build scalable backend systems and maintain best practices for the engineering org. (SF)
• An OpenAI backed startup that’s applying advanced reasoning techniques to reinvent investment analysis from first principles and build the IDE for financial research is looking for software engineers and a fundamental analyst. Experience at a Tiger Cub a plus. (NYC)
• A hyper-growth startup that’s turning customers’ sales and marketing data into revenue is looking for a forward deployed engineer who is excited to work closely with customers to make the product work for them. (SF, NYC)
• The treasury management arm of an established stablecoin project is looking for a research economist to bring a macro perspective at the intersection of traditional monetary theory and digital currency innovation. Advanced degree and portfolio of high quality research output preferred; no crypto experience necessary. (Remote)

Even if you don't see an exact match for your skills and interests right now, we're happy to talk early so we can let you know if a good opportunity comes up.

If you’re at a company that's looking for talent, we should talk! Diff Jobs works with companies across fintech, hard tech, consumer software, enterprise software, and other areas—any company where finding unusually effective people is a top priority.