Longreads + Open Thread

Longreads

• C Trombley One reviews Hyman Minksy's John Maynard Keynes. The big focus of the book (and the review) is the role of uncertainty in understanding the economy—both in terms of how economic actors react when circumstances change and how they act given the fundamental uncertainty of the economy. While perfect information always makes models simpler, there are always more ways to go meta: a core part of Minsky's model is that individually rational behavior can lead to collectively irrational results. Financial markets are a powerful channel for this, because they're all about temporarily reifying abstractions, and in complicated ways. For example, a dollar is worth a dollar as long as everyone believes this is true, but a share of stock is perfectly convertible to cash at the market price, but not if everyone treats this as a given all the time. Minsky (and Trombley) both demonstrate something fun: People on the left can appreciate capitalism in a way practicing capitalists can’t, because to them it can be an aesthetic experience rather than a practical one. It’s the same sense in which it’s easier to enjoy rhetoric from Pericles than from a charismatic figure alive right now—today you’re too distracted by the practical outcome of the speech, but it’s not like you’ll lose any friends today by supporting the wrong side in the Peloponnesian War.
• Marc Andreessen on the case for being optimistic about AI: much to agree with, especially on reasons to be skeptical of some aspects of AI safety being more risky than what they're aiming to fix. And there are some parts of the piece to be skeptical of. There is a real case for AI destroying jobs, eventually (in the short term, employment can go up because the value of doing any kind of information-processing task is now based on the net present value of future AIs being able to do it themselves). But one important point the article makes on the economic impact side is that the sectors with the most technology-driven change also tend to create the most equality in terms of access to products—like the information that's freely accessible via Google—while the industries that make inequality more salient are slow-moving ones where nothing changes except the price.
• Steven Sinofsky has a masterpiece on platform businesses, worth reading for the tiny minority of people who will create a platform and for the much larger number who build something dependent on platforms. Among other things, it has a nice taxonomy of different kinds of platform businesses, a good description of the traps proto-platforms fall into, and a sketch of the lifecycle platforms go through. One nice note here is that the piece does not insist on being definitive; at one point, it mentions an ongoing argument with Bill Gates over how to best operate Microsoft as a platform business. The details of these models are still up for debate because the sample size is so small and because the examples are necessarily heterogeneous.
• Josef Adalian and Lane Brown write about the decline of the streaming business, as seen be screenwriters, directors, and operators, in Vulture. It's amazing how quickly people in any industry can get accustomed to temporary circumstances, whether it's enjoying nearly-free Uber commutes in the mid-2010s, easy credit in the mid-2000s, lucrative stock-based comp until 2022, etc. In Hollywood's case, one driver was that streamers were all fighting for share, and there was a finite supply of TV and movie production talent that got bid up. The downside was that streaming economics are more opaque than traditional TV and movies; shows get valued based on how they affect signups and retention, and that's much less direct than their ad revenue or box office performance. (It also makes residuals even harder to calculate: even Netflix probably doesn't have high confidence in how your viewing choices today affect your propensity to unsubscribe two years from now.)
• Zachary Carter profiles economist Isabella Weber and her efforts to rehabilitate price controls in The New Yorker. "Price controls," in this case, can refer to a variety of different policies: one that's highlighted in the piece is a plan that gives German households and businesses subsidized access to natural gas up to a quota, with any excess consumption priced at the market price. In this case, though, it's a one-sided price control: the government, rather than the companies, eats the gap between market price and the controlled price. What that amounts to is using the government rather than households as a shock absorber, which is at least somewhat defensible for a good with inelastic consumption patterns. (But the policy only really works if it ultimately incentivizes people to switch to other energy sources, or if the shock is truly a one-off—and politically, taxpayers might find it annoying if a large line item in the government's budget was for subsidies to big energy companies, even if those subsidies offset government-imposed costs.) Weber uses the US's price controls in the Second World War as an example of when price controls work, but that's very much a special case: the point of a war economy is to increase production of military-related goods and then control inflation by crushing demand for goods that civilians need. It can work for a while, especially in a country that's feeling a surge of high trust because of a war, but it's a least-bad approach to dealing with bad news, not a good ongoing default.
• In this week's Capital Gains, we look at why economists dread deflation, and why voters are more irate about inflation. And note that not all economists dread deflation.

Books

• Osman's Dream: The History of the Ottoman Empire: The Ottoman Empire can fit into many different frameworks. In one sense, it was a classic example of a steppe nomad tribe rapidly expanding; in another sense, it was a case of the pattern within that where the steppe nomads militarily conquer a country so prestigious that the country culturally conquers them right back from within (after taking over the city of Constantinople and ending the Eastern Roman Empire, Mehmed II added ‘Caesar’ to his list of titles. It was also a multiethnic empire that controlled different territories with varying degrees of centralization; sharp lines on old maps are always something between an artistic fiction and an expression of the limits of contemporary artistic ability, since pre-modern governments had variable control of different parts of territory. The running theme in the book is that it’s astounding that the empire lasted as long as it did. Even during the period when the Ottomans were relentlessly conquering their neighbors, the country faced constant internal rebellions, religious disputes, pretenders to the throne, etc.

Open Thread

• Drop in any links or comments of interest to Diff readers.
• Inspired by Matt Mandel: have you worked at a high-performing company that insisted that new employees read a particular book? What company/industry, and what was the book? (Feel free to answer via email; if I get good answers I will compile them but will default to just noting the company and book unless you specifically ask to be credited.)

Reader Feedback

David Khoo notes an alternative explanation for the wine store collapse story from last week's Longreads:

The Sherry-Lehmann wine store affair sounds like classic long firm fraud: Take over an established business and its valuable commercial arrangements with suppliers and customers, then use those arrangements to defraud them. Order goods and don't pay for them. Take payment for goods and don't deliver them. Bank on the trust the previous owners had built up with them to delay, make excuses and continue the con until breaking point, then disappear with the money.

...

If anything, wine stores seem like a perfect target for long firms because there is such a long gap between paying for a product and receiving it. A business where customers routinely pay millions today for this year's vintage with delivery in 3-4 years is raw red meat for conmen.

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Diff Jobs

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

• A company building ML-powered tools to accelerate developer productivity is looking for a mathematician. (Washington DC area)
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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.

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