Longreads + Open Thread

Longreads

• Ernie Smith at Tedium writes a history of the ATM, which was a surprisingly gradual one: ATMs started out with limited features and limited utility, and only really took off when an external event, a major blizzard in New York, made them almost mandatory. It's a bit like the products that positively inflected during Covid and then didn't fully mean-revert: sometimes the technology is ready, but users just need a nudge.
  
  Via P.S. You Should Know.
• Matt Huang at crypto investing firm Paradigm calls crypto the casino on Mars: yes, there's a lot of zero- to negative-sum gambling going on, but there's also a genuinely useful financial product. (I've heard from a few different people referencing a few different countries that crypto is, in fact, useful in places that are experiencing high inflation and have strict currency controls; in the US, it's a way to gamble, but in Turkey or Argentina it can be a way to pay the rent.)
• And, in the interest of equal time, here's Patrick McKenzie reviewing Zeke Faux's Number Go Up, a book about the dark side of crypto that doesn't go nearly far enough in exposing just how bad some behavior in the industry got. He makes a very good case that there's room for much, much more investigative journalism, starting with Tether and then extending to everything that touches Tether. A few years ago, "everything that touches Tether" described almost the entirety of the crypto world, but the US, at least, is separating regulated crypto from the kind that directly interfaces with entities that are either committing fraud or are going to great lengths to look as suspicious as possible.
• In the NYT, McKenzie Funk profiles Hank Asher, a former drug smuggler turned informant who built several businesses devoted to collecting and monitoring public but hard-to-search data like vehicle registrations, home purchases, and the like. One business highlight from the piece is that Asher's early success was in Florida, which has very relaxed public records laws ("Florida man" jokes are popular, not because Florida's population of entertaining criminals is that much higher, but because it's quite easy to get detailed information on what they did). But later, the business expanded elsewhere: just because a company launches due to a regulatory quirk in one market doesn't mean that its entire existence is a regulatory arbitrage. A social commentary highlight is that weird characters like Hank Asher seem to be rarer today than they used to; someone with that kind of background is probably either playing it up on social media or unsuccessfully trying to hide it. Ironically, Asher's own work makes it harder for people to escape their past, a problem that cost Asher the control of his own company.
• Susan Athey and Michael Luca have a paper on the role of professional economists in tech companies. High margins and defensible economics mean that tech companies, relative to other businesses, can afford frills like having a few economics PhDs on staff to run behavioral studies, design incentives and auctions, and lobby. But those high margins also mean that tech companies' products are a better fit for the simplified models that economic insights rely on. A billboard company can't do a Vickrey Auction for every single billboard it owns, but a self-serve ad tool like Google's search ads can conduct live auctions on every single ad-supported search. It's fortunate for economists that the kind of businesses that can afford to hire them are also the ones that can make the best use of them.
• Moses Sternstein interviewed me on topics ranging from writing to investing to SEO in Random Walk. A very fun conversation; if you’ve ever been curious about how I switched from doing online marketing to working at a hedge fund, this interview has the story.
• In Capital Gains, our newsletter breaking down topics in finance, economics, and corporate strategy, we look at why some companies have excellent shareholder letters, why most don’t, and what companies are trying to communicate when they write them. For anyone who is a big fan of well-written corporate letters, the good news is that as more corporate communication takes the form of text rather than in-person conversations and presentations, more executives, including CEOs, will be indirectly selected for their ability to write a killer annual letter. Whether this is good or bad for shareholder returns is an entirely separate question, but skimming the list of companies that have famously good letters shows that it’s also a selection of companies with good shareholder returns. (Or maybe it’s really hard to criticize someone’s writing when they’re making you rich.)

Books

• Taking Down the Lion: The Triumphant Rise and Tragic Fall of Tyco's Dennis Kozlowski: Tyco was part of the early 2000s crop of accounting scandals, but, compared to the big ones (Enron, Worldcom, Adelphia) was relatively more benign. Tyco was, in fact, a legitimate business (or a collection of them) and while the executives there were very well-paid, they did grow the business substantially. What I was hoping for from this book was an overview of how they did it and why the Tyco model stopped working. Instead, this book focuses mostly on the scandal and trial.
  
  And, to be fair, the trial was a classic case where fairly minor white-collar malfeasance, of the kind that could be corrected by paying a big fine and promising never to engage in that kind of behavior again, collided with absolutely wild stories of exactly how Tyco misspent shareholder money. Their CEO famously used $6,000 of company money to buy what must have been a very elaborate shower curtain—but the backstory there seems to be that the CEO hired a friend as interior decorator, with an unlimited budget, and the decorator went wild at a company apartment. Tyco's CEO apparently never saw the shower curtain in question. The other big part of the Tyco scandal was that the company hosted a vacation for senior employees that included a birthday party for the CEO's wife, and at that party, once again, the details were outsourced to someone with a large budget and very poor taste, and the result was that jurors got to see a video of a company-subsidized ice sculpture of Michaelangelo's David that urinated vodka. No one has pushed forward the frontiers of new money tackiness like this. (One very odd detail there was that Tyco's events planner, who was in charge of this event, had also had an affair with the CEO a decade prior—yes, the same CEO asking this event planner to put together a birthday party for his wife partly paid for with company money. Perhaps the vodka-urinating ice sculpture was an inside job!)
  
  If this book has a lesson, it's not about making money, but about spending it. And the lesson is, if you're going to engage in wild conspicuous consumption, 1) do it on your own dime, even if there's a plausible business purpose, and 2) expect to regret it, even if the party is very fun at the time.

Open Thread

• Drop in any links or comments of interest to Diff readers.
• There seems to be a steady increase in the use of robot vacuums and smart speakers. What are some other physical products that will be increasingly deployed in the home? We identified most of the useful appliances in the first few decades of widespread residential access to electricity, but surely we haven’t solved all of them just yet.

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)
• A well funded seed stage startup founded by former SpaceX engineers is building software tools for hardware engineering. They're looking for a full stack engineer interested in developing highly scalable mission-critical tools for satellites, rockets, and other complex machines. (Los Angeles)
• An early-stage startup aiming to reduce labor costs by over 80% in a $100bn+ industry is looking for a part-time technical advisor with robotics experience; this has the potential to evolve into a full-time role. (NYC)
• A company that helps clients use alternative data to make better decisions is looking for a data scientist/analyst with experience in the finance sector. (Remote)
• A startup building a new financial market within a multi-trillion dollar asset class is looking for generalists with banking and legal experience. (US, 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.

Reader Feedback

Last week's Longreads asked which markets should exist, but don't. Max Conradt made many good suggestions in the comments, like weather derivatives and cloud computing futures. There are some weather-linked products out there, like catastrophe bonds, but weather is a case where it's hard to have a complete market; not everyone wants to bet on rainfall in Dallas tomorrow or whatever, and for the high-impact weather events, there often is a way to bet on them through agriculture futures and natural gas. But it would be nice to have more markets here, if only so we can use natural gas futures as a cleaner proxy for long-term supply and demand trends rather than as a way to bet on how cold winter will be this year. Cloud computing futures are another fun one, though perhaps the limiting factor there is that the hyperscalers see better ways to price-discriminate: if someone is locking in a lot of compute over a long period, it might be more value-accretive to talk to them about what they're doing and why in order to figure out exactly how much they'll be willing to pay.