Longreads + Open Thread

Longreads

• Derek Urban has a very enjoyable piece on investing in Bhutan, a country with a population of under a million, a GDP of $2.5bn, and a total market cap of $700m. To put this in context, the entire stock market of Bhutan is worth less than the market cap of Medifast. Markets like this can be fun to look at because it's entirely possible to enumerate every public company and understand them all (a bit like the Value and Opportunity blog's series that looks at every single public company in a given geography, summarizes the businesses, and notes what looks interesting). An outside investor naturally operates at an information disadvantage compared to local participants—but has an information advantage in making relative value assessments about whether the overall market is cheap or expensive. And this kind of thing can be worth doing for pure meme value; if you're going to pick a stock that goes up 50%, it's simply much funnier for it to be a Bhutanese alloys business rather than yet another SaaS stock.
• In Age of Invention, Anton Howes tells the story of 18th century industrial spy John Holker, who brought textile knowledge and textile workers from Britain to France. Part of this is a story of spycraft and incentives: once the workers were in France, they were reluctant to share everything they knew, since their knowledge would be worthless once it wasn't unique. So they got pensions, and were paid bonuses for training local workers. Howes also makes a broadly applicable point: in the present, spies work for whoever they're spying for. But in the long run, every spy ends up working for future historians: they compile a list of the most pressing questions people had at a specific time, and then they find and write down the answers.
• KG of Kinetic Energy Ventures has a transcript and slides from Bill Gurley's instant-classic speech on technology and regulatory capture. It's a good mix of fun anecdotes and high-level theory on how the sausage gets made (one highlight: a 1999 Morgan Stanley research report finding that when pro-competition legislation gets passed, the main result is that incumbents earn higher returns. Though it's worth noting that in some famous examples of this, like Standard Oil and AT&T, part of what happened was that the industry got more dynamic once it broke up, and the Jevons Paradox offset margin compression from price competition.) This is one of those talks that should give you mixed emotions: on the one hand, there's deep unfairness and inefficiency in regulatory capture. On the other hand, it looks like a repeatable way to identify good investing opportunities.
• Jason Farago argues that artistic innovation has slowed down this century, in clothes, movies, and music. The classic way to talk about this is to note the predominance of sequels, remakes, and film versions of bestselling books among top-grossing movies, but this piece goes further; it is hard to think of what clothing or gadgets you could use to set a movie in 2023 rather than 2013 (it's telling that the best cue for "this movie is set in 2023" is to have a few people, but not a majority, wearing masks). It does make one interesting point on representation in the arts: being the first person in category X to achieve Y is only a legible accomplishment if Y is something that's been done before.
• Michael Buckland has a 1997 paper asking What is a "Document"? This is particularly worth revisiting in light of the apparent abstraction gap between the PC generation and the smartphone generation—documents as an abstraction are tied to the system used to organize them, and filesystems are obfuscated for smartphone users. What counts as a document and how it gets stored and categorized is somewhat arbitrary, but this is also something anyone designing a new system has to carefully consider.
• In Capital Gains, our spinoff newsletter breaking down concepts in finance, economics, and corporate strategy, we look at how managing a complex organization means making things that are a rounding error for the company feel like important decisions to whoever is responsible for them. Coordinating large groups is a complex problem, and no effective method scales indefinitely.

Books

• The Missing Billionaires: this book opens with a striking observation—there were about 4,000 millionaires in the US in 1900, and if they'd invested in a diversified portfolio, achieved average returns, and paid the usual taxes their descendants today would probably number around 16,000 billionaires. The US has lots of billionaires, at 700, but not nearly as many as would be expected. In other words, there's substantial mean-reversion in extreme wealth, even though the extremely wealthy can certainly afford advice on putting their money into index funds. This book walks through the math of diversification for preserving and lowly compounding wealth (so it's not a book on how to get extremely rich, but a book about how to gradually but predictably become richer than you currently are). One of the coauthors has some good personal experience to bring to bear: one of his consequential financial decisions was to invest a substantial chunk of his net worth into Long-Term Capital Management, the hedge fund he co-founded. This decision did not turn out well. The book has some details on how the fund operated and what his thought process was and could have been. (Among other things: LTCM's managers had explicitly warned their clients that returns would be more fat-tailed than historical statistics implied—knowing the Black Swans exist and even warning about them doesn't preclude being victimized by one!)
  
  This book is closer to a personal finance book than to a book about delivering outlier returns. But if your life plan involves un-diversified bets on highly volatile outcomes (i.e. if you're actively managing money for yourself or others, or if you're a founder), the book is worth reading for its framework for just how all-in you want to be, even if you're confident that the assets you've chosen will have extraordinary performance.

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 company building the new pension of the 21st century and building universal basic capital is looking for fullstack engineers with prior experience in fintech. (NYC)
• A successful crypto prop-trading firm is looking for new quantitative developers with experience building high-performance, scalable systems in C++. (Remote)
• A vertically integrated PE-backed cannabis company is looking for a data analyst with visualization experience. Excel wizards only! (Remote)
• 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)

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.

Open Thread

• Drop in any links or comments of interest to Diff readers.
• If it is possible to preserve wealth, and even relative wealth, as The Missing Billionaires describes, should we expect more multi-generational wealth in the future? Or will the super-rich tend not to switch to making Kelly-optimal decisions, given that they probably wouldn't be quite so rich if they'd avoided under-betting early on?