Longreads + Open Thread

Longreads

• Bits About Money on the business of check cashing. One weird aspect of some commentary about the financial services industry—often taking the form "Why don't banks just let us do X?"—is that finance is even more money-focused than other kinds of businesses, but the question is usually not phrased in its more informative form, "Why isn't it profitable for a bank to do X? (And what might we change in order to make this profitable?)" This piece demonstrates why such a reframing is useful: many people have access to free checking, but some people resort to expensive checking for good reason: a payments business is really a credit business, and what's getting underwritten in this case is the trustworthiness of the person paying by check.
• From a decade ago, here’s Rich Cohen on getting hired to ghostwrite the memoirs of billionaire private equity investor Teddy Forstmann. You can read this as a story about the declining marginal utility of money—past a certain net worth, the things you want (but don't instantly get) are the things money can't buy. It's unclear from the story whether Forstmann was genuinely hiring a ghostwriter to tell his story, or actually paying someone to sit and listen to his stories for a while.
• Matthias Doepke, Anne Hannuschc, Fabian Kindermann, and Michèle Tertilt on The Economics of Fertility. A good refresher because some of the conventional wisdom has changed over time: at a country level, GDP and fertility within rich countries have been positively correlated since the mid-1980s. And the classic negative correlation between a mother's years of education and her number of children is also no longer linear: since the 2000s, women who get some kind of post-secondary education have slightly more kids than those who finish college and don't go on to do other things. Studying fertility is tricky because there are so many offsetting forces. For example: the richer you are, the more of everything you can afford, including kids. But the more you make, the higher the opportunity cost of reading bedtime stories, staying home with a sick kid, etc. And sometimes the effects are very nonlinear and hard to predict. For example, one factor that predicts the size of countries' post-war Baby Boom is conscription during the war. The proposed mechanism is that conscription adds more women to the workforce during the war, and that when the war ends, that means that women who enter the workforce have more competition from other women who are already working, pushing wages of newly-employed women down and thus reducing the opportunity cost of kids. Another reason fertility is tricky to study is that it's uncomfortable to talk about "the economics of" something as personal as the decision of whether or not to bring new life into the world. On the other hand, economics studies what we want and what we get, and it doesn't exist without the "We," meaning that in a sense the most important subfield in economics is that of fertility—it's the sole determinant of what the "We" will be! (Via Marginal Revolution.)
• D. Graham Burnett in Asterisk on the early days of ad tracking, including manually tracking people's eye movements to see which features of ads draw their attention. The ad business has a slightly grubby reputation, but it's trying to answer some pretty fundamental questions: how do we figure out what we want? What makes us switch from a vague intention to an immediate decision? And, once you've answered questions like that: how do you keep the ads fresh and effective once whatever you've originally tested stops working?
• Adrienne LaFrance writes in The Atlantic about the emerging ideology of Big Tech. The tone is a lot more alarmist than the underlying content (did you know that Silicon Valley went 4:1 for Hillary but only slightly more than 3:1 for Biden? At this rate, outcomes there could be a toss-up as soon as 2056!). Instead, this piece is really about who has permission to make the big decisions and pronouncements. Elected officials, sure, they get to make important calls, for better or for worse. And it goes without saying that the media can provide input and shape narratives. But should a product manager make choices that affect millions or even billions of people? Answering with a yes amounts to supporting a sort of political meritocracy that transcends the political system: people who correctly chose a field that turned out to be high-impact will end up, as a reward, having higher impact.
• In this week's episode of The Riff, we discuss Corporate Mortality, Momentum Investing, and Learning From Extreme Events. Listen with Apple/Spotify/YouTube/Twitter.
• In Capital Gains this week, we return to interest rates, specifically the question of where rates come from. You can tell a straightforward story about why real interest rates should be positive: they're a way to reward people for deferring consumption instead of getting what they want right now. But you can just as easily tell a story about why rates should be negative: you're paying to store money in order to get future consumption, and no amount of present enjoyment can compensate for future destitution. At any given time, rates represent the intersection of these two forces, both of which vary over time.

Books

The Fish That Ate the Whale: The Life and Times of America's Banana King. In 1870, bananas went for the equivalent of $47/bunch. Now they're an absurdly cheap source of calories, and have been for some time (in his memoir, Frank McCourt talks about moving to the US in the late 1940s, where he couldn't necessarily afford to take the subway but could subsist on bananas). How we got to this point is partly a story about the general rise in agricultural productivity over the last century-plus, but it's also a wild story of corporate governance, corporate-government relations, market coups, and literal coups.

The book is partly a portrait of one person, Samuel Zemurray, and his decades-long quest to dominate the banana business. Zemurray started scrappy in the 1890s, buying small shipments of bananas and shipping them as quickly as possible before they spoiled, and ultimately built up the second-biggest banana company in the US, before selling it to the biggest, United Fruit. This sale was partly political: Zemurray's company, Cuyamel, had bought land in an area claimed by both Honduras and Guatemala, and United Fruit's efforts to keep him from using this land came close to causing a war between the two countries. A few years later, when United Fruit's profits collapsed during the Great Depression, Zemurray launched a hostile takeover. This takeover was hostile indeed ("You've been ——ing up this business long enough. I'm going to straighten it out." —Time magazine, 1933).

The book is also a portrait of a particular time in a particular part of the world. It's a sort of nonfiction Nostromo where the focus is on hustle, power, and big personalities. There are characters with names like Jake the Parrot King, or people who'd eventually become public figures—John Foster Dulles and his brother Allen Dulles both worked for United Fruit before their government service—service that perhaps coincidentally included taking some actions that were very favorable to United Fruit's interests, at least at first.

United Fruit and Zemurray overreached in 1954, when he and the CIA helped launch a coup in Guatemala to depose their left-leaning president. This ended up drawing attention to United Fruit's habit of claiming implicit veto power over the decisions of banana-export-unfriendly governments, and raised the question of whether government policy in the region was determined by US interests or UF's. A good reminder that if you're good at business, you'll eventually solve all of your business problems and be left with less tractable political ones instead.

Diff Jobs

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

• A CRM-ingesting startup is on-boarding customers to its LLM-powered sales software, and is in need of a backend engineer to optimize internal processes and interactions with customers.
• A company building the new pension of the 21st century and building universal basic capital is looking for a product designer with fintech experience. (NYC)
• A diversified prop trading firm with a uniquely collaborative team structure is looking for experienced software engineers. (Singapore or Austin, TX preferred)
• A private credit fund denominated in Bitcoin needs a credit analyst that can negotiate derivatives pricing. Experience with low-risk crypto lending preferred (i.e. to large miners, prop-trading firms in safe jurisdictions). (Remote)
• A well-funded startup is building a platform to identify compliance risks associated with both human- and AI-generated outputs. They are looking for a frontend engineer with React/Typescript experience to join their team of world-class researchers. (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.
• The author of the Banana King book indicates that he heard about Zemurray from seeing his name on buildings at Tulane. What are some other good biographies of undeservedly-obscure tycoons?