Longreads
Jon Stokes on feeds and context. This is a very interesting refinement of the filter bubble thesis—it's not just what you read, but the order in which you encounter things. This is most obvious when something viral happens out of context; yes, a Senator did ask Facebook to "commit to ending Finsta," which makes it sound like he doesn't know what "Finsta" means, although earlier in the hearing he'd defined it, so it was just an inaptly phrased question, not a demonstration of ignorance. If you watched the entire proceeding, the line wouldn't have been newsworthy, but out of context it was a big deal. Since there are plenty of things that are more interesting when they're taken out of context, there's continuous selection against context in any popularity-weighted feed.
Rohit of Strange Loop Canon on outliers, with details on how competitive tests do badly when they're known to be competitive. This doesn't mean people can't be ranked, but it means that the rankings have to be applied judiciously, and that they mean a lot more before they're prestigious. A good way to test this will be to track Y Combinator's hit rate on getting funding the startups that turn out to be the most valuable ones a few years later; YC does seem to do a great job at assessing quality, so if their hit rate goes down it's a good measure of a fundamental limit.
A fun piece on where Tether's money is, and where it isn't. This does not end up solving the longstanding mystery of Tether, though the piece does end up finding one bank that claims to have $15bn of Tether's money. One ongoing theme in Tether's history is that some of its managers are gun-shy about risk, and the other managers buy them out. So there's an evaporative cooling effect, accelerated by the fact that Tether managers who are willing to use its funds aggressively naturally have more buying power than the ones who don't.
Chris Dixon on Why Web3 matters: the life cycle of most successful companies starts with a period of usage growth and then moves on to more monetization, i.e. they begin by creating value and end by capturing more of it for themselves. This does make them more fundable, but it's not the only model, and token-based funding can spread that equity around in a way that keeps everyone aligned for longer. There are probably some categories where that model is less effective than a more concentrated one—in an industry with lots of execution uncertainty, like biotech, it makes more sense for there to be a short list of investors who have done substantial research. But for many consumer-facing products, a tokenized model is promising.
This FT profile of Farouk al-Kasim, one of the architects of Norway's oil policies, is worth reading. It's partly a look at how contingent history is—he moved from Iraq to Norway to get better healthcare for his son, and wasn't aware that Norway was looking for oil at the time. And it's also a look at how nonrandom it is: for many countries, discovering natural resources is a net negative for the average standard of living, because of the ensuing economic distortions, but Norway managed it well.
Open Thread
Drop in any links or books of interest to Diff readers.
What are some other good examples of Norway-like outliers, where a country had exactly the opposite of the expected impact from a given economic change? And are there any good examples in the private sector?
I really liked the Insull book you recommended a while back. It's interesting to read about the how the widespread adoption of electricity unfolded and how it connected to transportation and architecture, and you don't necessarily get that as much when you read about Tesla and Edison. In context of the recent discourse around the Scott Alexander piece about traditional architecture, there is a great bit in there about how everything before electricity was built around the limitations of kerosene/candle lighting, from the high ceilings to the brown furniture, and people got away from it as soon as they could. Traditional architecture may be outwardly attractive to many but a) there is a huge supply of it left over and b) many people don't necessarily want to LARP living in the 1890s.
The resource curse is interesting to me because you can argue that most major countries with lots of natural resources actually do much better than those without. America, Canada, Australia, New Zealand, for example. Within those countries, I think the states and provinces with the most resources do better than the rest, and people tend to congregate around the richest natural resources, we just stop noticing that after a while (for example, Seattle was originally a lumber town and is still Weyerhauser headquarters). It's just that we intuitively expect resource-rich countries to *always* be richer, and that is simply not true because as we know it opens some incentive for people to shift from productive activity to rent extraction.
In terms of companies, Marc Andreesseen has talked about his early career at IBM as an example, they were once dominant but by the time he got there it had ten layers of highly compensated management that prevented them from doing anything. Rich families also sometimes have the tendency to litigate over inheritances and trusts.
I mentioned in an essay a while back that I think any economic agglomeration is functionally similar to an oil deposit, in that it is a resource that can't easily be moved, so people scheme to find ways to extract from it rather than build something useful, so e.g. if you think about Silicon Valley, people that own homes in California want to limit new construction so that they can sell or rent their existing houses to tech workers at inflated prices, they maintain a tax regime where they are exempt from paying taxes and tech workers have to make up the shortfall with high income taxes, the construction unions are happy to cooperate so they can get their cut on what little does get built, etc. - everyone schemes to extract what they can from the tech industry in much the same way that powerful people in Venezuela extract what they can from the oil industry.
Other countries that are Norway-like outliers:
- Germany and Japan after WW2. Both lost territory, lost manpower, lost geopolitical influence, and had heavy economic damage, but quickly started strong growth. Dont really know why - a reset of political institutions might have played a role (if all previous laws go away, or are re-evaluated, it's a good opportunity to start with light regulation), luck in terms of natural resources (just as Germany lost it's coal mines in Silesia, the coal mining industry in Europe went into decline), and profiting from the new world order (the USA needed allies against communism, so provided investment to restart German industry, and military power to enable international transport and trade).
- Negative example: East Germany after the fall of communism joined West Germany, which meant, unlike for e.g. Poland or Czchia, instant access to established institutions, experienced capitalist managers, and huge investments in infrastructure, education and transfers. But it actually did worse - being a part of West Germany also meant that it was really easy for all the smart and ambitious young people to move away to the west, and adopting the Deutschmark meant East Germany quickly adopted a western standard of living, but also became expensive before it became competititve.