Thoughts in Between

by Matt Clifford

TiB 209: The dollar is dead, long live the dollar; memes and investing; public purpose technology; and more...

Welcome new readers! Thoughts in Between is a newsletter (mainly) about how technology is changing politics, culture and society and how we might do it better.

It goes out every Tuesday to thousands of entrepreneurs, investors, policy makers, politicians and others. It’s free.

Forwarded this email? Subscribe here. Enjoy this email? Forward it to a friend.

Reports of the dollar's death have been exaggerated

Of the many areas where my knowledge is thin, macroeconomics is perhaps the field in which my ignorance is most impressive. But the war in Ukraine, and especially the West's response to it, make it an essential topic of study if you (and I) want to understand the core topics of this newsletter. Above all, given the extraordinary breadth of the West's financial sanctions against Russia, particularly the freezing of its central bank's largely dollar-based reserves, lots of commentators are asking whether we're seeing the disintegration of the dollar's dominance.

Adam Tooze (who else? it turns out I'm not his only fan) summarises the argument well here. I'd also recommend this piece in the FTthis interview with Zoltan Pozsar on the always excellent Odd Lots podcast, and - slightly less mainstream - this podcast with Luke Gromen, who takes a longer term perspective. The core thesis is that the sanctions push Russia (and other US adversaries) ever deeper into China's orbit and towards China's goal of a world with a growing share of transactions settled in renminbi.

That said, several of these commentators are skeptical we're heading for rapid de-dollarisation (even if some think it would be a good thing). After all, an alternative is needed and, as Rana Foroohar says:

The Chinese want to de-dollarise, but they also want complete control of their own financial system. That’s a difficult circle to square. One of the reasons that the dollar is the world’s reserve currency is that, in contrast, the US markets are so open and liquid.

Moreover, as Michael Pettis observes in this thread), as long as China runs a large trade surplus, it has to acquire foreign financial assets... and so avoiding the dollar is very difficult without painful domestic economic adjustment. Does this mean Bitcoin's time has come? It's very unlikely, as Noah Smith explains (paywalled). Certainly this is a moment where it feels like something's got to give, but it doesn't seem like it's the dollar - at least not yet.

The meme as a financial strategy

Just over a year ago I wrote "How Did The World Get So Weird?", which turned out to be, by a long way, the most popular TiB edition so far. The core thesis was that the internet is a "variance-amplifying institution" - that is, it selects for and magnifies narratives and behaviours that create extreme outcomes (I discussed this at greater length with my friend Jim O'Shaughnessy on his podcast in December).

The immediate prompt for that piece was the extraordinary / hilarious GameStop/AMC-meets-Wall Street Bets affair, which at the time seemed like an internet joke - albeit one with billions of dollars at stake - in its purest form. But now AMC has used its (still) absurdly elevated share price to pursue a financial strategy equal parts rational (if the stock is overpriced, sell some and buy other stuff!) and bizarre: as Matt Levine reported a couple of weeks ago, they bought a (literal) goldmine - one that, inevitably, doesn't actually currently mine any gold.

As Levine noted at the time, this maximises the value of AMC’s best asset: its ability to turn a stock into a meme stock. Sure enough, stock in the goldmine soared once AMC’s involvement was announced. Elsewhere in finance, this is a perfectly acceptable strategy. Levine notes it's a textbook Warren Buffet move too: leverage the fact that the stock goes up when you announce you've invested to be allowed to buy low. Arguably it's Y Combinator's strategy too. Why is this on my mind today? Well, Elon Musk - the ultimate symbol of the variance-amplifying age - announced an investment in Twitter and the stock soared. The ability to propagate memes is becoming the world's best financial strategy.

Related: this Reddit meme experiment is pretty remarkable. Appreciative commentary here that's worth your time (Thanks Torsten for the link!)

Tanya Filer on building "public purpose technology"

My guest on the TiB podcast this week is Tanya Filer, who leads the Digital State Project at Cambridge University's Bennett Institute and is founder of StateUp, an advisory firm focused on innovation that serves a public purpose. This conversation focuses on the idea of "public purpose technology" (PPT): technology built by private comapnies but serving the public sector or creating an alternative mechanism for providing a public good.

We discuss the companies that are building PPT and the investors that are funding it - including the question of whether PPT can be funded by typical for-profit VCs. A lot of our discussion also focuses on the challenges of building for the public sector. Investment is certainly one, but procurement processes are arguably an even bigger obstacle, particularly for startups.

If this is a topic that interests you, I also recommend this four-part series by Johannes Lenhard (who is affiliated with StateUp), which dives into it in more detail. You might also enjoy StateUp's Substack and Tanya's writing for Brookings. The idea of "digital minilateralism" - opt-in international governmental collaboration on shared digital infrastructure - seems especially interesting and productive. Enjoy this conversation!

Quick links

  1. Some of my best friends have MBAs... but this study (in thread form) is quite something (NB: some pushback)
  2. Britain's lost decade (and then some). It's just been an absolutely astonishingly bad period in the UK's economic history. And will likely get worse for the poorest.
  3. Throwing the book. I generally think the world is getting better, but this looks bad and makes me sad...
  4. Judging a book by its cover. ... so to cheer yourself up read this thread of the most beautiful book titles.
  5. Shhh! Fascinating data on secret keeping. I feel I have an embarrassingly low number compared to average (or maybe I would say that?)

If I could summarise the next steps...

Thanks for reading Thoughts in Between. I do appreciate it.

As usual, any of the following are welcome: shares, tweets, forwards, replies, comments, criticisms, suggestions and fulsome praise.

Until next week,

Matt Clifford

PS: Lots of newsletters get stuck in Gmail’s Promotions tab. If you find it in there, please help train the algorithm by dragging it to Primary. It makes a big difference.