Thoughts in Between

by Matt Clifford

Matt's Thoughts In Between - Issue #27

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Opting out of revolutions

A couple of months ago a friend asked me a provocative question: ten years from now, do you think you'll be convinced you were doing the most important thing you could have been in 2018? I think the answer is yes, but it's a great test, and one I was reminded of this week when reading this short, interesting post by Stefano Zorzi.

Stefano asks a slightly different question: when should one "opt out" of public life and pursue purely private interests? And when are the stakes too high for that?

Stefano suggests that the answer has to do with living through paradigm shifts: when political conflict is about what model of the world should prevail, the costs of opting out are high; when it's about what version of the "winning" model we want, the costs are relatively low. (He cites Carlotta Perez's superb Technological Revolutions and Financial Capital on how these moments relate to tech breakthroughs)

Are we living through such a shift now? It seems hard to know at the time - and by the time you can be sure, it's too late. But if you did believe we were living through an unusually important moment in history (lots of people seem to) and you believed you should "opt in", how would you do that? It seems like an important question to which few people - and certainly I'm not one of them - have an answer.

Why are the quants not winning in VC?

There's an apparent irony in the fact that venture capital:

  1. has invested heavily in data-driven analytics and decision making for nearly every industry, and
  2. is itself still largely based on gut, intuition and small-scale "pattern recognition"

Given the huge success of systematic approaches in public market investing, it might seem surprising that there's no Renaissance Technologies of VC.

Stephen McAnearney has an excellent, comprehensive discussion of why quantitative VC is so hard, which looks at data sources, feature extraction, signal quality and more. He concludes that even if purely systematic strategies are unlikely to succeed, data is likely to become much more important. It's certainly true that experiments like Social Capital's Capital As A Service and funds like SignalFire are some of the most interesting new ideas in VC today.

I also love the Andy Grove line McAnearney cites: "Anything that can be done, will be done, if not by you then by someone else". Important inspiration for the paranoid!

Who can make a 250 year promise?

Patrick McKenzie makes an interesting point about how few institutions in society can make multi-century commitments (e.g. bond issues, pension liabilities).

Which institutions might you trust to still be around in 250 years? Companies seem an unlikely bet: though some have issued 100 year bonds, their average lifespan is falling and the very oldest are not exactly corporate titans (Would you buy a Bingley Arms bond?). Paul Ormerod wrote an excellent book on this, Why Most Things Fail.

Countries are a little better (though there are not that many that were around 250 years ago in their present form), while some universities seem a pretty good bet (Nice anecdote on Oxford's long term planning).

Personally, I'd bet on countries small and rich enough not to get into wars or go bankrupt; universities with large endowments and powerful alumni that have already survived a political revolution; and institutions that transcend national boundaries, have large assets and devoted supporters. So when the Government of Singapore, Harvard University and the Catholic Church issue their 250 year bond ETF, I'm a buyer.

Of course, if you ask some people, 250 years just isn't a very long time.

Quick links

  1. Partisanship is a hell of a drug. Great chart and commentary on Nixon's approval ratings during Watergate.
  2. Engineering is for rich kids... unlike computer science? Rank of college majors by parental income, with some surprising results.
  3. A brief history of the world since 1960... at least in agriculture. Incredibly data rich chart.
  4. Sentimental cartography. Beautiful post of "conceptual" maps - must-browse for map lovers.
  5. UBI quiz: which country already has a successful universal basic income? (No, not Alaska)

Your feedback

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Until next week,