Thoughts in Between

by Matt Clifford

TiB 127: The most powerful people in the world; the limitations of VC; murder mystery games; and more...

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Central bankers > entrepreneurs?

Conor Sen tweeted a provocative idea this week:

Fiscal and monetary policymakers are more important to the future of the US economy than business owners and entrepreneurs.

As we’ve discussed before, it’s certainly true central bankers are increasingly the underwriters of the stock market and, indeed, the entire economy. In the pandemic, as in the global financial crisis, successful monetary policy has made the difference between true existential disaster and mere generational crisis (which, facetiousness aside, should not be underrated). 

It’s worth taking this idea seriously. If central banking carries so much leverage, do we allocate enough talent to it? Do we have the right institutions to train the monetary policymakers of the future? How should we think about the politics of central banking? If central banking is to be (once more) a major magnet for ambition, it feels like we’re in what I’ve described previously as the “pre-mainstream phase", where career paths are still quite opaque.

Should we worry about the rise and rise of the central bankers? Today’s central bankers may have entered the profession when it was less obviously a site of power, but their successors may have baser motivations. All forms of power resist compartmentalisation: if you give someone enormous power but not enormous wealth, the pressures of predatory precarity mean that the power will be monetised one way or another - and probably not in the public interest. Perhaps the unpopular conclusion is that our central bankers are today wildly underpaid.  

Can venture capital work outside startups?

Academics Josh Lerner and Ramana Nanda have an excellent new paper on the limitations of venture capital. They draw three main conclusions: first, that VC is appropriate only for a narrow subset of innovations; second, that influence in VC is too concentrated and unrepresentative; and, third, that VCs have become too lax in exercising corporate governance.

All three are worth pondering, but especially the first. There’s been a lot of interest in trying to apply the VC model to domains outside startups, such as “venture philanthropy". Why? One phenomenon that’s core to VC is that startup outcomes appear to be power law-distributed (See Jerry Neumann's definitive post). Most startups fail, but the winners win so big that they make up for having to kiss so many frogs. VC is a “magnitude not frequency of success" business. If the same applies to, say, philanthropy (which is an argument often made by Effective Altruists) or science, maybe a VC-like model can help fund the search.

The problem is these domains lack another obvious but crucial VC feature: its outputs are measured in the same unit as its inputs - cold hard cash. This isn’t true of other domains. Even if you can find a philanthropic outcome that’s 1000s of times better than average (and even some EAs are skeptical), you can't use that outcome to pay for searching across 100s of candidate interventions. From a cash accounting perspective, philanthropy is a “frequency not magnitude” domain. I wonder if that means funding for power law-distributed phenomena outside startups is undersupplied by the market - and, if so, who can fill the gap? 

Summer holiday special: murder mystery games

This is not a normal TiB topic, but it’s summer vacation season and, at least for some readers, lockdown restrictions are starting to ease, so I hope you will excuse me. I’ve written two murder mystery party (i.e. not video) games that I’m making freely available for anyone to play. You can get them here.

I’ve always loved murder mysteries games, so over the last couple of years I’ve had a go at writing some of my own for friends and family. These are unscripted games. You play in a group and each person is given a character with goals and relationships. Ideally you'd play in person, though I guess it might work over Zoom with breakout rooms. There are some basic rules to govern your interactions, but otherwise you’re free to improvise. It requires all the players to throw themselves into it, but if you have such a group, it’s a lot of fun.

There are two I’ve playtested enough to think other people might enjoy them. One, for ten players (nine characters plus a moderator/game master), is set in ancien regime France and is about religious confluct and intrigue at court. The other, for six players (five characters plus a moderator), is set in interwar Paris and is about struggle for control of a political party. Both, I should say, are deeply historically inaccurate... They’re completely free to play - all I ask is that if you end up trying them, you email me and let me know how it goes. Enjoy! (Don’t worry, normal content will resume next week). 

Quick links

  1. You are what you cook. Interesting reflections on creativity and innovation via the world's greatest chef.
  2. Hindsight and foresight. Rob Wiblin reflects on what we know - and should have known - about coronavirus (See also: interesting 2018 paper on underestimating pandemic risk)
  3. The Art of Learning. Excellent (long) thread on the mental models of the fascinating Josh Waitzkin
  4. US vs China, academic metrics edition. China overtakes the US on peer-reviewed publications? (but does it matter?)
  5. Unlikely bedfellows. Intriguing paper on the common psychological correlates of alt-right and far left beliefs

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Until next week,

Matt Clifford