A Few Things: DALL-E2, Balaji on Lying Media, Doomberg & Marko on the European Energy Crisis, Uncharted, Niall Ferguson on Inflation, A Shortage Of Trust, Simulacra and Simulation
September 7, 2022
I am sharing this weekly email with you because I count you in the group of people I learn from and enjoy being around.
You can check out last week’s edition here: A Few Things: Zoltan on Bretton Woods III, Jim Grant on the FED, Complexity Science, SaaS Returns, AI 2041, Balaji on Network State…
“Sinners often speak the truth. And saints have led people astray. Examine what is said, not the one who says it.”
- Jesuit priest Anthony de Mello encouraging us to focus on the message before the messenger.
“The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.”
- Winston Churchill
“The secret to doing good research is always to be a little underemployed. You waste years by not being able to waste hours.”
- Amos Tversky
A. A Few Things Worth Checking Out:
1. This has absolutely blown my mind.
Open AI released DALL-E 2 last week. It’s an AI system that can create realistic images and art from a description in natural language.
For example, it can take the original Girl with a Pearl Earring by Vermeer and synthesise the room she might be in:
Or it can create variations:
or you could give it a description like: a painting of a fox sitting in a
field at sunrise in the style of Claude Monet
Here’s a 2-min video from Open AI on how it works:
The future is going to be a funny place.
How will we know what is real?
2. Balaji Srinivasan was on the Modern Wisdom podcast titled: Legacy Media Is Lying To You.
Balaji is an entrepreneur and essayist, he was co-founder of Counsyl, former chief technology officer of Coinbase and former general partner at Andreessen Horowitz.
I have found him a good guide to our near future.
Some of the big ideas I got from this are:
Importance of having a world view to hang information and ideas onto. Don’t read in a vacuum, else it’s all just noise.
Have a dashboard of your life: what’s doing well? what’s not working that you should work on now?
In the future, synthesis engines will be much more important than search engines.
By 2030, the English speaking Internet will be Indian. India’s projected population in 2030 is 1.5 bn, versus US & Europe combined at 900mm.
In the connected world of tomorrow, where knowledge workers can live anywhere, a country’s firewall will be like today’s immigration policies.
3. Doomberg, Marko Papic, Luke Gromen and Grant Williams got together to discuss the European Energy Crisis:
Here is a link to the 2-hr recording:
My learnings were:
Marko: There is political will to keep Europe together. The cost of subsidies is EUR 500bn, which can be borne. Europe is used to paying more and it’s survived just fine.
Putin's leverage goes away next year. Europe can get gas elsewhere, albeit at a higher price, but Putin can’t sell gas to many others in that size.
G7 energy sanctions are just a facade. The oil is still being sold, if they were real it would be similar to what we have done with Iran. Sanctions are a great deal for some countries. And now with G-7 cover it's even better. European sanctions hurt Europe more than they hurt Russia. He sees both Europe and Russia capitulating.
Doomberg: Prepare for a rough winter and stockpile what’s necessary to survive at your household level. Europe really should bring Nuclear back. US and Canadian Gas companies in good shape long term as global gas prices converge due to LNG. We will have a global gas market as we do with Oil today.
4. Three-time CEO and six-time author Margaret Heffernan was on the EconTalk podcast discussing her book: Unchartered. It’s all about navigating uncertainty and conducting imaginative experiments.
The three big ideas I got out of it were:
Scenario Planning: Forecasting, predicting is not a good use of time. No one has a crystal ball. Far better to plan for different scenarios and be able to survive them. “If this occurs, what will I wish I had done in advance?”
Experimentation is the key to innovation. Have the courage to run experiments and make sure ideas from everywhere can reach you.
Be a flaneur (as Taleb would say) and be present in the now. Explore across domains and keep an open mind. This will allow you to find new ideas and combine ideas across domains.
“There's a lot of misunderstanding about scenario planning. One is that it's about coming up with different views of the future and then choosing one… And that's not what it's about. It's really about coming up with a number of different scenarios of the future and then interrogating each one and saying, 'Okay, if Scenario One were to come true, what would I wish I had been doing right now in order to put myself in a stronger position for that eventuality?' And similarly, with Scenario Two, Three, and Four. And so, what it really is at its best at is surfacing choices, options, and alternatives.”
“When I worked in broadcasting, I had a huge pleasure of working with a lot of really outstanding artists--writers, playwrights, actors, musicians, visual artists. And, I started noticing lots of things about them. One of them was that quite a lot of them were fantastically good at doing something today that ended up being exactly what people wanted two to three years hence. And I was just constantly puzzling how they did that. And it wasn't about prediction. It was: They were fantastic sense-makers, and they generally wandered around- is really the simple answer. Which is: they really paid attention to where they were and what people were thinking and what different things they saw change. And they were constantly mulling over this and thinking, 'What does it mean? What does it mean? What's on people's nerve endings?' You know. And they necessarily lived in a context of uncertainty.
5. Learnt a bunch from Neckar’s post on Julian Robertson and Tiger.
That’s a track record Julian put up.
6. Historian Niall Ferguson has a warning for investors:
7. Focus To Win by Farnam Street.
The only people you should hire are focused ones. The only competitors you should worry about are the focused ones.
If you look around, you’ll notice the people and organisations moving the fastest are the focused ones. Not only do they focus on a few ideas, but within the scope of those ideas, they are able to focus on the key variables.
Identifying the variables that matter comes with focus. When you commit to living in a problem, you understand things about it that the tourist cannot.
Focus turns energy into results. Why would you spend any time on your 5th most important idea? All of the energy that goes toward anything that is not the most important thing comes at the expense of the most important thing.
Narrow the focus. Raise the standard. And set yourself apart.
8. Matrix is one of my favourite movies, it was cool to see the making of the dojo scene:
9. A new friend, Max T, asked me how I handle learning and information flow on a weekly basis and it helped crystallise my thinking on it.
Always pursue your own curiosity. The best way to be interesting is to be interested. There is so much stuff out there, twitter, blogs, papers, podcasts, books, that the magic is not in what you read, but in what you don’t. Optimise for wisdom not noise.
Spend a lot of time finding good sources and people you trust. Focus on information that is timeless not ephemeral. Always ask does this person know what they are talking about and will this information be useful in a years time.
Writing and communicating is a superpower and comes with practice, so just do it often. But zooming out, it’s not even about what you read or write…it’s about the person you are becoming. Spend time thinking about who you want to become and then acquire the skills and habits that will make it a reality.
B. A Shortage Of Trust:
Thanks to my friend Jakub, I read a thoughtful piece by Vincent Deluard at StoneX. It was titled: A SHORTAGE OF WORKERS, ENERGY, AND TRUST: WHY THE RECESSION WILL NOT KILL INFLATION.
We have all been discussing the labour shortage and energy shortage as inflation drivers, but I’d never thought about the trust shortage.
Sharing the key bits below:
The third shortage is the hardest to measure but likely the most critical for secular inflation: trust. Inflation is inversely proportional to the level of trust between a country’s citizens. The countries with the lowest inflation are also the ones with the highest levels of trust.
Countries with a high level of trust are so predictable that they are often quite boring. Life follows well established paths: get good grades at the local public school, go to the capital to study at the handful of elite universities, join the ranks of government or the country’s leading bank, buy an apartment in the capital and a chalet in the mountain, and adopt the exact same views, tastes, and opinions as your peers. Repeat with children and grandchildren.
If a country has a high level of trust, the most inflationary policies have almost no effect on prices. Japan has run a cumulative deficit of 161% of GDP since 1995. The Swiss central bank’s balance sheet has soared to 130% of GDP from 32% of GDP in 2010. Both countries deliberately weaken their currencies to boost exports. And yet inflation in these countries is among the lowest in the world, at 3.4% in Switzerland and 2.4% in Japan.
Conversely, trust is scarce in high inflation countries. Elections are rigged. Judges can be bought. Government contracts are awarded to friends and family, run over cost, and are rarely finished. Family and ethnic loyalties outweigh merit and hard work. Social and cultural divisions run deep: typically, a third of the populace dreams of a socialist utopia, a third believes that only a strong military junta can maintain order, and a third supports the status quo because it serves their personal interests.
Everything is harder in low-trust countries.
It seems to me that the general level of trust US and Europe was slowly eroding in the past two decades and that it collapsed with COVID. Opinion polls confirm this unravelling. Just 18% of Americans think the country is headed in the right direction. Joe Biden’s approval rate collapsed to 37%, which is a bit less than the low set by D. Trump and the level which forced the resignation of R. Nixon.
This collapse of trust is observed across all Western democracies, even in countries with traditionally boring politics and strong social consensus, such as Canada, Germany, and the Netherlands. Explaining this complex and multi-faceted phenomenon exceeds the scope of this paper, but I will highlight the three most immediate causes which have accelerated the unravelling of post-War institutions.
First, transparency. Power’s legitimacy rests upon the notion that the rulers are worthy of their privileges.
Second, the fragmentation of reality and the erosion of shared narratives. The disintermediation and the fragmentation of the news naturally leads to a fragmented society.
Third, COVID was an inherently trust-destroying event. Because of bad luck, poor information, and excessive caution (rather than any dark ulterior motive), politicians and health authorities have covered themselves in ridicule and lost credibility by pushing conflicting messages and adopting inconsistent policies. COVID and lockdowns broke the last remaining social institutions which tied communities together.
C. Jean Baudrillard and Simulacra and Simulation:
Staying with the Matrix theme, here’s a trailer to remind you if you missed the original:
The French philosopher Jean Baudrillard is credited for the idea behind the Matrix movies.
The Wachowski brothers paid homage to Baudrillard in the first "Matrix" movie. Neo, the character played by Keanu Reeves, hides his contraband software in a hollowed-out copy of "Simulacra and Simulation. In another scene from the movie, Laurence Fishburne's character quotes Baudrillard directly: “Welcome to the desert of the real.”
What’s relevant about this book today?
Baudrillard would say, we are already living in the Matrix. We don’t need some Metaverse for it.
His key messages about today would be:
The “simulation” we are in disconnects us from reality. Media and technology creates a layer of abstraction, such that for us reality only exists in the media, in TV, on our phone. When we say “War”, we just see images on a screen. In the old days, if a war was a thousand miles away, it didn't exist. Now it exists, but as something narrow and general. When we see an issue now, we see it with a very narrow set of images and symbols. This leads to most of us having little connection to the real world.
We make sense of the world socially. As a people we focus far more on having common symbols we can gather around rather than our own individual realities. As a society now, we focus on producing symbols versus living in a reality. This leads our interactions being far more about signalling and symbolism. The biggest companies today manipulate symbols and we value things primarily based on their symbol values.
There is no master narrative or truth. We can all choose to be who we are and then find data to justify that position. We can all live in our own simulations. We have lost all ability to make sense of the distinction between nature and artifice.
Here’s a great summary video (with 190k views) if you are curious:
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As always a truly fascinating read. I felt more awake and inspired post the read. Thanks Ahmed.