The Diff is a newsletter tracking inflections in finance and tech. Our goal is to track the companies and trends that will matter more over the next five years, rather than just keeping tabs on what's happening day-to-day. Finance and tech are two broad industries that both happen to be very meta industries: they're a layer on top of the rest of the economy, and on top of human behavior. They're also good laboratories for understanding broader trends; when industry cycles are fast, as in software, you can learn things that might take decades to become apparent in a slower industry. Finance has the convenient feature that asset prices react almost instantaneously to news (not always the right way, of course), so you can get a real-time reading on what people are thinking in response to what's changing in the world.
Today, large institutions are mostly designed for a much simpler world with faster productivity growth. Outside of computers and communications, scientific progress has slowed abysmally since the mid twentieth century. Meanwhile, in government, media, and education we’ve moved backwards; we’re less efficient and less effective than ever before, despite shinier tools and lavish spending. But the obligations institutions have—whether they’re formal ones like government transfer programs or informal ones like a company’s commitment to its customers, employees, and suppliers—are all designed around a higher-growth world. This naturally leads to conflict.
Some of that conflict will play out between legacy sectors and more dynamic ones, and plenty of it will happen within those sectors. We are still early to the trend of software getting deeply embedded into every company’s processes, and to the financialization of everything.
Pundits like to talk about how the pace of change has never been faster. They’re right, but in the wrong sense: the pace of fundamental change is slowing down, so unpredictability represents less progress and more chaos.
What is The Diff About?
- Big Tech: what are Amazon, Google, Facebook, Apple, and Microsoft up to? How do they think about the world they increasingly run? As more of the world gets mediated through screens and stored in databases, understanding what’s going on means thinking like a programmer. Programmers, after all, are pushing changes in reality to prod every day.
- Tiny Tech: profiling emerging startups and new, unproven technologies. A valuable tech company is an incumbent, with the attendant blind spots and weaknesses. Smaller companies are a bet on the future, based on a vision of how it will differ from the present. (And small companies can’t afford a PR department whose job is to tell the CEO don’t say that.)
- Finance: Financial institutions react to the world quickly—you can go from long AAPL to short AAPL more or less instantly, but for Apple to go from long smartphones to short smartphones would take a decade. So finance is a leading indicator of a) the state of the world, and b) what’s uncertain about it. But financial institutions are run by human beings, with their own biases and incentives.
And some narrower, more time-sensitive trends:
- Covid-19 has had an immense impact on society, but the long-term effects are just starting to play out. These include political shifts, breakdowns in the supply chain, mass insolvency in small businesses, and growth in the biggest and most profitable technology companies.
- American universities are the core of America’s competitive advantage in building and scaling large technology companies, but the university system is overextended.
- As competition between the US and China gets sharper, tech companies will get more politicized. Which faction they align with is an open question: are these freewheeling coastal companies natural Democrats, or are they big businesses worried about regulation and thus natural Republicans?
- Meanwhile, other governments worry that they’re being drawn into either the US or Chinese orbit. Countries have many ways to determine their own fates, from diplomatic relationships and economic independence to military strength. Over time, more countries will view controlling their hardware, software, and energy as critical.
Who Writes The Diff?
The Diff was founded by me, Byrne Hobart. I’ve worked in tech (digital ad agencies, Yahoo, 21.co) and finance (SAC Capital/Point72, 7Park Data, M Science). I’ve been investing in public companies since middle school, and writing online since high school.
Jack Wiseman joined in August 2021 to work on research, operations, and new ventures including recruiting.
Who Reads The Diff?
Readers skew towards the two fields I write about: technology, particularly software, and finance, especially hedge funds. Readers include hedge fund managers, tech company founders, venture capitalists, and 1.5% of the Forbes 400.
What You’ll Get
Some of the most popular free posts from The Diff include:
- Minsky Moments in Supply Chains
- Amazon Sees Like a State
- How Airlines Explain the Economy
- V-Shaped Recovery for Me, L-Shaped Recovery for Thee
- VC Incentives: Logo-Hunting and Optionality (sample feedback from a VC associate: “Now I understand why I want to quit my job.”)
- Hiring Based on Side Projects: Unfair, But Good For the World
- Palantir: On Business, Cults, and Politics
- Stripe and Solid-State Economics
- The Factorio Mindset
- Understanding Airbnb
- How Bubbles and Megaprojects Parallelize Innovation
- Just One Thing or Every Single Thing?
And some of the top paid posts:
- Companies: Korea's Samsung or Samsung's Korea?, Games Workshop: In The Grim Dark Future, There Is Only High Incremental Operating Margin, Carta: Bringing Tech Companies Back to the Futuristic 1990s, ZoomInfo: IPO of an Accidental LinkedIn Clone, Theme Parks, Pre-Covid and Post-, Asana: Ontology-as-a-Service, Snowflake and the Price of Simplicity, Opendoor Restructures Real Estate, Understanding Affirm, Roblox: Tweenage Mutant MMT-ers, and Understanding Flag Carriers.
- Finance: High Modernist Investors and Postmodern Investors, A Useful Economic Law That's Always Wrong, The Alternative Data Primer, Value? Yes. "Systematic?" Not Necessarily, Why United Airlines Wants to Risk a Run on the Bank, It's Hard to Make Money Shorting Worthless Stocks, On What Adds Up, and Collectibles, Fractional Status, and Fragmented Funding.
- Macro: African infrastructure: The long, long game, Vacations as the Linchpin of Eurozone Economic Stability, Globalization: A Toy Story, Reserve Currencies as Giffen Goods and the Consumer of Last Resort, and Big Cities Have a Comparative Disadvantage at Basic Services.
- Everything Else: The Programming/Excel Efficient Frontier, Minimum, Viable, and Not Even a Product, and Why Does "Commoditize the Complement" Work?.