Content Marketing, GDP Lies, Minting Certainty

Plus: Charter Cities, technical debt, Euro conspiracies, and how hedge fund LPs asked for fee increases before they asked for lower fees

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This newsletter is, as you might suspect, is part of my sinister plot to achieve wealth, fame, and camaraderie. It’s working so far. If you’d like the full Bond Villain speech, read my Guide To Content Marketing For Non-Hucksters. The paradox of the Internet is that it’s the most massive of mass media, but the interesting stuff happens in more micro niches. Thirty years ago, if you were interested in one obscure topic that only a dozen other people cared about, you’d probably die without meeting them. Now, they might have a subreddit, and if they don’t, you can find them by writing online.

I’m fascinated by lies. Big Lies, white lies, noble lies, Fake News, fake meat, and self-deception. In The Economics of Lying About GDP, I contrast the effects of China and India’s efforts to nudge their reported economic growth stats in a more favorable direction. In many fields, you can fake it ‘til you make it, but in macro policy that only works if your country actually makes things.

It’s always great fun to apply class warfare analysis to the people most likely to cheerlead class warfare. Deepfakes Paranoia Considered Pointless is my attempt to get to the bottom of why journalists are so worried about forged videos. If they’re worried about dishonest video footage as such, they had ample opportunity to demonstrate it. Now, the real problem they face is losing a monopoly on deceptive editing.

I’m bullish on charter cities, and I’m putting my money where my mouth is. The best reason to learn about economic growth is to figure out how we can get more of it, and charter cities are one of the best options around. So I’ve made an early-stage investment in a Shenzhen-as-a-Service provider.

Money is a slippery concept; a consensus hallucination. If we stopped believing in it, the economy would collapse, but nobody is incentivized to stop. That’s good and healthy, but it does mean it’s nerve-wracking to think about how the system really works. If you understand it, can you still believe in it? In Money is Minted Certainty, I try to syncretize gold-buggery and modern monetary policy by arguing that a bank is best understood as a kind of mint.

Finally, just published: why technical and organizational debt are forms of financing. It’s healthy to be skeptical of debt; all else being equal, it’s better not to owe anybody any money. On the other hand, it’s always good to be able to borrow in order to make high-return investments. Poorly-documented code, un-scalable systems, broken company cultures, and superstar-jerk employees are all forms of borrowing, and it’s better to use them prudently than to eschew them entirely.


An interesting FT op-ed from the governor of Hungary’s central bank, arguing that the Euro was a mistake.

I tend to think of the Euro as a conspiracy to depress the value of the Deutschmark as a favor to Germany’s exporters. In that model, it makes sense in a world where goods flow freely and capital doesn’t, because recessions are out of sync and there’s always somebody, somewhere, who can afford a new Volkswagen. But when capital is mobile, recessions will tend to happen at the same time everywhere; instead of safe havens, you just have last dominoes.

(In this model, the US is a deluxe extra-dense domino that can sometimes avert a continued collapse—not always, though.)

It’s worth meditating on whether the Euro is strictly a bad idea just because its original criteria haven’t been met, or if its existence obviated some of those criteria. I’m still undecided; as XKCD pointed out long ago, every obvious bugfix breaks somebody’s workflow.


Worth reading although it doesn’t actually exist yet: the excellent tech-Fintwit personality Non-GAAP now has a newsletter.


This was a throwaway line, but I’ve been thinking about it a lot: lowering a strategy’s volatility is a de facto fee increase. If you hold risk/reward constant, the lower the volatility the more profits get eaten by a flat 2% management fee. This has two implications about active management: first, changes in aggregate assets under management understate changes in the opportunity set. If a billion-dollar fund has the daily dollar volatility a $500m fund would have had five years ago, it’s implicitly taking advantage of the same aggregate value of opportunities. Second, fee pressure might just be a lagged response to investors’ preference for smoother returns. When endowments ask hedge funds to target lower volatility, they’re basically giving those funds a larger share of returns, so lower fees are just a way to get back to even.