Longreads + Open Thread

Longreads

• Aurelia Song and Charlie Dever on cryonics, and why it's hard. Cryonics is a nice Pascal's Wager because it does offer a theoretical shot at immortality—humanity has eliminated one cause of death after another and gotten better at extending healthspans (albeit mostly through lifestyle changes), so there's the tantalizing possibility that we'll be able to keep people alive indefinitely at some point. But the practical problems are daunting: this piece is mostly about the mechanics of actually preserving a body in a way that lets it get restored, which is especially tricky given that the part we really care about is the brain, and the components in question are incredibly delicate. Reading this piece will give you a deeper appreciation for your own skull, which in all likelihood will keep an incredibly delicate set of mechanisms physically safe from trauma for the better part of a century.
• Tyler Cowen interviews John Arnold. One of the divides between Bond People and Stock People is that with stocks, you never quite know if you were right or not, and you can be right on fundamentals but wrong on something else. But with bonds, if you're right, the bond says right there in the indenture what you're getting and when, so you can pleasantly ignore the noise. Physical commodities have this same trait: "One of the great things about the natural gas industry for a long time—and it’s still largely true now—is it was a closed system. You could figure it out. It also had this forcing mechanism twice a year. The fundamentals had to align with price more or less twice a year—at the end of the injection season and end of the withdrawal season of gas. So, where price could deviate away from fundamentals for a time period, it had to come back at a certain time. It was a system that was conducive to being modeled." This was in the context of Arnold's career approach, of choosing a narrow domain and then being as good as possible at that domain. This creates some meta-risk (he probably wouldn't have done so well if he'd chosen coal instead of gas), and also boredom risk (at some point, the incremental billion is not so fun). So, this is a high-variance approach, but the world is a more interesting place when more people take this option.
• Owen Yingling on the decline of literary fiction. This piece is full of surprises: the last work of literary fiction to make the Publishers Weekly annual bestseller list was The Corrections, in 2001; Portnoy's Complaint was at the top of the list in 1969. The piece looks at some hypotheses for which the timing doesn't work—we weren't too TikTok-addled to appreciate Franzen in 2002—and makes the point that many of the MFAs who are inventing compelling characters and putting them in thought-proking-dialog-inducing situations are doing it for HBO and Netflix instead. A truly strange development if so; you'd think readers would be less distractible than TV viewers. On the other hand, maybe well-produced TV shows featuring attractive stars lead to a genre of literary fiction that people will not just buy but actually finish.
• Gareth Edwards has the story of Compaq—it turns out that the beige box biz is more interesting than people give it credit for. A critical moment in American business culture was when IBM launched a PC that was fairly open, so that in principle anyone could build a compatible clone. This was a very bold move, which turned out to be a bet-the-company decision (IBM lost the bet. They still exist, but not really as a force in the computer industry.) The work of actually building an IBM-compatible PC without getting swarmed by IBM-compatible lawyers was one of those weird projects at the edge of law and tech, a bit like some parts of the online ad ecosystem today. And, as it turned out, having lots of commodity PC companies beating one another up was a wonderful backdrop for the companies that sold components to those PC businesses, or the software that ran on them. The PC manufacturers, in effect, donated a great deal of effort and business acumen to the project of making the world a better place for selling PowerPoint.
• Brad Setser on what the dollar's reserve status really means. Some of this is just a useful clarification—there isn't a direct link between the dollar being a reserve asset and US equity outperformance, except in an indirect way. The most interesting part is the claim that demand for safe dollar-denominated assets is not just a function of governments accumulating reserves, but of private sector institutions reaching for yield. It wouldn't be the first time this happened: the dollar was imposed as a global reserve currency because the Bretton Woods arrangements made it directly convertible with gold, but it remained a reserve currency after the gold link was severed because so many people had used it that way. So if the US used to have to run deficits to supply safe assets to foreign governments, that same deficit-friendly approach makes US debt a bit spicier, in potential real-return terms, than what other big borrowers can offer.
• In Capital Gains this week, we look at how the highest-margin and lowest-cost companies both have the most interesting set of strategic options, and what each margin structure does to a company's culture over time.

Books

Bandwidth: The Untold Story of Ambition, Deception, and Innovation That Shaped the Internet Age and Dot-Com Boom: We talk about the "dot-com boom" rather than "the telecom boom" because relatively more dot-com money went to Super Bowl ads, not to mention consumer-facing applications. The rise of bandwidth consumption per capita is just one of those gradual, invisible quality-of-life improvements, like your higher-than-historical odds of surviving car accidents or gunshot wounds, or the steady decline in the inflation-adjusted price of a basic coffee machine, refrigerator, etc. The book's author, Dan Caruso, played a role in this as an executive in several of the companies involved, most recently Zayo, which was taken private in 2020 for $14bn.

This is an unusually relevant story today because we're in the midst of another capex-heavy buildout underwritten by aggressive demand projections. As with the early stages of the telco boom, basically every disappointment has been from underestimating rather than overestimating demand. One feature of such booms is that often, there's a fixed cost to adding a certain amount of capacity, and a low marginal cost to adding more: the book mentions that during fiber optic buildouts, most of the cost was the digging, not the cables, and that one company, AboveNet, took this seriously and used many more fibers than competitors, paying 20% more and getting ten times the capacity.

The telecom boom went through roughly four phases:

1. Everyone who didn't invest the maximum possible amount in capacity felt stupid, as the ones who did got high market values and attractive M&A offers.
2. Everyone who did invest as much as possible in capacity felt stupid, and there was a massive fiber glut. A surprising fraction of these companies resorted to various kinds of accounting fraud. The most common techniques were basically barter deals, where two fiber companies would buy similar amounts of capacity from each other, with both sides booking revenue. In other cases, they just reclassified expenses as capital expenditures instead of operating expenses. Caruso mentions a few cases where he was in the room when such deals were proposed, but managed to extricate himself without doing anything that would lead to jail time.
3. Demand growth slowed, stocks went down, and many people in the industry did, in fact, spend some time in prison. Many of the companies they built went bankrupt, and slightly more patient or more savvy telecom investors picked up the pieces.
4. All of these irresponsible and sometimes criminal executives were in some sense vindicated by the fact that we now live in a world of ubiquitous high-bandwidth connectivity, where it's not at all strange to watch a high-resolution streaming video on a palm-sized mobile device, or to acquire a game that's tens of gigabytes by downloading it.

So, read this if you want a vast collection of stories about how people can be basically right about the long-term outlook and, through their own mistakes, lose all of their money and perhaps their freedom. You have to get more than the big picture right.

Open Thread

• Drop in any links or comments of interest to Diff readers.
• What are some other booms that, because they were less consumer-facing, are under-studied? Bandwidth briefly mentions an article deflating some myths about bandwidth growth in the 90s, authored by Andrew Odlyzko, who has written an excellent essay on a similarly obscure but massive bubble in the 19th century.

Diff Jobs

Companies in the Diff network are actively looking for talent. See a sampling of current open roles below:

• An OpenAI backed startup that’s applying advanced reasoning techniques to reinvent investment analysis from first principles and build the IDE for financial research is looking for software engineers and a fundamental analyst. Experience at a Tiger Cub a plus. (NYC)
• Ex-Citadel/D.E. Shaw team building AI-native infrastructure that turns lots of insurance data—structured and unstructured—into decision-grade plumbing that helps casualty risk and insurance liabilities move is looking for a data scientist with classical and generative ML experience. (NYC, Boston)
• Deerfield-backed, Series A company building agents for healthcare administration (prior authorization, eligibility checks, patient scheduling) is looking for a senior software/AI engineer to build backend services and LLM agents. Experience building and monitoring production-quality ML and AI systems preferred. (NYC, Hybrid)
• Well-funded, fast-moving team is looking for a full-stack engineer to help build the best AI powered video editor for marketers. Tackle advanced media pipelines, LLM applications, and more. TypeScript/React expertise required. (Austin, Remote)
• A Google Ventures-backed startup founded by SpaceX engineers that’s building data infrastructure and tooling for hardware companies is looking for a product manager with 3+ years experience building product at high-growth enterprise SaaS businesses. Technical background preferred. (LA, Hybrid)

Even if you don't see an exact match for your skills and interests right now, we're happy to talk early so we can let you know if a good opportunity comes up.

If you’re at a company that's looking for talent, we should talk! Diff Jobs works with companies across fintech, hard tech, consumer software, enterprise software, and other areas—any company where finding unusually effective people is a top priority.