Longreads + Open Thread

Longreads

• In Economic Forces, Brian Albrecht has a great piece on how hard it is to draw meaningful causal conclusions from economic data. You face annoying tradeoffs about how well you can measure the direct effect of a given change and how well you can assess the indirect effects. History always has a sample size of one, so you'll always be able to argue about things, forever. This is a piece that would be a lot more viral if it claimed that it's a secret the economics establishment doesn't want you to know about, but it isn't—it's just something that commonly gets addressed in the paper but not necessarily in the abstract. (As a general rule, there's a lot of alpha in looking at a higher-order property of the distribution—if everyone's talking about mean, look at the standard deviation.)
• In Works in Progress, Ralph Weir argues that Greek and Roman sculptures were not, in fact, painted with incredibly tacky colors. There are two sides to this argument: first, we have frescoes that depict statues, and they're pretty tasteful (not to mention other ancient statues that are painted and look pretty good). And second, that the people reconstructing these statues in their original form are reluctant to do anything that doesn't have a strict historical justification, and thus work with the (tiny subset of) material they have, rather than making an educated guess. In retrospect, the claim that those austere marble statues actually looked like Ronald McDonald was too good to be true.
• Issie Lapowsky has a retrospective on Tiger Global's 2021-vintage venture fund in Rest of World, with some (mostly anonymized) interviews with founders who were recipients of Tiger's largesse. When you're judging historical events, any time the judgment is relevant, it's too hard to know for sure, and the funding spree of 2021 is no exception. In venture, there's a classic J-curve, where failures flame out quickly and successes take a longer time to play out. That's going to be especially true of the class of '21, where the more commoditized part of venture was assessing their current economics, and some of the upside came from figuring out just how big their addressable market could be. Some of the best venture investments are the ones that expand along axes that investors didn't expect (it's unlikely that anyone could have predicted how much time people would spend watching short-form video a decade ago, but even having a guess an order of magnitude too low would have underwritten some good deals). If your model is that companies structurally differ in how high their long-term return on investment is, then you'd expect a diversified portfolio of high-risk investments to start out with lots of losses, and for the survivors to keep printing higher and higher valuations.
• Nilay Patel interviews Stack Overflow CEO Prashanth Chandrasekar. Some of corporate America's greatest unsung heroes are the people who run companies that will never be quite as profitable as their backers hoped, but that do have a valuable and free cash flow-positive role to play in society. Stack Overflow used to be a brand name like Kleenex, though one that probably beat Kleenex in terms of daily sessions per weekly active user except at the peak of flu season. It isn't that anymore, and can't be—but it's still a uniquely valuable repository of training data, and remains a great tool for technical Q&A. A very worthwhile interview for anyone who's deeply depressed about the impact of LLMs—there's a difference between AI being net bad for you and AI cutting your economic value to zero.
• In Works in Progress, John Halstead and Philip Thomson on why prehistoric socities weren't quite as violent as we thought, and what actually drives this violence. You might be tempted to think that it's good news that our ancestors were less homicidal than previously thought, but this piece still has plenty of grim tidings: they argue that humans are unusually reluctant to engage in violence, but that we're also unusually lethal compared to other species. Small, egalitarian societies can't coordinate retaliation against the local sociopathic killer, so that killer tends to get away with more. So what separates modern, comparatively non-murderous societies from our more violent ancestors is that we're more effective at dealing with a very small population of sociopaths. (Or that we've given them other, less violent ways to keep busy.)
• This week in Capital Gains, a look at why convertible bonds monetize volatility, with thoughts on option pricing, hedge fund history, and why some CEOs have a direct financial incentive to be as controversial as possible.

Books

The Big Time: Harvard Business School's Most Successful Class--And How It Shaped America: Collectively, America's Baby Boom generation has sewn up the all-time competitive rankings for "born at the best possible place and time." But one of the luckiest subsets of a generation is the members of the Greatest/Silent generation cohort that managed to get into a handful of elite institutions that had a half-decade backlog to work through and could be as picky as they liked while still admitting really incredible people. The Harvard Business School class of 1949 was the first class to be disproportionately made up of G.I. Bill recipients, many of whom had already had a large number of direct and indirect reports, and in a situation where the stakes were a bit higher than they were in corporate America. (That meant that not only were they subject to a very high bar for achievement, but they also had a difficult shared formative experience; America's postwar business elite would have been incredibly cohesive.)

You could write a book about this as a triumphalist work about the men who Made It, and how much they deserved it: "From humble beginnings as the son of an executive vice president of the Du Pont Corporation, our hero, Albumen Waspington IV, reached the heights of senior executive vice president at the Du Pont Corporation."

But that's very much not what The Big Time is going for. The higher the cutoff is for any given contest, the more the winners will be determined by luck, and the book is partly about what people do when they get an incredible windfall. What many of them do, in this book, is: they go into the ad business. (Way back in 2011, Jeff Hammerbacher worried that "he best minds of my generation are thinking about how to make people click ads. That sucks." Turns out it's been a problem off and on for a while!) They were part of a generation where the critical problem for businesses was generating demand, because government-funded capex during the war had created so much supply. A technocrat couldn't have planned it better—the brightest and most ambitious people around tended to focus their careers on the critical problem of convincing people to spend more money. Meanwhile, very few of them went into finance; allocating consumption was a more pressing problem than allocating capital.

And they did very well. "Forty-five percent of the men in the Class were either CEOs or chief operating officers... Collectively, [the companies they managed] had annual revenues well in excess of $50bn, [and] employed over a million people." Notably, they didn't seem to start many companies. They also didn't go into finance—Lever Brothers alone hired more Harvard MBAs than the investment banking industry. There are points in the economic cyle where being an entrepreneur is the best way to create wealth, but there are other times where it's actually more valuable to take an existing institution and make it run much better. There was more than a startup's worth of value creation available from dragging a company whose CEO was still living in the Great Depression to the present, and some of that upside was captured by the class of '49.

The book is a nice sociological portrait, and it goes out of its way to be literary (it seems like business books started to experiment more with style starting after The Money Game in 1968, and then gave up on it around the Great Financial Crisis, when straightforward reporting was plenty novelistic). Anyway, the book has some fun with its prose: "Little new blood came in through the thirties, and, with business prospects so dim, it was mainly dim prospects who studied business." Elsewhere, the book describes the growth of Haloid (parent company of Xerox) as "exophthalmic." A good book over all, and one with a little extra flair, too.

Open Thread

• Drop in any links or comments of interest to Diff readers.
• Are there any other good books about a cohort that basically lucked into unusually stringent selection criteria, such that they'd be permanently branded as elites? This can't have happened just once.

Diff Jobs

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

• A well-funded, Series C startup building the platform and agent primitives to drive operational transformation at large, complex institutions (starting with higher education) is hiring platform engineers. The work spans distributed systems, applied AI, and full-stack infrastructure, focused on deploying reliable agents that meaningfully bend institutional cost curves. (Remote)
• YC-backed startup automating procurement and sales processes for the chemicals industry, which currently relies on a manual blend of email, spreadsheets, legacy ERPs, etc. to find, price, buy, and sell over 20M+ discrete chemicals, is hiring full-stack engineers (React, TypeScript, etc.). Folks with exposure to both startups and bigtech, but also an interest in helping real-world America with AI preferred. (SF)
• A first-of-its-kind PE firm applying blockchain technology to transform legacy businesses is seeking an Investment Partner to lead deal execution and portfolio management. Ideal candidates have 12+ years of transaction and portfolio experience at leading tech-focused buyout funds (Silver Lake, Vista, Thoma Bravo, Francisco Partners, TA Associates, HG, Thrive Capital, or similar). No crypto experience required—they're looking for elite PE operators who are curious about frontier technology. (NYC)
• A leading AI transformation & PE investment firm (think private equity meets Palantir) that’s been focused on investing in and transforming businesses with AI long before ChatGPT (100+ successful portfolio company AI transformations since 2019) is hiring Associates, VPs, and Principals to lead AI transformations at portfolio companies starting from investment underwriting through AI deployment. If you’re a generalist with deal/client-facing experience in top-tier consulting, product management, PE, IB, etc. and a technical degree (e.g., CS/EE/Engineering/Math) or comparable experience this is for you. (Remote)
• A hyper-growth startup that’s turning the fastest growing unicorns’ sales and marketing data into revenue (driven $XXXM incremental customer revenue the last year alone) is looking for a senior/staff-level software engineer with a track record of building large, performant distributed systems and owning customer delivery at high velocity. Experience with AI agents, orchestration frameworks, and contributing to open source AI a plus. (NYC)

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.