Longreads + Open Thread

Longreads

• Paul Graham on brands. This is a fun essay because it takes the following form: consider a topic that you care a bit more about than other people, then start asking yourself questions about why it's interesting. In PG's case, the topic at hand is that Swiss watches used to be beautiful, minimal, and mechanically clever, and now they're gaudy and don't keep time better than any of the electronics you have within arm's reach. When they couldn't differentiate by being better at the task of telling time, they had to do something else, and they chose branding. You can easily push back on this and say that companies like Apple have valuable brands but also make great products (and I was surprised not to see this addressed in the piece!). But for the products that make that brand so valuable, Apple is generally giving customers a pretty good deal. So maybe a guiding principle could be that companies do best when they're building up brand value, but not selling it. (Other than the charging cables and the notorious $19 polishing cloth.)
• David Oks: it's a myth that ATMs destroyed bank teller jobs, but smartphones did. I've never much liked the contrarian claim that bank tellers' jobs were safe, because while the number of tellers went up alongside the number of ATMs for a while, the growth rate slowed, so technology was automating some of it away. It's true that if you automate one subtask of a complicated transaction, the labor that's complementary to that task gets more valuable. But as Oks notes with respect to phones, once you can bundle all the interactions you have with your bank into one device that you can use from anywhere, ATMs go from lead-generation for a valuable kind of customer to just one more service that banks provide. Perhaps more interesting these days is to think about why ubiquitous mobile payments and credit cards haven't yet destroyed the ATM! Cash persists for many reasons, but one underappreciated one is that we reach for it when we find ourselves unprepared, navigating uncertainty in unfamiliar situations. If level 5 agentic commerce means agents are anticipating our every need and managing the plurality of transactions for us, we may find ourselves in far fewer of those situations.
• Hamilton Nolan muses on what kind of business model makes sense for a modern newsletter. He's not asking from a cash-maximizing perspective (the answer there is to use the newsletter to get deal flow and find LPs and then monetize the whole thing with carried interest and management fees). Instead, he's asking: what kind of media business can a politically progressive person be in without being, or at least feeling, morally compromised. Subscriptions are fine, but many newsletters can't get enough of them to be sustainable, and they also mean that some of the information is behind the paywall—a mission to comfort the afflicted and afflict the comfortable, but only if the afflicted are comfortable paying a few bucks a month, doesn't work. Advertising, of course, creates the temptation to say things advertisers want to hear. And while there's a long history of wealth progressives subsidizing prestige media outlets, there's less of a history of them doing that for individuals and that offering once again entails getting your hands dirty. The right way to think about it is that many newsletters aren't media businesses at all, and that the job of writing them is closer to being a pastor than a journalist. Pastors tend to ask for money, and they ask people who can pay a little more to donate a little more. That model is awkward, but if you're trying to avoid moral conflicts, you'll have to do something awkward eventually.
• Dwarkesh Patel has a wide-ranging interview with historian/composer/sci-fi novelist Ada Palmer, mostly about the Renaissance. There's an interesting meta aspect to the interview, where Palmer's narrative looks at how things came together—Petrarch deciding to revive the classics, art and education as sources of legitimacy, why it was hard to make money mass-producing books before there was a mass market for books, etc. And that's also how doing history works: you can have a better sense of who Machiavelli was as a person if you know what Florentine norms around exile were, for example. Machiavelli could have had a nice life as a court philosopher anywhere he wanted, but he insisted on staying near home because Florence was the only place where he wanted to work. We've also clarified some of Machiavelli's views by adjusting for the way language evolves: Machiavelli talked about the importance of preserving rights for the "popolo," which some readers thought meant "everyone" and which at the time that he wrote meant "the richest ~4%, whose monopoly on the political process is so obvious as to be not worth stating explicitly."
• Will Wilson of Antithesis (disclosure: long) on a fighting retreat from a quirky internal culture. Small companies are all different, but big companies feel pretty similar, and that means that the more a small company succeeds, the less it's the company that early employees were so excited to see succeed in the first place. As Wilson notes, the forces that push for this are strong enough that they're hard to resist—if you want your culture to be stable over long periods, it probably needs to be tied to a religion that entails inconvenient, conspicuous lifestyle choices. A company can't really do that. One thing the piece articulates is why you'd want to do that. An easy way to read the homogeneity of big companies is that there's one good way to manage a company, and everyone who executes it gets big while everyone who doesn't stays small. But, as Wilson notes, a coherent culture is an advantage, because it reduces the latency and improves the fidelity of communication, and communication is the limiting factor for how much an organization can accomplish.
• A Read.Haus reader asks for book recommendations about Drexel and Michael Milken. I got very interested in this era in high school, which was a wonderful time for buying used books online: the fulfillment center economics hadn't gelled yet (or people just weren't thinking about what low inventory turnover does to their costs), so you could get a lot for $0.01 + $3.99 shipping. Predator's Ball is a classic for a reason. It has lots of little character portraits of various financial figures from that era, some of whom have gone on to great success and some of whom are clearly of a particular time when markets were less efficient and rules were poorly enforced. The big more pro-Milken books are Highly Confident and Payback. The latter is basically a legal defense, with lots of nuance that will be fascinating to people interested in the origin and development of securities law. The last I'd mention is Dangerous Dreamers, which is a more general history of financial innovation but which has largely sympathetic summaries of many other controversial financiers. My overall view is that Milken accomplished incredible things in building a new market and assembling an exceptional team. I don't think bending the rules would have made the difference between success and failure there, and those rules were seen as more flexible than they are right now. The actual legal case against Milken was very dodgy in the way that many white collar cases are; he more or less went to jail for minor paperwork violations because it was hard for the judge to believe that someone that close to Boesky and the like wouldn't have misbehaved (Predator's Ball talks about some sharp practices that, while not ultimately part of the trial, do give the impression that he didn't like to leave money on the table). The consistent personality portrait across all these works shows that in one sense, his punishment was deeply unjust: he was banned for life from the securities industry, which is like a chef who gets accused of mistreating the kitchen staff and is permanently forbidden from so much as operating a microwave. Milken was clearly born to make deals, and was sometimes a little too good at it.
• In Capital Gains this week, we look at why commodity futures prices are not like stock prices. The price of front-month futures is the price for delivering a product in a specific place at a particular time, and that's not the same thing as the long-term price. Front-month oil futures tend to be more volatile when there are supply shocks, because there's literally less oil to go around. But you can't use the price of more distant contracts to say exactly where prices will go, because those prices are partly set by the arbitrage opportunity to buy physical oil, sell futures, and profit from the difference. Which means that when the price of storing oil changes, perhaps because existing storage is getting drawn down that pushes the equilibrium price of storage down, too. Prices still embed expectations, and every price is a one-dimensional projection of a multi-dimensional reality. But that's especially true when the price is for a physical product.

Open Thread

• Drop in any links or comments of interest to Diff readers.
• What are some big companies that have maintained a distinctive culture? Trader Joe’s seems different from other retailers (maybe having a parent company actually helps!), Southwest clearly differs from other big airlines (but it’s getting more similar), Chick-fil-A actually follows the “inconvenient, conspicuous lifestyle choice” model by being closed on Sundays. Who else?

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