Longreads + Open Thread
SF Crime, Tolstoy, Defense Tech, Social Media, Diversification, Diller
Applied Divinity Studies has a data-driven disagreement with the thesis that San Francisco’s crime levels are unusually bad lately. It’s always possible for a narrative to be both popular and completely wrong, and it’s always good to double-check the data. Of course, data on crime is unusually hard to trust, because the people who compile it are the ones who are being judged based on it. And in some cases you can read the post as questioning the possibility that we can ever get a trustworthy statistical sense of crime rates: one point it makes is that there are a handful of stores that report vastly more shoplifting than others, and that they distort the data. But a corollary to this is that a substantial fraction of shoplifting incidents never get reported.
C. Trombley One has a review of Tolstoy and De Maistre’s skeptical theory of history, worth reading both in light of the argument above and because of current events in Ukraine. If it’s impossible to interpret historical events without voluminous information, some of which may be wrong, then interpreting current events is that much harder. (Especially in this case, because Putin has exercised control over Russian media for years, while Zelensky was elected in part because he was good at using social media—when you see him on Twitter, keep in mind that he’s in charge of Ukraine in part because he’s good at convincing people of things through social media.)
Josh Wolfe in TechCrunch talks about defense tech as a return to the tech industry’s roots. Before there was an unlimited supply of VC and growth equity money, there was an unlimited supply of Department of Defense money (during the Apollo program, NASA ordered more transistors than it strictly needed from Fairchild Semiconductor, because they worried that Fairchild would go under before the program ended). Part of the case for defense tech is that as big tech companies mature and start operating more democratically, employees who object to selling weapons can scuttle efforts to do so. The companies that excel in defense tech focus on it exclusively.
T. Greer at Scholars Stage has frank thoughts on how US government officials misuse social media : “Memes like these are the product of a culture that retweets more than it reads.”
Alicia McElhaney at Institutional Investor has a great story on the Gerber Statistic, a better measure of diversification; the creator thought his efforts challenged the work of Harry Markowitz, but ended up publishing with him. Measuring diversification rigorously means having an estimate of how each incremental addition to a portfolio affects that portfolio’s risk, which sounds like something that could be fairly easily inferred from historical data but which turns out to have some complications. This is also a nice story about practitioners cooperating with academia; there’s a huge volume of published research in academic finance that ends up only working when transaction costs or other real-world factors are ignored, and sometimes intuitions about the real world can be formalized.
King of Media: The Barry Diller Story: The media industry is full of financial late-bloomers, who get a great operating track record early in their career but only start accumulating serious money later on. Diller is a great example of this: he was a successful agent, and then TV executive, but didn’t work fully independently until three decades into his career, when he took over QVC.
Drop in any links or thoughts that would be of interest to Diff readers.
The Ukraine invasion, like Covid, was a “Gray Rhino”: there was a long period where it was a live possibility with nonzero odds of being a big deal, but it was still being ignored. (In both cases, I’m using market reactions as a proxy for how much it was ignored until it was too late; Russian stocks dropped 33% on the news of the invasion, indicating that even the oligarchs weren’t fully clued in.1) What are some other good Gray Rhinos to keep an eye on?
A Word From Our Sponsors
Mercury is the banking stack for startups.* Get FDIC-insured accounts, virtual and physical debit cards, currency exchange, and domestic and international wires.
Customize the banking experience you want with features like read & write API access, custom team-management, and integrations with the tools your startup uses, like Quickbooks and Stripe.
And you can keep growing with Mercury. Use tools like Mercury Raise, which connects founders to quality investors, 1:1 mentorship, and a curated network, or Mercury Capital, which matches startups with the right financing options with just four questions.
Head to mercury.com to apply in minutes, right from your laptop.
*All banking services provided by Evolve Bank and Trust, member FDIC.
One possibility is that since Russia has lots of currency reserves, a not especially liquid market, and a powerful business community, the government was keeping prices elevated until the war started. It’s a lot easier to criticize a prospective war than to criticize your country for a war that’s being actively fought (even if most people oppose it, wars seem to make politicians temporarily more popular and then continuously less popular over time). So once the actual invasion started, there wasn’t a reason to maintain prices.
This is a speculative theory that has only circumstantial evidence, and it’s most likely that the price changes were pretty organic—sometimes a market-moving surprise is just a surprise.