Opus 11: Best Reading of 2020

There is somewhat of a running joke in my family about the random things I share at the dinner table. Thankfully, more than half the time, the things I say turn out to be true, so I am batting over .500 on the recalling of the obscure things I read. I was never an avid reader growing up. You would rarely find me somewhere with pages open in front of me for hours on end, I just wasn’t that kind of a kid. Sometime in college, though, something happened where I started to become addicted to reading lists. I would hunt for reading lists from any person I respected, heard the name of a few times, or wanted to meet one day. These reading lists became my preferred libraries—curated lists of articles, books, and essays recommended by people with the ethos I respected. I became a power user of Instapaper, saving everything I would find and would spend my bedtime hours scrolling those pages rather than scrolling Reddit or Instagram. Don’t worry, I still do more than enough of that too.

I wanted to share the best things I read this year. I have a more permanent Library pinned to the top of the Opus Letter homepage, so this list will be things that I came across in the last 12 months. Most of the reading is evergreen and not related to Covid, a refreshing change I imagine for many.

I hope the following is an interesting collection of things that can cater to all readers. It is a sprinkling of economics, history, politics, sociology, travel, and venture. I suppose it is the best textual representation of myself.

Homework Reading

Progress, Postmodernism, and The Tech Backlash

Food used to come from a farm; then it came from a grocery store hooked up to the food cloud, owned by a bank; now it comes from a delivery courier, hooked up to the cooking cloud, owned by a sovereign wealth fund. This is a very postmodern form of progress: food isn’t necessarily getting better, or more nutritious, or even cheaper. But it’s exactly what you want, and the more you like it, the richer someone gets.

Volatility Is The Instrument That Makes Us Face Truth

People say, “Is volatility an asset class?” I say it’s the only asset class. Because if you decompose the returns of all these different strategies into what they really are, they tend to either look like short vol or long vol. In that sense, you can simplify the institutional portfolio into those broad buckets. When you do that quantitatively or just qualitatively, but from a quantitative standpoint, you will see this if you run a dimensionality reduction on some of these portfolios. And the average institutional portfolio is just a 98% short volatility portfolio that is exposed to various degrees of football exposure that will all perform not that well during a period of regime change.

Chess is an exercise in concentration

I sometimes think of chess opponents as psychopathic flatmates with whom I have to share a living space. They look harmless, but I know we signed the same contract that says they need to try to get inside my room, steal my possessions and hunt me down, before killing me; naturally, I am obliged to do the same to them. Together we create a story, and narrative themes such as attack and defence are both reduced and reified into particular moves with particular pieces on particular squares, which we record like stenographers, into our own arcana of algebraic notation. The climax of a game’s story might be ‘Brutal counter-attack!’ but the record merely reflects the logical power of a short sequence of moves, for instance: ‘…34. Bf3 Nh3+ 35.Kh1 Qg4!! Resigns.’

Science is Getting Less Bang for its Buck

Our graph stops at the end of the 1980s. The reason is that in recent years, the Nobel Committee has preferred to award prizes for work done in the 1980s and 1970s. In fact, just three discoveries made since 1990 have been awarded Nobel Prizes. This is too few to get a good quality estimate for the 1990s, and so we didn’t survey those prizes.

However, the paucity of prizes since 1990 is itself suggestive. The 1990s and 2000s have the dubious distinction of being the decades over which the Nobel Committee has most strongly preferred to skip, and instead award prizes for earlier work. Given that the 1980s and 1970s themselves don’t look so good, that’s bad news for physics.

Loyalty Tests

It is easy to see why companies prefer such arrangements. They resemble conventional “loyalty” programs, in which customers collect points and earn discounts, only now the purchases occur automatically and the loyalty occurs by default. Of course, calling those old points programs “loyalty” rather than bribery was always a kind of propaganda — a euphemism to obfuscate the transactionality of the exchange, as if finer feelings were involved in amassing frequent flyer miles. But the goal of such programs was ultimately to engender the sort of habitual buying that subscription services entail from the onset. Rather than buying à la carte in discrete transactions, consumers establish a regular rhythm of payments in exchange for better access, or the comfortable freedom from choice that a loyalty arrangement promises. 

What if Competition Isn’t Natural?

Margulis argued that mitochondria and chloroplasts—two organelles within eukaryotic cells—were once independent organisms that, at some point in the very distant past, merged with ancestral prokaryotic cells in a mutually enriching, symbiotic relationship. Rather than competition, it was collaboration, she argued, that constituted the origins of eukaryotic cells, which is to say, all complex life on planet Earth.

A Failure, But Not of Prediction

I think they were actually good at probabilistic reasoning. The control group said “15%? That’s less than 50%, which means cryonics probably won’t work, which means I shouldn’t sign up for it.” The frequent user group said “A 12% chance of eternal life for the cost of a freezer? Sounds like a good deal!”

The Psychology of Human Misjudgment, by Charlie Munger

First. Under recognition of the power of what psychologists call reinforcement and economists call incentives. Well, you can say, “Everybody knows that.” Well, I think I’ve been in the top 5% of my age cohort all my life in understanding the power of incentives, and all my life I’ve underestimated it. And never a year passes, but I get some surprise that pushes my limit a little farther.

One of my favorite cases about the power of incentives is the Federal Express case. The heart and soul of the integrity of the system is that all the packages have to be shifted rapidly in one central location each night. And the system has no integrity if the whole shift can’t be done fast. And Federal Express had one hell of a time getting the thing to work. And they tried moral suasion, they tried everything in the world, and finally, somebody got the happy thought that they were paying the night shift by the hour and that maybe if they paid them by the shift, the system would work better. And lo and behold, that solution worked.

The Weather in Mongolia

In the morning the sun rose and filled the tent with its buttery glow. Narmandakh was still asleep in his del, head propped on his saddle in the Mongolian way. Outside it was very cold. I peeled away frosted socks from my frosted boots and walked out to the lakeside. For two miles the water stretched north, a flat sheet of grey in the morning sun. Smoke rose from a group of distant gers but otherwise nothing moved in that vast arena of mountains.

In the gers above the lake was a man named Baatar Tsimbingsereng. He was a young grandfather who lived with his extended family. Normally they spent the summer close to Uliastay but in recent years the number of other herders had forced them higher. They had a horse for sale, a light-stepping ginger mare.

The Diary of a Fire Lookout

The greatest gift of life on the mountain is time. Time to think or not think, read or not read, scribble or not scribble—to sleep and cook and walk in the woods, to sit and stare at the shapes of the hills. I produce nothing but words; I consume nothing but food, a little propane, a little firewood. By being utterly useless in the calculations of the culture at large I become useful, at last, to myself.

The Great Urban Comeback

On October 11, as the city smoldered, the Chicago Tribune published an editorial with an all-caps headline: cheer up. The newspaper went on: “In the midst of a calamity without parallel in the world’s history, looking upon the ashes of thirty years’ accumulations, the people of this once beautiful city have resolved that chicago shall rise again.” And, with astonishing speed, it did. By 1875, tourists arriving in Chicago looking for evidence of the fire complained that there was little to see. Within 20 years, Chicago’s population tripled, to 1 million. And by the end of the century, the fire-flattened business district sprouted scores of buildings taller than you could find anywhere else in the world. Their unprecedented height earned these structures a new name: skyscraper.

Merits of Bottoms Up Investing

Our job is not to see the future, it’s to see the present very clearly.

America is Having a Moral Convulsion

When people in a church lose faith or trust in God, the church collapses. When people in a society lose faith or trust in their institutions and in each other, the nation collapses.

The Cultural Distances Between Us

People often think, “Why are some countries corrupt?” To me, that’s not the puzzle. The puzzle is: Why are some countries able to suppress corruption? The reason I frame it that way is because, from a cultural evolutionary perspective, corruption is what is natural to us. We cooperate with friends who we regularly interact with through direct reciprocity. You scratch my back, I scratch yours, I help you, you help me, screw me over, I screw you over. We rely on reputation, and so on. Corruption, I argue, is one scale of cooperation—a lower, more natural, more stable scale—undermining another. A president gives a contract to his daughter, and we say that’s nepotism. But really that’s inclusive fitness, undermining institutional punishment. If you give a job to a friend because they are your friend, that’s cronyism. But that’s also just direct or indirect reciprocity, undermining our meritocracy.