Sunday, October 1, 2023

October 1st Links

  • As described by Isaacson after two years of following Musk around, the entrepreneur’s methods remind me of Stalin’s for growing the Soviet steel industry: purge and surge. Periodically, Musk somewhat randomly fires some employees to encourage the others, then leads the gung ho survivors on a Stakhanovite push for greater production for a couple of months. He then vanishes to one of his other enterprises, until he suddenly reappears with some crazy new self-imposed deadline. One difference (besides not sending wreckers to Siberia, of course) is that Musk has the capitalist price system to direct his fury for streamlining his assembly lines in effective directions. While Stalin succeeded at getting the Soviet economy to smelt more tons of steel, communism was useless at producing complex desirable consumer goods such as Tesla electric cars.In contrast, Musk obsesses over the cost of each part, relentlessly asking his underlings during surges why they can’t make each item more simple. [Steve Sailer]
  • When you look into it, a curious regularity is that many of the great authoritarian leaders came to power supporting the governments they later overthrew. Julius Caesar lead the populares against the traditional aristocratic privilege of the Roman Senate. But did this matter once he’d assumed power? Did it stop his rule from being further right than what came before – monarchy, instead of oligarchy? Not one bit. Same thing with Napoleon. It’s well known that he was willing to use “a whiff of grapeshot” to defeat the mob, which sounds pretty based. But it was a Royalist mob, attacking the revolutionary government! Those who just wanted competent authority invested in the ablest man would have been much better off supporting the man shooting at them, though it was very hard for them to know that at the time. Even in modern times, Augusto Pinochet led the crackdown on anti-Allende protests in 1972! All of which is to say, that it’s not nearly as obvious as you might think where exactly the next competent authoritarian might come from. It is a mistake to place too much weight in the man’s politics before he seizes power. Those destined to rule seem to instinctively know that the first thing to do is actually acquire the power to rule, by whatever means necessary, otherwise all your grand visions amount to very little. [Shylock Holmes]
  • There is an odd tension people sometimes get from being weaned too much on moronic Manichean versions of history, where one somewhat feels the need to "pick a side" in the story, rather like a foreigner moving to America and deciding on a random NFL team to support (I know several people who did this, incidentally). And while this instinct of picking sides in history not generally useful, I think it is useful to consider the question of who acted wisely, who acted foolishly, who could have achieved a better outcome if they had acted differently, and if you were a random elite civilian at the time, who would you have chosen to support. Guiding you in this, of course, are your general abstract principles - in my case, things like support for central authority and skepticism of proponents of radical leftist change. But how much should that commend Ferdinand VII to you specifically? It's not totally clear. I think anyone with monarchist leanings will probably lean towards supporting the monarchy before things go to hell. But what about afterwards? As I said about the French revolution, at some point the fastest and best path back to strong central authority for France was not restoring the House of Bourbon, but rather ... elevating Napoleon. [Shylock Holmes]
  • We propose a novel demographic channel that can explain the long decline in interest rates. We introduce a model of endogenous fertility, in the spirit of Becker and Barro (1988), where patience levels can be heterogenous across agents. Since children are a form of saving, and since patient agents tend to save more than impatient agents, the model implies that patient agents will have more children. If those children in turn inherit part of their parent’s higher patience levels, then the average level of patience in society will increase over time as a result of evolutionary pressures that naturally select the most patient agents. While this mechanism is theoretically plausible, its relevance in practice is a quantitative question. We use the structure of our model to
    calibrate the distribution of patience across individuals to experimental micro-level evidence. We find that the contribution of selection – the difference between the implications of our heterogeneous-agent model and a model of one dynasty – can explain much of the fall in the global interest rate. [Selection, Patience, and the Interest Rate]
  • The SPR peaked in October 2010 at 727 million barrels. Obama sold 32 million barrels over the remainder of his presidency, leaving it at 695 million in January 2017. Trump sold 57 million barrels during his term, leaving Biden with 638 million. And now Biden has sold 291 million barrels in a two-and-a-half years, a rate of about 300k bbl/d. While Obama and Trump's sales were relatively modest, Biden's sales during the summer of 2022 were at a rate of 1 million barrels a day, a rate that could fairly fit under McNally's concept of swing production. The inelasticity of demand means that Biden's sales, which amounted to 1.25% of daily world production at peak rates, could have had a very significant impact on the oil price. As an example, McNally points out that in 1979 the loss of Iran's 2 million barrels per day - which was about three percent of world supply - led to the price of oil more than doubling. And it is taking not only these sales but also Federal Reserve balance sheet reductions ("tightening," which was initiated at the same time as the oil sales) to keep oil under $80 per barrel. The SPR oil sales are obviously not sustainable in perpetuity - there is less than a year's supply left at a pace of 1 million barrels per day. Nor is tightening likely to be sustainable indefinitely, as we have written in the past. As we have seen, tight money does not really help an over-leveraged country delever since it causes debt/GDP to rise and also threatens the banking system. [CBS]
  • If we look out a year from now, assuming that cash from operations holds up, they are able to pay off these liabilities, and the unit price remains the same, then the same ~$300 million of annualized cash from operations would be available for distribution to common unitholders with a market capitalization of $860 million. Potentially a 35% yield, or $20+ per unit on the current $68 price. The royalty model is just so superior to the producer model. When we looked at coal producer earnings this quarter, we see that they are cheaper on EV/EBITDA than NRP, but they have vastly larger capital expenditure requirements. (They are also more leveraged to the coal price, for better and for worse, since they have production cost and a royalty owner doesn't.) Something fantastic about royalty companies is that they can benefit if the producers foolishly over-expand their capacity and harm their commodity price. [CBS]
  • Cavities were cured in 1985 and no one knows it yet. It is possible to genetically engineer Streptococcus mutans, the dominant human mouth bacteria, to produce ethanol instead of cavity-causing lactic acid. Further modifications cause it to outcompete native mouth bacteria, without spreading outside of the mouth. All research suggests that a one-time brushing of this GMO strain onto the teeth will dramatically reduce, or entirely eliminate, dental caries. A variant of this organism was first created in 1985, and volunteers deliberately inoculated themselves with the modified strain. This has, to our knowledge, caused no ill effects since. This bacteria has been stuck in patent hell, and FDA hell, for decades. Our plan is to get this cure for cavities back on track to a worldwide rollout. [Lantern Bioworks]
  • I’m a big fan of compounding returns. So, people who learn something, and then the next year what they learn is built on top of that, and then on top of that, and on top of that. If you have compounding returns for several decades, even if you start out at only a so-so level, your total returns will be quite high, just as would be the case in finance if you can invest successfully every year. So, perseverance in learning. And one of my favorite interview questions is to ask people, “What is it you do to practice the way a professional pianist might practice scales?” And that’s getting it are they trying to get better every year or not? And if they’re not working on getting better every year, they’re only going to improve a bit. [Tyler Cowen]
  • Noticing: An Essential Reader is the definitive collection of Steve Sailer’s most incisive observations on culture, immigration, class, politics, and human biodiversity. Sailer’s unique approach to the most controversial topics of our time, combining good old-fashioned common sense with a researcher’s eye to the data, has allowed him critical insights into American life that few others see and virtually no one else dares speak out loud. [Passage Press]

No comments: