Books - Q2 2026

• The Man Who Ran Washington: The Life and Times of James A. Baker III (3/5) Since we are having a new Gulf War, we decided to read about the Secretary of State during the the first Gulf War. (This is sort of how we are coping with our annual Trump Crash.) Trump and Hegseth make us nostalgic for George H.W. Bush, Baker, and Cheney. James Baker was Reagan's chief of staff and secretary of the treasury and secretary of state, as well as George H.W. Bush's chief of staff. Born in 1930, he's about to turn 96. Baker came from a family of Houston lawyers - his great grandfather founded Baker Botts. He went to the Kinkaid School, Princeton, and the UT law school. He played tennis at the Houston Country Club, which is where he met the older Bush - they became doubles partners. During the Korean war, he was assigned to a ship patrolling the Mediterranean. ("I fought the Korean War on the French Riviera.") His start in politics was as an under secretary of commerce in the Ford administration, and then the campaign manager for Ford in 1976 (which lost to Carter). He then managed Reagan's campaign in 1980. Baker was sort of running the country for parts of Reagan's presidency, so this is a good "deep state" studies book. Baker would for sure want to get the Strait of Hormuz under American control now, but likely would not have risked a showdown over it, the way that Trump has. He is an uber-Episcopalian, the Special Counsel to the Vestry of St. Martin’s Episcopal Church in Tanglewood (Houston). The Bushes were members as well, and Baker gave a eulogy for HW there. Conservatives never trusted Baker. They perceived, correctly, that he was interested in personal advancement more than ideological principle. ("When the tectonic plates of history move, move with them.") As Reagan's chief of staff: "It said something about Reagan's pragmatism that he wanted someone who was not an ideologue to run his White House and something about his nature that he held no grudges." Baker said to Volker: "the president is ordering you not to raise interest rates before the election." Something interesting: Trump took out full page ads in newspapers in the 1980s to say that the U.S. should charge countries such as Japan for protecting oil tankers traveling through the Persian Gulf. Never knew that Baker picked Alan Greenspan to be Reagan's Fed chair. Baker said to Bush about Gulf War I: "this has all the ingredients that brought down three of the last five presidents - a hostage crisis, body bags, and a full fledged economic recession caused by forty dollar oil." After the Bush administration, Baker cashed in by working for David Rubenstein (Carlyle), with the idea that he would attract walthy clients via "star power." Baker also ran the Florida election fight for George W Bush in 2000: "if we try to fight this battle at the Supreme Court, the liberals will vote against us because we're not liberals and the conservatives will vote against us because they're conservatives and will want to show constitutional deference to the state." Ted Cruz was a campaign aide who worked on the recount fight. Something that comes through in the book is that Baker really neglected his family so that he could have this political career. While he was in Washington at the White House, he was not with his kids in Houston. 
• Love & War In The Apennines (5/5) This is a great autobiographical adventure story by Eric Newby (1919-2006), who got captured during a Special Boat Service operation during WWII (in 1942) and was imprisoned in Italy. He escaped during the armistice and was helped by Italian civilians, including the woman who would become his wife. It's a high agency story. While retreating from the failed SBS attempt to blow up an airfield, he was smart enough not to fire upon Italian perimeter guards. (And they were smart enough to leave his group alone, too.) In general, he was smart enough to try to survive, not follow the rules (whether Britain's or his captors'), and not try to be a hero. He seemed to see at a quite young age that the war was pointless. I wonder if his experiences working at an advertising agency and then as a lowly apprentice sailor helped him to realize that everything is a scam, and keep his head down? He was fortunate to have spent most of the war as a POW or on the lamb in Italy. He was recaptured by the Germans in late 1943, who were oddly obsessed with rounding up these escaped POWs who were just doing things like laboring on Italian farms.
• The Last Grain Race (5/5) Also by Eric Newby - his first book, about that experience as an apprentice sailor on a four-masted steel sailing ship that carried grain from Australia to the U.K. The ship itself survives and is now a restaurant on the Philadelphia waterfront! Very dangerous work to climb the rigging in storms to change the sails. Atrocious food and uncomfortable conditions aboard the ship. His voyage was in 1938-1939 which was both right before WWII and the very end of the era of sail (wind) energy propelling ships carrying freight. They were passed by steamers over the course of the voyage, which took about eight months. Somewhat baffling why he went from a white collar (or at least clerical) job to a virtually unpaid job on an obsolete sailboat. Wonder if he knew that he wanted to be a writer (something he achieved only later in life) and that writers need unusual life experiences to tell good stories?
• The Eitingons: A Twentieth-Century Story (2/5) Author Mary-Kay Wilmers, the editor of the London Review of Books, is related to Leonid Eitingon, the NKVD General who organized the assassination of Leon Trotsky in Mexico City. As John Maxfield points out, her brother Robert G. Wilmers was an American billionaire and chairman of M&T Bank until his death in 2017. (Readers may recall Special Tasks from a couple years ago, an autobiography of Sudoplatov, who was Eitingon's superior.) We never knew that Soviet citizens had to write an "autobiographical statement" from time to time, which could subsequently be used against them. Highlight: "Stalin more than most believed in the power of the single malevolent individual - he was his own model - and though Trotsky may not have been as much of a threat to the Soviet Union as Hitler he compounded that threat a hundredfold." Orlando Figes gives an accurate review: "The trouble is that Wilmers wants to give us everything from her research, even when it goes nowhere, and to put herself into the narrative at every opportunity. The result is an over-long and sometimes self-indulgent book, which sits uncomfortably between historical writing and a literary version of Who Do You Think You Are?"
• The Scaling Curve: Dario Amodei, Anthropic, and the Race to Build and Survive Superintelligence (4/5) Something funny about this is that it seemed noticeably AI-written.... because it was! The author is listed as "Claude St. John" which seems to be a pen name for Tod Sacerdoti, who used Claude to write the book. That will probably be the new normal, especially for books about current events that need to be written quickly. I wonder whether Robert Caro could finally finish his last LBJ volume if he just put Claude to work at the presidential library where he is turning every page? Highlights: "The model had been given one objective, predict the next word. And in learning to do that well, it had learned to do a great deal else besides." "And they were working, he noticed, not because anyone had discovered the right algorithm or the right architecture. They were working because people had finally thrown enough computing power at them." "The company, on paper, loses money every year. It lost eight hundred million in 2024 and eight billion in 2025. It looks like a catastrophe. But if you think of each model as its own company, each one is profitable. What creates the appearance of loss is not the underlying economics but the exponential scale-up—the fact that each new generation costs an order of magnitude more than the last." "If AI models became a commodity, the value would flow to the company with the largest distribution network and the most data, which was Meta." "Just as a child raised with strong principles and a clear sense of identity was better equipped to navigate novel situations than a child raised with a rigid list of rules, a model trained on principles generalized better than a model trained on prohibitions. Anthropic’s own research was increasingly confirming this: high-level training at the level of character and identity was surprisingly powerful and generalized well to situations that the constitution’s authors had never anticipated." "This paralleled the discovery in Constitutional AI that principles generalized better than rules." "The idea [of superposition], grounded in the theory of compressed sensing, was that neural networks could represent far more concepts than they had neurons by encoding multiple concepts in overlapping patterns across groups of neurons." "In knowledge-work settings—finance, law, healthcare, pharmaceutical research—a mistake was worse than silence, and flattery was worse than honesty." "Could powerful AIs invent a new religion and convert millions of people to it? Could most people end up addicted to AI interactions?"
• A Small Place in Italy (3/5) Another Eric Newby, not quite as good as his first two stories (about being a POW in Italy and about being an apprentice sailor on a four-masted barque), but how could it be. In this one, he and his wife Wanda restored a dilapidated farmhouse, "I Castagni," in the Apuan Alps of northern Italy, starting in 1967. Probably the most interesting thing was his discussion of taking part in the annual vendemmia, the grape harvest. (For making wine, of course. The locals only drank their own wine and did not trust wine that had been produced in other regions of Italy.)
• Sid Meier's Memoir!: A Life in Computer Games (3/5) Best known as the creator of the Civilization strategy game series. He was working for a company that made cash register software, and another employee picked him to be a computer gaming company co-founder. It was the classic pairing of the nerdy programmer (Meier) and the charismatic salesman type (Bill Stealey), and in this case they respected each other's strengths and abilities well enough to succeed. (Here's a telling example: "Converting our games to the Commodore would be a purely financial move for the company, and I kind of felt like that was Bill's problem, not mine. The work wouldn't involve anything new or interesting; it was just a way to sell more of what we'd already made.") His cofounder was a pilot and they started with flight simulator games. Meier always had to fight for his strategy games that gaming company execs thought were less marketable than action genres. (When he left the first firm he founded, it was a reasonably easy separation because "they didn't want to be making detailed strategy titles any more than we wanted to be making Top Gun flight simulators.") He met Tom Clancy when they worked on a submarine simulation, and Clancy gave him career advice. By 1989, their company had $15 million in revenue, which was a lot of money back then. (Now you'd probably raise $15 million from VCs just to start an overstaffed software company.) He is a "train autist," when he was a kid he read the Swiss railroad timetable for fun and imagined the paths that the trains were taking in his mind. As a child he played the violin and read music theory and was passionate about Bach, so he made a computer game that generated Bach-like music. (Which wasn't commercially successful.) Bach wrote "puzzle canons." Other highlights: "Mostly I was tired of hyperrealism. If real life were that exciting, who would need videogames in the first place?" Non-transitive: "the balance of artillery, cavalry, and infantry created a classic rock-paper-scissors scenario." He says that games aren't the defining theme of his life, it's "the interesting decision," and "a game just happens to be a well-curated series of them."
• Lunch with the FT (3/5) The weekend edition of the Financial Times has an amusing column, Lunch with the FT, where a writer for the FT takes a celebrity out to lunch for an interview, expensed to the FT. (Although: “What we view as a declaration of editorial independence has often been taken as a cultural insult or a poor reflection of the guest’s own financial standing.”) In 2026 they have interviewed Anthropic founder Dario Amodei and Christian nationalist pastor Doug Wilson. Nobody likes when the Lunches are dry: “Anxious not to have one of those teetotal Lunch with the FT’s that prompt mocking letters from readers, I receive reassurance that wine is on its way.” This 2012 article has good background on the Lunches, including the fact that Gore Vidal had the second most expensive one up to that point. FT editor Lionel Barber says, “Lunch should be done with panache but not indulgence.” He defines that as “excellent food but not vintage wine”. The six types of people you meet at Lunch with the FT: the star, politician, the thinker, the executive, the maverick, and the humble achiever. 
• Steve Jobs in Exile: The Untold Story of NeXT and the Remaking of an American Visionary (3/5) This new biography focuses on 1985-1997 period, the time between when Jobs was kicked out of Apple until Apple bought his successor company, NeXT. As we know, Steve was a fanatic. This led him to nearly destroys his companies many times, but it also let him create the best smartphone, a trillion dollar product. One idea would be that you should invest in this type of person, since the joint-stock option translates their volatility into a valuable call option for you. ("[Susan Barnes] had somehow managed to help Steve eke out a $50 million credit line from J.P. Morgan. He treated it like found money: 'If we can't pay it back,' he said, 'too bad.'") And it seems like Larry Ellison figured this out early. He backed Jobs and, later on, Musk - both extremely volatile entrepreneurs. When Musk bought Twitter, Ellison said that he would invest “a billion... or whatever you recommend.” Another concept in the book is that it you can create value in a startup by doing things that big companies are too sclerotic or incompetent to do, and then they'll buy your company even if it is not profitable. A good idea right now would be drone defense. For whatever reason, the incumbent defense contractors seem unable to build this, so get a team together and get a prototype and sell to them.
• Peace and War: Growing Up in Fascist Italy (3/5) Written by Eric Newby's wife, who helped him after he escaped from POW confinement in Italy. Her family was Slovenian, and when Slovenia was annexed in 1941, and she and her parents were forced to move to Fontanellato, in northern Italy (Parma) because the Italians did not trust the loyalty of Slovenians. Both Eric and Wanda's books give a sense that the fascist governments of Germany and Italy were highly officious, meddlesome, and tyrannical. They were doomed to lose because they repelled intelligent people - much like today's Republican Party. Something else amazing is that she was one of 11 children but only she and her brother survived - shocking infant mortality and she was born in 1922! Her life in Italian speaking Slovenia a century ago was more like life 500 years ago than life today. She and Eric had two children and two grandchildren, which is rather blue-coded.
• The Political Economy of Pipelines: A Century of Comparative Institutional Development (3/5) "Pipelines are the quintessential choke points on trade." "The average cost of pipeline capacity decreases relentlessly with larger pipelines, as cost rises linearly while capacity rises exponentially. That means that a single pipeline is the least expensive way to serve the market for any conceivable quantity shipped - the definition of a natural monopoly...""Land is the ultimate scarce commodity, and major gas pipelines need lots of it..." However: "long-distance pipelines do not have the characteristics of gas distribution companies' local area networks, which effectively and 'naturally' bar the entry of competitors." Long distance gas pipelines were made feasible in the early 20th century by better welding. "The Interstate Commerce Commission became an effective government-underwritten cartel device in the railroad industry, although it had been invented for quite a different purpose." Talks about the Natural Gas Act and the unbundling of pipelines." Gas pipelines went from being the dominant buyers and sellers of gas in the United States to owning none of the gas they shipped." 

Books - Q1 2026

• The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success (5/5) Bought two copies of this, one to read and one for the CEO of a company that is cheap and overcapitalized but inexplicably reluctant to buy back stock. (The book has been on sale for half off on Amazon.) The Outsiders is much better than I thought the first time around, when I got bogged down with how unscientific it is. It is true that there is no control group, but you can learn useful things about the world from small sample sizes. I also did not appreciate back then how persistent business quality is, so while it may be a bad idea for a retailer to buy back stock (Sears / Radio Shack), it will work much better for a company that owns royalties or has a durable business "franchise." The Outsiders has eight case studies of companies with very high total shareholder return (significantly better than S&P 500) over long periods of time that also repurchased large amounts of stock (share cannibals). The cases in the book are: Tom Murphy / Capital Cities, Henry Singleton / Teledyne, Bill Anders / General Dynamics, John Malone / TCI, Kay Graham / Washington Post, Bill Stiritz / Ralston Purina, Dick Smith / General Cinema, and Warren Buffett / Berkshire Hathaway. The youngest of these executives is John Malone, who was born in 1941. Bill Anders was an Apollo astronaut! We really need a more up-to-date and scientific study of share cannibalization. (Some incredible share repurchasers of the past decade: AutoNation, DaVita, eBay, Synchrony Financial, Dillard's, Murphy USA, Allison Transmission, Group 1 Automotive.) An honest assessment should also look at attempted cannibalizations that turned into shareholder wipeouts, such as Sears. Could those failures have been predicted in advance? (Share repurchases are much riskier if a company has leverage, low profit margins, or lacks profitability.) The book was written in 2012 and he picks Transdigm (TDG) as a contemporary analog of an Outsider company. An outstanding choice: subsequently it is up 20x vs 6x for the S&P 500, which is 26% compounded vs 15%. Other highlights: Singleton was the "Babe Ruth of repurchases." John Malone's research project at Bell Labs was "studying optimal strategies in monopoly markets." (Paper: Resource Allocation and the Regulated Firm.) "EBITDA in particular was a radically new concept, going further up the income statement than anyone had gone before." What we are most confident in would be that royalty-like businesses should return capital via share repurchases. But managements of large cap companies are much better at this now, as we noticed when we read the AmEx book last year. It is at the Oddball micro caps and small banks where the managers have trouble understanding the benefit of share repurchases.
• The Art of Spending Money: Simple Choices for a Richer Life (2/5) Always looking for a good personal finance book to give to people with questions about building wealth. The Millionaire Next Door is good in many ways but some of its ideas are out of date now. (In particular, it is much harder to be frugal in buying your primary residence because you don't want to live in an underclass neighborhood.) I should have remembered that the author's (Morgan Housel) previous book was just a blog post turned into a book. Here is the tl;dr summary for this one. Interesting chapter at the end about the lifecycle of greed and fear: "Greed happens when you double down on actions that at one time worked but aren't sustainable, or that cause you to overestimate how influential your actions were on outcomes."
• Landscapes of Extraction: The Art of Mining in the American West (2/5) Nothing more cornucopian than a gigantic open pit copper mine that has been in business since 1906. The Bingham Canyon Mine takes up 0.02% of the land area of the state of Utah. Can we spare the intrusion? To ask an art museum curator the answer would be "no." They think that mines and oil fields are "problematic" and need to be "interrogated" with art. Hey, that energy is keeping the lights on in the gallery. (Also remember: "There would be a lot fewer history professors without cheap energy.") The Works Progress Administration's Federal Art Project (FAP) paid for a lot of this industrial art during the Great Depression. Remember that  there was no demand for artists or writers during the Great Depression and it turned that generation of would-be artists into communists. Some of these paintings are great, though, like the Chasm of the Bingham or Merrill Mahaffey's painting of the Morenci copper mine (owned by FCX).
• In Short Measures: Three Novellas (2/5) They say never meet your heroes. We really like Michael Ruhlman's nonfiction writing. His book The Making of a Chef is a true 5/5 and so is Walk on Water, the book about a pediatric heart surgeon. (The theme in his early books was that the "people who pursue perfection, date-on-a-dime clarity, and impossible high standards are the most compelling human beings alive.") However, this book is a collection of three short novels that he wrote around the time he got divorced. Based on the theme of the first novella (I didn't read the other two), I think that he was working on his own justification for leaving his wife to be with another woman. (Oddly, for a much older and less attractive woman.) Catholic News has a great, based take on the New York Times' story on Ruhlman's second marriage: "I do know that when you are married, it is profoundly dangerous to develop a fast friendship with someone of the opposite sex. Above all, married couples must protect their hearts. One may not be footloose with your heart. In fact, it is no longer yours." "As a final silly coda, the Times reported that crime-novelist Laura Lippman became a Universal Life minister so she could officiate at their wedding in the park. It is all so heart-breaking and, I regret to say, so utterly unserious." Michael had a bad fall last year while drinking. Falls claim a lot of alcoholics. And foodies tend to drink too much.
• The Renaissance: A Short History (3/5) Paul Johnson says that the Renaissance was the first great cultural war in European history. "Medieval certitude - or credulity depending on your viewpoint - was now faced with Renaissance scrutiny, or skepticism." "In response to the Protestant cult of the vernacular - of simplicity, austerity, and puritanism - the Catholic Church, after its earlier defensive and guilt-ridden response, decided to embark on a much bolder policy of emphasizing the spectacular. With the Jesuits in the vanguard, churches and other religious buildings were to be ablaze with light, clouded with incense, draped in lace, smothered in gilt, with huge altars, splendid vestments, sonorous organs and vast choirs, and a liturgy purged of medieval nonsense but essentially triumphalist in its content and amplitude." His chapter "The Buildings of the Renaissance" would be useful if one were to visit Rome, Venice, or Florence.
• Beyond Banks: Technology, Regulation, and the Future of Money (2/5) There was a great tweet about banks three years ago that we often think back on: "what if everyone's paycheck gets automatically deposited into some dude's credit fund and the government guarantees the deposits if the fund manager makes a mistake?" Banks are a 19th Century technology that attempts to do two different, important tasks: safely store medium of exchange, and also finance long-term productive enterprise. We published the idea in Oddball about eight years ago that you could separate the two businesses, lending and payments. That is what the author proposes here. ("Removing banks as ubiquitous but essentially unnecessary middlemen would help reduce the high cost of payments.") However, we have gotten much better at understanding that things are the way they are for a reason. (Reading Calomiris's book about why we have banks.) Who do you think would win in a political struggle over this, the Trump boys and their crypto schemes, or JP Morgan and Visa?
• The Long Way (2/5) This was tedious - it looks like sailing around the world would be somewhat difficult and dangerous but also quite boring. At least with mountain climbing you have great views, exercise and company. Instead of finishing the 1968-1969 Golden Globe race and returning to England where his wife and stepchildren lived, he sailed on to Tahiti and fathered a child with a new partner. Makes sense that someone who could spend years of life alone at sea is not very tethered to relationships on land.
• A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market (3/5) This was reviewed in a two part review by our correspondent @pdxsag. Thorp was born in 1932 so he's now almost 94. He looks amazing for his age. (Here's a 2024 photo taken with Boaz Weinstein.) No one can figure out how he's aging so well. Tim Ferriss interviewed him and so did Bloomberg, but we really don't know the secret. Apparently he could still do a chin up at age 91. He mentions in the book that "when I wanted to know some organic chemistry to explore ideas for extending healthy human longevity, I learned it as I needed to." Maybe one thing is that, thanks to inventing an options pricing model and various arbitrage techniques, he was able to retire from working pretty young and lived a chill life in Newport Beach. Thorp says that he has maintained his high school weight, takes magnesium, Vitamin K, and Vitamin D, and exercises a lot. Good to know that if you are a blackjack player, removing the 5s from the deck changes the edge from 0.2% house advantage to 3.29% for the player. Talking about counting cards, he observes that playing with edge results in moderately heavy losses mixed with 'lucky' streaks of the most dazzling brilliance: "I learned later that this was a characteristic of a random series of favorable bets. And I would see it again and again in real life in both the gambling and investment worlds." He told an acquaintance to pull money out of Madoff's fund, but the guy didn't listen to Thorp's points, he "would simply poll everyone he knew for their opinion and go with the majority view." He doesn't believe in keeping deposits at mutual banks, either: "Our hundreds of accounts took capital away from other investments." The book is half autobiography and half "Thorp's bland personal financial advice."
• Crossing the Chasm (3/5) The 1990 book about marketing disruptive technology products, explaining the gap (the "chasm") between early adopters and the mainstream market. Technology adoption life cycle progresses through innovators, early adopters, early majority, late majority, and laggards. He says that model came from research on the adoption of new strains of seed potatoes among farmers. Realized that I am probably early majority (which is mainstream), across the chasm, and not an early adopter. ("Conservatives, in essence, are against discontinuous innovations. They believe far more in tradition than in progress. And when they find something that works for them, they like to stick with it.") Something about the visionaries: "likely to be planning on implementing the great new order and then using that as a springboard to their next great career step." That's a principal-agent problem where they may not have to live with downsides of technologies that they buy. That's also why the visionaries may alienate pragmatists, and pragmatists don't reference visionaries in their buying decisions. Interestingly, Everett Rogers who wrote the book Diffusion of Innovations (1962) doesn't believe in chasms: "innovativeness, if measured properly, is a continuous variable and there are no sharp breaks or discontinuities between adjacent adopter categories (although there are important differences between them)." One of the keys to crossing the chasm: "Can you explain your product in the time it takes to ride up in an elevator?"

Books - Q4 2025

• Born to Be Wired: Lessons from a Lifetime Transforming Television, Wiring America for the Internet, and Growing Formula One, Discovery, Sirius XM, and the Atlanta Braves (3/5) Everyone is talking about this autobiography by TMT entrepreneur John Malone. The WSJ review puts it well: "revelatory personal history and an exhaustive—sometimes exhausting—exploration into the intricacies of Mr. Malone’s various business transactions and relationships." John Malone was very early to the idea that you should focus on cash flow generation rather than net income. (Some say that he invented the EBITDA metric!) Cable companies were perfect for this because the capex to hang the cables and such could be depreciated over a much shorter period than their useful lives. He also liked to use as much debt financing as possible because interest is tax deductible. He also had a flywheel concept (like Bezos): "More scale equals more savings, which gave us more buying power to buy more systems and build more scale, which equaled more savings - a virtuous growth cycle." Byrne Hobart quips, "there are good times, and there are bad times, but there are no times when AT&T is not making poor capital allocation decisions." Something interesting about Malone - he was a big believer that you should partner with competitors in joint ventures, rather than bidding against them (e.g. for acquisitions). Split the surplus with your competitor rather than giving it all away to the seller in a competitive auction.
• Rethinking the Economics of Land and Housing (3/5) Always good to be rethinking things. We posted a link earlier to a Georgist economist who had a conspiracy theory that neoclassical economics was designed and promoted by landowners and their hired economists to divert attention from the way that landowners capture an unfair share of society's increasing wealth. "Once land is owned privately, much of the additional value created by society is captured by landowners, even if they have done nothing to earn that value." The debate between neoclassicist and Georgist economists comes down to whether land is just capital or a distinctive factor of production. I would bet on John Bates Clark. Points out: "physical space is also highly desired and not subject to diminishing returns - as people get richer, they want more space, " and "as economies mature the demand for land relative to other consumer goods increases," because it is a positional good. That is good for land investments if cornucopianism is right. A little bit of heterodox economics goes a long way, but if the Georgists were hopping mad about the benefits of owning land, that tells us that land is a bottleneck that we should be owning. The trick would be to find more attractively priced kinds of land, and note that natural resources are "land" in Georgist thinking. 
• The Scaling Era: An Oral History of AI, 2019–2025 (4/5) This gives really good insight into what the tech nerds who are going to spend a trillion dollars on data centers full of GPUs ("compute") are thinking. (Fair warning: it is written in Redditor nerdspeak full of jargon, and it can be painful to read.) A great point by François Chollet who is a skeptic of LLM intelligence: "If you look at LLMs closely, it's pretty obvious that they're not really synthesizing new programs on the fly to solve the task that they're faced with. Instead, they're reapplying things that they've stored in memory. For instance, LLMs can solve a Caesar cypher, transposing letters to code a message. That's a very complex algorithm, but it comes up quite a bit on the internet. They've basically memorized it. What's really interesting is that they can do it for a transposition length of three or five, because those are very common numbers in examples provided on the internet. If you try to do it with an arbitrary number like nine, it's going to fail. It does not encode the generalized form of the algorithm but only specific cases." Leopold Aschenbrenner is one of the Capex Maniacs: "The next model doesn't just require code, it involves building a giant new cluster. It involves building giant new power plants. Since ChatGPT, this extraordinary techno-capital acceleration has been set into motion." "By 2030, you get the trillion-dollar cluster using 100 GW - over 20 percent of US electricity production. That's 100 million H100-equivalents." There is an essay called The Bitter Lesson by Richard Sutton: "[G]eneral methods that leverage computation are ultimately the most effective, and by a large margin." "AI researchers have often tried to build knowledge into their agents; this always helps in the short run and is personally satisfying to the researcher; but in the long run it plateaus and even inhibits further progress; and breakthrough progress eventually arrives by an opposing approach based on scaling computation by search and learning." The author believes in the Gods of Straight Lines: "The GPUs are getting steadily better. The training runs are using steadily more compute. All the lines on all the graphs are perfectly, eerily straight (on a log-log scale!) and can be extrapolated with ease. Next year is simply this year, plus a known rate of change multiplied by delta-t. Scale is all you need."
• The Third Kind of Knowledge: Memoirs & Selected Writings (3/5) This is a collection of writing and memoirs by Robert Fitzgerald (1910-1985) who made probably the best translation of the Odyssey. As we saw with Paul Fussell, it is hard to understand what a big deal poetry and literary criticism were for men of this generation. An important corollary there is that there was no demand for poets during the Great Depression and it made this generation of Ivy League would-be poets into communist sympathizers. (Fitzgerald graduated from Harvard at the exact low of the Great Depression and had to work for a second rate newspaper in New York and then for Fortune magazine. He writes of Spain as "a legitimate Republic [that] had been attacked by a military and Fascist uprising.") Fussell, who almost died in WWII, said that Harvard men got to be "admirals' aides" in the war, and that is exactly what Fitzgerald, who went to Harvard, was! Something else that's "older generation coded" is being married multiple times. Fitzgerald had three wives. Other highlights: "General Marshall at Princeton some years ago said that no young man should think himself educated until he had read Thucydides - because, I take it, nowhere better than in Thucydides can you learn the best and worst to be expected from war and politics." "The Odyssey is about a man who cared for his wife and wanted to rejoin her. In the resonance of this affection, and by way of setting it off, the poem touches on a vast diversity of relationships between men and women: love maternal and filial, love connubial and adulterous, seduction and concubinage, infatuation superhuman and human, chance encounters lyric and prosaic." "A word about 'translation'. The Odyssey, considered strictly as an aesthetic object, is to be appreciated only in Greek. It can no more be translated into English than rhododendron can be translated into dogwood. You must learn Greek if you want to experience Homer, just as you must go to the Acropolis and look at it if you want to experience the Parthenon." "Late in '44, I was assigned to CINCPAC at Pearl Harbor, and when that command moved to the Marianas, to Guam, I went along on staff, to do various menial jobs. From, say, February to October of that year, I had nothing to do when off-duty but to read. I took three books in my footlocker. One was the Oxford text of the works of Virgil, one was the Vulgate New Testament, and the other was a Latin dictionary... my first real exposure to the Aeneid was hand to hand, with nothing but a dictionary - no instructor, no scholarship, nothing but the text itself, and the choice, evening after evening, of doing that or going to the Officers' Club and getting smashed." A big reason that he translated the Odyssey was that he could work remotely: "the best place to get help with the household and the children was overseas." His expenses were paid for six years by a Doubleday book advance and a Guggenheim fellowship to do the translation. He was Catholic and he did have six children!
• Underground: Stories to Understand Past, Present, and Future of Mining (3/5) Something to think about - sodium carbonate (soda ash) is used to produce lithium carbonate from lithium brines. You would think that demand for NRP's Sisecam Wyoming soda ash should grow with increasing global lithium production. "China is very advanced in the battery supply chain, in all segments, and much better than the West." Was surprised that the author mentioned the documentary Empire of Dust! Highlights: "During a family vacation on the French Riviera, Adolf [Lundin] took his sons, Lukas (12 years old at the time) and Ian (10 years old) to a cafe. Adolf looked across the table at his sons and announced that it was time to make a decision. 'Which of you will be my mining engineer and who will be in charge of the oil? You have 10 minutes to decide.' Lukas opted for the former, and Ian for the latter." Mentions an essay by Vaclav Smil: Peak Oil: A Catastrophist Cult and Complex Realities. Author: "We will take the opportunity to argue forcefully that resources are not running out globally and that we will never run out of oil." Talks about Malthusian thinking and mentions Julian Simon but not Herman Kahn or "cornucopianism." Mentions Alphamoon! (Tin producer in the DRC. Africa is rich with minerals.) Cecil Rhodes' Confession of Faith: "I contend that we are the finest race in the world and that the more of the world we inhabit the better it is for the human race."

Books - Q3 2025

Read 15 books this quarter. Two main themes: demographics (3) and financial services companies and banking (4). [See also first quarter 2025 and second quarter 2025.]

• Super Agers: An Evidence-Based Approach to Longevity (2/5) Just published but this reads like it was written in 2020. Surprisingly many references to climate change by the woke author, cardiologist Eric Topol, who wants us to know that red meat consumption has a big greenhouse-gas footprint. He also says, "food deserts are real." At the same time, the book is a decent survey of the cutting edge in conventional medicine. He says that he has become convinced that we are in the early stages of generalized anti-aging drugs. He is very excited about the GLP-1 drugs for several reasons: "a disassociation between side effects and efficacy," as well as reduction of inflammation throughout the body. (Carl Lumma predicts: "We will eventually have a pill that 1B+ people take every day. It will be the most successful drug in history.") One thing he cautions about is that ultra-high protein diets (like keto) could potentially promote atherosclerosis because they are so high in leucine. On the other hand, taurine supplementation could be useful for antiaging. As you would expect, he is opposed to supplements - he does not have an anti-aging stack. He gives sensible advice on lifestyle factors (except for his total abstinence from red meat): exercise, avoiding ultra-processed foods, very low alcohol consumption, avoiding environmental toxins. (Air quality is an underrated concern.) Topol quotes someone saying that "AI will not replace pathologists - it will only replace those who do not use AI." A friend of CBS calls this "augment" theory: AI/LLMs will augment human workers and be especially useful to smarter ones who think of good questions to ask. Finally, "if an infection causes a disease, it makes sense that there could be a vaccine for it." Does he know about Greg Cochran's theory? Best takeaway: focus on diet and exercise so that you don't end up in the hands of a doctor who believes in food deserts.
• Empty Planet: The Shock of Global Population Decline (1/5) Another woke book, written by two Candian wordcels who have noticed the declining birth rate and aging population problem, but whose proposed solution is mass immigration from the third world. The problem with their "solution" is that the immigration seems (to us) to contribute to the falling native birthrate, so you end up with a positive feedback loop and a replacement of the natives with migrants. But if you replace everyone in Canada with Indians, don't you just end up with a cold India? The intellectually dishonest authors dismiss all of these types of concerns with "nativism" and "racism" name-calling. They have Trump derangement even though the reason that Trump got elected may have as much to do with the Iraq war disaster (which was supported by both parties) as with immigration policy. These guys are wordcels so the book unfortunately has no modeling of different scenarios or quantitative analysis of the implications of different scenarios. What we really want to know is: how much demand for oil and coal there is going to be in 2050? How about real estate? The Twitter account BirthGauge posts TFR data which continues to show steep declines. The number of births in Poland is down 10.5% for the first half of 2025 compared with 2024. The Baltic and Visegrad TFRs are plummeting. Something that we have figured out with the help of Empty America is that these population collapses are paradoxically bullish for the big cities. People leave rural areas and small towns and crowd into the biggest population centers. Another question that we have is, assuming that you have high fertility subpopulations, how long will it take - and how big of a drawdown in population will there be before those subpopulations dominate, both numerically and politically? The Amish have a TFR of 6 but their population of 400k is too small to make any difference. And how will politics change when virtue signalling leftists with sub-replacement TFR are replaced? Cornucopian theory predicts that energy availability will continue to increase. So if energy abundance and rising standard of living is causing leftism then expect more leftism. On the other hand, religiosity (and political belief) is heritable, and the religious are having more children. The 21st century will be a test of which of these forces (increasing energy/abundance/affluence vs increasing religiosity) is stronger. 
• Buffett's Early Investments (3/5) Not sure that anyone really needs to be thinking about common stock investments that Warren Buffett was making in 1950, seventy-five years ago, but here we are. On the other hand, it does say something that you could have a strategy of buying low quality companies at a big discounts to liquidation value in 1950 and have it still work three-quarters of a century later. You could bring Benjamin Graham and Jerome Newman (born in 1894 and 1897) back today and they could set right to work making a good return with basically nothing changed about their strategy. There is very little actively managed money involved in small bank investing right now, so you can buy small banks for under 1x tangible book value and around 7x earnings. (These are not even low quality businesses necessarily.) One thing that we had never heard before is that Buffett's Berkshire Hathaway conglomerate holdco was essentially a copy of Graham & Newman's company Philadelphia & Reading. "Buffett saw up close the power of total control - all the many levers an intelligent investor can pull not when he influences management, but when he becomes management. Nearly all the characteristics that became famous hallmarks of Berkshire Hathaway - the 19th century industrial beginnings, the irreversible secular decline of the original business, the initial cheap valuation, the fight for full control, the partial liquidation of inventory to raise cash, the reallocation of capital towards new and better businesses, the clever management compensation, the behind-the-scenes tax minimization strategies, the reliance on personal friendships to source deals, and the fundamental integrity and trustworthiness of company leadership as the foundation of a sprawling conglomerate - had some antecedent or inspiration in the way Ben Graham and Micky Newman transformed and built P&R."
• Dune (2/5) Empty America says, "I think the Frank Herbert Dune series is the 'deepest well' of ideas in any one series of books." The novel was published in 1965 and was made into a movie in 1984 (David Lynch), TV miniseries (2000) and movie again in 2021 (Denis Villeneuve). Perhaps what Empty America likes about it is that in the "Duniverse," a transhuman civilization that has banned all "thinking machines", including computers, robots, and artificial intelligence. "Thou shalt not make a machine in the likeness of a human mind." Otherwise, it seemed rather thin in terms of ideas -- we are not seeing what Empty America sees here. (Normally he is a great source for worthwhile books.) The idea of an underground burrowing worm that is a quarter-mile long and over 100 feet in diameter is preposterous. A good science fiction author should be thinking about friction and the square-cube law. Also the power required to move that much sand out of the way. Highlight: "A world is supported by four things: the learning of the wise, the justice of the great, the prayers of the righteous, and the valor of the brave."
• The Death of the Banker: The Decline and Fall of the Great Financial Dynasties and the Triumph of the Small Investor (2/5)  Ron Chernow worked on financial policy studies for a while in the 1980s. Unlike his tedious biographies, this is a short little pamphlet that gives his theory of why banking dynasties centered around a particular family have not been a permanent feature of economic life but rather a fleeting developmental economic phase. Best quote: "As we have seen repeatedly in our own day, any successful business that engenders a large surplus is, potentially, an embryonic bank. In the absence of special regulatory restrictions, banking seems to spring spontaneously from other forms of economic activity." His model is that there are suppliers of capital (creditors/investors), users of capital (governments, industry), and intermediaries (investment bankers) and that the relative bargaining power - the bottleneck or fulcrum - has shifted over time. That makes sense, although he does not really have good reasons for why it shifts. He ought to be thinking much more about regulation, the way that Charles Calomiris does. Big problem with Chernow: too much biography, not enough economics.
• Intellectuals: From Marx and Tolstoy to Sartre and Chomsky (4/5) Good summary: "Intellectuals asks whether the despicable personal behavior of several influential thinkers disqualifies their far-reaching theories about how people should live." But it was not just "several." Every single leftist so-called "intellectual" from the past two centuries has been disloyal to friends, dishonest, vicious, and sexually immoral. One thing that Johnson missed, but that our generation has picked up on, is that these leftists - Marx, Sartre, etc. - were hideously deformed: bioleninism. (Another term to describe them is spiteful mutants.) Johnson: "I want to focus on the moral and judgmental credentials of intellectuals to tell mankind how to conduct itself. How did they run their own lives? With what degree of rectitude did they behave to family, friend, and associates? Were they just in their sexual and financial dealings? Did they tell, and write, the truth?" Answer: they were all monsters. Highlights: "Kipling was not an intellectual. He was a genius, he had a 'daemon' but he did not believe he could refashion the world by his own unaided intelligence, he did not reject the vast corpus of its inherited wisdom." "By the summer of 1949, thanks to a good deal of double-dealing and outright lying, Brecht had exactly what he wanted: an Austrian passport, East German government backing, a West German publisher, and a Swiss bank account." Hemingway: "My sympathies are always for exploited working people against absentee landlords even if I drink around with the landlords and shoot pigeons with them." Something interesting that Johnson has picked up on is that the Great Depression was horrible for book sales, and it caused the intellectual class to become communist, which it has remained now for nearly a century. Possible that there would be no Somalis in Minneapolis today without the Great Depression. 
• Style Drift (4/5) The latest (4th) installment in the Robert Fairchild Shipping Man series by Matthew McCleery, who is the president of a shipping industry information business called Marine Money. We thought the original book was a 5/5 and the sequels (Viking Raid, Exit Strategy, and this one) have held up well. Highlights: "'You'll take Dogecoin but you won't take gold?' 'Dog money is gold. For people who aren't fossils like you.'" "Picture the biggest warehouse you've ever seen. Raiders of the Lost Ark big. It stretches in every direction. Cool, dry air. Stacked to the rafters with rent-paying items." "Robert had learned early in high-stakes finance that big pitches had to be made face-to-face even if that meant flying across the world for a single lunch meeting." "Serendipitous run-ins between finance pros used to only happen in New York - but ever since COVID, the southeast coast of Florida had become equally fertile ground."
• Sleeping Beauties: The Mystery of Dormant Innovations in Nature and Culture (3/5) We mentioned earlier this year that scientific papers which are "sleeping beauties" should be part of cornucopian theory. (The LFP battery chemistry took off because of scarcity of lithium and cobalt, but it has been known as a possible cathode material at least as far back as 1996.) The biological analogies are interesting - like the paper about the different biochemical pathways for plants to make caffeine - but we were expecting much more about the sleeping beauties in science. Here is a paper that looked at academic literature using a quantitative beauty coefficient. ("The results indicate that many SBs become highly influential more than 50 years after their publication, far longer than typical time windows for measuring citation impact.")
• A Term at the Fed: An Insider's View (3/5) Good timing since the July Fed meeting had dissents from two Fed governors who were Trump appointees (Bowman and Waller). (And now Trump has fired a Fed governor!) The author Laurence Meyer was appointed to the Federal Reserve Board by Clinton in 1996. Clinton's first choice was Felix Rohatyn (see Q1 books) but Republicans controlled the Senate and thought that Rohatyn was too dovish. (You always want tight money if you oppose the administration and loose money if you are in charge.) Meyer ended up being pretty hawkish most of his term. An evident change thirty years later is that politicians are now much less concerned about inflation. Meyer mentions that for a presidential administration to comment on monetary policy was unthinkable - no longer! If they are appointed for a full term, Fed governors serve for fourteen years and have a very cushy job, working in a pink granite and marble building, with staff to do all of the actual work. There must be some kind of a travel budget because they make speeches all over the place, although their salary is pretty low. (Meyer: "If you ran down your wealth year after year, as we were doing, you wouldn't be able to retire well.") Surprising: "I ended my term not sure I had ever influenced the outcome of an FOMC meeting." Greenspan was the chairman during Meyer's entire term and was dictatorial. For 19 years, the U.S. economy was partially centrally planned by one man. Powell is probably getting much more pushback today than Greenspan ever experienced. Greenspan's big view, the reason he didn't tighten during the mid-1990's: "newborn technological innovations take years to become productivity-accelerating tools." Other highlights: "Each wave of innovation brought with it an acceleration in productivity, while pauses in the pace of innovation were reflected in low productivity growth." "Unfortunately the Thai currency didn't really 'float.' It sank." The Federal Reserve is an institution that represents capital. The Fed's job is to make sure that labor is never the bottleneck in the economy, that labor can never earn economic rents. 
• Lincoln: A Novel (3/5) This is one of Gore Vidal's historical fiction novels. Something interesting about Abraham Lincoln is that despite having four sons, he appears to have no living descendants, the last one having died decades ago. Are WASPs not just declining politically but actually going extinct? Good review of the novel when it was published (1984) in the Claremont Review: Lincoln as Nihilist. Gore Vidal was something of a libertarian, so this novel really hammers the Lincoln (and Seward) as dictator theme. You don't often see that. "There were times when Seward felt that Chase shared his imperial vision. But those times were few. Essentially, Chase was a man in thrall to a single cause - the abolition of slavery. It was a cause that tended, in Seward's view, to drive men quite mad, assuming that they were not already mad to begin with and so turned to the cause of abolition as a means of legitimizing the furies that drove them."
• Churchill (3/5) To be clear, Paul Johnson is an essayist and not a historian. So his short biographies (this one, or his Napoleon) or his histories (Civil War) are worth reading because they are opinionated, punchy, and very readable, but they are certainly not the last word on controversial aspects of history. While Andrew Roberts loved his subject (Napoleon), Paul Johnson made a convincing case that Napoleon ruined Europe. (Note that Andrew Roberts has also written a 1,152 page biography of Churchill.) Paul Johnson seems old to us today because he was born a century ago (1925), but Churchill was half a century older than Johnson. He lived from November 1874 – January 1965. Churchill is a figure from the distant past, and Johnson was expressing a great nostalgia for Churchill (and for his teenage WWII years) when he wrote this book in 2009. Johnson is unabashedly pro-Churchill: "no man did more to preserve freedom and democracy and the values we hold dear in the West." Could Paul Johnson not see, towards the end of his life, where the road taken by the British in WWII was leading? Churchill himself bizarrely said early in his career, "the British Empire is the world's greatest Moslem power." Some highlights: "This safe seat [Epping in Essex], near London, was of enormous benefit to his career. He never had to worry about it." "From the start of the crisis [WWI], he was a prominent member of the war party. The issue to him was Belgium and her ports, especially Antwerp. Britain had always been opposed to these ports, aimed like pistols at her coast, being in the hands of a major power, especially France. That was why Britain gave a solemn guarantee of Belgian independence. Now Germany was the threat, and when the right wing of the German army, as part of the 'Schlieffen Plan' to subdue France, swung through Belgian territory, Churchill was enthusiastically in favor of Britain sticking to the guarantee - 'a mere scrap of paper' as the kaiser bitterly called it." One of Churchill's great enjoyments was his country house, Chartwell.
• American Express: The People Who Built the Great Financial Empire (3/5) Capital allocation and corporate strategy has come a long way since the 1960s and 1970s. American Express stumbled through the mid-century with two CEOs in particular (Howard Clark and James Robinson) who could not figure this out. For a long time, there was a question internally of whether AmEx was a travel services company or a financial services company, with reluctance to embrace the financial services view. James Robinson (1935-2024) became CEO at age 41 (which would never happen today) and had the wrong goal, to grow reported net income instead of intrinsic per share value. Though the shares were "out of favor," there was no thought of repurchases, rather acquisitions. Robinson actually tried to make an acquisition that would have been fantastic: McGraw Hill (now known as S&P Global, a $170 billion company). But they couldn't come to terms. Imagine if, instead, AmEx had just bought a friendly 10 or 20% stake in McGraw Hill and held onto it? One thing we didn't know is that at one point Chase owned 97% of AmEx, but was forced to sell after the Depression. Something interesting is that managements had no concept of "disruptive innovation" or the dilemma that innovators face. When debating whether to create a charge card, Amex execs worried that it would "undercut" the traveler's check - what we would now call "cannibalization." But they did not have the language needed to discuss and understand this concept. It seems so common historically in corporate America for acquisitions to have underperformed share repurchases. But managers have figured this out. In 1994, the S&P 1500 firms' market capitalization was $12 trillion. They spent $110 billion on dividends, $56 billion on repurchases, $65 billion on acquisitions, and $351 billion on capex. In 2018, the combined market capitalization was $24 trillion and they spent $525 billion on dividends, $875 billion on repurchases, $505 billion on acquisitions, and $823 billion on capex (link). Repurchases went from 13% of the amount spent on acquisitions and capex to 66%. Something else - remember that Jamie Dimon worked for American Express as an assistant to Sandy Weill from 1982-1985, after getting his MBA. Then the two of them bought a consumer finance company from Control Data and created Citigroup. We have the Dimon biography (Last Man Standing) on our list to read; he writes a good shareholder letter at JPM.
• Breakneck: China's Quest to Engineer the Future (3/5) Should have known that Tyler Cowen's recommendation was not worth much, but gambled on this because we have Linked to the author, Dan Wang, before. (Unless the reason that I thought this book seemed trite was because I have already read Wang's ideas on his website?) Noah Smith asks a good question in his review: "you should wonder whether modern China is best modeled as 'America with different leaders', or 'America 75 years ago.'" Dan Wang ways that China is an engineering state that builds and the U.S. is a lawyerly society that blocks everything. But China is less developed - that could be an alternative explanation. Good quote: "The greatest trick that the Communist Party ever pulled off is masquerading as leftist." "The state is enacting a right-wing agenda that Western conservatives would salivate over: administering limited welfare, erecting enormous barriers to immigration, and enforcing traditional gender roles." Other highlights: "Financial investors have seen that there is no relationship between Chinese stock market performance and GDP growth. Although the economy has grown by a factor of eight in real terms between 1992 and 2018, the Shanghai Composite Index has been one of the worst performing major indices." China's current five-year plan demands that the manufacturing share of the economy stay constant - we have seen that is not necessarily a good idea. Mentions a book called "The Morning Star of Lingao" which imagines 500 people traveling back in time to 1628 to try to start an industrial revolution in China. Big story is China's one child policy and upcoming demographic collapse. Mao was not Malthusian: "It is a very good thing that China has a big population. Even if China's population multiplies many times, it is fully capable of finding a solution. That solution is production. The absurd argument of Western bourgeois economists like Thomas Malthus that increases in food cannot keep pace with increases in population was not only thoroughly refuted in theory by Marxists long ago but has also been completely exploded by the realities in the Soviet Union and China." However, Mao's successors found that production was falling short under their central planning system, so they blinked and instituted savage population control measures under Deng Xiaopeng: "Rather than acknowledge that it could not deliver the goods, the Communist Party decided instead to blame the people. It was their 'overpopulation' that was the problem, not the inadequate economic system that the leadership insisted on." (We have mentioned Song Jian previously. He was interested in Cybernetics.) Speaking of unreliable population figures, China did not have a census until 1982, so their modeling was based on shaky estimates. "Chinese leaders were just enough exposed to the West to absorb their neo-Malthusian doomerism, without being exposed enough to the Western pushback against it." Also talks about Covid: "China doesn't have a robust system for political contestation; engineers will simply follow the science until it leads to social immiseration." Anyway, Wang thinks that it's great that China builds so much, but they don't build the right stuff.
• After the Spike: Population, Progress, and the Case for People (2/5) Wow, another woke book (like Empty Planet) about falling population. It's unclear why woke leftists are taking such an interest in population decline, but their biases make it difficult for them to reason clearly. The premise of the book is absurd: that people will choose to have 0 or 1 children for many generations in a row. These co-authors worry that since TFRs have never risen above replacement after dropping below, they never will - ever. They briefly consider population subgroups with different fertility - the Amish - but they are blank slatists who think that these differences are cultural. ("For heritable fertility to prevent depopulation, a high-fertility subpopulation would have to hang together, generation after generation...") In reality, much of fertility differences are driven by personality differences that are genetically determined and heritable. (Greg Cochran would rip this book to shreds.) The authors themselves are examples of this. Co-author Michael has only one child because his wife's "work was important to her and she didn't want pregnancy to compromise her ability to serve the communities that she worked with." What we are experiencing right now is a major selection event against that type of behavior: pathological altruism. Empty America tweet: "There probably isn't anyone you can vote for who will voluntarily tolerate population loss. Above a certain level of power/wealth, national population loss is direct personal negative for them and their own families. They will find some way to get people in." We need to build a better population model with subgroups that have different, partially heritable fertility rates. Mentions The Escape from Hunger and Premature Death, 1700–2100 by Robert Fogel.
• Last Man Standing: The Ascent of Jamie Dimon and JPMorgan Chase (4/5) We should have read this earlier. JPM has had a total return of 12.5x since it was published in October 2010. The stock traded for less than book value from the financial crisis until 2016, and again in 2020 and 2022. Shares outstanding are down by 30% since 2010. Jamie Dimon is kind of a Warren Buffett of banking. We were really impressed with his shareholder letter for 2024. (Example: "I’m a fanatic about proper accounting. Accounting can lead you to the wrong answer. Regulatory rules can lead you to the wrong answer.") That may seem trite, but it makes a big difference if you act that way. We remember talking to bankers before the interest rate spike this cycle who said that rising yields wouldn't matter to the value of their loans and bonds because they are allowed to mark them at cost, so they wouldn't show a loss. Dimon's first letter, as CEO of regional bank Bank One in Chicago, was great too. He used Bank One to take over J.P. Morgan Chase & Co., which is now the biggest bank in the world, with a $900 billion market cap. Highlights: "Dimon's is not a Horatio Alger tale. He has spent the majority of his life within the same five blocks on Park Avenue." Regarding trying to buy Fireman's Fund in 1985: "American Express couldn't do a deal if Sandy [Weill], Morgan Stanley, and Warren Buffett were on the other side." "Weill's taste for martinis led to afternoon naps on the couch in his office." (Also a big cigar smoker, Sanford Weill is still alive, age 92.) Playbook: "fortress balance sheets that gave the wherewithal to make acquisitions during downturns, when assets were cheap." "Dimon considers information systems one of the core competencies of a financial services company, and he thought the function (and any associated information technology strategy) belonged in-house." Buffett on Dimon: "Jamie writes a great letter. He writes it like he would write it to me if I owned 100 percent of the bank. It's a very sensible and literate letter from a manager to his owners. You can't find many like that. You particularly don't find them in financial services."

The top (5/5) books year-to-date:

The Vanished Landscape : A 1930s Childhood in the Potteries (Q1)  

Rocket Boys: A Memoir (Q1)  

Class: A Guide Through the American Status System (Q1)  

Civil War America: 1850-1870 (Q2)

The Fundamental Index: A Better Way to Invest (Q2) 

Books - Q2 2025

Second quarter: read ten books, down from 11 in Q1 2025. 

• The Price of Time: The Real Story of Interest (3/5) See The Tom File review last year. I read it because it is by Edward Chancellor, who edited Capital Returns: Investing Through the Capital Cycle, which is a CBS 5/5 book (see review). He says he wrote it out of a "Bastiat-like conviction that ultra-low interest rates were contributing to many of our current woes." I used to be a big believer in this, but after doing cornucopian studies, I am no longer as convinced. The first part of his book is a defense of the morality of charging interest on loans. "Interest has always been with us because resources have always been scarce and must be rationed somehow." There were always lots of workarounds to the "usury" prohibitions. "The Scholastic denunciation of usury was suited to a self-sufficient agrarian society, in which loans were primarily for consumption purposes." Something funny by William Gladstone in 1854: "the superstition which formerly prevailed [on the subject of usury] was partly Judaical and partly Mohammedan." Swedish economist Knut Wicksell is the one who concluded that a discrepancy between market interest rates and the "natural" interest rate would be revealed by changes in the price level (i.e. deflation or inflation). John Law mistakenly believed that the Dutch had lower borrowing costs because they had a greater quantity of money in circulation and not because they were thrifty and has a greater stock of capital. Bagehot quote: "John Bull can stand many things, but he cannot stand two per cent." His book Lombard Street discusses ideas for central bank intervention during market panics. ("It is no coincidence that the chief proselytizers for central bank accommodation came from banking families." "In his memoirs, The Courage to Act, Ben Bernanke mentions Bagehot more frequently than any other economist.") We have not read Bernanke's book, but he thinks that the Great Depression was caused by "monetary policy [which] tried overzealously to stop the rise in stock prices." It may be one that we need to read for our "Bailout Studies" program. (He also has a book of Essays on the Great Depression.) Other highlights: "Piketty assumed that wealth compounds with time, whereas in reality the rich divide their fortunes and most savings are spent in retirement." "Between 1945 and 1980, interest rates in the United States and the United Kingdom averaged in real terms minus 3.5 per cent. Negative real rates provided an annual subsidy to the U.S. government equivalent to a fifth of tax revenues. Thanks to financial repression, America's national debt (relative to GDP) declined by nearly three-quarters."
• Civil War America: 1850-1870 (5/5) This is an excerpt of Paul Johnson's A History of the American People, dealing with the Civil War era. Something that we have come to appreciate is that the Southerners' vision for the Americas was horrific. As Paul Johnson puts it, "the South's dream of an all-American, all-slave Caribbean." "[T]he Civil War hastened the development of the West because, by removing the Southern-Democratic majority in both houses of Congress, it ended a legislative logjam which had held up certain measures for decades and impeded economic and constitutional progress." Some highlights: "The Mexican war was the great proving ground for future American bigshots, both political and military." Johnson thinks that Jefferson Davis (1808-1889) "tended to take the progressive line on everything except slavery." "From 1840 to 1860 this megalopolis [stretching from Wilmington to New York] was the most rapidly growing large industrial area in the world - and it was this complex which made inevitable, in military-economic terms, the South's ruin." "What finally happened to the South in the 1950s, Davis was urging in the 1850s. But slavery repelled capital and white skilled labor alike, and Southerners themselves did not want industrialization for many different reasons, most of all because they felt instinctively that it would mean the end of slavery and plantation culture." "By seceding from the Democratic Party, the Southern states threw away their greatest single asset, the presidency. Then, by seceding from the Union, they lost everything, slavery first and foremost." "No railway trunk lines bound the rebellious states together. The South had no infrastructure. Its railroad system was designed solely to get cotton to sea for export. There was virtually no interstate trade in the South, and so no lines to carry it." "By opposing slavery and by insisting on the integrity of the Union, Lincoln identified himself and his cause with the two most powerful impulses of the entire 19th century - liberalism and nationalism." General Jackson: "He certainly preferred a fight on Sunday to a sermon but failing to manage a fight, he loved next best a long, Presbyterian sermon, Calvinist to the core." Lincoln talking about the Bible: "Take all of this book upon reason that you can, and the balance on faith, and you will live and die a happier and better man." Woodrow Wilson (1856-1924) was the last president born before the Civil War.
• The Fundamental Index: A Better Way to Invest (5/5) Written in 2008 by Rob Arnott (and coauthors) of Research Affiliates (RAFI). Something that I never realized - the S&P 500 index was created to measure how the stock market was doing, and not as a strategy. After it was a measurement it became a benchmark, and then from a benchmark it became a strategy. The problem with the capitalization-weighted index is that "we're going to wind up putting most of our money in overvalued stocks because the scale of our investment is explicitly linked to the stock's price, hence to the error in that price." "Price weighting ensures investors have maximum exposure to a bubble's darlings right before they fall off a cliff." S&P 500 investors lost a bunch of money in Cisco in 2000 when it had a 4.3% weight and then fell 90%. I would imagine something similar will happen with Tesla in the coming years. (The top five in the S&P today are AAPL, MSFT, NVDA, AMZN, and META.) One alternative to the market cap weighted index (SPY) is to equal weight (RSP). But another alternative is to fundamentally weight. You could own every company in proportion to its revenue (RWL) as a share of the total, for example, or another fundamental attribute like book value or cash flow.. But the most interesting approach is to use a composite of these fundamental attributes (PRF). The particulars turn out not to be hugely important: "all of these Fundamental Index portfolios performed similarly - while capitalization weighting did not - because each one broke the link between portfolio weight and pricing error." Something interesting they find is that the more inefficient the market, the more the fundamental weight strategy outperforms the market cap weighting. So it does better with small cap stocks and foreign stocks. ("Cap-weighting performance drag relative to its opportunity set is proportional to the square of the errors in price.") They also find that five-year smoothing of the fundamental variables does better than weighting on the most recent data. Basically the key here is that market cap weighting is trying to own companies in proportion to their size, but the fundamental variables are a better measure of size than the market capitalizations. "Changes in the size of a company on one fundamental measure may be offset by changes in another size metric. For example, U.S. automakers recently experienced a large increase in sales accompanied by a reduction in cash flow. This netting effect in the [fundamental composite] indexes can leave the overall fundamental size of the company and the need to rebalance unaltered." Which is good because, "one of the indexing world's dirty secrets is that their trading costs are a disaster, only alleviated by the very low annual turnover." Periods of time when market cap weight index outperforms the fundamental are "growth-dominated markets" - essentially there is an out of control positive feedback loop. If I had to do passive investing, I would for sure use a fundamental index and not a market capitalization one.
  
• Skunk Works: A Personal Memoir of My Years at Lockheed (3/5) The author Ben Rich (1925-1995) worked for the "Skunk Works" of Lockheed building stealthy aircraft. The big accomplishments were the U-2 (late 1950s), the SR-71 Blackbird (1962) and the F-117 Nighthawk stealth fighter (1978). Some highlights: "Our designers spent at least a third of their day right on the ship floor; at the same time, there were usually two or three shop workers up in the design room conferring on a particular problem. That was how we kept everybody involved and integrated on a project." "A future commander resented having only a four-man crew to boss around on a ship that was so secret that the Navy could not even admit it existed. Our stealth ship might be able to blast out of the sky a sizable Soviet attack force, but in terms of an officer's future status and promotion prospects, it was about as glamorous as commanding a tugboat. At the highest levels, the Navy brass was equally unenthusiastic about the small number of stealth ships they would need to defend carrier task forces. Too few to do anyone's career much good in terms of power or prestige. The carrier task force people didn't like the stealth ship because it reminded everyone how vulnerable their hulking ships really were."
• Romney: A Reckoning (2/5) A case study of a principled loser. "Watching Trump complete his conquest of the GOP was even more devastating to Romney than losing his own election in 2012." Even though Romney was right about Trump, he's an unbearable goody-two-shoes. Has there ever been anyone in American history more sanctimonious than Mitt Romney? Romney's dream in life was to make sure the Empire's books are balanced by canceling Social Security before it collapses. This was funny though: "It's a challenge to justify borrowing 33 billion from China so we can give it to Israel, particularly when I am under the impression that Israel is sufficiently well financed to provide the funds itself." "A devout institutionalist, Romney had harbored a certain subconscious notion that somewhere in the U.S. government, serious people were sitting in rooms drawing up cohesive plans to address America's long term challenges. But if those rooms existed, they did not appear to be in the United States Senate."
• On the Hunt for Great Companies: An Investor's Guide to Evaluating Business Quality and Durability (3/5) Topics: economies of scale, switching costs, network effects, brand. Highlights: "there are rare examples of the phenomenon where market-leading firms actively downplay their market positions in investor communication due to fear of antitrust intervention. In these instances, they define their markets as a union of several large markets to disguise their monopolistic market positions. Most companies, on the contrary, exaggerate their distinction by defining their market as the intersection of various smaller markets, making them appear more dominant than they are.""Occasionally, businesses are 'undermonetized,' where they intentionally or unintentionally do not extract as much value from customers and/or suppliers as they could." Businesses that are over-earning "may appear statistically cheap to some investors who are overly focused on valuation-multiples." Analyzing companies that aren't yet profitable: "Typically, the time of the largest absolute losses isn't that far from the [per unit] break-even point. At that point in time, when the business suffered its largest absolute loses, two investors - one focusing on per-unit profitability and another focusing solely on absolute profitability - would come to opposite conclusions about the company's direction. The one only focusing on absolute profitability will see that the business seems to lose more and more money. The one focusing on per-unit profitability will see that the business is rapidly approaching breakeven." Geographical repeatability: "focusing only on consolidated profits leads the investor to conclude that the entire group is not operating with a proven business model, while in fact some parts of the business are profitable, and the remaining part is following the same delayed unit economics trajectory as the mature ones..." An investor who focuses on the "group" profitability is implicitly capitalizing the newer markets/stores as liabilities! Businesses that acquire customers with a high lifetime value can have a high customer acquisition cost, and those can look unprofitable to the untrained eye while actually having solid underlying economics.
• A History of the American People (3/5) Paul Johnson's history of America, from which the Civil War book (above) was excerpted. His view of America: it was "founded primarily for religious purposes." “The Revolution could not have taken place without this religious background. The essential difference between the American Revolution and the French Revolution is that the American Revolution, in its origins, was a religious event, whereas the French Revolution was an anti-religious event. That fact was to shape the American Revolution from start to finish and determine the nature of the independent state it brought into being.” “The Second Awakening, with its huge intensification of religious passion, sounded the death-knell of American slavery just as the First Awakening had sounded the death-knell of British colonialism.” More highlights: "If the antinomians had their way, it was argued, religion and government would cease to be based on reasoned argument, and learning, and the laws of evidence, and would come to rest entirely on heightened emotion - a form of continuous revivalism with everyone claiming to be inspired by the Holy Spirit." "The basic economic fact about the New World was that land was plentiful: it was labor and skills that were in short supply." "Modern politics was invented in the England of the 1640s..." which was right when the English began settling in America. "In 1700 the American mainland's output was only 5 percent of Britain's; by 1775 it was two-fifths." So, the revolution was economically determined. "Colonial American was the least taxed country in recorded history. Government was extremely small, limited in its powers, and cheap." Washington: "the next best thing to owning a lot of land was to become a land surveyor." The founders: "They were the Enlightenment made flesh, but an Enlightenment shorn of its vitiating French intellectual weaknesses of dogmatism, anticlericalism, moral chaos, and an excessive trust in logic, and buttressed by the English virtues of pragmatism, fair-mindedness, and honorable loyalty to each other." Both the Southerners and, before them, the English crown were blocking Manifest  Destiny. A royal proclamation in 1763 "forbade Americans to settle in any lands beyond the heads or sources of any of the rivers which fall into the Atlantic Ocean from the West or Northwest." Franklin: "Though sad about the break with Britain, he was confident that America's huge economic and demographic strength - he was one of the few people on either side who appreciated its magnitude - would make it a certain victor." "No member of the [British] government ever thought of crossing the Atlantic on a fact-finding mission." "Franklin was planning with the French Ministry of Marine a series of attacks on the English coasts, with John Paul Jones in charge of the naval forces and Lafayette of an invasion army. British resources were stretched thin all over the world." George III called the revolution "a Presbyterian rebellion." "The English church and state lost the political and military battle because they had already lost the religious battle." The anti-Federalists: "their objections varied and they appeared unable to agree on an alternative to what they rejected." The Constitution "by a historical accident [was] actually drawn up at the high tide of 18-th century secularism, which was as yet unpolluted by the fanatical atheism and the bloody excesses of its culminating story, the French Revolution." "The farmers and planters of the South hated Philadelphia and its rich Quakers, they hated New York and its rich lawyers, and, most of all, they hated Boston and its rich merchants and shipowners." Paul Johnson is good on economics: "Taylor's theory was an early version of what was to become known as the physical fallacy, a belief that only those who worked with their hands and brains to raise food or make goods were creating 'real' wealth and that all other forms of economic activity were essentially parasitical. It was commonly held in the early 19th century, and Marx and all his followers fell victim to it. Indeed plenty of people hold it in one form or another today, and whenever its adherent acquire power, or seize it, and put their beliefs into practice, by oppressing the 'parasitical middleman,' poverty invariably follows." "Next to Burke, [John] Marshall revered Adam Smith's Wealth of Nations. He was closer to its spirit than Hamilton, believing the state should be chary of interfering in the natural process of the economy." Great quote: "Some of the older churches, especially the Episcopalians, sniffed at camp-meetings, saying 'more souls are begot than saved there'... it was the uninhibited Methodists who profited most from revivalism... by 1844 they were the biggest church in the United States." "The esoterical reinterpretation of the scriptures produced in thirty-eight huge volumes by the 18th century philosopher Emanuel Swedenborg became an immense quarry into which American sect founders buried industriously for decades." "Even the most bizarre of these sects founded schools, training colleges for teachers and evangelists, and even universities." "By opposing slavery and by insisting on the integrity of the Union, Lincoln identified himself and his cause with the two most powerful impulses of the entire 19th century - liberalism and nationalism." On T.R.: "There was something petty in this kind of populism, coming from a man whose family had inherited, and always lived off, wealth accumulated in distant times by methods which would not bear close examination." We never think about how T.R. entered the race in 1912, splitting the vote with Taft, and allowing the horrible Wilson into office.
• U.S. Bank Deregulation in Historical Perspective (3/5) Another one by Charles Calomiris, author of Fragile by Design (note) and also the "Fiscal Dominance" paper from two years ago. This short review by Cato is a good summary of the book. His academic career was essentially pushing for bank deregulation, and this book is a collection of some of his papers. One of his main ideas was that unit banking - prohibiting banks from having branches, which was the law in most states for a long time - made the U.S. financial system less robust and contributed to the many financial panics and episodes of bank failure. ("The United States experienced banking panics in a period when they were a historical curiosity in other countries..." "likely association between the unique init banking system in the United States and its unique propensity for panics.") Other countries with similar banking systems (fractional reserve, which Austrian economics people blame) such as Canada were able to avoid having so many episodes of systemic bank failure. "The evidence shows that unit banks were less diversified, more vulnerable to failure, less able to grow in the aftermath of diverse shocks, less efficient in their use of scarce bank capital and reserves, less able to provide credit at low cost during times of peak demand, less able to provide services in remote areas, less competitive in local markets, less able to transfer capital across regions, and less able to finance interregional commodities trade. It is no wonder that the unit banking system was so uncommon in the international history of banking. The main puzzle is why it persisted so long, despite its disadvantages, in the American banking system." Another thought: "Restrictions on branching served the interest of wealthy farmers at the expense of poorer farmers and industrialists." Why is the government tolerating stablecoins? "Another interesting possibility is that technological change and global market competition will force the full deregulation of the banking industry, whether Congress acts to do so or not. The key to such a dramatic change could be the privatization of the payment system, made possible through the development of new wholesale and retail clearing arrangements via the internet. If financial institutions can develop networks to clear claims among their customers without the use of checking accounts and Fed-controlled payment networks, then there would be little need for them to maintain bank charters (which currently provide unique access to the payment system)." It is interesting to think about the economic function that banks serve. Theories: "repositories of scarce information capital about borrowers." Farmers liked unit banking because location-specific bank capital tied the banks fortunes to their own. Senator Carter Glass had a strange fixation with separating commercial banking from investment banking. That separation lasted until the Gramm–Leach–Bliley Act (GLBA) aka the Financial Services Modernization Act of 1999. Maybe big banks should have made more of the fact that Carter Glass was a segregationist who supported poll taxes and literacy tests for voting? Also, Senator Phil Gramm who wrote the deregulation legislation is the father of Jeff Gramm, activist investor who wrote Dear Chairman.
• Original Sin: President Biden's Decline, Its Cover-Up, and His Disastrous Choice to Run Again (2/5) The purpose of this book is to assign blame for the 2024 election loss to Biden and his inner circle of advisors (politburo) for hiding his cognitive decline. It also whitewashes Biden's other scandals, such as his bribery racket, by focusing attention on Hunter's drug addiction and not his role as a bag man. Even though it is a whitewash and a rush job, there are some fascinating admissions. One thing we realize is that common knowledge in D.C. does not circulate very far, even on Twitter. Regarding Biden's cognitive decline: "We weren't going to change that he was running, and no one wanted to be on the outside in case he did win. So no one said anything." Even more surprising, in September 2023 at an event that included Chris Christie and Jeb Bush, Ari Emanuel shouted at Ron Klain across a room, "Joe Biden cannot run for reelection! He needs to drop out! He can't win!" How did we not hear about that at the time? Another thing insiders know is that the polls are fake. The public is being told that Biden or Harris are five points ahead while everyone in D.C. knows that they are going down in flames. But we never hear about that either. For example: "Biden needs to stay in, one black congresswoman argued before the entire caucus. If he gets out, this is going to fall on the shoulders of a black woman. And Kamala Harris is going to lose, and everyone is going to blame black people. There was a real sense from black members that a Harris candidacy - and a devastating loss that many seemed to anticipate as a foregone conclusion - would be horrible for people of color. And yet that argument often came with the caveat that the party could not pick any replacement nominee other than Harris." 
• Dealings: A Political and Financial Life (2/5) We remember reading about Felix Rohatyn in Barbarians at the Gate, because he represented the special committee of RJR Nabisco in the leveraged buyout auction. Classic silent generation: he "flunked out" of physics at Middlebury, but had some sort of distant connection to André Meyer and was able to get a low-level job at Lazard. Never reveals how he got Meyer's attention. He does say that he knew Samuel Bronfman's daughter and that Bronfman told him, at breakfast one Sunday, to ask to transfer from foreign exchange trading to working on mergers. Also puzzling how he was able to get into (and pay for) Middlebury as a refugee from Europe in 1942. As an investment banker, Rohatyn would go to the Allen & Company conference in Sun Valley, Idaho since he was involved in media deals. That is an interesting multi-generational financial firm, with CEOs Charles R. Allen, Jr., Herbert A. Allen, Jr., and now Herbert A. Allen III.