Books - Q3 2026

• Lunch with the FT: A Second Helping (3/5) Followup to the first edition, which we read last quarter. This edition has the best lunch so far, a decade ago with Nigel Farage. It is a reminder that the FT has two types of Lunch interviews: Great men who they think are “scoundrels,” and scoundrels who they think are great men. One Lunch, with Isabelle Huppert, was at Arpège in Paris, a Michelin 3 star. That's rare for the Lunches. (Chef Alain Passard says, "I want to elevate the humble vegetable to a grand cru.") In the appendix is a profound letter to the editor: "I am sure that the poet Homer would have appreciated an invitation to Lunch with the FT. As he showed in the Iliad and the Odyssey, food, wine, laughter, conversation and friendship were essential for a meaningful life. Somewhere in the Elysian Fields, this wondrous poet must be feeling somewhat envious of Murad Ahmed’s lunch with Demis Hassabis and Gillian Tett’s with Ginni Rometty. Artificial intelligence was the central topic of conversation at both meals. This is not a new idea. As Homer wrote of Hephaestus/Vulcan: 'There were golden handmaids also who worked for him, and were like real young women, with sense and reason, voice also and strength, and all the learning of the immortals.' I hope there are copies of Homer in the offices of DeepMind and IBM." Also see, Lunch with the FT, with the FT. You realize reading the Lunches what a strong connection the British still feel to Africa. Lots of Lunches with Nigerians like Aliko Dangote. This year's Lunches have included Dario Amodei, Erik Prince, and Doug Wilson.
• The Powerful and the Damned: Private Diaries in Turbulent Times (3/5) Memoir by the previous editor of the Financial Times, Lionel Barber (b 1955), who compiled the two "Lunch with the FT" books that we read earlier. Confirms that he is a globalist midwit. Sad to have a financial newspaper with really no theory of economics, let alone a sound theory. He wonders why the FT missed the 2008 crisis. Were they going to offend their advertisers and story contacts? (The Guardian describes it: "tension between the need to suck up to the very rich and the imperative to expose their depredations.") Great case study of an "elite" member who is supposed to be paying attention, but exhausts himself by flying all over the world, and never reads anything substantive. (He was invited to Davos, Sun Valley, and state dinners in the UK and US.) Barber quotes a Daily Mail description of himself as a “weapons-grade social climber and name-dropper extraordinaire” and that is absolutely apt. The book makes it very clear that in Europe, nationalism is low status and globalism is high status. Barber brags, "my children were educated overseas." The Brexit discussions support the thesis of The Populist Delusion, that populism will never work because the marginal are too incapable, by definition.
• Now It Can Be Told: The Story Of The Manhattan Project (4/5) Leslie Groves (1896-1970) was a West Point graduate who built the Pentagon office building and then ran the Manhattan Project from 1942-1947, when it was turned over to the Atomic Energy Commission. The current moment with AI/LLM model development is our era's Manhattan Project: it is an arms race with China. I think that the government would do anything to win this arms race, so it is worth looking at what they did to win the original one. Example: "We had always made a determined effort to withhold all information on the atomic bomb project from everyone, including members of the Executive Department, military personnel and members of Congress, except those who definitely needed it and who were authorized to receive it. As a result our methods of obtaining funds had always been rather unorthodox." "[A]rranging for me to be paid by the United States $37,500,000, a sum sufficient to cover the expected obligations. I then deposited this money in a personal account at the U.S. Treasury. From this I made withdrawals as necessary." "It was further agreed that no information would be given to the press on the removal of the silver, and that the Treasury would continue to carry it on their daily balance sheets." Wouldn't surprise us if the Fed buys the hyperscalers' debt if they have any difficulty financing their data centers. Something not mentioned in the book is that Groves had a son (Richard) who was at West Point during WWII and the bomb saved him from going to Japan. Richard (1923-2011) had four children. Groves' other child was a daughter (Gwen) who had three children. So Groves had 7 grandchildren which is respectable but maybe a little light for someone born in 1896. He was a competitive military career man. His son hardly ever saw him.
• The Takeover Game (3/5) Written by New Yorker contributor and financial journalist John Brooks (1920-1993) and published in 1987. He wrote other books including Once in Golconda, about the 1929 crash, and The Go-Go Years, about the 1960s. This one is about takeovers and buyouts, and while there was a crash in October 1987, he was wrong to try to foment a moral panic about them. With 40 years of hindsight, nothing in here is as imperative as Brooks was trying to make it seem. The 1980s takeovers - at big premia to market prices - were a sign that stocks were cheap. What is surprising is that corporate managers were willing to let their companies get taken over, and lose their own jobs, rather than return capital to shareholders! A company is a lot less inviting as a takeover target if it does a leveraged recapitalization to buy back stock or pay a dividend. How about that instead of the dubious takeover defenses, like the "poison pill"?  Moran v. Household International, Inc. (1985) is the Delaware Supreme Court case that upheld a poison pill. A board of directors may adopt a shareholder rights plan (a "poison pill") under the business judgment rule, provided it meets initial standards of reasonableness. Note that Martin Lipton is still around, age 95, and so is Herbert Wachtell, age 94. This was written before Barbarians at the Gate, about the RJR Nabisco MBO/LBO, which is the better book about the time period. Still, there are some good bits. "The old investment-banking prejudice against securities trading, as opposed to underwriting, was not all arbitrary snobbery. It is true enough that, in general, underwriters were and are more gently bred, well educated, gentlemanly of demeanor, and soft of speech, traders more brash, overly competitive, and loud. But the prejudice has a firm basis in social utility." Another observation is that the antitrust movement in the earlier 20th century caused the conglomerate mess of the middle part, because the more logical and efficient horizontal and vertical mergers were essentially banned. (Until Reagan dismantled antitrust enforcement.) George Stigler used the terms "merging for monopoly" and "merging for oligopoly" to contrast the structural drivers and goals of the first two great U.S. corporate merger waves. The first wave sought direct dominant control, while the second wave aimed for shared industry leadership under stricter antitrust laws. Some other interesting parts were about the Martin Marietta / Bendix and St Regis Paper Company battles and transactions. (He is a little lazy in not reporting details like valuation and company performance, which are now extremely difficult to figure out.)
• Temples of Chance: How America Inc. Bought Out Murder Inc. to Win Control of the Casino Business (3/5) This is an anti-gambling polemic written at the beginning of an upward inflection in gambling. Casinos seem positively quaint now that we have smartphone sports betting, cryptocurrencies, and zero day options. It is distasteful but seems like a durable trend because in a cornucopian world, status is one of the things that is really scarce, and a certain proportion of people are psychologically wired to risk it all to try to be on top. Quite a bit of the book is about Donald Trump's casino investments in Atlantic City. When Trump was opening the Taj Mahal casino, a sell side analyst said that "it would break every record in the book. And that strong business would continue during May, June and July, but when the cold winds of October came, it wasn't going to make it." Trump threatened to sue Janney Montgomery Scott and demanded an apology. But when the cold winds of October came, the casino missed its first debt payment.
• Empire of Pain: The Secret History of the Sackler Dynasty (4/5) The Sackler family fought an opium war against the United States - and won! That's how weak the state was twenty years ago, so we shouldn't be surprised that it is now losing a war to Iran. They were so arrogant and careless that they did lose the company (Purdue) and had to pay billions of dollars out of pocket (in installments), but the family members were never charged with crimes and had enough left over that they still have significant family offices. The founder of the family, Arthur Sackler (1913-1987), basically invented pharmaceutical advertising and was an early and aggressive practitioner of direct sales to physicians using reps. He took over a medical advertising agency (William Douglas McAdams), he organized his brothers' purchase of a pharmaceutical manufacturer (Purdue), and he also became a publisher and started a weekly medical newspaper in 1960, the Medical Tribune. He was also a silent owner of the other competing medical ad agency (L. W. Frolich) and other medical publications. The family was very secretive about what they owned, but at the same time they liked having their name slathered all over art museums and educational institutions. They were very frank about how philanthropy is different than charity - it was an investment in status and power. (And buying protection against criticism.) Of course, the publications shilled the products that his pharma company and ad agency clients were selling. The family was very good at regulatory capture. Purdue hired the FDA reviewer who approved OxyContin right after he "retired." Arthur Sackler was married three times, unceremoniously abandoning his first two wives when he spotted something better. His younger brother Mortimer was married three times and had children with all three. The other brother Raymond only had one wife, but his son Richard (b 1945) is the main villain in the story. Richard is the boomer who took over from his father and got the family into opiates. Highlights: Arthur's daughter asking him to play with her. "I'm going to wait until you're an adult. Then I'll have a conversation with you." "[T]he commercial life span of a branded drug is the short interval between when you start marketing it and the point when you lose patent exclusivity. Roche and Arthur didn't need to fight off regulation forever; they just needed to hold it off until the patents had run out." "The Sackler empire is a completely integrated operation. They could develop a drug, have it clinically tested, secure favorable reports from the doctors and hospitals with which they had connections, devise an advertising campaign in their agency, publish the clinical articles and the advertisements in their own medical journals, and use their public relations muscle to place articles in newspaper and magazines." The Republican presidential administrations - Reagan, George W. Bush, and Trump - were particularly malleable when Sacklers needed forbearance. Also, the Republican state attorneys general were more interested in quickly settling the Purdue lawsuits. There were also Republicans like Rudolph Giuliani who took money to intervene for Purdue at key moments and keep the racket going. "A doctor who wrote a lot of painkiller prescriptions was a priceless commodity. Like casino employees talking about an especially profligate gambler, the sales reps referred to these doctors as 'whales.'" Another Sackler family strategy was to fund advocacy groups for pain patients. "On the very day that the patent for the original formulation [of OxyContin] was set to expire, the FDA, ever obliging, declared that the benefits of the old version of OxyContin 'no longer outweigh' the risks," which meant that no one could produce a generic version! "The Sacklers' impulse to slap their name on any bequest, no matter how large or small, might have found its surreal culmination at the Tate Modern... in which a silver plaque informs visitors that they happen to be riding on the Sackler Escalator." "One unadvertised hazard in the life of a plutocrat is that the people around you can be prone to yes-man sycophancy. In theory, you should be able to avail yourself of state-of-the-art counsel. But instead, you often get lousy advice, because your courtiers are careful to tell you only what they think you want to hear." 
• The Puzzle Palace: Inside the National Security Agency, America's Most Secret Intelligence Organization (3/5) Published in 1982, this is seriously out of date. One interesting thing, though, is that even back then the NSA spoke of computers in terms of acres. The agency was established in 1952 by a secretive presidential directive - not by legislation! They've had continual problems with employees defecting to foreign countries. Intelligence agencies are really in the business of maintaining state power domestically and not in competition with foreign intelligence agencies, who are their friends and colleagues, regardless of whether the foreign countries are friends or not. (Remember our observation about Tinker, Tailor, Soldier, Spy: the real enemy is within.)
• Prediction Machines, Updated and Expanded: The Simple Economics of Artificial Intelligence (2/5) Thesis is that what AIs/LLMs do is predict, and they are going to decrease the cost of prediction, which increases the value of anything that complements prediction. Highlights: "The rise of the internet was a drop in the cost of distribution, communication, and search." "From an economist’s perspective, Google made search cheap. When search became cheap, companies that made money selling search through other means (e.g., the Yellow Pages, travel agents, classifieds) found themselves in a competitive crisis. At the same time, companies that relied on people finding them (for example, self-publishing authors, sellers of obscure collectibles, homegrown moviemakers) prospered." "A pioneer of this field, Frederick Jelinek (1932-2010) remarked, 'Every time I fire a linguist, the performance of the speech recognizer goes up.'" "In 1993, Michael Hammer and James Champy, in their book Reengineering the Corporation, argued that to use the new general-purpose technology—computers—businesses needed to step back from their processes and outline the objective they wanted to achieve." "Like classical computing, AI is a general-purpose technology. It has the potential to affect every decision because prediction is a key input to decision-making."
• Unruly Americans and the Origins of the Constitution (3/5) Similar perspective to The Framers’ Coup by Michael J. Klarman (see 2020 notes). The Constitution was a conservative counter-revolution to protect creditors against irresponsible populist economic measures enacted by a majority of state legislatures in the mid-1780s. The irresponsible economic measures were a response to a post-Revolutionary economic depression: "per capita gross national product plummeted nearly 50 percent in the fifteen years after Americans declared their independence." Charles Beard's economic interpretation of the founding was that the supporters of ratification who were creditors "determined to suppress state debtor relief laws and inflationary monetary schemes, as well as speculators in government securities who stood to make a fortune from the creation of a powerful national government possessed of sufficient taxing power to pay off its debt at face value. Antifederalists, according to Beard, were mostly debtor farmers." What is most striking is that the post-revolutionary rich were absolutely determined to protect their wealth from a currency devaluation, but it was not long at all before the elite were generating schemes for currency devaluation that they could control. As usual with a historian, the book is weak on data and prices. It seems like the big problem was a deflationary recession in the wake of independence, and as usual the debt contracts did not account for this, leading to a conflict between creditors on one side and taxpayers and debtors on the other. (A good political lesson is that both sides were perpetually unhappy, the creditors always thinking that state legislatures were too populist and the debtors thinking they weren't populist enough, until the constitution settled the issue.) The surprising thing about the 1787 constitution is that the creditors won, decisively! The rich really liked the Article 1 Section 10 Clause 1 prohibition on state laws "impairing the Obligation of Contracts," which really meant any type of debtor relief. Something we never knew was that Abigail Adams was buying states' war debt for 15 cents on the dollar. One big thing has changed since the 1780s: then the poor wanted inflation and the rich wanted deflation (because they were net creditors). Now, the rich want inflation. ("The optimal capital structure in America is have just enough liquidity to survive until the bailouts.") In 1769, George Washington supported the idea of a boycott of British goods: "The extravagant & expensive man has the same good plea to retrench his Expenses. He is thereby furnished with a pretext to live within bounds, and embraces it." Which reminds us of our interpretation of 20th Century threadbare WASP frugality as really a mutual sumptuariness limitation treaty as a response to confiscatory income and estate taxes, and inflation.
• Departures and Arrivals (3/5) Collection of travel essays by Eric Newby (1919-2006, previously). The first half were really good, especially the ones about his childhood in England, which remind me of Paul Johnson (who was born nine years later). Newby spent a lot his post-war life traveling in exotic, far-flung places like India, Afghanistan, South America. I wonder whether he thought that England in mid-20th century was "boring"? If so, he did not know how good he had it. That England is gone, never to return, and now it looks like all the "global south" countries he was busy exploring. There would be no place in the world that you could travel to today that would be like early 20th century England. Eric and Wanda Newby had two children and two grandchildren. (Eric was an only child but Wanda was one of 11!) Eric seemed to define himself as a "traveler" and I think that preoccupation is a low-TFR trait.
• Something Wholesale (4/5) Autobiographical Eric Newby, this one about his post-war career as a traveling salesman at his father's garment firm ("the rag trade"). Newby's father was unusually old (45) when he was born, so you get a great depiction of what an Englishman born in 1874 was like. His father loved to row a skiff on the Thames, which must have looked something like this. The firm couldn't keep up with changing fashions in the 1950s and so dissolved. His father's half century owning an independent business did not seem to leave much of a surplus for one child to inherit. This is what ultimately pushed Newby into writing, and into far-flung adventures so that he would have something to write about.
• The Unanchored Central Banker: Demography, Fiscal Instability, and an Erosion of the Central Bank's Inflation-Fighting Ability (3/5) This is a sequel to The Great Demographic Reversal (review), by economists Charles Goodhart and Manon Pradhan. The thesis is that central banks in advanced economies won't be able to fight the inflation that is a consequence of societies aging. Too much discussion of China, which is not a factor in the key question, the provision of health care to older generations in the U.S. Some highlights: "Basel regulations tended to incentivise banks to hold public sector debt, for example, by treating public sector bonds as risk-free and ignoring interest rate risk, relative to credit risk. This is financial repression, plain and simple, and it has encouraged banks to hold more public sector bonds than they would have done under a more even handed system." They come up with the idea of taxing land, because it is an immobile factor of production. (Georgist!) Most interesting thing was a pointer to John H. Cochrane's work on the fiscal theory of the price level. Theory: "the price level adjusts so that the real value of government debt (including money) equals the present value of the primary fiscal surpluses that will repay the debt." Cochrane just published a new paper in August: Inflation and Debt. (His theory is that debts and deficits per se are not inflationary. They are inflationary when they are not credibly backed by future repayment. Higher rates and fiscal tightening can reduce inflation, but higher rates + unchanged fiscal policy need not reduce inflation and can ultimately increase it. Ultimately, the U.S. will need to either increase the present value of future primary surpluses—through growth, spending restraint, or revenue—or reduce the real value of the claims against those surpluses, through inflation or default.) This Goodhart and Pradhan book is pretty slapped together, Cochrane's paper is more interesting.
• A Traveller’s Life: A Witty and Inspirational Memoir of a Lifetime Spent Exploring the Globe (3/5) Something emerges from our Eric Newby reading program, which is that travel is boring. His writing is best when he is writing about his life in England, or during WWII, or sailing on the clipper ship to Australia. The travelogue writing is not as good. Funny highlight: "the truth is that babies do not like travel, and I was no exception. Babies are unadventurous. Babies act as grapnels to prevent 'the family' dragging its  ground. That is why they were invented. Perversely, their desire for fresh horizons comes much later when they have already begun to 'attract' fares, and can no longer travel free; by which time they are no longer babies at all."

Thursday Night Links

• Another response, however, is to import new congregants from more backwards societies that have not yet secularized. For this reason, a common refrain from religious figures is that without migrants no one would fill the pews. For example, Pope Leo XIV has praised migrants for revitalizing the Church with their “spiritual enthusiasm and vitality.” Catholic Archbishop Edward J. Weisenburger similarly advocates migration in order to “revitalize parishes.” This sentiment is not limited to the Catholic Church; Protestant figures make the same argument in the United States and Europe, and so do Mormon ones. By making this argument, these institutions damn themselves. Claims that migrants are required to revitalize churches are admissions that these churches are incapable of inspiring faith in Americans or Europeans, and that the United States and Europe truly are post-Christian rather than merely in an impious era. Moribund religious organizations don’t just resort to mortmain migration to supply parishioners, they also do so to acquire money. The funding model for many religious organizations has gone from tithes or donations or fees from congregants, which requires organic appeal, to farming government grants for providing services to asylum seekers. As usual with mortmain migration, this does not work in the long run. The children of immigrants are exposed to all the same national and global influences as their native peers, and abandon the faith themselves. Plus, the source countries are secularizing or converting to more vital faiths capable of proselytizing and retaining believers. Long-run survival of these churches and denominations requires successfully grappling with 21st century secularism. But it’s much easier to avoid innovation by putting the day of reckoning off for a decade through mass migration. [Aporia Magazine]
• What people think about Jesus Christ is far more important to me than what people think about Republicans or conservatives, and pandering to white nationalists reinforces the worst stereotypes about the Christian faith. The Bible doesn’t say that immigrants, minorities, or neoconservatives alone need forgiveness; the Bible says “all have sinned and come short of the glory of God.” The Bible doesn’t say that only Anglo-Americans can be saved by faith in Jesus Christ, but that “whosoever shall call upon the name of the Lord shall be saved.” Nationalist populism, with its emphasis on bigger government helping friends and harming enemies, is bad enough; nationalist populism whose fixation on racial identity politics drives people away from Jesus Christ’s admonition that “no man cometh unto the Father but by me” is much worse. [The UnPopulist] 
• You cannot invest money in most bond markets today and make a reasonable return (the risk-free return has been recast as return-free risk). In addition, we are at or are approaching that point in many real estate markets as well. In many capital cities today, you’re lucky to be able to get more than a 4% gross rental yield on residential real estate (25x sales). After costs (including property management) and tax, that’s somewhere in the order of 40x earnings. Stocks are currently one of the last bastions of reasonable returns. But there is no inevitability that that situation will persist. Opportunity does not exist just because it is needed or desired. If markets were to melt up to 50x, it would feel good for a while (if you were invested). However, your future stream of dividends would not have increased, so in truth you would be no wealthier, and furthermore, you would be confronted with the reality of poor reinvestment returns on dividends and corporate stock buybacks. In the long run, this would make you worse rather than better off, despite feeling wealthier in the short run. Conversely, if markets were to melt down and trade at cheap levels, it would feel painful for a while. But you would be better off long term. Bond investors understand reinvestment risk, but most stock investors do not seem too. [Lyall Taylor]
• Kushner, who is forty-five, has little regard for the craft of diplomacy. In his view, it is less important to know a region’s history or the details of the partisans’ negotiating positions than to simply hear the sides out and split the difference. Peace deals are like real-estate deals, he has said. Both involve hard bargaining and, at times, bluffing. The fact that so many diplomats before him have struggled is a testament not to the intransigence of international problems but to the mediocrity of his predecessors. [The New Yorker]
• Canada’s status as an effective American protectorate benefits both parties, but some of Canada’s elite aspire to independent great power status and see immigration as a path to it. The logic is that with a tenth of America’s population, Canada must accommodate its larger southern neighbor, but with a quarter or a third would have much more leverage to act against US interests. This is wrong because people are not interchangeable. Canada with the population, prosperity, and stability of Mexico can harm the USA but not oppose it. In any case, the aspiration alone is a hostile act against the United States and should be treated as such. [Aporia Magazine]

Thursday Night Links

• Thank you. It's great to be here again and to see so many familiar faces. I've been looking forward to this weekend—what better place to mark my 100th day as Chairman? For the fine hospitality, everyone here is in debt to President Jeff Schmid and his colleagues at the Federal Reserve Bank of Kansas City. Jeff, our thanks to you all. Jeff and the other planners have some recreation options lined up for later today. And I'd advise you to be very careful with your choices. As I learned years ago, you can take two different kinds of hikes on the trails around Jackson Hole. I can sum up my hikes with former Vice Chairman Don Kohn in two words: I survived. These steely marathon death marches revealed a side of Don I wasn't ready for. There's another kind of hike—one I associate with Chairman Ben Bernanke, my old colleague. With Ben, it's a much more leisurely pace, an easy stroll along the wandering trails at the Rockefeller Preserve. [Warsh]
• The cement plant, then known as River Cement Company, took advantage of the vast reserves of Kimmswick and Plattin limestone that follows the banks of the Mississippi River.  These formations of limestone have been referred as the “White Cliffs of Selma” in writings of Mark Twain.  Also, in Mark Twain’s “Innocents Abroad,” he compared the bluffs to the Pyramid of Cheops. [Buzzi Unicem USA]
• Democratizations lower stock valuations and raise risk premia substantially across several proxies in data covering 90 countries over 200 years. These results cannot be explained by increased macroeconomic risk nor do other periods of high political or regime transition risk have the same effect. Exogenous variation coming from a change in Catholic church doctrine confirms that risk premia rise with the probability of a successful democratization. Redistribution risk can explain these results. In the data, redistribution follows successful democratizations: the size of the public sector and measures of economic competition rise, and income inequality and measures of corruption fall. Moreover, democratizations with higher redistribution risk see a substantially larger rise in risk premia than other democratizations. A redistribution-based model of democratic transitions with asset prices and incomplete markets can fully explain the results. [Max Miller]
• The acquisition will be funded through a $9 billion nonvoting minority equity investment in ONEOK's existing business. The investment carries an internal rate of return (IRR) that is capped at 7.0% for the first nine years of the investment, which is lower than ONEOK's cost of publicly traded equity. Distributions in excess of the capped IRR will reduce the minority equity capital balance over time, which increases the economic value attributable to ONEOK common shareholders. In addition to funding the acquisition, ONEOK intends to extinguish approximately $5 billion of existing indebtedness, immediately reducing expected pro forma 2027 leverage to approximately 3.25 times debt-to-EBITDA. [Oneok, Inc.] 
• As we discussed last quarter, we have seen increased interest from data center developers here recently. And I'd say that interest has been pretty varied. It ranges from developers looking to purchase maybe a few hundred acres for the actual data center footprint, other developers looking for several thousand acres for data center co-located power and perhaps even a buffer zone to address community concerns. But needless to say, the site requirements and the due diligence for data center development are even more stringent than what we see for solar development. So these types of opportunities are invariably going to take longer to materialize. With that said, we're certainly focused on identifying these types of opportunities within our land base and really capturing some of that momentum that we see in data center development. We put together a cross-functional team internally to identify what we think are higher potential sites within the portfolio. We've also listed some outside experts to help us with identifying those opportunities as well as marketing the potential side. So optimistic that we'll see this type of use contribute to our portfolio of HBU opportunities. But still a little early to speculate on just orders of magnitude in terms of pricing or number of acres that might ultimately be sold into that use. [Rayonier Inc.]
• Shareholders usually do not care so much about a particular company since they have invested widely across the economy. Instead of dying company A making a bold bet and potentially collapsing, much better for company A to just keep plodding along giving good but not amazing returns while they simultaneously invest in company B which is new and innovative and doing all sorts of crazy risky things. The shareholders can diversify across these risks while the management and leadership of company A cannot. This idea is the core of Clayton Christensen’s disruption theory. That incumbents have many advantages of scale, size, resources, etc, but their actual existing successes often become hindrances in the long run because they also entail a lock-in to the current way of doing things. The opportunity costs for doing anything else are just too high. And so, in a nonstationary environment, eventually there open up opportunities for newer firms, without high opportunity costs, to seize these opportunities, grow, and become the incumbents in their turn. These opportunities often (but not always) emerge at the lower end of the market, which the incumbents do not compete in as fiercely because the opportunity costs of further maximizing their existing business vs undercutting themselves to cater to the lower end are too high. [Beren Millidge]
• Poor is the person without Slack. Lack of Slack compounds and traps. Slack means margin for error. You can relax. Slack allows pursuing opportunities. You can explore. You can trade. Slack prevents desperation. You can avoid bad trades and wait for better spots. You can be efficient. Slack permits planning for the long term. You can invest. Slack enables doing things for your own amusement. You can play games. You can have fun. Slack enables doing the right thing. Stand by your friends. Reward the worthy. Punish the wicked. You can have a code. Slack presents things as they are without concern for how things look or what others think. You can be honest. You can do some of these things, and choose not to do others. Because you don’t have to. Only with slack can one be a righteous dude. Slack is life. [Zvi]
• On a positive note it is likely the case that the lives of many former aristocrat descendants are not worse than they would have been in the counterfactual with no Industrial Revolution. While their relative power has massively declined, they now have access to modern amenities, modern medicine, much more accessible travel, and in general it is likely just better to be a minor rich person today with a family house out in the country than a powerful lord several hundred years ago. The positive case for the singularity would look something analogous to this — as a human your economic power relative to other agents would be vastly diminished compared to today, but at the same time you would have access to many amenities unimaginable to billionaires today — such as a post-scarcity world for almost any good, biological immortality and digital backups, the ability to comprehend and understand the universe at a much deeper level, access to truly immersive VR simulations, and the possibility of interstellar travel. [Beren Millidge]
• We get clean and predictable scaling laws when we have removed all bottlenecks that would prevent further scaling. Once all bottlenecks are removed, then the generality of neural networks provides us a direct and predictable way to convert compute into amortized compressions of increasingly rare features of the training dataset. The hard part, of course – and the reason why figuring out ‘scaling’ took so long historically – is that removing enough bottlenecks to enter this ‘scaling regime’ is hard. [Beren Millidge]
• This latter point is the core argument of the bitter lesson. At small scales we do not have the capacity to properly model the entire distribution, so using a bias that encodes part of the structure ‘by hand’ can speed up training, increase sample efficiency, and generally improve performance. However, no real-world data distribution perfectly matches our hand-coded biases, so in the long run with sufficient compute and data it is better to encode the most minimal prior that sufficiently covers the hypothesis space. [Beren Millidge]
• Surprising detail is a near universal property of getting up close and personal with reality. You can see this everywhere if you look. For example, you’ve probably had the experience of doing something for the first time, maybe growing vegetables or using a Haskell package for the first time, and being frustrated by how many annoying snags there were. Then you got more practice and then you told yourself ‘man, it was so simple all along, I don’t know why I had so much trouble’. We run into a fundamental property of the universe and mistake it for a personal failing. [John Salvatier]

Thursday Night Links

• Across our roughly 30 holdings, just over a third operate in oligopolies, nearly 28% in duopolies, and another third are the clear leaders of otherwise fragmented markets — dominance in one form or another, in effectively every position, with more than three quarters of the portfolio protected by wide moats. Market structure isn’t a footnote in our process — it is the process. Before we ask how fast a business grows, we ask who can hurt it. And when a market structure is truly favorable, we often refuse to pick a single winner. We call it playing the tandem. Think of Visa and Mastercard. Two networks, one moat, rational pricing, both compounding for decades. Investors who agonized over which of the two to own missed the deeper insight: the industry structure itself was the asset. Owning both meant owning the toll road, not betting on a single toll booth. [Thierry from arvy]
• In the mid-1990s, Victor Niederhoffer asked a friend of his to explore emerging markets in Southeast Asia. He reported back that in Thailand the brothels had been cleaned up and people were leaving long cigarette butts in ashtrays. It was just the kind of close-to-the-ground intel that Niederhoffer looked for, and he sensed an opportunity. [WSJ]
• When asked once at a social function if he were from Chihuahua, he was reported to have replied, "No soy de Chihuahua; Chihuahua es mío" ("I'm not from Chihuahua; Chihuahua is mine"). [Luis Terrazas]  
• A terrifying scenario which isn't even the worst case (I'm not including the "War with China" scenario): The crunch comes. Benefits get slashed 30%. But it leads to so much outcry that in the next midterms a Restore Social Security platform wins. FICA taxes get  hiked and benefits restored. The economy slips into immediate recession. Tax revenues plummet even further. Benefits get slashed again, but this time raising taxes isn't really an option due to the recession. The Fed starts to lowkey (maybe highkey) monetize the debt. Bond market sales start failing. Medicare starts skipping payments to providers. Providers stop taking Medicare. Old people start not having access to treatment. Euthanasia is legalized as millions of older people vote for it thinking it will be a more dignified way out than the long suffering in a failing Medicare system. A strange coalition of compassionate olds and "compassionate" youngs keep voting to expand euthanasia with lower and lower eligibility rules. Old age spending starts to mysteriously fall. CDC announces they are no longer tracking euthanasia cases. It is now 2045. The budget is now approaching a surplus, somehow. Life expectancy at age 70 is, strangely, still fairly high, but that's because the top 10% can now expect to live to 150 even as the bottom 10% have <1 year of expectancy. In 2055 an inquiry commission is formed and we discover that millions of old people were straight up murdered for budget control reasons. Nobody goes to jail but old people still don't go out alone, for safety. [lymanstoneky]
• Deborah Laufer has sued hundreds of hotels whose websites failed to state whether they have rooms accessible to the disabled. As the sheer number of lawsuits suggests, she does not focus her efforts on hotels where she has any thought of staying, much less booking a room. Instead, Laufer systematically searches the web to find hotels that fail to provide accessibility information and sues to force compliance with the Americans with Disabilities Act of 1990. Ordinarily, the hotels settle her claims and pay her attorney’s fees. But some have resisted, arguing that Laufer is not injured by the absence of information about rooms she has no plans to reserve. Only plaintiffs who allege a concrete injury have standing to sue in federal court. Laufer, these hotels have argued, is suing to enforce the law rather than to remedy her own harms. Laufer has singlehandedly generated a circuit split. The Second, Fifth, and Tenth Circuits have held that she lacks standing; the First, Fourth, and Eleventh Circuits have held that she has it. We took this case from the First Circuit to resolve the split. Though Acheson Hotels, LLC, filed the petition, Laufer supported the grant. After we granted review, the case took an unusual turn. In July, the United States District Court for the District of Maryland suspended Laufer’s lawyer, Tristan Gillespie, from the practice of law for defrauding hotels by lying in fee petitions and during settlement negotiations. [Acheson Hotels, LLC v. Laufer]
• When sale negotiations began between the Old Jack Daniel stockholders and the representatives of Brown-Forman, the sellers' asking price for the Old Jack Daniel stock was placed at $20 million. This amount was arrived at by two methods. First, the anticipated combined earnings for Old Jack Daniel and its sales affiliate, Nashville Sales Company, for the fiscal year 1956 were $2 million. The Old Jack Daniel stockholders considered that a sales price of 10 times earnings, or $20 million, was reasonable. The second method was that the net tangible assets of Old Jack Daniel were valued at $15 million, and to this was added $5 million as the value of goodwill. In determining the net tangible asset value of Old Jack Daniel, the bulk inventory was valued by the same method as that used for insurance valuation. [Jack Daniel Distillery, Lem Motlow, Prop., Inc., v. the United States]
• After more than a decade of under‑investment (particularly in Europe), Goldman Sachs Research analysts believe that higher real yields, geopolitical fragmentation, and supply chain rewiring have shifted equity leadership back toward tangible productive assets. They introduce the "HALO" framework—Heavy Assets, Low Obsolescence—to identify companies that are less exposed to technological obsolescence. [Goldman Sachs] 
• Now look at how a data center actually gets built. Rezoning, special use permits, comprehensive plan amendments, a negotiated “community benefits agreement” of school donations, fiber, soccer fields, and payments in lieu of taxes, public comment and then more public comment. These are not general rules. They are terms of admission negotiated with whoever holds the veto. Calling them community benefits doesn’t change the structure. Access to economic activity has become something that must be bargained for, argued for in the collective sphere, and paid for–with success determined by rents and political access. The natural state returns. (The subsidies, by the way. are the same error wearing the other hat. A sales tax exemption written for datacenters and a county moratorium aimed at datacenters both replace a general rule with a judgment about whether this industry deserves to exist. An open access order offers neither special favors nor special burdens. It offers a rule.) Opponents often complain that communities deserve more of a say. No, they do not. You did not vote on the bakery and the baker did not vote on you. That is the deal. Datacenters happen to be where this is most visible today. Their size and novelty make them easy targets for vilification and rent extraction. But the big issue is not datacenters. It is whether building depends on following impersonal rules or on securing permission case by case from those who control access. [Marginal Revolution]

Tuesday Night Links

• One argument against Amazon is that it is investing for a revenue volume that will never come. That's a different argument, to me, than saying its business model isn't profitable. And even on that point, you can chart its quarterly revenue for yourself and tell me if it looks like it's flattening out.  Though it has not always been on an exact upward sloping curve (we can expect the curve's slope to adjust up or down as various lines of its retail business mature or accelerate depending on Amazon's market share and traction in each line), the long term arc bends up like the corner of a world-dominating smile. [Eugene Wei]
• Knowing the numbers isn't enough in and of itself, but as books like Moneyball make clear, doing so can reveal hidden truths, unknown vectors of value (for example, in the case of Billy Beane and the Oakland A's, on base percentage). To this day, people still commonly talk about Amazon not being able to turn a profit for so many years as if it is some Ponzi scheme. Late one night in 1997, a few days after I had started, and about my third or fourth time reading the most recent edition of the Analytics Package cover to back, I knew our hidden truth: all the naysaying about Amazon's profitless business model was a lie. Every dollar of our profit we didn't reinvest into the business, and every dollar we didn't raise from investors to add to that investment, would be just kneecapping ourselves. The only governor of our potential was the breadth of our ambition. [Eugene Wei]
• Upon taking over from Tavares in 2025, Filosa convened a series of strategy meetings at U.S. headquarters in Auburn Hills, Mich., just outside Detroit. One presentation included an all-black slide. The only words were a date–June 15, 2021. It was the day the company decided to remove the Hemi from some vehicles. [WSJ]
• Currently, the real yield offered on 30-year TIPS at the market price is higher than at any time in the last several years, getting to over 3%. That high yield is also coming at a time when stock index valuations are still elevated, making the relative attraction of that long-term yield more competitive with equities than is typical. [WSJ]
• Any stream, from the littlest brook to the mightiest river, has a length that’s proportional to its drainage area raised to the power of 0.6. (In symbolic form: L ~ A0.6.) [Hack's law] 
• The territory was acquired in 1890 by German South West Africa in order to provide access to the Zambezi River and consequently a route to the east coast of the continent and German East Africa. The route was later found not to be navigable because of the location of the Victoria Falls, one of the world's largest waterfalls. [Caprivi Strip] 
• Internet advertising has been the fastest growing advertising channel in recent years with paid search ads comprising the bulk of this revenue. We present results from a series of large scale field experiments done at eBay that were designed to measure the causal effectiveness of paid search ads. Because search clicks and purchase behavior are correlated, we show that returns from paid search are a fraction of conventional non-experimental estimates. As an extreme case, we show that brand-keyword ads have no measurable short-term benefits. For non-brand keywords we find that new and infrequent users are positively influenced by ads but that more frequent users whose purchasing behavior is not influenced by ads account for most of the advertising expenses, resulting in average returns that are negative. [NBER] 
• No matter how we configure the selection process, however, the problem of the resulting elite becoming insular and self-serving appears to be a chronic one. In a long book review of Soner Cagaptay’s The New Sultan (2017) on Turkey’s president Recep Erdogan, Alexander argued that domination by elites is virtually tautological. People who are bright, ambitious and, when necessary, ruthless will figure out what it takes to get on top, and then take the necessary steps. Hoping for a different kind of elite, such as one dominated by the self-effacing and reflective, is a waste of time. [The Political Contradictions of Trumpism] 
• Senator Joseph McCarthy famously asked, “Who lost China?” A credible answer would include the following obvious counterfactuals: with less indulgence from New Deal liberals, with sustained military aid rather than an unwarranted military embargo, with a press corps that preferred an imperfect and semi-democratic China to totalitarian Communism, republican China—and thus the best Chinese traditions plus a modicum of liberty—might have endured. China would have escaped what Dikötter calls “The Tragedy of Liberation.” This is the great theme of his major trilogy. [Red and Dead] 

Wednesday Night Links

• The world has been noisy recently. Geopolitical conflict, shipping disruptions, tariff fights. I don't know how those will resolve. What I do know is that we paid off our bank revolver last month and have only $14 million of debt outstanding. Barring something unforeseen, we intend to raise distribution significantly in November. Coal, both metallurgical and thermal, has settled down and shown modest improvement off the lows, although I can't point to any single event that's likely to push prices sharply higher from here. We're not in the business of predicting commodity prices anyway. What matters more is that our mineral rights segment just keeps doing what it's done for years, producing cash, rain or shine. Through every major coal cycle, it has been the most dependable cash generator we've ever owned. [Craig Nunez]
• "NRP generated $42 million of free cash flow in the second quarter of 2026 and $163 million of free cash flow over the last twelve months before accounting for the $39 million investment we made in our soda ash business in the first quarter of 2026," said Craig Nunez, NRP's president and chief operating officer. "We are on track to pay off all debt and significantly raise distributions before year-end.” [Natural Resource Partners L.P.] 
• The bottom line is that Washington, fearing the consequences for US financial markets, is reluctant to see foreign central banks use their dollar reserves. This is telling us that the dollar is not the attractive reserve currency it once was. When this message sinks in, other countries will redouble their search for more attractive, readily usable alternatives. Reserve diversification is apt to gather steam. [FT] 
• Before 2021, TPL was structured as a trust — that was, until activist shareholders Eric Oliver (SoftVest L.P.) and Horizon Kinetics got involved in modernizing TPL. While Texas Pacific’s unique trust structure granted it more flexibility than the three names listed above, it still had significant drawbacks that were ultimately remedied when it converted to a C corp. In May 2026, Oliver took action again, this time seeking to amend the structure of Permian Basin Royalty Trust through a merger with Blackbeard Holding’s US Land Guild. This transaction, if approved, creates an entity similar to TPL and would crucially restructure the Trust’s net profit royalties into 15% revenue royalties and also allow the new C corp to repurchase units and acquire new properties. [Athelas Research]
• When a workman is unceasingly and exclusively engaged in the fabrication of one thing, he ultimately does his work with singular dexterity; but at the same time he loses the general faculty of applying his mind to the direction of the work. He every day becomes more adroit and less industrious; so that it may be said of him, that in proportion as the workman improves the man is degraded. What can be expected of a man who has spent twenty years of his life in making heads for pins? [Alexis de Tocqueville]
• At lunch as in business, Nelson Peltz makes his preferences known. Sweeping past the row of pink bougainvillea into Trevini in Palm Beach, the octogenarian activist investor and father-in-law of Brooklyn Beckham greets me, then turns to the waiter: “Can you turn the music down? We have important stuff to talk about.” It’s the proprietor’s prerogative — Peltz’s 19-year-old investment firm, Trian Partners, owns the building and the Italian restaurant is their de facto canteen. Soon the elevator-style music quietens down and we settle at our table on the outdoor terrace. [FT]
• When the week began, Leopold Aschenbrenner was preparing for his wedding. The plan was for a multiday celebration in Carmel, a seaside town in Northern California, with the ceremony at a Tuscan-style villa and the send-off at a spa in the forest. There would also be a pre-wedding colloquium to discuss ideas in panels and breakout sessions. [WSJ]
• “The first half of 2026 was the strongest in CME Group's history,” said CME Group Chairman and Chief Executive Officer Terry Duffy. "We delivered record H1 performance across revenue, adjusted operating income, adjusted net income and adjusted earnings per share, all of which were powered by record trading in Q1 and our second-highest Q2 volumes ever. [CME Group Inc.] 
• PrairieSky, the subject of one of the roundtable topic questions, is a land and royalty company that has done just that. In the 12 years since its IPO, even while more than tripling its acreage from 5 million to 18 million acres, it managed to double its acres per share. That’s about 6% annually, in addition to whatever revenue and earnings growth it managed to achieve. That astoundingly large and largely unexploited land portfolio, which sprawls along a roughly 750-mile axis across three Canadian provinces, gives PrairieSky the advantage of not having to reinvest profits in additional royalty contracts. Its large cash flow budget is fully available to pay dividends, repurchase shares, and make expansion-type land acquisitions. That consistently applied capital allocation plan by an executive team that requires of itself to, within three years of appointment, make cash purchases of enough PrairieSky stock to be worth 2x to 5x their salary. This is separate from their direct stock-based compensation. It is a strategy toward ensuring itself of a very long stretch of financial compounding possibilities. Those of us gathered here happen to know that it’s possible to own land in the public sphere, even though this largest of all physical resources is not even listed as a sector in the equity indexes. That was the idea—land, not oil—in the original buy recommendation for Texas Pacific Land Trust over 30 years ago: to own the internal, frictionless compounding benefits of share repurchases to increase the per-share acres held. [Horizon Kinetics]
• Many of us will remember when we first read Syme’s Roman Revolution. In my case it was largely in a Cardiff suburban back-garden during the summer of 1969: I still have that battered copy, together with my intrigued and not very insightful student comments in the margin. I have often re-read it since, but nothing compares with the initial impact made by that first reading. I had never read any prose quite like it before. [Chris Pelling] 

Tuesday Night Links

• Washington said Wednesday that, as of next week, it would impose a 25% tariff on some 3,000 goods from Brazil. It is the first country hit with duties under the Trump administration’s new strategy of using Section 301 of U.S. trade law to punish alleged unfair trade practices. Among a host of grievances, including anticorruption enforcement and barriers to U.S. ethanol imports, Washington argues that PIX has become so ubiquitous in Brazil it unfairly disadvantages U.S. payment companies such as Visa and Mastercard. There is also growing concern in Washington that Brazil and other countries are seeking to reduce their dependence on the dollar. [WSJ]
• Shortly before my guest arrives for lunch, I realise that our chosen Greek taverna does not serve alcohol. Not only that, the waiter has no idea where I might buy a bottle of wine. On a scorching summer’s day in central Philadelphia I head down a few sultry streets on what is not, it transpires, the easiest mission. The only options are a Moldovan Pinot Grigio or a Portuguese Vinho Verde. I return with a bottle of the latter on the grounds that a taste of southern Europe is more fitting for a latter-day Homeric feast. Emily Wilson, the acclaimed translator of Homer’s epics, is seated beneath a painting of a sleepy Aegean harbour. She had picked the little family-run Kanella restaurant, with its blue-and-white awnings, as the nearest she could get to my proposal we meet on a Mediterranean island on Odysseus’s star-crossed journey. [FT] 
• As a new separate entity, Mobility Global will likely be a good business to hold on to as it has many trusted products (CARFAX, Polk, Automotive Mastermind, and Market Scan) that are deeply embedded in the automotive ecosystem. MBGL’s customers span from nearly every global auto OEM and tier 1 supplier to thousands of car dealers. With annual revenues of just $1.75 billion, high margins, >80% subscription-based revenues, and now with greater flexibility to invest and acquire, MBGL management believes it can continue to grow at a high single-digit rate and expand margins. [Douglas Ott]
• This might be a long war. If it is a long war the United States should try to win it. The prerequisite for winning it is similar to what would be needed to win a war against China: complete military reform, drone manufacturing capacity, energy resilience. Let's go. Again the right way to fight this if it is a big war, is to have it politically "pay" for all the difficult reforms the U.S. needs to do anyway! The strongest EV argument is that gas prices at the pump don't matter anymore politically. The best argument for drones, is that they're more cost effective than tanks or jet fighters. The best argument for building both ourselves is so we're not vulnerable to supply chain attacks. etc. Unfortunate update: There is for now still almost no recognition in the military that this method of war won't work on a peer adversary and is extremely expensive. Little recognition that China will wage war in a way similar to Iran but greater scale. [Samo Burja]
• The last time electricity use grew five percent annually or faster was between the 1950s and 1970s, during the adoption of air conditioning, refrigerators, dishwashers, and washing machines. From 2005 to 2023, electricity use was almost completely flat. But as that lull in growth comes to an end, the grid will have to adapt. [Works in Progress]
• Goodspeed shows that British and American expansions do not resemble Dorian Gray, looking beautiful but hiding an inevitable accumulation of malinvestments (objectively bad investments that are destined to fail) and distorted decisions (mistaken economic decisions taken on the basis of bad regulation or flawed prices) that make a correction inevitable. If they did so, he argues, one would expect that as expansions get longer they get more and more likely to end. In his data, however, the relationship between the age of an expansion and the probability of death is essentially zero. Nor do measures of increased investment during the boom correlate with the severity of a downturn. Nor do longer expansions have longer recessions after them. This is why recessions remain essentially unpredictable. Any perceived regularity is likely to be a statistical illusion. Goodspeed shows that attempts to forecast recessions such as inversions of the yield curve (where long-dated government bonds have lower interest rates than short-dated ones) or the Sahm rule (which says a recession is likely underway if the unemployment rate spikes high above its recent lows for three months) are overfitted to US data and don’t work for the UK. [Works in Progress]