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]

Thursday Night Links

• Our modern Midas-in-Reverse hopes his hagiography one day describes the great ‘labor’ of his shepherding the nation through an historic crossroads, a transition between eras. It’s why he styles his iconography around kitschy parallels to the Gilded Age, Belle Epoque, Fin de Siecle, etc.; and he’s not altogether wrong in intuiting the fundamental ethos of our times, a transitional period of wayward decadence preceding something terrible—a time of calamitous revolutions and world wars. But wherein lies the difference is Trump believes himself to be providentially appointed to steer the country clear of the pitfalls associated with such ‘ending epochs’ and into a golden era of manifest abundance. Unfortunately, he appears blind to the coming realities: things are only getting worse, the very logies and chintzy veneers of the artifice he imagines will herald this ‘greatness’ in the offing instead betray the disintegration happening all around us. And to top it all off, there is little of substance beneath the gilding and cheap plaster. In an unprecedented display of “will to power”, Trump is attempting to manifest his ‘Golden Age’ merely by shouting it from the rooftops. Instead of carrying out real policies of reconstruction and transformation, fixing jobs, inflation, and all the actual underpinnings of a healthy state, he instead chooses to erect presumptive monuments to hopes and wishes and would-be accomplishments. [The Kitschification of America]
• Governor Greg Abbott today announced the eighth Texas Energy Fund (TxEF) loan for 860 megawatts (MW) of new, reliable power in Ward County, enough electricity to power approximately 215,000 Texas homes. Vistra is building the project, which consists of two new natural gas units at its Permian Basin Power Plant, more than tripling the site’s current capacity. [Office of the Texas Governor]
• GE Vernova’s gas turbine backlog reached 100 GW in the first quarter, up sharply from 83 GW at the end of 2025. Parks said the company shipped 25 gas turbines in the quarter, a 32% increase from the first quarter of 2025, with pricing rising faster than the inflation rate. [Utility Dive]
• The In-ERCOT Generation Loan Program provides low-interest loans to qualifying companies for the construction of new or expansion of existing dispatchable electric generating facilities in the ERCOT power region. Qualifying projects must add at least 100 megawatts (MW) of new dispatchable generation capacity to the ERCOT grid. Loan amounts may not exceed 60% of total project costs. PUCT rule 16 TAC §25.510 establishes program rules, eligibility requirements, loan terms, evaluation criteria, and the application process. The PUCT evaluated applications based on the applicant's experience and strength of financing, as well as the proposed project's technical and financial attributes, location, speed to market, and generation resource type, among other factors. The program provides 20-year loans at a fixed 3% interest rate. Amortization schedules vary with each agreement. This program is capped at financing no more than 10,000 MW of new generation. [Public Utility Commission of Texas]
• In late May a gas explosion at a mine in Shanxi killed 82 people, the worst Chinese mining accident since 2009. Inspectors then shut more than a hundred mines. Shanxi makes about a quarter of China’s coal, so this was big. The interesting part is that the mines did not fully reopen. Before the accident they were running above their official capacity, over a hundred and ten percent. After, the safety crackdown pushed them down to seventy or eighty. One trader thought the lasting loss could be twenty to thirty million tonnes even after restarts. And it hit the good coal hardest, the exact grades you cannot get from Mongolia or Russia. [Cannibal Stocks]

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."