Friday Morning Links

• This paper extends a simple economic model of the regulated firm to include a wider range of both management objectives and of regulatory constraint. The authors find that these generalizations in the assumptions are able to effect profound alterations in the conclusions. For example, if a firm is constrained to a fair return on invested capital, we find that the profit-maximizing firm would have an incentive to overcapitalize (the Averch-Johnson result), while the sales or output maximizing firm would have an incentive to undercapitalize. [John C Malone]
• Below, in bullet point format, is a list of the ticker symbols across the midstream and MLP universe that have disappeared since the August 2014 peak. In total, 73 names have been removed from the universe (or become irrelevant due to size). In addition, a further 9 tickers that were created after the peak are gone too (names like DM, PTXP, RMP). [MLPguy]
• The U.S. produces plenty of gas, but bottlenecks abound, said Kevin Greiner, CEO of Gas South, which supplies natural gas to about 500,000 customers in the eastern U.S., including curtailed manufacturers. “We just don’t have enough pipe capacity to get the gas from where it’s being produced to where it’s needed,” he said. [WSJ] 
• The argument for the paleo V8 runs thusly: In the past two decades, emission and fuel-economy requirements forced pickup manufacturers to downsize engines and increase complexity, using turbocharging, variable cam phasing, direct fuel injection and other means to squeeze more efficient power out of fewer cc’s. But as a generation of buyers can attest, these hard-revving little gassers suffered a host of maintenance, reliability and durability issues. The last decade has been particularly hard on Ford buyers, who have endured a string of recalls affecting the “EcoBoost” 2.0-liter, 2.7-liter and 3.0-liter engines, 10-speed automatic transmissions and other mission-critical components. Let me take a moment here to say, recalls suck. [WSJ]
• Those who have lived in software land don’t realize they’re about to have a hard lesson in hardware. It’s actually very difficult to build power plants. You don’t just need power plants, you need all of the electrical equipment. You need the electrical transformers to run the AI transformers. Now, the utility industry is a very slow industry. They pretty much impedance matchto the government, to the Public Utility Commissions. They impedance match literally and figuratively. They’re very slow, because their past has been very slow. So trying to get them to move fast is... Have you ever tried to do an interconnect agreement with a utility at scale, with a lot of power? [Elon Musk]
• Our aggregates business once again delivered record profitability and meaningful margin expansion, reflecting strong strategic and commercial discipline and a consistent focus on what we can control. Our highly complementary Specialties business also achieved record revenues and gross profit, underscoring its differentiated value and strategic importance within our portfolio. Notably, we delivered these results despite single-family housing and nonresidential square footage starts, the two macro indicators most highly correlated with aggregates demand, remaining approximately 20% below their post-COVID peaks. [Martin Marietta Materials, Inc.] 
• When I can combine two of my passions, cycling and visiting French villages, I’m about as happy as I can be. At some point around 2003 or 2004, on one of my first cycling trips to France, I picked up a big, coffee-table book called Vu du Ciel: Villages – Des Alpes-Maritimes et du Var (you can find it in many bookstores in France and on amazon.fr). It features 73 villages from the Alpes-Maritimes department and 59 from the Var department. There are beautiful aerial photographs of each village along with a short, one paragraph description. Some of these villages I was already quite familiar with (Eze, La Turbie, Peillon, Peille, Gourdon, etc.) but many more were new to me. I made a goal to cycle to each and every one of the 73 villages in the Alpes-Maritimes section. It took me nine years (I was only able to cycle in France about three to five weeks each year), trying to reach as many as I could every summer when I was here, and in 2013 I finished. I can’t begin to tell you the sense of accomplishment and satisfaction when I rolled into that village (Tende). [Steve and Carole in Venice]
• I think if I had to do this all over again, coming out of COVID or I'll say post-COVID, I would not have -- when they went on allocation, I'd have told them to keep their trucks. That's what I'll tell them next time. They keep their trucks and when they jack prices, they can keep their trucks because I can sweat out 2, 3, 4 years, and I think my customer will support me. I think I was over eager to buy trucks because we had such a nice balance in '16. I wanted to get back to that balance quickly. And I didn't stand firm enough when they came through with massive price increases. I just don't know it's unsupportable. Now they had all this talk, and we all saw it and I think everybody is a little guilty of this saying that, as Mary Barra did, she had something, I don't know, after 2037 or something, GM will not make an internal combustion engine. Well, if you're on my end of the deal, that's a frightening thought because the other ones don't run, you see. So you can see how I fell into the trap and think well hell, if she's not going to build any, but then my friends at Ford didn't make quite as broad a statement, but practically speaking, they were running their investment as if they were no longer willing to make it. [U-Haul Holding Company]

Friday Night Links

• Bottom line: the slow-moving, minimally invasive Anglo-Saxon schemes of regulation and litigation assume fair play, that people mean well, deserve due process, and are entirely unsuited for the vast majority of the world’s population, who do not share these cultural values. Such systems require a “guilt culture” like ours, where individuals, as part of their self-image, desire to behave according to abstract notions of right and wrong and align their behavior, however imperfectly and often tempted, to those notions, and feel bad when they fall short. In much of the world, the only effective regulation to make scammers behave is swift, violent, and unilateral punishment, no trials, no judges, no juries. Our system is only well-suited to a free people with at least the contents of cultural Christianity, where outliers are rare enough that enforcement’s necessity is rare. It will fail against the human default of “shame cultures” where public reputation is all that matters, and besides which, cultures where cheating foreigners, especially, from their perspective, gullible, foolish ones like us who believe in people following the law voluntarily as a matter of personal morality, is seen as smart, not wrong. [The Tom File] 
• This attitude is a variant of the philosophical notion that all truth can be arrived at by pure thought and is unfounded and harmful. One wonders what state space travel would be in if the Goddards and yon Brauns had spent their time trying to find the universal laws of rocket construction before trying to build space ships. Al needs a stronger experimental base. Like other branches of endeavor (notably physic, aeronautics and meteorology), we should realize our desperate need for more computing, and do things about it. [Hans Moravec]
• I don’t think we appreciate how much modern liberalism will be associated with the brief period of time where broadcast media was dominant, and small groups of people could send one-way communications to large groups who could not yet compare notes about what they were receiving. [Harry Bergeron]
• In exchange for deleting the cost, complexity, and schedule risk of a gas powerplant comes the sizable land demands of a solar array. To a rough approximation, 15 acres of solar are required per MW of DC AI load. For reference, the USA has about 150 million acres of unpopulated desert west of the Mississippi, enough for 10 TW of AI development. 10 TW is much more than total global electricity generation today. There is plenty. On the other hand, while fracked gas is relatively abundant (for now) the turbines that convert it into power are hard to make, hard to ramp, and largely already spoken for. If AI seeks growth beyond the production ramp of turbines, it is clear which way the wind is blowing. [Casey Handmer]
• If you look at the history of vitamins, they were all discovered between 1910 and 1948. Casimir Funk invented the idea and called them “vital amines.” The thing is they ain’t all amines: Vitamin C isn’t, nor is B5 or B7 (I think they’re amides; I never took organic chemistry, sorry not sorry). We’ll stick with the “your body needs it” definition. Vitamins were originally discovered to prevent disease, but also to optimize health. I don’t think there is any acute disease associated with Vitamin-D deficiency (which most indoors people have), though it makes you pretty unhealthy if you don’t have enough of it. Or, conversely, helps you to remain pretty healthy if you have a good amount of it. The fact that there exists such powerful vitamins without acute deficiency syndrome rather indicates that there may be many such cases. Here are a few inexpert suggestions for consideration by people who get paid to think about such things. These are all well-known substances with well-documented effects; I’m not suggesting anything esoteric. Some of ‘em I take myself, because spending a few bucks at the supplement shop is cheaper than massive medical intervention later in life, and there’s no obvious downsides other than purity/adulterant concerns (which are ubiquitous with anything you put in your mouth anyway). [Scott Locklin] 
• When bureaucracies were created, they were innovative and productive organizations. I know it’s hard to believe, but USDA, the FDA and the EPA were once as innovative and productive as early years NASA. Now ... not so much. People have been complaining about PFUAs and stuff like fire retardants to the EPA for decades. But the squirreley numskulls who warm the chairs there are too busy doing the crap they’ve been doing since Nixon created them by fiat in 1970. Optimized for old battles. Most of which are already won. [Scott Locklin] 
• Smil takes us through a couple of historical examples of Inventions; ones which helped but later turned into problems (leaded gasoline, CFCs, DDT), ones which were supposed to set the world on fire but didn’t (airships, supersonic flight, fission reactors) and ones which sound amazing but we just plain can’t figure out how to do (nitrogen fixing wheat, fusion reactors, hyperloop). Smil, because he actually studies the history of real technologies and how they work makes some disapproving sounds at the AI hypewagon spinning up at the time he wrote this (2023) and reiterates that the idea of continual progress is a total myth. There was a time of enormous technological progress which actually changes how people live: it’s mostly been over for decades. People still act as if we’re still being given marvels like refrigeration and gas turbines, when all we get is twitter (founded 2006) and radiophones with longer battery life that you can use to call a taxi without talking to anybody. [Scott Locklin]
• Organic growth capital investments, net of proceeds from asset sales, are expected to be in the range of $1.9 billion to $2.3 billion in 2026, which includes estimated growth capital expenditures of approximately $2.5 to $2.9 billionless approximately $600 million of proceeds from asset sales. Sustaining capital expenditures are expected to be approximately $580 million in 2026. [Enterprise Products Partners L.P.]

Monday Morning Links

• Shell’s faster-moving scenarios envision annual solar installations exceeding a terawatt globally by the early 2030s — roughly the equivalent of adding today’s entire US power system every year. At that scale, accelerating, market-driven electrification becomes difficult to stop regardless of politics. Physics reinforces the trend, according to Shell: “Electricity is increasingly the most efficient way of delivering energy services, and electrification continues to expand across transport, buildings and industry.” Electric motors waste far less energy than internal-combustion engines. Electrifying industrial processes avoids many of the energy losses inherent in combustion. As Shell calculates, electricity’s share of final energy — the energy actually used by homes, vehicles, and factories — rose by two percentage points per decade for most of the past century, but is now climbing at more than twice that pace. [Faster, Please!]
• Herman Kahn, gregarious and rotund, is presented as the model “conservative futurist” in my 2023 book. President Ronald Reagan eulogized him in 1983 as “a futurist who welcomed the future.” [Faster, Please!] 
• Consider two statements by the Japanese prime minister and the US President over the past few months. Each leader called time on the prioritization of finance over operating competence. When Mr. Trump exhorted defense contractors to cap executive pay and put production before buybacks and dividends, he was asking them to act more like the Japanese conglomerates who are already doing these things (and who are often better at making and maintaining US weapons systems than their US counterparts). Consider RTX compared to Japan’s three “heavies,” all of which supply key components to RTX (and have had to share in multi-billion dollar cost to repair RTX’s mistakes in its civilian engine business). Between 2010 and 2024, RTX spent $40bln on buybacks against $26bln on capex and $39bln in depreciation while paying its CEOs (including Greg Hayes, who trained as an accountant) over $300mm in compensation. The three heavies spent $180mm (total) on buybacks and $40bln on capex while spending far less than the $5mm/year CEO salary cap proposed by Mr. Trump (all numbers from Capital IQ). It is no wonder that Mr. Hayes’ successor (a lawyer) needs Japan’s help in dealing with its multi-year Patriot missile backlog…help Japan’s heavies (all led by experienced engineers) can fortunately provide, while introducing a slew of new products from nuclear power plants to energy efficient turbines to advanced frigates and submarines in the bargain. [Japan Optimist]
• Most notably, if men and women have very different views or experiences of travel, this could influence how easily men and women pair up. If women see travel as an important form of identity-formation, a high-status activity, and a valuable form of leisure, but men disagree, then women and men might find themselves at odds over what activities they enjoy together, or that they have fundamentally divergent experiences of the world. Men who are unwilling to travel might even inadvertently broadcast to women that they have low social status. As it turns out, voluminous survey data suggest women really do value international travel more than men, and that women make up a disproportionate share of those traveling internationally for leisure. For whatever reason, international leisure travel is a disproportionately feminine activity, and one that women tend to see as part of their identity formation and growth. [Institute for Family Studies]
• Buzzi generated 40% of its revenue and 52% of its EBITDA in the United States in 2024. The company has doubled its U.S. revenue organically over the past 10 years, and its American assets generate margins consistently above other U.S. players. Yet Buzzi’s U.S. peers trade at 12x 2025E EBITDA. In Europe, Heidelberg and Holcim trade at 9x-11x 2025E EBITDA. By contrast, Buzzi trades at just 6.8x 2025E EBITDA, and that excludes €1.2 billion of value from its high-margin Mexican business and other minority-owned assets. If Buzzi was valued in line with its comps, the stock would be worth twice as much. [Kerrisdale Capital]
• The Natural Gas Pipelines business segment’s financial performance was a record for the fourth quarter. Growth in the fourth quarter of 2025 relative to the fourth quarter of 2024 was due primarily to higher contributions from our Texas Intrastate system, KinderHawk and Outrigger Energy assets,” said KMI President Tom Martin. “Natural gas transport volumes were up 9% compared to the fourth quarter of 2024 primarily due to LNG deliveries on Tennessee Gas Pipeline. Natural gas gathering volumes were up 19% from the fourth quarter of 2024 across all assets, with our KinderHawk system making the largest contribution. [Kinder Morgan]

Long Weekend Links

• One way to think about computation before computers is through the work of Herbert Simon, the only person to win both the Turing Award and the Nobel Prize in economics. He explained that firms, like computers, are information processing systems. Firms have hierarchy, limited cognitive power, and bounded rationality. Firms also have learning curves, where unit costs fall predictably with cumulative production. In a way, humans organized themselves to be better information processors long before computers. We might extrapolate the trend before Moore’s Law to 400 years ago, with the invention of the joint stock corporation. [Zhengdong Wang]
• A feature shared by all living organisms whose behavior is complex enough to place them near human in intelligence is a hundred billion neuron nervous system. Imaging vision requires a billion neurons, while a million is associated with fast and interesting, but stereotyped, behavior as in a bee. A thousand is adequate for slow moving animals with minimal sensory input, such as slugs and worms. A hundred runs most sessile animals. The portions of nervous systems for which tentative wiring diagrams have been obtained, including much of the brain of the large neuroned sea slug, Aplysia. the flight controller of the locust and the early stages of some vertebrate visual systemsTreveal that the neurons are configured into efficient, clever, assemblies. This should not be too surprising, as unnecessary redundancy means unnecessary metabolic load, a distinct selective disadvantage. [Hans Moravec]
• If you’re trapped by a problem, in your research, or in business, or on a military campaign, and you can’t figure out any way to free yourself, try turning the tables on yourself and prove that it’s impossible for you to win. Note that this is not the same as avoiding impossible problems in stage 1 (the site survey), we are assuming here that we’ve chosen a solvable problem, but we’re going to pretend it’s impossible anyway. Why? Because we might learn something from how and where our impossibility proof eventually fails. There will be some crux. Some moment it can’t connect and all turns to ash. Study that moment, it may be the key to your original problem. The adversarial equivalent of this is putting yourself in the enemy general’s shoes. What is the move you can make that there’s no way for him to plan for or respond to? That’s your move. Example: It’s your move in a chess game and you’re in a horrible position. You can feel the net tightening around you, and you don’t know how to escape. So you turn the situation around, and think about how your opponent can force a checkmate. All of the paths to checkmate hinge on attacking one particular square. You return to your side of the board and see that there’s a method of defending that square which blocks every checkmate and lets you escape the trap. [Mr. and Mrs. Psmith’s Bookshelf]
• I believe that Chinese technological success is now the rule rather than the exception. There are two fields in which China is substantially behind the west: semiconductors and aviation. The chip sector is gingerly attempting to expand under the weight of US restrictions; meanwhile, China’s answer to Airbus and Boeing is on a very long runway. I grant that these are two critical technologies, but China has attained technological leadership almost everywhere else. And I believe its technological momentum will continue rolling onwards to engulf more of their western competitors over the next decade. The electric vehicle industry is the sharp tip of the spear of China’s global success. Chinese EVs have greater functionalities than western models while selling at lower price points. A rule of thumb is that it takes five years from an American, German, or Japanese automaker to dream up a new car design and launch that model on the roads; in China, it’s closer to 18 months. The Chinese market is full of demanding customers as well as fast-iterating automotive suppliers. It also has a more productive workforce. According to Tesla’s corporate disclosures, a worker at a Gigafactory in China produces an average of 47 vehicles a year; a worker at a Gigafactory in California produces an average of 20. China’s automotive success is biting into Germany more than anywhere else. I keep a scrapbook filled with mournful remarks that German executives offer to newspapers. “Most of what German Mittelstand firms do these days, Chinese companies can do just as well,” said a consultant to the Financial Times. “In my sector they look at the price-point of the market leader and sell for roughly half of that,” the boss of a medical devicemaker told the Economist. It’s never hard to find parades of gloomy Germans. Now more than ever it looks like their core competences are threatened by Chinese firms. [Dan Wang]
• Also, when you look at these cars and there’s no one driving, I actually think it’s a little bit deceiving because there are very elaborate teleoperation centers of people kind of in a loop with these cars. I don’t have the full extent of it, but there’s more human-in-the-loop than you might expect. There are people somewhere out there beaming in from the sky. I don’t know if they’re fully in the loop with the driving. Some of the time they are, but they’re certainly involved and there are people. In some sense, we haven’t actually removed the person, we’ve moved them to somewhere where you can’t see them. [Andrej Karpathy]
• The mineral deposit at the quarry is layers of limestone that originated from a combination of depositional and erosional processes associated with sea-level fluctuation during the late Pleistocene era. The geology is composed of three major sedimentary formations as discussed in Section 6.3. The total thickness of the combination of the Miami Limestone layers varies from 70 to 85 feet. The current quarry excavation extends over an area of approximately 3,045 acres and will expand over the life of the mine (LOM) to 4,655 acres. The quarry currently averages an annual production of approximately 10 million tons of limestone to feed both the aggregate plant and the cement plant. [Titan America SA]
• The transaction includes modern and high-quality assets such as an integrated cement plant, operating one of the most efficient cement kilns in Pennsylvania’s Lehigh Valley, with a clinker production capacity of 990,000 short tons per year. Thanks to its attractive location, the plant is well-positioned to serve a 6.2 million short ton per year addressable market across Pennsylvania, Maryland, Delaware, and Ohio, with strong exposure to large-scale infrastructure and technology investments and extensive transportation modernization programs. The acquisition is expected to accelerate top-line growth, enhance geographic diversification and improve operating margins through the realization of integration synergies, including substantial operational and commercial benefits from integration with the existing assets—Essex Cement in New Jersey and Roanoke Cement in Virginia—as well as Titan America’s fly ash processing and marketing facilities operated with Separation Technologies, a Titan subsidiary across Pennsylvania and Ohio. [Titan America SA]
• Amrize has entered into an agreement to acquire PB Materials Holdings, Inc., the leading aggregates business with a complementary ready-mix concrete network in the high growth West Texas region. Part of Amrize’s profitable growth strategy, this acquisition will strengthen the company’s aggregates business, adding over 50 years of aggregates reserves in West Texas to serve long term demand. PB Materials will add 26 operational sites into Amrize’s network, extending its operations throughout Texas and the Southern region as infrastructure, energy projects, data centers and commercial investments drive construction growth. [AMRZ]
• The Texas-Arizona-California corridor becomes the undisputed tech mecca, triggering a land grab unlike anything since the railroad era. Water rights, housing developments, commercial real estate, data centers, AI infrastructure - everything gets bid up to absurd levels by everyone from sovereign funds to family offices to retail FOMO. The border states that were flyover country a decade ago become more expensive than coastal tier-one cities. Arizona water rights trade like Bitcoin in 2021. Someone will get very rich. Most will arrive too late and overpay. [Mojo]
• If breakevens reduce by only 30 percent over the next five years, approximately 60,000 locations currently classified as Tier 2 ($40 to $50 per barrel of oil equivalent [BOE] breakeven) could achieve the same breakevens as today’s Tier 1—less than $40/BOE, in the absence of inflationary pressures. This could increase the overall Tier 1 count by 150 percent. A range of innovations, such as horseshoe wells and other next-generation designs, frac efficiency gains such as trimulfrac, and other novel breakthroughs yet to be developed, could all contribute to this movement, alongside the cost efficiencies coming from expanded scale. [McKinsey & Company]
• Tech giants are sick of waiting around for electricity. But locking in future power means taking on more upfront risk. The race to build up more AI data centers has created a strain on the existing power grid while also bottlenecking the ambitious plans of the world’s largest tech companies. AI systems consume far more energy than more typical servers and other computing gear, but new energy generation facilities don’t exactly go up overnight. As a result, companies better known for driving advertising clicks and social network likes are now diving into the power business. In a landmark deal, Google-parent Alphabet last month agreed to buy renewable energy developer Intersect Power for $4.75 billion, plus the assumption of debt. [WSJ]
• I’m writing this because we’ve obviously been differentiating into castes in the USA - much like all good things (height, attractiveness, reaction time, life satisfaction, etc) end up being positively correlated with “g,” there is a cluster of people who are the exception to the “80% of Americans are overweight or obese” rule because they exercise and watch what they eat, AND have good careers and are educated and are more conscientious and have better time preference and own real estate, and so on. [Performative Bafflement]

New Year's Links

• In the 1960s and 70s, the standard way to do economic analysis was to feed data into a model and then estimate the relevant parameters. For example, based on historical data, economists believed there was a stable tradeoff between unemployment and inflation, i.e., the Phillips curve. Policymakers believed they could exploit the tradeoff by accepting higher inflation in exchange for lower unemployment. However, when oil price shocks in the 1970s generated both inflation as well as rising unemployment, expansionary monetary policy failed to deliver the predicted results. Instead of lower unemployment, the economy experienced “stagflation” of higher inflation combined with high unemployment, suggesting that the historical relationship had broken down. So what happened? Expectations of inflation made workers and firms change their behavior: knowing that inflation was going to be higher in the future, workers demanded higher wages and firms hired fewer workers today. It turns out that a statistical correlation between lower unemployment and higher inflation is not exploitable by policymakers as an intervention, because their policy action induced a different set of behavior by agents. [Arpitrage]
• If breakevens reduce by only 30 percent over the next five years, approximately 60,000 locations currently classified as Tier 2 ($40 to $50 per barrel of oil equivalent [BOE] breakeven) could achieve the same breakevens as today’s Tier 1—less than $40/BOE, in the absence of inflationary pressures. This could increase the overall Tier 1 count by 150 percent. A range of innovations, such as horseshoe wells and other next-generation designs, frac efficiency gains such as trimulfrac, and other novel breakthroughs yet to be developed, could all contribute to this movement, alongside the cost efficiencies coming from expanded scale. [McKinsey]
• There were two areas of good news during the quarter. One is a surprising demonstration of operational discipline, and the other is the company’s expansion opportunities in natural gas. The biggest recent positive is the company’s decision to suspend development of its Lake Charles LNG project. This is a clear example of management exercising discipline in deciding which projects it is willing to pursue. Energy Transfer was unable to secure enough offtake agreements on attractive terms with high-quality global LNG buyers, so it canceled the project. I don’t believe this is how the “old” ET would have behaved. [HFI Research]
• The Texas-Arizona-California corridor becomes the undisputed tech mecca, triggering a land grab unlike anything since the railroad era. Water rights, housing developments, commercial real estate, data centers, AI infrastructure - everything gets bid up to absurd levels by everyone from sovereign funds to family offices to retail FOMO. The border states that were flyover country a decade ago become more expensive than coastal tier-one cities. Arizona water rights trade like Bitcoin in 2021. Someone will get very rich. Most will arrive too late and overpay. [Mojo]
• I know many hiring managers and believe you me the "Charlotte" and "Matthew" resumes are treated very differently from the "Lynneleigh" and "Packston" ones. Not many of these sorts of names in senior management... On the other end of the spectrum, names like "Apple", "River" or "Moon" tend to be from bonhemian upper middle to upper class families. Perhaps they dont have to worry about hiring managers so much! [Reddit]
• I quit my job and returned to Shaker Heights to live with my father as I regrouped and worked on my novel. I was grateful to be back home in the leafy comfort of suburban Cleveland, where I would remain for most of the next thirty years, marrying, buying a house in the suburbs I loved, having kids. I loved living here. It was my home, my people. Living where you grew up, I found, gave you great spiritual capital you could regularly tap into; it gave cohesion to this life. My father was here. I could point out to my kids the ballfields where I’d played Little League. My daily jog through the neighborhood took me past my elementary school. Each time I stepped on the cracked sidewalk slab on Fernway Road, the spot Debbie Shaw kissed me in second grade, I thought of her. [Michael Ruhlman] 
• In 1980, two economists, Sanford Grossman and Joseph Stiglitz, published a paper that challenged the Efficient Market Hypothesis (EMH), an idea that had dominated financial theory for two decades. The EMH held that market prices reflect all available information. If IBM traded at $100, that price encoded everything knowable about the company—its earnings, prospects, management quality, competitive threats. Thousands of informed traders had collectively processed all relevant data and bid the stock to its true value. Grossman and Stiglitz identified a fatal contradiction. If prices already reflect all information, why would anyone spend resources gathering it? Information is costly—you have to collect data, analyse it, and still make decisions under uncertainty. But if the price already tells you everything you need to know, gathering information is irrational. [The Terminalist] 
• A more useful measure of competition would be based on what we’re actually trying to get competition to do, working backwards from the outcomes we want in order to see what the features are of markets that deliver them. Competition works because it rewards businesses that find better ways to serve customers, and punishes ones that overcharge their customers or offer substandard products. If markets are competitive, then businesses that make desirable products at lower cost will grow larger as customers switch to them, putting pressure on their competitors to improve by cutting prices or making better products. They may face the prospect of having to exit the market altogether. In short, we want to measure whether markets are rewarding excellence or sclerosis. It turns out that such a measure exists: what is called the Olley-Pakes decomposition. The decomposition measures whether customers are switching to more productive companies. If productive companies are gaining market share, we might judge that the market is competitive and working well. If they’re not, and more productive businesses are not doing better than less productive ones, something is wrong, and intervention could be necessary. [Works in Progress]
• On the surface, it was reasonable to expect that bigger reactors would be cheaper per unit of electricity generated. For example, the control room and the security fencing should cost approximately the same for a 900 and a 1,300 megawatt reactor. EDF’s own estimates found that, for the same total output, a smaller series of 1,450 megawatt units would be 15 percent cheaper than a larger series of 600 megawatt reactors. But these larger designs brought greater complexity. For example, the 1,300 and 1,450 megawatt reactors needed an extra coolant pump, steam generator, and piping circuit to remove heat safely from the larger reactor core. The engineering work required to integrate these systems did not scale linearly with increased output. [Works in Progress]

Books - Q4 2025

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

Christmas Eve Links

‘A cold coming we had of it,
Just the worst time of the year
For a journey, and such a long journey:
The ways deep and the weather sharp,
The very dead of winter.’
And the camels galled, sore-footed, refractory,
Lying down in the melting snow.  

[Journey of the Magi, T.S. Eliot]

• Reading good stories at an early age, especially myths, legends, and fairy tales, builds children’s moral imagination. It provides them with an imaginative framework for understanding the world around them, and a rich resource on the affective level for discerning between good and evil, right and wrong. In reading classic fairy tales, children practice navigating a world filled with perils by stepping into the shoes of an Everyman protagonist, and are thereby given the confidence that no matter what “monsters” they will have to face, the story is going to end happily ever after. In this way, fairy tales are an essentially Christian genre. Crucially, fairy tales are not cloyingly didactic; they teach about the consequences of vice in a way that is extremely subtle, but deeply profound. [The Lamp] 
• Losing my parents wasn’t just a reminder that I will die and be forgotten. It also started that very process. When they died, they took to the grave some of the stories and memories they had of my early childhood. Things that only they remembered, that I never knew or have forgotten. Things that never got written down or captured in Kodak. Those events and memories were part of my story, my life. But now they’re gone because the only two people who carried that part of my life story are gone. I’m not even dead yet, and I am already slowly being erased from the world. What I am experiencing, then, what I see and touch and what I insist on recording is that everyone, everything on earth is ephemeral. My parents are dead; my wife and daughters and friends will all eventually die; my teaching and poems and translations will someday be forgotten or lost; even what little I have put into print will sit slowly biodegrading in the basements of a handful of libraries. This summer I went to our college library to borrow a volume of poems by the great Spanish Romantic poet José de Espronceda; when I opened it, most of the pages had never even been cut. Does anything we do last? As a Catholic, I have consolation available to me in the faith: “Are not two sparrows sold for a small coin? Yet not one of them falls to the ground without your Father’s knowledge”; “Precious in the eyes of the Lord is the death of his faithful ones”; “I look forward to the resurrection of the dead.” This is what I have somewhat thoughtlessly called the “good news” all my life. But as the saying goes, the good news isn’t good unless the “bad news” is bad. When I lost my parents over that catastrophic year, I finally heard the bad news. [Kelly Scott Franklin]
• What’s more, given the amount of scriptural support for the practice of venerating relics, it’s unclear why the practice seems to be followed mostly by Catholics. Acts describes how the early Christians would touch handkerchiefs and aprons to Paul and bring them to the sick and possessed, and “the diseases departed from them, and the wicked spirits went out of them.” When the hemorrhaging woman wished to be healed, she knew that just brushing the edge of Christ’s cloak would heal her. Christ Himself created one of the Church’s most cherished relics. While Jesus was carrying His cross on the way to Calvary, a woman was moved with compassion and approached Him. Desperate to give Him some kind of consolation, she wiped His bloody, sweaty face with her own veil. Later, the woman realized that the image of Christ’s face had been imprinted on the cloth. The woman has been named “Veronica” by tradition, derived from the Latin vera icona, or “true icon.” Thousands of miracles have been attributed to Veronica’s veil, and the Church preserves and venerates it to this day. I have come to think of our N.I.C.U. nurse as not unlike Veronica. Just as Veronica approached Christ to wipe His face, desperate for some way to alleviate His suffering, the nurse had given us the little teal-starred blanket because she was attempting to find some way to console us. The blanket became his only real possession, since we didn’t have the time or the presence of mind to give him anything else. And just as Christ left His imprint on Veronica’s veil, He also allowed Iggy’s blanket to become something more for our girls, a way to give them the grace of consolation. [The Lamp]