Thursday Night Links

• Texas, in aggressively growing metro suburbs across several economic powerhouse regions across the state, enables a very achievable driving distance proximity. It’s possible here, and common given the critical mass of the state’s economy, for extended families to be no more than 3-4 hours apart with no compromise on economic opportunities. On net, in its emphasis on jobs in highly technical sectors, Texas seems to be getting smarter, if comparable standardized test scores are analyzed. Perhaps the achievable ideal for professional extended families is frequent, doable road trips, between equally nice suburbs in DFW, Houston, San Antonio, and Austin. Demographers call this economically dense super-region the “Texas Triangle,” and right at its beating heart, nearest its population-weighted center, sits College Station. It’s a compromise that certainly beats the hell out of cross-country Thanksgiving flights. [The Tom File]
• I’ve long been in the “higher for longer” camp, insisting that the US Federal Reserve must hold short-term interest rates at the current level or higher to get inflation under control. The facts have changed, so I’ve changed my mind. The Fed should cut, preferably at next week’s policy-making meeting. [Bill Dudley]
  
• Scott is sometimes described as an anarchist, and he was influenced by a number of anarchist thinkers (especially Colin Ward). But he was ambivalent about whether abolishing the state entirely was a practical goal—to quote one of his book titles, he gave just Two Cheers for Anarchism. Nor would he describe himself as a free-market libertarian: While there was obvious overlap between his thinking and, say, Friedrich Hayek's ideas about dispersed knowledge, Scott saw his work as a critique of large-scale corporate capitalism as well as of the state. In an oral history interview conducted in 2018, he remembered William Niskanen of the Cato Institute calling to ask if he would speak at a libertarian event: "I remember my partner was with me and I put my hand over the phone and said to her, 'What have I done wrong that the Cato Institute is calling me and wants me to sort of talk at their conference?'" [Reason]
  
• "As escalating uncertainties drove an increased need for risk management across all asset classes, CME Group achieved record Q2 volume and generated record revenue, adjusted net income and adjusted earnings per share," said CME Group Chairman and Chief Executive Officer Terry Duffy. "During the quarter, and for the first time in more than a decade, our volume and open interest grew in every asset class, with overall ADV up 16% in commodities and 13% in financial markets. We also reached significant records in many of our U.S. Treasury products where ADV increased 36% to 8.2 million contracts." [CME Group Inc.] 
• Under this metric, a number of counties in Pennsylvania have extremely unlikely distributions of voter birthdays. Seven counties representing almost 1.4 million votes total (Northumberland, Delaware, Montgomery, Lawrence, Dauphin, LeHigh, and Luzerne) have suspicious birthdays above the 99.5th percentile of plausible distributions, even when using conservative assumptions about what these distributions should look like. These suspicious birthdays also matter significantly for election outcomes. While there are suspicious counties that vote Republican overall, in general more suspicious birthdays in a county are strongly associated with a larger Biden vote share, and a higher Biden vote share relative to all Democrat presidential candidates since 2000. More suspicious birthdays are also associated with a higher vote share for Jorgensen relative to Trump (consistent with a fraud scheme aiming to get Biden high but not “too high”, while simultaneously giving as few votes to Trump as possible). [Revolver]
• In the Telecommunications Act of 1996, Congress delegated its taxing power to the Federal Communications Commission. FCC then subdelegated the taxing power to a private corporation. That private corporation, in turn, relied on for-profit telecommunications companies to determine how much American citizens would be forced to pay for the “universal service” tax that appears on cell phone bills across the Nation. We hold this misbegotten tax violates Article I, § 1 of the Constitution. [United States Court of Appeals for the Fifth Circuit]
• Donald J. Trump long ago decided he wanted a very different Republican Party platform in 2024. The delegates who arrived in Milwaukee early last week before the Republican National Convention, with grand plans of drafting a sweeping document of party principles, quickly found out just how determined he was. Within minutes of their arrival, their cellphones were confiscated and placed in magnetically sealed pouches. There would be no leaks of information. It was only then that the delegates received a copy of the platform language the Trump team had meticulously prepared, which slashed the platform size by nearly three-quarters. “This is something that ultimately you’ll pass,” Mr. Trump told the delegates by phone and made audible to the room, according to a person who was there and who was not authorized to speak publicly. “You’ll pass it quickly.” [NY Times]
• Here the inexpert reader must note an important detail about the British undercover world. Cornwell’s reports on Mitchell had been going to an organization often called MI5, whose real name is the British Security Service. Lazy or incurious journalists frequently suggest that its employees are spies. But this is an evasion at best. The only proper description of MI5 is that it is a secret police force. Though it has no powers of arrest, it knows people who do. And its job has always been to snoop on those whom the current government regards as potential enemies. It once snooped on me, because it thought I was too left-wing, and I suspect it may soon snoop on me again because it thinks I am too conservative. Thanks to his most famous books, Cornwell is generally associated with the supposedly more reputable and romantic MI6 (properly the Secret Intelligence Service or SIS), which does employ spies. But this is not quite right. MI5 and MI6 dislike and mistrust each other, and it is quite unusual for anyone to serve in both, but Cornwell did. And in his letters, he confesses to German friends that he viewed MI5, the Secret Police, as “ultimately more rewarding, more obviously necessary, more vocational” than MI6, the spies. [Peter Hitchens]

Thursday Night Links

• There’s also something in evangelicalism that’s just off-putting to a lot of people like Vance. It’s not just the working class Pentecostal congregations like the one I was raised in (which was very similar to Vance’s experience). The average suburban megachurch is also incredibly cringe. I like to distinguish between middle class and striver class. Evangelicalism appeals to the middle class, but much less so to the striver class. And the elites of our society are either people from the upper classes, or strivers like Vance. [Aaron Renn]
• Priests ordained since 2010 “are clearly the most conservative cohort of priests we’ve seen in a long time,” said Brad Vermurlen, an assistant professor of sociology at the University of St. Thomas in Houston, who has studied the rightward shift of the American priesthood. Surveys tracking the opinions of priests have found that, starting in the 1980s, each new wave of priests in the United States is noticeably more conservative than the one before it, Dr. Vermurlen said. [NY Times]
  
• Everyone gets married young. Women constantly have children without committed men. Men beat and cheat on their partners. Women stay with their abusive partners, at least until the men get bored and leave. Everyone eats junk food and drinks soda for every meal. Everyone screams all the time, or they punch each other. People buy stuff they can’t afford. Everyone heavily drinks. Drug abuse is everywhere, especially of prescription painkillers. Few people want to work, and those who do are terrible employees. Yet nothing is ever anyone’s fault. Or rather, every bad thing is the fault of the economy, the government, Obama, the industrial companies, the Japanese, the Chinese, or some other mysterious malevolent force somewhere in the universe. [Matt Lakeman]
• I wonder why this became so popular? The message of the book is that Appalachian whites are totally hopeless. It is true that they behave very differently than Germanic or Scandinavian whites (e.g. Minnesota and Wisconsin, see Sailer): more violent and less future oriented. But rural whites would be doing much better if the country had not been deliberately deindustrialized. All the more reason for Trump's tariff program. The problem is that for reindustrialization to occur, tariffs would need to be perceived as permanent, and Trump will be gone after one term. (Also, Trump is not smart enough to win Oval Office debates about this against his globalist staffers.) So, the 2019 crash will be blamed on Trump (because he was desperate to claim credit for the final years of bubble), and therefore blamed on populism and nationalism. [CBS]
• The good news is there are lots of opportunities to find great value outside of the mega-caps currently (see a few examples in my recent archives). I think there is an interesting valuation gap emerging between the largest 25-50 stocks and everything else. This has happened numerous times in the past where the large high-quality stocks became expensive while bargains existed elsewhere, most famously in the early 1970’s and the late 1990’s. Both of these periods were followed by a multi-year correction where the expensive stocks fell and the cheapest stocks soared. [John Huber]
• In early days some argued that the obligations of the Constitution operated directly on the conscience of the legislature, and only in that manner, and that it was to be conclusively presumed that whatever was done by the legislature was constitutional. But such a view did not obtain with our hard-headed, courageous, and far-sighted statesmen and judges, and it was soon settled that it was the duty of judges in cases properly arising before them to apply the law and so to declare what was the law, and that if what purported to be statutory law was at variance with the fundamental law, i.e., the Constitution, the seeming statute was not law at all, was not binding on the courts, the individuals, or any branch of the Government, and that it was the duty of the judges so to decide. This power conferred on the judiciary in our form of government is unique in the history of governments, and its operation has attracted and deserved the admiration and commendation of the world. [William Howard Taft]
• In materials science, a disappearing polymorph is a form of a crystal structure that is suddenly unable to be produced, instead transforming into a different crystal structure with the same chemical composition (a polymorph) during nucleation. Sometimes the resulting transformation is extremely hard or impractical to reverse, because the new polymorph may be more stable. It is hypothesized that contact with a single microscopic seed crystal of the new polymorph can be enough to start a chain reaction causing the transformation of a much larger mass of material. Widespread contamination with such microscopic seed crystals may lead to the impression that the original polymorph has "disappeared." [wiki]
• We’ve been looking for historic cases of discontinuously fast technological progress, to help with reasoning about the likelihood and consequences of abrupt progress in AI capabilities. We recently finished expanding this investigation to 37 technological trends. This blog post is a quick update on our findings. See the main page on the research and its outgoing links for more details. We found ten events in history that abruptly and clearly contributed more to progress on some technological metric than another century would have seen on the previous trend. Or as we say, we found ten events that produced ‘large’, ‘robust’ ‘discontinuities’. [Less Wrong]

Tuesday Night Links

• Trailing performance has not exactly been a selling point for value investment strategies in recent memory. As the last 15 years unfolded, a wave of bad performance has seen allocators shift remorselessly away from the strategy of investing primarily at undervalued companies to more growth-orientated approaches. This has hollowed out the value investing community. As far as I can tell, the universe of value managers has shrunk to the aged whose records pre-2009 are strong enough to keep investors loyal, quants who trust the long-term data and cranks who are weirdly obsessed with natural resources stocks. [Verdad Weekly Research]
• I am using going to use a 7mg slow release nicotine patch (of the type made for smoking cessation) for the next 3-5 days to see if it impacts my over-stayed their welcome Covid symptoms. I started my experiment at 9am Saturday July 6th. I am treating this as a “kitchen table” science experiment in which I am clearly an N of 1 from which you can only take anecdotal evidence. But maybe one data point becomes many and with the network effects of social media maybe we push forward other experiments. [Julie Fredrickson]
• I suspect that the sustainable solution is neither the open-borders of neoliberals nor the isolationist instincts of the nationalist right. If the West survives, it is not in our nature to ignore suffering people. It seems a return to some sort of privately administered government for failed states would align the proper incentives. If we reformed some of the laws restraining American private interests from managing their property rights in foreign jurisdictions, the market might solve the problem. American oil companies, for example, would be more than capable of raising private security forces to create free provinces, call them “opportunity zones,” in Nigeria where Christians would be welcomed and well-governed under a private, Western-aligned regime, and everyone profits from an orderly society engaged in positive economic activity rather than grift. Service in private security forces would create an alternative to the increasingly woke conventional military for Western young people with an impulse to earn good money, see the world, and truly, sustainably help the oppressed. [The Tom File]
  
• There emerged a comical overlap between the beliefs of the nation’s most elite liberal Biden supporters and the beliefs of the most rabid and conspiratorial supporters of former President Trump. Resistance or QAnon, they shared a grand theory of America in 2024: There has to be a secret group of high-level government leaders who control Biden and who will soon set into motion their plan to replace Biden as the Democratic presidential nominee. Nothing else made sense. They were in full agreement. [New York Magazine]
• If Biden really were a puppet of secret higher powers, you might think that the shotcallers would have had a contingency plan for how to replace him in case the stubborn old egomaniac becomes so senile that even the public notices. As it turned out, the elites don’t seem to have had any plans. The Best and the Brightest are currently stumped by the fact that Dr. Jill and Hunter, while they despise each other, are in agreement that they, personally, would benefit from Joe being President until 2029. [Steve Sailer]
• In To Overthrow the World, Sean McMeekin investigates the evolution of Communism from a seductive ideal of a classless society into the ruling doctrine of tyrannical regimes. Tracing Communism’s ascent from theory to practice, McMeekin ranges from Karl Marx’s writings to the rise and fall of the USSR under Stalin to Mao’s rise to power in China to the acceleration of Communist or Communist-inspired policies around the world in the twenty-first century. McMeekin argues, however, that despite the endurance of Communism, it remains deeply unpopular as a political form. Where it has arisen, it has always arisen by force. [To Overthrow the World]
• Everett is very keen to use the Pirahã as an example to disprove Noam Chomsky’s theory of universal grammar. Curiously, I don’t believe anyone has considered the opposite: rather than considering whether the Pirahã disprove the universality of grammar in humans, maybe their language suggests Pirahã aren’t entirely human? [Misha Saul]
• Conservatism has died, not from an assassin’s bullet, or even from old age or because it was run over by a bus. It has died because there is no call for it anymore. This isn’t to say that nobody wants it, but that nobody cares that we want it. The same thing has happened to most of the things I like, from the forgotten Aztec chocolate bar to railway restaurant cars, from woodland peace to proper funerals. [Peter Hitchens]
• The whole people appear to be divided into an almost endless variety of religious factions, and I was told, that to be well received in society, it was necessary to declare yourself as belonging to some one of these. Let your acknowledged belief be what it may, you are said to be not a Christian, unless you attach yourself to a particular congregation. Besides the broad and well-known distinctions of Episcopalian, Catholic, Presbyterian, Calvinist, Baptist, Quaker, Sweden-borgian, Universalist, Dunker, &c. &c. &c.; there are innumerable others springing out of these, each of which assumes a church government of its own; of this, the most intriguing and factious individual is invariably the head; and in order, as it should seem, to shew a reason for this separation, each congregation invests itself with some queer variety of external observance that has the melancholy effect of exposing all religious ceremonies to contempt. It is impossible, in witnessing all these unseemly vagaries, not to recognise the advantages of an established church as a sort of headquarters for quiet unpresuming Christians, who are contented to serve faithfully, without insisting upon having each a little separate banner, embroidered with a device of their own imagining. The Catholics alone appear exempt from the fury of division and sub-division that has seized every other persuasion. Having the Pope for their common head, regulates, I presume, their movements, and prevents the outrageous display of individual whim which every other sect is permitted. [Domestic Manners of the Americans]

Books - Q2 2024

• The Worlds of Herman Kahn: The Intuitive Science of Thermonuclear War (2/5) We read one of Herman Kahn's books, The Coming Boom, in Q1 2024. He is interesting because he had a physics and mathematics background but was optimistic or cornucopian about the future. (He was also Stanley Kubrick's model for Dr. Strangelove.) The account @Empty_America on Twitter was the one who reminded us about Kahn (actually tweeted about him quite a bit but then deleted most of the tweets). This book by Sharon Ghamari-Tabrizi has an amusing picture of 300lb Kahn on the cover, but was not quite what we were looking for. A few noteworthy items, though. "Kahn befriended people far from him in taste, opinion, and preoccupations." "Such a procedure is necessary in order to obtain the entire spectrum of thinking of all various and opposed groups." "I can make your argument better than you can and then I can show you why it's wrong." The U.S. missed the chance to take out the Soviet Union after WWII and by 1956 the USSR was able to "traipse around the world without fear of Western intervention," in Hungary. I knew that Scientific American is woke today, but I did not realize it had always been woke since its founding in 1948. Its book reviewer, mathematician James R Newman, wrote a very critical review of Kahn's first book, On Thermonuclear War. Kahn was born in 1922 and died pretty young, at age 61 in 1983. He missed the boom that he forecast in The Coming Boom. If he'd been born 20 or 25 years later, he could have been quite a venture capitalist.
  
• The Next Two Hundred Years: A Scenario for America and the World (5/5) Herman Kahn was excited about America's bicentennial, and he wrote this book in 1976 with his predictions (a "scenario") for the next two centuries. If you remember in our Q1 2024 book notes, we thought that Kahn is interesting because he was a physicist but his beliefs were economist-cornucopian. He thought that problems that were less than existential could likely be solved through ingenuity or substitution, and the real meta-problems were pessimism and attitudes of anti-prosperity. (Just as we are writing this, a point for the cornucopian view: "America’s honeybee population has rocketed to an all-time high.") Remember that he was writing this just a few years after the Club of Rome put out its study, The Limits to Growth, which argued that high rates of growth would mean that the world would run out of resources of key materials, increasing pollution would have serious effects, and populations would outrun the world's food supplies. This was the same argument that has been made by Malthus, Paul Erlich (in The Population Bomb), Al Gore, and James Howard Kunstler. Here is how economist Wilfred Beckerman critiques the Limits to Growth argument: "Failure to allow for the fact that changes in the balance between demand and supply for any materials had, over the past, eventually led to changes in price which provided the stimulus, where necessary, to the discovery of new resources, to the development of substitutes, to the technological improvements in methods of exploration, extraction and refinement, to substitution in the products in which they are embodied and so on. History is full of dire predictions that if the demand for a certain product continued to grow as before the known resources would be used up in x years time, and all of them have been shown by events to have been absurd. The concept of 'known resources' is a misleading one; society only 'knows' of the resources that it is worth discovering given present and prospective demands, costs and prices. Thus the technique of inserting fixed supplies- even with some assumptions concerning eventual finite increases in these supplies - into a computer and then confronting them with indefinitely expanding demands, which must eventually overtake the supplies, bears no resemblance to the way demands and supplies have developed over the past and has no foundation in economic analysis or the particular analysis of technological innovation." There was the famous bet between Julian Simon and Paul Erlich about whether the real prices of copper, chromium, nickel, tin, and tungsten would rise or fall over the decade 1980-1990. Between 1980 and 1990, the world's population grew by more than 800 million (the largest increase in one decade in all of history) but the price of each of Ehrlich's selected metals had fallen. Three of the five metals went down in nominal terms and all five of the metals fell in price in inflation-adjusted terms. For all five metals, better technology allowed for either more efficient use of existing resources, or substitution with a more abundant and less expensive resource. OK, now that we've got that out of the way, Kahn's thoughts. He thought that in 1976, the most developed countries had "superindustrial" economies, but they (and eventually other) countries would graduate to being "postindustrial," where the task of producing the necessities of life becomes "trivially easy." As mentioned in the previous book note, Kahn was a believer that he could "make your argument better than you can and then [show] you why it's wrong." (Charlie Munger had the same philosophy.) So, in Two Hundred Years, Kahn outlines four perspectives: the "convinced neo-Malthusian," the "guarded pessimist," the "guarded optimist," and the "technology and growth enthusiast." These archetypes pop up time and again. He points out that the most pessimistic Malthusians, when things do not collapse as they expect, will say that postponement of collapse only makes the eventual (inevitable) collapse more severe. At the time he was writing, he felt that the Malthusian view had gained great influence in society. Isn't it interesting that he was a nuclear war strategist but was not a doomer? Kahn points out that as societies get richer, labor (i.e. servants) gets more expensive, and believed that objections to growth came from this class interest. (He quotes Schumpeter, "one good maid is worth a household full of appliances.") Kahn addressed the LTG arguments regarding energy, raw materials, and food. The oil crisis: "[t]here was no physical shortage of oil, only a cartel that succeeded in forcing at least a temporary increase... the cartel's moves actually decreased the possibility of future energy sources" by increasing the rate at which new energy came on and decreasing the rate at which it was used. In case he was wrong about oil, he considered fission, fusion, solar, and geothermal energy as well as the possibility of better conservation and efficiency. But he also noted that "once an effective process for the extraction of oil from shale is developed, the total available supply of fossil energy" would be increased. He only needed some of the possibilities to work, and one did. Similarly, with regard to raw materials, he pointed out that "most of the resources that have been extracted from the earth generally exist above ground somewhere and can be reclaimed and recycled." "In a hypothetical world in which all materials would be sold at approximately their marginal cost of extraction, the possibility of any shortages because of exhaustion could be anticipated for decades... In the real world, sudden or very rapid changes in supply or demand can occur and create temporary economic anguish. The rate of growth in gross world product increased by about 40 percent during 1973 and at the same time there was an unusual degree of inventory accumulation accompanied by considerable speculation in commodities. As a result, prices skyrocketed and the public was told that 'everything was scarce' in 1974. But only a year later 'nothing was scarce.'" "There is little reason for known reserves to exceed the expected demand by more than a few decades. It does happen occasionally but not because shortages have prompted a search for additional supplies. Thus, if we have stumbled upon coal reserves for more than 200 years and iron ore for more than 1,000, we can hardly expect private investors to be excited about a proposal to look for still more." "The tendency to underestimate future production is so strong that similar mistakes are made over and over again." He said that he expected "the fluctuations of the commodity cycle will undoubtedly continue, around a slowly changing trend line, which is much more likely to be downward than upward sloping." Regarding copper, similar to what we have noticed: "In the 19th century, for instance, only copper ores containing 4 to 6 percent of copper were regarded as useful. At present, however, ores are worked with an ore content of as little as 0.4 percent. It is virtually certain that in 20 to 30 years ores with as little as 0.25 percent will be profitably exploited." Regarding food, he pointed out that between 1790 and 1974, farm employment had declined from 90% to 4.4% of the labor force in the U.S. He saw the possibilities of: expanding tillable acreage, multiple cropping, and increasing yield per acre as ways of increasing output for a growing population. Ultimate takeaway: "Nearly every measurable environmental blight or hazard can be corrected by a combination of technology, a reasonable amount of money, sufficient time to make the required changes, and (occasionally or temporarily) some (otherwise undesirable) self restraint."
• SUPERGENIUS: The Mega-Worlds of Herman Kahn (3/5) This is a biography of HK by a colleague, Barry Bruce-Biggs. Kahn got famous writing and consulting about nuclear war fighting strategy (On Thermonuclear War), but that is not why we are reading about him - we are interested in studying cornucopian thinking. Kahn himself got bored with nuclear strategy by 1965 and turned his attention to growth and development, and particularly to rebutting "limits to growth" and neo-Malthusian thinking. He had the idea that world wars were unlikely to happen again: "modern technology and other developments have either obviated, lessened, or made transitory the historic strategic value of many geographic areas." "National strength, power and influence today depend mostly on technology, gross national product and a host of imponderables and hardly at all on the possession of critical geographic areas." Funny: "drawing straight lines or straight curves is an extraordinarily good way to predict a rate of change that already has a history of change." We saw in The Next 200 Years that he pretty much nailed the energy consumption (in quadrillion BTU) of the world today, almost fifty years ago, using simple extrapolation. That makes the extrapolation-based predictions of today's cornucopians (like Casey Handmer) interesting to consider. Author BBB: "The motor of the Post-Industrial Society was immense wealth in the advanced economies, calculated simply by extrapolation of historical growth rates of gross national product, and dividing them by official population projections, giving enormously affluent societies." "As he deviated from the liberal establishment, Herman discovered middle America. The schism between the elite and the mass intrigued him. In 1968 he opined, 'the United States has a Christian-fundamentalist core, which has almost disappeared from the governing political circles. You could describe the United States as a white, Anglo-Saxon, Protestant, middle-class, Christian-fundamentalist country run by a coalition of minorities...' Secular humanism is the religion of the upper classes of America and for that reason was the de facto state religion." BBB: "The topic was tailor-made for Herman, encompassing science, forecasting, and social values. The neo-Malthusians were attacking what he believed best for humanity... became his central interest for the next decade." "Somehow the great Earth had been transmuted to a thin-shelled egg, vulnerable to being crushed by behemoth humanity." HK worked with Michael Hudson, who we have mentioned in other contexts. (BBB says that Michael Hudson's books, "if read, should be read very carefully.") HK was born 1922 and died 1983; Charlie Munger was born 1924 and died 2023. They had quite a bit of philosophical overlap but it seems clear that CM was much more "successful" not only financially but by other measures. Munger focused his intellectual energy and optimism on making investments; HK tried to make money selling ideas to the public sector and nonprofits. I could imagine him instead being one of the early venture capitalists. Arthur Rock, for example, was born in 1926 (and is still alive) - he invested in Intel and Apple. Instead of presenting to SAC, he could have been presenting (and raising money) from university endowments. Perhaps the four years from 1922 (HK birth) and 1926 (Arthur Rock) is key... being born at the wrong time caused HK to be "stuck" for 20 formative years of his life as a nuclear war doomer before pivoting. But he was still trapped in the business model of nonprofit consulting. 
• Blip: Humanity's 300 year self-terminating experiment with industrialism (1/5) This is a neo-Malthusian book that argues that we are going to run out of nonrenewable natural resources (e.g. minerals) and will culminate in "humanity's permanent global societal collapse, almost certainly by 2050." The thesis is based on the two primary fallacies that Kahn and Julian Simon (next book, below) warn about. First there is the idea that the known resources of the NNRs (minerals) are going to be used up. (However, society only 'knows' of the resources that it is worth discovering given present and prospective demands, costs, and prices.) Second is the idea that things like falling ore concentrations demonstrate that mineral resources are reaching a point of exhaustion that will cause production to cease. Take a look at the copper ore grade over time at the Bingham Canyon mine in Utah (owned by Rio Tinto). It has fallen by almost an order of magnitude in concentration over the past century that the mine has been open, but the total tonnage of ore mined has greatly increased, with the result that copper production has grown. Developments like this are the reason why the real price of copper has not risen over the past century even as the ore grades have declined. When you see someone worried that we are going to run out of iron, you can throw the book away. (Earth's crust is 5% iron.)
  
• The Ultimate Resource 2 (4/5) This is the second edition of the book that Julian Simon wrote in 1981, which was right after the wager with Ehrlich about the metal prices. Some highlights: "A baby is a durable good in which someone must invest heavily long before the grown adult begins to provide returns on investment." "On the one hand, the doomsters say that there are too many of us; on the other hand, they warn that we are in danger of most of us being wiped out." "The most important elements in raw-material price trends have been (1) the rate of movement from richer to poorer ores and mining locations, that is, the phenomenon of "exhaustion"; and (2) the continued development of technology, which has more than made up for exhaustion." "This increase in the price of people's services is a clear indication that people are becoming more scarce even though there are more of us." Bad trend for businesses with low profits per employee? Although real wages have been growing in the rest of the world but not so much in the U.S. the past few decades. "...we have the capacity to develop additional ways to meet our needs: for example, by using fiber optics instead of copper wiring, by developing new ways to exploit low grades of copper ore previously thought not usable, and by developing new energy sources such as nuclear power to help produce copper.""Any country that gives to farmers a free market in food and labor, secure property rights in the land, and a political system that ensures these freedoms in the future will soon be flush with food, with an ever-diminishing proportion of its work force required to produce the food." Empty America recently tweeted, "World population will peak in this century, possibly much sooner than predicted. After that point, immigration is just rearranging the furniture. Immigration into one place will just create vacancy somewhere else." You can tell that EA is a disciple of Kahn and Simon - cornucopian. The real price of copper has not risen even as the ore grade has plummeted because we are able to use diesel fuel to push tons of waste rock out of the way to get at the copper. That suggests that cornucopianism will work as long as energy remains abundant. The real price of natural gas is at an all time low right now. Crude oil is bouncing around the same real price where it was fifty years ago. "The statistical history of energy supplies is a rise in plenty rather than in scarcity." "The historical facts entirely contradict the commonsensical Malthusian theory that the more we use, the left there is left to use and hence the greater the scarcity." "Through the centuries, the price of energy - coal, oil, and electricity - have been decreasing rather than increasing, relative to the cost of labor and even relative to the price of consumer goods..." He thinks that life expectancy is the best metric for well being, especially for those who do not trust GDP/capita. Points out that in the U.S., "a large proportion of rural counties have lost population in recent decades;" this trend has continued and is found in other countries too. (Maybe Empty America is the reincarnation of Julian Simon?) He points out that rural people worry about population loss, "because the trend feeds on itself; the fewer people there are, the poorer the economic opportunities for those who remain (just the opposite of Malthusian theory), and the greater the incentive for them to leave, too." "The continued concentration of population could mean that the absolute number of persons living on (say) 75 percent of the area of the Earth might be declining even as total world population increases..." "Given that agricultural productivity per acre in presently developed countries is increasing faster than population growth... it follows that the total amount of land used for crops in poor countries will eventually decline... in comparison with recreational land, agricultural land may not be a good investment for the very long run." And thus, "the traditional economic motive for war - acquiring farm land - is fast disappearing." Interestingly Simon mentions Camp of the Saints (published 1973): "The notion of a poor population taking over the developed world is... even less plausible. The uneducated poor demonstrably have no capacity to operate the instruments of a modern society, or else they would not be poor." Some thoughts: Ehrlich's Population Bomb book had the effect of discouraging some of the intelligent, conscientious people who read his book from reproducing. Nobody in the third world refrained from having children because of it. Then on the other hand, Julian Simon is not concerned with the quality of the population either. At the end of the book, Simon tries his hand at the subject of population and IQ. "It is reasonably to assume that a given individual's intelligence (whatever that means), or any aspect of it, is affected by the individual's genes without assuming that there is a strong correlation between the intelligence of parents and children..." We know that's not true and that IQ is highly heritable. One other big "oops" is his claim that immigrants raise "our" standard of living -- immigration is much better for landowners/rentiers than it is for laborers, and letting in dysfunctional immigrants is negative sum for society as a whole.
• In Defence of Economic Growth (3/5) This was written in 1974 by Oxford economist Wilfred Beckerman. The third sentence of the book is a bold assertion: "Mass unemployment has been eliminated, and the pre-war trade cycle, which was the cause of so much anxiety and misery, has been replaced by, at worst, minor fluctuations around a generally high and rising level of economic activity." Check out this chart of real GDP on a log scale: up and to the right. Beckerman wrote the book in response to the anti growth movement, which he separated into two themes: "that growth does not make us any happier; indeed [makes] us less happy and that the 'costs' of economic growth include a deterioration in the quality of life" and that "growth cannot continue much longer anyway" because of limits to growth. As he points out, one view was saying that "growth is bad for us whether we can have it or not" and the other was saying "continued growth is impossible whether we like it or not". Economics of growth: "The growth problem is a problem of how resources should be allocated over time. For in order to grow an economy must invest (either in physical capital, in human capital, or in research and development). If resources are used for investment they cannot be used for current consumption. To the economist, therefore, the costs of growth consist of the current consumption foregone." Points out that "The middle classes, in particular, have always been very hot on morality, particularly when it coincides with their own interests." "[I]t is likely that the middle-class opposition to growth reflects partly their sense that economic growth brings a loss of various privileges." "[T]he middle-class intelligentsia can no longer easily find domestic servants or others to do their various jobs round the house or garden..." Growth means that "Skiers must endure endless lift lines and reckless adolescents on busy slopes where they once schussed in peace... grand cru Burgundy prices are bid up by noveaux wine enthusiasts." There is a question of whether GDP growth understates or overstates human welfare. He points out that inventions like antibiotics, which are a de minimis contribution to GDP, have a gigantic, positive effect on human welfare. Another understatement of GDP could be because it does not include leisure time. I'm really not so interested in whether economic growth is good or not, but rather whether growth is sustainable or if the availability of cheap energy will be a constraint. Beckerman's thoughts: "There are two types of general flaw in the argument that economic growth should be slowed down or brought to a halt on account of the danger that, otherwise, the limits to raw materials will be reached suddenly and with drastic consequences. The first is that the argument fails to allow for the various feed-back mechanisms at work in society, which, as shown above, have always tended to ensure that supplies and demands are matched one way or another (not necessarily always by finding new supplies - the mechanism may involve reducing the rate of growth of demand)." He highlights the favorable economic feedback mechanisms: "incentives to new exploration, recycling, and the use of substitutes, that would all be occurring gradually as the increasing scarcity of any product led to an upward trend in its price." This book was not that useful for the Cornucopianism study, but it did have some worthwhile tidbits.
  
• Noticing: An Essential Reader by Steve Sailer (5/5) Steve Sailer's tagline for his new anthology is: "Political correctness is a war on noticing." It is a collection of his writing about culture, immigration, class, politics, and human biodiversity. It is all old material, some quite old, which is interesting because you may not have read it before. Since it is organized around the theme of political correctness, there is not much of the non-political content, which is too bad. I would have liked for the anthology to include some of his best writing about non-political subjects, and also his conceptual toolbox, his concepts such as: "there's no end to the ways that nice things are better than not nice things," "good predictions are boring/pundits are predicting coin tosses," "the future isn't going to be terribly idealistic," for example. But I can see why, for marketing purposes, he and his publisher wanted an organizing theme. Here's a good post (not review) about the book. Some highlights: "Noticing works as well as it does relative to the competition not because I've invented revolutionary empirical techniques for understanding the world as it is, nor because I am terribly smart, but because I reject the growing bigotry of the 21st century." "A big problem for modern class warriors like Pat Buchanan on the right or Jim Hightower on the left is that over the years the number of blue collar workers with the verbal talent needed to articulate their class interests has plummeted." "Whether you're a Pollyanna optimist or a paranoid pessimist, it's still an oddly comforting assumption that somewhere, behind all the nonsensical propaganda, there is somebody smart who is secretly pulling the strings to achieve his goals, whatever they may be. That there's an Inner Circle comprised of profoundly competent men plotting the course of history is one of the most popular staples of science fiction." Talking about Fethullah Gülen: "He who controls test preparation controls the future." "In Paul Johnson's just-published and immensely readable book Art: A New History, you can see how even this most opinionated of historians must adapt himself to the judgments of artists. Much of the book's entertainment value stems from Johnson's heresies, such as his grumpy comment on Michelangelo's Sistine Chapel: 'No one ever wished the ceiling larger.' Still, Johnson can't really break free from conventional art history because he can't avoid writing about those whom subsequent artists emulated." That's from Sailer's review of Charles Murray's book Human Accomplishment (2003), where he summarizes, "Why is the West the best? After five years of work, Murray still didn't know. Then, he had an unexpected epiphany: the single biggest reason most of history's highest achievers came from Christendom was... Christianity." On Noticing: "[I]t helps to have a model in your head that corresponds fairly well with how the world works. When you've got the right theory, it's easy to observe more - you can hold more details in your mind because they fit together." Amusing: "Obama became galvanized by the notion of the mayor of Chicago as a powerful man, somebody with clout. That was a comically juvenile ambition because you can't be mayor of Chicago if you are an outsider." "[W]hen Obama ran against a genuine African-American, Bobby Rush, for the Democratic nomination for the House in 2000, he lost badly. This plunged him into depression, from which he revivified himself by giving up his bizarre dream of being elected mayor of Chicago (which is not a job for transplants from Hawaii) and finally admitting that he was the nice white person's vision of a black politician." One last bit on Sailerian thinking: "I would encourage intellectuals to try to subscribe to a form of vulgar Hegelianism in their thinking that I've found very useful: If you hold a thesis for what seem like good reasons, and somebody counters with a well-argued antithesis, you have three options: reject the antithesis (the most common), convert to the antithesis (the most dramatic), [or] look for a synthesis that makes the most of both your thesis and the other guy's antithesis (usually, the hardest but most productive)." If Sailer's book was on Amazon (instead of direct from publisher only), I would probably have already ordered a few copies for some normies who are ready to expand their minds. Looks like there is a new discount code from Lomez for ordering the book.
• Santa Monica Partners Letters to Partners 1982-2021: 40 Years of "Pink Sheet" Investing (3/5) This is a collection of 40 years worth of investment partnership letters by Lawrence J Goldstein, who still runs Santa Monica Partners, which (oddly) is in New York. Goldstein is now 88 years old - he started his fund at age 46 at the major generational low in equities when the Shiller P/E ratio of the S&P 500 was 7x. At least for the first 20 years, he was charging 3/20 fees! His gross performance over 40 years was 16.1% compounded, which is meaningfully (373 bps) better than the S&P 500's 12.4%. (That ends up being about 4x as much money, gross. Net of fees the result was much closer to the index.) You can see from his 13F that his portfolio is dominated (77% concentration) by Mastercard, Texas Pacific, and Balchem. He started his fund to trade pink sheet ideas (what we now call Oddball Stocks) but these hundred baggers ran away with the portfolio. Goldstein is a strong believer in "never sell" when it comes to "good" companies - don't think he had that attitude regarding special situation type trades. The letters themselves are not very good. He does not have a whole lot to say about why he owned those three companies. Maybe he had unpublished investment memoranda with his theses, maybe it is in his head, but there is really not much about how he thought about the investments. Something funny is that in his July 1995 letter, he wrote that "for me to buy a stock listed on the NYSE it has to be something very special... by being listed on the NYSE a stock normally cannot be characterized as neglected or what I like to call the stocks I look for, overlooked and/or ignored." We have come to think that investors do not make money off of information edges nearly to the extent that they think they do, perhaps not even at all. Corporate profits after tax are up almost 20 fold in nominal terms since 1982, and the ten year bond fell from 10% to nearly 0%. Goldstein was aligned with a very favorable macro tailwind. If you are cornucopian or at least not a doomer, you might figure that this trend will continue. It seems like you should be able to add an immense amount of value by picking good businesses at reasonable valuations and staying fully invested. There is something interesting in the October 2009 letter about the securities exchange businesses. It is so much better than Goldstein's other writing that we wonder whether it was either written by or plagiarized from Murray Stahl of Horizon Kinetics. (The book plagiarizes this blog post Oddball Stocks about net nets!) The essay about exchanges points out that stock and option trading volume has been growing much faster than economic growth or other macro variables, and also points out that the individual exchanges' trading volumes have grown even when their market share has fallen, as in the case of CBOE which started out in 1973 with the entire options market and now has 30% market share. He says that the data "does not support the notion that market share and volume growth are mutually exclusive; if anything, the results are consistent with the opposite viewpoint, that competition is associated with increased volumes." "Perhaps there is a special form of Moore's law that operates for securities exchanges... What could be the various enabling factors for exchange volumes, analogous to the process, physical chemistry, and engineering advancements that facilitate the operation of Moore's Law? First, it should not be ignored that the mere expansion of the world economy, business activity, corporate profits, and private savings will result in an expansion of the market capitalization of companies and the number of shares that can be traded, and of the volumes of commercial exposure that must be hedged via futures contracts, and so forth. Beyond that, it would appear that virtually any development in regulations, technology, portfolio, or trading practice, or product innovation that lowers a barrier to trading, whether it is via increased transaction speed, lower transaction costs, better or more diverse tools for hedging, diversifying, reducing risk, or acquiring risk, will invite more trading."
• Babyology: Volume One (4/5) A graphic novel by Owen Cyclops. This Amazon reviewer describes it well: "one comic being a story of a new dad with humorous anecdotes and situations, and the next one will have deep, esoteric conversations about different points in theology, followed by an in depth study of the various uniquely American religious cults that have sprung up". Owen's comics pop up on Twitter, but what made us order it was a strong recommendation from Hank Oslo of American Sun, who gave it five stars. He mentioned something that I never knew: the Cathedral of the Madeleine in Salt Lake City, which is the only cathedral in the U.S. under the patronage of St. Mary Magdalene, is perhaps a troll of the Mormons, since she is the Apostle to the Apostles, and the Mormon hierarchy includes a Quorum of Twelve Apostles. (The official story is that the feast day for Mary Magdalene is right before Pioneer Day, so Catholics in SLC would have something to celebrate at the same time.) Owen quotes William James: "in religion, you can learn about the tendencies and nature of a group by observing its fringes," and he has a series where he compares three "uniquely American" Christian groups: the Seventh Day Adventists, Jehovah's Witnesses, and Mormons. As mentioned, his comics are mostly either new dad or theology themed. He has a series talking about the history of chiropractic, which his wife seems to have taken their newborn baby to on account of having "a lot of tension." Owen thinks that "chiropractic" sounds like an adjective and not a noun and refers to the practice as chiropracty or chiropracting. When the subject of chiropractic comes up, we must always link to the H.L. Mencken essay about the "reposterous quackery".
• The Origins of Woke: Civil Rights Law, Corporate America, and the Triumph of Identity Politics (4/5) There's a debate on the right between what we might call "activists" and "defeatists". A good example of this was in a recent IM-1776 "face off" between Christopher Rufo (an activist) and Curtis Yarvin (aka "Moldbug," a defeatist). As Rufo says to Yarvin, "I see in your pessimism an excuse for inaction." Rufo has been winning victories against DEI programs that discriminate against whites and Asians. Another activist is Richard Hanania. His essay, "Why You Should Preorder My Book," was high agency, as opposed to Moldbug's defeatism (deliberate demoralization, even) and low agency wallowing. The book is about the exact provisions in civil rights law that he believes have led to wokeness, and plausible mechanisms for changing or reversing them. Highlights: "It is tempting to believe that [wokeness] was actually designed in the sense that there was a small group of individuals who created the laws that we now live under, all the while foreseeing their downstream effects on society. This would be a mistake. In tracing the development of civil rights law over time, we can see that it was not created by philosophically inclined liberals who were reading Marcuse and Gramsci. The historical record is clear on this point." "Universities adopting quota systems that they justified as necessary to redress historical wrongs done to blacks, for example, would at least have had a limited cultural effect, as affirmative action has in other countries where it is practiced. In contrast, anchoring affirmative action in the rationale of 'diversity' required the creation of a new and largely incoherent official ideology that has been used to justify crusades against 'inequity' and constant management of the thoughts and behaviors of students and faculty." "No reader should make the mistake of believing that the detailed and dense nature of Labor Department regulations means that they are logically coherent or adhere to basic principles of the rule of law. Rather they make a soft quota system politically and legally palatable while giving regulators arbitrary power over business as they pretend to restrain themselves." "The fact that around 10-20 percent of all civil cases filed in federal court in recent years relate to discrimination of some kind should lead even those unconcerned with the implications for economic growth or freedom of association to realize that society might be overinvesting in fighting this particular harm. Of all the issues our legal system could be addressing, it is interesting that so much effort and attention is now directed at a private cause of action that was not even recognized as part of the legal system until recent decades." Hanania points out something I hadn't noticed, which is that the proportion of Americans working in "human relations" began to explode higher in the late 1960s, and is now more than 1% of the population. Is that what happened in 1971? (We used to think that what happened was energy scarcity, but natural gas prices are at record lows, and things are seeming more cornucopian.) Sailer points out something in his review of the book: "Granted, it’s kind of humiliating to have to live like this, so many workers adapt to these dictates by assuming that what they need to say to protect their jobs is what must be morally and scientifically true. It helps ease the cognitive dissonance." On strategy: "Conservatives have blamed wokeness on entities as diverse as capitalists, the education system, recently arrived immigrants, financiers, Hollywood, the United Nations, 'globalists,' the mainsteam media... Like the general who is given the task of defending everything, a movement faced with an endless list of powerful oppressors is likely to either stretch its forces so thin that they are overwhelmed or decide that it is trying to do the impossible and give up." "[T]he natural point of attack is civil rights law." Hanania says to start with the low-hanging fruit: "repealing or amending EO 11246, abolishing the disparate impact doctrine in Title VI and Title VII, and reworking the rules on Title IX through OCR in the Department of Education. There's a clear path to doing each of these things through either the executive branch or the judiciary, where conservatives have some representation and control." "The four fundamental pillars of wokeness as law - affirmative action, disparate impact, harassment law, and Title IX - can to a large extent be handled through the executive branch and the courts alone."
• Superabundance: The Story of Population Growth, Innovation, and Human Flourishing on an Infinitely Bountiful Planet (3/5) This is another one for the Cornucopian vs Malthusian reading stack. We have found that there are no contemporary Malthusian / peak resource books that are any good. This book is published by the Cato Institute and was written by one of its fellows and an affiliated economist. The forward is by George Gilder: "The ultimate test and measuring stick of wealth is time. What remains scarce when all else becomes abundant is our minutes, hours, days, and years. Time is the only resource that cannot be recycled, stored, duplicated, or recovered. Money is most fundamentally tokenized time. When we run out of money, we are really running out of the time to earn more. Measured by this only universal gauge of value - time - we are in a crowning golden age of capitalism." "Going back to 1850, the data collected by Tupy and Pooley show that for more than a century and a half, measured by time prices, resource abundance has been rising at a rate of 4 percent a year." A famous example of this is William Nordhaus' 1994 essay about improvements in lighting efficiency. Quoting Thomas Sowell: "The cavemen had the same natural resources at their disposal as we have today, and the difference between their standard of living and ours is a difference in the knowledge that they could bring to bear on those resources and the knowledge used today." Something we never knew: a Chinese "state councillor" named Song Jian is the one who came up with the one-child policy after reading Club of Rome's The Limits to Growth. They mention an article on peak farmland: if the productivity of the world's farmers increases to U.S. levels, humanity will be able to restore at least 146 million hectares of cropland to nature." They define "abundance": "when the nominal hourly income increases faster than the nominal price of a resource." Looking at 50 basic commodities (hard and soft, from aluminum to zinc), they find that the ratio of the nominal price of these 50 commodities to GDP per hour (a proxy for workers' hourly wages) fell by 72% from 1980-2018. In other words, the average person globally was able to buy much more of them. They got cheaper. They also note that at no point during that period did they collectively become less abundant (more expensive in terms of hours of labor required to buy them). They look at baskets of commodities as well as finished goods (and services) over increasingly lengthy periods of time and keep finding the same thing. The products get easier and easier for workers to buy in terms of the amount of time they have to work to pay for them. It is true in the U.S. and it is true globally as well. The specific examples are interesting: a U.S. blue collar worker had to work 200 hours to buy a 5,000 BTU air conditioning unit in 1952 and only 5.5 hours in 2019. The amount of time that it takes for workers to afford items seems to fall at a consistent rate of several percent per year. This means that the standard of living is doubling every 20 years. Ever wonder why 80 year olds have trouble letting go of material possessions? During their lifetimes, there have been 4 doublings of material abundance. They are imprinted on an environment of greater scarcity. The authors estimate that the "personal resource abundance multiplier" of blue collar workers in the U.S. rose at a compound rate of 4.08% between 1850 and 2018, doubling every 17.3 years. 
• Ten Global Trends Every Smart Person Should Know: And Many Others You Will Find Interesting (3/5) This is by one of the same authors as Superabundance and also published by the Cato Institute. Contains many examples showing how the Industrial Revolution ended the Malthusian relationship between population size and quality of life. Cato is left-libertarian so they think that the trends of increasing gay marriage, more countries with "democracy," and more female politicians are as important as longer life expectancy and fewer people in poverty. It seems as though energy is what broke the relationship between poverty and misery, so things are looking good for Cornucopianism because nuclear fission and photovoltaic solar ought to be able to replace hydrocarbons. (Especially if battery chemistries keep improving since that is needed for vehicles as well as intermittency problem of solar.) It seems like the biggest threat to increasing prosperity is not peak oil (which really seems like a dead theory with oil trading at the same inflation adjusted price now as 50 years ago) but a return of communism / bioleninism. 
• More From Less: The surprising story of how we learned to prosper using fewer resources – and what happens next (3/5) Might be better to just read this paper - The Return of Nature - about how the economy no longer advances in tandem with the use of resources such as land, forests, water, and minerals. It has decoupled. Agricultural production (e.g. tons of corn) has decoupled from acrage and other inputs like fertilizer. Emissions of sulfur dioxide decoupled from GDP per capita in 1970. Carbon dioxide emissions decoupled from GDP per capita 2007. This book points out something funny about Malthus' Essay - Malthus said that populations grow geometrically but subsistence (food) grows only arithmetically, hence a growing population would eventually starve. But Malthus never makes a convincing argument for this, he just wrote that "the most enthusiastic speculator cannot suppose a greater increase than" arithmetic increases in food production. In thinking about Casey Handmer's idea to fix carbon from the air, it should be remembered that more than a century ago we figured out how to fix the (much more abundant) nitrogen from the air. Synthetic fertilizers and hybrid wheat were the two biggest factors in breaking the relationship between poverty and misery; true Malthusianism. And there is nothing on the horizon that is going to take away nitrogen fixation - certainly not with natural gas at all time lows! Buckminster Fuller coined the term ephemeralization in 1938 to describe doing "more and more with less and less until eventually you can do everything with nothing". (Noticed just as I'm writing this that Casey Handmer made the same comparison of his carbon fixation with nitrogen fixation.)
• Possible: Ways to Net Zero (4/5) Hard to believe that the birthplace of the Industrial Revolution now has an industrial sector in steep decline. It began with company managers with no technical or scientific knowledge and weak, ignorant shareholders who also lack technical knowledge, but it has progressed to men like Chris Goodall - author of this book - who want us to eat bugs instead of beef. Make no mistake, he is a commie who believes in central planning and not markets. If the Chinese aren't actually paying people like him to be agitators, then they must be marveling at how Europe is deindustrializing voluntarily. The reason that this book is worthwhile is that the author needs to make the case that "net zero" is achievable, so he surveys, with the most optimistic possible bias, the progress in reducing carbon in areas like batteries, steelmaking, photovoltaic solar, carbon capture, and direct air capture. The same way that last year we were startled by LFP batteries, this year we are a little surprised that photovoltaic solar has gotten much cheaper after seeming to flatline in 2021 and 2022. Goodall says, "the price rise did not indicate any long-term shortages of raw materials. Rather, it was caused by a temporary insufficiency of production capacity in the factories making polysilicon, which was swiftly corrected." Cornucopian. It also reflects the fact that photovoltaic solar panels have had a high "idiot index," to use Elon's concept. He outlines his own theory for how cornucopianism works: price rises incentivize the suppliers to expand production. They also push manufacturers into finding cheaper alternatives to the costly commodity. And they induce attempts to improve efficiency and recycling. Note that a puzzle is why electricity in California seems to be rising in price faster than the national average? It's 29 cents vs 18 cents in the rest of the country. Utilities are having a lot of trouble connecting new sources of supply (wind farms, solar arrays) with new sources of demand (data centers). A big part of the explanation is probably opposition to electrical transmission lines. That implies that the supply and demand should be brought closer together. You could have "silicon grasslands" on the gigantic tract of land owned by Aztec Land and Cattle in northern Arizona, combining wind and solar farms with data centers. There are lots of cornucopian themes in this book. For example, will the world have enough of the resources needed for batteries, wind turbines, and solar panels? Goodall responds, "prices are likely to respond rapidly to higher demand, encouraging more investment in exploration and production and eventually greater availability... manufacturers will also strive to reduce the use of expensive metals and other materials." As an example, "conventional lithium ion batteries became two and a half times lighter per unit of energy stored in the twelve years to 2022." One recurring theme in discussions of energy and natural resources is the capex vs opex tradeoff. If your opex input is expensive, it makes sense to spend more on capex to build something that's efficient. If your opex input is cheap, it makes sense to spend as little capex as possible and "waste" the input. Casey Handmer predicts a world of extremely cheap electricity from photovoltaic solar, and since he wants to use it for electrolysis of water, he is optimizing his electrolysers to be cheap to build instead of efficient. Another example is solid direct air capture of CO2 versus liquid direct air capture. Apparently liquid DAC requires more capex but uses less energy. So if solar PV is cheap, that implies you would use the solid chemistry. Anyway, we read these books out of concern for our oil & gas, metallurgical coal, and midstream investments. We continue to think that it is going to take a long time to transition to electric vehicles, and the specter of replacement might make this a "tobacco-like" trade thanks to reduced reinvestment, higher commodity price, and more cash returns to shareholders. Regarding met coal - there are two potential alternatives for steelmaking: direct reduction using hydrogen and electrolysis of ore. Electrolysis of ore is interesting because it would allow steelmakers to use lower quality ores, and the input would be electricity which will be cheap if Casey Handmer is right about photovoltaic solar. ArcelorMittal is building a 2 Mtpy direct reduction plant in Spain. They claim that it will be producing next year. The economics of direct reduction depend on the relative prices of coal and hydrogen. Goodall claims 4MWh/t of electricity for steel. (He claims that's true for either hydrogen reduction where the hydrogen is produced electrolytically, or for electrolysis of ore.) Of course, no one is going to be eager to retire a conventional furnace, and that will be especially true if met coal got cheaper. Theme: high fossil fuel prices accelerate the transition and low prices delay it. Fossil investors should bear in mind that high prices are self-limiting, at least in the longer term. Producing cement releases tons of carbon. One interesting possibility here is if that carbon is captured and needs to be stored, the pore space owned by Natural Resource Partners could be a good place to put it. Some asides: mentions BMW as a leader in making more car parts out of plastic to save weight and increase fuel economy. Their cars have become unreliable junk! Just look at how little a BMW with 100k miles is worth compared to a Toyota with the same MSRP. Another thing - people that would have been environmentalists 30 years ago are now monomaniacally obsessed with carbon. 
• The Talented Mr. Ripley (3/5) This is a rare case where the film is arguably better than the book, but of course the film was perfectly cast with Jude Law and Matt Damon. Funny passage: "Dickie's very old-fashioned about some things, Tom, the things he doesn't have to fool with. There's still only a wood stove here, and he refuses to buy a refrigerator or even an icebox." "One of the reasons I fled America. Those things are a waste of money in a country with so many servants. What'd Ermelinda do with herself, if she could cook a meal in half an hour?"
  
• The Andromeda Strain (4/5) by ubermensch Michael Crichton - it was his first novel under his own name and his sixth novel overall. Crichton liked to include realistic pseudo-detail in his techno thrillers. Amusingly, The Andromeda Strain describes a Hudson Institute study of "cautery": the use of a nuclear weapon to prevent the spread of a pathogen of extraterrestrial origin. It really reads like Herman Kahn - Crichton must have read Kahn's work. (Andromeda was written in 1969, On Thermonuclear War was written in 1960.) The fictional memo suggests four possible scenarios where Cautery could be required. One scenario - if an extraterrestrial pathogen landed in a Soviet urban center - would have "six possible consequences of American-Russian interaction following this event, and all six led directly to war."
  
• The Essential Herman Kahn: In Defense of Thinking (3/5) Rounding out the Herman Kahn reading. This is an anthology of some of Kahn's work over the years, put together by an economist from GMU, Paul Dragos Aligica. (He has another book, Prophecies of Doom and Scenarios of Progress, about the pro-growth intellectual tradition that arose in the 70s in response to the "limits to growth" movement.) Again, Kahn lost interest in warfare - he seems to have perceived that there would be a long-lasting nuclear stalemate. "Increasingly, the most effective and reliable way to achieve affluence, power, influence, status, and prestige is through economic development, and not through territorial or political gains." "History always shows change: rise and fall; reformation and counter-reformation; disruption and reconstitution; decline and renaissance; extension and diminution; other internal or external contradictions; or mutations causing conflict and change, defeat or victory..." He was not anti-white or anti-European: "[C]onquest is not an international crime invented by the European peoples. The poverty that exists in the Third World was not caused by European colonization, nor can the current problems of the poor nations be solved by fostering a sense of guilt in the rich nations." He thought that these attitudes were "most prevalent among citizens of what we call the Atlantic Protestant culture area." (Moldbug would agree with this!) A good summary of Kahn's views on neo-Malthusianism vs technology-and-growth optimism: "in the next one hundred years material needs can be met so easily in the currently developed world that the more advanced nations will develop superindustrial and then postindustrial economies." He had two big tools for forecasting the future: extrapolations from current trends, and historical analogies. But he preferred the extrapolation of curves: "many phenomena of interest to futurologists appear to increase more or less exponentially for a period of time, perhaps at a varying rate of growth, but they reach a maximum growth rate and then pass through a point of inflection."
  

Tuesday Night Links

• Did Donald Trump save the Union? He appointed conservative judges, providing a legal "shield" for social conservatives to exist in the USA. Otherwise the progressive attack against dissenters might have become so aggressive and unchecked as to generate real instability. It's a big deal. Post-Trump, the ~30% of the US population who are convinced social conservatives have some confidence that "Bake the Cake" style persecutions can be successfully fought via the Federal Courts. Otherwise the brakes would be off, no limit. As opposed to the late-Obama era, it just feels much more plausible now for Conservatives to participate on a national level, rather than entirely focusing on enclavism in certain southern states, etc. This tone comes from the top, from SCOTUS, etc. Dobbs was a "super signal" that the era of unilaterally imposing progressive social values onto every community/family in the USA by force was coming to an end. A deal was made.  It was accepted that Conservatives weren't just going to go away or utterly surrender. In an alternative Hillary timeline, in the face of a totally hostile Fed Gov, blue states conservatives would have had a very strong incentive to move places like Tenn, FL, etc. Would have greatly increased regional sorting and polarization. A "partition" effect. [Empty America]
• Am starting to see evidence that inventory is surprisingly starting to build in some housing markets, particularly in FL, TX, and AZ. I am a structural housing bull, believing that the US is massively under inventoried, so that struck me as odd. The local charts data that I have seen so far has shown that the inventory situation in these markets has all changed in the last few months, I.e. all of the sudden everyone wants to sell at once. So here is the thesis: Everyone thinks the housing market is up 50-100% since Covid, but that is based on an abnormally low number of transactions.  Most owners are sitting there thinking they have this massive amount of equity they can unlock whenever they want because 2 houses in their neighborhood have traded in the last 12 months at ATH prices. I think people are waiting for the first FED cut to put their house on the market as they think value increases when that happens, and instead what we are going to see is more houses come on the market than expected, all at once. A few of those sellers will actually need to sell as they held out too long and will start offering their houses at lower and lower prices and it will cause a cascading effect.  Put another way, I think high rates have caused the market to seize, and the values most are using as benchmarks for pricing will turn out to be a mirage when the market starts functioning again. [Gunwale Capital]
• A friend of mine was invited by a FAANG organization to visit the U.S a few years ago. Many of the talks were technical demos of impressive artificial intelligence products. Being a software engineer, he got to spend a little bit of time backstage with the developers, whereupon they revealed that most of the demos were faked. The products didn't work. They just hadn't solved some minor issues, such as actually predicting the thing that they're supposed to predict. Didn't stop them spouting absolute gibberish to a breathless audience for an hour though! [Ludicity]
• An apocalypse is also the subject of Paul Kingsnorth’s first novel, The Wake. Buccmaster of Holland is a socman, a member of the wapentake, an owner of three oxgang of land, and fiercely proud of his standing in his community. Unfortunately, the year is 1066 and the world as he knows it is about to end. Buccmaster knows something is coming. First, there was the strange bird with eyes of fire and fingers like a man flying over the village. Then there was the appearance of a hairy star in the sky. No one knew what these signs meant, and no one wanted to listen to Buccmaster. What was coming, of course, was the Norman invasion and the end of Anglo-Saxon England. Buccmaster’s sons go off to fight for King Harold—first at Stamford Bridge and then at Hastings. They never come home. When Buccmaster and his neighbors refuse to pay tribute to their new Norman overlords, the village is burned, Buccmaster’s wife is killed, and all the animals are destroyed or taken. Buccmaster misses all this while away in the fens. He takes to the forest and lives as a “grene man,” a kind of Anglo-Saxon partisan looking for opportunities to strike at the Norman conquerors whenever opportunities present themselves. [Mr. and Mrs. Psmith’s Bookshelf]
• The heat and pressure of the mantle cause the iron and magnesium in the mantle to be in a chemical state that wants to give away some electrons (a reduced state). The atmosphere due to the sun’s UV splitting water and subsequent hydrogen escape is in a state that wants to suck up electrons (an oxidized state). Separate these two conditions with a barrier (the crust) and focus where they meet to specific points (vents) and you get in essence a battery that runs on the reduction-oxidation difference or redox potential. The amount of energy that’s doled out in this process is the perfect amount and type to do the organic chemistry that’s central to life. Other sources of energy are either too diffuse (the Earth’s heat) or too energetic (light) to be good for life’s chemistry. (Photosynthesis now harnesses light, but it’s a complex process that involves breaking the huge amount of photon energy into smaller manageable chunks of chemical energy.) [Fermi's Envelope]

Tuesday Night Links

• I picture the gods of straight lines as innumerable hovering spirits, just in the corner of your vision, vanishing as you turn to look at them directly. It’s hard to tell if they’re still or in motion. But they’re always there, as the world glides forward on its trajectory. And when that trajectory shifts, or something disruptive happens, they slide in, and they gently push it back on track. They take joy in the work, I think. Or amusement, at least, at all the narratives that humans develop to explain why each thing happened. It’s not that those narratives are false—but they almost always miss the point. [Richard Ngo]
• Extrapolating is risky business, but at present rates solar power will reduce in price by a factor of 10 every 17 years. Continuing that trend, in 2050 power will be cheap enough to artificially refill rivers parched by global warming with pumps and desalination, for example. This trend need not stop in 2050. It is my belief that by the time I die, historians will see the period between 1973 and 2013 as an anomaly, a blip, a detour into computing on an otherwise unbroken industrial trend towards ever greater deployment of useful energy for peaceful humanitarian purposes. What is The Program? The Program is a vision for the mass deployment of solar power, smart grid technology, grid storage, and electric vehicles. [Casey Handmer]
• All we really do is take the opposite side of the time risk decision that the professional investment community does. They need high near-term returns and won’t take the risk of underperforming their benchmark while waiting: look like the market to not underperform the market. We want securities that offer a suitable long-term return. We’ll take the time risk—and the discount that’s usually offered to take it—that other investors don’t want, because a long time horizon gives us better odds of being right. How can a ten-year estimate be more reliable than a one-year estimate? [Horizon Kinetics]
  
• Immediately after the combination with Praxair, Linde announced substantial price hikes, and it has continued to increase prices ever since. In the last quarter of 2023, for instance, according to Linde’s investment documents, its sales in the U.S. grew by 6%, “driven by 5% higher pricing and 1% volumes.” And the root of its pricing power isn’t hidden; in 2022, its 10% boost in profit was, according to the corporation’s annual report, “primarily due to higher pricing… driven by merger related assets.” Operating margins went from about 10% in 2019 to 16% in 2022 to 27.6% in 2023. In 2023, the company paid out 50% more to investors than it invested into the business. Today, the industry is a lot like Verisign, on a larger scale. Industrial gases are essential to customers, but also an afterthought, because they are usually a small percentage of the customer’s cost. No one really cares if there are price hikes, as long as the gases are delivered. It’s also hard to switch, distribution is a bottleneck, and long-term supply contracts are common. The result, for Linde, is high operating margins, low investment, and lots of dividends and buybacks. There are a few other big companies in the market, like Air Liquide, but the merger cut price competition substantially. Last year, Linde fortified its position in distribution, buying one of the biggest packaged gas distributors in America, nexAir. And its executives have announced they are looking for ‘tuck-in’ acquisitions, meaning they want to keep buying mid-market firms as a consolidation play. Unless you are buried in a supply chain somewhere, most people will never hear about the industrial gas price increase. But as with Verisign, a few pennies are coming out of your pocket every day because of this economic termite. [Matt Stoller]
• Not every business model is as as safe as Coca Cola. Indeed almost every business model is more dangerous than Coca Cola. A not financially levered mining stock can halve five or six times. If you have a mining company that mines coal at $40 per tonne, has no debt and the price is $60 a tonne it is going to be really profitable. But prices below $40 (highly possible) will take profits negative. Add in some environmental clean up and some closing costs and it is entirely possible that a stock loses 95 percent of its value. Averaging down when down 40%, some more when it halves, and then halves again and it will still lose two thirds of its value. The difference between averaging stuff like that down and doing what Bill Miller did is only one of degree. [John Hempton]
• The Alaska Permanent Fund Corp. has received cash from a different kind of borrowing: private-equity managers making payouts that come not from investment gains but from loans they have taken out to appease cash-starved pensions and other investors. That is frustrating for the investment chief, Marcus Frampton. He estimated that his fund, which invests mineral revenue and other state money, could borrow on its own at lower cost. So far, this practice doesn’t appear to be widespread. The $80 billion Alaska fund has been getting more cash from its private-equity program than it has put in. But it still missed out on around half a percent worth of stock gains—or about $40 million—over the past year after private equity tied up more cash than expected, causing the fund to run a smaller than planned stock portfolio, Frampton told the fund’s board last month. Board members decided to reduce real-estate and cash holdings instead. They also voted to scrap a goal set a year ago to reduce the share of assets in private equity. [WSJ]
• To me, this raises the question: where is the popular front against Trumpism? If he is indeed as bad as most Democrats seem to believe—i.e., we’re one step away from fascism, it’s Weimar Germany 1932 all over again—shouldn’t Democrats be casting the net as wide as possible, compromising on anything and everything to make their party maximally accessible to persuadable voters? After all, we’ve got to stop fascism here! But that’s not what’s happening. Despite their dire assessment of the threat posed by Trump, moves to compromise on contentious issues that persuadable voters care about are few and far between. Look what’s happening with the immigration issue that has come to the fore in the negotiations over aid to the Ukraine and Israel. Instead of eagerly embracing a deal to move the aid forward that would include fairly modest reforms to the asylum system and other changes to tighten border security, Democrats are evincing the greatest reluctance to make such a deal. And this is despite the reality that voters, including most persuadable voters, view the Democrats as absolutely abysmal on the issue of border security. It’s hard to understand. And the great irony here is that progressive Democrats, who are precisely the ones who are most hysterical about the threat posed by Trump and Trumpism, are also the ones most adamantly opposed to making any compromise on border security as part of this deal. Or really anything else for that matter. This is not a recipe for success. I suppose that’s because they don’t really want a popular front against Trumpism but rather a popular front for all the stuff they feel comfortable supporting. But that’s not how a popular front works and it’s certainly not how Democrats are going to rebuild and expand their coalition for 2024. Instead, such a sectarian approach simply enhances the very real possibility that Donald Trump will (gulp) win next November. [Ruy Teixeira]
• It is easy, then, to see why each party’s rebranding is imperative but hard to see how either effort succeeds. Both Democrats and Republicans can draw consolation from the knowledge that it will not be necessary to perform the work perfectly, or perhaps even competently. It should suffice to secure the inside track to electoral dominance by becoming the political party that does the second-worst job of revising its raison d’être in order to assemble the coalition that might most plausibly secure a durable majority. An old joke about two imperiled hunters ends with one telling the other, “But I don’t have to outrun the bear. I just have to outrun you.” [William Voegeli]
• As I detailed in Life After Capitalism (2023), wealth, unlike money, is essentially knowledge commanded by the owners. Wealth is not material resources as Robeyns and Alfani suppose, but a fabric of ideas and commitments, expectations and insights, experiments and projections, that together constitute the worth of the venture. As economist Thomas Sowell wrote back in 1971, “the Neanderthal in his cave had all the natural resources we have.” The difference between our age and the Stone Age is entirely the growth of knowledge. The growth of knowledge is learning, which conveys the essence of economic growth. As manifested in “learning curves,” ubiquitous in enterprise, costs of production predictably drop by 20-30% with every doubling of sales. [George Gilder]

Tuesday Night Links

• You see way more stocks that are dramatically overvalued in your career than you will see stocks that are dramatically undervalued. I mean there — it’s the nature of securities markets to occasionally promote various things to the sky, so that securities will frequently sell for 5 or 10 times what they’re worth, and they will very, very seldom sell for 20 percent or 10 percent of what they’re worth. So, therefore, you see these much greater discrepancies between price and value on the overvaluation side. So you might think it’s easier to make money on short selling. And all I can say is, it hasn’t been for me. I don’t think it’s been for Charlie. It is a very, very tough business because of the fact that you face unlimited losses, and because of the fact that people that have overvalued stocks — very overvalued stocks — are frequently on some scale between promoter and crook. And that’s why they get there. And once there — And they also know how to use that very valuation to bootstrap value into the business, because if you have a stock that’s selling at 100 that’s worth 10, obviously it’s to your interest to go out and issue a whole lot of shares. And if you do that, when you get all through, the value can be 50. In fact, there’s a lot of chain letter-type stock promotions that are sort of based on the implicit assumption that the management will keep doing that. And if they do it once and build it to 50 by issuing a lot of shares at 100 when it’s worth 10, now the value is 50 and people say, “Well, these guys are so good at that. Let’s pay 200 for it or 300,” and then they could do it again and so on. [Warren Buffett]
• “One side or the other is going to win,” Justice Alito told the woman, Lauren Windsor, at an exclusive gala at the Supreme Court. “There can be a way of working, a way of living together peacefully, but it’s difficult, you know, because there are differences on fundamental things that really can’t be compromised.” [NY Times]
• Today, the FDA rescinded the MDOs issued in June 2022 to JUUL Labs, Inc. This action is being taken, in part, as a result of the new case law, as well as the FDA’s review of information provided by the applicant. Rescission of the MDOs is not an authorization or a denial and does not indicate whether the applications are likely to be authorized or denied. Rescission of the MDOs returns the applications to pending status, under substantive review by the FDA. The FDA's regulations significantly limit what the agency can disclose regarding the content of pending applications. [FDA]
• They then review the geophysical and geochemical processes that take place in the mantle, the crust and the atmosphere and describe the redox states of minerals in the mantle and how the atmosphere on the surface is held at a more oxidized state by hydrogen escape. (This chapter is the most in-depth and best introduction to the field of geochemistry that I’ve ever read.) The reduced state of the mantle and the oxidized state of the atmosphere turns the Earth into a giant redox battery (which has precisely the right energy difference to run the organic reactions of life) with the barrier being the crust itself and hydrothermal vents acting to concentrate this diffuse redox energy to specific points on Earth. [Fermi's Envelope]
• The software’s design and growing reach have raised questions among real estate and legal experts about whether RealPage has birthed a new kind of cartel that allows the nation’s largest landlords to indirectly coordinate pricing, potentially in violation of federal law. Experts say RealPage and its clients invite scrutiny from antitrust enforcers for several reasons, including their use of private data on what competitors charge in rent. [Pro Publica]
• Jacobson held that mandatory vaccinations were rationally related to “preventing the spread” of smallpox. Jacobson, however, did not involve a claim in which the compelled vaccine was “designed to reduce symptoms in the infected vaccine recipient rather than to prevent transmission and infection.” The district court thus erred in holding that Jacobson extends beyond its public health rationale—government’s power to mandate prophylactic measures aimed at preventing the recipient from spreading disease to others—to also govern “forced medical treatment” for the recipient’s benefit. [United States Court of Appeals for the Ninth Circuit]
• Nowadays, in rereading a Bond novel or one of Fleming’s brilliant short stories, I find the experience is more wistful—it is like taking a holiday to a far-off time where men were still men, women still women, and little green men from Mars still little green men from Mars; where the exhausts of the luxurious airplanes smelled strongly, one cigarette followed another, and every trip was an exotic adventure. Our cauterized and neutered era seems bland and gray in comparison. It really pays off, by the way, to read the books and stories if you haven’t. They are similar, but never the same as the movies based upon them. You will recognize the dashing Bond you already know, but will spend more time with him driving through England thinking more conservative thoughts than you would expect and fussing around in a prissy way about how his eggs are prepared. In the books you will be amused to learn that Bond harbors a particularly strong dislike for tea. [Eduard Habsburg-Lothringen]
• There are three main techniques for making green steel. One of the most promising but early-stage from Electra and others uses electricity and chemistry during production. The other two substitute hydrogen for fossil fuels and trap emissions with carbon capture. These two methods have shown promise but still face significant cost and logistical challenges despite government subsidies.
  Electra’s technique for making clean iron begins by dissolving iron ore in an acid-based solution, a step that is similar to putting salt in water. The company runs electricity through the system to separate pure iron from impurities. Another electric current is then used to turn the iron into plates roughly the size of door frames. [WSJ]
• The market tries, but just can't shake its Phillips Curve instincts, which is why any news that is considered to increase the likelihood of interest rates being "higher for longer" is deemed bad for the economy and bad for stocks, and vice versa. It's not surprising that this is so, since decades of experience have taught the market that recessions reliably follow periods of tight monetary policy. ("Tight" being defined, traditionally, as high and rising real interest rates, and a flat to inverted yield curve, and a strong currency. I've maintained for many years, however, that a better definition of tight money would include high and rising credit spreads.) What the market is missing is that the Fed in 2009 adopted an abundant reserve regime that changed everything. Higher interest rates since then have not equated to bad news for the economy because abundant reserves mean abundant liquidity, and that in turn is what keeps the economy on an even keel and credit spreads low. [Scott Grannis]
• Last week, I had a drink with a Catholic priest friend who works with young people in custody. Inevitably, our talk turned to how radically unchurched they are – not badly disposed to Christianity, just unfamiliar with much of the doctrine and almost all the forms of worship, even though many had a Catholic granny or a non-practising parent. He mused over the startling speed of the secularisation of society. ‘Protestantism has collapsed,’ he said, and not in any triumphalist spirit. [The Spectator]
• “Enforcement against illegal e-cigarettes is a multi-pronged issue that necessitates a multi-pronged response,” said Brian King, director of the FDA’s Center for Tobacco Products. “This ‘All Government’ approach – including the creation of this new Task Force – will bring the collective resources and experience of the federal government to bear on this pressing public health issue.” [Tobacco Reporter]