Central Bank Omnipotence Monitor – 11.30.2018


Access this month’s monitor slides in Powerpoint and in PDF.

Access the monitor values in Excel.

  • While our slower smoothed measure has moved only slightly, our November point estimate for the attention around central bank omnipotence has spiked to the highest point in 2018. 
  • Like the inflation narrative structure, we have observed a new center forming around the poor performance of financial markets and the expectation that central banks will adjust their policy to protect these markets. It’s early, but it is possible that we are seeing a resurgence of a central bank omnipotence narrative that has been dormant for some time. 
  • We still note that inflation and the various risks to the European financial system remain very central to these articles as well. We have not, however, seen as prominent a “maybe ending QE in Europe isn’t such a good idea” narrative emerging there.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention

Source: Quid, Epsilon Theory

Fiat News Index

Source: Quid, Epsilon Theory

Narrative Sentiment

Source: Quid, Epsilon Theory

Key Articles

S&P 500 Valuation Floor Is as Wobbly as 2019 Earnings Estimates

Instant view: Investor reaction on Democrats win

Italian bond yields rise as govt digs in heels on budget

Pimco Guru Calls a Turning Point for Bond-Market Returns in 2019

Dollar hits 16-month high, yen boosted by risk-off sentiment

Wells Fargo Says Buy Now in Best Stocks Entry Point in Two Years


Inflation Monitor – 11.30.2018


Access this month’s monitor slides in Powerpoint and in PDF.

Access the monitor values in Excel.

  • Attention to inflation narratives continued to wane in November as drumbeats for a slowing in the pace of Federal Reserve hikes became louder than discussion of continued wage inflation and price movements in emerging markets. 
  • In our view, the core inflation narrative has effectively shifted to, “Input prices may be rising, but Fed won’t let asset prices fall like this.”
  • Of some interest, the largest single cluster – and a new one – is now a cluster focused on protests and shortages. These may not be familiar to all US readers, but are increasingly an issue in other regions. 
  • This cluster and others seem to be telling stories of non-monetary causes for local inflation, especially issues like Brexit, tariffs, taxes and trade rules.
  • We observed no major changes in the usually negative sentiment around inflation, or in the fiat news / advocacy journalism language present in articles. 

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention

Source: Quid, Epsilon Theory

Fiat News Index

Source: Quid, Epsilon Theory

Narrative Sentiment

Source: Quid, Epsilon Theory

Key Articles

Brexit ‘Queues at Dover’ Can’t Be Solved by Bank of England

BOE Warns Disorderly Brexit Could Unleash a Savage Recession

The Fed’s Likely to Take a Rate-Hike Breather in 2019

No turning back for ECB on end to bond purchases

Fed doesn’t seem in as much of a rush to raise interest rates as stocks plunge


US Fiscal Policy Monitor – 11.30.2018


Access this month’s monitor slides in Powerpoint and in PDF.

Access the monitor values in Excel.

  • After the usual mid-term election narrative chatter, the importance placed on fiscal policy in the U.S. across media outlets continued to plummet in November. 
  • Along with the drop in attention to any one narrative, advocacy journalism and fiat news measures continued to decline. Our general interpretation is that the topics have generally returned to ‘policy wonk’ status. 
  • Sentiment on these topics has quickly returned to neutral levels, too as the wonks take back the baton from the more pointed advocates across news and ‘analysis’ journalism. 
  • We still see and hear investment theses built around the notion of major fiscal policy shifts in the US. Those things may come to pass, but until the narrative becomes more widely accepted and promoted, we don’t think that these theses have legs. 

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention

Source: Quid, Epsilon Theory

Fiat News Index

Source: Quid, Epsilon Theory

Narrative Sentiment

Key Articles

About the Coming Recession

Democrats Are So, So Bad at This

Why Richardson ISD’s longtime CFO has a ‘vote no’ sign in his yard against the district’s school tax increase election

Italy says not changing budget plans as euro partners fret

Fed Meeting on 7-8 November 2018: Impact of a Rate Rise

An Update on Quantitative Tightening: How Big of a Risk Is The Fed?


Trade and Tariffs Monitor – 11.30.2018


Access this month’s monitor slides in Powerpoint and in PDF.

Access the monitor values in Excel.

  • Thanks to a remarkably concentrated November point-in-time measure, our attention measure rose sharply. 
  • There is now an emerging narrative around tariffs and trade: they are a national security issue. This has the potential to be a powerful switch in rhetoric, leveraging a meme with strong emotional content to attach tariffs to territorial conflicts, intellectual property disputes and cybersecurity concerns. 
  • We would be very mindful of the ability for this pivot to sustain trade policy that might otherwise be unsustainable and unpopular.
  • While Brexit has obvious trade implications, it has been surprisingly undercovered as a trade issue. Outside of its impact on bank sustainability, it is currently almost completely divorced from any trade narratives and is not something we would expect to exert significant influence on ex-UK financial markets unless there is a material and surprising event.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention

Source: Quid, Epsilon Theory

Fiat News Index

Source: Quid, Epsilon Theory

Narrative Sentiment

Source: Quid, Epsilon Theory

Key Articles

U.S. Crop Giants are Doing More Brazil Deals Thanks to Trade War

U.S., China ‘not on the cusp’ of trade deal: White House adviser

Pence’s Sharp China Attacks Fuel Fears of New Cold War

November Brexit Deal Hopes Fade as U.K. Ministers Fail to Agree

Fed points to December rate hike but is worried about tariffs and debt


Credit Cycle Monitor – 11.30.2018


Access this month’s monitor slides in Powerpoint and in PDF.

Access the monitor values in Excel.

  • Our single point attention measure rose from floor levels in November, although our smoothed rolling measures have only moved slightly. The main cause appears to be significantly tighter and shared language across articles about fed activity and inflation, about bond funds and about leveraged loans and CLOs.
  • We’ve also seen “junk bond” take over from “high yield” as the top n-gram for some topics.
  • Sentiment, however, has rebounded back to normal levels for the topic. We don’t have a ready explanation for this, although many of our monitors took a downward turn during the election cycle. 
  • We have also observed fiat news measures rising to unusual levels, even for a topic that is very often “explained” to readers. While on its own we don’t think this has much explanatory power, we do think it tends to be indicative of newly established or changing narratives, something we will be able to evaluate over the coming months.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention

Source: Quid, Epsilon Theory

Fiat News Index

Source: Quid, Epsilon Theory

Narrative Sentiment

Source: Quid, Epsilon Theory

Key Articles

Home loans defaults set for ‘moderate’ rise

High oil prices to amplify fiscal pressures

Dealing with debt in the UAE: First-hand accounts

Multi-Asset Credit: Buyer’s guide to multi-asset credit

Sovereign bond yield spreads and sustainability: An empirical analysis of OECD countries

The joint dynamics of sovereign ratings and government bond yields


FAQs and Guide to Narrative


Welcome to ET Professional! If you’ve been reading Epsilon Theory for a long time, many of the terms and tools we use will be familiar to you. In case you’re new or just in need of a refresher, we’ve prepared a brief guide to reading and using the tools on ET Professional. 

Common Terminology

Narrative Narrative is a word which, in common usage, describes a story that we perceive to be manufactured or artificial. Usually it is a pejorative, referring to something that is intentionally misleading, something which is decided in advance and attaches facts as convenient. This is…not exactly what we mean when we say it. When you read “Narrative” on Epsilon Theory, you should read it as “an abstracted and symbolic representation of reality that replaces that reality as the locus of our thinking about a topic.”  A Narrative may be malicious or benign, but it is always most powerful and relevant to our interests when it becomes Common Knowledge, and especially when it leverages or is itself a Meme.

Meme – When we say ‘meme’, we don’t mean cat GIFs. We are referring to globally relevant sources of narrative power, by which we mean either biologically evolved or culturally derived but robust (fine, ‘Lindy!’) pattern responses. Think about the great story arcs in literature, theatre and film, and their recurring patterns and values. These are memes. Fear of the other is a meme. When we talk about constructed versions of these memes, which attach visceral or culturally powerful ideas like fear, glory, disgust or passion to another idea, you will see us refer to a word in italics with an exclamation mark to distinguish the abstracted meme from the real term it replaces: e.g. truth! vs. truth. 

Common Knowledge – Common Knowledge, in game theory terms, is public knowledge that every agent knows that every other agent knows. It affects the game in ways that simply knowing something does not. Narratives are most effective when they become part of and leverage Common Knowledge.

Missionaries – We call the people and entities who promote Narratives Missionaries. They can typically be identified by their tendency not to provide you with facts but with instructions on how to think about a topic.

An Introduction to Narrative Maps

The summary below highlights how the maps are constructed using Quid. For most explicitly financial topics, we constrain sources to CNBC, Reuters and Bloomberg. For topics that veer into politics or macroeconomics, we use a broader range of sources with large circulation. In order to minimize false positives from republication of similar articles from wire services, we use a very low threshold to determine whether an article is considered functionally identical to another and collapsed into a single node. 

The organization into clusters can be described in a range of ngrams, which may be words, combinations of words or other short, distinctive phrases. For ease of interpretation, we further label clusters with a single prose-like description. In general, our analyses examine the closeness of topics/clusters, the sentiment of topics/clusters and the changes in both over time.

ET Pro Narrative Metrics

We current calculate and track metrics in four key areas. 

Attention: Epsilon Theory’s attention measure is a calculation we produce based on the normalized harmonic centrality of a network. That means that we take raw data of node adjacencies (i.e. which articles connect to which others, and how closely?) from a Quid-created network for a period of time, usually a month or a quarter, and calculate the shortest distance between each of the stories to establish their similarity within the network. The harmonization process is a means for inverting those distances (i.e. literally 1/X) to calculate a mean shortest-distance value for each node to each other node. We then normalize that for the overall size of the network. What we are concerned with is identifying the presence of large, indicative networks of stories with similar language that have a larger than normal influence on the entire graph of stories! That means that our Attention measure is an expression of the percentage of nodes in a network with high normalized harmonic centrality.

Sentiment: Sentiment is mostly self-explanatory in what it tracks, but for reference, Quid tracks the use of language and attached quantities of negativity and positivity to certain words. Our data set provides us with the total value of positive terms, ‘ngrams’ and phrases, as well as the total value of negative terms. This is an imperfect science. For some monitors (e.g. Inflation) we do not include sentiment at all, because articles about inflation are invariably dismal. For others, there is some risk of false positives. For example, because “lost” has negative sentiment value, the expression “lost weight” might score as being negative, when for most of us, we would gladly consider that a definite positive. Still, over a large enough group of stories, it is an effective tool when considered in comparison to prior periods of time for a particular topic or range of topics. 

Fiat Language: Establishing fiat language has been an ongoing experiment to measure the extent of Missionary activity on the front end (in the language used) rather than on the back end (in the Narrative actually constructed). We track and measure the percentage of articles on a topic during a period which use certain words which we believe are more prevalent in advocacy journalism or in journalism that tells the reader how to think about a topic. The measure is usually that percentage. 

Key Articles: In both our monitors and in the In the News content, we select a range of articles based on a measure that combines (1) closeness to other articles, (2) the number of “shortest paths” that pass through the note and (3) the closeness of the article to other clusters. In other words, we want to show the articles which are most indicative of and similar to the overall network of stories about that company, topic or issue. We think this is helpful context to the work we do in discussing and interpreting the narrative maps. 


Burn. It. Down.


Please read the Miami Herald article on Jeffrey Epstein.

How a future Trump Cabinet member gave a serial sex abuser the deal of a lifetime

– by Julie Brown for The Miami Herald (November 28, 2018)

“Jeffrey is both a highly successful financier and a committed philanthropist with a keen sense of global markets and an in-depth knowledge of twenty-first-century science,” Clinton says through a spokesman. “I especially appreciated his insights and generosity during the recent trip to Africa to work on democratization, empowering the poor, citizen service, and combating HIV/AIDS.”

“I’ve known Jeff for fifteen years. Terrific guy,” Trump booms from a speakerphone. “He’s a lot of fun to be with. It is even said that he likes beautiful women as much as I do, and many of them are on the younger side. No doubt about it — Jeffrey enjoys his social life.”

– New York Magazine, October 28, 2002

Log for one of Bill Clinton’s 26 flights on Epstein’s “Lolita Express”

It’s almost as if there’s a ruling class.


Even When I Lie


So what does that make you? Good guys? Don’t kid yourselves. You’re no better’n me. You just know how to hide…and how to lie. Me? I don’t have that problem.  I always tell the truth. Even when I lie.

Tony Montana’s speech to restaurant patrons from Scarface (1983)

Mass propaganda discovered that its audience was ready at all times to believe the worst, no matter how absurd, and did not particularly object to being deceived because it held every statement to be a lie anyhow. The totalitarian mass leaders based their propaganda on the correct psychological assumption that, under such conditions, one could make people believe the most fantastic statements one day, and trust if the next day they were given irrefutable proof of their falsehood, they would take refuge in cynicism; instead of deserting the leaders who had lied to them, they would protest that they had known all along the statement was a lie and would admire the leaders for their superior tactical cleverness.

The Origins of Totalitarianism by Hannah Arendt (1951)

Justice and honesty will be the first topics of our speech, especially as we are asking for alliance; because we know that there can never be any solid friendship between individuals, or union between communities that is worth the name, unless the parties be persuaded of each other’s honesty.

History of the Peloponnesian War, Book 3, by Thucydides

When I was young, a Sunday School teacher presented our class with a hypothetical.

Imagine for a moment, he said, that a criminal came into the church today and seized your parents. He took them up to the front of the church and pointed a gun at both of their heads. Unless you denied your faith, he would kill them both. What should you do?

A heavy question for a 12-year old, it always disturbed me. ‘Always’, I say, because it was asked of me more than once. It came up shockingly often, although I suspect given differing sensibilities that you might consider once shocking enough. Perhaps it was the favorite brainteaser of a teacher bored of 30 years of giving the same pictorial lessons of Zacchaeus climbing the tree. I think it was a reflection of some evangelical churches’ occasionally morbid obsession with the end times described in Revelations. There was a time when ‘What will you do when you are persecuted for your faith’ occupied much of my mind. ‘What if Jesus returns before a girl ever kisses you?’ occupied most of the rest. There was really no doubt in any of our minds that it was going to happen during our lifetimes. Probably much sooner.

The intended moral of the story was that there is no valid justification for sin. To lie by denying Christ was the greatest of these sins. You will be disappointed to learn that the typical lesson does not discuss the two last people who were asked if they knew Him; the one who lied became Pope, and the one who told the truth hanged himself and, if Luke’s vivid account is to be believed, exploded. Instead, the usual lesson proceeds from Job to a reading from the Sermon on the Mount. You know this sermon, even if you don’t know that you know it. Blessed are the meek, etc. You may not know that this is where it ends up:

If your right eye causes you to sin, pluck it out and cast it from you; for it is more profitable for you that one of your members perish, than for your whole body to be cast into hell. And if your right hand causes you to sin, cut it off and cast it from you; for it is more profitable for you that one of your members perish, than for your whole body to be cast into hell.

Matthew 5:30

More heavy stuff. In a spectacle to be repeated in a thousand thousand Dodge Caravans and Chevy Suburbans on the way to Old Country Buffet after church, the children turn their Sunday School lesson around on their parents. What would you do, mom and dad, if I were brought to the front of the church? I bet that if you could look in on those parents in those minivans, you’d see just about all of them look their children straight in the eyes and tell them the same thing: I would lie a million times before I let someone hurt you.

For the most part, our moral systems end up with a similar basic set of rules. Don’t kill, don’t steal, don’t cheat, don’t lie. The problems arise in weighing conflicts between rules within our value system, or between multiple value systems. Common sense allows us to easily resolve some of these conflicts. Don’t lie, but if the alternative would result in the murder of your children, lie until your lips turn numb. More often, the units we must weigh are irreducible and incompatible. How many lies offset an act of generosity? The answers to these questions are non-falsifiable, even if various ethical systems purport to have adopted more objective means to answer them. That means that we will disagree. It also means that, as much as we might like to say ‘the ends don’t justify the means’, we are often left with no choice but to judge the rightness of actions  by calculating their expected consequences, and by weighing unweighable goods and bads.

This ground was well-trod among ethicists hundreds of years ago. You need a 4,000-word, dime store survey version of it from me today like you need a hole in the head. But if we would be students of the widening gyre of politics and the black hole of financial markets, there is one ethical topic we must grapple with directly and urgently. It is the thing which Thucydides considered a prerequisite for union within a community. It is what Hannah Arendt considered the first casualty of a state veering toward totalitarianism.


Like any other ethical idea, honesty may inevitably come into conflict with other principles. It is these conflicts and how they are resolved or justified, whether rightly or wrongly, that empower the widening gyre. In simpler terms: our differing reasons for becoming liars are what are causing us to fall apart. Understanding those reasons will play a large role in how we chart a path back to sanity. The way I see it, there are three reasons a person becomes a liar: he believes that he must, he believes that he may, or he believes it serves a Greater Truth.

Because He Believes He Must

You may not remember the name Muhammad Saeed al-Sahhaf. A one-time attendee of the University of Arizona and erstwhile aspiring English teacher, this man is probably better known to you as Baghdad Bob. In his capacity as Information Minister for the Ba’athist regime in Iraq, he gained fame for issuing preposterous lies at regular press briefings during the US-led invasion in 2003, like announcing ‘there are no American infidels in Baghdad’ over the unique whine of the turbine engines used to power the American M1A1 tanks that were maybe a few hundred yards away from where he stood.

There’s something else you may not know about Baghdad Bob: He also used to read the names of the political enemies Hussein’s government executed.

I think most people, if asked whether Baghdad Bob’s must-see pressers made him evil, would say ‘no.’ That isn’t because those people don’t believe that lying is wrong. They probably do. It’s because they have thought through the likely consequences of his lying. It’s because they regarded Al-Sahaaf with empathy. Everyone knew that everyone knew that he was lying, and Al-Sahaaf knew that they knew it.  We all concluded that there was probably little harm caused by his lying, and knew as well as he that his life expectancy was very much in question if he told the truth.

Even when there are ascertainable consequences to lying to protect our lives, most of us still demonstrate a great deal of empathy. In the Vietnam War, John McCain lent his voice to a Radio Hanoi propaganda recording. In it, he attested to being the aggressor, and praised the quality medical care, food and treatment he received at the hands of the North Vietnamese. Would this have been demoralizing to other POWs? Empowering to the enemy? Yes, possibly. Yet McCain underwent such torture and abuse to extract those statements that few – except for some meta-game morons who used this in campaigns against him for public office – would take any moral issue with his actions. Even if he hadn’t layered on years of courage and selflessness as a POW, McCain would almost certainly have been forgiven this lapse on one simple basis: None of us, being honest, could imagine doing otherwise.

As a rule, our willingness to tolerate those of us who become liars because we must is dependent on our capacity for empathy.

Because He Believes He May

I have two sons – a 2-year old and a 3-year old.

When the boys come down from their room together in the morning, our routine includes asking the older of the two if he slept well. And did you have any dreams? At this point, his eyes begin to scan the room for objects. Yes, Daddy, I dreamt about a…robot…dinosaur…in a rocket ship to…Jupiter! The younger of the two witnesses our eager response and conjures up a slightly modified story, usually with some detail to make it more impressive. I dreamt about TWO Jovian robot dinosaur astronauts, daddy.

In the same way that I lied to you by implying that either of my sons have ever even heard the word ‘Jovian’ because it’s funny (to me) and because I know that you know that I’m making that up, each of my sons is lying through his baby teeth. Because of course they are. Two-year olds are liars. And that’s OK, because we all know that we all know that two-year olds are liars.

Our permissiveness toward certain lies extends far beyond childish boundary-stretching, of course. In most kinds of small talk, we are culturally expected to lie. When we ask Janice about her weekend, we expect her to tell us that it was fine, even if it wasn’t. When we ask Marvin how the kids’ soccer games went, we expect him to tell us how much he enjoyed watching children run around in a horde very, very slowly for several hours. Even our question is a bit of a lie, standing in for something else. It’s us telling a person we love that we were thinking about their family. In exchange, they express gratitude for our concern by not giving us more details about the drying paint that is kids’ soccer. Even in most negotiations (at least in most western cultures), there is some expectation of dishonesty. We expect the car salesman to tell us he’s got to speak to his manager, even though he knows and we know he’s just going to go check his phone – or if the dealership is dumb enough to put the ‘manager’s office’ in view – to sit with the manager for 5-10 minutes of complete unproductivity for all involved. We must find a place to tell someone that something is our final offer, even if we know that it isn’t.

People tell all sorts of other lies because it is common knowledge that they may. It is common knowledge to expect home-team bias from local sportswriters and journalists. It is common knowledge that the cable guy’s 9-12 window means 1:30. It is common knowledge that when someone says they are 5 minutes away, they are 10-15 minutes away. It is common knowledge that the old ’24-hour bug’ probably doesn’t exist. Most of us learn to adopt patience with those who lie because they may, but that patience is not infinite.

Sometimes, of course, we tolerate those who lie because they may because the lies really don’t matter, or because we are indifferent and lazy. But in just as many cases, our willingness to tolerate those of us who become liars because they may is dependent on our capacity for mercy.

Because It Serves a Greater Truth

There is a third reason a person becomes a liar, and it is probably the most powerful: He becomes a liar because he believes it is the right thing to do. Because it serves a Greater Truth.

What are these Greater Truths?

Well, they can be all sorts of things, but they are usually grand concepts like duty, loyalty, honor, fidelity, fairness and justice. It is not hard to imagine examples. What if you were hiding someone in your home who was fleeing from oppression? Would you be willing to lie about their whereabouts to keep them safe? As a soldier of your country under interrogation, would you be willing to tell a lie to protect the secret plans you know? If you were compelled to testify against your spouse, would you lie in their defense? OK, maybe the last one depends on your relationship with your spouse and what they did, but the point is that there are very obviously cases where honesty gives way to some greater moral value.

Fortunately, in modern America we rarely have an interrogator’s gun to our heads. We have little need to hide others from persecution. Hell, many courts in the US cannot even compel you to testify against your spouse. Our civil society provides ample remedies and avenues for redress to conflicts between things we know to be true and things we believe to be important. We are rarely called to consider the relative merits of truth and Greater Truth. Rarely, but not never. There are some social and cultural ideas which are true, which are important, and for which we nevertheless reach an impasse that causes huge political or social blocs to believe – not without reason – that there is no civil redress for their concern. This is invariably the result of the perception of an uneven playing field.

If you knew that something was true AND you knew that it was critically important AND you knew that nothing else in your power – not voting, not debating, not engaging other people – could change it, then would you lie? Then would it be…right to lie? In a sense, you see, like Tony Montana, we would be telling the truth, even when we were lying. It is bewitching logic.

I think there are two such Greater Truths governing our politics.

For my part, I believe that each of these ideas is true AND that each of these ideas is important. You may disagree. But that’s what I think and believe. Now let me tell you what I know. I know that for most of us, when we read these two items together, the bile will rise from our stomach to our throat just a bit. I know that for most of us, our skin will get redder, hotter to the touch, just to be forced to consider this idea next to this other one, which isn’t nearly as important – or maybe not even a real thing!

Let me tell you something else I know. I know that there are maybe two hundred million Americans who feel desperate about their Greater Truth right now, regardless of how important it is to you or me. We believe these things so passionately that we will devote our political lives to convincing more people of their truth and importance. We are so fearful of the damage to our society and our values if we lose these battles, because they are existential. We would do just about anything. Argue with relatives and strangers on the internet? Hell, we do that just for fun! Would we campaign? Sure. Would we give money? Sure.

Would we tolerate lying?

Ah. No?

Then let me ask it a different way. If it meant passing policies that helped the historically disadvantaged reclaim the American Dream, would we tolerate the forceful redefinition of words like bigot and racist to refer not to people who we witnessed treating people differently based on some inherent trait (as it did for hundreds of years), but to refer to people who for some reason opposed our platform of policies designed to tear down unjust institutions? If it meant leveling the playing field dominated by the wealthy and powerful, would we tolerate the presentation of news in ways that actively sought to take those institutions and people to task in exaggerated ways, even if doing so skewed coverage and stepped over the line into opinion and analysis from time to time?

Let me ask it yet another way. If it meant creating a counterbalance to the overwhelmingly biased and unfair media narratives that label every conservative point of view as hate-driven and bigoted, would we tolerate the creation of news networks which are even more aggressive in their mixing of news and opinion? Would we tolerate being led politically by a man who lies constantly and brazenly, just to offset the unbalanced landscape created by our political opponents?

Unlike the other reasons we lie, it isn’t empathy or mercy that govern our reaction. Our willingness to tolerate those of us who lie in service of a Greater Truth is dependent on whether or not we share their belief in the primacy of that Greater Truth. We lie and tolerate these lies not because we must. Not because we may. But because we have convinced ourselves that we should.

And THAT is our greatest lie, the principal tool of our present widening gyre.

What Now?

For at least two more years, until the next ‘most important election of our lives’, parties and people will insist that we must argue about and determine who is more wrong and who is more responsible for our current polarized political state. In fact, I strongly suspect that the majority of email and comment responses will be about exactly those two questions. The word ‘bothsideism’ will make its inevitable, ignominious appearance. And sure, maybe you could make a compelling argument one way or another that there is no comparison. One side has gone way out on a limb, bears the brunt of the responsibility, and there’s no other way around it. Even so, we would still reach the same conclusion:

It. Does. Not. Matter.

I mean, sure, it matters if we’re tallying up points in some imaginary competition. It matters if we are so delusional as to think that a single American is sitting out there determining which policy platform to support and vote for based on our arguments about which party or individual is more to blame for present political polarization.

But here’s something that does matter: If 40% of us believe that the other 40% is irredeemably hateful and bigoted, and that 40% of us believe the other 40% hates us, our country and its values, we have no country. As well-intentioned and well-founded as our Greater Truths may be, if we press ahead with our willingness to pursue fundamentally dishonest strategies with one another in support of those Greater Truths, we have no country. Or, as Thucydides put it:

There can never be any solid friendship between individuals, or union between communities that is worth the name, unless the parties be persuaded of each other’s honesty.

Unfortunately, I think we’re beyond that. Could you really be persuaded? Could I? No. The question for those who still want to be a country together is this: What must I do to convince you of my honesty?

What can members of the political left who still want a country do to convince the other 40% of their honesty? They can start openly talking about and stop ignoring and denying the overwhelming influence of progressives in the media, entertainment and academia. They can stop exploiting ‘hate’ language to end any disagreement over political policy. In every political interaction they have, they can work to suspend every instinct that causes them to believe that the worth and moral value of their fellow citizens are defined by their political opinions.

What can members of the political right who still want a country do to convince the other 40% of their honesty? They can stop justifying lies and liars in support of the Greater Truth of vast left-wing biases in academia, entertainment and media. Lose elections. Lose control of the government. Yeah, maybe that means Beto skateboards into Washington to wag his finger and nominate RBG’s replacement. Do it anyway. And do it for three reasons: do it because, in the long run, it will help the ideas of a party built on individual responsibility and economic freedom. Reagan doesn’t happen without Goldwater. Do it because it will be necessary to maintain a functioning, non-authoritarian society. Do it because it’s the right thing to do.

The alternative is that we can all keep trying to convince ourselves that we’re always really telling the truth, even when we lie. But I’m telling you now – that strategy is as poisonous to its source as the target. And it always ends the same way.

PDF Download (Paid Membership Required): https://www.epsilontheory.com/download/17786/


In the News | Week of 12.3.2018


In the News highlights key news stories from the prior quarter for companies announcing earnings over the next week, or for other major economic announcements. These stories are not the most read or the most important, but they are the most representative of the stories that mention these companies and events.

Broadcom (AVGO)

Road To Financial Independence: Growing Dividends, Endless Opportunities But Limited Capital

Predictions 2019: Media What’s On Tap?

China’s cyber-spying ‘keeps a lot of US tech CEOs up at night’

Mystery Memo Roils China-Linked Broadcom’s Bid for Sensitive U.S. Contracts

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Qualcomm Accuses Apple of Stealing Secrets to Help Intel

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Take Back Your Thinking


Riding on the coattails of  Ben’s ‘Take Back Your Distance’ section of last week’s Things Fall Apart (Part 3) – Politics, I thought I would share the personal journey (with links at the bottom of this note) I have been on for the past few years to take back the ability to think about things for sustained periods of time, and to know what I am thinking about and why.

I started on the journey to ‘take back my thinking’ as I could feel myself getting caught up in the fast moving swirl of communication and ‘news’, and losing the distinction between what I was thinking and what I had simply been exposed to and thought that I was thinking.

You could say that I had developed ‘Fiat Thought’.

As a citizen and as a leader, it seems to me that mistaking Fiat Thought for real thought is the single most dangerous thing one can do, and so I decided to develop and deploy ‘three lines of defense’ to try to take back my thinking:

  • Make my personal tech somewhat inconvenient and limited.
  • Introduce a couple of hours per day of ‘boring’ (low external stimulation) time.
  • Take on daily doses of Śūnyatā.

Overall it has been a much more difficult journey than I thought it was going to be.

Most things I tried in building these defenses were at least initially quite unpleasant (the inconvenient tech irritating and friction-y; the boring time boring; the Śūnyatā doses occasionally quite disturbing), and many things I tried simply didn’t work or didn’t stick. But after a solid couple of years of sustained effort I’ve stabilized on a set of protocols for the three lines of defense that, as far as I can tell, are collectively fairly effective.

Unfortunately the Fiat Thought defense protocols I arrived at are more like the malaria prevention protocol (daily Malerone pre-, during- and post- + bug spray + nets) rather than a one-and-done (well, two-and-done) inoculation like the measles vaccination, and so I keep them up whenever I am in a high risk area (e.g., a major metropolitan area with unrestricted internet access), which is kind of a chore.

As it happens, whenever I’m not in a high risk Fiat Thought area, I’m usually in a high risk malaria area, so you pick your poison, I guess.

Anyway, here are the three lines of defense I’ve stabilized on and have been running for the past couple of years:

Make my personal tech inconvenient and limited

  • Turned off notifications on my phone, with phone always in silent mode (switch from ‘push’ to ‘pull’).
  • Turned my phone to greyscale (makes apps literally dull).
  • Set phone screen brightness to minimum (makes apps even more dull).
  • Removed all non-utility apps, so just left with: SMS, calendar, clock, Google Maps, Uber, bike share app, Spotify (note: on iPhone I couldn’t actually figure out how to remove Safari but I could hide it and password protect it with a password I don’t know).
  • Stopped carrying my phone on the weekend.
  • Read the WSJ daily print edition instead of online aggregated news (The FT print edition would be better, but I’ll take what I can get).
  • Use an old 1st generation Kindle for reading books (instead of reading on my phone).
  • Use only an eight-year-old iMac desktop at home, so I have to intentionally go to the computer and then wait for it to boot instead of having an ‘always on’ device around.
  • Got off Facebook and Twitter (I haven’t deleted my profiles as I can’t be bothered to figure out how, but I no longer post to either, which has removed the interest for me).

Introduce a couple of hours per day of ‘boring time’

  • Walk to any appointment that is a 30 minute or less walk time, and take public transit for any journey where it is less than a 25% time increase vs. taking a car (Google maps is very good as predicting this).
  • An hour-ish simple daily meditation practice, with some longer more intensive periods a few times a year to really stare at my thoughts.

Absorb daily doses of doses of Śūnyatā

This one is tricky to write about.

I use the romanized Sanskrit term ‘Śūnyatā’  here in the in the way it is commonly used in translations of the Tibetan Buddhist canon, rather than the romanized Tibetan of ‘stong pa nyid’ , which is quite a mouthful, or the typical English translation of ‘emptiness’, which is misleading.

Regardless, whatever word we use, the exercise I ended up taking on and maintaining is something like Marcus Aurelius advocated in Meditations – daily consideration of the true nature of things (for Stoics the logos) and their impermanence, one’s own impermanence, etc. As Aurelius considers and notes in Meditations book 4.4, “The world is truly nothing but change. Our life is only perception.”

After a fair bit of exploration and experimentation, I believe that the Tibetans have far and away the most sophisticated and reliable technology for acquiring Śūnyatā, although for sure many other traditions have equivalent concepts and sophisticated methods for acquisition.

In summary

So, the culmination of this journey to ‘take back my thinking’ is that, outside of the office, I’m limited to an iPhone that I have spent a lot of time and effort turning into a greyscale dumb phone, an old desktop computer that takes a couple of minutes to boot, and a ten-year-old Kindle. I spend a fair amount of time sitting on a cushion half-staring at a blank wall. I’ve become a bad Uber customer. And I spend a bunch of time thinking about (literally) nothing.

I appreciate what an immense privilege it is to have the time / money / freedom to do this, and so the question is: Is it valuable, or is it just some next-level-tech-elite-anti-tech-BS?

I say without a doubt that it is beyond valuable.

In a world of Fiat News that quickly becomes Fiat Thought, taking back my thinking is absolutely foundational to my identity.

As Christopher Beirn commented to a recent Rabbit Hole note: homo sapiens is a hackable animal. So the only question really is whether you are hacking yourself or someone else is hacking you … and if someone else is hacking you, then you’re just the unwitting host for the program.

Links follow:

Why and how to make tech inconvenient:

  • Firstly, to know who you are competing with in the race to hack yourself, check out BJ Fogg, a leading thinker and practitioner on how computers can be designed to influence attitudes and behaviors.  He is the author of the seminal book, Persuasive Technology, (subtitled: Using Computers To Change What We Think and Do). This is a somewhat overwrought, but really quite good Medium post that examines that dark side of using the type of ‘persuasive techniques’ that BJ Fogg developed.
  • Tristan Harris offers his take here on ‘How Technology Hijacks People’s Minds — from a Magician and Google’s Design Ethicist’.
  • From a practical perspective, here’s a bunch of ideas conveniently collected together by Tristan Harris’s Center For Human Technology on how to make your tech dull and inconvenient.

Why and how to have periods of limited external stimulus:

  • There are literally thousands of books on ‘Why meditation is great’ but ‘10% happier’ is one of the least irritating and easiest to read. Full title: 10% Happier: How I Tamed the Voice in My Head, Reduced Stress Without Losing My Edge, and Found Self-Help That Actually Works–A True Story by Dan Harris (a TV new anchor).
  • If you don’t have a meditation practice and want to get one going, my best advice is to kick start it by doing a minimum of five days in a silent Vipassana-style retreat. Here is a Medium post of a pretty average experience of attending a 10 day Goenka (a common variety) one. As the writer makes very clear: It will most likely hurt.


In many ways I hesitate to offer any links or thoughts on this.

For calibration, even Pema Chödrön – arguably the leading Western light on Tibetan Buddhism, someone who has been a serious, full time student of Tibetan Buddhism for 40 years, someone who studied directly under the legendary Chögyam Trungpa – skipped commenting on the Śūnyatā chapter (chapter nine) in her commentary on the classic ‘The Way of the Bodhisattva’.

But then, in the noble spirit of Silicon Valley, after briefly hesitating and realizing I am fundamentally unqualified, I proceed anyway:

  • As mentioned above, while Meditations by Marcus Aurelius covers much more ground then just concepts of impermanence and emptiness, I find it extremely accessible and inspiring as an account of a real-world struggle to integrate this type of ‘philosophic’ thinking and perception into day-to-day action. The Modern Library edition also has a terrific introduction by Gregory Hays.
  • For the Zen version I would go straight to the writing of Eihai Dogen (the 13th century founder of the Soto Zen school) who offers such sage advice as “When you ride on a boat and watch the shore, you might assume that the shore is moving. But when you keep your eyes closely on the boat, you can see that the boat moves. Similarly, if you examine myriad things with a confused body and mind, you might suppose that your mind and essence are permanent. When you practice intimately and return to where you are, it will be clear that nothing at all has unchanging self” … hmm …
  • The Rinzai sect has its own method of ‘koan study’ (“What is the sound of one hand clapping?” etc.) to push through conceptual thought to the “selfless-self”. I personally have never gotten along with koan study. Others swear by it.
  • The Tibetan canon is so vast it’s hard to say where to start. The writings of Chögyam Trungpa are pretty available and accessible (Trungpa was a kind of maniac rock-n-roll Buddhist meditation master with some pretty troubling behaviors but, man, could he write).

One final comment: If you decide to go get yourself some Śūnyatā, and go after it in an intensive and sustained way (say, spending more than an hour or two a day on a combination of contemplation and meditation for more than a few months), I would strongly advise working with a professional as you will likely bring about significant adaptations to your brain and nervous system. So, y’know, if you’re not a trained brain surgeon better not to self-operate.


Deals Are My Art Form

Image result for young donald trump

“I don’t do it for the money. I’ve got enough, much more than I’ll ever need. I do it to do it. Deals are my art form. Other people paint beautifully on canvas or write wonderful poetry. I like making deals, preferably big deals. That’s how I get my kicks.

Most people are surprised by the way I work. I play it very loose. I don’t carry a briefcase. I try not to schedule too many meetings. I leave my door open. You can’t be imaginative or entrepreneurial if you’ve got too much structure. I prefer to come to work each day and just see what develops…

It never stops, and I wouldn’t have it any other way. I try to learn from the past, but I plan for the future by focusing exclusively on the present. That’s where the fun is. And if it can’t be fun, what’s the point?”

The Art of the Deal, by Donald Trump with Tony Schwartz (1987)

The disparate treatment of institutional allocation to private equity and hedge funds has gotten a lot of press coverage over the last year or two. At Epsilon Theory, we published a brief called Locusts’ Lament discussing the glowing private asset narrative and the correspondingly dismal hedge fund narrative that you would expect as the relative allocations of large allocators to these areas move in opposite directions.

Research, consultants, social media and the press offer a lot of explanations for why institutions continue to make large – if mostly consistent with the last few years – allocations to private assets while approaching active liquid strategies with increasing skepticism. Poor hedge fund performance. Strong exit valuations. The benefits of infrequent marks-to-market on private assets. And, of course, there’s the reinforcement that comes from the fact that everyone else is doing it. These all coalesce into a sort of career risk argument for the dominance of private asset funds.

These are all true, to one extent or another. But there’s another factor at play, and I think it’s structural. I don’t think it’s mean-reverting. I think it is a meme.

Now, part of the confusion of this issue in the press is the result of a poorly presented understanding of how decisions are made at large asset pools. Most articles imply that individual portfolio managers and senior staff are making significant regular changes to the asset allocation of these pools. Take a look at this recent piece from AI CIO. Read the headline. Read the sub-header. Now read the article. Is CalPERS rapidly deploying a burst of allocations or shrinking its allocation to private equity? And how is that decision being made? Still confused after reading? Good. Me too.

What is important to know is that while governance models can vary quite a lot, it is rarely the case that PMs – and frankly, even the CIO – would have the authority to make decisions out of keeping with the general asset allocation plan. In general, boards set strategic asset allocation targets on an irregular basis, usually at the recommendation of a plan consultant OR the Chief Investment Officer OR some combination of the two. They also usually set guidelines within which the staff is delegated authority. Some boards delegate a great deal of authority. Some delegate practically none. Some boards defer heavily to the strategic asset allocation recommendations of consultants or the CIO, and some guard that prerogative jealously.

But if you want to understand, by and large, how big pools of capital make big decisions about how much of their plan will be allocated to private equity, venture capital, private real estate, hedge funds, alternative premia (and everything else), you must focus on the interactions that take place between the CIO office, the consultants and the board. This is, of course, the nexus most people refer to when they discuss all those career risk-related factors. But most of those factors will rise and fall with the relative fortunes of this asset class or another. There is another factor which matters all the time:

Asset owner boards are dominated by politicians, lawyers and businesspeople. Deal people. People for whom – like the Donald – The Deal is their art. Understanding the decision-making process of large pools of capital means understanding the deals! meme.

From time to time, it becomes fashionable to attack these boards as unsophisticated or unethical. Sure, you could find anecdotes of just about anything, including these dismal traits, but in general, this just isn’t true. Most of these politicians, lawyers and businesspeople are smart. Very smart. Most of them are honest. Very honest. I really believe that, although I suspect I’ll take some flak for it. And many of them are truly subject matter experts, but almost always in fields other than financial markets.

I have seen board rooms when a discussion of a global macro hedge fund or a managed futures fund comes up. I have seen board rooms during discussions of risk parity and alternative premia. I’ve seen board rooms during presentations of relative value strategies across asset classes. I’ve seen staff present very efficient quantitative strategies that can leverage securities lending to produce better-than-passive results. I’ve seen the recommendation of risk-based tactical allocation and rebalancing schemes. Even among boards consisting of blindingly intelligent founders of multiple businesses, successful and well-respected politicians and other community leaders and stakeholders, the eyes go glassy in a hurry. Many of the strategies seem impenetrable, and usually fall well outside of the comfort zone of the people hearing them. Good presenters have learned that their best bet is to keep it short.

Private investment strategies, on the other hand, are the most similar of anything an asset owner does to what most of the board members have done to make their own careers. They find growing companies in a niche that just need capital to put them over the top. They broker deals between companies to make a larger, more efficient business. They offer to fix operational issues in a business generating actual products and actual cash. They negotiate with governments and regulators to create value in new ventures. It looks a lot more like investing, it feels a lot more like investing, and in a lot of ways, it is a lot more like investing than what most more liquid alternative strategies offer. More importantly, it feels like deals! I have been in these board rooms, too, and it’s front-of-seat stuff. There is only one public markets strategy that produces similar interest: activism. There is only one other strategy of any type that offers more interest: direct, opportunistic and principal investments. 

Expect more articles in the next couple years that look like this article from the Wall Street Journal today. Opportunistic and principal investments have been all the rage for years, and are expanding into smaller pools, too, because there is nothing that looks more like a deal than a large pool of assets buying – and sometimes operating! – an actual building. An actual airport. An actual farm or timber property or producing well. An actual company.

I’m not saying that all this is good or bad, although I have a lot of opinions. We’re on record saying we do favor being closer to cash flows and further from abstractions, so there’s a lot of the emphasis on privates in general and so-called principal investments in particular that we are very much on board with (although any asset owner who thinks they aren’t getting at least some adverse selection in the opportunities brought to them is either unserious or dishonest). I am saying that if you are in hedge fund sales, in the shrinking cap intro space, or a liquid fund manager waiting for that bear market that is going to pull big asset owners back into hedge funds and other active strategies in public markets, I think you may be waiting a very, very long time. The deals! meme is just that powerful, and I think you’d have to see a brutal cycle of underperformance before the dynamic with boards changes in a way that will allow the big, slow strategic asset allocation processes to come up with shifts away from these types of investments toward active liquid strategies. Oh sure, around the edges, there is still going to be some performance chasing at the strategic asset allocation level. But as a really big shift? I think we’re still years away. I could be wrong.

Now, if you’re comforting yourself that ‘alternatives’ as a category has largely – and thankfully – been replaced by categorizations of private equity into global equity allocations, private real estate into real asset allocations and hedge funds into multiple areas reflecting the underlying security exposures, and that allocations really aren’t explicitly shifted between hedge funds and these private assets any more, don’t. They are. I mean, of course they are, even if it’s done so indirectly now instead of directly. In the old days, private equity, real estate and hedge funds were all in a catch-all alternatives bucket, and we shifted between them. In the new days, those allocations are almost always split out into multiple categories, but the governing constraints and conventions (e.g. minimum acceptable allocations to passive liquid markets, risk targets, maximum feasible allocations to high fee products) lead us to the exact same outcomes. Yes, asset owners are still deciding between private assets strategies and active liquid assets strategies.

It also doesn’t help that mean-variance models and other tools used as part of the average strategic asset allocation process are garbage in-garbage out. Consultants and some CIO offices that are targeting higher necessary returns are increasingly anchored to the asset classes that these assumption-driven models like. Why? Because every strategic asset allocation meeting for the last 5 years began, and every strategic asset allocation meeting for the next 10 years will begin with something akin to the following: Well, to meet our real return targets with these assumptions, we’d have to allocate 100% to either private equity or emerging markets! Ha ha ha! Of course, doing that would be imprudent, but…

Yeah, ‘but.’ Because by this time, the conversation has been framed. And in hundreds of rooms filled with truly smart, truly ethical, truly honest and well-meaning people infected with the deals! meme, private assets will not just feel like the understandable and straightforward strategy, they will look like the right and sensible and prudent thing to do as fiduciaries. And for some, that may end up being correct.

But for anyone hoping for the long-awaited sea change back into most active liquid markets strategies? I wouldn’t hold my breath.  


American Gods


This is fourth or fifth time I’ve used Neil Gaiman as the touchstone for an Epsilon Theory note, but it’s okay because he’s that good. Plus there’s Ian McShane in the TV version of American Gods, who is also that good. So don’t @me.

On the surface, American Gods is a fantasy story about Norse gods looking for a comeback, wrapped up in a Gaiman-esque history lesson about the origins of the Easter Bunny myth and the like. Think Joseph Campbell meets Steven Spielberg, which is … pretty high praise when you think about it. But what American Gods is really about, and hence the title, is that our modern attitudes and practices toward the Big Ideas that dominate our personal and social lives, memes like Cancer! and The Market! and National Security!, are EXACTLY like the attitudes and practices non-modern humans had towards Hades and Hermes and Mars. Not kinda sorta like. Not metaphor or simile like. EXACTLY like. We build exactly the same temples, except we call them hospitals and exchanges and TSA checkpoints. We say exactly the same prayers of propitiation, except we call them mammograms and technical analysis and deterrence theory. We have exactly the same professional priestly castes to guide the allocation of our worshipful tithes, except we call them health insurers and economists and lieutenant colonels.

Did you know that there are tens of thousands active-duty colonels and lieutenant colonels in the US armed forces? There’s a statutory max of 650 active-duty generals, in case you were wondering. I find this a fascinating statistic. But I digress.

Cancer! IS a death god. The Market! IS a commerce god. National Security! IS a war god.

I’m willing to wager a large sum that every single person reading this note has said a silent prayer asking for the favor for one of these gods at some point in his or her life.

There’s an Epsilon Theory note published on all this a few years ago, called Magical Thinking. It’s one of my all-time faves, and I think you’ll find it worth your time.

Every idea has a story, but the story is not the idea.

Stories change with the times. They are born, they live, and they die. But if the idea is powerful enough – if it’s a Big Idea like death or commerce or war – then the idea can survive the lifecycle of its story. It can find a NEW story and be reborn.

For the past two years, the idea of crypto has been wrapped in the story of Price.

Price is one of the Old Stories, one of the most powerful and certainly the most seductive. I completely understand why so many crypto adherents came to their faith through the allure of Price, and I completely understand why Bitcoin Maximalists and the various Hodler denominations – like all millenarian sects – will never believe that Price has deserted them. 

But Price is also the most fickle of the Old Stories. It has a very short lifecycle in any single host, and it survives parasitically by sucking out the life in one idea and moving on to the next. Just follow the raccoons if you want to know where Price is hanging out.

I think you can find Price over in the cannabis aisle of the meme supermarket today.

Crypto needs a new story.

Or rather, it needs a better Old Story. 

I think that better Old Story is small-l liberalism. I think it’s an autonomy of mind. It think it’s Clear Eyes and Full Hearts. I think it’s the Old Story of Liberty and Justice for All.

Here’s an example of what I’m talking about.

Kiva, Sierra Leone and U.N. agencies partner to implement ‘credit bureau of the future’

An exciting new partnership between Kiva, Sierra Leone and U.N. agencies is set to bring a nationwide digital identification system to the people of Sierra Leone that is designed to provide citizens with formal identity and control over their own credit information.

Sierra Leone’s President Julius Maada Bio announced the initiative, which could be a promising new model for global financial inclusion, during his address to the Sept. 27, 2018, U.N General Assembly.

The centerpiece of the partnership is the new Kiva Protocol, which will create and establish a national digital identification system using distributed ledger technology (DLT). The system will help ensure that every citizen in Sierra Leone has secure and complete ownership of their personal data and information, with the ultimate goal of helping people access the financial services they need.

“Sierra Leone will now modernize its Credit Reference Bureau and radically transform its financial inclusion landscape,” President Maada Bio said of the partnership during his U.N. address.

The United Nations Capital Development Fund and the U.N. Development Programme are partners on the project.

“Through this implementation, Sierra Leone is setting out to build one of the most advanced, secure credit bureaus,” said Xavier Michon, Deputy Executive Secretary of UNCDF. “It could serve as a model for both developing and developed nations in the future.”

Globally, 1.7 billion adults are unbanked and unable to access the financial services they need to improve their lives and their families’ futures. Two of the major barriers to accessing financial services are a lack of formal identification and a lack of verifiable credit history.

The new Kiva Protocol is designed to address these barriers by issuing digital identification to all citizens and enabling formal and informal financial institutions to contribute to a person’s verifiable credit history.

Currently, unbanked people cannot leverage financial transactions from the ‘informal economy,’ such as credit with a local shopkeeper, to build their credit history. The Kiva Protocol will capture a wide range of financial transactions—from bank loans to credit with a local shopkeeper—to help people access the financial services they need, including loans for businesses, education or basic medical services.      

Kiva is building the system that will record these transactions using distributed ledger technology. For 13 years, Kiva has worked to provide financial access to the unbanked and underserved, becoming a trusted name with strong partnerships across the global microfinance industry. We identified that a systems-level change in identification and credit history has the potential to unlock massive amounts of capital for the populations they serve, so began the hunt for a solution.

“With this partnership in Sierra Leone, we hope to carve a path to a system of global identity and federated credit history,” said Kiva CEO Neville Crawley. “This can unlock capital for the populations who need it most, allowing lenders to massively increase services and the flow of funds to the world’s unbanked.” Rollout of the Sierra Leone project is planned for 2019, after continued ongoing implementation discussions.

For more information, visit kiva.org/protocol

What’s the crypto connection here?

The Kiva protocol is built on distributed ledger technology (DLT), which is the broad category of decentralized database structures that includes the more well-known blockchain technology that underpins Bitcoin. So when I say “blockchain not Bitcoin”, that’s shorthand for “DLT without a monetary application.”

DLT is a data infrastructure model that is in direct opposition to the far more common centralized database model. The centralized model is far more common because it can be directly controlled by a central authority. Like Google. Like the Chinese government.

DLT is a revolutionary tool to promote liberty and justice for all, because it is impossible for a government to edit or shut down a well-implemented, well-distributed ledger. 

DLT is a viable tool to promote liberty and justice for all, because, at least in this case, it is not directly threatening the State by trying to BE money.

There’s another crypto connection here, too. A language connection. The Kiva protocol is built on a cryptographic personal identifier, which means that each individual controls the release of his or her credit history. This is crypto as in “cryptographic”, not crypto as in “cryptocurrency”. You may think this is beside the point. You may think that a language connection is small beer. It’s not. When you look at the history of how Big Ideas merge and transform over time, particularly how religious ideas merge and transform over time (and if you don’t recognize that both crypto and small-l liberalism are religions, you’re just not paying attention), appropriating language and ritual is critically important. Read American Gods if you don’t believe me.

The Kiva protocol is for the unbanked, the hundreds of millions of people around the world who do not have easy access to the monetary goodies that the City of Man can provide, like credit at a reasonable interest rate.

In my opinion, providing cheaper credit to the unbanked is the single most promising initiative to spur global growth available to humankind.

And it’s just a start.

Anyone reading this note is not unbanked. You are almost certainly overbanked. The tools for promoting OUR liberty and justice, however, are the same. It’s a DLT data infrastructure combined with applications that do not directly threaten the State’s sovereign control over money. These are applications that take back our core Identity Data – what we do and where we go and who we go with, both physically and virtually –  from the thieving hands of the little technology kingdoms. 

You can read more about Taking Back Our Data here.

You can read more about our larger civics initiative here and here.

You can join us here.

Because we really are just getting started. 


What’s Your Metagame? An Open Letter to the Crypto Community


It IS a community, you know.

It’s an epistemic community, which is a ten-dollar phrase meaning a community of shared knowledge, or more specifically a community that shares a sense of how one gets to useful and valid knowledge.

Within that broad epistemic community of crypto, there are lots of very different goals, lots of very different geographies and environmental attributes, lots of very different talents and constraints.

There’s also lots of money and lots of passion. Which attracts lots of raccoons to steal your money. And lots of false prophets to steal your passion. And usually your money, too.

I’m trying to build a different epistemic community than yours – one based on shared knowledge of small-l liberalism. There are lots of important differences in the epistemic focus of small-l liberalism (at least as I understand it) and the crypto community (at least as I understand it), but even more important similarities.

The crucial similarities are a commitment to individual liberty as the sine qua non for any organization of our social lives, and a resistance to instruments of the Nudging State and the Nudging Oligarchy, both of which have a very different conception of how our social lives should be organized. There’s also a shared belief in technological progress and advancement, an advancement that drives an up-and-to-the-right arrow to history, as well as a shared belief in the epistemic foundation of that technological progress – the research program.

I’m writing this letter to invite an exploration of a joint research program, as described in the Take Back Your Data section of Things Fall Apart (Part 3) – Politics.

I’m interested in sharing ideas for a research program focused on liberty.

I’m interested in sharing ideas for a research program focused on resistance to the Nudging State and the Nudging Oligarchy.

I’m interested in sharing ideas for a research program focused on technological advancement.

I’m interested in learning.

I’m interested in teaching.

I’m NOT interested in a shared research program ABOUT money.

I’m not interested in coins. I’m not interested in tokens. I’m not interested in cryptocurrencies per se.

Why not? Because I believe that a research program ABOUT money is inevitably a metagame fail. It’s not just the raccoons that money attracts like an open garbage can, although that’s bad enough. What’s worse is that money attracts the hostile gaze of the State, and our communities cannot withstand a direct confrontation with the worldly seats of power.

I say this because humans have been wrestling with these questions for thousands of years. I say this because we have evidence of succeeding in these confrontations and failing in these confrontations. Here’s how one well-known resistance fighter handled the issue.  

And they sent to him some of the Pharisees and some of the Herodians, to trap him in his talk. And they came and said to him, “Teacher, we know that you are true and do not care about anyone’s opinion. For you are not swayed by appearances, but truly teach the way of God. Is it lawful to pay taxes to Caesar, or not? Should we pay them, or should we not?”

But, knowing their hypocrisy, he said to them, “Why put me to the test? Bring me a denarius and let me look at it.” And they brought one. And he said to them, “Whose likeness and inscription is this?”

They said to him, “Caesar’s.”

Jesus said to them, “Render to Caesar the things that are Caesar’s, and to God the things that are God’s.”

― Mark 12:13-17

Everything to do with money – and by everything I mean everything, including banking and credit, not just the currency itself – belongs to Caesar.

Money is why Caesar exists. Money is the sole foundation and the sole provenance of the City of Man. This was true for Jesus. This was true for Maimonides. This was true for Siddhartha Gautama. This is true for us. If you challenge Caesar on money … if you fail to render to Caesar the ONE THING that is inextricably and undeniably his … then you will lose.

I read the Old Stories of religious leaders and tell them to you now, not because I’m a religious person – I’m really not – but because these are stories of successful secular resistance and winning secular metagames. It’s not an accident that in every example I know of an epistemic community successfully fostering real and lasting social change, they have rejected the siren call of Resistance-as-money. It was the wrong answer to Caesar’s test then, and it’s the wrong answer to Caesar’s test today.

I’ve been thinking about writing this letter for more than two years now. So long as people were getting rich from their crypto faith, though, I knew it would be pointless to write it.

As the Buddhists say, “money is the most trusted material to test human nature.”

When money is flooding in like a river, the roar prevents us from hearing anything else. Certainly that’s been my experience, usually to my ultimate detriment. But when the water rushes out, there’s nary a sound. We’re all ears. That’s been my experience, too. Almost always to my ultimate benefit.

There’s bigger game afoot than getting rich.

There’s liberty and justice for all.

We say those words by rote when we’re kids in school, and our belief in those words gets thoroughly kicked out of us as we move through the world. But I tell you that it’s time for a comeback. I tell you that this is a game we can win, if we play the metagame as wise as serpents and as harmless as doves.

To see what we’re about, check out the Epsilon Theory website. You can enter the rabbit hole from pretty much any point, but the “Things Fall Apart” series is a particularly good place to  start. In any of the notes, you’ll find that the commentariat is vibrant, active and wise. It’s the best thing happening on the internet today, imo, and it’s where we will design a shared research program to change the world.

And when you’re ready to join our pack, go here. You can just watch if you want, but I hope you’ll participate. Because the smarts and the passion of the crypto community will make all the difference in this long game, if there is a metagame to the crypto community beyond the creation of Resistance-as-money.

Is there more to crypto than cryptocurrencies?

Asking for a friend.

Co-founder, Chief Investment Officer
Second Foundation Partners

1735 Post Road, Suite 10
Fairfield, CT 06824

[email protected]




I am struck this Thanksgiving morning that there are three precious things we each possess which we may choose to give to others: our labor, our wealth and our attention.

I am grateful for the hundreds of thousands of you who have chosen to share some measure of these things with us.

This is my favorite holiday for many reasons, not all of which are gravy-related.  As investors and citizens, we spend so much of our time preparing for and seeking to improve the future for ourselves, our clients and our children. There are few professions which so infrequently act in the present. We are forever looking to past analogs or to measure risk. We seek to uncover how behaviors manifested in asset price or to discover some trait of a company, and in so doing we look to predict the future. And yes, even when our predictions are only implicit, they are tacit projections of the world that will be.

Gratitude is different. Gratitude is always an act of the present.

Gratitude asks us to consider how much of what we are today and how much of what we have today are the result – if only in part – of the labor, wealth and attention of others. Ben and I are fond of saying that there is no easy path to resolution, no panacea for the widening gyre of our politics today. Yet if there were such a path, I believe it would begin with the conscious replacement of resentment, cynicism, anger and entitlement with gratitude.

So thank you.

Except for those of you who will serve wet dressing/stuffing instead of the unambiguously superior cornbread texture dressing today. I’m really not sure about y’all.


The Power of Neg


[Ed. note – “Things Fall Apart (Part 3) – Politics” is the longest note I’ve written, and it could have been a lot longer because there’s just so much to say. In this and a few more Briefs I’ll share a few ideas that were left on the cutting room floor.

There’s an old chess saying about gambits, where your opponent offers a sacrifice of a piece in order to secure some lasting positional advantage in the game going forward. The word itself comes from the Italian gamba, meaning leg, but is apparently also a term used in wrestling meaning to “offer a leg” as a sacrifice in order to secure an advantage.

The easiest way to defeat a gambit is to refuse it.

Your opponent is not an idiot! He’s not offering up a pawn out of the goodness of his heart. He’s enticing you down a path of game play of HIS choosing. He has a strategic plan for winning if you go down this path. Do you?

The core game theory concept in TFA3 is the power of refusing to play the game.

Declining the game is typically THE most powerful metagame move available to you.

But refusing to take the bait is only Step One. Aggressively refusing to take the bait is Step Two.

It’s the power of neg.

Now unless you have high school kids, you might not know what “negging” is. Certainly I didn’t. Negging is negative attention. In the YA social scene, it’s small insults to pique your target’s attention and interest through aggressive negativity, like “You’d be pretty if you cut your hair.”

Negging isn’t just a high school thing. Once you start looking for it, you will see it everywhere humans try to exercise their will on other sentient creatures.

Here’s an example from the ET note “Clever Hans“.

This is Bali, a three-year old mustang mare we adopted in 2016 from the Bureau of Land Management, trained by daughter #3, Haven.

Mustangs have to be “broken” to accept a human’s touch and control, a word that conjures up images of bucking broncos and the forcible crushing of an animal’s spirit. But that’s not how it works.

The way it works is negging. The way it works is sitting in the paddock and turning your back on the mustang, ignoring her entirely. The horse gets curious and comes to check out this strange creature sitting on her turf, albeit keeping a healthy distance. The trainer continues to studiously ignore the horse. This goes on for quite a while, maybe a couple of days, but each time the mustang approaches she gets a little closer, until ultimately she makes the first physical contact and allows the human to start controlling her.

It’s really pretty amazing. This highly intelligent animal is so desperate to have a social interaction, so frustrated at being ignored, that it willingly surrenders its autonomy.

Sound familiar, Mr. @RandoBlueStateLawyer with 45 followers who spends the better part of every afternoon thinking about his next brilliant riposte to the latest Republican Hot Take on voter registration?

Sound familiar, Mr. @RandoRedStateRetiree who spends every evening working himself into a MAGA apoplexy that can only be sated by retweeting his 19,001st Hannity blurb?

Sound familiar, Neb Tnuh?

The point of TFA3 is that the power of negging is not reserved for statist organizations and corporate oligarchies to use against us. WE can use the power of negging against THEM.

Elections are not a single-play game. If WE stop voting for ridiculous candidates, even if “our” party loses that particular election, THEY will bend over time and offer us less ridiculous candidates. It may take multiple elections before they believe our resolve, fewer if we neg their ridiculousness through persistent write-in campaigns

Earlier this year, Republican Roy Moore lost to Democrat Doug Jones in a high profile race for U.S. Senate in Alabama, a state that polls something like 70% Republican. The margin of victory for Doug Jones was 21,000 votes. There were 23,000 write-in votes for a Roy Moore alternative. Will Alabama Republicans nominate as absurd and ridiculous a candidate as Roy Moore next time? We’ll see, but I doubt it. They’ve been negged.

This is how change happens. Not from above but from below.


Say Uncle!


“The Fed is going wild. I mean, I don’t know what their problem is that they are raising interest rates and it’s ridiculous…the Fed is going loco and there’s no reason for them to do it. I’m not happy about it.”

Donald Trump, in a Fox News telephone interview on October 10, 2018

“He’s wrong…their record’s not as good as mine, and I’m sorry to be like that. I’m sorry to be like Bill Parcells: You are what your record says you are. And they’re 0-and-1, and they’ve got to start shaping up and stop being ideological…They’re wrong now, and they were wrong then.”

Jim Cramer, on CNBC on November 14, 2018

“Start with the Fed, which should rethink its December rate increase. No other major central bank is likely to raise its rates soon. The Fed needs to weigh whether it should expand the gulf between U.S. and foreign monetary policies at a fragile moment as global investors demand more dollars.”

“America is Not an Island”, by Wall Street Journal Editorial Board, November 15, 2018

Just a quick observation on some emerging common knowledge as equity and credit markets limp into Thanksgiving.

If you’re feeling the Wall Street story-telling apparatus whirring up a little bit here these last few weeks, you’re not imagining things. We are officially in full-on “Uncle” mode. Here is some data from the research we do on the narratives of central bank omnipotence. What you’re seeing are the percentages of news stories about the Fed, the Federal Reserve or other Central Bank terms, which ALSO refer to other topics. In this chart, we highlight the stories which refer to Inflation, Unemployment and the Stock Market.

Yes, that jump in the percentage of stories about the Fed that also mention the stock market in the first half of Q4 is real, and pretty broad-based across news, opinion, analysis and research pieces. Across outlets, too. This isn’t just CNBC reprinting and syndicating things that Cramer says on the air. To be clear, I’m not saying that I agree with either side of the should-they-or-shouldn’t-they argument. But I AM saying that the financial media’s missionaries haven’t been been this transparent and bold in their monetary policy campaigning in years. 


Hobson’s Choice


[Ed. note – “Things Fall Apart (Part 3) – Politics” is the longest note I’ve written, and it could have been a lot longer because there’s just so much to say. In this and a few more Briefs I’ll share a few ideas that were left on the cutting room floor.

Bobby: What do you mean you don’t make side orders of toast? You make sandwiches, don’t you?
Waitress: Would you like to talk to the manager?
Bobby: You’ve got bread and a toaster of some kind?
Waitress: I don’t make the rules.
Bobby: Okay, I’ll make it as easy for you as I can. I’d like an omelet, plain, and a chicken salad sandwich on wheat toast, no mayonnaise, no butter, no lettuce, and a cup of coffee.
Waitress: A number two, chicken salad san, hold the butter, the lettuce, and the mayonnaise, and a cup of coffee. Anything else?
Bobby: Yeah. Now all you have to do is hold the chicken, bring me the toast, give me a check for the chicken salad sandwich, and you haven’t broken any rules.
Waitress: You want me to hold the chicken, huh?
Bobby: I want you to hold it between your knees.
Waitress: You see that sign, sir? Yes, you’ll all have to leave. I’m not taking any more of your smartness and sarcasm.
Bobby: You see this sign? [sweeps all the water glasses and menus off the table]

In the iconic diner scene of “Five Easy Pieces”, Bobby just wants to get a side order of wheat toast with his breakfast. Bobby has an entire menu to choose from, and the diner makes toast for sandwiches all day long, but it is impossible – despite a smart proposal of pair trades and long/short exposures that would isolate the wheat toast factor – for Bobby to get what he wants. Bobby has encountered a Hobson’s Choice, which is part of a more general class of games that includes ultimatums and dilemmas.

A Hobson’s Choice is when you are presented with what seem to be multiple opportunities for free will and free choice, but in truth you’ve been given a single option. 

Bobby can have an omelet with a roll, or he can have nothing.

As the story goes, the original Hobson was a guy who rented out horses for the carriages of Cambridge, England in the 1600s … what was called a livery stable. It was a big stable with lots of horses that were theoretically all for rent, but Thomas Hobson gave his clients a simpler choice: rent the horse in the front stall or rent no horse at all.

You would think this sort of horrible bait-and-switch customer service would be a disaster, but you’d be wrong.

Attracting clients with lots of apparent choice and then giving them no choice at all is one of the most powerful and successful business models in human history.

Any customer can have a car painted any color that he wants so long as it is black. ― Henry Ford

I’ll make him an offer he can’t refuse. ― Vito Corleone

Oligarchs and mob bosses understand Hobson’s Choices really well. So do asset managers and financial advisors.

I wrote a long note back in 2016, also called Hobson’s Choice, about the ways asset managers and financial advisors create a “menu” of options for you that are really no menu at all. It needs some updating now that I’m no longer in the belly of the beast of an asset manager myself, but it’s still a pretty good read. 

My point today, though, is that the use of Hobson’s Choice isn’t limited to business models. It is part and parcel of the modern political model, too.

Here’s my favorite punchline from Things Fall Apart (Part 3) – Politics:

Want your political party to put forward better candidates?

Then stop voting for the crappy ones.

Because the only way to escape a Hobson’s Choice is to refuse to play the game.


Things Fall Apart (Part 4)


Download a PDF of Things Fall Apart (Part 4).

Listen to an audio recording of Things Fall Apart (Part 4).

As Above, So Below

“As Above, So Below” is the central principle of the ancient philosophies known as hermeticism, philosophies that had an overwhelming impact on the ancient Greeks, early Christianity, the Renaissance, the Reformation … i.e., Western civilization. I know it’s weird to imagine, but this little phrase has been one of THE most influential ideas in all of history.

“As Above, So Below” means that our social lives are organized as a fractal, that when there is disorder in the heavens or the seats of worldly power, so is there disorder in our communities, our families, and our personal lives. It means that when Pharaoh hardens his heart, whether he lives in a marble palace on the Nile or a white house on the Potomac, so do OUR hearts harden, as well.

It means that the widening gyre, which we can see represented most clearly on a national scale and in national elections, is no less potent and no less present in our everyday lives. It means that Things Fall Apart in ways both large and small. Always and in all ways.

I see this fractal nature of alienation and polarization in my friend, Neb Tnuh, who I’ve written about before but will reintroduce here. I bet his story is familiar to you.

Neb has a hard time talking with real people these days. Neb just doesn’t … connect … the way he used to. He doesn’t have much to say. He mumbles a lot. He imagines long and involved conversations with people in his head, but that’s where they stay. In his head.

Sartre famously said that hell is other people. For Neb, hell is other people who want to talk about markets or politics. Neb is just so WEARY of being lectured for the umpteenth time on why Trump is so awful or why Trump is so great, why Bitcoin is going to $100,000 or why Bitcoin is going to zero, why the “fundamentals are sound” or why the fundamentals are sound EXCEPT for this one thing which will bring the whole house of cards tumbling down ANY DAY NOW, why the Fed is the source of all evil in the world or why the NRA is the source of all evil in the world or why the Democrats / Republicans are the source of all evil in the world.

So obviously Neb is a real barrel of laughs at parties, which he shuns today even though he remembers that he used to like parties. The circle of real people that he actively feels comfortable being around has shrunk and shrunk and shrunk until he can count them on his fingers, and even here Neb increasingly has a hard time connecting with these non-rhinoceros friends. He increasingly talks past and through the people who are the most important to him, like his wife and daughters. And that makes Neb saddest of all.

He’s lost friends over the widening gyre, lost over the event horizon of black hole Trumpdom or lost in the blare of doubleplusgood DemSoctalk. He’s lost family, too.

On the flip side of that coin, it’s easier and easier for Neb to talk with complete strangers on social media platforms. It’s all so easy for Neb to lose himself in this ocean of social abstraction and Turing tests, because he’s fluent in the symbolic languages of mathematics, history and pop culture. And so he swims in that ocean, compulsively even, until he’s forgotten whether or not there was ever a shore.

It’s not just what I see in my friend Neb. I see this fractal nature of alienation and polarization in the men and women I meet everywhere I go in the world. I bet their story is familiar to you, too.

Everywhere I go, and I travel a LOT, I see men and women solving little puzzles, righting little wrongs, seeking little truths. As best they can. Two steps forward and one step back, for sure, but always with good will. And yet everywhere I go, I see these men and women of good will unfulfilled by their small good works. Everywhere I go, I see these men and women of good will deceived by their State and their Oligarchs, their autonomy of mind enchained by words and stories willingly taken as shackles.

In a thousand different ways, I see these men and women of good will nudged into believing that their small good works are not enough, that in order to find fulfillment as right-thinking and right-behaving modern humans, they must pledge their service, yes, but even more so their mindfulness to the Nudging State and the Nudging Oligarchy. I see them told that their individual acts of good will, all performed on millions of tiny stages far away from the collective gaze of the modern Panopticon, are not enough. I see them told that what they do on these small stages is of no importance in the grand scheme of things.

I tell you it is EVERYTHING.

I tell you it is so, because all of this has happened many times before. This game has been played over and over again throughout history, sometimes won and sometimes lost. Let us be winners.

I tell you there is a way forward, a way to reverse the widening gyre of the body politic and the body personal alike. The way forward rests on this simple truth: fractals work the other way, too.

As Below, So Above

How do we tend to our nation and our world? By tending to ourselves and our pack. By playing OUR metagame and forcing the Powers to seek OUR attention and bend to OUR form, rather than surrendering our Identity for a scrap of their attention and the thin gruel of schadenfreude.

Andrew Fletcher, a Scottish patriot of the late 17th century who I’ll write a lot more about one day, famously said, “Let me write the songs of a nation, and I care not who writes its laws.”

By tending to ourselves and our pack … by playing OUR metagame … by forcing the Powers to seek OUR attention and bend to OUR form … we become patriots once again, but in a modern context of modern media and modern technology. We create a self-sustaining movement that works from the bottom up, not the top down. We will not be writing laws. We will be writing songs. These are the songs of Identity. These are the songs of an autonomy of mind. These are the songs of solving little puzzles, righting little wrongs, and seeking little truths. These are the songs of individual acts of good will, far from the gaze of the State. We’re not going to be embarrassed by our lack of “importance”. We’re going to celebrate it.

And those songs will spread, fractal-like. First we will sing them as individuals. Then we will sing them as packs. Then we will sing them as communities, both geographic and epistemic. Then we will sing them as a nation.

It will take a long time. It may take a lifetime. Or two. And that’s fine. That’s as it should be. The Second Foundation knows how to play the long game.

As Below, So Above.

I’ve got three songs to sing. Three songs of playing OUR metagame and not playing THEIR metagame. Three songs of recognizing the difference and acting accordingly.

Each song has a common beat. It’s the beat of resistance. It’s the beat of refusal. We refuse to vote for ridiculous candidates. We refuse to invest in ridiculous securities. We refuse to borrow ridiculous sums. We refuse to sell our birthright for a mess of pottage.

We refuse to play THEIR game.

Like all great comedy, it’s political and it’s subversive without wearing its politics and its subversion on its sleeve. It’s Groucho Marx, not John Oliver and the rest of the late-night Comedy Scolds. It’s Damon Wayans’ Homey the Clown, a con out on parole trying to make his way in a suburban white world stacked against him. A world designed to humiliate him even more than the clown costume he wears. But when pressed to ridiculousness, he and we must answer this:

Homey don’t play that.

Know who’s even MORE subversive than Damon Wayans? This guy.

And they sent to him some of the Pharisees and some of the Herodians, to trap him in his talk. And they came and said to him, “Teacher, we know that you are true and do not care about anyone’s opinion. For you are not swayed by appearances, but truly teach the way of God. Is it lawful to pay taxes to Caesar, or not? Should we pay them, or should we not?”

But, knowing their hypocrisy, he said to them, “Why put me to the test? Bring me a denarius and let me look at it.” And they brought one. And he said to them, “Whose likeness and inscription is this?”

They said to him, “Caesar’s.”

Jesus said to them, “Render to Caesar the things that are Caesar’s, and to God the things that are God’s.”

― Mark 12:13-17

Jesus don’t play that.

Do we withdraw from the world? No. We render to Caesar the things that are Caesar’s. We pay our taxes. We work hard at our jobs. We drive our cars and buy from Amazon and cheer the circuses.

But those things that our OURS? Those things that Caesar has STOLEN from us?

We’re damn well going to take them back.

We’re going to take three things back from Caesar. We’re going to sing three songs of resistance.

Take back your vote.

Take back your distance.

Take back your data.

“Hope has two beautiful daughters; their names are Anger and Courage. Anger at the way things are, and Courage to see that they do not remain as they are.”

“Do you wish to rise? Begin by descending. You plan a tower that will pierce the clouds? Lay first the foundation of humility.”

― St. Augustine of Hippo, City of God (426 AD)

I’ll be quoting a lot from Augustine throughout this note, because no one understands where we are today in 2018 better than Augustine did in the freakin’ fifth century AD. Augustine watched the long fall of Rome. One thousand six hundred years ago. Augustine watched Rome steal what I call our clear eyes and full hearts, and what he called our perceiving minds and our loving hearts. Augustine also called it our soul, but he was a saint and I’m not.

Are you angry about what’s happening to our world? Are you pissed off that you and your children and their children are immersed in a widening gyre without end? Good! Now find that other daughter of Hope and let’s get started. Her name is Courage.

As Below, So Above.

Take Back Your Vote

This is the section that will make a lot of people angry, because a lot of people will think I’m saying you shouldn’t vote. I’m not. I’m saying you should vote for the right reasons. Or better yet, let’s start with a simpler notion. Don’t vote for the wrong reasons.

What are the wrong reasons? They are instrumental reasons. They are because you have been told that  your vote matters in who wins or who loses. They are because you have been told that you might make a difference in the outcome. This is a lie. You will never determine the outcome of any election that’s big enough to get television coverage, and you should never vote to “make a difference” in that election.

See, I told you this section would make you angry.

The Clear Eyes, Full Hearts process requires, among other things, that we understand Estimation, that we understand the role of chance in our lives. And that understanding tells us one crucial thing when it comes to voting – our individual vote does not matter. It really doesn’t, not for any election above, say, your local dogcatcher. And not because the odds are so long that you’ll own the winning lottery ticket in a stadium packed with more people than any stadium you’ve ever seen. No, it’s because – and this is really hard to wrap your head around – the actual result of any modern election of size is a range, not a single number. Every final vote count of an election that’s big enough to televise is wrong. Guaranteed. Meaning that every time you recount that vote, you will end up with a very slightly different number. We call it quits and publish a “final result” because our society requires that sort of faux certainty, but it is definitely faux. Even if a miracle happens and the observed result is a tie, it’s not really a tie. That’s just the immediate observation of the statistical range. Take another observation and you will get another result. That result where your single vote made a difference? Do a recount and watch that difference disappear. Your difference-making is a mirage. Guaranteed.

Am I telling you that you can’t “make a difference” in an election? No, I’m not. You can make a difference through your non-voting political participation. You can make a difference by putting a sign in your yard. You can make a difference by knocking on doors. You can make a difference by getting voters to the polls from areas where you think citizens are more likely to support your candidate. All of these things can and do make a difference in ways that your actual vote cannot.

What I am telling you is that your specific vote will never make a difference in the outcome of an election.

What I am telling you is that your political participation is not defined by your vote. In fact, your vote is the smallest bit of your political participation, and you should think of it that way.

What I am also telling you is that you should vote anyway.

Not to impact the outcome, which you won’t, but to express your identity, which you will. This is what it means to vote for the right reasons. You’re not a bad person if you don’t vote. Really. But you will be a better person if you do.

Voting to express your identity means voting FOR a candidate, never against a candidate.

Voting for “the lesser of two evils”? Nope, you’re really voting against the other “more evil” candidate. That’s not a right reason. That’s not voting FOR identity. The only reason to vote for a lesser evil is if it keeps the greater evil out of office. Your vote won’t make a difference either way. So don’t vote for the lesser evil. QED.

Holding your nose “for the good of the party”? Nope, this is the quickest way to lose your identity, not gain it. It’s the Big Lie of Instrumentalism that we MUST vote for a sorry raccoon like Roy Moore because how else will “our” party keep control of the Senate and get “our” Supreme Court nominee appointed. It’s the Big Lie of Instrumentalism that we MUST vote for a sorry raccoon like Bob Menendez because how else will “our” party prevent the other party from having a 60-vote procedural majority. And btw, if you think there’s a lick of difference between Roy Moore and Bob Menendez in any respect other than their political affiliation and their accent, then you’re just not paying attention.

We can do this. We can vote like my home state of Alabama voted in the special Senate election earlier this year, where Republican Roy Moore was defeated in a statewide election that polls something like 70% Republican, because a critical mass of Republican voters said NO to the Big Lie of Instrumentalism. They refused to vote for either candidate, either by staying home or casting a write-in vote, because they could not vote FOR either candidate. Doug Jones won that election by 21,000 votes. There were 23,000 write-in votes for a Roy Moore alternative.

Kinda nice to see Alabama leading the country in Clear Eyes, Full Hearts civics, not just alphabetically.

Write-in votes are the short-term answer to voting FOR identity.

You will be told that you are “wasting your vote” if you don’t act instrumentally in service to the party line. You will be told, over and over again, that if you don’t vote for the ridiculous candidate of THEIR choice, then OMG the world will come to an end. Bollocks. THEIR little game will be more difficult if this ridiculous candidate is defeated. YOUR metagame will be just fine. Because there will be another election. And over time, THEY will bend to YOU.

Want your political party to put forward better candidates?

Then stop voting for the crappy ones.

Vote for Pedro.

That’s the tagline from Napoleon Dynamite, and that’s San Antonio Spurs head coach Gregg Popovich rocking the t-shirt. I love Pops almost as much as I love write-in votes.

Is there more we can do to make our vote matter in an identity-affirming way? You said that write-ins are the short-term answer in taking back our vote. What’s the long-term answer?

The long-term answer is structural change in the electoral process. The long-term answer is breaking the stranglehold that a two-party system has in a first-past-the-post voting choice system within a geographically-based representation system. The long-term answer is creating an electoral structure that encourages a wider range of viable candidates and viable political parties, so that YOUR identity and YOUR values find more direct representation. So that you can find a candidate you can vote FOR.

I say this without knowing what your identity and your values are. I say this knowing full well that I’ll find some of those viable candidates and viable political parties to be personally abhorrent, and that some of these personally abhorrent candidates WILL be elected. I say this knowing full well that structural change in the electoral process happens through Constitutional amendment, and once that snowball starts rolling downhill it can end up in an avalanche that swamps us all, an avalanche that makes things worse – maybe much worse – rather than better.

That’s why this is the long-term answer. That’s why we need TIME before pushing for structural change. Second Foundation will push for structural change. But first we want to arm a critical mass of citizens with songs of individual autonomy, as opposed to the weaponized songs of State and Oligarch now in heavy circulation from both the left and the right. The widening gyre is not a mean-reverting phenomenon.

Pew Research Center (2018)

This is a chart of the party faithful, where the purple center does not hold. But is there still a silent majority of citizens stuck in the purple middle, abandoned by both parties moving to the extremist wings and invisible in this chart? Yes, I think there is. But they need to hear a new song to become mobilized and visible. Not a song of a third party imposed from above, but a song of autonomy coming from below.

As Below, So Above.

Take Back Your Distance

When I say distance, I mean establishing a healthy physical separation from the Nudging State and the Nudging Oligarchy, as well as a healthy mental separation.

Reclaiming your geographic distance means just that. It means physically separating yourself from the seats of power and their instruments. It means finding some way out of the physical belly of the beast. I realized this when I was reading Saint Augustine. Because he’s not just Saint Augustine. He is Saint Augustine OF HIPPO. Of a sleepy backwater town in Northern Africa, what is today Algeria, far far away from the grandeur and glamour that was Rome. Augustine was no stranger to Rome. He made a career in Italy and didn’t convert to Christianity until he was 31 years old. He was a player in every respect of the word. But he got out.

What happened when Augustine got out? What happened when he created an actual physical distance between himself and Rome? He could see Rome clearly. He could see the City of Man for what it was and write City of God. He could see himself for who he was and write Confessions. Augustine wrote these two books almost 1,600 years ago, and yet they read as if they were written yesterday.

“I recall how miserable I was, and how one day you brought me to a realization of my miserable state. I was preparing to deliver a eulogy upon the emperor in which I would tell plenty of lies with the object of winning favor with the well-informed by my lying; so my heart was panting with anxiety and seething with feverish, corruptive thoughts.

As I passed through a certain district in Milan I noticed a poor beggar, drunk, as I believe, and making merry. I groaned and pointed out to the friends who were with me how many hardships our idiotic enterprises entailed. Goaded by greed, I was dragging my load of unhappiness along, and feeling it all the heavier for being dragged. Yet while all our efforts were directed solely to the attainment of unclouded joy, it appeared that this beggar had already beaten us to the goal, a goal which we would perhaps never reach ourselves. With the help of the few paltry coins he had collected by begging this man was enjoying the temporal happiness for which I strove by so bitter, devious and roundabout a contrivance. His joy was no true joy, to be sure, but what I was seeking in my ambition was a joy far more unreal; and he was undeniably happy while I was full of foreboding; he was carefree, I apprehensive. If anyone had questioned me as to whether I would rather be exhilarated or afraid, I would of course have replied, “Exhilarated”; but if the questioner had pressed me further, asking whether I preferred to be like the beggar, or to be as I was then, I would have chosen to be myself, laden with anxieties and fears. Surely that would have been no right choice, but a perverse one? I could not have preferred my condition to his on the grounds that I was better educated, because that fact was not for me a source of joy but only the means by which I sought to curry favor with human beings: I was not aiming to teach them but only to win their favor.”

Neb, meet Augustine. I think you’ll have lots to talk about.

Geography matters. We don’t think it does in the age of the Internet and Amazon and Whole Foods and global supply chains and all the rest. But it does. Your geography is a critical driver of your Identity, both its formation and its development, at every age and at every stage of life.

But geography doesn’t have to be measured in miles. It can be measured in square feet.

“So long as you write what you wish to write, that is all that matters; and whether it matters for ages or only for hours, nobody can say. But to sacrifice a hair of the head of your vision, a shade of its colour, in deference to some Headmaster with a silver pot in his hand or to some professor with a measuring-rod up his sleeve, is the most abject treachery, and the sacrifice of wealth and chastity which used to be said to be the greatest of human disasters, a mere flea-bite in comparison.”

― Virginia Woolf, A Room of One’s Own (1929)

Woolf has her own notion of the Oligarchy and the State to contend with, a whole lot less smiley-face and a whole lot more male than mine. I get that. Yet her “greatest of human disasters”, the self-censoring of our voices in “deference to some Headmaster with a silver pot in his hand” is EXACTLY what I’m talking about in this note.

Our primary adversary in maintaining our autonomy of mind is not censorship from above. Our core problem is not government “national security” prosecutions or Facebook expulsions or Twitter bans or university snowflake mobs. I mean … yes, these are problems. I’m probably as close to a free speech absolutist as you’re likely to find, and it bothers me to no end that our virtual Speakers Corners – i.e., Facebook and Twitter and the like – have been subsumed by the Oligarchy. But I’m really not that worked up about some slippery slope between shutting up pathetic little raccoons like the InfoWars crew or an adjunct professor of Self-Hatred Studies and silencing the next Thomas Paine. I’m really not. That’s not how pervasive censorship works. That’s not how any of this works.

What I AM worked up about is the same thing that Woolf is worked up about. It’s the self-censorship of thought and deed that the Nudging State and Nudging Oligarchy have instilled in all of us, and I do mean all of us. It’s the profoundly powerful meme that everything of true value and importance in this world is mediated by the State or the Oligarchs, that YOU don’t matter and what you DO doesn’t matter if it can’t be located within the context of a grand contest between this statist organization and that statist organization or between this commercial oligopoly and that commercial oligopoly.

Wanna feel invisible? Wanna feel lost? Wanna feel abandoned? Take a job where your seat has power in this contest of markets or politics. Maybe it’s an allocator’s seat for a pension fund. Maybe it’s a CIO seat for a decent sized RIA. Maybe it’s a seat in the state House. Maybe it’s a seat in Congress. Maybe it’s a seat at the Wall Street Journal or the New York Times. Now hold that seat for a few years … it won’t take that long, four or five years at most. Four or five years before you start to believe that it’s YOU who are special, that it’s YOU who gets your phone calls answered, that it’s YOU whose jokes are funny. Now leave that job … not because you’ve got another seat lined up, but because you are special and want more.

Now watch How. It. All. Stops.

Because you may truly be special. You may actually deserve more. But once you’re out of the game, once you leave that seat … no one cares. You are no longer useful to the players still in the game. You are no longer instrumental. You no longer MATTER.

I can’t tell you how many times I’ve seen people confuse themselves with their seat. I can’t tell you how many times I’ve seen formerly seated people befuddled and confused by no longer mattering. I think Neb may have experienced this. I’ll have to ask.

He says yes.

Whether or not you’ve ever been defrocked, whether or not you know what it feels like to go from mattering to not mattering, you know what I’m talking about. You know that there is a pecking order dominated by contests of statist organizations and commercial oligopolies. You know that there are games that must be played and forms that must be followed to advance in that pecking order. You think about playing those games – Caesar’s games – morning, noon and night. You wake up thinking about how to advance your company’s interests. You go to bed thinking about social media and national politics. You think it is natural to think about Caesar’s games morning, noon and night.

I tell you it is NOT natural. I tell you THIS is the self-censorship that stunts the world, that we do not ALLOW ourselves to engage in ideas and practices away from Caesar’s games.

When I think about all the talent that is spent playing these games of State and Oligarchic competitition … when I think about what this talent could DO if even a fraction were devoted to solving little puzzles, righting little wrongs, and seeking little truths …

As the kids say, I can’t even.

I’m not saying that you should stop playing Caesar’s games. I’m not saying that “taking back your distance” means getting off the grid. I’m saying that you need a safe space where you can disengage from Caesar’s games, mentally and physically, so that you can stop censoring yourself. So that you can explore YOUR art and YOUR science and YOUR puzzles that need solving and YOUR wrongs that need righting.

I’m saying that you need what Virginia Woolf said you need – a room of one’s own.

Find a space for yourself. Find a space for your pack. Remove everything that, in Woolf’s words, gives mental deference to Team Elite and the measuring rods they have up their sleeves. This is where you will write your own songs. This is where you will change your own world. And then everyone’s.

You know, we talk a lot about the “crumbling infrastructure” of this country, the roads and bridges and airports that everyone knows that everyone knows desperately need a State-directed and Oligarch-partnered program to rebuild. Again, I say bollocks.

There IS an infrastructure that needs rebuilding in this country and every country, and it has nothing to do with transportation. It has no need to be mediated through the State or the Oligarchy, even though they would desperately like to.

The most critical infrastructure in America is the public library and the public meeting room.

Every local government – urban, suburban and rural alike – should rebuild and build out a public library system. Every civic and charitable organization should build a public meeting room, preferably where people can create, not just socialize. Like a maker space. At a public library.

This is the main reading room of the Birmingham public library. Or at least it was. I don’t know if people still actually read here or not. It’s probably been turned into a bloodless “research area” because, you know, it’s too “fine” for the hurly-burly of actual reading. But I remember it as my father’s favorite place in the entire world, and we’d come here every other week or so. I remember every single one of those wall murals and the stories that they told. I could check out any book I wanted, on any subject I pleased. What power I had!

Want to change the world, Mr. Billionaire Philanthropist? Want to fight for something that truly matters, Ms. College Graduate?

Libraries and maker spaces. Build them. In every community in America. Particularly poor communities, urban and rural. Give every American the space to make and create. And stand back.

As Below, So Above.

Take Back Your Data

It doesn't have to be like this

It doesn't have to be like this
It doesn't have to be like this
Killer whales, killer whales
― Car Seat Headrest, “Drunk Drivers / Killer Whales” (2016)

“Step by step they were led to things which dispose to vice, the lounge, the bath, the elegant banquet. All this in their ignorance they called civilization, when it was but a part of their servitude.”

― Tacitus (56 – 120 AD), Roman senator and foremost historian of the Julian empire, describing how his father-in-law, Agricola, truly subjugated the British tribes after defeating them on the battlefield.

“ Justice being taken away, then, what are kingdoms but great robberies? For what are robberies themselves, but little kingdoms?”

St. Augustine of Hippo, City of God (426 AD)

We have so many little kingdoms in our world today, each part of Caesar’s world, each perpetuating a robbery on us. These are mostly technology companies, small essentially-sovereign states in their own right. I’m talking about the little kingdoms of Apple, Amazon, Google and Facebook for starters. But there are many others. When they take our personal information – particularly our location data, where we are and where we go and who we go with, both physically and virtually – they are robbing us of a critical part of our identity. They’re just taking it. I’d call them raccoons, but they’re far larger than any raccoon, and they rob us in a far more elegant way. They are giant, elegant predators. They are killer whales.

Now I’m no Luddite, and I’m no ascetic hermit. I understand the value of my personal location data, and there are times when I am quite happy to share my identity with Caesar’s little kingdoms for the luxuries they provide. I happen to LIKE the lounge and the bath and the banquet … all those trappings of civilization that Tacitus notes, quite rightly, possess the power to entrap us without our noticing. Well, I’m noticing, but does that mean I have to stop going to Whole Foods or ordering from Amazon Prime? Because that seems like a tough call. A really tough call. Can we be civilized without being constantly robbed? Not robbed of our money (although that, too). But robbed of something far more important: our identity and our autonomy of mind.

The answer – and this is the same answer that Augustine came up with 1,600 years ago – is YES, we can live IN the City of Man without being OF the City of Man. We can participate in an unjust world without losing our souls.  

How? Through our God-given capacity for self-control.

We don’t have to hide our movement and our behavior in the City of Man. We have to be responsible for our movement and our behavior in the City of Man. We have to own it. We have to self-control it.

I understand why people delete all of the data that Facebook and Google and the rest of the little kingdoms collect on them. I’m saying that we deserve more. I’m saying that we deserve to have the data collected by Facebook/Google AND to have that data secured away from Facebook/Google AND to choose when or if that data is released in limited form to the little kingdoms as payment for their services.

When I say we have to take back our personal data of identity, I’m not saying that we must hide it or destroy it. I’m saying that we must self-control it. And that means doing three things.

  1. We take our location data back;
  2. We secure it;
  3. We release it when we want to release it.

The crux of this demand is the securing of location data away from Facebook and Google and the rest. Again, I’m not talking about the ability to prevent Facebook/Google from collecting the data. We have that (kinda sorta). I’m talking about forcing Facebook/Google to continue collecting their physical and virtual location data AND forcing them to pipe that data away from them and into an inviolable and unique repository of our choice.

It will take a law to force the little tech kingdoms to do this.

But they WILL do it. They will scream bloody murder about how this is unfair, about how they will be forced to discontinue services, about how they’re going to start charging big bucks for the things they do for free today. And then they won’t. Because there will be some competitor who will. Because they’ve got too sweet of a gig to pick up their ball and go home. It’s just like the global oil company that says they “own” the oil fields in some foreign country. They really don’t. And when those oil fields are nationalized, which they always are, the global oil company always stays to do the same work, just less profitably. Because that’s what global oil companies DO.

In exactly the same way that political parties tell us that OMG the world will come to an end if we don’t play THEIR metagame and vote for THEIR crappy candidates, so do commercial oligarchies tell us that OMG the world will come to an end if we don’t play THEIR metagame and acquiesce to THEIR robbery.

And in exactly the same way that political parties will bend to OUR will and put forward better candidates if and only if we play OUR metagame with resolve and the courage to refuse, so will commercial oligarchies bend to OUR will and put forward a better service.

If and only if we play OUR metagame with resolve and the courage to refuse.

I think we can get that law passed. I think that other than an infrastructure spending bill, the only source of bipartisan agreement in America today is to find new and novel ways to stick it to the little tech kingdoms. The great robbers today are looking to put down the little robbers, and I’m okay with that!

That’s how we get our data back. We nationalize it, to use the oil field analogy, and by nationalize it I mean we personalize it. Now where do we secure it? Where do we pipe the data? What is the inviolable and unique repository of our choice?

To answer that question, I first need to back up a second.

I’ve expressed a very constrained opinion about Bitcoin in Epsilon Theory. I’ve written that I think Bitcoin is art … wonderfully elegant and subversive art, but art all the same. I say that as high praise, not as condemnation, because the pursuit of elegant and subversive art is EXACTLY what I want to encourage with these songs of autonomy and resistance. I think Bitcoin is a novel and artful twist on an old idea, the bearer bond. I also think it’s a corner of the financial world that is irretrievably infested with raccoons – the hucksters and con men who cajole and steal money from us marks, but let’s leave that aside for now. From a fundamental point of view, I don’t believe that Bitcoin is a “store of value” per se, except as any work of art is a store of value, and I don’t believe it’s money.

But I also understand that there are many truth-seekers and allies of Epsilon Theory who do believe it’s money, who very much see Bitcoin-as-money as an instrument of defense and resistance against the robbing State and the robbing Oligarchy. I sympathize with and agree with so much of this impulse. But here’s why I believe that your focus on Bitcoin-as-money is a misguided focus. Here’s why I believe that a focus on Bitcoin-as-money is a metagame fail.

Everything to do with money – and by everything I mean everything, including banking and credit, not just the currency itself – belongs to Caesar.

Money is why Caesar exists. Money is the sole foundation and the sole provenance of the City of Man. This was true for Augustine. This was true for Jesus. This is true for us. If you challenge Caesar on money … if you fail to render to Caesar the ONE THING that is inextricably and undeniably his … then you WILL lose. Bitcoin-as-money is the wrong answer to the test of the Pharisees. Bitcoin-as-money is a catchy tune. It’s just not an anthem that can win the metagame.

We all sing along 
But the notes are wrong
― Matt and Kim, “Get It” (2015)

So let’s get the notes right.

Let’s use the elegant and subversive art of Bitcoin – the distributed ledger technology known as blockchain – as the global infrastructure for taking back our personal data.

Let’s not play Caesar’s games – the games of money – with blockchain. Let’s play OUR games – the games of identity and the games of an autonomy of mind – with blockchain.

A distributed ledger infrastructure combined with encrypted personal keys doesn’t just secure our personal data away from the State and the Oligarchy. It’s not only an instantiation of our self-control over the collection and security of our data. It’s also – and this is critically important – an instantiation of our self-control over the release of our data. Yes, we refuse to allow the kingdoms to steal our identities. AND we refuse to allow the kingdoms to ignore or block our identities.  

How do we pay for all this? By engaging with the City of Man … there are many commercial oligarchies and statist organizations with zero love for the little tech kingdoms, and the enemy of my enemy is my friend. As a wise dungeonmaster once told me, being lawful good doesn’t mean being lawful stupid.

This is a metagame we can win. The tools are there to make this happen. The money is there to make this happen. The anger is there to make this happen. All we need is that other daughter of Hope. All we need is Courage.

As Below, So Above.

I’ll close this note with one last St. Augustine quote, maybe my favorite.

God has promised forgiveness to your repentance, but He has not promised tomorrow to your procrastination. 

The time to act is now. The time to act is ALWAYS now. As wise as serpents and as harmless as doves …

Take back your vote.

Take back your distance.

Take back your data.


That’s Just Putting On a Nice Sweater


Kyle Broflovski: That’s not being nice. That’s just putting on a nice sweater.

Eric Cartman: I…don’t understand the difference.

Kyle: I know you don’t.

South Park, Season 7, Episode 11 (“Casa Bonita”) (In honor of the latest dumb Voxsplainer)

Around the office, and sometimes on phone calls, I refer to our clients as family. On what we call a new account…uh…client call, I often thanked a new client that we were so happy that you were joining our family. Dr. Steve, and wonderful wife in L.A., I’m happy to share with you that Chris’s ailments that we discussed so eloquently are gone. She’s feeling just great. Kurt and Grace in Michigan…<sigh>…I’m so sorry to say that we never got to go bass fishing. I wound up walleye fishing on Lake Erie, but that’s not nearly as satisfying as had I got to go with you. To a client in Kansas City, thank you so much for the barbecue sauce. I will enjoy it and think of you always in the future. Valerian Rex, looks like I owe you a Cuban sandwich. Our client in Marseilles, my wife and I were certainly looking forward to joining you in the French Riviera. It is so beautiful. Our clients on the Gold Coast in Australia, I was hoping to see that beautiful sunset that you spoke of so many times.  More locally, Troy, I was really hoping to become a boating enthusiast with you…that I will miss.

John…we talked about you a lot…in the office. Not sure you knew it, but your name was Boca…

This rogue wave that I was unable to navigate has likely cost me my hedge fund. And the reason why I had a hedge fund is you were clients. I promise you, every day when I woke up and I would check the markets, I was checking for rogue waves…I am so sorry that I was unable to manage the rogue wave that hit us this week.

James Cordier, President and Head Trader, optionsellers.com from November 16, 2018 Update

We love process over answers here. But any honest discussion of process has to come to grips with a problem: process has become a right-sounding idea.

What does that mean? It means that telling people to value process over outcome isn’t novel any more. It means that we have all been browbeat into preferring process to outcome. It means that being acceptable – and in the mainstream – requires us to pay homage to process. And it means that raccoons who could not care less about process-based approaches to managing both risk and uncertainty will typically adopt the same language as those who do. The result is that this right-sounding idea is, perhaps, more often encountered in its cartoon form than in its real form.

If you want to see some process cartoons in action, take a closer look at what went down with optionsellers.com last week. Well, don’t look into it at their current website, I suppose, which looks like this after they lost more than 100% of their clients’ money by selling options on natural gas and crude oil in managed account vehicles:

Instead, you need to go to cached versions of the site. You will learn that the principal was a regular on cable financial news networks. That shouldn’t be a surprise. You will learn – hopefully, again, without surprise – that the website used to look like a bad Cialis advertisement. I guess you really can’t come right out and say, ‘Are you a bored, retired white male with a ton of money who needs to feel alive again?’

But you might be surprised at how frequently “risk management” comes up.

Here’s a selection of blog posts you would have been presented with as a client:

  • Sleep at Night Risk Management for Option Sellers
  • 5 Rules for Surviving the Next 4 Years
  • Avoiding the Big Hit When Selling Options
  • The 2 Key Criteria You Must Use to Measure Diversification

Beyond these kinds of blog posts, you will see all sorts of allusions to Talebian concepts as well, like this one which suggests that selling deep out-of-the-money options is how to prepare for black swan events. If you are ever feeling guilty about your behavior, force yourself to read this again and again as punishment until you feel like the universe is in balance again.

Process and method words abound on the website’s materials, because they must. Lip service to the value of diversification and conservatism are everywhere, too, as are attempts to sell against the unpredictable volatility of equity markets. Because you can’t sell anything without this language in 2018, especially a risky strategy that is willing to bet the farm on huge exposure to notoriously idiosyncratic markets like natural gas. All of those blogs, all of that garbage about deep out-of-the-money options and black swans – is a cartoon of process. It’s a Nice Sweater.

Clear Eyes means looking for – and yes, maybe sometimes overzealously identifying – Nice Sweaters.

We’ve written about this before in The Grammar of Risk. This raccoon delivered its clients – I’m sorry, family – the Leverage, Illiquidity and Concentration Triple Crown. Not because they extracted premium from selling options, which can be a completely valid strategy in the right context, but because the structure of their trades was not built around limiting the extent to which leverage, illiquidity and concentration could take over control of the ship. Underneath the nice sweater of process was a strategy which was entirely dependent on an individual’s experience and discipline to navigate a process which was mathematically certain, over a sufficiently long period of time, but for such intervention, to achieve ruin. And it comes back to us as well: If we place trust in any one person, model or algorithm to ‘manage rogue waves’ which could bring us to ruin, we do not have a process, no matter what kind of sweater we put on it.

If you’re willing to spend some of a lovely Sunday reading more about ruin, time horizons and the matching of assets and liabilities, Epsilon Theory has you covered.

Cat’s Cradle

You Had One Job

Always Go to the Funeral


The Koan of Donald Rumsfeld

Things Fall Apart, Part 3 (Markets)


Cards of Control and a Brave Little Toaster


Returning to the 2017-vintage Rabbit Hole format: No grand theme this week, just some links I thought were noteworthy.

Cards of Control

If you only read one thing this week read this 👉Cards of control: How ZTE helps Venezuela create China-style social control. This is an exceptionally well-sourced long form article on the implementation and implications of ZTE ID cards in Venezuela.

Decentralized Identity: Ideology & Architecture

If you want to understand self-sovereign identity I think this is about as good a primer presentation as any. It is no more than a 15 minute read time even if you are new to digital identity and, I think, hits the major points in a sensible way.

Btw: don’t be put off by the ‘Bitcoin Association of Switzerland’ logo on the cover … there is no further mention of bitcoin (or Switzerland) in the presentation.

Going Underground, as a Toaster

Despite writing in recent weeks of the rise and reach of ‘the Chinese system’, I don’t believe we will actually get full, unavoidable surveillance in most of the real world any time soon.

For most people in the general populace (i.e. groups who are not specifically and intensively targeted) of most countries the rise in surveillance tech just means staying outside the surveillance system will be inconvenient not impossible, and so most people won’t bother.

For example, if you want to stay out of the video recognition system you (sort of) just have to put a ‘adversarial perturbation’ sticker on your head – see link here for how to get yourself classified as a toaster. For a more technical explanation of why you can get yourself classified as a toaster, or panda, or whatever, there is a good paper here.

This is also why I think real world ID and app data are currently much more effective surveillance techniques than video as video processing is still expensive, imprecise and hackable. But video surveillance still gets the headlines as it just feels so much more like surveillance.

Defining and Designing Fair Algorithms

While researching SB-10 bill (referenced in last week’s Rabbit Hole here) I found Stanford Computational Policy Lab and their work on SB-10 and then their presentation on Defining and Designing Fair Algorithms – check it out, it’s  long (112 pages), but really good work.

Sinister News Readers

And, finally, there is something deeply sinister about this Chinese news bot (scroll down to the YouTube video to see it in action). I think the sinister thing is something so human-like presenting news with no conscience of regard for ‘truth’ (>> insert preferred partisan joke here<<) … I don’t know, just deeply, deeply sinister in a Minsky / Shannon Ultimate / Useless Machine kind of way.