We Didn’t Say it WASN’T a Press Release

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.

Discretionary Consumption Becomes Law In The Land Of Lincoln [Benzinga via Morningstar]

There are a couple reasons I’m intrigued by this story ranking so high on the Zeitgeist today. The first one is that weed stocks have been remarkably resilient as a part of the financial media Zeitgeist. My suspicion is that this is simply being driven by clicks, and if you write about weed and weed stocks, you’re going to get those clicks in ways that writing about, say, Clorox wouldn’t get you. Doesn’t hurt that Motley Fool’s business model, whatever it was originally, is now basically pitching investments cannabis ideas to your boomer relatives on Facebook, either.

But I’m also fascinated by how often these Benzinga articles keep ranking as highly as they do. Every one we see is syndicated through Morningstar, reads like a news article, transitions to an obvious pitch, and never really discloses that it was really just a press release disguised as news. Is there any chance that the average person researching mutual funds on Morningstar.com, would know that? It’s really misleading, and really disappointing.

You rarely see a They Live meme-worthy transformation of newsy-looking content to pure pay-to-distribute opinion journalism in the course of a single piece, but well, here we are:

I suppose it goes without saying, but “Why am I reading this NOW?” should be your go-to on just about any site that syndicates content like this as news, sight-unseen. Add Morningstar to that list.

The ANDs of Asylum

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories. On the weekend, we leave finance to cover the last week or so in other shifting parts of the Zeitgeist – namely, politics and culture. It’s not a list of best articles or articles we think are most interesting … often far from it.

But these are articles that have struck a chord in narrative world. 

Bringing the Border to the Front Range [Boulder Weekly]

Increasingly rare, but powerful even so, are pieces which demonstrate high connectivity in narrative structure not because of their adherence to a particular common narrative, but because they connect otherwise disparate language with their own familiar language. It is the power of AND, a thing that most on-narrative journalism and writing misses, so caught up in hewing to some particular interpretation of facts.

This is one. It does not shy away from discussing conditions of detention facilities at the border.

AND it does not shy away from discussing an influx of asylum-seekers that is not a fantasy.

AND it tells both the stories of those who fear the current administration’s policy’s effects, and those who admit that, under some definitions, it is working.

The piece is feature journalism. There are opinions, affected language and structural decisions that convey a view in this piece. But broadly? This is gyre-closing, not gyre-widening work. No, it’s not about always naively presenting ‘both sides’. It’s about remembering that most of our complicated issues warrant far more ANDs.

Zeitgeist Narrative Map – Week of June 16 in Review

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

This is the map that links them all together for the week gone by.

Source: Quid, Epsilon Theory
  • The week’s macro focused news (NE quadrant) emphasized the Fed above all – for obvious reasons
    • We note, however, that China and trade were never far from the language used to discuss Fed policy
  • Language relating to Iran and oil prices was more connected than we would have expected. A little drilling down demonstrates that there is some active linking of ‘geopolitical risk’ and ‘wag the dog’ narratives around China, Iran and easy Fed policy
  • Beyond Meat’s adopted taxonomy is not even part of the go-go growth language cluster (NW quadrant). It’s in pure pitch-to-retail land (SW quadrant), through and through, a la Tesla. Proceed with caution.
  • As with almost every other network we observe, education and health care / health care cost-related language remains central to almost every graph
  • We were surprised to see Slack as disconnected from the rest of the language we would otherwise have expected to be related – whether growth or in retail-friendly momentum language – but that’s exactly where it was. Alone and on its own with only limited connection to any market narrative.
    • We are not sure what this says about the IPO frenzy or Slack as a business, but it isn’t being connected to bigger ‘thematic’ market commentary in the way other IPOs in the last year have

The Half-Happy Horror

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The Judgment of Solomon, Gaspar de Crayer (c.1620)

Optimization is a scourge.

I say this as someone who is as addicted to efficiency as anyone I know. I have a chart – not a mental chart, but an actual on-paper chart – of which of the three specific routes I should take to my office by day and time. I almost never schedule same-day meetings because I find it disruptive to planned periods of work on certain projects. I set up a mise en place for making Kraft Mac & Cheese for my kids, for God’s sake. My biggest average allocation to public markets in non-taxable accounts for several years has been to risk parity. Much of the rest has sat in systematic trend-following and behavioral premia strategies. I am an optimizer, y’all.

Yet I have also spent my career as an allocator to investment strategies observing what both explicit and implicit goal-seeking does to investors and their processes.

I’m not really talking about the robustness of objective-function optimized portfolios to changes in key variables or estimation methodologies, although just a shred of epistemic humility in portfolio construction would go a long way with some quants. I’m also not really talking about the mean-variance frontier-plotting and JP Morgan GTTM-driven Monte Carlo slides I see being put in front of clients (and which I have, from time to time, put in front of them myself). Feel seen? Throw a rock in the air and you’ll hit someone guilty.

But what I really mean is this:

Our need to manage common knowledge about multiple competing objectives in an optimization-centric framework makes us into professional cartoonists.

The Lip-Service Cartoon

I’m not saying anything outlandish here. If you’re a professional investor, you’ll be familiar with this – especially the lip-service cartoon. This is the one where we pretend – and ask everyone else to pretend – that our secondary and tertiary objectives or constraints are conveniently totally achievable without impacting our primary pursuit, even when they’re not.

I have written about this recently in context of post-secondary education, where optimization’s effects are obvious. The stories we tell about college are that it ought to serve three objectives, usually all at once:

  • College should broaden horizons, providing a foundation of historical, philosophical, aesthetic and scientific knowledge and the critical thinking needed to process problems raised by or answerable using that knowledge;
  • College should prepare students to enter and be successful in a profession; and
  • College should provide an environment for the socialization, personal growth and independence of young adults.

In practice, by any realistic measure of revealed preferences American universities don’t really optimize for any of these things. As we have argued, we think they mostly target maximizing the signal sent about the underlying intellectual, temperamental and socioeconomic and demographic traits of their degree-holders, because, well, that’s what our culture has permitted and what alumni donors demand.

Is it true that critical study of history, philosophy and language can improve the quality of thinking? Of course it is! If you’ve been reading Epsilon Theory very long, you will know that we believe the same Big Ideas tend to permeate almost every area of human activity, and that identifying those variants and their memetic attachments in the wild can be a meaningful advantage to our thinking. You’ll also know that we are passionate about the human importance of art and creation. The cartoon isn’t in recognizing the importance of these things. It isn’t even in recognizing that they may have some value for multiple objectives. The cartoon is in our pretense that coursework in music theory and the emergence of proto-Celtic language and cultures from other Beaker societies will be just as important to professional pursuits or personal growth of young adults as it is to living an enriched life. By corollary, however many hours you spend studying Kant, it won’t make you as good at your job as spending the same amount of time doing that job or preparing more directly for it.

To maintain the cartoon, we must pretend that it will.

Our pressure to create these cartoons can be traced to our sensitivity to common knowledge about those secondary and tertiary objectives that we are ‘balancing’. It is untenable – unacceptable – to be seen as not seeking out those objectives, and it is desirable under almost every governing narrative of the Zeitgeist to be seen as pursuing them. The inevitable result is that they get only as much of our energy and attention as is necessary to maintain the cartoon.

If you want to see this in financial markets, look no further than the methods your value managers provide for avoiding value traps (which will, I assure you, be disregarded as not being relevant in this particular case when it suits them), most ESG overlays, and almost every risk report provided by a non-integrated risk team to the portfolio management team. Pro-tip: the more a PM you are interviewing goes on about how much having daily access to these risk statistics has really changed their thinking, the more full of shit they are.

In fairness, it isn’t that they’re lying – it’s that the cartoon permits them to act as if the balancing of multiple objectives is serendipitously bereft of any tradeoffs. Their process is just that good.

The Measurement Cartoon

Sometimes our cartoon isn’t that we wave our hands at potential tradeoffs between our objectives, pretending that some magical alignment of our ideas permits the kind of synergy never found in nature. Instead, the cartoon is the pretense that we have the capacity to measure what those trade-offs are, even when we don’t.

The most inevitable cartoons of this variety, I think, are those built around liquidity. Our industry gets the occasional reminder that liquidity matters, such as with the recent Woodford business in the UK, or the Third Ave blow-up a few years back. After those events, there’s usually a 12-18 month cycle in which people Really Care about it. They add a few more questions to their DD questionnaires, and once the answers from fund managers congeal around some standardized answer, the questions largely stop, other than in the most perfunctory way. That is, until the SEC passed 22e-4, a rule establishing the requirement for a liquidity risk management program for open-end investment companies. It requires the mapping and publishing of position liquidity in four different categories.

In this case, we have a rule requiring the creation of a cartoon, and lest anyone is laboring under any delusions here, that’s exactly what investors will get. I’ve provided below a helpful example of the rule, its standards, the cartoon responses investors will receive and the real response investors would get if the industry were concerned about telling them the truth:

The point, of course, is not that liquidity isn’t important. When it matters, it matters a lot. And when it matters a lot, things are happening that are often not quantifiable in ways that will make sense under any objective quantification scheme in a normal environment. Asset class flows, manager-specific flows, market direction and available position-level liquidity are all pro-cyclical. As has almost always been the case, these cartoons will tell a happy story about liquidity to investors…until it’s too late. In other words, the value ascribed to a liquidity bucket is an ephemeral, practically useless figure that gives false comfort and context to manager and investor alike.

There are other examples of how we optimize for multiple objectives by turning a complicated secondary objective that deserves our respect into a cartoon we hand over to ALPS, BNY or our internal risk management team. Highly leveraged funds whose managers have ever uttered the words ‘Cornish-Fisher expansion’ to a client, you are correctly detecting side-eye. In all such cases, there’s nothing disqualifying or wrong about using guideposts or systematic measures, but when we optimize for some key objective (return or volatility-adjusted return) and explain away others (maintaining adequate liquidity) by constructing a cartoon to ‘measure’ them away, we’re gonna have a bad time.

The Mitigant Cartoon

In still other circumstances, we know that we can’t measure a secondary thing we care about, so the hand-waving takes a different form. We don’t have measurements. We have mitigants.

To be fair, mitigants are real things. AND they are often the basis of cartoonish abstractions that allow us to dismiss important things we ought to honestly, fully consider. We know that excessive leverage and concentration in this strategy creates potentially outsized risks to the portfolio, but worry not: in portfolio transparency we have a powerful mitigant. We know that there’s an unusual capital structure which could permit the intentional impairment of our class of interest, but the principal is a public personality with long-term clients in the same class. These are strong mitigants, you see.

The problem with mitigant cartoons – and what distinguishes them from actual mitigants, is that they are among the most basic tools of confirmation bias. They provide ready answers to our concerns which, like our other cartoons, miraculously seem to support the unbridled pursuit of whatever our primary objective was in the first place.

When we build too much of our thinking around optimization instead of good-faith, knowingly messy, honest evaluation of conflicting facts and circumstances, we will inevitably find that all of our problems become just-so stories. They will perfectly explain, measure or mitigate away the things we have to be seen to care about but don’t. They will perfectly support our single-minded pursuit of the things we do care about.

The Half-Happy Horror

Look, the idea here isn’t that we can’t walk and chew gum at the same time. An incredible share of life is obviously about finding balance between conflicting things, priorities and ideas – whenever it’s possible to do that, that is. The idea also isn’t that we shouldn’t adopt systematic methodologies -quite the opposite, as I frankly think these tendencies to optimize are stronger for those who don’t constrain their processes to rules (yes, it is clearly quite possible to systematize predispositions in such rules, too).

The idea is simply that optimization of decisions involving multiple objectives and constraints – whether fully systematic, rules-based or discretionary – is the kind of thing that should always cause the responsible investor and citizen to step back. Especially when the alternative is often a solution that will make everyone half-happy, which in a zero-sum game is no solution at all.

What can that person do?

  • We can (try to) be honest with ourselves. If we have a constraint, a risk, or a secondary objective in our strategy we’re trying to balance with another, are we giving them lip service? Are we draping them in unwarranted quantification so that we can consider them ‘solved’? Are we clothing them in ‘mitigants’ so that we can check the box and move on?
  • We can focus on ANDs. The language we use to talk about multiple objectives often betrays our attention and the considerations we would just as soon wave our hands at. In my experience, it is critically important to start from a place that considers all facts as ANDs, rather than presuming their relationship to one another.
  • We can try to simplify our decisions. Where possible, simplifying decisions and our responses to them so that we truly can focus on a narrower set of objectives – not through abstraction, but in truth – can help a great deal. With portfolios, maintaining a lens to conceptualizing pools of capital as serving discrete objectives can be an effective management tool.

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A Modern Vocational Curriculum

When I wrote Starry Eyes and Starry Skies a few weeks back, I made the argument that adequate vocational training for just about every financial services job I could think of would take several months (at most). A few readers asked me why I didn’t think that a longer, more in-depth liberal arts education had value. They clearly didn’t read the piece.

Still, it’s worthy of an answer: I do think it has value. But its value is caught up in the conflicted mess of the three products being sold by American universities: mind-expanding liberal education, vocational training and credibility signaling. We do no service to those whose jobs will ultimately never require them to use even the most modest insights or critical thinking gained from detailed study of Dostoevsky by forcing them to do so for four or more years. We likewise do no service to those who would learn for learning’s sake and yet subject them to four years of watered down classes that have to justify their value in some vocational or competitive signaling sense against other departments or institutions.

When you try to solve for multiple problems, you are almost always solving for only one.

A few other readers who actually read the piece asked me what I thought that truncated vocational training would look like. More recently, the CEO of Presto, a hospitality technology company, posted a similar, if more general question. Specifically, he asked:

If you could redesign college education for smart people who don’t know what they want to be, what would it look like?

His answer was quite good. I just have a different take. So here’s my answer: an intensive set of three separate quarterly sessions over a period of nine months, structured not to identity what is most important but to target the fundamental modern skills that are not necessarily more easily acquired in a work-place setting, and which provide the easiest ramp for additional hard- and soft-skill development in other areas once in that professional environment. It is an important distinction, because in almost every case, the most important determinants of success will have little to do with curriculum and knowledge, and far more to do with temperament, values and natural abilities in a range of different areas.

The topics excluded in the curriculum are left out for very different reasons. You don’t include econometrics because it’s useless unless you plan to become a graduate-level economist. You don’t include a productivity software class because two weeks of Excel without a mouse in your first job will do a better job of it. You don’t include an ethics course because if you are prone to unethical behavior, it sure as hell ain’t gonna be a class that changes that.

I’m sure you’ll let me know in the comments how much you hate it.

Quarter 1

Quarter 1, Module 1: Professional Writing

Good writing is the rarest skill among young professionals I have hired. It is also the trait shared among those who progressed quickly in accomplishment and responsibility.

  • Short-form writing:
    • Extracting and synthesizing key information
    • Bulletized / short-form writing
    • Note-taking
    • Email / slack-style
  • Long-form writing:
    • Technical
    • Analytical

Quarter 1, Module 2: Calculus

I’ll get the most argument on this one. But y’all, there really are a lot of jobs that benefit from understanding the calculation and implications of rates of change. You need more math than high school gives you.

  • Limits, integrals and derivatives
  • Differential equations
  • Optimization and graph construction

Quarter 1, Module 3: Fundamental Managerial and Financial Accounting

Every graduate who might work in some kind of business or non-profit (which is, as it happens, just about all of them) should be able to read and largely understand its financial statements, and should have some sense of how to build a similar financial statement for a household or small enterprise.

  • Ledgers, accounts, line items, debits and credits
  • Accruals and cash
  • Assets, liabilities, equity, income and expenses
  • Standardized structure (IS/BS/CF)

Quarter 1, Module 4: Interviewing, Public Speaking and Debate

Most university graduates are terrible extemporaneous, prepared, ad hoc and informal verbal communicators.

  • Basic formal logic
  • Research, preparation and performance techniques
  • Interview question formulation, conducting
  • Email, phone, conference call, video call, and meeting-size variable etiquette
  • Practical settings

Quarter 2

Quarter 2, Module 1: Capital Markets

You could call this corp fin, too, but importantly. the right course design here needs to emphasize far more about fund-raising, sources of capital and project/investment return evaluation, and far less about valuation techniques and grinding out WACC calculations. In short, a young professional should know what ROI means, the kinds of decisions that improve it, and the kinds of manipulation that others will practice to make it look improved. They should also know what secondary financial markets are and how they work at a high level.

  • Forms, sources and costs of capital
  • Returns and project evaluation
  • Capital structure optimization, credit and risk
  • Secondary markets

Quarter 2, Module 2: Statistics and Probability

  • Conditional probabilities
  • Measuring relationships, regression, optimization
  • Measuring central tendency and distribution characteristics
  • Interpretations, esp. applicability of generalized measures

Quarter 2, Module 3: Programming in Python

This will change at some point in the future. For now, any graduate of any post-secondary program purporting to have vocational influence should be at least proficient in the structure, syntax and methods of Python programming.

  • Structure and syntax, objects and classes
  • Libraries, API and packages
  • Functional programming
  • Data integration
  • Intro to ML, NLP, Tensorflow, etc.

Quarter 2, Module 4: Modern Sectors, Industries and Trade

Macroeconomics curricula are only slightly less useless for most students than microeconomics versions. The gap left for most students by removing them, however, is a simple, if detailed survey of what kinds of companies are out there, what their business models are, how they integrate, who their vendors and customers are, how they make money and how they fund themselves.

Quarter 3

Quarter 3, Module 1: Project / Experiment Management

The skill at organizing projects and resources is a technical one useful to almost any entry-level professional role. It is also a philosophical one that is critical to growth in managerial or leadership positions.

  • Workflows and dependencies
  • Timing, resource allocation
  • Organizational design
  • Conventions for group communication, meetings, logistical planning
  • Marketing experiment design and execution

Quarter 3, Module 2: Databases and Data Analysis

Most skill with data analysis tools and techniques will be best developed in a working environment on live projects. But fundamental knowledge here is important to building those skills.

  • Data classification, ordering and storage
  • Data retrieval, metadata and queries
  • Common data analysis techniques and packages
  • Applied statistical techniques

Quarter 3, Module 3: Business Law

The first job a graduate has should not be the first time they’ve read a contract, encountered its peculiar terms of art, navigated between defined terms and a contract body, or seen disclaimers, indemnities or closing conditions.

  • Torts and contracts
  • Regulation, regulators and SROs
  • Universal principles, esp. fraud

Quarter 3, Module 4: Hospitality

No fourth module this quarter. Instead, everyone works a food service job.

No, I’m not kidding.

Classes on sales are nonsensical gobbledygook, but the idea is right. It’s just something that can only be captured in a practical setting. If most graduates lack anything as much as they do writing and general communication skills, it is an understanding of how to respond with grace under pressure. It is the realization that one is always, always selling in every direction in any professional setting. It is a mentality that emphasizes hospitality, a much better and more comprehensive concept than client service or customer service models.

All told, with decent instructors, I’d be happy to put up a graduate of this program of equal natural abilities against a graduate of any undergraduate program in the country.

It’s unrealistic, I suppose, to consider that we will be able to break the stranglehold that signaling-based institutions have on structuring an expensive four years that functionally serves only a portion of students at all, and almost nobody well. Still, it is worthwhile for us to go through thought experiments like this, if only to perform self-evaluations, give thought to how we structure our professional education programs within our businesses, and how our own children’s educations are going.

It is also important for us to consider how we can make it feasible for a true, liberally minded, horizons-expanding education to exist without the frequently oppositional aims of signal-maximizing and vocational preparation. You won’t be surprised to hear that I think it starts younger, with less reliance on the system or with more reliance on the Pack.

Yeah, we’ve got a lot more to say about this.

Democracy Dies with Dancing

Qatar, a country without a free press, hosts a D.C. party celebrating…the free press [Washington Post Magazine]

When a sitting president repeatedly calls your industry the ‘enemy of the people’, I think you can be forgiven some dramatics about the importance of and threats to mass media outlets. Newspapers and cable TV news are not ‘the press’. although they constitute a meaningful portion of it, so there’s some abstraction being done here, but again, not inappropriately so. At least in my judgment.

AND I think that a lot of the reason for the newfound religious belief in the importance of the first amendment among some press types has more to do with opposition to a deeply disliked and antagonistic president than it does with any sort of widespread passionate, principled belief in the fundamental value of freedom of expression. To wit, this article sends a journalist into a Washington D.C. party sponsored by notorious journalist-squelcher Qatar. Hilarity ensues.

Utter horseshit, of course. I’m not a media member in any accepted sense of the word, but even I know that Qatar routinely shuts down critical media. You’d have to be living under a rock in the industry not to. But in a world of narrative, it’s important to drape our preferences in the most politically acceptable and emotionally charged memetic impulses available to us. We’re banking the unbanked! We’re protecting the poor students punitive damages would adversely impact! We are crusaders for free speech!

Y’know, unless there’s a good DJ.

Election Rewind: June 2015

One of the questions that has come up from our ET Live! discussions about the 2020 elections is, “What would this have showed at this point in the last election?” It’s a good question, so we decided to take a look.

It so happens that May 2015 was a pivotal month in the GOP primaries. Now-president Trump was polling at low single digits, but that wouldn’t last for long. So what would you have seen in narrative structure that month? First, when looking at Attention – our measure for the external similarity of candidate-specific language used in media with the language relating to the election more broadly, you would have seen a few candidates who, despite widespread popularity, suffered from a narrative structure at odds with what the 2016 election was perceived to ‘be about.’ You also would have seen two candidates with middling single-digit poll numbers whose narratives in were media very in-line with what it was perceived to ‘be about.’

What about sentiment?

There is a tendency when we think about elections and politics to think about populations and what they care about. We build up predictive engines based on demographics, expressed preferences and revealed preferences on issues, responses to poll questions and other inputs. In general, those models are pretty good. Well, they’re OK.

We think that the time has come to stop predicting and to start observing – not what polls are saying or what our network of friends or social media followers are retweeting, but what the crowd thinks that the crowd thinks. We continue to think that the widest possible net of mass media, blogs and other primary content gives us the best window into observing that thing, which we call Common Knowledge.

Does this mean that Biden is Jeb, and that we can hand out the Carson, Cruz and Trump roles to some combination of Warren, Harris and Sanders? No. There are different circumstances for each (not least Sanders’s prior electoral history), and there are a lot of actual events that can still influence that common knowledge. But for now, what we can observe is that Biden is a poor fit for what everyone knows that everyone knows the 2020 election is about. We can similarly observe that Sanders in particular is a good fit for that common knowledge, with a hell of a lot of rah-rah cheering coming from the kinds of language used to cover him by the impartial media.

It means something for the way we consume information, if we want our own views to be less shaped by our intuitive ability to unwittingly internalize and co-opt that common knowledge as our own points of view.

It also means something for how we ought to anticipate primary season playing out.

Warren in June: Back in an Unflattering Spotlight

Warren Narrative Map as of May 31, 2019

Source: Quid, Epsilon Theory

Warren Narrative Commentary

  • The lower attention level of Sen. Warren’s narrative compared to that of other top candidates is, we think, indicative of two patterns.
    • The first is that Warren’s campaign and its coverage have emphasized her role with respect to issues that are less relevant to overall election narratives. In particular, impeachment of President Trump continues to be an issue linked in media to Warren, but it is treated as a peripheral election issue in media, at best.
    • The second is that, even with respect to otherwise high attention topics like student loans, socialist or highly progressive policies, etc., the language used in coverage of Warren’s policy ideas treats her association with them as almost ‘accidental’.

  • In a sense, our opinion is that Sen. Warren’s attempts to balance support of centrists while still claiming the mantle of the ‘very progressive’ candidate – despite a track record that generally supports the latter contention – are not yet resonating in political media.

  • They are resonating more than Biden’s narrative, and we would not be surprised to see Warren take some of his early support.

  • As Sen. Warren’s very prominent senatorial activities take a backseat to campaigning over the coming months, we will be interested to see if the overall cohesion of and attention to her platform and candidacy improves from today’s somewhat fractured narrative.

  • If it is true that Warren’s best opportunities lie ahead in the more wonkish phases of the primary season, we would also counsel monitoring the sentiment of her coverage, which, while not as abysmal as Biden’s, has been increasingly negative over the course of 2019.

  • The leading women candidates – Harris and Warren – have both been treated to far more negative language in political media in recent months than all of their non-Biden counterparts. On that basis, we counsel care in consuming potentially affected / opinion-influenced news content about these candidates.

  • Topically, Warren appears to have attempted to carve herself out as THE anti-trust, anti-corporate power candidate, and as the solving-student-loans candidate. She’s been prominent with her plan on the opioid epidemic, too. But the media have not yet fully embraced the relationship between these topics and Warren’s policies. In other words, when they write about ‘the student loan crisis’, they only occasionally refer to Warren with language about her proposals. However internally coherent the platform may be, the link isn’t nearly as connected in media election narratives as, say, Sanders and healthcare.

  • These are both important issues to 2020 election narratives. We think closing the gap on her association with these issues would have a significant impact on the common knowledge promoted by media about her candidacy.

  • The Native American claims issue is still there, albeit in mostly right-leaning media. It also remains surprisingly central to discussions of Warren. But it has declined substantially in quantity, attention and cohesion over the last few months.

Warren Narrative Attention as of May 31, 2019

  • Whatever Warren Narrative exists is roughly average among candidates in terms of its consistency with broader election narratives and language.

  • This does, however, represent a meaningful increase over the last few months as campaign dialogue has moved away from new candidate announcements and back toward more issue-focused language that has tended to align well with Warren’s own coverage.

  • In fact, Warren trailed only Kamala Harris in our attention measure for the month of May alone. Unfortunately, that higher attention has not been accompanied by positive coverage.

Warren Narrative Cohesion as of May 31, 2019

  • Senator Warren’s narrative has been very consistent (note the tightness of the Y-Axis scale on the above graphic) throughout early 2019, and ranking in the top half of candidates but soundly behind that of Sen. Sanders.

  • The internal consistency of language used to describe Sen. Warren and her campaign has been moderate, but is probably being suppressed somewhat by her very public involvement in the US Senate and the added complexity of non-election issues on which she makes public statements.

  • Regardless of the causes, as with most other candidates, a Warren Narrative has not yet crystallized in media in the same way that a Bernie Sanders Narrative (or for that matter, a Joe Biden narrative) has.

Warren Narrative Sentiment as of May 31, 2019

  • While the data we are working with can’t ascribe intent, we do note that each of Harris, Warren and Gabbard have been soundly in the bottom 4 of sentiment for the second quarter of 2019 (joined only by Biden).

  • As important and central as sex and gender language have been thus far, it is striking that media accounts of the three most prominent woman candidates have tended toward such negative language in coverage.

  • We would be mindful of this in reading all of the coverage of these candidates, but in the case of Warren in particular, whose descent in sentiment has been so consistent, we would be doubly cautious of the influence of the revealed preferences, if you will, of authors and news outlets.

  • We also note that this has happened even as the broadly negative coverage of her prior comments about Native American ancestry have faded. This sentiment swing does not to be a feature of right-leaning publications alone.

The Not-So-Much War

Hedge funds and private-equity funds face tug-of-war over talent [Business Insider]

This blurb is from a BI daily round-up piece – if you’re a BI subscriber (LOL) you can access the full bit from the link.

The long and short of it is this: calling the fight between PE/VC and Hedge Funds over talent in 2019 a ‘tug-of-war’ is like calling the USWNT group stage match against Thailand last week riveting sports entertainment. I’ve been asked for advice from a lot of soon-to-be-alumni from my own alma mater over the last few years. I’ve done quite a few interviews of prospective students, too. It has been years – legitimately years – since I’ve heard the words “banking” or “hedge fund” in any of those conversations.

Public markets active management professionals are fighting a valiant rearguard action in narrative space (as they are in AUM space), but it’s a sure loser; that is, until the next liquidity crunch coincides with actual marks-to-market that remind us all what some of those ’06 vintage buyout or early 2000s VC funds looked and felt like.

I wouldn’t hold my breath. We’ll get our adversely selected candidate pools and like it.

Zeitgeist Narrative Map – 6.14.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But this is the map that links them all together.

Source: Quid, Epsilon Theory
  • Usual mix of core topics in financial media today, although extracted ngrams from the commentary cluster have tended toward terms like ‘defensive’, ‘bearish’ and ‘downside.’
  • Commentary is more closely related to the Fed Cut discussion language, indicating what we think is greater attention to these public market concerns than the more positive tech/health care/private equity chatter on the right hemisphere of today’s narrative map.
  • IPOs have faded from the radar a bit from summer in terms of quantity, but discussion of them is still intensely connected to the narrative of markets from a linguistic perspective.
  • Privacy and Big Tech break-up language, especially from the campaign trail, is starting to filter a bit more into financial media. It’s a narrative we’ll have our eye on.

Victims of Success

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.

Beyond Meat’s stock falls after former investor Tyson Foods announces plant-based nuggets [CNBC]

Of all the last couple years’ IPO run-ups, Beyond Meat’s is the one that feels most to me like vintage ’90s. The narrative power of Unknown Growth Potential! is so strong in a largely growth-constrained world that we’re almost all willing to take a small gamble on it, or else bet that others will do so, which works out to the same thing.

So I don’t begrudge those that are trading the thing with those ideas in mind, although I have neither the skill nor attention span to attempt it myself. But one starts to get the impression that there really are true believers here, not just in the long-term potential of meat alternatives (which does seem somewhat inevitable), but in the long-term prospects of the first company to have success marketing an edible beefesque recipe of heavily processed pea protein, canola oil and laxatives. Even among the sell-side, there are those who believe the fledgling franchise ought to be valued in the same range as the largest long-time producer of America’s favorite protein.

But if you’re betting on growth, remember: you’re betting on IP or you’re betting on a brand. It makes more sense in tech-land, which is where you usually see these growth stories, where they can platforms that establish meaningful switching costs and capital-driven barriers to entry. Tyson gave the market a (very) little reminder that that kind of belief in the IP of processed packaged food is perilous. These are not hard-to-figure-out ingredients, folks. Beyond that, the last several years have given us frequent reminders that brand sometimes doesn’t mean what it used to among American food consumers. Somehow, the narrative for Beyond Meat seems to have survived these reminders thus far, perhaps because this is the trade that allows investors smitten with the idea of meat alternatives to view it through a lens of abstraction that makes the ‘idea’ investable as a single stock.

That doesn’t mean you have to be a skeptic on the idea of plant-based meat analogs, much less a fellow like the above-pictured Rick Wiles, who believes that the competing Impossible Burger is part of a satanic plot to create a race of soulless creatures. But if you choose to invest on the basis of a strong narrative – an entirely justifiable approach in many circumstances, we think – take care not talk to yourself into believing your own stories. The longer you dabble in this kind of speculation, the easier it becomes.

Live from Potemkin

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.

Social network under fire but staffers show no signs of pressure [Fox News]

Most Potemkin Villages are not about malicious deception.

In other words, most are not displays intended to convey a lie that is only recognized as such by one party, like the imaginary town of Rock Ridge, built to prevent the would-be atrocities of the Number 6 Dance later on. On the contrary, most of these elaborate set-pieces are lies constructed to maintain common knowledge that is convenient in one way or another to everyone. Everyone walks away getting to tell the story they want. It’s a sort of clear eyes / full hearts thing, but for pathological liars and politicians (your brain probably just inserted the Mark Twain quip that felt too on-the-nose to me here, so just pretend I wrote it).

But when that common knowledge starts to break down, you start seeing weird things. This article is a weird thing. The author flits effortlessly between genuine impressions that employees are ‘happy’ and skeptical side-eye at tough topics being brushed off. If the whole piece seems awfully confused about how much bullshit Facebook is shoveling and what can be surmised from that, well, that’s because it is.

I don’t know how the Big Tech narrative has changed since we observed that “FANG” had become a negatively tinged concept, although we will be spending more time on the topic. But in the widening gyre of 2019 US electoral politics, having one armed tied to the “biased opponents of free speech” narrative and another to the “excessively powerful corporations representing interests of the ultra-wealthy” narrative doesn’t sound like a recipe for a fun few years.

Sanders in June: Polarizing…Except in Media

Sanders Narrative Map as of May 31, 2019

Source: Quid, Epsilon Theory

Sanders Narrative Commentary

  • Of all major candidates, Sanders coverage demonstrates the highest attention, the highest cohesion and the highest sentiment (although sentiment relating to coverage of Pete Buttigieg, who has emerged somewhat in May and June, rivals that of Sanders).
  • The high cohesion – visualized by the overall compression of distance between nodes and clusters in the graph above – indicates high similarity of language across articles referencing Sen. Sanders. Authors’ references to Sanders follow a structured taxonomy and almost obligatory references to his age, socialism-related terms and his 2016 campaign.
  • We think this alone justifies significant caution when reading news about Sanders and his campaign. We think the gravity of the strong Sanders narrative has the capacity to skew the language and implicit/explicit conclusions included in news reports in the direction of that narrative.
  • Discussions of democratic socialism, the green new deal and related topics concerning universal health care, workers rights and unions, taxing the rich, etc. all occupy the most central, most connected part of Sanders’s narrative. At this point in the campaign, the Sanders narrative is not only more cohesive than that of other candidates, it is cohesive around key issues.
  • Those key issues and the language used to discuss them happen to be the ones that the media have been most engaged in writing about – popular democratic socialist policies are central to the narratives of the Democratic primary – which is the driver of Sanders’s very high attention score in our system.
  • There are only two central clusters within the Sanders graph that are remotely negative: the first includes articles defined by ‘old white guy’ language, usually expressed with concern about dual standards in discussions of electability and likability of Sen. Warren and Sen. Harris, in particular. The second are discussions of Sanders’s remarks on Israel and Netanyahu.
  • From a ‘predictiveness’ perspective, we think it is more difficult to judge how much the influence of media will be on a candidate like Sanders, who has a history and has established “opinions” from many likely voters. Still, the media is (intentionally or unintentionally) promoting common knowledge that “Sanders is the candidate with the policies that will make America America again.” We are less convinced than some that voters still turned off by the 2016 primary or by Sanders’s socialist credentials won’t be affected.

Sanders Narrative Attention as of May 31, 2019

  • Attention of coverage on Sanders declined somewhat in March with the entrance of additional candidates; since that time, however, it has remained stable and still well above that of nearly all other candidates.
  • For most of 2019, populist and democratic socialist-related topics and language have dominated election coverage, which we suspect is the main reason for Sen. Sanders’s attention measurement under our methodology.

Sanders Narrative Cohesion as of May 31, 2019

  • With the exception of the period prior to his formal announcement of a 2020 campaign, the cohesion of coverage of Sen. Sanders has been both very high and consistent.
  • We think that the narrative of Sanders – the ‘socialist’ candidate with a very progressive policy history – is crystallized across media coverage, causing all pieces to veer toward mentions of those issues or the use of language consistent with that common knowledge, even on disparate topics.
  • As noted previously, we believe the presence of such a cohesive narrative warrants extra caution when reading news about Sanders (from all parties, regardless of perspective on his candidacy).

Sanders Narrative Sentiment as of May 31, 2019

  • Interestingly, the sentiment attached to Sanders coverage has steadily increased in every month of the primary campaign.
  • This is an unusual pattern, and isn’t reflective of anything happening more broadly with the mix of topics over these five months – it certainly isn’t a pattern shared by any other candidate.
  • It is, however, only five months. This rise could absolutely be a feature of some random relationship of Sanders to topics that were covered more positively. Still, as consumers of news, we would be concerned that this might be indicative of knowing or unknowing preferences on the part of journalists authoring stories or editors assigning coverage.
  • Almost universally, we think consumers of political news – supporters and opponents of Sen. Sanders alike – should be asking “Why am I reading this now?” for almost every Sanders article they read.

The Crossover Point

The New York Times published a powerful story this weekend.

It was the kind of story that has become entirely too common – the story of a young woman, a child from a suburban Dallas megachurch who was abused by a church leader. Not only that, but a leader of the church’s children’s ministry. Utterly heartbreaking, and the kind of thing that our growing familiarity has made too easy to ignore, or to allow not to affect us. 

And yet the story was different from those that would be familiar to us, at least in some small ways. Unlike the prior scandals in the Catholic Church, for example, it wasn’t that the authorities weren’t immediately notified. They were. It wasn’t that the abuse wasn’t taken seriously by church leaders. By all accounts and by all evidence, it was. It wasn’t even that the church didn’t take swift action to prevent anything like this from happening again. It appears that they did. It was that within the church and without, the leaders acted in ways that demonstrated their great concern for how the full revelation of what transpired might impact their ministry, even if it meant ignoring the need of the victim and her family to be seen. To be heard. Regarding the church’s discussion of the termination of the minister, the Christian Post reported:

If we can suspend our disgust long enough to consider what could possibly have gone through their heads to miss the mark by so much, it is not difficult to find at least some empathy. I think these are people who earnestly believe that their ministry is doing important work. They are people who believe – perhaps with justification – that they would never get a fair shake from people on the outside to tell a fair, true story about what happened. They are running through scenarios of the harm that might be done if that happened, if they didn’t control as much of the message as they might. They are trying to find a balance somewhere between the things they know are right and the things they believe are important and worthy of defense.

But this is a lie we tell ourselves. There is no balance to be found between what is right and what we believe is important.

This conundrum isn’t a problem only within this church, or The Church, for that matter. It is a natural feature of scale. 

There is a scale of all activity at which we function and are (more or less) treated and perceive ourselves as humans, and there is a scale of activity at which we function and are treated and perceive ourselves in context of some group to which we belong. I am not talking about tribalism, necessarily, but a change that takes place whenever what we need others to believe to be true about a thing we do becomes more important than what we know to be true about that thing. 

It happens with churches when The Church! becomes a thing, something seemingly more important than the unique and several relationships of accountability and discipleship that justify the thing in the first place.  It happens with businesses, when the single-minded pursuit of an idea gives way to The Business!, a thing of job creation and reputations and expectations. It happens with investment strategies, when our philosophies, principles and maybe even our edge are subsumed into The Fund!, this thing of track records and sustainable management fees and the long-term franchise value of the business we are running.

I’m not talking about a technical problem.

I don’t mean the technical way that any edge we have disappears when our assets become too large because of some liquidity-induced impairment to our flexibility and ability to take on certain positions. I mean the way that our thinking changes when our business or our fund reaches the point at which our management fees are enough, when they allow us to employ people, to start thinking about the capitalized value of our business instead of the returns we generate. 

I don’t mean the technical way that a business or church or any other affiliation of humans changes when it gets bigger and we can’t always have lunch with or talk to everyone every day. I mean the way that our thinking changes when the Important Mission of that place becomes important to us beyond the sum total of the things we do together as part of it. 

To be sure, the line where this happens isn’t a line between good and bad, although the Village Church example shows just how easy it is to turn this illusory conflict into brutally poor decisions. Many of our critically important institutions – national identity, culture, community, enterprises built around grand ideas – demand that we cross it boldly. Invariably, however, it is the line where we will be forced, sometimes quite often, to decide between what is right and what we believe is important (a false choice, even so). It is the point at which our thinking ceases to be about the right way to treat an individual, and where we begin to consider the consequences on some other thing of value.

It is the Crossover Point. 

As investors and citizens and friends, I think part of Finding Your Pack means developing relationships of meaning, mutual trust and accountability in which the relationship itself IS the thing. It also means knowing where your Crossover Points lie, and being conscious and intentional about crossing them. For professional investors and citizens alike, I think it’s a worthwhile dimension for self-inventory and consideration. 

Americans Rely on Public Restrooms

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.

Americans Rely on Public Restrooms  [Press Release]

This is among the weirdest press releases I’ve ever seen. Any time you kick it off with stats about the relative public bathroom proclivities of different demographics, you’ll make the list.

So why publish a press release like this? Like any other PR piece – even one as weird as this – the entire aim is to create common knowledge, to make the reader change what he or she believes everyone else knows about a topic by presenting something as news. And yes, that’s true for the non-bathroom things people do in the bathroom, too. This manufacturer of commercial bathroom fixtures wants everyone to know that everyone else knows that people like to go to the bathroom and cry sometimes.

All that being said, I will leave you, dear reader, to consider why crying in a bathroom stall is so connected to financial news.

Biden in June: Popular but Disconnected

This candidate-specific report is part of our Epsilon Theory Election Index series, in which we turn the tools of narrative analysis and natural language processing to media coverage of the 2020 election. For more about this series, including explanations of all of the terminology and measurement used here, please read our first installment here.

Biden Narrative Map as of May 31, 2019

Source: Quid, Epsilon Theory

Biden Narrative Commentary

  • In general, while sentiment attached to Biden by the political media continues to be far more negative than for other major candidates, some of that sentiment is isolated to topics that don’t appear to be getting much traction: his role in the 1994 Crime Bill, the Trump/NK ‘low IQ’ banter and ‘Ukraine scandal’ being chief among them.

  • Articles about these topics tend to be standalone and linguistically distinct. They are usually only about that thing, and aren’t routinely being referred to in ‘core’ articles about the election and Biden’s candidacy. We judge that common knowledge at this point is that ‘these don’t matter and aren’t relevant to the election.’

  • That isn’t true, however, for Biden’s history with Anita Hill. It is much more connected to Biden’s central narrative, and the topics of sexism and racism – especially in context of the Democratic Party’s role in expunging them – are central to broader election narratives in a way that make this the ‘negative’ issue of concern.

  • The most striking feature of Biden coverage, however, is that the most connected, most on-narrative articles aren’t about Biden at all. They’re about Donald Trump or about a policy proposal or event from another candidate. In other words, Biden’s narrative is largely being defined as a measuring stick or comparison (e.g. will this allow candidate X to close the gap with Joe Biden in polls?) without much in the way of primary influence.

  • There is one exception: there DOES appear to be common knowledge that Biden is the candidate who can secure more votes from the black community.

  • Other than that, as expressed elsewhere our view is that Biden at this point is a candidate whose narrative in media is moderately well-defined, but mostly in terms of things other than his policies or candidacy, and whose narrative is at odds with the issues being promoted as ‘important’ to the 2019 election.

  • We suspect that the realization of this treatment – whether justified or not – has prompted some of Biden’s more aggressive recent moves, including his flip on the Hyde Amendment and declaration of Donald Trump as an ‘existential threat.’

Biden Narrative Attention as of May 31, 2019

  • As noted previously, relative to the other major candidates, the Biden narrative is very much at odds with the broader 2020 election narrative, which is what we track through our Attention measure.

  • What people write, care, and think about when they write, care, and think about the 2020 election is very different from what they write, care, and think about Joe Biden and his candidacy.

  • This effect has been far more pronounced since his announcement.

Biden Narrative Cohesion as of May 31, 2019

  • While attachment to broader election narratives has been weak, relative to other major candidates, the internal consistency of Biden coverage is comparable and competitive.

  • As his campaign has ramped up – and as his narrative as “front-runner” has emerged – the cohesion of a Biden narrative has accelerated.

  • In short, we see a moderately cohesive network of articles that simply isn’t all that related to anything else being written about the election, key topics, or policy issues.

Biden Narrative Sentiment as of May 31, 2019

  • While the sentiment attached to language used in Biden coverage has bounced back slightly from the lows following his candidacy announcement, it remains far below that of any other candidate over and during almost any period.

  • Some of this can be attributed to the early oppo research effects faced by any front-runner with an established legislative and political history, but even so it should be noted that this coverage has resulted in the presumably desired negative sentiment effects.

  • One could argue that Biden has actually been somewhat fortunate. The scandal and criticism-related topics other than Anita Hill have been sufficiently distant and disconnected from most coverage that their discussions have not really impacted the broader sentiment. As you can see from the sentiment visualization of the Biden narrative map for May 2019 below, the two most negative sentiment clusters are among the least well-connected to the broader Biden narrative.
  • Still, it remains our view that broader election media has (intentionally or unintentionally) treated socialism, green new deal, equality, difference from Trump and other issues outside of Biden’s wheelhouse as The Issues of the 2020 election thus far, and has been unfavorable in treatment of candidates, centrist or otherwise, who have not incorporated those principles into their own story-telling and platforms.

  • Biden’s more recent attempts to appeal to progressives – and the media response to them – will be telling and should be monitored, but our conclusions continue to be that (1) we would read any news about Biden with significant caution about the underlying attempts of the outlet to establish common knowledge about his candidacy, and that (2) we would not be surprised to see continued erosion in support for Biden in favor of Warren, Sanders and (to a lesser extent) Harris.

The Weekend Zeitgeist – 6.9.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories. On the weekend, we leave finance to cover the last week or so in other shifting parts of the Zeitgeist – namely, politics and culture. It’s not a list of best articles or articles we think are most interesting … often far from it.

But these are articles that have struck a chord in narrative world. 

The Puzzle [The Players’ Tribune]

It is encouraging to see a piece that doesn’t treat strength and vulnerability as dichotomous at the top of the Zeitgeist.

From the Greeks to Instagram: The Secret History of the Flower Crown [Jezebel]

I am not the target audience for this piece, or perhaps much that gets published at the blog that, like Deadspin, was among the Gawker properties that survived (sort of) the wrath of Peter Thiel and Hulk Hogan (if “Peter Thiel and Hulk Hogan” sounds like the start to a decent joke instead of something you remember from a few years back, consider Googling it).

Still, it is an interesting brief aside into the history of one particular symbol. It highlights the capacity of the arts and entertainment to provide long-term support to narratives, the necessity of the occasional iconclasm, and the inevitable co-option of particularly effective symbols to serve even more abstracted ideas. Not deep, not broad, but an interesting weekend read.

As to why it sits at the top of our Weekend Zeitgeist – the most linguistically connected articles published in the world in the past week? Gender and sex – and the language used to discuss them – are integral to the Zeitgeist in 2019. Here is our map of their connectedness to all non-financial news in the last week alone. They are both central and connected to almost all other topics and language/meaning-based clusters.

Source: Quid, Epsilon Theory

Walter Carpenter: The workers behind the tourism dollars [VT Digger]

Since the Reagan Revolution, certain words have been banished from the American political lexicon, tarnished as they were with associations with communism or socialist policies. Among the simplest, and most powerful?


It’s not a word even Obama used all that much. He preferred ‘folks.’

Trump and most others adopted less socialism! meme-sensitive variants like ‘hard-working Americans’ or ‘blue collar Americans’ or ‘regular, everyday Americans.’

Why was this connected to so many articles? Why did it sit at the top of the Zeitgeist? Because the language of socialism, of talking very specifically about workers and their lives, is no longer off-limits. Sure, editorials like this would have found their way into plenty of Vermont newspapers in the past.But there’s no way in hell they would have been among the top 5 most connected to all published articles by language.

Here are the socialism-related articles (in bold) against the full network of non-financial articles.

Source: Quid, Epsilon Theory

For more about what we are observing here, be sure to keep up with the ET Election Index.

The Democrats Discover the Supreme Court [The Atlantic]

Despite its third foundational principle (in which it rather delightfully claims to be the organ of no party or clique), the Atlantic probably sits on the periphery of the 10 most influential missionaries of left-leaning politics in the US. Like many similar publications, it is an essay, analysis and opinion journal. Ordinarily I’d call this paragraph an exercise in Fiat News, but the article is obviously just a collection of the author’s opinions, and if you expected otherwise, it’s probably your own damn fault.

Regardless of how you feel about this policy idea in particular, there’s one word that should always trigger your “Why am I reading this now?” impulse. whether you see it in true news or opinion pieces: moderate. Conservative journals usually prefer the term mainstream to validate and imply the accepted nature of their opinions – National Review used the term in 320 articles in the last year alone. The trigger should be the same. There is rarely a case in which these words will be used, especially as much as moderate is in this piece, that is not intended to shape common knowledge about what everyone thinks everyone thinks. And it usually means that the thing or policy about which the word is being used, well, ain’t, although it’d sure be nice if everyone thought everyone thought it was.

The Anti-College Is on the Rise [New York Times]

Regular readers will not be surprised that this is at the top of the Zeitgeist. We’ve written about related issues, too.

The problem is the same problem faced by the federal reserve and by portfolio managers and just about everyone else. When you optimize for two objectives, you will usually solve for one…or none at all. The post-secondary system has tried to solve for producing rich, broad, civil-minded liberal education on the one hand, and vocational training on the other, the latter becoming a marketing necessity throughout the 20th century. What they ended up with was neither, and a powerful credentialing cartel.

For my part, initiatives like the above are interesting, and seem to be searching for reproduction of a purely educational mission. I have no aversion to them, because that is a thing that a healthy liberal society should make available to its citizens. I also have no faith that they will do anything to tear down the credentialing problem embedded in university education.

But I suppose not everything has to. Optimizing for one objective – and achieving it – is rare thing worthy of admiration.

truth and Truth

Smiley-faced authoritarianism is rarely announced with dire, thundering rhetoric.

Instead, it is delivered with smiles and hashtags. It is celebrated as an achievement. It is tweeted with the perfect celebratory photo, tinted with just the right filter, Twitter handle watermark in just the right place. If the composition of the photo can frame the idea of ‘speaking truth to power’, all the better. If it can superimpose self-praise in bold text, we are in the smiley-faced sweet spot. If that self-praise can incorporate an Orwellian euphemism like, say, “legitimize a growing industry,” it is hard to see how we can do better.


There are powerful memes here: ‘legitimizing’ an industry isn’t just a creepy paternalistic turn of phrase – in this case it is also a meme of equality! Safety! Protection! But the memes attached to the bill itself were even worse. Around the same time that Rep. Gilchrest proposed CT HB 5754 earlier this year, another bill was proposed and referred to committee – HB 6742. That second bill was introduced with the following description: AN ACT CONCERNING THE ERADICATION OF HUMAN TRAFFICKING AND FORCED AND EXPLOITED LABOR IN STATE CONTRACTS. What came out of committee? Narrative, of course, in the form of the new frankenbill: AN ACT CONCERNING HUMAN TRAFFICKING AND STATE CONTRACTS AND THE LICENSING OF ESTHETICIANS, NAIL TECHNICIANS AND EYELASH TECHNICIANS.

Yes, you read that correctly.

The original bill had all of the usual trappings of occupational licensing legislation: high school diploma requirements for professions with no conceivable justification. Big recurring fees paid to the state. Huge fines (i.e. $25,000) for violations. Absurd training requirements. In this case, the state of Connecticut felt it was necessary to impose all of these requirements on people who wanted to become hairdressers, makeup specialists and nail salon workers.

Occupational licensing laws are almost universally terrible. They ought to be one of those rare Widening Gyre-crossing miracles that unite both market liberals and full-on socialists. They disproportionately harm the poor. They disproportionately harm women. They disproportionately harm minorities. They promote anti-competitive behavior that reduces the rewards for well-run businesses and entrepreneurs and protects poorly run enterprises. They protect petty cartels. They make no one safer. They produce almost no advantages for anyone other than (1) poorly run incumbents looking to raise barriers to entry, (2) rent-seekers looking to profit from new educational requirements and (3) the politicians who receive funding from them. For all of those reasons, there is a strong movement to pull back these cartelization rituals in most states, and in most jurisdictions a bill like this would undergo far more challenge.

But what is truly terrible, and what permitted the bill to advance at all, was the cynical adaptation of the human trafficking angle, a gift from the narrative gods. By grafting it to the early language of the bill, it permitted supporters to present opposition to it as support for a vile thing. It abstracted the nuts and bolts of a purely bureaucratic proposal into unassailable concepts. And the bill sailed through committees and amendments.

There is Truth-with-a-capital-T in the horror of human trafficking. It happens. It is detestable and ought to be resisted with all the force we can muster. And it has been facilitated in the past through nail salons in particular. And yet the truth-with-a-lower-case-t, the facts, are that there is no evidence that the paltry ‘notice-posting’ requirements of the draft bill or any of the licensing would do anything more than provide lip-service to the very real problem that was used to adorn the legislation for narrative purposes. There is also a growing body of evidence that politicians, prosecutors and police are increasingly adorning other charges with public assertions of human trafficking on the front-end of processes to quickly convert public opinion, after which (because the truth belied the Truth) those claims have often fallen apart (e.g. Bob Kraft investigation).

The final bill is, thankfully, more limited, and requests feedback from the incumbents in the affected industry prior to drafting the scope and specifics of licensing requirements that will be promoted in whatever final legislation emerges. Still disappointing that it passed, but that’s a political opinion of mine, and not an observation on the cynical manipulation of narrative, which has largely been removed.

The lesson, however, remains: beware those who shout Truth and ignore truth.

In the Widening Gyre, I suppose this will be an informally recurring series.

The ET Election Index – May 2019

This is the second installment of Epsilon Theory’s new monthly feature – the ET Election Index. Our aim with the feature is to lay as bare as possible the popular narratives governing the US elections in 2020. That includes narratives concerning policy proposals and candidates found in the news, opinion and feature content produced by national, local and smaller outlets.

Our goal isn’t to uncover ‘media bias’.

Our goal isn’t to discuss the ‘fairness’ of coverage to different candidates.

Our goal isn’t to ‘fact check.’

Our goal is to make you a better, more informed consumer of political news by showing you indicators that the news you are reading may be affected by (1) adherence to narratives and other abstractions, (2) the association/conflation of topics and (3) the presence of opinions. Our goal is to help you – as much as it is possible to do – to cut through the intentional or unintentional ways in which media outlets guide you how to think about various issues, an activity we call Fiat News.

Our goal is to help you make up your own damn mind.

Our first edition covered April 2019, and included detailed explanations of each of the metrics we highlight below. If this is your first exposure to our narrative maps, analysis or metrics, we recommend that you start with that primer.

Election Narrative Structure as of May 31, 2019

Source: Quid, Epsilon Theory

Commentary on Election Narrative Structure

  • We observed two major focal points within the 2020 Election narrative structure in May: an ongoing peripheral focus on impeachment discussions and election security / infrastructure, and a much more centralized discussion of the current roster of candidates and prominent election issues for 2020.
  • The five most influential clusters on the overall network – meaning those with the most universal language similarity – were (1) Trump Super PAC, Embraces Big Money, (2) Electability, Likability, Sexism, Biases and Voter Suppression, (3) Markets Respond to Escalating China Trade War, (4) Joe Biden Beats President in Polls and (5) Strong Trump Economy
  • Not far behind these topics and very close to the center of the overall network is the large cluster defined by references to Climate Change, the Green New Deal and terms associated with Socialism. The combination of these terms with discussion of sexism, biases and voter suppression leads us to believe that the core election narrative promulgated through media continues to be well-left-of-center populism.
  • With the candidacy announcements of most major candidates now firmly in the past, most topical clustering has reverted to election issues and platforms rather than individual candidates.
  • Our separate research on China Trade War narratives indicates that the “existential”, “national security” language has been increasingly conflated with trade war issues, especially beginning in May 2019. Tackling this issue and using it will be a unique challenge for Democratic candidates, some of whose support base is ambivalent (at best) about free trade.
  • Whether it will match up with the final campaign remains to be seen, but we believe current media narratives are (by and large) positioning President Trump on the basis of his economic agenda and Democratic campaigners on their association with social / equality / fairness issues.

Candidate Cohesion Summary

Commentary on Candidate Cohesion

  • Candidates in bold are those for whose coverage we would exercise special caution in our news consumption habits.
  • Coverage of Sanders remains by far the most cohesive. Outlets have established language patterns and terms for discussing Sanders and his policies, and whether the authors (whether opinion or news writers) have an opinion, the abstraction of Sanders into ‘the Socialist Candidate” appears to be ubiquitous. We would read any Sanders coverage with special attention to this tendency.
  • Cohesiveness around a Biden narrative has broken down somewhat after the fever pitch following his candidacy announcements. We would always counsel caution when consuming political news, but no longer think there is cause for particular caution with respect to Biden news.
  • The deterioration of any coherent narrative about O’Rourke and Booker continued in May. They still both receive significant volume of coverage, but the language used across outlets was highly variable and disparate in tone and approach, and lacked any abstractions of the candidates or policies into any ‘idea’ or ‘role’ in the primary process. We think it is fair to say there is no longer a Beto or Booker narrative.
  • The biggest cohesion riser – and we think, the major beneficiary to Beto’s decline – is Pete Buttigieg. Earlier media reports were much more disparate, but Mayor Pete’s May coverage nearly approached Sanders-level unanimity among media outlets.

Candidate Sentiment Summary

Commentary on Candidate Sentiment

  • The candidates in bold are those whose levels or changes in coverage sentiment would give us pause in our consumption of election coverage.
  • Yang’s extremely positive coverage continued in May, but on only a slight increase in volume.
  • While coverage of Biden was less negative in May – mostly on the back of a strong cluster of stories written about polls demonstrating his advantage against Donald Trump – it remained below average and was not enough to pull YTD sentiment out of last place among major candidates.
  • In addition to a clear cohesive narrative, Bernie Sanders enjoyed the most positive coverage of all major (non-Yang) candidates in May.
  • Gabbard, Harris and Warren continued to be associated with far more negative language, in spite of a high concentration of articles highlighting and empathizing with the existence of a potential double standard in the evaluation of female candidates.

Candidate Attention Summary

Commentary on Candidate Attention

  • As was the case in our April update, among high-polling candidates, the broader election narrative (i.e. topics, language, people and issues) aligns most closely with Sanders and has since the beginning of the primary process. In other words, the things that journalists, opinion writers, bloggers and pundits are saying about the election and its major issues are the things they also associate with Bernie Sanders.
  • The language used in discussions of Booker and Klobuchar continues to be the mirror image of Sanders: completely disconnected from broader election narratives.
  • While a more coherent Buttigieg narrative emerged in May, it was similarly disconnected from broader election narratives. Like Gabbard or Yang, Buttigieg runs some risk of having clear stories told about him which have little to do with the central stories being told about the election.
  • Despite the huge volume of his coverage, Biden’s attention dipped below that of Warren, Harris and Sanders in May.
  • In general, our interpretation is that media treatment at this stage has been more aligned with more progressive candidates and their platforms and less favorable to more centrist candidates and theirs.
  • The goal of our research is to equip voters to consume election information with clear eyes, and not necessarily as a predictive science. Given this narrative structure, however, we would not be surprised to see continued erosion and splitting of Biden’s current support among Warren, Harris and Sanders.

The Continuing Series

Following the upcoming candidate-specific reports, this series – including issue-related narrative analyses – will continue as an Epsilon Theory Premium feature and will require a subscription.

If you are looking for a more detailed package of our election narrative signals and analytics, including raw data and candidate- and issue-level narrative structure analysis, please email us directly at info@epsilontheory.com.