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The Chinese Panoptistate

Ben Hunt, September 25, 2018

Not gonna lie, I didn't come up with the term "Panoptistate" to describe what China is doing with its social data monitoring effort, but I am definitely going to steal popularize it. I saw the word on Twitter, and if the genius who invented it wants to reach out to me, there's a six-month free subscription to Epsilon Theory Premium waiting for her or him.
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Guest Post: The Two Worlds of Data Infrastructure

Ben Hunt, September 24, 2018

Leave no dark corner

China is building a digital dictatorship to exert control over its 1.4 billion citizens. For some, “social credit” will bring privileges — for others, punishment. - by Matthew Carney, Australian Broadcast Corp, September 18

[Ben's note: I don't think there's any more important issue in the world than the way our personal data flows through global data infrastructure and is controlled by owners of that infrastructure. China, of course, is constructing the Black Mirror version of all this, but I don't feel like we're too far behind in the West. So I asked my friend Neville Crawley, who is the single smartest person I know on questions of data infrastructure in general and data infrastructure in China in particular, for his thoughts. What Neville describes below as The Alternative System is worth everyone's time, attention and effort. It certainly has mine.] 
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Mailbag: Mastering the Art of French Cooking

Ben Hunt, September 23, 2018

Thank you for continuing to write an excellent blog. How funny to read your Julia Child post this morning, not an hour after walking down Washington Street as it becomes Kirkland. I'm visiting Cambridge where I too did my PhD, I too scraped together the Team Elite bona fides (even as its ethos eluded me), and I too lived in a crumbling shared apartment in Slummerville. That area's now full of fancy lofts, by the way.


I was sipping a $4 coffee and daydreaming about, not kidding, how much longer we can collectively pretend Cambridge hasn't already become Cambridge(TM), when I passed by Savenor's and stopped to marvel at a sign in the window: "Wanted: Butcher's Assistant and Cashier". For a moment, I was spellbound. Here was the artisanal tradition, robust, unbroken, open to any passer-by willing to learn the trade.


And then I woke up and remembered when and where I was: the butcher's assistant would need to ask his boomer parents for help with downpayment for the Union Square loft, of course. It'd be an Investment, just like the BA in French Lit.


And then I read your post.

-- C.

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It's a Floor Wax AND a Dessert Topping

Ben Hunt, September 22, 2018

On September 18th, the New York Attorney General's office released a scathing report on crypto exchanges. Three (Binance, and Kraken) were referred for prosecution, and the largest crypto exchange - Coinbase - was described as maintaining a "proprietary trading" operation that faced Coinbase clients and accounted for 20% of total trade volume on the exchange. On September 19th, Coinbase posted a blog report stating that the NY AG's report was untrue, and that Coinbase "does not operate a proprietary trading desk, nor does it undertake market making actions."

So who's telling the truth? Is Coinbase running a prop desk or not?
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The Curse of Category

Ben Hunt, September 21, 2018

A student says, “Master, please hand me the knife,” and he hands the student the knife, blade first. “Please give me the other end,” the student says. And the master replies, “What would you do with the other end?”
― Alan W. Watts, “What Is Zen?” (2000)

We have a blueberry bush right outside our porch. It hasn't had a great year, and here in the middle of September we are way past blueberry season in Connecticut. I know that. I'm from the South, so I'm familiar with pokeweed, which also has purple berries, but a cluster of pokeberries looks nothing like a cluster of blueberries. I know that. Pokeberries are poisonous. I know that, too.

So why did I eat one this morning?
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Mastering the Art of French Cooking

Ben Hunt, September 19, 2018

If you're afraid of butter, use cream.

-- Julia Child (1912 - 2004)

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But Our Interests Are Aligned!

Ben Hunt, September 18, 2018

Harold Hill: Ladies and gentlemen, either you are closing your eyes to a situation you do not wish to acknowledge, or you are not aware of the caliber of disaster indicated by the presence of a pool table in your community!

-- "The Music Man" (1962)

For those of you who have somehow never seen a high school production of "The Music Man", the plot goes something like this. A con man by the name of Harold Hill comes to River City and convinces the town folk that their youth are on the slippery road to perdition, and that the only solution is to establish a wholesome marching band that Hill is happy to lead. Just pay in advance for those band uniforms and instruments, please.

The modern use of stock-based compensation is a confidence game, in the true sense of the word, that would be very familiar to Harold Hill. Read more

You Provide the Pictures and I'll Provide the War

Ben Hunt, September 17, 2018

Real-life billionaires aren't young Citizen Kane. They don't buy media properties as vanity projects or as part of a crusading public interest. No, real-life billionaires are old Citizen Kane. They buy media properties because they understand the political and economic power of Fiat News. They buy them because these properties are the indispensable asset in an effective metagame strategy to maintain their empires.
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True Freedoms / Hollow Freedoms

Ben Hunt, September 16, 2018

I'm in a mood this morning, getting sucked down by what I see as the casual abdication of our individual autonomy of mind, the exchange of True Freedoms for Hollow Freedoms. And not even a begrudging exchange, but an enthusiastic one. A seller's market, as it were, for Hollow Freedoms. Then I remembered this piece from a year ago ("Pecking Order" November, 2017). It helped me get back on track in thinking about a positive program forward. Maybe it will help you, too.

In January 1941, eleven months before Pearl Harbor brought the United States into World War II, Franklin Roosevelt gave his Four Freedoms speech, memorialized over the next few years by Norman Rockwell in these famous paintings.

What is autonomy of mind? It’s freedom. What freedoms? These.
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Lehman and the Meta-Game of Trading

Ben Hunt, September 15, 2018

A cornerstone of the Epsilon Theory research project is the meta-game. It's the subject of the most popular ET note to date - "Too Clever By Half" - and I think it's the most important game theoretic concept to master if you want to have a successful career in financial services. Or a successful career in anything, really. But what I haven't written about is when the idea of the meta-game first really hit home for me. It was 10 years ago to the day - September 15, 2008 - the day that Lehman went under.
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Hunt's Law: An Experiment

Ben Hunt, September 14, 2018

Hunt's Law (fake news drives real news out of circulation) applies everywhere today, even to Hunt.

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Hunt's Law

Ben Hunt, September 13, 2018

Gresham’s Law: bad money drives good money out of circulation.

Hunt’s Law: fake news drives real news out of circulation.

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Repo 105

Ben Hunt, September 12, 2018

Branded a Villain, Lehman’s Dick Fuld Chases Redemption

Wall Street veteran, pilloried over bank’s collapse, has said his firm didn’t have to die. A new book agrees. - Wall Street Journal (September 6, 2018)

Every time Dick Fuld's publicists succeed in getting a "redemption story" published in the Wall Street Journal or New York Times, I'm going to write an Epsilon Theory brief about Repo 105, the fraudulent scheme that Lehman Brothers ran for years to hide its deteriorating financial condition from investors and regulators alike.
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Whitestone Bridge

Ben Hunt, September 11, 2018

Everyone has their 9/11 story. Mine is in a car heading to LaGuardia for a 7 am flight to Los Angeles, crossing the Whitestone bridge and seeing the Manhattan skyline in that early morning glow. It was a perfect day. Crisp. Clear. Not a cloud in the sky, as they say. I remember that view so vividly. I remember thinking to myself: what a perfect day.
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Controlling Your Cartoon: Nike and the Art of the Meme

Ben Hunt, September 10, 2018

The key to political and commercial success in a widening gyre? Controlling your own cartoon.
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Mailbag: Mind the Gap!

Ben Hunt, September 9, 2018

A quick question about the chart on pages 5 and 6 please [Things Fall Apart (Part 2)]: If you assume all other assets stay the same, how far would US equities need to fall to close the gap between US Household Net Worth and US GDP?

- Stuart E.

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19th Century White Papers

Ben Hunt, September 9, 2018

The most frequent question I get is "what do you read?", and I sense that people are really disappointed when I tell them comic books, short stories, and science fiction. Oh, I start plenty of "real" books, and I'll breeze through them, slowing down in parts for something that seems immediately relevant. I've got two stacks of these books in my bedroom and four in my office. I'm sure that one day I'll make my way through them, in exactly the same way I'm sure that I will reply to all of those emails that I've carefully tucked away in some folder. Yeah, right.
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They Don't Think It Be Like It Is, But It Do

Rusty Guinn, September 7, 2018

They don’t think it be like it is, but it do.

- Oscar Gamble (1949 - 2018)

I’ve always loved this beautiful line from Oscar Gamble – who, sadly, passed away earlier this year. I referenced it in the first of my Things that Matter series last year, a note called Whom Fortune Favors.  The gist of it is: when we are active in a specialized field for a very long time, or when we have a highly technical understanding of a narrow field, we often miss what should be obvious truths about that subject staring us in the face.
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Cartoons Against Humanity

Ben Hunt, September 6, 2018

Wages Are Growing Faster Than You Think, White House Says

Trump advisers calculate hourly pay grew 1% in the second quarter, rather than the official figure of 0.1%, citing a new way to measure

Nowhere is the cartoonification of data more obvious than in the construction of labor reports, and nowhere is it more influential on markets and politics.

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What Is Wrong With You?

Ben Hunt, September 3, 2018

There's a great Terry Pratchett quote that goes something like this:

A European says, "I can't understand this, what's wrong with me?"

An American says, "I can't understand this, what's wrong with you?"

There's no doubt that social media in general, and Twitter in particular, is a decidedly American construct.
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We're on Number 9

Ben Hunt, September 1, 2018


If you’ve never read Friedrich Hayek's The Road to Serfdom … that’s okay, most people haven’t. But do yourself a favor and at least read the Classics Comic Book version I’m copying from here, The Road to Serfdom (in Cartoons). The Hayek cult is just as silly as the Elon cult or the Uncle Warren cult or the crypto cult, and I’m not saying that Hayek was some Nostradamus. But I AM saying that Hayek was a really smart guy who believed with all his heart in small-l liberal virtues and keenly observed the politics of the world the last time we got into such a global mess.

We're on Cartoon #9 today, well on our way to Cartoon #10.
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Interview: Dangerous Abstractions

Ben Hunt, August 31, 2018

I was in San Francisco earlier this week, and got a chance to sit down with Matthew Pirkowski and discuss my  motto for investing and for life: Long Volatility, Short Abstraction. And yes, we talk about crypto, financial "innovation", and my obsession with calling out the raccoons of the world.

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Hot Rocks

Ben Hunt, August 30, 2018

This is my 250th Epsilon Theory post. Yow! While there's no getting around some repetitiveness on the major themes of ET, like the Narrative Machine or the Common Knowledge Game or the Three-Body Problem, I do my best to keep the story arcs fresh by not repeating myself in the ephemera - the movie quotes and graphics and the like. But there's one quote that I've used three separate times, and two graphics that pop up again and again. So for this 250th note I thought I'd call out these Hot Rocks of Epsilon Theory.

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Mailbag: Letter From a Birmingham Museum

Ben Hunt, August 29, 2018

A couple of notable emails from Epsilon Theory readers on "Letter From a Birmingham Museum".

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Mailbag: Wall of Worry

Ben Hunt, August 28, 2018

Can you please explain what you mean by wall of worry? ie, fake or imagined hurdles?

- @MonirTheKu

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Epsilon Theory Core Curriculum, Vol. 1

Ben Hunt, August 27, 2018