If you’re like me, you’ve been put off from digging deeper into DeFi by the terrible signal-to-noise ratio of anything crypto-related on the interwebs. That’s why I found this DeFi primer (using Maker DAO as a specific example) by ET contributor and banking analyst Marc Rubinstein to be so fantastic.

Epsilon Theory may have gotten its formal start in 2013, but the soft launch took place in 1991. That’s when my partner Ben finished his doctoral work at <lifts nose slightly> a school up in Cambridge. His work there (and his 1997 book, Getting to War) focused on how news could be used to predict the likelihood of war. It also analyzed how news was used by institutions and individuals to foment an appetite for and belief in the necessity of war, which is related to but not the same as the ability to use that news for predictions.
So yes, we were interested to read about Project Cassandra, a collaboration between German academics and military leaders to quantify the risk of conflicts using…literature. The Guardian covers it here in what I think is a very worthwhile read.

The project is really interesting. It confirms, or at least shares, many of the core principles of our Narrative Machine project. Not least among them is the recognition that oft-mined sentiment possesses a fraction of the influence of memes with subjective power that can only be identified objectively through words and phrases of meaning. Or the observation of identifiable, recurring story archetypes.
Leaving aside that we focus on different universes of creative output, our projects DO differ in one respect. The Cassandra Project appears to place great emphasis on the ability to quantify the popular and critical acclaim of a fictional literary work. For example, more popular, more viral, more well-regarded work would have different influence, which is a perfectly sensible hypothesis.
Because we focus on a larger and more frequent dataset of news, blogs, press releases and transcripts, we get to do two different things: first, instead of estimating how much of an audience has heard an idea and how much that idea has changed their minds, we can more easily observe how much a specific memetic idea has reproduced within the dataset over time.
Second, because our dataset includes items which are nominally news / non-fiction content, we can observe the extent to which explicit and implicit opinion language is being deployed, which also provides a window into the narrative-shaping efforts of Common Knowledge missionaries.
Two different approaches to a similar problem. I prefer ours, because I feel more confident saying that an idea has reproductive legs by observing how it changes the language other people use to discuss it, and because knowing some of the intentions of powerful institutions and influential individuals is an indispensable part of any effort to quantify the potential effects of narrative.
But there are absolutely features of the zeitgeist which will only manifest in the arts, in literature, and in the groanings and yearnings of those who make the songs. For that reason alone, we think the Germans have the right of it here in the way that the Scots did before. It’s a very cool project.
Let me make the songs of a nation, and I care not who makes its laws.
Andrew Fletcher, Commissioner of the Old Parliament of Scotland (1703)
— Rusty Guinn | July 8, 2021 | 12:32 pm
The politicization of inflation into a partisan “There Is No Inflation!” TM Narrative by the nudgers and mandarins on the left is really depressing.

The politicization of inflation into a partisan “Biden Inflation!” TM narrative by the clowns and raccoons on the right is really depressing.

It’s really depressing because it makes it impossible for me to say anything on inflation without getting lumped into an insane partisan box. It’s an entirely constructed and false framing of the issue, and I’m just so freakin’ weary of it.
We call this political auto-tuning. We call this a political shock collar.
It’s the go-to move of incumbents in a two-party system with high-peaked bimodal electorate preferences. THIS is why there are no successful centrist politicians. THIS is why there are no stable centrist policies. THIS is why we can’t have nice things.
THIS is why I believe that top-down societal change is impossible, but instead must emerge from the bottom-up through an authentic social movement of Make/Protect/Teach.
Watch from a distance if you like, but when you’re ready … join us.
— Ben Hunt | July 2, 2021 | 11:09 am
We make it no secret that our research program here is all about using natural language processing to identify and measure narratives in the world. But is Narrative truly only shaped by verbal and written communication? Do Missionary statements have to be made with the mouth?
Of course not.
Here’s narrative missionary Max Scherzer, pitcher for the Washington Nationals, providing an exaggerated form of protest against the revised MLB enforcement policy regarding the use of foreign substances. The umps have generally been inspecting hats gloves and belts for these substances. Max decided to give them a little, shall we say, extra on the belt removal.

Here’s Oakland Athletics pitcher Sergio Romo, picking up every nuance of Scherzer’s crystal clear communication to the commissioner’s office.

Scherzer and Sergio’s sticky substance strip show is memetic perfection in the form of malicious compliance. There is no press conference speech either pitcher – or the others who will no doubt mimic their displays in the coming days – could have made that would have more clearly shifted Common Knowledge to the belief that the foreign substances rule was being applied, interpreted and policed in an absurd, preposterous way.
Bold prediction: this narrative doesn’t peak until Joe West enrages Zach Greinke into an NC-17 display on national television.
— Rusty Guinn | June 23, 2021 | 9:21 pm
The average American news consumer is exposed to far more headline text on news websites, social media apps and content aggregation sites than they are to the prose of the articles themselves. It should be no surprise, then, that more Fiat News and Missionary behavior exists in headlines than almost anywhere else. It typically gets a pass because, well, the whole job of a headline writer is to summarize what an article is about. But that’s precisely the task that lends itself so perfectly to telling us how we should think about the article. What’s important? What should our conclusions be? How should we feel about it?
I’ll give a free subscription to our free newsletter if you can find the fiat news language in this gem of a headline to a CNN news article.
Here are the companies rushing workers back to the office — and the ones that aren’t [CNN]
Aside from the general observation to take care in our content consumption habits, remember that it is the constant barrage of articles – and headlines – like this that reinforces our belief that the missionaries of the “Work From Home Forever!” narratives are dominating the field, at least in the Narrative war.
— Rusty Guinn | June 22, 2021 | 9:58 am

I saw this work of art on Twitter today, referring to Dropbox management using stock buybacks to sterilize their outrageous stock-based comp, and it made my day.
The Epsilon Theory notes I wrote about stock buybacks in 2019 are the most controversial thing we have ever published. They generated more anger, more arguments and more cold shoulders from the mainstream finance community than anything else we’ve done. Here’s my position:
When stock buybacks are used to sterilize stock-based comp (i.e., a company gives managers stock with one hand and buys it back from them with the other hand), no money is “returned to shareholders”. This is true whether or not management actually sells its shares into the buyback program.
Stock buybacks only “return cash to shareholders” to the degree that the buyback program reduces the sharecount. To the degree the buyback program does not reduce the sharecount, but simply sterilizes new issuance to management, it is purely a transfer of wealth from shareholders to management.
As the kids would say, it’s just math.
I think you would be AMAZED at the proportion of stock buyback programs that go towards sterilizing stock-based comp. I certainly was. I think it’s the greatest transfer of wealth in human history.
Not to founders. Not to entrepreneurs. Not to risk-takers.
Nope … to managers. To asset-gatherers. To fee-takers. To rent-seekers. To rakes.
Yep, Jamie Dimon is the rake. But then so is every S&P 500 management team. So is every Wall Street management team. That I’m aware of, at least. It’s the water in which we swim.
“Yay, Stock Buybacks!”
It’s amazing how many people get very angry at me when I say this.
Anyhoo … in addition to The Rake, here are the notes that started all the fuss.
— Ben Hunt | June 15, 2021 | 4:04 pm

Recent major media stories that feel to us like they’re part of a larger narrative campaign.
Modeling common knowledge by analyzing missionary statements and their reverberations works. Except when it doesn’t.
What do you get when you give a raccoon billions of dollars AND invisibility from regulators? Collusion and insider trading.
Most of us are under the impression that a protracted conflict within China will increase national unity. Not this time.
Recent Notes
The Intentional Investor #22: Eric Markowitz
In this engaging episode of The Intentional Investor, host Matt Ziegler interviews Eric Markowitz, exploring his fascinating journey from investigative journalism to investment research. The conversation weaves through Eric’s formative years, professional evolution, and life-changing experiences, offering valuable insights into the intersection of media, investing, and personal growth.
DeepFreak
In seven days, a narrative about AI tech technology became a narrative about what it meant for chip manufacturers, which because a narrative about national security.
The Intentional Investor #21: Corey Hoffstein
Join Matt Zeigler as he sits down with Corey Hoffstein, a successful entrepreneur and financial innovator, for a candid conversation about his remarkable journey from video game programmer to financial pioneer. In this wide-ranging discussion, Corey shares the story of his career trajectory – from teaching himself programming at age 12 to founding Newfound Research and developing groundbreaking investment strategies.
A Death in the Family
Today I know that the meaning of the American Presidency is dead, and like the loss of a beloved family matriarch it’s a loss I’ll never get over. I know that I have to accept it, but I’ll never get over it. And right now I’m still pretty angry at ALL of them.
The Intentional Investor #20: Dr. Preston Cherry
Join host Matt Zeigler as he sits down with Dr. Preston Cherry, founder and CEO of Concurrent Wealth Management and author of “Wealth in the Key of Life.” From his father’s treasured vinyl collection to transformative “fog years,” Dr. Cherry shares his journey of discovering the deep connections between music, money, and meaning.
The Four Horsemen of the Great Ravine, Part 1
Every so often, things fall apart.
In the words of those who lived it, here are the vibes and the semantic signatures of the twentieth century’s most devastating social collapses.
From the meaning in their words, wisdom for our future emerges.
Data Engineer I
We’re looking for a Data Engineer to help build and maintain the data pipelines that power our AI-and NLP-driven narrative analysis platform. You’ll work with everything from structured financial data to unstructured news and social media content.
Business Analyst
Second Foundation Partners is looking for a Business Analyst to help us build tools that make sense of the world’s narratives using generative AI.
Digital Content Writer I
Second Foundation Partners needs a talented, passionate writer intrigued by the opportunity to bring data to life through engaging daily content about media, markets, and sports.
Chapter 6: The Possibility Engine
Humans evolved to acquire symbols as quickly as possible.
Language and storytelling evolved to be acquirable as easily as possible.
That’s why our tales spin us.
Chapter 5: The Axe that Never Was
Our brains evolved to tell stories before they evolved to speak.
This has fundamental implications for our susceptibility to communication in the networked age.
Chapter 4: Out of Eden
If we care about the influence of social networks on our minds, why are we talking about bipedalism and the 8 million year cycle of co-evolution it kicked off?
Because it defined how our young were parented, how we taught them, and what they were exposed to. Because it changed how our symbolic brains evolved.
Intentional Investor #19: Yuri Khodjamirian
Join host Matt Zeigler as he interviews Yuri Khodjamirian, Chief Investment Officer at Tema ETFs, in this captivating episode of The Intentional Investor. From his early years during the collapse of the Soviet Union to building innovative investment products today, Yuri shares his remarkable journey through the world of finance and entrepreneurship.
Chapter 3: Caliban’s Garden
Man’s road to becoming a storyteller began with a single step.
That step kicked off millions of years of co-evolution of the human brain, society, language – and our relationship with story.
Chapter 2: What is Story?
There are a lot of ways to define a “story.”
But to understand how story interacts with human consciousness requires us to be more specific.
Intentional Investor #18: Jason Buck
In this fascinating conversation, Matt Zeigler sits down with Jason Buck, co-founder of Mutiny Fund, to explore the unexpected intersections between entrepreneurship, risk management, and personal development. From selling mixtapes in rural Michigan to developing real estate in Charleston and ultimately founding an innovative investment firm, Jason’s journey challenges conventional wisdom about success and risk-taking.
Chapter 1: Overhearing Ourselves
Shakespeare invented the human by inventing a device which spoke the language of consciousness:
Story.
Introduction: David Bowie’s Alien
David Bowie was right.
Social networks aren’t a tool. They are an alien force that transforms human consciousness.
Making Sense of Markets in a Post Election World | Grant Williams and Ben Hunt
Matt Zeigler is joined by Ben Hunt and Grant Williams for a candid discussion of the 2024 post-election landscape and its implications for markets. The guests explore how trust, or lack thereof, shapes both political and market narratives, examining the transformation of capital markets into what they describe as a “political utility” where “number go up” has become the prevailing faith.
I Think Representative Democracy is a Good Idea and We Should Give It a Try
I am 60 years old.
I am a (very) patriotic American.
I have never felt represented by any elected official.
Never.