Obama on activism


Fascinating piece. Presented without much commentary. Emily S. Rueb and Derrick Bryson Taylor write:

“This idea of purity and you’re never compromised and you’re always politically ‘woke’ and all that stuff,” Mr. Obama said. “You should get over that quickly.”

“The world is messy; there are ambiguities,” he continued. “People who do really good stuff have flaws. People who you are fighting may love their kids, and share certain things with you.”

Clarence Thomas’s commitment to black Americans


Fascinating article by Corey Robin in the New York Times. It strikes me that there are some echoes here of emerging contemporary evangelical theology–a rejection of the Religious Right and political engagement and move towards personal and societal engagement (see, e.g., Stanley Hauerwas). As Rubin writes:

The conservative principles that Justice Thomas came to embrace — and still holds on the Supreme Court — reflect that sense of defeat. He now believes that black politics is an exercise in futility: The combination of white racism, racial inequality and the small size of the black electorate makes it impossible for African-Americans to achieve a political foothold.


At the heart of Justice Thomas’s jurisprudence, then, is a belief that the market is effective and politics is pointless. Such a jurisprudence suggests that Justice Thomas’s ideological story is less personal and psychological than it is historical and political. It reflects the larger retrenchment we’ve been living with since the 1970s, where politics is a commoner and capital is king, where people look to the market for solutions rather than the state.

2019 Baseball Hall of Fame


Mariano Rivera, Roy Halladay, Edgar Martinez, and Mike Mussina. A phenomenal class for both performance and, by all accounts, character.

As a Yankees fan, I am particularly thrilled about Rivera and Mussina. Baseball, for whatever reason, builds character–the stories you hear about baseball players are different from basketball or football players (the contrast between Cody Bellinger and Lonzo Ball is a great example). Maybe it is because, as one former baseball player told me, you carry your own bags in the Minor Leagues for five years before making it big. The Yankees have always in particular personified that for me and Rivera and Mussina are clear examples.

Mariano Rivera clearly deserved to be a unanimous Hall of Fame pick. Derek Jeter’s letter in The Players’ Tribune is a great read; the stat that best encapsulates Mo is the fact that, despite pitching for 19 years, “In human history, more people have walked on the moon than have scored an earned run off of Mariano Rivera in the postseason.” But despite the accolades, this is the story that I have always loved about Mariano Rivera the most:

At the same time, Rivera believes in a higher power. Before Game 7 of the 2001 World Series against Arizona, Rivera surprised teammates by addressing them in a team meeting, and the words he chose confused some of them. After exhorting them to get him the ball, Rivera talked about faith and fate; no matter what happened, it was all in the hands of God. It didn’t sound like him, a veteran teammate said, because Rivera was all about confidence and control. But Rivera intended his words to be a comfort for his teammates, because they were comforting to him.

Hours later, the Diamondbacks scored twice in the bottom of the ninth against Rivera to beat the Yankees and win the World Series, the most notable failure of Rivera’s career. He made a throwing error, allowed two runs, and when it ended—when Luis Gonzalez blooped a broken-bat single over the Yankees’ drawn-in infield—Rivera turned and ambled off the mound, his stride and expression never changing. He looked and moved the same as if he had just completed an inning in a mostly meaningless game in May.

The Yankees’ victory parade in the city was canceled, and Enrique Wilson, the Yankees’ utility infielder, changed his flight back to the Dominican Republic. The plane Wilson was initially scheduled for—American Airlines Flight 587—crashed in Queens, killing all 260 passengers.

Wilson saw Rivera the next spring, and they talked about the twist of fate. If Rivera had closed out the Diamondbacks in the bottom of the ninth of Game 7, Wilson would have, in all likelihood, been on the plane that went down. For Rivera, this was further confirmation that he and his teammates were all subject to God’s will. “I’m glad we lost the World Series,” Rivera said, “because it means that I still have a friend.”

Built this way, Rivera’s psyche is all but indestructible. Most of his successes and failures belong to him, the rest to God. There is nothing ceded to his opponents.

Mike Mussina was a bit more of an edge case, probably because he was always the bridesmaid, never the bride. He threw three games where he was perfect through seven, but never finished any of them (but somehow, Philip Humber threw a perfect game?). He was thirty wins short of 300. He was 187 strikeouts short of 3,000. He never won a World Series, despite dominating the postseason. He was a six-time top-5 finisher for the Cy Young, but never won.

But what I love about Mussina is that he never seemed driven by the individual accolades; he was driven by the love of the game and his team. In 2008, he won 20 games and struck out 150 batters. Had he kept playing, he would have easily reached 300 wins, 3,000 strikeouts, and, had he stayed in pinstripes for just one more year, would have won the World Series in 2009. But Mussina walked away, determined to go out on top. When he got the call, he was coaching basketball at his high school alma mater.

Congratulations to two wonderful, classy pitchers. Their spots in the Hall are well-deserved.

Marginal tax rates


There has been lots of talk about marginal tax rates recently, thanks to Alexandria Ocasio-Cortez’s proposal for 70% marginal tax rates. The essential argument that Ocasio-Cortez proposes is that because these are extremely marginal–for the ultrawealthy–there should be minimal negative impacts from an incidence perspective.

Not so fast, writes Stanford GSB’s Charles I. Jones:

This paper considers the taxation of top incomes when the following conditions apply: (i) new ideas drive economic growth, (ii) the reward for creating a successful innovation is a top income, and (iii) innovation cannot be perfectly targeted by a separate research subsidy — think about the business methods of Walmart, the creation of Uber, or the “idea” of Amazon.com. These conditions lead to a new term in the Saez (2001) formula for the optimal top tax rate: by slowing the creation of the new ideas that drive aggregate GDP, top income taxation reduces everyone’s income, not just the income at the top. When the creation of ideas is the ultimate source of economic growth, this force sharply constrains both revenue-maximizing and welfare-maximizing top tax rates. For example, for extreme parameter values, maximizing the welfare of the middle class requires a negative top tax rate: the higher income that results from the subsidy to innovation more than makes up for the lost redistribution. More generally, the calibrated model suggests that incorporating ideas and economic growth cuts the optimal top marginal tax rate substantially relative to the basic Saez calculation.

(Slides are also available.)

This is a super interesting paper. We generally think of the “mega-rich” in an abstract sense as multi-generational heirs and heiresses who did not do much to earn their wealth, or of CEOs who get paid a lot of money for being at the top but would probably not stop being CEO if they were paid less. The first category is actually not particularly true–68% of the ultra-high net worth population is self-made (probably because 70% of wealthy families lose their inheritance by their second generation)–but the second one… may be?

But the really important question is what kind of CEOs these UHNW people are. Do they just hold pencils and push paper and generally keep the trains running on time? Or, to be less extreme, do they spend their time doing procurement and hiring effective salespeople and otherwise doing things that are generally zero-sum and do not broadly add to GDP or social welfare?

But what if they are formerly aspiring CEOs? What if they are the innovators and the scrappers and the upward-mobility-creators of the world? Of course, innovators are, to some extent, doing it for the love of the game–because they see a problem, they think they can fix it, and, sometimes, because of social good (or at least because they can convince themselves they are creating social good). But, one presumes, at least some of this is driven by a desire for super-high payoffs. 90% of startups fail. On a risk-adjusted basis, the only way to compensate for the blood, sweat, tears, and high likelihood of failure, a startup founder may justifiably demand a particularly high amount in order to be willing to do the job. And if this is the case, reducing rewards that a future CEO might expect–for example, through a higher marginal tax rate–might reduce the optimal top tax rate.

That is the exact model that Jones presents and I have to admit that I find it somewhat interesting. It is not obvious that it is true, of course. For one, it is theoretical, not empirical, and it starts by assuming that the previous paragraph is true. For another, it is insanely hard to figure out the social benefit of economic innovation, especially once you start separating by industry (14% of the UNHW population made their money in finance), and it is therefore very hard to price what the top tax rate ought to be. But the intuitive argument of “taxing the top shouldn’t matter because it’s all marginal and on the ultra-rich” is a bit like saying “pharmaceutical drugs are cheap to manufacture so their prices should be low”–it only looks at operating expenses, not capital (and intangible) upfront costs.

Blockchain & Occam’s razor


Matt Higginson, Marie-Claude Nadeau, and Kausik Rajgopal write:

Given the lack of convincing at-scale use cases and the industry’s seemingly becalmed position in the industry lifecycle, there are reasonable questions to ask about blockchain’s future. Is it really going to revolutionize transaction processing and lead to material cost reductions and efficiency gains? Are there benefits to be accrued that justify the changes required in market infrastructure and data governance? Or is a secure distributed ledger primarily just one option when contemplating possible replacements for legacy infrastructure?

Certainly, there is a growing sense that blockchain is a poorly understood (and somewhat clunky) solution in search of a problem. The perspective is exacerbated by short-term expense pressures, cultural resistance in some quarters (blockchains may threaten jobs), and concern over disruption to healthy revenue streams. There are challenges in respect of governance—making decisions in a decentralized environment is never easy, especially when accountability is equally decentralized. And there are technical impediments, for example in respect to blockchains’ data storage capacity.


An emerging perspective is that the application of blockchain can be most valuable when it democratizes data access, enables collaboration, and solves specific pain points. Certainly, it brings benefits where it shifts ownership from corporations to consumers, sharing “proof” of supply-chain provenance more vertically, and enabling transparency and automation. Our suspicion is that it will be these species of uses cases, rather than those in financial services, that will eventually demonstrate the most value.

There are really two starkly different camps in the blockchain debate. On the one side are the unrestrained proponents, who tend to either not understand blockchain as a technology or do not understand the end markets in which blockchain is being deployed (e.g., how screwed up bank back-office technology and workflows really are). On the other side are the unrestrained skeptics, who tend to believe that all of blockchain is hype (in large part, I suspect, because the proponents use blockchain for pretty silly use cases).

Against all this, Higginson et al. propose three conditions to evaluate the usefulness of blockchain:

  • Start with a problem (Occam’s razor)
  • Have a clear business case and target ROI
  • Commit to a path to adoption

It is not as sexy as “blockchain solves everything” and does not access the self-righteous snobbery that comes with “blockchain solves nothing,” but it seems like a pretty reasonable middle ground.

Local media


Steven Waldman & Charles Sennott write:

While national institutions like the New York Times, the Washington Post, and Fox News are doing well, local news organizations have collapsed. Some 1,300 communities have totally lost coverage since 2004. The number of newspaper reporters in America has gone from 455,000 in 1990 to 183,000 in 2016.

This has made journalism more concentrated on the coasts. In 2004, one in seven reporters lived in New York, Washington, and Los Angeles. By 2016, the ratio had worsened, dropping to one in five. Part of why the national media missed the rise of the Trump voter is that newsrooms outside of these more liberal enclaves have been hollowed out.


Mind you, I’m not calling for mini-Fox Newses in local media. That would actually make matters worse, not better. We don’t need more commentary on national issues but rather more reporting on highly local issues: not the Supreme Court but local family court, not the Mexico City policy but the functioning of the local veterans’ hospital. This old-fashioned, on-the-ground community reporting may seem less sexy, but to the people in those communities, it’s crucial.

The authors (who founded Report for America) make three compelling points:

  1. If reporting keeps governments accountable, the lack of local reporting is unlikely to keep local governments accountable. Waldman and Sennott even cite some interesting research from Notre Dame and University of Illinois at Chicago suggesting that the closure of local papers have a direct causal impact on municipal bond prices (driven by worst fiscal discipline)
  2. Local papers are critical for the success of civil society–the lack of papers “makes it harder for altruistic or civic groups to get the word out”
  3. Local papers have more representative backgrounds (Waldman and Sennott note that one in five journalists live in New York, Washington, or Los Angeles), and diversity of viewpoints increases the likelihood of truth emerging. The authors even suggest that “part of why the national media missed the rise of the Trump voter is that newsrooms outside of these more liberal enclaves have been hollowed out”

I think this is a brilliant analysis of why local news matters. I am a little skeptical of the solution though–Report for America pays half the reporter’s salary for a year to cover local news. That seems… not at all scalable? I get the Teach for America connection, but (1) it’s not clear that TFA is all that scalable either, (2) TFA’s criticism has come because of its lack of permanence–something that matters even more for journalism (you could argue that one year of educational intervention is enough to put a kid on the right long-term track, but it is unclear why journalism would have a similar impact). I do like the idea of having a local partner involved (RFA expects that a quarter of the funding comes from local partners, like universities or foundations).

The more interesting question, to me, is why local journalism died in the first place–a topic of which I am woefully ignorant. The most common answer is that newspapers are dying in general and local newspapers have worse economics and thus are the first to die. But one might argue that the “local” newspapers that are dying were overly focused on national news and only a few players could emerge victorious (Waldman and Sennott cite another report which found that only 17% of local paper stories were actually about the local community).

In fact, you could imagine a story (that I am completely making up) that local newspapers existed as regional monopolies, started losing ground to national papers with better unit economics in the digital age, tried to compensate by playing in national news, and then dying because they could never beat the New York Times, Wall Street Journal, or (more likely) Fox News and CNN–and because they lost the local credibility that their readers originally craved.

If this is the case, you could imagine a savvy digital media operator coming along, building a strong digital-first local newspaper network, and doing at-scale marketing, sales, and distribution (because it is a national operator). The internet allows marketing in particular to be hyper-local and targeted. And, in fact, Patch Media was reported to be profitable in 2016, though I am not sure that is the vanguard of high-quality reporting. The model I would imagine is closer to The Athletic, with strong regional reporters–the Bergen Record, not the Wyckoff Suburban News.

It surprises me that Google, with its News Lab offering and fairly weak Google News product, is not creating something like this. Maybe they are too worried about scaring off the rest of the media industry. Or maybe they know something I do not about local news.



Name the person: a well-known, public, tech entrepreneur wearing black shirts who:

set a punishing timeline and dismissed concerns among senior executives and key designers that the new look wasn’t testing well, say some of the people. He rejected his team’s pleas for more time.

Yes, exactly, Snap CEO and co-founder Evan Spiegel. This worked, right? This is what happens in Silicon Valley?

It was a debacle. When the redesign made its debut in February, users widely panned it. Snap lost users for the first time in its history over the next quarter. Its revenue, which comes mostly from advertising, continued to rise. But its share price has fallen roughly 76% since its February peak, reaching an all-time closing low of $4.99 Friday and reducing Snap’s market capitalization from nearly $25.5 billion to about $6.5 billion.


Silicon Valley has an odd management model. When Steve Jobs, Elon Musk, or any of the other Valley heroes “push conventional thinking” over the objections of their stakeholders, they are lauded as visionaries. But of course, their valuations and revenue (though not their profit!) have kept rising. As soon as that goes away (see: Holmes, Elizabeth), the founder suddenly becomes immature, tyrannical, and unable to run a company–even though they are doing the same things they did while they were “successful.” This even happens within a company:

The redesign mess adds to troubles swirling around Snap and raises questions about whether Mr. Spiegel’s management instincts can help it pull through. His style—trust instincts, take control of details, ignore naysayers—paid off during Snap’s meteoric rise after its 2011 founding.


Snap Chairman Michael Lynton calls Mr. Spiegel “a brilliant, responsible and thoughtful leader,” adding that “Evan’s decisions on how best to grow Snap are exactly what has created such a positive user experience.”

He’s probably right, by the way. I am not sure a consensus-building CEO would have made millions for the Catholic Church the way Spiegel did.

But how do you pick the visionary CEO? How do you know whether the CEO is the Elon Musk and not the Elizabeth Holmes?

A few other questions:

  • Do visionary CEOs have to be tyrants? Is this unfettered freedom and demand for excellence what allows them to build superior products and services–or is it a side effect? This reminds me of the Ray Dalio debate: does Bridgewater’s unusual view of human behavior allow it to beat the market, or does it have a superior investment philosophy and also has a philosophy of human behavior?
  • Do investors care? If you are behind the veil of ignorance and have the option to choose between a manager that listens to their board, has happy employees, and a good chance of slightly outperforming, or a manager that goes rogue, has fearful employees, and some chance of drastically outperforming and a high chance of failing–which would you prefer? The latter’s risk profile sounds eerily like a venture capital investor’s risk profile
  • If you hit a “moonshot” and find a tyrannical visionary who drastically outperforms, are they more likely to succeed going forward? We likely do not have enough data to know for sure, but the next iteration of Snap, plus the next generation of startups founded by Musk and others, will be telling

Liberal arts


Victor Davis Hanson:

The tragedy, then, is not just that a campus of the University of Wisconsin would drop the history major but that the custodians of history in the 21st century lost the ability to teach and write about history in a way that sustains a hallowed 2,500-year tradition. In other words, what is being jettisoned is likely not just history as we once understood it but rather de facto poorly taught “-studies” courses — which sadly become snapshots of particular (and often small) eras of history — designed to offer enough historical proof of preconceived theories about contemporary modern society. The students then are assumed by the course’s end to be outraged, persuaded, galvanized, and shocked in politically acceptable ways. Usually they are just bored, as supposedly with-it professors endlessly regurgitate the esoterica picked up in graduate schools.

Hanson overstates his case at times, but the core argument is quite interesting. History is pitched as a way to understand and “fix” the present. However, most history courses are “snapshots of particular (and often small) eras of history — designed to offer enough historical proof of preconceived theories about contemporary modern society… Usually [students] are just bored, as supposedly with-it professors endlessly regurgitate the esoterica picked up in graduate schools”

The piece that I thought was most interesting–one of the most common justifications for teaching history is avoiding the mistakes of the 1940s (“at a time when Nazism is resurgent society needs for people to know history, even if the economy might not”), but:

Unfortunately, few universities offer courses in World War II, which might most effectively offer a variety of explanations of why Nazi Germany was able to absorb most of Europe and trigger what would become a global conflict that cost 65 million lives.

But when one looks at the Wisconsin campus catalogue, one seems to find few if any classes in World War II. The closest might be “Women, War and Peace,” “Dilemmas of War and Peace: An Introduction to Peace Studies,” or “War and Propaganda in the 20th Century.” No doubt such offerings might be great courses, but I don’t think they would cover fully the Nazi aggrandizement of the late 1930s, particularly the role of Soviet collaboration, British and French appeasement, and American isolationism, or the tragic circumstance of the Munich Agreement — in other words, the likely best way for students “to know history” of any purported contemporary Nazi ascendance.

Of course, liberal arts education is much more than utilitarian concerns about the present day. But I found compelling Hanson’s claim that liberal arts themselves deserve some of the blame for their own death.

Scientific fraud


Alex Berezow:

A stunning report published in the Annals of Internal Medicine concludes that researchers often make “inappropriate requests” to statisticians. And by “inappropriate,” the authors aren’t referring to accidental requests for incorrect statistical analyses; instead, they’re referring to requests for unscrupulous data manipulation or even fraud.

Full report in the Annals of Internal Medicine here.

This seems… not as surprising nor shocking as I expected?

Some of the results are somewhat open to interpretation. 24% reported that they had been asked to “remove or alter some data records (observations) to better support the research hypothesis.” 30% had been asked to “interpret the statistical findings on the basis of expectations, not the actual results.” On the one hand–yes, this runs the risk of confirmation bias. But on the other hand, don’t you have to be somewhat hypothesis-driven when doing scientific research?

There is a real, active debate with measurable results in quantitative trading. Basically, there are two schools of thought. One school (e.g., AQR) basically replaced its traditional, frat-bro/swim-team human traders that traded by drawing hypotheses out of the data with economics and computer science PhDs that could manipulate this data faster and better. The other school (e.g., Renaissance, Winton) do the same thing but let computers make all the decisions. The difference is that the latter will often trade on counter-intuitive signals (“if there were signals that made a lot of sense that were very strong, they would have long ago been traded out”), while the former will generally only trade on signals that they can intuitively understand, even if they could not have gotten to the signals on first principles. Matt Levine has more here and here.

At first glance, this would imply that the news in Annals is terrible. After all, Renaissance and Winton are purported to outperform the market, so it must work. Should we not force our scientists to be data-driven and lay aside ingoing hypotheses?

But the problem is that there are very few Renaissances and Wintons in the world. The reason for this is that there are very few people in the world who are good enough at data science to be able to differentiate between random statistical significance and counter-intuitive hypotheses that generate alpha. And the intuitive quant firms have not done badly! (At least, until the last few years–and that may be driven more by an uber-bull market, which makes it hard for any firm to generate alpha.)Maybe scientific research should be “good enough.” This is super controversial, since scientists almost universally believe that changing data to fit hypotheses is wrong–but then again, this data show that scientists are doing that anyway. Think about it. You’re a budding associate professor, trying to make tenure, and you discover a result that implies that the world is flat, or pirates are inversely correlated with global warming, or green jelly beans cause cancer. What do you do? Do you just uncritically hit “publish”? Or do you assume that your data were wrong and “interpret the statistical findings on the basis of expectations, not the actual results”?

The Jets


Head Coach Todd Bowles has, unsurprisingly, been fired and the replacement rumor mill is already starting.

I am really surprised that General Manager Mike Maccagnan sounds pretty secure. Maccagnan’s draft whiffs are legendary–only 10 of 28 of his picks are on the roster. The consensus in New York sports media is he is getting another chance solely because he drafted Sam Darnold, but why? Maccagnan wanted Kirk Cousins, an overpaid veteran who only beat one team with a winning record this year. Darnold was his second choice and even Darnold was not a particularly inspired pick–if you had to go for a quarterback in the draft because you lost out on free agency, Darnold was the clear safe choice relative to Baker Mayfield, Josh Rosen, Josh Allen, and Lamar Jackson. It is not even obvious that Darnold was the right choice, in retrospect, given Mayfield’s hot start for Cleveland (Cleveland drafted first, but Darnold was higher on the Jets draft board). And while free-agent decisions always look bad in retrospect, the biggest misses were ill-advised at the time (Darrelle Revis, Trumaine Johnson).

At the same time, the piece that most pundits miss is that GMs can grow. It is easy for us to think of GMs as springing fully-formed from Athena’s head, but you expect growing pains the first few years. There is a reason we promote our analysts after three years–analysts get better over time. There is a limit to this (I suspect personnel search may be the next target for NFL analytics, if in fact it is not already), but remember that Maccagnan’s last job was director of college scouting.

Separately, I do not really understand what the Jets beat writers think should happen next. The consensus is they should hire “the next Sean McVay,” a coach generally described as young, fresh, exciting, and innovative on offense. And then we hear the Jets should hire… 26-year-veteran Mike McCarthy? 21-year-veteran John Harbaugh? McVay was a surprise–if you want another McVay, you need to swing for the fences and go with someone unproven.

Finally, I wonder how Christopher Johnson impacts the search. Woody Johnson was reputed as one of the worst owners in the league (the Tim Tebow debacle was one of the clearest illustrations) and insiders seem to really like Christopher. Does he bring a more level-headed decision-making process?