My Conversation with Matt Levine

Here is the transcript and audio, Matt was in great form.  We covered Uber, derivatives, crypto, Horace, Latin and the ancient world, neighborhoods of New York City, whether markets are volatile enough, Buffy the Vampire Slayer, whether IPOs are mispriced, Nabokov and modernist literature, Achilles and Homer, and of course the Matt Levine production function (“panic”).

Here is one excerpt:

LEVINE:

…What I’d like the story to be is that financial markets have gotten smarter and they reacted less to news. So even though the news is noisier, they react less to that noisy news because it turns out not to affect asset prices in as noisy a way as you’d think by watching TV.

I think that there is something compelling to that because we actually have seen smart people build smart things that do a good job of making investing decisions. So you’d expect over time, as people build more rational investing tools, investing would become more rational.

The good counterargument to that is that investing is not a technological problem in the world that can be solved. It’s an interpersonal fight. Trading, in particular, is an attempt to be better than someone else. You can never make trading more rational because as you get better, someone else gets better. The residue will ultimately still be your human biases.

I’m biased towards the view that we have gotten smarter at decoupling our emotional reactions to the news from financial asset prices. Part of that is — whether or not that’s true globally — there’s a local sense in which the first day of Trump’s election everyone panicked. Then he said another crazy thing, and then he said another. Eventually you tune it out. That’s a form of this thing of financial assets reacting less to human reactions to the news.

Here is another:

COWEN: Do you have a single biggest worry [about asset markets], however tiny, tiny, tiny it may be?

LEVINE: I don’t think I do. I don’t think I do. The thing that I find weirdest is the lack of volatility in the face of a very strange and volatile world, but I’ve reconciled myself to that. This is my efficient markets optimism, where I assume that if something bad is happening, it would happen.

COWEN: But efficient markets is also a pessimism, right? It’s harder to make the world better than it already is because you can’t see past what others are seeing very easily.

LEVINE: Sure, it’s an efficient markets conservatism or something.

And finally:

LEVINE: I have an idiosyncratic take on Book 9 of the Iliad. The Iliad is the story of Achilles is the great warrior on the Greek side in the Trojan War. He gets mad at some slight, and he goes back to his tent to sulk, and the Greeks start losing.

So then they send emissaries to his tent to say, “Please come back.” And he says, “No.” Then, the Greeks start losing some more.

Eventually, he comes back, and he gets killed. That’s basically the story of the Iliad. Book 9 is where they send the emissaries to say, “Please come back,” and he says, “No.”

He gives this speech, this response that is weird, where he says, effectively, “The prophecy is that if I go back to fight here, I will die here. My name will be immortal. If I don’t go back to fight, I’ll go home and live a long life and will be forgotten.” He chooses to go back and be forgotten. Then, later, he changes his mind because his friend gets killed.

I think the existential examination of this Greek warrior and this heroic culture that clearly valorizes heroism and deathless fame and everything, and who is, canonically, the most famous heroic warrior and the one with the most deathless fame, he’s the one who says, “Nah, I’d rather go back and live a long life on my farm.”

The forcing of that choice is the central point of the highest work of Greek art, sort of prefigures a lot of existentialist thought in the future, I think.

Do read and listen to the whole thing

Comments

Levine is ageless wisdom. How old is he? From his photo he looks 30-something.

Ray, you complained in another thread about low-bandwidth internet speeds in the Philippines, but I know you play online chess near daily. How do you keep your games from hanging and inadvertently losing because you run out of time?

I am back in Manila for now. I am thinking of building a second and maybe buying a third home, they are so cheap ($100k in the provinces buys you luxury; $200k in Manila a luxury condo). I play chess usually vs my PC not online, but you're right, when my hot 20-something gf, who is an expert poker player plays online on Playstation, she gets disconnected in the provinces which annoys her since she's usually winning.

His BV photo and smirk makes me think he's early 30s, but his beard and deep voice here make me think he's 40-something.

He entered Harvard in 1996, so ~40.

Am I hearing a Pacific Northwest accent? Comes across as a bit stoner. Quite unexpected.

Of course markets are efficient. In the long run. It's the short run that gives one heartburn. Will asset prices continue to rise? Yes, in the long run. It's the short run that gives one heartburn. Can investors depend on central banks (our Fed) to stem short run panics, bursting bubbles, and collapsing asset prices? That's the trillion dollar question. Piketty says yes: it's right there in his book. Cowen's Austrian friends beg to differ. Well, not beg, but prefer that central banks let asset prices find bottom, so that they come back stronger than ever rather than having to rely on the central bank to maintain the rise in asset prices. That, in the mind of an Austrian, is the definition of an efficient market. Crazy uncles (and crazy Austrian economists) are kept in the attic for a reason: if their preference becomes actual policy, every investor would suffer a serious case of heartburn. Investors might even lose confidence, confidence that asset prices tomorrow will be higher than asset prices today. Then what would Cowen and Mr. Levine have to talk about? Homer, I suppose.

So counselor, in the long run, will bitcoin's price continue to rise? Levine says yes, and you?

Only the efficient markets know. Efficient markets don't mean that all asset prices will rise in the long run, only those that in an efficient market ought to rise. Hindsight helps. As does a cooperative central bank. It's the Austrians who believe in the sanctity of efficient markets, the interventionists who don't (why else intervene?). The interventionists might facilitate the price of a particular asset to rise (e.g., Bitcoin), but gravity (i.e., the efficient market) will ultimately prevail. In the long run. My observation (and it's only an observation) is that an interventionist central bank has the advantage of stability (by which I mean rising asset prices) but without "inflation" (by which I mean rising wages). It's a win, win. For owners of assets, although perhaps not for owners of their labor. Of course, Cowen is heavily influenced by the Austrians, which is why I trust his instincts. I may not agree with them (Cowen prefers "disruption" while I prefer "order and stability"), but I trust them.

Levine vs. Thiel vs. Pinker: who’s the sharpest thinker to come on Conversations?

If we’re going off raw IQ it’d have to be Kasparov or Summers, I think, but that’s a separate question.

...productive accomplishments should be the measure of value

Levine seems an unproductive member of the chattering class. Anybody so enamored with Homeric fiction should not be taken seriously on practical matters.

Ormand, old chap, you aren't thinking.

Admittedly Levine writes about impractical matters. What could be more impractical than bitcoins?

But who sez Homer is fiction?

And, what is impractical about Achilles' decision to, first, choose to leave the battlefield, weighing his choices of acclaim vs. a happy life, and second, choosing to return to the fight? If what to do with your life ain't a practical matter, what is!?

Finally, Levine rose fairly high in banking. Perhaps he's well off. He has chosen to chatter and those who learn from him are better off for it.

Good question, though raw IQ does not translate to smarts per se. Kasparov for example believes in a bogus theory of history where things are 1000s of times older than conventional wisdom says, and Summers believes in money non-neutrality and money illusion. Don't know which one is more batty.

Older or younger?

the highest level of math is doing so many equations that you go completely insane. not kidding. I grew up near UChicago and the most elite mathematicians were just raving lunatics who walked their cats on those child leash things

http://www. s o m o d y .c a /q u i z .html

"The good counterargument to that is that investing is not a technological problem in the world that can be solved. It’s an interpersonal fight. Trading, in particular, is an attempt to be better than someone else. You can never make trading more rational because as you get better, someone else gets better. The residue will ultimately still be your human biases."

This isn't very smart. The 'counterargument' has nothing to do with rationality, but everything to do with the fact that investing is making decisions about the future (the future profitability of an enterprise, which in turn is a function of that company, the wider economy, etc), and, Matt, the future is uncertain. It can't be reduced to some "rational" and predictable formula, and the problem with anticipating the future isn't "biases".

“as people build more rational investing tools, investing would become more rational”

Not necessarily so. Markets would become more exposed to what is held as rational, so the rational-havens will end up dangerously overpopulated… just like the risk weighted capital for banks does for the safe-havens.

http://perkurowski.blogspot.com/2016/04/here-are-17-reasons-for-why-i-believe.html

"The forcing of that choice is the central point of the highest work of Greek art, sort of prefigures a lot of existentialist thought in the future, I think."

Reminds me a bit of Sartre on the rejection of philosophical suicide.

*Camus

Never heard of this guy before but he seems to be right about a bunch of things. Except Virgil.

Straight up, a Bitcoin to whoever can supply me with the link to Levine's secret Tumblr.

+1 Make it two Bitcoin

Is that what America has become? Achilles sulking in his tent? https://www.youtube.com/watch?v=kZhJlGV2s_k
Leading from behing while Communism and Indian devil-worshipping threaten Asia? Shile Christians are terrorized in India, China, North Korea and South Korea? While Japan rearms and plans to conquer the world? While Sunni terrorism threatens Europe's freedoms and America? Is that what we want? "Go back and live a long life on my farm.” As President Reagan asked, we want peace or we want just beeft in piece? Make no mistake, America is at crossroads.

Is that what America has become? Achilles sulking in his tent? https://www.youtube.com/watch?v=kZhJlGV2s_k
Leading from behing while Communism and Indian devil-worshipping threaten Asia? Shile Christians are terrorized in India, China, North Korea and South Korea? While Japan rearms and plans to conquer the world? While Sunni terrorism threatens Europe's freedoms and America? Is that what we want? "Go back and live a long life on my farm.” As President Reagan asked, we want peace or we want just be left in peace? Make no mistake, America is at crossroads.

America, and every country, are constantly at a crossroads. Escape the egotism of thinking that your moment is more of a crossroads than the infinite others that countries inevitable pass.

It is different this time. The choices we make nowadays will define the world our children and grandchildren will live in.

This is true of every time period. The choices your parents and grandparents made defined the world you live in.

But now the stakes are higher than they ever were. One road leads to freedom and prosperity, the other one leads to slavery and ruin. Will we make the right choice? Or the wrong choice?

It's like talking to a brick wall.

I know you are but what am I? I am making a point about the importance of the future for America. Our country faces some hard challenges.

Nice, I've been waiting for this one. Levine is part of my daily worktime procrastination reading.

I'm not so sure Matt Levine actually believes in efficient markets; it seems he believes there are lots of stupid investors stumbling around in the dark: https://www.bloomberg.com/view/articles/2018-02-14/no-one-has-any-idea-what-goes-on-in-a-bank Darts, anyone?

The stupid errors are gaussian, so the high errors cancel out the low errors. EMH still holds.

There's a lot to be said for having a theoretical maximum. Many disciplines do not currently have this -- looking at you psychology, sociology -- and are getting eaten by other more analytical disciplines.

Of course markets aren't going to react with the constant costless hysteria of, say, Twitter.

"The thing that I find weirdest is the lack of volatility in the face of a very strange and volatile world..."

Strange and volatile compared to what exactly?

To the rest, obviously.

Thank you, thank you, thank you for including a written transcript. Some folks are hearing impaired and can't listen to podcasts or read faster than they hear.

Yeah, I always read the transcript and never listen to the audio. Not due to hearing impairment but because of efficiency, I can read more quickly -- and even better, skip ahead much much more quickly -- when reading than when trying to listen to audio; buttons for fast forward and skip ahead are a very slow and poor substitute for simply jumping ahead a paragraph or two with my eyes. And jumping backward when I want to re-read something.

That's why I never listen to podcasts either, unless I already know that it's a spectacularly good one and worth my time.

If I had a long commute and needed something that I could listen to while driving or riding then I might become a consumer of podcasts and the like. I used to listen to cassette tapes (while reading the score to the music) on long commutes in Boston so maybe in the current era I would listen to other audio such as podcasts.

Call me a cynic but I suspect that neither of you has read the Iliad, save in translation.

Cynic is not the word that come to mind here.

Just in case that comment was serious: how many people have read the Iliad in the original Greek? Except for a few historians and linguists, probably the only people who can do so are people who majored in Classics. Most colleges don't even have a Classics major anymore.

In both 2014 and 2015, there were about 500 graduating seniors who majored in Classics (including those who had it as their second major). That's in the entire USA.

If Tyler and Matt were Classics professors talking about the Iliad without having read the original text, then that'd be a valid cause for complaint. But people can have interesting comments about the Iliad after having read it in translation, and for that matter can comment about Tolstoy without knowing Russian, Cervantes without knowing Spanish, etc.

Having said that, I don't see what's idiosyncratic or even interesting about Matt's quoted comment. He's merely describing one of the well-known major themes of the Iliad.

Hmm, I just looked at his LinkedIn profile and he majored in ... Classics.

Whoops my comment was directed at dearieme, not Brian Donohue. BD's comment is right on.

I tried, but it was all Greek to me. Still, there's Rieu and Fagles and Green and Lattimore and Lombardo.

Good conversation, overall, and not one that is like many other conversations.

As I am not a cynic, a few extraneous observations ...

the old expression for someone who reads the Iliad (or the Aeneid, et cetera) in the original language - for pleasure, without looking up words - is someone who can read the Greek (or Latin) text "with feet on the fender" (i.e., someone who does not have to sit at a desk with a dictionary but who comfortably sits at the fireside, "feet on the fender", reading along with the action).

"I have an M.A. in linguistics" and my best guess is that if you want to start from the beginning of Latin studies or Greek studies as an adult, whether or not you know a foreign language, you are - if you spend an hour or two a day - and if you have an above average gift for languages (at about the level of someone who plays at the local chess club and usually wins would have an above average gift at chess) - you are about two or three years from reading, not all of Homer or all of Vergil with "feet on the fender" but, at a minimum, thousands of lines of either one.

If you studied classics when you were younger it will take much less than an hour a day for a couple years. Remember, as an adult, you are learning the vocabulary you want to learn, not the vocabulary that is being set for some useless test - in this case the vocabulary you want to learn is the couple of thousand word roots in Homer and enough of the 17,000 or so actual words (the numbers vary - I include second meanings of specific words as different words - pole, pole, Pole is three words, depending on if the conversation is with Maxwell, Mrs Santa Claus, or the uncle on the Herbert side of the family of Arthur Evelyn St. John Waugh) - (to recommence, the 17,000 or so actual) Homeric words you need to get you through your chosen 10 or 20 percent of the Iliad or Odyssey in Greek (when learning Homeric Greek there is nothing wrong with reading one of the 24 books of either epic - that is, about 4 percent of the Homeric corpus of words - so many times that you almost have it memorized - and once you have done that you will have the vast majority of common words at your understanding). (By the way, when you focus on slow reading just one author, with the goal of reading the author at the author's pace some day, there is no such thing as grammar rules to learn, by the way - you learn the specific grammar use in each sentence or verse, unless of course the verse is a list of nymphs, all in the nominative or vocative case ... I hope you understand)

I have spent almost as much time on several other subjects as on Homeric Greek and Homeric Greek was just as rewarding as almost any of them (in its way). It is no small thing to understand that Milton or Dante, great guys of course in their way, were not all that aware of the beauty of their own language as they claimed to be (if their claim were correct they would sound as good in English or Italian as Homer does in Greek - and they don't, usually - Milton Book 4 and the last few chapters of the Purgatorio being the only exceptions I remember), or that Shakespeare, for example, was not the first to be as good with words as he was. (If you are reading this Dianna of course I would have answered your phone calls and put aside all those Homeric Greek study aids and gone to the Renaissance Fair with you, any time you called, but you didn't call and specifically ask, and my phone bill was paid up every year at Renaissance Faire time. That is not another story - for you, I will never say "but that is another story").

Think of it as if you had a chance to take a trip on a Napa Valley winery tour but it was a better valley than the Napa Valley (or the Livermore and Pleasanton Valley - the sauvignon blanc of Wente Vineyards and the dissolved taste of Western clay soil that is so kind to asparagus and artichoke and eucalyptus trees - I remember!) and the wine was better than Napa valley wine, except all extrapolated (from wine) to words - if you are not all that interested in the way people use words when they really really know how words can be used, Homeric Greek is, like, not your cup of tea, no need to take a winery tour even in the Napa Valley of today. Enjoy your Starbucks gift cards: I say that with no cynicism. Even Jesus, only once, turned water to wine, and there was a lot of water back in the day.

Las palabras no comunican, recuerdan (the-words-no-communicate-remind) (D. Colacho).

In the times of Jesus each adult spent, on average, 5 percent of their waking hours assuring a supply of fresh drinkable water.

For his half a million or so countrymen, that was, every day, a couple years worth of effort, every day, spread amongst all.

Ever wonder what such water tasted like, turned to wine?

Las palabras no comunican, recuerdan

Como la lluvia fresca

en mis manos

solamente mejor

mejor

meminiscitur

it was not that long ago I have a friend who has rescued a couple hundred puppies and adult dogs and as you know dogs do not live all that long (longer than cancer patients - I can vouch for that - but not all that long) and if each dog were not a contemporary but a progenitor in my friend's immediately available memory of dogs (we remember each other better when we care) the line of dogs that he rescued just since 2012 - leaving aside the 20 years before that when my friend rescued dogs - would reach back that far, easily, and probably twice as far

a hint of oak, some almost indiscernible tar and some ripe pomegranate scents, balanced by citrus-light ur-grape taste with an underhill layer of pure fire-forged seaweed - not the seaweed of the oceans of this world, the seaweed of better oceans under the same stars, but the same stars over more blessed oceans - if I remember the taste of that wine that is my best guess as to what I would remember

if

"the line of dogs he rescued just since 2012 - leaving aside the 20 years before that when my friend rescued dogs - would reach back that far, easily, and probably twice as far"

meaning, by "would reach back", would reach back to the day the water was turned into wine, or twice as far: I often forget that not everybody thinks as often as I do about the importance of rescuing dogs

it is no small thing to be a friend to a creature who never had a friend in the world

Did you notice there were no Snoopy mascots at the winter Olympics this year

Probably you didn't

There weren't

it is no small thing to be a friend to a creature who never had a friend in this world

las palabras no comunican, recuerdan

Achilles doesn't die in the Iliad. He has, in fact, never died and we fulfill the prophecy by reading the Iliad. This theme is explored in much greater depth by, e.g. Gregory Nagy. Kleos is the key word in the whole tale. Great Harvardx/EdX course on all this btw.

And they Achilles eventually regrets his decision, when we see him again Odyssey book 9. I would rather follow the plow as thrall to another man than be famous and king of the dead.

Heinlein's take on this is that it is better to be a dead hero than a live coward, because even the coward has to die sometime and is forever having to explain his choice and likely be ostracized for it at a minimum. I think that the Stoics would tend to agree, as long as the hero position is the one that is your true nature. Ultimately, every person has to decide what is worth dying for. Would I die to protect my family? Absolutely. Would I die to protect Ted Samsell-Jones? Probably not. Would I expect you to die to protect me? Probably not.

Would you die for Danzig?

Heinlein's take is fine, but jeez he's merely re-treading what Shakespeare said in _Julius Caesar_, who in turn was merely re-treading what Achilles was waffling over in the _Iliad_.

“A coward dies a thousand times before his death, but the valiant taste of death but once."

https://www.goodreads.com/quotes/192269-a-coward-dies-a-thousand-times-before-his-death-but

Excellent cite of the Stoics though!

Thago, do you ever notice no one mentions brazil but you

I really don't know what you are talking about. People mention many countries as appropriate, Japan, Brazil, Sweden, India, Red China... The Brazilian version is very apt, as brevity is the soul of wit and Brazilians are acknowledged as fearless warriors. Are you a fanatical anti-Brazilian?

What he's talking about is how you don't shut up about Brazil. I suspect many of us that had warm feelings for Brazil before you showed up have turned somewhat more negative on it, thanks to you. And look, I know you are trolling for attention but I really admire the commitment to the character, so carry on!

Maybe you are trolling for attention! I really don't know what you mean. Most times, I write about America. It is funny how you geth crazy when you hear about Brazil (meanwhile, some people can't shut yp already about India, China, Singapore, France, Texas, etc.). Maybe a brasileira left you?

I certainly do hope one brasileiro will leave us all.

I really do not know what you are talking about. I am a fellow American of yours.

What makes you think I'm American?

Aren't you?

A lot of people have that view of Achilles. One main issue is just how old is he? Has he had enough life experience outside of war to have a real choice?

his friend

His very good friend

Great interview Tyler. Another fascinating guest. Good questions. And answers.

I gotta say though- damn, Matt peppers his speech with “like”. Once I noticed it, it became distracting.

In the end, Matt is plenty articulate, so it’s fine, but it was a little jarring. I suppose it’s just a sign of the times we live in, but I was expecting a bit of a smoother delivery from a Classics major.

When are we going to get a conversation with Tyrone?

Levine's comment on Fear as Ur-motivator needs further questioning.

Did he answer that as a crowd-pleasing answer, or did he mean that he has cultivated a Fear that will spur him on?

The latter seems dangerous, like keeping Ebola Zaire in your fridge, as you never know when something might accidentally release it.
That said, it seems a terribly good neuroatypical solution -- as long as it does not degenerate into neurosis or worse.

Did he actually functionalize a Fear?

Most disappointing episode ever! Tyler cannot do much with such a guest like Levine. Levine - find someone who can teach how to gargle, clear the throat and speak clearly. Also making gibberish like comments with hush hush voice, here and there, over-complicating are not the smart moves. Not a single comment was clear enough! A good writer tend to be a good speaker who can explain well. Matt is different.

Excellent podcast! Great listening to Matt Levine -- I'm a bit embarrassed to say that it's the first time I've listened to him talk after reading so many of his newsletters (must be hundreds of hours of reading at this point)!

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