Category: Current Affairs

New Emergent Ventures Vertical Supports Talent Identification Projects

Here is the press release and more detail, I thank Schmidt Futures and Eddie Mandhry for their support, and there is a parallel initiative led by David Deming and Heidi Williams, focusing on the research side of talent identification (for that do not apply to Mercatus/EV).  Applications on the practitioner side for finding and developing talent are welcome at the usual Emergent Ventures site.

Italy fact of the day

Before becoming Italian prime minister, Giorgia Meloni was one of the most strident voices on migration in the European Union. As an opposition politician, she warned darkly of efforts to substitute native Italians with ethnic minorities and promised to put in place a naval blockade to stop migrants crossing the Mediterranean.

During her time in office, she has taken a markedly different tack — presiding over a sharp spike in irregular arrivals and introducing legislation that could see as many as 1.5 million new migrants arrive through legal channels.

Do note this:

Meloni is presiding over a country that is economically stagnant and in demographic decline. Over the last decade, Italy has shrunk by some 1.5 million people (more than the population of Milan). In 39 of its 107 provinces, there are more retirees than workers. ..

Meloni’s legal migration decree estimates Italy needs 833,000 new migrants over the next three years to fill in the gap in its labor force. It opens the door to 452,000 workers over the same period to fill seasonal jobs in sectors like agriculture and tourism as well as long-term positions like plumbers, electricians, care workers and mechanics…

Given Italy’s rules on family reunification, which allow residents to bring in relatives, “it’s easy to predict that over something like 10 years, these figures will triple,” bringing in about 1.5 million migrants, said Maurizio Ambrosini, a professor of sociology and an expert on migration at Milan’s university.

The median voter surfaces yet again?  Here is the full account, via Andrew McLoughlin.

The Relentless Rise of Stablecoins

1. In 2022, stablecoins settled over $11tn onchain, dwarfing the volumes processed by PayPal ($1.4tn), almost surpassing the payment volume of Visa ($11.6tn), and reaching 14% of the volume settled by ACH and over 1% the volume settled by Fedwire. It is remarkable that in just a few years, a new global money movement rail can be compared with some of the world’s largest and most important payment systems.

2. Over 25mm blockchain addresses hold over $1 in stablecoins. Of these, ~80%, or close to 20mm addresses, hold between $1 and $100. For a sense of scale, a US bank with 25mm accounts would rank as the 5th largest bank in the US by number of accounts. The massive number of small-dollar stablecoin holdings indicates the potential for stablecoins to provide global financial services to customers underserved by traditional financial institutions.

3. Approximately 5mm blockchain addresses send stablecoins each week. This number provides a very rough proxy for global users regularly interacting with stablecoins. These ~5mm weekly active addresses send ~38mm stablecoin transactions each week, representing an average of over 7 weekly transactions per active address.

4. Stablecoin usage has decoupled from crypto exchange volumes, indicating that significant stablecoin transaction volumes may be driven by non-trading/speculative activity. Since December 2021, centralized exchange volumes are down 64%, and decentralized exchange volumes are down 60%. During this period, stablecoin volumes are down only 11%, and weekly active stablecoin addresses and weekly stablecoin transactions are up over 25%.

5. Of the ~5mm weekly active stablecoin addresses, ~75% transact less than $1k per week, indicating that small/retail users likely represent the majority of stablecoin users.

6. The outstanding supply of stablecoins has grown from less than $3bn five years ago to over $125bn today (after peaking at over $160bn) and has shown resilience to the market downturn with the market cap of stablecoins currently down ~24% from its peak, compared with a ~57% decline for the overall crypto market cap.

7. Less than 1/3rd of stablecoins are held on exchanges. Most are held in externally owned accounts (not exchanges or smart contracts).

8. The majority of stablecoin activity uses Tether (USDT). Tether represents 69% of stablecoin supply, and YTD has accounted for 80% of weekly active addresses, 75% of transactions, and 55% of volumes.

9. Most stablecoin activity occurs on the Tron and BSC blockchains. Year-to-date, the Tron and BSC blockchains collectively account for 77% of weekly active addresses, 75% of transactions, and 41% of volumes.

10. The Ethereum blockchain is used for higher value transactions (on average). Despite accounting for just 6% of active wallets and 3% of transactions, the Ethereum blockchain is home to 55% of stablecoin supply and settles close to 50% of weekly stablecoin $ volume.

These are all from a Bevan Howard report, The Relentless Rise of Stablecoins (requires email).

Is polarization going up or down?

Rachel Reeves has ruled out any version of a wealth tax if Labour forms the next government, declaring that additional taxation will not lead to prosperity.

In an interview with The Telegraph, the shadow chancellor launches a bold bid for support from businesses and wealthier households, saying she will not introduce a levy to target wealth or expensive properties, and will not increase capital gains tax or the top rate of income tax.

Instead, she says, she will do “whatever it takes” to attract private investment to Britain.

Here is more from The Telegraph.  Median voter theorem still underrated!  Hail Anthony Downs!

Excess All-Cause Mortality in China After Ending the Zero COVID Policy

In this cohort study across all regions in mainland China, an estimated 1.87 million excess deaths occurred among individuals 30 years and older during the first 2 months after the end of China’s zero COVID policy. Excess deaths predominantly occurred among older individuals and were observed across all provinces in mainland China, with the exception of Tibet.

So what is the proper sarcastic headline here?  “I guess that flu was worse than we thought!”?  Or “How is it that China ran out of ivermectin?”  Here is the new JAMA piece, via Rich Dewey.

To be clear, I never thought Zero Covid was a sustainable policy for China.  The real criminal negligence lies with CCP leadership, which turned down opportunities to pursue joint mRNA vaccine production — with the West of course — earlier on.

SpaceX Versus the Department of Justice

The DOJ is suing SpaceX for focusing its hiring on US citizens and permanent residents. Yes, you read that right.

Semafor: The DOJ alleges that SpaceX discouraged refugees and asylum seekers from applying to open positions and refused to hire those that did, according to the complaint.

According to the complaint, SpaceX job postings wrongly stated that only U.S. citizens and lawful permanent residents could apply for openings, and that “SpaceX’s hiring practices were routine, widespread, and longstanding, and harmed asylees and refugees.”

Under U.S. law, both asylum seekers and refugees are protected from hiring discrimination regardless of citizen status.

The lawsuit is bizarre. I am sure Elon would be happy to hire some refugees from the Russian space program. So why does SpaceX advertise that only US citizens and lawful permanent residents can apply for some jobs? Because that’s what they understand the law requires:

People “don’t understand the chilling effect of the federal export control laws” that SpaceX allegedly cited in its job listings as a reason for excluding refugees and asylees as candidates, writes Abhi Tripathi, the director of mission operations at UC Berkeley’s Space Sciences Laboratory. The International Traffic in Arms Regulations (ITAR) only allows U.S. citizens and green card holders to access information in companies that make spacecraft and rockets for national security reasons. “Employees are PERSONALLY liable with huge fines and imprisonment if the wrong info gets out,” Tripathi says. It’s unclear which positions SpaceX allegedly refused refugee and asylum applicants for.

Now SpaceX may be wrong about the technicalities of the law, the distinction, as I understand it, rests on the difference between US Persons and US Citizens, but they are 100% correct that the DoD frowns on non-citizens working for military related ventures. As a result, jobs restricted to US citizens are common in industries that interact with the military or that involve technologies which are potentially dual-use, such as jobs at SpaceX. Jobs that require security clearances are, of course, typically restricted to US citizens but so are many jobs not requiring clearances. Here, for example, is an ad for an engineer at Northrup Grumman in aerospace structures that does not require security clearance but advertises US Citizen only. The U.S. military, of course, mandates citizenship or a green card for enlistment, a policy that is shared by another federal employer—can you guess? Surprise. The Department of Justice.

Below, for example, is an ad for a recreational specialist to work for the DOJ’s Bureau of Prisons–this is not a job involving national security!–but the ad states clearly that U.S. Citizenship is Required. Most federal government jobs, in fact, are restricted to US citizens. The Federal Reserve even requires US citizenship to get an internship.

In short, it seems that SpaceX is being singled out for punishment for a practice that is widespread in the industry and often encouraged by, sometimes required by, and usually practiced by the Federal government.

“What Harvard can learn from Olive Garden?”

That is the title of my latest Bloomberg column, here is one bit from it:

One lesson is that it’s harder to convince poorer individuals to mingle with wealthier individuals in settings where the culture is shaped to align with a higher socioeconomic status. Churches, for instance, are usually free and open to all — but the poor do not seem so keen on attending religious services in wealthier neighborhoods. Maybe that’s because they don’t view the wealthier church as a “better service” (however that might be defined) but rather as an environment where they do not feel entirely comfortable or welcome.

In other words: Wealthier institutions or establishments attract a mixed customer or user base only when they give up cultural control. Taller stained-glass windows and more comfortable pews can do only so much to attract lower-income churchgoers. (An aside: One nice feature of marketing “culture” — for lack of a better word — on the internet is that it can be broadly appealing. Classical music on YouTube, for example, is not only free but also free of snob appeal.)

The business model of America’s nonprofit sector depends on producing status and reputation, both for itself and its affiliates. Many nonprofits work at creating environments of a very particular sort, both to raise money and to boost their influence. To elites, those environments are innocuous, even inspiring. But those same elites are starting to realize that what is inviting to one person is off-putting to another.

Here is a related (and very good) column from Catherine Rampell.

What should I ask Jacob Mikanowski?

Yes I will be doing a Conversation with him, here is Jacob’s self-description from his home page:

I’m a freelance journalist and writer based in Portland, OR. My academic training is in the history of Eastern Europe, but for over a decade, I worked as a critic and a science journalist. I write about art, books, movies, ancient history, anthropology, and – occasionally – food. I especially like to work on stories about the intersection of science and the humanities, photography, and people who are helplessly obsessed with whatever they’re doing.

For the past few years, I’ve been working on single project which combines all my interests: Goodbye, Eastern Europe: An Intimate History of a Divided Land – a book-length history of Eastern Europe, covering culture, politics, religion and ideology (essentially, everything which made Eastern Europe, Eastern Europe over the past 2000 years)…

I loved the book, and that led me to Jacob.  Here are some of his articles.  Here is Jacob on Twitter.  Here is a good WSJ review of Goodbye, Eastern Europe: An Intimate History of a Divided Land.

The Real UFO Story

Erik Hoel writes that the “the UFO craze was created by government nepotism and incompetent journalism” which makes a lot more sense to me than the other explanation. Here’s a key bit:

To sum up the story as far as I understand its convoluted depths: diehard paranormal believers scored 22 million in Defense spending via what looks like nepotism from Harry Reid by submitting a grant to do bland general “aerospace research” and being the “sole bidder” for the contract. They then reportedly used that grant, according to Lacatski himself, the head of the program, to study a myriad of paranormal phenomenon at Skinwalker Ranch including—you may have guessed it by now—dino-beavers. Viola! That’s how there was a “government-funded program to study UFOs.”

Our current journalistic class, unwilling or unable to do the research I can do in my boxers in about five hours, instead did a big media oopsie in The New York Times, running the story and lending credibility to the idea the Pentagon did create a real serious task force to investigate UFO claims. The fervor in response to these “revelations” memed into existence a real agency at the DoD that now does actually study UFOs, simply because everyone “demanded answers”—which is totally understandable, given the journalistic coverage. However, the current UFO task force is staffed by, well, the people willing to be on a UFO task force. According to the Post:

And who was in charge, during the Trump administration, when the Pentagon created a UFO Task Force to investigate incursions of unknown objects over America?

Stratton—who believes the ghosts and creatures of Skinwalker Ranch are real—officially headed up these Pentagon investigations for years.

The “chief scientist” of this Pentagon task force was Travis Taylor, who is and was a co-star of “Ancient Aliens” on the History Channel. He currently stars on “The Secret of Skinwalker Ranch” on the same network.

This official embedding makes it difficult to break the veneer of legitimacy unless you know the whole story, simply because there’s likely a lot of coordination by professional UFO enthusiasts behind the scenes, which is why you’ll occasionally read stuff about how anonymous sources from other insiders confirm the accounts.

See also my previous post on Uri Geller and the government’s Stargate Project.

Austin Vernon on the IRA (from my email)

I’ve thought about this some, but honestly some of the subsidies are so mind bogglingly large that I find myself constantly going back to read the rules to make sure I’m not getting it wrong.

So I think the first thing is that the law is not fiscally sustainable because the subsidies are large and uncapped. I would expect it to quickly get into the trillions over the ten year period without adjustments.

One example is that with all the adders, solar panels get a $26/MWh subsidy when using the production tax credit. Lazard says solar can cost as little as $24/MWh in the best spots in its latest release. So it will spark a boom and all kinds of inflation in the solar supply chain, while also favoring utility scale solar over distributed solar since distributed is more hamstrung by regulation so the impact isn’t so dramatic. The process of selling these tax credits can be pretty complicated, though there are provisions to make it slightly easier in the bill. So the finance industry should earn a lot of new business.

Most attention has gone to the factories, but batteries already made sense before the IRA and you can see this in pre IRA announcements. So I think a lot of those factories would have happened, anyway. Car makers like to have their suppliers local and with batteries being such a big portion of cost there was no other way to do it. And naturally these factories are going near car manufacturing regions like the southeast or the upper midwest. There is no reason to ship batteries further than necessary.

Solar panel factories are a different bag of worms. I think we would have gotten more module assembly and possibly more polysilicon. That is because most of the module weight and volume is low value stuff like aluminum or glass that is expensive to ship. And we have restrictions on using Chinese polysilicon from the Uyghur provinces. But wafers and cells would have been slower to come over. Also some module assembly might have been in Mexico instead of the US. Of course these factories are going to states with lower labor costs where it is easier to build, which happen to be Republican. Another wrinkle with solar factories is that they depreciate at an extreme rate. Usually they are obsolete after 2-3 years and need to shut down. So there is a real possibility at the end of the law that you see a massive drop in solar deployment because the inflated supply chain will have to rationalize to non-subsidy conditions and then our factories will not have the revenue to upgrade to the next generation. That will then kill the supplier ecosystem, etc. So the earlier the subsidies get ratcheted down to prevent the boom-bust cycle, the better for long term health. It may also be like the wind PTC a decade ago where things collapsed after lapse of the subsidies and they brought them back.

Hydrogen also has crazy subsidies similar in magnitude to the solar PTC, especially because you can stack the solar PTC on top of the hydrogen one. Who knows where that will show up. But it will be frothy. We should be able to tell how crazy these were because I imagine few other countries will be so generous and we’ll be able to see what use cases happened here that made sense nowhere else. Hydrogen is the lazy answer to decarbonization problems and there is almost always a better way. Free of subsidies hydrogen demand would probably fall because refining lighter fuels like gasoline and diesel is the main use case. I’m optimistic about hydrogen and CO2 feedstocks for chemicals on longer horizons, but the US is the last place they make sense because of our inexpensive natural gas.

So overall you have inflationary/budget pressure on the negative side while support could be relatively bipartisan at the national level because of a climate/economic development alliance. I don’t think local and state will align as well. Probably there will be more local bans if people are building solar to mostly farm subsidies. And state utility regulators and ISOs might resist further solar+wind deployment where the natural gas lobby is strong (you could rename IRA “natural gas demand destruction bill”). The sweet spot would be solar + wind directly powering local industry by providing things like process heat (sorry geothermal!).

Here is the Substack of Austin Vernon.

What have I been thinking about lately?

Robin Hanson asked me this question at lunch last week, and due to the general raucousness of the occasion I didn’t get a chance to answer.  So here is my list of recent questions:

1. How much did the British colonial welfare state for Ceylon in the 1930s help that country and its later social indicators?

1b. How much did it matter that Ceylon was a Crown colony and not part of the Raj?

2. Why has Thailand done considerably better than the other major Buddhist economies?

3. Why are there so few liberal or even technocratic voices in Sri Lanka politics?

3b. How is this consistent with Sri Lanka doing so well on so many social indicators?

4. Why does Qatar seem (at least to me) so much more aesthetic than Dubai?

5. What is the correct Straussian reading of all those 2017 Saudi (and other) demands made on Qatar?

6. To what extent will the developments of the next twenty years favor nations with a lot of scale?

7. Ecuador seems to be moving backwards on the political front, including violence, corruption, and electoral problems.  In the smallest number of dimensions possible, why exactly is this happening?

8. What is the equilibrium, given our current trajectory on drug policy and the rising number of drug-related and also opioid deaths?

9. When generative AI models become better and smarter, how many more people will be interested in incorporating them into their workflows?  Or will most of this happen through a complete turnover of companies and institutions, happening much more slowly over time?

10. Music delivery and distribution mechanisms have changed so many times?  But what exactly will or could succeed music streaming?  When it comes to the economics of music, have we reached “the end of history”?

11. What exactly does one learn that is special when traveling to places that are not at all on the cutting edge?

12. Which exactly are the political economy principles governing the allocation of green energy projects in the IRA?

There are more.

Which countries are the losers in the new mercantilism?

New tax credits for manufacturing batteries, solar-power equipment and other green technology are drawing a flood of capital to the U.S. The European Union is trying to respond with its own green-energy support package. Japan has announced plans for $150 billion of borrowing to finance a wave of investment in green technology. All of them are working to become less dependent on China, which has a big lead in areas including batteries and the minerals to make them.

Now, some smaller players are getting left behind. Many are nimble economies that were on the rise during decades of free trade, but are at a disadvantage in a new era of aggressive industrial policy. Industrialized nations such as the U.K. and Singapore lack the scale to compete against the biggest economic blocs in offering subsidies. Emerging markets such as Indonesia, which had hoped to use its natural resources to climb the economic ladder, are also threatened by the shift.

Here is more from Ballard, Douglas, and Emont at The Wall Street Journal.

Emergent Ventures winners, 28th cohort

Anup Malani and Michael Sonnenschein, Chicago and Los Angeles respectively, repeat winners, now collaborating on a new project of interest.

Jesse Lee, Calgary, to lower the costs on developing safe and effective sugar substitutes.

Russel Ismael, Montreal, just finished as an undergraduate, to develop a new mucoadhesive to improve drug delivery outcomes.

Calix Huang, USC, 18 years old, general career development, AI and start-ups,

Aiden Bai, NYC, 18, “to work more on Million.js, an open source React alternative,” and general career development.  Twitter here.

Shrey Jain, Toronto, AI and cryptography and privacy.

Jonathan Xu, Toronto, currently Singapore, general career support, also with an interest in AI, fMRI, and mind-reading.

Viha Kedia, Dubai/ starting at U. Penn., writing, general career development.

Krishiv Thakuria, entering sophomore in high school, Ontario, Ed tech and general career development.

Alishba Imran, UC Berkeley/Ontario, to study machine learning and robotics and materials, general career development, and for computing time and a home lab.

Jonathan Dockrell, Dublin, to finance a trip to Próspera to meet with prospective venture capitalists for an air rights project.

Nasiyah Isra-Ul, Chesterfield, VA, to write about, promote, and create a documentary about home schooling.

Sarhaan Gulati, Vancouver, to develop drones for Mars.

And the new Ukrainian cohort:

Viktoriia Shcherba, Kyiv, now entering Harris School, University of Chicago, to study economic and political reconstruction.

Dmytro Semykras, Graz, Austria, to develop his career as a pianist.  Here is one recent performance.

Please do note there is some “rationing of cohorts,” so some recent winners are not listed but next time will be.  And those working on talent issues will (in due time) end up in their own cohort.