Results for “markets in everything”
1803 found

Why Americans are fatter

by  Tyler Cowen in

…Americans are not consuming more carbohydrates and trans fats because McDonald’s is super sizing our dinners.  Nor is our diet changing because Uncle Sam is subsidizing corn.  Rather, Americans are eating poorly because of a much more fundamental change in how we eat, specifically, the rise of snacking.  In fact, the amount we eat and drink between meals accounts for nearly all the growth in our consumption of carbohydrates and fats over the past thirty years.  Perhaps the biggest source of America’s recent weight gain and sugary diet is not so much the value "meal" but the simple snack.

…the free market has caught up with American food culture…With snacking, food is no longer about sustenance or even sociability: it is about amusement and self-medication.  We now eat to relieve our stress, to alleviate our boredom, or simply make ourselves feel better.  Food, in short, has become our drug of choice.  And the types of foods that are best suited for these psychological tasks are the very ones that cause us so many health problems, that is, sweets, fats, and refined carbohydrates.  In other words, the ultimate source of the changing American diet goes beyond McDonald’s, corn syrup, or the food pyramid; the ultimate source is the American way of life.

That is from J. Eric Oliver’s excellent Fat Politics: The Real Story Behind America’s Obesity Epidemic.  Here is Steve Levitt’s positive review.  Here is an LA Times review.

What about me? I am not going to exercise beyond my current levels of tennis, basketball, and walking are enough.  So I could become thinner in three ways.  First, I have recently switched from Raisin Bran to Spelts cereal in the morning.  Second, I prefer mineral water to Coke, but Szechuan restaurants do not serve the former.  I am waiting for Markets in Everything, and in the meantime I am not willing to give up Dan Dan Noodles or eat them with plain ice water or tea.  Third, in the last year I have started snacking on high-quality dark chocolate.  I have yet to decide whether I wish to fight this new source of additional calories…

Addendum: Comments are now open…

Guero and Crunchy Frog

by  Tyler Cowen in

Amazon.com lists Beck’s new album —Guero — as coming out next week, but today I found copies in my local Starbucks, bless their hearts.  The sound is muddier and murkier than usual, with plenty of rhythm changes and scratching. On first listening it is at least as good as Odelay (and similar in style), but not quite up to my favorite, Mutations.  But then again, I’ve underrated every other Beck album on first listening, so why should this one be any different?

While we are off the topic of economics, Entertainment Weekly lists the 20 Best Monty Python sketches.  Most of the picks are on target but "Miss Anne Elk" and "Summarize Proust" are conspicuous for their absence.  And "The Argument Clinic" (the original inspiration for "Markets in Everything," I might add) deserves to be way higher than #20.

Will you ever be thawed out?, part II

by  Tyler Cowen in

Many of you have written back in defense of cryogenics (be sure to read Robin Hanson’s appended response).  But reader Michael Goodfellow offers a more negative view:

Robin Hanson’s comment implies cryonics will continue to be used even after the first set of people is revived.  This is unlikely.

There are few diseases (including aging) that could damage your brain more than having your head cut from your body and frozen.  The ability to repair this huge damage implies the ability to repair nearly any damage in a living person.  So no one will be frozen after the point where revival becomes possible (because no one will die!)  In fact, since repair of lesser injuries would be possible before
that, cryonics would already be an unused technology (no new brains frozen) long before revival is possible.

This has some consequences — if you are revived, it will be to a society of immortals.  Second, cryonics will stop being used before it has been proven to work, even if it does work (because no one dies and is frozen.)  So only a limited number of people will ever be frozen, and they will all have to take on faith that the technology can work.

My take: I’ll stick with my original pessimism, albeit for simpler reasons.  Despite recent efforts, it remains hard to buy insurance against the price of your home falling five years from now.  And how many companies issue fifty-year bonds?  Can I expect that  anyone will maintain my web page long after I die?  How much capitalization is needed to insure that an organization lasts even as little as fifty years?

In reality the series should be called "Spot Markets in Everything."

Eyeballs are scarce

by  Tyler Cowen in

When you are in your hotel room what do you look at but…well…the items in your hotel room.

Given how hard it is to command consumer attention, it is only natural that hotels start selling these goods. At the Regency in Manhattan, you can now get the following:

1. A bath mat for $45

2. Down pillows for $28 each

3. A bathrobe for $69

And of course you get to test the items before you buy. Some hotels also believe that buyers will think back positively on their hotel experience, boosting repeat business.

Next in line may be the “swiveling, floor-to-ceiling TV cabinet,” priced at $3,000. Hotels are now selling beds and $4000 tubs as well. Of course if you really like the hotel merchandise you could just move in permanently.

The data are from Forbes, June 7 issue, p.124. “Markets in Everything,” as they have been known to say.

A picture is worth a thousand words, maybe sometimes

by  Tyler Cowen in

Ever try Internet dating? How do you know that picture is for real? Is her age shaded downwards? Or what if the guy is still married?

Here is one option:

Zeri now sifts through this city’s bustling singles scene with a local off-line dating service called CheckMates, which screens its members – some 90% of whom are refugees from the online world – using everything from Google searches to driver’s license verifications.

“My clients care about physical and financial safety, but more simply, they worry about people’s ability to misrepresent themselves online,” says CheckMates founder Carole Shattil, who for $1,500 and up will personally scour the city’s singles scene in search of a potential match.

“I meet every one of my clients,” who number around 1,100, she says. “Online services can’t do that.”

Or perhaps the photo poster can offer outside certification:

Hoping to ensure the quality angle are upstart businesses such as LookBetterOnline.com, an 8-month-old Los Angeles company that links daters with local professional photographers.

The resulting head shots, which cost $129 and aim to walk the tightrope between oddball self-portrait and soft-focus silliness, can be posted on any online dating site and are accompanied by a logo that notes the month and year the photo was shot. Gold certification (an additional $20) adds age, height and weight while platinum status ($50) includes a criminal record, marital status and bankruptcy filing review.

Of course some daters may prefer a criminal record in their significant other. And I enjoyed that last bit about the bankruptcy review. For another $100, perhaps they will report how many “naked puts” you have written.

How about this service?

Of growing concern are “organized efforts to bilk American men,” often in the form of foreign women who ask for plane fare to the USA and then vanish.

“We’re trying to clean up this industry,” says Herb Vest, founder of Dallas-based TrueBeginnings, a 6-month-old site that boasts a partnership with a criminal-record database firm called Rapsheets.com, which stockpiles 150 million records compiled from more than 110 state and county agencies.

“I don’t want to introduce someone to a felon,” Vest says.

Here is the full story. And yes, sometimes I title these posts “Markets in Everything.”

Redux, my CWT with SBF

by  Tyler Cowen in

I won’t indent:

COWEN: I have some crypto questions for you. Is there, in fact, any way to coherently regulate stablecoins? I see what the proposals say: It’s all about capital requirements, deposit insurance, treat it as a bank account, like a new kind of money market fund. Can that possibly work? Doesn’t it end up having to be applied to all of crypto, all payments companies, PayPal, whatever else? What’s really there that they can do?

BANKMAN-FRIED: That’s a really interesting question. First of all, I will say, I think there is something that does work compared to the current environment, but I’ll get to your point — it’s actually a good one. If you just said, “Look, all stablecoins have to be fully backed by the dollar and have to have audits to confirm that they are in a bank account,” that would get a pretty safe product that was well understood, well regulated, and frankly would be, from a product perspective, just as good as current stablecoins. That’s what all the stablecoins are doing today.

It’s a mess because there’s no clear regulatory framework for them to fit into and to have oversight of that. So, part of my answer there is, basically, yes, I think that framework would solve the current problems that people have in a pretty clean way. But you have a good point there, which is, how about PayPal? There are all these things that we don’t call stablecoins right now, that we call something else.

COWEN: PayPal promises me a dollar, and they give it to me. I’m happy, right?

BANKMAN-FRIED: Exactly. In fact, a lot of these look a lot like stablecoins when you drill into it. When you really dig into it, what is the difference between PayPal and USDC? I guess there’s some differences, but I think there are more similarities than there are differences, to be honest. What does that imply for PayPal? You can just say, whatever it implies, stablecoin is not PayPal — it’s how it is.

I think there would be a big improvement over the current world, where it’s the same thing but without regulatory oversight and with a lot of random drama because of this. But I do think that it gets to this question of, “Wait, but banks are allowed to rehypothecate dollars. Banks are allowed to do all manner of wacky things with their deposits.” Are stablecoin companies allowed to? If not, is it obvious they shouldn’t be allowed to? And how should that be governed and regulated?

Maybe the answer is, whatever: The banks will do that on their behalf, the banks where they hold their assets, and then pay them interest for the right to do that — although, of course, right now banks aren’t actually paying interest, really . . .

COWEN: Not to me. Also, how stable does a stablecoin have to be to be regulated as such? If there’s any regulatory definition, won’t a lot of people just camp their crypto assets to be just slightly more volatile than wherever the line is drawn, or you’d just end up regulating all of crypto? How does that work?

BANKMAN-FRIED: This could go in a few ways. Is your thought that people will attempt to get just barely into the regulatory system or just barely out of it?

COWEN: Maybe both, but a lot of people will go out of it. So I’ll issue something. I’ll call it a “not stablecoin,” but de facto, it will be very stable. But also, “Oh, it’s just sort of an accident. Oh, who knows what the markets going to do today?” It’s just stable for decades. How do you regulate that?

BANKMAN-FRIED: Oh, that’s a really good question. Of course, what it gets you is this question of, what if a stablecoin didn’t promise to be a stablecoin? Is it bad that it’s backed by the dollar? Does it somehow make it worse from a regulatory perspective? Why is it being held to a higher standard?

COWEN: Exactly.

BANKMAN-FRIED: I do think there’s a little bit of an answer here, although I also think that this is getting at another point, which is, you could reasonably say, “Look, are consumers doing what they’re doing with their eyes wide open?” If there’s sufficient disclosures and transparency, shouldn’t people be allowed to use stablecoins with some risk in them?

I think that’d be a reasonable thing to think, but if you put that aside for a second, you say, “No, absolutely not.” Here’s one difference between that and the stablecoin, which I think is relevant, is that a stablecoin is not just stable in one direction. It’s stable in both directions. In particular, if you’re an investor, and you buy a stablecoin, you have downside risk but not upside. If somehow the stablecoin company makes money, you’re probably not going to get any of that, but if it loses money, somehow, you’re probably on the hook for that.

So, there is something a little asymmetric going on here for the consumer. I think it wouldn’t be crazy from that perspective to think that there should be some protection here and that maybe there should be regulation if consumers are only given one side of exposure, but I don’t think that’s obviously true. I think you’re making a decent point.

COWEN: Now, if we look at DeFi, there are some forms of obvious, explicit leverage, like people borrow money to participate in the system. But those aside, I’ve learned over my life, if you look at any system, any institution, typically there are forms of hidden implicit leverage in those institutions. Might be good, might be bad, but it’s there, and in a sense, you don’t understand the institution until you understand where’s the implicit leverage in this game. In DeFi, where is the implicit leverage? Is it rehypothecation, or where is it? What is it?

BANKMAN-FRIED: Ignoring the explicit leverage of borrow-lending protocols —

COWEN: Yes, which is easy to see, right?

BANKMAN-FRIED: Which is easy to see, yes. So, what happened in 2008? What caused the collapse in a lot of things? That’s sort of a dumb question, but one of the things that led to this is that no one knew how much leverage there was, really, in the system. As you said, there’s always implicit leverage, and in this case, it was all of these bespoke OTC swaps between banks that basically didn’t get reported anywhere. In fact, those got rehypothecated again and again and again. No one was keeping track of the total notional fees. It was impossible to — they weren’t public.

One thing you could do is look for a similar thing in crypto. You could look for OTC transactions. You could look for OTC swaps that live on. You could look at OTC borrow-lending. Those are in crypto. Are they in DeFi? It’s sort of ambiguous — they touch all areas of the crypto ecosystem.

But that’s an area where I think there’s some dubiously accounted-for leverage. I think that’s one answer to that question. Where else is there leverage that sort of is implicit? Rehypothecation sometimes, although in DeFi, because it’s all on-chain, it has to be pretty explicit if it’s going to be rehypothecated, but you’re not . . .

COWEN: But it’s hard to see, right? If you traced everything, you could find it, but no one’s actually watching it. Or are they?

BANKMAN-FRIED: Well, they’re halfheartedly watching it maybe, is how I’d put it, which is not great. Maybe full-heartedly watching it. I could imagine arguing for people full-heartedly watching it, and that would be a reasonable thing for them to be arguing for. In particular, if someone releases a protocol, there’s a question of, well, is that protocol rehypothecating? You just look at the code and see if it can rehypothecate, right?

In general, people actually often do know whether each protocol individually can rehypothecate, which is a separate question from whether they, as a group, can or whether they are or something. But in fact, most of these aren’t. Most DeFi protocols are not doing things beyond what they literally say they’re doing, and so the amount of leverage they introduce into the system mostly is what they say they are.

But here are some hidden things. First of all, you take one leverage thing, you put in another leverage thing, so DAI. DAI is an algorithmic stablecoin. Like other algorithmic stablecoins, it is not perfectly stable. It’s not perfectly stable because it’s not backed by the US dollar. It’s backed by crypto assets that could have price movements. It’s very overcollateralized. DAI can then be used as collateral on some borrow-lending protocols in crypto. That’s one form of rehypothecation in DeFi markets that you can trace through. It is, in theory, public, but it’s not super easy, necessarily, to trace through.

COWEN: Now, for mathematical finance, as you know, we at least pretend we can rationally price equities and bonds. People started with CAPM. It’s much more complicated than that now. But based on similar kinds of ideas — ultimately arbitrage, right? — if you think of crypto assets, do we even have a pretense that we have a rational theory of how they’re priced?

BANKMAN-FRIED: With a few of them, not with most. In particular, let’s talk about Dogecoin for a second, which I think is the purest of a type of coin, of the meme coin. I think the whole thing with Dogecoin is that it does away with that pretense. There is no sense in which any reasonable person could look at Dogecoin and be like, “Yes, discounted cash flow.” I think that there’s something bizarre and wacky and dangerous, but also powerful about that, about getting rid of the pretense.

I think that’s one example of a place where there is no pretense anymore that there is any real sense of how do you price this thing other than supply and demand, like memes versus — I don’t know — anti-memes? I think that more generally, though, that’s happened to a lot of assets. It’s just less explicit in a lot of them.

What is Elon Musk’s greatest product ever, or what’s his most successful product ever? I don’t think it’s an electric car. I don’t think it’s a rocket ship. I think one product of his has outperformed all of his other products in demand, and that’s TSLA, the ticker. That is his masterpiece. How is that priced? I don’t know, it’s worth Tesla. It’s a product people want, Tesla stock.

COWEN: But the prevalence of memes, Dogecoin, your point about Musk — which I would all accept — does that then make you go back and revisit how everything else is priced? The stuff that was supposed to be more rational in the first place — is that actually now quite general, and you’ve seen it through crypto? Or not?

BANKMAN-FRIED: Absolutely. It absolutely forces you to go back and say, “Well, okay, that’s how cryptocurrencies are priced. Is it really just crypto that’s priced that way?” Or maybe, are there other asset classes that may claim to have some pricing, or purport to, or people may often assume it does, but which in practice is not exactly that? I think the answer to that is a pretty straightforward yes.

It’s a pretty straightforward answer that you look at Tesla, you look at a lot of stocks right now, you think about what determines their market cap — the discounted cash flow? Yeah, sort of, that plays a role in it. That’s 30 percent of the answer. It’s when we look at the meme stocks and the meme coins that we feel like we can see the answer for ourselves for the first time, but it was always there in the other stocks as well, and social media has been amplifying this all over the place.

COWEN: Is this a new account of how your background as a gamer with memes has made you the appropriate person for pricing and arbitrage in crypto?

BANKMAN-FRIED: Yeah, there’s probably some truth to that. [laughs]

Here is the full dialogue.

Why so much drug use in the United States?

by  Tyler Cowen in

That is a question from a loyal reader, and he does not mean pharmaceuticals rather illegal drugs.  I can see a few hypotheses:

1. Americans consume more of almost everything.  Including health care.  We are simply a nation of consumption, for longstanding cultural reasons and supported by our higher wealth and our ability to save through human capital and rising asset prices, thus enabling more spending.  So we are going to spend more on illegal drugs too.  In fact illegal behavior with the prescription drugs themselves is one of the fastest-growing drug problems in the United States.

1b. Americans also take way more legal prescription drugs than their counterparts in other countries.  Under one estimate, Americans consume 80 percent of the world’s painkillers.

2. Corporate interests, including Big Pharma, are in America relatively strong, including politically strong, and relatively prominent in advertising.  Some of those companies have worked hard to accustom you to the idea that you ought to “take something.”

3.  America has borders with Mexico and the Caribbean, which makes it harder to keep out illegal drugs.

4. Price! (Duh)  Somewhere recently I saw price estimates for cocaine in various countries (might anyone recall the link?).  It was cheaper in the United States than elsewhere.  We are a large market, have economies of scale, and are great at retail and marketing.  Many other things are cheaper here to, which in turn brings us back to #1.

5. Compared to say Germany or Denmark, there are fewer people “looking out for you.”  Americans are more likely to move away from family and friends, and more likely to live “in the middle of nowhere.”  We are lonelier, maybe not at the median but on the left hand side of the distribution.  Our demand for therapists is pretty high too.

6. Student life can be more competitive in the United States than in Canada or Europe, and that may induce many Americans teens to use amphetamines, which are more popular in America.

7. America is in general a high-variance country, due to large market size, ethnic diversity, relatively open and competitive markets, and the looseness of many of its social norms.  A higher-variance country will have many more people clustered in the unsatisfactory behavior patterns.

7b. Along related lines, American teens are more frequent users of illegal drugs than are European teens.  But American teens also have amongst the lowest rates of smoking and drinking.  So some of us are very disciplined, others much less so, again reflecting the high variance of both inputs and outcomes.

8. Americans are keener to try new products, relative to most of the rest of the world.  Along these lines, we have relatively big problems with the newer opioids and synthetic drugs.  Heroin historically has often been a bigger problem in Europe, and that is hardly a new drug.  In era of new drugs, as we currently are living in, this will nudge the balance toward Americans doing drugs more.

9. American teens have more disposal income to spend, compared say to European teens.  This may come from either jobs or from parental allowances.  Furthermore, the European youth, especially in Italy, are more likely to live at home for many more years.  That probably limits illegal drug use.  Americans are more likely to go away for college to “a campus,” and “a dorm,” a horrible institution if you think about it for too long.

What else?

Saturday assorted links

by  Tyler Cowen

1. An obvious but still underrated point: “we find parenting attitudes strongly predict paternalistic policy attitudes—more than ideology, party identity, or any other measured demographic variables…”

2. DSM-V now makes the bestseller list (London Times).  “Ralph Lewis, a psychiatrist, wrote recently in Psychology Today of a “trend toward increased self-diagnoses” that was “particularly pronounced among young people” and predated the pandemic.”

3. Roubini in the FT: “Before this week’s ECB meeting, executive board member Isabel Schnabel stated that the bank’s willingness to deal with fragmentation risk had “no limits”. This echoed former ECB president Mario Draghi’s game-changing “whatever it takes” statement of 2012. But Schnabel also hinted at the need for policy conditionality when it comes to offering support. Given the current volatility of financial markets, one can expect they will further test the ECB’s ability to protect the currency union by backstopping fragile eurozone states.”

4. ESPN: “The Warriors are 5-1 to win the 2023 NBA title at Caesars Sportsbook, followed closely by the Brooklyn Nets and Boston Celtics, who are each listed at 6-1. The Milwaukee Bucks (15-2), Phoenix Suns (8-1) and LA Clippers (8-1) round out the teams with single-digit odds entering the offseason.”  Nets #2???

5. “So intense was the EU’s involvement in Northern Ireland – a part of a non-member state, remember – that it has imposed 4,000 new laws there over the past 18 months.”  Link here, where are the fans of democracy on this issue?  (NB: I don’t agree with everything in this piece, should go without saying but periodic reminders can be useful.)

6. Further evidence (from sex lives) on the current human capital deficit (FT).

Further jobs with your voice

by  Tyler Cowen in

I’m a re-recording mixer and sound mixer so I can confirm that the people who provide such specialized voice talents are amazing. There are also many more varieties: one of the films I mixed featured a dog as a lead character. There are two people who are known for their abilities to mimic dogs and make between 5 and 10 thousand dollars a day.

There are also the amazing people who work in “loop groups”. They provide the background chatter that you hear in any scene with more than a few people. Whether it’s a scene with a few people in an office, or a large group in a restaurant, they have to provide talking without actually saying any identifiable words. It’s particularly important as many countries, especially Germany, will block any films that have identifiable English in the sound files. These background vocals are known as “walla”.

That is from Michael Farnan in the comments.

What Operation Warp Speed Did, Didn’t and Can’t Do

by  Alex Tabarrok in

Operation Warp Speed was a tremendous success and one that I was pleased to support from the beginning. Many people, however, are concluding from the success of OWS that big Federal funding can solve many other problems at the same speed and scale and that is incorrect.

First, it’s important to understand that OWS did not create any scientific innovations or discoveries. The innovative mRNA vaccines are rightly lauded but all of the key scientific ideas behind mRNA as a delivery mechanism long predate Operation Warp Speed. The scientific advances were the result of many decades of work, some of it supported by university and government funding and also a significant fraction by large private investments in firms such as Moderna and BioNTech. It was BioNTech recall that hired Katalin Karikó (and many other mRNA researchers) when she couldn’t get university or government funding. Since OWS created no new scientific breakthroughs there isn’t much to learn from OWS about the efficacy of large scale programs for that purpose.

Second, it’s important to understand that we got lucky. OWS made smart bets and the portfolio paid off but it could have failed. Indeed, some OWS bets did fail including the Sanofi and Glaxo-Smith-Klein vaccine and the at-best modest success of Novavax. Many other vaccines which we didn’t invest in but could have invested in also failed. To be clear, my work with Kremer et al. showed that these bets and more were worth taking but one should not underestimate the probability of failure even when lots of money is spent.

So what did Operation Warp Speed do? There were four key parts to the plan 1) an advance market commitment to buy lots of doses of approved vaccines–this was important because in past pandemics vaccines had entered development and then the disease had disappeared leaving the firms holding the bag with little to show for their investment 2) the lifting of FDA regulations to allow for accelerated clinical trials, for example, phase 3 trials could start before phase 2 trials were fully complete 3) government investment in large clinical trials–clinical trials are the most expensive part of the development process and by funding the trials generously, the trials could be made large which meant that they could be quick 4) government investment in capacity, building factories not just for the vaccines but also for the needles, vials and so forth, even before any of the vaccines were approved–thus capacity was ready to go. All of these steps shaved months, even years, off the deployment timeline.

The key factor about each of these parts of the plan was that we were mostly dealing with known quantities that the government scaled. It’s known how to run clinical trials, it’s known how to produce vials and needles. The mRNA factories were more difficult but scaling problems are more easily solved with investment than are invention problems. It’s also known how to lift government regulations and speed the bureaucracy. That is, no one doubts that lifting regulations and speeding bureaucracy is within our production possibilities frontier.

It also cannot be underestimated that OWS funded people who were already extremely motivated. The Pfizer and Moderna staff put in near super-human effort–many of them felt this was the key moment of their life and they stepped up to their moment. OWS threw gasoline on fire–don’t expect the same in a more normal situation.

Another factor that people forget is that with vaccines we had a very unusual situation where the entire economy was dependent on a single sector–a macroeconomic O-ring. As a result, the social returns to producing vaccines were easily a hundred times (or more) greater than any potential vaccine profits. Thus, by accelerating vaccine production, OWS could generate tremendous returns. Most of the time, markets internalize externalities imperfectly but reasonably well which means that even if you accelerate something good the total returns aren’t so astronomical that you can’t overspend or spend poorly. Governments can spend too much as well as too little so most of the time you have to factor in the waste of overspending even when the spending is valuable–that problem didn’t really apply to OWS.

So summarizing what do we need for another OWS? 1) Known science–scaling not discovering, 2) Lifting of regulations 3) Big externalities, 4) Pre-existing motivation. Putting aside an Armageddon like scenario in which we have to stop an asteroid, one possibility is insulating the electrical grid to protect North America from a Carrington event, a geomagnetic storm caused by solar eruptions. (Here is a good Kurzgesagt video.) Does protecting the grid meet our conditions? 1) Protecting the electrical grid is a known problem whose solution does not require new science 2) protecting the grid requires lifting and harmonizing regulations as the grid is national/inter-national but the regulations are often local, 3) The social returns to power far exceed the revenues from power so there are big externalities. Indeed, companies could have protected the grid already (and have done so to some extent) but they are under-incentivized. (The grid is aging so insulating the gird could also have many side benefits.) 4) Pre-existing motivation. Not much. Can’t have everything.

I think it’s also notable that big pandemics and solar storms seem to occur about once in every one hundred years–just often enough to be dangerous and yet not so often that we are well prepared.

Thus, while I think that enthusiasm for an “OWS for X” is overblown, there are cases–protecting the grid is only one possibility–where smart investments could pay big returns but they must be chosen carefully in light of all the required conditions for success.

Explaining NFTs

by  Alex Tabarrok in

Writing at the Harvard Business Review, Steve Kaczynski and Scott Duke Kominers have en excellent explanation of how NFTs create value–the best I have read.

NFTs don’t just provide a kind of digital “deed.” Because blockchains are programmable, it’s possible to endow NFTs with features that enable them to expand their purpose over time, or even to provide direct utility to their holders. In other words, NFTs can do things — or let their owners do things — in both digital spaces and the physical world.

In this sense, NFTs can function like membership cards or tickets, providing access to events, exclusive merchandise, and special discounts — as well as serving as digital keys to online spaces where holders can engage with each other. Moreover, because the blockchain is public, it’s even possible to send additional products directly to anyone who owns a given token. All of this gives NFT holders value over and above simple ownership — and provides creators with a vector to build a highly engaged community around their brands.

It’s not uncommon to see creators organize in-person meetups for their NFT holders, as many did at the recent NFT NYC conference. In other cases, having a specific NFT in your online wallet might be necessary in order to gain access to an online game, chat room, or merchandise store. And creator teams sometimes grant additional tokens to their NFT holders in ways that expand the product ecosystem: owners of a particular goat NFT, for example, were recently able to claim a free baby goat NFT that gives benefits beyond the original token; holders of a particular bear NFT, meanwhile, just received honey.

Thus owning an NFT effectively makes you an investor, a member of a club, a brand shareholder, and a participant in a loyalty program all at once. At the same time, NFTs’ programmability supports new business and profit models — for example, NFTs have enabled a new type of royalty contract, whereby each time a work is resold, a share of the transaction goes back to the original creator.

This all means that NFT-based markets can emerge and gain traction quickly, especially relative to other crypto products. This is both because the NFTs themselves have standalone value — you might buy an art NFT simply because you like it — and because NFTs just need to establish value among a community of potential owners (which can be relatively small), whereas cryptocurrencies need wide acceptance in order to become useful as a store of value and/or medium of exchange.

Read the whole thing. Kaczynski and Kominers also offer good advice to firms and organizations interested in creating NFTs. It remains true, of course, that there is a lot of foolish and wasted spending in the space–that’s typical of most new asset classes where the rush to get into the space throws up a lot of noise making the signal more difficult to detect.

Addendum: Don’t forget you can buy the Marginal Revolution NFT! You will be purchasing from the new owner (we sold it) but I believe we get a royalty which also illustrates an advantage of the NFT model.

Image: SupDucks6484.

Why the lab leak theory matters

by  Tyler Cowen in

Here is Ross Douthat at the NYT:

…there’s a pretty big difference between a world where the Chinese regime can say, We weren’t responsible for Covid but we crushed the virus and the West did not, because we’re strong and they’re decadent, and a world where this was basically their Chernobyl except their incompetence and cover-up sickened not just one of their own cities but also the entire globe.

The latter scenario would also open a debate about how the United States should try to enforce international scientific research safeguards, or how we should operate in a world where they can’t be reasonably enforced.

I agree, and would add one point about why this matters so much.  “Our wet market was low quality and poorly governed” is a story consistent with the Chinese elites not being entirely at fault.  Wet markets, after all, are a kind of atavism, and China knows the country is going to evolve away from them over time.  They represent the old order.  You can think of the CCP as both building infrastructure and moving the country’s food markets into modernity (that’s infrastructure too, isn’t it?), albeit with lags.  “We waited too long to get rid of the wet markets” is bad, but if anything suggests the CCP should have done all the more to revolutionize and modernize China.  In contrast, the story of “our government-run research labs are low quality and poorly governed”…that seems to place the blame entirely on the shoulders of the CCP and also on its technocratic, modernizing tendencies.  Under that account, the CCP spread something that “the earlier China” did not, and that strikes strongly at the heart of CCP legitimacy.  Keep in mind how much the Chinese apply a historical perspective to everything.

A number of you have asked me what I think of the lab leak hypothesis.  A few months ago I placed the chance of it at 20-30%, as a number of private correspondents can attest.  Currently I am up to 50-60%.

How would actual alien spacecraft influence asset prices?

by  Tyler Cowen in

Primarily as an exercise, I thought about that question for a while, and here is part of my answer in a Bloomberg column:

If you know you are being watched, what exactly do you wish to buy more of? I would bet on defense stocks to rise, whether or not there is much we can do to defend ourselves against this alien presence.

Of course investors could not be sure that these alien drone probes will merely observe us forever. They might be observing with the purpose of rendering judgment. If they are offended by our militaristic tendencies, the quality of our TV shows and our inability to adopt the cosmopolitan values of “Star Trek” over the next 30 years, maybe they will zap us into oblivion. But that kind of systematic risk is hard to insure against. After such an act of obliteration, neither gold nor Bitcoin will do you any good.

My main prediction is that alien UFOs will be bullish for the dollar. The U.S. government seems most closely connected to the UFO phenomenon, for whatever reason. (Maybe its pilots fly more sallies and record better data?) In any case, if alien UFOs become more likely, an informational advantage would accrue to the federal government. And the dollar already has a tradition as a safe haven currency…

Most of us would get used to the idea of alien presence without quite believing in it. As The New Yorker makes clear, many Americans believed in alien-origin UFOs after World War II, as did many American policymakers. It might have spurred greater interest in the space program and science fiction, but it didn’t affect most aspects of American life, nor did it seem to drive markets.

Never underestimate the capacity of markets, like humans, to adapt. Just as many of the strangest parts of our lives can come to seem normal, so Wall Street can find a way to do business with just about anybody — aliens included.

I do full, literally mean everything stated in the column.  But the piece also has (at least) two esoteric meanings — can you guess what they are?