Stripe’s Annual Letter
Stripe’s Annual Letter is eminently quotable and insightful. As a payments company, Stripe has a unique data on the entire business landscape. But who else about the Collison brothers would cite the O-ring model in their annual report?
Businesses on Stripe generated $1.4 trillion in total payment volume in 2024, up 38% from the prior year, and reaching a scale equivalent to around 1.3% of global GDP.
The businesses on Stripe span every chromosome of the economic genome.
The US corporate sector is both a cradle of invention and a densely populated graveyard of companies that had fabulous futures in their pasts.
How is AI making it’s presence felt beyond chatbots?
…we started with ChatGPT, but are now seeing a proliferation of industry specific tools. Some people have called these startups “LLM wrappers”; those people are missing the point. The O ring model in economics shows that in a process with interdependent tasks, the overall output or productivity is limited by the least effective component, not just in terms of cost but in the success of the entire system. In a similar vein, we see these new industry specific AI tools as ensuring that individual industries can properly realize the economic impact of LLMs, and that the contextual, data, and workflow integration will prove enduringly valuable.
Examples in this vein include Abridge, Nabla, and DeepScribe, which are rethinking medical and patient care, while Studeo is reshaping how real estate businesses market property. Architects are using SketchPro to instantly render designs with simple text prompts, restaurants are using Slang.ai to take phone reservations, and property managers are unifying customer support with HostAl. Harvey, whose Al legal assistant is used by many Fortune 500 companies, quadrupled revenue in 2024.
AI and SAAS make small businesses competitive with big business:
From 2005 to 2017, independent pizzerias in the United States saw a decline in numbers as the industry franchised. Then that trend in 2017. By 2023, more independent pizzerias in America than in any other year on record.
We think the rise of vertical SaaS is at least partly responsible. From a platform like Slice, dedicated specifically to the needs of pizzerias, new businesses can get a logo, website, payment system, ordering system, marketing toolkit, and branded boxes—basically everything else they need to operate their pizza
business (except an oven and the perfect sauce). They can remain independent while still benefiting from a franchisee’s economies of scale.
Crypto has found product market fit with stablecoins, “room temperature superconductors for financial services”.
Why care about stablecoins? Improvements to the basic usability of money make economies more prosperous. Consider the transitions from coins to banknotes, from the gold standard to fiat currency, and from paper instruments to electronic payments. Stablecoins are a new branch of the money tree. Such transitions occur with some regularity over the centuries, and the effects tend to be large.
Stablecoins have four important properties relative to the status quo. They make money movement cheaper, they make money movement faster, they are decentralized and open-access (and thus globally available from day one), and they are programmable. Everything interesting follows from these
characteristics.
(See also my talk to Congressional staff with Garett Jones on stablecoins and President Trump’s Crypto Executive Order.)
Finally, Europe needs to wake up:
We don’t think that anyone in Europe deliberately made it a policy goal to discourage the creation or success of new firms, but this has been the inadvertent result. GDPR alone is estimated to have reduced profits for small tech firms in Europe by up to 12%. Those cookie banners hurt, whether you accept them or not.
What I’ve been reading
1. Eric Topol, Super Agers: An Evidence-Based Approach to Longevity. Longevity research goes mainstream! Very clearly written, well argued, and focused on the science. I cannot pretend to evaluate the details of the material, but this seems a step ahead of the other, typically less serious books on the same topic.
2. Daniel Dain, A History of Boston, 772 pp., clearly written and consistently interesting. Most of all one receives the sense of Boston as a place with a long history of radical ideas. Has it moved away from that tradition or cemented it in? I find that more and more of America has little acquaintance with New England and its history, and this book is one good way to remedy that. Remember Rt.128? Paul Revere?
3. Stephen Macedo and Frances Lee, In Covid’s Wake: How Our Politics Failed Us. A reasonable, evidence-based, non-crazy account of governance failures and excesses during the Covid crisis. For me there was not so much new here, but I am glad to see saner voices moving into the discourse.
4. Making and Meaning: The Wilton Diptych, National Gallery of London. If you want to learn about a historical figure (in this case Richard II), read a book about an art work associated with them.
5. Zaha Hadid, Complete Works 1979-Today. Architecture, plus excellent preliminary sketches of the works. The Weil am Rhein works are my favorite of what I have seen by her. Exactly the kind of picture book that will become more valuable in an age of strong AI. Here are seventeen buildings by her.
John McWhorter, Pronoun Trouble: The Story of Us in Seven Little Words. Mostly about actual pronouns, not the PC debates.
There is Paul Bluestein, King Dollar: The Past and Future of the World’s Dominant Currency.
Sunday assorted links
“What do I think of the Trump-Zelensky dust-up?”
A reader requests that in the comments, but it is exactly the kind of topic I can tire of. Nonetheless I will jot down a few quick pointers on how I think about it:
1. Downweight almost every opinion you read on Twitter, instead check the Ukrainian bond market. If need be, query with Grok on matters such as this. You can however consider Twitter opinions as sociological data of a sort, so downweight them for truth value but do not ignore them. Especially downweight comments designed to raise or lower various individuals in status, they are a kind of epistemic poison.
2. Look for say commentary from China, among other unusual sources. They have a stake in the matter, are often quite perceptive, and won’t be trapped by the same ol’ mood affiliations (they do of course have their own).
3. Consult with some friends and contacts involved in Ukraine, with good inside perspectives.
Triangulate and aggregate!
You will end up with something quite different from what either (American) “side” is saying.
Do female experts face an authority gap? Evidence from economics
This paper reports results from a survey experiment comparing the effect of (the same) opinions expressed by visibly senior, female versus male experts. Members of the public were asked for their opinion on topical issues and shown the opinion of either a named male or a named female economist, all professors at leading US universities. There are three findings. First, experts can persuade members of the public – the opinions of individual expert economists affect the opinions expressed by the public. Second, the opinions expressed by visibly senior female economists are more persuasive than the same opinions expressed by male economists. Third, removing credentials (university and professor title) eliminates the gender difference in persuasiveness, suggesting that credentials act as a differential information signal about the credibility of female experts.
Here is the full paper by Hans H. Sievertsen and Sarah Smith, via the excellent Kevin Lewis.
Some reasons why I do not cover various topics much
1. I feel that writing about the topic will make me stupider.
2. I believe that you reading more about the topic will make you stupider.
3. I believe that performative outrage usually brings low or negative returns. Matt Yglesias has had some good writing on this lately.
4. I don’t have anything to add on the topic. Abortion and the Middle East would be two examples here.
5. Sometimes I have good inside information on a topic, but I cannot reveal it, not even without attribution. And I don’t want to write something stupider than my best understanding of the topic.
6,. I just don’t feel like it.
7. On a few topics I feel it is Alex’s province.
Addendum: Pearl, in the comments, adds an excellent #8: “8. Choosing sides in these debates would reduce my overall influence and access to new information”
Personality traits and gender gaps
This paper examines the effects of the Big Five personality traits on labor market outcomes and gender wage gaps using a job search and bargaining model with parameters that vary at the individual level. The analysis, based on German panel data, reveals that both cognitive and noncognitive traits significantly influence wages and employment outcomes. Higher conscientiousness and emotional stability and lower agreeableness levels enhance earnings and job stability for both genders. Differences in the distributions of personality characteristics between men and women account for as much of the gender wage gap as do the large differences in labor market experience.
That is from German data, published in the JPE by Christopher J. Flinn, Petra E. Todd, and Weilong Zhang.
Saturday assorted links
2. Writing for the AI is paying off.
3. You’ve quoted Gerhard Richter as saying that a good picture “takes away our certainty,” and suggested (Philip Guston) that doing so enables us to “begin to see the push and pull of impulse, recanting, and reconfiguration that constitute painting and, by extension, life itself.” From Prudence Crowther.
4. Details on DOGE history (NYT).
5. Anthropic wants someone to write on the economic effects of AI.
6. “Access to legal status reduces the probability of immigrants intermarrying with natives by 40% and increases the hazard rate of separation for intermarriages by 20%.” USA data — incentives matter!
USA fact of the day
After years of decline, the Christian population in the United States has been stable for several years, a shift fueled in part by young adults, according to a major new survey from the Pew Research Center. And the number of religiously unaffiliated Americans, which had grown steadily for years, has also leveled off.
Here is more from the NYT. The youngest cohort does not seem to be declining in religiosity (unlike earlier generational shifts), and for that youngest cohort the gender gap in religiousity basically has disappeared.
The Economist 1843 magazine does a profile of me
I believe you can get through the gate by registering. A very good and accurate piece, first-rate photos as well, including of Spinoza too, here is the link. Here is one excerpt:
I asked Cowen – it is the kind of question you come to ask him – what were the criteria for a perfect Central American square. He began plucking details from the scene around us. Music, trees, a church, a fountain, children playing. “Good balloons,” he noted, looking approvingly at a balloon seller. I genuinely couldn’t tell whether he was extemporising from the available details, or indexing what he saw against a pre-existing model of what the ideal square should look like.
And:
When he told me he had never been depressed, I asked him to clarify what he meant. He had never been clinically depressed? Depressed for a month? For a week? An afternoon? I looked up from my notebook. An enormous smile, one I’d not seen before, had spread across the whole of Cowen’s face.
“Like, for a whole afternoon?” he asked, hugely grinning.
Here is the closing bit, taken from when the reporter (John Phipps) and I were together in Roatan:
As we came back to shore, Cowen smiled at the unremarkable, deserted village. “I’m long Jonesville,” he said warmly. (He often speaks about places and people as though they were stocks you could go long or short on.) I asked him if he would think about investing in property here. He shrugged as if to say “why bother?”
The cab had begun to grind its way up towards the brow of a hill with audible, Sisyphean difficulty. I mumbled something about whether we were going to have to get out. “We’ll make it,” Cowen said firmly. He was talking about how he liked to play basketball at a court near his house. He didn’t mind playing with other people, but most days he was the only person there. He’d been doing this for two decades now; it was an efficient form of exercise; the weather was mostly good. I asked him what he’d learned playing basketball alone for decades. “That you can do something for a long time and still not be very good at it,” he said. The car began to roll downhill.
Self-recommending, and with some significant cameos, most of all Alex T. and also Spinoza.
Friday assorted links
1. Insightful Bob McGrew tweet on GPT 4.5. And Andrej. My remark from a group chat: “I am more positive on 4.5 than almost anyone else I have read. I view it as a model that attempts to improve on the dimension of aesthetics only. As we know from Kant’s third Critique, that is about the hardest achievement possible. I think once combined with “reasoning” it will be amazing. Think of this as just one input in a nearly fixed proportions production function.”
3. Hot hand in Jeopardy betting?
4. “We’re seeing an AI boom on Stripe.”
5. The pandemic drove a dating recession.
A $5 million gold card for immigrants?
That is the topic of my latest Bloomberg column, here is one excerpt:
As usual, however, the devil is in the details. There is a good chance Trump’s proposal could work out well — and a chance it could severely damage the nation.
One worry is selection effects. The $5 million fee means the program would skew toward older people, and would probably also skew somewhat male. Neither of those biases is a problem if other methods of establishing residence remain robust. But will they?
With a gold card program, the government would have a financial incentive to limit other ways of establishing residency. You can get an O-1 visa or an H-1B, for instance, if you have a strong record of accomplishment or an interested employer with a proper priority and perhaps some luck. Neither of those options cost anything close to $5 million, even with legal fees. Not everyone with a spare $5 million can get an O-1, or a proper job offer, but still: At the margin, these options would compete with each other.
These other options are well-suited for getting young, talented people into the US, which is precisely the weakness of the gold card proposal. Ideally the US would expand these other paths, but with a gold card program they might be narrowed so the government can reap more revenue from sales of gold cards.
I favor the idea in principle, but am worried it might be part of a broader package to tighten immigration more generally.
Matt Yglesias on morality
I do broadly align with utilitarian/consequentialist ideas, and I particularly like the formulation Richard Y Chappell calls Beneficentrism, which is simply the claim that one very important thing in life is to try to help others, including those who are very different or distant from ourselves.
I think that in that formulation, you address in one fell swoop 95 percent of what trips people up about utilitarianism. You can take special care of your friends and family. You can care more about citizens of your country than you care about people on the other side of the world. But you should care some about the general welfare. This is in fact pretty important and you should be doing something about it. How much? Probably more than you are doing. Probably more than I am doing.
Here is the full (gated) post, mostly about other matters.
Can Enhanced Street Lighting Improve Public Safety at Scale?
Street lighting is often believed to influence street crime, but most prior studies have examined small-scale interventions in limited areas. The effect of large-scale lighting enhancements on public safety remains uncertain. This study evaluates the impact of Philadelphia’s citywide rollout of enhanced street lighting, which began in August 2023. Over 10 months, 34,374 streetlights were upgraded across 13,275 street segments, converting roughly one-third of the city’s street segments to new LED fixtures that provide clearer and more even illumination. We assess the effect of these upgrades on total crime, violent crime, property crime, and nuisance crime. Results show a 15% decline in outdoor nighttime street crimes and a 21% reduction in outdoor nighttime gun violence following the streetlight upgrades. The upgrades may account for approximately 5% of the citywide reduction in gun violence during this period, or about one sixth of the 31% citywide decline. Qualitative data further suggests that residents’ perceptions of safety and neighborhood vitality improved following the installation of new streetlights. Our study demonstrates that large-scale streetlight upgrades can lead to significant reductions in crime rates across urban areas, supporting the use of energy-efficient LED lighting as a crime reduction strategy. These findings suggest that other cities should consider similar lighting interventions as part of their crime prevention efforts. Further research is needed to explore the impact of enhanced streetlight interventions on other types of crime and to determine whether the crime-reduction benefits are sustained when these upgrades are implemented across the entire City of Philadelphia for extended periods.
That is from a new paper by John M. Macdonald, et.al. Via the excellent Kevin Lewis.
Boris Spassky, RIP
In Leningrad’s embrace, midwinter’s chill, A prodigy was born with iron will. The chessboard’s call, a siren to his mind, Young Boris Spassky left his peers behind.
A crown he claimed in nineteen sixty-nine, Against Petrosian’s force, his star did shine. Yet Reykjavik’s cold winds would soon conspire, With Fischer’s challenge, stoking global fire.
The “Match of Century,” where East met West, Two minds engaged in psychological test. Though Spassky yielded, grace he did display, Applauding Fischer’s genius in the fray.
Beyond the board, his life took varied course, From Soviet roots to seeking new resource. In France he found a refuge, fresh terrain, Yet ties to Mother Russia would remain.
A “one-legged dissident,” some would declare, Not fully here nor there, a soul aware. Through Cold War’s tension, politics entwined, He stood apart, a free and thoughtful mind.
His games, a blend of strategy and art, Reflect the depth and courage of his heart. Now as we mourn his final checkmate’s fall, His legacy inspires players all.
Rest, Grandmaster, your battles now complete, Your journey etched where history and chess compete.
That is a tribute poem from GPT 4.5