My wife Yinh pinged Khe to see if he’d host a seminar for people interested in getting more mileage out of AI. He agreed (and texted me separately with “I’m sure you know this already, but your wife is a force of nature”…Oh, I’m quite aware).

She emails 60 friends and associates, inviting them to this session. She got 40 affirmatives by the next time she checked her email. As she told me by text, “everyone feels like a boomer”.

I’m not going to spend time speculating on AI futures but it’s hard to not realize that sources of value are shifting beneath our feet. AI could have written a lot of my technical posts. It wouldn’t have been in my voice, and insofar as my written voice has some entertainment or organic attraction, it’s not the same quality. But it would convey much of the instrumental information content and at far lower cost.

To paraphrase a tweet I can’t find anymore (I gave Grok 2 chances but no dice) from a lifelong software developer: I used to pride myself on solving tricky problems and finding elegant solutions and watching LLMs do this instantly has rattled my sense of self-worth.

A lot of value-added work in the past is commoditized. Without speculating on futures, I only invite you to prompt yourself, “how much of the work I do is truly unique?”

There’s an ongoing whole layer of AI-enabled automation creep that we’ll embrace, I’m not talking about that.

Aside: The latest one I’ve appreciated is the Gemini summaries that sit on top of long email threads:

I’m talking about the increasing automation of formerly complex tasks that we actually hang our hats on. My voice is the organic part of the writing. But what’s that even worth relative to the content? A doctor’s job is a mix of inference and bedside manner. What’s the relative value of these things? If you are in sales, how much of your cycle has to do with trust and a firm handshake versus data persuasion and storytelling. What will AI lower the cost of, not just for you, but for competitors? It’s the Innovator’s Dilemma in homine.

You squeeze one part of the balloon and the air bulges into another part. It’s like the “commoditize the complement” thinking in product strategy.

This article by Jon Matzner is a good example of updating your models hard in the face of re-structured inputs:

The Only Cost I Want to Go Up

Where does the value go? What are your sunk costs? What is a trapped asset or idea that is now tenable? These types of questions were always relevant, but the speed at which they are coming at us in a wide-open frontier is only precedented at major inflections of general-purpose technology. A relatively recent example on the timeline of innovation is Netflix knowing long before it became a streaming-first company that streaming was the future, but broadband needed to catch up. The AI inflection is a confusing sandstorm rapidly covering old monuments while revealing new spaces to build. Anyone paying attention can feel it. Hence, the FOMO response to Yinh’s email.

---

A couple weeks ago, in work is going to feel very different by next Christmas, I said I’d share some of the things I’m doing with AI. For example:

I can write a description of a bug in Linear or Jira (who am I kidding — I upload a screenshot with a blurb and have AI write a detailed bug spec complete with testing protocol) and assign it to…”Claude bot”. A dev approves the change. Push to prod.

Tools I use

1. Claude Code with Opus 4.5 on a Max plan ($100/m)
2. Gemini Pro ($16/m)
3. ChatGPT Plus ($20/m. This is really Yinh’s but I use it sometimes. Don’t tell.)
4. NotebookLM when I want an audio summary of lengthy text. Sometimes I will give it a bunch of notes and have it generate a podcast conversation about them which can help me find connections or through-lines that outlining doesn’t. Something about hearing vs hearing I guess. I could get to the same place sparring with a text-based LLM but this way I can do it while walking or in a less taxing way. Or sometimes because I need to just let some material wash over me.
5. A service (in stealth at the moment) that connects to any data source including the moontower options database that’s hyper-tuned for inference. An example I’m messing with now is something I call VCR or Variance Contribution Ratio. What percentage of the realized variance in a list of assets in some window came from N% of days. You can ask it a question like that and it will come back with all kinds of ideas, charts, insights. It’s an intern that skips the photosynthesis→food→brain power+senses drivetrain altogether and just runs on sending electricty through a recipe trained loop that our ancestors have run through many times before. Progress. Suicide. Both. I don’t know, I’m just an ape with a lever.

Comments

• I was using Terragon as an agent that can talk to my github repos as well as deploy to vercel but Claude has replaced all this workflow. Similarly, Claude has replaced my usage of Copilot in VSCode.
• I find the native MSFT Copilot in Excel to be trash. I haven’t used Claude for Excel yet. I have found the Claude Chrome extension in the browser to be helpful with Google sheets.
• More broadly, Claude and Gemini browser tools are still clunky in some contexts (“port this substack post to my wordpress site”) and useful in others especially within your email. “Give me a list of all the people who reached out asking about XYZ” or “go find the loan agreement document with entity X and compute the accrued interest according to its provisions through today”.

Silo’d projects I’m currently using AI for

As a matter of procedure, I use Projects folders within Claude to compartmentalize initiatives. You can upload lots of files to the project for context and then have a limitless number of chats within the project itself all dealing with different aspects. I like to tell Claude to consolidate what I’ve accomplished or learned from individual sessions and then I feed that back into a living document in the files section so its always handy to the bot for future chats. These documents also include feedback about directions Claude took that I didn’t like. I don’t know what reinforcement learning is mathematically but the process feels like manual training.

Here’s a few things I’m working on:

Investment Idea Generation

Agent reads investment letter email, generate a bullish/bearish template that considers the author’s sentiment, timing, etc, which can automatically be fed another agent connected to moontower.ai infra to see how it accords with option surfaces. Another agent then presents the output. In an advanced form this is becoming part of the product itself, capable of generating watchlists and so forth. (I’m more interested in the pipeline at the moment. The business end of it would be more complex since there’s author IP involved).

Status: very early…need to get email agent running

Mooncoin Option Trading game [skunkworks name for now]

This is less agentic and more LLM conversation about gameflow. However, Claude Code was integral to helping me style.

Status: Ready for a second round of playtesting to pin down the concept. Long way from a final product but can start playtesting over Zoom!

Current screenshots:

Trading Quizzes

One of my projects is setup as a RAG with about 70 articles. I’m having Claude devise interactive quizzes that give learners a chance to practice their option knowledge. Varies from beginner to more advanced.

Status: early and promising. A few rounds of iteration so far on a tranche of concepts where I’m training the LLM to know what I consider a good question. From there I will extend it to more tranches of material and if that goes well I know have a custom quiz maker for any material I give it. I’ve been heartened by some of the angles it’s taken on questions — it definitely comes up with stuff I wouldn’t have. The median quality can be higher, so still more to do. I’m not sure how much of the meta of making a good question I’m going to succeed in relaying but that’s part of the fun.

---

Money Angle

In the late aughts, one of my family members had a side-hustle while getting his Masters where he’d post ads on Craigslist offering to help people with their Excel work. People were willing to pay a lot more for this than I expected.

He told me why.

It was people who somehow ended up with Excel-heavy jobs without knowing how to use Excel. He was quite literally doing their jobs for them. In finance terms, he was the layoff account where his client was a bank trading desk arbing their customer (the employer) and he was picking up the juicy scraps.

So much for that. Anthropic just released Claude in Excel

Claude in Excel is an add-in that integrates Claude into your Excel workflow. It’s designed for professionals who work extensively with spreadsheets, particularly in financial analysis and modeling.

With Claude in Excel, you can:

With Claude in Excel, you can:

• Ask questions about your workbook and get answers with cell-level citations
• Update assumptions while preserving formula dependencies
• Debug errors and identify their root causes
• Build new models or fill existing templates
• Navigate complex multi-tab workbooks seamlessly

Money Angle For Masochists

Today is for the younger masochists (and their overseers).

I’m going to start an investment beginnings class locally. There’s a few things at the end of this section you can use. If it inspires you to do something similar or have ideas, let ‘er rip!

Around 15 people signed up. I’ll see how the experiment goes and report back as it evolves.

This is the email I sent to the families:

We recently opened up a brokerage account for our 12-year-old, Zak so he could start investing in some stocks he’s interested in. I want to give him a more structured foundation and since this scales easily to a group, I figured I’d open it up to family and friends.

What it is: A hands-on class where we learn by doing – looking up real securities, building spreadsheets, understanding how markets work, and developing the kind of financial instincts that serve you for life. The goal is to make sure participants aren’t suckers and start with good financial hygiene.

The approach: Participants will be treated as capable people who can figure things out. We will get comfortable working at the edge of what we know how to do, wherever that may be – Googling, LLM’ing, excel formulas (and we can get into heavier automation/coding if there is appetite), troubleshooting, and being resourceful. If this inspires ambition, we can go further. Other than building an object-level understanding of investing, the dual goal is to earn the type of confidence that only comes from competence and its prerequisite — persistence. This will feel harder than school.

Format: Sessions in front of a room with a projector. Each participant will need a laptop to follow along. We’ll use real tools and real data. (I’ve asked a company to sponsor this by giving us free licenses to their tools, but we’ll see if that comes through. There are plenty of open-source resources that will work.)

Who it’s for: Anyone 12 and up – young people and adults welcome. No prior knowledge needed. Participants will get maximum mileage if they have a brokerage account, but it’s not required.

Cost: Free. I’m doing this for Zak anyway.

Location: [redacted]

Schedule: TBD

Note: I will record sessions to share with remote friends who are interested by uploading as unlisted (undiscoverable but public) YouTube videos. Participation is implied consent to this.

Action items

1. If you’re interested or have questions, just reply. I’ll follow up once I have a sense of the group.
2. As a first step towards “doing” we need everyone to get to some absolute basics. I’m having Zak read Blue Chip Kids. but if you want a video series, I curated a custom sequence: Khan Videos in place of Blue Chip Kids for investing basics

This is a very loose draft of the plan. I will prepare a lesson before each session (this week is the first) and update this document. As always, work-in-progress.

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From My Actual Life

I’ve mentioned before that I coach both my boys CYO basketball teams (4th and 7th grade). The highlight of my past week was Zak’s (7th grade) game so I just want to share it.

Zak had a cold and a headache but we gave him some Advil and said to come root his team on. We were only going to have 5 players without him. He wore his uniform anyway in case he felt good enough to go and in pre-game shooting he said he could play.

The game was neck and neck. One of our players scored an unlikely basket off an offeensive rebound as the clock expired to send the game to overtime. It was shocking, everything about the rebound itself and making the layup from directly under the rim was unlikely.

We’re in OT, down by 2 with 5 seconds left. We intentionally foul. Our opponent misses both free throws. I was prepared to call timeout but Zak ripped the rebound and took off.

No point in calling the timeout since it wouldn’t advance the ball from our backcourt. Instinctually I liked our admittedly very slim chance better with him one on one against a chaser.

Well, he makes it to the 3-pt line, the chaser jumps pass him as he hesiatated for moment, and just put the shot up as the clock is expiring.

Swish.

We win by 1. The team mobs him. Because it’s an overtime game and these things are on tight schedules all the people there for the following game are watching and the whole place jumps.

It’s a meaningless 7th grade CYO game but it was a unique moment. We joked that it was his Jordan flu game.

Anyway, that win happened to clinch 1st place in our division but we had already clinched a playoff spot so it wasn’t integral. We wrap the regular season today and have playoffs in 2 weeks.

(I’ve already went to watch the team will most likely draw from the other division. They have a kid that’s 5’9 and one that’s 6’0. Zak is 5’4 and one of our bigger kids 🫣)

Stay groovy

☮️

Moontower Weekly Recap

Posts:

• sticky vs floating strike
• slashing away parts of their humanity

Friends,

The following statements are simultaneously true:

1) You can do anything if you put your mind to it” is a lie.

If your last name is McCaffery, you have a chance of engineering elite athletes. If you are an Abdelmessih, you’ll be waiting for the metaverse for the sensation of what a 4.3 40 feels like.

2) You are currently very far from your ceiling.

You can drive a truck through the gap between these 2 ideas so they are not really in conflict.

To let the first disappoint you is to let perfection thwart the good. The cost of this pedantically true statement is self-defeat. It’s the kind of victory only an intellectual would recognize because it’s familiar territory — an unnatural use of technicalities to excuse failure because they define success as adherence to fine print. It’s a strange inversion of “It’s better to be roughly right than precisely wrong”. They are precisely right but roughly wrong, but the wrongness touches their life ceaselessly and in the most material ways.

To let the second statement disappoint you is known as a “start”. Congratulations. Recognition is the first step. This should be obvious, but the path to improvement starts by realizing there’s room for it. In you. Not in the world changing such that your conditions are improved, but for you to improve your station, with a smiling indifference to a world you can’t control anyway.

But I stay “start” because beginnings are sensitive to expectations. If you start anything expecting it to be easy, you will likely not finish. It’s such a simple observation, but it bears a life-changing load. It means that anything you are serious about doing should start with the expectation that it will test your resolve, so when the moment comes, you are not hit with the double indignity of difficulty but also surprise.

And one of those negative surprises always comes from others. Haters. But haters also come from people who don’t actually hate you. They may even love you. But this is how they deal with being disappointed in themselves.

This is not an easy subject. It’s at the root of how everyone relates to everyone else. It’s wrapped up in status, luck, a sense of narrow justice when it has to do with the promotion at work, and global justice in the sense of being born on third (or America…although whether the runner is heading home or to second is today’s “dress” debate).

It’s not as easy as saying “ignore everyone else”. There’s a scammer in jail or even just a common internet grifter who dismissed sober advice from someone they respect who they dismissed as speaking behind a veil of risk-aversion. Or less scandalous scenarios like “I’m dropping out of school to pursue acting”.

It’s a good idea to consider the judgement of those you are certain love you. But even then you need to grade them on a curve based on their own risk bias which takes some judgement of your own. Parents want to see their adult children on solid ground. If you win an Oscar and they get to walk the red carpet, that’s just gravy. That will never be in their calculus. But it might be in yours. They’re running a max-min strategy, you want to win the tournament.

(Rob Carver’s analogy to the Wordle starting word choice is a tangible expression of this for most of the English-speaking world who got swept up in that game.)

So if you should consider the judgment of loved ones and even then with skepticism, you know who you should definitely ignore? Randos and water-cooler friends. There’s just too much at stake.

I posted this on X in a thread where Ryan was parrying haters.

When it comes to haters its useful to remember that the correct retaliation is nothing but apathy which if the detractor was smart in the first place, they would realize that themselves. What’s that line about hate being like drinking poison and expecting the other person to die?

Hate seems like ultimate confession of weakness.

It’s very rare that anyone changes anyone else’s mind. Unlearning hurts.

The internet fools us because when life’s most important moments happen, your world shrinks. The volume on everything turns down, and you are left with a few people. The hater? Might as well be an atom in another galaxy. Why would they occur to you?

Attention is everything. Lots of people on here give you the gift of permitting yourself to ignore them. Accept it gratefully

Scott Adams, the Dilbert cartoonist, died this week after a battle with prostate cancer. He’s a politicized figure (Scott Alexander’s memorial post is a bizarre mix of tribute and psychoanalysis). But like many others, I’ve read his work on career advice and even the thought experiment book “God’s Debris” which I remember precisely nothing about. But I did see a quote from it this week, which I strongly agree with:

“People think they follow advice but they don’t. Humans are only capable of receiving information. They create their own advice. If you seek to influence someone, don’t waste time giving advice. You can change only what people know, not what they do.”

Money Angle

I want to expand briefly on Wednesday’s HOOD: A Case Study in “Renting the Straddle” because HOOD’s implied volatility that contains earnings actually declined for the rest of the week and disentangling that is a good chance to reinforce your understanding.

On Wednesday, Feb 13th HOOD vol (which encompasses earnings on Feb 10) lifted a bit from when I wrote the post. We’ll call it 68% IV.

To make 68% IV fit smoothly with the non-earnings vols from the preceding expirations, we need to assume an earnings move that allow the ex-earnings vol to be ~56%

That corresponds to about a 9.5% earnings move (a bit higher than the average move of 8.55% for the past 8 quarters).

This table shows implied trading day IVs net of various-sized expected earnings moves.

Let’s tie this idea back to theta or option time decay.

A one-day move of 9.5% corresponds to a single-day implied vol of ~119%

9.5% / .80 = 119%

This comes from remembering that an ATM straddle is 80% of the implied vol

As you approach the earnings day, the implied vol of the option will be dominated by the fact that the stock is expected to move 9.5%. Therefore, we know the implied vol is going to increase.

We think of theta as “how much value the option loses as time passes” but because we know that vol is going to steadily rise, we can conclude that the actual experience of theta is going to be much less than the model says. The model doesn’t “know” the implied vol is going to increase, but you do.

As vol increases, the option will gain value that offsets some of the theta. It won’t offset all the theta. If it did, then you would just buy all the options today, have free gamma for a month, and sell them right before earnings.

So much of the theta will be offset?

We can answer this if we hold our assumptions constant:

• trading day IV is 56%
• earnings move is 9.5%

(I added the assumption that the earnings date is also the expiration date. It’s stark that all the theta we defer happens on the last day.

You can see how the vega offsets part of the theta.

Just like with any option, the theta still accelerates as you approach expiry but at a slow rate (theta is left axis).

All the theta happens at the end.

Oh, as a matter of pragmatism, I should add that HOOD option markets are wide. And yet there’s millions of contracts of open interest! Amazing for market makers. To quote Alanis…isn’t that ironic?

Money Angle For Masochists

In Thursday’s paid subs post, embedding spot-vol correlation in option deltas, I buried this story but I thought worth sharing since it’s broadly suggestive of what happens when you list options on an investments touted as worth being in your asset allocation:

I started in commodity options just before the listing of electronic options markets. When I first stepped into the trading ring, many market-makers were still using paper sheets. We had spreadsheets on a tablet computer, but heard of a fledgling software called Whentech. Its founder, Dave Wender, was an options trader who saw the opportunity. I demo’d the product, and despite it being a glorified spreadsheet, it centralized a lot of busy work. It had an extensive library of option models and it was integrated with the exchange’s security master so its “sheets” were customized to the asset you wanted to trade.

I started using it right away. Since it was a small company, I was able to have lots of access to Dave with whom I’ve remained friends. I even helped with some of their calculations (weighted gamma was my most important contribution). I was a customer up until I left full-time trading. [Dave sold the company to the ICE in the early 2010s. It’s been called ICE Option Analytics or IOA for over a decade.]

The product evolved closely with the markets themselves. Its nomenclature even became the lingua franca of the floor. Everyone would refer to the daily implied move as a “breakeven” or the amount you needed the futures to move to breakeven on your gamma (most market-makers were long gamma). Breakeven was a field in the option model. Ari Pine’s twitter name is a callback to those days. Commodity traders didn’t even speak in terms of vols. They spoke of breakevens expanding and contracting.

What does this history have to do with a spot-vol correlation parameter?

This period of time, mid-aughts, was special in the oil markets. It was the decade of China’s hypergrowth. The commodity super-cycle. Exxon becoming the largest company in the world. (Today, energy’s share of the SPY is a tiny fraction of what it was 20 years ago.)

Oil options were booming along with open interest in “paper barrels” as Goldman carried on about commodities as an asset class. But what comes with financialization and passive investing?

Option selling. Especially calls.

Absent any political turmoil, resting call offers piled on the order books, vol coming in on every uptick as the futures climbed higher throughout the decade.

A little option theory goes a long way. Holding time and vol constant, what determines the price of an ATM straddle?

The underlying price itself: S

straddle = .8 * S *σ√T

If the market rallies 1%, you expect the straddle price at the new ATM strike to be 1% higher than the ATM straddle when the futures were lower. Since the “breakeven” is just the straddle / 16, you expect the breakeven to also expand by 1%.

But that’s not what was happening.

The breakevens would stay roughly the same as the market moved up and down.

If the breakevens stay the same, that means if the futures go up 1%, then the vol must be falling by 1% (ie 30 vol falling to 29.7 vol)

It dawned us. Our deltas are wrong.

If we are long vol, we need to be net long delta to actually be flat.

When your risk manager says why are you long delta and you explain “I need to lean long” to actually be flat, you can imagine the next question:

“Ok then, how many futures do you need to be extra long for this fudge factor?”

We need to bake this directly into the model because it’s getting hard to keep track of. Every asset and even every expiry within each asset seems to have different sensitivities between vol and spot. The risk report can’t be covered in asterisks detailing thumb-in-the-air trader leans.

Whentech listened. Whentech introduced a new skew model that allowed traders to specify a slope parameter that dictated the path of ATM IV. Their approach was simple and numerical…

 

From My Actual Life

I definitely have more couch potato tendencies in the winter. I’m currently watching Mad Men (for the first time!) I’m almost finished with Season 2 which means I like it.

I recommend the movie Eden on Netflix. Go into it knowing nothing. That’s how I went in (Yinh said let’s watch some movie called Eden and I said ok knowing nothing else). I’m so out of touch sometimes, we were a quarter of the way through the movie before I said “Isn’t that Jude Law?”

It’s definitiely one of those movies where right after you finish it, you’re googling “how true were the events in [movie title]?”

Wednesday night was the first time I ever went to a Cal game which is kinda pathetic since I’ve lived less than 20 minutes from Berkeley for over a decade now. But St. Mary’s College usually has a better hoops team, is even closer, and has a much smaller arena. It’s more of a gym than a venue.

Cal was able to hang with the Blue Devils for the first half before Duke started being Duke.

So many nepo babies in the game. Marbury’s son was is a sophomore walk-on for Cal (he’s only played 5 minutes all season though), Justin Pippen is Cal’s starting PG as a sophomore, and the freshman Boozer twins play for Duke (although only the 6’9” one sees the court. 6’4” bro MIA). The taller Boozer is a force. Much savvier than you might expect from a freshman big.

Duke brought out some local celebs. We didn’t see them, but Steph and Del Curry were there with family. We did see these guys one of whom’s life is basically a victory lap. Getting dapped up every 3 seconds, everyone taking selfies with him. You can decide who I’m talking about:

 

 

Stay groovy

☮️

Moontower Weekly Recap

Posts:

• Illusions, Empathy, and the Hackability of Perception
• HOOD: A Case Study in “Renting the Straddle”
• embedding spot-vol correlation in option deltas

   

Friends,

I started to feel it over the break, but the feeling is inescapable after the past week.

This has nothing to do with current events. It’s me having the same reaction to Claude Code that early adopters using the terminal have already felt:

Work is going to feel very different by next Christmas. Yinh and I were talking about how long 2024 felt. There were a lot of life events, but just in terms of workflow, it felt like a year ago I was mostly using LLMs for transcription, editing, and giving it photos of broken stuff for help.

Today, I can write a description of a bug in Linear or Jira (who am I kidding — I upload a screenshot with a blurb and have AI write a detailed bug spec complete with testing protocol) and assign it to…”Claude bot”. A dev approves the change. Push to prod. Hundreds of hours saved over the course of a year. It’s accelerating by the week.

I’ll share more about what I’m doing personally in the letter this week, but here are a few must-reads if you are curious about getting more out of AI.

1) Claude, Code, and What Comes Next (6 min read) by Ethan Mollick

This is a strong overview of why Claude Code feels so stepped-up in capability. I’m using Opus 4.5 regularly and for one project in particular, its ability to compress the chat is lengthening the context window. This post is a nice primer to read while the idea of agents working 24/7 for you floats in the back of your mind.

2) How I code with agents, without being ‘technical’ by Ben Tossell

Khe texted me this post and it’s the next thing to read after Mollick’s. This gives you a glimpse into the near future (which is already here for Ben despite his humility in this post) with very concrete ideas. PSA: Khe’s letter is mandatory if you are a regular person trying to get the most out of the tools around us. I feel like I’m literally stepping in his tracks, just 3 months behind as I’m finally using Claude Code (I just needed it to be in a desktop app rather than command line because I just think DOS and my brain powers off.)

In this article, Ben says:

Not to be like everyone else on Twitter when they see Andrej Karpathy tweeting something, but this really rang true to me: **there’s a new programmable layer of abstraction to master.**

First of all, I have the Claude extension in my chrome browser. This lets you talk to Claude about anything you are seeing. Like the design of the website you’re on? Ask it to extract a style sheet. Don’t want to read the whole email or article? No need to copy/paste, just ask the sidekick to summarize it. There’s even a Google Sheets add-on if you want it to spreadsheet for you.

In this case, I just asked Claude in my browser for the Karpathy thread that Ben is referencing.

Boom, it just goes out to the web and finds it.

Here’s the Karpathy quote:

I’ve never felt this much behind as a programmer. The profession is being dramatically refactored as the bits contributed by the programmer are increasingly sparse and between. I have a sense that I could be 10X more powerful if I just properly string together what has become available over the last ~year and a failure to claim the boost feels decidedly like skill issue. There’s a new programmable layer of abstraction to master (in addition to the usual layers below) involving agents, subagents, their prompts, contexts, memory, modes, permissions, tools, plugins, skills, hooks, MCP, LSP, slash commands, workflows, IDE integrations, and a need to build an all-encompassing mental model for strengths and pitfalls of fundamentally stochastic, fallible, unintelligible and changing entities suddenly intermingled with what used to be good old fashioned engineering. Clearly some powerful alien tool was handed around except it comes with no manual and everyone has to figure out how to hold it and operate it, while the resulting magnitude 9 earthquake is rocking the profession. Roll up your sleeves to not fall behind.

If Karpathy feels behind, I guess the rest of us shouldn’t feel so bad. But the part I bolded feels big. Like you need to stop your first reflex about how you’d approach a problem and embody someone to whom this is all native to (while recognizing that nobody is perfectly native to it. Instead, there’s a continuum of how far along people are in how easily they consider problems in light of the new capabilities.)

3) Claude Codes by Zvi Mowshowitz

Things are moving fast. This came out 48 hours ago. Highly practical and honest assessment of the current state. Also happens to echo my opinion — this is going to be a vertical year in terms of workflow.

4) Greg Isenberg on “what young builders do” (X thread)

This thread is just a mind-eff because it shows the frontier of the kids building in the context of entrepreneurship.

5) Everyone Is Wrong About the Skilled Labor Shortage (5 min read) by Jon Matzner

. I tend not to think about things along the lines of “what are the jobs of the future”. It feels like when you do that, you are choosing a self-alienating frame that favores the predicate over the subject.

Anyway, a local friend is a lecturer at Cal in AI. Kids similar age as mine. He gets asked about future jobs all the time and I can’t pretend I never think of that even if I resist the impulse.

His answer is “fix people, fix animals, or fix robots”. He’s also partial to the “trades”. Basically, work that AI will eat last.

It makes sense. I can’t say I’m sold. My own view is that the acceleration is so fast that any prediction on those lines is swamped by the error bars, but insofar as you must choose, it’s as good a guess any. But that’s not a great foundation for deciding, so I just treat that topic as entertainment.

My view here even disappoints me because it sounds helpless with respect to planning. But then I read an article like Matzner’s and it’s an example of how a lot of consensus thinking (like going into the trades) is perfectly risky. The frictions to knowing how to do something will melt. The asymmetry in info that a tradesperson has compared to the client has been narrowing over time (YouTube) but the “last mile” of actually doing is going to get shorter. You’re going to know how to fix anything at home, it will be a question of whether the time is worth it or not. If there are no jobs, we’ll have plenty of time to fix things. I think I’m kidding. But what if I’m accidentally right?

6) Dos Capital by Zvi Mowshowitz

And now we get to the macro. Provocation instead of practical. For the lolz.

Zvi’s post is a reaction to Trammell and Dwarkesh’s post about the unprecedented wealth inequality we are about to see. What Zvi calls absurd is effectively Trammel & Dwarkesh not taking their premise seriously enough.

Zvi (emphasis mine):

They affirm, as do I, that Piketty was centrally wrong about capital accumulation in the past, for many well understood reasons, many of which they lay out.

They then posit that Piketty could have been unintentionally describing our AI future.

As in, IF, as they say they expect is likely:

[redacted list of assumptions in order]

Does the above conclusion follow from the above premises if you include the implicit assumptions?

Then yes. Very, very obviously yes. This is basic math.

Sounds Like This Is Not Our Main Problem In This Scenario?

In this scenario, sufficiently capable AIs and robots are multiplying without limit and are perfect substitutes for human labor.

Perhaps ‘what about the distribution of wealth among humans’ is the wrong question?

I notice I have much more important questions about such worlds where the share of profits that goes to some combination AI, robots and capital rises to all of it.

Why should the implicit assumptions hold? Why should we presume humans retain primary or all ownership of capital over time? Why should we assume humans are able to retain control over this future and make meaningful decisions? Why should we assume the humans remain able to even physically survive let alone thrive?

Note especially the assumption that AIs don’t end up with substantial private property. The best returns on capital in such worlds would obviously go to ‘the AIs that are, directly or indirectly, instructed to do that.’…

Even if we assumed all of that, why should we assume that private property rights would be indefinitely respected at limitless scale, on the level of owning galaxies? Why should we even expect property rights to be long term respected under normal conditions, here on Earth? Especially in a post calling for aggressive taxation on wealth, which is kind of the central ‘nice’ case of not respecting private property.

The world described here has AIs that are no longer normal technology (while it tries to treat them as normal in other places anyway), it is not remotely at equilibrium, there is no reason to expect its property rights to endorse or to stay meaningful, it would be dominated by its AIs, and it would not long endure.

If humans really are no longer useful, that breaks most of the assumptions and models of traditional econ along with everyone else’s models, and people typically keep assuming actually humans will still be useful for something sufficiently for comparative advantage to rescue us, and can’t actually wrap their heads around it not being true and humans being true zero marginal product workers given costs.

That’s the thing. If we’re talking about a Dyson sphere world, why are we pretending any of these questions are remotely important or ultimately matter? At some point you have to stop playing with toys.

I don’t even know that ‘wealth’ and ‘consumption’ would be meaningful concepts that look similar to how they look now, among other even bigger questions. I don’t expect ‘the basics’ to hold and I think we have good reasons to expect many of them not to.

Ultimately all of this, as Tomas Bjartur puts it, imagines an absurd world, assuming away all of the dynamics that matter most. Which still leaves something fun and potentially insightful to argue about, I’m happy to do that, but don’t lose sight of it not being a plausible future world, and taking as a given that all our ‘real’ problems mysteriously turn out fine despite us having no way to even plausibly describe what that would look like, let alone any idea how to chart a path towards making it happen.

The AI discourse is a ready reminder that there are no rules. There’s only power. We are bears on a unicycle. To some of our tech overlords humanity is but an experiment. A branch of a codebase we can’t see the extent of. And most likely NOT ‘main’.

To be overwhelmingly confident that this path is humanist is either hubris or motivated by the next round of funding. It just doesn’t seem clear to me that human flourishing is a layup end state of this trajectory.

Google’s mission is “to organize the world’s information and make it universally accessible and useful.” Google’s AI division’s mantra?

“Solve intelligence, and then use that to solve everything else.”

There’s mission creep and then there’s MISSION CREEP. If a business’s goal is to solve a problem and this is a quest to solve all the problems, I think it’s only fair to ask, while we still can…

“What is the last problem?”

[Nate Bargatze voice: Nobody knows]

Not a bad place to insert Asimov’s famous short story, The Last Question.

Money Angle

These 3 videos had me dying. The dude behind them, Benjamin, clearly has a strong grasp of trading and investing, but this is totally underselling the talent.

Erik pointed him out to me. Benjamin publishes videos rarely (they take a long time to create), but despite being sparse in his output the quality is so good that you can see why they get millions of views and why the channel has over 600k subs. You don’t generally see these numbers on an account that has published 33 videos total.

Enjoy!

Money Angle For Masochists

From Kevin Mak’s outstanding Price Discovery and Trading:

What’s elegant is that this example very quickly teaches people to go from thinking with an individualistic perspective (what do I think it’s worth?) to thinking with a market perspective (what is the market saying it’s worth?). This shift in the way you think is extremely counterintuitive to non-market people (who are the majority of my students, and a majority of the population in general).

I urge you to read the post because it contains beautiful game that Kevin created to give students a visceral sense of how prices emerge from the interplay of public and private information.

Just after Christmas, I spent a day at the Arbor Quant Bootcamp run by Ricki & Ross. The bootcamp is 4 days. I attended “options” day (and even had the honor of speaking for an hour).

Options day is the last day of the camp. The capstone game brings together everything you learned over the course of 4 days. It was, by far, the coolest simulation I have ever seen of a trading situation. I won’t say too much but it involves teams huddled around computers live trading a situation that brings together options, index arb, game theory, probability, and an incredibly layered scenario where the right approach is not a settled matter. An incredible canvas for socratic teaching on top of a basic corpus of financial plumbing.

Given the audience of this letter, I hope you can all experience this one day. I sent my neighbor’s son to this bootcamp a few months before entering college because he wanted to know how he’d know if he liked trading. You will walk away from this bootcamp either unable to think of anything else other than what you just experienced or you will want to run far away. Either way you win because you’ll understand what trading really is (and why it’s a general skill set — which explains how many traders at prop firms have traded many different asset classes and markets).

It is a stark experience. You go on the internet and get some impression of what trading is and then you attend this lobotomy and can’t see markets the same way. For the uninitiated, it will spark the “Omg, I can see how looking at the world through this lens prints money for Jane Street et al”.

I have no financial interest in Arbor’s business, I’m just a huge fan. I’ll obviously boost the next session once it’s announced.

(Also, I’ve been working on a card game and one of the mechanics in their simulations might be the unlock I’m looking for. We’ll see. It’s an ongoing project in the moontower skunkworks.)

Advice

I had lots of conversations with people in attendance who were just starting their trading careers ,either at banks, private funds, or prop firms. I was asked for advice quite a bit. I’m generally uncomfortable with that because a lot of the best advice is banal (“don’t be late to work”) and more specific advice is so overfit that you can find its opposite in other people you admire.

But I did get asked one question that I had the rare fast, confident answer to. An eager fella asked me what asset class he should try to get into “for his career”.

Hold your horses, kid. You’re pivoting your data on the wrong column.

You should be more concerned about who you learn from. Asset classes go hot and cold, often for long stretches. They also teach you different things. Single stock option trading is very different from trading options on macro assets or index.

[I should probably write about this, but one is much closer to heads-up no-limit poker and the p/l glide paths from t-zero to t+x is totally inverted between the 2 businesses. If you want to have some laughs, put an index trader in a stock trader’s seat or vice versa. One can learn the other, but there’s an unlearning and learning curve.]

You may not have a choice in who you learn from. You will also not have a mature enough taste when you are starting out to distinguish mentors. So the beginning of your career is an especially sensitive starting condition to an already-wiggly path. But you’re better off at least being aware that “who” is more important than “what”. The right surroundings can turbo-charge your career or saddle you with habits you might never unlearn.

On advice, Gappy’s updated memo is terrific:

2025 Buy-Side Quant Job Advice

 

From My Actual Life

We played a lot of games over the holiday break. Some recs.

Timeline games

Hitster: Draw a card. Scan the QR code and a song plays on Spotify. Place it on your timeline based on the year the song was released. First player to line up 10 cards wins.

Chronology: Same idea as Hitster but cards with historical events written on them. Did you know the first looping roller coaster preceded the Gettysburg Address? Neither did I.

Weirdly, these games are not by the same company despite the same mechanic of completing a timeline of 10. I’ve never played a game with that mechanic and then played 2 with 4 days. Baader-Meinhof game moment, I guess.

 

Trickery games

Imposter: This is a free social deduction game that got a lot of play since we had several large gatherings.

 

Skull: I’ve boosted this game before. It’s reminiscent of poker or Liar’s Dice but we played a bunch over break with several groups and it universally loved. Even the 9 year-olds were super into it. Take 2 minutes to learn but then it’s very rich.

My favorite game review channel is Shut Up & Sit Down:

You really don’t need to buy the game to play it. Here’s the same game played with whatever cards you have around the house:

Finally, we played a giant round of a game I wrote about last year:

Left Center Right (1 min video)

This game is pure degeneracy and takes less than a minute to learn. Asian grandmas and 5-year-olds alike will lose their minds over it. Huge party hit this holidays. It’s actually an old game, but new to me. It has zero skill so when I heard how it works I immediately poo poo’d it but playing it in a group of 15 for a little cash is amazing.

If you want to make it skillful just create an open outcry side-market on who the winner is. Let’s say “Ann” is playing…Ann futures settle to 0 or 100 depending on if Ann wins so you can bid, offer, or trade any integer price between 0 and 100 based on your assessed probability of Ann winning. It’s a faithful simulation of mock trading (and really similar to the StockSlam game I was playing a couple years ago).

This year, we played a single round of LCR on Christmas Day that took close to an hour. 17 people with a $20 buy-in. Winner got $340. Asian aunties were rabid. Call me whatever you want, but “these people” love gambling.

[Because of the buy-in, we used poker chips instead of singles for tokens. I was told this took away from the experience since “grandma wants to see the cash”. Noted for next time.]

 

Stay groovy

☮️

Moontower Weekly Recap

Posts:

• slop
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• https://trading-sim.moontowermeta.com/