Notes From Todd Simkin On The Knowledge Project


From the description:

Todd Simkin is Associate Director at Susquehanna International Group, a privately held trading and technology firm. During his 25 years with the company he has held a variety of roles, including responsibility for SIG’s firm-wide education and trader development, where he taught the company’s new traders what questions to ask and what criteria to weigh before making hugely impactful decisions for the firm.

He calls on experiences from his lengthy career in financial services and educating traders to help Shane understand how to make better decisions. On this episode Simkin breaks down all the influences that go into how and why we make decisions, why financial decisions are different than inter-personal ones, the strategies involved with teaching other people to make better decisions, what he looks for when he’s hiring, the value of asking the right questions, and so much more.

[FD: I started my career at SIG eventually spending 8 years there. I’m living proof of what Todd says in the interview: Traders are made not born. A statement famed Turtle Trader Richard Dennis, and Trading Places’ Mortimer Duke would agree with. So it must be true.]

This interview lifts the veil a bit on SIGs trader education program, but is more broadly a statement of SIG’s culture. We get things wrong all the time but we need to make decisions. SIG is like a think tank on the subject of decision-making. It’s a popular topic these days, in fact many of Shane’s prior guests have been experts in the field. SIG was an early adopter of institutionalizing concepts from behavioral science. And as we’ll see, this is really a team effort. Isolated attempts of correcting one’s own cognitive biases have shown to be nearly futile and Daniel Khaneman has himself lamented how awareness of bias doesn’t seem to inoculate us from it.

In addition, to the decision ideas Todd talks about, I found this to be a masterclass in communication. If you are a parent, this episode is full of gold.

These are my notes organized by theme. You can find my Otter transcript here.


SIG’s approach starts with humility

Our approach is to recognize that we, we are often on the bad end of informational asymmetry, that other people who are looking to trade in the markets frequently no more than we do. And as a as a result, we don’t want to back our own limited opinion against a more informed counterparty. Instead, what we want to do is take the information that we have coming from outside sources, and there are multiple outside sources, different types of products that are being traded, different options series, if we’re trading derivatives, and use that information to improve our own information set to then be able to allocate our capital in a way that we think will lead to a return.

How to manage information asymmetry — start with reasonable priors then update hard

There a few ways that we’ve tried to handle it. One is to is to build out research capabilities internally so that we do have sort of some basis for our initial opinion. But the most important thing, from our perspective, is to be willing to update that opinion, in a Bayesian way to use approaches that are that are going to be inclusive of all the information available to us. And only when we get to mutually exclusive information, or mutually exclusive signals. Can we say something here doesn’t jive right? It’s totally fine. If somebody says they think that the stock price is greater than 100, no, nothing else, I think the stock price is going to be greater than 100. Somebody else says they think the stock price is going to be lower than 105. I say, Okay, now I’ve got a market. Now I’ve got two sides. And then someone else says, Do you think the stock price is going to be lower than 97? Now we don’t have information that can coexist in the same universe. I don’t need to know who’s right. But I do know that it can’t both be above 100 and be below 97.

I have used a similar analogy. Trader’s are not acting on some thesis or worldview about the future. They are simply looking for contrary pieces of information that are unlikely to be simultaneously true, and take counterparty to both sides. If the Warriors are 20 bid to win the NBA Championship and the field is 85 bid this is a strong-form example of “can’t simultaneously be true” aka arbitrage. In reality, the process of finding opposing propositions requires:

a) casting a wide net for information

b) normalizing the information (see Measurement Not Prediction)

c) communicating & outputting the cleaned information back to decision-makers

This process underpins many business flows. Trading is just one example of a type of business. Performed methodically, what SIG is doing is a business not an investment strategy.

Bayesian Updating Applied To Trading

Options derive the value because the future stock price is not going to be the same as what it is today. And there’s some probability that it’s going to be higher or lower. And knowing what that forward looking probability distribution function looks like, leads to the ability to price the options to come up with the fair value based on their expectancy. And one of the determinants of sort of how much a stock can move is what we call its volatility. The volatility is just the annualized percentage return on the stock in any given year, or really for a time slice because it can change that can change over time.

So if I think that the fair value of an option is say, $3, because of all of the assumptions that I have built into that, and then someone comes and wants to buy 10,000 options from me for a price of $3.10. There are two things I could do one, I could say, well, I know that all of my assumptions are grounded in truth, I know the future better than anybody else. So I know that over the long run, if I sell these options at $3.10, I’m going to make 10 cents in an expected return over and over and over again, that is not the approach that we take at Susquehanna.

Instead, I would say this option can be worth more than $3. Given some some possible sets of information about the future. Maybe this person knows something about the fair value of the underlying of the stock that’s different than what I know, looking at the stock market. And I can test that by going out and trying to trade stock. Maybe they know something about the forward looking volatility, the forward looking probability density function. And I can say, Well, if that’s the case, how wrong would I need to be to now be losing if I if I entered this trade? And this is where where Bayes Theorem comes in. Because I can say I have my prior assumption set, my prior probability distribution. Now, how much do I want to weigh this new information to come up with a new a new distribution that will allow me to come up with a fair value.

And again, in isolation, it’s really hard for me just to say this person’s wrong. But if I have a similar looking option similar because it’s the same expiration, or because it’s the same strike and a different expiration, or that there’s something about the option that looks close enough to this, I can say, I can find disconfirming information. And only when I find disconfirming information, can I feel more comfortable about taking the other side of this trade


Confirmation and Attribution Bias Example In Discourse

There are lots of other things in your life, where you’re you’ve got ego tied up, you’ve got some part of your personality benefits from sort of the truth value of whatever position it is that you’re taking. So when you get disconfirming information, you’re going to discount it. I’ve been thinking so much about tribalism lately, like this is just something that’s been showing up in conversations I’ve been having all around. The thing that that’s very clear is that when people hear information that comports with whatever their tribe believes, or whatever their tribe supports, they’re willing to accept it without doing a lot of digging into the quality of the source, the quality of the information, the sort of the implications of the rest of the information that goes with it. And anything that challenges their tribe believes they are going to be more dismissive of whether or not it comes from a quality source. I’ve got children that that feel very strongly aligned with political parties. And, and I also have a quote on the wall in my office that I think is just such a good important quote, to, to help remind me about the importance of habits leading to, to behaviors, I shared the quote with with one of my daughters, my 16-year-old, and, and she said, that sounds kind of interesting. Like I sort of like that. And then I shared with her who the quote was from, and she’s like, alright, I don’t need it. And it was because it was from somebody in the other camp, it was from the wrong political party.

[Me: Reminds me of Paul Graham’s Keep Your Identity Small]

If you’re curious about the quote it was from Reagan espousing good habits. It’s an articulate way to say that “you’ll play like you practiced”:

The character that takes command and moments of crucial choices has already been determined. It has been determined by 1000 other choices made earlier in seemingly unimportant moments, it has been determined by all the little choices of years passed. By all those times when the voice of conscience was at war with the voice temptation, whispering the lie that it doesn’t really matter. It has been determined by all the day to day decisions made when life seemed easy and crazy seemed far away. The decisions that piece by piece, bit by bit developed habits of discipline or of laziness, habits of self sacrifice, or self indulgence. Habits of duty and honor and integrity are dishonor and shame.

Tribalism is the negative expression of an otherwise useful shortcut:

Heuristics are shortcuts that we take that are mentally freeing, right, it will be really hard to always work from first principles. So it’s so much easier. If you can have a heuristic that you can fall back on, that just sort of tells you what to do next, without having to stop and  think through the process. When your heuristic is, “I’m going to find people who are like me, and if I do what they do, then I’m going to sort of maintain my integrity, I’m still going to be like me, because this is what people like me do”, then it’s very easy to fall into the trap of not sufficiently contemplating each of those, each of those actions, each of those different behaviors.


Rules vs Principles: It’s not cut-and-dry. Context matters. Rules are amazing shortcuts for some things.

It’s so much easier if you have a rule than if you tried to have a principle. “I don’t eat dessert” is so much easier than each time that you have the opportunity to have dessert to say, well, I don’t eat a lot of dessert is this one of the times that I’m better making a change there.  I get up and do some type of exercise every morning. And I find it easy to exercise seven days a week, I found it really hard to exercise five days a week. And the reason was every morning the alarm goes off at 5am, it’s really easy to not have your feet hit the ground and get going. It’s really easy to say, well, I need to take two days off anyway, this can be one of the days that I take off. So on the “I don’t eat dessert rule”, I think that’s a great way to pre-decide. Lazy has a lot of value laid in it, to lighten your cognitive load. I don’t have to stop and think about everything if I’ve already spent the time thinking about it.

But you’re not part of a group of non-dessert eaters, right? This isn’t part of a broader identity that you’re now wrapped up in, where if you decide to change that rule and have dessert, you don’t have other people calling you a dessert denier, right? Who cares, right? Okay, so she used to eat dessert or used to deny dessert, and now he’s having an ice cream sundae. Good for him. Maybe it’s his birthday, whatever it is, this is a decision, that’s totally fine with him. And you don’t have to worry that you have now also contradicted all of the other tenets held by the people in the non-desert eating group.

If it’s something that is more tribal, where we are the type of people that do this and don’t do that, then a violation of one part of that removes you from this group.

Shane points out a paradox in cognitive science. Knowing our biases doesn’t seem to help us overcome them. This is a topic the brilliant Ced Chin has studied in depth. Ced told me that the literature suggests the only way cognitive bias inoculation works is via group reinforcement. I told him that was exactly the cultural DNA when I was at SIG which makes me believe there is a lot of value in being aware of bias. Anytime you replayed your decision process, it was a cultural norm to point out where in the process you were prone to bias.

Todd addresses why this works:

It is definitely true that it is sort of descriptive of the past. A lot of these heuristics and biases are things that we can see when we after we’ve already identified that a mistake has been made. And we say, Okay, well, why was the mistake made? Say, oh, because I was anchored, or because of the way the question was framed, or whatever it might be, we have a really hard time seeing it in ourselves.

But here’s the key:

We have a really easy time seeing when someone else is making that type of stupid mistake. A big part of our approach to education is to teach people to talk through their decisions, and to end to talk about why they’re doing what they’re doing with their peers, the other people on their team. If we can do that real-time, that’s great. Often in trading, you don’t have that opportunity, because things are just too immediate. But certainly, anytime things have changed. If you’re doing things differently, it’s a really good time to turn to the traders around you. And the quantitative researchers around you and the assistant traders and your team and say, Hmm, it looks like all the sudden Gamestop is a whole lot more volatile than it was a week ago. Here’s how I’m positioning for this trading. What do you guys think? And have someone say, oh, it seems like you’re really anchored to last week’s volatility. If things have changed that much, you need to move much more quickly than you’re moving right now.

So you don’t realize that you’re anchored, that’s the whole nature of being anchored, is that you don’t recognize the outsized importance that the anchor has on your decision, but somebody else who’s a little bit more distant from it can. So if we’re good at encouraging communication, then we’re going to be really good at getting other people to help improve your decision process.

[Me: There it is. The key — communication. It’s not some magic formula. Even after I left SIG I spent my whole career working with SIG alum. This culture and these types of communications happen all day on the desk. Despite the common perceptions of “trading”, I have always found it to be a team game and communication skills are paramount.]

Speaking of teamwork, the next quote is money:

I know that you are fond of pointing out that you are the sum of the five people that you spend the most time with. So if the people that you’re spending the most time with are your co workers who are thinking about trading the same way you are, then maybe you’re going to combine the same types of errors, it’s certainly better than then trying to act on your own.

But even better is if you have a culture that rewards truth finding, as opposed to rewarding action.

If nobody feels personally attacked, because of somebody else pointing out their error, but instead feels like we together have now done more to get closer to, to some truth to the better way to act or the you know, the more accurate, fair value of this asset that we’re trading, then everybody feels like it’s a win. And they will therefore encourage the involvement of the people around them.

Shane asks what the most important variables are for being a better decision maker. He expects Todd might say probabilistic thinking but Todd’s answer was fast and blunt.

Talk more is number one, that beats probabilistic thinking that, that beats sort of anything else.Truth finding is, is being able to bring in other people in the decision process in a constructive way. So finding good ways to communicate to improve the input from others. 

Thinking probabilistically I think is definitely a very, very important piece of trying to diagnose what works by trying to think of where where things fall apart, where people fail.

The other place that people fail is falling in love with their decision process and not being open to being wrong. So in openness to to feedback to finding disconfirming information to actively seeking out disconfirming information, which is really uncomfortable. But that that I think is the other piece that is is super important for being a good trader.


In 2009 Todd moved over to the education side of SIG where he focused on teaching decision-making under uncertainty, option pricing, finance and how to apply this knowledge to markets. SIG’s training is legend for good reason. In hindsight, I recognize just how  well-designed it was. It felt intense yet forgiving, competitive yet nurturing.

When I went to SIG “class” as it was called you’d spend 3 months at the headquarters. 20 years ago, it was a bootcamp that included:

  • 4 weeks of theory (including 4 hours of deriving Black Scholes assumptions and 4 hours of deriving the formula. Went mostly over my head)
  • 8 weeks of mock trading in an on-site simulated options pit.
  • Interspersed where lectures by various business heads
  • You were also required a minimum of 100 hours of poker and the class winner was chosen by Sharpe Ratio

Todd pulls back the veil on SIG’s education philosophy:

Susquehanna has always had a very growth mindset perspective on teaching trading, you know, before Carol Dweck, had even shared her views on growth mindset. It has always been the company’s position that traders are made not born. We’re now over 2000 people worldwide, and we still have a small company mindset of we’ve got to make the best of what we have.

The way that we’re training people today is certainly changed from what it was originally, but there are a lot of things that have stayed the same. And among that is, is this idea that if we have smart people that are educable, and vocal about their thought process, so that we can improve it and willing to be wrong, then we can teach them about trading.

The principles from Todd’s background in linguistics and deaf education informed how SIG designed their training.

When I was originally studying education, I was thinking that I might be teaching sixth-grade deaf kids how to do math. Instead, I’ve got MIT graduates who certainly understand math, but don’t know trading. And I’m teaching them how to make these asset allocation decisions with imperfect information. But the approach is still the same.

The approach is still this one of modeling the process, finding out where somebody is, and finding out what they can grow to and providing the appropriate support so that they can grow to be a better decision maker. 

SIG rejected Piaget’s approach that suggests learning unfolds at pre-determined developmental stages.

Piaget had, you know, a pretty rigid framework for the stages that you move through how you move through them. And that education effectively ended at adolescence. And because he said, Now, that’s kind of bunk. That’s not how any of this works.

SIG’s approach adheres more closely to Russian psychologist Lev Vygotsky. Notice the engine at work:

All of education is socio-cultural, all of education comes from interaction with others. And those others in order for them to be educators have to be more knowledgeable than you are. And that when you have interaction with more knowledgeable others, what those people are able to do is recognize your zone of proximal development, you have a zone of things that you know, and then you’ve got a zone that is just too far out of your reach that, you know, no matter what if I were to sit down my six year old nephew, and try to explain linear algebra to him, he’s not going to get it yet, he just doesn’t have the fundamental tools to do that.

But somewhere outside of your zone of mastery is this zone of proximal development, the zone that that you can move into with appropriate support and that support in the Vigotsky literature is referred to as scaffolding. And you want it to be the minimal amount of support necessary to appropriately move somebody to be able to handle the next level of mastery. Over time, you can dismantle that support, dismantle that scaffolding and that zone becomes part of their zone of mastery, and you’ve just pushed out where their zone of proximal development is so that over time you can you can move them into an area where they’re learning more and more and they’ve got greater mastery and competence in whatever area is that that you’ve been teaching them. And eventually, they become more knowledgeable than other people around them. And they can provide the scaffolding as the more knowledgeable other for their peers as well.

[cross reference from ScienceDirect about the zone of prozimal development (ZPD) and the difference in approach between Piaget and Vygotsky:

This use of ZPD defines ‘teachability’ of the child in a specific activity or in problem solving. If an activity or problem can be accomplished by the child with the help of more capable others, this activity or skill is considered possible to teach the child. If, however, the activity or skill cannot be accomplished by the child with the help of more capable others, it is considered not useful to teach to the child.

Unlike Piaget, who believed that instruction should follow development, Vygotskij argued that guidance can, should, and does lead development. They would differently define what is currently called ‘developmentally appropriate curriculum.’ Piaget insisted that learning is essentially an individual endeavor and that adults can only facilitate by providing an enriched stimulating learning environment and opportunities for children to share and discuss their egocentric thinking with each other to promote disequilibrium in the child’s thinking. Adults should not interfere in the child’s individual thinking because it can only lead to imposition of the adult’s ideas onto the child—what Piaget called ‘sociocentrism.’ In contrast, Vygotskij encouraged adults to provide guidance and help and to engage students in activities that are beyond their individual levels of competence (‘performance before competence,’ Cazden 1992)…
A student’s teachability depends not only on the student but also on the teacher (and broader communities in which the child participates). Thus, no test of the child alone would accurately determine the child’s teachability—the teacher always counts.]

How SIG mitigates hindsight bias and “resulting” which is the practice of having an outcome dictate whether you made a good decision at the time with the information you had at hand:

We do everything we can to shield, the person we’re giving feedback to from knowing the results. I’m not going to tell you whether or not this trade worked out, I will tell you the information that was available to me at the time that I made the trade, and then what I did, and you can give me feedback on that process. So the identification from this less formal setting comes from from knowledge about about how trading works, or how this particular risk taking works. In our education setting, it’s something that we control a whole lot more cleanly. We don’t have to present a very complex trade and see who can figure out the pieces of it until everybody in the trading class is ready to get there.

In Being A Pro And Permission To Be Serious I argue that a hallmark of being a professional is the equivalent of “watching film” to get better.

Here is Todd describing a Socratic learning process:

We can build from from smaller pieces up to up to the larger concept, and see who along the way, isn’t processing that smaller piece appropriately. And a big part of how information is passed from the mentor to the mentee is by modeling the decision process, it is not enough to say you should have raised the vol by two points when this trade came in. Instead, it’s so much more important to say, okay, when this trade came in, I remembered that earlier in the week, somebody had traded this other structure. And when they did, I updated my possible outcome space to look different. This trade confirmed with that other trade did so so now I was I just more heavily weighted this other outcome. And the result was that I took volatility up two points, then someone knows not only what to do, which is really not the important thing to take away. But how to do it, which is very much what we’re looking to teach…

We’re really discussing how we would behave in a situation and modeling what the conversation should look like and will disagree with each other. The answer to just about every trading question is “it depends”, which is a really hard thing for someone to hear when they’re first learning because they want the answer. They want to know, when I’m in this exact situation, again, what is the optimal thing to do?

The interesting part of the conversation comes in the what it depends on. All of these questions lead to the some type of answer of what you could do. And there’s some things that are clearly wrong. And it’s important to talk about that, too. So when we’re talking about it in a trading context, it’s really nice that one teacher can say, “I think that I probably would have shown a bid for this price and this amount”. And someone else says, “Well, I don’t know that I would because this broker has behaved this way before. So I think that this might be a time where I’d be afraid that I’m opening myself up to selection bias if I if I were to price it that way, so I would do this.” And you have these senior traders who are disagreeing. And so there’s this really nice modeling of how to think about how to improve the process, so that you can reach an answer that you are tentatively more comfortable with.

His technique for extracting the most out of an interview is clearly influenced by SIG’s educational approach. I’ll let you see the quote first then explain my experience when I interviewed there.

The best outcome for me in an interview, is if the candidate walks away, and wishes they could have part of the interview back. That means that I did not spend the entirety of the interview in their zone of mastery, where they just got to show off  in front of me. Then I’m left to decide whether or not they would have the skills to do more. And I did not spend the entire time in the zone of frustration, where they couldn’t do anything. And it’s like, “okay, I didn’t expect you to know how to do that anyway but if you could, that would have been great to see” and still make a hiring decision.

Instead on on multiple dimensions, I’ve been able to find the place where, with a little bit of support, they could do a little bit more. A big part of the reason I like that is exactly this thing that we’re talking about, which is this openness to feedback.  I’m giving them feedback, because I’ve successfully mapped out their zone of proximal development, and now I’m providing a little bit of scaffolding to see what they can do with support.

You will find that some people embrace it and say, Oh, I think I see where you’re going. Let me see if I can take it from here. That’s a great answer.

You will find some people who are just waiting for you to give them more of the answer. Who will just wait for you to map out the entire selection process and then they’ll just fill in the numbers.

I think you’ll find some people who are totally resistant to it, who will shut you up, who will put their hand up and say, no, no, no. Let me work on it my way. And they’re always not working. Yeah. And I know why it’s not working. And I can help direct them away from it. But they don’t take the feedback. I don’t want the person who doesn’t take the feedback. And I don’t want the person who’s waiting for more feedback. I want the person who is hungry and eager to use the tools that are presented and available to them to then do the work themselves. That’s what’s going to be successful when they’re trading. And they get to have a small opportunity of doing that in the interview process.

In my first round, on campus interview, I struggled with 2 out of 3 questions. You can see the types of questions they ask in Interview Questions A Market Maker Gave Me in 1999. But I’m almost certain the only reason I was asked back for another round was because I was fascinated by the questions and asked what I could read to learn more so I would better prepared. Quantitavely I was a below-average hire but knowing that probably help me take learning more seriously. I don’t think I ever took learning very seriously in school (I took grades seriously). But trading sounded so interesting, I really wanted that job (see For Fun, My Career Origin Story).

As Todd was preparing to go on Jeopardy, we get this entertaining story that epitomizes SIG’s values and culture.

Before I went on the show, I knew that there were some things that I needed to really brush up on. Shakespeare comes up in ways that I knew that I didn’t have a deep enough knowledge of. I wanted to make sure I knew all the presidents and vice presidents in order, things like that. And Jeff Yass, one of the founders of Susquehanna, the Chief Risk Manager at Susquehanna, came into my office before I went, and he said, “Todd, nobody cares if you know anything about American history. But if you screw up the the betting on the Final Jeopardy and Daily Doubles, don’t even bother coming back.”

This was a lovely reminder that I couldn’t embarrass myself by not knowing trivia. And a very good reminder that what I do as a profession is put money at risk. So I should probably make sure that I’m thinking pretty clearly about about how I’m gambling in the game. And when I got back, he came in my office, close the door behind me said, “I know that you’re not supposed to share the results until the show airs but tell me how much money you had, how much money everybody had in Final Jeopardy, and I’ll tell you what you should have wagered”

And that’s all that he wanted to talk about when I when I got back. I won one night, so made it back to Final Jeopardy and he approved my wagers on both. 



On being a more constructive communicator:

Adam Grant recently was talking about how to get feedback from people who are lower on the the corporate echelon, direct reports or their reports. And one of the things that he talked about was to lead with an honest acknowledgement of your shortcomings. That’s really constructive, because that allows for feedback. It invites it in an open way where you’re clearly challenging behaviors and not the person and then has the open ended piece of asking the important “what else?” question.

Non-constructive ways are seeking out “Yes, man” answers. Like, “Hey, I just won $10,000 on that last trade that I did, seems like that was pretty good. Can you think of any ways I could have improved that?” It’s really hard to follow that up with, “Yeah, I think you probably should have won a lot more. Or you could have done it in a much less risky way. Or you won because you flipped the coin and it came up heads. Stop patting yourself on the back, this was not all that impressive.”  You haven’t really opened up for [constructive criticism] if you frame it as “why my trade was good.” Instead, tell me why this piece of my decision process was good.

The other important thing is to actually change your behavior when you get the feedback. If you get feedback, and then don’t do anything with it, people are going to stop giving you the feedback. It’s not just not helpful to ask for feedback and not change. It’s actually hurtful.

The theme of modeling behavior as the key to learning recurs throughout the interview. I’m also a strong believer in this idea (I don’t remember it being explicitly discussed at SIG, but it’s quite apperent that we learned by breathing in the culture). I am extremely concious that my kids learn from what I do more than what I say. 

I was delighted to hear Todd’s approach to teaching his children and it’s the primary reason to return to this episode. 

“You’re not going to get this unless you hear how I’m approaching this decision”.

I think about this a lot more with my own children, that this is something that I think about a lot as I’m, as I’m raising adults into the world, they frequently come to me and my wife and ask for advice. The important thing for us to show them is not what the answer is, because we’re going to be wrong. But how we think about the answer which is probably going to be much more important for them as they go forward making decisions when I’m not going to be standing next to them, but they can have sort of the proverbial dad on their shoulder whispering in their ear. “Have you thought about this? Did you consider it this way? What is the cost of this? What are the benefits of this? Is this a decision that you can change after the fact?  Or is this one that you’re sticking with?”

All those questions that I would ask in trying to reach a decision, instead of just sort of asking it to myself and then and then handing over the the outcome? I share the process and sharing the process leads to more constructive conversations with my children and with and with our traders.

Reflective listening:

Something that I learned while I was in college, from a book called Teacher Effectiveness Training. When I read it in the book, and we talked about it in class, I said, this is the dumbest piece of advice anybody’s ever put down on paper. And it was around reflective listening. And the idea was that instead of trying to step in, and problem solve, instead of trying to reframe instead of trying to provide context or or dig deeper, all you do is tell the person what you heard them say.

So that night, a friend of mine was over at my apartment for dinner. And she was talking about a problem that she was having with a roommate. And I was like, just for kicks, I’m going to give this a shot. And she’s, you know, salting the chicken or whatever it was, and she’s like “my roommate never puts her dishes away, and it bugs the hell out of me.” I reply, “So it sounds like you’re really bothered when she doesn’t put away your dishes.” She says, “Yeah, and it’s not just that, it’s also that she doesn’t appreciate it. When I do clean up.” Then I said, “So it sounds like you know, part of the problem here is that you’re not feeling appreciated.”

She’s gonna think I’m the dumbest guy that she’s ever known, right? Like, all I’m doing is, is repeating what she’s saying. And I was like, well, this, this certainly feels dumb. And I guess at some point, I got to call myself out on and point out that I’m just doing this stupid thing from the stupid book. And that’s, and then she turned to me and said, “Todd, this is the most beneficial conversation I’ve had about my relationship with my roommate ever. I feel like I’m coming away with this understanding myself better and her.”

Her experience was totally different from mine! She felt heard, she felt seen. And she felt like she now had the power to make a better decision about her relationship going forward. And I thought, Okay, well, maybe this guy’s not so stupid. Maybe this book isn’t so stupid. And maybe these methods work in places that I wouldn’t have thought they would work. And it’s not always the solution. But it’s a much better solution than I would have thought it would be. And it’s something that I find myself doing with my kids all the time, and it no longer feels forced to me It no longer feels fake. To me, it’s very clear that what I’m doing is allowing the space for for them to finish their own thought. That’s one of the things that I do with my kids that I think has been been really beneficial.

“How do you feel about that?”

His daughter’s friend was venting to his daughter. Here’s what happened:

My daughter said, “Well, how do you feel about that?” And, and her friends said, “that is the most Simkin thing that I could hear you say at that point? Instead of asking what I want to do next, you start with, ‘how do I feel about it’, which is something that the friend and my daughter have heard from me and Shelly, my wife, over and over again.

Again, it’s really hard for us to jump in and start providing advice, if we don’t even know where the child is coming from. If we start saying “well, it sounds like that other kid was being a jerk?” and then your kid is like “no, that’s not what I was saying at all. How do you not get me? How do you not understand what this is just starting with?”

So we say “How do you feel about that?” It feels like the Freudian psychologist sitting back, you know, while you’re lying on the couch mumbling something, but turns out to be really helpful.

This is really very similar to understanding truth, that if you don’t have an understanding of what’s really happening as a starting point, if we can’t sort of agree on the facts, then then we’re not going to be able to reach a good decision trading or interpersonally.

The principle of charity in life and in trading [this principle is 1 of my 3 Simple Rules For Social Media]:

When I’m modeling decision processes for my classes or kids, I use the principle of charity. When somebody says something, assuming that they’re not an idiot, assuming that they’re coming from from a place of sincerity and good intentions, and giving them the benefit of the doubt.

On the trading side, this principle of charity is really giving somebody credit for knowing what they’re doing when they’re trading against you. This is what sort of protects you from from being run over by somebody who has better information than you do.

On the interpersonal side, this gift to the other person, is an assumption that that they are well intentioned and smart and approaching this for the same purpose that you are, and therefore you’re going to end up being aligned in your process to reach a resolution to a conflict or to come to an agreement about whatever it is that you guys are talking about. Every single negotiation is a cooperation and collaboration.

We’re never in a situation where the person has to negotiate with you. They have some alternative, they can walk away, which means that the only reason anybody’s going to engage you in a negotiation is because by doing so they’re going to get a better outcome than by not doing so. If that’s the case, then every negotiation is collaborative. Having a favorable outcome for yourself means that you have to have a favorable outcome for them as well. Otherwise, they’re not gonna be part of this conversation, and definitely not future conversations.

It’s easy to see where Todd gets his approach to parenting. This story of how his father modeled decision-making is brilliant but also so loving a thing to do when it might have been easy to just roll over. The setup was Todd was frustrated with lacrosse in high school and decided to quit.

Let’s follow along:

My father said, to come into the living room sit down, I want to talk to you. So I sat down in my towel and thought that this was going to be a couple seconds of  “You can’t quit lacrosse”, which which would have made some sense. A sort of  heavy-handed edict.

But instead, he said,  “Yeah, I’ve been thinking about it. It’s really been bothering me thinking about the fact that you’re quitting. It really bothers me because I haven’t heard why you want to quit, other than the fact that you’ve been frustrated with your coach, there’s not enough here. Like it doesn’t make sense. So you’re gonna have to explain to me in a way that it makes sense in order for me to be supportive of this.

In hindsight, I recognize that this was such great parenting happening here, which was not saying, here’s what you have to do, here’s what you can’t do. But instead, it said, if this is a reasonable and rational choice, or even an emotional choice, which isn’t necessarily rational, but if it’s an emotional and consistent choice, I’ll back you up on on doing this.

If it’s not, if this is rash, and it’s going to have long term implications for you, which it is,  you can’t quit the team and then three days later, go back and say you’ve decided that you want to rejoin, then there are big implications here. So you need to make sure that you’ve given this appropriate weight and appropriate thought, before following through with the decision that you can’t change. Tell me what you’re thinking and tell me what your plan is. If you do this, you’re gonna have an extra two hours every afternoon, you have an extra 10 hours a week. What are you doing with that time? How are you better off having that time, not on the lacrosse field than when you were on the lacrosse field.

The way we left it at the time was with me feeling a bit frustrated that I was not able to convince my father that this was the right choice. And because I couldn’t, I realized that maybe it wasn’t the right choice. Maybe what I needed to do was wait, and waiting was the low cost option, right that at the time, I didn’t know what options were. But in the way I sort of frame and think about the world. Now I recognize that this is what we would refer to as a real option that that there is a cost to it. It does cost me something, it costs you something in terms of my frustration level. And the fact that I’m tired after running for two hours straight. And I’m not as fast as the other guys on the team. So I’ve got to play catch up a lot. But that’s day by day, and in return, I get this upside of maybe there’s some benefit to me sticking with this longer term.

I ended up reaching the conclusion, a couple weeks later, that I wanted that to be my last lacrosse season. But I would finish out the season I would finish out both the commitment to the team and also find the opportunity to fill that time with with something else that was going to also be productive and ideally more productive than playing lacrosse, which I couldn’t do midseason. I couldn’t switch over and start start playing on the baseball team midseason. But the process of having my father model, deliberate decision making for something that was consequential was really was really pretty beneficial early on.

How this still influences Todd:

I try to take the same care today that my father had then, which is that he never erupted, you know, his his reaction was never emotional. It was purely inquisitive. It was like, you know, help me understand better. And the question he helped me understand better is, is exactly the way I approach decisions that my children are making is to say, look, you know that I love and support you with whatever it is that you’re doing. But I can either provide context, or at the very least more support if I understand better where you’re coming from.

One of the one of the other teachers of the class at Susquehanna has such a lovely touch, he just says, Tell me more, and tell me more doesn’t have any value laid in it, it doesn’t have , any judgment in it. It’s just saying, go ahead and add more words to what you’ve already shared. You want to take this action against this type of order flow? Why? Tell me more. And effectively what my father was saying is the same as what as what Mike, my co- teacher says, when he’s talking to our students, which is just, I cannot reach a conclusion about what you’re saying, until I understand it better. So help me understand it better. Tell me more.

What stands out for me is the magic that can happen when we combine the principles of charity with a demand for mental rigor and vulnerability. 

This approach establishes very early, that we’re on the same side that we have, if not all of the same goals, we have alignment with our values and our goals, I want to support you says all I’m looking for is an excuse to make sure that you and I are facing the same direction and facing the world together. Help me get there bring me into alignment with you by by telling me more,

“I want to support you. I want to help you, but I need to understand you better”




Notes from Tom Morgan on Infinite Loops


Tom Morgan, Director of Communications & Content at The KCP Group, joins Jim O’Shaughnessy on Infinite Loops to discuss:

  • The trillion-to-one ratio of attention
  • “Love” as a compass for growth
  • Religions and Traditions
  • Enlightenment vs. Adulthood

On attention and the possibility that there is something beyond us:

Tom: I’m not going to paraphrase the whole thing [Usual Illusion], but the relevant piece that we probably are aware of 60 bits of information at any given moment, but there’s 11 million that are potentially available to us. If I say to you, “Wiggle your big toe,” you’re suddenly aware of your big toe. That information was coming to you all this time.

You are having a conversation with a cocktail party with one person, and you hear someone else across the room say your name and you swivel your attention to that. You were taking that information in some way, it just wasn’t being served to your conscious awareness. It’s a filtering process. That feels like something that’s intuitive and is easy for us to understand. The bit that took me a really long time to understand is the idea that outside of that million to one ratio, there’s a trillion to one ratio of things that we’re never aware of and never can be aware of.

When you think about an earthworm, an earthworm has never seen a sunset and it will never see a sunset because it has not evolved to see a sunset. We will never experience the way a Bloodhound does with 200 million receptors in its nose because it’s not relevant to us. So the reason why that’s important is that if you think about a trillion to one ratio of things outside of us, the things that we’re aware of, the idea that there wouldn’t be a force influencing us that was hidden goes from a possibility to, I think, a probability.

How the powerful were able to shut down threats with might and control of information in mid-sixties to mid-seventies

Jim: Watch the music videos from that time. Again the artists were at the forefront. They were the tip of the spear in this and the spear scared the shit out of the left-brained dominant society and the man, so to speak. Psychedelics were broadly being misused in many cases. But all of the elements required for a phase change to happen successfully were in place in the mid-sixties to the mid-seventies. The man in this case, Richard Nixon, but everyone in control, and I’m speaking pretty specifically about the US here. But it happened in the UK too. And it happened in Germany. It was a global phenomenon. They made drugs, almost all of which are the non-addicting drugs, illegal. Fed max prison for going. They made an example of Timothy Leary. He became the scapegoat for like, having a couple of joints in his pocket? They didn’t even get him with any kind of psychedelic. You got to remember this guy was a tenured professor at Harvard, who was a well-thought-of psychologist. And, so they made an example of him because, now this is getting into kind of my take on this, people are terrified of what the implications are for being free.

The conventional keepers of the social “truths” shut it the fuck down. And they did that because they could. They did that because back then there was no global communication network like we have today.

People, for example, didn’t know that Franklin Roosevelt was in a wheelchair. They did not know that. Can you imagine in our day and age? Even trying to comprehend that is wild. So they were the keepers of the “truth” and it was a narrative that everyone believed.

Bucky Fuller, on death and rebirth being a shocking or scary idea:

There’s nothing about a caterpillar that suggests the butterfly.

The balance of safety and vitality; bridging specific knowledge and control with the abstract

Tom: And at the moment we’ve optimized for safety at the cost of vitality. And if you want vitality, you have to give up certainty. You have to give up the certainty of what you want, and you have to give up all forms of security, but not all forms of security. I don’t want to overstate this. Everything’s a balance, right?  We’ve just gone too far in one direction. And I think that’s sort of the prescription. It doesn’t involve a huge societal meltdown. It just involves more of an awareness of our own vulnerability and our own holistic inclusiveness.

Jim: It’s not like we haven’t been thinking about this as human beings. Forever we have, and we let traditions, and I’m not anti-tradition, but I am opposed to traditions which have osified and are not serving us anymore. And it’s like our school system, it’s like every, this is the kind of the main central heart of the great reshuffle. All of those old systems are broken or breaking. And we need to make new ones. And making new ones is going to be scary, but the only way you do that is to understand vitality.

Tom: I think any kind of reductionist theory is always going to be incomplete. You can get to the Higgs boson, but the Higgs boson isn’t going to tell you how to live your life. Right? You need values for that. I think there are actual universal values. They may be expressed in a Ten Commandment or something like that. But there is some sort of metaphysical truth out there. But the root to that individual creativity. That way you co-create with the environment around yo is intrinsically unique. And that sounds incredibly saccharine. Because it’s like, everyone’s special. Everyone’s got creativity inside them. Again, terrible words, right. When I heard “creativity”, I think of finger painting. And when you talk about reading poetry and listening to songs that just annoys my intellect.

But you have to remember that your intellect is fiercely resistant to all of these ideas because it requires giving up the steering wheel.

[Still] you do need to be is actually practical, because spiritual regressiveness and spiritual bypassing gets us nowhere in the same direction. So you need to be looking for people that are building the bridge from science back to spirituality.

Intuition or wisdom as evidence of a good filter

Tom: I read a resonant quote, two days ago, wisdom is knowing what information is important. Well that’s simple and incredibly profound, right? And to go back to the Usual Illusion example: you can’t take in 11 million bits, you’d be burned out like a light bulb in a nuclear reactor. You can’t take in a trillion bits, you’d be jello.  So all this is about, is all we’re talking about is how do you calibrate your filter to get the full range of human experience, including the shit stuff, which is the problem. If you hide in your intellect, as a lot of people I know have, it’s typically a coping mechanism to prevent yourself from experiencing the full range of human emotion.

And if you do get blown open, a blowing open experience tends to be incapacitating and overwhelming. And that’s the point. You’re not supposed to have a direct experience of that, right? Too many crazy psychedelic experiences make you too open. You believe everything, you need a good filter.

And that’s the definition of wisdom. And I think that George Soros example is brilliant. So like, for those of you that don’t know the George Soros anecdote, it was that he used to give all these really clever, retroactive reasons why he did things and then his son gave an interview I think to the Irish Times where he was like “Oh no, it’s just his back hurts when his portfolio positioned wrong.”

I thought about that for a long time. And my interpretation of it, whether right or wrong is that, we lay down a whole bunch of information from pattern recognition and he laid down a whole bunch of information from seeing an enormous number of different trading scenarios play out. But those recognition patterns run in the background. Because if they’re running in the foreground, you’re not going to get anything done. You’re going to be using your 60-bit consciousness to act in the world. But when something trips that, because it’s not running in your intellect, it’s running in your unconscious, you’re going to feel it as a sensation first.

And that’s the point. You need to be in tune enough and embodied enough that when you feel that, you don’t just feel it and discount it, you feel it and know what it means. So you are serving the correct emotions, you’re serving the correct physical sensations to your consciousness. And then you are able to interpret them and act on them in the correct way. That is a well-calibrated filter. It’s not about feeling everything all the time, because then you’re just going to be mush.

Notes From Moloch

Select excerpts from Slatestarcodex’s:

Meditations on Moloch (Link)

The premise:

The implicit question is – if everyone hates the current system, who perpetuates it? And Ginsberg answers: “Moloch”. It’s powerful not because it’s correct – nobody literally thinks an ancient Carthaginian demon causes everything – but because thinking of the system as an agent throws into relief the degree to which the system isn’t an agent.

Categories and examples of “multi-polar traps”

Situations where the best course of action for an individual makes the group worse off.

I sorted them as follows:

  1. Prisoner’s Dilemma
    • Dollar auctions (think of “pay to bid” auctions)
    • Tragedy of the commons problems (ie overfishing)

  2. Race to the bottom
    • Malthusian Traps (intense competitive pressures that penalize attempts at “slack”)
    • Capitalism (an instance of the evolutionary mechanism underlying Malthusian traps)
    • Two-income traps (From within the system, absent a government literally willing to ban second jobs, everyone who doesn’t get one will be left behind.)
    • Agriculture (Maybe hunting-gathering was more enjoyable, higher life expectancy, and more conducive to human flourishing – but in a state of sufficiently intense competition ag wins)
    • Arms races
    • Education signaling
    • Science and pseudo-science research
    • Gov’t corruption
    • Politics (Congressmen tactics to get elected)

All these scenarios are in fact a race to the bottom. Once one agent learns how to become more competitive by sacrificing a common value, all its competitors must also sacrifice that value or be outcompeted and replaced by the less scrupulous. Therefore, the system is likely to end up with everyone once again equally competitive, but the sacrificed value is gone forever. From a god’s-eye-view, the competitors know they will all be worse off if they defect, but from within the system, given insufficient coordination it’s impossible to avoid.

…in some competition optimizing for X, the opportunity arises to throw some other value under the bus for improved X. Those who take it prosper. Those who don’t take it die out. Eventually, everyone’s relative status is about the same as before, but everyone’s absolute status is worse than before. The process continues until all other values that can be traded off have been – in other words, until human ingenuity cannot possibly figure out a way to make things any worse.

My own local example:

The public school system shifted the start date of the scholastic year up from late August to early August to gain an artifical advantage in year-end standardized test scores by giving the students more time to prepare. Eventually, all schools will adopt this to maintain competitiveness and we’ll sacrifice the value of summer vacations in August when people commonly take off work and camps are not in session.

Select Excerpts

On incentives and initial conditons…

Any human with above room temperature IQ can design a utopia. The reason our current system isn’t a utopia is that it wasn’t designed by humans. Just as you can look at an arid terrain and determine what shape a river will one day take by assuming water will obey gravity, so you can look at a civilization and determine what shape its institutions will one day take by assuming people will obey incentives. But that means that just as the shapes of rivers are not designed for beauty or navigation, but rather an artifact of randomly determined terrain, so institutions will not be designed for prosperity or justice, but rather an artifact of randomly determined initial conditions.

We just analogized the flow of incentives to the flow of a river. The downhill trajectory is appropriate: the traps happen when you find an opportunity to trade off a useful value for greater competitiveness. Once everyone has it, the greater competitiveness brings you no joy – but the value is lost forever. Therefore, each step of the Poor Coordination Polka makes your life worse.


Capitalism is a lossy accounting system in that it can elevate priorities without precision. Not unlike napalm. Its a victim of its own success in the sense that any critique of it galvanizes its defense with soothing rationalizations both by the rich and by those to whom it has unknowingly imprisoned. Look, capitalism is good. It doesn’t need religious arguments in its favor to affirm that. Those arguments discredit its supporters which is a collective self-own. It’s possible to discuss its merits and flaws in the same room.

With that said, here’s a nuanced point from the essay…

I know that “capitalists sometimes do bad things” isn’t exactly an original talking point. But I do want to stress how it’s not equivalent to “capitalists are greedy”. I mean, sometimes they are greedy. But other times they’re just in a sufficiently intense competition where anyone who doesn’t do it will be outcompeted and replaced by people who do. Business practices are set by Moloch, no one else has any choice in the matter. (from my very little knowledge of Marx, he understands this very very well and people who summarize him as “capitalists are greedy” are doing him a disservice)


Politics is similarly skewed…

As well understood as the capitalist example is, I think it is less well appreciated that democracy has the same problems. Yes, in theory it’s optimizing for voter happiness which correlates with good policymaking. But as soon as there’s the slightest disconnect between good policymaking and electability, good policymaking has to get thrown under the bus. For example, ever-increasing prison terms are unfair to inmates and unfair to the society that has to pay for them. Politicans are unwilling to do anything about them because they don’t want to look “soft on crime”, and if a single inmate whom they helped release ever does anything bad (and statistically one of them will have to) it will be all over the airwaves as “Convict released by Congressman’s policies kills family of five, how can the Congressman even sleep at night let alone claim he deserves reelection?”. So even if decreasing prison populations would be good policy – and it is – it will be very difficult to implement.

The libertarian-authoritarian axis on the Political Compass is a tradeoff between discoordination and tyranny. You can have everything perfectly coordinated by someone with a god’s-eye-view – but then you risk Stalin. And you can be totally free of all central authority – but then you’re stuck in every stupid multipolar trap Moloch can devise. The libertarians make a convincing argument for the one side, and the monarchists for the other, but I expect that like most tradeoffs we just have to hold our noses and admit it’s a really hard problem.

This reminds me of a story I heard from my wife about an elementary school class election. One kid gave an impassioned speech about what they would change (no hall monitors anymore? I have no idea what kids see as the real issues in that otherwise simulcrum of no reality I know of called “school”). Anyway, the challenging candidate rolls up to the podium and declares that if you elect him, he’ll secure the school a…rollercoaster! In the exit poll one of the students was asked why they voted for the rollercoaster candidate and the student said, “I know it probably won’t happen, but what if it did?! That would be soooo cool”.

I suspect the challenger is on their way to a lucrative career in politics.

And we are all worse off for it.

How conservative and liberal views of societal evolution dictate thir imperatives

Societies, like animals, evolve. The ones that survive spawn memetic descendants – for example, the success of Britan allowed it to spin off Canada, Australia, the US, et cetera. Thus, we expect societies that exist to be somewhat optimized for stability and prosperity. I think this is one of the strongest conservative arguments. Just as a random change to a letter in the human genome will probably be deleterious rather than beneficial since humans are a complicated fine-tuned system whose genome has been pre-optimized for survival – so most changes to our cultural DNA will disrupt some institution that evolved to help Anglo-American (or whatever) society outcompete its real and hypothetical rivals.

The liberal counterargument to that is that evolution is a blind idiot alien god that optimizes for stupid things and has no concern with human value. Thus, the fact that some species of wasps paralyze caterpillars, lay their eggs inside of it, and have its young devour the still-living paralyzed caterpillar from the inside doesn’t set off evolution’s moral sensor, because evolution doesn’t have a moral sensor because evolution doesn’t care. Suppose that in fact patriarchy is adaptive to societies because it allows women to spend all their time bearing children who can then engage in productive economic activity and fight wars. The social evolutionary processes that cause societies to adopt patriarchy still have exactly as little concern for its moral effects on women as the biological evolutionary processes that cause wasps to lay their eggs in caterpillars. Evolution doesn’t care. But we do care. There’s a tradeoff between Gnon-compliance – saying “Okay, the strongest possible society is a patriarchal one, we should implement patriarchy” and our human values – like women who want to do something other than bear children.

Too far to one side of the tradeoff, and we have unstable impoverished societies that die out for going against natural law. Too far to the other side, and we have lean mean fighting machines that are murderous and miserable. Think your local anarchist commune versus Sparta.

An optimistic angle. Or maybe not.

Franklin continues: “The project of civilization [is] for man to graduate from the metaphorical savage, subject to the law of the jungle, to the civilized gardener who, while theoretically still subject to the law of the jungle, is so dominant as to limit the usefulness of that model. This need not be done globally; we may only be able to carve out a small walled garden for ourselves, but make no mistake, even if only locally, the project of civilization is to capture Gnon. “

I maybe agree with Warg here more than I have ever agreed with anyone else about anything. He says something really important and he says it beautifully and there are so many words of praise I want to say for this post and for the thought processes behind it. But what I am actually going to say is…

Gotcha! You die anyway!

My Concluding Thoughts

  • First a general thought:

    This essay is infotainment. It’s a work of art, it’s provocative, and one I expect to return to because it is stirring. Its sense-making Slatestar at his best. It’s dreary by default. But I see a glimmer of liberation peeking from behind its nimbus:

    If you accept its hopelessness and kneel to Moloch, you might fare better. But it’s delaying the inevitable. Instead, you can rebel. It might be quiet. And maybe nobody will care. But a large part of your reality is your own internal narration of it. There are truths that inhabit the physical world. Beyond that, things veer pretty quickly towards “it’s all made up”. This is liberation. How you feel about how you play matters. You might as well play your way since it doesn’t matter anyway.

    But this is not even the useful part.

    The real gift is once you witness how others deal with this non-mattering, you have found a magic compass. It points you to the family you choose. It gives you back control of your attention. And while we’re here, that’s probably the most useful choice we have.

  • A (pollyannish?) thought:

    This essay highlights how capitalism and competition narrow our values. ESG seeks to broaden our values. There is some irony in that one of the arguments in favor of ESG is that if we internalized our externalities, through what amounts to a broader system of accounting, that it would also maximize a Chicago-school capitalists brand of utility.

    Perhaps this is true. Companies that are more virtuous might be better for “shareholder value” in the long run. But part of me finds that reasoning patronizing. Like hiding the dog’s pill in peanut butter. 

    The ESGer is conceding a point they shouldn’t have to. Instead of trying to fit a wider set of values into an existing legible accounting system we could realize that the system is a needless sacrifice to legibility.

    (I don’t need a lecture on the grifty aspects of ESG. Every movement that gains traction brings its share of mops and sociopaths.)

  • Finally:

    You should read the essay. It’s a classic from a good writer. If you need another breadcrumb, one of the questions Slatestar poses:

    Why do things not degenerate more and more until we are back at subsistence level?

    I can think of three bad reasons – excess resources, physical limitations, and utility maximization – plus one good reason – coordination.

    You’ll need to read it to explore the answers.

Notes From C.Thi Nguyen Interview About Games and Society


C. Thi Nguyen received his Ph.D. in philosophy from the University of California, Los Angeles. He is currently associate professor of Philosophy at the University of Utah. He has written public philosophy for venues such as Aeon and The New York Times, and is an editor of the aesthetics blog Aesthetics for Birds. He was the recipient of the 2020 Article Prize from the American Philosophical Association. His recent book is Games: Agency as Art.

I only excerpted topics of particular interest to me so you should listen to the podcast for a fuller understanding. Anything bold is my emphasis.

Intro by host Sean Carroll

One of the good things about the artificiality of games, you know when you’ve won or lost, unlike life. But…that clarity of knowing when you’ve won or lost is very seductive outside the context of a formal game. It’s very seductive in life.

Thi has developed this understanding to study things like echo chambers and cult leaders. A cult is in many ways like an echo chamber. In both cases, it’s not just a filter bubble where you prevent information you don’t want from getting in, but it’s like a strategy for preemptively undermining claims from outsiders that the cult leader or the echo chamber doesn’t want you to believe in, right? You give people ways to discount outside information.

One of the reasons why cults and echo chambers are so seductive is that they bring clarity to values and moral reasoning, maybe a little bit too much clarity: They make it too easy, they make things cut and dried in a way that the world itself is often not so cut and dried. So he has a whole understanding of why we’re so seduced by conspiracy theories, by cult leaders, by echo chambers, and how it relates to this seductiveness of clarity that we get from thinking about games and point. We get points, we get likes on our tweets, we get steps on our Fitbit. This engages our brains for interesting evolutionary reasons, and that feature of human psychology can be gamed, if you like, by the leaders of cults or echo chambers.


What is a game?

The notion of a game is really disputed in philosophy. It’s very storied. In philosophy, it’s a particularly famous concept, because when Wittgenstein was like, “No, you can’t define concepts,” his example of an undefinable concept was a game.

There’s an amazing book from Bernard Suits called The Grasshopper, which is an attempt to define games, which actually takes itself as a response of Wittgenstein and also secretly about the meaning of life and the relationship between games and the meaning of life.

The short version is, “To play a game is to voluntarily take on unnecessary obstacles for the sake of making possible the experience of struggling against them.”

  • Part of the idea of the game is that the goal of the game is partially constituted by obedience to certain restrictions:

    If you’re trying to get to the top of a mountain to get some rare drug that’s only there, you’re not playing a game. You’re just trying to get to the top of the mountain. If you’re trying to climb the mountain as a mountain climber, then certain restrictions are part of what you’re doing. So the medical seeker is not a game player, and the mountain climber is. And one way you can tell is if someone goes by in a helicopter and says, “Hey, you want a ride?” The medical climber will say, “Of course, get me the cancer drug.” And the other person is like, “Of course not. What do you think I’m doing?”

  • Autotelic: It’s worth engaging in the activity for the sake of the engagement and the doing rather than the product.

The charm or allure of games

  • Struggle

    The aesthetic experience of struggle can be accessed in a safe way by making the difficulty manageable.

Some struggles are beautiful, some struggles are satisfying. And what games do is, they let you tweak the activity to maximize that satisfaction…Most of life’s challenges are too big or too boring and little for us. In games, we get to modify the world of the game and the abilities we’re allowed in the game until they fit just right.


I feel like things like chess are kind of tuned to maximize that moment, you get more and more of those moments. In my normal life moving around the world, I get to feel graceful once a week, but rock climbing tunes you into the part of the activity that has that feeling. It’s built to constantly call out of you that incredible experience of delicate, graceful, perfect motion.

Manageable because of clarification

Games are these circumscribed spaces where the actions in space have been often been leaned down and clarified, so your actions can fit. They’re clarified, not just because the actions you can perform have been clarified, it’s because your values have been clarified.

Bounded and limited beings make things that make them feel temporarily okay, like spaces where we don’t feel too little for this vast world. The real world is this existential hell-scape of too many values, and games are like this temporary balm, where the world makes sense for a little bit.

  • Games as art

    Games are sculpted experiences of practicality. I think what’s interesting in games is, if games are sculpted practicality, then the beauty emerges in the practical action. So in other words, when you play a game, it’s not the game that’s beautiful, it’s you that’s beautiful.

    I think a lot of the literature about games has been going around looking for qualities that are in the game, like, Oh, the graphics are beautiful, the sound is beautiful, the story is beautiful. And they’re not looking at how radically different games are. And I think there are other things like this that are also mostly neglected, but the thing that makes games unique is that they’re sculpted action.

The danger in having your values clarified

  • Gamification

    Game values are hyper crisped-up, and that’s fine if you put away those values at the end. But when you gamify something like education or communication, then you’re forcing a singular clarified value system on a real-world activity. Think of how Fitbits or Twitter engagement can orient your goals towards local maxima. Twitter’s gamification squashes an individuals’ pluralistic values and gets everyone, insofar as they’re motivated, to be motivated in the same direction.

    • Education examples:
      • Sean Carroll: I used to be at the University of Chicago, which obviously has always been academically super-duper strong, but back in the day, it wasn’t the place you applied if you were interested in Harvard or Stanford or Princeton, it was less well known. So suddenly, there was a strategy that they undertook at the University of Chicago because they were being hurt in the US News rankings, and they were being hurt because the only people who applied to the University of Chicago were the ones who really wanted to go there. And you are rewarded in the US News rankings by having a high selectivity, by rejecting most of the people who apply, so they intentionally encouraged people to apply knowing they would reject them, ’cause it increased their selectivity, and they leapt up in the rankings. That’s an example of maybe the goal perverting the original aspiration.
      • Law School culture
        A study about law school culture when the US News and World Report started ranking them charts a bunch of stuff like what you’re talking about, about people gaming the rankings. One of the things they point out is that different law schools used to follow different missions before the rankings, but if their mission is skewed to the ranking at all, then you drop in the rankings, so it’s forced everyone to pursue the same values.

        Before the rankings, prospective law students used to talk about what different law schools valued and talk about their own values and decide what their values were, to pick which school to go to. Now, they, say 99% of the students just assume their goal is to get into the best school, where the best school is set by the ranking. So they don’t go through the process of value self-deliberation. You end up outsourcing your values, you end up letting somebody else perform value deliberations for you, and what goes into those values are often very much based in what’s in the interest of large-scale institutions and the kind of information management systems at large-scale information.

People worry a lot about games creating violence, and there’s actually a lot of data that mostly they don’t. And I think part of that is that the violence in games is fictional, and we have a lot of information that people are mostly capable of screening off fictions. The thing that I’m really worried about is people becoming used to the idea that the goal is some simple, quantified thing that people share, and what we’re supposed to do is do everything in our power to up that simple measure, and one thing on to note, that’s not fictional.

We shouldn’t worry about games creating serial killers, we should worry about them creating Wall Street bankers.

[obligatory reference to James C Scott’s Seeing Like A State: “Look, what you should think is that large-scale institutions generally see the parts of the world that are processable by large-scale bureaucratic machines, which are quantified data, they can’t register the part.” So, think about this, a large-scale school district or an educational bureaucracy can’t register individual student evaluation data, they can only register aggregatable data like GPA. So, says Scott, large-scale institutions have reason to remake the world along lines that are more regular, so that they can be legible to the institution and actable on by the institution.]

  • The satisfying aspect of games common to conspiracy theories

The satisfaction we crave in the clarity and simplification of games is why we are drawn to conspiracy theories. Conspiracy theories are tuned to give you the exact same pleasure [as games]. Someone has changed the nature of the world, apparently, to make it tractable.

How the argument works:

    1. There’s a source of anxiety: The world is complex

      Scientists are hyper-specialized, no-one understands everything, at some point you realize that you have to just trust tons of stuff that you have no ability to grapple with.

    2. Conspiracy theories circumvent our need to trust

      They say “Don’t be sheep. Don’t trust other people. Here is a vision of the world, where you can contain the world in you. You can explain all of it with this one powerful explanation.” It is a game-like pleasure, but exported to a place where it’s dangerous.

      • Refers to a book by Elijah Millgram, called The Great Endarkenment. It talks about how knowledge must not be individual quest given the fact that the world is so hyper-specialized that no one can know more than a tiny amount of it. [This stands in contrast to the] ideal of intellectual autonomy that drove the Great Enlightenment. But it doomed itself, because it created all the science that made it impossible to be intellectually autonomous. If you still hold to the old ideal of intellectual autonomy, where everyone can understand everything, what you get is being driven to anti-vaxxing and various conspiracy theories in which you reject trust in the sciences.]
    3. Conspiracy theories hack our desire for clarity

      It’s not that clarity is always bad. When you have intellectual success, you do have this feeling of clarity. My worry is the feel of clarity actually comes apart from real understanding, and that outside actors can game it.

      For example, in the course of evolution, it made perfect sense for us to pursue sugar and fat because calories are scarce, it’s hard to get enough fat and so on. Then the world changes and industrial forces figure out that they can maximize the feeling of sugar and fat separate from any nutritive qualities. And then if you’re still stuck on that old heuristic and chasing sugar and fat, then you’re screwed. Clarity can be like cognitive sugar. Someone can aim to max out the feeling of clarity, and the way that looks like is a conspiracy theory.

Trust’s role in conspiracy theories

1. Trust is tricky because there’s a lot you cannot trust, yet being able to trust is not optional

If you devote your entire life to it, you can understand one one-millionth of the human landscape of knowledge. [Even worse] not only can you not understand everything else, you don’t even have the capacity in yourself to pick the right experts to trust.

I have a PhD in philosophy, I have a lot of education. If you gave me a good, a real statistician, and a fake one, I don’t have the mathematical skills to tell the difference between a good statistical paper and one that gives a bad result. I don’t have that in myself. So what you get is actually this incredibly iterated and very fractal chain of trust.

[An example of why we have no choice but to trust in many cases:

There was one proof of a really famous theorem that literally only one guy understood, and he’s getting old, so a whole bunch of people had to have a project to re-write the proof in a way that other people could understand it. And that whole process of dealing with the fact that you need to trust some things, while you shouldn’t trust everything, is a tricky thing that is probably under-theorized.]

Politically, conspiracy theories tend to be associated with the right, but the left’s appeal to science fall flat because they are not appreciating the role of trust:

      • The false argument they spout:

        “Oh, these fucking anti-vaxxers, anti-maskers. Think for yourself, look at the science, evaluate the science.”

        When the truth is “I can’t evaluate that science.”

      • The obstacle is not whether people trust Science with a capital “S”, it’s the trust of its messengers

        Look at the people that are legitimated in a certain institutional structure, which involves a background trust in those institutions. And I think there’s this vision where for a lot of us, like when you look at anti-vaxxing, anti-masking, the climate change denialist space, what we want to say something like, “Oh, those people are totally irrational.” But I think what you have to think instead is, they have an entirely different basic framework of trust, for a different set of institutions. The degree of rationality there depends on the degree to which we can justify our trust in our institutions. And that’s a really, really complicated matter, and it’s not like the authoritative institutions are always right. There are plenty of historical cases where they are corrupted, right?

        It’s hard to be against conspiracy theories as a blanket statement ’cause sometimes there are conspiracies. We have plenty of historical examples where all the institutions in a particular country have become corrupted, have taken over the news media, are issuing fall statements. That’s a real thing that happens.

2. Echo chambers are not about ignorance, they’re about trust

An echo chamber is a system in which people have been taught to systematically distrust people on the other side. The book Echo Chamber doesn’t quite say the world around Rush Limbaugh is a cult, but they basically almost say it. This book is an empirical analysis of the world around Rush Limbaugh — Rush Limbaugh’s top people just systematically distrust and dismiss people on the other side.

This is is different from not hearing them at all (which is the filter bubble argument). The problem goes back to trust, not irrationality or disbelief of science.

A large segment of the population has had their trust subverted and undermined and directed toward what we think of as like the wrong institutions.

The way back is not to wave the evidence in people’s faces. I think people want to be like, “Oh, climate change denialists, just look at the evidence, here is the evidence,” but of course they’re not showing you the evidence, they’re showing scientists that they trust who process the evidence, ’cause not even a climate change scientist, a particular climate change scientist, has looked at all of the evidence for climate… It’s all processed.

Someone whose trust has been systematically undermined in that set of institutions will not trust evidence from sources they distrust**. And that is rational.

This is a complicated problem without easy solutions. But the first step is recognizing the story is that the other side doesn’t hear us. It’s that their trust has been undermined.**

A lot of public policy figures are fixated on the filter effect thinking we just need to create these public spaces where people can meet each other and talk to each other. That’s a standard view in a lot of political philosophy and public policy. And I think that’s not going to work if trust has already been systematically undermined. It doesn’t matter if you meet and hear the other side, if you already have a prevailing story that says they’re malicious, manipulative, evil people.

The grand takeaway

The need for clarity as evidenced by our love of both games and conspiracy theories can cause us to overoptimize and seek safety in echo chambers.

What do we do about it?

While there are no answers some hints that can point in helpful directions:

  1. Transition between perspectives

    Playfulness is the quality to transition between different world perspectives, easily, lightly, to hold your perspective lightly and slip between different ones. This can be done via literally traveling and playing games where you are forced to slip in between different value perspectives.

    It’s hard to do, it’s hard to put on different worldviews as like different outfits. This is a resonant argument for reading and earning widely:

    This is going to become the world’s oldest chestnut, but sometimes I think like, this is what the fucking humanities are for. Read some art, read some novels, motherfucker, and if you want the background paranoid view, it’s something like the world has very good reasons to get us to onboard to super simple, clear targets. And when I look at universities cutting humanities programs in favor of business schools and STEM, because those are higher-earning jobs or lead to more clearly measurable productivity, I’m like, of course, reading weird subtle art, experiencing weird subtle art, including games, but also including novels and music and all this other stuff, is this stuff that might have clued you in to different value perspectives other than make a lot of money and get a good job. And of course, they’re going to get cut out in a world dominated by hyper-simplified institutionalized values.

    One of the suspicions I have is that certain domains, especially the domains that science has a lot of success with, are the kinds of domains that admit of extraordinary clarity. And other domains, like the domain of life value and the domains of personal health and fitness and aesthetic joy, are not domains that admit of the same systemic clarity. And when we demand them, we start hitting simplified targets.

    There’s a difference between qualitative and quantitative data. Qualitative data is really rich and nuanced and subtle, but it’s really context-sensitive. It doesn’t aggregate, it doesn’t travel well.

    [insert quote: Not everything valuable can be measured, and not everything we measure is valuable]

  2. Be aware that there are forces that are trying to manipulate us

Like the sugar analogy, is this moral view or worldview too yummy? Is it just too satisfying? Did someone make this just for me and people in my cohort to swallow down?

This is definitely not a blanket. The thing is, you also get clarity and pleasure from really getting at truths. You can’t throw all that stuff away, you just have to realize that the signal has been amenable to perversion and misuse.

Keepsakes From Slatestar’s Fake Graduation Speech

Link to original post:

These excerpts capture the gist of the “speech” that I want to retain.

What if education, as you understand it – public or private or charter schooling from age four or five all the way to university as young adults – is, on net, a waste of your time and money?

Addressing The Alleged Benefits

Benefit 1: The philosophical benefits of feeling connected to the beauty of mathematics, the passion of the humanities, the great historical traditions.

Testing the claim: Compare to a control group — the unschooled

“unschooling” movement, a group of parents who think school is oppressive and damaging. They tell the government they’re home-schooling their children but actually just let them do whatever they want. They may teach their kid something if the child wants to be taught, otherwise they will leave them pretty much alone.

And this is really hard to study, because they’re a highly self-selected group and there aren’t very many of them.

What do we know from the small sample?

    1. if you’d stayed out of public school and stayed home and played games and maybe asked your parents some questions, then by the time your friends were graduating twelfth grade, you would have the equivalent of an eleventh-grade education.
    2. Louis Benezet’s experiment: He decreed that in some of the schools in his district, there would be no math instruction until grade six. He found that within a year, these sixth graders had caught up with their peers in traditional schools, and furthermore that they were able to think much more logically about math problems – figure out what was going on rather than desperately trying to multiply and divide all the numbers in the problem by one another.math education before grade six is useless at best. And it’s hard to resist the urge to generalize to other subjects and children even older still.

Why is it so easy for the unschooled to keep up with their better-educated brethren? My guess is that it’s because very little learning goes on at school at all.

      • According to the general survey of knowledge among college students, 3.3% know who Euclid was, 7.6% know who wrote Canterbury, and a full 15% know what city the Parthenon’s in.
      • 36% of high school students know that an atom is bigger than an electron, rather than vice versa. But a full 59% of college students know the same. That’s a whole nine percent better than chance. On one of the most basic facts about the fundamental entities that make up everything in existence.

“But knowledge isn’t about names and dates!” No, but names and dates are the parts that are easy to measure, and it’s a pretty good bet that if you don’t know what city the Parthenon’s in you probably haven’t absorbed the full genius of the Greek architectural tradition. Anyone who’s never heard of Chaucer probably doesn’t have strong opinions on the classics of Middle English literature.

Benefit #2: The practical benefits of being able to get a job and afford nice things like food and shelter.

Testing the claim: Employment

About fifteen percent of you will be some variant of unemployed straight out of college. Another ten percent will find something part-time. And another forty or so percent will be underemployed, working as waiters or clerks or baristas or something else that uses zero percent of the knowledge you’ve worked so hard to accumulate.

As bad as you will have it, everyone who didn’t graduate college still has it much, much worse. All the economic indicators agree with the signs from the desolate wasteland that was once our industrial heartland: they are doomed. Their wages are not stagnating but actively declining

Testing the claim: More education

As bad as the job market is, staying in school looks worse. Economists warn that attending law school is the worst career decision you can make, so much so that newly graduated lawyers have nothing do to but sue law schools for not warning them against attending and established firms offer an Anything But Law School Scholarship to raise awareness of the problem. Doctors are so uniformly unhappy that they are committing suicide in record numbers and nine out of ten would warn young people against going into medicine. Graduate school has always been an iffy bet, but now the ratio of Ph. D applicants to open tenure track positions has hit triple digits, with the vast majority ending up as miserable adjunct professors who juggle multiple part time jobs and end up making as much as a Starbucks barista but without the health insurance.

We were counting the benefits of formal education. We did not do so well in trying to prove that it left you more knowledgeable, but it did seem like it had some practical value in getting you a little bit more money.

What of the costs of education?

Musing for society at large

Well, first about twenty thousand hours of your youth. That’s okay. You weren’t using that golden time of perfect health and halcyon memories when you had more true capacity for creativity and imagination and happiness than you ever will again anyway.

the financial side of it. At $11,000 average per pupil spending per year times thirteen years plus various preschool and college subsidies, the government spends $155,000 on the kindergarten-through-college education of the average American.

How about to each of the individual types?

To the one who says:

I am the 3.3%! I know who Euclid was and I understand the sublime beauty of geometry. I don’t think I would have been exposed to it, or had the grit to keep studying it, if I hadn’t been here surrounded by equally curious peers, under the instruction of enthusiastic professors.

  • to you my advice is: if you’ve sacrificed everything for knowledge, don’t forget that. When you are a paralegal in Brooklyn, and you get home from work, and you are very tired, and you want to curl up in front of the TV and watch reality shows until you are numb, remind yourself that you value knowledge above everything else, that you will seek intellectual beauty though the world perish, and read a book or something. Or take a class at a community college.

my education was worth it….because of the friends, I made here

  • my advice is similar: if you’ve sacrificed everything for friendship, don’t forget that. When you are a paralegal in Brooklyn, or a market analyst in Seattle, or God forbid an intern in Michigan, and you get home from work, and you are very tired, and you want to curl up in front of your computer and check Reddit, remind yourself of the friends you made here and give them a call. See how they’re doing. Write them a Christmas card, especially if it is December. Anything other than declaring friendship your supreme value and drifting out of touch.

my education was worth it…because of the connections I made

  • If you’ve sacrificed everything for ambition, be ambitious as hell. When you are a paralegal in Brooklyn or whatever, claw your way to the top, stay there, and use it to do something important. If you’ve sacrificed everything for ambition, don’t you dare stop at middle manager.

my education was worth it… because it helped me learn civic values, become a better person who is better able to help others.

  • If you’ve sacrificed everything to help others, don’t let it all end with donating a tenner to the OXFAM guy on the street now and then. Join Giving What We Can or go volunteer somewhere. If you’ve sacrificed everything for others, make sure others get something good out of the deal!

my education was worth it because formal education in the school system taught me how to think.

  • Sorry, one second, HAHAHAHAHAHHAHAAAHAHAHAHHHAAHAHA…I’m sorry. Ahem. To you my advice is, again, similar. If you’ve sacrificed everything to learn how to think, learn how to think. When someone says something you disagree with, before you dismiss a straw man it and call that person names and slap yourself five for your brilliant rebuttal, take a second to consider it fairly on its own terms. Go learn about biases and heuristics and how to avoid them. Read enough psychology and cognitive science to figure out why your claim might kind of inspire hysterical laughter from people even a little familiar with the field. Just don’t sacrifice everything to learn how to think and end up only rearranging your prejudices.

And To Those Us Who Feel Fleeced

Finally, some of you will say, wait a second, maybe my education wasn’t worth it. Or, maybe it was the best choice to make from within a bad paradigm, but I’m not content with that.

To you, I can offer a small amount of compensation. You have learned a very valuable lesson that you might not have been able to learn any other way. You have learned that the system is Not Your Friend. I use those last three words very consciously. People usually say “not your friend” as an understatement, a way of saying something is actively hostile. I don’t mean that.

The system is not your friend. The system is not your enemy. The system is a retarded giant throwing wads of $100 bills and books of rules in random directions while shouting “LOOK AT ME! I’M HELPING! I’M HELPING!” Sometimes by luck you catch a wad of cash, and you think the system loves you. Other times by misfortune you get hit in the gut with a rulebook, and you think the system hates you. But either one is giving the system too much credit.

To you I don’t have very much advice…if I knew how to fix the system, it’s a pretty good bet other people would know too and the system would already have been fixed. Maybe you, armed with a degree from the University of [mumble], will be the one to help figure it out.

On the other hand, someone a lot smarter than I am did have some advice for you. Poor Kurt Vonnegut never did get to give a real graduation speech, but one of his books has some advice targeted at another major life transition:

Hello babies. Welcome to Earth. It’s hot in the summer and cold in the winter. It’s round and wet and crowded. On the outside, babies, you’ve got a hundred years here. There’s only one rule that I know of, babies-“God damn it, you’ve got to be kind.”

I don’t know how to fix the system, but I am pretty sure that one of the ingredients is kindness.

I think of kindness not only as the moral virtue of volunteering at a soup kitchen or even of living your life to help as many other people as possible, but also as an epistemic virtue. Epistemic kindness is kind of like humility. Kindness to ideas you disagree with. Kindness to positions you want to dismiss as crazy and dismiss with insults and mockery. Kindness that breaks you out of your own arrogance, makes you realize the truth is more important than your own glorification, especially when there’s a lot at stake.

Unpacking The Beauty Of A deBoer Book Review

Freddie deBoer’s review of Ross Douthat’s The Deep Places, a memoir of Douthat’s illness, is impressively balanced and justified (I say justified because the definition of balance has shifted from what I can tell from “reasonable opposition” to “any opposition” as if every view holds equal merit. No doubt a side effect of “democratization” of distribution. Look, just because there are a few ghouls who deny the Holocaust or rationalize slavery doesn’t mean the school library should grant them shelf space).

deBoer’s praise of the book is as profound as the experience he had reading it. Yet his well-founded criticisms are never watered down. It’s hard to imagine a reviewer who found so many problems with the narrative taking the effort to extol, with equal sincerity, its virtue. The review is a lesson in seeing and communicating. The nuance stands in such relief to the binary discourses that at this point have left us haggard at best but more likely numb. Reading this review left me feeling that integrity was a fringe value, because it was jarring to see a sweaty writer say “good game” and actually mean it.

You can read the full review here.

My highlights are below (boldface is mine).

The nature of the internet

  1. In the internet era, likeminded people will find each other, including those that are suffering from ailments the conventional medical system can’t treat or even define. It’s therefore no surprise that since the whole world went online the number of people claiming to suffer from disputed diseases with shifting symptoms and complex etiologies has risen dramatically. All of those people, I have no doubt, are in some kind of pain, and we are compelled by decency and shared humanity to confront that pain. But it’s also true that the internet creates conspiracists, it heightens distrust of institutions, it magnifies paranoia. On the internet, no matter how fanciful your sneaking suspicions might be, no matter how disordered and unhealthy, someone will emerge from the digital fog and whisper to you that all of it is real. From this stems gangstalking, stems QAnon, stems people who think they’re getting sick from 5G. It’s a problem from hell and one I don’t know how to fix.

  2. When one group of people in society feels unheard for so long, in time they form a crusade, and the object of that crusade is the most human of all demands: feel our pain. It is natural to want the world to understand our suffering as something different, something deeper, something special. The cacophony of our political lives stems in no small part from the ceaselessly multiplying number of groups that ask that their suffering be seen as something transcendent and unique. The trouble, of course, is that we’re all suffering, and in fact to suffer is the least special, most ordinary thing any person can do.

Why Douthat is an interesting narrator to this story:

  1. I have also known a fair number of people who claimed to suffer from chronic Lyme, and they have all been… crunchy. The diagnosis and its inherent antagonism to the medical establishment fit very well into a kind of bourgie hippie boomer counterculture. Chronic Lyme advocates insist that all manner of people believe they suffer from the disease, and I have no reason to doubt them. But it’s also the case that there is a decided cultural slant to their community, and I associate it more with the world of acupuncture and reiki than dissident conservatives.

    And yet Douthat proves himself to be the right guide, I think precisely because he’s likely never paid money to have his chakras aligned. He so clearly does not want the answer to be found in the types of medicine that are so often superficially ridiculous, but has been moved to by unrelenting illness, and the consequence is that he is open-minded but never credulous.* 2. Douthat seems to attract more progressive ire, I suppose precisely because he refuses to occupy the stereotype of the snarling right-winger. (I can tell you from long experience that there are many people whose first demand is not left-wing politics or right-wing politics but political comprehensibility, for everyone to dutifully sort into teams.) On balance I can think of few writers who have paid more of a price for being thoughtful than Douthat. His recent book The Decadent Society is an often compelling, occasionally meandering collection of complaints that I can imagine emerging from no other writer.

Why deBoer’s affection for the book does not relieve him from his critical duty

  1. What we have in The Deep Places, I think, is the most compelling and moving version of a bad argument; it provoked my admiration again and again even while I shook my head in concern on every page.

  2. I also take Ross Douthat seriously, and to take an author seriously is to subject their books to real critical evaluation, which means that I can’t simply enjoy the elements I liked and ignore those I didn’t. A less fair reason for my critical sympathy is that I suspect The Deep Places may well become a new bible for the chronic Lyme movement. And if so, like all bibles this one will find its considerable nuance and restraint drained from it as it becomes a holy object to a group of people who, whatever the truth of their medical conditions, are looking for someone to tell them that the world has been uniquely hard on them.

  3. The author is excused for loading the dice. But the book is not.

  4. Skepticism towards a particularly story about the origins of pain is not the same as skepticism towards the pain itself.

  5. Setting aside its unjustifiable placement in scare quotes, the use of the word hypochondriac is notable here because, though I have not counted, the word cannot have appeared in the text more than a handful of times. I don’t believe the term Munchausen appears at all. But these are real, documented, prevalent conditions that have serious negative consequences for our overtaxed healthcare system. I spent the entire book wondering when Douthat would confront those conditions directly and with research, rather than expressed as his fleeting fears about the legitimacy of his own feelings. But it never arrived, and if there is one part of this book that I would name a serious flaw, it’s that.

  6. The chronic Lyme community, as sympathetic as I find them, makes difficult demands of the rest of us, including surrendering empirical rigor in the field where it is most essential… I have tried to separate my skepticism towards the illness from my impressions of the book, but I haven’t been able to. I am left with a long record of pain, a man who has responded to that pain in profoundly human and sympathetic ways, and a mess, a terrible mess of illness and medicine and science and conspiracism, and at its core a tangle of bodies and the people who no longer recognize them. And a book I do not know how to evaluate.

deBoer’s logic at work

  1. But I am compelled to point out that, again and again, Douthat shares something that would seem to point firmly against his working theory of his suffering and yet seems not to notice. He references Pamela Weintraub’s Cure Unknown, another chronic Lyme memoir, and notes that “her family of four were all infected in the same yard, the same woods, the same neighborhood – and yet she, her husband, and their two sons followed completely variable paths toward recovery.” Douthat mentions this uncritically and takes it as evidence for the mysterious nature of Lyme. I, on the other hand, hear such a thing and think that a disease that supposedly springs from the same infection by the same bacterium carried by the same parasite in the same geography and yet results in totally dissonant outcomes for treatment and recovery is not one disease in any conventional sense. At times I wanted to say to some imaginary listener, “Isn’t an illness that can seem to have any symptoms imaginable at any given time a little hard to believe?”

  2. At one point, Douthat recalls that his wife asked a skeptical doctor if Lyme’s prevalence in the region meant it was an unsafe place to raise children. I am trying to summon all of my charity here: this is a little much. It’s hard to entertain the notion that a disease that is serious but treatable, and a potential variant that is incredibly rare if it exists at all, poses such a serious threat to children that it might make the 70,000 square miles that constitute New England an irresponsible place to raise a family. Such questions emerged from a harried and exhausted family that had been brought to its breaking point, and I have no desire to mock the sentiment, at all. But the question also has appeared now in an important work of nonfiction by a prominent and successful writer, and it is my responsibility to point out that it is this type of excess that has done so much to discredit chronic Lyme advocates. I recognize that this aside is meant, in part, to demonstrate the degree to which fear of Lyme had crept into their lives. But Douthat clearly saw it as a sensible question, describing the doctor’s response, “he looked at her as if the question had never even occurred to him.” Well, yes, I imagine he would. Skin cancer kills 15,000 people a year. The incidence of skin cancer is significantly higher in regions with a higher UV index. Yet no one has declared the Southwest an irresponsible place in which to raise children. The doctor was surprised by the question because it was not a sensible one.

  3. Well, Occam’s razor can be a cold thing, and it is far from an infallible guide. But I must invoke it here: can it possibly be the most direct, most parsimonious explanation that a disease runs rampant among some of the most affluent and well-connected people in the country, and yet for reasons that remain inscrutable to me, the medical establishment has conspired to belittle and ignore them? Medical researchers live to discover new diseases and doctors flourish professionally when they treat them. So why the conspiracy? For what purpose? Who profits? Both because of the incentives of malpractice law and the fact that more treatment means more money, our doctors tend to over treat, over diagnose. But the chronic Lyme narrative requires us to believe that doctors refuse to take it seriously, despite such suffering… for what?

deBoer’s undiluted praise

  1. But boy, it’s beautifully rendered. Thus my dilemma, as a reviewer. Despite how harsh the above might sound, I experienced this book as a brave and brilliantly-realized cry of pain and loss, and that’s worth the purchase price itself.

    It’s autumn, as I write this. Like any good stereotypical white dude from New England, fall is my favorite season. Pretentiously I tell myself that it’s because fall is the beginning of an ancient ritual of death and rebirth, because it helps me access the most visceral elements of human life, because it helps me imagine that everything I loved that has died will sometime return, flowering and green. More accurately I love fall because the weather is pleasant and the leaves are pretty and football is the only sport I really follow anymore. But either way, fall is my time of ritual. In fall I read old books by dead writers who were unafraid to sift through the silt of mundane experience to find those things that survive the cruel and steady passage of time. I drink dark beer and let pot roast braise for hours on the stove. I curl up into myself.

    The Deep Places is a book for fall; I wandered today through Prospect Park and saw stubborn leaves at last beginning to change, and I thought about old gods and Christ’s love and chronic Lyme and those families that suffer from it, whatever “it” really is. The book’s manner is as spartan and tangled as the denuded trees that grace its cover. Douthat walks a narrow line, depicting a story that must by its nature invite sympathy without appearing to seek it, and he achieves this beautifully. He writes about pain, famously hard to put into words, with clarity and poise. The book is one of those rare few that tread in mourning without the constant reassurance of a happy ending soon to come. And its palette is somber and rich.

    I am one of those untrustworthy types who looks for craft first in anything I read, and I respect degree of difficulty. Writing about suffering is not easy, putting yourself out there so nakedly to a public that seems crueler by the day is not easy, and wandering through such a tangled story of the heart is not easy. For that reason alone, I commend The Deep Places.*

  1. Writing on suffering:

    But the moral imagination does not have limits. Our capacity for compassion cannot be overtaxed. What’s immensely clear in The Deep Places, and rendered beautifully, is that Ross Douthat has suffered, terribly, and his suffering has seeped out into his family and his home and his work. As so many have, he has been forced to deal with frequently uncaring doctors and a Byzantine and cruel medical system when he was least equipped to deal with them. He has seen people close to him express doubts about his sanity, he has questioned whether he will be well enough to continue his career, he has worried ceaselessly about leaving his family fatherless or, worse, of being a permanent burden on them. All of that deserves not just sympathy but understanding, adult and rigorous and friendly and honest understanding. For that reason, above all else, I’m glad that The Deep Places exists and I’m glad to have read it.

    The late Ram Dass once wrote to grieving parents, “something in you dies when you bear the unbearable, and it is only in that dark night of the soul that you are prepared to see as God sees, and to love as God loves.” I do not know what it’s like to love as God loves. But I do know what it’s like to suffer, and then to suffer more, and at last to feel something die inside me. The note of uplift at the end of The Deep Places, uncertain but real, is a record of Douthat’s willingness to let that something die inside of him too, in order to move on. That’s a thing of beauty, and though it’s difficult that Douthat cannot declare himself healthy at the end, it’s the kind of difficulty that should be faced by any adult. In that, his book triumphs.

Dan McMurtrie with Howard Lindzon


About Dan: Dan McMurtrie is a 28-year-old founder, portfolio manager, and Twitter phenom more commonly known to his nearly 60,000 followers as @SuperMugatu. He’s an insanely funny, original and inspiring person who knows a lot about social media, maintaining an audience and the behavioral side of investing. Dan’s New York-based hedge fund, Tyro Partners LLC, focuses on trends and supply chains driving technology, healthcare, industrial, and consumer markets.

An insight common to making money and making people laugh

Something everybody knows it to be true but no one’s speaking up about it being true

On people struggling to make sense of the world

It’s a paradigm shift to a networked world…going from one-to-many media to many-to-many media, and having cycle times for communications go down to sub-second, meaning the number of cycles, the number of communications is going to infinity really fast. That’s leading to all these weird neurological effects because your brain is not used to having hundreds or thousands of opinions scattered at it. Your brain is used to thinking that an opinion from somebody means something, which is super wrong. And so I think this knee-jerk reaction to dismiss things that well-trained investors in the past three years have developed is actually the biggest weakness you can have, because everything now is like this kind of meta game of “it looks absurd but it’s actually not. Actually you shouting that it’s absurd, is what’s going to give it the audience that makes it real!”

The output of our quickly networked world is disrupting seasoned investors’ heuristics

It’s scaring the shit out of people. They’re looking at this and they’ve been around the block a few times, and their experience is betraying them because they’re seeing things that are so behaviourally horrifying to them that they don’t realize that they’re then becoming just instinctive and knee jerk, And they’re not running basic numbers [and asking themselves] “Is this a material amount of money?”.

[consider the lazy argument against Dogecoin that it has unlimited supply]

Is it actually unlimited supply? I’m like, “Yes, but is it unlimited supply forever. No. There’s a more nuanced point  that it’s not unlimited supply at any individual point in time, there’s a rate limiter on time with those points, which is why this pump thing is working. 

An example of how brains get hacked in this networked world, orchestrated by the guy that oversaw such hacking at Facebook

There’s a technique that I think Chamath does that I call “the 90% rule”. What you do is you say something that’s technically accurate, but like maybe 10% off of how a professional would say it, or maybe it’s 10% not correct, but it’s in the spirit of correct. For example, Chamath said something on Twitter — that he was up 120 basis points this year, and the market’s up 30 basis points, so he said he’s outperforming by like 300% or 400% or something. [Everyone jumped on Chamath for this], but do you actually think that Chamath doesn’t understand basic math. Do you think the guy who led monetization of mobile advertising for Facebook doesn’t understand the way things are reported. The guy who’s leading several SPACs, who’s talking to bankers every day, who has a sophisticated family office. You could dislike the guy for a million things, but basic numeracy is not one of them. And yet the knee jerk reaction [by people on Twitter] is that he’s wrong. I think the reality is, and here’s the brutal thing about Twitter, most people on Twitter are strivers. The people that are working really hard, they’re trying to make it, and candidly for most people it’s not working out. Especially the finance guys. The guys who went to finance, they’re not getting the money. It’s not working out. They’ve got the CFA, they’ve got the MBA, they worked at Goldman, they went to Wharton and they’re still not making a fraction what they thought they were. They’re not moving up. It’s not working out because of top-down industry dynamics which you’ve talked about ad nauseum, but that makes them really bitter. They’re really bitter because they feel like they’re getting screwed. And so when they see this guy, who’s making billions of dollars, making a beginner mistake, that would have gotten them fired, the amount of unrighteousness or injustice feels so massive. It overrides all logic and reasoning.

Nobody is immune from the brain-hacking that the networked world is doing, but the first step to understanding it is being aware of it.

My big thesis right now is technology is being used to program people, not the other way around. In the frickin documentary on Netflix [referring to “Social Dilemma”] is half of the stuff and [Chamath] is doing it. It’s crazy how effective this stuff is. A great example of this was when I tweeted a stupid joke that “no one actually knows what’s in chalk, they just teach you to accept the premise when you’re so young, and they just go with it.” And you have people, like real people with PhDs responding like I’m a fucking idiot. Everybody knows what chalk is. Don’t you see this as tweeted from my iPhone?! I tweeted this from a supercomputer in my pocket. Even if I didn’t know what chalk is, I could obviously put faith in it. [This is obvious if you think about this] for more than a split second but you have people who have multiple PhDs from places like MIT, who are completely hacked. Their brains are being hacked. And they look like fools, and they think they think that they’re smart because they’re speaking. Not to validate what they’re saying. They’re speaking to validate themselves, and that’s the weakness that all people have. This is the dark arts that you have to study now.

Change is occurring at an accelerating rate

There’s a concept called the Overton window, which, not to be like a dropper of concepts but Overton Window refers to what like types of political policies are acceptable to talk about in public. [A few years ago universal basic income was considered a quack idea], last year Donald Trump initiates universal basic income. Admittedly because of a virus so I’m not saying it was a wrong move, but you need to understand how insane that shift is society that that went from unthinkable to expecting it, and actually the people almost revolted. I mean I was in Richmond, Virginia when the protests were happening there. We were watching the breakdown of society happened, because there was some uncertainty around it that changed in a year.

You can’t put your head in the sand about the role of social media. The genie is out of the bottle. Dan sees evidence that some managers do not understand that reality.

The thing about Twitter within hedge funds or institutional endowments that nobody really wants to admit is, even if the CIO isn’t on Twitter, (and if he isn’t, it’s only because he’s too old) all of their analysts are! So, like there’s this huge issue right now of mass group gaslighting of mimetics and ideas spreading like viruses and if you’re a CIO right now, you probably don’t actually know what your firm’s sourcing mechanism is (unless you’re pushing all your ideas down). The number of times I meet with the senior guy who runs a fund, and he starts rattling off ideas I’m like “Yo, you know your analysts ripped all of that from Twitter right. And they’re like ‘What are you talking about?’ and I’m like, Look, there are these cliques of people on Twitter, I’m not even I’m not saying they’re bad ideas, but they aren’t original ideas. I’m just telling you. I’m not going to doxx your boy, I’m not going to get anybody in trouble, but I’m just telling you that you don’t know how your own investment process works. You don’t realize you’ve already been fully infiltrated by social media.”

Instead of fighting this new reality, adapt to it.

[You’ve been infilitrated by social media] but you actually kind of want that because if you are the only guy who’s not participating in these things [you are missing important context]. For example in January, and the end of December [during the stock squeezes]. I’m not particularly smart, especially relative to other hedge fund guys, but I was seeing where the liquidity was in the market and I was seeing the type of stuff happening on StockTwits and Reddit and all these other places I mean there was just gonna be just some crazy stuff happening. I went to my clients and said “Look, I’m not gonna play this game. I’m gonna take exposure way down. Yes, I believe I should be short half these companies, but I’m short the stock not the company. I’m not messing with this.” I had several people say I lack conviction, long-term investing blah, blah. Then the next three months it was just a hedge fund after hedge fund blow up. This is not going away, it’s not going back because it’s not 2000. This is not instant messaging. Last year was the first year that most waking hours for humans were online, and everybody was on one to five websites. Nobody really understands how significant that is. Everybody’s now networked, all the time 24/7.

The bar for what is considered table stakes is rising. Psychology and the repercussions of being highly networked should receive more of your attention to gain an edge.

People don’t realize how fast these big changes happen and so when I just look at some people who think we’re gonna, we’re gonna be good investors because we do more conservative discounted cash flow analysis than the other guys I’m like, “You’re like a dude with a horse and a saber walking into WWII. You’re about to have a really bad time. Like I can’t even explain to you the ways in which you’re going to get beaten down, and you’re not psychologically prepared to deal with any of this stuff because it’s gonna seem random. It’s just gonna be chaos. There’s gonna be bombs dropping and machine guns and you’re not gonna know what either of those things are. It’s just a really weird time to be an investor and I think you have to move the psychology stuff up in how you’re relating to the world into a really forefront position. Or these systems are just going to eat you.

How Dan’s fund is adapting

We’ve continued to zoom in on this behavioral stuff. Everything else is table stakes. Of course, you need to know how to value something, you need financial analysis, you need to be able to read transcripts, and do value research. But that became commoditized sometime between 1995 and 2010. Look at the number of people who have CFAs or how many people went through banking here or internationally. Companies like You can go online, hire somebody anywhere in the world in like 10 minutes with a contract and a 1099.

Right now, I think the markets become a pure metagame of the game. Where does it go from there? The thing is humans are still very human, and actually, the rise of passive means the humans are a smaller percentage of the market. When they move at once they have a bigger price impact, because it’s just everybody running out the fire door of a theater. It’s as old as the hills. It’s all the same stuff again but remixed and much faster. It’s still music but it’s going from jazz to dubstep, way more aggressive, way faster, with all these different games being played. So we spent a lot of time trying to understand the fundamentals and what’s going on in these businesses and what’s going on in the supply chain, but also what is the psychological game going on in the market.

You must find a lineup where you’ve got great fundamentals, good business improvement, a really long-term runway, and you have some really distracting psychological thing that’s distorting the price. Or more importantly, maybe in this era, mandate arbitrage. As more and more capital is just driven by somebody’s investment policy statement, or an endowment investment policy statement or the S&P index rebalances. Those legal mandates are really powerful and just getting bigger. So we want to see a clustering of understanding why the opportunity exists. Because of legal mandate, because of agency costs and behavioral things like [where investors] can’t go to LPs and own it because they are going to get upset. If we see that plus it’s a good business [that becomes a potential opportunity].

This bit reminds me of the style of trading I’m more accustomed to where we don’t predict so much as try to “see the present clearly”. I’m more accustomed to measuring what is happening now than predicting tomorrow. (An example from my world would be owning optically expensive volatility because it’s carrying well)

We don’t try to predict. We try to observe. We might have a starter position on but when we see thesis confirmation, we’re going to add. What we do not really like to do, is make a big bet because we think x is going to happen. I don’t think it’s necessary because I don’t think the market adjusts to new information as well.

Dan loves Warren Buffet but scoffs at his cargo-cult imitators

I’m a huge Warren Buffett fanboy. My favorite people in investing are Warren and Charlie and then my least favorite people in investing, generally speaking, are people who tell you that they’re fans of Warren and Berkshire.

A great filter is to ask them “what’s your favorite Berkshire business?” If they say See’s Candy, you know that they know nothing. Nothing about Warren Buffett or Berkshire Hathaway. The reason is Warren Buffett is probably one of the greatest marketers to ever live. He’s built this brand. He’s built this brand that’s hyper-consistent. That allows him to not answer any critical questions, because he doesn’t actually have to defend objectively right or wrong. He just has to defend consistency with his brand.

There are several value investors that really market themselves as like Warren Buffett or Charlie Munger brands. Baby Buffetts. They all have kind of good records of not losing huge amounts of money but none of their records would stand on their own in a vacuum. They live off this same narrative. Recently I’ve had some interesting interactions with a couple these people. You ask them “How do you think about your business?” They’re very candid. “Look, I am looking for somebody, where that’s what they want. They want to feel that they’re investing in a long-term, conservative thing. They’re not going to lose their money. They will compound well and they get to feel like they’re part of the church of Buffett.”

At the end of the day, what are they selling is a psychological safety blanket. They’re not selling an investment product at all…they will only take inbound clients because they don’t want to go out and convert anybody. Look at how these [investors] behave. If you’ve ever studied cults, you see the exact same behavior. I don’t necessarily think it’s malevolent or bad, but I think that in the modern era, with everything that Warren Buffett did now being sped up 100,000 times, and on Twitter everyday with people doing these explainer threads and Substacks. These are all the same psychological manipulation techniques. It doesn’t mean they’re malevolent. If you really understand how Warren built his public persona, why he built it the way he did, and how he changed his business at every scale level of capital [out of necessity] you’d understand that the idea that Warren Buffett The Empire Builder, bears any resemblance to Warren Buffett The Ruler is naivete.

Why 2020 made Dan optimistic

Looking forward, I think the takeaway from last year, has to be a profound optimism for humanity. We just took a global pandemic on the jaw. As pissed off as everybody is we’re calling it the Five Aces Problem. It’s like you being dealt a poker hand with four aces and people are like “It would be good if we had a fifth ace”. There’s no fifth ace in the deck! You can tap something on your phone and have a pizza in 20 minutes! You can have a date in 5 minutes. You can have anything you want delivered to your house within 2 days. Like woe is you that you couldn’t get the specific dumbbells you wanted that week. During quarantine, we were living a better life than people in the 1960s were able to live. People in the 25th income percentile now live better than Rockefeller did. We’re going up a curve that is getting exponential so people are not understanding how insanely awesome the performance last year was of humanity. And sure we have some supply chain chokeholds leftover from last year. Yes, there are obvious knock-on effects. We’ve got some issues around the government explicitly putting all risk onto the dollar and making some big bets on modern monetary policy. Those are generally concerning things, but they are super obvious. I just don’t see how you can’t be optimistic about our ability to solve these problems.

I think one of the things people struggle with, I just wrote about this, is as the world gets better, as you go from being a caveman to being an office worker, your job is moving further and further away from the kind of base Maslow needs. You’re not hunting a saber-toothed tiger, you’re typing in data entry or doing social media posts. That’s why every generation looks at the next generation and thinks they’re soft as hell. You know “they had to walk both ways to school uphill in the snow.”

It always happens like that. That’s what progress is.

Darrin Johnson On Flirting With Models

Independently Shorting Volatility with Darrin Johnson (Podcast)
Corey Hoffstein’s Flirting With Models

Darrin Johnson is an options trader and the first independent trader Corey’s had on the pod. Considering Corey’s show focuses on institutional and cutting edge investment professionals, it says a lot that he had Darrin on the show. I’m not surprised, I’ve been following Darrin on Twitter for years and impressed by his understanding of options trading. I have always believed that option trading is an apprentice activity. I cannot imagine how difficult it would be to learn the game with the guidance of masters. Darrin has managed to cobble together that guidance from a variety of sources including Euan Sinclair’s books, Twitter, hiring grad students to walk him through the academic math, running countless simulations, and detailed reconstructions of financial products.

Here are some of my favorite aspects and insights from the interview (with my commentary):

  • Darrin’s entrepreneurial path before he even found his way to trading is worthy of an interview of its own.
  • The importance of building sims instead of backtesting as a way to get more samples. For those of us who trade for firms, we benefit from the collective osmosis of many traders discussing trades and situations in detail. All those morning huddles and afternoon meetings help us build a mental library of counterfactuals. Darrin did the next best thing…build simulations, knowing that a backtest is a single version of what could happen. This is crucial to get a fingertip feel for how positions behave.
  • The idea of pricing out financial products to the penny. Darrin called it “back-office” kinda stuff that retail traders don’t do. Corey said he does this too. This is exactly what you do at a mm/arb shop. As a clerk I remember building giant spreadsheets to price fair value for ETFs. This is not optional work. You will use those skills to attack new products and understand the frictions to arbitrage.
  • At around the 40:00 minute mark Darrin explains why he concentrates his selling on at-the-money or meaty options not the wings. He makes the correct insight: when you sell tails, you need to capture the entire premium. The hit ratio of selling tails is high but when you lose you lose many multiples of the premium. If you fail to collect the full premium, it will not make up for the losing trades. The difficulty of selling tails is even trickier yet. Darrin explains how betting against longshots leaves you uncertain if you have an edge in the first place. In my words: good luck differentiating between a 50-1 shot vs a 100-1 shot. That’s the difference of 1 probability point but it’s massive in payoff space. I discuss further in Tails Explained.
  • Here’s a more subtle insight from the interview. Darrin tries to find the structure that has the best payoff to his vol forecasts or thesis. Notice the subtext. If there’s a “best” there must be a “worst”. This is the basis of relative value trading — buy the best payoff and sell the worst payoff contingent on the vol forecast coming true. For example, if you thought skew was cheap in the oil complex compared to macro backdrop, you could buy the cheapest puts across the oil and products suite. You could buy some ratio of oil puts and selling RBOB or HO puts depending on how how you think the macro stress plays out. Now you might want to be outright long the vol forecast coming true so you might not want to turn this into a basis trade (the advantage of a basis style trade is you can likely do it bigger). Or you could choose to buy oil puts and say sell puts on an equity index where the stress has been priced in. Because you’d be taking an even larger basis risk than staying within the oil complex, you would size the trade smaller than the oil basis trade, but perhaps larger than an outright long oil vol position. The point is there is a lot of creativity on trade expression that balances edge and basis risk.

Since the interview was so good, it got passed around quite a bit on Twitter. In one of the ensuing discussions, I offered my down-to-the-studs view of what options trading really is:

There’s nothing magical about options trading. Paraphrasing Darrin, the intellectuals who are drawn to it prolly need a more blue collar view. Step back and think about what the market needs. What risks doesn’t it want to hold? Obsess over the who and why, not moments [of a distribution]… For years the “job to be done” in vol was be willing to pay theta The marketplace was bidding for that role and vol folks that filled it did well. The market “bids” for different roles all the time in vol-land and the job of a vol trader is to fill it. Simple not easy.

@TheSpeculator0, who trades for a firm, astutely observes: It’s not easy to catch the regime change that switches up the roles.

My response:

That’s why risk management is key. The nature of market-making, even if you don’t explicitly have that title, is you lose on the regime change. So you adjust and hope the next regime lasts long enough to pay you for the [money-losing] transitions.

If you want a fuller discussion for the raison d’etre of vol trading, you probably won’t do better than Corey’s podcast with QVR’s Benn Eifert who describes the job as “bringing balance to the force”. I took full notes for you…Flirting With Models: Benn Eifert (Link)

Bubbles: Knowing You’re In One Is Not Even Half The Battle

Select excerpts from Aaron Brown and Richard Dewey’s paper:

Toil and Trouble, Don’t Get Burned Shorting Bubbles (SSRN)

It was not a mystery that there was a bubble in subprime from 2005-2008. That did not mean shorting it was an easy trade. With the benefit of hindsight, we can learn about the risks of shorting frothy assets that may even be a bubble.

From the abstract:

Bubbles are among the most puzzling and controversial phenomena of financial markets. Although rare, their cumulative impact on both investor returns and the broader economy can be great. One particular question that has motivated research is why shrewd short sellers don’t prevent excessive price increases. The “limits to arbitrage” idea argues that correcting inefficient market prices is neither easy, cheap nor riskless. The “rational bubble” literature identifies situations in which being long the bubble is a better trade than being short, even if investors know for certain the bubble will pop.

We examine the “short subprime” trade from 2005 to 2008 to evaluate these and other explanations. We argue that the short subprime trades had more risk than is commonly appreciated. We discuss how the opaque and illiquid nature of subprime mortgages deterred some investors from purchasing CDS contracts and note that other investors assessed the risk of counterparty failure, government intervention and unknown time horizon to be sufficient enough not to purchase CDS contracts.

Talking to investors who saw the bubble and passed on shorting it, instead opting for alternative strategies:

We interviewed and analyzed the internal research of several investors who evaluated the short subprime mortgage trade and decided not to purchase CDS contracts and present some of their reasoning below.
    • The Basis Trade: Magnetar Capital in Chicago.

      Magnetar did not cooperate with the media, so their story has not been widely told. Magnetar reportedly employed a strategy whereby they purchased the riskiest equity tranche in many CDOs which often offered double-digit returns. They used this positive carry to pay for protection on the AAA tranches that most investors assumed were safe. Magnetar appreciated that the correlation between the safest AAA tranche and the lowest quality equity tranche would be close to one in a crisis due to the way these securities were constructed.

    • Picking-up-the pieces trade: Soros and Tepper


      Perhaps the safest way to profit from the subprime mortgage meltdown was the time-honored method of picking up the pieces at the bottom. George Soros and his Chief Investment Officer Keith Anderson smelled opportunity and hired two ex-Salomon Brothersmortgage experts, Mason Haupt and Howie Rubin.


      David Tepper purchased shares of Citi and Bank of America near the bottom, helping his Appaloosa fund return 120% in 2009 on $12 billion in capital.

    • Convex-listed hedges correlated with a downturn: Talpins and Dalio

      Ray Dalio at Bridgewater and Jeff Talpins at Element Capital are rumored to have purchased futures or options on government bonds that would rise in value if the Fed aggressively cut interest rates. Many on Wall Street believe that Element purchased Eurodollar options in 2007 that helped his firm generate returns of 26.4% in 2007 and 34.9% in 20083. Talpins has posted annualized returns north of 20%, without a single losing year in the decade that followed. And simply being long volatility in equity markets, fixed income or currency markets paid off nicely for many traders. The key to these trades is that they removed some of the unattractive aspects of the subprime trade, by using more liquid instruments, waiting for the crisis to materialize or constructing more nuanced expressions.

The collection of people that did these trades: George Soros, David Tepper and the team at PIMCO are investors with long-term track records. They made their money quietly, in sensible trades over several years, and were also able to put large amounts of capital to work.

The sobering difficulty of the short subprime trade:

Betting against subprime mortgages worked, but it was somewhat of a Goldilocks trade: it required default rates to get high enough to generate profits on your insurance, but low enough that the banking system survived to pay you and that the government didn’t help out borrowers at your expense.

Current backdrop:

As we write this analysis in the first quarter of 2021, financial market pundits are calling bubbles in everything from cryptocurrencies and TSLA to SPACs, high-end real estate and, most recently, stocks hyped on Reddit.

My takeaways:

    • Shorting subprime looked like a hero trade but the path was painful and uncertain. You needed to weather the negative carry and margin calls on bilateral trades with banks for years. And you needed to bet against on institutions that were not bailed out.
    • Taking a bubble on straight ahead looks like foolish risk reward, especially if the bubble is “rational”1 and has no clear correcting catalyst.
    • Need to think about the risks and incentives of the system. For example, if you believe bonds are currently overpriced and shorting them, even with their low-yield and therefore relatively small negative carry, you cannot ignore the possibility that the rules can be tampered with in the name of the system. Just as banks were bailed out, it’s not impossible to imagine a yield curve control policy (YCC) similar to post-WWII would cap any upside on a short Treasury trade.
    • The paper describes what you are up against eloquently:

      The reality is that structuring good trades is often every bit as difficult as forecasting. This is particularly true if a trade is contingent on a crisis materializing, when pricing is less reliable, liquidity dries up and contractual obligations are sometimes not honored. In these instances, trade construction is everything. Even if an asset price bubble can be confidently identified ex-ante (no easy task), making money from the bubble is perhaps equally challenging….

      This separates opinion havers from risk-takers. Getting the right odds on the right contingent payoff in the state of the world that matched that payoff. And then actually being able to collect. Having an opinion on markets is like have a business idea but no ability to execute.

Graham Duncan’s “What’s Going On Here, With This Human?”

Excerpts from Graham Duncan’s “What’s Going On Here, With This Human?” (Link)

Interviewing is really a narrow application of a broader art. Duncan begins:

The philosopher Kwame Appiah writes that “in life, the challenge is not so much to figure out how best to play the game; the challenge is to figure out what game you’re playing.”

When I try to figure out what game I’m playing, I see that for the last 25 years I have been playing a game of strategy applied to people, a game where over and over I try to answer the question “what’s going on here, with this human?”  In this essay, I make recommendations about candidate selection based on thousands of assessments I have made and my somewhat obsessive interest in the topic.

My goal in this essay is to help others make better decisions on a potential hire, business partner, or even life partner as quickly and as accurately as possible.  It’s made up of suggested action steps and some of the ruminations that underlie them. At the end I include my own assessment of different personality assessments and some of my go-to interview and reference questions.

These notes are select excerpts from the essay that I want to keep as a reference. My favorite line from the entire essay:

One of the greatest gifts we have for each other, for our children and spouses, for our teammates, is the positive feedback loop we can put someone into purely by believing in them, by seeing their genius and their dysfunction clearly and then helping them construct conditions for the former to flourish.

That emphasis is mine. I consider this to be one of the cheapest forms of human capital and this essay is ultimately about allocating that capital.

From the introduction

My summary: When we interview someone for a job we are looking for signs that they will do the job well. But when our goal is to “see someone clearly”, our focus shifts to finding the best role for them.


It can be useful, when interviewing someone, to take Rumelt’s cue and ask explicitly: what’s going on here with this person in front of me?  The more I’ve done it, the more I realize that what most people think of as the hard parts of hiring—asking just the right question that catches the candidate off guard, defining the role correctly, assessing the person’s skills—are less important than a more basic task: how do you see someone, including yourself, clearly?

Seeing people clearly—or at least more clearly—matters not just when finding the “best” hire, but in identifying the best role for them. Even looking at those of us who are lucky enough to have a high degree of choice about what we do with our work, I’ll bet that as few as 20% of us are in the seat that best optimizes our talents and skills at any given time—the seat that makes us feel at home in the world. That’s not good for the 80%, and it’s not good for their teams either.

The poet David Whyte describes the unfolding of life and career as a “conversation with reality”:

Whatever a human being desires for themselves will not come about exactly as they first imagined it or first laid it out in their minds…what always happens is the meeting between what you desire from your world and what the world desires of you. It’s this frontier where you overhear yourself and you overhear the world.And that frontier is the only place where things are real…in which you just try to keep an integrity and groundedness while keeping your eyes and your voice dedicated toward the horizon that you’re going to, or the horizon in another person you’re meeting.

Whyte captures how hiring can be an art form. When you see people clearly, you see the transcript of their conversation with reality up until that moment of your meeting, and you glimpse the horizon that stretches out ahead of them. And then sometimes you can help them overhear themselves and overhear what the world wants from them, whether or not that includes working in the role that you had initially imagined for them.

Part I: Seeing your Reflection in the Window

My summary: The role of being an interviewer can affect your judgment in ways in which you are not aware.


If I picture my thirty-year-old self doing an interview, I see him as the friend looking through the window: not seeing the way his mind was constantly making snap judgments about the candidate, creating stories with the slightest bit of material, “I like this,” “I don’t like that.” He would project his reality onto the reality of the other person, missing that, for instance, often even very senior people are not their usual selves in a formal interview setting, that there’s a power dynamic that he should not take lightly. He would not yet be aware that while his sensitivity to being hustled is a gift, it also creates a blind spot that causes him to mistakenly pass on a particularly good sales person or someone who is earlier in their career and still relies on jargon or cliché.

Part II: Seeing the Elephants in the Room

My summary: There are meta-techniques for overcoming your own blindspots


So let’s reframe the interview process: there are two elephants in the room, yours and that of the person you’re trying to see. The bad news is that you’re mostly blind to both elephants. The good news is that there are a lot of other riders who’ve traveled alongside the other rider and elephant. If you take your perspective on the rider and your glimpses of his or her elephant, and add everyone else’s experience of the rider and their elephant, and then control a bit for your own elephant and the references’ own elephants, you can get a good sense of how the candidate’s rider-elephant combination behaves.

Diving into techniques:

  • During interviews, I try to create a stillness that helps separate signal from noise, elephants from riders.

    During interviews, I try to create a stillness that helps separate signal from noise, elephants from riders. The easiest way to create conditions of stillness is to talk very little. It also helps to have the candidate you’re trying to see clearly ask you questions. Questions have very high signal value compared to most anything else you can get from a candidate. This is harder to do in practice than you might think—you need to make the candidate feel safe enough to ask their true questions, and you need to answer concisely or you’ll run out of time (which is particularly hard if the person asks good questions). I write down each question and sometimes respond with “I’ll answer, but first I’m curious, why did you ask that?” I’m looking for the felt sense of a “hungry mind” based on the way their questions flow. That’s very hard to fake.

    I like asking up-front, “So what criteria would you use if you were the one hiring someone for this role?” I love this question because of how unexpected the answers are. Some are tactical when you expect abstraction. Some improve your own criteria. Some use jargon that may indicate they are playing someone else’s game versus authoring their own. All are quite revealing.

  • I now consider in-person references with someone who knows the candidate well 5x more valuable than an interview. They can be 10x more valuable when you are already in a high-trust relationship with the reference-giver, and the reference-giver is in a position to see the candidate clearly, with no agendas and few blind spots of their own.

    • Given the importance of references, the highest purpose of your own interview with a candidate might be to improve your ability to conduct reference interviews, where you hold your own view as just one in a collection of views. This requires an ability to hold multiple perspectives at once. This is difficult to do because your own impressions from the interview are so vivid and multi-sensory, and everyone else’s views are mainly conveyed through language. In my experience, holding your own perspective alongside those of references should feel slightly uncomfortable and disorienting, or you’re doing it wrong. You should find the candidate confusing at times. If you first see their dysfunction, you should know you have yet to find their genius, and vice versa.
    • I try to conduct references with an eye to quirky forms of excellence. When I’m on the receiving end of reference calls, I notice that the caller is often subtly framing the exercise with a mildly suspicious “gotcha” vibe (“so why did George leave after only two years?”). I don’t find that particularly effective; it tends to make me shut down as a reference giver. Instead, when I’m calling someone, I try to imagine myself as head of people operations for the entire hedge fund or private equity ecosystem, that I’m agnostic as to where they should sit and just trying to help them get to the best spot.  That mindset seems to allow me to size up people more generously and accurately, and to accommodate more quirkiness…I also try to stick to the default assumption that “everyone is an A player at something.” It’s a more effective and more dynamic way to approach an interview—a live, fascinating puzzle to discover what the elephant and the rider do well—rather than going in with the purpose of determining whether someone is an A player in a binary, Manichean way. I prefer to imagine that I’m trying to find the candidate the best possible job for them; it may be the job I had in mind, or something else altogether.
    • As your sample size of references goes up, you can begin to calibrate on the credibility of the reference giver (what’s their sample size? What are their biases?) as well as to tune into what a “table-pounding” reference sounds like. Fourteen years later I still remember a reference I did for our CFO hire: the woman who had worked with him had a tone of “why are you wasting your time talking to me and not spending your time trying to convince him to join you?”

    • The hardest part is understanding the dog that doesn’t bark. If you don’t hear that table-pounding from someone who knows the reference well, is it contextual in some way (the person is tired, you caught them right after a tough conversation, they are jealous, etc.) or is there signal there? It’s one element of the process that requires the 10,000 hours of practice to get calibrated.


Part III: Seeing the Water

My summary: After making best efforts to illuminate your own blindspots, you also need to consider the context from which the candidate you are evaluating emerges.


I now believe that there is no such thing as an A player in the abstract, across all time, in whatever ecosystem they end up in.

Considering the candidates’ context:

  • When you’re taking someone from one ecosystem to another, changing their context, you have to try to see the water in both.

    • It’s disruptive and risky to take someone out of the setting in which they’re thriving, since there are a lot of subtle things going on in the original that may not be immediately obvious. How much of their success depends on the water in the first ecosystem?  Was there someone there who believed in them that set a positive feedback loop in motion that may not persist across systems? Try to understand as much as possible about “what’s going on here” in the candidate’s prior ecosystem. For instance in the investment management context, often a portfolio manager will run a large idea by their boss and subtle reactions (a raised eyebrow, a long pause) will cause them to actually size the position smaller.  That constant tension is constructive, and if you take the portfolio manager out of that container they will not perform in the same way in the absence of the tension. This particularly applies to people who leave to start their own companies—in part because they may have a hard time recreating the culture and context that allowed them to thrive when they worked in a structure designed by someone else.

    • It’s even possible that strengths in one context become weaknesses in another. Take someone who is super motivated and who loves to win, but because of this competitiveness doesn’t give as much as they get from peers. In one ecosystem they develop a reputation as a talented “taker” that people are wary of, while in another they are celebrated without reservation.

    • It’s even possible that strengths in one context become weaknesses in another. Take someone who is super motivated and who loves to win, but because of this competitiveness doesn’t give as much as they get from peers. In one ecosystem they develop a reputation as a talented “taker” that people are wary of, while in another they are celebrated without reservation.

Discussion of Personality Tests

The Big 5 or OCEAN personality test

My summary: I have noticed this is a favorite of the tech world. Marc Andreesen addresses the focus on ‘concientiousness’ in his interview on education (my notes here). Founder Slava Akhmechet says the Big 5 personality traits “are kind of like Myers Briggs, except real.”


There are thousands of studies using the Big Five. Within psychology, it’s the equivalent of gravity, and at this point, nearly everyone in academia finds it a useful mental model for personality. Sam Barondes’ book Making Sense of People is a great introduction to the Big Five. I tracked down Sam and asked him about the book’s raison d’être. He told me that he wrote it because he knew the Big Five was solid as science but had noticed that, in his own hiring in the medical department at UCSF as well as among the fancy tech CEOs he counseled, no one was actually using it in practice.


My summary: A high-signal form of interviewing described in Geoff Smart’s book Who and his father Brad Smart’s book Topgrading. 


“Resourcefulness” is the meta competency:  

Resourcefulness is the single most important competency, so here’s my advice: look for evidence of Resourcefulness 100% of the time as you evaluate candidates. Imagine that you have special magical glasses that register through the lens whether the candidate is, at this moment, revealing Resourcefulness and maybe then it flashes green, or lack of Resourcefulness and maybe then it flashes red. I’m making the point that Resourcefulness is not a competency you first think of after the interview while you’re reviewing your notes. You must constantly ask yourself, “Does that example, what I’m seeing, what I’m feeling, what I’m hearing, show Resourcefulness, or lack of it?” 

I sometimes imagine I’ve dropped the candidate I’m interviewing on a desert island and I come back five years later. Some people I’d worry about, some people I wouldn’t. The Y Combinator application question “what’s a system or game you’ve hacked in the last year?” is a good arrow in the quiver when exploring the resourcefulness dimension.

Guide to References

  • Preparing for reference calls

    Before calling references, Duncan and his team review these points:

    • There are two kinds of information: public information and private information. Our personal assessments of our peers and former employees are firmly in the bucket of private information. That’s both what makes references valuable, and what makes them hard to get.
    • Your mission is to collect as many private assessments on your candidate as possible.
    • Remind yourself that your base case is that you will not proceed with the candidate despite the fact you’re at the stage of doing references. You want to create a default mindset that listening to the references is going to actively make you change your mind to make the hire. “Let the references speak” is our mantra.
    • For each candidate there is often one reference that is the motherlode, the Yoda reference—the unbiased, calibrated, no bullshit, clear-eyed reference, someone with “acerbic good taste” who has experienced your candidate with limited ego baggage of their own and is willing to transfer that private information to you. Sometimes you get them on the first call, sometimes it’s on the 20th call. Have you found that reference giver yet? If not and the context permits, do not proceed with the hire, allow yourself to hold the uncertainty.
    • Assess whether the reference giver is calibrated—what’s their sample size and do they actually know what excellence in this role is? (Assume 80% of people are not calibrated on the Michael Jordan of this thing.)
    • Assess whether you find the reference givers themselves credible. Identify any biases. Would you hire the reference givers or want to work for them? If not, make sure you weight the content of the reference slightly lower.
    • Try to mess with the expected “script” of a reference conversation, where the reference giver reads a LinkedIn testimonial and you read from a check-list of questions. Skim the questions below in advance in order to have them in mind, but try not to read from the list because it creates a different dynamic, more interrogation and less creative exploration and appreciation of someone’s idiosyncrasies.
    • The dog that doesn’t bark is the hardest thing to assess and requires calibration / a big sample size —what could they say on the positive side but are not saying?
    • Do references in person if you can, Zoom is second best, phone is third best.
    • Start with an opener that makes it safe to convey private information: “Thanks for taking the time. I’m trying to find the right seat for Jane and I’m investing the time in speaking to people who know her. Everything you say will be off the record, and I don’t plan on conveying any of it back to Jane.”

  • Reference questions

    • How would you describe Jane to someone who doesn’t know her?
    • What’s your sample size of people in the role in which you knew Jane?
    • Who was the best person at this role that you’ve ever seen?
    • If we call that person a “100”, the gold standard, where’s Jane right now on a 1-100?
    • Does she remind you of anyone else you know?
    • If Jane’s number comes up on your caller ID, what does your brain anticipate she’s going to be calling about? What’s the feeling?
    • Three attributes I like to keep in mind are someone’s hunger, their humility, and how smart they are about people. If you were to force rank those for Jane from what she exhibits the most to least, how would you rank them?
    • What motivates Jane at this stage of her life?
    • If you were coaching Jane, how would you help her take her game up?
    • If you were going to hire someone to complement Jane doing the same activity (NOT a different role), what would they be good at to offset Jane’s strengths and weaknesses?
    • How strong is your endorsement of Jane on a 1-10? (If they answer 7, say actually sorry 7s are not allowed, 6 or 8? If the answer is an 8, “What is in that two points?”)

Guide to Interviews

  • Preparing for interviews

    • Remember that your mission is primarily to get to know the person well enough to do effective reference checks
    • Can you glimpse the person’s elephant as distinct from the rider, who is speaking to you?
    • Can you establish enough safety to allow the frame of “how can I help you find the best job for you in the world?” instead of “are you an A player, are you a fit for this role?”
    • Interrupt often to establish a fast cadence and avoid monologues

  • Interview Questions

    • What criteria would you use to hire someone to do this job if you were in my seat?
    • How would your spouse or sibling describe you with ten adjectives?
    • I think we’re aligned in wanting this to be a good fit, you don’t want us to counsel you out in six months and neither do we. Let’s take the perspective of ourselves in six months and it didn’t work. What’s your best guess of what was going on that made it not work?
    • What are the names of your last five managers, and how would they each rate your overall performance on a 1-100?
    • What are you most torn about right now in your professional life?
    • How did you prepare for this interview?
    • How do you feel this interview is going?