Notes from RenTec CEO Peter Brown on the GS Podcast

Podcast: Goldman Sachs Exchanges: Great Investors

Raj Mahajan, global head Systematic Client Franchise interviews  Renaissance Technologies CEO Peter Brown on July 27, 2023

I grabbed some excerpts from the transcript for future reference.

I include my own commentary here and there.

Newsflash: Money is a big factor in what people choose to do

Raj Mahajan: Seems that you were right at the vanguard of the machine learning movement in 1993. So, why did you leave an exciting career at IBM for a small financial company in Long Island that no one had ever
heard of?

Brown: …Three things happened. First, Bob had a second daughter accepted to Stanford. But he couldn’t afford to pay for her to go to Stanford on his IBM salary. So, she had to go to the agricultural school at Cornell, which offered scholarships to New York State residents. The second thing that happened is we had a daughter born. And a third thing was that Jim then offered to double my compensation. After that offer, I came home. I took one look at our newborn daughter and realized I had no choice in the matter. So, the decision to leave computational linguistics for a small hedge fund that no one had ever heard of was made purely for financial reasons.

Examples of Emotional IQ

[Kris: The EQ vs IQ thing is a false dichotomy. I suspect they are actually positively related but when we look at outliers on either dimension there is a major Berksons Paradox effect. RenTec has the reputation of being the true “smartest guys in the room” in the IQ/STEM sense of the word. And yet, multiple times in this interview I am struck at how people-savvy they have been. Which makes perfect sense to me. In a domain where the competition constantly learns and psychology plays an enormous role this is exactly what you expect. Only the naive who believe that investing is physics as opposed to biology cling to Spock-like caricatures of effective quants. Here are several excerpts demonstrating an deep understanding of human behavior]

Selling an approach to employees

Brown: At the end of 2002, Bob and I also took over the rest of the technical side of the firm, which included the trading of currencies, bonds, options, and futures. Now, our plan was to use the equities code that we and others had developed to trade these other instruments. But we recognized they would not be so great for morale to tell, say, one of the futures researchers, “You know all that code you spent the last decade of your life developing, guess what, we’re going to throw it out.” So, we had to spend quite a bit of time getting everyone to buy into our plan. To do this we used an approach that I learned from a biography I’d recently read of Abe Lincoln, which was to get them to come up with our plan themselves. Now, that took some time, but eventually it all worked out. 

Jim Simons weighing the input to manage a risk crisis

See below: 2007 — “Quant Quake”

Jim Simons reading a situation shrewdly

Brown:  In the fall of 2008, the whole financial system was stressed. So, we were concerned with the stability of our counterparties. So, we spent a lot of time with those counterparties and examined their CDS rates and so forth. I remember at one point, two senior executives from some firm we did business with came into our New York City office to meet with us. They assured us that the funds we had in our margin account were safe with them. And I was inclined to believe them. Why not? But after the meeting, Jim said, “Peter, they wouldn’t have come to our office. They wouldn’t have requested the meeting unless they were in real trouble. It’s time to get out.” So, we did. And Jim was right because shortly thereafter, that firm just disappeared. 

Examples of automation and innovation within RenTec

Brown: When we got control of the New York office, the first thing I did was to walk around that office, find out what everyone was doing. And what I found was that many people were doing jobs that could be automated. So, we set out on a massive campaign to automate our back-office operations. We moved from checks and wires to SWIFT and ACH. We replicated counterparties margin calculations. We built a large legal database that could be accessed by computers to fill out regulatory forms. We brought in AI systems to automatically read and pay invoices. We automated the treasury department so that cash and margin needs could be managed by computers instead of humans. My point of view was that Stony Brook produces a huge list of transactions and New York City produces monthly statements, K1s, and government filings. And I just didn’t see why humans need to be involved in the process of translating trades to monthly statements. Now, 13 years later, we’re not done yet. And I’m embarrassed to admit that we still even have a few people who use Excel. But we’re getting there. In fact, I was told recently that we’ve eliminated 97 percent of the spreadsheets that had originally been used in the company.

Stories about risk management

March 2000 — Dot Com

Brown: Let me start with March of 2000 when the dotcom bubble burst. We were doing extremely well back then. And we had large positions in the internet stocks. They were traded on NASDAQ. At one point the head of risk control came to me and said he was worried about the size of our NASDAQ positions. But I told him not to worry, the computer knew what it was doing. Then we took a big loss one day. So, I worked through the night trying to understand what was going on. The next day we took another big loss. And I, again, worked through that night. So, now it’s the third day and I hadn’t slept for, I don’t know, 48 or 50 hours. And I was sitting in a meeting with Jim and a few others when the head of production knocked on the door and asked to speak with me. I walked out of the meeting, and he told me we were down again by a large amount. So, I walked back in the meeting, and I must have turned white or something because Jim took one look at me and said, “It doesn’t look good.” Now, not having slept the previous two nights, I remember thinking I’m not sure I can get through this. But I really didn’t have much choice in the matter. And so, we got back to work and eventually we did get through it. A couple days later I went into Jim’s office and told him that I’d screwed up in not appreciating the risk we were taking and said that if he wanted me to resign, I would resign. But he responded, “Peter, quite the opposite. Now that you’ve been through such a stressful losing period, you’re far more valuable to me and to the firm than you were before.” Now, that response really tells you something about Jim Simons.

2007 — “Quant Quake”

Brown: When that happened, I was on vacation, and I was on a very long flight back to Newark Airport. And the moment the plane landed, my phone went nuts with all kinds of texts and missed phone calls. So, I called into work when it was going on and I got Kim, Jim’s assistant. And she said, “Jim wants you to get back here as soon as you’re physically able.” So, I raced out. I found a taxi, leaving my family to fend for themselves at Newark Airport. And pushed the driver to drive as fast as he could from Newark to Long Island. I ran into my office, and I found Jim, Bob, Paul Broder, who was head of risk control, all holed up. And the office was full of cigarette smoke. I could barely breathe. And then there was this, I remember seeing this, 16 oz cup full of Jim’s cigarette butts. And I’m thinking, like, why do they have to do this in my office? And they were all staring through the haze at the computer screens trying to figure out what was going on. And Jim was interpreting every little wiggle and various graphs. He was really scared. And he wanted to cut back and hard. Paul also wanted to cut back. Raj, I’m sure you know, the head of risk control always wants to cut back. Because he doesn’t get paid to make money. He gets paid to make sure you don’t lose money. 

And Bob, you know, Bob’s always very calm. But he wasn’t against cutting back. But I looked at the data and saw that the model had these enormous predictions, the likes of which I had never seen before. It was clear to me what was going on. People were dumping positions that were correlated with their own positions. And they were driving prices to ridiculous levels. I felt they had to come back. I argued that we should not cut back. That this was going to be the greatest moneymaking opportunity we’d ever seen. And if anything, we should increase our positions. But it was three against one. And so, we continued cutting back. But I succeeded somewhat because we cut back at a slower pace. And then at one point, miraculously, the whole thing came roaring back. And indeed, it was an incredible money-making opportunity. Now, what we learned from that was to always make sure we have enough on reserve to just hang on. Later, when Jim was about to retire, I reminded him of this period and asked if he was concerned that I was going to be so aggressive that I was going to blow the place up. But Jim responded that the only reason I was so aggressive was because I knew he was determined to reduce risk, another example of Jim’s insight into human nature. 

What RenTec does differently

Brown: I guess there are some firms that make it their business to learn how others make money and try to learn their secrets. That’s not our style. We just hire mathematicians, physicists, computer scientists with no background in finance and no connections with Wall Street. 

A few principles we follow:

  1. Science

    The company was founded by scientists. It’s owned by scientists. It’s run by scientists. We employ scientists. Guess what, we take a scientific approach to investing and treat the entire problem as a giant problem in mathematics.
    [Kris: In chatting with a friend who has proximity to RenTec, I learned of this a few years ago. I was intrigued by how they felt quite comfortable incubating highly promising individuals by offering a well-paying collegiate atmosphere that offered an alternative to traditional academia. It feels like just another instance of what I call risk absorption. RenTec is a highly efficient “bidder” for the risk of a scientist’s effort panning out. They can build a portfolio of talent in the form of a skunkworks knowing that they can scale important discoveries across their trading. Not unlike how a military R&D department might think of investments in scientists.

  2. Collaboration

    Science is best done through collaboration. If you go to a physics department, it would be absurd to imagine that the scientist in one office doesn’t speak to the scientist in the office next door about what he or she is working on. So, we strongly encourage collaboration between our scientists. For example, we encourage people to work in teams. We constantly change those teams up so that people get to know others within the firm. We pay everyone from the same pot instead of paying different groups in accordance with how much money they’ve made for us and so forth.

  3. Infrastructure

    We want our scientists to be as productive as possible. And that means providing them with the best infrastructure money can buy. I remember when I was at IBM, there was this attitude that programmers were like plumbers. If you need a big project done, just get more programmers. But I knew that some programmers were, like, ten times or more productive than others. I kept pushing IBM management to recognize this fact. But it did not. I remember being in an IBM managers meeting and some guy from corporate headquarters was explaining how they created something called their headlights program. The goal of which was to identify the best programmers in the company and pay them 20 percent more than the other programmers. Now, I figured this guy from corporate was making, like, $300,000 a year. So, I raised my hand and suggested they increase the pay of their best programmers to $400,000 a year. And he was stunned. He said, “What? More than me? You’ve got to be kidding me. Well, if the guy’s Bill Gates.” I said, “No, Bill Gates was making, like, 400 million per year. Not 400,000.” Anyway, they just didn’t get it. We don’t make that mistake. We pay our programmers a ton in accordance with the value we place on the infrastructure they produce.

  4. No interferenceWe don’t impose our own judgment on how the markets behave. Now, there’s a danger that comes along with success. To avoid this, we try to remember that we know how to build large mathematical models and that’s all we know. We don’t know any economics. We don’t have any insights in the markets. We just don’t interfere with our trading systems. Yes, of course there are a few occasions where something’s going on in the world and so we’ll cut back because we think the model doesn’t appropriately appreciate the risk of what’s going on. But those occasions are pretty rare.
  5. Time

    We’ve been doing this for a very long time. For me, this is my 30th year with the firm. And Jim and others were doing it for a decade before I arrived. This is really important because the markets are complicated and there are a lot of details one has to get straight in order to trade profitably. If you don’t get those details straight, the transaction costs will just eat you alive. So, time and experience really matters. 

A word on politics

[Kris: Peter Brown is liberal and co-CEO Bob Mercer is famously conservative. I can say that coming from the trading world, the liberal perspectives are in the minority amongst the traders but less so amongst the academics.]

Raj Mahajan: Is it true that while Bob Mercer and you have different politics, you worked closely for nearly 40 years at IBM and Renaissance? 

Peter Brown: Yes. It’s true. Bob and I began working together at IBM 40 years ago. And for most of the time, we’ve had offices right next to one another. So, we’ve done a lot together. And we’re still really close. In general, I find no better way of building friendships than through the collective creative process of building something together. And I see no reason why politics should interfere with friendship. 

Man vs machine stories

1) My understanding is that you had nothing to do with finance until age 38 and, instead, began your career working on automatic speech recognition. How did that happen?

Brown: So, at one point during high school I learned about the Fast Fourier transform. And I thought this was about the coolest thing I had ever seen. Probably because I went to an all-boys’ school and had nothing better to contemplate. Anyway, for some reason I got into my head that with the Fast Fourier transform it should be possible to recognize speech. You just take the speech data, transform it into the frequency domain. Match it up against patterns for words. And presto, magic, HAL would be born. And this idea always stuck around in the back of my mind. 

Then when I went to college I majored in math and physics. But in my senior year I had to fulfill a distribution requirement. So, I took a course in linguistics. And one day in the back of that course I heard a couple students talking about some guy whose name was Steve Mosher who started a company called Dialogue Systems that was doing speech recognition. And I thought, wow, great, I remembered this idea from back in high school. After class I raced over to the physics library. That’s because this was before the internet, so you had to go to the library. And I looked this guy up. And I found a paper he’d written. And I tracked him down. Applied for a job. And he hired me. And when I was there, I just fell in love with the idea that through mathematics it might be possible to build machines that do what humans do. I just loved the idea of exposing human intelligence to be nothing more than robotic computation.

2) I recently heard that in a talk you give at Harvard Business School you mentioned that you had a role in starting up the Deep Blue project at IBM. Can you tell us about that? 

Brown: Wow. Okay. I had been at IBM for a year or two. And I was standing in the men’s room one day when the vice president of computer science, a man named Abe Peled walked up next to me. I thought to myself, now’s my chance. I turned to him and said, “Dr. Peled, do you realize that for a million dollars we could build a chess machine that would defeat the world champion? Think of the advertising value to IBM.” He turned to me, looking kind of annoyed, and said, “What’s your name?” So, I told him. And then he said, “Could you please let me finish up here?” And so, I thought, wow, I had made a big mistake. So, I apologized, and I high tailed it out of there as fast as I could hoping he’d forget my name even faster.

But a half hour later, he called me in my office and told me that if I wanted to build a chess machine, he’d put up the million dollars. I told him that I was occupied with speech recognition. I have three friends from graduate school who could build it. He said, “Okay, hire them.” So, we did. They built the machine. I named it Deep Blue. In the first match, the IBM machine was a very weak machine. Weak physically. You know, I think only one special purpose chip in it. And we lost. The final match, however, was a different story. IBM had a much, much stronger machine with hundreds of special purpose chess chips. IBM won that match and IBM’s stock jumped $2 billion afterwards. Of course, it fell back down later. 

Now, a few years ago I was asked to speak at the Harvard Business School. And when I arrived, outside the auditorium, I could see all these protesters. And I thought, oh no, why are they protesting me? What have we done? Is there something I’m not aware of? I really didn’t want to do that. But as I got closer, I could see they were all holding signs about investing in Puerto Rico. And I thought, what is this all about? I was totally confused because I didn’t think we had anything to do with Puerto Rico. Then it turned out that the speaker before me was some guy named Seth Klarman from some firm named Baupost. Evidently, that firm had some investments in Puerto Rico and the protesters were protesting him. So, I went in to see Klarman’s talk, or at least the end of Klarman’s talk, to find out what all the hullabaloo was about. 

At the end of his talk, someone asked him his thoughts on quantitative investing. I suppose it was a set up for my talk. I don’t know. And I carefully noted his answer which was, “To do what I do takes a certain amount of creativity and finesse that a computer will never have.” And all those Harvard Business School MBAs seemed to really like that response. So, when it was my time to speak, right after him, I began by pointing out that after defeating Deep Blue in the first match, Kasparov was elated and gave a press conference at which he said, “To play chess at my level takes a certain amount of creativity and finesse that a computer will never have.”I then went on to point out that two years later we crushed him. Now, I’m not sure that’s how things will evolve. But whether it’s speech recognition, machine translation, or building large language models, or chess, or making investment decisions, I continue to love the process of showing that human intelligence, intuition, creativity, and finesse are nothing more than computation.

[Kris: In defense of Klarman, like the pod shops, I don’t think RenTec is investing so much as trading. Marc Rubinstein writes:

Dmitry Balyasny, founder of Balyasny Asset Management, attributes the model to a trading view of markets as distinct from an investing view.

“[Its] origins go back to my origins as a trader and thinking about how to build out business around trading… It makes sense to have lots of different types of risk-takers, because you have less correlation, you could attack different areas, the markets, and have specialists in different areas.”

I’ve beat that drum in Trading vs Investing and with great humility in How I Misapplied My Trader Mindest To Investing

Addressing Brown’s obsession with “exposing human intelligence to be nothing more than robotic computation.”

In The Introspection of Illusions, author David McRaney parses opacity of the intelligence and preferences buried in our subconscious:

Psychologically speaking, users found it easy to access the feelings that prompted them to give those films one star or five. Explaining why they made one feel that way would require the kind of guided metacognition that the Netflix interface simply couldn’t offer. Even when you stepped away from the code and the spreadsheets and asked people in person, they might not be able to tell you. They could make a guess. They could attempt to explain, justify, and rationalize their feelings, reactions, and star ratings, but without a conversational tool, a back and forth to get past all that to something honest and perhaps previously unexplored, you ran the risk of precipitating a psychological phenomenon known as the introspection illusion which would likely result in yet another phenomenon known as confabulation. There’s an entire literature of books and papers and lectures and courses devoted to this side of psychology. To put it very simply, we are unaware of how unaware we are, which makes us unreliable narrators in the stories of ourselves. You are, however, amazing at constructing stories as if you did know the antecedents of those things when explaining yourself to yourself and/or others.

There are parts of us we can’t access, sources of our emotional states we can’t divine, and I find some strange poetry in the fact that, like us, the algorithms can’t always articulate the why of what we do and do not like. Yet, through millions of A/B tests slowly zeroing in on more and more successful correlations, the Netflix Recommendation Engine can produce a glimpse of something a bit like the sort of profound, soul-exposing knowledge earned via an intense introspection that we could never achieve. Something a few fathoms deeper than “I don’t know, it just wasn’t for me.”

Speed Round

1) Is it true that at one point you went to IBM to suggest that the statistical methods you were using in speech recognition could be applied to finance, and asked to be given an opportunity to manage some fraction of IBM’s corporate cash?

Brown: Yes. I think that was in 1993. But IBM corporate had absolutely no interest. So, instead we went to Renaissance where we did the same thing we had in mind for IBM, but instead with money Jim Simons had raised.

2) Is it true that since you first joined Renaissance you have spent nearly 2,000 nights sleeping in your office? 

Brown: Yes. My wife works in Washington DC. And my experience has been that when a husband and a wife work in two different towns, the husband commutes. Psychologically, if I’m going to be away from my family, I have to work. I sleep in my office when I’m in Long Island. 

For me, productivity-wise it’s really fantastic being able to spend nearly 80 straight hours each week with no interruptions except sleep thinking about work before spending three more normal days at home. Of course, I really miss my family. But the freedom to concentrate nonstop on work while surrounded by my colleagues is hugely valuable. And the job is so demanding, I really don’t see how I could do it otherwise.

[Adds this]  I’m just one of those types who can’t sleep. Not by choice. I just can’t sleep. So, I often am on the computer by around 2 am. And it’s true, I tend to send a lot of emails out in the middle of the night.

3) Is it true that you almost exclusively hire people with zero background and finance? 

Brown: Yes. We find it much easier to teach mathematicians about the markets than it is to teach mathematics and programming to people who know about the markets. Also, everything we do we figure out for ourselves. And I really like it that way. So, unlike some of our competitors, we try to avoid hiring people who have been at other financial firms. 

[Kris: The prop trading firms think similarly. My friend Joel talks about how Brown’s claim that it “is is easier to teach markets to mathematicians than it is to teach math to market experts, may seem dismissive to market-centric people but in reality is more of a statement about what “math” is at Renaissance.” He goes on to distinguish about levels of math but I latched on to this a more general observation:

Markets person isn’t a thing. Markets thinking is systems thinking and anyone from any discipline can learn that. From there go on Investopedia and learn how a zero coupon bond or share of stock works. start with a good, teachable mind then label the variables.

Math/STEM skills are legible markers of computational/rigorous thinking. Someone trained in the nitty gritty of assumptions, what follows, and so on. Making abstractions concrete.

If I’m generous it took a month of professional training for non-finance STEM grads at SIG to know everything finance grads would have brought to the table. But you can’t teach math and computer science in a month. 

Ultimately this is only part of the story of getting a great start in finance. There’s a Berksons Paradox once you are in the pool of high level finance employment where the math skills don’t correlate as much with talent. You get older and realize the dichotomy of being a math person vs a verbal person that you carried as an identity when you were young is bullshit. Skills in either are likely highly correlated. But maybe the right door or guidance wasn’t there to help you see that.]

4) What do you actually look for in applicants? 

Brown: Math ability. Programming ability. A love for data. A work ethic. And most importantly, the ability and desire to work will in a collegial environment.

5) How do you actually assess those qualities?

Brown: I think probably the same way other firms do. First, we get resumes. Those that look promising we give them phone interviews and we ask them for references. If those pan out, then we invite the promising applicants to give research talks. Talks like if you’re applying for a job at a university or something like that. And then we put them through a grueling day of solving problems in math, physics, statistics, computer science, and so forth at a blackboard.

6) Is it also true that your staff had to install mirrors in the corners of the office to prevent you from flying into people as you rode a unicycle around the office? 

Brown: Where did you get all these questions from? Yes, it’s true. Although, I don’t ride a unicycle anymore because at one point I crashed and the unicycle broke

Mark Manson Chats With Erika Kullberg

Mark Manson, author of The Subtle Art Of Not Giving A Fck*, went on the Erika Taught Me podcast.

Pound for pound some of the best self-help advice condensed into a 1-hour conversation.

My favorite excerpts including my own comments below.

On what you should be doing

“I realized I actually didn’t want to be a musician. I thought I wanted to be a musician. I thought I wanted to be on stage and people cheering and everything but I didn’t want the process that was required to achieve that. With writing it’s the opposite. I enjoy the cost. I enjoy sitting by myself in a room quietly, rewriting a paragraph over and over again. That feels very natural to me. There’s something exciting about that challenge to me in a way that there was never any excitement with the challenge of practicing scales or runs. One thing that I always tell people is that it’s easy to want the reward. It’s hard to like the struggle. When most people ask themselves, what do I want to do with my life or what am I passionate about? They think about the rewards, they don’t think about the struggle. You should be asking yourself, what is the struggle that I like? What is the struggle that I’m passionate about? What is the challenge that excites me rather than drains me?”

[Kris: thinking of “passions” as something fixed or innate is probably not constructive. You can become passionate about something that you get good at and of course, at any point in time you never know the whole menu, so passions can be discovered by trial and error or having a curious non-instrumental approach to what you spend your time on.]

‘Screw Finding Your Passion’

Even in your dream job, you’re going to be annoyed 20% of the time. There’s no such thing as a job, relationship or endeavor where you are happy all the time. Even in your dream relationship, you’re still going to be sick of the person 10% of the time. That’s just life, and there’s no escaping it completely. So, I think the goal here is not Happiness with a capital “H.”

[Kris: Denis Leary’s version —Happiness comes in small doses folks. It’s a cigarette, or a chocolate chip cookie or a five second orgasm, that’s it okay? You come, you eat the cookie, you smoke the butt, you go to sleep, you get up in the morning and go to fucking work okay? That is it, end of fucking list!

The tone of this sounds like ‘settling’ but I interpret it as not focusing on some endpoint to make you happy. Enjoy the bits along the way, but they aren’t the end all be all and stop imbuing achievement with the expectation of actualization or whatever.]

The angst advantage

[Kris: In Ambition As An Anxiety Disorder I discuss Andrew Wilkinson’s comment that Most successful people are just a walking anxiety disorder harnessed for productivity. This hints at an example of hormesis — the right amount of a “bad” thing like stress or angst can be useful while too much is destructive. Just one of those ambiguous tensions life requires we modulate.]

I don’t think being happy all the time is the most adaptable strategy in life. If you think from an evolutionary perspective, imagine two creatures: one is happy all the time, always optimistic, thinks everything is great, and everything’s going to go great. Then you have another creature who’s a little bit paranoid, a little bit freaked out every time there’s a rustle in the bush, thinking it’s a tiger. Which one’s going to survive longer? It’s the slightly paranoid one. The slightly anxious one. The one that’s constantly dissatisfied. The one that says, this food’s not enough. I need more. That’s the one that’s going to survive and procreate. So, in that sense, a moderate amount of dissatisfaction with our lives is, from an evolutionary standpoint, highly adaptable. If you look at like research on happiness and wellbeing it is an inherent part of our nature to be mildly dissatisfied most of the time.

Happiness as an indirect pursuit

People are overly focused on the feeling of happiness. They should focus more on spending their time well and doing things that are worth doing. There’s a curious thing about human emotions, which we’ve all experienced. Let’s say you’re angry and you don’t want to be angry anymore. It just makes you more angry because you get upset about your anger, or if you’re anxious and you don’t want to be anxious. You get anxious about being anxious. The peculiar thing with happiness is that if you constantly ask yourself, am I happy? How can I be happy? I want to be happy. You make yourself less happy. It’s one of the few things in life that putting more effort towards it or more focused attention towards it decreases the result. It’s one of the few things in life that by simply letting it go and not trying to control it, it happens more often. A lot of people get caught up in how they feel. Emotions are important, but you’re going to feel things all the time. You’re always going to be anxious or angry or happy or sad. Life is always going to put you in those situations. What matters is what you do. It’s how you react to the emotion. If you develop the capacity to consistently perform good actions, despite whatever emotion you’re feeling, then more often than not, you’re going to feel good about yourself.

[Kris: If I say “Don’t think of an elephant” what do you think you are going to do? You’re going to think of an elephant of course. Happiness is a byproduct. It’s an indirect pursuit. The harder you try the more elusive it is. Reminds me of Michael Crichton’s quote: If you want to be happy, forget yourself. Forget all of it—how you look, how you feel, how your career is going. Just drop the whole subject of you. People dedicated to something other than themselves are the happiest people in the world.

My friend Tom Morgan echoes the futility of focusing on happiness: Happiness often lies in the temporary suspension of our ego’s desire to explain and control everything]

Gratitude Is An Action You Can Take

Gratitude is useful because it is forcing you to take a certain perspective of just being appreciative of the things that you have. Gratitude is slightly different than happiness even if the two often coincide or happen together. Gratitude is more like an antidote to misery than it is a cause of happiness. When you feel miserable, you’re so focused on the one thing that you don’t like that you’re forgetting the 100 things that are good. The practice of gratitude forces you to take your attention off that one thing you don’t like, and realize “my life’s pretty sweet.”

[Kris: This is a key practice in our household. It keeps the angst that drives you from tipping into envy or unhealthy emotions. As hokey as it sounds, I mean it when I say any day that I get to wake up is a good day. Because is the grand scheme, it could be worse.]

The 3 pillars of well-being

  • What are we spending our time working on?
  • Who are we spending our time with?
  • How much are we taking care of our bodies?

If you can answer all three of those things satisfactorily, you’re probably a happy person most of the time. All these other questions, the philosophical ones or productivity ones, they’re window dressing. They’re not the real thing. Have a few good relationships in your life, work on a project that you care about and feels important to you, and don’t mistreat your body. That’s the 20% that drives 80% of happiness.

[Kris: A fulfilling life, like anything worth pursuing, is a simple formula. Simple, but not easy. Like losing weight. Mark just distilled it for you.]

Reconciling unconditional love with the practical need for boundaries

You set this ‘if-then’ statement within a relationship. “This thing drives me crazy, please don’t do it. If you do it, this is how I’m going to react.” It’s healthy because it sets expectations for both people. Now my wife knows what upsets me and how I’ll respond. There’s no ambiguity or uncertainty around it. A more intense example is monogamy: if you cheat on me, I’m going to leave you. That’s a clear ‘if-then’ boundary. I’m still going to love you, I’m still going to care about you, that’s unconditional. But we’ve set these boundaries, these expectations, and if you don’t live up to them, we don’t have a relationship anymore. Many people who are entangled in unhealthy relationships struggle to set boundaries because they don’t want to displease their partner or start a fight. What they don’t realize is that by setting that boundary, despite the discomfort and potential for a temporary argument, you’re preventing dozens of future fights. It’s the one fight that prevents the next 20.

[Kris: “The single biggest problem in communication is the illusion that it has taken place.” – George Bernard Shaw]

Being responsible even when you’re not at fault

You should take responsibility for everything in your life. It’s a common piece of advice, but the most frequent objection is: ‘Well, bad things happen to good people. What if I’ve been wronged or a tragedy has occurred? That’s not my fault. Why am I responsible for that?’

I differentiate between fault and responsibility. We often assume that fault and responsibility are the same thing, and legally, they usually are. However, from a personal psychological point of view, you can be responsible for many things that are not your fault. If someone leaves a newborn baby on your doorstep, it’s not your fault, but it’s absolutely your responsibility to do something. Similarly, if you get hit by a car and end up in the hospital, it’s not your fault, but it’s your responsibility to recover, take care of your health, and do everything you can to get healthy again. There are many situations in life for which we are responsible, but it’s not our fault. We had nothing to do with how it happened. I believe this concept opened many people’s eyes to separate the fault component from responsibility, helping them to accept this piece of advice more comfortably.

[Kris: This strongly aligns with my opinion that you should “put your oxygen mask on before you help your neighbor”. You have a responsibility to care for yourself so you can help others. This also means accepting help. In my own life, I’ve had a loved one refuse help thinking they have spared me a burden, but I know that by not inconveniencing me today they would become a larger burden in the future when they are less capable of helping themselves even with my aid. This experience has given me the imperative to make sure I take care of my health, my finances and my well-being. Not just so I am not someone else’s burden but so I can continue to be a source of support for others.]

The self-help advice that drives Mark crazy

The traditional “law of attraction”. Like The Secret. Manifestation. The idea is to visualize and believe something, and it will happen. It’s not entirely wrong. I addressed this topic in an extensive article on my website years ago. The concept in psychology known as confirmation bias plays a key role….It occurs consistently and the law of attraction leverages this bias in our favor. For instance, if your goal is to become rich, you’ll start noticing opportunities that were always there but went unnoticed because you hadn’t been thinking about your goal.

There’s nothing magical or cosmic about it. It’s a common, well-documented perceptual bias. When used effectively, the law of attraction trains you to use confirmation bias to your advantage. The problem is, it’s often shrouded in cosmic jargon and extends beyond simply thinking about your goal. There’s a crucial distinction between focusing on an external goal and the identity you want to inhabit. If, for example, I decide I want to be seven feet tall and play in the NBA, no amount of thinking will make it real. That’s not success; it’s delusion.

I have several issues with the law of attraction. I’ve been quite critical of it, despite recognizing the grain of sound advice within. It advises to look for the positive in anything that happens to you, which can be helpful but should not be applied indiscriminately. It’s perfectly normal and healthy to feel sadness when tragedy strikes.

[Kris: Notice how calls to be indiscriminately positive backfire by setting impossible expectations. Happiness is the gap between reality and expectations.]

What many attribute to the law of attraction is often just confirmation bias, accountability, and goal setting. When you set a goal, it provides a finish line. Without a clear goal, it’s difficult to measure your actions. For instance, if you want to make a lot of money, define the amount. Once you decide on a figure, you can break it down into monthly targets and figure out the steps needed to get there. The law of attraction isn’t responsible for this. It’s simply setting a goal, breaking it into subtasks, holding yourself accountable, and using confirmation bias. It’s easy to see why people appreciate this concept, but it’s crucial to remember that it requires action. You can’t merely wish for wealth and expect it to materialize.

[Kris: I beat this dead horse to death but this topic is really about doing the proper attribution. Mark is showing how confirmation bias can be leveraged for good. How goal setting deserves credit for progress, not magic. And notice, if “manifestation” didn’t happen to re-skin confirmation bias it wouldn’t work and therefore it would never have taken off as a self-help concept. It had to have a nugget of truth to woo followers. Every cultish movement will have a nugget of truth that is really just a hand that gets over-played]

Imposter syndrome is healthy

I have a contrarian take on impostor syndrome. I believe it’s healthy. If you made a bunch of money very quickly you should have impostor syndrome. You should be asking yourself, ‘Do I deserve this? Did I work hard enough for this?’ Because that is the opposite of taking it for granted and being arrogant. It’s not fun to feel that and I certainly went through some impostor syndrome after ‘Subtle Art’, but ultimately, it keeps you humble. It keeps you a bit hungry, thinking, ‘I should do something again to show that this wasn’t a fluke,’ and it keeps you grounded. It reminds you that you’re not necessarily better or worse than your buddies that you hung out with last year who are still making the same amount of money they did before. Impostor syndrome is actually healthy, as long as it’s not debilitating. At the end of the day, any sort of self-worth issue comes back to the same thing. Are you doing good work? Are you surrounded by good people? And are you treating yourself well? If you can say yes more often than not to all three of those questions, you’re eventually going to be in a good spot.

[Kris: Echoes Sal Khan’s take on imposter syndrome —

I think some of that impostor syndrome, I actually want to retain. I never want to forget how, like, there, there was a time not too long ago that I would pass on the organic produce. I think it lets you just appreciate the world a little bit. And we all know about hedonic adaptation and the hedonic treadmill. I don’t claim that I’m immune so I don’t want to sound like I’m some guru here. I live in Silicon Valley. We live in that same house, and a lot of our friends have now moved into houses that are multiple of the size of our house. Every now and then it’s “maybe it would be nice to have two saunas.” But I always remind myself, “well imagine their electricity bill, or like, the gardening bill or the water bill or whatever.” But, yeah, I think it’s healthy imposter syndrome.

A healthy one keeps you grounded, allows you to enjoy it a little bit. Like every now and then I get invited to meetings with people or conferences with people, where both healthy and unhealthy impostor syndrome could be at play. The healthy imposter syndrome says  “Wow, you get to meet your childhood hero, or someone that you thought you could only read books about, and you’re meeting this person, and they are interested in what you have to say, and they’re supporting Khan Academy.” That’s kind of fun. I don’t know if that’s impostor syndrome, or that’s just remembering yourself when you’re younger. And you’re like, “Wow, how is little Sal in this meeting right now? That’s kind of wild.”]

Moontower #116


I’m a bit more than halfway through this summer’s travels. So far we have been to Tahoe, Jupiter, Disney, DFW, and Austin. We are headed to Puerto Plata this week before our last leg in the NJ/NYC area.

I didn’t publish last week and likely won’t publish next week. Other than checking Twitter a handful of times a day, I’m pretty offline this summer. I read maybe an article a day. I’m listening to none podcasts (to borrow my 5-year olds grammar). I’m not even reading a book so any intellectual side I have is being totally starved of stimulus. Total GTL life minus the gym.

The upcoming week is always a fun one. My birthday is on the 12th and Zak is on the 13th. We actually went to the hospital for his birth on the 12th but I guess he wanted his own day. July 12th has captivated me for another reason. It is the anniversary of the horrific shark attacks that inspired Jaws. In another self-centered twist, they occurred a few miles from where I grew up contributing to my and my sister’s obsession with sharks (my sister actually went as far as tagging nurse sharks in FL for a summer job in college. She subscribes to any shark news so she pointed out a video of a Great White spotting in Jupiter two weeks before we went there in June. We hid this bit of info from the rest of the family).

The shark attacks of 1916 make sense as the inspiration for Peter Benchley’s monster which he infused with vengeful intention. From Atlas Obscura:

IN JULY OF 1916, NEW Jersey became the site of a series of vicious shark attacks that would span 12 days and take the lives of four people and severely injuring one.

With previous deadly attacks in Beach Haven and Spring Lake, New Jersey, the shark made its way north and down a freshwater creek in Matawan, New Jersey on July 12, where it would attack and kill 12-year-old Lester Stillwell and 24-year-old Stanley Fisher within an hour of each other. Matawan hadn’t prepared itself for attacks like other shoreline towns in New Jersey, as they were so far inland along a freshwater creek. 

The suspected man-eater would be caught two days later in the nearby Raritan Bay. To be sure it was the killer, the over 300-pound monster was dissected, and 15 pounds of human remains were found in its stomach.

It’s has been determined that the shark was a bull shark, the only shark that can survive in both fresh and saltwater. The incident was a heavy inspiration for Peter Benchley, who would write his 1974 novel Jaws set on Martha’s Vineyard, Cape Cod in the fictional town of Amity.

While it’s unclear if it’s a permanent addition, the site of the shark attack is currently marked by a painted shark. The town of Matawan also has two separate memorials to the victims.

For the full details, check out the Wikipedia page: The Jersey Shore Attacks Of 1916

It’s a great beach read in the same way that it’s fun to read about serial killers in your tent at sleepaway camp in the woods.

The Money Angle

Before vacation, I listened to fund manager Dan McMurtrie’s interview on Howard Lindzon’s podcast. It was provocative and entertaining enough for me to jot some notes.

I recommend taking a full listen. Dan is funny. And gifted at the art of troll.

To see my notes go to Dan McMurtrie with Howard Linzon (Moontower Meta)

Last Call

We’ve been up to a lot of fun stuff in Texas. Some of it will make for good discussion when I’m ready but in the meantime, I’ll just mention a few DFW places that we have enjoyed in the past couple of weeks.
  • FC Dallas MLS games

    We went 2x. For less than $40 you get amazing seats. The overall environment is fun and positive. I have never been to an MLS game before and while I know nothing about soccer, I and everyone we went with found the fan experience to be outstanding.

  • Burger’s Lake (Fort Worth area)

    We went here 2x as well (the friends we are staying with have been hosting 2 to 4 families from our NYC/CA crews the entire time we’ve been here, so we repeat activities as the revolving door requires). It’s a lake with high diving boards, water slides, a trapeze swing, and attractions catering to younger kids. Bring your own picnic or use the camping grills to make burgers. You will need to sneak booze in. On weekends they check your cooler, but we got away with it during the week. Your welcome for the tip.

  • The Stockyards (Fort Worth area)

    Also did this 2x. Step back into the history of cattle-ranching. There’s plenty of activities for kids and rows of old saloons and restaurants for the grown-ups. And if you want something less rustic, the newish Hotel Drover is a great spot to grab a ranch water (I make this drink all the time, but didn’t realize Texans have a name for it). It also looks like a fun spot for a weekend getaway with a nice pool and access to the stockyards. Time your visit to see the daily longhorn cattle drive up the main drag.

  • Deep Ellum (Dallas)

    This is an area of Dallas that reminded me a bit of Wynwood in Miami. Cool restaurants and shops (Jack White’s baseball brand Warstic is headquartered here). Plus lots of locals flexing their muscle cars (my kids are totally obsessed with cars right now especially Challengers with kits such as Demons, Super Bees, and Hellcats. Hellcats come with 2 keys, a black and a red one. The black one is the regular one. The red ones unleash the beastly Hellcat engine. These cars are built for drag racing. If Fast and Furious movies didn’t have cringey sex scenes, I’d take the boys to see F9). If you visit and dig tequila/mezcal you need to go to the Ruins. I tweeted about it.

  • Bar hopping in Dallas

    Grab a cocktail at the Mitchell, see the decor in the Adolphus Hotel, and end at the Thompson Hotel. There you can see some prettiness and pretty people at Catbird before grabbing dinner at Monarch or sushi at Kessaku. The sushi was outstanding by any coastal city standard but pricey. Sake choices were underwhelming, but the view is a consolation prize. Finally, end the night, at a ridiculously good mezcal bar hidden in a bridal store. In a strip mall. The empanadas and cocktails are lit at this tiny spot started by two bros from Mexico City. It’s called La Viuda Negra. It was better than the movie we saw of the same name last night in IMAX.

Literary Version Of A Chart Crime

Last week, we talked about “chart crimes“. Often these are charts that poorly constructed because the authors have been fooled by correlations or invalid comparisons. These are naive but honest. Then there are charts that use sleight of hand to nudge a conclusion. This author has an axe to grind. 

This week, we will discover the literary version of chart crimes. It’s what Cedric Chin simply calls “sounding insightful”. It’s an approach honed in the internet tournament for attention. Since desire is the only barrier to publishing online we are witnessing “an arms race in writing. The best online writers are able to make something sound insightful — regardless of whether it’s true, or whether it’s useful.”

Ced continues:

This isn’t some evil conspiracy. ‘Writers optimizing to produce insight porn to grab attention’ sounds nefarious, but it’s really more like ‘writers responding to the incentives of the social internet’ — a simple side effect of the attention economy.

My own feeling is that the overlap between universally “good writing” and “optimizing for attention” is much higher than “good writing” and “being right about what you are writing about”. I’m sure there’s some mix of practice, talent, and writing ed that can make you a good writer. But I’m not sure how correlated any of that is with having accurate or well-reasoned thoughts.

A bad writer with bad takes is harmless. Nobody finds them. A bad writer with good takes needs an agent. A good writer with bad takes is hard to detect for 2 reasons:

1. Part of good writing is being effectively persuasive. A good writer has you in a spell. 
2. There are elements common to all good writing so you cannot distinguish good takes from bad takes based on style.

Ced refers to some of these common elements as “tricks”. 

Here’s 2 familiar ones:

  1. Use a story.

    I started this piece with a story. Preferably from a historical period that the reader isn’t familiar with.

  2. Repackage obvious truths and sprinkle them over the course of an essay

    Clichés can thus be repackaged to sound insightful. This is a useful trick because a) clichés are often truths the reader already agrees with, and b) whatever sounds insightful will keep the reader going.


Usefulness Separates Infotainment From Scholarship 

Ced warns that what sounds insightful isn’t always true or useful. Some excerpts:

  • [Venkat] Rao’s piece is not ok if your goal is to read for career reasons. But it’s ok if your goal is to read for entertainment. It’s ok because Rao’s goal is to attract eyeballs, not create better business leaders. And his writing is so good most people will forgive him for it.
  • As a writer, I admire what he’s done. But as a business person, nearly everything that [Dave] Perell says in the piece about business is subtly wrong — enough to make me treat his essay as entertainment, not education.
  • Writers are often seen as smarter because good writers today are trained to optimize for sounding insightful. This bleeds over into reader perception. I think that whether a writer sounds smart or a piece sounds sophisticated shouldn’t affect you if your goal is to put things you read to practice. The questions remain the same: “Is this person believable? How likely is this going to be useful? And what’s the cheapest way to find out?”

Clear Thoughts Do Not Equal Correct Thoughts

Ced concludes his post:

A year ago I wrote Writing Doesn’t Make You a Genius. I noticed that people tend to assume good writers are smarter than they actually are. I argued that this was mistaken — that writers sound smarter on paper because the act of writing forces them to clarify their ideas.

But now I have another reason. Writers are often seen as smarter because good writers today are trained to optimize for sounding insightful. This bleeds over into reader perception.

My Own Reconciliation My feeling is the usefulness of writing comes in 2 forms:

  • Form 1: The writing helps you make better decisions or predictions.
  • Form 2: The writing is useful for entertaining or provoking you. If a writer is wrong in interesting ways their work is still useful.

The most common failure is to incorrectly label a Form 2 piece as Form 1. If all you ever read is Malcolm Gladwell or self-help you might never know the difference. 

For a fuller discussion, please check out Ced’s Beware What Sounds Insightful (Link)

On Police Reform

As protests flooded the streets in the wake of George Floyd’s murder, I pulled together a stream of thoughts in my weekly letter. One of the questions I wondered aloud about was what standard police should be held to. In tweet form:

One of my readers who I chat with responded with illuminating insights on the topic. It turns out he/she had quite a background in law enforcement with a good view into local and Federal practices. As is our national habit, the discourse on police has quickly become politically polarized. Polarization is obscuring the massive degree of nuance endemic to the rich topic of law enforcement. This friend felt compelled to write down his/her thoughts and iterated on the essay over many sessions. I pushed for it to be published but the demands of this person’s current profession require anonymity. So I asked to share it on Moontower preserving anonymity. I don’t have a big platform but I’m happy to share this with those of you who do follow. Thanks to my guest and of course to you for reading.

We have a valuable opportunity to change right now but we are running the risk of not realizing powerful change due to a false equivalency in the dominant narrative.


1. What Can You Do Today to Help Create a More Just Society

2. What is the False Equivalency and Which Key Stakeholder is Missing?

3. Worldview and Caveats

4. Race and Fatality in Police Encounters

5. A Baseline for Police Violence

6. Understanding Violent Encounters and Human Limitations

7. Societal Considerations

8. Concluding Thoughts


What Can You Do Today to Help

Before expanding on the false equivalency and its effect, here are some initiatives that I think will, you know, just help make society a little bit better for everyone. No need to look at it through a political ideology, just look at it and say gee, this would help a lot of people. Think of it as trying to move society closer towards John Rawls’ Justice as Fairness without making any normative judgments about the current state of affairs.

  • Immediate: Help support bail for underprivileged people. Poor people that can’t afford bail often lose their jobs while waiting for trial, even if found innocent later. I recommend the Bail Project.
  • Immediate: Support legal assistance so that disadvantaged groups are more likely to get good legal representation. Anyone who has ever seen Lionel Hutz in action knows what I mean.
  • Medium Term: Anything that helps support educational and healthcare disparities between communities. If you aren’t sure, go to CharityNavigator and sort by 4-star charities.
  • Medium Term: Take away the power police unions have to protect police officers from losing their job even after multiple complaints. This is a sticky situation because it then brings the wider circle of public unions under scrutiny. Here is a nice overview of the potential problems.
  • Policy questions to ponder: ending the criminalization of drugs. Over policing of disadvantaged areas. The militarization of the police.
  • I also feel the need to caveat this with the following: When I first wrote this, I forgot to say anything about George Floyd? Why? Because I’ve thought about this problem deeply for years, so Floyd might be the catalyst for me sharing my thoughts, but not the catalyst for me taking an interest in this narrative, that happened a long time ago. Every cop that I know thought the murder of George Floyd was just that, murder. It was heartless, bizarre, and without explanation. 

What is the False Equivalency and Which Key Stakeholder is Missing? 

We have a valuable opportunity for change and we might fail to capitalize on it. We are missing a critical opportunity to communicate about some very real issues as a society. What’s happening instead? We are screaming past one another with ideology and frameworks. Some very positive changes have occurred but what I fear is that the current narrative completely alienates and vilifies one key group that’s going to be needed in our fight for a more just society.

 On a national level, what is the false equivalency? It is the following: “a complex and long line of historical inequalities and oppression have created a system with inherent racism” is considered equivalent and just as true as the following state “the police are racist.” The first statement is substantiated, the second one really is not. Why do I think this clarification is important? Because you can disarm a lot of hostility in the discussion between the left and the right once you tweak the narrative to allow for this nuance, and maybe we can work on changes that in theory many of us support. The heart of the argument is thus bound up in these three points:

  1. Is there a complex and long line of historical inequalities, oppression, and racism that have surreptitiously and latently made the experiences of minorities in the legal and law enforcement realms to be different than mainstream populations? Yes. This is racism.
  2. Are police officers en masse a group of racists proactively attempting to discriminate against minorities solely due to their minority status? No.
  3. If you accept both points 1 and 2 it allows for constructive dialogue. Also, if you want real reform it makes a whole lot more sense to have the police as partners in that effort and not adversaries. If you vilify the police and blame them for every ugly aspect of the system, threaten their lives, and cut their funding etc. are you going to on average get better or worse qualified people applying to be police officers?

I think most people right now agree on point #1 above, so let me spend some time on point #2 and help explain parts of the law enforcement job that often go unexplained to the general public, to the detriment to all of us in this discussion.

Worldview and Caveats

I’ve already shared some of this writing with friends and was attacked for it, so let me try to be clear upfront and say: I think there are very real problems in society. The outcomes under the current state are discriminatory and there are entire segments of the population crying out saying they haven’t been heard and have been suffering from racism. We should do everything we can to help them. The pain and psychological trauma of literally living one’s entire life in this manner is are burdens that I cannot even begin to fathom.

Race and Fatality in Police Encounters

Three studies from progressive academics concluded the following:

  1. Journal of Politics, research from Shea Streeter of Stanford University1 has shown that, if you compare blacks and whites coming into contact with the police under similar circumstances, they have a virtually equal likelihood of being killed. “The reason why so many police killings of African Americans have sparked outrage is that, at least to many, the circumstances of those interactions did not appear to warrant lethal force. A jarring implication of my research is that an analogous proportion of white decedents are also killed by police under similarly dubious circumstances.”
  2. Proceedings of National Academy of Sciences – Officer characteristics and racial disparities in fatal officer-involved shootings2. “We did not find evidence for anti-Black or anti-Hispanic disparity in police use of force across all shootings, and, if anything, found anti-White disparities when controlling for race-specific crime. While racial disparity did vary by type of shooting, no one type of shooting showed significant anti-Black or -Hispanic disparity.”
  3. Ronald Fryer of Harvard University – An Empirical Analysis of Racial Differences in Police Use of Force3: On the most extreme use of force – officer involved shootings – we find no racial differences in either the raw data or when contextual factors are taken into account. We argue that the patterns in the data are consistent with a model in which police officers are utility maximizers, a fraction of which have a preference for discrimination, who incur relatively high expected costs of officer-involved shootings.
  4. Unrelated to fatal force situations, but also worth reviewing4 if you are interested in these meta-studies: 85-90% of all racial groups who called 911 for help felt they behaved properly

I think this broadly helps frame a discussion where we can dispense with the false equivalency and agree on points 1 and 2 above.

A Baseline for Police Violence

There are over 800,000 law enforcement officers in the US5. In any given year there are approximately 63 million unique interactions between a civilian and a police officer in the United States (source: US Department of Justice6). Police shootings are cataloged and scrutinized by media and the Department of Justice. The FBI has entire divisions dedicated to investigating civil rights violations of local police departments. The Washington Post has a widely publicized police database7 which broadly proclaims that “black Americans are killed by police is more than twice as high as the rate for white Americans.”

If we are looking for clearly objectionable police behavior and bias let’s filter this down and specifically look only at shootings of unarmed people and not shootings involving some kind of weapon. Filter the database for 2019 and we see 1,004 people. Filter it again for “Unarmed” and the number drops by 99% to 56 people. Of those 56 people: 25 were white, 15 were African American, 11 were Hispanic, and 5 were other.

There are pretty broad studies from Harvard and Michigan State University that conclude that at least when it comes to fatal force the police are not biased by race8. What I think is clear is that minorities are more likely to have contact with police, and more likely to be prosecuted for a crime than white people under similar circumstances. So here you have the paradox of points 1 and 2 on display: as a minority you are more likely to have a police encounter purely based off the demographics of communities and deployment of police assets (point 1 above systemic factors) but once that encounter starts you are of equal or even less likely to be killed than a white person (see footnote 4) i.e. point 2 above police officers, in general, aren’t biased in their application of fatal force.

Everyone forgets to look at police officers though – the other side of the coin. 48 police officers were killed in 2019, 40 were white, 7 were African American, and 1 was Asian. This means that if you are an unarmed African American as part of the general population in 2019 you die at the hands of police at a rate of approximately 15 per 37.1 million compared to African American police officers who died at a rate of 7 per 106,400. (800,000 police officers, of which 13.3% are African American9, compared to 12.6% of the general US population).

So even if you assume every unarmed killing (more on that later – use of force, tactics, and the fact a police officer never knows who is armed or not) is entirely without any reasonable cause you have a fatality error rate in 2019 for all citizens, regardless of color, of 56 people per 63 million unique police to citizen interactions per year. Or a rate of .00009%. I think one is one too many but when you have 800,000 people making decisions in 63 million encounters some of which are bound to involve making decisions under conditions of risk, violence, and uncertainty, I would imagine that error rate is broadly representative of the error rate in any human endeavor.

Understanding Violent Encounters and Human Limitations 

“As your heart rate goes up, your tunnel vision can get narrower and your auditory exclusion can increase.” 

— Dave GrossmanOn Combat: The Psychology and Physiology of Deadly Conflict in War and in Peace

Everyone sits back and looks at the situation and likes to think about what they might have done. Here are some realities for the people that have seen too many movies. You can start with the first 3 listed in this article: 15 Things The Police Wish The Public Knew About Law Enforcement10:

  1.   The police aren’t martial arts or even hand to hand combat experts.

    “People have been conditioned by TV to believe that a properly trained police officer of any size can take down a person of superior size and strength11, quickly, almost effortlessly, without the use of weapons, and without any injury to either party. This is not true. Few cops are expert martial artists. The defensive tactics training12 they receive is fairly perfunctory. Struggles often result in injured joints, lacerations, concussions and other injuries to both parties. There is lots of cursing and screaming involved. The cops usually win, but only because they can get enough cops on the scene to overwhelm the adversary.

    The reality of it is this: if you get physical with a police officer they are going to assume their life is in mortal danger. If at any point you can hit them hard enough to stun them, or are able to grab their weapon, their assumption is that you are going to kill them. So this is why you see multiple police officers tackle and hit people at times – they aren’t experts in hand to hand combatives, they are going to use numbers and brute force to bring the situation under control as quickly as possible.

  2.  Performance Under Stress: During a stressful event the human capacity to think and even respond with coordinated physical movements is reduced.

    What you get is brute force gross motor function moves. Let’s talk about people’s reaction under stressful situations13 for people who have never been a knockdown drag-out fight or have not been shot at:

      • During a stress event, the SNS is activated and adrenaline, chemicals, and hormones are dumped from the adrenal glands and immediately sent out to the areas of the body needed to primarily support the survival effort. At 145 heart beats per minute (BPM), most people lose complex motor skills, meaning those manual dexterity skills necessary to do several things at once or in unison.
      • At 175 BPM, the pupils dilate and flatten and visual narrowing occurs – or what is referred to as tunnel vision – and since the visual system is the primary sensory system for the brain it becomes increasingly difficult to focus and track objects and targets.
      • In the auditory system, hearing shuts down or is diminished significantly at around 115 BPMs and that is why many people say they didn’t hear anything during a life-threatening stress event.
      • The brain is ultimately affected as well. At 175 BPM, it is not uncommon for someone to have problems recalling what just occurred. This is sometimes referred to as “critical stress amnesia.” Immediately after an event, a person may only recall 30 percent of what happened with memory gradually increasing over many hours.
      • At 185-220 BPM, most people will go into a state of “hyper-vigilance.” This is also commonly known as the “deer in the headlights” or “feedback mode” where a person repeats non-effectual actions or having irrational behavior like moving from behind the protection of a building during a gunfight.
      • Lastly, at a mere 115 BPM, fine and complex physical motor skills become less available and effective. Pulling the trigger of handgun correctly, aiming on target or manipulating handcuffs or other tools becomes increasingly difficult to do. This is in direct contrast to the gross motor skills which become enhanced such as those parts of the body needed to fight or flee.

  3.  Split Second Decision Making14: Why It Can Look So Bad After The Fact
    • Go back and re-read the effects of stress on the body and the impact on motor skills and brain function. The average gunfight is over in seconds which means there is not often time for conscious thought. When people receive weapons training they are usually taught to 1. Aim center mass of a target because even when you are aren’t under stress it’s nearly impossible to hit an appendage such as an arm or leg and 2. Keep shooting until the target goes down. Why? Because sometimes getting shot actually doesn’t stop someone from coming at you. I refer to this Apple podcast: Mike Day: Navy SEAL, Shot 27 Times and Never Quit15 who was shot 27 times and still managed to take out his attacker.
    • So when you read some incendiary article that police shot someone 30 times, what they aren’t saying is that it’s not like the police had a meeting before and decided how who was going to shoot how many bullets, the entire event probably transpired in 5 seconds with no time to coordinate, and each officer drew their weapon as they were trained to do and shot repeatedly until the individual went down. Furthermore, given the effects of stress on the body, each officer was probably not even aware of what the other people around them were doing at the time.

Examples of the Types of Decisions Officers Make: I’ve spoken to people about the death statistics for police officers and the response is so what, they signed up for that job. Well, the counterpoint is that you’ve implicitly admitted then than it’s inherently dangerous and violent. Why is that an important acknowledgment? Because to understand police violence you need to understand what kinds of situations they are confronted with and how they are trained to react.

    1. Hint: it’s not easy16 and unless you’ve undergone the training17 it’s really easy to read an after the fact headline and become enraged. Footnotes 8 and 9 are really worth going to in order to get a feel for this.
    2. Two quick summary stories from my use of force training: in one class we watched bodycam videos of police shootings and voted after on if the use of force was appropriate. On one of them, the person was running, stopped, turn around really quickly and pulled a gun out. He was shot and killed. 100% of the class voted it was an appropriate shooting. They slowed the tape down and showed us the pictures after, it was a very young man and the gun was actually a cell phone.
    3. It’s not easy when it’s happening in real-time speed and your stress hormones are flooding your system – vision narrows and your brain just reacts at times without time even for conscious thought. In the virtual simulator, I was in a shoot or no-shoot decision and I shot a lady. To me, it looked like she was pointing the gun at another officer to her right. They let the video play through and it turns out she was putting the gun down, I just had a bad angle. It’s terrifying to me how hard it is to make decisions in these scenarios.
    4. Look at this scenario18 and how fast it plays out – and the officers have the benefit of daylight and helicopter telling them what the person is doing. The reality is you never know who19 has a gun – I carried a concealed weapon and was able to draw it and fire two shots into a target at close range in under 2 seconds
    5. What is the takeaway when you combine these split-second scenarios with human decision making under stress: Police officers are taught that action beats reaction – so if he/she even thinks you are reaching for something that might harm them they are going to attempt to react faster than you and shoot. If you want to see why officers often react the way they do, or attempt to react with a strong level of force to head off any resistance right up front just go on youtube and drop in something about traffic stops gone wrong. Things go from okay to getting shot at in a literal second. A lot of the posturing and domineering behavior is done in hopes to dissuade someone from even thinking about taking that road.
  1. The Damage of a Bad Media Narrative20 “Atlanta Police Officer Shoots a Black Man Dead at the Fast-Food Drive-Thru” That’s the headline, people are already protesting. The police officer has already been fired and the mayor forced the police chief to resign. You read further details: the man had passed out in his car and was blocking the drive through so police were called. He got out of his car, started wrestling with the officers, managed to take one of their tasers, and was firing it at them, and only at that point did they shoot him. None of that is in the media, instead the officer is fired and the police chief is forced to resign. Any intelligent police officer that can find work elsewhere right now is going to do so and you are going to be left with less qualified and capable candidates. This entire narrative is making the situation more volatile and more error prone rather than the opposite.

Societal Considerations

 Large datasets and false homogeneity: First point and counterpoint: Large sets of numbers hide the truth at times. If you have never worked in law enforcement it’s hard to realize that the police are not a monolithic organization. Police departments are like church parishes – each one has its own culture, leadership, training department, demographic make-up, funding sources, etc. This view enables the following conclusions 1. Don’t just look at the national level averages and say there is no problem. On the other hand 2. The fact that departments vary widely should also make people hesitant to condemn the police en masse as some collective hive mind bent on discrimination. What is clear is that you give police departments a lot of power and authority – hiring practices should come under the ultimate scrutiny.

Lack of Narrative and Effect: Well what about the other side of the story when police are entirely wrong in their actions? I think that is put on display every day, what people don’t understand is what police officers are confronted with daily and just how quickly they have to decide under pressure. When you routinely vilify the police and incite hatred towards them without understanding the demands of their job and how these kind of things can occur you are creating a real problem in the sense that no reasonably intelligent person is going to want to become a police officer and the quality of your candidate pool is going to go down drastically. This will likely make all of the above problems worse over time and not better. There is a very real human element to this that is hidden by the dominant narratives.

“All Cops Are Bad Because They Don’t Turn in The Bad Cops”: People are dismissed from law enforcement agencies all the time – it’s just not publicized. I worked for a smaller agency and over the course of four years just in my local office we dismissed 4 individuals from internal investigations, from low ranking to very high ranking. They didn’t do anything criminal, or even overtly wrong in some cases, but they were judged to have a character not appropriate to law enforcement. That being said, there is a lot of evidence piling up that police unions are a very large problem because they protect officers from complaints and the officers cannot get fired. So even if a fellow officer or citizen files multiple complaints, nothing happens21. We didn’t have a union so people could be dismissed at any point.

Concluding Thoughts

Let’s stop turning police officers into the scapegoat for all the underlying societal problems that nobody wanted to address before. You need a holistic and systemic approach. Reach out to local police departments and include them in the discussion, support politicians to change the laws they have to enforce, support charities that help ensure equal treatment in the justice system. But if you keep vilifying and blaming the police for the entire system you are only going to get less qualified and less astute police officers moving forward, and that will be to the detriment of all of us. The current narrative is largely inaccurate, it’s also damaging.

Breaking Barriers United on Defunding The Police (Link)

Jay Stalien on Being a Beat Cop in Urban America (Link)

Humanizing the Badge (Link)

On Trading and Aptitude

I know there are many younger readers of this letter. I’m not a quant. I took Calculus BC in HS and one stats class in college (although I do want to take more math online — I’m not advocating ignorance). Many of you are very strong in math. There’s a perception that options are about graduate degree stochastic calculus and differential equations. There are research-oriented jobs for which this is true. These jobs require raw mental horsepower and lots of training to tackle technical problems.

On the trading side, don’t get discouraged by academic notation in option papers. Here reasoning and numeracy are the pen and hammer. The tools of the trade. I should add for college students looking to get into trading coding is now table stakes. You need to have something to give in exchange for learning. The business is harder than ever, fetching lunch is not enough. (I know what you are thinking. Every generation in trading always thinks “if I was just born 10 years earlier it would have been so much easier to rake in the bucks”. It’s as stupid as a 300 lb lineman who wishes he could have come up in a time when linemen only weighed 250. He’s committing a time travel fallacy where he gets to go to the past with knowledge of recent innovations in diet, drugs, and exercise). Continuing on. The ability to code is also self-reliance. My own ability is very limited and I’m sure a junior will look at me the way I used to look at older traders who struggled with Excel. Circle of life.

Perhaps more so than the pure quant roles, in trading there’s a lot of room for grit. The analogy is as simple as the fact that most poker players are not quants, but there’s no doubting their discipline, endurance, ability to focus, number-sense, and logic skills. Your liberal arts (and no economics and business degrees are not science) degree is not a life sentence in ops.

(To be clear, this is not an affront to ops…my wife went that way. In fact, there is a whole conversation to be had about why a career in ops can be a more lucrative route. But it’s a parallel route and if a person wants to trade and take risk, anything else will feel like they failed even if objective standards might say otherwise).

On the other hand, tying this all back to the Parable of the Talents essay — trading is not for everyone. It’s not even for many. You can do anything, except for what you can’t do.

Music Appreciation Channels

My favorite YouTube channels are about music appreciation

1. Ryan and George are Lost in Vegas. (Link)

These 2 guys are R&B and hip-hop enthusiasts who have discovered rock and metal. Their followers submit songs for them to do reaction videos and they have amassed a million followers who tune in to see their commentary. It’s like a play-by-play for songs you know. Despite not being musicians themselves, you only need to see a few videos to realize they have innate musicality and perceptive ears. But the best part of these videos is how enthusiastic and endearing they are. It’s easy to see why they have become popular enough to quit their day jobs. I’ve been watching them for a couple of years and it’s cool to watch their palette widen and see what songs they will give their highest honor…”playlist!”

While I dig so many of their videos, including their breakdowns of Rush, Rage Against the Machine, Van Halen, and Metallica songs their’s nothing like watching them lose their minds over a song that you also love. They do plenty of hip-hop and even country songs.

Here are some of my favorites:

  • Alice in Chains: Rooster (Link)
  • Chris Stapleton: Tennessee Whiskey (Link)
  • Black Sabbath: War Pigs (Link)

And here’s a more recent one with their higher production backdrop…and is a great way to wade into the brilliance of Tool’s recent album which I’ve raved about before.:

  • Tool: Pneuma (Link)

2. Rick Beato’s Everything Music channel (Link)

Rick is a producer and multi-instrumentalist who represents the opposite end of Ryan and George’s amateur appreciation. Rick will dive into music theory and teach you what makes certain songs great. Everything from ear training to detailed top 20 lists. If you are a big music fan, music nerd, or musician this channel could keep you busy enough to displace Netflix. His home studio is ridiculous and he can sidestep getting blocked by music labels since he can easily just demonstrate the music being discussed on his own.

A great place to start:  “What Makes This Song Great?” series (Link)

Here’s a look at his other playlists. His son Dylan has perfect pitch and gets his own playlist full of his own party tricks.