Moontower #187


In Wednesday’s Munchies, I pointed you to Venkatesh Rao’s brain-expanding interview on Infinite Loops. One view I’m still marinating on is how finding a sense of meaning is not “a matter of spiritual retreats and going on soul-searching journeys and having shamans take you on ayahuasca retreats and things like that. It’s not about that at all. It’s the first time you come to a hard decision in your career or life, make the hard decision, see how good you are at making tough calls, and then keep doing that and meaning-making will take care of itself.”

To call meaning-making essential is not stepping out on a limb, unless you’re a nihilist.

Rao makes a bolder claim — looking for meaning is “intensely practical.”

A lot of people don’t get this. If you look at conversations about meaning-making in the abstract…listening to podcasters and getting radicalized, that level of conversation about the meaning crisis, it seems like a philosophical spiritual problem that should be addressed with religion and philosophy, ideas and so forth. It’s not. It’s really as simple as meaning-making is unlocked when you first learn to take courageous decisions and keep doing that, so it becomes a habit.

Connecting dots…when meaning-making is unlocked what actually changes for you?

You acquire an earned sense of agency as opposed to the illusion of agency that “tragic luck” furnishes. This requires being rugged now and again. Any rugging worth a lesson, means you took a real risk.

And I think yes, that is a learnable, teachable skill, but it’s one that the industrial environment with schooling and the paycheck world is actually anti-optimized for. It’s designed to teach you exactly the opposite of that. It’s designed to take you from an naive starting point and keep you tragically lucky for the rest of your life. And if they fail at it, you’re tossed by the wayside. That’s what the industrial world is set up to do, make you tragically lucky or throw you into the garbage heap.

Rao, coming around the bend with the baton, is arguing that our sense of agency is stunted by an institutionally enforced “narrow band of risk”. When I rummage through my feelings about education I come to a similar conclusion — the purpose of education is to bootstrap a sense of agency.

I’ll let one of my favorite education writers Matt Bateman take the baton for the last leg.

From Vocational Training For The Soul:

In the 20th century, there are two distinct rationales for education: vocational and characterological. Putting aside how well education actually does at getting you a better job or helping you become a better person or citizen, the idea is that the core of schooling should do both.

The most obvious place to look for the economic upside of an education is in the three Rs: writing, reading, and math. There are questions as to whether the specific math that students learn is optimally practical—should it instead emphasize, say, statistics, or personal finance, or maybe even spreadsheets?—literacy and numeracy are deployed throughout the economy and do indeed comprise an unambiguously useful part of education.

Literature, history, and the arts all fall under the heading of soulcraft. Even science, the practical driver of the modern world, is not that useful as you learn it in school. A small minority of students deploy their scientific knowledge in their careers, and those that do get specialized training far beyond what you get in K-12. These things are meant to prepare you for appreciation of or participation in the human project in a non-vocational way.

These divisions are very much alive today, as people struggle to find a coherent view of what our largely dysfunctional education system is supposed to accomplish. Some criticize education for not providing more economic upside, arguing for a more practical education, shorn of classical trappings. Others defend the humanistic value of education and argue that we should spend more time on non-economic upsides. This debate cuts across K-12, higher education, and even early childhood education.

Is there a way to transcend these divisions? Is there a way to get a handle on the vocational value of education that integrates its humanistic elements, rather than downplaying or siloing them?

It is commonplace today for a person to be profoundly alienated from the entire domain of work. This is not a Marxist critique about owning one’s labor, nor an aristocratic pining for a life of leisure. It is an observation that, for many people, work is a source of bitterness, not dignity. A seemingly small subset of people find meaning in work, and the rest fail to “find their passion”—a notion that is likely part of the problem—or simply resent work in a more general way.

While we still speak here and there of the value of a work ethic, the “ethic” part of this is, for us, obscure. We do not naturally see one’s personal relationship to work as a major moral issue. But it is one: the people who manage to find meaning in work are not the lucky few who land the good jobs, but the good who manage to build their souls in a certain way.

Education should offer more general value than the skills acquired on the job or in vocational training—but that general value, the soulcraft aspect of education, is not vocationally inert. It can and should nurture the beliefs and virtues associated with a life of work.

Bateman goes on to explain 4 practical ways to nurture such soulcraft. My favorite animates knowledge by linking it to actual humans. This is important (in my opinion) because without narrative disjointed ideas might as well be trivia.

  • The content of education should place more emphasis on the biographies that underlie it. There is no item of knowledge in education that is not the result of the work of some past human.

My second favorite:

  • We should allow opportunities for real work where possible. This is especially true of older adolescents, who can get jobs—from the entry-level to technical, depending on the teen’s skills and circumstances. But scaffolded opportunities can be provided for younger adolescents and elementary students to experience the reality, even the economic reality of work.

The inert child who never worked with his hands, who never had the feeling of being useful and capable of effort, who never found by experience that to live means living socially, and that to think and to create means to make use of a harmony of souls; this type of child… will become pessimistic and melancholy and will seek on the surface of vanity the compensation for a lost paradise.

And thus, a lessened man, he will appear at the gates of the university. And to ask for what? To ask for a profession that will render him capable of making his home in a society in which he is a stranger and which is indifferent to him. He will enter into a society to take part in the functioning of a civilization for which he lacks all feeling.

Maria Montessori

This week’s sponsor is PitBulls (myself, Tina and Steiner)!

PitBulls is the updated brand of StockSlam.

A large market-making firm is hosting PitBulls Sessions on May 17, 18, and 19 in Chicago. This is our 3rd series of doing these after NYC and SF. Come learn, have fun, and meet people with similar interests.

It’s totally free…and even better our host is always hiring!

  • You can learn more and apply here.
  • For some videos and context see: Mock Trading

Money Angle

I went on the Market Champions podcast with host Srivatasan Prakash (Spotify link) which was released this evening. Towards the end Sri asked me the old Richard Dennis turtle question (or Randolph and Mortimer framing if you prefer)…are traders born or made?

Look, I’m encouraging people to come to Pitbulls in May to learn how to think about trading and decision-making because I think these are teachable skills. But the proper answer is “it depends”. You can listen to the interview for a fuller take but before asking the question it pays to define terms. “Trader” is a vague term. Portfolio managers fit the spirit of the word better than those titled “execution trader”.

[I remember interviewing at a large AUM stock-picking fund in the mid-2000s for an execution job. I had a friend at the fund who got me the interview. When I was rejected I circled back and asked my mole what the problem was — “they knew you’d be bored.” The job was more formulaic than what I was doing. Meanwhile, I was pissed because the job would have paid about 2x what I was making at SIG which should remind you that beta pays a lot more than arbitrage. Sorry nerds, but on average, you skim more off the top knowing which side of the plate a fork setting belongs than knowing an exchange’s rebate tiers.]

Trading is a broad job description and it’s more of a team sport than commonly portrayed. Yet regardless of what criteria you choose to classify it, the most satisfying version of it is when it’s creative. Delightful puzzle-solving especially under live fire where the stakes aren’t life and death — just money. For some types of people, this is a deeply attractive way to spend your day (although I’d warn you that a lot of time it’s rote and boring — soldiers, firefighters, poker pros — it’s a lot of downtime, folding hands and waiting punctuated by periods of action where instincts and muscle-memory matter more than intellect).

In the interview, I make this point with a unique trading scenario I encountered back in 2020 when oil prices went negative. It involved several relative value dislocations between USO (an ETF that holds oil futures), oil futures, and the options on each.

In general, the model to price the relative value between options on USO vs futures options requires creativity and detailed thinking. But when oil went negative several new dislocations announced themselves — and if you were a paint-by-numbers trader then some of the dislocations were actually a trap. If you think more like a financial hacker, it was an opportunity. But you had to be quick — napkin calculations over intricate models.

If the puzzles of financial hacking interest you read ahead.

Money Angle For Masochists

The Setup

You are a trader specializing in making markets in oil futures and related derivatives. Your tradeable universe includes:

  • listed on oil futures
  • listed oil options
  • an ETF that holds front-month oil futures (like USO)
  1. The market closes. You observe the following facts:
    notion image

    The ETF share price closes at $6.00, in line with its NAV.

  1. You walk into the office the next day. All of the prices and facts are unchanged. However, you notice: The 0-strike put on the futures is $1.00 bid! You scratch your head. The zero-strike put has a bid?? Understanding that markets don’t present free money so easily, you come to the most likely explanation — oil futures can go negative!

Now the fun begins.

The following questions will slowly help you identify what opportunities might exist. I’ve provided hints that become increasingly strong so if you want to challenge yourself don’t rush for help too soon.

To continue:

Financial Hacking: ETF vs Negative Oil Futures

Note: If you are interviewing a junior or mid-level trader this might inspire some new questions.

From My Actual Life

Something I recently started doing that might be of interest to parents:

I’m reading “Journey to the Center of the Earth” by Jules Verne to my almost 7-year-old.

Written in the 1800s, the writing style is challenging.

So I read a bit, then I “translate” it into a more natural language for him. I’ve explained to him that if he reads the books he’s able to read and I read this book to him (instead of him trying to read it himself, which he was trying to do, but I have zero confidence he’s understanding), the combination will give him “magic.” I try to create some mystique around reading because I want him to think reading gives him special powers. Because that’s a fun thing to think, of course (and we probably should think about more things in such ways because it helps us notice the joy in being alive and stuff).

One of the chapters ended in a particularly suspenseful way. And I tried to explain the concept of suspense to him (to his and his teacher’s credit, he mentioned that when they read in school, they pause to try to predict what will happen next in the story).

So with the idea of suspense established, I just asked him to come up with suspenseful sentences. I’ve never asked him to do that, and he didn’t reply with anything substantive, but that’s okay, whatever… (I did give him an example: “The boy thought he locked the door, but then he saw the knob turn,” and my son goes, “that would freak me out,” and since this was just before bed, I felt a bit guilty..oops)

Just sharing for other parents’ benefit, I think we all want to find ways to show the joy of reading and wanted to start showing him “techniques,” a word I asked Alexa to define for him. So he can identify the author’s “weapons” and so maybe one day he can use them when he writes.

Stay groovy


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