Moontower #63

Friends,

Protest. Riots. Justice. Change. It was hard to think about anything else this week. I have a lot of scattered thoughts. I keep fixing to them like stars in a black sky. I admit I cannot seem to find the constellation that connects them so I’ll just list the links that resonated. I’ll follow it with some of my own riffs at the end. I’ve picked up a lot more subscribers recently on the back of my financial posts. I probably don’t have enough goodwill to offend. If sorting my feelings here makes you uncomfortable you can always reach out. I don’t usually do posts like this but it felt a bit off-key to just write one of my typical posts. And of course, there’s always the “unsubscribe” button. I appreciate every reader but this is just a free email from a random middle-aged dude.

Ok, let’s ride.

My Favorite Links From The Week

1) Twitter thread of a fan describing how Dave Chappelle changed everyone in that room that night. 200+ people became part of the solution if they weren’t already. Even a privileged girl in a privileged hat with a privileged mindset. Point is, it doesn’t matter what you thought before. You can always change. (Link)

This Twitter thread pairs perfectly with Chappelle’s suggestions

@pickledmint: Tips on engaging in conversation with family about the BLM movement. From your local social worker who has dealt with extremely conservative, racist, bigoted, homophobic family members their entire life. A thread with examples. (Link)

2) Bob Seawright’s letter this week was bullet after bullet of insight. While I’ll mention my favorite parts, I encourage you to read the whole thing. (Link)

• He was a criminal attorney in his younger years. He described himself as “generally conservative, law-and-order guy”. But he writes:I had to conclude that the system was rigged. The police had also determined that the system was rigged, but in a different way, and did what they deemed necessary to get what was, in their view, the proper result.

  I have no doubt that in the vast majority of cases, rough justice was done. But the dishonesty of the proceedings had to have a chilling effect on the people involved. Police, prosecutors, and judges lost sight of the oaths they swore. Defendants lost faith – if they ever had it – that justice was possible. The rule of law was honored only in the breach.

• Vonnegut gave Seawright’s commencement speech in 1978. Teaser:

  Being stupid and full of myself – in other words, a new college graduate – I completely misunderstood it. At the time, what I heard was him telling us to hate more…

• MLK on riots:

  Riots are “socially destructive and self-defeating,” the Rev. Dr. Martin Luther King Jr. said during the violent unrest in the 1960s. However, “[i]t is as necessary for me to be as vigorous in condemning the conditions which cause persons to feel that they must engage in riotous activities as it is for me to condemn riots.”

• One of the best-articulated characterizations of Trump and his supporters:

  President Trump’s inaugural act was a petty and absurd lie about a meaningless fact, the falsehood of which was readily demonstrable…It was all ready-proof that President Trump is manifestly unfit for office…I screenshotted and highlighted what comes next. (Link)

Links That Stood Out To Me

On the insidiousness of racism:

• Jowanza is a black software developer. The racism he deals with does not leave a smoking crater. I’d describe it as the 21st century, Nextdoor strain of racism. And this dude codes for a living. (Link to my tweet response and his post)
• Ben Thompson usually writes about the chess game of big tech and media companies. Here he uses his sharp eye to deconstruct how institutionalized racism perpetuates. There’s a “crescent you can’t unsee” in Madison, WI. Read through the end to get to the tradeoffs in social media policies with respect to how they shape public discourse. (Link)

On Kaepernick:

• First of all, the public can’t trade for a damn. (Link)
• Malcolm Jenkins’s emotional rebuttal to Drew Brees who tried to die on the kneeling-dishonors-the-flag-hill (to his credit, he cut his losses). Jenkins’ pain, anger, disappointment and appreciation of history stands in very sharp contrast to Brees’ intellectually lazy stance. Jenkins’ pleas reflect skin-in-the-game. (Link)
• If you watched Last Dance, you will recall that this tweet could have applied to Jordan too. I wouldn’t go so far as to condemn Jordan and Tiger. But the tweet accidentally reminds you how big Kap’s sacrifice actually was. (Link)
• The flag idolatry arguments always felt a little dog-whistley to me. Let’s try this thought experiment: Kap was playing in SF, which has some of the most progressive gun restrictions. If he kneeled in protest of those un-American laws, would he have been “disrespecting the flag”? What if Kap was white and kneeling against gun laws that were “treading” on him?

  The Declaration of Independence’s “All men are created” comes before the Second Amendment. I mean it says it right there in the name — amendment. It didn’t even make the first draft. The way to honor the flag is by protecting our equal rights. Kap sacrificed his career to keep what our soldiers fought for sacred. Kneeling was never about dishonoring America. And if you think I’m an idiot at least I’m in good company. Check out Bill Burr in the first 60 seconds of this clip. (Link)

• In a similar vein to my Kaepernick opinion, a buddy of mine wrote of all these protests:

  Please don’t be one of the people who claims that this all shows that liberals or democrats or whoever do not support the “rule of law”. This entire protest is about supporting the rule of law, because nothing is more damaging to “law and order” than law enforcement being above the law and untrustworthy. (emphasis mine)

On police:

• David Epstein, who I’m a fan of, interviewed his brother who is a lawyer focused on justice reform. The history of the Minneapolis police and their “prone restraint” training makes Floyd’s homicide so much worse. But this interview goes into several embedded features of the police and union institutions that make reform so difficult. Interesting and disturbing. (Link)
• When Springsteen remembered one of their victims, the NYC cops turned on him. It goes deeper. (Link)
• The looters and opportunists suck. Not just because of their crimes. Because they provide cover to those who may want to delegitimize the protests. But many of the looters will hopefully face penalties. Many were arrested. Many will have their actions etched in their permanent records. But will we be able to say the same for the cops who were entrusted as agents of the state which is an agent of its people? I’m not talking about the cases where cops were earnestly defending themselves. I’m talking about the cops who confirm suspicions of sadism. Thread of awful videos. (Link)
• Don’t get me wrong, I also have sympathy for the police. My view is best explained by an unexpected source — the “abolish the police” movement. It’s not what it sounds like. It’s rooted in the recognition that we ask too much of police. They are asked to be the mop for all society’s spills. Spills that we don’t take care of closer to the source. Police are asked to be social workers (anyone living in SF has seen this). They are asked to deal with the mentally ill. That shouldn’t be their job. The “abolish the police” movement is not so much about cutting the supply of police services as much as it’s trying to cut the demand for them. What can we fix upstream of the police? (Link)

On the press:

When I first saw this my head almost exploded. But it turns out this was a turduken of a headline sewed together by the AP to make Trump look like the pure spirit form of himself instead of the one that pretends to be a leader. But no, if you watch the clip he exercised enough restraint somehow to not actually link Floyd to the economy. This is just another piece of clickbait polluting the air and with no recognition of its negative externalities. If you wanted to make Trump look bad, you could just report on him honestly. By exaggerating, you cry wolf. You desensitize people to his nihilism.

Stream of Consciousness

Some of my own unorganized thoughts. Excuse the randomness. Much of it is open-ended.

• Environments and culture are bigger than the self. The studies of bad behavior in police units with strong unions is both upsetting and unsurprising. Also wouldn’t you expect good cops to become reluctant accomplices in covering up for bad cops? We ask a lot when we ask them to choose between brotherhood and morality because their livelihoods and safety depend on the first. This is more of an indictment of the system than the individuals. But the system also attracts bad actors. Even if the Stanford Prison Experiment never replicated, I’m still scarred from learning about it in my first semester in college.
• Mobs are scary. This is true in a physical sense. Just see this discussion of riots modeled as a coordination problem (h/t Taylor). But also in the groupthink sense. I’m just as wary of the warm embrace of mob acceptance. Validation without scrutiny usually precedes bonehead ideas.
• You can be outraged at rioters that are attacking cops as well as the police brutality. It’s possible to hold both these thoughts in your head at the same time. The rioters are capitalizing on a moment when police have lost legitimacy as an institution. Their destruction is a despicable example of collateral damage. But this moment is screaming that the collateral damage of the status quo is far greater. Are you angrier at the rioters who are just idiots being idiots or the “civilized” people who stand for order while perpetuating injustice?

  Check out this graphic.

  It’s definitely too reductionist. In fact, if you find yourself analyzing the output rather than the assumptions you have already bought the premise. But you must also confront the possibility that cursing the looters with more passion than scolding the status quo could mean you have lost any sense of proportion. (H/t Joe for surfacing that graphic from this post).

• People are more scared of the threat posed to their self-interest. If you are on the right side of the tracks you fear disorder more than injustice. I live in a fancy white neighborhood. You think I wouldn’t be terrified if gangs were plotting to pillage our home Dark Knight Rises style? The rumors on Nextdoor of such plans are just rumors. Be honest. Part of the reason it’s so easy to dismiss them is a sense that the authorities would never let that happen to white neighborhoods with white kids. Feels gross to even say that but until we start playing with our cards face up we won’t make progress.  Meanwhile, black parents live in chronic fear that their sons may be pulled over by a caffeinated cop.
• Is there a natural rate of racism? Is there a lower bound, like the natural rate of unemployment? Is human nature subject to a ‘law of conservation of conflict’? Does the fear that fuel racism shapeshift another set of group differences from a mere boundary to another “-ism”? Futile thought perhaps. Either way, as my Jewish friend Mike says, if you can’t eradicate the hate, he wants to know where it is so he can stay away. If you think there’s a baseline level of hate how does it change the mitigation strategies? Again, just thinking aloud.
• White privilege as original sin is an ideological overreach. Self-denial feels like such a closed way to recruit people to your cause. The Catholic church does that. Perhaps they would have been even more successful if they didn’t push that idea. Social questions rarely have answers to such counterfactuals.
• People are making lists of black-owned businesses to support. Others are countering that this non-merit based patronage is a long-run disservice to black owners. I ask, what is merit anyway? Unless you believe a white person was born endowed with superior ability, you can never escape the question of how the environment shaped ability. And if you cannot escape that, you cannot escape the question of racism. Disentangling this is complicated and since the problem is reflexive I don’t think studies are going to help. Economics has always posed trade-offs between equity and efficiency. In a showdown, whoever gets to define these terms will have won before the debate even starts.
• If integration and education are the keys to fighting racism, then black business support can be considered a positive externality that is otherwise uncaptured by financial accounting. I could see this making its way into ESG discussions if it hasn’t already. It might even turn out to be a wise move in the narrow commercial sense that we are used to. I’m sure one can find studies of professional women or minority investors being better than white male counterparts. As social science goes you can find any kind of study, but conceptually that result still makes sense. Just consider Nassim Taleb’s argument that you do not want your surgeon to be handsome like they are on TV. All else equal, you’d expect the uglier surgeon to be better since it requires more merit to overcome the bias which may select for that role. In other words, it’s really hard for black people to become hedge fund managers, so when they do you’d expect them to be far more skillful than there more typical counterparts. I always think this when I see undersized NFL players. Pound for pound they are the baddest dudes on the field.
• If riots and looting are the largest cost to having a moment of real change, I think we would be getting a bargain. I don’t think fixing the system would ever come that cheap. By the way, I really have no idea what fixing the system even means. What’s the bigger hurdle…agreeing there is a problem or having consensus on how to attack it?

• I get nervous when talking about humans on the group level. I feel much more secure in how I think of individual interactions and relationships. I don’t really understand how to scale those relationships. I’m always hesitant to anonymize the members of a group which inevitably happens when we abstract. But such is the realm of policy. I foresee more misery comparisons and pop ethics trolley problems. I guess Covid prepared us for that.

Finally here’s my list of expressions that should make you brace yourself for idiocy

• “All Lives Matter”

  A buddy said it best:

  Black Lives Matter is not that hard to understand. If I had a bumper sticker on my car that said “Unborn Lives Matter”, you’d understand that I was against abortions, not that I thought people already born didn’t matter. If I had a sign that said “Save the Whales”, you would understand that I thought whales were under threat. You would not angrily say to me “what about all the other animals?” Black Lives Matter is not in any way a statement that other lives do not matter. “All Lives Matter” is now used by racists and various other jerks primarily. Don’t do this.

• “Not all cops are bad”

  While this is true this is a misdirection. It’s not the relevant question. That statement would be true if even half the cops were bad. For reference, defect rates in manufacturing are measured in PPM. Parts per million! We have high standards for widgets.

  What defect tolerance will we accept for our armed enforcers?

• “Not all black people are bad”

  Um, this isn’t 1920. Racism is only that blatant behind closed doors. The problem of racism is when it’s been embedded in our institutions implicitly.

• “Virtue signaling blah blah blah”

  Worrying about virtue-signaling seems like a problem only privileged people worry about. Who else worries about this? I think the concern stems from the zero-sumness of status. People who are concerned about it are feeling the loss of relative status. It costs little to say woke things and confer a benefit to yourself. So naturally, there will be some imposters looking for a status boost (NFL, cough). If you are concerned about this you are being kinda narrow. I’d guess you might also be kinda miserable. Lighten up. It seems like a petty thing to worry about.

  Actually, let me conjure a stronger case against this worry. Bear with me, it’s a bit recursive.

  If you see virtue-signaling wherever you look, this is worse than an even neutral stance. Your attitude can be contagious. Onlookers who now know about virtue-signaling suspect everyone is virtue-signaling which works to delegitimize the cause people are allegedly signaling about. So indirectly, by worrying about virtue-signaling you become the intellectual cousin of a rioter who undermines the protests. Now onlookers who are motivated against protests start using claims of virtue-signaling, warranted or not, to detract from the do-gooding.

  If you want to be part of what Chappelle calls the solution, stop worrying about virtue-signaling. Just focus on what can do to help. Actions > words.

Speaking of actions, I know I’m under-educated in this area. I rambled the thoughts I had this week. It just felt like the thing to write down. If not for you, then for me. You could probably live a thousand scholars’ lives and still be grasping for answers. But you don’t have that luxury anyway. You get 85 laps around the sun give or take. You are going to need to make decisions without all the information. If sharing what I saw this week provoked thought one way or another then I hope we both inched a little closer to our better selves.

If you are interested,2 organizations I’m a fan of both empower black or underprivileged through education in STEM and business respectively.

1. The Hidden Genius Project (Link)
2. Build.org (Link)

They can take money or time.

The Money Angle

From the intro of my latest post:

I was chatting with a quant friend who was bouncing an options idea off me. In the course of the conversation, he was surprised I did not assume the .50 delta option was the ATM (at-the-money) option. My friend is much smarter than me on finance stuff but options aren’t his native professional language. So if this idea had him tripped up I realized I had a reason to write a post.

If I do this correctly you will gain a better understanding of:

1. Delta as a hedge ratio, not a probability
2. How volatility affects the mean, median, and mode of these returns
3. The relationship of arithmetic to geometric returns in option theory
4. What these distributions mean for the value of popular option structures

I wrote this post for a non-technical audience (not that I consider myself to be a technical anyway). I shared it on Twitter and it immediately became one of my most popular posts. If you find the topic interesting I hope you find its explanations approachable. If not, just reach out.

Lessons from the .50 Delta Option (Link)

Last Call