Moontower #71


Several family members wanted to get Zak a Nintendo Switch when he turned 7 a few weeks ago. I shot it down. I’m the bad guy. Sorry, not sorry. I’ll defend my stance and do you one better. I’ll explain why my stance even needs to be defended. Somehow in this battle over video games, I found myself on the low ground.

First, my defense is simple. Opportunity cost. Here’s an example. My 4-year-old Max recently lost his iPad for 10 days. For those of you who follow Yinh’s Insta (feel free to follow, her ‘stories’ are more amusing than anything I write), there was a period of this kid creating his own Marvel paper costumes and pumping out artwork like he was getting paid commission. Less screentime meant more creativity.

When the iPad resurfaced, it crowded out much of his ingenuity. It’s worse than that too. The iPad summons the devil. Every time Max is asked to turn off the screen we suffer a hell tantrum. All the phases of opiate withdrawal unfolding several times a day.

Zak, being 7 and having better emotional control, is not as dramatic but the video games are still crowding out his creativity.

You would think my no-Switch policy would be unanimously embraced. You’d be wrong. Here are the arguments and pro-video game propaganda I push back against.

  • “You played video games and look how you turned out”

    If you grew up in the era of “blowing dust” out of your NES cartridges and have managed to simply not blow your life to smithereens, people will say this to you. We have all seen the amusing correlation/causation pictures. Well, this fallacy is a specific strain of those spurious conclusions. The post-hoc fallacy. If Y came after X, then Y caused X.

    This fallacy is everywhere. Kid has hives. Sleeps in parents’ bed. Hives go away. Therefore, his bed caused the hives. (This just happened in our house). You have a cold so you drink soup. Cold goes away. Must have been the soup. These interventions are given credit for mean reversion’s work.

    The video game example is even worse in my mind because of opportunity cost. I might have a good job today in spite of, not because of, video games. How much didn’t I do because of video games? Maybe I would have been a better athlete, musician, or programmer. All activities that competed for time with video games. Hobbies that if cultivated would have been unambiguously more rewarding considering, today, I wish I was better in all 3 domains and could care less about my video game skills.

  • Video games have benefits

    When I was a kid, I was told video games “rot your brain”. Today, everything from critical thinking to reflexes are attributed to playing games. Scholarships, profits, and Ninja all lend games a legitimacy they didn’t enjoy in 1987. Nothing will make you seem stodgier, techno-fearing, and possibly stupid than being anti-video game.

    Consider Shopify founder Tobi Lutke. He is outspoken in his claims of games like Factorio and Starcraft contributing to his business savvy. Well, if you have ever heard Tobi speak, he’s really smart. A mind like his is going to deconstruct strategy and actively pull the insights from the game. Being analytical in the first place is what’s most important. If it wasn’t video games, he would have cracked something else.

    It’s not the game, it’s the approach to the game. Just like TV or movies or reading. Any passive activity can be intellectually enriching if your approach is active. When you read are you asking what the themes are? Why is the author framing things a certain way? How does it relate to other knowledge? Critically reading or watching can turn “brain-rotting” behaviors into brain-building ones.

Pushing Back Against The Modern Halo Around Gaming

You’d be forgiven for thinking I contribute to the gaming halo. The gaming section of my site is anchored by Let Your Kids Play Boardgames. Some nuance is in order. Our kids play some video games. Playing them is not especially bad or good. I put it in the same category as passively watching TV and it would count against that attention budget. (I reserve the right to modify my stance for games especially strategic or competitive).

Gaming, video or tabletop, can be an amazing way to learn. Fun is a renewable form of fuel to burn. Yet in the wrong personality, it can be horribly inefficient. Like learning about basketball from watching the Kardashians. How many people playing poker on their phones mindlessly are internalizing probability lessons? And parents, you know zombie-mode when you see it.

The halo of gaming stems from its strategic and competitive aspects. Still, strategy and planning can be acquired in many ways. Just this week I was thinking about how much Zak could learn if I asked him to break down the steps to catch a trout. He’d need to find out where to go when to go, what bait to use, and what technique to employ. Taking a big problem and breaking it into smaller steps.

Gaming has fast feedback cycles. Great for learning. But also convenient to get a mouse to push a dopamine lever. Then there’s the whole issue of transference. Does becoming a grandmaster make you better at other strategic endeavors or does it just make you good at chess? And here’s the diabolical question — if the grandmaster excelled in other domains how much credit should we give to chess? Again the fallacy rears its head, post hoc ergo propter hoc. Our minds are so easily tricked. The literature on transference is mixed, but it’s such a believable grift that most people won’t bother to check.

Overall I think the benefits of games are conveniently oversold. Just like TV, if accompanied by parental prompts and guidance they can be an enriching tool to practice critical thinking. Some kids, like young Tobi Lutke, will be inclined that way on their own. Many will just stare with dead eyes, unfazed if the house was burning down. Maybe I’m just an old crank who wishes he had that time back. I’d rather see what kids come up with when they aren’t sitting in front of a screen.

The Money Angle

On Finance Newsletters

An elementary second-order take on finance newsletters would be to assume they are worthless. After all, if the knowledge were valuable why would you share it? Taleb presses further “don’t tell me what you think, tell me what’s in your portfolio.”

John Boorman addresses what’s wrong with this take (link):

“If it’s so good, why would they sell it?”

This is one of the most egregious fallacies in the finance periphery. Why would they sell it? Why do you think? Do the math. Let’s take an example of an area where this is most commonly targeted; newsletter writers or subscription services. Imagine for a moment a trader has a $1m portfolio. He makes on average 10% a year, or $100k. That’s his trading income. If he also runs a subscription service that sells for a $1000 a year, he can get an additional $100k a year with 100 subs. That’s very nice passive income.

Now I used $1m in my example. In reality, most traders are capitalized at $100k or less. They would only need 10 subscribers to get the same return. If they had 100 subs, it would match their entire portfolio value! The question then becomes not “If it’s so good why would they sell it?” but instead “If it’s so good, why wouldn’t they sell it?”

And it’s also grossly unfair to limit this logic to newsletter/sub services. If hedge fund managers are so good, why do they need clients? We know why. The fees. They can make way more from managing other people’s money than just their own. It’s the exact same principle.

I’ve seen many people get tarred with this brush unfairly, especially in the area of technical research, and yet fundamental research with its dire record gets a pass. I’ve seen it firsthand too. If you give something away for free people think it can’t be worth anything. If you charge for it “If it’s so good, why would you sell it?”

Top writers are earning high six figures and well into the seven figures (I’m triangulating on this knowledge, if you think that sounds wrong I’m all ears) despite not promising holy grails. They do not pretend to the beat the market. They are sharing their investing journeys in honest ways while providing commentary and uncovering ideas. I think Boorman was early to recognize that the price signal of a newsletter was therefore a fitting upscaling of the noise inherent in investing.

Last Call

  • Nintendo’s commitment to craft is so Japanese. But is that culture holding it back? Awesome post on the video game industry and how the past, present, and future of Nintendo breathes within it. (Link)
  • My neighbor’s gardener is also a meteorologist. He alerted me to a gov’t campaign to suppress weather data. So I tweeted about it, and alas the replies rolled in with links corroborating the gardener’s story. (Link)
  • My favorite band in high school and still one of my favorites is Alice in Chains. Gibson has a new series where they interview guitarists. If you aren’t a fan you’ll skip this but if you are then you’ll enjoy this hour with Jerry Cantrell. Best thing I watched this week. H/t Avi. (Link)
  • I screwed up the discount link for Byrne Hobart’s letter last week. Here’s another. (Link)

From my actual life 

We took a few days off this week. Some recs for Bay Area folk:
  1. We went kayaking in Tomales Bay on Thursday with a couple of good friends. We had a private guide via Blue Waters Kayaking (Link). It’s one of the rare northwest facing bays in the world and it lies above the San Andreas fault. This creates a highly protected ecosystem with exceptional wildlife diversity. The fault divides the Pacific and North American plates. The Pacific plate travels north at a rate of about 1.5 inches a year, so you can see evidence of Monterey rock formation in Tomales Bay. I remember once reading that this movement also means that the endzones in Cal’s Memorial Stadium will line up next to each other at some point in the future. That stadium is built right on top of the Hayward fault.

    After kayaking, grab a bloody mary at Nick’s Cove then head into Point Reyes for a bottle of wine and the best grilled cheese sando at Cowgirl Creamery. Walk it off by the trails near the river.

    Wrap the day with outstanding wood-fired pizza from Cafe Reyes. Point Reyes is one of the most charming tiny towns in NorCal. The ride up to it through West Marin and Samuel Taylor Park is beautiful as well.

  2. We took the kids to Napa for a night. We stayed at Vista Collina which has a large beautiful picnic area surrounded by bars and markets and even a food truck. The pool is heated to 82 degrees. There’s a big hot tub as well. The property is shared with the Meritage and you are welcome to saunter through the vineyards and try the grapes.

    The resort is before downtown Napa, so if you are coming from Oakland it’s a 40 minute drive. We felt like we were much further away. A rare feeling these days. I’d recommend going during the week. Friday was much less crowded than Saturday even though the hotel is only booking 40% of its capacity.

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