Weekend Reads: August 8, 2021
Duck & Cover, Startup Compensation, CFA, Revolt of the Public
This week’s set of Weekend Reads includes a few more “crunchy” pieces — meaning practical and (I find) satisfying, like finding one of the pieces of crunchy dark bread in a bag of Chex Mix — as well as a longer (strong) recommendation for a book.
Short little piece stating that there are three religions in the world today: religion proper, science, and capitalism. The dominant one right now is science and, more particularly, medicine, which has a particularly Gnostic flavor to it. There is an evil deity — the virus, disease, etc. — and a good deity — recovery (not, notably, health). And there is a liturgy of medicine that is forced at gunpoint on the populations of the world. Imagine if the government forced you to buy stocks or to attend Mass/Synagogue/Mosque/whatever. But this new Gnostic religion is, seemingly, more accepted not just by the common man but by the proponents of the other two religions. Quick, if not a little pontificating, read.
In a similar vein, Helen Andrews at TAC points out the similarities between mandatory masking with cloths over children’s faces to the duck-and-cover practices of the Cold War era. People who don’t delude themselves in both situations know that neither practice would actually be helpful for the problem at hand, but both practices exist as a sort of security theatre to make it look like people are doing something.
I thought this was an interesting observation:
A more exact parallel for masks, in Cold War terms, would be the dog tags given to schoolchildren and recommended by civil defense authorities even for adults. In an actual war, they could be highly useful. Without them, parents might never know if their child was dead or alive. They cost pennies to make, and often the school board paid that. Wearing them cost nothing.
Dog tags offered potentially massive payoff for effectively zero cost — except, of course, symbolically. They would be a totem of death around everyone’s neck, a constant reminder to be afraid. Even a parent who took the nuclear threat seriously might balk at that.
Would you have forced your children to wear dog tags in those years when nuclear war was a real and present danger? Would you have worn them yourself? If the answer is no, then you should be able to understand those who today resist mandatory masks, both for their practical shortcomings and for what they symbolize. At a certain point one must refuse to live in fear, even when dangers are real.
I don’t (yet) have children, but I cannot imagine the psychological effect of having to remind them every moment of every day to live in fear of other people, especially every single other person for two years on end.
This is a good, if lengthy, guide to startup compensation around the late Seed or Series A stage. I think it can also be a guide for Seed and Pre-Seed founders who are thinking about how they should structure comp as they grow. This is based on an interview with Molly Graham, who is now Lambda School’s COO but was previously working at Facebook on compensation.
Some good takeaways:
Make compensation formulaic.
Give 1-2x chances to review compensation a year.
Assume everybody will learn what everybody else is making (and be formulaic for this reason).
Try to minimize negotiation. (I’m not sure how much I agree with this point, as I think people should be rewarded for negotiation. Graham’s core point here is that negotiation rewards the wrong type of people for early stage startups…which I get, but you want employees who will push you because that means they should, hypothetically at least, push other people. But I get her core point that you don’t want to be hiring mercenaries early on.)
The article includes lots of practical information that is presented in a digestible format, like this chart:
Of course, I wouldn’t put a ton of weight in specific numbers (especially for cash), as I am unsure when this article came out and market rates change, but the general gist is useful.
I’m a big fan of Byrne’s work (The Diff is the only Substack I currently pay for.) and found this piece particularly insightful both practically on the question fo the CFA and its utility but also generally on education and the value of different credentials. Byrne is one of the few people who is a CFA charter holder who does not have an undergraduate degree.
The case for the signaling model is beyond the scope of this piece, so I’ll just note that Caplan makes a strong case and his critics make a weaker one. He’s cheating a little bit by saying that his critics are partly-right: if you go to school, you will develop new skills. But his critics are really shooting themselves in the foot by arguing that the signaling component is zero, or at least that we ought to round it down to zero when we decide how much money we as a country should spend on schools.
The “Sheepskin Effect” is the most powerful restatement of the signaling model: students who stop attending school one semester short of their degree have half the wage premium they’d get if they finished it. (Do schools just save the most lucrative lessons for the last couple months?) And students who were wait-listed for elite schools earn about as much if they’re accepted as if they’re rejected. If you go to Harvard Business School, you will read thousands of pages for school, but just two pages account for the vast majority of the wage premium: your acceptance letter and your diploma.
From that perspective, the CFA may be the most virtuous educational credential available today. It’s not subsidized. It doesn’t send mixed signals — you don’t have to learn or burn the great works of the Western Canon. There isn’t a CFA football team (the Closet Put Writers? The Fightin’ Asset Accumulators?)
I recommended a podcast interview with Gurri a few weeks ago while I was working through this book and cannot recommend the book enough. The podcast interview was good — and is helpful to understanding his thesis — but this beautiful 448 page tome from Stripe Press is a must-read.
I am running a workshop on the failure of the elites in October with my colleague Michael Gibson and we’re assigning a few excerpts from this book on institutional failure. I now wish, after having read the book in full, I could run a year-long class on political and social nihilism with this as one of the core texts.
Gurri is a (former?) CIA analyst who originally wrote this book after the Arab Spring, the Occupy Wall Street protests, the Tea Party revolt, and a number of European revolts (left and right: Spain, Italy, France, Brexit, AfD in Germany, Ukraine, even the rise of Barack Obama in crushing the DNC establishment in 2008, etc.) more or less circa 2010-2014. He points out that the common theme between these populist uprisings isn’t really ideology. They don’t have an ideology in the traditional sense of the word. Rather, it’s a sort of against-ism or nihilism. They are simply against the status quo, against the system, against capitalism or corporatism or statism or whatever, against the swamp, against the establishment. In the cases where they do take power, they achieve pretty much nothing. And in the cases where they don’t their demands don’t result in a coherent and proactive agenda, but rather abstract things like “regulate the banks,” “promote free elections,” “crack down on corruption,” etc.
This is all largely a function of “information,” says Gurri. With the proliferation of the Internet and the access to information through “unofficial” sources rather than Walter Cronkite and the New York Times, the public has a chance to both see how the sausage is made and for their expectations of government to shift dramatically. These shifted expectations lead to repeated disappointments on the part of the public, who eventually end up embracing a sort of nihilism. (How, I will leave for the reader to read by Gurri.)
Gurri predicts it will get worse. And he’s writing this in ~2014. This edition of the book was published in 2018 and includes a foreword and new chapters at the end where Gurri reflects on his analysis. To quote the foreword, “Martin Gurri saw it coming.”
The new chapters at the end of the book take on the 2016 election and the first 2 years of the Trump presidency (again pointing out that running on an against-ism rarely really results in the apocalyptic announcements of what the establishment will ascribe to the nihilists — just like Obama was a middling center-left politician once in office — not the socialist revolutionary his critics expected, Trump, too, appeared not to be a fascist dictator like his opponents predicted, but a middling center-right politician), Brexit, Duterte in the Philippines, and other movements since 2014.
In the conclusion to the original edition, Gurri lays out two scenarios for the reader to consider: either everything since 2011 was coincidence and a collective aberration and OWS, the Tea Party, the Arab Spring, the Euro-populist revolts, etc. had nothing to do with each other, or Gurri’s hypothesis is right and the process of information allowing the public to embrace a sort of nihilism is true and will accelerate.
In the afterword in the new edition, Gurri says that he was wrong about one thing: how quickly this revolt of the public would accelerate. Trump v. Clinton was the perfect Petri dish for his thesis and proved it out to a tee. The same goes for Brexit and revolts against the EU.
A few key questions or thoughts I had after putting this down:
what would this book look like if it were written post-C*VID? The fundamental thesis in the book has to do with the breakdown of trust and expectations in formal institutions, those that rely on legitimacy in order to succeed. While Gurri touches on the institutions of science briefly in one chapter, it seems like 2020 and 2021 have completely blown a hole in the public’s trust of scientific institutions.
what does it mean for an entire generation to grow up in nihilism? Nihilism seems a lot more prominent among the Zoomers. Maybe this is simply the edginess of being a young person — lots of anarcho-capitalist and communist agitators tend to be under 25, after all — but I’m not so sure that can explain away the seeming nihilism (both left and right) of the under-21 crowd. I think this also explains well the phenomenon of “cringe.” Ask a young, Very Online Zoomer what they think is cringe and it is almost always anything that appears principled in Gurri’s “central” sense of the word — think industrial political proclamations of what America is, Zombie Reaganism, or Clinton-esque moderate welfare statism rooted in some abstract constitutional reasoning. It sounds cringe to ears that see it as fluffy language over decades of institutional failure. And could you blame somebody for thinking this if their entire lives have been defined by bungles like the Iraq War, the War on Terror, the Drug War, the 2008 financial crisis, Brexit, the 2020 p*ndemic response? These people have grown up in two decades of the “principled” people getting pie on their faces every. single. year. on pretty much every single issue. I think they can be excused for what may look like cynicism towards the proclamations of lawyers-turned-politicians bloviating on principles they don’t uphold.
how can this nihilism be turned for good? Gurri is a realist. I am (increasingly) a realist. You can’t just “BITFD (Burn It The F Down,” to steal a phrase from financial analyst Ben Hunt, because if you did the grifters and the snakes would still take power and people would just be a lot worse off and now the institution that got burnt down would have some kind of axe to grind. Gurri proposes taking the institutions that rely on legitimacy online and letting people see and contribute to the process to the extent that it might affect them. This might mean making legislation-making more transparent and having a way for people to be notified when new legislation may actually affect their lives so they can pay attention and contribute to the process. It may mean pulling back the curtain on Wall Street hedge funds (Gurri says in the podcast mentioned earlier that he loves r/WallStreetBets, I suspect for this reason). For the individual, this means focusing on your locus of control to the best of your ability and generally tuning out the rest of the information unless you reasonably believe it can affect you. I think this is generally right, but increasingly difficult.
Overall, I cannot recommend this book enough and want to give kudos to my colleague Michael for recommending it. If I could run a year-long class on this book alone, with some supplementary readings, I would. It’s probably the best analysis I’ve come across of the last decade and, I suspect, the decade to come.
I joined Kyle Kashuv on his podcast to discuss education & credentialing and why I’m optimistic for the long term (spoiler: it’s because I think our elites are super lame). Kyle called me a “doctor in diagnosing decadence,” which I think will now be my title on LinkedIn going forward.
What did you enjoy this past week? Feel free to send it over — I’m always interested in seeing what smart, interesting people are listening to or reading.