Most warning systems do not warn us they can no longer warn us

It has been the rare sort of week where I’ve been more of a consumer of content than a creator. I hope to process all of this during the weekend and get my mojo back.

Until then, I have another share today – a letter from the venture capitalists at SK ventures predicting what lies ahead. I thought it was nicely done.

Thanks, Brad, for sharing this.


Greetings-

To start, a few quotations as markers:

Then he heard the sand rumbling. Every Fremen knew the sound, could distinguish it immediately from the noises of worms or other desert life. Somewhere beneath him, the pre-spice mass had accumulated enough water and organic matter from the little makers, had reached the critical stage of wild growth. A gigantic bubble of carbon dioxide was forming deep in the sand, heaving upward in an enormous “blow” with a dust whirlpool at its center. It would exchange what had been formed deep in the sand for whatever lay on the surface.
– Frank Herbert, Dune

Chigurh: Just call it.
Shopkeeper: I didn’t put nothin up.
Chigurh: Yes you did. You’ve been putting it up your whole life. You just didn’t know it.

– Cormac McCarthy, No Country For Old Men

Unfortunately, most warning systems do not warn us that they can no longer warn us.
– Charles Perrow, Normal Accidents: Living with High Risk Technologies

Crises usually accelerate real trends in society and technology; they don’t create or refute them. 
– Gary Kasparov

The opposite of fragile is something that actually gains from disorder.
– Nassim Taleb


“There are decades where nothing happens, and there are weeks where decades happen.” That is Lenin’s line, and it has felt right in every way and, likely, in almost every country in the world these last eight weeks. And people—investors, in particular—are falling all over themselves trying to understand what it means. We all want to try to explain something this wrenching, and to explain how it feels.

We want to believe that we just lived through weeks where decades happened, as Lenin said. Except he didn’t say that. And as near as quote investigators can tell, he never said anything like it: the first example of the phrase only appeared a few decades ago. It has caught on partly because it’s well put, but mostly because it captures how we feel about what it’s like to have something come exploding into our consciousness and force us out of our usual amniotic now. We want an explanation, and we want it to explain where things go from here.

The reality, however, is that wildness has always lurked just beneath the surface. A combination of willful blindness, homeostasis, wishful thinking, and luck have let us skate past the holes in modernity’s ice and pretend nothing lurks beneath it. We have been making bets on smooth, thick ice for decades, and we stopped noticing, even if cracks open anytime in the thickest ice. Pandemics are a crack in our preferred reality, but they are nothing new, even if many countries, like the US, lack recent experience with them, and so pandemics hit harder and longer.

So, what changes? Post-pandemic, in the short-run, and contrary to many, we think very little changes, at least very little that is materially different from what we thought before. Rather than being a break with the past, we think people’s desperation for a return to normalcy—shopping! travel! work!—creates immense pressure to return to the recent past faster than anyone expects. There is inherent human-driven homeostasis, an almost inexorable need to bring things back to where they were before.

We think the biggest short-term effect will be an acceleration of existing trends. More things will go in the cloud; more things will be virtualized; more things will happen at the edge; more buying, selling, and entertaining will happen online: and so on. These trends will simply speed up.

What about, you wonder, the bigger changes people chatter about, like the death of commuting to work, the end of globalization, the collapse of professional sports, and the like? Not so much. Sure, we will see a paroxysm of people fighting the last war, much like how we armored commercial airliner cockpits after 9/11. In that light, expect a continuing run on contract tracing apps, thermal scanning, work from home chatter, N95 mask technologies, and that sort of thing. But that is extrapolative and impermanent, armoring metaphorical cockpits, rather than thinking about what this episode has taught us about the wildness that lurks beneath modernity.

We think a more useful analysis must go deeper rather than being merely extrapolative—it must be a thick description of how people live and die. This virus has been, both literally and metaphorically, a disease of modernity. Why? Because It attacks via the vectors of modernity: trade linkages, obesity, diabetes, air travel, mass transportation, urban density, social media, etc. Understanding long-run change requires understanding where modernity itself is under threat, and whether those threats will lead to meaningful—and investable—change.

Fundamental to the changing landscape is the realization that people have been shown how brittle their home structure is. For example, surveys show that New York and Shanghai apartment dwellers are realizing that giving up a balcony for a little more floor space in their aeries made them prisoners of quarantine: most buyers newly say they wouldn’t make the same decision again. Similarly, people all over the world are realizing that “preppers” aren’t nuts (at least, in their prepping), that there is merit in thinking in terms of how much inventory of critical things—food, water, and yes, toilet paper—you have.

Sociologist of risk Charles Perrow, long ago warned against the catastrophic risks created by tight coupling in society. To Perrow, tight coupling was any complex system where changes in inputs ripped quickly to new and unpredictable outputs, without an opportunity for meaningful intervention. Perrow would have called this current episode a reminder of tight coupling’s risks,  and a forced re-introduction to loose coupling—an attempt to make your life less easily whipsawed by abrupt changes in the world around you. In that light, we think people—and companies—will carry more inventory of everything, that the scarring experience here will turn us into proto-preppers, less willing to be caromed around by the vagaries of life. This a big change, one that will ripple through supply chains, housing, travel, technology, education, and health.

Speaking of health, life sciences is at an unremarked inflection. There is the real potential for multiple new and effective vaccine and drug delivery platforms to emerge at once, something that has never happened in the history of pharmaceuticals. We not only could see multiple vaccines arrive, which is appealing, but, more importantly in the long run, multiple new platforms for delivering drugs, which would vastly increase the drug arsenal, transform human health, and add vastly to societal wealth via decreasing aggregate cost of illness.

There is also, however, the real potential for multiple massive drug failures setting the industry back decades. Not just because current vaccine efforts could fail, proving that, in economist Robert Gordon’s terms, we are stuck on an undulating plateau of stalled (drug) innovation, but, more insidiously, that multiple billion-dollar vaccine programs could hit the market at once, all lose money, and re-convince pharma companies that vaccines are a terrible business, making the next pandemic even more therapeutically fraught.

Which will it be? We are optimists, and we strongly believe it will be the former, but it’s important to keep in mind that it is by no means a foregone conclusion.

Turning to other deeper changes, machine learning and big data are getting a real run-out here, and given our investments, we are glad to see it. In areas like medical imaging where machine learning continues to acquit itself well, throwing ample shade at human experts. This is overdue, important, and necessary.

On the other hand, naïve application of “big data” models is being shown for the dangerous practice that it is. Epidemiological models continue to acquit themselves poorly, in part because it’s hard, but also and importantly, to abstract away from this pandemic, because most interesting systems involve humans, and humans adapt and change in ways that work to make models’ predictions fail. As the old capital markets saying goes, “at inflections, markets move in whatever direction will cause the most pain to the most participants.” Big data models suffer no better fate at similar points, as people are belatedly discovering. We are hopeful that this new wisdom will lead to better, more flexible, more adaptive, and more useful analytical models, across finance, medicine, sports, risk, and so on.

Overall, we believe we will quickly return to a state much like where we were before recent events. It will be less different than many pundits expect. Under the surface, however, wildness will lurk—our society will merely be subcritical. This will be, of course, normal, not abnormal. Most of human history has been this way, unlike recent times, which were anomalously placid, a state that’s now ending as we return to subscriticality. We think that making this state visible and manageable will be one of the keys to investing moving forward.

There will be explosive economic, biological, and technological moves, much more explosive than in the recent past, in part because the ground has been cleared for them, but also because our new, over-excited society has collective scar tissue making it predisposed to jump sooner, further, and faster. This will lead to more rapid technology adoption, faster cycles, and great gains for investors willing to embrace the emergency of subcritical society. Platforms and tools that embrace this—enabling looser coupling, warning when legacy warning systems can’t warn, systems made stronger by volatility—are the emerging investments that we will be digging into as we move forward.

To summarize, here is our current state of thinking:

  • In the short-run, less will change than people think
  • In longer-run, we will see a complete rethinking of risk, slack, and societal coupling
  • We are interested in investments that acknowledge, track, and even gain from the wildness and disorder lurking under the thin ice of a newly subcritical society.

Ordinary and extraordinary – a poem

I came across a beautiful poem by William Martin recently that resonated deeply.


Do not ask your children
to strive for extraordinary lives.
Such striving may seem admirable,
but it is the way of foolishness.

Help them instead to find the wonder
and the marvel of an ordinary life.
Show them the joy of tasting
tomatoes, apples and pears.
Show them how to cry
when pets and people die.
Show them the infinite pleasure
in the touch of a hand.

And make the ordinary come alive for them.
The extraordinary will take care of itself.


Of course, this isn’t just about our conversations with our children.

It is just as apt for our conversations with ourselves.

(H/T: Arjun’s blog – a recent find)

Kareem Abdul-Jabbar reflects

Kareem Abdul-Jabbar wrote a powerful op-ed on the LA Times titled – “Don’t understand the protests? What you’re seeing is people pushed to the edge”

I’m copying the text here in full.


What was your first reaction when you saw the video of the white cop kneeling on George Floyd’s neck while Floyd croaked, “I can’t breathe”?

If you’re white, you probably muttered a horrified, “Oh, my God” while shaking your head at the cruel injustice. If you’re black, you probably leapt to your feet, cursed, maybe threw something (certainly wanted to throw something), while shouting, “Not @#$%! again!” Then you remember the two white vigilantes accused of murdering Ahmaud Arbery as he jogged through their neighborhood in February, and how if it wasn’t for that video emerging a few weeks ago, they would have gotten away with it. And how those Minneapolis cops claimed Floyd was resisting arrest but a store’s video showed he wasn’t. And how the cop on Floyd’s neck wasn’t an enraged redneck stereotype, but a sworn officer who looked calm and entitled and devoid of pity: the banality of evil incarnate.

Maybe you also are thinking about the Karen in Central Park who called 911 claiming the black man who asked her to put a leash on her dog was threatening her. Or the black Yale University grad student napping in the common room of her dorm who was reported by a white student. Because you realize it’s not just a supposed “black criminal” who is targeted, it’s the whole spectrum of black faces from Yonkers to Yale.

You start to wonder if it should be all black people who wear body cams, not the cops.

What do you see when you see angry black protesters amassing outside police stations with raised fists? If you’re white, you may be thinking, “They certainly aren’t social distancing.” Then you notice the black faces looting Target and you think, “Well, that just hurts their cause.” Then you see the police station on fire and you wag a finger saying, “That’s putting the cause backward.”

You’re not wrong — but you’re not right, either. The black community is used to the institutional racism inherent in education, the justice system and jobs. And even though we do all the conventional things to raise public and political awareness — write articulate and insightful pieces in the Atlantic, explain the continued devastation on CNN, support candidates who promise change — the needle hardly budges.

But COVID-19 has been slamming the consequences of all that home as we die at a significantly higher rate than whites, are the first to lose our jobs, and watch helplessly as Republicans try to keep us from voting. Just as the slimy underbelly of institutional racism is being exposed, it feels like hunting season is open on blacks. If there was any doubt, President Trump’s recent tweets confirm the national zeitgeist as he calls protesters “thugs” and looters fair game to be shot.

Yes, protests often are used as an excuse for some to take advantage, just as when fans celebrating a hometown sports team championship burn cars and destroy storefronts. I don’t want to see stores looted or even buildings burn. But African Americans have been living in a burning building for many years, choking on the smoke as the flames burn closer and closer. Racism in America is like dust in the air. It seems invisible — even if you’re choking on it — until you let the sun in. Then you see it’s everywhere. As long as we keep shining that light, we have a chance of cleaning it wherever it lands. But we have to stay vigilant, because it’s always still in the air.

So, maybe the black community’s main concern right now isn’t whether protesters are standing three or six feet apart or whether a few desperate souls steal some T-shirts or even set a police station on fire, but whether their sons, husbands, brothers and fathers will be murdered by cops or wannabe cops just for going on a walk, a jog, a drive. Or whether being black means sheltering at home for the rest of their lives because the racism virus infecting the country is more deadly than COVID-19.

What you should see when you see black protesters in the age of Trump and coronavirus is people pushed to the edge, not because they want bars and nail salons open, but because they want to live. To breathe.

Worst of all, is that we are expected to justify our outraged behavior every time the cauldron bubbles over. Almost 70 years ago, Langston Hughes asked in his poem “Harlem”: “What happens to a dream deferred? /… Maybe it sags / like a heavy load. / Or does it explode?”

Fifty years ago, Marvin Gaye sang in “Inner City Blues”: “Make me wanna holler / The way they do my life.” And today, despite the impassioned speeches of well-meaning leaders, white and black, they want to silence our voice, steal our breath.

So what you see when you see black protesters depends on whether you’re living in that burning building or watching it on TV with a bowl of corn chips in your lap waiting for “NCIS” to start.

What I want to see is not a rush to judgment, but a rush to justice.

Anti-intellectualism and racism – revisited

I shared a post about my reflections on the US Presidential race around this time 4 years back.


Fearing and, thus, hating someone who is different from us is a natural emotional response from a brain wired for life in the forest fighting other warring hunter gatherers. Racism, as a result, is a natural part of our humanity. We are all racist and discriminatory. If it isn’t based on color, we discriminate based on religion, education, sexual orientation, nationality, caste, etc.

The relationship between education and discrimination is a fascinating one as it is one that is underlined with a lot of tension. The reason for this tension is that an educated mind is one that treats every belief as a hypothesis that needs to be tested. Galileo Galilei, one of the fathers of the scientific method, discovered this was an issue in 1610 when he faced the ire of nearly every institution that mattered. The church, arguably the most powerful of those institutions then, took nearly 500 years to declare him innocent.

The essence of discrimination is blind belief. Education, thus, is dangerous as it shakes its foundations of discrimination. As a result, a key part of the oppressors playbook is to control the education its citizens receive. If you can fake education, i.e. pretend to educate while not really teaching the scientific method, people will never find out.

Until they do, of course.

This is why the Brexit was a damning verdict for anyone concerned about the state of the world today. It wasn’t because the Brexit was the absolute wrong result. There is a case to be made that it was a good result for both sides in the long run – that Britain will benefit and that the EU will treat it as a wake-up call to right the many issues inherent in its structure. The issue was the way it happened. It happened without the voters really understanding why they were doing what they were doing. It happened without any debate of the real long term issues. It was a classic anti-intellectual process and it was as good as a bunch of fearful people voting yes for xenophobia.

That is also why the November election in the United States is critical. It is becoming increasingly clear that the beliefs that drive the Republican party in the United States is not that of smaller government, but one of cultural disillusionment. It is also becoming increasingly clear that “make America great again” seems to just be a different version of “make America white again.” There are a lot of direct effects of the Republican nominee becoming President but probably none as powerful as the brand of anti-intellectualism that he espouses.

The key part of the Donald Trump message is simplicity. It is a clear action plan that involves shutting down borders, breaking ally agreements and building walls. These simple steps will put an end to the death, gloom and destruction. Leaving aside facts about violence and the like, this sort of simplicity ignores that one thing that makes debate necessary – nuance. Or, to use a more fitting term, trade-offs. Good decision making requires an understanding of trade-offs. Good decision making requires spirited debate and an understanding of nuance. But, discussing nuance isn’t what won Trump the Republican primary. It isn’t what he is about. He makes decisions based on his gut and data is for losers. Well, life can be relatively simple when you are born into a brash household in the top 1%. It isn’t that simple for everyone else and it is certainly not going to be simple when you govern in an interdependent world.

This is one direct effect, however. The full list is long. The most important indirect effect, in my assessment, is that I think his coming to power will sadly reverse the trend on discrimination and racism. The facts on violence and discrimination tell us one thing for certain – as bad as things seem, they have only been getting better and are better today than ever before. However, the moment we give up our willingness to debate, we indicate that we are open to flexing our discrimination muscles. It is a recipe for bigotry – an intolerance toward those who hold different opinions from us. If we are intolerant toward different opinions, can you begin to imagine what the future holds for people who look different from us?

This indirect effect is beautifully summed up in a line from a comment I shared following the Brexit – “But, can anybody tell me the last time a prevailing culture of anti-intellectualism has led to anything other than bigotry?”

When indeed…


It is a post I’ve thought about more often than I’d have liked in the past 4 years.

Never more often than during these few days, however.

Euthymia

Seneca defined euthymia as believing in yourself and trusting that you are on the right path, and not being in doubt by following the myriad footpaths of those wandering in every direction.

Euthymia, he insisted, is the state of mind that produces tranquility.

It resonated.

(H/T: “The Daily Stoic” by Ryan Holiday and Steven Hanselman)

Remembering training wheels

I shared a post about training wheels three years back.


Training wheels sound so great in concept. After all, they remove all the risk from learning to ride a bike.

But, they don’t work.

It turns out that removing all the risk of losing balance doesn’t teach us the most important ability required to ride a bike – how to balance. And, that, in turn, also means we don’t actually learn to ride the bike. Worse, it hinders our ability to learn without training wheels.

Risk and reward go together. Falling down is an important part of learning. And, we only make progress when we embrace the possibility of a fall.

Why, then, do we use training wheels? Fear of failure.

And, that’s thanks to a misunderstanding. You see, failure is not the falling down, it is the staying down.


I remembered this post as we began teaching our kids how to ride bikes 3 weeks ago. We used training wheels just to show our older child how much fun pedaling a bike could be.

We then took away the training wheels, pedals, and let her use her bike as a balance bike. She started by walking with it, progressed to quick strides, and soon figured she could rest between strides by balancing.

A few days later, we added the pedals back today and away she went.

Risk, doing, falling, learning, progress.

They all go together.