Books

How to Make a Few Billion Dollars

James Bailey1 Comment

The title is excellent, given that the author Brad Jacobs did in fact make a few billion dollars.

The book itself is fine to read, but also fine to skip if you aren’t yourself burning to build a billion dollar company through excellent management and mergers and acquisitions. I certainly don’t care to, which Jacobs says would make me a bad hire for one of his companies:

I only hire people who are motivated to make a lot of money…. If an candidate says to me ‘I’m not motivated by money’, I suspect either they’re not being candid or they lack the hunger that’s necessary to succeed

The book has plenty of hard-driving sentiments like this that you’d expect from a self-made billionaire:

Fire C players

For the first time ever, an American company, Exxon, had reported quarterly earnings in excess of $1 billion. The words “obscene profits” flashed on my TV screen, and I remember thinking “That sounds pretty good! Maybe I ought to check out the oil sector.” [This part I agree with, economic theory predicts that entrepreneurs will enter the sectors with the highest profits and its what I’d do if I wanted to make money, though in practice I think it is surprisingly rare for would-be entrepreneurs to choose this way -JB]

“The CEO trait most closely correlated with organizational success is high IQ” [specifically more important than EQ]

But Jacobs balances these ideas with some surprisingly hippy-like attitudes. Jacobs went to Bennington College and almost had a career as a jazz keyboardist. Chapter 1 is titled “How to Rearrange Your Brain”, and emphasizes the importance of meditation. Page 21 is basically “have you ever really looked at your hands, man… do it, it’s a trip”

I don’t want to spend even one hour around people who are unkind. An organization is like a party. You only want to invite people who bring the vibe up

Though perhaps this hippy/anti-hippy balance shouldn’t be surprising for someone who says one of the main things he asks about potential hires is “can this person think dialectically”.

Strongly recommend the book if you want to follow Jacobs’ path; weakly recommend it as a general management/self-help book or way to learn about markets.

The value of reading great literature

Joy BuchananLeave a comment

I am pleased to have guest posted for Henry Oliver:

“An economist asks: What is the value of reading great literature like Eliot and Tolstoy?”

In 2025, after mostly feeling too busy for great literature for a few years, I picked up two books that come highly recommended by people with good taste: Middlemarch and Anna Karenina. They are excellent, and they are long. I propose two reasons why they need to be long.

My second reason for long novels:

The second powerful thing about a long novel, if they are written by geniuses like Eliot or Tolstoy, is that you have enough time to see how choices play out over years. You have space to even see the consequences of the consequences. You will experience moral formation from these novels in a way that you just cannot from a 2-hour movie or social media post. 

Quick bio of Henry: Henry Oliver writes the popular literary Substack The Common Reader, which has been quoted in the Atlantic and elsewhere. His book Second Act, a study of late-blooming talent, was released in 2024.

Lastly, I must thank my sister for engaging me in literature discussion over the Christmas break. She is reading Proust.

Understanding Vulnerability: What Anna Karenina Can Teach Us About Grooming and Loneliness

Joy Buchanan1 Comment

Ever since becoming aware of the terrible news about “grooming gangs” in the UK, I’ve been wanting to write something about why men succeed in manipulating women. Having a moment to read fiction during my break from classes, I have picked up Tolstoy’s Anna Karenina. Now that I’m past the turning point in the book where Anna and her lover Vronsky have to think about a new life outside the care of Anna’s husband, it’s clear that Anna fell for a person who will struggle to take care of her and any children. How does it work?   

Most women are unprepared concerning how desperate they are for what I’ll call love. Many women receive very little attention. More than 40% of adult women in the US are single. We have statistics on marital status, but profound loneliness can also occur within an official relationship.

Articles about the UK grooming gangs often emphasize the disadvantaged economic backgrounds of the victims. That does matter, and it did make them more vulnerable to manipulation. Vulnerability within most people everywhere is underexplored.

Anna Karenina is married, privileged, admired in society, yet she feels lonely. When Vronsky shows her focused attention she falls hard, even though she knows there could be consequences. Tolstoy shows how powerful validation can be to almost any woman, not just those who might seem the most vulnerable.

Vronsky is charming and attractive on the surface, but ultimately self-centered. He ruins Anna’s life and deprives her children of a mother. Why did he succeed in the first place?

If Anna is beautiful, some would assume that she would not be lonely. There are theories going around about the advantages of being beautiful (lookism). Even Jennifer Garner and Jennifer Aniston get cheated on. Most women are not experiencing something that feels like love to them.

In the case of the grooming gangs, folks with an understanding of emotional deprivation hacked the system for evil. None of this diminishes the responsibility of perpetrators or the reality of coercion. Because the initial phase feels so validating, grooming victims often blame themselves later. We might do better by bringing the system out into the open.

Systems can be used for good by those who understands them. Especially young people with a better understanding of the system can have a better chance of making it work in their favor.

It’s a weird conversation to have with youths (easier to assign Anna Karenina in high schools, but kids are losing the ability to read a novel). Could we educate them with something like: “You have a desire to be loved that may never get fulfilled. That does not make you special. It’s the most unoriginal thing about you. Try to make the system work for you and not get tricked.”

The red flag for Vronsky should have been his lack of family and lack of care for his community (he does not pay his tailor). The classic advice for young women to observe how a prospective boyfriend treats his mother is still very good.

Tolstoy does not give specific advice about what people should do. A superficial reading of the story would be that Anna Karenina is about duty and sin and the wages of sin. But throughout, it is a meditation on happiness. The second word of the novel is “happy,” as in “All happy families…”

In the first line of the novel, Tolstoy situates happiness within a family, not as something experienced by individuals. The characters, Levin and Kitty, who seem happiest at the end, find each other and work toward something greater than themselves.

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2025 In Books

James BaileyLeave a comment

What I read in 2025:

Econ Books I Wrote Full Reviews Of:

The Little Book of Common Sense Investing: “John Bogle, the founder of Vanguard, wrote a short book in 2006 that explains his investment philosophy. I can sum it up at much less than book length: the best investment advice for almost everyone is to buy and hold a diversified, low-fee fund that tracks an index like the S&P 500.”

The Little Book that Beats the Market: “Greenblatt offers his own twist on value investing that emphasizes just two value metrics- earnings yield (basically P/E) and return on capital (return on assets). The idea is to blend them, finding the cheapest of the high-quality companies…. Greenblatt’s Little Book is a quick and easy way to learn a bit about value investing, but I think Bogle’s Little Book has the better advice.”

When Genius Failed: “Myron Scholes was on top of the world in 1997, having won the Nobel Prize in economics that year for his work in financial economics, work that he had applied in the real world in a wildly successful hedge fund, Long Term Capital Management. But just one year later, LTCM was saved from collapse only by a last-minute bailout that wiped out his equity (along with that of the other partners of the fund) and cast doubt on the value of his academic work…. The story is well-told, and the lessons are timeless”

The Art of Spending Money: “Its main point is that people tend to be happier spending money on things they value for their own sake- rather than things they buy to impress others, or piling up money as a yardstick to measure themselves against others (this is repeated with many variations). Overall it is well-written at the level of sentences and paragraphs with well-chosen stories and quotes, but I’m not sure what it all adds up to.”

Non-fiction I didn’t previously mention here:

The Napoleonic Wars: A Global History, Alexander Mikaberidze: Aims to educate us about the surprisingly major effects of the Napoleonic Wars outside of Europe. Succeeds wildly; I also learned a lot about the main European theatre. Hadn’t realized how poor British Russian relations were in this era, since they defeat Napoleon together in the end. But they were heading for war early on until a czar was assassinated, then actually went to war in the middle over Sweden and trade. Outside Europe, Britain briefly took Buenos Aires and Montevideo, and accidentally (?) captured Iceland, along with all the French and Dutch overseas colonies.

Talent: How to Identify Energizers, Creatives, and Winners Around the World, Tyler Cowen and Dan Gross: A business book that works best for someone who hires a lot. How to attract and retain diverse candidates, including but not limited to the most-discussed types of diversity. Tyler says that when he lived in Germany people often thought he was Turkish, and one told him to ‘get out of here, you Turk’.

Almost Human: The Astonishing Tale of Homo Naledi and the Discovery That Changed Our Human Story, Lee Berger and John Hawks: The story of how the authors excavated a cave in South Africa that held many remains from a previously unknown type of early human. Good storytelling, good explanations of what we know about early humans from other discoveries, and surprisingly frank discussions of the academic politics behind getting paleontology research funded.

The Ends of the World, Peter Brannen: The book explains Earth’s 5 previous mass extinctions and the geology / science behind how we found out what we know about them. Written explicitly about what all this means for current global warming; see my full review on that here.

Annals of the Former World, John McPhee: New Yorker writer follows geologists from New York to San Fransisco to learn about the land in between. Published as a series of 4 books (Basin and Range, In Suspect Terrain, Rising from the Plains, Assembling California), each one focusing on a different geologist and region. McPhee is known as an excellent stylist but the books are also quite substantive, I feel like I learned a lot.

Fiction

The Works of Dashiell Hammet: My friend Dashiell mentioned that this is who he was named after, and that Red Harvest was a good book of his to start with. He was right, and it lead me to read many others: The Thin Man (you may have heard of Hammet because of the movies adapted from this and The Maltese Falcon), Best Cases of the Continental Op, Honest Gain: Dicey Cases of the Continental Op. Almost every story has a twist more interesting than “the murderer isn’t who you suspected”.

Tress of the Emerald Sea, Brandon Sanderson. Sanderson is one of the most prolific authors of our time, so where do you start with him? He suggests “Mistborn or Tress of the Emerald Sea, depending if they want something more heisty and actiony or something more whimsical.”

The Frugal Wizard’s Handbook for Surviving Medieval England, Brandon Sanderson: Sanderson doing his best impression of Terry Pratchett rewriting Mark Twain’s Connecticut Yankee in King Arthur’s Court, with shades of Scott Meyer’s Off to Be the Wizard.

Janissaries, Jerry Pournelle: What if instead of going to a more primitive world alone, you got sent there with an army?

The Narrow Road Between Desires, Patrick Rothfuss: Enough of an expansion of The Lightning Tree to be worth reading, but at this point anything Rothfuss does other than finally finish Doors of Stone can’t help but be disappointing.

Beguilement, Lois McMaster Bujold: Her Sci Fi works are great so I looked forward to her take on the Fantasy genre, but this turns out to be her take on the Romance genre.

Meta

This year I realized that Hoopla has a lot of books that Libby doesn’t, it is worth checking both apps for a book if you have access to libraries that offer both

The End of Boredom: How AI Companions Might Reduce Random Violence

Joy Buchanan1 Comment

Joy writes: I read Co-Intelligence by Ethan Mollick (thanks to Samford for the free book). Most of it is old news for those of us who follow Ethan on social media and use ChatGPT. However, something that stood out to me was his mention of a study in which humans decide to give themselves a painful shock rather than sit alone in silence for 15 minutes.

Claude comments further based on my prompt:

The End of Boredom: How AI Companions Might Reduce Random Violence

Remember that study where people would rather shock themselves than sit alone with their thoughts? Ethan Mollick references it in Co-Intelligence, and it reveals something unsettling: 67% of men and 25% of women chose electric shocks over sitting quietly for just 15 minutes.

Here’s a strange thought—what if our AI-saturated future accidentally reduces certain types of violence simply by eliminating boredom?

The Violence-Boredom Connection

“Idle hands are the devil’s workshop” exists for a reason. Research has long linked boredom to risk-taking, substance abuse, and impulsive violence—the opportunistic kind that emerges from restlessness rather than planning. Young men starting fights on street corners, vandalism on summer nights, the restless energy that sometimes turns destructive—much of this stems from the unbearable weight of having nothing to do.

Enter Infinite Engagement

We’re rapidly approaching a world where boredom might become extinct. AI companions are becoming always available, infinitely patient, endlessly novel, and perfectly tailored to individual interests. Your future AI won’t just answer questions—it will debate philosophy at 3 AM, create personalized games, generate stories with you as the protagonist, or help explore any curiosity rabbit hole.

The cognitive void that once led people to shock themselves rather than think? It might simply cease to exist.

The Unexpected Benefits

Consider the implications: Young men who might have started fights out of restlessness could instead be deeply engaged in AI-assisted music production or coding projects. The same restless energy that manifests destructively could be channeled into creative collaboration.

AI companions could help process frustration before it builds to a breaking point—imagine having an infinitely patient listener during those dangerous 2 AM spirals of rage. While not replacing human connection, AI interaction might buffer the worst effects of isolation that can lead to radicalization.

The Dark Side

This isn’t utopian. An always-engaged society raises concerns: What happens to human relationships when AI companionship is always easier? Does constant stimulation atrophy our ability to self-reflect? Might we lose the creative insights that emerge from boredom?

Crucially, this would only address impulsive, boredom-driven violence. Systemic violence, ideological extremism, and deeper social problems won’t disappear because people have engaging AI companions.

A Strange New World

For the first time in history, boredom—that uncomfortable void that has driven both creativity and destruction—might become optional. The same species that chose shocks over silence is about to get exactly what it wanted: constant, meaningful stimulation.

Whether this leads to a more peaceful society or new problems we haven’t imagined remains to be seen. The question is whether we’ll recognize what we’ve lost only after it’s gone.

The experiment is already underway—we’re all participating in it.

Joy comments at the end: The AI-written essay is willing to explore downsides of AI engagement.

The Art of Spending Money

James Bailey1 Comment

The author of The Psychology of Money, Morgan Housel, has a new book “The Art of Spending Money” out this month. Its main point is that people tend to be happier spending money on things they value for their own sake- rather than things they buy to impress others, or piling up money as a yardstick to measure themselves against others (this is repeated with many variations).

Overall it is well-written at the level of sentences and paragraphs with well-chosen stories and quotes, but I’m not sure what it all adds up to. The main points seem obvious to me, though maybe that’s my fault for reading a book titled this when I’m already fairly happy with how I spend money. I think I err a bit on the frugal side, but I just don’t see many opportunities to turn money into happiness by spending it- I was maybe hoping for ideas on that front but I got none from the book. After reading it I don’t plan to do anything differently and don’t find myself thinking about spending differently.

Still, some highlights. The book is full of well-chosen quotes from others:

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The Little Book of Active Investing

James Bailey3 Comments

Wiley publishes a series of short books on investing called “Little Books, Big Profits“.

I previously reviewed Vanguard founder John Bogle’s entry in this series, the Little Book of Common Sense Investing:

I can sum it up at much less than book length: the best investment advice for almost everyone is to buy and hold a diversified, low-fee fund that tracks an index like the S&P 500.

You could call Bogle’s book the Little Book of Passive Investing; but most of the rest of the series could be the Little Books of Active Investing. That is certainly the case for Joel Greenblatt’s entry, The Little Book that Beats the Market (or its 2010 update, The Little Book that Still Beats the Market).

Greenblatt offers his own twist on value investing that emphasizes just two value metrics- earnings yield (basically P/E) and return on capital (return on assets). The idea is to blend them, finding the cheapest of the high-quality companies. The specific formula is to pick stocks with a return on assets of at least 25%, then select the ~30 stocks with the lowest P/E ratio among those (excluding utilities, financials, and foreign stocks), then hold them for a year before repeating the process. He shows that this idea performed very well from 1988 to 2010.

How has it done since? He still maintains the website, https://www.magicformulainvesting.com, that gives updated stock screens to implement his formula, which is nice. But the site doesn’t offer updated performance data, and his company (Gotham Capital) offers no ETF to implement the book’s strategy for you despite offering 3 other ETFs, which suggests that Greenblatt has lost confidence in the strategy. Here are the top current top stocks according to his site (using the default minimum market cap):

Perhaps this is worthwhile as an initial screen, but I wouldn’t simply buy these stocks even if you trust Greenblatt’s book. When I started looking them up, I found the very first two stocks I checked had negative GAAP earnings over the past year, meaning Greenblatt’s formula wouldn’t be picking them if it used correct data. The site does at least have a good disclaimer:

“Magic Formula” is a term used to describe the investment strategy explained in The Little Book That Beats the Market. There is nothing “magical” about the formula, and the use of the formula does not guarantee performance or investment success.

Greenblatt’s Little Book is a quick and easy way to learn a bit about value investing, but I think Bogle’s Little Book has the better advice.

Hayek on The Volatility Pie

Zachary Bartsch4 Comments

In the Road to Serfdom, Friedrich Hayek uses some basic quantitative logic to make an important point about employment and political economy.

Hayek starts by assuming that government jobs are stable relative to those in the private sector. This might seem obvious, but let’s just start by checking the premises. Below are the percent change in total compensation and total employment for government employees and for the private sector. From year to year, private employment and total compensation is more volatile. So, Hayek’s initial premise is correct.

https://fred.stlouisfed.org/graph/?g=1LcUK
https://fred.stlouisfed.org/graph/?g=1LcOu

From there, he proceeds to say that if any part of income or employment is guaranteed or stabilized by the government, then the result must be that the risk and volatility is borne elsewhere in the economy. He reasons that if there is a decline in total spending, then stable government pay and employment implies that the private sector must have a deeper recession than the overall economy. Looking at the above graphs, both government employment and the total compensation are much less volatile.

But can’t governments intervene in macroeconomic stabilization policies effectively? Yes! They can and do stabilize the economy, especially with monetary policy. But Hayek is referring to individual stabilizations. For any individual to be guaranteed an income, all others must necessarily experience greater income volatility. How’s that?

Consider two individuals. Person #1 has an average income of $100. In any given year, his income might be $10 – or 10% – higher or lower than average. For the moment, person #2 is not employed and has income volatility of zero. If the government provides a job with a constant pay rate to person #2, then they still have zero income volatility. But instead of earning a consistent $0, person #2 earns a consistent $50. Nice.

Of course, person #2 gets his pay from somewhere. By one means or another, it comes from person #1. Let’s be generous and assume the tax on person #1 has no resulting behavioral effect. His new average income is $50, being $10 higher or lower in any given year. But now, that $10 deviation is over a base of $50 rather than $100. Person #1’s income varies by 20% relative to his new average!

Reasoning through this, we can consider that a person has a stable portion of their income and a volatile portion. If someone takes a part of your stable portion and leaves you with all of your volatile portion, then your remaining income is now more volatile on average. I think that this point is interesting enough all by itself.

IRL, many of our taxes are not lump sum. Rather, progressive taxation causes a negative incentive for production & earnings. The downside is that we produce less. The upside is that the government takes a higher proportion of our volatile income than of our stable income (because income changes are always on the margin and those marginal dollars are taxed at a higher rate). So, the government shares the income volatility of the private sector. By continuing to pay government employees a stable salary, the government is effectively absorbing some of that year-to-year income volatility on behalf of its employees.* The government is, in a sense, providing income insurance to a subgroup.

What does this have to do with The Road to Serfdom? Hayek argues that, as the government employs an increasing proportion of the population, the remaining private sector experiences increasing income and employment volatility. Such volatility increases private risk exposure so much that people begin to fawn over and increasingly compete for the stability found in government work. He gets anthropological and argues that the economic attraction to government jobs will introduce greater competition for those jobs and subsequently greater esteem and respect for those who are able to get them. This process makes the government jobs even more attractive.

My own two cents is that there is nothing internally unstable about this process. Total real income would fall compared to the alternative. However, such a state of affairs might be externally unstable as other governments/economies compete with the increasingly socialist one.

*An important analogue is that firms behave in a similar way. An individual may receive a relatively constant salary so long as they are employed. But the result must be that the firm bears more of the net-profit volatility. So, as more people want stable private sector jobs, the profit volatility of firms would increase and result in greater [seemingly windfall] profits and losses.

Chesterton Right about the History of Patriotism

Joy Buchanan1 Comment

Unexpectedly, Chesterton on Patriotism from 2021 is one of my all-time top performing posts due to a slow but steady drip of Google Search hits.

In 1908, G.K. Chesterton published the following line in Orthodoxy,

This, as a fact, is how cities did grow great. Go back to the darkest roots of civilization and you will find them knotted round some sacred stone or encircling some sacred well.

By 1908, Chesterton had likely been exposed to Victorian early anthropological thinkers like Tylor and Frazer. Maybe I shouldn’t be impressed that he’d get it right, but I don’t think of Chesterton as having access to the best and latest evidence for how human civilization evolved.

I was browsing the book Sapiens (2011) this week and came across:

In the conventional picture, pioneers first built a village, and when it prospered, they set up a temple in the middle. But Göbekli Tepe suggests that the temple may have been built first, and that a village later grew up around it. (pg 102)

Today’s post is dedicated to congratulating Chesterton on making a conjecture that turns out to line up with the best we now know and archeological evidence that was only discovered in 1995.

Chesterton wrote,

The only way out of it seems to be for somebody to love Pimlico; to love it with a transcendental tie and without any earthly reason. If there arose a man who loved Pimlico, then Pimlico would rise into ivory towers and golden pinnacles… If men loved Pimlico as mothers love children, arbitrarily, because it is theirs, Pimlico in a year or two might be fairer than Florence.

Also this month I witnessed Americans celebrating the 4th of July. People here love this country “because it is theirs.”

I’ve heard a lot of panicking in the past 10 years about the fate of the nation, and I think we should always be in a partial state of paranoia. But, if love of country is needed in the recipe, we’ve still got it. (you might need an Instagram account to view Mark Zuckerberg Zuck wakeboarding in a bald eagle suit)

We’re All Magical

Zachary BartschLeave a comment

The widespread availability and easy user interface of artificial intelligence (AI) has put great power at everyone’s fingertips. We can do magical things.

Before the internet existed we would use books to help us better interpret the world.  Communication among humans is hard. Expressing logic and even phenomena is complex. This is why social skills matter. Among other things, they help us to communicate. The most obvious example of a communication barrier is language. I remember having a pocket-sized English-Spanish dictionary that I used to help me memorize or query Spanish words. The book helped me communicate with others and to translate ideas from one language to another.

Math books do something similar but the translation is English-Math. We can get broader and say that all textbooks are translation devices. They define field-specific terms and ideas to help a person translate among topic domains, usually with a base-language that reaches a targeted generalizability. We can get extreme and say that all books are translators, communicating the content of one person’s head to another.

But sometimes the field-to-general language translation doesn’t work because readers don’t have an adequate grasp of either language. It isn’t necessarily that readers are generally illiterate. It may be that the level of generality and degree of focus of the translation isn’t right for the reader. Anyone who has ever tried to teach anything with math has encountered this.  Students say that the book doesn’t translate clearly, and the communication fails. The book gets the reader’s numeracy or understood definitions wrong. Therefore, there is diversity among readers about how ‘good’ a textbook is.

Search engines are so useful because you can enter some keywords and find your destination, even if you don’t know the proper nouns or domain-specific terms. People used to memorize URLs and that’s becoming less common. Wikipedia is so great because if you want to learn about an idea, they usually explain it in 5 different ways. They tell the story of who created something and who they interacted with. They describe the motivation, the math, the logic, the developments, and usually include examples. Wikipedia translates domain-specific ideas to multiple general languages of different cognitive aptitudes or interests. It scatters links along the way to help users level-up their domain-specific understanding so that they can contextualize and translate the part that they care about.

Historical translation technology was largely for the audience. More recently, translation technology has empowered the transmitters.

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