If you have followed this blog long enough you will know that I am an unabashed fan of the life and work of Nassim Nicholas Taleb, pugilistic social media presence and all. There is no simple way to summarize why — this post from the economist Branko Milanović is as good of an attempt as any — and reducing his Incerto series of books to a collection of One-Neat-Tricks (Ergodicity! Lindy! Skin in the game!) would not do them justice.

Having said that, here is One Neat Trick: when deciding to act, think about the best-case and the worst-case scenarios and try to pick one with known and limited downside and a potentially unlimited upside. The classic example here is buying stock options: for pennies on the dollar you purchase the right to buy stock at a certain price by a certain date. If the stock costs less than that price by the time it expires your only loss is the price of the option. But in the unlikely but possible case it skyrockets, you can pocket a good chunk of change. ⊕ [Note: People misunderstand this as Taleb recommending that people from all walks of life go into options trading. Far from it. In fact, one thing he said at my first RWRI years ago which has served me well is that if you are not a professional trader and you earn money from a different profession, your priority should be capital preservation, not generation. ]

The flipside and what you should definitely not do is selling uncovered stock options. Yes, most of them will expire and be worthless and you will get to keep the modest steady income derived from the selling price. But in the unlikely but possible case it skyrockets, and you don’t actually own those stocks — that’s the “uncovered” part, and yes people actually do that — you will need to purchase them on the open market at that very high price. D’oh.

Rarely are real-life choices this clear. You usually have to pick between several bad options with the same limited upside and different downsides. Case in point — and we are finally getting to the point of the title — is what the Colorado town of Erie has to deal with. Some houses in Erie are yards away from the Draco pad, one of several new fracking projects slithering around Denver. The city council was initially against it, then one member did an about turn, changed his vote, and allowed the sale of mineral and oil rights “for up to $35 million over the next two decades” along with some 160 acres of land previously used for drilling.

Quoth the Mayor, Andrew Moore: “So when we get to the point of, ‘Hey, the state approved this’ — I can’t change that,” Moore said. “But I think we need to work to get as much as we possibly can for Erie.”

In case you missed it, his thinking was that the state approved it already, drilling is down in the next-door Weld County and Erie can’t stop it, so they might as well get something out of it, like keeping the 10/10 elementary school and building up some more of the infrastructure. The downside is that it is and the upside looks good, so what’s wrong with that?

Well, if you stopped to think about it for more than a millisecond a question may come to mind: why on Earth would a publicly traded company give anything to the town if they were going to drill and get the oil anyway, There Will Be Blood-style? Out of the goodness of their corporate hearts? Please.

First, the upside is not what it seems. This is from yesterday’s Denver Post:

Under the agreement negotiated by Owens, Erie would receive a $4.5 million upfront payment and 3% royalty interest for the life of the project, which the town projected at the time of the council’s vote could range from $19 million to $31 million. The royalties wouldn’t kick in until SM Energy has recovered 200% of its cost to develop Draco.

$4.5 million is significantly less than $35M, as there are no guarantees whatsoever that any royalties would be paid out: those development costs can skyrocket, particularly when it’s the company itself estimating how much everything cost. Fungible accounting ftw.

Worse yet, by selling their rights I can only assume that the townsfolk are giving up the opportunity to sue the company for any untoward consequences of pumping millions of gallons of pressurized fluid into a landscape pockmarked with old oil and gas wells. Paying the town $4.5 million to not have to think about would be a steal, and easily defensible to even the stingiest of the board members.

So these are the two bad, ugly, abysmal choices put forth: take the $4.5M upside in return for the unlimited downside if and when things go wrong and there is no one to hold liable; or don’t take anything but lawyer up and reserve the right to block everything in courts at the first sign of trouble while also getting some money for potential damages.

My choice would be preservation, but then one of the big reasons we are in Denver and not north of it is that we didn’t want to make choices like that.

I am shocked — shocked! — to find a zoomer “AI investor” caught swimming naked at the first turn of the tide:

Aschenbrenner, who had no previous trading experience before starting the fund, worked for the FTX Future Fund, the philanthropic arm of Sam Bankman-Fried’s empire before it collapsed in late 2022. He later joined OpenAI’s “Superalignment” team before being fired over an alleged leak.

With such an illustrious pedigree, how could things have possibly gotten so wrong so quickly?

And in the unlikely case you were still wondering if there was an AI bubble, even FT called it.

• Gillian Tett for the FT: Welcome to the era of financial candyfloss. ⊕ [Note: Gift link, if you click on time. ] It is the perfect metaphor for American finance: spinning thin and devalued real properties into mounds of tooth-decaying fluff. You know things are bad when it comes not from the Guardian but from a seasoned Financial Times columnist.
• Brett Murphy for USA Today: Rigged. ⊕ [Note: ᔥCorey Doctorow ] An exhaustively sourced, dramatically illustrated, harrowing story about truck drivers working as slave labor, from 2017. If only there were a mechanism by which the richest, most prosperous country in the world could control this and similar excesses of a greedy minority.
• Alice Fleerackers for Nautilus: When Stupid Was a Diagnosis. On the plight of people with intellectual disabilities. In some ways, the 1700s were better to most of them than even now, or rather, they were equally cruel and bad to everyone regardless of their mental prowess. Then came the oh so ironically named Enlightenment.
• David Tuller: Trial By Error: No Benefits for Multidisciplinary Rehabilitation in New ME/CFS Study. “ME/CFS” stands for Myalgic Encephalomyelitis/Chronic Fatigue Syndrome and it seems to be the consequence of viruses playing havoc with people’s immune systems, which leads to their autonomous nervous systems being out of whack. Many of you may not remember, but there was a big viral infection going around 5-6 years ago that left everyone exposed all at once, which led to an explosion of these cases in absolute terms, though in terms of percentages it is thankfully still a vanishingly small fraction. Sadly, you can’t rehabilitate your way out of this particular organic problem, and it puts many young and otherwise healthy people out of commission. If only there was a mechanism to fund more basic research.
• Davide Gioia: Wildlife on the Planet Furaha by Gert van Dijk. A book review. The book in question is an alternative evolutionary history, richly illustrated, from a professor of neurology at Leiden University. An instant pre-order for me, and it is coming out next week in the US!

Every dickover is infuriating, but the worst ones by far are on the websites I’m already paying to access. Go to hell, Gray Lady; what you’re selling doesn’t need an app.

The more I read about “Dialog” — a Peter Thiel-adjacent semi-secret society — from the likes of Andrew Gelman and Cory Doctorow, the firmer my belief is that America has zipped through its oligarchy phase to become a full-blown kakistocracy. These people are morons.

The departure of Marty Makary is looking more and more like a Murder on the Orient Express situation: everyone wanted him out. Well, everyone except for uniQure, Capricor and ImmunityBio who were named in the original version of that Endpoints News story as some of the companies lobbying for Makary’s ouster, then asked for their mentions to be removed, as the Editor’s note now helpfully clarifies. C’mon, people. Own it.

• Kenneth P. Vogel and Christina Jewett for The NYT: A $5 Million Donation From Big Tobacco Preceded F.D.A. Vape Decision. ⊕ [Note: Gift link ]

There is no definitive evidence linking the new F.D.A. guidance to the lunch, the donation or specific lobbying. But the episode represented a victory for an industry that mostly had been on the defensive for years.

The now former FDA Commissioner Mary Makary quit in protest, and this isn’t the first time lobbying has led to FDA turnover. Yes, lobbying is great again! Say what you will about Makary or his recent subordinate (and, full disclosure, my co-fellow, co-author and friend) Vinay Prasad — as I have — at least they had principles. Those who pay for a STAT+ subscription can get the opposite take from Matthew Herper, who called Makary the worst FDA commissioner in 25 years. ⊕ [Note: And before you ask what poor Jane E. Henney (FDA commiss 1999–2001) did to him, 25 years is how long Herper has been covering biotech. The headline could have used an “at least” for accuracy. ]

• Nick Bowlin and Katie Campbell for ProPublica and The Frontier: Oily Sludge Is Flooding Their Dream Home. Oklahoma Regulators Say They Can’t Help.

The basement of a brand new house being filled with oil-smelling, oil-appearing sludge and the government agencies are calling it “water”; a personal and bureaucratic nightmare. This is the wider context:

The Frontier and ProPublica’s reporting on oil and gas pollution in Oklahoma over the last year has shown how old oil wells abandoned by the industry pose severe public and environmental health risks. Officially, the state lists 19,000 orphan wells that state regulators are responsible for cleaning up, but the true figure is likely over 300,000, according to federal researchers.

Drill, baby, drill! Preferably through an LLC, so that you can forget about the holes you left behind once the boom busts. This is why I am surprised by otherwise sensible people like Casey Hendmer being so frustrated with lack of drilling [Note: X-post ] in oil-rich California. Could it be that even the smart Californians who would prefer not to live above an abandoned well? I mean, even the ones with just water in them can be scary. Or is it the case of Eden for the rich and stinky sludge for the poors? Let them have oil!

• Chance Townsend for Mashable: Google overhauls its AI subscription tiers, makes them cheaper.

This is one of many reports from Google I/O which focuses on the new prices without mentioning the severely restricted token limits for all tiers. Here is an example of what lower limits mean in practice. I would like to commend Google’s marketing team for this PR sleight of hand: does it count as shrinkflation is the prices have also gone down? And how on Earth would those lower prices help the already abysmally low revenue? Maybe the relative cost of tokens will have increased, but who knows? It’s not like Alphabet is a publicly traded company that should report that kind of information. Good thing AI is its own thing and isn’t affecting anything else around it. Asbestos indeed.

• Dalmeet Singh Chawla for Nature: Researchers who use hallucinated references to face arXiv ban.

There is now a one-year ban from posting on arXiv for all (co-)authors whose preprint have references that LLMs conjured out of thin air, or other signs of passing on LLM-generated content without human review (such as paragraphs starting with “Here is a 200-word summary of…”). ⊕ [Note: A question to readers more style-minded than me: is stringing these four — an ellipsis, quotation mark, right parenthesis, period — one after another a typographical faux pas? ] Note that this is for physical sciences only, life sciences-minded bioRxiv and medRxiv have not (yet) instituted such rules. Which didn’t stop some life scientists from defending [Note: X-post ] the practice of not checking one’s own references: who has the time? Apparently not people with current or former NIH funding. Having once spent a full day finding the correct reference to back up a non-essential introductory claim in one of my least-cited papers (7 as of today) I empathise with the suggestion that references should be more of a guide than firm fact, but empathy is one thing and truth another and in matters of science I will stand behind the truth because if not then what on Earth are we even doing? Unsurprisingly, Andrew Gelman has a good take on the matter.

• John Burn-Murdoch for the Financial Times: Why birth rates are falling everywhere all at once. This is a gift link but has only 3 uses, so I will reveal the punchline of this beautifully illustrated exploration of data here: “In country after country the birth rate plunged after the introduction of smartphones, no matter what the previous trend was. The younger the age group, the more pronounced the downturn — a mirror image of smartphone usage patterns.” Note that my thoughts on journalist science still apply: caveat lector. But since the article matches my own bias I link to it without hesitation.
• Harry Law for Works in Progress: Why Spain has the world’s greatest cities. Having recently been to Spain, I agree with their assessment that it does indeed have the best cities. Though with 65% of people living in apartments, and not of the luxury kind, I imagine it can get claustrophobic for introverts.
• Scott Lincicome for The Dispatch: GDP Is Good, Actually. Sure is, as long as you remember Goodhart’s law. Otherwise you get into all sorts of moral conundrums, such as whether it is OK to produce and sell stuff that causes cancer because hey, cancer drug research, manufacture and sale will also make GDP go up, amiright?
• Melissa Naschek for Jacobin: Socialism Has a Future. Central Planning Doesn’t. This is an interview with Vivek Chibber, professor of sociology at NYU. I will emphasize the same part Alex Tabarrok did, and for the same reason: “If we’re actually serious about changing the world, people on the Left … should be the most remorseless and the most merciless when it comes to facts.” Being merciless about facts used to be the defining characteristic of the scientific way of thinking, until people started using phrases like “settled science” and such as a linguistic bludgeon.

After dissecting the minutiae from the ongoing battle of the bozos ⊕ [Note: To save you a click: it is about the Musk-Altman trial. ] , Andrew Sharp’s weekly column ends with this paragraph:

The reality is knottier. Had the OpenAI founders not launched with a nonprofit structure in 2015, they probably never recruit the talent required to compete with Google. And had they done anything else other than exactly what they did in 2018 and 2019, all of computing would be less interesting today, and the company probably wouldn’t exist eight years later. Musk’s trial has been clarifying on that point, at least for me.

The AI side of technology is one of those rare occasions where biotech may indeed be like tech: people with knowledge, skills and ambition to make the early steps towards creating something new generally don’t do it for the money. Accolades, titles, a few more increments on their h-indices sure, but unless they are seriously delusional a lab postdoc coming in on a weekend to split the cell culture generally has no hope of getting into the top percentile in income. Up until a few years ago AI research was much like that, until it wasn’t.

Sharp writes that OpenAI had to flip the switch if it were to survive in these shark Google-infested waters once they smelled blood profit an opportunity to tell a new story to investors. Same can be said about any biotech: become successful enough, and there will come a time when the academic founders are asked to step away and let someone with different motivations run the show, lest they be lost in a sea of copycats, smoke-peddlers and competitive intelligence officers. The whole business has just become too expensive for some Jonas Salk-wannabe to dabble in.

A person of bad intent may propose that the adults coming to run the show once it becomes too expensive are the ones making it expensive in the first place to justify their existence, contributing the health care cost ouroboros on the way. But that is of course nonsense. The proof is in the pudding, what with famously efficient drug development pipelines, low health care costs and improving lifespans.

So let’s do what a genuine financial scion once proposed: invert. Instead of asking ourselves how to make drug development more efficient and cost-effective, let’s see how we could make it more expensive. Number one thing to do would making it all about the money: let’s portray people who don’t capitalize on their inventions as losers not heroes, make Nobel Prize winners notable only if they are billionaires (who won the Nobel Prize in Physiology or Medicine last year, again?), measure success of drugs in dollars earned not lives improved, extended or saved, have everyone skim a percent or five of the money swishing around in the ecosystem as their primary source of income without any penalty for ultimate failure ⊕ [Note: For more on this, do read Nassim Taleb’s Skin in the Game, which is about much more than the titular phrase which has become — much like his The Black Swan — a phrase people throw around without having any idea of the underlying concepts. ] guaranteeing that they will have every incentive possible to grow the pie, and I think you see where this is going because the system functions as designed so why should you complain? After all, there is no alternative.

Except that, of course, there is. It would be a big lift, to remove incentives of skimmers to inflate the balloon, stop various influencer platforms from inducing FOMO in everyone and anyone, recalibrate the median science journalist’s value system from Mr. Market to something more reality-based. Big, but not impossible, provided there is a will.

Therein lies the problem: that kind of thinking is somewhat at odds with the shared American culture, at least as recently described by Chris Arnade, that “you can live how you want, eat what you want, live (up to a point) how you want at a thin level, as long as you ultimately believe in making big money through hard work and playing by the rules.” Determining if the other two legs of the three-legged money/work/rules American stool are performing as intended I will leave as an exercise for the reader.

Dave Winer posted an important piece of text yesterday under the title Transcript of AOC’s answer. This is the American politician and congresswoman from New York Alexandria Ocasio-Cortez’s response to an interviewer’s question of whether she would run for president in 2028. ⊕ [Note: Not yet being a US citizen I will refrain from commenting on her politics. Though, provided the federal government is still functioning, 2028 may be the year I actually get to vote! ] It is short and to the point and you should read or listen to the whole thing, but here is the meat of it:

So the elite think: if you want this job, you just stepped out of line. And we want you to know where the real power is. And it’s in the modern-day barons who own the Post and own the algorithms. And we’re gonna — we’ll make an example out of you.

And what’s funny about that is that they assume that my ambition is positional. They assume that my ambition is a title or a seat. But my ambition is way bigger than that. My ambition is to change this country.

“Positional ambition” is the perfect way to describe much of the American — and indeed the world’s — malaise. Many heads of various institutions, from state to corporate, are there because they imagined themselves at some point sitting in the chair, or being in the room, or having some letters next to their name, without much thought of what they would do once they reached the position except whatever it took to keep it. In fact, I can think of only a single US president in living memory whose ambition wasn’t primarily positional — and he was kicked out after 4 years in a landslide. But of course that is by design: the system is made to produce the exact results that it does (see also: the American business).

So that is an important lesson for any young person, to think in terms of actions not positions. It is a spectrum, sure, and you cannot completely separate what you want to do from what it would take to do it and how to get there, but you shouldn’t dream about having a rock star lifestyle unless you also want to make music. And if we dialed down our collective positional ambition I suspect there wouldn’t be as many aspiring influencers around, most “influencers” being all about the position and without even a pretense of substance.