Longreads

• St. Louis' City Museum is a benign form of regulatory arbitrage: it's a warehouse that's been repurposed into a surreal venue featuring repurposed industrial products, found art, and live entertainment. Some of it was not strictly legal when built, but got legalized during the construction process. Whether it's in ride-sharing, offshoring, or crypto, the pioneers play a big role in writing the rules because they're the only ones who know what's going on. They're biased, sure, but they're also informed. In this case, there were natural limits to their ambitions; there's only one City Museum, so the precedents it sets only apply in one case. But it is a good demonstration of the complicated tradeoffs of lobbying: bias and information tend to be correlated.

• John Luttig on how most Covid trends have mean-reverted. Surprising mean reversion can be a more expensive process than trends slowly petering out and reversing, because when there's an inflection, the right approach is to spend quickly to take advantage of it. Companies that decided to see if trends like containerization, the Internet, or mobile were passing blips didn't do especially well, but the companies that did jump on these trends had to increase their expenditures in the face of significant uncertainty.

• Read about a study that didn't replicate while adding to the sample that shows it doesn't replicate.(Via P.S., You Should Know). One feature of the replication crisis is that there's pressure to publish results that don't just validate the null hypothesis, but another feature is that there's demand to cite studies that prove something over studies that demonstrate what we don't know. So increasing the quality of published research is partly a PR problem, of making it fun and participatory to determine that a given study was wrong.

• Freightwaves has a fun look at the business of transporting live bees: "Pollinating the seemingly endless fields of almond trees in California requires 85% to 90% of all honeybees available to pollinate in the U.S... Bees are trucked into California from across the country." However complicated you think global supply chains are, they are more complicated than that. As it turns out, the almond harvest is partly dependent on short wait times and quick inspections for bee-transporting trucks coming into California.

• Justin Murphy at Other Life on the freedom-specificity tradeoff for online content creators. If you pick a sufficiently narrow niche, it's possible to quickly become a top expert. (The most recent example I've discovered is this wonderful newsletter on the chemicals industry.) But if you choose a narrow niche, and you prosper with it, you're stuck. In general, breadth pays off over long periods, for two reasons: first, it means you're not tied to the fortunes of one particular industry—the world's leading expert on algorithmic stablecoins is probably wishing they'd chosen a different line of expertise right about now. And second, it turns out that many fields have surprising connections, whether they're fairly literal and direct (trucking regulations and almonds) or more metaphorical (stay tuned for an upcoming post on how railroads are AWS for industry).

Books

• How To Turn Down a Billion Dollars: This 2018 book tells the history of Snapchat from founding through its IPO. Snap had lots of red flags early on—a secretive approach, a product that looked like a low-status knockoff of more mainstream social media, a messy founder conflict—but turned out to be misunderstood. Misunderstood companies with stellar metrics have a responsibility to plan far ahead, because if competitors understood their use case, they'd be copied and killed; Snap has done this at the cost of a lot of volatility along the way.

Open Thread

• Drop in any links or comments of interest to Diff readers.

• There are some industries that are classically recession-resistant, like food, small luxuries (see the lipstick effect), and tobacco. But cycle sensitivity changes; tech companies mostly made it through 2008 in decent shape, but now that they're a larger share of the economy that might be harder to pull off. Are there any industries that are more or less recession-resistant than they were last time around?

Leave a comment

A Word From Our Sponsors

Here's a dirty secret: part of equity research consists of being one of the world's best-paid data-entry professionals. It's a pain—and a rite of passage—to build a financial model by painstakingly transcribing information from 10-Qs, 10-Ks, presentations, and transcripts. Or, at least, it was: Daloopa uses machine learning and human validation to automatically parse financial statements and other disclosures, creating a continuously-updated, detailed, and accurate model.

If you've ever fired up Excel at 8pm and realized you'll be doing ctrl-c alt-tab alt-e-es-v until well past midnight, you owe it to yourself to check this out.