Longreads- Last week, a long line of beating the odds on both the persistence of high returns and the mortality impact of smoking came to an end with the death of Jim Simons. In this lengthy interview with David Zierler, Simons talks about his academic background, his financial success, and his charitable giving (he says he's more proud of the Flatiron Institute than of Renaissance). It's a fun piece. For someone whose death singlehandedly weakened the IQ/wealth correlation, Simons is happy to give credit to other people for being smart, or even smarter than he is. Simons attributes his success to being good at recruiting talent, rather than to his own talents—which is partly a way to be modest, but it's also true that many people with theorems named after them haven't built multiple institutions the way Simons did. Other fun Easter Eggs: his name was anglicized, and his family's original name was Sutskever (unclear if there's any relationship to Ilya). And he describes his choice to start a hedge fund by saying he was stuck on a particularly challenging math problem and decided to do something else for a while—though he adds "Well, I certainly like math, but I also kind of like money."
- In Slate, Lincoln Michel clarifies some misleading numbers about the publishing industry that have been circulated recently, i.e. here. In short: the sales numbers are for calendar years, so they're closer to six month sales figures than full-year figures; per-book numbers are really per-format numbers, with ebooks, paperbacks, hardcovers, and audiobooks counted separately; books don't have to earn out their advance to be profitable; and "books" as a measured category includes plenty of products that you wouldn't think of if you were asking how well the average book sells or how much money the average author makes. Books are still a tough business, and the public does less reading and more watching than is ideal, but the situation isn't quite as dire as publishing companies' attorneys would like to make it look in contentious legal cases.
- Laurence Tratt on the nature of software. This is a really excellent piece, especially the first one: pure software is an unconstrained field, like math; a mathematician can manipulate concepts that have no real-world analog, and still be correct. But when a software product interacts with the real world, it's a purely abstract system running into a very concrete and fractally complex one.
- In the MIT Technology Review, Zeyi Yang writes about the rise of AI-based ancestor simulations in China. This, like AI girlfriends/boyfriends and AI therapists, is something to worry about: a simulation of a person can be useful, but the simulator has an incentive to create a sanitized and friendly version of that person. If your AI-generated mom encourages you and tells you how much she cares about you, that's a nice interaction; if she tells you you really ought to lose some weight and get a better job, that might be what she'd actually say in that context, but it's also likely to lead to customer churn. So the incentive for these simulations is to perform an emotional lobotomy, but keep enough real-world indications to make the interaction feel real. That's quite competitive with complicated real-world relationships—your AI relative is never going to be annoyed with you because it had a hard day—but there's a reason people evolved not to have uniformly and universally sunny attitudes.
- A recent and delightful new newsletter discovery: Glunker Stew writes deeply-researched and irreverent pieces about ancient history. Here's a look at who the "Sea People" were, where they came from, and how big a deal they were. It's more nuanced than many other narratives, and still has plenty of uncertainty, but is a great review of what was arguably the first time civilization faced an existential risk.
- In this week's episode of The Riff, we cover the case for Amazon buying a passenger airline (disclosure: long AMZN), why some productivity growth is invisible, BREIT, and why some companies can't truly issue common stock. Listen with Spotify/Apple/YouTube/Substack.
- And in Capital Gains: should schools teach financial literacy? It's much harder to answer than it looks: some financial literacy is just a series of grade school word problems, some of it's more difficult but has a short half-life, and in some cases it's so adversarial that it's better for people to think themselves ignorant than to overestimate their edge and lose.
BooksThe Greatest Capitalist Who Ever Lived: Tom Watson Jr. and the Epic Story of How IBM Created the Digital Age: How does a dyslexic party animal who suffered from clinical depression, nearly got expelled from high school, barely skated through college, and could hardly handle the rigor of his first job's training program go on to become CEO of the company that defined the computer industry in the mid-twentieth century? It helped that the person in question was Thomas Watson, Jr., and that IBM's founding CEO was one Thomas Watson, Sr. Family ties matter, and they mattered even more in the fairly sedate business world of the 50s and 60s. Watson, Jr., the subject of the book, had the classic difficult-childhood-because-his-parents-made-it-too-easy: he was an unreliable student, his dad arranged jobs for him, and he didn't really face any challenges in his early life that weren't entirely self-imposed. This was not good for his mental health, and it meant that in early life he had few indications of future greatness—the only evidence that he was a forward-looking early adopter was that he was smoking marijuana a generation before the hippies discovered it. What actually turned his life around was signing up for the military and discovering that he could actually do a good job without endless parental assistance. Here, too, luck came in handy: one of his first assignments was to convince military pilots and their commanders to use flight training systems. It's a stroke of luck that he was one of a tiny minority of recruits who happened to have direct experience selling computing hardware, and he did it well. He ended up working as an assistant to a general, who was more impressed by his output than by his pedigree. Watson returned to IBM, and ended up running it. And, over his tenure, beat his father's growth record while navigating two tricky transitions: first, IBM under Thomas Watson, Sr. was a cult of personality: employees sang from the official IBM songbook to start the day ("Pack up your troubles—Mr. Watson's here!/And smile, smile, smile./He is the genius in our I. B. M./He's the man worth while."). Watson, Sr. had once, as a traveling sewing machine salesman, had his entire inventory stolen while he was at a bar, so IBM forbade employees from drinking. All business questions waited on the CEO. That model worked for a while, but didn't scale; Watson, Sr. made the prudent decision to relax some of the rules while he was still in charge (he surprised his son at one point in the 1950s by serving wine at a company function, though liquor remained a bridge too far for a while). So IBM was very much a business built in the model of one person; if your cult of personality outlives the person, it's just a cult. Watson, Jr. made IBM more of a normal company. He also made it a much bigger company. He was early to recognize that the company's business was not selling punched cards but selling data processing services, so he took computers seriously as both a competitive threat and a revenue opportunity. This turned out to be the right call: the legacy business was threatened by both regulation and technological obsolescence, and for a while, Remington-Rand was ahead of IBM in the computer business. But they caught up, surpassed their rival, and became synonymous with computing just in time for computers to be synonymous with growth. The best way to read this book is that it's a story about personal and institutional legitimacy. IBM had accomplished a lot before Watson, Jr. took control, but it was also over-optimized for a business model under threat, and for the constant attention of a singular executive. It's hard to imagine that the single person most qualified to run IBM happened to be the son of the previous CEO, but it's also hard to imagine someone not named "Watson" being able to slay as many sacred cows. Open Thread- Drop in any links or comments of interest to Diff readers.
- The Diff previously wrote about IBM’s decision to bet the company on the System/360. What other big bets should we have looked at?
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