The Diff - Longreads + Open Thread

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Longreads

• Tyler Cowen interviews Shopify CEO Tobias Lütke. Some of the best bits of this are about the cross-cultural comparisons: "I’m German. I started a company with another German, both in Canada, for Americans." Lütke points out that one reason there are fewer tech companies in Europe is that there's less optimism about the future—technology is morally neutral on its own, and if you expect the world to be worse in the future then you might expect new technologies to enable worse behaviors. And presumably anyone who wants to enumerate all the things sold through Shopify storefronts that probably shouldn't be sold at all will have plenty to keep them busy, even if the net impact of making it easier to start and scale a small business is quite positive.
• Lars Lofgren has a breakdown of how Forbes is hosting endless pages of monetizable garbage content on long-tail topics. Forbes has been doing this kind of thing for a while; The Diff covered earlier iterations a few years ago ($). Old brand names have value in the eyes of consumers, but they also have value through a search algorithm: people have been linking to Forbes articles for a long time, and when they talk about the brand they'll probably focus more on the brand-focused things like business news rather than brand-dilutive ones like their landing page about getting rid of cockroaches. In the long run, things equilibrate, either because other sites get more authoritative or because Google penalizes Forbes. But in the short term, there's a strong economic incentive to clutter up the Internet with low-value content, and then to attach it to high-value brands in order to drive traffic.
• Dan Davies presents a cynic's guide to fintech. These are indeed cynical views of what fintech companies do, but he's not universally negative, and some of them are quite apt. For example, Davies observes that if you find a credit underwriting system that backtests well, you have no idea whether or not you've found one that actually works—there's the obvious effect of adverse selection (i.e. you make the most loans to people who fit your underwriting criteria but have some offsetting feature that's in competing lenders' models but not in yours), and the fun non-obvious effect that a unique underwriter will end up with correlated risks: "you’ve got all the mixed-race dentists in Yorkshire, or something. And this, in turn, means that when the world changes, your risks tend to be very correlated and you lose years’ worth of profit in one lump."
• Dwarkesh Patel interviews Daniel Yergen, author of The Prize. The Prize is a really great book for reframing the twentieth century as the story of what humanity did with oil and what various specific humans did if they either needed a lot of it and couldn't get it or had a lot of it and wanted to turn that into a different kind of power. It's reductionist to treat history as the work of a single force, whether you're practicing Whig history, Marxist analysis, or just obsessed with one particular industry. But energy is a universal input and oil is one of the most convenient ways to produce it and move it, so an oil-centric view of the world tends to interact with just about everything else.
• Jonathon Sine on China's Local Government Financing Vehicles. If you love reading about weird things people do with money, and crazy emergent properties of sensible-sounding incentives, this is a fantastic piece. China's governing approach is often described as pragmatic, and this is a good look at where pure pragmatism gets you: lenders treated these entities as effectively guaranteed by the government, they provided capital to grow the economies of the local governments that sponsored them, and because loans weren't on the books as government debt, this looked like high-quality economic growth. But the result is a system that's big, levered, and opaque. This is particularly interesting to read right now, because of China's economic struggles with the gradual deflation of their property boom—because Chinese financial systems' total exposure to LGFVs is even higher than it is to property speculators.
• This week in Capital Gains, we're looking at CAC, cohorts, and why some customers spend for a while and stop while others spend more and more.
• And in The Riff, we talked about the state of EU tech, degrowth, why Javier Milei is not proof that taking a chainsaw to the rules is always the answer (even if in Argentina it probably is) and more. Listen with Twitter/Spotify/Apple/YouTube.

Books

The Book-Makers: A History of the Book in Eighteen Lives: Oil is not the only product whose history can anchor a broader one. This book covers the history of the book business, with a lot of focus on books as a business. They're important cultural artifacts and they're repositories for the most significant discoveries ever made, but they're also something that gets made, or doesn't, based on the vagaries of the capital cycle and unit economics.

The early chapters are the most fun, because they show just how complicated it was to get a book made, both as a pure business matter and as a logistical challenge. Books had to be typeset, illustrations made (and reused), paper and ink acquired, etc. (One of the ways the business had to develop over time was to figure out what the right bundle ways: early on, binding a book was separate from buying the pages.)

Books were also an early instance of international supply chains, for equipment, materials, content, and talent. A Dutch printer might use a German press to relay an English translation of a French story onto Italian paper. The ink was usually local, but everything else could come from all over.

This is a good history, though it loses some momentum as the product it's talking about matures. What offsets this is that it's full of character portraits for people who mostly aren't well-documented enough to get a biography on their own, but who provide lots of vignettes that keep things interesting. All that progress in the art of wrapping knowledge between covers was the cumulative work of many interesting lives.

Open Thread

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

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