Longreads

• From Ben McKenzie and Jacob Silverman at the Washington Post, a look at crypto exchange Binance and its sometimes questionable uptime and payout record. Clearing trades—making sure buyers get what they paid for and sellers get what they're owed—is one of those problems that's close enough to solved that most investors can ignore it. It's not fully solved, since it's partly a credit problem, and any time you think you've perfected credit you'll end up creating a bubble. But tradfi does a decent job most of the time. In crypto, high leverage and high volatility mean that sometimes trading counterparties simply don't have enough money to make good on their obligations: if you're 20x levered short Dogecoin and Elon Musk adopts a Shiba Inu, you can lose 300% of your money. (Imagine telling someone this in, say, 2012.) Getting clearing right took some struggles: at one point in the 60s, the stock market had to shut down one day a week to catch up on paperwork, and the mafia discovered that they could rob couriers and steal share certificates. A big part of the Diff writeup of rival exchange FTX covered their various efforts to clear more efficiently and thus provide a more trusted trading environment. It's a hard problem to get right.

• Misha Saul has a speech from Adrian Loader on "Career, Power, and the Australian Dream." The meat of the speech is about how to think about your mid-career decisions, when you're still being handed goals and responsibilities but have some flexibility in determining how they're accomplished. This is tricky to manage, and especially tricky to manage mentally: middle management is the point in a career where your opportunities to blame other people are maximized, and resisting that temptation is hard.

• Patrick McKenzie of Bits About Money on donor advised funds and other forms of charity financial engineering. Tax policy around charity is a tricky balance between encouraging generosity without accidentally encouraging maneuvers that are mostly about saving taxes. There's a sort of Laffer Curve for control, where reducing donations' flexibility a bit prevents gaming the system, but doing it too much means people don't bother to donate as much. In this instance, the specific use case is allowing people to time their charitable tax deduction to coincide with a burst of income that rockets them into the top bracket, while timing their contributions more in line with the needs of the charities themselves.

• Andy Greenberg at Wired has a harrowing story about a child abuse site that was taken down by tracing Bitcoin transactions. It's a good reminder that while crypto allows pseudonymity, it also enforces transaction transparency—and pseudonymity can be reversed. This piece is also a look at how people operate when a) they have information that can prevent horrible crimes, but b) they don't want to act in a way that tips off the criminals.

• Stripe has an annual letter. Full of interesting datapoints, including high-level ones ($640bn in payments volume, +60% Y/Y!) and more granular (60% of 2021 tech IPOs were Stripe customers!) One bit that stood out: "On average, businesses from Austria, Belgium, Germany, the Netherlands, and Poland have increased their sales from EU customers by over 40% after accepting popular European payment methods (such as Sofort, iDEAL, and Bancontact) and reduced transaction costs by 40 basis points..." The big bear case on Stripe is that payments are a commodity, and that everyone ends up offering roughly similar services at roughly similar price points. But if new payments options can still, in 2022, drive this kind of revenue and margin improvement, then the commoditization point is clearly far away. And by the time it gets here, there may be commodity producers whose economies of scale allow them to offer a cheaper, better service than anyone else, even if they are mostly marking up other payment rails.

Books

• Republic of Spin: An Inside History of the American Presidency: part of the broad genre of history books that choose a narrow theme that intersects with a lot of big-picture events, Republic of Spin is basically a history of how US Presidents crafted their images using media that ranged from in-person speeches to ads to social media. As with a lot of history books that lead up to the present, it gets harder for the author to be evenhanded with the Presidents he had the opportunity to vote against, but he does a good and nonpartisan job on earlier ones. (For example, he pegs Jimmy Carter as being obsessed with image, and notes that Carter's down-home authenticity was partly crafted by his consultants and PR people.) One thing the book makes clear is that the easiest shortcut in PR is for it to be based on reality; Carter and Hoover both had very slick and effective public relations efforts until the economy undid them. Since the purpose of public relations is to frame events in a particular way, some of what starts as PR finds its way into history. This book won't necessarily change your mind about big events and narratives, but it will widen your confidence intervals.

Open Thread

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

• Sometimes the story of progress in an industry or academic field is luck followed by iteration, but sometimes it's more top-down: Einstein's letter to FDR kickstarting the study of atomic weapons, JFK's Rice University speech about the space program, William Crookes' The Wheat Problem catalyzing research into fertilizers, John Doerr's greentech TED Talk inspiring lots of investment, and hopefully this piece catalyzing more serious thought about the study of progress. Are there other good examples? Are there good failed examples? And what patterns emerge? Alternatively: are those speeches just the point at which a field that’s been fermenting for a while suddenly gets noticed?

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