For The Better - Email 10/17

For the Better comes to you bi-weekly with ideas about how and why to build companies focused on human flourishing and stories of the people who are doing it. Other enthusiasms may occasionally appear.

The Inefficiency of the Market is an Opportunity for Change

When I first began telling people about my idea for the Long Term Stock Exchange (LTSE), one of the most common responses I got was that reforming markets was impossible because of the Efficient Market Hypothesis. As it was taught to me (and pretty much everyone else), the theory holds that because share prices take into account all new information, they’re always trading at the correct value. The way to get higher returns is to seek out mispriced shares. This dependency on the idea that traders will arbitrate discrepancies away is essentially the wisdom of crowds on steroids. People who ascribe to this hypothesis believe it’s evidence that the markets work not just properly but perfectly. Not only is there no way to change them, there’s no need to change them – or even a reason to try. But as “The Less-Efficient Market Hypothesis” does a great job of explaining, it’s not true. To begin with, markets have actually changed dramatically over the last thirty years or so for various reasons. They’re now far less efficient in terms of share pricing, but somehow that hasn’t made it any easier to make money. There's so much liquidity that prices stay irrational longer than ever, creating deep delusion about what correct valuation really is. This thread offers a really good summary of forces described in the paper and some ideas about how to manage them. I’ve come to understand that the people who argue the market works perfectly right now really mean that it works perfectly for them. On a macro level, it benefits a certain kind of person over all the others. Not only that, but if the market is so different now than it was thirty years ago, why can’t it be changed again? LTSE and others who have followed in its footsteps prove it can be done. The Efficient Market Hypothesis is a cudgel used to prevent anyone who thinks the markets could work better from contemplating what that could look like. But even if it was true, there’s no reason it can’t be changed, and every reason to try. The issues cited in “The Less-Efficient Market Hypothesis” only show that the need for reform is more urgent than ever before. It’s ideal fodder for people who are ready to take on that project.

Things I’ve Enjoyed Lately 

🔵 AI: Dystopia or UtopiaA thoughtful look at both sides of the ongoing battle between AI doomers and their optimist counterparts. Among other things, it gets at the effect of potential economic implications by way of “the current AI hype cycle, which with its concomitant failures, distorts views. Most AI ventures will end in financial loss. In aggregate more money will be made than lost, but by a small concentration of world-changing companies.” Ultimately, as the author points out, “The future that happens will be the future to which we as society decide to guide this powerful tool.”

Athena:

One of the things I enjoy the most about what I do is that every day is a little different. I meet people building incredible companies and doing great things for the world, do my writing and work, and always reserve time for my family. Athena, which offers executive assistants at affordable rates, shares my belief that the key to making the most of everything life has to offer is keeping it running smoothly. I've partnered with them so you can focus on living your life rather than managing it. 

More info and a discount offer are here.

🔵 Let’s evaluate Kamala Harris’ entire economic policy programAn extremely useful thirteen-part breakdown of the Harris-Walz team’s major initiatives across every area, from healthcare to tax policy, startup support, housing, rural issues, and more. The election is less than three weeks away so there’s no better time to read up before you head to the polls. 🔵 Thinking through the future for LLM companies... and what this means for B2B AI startupsTips on how to “future proof” a B2B AI application layer company in light of the author’s belief that “It seems inevitable that as the underlying foundation models become more powerful, the LLM players will seek to justify the enormous investment that has gone into training their models by moving "up the stack", and evolve from an API or chat interface, to async agents.”