Kyla, you are such a special and observant mind. I am sending you: "hey good job"! I understand what you are saying and I love the passage: "I guess I had been expecting things to feel different, for the sky to open up, a booming voice to say “hey good job” and the sun to beam a single ray of light into the middle of my forehead, for fanfare and chorus and celebration, but instead, it was me and Moo, as always, in my kitchen/office/living room/bike workshop." You belong in a world think-tank trying to make sense, meaning and appropriate actions to improve upon such uncertainty. Thanks for another wonderful essay.
Human storytelling highlights the importance of micro connections, the face time with your family, friends, neighbors, and larger community. The act of extending one's community to a larger public pool by acts of common curtesy, kindness, and charity to strangers is a routine and sometimes heroic feature of our fables. To the extent we're being trained to accept a reduction of meaningful human connections, this represents a moral hazard. Dealing with live people is tricky and messy but that's where the good stuff is. Thank you for keeping it real, Ms. Kyla.
Reading your Notion, I found this extremely relatable:
- i know how elevators work. you press 'up' and the lightness of your heart carries you heavenward. or 'down' and the earth tenderly pulls you close
- When you realize reassurance seeking is a compulsion and no amount of reassurance will ever satisfy anxiety you will know peace
- once fucking again i have realized for the 6000th time that i was feeling insane because i was disconnected from my gratitude and as soon as i felt thankful for something i was not insane anymore
- why is there so little people explicitly experimenting with consciousness?? we have access to this shit every moment, let's understand and jailbreak it
- discourse isn't real, none of this is real...this is a thinking machine daily reinvented to distract you from maxima with minima, it's a funhouse mirror with no referent at the origin of a labyrinth with no perimetrical exit. and everything real encompasses this flat thing.
Technology is not the same as the essence of technology. When we are seeking the essence of *tree*, we have to become aware that that which pervades every tree, as tree, is not itself a tree that can be encountered among all the other trees. - Martin Heidegger (1889-1976)
Intelligence is a moral category. The separation of feeling and understanding, that makes it possible to absolve and beatify the blockhead, hypostatizes the dismemberment of man into functions.
Adorno, Minima Moralia: Reflections from Damaged Life, 1951
I find the typos to be distracting, like "to" when you mean "too." Also "who's" when you mean "whose." Maybe you could get a friend to read it over and edit a bit?
Hi Kyla, I really enjoyed this and congrats on finishing the manuscript!
Your point about the crushing uncertainty really hit home for me. Bc I like hearing that things are alright. And you are right, things aren't "that bad" but often it still feels like things are bad! And reading your post I realised it's the uncertainty about the future that makes me angsty. Rather than what's actually happening now.
Time to take a chill pill and wait for your next post. Thanks for making economics actually accessible and understandable to someone who doesn't really like reading the news!
I read your comments above very, very carefully. I wanted to see why I disagreed with the premise so profoundly. Your thoughts are so scatterbrained, your command of the English language so feeble (where were you originally educated in the basics of English?)... e.g "it's" where you mean "its... "to" where you mean "too", your reference points are sometimes non-existent. Or when you say, "credit card debt is not that bad". It just goes on and on. And the basic premise adds up to nothing. The economy is bad. Get used to it...
Hi Richard, I think you might find yourself outside of Kyla's target audience. The way she writes is one of my favourite things about her articles and I think it's wrong to suggest her English is "feeble". Her writing style is intentional and makes complex ideas accessible to many, many people. I personally find it fun and enjoyable to read. If you don't like it that's ok but please be kind. All the best.
I see. Incorrect grammar is "intentional", right? This is the thing with Americans (having lived there 22 years). We call it 'glorifying stupidity'. Shouldn't come as a surprise. Just look at what passes for American comedy - the stupider, the funnier...
"am just going to let this sit alone - "Nearly 60% of companies that have been public in the U.S. over the last century or so have failed to create value, defined as earning total shareholder returns in excess of one-month Treasury bills."- Henrik Bessembinder's research"
Interesting quote but I think it makes sense. Companies are supposed to be risky. If all of them succeeded then they would be risk free assets. Since the other 40% probably have massive gains (fat tail distribution), we should expect a lot of companies to 'fail'. Maybe even more than the 60% observed.
In order to reduec the 60% underperformance (have more 'beneficial' firms), we would need to ex-ante know that this company is 'bad' and will underperform. Therefore, we (as in society) should not allocate capital (or labor to it) as it is a waste of resources.
Can we determine which companies will be bad? If hedge funds and big investor managers have repeatedly been shown to not beat the market portfolio, how could we or the government be able to determine which firm will be bad.
Could there be something from a macro perspective we could do to influence the 60% (for example increase IPO costs, or trading costs as this will force more due diligence)? Maybe, but that will come with a trade off of potentially losing out on the big winners (which I'm assuming generate a lot of value to society - an assumption that can be discussed).
In the start-up stage, actually, there is research that showed that one can prune out certain bad investments, but there might be a cost associated with the decision - from my descriptions of it:
"Expert Investors? – Predictably Bad Investments: Evidence from Venture Capitalists by Diag Davenport
Are early stage investors and venture capitalists better than an algorithm? This paper suggests that the answer to that question is ‘no’. Although venture capitalists outperform the broad stock market quite significantly, most of this overperformance is driven by only a subset of their investments. An algorithm can prune out the investments that are ‘predictably bad’. This increases returns by approximately 7–41%, creating an even larger magnitude of outperformance versus the stock market. The author believes the reason for the poor investment decisions is the over-weighing of the characteristics of the founders of startups. Interestingly, I wonder if there is a repeated interaction component that might be at play – if you back the founder during a failed investment, the founder might accept you as an investor in the future when they’ll have a more successful investment. "
Maybe it is regional but where I live (in Florida) people are struggling. Food pantry demand is way up. Rents have skyrocketed; homelessness is increasing daily. The job market is not good for job seekers. When I was hiring for a role two years ago it was difficult to get over two applicants. Nowadays that same role would have 20-30 people apply. So it doesn't surprise me to see such sour sentiment.
Assuming the data is sound, and things aren’t all that bad, maybe we should do nothing. Back when I was a caseworker I learned that people need to make a personal choice to help themselves. I could only say so many combinations of words to convince them to begin picking up pieces of their lives.
All the Cass Sunstein-style nudging hasn’t amounted to much since the 2010s, so maybe time to stop trying to convince people to feel better, or to use another tool. Maybe that Taylor swift method is right: let them party.
In terms of the vibecession, I think you pretty clearly nailed that the fundamentals — housing, healthcare, and education — are a mess. We know how to fix those things, we just won't do it because of entrenched political interests.
Similarly, I don't see how you can blame VC specifically for misallocating capital when their objectives are so clear (high-risk, high-reward investment profile) and their performance is so legible (actual LP returns). I'm not sure what the counterfactual here is—do you just want them to do PE investing (the guys in more traditional companies) with lower risk/return profiles? Of greater concern is that change in the aforementioned fundamentals is practically illegal, and if no change is allowed, how can there be any innovation? This dynamic roughly translates to all of the physical world—atoms are much more expensive vs. the world of bits, where there is far less regulation and can grow much faster thanks to the existing infrastructure and zero marginal costs. If you want more dollars allocated into the real world, you have to change that return profile (see: CHIPs Act and IRA). Those are still one-offs, and they're still stuck in the same vetocracy and cost challenges that plague all modern physical world innovation in the US.
i think you can say "hey VC should maybe be different and maybe not chase bubbles and maybe allocate LP capital smarter" and that's perfectly reasonable and fine, and many VCs themselves feel the same way about the industry. Thanks.
I agree with all of that, but the VCs that do chase bubbles usually get burned (or they get lucky with their timing, start a podcast, try miserably to run social media companies their friends bought, etc.) I think it's the idea that VCs should be investing in foundational needs stuff that I'm reacting to, because if the expected return there looked better, VCs would go for it. Instead, the expected returns there are carefully managed, for legitimate reasons (e.g. price scalping for medicine) and political interests (NIMBY). I guess I am just lamenting the lack of large bets possible in those foundational areas, at least of ones I can see, and I wish yelling at VCs would fix it as opposed to the slog of having to drive fundamental change among voters and communities.
Not as smart as either of you here, but I'm curious, were you (Rob L) referring to Kyla's other newsletter on the Vibesession or todays?
There was only a brief blurb about venture capital in today's:
Misallocation and Mismeasurement
The gap between VC funding and impact, the difference between stock market returns and company value, survey response skew
Is it the word "misallocation" that is troublesome? You're arguing venture capital's 'thing' is inherently making high-risk investments instead of investing in foundational needs. So its no misallocation if by design VC's are taking high risks.
I was under the impression Kyla was saying like "do better" cause even in high risk investments there are better ways than chasing bubbles.
Is the issue here, that the blurb on VCs was too reductive? Or was it too much of a blanket statement?
I was talking about today's, though I did follow the vibecession stuff (which I think is perfectly on point). I think you have captured the gist of it — I'm trying to clarify how she connects the dots from "people think the economy is bad" to "VCs should do better". VC in my understanding is pretty mechanical in its approach, including investing in bubbles primarily because LPs want exposure to that part of the economy. They absolutely do dumb, self-serving stuff as well, and there are big parts of the industry that are wasteful (and occasionally actively harmful to the public), but at the level of the economy, it's more like calculus. The calculus for investing in "foundational needs" as she identified is pretty poor. Ultimately, we want the same thing, and her point is a fair one. I just think, if you really want VC as a category to be addressing the economy or any of housing, healthcare, or education in a way that would affect average consumer sentiment about the economy, it takes a much bigger change, upstream of VC as a category to shape their incentives to invest there.
Kyla, you are such a special and observant mind. I am sending you: "hey good job"! I understand what you are saying and I love the passage: "I guess I had been expecting things to feel different, for the sky to open up, a booming voice to say “hey good job” and the sun to beam a single ray of light into the middle of my forehead, for fanfare and chorus and celebration, but instead, it was me and Moo, as always, in my kitchen/office/living room/bike workshop." You belong in a world think-tank trying to make sense, meaning and appropriate actions to improve upon such uncertainty. Thanks for another wonderful essay.
"Don't wait to be generous" - post-it stuck to the side of my monitor
Human storytelling highlights the importance of micro connections, the face time with your family, friends, neighbors, and larger community. The act of extending one's community to a larger public pool by acts of common curtesy, kindness, and charity to strangers is a routine and sometimes heroic feature of our fables. To the extent we're being trained to accept a reduction of meaningful human connections, this represents a moral hazard. Dealing with live people is tricky and messy but that's where the good stuff is. Thank you for keeping it real, Ms. Kyla.
Congratulations on sending off the manuscript!
Reading your Notion, I found this extremely relatable:
- i know how elevators work. you press 'up' and the lightness of your heart carries you heavenward. or 'down' and the earth tenderly pulls you close
- When you realize reassurance seeking is a compulsion and no amount of reassurance will ever satisfy anxiety you will know peace
- once fucking again i have realized for the 6000th time that i was feeling insane because i was disconnected from my gratitude and as soon as i felt thankful for something i was not insane anymore
- why is there so little people explicitly experimenting with consciousness?? we have access to this shit every moment, let's understand and jailbreak it
- discourse isn't real, none of this is real...this is a thinking machine daily reinvented to distract you from maxima with minima, it's a funhouse mirror with no referent at the origin of a labyrinth with no perimetrical exit. and everything real encompasses this flat thing.
Technology is not the same as the essence of technology. When we are seeking the essence of *tree*, we have to become aware that that which pervades every tree, as tree, is not itself a tree that can be encountered among all the other trees. - Martin Heidegger (1889-1976)
Intelligence is a moral category. The separation of feeling and understanding, that makes it possible to absolve and beatify the blockhead, hypostatizes the dismemberment of man into functions.
Adorno, Minima Moralia: Reflections from Damaged Life, 1951
Re: Your book. Hey, good job!! ^_^ !!
If you persist in following the sun, then eventually you will find that sunbeam.
A book is a big project; sending one off is a big deal. I hope you get a chance to celebrate, maybe with some fanfare and chorus (live musical?).
You tackle tricky topics in this post. Thank you for your thoughtfulness. Our turn to think things over.
Thank you for being here.
I find the typos to be distracting, like "to" when you mean "too." Also "who's" when you mean "whose." Maybe you could get a friend to read it over and edit a bit?
Real: more cash has been printed in the past few years than in the course of history.
Shills: “aCtUaLLy u R wRoNg aNd ThE eCoNoMy iS gUd.”
thanks for this :D
also, how will we know that your book is available for the masses? sorry if you have already talked about this; I must have missed it.
"And I am not a psychology person (although the economy certainly feels more like psychological analysis than financial)"
Wellllll this why I read your newsletter. Animals spirits impacting the economy writ large are disregarded by so many out there but not thee!
Hi Kyla, I really enjoyed this and congrats on finishing the manuscript!
Your point about the crushing uncertainty really hit home for me. Bc I like hearing that things are alright. And you are right, things aren't "that bad" but often it still feels like things are bad! And reading your post I realised it's the uncertainty about the future that makes me angsty. Rather than what's actually happening now.
Time to take a chill pill and wait for your next post. Thanks for making economics actually accessible and understandable to someone who doesn't really like reading the news!
I read your comments above very, very carefully. I wanted to see why I disagreed with the premise so profoundly. Your thoughts are so scatterbrained, your command of the English language so feeble (where were you originally educated in the basics of English?)... e.g "it's" where you mean "its... "to" where you mean "too", your reference points are sometimes non-existent. Or when you say, "credit card debt is not that bad". It just goes on and on. And the basic premise adds up to nothing. The economy is bad. Get used to it...
Hi Richard, thanks for this comment. Appreciate you reading the piece and thanks for providing your perspective.
Hi Richard, I think you might find yourself outside of Kyla's target audience. The way she writes is one of my favourite things about her articles and I think it's wrong to suggest her English is "feeble". Her writing style is intentional and makes complex ideas accessible to many, many people. I personally find it fun and enjoyable to read. If you don't like it that's ok but please be kind. All the best.
I see. Incorrect grammar is "intentional", right? This is the thing with Americans (having lived there 22 years). We call it 'glorifying stupidity'. Shouldn't come as a surprise. Just look at what passes for American comedy - the stupider, the funnier...
I just want to own a home one day :/
Have you tried working hard to be born into a rich family?
"am just going to let this sit alone - "Nearly 60% of companies that have been public in the U.S. over the last century or so have failed to create value, defined as earning total shareholder returns in excess of one-month Treasury bills."- Henrik Bessembinder's research"
Interesting quote but I think it makes sense. Companies are supposed to be risky. If all of them succeeded then they would be risk free assets. Since the other 40% probably have massive gains (fat tail distribution), we should expect a lot of companies to 'fail'. Maybe even more than the 60% observed.
my guy, it should NOT be 60% of all companies, that's absolutely not cool
The way I see it, stock returns are fat tailed on both ends (just found this, hopefully reliable - https://www.mymoneyblog.com/return-distribution-individual-stocks.html)
In order to reduec the 60% underperformance (have more 'beneficial' firms), we would need to ex-ante know that this company is 'bad' and will underperform. Therefore, we (as in society) should not allocate capital (or labor to it) as it is a waste of resources.
Can we determine which companies will be bad? If hedge funds and big investor managers have repeatedly been shown to not beat the market portfolio, how could we or the government be able to determine which firm will be bad.
Could there be something from a macro perspective we could do to influence the 60% (for example increase IPO costs, or trading costs as this will force more due diligence)? Maybe, but that will come with a trade off of potentially losing out on the big winners (which I'm assuming generate a lot of value to society - an assumption that can be discussed).
In the start-up stage, actually, there is research that showed that one can prune out certain bad investments, but there might be a cost associated with the decision - from my descriptions of it:
"Expert Investors? – Predictably Bad Investments: Evidence from Venture Capitalists by Diag Davenport
Are early stage investors and venture capitalists better than an algorithm? This paper suggests that the answer to that question is ‘no’. Although venture capitalists outperform the broad stock market quite significantly, most of this overperformance is driven by only a subset of their investments. An algorithm can prune out the investments that are ‘predictably bad’. This increases returns by approximately 7–41%, creating an even larger magnitude of outperformance versus the stock market. The author believes the reason for the poor investment decisions is the over-weighing of the characteristics of the founders of startups. Interestingly, I wonder if there is a repeated interaction component that might be at play – if you back the founder during a failed investment, the founder might accept you as an investor in the future when they’ll have a more successful investment. "
Maybe it is regional but where I live (in Florida) people are struggling. Food pantry demand is way up. Rents have skyrocketed; homelessness is increasing daily. The job market is not good for job seekers. When I was hiring for a role two years ago it was difficult to get over two applicants. Nowadays that same role would have 20-30 people apply. So it doesn't surprise me to see such sour sentiment.
hey lara, im not negating any of that and totally agree. Florida is a bit of a special case due to your all's leadership as well.
Assuming the data is sound, and things aren’t all that bad, maybe we should do nothing. Back when I was a caseworker I learned that people need to make a personal choice to help themselves. I could only say so many combinations of words to convince them to begin picking up pieces of their lives.
All the Cass Sunstein-style nudging hasn’t amounted to much since the 2010s, so maybe time to stop trying to convince people to feel better, or to use another tool. Maybe that Taylor swift method is right: let them party.
In terms of the vibecession, I think you pretty clearly nailed that the fundamentals — housing, healthcare, and education — are a mess. We know how to fix those things, we just won't do it because of entrenched political interests.
Similarly, I don't see how you can blame VC specifically for misallocating capital when their objectives are so clear (high-risk, high-reward investment profile) and their performance is so legible (actual LP returns). I'm not sure what the counterfactual here is—do you just want them to do PE investing (the guys in more traditional companies) with lower risk/return profiles? Of greater concern is that change in the aforementioned fundamentals is practically illegal, and if no change is allowed, how can there be any innovation? This dynamic roughly translates to all of the physical world—atoms are much more expensive vs. the world of bits, where there is far less regulation and can grow much faster thanks to the existing infrastructure and zero marginal costs. If you want more dollars allocated into the real world, you have to change that return profile (see: CHIPs Act and IRA). Those are still one-offs, and they're still stuck in the same vetocracy and cost challenges that plague all modern physical world innovation in the US.
i think you can say "hey VC should maybe be different and maybe not chase bubbles and maybe allocate LP capital smarter" and that's perfectly reasonable and fine, and many VCs themselves feel the same way about the industry. Thanks.
I agree with all of that, but the VCs that do chase bubbles usually get burned (or they get lucky with their timing, start a podcast, try miserably to run social media companies their friends bought, etc.) I think it's the idea that VCs should be investing in foundational needs stuff that I'm reacting to, because if the expected return there looked better, VCs would go for it. Instead, the expected returns there are carefully managed, for legitimate reasons (e.g. price scalping for medicine) and political interests (NIMBY). I guess I am just lamenting the lack of large bets possible in those foundational areas, at least of ones I can see, and I wish yelling at VCs would fix it as opposed to the slog of having to drive fundamental change among voters and communities.
Not as smart as either of you here, but I'm curious, were you (Rob L) referring to Kyla's other newsletter on the Vibesession or todays?
There was only a brief blurb about venture capital in today's:
Misallocation and Mismeasurement
The gap between VC funding and impact, the difference between stock market returns and company value, survey response skew
Is it the word "misallocation" that is troublesome? You're arguing venture capital's 'thing' is inherently making high-risk investments instead of investing in foundational needs. So its no misallocation if by design VC's are taking high risks.
I was under the impression Kyla was saying like "do better" cause even in high risk investments there are better ways than chasing bubbles.
Is the issue here, that the blurb on VCs was too reductive? Or was it too much of a blanket statement?
Genuinely curious!
I was talking about today's, though I did follow the vibecession stuff (which I think is perfectly on point). I think you have captured the gist of it — I'm trying to clarify how she connects the dots from "people think the economy is bad" to "VCs should do better". VC in my understanding is pretty mechanical in its approach, including investing in bubbles primarily because LPs want exposure to that part of the economy. They absolutely do dumb, self-serving stuff as well, and there are big parts of the industry that are wasteful (and occasionally actively harmful to the public), but at the level of the economy, it's more like calculus. The calculus for investing in "foundational needs" as she identified is pretty poor. Ultimately, we want the same thing, and her point is a fair one. I just think, if you really want VC as a category to be addressing the economy or any of housing, healthcare, or education in a way that would affect average consumer sentiment about the economy, it takes a much bigger change, upstream of VC as a category to shape their incentives to invest there.