All-in Summit Highlights
Come for the speakers, stay for the networking, the zany parties and free shit (sponsored of course)
It’s not very often that one of the most talked about conferences in tech happens right in my back yard, so when I heard about the All-in Summit being held in LA, I had to take advantage. Personally I come to these things to meet people and to unplug for a bit and listen to some great speakers that might provoke some new thoughts or ideas for me.
This event was incredibly well produced (with the exception that hot coffee was a little hard to come by during breakfast) and the quality of the discourse was among the best I’ve seen at any of the dozen or so conferences I’ve attended post covid (when you’re a CEO you go to a lot of conferences).
I can see this growing to the point where it overshadows TED in a few years, which has unfortunately regressed into more of a forum to showcase luxury beliefs (more on these later down), progressive chest thumping and doomdayism than a forum for talking about new ideas and breakthroughs in technology and culture.
Overview of Speakers - recurring themes
The slate of speakers was very top shelf, with this year’s slate mostly running the macro-economics and policy side rather than the startup side (probably because the start up/venture game is simply not very hot right now and the weekly pod’s really haven’t spent as much time on it in the past). I sat in on most of them and below are my notes from the one’s I found most interesting.
Ray Dalio
If you already read Ray Dalio’s book, Principles for Dealing with The Changing World Order you more or less understand the crux of his talking points: history occurs in cycles built around rise and falls of different civilizations; We are in the twilight years of the American age; China is ascendant; the strength the currency erodes in the last stages of the civilization as it collapses under the weight of the debt it accumulated during it’s years of ascendance, etc. Below is just a summary of sum of the talking points I found interesting that were original from the thesis of his book.
Dalio outlined three forces driving the world today: debt & money creation, the rise of populism and the great power conflict between the US and China. Other (mostly natural) forces are less continuous but also have a significant impact - pandemics, droughts & famines and technological advances (like the rise of the railroad, air travel or now generative AI).
Dalio defined a populist as someone who “won’t accept losing”, which caused David Sacks to quip back that “populism is a reaction to failure of the elites.”
Dalio followed up by saying that populism is a natural consequence of growing inequality and as such is a natural consequence of the cycle of ascendance and the growth of decadence. He pointed out that substantial inequality is an inevitable consequence of the run up of debt that occurs when a civilization reaches its peak. The same forces that made the civilization strong create decadence that undermines them and the system that made them great. He drove this point home saying: “The risk of capitalism comes in the wealth gap and opportunity gap clash. That creates risk for democracy.”
On China:
Speaking about how the decline of great powers leads to war, “leading powers don’t go down without a fight”.
“I think China is going to be a great power for the foreseeable future…this conflict is going to be with us and its totally changing the world order.”
“They remember the particulars of their whole five thousand year history (china). Biggest risk is instability.”
“(From CCP’s perspective) Autocracy is best thing to have from their perspective due to risk of internal conflict.”
On India:
“India has highest potential growth rate. I think India is where China was when I started going there in 1984.”
“Modi is another Deng Xiaoping.”
“Historically, the neutral countries did the best…countries that are neutral have the most to gain from great power conflict.”
Predicting the Future and Monetary policy:
“We will have things to fight over at the same time we will hopefully have a productivity miracle…in the next five years I expect radical disorder. Elections, power conflict, climate issue, technology, etc. “
“I think you are going to see another move to try and print money in the next downturn.”
“Can exchange bonds for tangible things.”
“Gold is the only asset you can have that’s not someone else’s liability.”
“US made most of its money because of money we made BEFORE entering WWI and WWII.” This was an interesting point that the US really got rich on the lend/lease act and selling materiel to allied combatants before the war started. That’s likely what pulled us out of the recession. The fact that everyone else’s non war time economies sank due to capital destruction and that they were overloaded in debt/inflation from the conflict probably didn’t help either
On inequality and it’s impact on Capitalism
“The profit system alone does not direct resources adequately.” The example he gave is climate change where he feels negative externality’s aren’t being adequately captured. I tend to disagree with this because even with something like climate change, the best solution, whether you agree that climate change is a problem or not, is probably some sort of carbon tax (ie signaling profit motive) rather than the credits system and morass of regulations (more on this later from Bill Gurley) which has just turned into a kleptocratic casino.
On American Renewal
“There are pre-existing conditions that represent challenges. But it is not inevitable. What’s needed is:
A) a strong middle to bring company together
B) good engineering exercise “reformation”
“
Good luck with that, our constitutional system is specifically designed to prevent attempts at radical reform and radical change.
“We’re going to kill each other fighting over these things.”
Overall, I have mixed feelings about Dalio. I feel like he is a brilliant mind and is mostly right at the macro level, but some of his predictions I disagree with (e.g. - I think China has peaked like Japan in the 80s due to demographic headwinds) and I think that rising interest rates and the unskilled labor shortage are ALREADY starting to dampen inequality by taking the wind out of the sails of a lot of high net worth sales while simultaneously buoying wages on the low end of the scale.
The days of someone in middle management making $1M a year on Facebook stock are in the rearview mirror- new players in the white collar market are lucky to get a quarter of that. Meanwhile you can’t hire anyone to do painting or construction or flip burgers for less than $20/hr in CA - which is about double what it was a decade ago. So the floor is rising and the upper band is falling. The leverage is going away and so it feels like an evening out is slowly occurring here.
Steven Wolfram
Steven Wolfram received a Phd form Caltech before he was 20 and founded Mathematica. He’s probably one of the most foremost thinkers on computation and computational theory. I remember in engineering school the joke was “first try integrating by parts; if that doesn’t work, try integrating by Mathematica; if all else fails, integrate by Dave Burnett (who was the computational materials science chair)”.
The crux of Wolfram’s talk was on : “Computational irreducibility”. The idea that the consequences of simple rules can at times be very hard to figure out. This fits into Wolfram’s favorite topic of cellular automata, which he has extensively written about.
How do you formalize things that lets you work out what will happen?
The traditional view of science is that once you work out the equations you’re done. Turns out that is not true. Consequences of simple rules are very hard to figure out.
Some other key talking points from this thread:
“Even a very simple program can do very complicated things”
Principle of computational equivalence
Build a computer of a certain kind, how sophisticated can it be?
You can make a fixed piece of hardware that solves everything (Von Neumann architecture)
“nature discovered this trick: even a very simple organism can do very complicated things.”
Classic problem: does a collection of cells keep growing and turn into a tumor or does it die on its own? Complex problem solved with simple equations.
“We humans have only been interested in solving a small subset of what’s computationally possible”
What’s changed in the last 15 years?
Two major things:
In 2012: jump in image processing using Machine Learning
Then in 2022: Large Language Models (LLMs) had a breakthrough and we now have LLMs that have made a huge leap in ability to solve complex problems.
On LLMs
How do you construct language? LLMs have figured out a Semantic grammar to language that seems to indicate its much less complex than we thought.
Logic is a formalization of every day language
LLMs represent a linguistic user interface whereby humans can communicate instructions to computers in plain language.
One basic use of LLMs is that they can take a “Small set of points, send to an LLM, puff it up into a big report.” and then go the opposite direction to summarize (bloviation on demand)
Feeds into this concept of language as a transport layer for information
What really is communication?
We need to understand the nature of the black box…
“We are going to discover that its much simpler to understand human language than we thought”
Inter concept space: what’s between the concept of a cat and the concept of a dog? In between the things for which we have words?
What exists between the 50,000 words in the English language that are commonly used?
We have explored a tiny tiny fraction of the possible atoms
What could be underneath everything we see in the world?
Overall this is a fascinating talk and I recommend you watch the whole thing when it’s available on Youtube (hopefully soon) as a snapshot for where one of the foremost minds in computation thinks we are in the arc of the AI revolution.
Graham Allison
Graham Allison is the former Secretary of Defense for Policy under Clinton and was the Founder of the JFK school of government at Harvard. He’s also the longest standing member of the defense policy board. His book Destined for War: Can America and China Escape the Thucydides Trap became semi-famous during the Jim Mattis confirmation hearings for SecDef in 2017. As someone who actually read Thucydides and has read several books on the Peloponnesian war (Victor Davis Hansen’s A War Like No Other in particular is my favorite), I’m keenly aware of the analogy and the players, so I leaned in to this one. Below are some notes from the discussion and you can watch the longer video here.
China
“When one great power threatens to displace another, war always is the result”
“With regards to the relationship between US and china, expect things to get worse before they get worse”
Here’s his pithy explanation of the Thucydides trap:
“When a rapidly rising power displaces an existing power, shit happens”
“China is going to be largest power in history of world” - I actually disagree with this point, I think they are sitting on enormous debt bubble and their demographics are an utter timebomb.
“War isn’t inevitable, just structurally likely”
“If we settle for diplomacy or statecraft as usual, we can expect history as usual”
The Thucydean dynamic as he describes it is best exemplified as a seesaw: When the seesaw begins to tilt from the dominant to ascending play, the psychology begins to shift and prevailing power has issues with the ascending power being a peer when they were looking above them not that long ago.
How did we get here?
What led us to a lot of the stupid policy that has made China a threat? In 2000, China was 5-10% of US GDP - place was a mess and our leaders lacked the strategic imagination to believe china could grow to be a near peer adversary. The prevailing thinking was Fukuyama’s End Of History and that we were in a unipolar world with no major threats.
Graham spent some time on the Chinese mindset: for the last 5000 years, they were mostly the largest power - this is the norm historically for them (I’ve heard this point from numerous other historians and foreign policy wonks as well). Then came the “century of humiliation” - the 18th century- where the west overtook them. Since then they’ve been wanting to get back on top.
Chamath brought up the fact that China’s population woes will remove justifications for war because of waning growth and the lack of able bodied men (lots of single son/child households further amplifies this).
Graham retorted by pointing out that China already attacked us once before in Korea and beat us right back down to the 38th parallel. This means that they can point to a success within the generational memory of the PRC. Combine this with the fact that “Wars happen not because anyone wants a war…but because someone makes a mistake and it escalates (paraphrasing)”
India
On India, Graham believes that Modi is undermining multi-ethnic democracy by favoring majority (Hindu) over minority (Muslim) interests. He sees this leading to sectarian strife if he’s not careful. Also, historically most of the time China has grown faster than India (again, Modi’s push for deregulation may change the narrative here.
How to Counter China and the State of Play
“We need an alliance strategy more than they do (the Chinese)”
“We don’t operate in the South China Sea like we did 30 years ago during Clinton administration.”
David Sachs reacted to this talk to maintain the status quo that “we (the establishment) cannot conceive that other powers have some equivalent of our Monroe doctrine themselves”
Graham was clear that he thought “George Bush made a terrible, terrible mistake invading Iraq”. Brent Scowcroft (NSA to Ford and Bush I) said it was stupid and wrote an OpEd in the NYT to that effect when it was under discussion.
The Military Industrial Complex has perverted the Intelligence Community to write justifications for these wars before they happen - Chamath
This reminded me of the long discussion about the 40 year lead up to WWI that Barbara Tuchman discusses in The Guns of August with all the talk about the von Schlieffen Plan.
Are we equipped for a hot conflict with China?
“You could greenfield defense deparment today with half the money and you’d get twice the buck in terms of lethality” - Graham Allison
Congressman Ro Khanna
Ro Khanna is politically pretty liberal but I admire that he thinks for himself and doesn’t just parrot the party line all the time. He had some interesting thoughts on a variety of topics.
Regarding China he made a point about needing to change our mindset away from cold war thinking if we truly want to avoid great power conflict: “A lot of people are saying we are in a Cold War…I don’t want to repeat the same paradigm of the 20th century.”
He has some populist streaks to him: “why can’t we build modern steel plants in the US w/ lower carbon footprint?” Rep Khanna is currently sponsoring a bill with Marco Rubio to build economic zones in Midwest…to rebuild industry.
“Massive mismatch between the governing class point of view and working class point of view”
He called for a growth mindset to get us out from under the current debt situation: “Debt to GDP ratio only matters if you can’t improve GDP”
On Big Government
To his credit he did admit that “Regulatory corrosion has taken production hostage in America.”
Chamath then pointed out to him that while there have been many laudable efforts at regulatory reform, “The blob always comes in and then nothing changes”. Many of us use the term ‘Special Interests’ for this. More on this in Bill Gurley’s talk later.
One of the biggest regulatory captures is housing in CA because of all the requirements and regulations (earthquake strapping, green energy mandates, zoning restrictions, etc). Perhaps the most egregious example of this is affordable housing, where the County of Los Angeles has built less than 1000 units of affordable housing for the homeless since Measure HH passed a few years ago ($500M a year in sale tax to support homeless services) - this works out to a cost of nearly $550,000 a unit. Indeed, they are so incompetent they can’t even put a tent up for less than $40,000 each.
What’s broken in America and how do we fix it?
According to Congressman Khanna, we need to “recapture our sense of common purpose.” Part of the problem, as Sacks made a recurrent them throughout the talk is trust in leadership: “We’re in a situation where we (Congress) have lost the trust of the American people”. His solution is to do something few democrats have supported in the past and impose term limits. Shortly after this he unveiled legislation calling for Congressional term limits (adding to prior legislation he had calling for SCOTUS term limits) as well as a stock trading ban. We’ve been down this route before and term limits were imposed in the 90s only to be overturned as unconstitutional in 1995 in the Thornton case. Still, I admire that he’s willing to at least put the idea out there and its a debate worth having (in California, term limits imposed since 1996 have left us with a legislature even more captured by lobbyists and special interests than ever before, so the track record is mixed to say the least).
“Term Limits solve the staleness….incumbency advantage.”
On Defense
He briefly touched on the military industrial complex and some of the waste, fraud, abuse and gouging there. To his credit, in his first term on House Oversight he managed to uncover about $18M in price gouging from TransDigm - a conglomerate that did a roll up by buying a bunch of small components for various sole source components (landing struts for the F-22, longerons on the Osprey, etc) for various defense systems then pulled a Martin Shkreli and raised the prices 10x or more. He pointed out that Raytheon makes 40% profits on the Patriot (if this is gross margin for a mature program in production, that’s actually not horribly egregious) and no one holding them accountable. What he completely overlooked with this tirade is that decades of cost plus contracts are really the problem, along with the incumbent primes helping shape a regulatory system and revolving door that allows them to corner the market and block out competition from start ups.
Truman became vice-president by holding defense accountable during WWII. Perhaps Ro Khanna can follow a similar path with Ukraine? I’m not holding my breath but I’m glad to see someone paying attention.
Vinod Khosla
For those who don’t know, Vinod Khosla has been a fixture of tech for 40+ years since finishing his Stanford MBA in 1980 and later founding Sun Microsystems. From there he went on to a storied career during the telecom bull market as a partner with Kleiner Perkins, including his most successful investment where he turned a $3M check into Juniper Networks into a $7B investment at IPO (one of the largest MOICs in history). Since then, Khosla ventures has taken on a reputation for making big bets and also for doling out harsh advice to portfolio and non-portfolio companies alike.
Of his reputation for being harsh:
“Most VCs want to be your friend so they are hypocritically polite rather than brutally honest to help you make make a better decision”
OpenAI
One of his most recent bets was OpenAI, which after speaking with Sam Altman and the team, he was “so convinced in it, I made 2x the biggest bet I’ve made in my time in VC".” He thinks that Generative AI is so transformative that it will completed change our way of life.
He was drawn to the investment a few years ago because there were: “two major centers of excellence in AI; Google and Baidu. I was very worried about Chinese winning. I have no love for China…I thought it would be valuable to create a 3rd center and that was motivation for creating OpenAI.”
“30 years from now, hopefully people will work because they want to not because they need to….Hopefully those (drudgeries) jobs disappear”
Chamath brought up just how much of a shockwave OpenAI sent through the markets: “a lot of big co’s were caught flat footed (by OpenAI)”.
Khosla observed that in response to OpenAI it: “seems like big companies (FAANGs+ MSFT) want to scorch the earth on the model side.” This is pretty obviously what is happening and it’s driving NVIDIA’s stock price into the stratosphere to stock up on the computation to crunch all the parameters.
Since then he has pivoted away from LLM based investments, trying to find out what’s next:
“Everyone trying to scale LLMs….I’m trying to find what is different from this?”
On the current state of Capitalism
Khosla continued with a semi-progressive theme we heard from some of the other billionaires like Ray Dalio earlier in the day: “Capitalism is by permission of democracy and it can be revoked.” He elaborated on this say “Economic efficiency cannot be only criteria”. Khosla has been a soft advocate for policies like Universal Basic Income that have proven to fail in medium scale experiments (see Stockton, CA) and arguably we’ve had some form of UBI in the west (at least for the elderly) for most of the 20th and 21st century, yet poverty rates remain semi-stuck around 10% in most places.
On Venture Capital
Khosla is an entrepreneur’s kind of venture capitalist who believes in bold investments rather than safe ones:
“The Great thing about VCs….they like to place long bets.”
He still believes that large innovations don’t come from large companies:
“I’ve been doing venture for 40 years. In that time I only seen one example of a large innovation that came from a large company or large institution.”
His one example: BoA rolling out easy credit and debit cards in the 70s, which spun out and became Visa.
State of Play in Fusion
In his survey of the field there are six approaches and 70 companies trying to execute. The reason they invested in Commonwealth fusion was simply because they had raised more capital than anyone else. He also liked that many of the technologies they were developing had applicability beyond just the fusion problem, like the high field magnets they developed. He appreciated that the magnets had applicability beyond just fusion.
“They spent double digit millions to de-risk the largest challenge in the architecture: ‘can you build a 20T magnet?’
There are numerous alternative uses for same technology- nuclear medicine, etc
Even if the play doesn’t work, these alternatives give you off-ramps
He however believes there are many approaches that may pan out: “I think there is more than one approach that could be successful.”
On the bubble in venture that appears to be popping
Sacks introduced the point that the bubble seems to have popped. By the estimate of the folks on the stage there are 1400 unicorns in private markets today and half of them are fake.
How much did the asset bubble inflate everything? In Khosla’s mind it “Inflated some areas, deflated others.” Perhaps pointing to his experience in the telecom run up of the 90s he observed: “Bubbles make a lot of underlying business. Reality of the underlying business doesn’t change much if you are adding value.” After the telecom bubble burst in the early 2000s, dark fiber helped lead to many of the fixtures of the internet age we take for granted today: like a virtualized cloud with distributed computation throughout the globe, streaming video and Whatsapp calls anywhere on earth for free (anyone else remember when international calls were over a dollar a minute?).
He ended his panel with the point: “Investors bounce between fear and greed with nothing in between. Need to stay focused on long term in the middle”
Elon Musk
Elon’s talk was conducted remotely via Starlink from his plane. As a former SatCom systems engineer this blew my mind because the latency was imperceivably due to the LEO constellation’s low altitude. He might as well have been zooming from down the street, with virtually any glitches. If I’m some of the other Satcom providers, this demo would have made me shudder.
I’ll leave the full contents of the video to the viewer to watch, but it coincided with the release of his eponymously named biography from Walter Isaacson that same week.
One particular discussion about SpaceX supposedly denying use of Starlink to Ukraine for offensive operations in Crimea was notable: I’d heard this story before from others and a lot of his critics have used it as an attack point. For those of you who aren’t familiar with the anecdote, it’s been said that Elon effectively cut off a Ukrainian counteroffensive by denying them use of Starlink in Crimea because he was “worried about them starting World War III.”
The actual truth was much more complicated: it turns out that since Russia is under sanctions, SpaceX cannot provide service over any part of it’s territory by law (ie it can’t put spot beams over it) because that would be potentially doing business in Russia. SpaceX had provided thousands of terminals to Ukraine and had effectively replaced a large part of their telecommunications backbone. The Ukrainians had been using it for most communications involving front line troops for quite some time and realized late into their operation planning that they had no coverage over Crimea and were planning on using Starlink to command their drones there. So a few hours before SpaceX receives a cryptic request from the Ukrainian government to “turn on Starlink over Crimea.” Naturally this would send any corporate counsel into a total shit-fit since it would be a request by a foreign power to violate US law by breaking sanctions. As Elon put it “As a US defense contractor we don’t take orders from foreign powers through direct channels.”
Elon later went on to say “If the DoD or a presidential directive had requested service, we would have been obliged to provide it.” This bureaucratically driven pause seems like a more realistic story to me based on my experience with defense contractor compliance departments than the idea of a rogue billionaire trying to somehow exercise a vote over tactical operations of a foreign power.
Day Two
Fusion panel with David Kirtley (CEO Helion) & Bob Mumgaard (CEO Commonwealth Fusion)
The two CEOs started off with individual presentations starting with Bob Mumgaard at Commonwealth fusion. Commonwealth fusion uses a traditional Tokamak (magnetic confinement fusion) reactor and their key discriminator as far as I can tell is that they have raised more money than every other approach (70 companies currently pursuing) - over $2 billion.
Bob emphasized that their technical focus up to this point has been on producing a 20 Tesla superconducting magnet to contain the plasma in the Tokamak. They are now in the process of scaling their reactor design and construction is underway for a 2025 launch of SPARC. They are expecting to achieve Q>1 (that is net fusion energy out) using this reactor. He believes this will put us on path to have commercial fusion power by the 2030s.
David Kirtley - Helion
David Kirtley from Helion was next up. This company has gained a lot of attention due to investment from Sam Altman and others. Their approach is unique in that they are relying on Helium-3 reactions to generate fusion - this approach has the advantage of releasing a charged particle (a proton) in the reaction, which means that the power can be extracted through induction rather than traditional thermodynamic approaches of heating a working fluid - making it more efficient.
Their reactor is comprised of a long elongated cylinder with a formation fuel injector on each side. Then the injected fuel is accelerated and compressed then when the reaction occurs the electricity is recaptured via induction.
They’ve had to make some key breakthroughs in pulse power systems and capacitive systems in order. They have achieved temperatures of over 100M degrees K, have achieved bulk fusion in D-D and D-He3 and have over 10,000 fusion pulses achieved so far. They have been taking an agile approach to hardware engineering with work currently underway on their 7th reactor. He claims they have achieved 95% efficiency for input energy to heating.
They have already signed a power purchase agreement with Microsoft for 2028 with plans underway to build a 50 MW plant in Washington state (sidenote: 50 MW is the largest power plant you can build without being subject to federal power oversight and approvals directly).
They have had to invent and invest in significant capacitor manufacturing to store the pulsed power they need to achieve ignition temperatures using their approach. He claims they are the “first new capacitor manufacturer in US in a long time.”
Panel discussion
Both CEOs agreed the goal is to achieve grid energy costs of <$.01 kWh. This would more than be an order of magnitude cheaper than the average price we’re paying in Los Angeles right now - $.28 kWh. The implications of this cheap and abundant energy for humanity could fill volumes, but it’s as big of a breakthrough as the internal combustion engine was in the 20th century in my opinion.
Because their systems require effectively zero fuel, Mumgaard made the point that the “energy cost becomes the interest rate because its 100% capex.” This effectively makes utilities among the most profitable enterprises should this breakthrough be achieved.
David Friedberg asked the obvious question to both: “Why do you guys win?” They had different takes on the discriminators:
Commonwealth: Lowest science risk
Helion: We iterate faster than everyone else
Both agreed “100%” that we will see commercial fusion in our lifetimes. But replacing our 3000 GW of electrical utilities with Fusion will be very hard.
Bill Gurley
Bill Gurley brought the house down in the presentation above, which apparently he’s been working on for quite some time. Its the story of how big telecom lobbyists ganged up to prevent Tropos networks, a municipal WiFi provider they backed at Benchmark, from entering the market and disrupting their fee structure.
As a result of this and similar efforts, Telecom went from being 15% of VC activity in the 90s/early 2000s to today its so small NVCA barely tracks it anymore.
“As a rule, regulation is acquired by the industry and is designed and operated primarily for it’s benefit…” - George Stiglitz
“Regulation is the friend of the incumbent” - Bill Gurley
He gave another example from Obamacare with medical billing software. Doctors were paid $44000 each from government under Obamacare to buy software with a OHC (office of health coordinator) mandated feature set which used Epic’s software as a template. Epic’s CEO chaired the board that led to the committee. To make matters even worse, they got paid $17k more to prove they were actually using it. The mandated feature set prevented any disruptors from entering the market - in fact, folks were even fined for using less than acceptable alternatives. Classic regulatory capture.
He also went into how the same thing happened with Covid testing: which is why it costs 2x as much as they do in Germany.
Presently, Meta is the biggest driver of regulation on AI. OpenAI, others that are ahead in the game keep saying “please regulate me.”
Looking at prices over the last 30 years, the biggest run ups in price are in the industries with the most regulatory capture.
Bill concluded by pointing out:
“The reason Silicon Valley has been so successful is because it’s so fucking far away from Washington”
Larry Summers
Larry Summers has been a fixture on the wall in economic circles for decades and has a unique perspective on many of today’s problems. It’s likely he would be fed chairman now if the manufactured scandal around some comments he made regarding intelligence differences between the sexes hadn’t have ended his tenure at the helm of Harvard about 15 years ago.
Rather than summarize his remarks which you can watch in full here, I’ll try to pull out the most salient points he made below for reference:
Regarding economic predictions:
“Two types of economists, those who know they don’t know and those that don’t know what they don’t know.”
Regarding the so-called “soft landing” from the fed raising interest rates:
“What Samuel Johnson said about second marriages is also true about soft landings: its the triumph of hope over experience.”
Just because it’s taking a while doesn’t mean history won’t still repeat itself.
“Stuff that mean reverts, mean reverts.” In other words, economic gravity exists.
“Larger risk that we don’t have inflation below 3.5%…fed thinks it has control and it doesn’t and has to go back into raising rates.” You could see echoes of this thinking in comments this week from the Fed that they would likely raise interest rates again and maintain elevated interest rates until possibly 2025.
“Fed should realize that the extraordinary size of US budget deficit complicating policy task…needs to be more vocal calling it out.” The interest on the federal debt is now approaching $1T annually, due to many bonds needing to be re-issued at higher interest rates. The US basically bought a bunch of social spending, two endless wars and a covid panic on a massive adjustable rate mortgage the last twenty years and now the bill is coming due.
In 2021 the government infused $2.9T into a rapidly recovering economy and that’s how we got to where we are now. The Fed enabled this by buying bonds on a massive scale which is what maintained the ZIRP (zero-interest rate policy) for almost 14 years with minimal interruption. This put us off course from what should have been an era of enormous productivity improvements due to technological improvements with a clean fiscal house. Instead, we get to look forward to high interest payments being an increasing drag on the US economy moving forward, crowding out better investment.
On Current Social Mores
Summers beautifully captured the zeitgeist of our era when he said:
“It used to be that accomplishment led to esteem. Now we have embraced the false belief that esteem leads to accomplishment.”
In his mind, the biggest embarrassing education reform of the moment is eliminating standardized tests…most common grade at Harvard now is an A, so how do you differentiate? He believes that real reform and equity should come from doing away with legacy admissions and eliminating scholarship berths for elite sports like Fencing, crew and sailing.
Regarding the temptation of many in power today to intervene and regulate in every crisis, he took a classically conservative cant: “There are Limits to our knowledge….limits to our capability…best thing to do is get out of the way”
“The large reason why cops are good is because people commit far fewer crimes when they know they are around…same thing is true with regulation.” This is probably the most effective argument about why police forces are important: their mere presence, if properly empowered, deters crime.
He ended his talk on a high note, pointing to the fact that while our past problems also were pretty daunting, but we overcame them all.
“Most important theme in American history is Resilience”
Rob Henderson
Rob Henderson is a brilliant social commentator who, along with Leighton Woodhouse are in my mind two of the best sociological thinkers around today. He spends a lot of time discussing and thinking about the basis of social capital. If you aren’t subscribed to his Substack, you should definitely do so.
The subject of his talk was that as the society has reached a certain baseline of wealth in the last 50 years, Luxury beliefs rather than luxury goods, have become a symbol of status.
“Luxury beliefs have to a large extent replaced luxury goods as a symbol of status.”
One of the key qualifiers of a luxury belief is that the believer is comfortably insulated from the consequences of their beliefs. The best example of this would be the large number of upper middle class people living in safe communities who were advocating vocally to “defund the police” to advance equity when the communities most impacted by such foolish beliefs are poor minority communities.
Henderson explains this through the principal of distance from necessity: only people high on the hog could afford to mimic these beliefs, since lower class folks can’t afford to have them.
Another example of a luxury belief practice is the burning of social ties over political views which many upper class white progressives have turned into a public sport. Lower class people who will need to conserve social ties by necessity can’t afford to do this, but upper class people can as a sign of status.
In the past, Elites often took counter-intuitive steps or reversed previously luxuries to show their status. For instance, as world trade improved about 400 years ago, spices went from being luxury goods to being ubiquitous in Europe and suddenly common folk could have access to them. When suddenly the common folk could spice their food however they wished, Louis XIV’s court banned sugar and spice from all meals except dessert because they had become ubiquitous and therefore “vulgar.”
Perhaps the most costly luxury belief by the elite in Henderson’s view has been their assault on the nuclear family. In 1960, 95% of American children were raised in two parent households, whereas today it’s more like 52%. For the top 10% today its still 85%, whereas in the bottom 20% two parent households have become outright unusual. The single parent household disadvantage costs the lower classes $59k/year on average in lower income - that’s a gap that is hard to overcome, regardless of government transfer payment schema.
The need for elites to show themselves higher in the stack than the common folks is an inexorable human desire that has always been with us and will always be with us. In contemporary society, the upper class and middle class are hard to distinguish by the clothes they wear, the cars they drive, etc. Anyone who lives in LA can tell you that driving a nice car or wearing designer clothes isn’t always indicative of someone having high status. So the upper class have transitioned to credentials (degrees from expensive schools, work tenures at prestigious firms and life experiences) and certain beliefs to communicate status. “Academics decided we’re no longer public servants; we’re luxury goods. Oxford, Stanford, MIT >> Apple as a brand”
The fixation on credentialism as status is increasingly obvious in top tier college admissions: the Top 1% of families by income have more students at Yale combined than the bottom 60%. If these credentials weren’t such a status symbol, would the upper class be willing to break the law to ensure their children attain them?
Either way, Rob Henderson is really doing some ground breaking work on understanding these elite cultural trends and their origins. I highly recommend watching some of his work here.
The Parties
I had other obligations that kept me from going to most of the parties (maybe next year) but I did make it to the Barbie party at the Santa Monica pier, which was a blast. They rented out the full amusement park area with tokens and there was plenty of Koji tacos and Gin & Tonics to go around.
Here’s a picture of me and my good friend Jimi Smoot both thinking inside the box for a change. I don’t really do preppie Ken, but Jimi at least had a pink shirt.