Yanis Varoufakis (2023)

A penetrating analysis of where we are and why.

Varoufakis has form with analysing current political affirs, of course: he wrote about his short time as Greek finance minister during the 2008 financial crisis in Adults in the Room: My Battle with Europe’s Deep Establishment. In this book he tackles a bigger subject: how has the economic system we are now experiencing diverged from the capitalism we’ve known for over a century? Varoufakis’ take is that the torrent of government money that followed the crisis, and increased during the pandemic, was used by the owners of internet-based cloud providers and major platforms – the “cloudalists” – to build-up their capital stock risk- and cost-free, and used this to grab (and then sell) the attention of everyone. Moreover it allowed them to charge rents to everyone else looking to sell on the internet, since network effects made their platforms unavoidable. This return to rentier economics is what Varoufakis terms technofeudalism, and claims this is a better term that the other terms such as late-stage capitalism or hypercapitalism that fail to capture the return to rents as the major source of corporate income – to the point that the cloudalists don’t need to be selling profitable commodities any more.

Varoufakis has a keen eye for anecdotes and corners of the economy in which to test his hypotheses, such as how General Motors turned into a hedge fund with a sideline in cars, or the irony of capitalism being defeated by … more efficient capitalism. But the major point is that technofeudalism isn’t capitalism, and emerged largely because of government largesse leading to unintended consequences followed by significant political capture to keep the new status quo in place and without meaningful regulation.

This is a book about economics, but there’s a computer science perspective that’s perhaps worth taking too. Cloud systems may be inefficient in economic terms, because they extract rents from all users and service providers. But technically they’re almost always more efficient than owning and running your own computers to provide services, as well as reducing costs and risks for start-ups and being a lot more flexible and (potentially) energy-efficient. That’s not to say that there’s no evidence of rentier behaviour: the cloud providers segment the market to charge premium rates for not-very-different services, which in turn changes technical decisions in ways that might not benefit service providers, and they’re notorious for making their charging structures as opaque as possible.

It’s the network effects in terms of access to users’ attention where the rents really become too significant to ignore and almost entirely negative in their effects. We’re also seeing the platforms seek regulation to stifle competition, notably in AI, which will re-inforce their ownership of the most important means of computation.

Another thing to consider is that the cloudalists’ rents make offerings progressively worsen. Cory Doctorow terms this process enshittification, where platform-based services inevitably try to suck-in all the surplus value and squeeze-out other stakeholders – turning them into what Varoufakis terms “cloud serfs” living on whatever pittance of value the platforms don’t deign to hoover-up.

So far so negative. But Varoufakis doesn’t content himself with merely describing the emergence of the current situation. As a former Communist his class-based analysis (which I have to say strikes a chord with me) leads him to try to define an alternative economy that recognises the realities of the techologies we live with. His prescription seems utopian and hard to realise, although not as hard (as he points out) as when trades unions were first formed, or when right-wing dictatorships were defeated – and he provides possible strategies and rallying cries for us to fight back against the return of feudalism in a more pernicious form than anyone ever expected.

5/5. Finished Saturday 9 December, 2023.

(Originally published on Goodreads.)

Gregory Zuckerman (2019)

A history both of quantitative investing and of one of its most successful proponents.

Jim Simons comes across as a fascinating character, who transitioned across academic science and made some important contributions before deciding to tackle the practical aspects of investing. Driven by the same sort of mindset that he employed as a scientist, his new company developed some of the first methods for properly managing and diversifying risk.

But… to what extent was Simons responsible? To what extent did he “solve” the market, and to what extent did he provide a management structure within which others could? The story told here tends to the latter interpretation.

It’s also impossible to escape some of the darker aspects of the story. First of all, once the market has been “solved” (at least to the extent of extracting considerable and predictable profits) the company closes it to other investors, and it exists purely as a vehicle for its own staff. That seems like the epitome of pure financialisation. Worse, Simons and his partner Robert Mercer use their wealth and power to drive a political agenda that’s entirely focused on advancing this kind of financialism at the expense of … well, everything else. It’s not clear that they actually have a broader agenda, which in some ways is more shocking than if they had, but is in keeping with the authoritarian politicians they somewhat succeed in promoting.

4/5. Finished Sunday 3 December, 2023.

(Originally published on Goodreads.)

Genevieve Cogman (2014)

An enjoyable premise and good story: a Library outside time whose Librarians collect different variations of fiction from parallel worlds whose inhabitants live under different constellations of science, magic, chaotic faerie infestations, vampires, and the like. Clearly the start of a series, and while I don’t think I’m really in the target audience, it’s a book I thoroughly enjoyed.

3/5. Finished Wednesday 29 November, 2023.

(Originally published on Goodreads.)

Michael Lewis (2023)

An absolutely riveting account of the rise and fall of Sam Bankman-Fried, his Alameda Research hedge fund and FTX exchange. the book came out before the trial at which Bankman-Fried was found guilty of fraud other financial felonies.

The person who emerges from this account is … strange. That’s not all that unusual in tech industries: as a computer science academic I encounter lots of people at varying points on the Asperger spectrum. Like many such people Bankman-Fried has a hard time relating to others and to his own feelings, and (also like many such people) is competely open about this and other aspects of his inner world. Unlike others he somehow manages to gain the trust of supposedly sophisticated investors.

Why is this? I suspect it’s got something to do with the archetypes of the Boy Genius and the Great Man of Science: people who are misunderstood but can nevertheless succeed beyond normal measure. That’s an attractive hook for investors wanting to profit off unlikely accomplishments.

Part of Bankman-Fried’s strangeness was his embrace of effective altruism and the philosophy of an analysed and quantified life. The basic premise seems to be that the probabilistic techniques that work so well in finance can be applied to all life decisions. The problem (I think) is that this is a mistake, and lots of pseudo-mathematical talk about “expected value” doesn’t disguise that: but it does throw up a smokescreen for people who aren’t themselves clear about what the maths actually says. They allow Bankman-Fried some astonishing lattitude, playing video games on reporting calls and simply not turining up for events because something else “with a higher EV” showed up. These aren’t characteristics of a reliable business partner – and would label someone with a more normal affect a sociopath.

(Why do I think the talk about EV is a mistake? In order to make an expected value calculation one needs the value of an event and the probability of that event happening. The value might be available, but what about the probability? How do we assign probabilities to events that lie a long time in the future, and whose course we don’t understand? A one-in-a-billion chance, for example, sounds impressively quantitative. But it actually only refers to three independent one-in-a-thousand events happening together. What are those events, how did we assign their probabilities, and are there really only three of them? If we don’t know all of this information, then the numbers are simply speculative, and only sound quantitative. That’s not to say that these calculations can’t be done – finance people do them regularly – but they only work under conditions of substantial information and substantial control over the environment.)

Lewis is also quietly scathing of many of the characters who emerge around FTX. The bankruptcy CEO, John Ray, comes out badly, as do the corporate lawyers. And there are some uncomfortable questions. Why did FTX file for bankruptcy in the US when it had no presence there and didn’t deal with US citizens? Why were so many senior people offered plea deals? Why were some not indicted at all?

The trial (which has happened at the time I’m writing) brought up some contradictions with Lewis’ account. He clearly takes Bankman-Fried at his word a lot of the time, especially with regard to his inner calcultions, but also with the naturalness of his unkempt image. Testimony from those close to him suggest this is naïve, and was subject to a lot of delierate design. It’s an open question whether the trial has achieved a more accurate view of Bankman-Fried’s psychology than Lewis did, though, and this book deserves to be read in that context.

5/5. Finished Sunday 19 November, 2023.

(Originally published on Goodreads.)

Zeke Faux (2023)

A broad view of the state of modern cryptocurrencies from the perspective of an investigative financial journalist. Unlike many commentaries this work has involved serious investigation, including travel to crypto industry conferences and some less-than-enthusiastic participation in some of the activities (or scams) on offer.

The investigation starts by investigating Tether, a so-called “stablecoin” whose value is supposedly backed one-to-one by US dollars, making it essentially a digital proxy for a real fiat currency that can be injected into crypto exchanges and traded for other, more speculative, assets. But is Tether actually backed by all the dollars it claims? – by the end of the book we still don’t know, but we do know that the industry behaves as if it is, despite evidence to the contrary, because if it isn’t the entire industry is insolvent. There simply wouldn’t be enough dollars in the system to allow people to cash out.

There are some fantastically wry observations, not least how crypto presents itself as a system offering zero-trust interactions but is actually a system requiring quite extraordinary amounts of trust because of the lack of regulation, supervision, or insurance. It places participants entirely at the mercy and good intentions of actors who have every temptation to cheat behind the scenes. And the attempts to make crypto respectable (for example making them legal tender in El Salvador and Lugano) are offset by other, less credible, schemes (such as non-fungible tokens of low-resolution images trading for millions of dollars).

It’s hard to get to the end of the book without forming the opinion that all crypto is at best a techology desperately in search of an actual application, and at worst a huge confidence trick that plays on the ability of the sophisticated and unprincipled few to attrat money from those who’ve been sold a dream – and who believe it because it at least offers some hope of escape from their current circumstances.

5/5. Finished Monday 13 November, 2023.

(Originally published on Goodreads.)