back in black
Moontower #267
Friends,
It was a long week in southern CA.
I was pulling out of SAN in a rental car Monday am just as the earthquake hit. Feels like a lifetime ago.
I’m focused on getting back to routine this week. My version of back in black.
Let’s start with 2 education related links.
How to Help Parents and Teachers (12 min read)
Dominic Cummings
Cummings, known for his controversial role as Chief Adviser to Prime Minister Boris Johnson from July 2019 until November 2020, also writes a substack. (The thought of a Trump advisor having a substack is a comedic contrast that we’ll set aside.)
Cummings is an outspoken critic of the British education system especially in mathematics. This post opens with a summary that you can use to decide whether you want to continue. I enjoyed it.
What books and other materials to use to help children learn maths if your real goal is ‘they learn maths’ and ‘learn to think’ as well as they can — which is not at all the same as ‘follow the national curriculum’ or ‘succeed on government controlled tests’?
Why does the system generate huge numbers of rubbish material and suppress good material, so much so that many great books are hard to find (and whose judgement should you trust?) and have vanished from teacher training and institutional memories?
What is the Russian experience with Maths ‘Circles’, why are Circles so treasured by those who participated (an amazingly large number of western faculty), how do these differ from maths in normal English schools, what lessons can we be very confident in, how could these lessons be brought to Britain?
How much can such things scale, how much is limited by necessarily relatively few excellent teachers, what can/can’t (well) be scaled with the internet?
What can parents do given almost all schools (including almost all private schools, for complex reasons) are driven by *optimise to the national curriculum and government controlled tests* but this is bad for both those children more or less able than the median? How are these options affected by wealth? (NB. many teachers appreciate that optimising for the National Curriculum and government tests is not the best educational approach but most have no/little choice.)
What are the core beliefs about education among Westminster players across party allegiance and how do they undermine civilised education? Some of my ideas about this came from working in the DfE 2010-14, creating King’s Maths School and other projects, discussed below.
Yet Another Reason To Hate College Admissions Essays (11 min read)
Astral Codex Ten
Scott Alexander nails this one. It’s paywalled but piles on to a free post by Yascha Mounk’s The College Essay Is Everything That’s Wrong With America.
Yascha sets the scene (X addicts already know the backstory because these kinds of stories always make the poster the “main character” on the app):
A few days ago, an 18-year-old by the name of Zach Yadegari publicly shared his impressive accomplishments—and the disappointing outcome of his attempt to get into an elite college. Zach had a GPA of 4.0. He had a score of 34 (out of 36) on the ACT, a standardized test applicants sometimes take in lieu of the SAT. Perhaps most impressively, he is an accomplished coder who has built a genuinely successful business: an app that allows users to count calories by submitting photographs of their food, and which he claims already earns $30 million in annual recurring revenue.
Despite this impressive record, most schools weren’t interested in Zach. According to his post, he was roundly rejected by every Ivy League school (except for Dartmouth, to which he didn’t apply). Nor did he fare any better at other top colleges, such as MIT and Stanford. Even some comparatively less selective schools such as UVA and Washington University did not take any interest in him.
Scott Alexander starts his post:
His [the 18 year-old’s] essay is well-written on a stylistic level. It sort of, kind of, hits the right beats - “Now, I see that individuality and connection are not opposites, but complements” is approximately the sort of thing you’re supposed to say if you want to sound wise. I don’t feel like I really deeply understand what makes him want to go to college, but whatever, I would hire him for an entry-level writing job somewhere and expect him to pick it up quickly.
The reaction from people with college admissions experience was more negative. Aside from calling it “cocky”, they pointed out that it failed to list hurdles he had overcome, didn’t explain why the particular school he was applying for was a great match for him, and didn’t give the impression that admitting him to college would cause him to make some great contribution to the world.
These are reasonable things to ask from an essay. Why did I feel so uncomfortable with this response?
Writing, done honorably, is a good and valuable skill. Colleges would do well to select for it. Or at least it’s in my self-interest to say that.
But there’s nothing honorable about a college admissions essay. It resembles nothing so much as prostitution - not the fun sort of prostitution you read about in Aella blogposts, but the kind that appears in news stories on human trafficking. You have to twist your innermost self into a marketable commodity - smiling and telling your violators how much fun you’re having, while your soul screams the whole way through.
Five, maybe ten percent of applicants are some kind of special snowflake whose father was murdered when they were five years old. As he lay there bleeding out, he said “Daughter, my whole life, I dreamed of being the first LGBT person to get a PhD in the study of ancient Assyria. Now that dream has been taken from me. With my dying breath, I give you my trowel and hand-painted figurine of Tiglath-Pileser III, in the hopes that one day you will succeed where I failed”. She spent the next twelve years sweeping chimneys to support herself and her paraplegic mother, before one day - rotting in jail after protesting police brutality - she started talking to her cellmate and found he was Behnam Abu Alsoof, legendary expert on the ancient Near East. He offered to tutor her in cuneiform, and at age seventeen she published her first paper, a daring thesis claiming that the Elamite Kingdom, long thought a victim of foreign invaders, was actually destroyed by internalized misogyny. Now she wants to attend Dartmouth, the college her father always dreamed of making it to, with the top Assyriology program in the world, in order to continue her groundbreaking work on Bronze Age sexuality.
The rest of us are just some kid who wants to go to college because that’s where all the good jobs are. If you really press us, we’ll say something like “idk biology seems pretty cool”. We encountered an approximately average number of hardships. Once when we got our wisdom teeth taken out, the surgeon said we had the weirdest reaction to anaesthesia he’d ever seen - does that count as a hardship?
He expands his attack on the ritual of the college essay before ending by putting his finger on exactly the same feeling I have about the college essay (in bold):
While reading this, I fantasized about how I - now a professional essayist with more years of experience than the average college applicant has been alive - would address the college personal statement if I could do it all over again. The most damning thing I can say is that I would write it exactly the same. I don’t even remember what I wrote - I assume something about how I struggled with OCD as a child and that made me want to become a psychiatrist - but it was the world’s most boring prose, it used 1% of my talent and explained 0% of how I differ from every other would-be doctor, and every single incredibly clever thing I would write in my fantasies would have been much worse.
I don’t know how to destroy the college essay. But I do earnestly hope that someone destroys it.
Money Angle
Abraham Thomas doesn’t publish frequently but I always make time to read when he does.
This post is terrific:
Making Markets In Time (16 min read)
Abraham’s main point: Just as Wall Street profits from spatial arbitrage (trading across locations), Silicon Valley profits from temporal arbitrage — trading across time by financing different stages of a startup's lifecycle.
This framing explains several familiar features of venture in terms of well-theorized risk tranfer mechanisms.
Just as futures allow risk and logistics to be unbundled across intermediaries — like producers and consumers — venture rounds aggregate liquidity allowing investors to "pass the baton" through stage-specific benchmarks and funding expectations. The stages make the startup ecosystem legible which in turn drives volume.
Consensus is a bug not a feature. VCs are mocked for being herd animals, but shared consensus is necessary to keep the financing assembly line moving. Startups don’t just need to be “good”; they need to be “fundable” to the next investor in the chain.
I found this provocative because Thomas is suggesting that VC is a Keynes Beauty Contest more than long-term investing. A successful early-stage investor reliably front-runs consensus. They are market-makers, less concerned with “value” and more with positioning deals to match future investor appetite — similar to how a trading desk connects buyers and sellers.
But Thomas’ framing becomes even more provocative since I’m so predisposed to utter cynicsm in large scale private asset management.
The [VC majors] are not really hunting alpha. Outperformance is not the point; rather, because of their increasing economies of scale, they just want to be part of every (material) deal. The result is, essentially, beta on the private tech market — it may not be a true ‘index’, but it offers highly-correlated directional exposure to the market as a whole, which is almost the same thing.
LPs love this. Most institutional investors want sector exposure first, and in-sector outperformance second. The venture majors provide precisely this.
And the incentives don’t stop there. Allocator capital scales better than allocator diligence — it’s so much easier to deploy $20M into one fund than $1M into each of 20 funds. And of course GPs are happy to make 2% of the biggest number possible.
Everybody points to the 2024 statistic that 50% of new LP dollars went to just 9 firms; nobody seems to have a theory of why rational LPs would do this. Market-maker concentration provides the answer!
There’s a clear parallel with history here. Many of today’s largest investment banks — Goldman, JP, Citi — got their start as prop lenders during a previous technological buildout: canals, railroads and coal in the 19th century. They then broadened their franchise into more beta-like businesses like brokerage, depository and market-making — less glamorous, but far more lindy. Prop traders come and go, but banks go on forever.
The goal of the venture majors is to become the investment banks of the technology world. And it certainly looks like they’re succeeding! They say venture doesn’t scale, but this is not venture; it’s a completely different product, with completely different risk-return and investor profiles.
Money Angle for Masochists
A reminder in the spirit of being attuned to seemingly far-fetched risks:
If short selling were restricted in any way, the value of puts relative to calls on the same strike increases in a put-call parity framework.
Another way to say this is being long stock is more valuable since only long sellers can sell. If puts increase relative to calls on the same strike, as they do when borrow costs increase, that is like a synthetic future on the stock trading at a discount to the stock price.
Similarly, being short futures vs being long index or SPY expresses the same bet. If futures start trading at a sustained discount to the cash index value it could also reflect an implied probability of short-selling restrictions being imposed.
If futures are trading at full carry and you think such a ban is possible it's an asymmetric bet to put on conversions (ie short futures, long stock or for options short combos long stock).
🔗Related
📽️Teaching Options Basics With Live Data (Moontower YouTube)
📔Synthetics: Alternate Realities (Market Jiujitisu)
From My Actual Life
On Friday night, we saw AC/DC at the Rose Bowl for nephews first concert and my boys second (they liked this one more than the Foo Fighters).
My 8-year old started playing the guitar in December. He has the spark of obsession. He performs his first song with a band next Sunday (7 Nation Army “including the solo” which he emphasizes). We have cute video of him dancing when he was 3 with a small Loog guitar mimicing Angus Young. He was especially psyched to see him. So I play it up a bit. “The band is in a bus behind the tunnel, keep your eyes out for them when the lights go out, maybe you’ll see them coming to the stage…”
But I also told him they have famous friends. He knows all about GnR so I told him that Axl is friends with the band and lives in LA. I said, “I think he’s gonna be here. Watch the area by the stage where people come from the tunnel area.”.
Within 3 minutes…jackpot:
Dad is an f’n wizard.
(People in surrounding seats were impressed by that call and since I totally believed it was possible I was looking for him and was the one who spotted him. I mean Appetite was the first cassette I ever bought — this is stupid lifelong preoccupation paying off on a guess.)
Stay Groovy
☮️
Moontower Weekly Recap
Need help analyzing a business, investment or career decision?
Book a call with me.
It's $500 for 60 minutes. Let's work through your problem together. If you're not satisfied, you get a refund.
Let me know what you want to discuss and I’ll give you a straight answer on whether I can be helpful before we chat.
I started doing these in early 2022 by accident via inbound inquiries from readers. So I hung out a shingle through the Substack Meetings beta. You can see how I’ve helped others:
Moontower On The Web
📡All Moontower Meta Blog Posts
👤About Me
Specific Moontower Projects
🧀MoontowerMoney
👽MoontowerQuant
🌟Affirmations and North Stars
🧠Moontower Brain-Plug In
Curations
✒️Moontower’s Favorite Posts By Others
🔖Guides To Reading I Enjoyed
🛋️Investment Blogs I Read
📚Book Ideas for Kids
Fun
🎙️Moontower Music
🍸Moontower Cocktails
🎲Moontower Boardgaming
If this is the case, why wouldn't startups take money from VCs that are hunting alpha? I would think those would offer better terms. It seems like Thomas is saying that a startup's real goal is a runway toward consistent future funding. Or is going the big VC route more advantageous besides better access to future capital (advice, visibility)?