Tag Archives: Finance

Small post: I’ve been scooped

I don’t know if I’ve said this before, but I live near a railroad. Since early 2025, when Trump first announced his tariffs, I’ve taken to observing the railroad traffic with a far keener interest than I used to. I, like many other, expected the tariffs to cause a tradepocolyse. Foreign trade might grind to a halt, America would enter a recession, and I’d get a front row seat to all of that as the trains I had come to expect (and their horns that keep property values down) would stop passing me by.

I was wrong. The tradepocolypse never came, America has continued growing (faster than any other country in the G7), and the train comes right on schedule, loaded with goods that I thought would have been too expensive with the new tariffs.

I’d intended to make a post for *over a year* asking this question: why didn’t Trump’s tariffs harm US trade or even the US economy? But I was lazy and never made the post.

Well my laziness has been rewarded, I’ve been scooped. I had hoped to do a deep dive into this question, but Brookings has answered it better than I ever could. Give them a watch

Fusion power: hype or hopeless?

I’m going to lay my cards on the table and say this: I think it’s extremely unlike that a nuclear fusion power plant will send any energy to civilian grids in my lifetime. Having said that:

The fusion hype cycle never ends, it hibernates. In 2006, the international community came together to plan a nuclear fusion test reactor in France, called ITER. 20 years later and it still hasn’t been built (it was supposed to be completed by 2016). But ITER isn’t an actual fusion power plant, it is merely a research testing station designed to help scientists plan what an *actual fusion power plant* might look like, and solve a few of the many unsolved problems that have plagued the industry.

But ITER isn’t the only game in town. In the easy money era of pre-2022, several start-up corporations came online, claiming that *they* would have a working fusion reactor before ITER even completed building. They’d be selling to the grid by 2025 (later 2030, then 2035). Helion, Commonwealth, there were some big names with big backers, claiming unequivocally that they would crack fusion power and start selling it to the grid.

With this, the hype for fusion has come in cycles, waxing and waning as old promises are broken and new promises are made. It’s a joke that gets some people very prickly to say that “fusion power is 20 years away, and has been for 75 years,” because fusion-backers are well aware of the industry’s many many failed promises but think that “this time, things will be different.” And maybe it will be! But I’m almost certain it won’t be.

Just so we’re all on the same page: what is fusion? If you smash two atoms together, you can produce more energy than you put in. Atoms don’t like smashing together though, they naturally repel each other very effectively. The only way to overcome this barrier is to crush the atoms under incredible pressure (in stars), or heat them up to millions or billions of degrees Kelvin (here on Earth). These super-heated atoms create a “plasma,” with electrons stripped from nuclei, and the theory is that the plasma can self-perpetuate: the fusion reactions produce enough heat to keep the plasma superheated, with excess heat being used to boil water and drive a steam turbine (generating electricity).

This post is probably too late in the hype cycle. I think 2022 was the sweet spot when I saw these startup discussed commonly on social media. But I want to make a post and here’s my thesis: none of the fusion startups, nor government projects have any hope of successfully making a fusion power plant that brings power to the grid.

That’s honestly a hard claim to defend because there are actually many different *types* of fusion, and even if you conclusively argue that the ITER-type fusion reactors are basically impossible in our lifetimes, the National Ignition Lab-type fusion supporters will come out of the woodwork to say that *their* ideas are actually better and more feasible, and then you have to start the argument all over. So I’m going to try to take this in stages.

First of all: there are several different atoms you can fuse nuclei together to make energy. You can fuse any atoms lighter than Iron together and get more energy than you put in (supermassive stars do this in their cores). But the realistic scenarios of fusion here on earth focus on a few select atoms. To get the nomenclature down, Hydrogen comes in 3 isotopes: a single proton with no neutrons (normal boring hydrogen), a single proton with a single neutron (deterium aka “heavy hydrogen,” which also makes up “heavy water”), and a single proton with 2 neutrons (aka tritium). So anyway here’s how you’d do fusion here on Earth

  • Tritium-Deuterium fusion – nearly every serious fusion proposal wants to do this
  • Deuterium-Deuterium fusion – harder to do, but deuterium is extremely abundant compared to tritium
  • Something else (Deuterium-Helium3, Hyrogen-Boron, etc) – occasionally proposed when people are tired of naysayers like me pointing out how the previous two are infeasible

I’ll take these in reverse order:

Something Else (Deuterium-Helium3, Hyrogen-Boron, etc)

Using “something else” besides Tritium or Deterium for fusion is a pretty dead-on-arrival proposal in my opinion, mostly due to “Bremsstrahlung radiation” which I will directly translate to “braking radiation” because I’m not good at German.

When atoms are superheated (which is necessary if you want to get them to fuse), their nucleus and electrons separate. The negatively charged electrons whip around freely, wholly unchained to the positively charged nucleus.

But what happens when an electron and a nucleus fly past each other? Their opposite charges will interact and pull towards each other. The electron (which is WAY lighter than the nucleus) will slow down immensely, “braking” as it is pulled by the charge of the nucleus. When a charged particle slows down, it must emit energy, and so the electron emits X-ray radiation as it breaks to a near screeching halt compared to its previously unimaginable speeds.

That’s why it’s called “braking radiation.”

The thing about braking radiation is that it becomes more powerful as the atoms involved get bigger. That’s because bigger atoms have a bigger nucleus which carry a bigger charge. The Hydrogen nucleus has a measly +1 charge, it causes a tiny braking radiation on the zipping electrons. Boron nuclei have a +5 charge. They don’t cause 5 times as much braking radiation, they actually cause 25 times as much because the radiation goes up with the square of the charge.

This braking radiation produces massive amounts of X-rays, but it’s not the danger of the X-rays that is the problem, it’s the fact that they take with them all the heat of the plasma. Remember that this is happening in a fusion reactor, the reactor *must* be superheated to hundreds of millions degrees Kelvin (or Billions in the case of Boron and Helium based fusion). But the braking radiation produces so many X-rays, that they all radiate away and steal the heat from the plasma.

So if you try to do fusion with a Boron or Helium-based plasma, you need the heat from the fusion to keep the plasma hot enough to *continue fusing*. However the braking radiation will unavoidably be *cooling the plasma down faster than the fusion heats it up*. You’ll start up your fusion reactor at several billions of degrees Kelvin, only to see it rapidly cool to below-fusion temperatures, as fusion cannot keep it hot faster than braking radiation cools it down.

Fundamentally, it’s not possible on earth to do this kind of plasma fusion with Boron and Helium. The startups try to handwave this away, proposing for instance that they can heat the nuclei (so they’ll fuse) without heating the electrons (so they won’t produce braking radiation), but that’s pretty much nonsense (the two trade heat back and forth almost instantly).

Anyway that’s my two cents. Fusion that relies on elements heavy than hydrogen is impossible in the mid to near future, as there’s no reasonable way to keep the plasma hot while the braking radiation cools it down.

Deuterium-Deuterium fusion

D-D (D alone usually means “Deuterium” when talking fusion) is sometimes presented as an alternative to Tritium. But it isn’t. D-D fuses nearly 300 times more slowly than T-D (Tritium-Deterium) at the temperatures ITER and other startups are capable of reaching (a few million degrees Kelviun). That doesn’t just mean you need a power plant 300 times bigger, it realistically means D-D fusion *cannot heat the plasma faster than it cools*, meaning just like above you’d turn on your fusion reactor only to see it quickly cool as the fusion can’t sustain the temperature.

To make D-D fusion self-sustaining, you’d need temperatures of a few billion degrees Kelvin, not just a few hundred million. An order of magnitude bigger with an order of magnitude more problems keeping that plasma confined (ie not destroying the power plant) while fusion is kicking off.

No one has realistically proposed confinement methods that use known materials and keep the plasma from escaping or cooling down. There’s usually talk at this point of proposed or speculative materials, things that *might* work, but either haven’t been tested yet, haven’t been made in more than microgram quantities, or just haven’t been invented yet.

Tritium-Deuterium fusion (there’s a lot to cover)

Why then does everyone come back to T-D fusion? Why does every serious proposal use this and only this? Why is the international collaboration ITER, a collaboration between most of the world’s advanced economies, still only have plans to fuse Tritium to Deuterium? Basically it’s process of elimination. I don’t want to explain resonance states and Helium-5, but T-D fusion is the only atomic fusion that is reachable with materials that are currently under study, needing a mere 150 million degrees Kelvin to get going, unlike D-D fusion. And because both T and D have a charge of just +1, the braking radiation is marginal.

So of ALL the elements on the periodic table, and ALL the isotopes of those elements, Tritium-Deuterium is the only pair we can reasonably fuse in a controlled manner with the technology available today and for the next 100 years.

But just because it’s possible to fuse these atoms, doesn’t mean it’s possible to power the world with them.

See, fusing Tritium isn’t like putting gas in your car, Tritium is rarer than Diamonds, rarer than Gold, rarer than Platinum and Palladium and Plutonium. If Tritium is considered separately from Hydrogen, it would be one of the rarest element on Earth. There are about 25 kilograms of Tritium in the entire world. There are over 200,000,000 kg of Gold currently in human hands, and there are billions to trillions more deep within the Earth’s crust and oceans.

But to power a city like Chicago for a year would need about 275 kg of Tritium. The entire world’s supply of Tritium would power America’s 4th largest city for less than 2 months.

How are fusion advocates claiming they’ll power our cities, if the resources necessary to do so are so incredibly rare?

Well it helps to know where Tritium comes from. None of the Tritium on Earth was formed naturally. Tritium has a half-life of about 12 years, so if any of it WAS here when our planet formed 4ish billion years ago, it has long since decayed away. Instead, Earth’s Tritium was formed when Deuterium is hit with high energy radiation. Deuterium is a rare isotope of Hydrogen, so this doesn’t happen much in nature. But it DOES happen a lot in Canada, because of the CANDU fission reactors.

CANDU reactors use uranium to create power, and they moderate their energy production with Deuterated water, aka heavy water, aka water where the normal Hydrogen has been replaced by Deuterium. A CANDU reactor creates the perfect conditions for the creation of Tritium, although they consider this a biproduct that needs to be removed, not a desired effect. But again, because of the 12 year half-life, the Tritium that Canada produces quickly decays away to nothing while in storage, so there’s never been a chance to create a whole lot of it for fusion power.

So back to the question: if there isn’t enough Tritium to run a fusion reactor, how can fusion power our cities? Fusion advocates want to CREATE new Tritium, using their fusion reactors, and feed the created fusion back in to continue the process. Canada’s 25 kg of Tritium would be like a “pilot light” for a fusion reactor. Once the reactor has been turned on with a little Tritium, it can keep producing more and more Tritium as it needs, continuing the fusion process indefinitely. Deuterium by the way is relatively rare, but Earth has SO MUCH WATER that it won’t be *that* hard to get the Deuterium needed from that.

But here’s the thing: I believe it will be IMPOSSIBLE for fusion reactors to create the Tritium they need with the technology available to use within the next 100 years. I will continue this thought in my next post, because this one is getting long, but to summarize my thesis:

  • Fusing anything except Tritium and Deuterium for power will be impossible for the foreseeable future.
    • The temperatures needed are too high
    • The braking radiation will steal power from the reactor faster than power is created
  • Tritium-Deuterium fusion is the only possibility for fusion power for the foreseeable future
    • But it will be impossible to produce enough Tritium to do this for the foreseeable future

I haven’t proven that last point, but I will devote an entire post to it soon. I want to get this posted because I’ve been writing of it for a week, and it’s already very long. But stay tuned for the next post, because if I can prove that point then it will support the final bullet point of my thesis:

  • It will not be possible to power humanity with fusion for the foreseeable future.

Long time, no post

Job priorities and health issues have gotten to me of late, but I want to keep my hobby alive so I’m posting again.

The Lib Dems in Britain are again proving that they are complete NIMBYs in all but name. A lot of Liberal spaces like the word “YIMBY” now, and the implications that go along with it. But suddenly once a house needs to be built in “my” backyard, Libs like the Lib Dems are demanding an array of extras get tagged on so that the price of building the new housing skyrockets and the housing doesn’t get built after all.

There’s always a Disney morality that NIMBYs tug on. It’s sad when a new things changes an old thing you grew up with. And it’s inconvenient when your own life has to change to accommodate newcomers. Wouldn’t it be great if everything could stay the same? And if your own life was never affected negatively by anyone around you?

But frankly, this morality is childish. In the real world things change, and each of us changed the world in our own way, so too must we adapt to the coming of those after us. The Lib Dems want to demand that homebuilders build new amenities with each new house, so that locals won’t have to adapt to their area having more people with the same amount of amenities. But if the demand for amenities is there, then someone else will come in and build them. If an area doesn’t have enough doctors, new GPs will open up shop, secure in the knowledge that they’ll have a bustling client base immediately.

But demanding that a homebuilder build doctors offices as well, with no guarantee that the area actually needs new doctors, is ridiculous. And even if the area does need new doctors, let the people who specialize in building those things build new doctors offices. Let the homebuilders build homes.

As I said, we all were a burden on our local amenities when we first came into this world, when we first moved to our current home. So to will those coming after us burden our area. But those who came before us dealt with our presence, we should deal with those who come after. Let people build homes, for God’s sake.

Oil has become a much more elastic good than many commentators believe it to be. To recount, usually when the price of a good goes up, that signals to suppliers to create more of it. For a good with inelastic supply, supply changes little in response to price.

During the height of OPEC’s power, a few countries could hold a cartel on the market, so that no matter how much the price rose, supply stayed relatively constant. The excess price was simply taken by the cartel as economic rents, “free money” so to speak.

But OPEC is no longer at the height of its power. Several of the OPEC nations have been ignoring the cartels demands for years now, the core nations are agreeing to end their own supply constraints, but more importantly than anything else the USA is now the number 1 producer of oil, and its free market does indeed respond to supply and demand. New wells can and have turned on as the price has risen, with more and more land continuing to be explored for more oil.

I’ve seen it written a lot recently that oil supply is simply inelastic, and that this is why demand-side subsidies like Canada pausing its gasoline tax won’t do anything at all to help with affordability. But first, this argument doesn’t follow. And second, oil really isn’t as inelastic as it used to be. More oil will indeed be pumped as wells turn back on and as oil profits incentivize well expansion.

The timeline for this increase may not happen within the short scale of current wars (the current one may already be over when this is published?), but it does happen, and it’s part of why the price for Brent Crude futures remains so low despite the threat of so much oil being barred through Hormuz. Investors know that higher price will bring on more supply to bring the price back down. And of course many are betting that the war will be over soon, but that’s another issue.

Just random streams of consciousness.

Marginal effects are why your economic analysis is wrong

Rent control is like burning money AND apartments

This is going to be disjointed and streamsofconscious-y as usual, but here goes

The economic concept of the “marginal” is a bit difficult to explain in part because our word “margin” already has a number of definitions that people are more familiar with. I’m not an economist, and the dictionary definition doesn’t get across everything I want to say about this, but I want to give you an intuitive reason for why there are so many domino effects with any economic policy change.

Let me start with rent control. It is a truism, even most of the internet knows it, that rent control is Bad. While good “in theory” for helping current tenants make their rent payments, it is bad in theory (and practice) for the housing market as it depressed the supply of new housing leading to higher prices in non-controlled apartments. It’s also bad for non-current tenants (such as teens who need to move out of their parents houses soon) because they have to pay the much higher starting price for an apartment, not the reduced rate their parents pay thanks to decades of rent control.

But socialists still want to make rent control work, and still want to defend it saying that rent control isn’t the problem, greedy landlords are. Nevermind that landlords don’t build the buildings, they rent them out, let’s see why rent control makes builders less likely to build.

Some people have suggested that even in a rent-controlled apartment, the landlord is making a profit, just not “as much” as he could be. Thus rent control isn’t making his business unprofitable, and since it isn’t unprofitable there’s no reason for rent control to be decreasing the supply of housing this way. But let’s look at this:

  • So the landlord is making less profit, that means he has less money to buy a *new* apartment with, and also other investors looking to be landlords know they’ll make less profit and will be less willing to spend their own money on new apartments. This decreases the sale price for new apartment buildings.
  • This also decreases the likelihood of an empty-nester deciding to fix up their nest, rent it out, and move elsewhere, as their rent income is capped. Again this decreases supply, increases cost.
    • But let’s focus on apartment towers for simplicity.
  • So the price of new apartment buildings is down, that means builders know they can’t make as much money as they want.

Now here’s where a socialist might get heated: the builders *can still make a profit building a new apartment complex*, the landlord *can still make a profit buying that complex and renting it out*. They just make *less* profit thanks to rent control, but if they *choose not to make that profit*, they’re just being spiteful and greedy. Rent control isn’t the problem here because apartments are still profitable!

But here’s the thing: nothing ever happens in a vacuum.

  • So the price of an apartment building is down because of rent control, but the price of an office building is unchanged, because no rent control.
  • The builders don’t have infinite money to build with, each building project has to make the choice to build one or the other.
  • More builders will shift towards office buildings instead of apartment buildings because we’ve reduced the price of apartment buildings through rent control.
  • Less apartment buildings means less supply of apartments, meaning higher rent if demand stay the same.

So while rent control kept apartments profitable, it still depressed the building of them. On the margin, every builder is making a choice between building an apartment or an office complex (or a supermarket, or a warehouse, or whatever). And reducing the profit you can make off an apartment building reduces the marginal investment into apartments. You don’t have to make renting *unprofitable* to decrease investment, making it *less profitable* is enough.

Rent control increases the cost of housing for everyone except current tenants who never, ever move. This is true even if it doesn’t reduce profitability to zero.

Let’s talk about another, even more controversial application of margins: taxes. Wealth taxes on the rich, raising income taxes on the rich, these have become popular policy proposals for populist parties preaching the perishment of deficits (I really strained on that alliteration and still couldn’t stick the landing). Populists argue that rising taxes *doesn’t* drive off the wealthy at all, because no one would pack up their whole life and move just because of a measly 2% of their income or wealth. This is especially true when the district raising the tax (such as California or New York City) already has such a phenomenal pull on top-dollar jobs. Silicon Valley and Wall Street aren’t just going to move to Austin or Atlanta, are you crazy!?!

But again, we need to think of the *margins*. Think not about the 20-year Silicon Valley veteran, with 2 kids in middle school and a 30-year mortgage, grumbling about an extra 2% of their paycheck every fortnight. Think instead about the fresh grad juggling jobs offers and trying to find the best one. Silicon Valley pays a lot more than Austin, but this grad plugs the incomes into a tax-and-cost-of-living-calculator (plenty of free online) and finds that the extra 2% bumps Silicon Valley down below Austin in after-tax disposable income. The fresh grad takes the Austin job and California loses a high-income resident to tax.

Or think about the Silicon Valley empty-nester with less ties to the city. Their friends may still be here, but their children and families may be in other states. They may be juggling competitive job offers and wondering about where they’d like to retire too. They may want to live in Austin so they can be near their aging parents, and an extra 2% tax on their income might be enough to push them to make the jump and take the job offer in Texas. Again, California loses a high income resident.

How often do these types of anecdotes happen? How much do these anecdotes outweigh the people who are faced with an extra 2% tax, but still move to California or New York anyway? Well, that’s the whole reason we should be looking at the *data* on these things. The data suggests that rising income taxes really do result in marginally less high earners moving or staying in. Whether that outweighs the benefits is another conversation, but there *is still* an effect. And the data is *clear* that wealth taxes cause the wealthy to move *out*. Europe is littered with nations that instituted and the revoked their wealth taxes due to exactly this, in fact wealth taxes often *reduce* total taxation as so many high earners flee for foreign shores.

But again, the argument online ignores data and builds its own anecdotes. It’s often argued that *no one will ever leave California or New York, Wall Street and Silicon Valley have too much pull, no one would pack up their whole life and move out just for a measly 2% tax*. These arguments completely ignore the marginal tax-payer who is already pulled in two directions, that tax-payer may very well move out.

The final example I want to discuss is the most controversial of all: the marginal voter.

I’ll try to keep this generic: when a politician comes out with a policy that is popular in their party but very unpopular in the country at large, partisans often have an excuse up their sleeve:

“No one is going to change their vote over this, anyone who says they will is a liar was already voting for the other party to begin with.”

The partisans make another crucial mistake, they assume every voter is a strict partisan and aren’t taking the marginal voter into account. The marginal voter does exist, even if the strict partisan is too small-minded to comprehend such a person. There are people in this country who, for their own reasons, are torn each election between voting democrat and voting republican. Or voting for democrat and not voting at all. Or voting republican and not voting at all. Or voting third party vs voting for a main party, or writing in Mickey Mouse vs casting an actual vote.

A partisan may not understand these voters, or worse they may actively refuse to understand and simply throw up their hands saying “these people are all just stupid.” But our own small-mindedness does not change the reality of this world.

Many many voters cast their vote while wishing they had other options. And for many of those voters a controversial policy announcement, one beloved by the partisans but hated by most non-partisan voters, could be enough to make them switch sides or not vote at all. They could decide that that’s the last straw, the final thing they just won’t accept. They already didn’t like the candidate for many of the reasons the partisan loved the candidate, but were willing to vote for them anyway for whatever reason. But one more unpopular policy could just be a bridge too far.

So yes, voters *will* change their vote over this. Marginal voters. People the partisan doesn’t want to believe exist because partisans prefer to group the world into “righteous” and “evil” people, with elections being a game of turning out the righteous and discouraging the evil. Or worse, the partisan believes in a tripartide division of “righteous,” “evil,” and “stupid,” with the “stupid” not worth thinking or talking about, except as targets for advertisement demanding they choose “righteous” over “evil.”

But if you look at the data unemotionally, you will see that many many voters are already marginal, and your favorite policy proposal, if sufficiently unpopular, can turn off a hell of a lot of them and turn a winnable race into a lost one. It’s very hard to be objective about politics since it controls every aspect of our lives. But it was hard for our ancestors to be objective about say World War 2, since its outcome would also decide the lives of millions. Yet objective analysis was still required to defeat emotional flailing, so keep that in mind the next time you try to say that politics is too important to let analysts give their input.

Above: pencil-sketch version of the Downfall meme

Why European Capital Markets remain fragmented

Someone on twitter posted this clearly AI-generated image of burning money. See how many mistakes you can spot in the Euros. I think the one on the left is even an upside-down Bennie Franklin, although these are all supposed to be Euros.

I blogged a while ago about how Mario Draghi wants Europe’s capital markets to be more unified to spur growth. I outlined how this was not just a matter of putting ink to paper, unifying the capital markets means unifying EU investment laws. And since those laws involve things like property rights, worker’s rights, bankruptcy rights etc, some people are going to win or lose out if everyone suddenly has to have the same investment laws. Workers whose jobs were once guaranteed even during a bankruptcy won’t appreciate that protection being removed. Companies in jurisdictions which don’t guarantee workers’ jobs like that won’t appreciate the added costs and may even close up shop, leading to no jobs for those workers at all.

But I wanted to write more on this topic as it’s a subject that interests me. And rather than last time where I went deep into the weeds outlining how one specific regulation (bankruptcy) differed across the EU’s many member states, this time I’d like to take a more broad approach to the many ways the EU’s capital markets are fragmented. And I’d like to point out that overcoming this fragmentation and unifying the markets will involve some nations winning or losing out, which is why the markets haven’t unified yet, no one wants to be the loser.

First, let’s talk Central Securities Depositories. A Central Securities Depository (CSD) is responsible for making sure that when a buyer and seller trade a financial asset, whether that’s a stock or a bond or what have you, the buyer gets the asset and the seller gets the money. Ensuring that an agreed-upon trade actually *happens* is fundamental to a working financial market. You wouldn’t go to the store if there was a chance you’d pay your money and the cashier would keep your groceries, same thing with financial markets.

The USA has a single CSD. It’s a private company but with heavy government oversight. The EU has dozens of CSDs, structured very similarly. But with dozens of CSDs to work with rather than just one, buying and selling of assets becomes a hassle. “Settlement” is the term used in finance for when the buyer and seller actually exchange money for assets, and there is a small cost associated with settlement to make sure everything is legal and on-the-level. The EU having dozens of CSDs instead of just one raises those settlement costs substantially, that in turn increases friction in the financial markets and decreases investment.

The EU wants to unify their capital markets and have just one single CSD. But will it be the French CSD, thus bringing more jobs to France? Or the Italian CSD, bringing jobs to Italy? Everyone wants their CSD to be the European CSD, and no one wants their country to lose all the high-paying jobs and high-status institutions that a CSD brings with it.

Now let’s talk about IPOs. European financial leaders have bemoaned that America has way more high-valued startups than Europe, and that European startups often flee to America rather than staying home. IPOs have at least something to do with this.

When a startup IPOs, they sell ownership of their company in exchange for investors’ money. This is a powerful way for the startup to get needed cash, and for investors to get in on the ground floor. But while Europe may have almost as much money floating around as America does, that money is in dozens of different national silos split up by regulation. You need to just adhere to 1 set of regulations to get access to all of America’s investment money, you need to adhere to dozens of sets of European regulations to get access to European money. Is it any wonder then that companies IPO in America?

But say you purchase stock in an IPO, only to lose everything because the executives were overpromising and hiding the company’s problems. Can you sue the company to recover your lost investment? Well, it heavily depends on which country you bought the stock in. Countries with strict investor protections won’t enjoy losing those protections if the EU unifies its capital markets. Countries with more lax protections generally want to prevent frivolous lawsuits from investors, who may have been well aware of the risks of a stock but still want to blame the company for their investment going south. Those countries won’t appreciate new investor protections that encourage ever more investor lawsuits.

Then thinking about IPOs, there are a lot more rules about how the shares must be structured. If you are the CEO and founder of a company, you want to IPO to get money, but you may want to keep holding all the power and control over your company. How can you sell off ownership of your company without losing any of the power and control that ownership brings?

One way is to only sell a small portion of your company’s value. You can sell off 10% or 15% or 25% of it to raise money but keep the rest for yourself. This makes you a huge majority shareholder who can never be outvoted in matters of corporate governance.

This structure poses risks to the minority shareholders, both in terms of shareholder rights and in terms of stock value. This structure, where one person owns a large part of the companies, is part of why the Adani companies collapsed so spectacularly in value back in 2023. Adani owned 75% of his companies outright. Some shareholders though this protected them “Adani will never sell, so the value cannot drop.” But actually it didn’t protect them at all, Adani would never sell, but he could also never buy.

The value of the companies wasn’t based on what Adani himself would do, his 75% ownership was locked in and unchanging. Rather the value was based on what a small minority of investors thought, the other 25% owners. If some of those investors started selling, and if no other participants in the market were willing to buy, then the price would collapse *fast* because there’s a lot less buyers and sellers available than what it may seems. Adani and his 75% ownership could not be a buyer or seller, so the market for Adani shares was 1/4 as large as it seemed to be based on the listed value of his companies.

So anyway, minority shareholders can get washed by a majority shareholder keeping all the shares to himself and ignoring their rights. Different EU companies have different rules about how much of a company a majority shareholder can retain, and what the rights of minority shareholders are. Someone is going to lose out if those rules are unified across the EU. Some companies will find their ownership structure is no longer legal, and their majority shareholders will be forced to sell. Or if majority shareholders end up being able to have a *larger* stake, some market watchers will decry that this keeps too much power in the hands of rich majority shareholders, rather than in the hands of the small minority shareholders (aka “the people”).

Then there’s taxes. Say you are a German living in Germany, but you own shares in France’s Francis Frances (FFF), incorporated in the Netherlands. Your shares in FFF pay a dividend to you, which you receive as income.

Now, the Netherlands wants you to pay tax on that income, so they tax your dividend as the money leaves their country. Germany also wants you to pay tax on that income, so they tax your dividend as the money comes into Germany. You pay dividend taxes twice, while if you’d just invested in a Germany company and ignored the Netherlands entirely, you’d have only been taxes once.

But OK, there are EU rules that are supposed to prevent this double-taxation, which should encourage cross-border investment and help unify the capital markets. But those rules are often a mess of red-tape and delays. In theory, either Germany or the Netherlands or both should give you a tax credit to pay you back for what they took out of their dividend. In practice, they may hold your money for years, or require you to jump through arbitrary hoops to get it back.

And so in the end many investors *don’t invest outside their own country,* not because they are small-minded or don’t want to, but because they’d pay twice as much tax as if they just invested in their own country. This again fragments capital markets, but governments are loath to unify the tax code like this because they still want to maintain full sovereignty over their taxes and budgets. And besides, if they unified the tax code, what would the rate of dividend tax be? 30-40%, like in Denmark and France? Or 0%, like in Slovakia and Slovenia? Everyone has arguments on what the rate should be, and no one wants to budge because there are good reasons for each argument.

In the end, I think a lot of online commentators undersell the difficulty of unifying Europe. Unification of the capital markets isn’t held back by small-minded nationalists, or sclerotic bureaucrats, it’s held back by the need for trade-offs which no government wants to make. No government wants to come to the people and say “we’re changing the laws on stocks and taxes, and we’re moving all the CSD jobs across the border.”

Leftists in France would revolt at any fall in capital gains tax, rightists and investors would do likewise for any rise in such tax in the EU’s many many low-tax jurisdictions. Emerging economies like Slovakia and Slovenia would cry foul at having to remove their competitive advantage in taxes to appease Denmark and the developed economies, Slovakia might think the only way they can attract investment is by having lower taxes than the more advanced economies of Europe.

So once again, trade-offs *exist*, and they are the reason Europe still hasn’t unified its capital markets.

Everyone’s a reactionary in their own backyard

I’ve blogged before about Ezra Klein’s abundance agenda. To recap: Ezra Klein asks the following questions:

  • Why are so many people moving out of blue states and into red states?
  • Why do red states grow faster than blue states?
  • Why do blue states have so many problems with homelessness?
  • Why can’t blue states build train lines and green infrastructure on time and on budget?

Klein concludes that liberals being maligned as “bad on the economy,” is not entirely unfair, and that Blue State policies have in many cases reduced growth and made people’s lives materially worse off. A fixation on bureaucracy is a hamstring to business. For liberals to win, Ezra wants them to not just be “not as bad” as conservatives, but he wants them to embrace a pro-growth mindset and pro-growth policies. These policies would deliver more energy, more housing, and more jobs without ever-increasing government expenditures.

I feel I can conclusively say that Klein has lost the argument, at least in online left-leaning circles. Instead, Bernie Sanders and the anti-growth crowd are winning people over to the idea that we need to *further* restrict businesses, further increase government bureaucracy, and thereby further reduce growth.

Bernie doesn’t want to fix electricity prices by improving generation and transmission like Klein does, he wants a moratorium on building datacenters.

Bernie doesn’t want to fix housing by allowing private companies to build more of it like Klein does, he wants to prevent companies from buying houses.

Bernie doesn’t want to grow the economic pie like Klein does, he wants to shrink and reslice it.

But Bernie wouldn’t have a microphone if people weren’t willing to listen to him, and in online left-leaning circles, Bernie is listened to, not Klein.

I think it’s because fundementally, people are reactionary in their own backyards. It’s all well and good to say we should encourage economic growth. But new businesses compete with old residents for land, water, and electricity. And so old residents complain that new businesses push up prices, and demand that new businesses be stopped completely. This pattern is universal and as old as civilization itself. But the modern American left is now overwhelmingly urban, and urban areas are where new businesses want to build, so the American left is now overwhelmingly anti-business.

I just want to rattle off a few arguments I’ve seen online about building, why these arguments don’t hold water, and why I think Klein will not manage to bring his Abundance Agenda into prominence.

Bernie has recently called for a moratorium on new datacenters, to protect consumers from increased electricity prices. I’ve seen a lot of the online left that considers itself “pro-growth” defend this, on the principle that:

  • “Data centers produce economic growth, but not for the people who pay the higher electricity prices.”

Because data centers are “different,” it’s Good to ban new ones, it’s not anti-growth at all it’s just anti-“bad”-growth. To which I’d say:

  • “________ produce economic growth, but not for the people who pay the higher electricity prices.”

Insert factories, electric trains, mass transit, a new University campus, or literally *anything else* and this argument is the same. This isn’t an argument against data centers, it’s an argument against any economic growth whatsoever. When things change there will always be winners and losers. When economies grow, some individuals don’t get the full benefit of that growth. But the idea of the Abundance Agenda was that the losers need to suck it up for the greater good, the price of your house isn’t worth blocking new housing and increasing the homeless rate of the wider city.

When it’s “other people” blocking housing and causing problems, it’s easy to demonize them and say they’re small-minded, wrong-headed, etc. But suddenly when it’s your back yard, and its your electricity bill, then the same people who demonized NIMBYs become NIMBYs themselves.

Of course it’s different, because THOSE OTHER people didn’t have reasonable concerns, they were motivated solely by greed and stupidity. WE however are smart and reasonable, all our concerns are well-thought out. This is how everyone thinks, but a lot of online liberal spaces are incredibly insular, and so don’t realize that their “reasonable” complaints are nothing new, but are just part and parcel of the NIMBY handbook going back decades.

If you say that new homes aren’t needed, and developers are just greedy, then there’s a reasonable amount of the online left who will dogpile you for your stupidity. New homes ARE needed, homelessness proves that there aren’t enough homes for everyone. Building new homes reduces home prices and increasing housing.

But if you say data centers aren’t needed, suddenly you’re on the 60 side of a 60/40 issue. A minority of the online left has no issue with data centers. But there are enough anti-AI people, anti-Silicon Valley people, anti-everyone rich (which therefor means anti-AI because rich people own and are the face of AI companies), and just plain closeted NIMBYs that being against new data centers is a “reasonable” belief in these spaces, where being against new housing wouldn’t be.

A few years ago, Silicon Valley and techies in general were seen as a staunch bastion of liberalism, proof that LIBERALS were actually the economically smart ones and not conservatives. A single election was all it took to change that, with a few techies siding with Trump, and with others not being sufficiently *anti*-Trump, the Tech sector has lost its shine and is now placed by many liberals in the same bin as the steel sector, the automotive sector, or even the oil and gas sector. These are just “bad people” who make money by making the world worse. So if they want AI, some people will reflexively oppose them, and supporting AI comes at a social cost in these spaces, even if you strenuously state how much you oppose the techies and the wider Silicon Valley elite.

With this shift, Silicon Valley can now be railed against in liberal spaces in just the same way as Ford or US Steel. These idiots want to build a new thing? It won’t bring any real jobs, it will dirty up our town, it will raise our prices, and they’re just making money by being evil anyway.

So blocking any new silicon valley thing becomes a socially defensible position, where 4 years ago it wasn’t. This is how coalition politics shake out on a local scale, people don’t weigh up the real-world costs and benefits of a position, they weigh up the *social costs* and the *social benefits* of a position. Supporting AI carries a social cost, opposing it carries a social benefit. That decides how the coalition reacts to AI much more strongly that the real-world economics of the situation.

Because simply put, a data center moratorium is a dumb as a factory moratorium. I, personally, won’t be enriched by a new factory being built. And most modern factories are so automated that they provide vanishingly few direct jobs, they aren’t the assembly lines with workmen that people think about, they’re honestly about as automated as a data center these days.

But my area will benefit from the increased investment, prices will go down as supply of goods increases, and I think other people should be allowed to make money by investing just as I’d like to be allowed to make money by investing myself. I wouldn’t want my dream restaurant to be blocked by NIMBYs who don’t want me bringing traffic to their part of town, so I don’t think it’s right to block other people’s economic activities even though a new data center will bring more electricity demand to me.

Some try to argue that data centers don’t produce anything real, that all AI is a bubble. That still isn’t a reason to block data centers. YOU DO NOT KNOW how the AI race will shake out, nobody does. The point of capitalism is that everyone makes their bets, and we find out later who won. If you want to bet against AI, short NVIDIA, or short Microsoft, Google, and Meta. You can bet against them and make money if you’re right, but you don’t know you’re right, and if the AI boosters are right and you block them from building datacenters, you’re impoverishing us all just like when you block housing, or a new factory, or a new University campus. You’re reducing economic growth because you think you know better but won’t put your money where your mouth is by shorting the stock, instead taking the easy way of blocking the business.

But this has been a rambly post about my opinions. The point is that these are the arguments I’ve seen all over left-leaning online spaces. The arguments are overwhelmingly anti-capitalist, anti-business, and anti-growth. Any sector that is not seen as explicitly left-leaning becomes a socially acceptable target for attack and NIMBY policies. This is antithetical to Klein’s abundance agenda. This is why I thought his agenda would not win in the left-of-center mind space, and I’m even more confident of that prediction now.

Coalitions aren’t build by reasoned argument, they are build by the social costs and benefits of holding a specific position. Techies have been etched with the scarlet letter (T for Trump, natch), and so opposing anything and everything they do has a social cost in left-of-center spaces, regardless of the reasoned arguments that growth is good for the people’s prosperity. Basically all businesses are etched with the scarlet C for conservative, and so opposing business is generally in vogue as well. Klein’s agenda relies on allowing businesses to get their way, to improve all our lives by letting business do business. That isn’t going to fly in the modern left, and I doubt Klein can change it.

Revealed Preference, Revealed Belief

Revealed preference is a very important economic concept because quite simply: talk is cheap. You cannot poll people on what they economically most want, because humans are want to lie about ourselves so that we appear more noble, more virtuous, and so on. You cannot poll people, instead you have to look at what people *do*.

To explain revealed preference in simple terms: actions speak louder than words. People like to claim that they eat healthily, that they care about what they’re putting into their bodies. But many of those very same people fill their shopping cart with junk food at the expense of all else. So while they claim to eat healthily, they are revealed to eat junk food. Their revealed preference is that they prefer the taste of junk food over the benefits of healthy food, but you wouldn’t know it by talking to them.

At a societal level, revealed preference also shows up whenever popular causes force people to put their money where their mouth is. Reducing plastic waste polls really well, and large segments of society claim that they would happily pay more for a biodegradable option rather than pay less for a plastic option. But the data from supermarkets doesn’t bear this out, with nearly all consumers continuing to prefer a cheaper plastic option when available compared to a more expensive biodegradable option.

So when economists try to understand what drives people’s economic activity, whether it’s what they buy, where they work, or how they commute, one cannot rely on what people *say* they do, you must instead find out what they *actually* do. Because the gap between words and actions is massive and we all want to appear more noble than we truly are.

With revealed preference comes the tantalizing, but tricky prospect of studying *revealed belief*. Revealed *preference* is just showing what *actions* people take that are contrary to their statements. But revealed *belief* would be about showing *the reasoning behind those actions*.

To give an example, lets dissect the junk food vs healthy food choice. You might find people who adamantly claim that they eat healthy food *not just* for their health. They may claim that healthy food tastes better, is more convenient, and is even cheaper than junk food. But if that same person is revealed to mostly eat junk food, we can surmise that their stated beliefs about healthy food vs junk food (that it tastes better, is more convenient, and even cheaper) are also wrong.

Such a person who claims to eat healthy food but only eats junk food clearly has significant cognitive dissonance, or is just *lying* in order to seem healthier. It isn’t just that their actions belie their beliefs, rather their *revealed beliefs* are contradictory to their *stated beliefs*. They probably don’t actually believe healthy food is tastier and cheaper, they just say that to try to further the lie that they eat only healthy food. Their real belief is that junk food is tastier and cheaper, that’s why they buy it and eat it.

This *revealed beliefs* thing is tricky though because there could be several confounding factors. Say someone *only states* that they believe healthy food is tastier than junk food. If they are then revealed later to be buying junk food, is it because they actually don’t think healthy food is tastier? Or is it because the cheapness of junk food and the expensiveness of healthy food outweighs taste considerations? There can always be some other reason that people take their actions, outside of their stated reasons.

But with recent events, I do think I’ve seen a mass example of revealed beliefs. And it’s with tariffs.

When Trump was coming on the scene, first in 2016 and again in 2024, economists and political commentators from both sides of the Atlantic argued passionately against his tariffs on every conceivable level. Trump’s tariffs weren’t just a good idea taken too far, rather *any tariffs at all* would harm consumers and depress the American economy to unimaginable levels. Even tariffs against geopolitical foes like China should be avoided, as such tariffs harmed America a lot more than they harmed China, and so ultimately would be counterproductive.

Yet today in 2026 I see *many of those exact same people*, primarily from the European and Canadian parts of the Atlantic, argue passionately that the EU and other nations *must respond in kind* to Trump’s tariffs. That Europe and Canada should raise massive counter-tariffs against Trump, equal or greater in value to whatever he is levying against them, and specifically targeted at America’s major industries. When Trump’s team met EU officials and agreed to a “deal” whereby the US would raise tariffs and the EU would not respond in kind, this was seen as a disaster, a surrender, and a damning indictment.

It seems clear that there is a revealed belief going on here. These transatlantic thinkers claim that tariffs hurt America more than they hurt the tariffed countries, but if that were the case, then counter-tariffs would hurt the EU and Canada more than they’d hurt America. The “solution” to Trump’s trade war would then be to do nothing at all. LET Trump tariff every nation to high heaven, he’s primarily hurting America after all, and don’t respond in kind under any circumstances. Don’t tariff American products, don’t go after American businesses, don’t do anything differently than you’d normally do, because any such anti-trade measure would harm your own countries more than it harms America.

But the revealed belief here is that Trump’s tariffs *do* harm other countries more than they harm America, because counter-tariffs and other trade barriers are being called upon, on the assumption that they will harm America more than they’ll harm other nations. It seems that many transatlantic thinkers are revealing that all the rhetoric around tariffs was a Noble Lie. All the claims about how tariffs are ineffective and self-destructive were lies meant to dissuade the public from supporting tariffs in the first place. But now that the tariffs are out of the bag, the Noble Lie has no more use, and the Awful Truth about tariffs, that they are harmful to one’s own nation, but are effective at countering trade imbalances, has come to the fore.

Noble Lies such as this beclown the person saying the lie. They reveal the liar to be a hypocrite and untrustworthy. If you found that the person who goes on and on about healthy food was actually eating nothing but junk food, you’d probably never again trust their recommendations to you about healthy eating. And likewise, a lot of poli/econ commentators have lost a lot of credibility in my eyes by going back on their pre-Trump claims about tariffs. By revealing that they never believed those things in the first place, they reveal (to me at least) that I should never trust them again going forward.

“GDP is bullshit”

Transcription: “GDP is also a bullshit metric. If I buy $100 of flouride, add water, buy some bottles, repackage it as Crest Mouthwash, and sell it for $15/bottle, I’ve generated like $1500 of GDP. That’s not really adding value, that’s enriching shareholders at the cost of people who don’t realize they’re being robbed.”

Response: my guy, that’s literally the definition of adding value.

Now to be fair, this comment was downvoted when I found it, meaning more people disagreed than agreed, but still, this sentiment about “adding value” is something I see all over the internet in anti-capitalist spaces. People will literally explain adding value, then say something adds absolutely no value.

Even a marxist would agree that the labor required to add water, buy bottles, and package something adds value to the product. And a capitalist would say that if this poster successfully created mouthwash that people would buy for $15/bottle, then they’ve added value to that $100 of fluoride. And if this poster actually did this experiment, and made money off of it, they could quickly start a company and become rich.

But they can’t do this, because it’s actually quite difficult to create good, quality fluoridated mouthwash, and they have no skills besides complaining on the Internet.

Still, they have explicitly defined a process in which a low-cost good is turned into a highly desirable product, a process which both a labor-obsessed marxist and a capital-obsessed capitalist would say has “added value” to that good, and have said that it isn’t “real” value. They extend this to say that GDP is bullshit.

“GDP-is-bullshit”ism has seemed to take hold in some spaces. I can see why, people’s personal situations don’t always track the wider economy, so the economy as a whole (measured by GDP) can go up massively while some people or some sectors are struggling. It may not matter to you than millions of people have more time, money, and leisure because you personally lost your job as say a factory worker. In this case GDP can seem like a false measurement because people have a hard time looking outside themselves.

But in another way, it is true that some politicians laser-focus on GDP to the expense of all else. It is a basic truism that when a metric becomes a target, it ceases to be a useful metric. GDP is a *metric* of economic health, but once voters realized this they started grading their politicians on the GDP measurements they saw in the news. That in turn made GDP into a *target* for politicians to point at and say “look, I’m making things better!”

In that case, GDP can go up (because it’s being targeted) while people’s actual situation is going down. This is exactly what happened during the tail end of the Trudeau administration in Canada, Trudeau focused solely on rising GDP as his target, but GDP-per-capita went down. People’s living situations in Canada were not really improved at all despite Trudeau raising the national GDP.

Still, GDP is a good measure of what it measures: productivity. And what is productivity? It is the turning of low-value things into high value things.

The above poster blithely described it as “bullshit,” but think of this: everything we as a society need and want requires someone else to use their time, money and effort to make it for us. If there isn’t enough food for all of us, our lives are measurably worse off. Increasing the production of food requires the labor of a farmer, requires the cultivation of land, requires the creation of irrigation and of transport infrastructure and warehouses for the food and inspections to ensure the food is clean. The creation of all those things is captured in GDP.

GDP directly captures when something of value is created, whether it’s food, or irrigation to make the food, or warehouses to store the food, or even Crest Mouthwash made from raw fluoride. YOU may not think the thing created has value, maybe you don’t wash your mouth. But the beauty of capitalism is that OTHER people get to decide for THEMSELVES what they think is valuable, and if they want mouthwash, they’ll happily pay for it, and thus creating new mouthwash to sell to those people raises GDP.

This is a small post, it’s mostly meant to dunk on a single Internet commentator, and by extension dunk on an entire subculture of “GDP-is-bullshit”ists. But I want to make clear: GDP is NOT bullshit. It is a measure of goods and services created. Those goods and services have VALUE, maybe not to you, but to SOMEONE ELSE. If they didn’t have value to someone else, they wouldn’t raise GDP. And so complaining that some people’s goods and services add value, even though you don’t think they’re useful, is like complaining that other people are having fun with a game you don’t like.

“Why don’t they only film the hits?”

There’s a joke from “That Mitchel and Webb Look” that I want to dissect like a frog for a moment. The video is just one minute long, but if you don’t want to watch it I can summarize it here:

  • “So for the sketches we’re filming, I’m thinking we’ll make them “hit, hit, miss, hit, miss, miss”
  • “Do we have to film all the misses as well as the hits? Why not only film the hits and use those for the show?”
  • “Well it’s a sketch comedy show, it has to be hit and miss.”

The joke doesn’t need to be explained, but I will anyway: why does a sketch comedy show have a lot of sketches that miss the mark, as well as ones that are laugh out loud funny? Isn’t it easier to just film the hits? Well obviously the writers didn’t think those misses would miss the mark, they thought those misses might be hits as well, that’s why they wrote them and filmed them. You don’t know for sure what will be a hit and what will be a miss before you release the show.

A similar pattern is discussed with venture capital investing. Venture capitalists invest in hundreds of startups on the assumption that around 90% of them will fail and make no money at all. The 10% that succeed are expected to pay for all the failures. Well then why don’t venture capitalists *only* invest in the successes and not waste money investing in the failures? Again: they don’t know for sure what will succeed or fail before investing. A huge amount of time and money goes into predicting the success or failure of startups so these VCs can try to invest wisely, but it isn’t a solved problem by any means.

And if you think this investing problem has an obvious solution, take out a personal loan and invest 50,000$ in a single startup that *you know for sure* is guaranteed to be successful. You’ll 1000x your money and be able to pay off the loan and interest easily.

But this pattern of “why not only go for the hits?” holds true in science as well. But here many people don’t seem to understand or believe it.

Governments, corporations, and charities invest billions into potentially lifesaving treatments every year. 90% of those scientific ventures will come to nothing, only a few will be successful. But you don’t know for sure which will succeed and which won’t before you try.

I think of this because I all too often see people complain about “why did we invest X number of dollars into researching such and such, when Y was invented with so much less?” A World War 2 version of this is the infamous refrain about how the project to develop a better bomb-sight for American planes costed more than the Manhattan Project which made nuclear bombs. A modern version of this complaint might be complaining that the Amyloid hypothesis in Alzheimer’s disease has received so much funding despite never curing Alzheimer’s.

In both cases though, our best foreknowledge seemed to indicate that this was the right path. Nuclear fission was completely unproven tech, the scientists themselves were pessimistic about their abilities to make a bomb out of it. When the first test of a real nuclear bomb took place, the scientists involved had a bet going for how much power the bomb would produce (with some predicting it would be a dud). *EVERY SINGLE ONE OF THEM* drastically underestimated the power of the bomb they had created, the most wildly optimistic predictions underestimated the bomb’s power by half.

By contrast air-power was a proven war winner when the USA started spending billions on bomb-sights. Germany’s blitzkrieg had used massive air power to help them overwhelm, surround, and destroy, other nations all across Europe. Air power could destroy the railroads and bridges that let troops move across modern battlefields, it could destroy the factories where the troop’s guns and tanks were made, and domination of the air allowed an army a far better picture of the battlefield then their enemies had. In this scenario, the allies looked at the success of German air power and believed that upping their own air power might similarly prove dividends. They never got the total success of the German blitzkrieg, but overwhelming air power was at least part of how the USA held on in the Korean war, so it wasn’t a complete waste.

Similarly, the evidence for Alzheimer’s disease has always seemed to point toward Amyloid Beta playing a key role. The evident failure of drugs targeting Amyloid Beta means there’s a lot more we have to learn, but just because the Amyloid Hypothesis is flawed doesn’t mean a competing hypothesis is automatically right. Putting billions towards the Tau or neurotransmitter hypotheses is not guaranteed to have brought success, in fact these hypotheses were studied even during the dominance of the Amyloid Hypothesis, and neither of them produced working drugs either.

People have a video-game understanding of research, as I’ve complained about before. They think that if we just put enough money towards the correct hypothesis, we’ll find what we’re looking for. But we don’t know what’s correct before we commit our money, and if our hypothesis fails, we don’t even know if we just haven’t thrown *enough* money at the problem, or if we’re chucking good money after bad. Which answer you lean to likely says more about your politics than about the quality of the research itself. Should we throw more and more money towards commercial nuclear fusion, even though that industry has never once succeed in even the most modest goals set for itself? Should we cut off the Amyloid Hypothesis, even though a century of research shows that Amyloid Beta does play a key role in Alzheimer’s disease? Everyone seems to think they already know the answer, but few are willing to prove it with evidence.

Opportunity Costs in Civilization 6

One of the most important concepts I learned in economics is the idea of opportunity costs.  Every action we take has a cost, not just the cost of the action itself, but the cost of *now not being able to do something else* with either the time or money or both that we just spent.  

A simple example: a company only has 100$ to invest in a machine.  If they buy the machine that makes blue widgets, they can’t also buy the machine that makes red widgets.  Thus, buying the blue widget machine doesn’t *just* cost 100$, it also has the *opportunity cost* of not buying the red widget machine.

There are also opportunity costs with time, if you decide to go to Europe for your holiday vacation, you can’t also go to South America at the same time.  So the cost of going to Europe isn’t just the cost of the time and the tickets, it’s also the opportunity cost of not going to South America (or anywhere else) as well.

As an aside, this is why for some people it can make sense to NOT go to college EVEN IF college were totally free.  The cost of going to college includes the *opportunity cost* of not having a full-time job (if you’re a full-time student).  

A comedian once made a joke that, after graduating college he couldn’t find any work “because the dropouts already had the jobs.”  A funny joke, but it demonstrates a point:  You spend 4 years getting a degree, but if that degree doesn’t measurably increase your employment prospects, you could have been better off spending those 4 years getting work experience at a full-time job.  You could not only get the money that a full time job gives you, but the experience itself would increase your employability and ability to get better jobs.

So the education and degree you’re seeking needs to increase your employability *more* than just doing 4 years of work.  If not, then it’s a net loss *even if your education was free* because you had the *opportunity cost* of not getting those 4 years of work experience.

But I didn’t want to blog about college, I wanted to blog about Civilization again.

The non-gamers in my audience may be tired of my gaming blogging, but I’ve spent a lot of this holiday season playing Civ IV and Civ VI with friends, so I’ve been thinking about this.

I complain that in Civ VI, some of the leaders seem to have traits that are utterly worthless, they don’t feel like they improve your Civ’s abilities any more than having a vanilla Civ with *no* traits.  Eleanor of Aquitaine is one of these, her ability to culture-flip cities feels very underpowered and completely useless, and doesn’t make her any more powerful than a Civ that doesn’t have any abilities at all.

My friend shoots back at this by saying that if you put a lot of resources into it, you can set up a situation in which you culture-flip whole continents in an instant.  And yes, this is theoretically possible.  Does that mean Eleanor is “very powerful in the right circumstances?”  No.  Because of *opportunity costs*.  

See, the cost of putting all your resources into Eleanor’s culture-flipping ability is that *you can’t put those resources into other things*.  You can’t research technologies or build military units if you are instead spending your entire GDP on culture buildings.  Culture isn’t free, and it doesn’t just cost what it costs to produce it, it has the *opportunity cost* of not doing anything else with that money and production.

So in any situation where Eleanor can “culture flip a continent” by spending an absurd amount of resources on culture, any other Civ could just use those resources to win the game with military, or science, or even diplomacy.  

Eleanor’s ability is useless not because you *can’t* use it to do things, but because the amount you have to spend to make her ability not-useless could instead be better used to win the game in *any other way at all*.  Her ability has an *opportunity cost* in that if you try to use it to its fullest, you are by definition not using those resources on better strategies that will win you the game more easily.

And that’s what I feel about a lot of the Civ VI leaders.   Some  leaders have abilities so minor they don’t feel impactful.  Some have abilities that completely change the nature of the game.  And some like Eleanor have these abilities that are actually traps, because the opportunity cost of trying to use their ability to its fullest makes you worse off than if you’d ignored their ability and played the game normally.

People didn’t like Civ IV’s leader system because every leader drew from a limited pot of abilities.  Gilgamesh is Creative/Protective, while Catherine the Great is Creative/Imperialistic.  From my perspective, that’s unique, *no one but Gilgamesh has that specific combination of traits*.  From other people’s perspective though “they’re both creative so they’re too similar to be cool.”  

These people who say this seem to really be drawn to Civ VI because every leader has *completely unique abilities* not seen anywhere else.  But from my perspective “many of those abilities are worse to use than just ignoring the ability and playing the game normally.”  Leaning into your “special ability” can have an opportunity cost, and no one but me seems to recognize this.

So in the future, please think about opportunity costs, both for college and for your video games.  Making a nation have a super special ability isn’t actually cool if leaning into that ability makes you worse off than if you’d ignored it and played the game normally.   Opportunity costs are real, even if not everyone understands them.