Copper, NYC parking, AI rollups, Nauru, tax evasion, stablecoins, and more. Enjoy!
Copper is a critical natural resource for modern electrical equipment. The world has been worried about running out of copper since the days of Edison, but we always find more. How? Because of productivity improvements in copper mining. Daniel Jackling invented modern copper refining in 1906 with the “flotation separation” method. This enabled extracting copper from lower grade ores: “Enormous chunks of rock are blasted out, ground down into a dust as fine as face powder and separated in flotation tanks. Then these concentrated ores undergo further pummeling and processing. The final step [involves] electrolysis: 98.6 percent pure copper slabs are dunked in tanks containing an acidic solution, where they sit for nearly two weeks while an electric current is run through them. What you end up with – after metal atoms in the anode, the slab you started with, have migrated to the cathodes – is a sheet of 99.9 percent pure copper.” With over two millennia of refining the refining process, we have taken the time required to extract a ton of copper from over 40 years to just 21 days. Productivity is about doing more with less.
(2) No-Parking Zone: The Perils of Finding a Spot in NYC
One of the best articles I’ve ever read about the insanity of subsidized on-street parking. End-to-end, NYC’s 3 million on-street parking spaces would stretch to Australia. These occupy 13x the real estate of Central Park, yet 97% of the spaces are free (read: subsidized). It is obvious that prices are below market: (1) garage parking (the market price) costs upwards of $500 per month, and (2) NYC residents go to absurd lengths to avoid paying for their parking (residents spend 200 million hours per year driving around to find parking). “Free parking is not actually free. We [indirectly] spend as much on parking—via taxes, higher rents, and subsidies—as we spend on Medicare.” The obvious (but politically unpopular) solution is dynamic and market-based pricing: “Charge enough that there is always an open parking space on every block.”
Peter Thiel’s Zero to One is, in part, an indirect critique of the “efficient markets hypothesis” (EMH) in the context of startups. The basic logic is that, if the market for startup ideas were efficient, then all good startups would already be created. Since good startups are still being created, this disproves startup EMH. He mischaracterizes EMH—it’s not about possibility, but predictability—but otherwise lays out a strong (and EMH-consistent!) argument that “secrets” (EMH-speak: “info that isn’t yet available to the market”) are behind most successful startups.
“There are a few characteristics of the markets/sectors where AI rollups will be particularly effective. In no particular order, these markets should be: (1) highly fragmented; (2) large and growing; (3) lacking technology expertise and reluctant to buy software; (4) high revenue, low margin; (5) driven by human knowledge work (human knowledge labor is a majority of OpEx); (6) relationship-based, so businesses and their customers have sticky, long-term, trust-based contracts. [The] very best rollups will buy businesses that own unique and valuable datasets that can be used to train models […] the ideal sectors [are] ones where rollups are not already ubiquitous [so that] acquisitions can still happen at reasonable prices (ideally 1-3x EBITDA).”
(5) A Dark History of the World’s Smallest Island Nation
Nauru is the cautionary tale of the resource curse. This Pacific micro-nation transformed from a German colony to a phosphate powerhouse after guano deposits were discovered in the 1900s. By independence in 1968, 35 million tons of phosphate had left its shores—enough to fill dump trucks from NYC to LA and back. Nauruans briefly became rich, with a trust fund valued at over $1 billion and a per-capita GDP second only to Saudi Arabia. This wealth fueled absurdities like (of course) everyone buying sports cars on an island with one road. Once the phosphate ran out, Nauru took a shady turn with offshore banking, passport sales, and hosting an Australian migrant detention facility. Meanwhile, the sovereign wealth fund from phosphate shrank to $30 million by 2004, leaving a poor population with not much to do other than playing bingo.
(6) Where We Are Headed: A Rough Sketch of the Near Future
How AI agents are going to change the world: “Think about the mechanics of knowledge work. At the most basic level, you’re operating a keyboard and a mouse. Did you click the right button on the user interface? That’s pretty easy to verify. Did you successfully retrieve the right piece of information, or pick the right tool? That’s more subjective, but in a constrained setting, not that hard to verify. Did you write a good memo? Trickier, but with automated grading, it’s achievable. Did you fill out this form correctly? This one ranges from “trivially easy to verify” and “incredibly difficult,” but for many forms, it will be doable. As you go about your day, occasionally stop and think to yourself, “would it be easy to cheaply verify that I am doing this task correctly?” The answers vary, but I suspect you’ll find that the answer is often “yes.” This has implications for what the near-term economic consequences of agents are likely to be.”
(7) Are Restaurant Reservation Apps Worth It?
For those seeking a restaurant reservation in NYC, there is an entire ecosystem of apps to help. Dorsia has emerged as a leader, with its approach of charging both restaurants and customers—recently securing a $50.4 million investment that values the company at $146 million. The once-popular secondary markets for reservations (notably Appointment Trader, a one-man business with $7.2 million in revenue (!) last year) have been effectively outlawed by the recent Restaurant Reservation Anti-Piracy Act. Restaurants prefer Dorsia's method because they share the price discrimination economics, and the restaurants also have gotten creative by using minimum spend requirements that monetize table access while crediting it back against the meal.
(8) How Shell Entities and Lack of Ownership Transparency Facilitate Tax Evasion
“Three principal reasons explain the ability of tax evaders and others to continue to hide their identities as beneficial owners and operators. [First] is a legal framework in many jurisdictions that promotes lack of ownership transparency. [Second] is that those who abuse shell entities need the services of gatekeepers like accountants, lawyers, and TCSPs. [Third] is layering, or chaining of numerous shell entities in different jurisdictions, [which makes it] impossible for forensic accountants and tax authorities to discern the real identity of beneficial owners.”
(9) Stablecoins are Bank Deposits
Stablecoins sound like narrow banking to me: “A stablecoin issuer is a bank and a stablecoin is a bank deposit. This is not complicated. If you hand me money and I invest it, and in return I give you something that is a liability for me and an asset for you, and that is redeemable by you on demand and at par, I am a bank and the thing I have handed you is a deposit. It doesn’t matter if that thing also works as an intermediary in a crypto market, a token in a cross-border payment app or gets you a gumball out of a gumball machine. I’m a bank, you’re a depositor, we’re in this together. […] There are two main questions: Are these new sorts of banks, called stablecoin issuers, risky? And do they solve a problem that needs solving?” How is sending stablecoins different than Venmo? I’m only half kidding…
(10) The Disapproval of the Crowd
Palantir CEO Alex Karp: “We have today privileged a kind of ease in corporate life, a culture of agreeableness that can move institutions away, not toward, creative output. The impulse […] to smooth over any hint of conflict within businesses and government agencies is misguided, leaving many with the misimpression that a life of ease awaits and rewarding those whose principal desire is the approval of others. […] A certain psychological resilience, and indeed indifference, to the opinion of others are required if one is to have any hope of building something substantial and differentiated. […] As the comedian John Mulaney has said, “Likability is a jail.”
(0) Miscellaneous
Exotic tourism in Algeria. The bizarre story of metaverse “unicorn” Infinite Reality. The 1500s papal conclave prediction market. The mysterious buyer of the Boston Celtics. The secret to Elon Musk’s productivity. Cuba’s doctor diplomacy. Rising healthcare costs due to hospital consolidation. Predictions about AI’s impact on writing. Relatable habit of parenthetical writing. Undervalued real estate in Baja California. Update on the Mauritius economy. Profile of Brad Jacobs. Improving NYC’s biking laws. The unraveling of the King of Davos. Backlash against golden passports. The adventures of Barbecue in Haiti. Origins of GT Dave’s Kombucha.