Passive investment free-rides upon and dilutes the returns to passive investment. All differences in relative price are set by active investors, but those who are correct enjoy much lower excess return than they would in a world where billions of dollars of flow didn’t match their moves. 1/

You start with an assumption American capitalism flatters itself that is simply wrong, that if a thing is valuable it must earn higher returns. Passive investment simultaneously shirks the information work of investment while dramatically lowering returns to those who actually engage in it. 2/

That’s not the worst of it. There are more actively destructive aspects of widespread indexing. I may be mistaken, but you are unlikely to surprise me with a counter argument, this is an argument I’ve been making for almost 20 years. Mistaken or not, it’s a considered view. /fin

my son dug up a lego set, unopened, that was a gift several years ago. he hasn’t been very interested in legos in some time, video games have become his world, but suddenly he was eager to put it together. 1/

but before we did, my wife suggested we look up the kit, because they retire lego sets and sometimes they become collectible. sure enough, it’s no longer produced and goes for $200-$300 now. 2/

lucky us, i guess? we couldn’t open and build it anymore, it felt extravagant. it’s not like we’ve put it on ebay, though. back into the cabinet depths from which it came. 3/

i promised the kid i’d get him something else we could build together. we went to the lego store and blew $35 on a much less fancy, cool set. 4/

so, in practice the net effect of making legos into limited edition collectibles has meant we can’t enjoy (or afford) the better sets, and the hypothetical resale value has left us cash-poorer than we had been. 5/

i don’t think it has made the world a better place. /fin

Two essays (the second via the first) on America's somewhat entrenched trajectory towards marginalization, culturally and industrially. (But how about financially?) (See following posts.) 0/

"Left Behind" by Paul Musgrave musgrave.substack.com/p/left-behind 1/

"Labubu and the Decline of American Cultural Hegemony" by Miranda Wilson uscnpm.substack.com/p/labubu-and... /fin

1) In places where the unit of bargaining is sectoral, not firm or plant or job or agency, strong unions don't confer a competitive disadvantage by bargaining well. Structurally, unionization in the US stands in tension with employer success in a way it does not elsewhere;

2) In part because there is no implacable misalignment, unions and employers are frenemies: Yes, unions and employers fight over respective shares of the pie (in money, benefit, conditions including safety, etc)… But they are also able to recognize a shared commonality of interest.

Both unions and employers want their industry to thrive, and can find mutual advantage in efficiency gains, a bigger pie to split.

This kind of reasoning is short-circuited in a US context, because union activity is pitted against the competitive efficiency of particular employers from the get-go.

Some alignment still happens — unions and employers might both support a tariff. But in basic, fundamental, ways, US unions are set up to overlook employer efficiency, because the alternative is to concede everything.

If each union agrees it mustn't bargain too hard for fear of kneecapping an employer relative to some competitor, what results is no bargaining power at all, a race to the bottom across unionized shops.

i mean, again, we already have censorship resistant payments for sufficiently motivated, technically proficient users. try censoring a shielded zcash transaction. 1/

censorship is not about stamping anything out entirely. it's about making the frictions large enough that whatever the censor is threatened by or dislikes remains hobbled and small. 2/

it'll be hard to run a profitable NSFW gaming platform on shielded zcash transactions unless it's very, um, high-touch, high-value to its niche clientele. /fin

banks and credit card networks *can* serve anyone not formally sanctioned, but for sufficiently ick clientele, they choose not to. you might argue that competition will remedy this, there will be *some* stablecoin provider that will serve ick of your choice. 1/

but stablecoins will be subject to network effects (and network effects in the exercise of market power) just like other payment rails. 2/

if the big stablecoins don't serve someone, and EZ exchanges or wallets only easily surface the big stablecoins, the notional ability to pay with spankdollar won't matter very much. and as you say, big incumbents are already building moats for themselves. /fin

(to the degree there is an obligation to redeem any nonsanctioned KYCed customer — not a thing I knew! — censorship would take the form of blacklisting transfers to the customer, refusing to complete the KYC process for funded pseudonymous accounts for disfavored customers.)

to the degree it’s a chargeback issue, the caveat emptor, transaction finality characteristics of blockchains might help. 1/

but re legal but icky, that should be doable with conventional payment rails, but pressure by icked out people stops it. i don’t see why that wouldn’t work with stablecoin issuers as well. /fin

you could. depending in the blockchain beneath (if it’s a blockchain transaction, rather than a coinbase-customer to coinbase customer of lightning network thing), transaction fees might or might not be high. 1/

the main issues for these kinds of payments i think are uncertainty and inertia. until just now, there’s been some uncertainty surrounding the regulatory status of stable coins, the biggest financial institutions have mostly avoided them, and users have been satisfied with credit/debit cards. 1/

censorship is an issue of concern to certain kinds of politically active people, and customers of discreditable niches that are ultimately pretty small. 2/

there has been some effort to serve those niches (“spankcoin”), but people are lazy, want to use their main accustomed payment medium, not have to adopt new habits for particular kinds of purchases. 3/

given the Trump administration’s crypto enthusiasm, its deregulatory approach to fintech, and the financial industry’s always-desperation for a “platform” that will make industry participants rich fast, i think we can expect some of these barriers to be addressed. 4/

i’m not sure i see anything very virtuous coming out of it, though. if censorship is your concern, the genius act requires AML/KYC of issuers, and undoubtedly the ability to block or freeze accounts. just because crypto can be censorship resistant doesn’t mean it has to be. 5/

(there are some very obvious things-not-virtuous that might evolve from greater blurring of the lines between our essential payments system and assets whose value is arguably a kind of casino game.) /fin