Andy Kessler

WSJ: The Rise and Fall of SBF

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https://www.wsj.com/articles/the-rise-and-fall-of-sbf-sam-bankman-fried-cryptocurrency-exchange-ftx-ceab9794

I first got to know author Michael Lewis, then of “Liar’s Poker” fame, when in the mid-1990s I took him around Silicon Valley in an old beat-up convertible. I told stories and showed him where the first transistor and microprocessor were invented, plus Xerox Parc and its beanbag chairs, Hewlett Packard and Intel. As we drove around, I shared my history with entrepreneur Jim Clark, his time at Silicon Graphics and early days with Netscape, and of the venture capitalist Glenn Mueller, who committed suicide after being denied access to invest.

I then watched in awe as a seed of an idea bloomed. Mr. Lewis practically moved in with Mr. Clark while writing his terrific book “The New New Thing.” As his time with Oakland A’s executive Billy Beane of “Moneyball” and Michael Oher of “The Blind Side” proved, he has a bloodhound’s nose for putting himself in the epicenter of gripping drama. When I first heard that my friend was embedded with crypto wunderkind Sam Bankman-Fried of FTX, I thought, “Of course he is.” The result is “Going Infinite: The Rise and Fall of a New Tycoon,” out Oct. 3.

I recently had lunch with Mr. Lewis in Larkspur, Calif., to learn more. “Before Covid,” he explains, “I decided my next book would be extremely character-based.” In October 2021, after a friend asked him to check out SBF, “Sam tumbles out of an Uber and I took him for a hike,” Mr. Lewis recalls. “I think it was the first hike he’s ever been on even though he wears a crumpled T-shirt and shorts every day.” SBF, then worth maybe $20 billion and, it turns out, a fan of “Moneyball,” unloaded his story. “He was gasping the whole time and talking a mile a minute.” Mr. Lewis realized, “I had my character.”

After Mr. Lewis arrived in the Bahamas in early February 2022, SBF apologetically announced that plans had changed. Then the entourage got on a jet to the Super Bowl in Los Angeles. This was the Crypto Ad Bowl—Mr. Lewis says FTX paid Larry David $10 million—and though no one quite knew it yet, crypto prices would soon implode.

It was brunch with Shaq and then, Mr. Lewis recalls with amazement, an “exclusive party with Hillary, Leonardo, Chris Rock, four Kardashians, Katy Perry, Jeff Bezos, the owners of the Rams and Cowboys.” SBF was dressed in his crumpled T-shirt and shorts. “By the end of the evening, all anyone wanted to talk to was Sam”—a benefit of throwing money around.

All in, Mr. Lewis spent more than 70 days in the Bahamas on a dozen different trips. That’s commitment. Plus journeys with SBF to Washington to wave cash at political celebrities.

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WSJ: Why Is Anxiety Rising?

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https://www.wsj.com/articles/why-is-anxiety-rising-covid-climate-social-politics-mental-health-5f033f53

“Olivia expressed despair due to climate change.” “Badge is anxious when he thinks about the future.” In August, a Montana court ruled that these and other youth plaintiffs “have a fundamental constitutional right to a clean and healthful environment, which includes climate.”

Anxiety is on the rise and, rightly or wrongly, is blamed for everything. A recent federal survey reports 27% of respondents had symptoms of an anxiety disorder, up from 8% in 2019. That’s scary. Youth emergency-room visits for mental health have gone up significantly.

Do you suffer from anxiety? The Mayo Clinic’s list of signs and symptoms includes feeling nervous, feeling a sense of impending danger or panic, increased heart rate, rapid breathing, sweating and trouble concentrating. Apart from those with nerves of steel, I’ll bet we’ve all had at least one of these symptoms. A survey by KFF suggests that half of 18- to 24-year-olds report anxiety or depression symptoms. Not everyone can deal with them.

Gymnast Simone Biles and tennis player Naomi Osaka have withdrawn from competitions because of anxiety. PGA Tour commissioner Jay Monahan took a leave of absence for anxiety right after the merger announcement with Saudi-backed LIV Golf.

This is mostly a U.S. problem—affluenza?—which I’ve seen blamed on social media, poor sleep and previous underreporting. Yes, Instagram-inflamed narcissism is a problem, but I think the rise of anxiety is about more than that. So what is it?

• Extinction anxiety. Daily news reports question the ability of humans to survive in the near future. AI experts warn about human extinction.

 

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WSJ: Schumer Wants a Cut of AI

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https://www.wsj.com/articles/schumer-wants-a-cut-of-ai-musk-chaptgpt-economic-growth-regulation-4d8c73f5

Sen. Chuck Schumer, who’s never seen a camera he didn’t want to jump in front of, held a closed-door meeting last week on artificial intelligence. What? Closed? To me, it suggests an agenda beyond paving the path to a fantastic future. At the meeting, Elon Musk warned that AI is a “civilization risk.” Mr. Schumer declared, “We can’t be like ostriches and put our heads in the sand.” They sound more like dodo birds.

One clue to the hidden agenda: Besides Mr. Musk and Meta CEO Mark Zuckerberg, OpenAI’s CEO and other techies, the attendees included union leaders such as Randi Weingarten of the American Federation of Teachers, Liz Shuler of the AFL-CIO, Meredith Stiehm of the Writers Guild and two tech critics with “Humane” in their company names. Ugh. It looked like the ghosts of economics past had come to spook the spirit of economics future.

So of course it was held behind closed doors. It was as if the nascent AI companies were called into a meeting with a tough guy named Spike who listens and then says, “You wouldn’t want anything to happen to your nice companies there, would you?” Or as if the union representatives of the horse-drawn-trolley conductors, rail-gauge manufacturers and manure sweepers were sitting in car-design meetings, demanding full employment for their guilds.

Henry Ford once said, “If I had asked people what they wanted, they would have said faster horses.” Politicians might have demanded to tax horses based on speed. Back then, no one appreciated the potential for those rickety automobiles to transform the economy. We’re at the same juncture with AI today.

When politicians get involved, their agenda for any business is to slow it, tax it, regulate it, harness it, redistribute it or just plain kill it. Mr. Schumer clearly forgets, if he ever even knew, what drives economic growth.

Unions control the Biden agenda. See auto strike. It is always status quo over progress.

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WSJ: Makers vs. Taylor Swift Shakers

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https://www.wsj.com/articles/makers-vs-taylor-swift-shakers-economy-tesla-abundance-bce0bbd8

“I think Taylor Swift is great for the soft landing,” Columbia Business School economist Brett House declared in the New York Times. Not wanting a recession, I almost rushed out and bought $1,000 tickets and $25.99 friendship bracelets, but then I remembered that isn’t how the economy works. There are two sides of the economy: the productive side and the spend side. You can create wealth by learning or you can spend it. We have makers and, appropriate to Swifties, shakers.

In April, Bernard Arnault, chairman of luxury goods maker LVMH Moët Hennessy Louis Vuitton, briefly became the world’s richest man as Tesla’s stock was temporarily in the dumpster. Now Elon Musk is back. Bloomberg tracks the wealthiest daily. After Messrs. Musk and Arnault are Amazon’s Jeff Bezos, Oracle’s Larry Ellison and Microsoft’s Bill Gates. Françoise Bettencourt Meyers of cosmetics company L’Oréal, at No. 13, is the world’s richest woman. The list intertwines tech, luxury, energy and retail.

Most of those near the top of the list are makers. They do more with less, while the spending side, such as Mr. Arnault’s brands, sells less for more. This is the difference between mass production and custom products. Let’s face it, a $4,650 Louis Vuitton “khaki and beige empreinte calfskin leather with polished brass” tote has the same utility as a paper bag from Safeway. That isn’t productivity. On the flip side, Amazon can deliver you a handbag tomorrow. Manufacturing and retail logistics run cheaper every year because of Amazon, Microsoft and Oracle data centers. This is how wealth is created now. Louis Vuitton is how it’s spent. See the difference?

Tesla straddles both sides. Investors are betting, heck, praying, that Teslas, basically low-margin cars, become productive autonomous machines, and they might if their Full Self-Driving mode stops running stop signs.

The economy needs both sides. But here’s something to think about: Both bring joy, but only one drives progress. We all consume, but progress happens when we postpone consumption and invest. Produce first; spend later. Consumption informs the supply side, which is where learning and societal wealth creation take place. Concert tickets and fashion reduce savings and investment. Production learns; consumption burns.

Yes, we need basic essentials. Maslow’s hierarchy of needs:

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WSJ: The Climate-Change ‘Emergency’ Is Coming for You

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https://www.wsj.com/articles/real-climate-change-catastrophism-hasnt-been-tried-biden-emergency-global-warming-environment-b485421a

Two years ago during Covid lockdowns, I wrote about climate control freaks, facetiously anticipating a future headline: “Bad CO2 Day, Lockdowns Enforced.” A joke that would never happen, right? Well . . .

Last month President Biden was asked on the Weather Channel if he was ready to declare a national climate emergency and responded, “We’ve already done that.” Asked again if he declared a climate emergency, he said, “Practically speaking, yes.” There is no official emergency, but the president certainly thinks we need one.

The fawning press gave him a break—he didn’t really mean that, did he? But the notion of a national emergency today isn’t farfetched. The United Nations website blares: “What you need to know about the Climate Emergency.” The European Parliament has declared one. So have hundreds of jurisdictions in at least 39 countries, including the U.K., Canada, Japan and Bangladesh. Climate-activist teenager Greta Thunberg gave away the game in 2019 when she said, “I want you to panic,” and, “I want you to act as if you would in a crisis.” Emergencies are an excuse to do whatever you want.

U.S. presidents can declare national emergencies, as spelled out in the 1976 National Emergencies Act, but they must be explicit: “When the President declares a national emergency, no powers or authorities made available by statute for use in the event of an emergency shall be exercised unless and until the President specifies the provisions of law under which he proposes that he, or other officers will act.” I’ve searched far and wide for such provisions and can’t find them.

No matter, we’re living as if we’re already under emergency conditions. As of Aug. 1, the Biden administration has halted the sale of lightbulbs with less than 45 lumens of brightness per watt. Incandescent bulbs don’t make the cut and are now banned. Thomas Alva Edison is rolling over in his grave. Will electricity be rationed next?

Oops, too late.

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WSJ: Little to Like on the Prefix Menu

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https://www.wsj.com/articles/little-to-like-on-the-prefix-menu-late-stage-capitalism-language-neo-mid-444c6dac

Why the posthaste to use “post”? A post-truth world, post-gender society, postliberal order. I recently read of a post-prestige TV era. Since “Mister Ed,” has it ever been prestigious? Or postmodernism. Shouldn’t modernism always be current? That’s as illogical as post-apocalyptic. But my favorite post is post-rationalists—known on Twitter as “postrats”—kind of a beyond-truth troop. Irrational but fitting.

Don’t get me started about “late” as in late-stage capitalism. How many times have you heard pretentious poseur know-it-alls talking to their post-pierced barista and fellow pre-employed chai latte sipping layabouts using daddy’s credit card discussing how capitalism isn’t simply over but “so over”?

The German economist Werner Sombart is said to have been the first to print the term late-stage capitalism, around the turn of the century—the 20th century, that is. More than 120 years on, can it get any later? Better late than post, I guess. Late-stage capitalism means folks are fed up with having to work hard and instead are looking for handouts. Complain about capitalism all you want, but folks in Russia, Venezuela and Seattle, the short-lived home of the Capitol Hill Autonomous Zone, sure know what late-stage socialism looks like.

It works both ways. A doctor looking at my A1C blood-test readings told me I was pre-diabetic and to give up bread. How “pre”? Because I’m also pre-death. In Silicon Valley, most software is pre-release, even though it’s been released. Renamed “beta” to make it sound cool, these are test versions of the future. ChatGPT was released with many flaws—let users find all the mistakes.

“Uber” was a cool preemie, as in uber-athlete, Übermensch, until canceled ride pickups ruined it. The umlaut version of über is a nice touch. And be warned, adding “super” in front of any word can be super-annoying.

Here’s another trick. Add “neo” before almost any “ism” and it makes it sound über-hip, super-now.

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WSJ: 15 Ways to Win a Presidential Primary

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https://www.wsj.com/articles/win-presidential-gop-republican-primary-debate-election-2024-youngkin-desantis-trump-45ffe02d

The first Republican presidential debate is Wednesday, and voters are asking: What will it take to win in 2024? Donald Trump is ahead in the polls running a Festivus campaign, airing his grievances. Florida Gov. Ron DeSantis and entrepreneur Vivek Ramaswamy poke at woke. Here’s a thought: Virginia Gov. Glenn Youngkin thinks voters are “more focused on who is going to deliver results, who’s looking forward with a plan.” He’s right. Mr. DeSantis should take his own Iowa campaign event advice: “Leadership is not about entertainment. It’s not about building a brand. It’s not about virtue-signaling. It is about results.”

Candidates need to tell us what they can do and get done, especially when it comes to getting government off our backs. Mr. Youngkin asked the WSJ CEO Council in December: “What are the key issues that families are sitting around in the evenings concerned about and do you have a very clear agenda to address them?” K-12 curriculum was a winning issue for him. And this: “We really did fix our DMV. Virginians . . . can get things done faster today than you can check your rate at Geico.” Great line.

Americans aren’t stupid. We live in quiet desperation as government interferes with our lives—until we vote. Mr. DeSantis showed his get-government-out-of-our-lives philosophy in Florida by ending lockdowns, mask mandates, school closings and DEI requirements. He should get back to it—Halloween costumes show why bashing Disney probably isn’t a winning strategy.

We need a new phrase for kitchen-table issues. DoorDash-dining-while-streaming problems? Twitter jitters? Pain points? How about WTF—what to fix? Voters know what needs fixing, yet for mysterious reasons, no candidate seems to. Do it. Be Mr. Fix It. I have a list.

Start with the Transportation Security Administration: Everyone is sick of seeing dirty, holey socks at airports. Let us keep our shoes on and laptops in our bags and randomly screen 1 in 20 fliers.

Prescription-drug pricing is baffling. I paid $300 for a brand-name drug at Walgreens that dropped to $15 when I switched to Amazon Pharmacy. Why? Who knows?

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WSJ: Disney Makes a Mickey Mouse Mistake

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https://www.wsj.com/articles/disney-makes-a-mickey-mouse-mistake-attendance-business-media-woke-politics-florida-inflation-791a6ad1

Is Disney a haunted mansion? Squishy earnings. Writer and actor strikes. A woke fight with Florida Gov. Ron DeSantis. Indiana Jones bombed, and Marvel is mostly milked. But these are nothing compared with the age-old trap Disney has voluntarily walked into: When growth stops, raise prices to make up for lower volume.

The company’s earnings release last week says it all: “Lower affiliate revenue resulted from a decline in subscribers, partially offset by higher contractual rates.” And after losing subscribers, Disney raised Disney+ and Hulu ad-free streaming prices 20% last week. You can’t raise prices to infinity and beyond. Consumers eventually break.

Sure enough, attendance appears down this summer at Disney theme parks. No wonder. Tickets can cost $169 a day; 2-Day Park Hopper Disneyland tickets are $345 plus $30 a day for parking. Then add $8 pizza slices, $6 lemonade and $5 churros. Dinner at the River Belle Terrace might include less-than-mouthwatering bargains such as $19 BBQ Tofu or $22 Pimento Mac and Cheese. The Disneyland Hotel charges $425 a night, though you can find rooms for $200 outside the park. Add $20 embroidered Mickey Ear hats, and I calculate the tab can be more than $1,600 a day for a family of five. It’s “The Happiest Place on Earth,” except if you’re paying for it.

Disney CFO Christine McCarthy said in May that ticket prices track inflation. That’s not quite true—the New York Post reported last year that Disney theme park ticket prices are up 3,871% in 50 years, well above inflation. Ms. McCarthy cited spending on other stuff: “It’s T-shirts and hats, but also build your own light saber. Not cheap. But people tend to spend the money. That is consumer choice.” It seems consumers are choosing not to show up. Can you blame them?

The cable business may be worse—cord-cutters are killing it. Disney-owned ESPN has around 70 million paid subscribers, down from some 100 million 10 years ago. PwC thinks that number will drop to 50 million by 2027. One reason is constant price increases. ESPN now costs $9.42 a month per subscriber for cable operators, vs. 49 cents for the average channel in the basic-cable bundle. Many cable subscribers don’t even watch sports. Like clockwork, whenever ESPN and cable raise fees, athlete salaries and ticket and beer prices go up. It’s a virtuous circle for everyone but consumers.

The business model of professional sports is quickly deteriorating.

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WSJ: August’s Surprises Arrived Early

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https://www.wsj.com/articles/augusts-surprises-arrived-early-ufos-lk-99-brain2music-news-stock-market-trump-hunter-biden-c153db49

UFOs, brain scans and superconductors made it an unusually interesting July.

It’s as if they read my mind. In 2021 I noted that surprises often come during August. Two weeks later, President Biden’s Afghan exit turned into an unexpected fiasco. I figured, hey, let’s try again. I spent the past few weeks researching for a column about more August surprises. Imagine my surprise when July—even its last week or so—spit out a stream of surprises, all seemingly related. I ripped up the August column.

Let’s start with unidentified anomalous phenomena, the trendy new expression for UFOs. Former U.S. intelligence agent David Grusch testified to Congress on July 26 that the U.S. has retrieved not only UFOs but also “nonhuman” biologics of supposed pilots. Any pictures? If so, wanna bet they’re blurry and grainy?

I’m in the camp that thinks the government rolls out UFOs every time it needs a distraction. In 2003 the Central Intelligence Agency declassified documents showing that it had made up stories about flying saucers shortly after it was outed for its role in a 1954 Guatemala coup. Are the UFO stories being used to distract us from the Donald Trump indictment or the Hunter Biden tax evasion?

Maybe UFOs are real. If so, aliens must possess some really cool technology, like superconductors enabling quantum-drive engines. Lo and behold, July 22 saw the announcement out of South Korea of LK-99, a room-temperature ambient-pressure superconductor, surprising everyone. A video claims to show the Meissner effect, levitation via emitted magnetic waves as material becomes superconducting.

The creators even describe how to make the lead-based superconductor. The first step requires the synthesis of copper phosphide from copper powder and red phosphorus. Oops, the Drug Enforcement Administration labels red phosphorus a List I chemical used by illegal meth labs to convert pseudoephedrine into methamphetamine. It’s also in strike-anywhere matches. I suspect every scientist trying to replicate the room-temperature superconductor is now binge-watching “Breaking Bad” for tips.

Replicating the results will take time—a few weeks, or forever as many skeptics think.

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WSJ: AI’s Growing Legal Troubles

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https://www.wsj.com/articles/ais-growing-legal-troubles-section-230-publisher-class-action-9efaf374

Wow, that was fast. It took only eight months to find ChatGPT and generative artificial intelligence’s Achilles’ heel. No, it isn’t naive management, though OpenAI CEO Sam Altman did declare that AI poses a “risk of extinction” for humanity and practically begged a Senate Judiciary subcommittee to regulate AI, and then when the European Union actually did pass regulations, he threatened to pull out of the region.

And no, it’s not the White House, through which top AI execs did a walk of shame, allowing President Biden to extract from them a pledge of voluntary safety guardrails for AI. A pledge! Is that stronger or weaker than a pinkie promise?

Nor was it the Federal Trade Commission’s recent fishing-expedition letter to OpenAI demanding minuscule details of everything the company does. Well, Mr. Altman certainly was asking for that. Given that the FTC has been on the losing end of so many cases recently, maybe the company should let ChatGPT write the answers.

Instead, AI’s Achilles’ heel consists of good old-fashioned media issues. The first is copyright. Tools like ChatGPT, Google’s Bard and Meta’s Llama are large language models, meaning they input up to a trillion parameters by reading everything they can get their servers on, including Wikipedia, the cesspool of snark formerly known as Twitter, and racy Reddit of Roaring Kitty and GameStop fame. No wonder ChatGPT is so prone to hallucination. Social-media companies now want to be paid and have restricted the scanning of their innards.

Copyrighted snippets showing up in today’s search results are considered fair use. But can OpenAI or Google or Meta legally scan copyright material and create brand-new content from it, or is generative AI’s output considered “derivative,” requiring the original copyright owners’ permission? We are about to find out in a slew of copyright lawsuits. Comedian and sometime author Sarah Silverman this month joined a class-action suit against OpenAI and Meta, claiming they “copied and ingested” copyrighted materials and created “derivative” versions.

It turns out OpenAI scanned giant repositories of books, named Books1 and Books2—reminiscent of Dr. Seuss’s Thing 1 and Thing 2.

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