The Anti-Acc Revolution
2024 Year In "Review"
Originally, this post was going to be something of a victory lap. I’ve obviously kept all the receipts, which probably will come out later, but it’s pretty hard to understate how much I nailed all of 2024. Alas, the problem with having a banner year is the immediate performance anxiety that follows — “how am I supposed to do this again?”
The other reason this post is not exactly a retrospective, but is primarily forward looking, is that we all know what happened. It was the best of years, it was the worst of years. Following what I wrote on election day, exactly what I thought needed to happen has been set in motion:
In the absence of this, the only way to keep the mirage going is to keep printing money, and we are at the critical mass of not being able to do that anymore without deep, deep issues, some of which are already actively present. AI engineers and DoorDash drivers and unnecessary government jobs does not a healthy economy make.
There’s a palpable sense of desperation everywhere I look, and it’s reflected by the fact that nobody really trusts any institution to properly do anything, whether it’s a court of law or even counting votes. (Look, India counts a billion votes in a day, there is literally no reason a state should supposedly “take a week” to count ballots, though I suspect this won’t actually be an issue.) It is downright embarrassing how much litigation there is around basic, simple, logical things, and it’s a perversion of the legal system that common sense isn’t taken accounted for…
Something has to change immediately, because we are at the point of a debt recursion loop. Look, you can cite whatever numbers you want, I am convinced we are not getting “true” 2% inflation again.
While a majority of people clearly came around to a similar conclusion, change in a societal sense is not a conveniently priced implied volatility curve, a linear process where things “fix” over due time. Disagreements that haven’t been broached in ages have to be cleanly resolved, and it is clear that the level of volatility in society is not equivalent to what’s being reflected algorithmically. Immense legal hurdles must be cleared every step of the way, and too many “lawfare” (god, I hate this phrase so much) games have been allowed for far too long for this to not be a predictably painful roadblock. Egos that far surpass the likes of Jerry Jones and Kanye West have to coexist for longer than Jimmy Johnson was able to tolerate the Dallas Cowboys under the former, and both have the tendency to absolutely pop off unfiltered on instantaneous information transmission — I suspect only one party involved actually knows the full extent of how hard it is to transform a bureaucracy as opposed to completely bypassing it.
The Elon/Trump relationship is going to be regime-defining for as long as it lasts. (I’m hoping it can last at least 2 years, which is the minimum amount of time I think is needed to actually implement anything in the federal government, but I truly have no idea what happens.) If proper alignment occurs, it’s fairly likely that Tesla becomes the most valuable company in the world by the next presidential election as a proxy to Musk controlling the universe. If not, well, I think all big tech will be flailing in despair — after all, Musk is the one who actually bet on and willed Trump over the finish line. Nobody else will maintain a positive relationship with the incoming administration if this relationship grows dour.
My proxy for this relationship is obviously hinged on whether Truth Social or X is pushing discourse. I have a small position in DJT from prior to the election because I had a hunch that there was discussion of merging the two companies once the regulatory regime eases. That could still be the case, but the X machine has spun wildly out of control after the nomination discourse subsided for the holidays, where people even more terminally online than me started a DEFCON-1 tier discourse on immigration over Christmas, where a certain party randomly headshotted their electability in one of the more bizarre rants I’ve ever read:
A culture that celebrates the prom queen over the math olympiad champ, or the jock over the valedictorian, will not produce the best engineers. A culture that venerates Cory from “Boy Meets World,” or Zach & Slater over Screech in “Saved by the Bell,” or ‘Stefan’ over Steve Urkel in “Family Matters,” will not produce the best engineers...
More movies like Whiplash, fewer reruns of “Friends.” More math tutoring, fewer sleepovers. More weekend science competitions, fewer Saturday morning cartoons. More books, less TV. More creating, less “chillin.” More extracurriculars, less “hanging out at the mall.”
Look, this opinion is nothing new — a famous Fischer quote goes
The United States is not a cultural country. The people here want to be entertained. They don’t want any mental strain, and chess is a high intellectual form. Americans want to plunk in front of a TV, and not have to open a book.
and, dare I say, for my entire adult life, it’s always been true that overall, Americans could stand to eat a little less and work a little harder. But the core problem here is that the entire pipeline of enabling home-grown individuals that will push to create things so that people can choose to sit in front of a TV and tune out (a core “value” of American culture that’s so relatable that the Simpsons is still airing) has completely corrupted. A few years ago, I wrote about how a huge chunk of the problem spawns from uncollateralized federal loans enabling everyone to go to college rather than the motivated/rich/gifted, and how to fix it (a long read: Malt Liquidity 43: The College Loan Edition), and that the problem is definitely fixable domestically if the priority isn’t “number go up”, which, unfortunately, is a foreign concept to many of the largest parties that partook in that discourse:
Many Americans are sold the idea (I was as well) of “study what you want in college, it’s about finding what you’re good at.” I went to my parents and told them I wanted to study English/Comp Lit, and they told me GLHF and to pay for it myself. I ended up doing math. Many people did not realize a) that college has essentially turned into glorified high school for many degrees and b) that the cost would inflate so massively over the course of federal student loans. It’s positively insane how much it costs to get a random business/psychology/English degree that basically has zero market value. Now, on top of that, these people are supposed to graduate and compete with people who a) didn’t pay anywhere near the same amount for their credential b) will work at a much lower wage and c) were fully aware entering college that it’s purely vocational training? This is just unfair to put on anyone, let alone ~18 year olds, who should be wholly aware of what they were getting into, which even I didn’t.
The most common thing you hear about college is that you don’t use any of it in the workforce. Arguing over numbers doesn’t make sense when the training mechanism is completely broken. School for moderately bright kids, let alone gifted ones, is a complete waste of time. Why is someone at 16 stuck with the choice of going through the motions of credentialism and maybe getting industry experience at 20 instead of having an opportunity to sample it much earlier and take some actual applied engineering classes? Why are companies not made to assume the risk of training and mentoring fresh high school grads, instead of outsourcing the risk to the student, the most unstable party, who must then take the cost of debt on to assure their market value?
This can be done because it’s how it was done for a long time. Most people don’t need to go to college, even a lot of technical jobs don’t require degrees. The entire first wave of 2000s tech was built off the backs of enthusiasts, not degree programs. Not every field can be treated this way — hard sciences, medicine, etc. definitely require formal institutional training — but letting corporations both benefit from the imported labor and absolving themselves of the cost of training is net bad for morale, and screws over a lot of people…
Granted, the officers with fiduciary responsibility in public corporations cannot just wantonly opine on forward guidance about how shareholder-aligned growth shouldn’t be a priority without facing an immediate flurry of class actions, I’m sure. Unless your name is Elon Musk.
The hardest part of investing as a discretionary type is sitting on your hands and not messing with your positions and handling the nonstop Chicken Little sky-is-falling reflex. But, as we’ve seen all year, things can happen:
For the first time in my life, really, I am not bullish on any of the classic big tech names AAPL, MSFT, GOOGL, and I think the sky is close to falling on AI in general. With the FTC/DOJ bound to end the M&A Ice Age, all of the money parked in yield, private credit, and toying with moving offshore will absolutely seek to acquire value. People are going to try things — yours truly and Bill Ackman are once again looking at the ex we just can’t quit, a lady by the name of Fannie Mae (note: am long FNMAS — you can read more in Malt Liquidity 24, a 1/22/21 vintage) — and I’m sure an army of fundamental analysts and private equity types have been doing far more intensive analysis than scrolling X all day to find targets. Personally, I prefer the regime of Mergers and Acquisitions as opposed to 2024’s attempted Murders and Executions.
The most concerning part to me is the sheer capex of all these players on AI, and the complete lack of innovation on Apple’s part. For MSFT or NVDA to win, AI really does have to replace all skilled jobs by, like, Q2 2025. For AAPL to win, it has to remain a “neat” part of an OS and nothing more. For GOOGL to win, the search money printer can’t be disrupted by whatever happens. Squaring this away is far beyond the prediction capacity of anyone who isn’t divinely omniscient.
For me, the canary in the coalmine is once again identified by approximating legal situations that can’t be priced. I’m not one to primarily analyze companies on governance, but I noted in February that OpenAI’s revolving door and PR was quite concerning, and the departures have only gotten worse, along with a jarring Boeing-esque whistleblower suicide.
I ain’t passed the bar, but I know a little bit, in that in any sane reading, OpenAI did a ton of sketchy shit. But there is way, way too much money at stake here — what’s the downside of bricking on AI? Surely it’s a far worse scenario for QQQ overall than what META suffered due to bricking on the Metaverse. There’s definitely some sort of pairs trade/hedging that people running more money than god will have going, but personally, I just want to stay out of it. I don’t think earnings games are going to keep this train running at 30% a year for much longer.
There are two competing mindsets as to how to resolve all of this without the sky falling. Of the Muskian variety is to accelerate further — the way to beat the debt crisis that started the whole fear is to inflate away the debt by running faster and jumping higher rather than printing money — isn’t the interest problem silly when looked at from a Mars-eye view? And I definitely feel this is the only way out in the longer run. A solely Earth-based kick the can down the road path doesn’t exist: remember the ever-panned “fiscally conservative and socially liberal” descriptor?
But the problem here is that “growth” and wealth creation is so oriented around “number go up” metrics and financialization — GDP, quarterly earnings, whatever — that the true “acceleration” mindset cannot reasonably coexist with it. A breakthrough AGI is not going to make people’s lives easier, is my guess, but lazier. MSFT justifying their capex by replacing software engineers with AI is probably not a true paradigm-shifting breakthrough, as this post notes, which I agree with. “Policy” is not going to properly distribute resource allocation to account for this. It’s sci-fi esque speculation until I see a few more products and a few less faked demos and buzzwords in forward guidance.
Far more interesting to me is the idea that natural selection has already been beaten in segments of society — that people with Down’s syndrome can now live until their 60s or so is fascinating, let alone the fact that gene editing really hasn’t been truly experimented with on humans. For the time being, it looks like obesity has had a solid crack taken at it as well. If I had to bet on something truly warping how we think about humanity in the next 5 years, it would probably be the post-natural selection pathway rather than the post-human AGI pathway.
Science, when done properly as opposed to being “trusted”, thankfully, does not need to show quarterly progress. Breakthroughs won’t come from crushing benchmarks, but through a completely novel result or experiment that changes what we think is possible in ourselves. It’s not like an AI SWE is really messing with more than 10% of society, is it? Perhaps Buc-ee’s managers’ earnings will finally outpace a MSFT L3, wouldn’t that be an interesting shift?
I’d call this “anti-acc” thinking, because if we truly get comfortable with the fact that the S&P 500 can and should drop sometimes, we can focus on fixing institutions rather than selling products, which is so desperately needed in law and education that actually learning law made me borderline schizophrenic. The cracks are so glaringly obvious everywhere even to the layman — how does a loan between two parties where nobody lost money cause a 9 figure judgment? — that for someone with my memory, it drives me insane. Two years of solid focus on the problems with endless litigation, disparate impact, the inability to allow gifted kids to accelerate themselves in grade school, the problems with the college system (which is so broken as a signal that I doubt any kid born after 2020 will default to attending a 4-year institution after high school), could result in much better outcomes in the post-scarcity society where, if we don’t all have access to a personal megamind and queue up for tickets to Mars, at the very least, we can be content with our existence. Glaring economic and demographic issues aside, isn’t this the entire appeal of a place like Japan, where things just work the way they’re supposed to? Growth at all costs is precisely what led to the postmodern market state, where the numbers move around and the existence of a tangible connection to reality need not exist as long as the market cap is liquid.
I knew going into the election that Trump would win, as I had been saying for over a year in advance, and wrote to assuage some, er, liberal concerns that
here’s the good news — for the first time since 2020, I get the feeling that people are willing to try again. The entirety of 2020 felt like one collective psychotic break that I wasn’t a part of, and the chaos that ensued in 21-22 meant that a lot of people just kept their heads down, and some still are. But for my sect of peers — talented people who didn’t quite get a shot to build anything in the free money era, then immediately got plunged into the pandemic — there’s a palpable urgency that the next few years might be the last shot any of us has to innovate in prime working years
and I could only describe the “anti-acc” mindset of mine as “optimistically bearish”. “The SPY is falling” is awfully close to “sky is falling”, but if it delevers and sells off in the right manner rather than entirely collapsing, I think this is a better societal outcome than giga-churn big tech pushing the market up 20% would be.
As for the year in Malt Liquidity, I still consider Postmodern Society and its Future to be the crowning achievement even though I went on the most ungodly tear in my return to active management after 2 years of “retirement” from August 1st onwards (but more on this later.) As always, let’s review last year’s predictions:
Here are some predictions for 2024:
The first rate cut will come in May, and we will end the year at 3.5%. Rates likely shouldn’t drop more than this, but practically (to pump the markets), we will probably go down further to 3%, though this will bleed in to 2025.
I rapidly updated my rate cut prediction early in the year, making a pretty astonishingly accurate call:
At the time of that post, the rate cut probability in March was well over 80% and prediction market odds of Biden as the nominee were well over 90% IIRC. Taking the W on this one.
Donald Trump becomes president unless he is physically restrained from doing so (jail, assassination.)
I truly can’t believe how accurate the “jail, assassination” line was — I think we all knew it was a possibility for any president, but the manner with which it happened (twice!) and the obviously pivotal reactions that followed made the case for 45-47 far clearer than a “regulatory strangleholds and money printing is eroding the dollar” argument could ever have been.
SBF gets over 25 years, but some major scandal breaks about the decision to not charge him with campaign donation violations (which furthers Trump’s campaign)
Pray tell, what was SBF’s exact sentence?
Bitcoin won’t drop below 28k again due to being absorbed into the passive flow complex, but there’s a 10% chance we find out the US government was behind it the whole time.
At the time, BTC was ~44k, but I don’t think this was that high probability of a call. The passive flow complex obviously changed how this thing trades, which I wrote about in This is Flow, the first post of 2024, prior to ETF approval, and Look at BTC, I’m the ETF Now after observing the trading mechanics. The complete mania of November and MSTR made me somewhat bearish after the 100k touch — I still find it extremely peculiar how Bitcoin somehow gets regulatory approval and hands-off treatment from the SEC/CFTC/etc, the passive management firms, to the point where “strategic bitcoin reserve” is somehow a topic of discussion.
It will continue to become cheaper to travel to Japan: the poor Yen!
As evidenced by my travels, of which more will be written about later, and the fact that I am somewhat a human indicator of local maxima/minima in USD/JPY, this was a comfortable call. Would this constitute insider trading?
So, here are some calls for 2025 — hopefully (possibly?) I can be somewhat as accurate…
OpenAI’s legal defenses will continue to degrade, and this will hamper MSFT at multiple points throughout the year
Musk and Trump stay together longer than Harry and Meghan — and they make it to Christmas.
A major sports betting scandal breaks out, or a major sportsbook experiences serious financial difficulties
MSTR gets liquidated at some point this year
The “internet of blogs” returns as the X algorithm becomes too sensitive to Elon
Bullish: TSLA (though I think both 300 and 550 are touched this year), DJT — Bearish: X, NVDA
Bullish: League Tables discourse — Bearish: VIX discourse
Bullish: Crypto Legal victories — Bearish: the “transformative potential of web3” narratives, the Bitcoin Strategic Reserve
For 2025, I want to finish editing the “Malt Liquidity” anthology, whether an independent webpage or an ebook of some sorts, make it easier to refer back to old posts, and find a way to “productize” my schedule more, whether some sort of active discussion forum, emails, whatever. The split between platforms makes it quite hard to keep up, and I’ve finally purged my schedule of anything other than the work I want to do (and took a break for the first time in months) so I can focus on optimizing, among other things, consulting projects and interesting microVC/PE type ideas. More on this to come, of course — thanks once again to everyone who interacts with my scrawl!
Enjoyed the read on the way to work. Thanks Ven.
I really appreciate your thoughtful posts.