It’s kinda funny how global political and corporate leadership has clearly decided to learn nothing from Covid.

Nice that we got new vaccine technology out of it, but otherwise it’s “carry on, nothing to see here.” Just a bunch of shock debt.
I don’t entirely blame them. The lessons as currently being discussed are way too abstract to be actionable

“Hedge against China”

“Run more fat, less lean.”

“Diversify business models”

What actually changed:

Orgs: buy zoom and sanitizer
Individuals: more toilet paper
The biggest deep, lasting change needed is to run more fat. Give up some capital mobility efficiency for resilience. I need to dust off my old material on fat thinking and expand it to TED-talk level grand theory. I’ve been mailing it around more than usual but it’s too modest.
Fat as in both wealth in less fungible forms than money, and more redundancy. The inflation in highly financialized asset classes is something like a flash flood. Downpour of money supply, but it can only swirl around flooding the surface. It can’t penetrate for whatever reason.
Here’s a subtle point I think people are just beginning to realize. If capital chasing returns has nowhere to go, and there are no true risk-adjusted higher returns to be found, it kinda doesn’t matter if it moves at all, and it can also be stored in less fungible states.
Normally you should prefer $100 in cash to $100 in widget inventory because the latter can chase returns while the latter will likely only depreciate in value. But add enough deep volatility everywhere and suddenly it doesn’t matter.
What prevents capital from easily percolating from flash-flood inflation zone (stocks, crypto) to less fungible deep assets (real estate, chips) is we have a poor sense of how to build non-financialized low-liquidity portfolios of “stuff.” It’s in realm of silly survivalist larps
If you’d been clever enough to (say) stock up on DRAM chips or GPUs, you’d be sitting pretty right now. But we’re bad at that sort of thing thanks to decades of lean. We are better at betting on abstract instruments representing things than at holding actual things.
Even the real estate boom is primarily in the financialized end of higher liquidity properties that can be owned in Vancouver from China. I see people with vague back-to-the-land fantasies struggle yo learn the basics of owning raw land, how to get electricity and water to it etc
So crap properties in urban cores are caught between depreciation through blight versus appreciation due to uninformed demand. Right now, knowing how to use less developed land is more valuable than having the money to win bidding wars for developed land.
Owning things is a skill. Inventory management is a skill. Inventory is not rotting, depreciating, work-in-progress tied to a single use or market. It’s a kind of complex potential that can be more or less fungible than money in certain conditions.
We all got a shock lesson last year that under certain rare but foreseeable scenarios, toilet paper. PPE, and sanitizer have higher fungibility than cash. I bet Wall Street quants are brilliant at modeling scenarios and identifying things *worth* holding. But they stop there.
Nobody wants to actually acquire the skills of holding things. Just the skills of betting on representations and passing on the actual things as quickly as possible. Preferably not touching them at all. So we buy oil futures with nowhere to put the oil if forced to take delivery.
The Art of Being Fat

I have my essay title 😎
Maybe I should NFT this essay and financialize it 🤣
There’s a broader economic-philosophical point here.

Lean is a natural expression of growthism, which is growth-for-the-sake-of-growth *as measured by money* because in a time-averaged sense, under low-uncertainty conditions, money is the most fungible asset *on average*
Money is the best way to hold wealth if there’s a veil of ignorance on future. Yes, sometimes for days/weeks, hand sanitizer may be more liquid (heh!) but on average you’re best off holding money.

But what if... the veil were not opaque? And what if days/weeks turn into months?
If the future is such that you can expect the world to be in unusual regimes for long periods (months, even years), and you can partly predict it, you think of holding wealth differently. Like they did materials in WW2, or the way governments think about food/energy security now.
“Vaccine nationalism” is a sudden rude rediscovery of these principles. Countries are now randomly, anxiously hoarding things like plastic bioreaction bags they way they’re only used to holding oil and corn. It’s like toilet-paper-hoarding mentality at national scale.
Note I’m not really talking about strategic reserves, bilateral supply deals, or export controls. Those mechanisms are designed for a narrow class of military/geopolitical risks. I’m talking all forms of material atom wealth at all levels from individual to nation. Aka “fat.”
The “degrowth” movement is equally stupid. It’s a reactionary retreat based on first-world consumption guilt. What we need is a growth portfolio. Hold wealth in a variety of forms at a variety of places/political levels to reflect knowledge of an uncertain future.
If you sell computers or cars, learn to hold more chips and boards. Etc.

And learn to manage counterparty risk up and down your value chain. Companies are eager to have their partners to take on all inventory risk in JIT ways. Do the opposite.
This also means learning to retarget inventories on the fly. If you speculatively stocked up on some parts and the world changes and blows up your downstream, learn to sell off the parts elsewhere. Every inventory point is a potential sales point in some future.
Remember how early in pandemic many restaurants were selling their own inventory as groceries? That should become a routine habit to some extent. Retargeting inventory from any WIP state from inputs to outputs as a core competency.
Another angle: neoliberalism got asymmetrically better at thawing frozen assets into on-average more liquid ones than freezing liquid ones into frozen ones. Frozen assets (rightly) became a slur pointing to old-money rents captured and held with regulatory cronyism.
“Frozen assets” is a misnomer.

“Frozen” = on average more liquid in a larger set of futures

“Liquid” = on average more liquid in a narrower set of futures
I did try to market it a bit back then, but few bites. I got one short corporate talk out of it, and I attribute one fun new gig to it. But fat thinking just wasn’t a popular line of thought until last year.
Even where people did seem interested it was mostly financial fatness. As in hold a lot more cash on the books, take more investment than you need if you can do it in no/low dilution ways and retain control.

“Deep fatness” was an unpopular idea.
Angke I need to think through. There’s a deeply held almost theological belief especially in America that money is in fact the most resilient form of wealth in some absolute sense. That under any stressor the wise markets optimally redeploy capital best at the macro level.
You may think you are smart to hold on to a few more GPUs and N95s and ventilators and storage tanks of water, but you cannot know better than the omniscient market. All is for the best in this most financialized of all worlds. Trust the global superintelligent market.
It’s an unquestioning sacred belief that attributes magical properties to money flows and assumes no matter what happens it was for the best. Even if it seems awful, you assume you’re merely too dumb to see what the omniscient eye of the market sees.
And you can’t compare to what *could* have happened. Like ok, you can argue that “free” markets cost 500k lives in the US but also delivered the innovation of mRNA vaccine tech that may save billions of lives in the future, while totalitarian lockdowns save more lives now. But...
... can you imagine a scenario where we got both? Very few lives lost now, AND breakthrough vaccine tech?

I think so.

But not if you think the only scenarios are a) USA! USA! b) Chinese concentration camps lockdown in Xinjiang c) Fauciocracy
Money is not special. It’s not magically the best economic computation substrate for all scenarios anymore than totalitarian central planning bureaucracies are. Both are bunches of flawed, limited people making decisions with information not phlogiston or ley lines. No free lunch
“Red plenty” was a false utopia based on the omniscience of central planning bureaucracies

“Blue plenty” (as in the economic omniscience of blue-chip financialized assets) is also a false utopia. One based on the omniscience of superfluid capital. https://www.amazon.com/Red-Plenty-Francis-Spufford/dp/1555976042
The one kind of illiquid fat the US encourages as a matter of tax policy, home ownership, is probably the worst of both worlds. Locks up capital and immobilizes people, but doesn’t add significant resilience to anything.
You can follow @vgr.
Tip: mention @twtextapp on a Twitter thread with the keyword “unroll” to get a link to it.

Latest Threads Unrolled: