Author: Peter Freilinger

I was speaking to some old colleagues not long ago about hedge funds, in the context of how many fund managers had fallen for the siren song of “investing” in crypto and, given the open nature of their fund mandates (which can in many ways be boiled down to “make money in ways that aren’t boring so investors feel justified paying higher fees than in a mutual fund”), there were effectively no brakes on them piling in. One lamented the fact that he had never been given the opportunity to have such an open investment policy; he had been an equity fund manager and was limited to buying public common stock, listed on major exchanges, with limits as to single name concentration and industry concentrations and minimum holding periods. Another guy (alas, we were all men) talked about how fixed income was quite different: sure, you could take credit bets here and there, but ultimately, the general level and shape of the yield curve drove your returns, and since the Fed was essentially “the house” and could whipsaw the curve at will, he felt like his decisions were always just different shades of lipstick on the proverbial pig.

I took a somewhat different stance. I’ve never run a full-bore hedge fund, but back when I started my career, I had a somewhat hybrid experience of running a general purpose arbitrage fund. The mandate was to beat the return of money market funds, with the same risk profile (ie., effectively none). But there were no real constraints on what we could do in pursuit of that goal. A core strategy, for example, was futures arbitrage: we bought the underlying stocks or bonds of a given futures contract and shorted the futures against it – or at least, we did so when the market implied a carry rate on the contract in excess of regular money market returns. As long as we held on to the underlying and delivered into expiration of the futures, we had a “guaranteed” return – although I was taught, both formally and by experience, that the guarantee required holding the position to maturity, required confidence that the underlying you had bought was, in fact, properly deliverable, that your futures broker didn’t go under during the life of the contract, and that you and your management had full faith and confidence in the Chicago clearinghouses to make good on the contracts at expiry.

What I explained to my friends, though, was that it was the constraints – the career maintenance requirement that at no time would I lose money relative to just buying and rolling overnight time deposits – that made the job incredibly fun. I was supposed to find what in markets should be imaginary creatures – riskless performance superior to the performance of a riskless asset – and do so with billions of dollars, over and over again. And for seven years, I did it. Indeed, what eventually ended that halcyon period was being given the reins of a higher risk fund, which by definition would take bigger risks and would thus theoretically potentially have losses in excess of that theoretical money market fund comparator. I took bigger risks; I lost a bit of returns; and it turned out that management didn’t really buy into the idea that losses were okay and I found it expedient to look for employment elsewhere.

Subsequently to that, I managed bank balance sheets, and having brought the experience of that first career stint with me, I took pains to understand exactly what the constraints were – in other words, what losses were acceptable and what losses were not. I quickly realised that banks, in managing their balance sheets, don’t worry so much about whether a single investment loses money, especially due to changes in rates. They worry about the net gain or loss between what the bank is earning on its assets and what it pays on its liabilities. My job was to balance those two with the broader objective of increasing the net return over time. The constraints, moreover, were orders of magnitude more complex that what investment managers face in the “regular” funds world. I was using maybe 20% of the balance sheet to augment and diversify the other 80% of the assets – mortgages, credit card loans, lines of credit – and was trying to raise about 50% of the balance sheet in institutional funding markets while keeping a strong eye on what the deposit people were doing to bring in customer funds. When times were good, it felt like ice skating blindfolded on good smooth ice, but you always knew the ice might start getting chewed up – and you were never sure how thick the ice was and whether it would hold your weight if you fell down. I loved it, but to be sure, the ice broke more than once.

I’ve thought about this quite a lot recently, though not so much for what I do – I consult with banks on how to manage their balance sheet, but I’m no longer doing the skating, and I manage a small hedge fund, but it’s simpler conceptually than any investing I’ve ever done, even if what I’m buying and selling is intricate and complex to value and trade. Where it’s come into my thinking has been in thinking of the Fed and how it’s managing the money markets these days.

It should be noted that every bank treasurer I’ve ever met who’s worth his or her salt ultimately wants to be either a Fed governor, ideally the Chair, or running the open market operations desk for the New York Fed, essentially the head of portfolio management for the largest and most significant bank balance sheet on earth. I’m no different; that latter job, in New York, from an investor perspective is actually a bit boring – the market knows how you need to trade before you do – but it’s the interaction with the market, and the influence of being the go-to person for the rest of the Fed on the constant question of “so what’s the market really thinking about us?”. My fellow traveler here on the site, Mark, once served in that role for the Bank of England on their short term money desk – admittedly a bit of a junior currency regime relative to the US dollar system, but still, a part of me will always be green with envy that he had that desk for a period of time. I think often about what I would be doing today, at 9am on a Wednesday in February 2023, if I were sat at the screens in lower Manhattan instead of in front of my laptop on holiday in the Hamptons.

The Fed doesn’t just operate the largest single balance sheet on earth; it also sets the price of overnight money for the rest of the US dollar banking system. It is, after all, both the marginal buyer and seller of dollars to all other parts of the market – either directly, through its discounting and repo operations with banks and primary dealers in the US Treasury markets, or indirectly, as the rest of the market ultimately transacts with those banks and dealers and their capacity is set by what the Fed demands of them or they demand of the Fed. But in operating the rest of the balance sheet – funded by deposits from member banks, by currency outstanding, and by excess government balances – it creates ongoing indirect impacts on the demand for money and, thus, for the stability of the rate which it sets on money. If the balance sheet gets too big, the Fed can inadvertently distort the long term price of money, which then creates pressures on the short term demand for money depending on how they set the overnight rate. If the balance sheet gets too small, banks may be forced to place excess deposits in riskier assets, which can result in inflationary pressures which ultimately may require an increase in the short term rate, which in turn can stifle economic growth.

And the Fed has two missions. The first – to maintain long term stability in the value of US dollars – gets the most press, or at least it does for me because I’ve lived in the financial markets for going on thirty years now. The second, though – to enable monetary conditions consistent with the maintenance of full employment in the US economy – is the real kicker. Those objectives aren’t always in alignment, even if over the long run, there’s good reason to believe that economic systems engender optimal employment conditions when price stability is maintained. In the short run, however, Fed governors get appointed, confirmed, reappointed, and retire; in the short run, there are elections of the presidents who choose the governors and of the senators who confirm them; in the short run, the financial and popular press (and in today’s world, social media) interpret for the voters whether there is or is not alignment and regularly tell the Fed just what they think of the balancing act. If, back in the day of running a short-term arbitrage fund, I was ice skating blindfolded, then the Fed (and its system manager) ice skates blindfolded, with a rhino strapped to their back, as the warm springtime sunshine is starting to melt the ice.

Twelve months ago, as inflation started to spiral upwards, plenty of commentators (and politicians) blamed the Fed for “waiting too long” to rein in inflationary pressures in the monetary system as the economy returned to normal after COVID lockdowns and as the cumulative impact of $5 trillion in fiscal stimulus started hitting the economy with full force. Such criticism was ridiculous: most of the nattering nabobs of the publishing classes found it convenient to forget that there had been quite recently a pandemic which resulted in the largest two-quarter decline in GDP in history; anything the Fed would have done would have been at least somewhat wrong, and to have gotten it “wrong” in a way which maintained broad employment stability should have been cause for celebration, not whinging. But even beyond that, the short term blinders which focused on “inflation surging higher” ignored the prior decade of below target inflation, which had led the Fed to attempt monetary stimulus that led to the disruptive asset bubbles in real estate and other long-term assets which were beginning to harm household balance sheets. If anything, it was to the good that the Fed let inflation run up a bit – especially since the resulting sectoral decline in real and financial asset prices which we’re still observing is doing much to normalise wealth imbalances in the US domestic economy.

Now, with unemployment at historical lows – so low, in fact, that wage pressures continue to build – and with inflation still running well above historical averages, let alone its own target, the Fed is being criticised for potentially “overshooting” on rate hikes. Or worse yet: some observers believe the Fed will be “forced” to engender a recession in the US in order to get to the long-term target inflation level of 2%, with a number of articles in the past couple of weeks suggesting that the Fed should do away with the 2% target and allow inflation to run higher, longer, so as to ensure no job losses.

This all serves to remind me of that first job I had, running derivatives arbitrage strategies. There was one objective, well understood: beat the returns on overnight deposits. There was one iron clad constraint: don’t lose money, ever. That meant the returns were rarely stellar, but management also didn’t have to ever go back to investors and explain a loss. Then I was given what in theory was a “more fun” job: beat returns on overnight deposits by a lot – clear enough – but the constraint got squirrelly. It wasn’t “don’t lose money, ever”; rather it was “try not to lose money, but you’ll only know that a loss was too big after the fact”. That second job sucked.

At the banks I managed as treasurer, the objectives were actually quite tricky: some mix of meeting risk targets, “optimising” net interest margin, maintaining adequate ready liquidity, but the constraint was back to iron clad: always make sure your capital levels exceeded minimums with a cushion, and always have enough cash to pay the bank’s obligations on demand. I love that world of hard constraints – even if they are multi-dimensional, even if they sometimes were contradictory. The lack of ironclad objectives meant that there was always room for someone – a head of commercial lending, say, who thought they were being charged too much to fund their loans – to complain about how well I was doing my job, but with hard constraints to fall back on, I could find a way to navigate the bank with firm knowledge of, as it were, where the ice was getting thin.

The Fed has its constraints, loosely worded as they are, and the very size of the Fed and of the US dollar economy at which it stands at the centre mean by definition the job of managing their balance sheet is impossible to get right. Indeed, as the press reminds us (in particular with its own lack of memory), if you get it right in one period, it’s assumed you’ve planted the seeds of failure in the following one. Managing with such background noise as that must be intensely stressful, but the Fed’s governors have done an admirable job, and show no signs of cracking or falling prey to obvious mistakes. And arguably, they’ve done better than most other central banks – Japan, Canada, UK, the EU – despite the external noise, and despite being the obvious magnet for global monetary criticism. I think, though, it’s the fact of their constraints that enables such success.

Hedge fund managers often seem like the ubermenschen of the capital markets. The press avidly tracks their yacht and real estate purchases, and hangs on their pronouncements, whether it be on corporate governance or management style or talent selection. But in reality, most hedge funds die and fold quietly, and for every Citadel, there’s a dozen crypto and meme fund blowups. On the other side of the coin, the constraints we place on banks, on money market funds, and on our central bank are the unspoken key to their long term sustainability and success.

As we think about what may be required to face larger global challenges – global warming, for example, regardless of what you think its origins may be, or pollution control, or demographic changes – it’s worth reminding ourselves that the constraints are what bring out the most creativity and, ultimately, the most consistent success. We might miss out on the next upside trade, but knowing how to skate the thin ice is what will keep us alive.

Three years ago, my son’s godfather and I built a series of plywood and garbage 2″x4″ tables in my basement. My son’s godfather is a big model train guy – “there’s no scale like O scale” – and he and I have purchased quite a lot of track, rolling stock, and scenery for my son’s benefit over the years. I say for my son’s benefit but obviously, we’re buying stuff because we like it, and we’re hoping beyond hope that he’ll inherit our hobby, or obsession, or what we convince ourselves is a happy and healthy addiction, unlike our unhealthy addictions which are well known and need no restatement.

However, three or four months ago, my son started asking for Lego “modular” buildings, which are designed to be connected to one another to create Lego town landscapes. As a member of my town’s long range planning committee, I love this: he seems to intuitively understand that creating a coherent and lively, dense and connected townscape is one way that we get to celebrate the concept of community – far more than what Scarborough does in its personality-free high speed Route One and Payne Road corridors. My son in his Lego aspirations is showing a desire to be a part of a quietly and humanised urban landscape, with bookstores, Grand Emporium legacy department stores, boutique hotels, town halls, and police stations. And even a few suburban homes scaled in line with the town – and all located by a train station of our own, shared design, including a frequent traveler lounge (hanging out with his father through O’Hare and Newark and Sea-Tac has made the boy a keen observer of airline business class amenities) and a depersonalised train ticket dispenser which obviates the need for a local ticket office agent.

At a certain point in late November, the boy asked to put together the Lego town in place of the O Scale Lionel train layout. I was torn, because the model train stuff was a connection to the early 20th century that would be severed for my son, and I really want him to be as excited about that sort of thing as I am. But as I thought about it, he’s already there: he knows more about World War II than his teachers and his school mates, and if I’m honest, he knows more about pre-Civil War western US expansion than I remember from my undergraduate American history education at Harvard. He’s not rejecting anything: he’s trying to create something new of his own. And swallowing hard – and not telling his godfather in Massachusetts who loves O Scale more than he loves New Haven thin crust pizza – we destroyed the model railroad layout and started building the Lego town, complete with Lego trains but far more focused on the buildings, the minifigures, the road plates. We casually destroyed one world in order to create a new one based on a very different scale and purpose.

Two weeks ago, my son did roughly the same thing. We have what is called a Minecraft “realm”, which is an online world scape that I pay $6 a month for that enables the boy and his friends to build and create all sorts of stuff on line that, to me, has no meaning whatsoever, because video games are just about as meaningful to me as bitcoin, which readers of this blog will realise is to say, absolutely nothing. My son was getting a little annoyed at his friends’ creations – five other boys have access to the “realm”, three of which are particularly active but the other two boys have retained the right to come into the realm and be pests when they’re bored – so he reset the realm. Basically, he wiped it clean, much as we had wiped the plywood tables clean in the basement. The other boys still had access, and could still build whatever they wanted – but now on a new, clean tabula rasa.

The other boys descended into a kind of ten year old DefCon Five with a speed which should make anyone familiar with geopolitical conflict recoil in terror.

One boy threatened to hit my son in the face on the next day. Another cut him off from texting access. A third – frankly I’m not sure whether to be impressed or terrified – programmed an online bot to send my son text messages saying “Fuck you” every thirty seconds, and then told my son he would hack his school email account and use it to send bad messages to everyone at school.

My son did almost everything right – he let his parents know what was going on, he let his teachers know what was going on – and his parents intervened with alacrity but also with cool nerves. Other parents were informed, and on discovering their sons’ misbehaviour did all the right things. On discovering that the source of the civil unrest was the boy’s cavalier destruction of the realm, we realised that we hadn’t talked to him about stewardship – he was, in essence, the curator and protector of a creative sandbox which five other kids were using to explore their own creativity – and we hadn’t talked to him about the consequences of simply killing that world on a whim. He’s… well, I’m not sure he fully gets that yet, but on a certain level, understanding the power of global destruction is a lot for a kid who will turn eleven in early May. To the extent he’s absorbing any of this lesson is a huge step in his moral development; to the extent his friends are dialing back their own reactions and realising “wait, this is only digits in the cloud” is also a major step forward in their moral development as 21st century citizens. This whole episode, in other words, is going to create better adults out of this collection of five boys, united only by living in the same town in southern Maine, with parents who are both confused by the technology in which they live and at the same time are willing to open cans of whoop ass as appropriate when their kids text “Fuck you” to other kids.

But it does strike me that there is a creative element in human imagination which can be dangerous. The same instinct within us which drives us to paint, to sculpt, to write, to create, is at the root of the instinct to destroy. Not, per se, to destroy other people – our artistic impulse doesn’t motivate the Holocaust by any means. But our capacity to create makes it easy for us to destroy that which we have created without, really, feeling any obligation. I painted what I think is a very nice landscape painting of the Alberta foothills north of Calgary, which is now in the back of my car and, frankly, if it shatters in the -25C cold this evening and dissolves into atoms, I won’t really care about. But that unconcern also informs my feelings about four other paintings in the car – three by the ex-girlfriend, one by the boy – that also are as at risk to cold-driven destruction. In my mind, though, their continued existence or immediate destruction are both, well, “meh” events.

The boy and the ex-girlfriend might feel differently, though, just as the boy’s friends had a very different perspective on the instantaneous destruction of their Minecraft realm creations when my son hit “return” when asked “Are you sure?” by a dialog box a couple of weeks ago. I’m not arguing that our creations should be eternal: far from it. But we create all too easily, and we destroy even more readily than that. Yes, in most cases we create things that aren’t that good – my Alberta landscape is less than amateurish, it’s frankly just crap – but the ease with which we create and then can destroy leads to an impulse to destroy which really, frankly, isn’t healthy. It gives us a sense of power, that we can create, destroy, and create again – a sense that infuses our being from the earliest ages of awareness – which is at odds with the finite nature of our lives, of our existence in nature, of our experience of time and of being.

The O Scale railroad layout, fortunately, remains simply a deconstructed potential – it’s all made of plastic and copper, and has been put away neatly in cabinets, awaiting the construction of new, alternate plywood tables on which it can be created anew. The Lego sets, made of seemingly eternal hardcore plastic, can be taken apart and reconstructed at will, with enough patience and given that we’ve saved all the instruction manuals in a plastic storage crate in a corner of the boy’s room. As adults, though, we build, destroy, forget, and ignore the costs, all because the act of creation – and its mirror image acts of destruction – are all to easy to learn, back when we were children.

Ironically, then, my son’s deletion of the Minecraft realm taught a much more powerful lesson than the worlds of 19th and 20th century children with their playthings: when he hit yes to the question “Are you sure?”, the destruction was permanent. We can’t recall it – indeed, I called Microsoft; the boy really did permanently destroy the realm. His friends acted, therefore, quite rationally in their despair and confusion. The lesson is really for the adults: we destroy at our peril, and we can’t get it back when we say yes to “Are you sure?”

The paintings in the car – both the lousy landscape by my hand, the more practiced works by the ex-girlfriend that she abandoned years ago, and the nostalgic doodlings of the boy from back when he was four years old in a tiny apartment in Seattle – may not survive tonight. But if they do, I’ll make sure to preserve the son’s childish attempts at representing trains. And when I let my own work, or that of the ex-girlfriend, shatter in the February arctic cold, I’ll at least pause and reflect and think about the fact that destruction means at least as much as the act of artistic creation.

Stay warm, folks.

We live in a global world, whether most people acknowledge it or not. Even the states which reject it – North Korea, China in its more silly moments, Bhutan until recently – reject a globalised structure which, in their rejection, they acknowledge the universal reality. But as we slowly dismantle the liberal arts – not just those of the Western Enlightenment, but those of Confucian tradition, or of the Vedic sagas, or the stone inscriptions of the Mayans – we run the risk of forgetting that this global world is still new, and indeed, is not consistent in what it is to be global.

It is in this spirit that I wish to challenge Olúfẹ́mi Táíwò, a professor at Cornell University, who recently wrote a piece in Aeon.co rejecting the idea of “pre-colonial” Africa. On the one hand, I understand what he’s talking about: he’s rejecting a historiographical tradition which privileges Western concepts of history – of primary sources in written form, of histories primarily of organized states or their equivalent, and in dealing with non-Western societies, in particular only their engagement with the West as being worthy of the concept of “history” at all. I’m not sure that’s worth argument: he’s right, that’s lousy historiography, but we’re not arguing with Hegel anymore. Hegel’s conception of racial identity has been dead for a long time, and using him as a straw man is child’s play, and I don’t think Taiwo is engaging in child’s play. However, the idea of a pre- and post-“history” is an important one, especially as we sit in 2023 looking at our imperfect and clearly incomplete global project as a human species.

It may be important first off to emphasise what I mean by “globalisation.” It’s not the interconnection of nation-state economies via increasingly all-inclusive trade agreements like GATT. It’s also not the increasingly unavoidable influence of social and media constructs across national, cultural, and linguistic borders: the universality of Disney and BBC and K-Pop and Latin American magical realism. Globalisation, rather, is the seemingly inexorable trend towards the human species being fungible across the surface of our planet. That process has been accelerated of late – by things like electronic media, and increasingly safe and easy transoceanic and transcontinental travel and trade – but it’s been going on for longer than our supposedly historical sources can remember.

It started through some sort of a diaspora which we only really can uncover today via mitochondrial RNA evidence found in ancient tombs or, more regularly, just ancient corpses who show up randomly. Hominids exploded out of Africa in multiple pulses over hundreds of thousands of years, and because of climate changes, varying levels of social organisation and curiosity, and who knows what else, modern Homo sapiens developed and settled in more or less isolated groups, isolated enough to develop unique and mutually incomprehensible language groups and folkways, with enough tenacity and wanderlust to populate every arable corner of the planet no matter how tenuously arable, and with enough sheer stubbornness to stick it out, everywhere.

We have no real knowledge of how long that took; it seems like the last bits of the New World in Patagonia were probably settled, or at least discovered, around 4000 years ago – the last bit of footwork, as it were – and the islands of the Pacific were finally taken over within the last 800 years. But the fits and starts in between, well, we’re pretty unsure. And the ebbs and flows in regional and local contexts are even more mysterious: to the early humans who lived in a valley, or ranged over what they thought of as “their” steppe, surely every encounter with another group was fraught.

Sometimes, it was simply a matter of moving into a new area which had been recently vacated; many of the non-Latinate Indo-European tribes who moved into Northern Europe merely displaced the waning elements of Rome, for example. In other cases, genocide did the trick: Mongols displacing the late classical Scythians and Bactrians. And sometimes it was a mix of both: the Aryans, the Greeks, and the Mongols represented waves of peoples who invaded, but ultimately intermixed and blended into, the world of South Asia.

But it’s somewhat hard to dispute that by the Axial Age – around 2400 years ago all over, in the river basins of East Asia, the isolated peninsula of modern India, Pakistan, and Sri Lanka, Fernand Braudel’s greater Mediterranea, and the three distinct regions the New World, North, Meso, and South America, if you’ll excuse the anachronism of calling it by the name of a 16th century Italian guy; and the three African core kingdoms of the West, Ethiopian, and Great Lakes – the world had sort of settled into segregated cauldrons of humanity that only very, very peripherally knew of one another’s existence. Was there contact? Yes, sort of, but it was rare and strange enough to be in the realm of magic and myth, of the “there be dragons” kind of legend even as coins and spices and the occasional slave was shifted across the sands or seas or mountains that separated these cauldrons of human development.

I use that term deliberately: these areas were isolated cauldrons and human development was taking place in all dimensions: social, moral, ethical, military, technological, whatever. They were hotbeds, moving forward the potential of what it was to be “human” in the way that complex, isolated systems anywhere play out the evolutionary potential of said system. Their isolation – which lasted in all cases for centuries or, more relevantly, for scores of generations – allowed social and ecological absurdities to play them selves out to exhaustion, and also to play themselves into a kind of local optimisation. The sense of regret we now experience for the disapperance of those local optimisations – whether Renaissance era European notions of beauty, or Song Dynasty notions of beauty, or Poiynesian conceptions of celestial navigation – sing to the idea that we, as generalised human beings, can still recognise that perfection can have been achieved locally even if it failed to be transmitted globally.

And that, indeed, is the real revolution we’ve experienced as a species in the last millennium. Starting with the first basic navigational revolutions of what to the West was the late Middle Ages (and to the Chinese was the Song Dynasty, and to the real originators was the Mamluk Sultanate), the peoples of Eurasia slowly eroded their cauldrons, and gradually became aware of one another. Words were exchanged, goods, eventually peoples; with the technology of sail it accelerated, and the contemporary revolution of moveable type accelerated it even more, on different dimensions.

The New World and Africa lagged in this bubbling over of the cauldrons, purely because of transportation issues. Until long-distance over-the-horizon sailing became reliable, sub-Saharan Africa, the New World, and even Japan were far more isolated from the other cauldrons than, say Europe or India or the Far East. And so Eurasia became our reference point – by the time of the real wall-tearing-down events of the 15th and 16th centuries, Eurasian globalisation was already self-referential.

So then the Columbian Exchange happened: a massive trade of humanity, culture, art, wealth, disease. Perhaps the purest anthropological cliff event in human history, recognising that by the time Austalasia and New Zealand were settled, the pathology of most human disease was widely distributed in the genomes of the people who made the rough sea journeys to get there. The New World’s intersection with a global humanity is defined not by a colonial event but by a holocaust. A group of people in the Western Hemisphere, isolated for hundreds of generations, had fewer deadly pathogens to which they were immune compared to the Petri dishes of people coming from the Eastern Hemisphere (which, even if only the Europeans were the initial contacts, were already a homogenous global sub-species with shared immunities).

Compare this with Africa: the equivalent of the Columbian Exchange was decisively against the Eurasians in terms of disease and immunity, even if the advantage of technology and tools were decisively in favor of the Eurasians. That is to say, the boundary event of globalisation for Africa – the historical century or so where they were both forcibly, gradually, and violently introduced to a global human experience – is both distinct, and unique. And therefore worthy of study – just as the Columbian Exchange is worthy of study, and just as the late classical / early medieval / Song / Mamluk / Mongol event is worthy of study.

Which is to say, Taiwo is correct rhetorically – this is not pre-colonial or post-colonial as an event, and to speak in terms of colonialism incorrectly privileges a subsequent political event, the subjection of African societies by European military powers, over and above the really interesting anthropological event, the final tearing down of the pre-modern barriers between regionalised peoples. But he’s wrong to think that something didn’t really happen here, and that isn’t worth an independent – and yet also cross-cultural – exploration. The pots and kettles that, for millennia, bubbled up the dominating and yet essentially irrational social mores and folkways of human society really did exist, and over a shockingly short period of centuries, the lids came off and the stew of humanity boiled into the strange (and often distasteful) brew of our 21st century experience. When, and how, and why those pots boiled over is an essential topic for human exploration. Admittedly, it should be examined from every perspective – not just that of some white guys on the western edge of Eurasia who had a slight edge in small group organisation and firepower. But understanding how those guys got the edge, even as all of humanity plunged into a truly new world order of constant and unstoppable intermixing, and how and what happened when others got sucked into the fray, is surely central to how we can understand who were are today and where we might go in the future, for good or for ill.

Professor Taiwo wrote a phenomenal thought piece; I hope he can see, as he reflects on it, that in eliminating a colonial foundation, it is essential to lose the mystery of what happened when the barriers between an isolated Africa and the rest of the world – whether it be Eurasia or the New World – came down. The emergence of colonialism and imperialism are of separate interest, and if only for the moral damage they caused, demand further critical examination – but the real question is why Africa, and the New World, and India, and Han China, and Japan, and Europe, remained separate for as long as they did, remained independent and isolated cauldrons for as long as they did, and what caused them to spill and to create the messy global world in which we live in 2023.

In a perfect world, the game coming up on Wednesday would be played in the Free French garrison in Brazzaville – but we’ll have to settle for Bayt Stadium in Qatar.

Morocco was one of the holdouts in the imperialist game; it only lost its independence in 1912 when the Germans spooked the other European powers and led to its carving up as a “protectorate” (what a farcical term) of France, losing its southern areas to Spain. If you’ve not been to Morocco, you’re missing out; the food is good-ish – way too sweet for my palate – but the tea is amazing, and the people are just fun. Some of them even drink, which is a plus.

But in the last week, Morocco’s young soccer team has defeated the Spanish side, and to complete the Iberian humiliation, today beat Portugal.

Becoming the first African team to make the semifinals of the World Cup.

Facing off against France on Tuesday.

Its highly cynical, highly egotistical, and underrated as a racist post-colonial power former imperial overlord, France.

The ones who folded like a cheap deck of cards to the Nazis, making Casablanca – the neutral port, the haven of resistance, and most importantly the inspiration for the movie, possible.

The French.

Again, one always hopes for the best possible settings for when those who have been wronged get a chance to show up those who have done the wrong. My son’s friend wasn’t allowed to go to court yesterday to testify against his father, who beats him as a course of being, and because of that silence he’s still at risk, but I long for him to have his day in a proper court, to say what needs to be said. It would be better if the game on Wednesday were in Brazzaville for the young men of the Morocco team – to beat their former oppressors on African soil – but I have no doubt they’ll speak up solidly in a small autocracy in the Arabian Gulf next week.

I don’t think it takes much imagination to guess which team Rick, and Ilsa, and Sam – and yes, even Louis, despite his police loyalties – would be pulling for.

Round up the usual suspects, and let’s watch some footie next week.

One of Gertrude Stein’s most famous quotes – and she has many of them – is about Oakland, the other city by the bay in Northern California. She was born outside of Pittsburgh, but her father – wealthy and well-connected – moved the family to Oakland so he could run streetcar rail companies. Asked later about being from Oakland, she said in essence, why should I say I’m from there, because there is no there there.

The quote came to me vividly while listening to the pundit class – and many of my friends – talk about the collapse of FTX recently. What occurred to me is that all of the conversations have, at their core, a fundamental belief that there is something real, something something, at the core of cryptocurrencies. But there isn’t, and the more people behave as though there is, the more glaring the absence becomes.

Oakland, by the way, was always a town in search of a purpose. The problem, really, was that San Francisco was so perfectly situated for a pre-railroad era: a narrow peninsula that guarded the best anchorage on the west coast of a continent. As long as sail and steam ships were the supreme ways of communicating with the outside world – say, the way Santiago, Chile or Lima, Peru lived – then San Francisco was self-sufficient, even after gold was discovered at Sutters Mill. But then the world changed, railroads trumped all, and San Francisco was a pain in the ass: it was stuck on a narrow and difficult to access peninsula for iron horses. And so Oakland was invented: a convenient end point to the eastern rails, with decent (if not perfect) harbours, and a good spot to send ferries to the real place anyone really cared about, San Francisco.

Cryptocurrencies – we’ll call them “crypto” because it’s a pain in the ass to type the whole word – are much the same as Oakland. The real destination already exists: it’s called “the real economy”, which uses dollars and euros and pound sterling and yen. It’s the economy that most of the readers of The Essence of Water will recognise as “their economy”: a world where we trust contracts, and therefore trust the money denominator of those contracts, and on the basis of that trust, we innovate things like new semiconductors, and new derivative contracts, and new craft beers, and new brands, and new electric vehicles, and so on and so forth. What enables all of this clever innovation – some of which is real, some of which is just silly human imagination – is trust, not so much in the currency we use but in the social underpinnings of everything we use, namely contracts, agreements, and because of that, yes, the currency we use to denominate those contracts and agreements.

In the nineteenth century, contracts existed but if you wrote one in San Francisco – say, at the Carlton Hotel – you’d be hard pressed to know whether it would be honoured in Pittsburgh, which is where Gertrude Stein was born. Ideally you’d find some way to guarantee the contract – say, with gold, held in escrow by a trustworthy law firm in San Francisco or in Pittsburgh, who had a correspondent in the other city that could be used to vouch for the guarantee. In other words, you probably wouldn’t have trusted dollars back in the day – you would have trusted something else, but that something else wasn’t really what you trusted. You trusted the agents: law firms, banks, the Wells Fargo Company, or once the wires were up, the Western Union Telegraph. At no point did you really trust the units – those were just temporary proxies. What you trusted were the agents.

Today, you trust your bank, which is a lot like living in San Francisco back in the day. You probably have money back east, but you also have trusted agents – indeed, trusted agents make up much of your life, because you live remotely from the main sources of value exchange and creation. You and I don’t live closely to how value is defined – and, interestingly, no one does; value is defined in money markets whose only participants are insanely, incomprehensibly large institutions who exchange billions every minute and on the basis of those exchanges is how value is defined. We all live in San Francisco: a place where we depend on agents, on whom we trust – and against whom we hold contracts which protect us – to preserve and hold our value, even as the define it in their activity as banks, as brokers, as speculators on their own behalf even as they trade on our behalf.

In our brave new world of crypto, though, we give you an option of living in Oakland: a place where value only exists with relation to San Francisco, but isn’t really San Francisco at all. You can trust your agents – who, by the way, will only accept payment in the currency of Pittsburgh and San Francisco and, more importantly, Washington DC, to whom we all owe the burden of tax assessments – or alternatively, you can try your luck in Oakland’s currency, which is variously dollars, or community bank notes, or bad whiskey, or gold dust. Not so different from Tether – community bank notes, as it were – or Solana -bad whiskey – or gold dust – which, interestingly is the same thing as it always was, gold dust.

Crypto is a means of redefining society, where trust among agents and the power of enforcing agreements among them and us, to be on the basis of a fundamental lack of trust. Where the railroad ends, in other words, is where we fight and wrestle to redefine value which was obvious on the New York end of the iron trail. If you think trust is wrong, if you think trust is impossible, by all means, go to Oakland. There is no there there. There is nothing there. No trust, and by no means is there value. But crypto lives there and is traded actively. If you wish to turn your back on trust, on civil society, by all means, take the ferry. See you in Oakland. But if you want to enjoy the promise of a future, of a place which not only looks out towards the future represented by the Pacific horizon but also imagines new horizons on our shores, might I suggest you head to San Francisco. And keep your bank account denominated in the currency of the continent, which trusts Pittsburgh as much as anywhere else.