38 observations

---

My previous post makes it clear that I do not think you can raise someone’s agency levels via a 1000 word blog post.

This post is my contribution to the agency industrial complex.

1. They have exceptionally clear writing.

2. They say things that allow you to connect dots in your own life.

3. They are consistently dissatisfied with the state of their work.

4. They are dissatisfied with the state of the world.

5. They will always ask the question, no matter how dumb it may make them seem.

6. They are internally disagreeable.

7. They believe that agency is an environmentally-induced trait.

8. They often keep read receipts on.

The Structure, Incentives, and Negative Externalities of “You Can Just Do Things”

---

In No One is Even Trying, Applied Divinity Studies provides three compelling examples and relevant statistics showing that high performers often succeed through basic effort rather than exceptional talent. This leads to the reader asking themselves, “Am I even trying?”

This blog post archetype is often the most popular posts from a given blogger. Some other examples include:

• Maybe you’re not Actually Trying - Cate Hall (18,159 likes, her #1 most popular blog post)
• How to be more agentic - Cate Hall (3,330 likes, her #2 most popular blog post)
• How I practice at what I do - Tyler Cowen (142 comments, compared to 41 and 61 comments for the other two posts that day)
• The unreasonable effectiveness of just showing up everyday - Kishore Nallan (his #1 most popular blog post)

Every single decently written instantiation of this blog post garners high engagement. Or maybe I’m falling into this trap:

At the risk of sounding arrogant, I wrote a decent instantiation of this type of blog post as my third post, No One is Really Working. That post went viral and is still my most popular piece by far. Without sounding even more arrogant, I knew that it would take off, even though it existed in obscurity for over 135 days. Just look at how many variations of “you can just do things” went viral on X in the past year.

The predictability of virality demonstrates that there is an underlying structure to these agency posts that can be analyzed and replicated. No One is Really Working set out to test my theory in production. It achieved virality, so either my theory is true or I just got lucky.

In this post, I first describe the structure and steps to replicate popular agency posts, then explain why these posts impose a strict negative externality on the world.

Post Structure and Incentives

Agency posts send the reader a clear message: you are capable of doing much, much more.

21 assorted thoughts on derivative levels

---

The following are an assortment of notes and observations from Why do people who get paid the most do the least?.

1. A single worker can output a product that maps to different derivative levels.

A YouTube philosopher outputs work with components on every derivative level:

• First derivative: uses existing tools to upload videos on the YouTube platform
• Second derivative: builds systems and pipelines to increase content creation velocity
• Third derivative: identifies which philosophical ideas to popularize
• Fourth derivative: changing the thoughts of the third derivative people

The shape of their output depends on their objective function.

2. Nobody likes being told what to do, especially as you move up the derivative levels.

Third derivative workers really hate being told what to do.

3. Second and third derivative workers are often very stubborn in their personal lives.

The anecdotal evidence is overwhelming. I would be very curious to see data with respect to their personal life metrics (divorce rate, life satisfaction, etc.).

4. Professional and romantic relationships across large chasms in derivative levels are difficult to navigate, often due to very different interests and values.

Third derivative work

---

In No One is Really Working, I provide possible justifications for the high salaries of early-career professionals.

This post presents a theory of "derivative levels" as a way to understand why certain roles and types of work are highly compensated.

---

Both CEOs and professors are highly compensated, with different combinations of financial and social capital, yet neither appears to do much on any given day.

Consider the average day of a CEO:

1. Wake up
2. Go to the gym
3. Go to the office
4. Get briefed by your assistant
5. Respond to some emails
6. Go to some meetings
7. Lunch
8. Sit through a strategic initiatives meeting
9. Send some emails
10. Go home

And now consider the average day of a professor:

1. Wake up
2. Drink coffee
3. Give the same lecture you've done 1000 times with nobody listening
4. Go to a research meeting
5. Lunch with other faculty you don't really like
6. Talk with graduate students about research
7. Write a grant you probably won't get
8. Go home

Everybody who isn't a CEO or professor looks at these schedules and thinks to themselves, "These people aren't doing anything", followed by "I can do that." On most days, this is probably correct. The trajectory of Chipotle would not change if I was CEO for a day. College students around the world would still get their protein slop bowls that day, and life would go on.

Some people consider this oppression: "Why do CEOs get paid more than I do, when they're writing leisurely emails and I'm digging ditches in the hot sun?" Although this might happen in a few cases like nepotism, in a competitive labor market one should not expect CEOs to get paid out of proportion to the value they add. In No One is Really Working, I offer seven explanations as to why professionals get paid high salaries to do seemingly nothing. One rationale goes as follows:

12 observations and opinions on financial markets

---

This post draws insights from a previous post: Financial Markets.

Many of these insights are well-understood by finance practitioners but are still worth re-iterating.

1. The success of an exchange is a function of the number of interesting assets available to trade and how much people want to trade on them.

Exchange success = (assets) * (volume) + (selling data)

2. The success of a brokerage is a function of how much money people deposit onto the platform and how much people want to trade on them.

Brokerage success = (assets under management) * (volume)

3. Liquidity network effects are stronger than social network effects.

Liquidity network effects enable easier price discovery when everything is in the same centralized venue. Additionally, exchanges accrue technical debt and impose increasingly higher switching costs for integrators.

User preferences are constantly changing, putting significant pressure on the social network effect of brokerages. Furthermore, regulation is designed to incite competition among brokerages.

4. Consumers are generally very well-protected and oversight is quite robust.

Exchanges and brokerages from first principles

---

The global financial system exists to price, transfer, and distribute risk. Every asset (stocks, bonds, derivatives, etc.) encodes a unique risk profile and payoff function, allowing market participants to express viewpoints.

A market is a place where people can go to trade various assets. In finance terms, markets are where buyers and sellers meet to trade assets at prices they both accept. Functioning markets match people who want something with people who have it and determine what price clears the market. Today, almost all financial assets are traded electronically.

Modern financial markets facilitate the trading of assets through order books. Order books are digital ledgers that track all pending buy and sell orders based on price-time priority. Price-time priority dictates that trades are matched based on the best available price, and if multiple orders have the same price, the earliest order by time takes priority.

Order books have bids and asks. Buy orders (bids) stack up on one side, ordered from highest to lowest price. Sell orders (asks) line up on the other, from lowest to highest. When a bid meets or exceeds an ask, the matching engine executes a trade automatically. This process repeats millions of times per day, constantly discovering the price where supply meets demand.

In the US, the market infrastructure is split into two key players: exchanges and brokerages.

Exchanges are venues that define market structure rules to facilitate the buying and selling of an asset. Trades typically occur on an order book on a server. Notable exchanges include NYSE, Nasdaq, and ICE.

Brokerages are entities that connect users to exchanges. Users submit trades to brokerages who execute trades on your behalf through exchanges.

The separation between exchanges (execution venues) and brokerages (order-originators) was the direct effect of the Securities Exchange Act of 1934. Some countries implement a similar bifurcation (Canada, United Kingdom, Australia), while others operate exchanges and brokerages as a unified entity (China, Hong Kong, Singapore).

The vast majority of crypto exchanges operate both the exchange and the brokerage, including prediction market venues such as Polymarket and Kalshi.

This post explores the primary revenue sources of exchanges and brokerages.

Path-dependency protects us from ourselves

---

The following are examples of laws and economic structures that are not incentive-compatible, yet very few people seem to care.

Florida House Arbitrage

Florida has a state law called the Homestead Exemption that enables people to declare bankruptcy while keeping their primary residence. Notable people who have leveraged this exemption include OJ Simpson and Bowie Kuhn (former MLB commissioner).

There is a long legal precedence for utilization and makes it attractive for wealthy residents to leverage preceding bankruptcy.

The rules are as follows:

1. It must be your primary residence
2. Covers all property contiguously connected
3. No dollar limit on the homestead exemption value
4. Must have owned the property for at least 1,215 days before filing. If owned for less, the exemption is capped at ~$200,000

This provides the incentive for people to buy expensive homes while taking on massive personal risk. If you know you’re about to go bankrupt in the next 5-10 years, move to Florida. If there’s even a chance that you’re going to go bankrupt, the rational strategy is to:

1. Liquidate all your assets
2. Move to Florida and buy the biggest house you can afford that you can pay off in full
3. Live there for 1,215 days
4. Towards the end, take out as much credit as you can: credit cards, personal guarantees, etc. You can probably rack up $250,000 to $500,000 in debt
5. Declare bankruptcy, keep your house. Liquidate your house after bankruptcy proceedings.

Turn $10 million in exposed assets into $10 million in protected assets, while also extracting six-figures of discharged debt.

And yet neither Florida or Texas are on the top of the list for state bankruptcies.

Save us, Sumner

---

Every so often in conversation, I’ll hear someone say:

• “People aren’t buying gas right now because the price is high.”
• “People aren’t buying houses now because interest rates are high.”
• “Everybody’s wages are rising, which causes inflation.”

Every time a statement like this is uttered, a piece of Scott Sumner dies inside.

Sumner has a famous meta-insight: “Never reason from a price change”. The principle references instances where people treat prices (outputs) as causes rather than effects. When we observe a price change, it's always the result of underlying shifts in supply, demand, or both. The price itself tells us nothing about which force is at work. Responses should target the cause, not the symptom.

If you haven’t studied economics or really thought about these issues, it’s understandable how one could fall into these traps. Ceteris paribus, you typically buy less of something when the price is high and more of something when the price is low. But prices here are the effect, not the cause.

But it’s not just the random layperson making these mistakes. Sumner cites famous, well-seasoned economists making these errors:

• Robert Shiller viewing low real interest rates as an incentive for investment
• Larry Summers equating low interest rates with easy monetary policy

The correct interpretation of each statement is:

“People aren’t buying gas right now because the price is high.”

Markets operate via supply and demand. Consider the most basic Econ 101 graph: