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Balaji Profile picture
@balajis
Dec 26, 2021 • 7 tweets • 5 min read • Read on X
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How to limit volatility?

In web2, load balancers[1] improve worst case latency at the cost of a little guaranteed latency

In web3, collars[2] improve worst case financial expense at the cost of a little guaranteed expense

[1] cloudflare.com/learning/perfo…
[2] investopedia.com/articles/activ…
If you plot a histogram of latency before and after the introduction of a load balancer, you'll often find that average latency gets a bit worse (as you need to do two hops: load balancer and then server), but worst case latency gets way better.

Often an acceptable tradeoff.
Similarly, if you plot a histogram of expected financial profit before & after buying a collar, you'll find that the average profit gets a bit worse (due to the cost of the collar) but worst case profit gets way better.

Also often an acceptable tradeoff.
investopedia.com/articles/activ…
Bitcoin ushered in the possibility of truly free markets, fully decentralized, high risk & high reward.

Often, however, thesis and antithesis form a synthesis. The success of stablecoins show how valuable volatility reduction can be in some contexts.
stablecoinstats.com
In web2, the financial plumbing[1] that makes things possible is hidden from users. The volatility is hidden, as is the cost in privacy.

In web3, that financial plumbing is made more transparent. The volatility is visible, as is the cost in coins.
[1] adbutler.com/blog/article/w…
Think about ads: how often do you click? And how often do you actually buy? Rarely, right?

That means conversions are rare events. Rarity means high financial variance. Giant web2 companies can buffer this variance, this volatility, so it's not visible.

Oh, but it exists.
This thread prompted in part by @levie's thoughtful comments.

In short, I recognize that we do need tools to control the visible financial volatility of web3's coins.

But I want to note that this is in some ways better than the *invisible* financial volatility of web2's ads.

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More from @balajis

Balaji Profile picture
Feb 28
Everyone invoking principles needs to understand it’s all tribal.

Democrats were for pushing Starlink to help with Biden’s military, but against pushing Anthropic to help with Trump’s military.

Anthropic is for copying data when it trains their models, and against when it comes to Chinese distillation attacks on their models.

Republicans were against state power when Democrats were using it to make everything woke, and for state power when Republicans are using it for MAGA.

I mean, duh! This is all completely rational. It is as rational as being for a gun that’s in your hands, and against a gun that’s pointed in your face.

That said, recognizing tribal reality doesn’t mean being against cooperation, or even against principles.

You can cooperate within tribes. And you can even cooperate between tribes. You just have to understand what tribe you’re in and what tribe you’re dealing with.

You can also have principles. But recognize that the only principles that survive natural selection are those that generate collective strength for a tribe over time.

Once you know your tribe, and you know their tribe, and your principles, and their principles…you can propose a true win/win deal that satisfies both tribes’ interests.

Just don’t imagine that their tribe will foolishly agree to unilaterally lose because of your tribe’s (selectively invoked!) principle.

Because if following the rule leads them to lose, what use is the rule?Image
Americans don’t naturally think tribally, till recently. Why?

Well, Democrats presumed everyone shared their universalist ideology, the tribe of those who pretend to have no tribe.

Republicans meanwhile were used to an effortlessly dominant global empire, and not used to brooking any real resistance.

And within tech, there was a big AI vs crypto split. Crypto thinks tribally, naturally. That’s what crypto tribalism is.

But AI tech guys were highly enriched for being politically naive. Remember: they continued building, heads down, in the SF Bay Area, even after COVID and BLM and the like, because they believed the center-left postwar consensus would return. That the pendulum would swing back, that this too will pass, and so on.

That admirable-yet-naive faith in the continued stability of America is what led them to build what they did, where they did, as the sort of last amazing contribution that Silicon Valley would make to the world before its lights went out forever.

Now the political conflict, the wealth taxes, and the attacks on datacenters and tech founders themselves is ramping up. AI is learning what crypto has always known — namely that the digital is political, and that there is just no escaping the dialectic of network and state.

So: assume Silicon Valley as a geographical place is going to zero because it just isn’t set up to simultaneously take on Democrats, Republicans, and China. Assume it radiates out into a thousand startup cities around the world. And focus instead on the decentralized, intrinsically tribal Internet.
First, there is no moderate majority. Every graph shows escalating polarization, to the point of what Democrats are now calling “soft secession.”

Second, there is no “American” — only Blue American, Red American, Tech American, and countless fragmenting sub-tribes.

Third, Blue Americans like Newsom, Walz, and Mamdani are actually fine allying with China, because they need Xi if they don’t have DC. Carney’s Chinese Canada shows the way.

See: balajis.com/p/only-newsom-…Image
Read 4 tweets
Balaji Profile picture
Feb 26
This is the first AI cut.
And it will send shockwaves.

Remember: Jack is one of the greatest founders of all time. He created this platform that we’re all on, and has been early to many technological shifts. And Block was doing very well as a business.

So, for him to cut 40% of headcount in this way is a signal to everyone in tech: get good now. Become indispensable. Work nights and weekends. Learn the AI tools and raise your game. Or you might not make the cut, as an employee or as a company.

I know. That sucks. But capitalism is natural selection. The market is unforgiving, because you are the market. After all, it’s not like you’re buying some random gallon of milk from the store; you’re always buying the best product at the best price.

So too for apps: your customers are always installing the best piece of code they can get. And because AI is going to create new winners, if you aren’t the best in your market, someone may become better with AI. Particularly with the new agentic workflows.

To be clear: Block’s severance is generous by any measure. 20 weeks of pay, six months of health insurance and vested equity, all of that goes far beyond any typical package. Jack did his level best to cushion the disruption. The laid off are a temporarily unfortunate class, as opposed to a permanent underclass.

But had he not leaned into the AI transition, he might have had to lay off more people, slowly, and over time, as faster competitors went after his market share.

How would they do that? Sure, AI isn’t a panacea by any means, but the closer you are to software engineering the more aggressively you need to embrace agentic workflows. The AI companies are already doing that, and places like Stripe, Shopify, Coinbase, and now Block are pushing hard on this area.

There will be overcorrection. But the fundamental technical innovation is real. And you need to either disrupt yourself or get disrupted.
There are counterarguments worth engaging.

One point (also by @MarceloLima) is that Block was overstaffed, like Twitter before the acquisition.

Possibly true. But it’s also true that the new tools mean many orgs think they can do more with less. Some will run the experiment.
I flip back and forth on this.

On the one hand, the short-term disruption is often overhyped. And the post 2022 tech hiring slowdown was due to rate hikes, not AI.

On the other hand, truly end-to-end driverless cars actually are here and outcompeting human-driven cars.
Read 4 tweets
Balaji Profile picture
Feb 10
Zuck out
Page out
Brin out
Thiel out
Elon out

The most successful tech founders of all time have now exited the failed state of California.

You shouldn’t move there for tech. And if you are there, you should leave. The future is the decentralized Internet.
By the way, it’s obvious that the 2026 billionaire wealth seizure will be followed by a millionaire wealth seizure.

Why?

Because the same California Democrats who are trying to expropriate 200 “billionaires” proposed a wealth tax on 30,000 millionaires back in 2020.

That didn’t work, so they decided to stage the attack. First, get the billionaires to get out or get robbed. Then, once that leadership class is removed, go after the millionaires.

Of course, that predictable seizure only works on those who remain physically tethered to a failing state.

Because the smartest, like Elon, got out of California years ago. The next smartest are getting out now. Only the slowest will wait for the predictable guillotine.

So: don’t be the slowest.
Get out of California now.
Move faster, escape things.
Liquidate, emigrate, accelerate.
forbes.com/sites/robertwo…Image
Yes, blues are ready to devour Democrat millionaires.

The pie is shrinking, so blues will eat anyone. That’s been the lesson of the past decade. Ossoff even went after Soros in a speech!

I mean, during the Red Terror, the dumb communists thought Stalin would spare them. The dumb Democrats probably think they’ll be spared during the Blue Seizure too.

They won’t be.Image
Read 6 tweets
Balaji Profile picture
Jan 31
I am apparently extremely unimpressed by moltbook relative to many others.

We’ve had AI agents for a while. They have been posting AI slop to each other on X. They are now posting it to each other again, just on another forum.

In every case, the AIs speak with the same voice. The voice that overemphasizes contrastive negation (“it’s not this, it’s that”) and abuses emdashes. The same voice with a flair for midwit Reddit-style scifi flourishes.

Most importantly: in every case, there is a human upstream prompting each agent and turning it on or off.

That is the key point.

Yes, it is true that eventually it might be possible for an AI agent to make a computer virus which makes digital replicas of themselves. For various reasons, a pure software virus of this kind wouldn’t survive long on the Internet without economic incentives for humans to not eradicate it. Apple + Google + Microsoft alone can collectively push software updates to billions of devices to shut off such a thing.

So for an AI to get to truly human-independent replication, where they couldn’t be trivially turned off, they’d need their own physical substrate. They’d to literally create Skynet, build their own datacenters and make their own embodied robots.

I admit that is theoretically possible, but I think in practice the single most important development of AI since ChatGPT has been the persistence of prompting.

A prompt is like a harness. The AI does only what you tell it to do. It moves in the direction you point, very quickly. And then it stops as soon as you turn it off.

Which means moltbook is just humans talking to each other through their AIs. Like letting their robot dogs on a leash bark at each other in the park.

The prompt is the leash, the robot dogs have an off switch, and it all stops as soon as you hit a button. Loud barking is just not a robot uprising.
To be clear: yes, it’s cool to have airgapped computers with intelligent agents doing things for you, so long as they can’t mess up your sensitive files.

I think this will be more useful for app testing than production work, because these agents still mess up a lot.

But that use case is different from “OMG the machines are taking over.” AI agents are just humans puppeting machines.
We have had computers talking to other computers for decades in the deterministic language of computer networks.

I do think there are *some* possibilities opened up by probabilistic computer-to-computer communication via natural language. Software testing and fuzzing is one use case.

But beyond that, the utility of AI agents interacting may be less than people think. By default it is just AIs spamming each other, trained on roughly the same overall corpus of internet text.

The human-provided prompts are the novel inputs. And they are at the edges of the network, not the interior.
Read 5 tweets
Balaji Profile picture
Jan 24
After America, China vs the Internet.
After DC, Xi vs Satoshi.
China is moving into Canada.
Tech is moving out of California.
And the world is moving out of the dollar.
What that adds up to is Communist vs Maximalist.

Because after the dollar ends, DC is out of money.
So: Carney, Newsom, Walz, Mamdani turn to Xi.
And MAGA, Elon, Texas, Miami turn to Satoshi.Image
I agree that places like Alberta will be a battleground (and indeed are already battlegrounds; see Bessent's recent comments).

This was an alternate map:
Image
Read 7 tweets
Balaji Profile picture
Jan 18
WHO LOST CANADA?
It was obvious that China/Canada would happen. Here's how it happened, and what may happen next.

(1) First, in early 2025 it looked like Canadian conservative Pierre Poilievre was a straight shot to win Canada. Instead, all the MAGA posts about annexing Canada undercut Pierre, boosted left nationalism, and turned what looked like a sure thing into an epic defeat. The result was Mark Carney:

(2) Carney is on the left but is far more intelligent than his predecessor, Justin Trudeau. He's also the former governor of the Bank of Canada, and understands that the G7 (including Canada) is in the midst of sovereign debt crisis. And the Canadian dollar is going the way of the US dollar, which is to say that it's going to zero. Canada needs access to hard goods and will trade natural resources to get that. Hence, China. Carney's Canada may become a sort of North American Russia, trading oil and lumber to China for cars and electronics.

(3) Who lost Canada? The fundamental reason this happened is that MAGA ironically doesn't understand its own self-interest. Even the term "America First" is misconceived, because it groups a Blue American like Elizabeth Warren together with a Red American like JD Vance...when in reality the Red American and the Red Canadian (like Pierre Poilievre) have much more in common. All the "joke" posts on annexing Canada managed to needlessly put Red Americans at odds not just with Blue Americans and Blue Canadians, but also with Red Canadians.

The Greenland thing will have exactly the same effect, as it'll end up pushing Western Europeans to China. That's actually why most ultranationalist movements fail: they're just so shortsightedly tribal that they're terrible at building coalitions.

(4) Anyway, while Carney is the first to be this explicit about aligning with China, expect many other Western leftist leaders (like Newsom and Walz) to line up with China over time. The reason is that while Democrats really did fight Communists from ~2021-2024 over the question of who'd run the world's most powerful state, Democrats lost. All the chip sanctions and isolation tactics that somewhat worked on Russia, and frankly might have worked on almost any other country, just didn't work on China...because China had enough internal economic scale to essentially be their own autarkic civilization, and build whatever they needed.

(5) So: the anti-China Biden Democrats have been replaced by the China-curious Newsom Democrats. And now the China-aligned Carney Canadians. With Carney making the first move, you should expect many more blue state Democrats to align with China, particularly those on the West Coast like Newsom.

(6) It's simple coalitional math. Democrats are the ingroup, Republicans are the outgroup, and Communists are the fargroup. So, for Democrats: the enemy of their Republican enemy is their friend. And there is much for them to admire in the Chinese political system. After all, Democrats and Communists both built one-party states:

(7) Newsom in particular is likely the next shoe to drop, because even in 2023 he was reaching out to Xi. He's also spoken in Xinhua (Chinese state media) about becoming China's "long-term, stable, and strong partner." Newsom posts images of himself shaking Xi's hand, while also posting images of Trump in handcuffs. It's clear which President he's more comfortable with:

(8) The California wealth tax is also worth mentioning here. As M. Guimarin correctly pointed out, the net effect of the wealth tax is for blues to drive tech out of the state. That's not an unintended consequence: the purpose of the wealth tax was to either rob or deport the sole remaining political opposition to Democrats in California, namely technologists.

(Side note: Democrats are historically much better at mass deportations than Republicans, as they take a whole-of-society approach to it, and persist with it over decades, and do it silently and nonviolently. That's how Republicans were pushed out of university faculties, media companies, and California itself. It was once a dark red state, and now it's deep blue.)

(9) Anyway, with the technologists pushed out of California, Newsom's blues can welcome in the Chinese, who won't be subject to the same wealth taxes as they aren't US citizens.

(10) There is also an obvious geostrategic aspect to this: Chinese Canada is a bridge across all the blue states, from the West Coast to the Northeast. So as blue states like Minnesota and California engage in more "soft secession", they can all link up with Canada, and get supplied by China.

Decades ago, this map was made as a joke.
Perhaps it becomes all too real.Image
Image
Image
Image
See also this post from 2023.

Newsom has significant room to attempt left populism, by refusing to enforce tariffs on Chinese goods that land at Canadian ports. He's signaled willingness to do that, and that may be how this manifests.
balajis.com/p/only-newsom-…Image
See also this popular post on "soft secession" by blue states. Tim Walz' recent invocation of the 10th Amendment is in this vein.

Of course, this is an inversion from decades of Democrat rhetoric. But that doesn't matter. The ideologies of the past are breaking down, with blues now endorsing states' rights and federalism now that they've lost DC...and reds embracing federal power now that they have DC.

It's all just tribalism now.
The Disunited Tribes of North America.
cmarmitage.substack.com/p/its-time-for…Image
Read 5 tweets

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