Complex Systems with Patrick McKenzie (patio11) Writing the first draft of financial history with Byrne Hobart
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Jul 18, 2024 
Byrne Hobart joins Patrick McKenzie to discuss the toxicity of 30-year mortgages, finance newsletter dynamics, applying rationalist epistemics to hedge funds, and the joy of learning about an industry from scratch. They explore tax inefficiency in investments, competitive advantages in finance writing, evolution of web scraping, and monetization strategies of online travel agencies.
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Toxicity of 30-Year Mortgage
- The 30-year fixed-rate mortgage is inherently toxic due to its misalignment with banks' demand deposits.
- Its embedded interest rate options cause long-term rates to be more volatile, impacting the global cost of money.
Young Savers Hold Equity Risk
- Young households saving for retirement are the socially optimal holders of equities risk.
- Their long investment horizon allows volatility to wash out and maximizes returns over time.
Private Equity's Unique Returns
- Private equity's risk-adjusted returns look good because firms select recession-resistant companies and act early in downturns.
- These returns are tax-inefficient and best suited for patient capital like endowments or entities not paying taxes.