Things we are reading today - October 27th, 2023

The concept of superlinear returns is where performance is disproportionately rewarded, such that small differences in ability can lead to vastly different outcomes. This phenomenon is driven by exponential growth and thresholds. Fields with superlinear returns include business, fame, power, knowledge, and benefit to humanity. Superlinear returns arise from exponential learning curves and winner-take-all situations. They are most prominent in science, where exceptional individuals can far outperform others due to crossing thresholds of novel discoveries. Superlinear returns magnify the effects of variations in individual performance. Some of the key takeaways from this are:

  • Returns for performance tend to be superlinear rather than proportional. Those who perform better often get disproportionately more rewards.

  • Superlinear returns come from two main sources - exponential growth and thresholds. Crossing a threshold can enable exponential growth.

  • Fields with the highest superlinear returns include science due to combining learning, thresholds, and novel discoveries. Other examples include business, fame, and investing.

  • Ambitious individuals are well-served to seek out work with superlinear returns. While riskier, the potential rewards are much greater at the extremes of performance.

  • Doing exceptionally good, novel work is one way to benefit from superlinear returns since competition lessens at the far end of performance.

  • Following one’s curiosity can lead one into fields with superlinear returns, as curiosity tends to find interesting open questions that may develop in this way.

  • Technology and declining organizational power are expanding the scope of work with superlinear returns as well as the magnitude of the returns themselves.

  • Superlinear returns increase inequality as the reward curve steepens dramatically at the extremes of performance.

  • Developing good work techniques like pursuing interests and ambitions, seeking the best colleagues, and maintaining health can help maximize performance.

The Reserve Bank of India (RBI) has introduced a new regulatory framework for non-banking financial companies (NBFCs) that eliminates the classification of “systemically important” NBFCs. Under the new framework, only NBFCs with over Rs 1,000 crore in assets will be subject to more stringent regulations. This removes ambiguity around NBFCs between Rs 500-1000 crore being defined as systemically important. The new framework also categorizes NBFCs into a base, middle and upper layer based on asset size. Notably, the top 15 NBFCs will still be required to list on stock exchanges. The new rules aim to bring more clarity around the regulatory requirements for NBFCs of different sizes.

Sam Bankman-Fried founded two major crypto companies, Alameda Research and FTX exchange, and became extremely wealthy through crypto trading and investments. However, his companies collapsed in 2022 due to major losses at Alameda and misuse of customer funds. He is now on trial for fraud and faces decades in prison. The article discusses SBF’s rise and fall, his effective altruism beliefs which encouraged high-risk strategies if they had potential for large impacts, and the complexities of his character as portrayed in an author’s book about him. While some saw SBF as manipulative, others thought his actions could be understood from his unusual utilitarian perspective that the only ethical rule was to maximize overall well-being. The collapse of FTX had wide-ranging impacts and demonstrated the lack of separation between SBF’s companies as well as the fragility of the crypto world which depends on Tether, a stablecoin now also under scrutiny.

Google for India 2023 outlines Google’s continued partnership with India to advance its digital transformation. New initiatives include manufacturing Pixel smartphones locally and applying generative AI to make Search and commerce platforms more helpful for users. Google Pay aims to expand access to credit for underserved Indians through new digital lending products. Google Cloud is collaborating with organizations to launch inclusive apps that deliver citizen services and enable farmers to sell produce online. Efforts to improve online safety include combating financial fraud and supporting digital literacy programs. is increasing its funding for non-profits applying AI to issues like agriculture and is committed to partnering with India’s digital progress.

As countries undergo demographic transition, they may experience a demographic dividend followed by a demographic drag. Aging populations slow economic growth as the share of working-age individuals declines. However, gains in life expectancy and functional capacity can offset some negative impacts. Analysis of 145 countries from 1950 to 2015 confirmed population age structure significantly affects growth. A 1% higher working-age share boosted per capita income by 1% and amplified subsequent growth. While population aging may lower annual GDP growth 0.4-0.8 percentage points in OECD nations by 2050, improvements to labor markets and productivity could lessen impacts. Notably, China benefited tremendously from its demographic dividend in recent decades, though economic growth and stock returns are not always closely linked. Overall, demographic changes are difficult to counteract but not determinative of economic prospects.

The article titled “How to Make Yourself into a Learning Machine” talks about the importance of continuous learning and how one can become a learning machine. The article starts of by discussing the concept of a “learning curve” and how most people tend to plateau after a certain point which goes on to provide practical tips and strategies to keep learning and growing.

One of the key takeaways from this is the importance of deliberate practice. The author suggests breaking down complex skills into smaller, more manageable chunks and practicing them consistently over time. This can help build muscle memory and lead to more efficient learning.

The article also emphasizes the importance of seeking out feedback and learning from mistakes. By analyzing what went wrong and making adjustments, you can continue to improve and grow.

Another key strategy discussed is the idea of “interleaving,” that is, switching between different types of learning or activities. This can help prevent boredom and keep the brain engaged.