My favorite articles from January 2024:

Welcome to the January 2024 edition of my monthly reading list.

This month, I've curated insightful essays across topics including Artificial Intelligence, Economics, Psychology, Technology, Society, and Fintech. Dive in for a blend of deep technical insights, economic anomalies, psychological nuances, societal impacts of emerging tech, and the evolving landscape of financial technology.

May these selections enrich your knowledge and inspire innovative thinking.

Artificial Intelligence

• Understanding and Coding Self-Attention, Multi-Head Attention, Cross-Attention, and Causal-Attention in LLMs (Sebastian Raschka)

  • This article provides a comprehensive understanding of self-attention mechanisms, including self-attention, multi-head attention, cross-attention, and causal self-attention. It includes a step-by-step Python and PyTorch code walkthrough, offering insights into the inner workings of large language models (LLMs) such as GPT-4 and Llama.

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• CES 2024: BEGUN THE INFERENCE WARS HAVE (Digits to Dollars)

  • The AI inference landscape is at a crossroads, with a debate over whether it should predominantly occur in the Cloud or at the Edge. The traditional view has been that Edge computing is more economical due to user-funded capital expenditure and offers benefits in security, privacy, and data sovereignty.

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Economics

• Why Do Abnormal Economic Profits Come From? (The Diff)

  • It is true that if you assume perfect competition, interchangeable products, easy entry and exit from all businesses, perfect information, a desire to maximize profits, and zero externalities, the absence of economic profits ends up being an obvious conclusion from the model. All of those assumptions are approximately true, none of them are precisely true, and it's in the gap between "almost" and "always" that economic profits live.

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• Easy Money (Oaktree Capital)

  • Skimpy return prospects on safe assets lead to elevated risk taking – sometimes abetted by widespread optimism and/or the suspension of disbelief – and thus to the approval of investments that would likely be greeted with skepticism in normal times. Many of the risky assets people invest in out of presumed necessity are deemed less palatable and less valuable under tougher market conditions, when they can only be sold at lower prices.

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• Becoming Data Driven, From First Principles (Commoncog)

  • I’ve increasingly come to appreciate that you must earn the right to criticize becoming data-driven. Too often, critics of bad data usage have nothing credible to offer when pushed. I’ve read articles by folk proposing that the answer to Goodhart’s Law is to “hide the metric the workers are evaluated on.” I’ve listened to people whose argument against bad data use is basically “run your business on vibes”. Hell, I’ve made such arguments in the past.

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Psychology

• Incentives and the Cobra Effect (Boz)

  • My favorite example is unlimited data cell phone plans. Everyone thinks they want an unlimited data plan. But at the incentive level the goal for the carrier there is to give you the minimum level of service required just so you won’t switch carriers. Instead if you have a plan where you pay for data their incentive is to make your experience using data as fast and as great as possible so you are inclined to use more.

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• The Psychology of Apple Packaging (Readtrung)

  • A company’s obsession with embodying “how you do anything is how you do everything.

  • [Once Steve and his adopted father Paul Jobs] were building a fence. And Paul said “You got to make the back of the fence that nobody will see just as good looking as the front of the fence. Even though nobody will see it, you will know and that will show that you’re dedicated to making something perfect.”

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Technology and Society

• Apple’s New Mixed Reality Headset (HHHypergrowth)

  • It essentially provides a new spatially-based computing platform with infinite display capabilities. At a minimum, this device could potentially replace the need for a Mac with a multi-display setup, as well could replace a high-end TV and spatial audio setup for a single individual. You can run all the same apps as on a Mac or iPad, and share files and content with your other Apple devices through iCloud, plus it can also serve as a private external display for external Macs. But it's much more than just that, as you can now pick up and take it (your Mac and multi-display setup, or private movie theater) to wherever you work.

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• Dark Software (MTB Notes)

  • There’s too great a supply of undifferentiated software chasing increasingly picky demand that’s also locked behind a small number of monopolistic platforms extracting ever greater margin to access that demand (search, social, app stores, etc). And how did we get here? In many ways, the software industry is a victim of its own success. It’s never been easier to build and distribute software products—so it’s never been harder to build a big business this way.

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• The Opportunity Cost of Features (The Diff)

  • Why do big companies ship so little? Because as their margins expand, the downside from disrupting the main app's experience rises faster than the upside from adding a new one.

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• How non-technical people are using AI to code (Ben's Bites)

  • Non-technical individuals are increasingly leveraging AI to generate code for building applications, overcoming traditional barriers to coding. This trend is facilitated by AI models like GPT-4, which can guide users through the process of creating software, from generating code to debugging, and even providing step-by-step instructions for deploying applications.

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• How Does a Feature Get Made? (Technically, $)

  • At tech companies, software engineering is almost always considered the most scarce resource at the company. Engineers (especially good ones) are difficult to hire, highly paid, and have a straightforward work product – so naturally, what companies have them working on is a source of much thought and deliberation.

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• How Much of Modern Academia a Waste? (Noahpinion, $)

  • This means that the U.S. university system — and the systems of other countries that roughly copy what we do — is filled with professors who have been essentially hired to be teachers, but who prove their suitability for the job by doing research. They have to publish or perish, whether or not there’s anything interesting to publish. And journals, knowing that shutting researchers out of jobs would be detrimental to the academic system, will oblige young researchers by publishing enough papers that tenure-track faculty around the country can get tenure.

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• Bitcoin is a Special Interest Group (Noahpinion, $)

  • Levine therefore understates the impressiveness of what the Bitcoiners have done. They haven’t just created a financial asset from nothingness, without any dividends or interest or claim on any real economic activity. They’ve created an entire asset class out of nothingness — a thing that many American worker’s retirement accounts will put part of their life’s savings into, even though it has no dividends or interest or claim on real economic activity. They have, quite literally, memed regular people’s dollars into their wallets.

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• Beware Value Capture (Readtrung)

  • Reminds me a lot of Naval’s POV on not playing zero-sum status games

  • Why is ease of understanding and tracking important? Because consumer-facing products are more addictive when gamified. And gamification relies on metrics such as points, leveling up, rankings, rewards or badges.

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• Breaches and the SEC (HHHypergrowth)

  • That "if any" in the SEC statement is a big caution flag, as public companies should have robust security processes to evaluate cyber threats. The article emphasizes the increasing accountability of top management and boards for security incidents and risk management. Companies are now required to disclose their internal processes for mitigating and understanding these risks and to report significant incidents promptly after an impact analysis.

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Fintech

• Fintech From First-Principles (Matt Brown)

  • Barring a tech breakthrough or platform shift, it’s difficult for startups to compete exclusively or primarily on cost. That comes with time and scale, but cost itself was rarely the initial value prop. So most of fintech’s big winners from the last decade built a new platform or business model to make an existing financial product accessible to segments that had historically had been under-served and/or over-charged.

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• Building the Deconstructed Silicon Valley Bank (SyTaylor)

  • Since the banking crisis, a new breed of B2B Fintech companies has emerged, reshaping the industry and slowly building what is referred to as the Deconstructed Silicon Valley Bank. These companies have grown to offer everything that Silicon Valley Bank (SVB) did and more. They have automated finance operations, allowing small teams to manage finance at scale. They offer services like venture debt, revenue finance, and extending runway, which were previously the domain of SVB and First Republic.

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Early Stage Strategy

• Ultimate Guide: Pricing Pages (Aakash Gupta)

  • The article "Ultimate Guide: Pricing Pages" provides a comprehensive analysis of effective pricing page strategies, using examples from six leading tech companies: Figma, Stripe, Monday (B2B), and Apple iPhone, Fortnite, Netflix (B2C).

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• How to have the “talk” with your customers (Growth Unhinged)

  • The article discusses the importance of having pricing conversations with customers to optimize pricing strategies and increase average contract value (ACV) by understanding willingness-to-pay, providing insights on how to approach these conversations and offering 25 pricing-related questions to ask during customer interviews.

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Do you have an essay you think should be featured next month? Reply to this email and share it with me, and I’ll make sure you get some attribution.