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Malcolm Gladwell is not highly regarded by hipster intellectuals. This is, no doubt, because hipsters often hear their "midwit" friends riff on Gladwell and thus form an antigen to such palatable fare. But while these hipsters go off to read Foucault or Nietzsche, trying to glean meaning from a fever dream, I think Gladwell actually has a lot of valuable stuff to say.
One of his ideas was the difference between a "mystery" and a "puzzle". Forget the choice of words, they don't matter. Gladwell defines them like this (paraphrased):
A puzzle is something for which you just need more information to get the answer. For example: The files are in the safe. You need the combination to the safe.
A mystery is something for which all the required information is present, but difficult to process. Examples: The prevention of scurvy, which was learned and lost several times.
One conceit that many people enjoy is the idea that a large conspiracy is impossible, because if even one person spills the beans, the jig is up. For example, keeping the AACS encryption key secret was impossible. One person spilled the beans and it was over.
But large conspiracies are not impossible. Many conspiracies continue to exist even when all or most information is publicly available. For example, there was a large scale effort to convince the public that Covid had a zoonotic origin. Perhaps it did, perhaps it didn't. But evidence in support of a lab leak was deliberately denigrated by nearly all authority figures. There was no need to maintain a secret channel of communication. Once consensus was established, peopled picked up the signals to stay on side, and ones who didn't were punished. The best evidence in favor of a lab leak (that the pandemic started near a lab doing gain-of-function research on coronaviruses) was never secret. It was just not spoken of.
I'm taking a long time to get to the point but I recently discovered this remarkable Reddit thread. It's simply amazing that this is buried in a random AskReddit thread.
For context, /u/yishan is Yishan Wong, former CEO of Reddit. /u/samaltman is Sam Altman. At the time, he was still using capital letters and, in addition to his duties as head of Y Combinator, posting on /r/buttcoin.
In the thread, Yishan explains how Sam Altman used a series of leadership crises to essentially steal control of Reddit from its parent company Conde Nast. Sam Altman chimes in to admit that, yes, this is what happened and also to taunt Yishan.
Sound familiar?
Amazing that this information was never revealed or discussed in the recent takeover of OpenAI. Or maybe it was. But no one cared. It's revealing that Sam never even bothered to delete the thread. Information is only damaging when you have a competent media and one that wants to attack you. When they're on you're side, or they don't care, there is no need to hide anything. The OpenAI board was probably right about Sam, but the focus quickly became the behavior of the board. Slow clap.
Yup a notable example of a large scale conspiracy are the trading strategies used by Renaissance Technologies, which after many decades and hundreds of employees and considerable speculation online are still a secret. Not a single one of those employees spilled the beans to the public, thanks to NDAs and financial incentives to stay quiet. It is indeed possible for large groups of people to keep secrets for a long time.
By that logic, the original recipe for Coca Cola or KFC's secret spice blend is also a conspiracy.
I think any definition that encompasses undiscovered trade secrets is way too capacious.
It's more like answer to the argument that a conspiracy is not possible because it would require too many people to keep a secret, and the example of hedge funds is evidence otherwise of the ability of a lot of people to keep secrets.
Conspiracies differ in significant ways from trade secrets.
The fact that controversial and/or illegal activity is involved changes motivations and incentives for someone to defect, for example.
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I think a distinction needs to be made between conspiracies where the mere knowledge of the conspiracies existence is secret, versus ones where specific details are secret. Everyone knows that Coca Cola and KFC exist, and have spice blends, and that those spice blends are secret. The existence of the spices have not been successfully hidden, and in fact many (most?) of the individual spices are known, but their exact combination and proportions are unknown, which means competitors can sort of imitate them, but not perfectly. We know the who, what, and why, just not the how.
Meanwhile, if you had a similar level of secrecy for something like political assassination, it would be over. If it leaked that X, Y, Z people were in a secret assassination club that killed people for political gain, but the exact details of who they had killed were secret, you could arrest and interrogate X,Y and Z, and then find out the details (and even if you never found out the details, you could still punish them for what you did know). Criminal conspiracies require not only that specific details remain secret, but that the existence of the conspiracy itself remains secret. Which is a lot harder to pull off.
Citation needed. Hop on over to to last week's transnational thread, and you'll see plenty of people engaging in conspiracy theories about Navalny's death. Here you have a secret assassination club, knowledge of who they killed, but the lack of ability to interrogate suspects, resulting in no hard evidence. This is the usual pattern with suspected conspiracies. For an example closer to home you can take Epstein's death, or the imprisonment of Assange.
These conspiracies may be a lot harder to pull off, but by no means impossible. I will say this "someone would have squealed" argument makes sense in some conspiracies - I think I originally heard it with regards to the moon landing, where you'd have to not only buy the silence of highly trained and disciplined specialists, but grunt technicians and janitors, and also hide it from hostile intelligence like the KGB (then again it's not like secret military bases don't exist), but through repetition and progressing laziness it got applied to all conspiracies. Now the idea that conspiracies are impossible has become an article of faith among people who pride themselves on their rationality and skepticism (though even that is rather selectively applied, again see: Navalny).
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I would love to know what the Medallion Fund strategies are, although I have a feeling that (like a magician's tricks) the strategies would seem remarkably dumb once they are revealed.
I do wonder whether they are using their publicly available funds (which have mediocre performance) to generate alpha for the Medallion Fund.
As someone who works at a prop shop I half guarantee you the strategies would look remarkably dumb if you were told what they were. It's surprising how simple the strategies we use to generate a ton of money are, like so surprising you'd expect any good mathematics undergraduate to be able to come up with them if you pointed them in the right direction and gave them two weeks to work on them. Regardless, they are extrmely effective, to the point where it's like picking up free money off the ground.
The difficulty is not in finding the strategies, it's in setting up the whole high speed structure and the relationships with exchanges/brokers/clearers etc. so that you have access to the markets in the first place.
That's basically my understanding of it as a layman outsider.
Financial Markets are so large and complex and useful information is so dispersed that one trader can notice e.g. an arbitrage opportunity between the price of tea in China vs. Australia that allows them to front-run the market. Or perhaps they catch some more esoteric correlation like how when the tea shipments to a particular Chinese province are delayed, productivity drops by 15% or some such.
And the problem then is how do you bring enough capital to bear quickly enough to seize the opportunity without alerting other actors, and, ideally, turn it into a repeatable (algorithmic) bet to pump money out of the system.
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That would be illegal, right? Seems hard to imagine that nobody would blow the whistle.
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The fact that they’ve remained a secret and haven’t been poached by any former employee allows us to narrow down what they are and why their scope may be limited. Renaissance’s big advantage is just the weight of history; Simons attracts the best, he can pay the most, the best strategies are used on the employees’ / medallion fund to maximize retention, extreme risk control is better than at big historic places that have gone bust. More of the best people paid more, better engineers and better data to run strategies against historical data, then careful control of them. Renaissance is unlikely the same way Berkshire is, but in a real sense they’re unsurprising: run a casino for long enough and eventually someone is going to pick the right number four times in a row on the roulette table.
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