3 artists, 2 books & 1 documentary

December 19, 2024
by Björn Jeffery
Newsletters

Friends,

This may be the least predictable newsletter imaginable. But unlike the rest of the stuff clogging up your inbox – this is not selling or asking anything of you. It’s just some good stuff that I’ve come across lately.

I’m still writing a lot for the Swedish newspaper Svenska Dagbladet. If that’s a language you’re comfortable reading, then here’s a listing of my latest work. If not – you’re out of luck, for the time being at least.

I hope you find something interesting among the recommendations below. And happy holidays.

/Björn

Three artists to spend time with

  • Doechii – She just crossed over into the mainstream, but this is the most interesting rap I’ve heard for a long time. It’s versatile, clever, and artistic.
    Listen to: Nissan Altima.

  • Caroline Polachek – Hardly a new artist, this former singer from Chairlift is now on a solo ride. I discovered her this year, so it’s new to me. The music is unusually original and goes way beyond the average pop song.
    Listen to: Sunset + Watch: Dang (live on The Late Show with Stephen Colbert)

  • Remi Wolf – Her single “Cinderella” was one of my most played songs in the car this summer. It’s poppy and fun, with a souly voice.
    Listen to: Cinderella

Two books for your holiday break

  • Gambling Man – The wild ride of Japan’s Masayoshi Son, by Lionel Barber

    There’s hardly a major internet company that hasn’t been touched – in some way – by Softbank and their founder, Masayoshi Son. How did it happen? This former FT editor does a fantastic job of describing both the background and context for Masa’s trajectory, as well as a lot of juicy anecdotes from behind the scenes. A delightful read.

  • Send Nudes, by Saba Sams

    Short stories written in a light, bouncy manner. Little moments of youth get caught and dissected from the inside. This is fiction that reminds you of what it is like to be young – with everything good (and bad) that comes along with that.

One documentary to cherish

  • Wise Guy – David Chase and The Sopranos (MAX) – This is so much more than a walk down memory lane for Sopranos fans (which would have been fine by me). It adds personal depth to what I consider to be the finest tv-series ever made.

Three bonus things worth a look & a listen

  • The Rip Current – My friend Jake Ward (previously of NBC News and Popular Science fame) has a new Substack about technology that you should check out. He has a good eye for the space.

  • The Reith Lectures; Is Violence Normal? – The BBC series invites the forensic psychiatrist Dr Gwen Adshead to answer the seemingly simple question “is violence normal?”. The answer is more nuanced and interesting than it sounds.

  • If Books Could Kill: Who Moved My Cheese? – A podcast which is always a laugh, but this episode was especially good. A brutal teardown of a management literature staple.

Originally published on Substack on December 19th, 2024.

Trump’s appointment — a win for the tech companies

December 6, 2024
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on December 6th, 2024. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

The tech elite’s bet on Trump has already started to pay off. With the appointment of David Sacks as “AI and crypto tsar,” the venture capitalists have billions of reasons to celebrate.

The Silicon Valley elite gathered for a dinner at venture capitalist David Sacks’ home in June. The guest of honour was Donald Trump, then a presidential candidate. Tickets cost over three million kronor each — which may sound steep, but getting the ear of an incoming president can be worth considerably more than that. Venture capitalists around San Francisco are used to staking millions in the hope of a large return later.

That return arrived in the early hours of Friday morning. David Sacks was appointed by Donald Trump as “AI and crypto tsar.” It is largely a symbolic role — but the message it sends is clear: tech is back in the political inner sanctum. The tech companies’ new enthusiasm for Donald Trump is mostly about what he will not do. Trump has indicated he will not introduce tough regulation of cryptocurrencies and that he will not block as many corporate acquisitions on competition grounds. The “crypto tsar” Sacks will, according to Trump, work on a “legal framework” for the crypto industry to create more clarity. Clear guidelines are something most people — both critics and enthusiasts — would welcome. But the real value here is the legitimisation of the sector.

The market has already spoken clearly on this. Since election day in the United States, the crypto market as a whole has risen by over 65 percent. The equivalent of market capitalisation has increased by over 15,000 billion kronor in roughly one month. Bitcoin has set new price records. After a couple of years in the penalty box following enormous crashes at companies like FTX, there is now a strong tailwind for the first time in a long while.

Cryptocurrencies have often been presented as a kind of alternative to the existing economic system — an economy without a central bank, politically close to libertarianism. Philosophically it is a reasonable match. Transactions can occur without intermediaries, and flows of capital can happen without the possibility of political interference. Reality, as so often, looks a little different. Enthusiasts tend to distinguish between bitcoin and the rest — so let us do that. Bitcoin has an underlying system with some similarities to more stable assets — it has often been called digital gold. But for a wholly new economic system, there are structural problems that also exist in conventional economies. As early as 2021 a study found that 0.01 percent of all bitcoin holders owned over 58 percent of all available bitcoin. The starting point is, to put it mildly, imbalanced.

Looking at other cryptocurrencies, one need look no further than the name of the platform where many so-called “memecoins” are produced — tokens whose purpose is pure speculation. It is called “Pump.fun.” Being on the receiving end of a pump-and-dump — even if you are aware of the risks — is not always as fun as the name implies. It resembles a casino, with bad odds. Those who stand to gain from a less regulated crypto market in the United States are therefore fairly easy to identify. One example is venture capital fund Andreessen Horowitz, whose crypto fund has 82 billion kronor of exposure in this area — the value of their holdings just increased substantially. Individual early bitcoin investors are another example. They are already in the market and have seen a near-extraordinary rise in value in a short time.

The losers will likely be those who are now looking at crypto for the first time and deciding to invest — or gamble, which is probably a better description. Who would not be tempted by a rise of over 30 percent in one month, as bitcoin has just delivered? For every buyer at the peak price, there is also a seller. The Biden administration has put significant pressure on the tech world in recent years — companies have been blocked from acquiring smaller competitors and criticism of the entire sector has at times been fierce. Big tech became a temporary pariah in American politics. They therefore placed their trust — and their money — on Trump and a new era. That investment now looks set to become one of the better ones made in Silicon Valley in many years.


He sold a dream nobody buys anymore

November 22, 2024
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on November 22nd, 2024. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

The suit sold the dream. The excavator was supposed to do the work. But the visions and the reality never pulled in the same direction at Northvolt. What Peter Carlsson leaves behind is not what he had imagined.

It is a bright spring day in April 2018. A large yellow excavator stands at Finnslätten in Västerås. The first sod for Northvolt’s demonstration factory is a scoop of gravel. Standing next to the machine is a tall man wearing clothes more usually associated with a different kind of work: a white shirt and a dark suit. Peter Carlsson, Northvolt’s CEO, is pleased to have arrived here after eighteen months of preparation. In a year’s time, the plan is for Northvolt to begin producing its first batteries. “It’s an enormous opportunity for Sweden,” he says. It would not quite work out as he imagined — not for him, not for Northvolt, and not for Sweden.

The project actually begins much earlier, on the other side of the Atlantic. In 2013 Peter Carlsson was head of the supply chain at Tesla. He could see how the need for batteries would grow dramatically as the automotive industry electrified. The geopolitical tensions between East and West existed even then, though they would intensify considerably over the coming decade. The insight about battery demand was not unique. What was unusual was the approach Carlsson absorbed from his then-boss, Elon Musk. Tesla did not have factories — it had “gigafactories.” Today Tesla is not a car company but an AI and robotics company, if you were to ask Musk. He is a master at projecting vast visions over the more mundane reality of what is actually happening in the business day to day.

Back in Sweden, Peter Carlsson executed a manoeuvre his former boss would have been proud of. He painted the picture of a Sweden that would get its first home-grown gigafactory producing batteries. But doing so required financing in the multi-billion bracket. Carlsson’s vision engaged prospective customers like Volkswagen as well as funds and venture capitalists. Everyone was invited along for the ride. It became Europe’s most richly funded startup.

This is roughly where reality started to chafe. Building battery factories is complex. Building several simultaneously — in different countries, as Northvolt did — is harder still. The factories are hit by serious delays and complications. Meanwhile the company needs continued financing to keep operating. It becomes a juggling act between sorting out something as concrete as machinery on a factory floor, and convincing financiers that this is a journey they need to be part of — delays notwithstanding. At the same time, the global environment deteriorates. Inflation takes hold and interest rates surge. Optimism about the future takes a knock. But the money must come in and the factories must start working. The equation eventually becomes too difficult. On Thursday Northvolt announces it is filing for reorganisation in the United States — a so-called Chapter 11 process. On Friday, Peter Carlsson steps down as CEO.

It is impossible not to think back to the excavator and the pile of gravel from 2018. The suit sold the dream. The excavator was supposed to do the work. But the two never quite pulled together. Northvolt is a project that arouses strong feelings. On one side are critics who see it as a failure and a sign of a “green bubble” — an industrial project that was misconceived from the start and should never have been built. On the other side are those who see the value in the vision. Sweden and Europe need entrepreneurship and major ventures of this kind to manage the green transition and build greater independence from China. Risk is part of the price you pay for achieving something never done before.

The tension between vision and reality has characterised Northvolt from the very beginning — and in this case two things can be true simultaneously. What Peter Carlsson has demonstrated is that it is possible to mobilise industry, society and business to create something Sweden has never seen before. That is an achievement of real significance. At the same time, reality has consistently lagged behind, with years of delays and billions in additional costs as a consequence. The execution has not worked. What remains after the reorganisation will be a different kind of company, with different owners and new leadership. For Peter Carlsson the story ends here, as he steps down as CEO and becomes a senior adviser and board member after many years of hard work. For Northvolt, the next chapter remains to be written — but that will be someone else’s task.


Nvidia’s success is a risk factor for all of us

November 21, 2024
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on November 21st, 2024. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

Nvidia doubled its profit and the market responded with an “okay.” The expectations placed on the world’s most valuable company have become a problem — for the entire stock market.

There are two types of companies on the stock market. The first requires a trained equity analyst to understand the business — someone meticulous and detail-oriented who reads every quarterly report looking for the smallest signal about where the stock is headed. The second type is companies like Nvidia. This week it was reported that Elon Musk’s AI company xAI is in the process of raising 66 billion kronor from investors, with the purpose of buying 100,000 new chips from Nvidia. You do not need to be a painstaking detective to pick up the signal in that news.

Despite this, markets were jittery ahead of Nvidia’s latest results. Nvidia — now the world’s most valuable listed company — has somewhat involuntarily become a barometer for something much larger than itself. The prevailing AI boom has benefited both tech companies and ordinary listed companies through optimism about increased revenues and future efficiencies. In recent days Meta launched a new division dedicated solely to selling AI solutions to businesses. At the foundation of all these AI ventures sit Nvidia’s products. When AI gains ground in the world, so does Nvidia right now.

When the chipmaker’s quarterly figures were presented Thursday evening Swedish time, this was more than evident. Revenue grew 94 percent and profit more than doubled. Which other company of this size can report that kind of growth? Or has ever done so? But Nvidia is not like others. When the company’s guidance for Q4 indicated growth of 70 percent, that figure had to be measured against the preceding year’s 265 percent growth rate. The expectations are enormous. The stock thus dipped slightly in after-hours trading — despite the almost extraordinary gains.

Nvidia appears to be priced for a perfect delivery in a perfect market. That is precisely what it has experienced over the past two years. But can it continue? One concern is whether AI will gain ground in the way many seem to hope. The tech giants’ investments in infrastructure have been gigantic so far, but there is anxiety that they may be costing more than they are worth. At the scale Nvidia now operates, it would take only a slight reduction in that long-term commitment — investments pushed a little further into the future — to hit Nvidia directly.

As the largest company on the market, it therefore attracts a disproportionate number of eyes. The whole market watches it to see which way the wind is blowing. The situation is unusual. Under normal circumstances most people would probably have ignored a chipmaker like Nvidia. It listed in 1999 and a safe guess is that the name was unknown to most readers until relatively recently. Now, suddenly, it is bigger than Apple, Microsoft and Google. Looking at the top 100 companies by market cap, Nvidia is as large as the bottom 25 on the list combined — a group that includes names like Goldman Sachs, Inditex and BlackRock. That is the scale we are talking about.

That size means the outside world now knows more about chip deliveries and production issues than it ever wanted to. If Nvidia’s new chip, Blackwell, were delayed or failed to perform as intended, it would be a problem for far more than just Nvidia. The company now appears in all major global index funds, in US equity funds, in technology funds. If you have money in the markets or a pension savings account, you are probably exposed to Nvidia too — likely more than you realise. The company that spent so long making graphics cards for gaming PCs has become a barometer for the stock market itself. That was never its intention. For now the tailwind for Nvidia and the AI revolution it leads is still strong. But should that weaken, it could quickly become a problem for far more people than just them.


The mission: cut 20,000 billion kronor

November 13, 2024
by Björn Jeffery
SvD Näringsliv





Musk’s mission: cut 20,000 billion kronor

Published in Svenska Dagbladet, 2024-11-13. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

It is now confirmed — super-entrepreneur Elon Musk is stepping into Washington to clean up among American government agencies. The mission: cut 20,000 billion kronor from the federal budget.

Cast your mind back twelve years and try to explain this to someone if you can. A mildly confused Shiba Inu dog becomes popular on the internet. A meme emerges — an internet joke — about the dog misspelling its own name, and it gets called “doge,” a mangled version of the English word “dog.” Doge then becomes a cryptocurrency called Dogecoin, which at the time of writing has a market value of around 600 billion kronor — based on pure speculation. That is a higher valuation than companies like Volvo or Ericsson.

One of the most successful entrepreneurs of our time, Elon Musk, takes a liking to doge and Dogecoin. He uses the letters as an acronym for a proposed government body — the “Department Of Government Efficiency.” And now — in the early hours of Wednesday morning Swedish time — incoming president Donald Trump has appointed Musk to launch exactly that. What started as a joke is now becoming serious.

At a campaign event before the election, Howard Lutnick — responsible for managing the transition to Trump’s presidency — was on stage with Musk, fired up about how much government spending they could cut: “How much do you think we can rip out of this wasteful $6.5 trillion budget from Harris and Biden?” Musk responded with a broad smile: “I think we can do at least $2 trillion!” That translates to cuts of 20,000 billion kronor per year. At the time it was a hypothetical campaign promise from a billionaire hoping Trump would win. Now it may become reality. Together with former presidential candidate Vivek Ramaswamy, they will shape DOGE — the Department of Government Efficiency — to cut costs from the American state apparatus. The irony of appointing two chiefs and launching a new “department” to find unnecessary spending appears to have escaped them. “This will send shockwaves through the system,” Musk said in a statement.

Taking an axe to organisations is something Musk knows well. After buying the social media service Twitter in 2022 he laid off around 80 percent of the staff within a year. Outside observers predicted the service’s immediate death, not believing it could be run with so few employees. Apparently it could. X — as Twitter was renamed — rolls on today with around 6,000 fewer people on the payroll than when he bought it.

The American federal government is not a company, however. As former Treasury Secretary Larry Summers pointed out in a Fox News interview, only 15 percent of its costs relate to personnel. Firing every single government employee would therefore not be enough to reach 20,000 billion kronor in savings. To get there, he added, you would almost certainly need to cut healthcare programmes Medicare and Medicaid — a long-standing Republican ambition.

As a businessman, Musk has not only been good at cutting costs. He has also secured new revenue streams for his businesses. SpaceX carries out missions on behalf of the federal space agency NASA. Tesla has earned many billions from a type of mandated electric vehicle credits that competing car companies have been forced to pay them. Its car-buying customers have benefited from federal tax breaks introduced to encourage the electrification of the automotive industry. There may be savings potential in those areas too — but a fairly safe guess is that Musk will start looking at the other end of the government machinery first.

The situation is simultaneously somewhat bizarre and extraordinarily unprecedented. That money plays a large role in American politics is hardly news — but Musk has built himself an immense position of power in a very short time. Axios co-founder Jim VandeHei has described him as the most powerful private citizen in American history. He runs several billion-dollar companies in strategically important sectors, owns X as a media platform — and now steps across the threshold from the private to the public sphere. A government mandate to cut costs.

Those who have followed Elon Musk for a long time know that he tends to exaggerate and be optimistic about timelines. At the same time, he has delivered on multiple projects that most considered impossible — and did so simultaneously. Musk is not like everyone else. Now that he has a mandate to shake up government operations, one thing is certain: it will be messy. But it will happen. What the consequences will be remains to be seen.


Trump’s victory gives Musk the full payoff

November 6, 2024
by Björn Jeffery
SvD Näringsliv





Elon Musk bet everything on Trump — and is now more powerful than ever

Published in Svenska Dagbladet, 2024-11-06. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

The world’s richest man played an extraordinarily high-stakes political game. Elon Musk bet everything on red — and won. Now comes the payoff.

They were not always close friends, the two most talked-about billionaires in America. In the summer of 2022, Donald Trump’s re-election campaign was already under way, and from a podium he described Elon Musk as a “bullshit artist.” But a lot can happen in two years. Musk has rapidly become Trump’s most powerful ally. Now the payoff is coming.

Elon Musk is an entrepreneur whose many businesses are deeply intertwined with the American state. Tesla earned over 18 billion kronor in 2023 from a state-regulated electric vehicle tax credit. SpaceX has in practice functioned as a privatised arm of NASA. Add the regulatory approvals needed by brain-implant company Neuralink, and the political reach of the platform X. The picture is complex, but the common thread is that all are profit-driven companies that have made Musk enormously wealthy while operating in the grey zone between the public and private sectors — sometimes through subsidies, sometimes through regulation, sometimes through its absence.

Having a political leader who is well-disposed toward you and your businesses is therefore extremely valuable for Musk. But he has clearly managed to succeed without Trump’s help until now. To understand Musk’s newly found and very vocal political engagement, we need to look forward instead. What is on the agenda for his business empire?

Start with Tesla, which accounts for the single largest part of Musk’s wealth. In the late 2000s Tesla were pioneers in the electric vehicle category — a small niche at the time. After questions about whether that kind of car production could ever be economically viable, Musk launched several new models that were well received by the market. The small player became dominant and effectively forced the rest of the car industry onto the same track. Today electric vehicles are no exotic category — everyone makes them. Tesla remains a large and important player, but its dominance has faded. More importantly, the niche is no longer unique. To justify a higher stock market valuation than other car manufacturers, the company must talk about something else. Why else would Tesla carry a P/E ratio of 63 while General Motors trades at around 5? Tesla’s answer is self-driving cars and AI. Musk himself has said the company should be seen as an AI and robotics company. But after selling a “self-driving” add-on to Tesla cars for many years, full autopilot has yet to be released — partly because it is not ready, and partly because Tesla lacks regulatory approval. Self-driving cars do exist on American roads, but only from a handful of companies in a couple of specific areas. Tesla is entirely dependent on how regulations are shaped. Having the president’s ear in that situation is very convenient.

Next is SpaceX. Even with breakthroughs like catching and potentially reusing rocket boosters, enormous resources are required to keep the operation running. Exploring Mars — one of Musk’s stated goals — has no commercial basis at present. Musk wants to run the programme, but the American state needs to foot the bill.

Finally, X. The social network has lost enormous numbers of advertisers since Musk took over, but its power position remains strong. During the election campaign it was mobilised to present an alternative worldview to what was available in mainstream media. Accurate? Sometimes. But its role as a hub for a Republican media machine was cemented. Interest in X will increase with Trump as president.

It is possible that the former Democrat Elon Musk has simply grown tired of the establishment. He has expressed a desire to cut unnecessary bureaucracy through a special assignment for Trump — DOGE, the Department of Government Efficiency. The idea that the state is inefficient is hardly a unique insight; it is a well-worn argument from the political right. Being at the centre of such a process would be a new kind of feather in Musk’s cap. Whatever his actual political views, Musk had many billions of reasons to support a Republican election victory. He played a high-stakes game and managed to enrage the Democrats enormously. A defeat would have been devastating for him and for the companies he is involved in. The billionaire won again. And his power has never been greater.


The market has already picked a winner

October 29, 2024
by Björn Jeffery
SvD Näringsliv





Prediction markets ahead of the US election can influence more than money

Published in Svenska Dagbladet, 2024-10-29. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

Want to bet on who will win the US presidential election? With the right prediction you can now make a lot of money. But there are also reasons beyond profit that make speculators want to project a clear winner well ahead of the result.

“People overestimate their knowledge and underestimate the probability that they are wrong.” Nassim Nicholas Taleb, the economist and author whose glass is usually half empty, reviews humanity’s view of itself in his book Fooled by Randomness. Probabilities and truths are tricky. Sometimes they resemble each other, but they are not identical. Now — in the intensifying run-up to the American presidential election — that reminder may be timely. While Americans are placing bets on who will become the next president, the process risks sowing the seeds of distrust about how the election actually played out.

So-called prediction markets have existed for a long time — allowing individuals to speculate on specific questions like whether a certain technology will win a Nobel Prize or whether Taylor Swift will be the most-streamed artist on Spotify this year. It has been a hobby for a small minority trying to foresee the near future. But interest has rarely been higher than now. The reason is a newly legalised and rapidly growing market for wagering on the presidential election result specifically.

In early October the American service Kalshi won its appeal against the CFTC — the Commodity Futures Trading Commission, which regulates these markets. The CFTC had argued that this kind of prediction-making could negatively influence the election, but failed to prove that case sufficiently in court. As a result, Kalshi became the first service permitted to open public, money-backed predictions on who will be the next US president. The brokerage app Robinhood has since also allowed users to bet on the election outcome.

“Prediction” is a generous term in this context. Formally that is what users are supposed to be doing — but since there is a financial interest in the outcome, it is perhaps easier to call it what it actually is: a bet. Even a football pools coupon is a form of prediction, at some level. The difference from ordinary sports betting odds is that the market is entirely open. Kalshi sets no odds of its own; the system functions more like a stock exchange driven by supply and demand. The more people who have bet on a given presidential winner, the lower the payout — because the market has determined that outcome to be more likely. But probability, as noted, is not identical to truth.

The gap between prediction markets and opinion polls is in fact very large. At the time of writing, Donald Trump leads with around 62 percent on Kalshi’s market, while the latest polls show a near-dead heat. At least one of them is very wrong. Which one? And more interestingly, why? Outside the United States, additional prediction markets allow wagering on the election. Polymarket, a crypto-based service, can sidestep American regulations by allowing everyone except Americans to speculate on the result. Foreign users appear to have drawn similar conclusions — Trump leads with around 67 percent on Polymarket.

Some speculators appear extraordinarily confident. A user going by “Fredi9999” recently placed around 150 million kronor on Trump becoming the next president. The underlying crypto technology makes it difficult to know who — or how many people — are behind the position. One can only speculate about the motive. Perhaps it is not primarily about trying to profit from a correct guess, but about trying to influence the outcome. If Trump appears to be the winner in voters’ eyes, his chances of actually winning increase. Rajiv Sethi, economics professor at Barnard College, told the Wall Street Journal: “If I were trying to manipulate a market, this is exactly how I would do it.”

The divergence between prediction markets and polls could also become a card to play in any post-election dispute. Given the conflict that followed the 2020 election between Biden and Trump — which culminated in the storming of the Capitol on 6 January — there is already fertile ground among some for the belief that the election will not go fairly. In that context, being able to point to how different the result was from what the market predicted may be all that is needed to establish scepticism and challenge the outcome.

A single bet of 150 million kronor sounds enormous in a Swedish context. But in total around 20 billion kronor is at stake on Polymarket’s exchange alone. The question is how useful markets like Kalshi and Polymarket actually are at predicting the outcome of the American presidential election. The idea of listening to large groups to forecast the future was popularised in 2004 when journalist James Surowiecki published the much-discussed book The Wisdom of Crowds. It gives examples of how well-balanced groups can reach better and faster decisions than individual experts. But not all groups display wisdom. A stock market bubble is the opposite — everyone follows each other’s behaviour, fairly uncritically, and the majority ends up losing.

Looking at how Kalshi actually works, it is quickly clear that it is not designed to aggregate balanced voices that could outperform an expert. It looks like a betting site. Choose a question — which party wins the House majority? — and based on your answer you immediately see how much money you will win if you are right. By using terms like forecasting and prediction, sites like Kalshi and Polymarket have been attributed a seriousness they may not deserve. It is a slippery slope between a political forecast with a financial payoff and an old-fashioned bet. It is wagering dressed in the trappings of political science — and wagering is, as we know, no exact science.

Taleb makes a similar observation in Fooled by Randomness: “No matter how sophisticated our choices, how good we are at dominating the odds, randomness will have the last word.” Neither polls nor prediction markets can cleanly handle the randomness and unknown factors at play in something as vast as a political election. Is it harmless to let them run? That was the American legal system’s judgement, at least. But perhaps it underestimated the reasons people bet on these questions. You don’t necessarily bet to win the wager in the moment — you bet to influence others. And then, with randomness on your side, to win in the long run.


Did Klarna’s shareholders know what they were doing?

October 24, 2024
by Björn Jeffery
SvD Näringsliv





Did Klarna’s shareholders realise they were voting away their own influence?

Published in Svenska Dagbladet, 2024-10-24. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

The extraordinary general meeting at Klarna is over and the major shareholders got what they wanted. Sebastian Siemiatkowski strengthens his grip ahead of the listing. Why did the other shareholders let it happen?

“Minor administrative amendments to the articles of association” is not an agenda item that normally excites shareholders. But in Klarna’s case it concealed something that should have made the company’s shareholders furious — assuming they understood what it meant. There is much to suggest that many of them did not.

SvD has reported on the power struggle that preceded the extraordinary general meeting held in London on Thursday. Among the proposals passed was the ability for the board to remove members found to have breached their duties, and to appoint new members. Klarna — which now has a British parent company — is permitted to do this under British company law. In Sweden it would not have been possible: in a publicly listed Swedish company it is the shareholders, through the general meeting, who appoint at least half of the board members.

Power is now shifting from the general meeting to the board — which strengthens those already represented there, including CEO Sebastian Siemiatkowski and chairman Michael Moritz from venture capital firm Sequoia, while major shareholders such as co-founder Victor Jacobsson will lose out. His board representative, Mikael Walther, was forced to resign as a consequence of Thursday’s meeting.

What is not standard is that shareholders vote to reduce their own influence — at least not if they understand that is what is happening. According to Klarna itself, the move of the parent company to the United Kingdom was made to prepare the company for a listing, on the grounds that British law is internationally recognised and well understood by larger investors. Given that the listing will most likely happen in the United States rather than the UK, there were probably other options for domicile. But restructuring a company ahead of a listing is in itself neither unusual nor controversial — it is practically standard.

What is not standard is that shareholders vote to reduce their own influence. At least not if they understand that is what is happening. The decision to relocate was made in March this year. A share in the Swedish Klarna could be exchanged for a share in the British Klarna. It sounds simple, and shareholders reasonably did not want to stand in the way of the approaching listing — the prospect of liquidity beckoned. But then there was that matter of company law.

What Klarna voted through at its extraordinary meeting on Thursday was correct and legal under British company law. The equivalent manoeuvre in Sweden would not have been possible. So why did shareholders vote to reduce their own control over the company? Did they understand that the move — indirectly — entailed more than just listing preparation? A simple safeguard would have been to incorporate the same articles of association as in Sweden into the British company — to keep the same rules as before. But that safeguard was absent.

Whether this was a deliberate move or an unforeseen consequence can only be speculated about. The situation is now what it is. Power has been consolidated among existing board members, and a new standard articles of association has been established for Klarna — one that will likely be the framework presented to new investors at the listing going forward. Given the expected destination of the listing — the United States — that is unlikely to cause problems. The American stock market is full of companies with governance structures different from what Swedes are used to. Among the larger tech companies it is more the rule than the exception. The clarity it provides has probably helped several of them. Everyone understands who is driving and who decides. Zuckerberg is boss at Meta, and if you don’t like that, you shouldn’t invest in its shares.

But that reasoning only applies to the prospective new shareholders in Klarna — those who may come in after the listing and going forward. For the existing shareholders who have now lost much of their control and influence to the board, the situation is not so clear. They appear to have voted themselves out. The question is whether they understood that is what was happening.


How our grip on truth could crumble

October 22, 2024
by Björn Jeffery
SvD Näringsliv





Behind AI-generated deepfakes lies an even bigger problem

Published in Svenska Dagbladet, 2024-10-22. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

New digital tools have opened the door to mass manipulation that could influence the American presidential election. But behind AI-generated deepfakes lies an even bigger problem.

A girl in an orange life jacket sits in a boat. She looks as though she has been crying for a long time — tired, red-eyed. The water around her is brown and unwelcoming, and it is raining hard. She is holding a puppy. Hurricane Helene has just swept through American states including Florida, Georgia and South Carolina. The rescue operation has been difficult and the destruction enormous. The image of the little girl spreads quickly online as a symbol of the suffering Helene has caused. The girl does not exist. The image is AI-generated. Even an untrained eye can sense that something is not quite right — it looks partly animated, with a shimmer that gives it an unnatural gloss. Yet it quickly becomes a weapon in a political debate about whether society has prioritised the relief effort properly.

Fears that AI-generated images and deepfakes would influence American elections have existed for years. With the dramatically accelerating pace of AI development, those concerns have intensified ahead of this year’s presidential election. There are already plenty of examples. A user called “Think for yourself!” posted the fake image of the girl in the life jacket on X with the comment: “I don’t care if it’s AI, it’s still true!!!” The phenomenon raises an interesting question. Is it AI images influencing public opinion that we should worry about — or is there possibly an even bigger problem: voters deliberately allowing themselves to be influenced by an image they know is fake?

The term “deepfake” was coined on the internet forum Reddit in 2017 — a combination of “deep” from “deep learning,” a type of AI technique, and “fake.” On Reddit, this new technology was used to create videos where pornographic content was reworked to include celebrity faces. That genre of content has a tendency to be quick off the mark in major technology shifts. There is also no shortage of “cheapfakes” — poorly executed deepfakes using crude methods like pasting heads onto other bodies. The intent is the same, but the execution low quality.

In 2023 AI technology made a major breakthrough. Services like Midjourney and Stable Diffusion suddenly gave tech enthusiasts powerful tools to create new kinds of images. In March of that year an image appeared of the Pope wearing an incredibly elegant and fashionable white puffer jacket. It went viral immediately, with the Pope praised for his bold fashion choices. The image was, of course, fake. The creator had to issue an apology after what had seemed like a harmless joke spiralled out of control. In another example, Trump posted a series of images appearing to show Taylor Swift fans — so-called Swifties — rallying behind him politically. Also fake. In a Fox Business interview he distanced himself from the images, but in a telling way: “I know nothing about them other than somebody else generated them. I didn’t generate them.”

Trump didn’t create the images. But he spread them. And through that, uncertainty is created about what is true, what is uncertain, and what is entirely false. In a world of deepfakes, the opposite problem also arises: genuine photographs are assumed to be fake — or can at least be dismissed by a political opponent as exactly that. When presidential candidate Kamala Harris landed at Detroit Metropolitan Airport in early August, a large group of supporters with banners was visible beside the plane, enthusiastically cheering her arrival. Trump was not equally enthusiastic. On his own social media platform Truth Social he accused Harris of having manipulated the images: “Has anyone noticed that Kamala cheated at the airport? There was nobody at the plane, but she ‘AI’d’ it and then it showed a massive crowd, but they didn’t exist!” Given the number of people present, plenty of other images from the same moment existed. The crowd was real. But once the seed of doubt is planted, it becomes an argument one can deploy against almost anything. Does a picture make you look bad? Then it’s fake. Does a picture make your opponent look good? Also fake.

Political actors have always used a range of methods to smear opponents and try to win elections. In 1972 the American newspaper Manchester Union received a letter claiming that senator and presidential hopeful Edmund Muskie had used a derogatory term about a large voter group. The letter later turned out to have been written by an employee of the sitting president, Richard Nixon. It triggered a downward spiral for Muskie, who ultimately did not win the presidential nomination after all. A fake letter — a simple but apparently effective method. Another popular technique is robocalling — automated phone calls. In 2008, thousands of residents in North Carolina received a call in which a voice told them they would receive a voter registration form by post, which they should fill out and send back to ensure they could vote in the upcoming primary. The problem was that by the time the calls were made it was already too late to register, and the calls were going to people who were already registered. Confusion ensued, which may have prevented some from voting at all. The campaign was traced to a group called “Women’s Voices Women Vote,” which had connections to Hillary Clinton’s primary campaign.

What the introduction of deepfakes has done is dramatically lower the threshold — and the cost — for creating fake material. What previously required a professional video production team can now be done in a couple of minutes by anyone. The quality is often quite poor, and a new term has emerged to describe the enormous volume of low-quality AI imagery that has appeared: AI slop. Given the pace of AI development, we are months rather than years away from substantially more realistic images and videos of this kind. The companies behind these tools claim to have policies against such use, but enforcement is practically very difficult. And the damage can already be done by the time the source is identified.

The volume of political deepfakes is now so large that they have been documented in a database administered by researchers affiliated with Purdue and Northwestern universities. At the time of writing it contains over 540 examples.

There are two different perspectives on how the deepfake problem will develop. A pessimist would say it will likely get worse quickly. The quality of these services is improving, and in just the past few months AI tools for both audio and video have nearly exploded in capability. With better tools accessible to far more people, it is hard to believe the problem will resolve itself. Relying on human goodwill and good intentions in this context may be naive.

An optimist can note that despite this proliferation of new tools, the problem is still relatively contained. More fact-checkers than before — both news services and social media platforms — are now examining this kind of material. A fake image spreads fast, but it can also be debunked fast. AI development may even assist with that too. When Trump was shot at a political rally in Pennsylvania, an image spread appearing to show smiling Secret Service agents — as if pleased with the outcome. The image turned out to be false and was quickly verified as such by multiple independent sources. The problem is created fast, but the solution follows shortly after.

Taken together, we have a media landscape that may face a larger problem than individual fake images or video clips. Our shared sense of what is true and what is false risks eroding. The quality of the material does not necessarily determine whether someone believes it — they may simply have decided to trust the source, regardless of what it says. It takes only a drop of doubt before what we have collectively accepted as truth begins to crumble. Should that trend continue it will be a major challenge for society. But it is not strictly a problem that arose with AI and deepfakes. If — like the person who posted the girl in the life jacket on X — you have already decided what is true and false in the world, there are few things that can make you change your mind. Even when you know it is fake.


The paedophile alarm concerns every Roblox parent

October 20, 2024
by Björn Jeffery
SvD Näringsliv





Roblox accused of being a haven for paedophiles

Published in Svenska Dagbladet, 2024-10-20. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

The gaming platform has been described as a “nightmare landscape of paedophiles.” At the same time, two thirds of all primary school children in Sweden use it. Should parents be concerned about the accusations from Hindenburg Research?

“Escape to Epstein Island,” “Beat up the pregnant” and “Survive the killer” — these are some examples of games on the Roblox platform. In “Beat up the pregnant,” the objective is to kill pregnant women with knives and frying pans in a car park. The company itself describes its goal as to “connect a billion people with civility and optimism.” As you may notice, something does not quite add up.

Last week, short-selling firm Hindenburg Research published a report on Roblox. The platform allows users to create and publish their own games, which has led to a rather different range of content than games typically contain.

Hindenburg — named after the airship that exploded in New Jersey in 1937 — is, as the name suggests, a firm that profits when companies do badly. They short the shares and then publish reports — with obvious self-interest — that cast target companies in a poor light. When Hindenburg Research went after India’s Adani Group, the market value fell by over 120 billion kronor on the first day. Roblox’s share also took a hit after Hindenburg’s publication, though it has since recovered.

The firm’s criticism centres on two main areas. First, that Roblox is opaque about — and overstates — the number of players on its platform. Second, that it is a “nightmare landscape of paedophiles” where children and young people can encounter both inappropriate content and inappropriate people. Roblox allows children under 13 to play, but treats them differently on the platform — though in many cases children and adults play the same games simultaneously.

User numbers are an almost constant topic of debate for gaming and social media companies. What seems like a straightforward calculation rarely is. In 2016 Facebook had to apologise for having incorrectly reported how many people had watched video on its service — and overestimating video views had also distorted the associated advertising, which is Facebook’s primary revenue stream. In Roblox’s case it is a question of definition, and the company itself dismisses the criticism in a statement, saying its definitions are clear and properly disclosed. From the outside it is hard to judge — but making numbers look slightly more favourable than they are is hardly unique to Roblox on the stock market.

The second issue — around paedophiles and other inappropriate behaviour — is more serious. According to Roblox’s latest quarterly report, around 79.5 million users were active on the platform daily. Keeping track of all those users — particularly with chat functions and the ability to create custom games — is to put it mildly a challenge. Hindenburg’s report provides many examples of how obviously inappropriate content has slipped through the existing safety systems, and cites cases of multiple people arrested after attempting to arrange meetings with children on the platform. Games depicting simulated sexual assaults and similar content are numerous.

That sounds terrible — for parents especially. But provocative use of offensive names and actions is something that occurs throughout the digital world. It is not necessarily desirable, but it does not automatically mean that it is happening in reality, or that it was even intended to. Roblox maintains that it has a robust safety system that catches and blocks a great deal.

In an interview with Yahoo Finance, equity analyst Michael Pachter from Wedbush Securities commented on the report: “I don’t question that anything in the report is wrong […] but I’m not sure it’s relevant.” Pachter’s point is that the number of paedophile cases and similar incidents is very low relative to the number of users. He has a point — mathematically. But rarely has the contrast been so stark between what markets and ordinary people care about. A single paedophile is not much in statistical terms — but you don’t need more than one to cause serious harm.

Hindenburg Research are not noble knights concerned about children’s wellbeing. They are opportunists trying to make money by damaging a company that appears to have insufficient control over its operations. But what they are saying — regardless of their motives — is something that concerns every parent whose child plays Roblox. And there are many of us. Two thirds of all Swedish primary school children do.