What We're Reading #4

This edition is a bit depressing, to say the least.

Hi folks, hope you’ve had a great week!

Our team at Markets is always reading, often much more than what might be considered healthy. So, we thought it would be nice to have an outlet to put out what we’re reading that isn’t part of our normal cycle of content.

So we’ve started “What We’re Reading”, where every weekend, our team outlines the interesting articles — even books — that put our brains in seventh gear (if that even exists).

It’s a little unfortunate that even in what was launched as a fun exercise, our reading list is hardly able to escape the news cycle. The militarization of AI, the philosophical theories that drive the militarization of AI, the energy shock in West Asia — that’s most of what we’ve read this week.

No doubt, all of these are quite interesting to the extent that we don’t cover them on Markets by Zerodha. But they’re also saddening, maddening, and pitch-black dark — a sign of the times we live in, maybe. But that’s also probably why we might want to spread our territory a bit more, lest we end up sounding like doomer parrots.

We’d also love to know what has piqued your interest, too! Please feel free to let us know in the comments.

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What Pranav is Reading

‘God, It’s Terrifying’: How the Pentagon Got Hooked on AI War Machines, by Katrina Manson (link)

It was around midway last week that I learnt to fear the future.

There was news, out in the media, about a growing rift between the US Military and Anthropic. It was spicy enough, as the news went. Only, I couldn’t tell what my new best friend, Claude, was actually doing in the military. That was on me. I was naive.

So I read about what Palantir actually did. By the time I was done, the world seemed a few shades darker. There are computers that, at this very moment, are patching together thousands of datafeeds to decide, algorithmically, who one may kill next. Those who have used it consider it indispensable. To someone whose idea of war came out of JP Dutta’s Border, this feels rather dystopian. It’s just harder to say “yeh dharti meri maa hai” in an air conditioned room with seventeen screens carrying AI-annotated satellite feeds.

Jokes aside, war has changed somewhere in the last few decades. It’s worth knowing how, especially if we’re slipping into a dangerous, disorderly era. This is why I feel a need to get my hands on Katrina Manson’s new book, Project Maven, which comes out later this month. Maven, incidentally, is the AI system that Palantir runs for America’s military and intelligence wings. As Katrina quotes someone that built part of that system, “God, it’s terrifying.”

While we wait, Bloomberg has an excerpt from the book. Worth a read.

One Hundred Years in the U.S. Stock Markets, by Hendrik Bessembinder (link)

Ok, I don’t even want to pretend like I just read academic papers for fun. Maybe some day, I shall attain that pinnacle of nerdhood. And perhaps then, finally, I shall win Bhuvan’s respect. And then… uhm, that’s enough daydreaming for a day.

But I did talk to this paper a bit, thanks to ChatGPT. You should too.

Honestly, this paper recommends itself. If you’re here, chances are that you’re trying to gain a whiff of understanding around this terrible, inscrutable ocean buy and sell orders that we call a ‘market’, guessing at how each wave shall break. You could do worse than looking at the mecca of modern finance — America.

The picture, honestly, isn’t very pretty. Stocks are usually a lousy bet. 96% of stocks basically create no wealth at all. In fact, you’re better off just buying a treasury bill over a vast majority of stocks.

But the ones that work? Oh, boy, do they work! 3.7% of all stocks have created $91 trillion in wealth over the last hundred years, compared to the remaining 96.3% that have created nothing. That’s perhaps why the market is so maddening.

But it’s worth looking at this paper for the specific way in which it is.

Fort of Our Lady of the Conception (link)

One of the best gifts of history is that it makes geography come alive.

Take the little island of Hormuz, which is, really, the centre of the world right now. The United States, Israel and Iran are only the latest in a long line of combatants to clash over the spot. Its history, however, runs far deeper.

It began, really, with the Mongols, nearly a millennium and a half ago. As they tore through the region, the inhabitants of the nearby city of Ormuz, 40 miles away on the Omani coast across the Strait, fled to this island. Over its history, it often found itself as a place of refuge, tucked away where raiders couldn’t get to its wealth.

A thousand years hence, it was the Tweedledee and Tweedledum of modern Asian history — Portugal and England — that fought over the island. But this time, it was for power projection. That’s what it is today: a single point to choke the entire strait.

Our moment in time, too, will pass into history. None of the combatants, victorious or defeated, will survive. Perhaps the school textbooks will forget our century altogether. But the island? Well, the island will still be tortured by some damn war or another.

What Manie is Reading

Palantir goes to the Frankfurt School, by Moira Weigel (link)
The Intellectual Origins of Surveillance Tech, by Geoff Shullenberger (link)

My dual recommendations for today are less economics and more philosophy. But, as most people smarter than me will tell you, there’s no economics without philosophy. So much for someone like me who detests philosophy.

Both these articles, which have the same target subject, couldn’t be more important today. They address the PhD (in philosophy) thesis of one Alexander Karp. Yes, the very founder and CEO of Palantir.

The story goes that Karp did his thesis under scholars who adopted a very critical, often Marxist lens to understanding culture. One of them, Jurgen Habermas, who passed away very recently, was Karp’s teacher. Karp has apparently been known to give certain Marxist sermons to his employees in the past.

Karp’s thesis is centred around jargon. In his view, jargon provides cultural justifications for human aggression. That’s because jargon helps the speakers treat those justifications as permanent conditions of their existence. This, in turn, creates a social group of such speakers that’s based on excluding those who don’t speak this jargon.

Karp’s thesis gives the example of Martin Walser who, shockingly, argued against the need for any more Holocaust remembrance. He used phrases like “we Germans” to contrast against Jews who Walser thought got too much attention decades after the Holocaust. What makes it worse is that at some point before, Walser believed that Germans should take accountability for the Holocaust — a full 180-degree turn. Yeah, this is all very horrifying.

But Karp doesn’t seem to argue against the use of jargon. He simply believes some forms of jargon are better than others. When he says why “The West should win” and why “America First”, he’s also creating a new social order based on an exclusion of people who don’t believe it. This, the authors say, becomes the foundation of Palantir’s existence.

Where the major claim of both articles lies is that this idea of jargon, where you look for traces of language to try and build someone’s identity, might also provide insight into Palantir’s tech stack. Because, well, that’s what they do: find patterns across fragmented personal data using AI to trace out a digital sketch of someone out of it.

The technological claim feels like a big stretch. But the exploration of Karp and Thiel’s philosophies are very informative when it comes to how they define Palantir’s grand purpose. If you ask me, it’s scary, even immoral.

What Kashish is reading

Jeff Currie on the energy shock and “you can’t print molecules” (link)

This is Jeff Currie (ex-Goldman, now Carlyle) explaining why the current energy situation is less about markets and more about physics.

The most interesting bit was the growing disconnect between financial and physical markets. While Brent is trading around ~$100, physical crude in Asia is already clearing closer to ~$170–180. In theory, that kind of gap should get arbitraged away — buy cheap in financial markets, sell expensive in physical markets.

But that doesn’t really work here.

Oil isn’t just a financial asset; it’s a physical good that needs to be moved, stored, refined, and delivered. You can’t just buy a contract in the US or UK and magically settle it into barrels in Asia. The logistics — shipping, infrastructure, contracts, geopolitics — make that arbitrage extremely hard to execute in practice.

So the gap persists.

The other line that really stuck with me: you can’t print molecules. Financial markets can create liquidity, smooth volatility, and price expectations — but they can’t solve a physical shortage. If there aren’t enough barrels, there just aren’t enough barrels.

And that’s really his broader point. This isn’t a typical cycle where markets adjust smoothly. It’s a supply shock running through real-world systems, and the adjustment — if it comes — will likely be messy.

He also thinks we haven’t even started the real re-balancing yet, because there’s been no meaningful demand destruction so far.

Good video.

What Krishna is reading

The Oil Shock Is Here. And We’re Just Beginning to Feel It (link)

I came across Rory Johnston fairly recently. He runs a newsletter called Commodity Context — which breaks down the global energy market with data. Oil is one of those subjects I’ve been circling for a while, trying to understand the basics — how the market works, why prices move the way they do, who the real players are. Commodity Context has been one of the better things I’ve found for that.

So when HBR published a conversation with him this week about what’s happening with the Strait of Hormuz, I read it carefully. The US-Israel war on Iran is now in its third week. Iran has closed the Strait — the narrow passage at the mouth of the Persian Gulf through which about 20% of the world’s oil supply flows, mostly headed to Asia. Prices have already spiked, but Johnston’s argument is that this is only the start.

He has this phrase for it: an air pocket. Tankers that left the Gulf just before the closure are still at sea. They’ll reach their destinations in the next week or so, and after that, the deliveries stop. That’s when the air pocket hits — when the physical scarcity becomes undeniable and markets can no longer look away.

Johnston thinks the financial markets are still in a kind of disbelief, waiting for Trump to end this the way he usually ends things — quickly and cinematically. Johnston admits that was his own assumption too. He says he never expected to see an actual three-week closure of the Strait in his lifetime.

There’s a bunch of other interesting things he said, definitely worth a read!

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