Anusar Farooqui, Founder and CEO, Systematic Portfolios LLC. Words: policytensor.substack.com/?s…
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You have to understand war as a strategic process.
When I told you that Iran had lost cat and mouse, the pushback was that the flows were still considerably down from normal. People did not understand that the evidence already showed that Iran had failed to do what they declared repeatedly: that Hormuz was closed for all traffic, that not a single ship would pass unmolested.
Their failure to impose their authority undermined the credibility of their threats. This is what opened the floodgates. And now oil flows are back to prewar levels.
How did this happen? And what does it mean?
It happened bc they misjudged the difficulty of shutting Hormuz. This is not a physical problem. They can strike all the tankers in all the ports. They can strike US ships. They chose not to do that, perhaps in exchange for planeloads of cash, perhaps bc they are afraid of the US response, as @SanamVakil suggested in the NewYorker interview.
Whatever the reason, the Iranian defeat at Hormuz is highly significant because it blew their theory of victory out of the water.
If they are unwilling to escalate, they have no theory of victory. Which is fine. You can make peace if you are not up for the fight. But to pretend that there is still a viable theory of victory without any appetite for escalation is nonsense. They do not.
But if that is the case, then the Iranian asks are absurdly high. They can only be seen as an initial bargaining offer. This is why Trump rejected them out of hand.
You can’t have it both ways. War is a strategic process. If you do not have the appetite for the fight, then you have to give concessions to the other side, like the US did in 1972 to Hanoi.
How Iran decisively lost the game of cat and mouse.
As I have explained at length on the Substack, Iran threw down the gauntlet on July 9 and declared the game of cat and mouse over: only tankers in touch with the IRGC’s Hormuz authority were to be allowed unmolested transit.
Some 3.3 mbd has continuously been exiting Hormuz without permission and in defiance of the Iranian order. A small lifeline for the world economy, but more importantly, proof that Iran has not been able to decisively impose its authority on the shippers.
All this Iran-Oman agreement is good for nothing if the shippers continue to believe the Americans, and especially if they continue to evade Iranian control.
This means that they either have to shoot more tankers. Or they must accept defeat in the tanker war and more fully embrace counter-base campaigns as the principal means of putting pressure on the Americans.
We should learn soon enough which way they go. What is clear is that Iran’s attempt to shut down cat and mouse has been decisively defeated by the US.
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Policy Tensor retweeted
“One way to understand the class alliance that has coalesced around Bolsonarismo is to think of it as the meeting of those who have given up waiting for the promises of modernization to be realized, and those who have stopped pretending that the promises they made were real.”
What is happening in Brazil, and why do these elections matter so much? We asked a philosopher, a social scientist, a journalist and an organizer.
Now up on North South Notes: by Rodrigo Nunes, Camila Rocha, Piero Locatelli and Stephanie Weatherbee Brito
northsouthnotes.org/p/how-to…
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U.S. B-1 bombers evacuated from UK base after attack threats from Iran. My report on @axios
axios.com/2026/10/04/us-b-1-…
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Astra helped me understand how a permanent underclass could emerge without mass unemployment. chatgpt.com/s/t_6ac2d0bef260…
Is the thesis of the permanent underclass separable from the thesis of mass technological unemployment?
Hara (2026) summarizes the thesis of the permanent underclass as follows: 'once AI and robots advance far enough to displace human labor wholesale, we will be frozen in our current class positions'.
I don't dispute that there is at least a real possibility that AI could eat everyone else's work, reducing the bulk of the populace to a life of dependence and indolence. This could perhaps unfold over decades, for reasons @davideoks spelled out a while ago. Although one can see how it could happen much faster in an explosive RSI scenario.
I want to raise the possibility that extreme class stratification could emerge even if AI and robots do not displace most workers outright.
By 2028, there may be more agents than humans on the planet, and they may be performing more work than all humans combined. Perhaps only a small fraction of this additional work performed by machines may be captured as measurable surplus (and GDP), due to the familiar pattern of the shrinkage of the measureable economic value in sectors with the fastest productivity growth.
Still, if you hold unit values constant in your mind's eye, you can see how a vanishingly small fraction of humans, using vast armies of agents, could end up with the bulk of the work performed on the planet and the associated surplus.
One can see how this process could quickly lead to a two-tier society without any mass technological unemployment. So, you see, the thesis of the permanent underclass is separable from the thesis of mass technological unemployment.
Hara (2026): papers.ssrn.com/sol3/papers.…
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The greatest radiation of them all.
A recent analysis in Science of more than 116,000 bird songs has revealed that the astonishing variety of passerine birdsong is built from just eight basic acoustic motifs, like trills, whistles, and harmonic notes.
The findings also reveal that local environments greatly shape how birds communicate around the world.
Learn more on #WorldAnimalDay: scim.ag/4wYoVXE
ALT A phylogenetic distribution and trait correlates of acoustic motifs in passerine birds. Hedline reads: The global biogeography of passerine songs
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Prescient. One can go further. The ideology of the colorblind meritocracy can hardly survive the end of class hegemony.
Back in the 2010s I started but never finished an article arguing that the Asian status of “model minority” in the US is based on the neoliberal form of society and is thus susceptible to getting turned upside down as the crisis of neoliberalism deepens
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They can’t possibly think that they can win a protracted war of the sieges. And although the process is not monotonic, economic conditions will get worse over time.
This is the great puzzle of Iranian restraint. A deal serves Iran. Escalation serves Iran. What doesn’t serve Iran is kicking the can down the road. This is what I have described as the strategic incoherence of Iran’s policy.
Even if they are getting plane loads of cash from the Gulf Arabs, that’s a band-aid, not a solution to the problem posed by the boa constrictor.
Eventually, they have to break the gridlock and make a decision one way or another. Either abandon the big ask and get the python off their neck, or prosecute a strategic offensive to seek a decision.
Iran’s Top Security Official Warns of Dire Economic Crisis
The rare admission from Mohsen Rezaei, the security chief, came weeks after the U.S. tightened sanctions and its naval blockade.
Our latest article @ErikaSolomon for the @nytimes 👇🏼
#Iran
nytimes.com/2026/10/04/world…
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No. Even Israel won’t do that.
Prof. John Mearsheimer:
‘It's now clear that Israel cannot prevent Iran from acquiring nuclear weapons using its own conventional forces.
It doesn't work. The only option they have is nuclear weapons, and I believe the Israelis would use nuclear weapons in that situation.’
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Is the thesis of the permanent underclass separable from the thesis of mass technological unemployment?
Hara (2026) summarizes the thesis of the permanent underclass as follows: 'once AI and robots advance far enough to displace human labor wholesale, we will be frozen in our current class positions'.
I don't dispute that there is at least a real possibility that AI could eat everyone else's work, reducing the bulk of the populace to a life of dependence and indolence. This could perhaps unfold over decades, for reasons @davideoks spelled out a while ago. Although one can see how it could happen much faster in an explosive RSI scenario.
I want to raise the possibility that extreme class stratification could emerge even if AI and robots do not displace most workers outright.
By 2028, there may be more agents than humans on the planet, and they may be performing more work than all humans combined. Perhaps only a small fraction of this additional work performed by machines may be captured as measurable surplus (and GDP), due to the familiar pattern of the shrinkage of the measureable economic value in sectors with the fastest productivity growth.
Still, if you hold unit values constant in your mind's eye, you can see how a vanishingly small fraction of humans, using vast armies of agents, could end up with the bulk of the work performed on the planet and the associated surplus.
One can see how this process could quickly lead to a two-tier society without any mass technological unemployment. So, you see, the thesis of the permanent underclass is separable from the thesis of mass technological unemployment.
Hara (2026): papers.ssrn.com/sol3/papers.…
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What is the global deadweight loss of this? How many billions of hours do we collectively spend every year on ‘verifying’ that we’re human?
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I don't understand the obsession of the haters. They are not only hurling insults at me, they are harassing my interlocutors!
I can understand why you would push back against one person often. In my case, I often respond to Danny and a few other analysts. Even if I almost always write when I disagree, it is still a sign of respect. I pay attention to him because I find him to be serious.
Disagreement is, ofc, far more interesting than agreement. But I would never bother to respond to someone I thought was a moron. What would be the point of that?
So I am really puzzled by the haters. If they think I am so stupid that I should be summarily dismissed, why don't they just tune me out?
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No argument is offered about what is broken at OpenAI beyond their drive to beat the competition. But how is this broken? This is how the system is supposed to work!
If your case is that the firm’s risk appetite is higher than the social optimum, then make that case. This is an obvious case for regulatory restraint, not bc the culture of OpenAI is broken but precisely bc it is not!
OpenAI is a classic Schumpeterian firm, straight from @Ph_Aghion’s Nobel prize citation.
'What I’m about to tell you has, I realize, become something of a cliché: I resigned this week from OpenAI. I led the writing of the safety reports we published with each major launch.'
theatlantic.com/technology/2…
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Sure. They’re not interested in kicking the West’s ass. But the West is interested in strangulating them. And that is going to force their hand.
China is not interested in "kicking the west's ass."
Culturally, the 1.4 billion Chinese see themselves as "the civilized world." They still have the muscle memory of being an world empire. The rest of the planet are just occasionaly pesky barbarians tribes living outside of their world empire that can be useful to trade with but are not really part of "the actual world that really matters" and thus are not fundamentally relevant to their lives at all.
Xi Xinping does have to deal with these foreign barbarians, so his approach is soothing: talk smooth to calm the barbarians down, so that they don't feel too scared of the inherent superiority of Han civilization.
For example, in his recent talk with Turapo, the chief of the warlike Nacirema tribe, an exotic tribe whose chief paints his hair yellow and his skin orange, these tribals showed they are alarmed about China's peaceful development. So Xi soothed the barbarians stating "don't worry about the Thucidides trap, we have avoided it." 🤪
Also he talked in another occasion about "the world is big enough to accommodate the common development and common progress of all countries," i.e., the world is big enough so the Han civilized world does not need to engage too much with barbarians.
There is no reason for them to teach the barbarians about anything. In fact, the Chinese strategy is that things are good as long as the barbarians don't dare to act pesky against the *mandate of heaven* by deploying an aircraft carrier group in the Taiwan strait, which has not happened in 20 years BTW.
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One of the things that people don't seem to realize is that nukes are no silver bullet. States that have been nuked may continue to fight on. First users may still get their ass kicked.
There is a tendency to think that nukes are a trump card. That once you use them, and the other guy cannot, you win. It does not work that way. You're supposed to get your way because you're willing to use nukes and the other guy does not have them. But the other guy has other options, which may not work out for you.
For instance, it is not clear what the balance of forces will be after an unrestrained exchange of fire. Maybe you destroy Tehran. But Tehran then destroys all the oil fields and water treatment plants in Israel and the Arabian Peninsula.
Nuclear weapons are far less usable than people think they are. I am of the firm opinion that they can only be used under great duress. Specfically, I can see how someone can order first use if the existence of the state is at stake. But not otherwise.
I do not like lazy speculation about nuclear use. It is not serious. It is a form of self-congratulation.
'We got the bomb. OK?' piped.video/watch?v=UrgpZ0fU…
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