Oct 7, 2019 · 56m · capital-allocators
Jonathan Tepper - Variant Perception of Capitalism (Capital Allocators, EP.110)
0:00 / 0:00
gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
Macroeconomic researcher and author Jonathan Tepper joins Ted Seides to explain Variant Perception's quantitative forecasting engine and explore the core arguments of his book, The Myth of Capitalism. Tepper breaks down how widespread corporate concentration and regulatory capture harm the economy, while outlining actionable policy solutions to restore genuine market competition.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 20.7% of the talking time here. How this is scored →
Ted as informed peer 2.1 Guest teaching 2.7 Guest disagreement 1.0 Ted pushing back 0.5
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 37:00 Forceful dismissal of TransDigm and Valeant pricing defenses
Tepper forcefully rejects the hedge fund defense of small-ticket item pricing power, calling it blatant predatory gouging with zero social benefit.
Hardest push from Ted ▶ 36:43 Host challenges Tepper with the TransDigm relative pricing thesisTed presses Tepper by presenting the common investor argument that parts represent a negligible percentage of plane costs and justify price hikes.
Biggest teaching moment ▶ 39:50 Historical lecture on the Chicago School transformation of antitrustTepper provides a comprehensive historical account of US merger enforcement shifting from 1960s strictness to Bork's efficiency framework.
Ted holds their own ▶ 41:23 Ted articulates the consumer welfare price metricTed demonstrates his academic background in antitrust economics, drilling into how harm is defined strictly through consumer price increases.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Opening Sponsorships: AlphaSense, Intap DealCloud, and Admired Leadership | 0 | 0 | 0 | 0 | Solo host segment featuring sponsor reads for AlphaSense, Intap DealCloud, and Admired Leadership. | |
| Introduction to Jonathan Tepper and The Myth of Capitalism | 1 | 1 | 0 | 0 | Ted introduces Jonathan Tepper and asks open-ended biographical questions about his unusual upbringing with missionary parents in Spain. | |
| Early Economic Awakening, Homeschooling, and Academic Foundations | 1 | 2 | 0 | 0 | Tepper explains his early awakening to foreign exchange via Big Macs, homeschooling, and academic work on optimal currency area theory. | |
| Genesis of Variant Perception and Systematizing Macro Forecasting | 2 | 2 | 1 | 1 | Ted introduces a skeptical premise regarding macroeconomic forecasting noise, and Tepper critiques traditional Wall Street economists and guru models. | |
| Mechanics of Leading Economic Indicators and Business Cycles | 3 | 3 | 0 | 0 | Ted asks how Tepper constructs his leading indicators versus consensus tools; Tepper details the mechanics of housing, yield curve, and liquidity signals. | |
| Identifying Market Inflections and Asymmetric Contrarian Bets | 2 | 2 | 0 | 0 | Ted asks about identifying inflection points, and Tepper explains trading first/second derivative shifts with examples from China and Brazil. | |
| Investigating Corporate Profit Margins and the Origins of The Myth of Capitalism | 2 | 3 | 1 | 0 | Tepper recounts how an apparent breakdown in his wage indicator model led him to investigate corporate concentration and industrial profit margins. | |
| Defining the Myth of Capitalism and Its Socioeconomic Consequences | 1 | 3 | 1 | 0 | Tepper defines true capitalism versus state-protected oligopolies and outlines the macroeconomic harms of unchecked corporate rent extraction. | |
| Sponsor Spotlight: Ridgeline AI-Native Investment Technology | 1 | 3 | 2 | 0 | Following a sponsor read for Ridgeline, Ted asks about big tech, prompting Tepper to break down ad duopolies and platform anti-competitive abuses. | |
| Natural versus Unnatural Monopolies and the US Beer Market | 3 | 3 | 1 | 0 | Ted reels off a list of concentrated industries from the book, prompting Tepper to distinguish natural monopolies from unnatural ones like US beer distribution. | |
| Hidden Monopolies, Regulatory Barriers, and Predatory Price Gouging | 4 | 4 | 3 | 3 | Ted challenges Tepper using the standard hedge fund thesis on TransDigm's low relative pricing; Tepper strongly dismisses it as indefensible price gouging. | |
| Eyeglass Consolidation and the Shift in US Antitrust Doctrine | 3 | 4 | 1 | 0 | Ted brings up Luxottica's dominance, and Tepper explains the 40-year intellectual transformation of US antitrust enforcement stemming from Robert Bork. | |
| Critiquing the Consumer Welfare Standard and Defining Platform Harms | 4 | 4 | 2 | 2 | Ted cites the traditional consumer welfare standard from his studies; Tepper replies that regulators fail to enforce even their own standard and ignore platform harms. | |
| Regulatory Capture, Consulting Conflicts, and Retrospective Bribery | 2 | 3 | 2 | 0 | Tepper explains regulatory capture by consulting firms and retrospective bribes, contrasting Warren Buffett's and Peter Thiel's monopoly strategies. | |
| Concrete Policy Blueprints for Bipartisan Antitrust Reform | 2 | 3 | 1 | 1 | Ted asks about practical reform; Tepper outlines bright-line market share tests and bipartisan interest in reducing regulatory moats before concluding questions. |
Statements from this episode (27)
Tepper: Single Currency and Monetary Policy Cannot Work for Europe
“And I thought the Euro was an incredibly stupid idea because, you know, I was looking at the correlation of employment shocks with Netherlands and Germany and Spain and Germany, and the sort of core periphery issues quite were already evident then, and it was …”
Nine in Ten Economists Missed the Four Recessions Prior to 2008
“Nine out of 10 economists had missed the last four recessions where we had the blue chip consensus estimates”
Tepper: Markets price directional economic change and surprise, not absolute quality
“It doesn't matter whether the economy is good or bad. What matters is the change in the direction. So markets are all about surprise.”
Tepper: Economic growth indicators only provide reliable visibility up to 12 months
“So on the leading economic side, there are certain things that tell you where the economy is going to be in three, six, nine, or 12 months, and it's generally difficult to look out past that, particularly on the growth side.”
Tepper: Inflation lags the economic cycle due to delayed corporate pricing and wage cycles
“On the inflation side, because inflation is so lagging, so if you think of supermarkets don't immediately start raising prices until they're sure the demand is there, they don't start cutting prices until they're sure that it's dropping off, and then wage cycl…”
Goldman Sachs Is the Only Major Bank Using Leading Economic Indicators
“And then if you look at, like, the big banks, only Goldman has a few leading indicators. Most economists, like the Fed, ignores them. The Wall Street banks ignore them.”
Tepper: Global Liquidity Indicators Lead Stock Prices by Six to Twelve Months
“And those are very, very useful because they tend to lead the economic leading indicators themselves by about six months, and they tend to lead asset prices too. So we have a lot of our liquidity indicators will lead commodity prices. They'll lead even stock p…”
Tepper: Guru-driven macro forecasting is not repeatable or transferable
“I don't want to denigrate some of the gurus who I still admire, but I thought that that's not repeatable. They might be able to hire someone and train them and teach them, but it's probably like a one-off. And I thought surely the best thing to do is to create…”
Tepper: About two-thirds of US industries have significantly less competition
“And the issue was he was trying to look at for the median industry. Are there fewer competitors? Is there less competition at the national level today versus 10, 20 years ago? And the answer is for about two thirds of industries, the answer is there's a lot le…”
Tepper: High corporate margins stem from pricing power, not efficiency
“That paper itself started tied the high profit margins to competition and pointed out that it's not because these firms are just that much better and more efficient. They're getting a higher return on assets and it comes from scale. Rather, they end up with pr…”
Tepper: Many Oligopolies Exist Due to Regulation Rather Than Economic Scale
“There are just many industries where there's absolutely no reason why they should be a duopoly or an oligopoly. And a lot of this comes down to regulation. And so the myth of capitalism in my mind is that we're not really looking at a true capitalist system be…”
Tepper: Economic Inequality Stems from Lack of Competition, Not Capitalism
“What Piketty talked about certainly does happen, which is that you end up with an increase in inequality. And it doesn't come because there's a fatal flaw in capitalism. It comes because essentially there's not enough competition. Capitalism itself is not func…”
Facebook Killed Twitter's Vine Platform by Blocking Video Sharing
“Facebook effectively killed off fine by preventing that from being shared, which was Twitter's video platform. Facebook wanted to own video.”
U.S. Antitrust Chief Makan Delrahim Was Once Google's Lobbyist
“Macon Dalrahim, for example, is the attorney general for antitrust in the US. He was Google's lobbyist for the double click acquisition.”
Tepper: Two Companies Effectively Control 90% of the US Beer Market
“It's very difficult for companies to get national distribution, so that those who do have it have a pretty big advantage, and then through a series of mergers, because the regulators don't honestly care, you've ended up with two companies having over 75% marke…”
Tepper: Most US states have a health insurance duopoly or triopoly
“The McCarran-Ferguson Act essentially Devolved regulation down to the state level, which meant that the state insurance commissioners are the ones who decide things, so you essentially have a duopoly or three players in almost all states when it comes to healt…”
TransDigm Hikes Acquired Aircraft Component Prices by 500% to 700%
“A classic one that hedge funds love and that I think is horrific is Transtime. Basically, there's not competition because to get an FAA part approved takes a very long time, and so you and I can go and provide seat belts cheaper than Transtime, and anytime the…”
Valeant Exploited Regulation to Charge $300,000 for a Cheap Disease Drug
“There was Wilson's disease was the classic with Valiant, where absent regulation, they would not be able to charge 300 grand a year for a life threatening drug that really should cost pennies, right?”
Tepper: US antitrust regulators have blocked almost no mergers
“And in industry after industry, what's happened is that the DOJ and the FTC over the years, the level at which they will scrutinize mergers has sort of gone up and up. And then effectively, they've blocked almost no mergers and scrutinized almost no mergers.”
Tepper: Mergers Leaving Fewer Than Six Competitors Drive Up Prices
“There's extensive evidence that mergers, particularly under six players, lead to higher prices.”
Tepper: Sherman and Clayton Acts Were Political, Not Purely Economic
“But ultimately, the Sherman Act and the Clayton Act were much more political than purely economic, meaning that there was a decision that we don't want to live in a society where one or two people control entire industries.”
Antitrust Regulators Are Captured by Retrospective Bribes From Law Firms
“What they're ultimately doing is, it's what Nassim Taleb called the retrospective bribe, where it's not like someone's giving them a suitcase of cash, but rather they're very aware and conscious that if they're going to go back to their law firm, they want to …”
Warren Buffett Invests in Unnatural Monopolies Created by Regulatory Fiat
“Buffett tends to like what I call the unnatural monopolies, right? So he's an owner of Moody's. That only exists because it was an act of Congress which created the NRSRO designation, and it's easier to raise an armed militia in the U.S. Than it is to start a …”
Peter Thiel's Monopoly Thesis Only Addresses Network-Effect Natural Monopolies
“Thiel praised monopolies, but interestingly, if you read his book, The only examples he gives the monopolies are essentially ones that have very strong network effects, you know, and feedback loops where you do end up with a winner-take-all dynamic.”
Tepper: US Insurance Industry Is Exempt From Federal Antitrust Laws
“Believe it or not, the insurance industry is exempt from antitrust supervision under McCarran Ferguson, right?”
Tepper: Gold works only as a negative real rates bet, gold mines are terrible
“Gold essentially could be a useful investment given that it's the inverse of the real rate. So to the extent that real rates are negative, it might be good investment, but gold mines themselves are terrible. And gold has a limited function in terms of a bet on…”