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De-dollarization: Is the US dol­lar los­ing its dom­i­nance?

Top dol­lar no more? Learn more about the fac­tors threat­en­ing the dom­i­nance of the world’s re­serve cur­rency.

While the U. S.’s share in global ex­ports and out­put has de­clined, the dol­lar’s trans­ac­tional dom­i­nance is still ev­i­dent in ar­eas in­clud­ing FX vol­umes and trade in­voic­ing.

On the other hand, de-dol­lar­iza­tion is un­fold­ing in cen­tral bank FX re­serves, where the share of USD has slid to a two-decade low.

In fixed in­come, the share of for­eign own­er­ship in the U.S. Treasury mar­ket has fallen over the last 15 years, point­ing to re­duced re­liance on the dol­lar.

De-dollarization is most vis­i­ble in com­mod­ity mar­kets, where a large and grow­ing pro­por­tion of en­ergy is be­ing priced in non-dol­lar-de­nom­i­nated con­tracts.

The U.S. dol­lar is the world’s pri­mary re­serve cur­rency, and it is also the most widely used cur­rency for trade and other in­ter­na­tional trans­ac­tions. However, its hege­mony has come into ques­tion in re­cent times due to geopo­lit­i­cal and geostrate­gic shifts. As a re­sult, de-dol­lar­iza­tion has in­creas­ingly be­come a sub­stan­tive topic of dis­cus­sion among in­vestors, cor­po­rates and mar­ket par­tic­i­pants more broadly.

What are the po­ten­tial im­pli­ca­tions of de-dol­lar­iza­tion, and how is it play­ing out in global mar­kets and trade?

In short, de-dol­lar­iza­tion en­tails a sig­nif­i­cant re­duc­tion in the use of dol­lars in world trade and fi­nan­cial trans­ac­tions, de­creas­ing na­tional, in­sti­tu­tional and cor­po­rate de­mand for the green­back.

“The con­cept of de-dol­lar­iza­tion re­lates to changes in the struc­tural de­mand for the dol­lar that would re­late to its sta­tus as a re­serve cur­rency. This en­com­passes ar­eas that re­late to the longer-term use of the dol­lar, such as trans­ac­tional dom­i­nance in FX vol­umes or com­modi­ties trade, de­nom­i­na­tion of li­a­bil­i­ties and share in cen­tral bank FX re­serves,” said Luis Oganes, head of Global Macro Research at J.P. Morgan.

Importantly, this struc­tural shift is dis­tinct from the cycli­cal de­mand for the green­back, which is shorter term and has in re­cent times been dri­ven by U.S. ex­cep­tion­al­ism, in­clud­ing the rel­a­tive out­per­for­mance of the U.S. eq­uity mar­ket. “The world has be­come long on the dol­lar in re­cent years, but as U.S. ex­cep­tion­al­ism erodes, it should be rea­son­able to ex­pect the over­hang in USD longs to di­min­ish as well,” Oganes said.

What are the causes and im­pli­ca­tions of de-dol­lar­iza­tion?

There are two main fac­tors that could erode the dol­lar’s sta­tus. The first in­cludes ad­verse events that un­der­mine the per­ceived safety and sta­bil­ity of the green­back — and the U.S.’s over­all stand­ing as the world’s lead­ing eco­nomic, po­lit­i­cal and mil­i­tary power. For in­stance, in­creased po­lar­iza­tion in the U.S. could jeop­ar­dize its gov­er­nance, which un­der­pins its role as a global safe haven. Ongoing U.S. tar­iff pol­icy could also cause in­vestors to lose con­fi­dence in American as­sets.

The sec­ond fac­tor in­volves pos­i­tive de­vel­op­ments out­side the U.S. that boost the cred­i­bil­ity of al­ter­na­tive cur­ren­cies — eco­nomic and po­lit­i­cal re­forms in China, for ex­am­ple. “A can­di­date re­serve cur­rency must be per­ceived as safe and sta­ble and must pro­vide a source of liq­uid­ity that is suf­fi­cient to meet grow­ing global de­mand,” said Alexander Wise, who cov­ers Long-Term Strategy at J.P. Morgan.

Fundamentally, de-dol­lar­iza­tion could shift the bal­ance of power among coun­tries, and this could, in turn, re­shape the global econ­omy and mar­kets. The im­pact would be most acutely felt in the U.S., where de-dol­lar­iza­tion would likely lead to a broad de­pre­ci­a­tion and un­der­per­for­mance of U.S. fi­nan­cial as­sets ver­sus the rest of the world.

“For U.S. eq­ui­ties, out­right and rel­a­tive re­turns would be neg­a­tively im­pacted by di­vest­ment or re­al­lo­ca­tion away from U.S. mar­kets and a se­vere loss in con­fi­dence. There would also likely be up­ward pres­sure on real yields due to the par­tial di­vest­ment of U.S. fixed in­come by in­vestors, or the di­ver­si­fi­ca­tion or re­duc­tion of in­ter­na­tional re­serve al­lo­ca­tions,” Wise said.

The U.S.’s share in global ex­ports and out­put has de­clined over the past three decades, while China’s has in­creased sub­stan­tially. Nonetheless, the trans­ac­tional dom­i­nance of the dol­lar is still ev­i­dent in FX vol­umes, trade in­voic­ing, cross-bor­der li­a­bil­i­ties de­nom­i­na­tion and for­eign cur­rency debt is­suance.

In 2022, the green­back dom­i­nated 88% of traded FX vol­umes — close to record highs — while the Chinese yuan (CNY) made up just 7%, ac­cord­ing to data from the Bank for International Settlements (BIS).

Likewise, there is lit­tle sign of USD ero­sion in trade in­voic­ing. “The share of USD and EUR has held steady over the past two decades at around 40–50%. While the share of CNY is in­creas­ing in China’s cross-bor­der trans­ac­tions as it moves to con­duct bi­lat­eral trade in its own cur­rency terms, it is still low from a global stand­point,” Oganes ob­served.

The dol­lar has also stoutly main­tained its su­pe­ri­or­ity when it comes to cross-bor­der li­a­bil­i­ties, where its mar­ket share stands at 48%. And in for­eign cur­rency debt is­suance, its share has re­mained con­stant since the global fi­nan­cial cri­sis, at around 70%. “The day­light from the euro, whose share is at 20%, is even greater on this front,” Oganes added.

On the other hand, de-dol­lar­iza­tion is un­fold­ing in cen­tral bank FX re­serves, where the share of USD has slid to a two-decade low in tan­dem with its macro foot­print. “However, the dol­lar share in FX re­serves was lower in the early 1990s, so the re­cent de­cline to just un­der 60% is not com­pletely out of the norm,” said Meera Chandan, co-head of Global FX Strategy at J.P. Morgan.

While much of the re­al­lo­ca­tion of FX re­serves has gone to CNY and other cur­ren­cies, USD and EUR still dom­i­nate lev­els. “The CNY foot­print is still very small, even if grow­ing, and its push for bi­lat­eral in­voic­ing is likely to keep this trend on the up­swing,” Chandan noted.

The main de-dol­lar­iza­tion trend in FX re­serves, how­ever, per­tains to the grow­ing de­mand for gold. Seen as an al­ter­na­tive to heav­ily in­debted fiat cur­ren­cies, the share of gold in FX re­serves has in­creased, led by emerg­ing mar­ket (EM) cen­tral banks — China, Russia and Türkiye have been the largest buy­ers in the last decade. Overall, while the share of gold in FX re­serves in EM is still low at 9%, the fig­ure is more than dou­ble the 4% seen a decade ago; the cor­re­spond­ing share for DM coun­tries is much larger at 20%. This in­creased de­mand has in turn partly dri­ven the cur­rent bull mar­ket in gold, with prices fore­cast to climb to­ward $4,000/oz by mid-2026.

The dol­lar’s share in FX re­serves has de­clined in tan­dem with its macro foot­print

USD share of FX re­serves (lhs; un­ad­justed, %) vs. an av­er­age of the z-scores of U.S. share of global GDP and ex­ports (rhs; 1960–2023)

The dol­lar’s share of FX re­serves has de­clined in tan­dem with the U.S.’s share of global GDP and ex­ports.

In a sign of de-dol­lar­iza­tion in bond mar­kets, the share of for­eign own­er­ship in the U.S. Treasury mar­ket has been de­clin­ing over the last 15 years.

USD as­sets, prin­ci­pally liq­uid Treasuries, ac­count for the ma­jor­ity of al­lo­cated FX re­serves. However, de­mand for Treasuries has stag­nated among for­eign of­fi­cial in­sti­tu­tions, as the growth of FX re­serves has slowed and the USD’s share of re­serves has dropped from its re­cent peak. Similarly, the back­drop for for­eign pri­vate de­mand has weak­ened — as yields have risen across DM gov­ern­ment bond mar­kets, Treasuries have be­come rel­a­tively less at­trac­tive. While for­eign in­vestors re­main the largest con­stituent within the Treasury mar­ket, their share of own­er­ship has fallen to 30% as of early 2025 — down from a peak of above 50% dur­ing the GFC.

“Although for­eign de­mand has not kept pace with the growth of the Treasury mar­ket for more than a decade, we must con­sider what more ag­gres­sive ac­tion could mean. Japan is the largest for­eign cred­i­tor and alone holds more than $1.1 tril­lion Treasuries, or nearly 4% of the mar­ket. Accordingly, any sig­nif­i­cant for­eign sell­ing would be im­pact­ful, dri­ving yields higher,” said Jay Barry, head of Global Rates Strategy at J.P. Morgan.

According to es­ti­mates by J.P. Morgan Research, each 1-percentage-point de­cline in for­eign hold­ings rel­a­tive to GDP (or ap­prox­i­mately $300 bil­lion of Treasuries) would re­sult in yields ris­ing by more than 33 ba­sis points (bp). “While this is not our base case, it nonethe­less un­der­scores the im­pact of for­eign in­vest­ment on risk-free rates,” Barry added.

“Today, a large and grow­ing pro­por­tion of en­ergy is be­ing priced in non-dol­lar-de­nom­i­nated con­tracts.”

De-dollarization is most vis­i­ble in com­mod­ity mar­kets, where the green­back’s in­flu­ence on pric­ing has di­min­ished. “Today, a large and grow­ing pro­por­tion of en­ergy is be­ing priced in non-dol­lar-de­nom­i­nated con­tracts,” said Natasha Kaneva, head of Global Commodities Strategy at J.P. Morgan.

For ex­am­ple, due to Western sanc­tions, Russian oil prod­ucts ex­ported east­ward and south­ward are be­ing sold in the lo­cal cur­ren­cies of buy­ers, or in the cur­ren­cies of coun­tries Russia per­ceives as friendly. Among buy­ers, India, China and Turkey are all ei­ther us­ing or seek­ing al­ter­na­tives to the dol­lar. Saudi Arabia is also con­sid­er­ing adding yuan-de­nom­i­nated fu­tures con­tracts in the pric­ing model of Saudi Arabian oil, though progress has been slow.

Notably, cross-bor­der trade set­tle­ment in yuan is gain­ing ground out­side of oil too. Some Indian com­pa­nies have started pay­ing for Russian coal im­ports in yuan, even with­out the in­volve­ment of Chinese in­ter­me­di­aries. Bangladesh also re­cently de­cided to pay Russia for its 1.4 GW nu­clear power plant in yuan.

“The de-dol­lar­iza­tion trend in the com­mod­ity trade is a boon for coun­tries like India, China, Brazil, Thailand and Indonesia, which can now not only buy oil at a dis­count, but also pay for it with their own lo­cal cur­ren­cies,” Kaneva noted. “This re­duces the need for pre­cau­tion­ary re­serves of U.S. dol­lars, U.S. Treasuries and oil, which might in turn free up cap­i­tal to be de­ployed in growth-boost­ing do­mes­tic pro­jects.”

At the other end of the spec­trum, de­posit dol­lar­iza­tion — where a sig­nif­i­cant por­tion of a coun­try’s bank de­posits are de­nom­i­nated in the U.S. dol­lar in­stead of the lo­cal cur­rency — is still ev­i­dent in many EM coun­tries. “The ten­dency of EM res­i­dents to dol­lar­ize in times of stress ap­pears to be cor­re­lated across mar­kets,” said Jonny Goulden, head of EM Fixed Income Strategy at J.P. Morgan.

According to J.P. Morgan Research, dol­lar de­posits have grown mostly un­in­ter­rupted over the last decade in EM, reach­ing around $830 bil­lion for a sam­ple set of 18 EM coun­tries (excluding China, Singapore and Hong Kong). “While there are large re­gional di­ver­gences in de­posit dol­lar­iza­tion across EM, all re­gions are more dol­lar­ized now than they were a decade ago,” Goulden noted. Latin America is the most dol­lar­ized re­gion, with an ag­gre­gate dol­lar­iza­tion rate of 19.1%. EMEA’s rate stands at 15.2%, while Asia (excluding China, Singapore and Hong Kong) has the low­est rate at 9.7%.

China is the ex­cep­tion, as its dol­lar­iza­tion rate has been per­sis­tently falling since 2017. “This is not sur­pris­ing, as this was around the time when U.S.–China re­la­tions be­gan shift­ing into their cur­rent state, marked by the trade war and grow­ing diplo­matic, se­cu­rity and geopo­lit­i­cal ten­sions,” Goulden said. “This sug­gests that China, along­side progress on de-dol­lar­iz­ing its own cross-bor­der trans­ac­tions, has ef­fec­tively been de-dol­lar­iz­ing the de­posits of Chinese res­i­dents, adding an­other di­men­sion to its ef­forts to sep­a­rate from U.S. dom­i­nance.”

Get more in­sights straight to your in­box with J.P. Morgan’s In Context newslet­ter.

J.P. Morgan Global Research brings you the lat­est up­dates and analy­sis of President Trump’s tar­iff pro­pos­als and their eco­nomic im­pact.

Discover the fac­tors con­tribut­ing to U.S. ex­cep­tion­al­ism and how this is play­ing out across mar­kets. Could re­cent de­vel­op­ments in­clud­ing tar­iffs and the rise of DeepSeek un­der­mine American out­per­for­mance?

Leveraging cut­ting-edge tech­nol­ogy and in­no­v­a­tive tools to bring clients in­dus­try-lead­ing analy­sis and in­vest­ment ad­vice.

The Incredible Overcomplexity of the Shadcn Radio Button

The other day I was asked to up­date the vi­sual de­sign of ra­dio but­tons in a web app at work. I fig­ured it could­n’t be that com­pli­cated. It’s just a ra­dio but­ton right?

Boom! Done. Radio but­tons are a built-in HTML el­e­ment. They’ve been around for 30 years. The browser makes it easy. Time for a cof­fee.

I dug into our code­base and re­al­ized we were us­ing two React com­po­nents from

Shadcn to power our ra­dio but­tons: and

For those un­fa­mil­iar with Shadcn, it’s a UI frame­work that pro­vides a bunch of pre­built UI com­po­nents for use in your web­sites. Unlike tra­di­tional UI frame­works like Bootstrap, you don’t im­port it with a script tag or

npm in­stall. Instead you run a com­mand that copies the com­po­nents into your code­base.

Here’s the code that was ex­ported from Shadcn into our pro­ject:

“use client”;

im­port * as React from “react”;

im­port * as RadioGroupPrimitive from “@radix-ui/react-radio-group”;

im­port { CircleIcon } from “lucide-react”;

im­port { cn } from “@/lib/utils”;

func­tion RadioGroup({

class­Name,

…props

}: React. ComponentProps

Woof… 3 im­ports and 45 lines of code. And it’s im­port­ing a third party icon li­brary just to ren­der a cir­cle. (Who needs CSS bor­der-ra­dius or the SVG

el­e­ment when you can add a third party de­pen­dency in­stead?)

All of the styling is done by the 30 dif­fer­ent Tailwind classes in the markup. I should prob­a­bly just tweak those to fix the styling is­sues.

But now I’m dis­tracted, an­noyed, and cu­ri­ous. Where’s the ac­tual ? What’s the point of all this? Let’s dig a lit­tle deeper.

The Shadcn com­po­nents im­port com­po­nents from an­other li­brary called Radix. For those un­fa­mil­iar with Radix, it’s a UI frame­work that pro­vides a bunch of pre­built UI com­po­nents…

Wait a sec­ond! Isn’t that what I just said about Shadcn? What gives? Why do we need both? Let’s see what the Radix docs say:

Radix Primitives is a low-level UI com­po­nent li­brary with a fo­cus on ac­ces­si­bil­ity, cus­tomiza­tion and de­vel­oper ex­pe­ri­ence. You can use these com­po­nents ei­ther as the base layer of your de­sign sys­tem, or adopt them in­cre­men­tally.

So Radix pro­vides un­styled com­po­nents, and then Shadcn adds styles on top of that. How does Radix work? You can see for your­self on GitHub:

https://​github.com/​radix-ui/…

This is get­ting even more com­pli­cated: 215 lines of React code im­port­ing 7 other files. But what does it ac­tu­ally do?

Taking a look in the browser

Let’s look in the browser dev tools to see if we can tell what’s go­ing on.

Okay, in­stead of a ra­dio in­put it’s ren­der­ing a but­ton with an SVG cir­cle in­side it? Weird.

It’s also us­ing

ARIA at­trib­utes

to tell screen read­ers and other as­sis­tive tools that the but­ton is ac­tu­ally a ra­dio but­ton.

ARIA at­trib­utes al­low you to change the se­man­tic mean­ing of HTML el­e­ments. For ex­am­ple, you can say that a but­ton is ac­tu­ally a ra­dio but­ton. (If you wanted to do that for some strange rea­son.)

If you can use a na­tive HTML el­e­ment or at­tribute with the se­man­tics and be­hav­ior you re­quire al­ready built in, in­stead of re-pur­pos­ing an el­e­ment and adding an ARIA role, state or prop­erty to make it ac­ces­si­ble, then do

so.

Despite that, Radix is re­pur­pos­ing an el­e­ment and adding an ARIA role in­stead of us­ing a na­tive HTML el­e­ment.

Finally, the com­po­nent also in­cludes a hid­den but only if it’s used in­side of a el­e­ment. Weird!

This is get­ting pretty com­pli­cated to just ren­der a ra­dio but­ton. Why would you want to do this?

Styling ra­dio but­tons is hard (Wait, is it?)

My best guess is that Radix re­builds the ra­dio but­ton from scratch in or­der to make it eas­ier to style. Radio but­tons used to be dif­fi­cult to style con­sis­tently across browsers. But for sev­eral years we’ve been able to style ra­dio but­tons how­ever we want us­ing a few CSS tools:

ap­pear­ance: none re­moves the ra­dio but­ton’s de­fault styling al­low­ing us to

do what­ever we want.

We can use the ::before pseudo-el­e­ment to ren­der a “dot” in­side of the

un­styled ra­dio but­ton.

We can use the :checked pseudo-class to show and hide that dot de­pend­ing on

whether the ra­dio but­ton is checked.

in­put[type=“ra­dio”] {

/* Disable the browser’s de­fault ra­dio but­ton styles */

ap­pear­ance: none;

mar­gin: 0;

/* Recreate the cir­cle con­tainer */

bor­der: 1px solid black;

back­ground: white;

bor­der-ra­dius: 50%;

/* Center our dot in the con­tainer */

dis­play: in­line-grid;

place-con­tent: cen­ter;

/* Use a pseudo-el­e­ment to dis­play our “dot” */

&::before {

con­tent: “”;

width: 0.75rem;

height: 0.75rem;

bor­der-ra­dius: 50%;

/* And dis­play it when the ra­dio but­ton is checked */

&:checked::before {

back­ground: black;

This does­n’t re­quire any de­pen­den­cies, JavaScript, or ARIA roles. It’s just an in­put el­e­ment with some styles. (You can do the same thing with Tailwind if that’s your jam.)

It does re­quire knowl­edge of CSS but this is­n’t some ar­cane se­cret.

Googling “how to style a ra­dio but­ton”

shows sev­eral blog posts ex­plain­ing these tech­niques. You may say this is a lot of CSS, but the Shadcn com­po­nent we were us­ing had 30 Tailwind classes!

I’m not try­ing to con­vince you to write your own com­po­nent styles

Look, I get it. You’ve got a lot go­ing on. You’re not big on CSS. You just want to grab some pre­built com­po­nents so you can fo­cus on the ac­tual prob­lem you’re solv­ing.

I to­tally un­der­stand why peo­ple reach for com­po­nent li­braries like Shadcn and I don’t blame them at all. But I wish these com­po­nent li­braries would keep things sim­ple and reuse the built-in browser el­e­ments where pos­si­ble.

Web de­vel­op­ment is hard. There’s in­her­ent com­plex­ity in build­ing qual­ity sites that solve prob­lems and work well across a wide range of de­vices and browsers.

But some things don’t have to be hard. Browsers make things like ra­dio but­tons easy. Let’s not over­com­pli­cate it.

To un­der­stand how our ra­dio but­tons work I need to un­der­stand two sep­a­rate com­po­nent li­braries and hun­dreds of lines of React.

Website vis­i­tors need to wait for JavaScript to load, parse, and run in or­der to be able to tog­gle a ra­dio but­ton. (In my test­ing, just adding these com­po­nents added sev­eral KB of JS to a ba­sic app.)

Why am I mak­ing such a big deal out of this? It’s just a ra­dio but­ton.

But these small de­ci­sions add up to more com­plex­ity, more cog­ni­tive load, more bugs, and worse web­site per­for­mance.

We have strayed so far from the light

Look at it. It’s beau­ti­ful:

For the past week, I’ve found my­self play­ing the same 23-second CNN clip on re­peat. I’ve watched it in bed, dur­ing my com­mute to work, at the of­fice, mid­way through mak­ing car­rot soup, and while brush­ing my teeth. In the video, Harry Enten, the net­work’s chief data an­a­lyst, stares into the cam­era and breath­lessly tells his au­di­ence about the gam­bling odds that Donald Trump will buy any of Greenland. “The peo­ple who are putting their money where their mouth is—they are ab­solutely tak­ing this se­ri­ously,” Enten says. He taps the gi­ant touch screen be­hind him and pulls up a made-for-TV graphic: Based on how peo­ple were bet­ting on­line at the time, there was a 36 per­cent chance that the pres­i­dent would an­nex Greenland. “Whoa, way up there!” Enten yells, slap­ping his hands to­gether. “My good­ness gra­cious!” The ticker at the bot­tom of the screen speeds through other odds: Will Gavin Newsom win the next pres­i­den­tial elec­tion? 19 per­cent chance. Will Viktor Orbán be out as the leader of Hungary be­fore the end of the year? 48 per­cent chance.

These odds were pulled from Kalshi, which hi­lar­i­ously claims not to be a gam­bling plat­form: It’s a “prediction mar­ket.” People go to sites such as Kalshi and Polymarket—another big pre­dic­tion mar­ket—in or­der to put money down on a given news event. Nobody would bet on some­thing that they did­n’t be­lieve would hap­pen, the think­ing goes, and so the mar­kets are meant to fore­cast the like­li­hood of a given out­come.

Listen: Prediction mar­kets and the “suckerification” cri­sis, with Max Read

Prediction mar­kets let you wa­ger on ba­si­cally any­thing. Will Elon Musk fa­ther an­other baby by June 30? Will Jesus re­turn this year? Will Israel strike Gaza to­mor­row? Will the longevity guru Bryan Johnson’s next func­tional sperm count be greater than “20.0 M/ejac”? These sites have re­cently boomed in pop­u­lar­ity—par­tic­u­larly among ter­mi­nally on­line young men who trade meme stocks and siphon from their 401(k)s to buy up bit­coin. But now pre­dic­tion mar­kets are creep­ing into the main­stream. CNN an­nounced a deal with Kalshi last month to in­te­grate the site’s data into its broad­casts, which has led to bet­ting odds show­ing up in seg­ments about Democrats pos­si­bly re­tak­ing the House, credit-card in­ter­est rates, and Federal Reserve Chair Jerome Powell. At least twice in the past two weeks, Enten has told view­ers about the value of data from peo­ple who are “putting their money where their mouth is.”

On January 7, the me­dia gi­ant Dow Jones an­nounced its own col­lab­o­ra­tion with Polymarket and said that it will be­gin in­te­grat­ing the site’s odds across its pub­li­ca­tions, in­clud­ing The Wall Street Journal. CNBC has a pre­dic­tion-mar­ket deal, as does Yahoo Finance, Sports Illustrated, and Time. Last week, MoviePass an­nounced that it will be­gin test­ing a bet­ting plat­form. On Sunday, the Golden Globes fea­tured Polymarket’s fore­casts through­out the broad­cast—be­cause ap­par­ently Americans wanted to know whether on­line gam­blers fa­vored Amy Poehler or Dax Shepard to win Best Podcast.

Media is a ruth­less, un­sta­ble busi­ness, and rev­enue streams are dry­ing up; if you squint, you can see why CNN or Dow Jones might sign a con­tract that, af­ter all, pro­vides its au­di­ence with some kind of data. On air, Enten cites Kalshi odds along­side Gallup polls and Google searches—what’s the dif­fer­ence? “The data fea­tured through our part­ner­ship with Kalshi is just one of many sources used to pro­vide con­text around the sto­ries or top­ics we are cov­er­ing and has no im­pact on ed­i­to­r­ial judg­ment,” Brian Poliakoff, a CNN spokesper­son, told me in a state­ment. Nolly Evans, the Journal’s dig­i­tal gen­eral man­ager, told me that Polymarket pro­vides the news­pa­per’s jour­nal­ists with “another way to quan­tify col­lec­tive ex­pec­ta­tions—es­pe­cially around fi­nan­cial or geopo­lit­i­cal events.” In an email, Jack Suh, a Kalshi spokesper­son, told me that the com­pa­ny’s part­ner­ships are de­signed to in­form the pub­lic, not to en­cour­age more trad­ing. Polymarket de­clined to com­ment.

The prob­lem is that pre­dic­tion mar­kets are ush­er­ing in a world in which news be­comes as much about gam­bling as about the event it­self. This kind of thing has al­ready hap­pened to sports, where the lan­guage of “parlays” and “covering the spread” has in­fil­trated every inch of com­men­tary. ESPN part­ners with DraftKings to bring its odds to SportsCenter and Monday Night Football; CBS Sports has a bet­ting ver­ti­cal; FanDuel runs its own stream­ing net­work. But the stakes of Greenland’s fu­ture are more con­se­quen­tial than the NFL play­offs.

The more that pre­dic­tion mar­kets are treated like news, es­pe­cially head­ing into an­other elec­tion, the more every dip and swing in the odds may end up wildly mis­lead­ing peo­ple about what might hap­pen, or in­flu­enc­ing what hap­pens in the real world. Yet it’s un­clear whether these sites are mean­ing­ful pre­dic­tors of any­thing. After the Golden Globes, Polymarket CEO Shayne Coplan ex­cit­edly posted that his site had cor­rectly pre­dicted 26 of 28 win­ners, which seems im­pres­sive—but Hollywood awards shows are gen­er­ally pre­dictable. One re­cent study found that Polymarket’s fore­casts in the weeks be­fore the 2024 elec­tion were not much bet­ter than chance.

These mar­kets are also ma­nip­u­la­ble. In 2012, one bet­tor on the now-de­funct pre­dic­tion mar­ket Intrade placed a se­ries of huge wa­gers on Mitt Romney in the two weeks pre­ced­ing the elec­tion, gen­er­at­ing a bet­ting line in­dica­tive of a tight race. The bet­tor did not seem mo­ti­vated by fi­nan­cial gain, ac­cord­ing to two re­searchers who ex­am­ined the trades. “More plau­si­bly, this trader could have been at­tempt­ing to ma­nip­u­late be­liefs about the odds of vic­tory in an at­tempt to boost fundrais­ing, cam­paign morale, and turnout,” they wrote. The trader lost at least $4 mil­lion but might have shaped me­dia at­ten­tion of the race for less than the price of a prime-time ad, they con­cluded.

A bil­lion­aire con­gres­sional can­di­date can’t just send a check to Quinnipiac University and sud­denly find him­self as the polling front-run­ner, but he can place enor­mous Polymarket bets on him­self that move the odds in his fa­vor. Or con­sider this hy­po­thet­i­cal laid out by the Stanford po­lit­i­cal sci­en­tist Andrew Hall: What if, a month be­fore the 2028 pres­i­den­tial elec­tion, the race is dead even be­tween J. D. Vance and Mark Cuban? Inexplicably, Vance’s odds of win­ning surge on Kalshi, pos­si­bly linked to shady over­seas bets. CNN airs seg­ment af­ter seg­ment about the spike, turn­ing it into an all-con­sum­ing na­tional news story. Democrats and Republicans point fin­gers at each other, and no one knows what’s re­ally go­ing on. Such a sce­nario is “plausible—maybe even likely—in the com­ing years,” Hall writes. It does­n’t help that the Trump Media and Technology Group, the owner of the pres­i­den­t’s so­cial-me­dia plat­form, Truth Social, is set to launch its own plat­form, Truth Predict. (Donald Trump Jr. is an ad­viser to both Kalshi and Polymarket.)

The irony of pre­dic­tion mar­kets is that they are sup­posed to be a more trust­wor­thy way of glean­ing the fu­ture than in­ter­net click­bait and half-baked pun­ditry, but they risk shred­ding what­ever shared trust we still have left. The sus­pi­ciously well-timed bets that one Polymarket user placed right be­fore the cap­ture of Nicolás Maduro may have been just a stroke of phe­nom­e­nal luck that net­ted a roughly $400,000 pay­out. Or maybe some­one with in­side in­for­ma­tion was look­ing for easy money. Last week, when White House Press Secretary Karoline Leavitt abruptly ended her brief­ing af­ter 64 min­utes and 30 sec­onds, many traders were out­raged, be­cause they had pre­dicted (with 98 per­cent odds) that the brief­ing would run past 65 min­utes. Some sus­pected, with no ev­i­dence, that Leavitt had de­lib­er­ately stopped be­fore the 65-minute mark to turn a profit. (When I asked the White House about this, the spokesper­son Davis Ingle told me in a state­ment, “This is a 100% Fake News nar­ra­tive.”)

Read: The Polymarket bets on Maduro are a warn­ing

Unintentionally or not, this is what hap­pens when me­dia out­lets nor­mal­ize treat­ing every piece of news and en­ter­tain­ment as some­thing to wa­ger on. As Tarek Mansour, Kalshi’s CEO, has said, his long-term goal is to “financialize every­thing and cre­ate a trad­able as­set out of any dif­fer­ence in opin­ion.” (Kalshi means “everything” in Arabic.) What could go wrong? As one vi­ral post on X re­cently put it, “Got a buddy who is pray­ing for world war 3 so he can win $390 on Polymarket.” It’s a joke. I think.

With a bal­anced sales struc­ture across in­di­vid­ual mar­kets, Dr. Ing. h.c. F. Porsche AG, Stuttgart, de­liv­ered a to­tal of 279,449 cars to cus­tomers around the world in 2025. The fig­ure was 310,718 for the pre­vi­ous year, rep­re­sent­ing a de­cline of 10 per cent. Porsche’s top pri­or­ity re­mains a value-ori­ented de­riv­a­tive mix.

With a bal­anced sales struc­ture across in­di­vid­ual mar­kets, Dr. Ing. h.c. F. Porsche AG, Stuttgart, de­liv­ered a to­tal of 279,449 cars to cus­tomers around the world in 2025. The fig­ure was 310,718 for the pre­vi­ous year, rep­re­sent­ing a de­cline of 10 per cent. Porsche’s top pri­or­ity re­mains a value-ori­ented de­riv­a­tive mix.

“After sev­eral record years, our de­liv­er­ies in 2025 were be­low the pre­vi­ous year’s level. This de­vel­op­ment is in line with our ex­pec­ta­tions and is due to sup­ply gaps for the 718 and Macan com­bus­tion-en­gined mod­els, the con­tin­u­ing weaker de­mand for ex­clu­sive prod­ucts in China, and our value-ori­ented sup­ply man­age­ment,” says Matthias Becker, Member of the Executive Board for Sales and Marketing at Porsche AG. “In 2025, we de­lighted our cus­tomers with out­stand­ing cars — such as the 911 Turbo S with its T-Hybrid drive sys­tem.” The re­sponse to the launch of the Cayenne Electric at the end of 2025 also shows, Becker adds, that Porsche is meet­ing cus­tomer ex­pec­ta­tions with its in­no­v­a­tive and high-per­for­mance prod­ucts.

With 84,328 de­liv­er­ies, the Macan was the best-sell­ing model line. North America re­mains the largest sales re­gion with 86,229 de­liv­er­ies — a fig­ure that is in line with the pre­vi­ous year.

Porsche repo­si­tioned it­self in 2025 and made for­ward-look­ing strate­gic prod­uct de­ci­sions. The de­liv­ery mix in 2025 un­der­scores that the sports car man­u­fac­turer is con­sis­tently re­spond­ing to global cus­tomer pref­er­ences by ex­pand­ing its dri­ve­train strat­egy to of­fer com­bus­tion-en­gined, plug-in hy­brid, and fully elec­tric cars. In 2025, 34.4 per cent of Porsche cars de­liv­ered world­wide were elec­tri­fied (+7.4 per­cent­age points), with 22.2 per cent be­ing fully elec­tric and 12.1 per cent be­ing plug-in hy­brids. This puts the global share of fully elec­tric ve­hi­cles at the up­per end of the tar­get range of 20 to 22 per cent for 2025. In Europe, for the first time, more elec­tri­fied cars were de­liv­ered than pure com­bus­tion-en­gined mod­els (57.9 per cent elec­tri­fi­ca­tion share), with every third car be­ing fully elec­tric. Among the Panamera and Cayenne mod­els, plug-in hy­brid de­riv­a­tives dom­i­nate the European de­liv­ery fig­ures. At the same time, the com­bus­tion-en­gined and T-Hybrid 911 set a new bench­mark with 51,583 de­liv­er­ies world­wide.

With 86,229 de­liv­er­ies, North America re­mains the largest sales re­gion, as it was the year prior. After record de­liv­er­ies in 2024, the Overseas and Emerging Markets also largely main­tained its pre­vi­ous-year lev­els, with 54,974 cars de­liv­ered (-1 per cent). In Europe (excluding Germany), Porsche de­liv­ered 66,340 cars by the end of the year, down 13 per cent year-on-year. In the German home mar­ket, 29,968 cus­tomers took de­liv­ery of new cars — a de­cline of 16 per cent. Reasons for the de­crease in both re­gions in­clude sup­ply gaps for the com­bus­tion-en­gined 718 and Macan mod­els due to EU cy­ber­se­cu­rity reg­u­la­tions.

In China, 41,938 cars were de­liv­ered to cus­tomers (-26 per cent). Key rea­sons for the de­cline re­main chal­leng­ing mar­ket con­di­tions, es­pe­cially in the lux­ury seg­ment, as well as in­tense com­pe­ti­tion in the Chinese mar­ket, par­tic­u­larly for fully elec­tric mod­els. Porsche con­tin­ues to fo­cus on value-ori­ented sales.

Deliveries of the Macan to­taled 84,328 units (+2 per cent), with fully elec­tric ver­sions ac­count­ing for over half at 45,367 ve­hi­cles. In most mar­kets out­side the EU, the com­bus­tion-en­gined Macan con­tin­ues to be of­fered, with 38,961 of these be­ing de­liv­ered. Some 27,701 Panamera mod­els were de­liv­ered by the end of December (-6 per cent).

The 911 sports car icon recorded 51,583 de­liv­er­ies by year-end (+1 per cent), set­ting an­other de­liv­ery record. The 718 Boxster and 718 Cayman to­taled 18,612 de­liv­er­ies, down 21 per cent from the pre­vi­ous year due to the model line’s phase-out. Production ended in October 2025.

The Taycan ac­counted for 16,339 de­liv­er­ies (-22 per cent), mainly due to the slow­down in the adop­tion of elec­tro­mo­bil­ity. The keys to 80,886 Cayenne mod­els were handed to cus­tomers in 2025, a de­cline of 21 per cent, partly due to catch-up ef­fects the pre­vi­ous year. The new fully elec­tric Cayenne cel­e­brated its world pre­miere in November, with the first mar­kets to of­fer the model be­gin­ning to de­liver to cus­tomers from this spring. It will be of­fered along­side com­bus­tion-en­gined and plug-in hy­brid ver­sions of the Cayenne.

Looking ahead, Matthias Becker says: “In 2026, we have a clear fo­cus; we want to man­age de­mand and sup­ply ac­cord­ing to our ‘value over vol­ume’ strat­egy. At the same time, we are plan­ning our vol­umes for 2026 re­al­is­ti­cally, con­sid­er­ing the pro­duc­tion phase-out of the com­bus­tion-en­gined 718 and Macan mod­els.” In par­al­lel, Porsche is con­sis­tently in­vest­ing in its three-pronged pow­er­train strat­egy and will con­tinue to in­spire cus­tomers with unique sports cars in 2026. An im­por­tant com­po­nent is the ex­pan­sion of the brand’s cus­tomiza­tion of­fer­ing — via both the Exclusive Manufaktur and Sonderwunsch pro­gram. In do­ing so, the com­pany is re­spond­ing to cus­tomers’ ever-in­creas­ing de­sire for in­di­vid­u­al­iza­tion.

All amounts are in­di­vid­u­ally rounded to the near­est cent; this may re­sult in mi­nor dis­crep­an­cies when summed.

This press re­lease con­tains for­ward-look­ing state­ments and in­for­ma­tion on the cur­rently ex­pected busi­ness de­vel­op­ment of Porsche AG. These state­ments are sub­ject to risks and un­cer­tain­ties. They are based on as­sump­tions about the de­vel­op­ment of eco­nomic, po­lit­i­cal and le­gal con­di­tions in in­di­vid­ual coun­tries, eco­nomic re­gions and mar­kets, in par­tic­u­lar for the au­to­mo­tive in­dus­try, which we have made based on the in­for­ma­tion avail­able to us and which we con­sider to be re­al­is­tic at the time of pub­li­ca­tion. If any of these or other risks ma­te­ri­alise, or if the as­sump­tions un­der­ly­ing these state­ments prove in­cor­rect, the ac­tual re­sults could be sig­nif­i­cantly dif­fer­ent from those ex­pressed or im­plied by such state­ments. Forward-looking state­ments in this pre­sen­ta­tion are based solely on the in­for­ma­tion per­tain­ing on the day of pub­li­ca­tion.

These for­ward-look­ing state­ments will not be up­dated later. Such state­ments are valid on the day of pub­li­ca­tion and may be over­taken by later events.

This in­for­ma­tion does not con­sti­tute an of­fer to ex­change or sell or of­fer to ex­change or pur­chase se­cu­ri­ties.

When I get to­gether with my friends in the in­dus­try, I feel a lit­tle guilty about how much I love my job. This is a tough time to be a soft­ware en­gi­neer. The job was less stress­ful in the late 2010s than it is now, and I sym­pa­thize with any­one who is up­set about the change. There are a lot of ob­jec­tive rea­sons to feel bad about work. But de­spite all that, I’m still hav­ing a blast. I en­joy pulling to­gether pro­jects, fig­ur­ing out dif­fi­cult bugs, and writ­ing code in gen­eral. I like spend­ing time with com­put­ers. But what I re­ally love is be­ing use­ful.

The main char­ac­ter in Gogol’s short story The Overcoat is a man called Akaky Akaievich. Akaky’s job is ob­jec­tively ter­ri­ble: he’s stuck in a dead-end copy­ist role, be­ing paid very lit­tle, with col­leagues who don’t re­spect him. Still, he loves his work, to the point that if he has no work to take home with him, he does some recre­ational copy­ing just for his own sake. Akaky is a dys­func­tional per­son. But his dys­func­tion makes him a per­fect fit for his job.

It’s hard for me to see a prob­lem and not solve it. This is es­pe­cially true if I’m the only per­son (or one of a very few peo­ple) who could solve it, or if some­body is ask­ing for my help. I feel an al­most phys­i­cal dis­com­fort about it, and a cor­re­spond­ing re­lief and sat­is­fac­tion when I do go and solve the prob­lem. The work of a soft­ware en­gi­neer - or at least my work as a staff soft­ware en­gi­neer - is per­fectly tai­lored to this ten­dency. Every day peo­ple rely on me to solve a se­ries of tech­ni­cal prob­lems.

In other words, like Akaky Akaievich, I don’t mind the ways in which my job is dys­func­tional, be­cause it matches the ways in which I my­self am dys­func­tional: specif­i­cally, my ad­dic­tion to be­ing use­ful. (Of course, it helps that my work­ing con­di­tions are over­all much bet­ter than Akaky’s). I’m kind of like a work­ing dog, in a way. Working dogs get re­warded with treats, but they don’t do it for the treats. They do it for the work it­self, which is in­her­ently sat­is­fy­ing.

This is­n’t true of all soft­ware en­gi­neers. But it’s cer­tainly true of many I’ve met: if not an ad­dic­tion to be­ing use­ful, then they’re dri­ven by an ad­dic­tion to solv­ing puz­zles, or to the com­plete con­trol over your work prod­uct that you only re­ally get in soft­ware or math­e­mat­ics. If they weren’t work­ing as a soft­ware en­gi­neer, they would be get­ting re­ally into Factorio, or cross­words, or tyran­ni­cally mod­er­at­ing some in­ter­net com­mu­nity.

A lot of the ad­vice I give about work­ing a soft­ware en­gi­neer­ing job is re­ally about how I’ve shaped my need to be use­ful in a way that de­liv­ers ma­te­r­ial re­wards, and how I try to avoid the pit­falls of such a need. For in­stance, Protecting your time from preda­tors in large tech com­pa­nies is about how some peo­ple in tech com­pa­nies will iden­tify peo­ple like me and wring us out in ways that only ben­e­fit them. Crushing JIRA tick­ets is a party trick, not a path to im­pact is about how I need to be use­ful to my man­age­ment chain, not to the ticket queue. Trying to im­press peo­ple you don’t re­spect is about how I cope with the fact that I’m com­pelled to be use­ful to some peo­ple who I may not re­spect or even like.

There’s a lot of dis­cus­sion on the in­ter­net about what ought to mo­ti­vate soft­ware en­gi­neers: money and power, pro­duc­ing real value, ush­er­ing in the AI ma­chine god, and so on. But what ac­tu­ally does mo­ti­vate soft­ware en­gi­neers is of­ten more of an in­ter­nal com­pul­sion. If you’re in that cat­e­gory - as I sus­pect most of us are - then it’s worth fig­ur­ing out how you can har­ness that com­pul­sion most ef­fec­tively.

One of the ques­tions of the 2026 pre­dic­tion con­test is whether Nvidia’s

stock price will close be­low $100 on any day in 2026. At the time of writ­ing, it trades at $184 and a bit, so go­ing down to $100 would be a near halv­ing of the stock value of the high­est val­ued com­pany in the world.

It’s an in­ter­est­ing ques­tion, and it’s worth spend­ing some time on it.

If you just want the an­swer, my best pre­dic­tion is that the prob­a­bil­ity is around 10 %. I did­n’t ex­pect to get such a high an­swer, but read on to see how we can find out.

When we pre­dicted the Dow Jones in­dex cross­ing a bar­rier in 2023, we treated the in­dex as an un­bi­ased ran­dom walk. That was con­ve­nient, but we can­not do it with the Nvidia ques­tion be­cause of one ma­jor dif­fer­ence: the time scale.

Over short time spans, the volatil­i­ty1 Or noise, or vari­a­tion, or stan­dard de­vi­a­tion. of stock move­ments dom­i­nate their re­turn2 Or sig­nal, or drift, or av­er­age change.. This hap­pens be­cause noise grows with the square root of time, while sig­nal grows lin­early with time.

The plot be­low il­lus­trates an imag­i­nary amaz­ing in­vest­ment which has a yearly log-re­turn of 0.3, and a yearly volatil­ity of 0.3.3 Readers aware that stonks

go up will recog­nise this as an un­re­al­is­tic Sharpe ra­tio of 1.0. The mid­dle line fol­lows our best guess for how the in­vest­ment will grow af­ter each year, and the outer curves il­lus­trate our un­cer­tainty around the ex­act value of it.

Early on, we can see that the un­cer­tainty is much big­ger than the height to the trend line. Before a year has passed, the ex­act re­sult is de­ter­mined more by noise than by growth. Toward the end, growth has taken over and the noise has a smaller ef­fect.

One mea­sure of how much volatil­ity there is com­pared to ex­pected re­turn is the sig­nal-to-noise ra­tio. It’s com­puted as

and for the Dow Jones ques­tion, we were look­ing at a sig­nal-to-noise ra­tio of −8 dB. That is al­ready a lit­tle too high to safely as­sume it be­haves like an un­bi­ased ran­dom walk, but for a low-stakes pre­dic­tion con­test it works out.

Using re­turn data for the Nvidia stock from 2025, the sig­nal-to-noise ra­tio is −1.4 dB. Although the move­ment in this pe­riod is still dom­i­nated by noise4 Evidenced by neg­a­tive sig­nal-to-noise ra­tio., the ex­pected re­turn is still go­ing to mat­ter, and we should­n’t as­sume it be­haves like an un­bi­ased ran­dom walk.

Even if we ig­nore the prob­lem­atic sig­nal-to-noise ra­tio and pre­tend the Nvidia stock price is an un­bi­ased ran­dom walk, we’ll run into what’s per­haps the big­ger prob­lem: the the­ory of un­bi­ased ran­dom walks as­sumes con­stant volatil­ity through­out the year. The com­puter will hap­pily tell us there is a near-zero per­cent chance of the stock clos­ing un­der $100 at any point next year.

The com­puter does grant a 23 % prob­a­bil­ity that the stock price drops to $130, and that might get us think­ing. If we as­sume the stock price has dropped to $130, that tells us some­thing about the mar­ket en­vi­ron­ment we’re in. Nvidia might drop to $130 due to ran­dom chance alone, but it’s more likely to do that if we’re in a mar­ket with a higher volatil­ity than we as­sumed based on the 2025 re­turns. In such a mar­ket, a fur­ther drop to $100 is­n’t so strange any­more.

Our sim­ple ran­dom walk model does not ac­count for this. When fore­cast­ing stock prices over longer pe­ri­ods, we need a bet­ter un­der­stand­ing of how the volatil­ity might change in the fu­ture.

Fortunately for us, there are peo­ple who con­tin­u­ously es­ti­mate the volatil­ity of spe­cific stock prices. They even do it in re­la­tion to bar­ri­ers like the $100 price we’re in­ter­ested in. They’re op­tions traders!

The ex­pected volatil­ity of the stock price is one of the vari­ables that go into pric­ing an op­tion. This means we can look up a December 2026 Nvidia call op­tion with a strike price of $100 in the mar­ket, see what it costs, and then re­verse the op­tion pric­ing process to get an im­plied volatil­ity out.

To do this, we first need to learn how to price an op­tion, and to do that, we need to know what an op­tion is.

In this ar­ti­cle, we’re go­ing to fo­cus on call op­tions be­cause they are more thickly traded. Assume we have an un-ex­pired Nvidia call op­tion with a strike price of $100. We can then ex­er­cise it, which means we trade in the op­tion plus the strike price for one share in the un­der­ly­ing Nvidia stock. If we did that to­day, we would earn $84, be­cause we lose the $100, but the share in Nvidia we get in ex­change is worth $184.

We don’t have to ex­er­cise the op­tion, though. If the price of Nvidia goes up to­mor­row, we would earn more from ex­er­cis­ing the op­tion to­mor­row. We can de­lay ex­er­cis­ing it right up un­til it ex­pires, when it be­comes in­valid.

If we were able to buy the $100 op­tion for less than $84, we would get free profit. The chart above tells us, how­ever, that the $100 op­tion costs $92.90, mean­ing the mar­ket ex­pects there to be a bet­ter op­por­tu­nity for ex­er­cis­ing that op­tion be­fore it ex­pires.

To keep things com­pu­ta­tion­ally sim­ple, we are go­ing to use a bi­no­mial model for the price of the un­der­ly­ing Nvidia stock. We don’t know the daily volatil­ity, so we’ll keep that as a vari­able we call \(\sigma\). We will pre­tend that each day, the Nvidia stock price can ei­ther grow with a fac­tor of \(e^\sigma\) or shrink with a fac­tor of \(e^{-\sigma}\).5 This is a geo­met­ric bi­no­mial walk. We could trans­form every­thing in the rea­son­ing be­low with the log­a­rithm and get an ad­di­tive walk in log-re­turns.

Thus, on day zero, the Nvidia stock trades for $184. On day one, it can take one of two val­ues:

\(184e^\sigma\) be­cause it went up, or

\(184e^{-\sigma}\) be­cause it went down.

On day two, it can have one of three val­ues:

\(184e^{2\sigma}\) (went up both in the first and sec­ond day),

\(184e^{\sigma - \sigma} = 184\) (went up and then down, or vice versa), or

\(184e^{-2\sigma}\) (went down both days).

If it’s eas­ier, we can vi­su­alise this as a tree. Each day, the stock price branches into two pos­si­bil­i­ties, one where it rises, and one where it goes down. In the graph be­low, each col­umn of bub­bles rep­re­sents the clos­ing value for a day.

This looks like a very crude ap­prox­i­ma­tion, but it ac­tu­ally works if the time steps are fine-grained enough. The un­cer­tain­ties in­volved in some of the other es­ti­ma­tions we’ll do dwarf the in­ac­cu­ra­cies in­tro­duced by this model.6 Even for fairly se­ri­ous use, I would­n’t be un­happy with daily time steps when the analy­sis goes a year out.

It is im­por­tant to keep in mind that the spe­cific num­bers in the bub­bles de­pend on which num­ber we se­lected for the daily volatil­ity \(\sigma\). Any con­clu­sion we draw from this tree is a func­tion of the spe­cific \(\sigma\) cho­sen to con­struct the tree.

When we have cho­sen an ini­tial \(\sigma\) and con­structed this tree, we can price an op­tion us­ing it. Maybe we have a call op­tion ex­pir­ing on day three, with a strike price of $180. On day four, the last day, the op­tion has ex­pired, so it is worth noth­ing. We’ll put that into the tree.

We have al­ready seen what the value of the op­tion is on the day it ex­pires: it’s what we would profit from ex­er­cis­ing it. If the stock is val­ued at $191, the op­tion is worth $11, the dif­fer­ence be­tween the stock value and the strike price. On the other hand, if the stock is val­ued at $177, it is worth less than the strike price of the op­tion, so we will not ex­er­cise the op­tion, in­stead let­ting it ex­pire.

The day be­fore the ex­pi­ra­tion day is when we have the first in­ter­est­ing choice to make. We can still ex­er­cise the op­tion, with the ex­er­cise value of the op­tion cal­cu­lated the same way.

Or we could hold on to the op­tion. If we hold on to the op­tion for a day, the value of the op­tion will ei­ther go up or down, de­pend­ing on the value of the un­der­ly­ing stock price. We will com­pute a weighted av­er­age of these move­ment pos­si­bil­i­ties as

where \(V_u\) and \(V_d\) are the val­ues the op­tion will have on the next day when the un­der­ly­ing moves up or down in the tree, re­spec­tively. Then we’ll dis­count this with a safe in­ter­est rate to ac­count for the fact that by hold­ing the op­tion, we are fore­go­ing cash that could oth­er­wise be used to in­vest else­where. The gen­eral equa­tion for the hold value of the op­tion at any time be­fore the ex­pi­ra­tion day is

Let’s look specif­i­cally at the node where the stock value is $199. We’ll as­sume a safe in­ter­est rate of 3.6 % an­nu­ally, which trans­lates to 0.01 % daily.7 In the texts I’ve read, 4 % is com­monly as­sumed, but more ac­cu­rate es­ti­ma­tions can be de­rived from Treasury bills and sim­i­lar ex­tremely low-risk in­ter­est rates. The value of hold­ing on to the op­tion is, then

and now we only need to know what \(\tilde{p}\) is. That vari­able looks and be­haves a lot like a prob­a­bil­ity, but it’s not. There’s an ar­bi­trage ar­gu­ment that fixes the value of \(\tilde{p}\) to

where \(\sigma\) is the same time step volatil­ity we as­sumed when cre­at­ing the tree — in our case, 4 %. This makes \(\tilde{p} = 0.491\), and with this, we can com­pute the hold value of the op­tion when the un­der­ly­ing is $199:

The value of the op­tion at any point in time is the max­i­mum of the hold value and the ex­er­cise value. So we re­place the stock value of $199 in the tree with the op­tion value of $19.03. We per­form the same cal­cu­la­tion for the other nodes in day two.

and then we do the same for the day be­fore that, then be­fore that, etc., un­til we get to day zero.

We learn that if some­one asks us on day zero to buy a call op­tion with a strike price of $180 and ex­piry three days later, when the un­der­ly­ing stock cur­rently trades for $184, and has an ex­pected daily volatil­ity of 0.04, then we should be will­ing to pay $7.38 for that op­tion.

What’s weird is this num­ber has noth­ing to do with the prob­a­bil­ity we are as­sign­ing to up or down move­ments. Go through the cal­cu­la­tions again. We never in­volved any prob­a­bil­ity in the cal­cu­la­tion of the price. Although I won’t go through the ar­gu­ment — see Shreve’s ex­cel­lent Stochastic Calculus for

Finance8 Stochastic Calculus for Finance I: The Binomial Asset Pricing

Model; Shreve; Springer; 2005. for that — this price for the op­tion is based on what it would cost to hedge the op­tion with a port­fo­lio of safe in­vest­ments, bor­row­ing, and long or short po­si­tions in the un­der­ly­ing stock.

Even with­out go­ing through the de­tailed the­ory, we can fairly quickly ver­ify that this is in­deed how op­tions are priced. Above, we made ed­u­cated guesses as to the safe in­ter­est rate, a rea­son­able volatil­ity, etc. We cal­cu­lated with a spot price of $184, a strike price of $180, and ex­piry three days out. We got an op­tion price of $7.38.

At the time of writ­ing, the Nvidia stock trades at $184.94. It has op­tions that ex­pire in four days. The ones with a strike price of $180 cur­rently sell for $6.20. That’s in­cred­i­bly close, given the rough es­ti­ma­tions and the slight mis­match in du­ra­tion.9 The main in­ac­cu­racy comes from the volatil­ity we used to con­struct the tree. The ac­tual volatil­ity of the Nvidia stock on such short time pe­ri­ods and small dif­fer­ences in price is lower.

When we con­structed the tree above, we as­sumed a daily volatil­ity of 4 %. If we write code that takes the volatil­ity as a pa­ra­me­ter and com­putes the op­tion price for that volatil­ity, we can try var­i­ous volatil­i­ties un­til we find one where our price matches the mar­ket price for that op­tion.

We write the fol­low­ing code to per­form the price cal­cu­la­tion faster than we can do it man­u­ally.10 Note that we don’t ac­tu­ally con­struct the full bi­no­mial tree. We can com­pute the value of the un­der­ly­ing stock at any node given only its co­or­di­nates, and the op­tion value only de­pends on the next time step in a way that lets us op­ti­mise the com­pu­ta­tion with dy­namic pro­gram­ming.

im­port Control. Monad.ST

im­port Data.Foldable (forM_)

im­port qual­i­fied Data.Vector as Vector

im­port qual­i­fied Data.Vector.Mutable as Vector

– | Given the cur­rent price of the un­der­ly­ing,

– and the du­ra­tion (in days) and strike price

– of the op­tion, take a daily volatil­ity and

– com­pute the op­tion value.

op­tion_­value :: Double -> Int -> Double -> Double -> Double

op­tion_­value spot du­ra­tion strike sigma =

let

– Shorthand: u = e^σ

u = exp sigma

– Shorthand: d = e^(−σ)

d = exp (negate sigma)

– Assuming yearly safe in­ter­est of 4 %

– this is the weight­ing fac­tor tilde-p.

p = (exp 0.00016 - d) / (u - d)

– The value of the un­der­ly­ing stock at

– day t, node i.

s t i = spot * u^i * d^(t-i)

– The ex­er­cise value of the op­tion de­pends

– only on the strike and the price of the

– un­der­ly­ing stock.

v_e t i = max 0 (s t i - strike)

– The hold value of the op­tion de­pends on

– the two pos­si­ble fu­ture val­ues of the

– op­tion v_d and v_u.

v_h v_d v_u =

exp (negate 0.00016)

* (p * v_u + (1-p) * v_d)

in

runST $ do

– Create a mu­ta­ble vec­tor.

nodes

Vector.write nodes i (v_e du­ra­tion i)

– Walk the tree back­wards from the day

– be­fore ex­pi­ra­tion.

forM_ (reverse [0 .. du­ra­tion - 1]) $ \t -> do

– For each node, cal­cu­late hold value

– based on op­tion value in the next

– time step (which was just cal­cu­lated)

– in the it­er­a­tion be­fore.

forM_ [0 .. t] $ \i -> do

v_d

Here we are valu­ing a 31-day call op­tion for Nvidia, with a strike price of $170. The mar­ket price is $18.68, but our code re­turns $24.74. This means our guess for the im­plied daily volatil­ity of 4 % is too high. If we try var­i­ous val­ues for the volatil­ity, we’ll even­tu­ally find that 2.2 % leads to an op­tion price of $18.53, which is fairly close to the mar­ket price. This daily volatil­ity cor­re­sponds to a yearly volatil­ity of 35 %. If we look up other peo­ple’s cal­cu­la­tions for the 30-day at-the-money im­plied volatil­ity of the Nvidia stock, we’ll find they’re at some­thing like 36 %. Definitely close enough.

For an­swer­ing the ques­tion about Nvidia drop­ping be­low $100, we don’t want the 30-day at-the-money volatil­ity, though, but the 340-day far out-of-the-money volatil­ity.

The 340-day $100 strike call op­tions sell for $92.90 in the mar­ket. To get that price we need to feed our model a daily volatil­ity of 3.1 %. In other words, the 340-day $100 strike call op­tions im­ply a daily volatil­ity of 3.1 %. Because op­tions so far out of the money are more thinly traded, we might want to con­firm this volatil­ity by com­put­ing it for other op­tions with nearby strike prices.

We ex­pect the im­plied volatil­ity to go up as the strike price is fur­ther out of the money, which it does. It seems that 3.1 % is a rea­son­able im­plied volatil­ity for such large move­ments.

The Bank of England has pub­lished a method13 Working Paper No. 455:

In March 1770, as Boston boiled with out­rage over the killing of five colonists by British sol­diers, John Adams did some­thing few could com­pre­hend: he vol­un­teered to de­fend the en­emy. Adams be­lieved that the very idea of lib­erty de­pended on en­sur­ing that even the re­viled had coun­sel; that a free coun­try could not ex­ist with­out an in­de­pen­dent and im­par­tial bar will­ing to de­fend the de­spised.

But Adams did not be­lieve that his charge in de­fend­ing his client was to win at all costs. “Every lawyer,” he re­flected in his au­to­bi­og­ra­phy, “must hold him­self re­spon­si­ble not only to his Country, but to the high­est and most in­fal­li­ble of all Tribunals for the part he should act.” The moral map Adams es­tab­lished in this case be­came a foun­da­tion for the prac­tice of law in America. Indeed, to­day’s le­gal ethics codes still speak of lawyers’ three­fold duty: to the client, to the court, and to the coun­try.

Imagine if Adams had de­cided that de­fend­ing his clients meant win­ning at all costs. Can you imag­ine Bostonians’ out­rage if Adams had, say, with­held ev­i­dence that the British sol­diers did have mur­der­ous in­tent? What would Adams’s le­gal legacy be if he’d tried not to dis­cover the truth of what hap­pened out­side the Custom House, but to sow doubt and un­cer­tainty among the peo­ple of Boston? How dif­fer­ent would our le­gal sys­tem be if the British sol­diers were ac­quit­ted not be­cause they were in­no­cent, but be­cause they had a lawyer who was will­ing to hide the truth?

Such a hy­po­thet­i­cal has be­come our re­al­ity two and a half cen­turies later, only the vic­tims are chil­dren, and its eth­i­cal cor­rup­tion and harm op­er­ate at an in­dus­trial scale. What has emerged from in­side Meta over re­cent months re­veals how vac­u­ous the char­ac­ter­i­za­tion of the lawyer’s eth­i­cal oblig­a­tions have be­come: Meta lawyers or­der­ing ev­i­dence of child ex­ploita­tion de­stroyed and re­search find­ings buried, while they hid be­hind at­tor­ney-client priv­i­lege. Meta’s lawyers do not fol­low Adams’ prece­dent, but, rather, the ex­am­ple set by Big Tobacco lawyers in the 1970s and ’80s. These lawyers col­lapsed Adams’ three­fold duty into one — serve the client alone, what­ever the cost to the courts and the coun­try.

The story of this eth­i­cal ero­sion be­gins not in Menlo Park but in the to­bacco board­rooms of two gen­er­a­tions ago, when Big Tobacco at­tor­ney Ernest Pepples out­lined what he called the “honesty op­tion”: ad­mit­ting that smok­ing killed peo­ple. He con­ceded this would ex­pose to­bacco com­pa­nies to cat­a­strophic li­a­bil­ity, and the com­pa­nies ul­ti­mately re­jected hon­esty in fa­vor of profit. In the decades that fol­lowed, to­bacco lawyers coun­seled doc­u­ment de­struc­tion, abused at­tor­ney-client priv­i­lege to sup­press re­search, and in­tim­i­dated sci­en­tists whose find­ings threat­ened lit­i­ga­tion de­fenses. Big Tobacco’s at­tor­neys per­fected hid­ing the truth from the American peo­ple, aban­don­ing their du­ties to the court and to the coun­try. The cost of that aban­don­ment can be mea­sured in mil­lions of lives and bil­lions of dol­lars. The cost to the pub­lic trust is in­cal­cu­la­ble.

Fast for­ward 30 years to Meta head­quar­ters where the multi-tril­lion dol­lar com­pa­ny’s at­tor­neys are fol­low­ing Big Tobacco’s play­book, aid­ing and abet­ting the com­pa­ny’s dis­re­gard for pub­lic wel­fare and chil­dren’s safety. Meta’s lead­er­ship and le­gal team have hid­den “mountains of ev­i­dence,” as Jonathan Haidt and Zach Rausch put it, of di­rect and in­di­rect harms to kids and teens.

The lat­est rev­e­la­tions about Meta’s malfea­sance come from newly un­sealed court doc­u­ments. In 2020, the com­pany dis­cov­ered through its own ex­per­i­men­tal re­search — an ini­tia­tive known as Project Mercury — that when users re­duced the amount of time they spent on Facebook, their lev­els of de­pres­sion, anx­i­ety, and lone­li­ness de­creased. Meta’s lawyers buried the find­ings.

But Project Mercury, and Meta’s sup­pres­sion of its damn­ing re­search on the men­tal health ef­fects of Instagram, is only the be­gin­ning. Deeper rev­e­la­tions come from whistle­blow­ers Jason Sattizahn and Kayce Savage and their tes­ti­mony be­fore the U. S. Senate this past September. Sattizahn and Savage had been re­search­ing child ex­ploita­tion in Meta’s VR ecosys­tem, where they dis­cov­ered co­or­di­nated pe­dophile rings op­er­at­ing in­side games like Roblox. Sattizahn and Savage de­scribed an im­mer­sive ex­pe­ri­ence where chil­dren reg­u­larly en­counter what Sattizahn called “the trans­mis­sion of the mo­tion and the au­dio of sex acts” from adult users — not just sex­ual words or adult “content,” but the phys­i­cal ex­pe­ri­ence of “adults sex­u­ally grat­i­fy­ing them­selves” while “surrounding and hound­ing mi­nors,” com­plete with im­mer­sive au­dio.

Sattizahn also tes­ti­fied how, af­ter his re­search on Meta’s VR plat­form un­cov­ered chil­dren un­der the age of 10 in Germany be­ing propo­si­tioned for “sex acts, nude pho­tos, and other acts that no child should ever be ex­posed to,” Meta’s in-house lawyers de­manded the era­sure of any and all ev­i­dence of this find­ing. When asked by Senator Josh Hawley how of­ten she’d wit­nessed an un­der­age user be­ing ex­posed to in­ap­pro­pri­ate sex­ual con­tent on Meta VR, Savage replied, “every time I use the head­set.” The per­mis­sive­ness by the com­pany that Savage and Sattizahn tes­ti­fied to is mir­rored by the more re­cently un­sealed court doc­u­ments, which in­cluded that Meta main­tained a 17-strike pol­icy for sex traf­fick­ing ac­counts — re­mov­ing preda­tors only af­ter they were caught at­tempt­ing to traf­fic peo­ple 17 sep­a­rate times. Meta’s own in­ter­nal doc­u­ments called this thresh­old “very, very, very high.”

According to Sattizahn, Meta’s le­gal de­part­ment cre­ated what he called a “funnel of ma­nip­u­la­tion” in re­sponse to these iden­ti­fied risks to chil­dren, a com­pre­hen­sive sys­tem for con­trol­ling every as­pect of safety re­search. Legal rep­re­sen­ta­tives em­bed­ded in re­search teams de­manded de­struc­tion of find­ings deemed too sen­si­tive. Researchers were for­bid­den to use words like “illegal” or “non-compliant” even when plainly ap­plic­a­ble. Sattizahn and Savage’s tes­ti­mony is com­ple­mented by in­ter­nal com­mu­ni­ca­tions, now pub­lic, show­ing that Meta em­ploy­ees wor­ried they were be­hav­ing like to­bacco ex­ec­u­tives “doing re­search and know­ing cigs were bad and then keep­ing that info to them­selves.”

On October 23, 2025, a judge in a sep­a­rate case val­i­dated what the whistle­blow­ers and court doc­u­ments had de­scribed. Invoking the rarely used crime-fraud ex­cep­tion to pierce Meta’s at­tor­ney-client priv­i­lege, District of Columbia Superior Court Judge Yvonne Williams found Meta’s lawyers had coached re­searchers to hide, block, and san­i­tize stud­ies on teen men­tal-health harm in or­der to shield the com­pany from li­a­bil­ity. Judge Williams de­ter­mined there was prob­a­ble cause that these com­mu­ni­ca­tions were “fundamentally in­con­sis­tent with the ba­sic premises of the ad­ver­sary sys­tem.”

Attorney-client priv­i­lege was orig­i­nally meant to pro­tect can­dor in ser­vice of truth, but in Meta’s hands it has be­come a means of hid­ing the truth — a trans­for­ma­tion that marks how far the le­gal pro­fes­sion has drifted. John Adams be­lieved that truth was the lawyer’s surest refuge, the one place where all three du­ties could co­ex­ist. He wrote in his au­to­bi­og­ra­phy that his British client “must there­fore ex­pect from me no Art or Address, No Sophistry or Prevarication in such a Cause; nor any thing more than Fact, Evidence and Law would jus­tify.” When lawyers aban­don fact, ev­i­dence, and law, and turn their craft to­ward sup­pres­sion in­stead, they cor­rode the foun­da­tion of pub­lic trust on which the en­tire le­gal sys­tem de­pends. Judge Williams’ rul­ing is thus more than a pro­ce­dural re­buke; it is a re­minder that the law’s le­git­i­macy sur­vives only so long as truth re­mains dis­cov­er­able.

Yet Judge Williams’ rul­ing alone can­not stop Meta’s in­sti­tu­tional mis­deeds. Meta has thrived in an en­vi­ron­ment of pas­siv­ity, thanks to lawyers who refuse to re­port eth­i­cal mis­con­duct, bar as­so­ci­a­tions that de­cline to in­ves­ti­gate de­spite court find­ings of prob­a­ble cause and reams of ev­i­dence in the pub­lic do­main, leg­is­la­tors who pre­fer the­ater to leg­is­la­tion, and in­flu­en­tial busi­ness lead­ers from other sec­tors who re­main silent by­standers as tech lawyers re­make the le­gal sys­tem into one that re­wards grift and ex­ploita­tion rather than en­ter­prise and in­no­va­tion.

Impunity is not in­evitable. State bar as­so­ci­a­tions should open in­ves­ti­ga­tions to­mor­row and re­voke rec­i­proc­ity to Meta at­tor­neys li­censed in other ju­ris­dic­tions. The ev­i­dence is pub­lic: tes­ti­mony un­der oath, a judge’s find­ing of prob­a­ble cause, court doc­u­ments that speak for them­selves. Investigations for po­ten­tial dis­bar­ment should be­gin with se­nior lead­ers like Jennifer Newstead and Joel Kaplan, Meta’s re­spec­tive heads of le­gal and pub­lic pol­icy who bear re­spon­si­bil­ity un­der ethics rules for at­tor­neys work­ing un­der them.

Junior lawyers at the com­pany who may have wit­nessed this sys­tem­atic ob­struc­tion and failed to re­port it should also be scru­ti­nized, as the rules of pro­fes­sional re­spon­si­bil­ity gen­er­ally re­quire lawyers to re­port pro­fes­sional mis­con­duct by an­other lawyer “that raises a sub­stan­tial ques­tion as to that lawyer’s hon­esty, trust­wor­thi­ness or fit­ness.” That none re­ported what they wit­nessed de­mands in­ves­ti­ga­tion at the very least. A stint in Meta’s le­gal de­part­ment on a lawyer’s re­sume should be con­sid­ered dis­qual­i­fy­ing by law firms and other fu­ture em­ploy­ers, mak­ing that lawyer un­hire­able if they can­not show that they spoke up about, or were oth­er­wise un­aware of, the sup­pres­sion of ev­i­dence or harm. The fear of real con­se­quences for play­ing a role in per­pe­trat­ing such mas­sive harm to American chil­dren should force Meta’s at­tor­neys to ei­ther leave the com­pany or to be­gin to stand up for what’s right.

Congress and state leg­is­la­tures should also ex­am­ine whether le­gal ethics rules re­quire re­form: whether at­tor­ney-client priv­i­lege has been ex­tended too far when it shields cor­po­ra­tions’ most ques­tion­able ac­tiv­i­ties, and whether ben­e­fits of en­cour­ag­ing can­did con­sul­ta­tions with clients jus­tify costs of fa­cil­i­tat­ing cover-ups. Meta is not the only bad ac­tor here, but it did get caught in the most egre­gious be­hav­ior. The un­sealed court fil­ings demon­strate sim­i­lar be­hav­ior by Snap and by Google. OpenAI’s lawyers “accidentally” erased ev­i­dence com­piled by The New York Times’s at­tor­neys in its copy­right law­suit against the com­pany. Judges have caught at­tor­neys from Google and Apple with­hold­ing or de­stroy­ing doc­u­ments rel­e­vant to anti-trust tri­als. As Stuart Taylor in The Atlantic wrote of the to­bacco lawyers two decades ago, we should in­vite the pro­fes­sion’s lead­ers to “explain why lawyers should re­main free to hide ev­i­dence of cor­po­rate wrong­do­ing, mis­lead courts, and man­gle the truth.”

The ma­chin­ery for ac­count­abil­ity ex­ists. State bars can act to­mor­row to in­ves­ti­gate and sus­pend Meta’s at­tor­neys. Judges can con­tinue pierc­ing false priv­i­lege claims and is­sue sanc­tions against bad-faith ad­vo­cates. Legislators can de­mand bar as­so­ci­a­tions jus­tify their con­tin­ued self-reg­u­la­tion and re­form the rules of at­tor­ney-client priv­i­lege for cor­po­ra­tions. Law firms can fire clients that ask them to vi­o­late their broader du­ties to the coun­try and its courts. Importantly, hold­ing cor­rupt, un­eth­i­cal lawyers ac­count­able for en­abling harms to chil­dren does not mean that we sac­ri­fice the foun­da­tional tenet of the American le­gal sys­tem that John Adams cham­pi­oned: that even those we may de­spise — the red­coat sol­dier then, the bil­lion­aire and his ex­ploita­tive em­pires now — will re­main en­ti­tled to coun­sel who will zeal­ously de­fend them, pro­vided they fol­low the rules that the rest of us do.

Meta’s at­tor­neys have for­got­ten that the law’s le­git­i­macy de­rives from the in­tegrity of those who prac­tice it. For that rea­son, ac­count­abil­ity for fail­ing to fol­low the rules of pro­fes­sional ethics can­not be left in the hands of those who would per­vert the prin­ci­ples at the heart of their pro­fes­sion so ca­su­ally. Instead, it’s up to the rest of us — those who still be­lieve law should serve jus­tice — to en­sure Meta’s at­tor­neys are re­minded of their oblig­a­tions through real, ma­te­r­ial, swift, in­di­vid­ual con­se­quences. They are the ar­chi­tects of a sys­tem that harms chil­dren at an in­dus­trial scale, and every Meta lawyer who par­tic­i­pated or stood by silently shares the moral stain of what the com­pany has per­pe­trated.

Holding Meta ac­count­able in­cludes hold­ing its lawyers ac­count­able; the harm the com­pany in­flicts on young peo­ple could not ex­ist with­out lawyers will­ing to en­able it. Defrocking those lawyers could be what ends the im­punity for Mark Zuckerberg, his lieu­tenants, and his em­pire.

The truth will out for Meta’s lawyers — even­tu­ally — as hap­pened with Big Tobacco’s, but the stakes reach be­yond any sin­gle com­pa­ny’s malfea­sance or any one at­tor­ney’s lack of con­science. Just as to­bacco lawyers’ cor­rup­tion poi­soned pub­lic trust, Meta’s at­tor­neys threaten to com­plete the trans­for­ma­tion of law into a ser­vice avail­able only to those wealthy enough to cor­rupt it and shame­less enough to ig­nore the wreck­age. Whether courts can func­tion, whether Americans be­lieve law serves jus­tice rather than a sys­tem many be­lieve to be rigged, de­pends on whether those in power re­pu­di­ate this con­duct de­ci­sively, or whether they con­tinue, through their in­ac­tion, to tac­itly en­dorse it.

I’ve been us­ing Claude Code more and more re­cently. At some point I re­al­ized that rather than do some­thing else un­til it fin­ishes, I would con­stantly check on it to see if it was ask­ing for yet an­other per­mis­sion, which felt like it was miss­ing the point of hav­ing an agent do stuff. So I wanted to use Claude Code with the –dangerously-skip-permissions flag.

If you haven’t used it, this flag does ex­actly what it says: it lets Claude Code do what­ever it wants with­out ask­ing per­mis­sion first. No more “May I in­stall this pack­age?”, “Should I mod­ify this con­fig?”, “Can I delete these files?”

It just… does it.

Which is great for flow since I don’t have to worry that it stopped do­ing stuff just to ask a per­mis­sion ques­tion.

But also, you know, dan­ger­ous.

I like my filesys­tem in­tact, so the ob­vi­ous so­lu­tion is to not run this thing di­rectly on my OS ac­count.

First in­stinct: throw it in a Docker con­tainer. Containers are for iso­la­tion, right?

Except I want Claude to be able to build Docker im­ages. And run con­tain­ers. And maybe or­ches­trate some stuff.

So now you need Docker-in-Docker, which means –privileged mode, which de­feats the en­tire pur­pose of sand­box­ing. That means trad­ing “Claude might mess up my filesys­tem” for “Claude has root-level ac­cess to my con­tainer run­time.”

There’s also the nested net­work­ing weird­ness, vol­ume mount­ing per­mis­sions that make you ques­tion your life choices, and the gen­eral feel­ing that you’re fight­ing the tool in­stead of us­ing it.

* #yolo run it bare metal: no, no and no

* sand­box-run­time: more of an ACL ap­proach, I want Claude to be able to do any­thing, be­cause it does­n’t have ac­cess to any­thing ex­cept the code

* fire­jail or sim­i­lar: same prob­lem as Docker-in-Docker

* cloud VM: costs money, has la­tency, need to up­load my code some­where

Then I re­mem­bered about a pro­ject that I’ve used be­fore Docker be­came all the rage: Vagrant.

If you weren’t around back then, Vagrant gives you proper VM iso­la­tion with a re­pro­ducible con­fig file. It’s ba­si­cally in­fra­struc­ture as code for your lo­cal dev en­vi­ron­ment.

* shared fold­ers that make it feel lo­cal enough

I had­n’t used VirtualBox in years since Docker con­tain­ers cov­ered all re­quire­ments un­til now, so I grabbed the lat­est ver­sion (7.2.4) and got started.

First va­grant up and… the VM is peg­ging my CPU at 100%+ while com­pletely idle.

I spent an hour turn­ing off var­i­ous VM fea­tures, tweak­ing set­tings, ask­ing LLMs ran­dom com­bi­na­tions of “virtualbox high cpu idle”, you know, the usual.

Eventually I found this GitHub is­sue. VirtualBox 7.2.4 shipped with a re­gres­sion that causes high CPU us­age on idle guests. What are the odds.

Here’s what my sim­ple Vagrantfile looks like:

First boot takes a few min­utes to pro­vi­sion every­thing, and you need to sign in to Claude once for each pro­ject, but af­ter that, va­grant up is quite fast.

Then, when you are done for the day:

So, what can Claude do with these new­found pow­ers?

Since it’s run­ning in a VM, I also gave it sudo ac­cess and in­structed it that it has the power to do any­thing: in­stall sys­tem pack­ages, mod­ify con­figs, cre­ate files, run Docker con­tain­ers, what­ever.

* man­u­ally started a we­bapp API and in­spected it with curl re­quests

* in­stalled a browser and man­u­ally in­spected the app, then built end-to-end tests based on that

All things I’d be ner­vous about on my host ma­chine, es­pe­cially with the “just do it” flag en­abled.

And now I feel Claude is much more ef­fec­tive since it has the ex­tra con­text, it’s not re­ly­ing on me to run the com­mand, re­turn the out­put or er­ror mes­sage, and then it­er­ate. It just does it by it­self.

Claude Code is­n’t ex­actly a re­source hog, and the VM has plenty of head­room. The shared folder sync works fine, no lag or weird­ness when files change. This is un­der Linux with VirtualBox, YMMV for other plat­forms.

* gen­eral “oops I did­n’t mean Claude to do that”

What you’re NOT pro­tect­ing against:

* delet­ing the ac­tual pro­ject, since the file sync is two-way

* a ma­li­cious AI try­ing to es­cape the VM (VM es­cape vul­ner­a­bil­i­ties ex­ist, but they’re rare and re­quire de­lib­er­ate ex­ploita­tion)

* data ex­fil­tra­tion: the VM still has in­ter­net ac­cess, but be­sides the code there should­n’t re­ally be any data to ex­fil­trate

Threat model: I don’t trust my­self to al­ways catch what the agent is do­ing when I’m in the zone and just want stuff to work. This setup is about pre­vent­ing ac­ci­dents, not so­phis­ti­cated at­tacks.

Since all my pro­jects are in git I don’t care if it messes some­thing up in the pro­ject. Plus you get the ben­e­fit of be­ing able to use your reg­u­lar git tool­ing/​flows/​what­ever, with­out hav­ing to add cre­den­tials to the VM.

But if you need some­thing stricter, con­fig.vm.synced_­folder also sup­ports type: “rsync”, one-time one-way sync from the ma­chine run­ning to the ma­chine be­ing started by Vagrant, but then it’s on you to sync it back or what­ever is needed.

This took a bit to get right, mostly be­cause of the VirtualBox CPU bug. But now it’s fric­tion­less. I can let Claude Code do what­ever it wants with­out fear, and if some­thing goes side­ways, I just nuke the VM and start fresh.

The Vagrantfile is short and re­pro­ducible. Drop it in any pro­ject di­rec­tory, va­grant up, and you’re sand­boxed.

If you’re us­ing Claude Code with the dan­ger­ous flag, I’d rec­om­mend some­thing like this. Even if you’re care­ful about what you ap­prove, it only takes one mo­ment to mess things up.

A high res­o­lu­tion draw­ing of the ter­razzo lay­out. (Courtesy of US Bureau of Reclamation)

The west­ern flank of the Hoover Dam holds a ce­les­tial map that marks the time of the dam’s cre­ation based on the 25,772-year ax­ial pre­ces­sion of the earth.

One of the two mas­sive bronze cast sculp­tures that flank Hoover Dam’s Monument Plaza. (Photo by Alexander Rose)

On the west­ern flank of the Hoover Dam stands a lit­tle-un­der­stood mon­u­ment, com­mis­sioned by the US Bureau of Reclamation when con­struc­tion of the dam be­gan in 01931. The most no­tice­able parts of this cor­ner of the dam, now known as Monument Plaza, are the mas­sive winged bronze sculp­tures and cen­tral flag­pole which are of­ten pho­tographed by vis­i­tors. The most amaz­ing fea­ture of this plaza, how­ever, is un­der their feet as they take those pic­tures.

The plaza’s ter­razzo floor is ac­tu­ally a ce­les­tial map that marks the time of the dam’s cre­ation based on the 25,772-year ax­ial pre­ces­sion of the earth.

Marking in the ter­razzo floor of Monument Plaza show­ing the lo­ca­tion of Vega, which will be our North Star in roughly 12,000 years. (Photo by Alexander Rose)

I was par­tic­u­larly in­ter­ested in this mon­u­ment be­cause this ax­ial pre­ces­sion is also the slow­est cy­cle that we track in Long Now’s 10,000 Year Clock. Strangely, lit­tle to no doc­u­men­ta­tion of this in­stal­la­tion seemed to be avail­able, ex­cept for a few va­ca­tion pic­tures on Flickr. So the last time I was in Las Vegas, I made a spe­cial trip out to Hoover Dam to see if I could learn more about this ob­scure 26,000-year mon­u­ment.

I parked my rental car on the Nevada side of the dam on a day push­ing 100 de­grees. I quickly found Monument Plaza just op­po­site the vis­i­tor cen­ter where tours of the dam are of­fered. While the plaza is easy to find, it stands apart from all the main tours and sto­ries about the dam. With the ex­cep­tion of the writ­ing in the plaza floor it­self, the only in­for­ma­tion I could find came from a speaker run­ning on loop, broad­cast­ing a ba­sic de­scrip­tion of the mon­u­ment while vis­i­tors walked around the area. When I asked my tour guide about it, he sug­gested that there may be some his­tor­i­cal doc­u­men­ta­tion and di­rected me to Emme Woodward, the dam’s his­to­rian.

Left: Monument Plaza with ac­cess road on left. (Image cour­tesy of US Bureau of Reclamation). Right: Hansen lay­ing out the ax­ial pre­ces­sion. (Image cour­tesy of US Bureau of Reclamation)

I was able to get in touch with her af­ter re­turn­ing home. As she sent me a few items, I be­gan to see why the Bureau of Reclamation does­n’t ex­plain very much about the mon­u­men­t’s back­ground. The first thing she sent me was a de­scrip­tion of the plaza by Oskar J. W. Hansen, the artist him­self, which I thought would tell me every­thing I wanted to know. While parts of it were help­ful, the artist’s state­ment of in­ten­tion was also highly con­vo­luted and opaque. An ex­cerpt:

These [human] pos­tures may be matched to their cor­re­spond­ing re­flexes in terms of an­gle and de­gree much as one would join cams in a worm-gear drive. There is an an­gle for doubt, for sor­row, for hate, for joy, for con­tem­pla­tion, and for de­vo­tion. There are as many oth­ers as there are fleet­ing emo­tions within the brain of each in­di­vid­ual who in­hab­its the Earth. Who knows not all these pos­tures of the mind if he would but stop to think of them as us­able fac­tors for de­ter­min­ing pro­cliv­i­ties of char­ac­ter? It is a knowl­edge bred down to us through the past ex­pe­ri­ence of the whole race of men.

It is pretty hard to imag­ine the US Bureau of Reclamation us­ing this type of write-up to in­ter­pret the mon­u­ment… and they don’t. And so there it stands, a 26,000-year clock of sorts, for all the world to see, and yet still mired in ob­scu­rity.

Markings on the floor show­ing that Thuban was the North Star for the an­cient Egyptians at the time of the Great Pyramids. (Photo by Alexander Rose)

While I may never to­tally un­der­stand the in­ner mo­ti­va­tions of the mon­u­men­t’s de­signer, I did want to un­der­stand it on a tech­ni­cal level. How did Hansen cre­ate a ce­les­tial clock face frozen in time that we can in­ter­pret and un­der­stand as the date of the dam’s com­ple­tion? The earth’s ax­ial pre­ces­sion is a rather ob­scure piece of as­tron­omy, and our un­der­stand­ing of it through his­tory has been spotty at best. That this ma­jor en­gi­neer­ing feat was cel­e­brated through this mon­u­ment to the ax­ial pre­ces­sion still held great in­ter­est to me, and I wanted to un­der­stand it bet­ter.

The gi­ant bronze stat­ues be­ing craned into place. (Image cour­tesy of US Bureau of Reclamation)

I pressed for more doc­u­men­ta­tion, and the his­to­rian sent me in­struc­tions for us­ing the Bureau of Reclamation’s im­age archive site as well as some key­words to search for. The black and white im­ages you see here come from this re­source. Using the con­vo­luted web site was a chal­lenge, and at first I had dif­fi­culty find­ing any pho­tos of the plaza be­fore or dur­ing its con­struc­tion. As I dis­cov­ered, the prob­lem was that I was search­ing with the term “Monument Plaza,” a name only given to it af­ter its com­ple­tion in 01936. In or­der to find im­ages dur­ing its con­struc­tion, I had to search for “Safety Island,” so named be­cause at the time of the dam’s con­struc­tion, it was an is­land in the road where work­ers could stand be­hind a berm to pro­tect them­selves from the never-end­ing on­slaught of ce­ment trucks.

Hansen next to the com­pleted ax­ial pre­ces­sion lay­out be­fore the ter­razzo was laid in. (Image cour­tesy of US Bureau of Reclamation)

I now had some his­tor­i­cal text and pho­tos, but I was still miss­ing a com­plete di­a­gram of the plaza that would al­low me to re­ally un­der­stand it. I con­tacted the his­to­rian again, and she ob­tained per­mis­sion from her su­pe­ri­ors to re­lease the ac­tual build­ing plans. I sus­pect that they gen­er­ally don’t like to re­lease tech­ni­cal plans of the dam for se­cu­rity rea­sons, but it seems they deemed my re­quest a low se­cu­rity risk as the mon­u­ment is not part of the struc­ture of the dam. The his­to­rian sent me a tube full of large blue­prints and a CD of the same prints al­ready scanned. With this in hand I was fi­nally able to re-con­struct the tech­ni­cal in­tent of the plaza and how it works.

In or­der to un­der­stand how the plaza marks the date of the dam’s con­struc­tion in the nearly 26,000-year cy­cle of the earth’s pre­ces­sion, it is worth ex­plain­ing what ex­actly ax­ial pre­ces­sion is. In the sim­plest terms, it is the earth “wobbling” on its tilted axis like a gy­ro­scope — but very, very slowly. This wob­bling ef­fec­tively moves what we see as the cen­ter point that stars ap­pear to re­volve around each evening.

Long ex­po­sure of star trails de­pict­ing how all the stars ap­pear to re­volve around the earth’s ce­les­tial axis, which is cur­rently pointed close to our cur­rent North Star — Polaris. Note that when I say that the stars of the night sky “appear to” ro­tate around Polaris, it is be­cause this ap­par­ent ro­ta­tion is only due to our van­tage point on a ro­tat­ing planet. (Image cour­tesy of NASA)

Presently, this cen­ter point lies very close to the con­ve­niently bright star Polaris. The rea­son we have his­tor­i­cally paid so much at­ten­tion to this ce­les­tial cen­ter, or North Star, is be­cause it is the star that stays put all through the course of the night. Having this one fixed point in the sky is the foun­da­tion of all ce­les­tial nav­i­ga­tion.

Figure 1. The earth sits at roughly a 23 de­gree tilt. Axial pre­ces­sion is that tilt slowly wob­bling around in a cir­cle, chang­ing what we per­ceive as the ce­les­tial pole or “North Star.” (Image from Wikipedia en­try on Axial Precession, CC3.0.)

But that point near Polaris, which we call the North Star, is ac­tu­ally slowly mov­ing and trac­ing a cir­cle through the night sky. While Polaris is our North Star, Hansen’s ter­razzo floor points out that the North Star of the an­cient Egyptians, as they built the great pyra­mids, was Thuban. And in about 12,000 years, our North Star will be Vega. The work­ings of this pre­ces­sion are best ex­plained with an an­i­ma­tion, as in fig­ure 1. Here you can see how the axis of the earth traces a cir­cle in the sky over the course of 25,772 years.

Unfortunately it is a bit dif­fi­cult to see how this all works in the in­laid floor at Monument Plaza. The view that you re­ally want to have of the plaza is di­rectly from above. You would need a crane to get this view of the real thing, but by us­ing the orig­i­nal tech­ni­cal draw­ing as an un­der­lay I was able to mark up a di­a­gram which hope­fully clar­i­fies it (Fig. 2).

Figure 2. Description over­laid on the orig­i­nal tech­ni­cal draw­ing for the lay­out of ter­razzo floor. (Underlay cour­tesy of US Bureau of Reclamation, color no­ta­tions by Alexander Rose.)

In this di­a­gram, you can see that the cen­ter of the cir­cle traced by the ax­ial pre­ces­sion is ac­tu­ally the mas­sive flag pole in the cen­ter of the plaza. This ax­ial cir­cle is promi­nently marked around the pole, and the an­gle of Polaris was de­picted as pre­cisely as pos­si­ble to show where it would have been on the date of the dam’s open­ing. Hansen used the rest of the plaza floor to show the lo­ca­tion of the plan­ets vis­i­ble that evening, and many of the bright stars that ap­pear in the night sky at that lo­ca­tion.

By com­bin­ing planet lo­ca­tions with the an­gle of pre­ces­sion, we are able to pin­point the time of the dam’s com­ple­tion down to within a day. We are now de­sign­ing a sim­i­lar sys­tem — though with mov­ing parts — in the di­als of the 10,000 Year Clock. It is likely that at least ma­jor por­tions of the Hoover Dam will still be in place hun­dreds of thou­sands of years from now. Hopefully the Clock will still be tick­ing and Hansen’s ter­razzo floor will still be there, even if it con­tin­ues to baf­fle vis­i­tors.

A draw­ing of the ter­razzo lay­out. Click here for a high res­o­lu­tion ver­sion. (Courtesy of US Bureau of Reclamation)

I would like to thank Emme Woodward of the US Bureau of Reclamation for all her help in find­ing the orig­i­nal im­ages and plans of Monument Plaza. If you have fur­ther in­ter­est in read­ing Hansen’s orig­i­nal writ­ings about the plaza or in see­ing the plans, I have up­loaded all the scans to the Internet Archive.