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Everything in society can feel geared toward optimization – whether that’s standardized testing or artificial intelligence algorithms. We’re taught to know what outcome you want to achieve, and find the path towards getting there.

Kenneth Stanley, a former OpenAI researcher and co-founder of a new social media platform called Maven, has been preaching for years that this method of thinking is counterproductive, if not outright harmful. Instead of prioritizing objectives, Stanley says we should be prioritizing serendipity.

“Sometimes, in order to find those stepping stones that will lead to the things we care about, we have to get off the path of the objective and onto the path of the interesting,” Stanley told TechCrunch in a video interview. “Serendipity is the opposite of finding something through objectives.”

The idea of seeking novelty for its own sake started as an algorithmic concept that Stanley studies called open-endedness, a subfield of AI research about systems that “just keep producing interesting stuff forever.”

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How Maven’s AI-run ‘serendipity network’ can make social media interesting again

Rebecca Bellan

7:30 AM PDT • May 26, 2024

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Image Credits: Getty Images

Everything in society can feel geared toward optimization – whether that’s standardized testing or artificial intelligence algorithms. We’re taught to know what outcome you want to achieve, and find the path towards getting there.

Kenneth Stanley, a former OpenAI researcher and co-founder of a new social media platform called Maven, has been preaching for years that this method of thinking is counterproductive, if not outright harmful. Instead of prioritizing objectives, Stanley says we should be prioritizing serendipity.

“Sometimes, in order to find those stepping stones that will lead to the things we care about, we have to get off the path of the objective and onto the path of the interesting,” Stanley told TechCrunch in a video interview. “Serendipity is the opposite of finding something through objectives.”

The idea of seeking novelty for its own sake started as an algorithmic concept that Stanley studies called open-endedness, a subfield of AI research about systems that “just keep producing interesting stuff forever.”

“Open-ended systems are like artificially creative systems,” said Stanley, noting that humans, evolution and civilization are all also open-ended systems that continue to build on themselves in unexpected ways.

This algorithmic insight morphed into a life philosophy for Stanley. He even wrote a book about it in 2015 with his former PhD student Joel Lehman called Why Greatness Cannot Be Planned. The concept took off, making Stanley something of an international focal point for the brazen idea that, actually, you can just do things because they’re interesting, rather than because you need to complete some stated objective.

But in 2022 while leading an open-endedness team at OpenAI, Stanley said he was “boiling over with discontent” and “had this epiphany” where he decided to stop talking about bringing open-endedness to wider audiences and instead start doing something about it.

What if, he asked himself, he created a “serendipity network,” a system that’s set up to increase the probability of serendipity, for other people to enjoy?

So he quit his job and set about to create Maven, a social network built around an open-ended AI algorithm that evolves to seek novelty. When signing up, users select a series of topics to follow — from neuroscience to parenting — and the algorithm shows them posts that align with their interests. There are no likes, upvotes, retweets or follows, and there’s no way to amplify content to the masses.

Instead, when a user posts something, the algorithm automatically reads the content and tags it with relevant interests so it shows up on those pages. Users can turn up the serendipity slider to branch out beyond their stated interests, and the algorithm running the platform connects users with related interests. So if, for example, you’re following conversations about urban planning, Maven might also suggest conversations about public transit.

And while there’s no way to follow people on the platform, you can see and connect with other people who follow topics you’re interested in.

In a lot of ways, Maven feels like an antidote to today’s social media, where the “objective paradox is on full display” as people fall over themselves to create sensationalist content that will garner more attention and popularity.

“The echo chambers and the toxicity, the narcissism amplification and personal branding has gone totally out of control so that people are losing their soul and turning into brands,” said Stanley.

The addictive qualities of social media, harm to mental health in adolescents and adults, and ability to polarize nations is well documented. These, Stanley says, are the unintended consequences of ambitious objectives, the outcome of making popularity a proxy for quality.

“And then you get all these other things because once you have popularity, you have perverse incentives,” he said.

Stanley noted that Maven users can flag inappropriate content or misinformation when it pops up, and its AI is actively monitoring for highly inflammatory, offensive “or worse” content. He said Maven can’t fix the nastiness in human nature, but by eliminating the incentives behind sharing such content, Stanley hopes it could change the “overall aggregate dynamic of how people are behaving.”

Some social media companies have attempted to combat such incentives in the past. The OG of pushing out serendipitous content was StumbleUpon, a browser extension and app created by entrepreneur Garrett Camp, years before he co-founded Uber. Instagram in 2019 then tested out hiding “likes” to curb comparisons and hurt feelings that come with attaching popularity to content. X, formerly Twitter, is preparing to make likes private, as well, but for less wholesome reasons. In a very Elon Musk-inspired line of thinking, X’s goal is to create more engagement by allowing people to privately like “edgy” content that they otherwise wouldn’t to protect their public image.

Maven is less interested in connecting users with audiences, and more focused on connecting them with what’s interesting.

The problem of monetization

Stanley and his co-founders – Blas Moros and Jimmy Secretan – soft-launched Maven in late January. The platform publicly debuted in May alongside a Wired feature that Stanley says gave Maven a top trending spot on Product Hunt and brought on thousands of sign ups.

Those are still small numbers compared to other new entrants into the social media space. Bluesky, which launched in 2021, has had 5.6 million sign ups. As of January 2024, Mastodon had 1.8 million active users. Farcaster, a new crypto-based social protocol that just raised $150 million, has counted about 350,000 signups. All of these new networks will need to grow significantly if they’re to be considered successful.

It’s still an open question over whether Maven will even be able to grow its user base without the very toxic qualities we love to hate, but which nonetheless drag us back to the cesspit that is social media.

Maven raised $2 million in 2023 in a round led by Twitter co-founder Ev Williams, Stanley told TechCrunch. OpenAI CEO Sam Altman also participated in the round. Stanley said Williams and Altman invested because, like many of us who have become endeared by Maven’s almost too-sweet-for-this-world ethos, they think the world and the internet needs something like this.

And indeed, Maven’s idealistic hope to connect people to interesting ideas is reminiscent of the early 2000s, when the internet was a place of connection and exploration. Sentiments from early users on the platform are mostly positive and optimistic, as many came to the platform for genuine and serendipitous interactions and the promised freedom from toxicity.

But will idealism be enough to bring on more institutional investors later when Maven wants to grow?

“I think the challenge we face is that going forward, that becomes a harder and harder way to raise money,” said Stanley, noting that investors won’t be throwing down millions unless there’s a clear path to get a return on their investment.

“I just need to find the right investors going forward and quickly get to a sustainable business model,” he continued, musing over the idea of a subscription model that would allow Maven to keep its ideology intact.

There are, of course, other ways for Maven to bring in revenue. Advertising is one path, but one that appeals less to Stanley because of how tied up it is with virality and sensationalism.

Down the line, Maven could also potentially sell its data to companies like OpenAI that are training their algorithms on reams of data. OpenAI earlier this month signed a deal with Reddit to train its AI on the social media company’s data. And Maven’s value proposition from an AI standpoint isn’t even just the content on the platform – it’s the open-ended algorithm running it.

Stanley told TechCrunch he believes open-endedness is essential to artificial general intelligence (AGI), a type of AI that aims to match or surpass human capabilities across a range of cognitive tasks. Open-endedness is “such a salient aspect of being intelligent,” Stanley said. “It’s like this creative and also curiosity-driven aspect of being human.”

“The data is interesting from an AI perspective, because it’s data about what is interesting,” said Stanley, noting that current AI models are missing the intuitive understanding of what is interesting and what is not, and how that can change over time. However, even though the data has potential value to AI, Stanley said Maven has no deal with any company to grant access to that data.

And while he said he hasn’t ruled that possibility out in the future, he would think very carefully about what the implications of sharing such data would be.

“That’s not the point of this for me,” he said, noting that he’s not convinced that it would be a good thing for neural networks to be completely open-ended because that might make any creative endeavors by humans completely pointless.

“I really wanted to create this worldwide serendipitous community,” he said. “It’s not like I have a side plan that we’re going to use Maven to create open-ended AI or something. I just wanted to create something for people because I started to feel like everybody’s gonna be talking to chatbots more and more and we’re gonna be less and less connected with other people. And I was contributing to that being an AI researcher.”

“Something about this idea of a serendipity network made me feel morally better, like I could actually contribute to people being more connected rather than less.”

Famed fixed-income investor warns that Republican’s proposed tax cuts would exacerbate rising US deficits

A Donald Trump victory in the US presidential election would be “more bearish” and “disruptive” for the bond markets than the re-election of Joe Biden, according to Bill Gross, the longtime fixed-income investor.

Trump’s return to the White House would exacerbate the burgeoning US deficits that have soured him on the market that earned him the “bond king” sobriquet when he was running asset manager Pimco, Gross told the Financial Times.

“Trump is the more bearish of the candidates simply because his programmes advocate continued tax cuts and more expensive things,” Gross said, although he noted that Biden’s presidency has also been responsible for trillions of dollars of deficit spending.

“Trump’s election would be more disruptive.”

Gross’s comments come with less than six months to go until November’s US presidential election, and just days before a jury in Manhattan is expected to begin deliberations in the “hush money” case in which Trump could become the first former US president to be convicted of a crime.

Trump, a Republican, is leading Biden, the Democratic incumbent, in most national opinion polls as well as several recent surveys of voters in the key swing states that are likely to decide the election. He has also racked up high-profile endorsements in recent days, including from his former opponent Nikki Haley and billionaire GOP donor Stephen Schwarzman.

But Gross’s comments undercut one of Trump’s central arguments on the campaign trail: that he would be a better steward of the US economy and financial markets than Biden.

One of Trump’s key economic plans is a pledge to make his 2017 tax cuts permanent, a move that the Committee for a Responsible Budget, a think-tank, expects to cost $4tn over the next decade.

In an interview that ranged from his current market picks to the origins of his rare stamp collection, Gross elaborated on what he has learned while compiling 40 years of his monthly investment outlooks into a new book.

The burgeoning US deficit has turned Gross off the bond strategy that made him famous and led him to declare in his most recent outlook that “total return is dead”. The US fiscal deficit hit 8.8 per cent of GDP last year — more than double the 4.1 per cent deficit figure recorded for 2022.

“It’s the deficit that is the culprit; a $2tn [annual] increase in supply . . . is going to put some pressure on the market,” he said.

Instead, Gross said, he has been putting his fixed-income allocation into a closed-end fund that invests in preferred securities, contingent capital and up to 20 per cent private credit, while using some leverage to boost returns.

“It’s certainly more attractive for an investor that doesn’t need a lot of liquidity.”

Gross is also relatively pessimistic about US equity markets, warning that investors “need to temper their expectations” rather than expect an indefinite repeat of last year’s 24 per cent return for the S&P 500.

“Over time the markets should mean revert. To me, that means prices going up less than they have.”

“If people are expecting 10 or 15 per cent, [they] are going to be working with slimmer budgets.”

Gross, who still spends five or six hours a day watching the markets on his personal Bloomberg terminal, also has chunky investments in tobacco stocks and securities known as master limited partnerships, a tax- advantaged way of funding pipelines and other companies.

In both cases, he is seeking to profit from corners of the market that others avoid. Many investors shun tobacco for its health impact, while MLPs lose some or all of their tax benefits when held in mutual funds and retirement vehicles.

Addressing property taxes that favour owner-occupation would be more productive

For every complex problem, quipped the American satirist HL Mencken, there is an answer that is neat, plausible and wrong. There could be no better verdict on rent controls as a solution to the problems of Britain’s private rented sector.

Too bad, then, that Labour politicians are sending conflicting signals on the issue as the election nears. While the official Labour line is that rent controls are not party policy, shadow chancellor Rachel Reeves recently declared that she could see a case for controlling rents in local areas even though she did not favour a “blanket approach”.

Her comment came as the party attempted to distance itself from a commissioned report recommending that rent controls be pegged to the lower of local wage growth or the increase in the consumer price index. Meanwhile, Sadiq Khan, London’s Labour mayor, has in the past asked for powers to freeze rents in the UK capital.

Concern for those at the bottom of the housing market is understandable. In the 12 months to April, private rents in the UK increased by 8.9 per cent, way above consumer price inflation at 2.3 per cent. Financial support for those struggling with spiralling rents has been progressively eroded while shrinkage in social housing since the council house sell-off in the Thatcherite 1980s has not been reversed.

Yet the history of rent control, from its introduction during the first world war to its shelving in 1989, is an object lesson in the law of unintended consequences.

The combination of inflation and controlled rents after 1945 meant that residential landlords’ real income declined relentlessly. This removed their incentive to invest in lettable new housing or spend money on the upkeep of existing property. 

Tenants could not move for fear of forfeiting below-market rents and, potentially, security of tenure. This had adverse consequences for labour market mobility and led to a wasteful use of the housing stock as downsizing in old age incorporated a severe financial penalty.

The wreck of the private rented sector reached its apogee in the 1960s and 1970s with the great wave of gentrification in Britain’s inner cities. This was sometimes portrayed in the media as a benign process whereby enterprising young professionals moved into broken down neighbourhoods and turned them into salubrious, safer places.

In reality, gentrification was all about financial arbitrage. In an investigation published in The Times in 1973, I showed how two little-known property dealers with a private business empire of about 500 companies had bought up great swaths of Islington, Camden Town, Fulham and other parts of inner London. What they and other speculators were doing was exploiting the difference between the low market value of properties with protected sitting tenants and the much higher value of the properties with vacant possession. 

The speculators employed “winklers”, or front men, to induce tenants to vacate, by fair means or foul. This spread fear and distress among tenants while disrupting communities. The furore that followed these revelations prompted Richard Crossman, the Labour minister whose 1965 Rent Act sought to refine the rent control system, to declare that the act had failed to protect tenants.

By the time rents were deregulated in 1989, the private rented sector’s share of the housing stock had fallen to a tenth, down from nine-tenths in 1915.

The lesson here is that rent controls, with their perverse incentives, are a distraction from the reality that the housing affordability crisis stems chiefly from sky-high land prices. Oxford university’s John Muellbauer has found that more than 70 per cent of the value of homes lies in the value of the land.

The more fruitful avenue for Labour would thus be to address the current mish-mash of property taxes that strongly favour owner-occupation against renting. Cue the OECD’s recommendation, backed by Muellbauer, to shift from transaction taxes on property to annual taxes on land value, with appropriate deferral for cash-poor households.

As well as broadening the (currently stretched) tax base this has the potential to enhance labour mobility, reduce regional inequality, secure a bigger share of windfall planning gains for the public and curb property-based credit booms that crowd out more productive investments. It should be calibrated to encourage greening of the housing stock.  

Previous attempts to put land value tax on to the agenda have stalled in the face of vociferous opposition from landed interests. Still difficult, no doubt, for the Tories. But why should this scare resurgent Labour, with the wind in its sails? The prizes are many and rich.

The 37-year-old World No. 1 has yet to win a single tournament this year, but with uncertainty plaguing his rivals, he remains the favorite.

PARIS—Novak Djokovic spent his 37th birthday this week back on a clay court, celebrating a victory and being presented with a chocolate cake. Just days from the start of the French Open, the 24-time major champion was in good spirits, pacing around to share his dessert with the ball kids.

The surprising part was where the scene took place. Djokovic hadn’t yet traveled to Paris, where Roland-Garros kicked off on Sunday. He was at a fourth-tier tournament in Geneva that he had never played even a single time.

But in this strangely fitful season, Djokovic was just desperate for competitive matches.

Until last week, he had only taken the court in a tournament 17 times this year as losses piled up at a higher clip than usual. In fact, nearly halfway through the year, Djokovic has won exactly zero tournaments—despite looking untouchable after his victory at the 2023 U.S. Open. His run in Australia in January ended at the semifinal stage with a four-set loss to world No. 2 Jannik Sinner. Then he was knocked off the hard courts of the Miami Open by No. 123 Luca Nardi. And since then, Djokovic has stumbled through his clay-court campaign in fits and starts: a semifinal defeat against Casper Ruud in Monte-Carlo, a round-of-32 exit from the Italian Open.

“I just wasn’t able to find any kind of good feelings on the court, to be honest, with striking the ball,” he said after losing 2-6, 3-6 to Alejandro Tabilo in Rome. “I was completely off.”

That tournament was made even weirder by a bizarre incident in which a fan accidentally dropped a metal water bottle on Djokovic’s head while he was signing autographs. Though he seemed well enough the next day, showing up to the club in a bicycle helmet, he reported feeling nausea and dizziness right after the blow.

Though he reported no lingering effects, Djokovic still felt rusty and went to Geneva in the hope of finding some rhythm. There, he rattled off two quick wins before losing in the semifinal, which allowed him to set up in France in plenty of time. It wasn’t exactly how he had mapped out his spring, but no player on tour is more deliberate with how he spends his energy. Everything is designed for him to peak at the majors.

“I always strategically had a long-term plan in my head to play as long as possible so I can give my career a better chance to win more titles and break records,” Djokovic said. “You know, I have arguably had the better part of my career post-30 than before 30.”

Djokovic has a point. Twelve of his 24 Grand Slam titles have come since he turned 30. It’s the post-37 career that has begun to raise some questions.

Djokovic’s dip in form is just one factor contributing to this French Open men’s draw being the most open it’s been in years. For one, the twilight of 14-time champion Rafael Nadal’s career means that one of the surest things in 21st century sports is now a long shot. Sinner also arrived in Paris in less than perfect shape after dealing with a hip injury, while No. 3 Carlos Alcaraz has struggled to rediscover the kind of form that propelled him to a Wimbledon title last summer.

And yet, Djokovic remains the betting favorite to add a third title here in the space of four years to his trophy cabinet.

“It’s a crazy men’s tournament because there’s so much unpredictability at this time,” said Martina Navratilova, a two-time champion at Roland-Garros and analyst for the Tennis Channel. “It’s been Novak against the field in all the majors other than the French Open. But now that Rafa is obviously not playing his best tennis, he’s the favorite even on the clay.”

The women’s tournament is more clear-cut. World No. 1 Iga Swiatek, who has lifted the trophy in three of the past four editions here, once again landed in Paris head and shoulders above the rest on this surface. She won both of her high-profile clay-court tournaments in Madrid and Rome before heading to Roland-Garros, having beaten world No. 2 Aryna Sabalenka in both finals.

“Right now she looks pretty unbeatable,” Navratilova said. “She is beatable, but it’s going to take a monumental effort.”

But while the women’s No. 1 is in full swing, her counterpart in the men’s game knows just how much still has to happen to dominate the French Open again.

“Everything needs to be better in order for me to have at least a chance to win it,” Djokovic said.

Mary-Kate and Ashley Olsen, the child actresses-turned designers, have hired Goldman Sachs to find an investor willing to finance the growth of their high-end fashion brand The Row, industry sources told Miss Tweed.

The twin sisters rose to fame in the 1980s with the popular TV sitcom Full House in which they started playing when they were toddlers. Like Drew Barrymore who featured in Steven Spielberg’s E.T. and Shirley Temple who was a hugely popular child actress in the 1930s, Mary-Kate and Ashley Olsen were for many years the ultimate children sweethearts of America’s entertainment industry. They got into fashion at a young age and founded The Row in 2006 when they were 20. When they won the Womenswear Designer of the Year award from the Council of Fashion Designers of America (CFDA) in 2012, the two sisters officially left show business to focus on their career in fashion.

The twins, now aged 37, have built The Row into a highly desirable brand, known for its timeless designs and top-quality materials. The New York-based label is said to be profitable and generate turnover of around $250 million, several industry sources say. Some private equity firms have already been looking at the company’s books. One of the parties potentially interested is Téthys, the secretive holding company of the Bettencourt-Meyers family, the largest shareholder of French cosmetics giant L’Oreal. The Row and Téthys did not reply to requests for comment. Goldman Sachs declined to comment.

The Row – whose name comes from Savile Row, London’s chic tailoring strip – has become the go-to brand for the affluent and sophisticated fashion-conscious. Over the years, it has established itself as a credible American rival to Hermès in terms of market positioning, design and price point. One of its best-sellers is the no-logo Margaux bag selling for €6,340. Adopted by celebrities such as Kendall Jenner, it rivals Hermès’ Birkin in terms of cachet, some fashion experts say. The brand’s flat shoes costing $1,000 also sell well. Many of The Row’s bags and shoes are described as “sold out” on the brand’s website.

“The Row is the most desirable American brand, it’s at the top of the pile,” explains Euan Rellie, co-founder and managing partner of investment banking firm BDA Partners. “The term ‘quiet luxury’ applies to it in every way with the single gold chain as the identifier. The style is very minimalist with very high-end fabrics and an obsession with tailoring.” Now is a good time to sell a business, Rellie believes. “We are in an improving market. We’ve had a tough 18 months but now the sun is coming out even though interest rates have not come down yet.”

When The Row presented its collection during Paris Fashion Week in early March, viewers were asked to not take photos or videos, in contrast with every other brand that expects showgoers to advertise and publish photos and videos on their social media accounts. At The Row’s show, a notebook and pencil was provided on every seat to record thoughts and make sketches – like fashion critics, wholesale buyers and customers used to do before the digital age. The Row wished to make the point that luxury was also about living in the moment and being physically present at an event, fashion veterans said at the time. Photos of the show were published only a few days later – which never happens in a world in which images are instantly available and spread around the world in seconds thanks to smartphones.

The Olsen sisters are said to be very discreet. They rarely give interviews and try to stay below the celebrity radar as much as possible. Four years ago, Mary-Kate went through a bruising divorce from Olivier Sarkozy, the half-brother of former French president Nicolas Sarkozy. The news was covered by many celebrity and fashion magazines who offered their readers various explanations about why the couple split up.

The sisters may want to stay private but The Row has courted controversy on many accounts in the past. It has been accused by employees of hiring and promoting mainly white managers. Some of its staff have taken legal action on that point. The twins also ignore pressure from powerful animal rights associations like Peta, publicly wearing fur whenever they like. “The Olsen sisters break all the rules,” Rellie said.

In 2017, the Olsens had to pay $140,000 to a class action of 185 interns who complained about not being paid and working in harsh conditions.

During the pandemic, The Row was criticized for the brutal way in which it sacked around half of its staff. The job cut came on the heels of Barneys New York’s bankruptcy in 2019. Court filings from the bankruptcy revealed that Barneys owed The Row $3.7 million, making the brand the department store’s second-biggest creditor.

The two sisters have launched two other labels, Elizabeth and James and Olsenboye. They appear to be no longer active.

Industry sources say the Olsen sisters are keen to find an investment partner who will buy a minority stake and they would like to spend the funds on hiring talent and investing in new boutiques. The Row has only three stores, albeit in prestigious locations: Los Angeles’ Melrose Place, New York’s Upper East Side and London’s Carlos Place.

The Row has been trying to raise funds for more than a year now, industry sources say. It’s a rare asset but it has one major weakness: governance. The two sisters insist on controlling everything. That’s why they’ve been through several designers and CEOs in the past 15 years. “When they hire someone, they promise a post which the person eventually realizes he or she is actually not allowed to fulfill,” one former senior manager at The Row told Miss Tweed. “The sisters have amazing taste and they have created an amazing brand, but history shows that they don’t know how to manage people.”

Luckily, the two sisters get along very well. “They understand each other without speaking with one another,” the former manager said.

Today, the Olsen sisters run the company. Mary-Kate looks after design and Ashley acts as the CEO. The Row has been the training ground for many designers who now work for big brands such as Dior. Hermès’ current ready-to-wear creative director Nadège Vanhee Cybulski was The Row’s women’s design director before joining the French luxury brand in 2014.

“They’ve been running this company for a long time now,” said one financial source who is close to the Olsen sisters. “I think there is a weariness on the sister’s (Mary-Kate) part at this point. With all the retail turmoil, Saks’ credit situation, Matches bankruptcy and Net-a-Porter’s poor financial situation, I sense that they’re both just tired of the pressure of all the decisions they have to make, and the risks they have to take on inventory and production. It’s all a lot of pressure that doesn’t let up.”

It's not the first time The Row is opening up its shareholder capital. In 2013, the Olsen sisters sold a 20 percent stake to a group of private investors, who included billionaire Byron Trott, founder of the merchant bank BDT & Company. Last year, his firm merged with MSD, an investment company that manages funds on behalf of Dell founder Michael Dell and his family and friends. The new entity is called BDT & MSD. A source close to the bank confirmed that BDT & MSD was a shareholder in The Row as well as in Tory Burch, another fashion business that has been trying to find investors for some time, as Miss Tweed reported earlier this month.

Back in 2013, the deal with BDT & Company valued The Row at $100 million even though it was making around $9 million in revenue, one source with knowledge of the matter said. “Some people are ready to pay a lot of money to sit alongside celebrities at board meetings,” the source said. It is expected that Byron Trott and other investors will want to sell part or all of their stake – depending on the price – if and when a deal is agreed.

The Row is likely to attract more interest from private equity firms than from big luxury groups such as LVMH, Kering or Zegna Group, banking sources say. The Olsen sisters do not like being told what to do. Few luxury groups and investors will feel comfortable with that no matter how desirable The Row is as a brand.

A bold bet on rising rates lifted a small Massachusetts fund near the top of the performance rankings

Plymouth County is known for Pilgrims, cranberries—and a top-performing pension fund run by a 65-year-old former schoolteacher.

After a decade of mostly ho-hum performance, the $1.4 billion Plymouth County Retirement Association ranked in the top 10% of U.S. pensions over the past three years. Key to that success was an early—and prescient—bet that interest rates would rise. That buoyed the fund through big chunks of the past two years, when climbing rates hammered both stocks and bonds.

Now markets of all kinds have posted a six-month rally, stocks are hitting records and Plymouth risks falling behind again. But Peter Manning, the fund’s director of investments, is sticking to his guns. The hope that rates will fall soon is misplaced, he said. Another downturn could be coming for Wall Street.

And so, to Manning, the best way to enlarge the pension long term is by avoiding big losses, rather than chasing high returns.

“It ain’t about what you make. It’s about what you keep,” he said.

Beating the big guys

The fund, which manages savings for the county’s firefighters, bus drivers and custodians, delivered average annual net returns of 5.7% in the three years ending Dec. 31. That put it ahead of 92% of pensions nationally. The median U.S. public retirement fund returned 3.7% over the same period, according to Investment Metrics, a portfolio analysis provider.

Plymouth County surpassed bigger peers by slashing exposure to Treasurys and public stocks before they tanked in 2022. The fund then reinvested the money in infrastructure, private equity and inflation-protected debt.

While many other public plans have followed suit, the trades were also unusually quick for pension funds, which often change investments incrementally rather than in bold strokes.

“A lot of our clients made moves on the margin,” said Daniel Dynan, a managing principal at Meketa Investment Group, Plymouth County’s investment consultant. “The difference in Plymouth is the magnitude of the change.”

An unlikely trendsetter

With only 10,500 members, the fund is an unlikely trendsetter. U.S. public pensions guarantee retirement and benefit payments to 34 million members nationally, according to data from the Urban Institute, a nonprofit think tank. Plymouth County, which lies south of Boston, encompasses mostly middle-class suburbs, but also some wealthy enclaves and gritty urban areas. It is split between Democratic and Republican voters.

A decade ago, Plymouth County had only about half of the money it needed to make expected payments for its retirees. An accounting change in 2012 drastically widened shortfalls for most public pensions across the country.

At the same time, the board overseeing the fund, which had spent years relying solely on an outside consultant, was dissatisfied with its investment performance. The approach resembled the classic mix of 60% stocks and 40% bonds popular with ordinary investors.

“We were doing what everyone else was doing, running a 60-40 portfolio and hoping for the best,” said Tom O’Brien, Plymouth County’s treasurer and chairman of the pension board.

From teacher to investor

The county hired Manning to advise the board on investment strategy in 2012. He had never managed a pension fund before.

“I was a schoolteacher [in the 1980s] in a suburb of Boston and one day, after staring at 20 vacuous stares, I had a talk with my Uncle Bill, a currency trader,” Manning said.

He spent two decades trading commodity futures at his uncle’s brokerage in Boston and stocks at brokerages in Chicago. Then he became a financial adviser to wealthy individuals and families at Merrill Lynch on Cape Cod.

The job at Plymouth County involved a small pay cut, but offered the opportunity to run a nine-figure portfolio for public employees. He got a taste of how painful rising rates could be in May 2013, when comments by Fed Chairman Ben Bernanke sent bond prices tumbling in what became known as the “taper tantrum.”

“We lost $20 million in three trading days and it took us 36 months of clipping coupons to make that back,” Manning said. Coupons are the interest payments bondholders receive.

Initially, Manning and O’Brien focused on boosting alternative investments such as private equity and infrastructure, which made up less than 5% of the fund. They were part of a flock of pension funds seeking alternative investments for higher returns.

Plymouth County hired Meketa as a consultant in 2015, and private-equity and infrastructure investments climbed to nearly 15% by 2020, according to fund financial reports. Returns improved.

“They have a level of comfort being different,” said Dynan.

A contrarian call

Markets were on a tear the following year, lifted by the economy’s reopening from the pandemic. But Manning grew concerned in the summer about inflation. While many on Wall Street were calling price increases transitory, he worried inflation would persist, triggering rate increases and declines in stocks and bonds.

“We were going to conferences and being told that inflation was a paper tiger, or ‘this is not your father’s inflation,’” O’Brien said.

Manning consulted Bob Sydow, a high-yield bond fund manager at Mesirow who manages part of the pension’s money. Like Manning, he has worked on Wall Street since the 1980s.

“The money supply grew 43% over 26 months during Covid,” Sydow said. “I called it ‘free-range’ money and I thought it would generate a lot of inflation.”

From October 2021 to February 2022, Plymouth County pension sold about $80 million of its public stocks, or 6% of the fund’s assets, according to an email viewed by The Wall Street Journal. It shifted into real estate and infrastructure as well as short-term and floating-rate debt that is less sensitive to rising rates than traditional bonds, Manning said.

The fund lost 6.5% in 2022 while the median U.S. pension plan lost 14%. That outperformance has helped it stay ahead of other funds, even after it lagged behind the average in 2023.

Now, inflation remains above the Fed’s targets, and analysts’ forecasts for multiple rate cuts this year seem less certain. Plymouth County is keeping its strategy relatively unchanged, betting that rates will remain steady—or even climb.

Many investors are buying back into bonds because yields are at multiyear highs and they expect cuts by the Fed to trigger a rally. Manning takes a different tack. He thinks rates could stay high far longer than the Wall Street consensus, so he is using infrastructure funds to deliver income rather than bonds.

“Why do you have to own bonds at all in 2024?” Manning said. “It’s a legitimate question.”

Will Eurozone inflation derail the ECB’s rate cut plans?

Market Questions is the FT’s guide to the week ahead

Eurozone inflation has been gliding gently downwards for the past four months. But some analysts think price pressures will pick back up again this month, which could cause the European Central Bank to adopt a more cautious approach to cutting interest rates.

Consumer prices in the single currency bloc are expected to be 2.5 per cent higher in May than they were a year ago, a slight acceleration from 2.4 per cent a month earlier, according to a Barclays forecast of what the data will show when it is released on Thursday.

“Unfavourable base effects in energy will be the primary tailwind for headline inflation, pushing it to accelerate slightly,” said Mark Cus Babic, an economist at Barclays, adding that services inflation could tick up due to last year’s launch of subsidised German train tickets.

The figures come just a week before the ECB is widely expected to start lowering borrowing costs on June 6.

ECB president Christine Lagarde said last week there was “a strong likelihood” of a cut at its next meeting and most analysts believe it would take a massive surge in inflation to delay it. But other policymakers have warned that higher inflation readings will make the central bank less likely to follow up with another cut in July. 

“The ECB will probably deliver a first rate cut at its June 6 meeting but then pause in July, on the back of sticky wages but also services inflation, which we expect to remain elevated on a sequential basis in May, not least due to base effects in Germany,” said Frederik Ducrozet, an economist at Pictet Wealth Management. Martin Arnold

How healthy is China’s manufacturing sector?

Chinese factory data, released on Friday, will shed further light on the trajectory of the world’s second-largest economy after a period of heightened focus on its manufacturing sector.

President Xi Jinping’s government has emphasised the need for “high-quality production”, from electric vehicles to artificial intelligence, at a time when broader economic momentum and business confidence have come under pressure.

The official purchasing managers’ index, a gauge of manufacturing activity, is expected to have edged higher to 50.5 in May, according to economists’ forecasts compiled by Reuters. The index slowed in April to 50.4. A reading above 50 represents expansion compared with the previous month. 

A separate survey from Caixin showed factory activity expanding last month at the fastest pace in 14 months, at a level of 51.4.

Economic data released in mid-May showed that industrial production last month beat forecasts to rise 6.7 per cent year on year, though a real estate slowdown that began in 2021 continued to weigh on the economy. Exports returned to growth in April after a year-on-year decline in March.

Carlos Casanova, senior economist for Asia at UBP, noted recent economic data that “strong manufacturing output likely supported activity in April”, but added that, based on weak retail sales and investment, “the nature of China’s recovery remains lopsided”.

The data will be closely watched in the US, where President Joe Biden this month placed tariffs of 100 per cent on Chinese electric vehicle imports, and in Europe where policymakers have launched a probe into subsidies for the production of the vehicles. Thomas Hale

Will the Fed’s favoured metric show progress on inflation is stalling?

The Federal Reserve’s preferred measure of inflation is expected to show that prices in April rose at the same pace as March, despite a slowdown evident in the consumer price index last month.

The Bureau of Economic Analysis will release on Friday the personal consumption expenditures index data for April. Economists surveyed by Bloomberg forecast a 2.7 per cent year-over-year rise in the index, unchanged from the prior month. The core measure, which strips out the volatile food and energy sectors and is most closely watched by the Fed, is expected to be 2.8 per cent, also unchanged from March.

The PCE data will come in the wake of cooling inflation evident in April’s consumer price inflation figures. While April’s CPI data was still far above the Fed’s 2 per cent inflation target, the slowdown — after months of stronger-than-expected numbers — was a welcome relief for the market.

The PCE data will not reflect the same improvement, if the forecasts prove correct. But analysts argue that unchanged PCE data probably will not change the optimistic tone that has infused markets since the CPI data.

“Despite core PCE’s status as the Fed’s preferred measure of inflation, we’re less convinced it will change the market’s prevailing perception of the pace of consumer price inflation as the second quarter got under way,” said Ian Lyngen, head of US interest rate strategy at BMO Capital Markets. “In short, investors are cautiously optimistic that the Fed’s characterisation of the first quarter as a bump in the road towards cooling inflation is, in fact, an accurate read.” Kate Duguid

Move comes as Washington seeks to improve relations with Gulf state

The US is expected lift its ban on the sale of offensive weapons to Saudi Arabia, potentially in the coming weeks, according to US officials.

US President Joe Biden suspended the sale of such armaments to the kingdom three years ago, shortly after he entered the White House, criticising the conduct of the kingdom’s war in Yemen amid concerns about American-made weapons being used in air strikes that killed civilians.

But the decision has been under review after the UN brokered a truce in 2022 that has largely held as Riyadh has sought to extract itself from Yemen’s civil conflict, which it entered nine years ago.

Lifting the ban would be the latest sign of improving ties between the Biden administration and Riyadh.

Washington has already signalled to Saudi Arabia — traditionally one of the biggest buyers of US weaponry — that it was prepared to lift the ban, according to one person familiar with the matter.

The White House declined to comment.

Biden came to office promising to make Saudi Arabia a “pariah” because of his concerns about human rights in the kingdom, notably after the brutal 2018 murder of veteran journalist Jamal Khashoggi by Saudi agents at its consulate in Istanbul.

On the campaign trail in 2019, Biden also accused the Saudis of “murdering children” in an apparent reference to the war in Yemen, in which thousands were killed.

But relations have significantly improved since then, particularly after Russia’s invasion of Ukraine reinforced the belief in Washington that it needed Saudi Arabia’s co-operation on key issues, including energy, and to support US Middle East policies.

Senior US officials said this week that Washington and Riyadh were close to finalising a series of bilateral deals, including a defence pact and US co-operation on the kingdom’s nascent civilian nuclear programme.

The agreements would be part of a broader US-brokered compact that would lead to Saudi Arabia normalising ties with Israel, but it is dependent on the Jewish state agreeing to take steps towards the establishment of a Palestinian state.

Lifting the ban on offensive weapons sales was not directly tied to these talks, US officials said.

Saudi Arabia led an Arab coalition that entered Yemen’s civil war in 2015 to fight Iranian-backed Houthis after the rebels ousted the government and seized control of Sana’a, the capital, as well as most of the country’s populous north.

The kingdom, which shares a border with Yemen, drew widespread criticism for its conduct in the conflict. But in recent years, Riyadh has engaged in peace talks with the Houthis as Saudi Crown Prince Mohammed bin Salman has focused on his ambitious domestic development plans and on de-escalating tensions with regional foes, including Iran.

Progress on the Yemen talks stalled after Hamas’s October 7 attack and Israel’s retaliatory offensive against the Palestinian militant group in Gaza. The Houthis, which are part of Iran’s so-called “axis of resistance”, have launched missiles at Israel and attacked shipping in the Red Sea, disrupting flows through one of the world’s key maritime trade routes.

Washington designated the rebels as a global terrorist group in January, reversing the decision it took in 2021 to delist the movement.

But Saudi Arabia has continued to engage with a UN-mediated Yemeni peace process. In a sign that it did not want to escalate tensions with the Houthis, Riyadh did not join a US-led maritime task force designed to counter their attacks on shipping.

In Washington, the regional hostilities triggered by the Israel-Hamas war have reinforced the Biden administration’s belief that it needs Saudi Arabia as a key regional partner.

Ali Shihabi, a Saudi commentator close to the royal court, said lifting the ban on offensive weapons sales “would be an important step in continuing to rebuild the relationship between the US and Saudi Arabia”.

“And lifting the ban has become more important given the way the Houthis have behaved since October 7,” he added.