Finance as Truth Machine
While exercising today, I listened to Ray Dalio on DOAC. The interview starts slowly, repeating things published elsewhere. Then Steven manages to tease out Dalio's insights, tying together disparate threads into a more cohesive picture. We get perspective on the man and his learnings, as applied to Bridgewater and life.
Dalio prides himself on being systematic, open-minded, and principled. Like all successful people, he genuinely believes everyone can learn certain behaviors and mindsets that will lead to a more fulfilling and prosperous existence.
The Oracle of Omaha popularized Ben Graham's saying: "In the short run, the market is a voting machine but in the long run it is a weighing machine." One theme that sticks with me from Dalio's responses is the primacy of curiosity.
Dalio applies truth seeking to all facets of life, including employee incentives to build meaningful relationships through social club sponsorships. Arriving at his own conclusions and betting that the world will catch up has made him a billionaire. It's nice that he's sharing his mistakes and insights freely with us.
A very smart friend recently told me how working in finance has shaped his view of the world. He said it was actually kind of depressing, because you have to really take stock of how things are, as opposed to how you might wish them to be. Unlike makers who aspire and build the future, or activists who paint a picture of ideals, finance folks look around and study reality.
Polymarket and betting on stuff is very hot right now. At the All-in Summit, Kyle Samani and Vlad Tenev in particular highlighted the impending financialization of everything. We should all be bracing for impact and getting excited about the opportunities we'll have to participate.
I've written before how money is best viewed as a tool—to coordinate humans around ideas. Similarly, financial markets can be seen as truth discovery engines.
What's the value of a home, or a bushel of corn? What's the risk of a hurricane tomorrow and what are the implications? Where is the line between chance gambling and informed forecasting?
It's a bit silly to stick one's head in the sand, to denounce all money and betting as evil. While some people operating in these markets may simply want to earn lots of dough for themselves, markets exist on the whole because reality exists. We distill ideas from the universe and the myriad human interactions all around us.
I prefer to laud the utility of markets and the magic of consensus rather than lamenting finance as a parasitic industry. Markets bind us all through capitalism, which is obviously preferable over central planning and arbitrary price numbers from whichever tyrannic authoritarians happen to be in power.
What could be more democratic and liberal than an incessant debate among billions of transacting humans?
Jeff Bezos built on famously long time horizons and negative profit margins. He profoundly understood the enduring truths of consumer demand, that people always want cheaper, faster, and more variety. Elon leverages engineering truths combined with business savvy to create new rockets, batteries, and brain implants. I love ordering stuff on Amazon, and driving my Tesla is a joy.
Naval highly recommends David Deutsch and his book The Fabric of Reality. Paul Graham calls it founder mode. I learned to pay attention to market conditions the hard way, by failing for over a year to build a payments system in Ecuador. YC pointed this out to me in 10 minutes a priori, which shows the clarity of thought experienced investors can bring to a company.
Dalio talks about the leverage you get from surrounding yourself with excellent people. There are only so many brain cells you can marshal yourself and so many minutes in a day. I choose to write these blog posts freehand but maybe I should use AI more...
Dalio points out rather spiritually how everything is connected. Even if your goal isn't to become rich, understanding the world around you (and inside you) seems to be a universally good start in whatever direction you'd like to go.