The difference time makes; Tech bro cognitive dissonance
The difference time makes
I love this Jeff Bezos quote on long term planning: “Well, certainly, in 10 years many things will evolve; technology will change. Machine-learning technology, in particular, will evolve very significantly over the 10-year time horizon. But I would always encourage people, when they think about 10 years, to ask the question, what won’t change? That’s actually the more important question. You can build strategies around things that will be stable in time. In that 10-year vision, there are a bunch of things at Amazon that are not going to change. One of them, maybe the most important one, is that we will stay customer-obsessed instead of competitor-obsessed. We will work on maintaining that culture.”
Warren Buffett was born on August 30th, 1930. He is 94 years old. Were you to transport someone from that date through time and plop them down in the year 2025 they would likely suspect that Aliens had visited Earth and kindly shared their advanced technology with us common Homo Sapiens. They would also be shocked at how society itself had changed.
In 1930 the world was in the middle of the Great Depression. Most babies were still born at home, not in hospitals. 6% of White babies and 10% of black babies died before their first birthdays. It was only five years prior that half of US homes had electricity installed. Women had only been voting for ten years. Homosexuality was illegal in most of the United States and Europe. Traveling between New York and London was done by boat. Doctors were regularly featured in ads for cigarettes. The home television had not been invented. World War II hadn’t started. The largest companies in the United States sold commodities. And there were still laws throughout the country segregating whites and blacks.
92 years before 1930 was 1838. Slavery was still legal in the United States. Out of every 1,000 babies born, only 570 would make it to their 5th birthday. That’s not a typo. Barely half of children made it to five years old.
92 years before that was 1746, thirty years before the United States declared independence from Great Britain. Native Americans still outnumbered immigrants.
I’m paraphrasing what Warren Buffett refers to as the “lifetime” anecdote, which he uses to remind people how quickly progress is made. 276 years sounds like a long time ago, but “three lifetimes” doesn’t.
But you don’t need to look back 92 years to see an enormous amount of change take place. Consider the summer of 2012.
Facebook had just IPOd, and for the second election in a row Obama was being lauded for how expertly he used social media to connect with people. The mainstream media was explicitly positive on the topic of using the “private data” of Facebook users not only to win campaigns in the United States - but also to facilitate regime change all over the world (remember the “Arab Spring”).
The biggest economic threat the world faced was a breakup of the EU. Greek government bond yields had crossed 35% on the ten-year while German two-year bonds had gone negative for the first time. North Korea was the country everyone worried about – not Russia (except for Mitt Romney) or China. Amazon’s AWS revenue was only $1.5 billion (it will be over $120B this year). Oculus, the VR company that Facebook purchased for $2billion to launch its metaverse effort had just filed its incorporating documents (now the founder of Oculus - Palmer Luckey - has already started a new business building weapons, which is worth $30B+ and counting).
Russia was holding its equivalent of Davos - which - most of the world attended. Called the St. Petersburg International Economic Forum, Goldman Sachs, McKinsey, Pepsi, Mercedes-Benz and “everyone who is anyone in the energy business” were there. Mr. Putin delivered a vigorous speech about making Russia more business friendly. Romney was being laughed at and ridiculed for referring to Russia as a geopolitical ally. The Economist closed the article by saying:
Western companies and politicians remain optimistic that relations with Russia could normalize in much the same way as things have between the West and China.
LMFAO - so the goal of US foreign policy in 2012 was to replicate how marvelously things were going with China - in Russia…
How times change…
Cognitive dissonance?
One of the things that frustrates me most are smart people who totally grok that the future is unpredictable with respect to thing A, but who then become completely triggered when you point out that it is also unpredictable with respect to thing B. Climate change and financial markets are the quintessential example.
Most technology and finance bros agree that you cannot predict stock markets. However, most also agree that we can use “science” to forecast that if temperatures rise by 2 degrees then 50 million people will die 75 years from now.
One of the primary data points for predicting future death is [future wealth] - which you would predict largely by forecasting the performance of financial markets.
Do you see the logical error?
Besides, even if you could - with perfect accuracy - predict exactly what the weather was going to be like in the distant future, this is not the same thing as being able to predict what the future itself will be like (e.g. how humans have adapted). In order to predict deaths from climate change you would also have to be able to accurately predict:
Economic growth between now and then for purposes of estimating how many resources we will have to address climate change
Migratory patterns
How resources are allocated between now and then
What new technologies will get invented
How expensive electricity or other forms of energy would be
What infrastructure has been built and where
And the list goes on.
If I could give one gift of a understanding to the entire planet - I’d be very tempted to make that gift the innate comprehension of the inherent unpredictability of complex systems.
If anyone could predict the future of financial markets they would be a trillionaire. For reference, over 90% of mutual funds managers and over 95% of hedge fund managers under perform the S&P 500 over a 20 year basis. Their performance is worse than dart throwing monkeys. This is due mostly to fees - but obviously they are not - as a group - relatives of Nostradamus. And if you’re wondering - the average person performs far worse due to poorly timed purchases and sales (buying high selling low).
Predicting the future of a complex system is impossible. Why? The degrees of freedom (variables) interact with one another. Cultures evolve. Economic opportunities change. And yes - in cases - the weather changes too!
The more variables there are in a system the more difficult it is to figure out which ones combine to create signal. At a certain amount of complexity the signal disappears entirely. Remember, [time] needs to be multiplied by all variables because the path variables take is as impactful as where they arrive, making the total number of variables grow exponentially as time passes.
If you wanted to predict how many people will die from climate change 50 years from now - one of the most important variables to be able to forecast would be the performance of financial markets between now and then…If financial markets have negative returns between now and then, we would need to adjust our expectations around technological sophistication, the amount of infrastructure we can afford to build, etc. Similarly, if global stock markets compounded at 10%+, then we can infer that humans in 2075 are rich as Crassus and have likely invented all sorts of wondrous new technologies and built infrastructure that makes us look like a space faring civilization. It is also quite possible that we’re damn near done figuring out how to control the weather itself (if not already controlling it).
Here’s the takeaway. Financial markets are one of many complex systems that together make up the larger complex system of “human life”. If you can’t predict financial markets (or any other complex system that is part of the whole) then you can’t predict anything about any complex systems that count financial markets as a building block.
ChatGPT summarized complex systems thus:
The nonlinear relationships among components create feedback loops and emergent properties, where the whole behaves differently than the sum of its parts. These intricate interactions amplify uncertainties, ensuring that small errors or incomplete knowledge quickly compound into significant unpredictability over time.
The techies who most clearly illustrate this cognitive dissonance are (currently) the hardware bros. Here’s Gill suggesting that in order to “save the environment” - whatever that means - we need to climb the Kardashev scale (explanation below if you aren’t familiar with the term).
There are a group of people who believe (as I do) that we are going to have humanoid robots with human level intelligence - by the billions - able to help us build infrastructure - as soon as the late 2030s. But still they’re worried about the environment? What part of it specifically I can’t fathom. If we’re going to be landing humanoid robots on Mars we can probably allocate a few of them to plant some trees…
