​"Notably long-term debt cycles appear similar in many ways to short-term debt cycles, except that they are more extreme, both because the debt burdens are higher and the monetary policies that can address them are less effective. For the most part, short-term debt cycles produce bumps - mini-booms and recessions - while big long-term ones produce big booms and busts. Over the last century, the US has gone through a long-term debt crisis twice - once during the boom of the 1920s and the Great Depression of the 1930s, and again during the boom of the early 2000s and the financial crisis starting in 2008...

When credit is easily available, there's an economic expansion. When credit isn't easily available, there's a recession. The availability of credit is controlled primarily by the central bank. The central bank is generally able to bring the economy out of a recession by easing rates to stimulate the cycle anew. But over time, each bottom and top of the cycle finishes with more economic activity than the previous cycle, and with more debt. Why? Because people push it - they have an inclination to borrow and spend more instead of paying back debt. It's human nature. As a result, over long periods of time, debts rise faster than incomes. This creates the long-term debt cycle."

​"Typically debt crises occur because debt and debt service costs rise faster than the incomes that are needed to service them, causing a deleveraging. While the central bank can alleviate typical debt crises by lowering real and nominal interest rates, severe debt crises (i.e., depressions) occur when this is no longer possible. Classically, a lot of short-term debt cycles (i.e., business cycles) add up to a long-term debt cycle, because each short-term cyclical high and each short-term cyclical low is higher in its debt-to-income ration than the one before it, until the interest rate reductions that helped fuel the expansion in debt can no longer continue."

"There are four types of levers that policy makers can pull to bring debt and debt service levels down relative to the income and cash flow levels that are required to service them:

1) Austerity (i.e., spending less)

2) Debt defaults/restructurings

3) The central bank "printing money" and making purchases (or providing guarantees)

4) Transfers of money and credit from those who have more than they need to those who have less"

"The past few years have been described as the "post-truth" era. As each individual cultivates an upstream of information - drawing from friends on social media, favored news sites, and trusted pundits - society has found it hard to agree on the most basic subjects. Truth has, paradoxically, become a matter of perspective.

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In time we may see reality the same way. There is something reassuring in knowing that if you and I are standing next to each other on the same street, we will almost certainly agree on what we see. A green car passes, we concur. A Starbucks sits on the corner, door reliably opening and closing. A man drops his bag, bends, and picks it up. We feel the rattle of the train beneath our feet. Reality, a base layer of it, is indisputable to anyone of sound mind and easy for different parties to agree upon. Indeed, in some respect, that is what makes reality what it is - confirmation by multiple parties.

But just as the balkanization of information has challenged our acceptance of "truth," a "mirrorworld," as advanced by QR codes, may threaten our notions of "reality." As the two of us stand next to each other in the future, each wearing our own glasses, what do we see? My lenses, calibrated to my tastes and interests, pluck a code from the Starbucks window and manifest a mermaid that swims down the middle of the asphalt, singing a ditty of discount lattes. Yours alights on a subway station sign, pulling a billboard of delays and works-in-progress down, in front of your eyes. We both see the green car, but across its chassis, I see a scene from the newest Amazon Prime series while you see a diapered bay happily crawling. The man's bag as an affiliate code pinned to its side - with my ad-blocker on, I see nothing while you swat an image of it out of view.

Which of us sees reality? What does the word mean now?"

"Western economies have undergone a transformation from bulk-material manufacturing to design and use of technology - from processing of resources to processing of information, from application of raw energy to application of ideas. As this shift has occurred, the underlying mechanisms that determine economic behavior have shifted from ones of diminishing to ones of increasing returns.

Increasing returns are the tendency for that which is ahead to get further ahead, for that which loses advantage to lose further advantage. They are mechanisms of positive feedback that operate - within markets, businesses, and industries - to reinforce that which gains success or aggravate that which suffers loss. Increasing returns generate not equilibrium but instability: if a product or a company or a technology - one of many competing in a market - gets ahead by chance or clever strategy, increasing returns can magnify this advantage, and the product or company or technology can go on to lock in the market." 

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The Gene An Intimate History

"In the spring of 1939, Albert Einstein, mulling over recent advances in nuclear physics in his study at Princeton University, realized that every step required to achieve the creation of an unfathomably powerful weapon had been individually completed. The isolation of uranium, nuclear fission, the chain reaction, the buffering of the reaction, and its controlled release in a chamber had all fallen into place. All that was required was sequence: if you strung these reactions together in order, you obtained an atomic bomb...

We are at a similar moment - a quickening - for human genome engineering. Consider the following steps in sequence: (a) the derivation of a true human embryonic stem cell (capable of forming sperm and eggs); (b) a method to create reliable, intentional genetic modifications in that cell line; (c) the directed conversion of that gene-modified stem cell into human sperm and eggs; (d) the production of human embryos from these modified sperm and eggs by IVF... and you arrive, rather effortlessly at genetically modified humans.

Of course, much remains unexplored: Can every gene be efficiently altered? What are the collateral effects of such alterations? Will the sperm and egg cells formed from ES cells truly generate functional human embryos? Many, many minor technical hurdles remain. But the pivotal pieces of the jigsaw puzzle have fallen into place."

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"History teaches us that power is inseparable from financial power. The country that leads in financial innovation leads in every way: from Renaissance Italy, through imperial Spain, the Dutch Republic, the British Empire, and the United States since the 1930's. Only lose that financial leadership - just ask poor Mr. Pound, once worth $4.86 - and you lose your place as global hegemon."

"[Mark] Manson reminds us that, hopelessness is the root of anxiety, mental illness and depression. It is the source of all misery and the cause of all addiction. Chronic anxiety is a crisis of hope. It is the fear of a failed future. Depression is a crisis of hope. It is the belief in a meaningless future. Should we be surprised that such mental illnesses are on an eighty year upswing among young people and a twenty year upswing among the adult population?"

"Let’s define stress. In physical terms, stress happens when something wants to be in two places at one time. If I apply pressure to both ends of an iron beam, I create stress on the beam because one part wants to be north and the other part wants to be south.

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Stress is an inability to decide what’s important

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In mental terms, stress is an inability to decide what’s important. You want two incompatible things at once. I want to relax, but I need to work. Now I’m under stress.

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When you give up on something, it’s no longer stressful. When you accept that something’s out of your control, there’s no point in getting stressed about it."

The Gene An Intimate History

"'Why are twins different?' Well, because idiosyncratic events are recorded through idiosyncratic marks in their bodies. But 'recorded' in what manner? Not in the actual sequence of genes: if you sequence the genomes of a pair of identical twins every decade for fifty years, you get the same sequence over and over again. But if you sequence the epigenomes of a pair of twins over the course of several decades, you find substantial differences: the pattern of methyl groups attached to the genomes of blood cells or neurons is virtually identical between the twins at the start of the experiment, begins to diverge slowly over the first decade, and becomes substantially different over fifty years.

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Chance events - injuries, infections, infatuations; the haunting of trill of that particular nocturne; the smell of that particular madeleine in Paris - impinge on one twin and not the other. Regulatory proteins turn genes 'on' and 'off' in response to these events, and epigenetic marks are gradually layered above genes. How these epigenetic marks functionally impact the activity of genes remains to be determined - but some experiments suggest that these marks, in conjunction with transcription factors, can help orchestrate the activity of genes."

"Destiny and the big debt cycle led the US to find itself now in the late-cycle phase of the long-term debt cycle [9/25/20] in which it has too much debt and needs to rapidly produce much more debt, which it can't service with hard currency so it has to monetize its debt in the classic late-cycle way of printing money to fund the government's deficits. Ironically and classically being in this bad position is the consequence of the United States' great global successes that the US dollar became the world's dominant reserve currency, which allowed Americans to borrow excessively from the rest of the world (including from China) which put the US in the tenuous position of owing other countries (including China) a lot of money and which has put these other countries in the tenuous position of holding the debt of an overly indebted country that is rapidly increasing and monetizing its debt and that pays significantly negative real interest rates to those holding it."

The Gene - An Intimate History

"For nearly three decades since the eighties, psychologists and geneticists have tried to catalog and measure subtle differences that might explain the divergent developmental fates of identical twins brought up in the same circumstances. But all attempts at finding concrete, measurable, and systematic differences have invariably fallen short: twins share families, live in the same homes, typically attend the same school, have virtually identical nutrition, often read the same books, are immersed in the same culture, and share similar circles of friends - and yet are unmistakably different.

​

What causes the difference? Forty-three studies, performed over two decades, have revealed a powerful and consistent answer: "unsystematic, idiosyncratic, serendipitous events." Illnesses. Accidents. Traumas. Triggers. A missed train; a lost key; a suspended thought. Fluctuations in molecules that cause fluctuations in genes, resulting in slight alterations in forms. Rounding a bend in Venice and falling into a canal. Falling in love. Randomness. Chance."

"Four Reasons [The] Velocity [Of Money] Is No Longer Relevant:

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First, money creation by the Fed, rather than how frequently people spend their money, determines the rate of Velocity now.

​

Second, the Quantity Of Money is comprised of 60% Bank Reserves and 40% Currency In Circulation.  The public cannot spend Bank Reserves.  So, even if the public decided to spend its cash at a higher frequency, the impact of that on the Velocity Of Money would be limited.

​

Third, the idea that the Velocity Of Money is important grew out of the Quantity Theory of Money, which dates back to the 16th Century, when trade between nations had to balance due to the gold standard.  After the Bretton Woods System broke down in 1971, trade between nations ceased to balance.  When the domestic economy was subsumed into the global economy, that altered the relationship between the Quantity Of Money, Velocity, the Price Level and the Volume of Goods Sold (the four variables that make up the Quantity Theory of Money) in a way that caused the link between changes in Velocity and changes in the Price level to breakdown.

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Finally, Credit has grown so much larger than Money over the last five decades that the Quantity of Money and its Velocity are irrelevant.   It no longer matters how many times “Money” changes hands.  What matters now is how much Credit is created and spent."

The Big Cycles of China and It's Currency

"Remember, as a principle, get out of fiat currencies during debt crises and wars because they will be printed a lot to fund debt payments, which will lead them to be devalued and to high or hyperinflation."

"The 6 Sources of Social Power:

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Coercive Power - Forcing compliance with strength.

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Reward Power - Paying for compliance. 

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Legitimate Power - Compliance thanks to position. 

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Expert Power - Compliance through knowledge. 

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Info Power - Compliance through proprietary information. 

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Referent Power - Compliance because of personality."

"Happiness and freedom begin with a clear understanding of one principle: Some things are within our control, and some things are not. It is only after you have faced up to this fundamental rule and learned to distinguish between what you can and can’t control that inner tranquility and outer effectiveness become possible.

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Within our control are our own opinions, aspirations, desires, and the things that repel us. These areas are quite rightly our concern, because they are directly subject to our influence. We always have a choice about the contents and character of our inner lives. Outside our control, however, are such things as what kind of body we have, whether we’re born into wealth or strike it rich, how we are regarded by others, and our status in society. We must remember that those things are externals and are therefore not our concern. Trying to control or to change what we can’t only results in torment.

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Remember: The things within our power are naturally at our disposal, free from any restraint or hindrance; but those things outside our power are weak, dependent, or determined by the whims and actions of others."

The Gene An Intimate History

"When a gene variant reduces an organism's fitness in a particular environment - a hairless man in Antarctica - we call the phenomenon genetic illness. When the same variant increases fitness in a different environment, we call the organism genetically enhanced. The synthesis of evolutionary biology and genetics reminds us that these judgments are meaningless: enhancement or illness are words that measure the fitness of a particular genotype to a particular environment; if you alter the environment, the words can even reverse their meanings. 'When nobody read," the psychologist Alison Gopnik writes, "dyslexia wasn't a problem. When most people had to hunt, a minor genetic variation in your ability to focus attention was hardly a problem, and may even have been an advantage [enabling a hunter to maintain his focus on multiple and simultaneous targets, for instance]. When most people have to make it through high school, the same variation can become a life-altering disease.'"

The Gene An Intimate History

"Modern humans appear to have emerged exclusively from a rather narrow slice of earth, somewhere in sub-Saharan Africa, about one hundred to two hundred thousand years ago, and then migrated northward and eastward to populate the Middle East, Europe, Asia, and the Americas."

The Gene An Intimate History

"Calculating backward, the age of humans was estimated to be about two hundred thousand years - a minor blip, a ticktock, in the scale of evolution."

January 4, 2000

"Based on what I think I have a feel for, I would observe that every decade had its own unique characteristics...

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1920s = "roaring" - slow growth early building to a boom later, low inflation, extreme inventiveness, stock market boom.

1930s = "depression" - basically the opposite of the 1920's, bad for stocks and good for government bonds.

1940s = "war/post war" - the economy and markets were classically war dominated.

1950s = "stability" - good stock and bond markets.

1960s = "economic acceleration" - greater optimism and prosperity; good for stocks.

1970s = "stagflation" - good for inflation hedge assets and bad for stocks and bonds.

1980s = "disinflation" - bad for inflation hedge assets and good for stocks and bonds.

1990s = "roaring" - slow growth early leading to a boom later, low inflation, extreme inventiveness, stock market boom.

​

...yet, at the ends of each of each of these periods, most people assigned a high likelihood to the future being similar. In other words, though the environments have always changed dramatically (in fact, each decade was more likely to be opposite than similar to the decade that preceded it), most people who experienced consistent reinforcement for 10 years were inclined to believe that this would continue indefinitely."

​

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"What is a gene, then? When Mendel discovered the "gene" in 1865, he knew it only as an abstract phenomenon: a discrete determinant, transmitted intact across generations, that specified a single visible property or phenotype, such as flower color or seed texture in peas. Morgan and Muller deepened this understanding by demonstrating that genes were physical - material - structures carried on chromosomes. Avery advanced this understanding of genes by identifying the chemical form of that material: genetic information was carried in DNA. Watson, Crick, Wilkins, and Franklin solved its molecular structure as a double helix, with two paired, complementary strands."

"In addition to good luck and great people, we have been able to succeed as a company only because we have continued to take big risks. To invent you have to experiment, and if you know in advance that it’s going to work, it’s not an experiment. Outsized returns come from betting against conventional wisdom, but conventional wisdom is usually right. A lot of observers characterized Amazon Web Services as a risky distraction when we started. “What does selling compute and storage have to do with selling books?” they wondered. No one asked for AWS. It turned out the world was ready and hungry for cloud computing but didn’t know it yet. We were right about AWS, but the truth is we’ve also taken plenty of risks that didn’t pan out. In fact, Amazon has made billions of dollars of failures. Failure inevitably comes along with invention and risk-taking, which is why we try to make Amazon the best place in the world to fail."

"The concept for Amazon came to me in 1994. The idea of building an online bookstore with millions of titles—something that simply couldn’t exist in the physical world—was exciting to me. At the time, I was working at an investment firm in New York City. When I told my boss I was leaving, he took me on a long walk in Central Park. After a lot of listening, he finally said, “You know what, Jeff, I think this is a good idea, but it would be a better idea for somebody who didn’t already have a good job.” He convinced me to think about it for two days before making a final decision. It was a decision I made with my heart and not my head. When I’m 80 and reflecting back, I want to have minimized the number of regrets that I have in my life. And most of our regrets are acts of omission—the things we didn’t try, the paths untraveled. Those are the things that haunt us. And I decided that if I didn’t at least give it my best shot, I was going to regret not trying to participate in this thing called the internet that I thought was going to be a big deal."

"Throughout the long-term debt cycle, from 1945 until 2008, whenever the Federal Reserve wanted the economy to pick up it would lower interest rates and make money and credit more available, which would increase stock and bond prices and increase demand.  That was how it was done until 2008—i.e., interest rates were cut, and debts were increased faster than incomes to create an unsustainable bubble economy that peaked in 2007.  

When in 2008 the bubble burst and interest rates hit 0% for the first time since the Great Depression, that changed.  As explained more comprehensively in my book Principles for Navigating Big Debt Crises there are three types of monetary policy—1) interest-rate-driven monetary policy (which I call Monetary Policy 1 because it is the first to be used and is the preferable way to run monetary policy), 2) printing money and buying financial assets, most importantly bonds (which I call Monetary Policy 2 and is now popularly called “quantitative easing”), and 3) coordination between fiscal policy and monetary policy in which the central government does a lot of debt-financed spending and the central bank buys that debt (which I call Monetary Policy 3 because it is the third and last approach to be used when the first two cease to be effective in doing what needs to be done).  

"During this period [from 1990 to 2008] debt and non-debt liabilities like pension and healthcare liabilities grew a lot in the US and debts were used to finance speculations leading up to the dot-com bubble of 2000 and the mortgage bubble of the mid-2000s that led to busts that were stimulated out of by the creation of more money and debt.  These debt cycles are both undesirable and understandable because there is a tendency to favor immediate gratification over long-term financial safety, particularly by politicians.  

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Most people pay attention to what they get and not where the money comes from to pay for it, so there are strong motivations for elected officials to spend a lot of borrowed money and make a lot of promises to give voters what they want and to take on debt and non-debt liabilities that cause problems down the road.  That was certainly the case in the 1990-2008 period."

"What happened [after Mexico defaulted on its U.S. debt on August 23, 1982] created another jarringly painful learning experience for me.  While I was able to anticipate the debt crisis, which was profitable for me, it also led me to realize that the banks that had lent that money wouldn’t get paid, which led me a) to anticipate a debt-default-triggered depression that never came, b) to lose a lot of money betting on it, and c) to be very publicly wrong.  As a result of my personal losses and losses of clients, I had to let everyone in my fledgling Bridgewater Associates go and was so broke I had to borrow $4,000 from my dad to help pay for my family’s bills.  At the same time this painful experience was one of the best things that ever happened to me because it changed my whole approach to decision making.  It gave me the fear of being wrong and the humility I needed to balance with my audacity without killing my audacity.  It led me to make Bridgewater as an idea meritocracy in which I brought in the smartest independent thinkers I could find to argue with me, which resulted in our doing great over the next 40+ years.  I still carry that fear of being wrong, which is why I am doing this research, why I want the greatest thinkers in the world to challenge my thinking and to stress test it, and why I am passing this research to you for you to take or leave as you see fit.  

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Why was I wrong in 1982, and what did I learn that would be an important principle for the future?  What I had missed and learned from this experience was that when debts are in the currencies that central banks have the ability to print and restructure, debt crises can be well-managed, so they are not systemically threatening.  Because the Federal Reserve could provide the banks that made the loans that weren’t being paid back with money, they didn’t have a cash flow problem, and because the American accounting system didn’t require the banks to account for these bad debts as losses, there was no big problem that couldn’t be worked out.  I also learned that the value of assets is the reciprocal of the value of money and credit (i.e., the cheaper money and credit are, the more expensive asset prices are) and the value of money is the reciprocal of the quantity of it in existence, so when central banks are producing a lot of money and credit and making it cheaper, it is wise to be more aggressive in owning assets."

"In China, Mao Zedong’s death in 1976 led Deng Xiaoping to come to power in 1978, which led to a shift in economic policies that included capitalist elements like private ownership of businesses, the development of debt and equities markets, entrepreneurial technological and commercial innovations, and even the flourishing of billionaire capitalists—all under the strict control of the Communist Party. This shift in Chinese leadership and approaches, while seemingly insignificant at the time, was going to germinate into the biggest single force to shape the 21st century."

"I remember the devaluation of the dollar [in 1971] very well.  I was clerking on the floor of the New York Stock Exchange at the time.  I was watching on TV as President Nixon told the world that the dollar would no longer be tied to gold.  I thought, “Oh my God, the monetary system as we know it is ending,” and it was.  The next day was Monday.  When I got to work I expected there to be pandemonium, with stocks falling.  

There was pandemonium all right, but stocks were rising.  Because I had never seen a devaluation before, I didn’t understand how they worked.  Then I looked into history and found that on the evening of March 5, 1933, also a Sunday, President Franklin Roosevelt had given essentially the same speech, doing essentially the same thing, which yielded essentially the same result over the following months (a devaluation, a big stock market rally, and big gains in the gold price).  

As I looked further, I saw that it had happened many times before in many countries for the same reason—too much debt that needed money to ease the debt burden—with essentially the same proclamations by top government officials.  

More recent cases that you might remember include the Fed announcing QE on November 25, 2008, which followed Congress approving Treasury Secretary Hank Paulson’s request for the federal government to provide $700 billion for asset purchases; Mario Draghi in July 2012 stating that the ECB would “do whatever it takes,” which was followed by massive printing of money and buying of government debt; and March 15, 2020, when President Trump and leaders of both houses of Congress agreed on an over $2 trillion stimulus plan, and Fed Chair Powell announced big interest rate cuts to 0%, a $700 billion QE plan, and a slew of other supports, with both announcements followed by other big increases in these numbers."

"The most important thing to know about macroeconomics in the 21st Century is that Credit Growth Drives Economic Growth.

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In the United States, when Total Credit grows by less than 2% (adjusted for inflation), the country goes into recession.  That happened nine times between 1952 and 2009.  Therefore, it is very important to monitor and forecast Credit Growth."

"In pursuing its capitalist approach, in 1936-37, the Federal Reserve tightened money and credit to fight inflation and slow an overheating economy, which caused the fragile US economy to go into recession and other major economies to weaken with it, further raising tensions within and between countries.  Meanwhile in Europe, the conflict in Spain between the populists of the left (the communists) and the populists of the right (the fascists) flared up into the brutal Spanish Civil War.  Franco of the right, with the support of Hitler, purged all left-wing organizations in Spain.  

In November 1937, Hitler held a secret meeting with his top officials to announce his plans for German expansion in Europe to gain resources and bring together the Aryan race.  Hitler then put his plans for expansion into action, first annexing Austria and then seizing a part of Czechoslovakia that contained oil resources.  

Europe and the US watched warily, not wanting to get drawn into another war so soon after the devastation of World War I.  Then on September 1, 1939, Germany invaded Poland.  That is when England and France declared war on Germany, which is why that is the date that marks the beginning of World War II in Europe."

"In Roosevelt’s first 100 days in office he created a number of big government spending programs that were paid for by big tax increases and big budget deficits financed by debt that the Federal Reserve monetized.  He provided jobs programs, unemployment insurance, Social Security supports, and labor- and union-friendly programs.  After his 1935 tax bill, then popularly called the “Soak the Rich Tax,” the top marginal income tax rate for individuals rose to 75% (versus as low as 25% in 1930).  By 1941, the top personal tax rate was 81%, and the top corporate tax rate was 31%, having started at 12% in 1930.  He also imposed a number of other taxes.  Despite all of these taxes and the pickup in the economy that helped to raise tax revenue, budget deficits increased from around 1% of GDP to about 4% of GDP because the spending increases were so large."

"Deflationary depressions are debt crises caused by there not being enough money in the hands of debtors to service their debts.  They inevitably lead to the printing of money, debt restructurings, and government spending programs that increase the supply of, and reduce the value of, money and credit.  The only question is how long it takes for government officials to make this move.  

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In the case of the Great Depression, it took from the October 1929 peak to Roosevelt’s March 1933 action to make the move.  From that point until the end of 1936—the year the Federal Reserve tightened monetary policy and caused the recession of 1937-38—the stock market returned over 200%, and the economy grew at an average real rate of about 9%!"

The Great Mental Models Volume 2

"For Napoleon [Bonaparte] on his way to Moscow, the tactics of speed ultimately undermined his velocity. Because he gave up so much in order to go fast, he didn't have the resources to adjust when the route to Russia became treacherous for both his army and his objectives. Writing about the campaign, Clausewitz notes that Napoleon lost one-third of his army before Smolensk, and another third before Moscow. Disease, starvation, and thirst all culled the ranks of both the soldiers and the horses. And that was just on the way there.

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Napoleon got to Moscow, but with 90,000 men instead of the at least 400,000 he started with."

"As we saw from studying the Dutch and British empires, capitalism was key to these countries’ successes but also contributed to their failures.  It was successful because the pursuit of profit motivated people, and the competitive process of allocating capital and profit making directed resources relatively efficiently to what people wanted enough to pay for.  In this system those who allocated efficiently profited, which led to them gaining more resources, while those who couldn’t allocate well died economically. 

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At the same time, this system of increasing wealth produced widening wealth and opportunity gaps, as well as decadence in the form of people working less and increasingly living on borrowed money.  As the wealth and opportunity gaps grew, that produced increasingly widespread views that the system wasn’t fair.  When the debt problems and other factors led to bad economic times at the same time as the wealth and values gaps were large, that produced a lot of internal conflict that led to large, revolutionary changes in who had wealth and power and the processes for getting them.  Sometimes these big changes were made peacefully, and sometimes they were made violently.  When the leading countries suffered from these internal challenges at the same time as rival countries had become strong enough to challenge them, the risks of external wars increased.  When these seismic shifts in how wealth and power are distributed occur within countries (i.e., via revolutions) or between countries (typically through wars, though sometimes peacefully), the old world order breaks down and a new world order begins, and the process starts all over again."

The Optimism Bias

"Optimism protects us from accurately perceiving the pain and difficulties the future undoubtedly holds, and it may defend us from viewing our options in life as somewhat limited. As a result, stress and anxiety are reduced, physical and mental health are improved, and the motivation to act and be productive is enhanced. In order to progress, we need to be able to imagine alternative realities—not just any old realities, but better ones, and we need to believe them to be possible."

2017 JP Morgan Chase Annual Letter

"Bureaucracy is a disease. Bureaucracy drives out good people, slows down decision making, kills innovation and is often the petri dish of bad politics. Large organizations, in fact all organizations, should be thought of as always slowing down and getting more bureaucratic. Therefore, leaders must continually drive for speed and accuracy to eliminate waste and kill bureaucracy. When you get in great shape, you don’t stop exercising."

"One of the phrases you hear people using a lot right now is when we might “return to normal” or predictions that “we’ll never return to normal.” But life never returns to “normal” because the only constant in life is change.

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Of course, the future will not look like the past because it never does. But the future also never pivots completely away from the past because so many economic behaviors are driven by deeply ingrained human needs and desires that do not change all that much even when our environment changes radically."

The Gene An Intimate History

"From bacteria to elephants - from red-eyed flies to blue-blooded princes - biological information flowed through living systems in a systematic, archetypal manner: DNA provided instructions to build RNA. RNA provided instructions to build proteins. Proteins ultimately enabled structure and function - bringing genes to life."

"In 1971, when it was apparent that the US didn’t have enough gold in the bank to meet the claims on gold that it had put out, the US defaulted on its promise to deliver gold for paper dollars which ended the Type 2 gold-backed monetary system, and the world moved to a fiat monetary system.  As is typical, this fiat monetary system initially led to a wave of great dollar money and debt creation that led to a big wave of inflation that carried until 1980-82 and led to the worst economic downturn since the Great Depression.  It was followed by three other waves of debt-financed speculations, bubbles, and busts—1) the 1982 and 2000 money and credit expansion that produced a dot-com bubble that led to the 2000-01 recession, 2) the 2002-07 money and credit expansion that produced a real estate bubble that led to the 2008 Great Recession, and 3) the 2009-19 money and credit expansion that produced the investment bubble that preceded the COVID-19 downturn.  Each of these cycles raised debt and non-debt obligations (e.g., for pensions and healthcare) to progressively higher levels and led the reserve currency central banks of the post-war allies to push interest rates to unprecedented low levels and to print unprecedented amounts of money.  Also classically, the wealth, values, and political gaps widened within countries, which increases internal conflicts during economic downturns.  That is where we now are."

"Progress happens too slowly for people to notice; setbacks happen too fast for people to ignore."

"Between April 1971 and March 1980, the inflation rate rose from 4.2% to 14.6%. The trailing P/E ratio on the S&P 500 contracted by two-thirds, from 19.5x to 6.7x. Interest rates rose, too, but if you look at the magnitudes of these three number series and continue to follow the progress through the recovery, the earnings multiples really were associated with the inflation rate. "

"It is typically said that low interest rates support high stock and other financial asset valuations. But it is high inflation that is associated with serious valuation contraction. Investors today have little personal or institutional memory of the last inflationary period. Once inflation mentality takes hold, it ripples throughout the economy and daily life. People go shopping more frequently and buy greater quantities, because they know that the price of cereal will be higher the following month or even week. In 1971, President Nixon imposed wage and price freezes. Sounds like Russia or China, right? In the 1970s, during lunch hour, workers would visit a couple of banks, move their $1,000 or $5,000 6-month CDs from their old bank to a new one in order to get the free toaster ovens being offered for the switch."

"This whole 1971-1991 cycle, which affected just about everyone in the world, was the result of the US going off the gold standard. It led to the soaring of inflation and inflation-hedge assets in the 1970s, which led to the 1979-1981 tightening and a lot of deflationary debt restructuring by non-American debtors, falling inflation rates, and excellent performance of bonds and other deflationary assets in the 1980s. The entire period was a forceful demonstration of the US having the world's reserve currency - and the implications for everyone around the world of how that currency was managed....

After the 1980s debt restructurings were completed in the 1990s new global increase in money, credit, and debt began again, which again produced a prosperity that led to debt-financed purchases of speculative investments that became the dot-com bubble, which burst in 2000. That led to an economic downturn in 2000-2001 that spurred the Federal Reserve to ease money and credit, which pushed debt levels to new highs and created another prosperity that turned into another and bigger debt bubble in 2007, which burst in 2008, which led the Fed and other reserve currency countries' central banks again eased, leading to the next bubble that just recently burst."

"History has shown us that we shouldn’t rely on governments to protect us financially. On the contrary, we should expect most governments to abuse their privileged positions as the creators and users of money and credit for the same reasons that you might do these abuses if you were in their shoes.  That is because no one policy maker owns the whole cycle. Each one comes in at one or another part of it and does what is in their interest to do at that time given their circumstances at the time."

"Central banks want to stretch the money and credit cycle to make it last for as long as they can because that is so much better than the alternative, so, when “hard money” and “claims on hard money” become too painfully constrictive, governments typically abandon them in favor of what is called “fiat” money. No hard money is involved in fiat systems; there is just “paper money” that the central bank can “print” without restriction. As a result, there is no risk that the central bank will have its stash of “hard money” drawn down and have to default on its promises to deliver it. Rather the risk is that, freed from the constraints on the supply of tangible gold or some other “hard” asset, the people who control the printing presses (i.e., the central bankers working with the commercial bankers) will create ever more money and debt assets and liabilities in relation to the amount of goods and services being produced until a time when those who are holding the enormous amount of debt will try to turn them in for goods and services which will have the same effect as a run on a bank and result in either debt defaults or the devaluation of money."

"There are decades when nothing happens; and there are weeks when decades happen."

"We also saw unprecedented efforts by Congress to enact fiscal stimulus [in response to COVID 19]. We recognize that few people have any intuitive feel for numbers once we start counting in trillions (with a t). So, here’s a quick way to comprehend just how unfathomably large a trillion is. A million (with an m) seconds ago was a week and a half ago. A billion (with a b) seconds ago was 1989, when the San Francisco Giants played in the World Series against the Oakland A’s during which an earthquake shattered the city. But a trillion (with a t) seconds ago, humans hadn’t invented agriculture yet. In fact, our species was still a thousand generations removed from learning how to plant and cultivate crops. The earth was going through an ice age, the Sahara Desert was wet and fertile, and humans had not yet crossed the Bering Strait from Asia to the Americas. The number a trillion is unfathomably large."

"In 1999, the firm I co-founded, Red Envelope, was drafting an S-1 in anticipation of an IPO. At 31, I stood to register $30-60 million on the IPO. The bursting of the bubble damaged us, but the injuries weren’t fatal, and we were the only retail IPO of 2002. In 2008, a longshoreman strike left all our holiday merchandise hostage on a cargo ship 8 miles off the shores of the port of Long Beach. Then, as the credit crisis began to take hold, a prescient analyst at Wells Fargo decided to pull our credit facility. Within 90 days we were Chapter 11. That event, combined with divorce, reduced my net worth 97%.

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I didn’t deserve to lose near-everything. What happened wasn’t my fault — ok, maybe the divorce. Regardless, was this fair or (im)moral? Just as there’s no crying in baseball, there’s no fairness in shareholder accretion or destruction. Looking at jets at 31 wasn’t moral or fair either. So, what happened? Exactly what’s supposed to happen in a market economy — downside registered against commensurate upside.

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Red Envelope went through something also uniquely American … and productive — bankruptcy. The equity holders (e.g., yours truly) were wiped out (#bummer). However, we did our duty as board members and found a buyer, Liberty Media, who paid our vendors and kept the employees. No job loss, all debtors paid. When a 31-year-old is shopping for jets in November, part of the agreement with the invisible hand is he may lose most/all of it by March. There’s a word for that … capitalism."

"If you want to build great things, it helps to be driven by a spirit of benevolence. The startup founders who end up richest are not the ones driven by money. The ones driven by money take the big acquisition offer that nearly every successful startup gets en route. The ones who keep going are driven by something else. They may not say so explicitly, but they're usually trying to improve the world. Which means people with a desire to improve the world have a natural advantage."

"You need three things to create a successful startup: to start with good people, to make something customers actually want, and to spend as little money as possible. Most startups that fail do it because they fail at one of these. A startup that does all three will probably succeed.

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And that's kind of exciting, when you think about it, because all three are doable. Hard, but doable. And since a startup that succeeds ordinarily makes its founders rich, that implies getting rich is doable too. Hard, but doable.

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If there is one message I'd like to get across about startups, that's it. There is no magically difficult step that requires brilliance to solve."

"You're asking for trouble if you try to decide what to do without understanding how to do it."

"On the last day of class, I ask my students to turn those theoretical lenses on themselves, to find cogent answers to three questions: First, how can I be sure that I'll be happy in my career? Second, how can I be sure that my relationships with my spouse and my family become an enduring source of happiness? Third, how can I be sure I'll stay out of jail? Though the last question sounds lighthearted, it's not. Two of the 32 people in my Rhodes scholar class spent time in jail. Jeff Skilling of Enron fame was a classmate of mine at HBS. These were good guys - but something in their lives sent them off in the wrong direction." 

"Had I instead spent that hour each day learning the latest techniques for mastering the problems of autocorrelation in regression analysis, I would have badly misspent my life. I apply the tools of econometrics a few times a year, but I apply my knowledge of the purpose of my life every day. It's the single most useful thing I've ever learned. I promise my students that if they take the time to figure out their life purpose, they'll look back on it as the most important thing they discovered at HBS. If they don't figure it out, they will just sail off without a rudder and get buffeted in the very rough seas of life. Clarity about their purpose will trump knowledge of activity-based costing, balanced scorecards, core competence, disruptive innovation, the four Ps, and the five forces." 

Principles

"Step 1. Know your goals and run after them.

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Step 2. Encounter the problems that stand in the way of achieving your goals.

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Step 3. Diagnose the problems to get at their root causes.

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Step 4. Design plans to get around the problem standing in the way of your progress.

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Step 5. Do it. Execute those designs."

"I find for myself that my first thought is never my best thought. My first thought is always someone else's; it's always what I've already heard about the subject, always the conventional wisdom. It's only by concentrating, sticking to the question, being patient, letting all the parts of my mind come into play, that I arrive at an original idea. By giving my brain a chance to make associations, draw connections, take me by surprise. And often even that idea doesn't turn out to be very good. I need time to think about it, too, to make mistakes and recognize them, to make false starts and correct them, to outlast my impulses, to defeat my desire to declare the job done and move on to the next big thing."

"Nobody tells this to people who are beginners, I wish someone told me. All of us who do creative work, we get into it because we have good taste. But there is this gap. For the first couple years you make stuff, it’s just not that good. It’s trying to be good, it has potential, but it’s not. But your taste, the thing that got you into the game, is still killer. And your taste is why your work disappoints you.

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A lot of people never get past this phase, they quit. Most people I know who do interesting, creative work went through years of this. We know our work doesn’t have this special thing that we want it to have. We all go through this. And if you are just starting out or you are still in this phase, you gotta know its normal and the most important thing you can do is do a lot of work.

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Put yourself on a deadline so that every week you will finish one story. It is only by going through a volume of work that you will close that gap, and your work will be as good as your ambitions. And I took longer to figure out how to do this than anyone I’ve ever met. It’s gonna take awhile. It’s normal to take awhile. You’ve just gotta fight your way through."

Nobody Wants to Read Your Shit

"Nobody wants to read your shit. What's the answer? 1. Streamline your message. Focus it and pare it down to its simplest, clearest, easiest-to-understand form. When you understand that nobody wants to read your shit, your mind becomes powerfully concentrated. You begin to understand that writing/reading is, above all, a transaction. The reader donates his time and attention, which are supremely valuable commodities. In return, you the writer must give him something worthy of his gift to you."

Principles

"While I spend the most time studying how the realities that affect me most work - i.e., those that drive the markets and the people I deal with - I also love to study nature to try to figure out how it works because, to me, nature is both beautiful and practical. Its perfection and brilliance staggers me. When I think about all the flying machines, swimming machines, and billions of other systems that nature created, from the microscopic level to the cosmic level, and how they interact with another to make a workable whole that evolves through time and through multi-dimensions, my breath is taken away. It seems to me that, in relation to nature, man has the intelligence of a mold growing on an apple - man can't even make a mosquito, let alone scratch the surface understanding the universe."

"Before you’ve noticed important details they are, of course, basically invisible. It’s hard to put your attention on them because you don’t even know what you’re looking for. But after you see them they quickly become so integrated into your intuitive models of the world that they become essentially transparent. Do you remember the insights that were crucial in learning to ride a bike or drive? How about the details and insights you have that led you to be good at the things you’re good at?

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This means it’s really easy to get stuck. Stuck in your current way of seeing and thinking about things. Frames are made out of the details that seem important to you. The important details you haven’t noticed are invisible to you, and the details you have noticed seem completely obvious and you see right through them. This all makes makes it difficult to imagine how you could be missing something important.

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...

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If you’re trying to do impossible things, this effect should chill you to your bones. It means you could be intellectually stuck right at this very moment, with the evidence right in front of your face and you just can’t see it.

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This problem is not easy to fix, but it’s not impossible either. I’ve mostly fixed it for myself. The direction for improvement is clear: seek detail you would not normally notice about the world. When you go for a walk, notice the unexpected detail in a flower or what the seams in the road imply about how the road was built. When you talk to someone who is smart but just seems so wrong, figure out what details seem important to them and why. In your work, notice how that meeting actually wouldn’t have accomplished much if Sarah hadn’t pointed out that one thing. As you learn, notice which details actually change how you think.

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If you wish to not get stuck, seek to perceive what you have not yet perceived."

"Meaning is not something you stumble across, like the answer to a riddle or the prize in a treasure hunt. Meaning is something you build into your life. You build it out of your own past, out of your affections and loyalties, out of the experience of humankind as it is passed on to you, out of your own talent and understanding, out of the things you believe in, out of the things and people you love, out of the values for which you are willing to sacrifice something. The ingredients are there. You are the only one who can put them together into that unique pattern that will be your life. Let it be a life that has dignity and meaning for you. If it does, then the particular balance of success or failure is of less account."

"You have to build meaning into your life, and you build it through your commitments, whether to your religion, to an ethical order as you conceive it, to your life's work, to loved ones, to your fellow humans."

"One of the enemies of sound, lifelong motivation is a rather childish conception we have of the kind of concrete, describable goal toward which all of our efforts drive us. We want to believe that there is a point at which we can feel we have arrived. We want a scoring system that tells us when we've piled up enough points to count ourselves successful. 

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So you scramble and sweat and climb to reach what you thought was the goal. When you get to the top you stand up and look around and chances are you feel a little empty. Maybe more than a little empty. You may wonder whether you climbed the wrong mountain.

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But the metaphor is all wrong. Life isn't a mountain that has a summit. Nor is it, as some suppose, a riddle that has an answer. Nor a game that has a final score. 

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Life is an endless unfolding and, if we wish it to be, an endless process of self-discovery, an endless and unpredictable dialogue between our own potentialities and the life situations in which we find ourselves. By potentialities I mean not just success as the world measures success, but the full range of one's capacities for learning, sensing, wondering, understanding, loving and aspiring. "

"There is a wonderful, almost mystical, law of nature that says three of the things we want most - happiness, freedom, and peace of mind - are always attained when we give them to others. Give it away to get it back."

"Great investors don't get sucked into the vortex of influence. This requires the trait of not caring what others think of you, which is not natural for humans. Indeed, many successful investors have a skill that is very valuable in investing but not so valuable in life: a blatant disregard for the views of others. Success entails considering various points of view but ultimately shaping a thesis that is thoughtful and away from the consensus. The crowd is often right, but when it is wrong you need the psychological fortitude to go against the grain. This is much easier said than done, especially if it entails career risk (which is often the case)."

"The Ten Attributes of Great Fundamental Investors:

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1. Be numerate (and understand accounting)

2. Understand value (the present value of free cash flow)

3. Properly assess strategy (or how a business makes money)

4. Compare effectively (expectations versus fundamentals)

5. Think probabilistically (there are few sure things)

6. Update your views effectively (beliefs are hypotheses to be tested, not treasures to be protected)

7. Beware of behavioral biases (minimizing constraints to good thinking)

8. Know the difference between information and influence

9. Position sizing (maximizing the payoff from edge)

10. Read (and keep an open mind)"

"My first breakthrough occurred when a classmate in my training program [at Drexel Burnham Lambert] handed me a copy of Creating Shareholder Value by Alfred Rappaport. Reading that book was a professional epiphany. Rappaport made three points that immediately comprised the centerpiece of my thinking. The first is that the ability of accounting numbers to represent economic value is severely limited. next, he emphasized that competitive strategy analysis and valuation should be joined at the hip. The litmus test of a successful strategy is that it creates value, and you can't properly value a company without a thoughtful assessment of its competitive position.

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The final point is that stock prices reflect a set of expectations for future financial performance. A company's stock doesn't generate excess returns solely by the company creating value. The company's results have to exceed the expectations embedded in the stock market."

"In the current health care system of the United States, we are typically spending other people's money rather than our own. For people who don't have a lot of money, that's wonderful and in some cases a life-saver. That's the main benefit of the current system. But there is a cost - because people are spending other people's money, they buy too much, spend money on stuff that normally wouldn't be worth it, and the system approves technology or delays technology for reasons that are not ideal. If we went to a truly market-based system, poor people would have a tougher time. But everything would be a lot cheaper. And poor people would still get good medical care paid for by other people, but in this case it would be foundations and charities. In the current world, nearly everyone has that system. There is something comforting about that equality but we pay a very high price for it."

"There's an old saying: 'predictions are hard, especially about the future.' While hard, there are two ways to make reliable predictions about the future: deduction and induction. When either of these is available, prediction is (theoretically) possible.

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Deduction relies on playing out an inevitable chain of cause and effect. It is possible when the starting state of the environment and all the mechanisms that will cause that state to evolve are perfectly known. This is a strong condition. (And perhaps too strong. In most cases, knowing not all but just the important starting conditions and transition mechanisms will get you a good approximation of the future, or at least a good estimate of the probability of success or failure. This may be enough.)

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Induction, the second way to predict the future, assumes the future resembles the past. The ancients may not have known why the sun rose every morning but were pretty sure it would, because it had every day previously. Similarly, some business ideas are statistically predictable because they have been tried multiple times. If you go to a new restaurant you may not be certain if that restaurant will succeed or fail, but you know that fewer than half of restaurants survive their first year. New restaurants are similar enough to one another in their most important business aspects that their risk of failure can be induced." 

"There is an art to happiness. From 0 to 25, it's the stuff of Star Wars, discovery, spilling into adulthood, football games and magic.

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Then shit gets real from 25 to 45.

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Work is hard, economic stress, realize you're not going to be senator, or have a fragrance named after you and someone you love gets sick and dies.

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In your 40's and 50's though, a wonderful thing happens.

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You begin to take stock of your blessings, you realize that life is finite, start finding appreciation in relationships, in nature, in your achievements, and you get happier.

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The lesson here is keep on keeping on because happiness waits for you."

The Art of Living

"Understand that nature as a whole is ordered according to reason, but that not everything in nature is reasonable."

Poor Charlie's Almanack

"Another thing that often causes folly and ruin is the 'self-serving bias', often subconscious, to which we’re all subject.  You think that 'the true little me' is entitled to do what it wants to do.  For instance, why shouldn’t the true little me get what it wants by overspending its income?  Well, there once was a man who became the most famous composer in the world.  But he was utterly miserable most of the time.  And one of the reasons was that he always overspent his income.  That was Mozart.  If Mozart couldn’t get by with this kind of asinine conduct, I don’t think you should try it."

"Our ability to feel emotions is a large and valuable component of our biological decision-making process. As Mlodinow explains, 'Evolution endowed us with emotions like pleasure and fear in order that we may evaluate the positive or negative implications of circumstances and events.' Without emotion, we have no motivation to make decisions."

Poor Charlie's Almanack

"But there’s no way that you can live an adequate life without [making] many mistakes.  In fact, one trick in life is to get so you can handle mistakes.  Failure to handle psychological denial is a common way for people to go broke.  You’ve made an enormous commitment to something.  You’ve poured effort and money in.  And the more you put in, the more that the whole consistency principle makes you think, “Now it has to work.  If I put in just a little more, then it’ll work.”  Part of what you must learn is how to handle mistakes and new facts that change the odds.  Life, in part, is like a poker game, wherein you have to learn to quit sometimes when holding a much-loved hand.  And deprival super-reaction syndrome also comes in: You’re going to lose the whole thing if you don’t put in a little more.  People go broke that way – because they can’t stop, rethink, and say, “I can afford to write this one off and live to fight again.  I don’t have to pursue this thing as an obsession – in a way that will break me.”

"To discover new things, you have to work on ideas that are good but non-obvious; if an idea is obviously good, other people are probably already working on it. One common way for a good idea to be non-obvious is for it to be hidden in the shadow of some mistaken assumption that people are very attached to. But anything you discover from working on such an idea will tend to contradict the mistaken assumption that was concealing it. And you will thus get a lot of heat from people attached to the mistaken assumption. Galileo and Darwin are famous examples of this phenomenon, but it's probably always an ingredient in the resistance to new ideas."

"We can extract from human history a couple of principles. First, the principle that really isolated groups are at a disadvantage, because most groups get most of their ideas and innovations from the outside. Second, I also derive the principle of intermediate fragmentation: you don't want excessive unity and you don't want excessive fragmentation; instead, you want your human society or business to be broken up into a number of groups which compete with each other but which also maintain relatively free communication with each other. And those I see as the overall principles of how to organize a business and get rich."

"Investing is straightforward. It's simple, but it's not easy. It's simple because we're just trying to figure out the future trajectory of a given business. But it's not easy, because figuring out the future trajectory of any given business is really, really hard to do, even for the most simple businesses."

"What's happened over the last 20 years -- and especially the last 10 -- has no historical precedent. The telephone eliminated the information gap between you and a distant relative, but the internet has closed the gap between you and literally every stranger in the world."

Mastering the Market Cycle

"Richard Feynman, the noted physicist, wrote, 'Imagine how much harder physics would be if electrons had feelings!' That is, if electrons had feelings, they couldn’t be counted on to always do what science expects of them, so the rules of physics would work only some of the time. The point is that people do have feelings, and as such they aren’t bound by inviolable laws. They’ll always bring emotions and foibles to their economic and investing decisions."

Mastering the Market Cycle

"After 28 years at this, and 22 years before this in money management, I can sum up whatever wisdom I have accumulated this way: The trick is not to be the hottest stock-picker, the winningest forecaster, or the developer of the neatest model; such victories are transient. The trick is to survive! Performing that trick requires a strong stomach for being wrong because we are all going to be wrong more often then we expect. The future is not ours to know. But it helps to know that being wrong is inevitable and normal, not some terrible tragedy, not some awful failing in reasoning, not even bad luck in most instances."

"The three most harmful addictions are heroin, carbohydrates, and a monthly salary."

"The crowd puts [individuals] in the possession of a sort of collective mind which makes them feel, think, and act in a manner quite different from [how] each would feel, think, and act were [they] in a state of isolation."

"Sequoia Capital was the lead investor in my second firm, and the partner on our board told me a key tenet was they would not invest in a firm the partner could not drive to... Another tenet of venture, expressed by every investor I've raised money from (General Catalyst, Maveron, Sequoia, Weston Presidio, JPM, Goldman, and others) is they will not lead subsequent rounds. Good investors resist the temptation to smoke their own supply and require a 3rd party, arms-distance validation of the firm's value here and now."

"We have two classes of forecasters: those who don’t know – and those who don’t know they don’t know."

Mastering the Market Cycle

"But this effort to explain life through the recognition of patterns – and thus to come up with winning formulas – is complicated, in large part, because we live in a world that is beset by randomness and in which people don’t behave the same from one instance to the next, even when they intend to."

"The Future of Humanity" Google Talk on April 10, 2019

"We think that is the theory of everything, that everything we see around us is nothing but vibrations of tiny strings. Each subatomic particle is a note on a vibrating string.

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What is physics? Physics is the harmonies we can write on vibrating strings. What is chemistry? Chemistry is the melodies we can play on vibrating strings. What is the universe? The universe is a symphony of strings.

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And then what is the mind of God? The mind of God is cosmic music resonating through 11 dimensional hyperspace. That is the mind of God."