Just take 30 mins out of your life, half of a game of Dota2 and watch this. It's by Ray Dalio, and I think it's the best summary I've ever come across on the general macro economy as a foundation.
If you've read my blogs, I keep saying that business is relatively simple, like compared to being a scientist or engineer, but what makes business complex is the scale and the numerous associations it creates and affects.
Ray himself leads the highest performing hedge fund in the world (I believe), I've never met him, but a close family friend of mine has and so he's come up in conversation. He is well known for his 'principles' which if you have time to read, you should.
What sets Ray apart is these principles and his 'investment thesis' based on an approach to understanding the steps of what is knowledge & its application. The principles are mix bag of insights from Ray.
I think a lot of things in business is very experienced based, meaning that it's 90% application and 10% theory, so if you don't have the context of experience/application then the 10% doesn't really make sense because it has no context for application.
What I mean is, business by it's nature either solves a problem or increases productivity, but if you're not intimately aware of the problem to begin with or don't know of even the 'first level' of productivity for the particular business, business theory simply doesn't mean anything.
Anyhow, I'm not trying to turn this into a business post or anything, again, just sharing randomly, but I've fucked my back up really badly, like 2 herniated disks in my spine, I've been putting of getting an MIR and getting the exact treatment because I've been traveling so much, but it's been 2 months, so I haven't slept properly for 2 fucking months because I'm in 24hrs pain. I've stopped with the pain killers because they don't fully take away the pain and since I'm still drinking, it's a double whammy on the liver, so I opt to drink over pain killers.
But I've taken 2 days off, so I got to catch up on some reading, personal research, and so anyway, I came across Ray in my readings of the book 'the originals' and then touched base with my friend who knows him and we talked a couple of days ago about him and his theories, so I also came across this video which I think I want to show my boys as well (who are 4 and 7), in that, I think having this framework early on would simply open their eyes more.
I did force myself to watch it, as it was elementary for me, but by the 12 min mark, the content was good throughout and I was of course impressed by how well made it was, and for God sakes, its Ray Dalio, who am I to make any comment on this and plus it was made for step one elementary purposes, so my thought was, if it's good, I'll make my boys watch it, and of course, it was.
So in the spirit of sharing with my TLs, I hope you enjoy it, and don't worry about my back, I'm a battle harden idiot, I'll get the MIR done sooner than later, and it is marginally getting better, but the plus side is that I've stop smoking for the last 5 days, don't know why, but I think it's because I'm in so much annoying pain, the pain over wrote my withdraw pains and so I just took it. LOL.
www.bwater.com And the above is the link to the principles, which I think, if you have 1.5 hours, read it, I think it will give you about 10 years of either insight or a framework to start from which is something maybe more useful than anything I could ever write.
How about I lend you a sixth star, so you have more stars to spend and hopefully payback latter? So you'll make yet another great blog, which might be rated 7 stars and...
I'll print the principles also. From the look of it that's the kind of reading you need a pencil to go with.
On April 26 2016 21:59 AbouSV wrote: How about I lend you a sixth star, so you have more stars to spend and hopefully payback latter? So you'll make yet another great blog, which might be rated 7 stars and...
I'll print the principles also. From the look of it that's the kind of reading you need a pencil to go with.
I think printing them out is a good idea, things like those principles, it's good to read and re-read every couple of years as you get more experience as well. There a few books I like to re-read as I've gotten older and gotten much more out of it. You'd be surprised how much you miss because something is so relavent to you right then and there, you get overwhelmed and miss the other better stuff! Thanks ^^ I'll take anything for a 3 star rating lol.
On April 27 2016 01:28 Chef wrote: Nice animations, tediously slow on delivering information.
I think it gets better after the middle half, but I think it's because it was an intro for the mass American population. That being said, I think it does it's job.
Ray himself leads the highest performing hedge fund in the world
Not even close
Well, my bad, I should have googled it and not been lazy, so not the highest performing hedge fund, but the biggest, most under management, that being said, he ain't a hack, and I'm just lazy sometimes.
Hello, I watched the video, Mr. Ray sure has a nice voice to teach.
I want to ask you something though : If I understood correctly, credit creates growth out of thin air, and productivity increase creates real growth. If in the long run there is no productivity increase, there won't be any growth.
So why not ditch the principle of credit if it's a source of instability (=circles), social problems, and war if, after all, the final growth will be the productivity increase?
Are people that greedy to go through all the mess these circles create for the illusion of getting richer quickly?
On April 27 2016 04:44 NoSoldier wrote: Being in Beijing you should be expecting much better food than you ever had before. You wont get your food fresher than in china.
Steak is about how it's cooked or aged, but mainly cooked. ^^ The vegetables are fresh though!
On April 27 2016 06:28 TwiggyWan wrote: Hello, I watched the video, Mr. Ray sure has a nice voice to teach.
I want to ask you something though : If I understood correctly, credit creates growth out of thin air, and productivity increase creates real growth. If in the long run there is no productivity increase, there won't be any growth.
So why not ditch the principle of credit if it's a source of instability (=circles), social problems, and war if, after all, the final growth will be the productivity increase?
Are people that greedy to go through all the mess these circles create for the illusion of getting richer quickly?
This is probably the only key conclusion moving forward from this video which is a massive area of study and basis for how a lot of firms like bridgewater make their cash.
Here are the simple answers that will point you to the rabbit hole, which is again, just a rabbit hole and if you can remember that and come back to the first conclusion, you'll make your way out of the rabbit hole again (if that made any sense at all).
1. if credit is used to create more money, ie invested or to increase productivity, then it's positive.
2. issue is that when that is legitimately done, the assets begin to rise in value apart from productivity. And then are seen as investments due to ...dum dum dum..'human nature aka greed aka don't wanna miss out on a good thing aka free lunch is happening now' 3. so then credit is used to buy assets that are rapidly appreciating and then these assets are flipped for more cash, which is used to pay off the initial credit. 4. but if the assets continue to rise in value 5. then cash is used for credit worthiness and further credit is gained, to buy more assets 6. but then these assets are bought not just on credit, but on 'leverage' meaning with a little bit of credit, you get the right to buy and sell the asset, example: you put 10% down on a house to have the 'ownership' of it, while you pay the bank interest on the full amount, while only using x amount of cash (which actually may be credit i.e. borrowed cash to act as cash as down payment), 7. and you do this because while you 'bought' the house for 1m with 100k, the value of the house when up to 1.5m in 6 months, so then for 100k, if you sold at 1.5m, you'd pocket 500k minus 6 months of interest on 900k (the loan amount). 8. equaling super easy cash, but that can only come by, IF you had the credit or cash to make the bet. But when this keeps happening, people aren't necessarily greedy, the are blinded that this will continue.
9. now the above is covered in the video actually, i.e. the debt bubble.
10. But when it comes to just buying things, there is a limit to how much you can personally buy on your credit card, it's when you link it to you house for more credit or start making all these loans for investment on assets is where it goes way beyond your means to repay or is far above the initial productivity that started all this.
11. Rationally, IF asset prices are going up, and credit is cheap, why wouldn't you buy and sell the assets? Of course, you'd be a fool not to, it's basically free money, for the moment lol. 12. Then it's a matter of timing. If you get out before the market crashes, and have cash in hand, then essentially, if we say all business is a series of transactions, then you've accomplished the trader's maxim of 'buying low and selling high and getting the fuck out'.
13. Which leads to us to conclude 3 things. i. it's not just human nature, it is a rational thing to do when money is that free on the table. ii. but it is human nature to go buck wild on it ,i.e. gorge yourself silly iii. but if we know this, then can we manage ourselves to take advantage of it without getting hurt by it Which is all in the context that we know this is bad for everyone over all, but fuck it, we are doing this for our own selves and if someone is retarded to lose money, why not lose it us then letting the market vaporize it? Which leads to part 2.
PART 2. Why not just focus on productivity? Ignoring the fact that productivity increases asset prices, and assume that there is no credit at all. Well then it forces everyone to increase their productivity, 1. but productivity had it's limits to organically increase, 2. and certain jumps require huge capital investments,
like when you're a factory and you use human labour, then switch to automation, it's unlikely you will ever have enough capital from your profits to make the jump, but if you do make the jump, then your earning above the loan/credit amount, and you've just added immensely to the overall productivity of your area.
3. So there is this link at the higher stages of productivity that requires some type of credit. 4. But then if you factor in competition, whether it be another company or country, then to compete, sometimes you need to get that capital to invest in productivity, and again we get back down to credit.
5. But you're question is really about the consumer, and also productivity itself. I think the thinks we can say 100% is: i. ideal productivity is the way to go, but without credit as a facilitator, is it possible and how ii. ultimately humans are human, and the baggage that comes along with it, leads to period of great insanity/irrationality iii. do we knowing this: participate to take advantage of it, without getting sucked in, or, stay above it all (or apart as it ain't all bad), or is there something else on the productivity side we can contribute along side this expected madness (see point 5 i)
Good luck trooper, I do not have an answer for Part 2: 5 at all, but I'm sure Ray has his own answers to that, but I'd guess he is more partial to point 5 iii. ^^
Inaccurate video (and its conclusion). The video assumes that currency and credit is MONEY. Money needs to keep its value over long periods of time (in other words, inflation/deflation should not be possible).
Because of this phenomenon, credit/currency creation lowers the value of the currency unit itself, as more currency is chasing the same goods, making things cost more in currency units, but not necessarily in work hours.
Please also dont mistake Wealth with spending or Income. Wealth is not valued in currency but in assets. A house is not better suddenly when its price goes up, same when it goes down.
What is the difference from earning 1000 dollars and paying 1000 dollars for all the goods and services that you need that month, or earning 10000 dollars and spending 10000 dollars for the EXACT same goods and services in the same amount of time?
If prices would be stable and your income would rise, then I agree that it translates into wealth.
If anyone is indeed interested in economy, I suggest starting here:
There are other inaccuracies in the video, but to be frank, It is far too long to pick the video apart step by step (most people wont even watch the 30 minute video, much less try to critically asses the claims made against it).
On April 27 2016 01:28 Chef wrote: Nice animations, tediously slow on delivering information.
I think it gets better after the middle half, but I think it's because it was an intro for the mass American population. That being said, I think it does it's job.
I agree. Could have been condensed to 5 minutes for what it had to say, but it was food for thought. I thought the concept of commonplace borrowing being one way the price of goods get driven up was a neat point for how things escalate despite parts and labour being equal. It's certainly a nice change from 'supply and demand' being the go-to simplification of economics.
The appeal the human nature is dumb, but besides his point, so it didn't bother me that much. It could easily be a cultural phenomenon.
I think discussing productivity as an even and stable increase was not quite right. Even very briefly he could have said something about how very important inventions dramatically change that landscape, or how scarcity of actual resources is going to have large impact on economy. It sort of treats the economy in total isolation of world history, which is probably not correct. It focuses heavily on the last century, while making statements about long term cycles that last (apparently) 80 or so years. That's kind of a starvation on data to prove his assertions.
Thanks for the explaination. I surely understand that a human/company does not want to wait 50 years to become richer and prefers to gamble and use credit. Good point on competition between companies too.
Also :
The video assumes that currency and credit is MONEY. Money needs to keep its value over long periods of time (in other words, inflation/deflation should not be possible).
I don't understand this. It should not be possible, well okay, but it IS happening in the real world. So how does that make the video inaccurate?
On April 27 2016 16:50 iloveav wrote: Inaccurate video (and its conclusion). The video assumes that currency and credit is MONEY. Money needs to keep its value over long periods of time (in other words, inflation/deflation should not be possible).
Because of this phenomenon, credit/currency creation lowers the value of the currency unit itself, as more currency is chasing the same goods, making things cost more in currency units, but not necessarily in work hours.
Please also dont mistake Wealth with spending or Income. Wealth is not valued in currency but in assets. A house is not better suddenly when its price goes up, same when it goes down.
What is the difference from earning 1000 dollars and paying 1000 dollars for all the goods and services that you need that month, or earning 10000 dollars and spending 10000 dollars for the EXACT same goods and services in the same amount of time?
If prices would be stable and your income would rise, then I agree that it translates into wealth.
If anyone is indeed interested in economy, I suggest starting here:
There are other inaccuracies in the video, but to be frank, It is far too long to pick the video apart step by step (most people wont even watch the 30 minute video, much less try to critically asses the claims made against it).
I'm writing the following NOT to dissuade you from your position or thinking, I am replying to clarify my position in the thread for those who will read my post and your response.
1. What iloveav says about the inaccuracies of the video is wrong. The video of course simplifies the entire basis of the economy, but it is base on a macro approach and understanding of the fundamental pressures on what drives the economy.
2. Why iloveav thinks it's wrong and why he includes his own video and talks about wealth and currency as if it is the missed topic of Ray's video is because he is in the 'rabbit hole' and doesn't realize it. For him he already believes that the rabbit hole is the reality and is projecting his position on whatever he sees about the economy to make it fit with his position in the rabbit hole - which again he thinks is the macro reality - but I'm going to say, 100% it's not.
3. BUT It is a reality in the rabbit hole, where it seems to make sense, where very intelligent people apply and wrestle with it and use their understanding to make money off of other people and it all works, until it doesn't,
4. And it doesn't, it doesn't work when there is 2008 crash, and all of these really intelligent people who have probably never realized that they are in the rabbit hole have no choice but to dismiss the crash as just a condition of the market being a bubble - but fail to realize that their own 'macro views' are not macro at all, but are actually - taken as a whole, simply another micro construct in the context of the macro.
5. Why I'm confident in saying this, comes down to a matter of applicability. You take the sum of all these investment views or understanding about currency, wealth or whatever and yes, they give you an edge or they 'work' to maintain your own portfolio, but when it comes to preventing yourself from getting fucked by a bubble or recognizing a bubble or increasing true productivity (and I say true, because what they think productivity is in the rabbit hole is again just a micro understanding in the context of the underlying macro structures), - these 'rabbit hole macro views' simply have no answer or effect or are in a position to explain what happened.
6. iloveav isn't wrong in a certain context, but he is missing the context here and he is doesn't realize that in this case, this is NOT a choice between two equal views that are different. His position can be perfectly valid, and this position by Ray is perfectly valid, but when put together, iloveav position is a valid within the context of Ray.
7. But I say point 6, not to say that iloveav's view is actually valid. I personally don't give a shit about what iloveav's view as well as the wharton harvard investment bankers and economist view points are about the rabbit hole. You think the collective IQ and education on wall street couldn't settle a colony on Mars in a lifetime? I'm sure they could, I'm sure there are many more smarter people in wall street than elon musk or peter thiel, but then there is 2008.
And there is nothing to explain there except that from their position in the rabbit hole they could have never seen it coming.
Greedy, dumb, evil, is all besides the point, as they were all(most) intelligent enough, no one would have willing let this happen if they had known what was to come, but it does first come down to what do we really understand as macro and fundamentals.
8. To conclude: What you choose to do in the rabbit hole, do it if it works, but don't forget there is a rabbit hole.
The video is meant to be simplistic, but it s a basis for the context of all the rabbit holes out there, if you can remember what is in this video, you will always have a solid economic world view where you can build on and return to.
I'm saying that you won't go wrong with having this as your economic world view then you fill in the blanks and build upon it.
Do you think Ray or bridgewater associates invests solely on the basis of the views expressed in this video, no of course not, this is not their investment thesis or how to build wealth or manage assets, this is only the over all paradigm where they build everything else upon and really this video is not a big deal.
There is nothing so ground breaking or insightful here or controversial here, no one is going to say this is a cult video of extreme views, but the purpose and the only purpose is to share a framework which I think correct and will at the very least make you aware that there is this underlying reality and everything else which people think that drive wealth, the market and the economy.
If you don't have a full framework to view the economy, take 30 mins to watch the video, or not.
I'm not sharing to impose my views on TL, I'm sharing because I'm part of this community and would like to share.
And normally I wouldn't bother to respond to a post like iloveav's in great detail, because he writes to simply discredit my post and push his own position, and good for him, the fuck do I really care if he wants to believe or whatever, this is internet, BUT just because he pretty much wrote his own post as a perfect example of someone who completely missed the point of the context/purpose of the video and sets himself up perfectly for this, I could not resist to use this as a very strong example to further clarify and expand on my original post.
Thanks iloveav, I rarely get such easy targets on the internet and in life, it has made my day! Appreciate it bro.
If any of you haven't watched 'the big short' take 90mins to watch that, much more entertaining than the 30mins I linked in the OP, but I'd say that Ray's video is still much more significant than the Big Short, but taken together, it will make a lot more sense.
EPT
