Knowledge, Money, Principles, and Algorithms.
Forget about diversification; concentrate on acquiring knowledge.
Principles are the clandestine knowledge that eludes our awareness, while algorithms wield the power to unravel the mysteries we're yet to uncover. Forget about diversification; concentrate on acquiring knowledge.
In the intricate tapestry of human reality, principles and algorithms emerge as the guiding threads that shape our trajectory and carve our destiny. Often, the conventional view of algorithms confines them to abstract formulas, but their essence resides not only in equations but in the principles functioning as the code dictating our decision-making.
Consider Charlie Munger, a luminary in the investment universe, who transcends reliance on mere figures. He intricately weaves his choices into a verbal algorithm, from exploring elementary ideas to comprehending the significance of incentives and steering clear of diversification. Munger encapsulates his strategies in principles as unyielding as steel.
Ray Dalio elevates this philosophy to new heights, embodying his principles in comprehensive books that unfold an algorithm addressing not just financial challenges but the intricate tapestry of life itself. These principles become guiding beacons through the tumultuous waters of uncertainty.
Donald Rumsfeld's proposed taxonomy of knowledge divides wisdom into known knowns, known unknowns, unknown knowns, and unknown unknowns. Munger and Dalio's principles fall into the category of unknown knowns, a realm where these verbal algorithms offer maximum utility. They provide flexibility, multipurpose functionality, and unwavering guidance towards enduring excellence.
Yet, within Rumsfeld's taxonomy, a landscape of known unknowns emerges—a realm where artificial intelligence and mathematical algorithms unfurl their full potential. Recently, @GoogleDeepMind's AI birthed 380,000 new metamaterials, challenging even human intuition. We teeter on the edge of a technological revolution in materials science and biotechnology, where algorithms stand as the architects of a new era brimming with discoveries and limitless possibilities.
Thinking within Rumsfeld's taxonomy, I reflect on the epistemological portfolio.
Long Costco, Coca Cola — The Great Masters in the Known-Knowns
Long Google, Microsoft — Companies tackling the Known-Unknowns, from natural language processing, unfolding proteins to fusion energy and crafting new materials.
Long Palantir and Bitcoin — The Unknown-Knowns, Palantir using AI to reshape decision-making, and Bitcoin introducing new principles about trust and money.
Long VIX, GOLD — The Unknown-Unknowns
We could always confront Nassim Taleb's Black Swan events that have the potential to impact our portfolio.
The prowess of algorithms to navigate the vast ocean of the unknown stands as undeniable proof of their transformative power. In an increasingly intricate world, principles and algorithms ascend as beacons, illuminating the path to the future. Let's applaud these master builders of innovation, those who swing open doors to a new era of possibilities and discoveries.
Thanks for reading,
Guillermo Valencia A
Florianópolis, Brazil
December 11, 2023