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Investing in a nutshell: The Investing Course

My day job is managing a hedge fund, but on weekends and evenings I hold an online course in equity research and investing. I even taught a short 14-hour version of it this spring (2022) for students at London School of Economics.

I’ve worked as an analyst and later as a portfolio manager since 1994, so I’ve given the craft of investing a lot of thought –  not least here on the blog but also in the two books I’ve written on the topic. Me and my two main colleagues at Futuris (Brummer) were actually awarded a prize as The European Hedge Fund Of The Decade 2000-2009 in competition with thousands of aspirational hedge fund managers. Hence, I should know both how to invest, and how teach, and the best ways to learn, to invest.

The Swedish version of the course is heading into its sixth installment by October 2022. It consists of some 300 pages of really condensed material, plus supporting videos and spreadsheets, and runs over 12 weeks. I’ve done my utmost to keep it as short as possible, cutting out all the unnecessary fluff and bullshit that tend to go into investment courses. It’s concise and pedagogical, as witnessed by hundreds of the attendants, over 400 which are active in our private online group. I’m currently working on a version for an English speaking audience, but the adaptation is taking some time to complete, since I’m basically both working two jobs and preparing that new course.

I think about this stuff all the time.

So, how do you get good enough at investing to work as a portfolio manager? A friend recently, i.e., yesterday, asked me to point him to instructive interviews, books and other material that I think would help him learn investing well enough to eventually break into the hedge fund industry. I told him that apart from the sources I had already provided, I can’t remember or recommend any individual episodes that encompass the art of investing in a representative or useful way. Both here on the blog and in our previous conversations I have pointed out the 25 most important investment books, a dozen finance films, a dozen different investing podcast shows, including a few specific episodes, some fifty other books on psychology, decision making, science, history, philosophy as well as sci-fi books, ten newsletters from legends like Howard Marks, plus some other various resources that can be found online.

Rather than recommending reading all that, and formulate a complex and complicated investment method, my view on investing can be summed up such:

Use history as a guide to make forecasts for fundamentals and valuations. Use those to buy cheap & sell expensive, while respecting the cyclical nature of everything human, including the economy, psychology, profitability, procyclical accounting, analyst recency bias, and valuation fads. There is more nuance than that of course, but that is the gist of it.

You would actually do very good as an investor by just reading one single book about investing by Howard Marks, conveniently titled The Most Important Thing. It teaches you how to buy assets at a price less than their value, as well as points out the pitfalls of fear and fomo.

It’s probably better to read Marks’ book “The Most Important Thing” twice a year for five years than read ten other books on investing, but if you’re looking for more inspiration and vantage points to triangulate the art of buying low and selling high, you could add one book about Macro by Peter Schiff (HAEG), one book about the very big picture by Ray Dalio (e.g., The Changing World Order), The DAO of capital by Spitznagel to understand the psychology of trading, Fed Up by DiMartino Booth about the workings of central banks, Zero To One about start-ups, Hedgehogging on the topic of actually starting and running a hedgefund, Signals and other books about understanding macro and geopolitics by Pippa Malmgren, and a few monthly newsletters about valuation, annual returns and technical market signals by John Hussman. All of these I’ve listed and recommended publicly many times. I thus only mention a few of the best ones from the top of my mind here. Oh, I almost forgot to mention Russel Napier’s Anatomy of A Bear (how bear markets come about and play out). A final specific investment book tip is The Man Who Solved The Market, about the impossibility of technical analysis and pure pattern trading. Simons, however impossibly it was, eventually did solve the stock market.

From there on, I would suggest keeping up to date with trends in the economy and the financial markets by listening to weekly podcasts like MacroVoices, Invest Like The Best, Eurodollar University, What Is Money, Bankless, Hidden Forces, The Memo, Superinvestors, Smarter Markets and possibly a few more.

I would also include reading newsletters from some of the greatest financial thinkers of the last half century. They are very well known and widely read. Consequently, studying the newsletters won’t provide you with a significant investment edge, but it will teach you how some of the best and brightest think about investing:

Jeremy Grantham (Superbubble), Ray Dalio, John Hussman, Howard Marks, Jesse Felder, Pippa Malmgren, Marc Faber, Lyn Alden (Investment cycles), Fred Hickey, Genevieve Roch-Decter (GRIT), Variant Perception, Luke Gromen (FFTT), Brent Johnson (Santiago Capital; “USD milkshake theory”), Jeffrey Snider and so on. I would not least highly recommend watching interviews with Stanley Druckenmiller (e.g., the following seven 1, 2 [the link does work with a little trickery], 3, 4, 5, 6, 7; but also other superinvestors, such as Soros, Rogers, Zell, Icahn, Burry, Ackman, Munger (cognitive biases), Tudor-Jones). You won’t find any clear-cut answers there, not specific or crucial knowledge either. The letters and interviews are only meant as inspiration for finding your own path to buying the right assets in the right amounts at the right time, subsequently selling them in order to buy more of the right things at a later point.

A few other letters worthy of mention are Bison Interests (their latest letter on oil was quite interesting), Cliff Asness (aqr), Zoltan Pozsar (Credit Suisse) and Kuppy’s adventures in capitalism.

In my own books “The Retarded Hedge Fund Manager” and “TAOS”, I demonstrate the importance of psychology, wihile showing that any investment style can work, as long as you are disciplined, take notes, use those notes, consistently update your strategy (see More Money Than God regarding the importance of keeping up with the changing tides of the market) and most importantly avoid too much hubris. My first fifteen years as a hedge fund manager the years 2000-2014 first and foremost made me identify The Hubris Cycle, which by the way had been a much more fitting and timeless title for the book. You start out ambitious and disciplined, then when the results accumulate you tend to rest on your laurels thinking you’re a genius. Your hubris leads to losses and eventually to working hard and hopefully good performance once again.

A simple valuation multiple

can’t capture the reflexiveness

of a crowd

of psychologically unstable investors

You won’t learn investing in a practical sense from reading any of the books listed above, or from listening to the podcasts and reading tons of newsletters. You learn investing by actually investing and then course correcting, just as you learn to live a good life by trial and error, and bicycling by hopping on a bike and falling off a few times. You can read books about life too, but living is the only way of truly learning what life is about.

Investing isn’t hard, and that’s why it is immensely difficult at the same time. It’s a reflexive endeavour as detailed by George Soros in The Alchemy Of Finance, and by Buffett and Munger in the quip about the market being a beauty contest: If you want to find the winner, you’re not trying to estimate who’s the prettiest in the line-up, but who others are estimating others will vote for (i.e., not who those others consider beautiful, but who they guess most will vote for).

Being reflexive means that the financial markets change behavior over time, since the participants that create the market adapt to the actions of others in a constantly evolving feedback loop. It’s a kind of 3-Body Problem of psychology (a very good sci-fi trilogy by Cixin Liu, by the way, that I highly recommend). There is no stable solution, price patterns will keep changing forever. The underlying actual value, the sum total of available cashflows from various assets, however, is much more predictable. And in the end, buying an asset for a price below its value will always net you a profit, if you are patient enough (as well as calculated correctly, and had a nice Margin Of Safety against bad luck [read the book!])

I see investing as a self-devouring snake, an Ouroboros. All components feed on each other and almost teleologically require the subsequent steps to execute the present one. The very first step [head or tail] demands knowledge of the entire process [the snake]. For example, you can’t make quality investments without a good strategy and relevant investment notes, which require having already gone through a full cycle of investing from notes to evaluation. 

The market often reacts to events in surprising ways, often in the opposite direction of what one might logically expect. Spitznagel, e.g., talks about his roundabout approach to investing. The legendary George Soros calls it Reflexivity. I would add the book Obliquity – why our goals are best achieved indirectly, as input to how to think about approaching life, happiness and investing sideways. The teachings of Tao (Dao), e.g., as expressed in Tao Te Ching (and explanations of its verses) are also helpful in seeing how things are both the way they seem and not that way at all at the same time. In The Matter With Things, Iain McGilchrist explains how we need to move away both from binary thinking (either/or) and away from first order non-binary thinking (both/and), to a second order non-binary regime of both both/and and either/or thinking.

McGilchrist’s meditations resonate with my experiences of how the market first appears perfectly logical and rational, then morphing into a contradictory beast requiring upside-down reasoning, only to sooner or later start appearing logical again – first in the Just Do The Opposite way, but then actually just plain logical and understandable. And then it cycles back to incomprehensible again. And then to being comprehensibly incomprehensible. And so it goes, undulating, cycling, morphing, being reflexive, where you are your own enemy chasing your own tail. The process reminds me of the third book in the Atopia Chronicles, where the protagonist turns out to be his own antagonist – a bit like in the, however completely different, movie Predestination.

Neither the general idea of investing, nor the mathematics of it are difficult to grasp. Just buy good companies for less than they’re worth. You pay cash for a stock and make a forecast of how much cash you’ll get back from the investment in the form of dividends from the company’s earnings and in form of what you can sell the stock for at a later point.

The price you can expect for the stock in the future is what another investor would pay for it, given his thoughts about price, worth, earnings, dividends and the future stock selling price. I’ve written here about the one single valuation multiple you need to assess the value of an investment: FCF/MC (the normalized free cash flow yield).

You could hope for a bigger fool to pay an irrationally high price for the asset in the future, but it’s a more robust strategy to assume future buyers will be about as rational as you are when assessing the value, thus basing their willingness to pay for the stock on the asset’s cash flow in their future.

Try it out, i.e., go back in time 5 years, 10 years, 20-30 years through reading old annual reports and calculate the then prevailing NFCF/MC yield, and see if you would have wanted to buy the stock or not based on the yield. Then check the price chart going forward from there on and see what happened.

As you can tell, it’s pretty useless over reasonably long time periods, just like all other valuation gauges on a stand-alone basis.

Of course they’re useless! A valuation multiple can’t capture the reflexiveness of a crowd of psychologically unstable investors. Some multiples are more reliable over very long stretches of time, but you sometimes would have to wait 10, 20 or even 30 years for today’s valuation multiples to exert their full power over subsequent annual returns. Twelve years is, however, often enough for whole markets – as John Hussmann pedagogically demonstrates again and again in his newsletters.

A multiple like Price/Sales, or my suggested cash flow yield, or the theoretically correct but impossibly useless Discounted Cash Flow formula won’t save you, won’t help you become a good investor. Knowing that you should buy low and sell high won’t either.

What you need is a place to start, a kick in the butt to actually begin investing with real money, and a path to improving over time. My course, The Investing Course, really actually is a great resource for all this; for learning how to do real equity research and investing, taught by an experienced practitioner. Unfortunately 12 weeks of material can’t be summarized easily. Well, it can be but you wouldn’t get it. Buy cheap, sell expensive just won’t help you get to the finish line without all the rest, including some basic questions and definitions:

What is cheap? Who decides? When? How much should I invest? How long do I need to wait? When do I sell? What do I buy then? How do I make robust forecasts for fundamentals? How so for valuations? What about technical analysis? Macroeconomic data? How can I implement an investment commonplace for evaluation and adaption?

Ultimately it all boils down to this simple and straightforward question: What determines the value of an asset och what determines its price (and when)?

I unpackage that question thoroughly in my investing course, since unfortunately there just isn’t that one single podcast, let alone single episode, that can sum it all up in a nutshell. Except: Buy Cheap, Sell Expensive.

Sure, the following four podcast episodes are really good, but they still won’t help you unless you realize the truth – that there is no spoon, no secret formula, except just doing it, then learning from your mistakes:

 

Good luck, and see you once I get the English adaption of The Investing Course ready. Meanwhile, you can find the Swedish version here: https://finanskursen.se/

/Karl-Mikael Syding

P.S. If there are just two books you should read to foster a good research and investment routine, they are: Atomic Habits, by James Clear, and Deep Work, by Cal Newport. They have nothing to do with investing, but everything to do with focus and the power of good habits.

Some other great books related to investing
The New Case For Gold, James Rickards
HAEG: How An Economy Grows And Why It Crashes, Peter Schiff
BULL, Maggie Megahar
The Real Crash, Galbraith
Reminiscences of A Stock Operator, Edwin Lefevre
The Little Book That Beats The Market
Fooling some of the people all of the time, Einhorn
The Black Swan, Taleb
The death of money, James Rickards
The hour between dog and wolf
Tomorrow’s gold, Marc Faber
Lords of finance, Ahamed
Manias, panics and crashes, Kindleberger
Investing psychology, Tim Richards

Finance-themed pop culture
Liar’s Poker
Flash Boys
Bad Blood
The Big Short
Boiler Room
Inside Job (2010)
Margin Call (2011)
Too Big To Fail
The Wolf Of Wall Street

Various non-financial books for understanding the human psyche and world in general
Peak
Range
Grit
The Shallows
Thinking fast and slow
Predictably irrational
Noise
The Master And His Emissary
GödelEscherBach
The User Illusion
The doors of perception
Realms of the human unconscious
Secret teachers of the western world
Why We Sleep
The order of time
Something deeply hidden
Beyond weird
The Naked Ape
Sapiens
The Singularity Is Near
Engines of creation
The road to serfdom
Abundance
How to create a mind
The fourth turning
The fabric of reality
Wholeness and the implicate order
Einstein’s unfinished revolution
Surely you’re joking mr Feynman
What is real
Maps of meaning
Digital libido
The way of the SEAL
Lessons of History
History of Philosophy

Ender’s Game (on the importance of understanding the other side of the trade to the point of loving it)

Influence, by Cialdini (also see here)

Thinking in bets, Annie Duke

Non-financial Podcasts
Sean Carroll’s Mindscape
The After On Podcast
Brain Science with dr Ginger Campbell
Report on psychedelics
Philosophize this
Finding Mastery
Tech meme ride home

A few more newsletters
James Clear: 3-2-1
The Felder Report
Epsilon Theory, Ben Hunt

Some good twitter accounts to follow:

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New World Order

Everything, everywhere, all at once

Usually, I would say there is nothing new under the sun; there are no new paradigms. Status quo is always your best guess. So, just relax and keep at your processes. Take just one ridiculously easy step to make sure you get started at all. Then take just one more. As you were.

Start using Revolut. It’s the only card I use. See more at the end of this post, or just follow the link.

But as it always does, the cycle turns. In effect, it’s more of the same, just one more cycle. For everyone under 100 years old, however, it seems new, since it hasn’t happened in about a century. So fuck the status quo for now. The new is the same.

According to The Generation Theory, as well as the Fourth Turning idea, once every 85 years the paradigm shifts markedly – not to something completely new, but to a regime reminiscent of the ways things were 85 years ago.

Money. War. Institutions

The last time there was a Fourth Turning, we experienced a stock market crash in 1929-1932, a total war in 1939-1945, a new currency regime starting with Bretton Woods in 1944, the formation of the UN in 1945, as well as The European Coal and Steel Community (ECSC), a.k.a. the European Union, in 1952.

All of this seems set to repeat itself.  New war, new hegemony, new money, new governing bodies, new alliances, new politics. 

 

Plus ca change…

The details need not be exact, but nobody relevant today has any first hand memories of the 1930s and 1940s. If you turned ten in 1952, you’d be 80 today – most unlikely to be particularly influential. Hence, for all practical purposes, the WWII, UN, BW and the foundations of the EU are all lost to the history books. Hence, the mistakes are due for a retake.

I think most of the 2020s will be tumultous. Financially, economically, politically, and not least geopolitically. There will be war, pestilence, famine and death. All the riders of the apocalypse are actually already in the bag; just take alook at Ukraine, food shortages and the pandemic. But there will most likely be more.

Ukraine is not the war, it’s just a battle. The real war, the total war of the Fourth Turning is about the next long term superpower(s) and the New World Order for the rest of the 21st century: physical and digital. Who will control the most important physical resources in terms of energy, metals and food? Who will control the media, the narrative? Who will control the money? Who will control the heavens (space)? Who will decide what’s accepted behavior, what’s allowed?

Politics: First Trump, then AOC

I think Trump will win the 2024 presidency, due to the Biden administration being perceived as too weak in the face of strongman Putin’s brinkmanship politics, and Xi Jinpings exaltation as supreme and glorious leader until his passing. Since Trump can’t run in 2028, and since the US economy and its global status have been run into the ground by the end of his term, Accidentally Occasional Cortex will run in and win the 2028 election. She will for good and bad usher in a new era of socialism for the more and more marginalized USA. Maybe she’ll even serve more than two terms (!) We’ll see. In any case, she won’t fire off any nukes, no matter how rich and powerful China becomes. She’ll be too occupied levelling the playing field within US borders to fight external wars.

The long bear goodnight until February 14, 2023

The bear market will last longer than most expect, and the central banks will be more hawkish than most anticipate – willing to sacrifice the working class and shareholders alike in order to tame stubborn inflation. The ultimate nominal bottom might very well be reached already in November 2022, but could also be the result of a final capitulation “puke” a full year later before the usual election stimulus cycle takes the reigns. My best guess is the final puke comes around the turn of the year to 2023, maybe when Q4 earnings and 2023 outlooks are published – or slightly after when the reports are fully digested,  i.e., in January or February 2023.

As always, there will be vicious bear market rallies along the way. Be ready during earnings seasons and around FOMC rate decision announcements. CPI announcements might be key as well. Tread carefully. Don’t be a hero. Don’t use leverage. Focus on value.

We’re actually due a rally right about now, I think (timestamp: July 15, 2022). I would have thought relatively decent corporate Q2 earnings reports would’ve already triggered a rally, but so far too high inflation numbers have weighed more on traders’ sentiment.

Anyway, I’m tilted slightly longer than average in my hedge fund Antiloop’s L/S Equity strategy. Waiting for Godot. Rally anytime now. Ready here…

I’m long cheap “value” and short expensive “tech” and “hype” stocks. Not very sophisticated, but nor is the market. Just short everything ARK owns, and be wary of the rallies, and you should be fine. I’m buying long term real assets such as mining stocks, oil majors (Conoco, Chevron), gold miners (AEM, NEM), and fallen tech angels like SPOT, GOOG, INTC, MU and META. I also like car manufacturers and Nordic banks, plus select take-over targets lika Elekta (medtech) and salmon farmers (Austevoll).

When the final puke comes, I expect central bankers and politicians to pivot like never before. In the US either Biden during the Democrat presidential campaign, or Trump right after winning in 2024. The mother of all stimulus will drive stocks, inflation, gold, mining stocks, real estate, interest rates and so on. It’s hard to pinpoint any losers except ordinary workers, left behind by robots and asset holders. And then the deluge, the crash of crashes. The crash to end all crashes around 2027-28, which hands AOC a landslide victory on a platinum plate.

Preppers be prepping

The details don’t matter. Neither does the order of events. The message is one of turmoil, of fast moving markets, of opportunities abound. Where will you live (country, city/countryside)? What money will you use (gold, silver, Bitcoin, Ether, Monero)? Where will you keep your wealth (land, real estate, gold, stocks, bonds, crypto, art, farmland)? How will you make a living? What skills will you hone? What education will you get? What network will you prove your worth to? How will you go from your conventional position today to an unconventional position just ten years from now? There is a risk in moving too early, and another in moving too late.

TIP: Get it together and order a Revolut card (click ‘Revolut‘). It’s the only card I use, owing to the free foreign exchange transactions, not to mention how easy it is to invest/speculate/get exposure to both ordinary fiat currencies and a lot of different crypto assets. The fees are non-existent or negligible, just as the spread between buying and selling is.  There are 18 million of us in the Revolut network – and, yes, it’s a real bank and a real mastercard.

 

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The emergence of things from relations

TIP: Get it together and finally get a Revolut card (click ‘Revolut‘). It’s the only card I use, owing to the free foreign exchange transactions, not to mention how easy it is to invest/speculate/get exposure to both ordinary fiat currencies and a lot of different crypto assets. The fees are non-existent or negligible, just as the spread between buying and selling is. 

The Components Fallacy – wholes are not made of parts
I’ve been thinking about emergence and entropy lately; what they are and how they are related. Information theory, intelligence and consciousness also sprung to mind in the same context. They all seem to be different aspects of the same thing.

Let’s start with emergence, the idea that the whole can be greater than its parts, or at least that the whole, for example a gas cloud in a box can be understood as good or better in terms of a few macro data (pressure and temperature) than making calculations for every single gas molecule.

 

What is dead may never live


Emergence can be weak (it’s simply convenient to talk about chairs and tables, rather than their constituent elementary particles and wave functions) or strong (the whole is greater than its parts; water molecules aren’t wet; particles have no consciousness. The wetness and the consciousness  emerge as something new from the particles’ dance. Actually, quite like a dance or a song, really can’t be reduced to steps or notes, but are flowing wholes of the relationsships between their constituent components.

The dance doesn’t exist anywhere in its particles, only in the living process, betweens and relations. A simple machine has parts, it is its parts. But a living thing is not its parts; it’s not the same anymore after turned off, if stopped. Often it can’t even be started again. Hence dances, songs, life are not at all like machines built from components. Processes are something different altogether, non-reductionistic, only existing as wholes. Back to the topic of going from the bottom and up, i.e., emergence, rather than vice versa:

We can talk about objects like chairs and tables without knowing or caring about particles and quantum mechanics. In that respect, emergence works, it is real. At least for us people. However it might very well be real to us just because the macro level is our everyday level. That is the only level we understand. The top level was always going to be our ultimate reference level, the benchmark for what is real, what works.

The bottom level on the contrary is almost unfathomable, not “working” as far as intuition goes. Down there it’s just information, labels like charge, numbers accompanied by rules for how one number interacts with another number. We call it particles, we imagine small marbles zipping around, but they are “just” vibrations or excitations of a field. And the field isn’t tangible, it is itself just dimensionless numbers strewn about– just a way of keeping count, of governing the interaction with other numbers. There just isn’t anything there, with “anything” and “thing” and “there” defined as our everyday experience of tangible stuff being in a particular position, with a particular velocity, momentum and amount of kinetic energy.

The bottom level does by the way work from a scientific point of view. It works extremely well, better in fact than the top, macro, level. The bottom, quantum, level thus seems to be the true description of reality. And our macro world is just a neat result of weak emergence, of averages working, quite surprisingly, well enough for almost any basic application, except electronics, time measurement, particle physics and close-to-the-speed-of-light experiments.

It really is amazing that the everyday macro level does emerge from the beyond weird micro level. Macro things stay in place with absolute dead certainty, while their micro parts can’t be trusted to be neither here nor there. The question I am building up to is whether truly new macro things emerge from the micro level, and whether these emerged entities can effect, govern, the micro level, i.e., not only be the most effective descriptor, but actually writing the script for its parts.

The motions of a flock of birds, as well as the motions of the flock’s individual birds, can be more effectively predicted by modelling the flock than by following a single bird. The flock does indeed seem to have its own life, and be governing the motions if its constiutuent birds.

Similar things occur in songs, dances and consciousness. The next note of a song can be guessed from the song so far, even the very first time you listen to it. But the song in no way affects what notes it is composed of. How about consciousness. Does it emerge from some physical and biological processes, from the dance of molecules and energy? Can it affect it’s own contituent thoughts, affect the movements of the body, thus exercising “free will” upstream on the consciousness’s parts; independent of the physical laws that already govern how particles and fields interact while never creating or destroying any energy in the process?

Energy, by the way, isn’t real either. It too is “just” a useful accounting trick. Energy keeps track of information that enables predictions for interactions, but there aren’t any energy units anywhere. There never were any energy to begin with, and none was ever created. Things have momentum, i.e., mass and velocity. The zip about, crashing into each other, thus changing their respective speeds. Their labels thus change, but the sum of all energy labels always amount to zero. There is no energy, energy just tells us what to expect from an interaction. Energy thus is just a specific kind of information. Just like entropy is information about what we don’t know or can’t know, often called the level of disorder, perhaps the level of what’s not known about interactions.

Everything comes down to relations, dances, interactions:

There are, e.g., electrical charges, labels of plus and minus (but nothing tangible to pin the labels on, the labels are just there, ready to govern charged particles’ interactions).

And there are rules of interaction between quarks.

And then there is that curved space thingamajig, that gives the appearance of masses pulling on each other. A massive object, i.e., something assigned a mass number, bends space in a way that makes it seem as if other massive objects are drawn to it and vice versa. Mass governs (bends) space and time; and space and time govern the interactions of masses. It’s all a dance, there are no things, no particles, no bottom, just interactions, in betweens. The relations govern what is; the very existence of a particle, a thing is dependent on its relation with other nodes. The nodes, the relata is secondary to the relation. No man is an island, the elementary particle version. Where does this dance take place? In space? In time?

Animals experience space, but is it real? Is room a fundamental aspect of reality, or is that also a kind of accounting? In a computer game there is the appearance of space and objects, but from our point of view that space och those objects don’t exist. Where did space even come from to make room for massive objects to bend it? Can you have masses without space and vice versa?

All of the topics of discussion today, space, mass, energy, time seem like accounting tricks. It’s all just information about relations. Without relations there is nothing. Reality, life, consciousness are a song and a dance. There are no things, no units, no relata, just relations, pauses, in betweens, information about relative positions (not in space, just… relative as apart from absolute).

How do relations form without relata? How can anything begin. It’s an amazing feat of science to have made people accept the Big Bang theory as explanatory: Oh, you know everything just suddenly exploded into being from nothing. It was a fluke fluctuation in nothing. Wut? That‘s the foundation of science?!

Okay… let’s accept there is something. We all feel here, real, alive, conscious. That’s undeniable. We have that information.

Our current picture of “being here”, of existence, is that things happen with a likelihood.

Further, nature abhors differences; nature tends toward a smooth chaos with no islands of complexity. Lock a bunch of gas particles in a box and they’ll bump around until they all have more or less the same speed and are evenly distributed. Lock a universe in a box and with time, it seems, it will turn into a uniform sea of radiation, all stuff gone, all patterns gone. The only thing left being a more or less infinitely diluted radiation energy, basically zero everywhere. Maybe that’s an accurate description, maybe not. Our models can’t be relied upon for such long term predictions.

However, that’s of no importance to us.

In the short term, our pressing reality is that eggs tends to break, not the other way round. And still, life and consciousness are moving in the other direction — toward increasing complexity. Wut? How can the governing principle of increasing entropy, of an all-encompassing smoothing out, result in growing islands of increasing complexity, i.e., falling entropy? Further, we seem set to spread among the stars, thus exporting complexity to the rest of the galaxy. How can that be?

Gravity, quantum fluctuations, inflation and evolution worked together to create planets with conscious life-forms. That pesky gravity took an almost uniform cloud of hydrogen and made a trillion galaxies with a trillion different planets in each galaxy, and on at least one planet made conscious humans. The ultimate island of entropy defiance. Right here, entropy is falling, but Earth is radiating high entropy energy ever faster, almost as if life itself was just a tool to hike the speed of increasing entropy in the universe.

So, does entropy increase or decrease? And what is entropy? Is it correctly described as Disorder? Information about what could have been but isn’t? Is time an essential variable, or is the tendency toward increasing entropy enough to describe interactions and “The arrow of time”? Time seems more and more emergent, just a neat way of accounting for increasing entropy. Like space being a neat way of predicting how various stuff interacts, rather than being a truly foundational aspect of existence.

The more I think about the foundations of existence, the less I think we are anywhere close to a true description with the standard model of quantum fields acting on a canvas of space-time.

My guess is that we’re on the completely wrong track altogether. Information may be the foundation of super strings that explain quarks and atoms all the way up to water molecules. But the wetness of water isn’t “emergent”, it too is just a handy notion for us conscious macro beings; a variable to consider for our fitness equation (Donald D Hoffman), i.e., how to most effectively manage our interactions with other fitness point seekers in the cosmic game of Pokémon Go.

I think Existence is consciousness all the way down. Nothing is material, there is no real space, energy or time, just a “game” for consciousnesses vying for fitness points.

Even that doesn’t even begin to consider how the game started, how the relations got going, how something whole and non-existent got going not to mention divided into parts. If we did, however, begin as a divine sine wave, eclipsing itself with a perfectly opposite wave phase, before exploding into Hilbert space or something; the boredom of being conscious with nothing and nobody to do, would surely have made us look for ways to divide into separate parts. We seem to have succeeded. And thus the whole split into parts with less substance together than the whole.

Does it matter?

Does it matter if we are evolved meat sacks in a Big Bang universe, or avatars in our own cosmic game?

Not really, but I still think it’s worthwhile, important really, to realize we really know exactly nothing.

Nothing adds up. Our puny imagination just keeps assigning notions, reductionist labels to ultimately meaningless hypothesized components, when what we are is a set of relations that can’t be reduced to lifeless parts.

To be perfectly clear, we aren’t parts. We aren’t composed of lifeless marbles that magically (through emergence) spring into something greater. I have no idea of what we are, what is happening, how anything began, how it ends, and so on. I do know nothing is what it seems to us.

The capacity for surprises is endless, even just judging from a human materialist perspective.

Does matter matter? Well it does for us right now. However, the matter with things is that they aren’t. Matter, like space, energy, time and entropy, most likely is just a notion we conscious macro beings find handy for our little game.

Welcome to the real world.

Best,

Mike