R-Naught for Positive Human Interactions
Or how the popular contagion metric will solve inflation and give your life meaning again (or not)
Since the new year has begun, I have been doing some re-evaluation on my personal portfolio. That being the collection of investments of time and energy that make up my actual life, and not the collection of assets that make up my net worth. Modern Portfolio Theory can be applied conceptually here as well, as it would be important to have a diversified mix of things you spend your time on. Low-risk conservative time investments such as eating healthy, reading, and exercising are proven to provide great returns. However, they are obviously not as exciting in day-to-day life. Bungie jumping is a nice jolt of energy, and definitely would be the highlight of any single day (unless you are having a really good fucking day), but you can’t only spend time bungie jumping. You will have to eat and brush your teeth at some point. In tumultuous times, smart investors de-lever their riskiest assets and retreat to safe havens like gold (ugh) or treasuries (barf). My soul searching in recent months has brought me to this point of retreating to the fundamentals of health in mind, body, and spirit. Obviously I still keep a little money on the blockchain..
If you have been reading my articles you know that I like to make these analogous comparisons of life and markets (basically it is my whole schtick atm). These types of observations to me are the most important, and I try not to limit them to just life and markets. Understanding concepts fully enough to connect them to other seemingly uncorrelated concepts is the best way to truly bolster your knowledge, or to expand someone else’s. This is literally how the brain works as well, as neurons fire and form synapses. It’s also how comedy punchlines work, or even just language in general. That’s why Shakespeare was so revolutionary. He was just dropping sick similes and metaphors left and right and the crowd was going fucking bonkers (I am assuming).
These life fundamentals I have been practicing over the past few months have brought me to a place where every philosopher lands, which is uncovering your purpose, defining happiness, and yadda yadda yadda, you come to the meaning of life. Yeah, it’s about to get wild, so buckle up. The market analogy here is the answer to the question “why do you invest?”. Obviously to generate returns, but for whom? If you want to reap the benefits of your returns for yourself, and you want to be able to enjoy said returns in your current lifetime, then you have to have a certain time horizon, which will demand a certain IRR. You can’t go from 0 to retirement compounding 1% annually. If you are looking to generate returns only for your children perhaps (ie +1 generation from now), your IRR demands can be a little lower, dictating a more conservative approach to your portfolio. That got me thinking, does anyone really invest with the intention of not reaping any rewards for multiple generations (ie +2 generations or greater)? Benjamin Franklin famously bequeathed $4,000 to the cities of Boston and Philadelphia, with strict instructions not to be touched for 200 years, which ended up paying each city millions of dollars due to the power of compounding interest.
Who else thinks in such selfless, multi-generational terms? Most people are working paycheck to paycheck, or working for the weekend, or working to get a bigger house or new car, all things that suit to serve them in their current life, most of which are depreciating assets anyways. Politics in turn have become transactional, with the inability to make meaningful change baked into the process of re-elections. (Newsflash: China thinks in centuries, we think in election cycles) Of course, why would anyone act any differently? There is no prominent mental model for the type of behavior that delays gratification, let alone delayed gratification past your own expiry date. Some might call it irrational to think so selflessly, but I think most, if pressed, would actually call it noble. Think about the great architectural masterpieces of human creation. St. Peter’s Basilica took 150 years to build. Granted, there was some religious motivation, and I am sure some nice coin to the workers paid out of the Pope’s coffers, but it still invoked the spirit of spending time and energy on something that you would not see in your lifetime, which is a rarity today. I wonder if that has to do with having shorter lifespans back then, coupled with less advanced industrial abilities. Does lengthening the human lifespan, and making infinitely more things achievable within a single lifespan change the way a life (or self, or generation) is valued? Would that be akin to inflation and how printing tons of money devalues the currency? If the issue is life inflation of our personal time portfolios, and we are all valuing our own individual time less (because we have more of it), wouldn’t that collectively manifest into overspending time on frivolous things as meaninglessly scrolling our phones?
In any event.. that leads us back to the question of purpose and how exactly do we value and spend our time or rather, what is our time, and by extension, our actions and energy, actually worth? Let me say that again without the run-on sentence.
What is our time and energy actually worth?
Sure, there is a market value attributed to each of us that rewards us capital for our time and energy based upon our relative productivity, but there is also a social capital that we reward to culture, to evolution, and to the collective consciousness, just by being human. How are those things valued in society?
Stay with me.
Both types of rewards, meaning financial and social capital, can be used, or not, within our lifetimes. Financial capital is great because every time you spend it, it goes to someone else, who can spend it, and the money itself becomes a form of energy transfer. So too, does positive social interaction. Greeting a stranger with a smile may brighten their day, and they could go on to hold the door open for a person, who goes on to do some other positive action. A butterfly flaps its wings...
But why do we (collectively) not value such social capital anymore? Most say it is because of technology which has caused us to become more isolative, that we have connections with too many people instantaneously which causes us to devalue any individual connection. I don’t think that’s too far off base. Time has been devalued for sure, but like any inflationary period, the quadrillion dollar question is: how do you get yourself out of the vicious cycle?
(Sidebar – maybe you disagree with my assumption that society does not value its individual human interactions in the aggregate. There’s a real debate to be had here, but with myself being an optimist and believing people are inherently good, does not mean I believe that they are not intrinsically selfish. We are all born into this world as physiological egos that don’t recognize the perspective of others. Empathy is learned later through the evolution of consciousness, and often never. Of course, there are degrees and levels to this, but here’s a simple test. Take a look at your portfolio and tell me what you are doing with your time and money. Are you erecting a Basilica you will never see? Or Ben Franklin’ing your retirement to the city of Chappaqua? Of course not, because societal pressure has made that sound ridiculous to you. The same society, that in the aggregate, I am arguing values the future based on what it can return as net present value, which in the case of positive human interactions, is nil.)
Well, I have a thought, and it combines life and markets in one big, delicious pie:
We normalize a new time horizon.
Think about it. What is the #1 tool used to fight inflation? Constrictive monetary policy. What does that mean? It means less printing of money, or more specifically the raising of interest rates so that banks have to pay more for money, and thus passing that cost of money onto the consumer. Why is that such a hard pill to swallow? Because the end consumer being mostly big businesses (and their investors) have to endure less, or slower, growth than they are accustomed to. Why is that bad? Well, they have IRR demands because they want to be able to use their money in their own lifetime. How do we change that? We shift the horizon. How do we do that? Why all the fucking questions, just let me finish. We shift the time horizon by offering an objective metric that can help to visualize and contextualize and understand the importance and nobility of selflessness, as well as answering the question to the meaning of life and (theoretically) solving inflation.
Let me pause here for a second. This solve for inflation is both theoretical in reality and metaphorical in regards to the connection I am making in life vs markets. In reality, this solve for inflation is nothing new, and would be short lived due to the market’s demand of greater returns. What I am essentially positing from the market side of the metaphor is an acceptance of a new normal of lower IRRs in investment portfolios to lower volatility, de-risk the probability of a market crash, and essentially call for a slap single up the middle instead of swinging for the fences, so that the next batter up (future generations) can have an at-bat with runners on base. (sorry - baseball metaphor inside a market metaphor) This is also within the framework of the current economy, which I am not saying is exactly optimal. A far better future solution would be to remove the confiscatory and exclusionary middlemen (ie banks) from the equation with a more direct to consumer financial system (ie DeFi). I am just using the current topography as a canvas to paint my point.
What is that magical objective metric that quantifies the butterfly effect, normalizes a new time horizon, and gamifies your purpose for life? Introducing R0 (R-naught) for human positive interactions.
R-naught, as you may recall from the hours of COVID-19 news that you consumed, is a reproduction number that estimates how contagious an infectious disease is. R0 for COVID-19 was estimated to be between 2-3, which means that for every person infected with the virus, they would likely spread it to 2-3 more people, who would go on to spread it to 2-3 more people, and so forth. This is compared to the standard flu with an R0 of 2, and the Delta variant, with an estimated R0 of around 6-7 (and you all remember how “extra contagious” the Delta variant was reported to be). An R0 less than 1 would indicate that the disease would eradicate itself through lack of transmission.
Humanity has survived a global pandemic. The presence of which was felt far and wide, and it’s transmission objectively quantified via the R0. We are all now intimately familiar with the catastrophic nature of an infectious disease with an R0 north of 2, as well as one north of 6. Seemingly everyone on the planet has been infected by now unless extreme precautions were taken. It stands to reason, then that we are all now intuitively well versed in the concept of an R0 through this shared lived experience.
So let’s flip it on its head and use R0 for positive human interactions. Think how quickly an R0 of even just 2 would spread through a community, a region, a globe. This is nothing new. Prophets and gurus have been preaching this for literally millenia, but never has there been such a globally ubiquitous, language and religion agnostic, scientific benchmark to quantify the actual impact you are making on the world. Any measure of “goodness” is undoubtedly wrought with subjectivity. And subjectivity is the blurred vision in which we perceive the world. You can justify and use semantics to argue for or against any action that you can think of. But pure objectivity cannot be filtered out so frivolously. That’s why sales goals are not based on how you feel you did, they are based on whether you brought in the cold, hard cash or not. Using the R0 for positive interactions gives people an objective metric they can hang their hat on, track, have fun with, and generally gamify.
Circling back to the main topic of conversation, I was getting at the purpose of investing as a proxy or metaphor for the purpose of life. Why do we invest? To reap greater rewards at some point in time. You could argue that the purpose of life is the same. Many religions believe in an afterlife that is bestowed upon those who behaved well during their time alive. A future reward based on current actions. A large swath of the population might also say their purpose is to reproduce, and to raise beautiful, healthy children. Again, a future reward based on current actions. Some might say the meaning of life is to live in the moment, to be present in the now. From personal experience, backed up by millenia of Buddhist text, I can attest that if you go deep enough into the now, you realize that there is no now, that all time is connected, all matter is energy, all energy is one, all life is suffering, and that the only rational thing to do is cure that suffering with empathy and altruism. That empathy and altruism produces a change in the world that is a net future positive. There was suffering in our perception of the past, and now there is less suffering in our perception of the present and future. Whatever your level of ambition is, the reason for investing and for living is to have a future outcome greater than the current one. The market and life metaphor starts to blur together, and the question becomes: does it matter if you get to see the outcome or not?
Enter the ego. The most ambitious of the altruistic group want to be successful enough to have money to invest in companies that will change the world. Personally, that has been my mission, to acquire enough capital to make positive change. There are plenty of people out there with money who are shaping the world the way they want in a way that is not good for the greater good, nor for the future, but done out of myopia and greed. Adam Smith may have been correct in that markets are perfectly efficient, but they are certainly not moralistic. So, similar to the way the US military has to spend a shit ton of money on defense in case it ever gets attacked by some rogue first world dictator, capitalism needs altruistic people to make a shit ton of money to ward off the nihilists and shape the world for the benefit of the future. Idealistically (as we ambitious altruistic tell ourselves), that is the only way to make a dent in the world. But realistically, we cannot all change the world in a material fashion like this. There is a finite amount of time and energy, and with less than 3,000 billionaires out of 8 billion people on the planet currently, you could easily get discouraged in terms of the impact you might actually make. We have to have some humility and realize that we all can’t be Chamath. Of course, you can still make an impact with hundreds or even tens of millions of dollars, but now you have to delve into the “bang for your buck” discussion, and ultimately accept that you probably won’t make as material an impact as you would like. But all of this neurosis I am projecting stems from ego’s demand to see the returns within the current period of life. The “bang for your buck” changes with a shift in time horizon. You can take $100M and donate it to medical school scholarships and within your lifetime and see a couple hundred doctors materialize into the world purely through your generosity. Or, you could take that same $100M and build the foundation of a new democratized education system that will inspire the next generation to build upon that foundation, which will inspire the next generation to normalize that system, which will allow the altruist in the next generation to take $100M (or the future equivalent) and spend it on a different problem.
Here is where it all intersects.
1. We live in a globalist, capitalistic society with efficient markets (idc that both of those things are threatened for better or worse with nationalistic onshoring of investment to protect against supply chain issues, or trends towards democratic socialism or China’s brand of communist capitalism – as long as satellites and cryptography exist, so will globalism and capitalism – so get over it)
2. We all have the desire to see tomorrow be better than today (whether that be our IRR demands/ or altruistic change the world demands).
3. We have the desire to see those returns in our lifetime, because of societal driven pressure, or ego, or both.
4. The most ambitious of us want to have as large an impact as possible.
5. The size of the impact we can have is artificially limited in our minds, because of our narrow time horizon.
6. Shifting that time horizon out allows for more foundational building in the present, and greater compounding returns in the future.
7. Still being human, we need something to provide that dopaminergic effect to keep us interested when the myopia inevitably kicks in.
8. Using the R0 for positive human interactions gamifies the short term, and gives you comfort that you are not only contributing, but that your contributions will compound and have widespread, global impact over time.
9. Time and matter and money and energy are all the same things.
10. Change your perspective, know your worth, and contribute with confidence.