Welcome To Capital Misallocation
Welcome To Capital Misallocation
Unlike the World Full of Cheerleaders Correlating Characteristics of Successful Outcomes to Sell You Inductive Wisdom, Here We Focus on Wisdom to be Gained From Mistakes & Bad Decisions
Before we begin on this journey into the public realm of sharing my thoughts, why don’t we start it out with a very appropriate song by my all-time favorite band Pink Floyd - “Money”.
Money, Pink Floyd (1973)
Now lets dig in to the intro on the topic and what Capital Misallocation will delve into for as long as its progenitor is motivated to create content. If you know me then you probably will not be surprised that I chose to explore a topic that embraces my inner cynic. If you don’t know me, then I guess you should know that I have basically been a cynic / short seller / negative carry trader / 人間不信の人 (Japanese) / cinico (Brazilian, Italian, Spanish) / pain in the ass to argue with my entire life.
For example, when I was a kid I used to argue with people, kids and adults, whose arguments carried the “best” conclusion yet lacked a fundamental understanding of the premises or logical foundation of their strongly held view. I remember enjoying attacking people’s premises armed with the knowledge that they didn’t understand the pillars that their house (argument) stood upon even though their conclusion was sound. I guess that is why in Calculus they make you do the work to show that you understand all the underlying “givens” and consistent premises that are the foundation of the right answer. The funny thing is that I never did this to show off or try to embarrass people. Rather, I felt the world needed more people would would pipe up when bullshit was being spouted. As I got older and was introduced to alcohol, I found myself occasionally being the guy who bullshitting people. However, the difference was that I never took it personally when someone logically beat me - in an argument or chess. I almost appreciated it to be honest and never would subject anyone to Ad Hominem cheap shot attacks or priest style creditability challenges. So-called “experts” are the only ones who are allowed to talk about complex & uncertain topics.
THAT IS WHAT I THINK IS MISSING IN TODAY’S SOCIETY.
Srinivasa Ramanujan is an Indian mathematician who never received formal training from an “accredited” institution and only lived to age 33. Yet, he made major contributions to humans’ understanding of mathematics. Older readers of this, as well as math academics, will remember this name from Matt Damon’s first movie - “Good Will Hunting”. Damon wrote the screen play and created a character that was Ramanujan, but a Boston version with a “Park the Carrrrr” accent.
At age 15, Ramanujan obtained a copy of George Shoobridge Carr’s Synopsis of Elementary Results in Pure and Applied Mathematics, and then proceeded to develop his own theorems and ideas. Again, as a young 15 year old without any formal training he was able to tackle problems that would still be incredibly incomprehensible to many Harvard, Oxford, and MIT graduates and students.
You can follow up and read more about Ramanujan if interested. But the point is the same one that they tried to make in that famous movie with the late Robin Williams - namely that anyone should be allowed to approach any problem and have a reception if his or her analysis stands on solid ground. You don’t have to wear a cardinal red robe, to carry a PhD from a major institution, or wear a politicians suit to have a voice. Traditionally, a great deal of the historical misallocation of capital has come from these type of people who sold their “expertise” to the people. Then justifying incredible wastes of capital - both human and wealth.
Such adventures as “The Crusades”, “WW1”, “WW2”, “Guns and Butter”, “Iraq 1 & 2”, Enron, Bird Scooters, Ghost Cities in China, Bridges to Nowhere, 1% 30 - 100 Year Coupon Bonds, String Theory, Quantum Gravity, Pets.com, AOL/Time Warner merger, Covid policy, and Ethanol are some of the many ABSURD capital allocation decisions we will tackle on this blog and in the podcast.
IF YOU ARE A SLOW READER OR JUST DON’T LIKE THAT SONG HERE IS ONE MORE FOR YOU GUYS. A FAVORITE FROM MY TEEN DAYS.
C.R.E.A.M. , Wu-Tang Clan (1994)
Everyone one of us has latent creativity & intellectual ability that has been repressed by dumb jobs, reinforcement by media that you aren’t qualified to discuss these type of “priestly” topics, family obligations, life bullshit, and a ton of distractions (sports, movies, games, meaningless news, TV, etc.) I hope to resurrect the ability to dissent, to argue without ad hominem attacks, to dig deep into topics that have been hidden from the public. Why don’t we try to divorce ourselves from views / arguments and become better.
Bad decisions by Wall Street, DC, The Investing Public, The City of London, Hollywood, Sports Franchises, The Vatican, Beijing, Moscow, Berlin, Caracas, Buenos Aires, Mexico City, and many more will be explored. I am an equal opportunity cynic - we will go after anyone and everyone.
I hope to interview some of the people who were on the front lines of these decisions and discuss the assumptions that drove some of these questionable decisions during this journey into the “WTF, How Did They Greenlight That Massive Misuse of Capital?”. In addition, I want to interview current decision makers - capital & policy - and ask them what they think has serious deviations between perception and reality.
Ultimately, that is what this is about - the divergence between perception and reality. I have a weakly developed theory that the uncertainty gap between our perceived reality and the “unobservable reality” grows at an exponential rate as we move away from the present in both directions along the time vector. This exploration is about understanding how some people are able to command resources and take advantage of that gap at the expense of investors, citizens, and human society at large.
As someone who has done a lot of things right in his life and who has simultaneously made an equally large number of mistakes, I fully endorse that we embrace and explore the fallibility of the human condition. Ultimately its a journey towards a better understanding of the past, present, and future of nature & our society.
