Last week, in New York City, I presented at a global gathering to financiers of all kinds; pension managers, traders, asset managers, private equity investors, and service providers, some who have managed billions of dollars in assets, where it was clear I needed to reposition the foregone conclusions of finance. Conclusions not unique to people in finance but instead signifying the widespread solipsism of all of humanity attempting to control its destiny.
We, humans, must come to terms we are, in actuality, a mere speck in a universe consisting of 100 billion stars per galaxy like our sun, many surrounded by planets, times 400 billion galaxies, all guided by the same principles of nature’s evolution, with cosmologists suggesting our universe may be merely one of many. The destiny and longevity of humanity are determined not by our desire to control nature but by our need to subjugate to the rule of nature and adapt.
Finance initially evolved when none of those evolutionary facts were known or even deemed relevant, and thus finance charted its own course with a presumption of merit detached from evolutionary prowess. We know better now, and we must begin to adjust the goalposts of finance to the evolutionary objectives to which we are subjugated by nature.
So, let me redefine the role of finance here:
Finance is the arbitrage of innovation responsible for expanding the fractal of humanity to continually improve human adaptability to nature.
Let me unpack that definition.
First, finance implicitly arbitrates with an investment theorem what can be discovered. For in the words of Albert Einstein, the theory determines what can be discovered. Hence, it is important for finance to adjust its theorem to the theorem of nature, since dynamic relativity of nature’s investible assets cannot be discovered by stale monisms of distribution deployed by finance today.
Second, human ingenuity is dynamic and expands in all directions in search of improvement. Hence finance, aiming to capitalize on the guaranteed expansion of human ingenuity must mimic the nature of said expansion. Financial systems must adhere to the rules of nature to trace, support, and help expand humanity along the vectors of nature’s expansion.
Third, nature’s rule dictates only renewal yields the best proxy of sustainability. Meaning, in the case of all living creatures, the strength of renewal as the cause will yield the prolonging of life as a consequence.
Today, popular new finance programs (such as ESG, Impact Investing, Corporate Responsibility) are stuck in downstream suboptimization of undesirable consequence, and worse resell consequence as cause, leading in the words of Nietzsche to grave depravity of reason. They yield evolutionary false positives with masterful thesis drifts and retrofits to cover up their fundamental evolutionary fallacies. Those programs are the new snake oil sold to greater-fools, responsible for an accelerated anthropogenic cascade. The opposite of the desired humanitarian role of finance.
Finance must begin to adhere to a new normalization of evolutionary truth, the same truth everything else in our universe is subjugated to. No longer can finance be allowed to pursue its own agenda, and not be held responsible for strengthening human adaptability to nature. For any delay or adverse effect to human adaptability will cause humanity to live shorter than otherwise possible.
Finance has a clear opportunity to leverage the guaranteed expansion of humanity and thus to produce the consistency of predictable returns from the expansion of nature’s universe proven over the last 15.72 billion years, with a consistency better than any asset class allocation strategy can ever hope to achieve.