You Are Here

My fave Mick Stevens cartoon. That’s us, alright, smack dab in the belly of the beast.

Those of us of a certain age will remember the Powers of Ten movie by the Eames’s, a map of the universe that zooms out to the size of everything and then zooms in to the size of nothing. That’s us, alright, at every level of magnification.

I’ve always been a sucker for maps, particularly maps that visualize the world in a novel way, that show our place in the world with a perspective or in a dimension that we hadn’t previously considered. I call these maps of self-sovereign discovery, maps that reveal a path of self-directed exploration of our world and ourselves.

The art historian and critic Robert Hughes called the experience of discovering your place in the world in a novel way The Shock of the New (still the best book and TV series on art I’ve ever read/seen).

Art is a map of self-sovereign discovery.

The science historian and critic Jacob Bronowski called the experience of discovering your place in the world in a novel way The Ascent of Man (still the best book and TV series on science I’ve ever read/seen).

Science is a map of self-sovereign discovery.

You know what I miss most about the world before Amazon? I miss going to the library and looking up a book in the card catalog, searching the stacks for the book in question, and then losing myself in the experience of discovery AROUND the book I was originally searching for. It’s one of the best feelings in the world, and I’m not sure that my children have ever felt it. I haven’t felt it in at least 20 years.

Libraries are maps of self-sovereign discovery.

And no, the shelves at Barnes and Noble aren’t the same thing. At all. And no, Amazon’s recommendation algos aren’t the same thing, either, but are in fact an outright perversion of self-sovereign discovery. Why?

Because “discovery” algos are a Wolf Trap, the modern version of a design used by wolf hunters for a thousand years, where you set a blood trail through a one-way wicker door in a large circular fence built around a central pen with a scared, bleating sheep.

The key to the Wolf Trap? We wolves can’t see each other until it’s too late, each of us lured in by what we believe is a personalized and uniquely rewarding path of discovery.

The illustration above is from Le Livre de la Chasse (The Book of the Hunt), published circa 1407. I’m pretty sure you can find the original hanging in Mark Zuckerberg’s office.  

Amazon and Netflix and Facebook and all the other Leviathans of recommendation algos provide a constructed discovery “experience” designed to take our money. It’s no more of an actual discovery than Disney’s Jungle Cruise™ is an actual jungle cruise.

And we all know it.

We all know that we’re being led on very specific paths of “discovery” and “experience”. We all know that we ARE Bandersnatch. But we all play their game anyway.

For now.

I can see the world changing in its awareness of the artificiality and constructedness of the narratives that provide the choice structure that envelops us.

We are all Epsilon Theorists now.

The world is changing because a critical mass of people are fed up with seeing the world through the constructed “experiences” of commercial media providers, like Amazon and Netflix and Facebook in consumer-world, like CNN and Fox and MSNBC in voter-world, and like CNBC and other financial media outlets in investor-world.

I’m not saying that these commercial media providers are bad guys per se. I’m saying that they are professional narrative creators. That’s their business. They are paid handsomely to be the Hand of the King. Except it’s not a king, of course. It’s a Nudging Oligarchy and a Nudging State.

The path to changing the world … the path to unmasking the Potemkin Villages projected by commercial media providers in service to the Nudging Oligarchy and the Nudging State … has two initial milestones.

Step One – create an independent media platform with enough wattage and enough listeners tuned to your frequency so that you can get your message into every government, every bank, every asset manager, and every financial services firm of significance on the planet.


Welcome to the Epsilon Theory pack.

Step Two – broadcast a novel, authentic map of self-sovereign discovery for investors and citizens alike. Give people the tools to see for themselves the invisible threads of markets and elections. Because you’re smart enough to make up your own damn mind.

You are here.

So here’s the map.

The missionary is the atomic scale of our social lives as investors and as citizens. The missionary shakes his or her finger at you and tells you how to THINK about the world. The missionary presents an opinion of proper social behavior as news or fact, what we call Fiat News. The missionary is the act. The missionary is the driver of the Common Knowledge Game.

We write a lot about missionaries in Epsilon Theory.

The narrative is the human scale of our social lives as investors and as citizens. The narrative is an invisible organism, as alive as you or I, with a memetic lifecycle determined by the interaction of missionaries, media platforms, and the crowd watching the crowd. We are both biologically hardwired and socially trained to respond to narratives.

We write a lot about narratives in Epsilon Theory.

The zeitgeist is the macro scale of our social lives as investors and as citizens. The zeitgeist is the long-term ecosystem of narrative colonies. It is the spirit of an age, the driving ideas of social interaction, active over decades. Although never seen and hardly felt at the human scale, the zeitgeist is exuded by a society, like placards held up by a stadium crowd.

We have written little about the zeitgeist in Epsilon Theory.

You Are Here” is the first chapter in a virtual book of Epsilon Theory notes, new and old, focused on the investment zeitgeist of our modern age. I’m doing this for a simple reason:

For asset owners and long-term investors, the greatest risk to your portfolio is a change in the zeitgeist. 

It’s not whether Jay Powell is a hawk or a dove. It’s not whether earnings are weak or strong this quarter or this year. It’s not whether budget “reform” passes or fails. It’s not whether we have a recession in 2019 or 2020 or 2021 or whenever. It’s not whether China or the US “prevails” in this game of trade Chicken. It’s not whether Brexit happens or not.

These are all narrative-level phenomena. Are they important for making money or losing money in the market? Are you HERE in a map sense? Yes and Yes. But these are neither existential risks nor once-in-a-lifetime opportunities. Everyone recognizes the existence of narrative-level phenomena. They are known unknowns. They’re big, sure. But only big on a human scale. To use the language of Things Fall Apart, these are the three horsemen of the investment semi-apocalypse. They’re bad news if they break against you. But they’re not Death.

You are also HERE at the zeitgeist-level of social phenomena, and changes here ARE existential risks and once-in-a-lifetime opportunities. They do not exist on a human scale, only on a macro social scale. And because we can’t hear them or feel them like we can hear and feel narratives, we never talk about them. The zeitgeist contains our most cherished assumptions, the behavioral conditions that we take for granted and bake into everything we say and do. There is no more difficult task than to identify a zeitgeist while you are in it, and it is only through the application of non-human intelligences like Natural Language Processing (NLP) technologies that I feel confident in our ability to step outside of the ocean we swim in and measure if and how the zeitgeist is changing.

I believe that the investment zeitgeist is changing in three ways.

  • Deflationary expectations, now 40+ years old, are becoming inflationary expectations.
  • Cooperative and multi-play games in both international politics and domestic politics, now 70+ years old, are becoming competitive and single-play games.
  • Modern capital markets, now 150+ years old, are becoming political utilities.

I can’t prove any of this to you, but I can show you why I think what I think. I can make the case. All I really care about doing is getting you to think in terms of missionaries, narratives and zeitgeists. All I really care about is inspiring you to undertake your own acts of true, self-sovereign discovery. If I can get you to do THAT … well, that really is how the world changes for the better.

So here’s the plan.

I’ve got a bunch of new ideas to write up on these three zeitgeist changes, including novel applications of the Narrative Machine. I’ve also got some old ideas that are highly relevant for making the case, but are written up in some older Epsilon Theory notes. Usually I’d just include a link to the older notes and leave it at that. For example, I cover Zeitgeist Shift #1 extensively in Things Fall Apart (Pt 3). But for the much older notes I want to do something a little different here.

Epsilon Theory is a map of discovery, too. 

We put the texts and notes of Epsilon Theory underneath the NLP microscope provided by our friends at Quid. Each node is a separate article, and the AI clusters them according to the similarities of their words and phrases and textual construction. It’s an organization by meaning, not by date or author or title or keywords or the like. Combine this with some simple scripts to generate dynamic rollovers and active links, and the Epsilon Theory map truly comes alive.

Just click on any node and it will take you to one of our 300+ notes or briefs.

There is sooo much more we can do with the metadata embedded in the Epsilon Theory map, and we will in the weeks to come. Size of nodes representing how many people have read the note … brightness of nodes representing how recently the note was published … if you can imagine a dimension of meaning, authorship, or reading as a social experience, it’s now possible to create a visual, interactive representation of that dimension. And not just for Epsilon Theory texts, but for any collection of texts. Warren Buffett’s annual letters. Sell-side analyst reports on Tesla. The collected Fed prayers of Jim Cramer. Well, maybe not that last one.

In addition to highlighting areas of the Epsilon Theory map that may lead you to “library shelves” that you’ll want to explore, I want to highlight specific notes, both old and new, to the website version of “You Are Here.” It’s an experiment, for sure, in authorial discovery, but in the same way that I like to talk about playing the metagame, I think there’s an opportunity to create a metatext that can be useful for readers who want a comprehensive resource on what is admittedly a hard thing to wrap our heads around – the zeitgeist.

So here’s the first of those “special attention” notes, a piece I wrote four years ago (!) on the transformation of international politics into competitive and single-play games, what I’d now call Zeitgeist Shift #2. It’s called “The Clash of Civilizations”, and I think you’ll find it useful.

I’ll close this note with these two quotes from that note, because they’re sure to raise some hackles. They’re from my two favorite war criminals, Sam Huntington and Henry Kissinger.

The West won the world not by the superiority of its ideas or values or religion … but rather by its superiority in applying organized violence. Westerners often forget this fact; non-Westerners never do. – Samuel P. Huntington (1927 – 2008)

Upon learning of Cardinal Richelieu’s death, Pope Urban VIII is alleged to have said, “If there is a God, then Cardinal de Richelieu will have much to answer for. If not … well, he had a successful life.”Henry Kissinger, “Diplomacy” (1994)

There is nothing more important for your portfolio than the future trajectory of the American empire and the prospects of geopolitical conflict. Nothing. It’s time to wrestle with that.

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  1. Thanks Ben!

    Interesting info/Questions: Anyone Please! Thanks

    Kahneman: Bias and Noise

    And you find variability within individuals, depending morning, afternoon, hot, cold. A lot of things influence the way that people make judgments: whether they are full, or whether they’ve had lunch or haven’t had lunch affects the judges, and things like that.
    Now, it’s hard to say what there is more of, noise or bias. But one thing is very certain — that bias has been overestimated at the expense of noise. Virtually all the literature and 	a lot of public conversation is about biases. But in fact, noise is, I think, extremely important, very prevalent.
    There is an interesting fact — that noise and bias are independent sources of error, so that reducing either of them improves overall accuracy. There is room for . . . and the procedures by which you would reduce bias and reduce noise are not the same. So that’s what I’m fascinated by these days. 
          —from podcast with Tyler Cohen and Kahneman
    —My observations: When networks are inferred on real-world data, they often start to look pretty gnarly: tons of nodes, tons of arrows pointing all over the place. The real world is the largest of causal networks, so it is unsurprising that most correlations are not causal, even after we clamp down our data collection to narrow domains. Everything is connective-tissue….

    Question-1: Narratives obviously have direct or indirect effects and have an impact in structuring outcomes good or bad, what do you think of the above comments from D Kahneman on narratives or does it not have any effect at all?

    Bens Comment: “Deflationary expectations, now 40+ years old, are becoming inflationary expectations. “

    Question-2: I have read the archive I get most of Ben and Rusty’s propositions and learning more by the day…”Epsilon Appreciation”, I understand more is coming on this…I get Narrative/Common Knowledge/Zieghiest. One particular item and am watching to see real world is the chart on the Crude Oil Futures/S&P500 spread, very interesting for a novice like myself.

    I am trying to break down that narrative of inflation to real world. We obviously all understand real world inflation has not been a real issue in over a decade, wage increase pretty much zero, I get the inflation narrative is in the environment, I can see it But I cannot connect it into real world terms and moving markets…any help would greatly be appreciated??

  2. This note is scary-smart! I hope it becomes one of the largest nodes (most widely read) in the Epsilon Theory map.

    Here’s a link to a “map of self-sovereign discovery” I stumbled across a few days ago. My adult life coincides with the 7 decades it illustrates, so I have personal recall of most of the macro-economic relationships shown. For instance, I remember briefing senior military officers in the early 1990’s about how Japan was eating our (America’s) lunch in the field of microchips. Who knew how Japan’s relative ascendancy would fade! When I visited primitive, impoverished China in the 1970’s (a year after Kissinger helped pry open that particular Pandora’s box), my imagination utterly failed to recognize the amazing human potential waiting to be unleashed there. You are so, so right about the future trajectory of the American empire. We pack members gotta pay attention…

    BTW, Ben, it’s reassuring to know that someone else in the Western world remembers the Jacob Bronowski book and series.

  3. The maps most frequently used to depict the world are Mercator projections. Because it’s difficult to project a globe tilted on a 23-degree axis on a flat piece of media, certain adjustments must be made. The longitude is somewhat correct and uniform, but latitudes grom grossly large as you move from the Equator north or south. Russia looks a LOT larger than it is (is IS 9 times zones across). That is a basic distortion of reality that we learn from early childhood; however, nobody (almost) presents us with alternative views. In the days of Ptolemy, the maps used were quite different from the ones we see today with the Western Hemisphere as the focus.

    We live here, don’t we, so why not put us at the focus. The word “Orient” as into orient oneself came from a time when orient, from Latin meaning east, was actually at the top of the Beatus map. Why delve into all of this? Well, it was fun and shows that some parts about our perceptions are subject to being hacked, so to speak from the information produced by other for our consumption. It goes back centuries, but our Sapiens brains can only evolve so fast, probably meaning that we can be more easily manipulated by what we read, hear and see. Poorer is richer if you think that the accumulation of things on credit make you feel successful, sexy whatever. FWIW, Bob

  4. Avatar for Mpm186 Mpm186 says:

    “Cooperative and multi-play games in both international politics and domestic politics, now 70+ years old, are becoming competitive and single-play games.”

    Perhaps this change should be nested under the above, but I think this author gets at the larger point -he questions if the 20th century assumptions that free trade, increased consumption and GDP growth, and a “growing economic pie” are in fact desirable.

    “The Once and Future Worker: A Vision for the Renewal of Work in America”

    “The West won the world not by the superiority of its ideas or values or religion … but rather by its superiority in applying organized violence. Westerners often forget this fact; non-Westerners never do”. – Samuel P. Huntington (1927 – 2008)

    Victor Davis Hanson has a vigorously (and well done, imho), written retort to this in, “Carnage and Culture” in case anyone is interested:

    " …armies cannot be separated from the cultures that produce them and explains why an army produced by a free culture will always have the advantage."

  5. Avatar for jz1 jz1 says:

    As-above-so-below work both ways as fractal. Everybody think and act within their local small environment is everything that matters, and yet we all pay attention to the central government and billionaires. 1000 millionaire is much better than 1 billionaire. While I was busy taking care of my W2 job and try to raise my kid right so that he will NOT be on food stamps, those small things that matters, today, Ben says the geo-political of American Empire and inflation can both kill you and give you a once in a life time opportunity. I guess I will have to stop doing my small things that matter and pay attention to the “zeitgeist” change in “BIG PICTURE”. I am tired Ben. Can I just keep working and save half and be okay? I guess NOT because the “Zeitgeist” change can be deadly. I am NOT trying to be sarcastic and Ben’s stuff is deep and wide. I am just saying we are all forced to play a game few understands and we will all got tired. Leave it to the expert? No, I can’t trust them. DIY follow youTube advice? You will be exhausted between the W2/kids and zeitgeist games.

  6. Avatar for jz1 jz1 says:

    Well, my understanding from epsilon theory is that inflation is like global warming. You try to measure price change across millions of products with all the commodity and manufacturing tech changes. It is as difficult as measuring temperature change at all coordinates under all weather and taking into account solar system properties and figure out how much is contributed by human behavior. Suggestion is don’t spend effort on this black hole. Rather, just pay attention to how human crowd talk about it and stay one step ahead. The goal is to win the game, NOT to get the Truth. It took me a while to adapt to this kind of zero-sum gambler thinking from an engineering background believe in differential equations and repeatable lab experiments.

  7. JZ…Thanks for the help, greatly appreciate.

    Couple of thoughts…Isn’t the entire meta-narrative game then just an exercise in the entire process of “prediction markets” to help one understand how we/markets are conditioned toward a particular event or emergent phenomena?

    …if trying to price inflation is a difficult to impossible then all data is irrelevant and you just destroyed the entire quant industry?

    …I get the zero sum game analogy but would only add this:

    “All of this storytelling creates a huge amount of distracting noise for traders and investors. Narratives are seductive because they impose a sense of rationality on unexplained events; this allows us to be more easily fooled by what is probably random and meaningless activity. No one wants to admit that chance plays such a large role in events; acknowledging this truth would undermine our delusional self-image of being skilled, informed and in control” --Barry Rittholtz

    Thank You for the conversation…it helps, still a Skeptic&Optimist…I am just trying to maintain a balance of reality from all of the noise, which is why I do not drink the coo-laid from any of the missionaries or tribes…always learning! Like Ben’s buddy at Demonitized stated…everyone is selling something!

  8. Senator Ben Sasse had some interesting things to say about work-in-America in his WSJ editorial “The Challenge of Our Disruptive Era.” If interested, you can read it here:

    Ben Hunt has commented on those who work with their hand versus those who deal in symbols and abstractions, but I’ve not been able to find that particular note of his. Anyone?

    Looked into “The Once and Future Worker” on Amazon. Appreciate the pointer. The negative reviews are revealing. Lots of folks saying “My mind is made up. Don’t confuse me with facts.”

    Would never take issue with VDH. The question in my mind is whether America’s armies of the future will, in fact, arise from a “free” culture.

  9. Avatar for jz1 jz1 says:

    Mike, I do NOT mind people sell things through story telling. I do NOT have any intention to figure out what’s real or whst’s fake. I do want to have a house to live, happy neighbors, feeling at ease for my kid to play on the steeet, going to school without a bullet proof school bag, retire, can be treated when I am sick. I want to be free and for that I need to make money. That’s what’s real for me and I have to get it done right. Initially I thought I could just work hard and save half and I will be fine. Then I discovered these rent-seeking, inflation stealing activities that enslave everybody. In stead of focus on creating wealth and save half, I need to learn this wealth transfer game to protect my earnings. Epsilon theory is gambler’s theory to me and if you want to figure out the wealth transfer game, you learn from gamblers. It is NOT about reality, it is about wealth transfer, your chips into my hand, zero sum game. What saddens me is that the system have forced people getting their attention away from wealth creation productive work and into wealth transfer games. This corrupts the morality and push the civilization backward. But it is the environment I am in and I have to survive. Epsilon theory helps a lot. In the end, we need to understand Kissinger and Huntington to understand how the transfer is done. Those kong’s in Casino pales in comparasion from these people pointing guns at the world population and transfer their wealth into the hands of the Empire.

  10. Avatar for Mpm186 Mpm186 says:

    Thanks for the share on Sasse. I do want to get to his new book- I like to hear any ideas to combat that - widening gyre.

    I much agree with your last statement!

  11. An argument might be advanced the most difficult task has been successfully taken up by Nietzsche, Jesus, Dostoevsky, Shakespeare – perhaps Wittgenstein, Borges, Eliot, David Foster Wallace – and dozens more I’m surely ignorant of.

    Of these posthumous-born, as Nietzsche named them, at least some paid dearly, commensurate with the power of their prophetic gift. Might then a technology that holds out the promise of such an ability ask its own price of us at some point? What price that may be, I have no idea. I suppose it would be better we didn’t know in any case.

    Portentously yours

  12. Again thanks…I am glad you lean on Bens perspective…but I knew these memes long before ever reading anything by Ben Hunt! I remain skeptical but support the mission, efforts and overall goals…too much time in combat zones…I disagree about Reality,its all about separating the illusions to get to Reality of what’s really going on!

    Sentiments from Fantastic Beasts by JK Rowling: Awesome Perspective!

    Torquil Travers: I have some questions for you, Professor.
    Albus Dumbledore: This is a surprise.
    Torquil Travers: There’s a rumor that Newt Scamander is headed to Paris. I know he’s working under your orders. What do you have to say for yourself Dumbledore?
    Albus Dumbledore: If you’d ever had the pleasure to teach him, you’d know that Newt is not a great follower of orders.

    Albus Dumbledore: Do you know why I admire you, Newt? You do not seek power. You simply ask, “Is the thing right?”

    Theseus Scamander: The time is coming when you’re going to have to pick a side.
    Newt Scamander: I, I don’t do sides.

    Me either…Take Care! Always Learning! Clear Eyed & Full Hearts!

  13. Ben, since you wrote this, “[w]e have written little about the zeitgeist in Epsilon Theory,” my hope is that you’ll be writing a lot more about zeitgeist from an ET perspective going forward.

    Also, way back in one of my favorite notes - “Cat’s Cradle,” as its summarized, so much, so concisely - you wrote this:

    " …a recognition that the U.S. is well and truly stuck in the current macroeconomic regime of low growth + massive debt + insanely low interest rates, and there’s nothing the Fed can do in terms of jawboning or “communication policy” or forward guidance to get us out."

    Followed later by this:

    “But don’t tell me that the Fed “has no choice” but to accept the current macroeconomic regime, because they DO have a choice. The Fed giveth. The Fed can taketh away. It’s just a very, very, very painful choice that the Fed would have to make in order to taketh away, full of loss assignment and bankruptcy and status quo shattering. It’s a very brave choice they would have to make, a Volcker-esque choice they would have to make. And that’s why I don’t think they will ever do it.”

    At several other times, you have also referenced the current debt overhang as a growth dampener, but never specifically as an inflation dampener. So, do you see the zeitgeist shift from:

    “Deflationary expectations, now 40+ years old, are becoming inflationary expectations.”

    happening despite the debt overhang not having been addressed?

    Clearly, we had low growth and inflation in the '70s - it actually feels more “normal” to me (a kid of the '70s) than what we have now - but if inflation expectations break out and force higher rates, with this level of debt (several magnitudes higher than in the '70s), won’t the economy break and either tamp inflation back down or give way to Weimar Republic style inflation?

    Said another way, I’m of the belief that we “can’t” have higher interest rates without breaking the current economy and financial system. I’d love your and other pack members’ thoughts on this?

  14. Probably gonna get slammed for this but oh well:

    QE never caused a deflationary period across the five years it happened (Dec2008-Dec2013)…there was a small blip in 2003 but that was it…it was not hugely expansionary, but did push down long-term rates by 0.5 pp or so. That had to provide some boost to the economy. Thus 90% of the QE puts upward pressure on asset prices (Boom/Bust Cycle), while 10% got into the real economy and stimulated it. Of course the increase in asset markets far exceeds the increase in real activity, so price to income ratios rise.

    Unwinding QE…Given the expansion impact, it doesn’t make sense that the unwinding can be a huge negative, unless it were done very precipitously, which there would be no reason to do. If you read what they say, they’re likely just to let bonds and MBS roll off as they mature without reinvesting. They’re not actually selling anything. Remember, the Treasury sells about $7 trillion of debt every year, between new borrowing and rolling over old debt, without a hiccup. Even selling bonds is not hard, especially if everyone knows it’s coming and why.

    But I admit I cannot reconcile where/what he thinks by " inflation expectations" versus real inflation or does he think the narrative of inflation expectations will turn into real world inflation?..I do not see it in the real economy, But what do I know…about two cents worth.

    Ben Hunt…My view: as the tide of QE goes out, the tide of inflation comes in. And the more that the QE tide recedes, the more inflation comes in.

  15. DrB, the missionary/narratives/zeitgeist ending in ‘thank you military’ seems to go left to right in time whereas the three investment zeitgeists appear to go zeitgeist/narratives/missionary. To me, the terms are ‘covariant’; in essence the observation of zeitgeist is predetermined left to right and determinative right to left. However, the latter direction is not uniformly predictive locally e.g. Chicken Little and the like. Maybe I have it all wrong. (Thx to Mike and Kpaz for the Fed references in We’re all ET now.)

  16. Avatar for rguinn rguinn says:

    FWIW, there’s a lot of truth in how you’re characterizing this, I think.

  17. Avatar for rguinn rguinn says:

    I won’t speak for Ben, but I’m not so sure the argument is one of whether growth is desirable. I think that Tyler Cowen, for example, makes a case for many of the ideas we espouse, but in a growth-oriented framework that emphasizes an ethical system that explicitly values future humanity. His latest on this topic is below. I think it’s extraordinary.

    I think that the argument is really about whether that economic reality will be overwhelmed by political realities. The gyre doesn’t widen because it ought to, or because it is good that it should do so, but because that’s what widening gyres do.

  18. Mark,
    For me, zeitgeist is an ephemeral, lighting-in-a-bottle, expression of the state of human perception and cognition at a point or era in historical time. Dunno how Ben and Rusty plan to capture that via textual commentary on investments. Its creative expression is usually the province of artists.

    Maybe Ben is foreshadowing thru his references to
    (1) an illustrated book [The Shock of the New: The Hundred-Year History of Modern Art - Its Rise, Its Dazzling Achievement, Its Fall] and
    (2) a film [Powers of Ten].

    ET has already given us the Black Hole and Widening Gyre imagery. Maybe they’ve got some further visual depictions of 2019 zeitgeist up their sleeves.

    As to public and private debt, interest rates, and inflation prospects, I share your memories of the bad old days during the Carter/early Reagan presidencies when a trip to the grocery store was a voyage of price discovery. Can’t pretend to know what lies in our economic future.

  19. Avatar for jz1 jz1 says:

    Mike, reaching reality defined as “what’s really going on” feels like Truth (with capital T) seeking to me. I agree that a person should keep a clear Truth/principle as what’s to believe in, his own identity, stick to it, pick no sides and do what that person believe to be True/Right. This wins respect within the pack. But for mass crowd behavior, imagine the following. If you see 20 people outside of a bank lining up, suddenly becomes 40, then 80, while you are trying to find the “Truth” as whether the bank is actually insolvent or people freak out for wrong reason, Ben will take short position already on that bank stock. Even in reality the bank is sound, the crowd can make it bankrupt overnight. That’s the power of crowd. “Clear eye, full heart” to me is NOT about seeking truth. I think Ben specifically said “there is NO answer, just a process”. My eyes are NOT looking at truth, my eyes are looking at where crowd is going and be one step ahead of it. The narrative machine does NOT care about truth, it cares about where the crowd is going. I think this is what epsilon theory means.
    This does NOT mean I do NOT have a belief system or a code of conduct or judgement of what’s right or what’s wrong and I will take the sides that pays or convinient. This is just how you deal with crowd when you are forced by the FED to gamble your kid’s tuition money in the market.

  20. Avatar for jz1 jz1 says:

    Mark, my thought on the debt and inflation is this. Inflation using unsound money is the dishonest way of solving debt issue. Default under sound money is the honest way to solve debt. We all know what “they” will do. Suppose we will face the inflation situation, NOT asset, but actual goods and services, the question is whether it will be under the terms of the FED AKA Central Bank Omnipotence Inflation or the Weimar style with the narrative of Central banks have lost control. Either way, dent will be solved. I guess this is where you want to debate that high inflation means high rate and high rate kills the economy. I am thinking more simplistic. I can NOT show you math how rate will break the economy and existing debt and who wins or who loses. But if you tell me to solve debt in sure fire way, I will think either default or inflation will solve the debt. I am sure majority of the people will be the loser but the debt will be solved.
    You have to rethink about bond and commodity completely if the zeitgeist changes to inflation, and it is a situation holding 30 year treasury will kill you which is absolutely the opposite of the previous 30 year bond bull market.

  21. JZ, maybe…but narrative only gets you so far…I repeat from above.
    “All of this storytelling creates a huge amount of distracting noise for traders and investors. Narratives are seductive because they impose a sense of rationality on unexplained events; this allows us to be more easily fooled by what is probably random and meaningless activity. No one wants to admit that chance plays such a large role in events; acknowledging this truth would undermine our delusional self-image of being skilled, informed and in control” –Barry Rittholtz

    Its a methodology/process (tool), not an absolute and sometimes its a complete miss…similar to the inflation expectations…yes that might be a narrative amongst the talking heads but it is not in the real economy moving markets, can a narrative lead to a mob reality sure (true or not/doesnt matter)…but the apocalypse is not here nor anywhere close. Technology platforms like Quid and the human analysis is not a perfect process, we have been using network analysis and like programs for years in Find/Fix/Finish terrorist and trust me its not perfect…digital exhaust gets you close and sometimes its a dry well!

    I do know this those changes (zeitheist) be it narrative or any other…happen much quicker faster now than ever in history (global-connective-tissue)…absolutely! But the outcome is still just change with no real prediction capability…do you get better probabilities…havnt seen it yet.

  22. What it has been used for and will continue to be used as…is a tool to move mass sentiment (zeitgeist) for any entity/individual who understands the tech/Pych to nudge peeps/communities/nations and kick-start a “movement” (good or bad by anyone)…TBD

    If you don’t know who Cambridge Analytics is. google it and see the narrative under them, same stuff, same methodology, same capability…

  23. Enjoyable big picture (map) article that summarizes a framework in which to better make sense of what is going on. In the spirit of contribution to the pack, I highly recommend the viewpoint of Peter Zeihan when it comes to looking at geopolitics. He’s very compatible with ET. He’s an original thinker that speaks credible truth to established viewpoints. I saw him at the international CFA conference a few years ago and he has been mostly right in his forecasts. His framework for analysis sets him apart from other National Security analysts. His recent article ( ) lines up almost directly with what Ben is pointing to in this article. I have a lifelong interest in geopolitics and as a retired Navy Captain (Reserves), Annapolis graduate and Naval War College attendee, it’s kind of built-in to my DNA. Peter Zeihan is irreverent, an outstanding writer and worth the time to take in. That said, ET is my go to source for all things macro. Keep up the great work.

  24. Bravo Zulu, Captain!

  25. Avatar for jz1 jz1 says:

    MIke, I agree that there is nothing “certain”
    about any methodology in crowd game playing. The thing we are looking for is an “edge” statistically. Therefore the question to ask is that do you have an edge by focusing on the truth or do you have an edge by focusing on narratives. The goal is to win the wealth transfer game. Truthful or NOT is a don’t care. Ben and Rusty’s take is that Alpha used to be he edge generating factor. Alpha is some deep understanding and private knowledge of some securities or event. As information flows and regulation builds up, Alpha is becoming rarer and rarer which forces one to seek edge some where else and those two believes epsilon (error factor) AKA crowd psychology is the edge. Again, just an edge, NO guarantee but if you play many rounds with this edge, you have positive winning perspective.

    I read your comments several times and I think you come from an angle from enemy combat perspective. There, I agree the useful intel usually lie beneath tons of noises and the method to filter out noise and extract that intel is crutial to win that combat. There, stories or narratives can be distracting. In that game of life and death, you want the Truth, as accurate as possible and move 1 step ahead of your enemy who may well be spreading rumors and stories to hide their Truth motive and plan.

    Coming back to financial market, and let’s limit ourselves in wealth transfer aspect. There is wealth creation aspect of financial market but that’s NOT today’s market. Today’s market is largely wealth transfer. The crowd, voting prices on securities is NOT noise, they are your “enemy” and you want to move 1 step ahead of this enemy and collect their chips. They are NOT something to filter out so that you can identify the Truth and move 1 step ahead of the Truth.

    I am from chip design back ground and we do everything to we could to increase signal to noise ratio. If the chip does NOT behave like we intended, we analyze the symptoms and reason out where the design or modelling of silicon went wrong. We are truth driven professionals and our 401Ks got cut into 201Ks in 2009 and then house prices double or tripled and our saving yield 0%. We were totally fucked.

  26. Avatar for jz1 jz1 says:

    Mike, you know, the more I think about this, the more I feel you are really believe in seeking alpha, the Truth, the private knowledge that hide beneath all the fluff and noise that will give you an edge. There is nothing wrong with that. But I agree with Ben that with information flow nowadays, there is nothing you know that nobody else knows. If you have insider information and you trade, you will get arrested. It is harder and harder to get that informational advantage. I am NOT sure how well epsilon will work but we should NOT confuse alpha with epsilon. This is clarified in their epsilon theory manifesto.

  27. Avatar for fvc fvc says:

    Thanks Ben and Rusty - your map is a great resource to find articles. It might be worth having a “Start here” section with 5 key introductory reads so newcomers can pick up the lingo. Otherwise the number of nodes might be overwhelming.

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