#3. Observing the present: An introduction to Ben Hunt
When I was a 22-year-old AmeriCorps volunteer, I decided fundamentals didn’t matter in investing. With my exactly 6 months’ of investing experience, I couldn’t articulate why. I also couldn’t make the time of day for anybody who told me otherwise. But it would be 10 years before I’d come across Ben Hunt on a grey London afternoon and fully believe it myself.
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Another day of mediocre weather and me flicking through my phone. Another day of stocks morphing into stonks that paradoxically soared amidst rolling lockdowns. I stopped on this:
A man with decades of experience in finance tossed out a simple meme, and the calcified knowledge nugget that hardened inside me 10 years prior ignited into fiery magma. All he did was tell me what I already knew. That’s Ben’s superpower.
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The name Epsilon Theory stems from the formula for modern portfolio management, where y = α + β+ ε . The return of a security (y) is equal to its idiosyncratic factors (alpha) plus its co-movement with relevant market indices (beta) plus everything else (epsilon).
Everything else. That’s what Ben wants to explore. In his exploration, Ben aims a flamethrower at our collective calcified knowledge nuggets and ignites them en masse. Truths we know but we don’t call out because we’re unable or unwilling. The whispers of a thought that have always been just out of our field of vision. We knew they were there but could never capture them. Ben brings our whispers into focus and gives them a megaphone.
Below are the quotes, essays, and themes that have rung most true to me.
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“Make, protect, teach”
“You may think your individual act of DOING is a small thing. I tell you it is the only thing.”
— Ben Hunt
I first came across MPT in Ben’s piece Inception. In it, Ben begins by promising to not give you “The Answer” to any problems you or society are facing. “The Answer” assumes Ben knows something you don’t. But there is no singular vaccine for what ails society. There is no one thing to attach ourselves to. Nobody is coming to save us. It's not that easy. In Inception, Ben highlights individuality:
“Don’t mistake the merest part of your political participation – your vote – for the sum total of your political participation. To be a citizen is so much more than voting once every few years! To be a citizen is to DO.
So go do.
All the rest is commentary.”
Yes, voting is an amazing right that most in the western world are lucky enough to be able to exercise. And a vote is powerful and coveted. But to be a societal citizen is not to only vote. It is to participate in society. To make things that are of value to one another, to protect one another, and to teach each other. This is the core tenet of Epsilon Theory. And, in a departure from the name, is not only a theory but an action that Ben encourages his community to engage in. Members of Epsilon Theory actively share stories of how they’ve enacted MPT in their communities.
“The Narrative Machine”
“I am incredibly bad at predicting the future; I am only smart enough to observe the present.”
— Rem Koolhaas
In We’re Doing It Wrong, Ben introduces the Narrative Machine. In it, he likens current narratives (and markets) to a bonfire. Not because they destroy, but because of the way they take shape.
Most predictions use observations from the past to find a hidden pattern to apply to the future. But, Ben argues, a more appropriate way to anticipate the future is not to look at the past, but to observe the present.
A powerful computer will never predict the shape and size of a bonfire . But it can calculate how a fire will burn. Observe T0 and calculate what T1 will look like. When T1 is present, observe T1 and calculate what T2 will look like, and so on. Iteratively. The power of this prediction is not in identifying the fire’s “pattern” but in simultaneously observing everything in the present. Observe a huge matrix of variables and dependencies in their present state. Use the present state to dictate the next. Observe how the carbon, oxygen, and heat in each piece of wood interact. Use that observation to calculate how and where each twig will combust. Keen observation of the present is the only way to calculate a bonfire and the only way to calculate narrative. Markets and narratives aren’t closed-end systems with a hidden pattern. They are open and developing systems. Each branch feeds and burns in a different way.
“The Long Now”
“When did the future switch from being a promise to being a threat?”
— Chuck Palahniuk, “Invisible Monsters” (1999)
Epsilon Theory has published an in-depth 4-part series on The Long Now. “The Long Now” is the act of pulling our future selves into the present. It instills a sense of duty into us because of what will happen if we don’t act in a certain way. It's the politicization of our future selves. It's the transformation of our wants and fears into current needs. If you don’t give me your gummy bears, they will come alive and eat your family’s vegetable garden. You don’t want that do you? Of course not, vote for me and I will take care of it for you.
Why “the long now”? Because pulling our future and infinite selves into the present elongates our now. Because it is the antithesis of what “now” actually is: short. Much like the bonfire above, nobody and nothing can predict the future. Yes we should invest in our future, yes we should recognize its inherent risk. But recognizing risk shouldn’t stop us from living in the now. Appreciating each moment before it flickers away. As Ben says, “tick tock.”
“Bitcoin is art”
When people write about cryptocurrencies, my eyes glaze over at all the hot takes. We're all so lucky to have a plethora of blockchain experts in our LinkedIn and Twitter feeds... When Ben writes about cryptocurrencies, however, I pour a cup of coffee and dive in. In Ben’s In Praise of Bitcoin, he describes a Zoom call in which academics, think tanks, and Fed economists (including Paul Krugman) were trying to answer "what is the value of bitcoin?" Or put another way, why was Bitcoin trading at $50,000 at the time?
Ben’s take is simple. Bitcoin's value isn’t in easing safe financial transfers. It isn't in helping Taylor Swift prevent ticket scalping. Bitcoin is good art.
Bitcoin maximalists will tout the currency’s future as the global reserve. Bitcoin can remove the federal institutions that control our money. Bitcoin can resist authoritarianism. Bitcoin can take back ownership. And it’s because of these perspectives that Ben views bitcoin as art.
Bitcoin's price is a reflection of its owners’ view of our current superstructures. Its price is not important because of what it will buy you. Its price is important because owning bitcoin is itself an expression of independence in a world of conformity:
“…owning Bitcoin has been an authentic expression of identity, an extremely positive identity of autonomy, entrepreneurialism, and resistance…”
The price of bitcoin is a measure of global confidence in governments to responsibly manage currency value. It is a barometer of global trust in central institutions. Higher price, less trust. Yes a bitcoin will buy you things and yes a bitcoin has functional uses. But bitcoin is art.
“BITFD”
Ben has a healthy amount of distrust in institutions that convert humans into cogs. BITFD stands for Burn It The F* Down. For Ben, the “it” refers to “any persistent institutionalized corruption which takes from the people and gives to existing concentrations of political, social or financial power.” BITFD is Ben's call to build a society devoid of entrenched, corrupt interests.
Because Epsilon Theory’s broader message is of independence and care, this tenet gives me pause. Ben, actually, agrees. In The Projection Racket Pt. 1, Ben speaks to this:
“Why am I bringing all of this up? Because I know that it makes some of you uncomfortable when you read “Burn it the $*!# down“ or “BITFD” on these pages or on social media.
And I hear you.
It makes me uncomfortable, too...”
What Ben has identified is what nearly every American feels. Political ideation doesn't matter. The only impact political preference has is what the feeling is aimed toward. Not only are we angry, but we’re also scared of what might happen if we do BITFD. The core of Ben’s message here isn’t on the destruction. It's on empowering individual capability to rebuild and to answer the question, “then what do we want to build?”
“Clear eyes, full hearts, can’t lose”
Above all, this is the point that Ben repeats again and again.
Clear eyes = clearly seeing the present and ourselves as individuals. Understanding our decisions, why we make them, and how we make them.
Full hearts = making decisions unselfishly and with compassion and empathy.
If we’re aware of the present and our own capacities, if we make decisions with positive implications in mind, everything will turn out. Everything we do, we must do it for the right reasons.
“The only team I want us to be talking about is all 7 billion of us human beings.”
― Penn Jillette
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None of Ben’s theses are totally surprising. What’s surprising is seeing them written so plainly. They are core truths we’ve felt but never articulated. Epsilon Theory and its membership community has thrived in the spirit of this articulation. In not naming what we know, our narrative-driven reality becomes dictated to us rather than by us. And now, the world we don't want to exist perpetuates because we don't speak. Ben Hunt speaks.
“I believe that a decentralized and service-oriented social movement at scale can thrive in the age of social media technology. I believe that a decentralized and service-oriented social movement can both inoculate our hearts from the top-down Nudges that push us into [non-thinking brutes], as well as fill us with a positive energy that reverses the pervasive alienation that creates the [socially isolated and polarized individuals] of the world.”
--Ben Hunt
