Treating life like an index fund, why categorization might be dead and how the wind can be poetic
When I was studying at the university, many professors showed the statistics of index funds overperforming active fund managers by a stat of 80% + lower funds’ fees. The argument favoring passive funds becomes a no-brainer. This change on rationalisation is represented in the capitalization of passive indexes overcoming active funds into a multi-trillion dollar transition.
But the indexing trend has also permeated into other sectors, like tech markets, startups, our culture and our way of living. And while indexing might be the correct default for public investors (I’m not arguing this), it can be dangerous when replicated in other domains.
Physics → From Newton to quantum mechanics.
Politics → European Union, the member state indexing vs betting on ourselves.
Dating → Being with 5 partners per month instead of committing to one.
Career goals → Consulting and banking leading the “I like working in as many industries as possible”.
Parenting → Collecting hobbies and extracurricular activities to make their children broadly appealing.
The most disturbing trend is the amount of people treating life like an index fund. Never take big risks, never build a family, build a holding company other people run, don't make decisions, don't work hard on one thing, preserve optionality, never live just hedge until you die.
You can also call it midwit/cheems mentality. A mental barrier belief that we should not waste our time considering how to overcome natural laws. It’s the reflexive decision for an individual to choose inaction over action.
I’m not saying this is all wrong. After all, bad ideas, are always bad ideas. People at different stages of their lives naturally have different risk appetites. It is not cheems to not do something because it surpasses your risk appetite (provided your risk appetite is well-calibrated).
But in markets (like many more things in life), to make outsized returns, you need to believe in companies (vision, people, etc.) when others don’t. So I call optionality, b****. Abandoning the index mindset may be more valuable than ever.
Yes, you heard this right. Having optionality is good, but like almost everything in life, more of something good doesn't mean it's better. I definitely like having options, but to actually benefit, you have to exercise some of the options. ( I’m actively working to make more concentrated bets in different aspects of my life).
Smart people generally overvalue optionality. Many of my friends still talk about their desire to “maximize optionality.”, because when tossing a coin, options have a “Heads I win, tails I don’t lose” character. That’s why business school is so popular, it gathers somehow ambitious people around the idea of opening up new “options in their professional careers”. But, the whole point about optionality is that important options should be exercised!
This emphasis on creating optionality can backfire in surprising ways. Instead of enabling young people to take on risks and make choices, acquiring options becomes habitual. For a few, those destinations are in fact their dreams come true—but for every one of those, there are ten entrepreneurs, artists, and restaurateurs that get trapped in corporate.
I like to think about the idea that an optionality-obessed individual flirts with a casual lottery ticket buyer more than it looks. Both being a payday away from securing the resources they need to begin their work toward their true ambition. Close cousins.
Doing something meaningful implies giving up some optionality. Buying a house, getting married, having kids, spending money — all reduce optionality, but all worth doing. An endless pursuit of optionality results in deferring everything to a future that may never happen.
Humans have a natural inclination to categorize things, believing that there is a logic to the way the world works. However, as technology advances, questions arise about the role of traditional tagging and categorization methods, and the potential impact of Large Language Models (LLMs), yes AI.
Tagging can be messy, suboptimal, and prone to error. Myself included I’ve used many knowledge management solutions like Notion, Roam or Obsidian, but it’s true that in an era of content and abundant information, the way we classify and tag this information can be crucial when we expect it the least. Even ontologies evolve over time, and different people may use different labels to refer to the same thing. Tags can also be abandoned or poorly maintained, reducing the effectiveness of search.
Although semantic search engines are powerful, they are not always the best UI. While search interfaces help users find what they are looking for, they do not help users discover things they didn't know they were looking for. In this context, organizing and curating content can provide a sense of personalization and satisfaction in the search process, helping to turn mindless consumption into mindful sensemaking.
But quantity is not quality and there is still value in having humans exercise their ability to draw connections amongst seemingly unrelated things. There is a difference between generic tags and more richly meaningful concepts that require human taste and judgment to identify. Imagine linking a wine you drank with a landscape of terracota or a surf session with your partner’s hair. I hope that in these marriage, more creativity and ideas emerge.
A short snippet of ideas I wrote (in Catalan) after watching a “The Wind Rises” movie from Studio Ghibli.
Sempre m’ha fascinat la senzillesa i la producció amb què el director Miyazaki és capaç de transmetre emocions i idees -tot i ser d’animació.
La pel·lícula explica la història de Jiro Horikoshi, un dissenyador japonès d'avions, i està ambientada en el context del turbulent primer terç del segle XX. Un dels moments que més em va cridar l’atenció va ser una conversa d’en Jiro al tren, contemplant el paisatge "Le vent se lève il faut tenter de vivre".
El corol·lari durant tota la pel·lícula, en Jiro s'enfronta a molts obstacles en la seva cerca de dissenyar avions, incloent-hi guerra, malaltia i pèrdues personals. No obstant això, persisteix en la seva passió i en el seu desig de crear alguna cosa bonica i significativa. Troba una manera de viure i perseguir els somnis malgrat els entrebancs.
El vent com a element constructiu, aquell que ens empeny als nostres límits, o com a element desafiant, aquell que pot ser destructiu, de cara i feroç, em va captivar. En Jiro mostra perseverança, recerca de significat i propòsit en tot allò que fa. Evidentment, Miyazaki fa una tasca digna de genis, lligant missatge, imatges i música. Des d’ençà, per mi, el vent porta una banda sonora que sona a vida.
I tu, en quina cançó penses quan fa vent?