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The first kind of bubble is where everyone believes the future will be like the present. Think credit bubbles and real estate; think 2007-2008, where the fundamental belief that drove the bubble forward and into ruin was “We’ve figured this out. We can’t lose. The risk has all been worked out. Lever up, cowboy. We will never die.”
There are two reflexive feedback loops at work here. The first is the positive feedback cycle between that belief, “We have the future figured out”, and rising asset prices - which confirm the invincible mentality and drive it forward. The second loop is that rising asset prices translate to lower cost of capital. In a mindset like this, we get excessively comfortable with investing that low-cost capital into businesses and investments that generate predictable future earnings, or the illusion of predictable. That cheap capital can then meaningfully contribute to those earnings actually materializing, on schedule. Bubbles can genuinely be self-fulfilling prophecies; to a point. Past that point it’s bad.
Never Hertz to Ask
Alex Danco
suffering is not caused by ill fortune, by social injustice, or by divine whims. Rather, suffering is caused by the behaviour patterns of one’s own mind.
Sapiens
Yuval Noah Harari
‘The person who attempts to fight the iron logic of nature thereby fights the principles he must thank for his life as a human being. To fight against nature is to bring about one’s own destruction.’3
Sapiens
Yuval Noah Harari
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