Making sense of the contradictions around us
The pandemic era has thrown up a multitude of contradictory signals in life and financial markets. Are we potentially seeing multiple realities within the same reality?
The post Covid-hit world has been contradictory from an investor’s perspective as the narratives oscillate between extremes - inflation vs deflation, easing vs tapering, centralized vs decentralized finance, equities vs bonds, value vs growth and so on.
To make sense of what maybe going on - let us diverge a bit and glean into physics and fiction for a potential answer.
“In a phenomenon called Quantum superposition, for example, individual units (say, of light) exist in two states at once. They are both waves and particles, only settling on one or the other if you specifically test for it.”
A Quantum Leap in the Classical World by Jennifer Leman, Popular Mechanics
(https://www.popularmechanics.com/science/math/a29339863/quantum-superposition-molecules/)
Quantum entanglement is a physical phenomenon that occurs when a pair or group of particles is generated, interact, or share spatial proximity in a way such that the quantum state of each particle of the pair or group cannot be described independently of the state of the others, including when the particles are separated by a large distance.
Wikipedia on Quantum Entanglement (https://en.wikipedia.org/wiki/Quantum_entanglement)
In The Matrix, the main character Neo is offered the choice between a red pill and a blue pill by rebel leader Morpheus. The red pill represents an uncertain future—it would free him from the enslaving control of the machine-generated dream world and allow him to escape into the real world, but living the "truth of reality" is harsher and more difficult. On the other hand, the blue pill represents a beautiful prison—it would lead him back to ignorance, living in confined comfort without want or fear within the simulated reality of the Matrix.
Wikipedia on the Red Pill and Blue Pill scene from The Matrix (1999) (https://en.wikipedia.org/wiki/Red_pill_and_blue_pill)
Put on the Quantum lens and the apparent contradictions are easier to grasp.
1. Depending on our reality, the situation is either “fine” or “terrible” or something in between (Quantum superposition)
For e.g. Some of us tried out new recipes and posted on Instagram while others struggled to put food on the table (mostly the metaphorical table)
2. The world, while trying to put up barriers, instead got connected by the effect of the virus on societies and economies and the similar responses of central banks and governments. (Quantum entanglement)
For e.g. the Federal Reserve expanding its balance sheet in the US may have caused a 1974 painting by Vasudeo Gaitonde to sell for Rs. 32 cr in India.
3. Multiple states exist simultaneously, each influencing the other and realities are different depending on what we experience and how we perceive them. (The Matrix)
The weaker the state of the economy due to the virus, the greater the urgency for policy intervention and the consequent chances for equity markets to move higher.
SO, WHAT WE ARE SAYING IS
Trying to understand the current events via the traditional linear thought process will make it extremely difficult to comprehend this world.
o Embracing the reality that it is a complex (Quantum) world, where simple explanations may not suffice. There likely are multiple dimensions to everything around us.
o The existence of these “multiple realities” (“Multiverses” as various OTT shows would term it) means that changes in one state affect the reality of another state which in turn causes the reality of the first state to change.
o What is potentially in our control is to identify our purpose, manage our own situation and be a positive contributor to the collective eco-system.
Investing is but another facet of life. As we evolve, either the complexity of our world or our perception of the complexity of our world increases (these two aspects are connected and yet are two distinct states).
Investing in the coming age will need a quantum lens to look through the complexity of interconnected factors and convert into investment action.