Dwarkesh Patel: commitment

Transcript context

…But again, trying to make sense of Keynes, if you think about long-term investing, and I don’t think he meant Buffett-style investing. I think he meant building factories, trying to figure out what people would want to buy 25 years from that point in time. That probably was much harder than today. You had way less access to data. Your ability to build an international supply chain was much weaker. Geopolitical turmoil at various points in time was much higher. So again, it’s not a crazy view. I think there’s a lot in Keynes that’s very much of his time, that he presents out of a kind of overconfidence as being general. And it’s not general. It may not even be true, but there were some reasons why you could believe it. Another quote from Keynes, I guess I won’t read the whole quote in full, but basically says, over time, as investments, markets get more mature, more and more of equities are held basically by passive investors, people who don’t have a direct hand in the involvement of the enterprise, and the share of the market that’s passive investment now is much bigger. Should we be worried about this? As long as at the margin people can do things, I’m not very worried about it. So there are two different kinds of worries. One is that no one monitors the value of companies. It seems to me those incentives aren’t weaker. There’s more research than ever before. There’s maybe a problem. Not enough companies are publicly held. But you can always, if you know something the rest of the market doesn’t, buy or sell-short and do better. The other worry is those passive investors have economies of scale, and they’ll end up colluding with each other. You’ll have, say, like three to five mutual funds, private equity firms owning a big chunk of the market portfolio. And in essence, directly or indirectly, they’ll tell those firms not to compete. It’s a weird form of collusion. They don’t issue explicit instructions like, say the same few mutual funds own Coke and Pepsi. Should Coke and Pepsi compete, or should they collude? Well, they might just pick lazier managers who in some way give you implicit collusion.…

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