
Venkatesh Rao ☀️
@vgr
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Ok this idea is growing on me and is upgraded from minor to major. The options vs crypto example is peripheral. This is a way to view something much more fundamental — the explore-exploit tradeoff. For a fully certain value commodity, in a perfect competition market with instantaneous price discovery, the frontier collapses to a point at (1,1). A perfectly unbelievable fantasy collapses to (0, 0). The 45 degree ray is the fantasy-to-reality turnpike. As you learn more and the thing becomes more real, the frontier initially expands then contracts, with end points on the unit square perimeter. The (1,0) - (0,1) line is the explore-exploit transition frontier. When the frontier crosses that, you’re in fully convergent exploit mode. At that point you can start thinking about “IPO” or “exiting” the idea in some way, since either correlatedness and liquidity can be maxed out. The whole finance metaphor can be ditched. I’m calling it modal information theory — ie how possible worlds become real. 1 reply
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