On thinking ahead when markets get murky

Neuroscientist Malcolm MacIver's study of electric fish explains a lot about how all fish think — and all humans, too. 

The electrical currents employed by these distant cousins of ours to understand their surroundings allow MacIver to measure how far into the future fish are able to plan.

Not very, as it turns out.

Electric fish can’t see more than a few centimeters in the murky waters they swim in, so their brains have evolved to think no more than a few milliseconds into the future.

That gives them just enough time for an instinctual response when prey, predator or obstacle gets close enough to matter, but nothing else.

In that kind of environment, deliberation is a luxury, not a survival advantage, so fish have evolved a reflexive kind of brain, optimized for speed and devoid of planning.

Evolution didn’t bother with the more complex cognition that planning requires because the aquatic environment of fish didn’t reward it.

Fish that climbed up on land, however, eventually evolved the ability to see the Moon, the Sun and beyond.

Over millions of years, land-based fish were naturally selected for better eyesight because it’s easier and more useful to see through air than it is through water. 

It wasn’t just their eyesight that improved, though — it was their ability to think, too.

MacIver argues that the expanded vision available on land created a selective advantage for planning and abstract cognition. 

In other words, thinking ahead is useful on land in a way that it’s not in water — so the fish that climbed onto land evolved to think ahead.

“We speculated that moving onto land poured jet fuel on the evolution of the brain,” MacIver explains, “as it may have advantaged the hardest cognitive operation there is: envisioning the future.”

No land-based fish is better at envisioning the future than humans, of course.

But despite being out of the water for hundreds of millions of years now, our brains remain partly aquatic — primitive limbic and brainstem pathways still govern our fastest, reflexive responses to stimuli.

This is mostly to our disadvantage: We startle too easily, react when we should reflect and fail to plan for retirement.

But the ancient aquatic part of our brains also protects us from falling pianos, lunging snakes and hot surfaces — all the perilous situations in which there’s no time to reflect or think ahead. 

So it stands to reason, I think, that the aquatic part of our brains may also be more useful to us when things get murky and we can’t see very far into the future.

Have things ever been murkier than they are right now?

Fish-brained investors

Jeff Bezos is a famously long-term thinker, but he sometimes cautioned against it.

“If you are planning for more than twenty minutes ahead in this kind of environment,” he warned during the dotcom boom, “you are wasting your time.” 

At the time, the internet was evolving so rapidly that he thought it was dangerous to base a business model or an investment on any long-term assumptions.

Now, thanks to the unprecedented advance of AI, things seem even murkier — for businesses executives and investors, especially.

Will stocks and/or companies even be necessary a few years from now? 

Will people even be necessary? 

Technology has allowed us to see ever deeper into the universe, but it's impeding our ability to see into the future.

One thing that does seem certain, however, is that AI will disrupt many businesses over the next few years.

A few obvious victims (like newsletter writing) aside, it’s unfortunately impossible to say which. 

Microsoft, for example, might be a huge winner if everyone is soon using its co-pilot to write code and make powerpoints.

Or it could be a huge loser if AI eliminates white collar employment (and therefore the need to write code and make powerpoints).

I can’t imagine there’s ever been a time when potential investing outcomes have been as binary as that. 

The world’s largest registered investment advisor, Ric Edelman, thinks this is a reason to own fewer equities (being businesses of the past) and more crypto (being a technology of the future).

But his recommendations require a perhaps unrealistically clearsighted view of the future.

He recommends bitcoin, the appeal of which is largely based on its resistance to change — and Ethereum, which evolves in meticulously thought-out five-year plans.

Conspicuous by its absence from his recommendations is Solana, which does the opposite, aiming to iterate quickly, like a fish.

That has been an advantage in the current environment where crypto’s most active users don’t seem to care about anything other than the speed and cost of execution. 

But this too could change. 

Tomorrow’s users may put more value on censorship resistance and decentralization (however defined), in which case, crypto activity might migrate back to the slower-moving Bitcoin and Ethereum ecosystems.  

I’m guessing there’s probably a happy medium between the two approaches.

Jeff Bezos, for example, concentrated Amazon’s resources on things that he could observe now and was certain would persist: Customers would always want lower prices and faster delivery, he reasoned. 

In planning for the future, then, he argued that the most important question to ask is: “What’s not going to change in the next 10 years?”

Seems like good advice just now.

Be it crypto, equities or anything else, fish-brained investors and builders should probably focus on the things directly in front of them — and which of those are unlikely to change.

— Byron Gilliam

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