Time Part 1

The ultimate equalizer and its role in investing

Entropy and time define our world. The narrative of our civilizations is disorder followed by short-lived order measured against the arrow of time. Nevertheless, even chaos is a function of time.

Financial markets, too, could be described by entropy and time. Capital driven by rational irrationality constantly chases better risk-reward, resulting in never-ending transactions. In other words, investing is an infinite game, unlike poker or other games of chance, which are finite because they have a defined time frame.

Every position, regardless of the tool we pick, is time-dependent. Simply put, investing is an infinite game consisting of an endless number of finite games. Nonetheless, by investing in equities, we easily ignore the importance of time. Stocks are implicitly time-dependent, unlike derivatives and bonds, which are explicitly time-dep…