Making Contact with Reality
Making contact with reality is one of the greatest accelerants of understanding. This applies to anything - putting a product or idea out in the wild, telling someone what you’re scared to say, trying something instead of just imagining it.
When you make contact with reality you get feedback. Customers telling you what works and what doesn’t, people debating or poking holes in your theses, an individual’s response to your interiority, what things feel like actually embodied.
Feedback surfaces information you otherwise wouldn’t know faster than any other mechanism. This new information allows for progress.
Markets are an incredible means of getting this feedback. You can literally quantify things like usefuleness or interestingness with measures like price or “shares”. And markets feed on imprecision. Given a deviation from “truth” people will immediately arbitrage them back to reality.
If you watch markets you’ll see this reversion to Truth. Even in esoteric domains with instruments barely publicized, inefficiencies will be spotted and corrected. This is most obvious in financial markets, but turns out this also works for things like predicting the future (prediction markets) because truth surfaces when there is something of high enough consequence at stake, in this case money. Hayek talks about this where markets are a means of capturing information (Truth) from knowledge dispersed across populations.
Prices thus act as a decentralized information system, allowing millions of individuals to coordinate their decisions efficiently based on constantly changing circumstances.
Seeing these mechanisms firsthand feels visceral, raw. Almost like looking at the ocean, feeling its vastness and power. Awe. I like Hayek’s description:
I have deliberately used the word “marvel” to shock the reader out of the complacency with which we often take the working of this mechanism for granted. I am convinced that if it were the result of deliberate human design, and if the people guided by the price changes understood that their decisions have significance far beyond their immediate aim, this mechanism would have been acclaimed as one of the greatest triumphs of the human mind.
There are ways to apply the Truth Seeking capabilities of markets to everything. Vitalik Buterin calls this “info finance”. And like we have financial markets and prediction markets, we too could have decision markets. Robin Hanson’s Futarchy introduces decision markets as a means for making decisions in government. The movement’s slogan is that we ought to “Vote Values, but Bet Beliefs.” Hanson describes it elegantly:
In futarchy, democracy would continue to say what we want, but betting markets would now say how to get it. That is, elected representatives would formally define and manage an after-the-fact measurement of national welfare, while market speculators would say which policies they expect to raise national welfare. The basic rule of government would be: When a betting market clearly estimates that a proposed policy would increase expected national welfare, that proposal becomes law.
Futarchy could mean markets surface the best way to implement policy from the expertise of the population weighted by conviction (their monetary contribution). It’s a lower-stakes way to make contact with reality without yet implementing often expensive policy. I won’t get into it too much here, but there’s fun discourse on Futarchy’s mechanism (Mencius Moldbug’s rebuttal and his debate with Robin Hanson).
Another way to think about making contact with reality is that you’re taking things from idea-space to execution-space. You can sometimes make contact with reality in idea-space, iterating in your mind, if you have strong enough “models” of execution space. This often requires rigorous first principles thinking and expertise in a specific area. Being your own user is a life-hack for this.
Ideally you stay in idea-space long enough to build some conviction and then get into execution space, trying to close the loop as fast as possible on both. LLMs do this too. They spend some time in idea-space (reasoning) and then switch to execution space. Their feedback loops are incredibly tight (seconds or minutes) and only getting tighter. Tight feedback loops make sense, because the more you make contact with reality, the faster you can make progress.