The Universal Trade
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The notion of a universal trade comes from entrepreneur and venture capitalist Peter Thiel, as far as I can tell. I haven’t seen too many people talk about this idea — I first encountered it on a Discord chat, and maybe one other time since then. So, I figured: what a great excuse to introduce it to more people!
It’s really simple. Basically, any trade has four core parts to it: a view, a trade expression, a cost of carry and a catalyst. Let’s break these down.
1. The View
A view that you hold but the rest of the world doesn’t. In other words, a secret. This also relates to Thiel’s famous question: “What important truth do very few people agree with you on?”
Let’s say you predict that PEZ dispensers will, for some reason, become super popular in a few years. That would be your view.
2. The Trade Expression
You have to figure out some way to trade this view of yours with the world (most often for money). That’s called your trade expression. Sometimes, there is no trade expression — no way to profit off of knowing something that no one else knows. In cases like that, there is no trade to make.
3. The Cost of Carry
This is the cost you pay (or are paid) before you’ve made your trade. It’s the cost of waiting in the trade, in other words.
If you rent out a warehouse to store all of the PEZ dispensers you bought with the hope to sell at a higher price, your cost of carry would be the warehouse rent.
The cost doesn’t have to be monetary. It can, for example, be social or psychological. If your view is a controversial or heretical opinion, then the cost of carry will have more to do with your reputation.
4. The Catalyst
Lastly, we have the catalyst. It’s the thing that wakes the world up to your insight, and therefore allows you to make the trade.
The world had just experienced an apocalyptic event and the only currency that’s worth anything in this post-apocalyptic wasteland is PEZ dispensers. Catalyst.
And, with any luck, you go from holding a lonely view… to profit!
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