Liberty

Don't you know envy is one of the deadly sins? No need to be so jealous of him, not everybody can be a self-made billionaire.

I've really been testing what's in this book in the past week. We've been sleep training our kid, and I'm the one who's been waking up between about 10 PM and 6 AM... Really hard to get into more complex reading and consolidate complex memories, which is why I've been watching videos of DeepMind AIs playing Starcraft II against pro-gamers* and reading lighter stuff today. Sleep is probably the most underrated way to boost someone's investment performance (as well as general life performance). *https://youtu.be/cUTMhmVh1qs

No. It would just mean he made different trade-offs. Let's imagine a scenario: To me, someone who puts 90% of their wealth in T-Bills and does 20% CAGR for 20 years with the remaining 10% is still a great investor. They haven't created as much wealth as they could (which is one of the impressive things about Buffett, he's a top-tier wealth-maximizer, unlike Munger, f.ex., who spent a lot more of it along the way), but they still know damn well how to create value with stock-picking. A lot of money managers get measured on other people's money they manage, but we don't always know what percentage of their own net worth is invested. Jeff Bezos has made early investments in Google and other successful companies and would probably be a billionaire even without Amazon. But do you say that he only invested a smaller percentage of his money in non-controlled-by-him VC-type investments, so he's a bad VC investor? There's always luck involved with investing. Always. But over long periods, skill matters. It's like poker. Anyone can win a few rounds, but over long periods, the real pros come out on top. And when you are a concentrated active investor (as opposed to a passive, highly diversified one) over multiple-decades, skill matters most. You can look at cohorts born the same year as Buffett and the same year as this guy, and almost nobody ends up with similar outcomes. Lots of people go into investing, but there's very few with records like Buffett's. Lots of entrepreneurs make millions and decide to invest in the stock market, but very few end up with 800m single-stock-positions in their fidelity accounts and with 2.3bn in net worth. Of course, after the fact, people always try to explain these things are just being luck and survivorship bias. That's how the EMT people tried to explain away Buffett's success, to which Buffett responded with the Graham & Doddsville essay. I think the same kind of applies to this guy; he has non-random characteristics that make it less likely that he was just lucky as an investor (long-term orientation, doing fundamental and primary research, focusing on management and owner-operators/founders, concentration into industries he understands, focusing on industries with generally good economics and secular tailwinds (software, aerospace), etc). I don't know how good an investor he is, but under most realistic scenarios I can imagine, considering his starting point, portfolio composition, and current outcome, it seems highly likely that he's a quite good investor. Someone could've come out with some math and assumptions that could've convinced me otherwise, but so far the arguments I've seen haven't been convincing to me.

As far as I know, yes. Matthew Walker runs what seems to be one of the leading sleep labs:

We don't know #1. We don't know how much he put in stocks and how much he put in other things and what his allocation has been over time, whether as his equities went up he kept reducing his exposure, whether he changed his mind at various point and sometimes was 50/50, then 75-25, then 25-75, etc. We don't even know how much he really had at various points of his life except at the beginning and today. But #2 and #3 are impressive. In hindsight it seems like it was obvious, but the reason why P/E were so low back then is because everybody hated stocks after a decade of high inflation and high interest rates and crappy economy and various shocks, and assumed it would continue forward, and there certainly wasn't the info that we have today about stocks and investing back then, especially for someone who wasn't even working in the financial industry and approached investing as an amateur.

I've said elsewhere that I don't care what the journalist calls him. I'm interested by the guy, not by how he's framed by someone else. I don't believe he's the best investor ever or whatever. But to go and say that he's an underperforming investor and that he did nothing special based on shaky guesses feels wrong. I disagree that you can automatically assume that he's fully invested and never withdraws amounts just because he has a preference for long-term holdings or because the journalist framed it that way. Buffett is also a "buy and hold forever" kind of guy and he sold IBM and many other things. It's not because something is your preferred outcome/style that you do it all the time. You also have no idea how he uses leverage. Is it just tactically once in a while for short bursts, is it over long periods, it is for special situation bets with more binary outcomes. Does he have 50% or 30% of his net worth in equities and the rest in real estate and bonds or cash? Did he give millions to charity 30-40 years ago? Did he invest a bunch back in a startup venture that didn't work? You don't know, and that makes a huge difference in the outcome. Net worth is a flawed proxy for investment performance. But the chances that he's been 100% equities and never withdrew significant amounts feel a lot less likely than the alternatives, which are a lot more common with wealthy people. Buffett is an exception because he's been fully invested all that time and so frugal with expenses and withdrawals, but that's a very very rare situation. What we know is the starting point, end point, and and that he almost half his net worth in a single position that he held for over 160x and probably a decent chunk of the rest in other hundred-baggers that he held for decades (when most investors here probably sell most of something when it doubles once), and that his company has stayed pretty small. Those are the facts, and they're pretty extraordinary in themselves.

There are too many unknown factors to tell the exact thing you're pretending to know, and by giving him one or two conservative assumptions, you can pretend that you're lowballing things while in fact if some of the other unknown factors are different from your assumptions, the delta could dwarf the assumptions in his favor. You're basically saying: "Here, I'll give you 5 in your favor here, so that makes it a conservative assumption, and you're still not beating the SP500" while in fact there are these other 2-3 factors that could make a difference of 50 the other way (but can't make a difference against him because you've pegged them as far as they can go in that direction), but you won't even acknowledge them. It's either bad logic, or dishonest. Instead of trying to come up with conclusions based on unknown facts, I'd rather come to my conclusions based on known facts, and those facts are very impressive (his starting point and end point, the ratios of where his wealth is and likely came from, how he did things that almost no investor is capable of doing in practice, etc). Show me other self made billionaires that didn't have a fast-growing company that got huge and built most of their wealth by investing only their own money (not AUM gathering with fees) with long-term concentrated portfolios (his Heico position alone is almost half his net worth). I'll wait.

Did you read the part where bullshit is called on that napkin math? Making assumptions like "guessed net worth from arbitrary point is good proxy for equity returns and let's assume there were no large withdrawals or exposure changes over time" don't sound very realistic to me. Not everybody is Buffett, living in the same house he bought in the 50s, driving hail-damaged cars, not giving money to family, and keeping equity exposure at 99.99% of net worth his whole life... Yes, I think most of us did read the "napkin math". You had a link to the article, after all! ;) Great investor (best we've never heard of!)..with no evidence. The evidence we do have leads us to reasonable doubt. The dude's a self-made billionaire with a small company and multiple hundred-baggers worth over a billion in his fidelity account, but yeah, there's no evidence because you've decided to assume 100% of his net worth has always been invested in equities, he's never withdrawn big amounts (especially early on, which would have a HUGE impact on your math), and that your guessed starting point (midway through his life, why not start earlier?) is correct. I'd rather say that what we do know is very impressive, and that we don't know his exact investing performance, but that the chances that all your assumptions are correct is pretty low, so he's likely outperformed the market with the money he's invested, and that holding on to multiple hundred-baggers is impressive in itself.

This was excellent Liberty. Thanks so much for posting. I would also highly recommend these notes (~10 minute read) Liberty, 1. Have you confirmed the sleep notes at all? I'm not sure what you mean. Do you mean if I know the notes to be accurate? I've listened to the podcast but haven't read the notes, so I can't say. But if you meant something else, please let me know. I don't subscribe, I'm not sure where I found the site... Maybe just Googling for the podcast to post it here. Seems like a good resource.

I also like: "Don't just do something, stand there!"

Did you read the part where bullshit is called on that napkin math? Making assumptions like "guessed net worth from arbitrary point is good proxy for equity returns and let's assume there were no large withdrawals or exposure changes over time" don't sound very realistic to me. Not everybody is Buffett, living in the same house he bought in the 50s, driving hail-damaged cars, not giving money to family, and keeping equity exposure at 99.99% of net worth his whole life...

That's totally not something that is happening in this topic. :P Never seen this essay. Its really nice. I have had a few instances which were big oops type ones where I completely changed what I was doing. One question I have though is what you do if: 1) You are sure what you are doing is failing 2) You have no idea of a better alternative. Here I'm not talking about investing because the obvious alternative is to index invest. I more thinking about big problems like a failing career or a lack of passion in life. I am thinking of rut like patterns in life that people don't know how to break. I can think of a few answers: 1) Try anything new and different...experiment with a lot with different things 2) Meet different people 3) Look for the person who is succeeding while you are failing. Especially if that person fall into the psychological category of someone you dismiss because they had some unfair reason for succeeding or because you don't believe in what they are doing. 4) Take LSD or some psychedelic. I don't really think I have a good answer since I am having problems like this and I don't really have a good solution. 1 in combination with 2 is a huge problem. I'm reminded of the saying "When you find yourself in a hole ... stop digging". The first thing to do is stop doing whatever it is that is failing. Even if it means doing nothing at all until you figure out how you want to try to proceed. The bias towards action certainly is the cause of a lot of life's problems. It's the old: "All of humanity’s problems stem from man’s inability to sit quietly in a room alone." -Blaise Pascal I think the first thing to do is to look inside before you look outside. Everything you do, think, feel, contribute to others, ultimately goes through or comes out of your mind. Often if you end up somewhere, it's not just because life took you there, but because you took decisions - consciously or unthinkingly - that steered you that way. Sometimes when it's a bad place, it's because you had a misunderstanding about what you actually want/need, or just followed paths established by others. I'd suggest some real introspection and exploration to figure that out (I know it's a vague recommendation, but it's something that everybody has to do for themselves, there's not a specific prescription)... I remember that years ago I found the book Stumbling on Happiness by Dan Gilbert helpful to create a framework for life choices.

https://a16z.com/2019/02/22/humanity-ai-better-together/

I enjoyed this one, covers a lot of things (startups, tech industry, nuclear power, AI, social issues, housing, etc): https://medium.com/conversations-with-tyler/tyler-cowen-sam-altman-ai-tech-business-58f530417522

It's a challenge, but it's not like there aren't challenges with any reactor design. Since thorium has had a fraction of a fraction of the attention of other fuels, it's not surprising that some questions remain open while other questions with U or P have been solved over time as they were implemented... I doubt it's a show-stopper: "Using high Nickel and Molybdenum content, experimenting with Manganese and other additive content, and reducing Iron and Chromium content has proven to be relatively effective for reducing corrosion. For MSRs to become a viable option, a more effective alloy or material should be used to lengthen the life of the containment structure and to maintain relatively pure salts." http://large.stanford.edu/courses/2017/ph241/sunde1/

Nuclear is way safer than other forms of power, even despite all these decades old plants and some plants that were built near seismically active zones (not the best idea). Probably safer than wind and solar, if you count accidents building and maintaining these things. It's similar to how people fear air travel more than car travel even if one is much safer than the other, it's a cognitive bias. Chemical spills and exploding natural gas plants and mercury poisoning from coal fly ash and such have killed and contaminated way more people, but it doesn't get people's imagination going quite the same way... I remember this book being a good introduction to some of the science and technology behind it: https://www.amazon.com/Power-Save-World-Nuclear-Energy-ebook/dp/B001FA0J0U Yeah, that's why I said we need to do R&D into thorium. I'm thinking long term. It was always among the very best approaches, but it was put aside because you couldn't make nuclear bombs with these reactors, and back when the nuclear industry grew up, the government really wanted more bombs. But this isn't like fusion, we know how to make thorium reactors and have built working ones in the past, we just need to build big ones. These things are so safe, it's basically that you have to keep them in a precise equilibrium to get the reaction, and if anything at all changes (any kind of failure, a rise in temperature, a lack of power, etc), the molten salt just drains into a big underground container and the reaction stops by itself. Orders of magnitude less waste too, and breeders can generate their own fuel from thorium, so no enrichment process. "Comparing the amount of thorium needed with coal, Nobel laureate Carlo Rubbia of CERN, (European Organization for Nuclear Research), estimates that one ton of thorium can produce as much energy as 200 tons of uranium, or 3,500,000 tons of coal"

New Russo podcast: https://capitalallocatorspodcast.com/2019/03/03/russo2a/

I think it's mostly that people fear what they don't understand, and nuclear is inherently harder to understand for the average person, and this makes these people easy to scare and manipulate by both the pro-fossil fuel lobby and the more romantic/religious aisle of the environmental movement. The association with nuclear weapons is also a big issue. That's another benefit of thorium reactors; you can't make bombs with them. For those who are curious, this site is a good resource: https://energyfromthorium.com

Solar and wind are great and they keep falling in cost, as does storage (V2G tech in the future as well as smart grids with demand-response features will help a lot). But nuclear is also needed, I'm a big fan of it. I wish we'd put some serious R&D and money into LFTR tech (liquid fluoride thorium reactors) and breeder reactors. People need to be educated on the safety of modern designs, especially the passive safety measures of something like a LFTR (you would have to try really hard to make anything bad happen to it).

Bill Gates having a chat with MKBHD: Bill Gates talking about energy at Stanford:

Undoing Project was fun, nice to know more of the backstory on these people who I've been reading about for years, many good anecdotes. Doesn't replace reading the papers, or at least Thinking Fast and Slow, though.

I enjoyed it. The grand-father of silicon valley VCs.

Thanks. Unfortunately, they only have 1991 for TCI.

TCI 1991 annual report: https://drive.google.com/file/d/1xc-EI_a19yeXdESnIcOnk9goIax4XIzL/view h/t

Podcast interview with the author on Kevin Rose's show: https://www.kevinrose.com/single-post/matthew-walker (great interview, I recommend you forward it to friends and family that you know won't read the book. The health implications of sleep that science has been uncovering lately as well as the tips to improve should definitely be more widely known) A new one that came out today: https://www.foundmyfitness.com/episodes/matthew-walker