Insecurity Analysis

If you're an oh I never cry kind of person, if nothing seems to touch you or move you that deeply, this is for you.Few things might be more impactful — and more challenging — than giving space to what has been avoided for a long, long time.Because that was me. With the exception of brief outbursts, I didn't allow myself a lot of emotions. It was difficult (and expensive!?) to re-connect with my heart and body. Every week I stepped into a bland office with tired carpets and waited for the dreaded words: “How does that make you feel?”I was not feeling anything.If anything, my body felt empty. There was a void. And tension. Like someone holding a door from bursting open.The head was my safe space. I wanted to think about my life, not feel it. Kudos to my therapist who gently prodded me back to my body when I tried to divert and tell a story.Anger might have been the hardest to access.Hot flashing anger. Boiling anger. Stewing anger. Even today, anger is a tough one. I still push it away. If I get angry, I may feel a short pull, a hint at something happening. Then it gets bottled up and placed in the toxic waste storage somewhere down in my guts. Anger does not feel safe. I had to learn, like a toddler, that experiencing anger was not the same as being an angry person. I had to teach myself not to feel guilty for anger simply arising. I had to grasp that being angry at someone I loved did not threaten to break our bond. Don't get me wrong: I don't want to act from a place of anger. I don't want my life to be filled with anger. No, like all feelings and thoughts, it arises and vanishes. The anger burns off. The better my overall state, the more centered I am, the less interesting it is. (This was where meditation changed my life profoundly.) But the self-denial, I found, leads to a dissociated existence, to a disconnect from my truth.It creates tension and numbness in my body. It leads to behavior that is hard to explain — like suddenly avoiding a person or place. It leads to the willful destruction of the gift of time to experience distraction and release.Then I climb down the ladder and open the anger barrel. Ah. That's what's going on…“Until you make the unconscious conscious, it will direct your life and you will call it fate.” ― Carl JungI have found different ways to access that space. What seems to work best is movement, movement that lets the body express and release without the mind as an intermediary. Workouts, dance, TRE, breathwork all seem effective. And, yes, even writing — which has the advantage of being available for free to anyone at any time (well, provided some privacy).It's dead simple, but not easy.I learned this technique from the books of the late Dr. John Sarno (I shared it here with other notes on journaling). Years ago, Jim O'Shaughnessy mentioned Sarno to me, but I was not listening. Sarno focused on chronic pain, particularly back pain, and that was not a major issue for me.Last year, one of my stepbrothers used Sarno's method to overcome long COVID. The way he described it was very moving, as if he was dropping the weights he had been carrying by communing with his heart. It blew my mind.Strange as it may seem, people with an unconscious psychological need for symptoms tend to develop a disorder that is well known, like back pain, hay fever, or eczema. — The Divided Mind“John Sarno was a rehabilitation-medicine specialist at N.Y.U.,” writes Sam Dolnick at the New York Times. A doctor frustrated with his tools which didn't seem to be effective. His encounter with psychology made him see “his own physical ailments — an irritable stomach, itchy skin, shrieking headaches — as manifestations of his emotional well-being.” Mind and body appeared to him as one system and chronic pain often as a psychosomatic phenomenon — a physical symptom caused by psychological factors (he called it TMS).I don't know whether he is right about pain being a ‘distraction' but I don't doubt the connection between mental and physical health.As with Freud's patients, I found that my patients' physical symptoms were the direct result of strong feelings repressed in the unconscious. — The Mindbody PrescriptionThe medical community thought Sarno, who called himself ‘a heretic', went too far. “Because his colleagues wouldn't listen,” writes Dolnick, “he bypassed the journals and instead wrote best-selling books, conversational in tone, that detailed the link he saw between emotional distress and physical pain; he sold more than a million copies.”I didn't suffer from chronic pain, but I was familiar with the issue of bottled-up emotions. How else could they manifest? What issues was I risking down the road?Sarno focused on rage perhaps because that was his predicament (“I am furious!” he said. “It's there all the time! I'm in a rage!”). What about the other stuff we push away? The sorrow, shame, guilt, envy, fear, all the hurt and judgment and nasty stuff we would rather avoid.What if Sarno didn't go far enough?“It is perfectly acceptable to have a physical problem in our culture, but people tend to shy away from anything that has to do with the emotions.” — Healing Back PainI wanted to know the truth about how I felt — the embodied truth, not the story my mind would come up with. And I wanted to drop the weight. I needed to know how Sarno had helped people.For some patients, knowledge was enough. That's why Sarno's books analyze the condition, the treatment methods, and (Freudian) psychology. Unfortunately, Sarno buried a key idea among his many pages (kudos to his student Nicole Sachs for re-surfacing it): if knowing about the connection between psyche and body is not enough, you can choose to face and release whatever you are holding.The best description I've found is in the chapter ‘treatment' in The Divided Mind. Barely five pages of a “daily study program.” It's that simple.* Make three lists with all the sources of your emotional pain:* One list for your past: “Anger, hurt, emotional pain, and sadness generated in childhood will stay with you all your life because there is no such thing as time in the unconscious.”* One list for your current life circumstances: “List all the pressures in your life, since they all contribute to your inner rage.”* And one list for your personality traits, whatever contributes “to the internal emotional pain and anger.” For example: being a people pleaser, self-critical, a perfectionist, very driven, shy, self-sacrificing etc. — “The child in our unconscious doesn't care about anyone but itself and gets angry at the pressures to be perfect and good.” * Set aside time and “write an essay, the longer the better, about each item on your list. This will force you to focus in depth on the emotional things of importance in your life.” I called it write Until the Heart Catches.* Ideally, do this daily. More realistically, commit to it as an experiment, say for a month, then regularly to check in. This is done by hand. With pen and paper. I know you all want to type it and have AI analyze it. Or speak it into a transcription app and avoid typing altogether. That may be effective in different ways, but in this what matters is not insight but to have an emotional experience that was previously avoided.The point of the pen is movement. We need to move from head to body and stay with discomfort. We need to see the words take shape and be able to stare at them. We need to feel the emotional charge. It's work. If you stay at the level of trivial chatter, your experience will likewise be trivial.Yes, your hand may cramp in the beginning. It gets better.Yes, it may be illegible. That does not matter. We're not writing to share.This is about healing, growing, and a chance to get closer to your essence.What happens on that page is for your eyes only. It may be effective to destroy the pages later on. I haven't tried that yet, but I know it can be useful to ‘release' written statements — say a letter of forgiveness — to the ocean, fire etc.Occasionally, this writing yields creative sparks. Ideas and insights, songs and poetry, maybe waiting for you. There is gold in your shadow. When that happens, you just write the spark up somewhere else. Keep the mindbody writing between yourself and the universe.A few things I've learned doing this many times:* Turn off the phone. Practice discipline. You may feel the urge to go to the kitchen, the bathroom, to text someone, check the apps, to do work, to do anything but experience what has been avoided for so long.* Set a timer. It can take a while to go deep. I often start at the level of story with my gaze outward (“my problem is [person] is [doing]”). Give yourself enough space to go beyond the surface. Keep writing until you find the trail of feeling, then discomfort. Look for I feel [X] and, frankly, I'd rather not…* Stay with the body. The mind will try to distract you. For the purpose of this exercise what happened is irrelevant. The story does not matter. All that matters is whether you can give yourself permission to feel what your unconscious is holding.* Privacy. This is about experiencing emotions that don't feel safe to feel, let alone express around others. Even with my therapists and my IFS coach I censored myself. The more privacy you have for this work, the better.* Mindbody experience. I've broken pens, punched through pages, sobbed, cried, yelled, and cursed. I tend to shift back and forth between writing auf deutsch and in English. Many of my pages are illegible. Sometimes the letters get very large, at other times the writing is tiny. Allow yourself a full body experience. Give your parts the space to express themselves the way they want to.* Try speaking. Try reading the emotionally difficult/juicy stuff out loud. Don't think or dictate but rather let the hand write and then say out loud what appeared.* Let go. We're not trying to make this our reality. The goal is to visit the dragon's cave and return to the village. Say what needs to be said, cry if you feel like crying, and when you're done, close the notebook and leave it behind on the page. * End with soothing. Things might get loud and wild and you might feel raw and upset after. Give yourself time to calm down and comfort yourself. I'm not joking. Don't do this and hop on a work call right after.* Find a couple of self-care rituals as rewards for doing the work — a walk in nature, yoga nidra, a nap, hot bath, soothing music or guided meditation..* Add self-love and forgiveness. We're looking to meet ourselves on the page as honestly as we can. You might bump into shadow that can be difficult to face. That's valuable, but we also need to make sure we don't stay in that mindset. Aside from soothing self-care, end with an affirmation to love and forgive yourself. Perhaps find someone to share that love with. Share a hug.* The weirder this sounds, the more important it is. If everything love and forgiveness gives you the ick, try something like Love Yourself Like Your Life Depends on It by Kamal Ravikant.I've used mindbody writing for life circumstances like money or writing, for relationship and family issues, for hang-ups like my avoidance of intimacy, and for the big leaps I have not allowed myself. I could easily find dozens more for which I haven't explored with it yet.Like my reluctance to ask for help. Gotta be independent! Can't rely on others… oh. Is that so. I wonder what feelings are hiding in that space. Or my teeth clenched at night. I wonder what wants to be expressed there… Still, I've found it very effective already. I feel lighter and less tense. My story has been changing. I find peace and bliss on the other side of broken pens and mad pages.It is simply one way I meet my darkness and stuckness to release it, one page at a time.Maybe it's time to start the work?I hope this helps.— Frederik This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.frederikwrites.com/subscribe

I talk to author, trader, and DJ Jared Dillian about writing, lives, and his new collection of short stories: Night Moves.

This is a free preview of a paid episode. To hear more, visit alchemy.substack.comThe Art of Alchemy is a reader-supported publication. Become a paid subscriber to listen to the audio version of this post.

My conversation with Lyn Alden, author of Broken Money. Twitter: @LynAldenContact Disclaimer: I write and podcast for entertainment purposes only. This is not investment advice.

I recently had the pleasure of speaking with Jonny Miller, writer, podcaster, and breathwork facilitator. Jonny wrote some of my favorite recent pieces, including the amazing operating manual for the nervous system and How to Pay Off Your Emotional Debt. Jonny also puts together terrific small wikis like this one on emotional resilience, the ‘spiritual MBA' and Somalist (‘a global directory of somatic practitioners + trauma-aware bodyworkers'). We talked about breathwork and its benefits and risks (including Wim Hof), ‘state over story' and the ability to change the state of your own nervous system, Jonny's own journey, the $55,000 he spent exploring various modalities and experiences to find the most impactful ideas (including super interesting stuff like darkness meditation), emotional debt, repressed anger, and men's work. In the context of a breathwork journey, incomplete reflexes will rise to the surface and they will be felt. The body will move in a certain way, and then there'll be relaxation. It's almost like layers of an onion that keep on unpeeling. The more we become comfortable with feeling the full spectrum of emotions, the more that these deeper pieces start to arise. We tend to focus on the outer journey, the how of success. How to spot opportunities, how to invest, how to build a business. Mastering the inner journey is equally important: both understanding your why and having the tools and practices to master the stress and setbacks along the way. That's one of the lessons of the maze. Remember: great investors are survivors and experts at cultivating resilience. We have what I think of as this Cartesian hangover, almost going back to Descartes, of this mind-body dualism. I think the rational brain, the intellect, the kind of left-hemispheric way of perceiving the world has been very prioritized and almost worshiped in our culture. Controlling your mind, mastering your mind, mindfulness, all of these things have been really, really emphasized. I think what is starting to happen is the pendulum swinging back to, ‘oh no, there is no actual distinction between the brain and the nervous system.'

I had a chance to interview William Duggan, professor at Columbia Business School and author of Strategic Intuition. He explained how Kendo led him to his big idea, the difference between creative/strategic intuition and expert intuition (with examples including Howard Schultz, Henry Ford, and Elizabeth Holmes), and the roles of memory, passion, and presence of mind. Quotes that stuck with me: There is no now. Everything is history. … There is no other guide to the future. You don't have to have the passion before you have the idea. The idea gives you the passion. Oh great, this is what I'm gonna do. How do you judge an idea when you have it? Is it based on real knowledge and experience? Real pieces of the puzzle. That's how you judge. The moment you step into the battle, you forget everything. Meaning that you let your brain make the correct connections. That's the presence of mind, where your mind is clear. In martial arts, it's very fast, but it's really the same idea. It's to clear your mind and let your brain make its own connections, according to the situation and the circumstances. A lot of people think Henry Ford invented the assembly line. He did not. The assembly line was invented a hundred years before, at the start of the Industrial Revolution. He invented a certain kind of assembly line, meaning he put together the old assembly line with something new. I like to distinguish the natural flash of insight … Steve Jobs was good at it. He'd search and search and search and then something would strike him. I don't know if you know about the origin of Starbucks. Howard Schultz was working for a coffee company, high quality coffee, where you fill up your bag and take the coffee beans home. He goes to Milan for the first time in his life and he sees the coffee bar and he says, oh, okay, well we should clearly convert all our stores into that.

Hello everyone, I had the pleasure of chatting with Jared Dillian, author of The Daily Dirtnap and We're Gonna Get Those Bastards, about his new book Those Bastards. Years ago, I read his book Street Freak and I fondly remembered his wit, candor, depth of introspection, and keen eye for the antics of markets. Those Bastards is a collection of Jared's essays on life, death, meaning, friendship, marriage, luck, ambition, suicide, and much in between (including a few great bits on markets and finance). It's refreshingly honest and fun and led to a lot of reflection. In our conversation we touched on writing and finding your voice, escaping the caterpillar pillar, how markets are ruled by fear, being the guy who knows a guy, mental health and the power of writing, making meaningful memories, the right temperament for markets, why people don't change, and why you should ask people if they are lucky. A few highlights from the conversation: A lot of people think that markets sort of oscillate between fear and greed, right? But it really isn't fear and greed. It's fear and fear. It's all fear, right? Greed is fear of not getting something that you want. So working in the markets is, if you have any background in psychology, it's a very depressing place because the markets are filled with fearful people, like acting based on fear. But the thing is that it's very predictable. People behave in very predictable ways. So that's been my thesis about markets all along. I like to know lots and lots of people. Now, having a newsletter has been the perfect way to do that because a lot of times if I have a question about like air conditioning, I can put it in my newsletter and I get 20 responses. I know somebody who owns an HVAC company. I know people in all different kinds of industries and if I ever need help, I can reach out to them. I like to call that having a big world. I like to have a big world. I like to know lots of people. That's just my personal philosophy. I learned that people had similar experiences, they just would never talk about it. There are things you cannot talk about in polite conversation, but you can do it with words, you can do it on the page and you can bring people into this world. And that's the magic of it. My Substack is like a safe space for people to read this stuff and think about these issues, really the only place you can talk about 'em is with a therapist or something like that. The top five memories piece came from the show Lost. There's a character named Charlie and he has a premonition that he's going to die. He knows exactly when it's going to happen. And so he sits down and he starts thinking of his top five memories of all time. And it got me thinking like, that's actually a really good exercise. Like what are your top five memories of all time? I think one of mine was marching band in high school. One of mine was DJing. Really your goal in life should be to make more of those top five memories and keep doing that over and over again. I had a trade that made 15 million bucks. That was a great trade. But it doesn't make my list of top five memories, because top five memories are about relationships and achievement and things like that. Lehman was a great place to work, but ultimately that's not what we're here on earth for.

Hello everyone,I had the pleasure of chatting with Jared Dillian, author of The Daily Dirtnap and We're Gonna Get Those B******s, about his new book Those B******s. Years ago, I read his book Street Freak and I fondly remembered his wit, candor, depth of introspection, and keen eye for the antics of markets.Those B******s is a collection of Jared's essays on life, death, meaning, friendship, marriage, luck, ambition, suicide, and much in between (including a few great bits on markets and finance). It's refreshingly honest and fun and led to a lot of reflection. For a taste of Jared's writing check out his excellent recent essay People Don't Change:People don't change, until they do. What has to happen is that person has to hit bottom. Bottoms vary for different people—people with a high bottom get to keep their jobs and spouses. People with a low bottom have to lose everything before they learn.In our conversation we touched on writing and finding your voice, escaping the caterpillar pillar, how markets are ruled by fear, being the guy who knows a guy, mental health and the power of writing, making meaningful memories, the right temperament for markets, why people don't change, and why you should ask people if they are lucky.Enjoy,FrederikYou can listen to our conversation on Spotify, Apple, anchor (and via RSS).A few highlights from the conversation:A lot of people think that markets sort of oscillate between fear and greed, right? But it really isn't fear and greed. It's fear and fear. It's all fear, right? Greed is fear of not getting something that you want. So working in the markets is, if you have any background in psychology, it's a very depressing place because the markets are filled with fearful people, like acting based on fear.But the thing is that it's very predictable. People behave in very predictable ways. So that's been my thesis about markets all along.I like to know lots and lots of people. Now, having a newsletter has been the perfect way to do that because a lot of times if I have a question about like air conditioning, I can put it in my newsletter and I get 20 responses. I know somebody who owns an HVAC company. I know people in all different kinds of industries and if I ever need help, I can reach out to them. I like to call that having a big world. I like to have a big world. I like to know lots of people. That's just my personal philosophy.I learned that people had similar experiences, they just would never talk about it. There are things you cannot talk about in polite conversation, but you can do it with words, you can do it on the page and you can bring people into this world. And that's the magic of it. My Substack is like a safe space for people to read this stuff and think about these issues, really the only place you can talk about 'em is with a therapist or something like that.The ‘top five memories' piece came from the show Lost. There's a character named Charlie and he has a premonition that he's going to die. He knows exactly when it's going to happen. And so he sits down and he starts thinking of his top five memories of all time.And it got me thinking like, that's actually a really good exercise. Like what are your top five memories of all time? I think one of mine was marching band in high school. One of mine was DJing. Really your goal in life should be to make more of those top five memories and keep doing that over and over again.I had a trade that made 15 million bucks. That was a great trade. But it doesn't make my list of top five memories, because top five memories are about relationships and achievement and things like that. Lehman was a great place to work, but ultimately that's not what we're here on earth for.A few quotes from Those B******s:As a trader you must have the memory of a goldfish. You f**k something up, you clean up the mess, and move onto the next trade. There is always another trade.This is something they teach professional athletes. It was said that Derek Jeter was the best at doing this- he did not dwell in the past. He had absolutely no memory, and was out there hacking at his next time up at the plate. We all have slumps. It's about your ability to shake it off, rub some dirt on it, and get back in the game.If you are to be successful, pray that it happens very slowly. Peaking early isn't just true in high school--it's broadly true throughout life. You see this a lot on Wall Street. Good performance is difficult to sustain over any period of time. Early success leads to hubris which leads to mistakes.After a few successively smaller fund launches, you end up as a CFP in Evanston, Illinois. I was 34 years old at Lehman Brothers and still a vice president. A 34-year-old VP. Many people are surprised to hear that. Well, most of the guys I worked with are now selling insurance.I'm not a snob and I don't look down on people, but I did resent people dumber than me getting paid more for work that required less technical sophistication. But as time has gone by, I've learned ... that a bonus has practically zero correlation with performance. Once you learn that, life gets a lot easier.Finance is depraved. The further away it gets in the rear-view mirror, the worse it looks. I like investing. I like the intellectual challenge, I like taking risk- but I am allergic to b******t. And there is more b******t than ever on Wall Street.I like to say that when you work in finance, you understand how the world works. The average person sees used car prices rising, and has no idea why. The financier knows. You become conversant in politics, geopolitics, raw materials production, trade, the FDA approval process, venture capital, private equity, and many other things. In short, you become much more worldly. A kid from Staten Island can get hired on a desk and within a few years, acquire enough sophistication to carry on an intelligent conversation with most world leaders. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit alchemy.substack.com/subscribe

"What first led me to Wall Street was a desire to make money so I could buy great art and support artists. What I didn't know when I started is that working on Wall Street can be a fascinating art in itself and one for which I was almost immediately suited." — Roy Neuberger DISCLAIMER. I write and podcast for entertainment purposes only. None of this is investment advice and any information contained in my work should not be relied on to make investment decisions. Do your own work and seek your own financial, tax, and legal advice before making any investment decisions.

Disclaimer: None of this is investment advice. I write and podcast for entertainment purposes only and this conversation reflects our personal opinions. It should not be relied on to make investment decisions. Do your own work and seek your own financial, tax, and legal advice before making any investment decisions. Also see Speedwell's Disclaimer. Drew and I talked about Meta, Constellation, Floor & Decor, Restoration Hardware, and his research and writing process. I will share excerpts from the conversation and Drew's work on the substack. Drew Cohen writes at Speedwell Research and is a Portfolio Manager at Davidson Kahn Capital Management. Prior to Davidson Kahn, Drew was at Capital Group, where he helped managed $5B+ of AUM. Prior to his role at Capital Group, he worked at Goldman Sachs in New York in their Global Investment Research division.

Hello everyone,I'm usually skeptical of fiction involving financial markets. To make it thrilling and get life and death stakes, the genre typically blends with crime or conspiracy. Which means you need an engaging writer who knows both worlds well enough and doesn't turn the financial combatants into caricatures.But there are surprises. During my recent trip, I churned through Master, Minion by Paul Podolsky who also writes the Things I Didn't Learn in School Substack. Master, Minion is a fast-paced and thought-provoking thriller at the intersection of financial markets, geopolitics, and intelligence agencies. Paul started his career in Russia, worked on Wall Street for 20+ years, most of that time at Bridgewater, and spent a lot of time in China as well. He brought all of that to bear in the book.The story weaves together hot spots from Moscow to Hong Kong and, yes, Boston, with a wonderful depth of detail and cultural observation. Paul's depiction of the “verbal kung fu” and politics in his fictional hedge fund is priceless. But his real strength is to paint compelling characters ensnared in their respective systems of money and power.After reading his book and Substack, I reached out to Paul and am excited to share our conversation.If you can just take one thought with you this Sunday, consider his metaphor for life, the flow and the eddies. The eddies being the loops in which can get stuck in without being aware of it. When I asked him about it, I realized he was the living embodiment of the lessons from Tim Urban's The Tail End:One of the reasons I left Bridgewater when I was 52, I calculated how many months I was gonna live. I literally looked at an actuarial table. I think when I left Bridgewater, I had 384 months to live, statistically speaking. And there's a pretty wide range around that, if it's an individual.I thought about that. These 384 months are gonna come. There's nothing I can do. That is just the flow. How do I stay in that for myself? It's very hard to see, at least it was very hard for me when I was young. You have to listen carefully. What is that real thing that works for you?There's a period of time where I had no money and I had a young family. Money really, really made a difference, to try to make a comfortable tent, if you will, to sort of shelter them. But a little bit like you, I was thinking inside, this isn't the primary thing that motivates me. If I've got a million bucks now, if next year I have a million dollars and a hundred thousand, and the year after that I have a million dollars and two hundred thousand, that does not actually motivate me. And those months are going by. It's going 383 and 382 and 381… There are eddies that you could get stuck at in life.We talked about Paul's journey to writing, his book, intrigue and investing in emerging markets, understanding Russia, and much more. You can find a few quotes below. I hope you'll enjoy the conversation. I certainly did and look forward to reading more of Paul's work in the future.You can listen to this conversation on Spotify, Apple, YouTube, anchor, and via RSS.The information in these posts and on this website is not and should not be construed as investment advice.The paradox of writing fictionThe strange thing about fiction is, there's a weird paradox. On the one hand, you're making stuff up. On the other hand, it's sometimes easier to say something true by making something up.In the real world, you never quite know what other people are thinking. You have a hypothesis. Fiction allows you to create a bunch of characters and imagine their interior world, which is where so much of the mystery and the richness of life is.A few quotes that stuck from the book (no spoilers):Working at a hedge fund:Everyone understood the Boss had money, they, the hangers-on, me included, wanted that money and we all tried to destroy each other to get it. If [the CIA] was a team, this was Lord of the Flies.The Boss said he liked disagreement, but almost everybody was too scared to disagree.Understanding certain emerging markets:The idea that the state itself was criminal was something Americans had trouble getting their mind around. But the Boss might understand. In the Boss's mind, there were predators and prey, and he had dedicated his life to joining the ranks of the predators. Wealth was a precondition.Institutions are people:But the Fed is people and people are wired the same everywhere—ambitious, striving for greatness, prone to error, guilt-ridden.Great investors understand impermanence:Most people tend to look at what they are growing up in and think that it is normal, he said. To them it is normal that the US is the richest country. Normal that China is poor. Normal that Black people are poor and white people are rich. But the reality is, things change. Nothing is stable.Magic in markets:The signaling felt like primates establishing hierarchy. While the central bankers had the magical power to make the economy expand or contract, the investors had the magical power to become rich.Some things I learned from Paul during our conversation:The magic of writingYou spend a lot of time alone trying to … write the b******t out of an idea. Then you put the story out there and you get what I describe as pings from the universe. The story connects with somebody and you get this response back. It's kind of a magical process that you've created something.The medieval is alive and well in RussiaThe final thing which helped me understand [Russia] is it is medieval, in all that sense. If you think about the picture in your mind about the way Europe was working in the 14th and 15th century. There is a king. You pay tithes. There is palace intrigue. People are poisoned. You could end up in prison for no reason. Rule of law grew out of all of that, but that world is still alive and well in parts of the world. It's a very bizarre thing that a place with a space station that could do complicated computer programs has the medieval in it, but it's there.And what you're looking at in Ukraine right now is exactly that. It's a land grab for disobeying the emperor or the czar or whatever you call it. And the punishment is death. The traps of lifeThere's a quote at the beginning of the book from Chekhov, I should grab the copy off my desk, but basically that ‘life is a vexatious trap.' And I thought that was actually unbelievably powerful. You see these traps recreated in many different forms. I just think they're more virulent in those other cultures.Wall Street has that. Money on Wall Street has an addictive character. And people are willing to put up with a lot to endure that. They have these jobs that pay huge amounts of money, but many of them don't involve that much talent. Being a person like the Boss is a different type of thing. You know, a sort of character who can see the future. That's slightly different. And so some of the characters I was trying to get out of the hedge fund are people that are getting these insanely big salaries. Like the chief trader there. And they have this constant insecurity and they're stuck in this system where they love the money, but they don't have the talent to do something outside of that. And so that's that master minion relationship.And then the secret police in places like Russia or China, they're so corrupt. And I saw this firsthand with families. It's unbelievable that there is no escape. One of the characters actually wants to be a reformer and non-corrupt. And there are people who you will meet in these places there. But corruption has sort of infected his family. He's basically on the payroll of his father-in-law who is tied to all these nefarious things. And that repeats again and again and again and again. You can't extract yourself from it.Great portfolio managers as artistsI think really exceptional portfolio managers can look at something that's today and imagine a radically different set of circumstances. And their mind works a little bit like a kaleidoscope. In other words, they're staring at the world and they keep shifting the kaleidoscope and it's literally changing every single day.And they're imagining what that future is. But some of those things are radically different than what we're living through right now. And those are the people that correctly call stock market bubble tops and crises and things. It's a weird thing. There is an element to it that I think is quite artistic. If you think about artists that create stuff that seems really out there initially, but then 10, 20, 30, 40 years later, people are like, this is the most beautiful thing ever done. They're doing the exact same thing. They're imagining a set of pictures in our head that are gonna resonate “If I can't understand something, I remove it from my portfolio.”I saw what was going on in Ukraine. I said, this seems crazy. But what do you do if all of a sudden, the risk of your position has expanded more than what you'd anticipated? You take less risk. I called up all my contacts in Russia and everybody said, he is bluffing. There's no way he's gonna do this. And then I took less risk. And then as we got closer to it, I said, listen, I cannot predict this. I just closed all my positions in ‘21. And the minute he invaded, I closed all my positions in China.My thought being, listen, if Putin is crazy enough to do this in Ukraine, who's to say that Xi can't do this in Taiwan. I certainly can't. From an investor standpoint, there's other ways of making money. If I can't understand something, I just remove it from my portfolio. And that's one of the reasons I love liquid markets.Stories and understanding peoplePeople think in stories. Numbers are really important for measuring stuff. But the way people think is in stories. And stories are about feelings and emotions. And the feelings and emotions are relatively limited in number. People have been telling stories for thousands of years and they revolve really around a couple of themes.Escape, which this book is about, is one of them, and a couple of primal emotions. So to make a story resonate with people, you need to be in that zone for it to work. And so when I'm writing either a non-fiction piece or a fiction piece, one of the things I really try to do, which has taken me years to get to, is just listen: what am I feeling right now? Where is that coming from?And when I was writing Master Minion, I was imagining, what is going to irritate each one of these people? What's gonna scare each one of them? What do they really want? And you have to be, to make the scenes come alive, you have to be very locked-in, just the way you would be in a business meeting. If you're somebody who's good in a corporation, you have a very rich understanding of everybody around the table, what they want. And when you're writing a book, you're doing the same thing. It's just all the characters are in your head.George Soros on PutinI had the occasion a few times in my life to speak with Soros. I spoke with him in, I believe it was January of 2000, two weeks after Putin. Putin came to power December 31st, 1999 if my memory's right. So I asked him, I said, you know, what do you make of Russia's new president?And he just looked at me and he said, ‘not to be trusted'.' That was all he said. And that was an example of somebody way out ahead. I mean, think of what came next.Too much money (or being around it) can make you crazyThere's a little bit of me in every single character, truth be told. Even the diabolical ones. They say, write what you know, and each one of those people draws on strains of yourself.I think that money can make you crazy. It's a very strange thing. We need money. I've been in very limited circumstances. It's unpleasant, But it's also true that money, too much money, is not good for you. It's a little bit like food.When you were asking those questions, I was imagining how different it is in another industry. Imagine you're sitting around the table with Tim Cook and he's making 80 million or whatever. And you're the guy that's making a million bucks. Now a million bucks puts you in the top 0.1% of salaries. And you're sitting next to him and you're like, but this guy's not that much smarter than me. He's earning 80 million. I guarantee you there's somebody in that room thinking that way, cause people are people. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit alchemy.substack.com/subscribe

My conversation with Paul Podolsky author of Master, Minion and the Things I Didn't Learn in School Substack.

Hello everyone,A few months ago, I had the pleasure of interviewing David Senra, host of the Founders podcast. David is incredibly high energy and authentic about what he does. You think Mohnish Pabrai takes the idea of cloning seriously? Here's David:I can live the rest of my entire life never having one original idea. As long as I've mastered the handful of ideas that I see as recurring themes in the history of entrepreneurship, I will live a fantastic life. Because it's not only knowing this stuff, but also actually applying them.To paraphrase Bruce Lee, fear not the man who has read 10,000 books once but rather the man who has re-read the best ones over and over. Or, in David's case, the man who does both.David sticks to Munger's maxim of taking a simple idea and taking it seriously:The greatest entrepreneurs had one idea. They built everything around that one idea. There might be things that spawn off of that idea later on. There are other businesses that can grow out of that, other business lines, other products. But fundamentally, they start with an idea.In David's case it's podcasting and a vein of high quality information that he mines and converts into an attractive product. Actually, it's a combination of two big ideas: a big wave to surf (podcasting) and a big insight about David himself (love of reading and learning, ability to go deep in one area without burning out).I hope you enjoy the conversation and pick up some valuable ideas from his entrepreneurial heroes (and villains…).Reading a book is a movie for the mind. It's impossible to read a life story of an interesting person and not be involved emotionally. You're with them in their ups and downs. It's a predictable human reaction that you put yourself in their shoes.You can listen to this conversation on Spotify, Apple, anchor (and via RSS) or find a full transcript at Compound.If you're looking for an all-in-one solution to manage your personal finances, Compound can help (disclosures).A few things I learned from David:Building a company can require an illogical amount of persistence.James Dyson "has 14 years of struggle. He builds 5,127 prototypes. He mortgaged his house. Some days, after doing all these experiments, he's climbing into bed at night covered in dust, crying at how painful what he's trying to do. It's 14 years and 5,127 prototypes before he has a vacuum of his own design, that he owns completely, that he could start selling to the public.We know at year 14 he's going to have success. What about year three? What if he stopped right here? That makes perfect sense. This is why it's so difficult. It is the logical decision. He should have stopped there, but he didn't. The founder is the guardian of the company's soul.I covered the biography of this guy named Sidney Harman. If you ever get into a luxury car, you'll see speakers that say Harman Kardon. He winds up writing this fantastic autobiography. He's 80 or 90 years old when he's writing it. It's called Mind Your Own Business. In that biography he's distilling 50 years. We haven't even been alive for 50 years. This dude had been trying to build companies, successful and unsuccessful for 50 years. Imagine what he knows.He gave the best description of what I feel is the founder's role. The founder is the guardian of the company's soul.You cannot be the guardian of your company unless you love it. Edwin Land, Enzo Ferrari, and Steve Jobs, they talk about their products the way you would describe your lover. It's not the same as, I made a toaster, here's the toaster. No, they describe it like they're in love with what they've done.No one would have known Walt Disney's name if he'd started Disney and sold it five years later.There is this weird mind virus. I have an idea, I'm going to start up, I'm going to scale up, I'm going to sell, and then I'm going to do that over and over again. Inevitably, the question is who are the entrepreneurs you look up to? Who are your entrepreneur heroes? And they start listing off people that literally worked in the same company forever. I don't understand. Are you learning from these people or not? Because no one would have known Walt Disney's name if he started Disney and sold it five years later. No one would know Job's name if he just got kicked out of Apple and then disappeared.The value of compounding knowledge.An investor understands the power of compounding. Knowledge compounds, too. Imagine going back and trying to talk to Warren Buffett about everything he knew at 35 compared to what Warren Buffett knew at 80. That's not the same person. I've read 272 biographies of entrepreneurs so far. I have a unique set of knowledge there. It's going to pale in comparison to what I will know two decades from now or three decades from now.Studying the birth of industries.Henry Ford had an idea. I want to build an easy, reliable car that the average person working at Ford can actually afford. That was unheard of. … Edison says something that changes Ford's life. He says, that's it, young man, you have it, keep at it. So, the next 5-10 years of struggle, he remembers what Edison said and it helped him. That's how Ford approached it. That's his idea. …Billy Durant had built this vertically integrated carriage company for horses. He … went and bought a bunch of other carriage brands, and put them under one umbrella. The exact same playbook at the early days of GM. … Henry Leland worked for Samuel Colt. The ideas that he learned in the mass production of firearms, he then shows up in Detroit and starts applying them to automobiles. When Henry Ford has a question, he goes to see Henry Leland. He is the wise old counsel with a lot more life experience.”On founders and culture.Whoever you are and whatever is important to you, put that into your company. Don't shy away from the eccentric part of your personality because your personality is the foundation and the beginning culture of the company.The downside of intense focus and dedication.The people that get really good at what they're doing don't allow themselves to think or do much of anything else.Jony Ive, who worked very closely with Steve Jobs, was talking about one of the main lessons from Steve Jobs. He's saying, “Steve was the most remarkably focused person I have ever met in my life.” Jony works with Steve almost every day. This guy who is having lunch with him damn near every day says he is the most focused person in his life. That should tell you to do an audit of your life. Am I focused?But also:It's safe to assume that every single person I have read about is smarter than I am. Yet you see all these smart-driven people make mistakes. They usually over optimize their professional life to the detriment of everything else. They destroy their personal lives. They destroy their health.Time is the best filter.I love this idea. It's somewhat analogous to Buffett's insistence on a track record, on data with which to judge a person. Decisions made over time inevitably reveal character. I don't read a story and say that person's dead, I have nothing to worry about. No, that personality type was alive then, they're alive today, they will be alive in the future. Human nature is constant. … When I come across somebody that's completely ruthless. The minute you stop being useful, they will discard you. This is a problem that appears over and over again.What is your solution, David? The solution I've come up with for my life is avoidance. I don't want to partner with you. I don't want to chase money with you. I don't want to be friends with you. … I am very selective about who I spend time with. I only have one good filter for this. I think there might only be one good filter. That is time. Time is the best filter. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit alchemy.substack.com/subscribe

This conversation was originally published at Compound.

Hello everyone,A few months ago, I finally had the chance to record a conversation with Josh Wolfe of Lux Capital. This was published at Compound (I also previously profiled Josh).Josh has been a frequent podcast guest and I did a lot of prep work to find questions he hadn't tackled yet. As a result, I think it's a timeless conversation with the exception of a brief discussion of the macro cycle (Josh and Lux were bearish and cautious before markets turned down).Josh and his partners were young with an unconventional background when they bootstrapped Lux. With little capital under management they earned additional cash flow through a research business.We sold [the report] for $4,750 bucks a copy, sold a few 100 of them and helped keep our little business alive. I got access to all these famous CEOs and VCs. Vinod Khosla was one of the first VCs to buy it. And I was like, Okay, I'll sell it to you, but only if I can come and meet you. So I went out to Sand Hill Road and I remember his office, I remember viscerally what it looked like, it was the first major billionaire VC I met.I absolutely loved his comments about using doubt as motivation and fuel.Anybody that doesn't believe in you, either you let that bring you down, or it becomes fuel. To this day, we like to say that we believe before others understand. Because there really is something powerful, just psychologically, of believing in somebody.I would be on a run on a treadmill, and I'd be getting tired. And I would imagine some of these heroes cheering me on. ‘You can do it, come on.' I have ghost images of these individuals to cheer me on. Peter and I would find strength in the people that didn't think we were going to make it and felt really motivated to prove correct the people who did.It's also a framework he uses to assess founders. Chips on shoulders put chips in pockets as he likes to say.The best entrepreneurs we see are the ones who are so obsessed to prove other people wrong who don't think this is possible. That to me feels honest.It feels petty, but it's real.I also admired Josh's focus on his family. It's easy to neglect that if you're highly competitive.Being with my kids is just the great salve. … Family stuff for me is very cathartic. Whatever is going on, I could be negotiating a big financing. And my little guy who's six is like, Dad, I can't get the screw into this thing and that is more important. Getting the screw into the little toy is more important at that moment. That to me is a big thing.Thank you for listening and happy holidays

You can find a full transcript of this conversation at Compound.

Hello everyone,A few months ago I had the pleasure of interviewing Patrick O'Shaughnesssy, the prolific host of Invest Like The Best, as part of my work for Compound.We started our conversation on the topic of David Senra, host of the amazing Founders podcast, who had just joined Patrick's Colossus podcasting platform. David is one of the most focused people I know. Patrick one other hand is prolific but involved in a variety of efforts. Aside from podcasting, there is his venture capital firm Positive Sum, he is the CEO of O'Shaugnessy Asset Management, and he co-hosts Capital Camp. “Having a singular goal that's far in the future, that kind of crowds out serendipity and discovery along the way, is just not my style.”I was very interested in finding the unifying themes and the philosophy behind his work. Curiosity is a big driver for Patrick.“The reason I started my podcast was that I was frustrated by how imprecise even the best book on a topic was, as it related to my specific questions and curiosities. When I went to the world's best expert on whatever, I got exactly what I wanted quickly, with higher impact. I think if you wanted to learn about anything in the world, you'd be far better off, if you could get access to them, spending time with the world's leading thinkers on it and asking them questions directly, than by reading the five or 10 best books on that topic.”If Patrick is a fox, his mission is to find hedgehogs whose knowledge he can tap into.“It turns out that a podcast (a media business) and an investing firm are two really great things to have when your game is people-centric. Your game is effectively searching for interesting people. Being able to interview them and or invest in them are kind of the two most fun things to be honest with you. It's a great way for me to have a world around my interests. And in our investing activity, this is something we explicitly look for, we call it world building.”On the topic of David and Founders, Patrick hit the nail on the head. It's electrifying to meet someone on a mission.“You find these people that are on one of these scent trails and will stop at nothing to stay on the trail. It's infectious. You finish a conversation with him, and you want to run harder at whatever it is you're running at.”‍You can listen to our conversation on Spotify, Apple, anchor (and via RSS) or find a full transcript at Compound (part I, part II).If you're looking for an all-in-one solution to manage your personal finances, Compound can help (disclosures).A few things I learned from Patrick:Follow authentic curiosity and joy.“I don't know if there's a trick here. What you get on my podcast is just me. It's not a character I'm playing, it's just me, and that's a very sustainable strategy.”“I expect to do very well in the things that I do, not because I want some achievement badge, but because the process of doing that is joyful to me.”Conversation as a game.“To me, conversation is kind of like a game. I'm always interested in how much more interesting I can make a conversation that I'm in. I don't do small talk well. If I'm at a party, I'm always interested in how interesting something could get relative to the baseline.”Eastern philosophy as an operating system for life.“If you put a lot out there for others, with no expectation of a selfish return, you end up actually getting more than if you didn't do that. It's a strange worldview, because it's not a business school case study. The inputs and the outputs don't connect via some formula. You have no idea how it's going to come back to you.It is my form of faith. If I do this, it will come back. I have no idea how, but it will, and that's been my experience too. But if you were just trying to approach something strategically, irrationally, you would never behave this way because you can never tie the input to the output.” On working with founders.“Investors, I think, mistake a founder's desire for their capital for a founder's desire for them, and all the things that come with them."“My experience is that founders want the capital to fuel their business, and they want someone that they can have as a confidant, that they can trust, that they can call when needed. But they don't want a steady stream of ideas and advice. The classic one is, have you seen this competitor yet? Some large percent of texts from VCs to founders is like the website of a competitor. What I think we can do is ask really good questions, the theme in my life, and not mistake what a customer actually wants from us for what we think they want.”The good life.“I optimize for learning, I optimize for freedom of time, to be with my family, especially. Learning, reading, talking to people, spending time with people, moving in the woods, ideally, or outside somewhere on the water somewhere with my family and my friends.Everyone has something they love, or a set of things they love, but very few people really work to protect those things. And to structure their life so that they get as much of the things they love, and get joy from as they can.”Growth without goals, the guiding philosophy behind Colossus.See also Patrick's essay on the topic.“I'm not striving towards some end state for Colossus. Big, hairy, audacious goals may work some of the time, I'm actually very suspicious of them. I actually think most of the time they're very bad.”“I'm incredibly high energy in some regards and I'm incredibly lazy in other regards, which I think is an asset of mine. I think it's good to be lazy in certain ways. My instinct is always that there's something that needs doing that's important, but that I don't want to do. Build infrastructure around it, build systems around it, hire people, hire contractors, create a repeatable system for something that's valuable, but boring to me, and it's usually not boring to someone else.”“How do we find as many hosts that we can serve, me being the first. And what can we arm them with to reach a bigger audience and do a better job, and extract as much interesting knowledge as possible? The mindset doesn't need to be any more complicated than that. That will lead us in really interesting directions.” This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit alchemy.substack.com/subscribe

You can find a full transcript of this conversation Compound (part I, part II).

Alix Pasquet III is the Managing Partner and portfolio manager at Prime Macaya Capital. Disclaimer: The information contained in this summary has been prepared solely for informational purposes and is not an offer to sell or purchase or a solicitation of an offer to sell or purchase any interests or shares in any of the funds managed by Prime Macaya Capital Management LP. Any such offer will be made only pursuant to an offering memorandum and the documents relating thereto describing such securities (the “Offering Documents”) and to which prospective investors are referred. This summary is subject to and qualified in its entirety by reference to the Offering Documents. An investment in those funds carries certain risks, including the risk of loss of principal. While all the information prepared in this presentation is believed to be accurate, Prime Macaya Capital Management LP makes no express warranty as to the completeness or accuracy nor can it accept responsibility for errors, appearing in the presentation. Other events which were not taken into account may occur and may significantly affect the returns or performance of the fund. Any projections, outlooks or assumptions should not be construed to be indicative of the actual events which will occur. This summary is provided to you on a confidential basis and is intended solely for the use of the person to whom it is provided. It may not be modified, reproduced or redistributed in whole or in part without the prior written consent of Prime Macaya Capital Management LP.

Hi everyone,The following is my conversation with Adam Mead, author of The Complete Financial History of Berkshire Hathaway. We talked about conglomerates, early entrepreneurial experiments at Berkshire, the lean years in the insurance business, managing the company as an informed observer, and returns on his acquisitions.As to finding another Berkshire, Adam was skeptical:“I'll never say never, but it would be highly unlikely to find another [Berkshire Hathaway]. You have a Lollapalooza, to use a Charlie Munger term, starting when they're able to shoot fish in a barrel.”You can listen to this conversation on Spotify, Apple, anchor (and via RSS).Disclaimer: I write and podcast for entertainment purposes only. This commentary reflects the personal opinions of myself and my guest. This is not investment advice. Acquisitions: going-in returns vs. reinvestmentThis is another chart from the book worth highlighting. Berkshire was not built on finding extreme outlier deals. Much depended on how capital was reinvested subsequently (whether in organic growth, further acquisitions, or public markets) and, of course, cheap leverage from insurance float.From the book: “In Berkshire's early years, good companies were available for bargain prices. It bought the Illinois National Bank & Trust Company and The Buffalo News at book value, and the discarded Scott Fetzer and Fechheimer at premiums that still produced going-in pre-tax returns in the mid-20% range.Generally, the better the business was, the higher its price (as represented by purchase multiple paid compared to the company's underlying value). The return on capital of the underlying businesses (the company-level return) ranges widely.See's was one of Berkshire's earliest purchases and was made when markets were not as efficient. The low Scott Fetzer and Fechheimer purchase multiples reflected that Berkshire could act as a safe port amid the leverage buyout storm of the mid-1980s.By contrast, Lubrizol and Heinz were excellent companies earning great returns on capital, but the price Berkshire paid reflected the market's correct appraisal of that fact.”(I didn't see it specified on the page but I think the numbers refer to return on equity and price/book).From the conversation: “You have this dynamic in the early days of finding really good businesses like See's and having a pretty modest multiple. Good businesses at really good prices. Then you have the later days of buying really good or pretty good businesses at higher multiples because the market's just gotten efficient over time. But you still have the dynamic of reinvestment going on.Let's just use a plain example. If you had a business earning 30% on capital and you paid two times that capital, your going in return would be 30 divided by two, 15%. The important part is, if that business can grow, you don't have to reinvest at 2x the capital, you get to reinvest at 1x. That marginal capital gets, in this example, reinvested at 30%. That drags up your going in return over time. But I think Buffet's very clear in pointing out that you can't pay too much for growth. You can't have a going-in return of 2-3%, even if it grows enormously. The time value of money just destroys any kind of return that you have. I think he always looks for the good business and then he has a secondary analysis of what are the reinvestment opportunities. And he's fine, as long as the purchase price reflects it, he's fine taking the dividends and finding another place for them. And if the business can reinvest that capital, let's do that. That plays out in the extreme case of the energy business, where you're still getting, in many cases, 11-12% regulated return, which is nothing to sneeze at.”Conglomerates before Berkshire“The first sort of real conglomerate was American Home Products in the late 1930s. I do have some of those Moody's reports on my website.They weren't crooks. I think that can kind of be misconstrued. These guys weren't the Enrons of their day trying to just put something over on investors. But they strayed a little bit in terms of messing around with the accounting or saying, gee, the market's valuing our conglomerate at 20 times earnings or 15 times earnings, and we're gonna buy this other company at five or six times earnings. And I can buy anything that I want as long as it's less than my P/E. And it's gonna magically transform my conglomerate into something better. Now the problem with that is it ignored the underlying economics.”Control vs. delegation“I think this whole idea of extreme delegation comes from the fact that Buffet and Monger started as stock pickers. What is the difference between owning a 5% position and owning a hundred percent position? You have the ability to direct the actions of that company. But should you? Berkshire was being almost agnostic in the sense of ownership level. We're still gonna let that manager run his or her business. We're only attracted to businesses that are good anyways. So why would we go in and meddle?”“You don't just have delegation just shy of abdication. It's hands-off in the sense of not meddling, but you still have an informed observer. That is the key. Buffet's getting fed this river of data coming into Omaha. And I think he communicates his thinking to managers through his questions. Okay, let's be a little bit more aggressive in trying to price the product because we think we have pricing power.”“Buffet writes a letter to Chuck Huggins [at See's Candy] and says, I just went out and I saw this one store and our candy was sitting next to Russell Stover, and it was kind of a mess. Let's use these psychological tricks to keep our candy front of mind and make it have apparent scarcity. I mean, that's Buffet the entrepreneur, that's Buffet the manager.”Buffett's early days at Berkshire“He began in 1965 at Berkshire Hathaway. He lived in Omaha and a guy like that, so attuned to business, is going to just be curious about all these businesses around him. Well, one of them was National Indemnity. This was the real first big deal of Berkshire Hathaway, 1967. He bought National Indemnity and its sister company, National Fire and Marine for $8.6 million. In hindsight, he said he would've been better off buying that in an entity outside of Berkshire Hathaway.So it was sort of a mistake on his part to bring the legacy Berkshire Hathaway shareholders along with him. He just used it as his vehicle and the rest is history. That was the first transformative deal based. That gave Buffet not only a platform to invest the float, which was almost $20 million. Jack Ringwalt, the manager of that business, showed him that you can [underwrite] any risk as long as it's priced appropriately.”The lean years in insuranceAnother takeaway from both the letters and Adam's book is the number of years that parts of the insurance struggled. Early expansion efforts weren't always successful. And in the early 80s the competitive environment was very challenging. While the long-term cost compares favorably to even government debt, shareholders had to maintain conviction for a long time.“You have Buffet taking this idea that insurance can be a very good business, just trying to see what works. Let's scale this thing, right? … Some of these ultimately failed. This is experimentation and you have to see what works. Different markets operate differently. That was the 1970s, this period of let's build this thing.From 1982 to 1992, they lost $522 million from underwriting alone. Now, it sounds like a lot, and it was, but the insurance business overall was profitable because of the investment income. There was a period, National Indemnity saw its premiums decline from the mid eighties to the late nineties. Something like $350 million to $50 million. Just an extreme decline. That's a long time.” This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit alchemy.substack.com/subscribe

My conversation with Adam Mead, author of The Complete Financial History of Berkshire Hathaway.

You can find the full essay on Julian Robertson at: neckar.substack.com/p/the-tiger-that-was-a-wolf-lessons

You can listen to this conversation on Spotify, Apple, anchor (and via RSS) or find a full transcript at Compound.“This is the nature of what we do. It's the intersection of business and people and psychology and sociology and numbers. There's a lot of stuff that's always going on that makes sure you never have the game beat, never.”This past June I had the opportunity to interview Michael Mauboussin. I tremendously enjoyed this conversation and I believe it captures Michael's deep curiosity and passion about investing, business, the research process, and being a multi-disciplinary learner.At the time I published a full transcript at Compound. I am happy that I can now share the audio version.I assume many of you are familiar with his work. For an easy introduction check out this 2021 profile. Another excellent piece is his Reflections on the Ten Attributes of Great Investors which incorporates many of his key frameworks. And be sure to check out his new website with a library of his collected writings.If you're looking for an all-in-one solution to manage your personal finances, Compound can help. The firm can help diversify concentrated stock positions, optimize company equity, plan asset allocation, and more. You can sign up for access here.For more information, please check out further disclosures here.“Most investors act as if their task is to figure out a stock's value and then to compare that value to the price. Our approach reverses this mindset. We start with the only thing we know for sure — the price — and then assess what has to happen to realize an attractive return. … The most important question in investing is what is discounted, or put slightly differently, what are the expectations embedded in the valuation?”The below are some of my favorite highlights.You can listen to the conversation on Spotify, Apple, at anchor, and via RSS or find a full transcript at Compound.Druckenmiller, Soros, and position sizing* “When you observe very successful people over very long periods of time in these probabilistic fields, they tend to have certain attributes that are worth all of us paying attention to.”* “Here we have George Soros and Stanley Druckenmiller, two legendary investors, who say that [position sizing] is the main thing that drives their returns and results over a long period of time. Whereas we look at the real world, we find that most people don't create a lot of value from sizing and it's all security selection. The question is can we bring those things together to some degree?”Analysts and portfolio managers:* “A very good portfolio manager will be able to focus on the two or three issues that matter most for a particular company. And they're very good at identifying those and honing in on those.”* “There was a letter from Seth Klarman at Baupost to his shareholders. He said, we aspire to the idea that if you lifted the roof off our organization and peered in and saw our investors operating, that they would be doing precisely what you thought they would be doing, given what we've said, we're going to do. It's this idea of congruence.”Holding Amazon for two decades* “I first learned about this company from Bill Gurley who at the time was part of the underwriting team at Deutsche Bank who did the IPO. Bill just said, you should meet these guys because the way they think about things, even though this is a completely nascent industry doing, completely different stuff, the language they're using is the language you're going to be familiar with.* “In the late 1990s, I met Jeff Bezos and Joy Covy, the CFO. … Joy would just say to me, we're big fans of Warren Buffett and Charlie Munger. We think about return on capital. We think long term. We're making investments that appear to be bad, but when you pencil out the numbers, we think we're going to generate really attractive returns. I bought into that.”* “I was very influenced by a wonderful book by Carlota Perez that came out probably in the early 2000s where she talks about the interplay between technological revolutions and financial capital, one of the points she made was, it's often the case that the hard work happened after the financial bust.”On feedback, learning, and teams of superforecaster (aka investors)* “In every domain elite performers tend to practice. Every sports team practices, every musician practices, every comedian practices. What is practice in investment management? How much time should we be allocating to that?”* “The investment management industry is an industry that draws a lot of really smart people. It's a very competitive, interesting field. It's remarkable in the sense that feedback is very difficult to attain. In the long run it's portfolio performance and so on. But in the short run it's very, very difficult to do.”* “There's a distinction between intelligence quotient and rationality quotient, which is the ability to make good decisions. Along with some of his colleagues he developed a specific test to measure rationality. And if you look at the subcomponents of that test, it seems really consistent with what we would care about as investors. “* “When I say elite teams, or when Tetlock talked about elite teams, this elite teams in superforecasting. So these are the best of the forecasters working together. There are three important things. How big should it be? How do we compose the team? The third and final piece is how you manage the group. And this is usually where the mistakes happen.”Lessons for operators from his book Expectations Investing.* “Executives of public companies in particular should absolutely understand the expectations priced into their stock. The first reason is that if they believe something that the market doesn't seem to be pricing in, they have a communication opportunity.”* “Very few executives really understand how capital markets work. This is almost like our analyst portfolio manager conversation. When you get to that seat, all of a sudden you have responsibilities and skills that become important that you may not have ever dealt with before.”* “Understanding what has to happen for today's price to make sense is just such a fundamentally attractive proposition. And then evaluating whether you think that those growth rates in sales and profit margins and capital intensity and return on in capital that's implied, whether those things are plausible or not, it just makes enormous sense as an approach.”Thank you, Michael!“To be a great teacher, an effective teacher, it's about being a great student, a great learner yourself. I think that comes through if you're doing it well.” This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit alchemy.substack.com/subscribe

This conversation was recorded in June 2022. You can find a full transcript at Compound.

Alix Pasquet III is the Managing Partner and portfolio manager at Prime Macaya Capital. Notes on substack. Presentation on youtube. Disclaimer: The information contained in this summary has been prepared solely for informational purposes and is not an offer to sell or purchase or a solicitation of an offer to sell or purchase any interests or shares in any of the funds managed by Prime Macaya Capital Management LP. Any such offer will be made only pursuant to an offering memorandum and the documents relating thereto describing such securities (the “Offering Documents”) and to which prospective investors are referred. This summary is subject to and qualified in its entirety by reference to the Offering Documents. An investment in those funds carries certain risks, including the risk of loss of principal. While all the information prepared in this presentation is believed to be accurate, Prime Macaya Capital Management LP makes no express warranty as to the completeness or accuracy nor can it accept responsibility for errors, appearing in the presentation. Other events which were not taken into account may occur and may significantly affect the returns or performance of the fund. Any projections, outlooks or assumptions should not be construed to be indicative of the actual events which will occur. This summary is provided to you on a confidential basis and is intended solely for the use of the person to whom it is provided. It may not be modified, reproduced or redistributed in whole or in part without the prior written consent of Prime Macaya Capital Management LP.

You can listen to the conversation on: Spotify, Apple, at anchor, and via RSS.Hi everyone,I am a big fan Marc Rubinstein and his Net Interest substack and was very excited to finally record a conversation with him. Marc previously covered financials and fintech as a research analyst and hedge fund investor and now shares his takes on the sector with his readers on a weekly basis. It's a very well written and insightful lens on a fascinating corner of the market.I spent the first couple of years of my career as an analyst at Macquarie Group dealing with financials - with leasing and lending companies which we acquired for my employer's balance sheet. My view has been shaped by this early period of bargain hunting and I later struggled with fintech companies and their valuations. As Marc explains, financials are a unique sector with its own rules and heuristics where growth can be treacherous and the balance sheet is of supreme importance.It can be especially tricky to tell apart secular change from the credit cycle. As Jim Chanos said last week on Odd Lots, “every down cycle since ‘98 has seen those companies blow up, because it turns out they didn't have a better mousetrap. They just had the credit cycle at their back.”Marc and I talked about banks, fintech, the importance of incentives and culture, payments, the need to watch regulators, private equity and how alternative asset managers have been picking up business from investment banks, and the danger of relying on the view of CEOs too far removed from the risk.I'm going to share a few of my favorite writings by Marc followed by show notes. I hope you enjoy the conversation.Disclaimer: I write and podcast for entertainment purposes only. This commentary reflects a personal opinion, is not investment advice, and should not be relied on to make investment decisions. The views reflected in this commentary are subject to change at any time without notice. Do your own work and seek your own financial, tax, and legal advice before making any investment decisions.Why learn about financials?For a start, there's something exclusive about them. There are some industries on which everyone has a view. Supermarkets for example, or consumer tech. Financials isn't one of those industries…Second, financials are everywhere. Even companies that on the face of it aren't, can be financial companies in disguise.The third aspect of financials that makes them especially compelling is they're a great metaphor for the world around us. The financial system operates as a complex adaptive system. It consists of a network of banks and other financial institutions each of which operate according to their own incentives.Dotcom 2.0 (online brokers, asset managers, Silicon Valley Bank):I actually remember where I was the day the dot-com bubble burst. It was March 2000 and I was sitting in a newly-opened branch of Starbucks near my home in London, reading a copy of the Financial Times. …Commodities trading. In commodity trading, there are three ways to make money:Geographic arbitrage. Unlike financial markets, where pricing relationships are normally stable across regions, proximity to a product in the physical trading world can have a big impact on pricing. Commodity trading firms can leverage logistical capabilities to source product in one location and deliver in another, taking advantage of pricing differences between the two.Product arbitrage. Pricing differences exist between different blends, grades or types of the same commodity. There are over 160 tradable crude oil products with many different refined products and numerous end-users with highly specific requirements. By changing the form of the commodity, traders can lock in a profit. Time arbitrage. Over the long term, supply and demand tend to find a balance but, on shorter term horizons, they can remain out of sync. Trading firms can take advantage by storing commodities when supply is unusually high and drawing down inventories when demand is unusually high.What Sort of a Business is Investment Banking?For investment banks, risk management is their business. If they take risk, match risk and source risk, they can't outsource the management of that to a chief risk officer; it's the job of the frontline staff. How that all hangs together – how the incentives of staff are reconciled with the health of the firm comes down to the culture of the firm. And culture takes a long time to build, longer than most participants in fast-moving markets have the energy to invest.Buffett's BanksFinancial companies have a tradition of courting disaster, and Buffett's names are no exceptionThis is not by Marc but a related idea worth keeping in the back of our head: Aswath Damodaran recently discussed how in countries with sustained high inflation “every company becomes a financial service company, because they discover it's easier to run a bank on the side and lend money out short term than it is to build factories or toll roads.”Show notes* Marc's experience during the dotcom crash, when being a stock analyst “was kind of the coolest job you could have”* “These cycles are a feature of history, financial services companies sit at the heart of that. One way of thinking about a financial company is like a platform that is an intermediary. It intermediates supply and demand. But because incentives are such that the financial services company makes more money through volume, be that credit volume, be that trading volume, they're incentivized to create additional supply.”* Institutions adapting to the last down cycle:* (Druckenmiller talked about this at the Ira Sohn conference.)* [11] “That's a really good heuristic. Regulators and all market participants have a tendency to fight the last battle. They'll create a framework which will make the last battle less likely, but such is the nature of markets problems will emerge elsewhere. Looking at financials you can see that. 2000, 2001, 2002, we saw a corporate credit downturn triggered by fallen angels in credit markets and a number of banks, JP Morgan being one, suffered materially from corporate credit losses. The banks that suffered the most in that cycle, rough rule of thumb, suffered the least in the financial crisis. JP Morgan outperformed in that crisis.”* Parallels to the 1994 bond market massacre:* [14] “One precedent for what's going on in markets right now, really sharp hikes in interest rates, was February 1994 when Allen Greenspan hiked rates. It was a complete surprise to the markets and brokers, dealers, and banks weren't able to position for it. It's a reason why the Fed, highly topical, is very anxious not to deliver surprises".”* The growth conundrum:* [17] “I'm not a fan of growth. Any finance analyst is rightly wary of growth. Growth can be very, very cheaply manufactured, you're giving away money. What's more important than the volume of that is the pricing. And you don't have visibility on the pricing of that until further down the line.”* Hidden financials:* [25] “I talk about various reasons why financials are interesting. One of them is that many companies are financials in disguise. There's the famous Enron conference call back in 2001, Jeff Skilling calls the analyst an a*****e for asking, he says, ‘you're the only financial institution that doesn't publish its balance sheets.' And the focal point of that in the market is oh, wow. Jeff Skilling called the analyst names. To me it's, hang on a sec, no one actually realized that Enron was a financial company.”* GE Capital, growth, and private equity:* [31] “The yardstick for success at GE parent company was EPS growth. And GE Capital was a huge contributor towards that. Growth at a financial services company is not the way to track it. The model hasn't gone away, it's gone into private hands. Apollo is trying to recreate GE capital in its own terms.”* “They've filled a vacuum that was left when investment banks … they're not as powerful anymore. Private equity is a small part of what they do, the alternative managers, they now fill that vacuum … and they do a lot of the activities that investment banks historically used to do.”* Measuring success and competition: * “Like all sectors, you're looking ultimately for a return on invested capital that exceeds a certain hurdle rate, that reflects a willingness to return capital to shareholders.”* [36] “Competition is really damaging in financial services marketplace. Unlike antitrust policy makers, financial regulators don't promote competition. Some of the most successful banking systems globally, from a regulator's perspective, that have not suffered a financial crisis, have been some of the most concentrated banking systems. Canada is a very good example. In Ireland today, there are only two banks as a response to the financial crisis.”* “When looking at risk at banks and in financial services, you are looking for banks that aren't trying to over compete.”* Looking at financials as an investor:* [40] “One of the reasons why I think the finance sector is so attractive is that you have all the characteristics in there. There's growth, there is value, here's momentum. All kind of factors that apply elsewhere apply within financial services.”* “It's not a complex sector and we haven't talked about that yet, but something worth mentioning is that complexity is a feature to run away from.”* “There's no intellectual property, there is a commodity component really to it. Therefore banks often layer on complexity. Run away from that.”* “Look first and foremost at the balance sheet. Understand the balance sheet. Because of that it's helps to be quite close to credit markets.”* [45] “We had a global mandate and I think that's hugely powerful to be able to see patterns across borders. Banks and financials are quite local because they are regulated on a local basis. The products themselves culturally tend to be quite local. A mortgage in the US is nothing like a mortgage in Germany. The products are quite different, but market cycles and human behavior and competitive dynamics being the same, seeing patterns across countries is hugely powerful.”* “The lesson from China with Alipay is that when non-bank, financials get to a certain size, regulators will come in. Another tool of the financial analyst is to stay close, to watch what regulators are doing hugely. That's hugely important.”* Payments* [53] “Historically payments were almost a byproduct of banking. Banking was deposit taking fundamentally and because the liquidity sat at the bank, banks offered payments mechanisms. Increasingly, we're seeing that turned on its head and payments is becoming kind of the X of the relationship because of the data it throws off and the frequency.”* Fintech and customer engagement;* Robin hood is that actually* [54] “One of the reasons why I'm a bit cautious on business models like Robinhood is that to do finance well, engagement is a negative. You don't want your customer, objectively an investor, shouldn't be looking two hours a day on their portfolio. And yet they're incentivized to, to create that. There's a massive misalignment here between good investment practice and what these companies are aligned to do.”* “The problem with insurtech, a lot of insurance companies went public in 2020-2021, and they've performed very badly because it's a product customers only buy once a year. The inverse happens. There's no way really to create engagement. Payments is the sweet spot payments. There is a frequency of use that's not in conflict with good practice from the consumer's perspective. Companies offering payments are able to pick up data and that's hugely powerful when it then comes to credit underwriting.”* Which CEOs does he follow closely?* [59] “Jamie Dimon is very good. He's been around for a long time. Blackstone, whether it's Schwartzman or John Gray. Very insightful. And Marc Rowan at Apollo has a great understanding of financial services.”* The concept of the L6:* “I'm halfway through Michael Lewis's book on the pandemic, Premonition. I wasn't going to because in my view any book written about the pandemic was too soon. But I saw him being interviewed and it was pretty compelling.He makes this really interesting point about what he calls L6, stands for level six in an organization. He says, if you want to understand anything, then go six levels down in an organization. At that level you'll find the person who understands what it is you're looking at. And he said it was true in finance in particular … So I think a lot of CEOs don't necessarily know what's going on.” This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit alchemy.substack.com/subscribe

I am a big fan Marc Rubinstein and his Net Interest substack and was very excited to finally record a conversation with him. Marc previously covered financials and fintech as a research analyst and hedge fund investor and now shares his takes on the sector with his readers on a weekly basis. It's a very well written and insightful lens on a fascinating corner of the market. We talked about banks, fintech, the importance of incentives and culture, payments, the need to watch regulators, how alternative asset managers have been picking up business from investment banks, and the danger of relying on the view of CEOs too far removed from the risk. You can find show notes on the substack.

Hello everyone,I'm happy to share my conversation with my friend Nick Maggiulli who writes the excellent personal finance blog Of Dollars and Data. Nick just came out with his first book: Just Keep Buying: Proven Ways To Save Money And Build Your Wealth. Nick combines his empirical research with a personal perspective and I really like that he distills the work down into rules that are effective yet pragmatic. His advice is free from some of the guilt-driven personal finance drivel (save on avocado toast to get wealthy..).We talked about the book, his writing process, the optimal level of fame, and why he thinks people should not pick stocks themselves.You can listen to the conversation on your podcast player of choice: Spotify, Apple, at anchor, and via RSS.“Fear has a far greater grasp on human action than the impressive weight of historical evidence.” Jeremy Siegel“You have to keep reminding yourself of that quote. It's my favorite investment quote because it's the only thing that keeps me from letting my behavior take over from my logic.” Nick MaggiulliSome highlights from the conversation:Nick's argument against stock picking: how do you know whether you're good at it? It takes too long to establish a track record that is meaningful:“Imagine you're trying to get in shape. … You go to the gym for three months, see no difference. Go to the gym for six months, one year, no difference. Then, all of a sudden, you lose 10 pounds. .. No one would do it. With diet and exercise, you start seeing results within a few months. But with stock picking … after one year, no way. … I think it can take a decade or longer. And this is obviously debated in the literature. … How do you know when a factor is dead? It can take you 20 years. It takes roughly the same amount of time to figure up a manager's really good … Let's just say you did it for 10 years. … My whole life's changed. Five years ago, I just started blogging. I didn't have a book. Imagine I have to do this again and only then would I know if I have skill. After 10 years, oh, actually I shouldn't be doing this.”Income vs. expenses and guilt-free saving and investing:“I do these like simulations and say, Hey, if this person is on a steady state of retirement and they get this raise, if they save at least half of it, they're usually good to go. It's about reducing guilt. It's okay to spend a little bit of money. … Cutting spending is not a way to raise wealth in the long run. You can do it in the short term, but the only sustainable path out is I've seen based on the data is raising our income.Everyone was like, you got to cut your lattes. You're just gonna feel miserable and hate it and guilt yourself. And you're going to end up giving up or you're gonna feel like s**t. I'm saying that the way out is raising her income and there's a way to do it. It just takes a lot of work, but it's the only sustainable path out.”Nick's writing process:“I used to have a bunch of drafts which you can imagine as different pots sitting on the stove. Some have just ingredients, there's no heat on them. Some are kind of just simmering. Some are ready to take off, ready to serve. Sometimes I have nothing going and I just have to come up with something. It varies every week. Last week I wrote about inflation, why I think people are thinking about inflation incorrectly. I had this epiphany where I thought about it like, is that true?I said, oh, that's actually not true. Let's just write about that and see how it does. I like to reframe common things. A lot of stuff logically makes sense and then you run the numbers and you go, ah, that doesn't make sense as much as I thought it would have. A lot of things we just assume to be true and you ask, is that actually true?”Intuition backed by data:“I think there's a lot of people that have really good intuition, but they can't explain why it's true. So I ran the numbers and was like, Hey, this person who everyone is saying is dumb … yes, some of the things he said were a little silly, but I think his intuition was a lot stronger and more intelligent.” This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit alchemy.substack.com/subscribe

“We begin our lives as growth stocks and end our lives as value stocks.” I'm happy to share my conversation with my friend Nick Maggiulli who writes the excellent personal finance blog Of Dollars and Data. Nick just came out with his first book: Just Keep Buying: Proven Ways To Save Money And Build Your Wealth. He uniquely combines his data-driven research with a personal perspective and I really like that he distills the work down into rules that are effective yet pragmatic. His advice is free from some of the guilt-driven personal finance drivel (save on avocado toast to get wealthy..). We talked about the book, his writing process, the optimal level of fame, and why he thinks people should not pick stocks themselves. “Fear has a far greater grasp on human action than the impressive weight of historical evidence.” Jeremy Siegel “You have to keep reminding yourself of that quote. It's my favorite investment quote, because it's the only thing that keeps me from letting my behavior take over from my logic.” Nick Maggiulli

Hello everyone,I'm excited to share my second conversation with Sebastian Mallaby. Last time, we discussed his book More Money Than God. A quote from that conversation stuck with me:“The key was to do an unreasonable amount of preparation work. It shows you're serious and not wasting people's time by asking the obvious questions.”This time, we discussed The Power Law (see my write-up) in which he tackled the history of venture capital. The two worlds make for an interesting contrast: venture capitalists, networkers by nature, are more willing to meet and chat. But they're also natural storytellers which presents a challenge in the search for truth.In his book, Mallaby tried to disentangle luck and skill in venture investing, how to build winning and lasting cultures, and the importance of VCs for Silicon Valley. I had a lot of fun digging into these questions with him. I hope you enjoy the conversation. You can listen to it on your podcast player of choice: Spotify, Apple, at anchor, and via RSS.You can also add the Substack podcast feed to your podcasting player with the link on the bottom-right of the player.While individually “the story of every bet can seem to hinge on serendipity,” he argues that over the long run, “the best venture capitalists consciously create their luck.” The best “work systematically to boost the odds that serendipity will strike repeatedly.” A History of Systematic Serendipity and Grand Slams“The great challenge at venture partnerships is that the principals must refrain from killing each other.” Michael Moritz“When people write about the venture business, they're always writing about the startups we back. They never write about the most important investment we make, which is in the business.” Michael Moritz."The fast moving of ideas, people and money until they reached their optimal use, that's what made Silicon Valley worked. That's what made innovation turbocharged. "But where did that fast circulation come from, and my argument is it comes from venture capitalists."Some highlights from the conversation:* Sequoia:* “It took a year or two of networking to break into the cathedral. But once I was in they are very thoughtful people. … They explained to me how they thought about behavioral biases in decision-making. … For example, we know that we anchor on past decisions. When a VC decides not to invest in a startup at the Series A stage, it's quite difficult to change your mind at the Series B. … it's painful to pay much more … because we were wrong the first time. They kind put that on the table and said, we're probably anchoring, we're probably turning things down at Series B. From now on anybody who argues against the Series B investment is going to be subjected to cross examination - are you sure you're not anchoring?”* Strategy buckets in venture vs. hedge funds:* “Having written More Money Than God I was keen to put these different companies in buckets. I would see two different venture investors who had invested in the same company. I would try to find out … the contrasting mindsets. … People tend to have a few different stories going on in their head at once when they invest. It's not like you go with one chain of logic but not the other one. In venture capital, the distinctions people make are more around stage. Are you a seed investor, a series A investor, a growth investor. They might make distinctions by geography and they might make distinctions by sector.* But the mental approach, they say things like, some people want to bet on the size of the market and other people really want to bet on the type of founder they are backing. When I stress tested that kind of theory, I found it was normally not true.* Google had a strong position at series A because it had a working product which already had better search results than rivals. [Sequoia and Kleiner Perkins shared the round.] You had a natural experiment. The two were doing the same investment: did they have a different logic? And I came to the view that they had a subtly different logic. Kleiner Perkins was more a believer in technical breakthroughs, a product that was 10x better. I think that reflected the fact that both the dominant partners, John Doerr and Vinod Khosla were engineers by training. When they backed Google, I think they really believed the fact that the product was better was a huge deal. And therefore it justified a high valuation. I think Michael Moritz, who invested for Sequoia, came at it with a slightly different mindset. He also could see the product was much better. But I think he also thought of the Google investment in terms of the media side that he came out of himself. He said he made he invested in Google to look after Yahoo. He'd already invested in Yahoo. Yahoo had a popular web portal at the time. Part of him thought that Google could be the search engine in the top right-hand corner of the Yahoo site, a very valuable utility.”* Identifying founders:* “[At Accel] the idea was that when you saw a new technological wave coming, you would prepare your mind for what was going to happen. You would think through the potential businesses that would logically have to be created. … different types of business would logically have different types of founders.When you were building capital-intensive hardware you wanted somebody who was really responsible and deliberate and a good engineer and was not going to make the mistake of spending large amounts of capital on a manufacturing operation until they really got the design.* But when you were doing software, 10 or 20 years later … much more cheaply than a hardware product. The right approach is to move fast and break things. When Mark said that about Facebook, it wasn't some sort of t-shirt slogan.It was the logical implication of a world where software businesses were dominant. At software you do A/B testing. You put things in the market and … see which one goes better. The barrier to putting it into the market is so low, that's the best way to figure out product market fit. Therefore in a software world, a young founder who is brash and moves quickly and doesn't care about being responsible is perfectly fine.”* Asset manager franchise value:* “If you can create a machine, a system that can survive a change of staff and pretty much function the same way, then you've got something with franchise value. Also if you've got predictable revenue streams. … Private equity is so large that simply the management fee is attractive for the public markets. And there are fairly formulaic things that you do both in evaluating the deal and then adding value afterwards. Um, not to say they're simple because they could involve quite complex, say data science around improving the pricing strategy of the portfolio company after you've bought it. It's not simple, but it's formulaic.Hedge funds, when it comes to discretionary trading are simply not like that. There's a funny story in More Money than God about Paul Tudor Jones who tried to systematize this macro trading, had somebody to sit right next to him and watch his moves and … and take those insights and put them into an algorithm and do systematic trading. It just didn't work at all. … The exception in hedge fund space is algorithmic trading, where … concentrating market share in a few hands, those guys possibly could go public one day.”* Are VCs important?* “When I looked carefully and in detail at the history of Silicon Valley, I came away with a view that they were extremely important. People would say it's about Stanford. … But it just is wrong. MIT was a stronger engineering school in the sixties and seventies when this whole story began. … Then there was another story about defense contracts being the explanation for the origin of Silicon Valley. And yes, there were defense dollars being spent on semiconductors … but there were more defense dollars being spent on the military industrial complex centered on MIT and the Boston area. …* Another more persuasive story is about non-compete contracts. California has a special provision in the law that says you can't prevent your employee from quitting your company and joining a startup. And that's important to the startup ecosystem. I take that seriously. … When you look through these different variables, it turns out that venture capital really was the key thing that made Northern California special. That particular sort of risk friendly version of venture capital that was very hands-on and willing to back entrepreneurs even if they didn't necessarily have all the pieces they needed to make a startup function. …. * And so in this way, the act of entrepreneurship, which is scary and risky, is a bit de-risked by venture capital. Venture capital is a machine for manufacturing courage. That's extremely important to understanding how Silicon Valley grew up.”Disclaimer: I write and podcast for entertainment purposes only. This is not investment advice. I am not your fiduciary or advisor. Do your own work and seek your own financial, tax, and legal advice before making any investment decisions. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit alchemy.substack.com/subscribe

Hello everyone, I'm excited to share my second conversation with Sebastian Mallaby. Last time, we discussed his book More Money Than God. A quote from that conversation stuck with me: “The key was to do an unreasonable amount of preparation work. It shows you're serious and not wasting people's time by asking the obvious questions." This time, we discussed The Power Law (see my write-up) in which he tackled the history of venture capital. The two worlds make for an interesting contrast: venture capitalists, networkers by nature, are more willing to meet and chat. But they're also natural storytellers which presents a challenge in the search for truth. In his book, Mallaby tried to disentangle luck and skill in venture investing, how to build winning and lasting cultures, and the importance of VCs for silicon valley. And while he admits that individually “the story of every bet can seem to hinge on serendipity,” he argues that over the long run, “the best venture capitalists consciously create their luck.” Individual venture capitalists can “can stumble sideways into fortunes” and at times it seems like luck beats diligence and foresight. The best however, “work systematically to boost the odds that serendipity will strike repeatedly.” “The great challenge at venture partnerships is that the principals must refrain from killing each other.” Michael Moritz “When people write about the venture business, they're always writing about the startups we back. They never write about the most important investment we make, which is in the business.” Michael Moritz. "The fast moving of ideas, people and money until they reached their optimal use, that's what made Silicon Valley worked. That's what made innovation turbocharged. "But where did that fast circulation come from, and my argument is it comes from venture capitalists." I had a lot of fun digging into these questions with him. I hope you enjoy the conversation.

Hello everyone,I'm excited to share my conversation with Mary Childs, author of The Bond King (and co-host at Planet Money) on the rise and fall of legendary bond manager Bill Gross.You can listen to this conversation on your podcast player of choice: Spotify, Apple, at anchor, and via RSS.You can also add the Substack podcast feed to your favorite podcasting app via the link on the bottom-right of the player. I didn't realize this until Liberty showed me

I'm excited to share my conversation with Mary Childs, author of The Bond King (and co-host at Planet Money) on the rise and fall of legendary bond manager Bill Gross. Mary and I talked about Bill's breakfast habits (did low blood sugars end his career?!), his card counting days, the culture of paranoia at PIMCO, how he combined multiple sources of edge into “structural alpha” for long-term outperformance, the difficulty for a founder to leave their firm, Bill's desire for fame, and how emotions ultimately got in the way of investing. Some highlights from the conversation: Opening the door to a story: “If you're staring at a closed door … you just have to come up with a little piece of information to get that person to open that door, to crack it open. A little piece of gossip, a story that everyone's talking about. In and of itself that gossip is useless to you as a journalist, of course. But you can asking somebody, Hey, I keep hearing this ridiculous story. You have a little nugget of truth in there. You don't know what it is yet. … A lot of people want to help you understand and don't want to see the story misrepresented.” Traits of a founder: “The things that make someone capable of achieving the track record that Bill Gross did, building the kind of firm that Bill Gross was a part of, those personality traits are: you're going to be exacting. You're going to be really intense and focused. You're going to be a perfectionist, a micromanager. You're going to keep a really tight grip. These things, generally speaking help contribute to the success of the firm. … For the most part, these are things you see very frequently among founders, and also that toxic culture that can often come along with some of those traits. Those traits also make it very difficult, if not impossible, to have a graceful transition away from that founder. Because the minute they start to loosen their grip, they freak out. … The tight grip is who they are. This firm is who they are.” Being the house: “Bill gross learned from Ed Thorp's book called Beat the Dealer that you can count cards. … I think that this sensibility of both understanding the math but also feeling the pace of the table and knowing when you have that edge and when you don't, and also watching all the people around you who have no edge whatsoever and who were just flopping around taking dumb chances. All of that helped to inform how he approached the market and who he saw as his competitors. His competitors, aren't the dumb people doing the dumb stuff. His competitor is the market, is the dealer. This shows up when PIMCO figured out that the US government wasn't going to let certain institutions fail in the financial crisis. That there was going to be a government backstop … If I know that the US government is the house, I'm going to be the house, I'm going to try to align my own interests. … The point was to do what the government's going to do, but do it first: buy what they're going to buy and then sell it to them or ride that wave as the news of their purchase causes the price of those assets to soar. And that's exactly what happened.”

Hello everyone,I'm excited to share my conversation with Max Frumes, co-author of The Casesar's Palace Coup (with Sujeet Indap). I'm a big fan of the book and previously shared some notes on Twitter. It's a deep dive into the buyout and bankruptcy of casino giant Caesar's Entertainment and the slugfest between investors like Apollo, Oaktree, Appaloosa, GSO, Elliott, and some of the nation's most expensive law firms.It's a great introduction into the world of distressed investing and the prevailing culture. I've written previously about how distressed credit is a “knife fight over a limited number of slices” which shapes a scarcity mindset. The book illustrates the intense negotiations and explains the “creditor on creditor violence” that can take place (a recent example is Wesco).Max and I discussed how to break down such a complex story, explored key turning points, discussed the culture among distressed investors, what makes distressed investors successful, why there was no long-term damage for Apollo, how other investors were actually inspired by their moves, and how the space has changed in general.A key takeaway for me was that the participants in this game are very smart, creative, ruthless, and extremely competitive. This is a complex and difficult game to play and one should consider very carefully whether to enter the competition.I hope you enjoy the conversation. You can listen to it at: Spotify, Apple, at anchor, and via RSS.Marc Rowan, CEO of Apollo about the demise of Drexel:“You want chaos, things to be shaken up, the system to be brought down and built up again. When you think the world is coming to an end, that is the time to build a career and build the next great fortune.”A few quotes from the conversation:* “It is a very rich, fascinating industry because it is a combination of chess and poker, depending on what stage a restructuring is at.”* “Each of these firms does have their own personality. We go into detail about the origins of Apollo which was the most interesting because it was defined by brilliance and impunity, willing to push the bounds to the very edge of what is what's permissible under the law, under the credit docs. And that does go back to Mike Milken's firm Drexel Burnham. That's where Leon Black was one of the senior directors at the time it went bankrupt.”* “Firms who are the most successful in this industry are those who have expert knowledge and a good handle on the legal aspect, understanding valuation, and then the industry knowledge itself mixed with understanding game theory. Some people are more savvy with the press. Some people are more savvy with the orchestration of creditor or organization. Some people are more willing to be an iconoclast and go against the grain.”* “Ultimately the examiners reports said they had actual and constructive fraudulent conveyance claims against and corporate governance claims … a lot of them were simply because the creditors did not have independent directors during the time these decisions … where there's conflicts of interest. It seemed like the private equity sponsor was basically controlling everything. … So the lesson wasn't, maybe we shouldn't do those things. The lesson was let's put some independent directors in there.”Disclaimer: I write and podcast for entertainment purposes only. This is not investment advice. I am not your fiduciary or advisor. Do your own work and seek your own financial, tax, and legal advice before making any investment decisions. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit alchemy.substack.com/subscribe

I'm excited to share my conversation with Max Frumes, co-author of The Casesar's Palace Coup (with Sujeet Indap). I'm a big fan of the book and previously shared some notes on Twitter. It's a deep dive into the buyout and bankruptcy of casino giant Caesar's Entertainment and the slugfest between investors like Apollo, Oaktree, Appaloosa, GSO, Elliott, and some of the nation's most expensive law firms. It's a great introduction into the world of distressed investing and the prevailing culture. I've written previously about how distressed credit is a “knife fight over a limited number of slices” which shapes a scarcity mindset. The book illustrates the intense negotiations and explains the “creditor on creditor violence” that can take place (a recent example is Wesco). Max and I discussed how to break down such a complex story, explored key turning points, discussed the culture among distressed investors, what makes distressed investors successful, why there was no long-term damage for Apollo, how other investors were actually inspired by their moves, and how the space has changed in general. A key takeaway for me was that the participants in this game are very smart, creative, ruthless, and extremely competitive. This is a complex and difficult game to play and one should consider very carefully whether to enter the competition. A few quotes from the conversation: “It is a very rich, fascinating industry because it is a combination of chess and poker, depending on what stage a restructuring is at.” “Each of these firms does have their own personality. We go into detail about the origins of Apollo which was the most interesting because it was defined by brilliance and impunity, willing to push the bounds to the very edge of what is what's permissible under the law, under the credit docs. And that does go back to Mike Milken's firm Drexel Burnham. That's where Leon Black was one of the senior directors at the time it went bankrupt.” “Firms who are the most successful in this industry are those who have expert knowledge and a good handle on the legal aspect, understanding valuation, and then the industry knowledge itself mixed with understanding game theory. Some people are more savvy with the press. Some people are more savvy with the orchestration of creditor or organization. Some people are more willing to be an iconoclast and go against the grain.” “Ultimately the examiners reports said they had actual and constructive fraudulent conveyance claims against and corporate governance claims … a lot of them were simply because the creditors did not have independent directors during the time these decisions … where there's conflicts of interest. It seemed like the private equity sponsor was basically controlling everything. … So the lesson wasn't, maybe we shouldn't do those things. The lesson was let's put some independent directors in there.”

Hello everyone,I'm happy to share my conversation with Evan Tindell of Bireme Capital. I've enjoyed Evan's thoughtful letters over the past couple of years and it was time to talk about this approach to investing. We dove into Evan's background as a poker player, how he looks to exploit biases in his investment process, and how he navigated the ‘20-'21 bubble in growth stocks as a short-seller and value-oriented investor.If you're interested in his work, check out his three letters with thoughts on the bubble (part I - birth, part II - anatomy, part III - apex -“We believe inflation is likely to be the catalyst that ultimately pops the everything bubble” from 2Q21).Books mentioned: The Theory of Poker by David Sklansky.I hope you enjoy the conversation as much as I did. You can listen to it on: Spotify, Apple, at anchor, and via RSS.Through Evan I also found this interesting research paper on poker players as investors: “our findings suggest that skilled poker players are, on average, better fund managers.”“Extant academic work shows that winning poker players are more patient and less susceptible to behavioral biases such as the disposition effect … “patience is rewarded” among winning poker players, and these players tend to avoid “overweight[ing] frequent small gains vis-à-vis occasional large losses.”However, it's not as simple as picking a prominent poker player and hedge fund manager. It seems that after winning public tournaments, these managers take in more capital which leads to a decline in alpha.

I'm happy to share my conversation with Evan Tindell of Bireme Capital. I've enjoyed Evan's thoughtful letters over the past couple of years and it was time to talk about this approach to investing. We dove into Evan's background as a poker player, how he looks to exploit biases in his investment process, and how he navigated the ‘20-'21 bubble in growth stocks as a short-seller and value-oriented investor. Disclaimer: This content is for entertainment purposes only. This is not investment advice. I am not your fiduciary or advisor. Do your own work and seek your own financial, tax, and legal advice before making any investment decisions.

Happy Friday everyone!I'm very excited to share with you my conversation with Jimmy Soni. We discussed the many lessons from his new book The Founders about the origins of Paypal. I had an absolute blast and would highly recommend the book if you're interested in business, technology, startups, and examples of company cultureI hope you enjoy the conversation as much as I did. You can listen to it at: Spotify, Apple, at anchor, and via RSS.Disclaimer: I write for entertainment purposes only. This is not investment advice. I am not your fiduciary or advisor. Do your own work and seek your own financial, tax, and legal advice before making any investment decisions.

“PayPal started off as a product with no use case. Then we had a use case but no business model. Then we had to build a sustainable business.” Amy Klement I'm very excited to share my conversation with Jimmy Soni, the author The Founders: The Story of Paypal. [00:01:00]: Introduction, how did Jimmy find the story and go about the research process? [00:17:00]: Paypal's unique team and recruiting. [00:24:00]: Paypal's journey of pivoting and iterating the product and business model. [00:34:00]: Culture of truth-seeking and debate, workaholism, “Paypal PTSD.” [00:42:00]: Paypal's three leadership coups. [00:49:00]: Risk-mitigation and timing were key to survival. [00:57:00]: What were the lessons for the Paypal diaspora? [01:061:00]: Culture of ownership and giving people a lot of responsibility quickly.

This is my conversation with Will Thomson of Massif Capital, a long-short fund in real assets, and particularly the “sectors most important to a low carbon economy: Energy, Basic Materials and Industrials.” It complements a written Q&A on the firm's process and thematic outlook. A few highlights: Will is fairly bearish on the current setup of a stable, globalized world. He believes we're moving from a highly integrated world to a multi-polar one in which “spheres of influence” play a much greater role and affect commodities and trade. Energy and food are example sectors in which nations will increasingly to protect their own interests and create resilience. “What comes next is going to be very different from the past 30 years. And it's going to be very good, I think, for real assets and natural resources.” “We're gonna see a fundamental re-working of trade flows along different geopolitical lines.” Political acumen will become more important for management teams. (An anecdote from Disney on its philosophy operating abroad: “We always ask, ‘how does it reflect on the Mouse?'”) The collapse of the USSR led to a decline in Russia's industrial capacity relative to its commodity production, leaving global commodity markets well supplied. That stability has come to an end. Europe's decarbonatization efforts could go into overdrive and lead to attractive long-term opportunities among utilities and industrials. Will doesn't believe he can forecast commodity cycles but his best guess is that we're in the "first third."

Hello everyone,Today I'm happy to share a conversation and written Q&A with Will Thomson and Chip Russell of Massif Capital, a long-short fund in real assets, and particularly the “sectors most important to a low carbon economy: Energy, Basic Materials and Industrials.”I've long enjoyed their letters and white papers and used the Q&A to learn more about their process and worldview. With Russia's invasion of Ukraine I thought it was a good time to also catch up with Will and discuss how they navigate this environment (Will's baby daughter was also present for the first half of the conversation and happily commented at times

This is a re-upload of the episode at higher volume after some feedback that the conversation was difficult to understand on some devices. I'm very excited to share with you all a conversation with my friend Dan McMurtrie of Tyro Partners. The entire interview is about a topic that I believe is under-discussed but of vital importance to any investor: resilience and recovery when dealing with sustained pressure and stress. I believe this is crucial to longevity in investing. A number of great investors have commented or hinted at the mental and physical strain from a combination of market volatility and personal or business issues. Many retired because they were simply too exhausted and burned out to continue. You can find detailed show notes, examples, and a transcript on my substack - neckar.substack.com. "The goal of investing under stress is serenity. If you can, in times of extreme stress, get your life to be mundane that's a victory." "You'll hear a lot of managers say, Hey, I bought the market in the financial crisis, but they're probably not going to get on TV and say, and I threw up in the trashcan for it.” "When things go wrong, you're short a put on your own time.” "Think about it like a team, like a sports team. We need to have players who can execute plays at all times. And in order to have people who can execute plays at all times, some people have to have some Gatorade on the bench and let's just accept that and engineer around it.” [00:01:00]: Introduction. Why is resilience important? [00:07:00]: Where to find good advice? How to broach the subject? [00:20:00]: What are the different dimensions in which this matters (i.e. individual vs. team)? [00:37:00]: Which non-investment areas offer useful insights? [00:50:00]: What are specific best practices? Are these idiosyncratic or are there universal themes?

You can listen to the episodes at: Spotify, Apple, at anchor, and via RSS. Find Transcript here.Hello everyone.I'm very excited to share with you all a conversation with my friend Dan McMurtrie of Tyro Partners. The entire interview is about a topic that I believe is under-discussed but of vital importance to any investor: resilience and recovery when dealing with sustained pressure and stress. I believe mastering this challenge is crucial to longevity in investing.A number of great investors have commented or hinted at the mental and physical strain from a combination of market volatility and personal or business issues. Many retired because they were simply too exhausted and burned out to continue. I will share a few examples below to illustrate the point.However, I also believe that the topic is uncomfortable to discuss for many professional investors. It requires an openness that could be interpreted as weakness by peers, LPs, and other stakeholders. For that reason I am especially grateful to Dan for sharing his perspective.Dan credited a mutual friend of ours, Alix Pasquet of Prime Macaya Capital, as a “mentor, great friend, cherished collaborator, and invaluable teacher” on this subject and many others. I look forward to recording a conversation with Alix as well.I hope you find this conversation as insightful and valuable as I did.You can listen to it at: Spotify, Apple, at anchor, and via RSS.I will also send out a full transcript to premium subscribers.Why this matters.George Soros on the stress of managing his fund before hiring portfolio managers to do it for him:“It turned into an internal conflict where I felt the Fund was an organism, a parasite, sucking my blood and draining my energy. I asked myself, who is more important, the Fund or me? Is the Fund a vehicle for my success, or am I the slave of my Fund?” Soros on SorosPeter Lynch retired early, at age 46 in 1990, and openly discussed his workaholism and the toll it took on his family life:Early in his career, Bill Miller asked Lynch for advice. Lynch told him that the investment business is so rewarding financially and intellectually that it attracts an overabundance of intelligent people. “The only way you can beat them is to outwork them,” said Lynch, “because nobody is just so much smarter than the next person.” Lynch told Miller that he stayed ahead of the pack by reading investment research while he carpooled to the office at 6:30 a.m., working after dinner and on weekends, and taking no vacations for years. When Miller asked if it was possible to slow down as you got older, Lynch replied, “No. In this business, there are only two gears: overdrive and stop.” Richer, Wiser HappierIn a profile in Financial World, months before he announced his early retirement:“I've worked every Saturday for seven or eight years - I mean seven in the morning. In the last six months I've started working some Sunday mornings at home. … I haven't gone to a Celtics game in five years. … You think I enjoy coming in here on Saturday mornings? Don't you think I'd rather be playing with my kids or doing something with my wife?”From a Barron's piece covering his retirement announcement:“It's like - one hot fudge sundae is great, two are okay and five just makes you sick. I love this job. I love outside activities. I love my family. There's just too much of it.” Stanley Druckenmiller looking back at the moment he bought back into technology stocks at the top of the dotcom bubble, a bet that led to his departure from Quantum shortly thereafter (and a story I will discuss in greater detail in my profile on him):“You ask me what I learned - I didn't learn anything.  I already knew I wasn't supposed to do that. I was just an emotional basket case and could not help myself.” Speech at the Lost Tree ClubJulian Robertson also retired near the top of the dotcom bubble:“One former cub recalls that when he joined Tiger in the 1980s, he admired how Robertson rarely worked on Fridays and took plenty of time off to spend with his family at their home in the Hamptons. ‘He had a good lifestyle,' the former cub remembers. But as the fund and the company grew larger in the 1990s, he says, Robertson ‘started working like a dog.'”Institutional Investor: Do you ever regret that you decided to close down your funds?“I really don't. I can't do this forever. I'm not on the phone for an hour early in the morning from New Zealand [his second home]. I just couldn't wake up at age 95 worrying about my partners' money. I love my life so much now. In hindsight, I might have been better off closing two years earlier.” The Tiger in WinterScott Bessent on investors flailing under pressure (losing their “distance” as Dan might describe it):"George [Soros] wasn't bothered when people started losing money, but he was always worried they weren't feeling the pain because it was his money and not theirs. If people managing his money were down and he saw their trades getting bigger, he'd pull the money immediately. If the manager was down and their trading volume picked up dramatically, he'd pull it. The worst thing you can do when you're having a hard time is flail. In trading, when there is nothing to do, the best thing to do is nothing.” Inside the House of MoneyPaul Tudor Jones on the impact of divorce:“Like, one of my No. 1 rules as an investor is as soon as my manager, if I find out that manager is going through divorce, redeem immediately.  Because the emotional distraction that comes from divorce is so overwhelming. The idea that you could think straight for 60 seconds and be able to make a rational decision is impossible, particularly when their kids are involved. You can automatically subtract 10 to 20% from any manager if he is going through divorce.” “We find that marriages and divorces are associated with significantly lower fund alpha, during the six–month period surrounding and the two-year period after the event.” Limited Attention, Marital Events, and Hedge FundsBill Miller on working through a severe drawdown during the financial crisis, as recounted in Richer, Wiser, Happier:“Miller … describes himself as “very emotionless.” When stocks sink, his default mode is to remain calm and cheerful, actively welcoming the opportunity to profit from other investors' emotional disarray. But the pressure was so unrelenting during the [financial] crisis that he gained forty pounds. “When I get stressed, I eat or drink,” he confesses. “I wasn't about to eat salmon and broccoli every night and drink mineral water. … There's only so much pain I can take, and I drew the line there.” Paul Tudor Jones risk control memorandum to his traders from 1994:“When a trader draws down from peak, a series of proactive pre-determined measures will be implemented to assist the trader in regaining profitable form. A self-evaluation process will be required … Additionally, drawdowns will be accompanied by reduction in trading size, trading for liquidation only, and vacations.”

I'm very excited to share with you all a conversation with my friend Dan McMurtrie of Tyro Partners. The entire interview is about a topic that I believe is under-discussed but of vital importance to any investor: resilience and recovery when dealing with sustained pressure and stress. I believe this is crucial to longevity in investing. A number of great investors have commented or hinted at the mental and physical strain from a combination of market volatility and personal or business issues. Many retired because they were simply too exhausted and burned out to continue. You can find detailed show notes, examples, and a transcript on my substack - neckar.substack.com. "The goal of investing under stress is serenity. If you can, in times of extreme stress, get your life to be mundane that's a victory." "You'll hear a lot of managers say, Hey, I bought the market in the financial crisis, but they're probably not going to get on TV and say, and I threw up in the trashcan for it.” "When things go wrong, you're short a put on your own time.” "Think about it like a team, like a sports team. We need to have players who can execute plays at all times. And in order to have people who can execute plays at all times, some people have to have some Gatorade on the bench and let's just accept that and engineer around it.” [00:01:00]: Introduction. Why is resilience important? [00:07:00]: Where to find good advice? How to broach the subject? [00:20:00]: What are the different dimensions in which this matters (i.e. individual vs. team)? [00:37:00]: Which non-investment areas offer useful insights? [00:50:00]: What are specific best practices? Are these idiosyncratic or are there universal themes?

Hi everyone.Another week has gone by and the war in Ukraine continues. It feels self-indulgent to even write about investing from the comfort of a safe and warm home. Last weekend, I went to Washington Square Park to a demonstration. It wasn't as big a crowd as I had expected. Some Ukrainian friends went to Washington DC. Many more are active on Instagram, venting their anger, sharing their fears, and raising donations.As I experience the war through the “reality tunnel” of social media, I constantly have to remind myself that that the sheer quantity of attention-grabbing information is not equivalent to getting a high quality picture. It's Kahneman's “what you see is all there is” bias (or availability heuristic?). If my Twitter feed is filled with follies and fumbles by the Russian military (like busted tires, columns stuck in the mud or out of fuel, abandoned vehicles being lit on fire, even the paratroopers not living up to expectations), and yet they're advancing, then I'm probably getting a biased picture.We're witnessing what it's like to disconnect a modern economy from the rest of the world. Garry Kasparov called it the “technological stone age.” Axios had a list of companies withdrawing and the number of global brands participating seems unprecedented? You can find anecdotal evidence of the impact all over Twitter (helpful thread). For example: without Apple Pay and Google Pay you need cash and paper tickets.Marc Rubinstein wrote about the ongoing financial warfare: “as a means of inflicting economic pain, targeting the banking system is a good place to aim. The world learned that accidentally during the global financial crisis, and many European countries learned it again several years later.” With payment flows disconnected and trading on Moscow's exchange halted, Russian stocks crashed in London. There was an offer for Sberbank at stock at literally $0.00. Though I started getting confused when I saw the steep sell-off in Russian energy names. I was also astonished to discover that I own some 150 shares of Yandex in my personal account. As I looked at the stock, its price frozen, I faintly remembered thoughts like “oh, the Google of Russia, probably oversold, and surely Putin wouldn't risk his economy on some absurd 20th century invasion.” It's the kind of braindead trade - no, strike that, mindless gamble - that I unfortunately do from time to time. It was also a mistake that my mind apparently quickly dumped into the memory hole to protect my self image.. Talk about someone studying experts only to act like a complete amateur. It is my hope that by writing about it - by creating a kind of public shaming - I will finally rid myself of this behavior. And I will let Peter Lynch remind us all why compulsive bottom-fishing is treacherous:I was still confused about the price action in Russian stocks and the Russian ETF, RSX, which seemed to trade at a big premium to its NAV. I turned to Dave Nadig (Chief Investment Officer and Director of Research at ETF Trends) who has written about exactly this issue (and who also appeared on Infinite Loops).I hope you enjoy our brief conversation around this topic. For more context and charts check out Dave's writing and Twitter feed (Eric Balchunas is also good and of course Matt Levine has written about the issue as well).A few key takeaways:* There's precedent in an ETF's liquid underlying assets turning illiquid (or a permanent liquidity mismatch such as with junk bonds). The local stock exchange being closed is merely a special case. However, there are few precedents for the uncertainty around Russia given the small number of modern pariah states - think Iran, Cuba, North Korea.* Stock prices collapsing has a lot to do with the uncertainty around the status of the depositary receipts traded abroad. Gazprom's assets are valuable. It's equity is probably valuable. But depositary receipts owned by foreigners may or may not be valuable in the future. As Mark Gutman put it: “The value of a piece of paper that gives you rights to nothing is zero.”* With the underlying market closed, the ETF becomes a proxy for price discovery. But once the creation of new shares is suspended, it becomes disconnected from the value of the underlying, essentially like a close-end fund that can trade at a premium or discount to NAV. * The removal of Russian shares from emerging market indices (and therefore ETFs) at a price “at a price that is effectively zero” was particularly puzzling to me and Dave walked me through the process. Personally, I think these have at least some option value and it's going to be interesting to see if at some point in the future we'll hear about a creative trade.Meanwhile, Russian traders are left with what the Germans call Galgenhumor or gallows humor:“Dear stock market, you were close to us, you were interesting, rest in peace dear comrade.”Personally, I'm encouraged to see that the West is getting serious chasing down the oligarchs. Even Germany seized a $600 million yacht. (Although I'm not quite sure about the legal backdrop of seizing private property of people loosely affiliated with a hostile regime? If someone has a good background piece, I'd be interested). My hope is that pressure on Russia's elite could become Putin's undoing (and I could really use more hope when some people are talking about a 10 percent chance of the world ending).Still, it's worth considering the long-term implications and downside of economic warfare. Russia is going to move closer to China (worst case: a nuclear-armed vassal state?). The world will experience more sustained inflation in energy and food. And it saddens me to think that there are likely a great many people in Russia who don't support the war but can't risk jail or beatings to protest. Who will be fed propaganda and be censored in their speech. Feelings of hostility and bitterness among average people will get entrenched as the hearts harden.Men in my family fought and died in the German armed forces during WW2. My surviving grandparents, now in their late 80s, were children when the war ended and vividly remember the bombings, artillery shelling, and tense final days of fighting and surrender. These memories never leave. It's haunting to think that new ones much like them are being created as I write this. I hope this will be the last time I write about the war, but I doubt it.Stanley Druckenmiller interview with The Hustle in 2021:On the biggest risks to the equity market:Stanley Druckenmiller: Without a doubt: inflation strong enough that the Fed responds to it. No doubt about it. This bubble has gone long enough and it's extended enough that the minute they start tightening, the equity market should go down a lot. Particularly with so much of the cap weighted in growth stocks, which would be hit the worst. And our central case is that inflation occurs, but we're open-minded to something like ‘07-'08 when you never really got to the inflation because the bubble popped. So, inflation never got to the manifestation stage. This week* Letters: Dan McMurtrie on regime change* War Trades* Pod: Eric Mandelblatt of Soroban* Twitter Snacks: Greenblatt, Buffett, Steinberg, Paul Tudor Jones, James ClearDisclaimer: I write for entertainment purposes only. This is not investment advice. I am are not your fiduciary or advisor. Do your own work and seek your own financial, tax, and legal advice before making any investment decisions.

I'm reading my full piece David Tepper: The King of Bouncing Back and key takeaways from the second part, What I Learned From David Tepper. You can find both pieces with all quotes and sources on my substack: neckar.substack.com. “For better or worse we're a herd leader. We're at the front of the pack. We're one of the first movers. First movers are interesting; you get to the good grass first, or sometimes the lion eats you." "In the outside world, I'm that easygoing person. But if I'm on the field, I wanna win. And we win a lot.” Sections: Growing up in Pittsburgh Republic Steel The Goldman Setback The Horse Leaves the Barn Emerging Market Adventures Dotcom Distress The Delphi Distraction The Crisis Hits Inflection Epilogue Lessons: Don't do it for money alone. Lazy competitive. Be smart enough to get lucky. Find your own style. Ahead of the herd. But don't bet the firm. Bouncing back in life and markets. Unemotional under pressure. Staying nimble. Optimists win in the long run. Keep having fun.

Hello everyone.Today I'm joined by my dear friend Tom Morgan for a wide-ranging conversation around finding flow, recognizing resonance, the idea of moloch and slack, prophets and truth in the modern world, embodiment, and connecting mind and heart. Tom is one of my favorite writers and idea synthesizers. You can find his work at the KCP Group and on Twitter.It was a deeply personal conversation because I struggle with a lot of these questions as I'm trying to navigate this new stage of my life. You can tell from the way I wrestled to formulate some of the questions. So, don't hold it against Tom that we spent a lot of time on ideas such as following your curiosity, being vulnerable, and navigating personal crises.I hope you find the conversation as interesting as I did. Tom managed to articulate his mission in life towards the end. So it was definitely worth it.Listen to this episode on: Spotify, Apple, at anchor, via RSS.

Today I'm joined by my dear friend Tom Morgan for a wide-ranging conversation around finding flow, recognizing resonance, the idea of moloch and slack, prophets and truth in the modern world, embodiment, and connecting mind and heart. Tom is one of my favorite writers and idea synthesizers. You can find his work at the KCP Group and on Twitter. It was a deeply personal conversation because I struggle with a lot of these questions as I'm trying to navigate this new stage of my life. You can tell from the way I struggled to formulate some of the questions. So, don't hold it against Tom that we spent a lot of time on ideas such as following your curiosity, being vulnerable, and navigating personal crises. I hope you find the conversation as interesting as I did. Tom managed to articulate his mission in life towards the end. So it was definitely worth it. You can find full show notes on my substack.

Hello everyone.I'm very excited to share my conversation with Rob Wertheimer of Melius Research and one of the co-authors of Lessons from the Titans (my notes)I really enjoyed digging into the book's big themes around the culture and business systems of some of the most successful industrial companies. Rob shared his lessons on finding other compounders, evaluating leaders, digging into incentive structures, touring factories, and the best research note he ever wrote - but never published. I hope you'll enjoy this conversation as much as I did!Rob is a Founding Partner, Director of Research, and the lead research analyst for the global machinery sector with additional coverage responsibilities in industrial tech. Rob was the lead machinery analyst at Barclays, Vertical Research, and Morgan Stanley, and began his career in the Peace Corps in Niger, West Africa.Listen to this episode on:* Spotify* Apple* RSS* And at anchor.I also have a very rough transcript for this one.Disclaimer: this podcast is for entertainment purposes only and not investment advice. It does not constitute an offer to sell or the solicitation of an offer to buy any securities mentioned or discussed. Seek your own financial, tax, legal, accounting, or other advisor's advice before making any investment decisions. Do you own work. I am are not your fiduciary or advisor.Today's post is sponsored by Tegus. Tegus is an on-demand digital research platform on which investors share their expert calls. Their library currently has some 23,000+ calls covering many public and private companies and it's growing every day. It's a beautiful business model (I wish I was an investor!) and I could see it scaling up to cover any company and industry you can imagine. I think of it as being able to tap into a library of conversations between industry insiders. I'd encourage you to check it out - they offer free trials.Show Notes:* [Minute 1] Question: Background on Melius.* [2] Question: Key themes/takeaways from the book.* “The reasons for failure and the formulas for success haven't really changed at all. Whether it be 1950, 1980, or 2020, they are pretty much exactly the same.”* “The truth is that their secrets are hardly secrets at all—continuous improvement, rigorous benchmarking, disciplined investment, principled leadership, solid business systems* [3] Question: Assessing culture as an outsider.* “Does it drive your daily actions?”* “Danaher or Ingersoll Rand they'll do weekly meetings where you have a weekly meeting, you have like 20 minutes, you get two minutes to state your problem a minute to ask for feedback, you move on. That's an example of a daily or a weekly feedback loop that comes around. I think the best cultures have that sort of process ingrained in them.”* [5] Question: Importance of leadership.* “You make either a good allocation to capital or poor ones. And obviously that drives a ton of shareholder value differentiation, but there's also need for sustained commitment to a system. You can see lots of management teams that have sort of laid out goals, but if you don't get everybody motivated and incentivized the right way, then they can fade away.”* [6] Question: what are you paying attention to to see whether culture is changing or whether the arrogance is creeping in?* “The value gets created everyday throughout. And so, you know, if you have a culture that's spending too much time on big ideas and not enough time on generating the cash that, that allows you the flexibility to do things, if you have a culture that's veered into being a little bit PowerPoint-focused, if it's projecting yourself internally focused as opposed to executing on the daily task that can be a real red flag.”* [9] Question: Have you seen aspects of great culture that are universal or is it very specific to the company? How much room is there for bringing in ideas from the outside?* “Having clear goals, having reinforcement loops and having the ability to course correct is universal. One of the points we try to make in the book, a lot of these companies have been innovative and a lot of companies have created categories. How do you analyze caterpillar? Well, I don't look at them as the best bulldozer, and they do, but, but they might not have the best in everything. The competitive advantage doesn't always last on innovation, but it does last on getting everything, fixed, getting everything right.”* [11] Question: “Undisciplined operations don't work” - elaborate on this.* “What do you look for when you go in a factory? Well, it's not actually all that hard. You walk into the factory, you see if the sight lines are clear, if there's a bunch of inventory stacked up and piled up there, that's something wrong.That's waste. That's confusion. That's a disruption. You look to see that there an employee sort of idea board, and that there's lots of ideas flowing through because workers are the ones who see problems and they surface them. Right? So that's a mechanism for surfacing problems.”* “I went to a mining facility once, and they're these little disks that were used for smoothing or buffing the metal. And they just did a simple thing, a shadow board. It's called you paint on a, you know, on a cardboard wall. Like here's a picture of the disc. So when you're done with it, you stack it here. They found like 70 of these things, you know, they found like a million dollars of equipment. There's a picture of the broom there to hang the broom up. Right. So very, very simple things.”* “The essence of lean is stop and fix, get things, right. Surface problems. And that's a factory floor issue. But as we kind of talked about earlier, that applies to the whole company as well. If you see a problem, you can fix it. If you don't see it, then it grows.”* [15] Question: How do you weight insights from site visit in your assessment of a company?* “It's critical. And honestly, I missed it. I was a pretty new analyst on Caterpillar. When I saw some of these issues, I think I saw three or four factories in the first year, the first 18 months. And one of these visits I walked down and there's there's bins, just bins of things, labeled rework. I was like, what's rework. Well, it didn't come out right the first time. So we're going to do it again, you know? And, you know what I did, I kept writing about the end markets cause that's what I understood at that time. I kept writing about, oh, I think mining's going to be good or bad. I thought oh, well, this doesn't feel great, but I haven't seen that many factories and probably they'll fix it. And in fact that was a, you know, it was a terrible sign. Caterpillar was struggling with production not with the equipment quality, the equipment still great, but they weren't able to crank up production. * “That was actually a huge problem, a huge cultural problem, business system problem. And managers and leaders fixed it. But as I mentioned earlier, sometimes Lean takes a while. So if you've got a workforce who isn't used to it, it might take me five years to get the new system in.”* [17] Question: If it's so useful why wouldn't everyone do Lean?* “One answer to your question is continuous improvement is a compounding process, right? And Danaher is maybe the ultimate example of that, but you fix something that gets better and then you fix something else and it gets better and you keep going.”* “It takes a very serious commitment from senior management and it takes years, you know, maybe it takes five years to get everything kind of, you know, where everybody knows that their first job is to stop and fix. The first job is to reduce, you know, inefficiency. It can be tempting to say, well, let's just buy a few hundred extra hoses and just have them there, you know?”* [19] Question: Implementing Lean - like Danaher's visual management.* “It's not rocket science, right. But it is hard to do.”* “Very easy stuff, but in our day-to-day it can be hard to stop and focus on process.”* [20] Question: Is there a disconnect between analysts and management?* “You know, my job is a tricky one. You have to be arrogant enough to have an opinion, and humble enough to to know you're probably wrong most of the time, you know, close to half the time.”* [22] Question: Forecasting volatile markets.* “A lot of people in this job like thinking about things. So you get a lot of data points. You'd like to think about it. And some of the cultural stuff is harder to think about.”* “Melius uses two year forward price targets. Partly as a mental trick to try and get yourself to focus. Partly because these things show up more over time, right.”* “If you're trying to forecast a quarter, okay. You can say, well, what was, you know, what was demand of iPhone shipped this quarter or something.But if you're trying to focus on how Apple created value over the last 10 years, I mean, it's innovation and supply chain, you know? So those two things, you know then they switch and relative performance as your timeframe goes out longer.”* [24] Question: What have you observed in terms of what people do well or poorly with, with incentivizing the organization?* “If you have all your incentives structured around raising margin, that might be a phenomenal thing if you're underperforming, if your margins are low. Let's work on pricing, let's work on factory efficiency and et cetera. Eventually that playbook may come to an end. And if you're a person who's grown up in that system and you step into a leadership role it's hard to say to wall street to say all the analysts, you know what, they, we're just going to stop all that, you know, and we're gonna do something else entirely, right? Because investors invest on a certain expectation of future earnings and anything that changes.”* John Deere: “Under the current CEO, John May, they basically shifted their strategy. I think with the endorsement of the prior CEO as well, but they had tried to be a global manufacturer who was leading in all sizes of tractors and they started to look around and they said, well, the technology is changing so fast that we can actually create more value by focusing on large, we're going to try and serve all our customers. We're going to focus on investing in large farms where we can do autonomous tractors, or we can do, you know, actually they're, they're doing AI pattern recognition.”* “One company I follow United Rentals where incentives were a huge portion of the transformation. So they had different branch managers. Let's say, let's say you're a local McDonald's and you're incentivized on beating out the McDonald's down the road. That's kind of crazy. Right. And so, you know, one of the things that, one of the very simple, the powerful changes made it United rentals under a new CEO was let's shift the compensation to focus on regional or district results rather than on your own.”* “And that's a capital intensive industry. So let's charge people for the capital. You know, if you want to buy 10 more pieces of equipment to rent, [00:27:00] you know, that that's part of your compensation. You have to make a return on that. Bizarrely it had not necessarily been that way before.”* [29] Question: What metrics to track?* “Danaher and Roper they do the same thing, a very simple sort of cash return on cash invested. It's simplicity again, right. You know, if you have hundreds of metrics, it's hard to track them. It's hard to know where you're supposed to be doing.”* [30] Question: Assessing new CEOs.* “This is one of the great things about being in this industry is you get a chance to meet a lot of different management teams and you'll probably be wrong about many, but you at least have a basis on which to sort of judge.”* [32] Question: Trade-off of having access to CEOs: gaining insight vs. being subjected to selling.* [34] Question: Assessing big decisions like M&A.* “The ones that have gone wrong. And I write about a couple of them, you know, and again, a self-critical way, I thought the mining market would do X and it did Y so if you're basing an acquisition off of that, that can be very challenging.Versus if you're saying, hey, you know, I took the margins from 7% to 21% because of these processes and this company doesn't have this culture of process. And we can approve them. Then you're making more of a bet on your internal capabilities. So at least in our world that a lot of value has been created by the quote unquote compounders, like Roper like Danaher or like TransDigm. And they're able to use that to make relatively small bets that play to their strengths and they all have different strengths, let's say, but they all have a systematic way of approaching that strength or consistent way of approaching that strength.”* “If you look at Dave Cote, again at Honeywell, I believe you mentioned in his book that, you know, one of his jobs is try and create enough space for him to just sit and read and think … just finding time because being a CEO is a massively difficult job.”* [37] Question: Tell me everything you know about compounders, basically.* “They get their margins flowing, their cashflow going. They have often a fairly diverse set of businesses and they find it relatively easy to find new opportunities where they buy them and they, they run the same playbook again. So you buy a company, the margins are 10% and you bring them up to 20. All of a sudden that's generating cash. And as you do that more and more, your base gets bigger and you can compound it and ever accelerating rate. It's exponential growth. You know, an exponential growth is maybe slow at first and then very, very powerful over time.”* “I cover a few in Ametek and IDEXX, which do niche, industrial applications, Ingersoll, Rand. I think there's going to be a wonderful compounder over time that has a great system. So it's huge value creation and it's steady and it's repeatable.”* “And that's part of the idea of the book. We know what happens after innovation matures, you know, fades, it's culture, execution, and some of these things we've been talking about. So the answer is there's amazingly fruitful avenues for capital deployment. Cause not everybody has gotten these lessons and the lessons sounds simple, but they're not easy to execute always consistently.”* [40] Question: Evaluating compounders early on.* “There are companies that put up what he called a movie set. You know, it looks like lean. It looks like, you know a functioning system.And obviously they're trying, it's not meant to be, but it's not there.”* “You watch those metrics very closely. You see the steadiness, another answer to your question is what's the input, you know, so, you know, what are the daily management processes that you're doing? What are the daily cultural attributes of your company that are, that are there, right?”* [43] Question: Examples where it doesn't work?* “Illinois tool works had a decentralized system. … And in roughly 2006, seven, they had, I think 550 business units. And the idea was, you know, every business units can do a deal every year or every four years or whatever, and we'll compound it in a way, right. … I actually did a note that I didn't publish. That was one of my best notes ever, and I didn't publish it because I went back. I was like, all right, let's show how … each of those little divisions can do a deal every year and how that can drive compounding growth. I did the analysis and it looked like, well, gosh, actually it looks like they do a couple of big deals here and there.”* [46] Question: Value of CFOs.* “Sometimes we think a high-quality CFO can be, you know, under-priced in some ways. … we found that the CFO role can be going to be dramatically important.”* [49] Question: Managing relationships with companies.* “If you're an analyst and your job is to not just say, okay, that looks good, you know, but to actually create some value. There can be a desire to say something interesting, intriguing, provoking, different, right. To push them. And when that's done best, it's, you know, you're right. But I've spoken of arrogance before. I mean if you're covering Caterpillar and you have toured seven factories, but that's not that many, do you really say their production system is totally hosed? You know, is that right? Would that have been the right call for me?”* [52] Question: Smooth vs. volatile earnings.* “The CFO of Danaher's gave us this, the lesson, like, how do you think about volatile business as well? Let's say you buy something and revenues fall 20% and you apply all these fixes and you're, you know, you're applying maybe fixes for a down cycle. It'd be different for a steady business. And eventually you, you know, you get it back up and revenues, bounce back cause they're cyclical. And then now they're at 110% of where they were the effort and the lost time and compounding that you've lost during those two years of down cycle. Versus if it had just grown five percentage and you improve everything and then you've created cashflow and you can compound it. You've lost time and you've lost energy. … I think Warren Buffett has said, I'd rather have a, I don't want to misquote, a volatile 25% return than a steady 10. I think Danaher might say, well, we can do a lot with a steady 10. You know, we can sort of crank that through and compound it, whereas a volatile 20 or a volatile 15 or whatever the break point would be less valuable.”* [52] Question: Evaluating long-term investments and R&D.Enjoyed this piece? Please let me know by hitting the ❤ button. It makes my day to see if my readers like the content (it really does!) Thank you!If you enjoy my work, please consider sharing it with friends who might be interested.

I'm very excited to share my conversation with Rob Wertheimer of Melius Research and one of the co-authors of Lessons from the Titans (my notes) I really enjoyed digging into the book's big themes around the culture, business systems, and leadership of some of the most successful industrial companies. Rob shared his lessons on finding other compounders, evaluating leaders, digging into incentive structures, touring factories, and the best research note he ever wrote - but never published. Show notes, quotes, and transcript on neckar.substack.com. “You know, my job is a tricky one. You have to be arrogant enough to have an opinion, and humble enough to know you're probably wrong most of the time.”

You can find the episode on: Spotify, Apple, Google, RSS, and anchor.“It's all about how you gain control over your mind. It's all an inside job.”Hello everyone.I'm very excited to share my conversation with William Green (@williamgreen72), the author of RICHER, WISER, HAPPIER: How the World's Greatest Investors Win in Markets and Life. It's one of my favorite investment books this year because it is about so much more than just investing. William called it a “stealth spiritual book” and I have big sticker on my copy: “This is not a book about investing.”This conversation was a about William's own journey and setbacks, his search for worldly wisdom in everything from Zen Buddhism to Stoicism to the Kabbalah, and the many lessons he learned from great investors. It was the perfect conversation to bookend the year and provided me with a ton of ideas to reflect on over the holidays. I hope you will find it as valuable as I did.Also, William is working on his own podcast (he mentioned it towards the end of our conversation) for which I'm very excited. Keep an eye out for that, I'm sure he'll have some amazing guests and deep conversations.You can find the transcript here. It took a lot of time to clean up the automated transcript and I hope that going forward I'll be able to pay someone to do that work. However, this also means that the transcript is only going to be available for premium subscribers. You can still find the highlights and timestamps below.Today's post is sponsored by Tegus. Tegus is an on-demand digital research platform on which investors share their expert calls. Their library currently has some 23,000+ calls covering many public and private companies and it's growing every day. It's a beautiful business model (I wish I was an investor!) and I could see it scaling up to cover any company and industry you can imagine. I think of it as being able to tap into a library of conversations between industry insiders. For example, I recently read Michael Bloomberg's biography and am working on a piece about his origin story. What better way to find more info about the company than to jump through hundreds of expert call transcripts (thanks to their elegant search function)? I'd encourage you to check it out - they offer free trials.Disclaimer: this podcast is for entertainment purposes only and not investment advice. It does not constitute an offer to sell or the solicitation of an offer to buy any securities mentioned or discussed. Seek your own financial, tax, legal, accounting, or other advisor's advice before making any investment decisions. Do you own work! I am are not your fiduciary or advisor.Highlights:* 2.00: Introduction, William's journey to the book. * "This is not an investment book"* 3.00: “You can see within investing this exquisite complexity of life, all of the ways in which we're living in this murky place, where we don't know much, and we can't tell what the future holds. And yet we somehow have to try to make decisions.”* “Great investors  … they're tremendous pragmatists. And it struck me. I started to think of them as practical philosophers.”* 6.00: “I was working on the last part of the book. Just as COVID was turning our lives upside down. And it gave me an intense sense of my own mortality. And I started to think, well, let me at least leave one thing in my life that's worthwhile. … So there's a sort of grandiosity to the ambition of it where I'm actually trying to create something that will help readers and also at the same time, help myself.”* 7.00: William's study of everything from Zen Buddhism to the Stoics to the Kabbalah. “Tell me about what you're reading and why and how it's influenced your life?”* "I dip into the Zohar almost every day"* “I put in that sentence in the book and nobody has ever asked me about it.”* 10.00: “It's really a coded story about how do you get out of the dungeon when you're stuck, when you feel like you're going nowhere in your life, when you're lost, how do you get out of the dungeon? … And so it becomes a story about consciousness and how could he be free? While he was stuck in jail.* 11.00: “What they would say is this isn't about a fight that you have every generation with the Amalekites, this tribe that the Israelites fought with 4,000 years ago or whatever it was. It's about this war of consciousness with your own doubt. And so if you read the old Testament, literally, you just think it's kind of this meaningless story about fighting the Amalekites. But if you read it in this sense of it's all really about a path of consciousness.”* 12.00: “When I study things like Tibetan Buddhism, which I also find exquisitely beautiful or stoicism, which I found very helpful, I see this tremendous overlap. It's really all about consciousness. It's about how do you gain control of your inner landscape? How do you gain control of your mind? And, and so I think in the epilogue, I quote this great line from the poet Milton, who was blind, who was saying that the mind can make a hell of heaven or heaven of hell.”* 14.00: Sir John Templeton. “I failed to understand that what he was saying is no, no, you have to, you have to win this inner game in order to have a happy and successful life.”* 17.00: Tsoknyi Rinpoche, handshake practice.* 20.00: Jason Karp. “That disconnect between his effort and his performance was torture.”* 22.00: “The inner game of writing or investing is dealing with these fears, your anxiety, your desire to be respected, to have honor all of this stuff. It's your ability to deal with setbacks, your sense that however hard you work, sometimes it just doesn't work out.”* 24.00: Sometimes life has to burn down?* “We can get subtly misaligned and feel that we're going in the wrong direction, but you keep going. Sometimes you need it all to fall apart in a fairly dramatic way, whether it's a marriage or a job health, a career or reputation, you kinda need it to collapse.”* William's own setback and dealing with being laid off during the financial crisis.* 27.00: “One of the things that I liked about studying Kabbalah actually is that they, as I understood it, they would say if you don't believe that there's water, if you just think it's all random and that stuff just happens and it's unfair and is chaotic, you've actually created that reality because if consciousness is everything you see, the world is just chaos and disorder. But if you think there's order and there's something for you to learn and that everything is there for you to grow, then you create that reality. And it reminds me a bit, there's a beautiful [00:28:00] line from Einstein where he said, you can either live as if everything is a miracle or as if nothing is a miracle.”* “If you look at the things you've gone through, whether it's breakdowns of relationships or breakdowns of career, or existential angst, which I've had tons of over the years and you think, ‘God it all lead to these extraordinary things,' that's a totally different attitude and different framing than if you say, ‘God things never work out for me.'”* 29.00: “There's an extraordinary story where the temple, which was supposed to be the holiest place in the world in Jerusalem, burned down and rabbi Akiva, as he's watching, he starts dancing. And so that's an extraordinary thing.If you think of that triumph over sadness, uncertainty, fear about what's gonna happen.”* 31.00: How did he pick the subjects and ideas of the book?* "One idiosyncrasy of this book is that I've focused almost exclusively on investors whom I like and admire." (“I'm particularly drawn to those with wisdom, insights, and virtues that extend beyond an exceptional talent for making money.”)* 37.00: Bill Miller* 40.00: “And so I saw Bill dealing with this very painful staff in a really honest and honorable way. And he would say well he didn't realize how catastrophically wrong I could be because he said when you've been right, right, right. For all of those years, you said, even though theoretically, you know, that you need to be humble, you actually start to believe that you know what you're talking about.”* 43.00: “I write at some point in that epilogue, I say there is as great honor in the simple virtue of perseverance. And I don't say that lightly. I think that really deeply, I mean, there's something, one of the things about writing is that when, when you really simplify and distill things, you're always worried that people will see how banal your mind is and how trivial you are.* But, actually truth is pretty simple, I think. And so for me, when I'm condensing it down to that, I mean, I said there are two great lessons for me from Miller's Miller's downfall and recovery, because his recovery has been equally spectacular. One of them is about the simple virtue of perseverance and [00:44:00] one of them is everyone suffers.”* 46.00: “Life as a series of adversities that give you an opportunity either to behave well or badly” (Munger)* 48.00: How do I regain sort of control or semblance of control of, of the inner game or if my mind? Is reading enough?* 51.00: vice admiral Stockdale, * 53.00: “I used to be immensely impressed with the beauty of Miller's mind. When I was first writing about him in my twenties, there was something really wonderful about the fact that he was just so darn smart, just brilliant mind and brilliant moneymaker and gambler who outwitted everyone else.And gradually as I got older, I realized that actually what I admired most was his extraordinary resilience. And the fact that when faced with this incredible setback, he handled it just incredibly well. And, and there was a moment that I, I don't think I write about in the book where I was in his garden of his home in, in Maryland. … And he was living in a way that was deeply aligned with who he is. And he would show up for work every day and in jeans and a black t-shirt. … And I said to him, it's really amazing, it's kind of like Miller Unbound.You don't take orders from anyone. You're in control of your time, your [00:55:00] schedule, everything. And he's like, yeah, that's the best. And I, could just see that there was this kind of personal victory of this guy who is now 70, 71 who'd come through this storm and realigned himself afterwards in a way that was deeply true to who he is in all of his glorious idiosyncrasy.”* 58.00: “And, and so I'm not super impressed just with the ability to make money and not live a more thoughtful life. I think I was more impressed with that when I was younger. I liked that aspect of the [00:58:00] game of just being able to outwit the crowd. There's something about that, that I found very, very appealing.”* 59.00: What is it like to write about people who are very successful financially? Is there a downside (envy)?* “Why their lives resonated with me, whether it was a Bill Miller or a Nick Sleep, or a Monish Pabrai or Charlie Munger, in some ways they were all outsiders who had diverged from the crowd. And they were thinking in a very, in a very free way, they were questioning conventional opinion and they had constructed their lives in a way that was very true to who they are. So that resonated deeply with me because I could see that I was also an outsider who at least in my own mind who didn't naturally want to go with the crowd.”* Ed Thorp, Monish Pabrai, Irving Kahn* 1.03.00: The value of freedom and independence.* “I remember at one point working on a project with someone I really disliked who was kind of a bully and threatened me at one point and Monish said to me, you know, if you had had a bit more money, you just would have walked away and said, you know, f**k you. And, and I realized that was true.”* “It's been clarifying to me too, to know that being aligned with who you are in a deep sense is, is a very important thing. That that's the goal. It's the independence. It's not, it's not the number of zeroes in your [01:06:00] account. It's actually living in a way that's true to who you are.”* 1.11.00: Self awareness and lessons for non-professional investors. “Stumbling” into the right strategy.* From the book: Nick Sleep: "as luck would have it, he had stumbled into a field that perfectly suited his idiosyncratic mind."* "It also helps if, like Marks and Price, you stumble into an opportunity that happens to suit your talents and temperament."* Eveillard: "He had the good fortune to stumble upon Graham's value-oriented principles, which gave him an analytical edge."* 1.17.00: “Mohnish is optimized, as he once put it to me for the game of investing. He is very rational. He plays the odds. He loves playing, playing blackjack and poker and things like that for money. I mean, he figured out a card counting technique, basically. But he said it's incredibly slow and boring. But that he has the patience for, I can't play games. I find games incredibly tedious, even something like Scrabble, [01:17:00] which I should love as a word person. I'm too impatient for it. And so I have to accept the fact that I'm just not optimized to play the game of sitting in a room reading annual reports and occasionally finding a mispriced gamble, like a Munger does. That just doesn't suit my temperament. And so I have to outsource stock picking to other investors who are better suited for it. And so I think just that self-awareness of saying, am I playing a game, the plays to my strengths, my talents, and my interests.”* 1.20.00: Writing a substack vs. a book.* “And I would work 70, 80 hours a week, very consistently. It was a young man's game. It was very intense. And I think I was good at my job, but I don't think [01:22:00] probably ultimately it really suited my talents and, and it may be. Getting laid off, I'm being forced to, to figure out what should I be doing?Actually set me on a path of writing books. That's much better suited to who I am. And I love writing books. I always adored books. I love the feel of books. And I love podcasts. I love the fact that you can, you can sit and just have a thoughtful conversation. And so those are very idiosyncratic reactions and choices.”* “I write about it very briefly with a guy Mike Zapata who was in seal team six, which is the unit that, that famously killed Osama bin Laden. And he ended up setting up a hedge fund and he said to me yeah, there are three things that are important to me. He said God, family and fund in that, in that order.And he said, even this conversation that you and I are having it's a little bit outside that. And he said, that's okay. But he said, I just need to know that I need to keep coming back to God, family and fund. I, that was really helpful. And there was something, something kind of wonderfully tactless and lacking in terms of [01:25:00] EQ that he told me that.”* 1.29.00: Ed Thorp, Irving Kahn* 1.31.00: “And you look at Ed Thorp and he said, when I asked him about what he regretted in his life, he said I don't regret any of the principled decisions that I made. That's a really interesting comment. So then you think, ah, looking back in his 80s, he's really happy about the principled decisions he made, even when they worked against him, even when he made less money.”If you enjoy my work, please consider sharing it with friends who might be interested. It would mean a lot to me and help me make this my life's mission.