History Investor

In the Arena

Tue, 06 Aug 2024 10:20:00 +0000

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On Friday last week, I shared an excerpt from Theodore Roosevelt’s The Man in the Arena. I also wrote fewer words that I normally do — and received a lot of positive feedback on that email.

Initially, I was surprised, but as I thought about it more, it makes complete sense — one of the more eccentric US President’s words should be much more interesting than mine!

Given that, I thought we could take a deeper dive through Roosevelt’s Man in the Arena speech. For those interested, the full transcript can be found here.

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Who was Theodore Roosevelt?

Theodore Roosevelt, often called T.R. or Teddy, was the 26th President of the United States, serving from 1901 to 1909.

Born in 1858 to a wealthy family in New York, young Roosevelt was sickly and asthmatic. His poor health meant an early life spent mainly indoors amongst books. However, as he grew up, he found that vigorous exercise and adventure somehow atrophied the illnesses holding him back.

This focus on a “strenuous life,” as he would often refer to it, would stay with him for the rest of his life and lead to cattle ranching, business endeavors, intense hunting, military actions, and an eccentric presidency.

He graduated from Harvard and entered politics at the age of 23 after being elected to the New York State Assembly in 1882. His early start in politics was cut short when his mother and wife (two days after giving birth to their daughter, Alice) died hours apart on February 14, 1884.

As it would be for any husband and son, this double tragedy was devastating. In his journal, which he kept near-daily for most of his life, he wrote:

… I will hold on the rest of his biography for now. Maybe I can pick that back up later this year with a full email.

For those interested in learning more about T.R., I highly recommend Edmund Morris’ three-part biography of Theodore Roosevelt (currently 40% off on Amazon through that link; disclaimer: affiliate link).

When Was the Speech Given?

In April 1910, as he was spending his first year after leaving office on a trip across Africa and Europe, Roosevelt stopped in Paris at the Sorbonne and, unbeknownst to him, was to give what would become quite possibly his most famous speech — The Man in the Arena: Citizenship in a Republic.

According to Roosevelt’s biographer Edmond Morris, Roosevelt “was surprised at its success, admitting to Henry Cabot Lodge that the reaction of the French was ‘a little difficult for me to understand’”. Before the end of the week, the speech had sold 5,000 copies and been shared across Europe.

Most famous for its criticism of those that cast stones at those attempting to make progress, Roosevelt also touches on a wide-range of topics on politics and personal responsibility.

If you have made it this far, please take a moment to share the article with someone that might find it interesting — I appreciate your support!

Don’t Forget to Learn from History

The pioneer days pass; the stump-dotted clearings expand into vast stretches of fertile farmland; the stockaded clusters of log cabins change into towns… the men who wander all their lives long through the wilderness as the heralds and harbingers of an oncoming civilization, themselves vanish before the civilization for which they have prepared the way…
The conditions accentuate vices and virtues, energy and ruthlessness, all the good qualities and all the defects of an intense individualism, self-reliant, self-centred, far more conscious of its rights than of its duties, and blind to its own shortcomings. To the hard materialism of the frontier days succeeds the hard materialism of an industrialism even more intense and absorbing than that of the older nations...
As the country grows, its people, who have won success in so many lines, turn back to try to recover the possessions of the mind and the spirit, which perforce their fathers threw aside in order better to wage the first rough battles for the continent their children inherit. The leaders of thought and of action grope their way forward to a new life, realizing, sometimes dimly, sometimes clear-sightedly, that the life of material gain, whether for a nation or an individual, is of value only as a foundation, only as there is added to it the uplift that comes from devotion to loftier ideals.
The new life thus sought can in part be developed afresh from what is round about in the New World; but it can be developed in full only by freely drawing upon the treasure-houses of the Old World, upon the treasures stored in the ancient abodes of wisdom and learning, such as this where I speak to-day. It is a mistake for any nation merely to copy another; but it is an even greater mistake, it is a proof of weakness in any nation, not to be anxious to learn from another, and willing and able to adapt that learning to the new national conditions and make it fruitful and productive therein.

Build the Individual to Build the Community

The success of republics like yours and like ours means the glory, and our failure the despair, of mankind; and for you and for us the question of the quality of the individual citizen is supreme. Under other forms of government, under the rule of one man or of a very few men, the quality of the rulers is all-important. If, under such governments, the quality of the rulers is high enough, then the nation may for generations lead a brilliant career, and add substantially to the sum of world achievement, no matter how low the quality of the average citizen; because the average citizen is an almost negligible quantity in working out the final results of that type of national greatness.
But with you and with us the case is different. With you here, and with us in my own home, in the long run, success or failure will be conditioned upon the way in which the average man, the average woman, does his or her duty, first in the ordinary, every-day affairs of life, and next in those great occasional crises which call for the heroic virtues. The average citizen must be a good citizen if our republics are to succeed. The stream will not permanently rise higher than the main source; and the main source of national power and national greatness is found in the average citizenship of the nation. Therefore it behooves us to do our best to see that the standard of the average citizen is kept high; and the average can not be kept high unless the standard of the leaders is very much higher.

Don’t Sit on the Sidelines

There are many men who feel a kind of twisted pride in cynicism; there are many who confine themselves to criticism of the way others do what they themselves dare not even attempt. There is no more unhealthy being, no man less worthy of respect, than he who either really holds, or feigns to hold, an attitude of sneering disbelief toward all that is great and lofty, whether in achievement or in that noble effort which, even if it fails, comes second to achievement…
It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, and comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows the great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who know neither victory nor defeat.

Build Character Alongside Mind and Body

Let those who have, keep, let those who have not, strive to attain, a high standard of cultivation and scholarship. Yet let us remember that these stand second to certain other things. There is need of a sound body, and even more need of a sound mind.
But above mind and above body stands character—the sum of those qualities which we mean when we speak of a man's force and courage, of his good faith and sense of honor. I believe in exercise for the body, always provided that we keep in mind that physical development is a means and not an end. I believe, of course, in giving to all the people a good education. But the education must contain much besides book-learning in order to be really good.
We must ever remember that no keenness and subtleness of intellect, no polish, no cleverness, in any way make up for the lack of the great solid qualities. Self-restraint, self-mastery, common sense, the power of accepting individual responsibility and yet of acting in conjunction with others, courage and resolution—these are the qualities which mark a masterful people. Without them no people can control itself, or save itself from being controlled from the outside. I speak to a brilliant assemblage; I speak in a great university which represents the flower of the highest intellectual development; I pay all homage to intellect, and to elaborate and specialized training of the intellect; and yet I know I shall have the assent of all of you present when I add that more important still are the commonplace, every-day qualities and virtues.

Judge the Action Instead of the Action’s Reward

That is why I decline to recognize the mere multimillionaire, the man of mere wealth, as an asset of value to any country; and especially as not an asset to my own country. If he has earned or uses his wealth in a way that makes him of real benefit, of real use—and such is often the case—why, then he does become an asset of worth.
But it is the way in which it has been earned or used, and not the mere fact of wealth, that entitles him to the credit… It is a good thing that they should have ample recognition, ample reward. But we must not transfer our admiration to the reward instead of to the deed rewarded; and if what should be the reward exists without the service having been rendered, then admiration will come only from those who are mean of soul.
The truth is that, after a certain measure of tangible material success or reward has been achieved, the question of increasing it becomes of constantly less importance compared to other things that can be done in life. It is a bad thing for a nation to raise and to admire a false standard of success; and there can be no falser standard than that set by the deification of material well-being in and for itself… the man who, having far surpassed the limit of providing for the wants, both of body and mind, of himself and of those depending upon him, then piles up a great fortune, for the acquisition or retention of which he returns no corresponding benefit to the nation as a whole, should himself be made to feel that, so far from being a desirable, he is an unworthy, citizen of the community; that he is to be neither admired nor envied; that his right-thinking fellow countrymen put him low in the scale of citizenship, and leave him to be consoled by the admiration of those whose level of purpose is even lower than his own.

Both Practicality and Idealism is Needed

The citizen must have high ideals, and yet he must be able to achieve them in practical fashion. No permanent good comes from aspirations so lofty that they have grown fantastic and have become impossible and indeed undesirable to realize. The impracticable visionary is far less often the guide and precursor than he is the imbittered foe of the real reformer, of the man who, with stumblings and shortcomings, yet does in some shape, in practical fashion, give effect to the hopes and desires of those who strive for better things. Woe to the empty phrase-maker, to the empty idealist, who, instead of making ready the ground for the man of action, turns against him when he appears and hampers him as he does the work!…
Let him remember also that the worth of the ideal must be largely determined by the success with which it can in practice be realized. We should abhor the so-called "practical" men whose practicality assumes the shape of that peculiar baseness which finds its expression in disbelief in morality and decency, in disregard of high standards of living and conduct. Such a creature is the worst enemy of the body politic. But only less desirable as a citizen is his nominal opponent and real ally, the man of fantastic vision who makes the impossible better forever the enemy of the possible good.

Beware of Those that Take from Others

Of one man in especial, beyond any one else, the citizens of a republic should beware, and that is of the man who appeals to them to support him on the ground that he is hostile to other citizens of the republic, that he will secure for those who elect him, in one shape or another, profit at the expense of other citizens of the republic. It makes no difference whether he appeals to class hatred or class interest, to religious or anti-religious prejudice. The man who makes such an appeal should always be presumed to make it for the sake of furthering his own interest…
Let me illustrate this by one anecdote from my own experience. A number of years ago I was engaged in cattle-ranching on the great plains of the western United States. There were no fences. The cattle wandered free, the ownership of each being determined by the brand; the calves were branded with the brand of the cows they followed. If on the round-up an animal was passed by, the following year it would appear as an unbranded yearling, and was then called a maverick. By the custom of the country these mavericks were branded with the brand of the man on whose range they were found.
One day I was riding the range with a newly hired cowboy, and we came upon a maverick. We roped and threw it; then we built a little fire, took out a cinch-ring, heated it at the fire; and the cowboy started to put on the brand. I said to him, "It is So-and-so's brand," naming the man on whose range we happened to be. He answered: "That's all right, boss; I know my business." In another moment I said to him: "Hold on, you are putting on my brand!" To which he answered: "That's all right; I always put on the boss's brand."
I answered: "Oh, very well. Now you go straight back to the ranch and get what is owing to you; I don't need you any longer." He jumped up and said: "Why, what's the matter? I was putting on your brand." And I answered: "Yes, my friend, and if you will steal for me you will steal from me."
Now, the same principle which applies in private life applies also in public life. If a public man tries to get your vote by saying that he will do something wrong in your interest, you can be absolutely certain that if ever it becomes worth his while he will do something wrong against your interest.

If you found today’s issue interesting, more than anything, I would appreciate you forwarding it to someone that might also enjoy it. It is a big deal to me whenever someone reads my work, so I appreciate your support.

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Have a great weekend,

historyinvestor.com

Twitter / X: @HistoryEJ

Disclosure: Nothing in this article constitutes investment advice. More detailed disclosure here.

CrowdStrike Strikes

EJ — Fri, 02 Aug 2024 10:20:00 +0000

Happy Friday — and welcome all new subscribers!

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On My Mind

In April 1910, as he was spending his first year since stepping down as President traveling, Theodore Roosevelt was in Paris and gave what was to become quite possibly his most famous speech: The Man in the Arena: Citizenship in a Republic.

The speech is most famous for its discussion of how progress is made by those that try and fail — not by those that criticize those that failed. However, another part of the speech — below — has always stood out as more important to me.

Roosevelt reminds us to carefully consider why we choose the leaders we do — and to be mindful of the promises we hear them make. Given the election year in the US, it’s been on my mind a bit.

Of one man in especial, beyond any one else, the citizens of a republic should beware, and that is of the man who appeals to them to support him on the ground that he is hostile to other citizens of the republic, that he will secure for those who elect him, in one shape or another, profit at the expense of other citizens of the republic. It makes no difference whether he appeals to class hatred or class interest, to religious or anti-religious prejudice. The man who makes such an appeal should always be presumed to make it for the sake of furthering his own interest…
Let me illustrate this by one anecdote from my own experience. A number of years ago I was engaged in cattle-ranching on the great plains of the western United States. There were no fences. The cattle wandered free, the ownership of each being determined by the brand; the calves were branded with the brand of the cows they followed. If on the round-up an animal was passed by, the following year it would appear as an unbranded yearling, and was then called a maverick. By the custom of the country these mavericks were branded with the brand of the man on whose range they were found.
One day I was riding the range with a newly hired cowboy, and we came upon a maverick. We roped and threw it; then we built a little fire, took out a cinch-ring, heated it at the fire; and the cowboy started to put on the brand. I said to him, "It is So-and-so's brand," naming the man on whose range we happened to be. He answered: "That's all right, boss; I know my business." In another moment I said to him: "Hold on, you are putting on my brand!" To which he answered: "That's all right; I always put on the boss's brand."
I answered: "Oh, very well. Now you go straight back to the ranch and get what is owing to you; I don't need you any longer." He jumped up and said: "Why, what's the matter? I was putting on your brand." And I answered: "Yes, my friend, and if you will steal for me you will steal from me."
Now, the same principle which applies in private life applies also in public life. If a public man tries to get your vote by saying that he will do something wrong in your interest, you can be absolutely certain that if ever it becomes worth his while he will do something wrong against your interest.

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Quote of the Week

“We must love them both, those whose opinions we share and those whose opinions we reject, for both have labored in the search for truth, and both have helped us in finding it.”
— St. Thomas Aquinas

What I like about this quote is that it makes two points:

Listen to those that disagree with you…
… if they have genuinely put in effort thinking

#2 has to be true — if it is not, then #1 can be tossed out.

This reminds me of a similar idea, Hitchen’s Razor: “What can be asserted without evidence can also be dismissed without evidence.”

So often I hear people merely say, “Listen to what the other side has to say.”

Well, not every opinion is worth listening to. Keep that in mind when you want to share your own opinion next, as well.

Poll of the Week

Last Week

Question: When were you last sick?

Results:

🟨🟨🟨⬜️⬜️⬜️ I'm currently sick

🟨🟨🟨🟨⬜️⬜️ Within the last month

🟩🟩🟩🟩🟩🟩 Within the last 6 months

🟨🟨🟨🟨🟨⬜️ Within the last year

🟨🟨🟨🟨⬜️⬜️ It's been more than a year

Things to Read

CrowdStrike Outage | From Crashes and Competition by Stratechery, 2024

In any massive failure there are a host of smaller errors that compound; in this case, CrowdStrike created a faulty file, failed to test it properly, and deployed it to its entire customer base in one shot, instead of rolling it out in batches. Doing something different at each one of these steps would have prevented the widespread failures that are still roiling the world (and will for some time to come, given that the fix requires individual action on every affected computer, since the computer can’t stay running long enough to run a remotely delivered fix).

Berkshire | From 1994 At a Glance by Kingswell, 2024

One of my favorite things to do is to read the transcripts of old Berkshire Hathaway annual shareholders meetings over at CNBC’s Warren Buffett Archive.
(Yes, I realize how sad that sounds.)
The Warren Buffett Archive is an invaluable treasure trove that grants us a peek into the Berkshire AGMs of yesteryear — long before they were streamed online or received much media coverage at all.
Unfortunately, these unedited transcripts can be a bit unwieldy. Expect lots of umm’s, ahh’s, and fragmentary sentences that don’t go anywhere. What sounds perfectly natural spoken aloud often appears awkward and hard-to-read when written down.
Oh, and these transcripts are really, really long.
So, earlier this summer, I set out to do something about that — distilling the many hours of questions and answers at the 1994 AGM into a more readable and condensed format. I did not omit any question or answer, but simply summarized them all so as to get right to the point. If anything, I tried to err on the side of brevity.

Wisdom | From 77 Life Lessons by Arnold Schwarzenegger, 2024

Lesson #5
Decide who — not what — you want to be. Make your vision a part of your identity. Don’t say, “I want to be fit.” Say, “I want to be the type of person who can keep up with my kids and grandkids,” or “I want to be the person who everyone looks at on the beach.”
Lesson #41
Don’t major in the minor. There are so many people who worry about the last 5 percent so much that they never start working on the first 95 percent. Which supplements should I take? Which workout is optimal? Which diet is best? If you haven’t gotten the basics in order — training routinely and eating mostly real food — you’re wasting your time. Approximately 95% of your results will come from a basic foundation of training and good food.
Lesson #44
Show up—for yourself, for others, just show up. The biggest difference between successful people and everyone else is that successful people get up over and over again when they fall and just keep showing up. Giving up has killed more dreams than failure ever will.

Getting Started | From How Benjamin Graham Survived by Beyond Ben Graham, 2024

Ben proceeded to negotiate a salary of $12 per week, two dollars higher than N.H.&L’s typical starting salary but much less than he’d earned while moonlighting as a college student. Today’s top finance graduates may command substantial salaries in New York but Ben Graham would not be able to make ends meet without tutoring the children of army officers on Governors Island after working his long day on Wall Street…
In order to learn the business, Ben started out performing humble duties. He worked as a runner, delivery man, order clerk, and bookkeeping assistant. Right off the bat, he couldn’t believe the laxness he observed. His mother valued every penny and had taught him to take great care with money…

Visuals

Presidential Election: Nate Silver Stats

Presidential Election: Relative Advertisement Spending

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Have a great weekend,

historyinvestor.com

Twitter / X: @HistoryEJ

Disclosure: Nothing in this article constitutes investment advice. More detailed disclosure here.

Do Less, Do More

EJ — Fri, 26 Jul 2024 10:05:00 +0000

Happy Friday — and welcome all new subscribers!

I’ve managed to get sick — thanks to a toddler I love very much. I hope everyone here is doing much better than me — but let us all know in the Poll below!

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On My Mind

I often fall into the trap of trying to do too much.

It is easy to look at 24 hours in a day, say that is nowhere near enough time to do everything you want to do but you are going to try anyway, stuff your schedule full of idealistically optimized tasks, fail miserably at roughly all of them, and then feel bad about it when you are trying to sleep that night.

Then, something happens in life — like an insane deadline at the office — and suddenly those 24 hours nearly completely disappear. You have all of ~0 hours left each day to accomplish everything your mind says you should.

You are forced to remember the word prioritization. It is a word that hurts — but you haven’t any choice, so you do only the things that must be done. You feel a bit of anxiety and stress because of what you leave behind. But, one foot in front of the other and, eventually, you survive.

And survival feels good enough. You get past whatever stole those 24 hours — and you get some or most of them back.

And then, often quite quickly, you forget that painful word prioritization. You are back to jamming too much into those 24 hours, and that same bit of anxiety and stress find you again.

More hours didn’t improve your life. With less hours, you survived. With more, you drowned. It was never a question of how much time you had — it is about whether or not you can face that word, prioritization.

To quote Ryan Holiday of the Daily Stoic:

Each of us needs to take the time to set our priorities straight and to understand our limits... The key isn’t to always do more, more, more, but sometimes to do less so that we can do more of what we care most about.

Also, from Seneca, in the Quote below 👇

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Quote of the Week

“Tranquility lies in not undertaking tasks, either in public or private, that are either numerous or greater than our resources.”
— Seneca

Poll of the Week

Last Week

Question: What time do you tend to wake up?

Results: I’m in the 5am crowd… somewhere between 5:00am and 5:30am. Before my son was born, I was up at 4:15am every morning and in bed by 8:30pm. That no longer works…

🟨🟨⬜️⬜️⬜️⬜️ At / before 4 am

🟨🟨⬜️⬜️⬜️⬜️ 5 am

🟨🟨🟨🟨⬜️⬜️ 6 am

🟨🟨⬜️⬜️⬜️⬜️ 7 am

🟩🟩🟩🟩🟩🟩 8 am

🟨🟨🟨⬜️⬜️⬜️ At / after 9 am

Things to Read

Untouched Rainforest | From The Secret Garden by Andy Wright, 2018

The story of the Mount Lico expedition began six years ago when Bayliss, a conservation scientist and butterfly expert, happened to spy a small forest atop a mountain using Google Earth…
While locals were aware of Mount Lico and used the natural resources of surrounding forests, its tall, sheer walls meant that it was nearly impossible to access, which made it likely that the land on top was untouched by humans. However, scientists would later find out that someone had been up there at least once.

You Will Be Wrong | From The Folly of Certainty by Howard Marks, 2024

Sometimes things go as people expected, and they conclude that they knew what was going to happen. And sometimes events diverge from people’s expectations, and they say they would have been right if only some unexpected event hadn’t transpired. But, in either case, the chance for the unexpected – and thus for forecasting error – was present. In the latter instance, the unexpected materialized, and in the former, it didn’t. But that doesn’t say anything about the likelihood of the unexpected taking place.

Winners Win | From The Quality Factor by Byrne Hobart, 2024

A surprising stylized fact about markets is that, in general, it pays to own stocks that have high margins, stable earnings, and low leverage. You can hardly finish saying the intuitive explanation—that these are better businesses that will profitably grow in size over time—without interrupting yourself to ask why that wouldn't be instantly reflected in their valuations. The claim behind the quality factor is not just that these companies will do well, but that they'll continue to do better than investors expect…

Authoritarian | From The Real North Korea by Andrei Lankov, 2014

All of which is why we may soon be entering a golden age for truly psychotic totalitarian regimes. The Kim Il-Sung of the future won’t need an army of peasants expecting tile roofs if he has an army of killer robots, and ChatGPT is much cheaper than a full-time propaganda minister.
Depending on how good AI gets, it will sharply reduce the number of people required to run an effective regime. In the limit, you can imagine a single mad king with no human servitors at all, just a computer as his grand vizier. There would be no limit to how brutal or crazy this guy could get, no limit to what he could do to his populace for fear of triggering a revolt amongst his own bodyguards.
He would also be able to read the minds of dissidents. A singularity is another word for a black hole from which there is no escape. Kim Il-Sung was born a century too early. In another few decades the Eternal President might really have been able to build his eternal paradise. Sweet dreams.

Visuals

Fewer Unicorns Being Minted

Daily S&P500 Returns Since 2020

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Have a great weekend,

historyinvestor.com

Twitter / X: @HistoryEJ

Disclosure: Nothing in this article constitutes investment advice. More detailed disclosure here.

My Wife Bought Oreos

EJ — Fri, 12 Jul 2024 10:12:00 +0000

Happy Friday — and welcome all new subscribers!

I hope everyone had a good July 4th week — and I am glad to be back after the week off.

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On My Mind

My wife bought Oreos earlier this week.

I’m usually a very strict eater — I grew up with a number of food allergies and, genetically, my body loves storing excess fats as triglycerides and cholesterol. Thus, I’ve had to learn what to eat and what not to eat. After a few decades, it is fairly straightforward, unless…

“Have some self control,” she says disappointingly.

“I have incredible self control — I’ve not bought Oreos in over fifteen years! Why did you buy them?!”

“Don’t eat them… They are mine!”

You see — the issue is that while the purchased Oreos might be “hers,” they are very much in “our” house. The fact that she will eat +/- 2 of them a day drags out the whole Oreos-in-the-house problem. And that’s a big problem… because I love Oreos to an irrational extent.

Whereas my wife might view the pack of Oreos as a pleasant surprise when she opens the pantry, my eyes can’t see anything but Oreos when they are there.

I never consider buying Oreos — I walk past their aisle without a second thought. But, if they are in my pantry, I can’t resist their siren song.

At the grocery store, I have goals — get in, find the items I need (which are always the same), interact with other humans in the store as little as possible, leave before getting hurt. My brain must realize that grabbing the Oreos doesn’t help accomplish the above.

At home, however? I hit a snag while writing and suddenly my brain blacks out and I find myself sitting at my desk with six Oreos seconds later. If there was an Oreos Anonymous, my buddy sponsor would give up on me.

It’s a bit of an odd juxtaposition, isn’t it?

But I think there are a lot of things like that — things in your environment can dictate your brain’s priorities.

As parents, my wife and I have taken advantage of environmental cues with our toddler — we sing the same song every night when it is time to go to bed. Now, whenever our toddler hears the song, regardless of what he is doing, he slows down and looks for someone to carry him to his room.

And that’s what is on my mind this week… my wife changed my dietary behavior with an environmental cue. She doesn’t want me to eat the Oreos, but she knows what will happen when she brings them home: my self control disappears.

As you interact with others throughout your day — business or personal — are there environmental cues you can send that better help you get what you need?

Is a tone of voice, the presence of someone else, the form of communication, the location of a conversation, and so on, a better way to environmentally cue the other side towards the outcome you want?

If so, why aren’t you taking advantage of it?

Quote of the Week

“Pick an industry where you can play long-term games with long-term people.”
— Naval Ravikant

Poll of the Week

Last Week

Question: If you have a mortgage, what is your interest rate?

Results:

🟨🟨🟨🟨🟨⬜️ < 3%

🟨🟨🟨⬜️⬜️⬜️ 3 - 5%

🟨🟨🟨🟨🟨⬜️ 5 - 7%

🟩🟩🟩🟩🟩🟩 7% +

I would be in the more fortunate camp, with a 2.99% mortgage. The lowest I’ve seen on a 30-year fixed was a 2.60% a colleague got in late 2021.

Responses: KH: ”I've got 5.99 on my home, but 2.875 on my old home that we chose to keep due to the insane rate, leaving us as reluctant landlords.”

Things to Read

Anthrax Detective | From How to Catch a Lab Leak by Santi Ruiz, 2024

I'll start by telling you how I got involved in the Sverdlovsk anthrax outbreak.
I was asked by a man at the Central Intelligence Agency named Julian Hoptman, who was in charge of a small unit dealing with biological threats, to come down and become part of this small working group. They had just learned about this anthrax epidemic and naturally wanted to know what it was…
There was another article in a veterinary journal about the outbreak of anthrax in sheep and cattle, and it named some villages. I don't think anybody but me tried to find out where these villages were, because they're little teeny nothing villages, but somehow I found out. And I noticed four of them were all in a straight line. At the time I thought it might be because there's a highway that goes from down south to Sverdlovsk…
I talked with John McMahon, who later became the deputy CIA director. He was all for it. He said, “We would love you to go there. We'd like to have an American go there.” He gave me a map, because he said, “When you're there, they may take you somewhere in Sverdlovsk, and they'll tell you it's this place, and it'll be nothing. It'll be a chocolate factory or something. So I will give you the exact longitude and latitude”…
Anyway, I'm all ready to go, and then the Russians shoot down, probably by mistake, a Korean jet, and everybody died. I get a letter from Dumayev, and he says, “In view of events with this jet, it's not a good time. Unfortunately I cannot invite you.”

Perseverance | From Soldiering Through Life by Kingswell, 2024

Fittingly, Charlie Munger touched on this very subject in his final televised interview.
“Everybody struggles,” he told Becky Quick. “The iron rule of life is that everybody struggles.”
But he also offered a hopeful solution.
“If you soldier through, you can get through almost anything. It’s your only option. You can’t bring back the dead. You can’t cure the dying child. You can’t do all kinds of things. You have to soldier through it.”
“If you have to walk through the streets, crying for a few hours a day as part of the soldiering, go ahead and cry away. You can cry — but you can’t quit.”

Why So Early? | From The Cult of 5am by Anita Chaudhuri, 2024

He also points out that the most enthusiastic exponents of these regimes are people who can afford to outsource life admin. “These productivity gurus and entrepreneurs have money to pay people to do everything. Imposing this schedule on other people is punitive and it’s also boastful: ‘Oh, aren’t I a great person; why don’t you become more like me?’ Truth is, most of us can’t afford to”…
I decide to talk to some non-celebs who have made the 5am club work for them. Jenny Wilson, a colour therapist, gets up every morning at 4.55 and, while the rest of her family sleeps, has a quick shower before creeping into the spare room to start her day…
On day eight, I wake up at 5.04am without an alarm. The morning beckons. Do I bound out of bed to seize the day? I do not. I decide to return to my usual wake-up time, only now with a renewed focus. The week hasn’t been a total waste of time – far from it. What it has made me realise is how much time I was wasting before, particularly in the morning. It’s not when you get up that matters – it’s how you choose to use the precious minutes you have that really counts.

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Threads Users Less Likely to Use X Over Time

U.S. Private Equity Exit Values Down

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historyinvestor.com

Twitter / X: @HistoryEJ

Disclosure: Nothing in this article constitutes investment advice. More detailed disclosure here.

Stop the Bleeding

EJ — Fri, 28 Jun 2024 16:05:00 +0000

Happy Friday — and welcome all new subscribers!

Given July 4th next week, I plan to skip hitting send on the standard Friday email. I look forward to picking it back up the following week!

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Quote of the Week

The time to figure out what went wrong is after you stop the bleeding.
— Rich Handler, CEO of Jefferies

In 2021, one of Jefferies’ large clients, Archegos, lost somewhere between $8bn and $20bn over a few days.

Jefferies’ CEO, Rich Handler, is famous for having saved his bank a lot of money — and doing so in a somewhat stylish way:

Jefferies calls CEO Rich Handler, who is on holiday in Turks and Caicos with a spicy margarita on the way. They tell him Archegos isn’t answering their calls. Handler says he’s going to get his cocktail and he wants Archegos positions gone and a tally of losses by the time he comes back.
It was one of the few banks that escaped with minimal losses.

You see, a number of banks had loaned funds to Archegos. Those loans were backed by the securities Archegos owned. As the company started to unravel (due apparently to fraud, amongst other things), the banks asked for their money back.

Archegos stopped taking their phone calls.

Jefferies, thanks to Handler’s advice above to “liquidate them by the time my margarita arrives“, was one of the first lenders to start liquidating the assets Archegos held to pay off their loans.

Other banks were not so fast to move, and consequently did not avoid as much of the pain. Estimated losses, per a Wikipedia summary:

Company	Loss ($mm)
Credit Suisse	$5,500
Nomura	$2,850
Morgan Stanley	$911
UBS	$774
Mitsubishi UFJ Financial	$300

Why did all the banks here lose so much?

Once it was obvious something was wrong at Archegos, the banks tried to understand what was wrong while they were watching themselves lose money. As they tried to understand what was happening, they kept bleeding.

Jefferies, on the other hand, stopped the bleeding. After everything was bandaged, for them at least, they could take a breath and understand what had happened.

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Poll of the Week

Last Week

Question: In an average week, do you spend more time reading or listening (podcast, similar)?

Results: 58% of responders spend more time reading — I would be in the same camp. Though, since we had our first kid, podcasts have taken up a larger and larger share.

Things to Read (and Listen to)

Too Far | From What Will Future Humans Look Like by Natalie Wolchover, 2012

According to Stephen Stearns, a Yale professor of ecology and evolutionary biology, before the invention of the bicycle, the average distance between the birthplaces of spouses in England was 1 mile (1.6 kilometers). During the latter half of the 19th century, bikes upped the distance men went courting to 30 miles (48 km), on average. Scholars have identified similar patterns in other European countries. Widespread use of bicycles stimulated the grading and paving of roads, lending credence to the Fugate clan's excuse and making way for the introduction of automobiles. Love's horizons have kept expanding ever since.
"The distance between the birthplaces of parents has continued to increase since the invention of the bicycle, making it now easy, if not standard, for parents to have been born on different continents," Stearns told Life's Little Mysteries.

What is Great? | From On the Reign of Alexander by Bret Devereaux, 2024

Alexander has a lot of failings, and we’re going to get to them. But he was unnaturally composed and at least when it came to doing violence (and getting others to do violence effectively) he was highly competent, almost absurdly so. Not because he had some sort of world-shaking flash of brilliant insight, of ‘genius’ in the popular sense, but because he had a composed, calm but determined mind with an intuitive grasp of what his army was capable of and what simple solutions would work and be required in the moment, genius in the Clausewitzian sense (drink!).
The question that raises, of course, is a value judgement: is it enough to merely be good at killing and destroying in order to be great?

Too Cheap | From America’s Frozen Housing Market by Carol Ryan, 2024

As more owners stay put, the number of homes on the market has fallen. Tight supply is pushing prices higher, shrinking the pool of buyers who can afford a home. A household earning $100,000 a year can only afford 37% of home listings today, according to the NAR. In a balanced market where there is around five months’ supply of inventory available the number should be 62%…
Craig Picken, co-founder of Northstar Group, a search and recruiting firm of top talent in the aerospace sector, said that it had become difficult to match companies with the right executives because relocations have financial costs that neither employees nor employers want to shoulder. He gave the example of a vice president of engineering trapped in a “toxic and bureaucratic” workplace with a long commute who nonetheless turned down a new role because he had an existing 3% mortgage.
“His decision came down to an Excel spreadsheet…The salary increase he’d get with the new job was eaten by higher mortgage costs,” says Picken.

Alone | From They Choose to Live in Isolation by Adam Goodheart, 2023

There seems to be no simple explanation for how the Sentinelese, of all the human communities on Earth, have managed to remain so isolated for so long. Now and then over the past couple of centuries—first when the British extended their empire across the Andaman Islands in the 1850s and later after India took control of the archipelago—various outsiders have tried to make contact with North Sentinel locals.
From 1967 to the early 2000s, Indian government anthropologists occasionally were able to approach the beach by boat, twice in 1991 even drawing close enough to hand coconuts and bananas to islanders in the surf. More often, the Sentinelese simply melt away into the jungle when intruders draw too near or respond as they did to Chau: first with gestures and exclamations that unmistakably communicate warning—and then, if that fails, with volleys of arrows…
Although the Sentinelese can’t see these huts from their own settlements, they can likely see the yellowish gray smog that hangs over Port Blair, the islands’ administrative capital. They can definitely see the passenger jets, which pass close enough that tourists press their faces and phones against the windows to capture Instagram-bound images. Certainly the Sentinelese, sharp-eyed hunter-gatherers, have observed the outside world as intently as the outside world has observed them; more so, probably, since our boats and flying machines have by now become familiar parts of their surroundings.

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Tesla Growing Slower Than the EV Market

Startup Shutdowns Hit a New High

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Twitter / X: @HistoryEJ

Disclosure: Nothing in this article constitutes investment advice. More detailed disclosure here.

Mongolian Conquest

EJ — Fri, 21 Jun 2024 11:01:00 +0000

Happy Friday — and welcome all new subscribers!

I’m rebounding from LASIK and my doctors say that the uncommon complication — called DLK or Diffuse Lamellar Keratitis — is trending better. So, fingers crossed — and thank you to everyone who sent their well wishes!

On My Mind

More on DLK: While today the complication is somewhat uncommon — the clinic I went to gets 1 or 2 cases per 500 procedures or so — DLK following LASIK used to have incidence rates as high as 10% (depending on the source I find and what my doctor has said).

As technology improved — and lasers were used for a part of the surgery that previously involved a very sharp blade — the entire LASIK procedure became easier on the eye, reducing the body’s inflammatory reaction to the cuts and tissue ablation.

Thus, when I got DLK, it was a bit unexpected.

Fortunately, my opthamologist knows the treatment protocol and we started that immediately. However, given the low incidence rate, once it looked like the standard method of treatment might not be working as well as hoped, she was rather unconfident on next steps to take with treatment protocols.

Because of her lack of experience (which was not any fault of her own — there was no way she could have the experience given the progress of technology), she routinely consulted with a semi-retired doctor that started doing LASIK-like surgeries 30 years ago. Given DLK was more common in the past, he has significant experience with treatment protocols and disease progression.

I am lucky that this older doctor is around to help. But that will not always be the case.

30 years from now, and after these doctors with experience move on — and when technology improvements might mean 1 in 5,000 patients get DLK — how will the then-opthamologists understand treatment progressions and protocols?

Writing, drawings, scientifics studies, photos and videos all help — and you can memorialize things through those mediums. But those mediums transmit knowledge / learnings and not experience. My doctor knew the facts of how to treat DLK — but having less experience, she was unsure of herself when things became a little less standard.

First-hand knowledge like this is lost over time as it becomes less relevant — this is nothing new. I bet 1,000 years ago more people could self-start a fire in the woods for survival than can do so today. It is still useful to be able to start a fire — but you rarely ever need to anymore. So we don’t know how.

I do wonder if there is a step change about to happen in the speed of lost edge-case-related competence. While it sounds like an overused word by now, AI is getting pretty clever. We are seeing companies using it to read medical images without doctors in the loop, analyze legal documents for changes that need to be made, and serve up answers to questions in fractions of a second.

Right now, doctors still know how to read medical images, attorneys know what legal tricks to look for, and humans can leaf through paper books not yet digitized in order to find answers.

Will that always be the case? What happens when we lose some of those skill sets because a computer handles it so well that the average person doesn’t ever need those skills again?

Or — let’s think about programmers leveraging AI to write code. Often, the programmers leveraging AI for real use cases are incredibly experienced developers that generally use more junior programers for the bulk of code writing. The experienced folks focus only on the hard, nuanced parts of code.

What happens if AI replaces the junior programers — can we ever get experts that solve the hardest problems if people don’t first grind through years as junior code writers to build sold foundational skills and understanding?

I don’t know. I guess we will see. I’m optimistic everything will work out alright.

But — after having watched the uncertain face on my opthamologist frown defeatedly before she dashed off to call an older doctor — these things worry me a bit more than they had before.

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Quote of the Week

It is always thus — impelled by a state of mind which is destined not to last, we make our irrevocable decisions.
— Michael Proust

Poll of the Week

Last Week

Question: Do you wear glasses / contacts?

Results: 54% of responders do NOT wear glasses. At the end of May, I would have been in the minority — but given LASIK is trending well, it seems like I will have to vote “No” here as well.

Things to Read (and Listen to)

Genghis Khan | From Wrath of the Khans by Dan Carlin, 2012

Part One
In one of the most violent outbursts in history a little-known tribe of Eurasian nomads breaks upon the great societies of the Old World like a human tsunami. It may have ushered in the modern era, but at what cost?
Part Two
The Mongol leader Genghis Khan displays an unmatched level of strategic genius while moving against both Northern China and the Eastern Islamic world. Both civilizations are left stunned and millions are slaughtered.
Part Three
The expansion of Genghis Khan’s conquests continue, with locations as far apart as Europe and China feeling the bloody effects of Mongol warfare and retribution. Can anything halt the carnage?
Part Four
The death of Genghis Khan, the founder of the Mongol Empire, should have slowed the momentum of Mongol conquests, but instead it accelerated it. This time though, all of Europe is on the Mongol hit list.
Part Five
Succession issues weaken the Mongol Empire as the grandchildren of Genghis Khan fight over their imperial inheritance. This doesn’t stop them from dealing out pain, suffering, and ironically good governance while doing so.

Given LASIK a couple weeks ago, I am still getting re-ramped on reading. My eyesight feels great, but reading tends to wear down my eyes. Apparently, that might be the case for a couple more months — especially on screens.

Thus, I’ve allocated more time to Dan Carlin’s Hardcore History. Two weeks ago, I was going through his series on Japan in WWII. This week, I’ve kicked off his Genghis Khan / 13th century Mongolian Conquest series.

I’ve always had an interest in Mongolian history — partially from just being a bit of a history nerd growing up and partially because Richard Feynman went on an adventure to find Tannu Tuva — but my understanding of that Mongol Conquest-related history was a somewhat romanticized version.

Carlin shattered the rose-colored glasses I was wearing and highlights the brutal reality that was 10 to 50 million people losing their lives at the hands of the Mongols in this period.

While the military strategy and tactics the Mongols deployed were exceptionally forward thinking at the time, it is a bit nearsighted to focus there and not realize the human cost for those on the receiving end of Mongolian triumph.

Long-term | From Quiet Compounding by Morgan Housel, 2024

Long-term investing is about being able to absorb manageable damage; if you can’t do that, you’re pushed into the much harder trick of attempting to avoid short-term volatility. You’re only durable when you care more about surviving volatility than you do looking dumb for getting hit by it in the first place.
Instead of trying to look smarter than everyone else, you make a quiet bet that things will slowly get better over time.
You’re not in a hurry, yet everything is accomplished.

Disagreement | From A Lesson in Restraint by Kingswell, 2024

In a column on April 25, 2014, Joe Nocera of the New York Times called Buffett a “coward” and a “hypocrite” for wimping out with said abstention. That was just the first salvo of a bizarrely aggressive (and personal) series of attacks from Nocera on the matter. In the end, The Gray Lady eventually issued a flurry of corrections on his articles and the paper’s ombudsman even took Nocera to task for his slanted coverage of Buffett’s decision.
But, while Nocera kinda went off the deep end in his criticism, he was far from alone. Even at the usually friendly home cooking of the Berkshire AGM, one shareholder called the abstention “very strange, un-Buffett-like behavior”.
For one of the very few times in his professional life, Warren Buffett found himself on the back foot.

Laughing | From Our Sense of Humor and Age by Daniel Parris, 2024

When the scene finally came, the entire theater erupted with laughter, and the person laughing loudest of all was my dad. I was in shock: How was this possible? I always assumed that there was adult humor and child humor and that never the twain shall meet. Weirder still, I had never seen my dad laugh so hard during a movie.
After a few seconds of confusion, I decided to stop overthinking things and simply laugh along—father and son laughing at a stylish montage of phalluses. In hindsight, I had underestimated my father's ability to find things funny and his desire for laughter. For some reason, I always thought adults didn't want to laugh as much as children. I assumed that as we aged, our need for humor was replaced by reading The New York Times, eating charcuterie, perusing Wirecutter articles, complaining about the price of gas, and watching The Sopranos. Well, I was wrong. Everybody wants to laugh—even grown-ups.

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S&P 500 Earnings Growth…

…Fueled by the Largest Names

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Disclosure: Nothing in this article constitutes investment advice. More detailed disclosure here.

An Email From 2008

EJ — Fri, 14 Jun 2024 11:01:10 +0000

Happy Friday — and welcome all new subscribers!

On My Mind

Late last week, I got LASIK. If you are not familiar with the procedure, you can learn more about it from the FDA here. In summary, it is a surgery to correct vision.

I’ve had terrible eyesight since I was young — and it progressively decayed into my mid-twenties before settling out.

An average person has “20/20” vision, which means they can see what the average person can see at a distance of 20 feet. My vision was a bit worse than “20/600” — meaning, what the average person can see at 600 feet, I could see at 20 feet.

Fortunately, glasses worked well enough. However, if I ever lost those glasses, I was, for all intents and purposes, blind.

The procedure went well, and it was amazing — by the end of the day, I could see better than I could with glasses. I was seeing 20/15. It felt like magic.

However, the next morning, I found out that I am dealing with a somewhat uncommon, inflammation-related complication. Doctors are optimistic and apparently this complication is easily treated — but it does mean that I have to rest my eyes quite a bit.

Because of that required rest, I did not read much of anything this week — and maybe won’t next week, too!

Wait — “How are you writing this, then?” you might ask. Voice-to-text is pretty amazing. I can then spent only a little time editing on a keyboard!

However, I was sure everyone here reads more than just History Investor — meaning you might have things to share with other readers.

Thus, I reached out to the top 100 most active History Investor readers and asked for some help — this week’s edition features an aggregation of sources that those readers recommended.

Thank you to everyone that responded with something to share!

Going forward, I would love to keep sharing ideas from you all — if you ever have anything you would like to share with other History Investor readers, shoot me a note and we can include it in a Friday email.

Thanks!

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Quote of the Week

Fall in love with some activity, and do it!
Nobody ever figures out what life is all about, and it doesn't matter.
Explore the world. Nearly everything is really interesting if you go into it deeply enough. Work as hard and as much as you want to on the things you like to do the best.
Don't think about what you want to be, but what you want to do.
— Richard Feynman

Poll of the Week

Last Week

Question: On average, do you listen to music from 10+ years ago or from today?

Results: 59% listen to music greater than 10 years old. I would be in the same camp! Bluegrass, Jazz, Folk — though with a dash of techno dance music when working out 😃 .

Responses: ”I listen to an eclectic mix music from the late 50’s through today’s current hits. I often confound Spotify’s algorithms.”

Things to Read (and Listen to)

World War II | From Supernova in the East by Dan Carlin, 2018

The Asia-Pacific War of 1937-1945 has deep roots. It also involves a Japanese society that’s been called one of the most distinctive on Earth. If there were a Japanese version of Captain America, this would be his origin story.

Given I couldn’t read much, I decided to listen. I’ve been a big fan of Dan Carlin’s Hardcore History for a long time. Despite meaning to get to it eventually, I had never listened to one of his most popular series — a review of WWII Japan and the Asia Pacific portion of the war.

It is worth listening to — though it is 25+ hours in length across the multi-part series.

Aztecs & Spanish | From History of Conquest by William Prescott, 1843

Perhaps because it represents an heroic struggle against adversity, William Hickling Prescott's triumph over blindness often has been given more emphasis than his preeminence as an American historian.
The accident he suffered while a student at Harvard College was, it is true, a determining factor in the choice of his career. He was struck by a crust of hard bread and the sight of his left eye was destroyed. After graduation, when his right eye began to fail, he abandoned the practice of law in his father's office to seek medical advice in Europe. Living for almost all the rest of his life in a darkened room, he devoted himself to literary research.
His first great work was History of the Reign of Ferdinand and Isabella. After working for a time on a life of Moliere, he forsook it for his preparatory work on his History of the Conquest of Mexico. Washington Irving, who was doing research in the same field, withdrew in Prescott's favor. Because of his failing sight, he developed a phenomenal memory, upon which he depended during the time of his monumental labors.
Undeterred by his affliction, he undertook, after the completion of his Conquest of Peru, to revise Ticknor's History of Spanish Literature. His last work was the first two volumes of his unfinished History of Philip II, published in 1856. He died, in his sixtythird year, in 1859.

Opportunities | From Twitter by Tim Ferris, 2008

A 2008 e-mail I received from a mentor:
While many are wringing their hands, I recall the 1970s when we were suffering from an oil shock causing long lines at gas stations, rationing, and 55 MPH speed limits on federal highways, a recession, very little venture capital ($50 million per year into VC firms), and what President Jimmy Carter (wearing a sweater while addressing the nation on TV because he had turned down the heat in the White House) called a 'malaise.'
It was during those times that two kids without any real college education, Bill Gates and Steve Jobs, started companies that did pretty well.
Opportunities abound in bad times as well as good times.
In fact, the opportunities are often greater when the conventional wisdom is that everything is going into the toilet.
Well… we’re nearing the end of another great year, and despite what we read about the outlook for 2009, we can look forward to a New Year filled with opportunities as well as stimulating challenges.

Teaching | From Your Most Influential Teacher by Frederico Toca, 2023

Education is one of the most critical aspects of our lives. It shapes our minds, skills, passions, and futures. But education is not only about what we learn from books or exams; it’s also about whom we know from our teachers. Teachers can profoundly impact our lives, sometimes without us even realizing it.

Tribalism | From Seeking Freedom by Sebastian Junger, 2021

Sebastian Junger is the New York Times bestselling author of Tribe, War, A Death in Belmont, Fire, and The Perfect Storm, and co-director of the documentary film Restrepo, which was nominated for an Academy Award. He is also the winner of a Peabody Award and the National Magazine Award for Reporting. He’s based in New York City and Cape Cod. His newest book is titled Freedom.

From PerEpsilon Investments

(He shared a few things, and has his own website, so I thought I would copy things in his own words below here as well!)

Berkshire Hathaway Complete Annual Reports (PDF) - Surprisingly no one has made a complete compilation of Berkshire Hathaway's annual reports. Individual years are freely available online but there are no completed works so I took the liberty of creating one. You can download it from my website.
The Mystery of Curiosity (Video) - Tom Morgan from Sapient Capital
College Students are hitting the (Sports) Books (WSJ) - Not necessarily historical, but, I was able to contribute to a WSJ Opinion article about the proliferation of digital sports books as a grad student.
How China Works (Book) - Recently started reading this after hearing it recommended multiple times. Very dense, but straightforward and interesting.

Visuals

USPS Growing Package Volumes

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historyinvestor.com

Twitter / X: @HistoryEJ

Disclosure: Nothing in this article constitutes investment advice. More detailed disclosure here.

Building Perfect

EJ — Fri, 07 Jun 2024 11:45:00 +0000

Happy Friday!

Apologies for not having an “On My Mind” section this week — my wife was traveling, so I had to “cut corners” roughly everywhere in my life over the last few days.

It amazes me that there are thriving single parents out there. I am not nearly strong enough — you all are amazing.

Thanks!

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Quote of the Week

It has been my observation that most people get ahead during the time that others waste.
— Henry Ford

Poll of the Week

Last Week

Question: Do you watch / attend the Berkshire annual meetings?

Results: 52% said no! On my end, at least for the last six years or so, I have.

Last “On My Mind”

Question: Have you used AI to write something for you at work?

Results: 63% said yes! I would have to say that I have tried to use AI to write things. Often, after editing, the AI proved to be inspiration more than written words…

Things to Read

Leave Me Alone | From They Choose to Live by Adam Goodheart, 2023

The self-assured evangelist, 26-year-old John Allen Chau, had aimed to convert the Native people of a place he felt might be “Satan’s last stronghold.” Yet his brief visit bestowed another, distinctly 21st-century, kind of glory: Within a few days, unbeknownst to the islanders, the fact of their existence went viral…
Many of the islanders’ fans see them as romantic heroes: staunchly rejecting the interconnected world, the planet’s most committed practitioners of digital detox. A few dozen naked tribesmen with handmade bows and arrows seem somehow more powerful—more authentically human—than the billions of other Earthlings clutching smartphones.
In many ways, North Sentinel remains terra incognita. No visitor has mapped the jungle-shrouded interior of the island (roughly the size of Manhattan) or held a conversation with its residents. No one knows the size of the island’s population, which has been estimated at between 50 and 200. No one but the Sentinelese knows what language they speak, what laws might govern them, what god they might worship, or even what the tribe is called in its own language. From passing boats and aircraft, it’s possible to glimpse them spearing fish in the shallows, poling their dugout canoes across the lagoon, and aiming the bows that they use to hunt game…
On my first visit to the archipelago, 25 years ago, I decided to travel, foolishly and illegally, to the coast of North Sentinel. (The surrounding waters are strictly off-limits and patrolled regularly by the Indian coast guard and navy.) I paid some local fishermen to take me across the channel in their small motorboat under cover of darkness.
We arrived at dawn in the waters.

Stagnant Culture | From Culture in Crisis by Ted Gioia, 2024

Is old music killing new music?
When I first looked at this trend in 2022, old music accounted for 69.8% of streaming. I was stunned by that number—it’s not healthy when fans abandon new music—but it’s gotten worse.
More recent figures from research group Luminate indicate that old music has now grown to 72.6% of the market.
The same trend is now impacting live music. Nostalgia festivals are booming, while more up-to-date events like Coachella are struggling. .
According to The Guardian:
It all speaks to the changing face of nostalgia. There was a time when this kind of thing might have been much less high-profile, perhaps taking place on a cruise ship (where bands like Weezer, Creed and Flogging Molly have long performed gigs to captive crowds of superfans). But a decade-plus of the streaming revolution has had a flattening effect on musical eras and what is perceived as “old”.
This comes at a cost. The Guardian warns: “There will be no nostalgia in the future if the present is not properly tended to.”

Ponzi in Hollywood | From Master of Make-Believe by Evan Osnos, 2024

Like other accomplished swindlers, Horwitz excelled by knowing his audience. In Chicago, he was a wealthy heir who flew private jets to movie shoots. In L.A., he was a plucky football talent selling door-to-door. (A surprising number of people he dealt with in California mentioned how good he smelled.) His difficulty showing emotion, a detriment onscreen, turned out to be useful in pitch meetings. Edgar Allan Poe, in an essay on swindling, noted the power of nonchalance—the kind of take-it-or-leave-it indifference that conveys credibility—and Horwitz often succeeded by convincing investors that he didn’t much care whether they bought in. “Remember Zach does not need any money from us,” one wrote to another in 2017…
As the end of 2019 approached, Horwitz had raised three hundred and fifty-eight million dollars in the past year. He was running what scholars of confidence games call an “affinity fraud,” built around trust and personal connections. He found wealthy investors—in Napa Valley, Orange County, Las Vegas, and Chicago—who then spread the word on the tennis court and the charity circuit. But every network has limits, and the arithmetic of a Ponzi scheme is unforgiving. When you run out of new investors, the mechanism begins to collapse. After Thanksgiving, Horwitz fell behind on his payments for the first time…

Building Perfect | From Wither Utopia by Rohit Krishnan, 2024

It's probably not a coincidence that the golden age of Victorian explorers also happened at the same time. The sense of man taming nature, of going to the frontier and finding a new way of life, this was forefront in people’s minds. You can sense it when reading their books, or novels, or newspapers. Dickens wrote in that time, so did Jane Austen. John Stuart Mill too. Not just in the Anglosphere, it was the time of Victor Hugo and Tolstoy and Dostoyevsky and Melville.
When the frontiers existed, we could test ourselves against it. Which meant we could look at the vast expanse and see infinite potential. We only really have it today in the vast reaches of space or maybe the oceans, but it all feels all too jaded. Without more lands to conquer, we’ve succumbed to the melancholy of the human condition..

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Omaha's Oracle

EJ — Wed, 29 May 2024 10:20:00 +0000

Happy Tuesday!

Warren Buffett has held an annual Berkshire shareholder meeting every year since 1973 — when it was first hosted in the National Indemnity Company employee cafeteria.

Since then, the meeting has moved venues multiple times as attendee count grew alongside Berkshire’s success — and now the 19,000 seat CHI Health Center Arena is routinely standing room only.

I did not attend the meeting in person this year, but CNBC has recordings of the morning and afternoon sessions online. I thought I would share some of my favorite takeaways.

For all quotes, I have taken the editorial liberty to “clean-up” pauses, ums, backtracking, and similar. For all questions, I have paraphrased. No meaning has been changed, but I hope the readability is improved.

Given there are others focused on the business aspects of the meeting, I’m highlighting quotes applicable to more than just Berkshire’s own businesses. If you would like to dive a bit deeper — and also get into the business side of things — I would recommend:

Berkshire Hathaway’s 2024 Q&A Session, by Rational Walk
The Oracle Speaks, by Kingswell

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Poll

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Surround Yourself with the Right People

Question: Who are your most trusted advisors?

If you don’t live a life where you surround yourself — and limit yourself — to people you trust, it won’t be much fun. I mean, I literally have been in the position ever since I was in my twenties of being able to have people I trusted around me. And I’ve made mistakes occasionally, but they filtered out over time…
You can think about this, Charlie — in all the years we worked together — not only never once lied to me, but he didn’t even shape things so that he told half lies or quarter lies to sort of stack the deck in the direction he wanted to go.
He absolutely considered it of utmost importance that he never lied. Now, that occasionally got him in trouble at dinner parties or something…
But in terms of having a partner, I simply cannot think of a conversation I ever had with Charlie where he misled me or shaped it his way or anything of the sort. So when you get that in your life, you know, you cherish those people and you sort of forget about the rest.

About seven years ago, I worked with someone that was a near-constant source of negativity. They say misery loves company, and for some reason, this person’s misery was always looking at me for companionship.

I eventually changed jobs, and that person tried to stay in touch. I realized I could just choose to not stay in touch. It was my choice. It was an amazing discovery — I’ve since repeated “not staying in touch” many, many times. Just because someone is in your life today doesn’t mean they have to be in it tomorrow.

It sounds simple, but earlier in life, I felt an obligation to reciprocate relationships even if they were not positive.

Buffett is highlighting the reverse here — identify who you enjoy having in your life and keep them in it. But I think the reverse is also important — if you prune away relationships that pull you in a direction you don’t want to go while tending to those that add meaning to your life, you are sure to end up in a better spot over time.

One More Day

Question: What would you do if you had one more day with Charlie Munger?

We always lived in a way where we were happy with what we were doing every day. I mean, Charlie liked learning. He liked, as I mentioned in the movie, a wide variety of things. So he was much broader than I was.
But I didn’t have any great desire to be as broad as he was. And he didn’t have any great desire to be as narrow as I was. But we had a lot of fun doing anything...
And this you may find kind of interesting. We had as much fun, perhaps even more to some extent, with things that failed because then we really had to work and work our way out of them. And in a sense, there’s more fun having somebody that’s your partner in digging your way out of a foxhole than there is just sitting there and watching an idea that you got ten years ago just continually produce more and more profits…
You know, we started every day, and Charlie was interested in more things than I was, but we never had any doubts about the other person, period. And so if I’d had another day with him, we’d probably have done the same thing we were doing in the earlier days and we wouldn’t have wanted another.

Buffett and Munger were great business partners — so great because they had one core interest in common but a wide variety of interests that varied greatly.

Many people seek out business partners with capabilities different than their own — they are an operator and they need a finance person. So they go find a finance person. Often, however, but for the finance skill set, the person they choose as a partner might as well be the one looking back at them in a mirror.

Instead of a common vision, the partners are paired together due to a single uncommon trait. The resultant lack of diverse experience and perspective at least doesn’t make the partnership stronger — and in many cases, it is a weak foundation from which to build.

Buffett and Munger found in each other a partner approaching the same problem — investing — differently enough to have a strong foundation.

Beyond that, Buffett also reminds us here that you should focus on doing what you enjoy. If Munger was alive, they would be doing the same thing they always did. To the greatest extent we can, we should all be trying to set up ours lives in a way that allows that to be true for us, too.

Circle of Competence

Question: Do you think the markets today are similar to markets in 1999?

Charlie and I missed a lot of things. We never worried about missing something that we didn't understand. Why should we be able to predict the future of every business any more than we can predict what wheat yields are likely to be in the next year?

I feel like 1 out of 10 Buffett quotes have to do with staying within your circle of competence. One of my favorites — and one that I probably quote too often at the office — is that you should filter out opportunities that are “too hard” and just move on like they don’t exist.

I find a lot of people do the reverse — because a problem is hard, they double down on trying to understand it.

Unless something suggests you should be able to understand this terribly difficult thing in front of you, you might be wasting time. You are pretending that effort creates value, when in fact it often does not.

And — if you ask me — the fact that it feels hard might be a sign that you have ventured past the edge of your circle.

Focus Forward

Question: What would you tell your younger self to do differently?

I can figure out all kinds of things that should have been done differently — but, so what? I mean, I’m not perfect. But, I don’t believe in lots of self criticism or being unrealistic about what you are, or what you’ve accomplished, or what you’d like to do…
You don’t know where the paths would have led. I don’t think there’s any room in beating up yourself over what’s happened in the past. It’s happened and you get to live the rest of your the life and you don’t know how long it’s going to be…
I’m not really looking to change much. If I am very lucky, I get to play things out for another six or seven years — or it could end tomorrow. But that’s true for everybody, although the equation isn’t exactly the same…
I don’t believe in beating yourself up over anything you have done in the past. I believe in trying to find what your good at — what you enjoy — and then I think the one thing you can aspire to be — because this can be done by anybody and it doesn’t have anything to do with money — you can be kind — and then the world’s better off.

I find refreshing the general advice to just do the best you can.

Often this question is answered with a flavor of regret — regret from the person answering. That person says they should have done things so differently than they did that if they followed the advice they are now giving you, they would not be in the position they are today.

Every action we take involves a trade-off — and it’s easy to look backwards and imagine a better trade-off could have been made. That’s often just wishful thinking and imagining a past that never could have actually happened. It’s better to imagine the future you wish and work towards that instead.

I’m also reminded of a book from Cicero on “how to grow old” when Buffett says it “could end tomorrow. But that’s true for everybody”. Cicero says that even though a man might be young, can he be “absolutely sure that he will be alive when evening comes?”

Both men were approaching their final years when they said we should treat every day as precious by focusing on being kind and helpful to those around us — and how easy is it to forget that in the mundanity of life’s back and forth. It might be best for the young amongst us to remember that advice while there is still time.

Pass it On

Question: What would you request of those that have benefited from Berkshires’ success?

If you’re lucky in life, make sure a bunch of other people are lucky, too

This was my favorite line of the entire meeting. We often forget how hard it was to get to where we are today — and how many people were there for us along the way, with an outstretched hand pulling us upward.

Without them, we may never have gotten as far as we have. It’s important to look down from where we are now and notice the outreached hands that we can now pull towards us as well.

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Thomas Jefferson's Nephew

EJ — Fri, 24 May 2024 11:05:17 +0000

Happy Friday! And welcome to all our new subscribers!

It was great having a full week back at home without travel. Somehow, I still feel exhausted — I think a side effect of having a toddler. But, I’m glad to be back on a more normal schedule at least.

Next week, on Wednesday, I’ll share a bit of a deep dive on this year’s annual Berkshire Hathaway Shareholder Meeting. Keep an eye out for that one.

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On My Mind

Last week, I wrote about a soon-to-be founder’s startup idea. I thought his specific idea was challenging given he would be building an incrementally better product as opposed to tackling a new challenge.

In the B2B SaaS world, incrementally better solutions can be hampered by a difficult go-to-market motion. You have to convince a customer that their current solution, which they have paid for and learned to use, doesn’t work as well as they think. You then have to also convince them that your new solution is so much better than their current one that they should change.

That can be a tough sale — and see the quote in the Things to Read section from Jensen Huang, NVIDIA co-founder. He shares a similar concept, and he knows how to build a company much better than me.

Despite the above being my opinion — and the founder wanting my opinion — I struggled to share it. It feels a bit arrogant to be skeptical at such a high level. I wasn’t really diving into the specifics of what he wanted to build and debating those pieces with him. I was more or less asking him if he should get an entirely new idea.

I finally shared my feedback while thinking I was surely going to alienate myself from this exceptional person. His response surprised me.

No one else he had spoken with had done anything but encourage him (while offering funding in exchange for a chunk of the company, of course). He was thinking about the beauty of the tech he could build, not the business implications of selling that beautiful to-be-built tech.

Now, he didn’t say he agreed with me. But he did say that he needed to think some more about my response. He has since iterated on a few pivots around his original idea. He is early enough in development that pivots are relatively easy.

Time will tell if I helped him or just slowed him down — but at least he found my feedback helpful.

What is odd to me, however, is that I didn’t share anything really insightful. I know some of the others he has spoken with well — and all of them would have had the same gut reaction I did. They apparently decided to provide mainly encouragement instead.

It is easy to tell someone what they want to hear as a way to build a relationship. That approach can be disrespectful, however.

I want this guy to be successful. A couple years spent building exceptional technology is a big commitment. If he can’t really sell it once it is built, I can’t think of a more demoralizing outcome. Unfortunately, I see many tech-focused founders arrive at that endpoint.

So, I’m going to try my best to keep having wholly honest conversations. There are enough people in the world that automatically respond with positivity — and positivity could be the right response. But when it is not, an honest conversation is more respectful.

Personally, I think I can do that. The real trick then, it seems, is to find the people who will have wholly honest conversations back when I need something different than just positive support.

Quote of the Week

Don’t use skepticism as a thinly veiled excuse for inaction or remaining in your comfort zone.
— Tim Ferriss

Poll of the Week

Last Week

Question: Has your lifestyle been impacted by inflation?

Results: 56% said “Yes.” I would have to put myself in the same camp — I am putting less into investments / savings every month.

Things to Read

Integrity | From Thomas Jefferson’s Advice to His Nephew by Thomas Jefferson / Rational Walk, 1785

Give up money, give up fame, give up science, give the earth itself and all it contains rather than do an immoral act. And never suppose that in any possible situation or under any circumstances that it is best for you to do a dishonourable thing however slightly so it may appear to you. Whenever you are to do a thing tho’ it can never be known but to yourself, ask yourself how you would act were all the world looking at you, and act accordingly…
It is of great importance to set a resolution, not to be shaken, never to tell an untruth. There is no vice so mean, so pitiful, so contemptible and he who permits himself to tell a lie once, finds it much easier to do it a second and third time, till at length it becomes habitual, he tells lies without attending to it, and truths without the world’s believing him. This falsehood of the tongue leads to that of the heart, and in time depraves all its good dispositions…
Never think of taking a book with you. The object of walking is to relax the mind. You should therefore not permit yourself even to think while you walk. But divert your attention by the objects surrounding you. Walking is the best possible exercise. Habituate yourself to walk very far.

Building | From Conversation with NVIDIA’s Jensen Huang by Patrick Collison / Jensen Huang, 2024

Our purpose should be to go and do something that has never been done before, that is insanely hard to do, that if you achieve it could make a real contribution... If that's the case, the market is probably zero billion dollars in size because it's never been done before. I'd rather be a market creator than a market taker...
It's a gut call in the sense that your intuition says something as a starting thesis. But then you have to reason through it and the reasoning of it is much much more important to me than a spreadsheet. I hate spreadsheets because you can make spreadsheets do whatever you want. You can make any chart you want out of a spreadsheet - you just got to type in some numbers - and so I don't love spreadsheets.
For that reason I love words. Words are reasoning. Tell me how did you reason through this. What's our intuition? Why do we be believe that matters?

Trash AI | From Meet AdVon by Maggie Dupre / Byrne Hobart, 2024

Maggie Harrison Dupré writes in Futurism about AdVon, a company that places AI-generated writing with AI-generated author photos and bios on reputable sites.
There's a pattern in declining industries where companies try to monetize their brand at the cost of rapidly degrading it: in the short term, putting the Sports Illustrated logo on this content makes the content more valuable, but in the long run it makes SI worthless. That happens faster when the content provider is misleading companies about how it writes its content — the article has some fun examples of reviews for lifting belts suddenly veering into talking about Gucci, and reviews for microwave ovens that accidentally describe real ovens by reassuring customers that they can indeed use them to heat items wrapped in foil.
And there turns out to be another layer to the grift, where the same company that's getting paid to produce AI-generated reviews is also getting paid to insert particular companies' products into those reviews.
— Byrne Hobart

Detective Work | From Piecing Together Berkshire Hathaway's 1987 Meeting by Kingswell, 1987

I attended that meeting; I think it was my second meeting held at the Joslyn…
A year before this meeting, Warren said to me in his office that he measures his success as a manager by how few shares trade. To this he added, in passing, that that is not a view shared by his fellow CEOs, or on Wall Street. Not splitting the shares was one significant means of nurturing long-term ownership. Indeed, years later the specialist for Berkshire trading confirmed that the lack of trading meant shares could trade with a hundred dollar spread on a 10,000+ price, which amounted to 10 cents on a 10 dollar trade, less than the then 12.5 cent minimum spread. The reason? He didn’t need a higher spread to cover the risk of a sudden large trade.
Related to this is one of my favorite memories — not from a meeting. In the early ‘80s one day I walked through Grand Central in NY. Merrill Lynch had a booth there with two Quotrons, with two lines of people, which I ignored. I approached the desk and easily got the attention of a nice woman who was eager to help:
“May I help you?”
Yes, could you give me a quote for Berkshire Hathaway?
Sure, she replied, “I’ve never heard of it”; and proceeded to leaf through a 2” volume of listings.
— Arthur Clarke

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Delinquent Credit Card Debt Growing

Long-Term Downside Protection from the S&P 500

Don’t Get a Motorcycle

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Before New England

EJ — Fri, 17 May 2024 11:38:55 +0000

Happy Friday!

I hope everyone’s week has been well. It has been a busy travel week on my end — and I am looking forward to getting back home today!

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On My Mind

Thanks to my day job, I get to meet a lot of exceptional people. Every once in a while, an individual will stand out even more so than their peers. I’ve gotten to know someone like that over the last month or so.

He grew up bouncing back and forth between Europe and the US. While in Europe, he was noticed by a soccer (or football… since he was in Europe…) scout and ended up playing in professional “junior leagues” while attending high school.

While he enjoyed the sport, he decided it wasn’t the right long-term career path given his intellectual interests. Instead, he pivoted to computer science and college. After graduation, he landed a job at a large defense company and fell in love with cybersecurity.

He then joined a cybersecurity startup as employee # <100 — and that company ended up being valued at >$10bn. In his final role there, he managed a team of over 100 engineers.

After a brief stint at another large company — he wanted to get additional management experience — he went back to get a Masters in cybersecurity engineering from one of the top schools in the United States.

He leveraged that Masters into working at one of the top cybersecurity labs in the United States government for a summer, before joining one of the more respected cybersecurity automation companies after graduation.

For his birthday — he just turned 30 — he ran a marathon… because, at this point, why not. His hair is, as would be expected, also impeccable.

Given all the above, he feels he is finally ready to build his own company. And he is. He just needs the right idea to build — and he wanted to get my thoughts on his idea.

As arrogant as it sounds, I think he’s going to have a terribly difficult time.

In short, he is thinking about attacking a problem 20+ others are already tackling — including large incumbents that already have relatively good tools to handle the same use case. His pitch is that he can build a better solution.

And, for sake of discussion, let’s say that there is a 100% chance he can. I still think he shouldn’t. He will be trying to build an incrementally better product. For the kind of success he is looking for, I think that is not a great approach.

Building a minimally viable product will take him a good amount of time. He needs that first product to start getting real market feedback on if he has, in fact, built something better. But what will his pitch to potential customers be at that point in time?

“I know you buy 10+ products from Incumbent #1, but I want you to take time out of your day to try my new solution… which is only one of those products… because it is better.”

That is a hard pitch. In the customers’ eyes, they have already solved the problem you want to solve for them. You have to convince them that they haven’t. And then you have to show them something that is so much better that they will increase their day-to-day complexity by buying another tool.

Even though he is an exceptional individual, I think he would do better attacking a problem that others have not already solved. He doesn’t have to choose to fight such a hard battle. He is smart enough to build something others haven’t already tackled, and there would be less competition there, and his chance of success — if the idea is good — would increase materially.

And that pulls me back to thinking about my own work. Am I choosing to fight harder battles than I need to? Am I competing with other investors by trying to just be incrementally better? I can make one more phone call than them… read one more book … take one more trip to meet people… send one more email…

Everyone else is doing all the above. Competition is intense. There has to be a way to tackle things in a way others haven’t — I just haven’t an idea yet on what that might be.

Quote of the Week

Perhaps the most valuable result of all education is the ability to make yourself do the thing you have to do, when it ought to be done, whether you like it or not.
It is the first lesson that ought to be learned and however early a man's training begins, it is probably the last lesson that he learns thoroughly.
— Thomas Henry Huxley, Technical Education (1877)

Poll of the Week

Last Week

Question: Would you trust an autonomous car to drive you down a busy street for 10 minutes?

Results: 60% did not trust the autonomous car — and I would have to agree with the majority here.

Comment: “My Tesla does drives longer than that with no interventions all the time. It is getting closer than you think.”

Things to Read

Before New England | From Manitou and Providence by Neal Salisbury, 1984

I joke with friends that while I am an investor, I am constantly trying to find the courage to become a history professor. I can sit down and read a well-written history book while the day passes me by. I feel every minute of effort while slogging through a book on business, however.

I have always wanted to spend more time digging into a specific period of the Americas — 100 years before, and 100-200 years after, 1492 — when the Spanish first landed in the Americas. Consequently, I have about 7 books or so on the subject sitting — yet unread due to the wonderfully consuming impact of babies — on my bookshelf.

Given six flights this week, I decided to pull the shortest off my bookshelf — the title above — and made a dent into 120 or so pages. I’ll look to make a more detailed review of the book, but for now, a few quotes from the first half of the book or so:

The Region had a Healthy Status Quo

Though Verrazzano did not make the connection, such large families apparently resulted not only from a high fertility rate, but from the low mortality rate he noted. "They live a long life," he wrote, "and rarely fall sick; if they are wounded, they cure themselves with fire without medicine, their end comes with old age."
Later accounts confirmed that the Indians were strikingly healthy when they avoided European-induced epidemics, while other reports commented on the mildness of warfare before the introduction of guns and shrinking of resources due to colonization.

As Trade Began with Europeans, the Status Quo was Disrupted

They probably benefited [ in the battle between two Indian groups ] from their possession of a few iron axes and knives.
Here was where the contributions of European technology became critical for Indians. The possession of such weapons constituted an advantage which, when the fur trade drove bands beyond their customary territories and into competition with one another, eventually obliged all Indians in the vicinity to participate as a matter of survival.

After Being Disrupted, the Status Quo Become Trade

After a couple of generations, the old skills were forgotten. No longer able to supply themselves with these items, the Indians had become economically dependent on the French trade. Full-time hunting also deprived them of their subsistence autonomy. Concentrating exclusively on the hunt, they abandoned other food-producing activities of the winter months while over-killing the formerly adequate supply of fur-bearing animals.
By the beginning of the seventeenth century, they were leading a precarious existence every winter, relying on the French and other outside sources of food for survival.

Visuals

Inflation Remains Stubbornly High

Biden’s Proposes Higher Tariffs on Imports

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If You’re Lucky

EJ — Sat, 11 May 2024 03:50:00 +0000

Happy Friday!

Another delayed send? Yep… sorry about that — I’m getting close to a finish line at the day job, so I hope to get back to the regular schedule soon.

Additionally, there should be an email sent out on Sunday this week as well — keep an eye out — 😉.

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On My Mind

Last week, I used this section to share a portion of This is Water by David Foster Wallace — and there was a significant click rate on the longer speech itself. Given I am working on a tighter timeline, I thought I would do something similar this week.

I reviewed something I last read about four years ago — De Senectute (On Old Age) by Cicero — and the below has always been a favorite passage. It is a good reminder that while we all eventually lose capabilities as time marches forward, who we choose to be along the way is what matters in the end.

But bear well in mind that in this entire discussion I am praising that old age which has its foundation well laid in youth. Hence it follows— as I once said with the approval of all who heard it— that that old age is wretched which needs to defend itself with words! Nor can wrinkles and grey hair suddenly seize upon influence; but when the preceding part of life has been nobly spent, old age gathers the fruits of influence at the last.
For if the ills of which they complained were the faults of old age, the same ills would befall me and all other old men; but I have known many who were of such a nature that they bore their old age without complaint, who were not unhappy because they had been loosed from the chains of passion, and who were not scorned by their friends. But as regards all such complaints, the blame rests with character, not with age. For old men of self-control, who are neither churlish nor ungracious, find old age endurable; while on the other hand perversity and an unkindly disposition render irksome every period of life…
Undoubtedly, Scipio and Laelius, the most suitable defenses of old age are the principles and practice of the virtues, which, if cultivated in every period of life, bring forth wonderful fruits at the close of a long and busy career, not only because they never fail you even at the very end of life—although that is a matter of highest moment—but also because it is most delightful to have the consciousness of a life well spent and the memory of many deeds worthily performed.

Quote of the Week

If you’re lucky in life, make sure a bunch of other people are lucky, too
— Warren Buffett, 2024 Annual Berkshire Shareholder Meeting

Poll of the Week

Last Week

Question: On average, how many hours do you work a week?

Results: I’d have to toss myself into the 60 - 80 hours camp at the day job. The last few weeks have toyed with the second to last category, though…

🟨🟨⬜️⬜️⬜️⬜️ 20 hours

🟩🟩🟩🟩🟩🟩 20 - 40 hours

🟨⬜️⬜️⬜️⬜️⬜️ 40 - 60 hours

⬜️⬜️⬜️⬜️⬜️⬜️ 60 - 80 hours

⬜️⬜️⬜️⬜️⬜️⬜️ 80 - 100 hours

⬜️⬜️⬜️⬜️⬜️⬜️ 100 hours +

Things to Read

Tech Saving Lives | From Waymo Crashes a Lot Less ¹ by Timothy Lee, 2023

Two Greater Phoenix injuries over 5.3 million miles works out to 0.38 injuries per million vehicle miles. One San Francisco injury over 1.75 million miles works out to 0.57 injuries per million vehicle miles. An important question is whether that’s more or less than you’d expect from a human-driven vehicle.
After making certain adjustments—including the fact that driverless Waymo vehicles do not travel on freeways—Waymo calculates that comparable human drivers reported 1.29 injury crashes per million miles in Phoenix and 3.79 injury crashes per million miles in San Francisco. In other words, human drivers get into injury crashes three times as often as Waymo in the Phoenix area and six times as often in San Francisco.
And Waymo argues that these figures actually understate the gap because human drivers don't report all crashes. Independent studies have estimated that about a third of injury crashes go unreported. After adjusting for these and other reporting biases, Waymo estimates that human-driven vehicles actually get into five times as many injury crashes in Phoenix and nine times as many in San Francisco.

News or Insider Information? | From Is Hunterbrook Media a Hedge Fund? ² by Claire Malone, 2024

In many ways, Hunterbrook behaves more like a hedge fund than a journalism outlet. A core principle of traditional journalism, of course, is that reporters should pursue information if it is in the public good—not for remunerative reasons. Conflict disclosure is another basic tenet of journalism, but Hunterbrook doesn’t disclose the investors in its hedge fund…
Horwitz insisted that Hunterbrook is not a short-selling firm, not least because it sometimes goes long. The organization also publishes stories even if it’s not making trades on them and, Horwitz added, its investigators reach out to the targets of their investigations “in good faith” before publication. But Horwitz was slightly evasive when I asked what Hunterbrook pays its journalists. No one was making less than a hundred thousand dollars as a base salary, he said. “The upper limit is potentially incredibly high because it’s based on the performance of an investment fund, which is not an upside opportunity that reporters have had access to.” Another side market for Hunterbrook employees, he went on, is filing whistle-blower reports with the S.E.C….

Betting to Lose | From Martingale Beliefs ³ by Byrne Hobart, 2024

Martingale betting is a popular and effective way to lose all of your money. It goes like this: bet $1 on some game where your odds are 50/50 minus whatever the casino takes. If you win, go home. If you lose, double your bet…
Martingales are very obviously a bad idea, albeit a tempting one if you don't think through to the logical conclusion (or don't just take the first-principles view that if your expected value is negative on any given bet, there is no betting strategy that is superior to the others). Regardless, it's a useful pattern to look for, not just because the risk of ruin shows up in so many other places, but because the mid-Martingale psychology is so toxic.
There are many live examples, in finance and in other places.

Visuals

Startup Failures Increasing

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Have a great weekend,

historyinvestor.com

Twitter / X: @HistoryEJ

Disclosure: Nothing in this article constitutes investment advice. More detailed disclosure here.

1 https://www.understandingai.org/p/new-data-shows-waymo-crashes-a-lot

2 https://www.newyorker.com/news/annals-of-communications/is-hunterbrook-media-a-news-outlet-or-a-hedge-fund

3 https://www.thediff.co/archive/martingale-beliefs/

Indispensability of Risk

EJ — Mon, 06 May 2024 02:24:07 +0000

Happy Fri… Sunday!

My apologies for the tardy send this week! I got caught up in a number of things at the office and fell behind. I usually collect articles throughout the week — and then put it together on Wednesdays / Thursdays.

That doesn’t leave a large margin for error — and last week, I needed much more margin than normal!

Thanks for your understanding and support!

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On My Mind

While this section is usually my own thoughts, the last week gave me very little time to reflect. I did, however, re-read This is Water by David Foster Wallace. The speech — which he gave as a commencement address in 2005 — is definitely on my mind after a tough week.

I thought I would share a select portion of it here:

If you’re automatically sure that you know what reality is, and you are operating on your default setting, then you, like me, probably won’t consider possibilities that aren’t annoying and miserable. But if you really learn how to pay attention, then you will know there are other options. It will actually be within your power to experience a crowded, hot, slow, consumer-hell type situation as not only meaningful but sacred, on fire with the same force that made the stars: love, fellowship, the mystical oneness of all things deep down.
Not that that mystical stuff is necessarily true. The only thing that’s capital-T True is that you get to decide how you’re gonna try to see it.
This, I submit, is the freedom of a real education, of learning how to be well-adjusted. You get to consciously decide what has meaning and what doesn’t. You get to decide what to worship…
Worship power, you will end up feeling weak and afraid, and you will need ever more power over others to numb you to your own fear. Worship your intellect, being seen as smart, you will end up feeling stupid, a fraud, always on the verge of being found out. But the insidious thing about these forms of worship is not that they’re evil or sinful, it’s that they’re unconscious. They are default settings.
They’re the kind of worship you just gradually slip into, day after day, getting more and more selective about what you see and how you measure value without ever being fully aware that that’s what you’re doing…

Quote of the Week

Not being willing to take risks is an extremely risky strategy.
— Magnus Carlsen, #1 ranked chess player globally

Taken from the first article of the week, below and here — The Indispensability of Risk

Poll of the Week

Last Week

Question: Have AI / LLMs materially improved your life?

Results: Almost exactly 50 / 50; I’d have to vote “No” — no matter how much I try, I can’t find a meaningful use case for AI / LLMs.

Responses:

“I'm an NLP Engineer working with LLMs directly and I use them to break down complex topics, and sometimes do some ad-hoc evaluation of open source LLMs”
“Only in minimal time saving ways. Which I guess, is the way it is supposed to be. ;)”

Things to Read

Indexing | From The Indispensability of Risk ¹ by Howard Marks, 2024

Ashley says, “Many positions cannot be won or saved without something of value being given away, from a lowly pawn all the way up to the mighty queen.” Intentionally losing a piece as part of one’s gameplan is the sacrifice that Ashley is referencing.
He describes some sacrifices as “shams,” (a term coined by chess master Rudolf Spielmann in his book The Art of Sacrifice in Chess) where “. . . one can easily see that the piece being given up will return concrete benefits that can be clearly calculated.”
Others are deemed “real” sacrifices, where “. . . giving away a piece offers gains that are neither immediate nor tangible. The return on investment might be controlling more space, creating an assailable weakness in the opponent’s position, or having more pieces in the critical sector of attack.”
The analogy to investing begins to become clear. Buying a 10-year U.S. Treasury note is a modest or “sham” sacrifice. You give up the use of your money for ten years, but that’s only an opportunity cost, and accepting it brings the certainty of interest income. Most other investments involve real sacrifices, though, where the risk of loss is borne in pursuit of “gains that are neither immediate nor tangible.”

Vikings | From Frequency of Viking Raids ² by LiorLefineder, 2024

Throughout history, when people faced raids from foreign forces, they hid their money.

This is a “well, of course they did” type conclusion, but I love that we can correlate literature with archeology to prove it.

The top chart (colored chart) is the frequency of Viking raids throughout history as discussed in literature from the time, and the bottom chart (black chart) is the number of coin hoards found in digs that can be traced back to specific years.

When there were more Viking’s attacking, more coins were being hidden.

Expensive Reservations | From Why You Can’t Get a Restaurant Reservation ³ by Adam Iscoe, 2024

By five o’clock, the restaurant was jammed with its first wave of customers, who were excitedly considering what toppings to order—mushrooms, sweet peppers, pepperoni.
The man with the eye patch, Kimura, wasn’t among them. Neither was Alex or Gigi Principe. It turned out that they were all employees of the same line-sitting company, called Same Ole Line Dudes.
“I’ve been called here to wait at least a hundred times,” Kimura had told me. The going rate for an afternoon in line at Lucali is fifty-five dollars, a percentage of which goes to the company.
Baron Tremayne Caple wasn’t ordering pizza either. His table had gone, for a hundred and twenty dollars, to a person named Robin, who’d hired him.

Work Culture Wars | From TSMC’s Debacle in the American Desert ⁴ by Viola Zhou, 2024

The American engineers complained of rigid, counterproductive hierarchies at the company; Taiwanese TSMC veterans described their American counterparts as lacking the kind of dedication and obedience they believe to be the foundation of their company’s world-leading success…
Several former American employees said they were not against working longer hours, but only if the tasks were meaningful. “I’d ask my manager ‘What’s your top priority,’ he’d always say ‘Everything is a priority,’” said another ex-TSMC engineer. “So, so, so, many times I would work overtime getting stuff done only to find out it wasn’t needed”…
But the American workers didn’t have the same sense of loyalty. In the U.S., engineers had a plethora of job options that provided competitive pay and abundant personal time. The Taiwanese workers described their Phoenix colleagues as arrogant, carefree, and more willing to challenge orders. “It’s hard to get them to do things,” a Taiwanese engineer in Phoenix told Rest of World.

Visuals

The U.S. accounts for ~26% of Global GDP

Global Currencies Relative to USD in 2024

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Have a great weekend,

historyinvestor.com

Twitter / X: @HistoryEJ

Disclosure: Nothing in this article constitutes investment advice. More detailed disclosure here.

1 https://www.oaktreecapital.com/insights/memo/the-indispensability-of-risk

2 https://twitter.com/lefineder/status/1784595578539639050

3 https://www.newyorker.com/news/our-local-correspondents/why-you-cant-get-a-restaurant-reservation

4 https://restofworld.org/2024/tsmc-arizona-expansion

Shake the Skies

EJ — Fri, 26 Apr 2024 10:26:31 +0000

Happy Friday!

Thank you to everyone who replied to last week’s email. Open rates have rebounded and we are now beating the Beehiiv network’s average open rates. We are absolutely crushing engagement rates as well.

I have also been told that some corporate firewalls are blocking links. I am working with Beehiiv to understand workarounds. I am sorry about this. For now, I am providing a copy-paste-able link in related footnotes in case you have issues with the direct links.

Thank you for all the support!

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On My Mind

Saying “no” can be hard.

When a coworker or boss starts, “Hey, can you…”, it is easy to find ourselves saying “yes" before they even finish the question.

Early in your career, “yes” is often the right default answer. The capability you bring at that point is more-or-less that you are alive and willing to help. After a couple years of a constant series of “yes” replies, “no” starts to feel like a bad word. So you keep saying “yes.”

Inevitably, this approach eventually breaks — you only have so much time. The amount of things you could tackle far exceeds the time you have to do them. Life’s demands continue to march on outside of the office, further eroding the time you have to say “yes” in the office.

But “no” is a bad word — and we don’t want to curse in the office. Instead, it is easier to opt for saying nothing at all.

Saying nothing can take many forms — “let me circle back on that,” “I’ve got to handle this other thing first,” and of course, actually not replying if the situation (like email) allows for it.

I’ve found myself opting for this approach too often lately, which is a terrible middle ground. For the other person, there can be frustration and an inability to move forward on something due to uncertainty. For myself, while I have temporarily avoided saying anything, an obligation to eventually say something remains.

A clear “no” provides clarity to both sides. As you progress in your career, “no” becomes the more appropriate default answer. If it doesn’t, you end up drowning. It’s something that we all need to practice, however, before that becomes natural.

Quote of the Week

Two men who are kind to each other can shake the skies.
A thousand men criticizing one another can produce nothing more than a madhouse, and an expense to the community that confines them.
— Jack London, April 18, 1915

Inspired by how much I have enjoyed some of Jack London’s short stories — one of which I wrote about recently ¹ — I found an old copy of The Letters of Jack London by Stanford University Press on Ebay.

It’s been fun to Google search verbatim quotes from the letters and surface no references to Jack London — a small reminder that not all human knowledge and experience can be found online.

Poll of the Week

Last Week

Question: What is the net worth of the richest person you know personally?

Results: On my end, I would select “$1bn +” — a side effect of working in private investments!

🟨🟨🟨🟨⬜️⬜️ < $1mm

🟦🟦🟦🟦🟦🟦 $1mm - $10mm

🟨🟨🟨⬜️⬜️⬜️ $10mm - $50mm

🟨🟨⬜️⬜️⬜️⬜️ $50mm - $100mm

⬜️⬜️⬜️⬜️⬜️⬜️ $100mm - $250mm

🟨⬜️⬜️⬜️⬜️⬜️ $250mm - $1bn

🟨🟨🟨⬜️⬜️⬜️ $1bn +

Things to Read

But What For? | From Looking for AI Use Cases ² by Ben Evans, 2024

Suppose you want to analyse this month’s customer cancellations, or dispute a parking ticket, or file your taxes - you can ask an LLM, and it will work out what data you need, find the right websites, ask you the right questions, parse a photo of your mortgage statement, fill in the forms and give you the answers. We could move orders of magnitude more manual tasks into software, because you don’t need to write software to do each of those tasks one at a time.
This, I think, is why Bill Gates said that this is the biggest thing since the GUI. That’s a lot more than a writing assistant.
It seems to me, though, that there are two kinds of problem with this thesis.

Ben Evans explores the contradiction between the future AI enthusiasts point to of a general, holistic AI agent and the reality that thousands of start-ups are popping up to build niche AI application wrappers around things like OpenAI.

These wrappers are needed because any serious use case you can imagine is too niche for a general model to be effective. In a sense then, LLMs are the new SQL — thousands of valuable startups will be built on them, and the value isn’t so much the LLM as it is the wrapper around it.

Small Screens | From What Phones Are Doing to Reading ³ by Jay King, 2024

But I have found myself wondering whether we actually live in a world forcibly shaped by algorithms or whether our phones themselves — their fiddly buttons, their flashing screens, their slight but satisfying heft — have other, more fundamental ways of making us lazy. If the algorithms are to blame, then we need to find ways to get outside of or otherwise away from them.
But if the problem is our phones — and, of course, us — then we may have to walk away from much more.

If Jay King reads a book, it tends to be on his phone. Five years ago that wasn’t the case. Over time, the small screen phone format — and easy distractions a swipe away, Amazon’s recommendation algorithm, and tapping as opposed to page turning — changed what he reads and how he explores ideas through text.

Surprisingly, the changes aren’t all negative.

Indexing | From Who’s Afraid of Index Funds ⁴ by Byrne Hobart, 2024

Since then, indexing has gone from an obscure strategy to around 40% of the market as of a few years ago, based on the volume of trading that happens during rebalancing. And, as those index funds have competed more with other assets, they've pushed some active managers to move their portfolios closer to the index…
It's a bit like how irked large airlines get at low-cost carriers: the big airlines do work extremely hard to provide a nice experience, but a substantial fraction of flyers just want to get from one place to another as cheaply as possible. Once someone is selling the stripped-down version of what you're offering, you find out what the market thinks all your effort is really worth, and the answer is usually disappointing.

An interesting dynamic with index funds is that they have to buy. When money comes in, they can’t decide “valuations are high today, let’s hold off.” In fact, noone is really bothering themselves thinking about valuations.

Instead, index fund managers are thinking about assets under management and taking market share with lower fees. These incentives, as Byrne Hobart explores, are very different than those of active money managers — which leads to some interesting dynamics.

Visuals

U.S. fertility rate drops to a record low

Slowdown in Chinese residential floor space sold

Biden’s proposed capital gains tax is highest since inception

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Have a great weekend,

historyinvestor.com

Twitter / X: @HistoryEJ

Disclosure: Nothing in this article constitutes investment advice. More detailed disclosure here.

1 https://historyinvestor.com/p/to-build-a-fire-jack-london

2 https://www.ben-evans.com/benedictevans/2024/4/19/looking-for-ai-use-cases

3 https://www.newyorker.com/news/fault-lines/what-phones-are-doing-to-reading

4 https://www.thediff.co/archive/whos-afraid-of-index-funds

Lessons from the Wealthy

EJ — Fri, 19 Apr 2024 10:29:05 +0000

Happy Friday!

Thank you to everyone who replied to last week’s email. Open rates / engagement rates have ticked up a bit more! When I swapped domains earlier this year, there was a bit of a downtick in email delivery success rates.

Similar to last week, if you would like to help me a bit more, quickly hit reply to this email. You can simply say “Hi”!

By replying, you tell all the email clients out there that these emails are legitimate — which in turn helps ensure these emails get to your (and others’) inboxes.

Thank you!

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On My Mind

In my day job, I invest in early stage software companies. In general, I try to partner with companies where a combination of factors might, over time, result in exponential revenue growth and eventual profitability. I do have a good deal of flexibility when it comes to the situations I evaluate, however.

This flexibility means that I’m currently working on something different. One of these quickly growing, currently unprofitable companies is acquiring a much larger, profitable company where revenues are actually declining. These falling revenues are expected to continue as customers choose to move to next-gen tools, such as those of the acquirer.

A key part of the investment thesis is that the combined entity can reverse these declines. In short, if we could offer customers a next-gen product before they leave, shouldn’t they prefer to avoid the hassle of changing vendors?

That thesis is a hypothesis on how people act. The customers are looking for a next-gen product. If you can reduce the friction of getting a next-gen product, they might choose less friction and stay with you instead of evaluating the rest of the possible vendors.

It doesn’t matter if this specific next-gen product is the absolute best alternative for their use cases — all the next-gen products are somewhat different with nuanced use cases where each shines. What might matter most is that one alternative is easier to choose.

That is important to keep in mind for ourselves. How can you make it easy to work with you? How can you reduce the friction preventing others from moving forward with your ideas?

It isn’t necessarily the most capable or smartest person that wins. Often times, it is the one that is easier to work with.

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Quote of the Week

Diligently seek facts. Advice, never.
— Philip Carret

Philip Carret started one of the United States’ first mutual funds — all the way back in 1928. Warren Buffett is quoted as having said that Carret had “the best long-term investment record of anyone I know.”

If you had invested $10,000 with Carret and stuck with him for the 55 years he ran his fund, you would have $8mm when you finally pulled the investment out.

John Galbraith said something similar when it comes to writing: stick to the facts — and I think it is a great reminder.

I think often people are looking for answers. Answers are dangerous because someone else can make it for you. If you look for facts instead, you get to make your own answer — and you know why you landed where you did.

Poll of the Week

Last Week

Question: Did you personally watch the eclipse on April 8th?

Results: 54% did watch it! I, however, did not as I was traveling.

Earlier This Week

Question: Before today, did you know what Delta Force was?

Results: 63% knew what Delta Force was! I read the book… so I think I would have to vote alongside the majority here.

Things to Read

Preparation | From Don’t Forget to Prepare by History Investor, 2024

I had almost no idea of what to expect on the morning of 13 September 1978, when I loaded my pickup, kissed my family goodbye, and set out on the five-hour drive up I-95 from Hunter Army Airfield in Savannah, Georgia, for Fort Bragg, North Carolina— and points unknown.
I merely reminded myself that the future is always perfect. And wished it to be so.

This week, I refreshed a story from when I had ~15% of today’s subscriber count. It is one of my favorites — and I have changed my emails to be more targeted with key takeaways. The story is inspired by the book Inside Delta Force.

I have a number of older articles that could be refreshed with (hopefully) better writing and new perspectives, so I will try to work those in every so often.

Takeaways:

For Investors:

1. Most of your time should be spent preparing for action, not actually acting.

For Builders:

1. Don’t overly define your endstate. Build what is valuable, take feedback, and be flexible.

2. You will hit snags and take undesired detours along the way. Expect them.

3. Not everyone who starts the journey with you is meant to make it to the end.

For Us:

1. Compete with yourself yesterday, not those around you today.

2. Ignore unwarranted negativity from others.

3. Build skills that add flexibility to your future.

4. Seize great opportunities. There will always be uncertainty.

What Money Buys | From Lessons from the Ultra-Wealthy by Frederik Gieschen, 2024

That was lesson number two: money solves a lot of problems. What remains — like how to live a meaningful life, the conundrums of family and relationships, suffering, death — is the essence of life…
The rich are indeed different: they are exposed to a lot more of its energy. They live a more extreme version of the relationship we are all exposed to. Some master their relationship to money and live the life they want; others serve their money’s demands, unconsciously, and have their lives shaped for them.

Frederik Gieschen started his career as an investment banking analyst before working for a few different ultra-wealthy family offices. Today, he writes online about finance, literature, and history.

His career working with family offices gave him a glimpse into what made some of the richest so very different than the average American family — and also how they were not truly that different, at the end of the day, when it comes to what really matters.

History Rhymes | From Most Financial Phenomena are Older Than They Look by Byrne Hobart, 2024

Clews' book is not for everyone: it's repetitive, it's gossipy, and there are apparently many stories that he got wrong. Regardless, the constant flow of “unprecedented” events isn’t the only constant Clews illustrates; he also notes that people who succeed in finance sometimes have a tendency to spend a lot of time on their political opinions, often self-serving ones.
Clews does this to an egregious degree, pointing out that the unsung heroes of the Civil War were—yes!—the patriotic bankers who underwrote treasury auctions. So Clews' is a book for late 19th century financial history completists.

Byrne Hobart draws from Henry Clews' book Fifty Years in Wall Street, published in 1900, to illustrate that financial markets have always been subject to speculation, political influence, and unexpected crises — regardless of what we might say today of “unprecedented situations.”

In short, while the financial world has changed significantly in terms of regulations and technology, the underlying behaviors and patterns of market participants remain consistent over time. For example, Hobart compares the recent popularity of SPACs to the speculative financing of railroad companies in the 19th century and the use of over-the-counter equity derivatives to the risky financial maneuvers of an Erie Railroad director in 1868.

Visuals

ChatGPT nearing all-time high usage…

The US is now South Korea’s largest export partner…

… As is the case, now, in Taiwan

If you found today’s issue interesting, more than anything, I would appreciate it if you forwarded this email to someone that might find it meaningful. It is a big deal to me whenever someone reads my work, and I appreciate your support.

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Have a great weekend,

historyinvestor.com

Twitter / X: @HistoryEJ

Disclosure: Nothing in this article constitutes investment advice. More detailed disclosure here.

Don’t Forget to Prepare

EJ — Tue, 16 Apr 2024 10:15:00 +0000

Happy Tuesday and welcome new subscribers! If you find today’s note interesting, please consider forwarding it to a friend or colleague.

Was this email forwarded to you? If you enjoy the article, please consider subscribing. Thank you!

Poll

Inside Delta Force

It is important to realize that we have the ability to manufacture our own fate when we want to. We can... proceed when things look bad, or we can find plenty of reasons to quit if we don't want to go forward.
— Eric Haney, Inside Delta Force

After numerous terrorism incidents in the 1970s, the United States realized its armed forces had a counterterrorism blind spot. Green Beret Colonel Charlie Beckwith, who had served alongside the British Army's counter-terrorism unit the Special Air Service (also known as "SAS") in Malaysia, had been pushing for such a group since the 1960s.

Now that terrorism was a proven threat and the opportunity to be proactive lost, the U.S. Army commissioned its own SAS-like unit — Delta Force.

It is in the lead-up to Delta Force’s formation that we meet Eric Haney.

Uncertainty can be opportunity

Haney grew up in the 1950s in northern Georgia’s mountains. As a young boy, he experienced the excitement of electricity and indoor plumbing being brought into his family home. His parents had never entered high school, so when Haney looked like he might actually graduated from it, no one knew what he was supposed to do next.

Thus, following in the footsteps of friends and family, Haney joined the Army.

Though we may not have been scholars, we did know how to go into the military. I had grown up listening to the war stories and tales of my family and friends and I was determined to join up just as soon as I was able. I enlisted in the Army in the spring of 1970, while still in high school, with a reporting date immediately after graduation. I fell in love with the Army as soon as I met her.
I became a professional soldier, and that is what I will be until I die. The military is a profession that brands itself on the soul and causes you forever after to view the world and all human endeavor through a unique set of mental filters. The more profound and intense the experience, the hotter the brand, and the deeper it is plunged into you. I was seared to the core of my being.

About the time Colonel Beckwith was starting to recruit for Delta Force, Haney had just been promoted to sergeant first class. After eight years of near-continuous deployment with the Army Rangers, he feared the promotion signaled an imminent reassignment as an instructor training future generations.

That is not what Haney wanted. He enjoyed being in the fray — and had always succeeded there — so word made it back to Beckwith that there was an Army Ranger looking for something new.

As Haney was returning from a month in Panama’s jungles, Beckwith sent one of his men with an offer. Haney might be a fit for Delta Force, but it was impossible to know for sure. There were tryouts, and he would have to survive them. If he did, he just might be able to join the team.

He had my personnel records open on the table in front of him and he glanced at them occasionally as we talked about my career, about the units I had been in and the assignments I had held to that point. He told me this was a chance to be a charter member of a unit that would be unique in the American military — the nation's first unit dedicated to fighting international terrorism.
The prerequisites to try out were:
Minimum age of twenty-two. Minimum time in service of four years and two months. Minimum rank of staff sergeant. Pass a 100 meter swim test while wearing boots and fatigues, and pass the Ranger/Special Forces PT test. Have a minimum score of 110 on the Army general aptitude test, no court-martial convictions, and no record of recurring disciplinary problems.
About the only other thing Grimes told me was that if I was accepted, I could expect hard work, plenty of danger, and no recognition.

Haney wasted no time deliberating — he knew finishing his military years as an instructor was not the story he wished to leave behind. He signed up for tryouts on the spot and would join a group of men with backgrounds as decorated as his own all set on achieving the same goal — surviving selection.

I had almost no idea of what to expect on the morning of 13 September 1978, when I loaded my pickup, kissed my family goodbye, and set out on the five-hour drive up I-95 from Hunter Army Airfield in Savannah, Georgia, for Fort Bragg, North Carolina— and points unknown.
I merely reminded myself that the future is always perfect. And wished it to be so.

Perseverance is great…

The tryouts were a continuous string of examples showcasing that persistent action is required in order to achieve anything meaningful. Timed long-distance runs, an 18-mile hike with a 40 pound backpack, solo navigation drills across mountains with undefined destinations, and a 40-mile mountain hike at 2am served more as a test of will than skill.

Along the way, instructors made it easy to quit. All one had to do was say they were done, and that would be the end of it. “You can just quit now if you’d like” was a favorite phrase to the overwhelmed men.

And what a beautiful metaphor for life that is. Your destination is never truly known, it requires unending effort to get there, and along the way you can easily find sources of negativity telling you to voluntarily remove yourself from the challenge.

Haney dealt with all this by not getting focused on the finish line. That mindset doesn’t work when there is no actual end. Instead, he was steadfastly focused on doing well along the way and trusting he would get where he was going eventually.

I would just keep my mouth shut, my eyes and ears open, and respond to whatever came up. It’s the system I’d always used in new situations, and so far it had served me well.

Additionally, as he attacked what was in front of him he pushed away the temptation to look around and compare himself to the others.

Some were faster. Some were stronger. Some seemed to mind the pain less than he did. But those things didn’t matter — the only thing he could control was himself. He could make himself put one foot in front of the other, over-and-over. And so that is exactly what he did.

As the truck rumbled off, I looked at the other group, but they were still sitting there. I quickly wondered which of us was going where, and just as quickly dismissed the thought. The men in the other group weren’t my concern, and as for me, I’d know the destination when I got there.

… But don’t forget to prepare

As you read through all the events, you quickly conclude you would fail. But as you consider things a bit more, you have to be even more honest with yourself. You wouldn't just fail. You would, in fact, die.

You would get lost in the mountains. You would fall off a cliff. You would try to make the 40-miles and breakdown.

Unending resolve is not enough. You must be prepared. All the perseverance you can muster today won't do anything for you if you haven't lived a life up to today that has prepared you for the task at hand — who you are today depends on who you chose to be yesterday.

Success only comes after persistent preparation. The 163 men selected for tryouts had lived lives that prepared them to grab the unique, once-in-a-lifetime Delta Force opportunity and try. Without preparation, they could not even hope to try.

This is not unique to the military — Charlie Munger consistently shares the idea that there are only a few opportunities in life that define you. To take advantage of them, you prepare.

Spend each day trying to be a little wiser than you were when you woke up. Discharge your duties faithfully and well. Step by step you get ahead, but not necessarily in fast spurts.
But you build discipline by preparing for fast spurts.
— Charlie Munger

Finish lines can change

However, even with preparation, you will make mistakes. Haney did just that on the final 40-mile hike. He got lost. He went 7 miles off course in the wrong direction. And had to backtrack. And then keep going. He turned a 40-mile hike into more than a 50-mile hike, but he finished. After 18 hours, placing foot in front of foot, he made it to the finish line despite the setback.

It is rare that failure is a permanent state. After failure, you have the option to keep going. You can treat failure as only a stop on your journey. You don't have to let it be a destination. Many people treat getting knocked down as a reason to stay down. Like Haney, we don't have to.

What was the lesson here? Simple. Don’t quit. Never quit no matter what. Keep going... Keep going as long as you’re able to move, no matter how poorly you think you may be doing. Just don’t quit.

And it is important in life that you don't define failure as failure to achieve one specific goal. You can show up prepared and still not cross a specific finish line. That is alright.

163 men participated in the Delta Force trials. Only 12 were accepted into the program. Those 151 men were not failures — not even close.

They just had to accept that this Delta Force finish line wasn't one they were going to cross and instead start progressing towards the next.

Takeaways

As always, let me know what takeaways I missed or of real-world examples / expanded ideas from which other subscribers would benefit — Thank you!

Share Your Thoughts with a Comment

For Investors:

1. Most of your time should be spent preparing for action, not actually acting.

For Builders:

1. Don’t overly define your endstate. Build what is valuable, take feedback, and be flexible.

2. You will hit snags and take undesired detours along the way. Expect them.

3. Not everyone who starts the journey with you is meant to make it to the end.

For Us:

1. Compete with yourself yesterday, not those around you today.

2. Ignore unwarranted negativity from others.

3. Build skills that add flexibility to your future.

4. Seize great opportunities. There will always be uncertainty.

Leave a Comment

Take care and have a great rest of the week,

— EJ

historyinvestor.com

Twitter / X: @HistoryEJ

Disclosure: Nothing in this article constitutes investment advice. More detailed disclosure here.

Tales From the Eclipse

EJ — Fri, 12 Apr 2024 10:23:34 +0000

Happy Friday!

Open rates / engagement rates have improved materially over the last few weeks — so thank you everyone for all the support! When I swapped domains earlier this year, there was a bit of a downtick in email delivery success rates.

If you would like to help me a bit more, quickly hit reply to this email and tell me what time it is where you are. By replying, you tell all the email clients out there that these emails are legitimate — which in turn helps ensure these emails get to your (and others’) inboxes.

I will reply to every email I get with my own local time. If just 10% of you reply, I will have to write over 200 emails. Let’s make it happen.

Thank you!

Leave a Comment

On My Mind

I’m not a big fan of conferences.

As an investor in early stage businesses, however, you are expected to show up to one every now and again. Thus, I jumped on a plane, got off it, jumped on another plane, got off it, sat in an Uber, and then meandered around inside a fancy hotel for a few days earlier this week.

Fortunately, the conference was not a networking event for investors or a place where startups show-off their companies. Instead, it was an industry forum where certain kinds of decisions makers at large companies came together to collaborate on shared challenges.

I’m not one of those industry decision makers, but I communicate with a number of them regularly and thus was able to sneak in.

The event reminded me of the fragility of networking when juxtaposed against the strength of collaboration.

Everyone at this event was working on similar problems, willing to trade notes on approaches (despite being competitors in the market), happy to be shown their approaches aren’t working anymore, and open to follow-up conversations. Intentional conversations took the place of mindless business card trading, and people were eager to follow-up on very specific ideas.

True networking isn’t a sterile list of names to “go get” and endless back-to-back superficial discussions of how you might be able to add value. Instead, it is about adding value upfront and seeing what happens next.

If you focus on counting the email addresses you have collected, I think you are missing the value of a significantly better approach to growing your network. If you can improve the lives of those you interact with — even in just a small way, such as by providing perspectives on challenges at this conference — value finds a way back to you eventually.

Support: Big Desk Energy

One of the founders of Beehiiv, the newsletter platform I am using here, writes about “startup insights, stories, and vibes” every Tuesday. He was the second employee at Morning Brew before it was bought by Business Insider.

He shares witty advice for anyone looking to build something — whether it is a company, community, or yourself. You can check him out here — and if you end up subscribing, you will also be supporting my work here! Thank you!

Quote of the Week

The opposite of courage in our society is not cowardice, it is conformity.
— Rollo May

Rollo May was a psychologist and contemporary of Viktor Frankl, the famous Holocaust survivor who wrote Man’s Search for Meaning based on his experience in Nazi Germany’s concentration camps.

A common theme throughout their work is that doing nothing to stop something you know is wrong is more-or-less actively supporting that which is wrong.

Poll of the Week

Last Week

Question: Did you get tricked by an April Fool's joke this year?

Results: 43% were not tricked!

Comments:

“I was totally tricked by an article saying Nvidia purchased the Xbox business from Microsoft….it made sense to me. Oh well, maybe I’m gullible.”

Things to Read

400 / 400 = 1 | From Tales From the Eclipse by WaitButWhy, 2024

Earthlings are very lucky, eclipse-wise. Most planets don’t have a big enough moon to create a total solar eclipse. Not only is our moon big enough, it’s about exactly the size of the sun in our night sky because, by sheer coincidence, the sun is about 400 times farther from us than the moon and also about 400 times bigger than the moon in diameter—making our eclipses especially breathtaking…
As fortune would have it, the 2024 eclipse’s path of magical totality would be passing right over my new hometown of Austin, Texas. It was perfect.
Then came the weather reports. Austin was going to be cloudy on eclipse day… Nope. Not okay. It wasn’t an option to not see this eclipse…
We decided on Sunday night that Monday morning we’d get on a flight to somewhere in the eclipse’s path that was forecast to have clear skies. We settled on Arkansas

Tim Urban shares a short, funny story on the total solar eclipse he missed in 2017 — and the regret he felt after realizing he missed something that might not show up again for many decades.

Fortunately, he had one more shot before 2044 to see a total solar eclipse. This time, he wasn’t going to miss it.

Sustainable Business Models | From Popping the Publishing Bubble by Ben Thompson, 2015

It is easy to feel sorry for publishers: before the Internet most were swimming in money, and for the first few years online it looked like online publications with lower costs of production would be profitable as well.
The problem, though, was the assumption that advertising money would always be there, resulting in a “build it and they will come” mentality that focused almost exclusively on content production and far too little on sustainable business models.

Back in 2015, Ben Thompson of Stratechery discussed the publishing industry. He argued the then-current model, which relies heavily on ad networks, is fundamentally flawed as it incentivizes quantity over quality. This leads to clickbait content and a poor experience for readers.

Thompson proposed two alternative models for the future of publishing. The first is a niche approach, where publications focus on niche topics and charge subscriptions. This model ensures a more direct and effective connection between the content and a reader’s interest. The second model involves integrating ads seamlessly into the content, making them more engaging and relevant to the reader.

Eight years on, it seems like most social networks have adopted a combination of these two methods. Using data, they essentially segment their users into niche readers, and then sell ads that look more-or-less exactly like other users’ social media posts.

It’s a good reminder to those of us using social media — the sites feel free to us, but we actually pay them by giving them data. We trade data for a product. The company trades a product for the data. The company then sells that data.

That means we, the users, are the company’s true product.

Winner Takes All | From Cybersecurity’s Class Conundrum by Strategy of Security, 2024

Market dynamics like these can't be avoided. They're better to understand and accept than ignore or deny.
Cybersecurity has unique characteristics, but so does every interesting industry. Taking a contrarian stance against widely proven market forces happening in cybersecurity is an option, but probabilities are working against you.
If you're daring, you can take the bet — but do it with a clear understanding so you know which rules to bend and why.

The cybersecurity market has been experiencing the effects of a winner-take-all setup, where a few dominant players capture most of the market while smaller competitors struggle to compete effectively as they grow. This is not unique to cybersecurity companies or their competitive landscape.

Cole Grolmus takes a look at the dynamics that are driving this consolidation, including historical context from other industries both in and outside of the tech industry.

Todd Combs | From Graham & Dodd Annual Breakfast by Investment Management Insights, 2022

As an investor, you don’t need charisma or social skills. You need to have a decent conversation with management.
On the other hand, when you are in management, you have to convince people in the company when it comes to initiating change and you have to be good at explaining why change is necessary. As a manager, if you are good at communicating, you can mobilize people to change the operations…
Whereas as an investor, you see businesses fail left and right, you have the experience, so theoretically, you should be able to come in and tell people to change. But it doesn’t work like that.

At the 2022 Graham & Dodd Annual Breakfast, Todd Combs, who manages a portion of Berkshire’s investments and runs GEICO as CEO, joined Michael Mauboussin to discuss investing.

Combs dove into many investment topics including having an adequate margin of safety in investments (emphasizing that the future is inherently uncertain), the importance of unit economics (which involves considering the true costs of production and delivery of goods or services), the influence of interest rates on returns, how trying to time the market can be a fool’s errand, and the importance of understanding not only accounting, but the accounting approaches being applied to the statements at which you are looking.

Beyond investing, Combs touched on management challenges, such as the difficulty of implementing necessary changes even when the benefits are clear, the importance of being a good communicator, and the necessity of ensuring transparency and accountability in business operations.

Visuals

Inflation is starting to pick back up…

…with higher prices driven by housing

Leave a Comment

Have a great weekend,

historyinvestor.com

Twitter / X: @HistoryEJ

Disclosure: Nothing in this article constitutes investment advice. More detailed disclosure here.

Money with Old Friends

EJ — Fri, 05 Apr 2024 11:46:00 +0000

Happy Friday!

If you missed it earlier this week, make sure you check out my most recent deep dive article on Jack London’s writing — To Build a Fire.

As always, if you enjoy this note and would like to support my work, the absolute best thing you can do is forward this email to a few friends and coworkers that might find it interesting.

Thank you!

On My Mind

We started looking for daycare options — getting on waitlists — for our son about the time he was born. Our logic was that we wanted to get him into a program starting between the ages of 12 and 18 months. Most places we talked to suggested they had a 12-month waitlist.

I’m not the best at math, but that seemed to fit together fairly nicely — so we got on a few waitlists. 12 months passed and as we started to make phone calls to check in, we felt we had been tricked. 12-month waitlists magically turned into 24-month waitlists.

We had made the decision to trust a few well-known schools when they told us the wait was 12 months. We got on a few, but not all the waitlists. There was a small costs to joining each — but it rounded to zero compared to the onslaught of Amazon purchases we now seem forced to make daily for the little one.

We had made a mistake. We didn’t appropriately value the impact of being wrong relative to the cost of minimizing the chance of being wrong.

If we had gotten on every waitlist, we probably wouldn’t be in a situation where every single one 2x’d in length. We could have purchased near-costless options, but we didn’t.

Fortunately, we were able to pull at a few heart strings at other daycares and have some options now that require a bit more of a drive. So that is great. But that is a combination of luck and schools generally being averse to my wife calling them everyday asking if a new spot has opened up.

In hindsight, it was obviously that we should have bought all the free options that we could. Going forward, I’m going to try to keep this experience in mind when valuing whether or not it is worth paying nothing for potential value in the future.

Quote of the Week

I just write my books, much as a plumber fixes pipes and garbagemen haul away junk. I mean it, no introspection; it is just a kind of work I like and can do.
— Vaclav Smil

From Vaclav Smil and the Value of Doubt

Poll of the Week

Last Week

Question: Have you gotten sick so far this year?

Results: 69% of you have not gotten sick! On my end, I have definitely gotten close to being sick, but I’ve been lucky to avoid a full-blown illness so far this year. I’m sure that means that I will now be sick this week!

Comments:

“I've got a toddler, so I've been sick many times this year.”

Earlier This Week

Question: What is the coldest outside temperature you've experienced?

Results:

🟨🟨⬜️⬜️⬜️⬜️ 32°F / 0°C + (15%)

🟨🟨🟨🟨🟨⬜️ 0 to 32°F / -18 to 0° C (33%)

🟨🟨⬜️⬜️⬜️⬜️ -20 to 0°F / -29 to -18°C (15%)

🟩🟩🟩🟩🟩🟩 -40 to -20°F / -40 to -29° C (37%)

⬜️⬜️⬜️⬜️⬜️⬜️ -60 to -40°F / -51 to -40°C

⬜️⬜️⬜️⬜️⬜️⬜️ Below -60°F / -51°C

Comments:

“It doesn't get super cold in NC but I do run on a regular basis when it is in the 30's. The lowest temp run I have had was 26 degrees.”
“I’m from Norway…“
“In southwest Wyoming“

Things to Read

Earlier This Week | From To Build a Fire by History Investor, 2024

Jack London (1876 - 1916) was famous for his vivid literary depictions of survival in the harshest of natural environments. His best-known novels, The Call of the Wild and White Fang, set in the harsh Canadian wilderness and written from the perspective of animals as opposed to humans, captivated readers worldwide.
London's stories felt authentic as his adventurous life, from sailing to Japan and joining protest armies to his days as an oyster pirate and chasing after gold in the Klondike, provided a latticework from which to paint. His versatility as a novelist, short story writer, and social activist — combined with his ability to translate personal experiences into compelling narratives — made him one of the most popular authors of his time.
Despite his success, London's life was not without its challenges. He struggled to make good financial decisions and was often extended beyond his means despite substantial income. Alcohol was an escape from this reality, and his health declined before he grew old. He died in 1916 at the age of 40.
One of London’s most famous short stories (~7,000 words) is To Build a Fire, which he first wrote in 1902 and subsequently re-wrote with material improvements in 1908.

For Investors:

1. Some situations are “too hard” and you should avoid them

2. After a certain point, not all outcomes can be improved with effort

For Builders:

1. Lack of preparedness kills

2. Negative events compound if they are not dealt with quickly

3. History rhymes, so take lessons from those that built before you

4. Avoiding best practices in exchange for speed will bite you

For Us:

1. You can always outspend what you earn

2. Arrogance deafens our ears to what we need to hear

3. Self-reliance only takes you so far; relationships can help take you the rest of the way

You can help support History Investor by retweeting it on Twitter — Thank you!

The People Matter | From The Reddits by Paul Graham, 2024

I met the Reddits before we even started Y Combinator. In fact they were one of the reasons we started it.
YC grew out of a talk I gave to the Harvard Computer Society (the undergrad computer club) about how to start a startup. Everyone else in the audience was probably local, but Steve and Alexis came up on the train from the University of Virginia, where they were seniors. Since they'd come so far I agreed to meet them for coffee. They told me about the startup idea we'd later fund them to drop: a way to order fast food on your cellphone…
Their idea was bad though. And since we thought then that we were funding ideas rather than founders, we rejected them. But we felt bad about it…
So I called Steve and Alexis and said that we liked them, just not their idea, so we'd fund them if they'd work on something else…

Don’t Pull-Up Your Flowers | From You Make Money With Old Friends by Kingswell, 2024

Smith might not be everyone’s cup of tea, but — full disclosure — I’m a huge fan. Because, if nothing else, he has the courage of his convictions.
In 1992, Smith burst onto the scene with Accounting for Growth, a book that took aim at the financial machinations that British companies used to (legally) manipulate results. It cost him his job as head of research at UBS — and cemented his reputation as a bold truth-teller unafraid of critic or censor…
“Frankly, the share price isn’t the thing that tells you whether you got it right or wrong,” Smith said. “It’s what’s happening in the company”…
You make money with old friends. If you’ve got something like [Microsoft] that you get right, the likelihood is it’s going to continue to be right. I’m not a gardener, but I’m told what you’re supposed to do is water the flowers and pull up the weeds. An awful lot of people do it the other way around. They sell the things that worked and hang on to the things which are not working in the hope they’ll come right. Our strategy — and, in my view, the correct way to do it — is the opposite of that, to run our big winners.”

Mutual Benefit | From Poor Charlie’s Almanack by The Rational Walk, 2024

“Early Charlie Munger is a horrible career model for the young because not enough was delivered to civilization in return for what was wrested from capitalism.”
— Charlie Munger
Life is about more than accumulating money. Understanding the psychology of misjudgment is a prerequisite for a life well lived. “Early Charlie Munger” was not the ideal role model according to the man himself, but I’d like to think that by the end of his life, Charlie Munger knew that his status as a positive role model was secure.

Visuals

I hate Teams but it is winning (LibertyRPF)

The lottery is a tax on lower income houses (TheEconomist)

If you made it all the way down here, please take a moment to forward this email to someone that might find it interesting — I appreciate your support!

Leave a Comment

Have a great weekend,

historyinvestor.com

Twitter / X: @HistoryEJ

Disclosure: Nothing in this article constitutes investment advice. More detailed disclosure here.

To Build a Fire

EJ — Wed, 03 Apr 2024 10:23:25 +0000

Happy Wednesday and welcome to all our new subscribers — over 100 new readers have joined since the last deep dive article!

Weekly readers will know that I have been reading a bit of Jack London lately, and this email is inspired by one of London’s most popular short stories.

If the To Build a Fire section is a bit long for the time you have, see the TL;DR section towards the end of this note for a shorter summary. Takeaways for investors, builders, and ourselves are in the last section below.

As always, if you enjoy this note and would like to support my work, the absolute best thing you can do is forward this email to a few friends and coworkers that might find it interesting.

Thank you!

Poll

On my end, the coldest place I’ve been is Harbin, China. Many years ago, I spent December through February in the city — the coldest time of the year — and at night it would get to be -15 to -20 °F. I can’t imagine a colder temperature.

Jack London

Jack London (1876 - 1916) was famous for his vivid literary depictions of survival in the harshest of natural environments. His best-known novels, The Call of the Wild and White Fang, set in the harsh Canadian wilderness and written from the perspective of animals as opposed to humans, captivated readers worldwide.

London's stories felt authentic as his adventurous life, from sailing to Japan and joining protest armies to his days as an oyster pirate and chasing after gold in the Klondike, provided a latticework from which to paint. His versatility as a novelist, short story writer, and social activist — combined with his ability to translate personal experiences into compelling narratives — made him one of the most popular authors of his time.

Despite his success, London's life was not without its challenges. He struggled to make good financial decisions and was often extended beyond his means despite substantial income. Alcohol was an escape from this reality, and his health declined before he grew old. He died in 1916 at the age of 40.

One of London’s most famous short stories (~7,000 words) is To Build a Fire, which he first wrote in 1902 and subsequently re-wrote with material improvements in 1908.

We are exploring the 1908 version below.

To Build a Fire

Day had broken cold and gray, exceedingly cold and gray, when the man turned aside from the main Yukon trail and climbed the high earth-bank, where a dim and little traveled trail led eastward through the fat spruce timberland. It was a steep bank, and he paused for breath at the top, excusing the act to himself by looking at his watch. It was nine o'clock. There was no sun nor hint of sun, though there was not a cloud in the sky

Ahead of the man lay a difficult trek through the Yukon wilderness. At that time of year that far north, the sun barely peaked its head over the horizon to mark the break between night and day.

While he had become accustomed to dark, cold weather, he was a newcomer to the land and this was his first winter this far north.

He plunged in among the big spruce trees. The trail was faint. A foot of snow had fallen since the last sled had passed over, and he was glad he was without a sled, traveling light. In fact, he carried nothing but the lunch wrapped in the handkerchief. He was surprised, however, at the cold. It certainly was cold, he concluded as he rubbed his numb nose and cheek-bones with his mittened hand.

Previously in the company of others — who called “the boys” — the man had decided to take a longer route back to camp to scout potential timber harvesting locations for the Spring. The search completed, he was starting on his way back.

But the cold that morning surprised him — it was colder than anything he had experienced — but he marched forward regardless, alone but for a husky that trailed behind him.

The animal was depressed by the tremendous cold. It knew that it was no time for traveling. Its instinct told it a truer tale than was told to the man by the man's judgment. In reality, it was not merely colder than fifty below zero; it was colder than sixty below, than seventy below. It was seventy-five below zero.

The man did not realize the extent of the cold — to him, it was just cold. Very cold, yes — but that was all he thought about it.

He kept himself warm by moving at a quick pace. He hoped to reach his companions by dinner time that evening. Lunch — bacon and biscuits — was packed tightly against his chest to prevent it from freezing as he marched. He was making good time and looked forward to building a fire and sitting down for lunch once he covered another 10 miles and came to a fork in the creek he was following that he knew lay on the way toward camp.

It would be about half-past noon then.

Once in a while the thought reiterated itself that it was very cold and that he had never experienced such cold. As he walked along he rubbed his cheek-bones and nose with the back of his mittened hand. He did this automatically, now and again changing hands. But rub as he would, the instant he stopped his cheek-bones went numb, and the following instant the end of his nose went numb.

Despite inevitable frostbite to his cheeks and nose, the man pushed onward.

Empty as the man's mind was of thoughts, he was keenly observant, and he noticed the changes in the creek, the curves and bends and timber jams, and always he sharply noted where he placed his feet… he knew also that there were springs that bubbled out from the hillsides and ran along under the snow and on top the ice of the creek.
He knew that the coldest snaps never froze these springs, and he knew likewise their danger. They were traps… when one broke through he kept on breaking through for a while, sometimes wetting himself to the waist.

He kept his pace, and at half-past noon he was indeed at the fork in the creek he expected. Elated at the progress he had made, he sat down.

He unbuttoned his jacket and shirt and drew forth his lunch. The action consumed no more than a quarter of a minute, yet in that brief moment the numbness laid hold of the exposed fingers. He did not put the mitten on, but, instead struck the fingers a dozen sharp smashes against his leg. Then he sat down on a snow-covered log to eat. The sting that followed upon the striking of his fingers against his leg ceased so quickly that he was startled…
He had forgotten to build a fire and thaw out. He chuckled at his foolishness, and as he chuckled he noted the numbness creeping into the exposed fingers. Also, he noted that the stinging which had first come to his toes when he sat down was already passing away. He wondered whether the toes were warm or numb. He moved them inside the moccasins and decided that they were numb.

The man was a bit startled — this was a level of cold he hadn’t expected to meet. He stood and stamped around until feeling returned to his feet. As he stomped around the log, his mind thought back to stories he had heard from old men when he first arrived in the Yukon.

He had been told to never travel alone when it is fifty below zero.

That man from Sulphur Creek had spoken the truth when telling how cold it sometimes got in the country. And he had laughed at him at the time! That showed one must not be too sure of things. There was no mistake about it, it was cold. He strode up and down, stamping his feet and threshing his arms, until reassured by the returning warmth. Then he got out matches and proceeded to make a fire…

He knew how to build a fire, and in no time he had a flame roaring to life. He thawed out his body and ate his biscuits while protected from the weather by the fire, satisfied with his conquest of the cold.

Once he finished eating, he smoked his pipe, put back on his mittens, took a chew of tobacco, and called the dog to follow him away from the warmth and back into the frigid wilderness towards a camp still hours away.

The dog was disappointed and yearned back toward the fire. This man did not know cold. Possibly all the generations of his ancestry had been ignorant of cold, of real cold, of cold one hundred and seven degrees below freezing point. But the dog knew; all its ancestry knew, and it had inherited the knowledge. And it knew that it was not good to walk abroad in such fearful cold. It was the time to lie snug in a hole in the snow and wait for a curtain of cloud to be drawn across the face of outer space whence this cold came.

But the dog had no choice — together, they were going to battle the frost.

And then it happened. At a place where there were no signs, where the soft, unbroken snow seemed to advertise solidity beneath, the man broke through. It was not deep. He wet himself halfway to the knees before he floundered out to the firm crust.

He cursed his bad luck out loud. A second fire must now be built.

He would be delayed getting into camp where the boys were waiting for him. But there was no option — no matter how fast he could move, his feet would freeze if they were not dried before he continued. He gathered dry underbrush from several small spruce trees and struck a match to small piece of birch bark.

He knew there must be no failure. When it is seventy-five below zero, a man must not fail in his first attempt to build a fire--that is, if his feet are wet.

His feet were already beginning to freeze, and his fingers had lost their sensation the moment he removed his mittens to build the fire. The blood in his body was no longer being pumped to his extremities by a constant march forward — instead, it was retreating to his core.

He fed the birch-bark flame with small twigs, and gradually larger and larger branches and then finally his second fire was a success.

He was safe. He remembered the advice of the old timer on Sulphur Creek, and smiled. The old-timer had been very serious in laying down the law that no man must travel alone in the Klondike after fifty below. Well, here he was; he had had the accident; he was alone; and he had saved himself.
Those old-timers were rather womanish, some of them, he thought. All a man had to do was to keep his head, and he was all right. Any man who was a man could travel alone.

Now blessed with a flame, the man needed to get dry. He started to remove his frozen footwear, but he had made a mistake. He had built his fire directly underneath a large spruce tree.

It had been faster — it was easy to pull the dead wood from the tree directly into the fire — than what tradition would dictate as best: building the fire away from any structure that was heavily laden with softly packed snow.

High up in the tree one bough capsized its load of snow. This fell on the boughs beneath, capsizing them. This process continued, spreading out and involving the whole tree. It grew like an avalanche, and it descended without warning upon the man and the fire, and the fire was blotted out! Where it had burned was a mantle of fresh and disordered snow.

Dumbfounded, the man stared at what might be his own death sentence. The old man from Sulphur Creek had been right — maybe a man shouldn’t travel alone at fifty degrees below. But it did not matter. He would have to build a third fire.

He quickly gathered new tinder materials, but was surprised at the the lack of sensation he had while doing so. The man knew his hands were at the end of his arms, but he had to watch his hands pinch together to confirm he was, in fact, holding anything.

He reached for the matches in his pocket. He knew they were there — but his fingers no longer did. Haphazardly, he tore at his pockets and out fell the matches into the snow. Reaching for them, his fingers could not close.

Desperate, he bit at the matches and finally got them in between the palms of his hands as his fingers were stuck unmoving. Striking the entire set of matches against his leg, he succeeded in lighting them. With the bunch of matches burning into his numb fingers, he held his lifeline to the birch he had aggregated until he finally felt enough pain underneath the numbness that he could take it no more.

The blazing matches fell sizzling into the snow, but the birch bark was alight. He began laying dry grasses and the tiniest twigs on the flame. He could not pick and choose, for he had to lift the fuel between the heels of his hands. Small pieces of rotten wood and green moss clung to the twigs, and he bit them off as well as he could with his teeth.
He cherished the flame carefully and awkwardly. It meant life, and it must not perish.
The withdrawal of blood from the surface of his body now made him begin to shiver, and he grew more awkward. A large piece of green moss fell squarely on the little fire. He tried to poke it out with his fingers, but his shivering frame made him poke too far and he disrupted the nucleus of the little fire, the burning grasses and tiny twigs separating and scattering.
He tried to poke them together again, but in spite of the tenseness of the effort, his shivering got away with him, and the twigs were hopelessly scattered. Each twig gushed a puff of smoke and went out.
The fire-provider had failed.

He began to panic. It was no longer a question of frostbite — it was life and death, with the odds stacked against him.

The man looked down at his hands in order to locate them, and found them hanging on the ends of his arms. It struck him as curious that one should have to use his eyes in order to find out where his hands were. He began threshing his arms back and forth, beating the mittened hands against his sides.
He did this for five minutes, violently, and his heart pumped enough blood up to the surface to put a stop to his shivering. But no sensation was aroused in the hands. He had an impression that they hung like weights on the ends of his arms, but when he tried to run the impression down, he could not find it.

Fear further welled up inside him. He stood up and began to run.

The dog joined in behind and kept up with him. He ran blindly, without intention, in fear such as he had never known in his life. Slowly, as he plowed and floundered through the snow, he began to see things again, the banks of the creek, the old timber-jams, the leafless aspens, and the sky.
The running made him feel better. He did not shiver. Maybe, if he ran on, his feet would thaw out; and, anyway, if he ran far enough, he would reach camp and the boys…
His theory of running until he reached camp and the boys had one flaw in it: he lacked the endurance.
Several times he stumbled, and finally he tottered, crumpled up, and fell. When he tried to rise, he failed. He must sit and rest, he decided, and next time he would merely walk and keep on going.

But his strength never returned. He finally felt warm. He imagined his companions coming to find him — imagined going back to the States and telling of how cold it could really get.

He drifted on from this to a vision of the old-timer on Sulphur Creek. He could see him quite clearly, warm and comfortable, and smoking a pipe.
"You were right, old hoss; you were right," the man mumbled to the old-timer of Sulphur Creek.

And finally the man was fully silent. The dog waited. Eventually, it whined disapprovingly and crept closer to the man, only to recoil at the smell of death. It looked up at the stars, turned and trotted away in the direction of the camp it knew, where food and fire would be waiting.

TL;DR

A newcomer to the frigid Yukon forests of Canada, sets off through the wilderness to meet-up with companions after scouting a detour in search of timber that could be harvested in the spring. The temperature has plummeted to a bone-chilling −75 °F, and despite warnings from locals about the dangers of traveling alone in such extreme conditions, the unnamed man ventures out alone but for the company of a dog. The dog’s instinct tell it of the dangers ahead, but it reluctantly follows the man into the spruce-covered landscape.

As the pair traverse the Yukon terrain along the banks of a frozen creek, the man takes great care to avoid patches of thin ice concealed by snow. He sets out at 9am with the aim of reaching his companions’ camp by 6pm that evening.

At half-past noon, the man pauses to build a fire and warm himself while he eats his lunch. However, shortly after resuming his trek, he breaks through a patch of thin ice, soaking his feet and lower legs. He is forced to stop once again and build another fire to dry himself. It would be inviting death to continue wet at these temperatures — and he knows it.

Choosing a spot beneath a tree for the fire, he pulls twigs from a brush pile to feed the flames. Soon a fire is roaring. However, his decision to ignore best practices and build so near a tree ultimately undoes his efforts. A large amount of snow, agitated by the removal of branches to build the fire, falls from above, extinguishing the fire.

The man begins to lose sensation in his extremities, and the gravity of the warnings about the life-threatening danger posed by the extreme cold finally dawns on him. His hands are freezing — literally — and he cannot move his individual fingers.

In a desperate attempt to light another fire and without the use of his individual fingers due to frost, he strikes all of his matches at once, burning himself in the process. While trying to rekindle a flame, he inadvertently pokes the burning twigs apart with his frozen fingers, extinguishing his last lifeline.

In a last-ditch, panicked effort to restore his circulation, the man tries to run toward the camp — still hours away — but he stumbles and falls repeatedly in the snow before he can no longer push himself back to his feet.

As the cold hastens its conquest towards the man’s core, he remembers the warnings he received about traveling alone as he falls asleep for the last time. The dog, after some time, turns and trotts up the trail in the direction of the camp it knew was its destination, in search of the food and fire it knew it could find there.

Takeaways

As always, let me know what takeaways I missed or of real-world examples / expanded ideas from which other subscribers would benefit — Thank you!

Share Your Thoughts with a Comment

For Investors:

1. Some situations are “too hard” and you should avoid them

2. After a certain point, not all outcomes can be improved with effort

For Builders:

1. Lack of preparedness kills

2. Negative events compound if they are not dealt with quickly

3. History rhymes, so take lessons from those that built before you

4. Avoiding best practices in exchange for speed will bite you

For Us:

1. You can always outspend what you earn

2. Arrogance deafens our ears to what we need to hear

3. Self-reliance only takes you so far; relationships can help take you the rest of the way

Leave a Comment

Best,

historyinvestor.com

Twitter / X: @HistoryEJ

Disclosure: Nothing in this article constitutes investment advice. More detailed disclosure here.

A Call from the FBI

EJ — Fri, 29 Mar 2024 10:34:54 +0000

Happy Friday!

Apologies for the absence of the promised Jack London-themed email on Tuesday. You will also notice that today’s note is a bit shorter than normal. While I haven’t been sick, I have been almost sick for the last week.

I seem to have fended off actual illness with extra sleep, which required me to trade in writing / reading time for health. I think I am finally “on the mend” and should have that deep dive email out early next week.

If you enjoy today’s note, please take a moment to let me know what you liked most — either through a comment or by simply replying to this email. Doing so will help me improve things over time!

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Quote of the Week

20 years from now you’d give anything to be:
This exact age, exactly this healthy, in this exact moment.
Take a second to enjoy it.
— Rich Webster

Special thanks to a reader for sending this one along earlier this week!

Poll of the Week

Last Week

Question: Have you read anything by Jack London?

Results: About 67% responded “yes”. In middle school, I think it was, I read White Fang and Call of the Wild. These may or may not have been abridged versions.

Things to Read

More than Growth | From The Affluent Society After Ten Years by John Galbraith, 1969

Few economists would now argue that a sufficiently expanding economy will sweep away other social problems… The affluent society increases its wants and therewith its consumption pari passu with its production…
And the explanation for poverty in the well-to-do society must be sought in the general and not the particular aspects of the case — not in the nature of the society of the poor, but in the nature of a society of the rich which allows or requires some to stay so poor…
Might there not one day be discontent with a society in which there is single-minded concentration on the goal of economic success?

Galbraith published The Affluent Society in 1958 to explore how economic growth might necessitate significant investment in public goods as a means of economic security. At the time, Keynesian views of, to simplify, economic growth solving all social ills had found a enthusiastic base of believers in the post-war booming United States.

I’ve always struggled with those Austrian economics-based theories as 1) making sense on paper, 2) feeling logically beautiful, but 3) being idealistic as humans are not just rationale, economic automatons.

Ten years later, he reflected in The Atlantic on which of his ideas have stood the test of time and which now seem to have a less certain foundation.

Work-From-Office | From 8 Google Employees Invented Modern AI, 2024

Eight names are listed as authors on “Attention Is All You Need,” a scientific paper written in the spring of 2017. They were all Google researchers…
It’s always a delicate balancing act to figure out how to list names — who gets the coveted lead position, who’s shunted to the rear. Especially in a case like this one, where each participant left a distinct mark in a true group effort. As the researchers hurried to finish their paper, they ultimately decided to “sabotage” the convention of ranking contributors.
They added an asterisk to each name and a footnote: “Equal contributor,” it read. “Listing order is random.”
The writers sent the paper off to a prestigious artificial intelligence conference just before the deadline — and kicked off a revolution.

In 2017, a group of eight Google AI employees published a paper called “Attention is All You Need" at an artificial intelligence conference. The paper introduced what was at the time a novel concept for requiring less AI training data to achieve state-of-the-art performance — the approach used what they called Transformers.

Unlike previous approaches, a Transformer can process entire sentences of data at once, allowing for a more accurate and efficient interpretation of complex language patterns. This breakthrough has led to significant improvements in natural language processing, machine translation, and other AI applications.

I don’t understand the ins-and-outs of the technical details, but the impact of this paper has been significant. The Transformer has become the standard architecture for many AI-training tasks by enabling more efficient and accurate models.

To steal from Byrne Hobart’s comments on the article, “Second, this piece is the strongest indirect endorsement of return-to-office that I've ever read — it's full of references to accidentally-overheard conversations, chats in the hallway, and the like.”

Uncommon Honesty | From Neil Strauss Once Got a Call from the FBI, 2024

4. Write with uncommon honesty. Edit with uncommon brutality…
11. The first draft is for you. Be uninhibited and let your ideas flow like lava.
12. The second draft is for the reader. Make what matters to you matter to the reader. Ask questions like: "Where are they bored? Where are they confused?"
13. The third draft is for the haters. Clean up your prose. Get the facts straight. Take the bullets out of the gun. Then... ship.

Neil Strauss has written 10 New York Times best-selling books, and regularly writes at Rolling Stone and The New York Times (I wonder if that helps with the NYT best-selling titles?). He was recently on a podcast / YouTube with David Perell — who interviews writers — and Perell shared a list of 15 key takeaways.

I found Strauss’ writing process interesting. He mentions that the first draft has to be written for the author themselves. John Galbraith has said similar. And both suggest a brutal editing process is needed after that first draft — but that first honest draft is always the starting point because creativity and curiosity build the best stories. Fear of what others might think ultimately keeps pen from paper by stunting the process.

In my day job, sometimes I get caught up too early in “what is our Investment Committee going to want to see.” Instead, step one should generally be “what do I want to see,” and then you can refine from there.

If you start by already filtering what you are diligencing / building through a lens someone else gave you, you might not end up uncovering the things that would naturally be most valuable to learn.

Community

Sheldon Bishop writes about founders and deep dives into new startups every week— for example, he did Canva this week. He looks at everything from how things got started, to pricing, growth, operations, vision, and more.

I don’t receive any compensation here — I just thought I should give Sheldon a shoutout given the work he puts in!

The Zero to One by Sheldon Bishop

Learn how the greatest companies win, with actionable deep dives into their GTM motions, strategic playbooks, products, and founding stories.

Visuals

If you made it all the way down here, please take a moment to forward this email to someone that might find it interesting — I appreciate your support!

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Have a great weekend,

historyinvestor.com

Twitter / X: @HistoryEJ

Disclosure: Nothing in this article constitutes investment advice. More detailed disclosure here.