Investing is philosophical

Since Bitcoin has 6xed from my previous article. Just some observations to share.

  1. People ask me from 15k till now whether to buy bitcoin. 1/10 of them buy. 0 buy any amount worth mentioning.
  2. People ask me to sell it. Because it might drop to $0 tomorrow. But could it be that the person who knows when it will pump, knows better than a no-coiner when to dump?
  3. People say it is a Ponzi scheme. It is no different from gambling.
  4. People say it is too volatile thus it is not for them. Though in the previous article I already addressed the risk-adjusted-performance.
  5. None of them can be swayed. They stand very strongly by their disapproval because of 1–3 Forbes article they read or because they heard someone like Munger say it is ‘rat poison’.
  6. Everyone above has not read a jack about cryptocurrencies, not even run a node nor signed off.
  7. None of them improved their knowledge of cryptocurrencies or will desire to, asking the same questions in each conversation.
  8. The people who finally buy because I told them to, end up the same, read nothing but monitor the price judiciously.
  9. The people who will never buy it also monitor the price judiciously. As is human nature, they hope the price drops so they feel good that they did not miss out and were right.
  10. Textbook reflexivity?

What can we draw from this?

Charles T. Munger — ‘In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time — none, zero

  1. Explaining about cryptocurrencies to people of average intelligence and work ethic is a negative expected value (EV) activity.
  2. Most people have little curiosity.
  3. People cannot see the rate of changing paradigms until they are long past and then they say that it is so obvious. Social media, electric vehicles etc. You can if you are open-minded, and study hard enough.
  4. People talk too much, read too little, reflect too little, think too trivial. I sold bitcoin in 2018. Then reading more, I read more and realized that I was wrong. What will make you know you are wrong? Maybe you say that I am wrong after 6x? Then what is right?
  5. Reflection. What will make you read more to be right? What will you give to be right on a topic? To learn one must be humble. They say the top athletes are proud. Proud when it comes to achievements, but never in the gym. Everything has nuances, and average people choose not to see them. A person who does not read voraciously and thinks he can outperform at investing is like an athlete who does not go into the gym. You can if you have accurate, informative, on-time data (but you still need to read them?), or do insider dumping. Otherwise, you just have poor reporting metrics and think you outperform.
  6. People are bad at listening. It is impossible for everyone to read up on everything. But their tendency to shoot their mouth off on things they read nothing about does not decrease. Emotions and narratives make human interaction limitless, and we can be massively wrong for an extended period (i.e. nazi moral compass). To win, the contrarian must stick through all this chitter-chatter.
  7. Gambling? By definition, making decisions is an odds game. Investment is an odds game, thus a good gambler is a heck of an investor. “Investment” is just a euphemism, no? Who started off with arbitraging or trading? Just to name a few: Soros. Buffett. Thiel. A game has a 10% chance of winning, and you win 20x on winning. Will you play the game? To extend this, is Buffett really a good investor to have passed on Google and Amazon entirely instead of making a 1% bet given all the info. available to him? I like to use the adjusted kelly-criterion among many models when thinking about bet allocation.
  8. To extend this, average people think in terms of certain terms instead of probabilistic terms. Just using the right bayesian odds will significantly increase prediction accuracy. People who speak in certain terms for an extended time into the future are either great salesmen, extremely powerful/ capable, or inept at thinking.

…ye know not what shall be on the morrow… For what is your life? It is even a vapour. ye ought to say, if the Lord will, we shall live …

In a leveraged bull market, the retards appear to be geniuses. I might just be a retard :)

Investment/ gambling is beautiful as

  1. it deals with what people care strongly about (involves emotions)
  2. it deals with the future (hope)
  3. no one is always right (60% hit rate is fantastic)
  4. essentially a microcosm of life

In the end, it is just another decision-making process. Do we improve with each decision? Do our resources or thinking processes improve? What mental frameworks do we have at our disposal?

A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die and a new generation grows up that is familiar with it. . . . An important scientific innovation rarely makes its way by gradually winning over and converting its opponents: it rarely happens that Saul becomes Paul. — Max Planck

This is just 1 game and there are infinite games to play. But the finite game we all play is how we bet our souls, which is of infinite value. Do we read enough about it? Or are we bent on a strong opinion that it cannot be found out, or that it does not matter?