collabfund

Making water:

Bowman said his company’s machines — made for use at homes, offices, ranches and elsewhere — dehumidify the air and in doing so create water that’s filtered to make it drinkable.

The technology works especially well in foggy areas and depending on the size can produce between 200 and 1,900 gallons (900 and 8,600 liters) of water a day. The machines also operate efficiently in any area with high humidity, including California’s coastline, he said.

Malaria:

The world has gained a new weapon in the war on malaria, among the oldest known and deadliest of infectious diseases: the first vaccine shown to help prevent the disease. By one estimate, it will save tens of thousands of children each year.

Collections:

I like to collect the cashflows of the best businesses in the world. I pile them up high in my accounts, adding to them when values fall, automatically buying more when dividends and distributions are paid out. My collection gets larger every year. I can’t touch it. I can’t hold it. It’s virtual, it’s digital, it lives in the online environment created by the brokerage firms and exchanges. There are many collections like it, but this one is mine. I count up the cashflows coming my way when I’m in a bad mood and that makes me happy again. I think everyone should collect the things that make them happy.

Back to the office:

Griffin said many employees in Corporate America haven’t returned because their bosses are afraid to tell them to do so.

“If you talk to other CEOs, they live in fear of how we’ll be publicly persecuted from delivering the straightforward message: It’s time to go back to work,” he said.

Risk:

In 1987, the Safer was redesigned as a floating storage-and-off-loading facility, or F.S.O., becoming the terminus of a pipeline that began at the Marib oil fields and proceeded westward, across mountains and five miles of seafloor. The ship has been moored there ever since, and recently it has degraded to the verge of collapse. More than a million barrels of oil are currently stored in its tanks. The Exxon Valdez spilled about a quarter of that volume when it ran aground in Alaska, in 1989.

Have a good weekend.

Two little stories from nature that teach us a few things about investing:

1. Extremes lead to extremes.

California has been devastated by wildfires for a decade. Back to back, year after year. Long-term droughts turned forests into dry tinder.

So everyone was elated when 2017 brought one of the wettest winters California had seen in recent memory. It was epic. Parts of Lake Tahoe received – I’m not making this up – more than 65 feet of snow in a few months. The six-year drought was declared over.

But the fires just got worse. The wettest year in memory was followed by “the deadliest and most destructive wildfire season on record.” And those two things were actually related.

Record rain in 2017 meant a surge of vegetation growth. It was called a super bloom, and it caused even desert towns to be covered in green.

That seemed great, but it had a hidden risk: A dry 2018 summer turned that record vegetation into a record amount of dry kindling to fuel new fires.

So record rain led to record fire.

That’s not intuitive, but there’s a long history of this verified by looking at tree rings, which inscribe both heavy rainfall and subsequent fire scars. The two go hand in hand. “A wet year reduces fires while increasing vegetation growth, but then the increased vegetation dries out in subsequent dry years, thereby increasing the fire fuel,” the NOAA writes.

The point is that extreme events in one direction increase the odds of extreme events in the other.

And isn’t it the same in the stock market? And in business?

The Japanese stock market is the most-cited example of when long-term investing doesn’t work. The Nikkei index traded lower today than it was in 1990. In 2012 it traded 70% lower than it was at 22 years before. Just a disaster.

There can be a lot of explanations for what happened, not least of which is Japan’s demographics. But the biggest cause is simple: Returns were so extreme from 1950 to 1990 that there was nothing left over for subsequent decades.

The Nikkei increased 400-fold from 1950 to 1990, an average annual return of more than 16%. I don’t think any other country, in any era, has a stock market that performed so well.

What’s happened over the last 30 years is the flip side of an extreme event in one direction leading to an extreme event in the other. Today we marvel at how terrible the Japanese stock market has performed, but the real shocker is how well it performed prior. Half a century of extraordinary performance in one direction might lead to half a century of flat in the other.

Record good leads to record bad – just like California’s fires.

Same in business, where extreme success increases the odds of becoming fat, happy, and in over your head. WeWork raising $12 billion from investors seemed like extraordinary success – every company gushes in a press release when it raises a huge round. But the more extreme the fundraising, the more distorted the business became. Raising record money led it to nearly run out of money. A similar thing happens all the time: Energy went from negative prices last year to global shortages today. NYC rents went from plunging to surging. Shortages lead to gluts, busts seed the next boom.

That’s nature’s first lesson: Extremes lead to extremes.

2. Small changes compounded for long periods of time are indistinguishable from magic.

The most astounding force in the universe is obvious. It’s evolution. The thing that guided single-cell organisms into a human who can read this article on a phone. The thing that’s responsible for 20/20 vision and flying birds and immune systems. Nothing else in science can blow your mind more than what evolution has accomplished.

Biologist Leslie Orgel used to say, “evolution is cleverer than you are” because whenever a critic says, “evolution could never do that” they usually just lacked imagination.

It’s also easy to underestimate because of basic math.

Evolution’s superpower is not just selecting favorable traits. That part is so tedious, and if it’s all you focus on you’ll be skeptical and confused. Most species’ change in any millennia is so trivial it’s unnoticeable.

The real magic of evolution is that it’s been selecting traits for 3.8 billion years.

The time, not the little changes, is what moves the needle. Take minuscule changes and compound them by 3.8 billion years and you get results that are indistinguishable from magic.

That’s the real lesson from evolution: If you have a big number in the exponent slot you do not need extraordinary change to deliver extraordinary results. It’s not intuitive, but it’s so powerful. “The greatest shortcoming of the human race is our inability to understand the exponential function,” physicist Albert Bartlett used to say.

And isn’t it the same in investing?

Howard Marks once talked about an investor whose annual results were never ranked in the top quartile, but over a 14-year period he was in the top 4% of all investors. If he keeps those mediocre returns up for another 10 years he may be in the top 1% of his peers – one of the greatest of his generation despite being unmentionable in any given year.

So much focus in investing is on what people can do right now, this year, maybe next year. “What are the best returns I can earn?” seems like such an intuitive question to ask.

But like evolution, that’s not where the magic happens.

If you understand the math behind compounding you realize the most important question is not “How can I earn the highest returns?” It’s, “What are the best returns I can sustain for the longest period of time?”

That’s not to say good returns don’t matter. Of course they do. Just that they matter less than how long your returns can be earned for. “Excellent for a few years” is not nearly as powerful as “pretty good for a long time.” And few things can beat, “average for a very long time.” Average returns for an above-average period of time leads to extreme returns.

“The only thing that matters is where you are in the long run,” Marks said.

That’s the second lesson: Less focus on change, more focus on the exponent.

There are so many factors that can hold a person back in this life.

Many are circumstantial – a lack of connections, money, education, a stable home environment. These conditions are outside of our control, especially when we’re growing up.

But one of the biggest setbacks a person can face is one that can be practiced: your own perception of what you’re capable of.

In my years of experience, I’ve found that the defining characteristic that sets the massively successful apart is simply the belief that they are capable of achieving what they want.

That’s it.

If I could give a piece of advice to anyone starting out, in any field really, it would be to allow your imagination to expand to the belief that you are capable of achieving great things. And beyond capability, that you’re worthy.

It’s a hard line to toe, because there’s nothing more unattractive than overconfidence, especially when it’s unearned. But that’s not what I’m talking about here.

It’s not hubris – it’s chutzpah.

It’s that scrappy mentality. That way of thinking that says, “well, if someone’s gonna do it, why shouldn’t it be me?”

It’s that sense of purpose, of knowing that you can do more than what you’re already doing.

When I was getting started I used to scale back before I’d even begun. I’d make a plan, then look it over, afraid that I’d overdone it.

Now, I challenge myself to do the opposite. I make a plan and then I ask myself:

“Are you thinking big enough?”

I recently experienced two very different Sundays. The first was a modern-day version of Planes, Trains, and Automobiles as I attempted to navigate my way home from a trip to the Midwest. The second consisted of a 5am wakeup thanks to my younger son, a lunch that was disliked by both boys, and an afternoon driving my older son field-to-field as he officially entered youth sports mania. Yet as different as these days were, they paled in comparison to the things I read/watched.

On that first Sunday, I picked up a Wall Street Journal for the flight home. One of the cover articles was titled “The Social Media Stars Who Move Markets” and profiled a number of “investing influencers”. This group of twenty-somethings with little-to-no investment experience have managed to attract massive audiences and earn millions by doling out investment advice on TikTock, Twitter, and YouTube. The unifying mantra among all of them? Be bullish. Always. It is all they’ve known.

The following Sunday was the twentieth anniversary of the September 11th attacks. Unsurprisingly, this day was filled with remembrances and reflections of that day. Articles covered how 9/11 had shaped America for more than two decades and created a vulnerability not felt in generations. Yet it also highlighted the bravery displayed by many, most notably a 60 Minutes profile of the New York City Firefighters who charged up the towers.

The contrast between the two Sundays was stark, yet makes perfect sense. Given September 11th occurred more than two decades ago, the country is now split between those who “experienced it” and those who have just heard or read about it. For those who lived and/or worked through it, 9/11 kicked off a very difficult decade, especially when you consider the subsequent dot.com bust and Great Financial Crisis. For younger Americans, these events barely represent a blip on their radars. The result is a generational divide centered around the tension between experiencing and learning.

Experienced versus Educated

You can read thousands of books about the Civil War, but you will never truly know what it felt like to be a Union soldier on top of Little Round Top. You can study the Cold War, but you will never fully understand it unless you watched Nikita Krushchev bang his shoe on the desk at the United Nations. You can read about market crashes, recessions, and depressions, but you cannot fully grasp them unless you have invested through one. Unsurprisingly, those who live through moments like these often emerge more risk averse, while those who do not tend to be unphased, or in some cases even more emboldened. Look no further than the 1970’s and the years that followed.

In 1978, Stan Druckenmiller became the youngest director of research at Pittsburgh National Bank at just 25 years old. While Druckenmiller would go on to become one of the most successful investors of all time, he was a relative unknown at the time.

After receiving this promotion just one year into the job, Druckenmiller asked his boss why he was elevated over numerous more senior colleagues. He recalled his boss replying,

“For the same reason they send 18-year-olds to war. You’re too dumb, too young, and too inexperienced not to know to charge. We around here have been in a bear market since 1968. I think a big secular bull market is coming. We’ve all got scars. We’re not going to be able to pull the trigger. So I need a young, inexperienced guy to go in there and lead the charge.”

The 1970’s were a brutal decade for the country and the economy. Inflation was rampant, the U.S. dollar lost half its value, oil shortages were widespread, the Vietnam War divided Americans, and the stock market produced a negative real return. There were plenty of brief equity rallies, but nearly everyone who put money to work during these years had been burned. As a result, this decade caused an entire generation of investors to become risk averse. Yet something else happened during the 1970’s that doesn’t get enough attention. It created a massive opportunity.

As Druckenmiller’s boss highlighted, when a generation becomes scarred by past experiences it also opens the door for hungry, risk-seeking, and entrepreneurial young men and women. Luckily, several of them them took advantage during this period; from Druckenmiller to Bill Gates, Steve Jobs, Richard Branson, Sandy Lerner, Howard Schultz, Indra Nooyi, Jamie Dimon, Oprah Winfrey, Michael Moritz, Doug Leonne, and Paul Tudor Jones, among countless others. All were born in the mid-1950s, entered the early parts of their careers in the late-1970s, and started to have a material impact shortly thereafter. Coincidence? I doubt it.

Over the next twenty years (1980-2000), young entrepreneurs, business leaders, and investors helped lead the country through one of the longest economic expansions and secular bull markets in history. They leveraged the infrastructure built in 1960’s and 1970’s (semiconductors, personal computers, automation, digitization, and the earliest stages of the internet) to launch their businesses in the 1980’s and scale them through the 1990’s. There were certainly bumps along the way, including a recession in both the early 80’s and 90’s as well as Black Monday in ‘87, but each proved to be relatively minor speed bumps within a secular market expansion.

Given this backdrop, it begs the question — could we be witnessing a similar pattern today? After the most difficult economic stretch since the 1970’s, the country faced a very similar situation in the late 2000’s. After two deep recessions and a near meltdown of the financial system, another door had opened, and a new generation of unscathed and risk-seeking people once again took advantage.

Today’s Set Up

Why does this happen? Why do some of the most innovative ideas get funded and companies get started during the darkest of days? It seems counterintuitive, but these are often the ideal times to be an entrepreneur or join a startup. The fact is that when the economy is doing poorly, established firms are typically eliminating investments, slashing jobs, reducing compensation, and cutting back on new hires. As a result, the competition for projects is falling, the opportunity cost of going out on your own is low, and the competition to hire talented colleagues is even lower.

This happened in the 1970’s/early 1980s when established firms like General Motors, Ford, AT&T, IBM, Proctor & Gamble, Dupont, and many of the banks pulled in their reins, while Microsoft, Apple, Versace, Activision, Whole Foods, Starbucks, Bloomberg, Tudor, Dell, Adobe, Cisco, Blackstone, and Sequoia all got their starts.

Fast forward to the late 2000’s when Goldman Sachs, Bank of America, Cisco, Marriott, McKinsey, Citigroup, Johnson & Johnson, AIG, and countless “big box retailers” were the ones dialing back, while the likes of AirBnB, Square, 23andMe, Stripe, Shopify, Slack, NuBank, Zoom, Twilio, Moderna, WhatsApp, and Andreessen Horowitz emerged. All were founded after 2006, and most in 2008 or later. The bottom line is that recessions plant the seeds for future economic growth.

What it all Means

So, you may be thinking, “That’s sounds plausible, but it is all in the past. How about what lies ahead?” Three things stand out:

State of the Job Market: If it is more appealing to launch startups and easier to hire talented people during difficult economic times, is it less appealing and more difficult to do so amid an economic expansion and raging bull market? Typically yes, especially when larger companies are generating record profits, hiring hand-over-fist, and paying out generous compensation packages? Yet, while starting a new company and hiring capable teams may still be a challenge, it may not be quite as difficult as in years past. There are several reasons, but one that stands is that venture capital and growth equity firms have been raising massive funds, which are increasingly being used to recruit top talent to join their portfolio companies. The result is that smaller companies are as well positioned as they have ever been to thrive at this stage of a cycle.

Risk….Location, Location, Location: My gut reaction to Millennials and Gen Z’ers chasing jobs in startups and providing investment advice on Tik Tock, Twitter, and YouTube was that it had to be a sign of a top in the market and/or a bubble. On second thought though, isn’t that what younger generations should be doing? Shouldn’t they be the ones taking outsized risks and making bold investments given their youth? If so, could this actually be considered a material positive, especially when the older generations are scarred and more defensively positioned? I would argue absolutely. They are the ones who have the time and earnings potential to recover from any losses they may experience. Said another way, risk today may actually be located in the right hands, which has not been the case in numerous other past cycles.

Secular Bull Market: If risk is in the right hands, capital is flowing into venture capital and startups built off prior technologies, and challenging periods tend to be followed by longer sustained expansions, could we be in the midst of a secular bull market today? As you can see in the chart below, it was certainly true following the 1970s and World War II, and may be true as we look ahead. As with all things though, time will tell.

JP Morgan Guide to the Markets

Ports:

Despite mounting shipping delays and cargo backlogs, the busiest U.S. port complex shuts its gates for hours on most days and remains closed on Sundays. Meanwhile, major ports in Asia and Europe have operated round-the-clock for years.

“With the current work schedule you have two big ports operating at 60%-70% of their capacity,” said Uffe Ostergaard, president of the North America region for German boxship operator Hapag-Lloyd AG . “That’s a huge operational disadvantage.”

Generations:

$2 trillion of wealth flows from Baby Boomers to Millennials per year through inheritance, according to Fundstrat estimates.

Over the next 20 years, Millennials will inherit $76 trillion from previous generations.

Millennials tend to prefer higher-risk assets like stocks and crypto.

Baby Boomers are becoming a smaller relative share of the pool of wealth, meaning Millennial asset preferences will fuel a structural shift.

Shortages:

The cost of the intractable semiconductor shortage has ballooned by more than 90%, pushing the total hit to 2021 revenue for the world’s automakers to $210 billion.

That’s the latest dire forecast from AlixPartners, which predicts global automakers will build 7.7 million fewer vehicles due to the chip crisis this year.

Industry:

An estimated 321,000 Americans now work in the [cannabis] industry, a 32 percent increase from last year, the report found, making legal marijuana one of the nation’s fastest-growing sectors. In other words: The United States now has more legal cannabis workers than dentists, paramedics or electrical engineers.

Market share:

Google is so successful that it’s the most searched for term on Microsoft Corp.’s Bing search engine, the company’s lawyer told a European Union court on Tuesday.

“We have submitted evidence showing that the most common search query on Bing is by far Google,” Alfonso Lamadrid, a lawyer for the Alphabet Inc. unit, said at the EU’s General Court in Luxembourg.

Have a good weekend.

Success has a nasty tendency to increase confidence more than ability. The longer it lasts, and the more it was tied to some degree of serendipity, the truer that becomes.

It’s why getting rich and staying rich are different skills. And why most competitive advantages have a shelf life. Jason Zweig put it: “Being right is the enemy of staying right because it leads you to forget the way the world works.”

It is of course possible to indefinitely maintain whatever skills brought you initial success. Lots of people and a handful of businesses have done it.

But when success is maintained for a long period the greatest skill often isn’t technical, or even specific to your trade. It’s identifying and resisting a few dangerous feelings that can nuzzle their way in after you’ve achieved any level of success.

A few of the big ones:

1. The decline of paranoia that made you successful to begin with.

A common irony goes like this:

• Paranoia leads to success because it keeps you on your toes.

• But paranoia is stressful, so you abandon it quickly once you achieve success.

• Now you’ve abandoned what made you successful and you begin to decline – which is even more stressful.

It happens in business, investing, careers, relationships – all over the place.

Michael Moritz of Sequoia was once asked how his investment firm has thrived for 40 years. “We’ve always been afraid of going out of business,” was his answer.

It’s a rare response in a world where most successful people step back, take stock of all they’ve achieved, and assume they can not only breathe a sigh of relief but that their skills will run on autopilot.

A dangerous situation is when your goals (achieving enough success to relax) counter your skills (focus, paranoia, persistence). It hits you when you feel like past hard work entitles you to a break without realizing the cost of that break, however much it might be necessary and deserved. It’s part of why people who quit while they’re ahead are so admirable – it’s often not so much that they gave up, but that they’re aware of what made them successful and when that trait begins to wane.

2. Finding other peoples’ flaws more than you look for your own improvements.

A sad twist to Orville and Wilbur Wrights’ life is that they didn’t make much money from their invention. They were nearly irrelevant as soon as the airplane caught on.

Part of the reason the Wrights fell behind so quickly was that while competitors spent their time designing better planes the Wrights spent their time suing people for patent infringement.

Chasing competitors through court became an obsession. At one point in 1916 Orville demanded that every airplane produced anywhere in the world pay him a $10,000 royalty, high enough that no manufacturer could afford it – which was the point. Competitors, particularly those in France and Germany, ignored the demand and the Wrights spun their wheels in court for years while competitors spent their time designing better planes. By the time the patent wars were over, the Wrights’ flyer was obsolete.

A version of this happens when you see an investor spending all day on Twitter explaining why their competitors are wrong. I often wonder when they find time to figure out whether they, themselves, are right.

Charlie Munger says you shouldn’t have an opinion on something unless you understand the opposing side’s view as well as they do. It’s good advice, but it’s easy to take it too far. It’s almost always easier to find a flaw in a system than it is to discover why or how something might work, in the same way that it’s easier to destroy a relationship than build one.

A dangerous feeling is when your position on a topic centers around criticizing the other side versus evaluating why you’re right – or even better, why you might be wrong.

It’s a seductive trap because pointing out flaws is so much easier and more convincing than finding the obscure force that will make something work. It often signals that you don’t actually understand a topic but you want to be involved, and finding other people’s flaws is all you can come up with because you don’t have your own position to analyze. This may have been true for the Wrights, who were genius in the early engineering days of the aircraft but lacked the skills needed to bring it to the next level.

3. The feeling of mastering a topic, particularly if that topic adapts and evolves.

The first law of hard work is that you expect there to be a payoff. How could it be any other way?

But a dangerous feeling occurs when you want the payoff of years of hard work to be an assumption that you’ve mastered a topic. Or that you don’t need to update your views because you already spent years of hard work learning those views.

You see it all the time in so many industries. Veterans fall behind the younger generation because if veterans admitted that they had to adapt to what the younger generation is doing they’d feel like the hard work they put over their career was for nothing.

Even if you know your field evolves, the idea that what you learned in the past may no longer be relevant is so painful that it’s easy to reject. The longer you’ve been in a field the truer that becomes. It’s hard for a 50-year veteran to admit that a rookie might know as much as he does. But if what the veteran learned 30 or 40 years ago is no longer relevant, it can be true. And the rookie may be more aware of what he doesn’t know, while the veteran is iron-clad sure of his beliefs because he’s worked hard and expects a payoff.

Some things never change, and learning them in one era can help you in the next. But the more your field evolves – the more it involves people’s decisions – the smaller that set of learnings is, and the more you need to fight the urge to think that your long-term experience means you now permanently understand how the field works.

Investor Dean Williams put it: “Expertise is great, but it has a bad side effect. It tends to create an inability to accept new ideas.”

More on this topic:

• Why Competitive Advantages Die

• Casualties of Perfection

• Counterintuitive Competitive Advantages

We have harnessed technology to enable an incredible amount of information sharing around business and finance over the last two decades.

I have detailed data on thousands of publicly traded companies at my fingertips. What is their market cap? Who are their largest shareholders? Has the CEO sold stock recently? What is their business model and how do their unit economics compare to last quarter (or last year or five years ago)? I can essentially access the financial health of virtually all household brands at the press of a button.

But when I try to perform the same exercise (accessing data) on humans, including myself, it’s much harder.

What is my cholesterol? Respiratory rate? Resting heart rate? Posture/alignment? Sleep patterns? Blood oxygen level? Blood sugar level? The vast majority of us are totally in the dark on these metrics.

It has never made sense to me that I had access to so much data about businesses, and yet until last year, I didn’t even know what blood type I was.

The good news is — this is changing.

Companies like: WHOOP, Levels, Eight Sleep, Oura Ring, Apple Watch, among others are using sensors and biometric data to provide much more detailed information to consumers. And I believe we are only at the beginning.

The technology is improving quickly and the costs are coming down, allowing for accessibility more broadly.

I bet we will look back in ten years and have a hard time believing we were all managing the stresses of life without the tools and information to help us optimize and make better decisions regarding what we eat, when we eat, when we go to sleep, what temperature is optimal for sleep, when to rest, and when to push.

As a longtime WHOOP member, I can confidently say it has improved my health. I feel like I am flying a plane with radar — helping me see around corners and make small adjustments. It’s so simple. The data is collected passively and the device is not obtrusive (and increasingly invisible). All you have to do is look to Instagram or Twitter to see others expressing similar sentiments about how many of the companies listed above have helped them. Once you experience it, it is hard to go back.

While all of the information can feel overwhelming at first, over time the companies who will dominate this emerging category will have superior user experience to surface information in a way that is easily digestible and actionable.

In WHOOP’s most recent release 4.0, it announced the ability to export data to your doctor, physician, and or loved one. I would not be surprised if in time we can easily grant access to our data, in real-time, to our primary care physician or cardiologist — which will lead to much more personalized care.

Outside of Apple and Google’s efforts, there will be a $100 billion+ company built in this space. It’s exciting to see the seedlings of this movement happening right in front of our eyes. I suspect it will seem obvious in the not too distant future.

Education:

American colleges and universities now enroll roughly six women for every four men. This is the largest female-male gender gap in the history of higher education, and it’s getting wider. Last year, U.S. colleges enrolled 1.5 million fewer students than five years ago, The Wall Street Journal recently reported. Men accounted for more than 70 percent of the decline.

The statistics are stunning. But education experts and historians aren’t remotely surprised. Women in the United States have earned more bachelor’s degrees than men every year since the mid-1980s—every year, in other words, that I’ve been alive. This particular gender gap hasn’t been breaking news for about 40 years. But the imbalance reveals a genuine shift in how men participate in education, the economy, and society. The world has changed dramatically, but the ideology of masculinity isn’t changing fast enough to keep up.

Side hustles:

An undisclosed share of Gatorade’s profits flow to a Gatorade Trust. The trust then sends 20% to the [The University of Florida], which employed the professor who invented the drink nearly 60 years ago.

In 2015, Florida announced it had accumulated ~$250m from the royalties. Its annual take over the last few years has been ~$20m, according to the university.

Wealth:

Unprecedented YoY change in household net worth. pic.twitter.com/59JnvyM74X

— Cullen Roche (@cullenroche) September 23, 2021

Progress:

mRNA cancer therapy works (in mice). … “Nineteen of 20 mice treated with the four-component mixture had complete tumor regression.”

Savings:

If I had to convince my 22 year-old self to save more money, here is what I would say: Go big, then stop.

What I’m talking about is a savings philosophy so effective that it can put your future finances on easy mode. It can help you to build wealth for decades while you literally do nothing. It may just be the lowest effort way to set yourself up for a nice retirement.

Have a good weekend.

Last month the UN’s Intergovernmental Panel on Climate Change (IPCC) published its latest report which made clear that temperatures today are higher than any time in the last 125,000 years, and methane emissions are a primary culprit.

While methane makes up a smaller share of overall greenhouse emissions compared with carbon dioxide, some estimates indicate it’s close to 80x more powerful than CO2 when it comes to warming the planet.

Unfortunately, atmospheric methane concentrations continue to climb:

When you look at where all that methane is coming from, the livestock industry emerges as one of the largest contributors.

And among livestock, the world’s 1.6 billion cattle are responsible for the majority of the livestock industry’s greenhouse gas emissions.

While plant-based milks and vegetarian beef alternatives are on the rise, so are beef and dairy consumption — projections by the Food and Agriculture Organization of the United Nations show significant growth in the demand for livestock products through 2050.

With that in mind, solutions aimed at mitigating methane emissions stand to have a meaningful impact on climate.

That’s why we recently got behind a team of animal scientists, engineers, product designers, and veterinarians called ZELP (Zero Emissions Livestock Project).

As its name suggests, it’s on a mission to drastically lower greenhouse gas emissions across the livestock industry. It’s developed an unobtrusive wearable for cattle that measures, captures, and oxidizes up to 60% of methane emissions from the mouth and nostrils of cows, which is where they emit nearly all of their methane.

In addition to neutralizing emissions, ZELP can also tell cattle farmers quite a bit about the welfare of their livestock by capturing and analyzing lots of data about their feeding habits, rumination, and rest, which are useful inputs in caring for the health of each animal and help boost farm productivity.

You can follow ZELP’s journey here.

The biggest takeaway from history is that the characters change but their behaviors don’t. The technologies, trends, tragedies and winners – the events that take place – are always in flux and can be nearly impossible to predict. But the behaviors that drive people into action, influence their thoughts and guide their beliefs, are stable. They’re the same today as they were 100 years ago and will be 100 years from now.

Markets change, but greed and fear never do.

Industries change, but ambition and complacency don’t.

Laws change, but the tribal instincts of politics don’t.

My deepest forecasting belief is that you can better understand the future if you focus on the behaviors that never change instead of the events that might.

And those behaviors have a common denominator: They follow the path of least resistance of people trying to simplify a complex world into a few stories that make sense and make them feel good about themselves.

Simple stories, feel-good stories. Those are some of history’s most seductive beliefs, and they always will be.

A few that stick out:

1. An illusion that other people’s bad circumstances couldn’t also happen to you.

Most of history is slow progress amid constant bad news and occasional terrible news. A seductive story when hearing about tragedy is to believe this awful thing happened to this person, company, or nation, but it almost certainly couldn’t happen to me.

And you may be right about that. Your country may be more stable than the one that collapsed, your business may be stronger than the one that went bankrupt, and your health may be better than the person diagnosed with cancer.

The problem is that people don’t like to think in probabilities; it’s so much easier to think about risk as black or white, it will happen or it won’t.

So rather than thinking your business has a 10% chance of failure, it’s easier to think that what happened to Sears and Lehman Brothers could never happen to you. Before 2008 you didn’t think there’s a 5% chance of a banking collapse in America; you just looked at what had been happening in Latin America for decades and thought, “that can’t happen here.” Most of the world didn’t look at Wuhan China last February and think, “there’s a 25% chance that this is our future.” You thought, “I can’t even imagine my town being on lockdown.” Couldn’t even fathom it happening here. That was easier to understand and made you feel better.

When you go through life thinking low-probability events are zero-probability events, you’re bound to get stuck in an illusion that what happened to someone else couldn’t also happen to you.

That’s especially true when you add up the low odds of lots of unfortunate events. If next year there’s a 1% chance of a new disastrous pandemic, a 1% chance of a crippling depression, a 1% chance of a catastrophic flood, a 1% chance of political collapse, and on and on, then the odds that something bad will happen next year – or any year – are … pretty good. “History is just one damn thing after another” the saying goes.

A few years ago I interviewed Yale economist Robert Shiller. He talked about the possibility – not quite a forecast – that home prices could decline adjusted for inflation for a decade or longer.

I asked him why he thought that, or how it could happen. “Well, it happened before,” he said. Real home prices fell for most of the 20th century. “So of course it could happen again,” even if it seems crazy.

2. Imagining an unrealistic world where progress and success don’t demand a fee, and a belief that hassle, nonsense, disagreement and uncertainty are bugs rather than a cost of admission to getting ahead.

Jeff Bezos recently talked about the realities of loving your job:

If you can get your work life to where you enjoy half of it, that is amazing. Very few people ever achieve that.

Because the truth is, everything comes with overhead. That’s reality. Everything comes with pieces that you don’t like.

You can be a Supreme Court Justice and there’s still going to be pieces of your job you don’t like. You can be a university professor and you still have to go to committee meetings. Every job comes with pieces you don’t like.

And we need to say: That’s part of it.

That’s part of it.

It’s part of everything. His advice applies to so much more than careers.

A simple rule that’s obvious but easy to ignore is that nothing worth pursuing is free. How could it be otherwise? Everything has a price, and the price is usually proportionate to the potential rewards.

But the price is rarely on a price tag. You don’t pay it with cash. Most things worth pursuing charge their fee in the form of stress, doubt, uncertainty, dealing with quirky people, bureaucracy, other peoples’ conflicting incentives, hassle, nonsense, and general bullshit. That’s the overhead cost of getting ahead.

A lot of times that price is worth paying. But you have to realize it’s a price that must be paid. There are few coupons and sales are rare.

A seductive belief throughout history is people expecting an idealized world where you demand perfection and assume that having little tolerance for error, variability, and disagreement is an asset.

It’s a simple story, and it feels good. I wish it were true. But it’s so at odds with reality that it leads to people never achieving what they want because they’re unwilling to pay the required price, and over-idolizing those whose success was harder than it looks and not as fun as it seems.

3. An assumption that your view of the world is the view of the world, and a belief that what you’ve seen and experienced are the sights and experiences that explain how the world works.

Harry Truman once said:

The next generation never learns anything from the previous one until it’s brought home with a hammer … I’ve wondered why the next generation can’t profit from the generation before, but they never do until they get knocked in the head by experience.

Here’s at least one reason why: No lesson is more persuasive than the one you’ve personally experienced.

You can try to be empathetic and open-minded to other people’s lives, but when you’re trying to figure out how the world works nothing makes more sense than the unique circumstances of what you’ve lived through firsthand.

And the idea that you’ve never seen or experienced 99.999% of what’s happened in the world is hard to swallow because it’s intimidating to admit how little you know.

A more comforting story is convincing yourself that what you’ve experienced is the story of how the world works. This is how your career went, so that’s how economics works. These policies benefited you, so this is how politics works. You think what you’ve seen is a reflection of how the world works. What could be more seductive? Yet given how oblivious everyone is to the majority of experiences, what could be more wrong?

So everyone goes through life a little blind to the lessons that have already been learned by other people.

And it goes well beyond generations: There are massive experience gaps between different nations, socioeconomic classes, races, industries, religions, educations, on and on.

The person who grew up in poverty thinks about risk and reward in ways the child of a wealthy banker cannot fathom if he tried.

The person who grew up when inflation was high is scared in a way the person who grew up with stable prices isn’t.

The stockbroker who lost everything during the Great Depression experienced something the tech worker basking in the glory of the late 1990s can’t imagine.

The Australian who went 30 years without a recession has experienced something no American ever has.

It leads to all kinds of issues.

One is that we’re constantly surprised by events that have been happening forever.

Another is that it’s hard to distinguish people who have experienced something you haven’t from people who aren’t smart enough to understand your experiences.

A third is that topics like risk, greed, and fear are not the kinds of things that we can learn about and master as a society, like we did with, say, agriculture. As Michael Batnick says, “some lessons have to be experienced before they can be understood.” Every generation has to learn on its own, over and over.

The question, “Why don’t you agree with me?” can have infinite answers.

But usually a better question is, “What have you experienced that I haven’t that would make you believe what you do? And would I think about the world like you do if I experienced what you have?”

4. An assumption that history is a guide to the future and that things will continue working as they did in the past.

A $45 million dam in Colorado designed to prevent flooding turned out to not really be needed because the river it blocked slowed to a trickle. In Rotterdam, the opposite: A dam needs to be replaced a quarter-century sooner than once estimated because it’s under unprecedented stress.

Journalist Shayla Love explained the common denominator:

Stationarity is the idea that, statistically, the past can help you predict and plan for the future—that the variations in climate, water flow, temperature, and storm severity have remained and will remain stationary, or constant.

Nearly all the infrastructure decisions with which we live have been made with the assumption of stationarity. Engineers make choices about stormwater drainage pipes based on past data of inches of rain. Bridge engineers design foundations that can withstand a certain intensity of water flow based on the severity a certain location has experienced in the past. Reservoirs are designed to hold water based on historical information about water flow, and the historical water needs of a community.

A seductive belief that exists in almost every field is that things will keep operating like they always have. It’s an almost necessary belief in a world where you have to base a prediction off something.

But as Stanford professor Scott Sagan says, “things that have never happened before happen all the time.”

All the time.

In fact in most fields – especially business and investing – the most important events that changed everything and determined the majority of future outcomes are things that had never happened until they did.

The most important economic events of the last century are probably the Great Depression, World War II, the 40-year collapse in interest rates, and globalization. And while each had analogous ancestors, anyone predicting what those events eventually did to the world could be brushed aside by those who pointed out that, say, negative interest rates had never happened before. A nationwide housing bubble and bust had never happened before. A weapon like the nuclear bomb that could deter future wars had never happened before.

Then all those things happened. And they totally changed the world.

All history is the study of what’s changed, but it’s often used as a guide to the future. The irony is overlooked because the idea that if we gather enough data and read enough books we’ll acquire a map of the future is so seductive – it’s so simple, and makes you feel great.

That will never change.

A big lesson from history is how chance encounters lead to both magic and mayhem in ways that would have been impossible to predict.

Let me show you three times history hung by a thread.

Giuseppe Zangara was tiny, barely five feet tall. He stood on a chair outside a Miami political rally in 1933 because that was the only way he could aim his gun across the crowd.

Zangara fired five shots. One of them hit Chicago mayor Anton Cermak, who was shaking hands with Zagara’s intended target. Cermak died. The target – Franklin Roosevelt – was sworn in as president two weeks later.

Within months of inauguration Roosevelt transformed the U.S. economy through the New Deal. John Nance Garner – who would have become president had Zangara hit his target – opposed most of the New Deal’s deficit spending. He almost certainly wouldn’t have enacted the same policies, some of which still shape today’s economy.

Captain William Turner invited his niece, actress Mercedes Desmore, to tour his massive ocean liner before it sailed from New York To Liverpool.

The ship’s crew, eager to leave on time, removed the gangway for departure while Desmore was still onboard. She was stuck on a ship about to begin a seven-day voyage. Her furious uncle made the crew re-dock the ship so she could get off.

The redocking delayed the ship’s departure. No one could have known that six days later the delay would mean that Turner’s ship – the Lusitania – would sail into the path of a German submarine at the very moment its periscope could finally see through the day’s diminishing fog.

The Lusitania was hit with a torpedo, killing 1,200 passengers and becoming the most important trigger to rally U.S. public support for entering World War I.

Had it sailed through the Celtic Sea half an hour earlier – had Desmore’s tour not caused a delay – the Lusitania would have been cloaked in heavy fog. The ship likely would have avoided attack. A country may have avoided a war that became the seed event for the rest of the 20th century.

Robert E. Lee had one last shot to escape Ulysses Grant’s troops and regroup to gain the upper hand in the Civil War. His plan was bold but totally plausible. All he needed was food for his hungry troops.

An order was put in to have rations delivered to a Virginia supply depot for Lee’s men.

But there was a communication error in Richmond, and the wagons delivered boxes of ammunition but not a morsel of food.

Lee said the mishap “was fatal, and could not be retrieved.” His troops were starving. The Civil War ended two days later.

History hangs by a thread.

You can play this game all day. Every big event could have turned out differently if a few little puffs of nothingness went the other direction. It’s so easy to prove how fragile big events are to trivia and accident that you start to wonder what the point is.

It’s even crazier when you realize that every modern event has its roots in big past events, some of which occurred decades ago.

Take a simple question like, “What caused the financial crisis?”

When asked that most people point to things like lending standards and the Federal Reserve.

But if you keep digging into the roots of what happened you go down a rabbit hole that never ends.

To understand the financial crisis you have to understand the mortgage market.

What shaped the modern mortgage market? Well, you have to understand the 30-year decline in interest rates that preceded it.

What caused falling interest rates? Well, you have to understand the inflation of the 1970s.

What caused that inflation? Well, you have to understand the monetary system of the 1970s and the hangover effects of the Vietnam War.

What caused the Vietnam War? Well, you have to understand the West’s fear of communism after World War II.

What caused World War II? Well, you have to understand World War I.

What caused World War I? Well, for the Americans’ participation, an actress toured her uncle’s boat and then …

That’s also a game you can play all day.

And an endless number of modern innovations were born out of those freak events. The modern grocery store was invented because food sellers were trying to survive the Great Depression. Penicillin owes its existence to World War II. So do radar, jets, nuclear energy, rockets, and helicopters. mRNA vaccines will owe their existence to Covid-19. All of those big events could have turned out completely differently if a few minor accidents had gone a different way.

So much of history hangs by a thread.

Finance professor Ellroy Dimson says, “risk means more things can happen than will happen.” An important point here is that if none of these big events occurred, something else just as wild and unpredictable could have taken their place. Even when some part of the outcome is the same, the context and little bits of trivia are different in a way that can totally change the final story. America may have joined World War I without the Lusitania’s sinking, but its participation could have been less, or later, or not as popular. That could have shifted how the interwar period in the 1920s and 1930s played out, which would have impacted how World War II occurred, which would have altered the course of the most promising inventions of the 20th century … on and on, endlessly.

I try to keep two things in mind in a world that’s this fragile to chance.

One is to base your predictions on how people behave vs. specific events. Predicting what the world will look like in, say, 2050, is just impossible. But predicting that people will still respond to greed, fear, opportunity, exploitation, risk, uncertainty, tribal affiliations and social persuasion in the same way is a bet I’d take.

Another – made so starkly in the last year and a half – is that no matter what the world looks like today, and what seems obvious today, everything can change tomorrow because of some tiny accident no one’s thinking about. Events, like money, compound. And the central feature of compounding is that it’s never intuitive how big something can grow from a small beginning.

Status:

I refer to “increasing status” in the positive sense: accomplishing something impressive or contributing to others in a way that increases their estimation of you. That’s the only way that works, anyway. Paraphrasing Taleb: anything done with explicit intent to improve one’s status likely *won’t *improve one’s status. After all, the most respected people achieved their status as a byproduct of doing something great, like pursuing ambition, honor, and integrity!

Communication:

Your truth and *the *truth are not always the same thing. *The *truth is a fact. Your truth is just an opinion. Nobody values somebody who is honest about their opinions if their opinions always suck. Knowing when to offer your truth and keep your mouth shut is a rare quality. The line between thoughtful dialogue and disrespectful disagreement is razor-thin.

Different world:

“Thriving” at a new record:

Have a good weekend.

George Carlin once joked how easy it is to spot stupid people. “Carry a little pad and pencil around with you. You’ll wind up with 30 or 40 names by the end of the day. It doesn’t take long to spot one of them, does it? Takes about eight seconds.”

Like most comedy it’s funny because it’s true.

But Daniel Kahneman mentions a more important truth in his book, Thinking, Fast and Slow: “It is easier to recognize other people’s mistakes than our own.”

I would add my own theory: It’s easier to blame other people’s mistakes on stupidity and greed than our own.

That’s because when you make a mistake, I judge it solely based on what I see. It’s quick and easy.

But when I make a mistake there’s a long and persuasive monologue in my head that justifies bad decisions and adds important context other people don’t see.

Everyone’s like that. It’s normal.

But it’s a problem, because it makes it easy to underestimate your own flaws and become too cynical about others’.

I try to stop myself whenever my explanation for other people’s behavior – financial or otherwise – is “well, they’re not very smart.” Or greedy. Or immoral. Yeah, sometimes it’s true. But probably less than we assume. More often there’s something else going on that you’re not seeing that makes the behavior more understandable, even if it’s still wrong.

A few things make it that way.

1. When judging others’ poor behavior it’s easy to underestimate your own susceptibility to the power of incentives.

The worst behavior resides in industries with the most extreme incentives. Finance, where scams are everywhere. High-end art, where counterfeits proliferate.

But it’s important to ask: Are immoral people attracted to industries where there are big rewards for bad behavior? Or do big rewards for bad behavior cause good people to slide into immorality, justifying their decisions along the way?

I think so often it’s the latter.

It helps explain things like the 2008 financial crisis. Was it caused by greedy bankers? Maybe here and there. But the huge majority of it was good, honest people who wanted to do the right thing but whose definition of “the right thing” is instantly warped when they’re paid $8 million a year to sell subprime bonds.

Incentives are almost like a drug in their ability to cloud your judgment in a way you would have found unthinkable beforehand. They can get good people to justify all kinds of things.

That doesn’t excuse bad behavior. But it’s hard to know what you’d be willing to do until you’re exposed to an extreme incentive, and that blindness makes it easy to criticize other people’s mistakes when you yourself may have been just as tempted if you were in their shoes.

2. It’s hard to tell the difference between boldness and recklessness, greed and ambition, contrarian and wrong.

The same traits needed to be hugely successful are often the same traits needed to spark a catastrophe. Not always, but a lot of the time.

A low-probability bet that works makes you look like a genius.

A low-probability bet that fails makes you look like a … failure, maybe even an idiot, in the eyes of others.

But the difference between the two may have been minuscule. It could have been the same person doing the exact same thing ending up on the fortune or unfortunate side of luck.

Everything worth pursuing has a less than 100% chance of working. And a lot of terrible ideas have at least some chance of working. So you can make good decisions that don’t work, bad ones that do, and everything in between.

The hard thing is that when the probability isn’t easy to determine, the path of least resistance is to put your own failures in the “good bet that unfortunately didn’t work” category and other people’s failures in the “that was clearly a bad idea” one.

When judging others you want a simple story – did it work or did it not? And when judging yourself you want a comforting story – “my actions were worthwhile and I’m a good person.”

But those are just the easy explanations, not necessarily the right ones. So you may not be as great, and other people may not be as bad, as it looks.

3. Not all relevant information is visible.

My brother in law, a social worker, recently told me, “All behavior makes sense with enough information.”

It’s such a good point.

You see someone doing something crazy and think, “Why in the world would you do that?” Then you sit down with them, hear about their life, and after a while you realize, “Ah, I kind of get it now.”

Everyone is a product of their own life experiences, few of which are visible or known to other people.

What makes sense to me might not make sense to you because you don’t know what kind of experiences have shaped me and vice versa.

The question, “Why don’t you agree with me?” can have infinite answers.

Sometimes one side is selfish, or stupid, or blind, or uninformed.

But usually a better question is, “What have you experienced that I haven’t that would make you believe what you do? And would I think about the world like you do if I experienced what you have?”

It’s the question that contains the most answers of why people don’t agree with each other.

But it’s such a hard question to ask.

It’s uncomfortable to think that what you haven’t experienced might change what you believe because it’s admitting your own ignorance. It’s much easier to assume those who disagree with you aren’t thinking as hard as you are – especially when judging others’ mistakes.

Car prices:

Historically, it has been cheaper to buy a used vehicle over a new one, and overall that remains the case. But for some used models—mostly those with low mileage and bought in the past year or two—the differential is closing quickly.

For instance, the average price paid by a customer in June for a one-year-old vehicle was only about $80 less than the selling price of a brand-new vehicle, according to J.D. Power. That gap is typically closer to $5,000 or more, the firm’s data show.

“It just seems like we’re in fantasyland,” said New England auto dealer Abel Toll.

Productivity:

Our population increased from 75 million to 130 million between 1900 and 1940. In some countries comparable increases have been accompanied by famine. In this country the increase has been accompanied by more abundant food supply, better living, more leisure, longer life, and better health. This is, largely, the product of three factors - the free play of initiative of a vigorous people under democracy, the heritage of great national wealth, and the advance of science and its application.

Titles:

Why for instance should I be called “Professor Cowen,” but few people would address the person fixing their toilet as “Plumber Jones”?

For a long time I have insisted that my graduate students call me “Tyler.” My goal has been to encourage them to think of themselves as peer researchers who might someday prove me wrong, rather than viewing me as an authority figure who is handing down truth.

Tokyo Olympic budgets:

2013: bid projected $7.4 billion of costs

2019: official budget of $14.6 billion

2020: budget revised to $15.4 billion

2021: government auditors project total spending will be $28 billion.

Debt:

Banks say their wealthy clients are borrowing more than ever before, often using loans backed by their portfolios of stocks and bonds. Morgan Stanley wealth-management clients have $68.1 billion worth of securities-based and other nonmortgage loans outstanding, more than double five years earlier. Bank of America said it has $62.4 billion in securities-based loans, dwarfing its book of home-equity lines of credit.

Have a good weekend.

Wealth is easy to measure but hard to value.

When George Vanderbilt moved into Biltmore – the largest home in America at 178,000 square feet – one newspaper in 1899 wondered what the point was.

The goals of the country’s richest during the Gilded Age, it said, seemed to be “devoting themselves to pleasure regardless of expense.” But often they got the reverse: “Devotion to expense regardless of pleasure.”

George didn’t spend much time in the 250-room mansion which, by the time he died, had nearly bankrupted him.

Twenty years before Biltmore was constructed, the New York Daily Tribune wrote that “The Vanderbilt money is certainly bringing no happiness to its present claimants.”

That wasn’t closet jealousy. Armed with the world’s greatest fortune, the Vanderbilt family seemed committed to proving the idea that money doesn’t buy happiness. They took it a step further, showing that when managed poorly money could in fact buy resentment, insecurity, and social anxiety. It could buy it in bulk.

Money buys happiness in the same way drugs bring pleasure: Incredible if done right, dangerous if used to mask a weakness, and disastrous when no amount is enough.

The highest forms of wealth are measured differently.

A few stick out:

1. Controlling your time and the ability to wake up and say, “I can do whatever I want today.”

Five-year-old Franklin Roosevelt complained that his life was dictated by rules. So his mother gave him a day free of structure – he could do whatever he pleased. Sara Roosevelt wrote in her diary that day: “Quite of his own accord, he went contently back to his routine.”

There’s a difference between working hard because you want to and working hard because someone else told you you had to, and how to do it, and when to do it. Even if you’re doing the same work, the independence of doing it on your own terms changes everything in the same way that sleeping in a tent is fun when you’re camping but miserable when you’re homeless.

To me, the highest form of wealth is controlling your time.

Wealth can lead to time independence, but it’s never assured. It can be the opposite, as whatever created the wealth – whether a company or an inheritance – creates a claim on your time in equal proportion to its financial reward. A great number of CEOs fall into this category: They have an abundance of wealth and not a moment of free time or scheduling control even when it’s desired, which is its own form of poverty.

Charlie Munger summed it up: “I did not intend to get rich. I just wanted to get independent.” It’s a wonderful goal, and harder to measure than net worth.

2. When money becomes like oxygen: so abundant relative to your needs that you don’t have to think about it despite it being a critical part of your life.

There’s a scene in the documentary The Queen of Versailles when the son of a man whose ability to make money was exceeded only by his desire to spend it, causing a family fortune to shrivel near the edge of bankruptcy:

On my wedding day my father gave a speech, and he looked at my wife and he said, “You will never have anything to worry about in your life.”

But now we worry every day.

A high form of wealth is avoiding that mess. And it isn’t necessarily tied to how much money you have.

Keep two things in mind:

• Desiring money beyond what you need to be happy is just an accounting hobby.

• How much money people need to be happy is driven more by expectations than income.

A thing I’ve noticed over the years is that some of the wealthiest people think about money all the time – which is obvious, because it’s causation. But it’s an important observation because most people, despite aspiring to become one of the wealthiest, actually want something different: the ability to not have to think about money.

It’s a different skill, but it’s powerful when you make it work. A person whose expectations relative to income are calibrated so they don’t even have to think about money has a higher form of wealth than someone with more money who’s constantly thinking about making the numbers work.

3. A career that allows for intellectual honesty.

This includes: Being able to say, “I don’t know” when you don’t know. Being able to speak critical truths about your industry without fear of retribution. The ability to make reasonable mistakes, and be open about them, without excessive worry. And not pretending to look busy to justify your salary.

There are high-paying careers that allow all those things. But there are so many that don’t, and a lot of what people pass off as “hard work” and “grinding” is just finding ways to bury the truth. A job that lets you be open and honest pays a bonus that’s hard to measure.

More:

• The Spectrum of Financial Dependence and Independence

• Wealth Is What You Don’t Spend

• The Biggest Returns

$1 billion:

“Just think about it,” the luminary told me. “It’s nearly impossible to spend a billion dollars.” I laughed at the ridiculousness of this statement, but he went on, doing the math in front of me to make his point. “The most expensive Gulfstream jet in the world is $65 million; a couple of very fancy houses will cost you $20 million, $30 million total; many of the highest-end cars are only a few hundred thousand dollars each. You’ve done all that and you’ve still got around $900 million or so left to spend.” I responded, “Well, you could just give it away to people and organizations in need.” “Ahh, but you can’t,” the man said to me. “Are you just going to hand it to someone and hope they do the right thing with it? You have to build entire infrastructures to give the money away.” He went on to explain that you need to hire legions of people, often hundreds, including teams of lawyers and tax lawyers, finance experts, project managers, communications staffers, and so on, to manage the distribution of the money. “Just look atWarren Buffett.Rather than figure out how to give his money away, he just gave it to the Gates Foundation to do it for him.” Then, the man explained, there is the “problem” that your billions will only grow, often quicker than you can give them away, with interest and rising investments. “Being a billionaire is a lot harder than it looks,” the man said.

Fees:

[Realtory] Commission revenue – the cut that brokers collect for helping buy and sell homes – is on track to surge 16% in 2021, surpassing $100 billion for the first time.

Used cars:

Time flies:

They say the “days go slow but the years fly,” and as I sit here stewing in my worries, I can’t help but reflect on just how fast my life is going.

My 20s were a blur. I met my wife and we got married. As we entered our 30s, we knew we wanted to start a family. After that period of time, it seems like someone pushed fast forward.

If I could map my life from the moment my son was born to its end and compress it into one 24-hour period, it would probably look like this.

Tuesday’s space flight:

At 18, Mr. Daemen will be the youngest person ever to go to space. At 82, Ms. Funk, who goes by Wally, will be the oldest.

Have a good weekend.

“One of the most persistent fallacies is the reflexive association of wealth with wisdom,” Ed Borgato once wrote.

Wealth might be a sign of good decisions, but can those decisions be repeated? And do good decisions in one field translate to wisdom in other areas of life? Maybe, maybe not – that’s the best we can say. And there are times where exceptional wealth can prevent empathizing with ordinary people, making insight more precarious.

A similar mistake, a bit harder to grasp, is the assumption that smart people have the right answers.

They may. But does intelligence in one field convert to others? Does being good at taking tests translate to, say, leading groups of people?

Maybe. It’s never clear.

And like wealth, there are situations where people become too smart for their own good, where intelligence is a liability and blocks good decisions.

A few causes:

The ability to create complex stories makes it easy to fool people, including yourself.

I know people I would not want to debate with on the question, “What is 2 + 2?” because they could go down a rabbit hole that’s over my head and leave me either exhausted or convinced the answer may not be four.

The dangerous thing is that those people can do the same things to themselves.

Richard Feynman said, “The first principle is that you must not fool yourself — and you are the easiest person to fool.” The smarter you are I think the truer that becomes.

When you’re blessed with intelligence you’re cursed with the ability to use it to concoct intricate stories about why things happened – especially stories justifying why you made a mistake or why you’ll eventually be right in an area you’re wrong.

The big blowups in any field aren’t typically caused by a lack of smarts. The catastrophes are typically caused by extreme intelligence that causes people to believe their own dangerous stories – that you can predict with accuracy, use leverage because your prediction must be true, and ignore warning signs that would have been obvious to a normal person who’s less adept at mental gymnastics

What’s boring is often important and the smartest people are the least interested in what’s boring.

Ninety percent of personal finance is just spend less than you make, diversify, and be patient.

But if you’re very intelligent that bores you to tears and feels like a waste of your potential. You want to spend your time on the 10% that’s mentally stimulating.

Which isn’t necessarily bad. But if your focus on the exciting part of finance comes at the expense of attention to the 90% of the field that’s boring, it’s disastrous. Hedge funds blow up and Wall Street executives go bankrupt doing things a less intelligent person would never consider. A similar thing happens in medicine, a field that attracts brilliant people who may be more interested in exciting disease treatments than boring disease prevention.

There’s a sweet spot where you grasp the important stuff but you’re not smart enough to be bored with it.

Intelligence can make it difficult to communicate with ordinary people, who may have the missing insight you’re looking for.

How many academics have discovered something amazing, but wrote it in a paper so dense and complex that no one else can understand it?

And how many ordinary people would be able to bring an academic’s discovery into the real world if they could understand what was written in those papers?

It has to be so many.

Computer scientist Edsger Dijkstra once wrote:

[Complexity has] a morbid attraction. When you give an academic audience a lecture that is crystal clear from alpha to omega, your audience feels cheated and leaves the lecture hall commenting to each other: “That was rather trivial, wasn’t it?” The sore truth is that complexity sells better.

When complexity is the preferred language of very smart people, great ideas can become walled off from ordinary people. Most of the allure of the information age is that ideas can be shared among huge groups of people. But among the superintelligent, that’s often not the case – they’re speaking a different language.

Occasionally someone like Richard Feynman comes along, whose storytelling skills equal his genius. But it’s rare. Communication and intelligence are not just separate skills; they can repel each other, and the smarter you become the more complex your communication and the smaller the audience you may be able to persuade.

The key, like so many things, is respecting balance and diverse views.

Barry Ritholtz asked people for their top 10 money rules last week.

Here are mine.

What money can and can’t do for you isn’t intuitive, so most people are surprised at how they feel when they suddenly have more or less than before.

Money makes it easy to mistake optimism (good) with gullibility (dangerous) and overconfidence (disastrous).

Getting rich and staying rich are different things that require different skills.

The formula for how to do well with money is simple. The behaviors you battle while implementing that formula are hard.

“Save more money and be more patient” is too simple for most people to take seriously, but it’s the best solution to most financial problems.

Expectations move slower than reality on the ground, so it’s easy to become frustrated when clinging to the economic trends of a previous era.

Everything is relative. John D. Rockefeller was asked how much money was enough and said, “Just a little bit more.” Everyone, at every income, tends to feel the same.

Spending money to show people how much money you have is the fastest way to have less money.

Debt removes options, savings add them.

No one is impressed with your possessions as much as you are.

The key thing about evolution is that everything dies. Ninety-nine percent of species are already extinct; the rest will be eventually.

There is no perfect species, one adapted to everything at all times. The best any species can do is to be good at some things until the things it’s not good at suddenly matter more. And then it dies.

A century ago a Russian biologist named Ivan Schmalhausen described how this works. A species that evolves to become very good at one thing tends to become vulnerable at another. A bigger lion can kill more prey, but it’s also a larger target for hunters to shoot at. A taller tree captures more sunlight but becomes vulnerable to wind damage. There is always some inefficiency.

So species rarely evolve to become perfect at anything, because perfecting one skill comes at the expense of another skill that will eventually be critical to survival. The lion could be bigger; the tree could be taller. But they’re not, because it would backfire.

So they’re all a little imperfect.

Nature’s answer is a lot of good enough, below-potential traits across all species. Biologist Anthony Bradshaw says that evolution’s successes get all the attention, but its failures are equally important. And that’s how it should be: Not maximizing your potential is actually the sweet spot in a world where perfecting one skill compromises another.

Evolution has spent 3.5 billion years testing and proving the idea that some inefficiency is good. We know it’s right.

So maybe the rest of us should pay more attention to it.

So many people strive for efficient lives, where no hour is wasted. But an overlooked skill that doesn’t get enough attention is the idea that wasting time can be a great thing.

Psychologist Amos Tversky once said “the secret to doing good research is always to be a little underemployed. You waste years by not being able to waste hours.”

A successful person purposely leaving gaps of free time on their schedule to do nothing in particular can feel inefficient. And it is, so not many people do it.

But Tversky’s point is that if your job is to be creative and think through a tough problem, then time spent wandering around a park or aimlessly lounging on a couch might be your most valuable hours. A little inefficiency is wonderful.

The New York Times once wrote of former Secretary of State George Shultz:

His hour of solitude was the only way he could find time to think about the strategic aspects of his job. Otherwise, he would be constantly pulled into moment-to-moment tactical issues, never able to focus on larger questions of the national interest.

Albert Einstein put it this way:

I take time to go for long walks on the beach so that I can listen to what is going on inside my head. If my work isn’t going well, I lie down in the middle of a workday and gaze at the ceiling while I listen and visualize what goes on in my imagination.

Mozart felt the same way:

When I am traveling in a carriage or walking after a good meal or during the night when I cannot sleep–it is on such occasions that my ideas flow best and most abundantly.

Someone once asked Charlie Munger what Warren Buffett’s secret was. “I would say half of all the time he spends is sitting on his ass and reading. He has a lot of time to think.”

This is the opposite of “hustle porn,” where people want to look busy at all times because they think it’s noble.

Nassim Taleb says, “My only measure of success is how much time you have to kill.” More than a measure of success, I think it’s a key ingredient. The most efficient calendar in the world – one where every minute is packed with productivity – comes at the expense of curious wandering and uninterrupted thinking, which eventually become the biggest contributors of success.

Another form of helpful inefficiency is a business whose operations have some slack built in.

Just-in-time manufacturing – where companies don’t stock the parts they need to build products, relying instead on last-minute shipments of components – was the epitome of efficient operations over the last 20 years. Then Covid hit, and virtually every manufacturer found itself dreadfully short of what it needs.

Super-efficient supply chains increase vulnerability to any disruption. And history is just a constant chain of disruptions. So you can imagine that we’ll hear stories of companies who increased their earnings by, say, 5% by maximizing supply efficiencies only to see earnings fall 20% or more due to having no slack when trouble hit. We are in the biggest post-WW2 consumer boom and car companies are shutting down production because they’re out of chips. A little inefficiency across the whole supply chain would have been the sweet spot.

Same in investing. Cash is an inefficient drag during bull markets and as valuable as oxygen during bear markets, either because you need it to survive a recession or because it’s the raw material of opportunity. Leverage is the most efficient way to maximize your balance sheet, and the easiest way to lose everything. Concentration is the best way to maximize returns, but diversification is the best way to increase the odds of owning a company capable of delivering returns. On and on, if you’re honest with yourself you’ll see that a little inefficiency is the ideal spot to be in.

Just like evolution, the key is realizing that the more perfect you try to become the more vulnerable you generally are.

Births/deaths:

Outperformance:

He’d been solidly in the second quartile every year for 14 years in a row. And where do you think that put him for the 14 years overall within his competitive universe? 4th percentile. In normal life, we say, well, if you range from 27 to 47, where are you on average? About 37. And the answer in his case was 4. By being in the top half for 14 years, he was in the top decile for the whole period. And I thought that was a great realization.

Code:

Software is a lever on the real world.

Someone writes code, and all of a sudden riders and drivers coordinate a completely new kind of real-world transportation system, and we call it Lyft. Someone writes code, and all of a sudden homeowners and guests coordinate a completely new kind of real-world real estate system, and we call it AirBNB. Someone writes code, etc., and we have cars that drive themselves, and planes that fly themselves, and wristwatches that tell us if we’re healthy or ill.

Work all day:

“Research indicates that five hours is about the maximum that most of us can concentrate hard on something,” says Alex Pang, founder of Silicon Valley consultancy Strategy and Rest and author of several books examining the links between shorter working hours and productivity. “There are periods when you can push past that, but the reality is that most of us have about that good work time in us every day.”

Quits:

Workers have had more than a year to reconsider work-life balance or career paths, and as the world opens back up, many of them will give their two weeks’ notice and make those changes they’ve been dreaming about.

Surveys show anywhere from 25% to upwards of 40% of workers are thinking about quitting their jobs.

“I don’t envy the challenge that human resources faces right now,” says Anthony Klotz, an associate professor of management at Texas A&M University.

Have a good weekend.