The Battle of GameStop

Over the past several weeks, GameStop stock has traded more like a cryptocurrency than a failing mall-based retailer.

GameStop

What is going on here?

In one sentence: Institutional investors short GameStop (i.e., the prevailing wisdom, at least until the past few weeks) are playing a game of chicken with retail investors & contrarian institutions who are long.1

The Current Situation

GameStop is a video game retailer; it has been in decline for several years now. Video games have moved to an online, direct-to-consumer distribution model. Foot traffic in malls (where most GameStops are located) was down even before COVID; many mall-based retailers are struggling.

Unsurprisingly, over the course of 2020 this led to GameStop becoming one of the most shorted stocks on Wall Street.

However, there were early signs that GameStop was undervalued. Michael Burry (of The Big Short fame) took a large long position in 2019, claiming video game discs are not entirely dead. In August 2020, Roaring Kitty (a.k.a. u/DeepFuckingValue on Reddit) published a video detailing why GameStop was a good play based on its fundamentals – a future short squeeze would just be the icing on the cake.

Michael Burry

Christian Bale playing Michael Burry

On January 11th, Ryan Cohen (founder of Chewy, which sold to PetSmart for $3.35 billion), joined GameStop’s board after his investment firm built up a 10% stake in the company. At this point, retail investors, especially those on the popular subreddit Wall Street Bets went crazy. They highlighted that GameStop was now a growth play. It is now led by a previously successful founder, its online business is growing at a 300% rate, and it is in the process of turning around its core business.2 As such, GameStop should be valued at a Venture Capital multiple of 10x+ revenue, rather than a measly 0.5x revenue.

This narrative is compelling. Despite short sellers warning otherwise, GameStop has continued to climb in price. All of the GameStop options issued (with a high strike price of $60) were in the money on Friday (1/22/2021), trigging a gamma squeeze as institutions who had written the options rushed to cover their positions. GameStop closed Friday at $65.01.

On Monday (1/25/2021), GameStop opened at $96.73, spiked at $159.18 (likely because of another gamma squeeze),3 then crashed with pressure from institutional shorts, closing at $76.79 (still up 18% day-over-day).

But the bulls aren’t finished with GameStop. These gamma squeezes are nothing compared to what will be coming: the near-mythical “Infinity Squeeze”. Most famously seen with Volkswagen in 2008, when short sellers are forced to cover their positions due to a margin call, the price of the stock rapidly rises (hypothetically to infinity) since the number of shares shorted exceeds the number of shares available to buy.

Volkswagen

VW Short Squeeze via FT

The Allure of Wall Street Bets

Can a subreddit comprised of retail investors really move the market like this? I doubt it – all of the big swings in this stock have been caused by institutions. What this subreddit does is control the narrative.

First unveiled to the mainstream finance world in a February 2020 Bloomberg article, Wall Street Bets is profane (as I’m sure you’ve noticed if you clicked any of the links in this post). But Wall Street Bets isn’t some sinister, market-manipulating entity. Rather, it is a virtual water cooler for individual retail investors to post memes – and emojis, oh so many emojis – about their investments.

Reading Wall Street Bets feels like the discussion at a middle school cafeteria table circa 2000. Redditors on Wall Street Bets (who refer to themselves affectionately as “autists” or “retards”)4 encourage one another to have “diamond hands” (💎 🤲), the will to stay strong and not sell a stock when things are going poorly. Contrast this with the “paper hands” (🧻 🤲) of those who are weak-willed and sell a stock based on market sentiment. Companies are headed “to the moon” (🚀). Bears are not mentioned without the adjective “gay” (🌈 🐻). Self-deprecating cuckold references to “my wife’s boyfriend” abound.

Despite this language (or perhaps because of it), Wall Street Bets is one of the most entertaining and informative places on the internet. People post meaningful analysis of companies that are undervalued and why they are investing. Browsing the subreddit, you get a crash course on concepts that you would otherwise learn only at a buy-side firm or working as an options trader: EBITDA multiple, book value, delta hedging, implied volatility.

But the most compelling aspect of Wall Street Bets is in its name: the bets. The ability to gain (or lose) a life-changing amount of money – with screenshots to prove it – creates an environment similar to that of the casino floor. And if Wall Street Bets is the casino floor, then Wall Street itself is the house.

The same emotion that caused us to root for the thieves in Ocean’s 11 is what makes Wall Street Bets so enticing. Put frankly, Millennials are tired of getting fucked by the man. When you’re underemployed with $100,000 in student loan debt, your financial situation feels overwhelming. You really don’t want to take the advice of your parents or CNBC talking heads5 to invest 10% of your salary for a 4% annual return. At that point, what’s another $5,000? Might as well buy some short-dated GME calls.

For those of use who don’t fit the underemployed Millennial archetype, Matt Levine’s Boredom Markets Hypothesis applies. COVID has required us to work from home, without much ability to spend for travel, dining, or entertainment. Putting money into Robinhood is a decent substitute – with the added bonus of it being an “investment”, rather than consumption. In an age where the Fed will print seemingly unlimited money to prop up capital markets, better to be irrational exuberant as a part of the market than be left out of the party.

money printer go brrrrr

Further, the narrative presented by the GameStop trade in particular is compelling. It allows the small retail investor to play a role in market events normally only played out at the hedge fund scale (a short squeeze was a key plot element in Season 1 of Billions). The short sellers in this case aren’t particularly sympathetic: Andrew Left of Citron Research released a video in which he lays out the bear case for GameStop. His main argument was a smug appeal to authority, essentially claiming “Wall Street knows better than you people on message boards”.6

Billions Short Squeeze

Billions, IRL (image via Forbes)

So sure, Wall Street Bets is irreverent, has irrational exuberance, and is guilty of hero worship (Elon Musk and more recently Ryan Cohen). But it also provides a sense of community during the stresses of COVID and provides a compelling way for the little guy to stick it to the man.

As Keynes reminded us (in the most overused finance quote of all time): “The markets can remain irrational longer than you can remain solvent.” When enough people believe in a vision, it can cause that vision to manifest itself. Wall Street is scared that retail investors can manifest their own vision, rather that the one dictated by the major financial players.

What George Soros Got Right

The entire GameStop scenario is a case study in reflexivity.7 Reflexivity is the idea that our perception of circumstances influences reality, which then further impacts our perception of reality, in a self-reinforcing loop. Specifically, in a financial market, prices are a reflection of traders’ expectations. Those prices then influence traders’ expectations, and so on.

This may seem obvious to some, but it flies in the face of the efficient-market hypothesis. As Soros states,

What makes reflexivity interesting is that the prevailing bias has ways, via the market prices, to affect the so-called fundamentals that market prices are supposed to reflect.8

What does this mean for GameStop? Because of traders’ bullish sentiment, a previously failing company is now in the position where it can leverage the overnight increase in value to make real, substantive changes to its business. GameStop can pay off debt through the issuance of new shares or make strategic acquisitions using its newly-valuable shares.9 A struggling company could become solid simply not because of a change in the underlying business, but because investors decided it should be more valuable.

Reflexivity may be the best way to understand the 21st Century. Passive investing is an example of reflexivity in action.10 So is winner-take-all venture investing. Uber raised an absurd war chest, causing more investors to want to pile in, which led to more fundraising and eventually a successful IPO. The fact that Uber has not yet turned a profit, yet today has a $100 billion market cap, cannot be explained with traditional financial thinking, but can be explained by reflexivity.

The internet and instant communication only accelerates these trends. Instances of reflexivity like the strange market movements we’ve seen with GameStop are happening more and more – not only in financial markets, but also in the political and social realm, to incredible effect.

When Donald Trump won the presidency in 2016, I distinctly remember writing in my journal: “Anything is possible.” I was blown away that this complete buffoon of a man, someone who the Huffington Post refused to cover as politics meme-d his way into the presidency. He was a joke, until suddenly, in a Tulpa-esque twist…he wasn’t. Similarly, internet conspiracy theories spread via Facebook memes manifested themselves in the real world when Trump supporters stormed the Capitol a few weeks ago.

Our perception shapes reality. And when enough people agree on a specific perception, it becomes reality.11 As we become more and more connected, discourse will expand and and accelerate. We’re going to see some strange things become reality.

Even, perhaps, hedge funds going bankrupt and newly-minted millionaires, all because of some people who wrote about a struggling video game retailer on Reddit.


Notes:

  1. For the best summary of the current situation, see Matt Levine

  2. When you take into account the closures of poorly-performing stores, per-store revenue and profits are up

  3. Options were written up to a strike price of $115 and these all were in the money. 

  4. Not condoning the language, but Wall Street Bets members with trading gains often make donations to these causes

  5. Wall Street Bets has a love/hate (mostly hate) relationship with Jim Cramer, a.k.a. “Chillman Boomer”. 

  6. Andrew Left is an interesting character. That said, I’m not here to attack him personally, and nobody in their right mind would condone the alleged threats made against him by GameStop bulls upset by his stance on the company. 

  7. Good intro to Soros’s Theory of Reflexivity in this Financial Times article

  8. The Alchemy of Finance, page 10. 

  9. More details in this Reddit post

  10. Passive investing is also helping GameStop’s run – as the price of the stock increases, index funds need to buy more shares to re-weight, which in turn drives up the price. Reflexivity. 

  11. This is my favorite rebuttal for those who claim “cryptocurrency has no intrinsic value”. Sure – but neither does the U.S. dollar. We just all decided that it would have value, so it does. 

An Ode to Chess

When I was six years old, I joined the chess club at my school. I remember thinking at the time that chess club must be about the coolest after-school activity imaginable for a first grader.

Chess

Who needs video games when you've got this?

Twice a week, a man (probably just a high school student, but when you’re six years old, everyone over 15 seems like an adult) came to our classroom to give us chess lessons. We learned how the pieces moved, their relative importance, and basic tactics. We studied some famous games; all of us were amazed to learn that it might make sense to sacrifice your queen in order to win a few moves later.

In retrospect, I don’t think that Highland Ranch Elementary School was some bastion of intellectualism; rather, I was just an extremely nerdy kid.

Twenty years went by and I didn’t think very much about chess. But over the past few months I’ve become semi-obsessed. In the past year, I’ve gone from about the 15th to 75th percentile of players on Lichess.1

Chess as Boxing

I became interested in chess about the time that I started boxing training. The two are more similar than they appear at first glance. In both chess and boxing, it is imperative that you:

  • Control your emotions. If you’re overexcited, you will make mistakes. You need to be coldly rational and calculating to win.
  • Balance offense with defense. If you are overly attacking, you leave yourself open to counterattacks that will do damage. Aggressive gambits can work, but if your opponents sees what you’re doing and counters, look out.
  • Let go of your ego. You will get beaten up (physically or metaphorically). Learn from it and get better.
  • Think ahead. Whether you’re thinking several moves ahead or throwing combinations that will open up space for punches in different areas, what you do now impacts what happens down the line.
  • Always protect your king. (Keep your hands up.)

Chessboxing

Potential future in chessboxing? Photo via Huck Mag

Beware Cartesian Dualism

Chess teaches how our physical state impacts our mental state, and vice versa. If I haven’t gotten a full night’s sleep, I lose way more games than I win. Same goes if I am distracted by a problem that I’m thinking about at work.

I’ve taken to using chess as a heuristic to determine if I’m in the right state of mind to start a project that requires a lot of brainpower. I ask myself: If I were to play a few chess games right now, would my Elo2 rise or fall? If it would fall, best to get some rest before tackling complex work or making any major decisions.

Chess requires intense focus. To win a game of chess (against an opponent at a similar skill level), you need to block out the rest of the world. Being able to think deeply solely about the pieces on the board in front of you is both an intellectual indulgence and a way to train your mind. In a world where we are bombarded with information, chess can make you a better student, entrepreneur, investor, or employee by teaching the focus required to block out the noise and attack the complex problem at hand.

Overall, I’ve come to see chess as a beautiful game. A good move in chess is elegant. You have to give your opponent credit for trapping you in a way that you didn’t see coming. Conversely, there is no better feeling than when your opponent makes a move you knew they would make, and you have a better move to counter.

If that’s not a metaphor for the business world, I don’t know what is.


Notes:

  1. If I had a more directed plan of study and spent more time on tactics, no doubt I could get my rating higher. But for now, I play games mainly for entertainment. 

  2. Technically Glicko-2 

Peacetime vs. Wartime COVID Response

Ben Thompson discusses new defaults, claiming we need to move faster and challenge the status quo in order to accomplish more as a society. He cites COVID response, specifically with regards to vaccine approval, as an area in which we should have prioritized moving more quickly in order to save more lives.

This is a sympathetic argument. Essentially, it is a specific instance of the Great Stagnation. While the development of this vaccine is a win for humanity, we should be moving even faster by incorporating lessons from the tech industry and software development best practices.

The obvious counterargument is a combination of Chesterton’s Fence and ergodicity. Chiefly, decisions that have the potential to cause significant detriment should be made with an abundance of caution and a full understanding of the terrain. Placing bets with, say, a 90% chance of a positive payoff for society and a 10% negative payoff will be net negative over the long run. In other words, you’d be rational to not play a game of Russian Roulette for $1 million, despite the game’s high expected value.

Thompson argues that both authoritarian and liberal regimes can implement these new defaults. However, the relevant axis on which to evaluate countries’ default attitude towards COVID and technological progress isn’t authoritarianism vs. freedom, but rather peacetime vs. wartime mindset.1

Wartime Mindset

Decidedly not the U.S. COVID response

FDA approval processes (and many of the other governmental processes in liberal democracies) are built around peacetime opportunity costs. They prioritize safety over rushing to get a vaccine out the door. When the opportunity cost changes (i.e., there is a new global pandemic and lives are on the line) those institutions have trouble updating their behavior accordingly.

Conversely, authoritarian regimes are much more militant. You see this in China’s approach not only to the virus, but in audacious economic initiatives (e.g., Belt & Road) and the defense of its political ideology on the world stage.

That mindset is actually similar to the democracies that have responded best to COVID. Israel (very much a “wartime” country – mandatory military service, surrounded by its enemies, etc.) is blowing the rest of the world out of the water in its vaccination implementation. In normal times, it is a powerhouse of innovation, largely due to elite technological groups in the military. South Korea (another country with mandatory military service, has an enemy with nuclear weapons to the north) had a great COVID response. And Taiwan, a country that faces constant existential threat from China,

[E]xhibited the exact same sort [of] can-do attitude alongside a free press, elections, and pig intestines in the legislature.

The US last had a “wartime” mindset during World War II. Many of the innovations in the following period – nuclear physics, the space race, computers, etc. – can be directly attributed to the massive mobilization effort and public-private partnerships of the time.

Gas Mask

So the question to ask is: How do we cultivate the wartime mindset that leads to innovation? And if COVID can’t catalyze this, what can?


Notes:

  1. This is similar to Ben Horowitz’s concept of peacetime vs. wartime CEO. His book, The Hard Thing About Hard Things, is one of my favorites

The Local Maxima Trap

Applied Divinity Studies asks: “Why don’t people quit their jobs at large tech companies?”1

We can explore this phenomenon through a machine learning analogy. I propose that human beings are awful at optimizing explore - exploit algorithms.2

Golden Handcuffs

Careers as Gradient Descent

A useful metaphor for our careers is a hill climbing algorithm.3 Imagine that you are dropped at a random point in a hilly area. Your goal is to get to the top of the highest hill. The problem is, you can only see a few feet in front of you.

If you only move uphill, you risk getting stuck at a local maximum. You’ve gotten to the top of a hill, but there’s no way to know if it’s the highest one in the area. So there needs to be some element of randomness your steps – you need to take downhill steps in order to explore different hills in the terrain.

Hill

This hill-climbing metaphor for career exploration is similar to the way that a neural network “learns”. The key concept that we need to apply is alpha, or learning rate.4 Learning rate describes the magnitude of updates that the network makes for each new data point encountered. This affects both how fast the algorithm learns and whether or not we actually reach a minimum.

To make this a bit more concrete, imagine a neural network that attempts to classify images of pieces of food:

  • If the learning rate is 0, each new piece of information will not update our classifier at all. The network simply ignores all new data points.
  • If the learning rate is 1, each new piece of information will be the only piece of information that the classifier takes into account. We’ve built a this photo of a hot dog vs. everything else classifier, which isn’t very interesting.
  • If the learning rate is too low, the model will learn very slowly, though it will eventually be able to distinguish different types of food.
  • If the learning rate is too high, the model will learn quickly. However, the model also runs the risk of having a high error rate because it overfits the most recent data. It “bounces” between different understandings of food, heavily influenced the most recent pieces of information it has encountered.

Gradient Descent Diverging

When setting up a machine learning model, people will often “tune” the parameter by trying out a few different learning rates to define the optimal rate for the particular algorithm. But we can’t run simulations of our careers and then choose the optimal learning rate after reviewing the results.

If someone has a career learning rate that is too high, they bounce around. They have tons of ideas for their career, maybe start new businesses, try to grow their skillset, but get partway through and then jump to the next endeavor. Conversely, if their learning rate is too low, they take too long to reach the global maximum. They may spend 30 years climbing a small foothill when the terrain contains the Rockies.

So why don’t people quit their job at large tech companies? They have the wrong learning rate for the neural net of their careers. They’ve become stuck at a local maximum.

Hazing as the Path to Brotherhood

“Whoever fights monsters should see to it that in the process he does not become a monster. And if you gaze long enough into an abyss, the abyss will gaze back into you.” – Friedrich Nietzsche

A key element missing from this machine learning analogy is that our preferences change over time. Because most people experience loss aversion, setting out on a certain path makes it harder to explore other paths.

This strikes me as the strongest argument against the effective altruism concept of “earning to give”. In Doing Good Better, William MacAskill addresses this directly:

Another important consideration regarding earning to give is the risk of losing your values by working in an environment with people who aren’t as altruistically inclined as you are. For example, David Brooks, writing in The New York Times, makes this objection in response to a story of Jason Trigg, who is earning to give by working in finance:

You might start down this course seeing finance as a convenient means to realize your deepest commitment: fighting malaria. But the brain is a malleable organ. Every time you do an activity, or have a thought, you are changing a piece of yourself into something slightly different than it was before. Every hour you spend with others, you become more like the people around you.

Gradually, you become a different person. If there is a large gap between your daily conduct and your core commitment, you will become more like your daily activities and less attached to your original commitment.

This is an important concern, and if you think that a particular career will destroy your altruistic motivation, then you certainly shouldn’t pursue it. But there are reasons for thinking that this often isn’t too great a problem. First, if you pursue earning to give but find your altruistic motivation is waning, you always have the option of leaving and working for an organization that does good directly. At worst, you’ve built up good work experience. Second, if you involve yourself in the effective altruism community, then you can mitigate this concern: if you have many friends who are pursuing a similar path to you, and you’ve publicly stated your intentions to donate, then you’ll have strong support to ensure that you live up to your aims. Finally, there are many examples of people who have successfully pursued earning to give without losing their values…There is certainly a risk of losing one’s values by earning to give, which you should bear in mind when you’re thinking about your career options, but there are risks of becoming disillusioned whatever you choose to do, and the experience of seeing what effective donations can achieve can be immensely rewarding.

But how many fresh college graduates take a software engineering job at Google while “surrounding themselves with other members of the effective altruism community”? Most people lack MacAskill’s level of circumspection in making career decisions. They stumble into their life decisions rather than making them deliberately. And even for the most deliberate, life is made up more of things that happen to you than things that you control directly.

Once you start down a path, you take on the values of the people that you interact with on that path. My freshman year of college, many of my acquaintances went through a hellish hazing process when when pledging fraternities. In the moment, they said they hated the process. Yet the next year, they were hazing the next class of pledges.

Fraternity hazing prepares people for the bullshit jobs that they encounter after college. These experiences are meaningful precisely because of the wasted effort put into them. The more that we struggle for something, the more we value it.

You see this combination of increased opportunity cost and sunk cost fallacy in all sort of fields that attract ambitious people: finance, law, medicine. Exploration is explicitly discouraged in favor of exploiting the path in front of you. So without a clear plan to counteract these effects, your learning rate declines as you experience some modicum of success.

More broadly, exploration is encouraged for children but discouraged for adults. As a 20- or 25-year-old, it’s exciting to up and move to a new city and start a career in a new industry. Your friends may look askance at you if you do the same at 45.5

I’ve experienced this in my own career. As a fresh college graduate, I was in debt, yet turned down a six-figure investment banking job when my startup was funded to the tune of $35,000 by an accelerator in Santiago, Chile.6 But today, with far more experience, money in the bank, and better business ideas, it’s harder for me to take the leap to be a full-time entrepreneur. My learning rate has declined and I’m less willing to deviate from the hill that I’m climbing.

This is essentially the conclusion that Applied Divinity Studies reaches:

Once you work at Google, you look around, see thousands of genuinely brilliant programmers who aren’t successful, and you get totally trapped. All of a sudden, you go from “I’m incredibly gifted and would do great things if only society wasn’t holding me back” to “there are literally 100 people within eyesight more gifted than me, and they’ve all settled for mediocre jobs, so I guess that’s the most I can hope for”.7

Escaping the Matrix

Can anything be done about this? Presumably, this is a net negative for society. People who could be creating value (and employment) by founding companies, pushing the frontiers of scientific knowledge, or casting into being great works of art are instead toiling away at yet another superfluous messaging product for Google.

As explored in the empirical data, many founders start out on the same path that leads to an engineering role at a large tech company. However, they bounce off of this path before their peers begin employment at these companies.

But rather than the selection effect that Applied Divinity Studies addresses – that founders don’t want to work for Google – this may be an example of the exact opposite selection effect. Namely, Google won’t employ the type of people that become founders.

Successful founders are intellectually curious about the world around them, both within and outside of their areas of expertise. They draw connections between seemingly disparate ideas – that is a large part of why they are able to create novel businesses. Steve Jobs bummed around India, experimented with LSD, and sat in on calligraphy classes as a college dropout. Patrick Collison reads about and has questions regarding nearly any topic imaginable. Elon Musk is driving humanity forward in the realms of energy, transportation, space travel, and artificial intelligence, but after graduating from Penn with a degree in physics couldn’t get a job at Netscape.

The best founders are exploring – they have a large alpha. Starting a company requires breadth of knowledge (to make connections) followed by depth into the specifics. In its hiring process, big tech selects only for depth, for those who have optimized for the big tech path.

Smaller, scrappier companies are more likely to tolerate exploration. After the startup that I founded, I applied to the big tech companies and didn’t get interviews. But DoorDash – at the time a 200-ish person company – was willing to take a chance on me.

All of this supports the conclusion that when Googlers do start companies, those companies perform disproportionately well.

So what does all of this mean?

Mountain Climbing

Are we even on the right hill?

In the optimization problem of your career, climbing one hill makes it easier to reach the top of other, higher hills. Working at Google is a great first step to starting a company – you gain legitimacy, meet potential cofounders, can save enough money to not have to worry about personal finances, etc. But paradoxically, frustratingly, the people most likely to make it to the top of this hill are the ones most likely to get stuck there. It’s not that future founders self-select away from big tech. Rather, big tech selects for the people who have optimized for the hill of big tech, not the ones who have explored enough to be successful founders.

Finally, if you work at a big tech company, it makes sense to increase your alpha periodically. Most career decisions are reversible; after your startup fails, you can go back to the Product Manager role at Facebook. But you only have one life. You won’t be able to re-run the simulation with a different learning rate once your career ends.


Notes:

  1. The key assumption here is that large tech company employees have not reached their global maxima.

    Presumably, you have some values, and those values are not maxed out. They might be hedonic (your life is not as pleasurable as it could be), altruistic (the world is not as good as it could be), or narcissistic (your status is not as high as it could be).

    For the small subset of Google, Facebook, etc. employees who “love your job more than anything you can possibly imagine doing instead”:

    1. Congratulations
    2. You can ignore the rest of this post

  2. Scott Young provides a good overview of this topic. 

  3. Chris Dixon’s blog post from 2009 was my introduction to this concept. 

  4. I tried to make this overview as simple as possible, but no simpler.

    • I recognize that technically alpha is a hyperparameter, as opposed to a parameter.
    • I referenced this Slate Star Codex post to help me explain alpha to a non-technical audience.

  5. I’m convinced this is the reason adults struggle so much to learn new languages. Children aren’t afraid of looking stupid, so they are constantly babbling, are corrected in their language, and improve over time. Most adults are afraid to look like idiots when they speak (almost never the case, everyone I’ve encountered appreciates that you’re trying to speak their language), so they only get in a fraction of the reps. 

  6. Startup Chile: a great experience when you’re 22, would never do it again. But that’s the topic for another post. 

  7. Related: Smart people can convincingly rationalize nearly anything

On Travel

I wrote this blog post in 2014, the summer before my senior year of college. I had spent the previous year away from Penn: one semester studying abroad in Argentina, followed by a leave of absence to work at an investment bank in Chicago and then backpack around Australia and New Zealand.

I gained a lot of maturity through this reflective quarter-life crisis. I highly recommend taking time off from school or work in your early 20s if you have the opportunity to do so.

One year ago today, I was in Budapest. In reflecting on how much has changed over the past year, I was reminded of what I wrote about travel back in 2014.

Backpacker

Enter 21-year-old me.


Why Not to Travel

I love to travel. And over the past two years, I’ve been fortunate enough to be able to make travel a priority in my life. Among other trips, I studied abroad in Buenos Aires and traveled around South America, braved a long flight across the Pacific to see Australia and New Zealand, visited friends and family across the country, and participated in a service-learning trip to Rwanda.

Travel has enriched my life. I’ve met people, been exposed to new points of view, and seen things that I would have had no chance of laying eyes on back at home. As St. Augustine said,

“The world is a book and those who do not travel read only one page.”

Sydney Opera House

But the more that I travel, the more I look inward and wonder just how much it has changed me. I wonder if some of the lessons that I’ve learned wouldn’t have been easier and simpler to learn closer to home. I wonder if all of the money I’ve spent on airfare, hostels, and alcohol was worth it. I wonder if my life was changed enough during my travel experiences that I’ll be able to make a bigger impact on the world in the future than I otherwise would have – or if I should have just donated the thousands of dollars I spent on travel to charities that tangibly improve people’s lives right now.

Every time I start a trip, I manage to convince myself that it’s going to be life-changing. That somehow the experience of physically being somewhere different will fundamentally change me – make me more outgoing, more interesting, more motivated to learn new languages, more likely to walk up to that girl in the bar, more like the Dos Equis man.

I think this is in part what has been sold to us today. Travel has become commoditized and romanticized. We’re hooked on images of exotic lands, pristine beaches, new adventures, strange tongues, and moonlight trysts. It’s a mental state, an attitude that companies try to package and sell to us. They claim: “If only your surroundings change, so too will you as a person. You can be anything that you want to be; you can be the person that you’ve always dreamed of being.”

The more that I travel, the more I realize that the whole claim, while alluring, is utter bullshit. I’m the same person in Argentina that I am in New Zealand that I am back home.

We all expect that travel will be “life-changing” or “incredible”, so we only share the highlights of our trips. We don’t tell our friends about the long nights spent sleeping on airport benches, the lost luggage, the feelings of loneliness thousands of miles away from anyone in your support network, the boredom as we lie in bed at an empty hostel in a tiny town in the middle of nowhere with nothing to do at 10 p.m. on a Saturday night.

Our problems don’t disappear when we travel. We still have the same worries, insecurities, anxieties, vices, and character flaws that we do at home. Physical location doesn’t change any of that. Yes, travel can lead to incredible growth experiences, but you have to work at it, just like anything else in life. Changes don’t magically occur.

Emerson recognized this. He claimed,

“Travelling is a fool’s paradise. Our first journeys discover to us the indifference of places. At home I dream that at Naples, at Rome, I can be intoxicated with beauty, and lose my sadness. I pack my trunk, embrace my friends, embark on the sea, and at last wake up in Naples, and there beside me is the stern fact, the sad self, unrelenting, identical, that I fled from. I seek the Vatican, and the palaces. I affect to be intoxicated with sights and suggestions, but I am not intoxicated. My giant goes with me wherever I go.”

I agree with Ryan Holiday that there is no inherent value to travel. You don’t win an award for having more stamps in your passport than your friends. Talking about all of the places that you’ve been comes across a little bit like bragging about your SAT score. Nobody cares and everyone is just a little bit put off.

I’m guilty of this myself. When I’m on a trip, I find myself wondering about what countries I can “do”.  As if flying into a country and being there for a day or two somehow makes me a more valuable human being.

All that being said, we can work to make travel incredibly valuable. Travel can be a great learning experience, can enhance and enrich our lives. But we can’t let it fundamentally define our lives.

The first step is to define why you’re taking a trip. Have a purpose or an objective. Do you want to learn about a new language and culture? To escape the normal routine of everyday life? To just lie on the beach and relax?

Any of these are fine. But be honest with yourself about what you’re doing. And be realistic about your expectations for what the trip will bring. Realize that the whole concept of “things falling into place” or “things just happening” is ridiculous. You have to work to make those great experiences happen.

Seneca once said,

“Travel and change of place impart new vigor to the mind.” It’s definitely true that travel can recharge your batteries and give you the perspective that you need to take on new projects back at home.

But he also claimed,

“They [travelers] make one journey after another and change spectacle for spectacle. As Lucretius says ‘Thus each man flees himself.’ But to what end if he does not escape himself? He pursues and dogs himself as his own most tedious companion. And so we must realize that our difficulty is not the fault of the places but of ourselves.”

Travel to enhance your life. Not to escape your life. You can’t outrun your inner demons. Your physical location doesn’t matter so much as your mental state and actions. Wherever you happen to be in the world.

What I’ve Learned from Travel

It’s been said that all travelers are either running from something or looking for something. For most people, it’s probably a combination of both. And while I just said that you can’t romanticize travel as the solution to all of your problems, I still find a lot of value in travel. You just have to be running away from and towards the right things.

Personally, I love the novelty of travel. I’m running from monotony and my day-to-day existence, in which I’m not as mindful as I could be. (I know, I’m working on this…) I’m running towards new experiences, new languages, new cultures, and new people. When I’m on a trip, out doing things, I feel alive, as if I’m an active participant in all that life has to offer.

Travel like this can be invigorating and have positive effects even when we return home. We need periodic breaks from work and everyday life in order to be more productive and happy.

Beyond those benefits, I’ve also learned a lot through various trips. If you do it right, travel is a great way not to let your schooling interfere with your education. With that in mind, I wanted to share the top lessons I’ve learned and ways that I’ve grown through travel.

Patience & Going With the Flow

If you travel, you will learn patience. When you’re in a country where you don’t speak the language and have to deal with a bag mixup, or you’ve been waiting two hours for a bus and don’t know if it will show up, or all of the trains are shut down without an explanation, you start to freak out. Then, after a couple minutes, you realize that it isn’t the end of the world. You can figure this out and your life will go on. It becomes an almost Zen experience.

When you get back home, you won’t complain about having to crash on the floor of your friend’s apartment or a flight being delayed a few hours. You’ve been through worse. I’m a firm believer that in travel, as in life in general, you can choose to either laugh or cry at just about everything. If you choose to laugh, you’ll be a lot happier. Moreover, you’ll have accrued a lot of funny stories that you wouldn’t have had you just stayed at home. Those stories will pay dividends in bars and at family reunions for years to come.

Talking to Strangers & Getting Out of My Shell

The first trip that I took completely alone was a few months ago in New Zealand. The first few days, I was quiet and just read. It was nice and a really good opportunity for me to decompress after working really long hours for the previous three months. But after a while, I started to get bored.

New Zealand Beach

New Zealand – Heaven on Earth

I quickly realized that there were only two options here:

  1. Stay quiet and remain bored and lonely.
  2. Start talking to people.

So I bought some beer and shared it with my roommates in a hostel. Surprise – they didn’t bite my head off. Everyone was in the same situation that I was and wanted to meet new people. I got over my fear of going out alone. The reality is, it’s not a big deal to go to a bar, or grab dinner, or do anything by yourself. Nobody really cares – they’re all too worried about themselves.

One of the best things about travel is the people that you meet. You make friends who are completely different from you and learn entirely new world views. People who travel are some of the most open-minded and interesting people that you’ll ever meet. The traveler population self-filters – anyone who is closed-minded or boring will just stay at home.

Additionally, everywhere I’ve been, I’ve found that people are generally proud of the place that they are from. That’s not to say that they’re jingoistic, or have a misconception that where they live is a utopia. Rather, they can see the good in where they live and are eager to share that with other people. As a traveler, it is an incredible experience to be on the receiving end of this energy and to learn firsthand about a culture from someone who is enthusiastic about it.

How to Listen

Travel can teach you how to deal with myriad people and situations. When you’re in a place that you’re not familiar with, you are constantly absorbing information. Every cab driver, waiter in a café, or person that you meet in a hostel has a story that you can learn from. And when you’re in this state of absorbing information, you really learn how to listen.

When you talk to most people, they are (in a best-case scenario) thinking about what they will say next to continue the conversation. Truly listening, focusing 100% of your attention on the person that is talking to you, is an invaluable skill. People notice. Travel causes you to be more present in the moment – it can also cause you to be a more present listener.

You Won’t Get Kidnapped, Murdered, Etc.

The media completely blows out of proportion the risks of traveling abroad. Talking about the great experiences that people have abroad just doesn’t make for good news. But the vast majority of travelers I’ve talked to have never encountered the slightest issue.

Granted, you have to take obvious precautions. Talk to the locals about which neighborhoods to go into and which to avoid. Don’t get too drunk. Don’t travel alone down sketchy alleys at 3 am. Don’t get involved in drug deals with cartels. Don’t visit Syria right now.

But even in places with lots of violence, the violence doesn’t revolve around tourists. People realize that if you start to kidnap or kill tourists, they stop coming to your country, which just hurts business for everyone.

There will be occasional muggings, kidnappings, and even deaths. But this stuff happens in the US, too. Imagine if we were to judge New York City based solely on the 9/11 terrorist attacks, or Chicago based on all of the murders that happen there (over 500 in 2012). That’s exactly what we do with other countries.

Frankly, I felt safer living in Buenos Aires than I do living now in Philadelphia. If you take the necessary (i.e. obvious) precautions, the risk that something will happen to you is minimal.

Spanish

I spoke Spanish pretty well before I left for Argentina, but by the time that I got back I really felt like I was fluent. There is a huge difference between being able to speak the language in a classroom and being able to speak it in everyday life. I found that I was able to understand everything that was said in the classroom, but was challenged in trying to talk to my peers. All of the slang and the stronger accents that people use with one another in casual conversation made it much harder to communicate for me, as I learned the language in a classroom. But by constantly being exposed to that slang and normal, everyday speech, I soaked up the language like a sponge.

Immersion is the best way to learn a language. And in the Internet Age, you can work to get that at home, but there’s always a huge temptation to fall back on your native tongue. Moving to Argentina and being away from my entire English support network forced me to learn Spanish. At first, after concentrating hard to communicate for as few as 15 minutes, I thought that my brain was going to melt. But gradually, it got easier and easier. Being fully surrounded by the language increased my skills more than classes ever could.

Being Selfish is Okay

Travel is principally for our own benefit.  That should be recognized. There’s nothing wrong with going to Mexico and hitting the beach. The entire economy of some tropical countries is predicated on tourism. By traveling, you’re doing your part to stimulate the local economy.

However, “voluntourism” has become very popular lately. The idea is that you spend your vacation doing service work – building houses in Nicaragua, or helping with a water project in West Africa. This concept has come under a lot of criticism. Quite frankly, the money that is spent on these trips would be better spent if it were sent to the communities directly.  Then, local experts can be hired to work on these projects.  This both ensures that the construction is sound (after all, experts, rather than a group of well-meaning but ultimately clueless kids, are working) and the local economy is stimulated.

This was an issue that I wrestled a lot with prior to my trip last summer to Rwanda. With a group of Penn students, I spent 10 days living in a community for high school-aged children who were orphaned during the genocide. I wondered about the impact that we would really make.  Would it be better to just donate the money, rather than spend thousands of dollars to travel there?

I came to recognize that I didn’t change the world during this trip. Quite honestly, if my goal were to make the most positive impact right now, I would have donated all of the money to a quality charity that works on infrastructure projects in Rwanda.

I realized that the trip was primarily for myself and my education. That’s fine. I learned firsthand what life is like in Rwanda. And I hope that in the future, as I earn money and gain professional experience, I’m able to give back and make intelligent decisions about giving based on what I experienced in Rwanda. I hope that this trip will allow me to make a greater positive impact in the future than I otherwise would have been able to.

I learned that in general, these trips are primarily for the participants’ benefit, not the benefit of the local community. The positive impact comes from what the participants learn and what actions they take when they return home.

My Travel Limits

As great as travel is, at some point you’re going to want to come home. The time period is different for different people, but eventually the vast majority want to put down roots somewhere. Maybe you’re done with a trip after two days, maybe after two weeks, two months, two years, or even two decades – at some point you want to come home.

I reached my limit during my study abroad in Argentina. I think that at this point in my life, I can travel and be away from friends and family back in the US for about four months. But when I reached that point in my trip, I started to get homesick and was ready to go home.

Conclusion

Ultimately, travel has caused a great deal of introspection and led to a lot of personal growth for me. I truly think that travel, when done right, can be one of the most valuable experiences that life offers.

Getting to distant places is cheaper, faster, and easier to do now than at any other point in history. The world is your playground. Get in the sandbox, get dirty, and see what you can learn.