May 16, 2021
Over the past several months, I’ve watched the price of Bitcoin increase 400%, the price of Ethereum increase 1,000%, and the price of Dogecoin increase 5,000% (in bubble driven, then deflated by Elon).
I’ve been kicking myself for standing on the sidelines through all of this. I’ve been researching crypto since 2013, work at a cryptocurrency analytics company, and made some money trading in the 2017 crypto bull run. Yet I’ve had a lot of FOMO as it seems like everyone except me is making money.
To the Moon!
However, there’s a strong argument to be made that I shouldn’t be investing in crypto at all. If you analyze the net present value of my future cash flows, by far my biggest portfolio position – my salary, stock options, and the expertise and personal capital I build through the work I do for 10 hours per day – is long cryptocurrency futures. If I get rich due to crypto, it will be because of TRM stock options, not because I made an early bet on Bitcoin or Ethereum.
This is the smart decision! I shouldn’t be investing in crypto for the same reason that you shouldn’t invest in your company’s stock. Sure, you may think that Apple stock will continue to increase in value (I do), but if a Black Swan event occurs and you’re laid off, you don’t want your retirement account to evaporate as well. See Enron.
So how I spend the majority of my waking time can be represented as a call option on cryptocurrency and blockchain adoption.
What other areas of life also contain hidden derivatives?
- Mortgages. When you take out a mortgage in order to buy a house, you are placing a levered bet on the future of the local labor market. Ask my family who lives in Detroit how that worked out when the auto companies left.
- Relationships. Staying single is holding a call option on your future attractiveness in the dating pool. Assuming a heterosexual relationship, theta is higher for women than for men. Conversely, being in a relationship is selling that call. You earn premium up front, but may miss out on gains.
- Learning. Being a lifelong learner and building a marketable skillset is a hedge against competition in the global labor market. If you’re not continually learning or building your comparative advantage, you have taken a short position on globalization and are not concerned with the risk of educated, motivated people in lower-cost countries abroad taking your job.
- Parties. Attending a cocktail party is spending your time on a far out-of-the-money call option. You may meet someone or be presented with an opportunity that changes your life.
- Hobbies. Odds are that few will read this post. But each time I write and publish online, I pay a small premium (time) for a call option that my writing will lead to opportunities that I wouldn’t get otherwise. Any time spent creating as opposed to consuming is not only buying this call option, but also serves to increase the portfolio diversification of your future earning potential.
- Cryonics. Being cryogenically frozen is a call option on the future of science, as well as being a hedge against death. Pascal’s wager for the 21st Century.
May 4, 2021
I find it nearly impossible to get deep work done during normal business hours. When there are a million Slack notifications to respond to, emails to read, and personal text messages that pile up, it is difficult to block out the world to write, code, or do any other work that requires focus and brainpower.
It’s much easier to focus on work when the rest of the world is sleeping. In the stillness of the early morning or late night, I have nothing to distract myself from my thoughts, and the weight of Resistance becomes a tiny bit easier to bear.
Every hacker and creative I’ve known experiences this. They do their best work late at night or early in the morning.
Laguna Beach, Night Mode
I am a morning person. When I lived in New York, I loved waking up before 6 a.m. In the quiet of the early mornings there was nothing to distract me. I liked being able to read, write, or work on personal projects and get a solid three hours of work in before I needed to head into the office.
But living in California for the past two months, I’ve found it harder to get work done in the mornings. I can’t beat the East Coast early risers at their own game. By the time I wake up at 5:00 or 6:00, they’ve already been at it for a few hours: sending emails, Tweeting, doing everything they can to distract me. So instead, I’ve been staying up later and later to get things done. The early-morning stillness of New York has been replaced by the late-night stillness of Los Angeles.
Have other people experienced this? Or is it just me?
March 27, 2021
Smart people should build things. When I first came about this quote, it resonated with me, probably because at the time I was studying at a university where students were funneled into consulting and finance, perhaps the antithesis of building things. I had the tunnel vision of a 21-year-old that knew my decision on what job to take immediately after college was a BIG DECISION that would “determine the rest of my life”.
Lack of perspective aside, there is an immense joy in creation that I believe most white-collar professionals miss out on. Not only that, but gifted people have an obligation to humanity to create that which drives us forward as a species.
Formative Experiences vs. Legacy Building
In my early 20s, my main focus was racking up experiences. I traveled to different countries like a madman, crossing one after another off of my list. I didn’t ever want to miss out on the adventure, the nights out, the people I would meet along the way.
Now, as I settle into my late 20s, my mindset has shifted. I feel the need to produce; to craft a career, to write, to build the close relationships I already have in my life rather than chasing new ones. That’s not to say that the desire for new experiences is no longer there – it is just greatly diminished. I no longer feel the need to meet people that won’t be in my life a year from now. The crazy night out is no longer worth the hangover and lack of productivity the next day. My values have changed from experiencing life and seizing what the world has to offer to creating something of value to offer the world.
Further, creation is the path to building wealth. If you’re not working to make yourself antifragile by building equity or generating multiple streams of income, you’ll forever be trading your time for money.
As kids, we are constantly creating. We draw pictures, devise new games, invent fantasy universes that we populate with imaginary friends. There is an innate, playful yet powerful, drive within us to leave our mark on the world.
To create is human
Contrast this with adulthood. I see smart, talented people in their 20s working at a bullshit job all day, creating slide decks or spreadsheets. Then, tired from work, they go home and passively watch Netflix, scroll through Instagram, or, if it’s the weekend, head to the bar until it’s time to do it over again. This consumption, rather than creation, leads to much of the alienation and existential ennui in postmodern life. This is water.
We were once told that we could be anything that we wanted to be, but our entire school system is designed to beat the individuality out of us and train responsible workers. Our drive to create and play is forced to contend with the need to pay rent and have health insurance. It takes intentional effort to break free from this mindset.
Yet, our creative energy still exists. But because we are disengaged from our work, we’re drawn to hollow facsimiles of true creation. This manifests in a few different ways:
- Video games: building skills and progress in virtual worlds.
- The solipsism of sculpting the perfect body: fetishization of two-a-day Barry’s Bootcamp classes, washed down with an organic kale smoothie and a grass-fed steak.
- Taking up a 19th century (i.e., hipster) hobby: brewing beer, woodworking, making artisanal pickles. There’s something tangible and satisfying about these pastimes; they scratch an itch in ways that 21st century knowledge work generally doesn’t.
But for the majority of people, who don’t have the free time and/or discretionary income those activities require, creative energy is funneled into family-building.
Over the years, I’ve noticed that when you ask people with children how they (i.e., the person you’re talking to) are, just as often as not, the response is a list of all the things their kids are doing. Their kids have become their entire lives. I’ve always found this sad.
I understand wanting to have kids – love, biological drive, all of that. But it is inherently selfish to want children. It takes a lot of hubris to think: “Yeah, my partner and I have a complimentary set of neuroses, let’s create a new human with THAT.”
I expect that those of you with a family will read this and think “Check back with me in 10 years when you have kids”. And a part of me expects the same from myself – I fully expect to look back at what I’ve written here in a few years and laugh at myself. But I also think about how much the real world beats down the idealism that we have as adolescents, before we’re exposed to the cynicisms of the world, and wonder if there is a kernel of truth here.
Being a good parent and a good partner is a noble pursuit. But is this the best course of action? Or do people choose to have kids because it is the path of least resistance?
The Cost of Greatness
I wonder how much human potential is lost because we try to do too much. We aren’t willing to make the sacrifices that greatness requires. Because those sacrifices are great.
I think about the companies that have come out of Y Combinator, where during the program founders are told to build their product, talk to customers, eat, sleep, work out, and do literally nothing else.
Or Picasso – perhaps the best-known artist of the 20th century. There is no doubt he was brilliant. He was also a terrible romantic partner and father.
Picasso’s romantic life was a revolving door of affairs and infidelity…[his] singular focus on art meant that everything else in life had to take a back seat, including his relationships and his children.
Les femmes d’Alger, via Quartz
Or maniacal, tortured-yet-brilliant works of literature. From Dave Eggers’s introduction to Infinite Jest:
Here’s a question once posed to me, by a large baseball cap-wearing English major at a medium-sized western college: is it our duty to read Infinite Jest? This is a good question, and one that many people, particularly literary-minded people, ask themselves. The answer is: maybe. Sort of. Probably, in some way. If we think it’s our duty to read this book, it’s because we’re interested in genius. We’re interested in epic writerly ambition. We’re fascinated with what can be made by a person with enough time and focus and caffeine and, in Wallace’s case, chewing tobacco. If we are drawn to Infinite Jest, we’re also drawn to the Magnetic Fields’ 69 Songs, for which Stephin Merritt wrote that many songs, all of them about love, in about two years. And we’re drawn to the 10,000 paintings of folk artist Howard Finster. Or the work of Sufjan Stevens, who is on a mission to create an album about each state in the union. He’s currently at State No 2, but if he finishes that, it will approach what Wallace did with the book in your hands. The point is that if we are interested with human possibility, and we are able to cheer each other onto leaps in science and athletics and art and thought, we must admire the work that our peers have managed to create. We have an obligation, to ourselves, chiefly, to see what a brain, and particularly a brain like our own — that is, using the same effluvium we, too, swim through — is capable of. It’s why we watch Shoah, or visit the unending scroll on which Jack Kerouac wrote (in a fever of days) On the Road, or William T. Vollmann’s 3,300-page Rising Up and Rising Down, or Michael Apted’s 7 Up, 28 Up, 42 Up series of films, or … well, the list goes on.
How many people are wasting their time rearing children or making cheese? And what is their obligation to their immediate family and close friends, as opposed to the world as a whole?
Writing this makes me sympathetic, perhaps for the first time, to the arguments for a centrally planned economy. In the U.S. today, we focus on individual choice, being well-rounded, and the left half of the bell curve (getting test scores up). I’d love to do the exact opposite – identify the geniuses at the far right of the bell curve early on and pour money and resources into their education. Because those are the people who drive society forward; one Jeff Bezos creates thousands of millionaires and hundreds of thousands of jobs.
What is the optimal societal ratio of good fathers to people like Elon Musk, Norman Borlaug, or Bill Gates? Is this even a zero-sum game? To play devil’s advocate, one could argue that exceptional people have more of a moral obligation to reproduce, in order pass on their exceptional genes.
At the same time, when the child is drowning right in front of you, isn’t that the more pressing need?
March 11, 2021
Congressional hearings are a waste of everyone’s time. When people become outraged about something in the news that they don’t understand – be it Facebook harvesting user data, Pharma Bro, or the retail trading frenzy regarding GameStop – Congress hauls up a scapegoat to atone for our societal sins. In a Girardian reading, this ritualistic sacrifice lends legitimacy to the main religion in the U.S. today: our contemporary political system.
The problem is that Congress is comprised of a bunch of old politicians. While they may have legal training, our Representatives and Senators have no understanding of technology, health care, finance, or any of the other complex systems that underpin society. So we’re stuck with Orrin Hatch being confused that Facebook makes money by running ads or David Scott arguing that it is Robinhood’s responsibility to monitor social media chatter to ensure investors on its platform are not being misled.
If I were king for a day, my GameStop inquisition would consist of the following people and questions.
Thomas Peterffy, Chairman of Interactive Brokers
Mr. Peterffy, in a viral interview on February 17th, you claimed, in reference to GameStop trading on Thursday, January 28th: “We have come dangerously close to the collapse of the entire system.”
Can you please elaborate? What would have happened in a worst-case scenario?
Michael Bodson, President and CEO of the DTCC
- Mr. Bodson, please describe in detail the function of the Depository Trust and Clearing Corporation, including its ownership structure and who has a financial interest in the firm.
- Please describe the need for capital requirements and the counterparty risk in T+2 settlement.
- Walk us through who assumes risk for making the end customer whole when any given actor in the system fails.
- Show us the models used to calculate capital requirements for your partner brokerages. How (and why) do these models differ between brokerages?
- What is a “fail-to-deliver” for a given security? What is the process for resolving them, and what are the consequences for the party that fails to deliver?
Bonus points for hauling up John Davidson, CEO of the Options Clearing Corporation, and repeating these questions with him.
Jerome Powell, Chairman of the Federal Reserve
Mr. Powell, your magical money printer has gone “brrr” for the past year. With the explosion in money supply, are you at all concerned about inflation in capital markets, as opposed to in a basket of consumer goods?
Given the fact that the printer is running as we speak, I assume the answer is “No”. In that case, please explain how your monetary policy helps Americans in the the lower 50% of income, the majority of whom do not own a home nor hold any stock (directly or indirectly)?
Matt Levine, Bloomberg Columnist
Mr. Levine, on January 25th, you explained how short interest can be greater than 100% of shares outstanding:
This does not necessarily mean a lot of people are doing evil illegal nefarious naked shorting! Really, I promise! There is no special limit on shorting at 100% of shares outstanding! Here is an explanation of how options market makers (discussed below) are allowed to short without a locate, but I want to offer an even simpler explanation. There are 100 shares. A owns 90 of them, B owns 10. A lends her 90 shares to C, who shorts them all to D. Now A owns 90 shares, B owns 10 and D owns 90—there are 100 shares outstanding, but190 shares show up on ownership lists. (The accounts balance because C owes 90 shares to A, giving C, in a sense, negative 90 shares.) Short interest is 90 shares out of 100 outstanding. Now D lends her 90 shares to E, who shorts them all to F. Now A owns 90, B 10, D 90 and F 90, for a total of 280 shares. Short interest is 180 shares out of 100 outstanding. No problem! No big deal! You can just keep re-borrowing the shares. F can lend them to G! It’s fine.
What happens when all of these shares need to be covered in a small time frame – for example, were prime brokerages to trigger margin calls in rapid succession? If the float is lower than the number of shorted shares, hypothetically, how high could the price of the stock go?
Additionally, GameStop stock has been running up dramatically in price (from arguably a fair value of $40) over the past few weeks on essentially no news. See Exhibit A below.
Exhibit A: GameStonk
Shares reached $346 in intraday trading yesterday (March 10, 2021), then tumbled to $198 (-43%) in 20 minutes. The stock closed at $265.
On February 1st, you said:
I don’t think, however many days we are into this nonsense, that GameStop is a particularly important story (though of course it’s a fun one!), or that it points to any deep problems in the financial markets. There have been bubbles, and corners, and short squeezes, and pump-and-dumps before. It happens; stuff goes up and then it goes down; prices are irrational for a while; financial capitalism survives.
But I tell you what, if we are still here in a month I will absolutely freak out. Stock prices can get totally disconnected from fundamental value for a while, it’s fine, we all have a good laugh. But if they stay that way forever, if everyone decides that cash flows are irrelevant and that the important factor in any stock is how much fun it is to trade, then … what are we all doing here?
Mr. Levine, are you freaking out yet?
Nancy Pelosi, Speaker of the House
Ms. Pelosi, according to the House of Representatives Financial Disclosure Reports, you and your husband regularly make sophisticated investments in publicly traded companies and their derivatives. My question for you is two-fold:
- What is your plan to address the rampant and blatant violations of the STOCK Act in Congress?
- Will you sponsor (and pass, given that Democrats now control the House, Senate, and White House) a bill that ensures our elected representatives are subject to harsher trading restrictions than investment professionals?
- Here’s a good starting point: Any member of Congress must turn over all portfolio management decisions to a designated fiduciary representative. Communication of any non-public information to this fiduciary representative has a minimum penalty of a forced resignation, a lifetime ban from holding elected office in the future, and jail time.
Since we both know the answers to these are respectively “Nothing” and “No”, I have a third question: How can I get access to your trades in real-time, as opposed to with the monthly delay of official financial disclosures? I’m looking for only a fraction of your sweet, sweet tendies.
Eugene Fama, Nobel Laureate in Economics
It’s hackneyed to pick on the Efficient Market Hypothesis at this point. Dr. Fama, you are dismissed.
Keith Gill, a.k.a. Roaring Kitty, a.k.a u/DeepFuckingValue
You, sir, are a deep fucking legend.
February 14, 2021
Many people want to be writers. Few want to write.
The following quotes are for the times that you want to be a writer, but don’t want to write.
Professionals Show Up
Steven Pressfield’s The War of Art contains many gems.
Getting started is what’s tough:
There’s a secret that real writers know that wannabe writers don’t, and the secret is this: It’s not the writing part that’s hard. What’s hard is sitting down to write.
Fear is good:
Are you paralyzed with fear? That’s a good sign. Fear is good. Like self-doubt, fear is an indicator. Fear tells us what we have to do. Remember our rule of thumb: The more scared we are of a work or calling, the more sure we can be that we have to do it.
Do or do not, there is no try:
Are you a born writer? Were you put on earth to be a painter, a scientist, an apostle of peace? In the end the question can only be answered by action. Do it or don’t do it.
Put in the hours:
Someone once asked Somerset Maugham if he wrote on a schedule or only when struck by inspiration. “I write only when inspiration strikes,” he replied. “Fortunately it strikes every morning at nine o’clock sharp.”
That’s a pro.
The Alchemy of Working on the Right Project at the Right Time
[N]o amount of knowledge or tenacity or craftsmanship can substitute for the alchemy of working on the right project at the right time. My first book was written in response to the loss of a loved one – a grandfather who had essentially raised me – and eulogized not only a relationship, but also a particular phase of life. It took me a long time, and many false starts, to find my way to a project where I felt that same synthesis of subject and psychological state again. And when they come together, the writing itself changes: It doesn’t feel like work, it doesn’t feel like sentences in a holding pattern. It’s just necessity. (And then it’s revision, of course.)
– Téa Obrecht
The Gap Between Taste and Ability
Nobody tells people who are beginners – and I really wish somebody had told this to me – is that all of us who do creative work…we get into it because we have good taste. But it’s like there’s a gap, that for the first couple years that you’re making stuff, what you’re making isn’t so good, OK? It’s not that great. It’s really not that great. It’s trying to be good, it has ambition to be good, but it’s not quite that good. But your taste – the thing that got you into the game – your taste is still killer, and your taste is good enough that you can tell that what you’re making is kind of a disappointment to you, you know what I mean?
A lot of people never get past that phase. A lot of people at that point, they quit. And the thing I would just like say to you with all my heart is that most everybody I know who does interesting creative work, they went through a phase of years where they had really good taste and they could tell what they were making wasn’t as good as they wanted it to be – they knew it fell short, it didn’t have the special thing that we wanted it to have.
And the thing I would say to you is everybody goes through that. And for you to go through it, if you’re going through it right now, if you’re just getting out of that phase – you gotta know it’s totally normal.
And the most important possible thing you can do is do a lot of work – do a huge volume of work. Put yourself on a deadline so that every week, or every month, you know you’re going to finish one story. Because it’s only by actually going through a volume of work that you are actually going to catch up and close that gap. And the work you’re making will be as good as your ambitions. It takes a while, it’s gonna take you a while – it’s normal to take a while. And you just have to fight your way through that, okay?
– Ira Glass
The Fear of Making Something Lame
One of the biggest things holding people back from doing great work is the fear of making something lame. And this fear is not an irrational one. Many great projects go through a stage early on where they don’t seem very impressive, even to their creators. You have to push through this stage to reach the great work that lies beyond. But many people don’t. Most people don’t even reach the stage of making something they’re embarrassed by, let alone continue past it. They’re too frightened even to start.
– Paul Graham
Writing Is Similar to Trying to Seduce a Woman
Writing is similar to trying to seduce a woman. A lot has to do with practice, but mostly it’s innate. Anyway, good luck.
– Haruki Murakami
In his memoir, Murakami goes into a bit more depth regarding his writing process:
When I’m in writing mode for a novel, I get up at four a.m. and work for five to six hours. In the afternoon, I run for ten kilometers or swim for fifteen hundred meters (or do both), then I read a bit and listen to some music. I go to bed at nine p.m. I keep to this routine every day without variation. The repetition itself becomes the important thing; it’s a form of mesmerism. I mesmerize myself to reach a deeper state of mind. But to hold to such repetition for so long – six months to a year – requires a good amount of mental and physical strength. In that sense, writing a long novel is like survival training. Physical strength is as necessary as artistic sensitivity.
I’ve saved the best for last. My favorite book about the writing process – and the one I’ve found the most useful – is Steven King’s On Writing.
What writing is about:
Writing isn’t about making money, getting famous, getting dates, getting laid, or making friends. In the end, it’s about enriching the lives of those who will read your work, and enriching your own life, as well.
It starts with this: put your desk in the corner, and every time you sit down there to write, remind yourself why it isn’t in the middle of the room. Life isn’t a support-system for art. It’s the other way around.
You need to read and write a lot:
If you want to be a writer, you must do two things above all others: read a lot and write a lot…Every book you pick up has its own lesson or lessons, and quite often the bad books have more to teach than the good ones…You cannot hope to sweep someone else away by the force of your writing until it has been done to you.
Reading at meals is considered rude in polite society, but if you expect to succeed as a writer, rudeness should be the second-to-least of your concerns. The least of all should be polite society and what it expects. If you intend to write as truthfully as you can, your days as a member of polite society are numbered, anyway.
On the writing process:
You can read anywhere, almost, but when it comes to writing, library carrels, park benches, and rented flats should be courts of last resort – Truman Capote said he did his best work in motel rooms, but he is an exception; most of us do our best in a place of our own. Until you get one, you’ll find your new resolution to write a lot harder to take seriously…
…The space can be humble (probably should be, as I think I have already suggested), and it really needs only one thing: a door which you are willing to shut. The closed door is your way of telling the world and yourself that you mean business; you have made a serious commitment to write and intend to walk the walk as well as talk the talk.
By the time you step into your new writing space and close the door, you should have settled on a daily writing goal. As with physical exercise, it would be best to set this goal low at first, to avoid discouragement. I suggest a thousand words a day, and because I’m feeling magnanimous, I’ll also suggest that you can take one day a week off, at least to begin with. No more; you’ll lose the urgency and immediacy of your story if you do. With that goal set, resolve to yourself that the door stays closed until that goal is met…
…[Y]ou need the room, you need the door, and you need the determination to shut the door. You need a concrete goal, as well. The longer you keep to these basics, the easier the act of writing will become. Don’t wait for the muse. As I’ve said, he’s a hardheaded guy who’s not susceptible to a lot of creative fluttering. This isn’t the Ouija board or the spirit-world we’re talking about here, but just another job like laying pipe or driving long-haul trucks. Your job is to make sure the muse knows where you’re going to be every day from nine ’til noon or seven ’til three. If he does know, I assure you that sooner or later he’ll start showing up, chomping his cigar and making his magic.
On having support:
Writing is a lonely job. Having someone who belies in you makes a lot of difference. They don’t have to make speeches. Just believing is usually enough.
Persistence is key:
[S]topping a piece of work just because it’s hard, either emotionally or imaginatively, is a bad idea. Sometimes you have to go on when you don’t feel like it, and sometimes you’re doing good work when it feels like all you’re managing is to shovel shit from a sitting position.
Drugs aren’t necessary:
The idea that creative endeavor and mind-altering substances are entwined is one of the great pop-intellectual myths of our time.
When you write a story, you’re telling yourself the story…when you rewrite, your main job is taking out all the things that are not the story.
Write with the door closed, rewrite with the door open.
Finally, how to know if you’re talented:
If you wrote something for which someone sent you a check, if you cashed the check and it didn’t bounce, and if you then paid the light bill with the money, I consider you talented.