Mary Graif McDevitt was a secretary in Binghamton, New York, in the early 1900s. Her boss, A. Ward Ford, sat on the board of a small company called the Computing Tabulating Recording Company. The board hired a salesman named Tom Watson to run it, and Watson renamed it International Business Machines. Mary borrowed $125 and bought shares (borrowing to buy your boss’s stock usually ends badly). She kept reinvesting.

Her son Robert inherited the shares. He graduated from Georgetown in 1940 and ran a funeral home in Binghamton. He never sold. He died in 2008, at 90, as IBM’s largest individual shareholder, with more than $250 million in his personal account. He left $75 million of it to Georgetown, the largest gift in the school’s history at the time.

Nothing forced him to sell, so he didn’t.

Warren Buffett, Mark Leonard, and Henry Singleton are among the investing heroes we all know, yet mimicking their permanent capital vehicles without understanding why they worked is a dangerous game. A few permanent holding companies will join the rarefied air of Constellation, TransDigm, Danaher, Lifco, and Berkshire. Most won’t. You’ve probably met the founder of one, or heard one on a podcast. What does “building the next Berkshire” mean when there’s so much more to Buffett’s genius than the legal structure he used? Copying Berkshire’s visible legal structure is easier than replicating Buffett’s investment edge. By edge, I mean something specific a firm can do that others can’t or won’t. Constellation tracks tens of thousands of tiny vertical-software companies and stays in touch with their owners for years, which nobody can replicate in short order. It also has a culture that builds patience and discipline into the investing process. Danaher has the wherewithal to carefully implement the Danaher Business System. The right structure naturally aligns with an edge and multiplies it.

A typical fund with a ten-year life must return capital when the contractual and external clock runs out. Continuation vehicles can stretch out the timeline, but eventually the fund must dissolve to fulfill its fiduciary and legal obligations to return what is left to investors. A permanent vehicle can remove the legal clock, but does little for the other temptations an investor might face: boredom after a long stretch with no deal, new growth areas of the market you are unprepared to attack, and buyers willing to overpay for your assets.

Berkshire Hathaway is the classic permanent vehicle. It buys and sells companies and stocks when it wishes. But Berkshire itself is about as permanent as a vehicle gets. It’s a C Corp, controlled culturally and through Buffett’s voting stake. After the initial capital went in, Berkshire kept what it earned and built on it. It hasn’t paid a dividend since 1967. The capital is trapped, and that’s a positive when you have the greatest investor at the helm. Berkshire also had an amazing insurance business. Its float was cheap money to invest, and few personal accounts ever get that. And Berkshire could move cash without selling anything. It paid $25 million for See’s Candies in 1972. By 2007, See’s had earned $1.35 billion pretax and needed only $32 million of it back. Buffett sent the rest to other businesses.

Family offices are permanent for the same reason a personal account is. A family office exists to serve the family. You can trade what’s inside a personal account, but you can’t change whose account it is.

§The three reasons people give

§1. Lifestyle

Lifestyle reasons come down to one of two things:

• Ego. You want to say you have a permanent holdco, even if it doesn’t matter. “We never sell” does well at cocktail parties, but don’t expect the high to last.
• Belief that it leads to the life you want. Usually you want something else, like fewer reporting requirements or more time to think, but there are more direct ways to get there. Atypical fund structures are on the table when you work with investors who share a similar vision. Be careful, though. Sometimes this is ego posing as humility.

§2. Marketing

You may want to raise money for the vehicle itself. Or you’re in an auction, and “permanent capital” is a strong selling point. Sellers care about who owns their company, so a buyer who promises to hold for the long term can have a differentiated bid. After close, though, it’s critical the “permanent” strategy aligns with the subsequent operating, capital allocation, and cultural approaches the company takes.

§3. Duration: the edges that need decades

Every sale leaks somewhere. You pay tax on the gain, the cash sits around while you look for the next deal, and the next deal is rarely as good as the one you just sold. Hold something compounding at 15% for 20 years and sell once in the middle, and you give up about a fifth of what you’d have ended with, assuming the next deal is just as good.¹ By year 10, most businesses have already had their re-rating, and growth has slowed, which creates the temptation to sell. The asset you hold can slow to 12.5% a year and still tie the seller who got impatient. As Munger said, “The first rule of compounding is to never interrupt it unnecessarily.”

Structural undervaluation. If an asset is undervalued for reasons that won’t correct within any normal holding period, you can’t sell into a re-rating. Think of Japanese companies that sat below book value for decades because of cross-holdings, or a conglomerate the market won’t price at the sum of its parts. You make your return by holding these to run-off and clipping cash along the way. When your own stock carries a large and durable discount, the best option can be large buybacks. Henry Singleton did this at Teledyne, where he bought back 90% of its shares in a ten-year period. Other investors have bought back stock all the way until they filed for restructuring. A permanent cart full of lemons only gets more sour with time.

Compounding advantages. Some assets grow more valuable the longer you hold them. This can look like the “Munger Trade,” where you put your ego aside so a generational steward can build their life’s work while you sidecar. It’s like holding Amazon from over $100 in late 1999 to under $6 in 2001 all the way to this decade’s highs, or wiring Buffett money in 1956.

Reputation. Firms with the partners’ names on the front door, passed down from generation to generation, doing everything from pre-seed investments to restructurings, have an advantage that’s hard to replicate with a revolving door of capital. Brown Brothers Harriman and some regional family offices fit this bill. BBH traces its partnership to 1818. When a family sells the business, BBH can get the first call because it banked the grandfather.

Patience. If you can wait a decade and then concentrate on a couple of opportunities, a permanent vehicle may fit. It could mean doing nothing for five years while your friends close a deal every quarter. Berkshire holds $365 billion in cash, and has avoided the temptation to spend it for the sake of activity. The rare creatures who can avoid action for years at a time retrofit nap rooms into their offices and know they’ll lose at sourcing as a volume sport.

A permanent vehicle isn’t a substitute for judgment on the asset. Plenty of families held Kodak forever too, and it didn’t end well. The McDevitts won because they picked IBM and nothing ever made them sell. They didn’t need a vehicle because their only job was to sit and wait. An operator who makes businesses better and recycles the cash has more jobs, and the right vehicle helps with every one of them.

Permanent structures should not be preconceived. They are the destination after discovering a personal investment edge, and live as an efficient way to exploit and amplify what you are excellent at.

Thank you to Abi, Harrison, and Jeff for contributing and reading drafts.

§Distribution matters

When companies deploy AI outside of existing systems, new bots, apps, and accounts, adoption collapses. Teams live in Slack, Linear, GitHub, Outlook. Adding another tab and another software vendor to learn about adds unnecessary friction. While IT teams understandably isolate LLMs for data control, forcing isolated platforms ultimately suffocates adoption.

Tools that survive company adoption look like Claude Tag in Slack, Atlassian’s products in Jira, Instinct in iMessages. Bringing the LLMs into surfaces we already understand and know. We’ve also built some for clients and ourselves. The friction to onboard is lower. It shouldn’t even feel like onboarding when their LLM is a taggable object in Slack. Adding AI to what you already know beats out adding two new tools at once (the model and its surface). Even the most powerful models hit a wall when they ignore user friction and accessibility.

Powerful models hit the same wall. ZAI released GLM-5.3, which had frontier capabilities at a smaller-model speed. They gave unlimited tokens for a while, yet it launched through the CLI. Great for programmers, non-programmers can’t touch it. It’s unreasonable to expect someone who’s never opened a terminal to try it out. Some early adopters dabble in MCPs and side tools, but that’s not how you reach a business. The surface is the bottleneck, not the capability.

And the opposite mistake is worse. Connecting your agent to everything at once also doesn’t work for the enterprise. Grok Bot has tried this. A beautiful interface, broad integrations, paired with easy onboarding. The concept is elegant, but the problem of permissioning remains. Expecting users to connect their agent to everything and then delegate permissions later is a failure case and a security concern. Giving unfettered access to all of your files and organizational logins isn’t something anybody should be readily excited about.

One LLM to rule them all, One llm to find them; One llm to bring them all and in the darkness bind them

I asked Grok Bot to send me a daily calendar summary and prep me in the morning. First, it fired off inconsistently and broke. Annoying, but expected for a new product. What broke my trust was how it dug into Slack and a random Desktop folder with personal files unrelated to calendaring. After perusing files and articles beyond necessary, it completed the task. But that made me wary of asking for anything sensitive or broad, when Google Calendar and Gmail would have been enough.

The model I have adopted is to treat AI as a remote employee who can’t hop on Zoom. Train and onboard them like any other employee, give them the tools needed, scope to a specific problem set, allow them to learn, and most importantly, put them where I already live. Nobody would add a new tool to talk to a single employee. Instead, we would invite them to Slack, Jira, and more. Treating AI the same, as a new teammate who can contribute as a normal teammate, is the abstraction I expect to stay.

The next phase of enterprise AI is not about better models. It’s improving the current surfaces, meeting teams where they work. The bleeding edge is interesting, but we have to move on from being beta testers. For AI to be adopted in the workforce, we have to be comfortable deploying it in our own environments. Treating it as a teammate who won’t sleep or eat. The companies that move beyond beta-testing and into embedding just added a new teammate for 10% of the cost.

Related reading: Everything Is a Context Problem

Western Union was a telegraph monopoly running out of reasons to exist. Competitors’ long-distance rates were falling while Western Union’s kept rising. The uniformed messenger, once an iconic mascot, was being phased out as machines took over. They needed a growth story, and they needed it fast. They settled on Telex, a direct-dial teleprinter service still years from commercial launch and already eating a significant share of the R&D budget. It had to work, or Western Union was in trouble.

Market cap of $118M, earnings of $19M, pension outlays of $10M, reserves of $2.4M. The retirement obligations were growing 15% annually, on track to become a $200-250M liability¹ with no funding plan behind it. Western Union ran it pay-as-you-go, so the earnings looked real and weren’t. $17 a share for a stock worth pennies.

Munger saw this as a prime short candidate. The company was overstaffed, surrendering pricing power, and watching its technology become obsolete. He’d learned from a previous investment that setups like this didn’t end well. This was his chance to sit on the other side of the table.

Source: FCC, Statistics of Communications Common Carriers, 1956 (full report)

So Munger shorted the stock, wrote up the thesis, and sent it out.

—

From 1956 to 1958, the stock chopped. From 17 to 22 and back down to 19. Then a recession pulled the shares back to 14. It only went up from there. In 1958, Telex launched, and nobody cared that the pension cost was still compounding underneath it. It ran from 14 to 34¾ in 1958. In 1959 it ranged from 29¾ to 53¾. 1960 was the top. The stock hit 57, over 3x the original 1956 short.

Source: Bank and Quotation Record, NYSE tables, Jan. 1960 issue (full-year 1959) (archive.org)

The whole time, the pension cash cost grew from $10M to $19M, and the debt load more than tripled from $43M to $149M. The Telex growth narrative drowned out the deteriorating fundamentals.

Munger covered somewhere in that run-up². He’d circulated his report more widely as the shares climbed against him. The market went up, he told more people, the market went up again. “I couldn’t understand it” was about all he had to say. He closed the position at a loss, roughly triple where he’d shorted it, and never shorted a stock again.

—

”Everything we’ve ever thought about shorting worked out eventually. But it’s very painful.” — Warren Buffett

Munger was out of Western Union. Western Union spent the next twenty-eight years proving the math from 1956 correct, and none of it counted because he wasn’t holding the position anymore. Being right early is indistinguishable from being wrong.

In 1962, the pension expense alone was $19M against operating income of $7M, and Western Union still borrowed to pay a $10.5M dividend anyway, because a monopoly in decline can keep writing checks long after it’s stopped earning the right to. They were functionally insolvent, making just enough cash to keep the stock from cratering.

In the 1960s, data networks saved the company again. They raised preferred stock and issued debt to buy the first U.S. domestic communications satellite fleet. Revenue peaked at $335M, but the earnings were deeply negative. Telex was declining 20% a year as MCI and fax machines ate into its market share. Something had to break.

The core business bled $117M in losses across 1983 and 1984. The dividend was suspended. Banks pulled their credit. It took twenty-eight years, but the thesis Munger published in 1956 was finally paying off.

Source: Western Union Flashes Warning, Washington Post, Dec. 19, 1984

In 1987, Drexel arranged the financing that finished it. They tried to salvage the company with strategic divestments and an ill-fated merger with ITT World Communications. They couldn’t escape the inevitable: a November 15, 1991 involuntary Chapter 11. The certificate that once symbolized a monopoly was now worth less than the nail holding Buffett’s up.

Source: New York Times, May 8, 1987

The money-transfer business came out of the estate intact³. It passed through First Financial, then First Data, which spun it off under the old Western Union name in 2006. A year later, Berkshire bought in. They got out of it quickly.

—

Thank you to Abi, and @dunbelievable for contributions and draft-reading

We tried outsourcing our support to off-the-shelf software. Their pitch: generate perfect customer support experiences with AI. All their systems did was read our in-house notes and guess.

A user would write in asking if their July payment was recorded. The rented product would send back a generic article about our billing practices. The same one it sent to everyone. It didn’t know who the customer was. Nor their history with our company. Nor the specifics of their billing setup. The bots weren’t dumb. They just didn’t know anything. Context Problem.

Enterprise companies insist on shelling out millions of dollars for these AI solutions. Generic products nervously avoiding real problems. Frustrating customers and somehow creating more low-value work for employees. Most companies have yet to see real returns from AI:

§When Genius Models Fail

We are way past the excuse of intelligence. These models have performance comparable to a PhD. 91% on GPQA Diamond, against a 65% human-expert baseline. They are solving open math and computer science problems. Industry-ignorant brainiacs. Brainpower can’t be the bottleneck.

We improved our own support metrics, reducing resolution time by 88% and replies to resolve by 46%. All from a custom harness. We struggled for over a year to figure out how to make AI work. Solutions working 10% of the time. Answers focusing on a different question than the one asked. We rebuilt the retrieval layer four times.

An LLM is a PhD hire on their first day in the field. Brilliant. Can spin a thesis with the best of them. Pointed in the wrong direction, they will hurt your business. Not because they can’t help, but because you’re asking them to solve PhD-level problems with pre-school level tooling. Botching agent onboarding is an organizational failure.

Context and tooling become the new bottleneck.

I’ve been tracking where our tools fail. We logged over 2,000 errors across 57,000 actions since March. 73% trace to one tool calling our database wrong¹. The models can’t own these failures. The fault is mine, for neglecting to provide the proper success paths. Context problem.

§A Model for Value

If context is the scarce input, the question becomes who owns it.

Each AI Lab is the alternative to the next. Capabilities converge, prices collapse, and the lead changes hands every few weeks. Your context has no alternative. Nobody else holds your customers’ history, your error logs, your post-mortems.

Domain, system, and individual knowledge is boutique. Universal tools lose usefulness the farther they travel from your articles of incorporation. Real value must be secured at the company level. Responding to customers in their own vocabulary. Aggregating inputs for your company’s strategy. Only you can do either.

In July a user wrote in, “your program will not let me enter the show.” Our harness spent six minutes and eighty cents identifying:

• a duplicate piece she couldn’t delete
• a validation error that wouldn’t clear

A rented bot would have sent her an article about uploading files with a FAQ at the bottom. Our harness pulled her entire history and went hunting. Her logs, error history, the module she was interacting with, all of it. Sentry was silent for her account, so it knew there was a client-side error, not a crash. By the time our support agent opened her ticket, it had a code change ready to deploy and caught a data bug we would not have seen otherwise. Context, resolved.

These models will not just “figure it out.” Integration costs will collapse once the model crosses a threshold. Yet they will never touch zero. Your business will keep generating context only you hold, and building your harness will not be a one-time task. Scaffolding tailored to you and the terrible problems you wish to conquer. Doing it now compounds institutional knowledge and earned secrets. As the models get better, so does the harness.

Our inbox stays clear. Who each customer is, what they bought, where they got stuck: on file before anyone opens the ticket. When someone asks about their July payment, the harness pulls their account and the specific charges.

Reducing resolution time by 88% matters less than what it bought. Now, we are free to run at our own terrible problems.

Thank you to Andrew, Justin, and Harrison for contributing and reading drafts.

He was a successful attorney at Musick, Peeler & Garrett, cashing an hourly rate. Yet he had a burning desire to be rich. And fast. After hundreds of timid commutes, he decided to address himself.

He knew Transformer Engineers and its staff intimately. They were a common job shop. Developing and manufacturing components, magnetic amplifiers, wave filters, and hermetic transformers for missile guidance and telemetry. Sold through the prime contractors in the aerospace missile defense industry. Yet this one was different than the dozens of others that had popped up in the Pasadena highways trolled by our enterprising lawyer.

Transformer Engineers employed a one Ed Hoskins. Brilliant, honest, and possessing an unrelenting inventor’s mind. Partnering with Ed was an opportunity, and a privilege.

Munger loved to tell one story that captured Hoskins’ soul. On a fishing trip in Minnesota, Hoskins pressed a guide who swore the lake was thick with muskies:

“Are any muskies caught in this lake?” asked Hoskins. “More muskies are caught in this lake than in any other lake in Minnesota. This lake is famous for muskies.” “How long have you been fishing here?” “Nineteen years.” “How many muskies have you caught?” “None.”

That was Ed. He would rather have the ugly truth than a comfortable lie. And he expected the same of everyone surrounding him.

So Charlie made a detour from his work commute right into the offices of Ed and his team. The ask was simple. Let me graduate from advisor to partner. Ed had reached a disagreement with his venture capitalists, who wanted to replace him. Very short-sighted, unlike any investor since.

In Munger’s own words:

“We worked out a deal for him to buy them out, using large amounts of credit. It was an early leveraged buyout. It was a nonlegal solution to what looked like a legal problem.”

Ed stayed in the business and Charlie became a capitalist. And now, the agony:

Post-buyout, the Korean War fired off. Transformer Engineers was booming. They hired more people, and completed more jobs to meet their customers’ needs. Business was phenomenal, until the war stopped.

In 1953, an armistice was reached. No more war, no more missiles. Customers vanished overnight, and purchase orders were not upheld. Transformer Engineers was shocked. They built up all this capacity. More employees, machinery, fixed costs, and the anchor of credit from the previously successful leveraged buyout. The business was deep in the red.

Ed worked 90 hours a week through it, designing every transformer himself:

“I can’t tell you how close we were and what a wonderful man he proved to be,” Munger said. “We had troubles that made his hair fall out.”

Compounding the high costs was the eroding pricing power. Transformer Engineers had no brand. A thin moat. All the value laid with the prime contractors. The same contractors who were squeezing common job shops at every opportunity. High fixed costs, steep revenue drops, and no path to solve either.

For years, the company had to downsize.

“A lot of struggle, a lot of nerve pain,” Munger said. “We damn near lost everything.”

It was painful, excruciating, and it’s not something that Charlie Munger would ever want to be involved with again. However, there is no other possibility, not when liquidating outright meant fire-sale prices with nothing left after the debt.

This was nothing short of a disaster.

Transformer Engineers tried to acquire their way out of this mess, a second sin. They bought William Miller Instruments, a startup building a cathode ray recording oscillograph. Munger described it later:

“my first investment with my pitiful savings. I invested right in Pasadena. It was called William Miller Instruments. And I damn near lost all my money, it was hell on earth. We just barely squeaked out with a substantial outcome. The oscillograph we’d invested in and were so proud of, somebody invented magnetic tape, and by the time it got to market we sold three. Three total in the whole country. This technology is a killer as well as an opportunity. My first experience damn near killed me.”

Their product toiled for years coming to market, and by the time it launched, magnetic tape had already eaten the category. This compounded their mistake, and the investment was written down to zero.

Then comes Harry Bottle. He was the legend that eventually turned around Dempster Mills, one of the Buffett Partnerships’ largest investments. He stepped up as comptroller. Harry downsized their building and moved. He cut out unprofitable clients, and moved beyond military clients into industrial ones. And clawed back profitability.

All these efforts led to an okay return by Charlie Munger’s standards. He mentioned that they eventually made some money, but that was no use pretending that this was easy for them. The investor partnership ended by 1960 or 1961 when the business was sold to Electronic Specialty Co.

“I never went back to the high-tech mode,” Munger said. “I tried it once and found it to have many problems. I was like Mark Twain’s cat that, after a bad experience, never again sat on a hot stove, or on a cold stove either.”

In 1995, nobody doubted the internet would matter. But holding the exponent in your head was impossible. Nobody doubts AI is a big deal either. But who is accurately imagining how big?

Scale estimation remains elusive in a world where the crowd can decipher direction. The mistake is in the magnitude.

Take Jeremy’s viscerally titled “Billion Dollar PDFs”. Which he expands on in Patrick’s podcast:

every once in a while someone basically crystallizes a notion right at the right time in the right way that becomes the foundational viewpoint or opinion in a certain era…the Billion-dollar PDF thing is this idea that you can form billions of dollars of capital one way or another around simply setting a new idea

His framing is about the insight to set the story first, to take charge of the narrative. Part of what makes these stories¹ resonate is their common arc: how everybody is directionally correct in a prevailing mega-trend, but is off on its magnitude.

Take Situational Awareness. Leopold’s seminal paper described a future where AI is the dominant knowledge force…by 2027! Written in June of 2024, the framework presented was contrarian. Which feels weird. The AI narrative was well under way already. By publication date:

• ChatGPT had 200MM+ users

• Apple Intelligence was in full swing

• The EU had already created an AI Act

Even the layperson was familiar with AI. But Aschenbrenner’s insight was you all are drastically underestimating how important AI will be, how quickly it will propagate, and how gigantic the resources dedicated must be. And not by 10 or 20%. The mob was off by 1000x or 2000x.

Bill Gates’s 1995 Internet Tidal Wave memo established the same notion. The number of websites was growing 5x monthly. Netscape had IPO’d at a $2.3B valuation (and doubled). Nearly 10 million adults in the US alone were online. The internet was far from a phenomenon banished to obscurity.

Gates’s insight was in his fourth line of the memo:

In the next 20 years the improvement in computer power will be outpaced by the exponential improvements in communication networks.

I dare even say Gates didn’t realize how large the web would become over the next 30 years.

The growth rates are astounding, and being able to visualize a compounded rate so high over decades is impossible. Arguably, we still have a long way to go before we stop gaining speed. Maybe we are still underestimating it.

Peter Thiel² endured a blind spot as well:

Whenever a tech startup has a strong up round led by a top tier investor (Accel counts), it is generally still undervalued. The steeper the up round, the greater the undervaluation.

He passed on Facebook’s Series B. $500MM valuation, a $1B offer six months later, then a $15B valuation eighteen months after. Now to $2 trillion. Even the greats underestimated how good being right can be.

—

In 1984, Buffett explained his investment school of thought via the coin-flipping analogy in The Superinvestors of Graham-and-Doddsville.

By then, Paul Volcker’s fame had peaked and greenmail was a well-established practice. Outside of academics, rarely was there disagreement about why Buffett’s school of thought worked. But nobody took these schemes as far as Buffett had for so long. Duration was the trade. The longer you followed his philosophy, the bigger the underestimate turned out to be.

Screen nearly 9,000 13F filings for concentrated funds that held a single position for over a decade. The list doesn’t crack a hundred names. The positions that survived are no secret. Big tech and Berkshire. Names we all owned at one point or another. It was easy to agree investing was riding a great wave. Staying on it for a decade: not so much.

Or as Soros put it to his mentee who pitched an investment:

That is the most ridiculous use of money management I’ve ever heard. What you describe is an incredible one-way bet. We should have 200% of our net worth in this trade, not 100%.

Druckenmiller’s idea was precise. He just didn’t realize how right he was. He later explained how he channels his mentor, saying:

I do like it when I have extreme conviction and no one else believes it. It gives me even more conviction.

This instinct plays out in operations: not who spots the trend, but who dares to push it further than anyone else believes rational. Extraordinary companies tend to max out 1-3 variables and are OK with being mediocre at the rest.

The Replaced also knew the big factors but got it wrong. Maybe they strayed too much; other times they were just not as excessive.

Take Microsoft replacing IBM. Software was once Big Blue’s game. Yet Microsoft figured out just how extreme building and distributing software could be. 100x more radical than IBM, which enabled them to surf for a very, very long time.

Or Sears, which was replaced by Walmart. Walton was simply 100x better at scale-merchandising. Kodak, which was the technological leader in film, got creamed by Canon, which embraced digital photography. Canon just went further out on the adoption curve. Something Kodak had historically dominated.

All of these examples are fine with being passable in other areas of their business. Microsoft is not innovative. Walmart isn’t the best at ecommerce, and Canon doesn’t make the most portable cameras. But they all figured out the 1-3 variables to be immodest on, and made the rest good enough. And these variables were not new to the industry! They were just not well believed.

Riding the edge of the bubble is dangerous. Not every factor should be taken to the extreme. Not all waves will churn for decades. Billion Dollar Ideas don’t come around every quarter. The multitudes can be wise!

You also shouldn’t over-index on one specific trend. A failure mode is the world changing and your notions stagnating. Sometimes the crowd over-corrects and you should adjust enthusiasm accordingly. Don’t get stuck! Always Be Correcting assumptions.

And there may be no story at all. Maybe it was false³, overstated⁴, or plain wrong⁵ from the start.

But sometimes it holds. If your story is true, the dangerous question isn’t “what if this goes wrong?” It’s legitimate, but it crowds out the underrated one: what if this goes right? If everyone is drastically underestimating how good the upside can get, that’s not a reason to doubt yourself. It could be the whole opportunity.

Thank you to Duncan, Justin, Andrew, Chris, and Ted for reading drafts and contributing

In early 1994, Joel Greenblatt found a beautiful, straightforward setup in American Express. The company was preparing to spin off its underperforming, volatile Lehman Brothers subsidiary. Stripped of Lehman, the remaining company would own two attractive assets: its irreplaceable travel-related services and Investors Diversified Services (IDS), a financial planning network compounding earnings at 20% annually.

Greenblatt did the math: with American Express trading at $29/share and the Lehman spinoff valued around $3-5, investors were buying the new and unencumbered American Express for $24-26/share. This translated to a price-to-earnings ratio of less than ten, a massive discount compared to peers. Within a year, American Express hit $36/share, resulting in a gain of over 40% for relatively little heavy lifting¹.

This is the allure of “special situation” or “event-driven” investing. Instead of waiting years for a stock to mysteriously converge with its intrinsic value², you find a built-in corporate event, like a spinoff, that forces the market to value the company appropriately on a distinct timeline.

But what happens when you don’t just wait for the catalyst, but force it yourself? You become an activist. And in 1994, the exact same year Greenblatt made an effortless 40% on American Express, he launched his first, and last, hostile activist campaign³. The opportunity cost of activism isn’t abstract. It is exactly investments like American Express which show how expensive activism campaigns can be.

§American Defense, 1990s

The Cold War was over. Defense spending was careening downward. Procurement budgets were being slashed. Defense companies were slow to react. They had excess capacity, and had no idea what to do with it. The once growth industry was going de-growth, while still being capital intensive with thin margins.

Seeing this, Honeywell spun off Alliant Techsystems to be its own public company in 1990. Shareholders would receive 1 share of ATK for every 4 of HON. This would lead to the 17th largest independent defense contractor, with 8,300 employees, $1.1B in revenue, $54M in income, and roughly $225M in debt.

The company was bloated. They had two groups and six divisions. Far from nimble. Toby Warson, the first CEO, removed 1,600 administrative and managerial positions, took the company’s layers of management from fourteen to seven, and significantly reduced the debt load.

Everything seemed great, until 1993. Revenue dropped from $1.1B to $800M. Income went from positive $54M in 1990 to negative $80M. Perhaps they were still bloated. But the defense industry had not been set up to reach its peak during the Cold War. The Gulf War kept the company stable during the early 1990s, but at this point, it was clear the company was overprovisioned.

§Acquire to Survive

Alliant acquired their way out of this problem. In 1992, they attempted to acquire Olin Corporation’s ordnance division for $68M. Another defense contractor, this time a sole supplier of certain specialized large-caliber munitions. This was blocked by the FTC on antitrust grounds. The combined company would be the sole supplier for their market⁴.

Rebuffed by larger acquisitions, Alliant turned to smaller ones. In 1993 alone they acquired Accudyne, Kilgore, and Ferrulmatic for $100M in total. None of these arose to the level of anti-trust, but management was maligned with an appetite for acquisitions. So they went bigger.

In July 1994, Alliant announced a deal to acquire Hercules for $470M, with roughly $105M of the purchase being in stock. This would have doubled the size of the company, but critics would argue they were overpaying. And critics could buy your stock, and force a proxy contest.

§The Proxy

Management and the board were all for this deal. They would acquire one of their larger competitors, bolstering their position and operating leverage. By securing valuable manufacturing facilities, the combined company would be an indispensable asset to the DOD.

Joel Greenblatt and his team thought otherwise. They accused management of going on a debt-fueled M&A spree instead of downsizing. These sorts of transactions, handled poorly, would kill the company and permanently impair its cash flow. Instead of an acquisition, cash should be used to reduce their debt or perhaps buyback stock.

Buying other defense companies at these prices was effectively transferring the shareholder’s wealth to the sellers. The integration risk would go against all of the streamlining they’d already done. Not to mention going through the nightmare of anti-trust, again. So, holding just 2.8% of the stock, moved to replace 6 of the 9 board of directors.

§Outcome

Joel won. They got their six board seats. Joel remained as chairman before stepping down after 1 year. He and the other directors did stay on the board until 2000, retaining this particular position and investment vehicle⁵.

After the board turned over, Warson was ousted. They brought in a new management team, one who they believed were not as interested in expanding for expanding’s sake. However, the official posture of the company did not change: they still expected the deal to go through.

The new board was not too quick to dismiss the deal, now that they were inside the company. Their stance changed from “this deal should not go through” to “we should reconsider this deal” to “we should lower the price”. And lower the price, they did.

The original ink said $365M cash and 3.5M in shares. They closed at $296M in cash and 3.86M in stock. The FTC issued a final consent order in 1995, and the board added capital allocation metrics, to make sure they were focused on making the acquisition accretive to earnings.

Although Joel got what he wanted, this was not a successful investment by his standards. By the time he had stepped down as a director in 2000, the company was doing $1B in sales and $75M in net income. Suspiciously similar to the post-spinoff numbers, a decade earlier.

Greenblatt had entered the investment around $35 per share and exited near $65 per share. This worked out to a roughly 10% annual return for steering a company through a grueling, half-decade turnaround. Compare that to the quick 40% he made on American Express in under a year, and it is easy to see why Greenblatt decided to not become hostile again.

However, after leaving the board, the industry was revitalized due to the War on Terror. The stock rose from $65/share to $250/share over the next five years. Joel, I hope you held on!

We’ve failed many times. Not every problem can or should be solved with an LLM. Too expensive. Wrong problem. Improper tool. By abusing this new technology in every which way, without even knowing the Art of the Possible, we’ve run into plenty of roadblocks.

So we started a framework to use across all our companies, and teach today:

1. Create scoped problems with defined positive outcomes

2. Allow for initial 50th percentile success rates

3. Generate enough data to make compelling improvements

4. Implement a tight feedback loop

The solution will skyrocket from the 50th percentile to the 99th percentile. Cheaply, too. If done correctly. The issue is, this takes time. You can’t “one shot” a proper solution to your problem. But you can make dogged, incremental, constant progress.

Take email marketing. Let’s say you want to start a campaign for your users. Does this fit our framework?

1. Scoped problem with defined positive outcomes

Let’s create a marketing campaign for onboarding users that will raise free trial conversion from 1.25% to 2.5%.

If we don’t make our goal clear (increase the conversion rate), or perhaps become vague (are we facilitating this over sms messaging? video marketing? blogs?), we will fail at the next few steps. Have this clear target in sight, something the LLM now knows to hurtle toward. Without specificity, the entire system will come crashing down.

2. You can afford an initial 50th percentile success rate

OK so 50th percentile is pretty bad. Of course we want to do better, but let’s assume we can start on the low side. In this context, our email marketing campaign will have middling results. 5% open rate compared to your average of 25%. In other scenarios, we would kill the campaign rather quickly.

But remember, the LLM won’t have the human context you and I possess. You should plug in as much data as you can when kicking off this project. Previous campaigns, personas, anything. But, an LLM can never have all the worldly context you have about your business. From knowing your taste to what campaigns have subtly influenced you to the reason you started this company and its core mission…you can hardly convey all of this to another person efficiently. Now imagine doing that to a bunch of sand particles mixed with silicon.

So be patient! It won’t work out of the gate. In fact, expect the LLM to flounder. This is expected. We are setting a baseline. Use this as a jumping off point to start collecting data.

3. There is enough data to generate compelling improvements

This goes back to choosing the right problem.

Using an LLM for a marketing campaign like this will be useful if we have enough users signing up. This would be the wrong problem if you are adding 1-2 users a month (why are you focusing on conversions?? Increase your top of funnel!). But if you are adding 1-2 users an hour, you have enough signal to work with.

If you can’t generate compelling data directly related to your goal, LLMs are not the right fit for your problem.

4. You can implement a feedback loop

How can we take our problem, our data, and our LLM and create a self-improving system?

Figure out a way to do two things:

1. Turn the LLM’s outputs and data into inputs

2. Provide directional guidance

You want to take the marketing campaign the LLM has started building, and make it recursive. Take the collateral and the data generated, then throw it back into step 3, the data machine. Do this autonomously and as often as you can. Keep the feedback loop and data you provide scoped.

For example, let’s say the LLM comes up with a new onboarding email, which links to a Getting Started guide.

Figure out how you can tape your systems together so you can take the data from the email and put it into the LLM, asking it to interpret the data and improve the system. For example, take the following data, pipe it into your database, and trigger a daily improvement prompt:

• email content

• click rates

• responses

• user behavior and attributes

LLMs will go the right direction for the email campaign maybe 80% of the time. The other 20%? You’ll need to step in and make some tweaks. Say it will start interpreting responses as a positive signal…

If a user replies “TAKE ME OFF YOUR LIST,” a naive LLM just sees engagement. It thinks, “A response is a response! Let’s send more emails like that one.” You have to guide the model on what great looks like, and compound to there.

The perfect prompt doesn’t exist, and chasing it will only burn through your cash and patience. Accept that your first deployment is going to be mediocre. That is the whole point. Get the 50th percentile version out the door. Stop looking for a magic trick, and focus on building a self-improving engine.

Here are some more tips:

• Storing data is wildly cheap nowadays. Try to store everything.

• Make the human feedback loop ergonomic. Have a dedicated Slack channel for you to send feedback.

• Explicitly tell the LLM they are allowed to delete. They have a disposition (much like humans) to add, when in fact deletion may be the best option.

§The Emailer Problem

The legacy emailer module was one we needed to fix. To send emails in the previous version, you navigated to your user profile, selected preferences, then emailer, and then composed and sent. That’s not where email belongs. It was a silly architectural decision, but the emailer had lived there for fifteen years. Our users knew precisely where to locate it.

We moved it to a tools dropdown. Immediately, support tickets rolled in. “I used to send emails from the profile page. Where did it go?” The feature wasn’t missing. It was two clicks away in a logical home. But muscle memory kept pulling people back to the old residence, and when they arrived to an empty room, they assumed the worst: something broke, and the new owners were not taking care of the product.

This created a real support burden. No bugs. No outages. Just hundreds of users who couldn’t reconcile the interface in front of them with the one etched into their palms.

§The Diagnostic Question

Every time one of these tickets lands, I pause before responding. The question I sit with: Is this person lost because their muscle memory is steering them to a place that no longer exists? Or is our interface genuinely unclear?

If someone opened this app for the first time today, with no history and no habits, would they find this feature without help? That matters for acquisition, but it wasn’t what our current users cared about.

If a fresh user would struggle too, the design needs work. If thousands of long-time users stumble by unlearning what their fingers already know, we’re dealing with a transition cost. Real, but temporary.

Muscle memory is a latent form of usability, and we broke it.

A few weeks ago we set out to migrate the way galleries collect those fees from a legacy system to a modern one. The legacy system was running fine in the way legacy systems “run fine”. Meaning, every few weeks a customer wrote in to say their gallery’s event page advertised one fee, but artists were charged another. Someone on our team had to dig into a twenty-year-old admin panel to figure out why. Digging into a single gallery could mean an hour of work. Multiply by the hundreds of galleries we serve, and doing this every time an issue came up was unsustainable.

This piece is about how we did the migration, what AI did during it, and what AI did not. Most of what gets written about AI is written by people who have not used it for anything load-bearing. Well, we have deployed against legacy, load-bearing systems (with some success!). Here’s what actually happens:

—

§The artifact

For twenty years, our platform let art galleries paste in raw HTML for their page. Whatever they pasted became the payment button. This button would contain the fee calculation. We would help generate it, but sometimes users would want to modify the HTML and sometimes JavaScript themselves. The previous owner would sometimes create custom buttons for galleries, allowing them to deviate from the norm ($35 base fee) to the obscure ($10 base fee + $5 per art piece for your first 3 and then $10 per piece after, 2x each of those for non-members).

Right next to that textbox was another textbox where the gallery wrote prose for the artist, like ”Members $10, Non-members $45.” These two boxes had no explicit relationship to each other. The artist read the prose. The button charged according to the HTML. The gallery was in charge of verifying these two matched. There were no checkers, no validation. Just raw code. Although we had a “wizard” to generate the HTML, users were free to create their own HTML (and they did!). Justin wrote about how LLMs have affected Buttondown. We saw increasing support requests in the same vein.

This is the kind of system you build in 2010 and never quite get around to replacing. It “worked”. The gallery was responsible for what they pasted. We were responsible for what we charged. We could claim innocence when there were issues. But should we?

When there were mistakes, sure our support inbox would be flooded by artists and galleries alike. But the support-by-a-thousand emails felt facile compared to the alternative of ripping out a foundational system. Sure, it caused a brief reputational hit, but what is the value of your reputation compared to a weekend of grinding out a new payment system?

OK, we needed to make a change.

So we built the new system. Now, the application fees were stored in defined fields, and the button was generated from them. Prose and the charge amount cannot drift apart. Computing fees was easy.

But building the new system was the easy part. Now we must upgrade 282 active fee-collecting events.

—

§What was inside the textboxes

Before we could migrate anything, we had to look at what was actually in the textbox. Twenty years of paste-whatever-you-have produces a long tail of weirdness. AI made it possible to look at all 282 of them in one sitting.

A few examples:

A gallery in Hawaii had two different deposit accounts wired into the same event. The gallery’s HTML textbox routed payment to one account; a backup button they had also pasted into the prose textbox routed to a different one. Twenty artists had submitted. Depending on which button each artist clicked, the money went to one of two bank accounts. Which makes it hard to track down, provide refunds, and add fixes where we needed to! This needed to be cut down to the intended account.

A Gallery in Connecticut had pasted their entire payment button into the prose field, leaving the HTML textbox empty. The form rendered the button anyway, since browsers are forgiving. Thirty-one real artists submitted through it. The gallery’s accountant could not have told from looking at the page that anything was wrong. We needed to move their payments to the correct textbox.

A Gallery in New York had two active events with no deposit account configured at all. Broken from the moment of creation. But the gallery had eighteen prior events stored in our system. The account used in each of those past events was visible in the old HTML, and we could trace how it had migrated over time: an Earthlink (yes, I haven’t heard of this internet provider either) address used in 2018, a switch to Gmail in 2020, the same Gmail through five subsequent events. We recovered the right account from the gallery’s own history.

A Gallery in California had marked an event as “paid” in our system but configured no payment button at all. We had quietly assumed this kind of state meant the gallery was broken. It wasn’t. They were collecting fees through their own website, which had processed fees from forty-seven artists. They had simply indicated we were collecting fees, when in reality they were collecting fees. The configuration looked broken. The fee-collections were humming along just fine.

These four examples are the texture. Multiply by 282. Lots of bespoke buttons and situations, all of which needed to be collapsed into a consistent system. Talk about a big band-aid to rip. This might hurt a bit!

—

§What AI did

Harrison built a tool, call it The Analyzer, which read the HTML in each of those 282 textboxes and reported what fee it would actually charge, what PayPal account it would route to, and what kind of pricing structure it had: flat fee, dropdown of options, tiered pricing, or something custom.

For each event, The Analyzer compared what the legacy hand-pasted HTML would charge against what the modern system would charge if we migrated it. If those numbers matched within a penny, the migration was safe. No artist would see a different price. If they didn’t match, the migration was skipped, with a note explaining why. This would allow for a manual review later.

This is the kind of work AI is good at. It is repetitive. It requires careful reading of code that nobody alive understands well. It rewards patience. A junior engineer could have done it in three months if they wrote all the code. It would have been more efficient for them to burn a few days manually checking everything. AI did it in a single session.

The pattern matters. AI was not generating the migration. AI was reading twenty years of customer-supplied configuration and producing a structured decision per event: safe to flip, or skip with a reason. Every flip was reviewed by a human (me!). Every database change was previewed before it was applied. Nothing modified production directly.

By the end of the verifiable batch:

• 101 of 101 simple flat-fee events passed verification and migrated cleanly.
• 64 of 66 events with multiple price options migrated cleanly.
• 39 of 40 events with tiered pricing migrated cleanly.

Where The Analyzer flagged a mismatch, the mismatch was usually real. In one case the difference was a single character — ”Non member” versus ”Non- member”. The prices and structure were identical. The labels had drifted because somebody had once edited the event in the modern system, and the modernized label had been saved alongside the original. Trivial. But the strict matching rule caught it. Lenient matching, “the prices match, the labels are close enough”, would have flipped it silently and pushed a small drift downstream forever.

—

§What AI did not do

AI does not have judgment about what a customer actually meant. It has pattern-matching on what their data looks like. The two are often close. Sometimes they are not.

Late in the project I made a quiet decision that turned out to be wrong. There were eighty-four events in our system that had been marked “paid”, but had no payment button configured at all, no HTML in the textbox. I assumed most of these were galleries who had clicked the wrong setting. For seven of them, I reclassified the setting from “paid” to “free.”

After a brief pause, I asked: did you actually check what the gallery wrote in their prospectus? What did they say?

I checked. Every one of the seven prospectuses was empty. There was no signal at all. The gallery had clicked “paid” and walked away. I had reclassified them based on what looked like the most likely explanation, not on any actual evidence.

I reverted all seven. They went back into the “paid but unconfigured” bucket — which is what they actually are. That bucket is not a data problem. It is a real reflection of where galleries are in their own setup process. Some of them will finish later. Some of them never will. The fact that the bucket exists is information about our customers, not noise to be cleaned up.

This is the part of AI work that does not show up in the demos. The model will happily make whatever change you tell it to make. It has no sense of whether you are working from evidence or from a hunch. The discipline the human brings is: do I actually know this, or am I assuming? AI accelerates whatever discipline the human has. If the human is sloppy, AI is sloppy, but faster.

—

§What it produced

We started the session with 51 events on the modern system and 282 on the legacy hand-pasted one, about 15% on the modern path. We finished at 293 on the modern system and 39 on the legacy one, about 88%. The bump from the original number included some shows in the past, so we could be consistent. Many galleries would copy a previous show as a template for their next one. I wanted to make sure everybody was working on the modern system, even if they duplicated an old show.

Across all of it, no artist saw a different fee than they would have paid the day before. The verification rule held.

The remaining 39 are not migrations we couldn’t do. They are events where doing the migration is the wrong move, galleries running custom-built payment buttons that need translation, galleries with edge-case pricing the modern system doesn’t represent yet, past events whose original configuration is the historical record of what they charged and shouldn’t be rewritten. Each of those is a one-by-one decision. There is no batch tool for them. This took a few hours to get across the finish line.

Underneath the count is the bigger result. The class of support ticket that drove this project, gallery says one fee, button charges another, should disappear for the migrated events. The two fields can no longer drift, because there are no longer two fields.

—

§What this work says about AI

A few takeaways for anyone trying to make sense of where AI fits in a real business.

AI is good at high-volume, low-judgment reading. The 282-textbox tour was the kind of work nobody wants to do, that takes weeks if done manually, and that is mostly mechanical pattern recognition. The cost of doing it dropped by an order of magnitude. The work itself didn’t change.

AI compounds the operator’s discipline. Every safe move I made, reversible changes, human-reviewed previews, strict matching rules, one wave at a time, was a move I could have made without AI. AI made the moves cheaper to make in volume. The seven-event reversion was a move I would have had to make either way; the difference is that AI helped me make the wrong call faster.

AI does not replace the part of the job that requires knowing your business. Knowing that “paid event with no button” is a real customer state, not a data error, takes years of looking at the same kind of data. Knowing that the school in the midwest receives some of the routing emails for one program but not the others takes context AI cannot have. Knowing when to leave a twenty-year-old record alone, because it is the only audit trail of what an artist was actually charged in 2018, is a judgment call AI will make wrong by default.

The interesting work is the cleanup surfaced from the migration. Five different galleries had configured “member discount” pricing in a way the modern system does not represent correctly. The migration would have flipped them blindly. Instead, each one became a small product conversation: how should the modern system represent this pattern? That is the real engineering question. AI surfaced it. It cannot answer it.

We will keep doing work like this, using AI for the volume tour, using human discipline to decide what is safe to change, and using both to find the next product question worth answering.

Listen to his recent appearance on A Cheeky Pint.

“I’m constantly addressing the limiting factor. On the deadlines front, I generally actually try to aim for a deadline that I at least think is at the 50th percentile. So it’s not like an impossible deadline, but it’s the most aggressive deadline I can think of that could be achieved with 50% probability. Which means that it’ll be late half the time.

What can I say that’s actually helpful to people? Generally, a maniacal sense of urgency is a very big deal. You want to have an aggressive schedule and you want to figure out what the limiting factor is at any point in time and help the team address that limiting factor.”

After reading the excellent Musk biographies¹, this modus is not surprising. But the podcast is the best articulation of this ever-present idea: An engineer estimates a project will take a month. Musk demands it in a week. If the engineer pushes back, Musk cuts the timeline to three days.

Why engineer this level of stress?

§The Gas Law of Productivity

Work behaves like a gas. Time allotted will match time allocated. This is also known as Parkinson’s Law: work expands to fill the time available.

Give a team one week to complete a task, and it takes a week. Give them two days, and they often deliver with the same quality. You force people to strip away the polish nobody asked for. The meetings which should have been emails, the dashboards which are destined to collect dust. The team will move faster because they lack the time to stall.

Musk explained his framework on the podcast:

There is a law of gas expansion that applies to schedules. If you said we’re going to do something in five years, which to me is like infinity time, it will expand to fill the available schedule and it’ll take five years.

Physics will limit how fast you can do certain things. So scaling up manufacturing, there’s a rate at which you can move the atoms and scale manufacturing. That’s why you can’t instantly make a million units a year of something. You’ve got to design the manufacturing line. You’ve got to bring it up. You’ve got to ride the S-curve of production.

Think about time allocation this way: given physical constraints and perfect efficiency, what is the minimum wall-clock time needed to complete this task? It’s way shorter than the initial estimates would suggest. What is the rest of the space for? Figure out what the floor is, anchor to it. Solve the bottleneck which is stopping you from achieving the perfect timing.

§The Math of Missing Deadlines

Aiming for a 50% failure rate sounds demoralizing. Half your projects will miss the mark. But look at the math.

If you set a brutal deadline and hit it half the time, you still lap the competition. Even your failures move faster than their successes. Competitors plan for a month. You plan for a week. You miss the mark. You finish in two. Still a good result.

§Micro-Deadlines: Applying the 50% Rule

I try to scale this concept down to daily work via timeboxing.

Instead of working on a bug until it is fixed, I box it. I allocate a maximum of two hours. It prevents lingering. I do this for most tasks. When timeboxed, this is the one thing I will focus on. And I can’t step away until the timer is done.

But we can push this further.

Instead of setting a comfortable two-hour timer, you set the timer for 30 minutes. Build a schedule with a 50% probability of success. If you miss the mark, you still learned more about the problem and the blocker. Take that data into the next box and repeat. The next time you are ready to tackle this bug, refresh your memory on what you have already researched. Then start trying a new approach, and a new approach, and a new approach until the problem is solved.

More often than not, the answer was a reluctant “yes”.

Support Weeks draw us away from the team for an entire cycle. The context switching is brutal, making it impossible to create room for deep work. Delving into the inbox is useful when first closing an acquisition. But there are diminishing returns. At this point, it was a “code red” problem.

We’d already tried the obvious moves. Justin helped us implement better systems and tools for support. We shut our inbox down on weekends. Expanded our documentation. Tweaked the application to address common issues. These changes were all positive. But, the requests became incrementally more difficult (good! We solved a lot of low-hanging fruit.) and increased as a function of the underlying growth our companies were experiencing (it could be worse!). Powering through support still cost our Partners multiple hours every day. Even trivial requests were taking longer than expected. Not to mention the implicit costs of having open loops and mental fatigue caused by the ordeal. Not good!

§Why off-the-shelf bots failed

We looked into AI support bots like Finn from Intercom and HelpScout’s bots. But out-of-the-box solutions have three fatal flaws:

1. They only read documentation. They can reset a password, but they fail at complex queries. If it wasn’t in the documentation, good luck! The bots would make up an answer, confusing both the user and human reviewer who inevitably picked up the pieces.
2. Users hated them. Even I have trauma from other site’s chatbots, running around in circles and never giving truthful answers. Trying to straighten out a billing error becomes a feat parallel to hacking your way to ticket escalation so a human would review it.
3. They lacked context. They didn’t know who they were talking to, what the user was doing, where they were in the process. Bots would start from 0 every time. Sometimes it could guesstimate at the user given the initial query. But this wasn’t consistent. And the user’s information was rarely used to help solve the underlying problem.

Having an obstacle and getting trapped in an auto-responder turns support into a wrestling match. If an artist has a billing issue, the bot spits out a generic, irrelevant article. It sucked! Users stomped away. Tickets which required my attention tanked summarily with customer satisfaction scores. This was a complete and utter dead-end.

§What we built instead

We knew AI could work if we removed those false constraints. So, we built our own: JustinBot (named after a famous film, book, and software blogger, you should read his stuff).

JustinBot evaluates a request in two steps before responding. First, it reads the message. Next, it chooses between two paths:

Path 1: The Documentation Route If the bot is over 90% confident that an article answers the query, it sends the link. This handles about 15% of cases. Most commercial bots stop here, leaving the other 85% of users frustrated. This capability was on par with the off-the-shelf solutions we were familiar with. But this was not the goal. If all which was achieved was being “on par”, this would be a colossal waste of time. Which brings us to Path 2, where the real benefits were.

Path 2: The Context Route For the remaining issues, JustinBot builds a user profile. It reviews everything we know about the user to provide a hyper-specific, contextual answer. Say the artist has a payment issue. The bot will do the following:

1. Check the artist’s recent applications
2. View the current payment configuration
3. Run through a variety of common scenarios
4. Identify the one which matches closest to the original message
5. Configure a response

The same logic covers most other tickets — account setup, settings, our custom modules. I’ve tried to give it as much context as possible: the account’s history, error logs, and the language we use in support responses. The goal is to replicate what a real support agent would have on hand before they reply. And because we are using AI, we are able to collect and process this information at 100x the speed while 5% of the cost.

Responses would include as much information as the user could possibly want. It would incorporate what we knew about them, to let the user know we weren’t guessing. If possible, a helpdoc was linked to. With this, users were now getting contextual, helpful, and speedy responses. Our support team was able to step back big time.

§A human reads every reply

Steve Jobs used to run Wednesday Marketing and Advertising meetings, where their top agencies and marketing directors would present what was slated to be released, and when. For a period of time, every billboard, commercial, and piece of collateral was approved by Steve himself. Apple’s image was so important, it could not be delegated.

Our customer support is equally important, for us. No matter how good JustinBot gets, I don’t want to give it full autonomy to respond to our users. Instead, it sets up drafts for our support team to review and send. This lets us catch obvious errors (which then get fixed), tweak language, and double-check that everything is running smoothly.

The idea of artificial intelligence working for us while I sit back and relax in the Florida Keys is not reality. I want to be supervising. Making sure we’re heading in the right direction, course-correcting, building incremental improvements into the existing system. And I can’t delegate reviewing others’ work too much.

So: a human stays in the loop. Able to press the red button if necessary. Able to suggest improvements. Able to adjust the system where necessary. It means we move a tad slower, but with confidence. We catch problems earlier, and spot what’s working sooner. The trade-off is worth making, especially when our reputation is on the line.

§The payoff

JustinBot now handles ~80% of Tier 1 requests. It answers simple questions instantly, saving us from the context switching, investigation, writing responses. And on the requests it can’t answer, the reasoning it produces points us at the right thread to pull. If the bot has already checked the settings and the payment is still failing, we know to look elsewhere.

By feeding JustinBot the full context of a user’s account, we get something that acts like a human agent, without the human cost.

This always rubbed me the wrong way. It felt like an inefficient detour to a simple goal. Ultimately, there are much more effective ways to break into this industry.

§Getting involved is about surrounding yourself with the trade

Really pursue it. Become enveloped in the world you aspire to. This doesn’t stop at reciting headlines or subscribing to a Substack or two. Instead, this includes devouring what you can get your hands on. Producing proof of work. And talking to practitioners. Don’t worry about playing the usual routine to show you are indeed trying. Become so acclimated with the industry, you naturally assimilate into it.

Of my peers, those who picked their spots and became involved have had the quickest and most prolific kickoff after seizing their diploma. Some went to prestigious and storied firms. Others went into weird areas of the markets. But all came out of school prepared and well adjusted for the world they were walking into. It’s the difference between studying for an exam the morning of, and preparing for years beforehand. And in a competitive environment with so few spots for too many students, being able to be a natural extension of the industry becomes a formidable edge.

Get in there any way you can. Being involved is not about reading dusty textbooks alone. Surround yourself with the craft. Absorb foundational texts. Build a small tool for yourself. And then a few more. Reach out to practitioners and ask real questions (ones which only they can answer!). Wrap yourself in the world you plan to spend decades in, learn all there is to learn, and then go to class. This constant attention and deliberate thinking will produce two by-products over a long enough timeline:

1. You will have surpassed your rivals.
2. You will have stumbled into an original idea.

If you still need convincing, consider this: nobody is interested in hearing you parrot Matt Levine’s memetics. We know you can read. We know you took the ten minutes to query “most interesting finance blogs”. I want something new. Show you have sharpened your own thinking and arrived at a perspective worth hearing. This doesn’t mean you shouldn’t read Matt’s superb writing. Nor is this an excuse to refuse the influence offered by those smarter than you or I. The aim is to be so involved, you start to form your own opinions.

Everybody is helpful in this new mission of yours! Even if they are wrong (many such cases), as you will surely be wrong in time (ask me how I know!), take this as an opportunity to learn. These are undermonetized learning opportunities. Don’t let them go to waste! Why were they wrong? What was the right point of view? What is their underlying worldview? Becoming curious and earnest with these questions will open up plenty of doors. And it becomes benign to show you have “done the work”. A fleeting conversation with you will showcase the notions and process you have started to develop.

§My approach during my undergraduate years varied between reading, writing, and learning from others

Early in my freshman year, I stumbled across the wonderful Bloomberg markets room. It was filled with Bloomberg terminals, rarely hosted classes, and was seldom locked. The business school, on the other hand, started to have strict hours during Covid. A side effect of being involved is when you want to get in somewhere, and people notice how into the world and how persistent you are, metaphorical and physical doors will appear ajar. It was there, where I was able to start getting involved in a big way.

Producing stock pitches, keeping up with the daily news, and being about one-hundred-and-nineteen steps from the library full of the finest reference texts any finance student could get their hands on. And I wasn’t the only one! Every day, there were a few peers bumming around in this room. Previously, my finance experience consisted of dissecting books and watching annual meetings alone. But talking with other students in real-time—debating and getting excited about different ideas—accelerated my learning.

Being able to intelligently disagree. Or to hold an even stronger opinion. Perhaps to make a bold prediction and observe how reality unfolds…this is what it is about. We were able to gain new understandings of the world. Wrestling with hard questions. Without a clear answer and no “professional” supervision. Being surrounded by a cabal and taking in information, processing it, and outputting it is the best way to be involved! We would look over the same companies, break out, and then come back together to compare our views.

Lectures became boring. The answers came like molasses. And certainly contained no stakes. Projects became nuisances. Presentations were futile. The goal was to complete them quick enough so we could get back to our Bloomberg machines. We were able to move past the simulacra of the classroom. Now, when it came to recruiting, we were ready! We could speak to ideas we had worked on, why some had failed, what we would have done differently. If somebody knew a field we had an interest in, conversations could become even more exciting. Perhaps it led to interrogation-territory, a few times.

Which brings me to the final reason to become involved. It’s fun! Perhaps you wish to optimize for starting salary, or prestige. Even if you have to go through the droll and drag of all the other exercises which come from the university undergraduate careers firing squad, you should enjoy getting involved. Being able to dive deep into the industry, there will be plenty of niches which may ignite your curiosity. But nobody will find them for you. Perhaps new people to meet and new ways of looking at the world. So even if you want to become the best recruit coming out of campus, or you wish to just find the first person who will hire you, Get Involved!

§The Upside

Dominant platforms pipe demand directly to category leaders. You spend zero dollars on marketing. You can certainly pour capital into customer acquisition to accelerate growth. However, the platform’s native gravity provides a baseline momentum that independent software struggles to replicate.

Consider our Chrome application. We own the category. Chrome expands its user base steadily every year. That ecosystem growth automatically becomes our growth. We skip the marketing campaigns entirely. The platform acts as our permanent sales engine.

Platform dependency drastically reduces churn. Users invest hours configuring Zendesk or Shopify. They embed your tool into that foundation. Extracting your software requires tearing out their established workflows. You represent a microscopic fraction of their total operating cost. Consequently, your retention anchors to the platform’s retention rate, which almost always outperforms standalone metrics. As the math dictates: churn murders software.

Platforms actively want your success. Shopify algorithms promote top-tier apps. Apple supplies developers with crucial visibility tools. A robust plugin ecosystem solidifies the platform’s moat. By wielding your engineering resources, Salesforce avoids hiring internal developers to maintain niche features. When you lead a category, the platform disproportionately routes new ecosystem capital your way.

§The Downside

Platforms will issue compliance mandates. Most requests are routine. Some look like demolition orders.

Chrome forced the migration from Manifest V2 to Manifest V3. Google wanted to suffocate ad blockers to protect their core advertising revenue. Their structural migration forced us to rebuild our extension from the foundation up. Justin spent his entire holiday executing a massive, load-bearing rewrite. Rebuilding a mature, complex asset simply to appease a landlord’s policy shift is an atrocious waste of engineering capital. You lack leverage. You comply. You survive.

We dominate our Zendesk category. Our position is fortified, but our churn heavily correlates with users abandoning Zendesk itself. They cancel the platform. We get caught in the blast radius. Exit surveys consistently reveal regret. Users loved our tool but lost the foundation it lived on. You cannot fix this. If the platform stagnates, your revenue stagnates. A shrinking ecosystem eventually crushes your independent growth efforts.

You can hedge this risk by abstracting your architecture to serve multiple platforms. Fomo.com executed this flawlessly. They originated as Notify.app, a Shopify plugin leveraging social proof. After the acquisition, Ryan’s team retooled the engine to bridge multiple ecosystems. They now power over 100 integrations. If you acquire or forge platform apps, cross-pollination is your ultimate defense. Transitioning your core asset across diverse ecosystems yields the ultimate prize. You become independent software.

§The Nightmare Scenario

The fatal strike: the platform clones your feature and evicts you.

We have not experienced this. History shows it remains rare. Platforms prefer outsourcing the heavy lifting to third-party developers. They value the developer ecosystem and avoid burning profitable bridges. You absorb their development costs while enriching their marketplace. They lack the incentive to execute you. They might compete. They rarely evict.

The glaring exception is violating the Terms of Service. Renegade WhatsApp tools operate in the gray zone, then act shocked when Meta aggressively cleans house. If you operate within the blueprints, the threat matrix remains low.

When platforms do deploy a native alternative, their solution is predictably sterile. They build broad features for the median user. You forge specialized tools for power users. Their launch frequently educates the broader market, driving uninitiated users toward your category. If your craftsmanship remains superior, you survive the initial tremor and capture the newly expanded market.

§Growth Hits a Ceiling

The ultimate constraint is hitting the ceiling.

Securing 80% of a platform’s addressable market chains your trajectory entirely to the platform. Ecosystem expansion hits a hard stop. Every incremental percentage point of your growth requires the platform to expand first.

The breakout maneuver requires moving off-platform. This requires heavy lifting. You must construct independent acquisition channels, engineer standalone billing infrastructure, and battle in the open market. Yet, unlocking a massive new addressable market justifies the labor. This is especially true when your existing users already traverse multiple ecosystems and demonstrate a willingness to buy standalone tools.

We plan to deploy more capital into this strategy, despite the structural risks. You are introducing new dependencies. You risk starting from zero. We currently rank this lower on our priority matrix. But, when loyal users consistently request your tool on their new ecosystems, you must listen to the market.

§Our Approach

Platform assets currently generate roughly one-third of our revenue. We intend to compress that exposure down to 20%. Platform tools provide stable, high-margin cash flow. They demand drastically less maintenance, marketing, and sales overhead than independent software. However, the systemic dependencies are severe, and compliance taxes compound over time.

Will we continue acquiring platform apps? Yes. But with stricter parameters.

We purchase platform assets at a steep discount to their standalone cash flow valuations. The omnipresent risk of demolition justifies that haircut. We hunt for these specific traits:

• Fully constructed applications, not half-finished projects.
• Familiar, proven platforms we already trust.
• Assets protected by deep structural moats.
• Category leaders firmly welded into user workflows.

We acquire them. We reinforce their architecture. We methodically bridge them off-platform.

These are fantastic assets to yield. Just do not let them become your foundation.

Henry Ford was only half-right about a faster horse. Ditto with Steve Jobs and dictating to users.

Customers are the undisputed experts on their pain. They point to their wounds. But lack the vocabulary to articulate a robust solution. They do not know our internal thoughts, technical constraints, or skill sets. Customers aren’t wrong. They are mistaken about what an elegant solution looks like.

Programming with large language models has increased our implementation speed tenfold. But this speed birthed a new problem: Literalism.

§The High Cost of “Ghost Work”

Shipping exactly what a customer asks for is the sin of Literalism. A customer requests “Feature XYZ.” We hobble together a solution in thirty minutes. This is what productivity feels like.

In reality, we generated “ghost work.” These features ignore our core goals. Create brittle code. Bloat the user interface.

Take a recent sin of mine. An art gallery wished to require artists submit their address. The “fast,” AI-assisted blunder took 30 minutes end-to-end. I wrote code which created a conditional requirement for artists to add their full address for only this specific call.

It was a graceless implementation:

• Bolted-on: I moved before I thought.
• Jagged: I broke the logic of our design system.
• Dead weight: I forced a new code path to monitor.

§Interrogating Pain

We must interrogate feature requests. “Why do you want this? What task are you attempting to accomplish?”

Listening is difficult. Especially so when a customer is in pain, their project launches tomorrow, and they want a fix today. Pain is disorienting. A user knows they hurt, cannot explain the anatomy of the friction.

This is where “taste” comes in. Speed gives us more time to develop opinions.

Wait. Look. Sit still. Ingest the data. Feel friction alongside the user. Taste requires deep attention to the underlying context.

Contrast this with dumping context into an LLM and expecting the Magic Sandbox to fix everything.

Great implementations treat features and bugs as symptoms of a single gap. Take multiple messy requests and build one elegant solution. Solve the present issues, and prevent the future ones. In my gallery example, the elegant solution wasn’t a “required toggle.” It was Custom Questions. I built a system for custom fields. It solved the user’s immediate crisis and fixed five future problems I haven’t even thought of yet.

We must build what our users actually need. Stop reacting to every request. Buy yourself time. Develop taste. Think.

So I stopped trying to see everyone separately. I started assembling groups instead.

§The Experiment

I texted a handful of people a simple pitch: “I’m getting a few people together for bagels when I’m in town. Would you be down to join?” Six total committed. We grabbed bagels, walked to Central Park, sat along some stone walls, then wandered further to one of the ponds. Three hours passed without anyone checking the time. The feedback afterward was unanimous — everybody had a good time.

This is the model I plan to repeat. There should be two modes for seeing people on the road:

• One-on-one mode is reserved for first meetings or conversations demanding undivided attention.
• Group mode handles everything else.

§1. Six Is the Number

Six people, yourself included. More than that and the gathering becomes unwieldy — voices compete, seating gets complicated, side conversations fracture. Six is large enough that everyone can meet everyone else, but small enough that nobody gets lost. If you do not click with three of the five, there are still two others to fall back on. When walking, pairs form naturally. Everyone finds a conversational partner without effort.

§2. Curate the Mix

Think hard about who you invite and why. A table of six people from the same school studying the same discipline produces a narrow, predictable conversation. Variety is the whole point. Different perspectives, career stages, and interests. For reference, our group had two women and four men, three people in finance, two in technology, and one in law. Knowing each person’s personality, and how those personalities might compliment, mattered more than anything else for meshing well.

§3. Change the Scenery

We moved through four locations in three hours: the bagel shop, a stretch of sidewalk, the stone walls in Central Park, then the pond further in. Each change of setting reshuffled the group. Walking naturally rotates who you talk to. Sitting back down gives you a new neighbor. The conversation reinvents itself every thirty minutes without anyone orchestrating it. Static gatherings stagnate. Movement keeps the energy alive. Don’t let changing the scenery be a distraction, though.

§4. Show Up Late

This one was an accident. I told everyone to meet at nine. I arrived at ten past. By the time I walked up, the group had already introduced themselves and fallen into conversation. They skipped the awkward phase — the stilted silence where everyone waits for the host to broker introductions. Because I was not there to serve as the social hub, they built their own connections from the start.

I would not recommend being rude about it. But if there were a way to replicate that dynamic on purpose — removing yourself as the bottleneck so the group bonds without a mediator — that changes the entire texture of the gathering.

§Logistics

Invite fifteen people. Expect a third to show. Give them forty-eight hours of notice. Enough to plan, not enough to overthink. Pick a central, low-friction location. Morning works best; it sets the tone for the rest of the day and avoids the scheduling collisions that stack up by afternoon.

Do not be prescriptive. Do not send an itinerary. Just say: “Meet at this bagel place at nine. A couple other people will be there.” Let the gathering take on a life of its own.

§The Semantics of Prioritization: A Manifesto of the Infinite Timeline

We operate on an infinite canvas of potential tasks. At Third South, I wake up every morning to a thousand things I could do. But part of my role is to filter those thousand possibilities down to the few worth doing.

For a long time, I used a specific shorthand to protect our focus. When a non-critical technical project came across my desk, migrating a tiny business to our own servers, or marginally smoothing out an AI workflow, I dismissed it as a ”shiny object.”

I was wrong. And that specific choice of words was a failure on my side.

—

§The “Shiny Object” Slur

“Shiny Object Syndrome” is the ultimate insult. It implies a lack of discipline, a wandering eye, and a preference for novelty over value. By labeling legitimate work as a “shiny object,” I was using a conversational trump card to shut down discussion.

It felt efficient. In reality, it was demoralizing.

When you tell a team member their idea is just a “toy,” you aren’t just saying “not now.” You are insulting their professional judgment. You are telling them that their intuition for what makes a business better is fundamentally broken.

The truth is, there is a massive semantic chasm between a distraction and a low-priority investment.

—

§The Infinite Canvas vs. The Finite Clock

We have to distinguish between the nature of the work and the timing of the execution.

• A Shiny Object is a task that serves no real purpose. It is purely aesthetic, purely novel, or purely ego-driven. Even given infinite time and resources, we would never do it because it adds zero value to the customer. It is a hallucination of progress. This would be like finding or creating a new tool to record customer videos. We already really like the tools we have, and there is no business or customer reason to change it. We kill these.

• A Low-Priority Investment is something we should do…eventually. That VPS migration? It would save money. It would increase speed. It is a valid engineering improvement and a clear customer upgrade. If we had an infinite timeline, we’d do it.

But, we aren’t on an infinite timeline. We have bigger fish to fry, and that migration might be #101 on a list of 100.

One confusing bit is Shiny Objects are often the result of “the grass is always greener” syndrome. It’s chasing something which might seem like a low-priority investment, but after some scrutiny it is surfaced due to boredom. And another tricky bit is this: Shiny Objects become ever the moreso when using them to evade actual work! By not attacking the limiting factor, and instead focusing on this cool thing in the corner, you can feel more productive than you really are.

—

§The New Litmus Test

I am retiring the “shiny object” label for legitimate work. It’s too blunt an instrument for a surgical job. Moving forward, I am changing the language of our prioritization. My framework will be:

”Given an infinite timeline, would we do this?”

• If the answer is No: It’s a distraction. Bury it.
• If the answer is Yes: We acknowledge it as a “Valid Investment.”

And then, we ruthlessly decide if it’s more important than the five things pushing the business forward.

By shifting the language from “Your idea is a toy” to “Your idea is valid, but the clock won’t allow it today,” we preserve our initiative while maintaining our focus. We stop insulting the judgment of the people building Third South, and we start having honest conversations about the math of our time.

Most artists we interact with don’t think of themselves as call-seekers on our platform. They think of themselves as artists who submit to their gallery. This doesn’t mean they are averse to finding more calls. They just haven’t thought of EntryThingy as a destination to apply to calls. Getting them to apply anywhere else, even if they want to, requires someone to put the right show in front of them at the right time. There aren’t a lot of tools out there that do that proactively. So we built one.

—

§TikTok’s Algorithm Doesn’t Work (For Us!)

The first thing you have to understand about building this is that we are not TikTok or Netflix. We don’t have near-infinite inventory. Art shows expire: galleries accept applications for a window, then close. We can’t recommend the show that closed last month. The inventory is also split between internal calls we run on the platform and external calls we scrape in. Both have deadlines. Both disappear.

What that means is that TikTok physics just don’t apply here. TikTok works because it has billions of videos and enough implicit behavioral signals (scroll depth, view time, shares, replays) to train a model that knows more about you than you know about yourself. We have a way for artists to bookmark a call. We have emails when they have questions. We have applications. That’s it. There’s not enough inventory to have statistically significant implicit signals. The whole approach has to be different.

For explicit signals, there is also not enough data on an artist-by-artist basis. When they apply to a single show, we can’t make too many leaps to figure out the next show. The data isn’t there!

Also- the mediums artists participate in can create more of a gap compared to a TikTok or movie presence. I may not love certain types of comedy, but I can certainly be recommended them. I may even watch! But artists won’t participate in shows which don’t match their medium. For example, if you are a photographer, you won’t consider a show based on ceramics.

Justin suggested 80/20ing our algorithm: location and medium.

Show artists calls that are in their area and match what they make. We had plenty of data to get started. —

—

§Location: Harder Than It Looks, But Not That Hard

There are two ways to figure out where an artist is.

You can ask. This is the easiest by far. We ask at signup, and any time we surface the algorithm, we make it clear that artists can edit their location settings. Self-selection is the most accurate signal we have. It’s our preferred method.

You can infer. By looking at the calls an artist has applied to historically, you can make a pretty good guess. If someone has applied to ten shows in Texas, we’ll say they’re from Texas. This turned out to be extraordinarily useful, because many artists who signed up years ago never provided state information. We needed a way to say: if you’ve applied to a lot of shows in one area, we’ll assume that’s your area. Artists can change this at any time.

Colin had the brilliant idea of going a level deeper and focusing on major cities. Location gets messy when you infer it, because some states are enormous. “California” is doing a lot of work. If you’re from Los Angeles, you’re probably not applying to calls in Northern California. In fact, because Los Angeles has so many calls, you’re almost certainly applying to things around LA specifically. So we mapped out major metropolitan areas and used the Haversine formula to calculate proximity: within 50 miles of a major city center gets you matched to that metro. This was a significant signal improvement.

We also allow multiple states. This sounds a little weird at first, but less so once you think about border cities. An artist on the Nevada-Arizona border might want shows from both states. Many artists are willing to drive a couple hours if it’s the right show. We give them the option to say so.

§The First Version Was a Disaster

Before any of this, we tried US regions. Northeast, Southeast, Southwest, etc. Fewer buckets, simpler logic, faster to ship. Seemed reasonable.

An artist from Florida started getting shown a call in Virginia. Both were “South.”

We reversed it within two days. The lesson was obvious in retrospect: artists think about location at the state and city level, not the regional level. I grew up in Rhode Island. The chances of me driving to Vermont for an art show are essentially zero, even though we’re technically in the same region. Our first attempt was too broad. Our second was too brittle. Our third was just right.

—

§Medium: This Is Where It Gets Complicated

Medium is harder than location. A lot harder.

Photography is obvious. Painting is obvious. But what about someone who does painting on ceramics: are they a painter or a ceramicist? What about mixed media artists who work across five categories? What counts as mixed media? There is so much here…the longer tail of mediums stretches around the corner, and artists are often hard to pin down. We offer 37 distinct medium options across the system so people can specify what their medium really is, and even that’s not always enough.

For artists who signed up without providing medium information, we backfilled using three layers:

1. Past applications. If they entered a category that mapped to one of ours (painting), we called them a painter.
2. Their own descriptions. If “watercolor” showed up multiple times across their artist statements, we used that.
3. The calls they applied to. If we couldn’t get anything from the artist directly, we looked at what the organizer described the call as. Applied to three photography shows? We’ll assume photographer until you tell us otherwise.

This is far from perfect. Artists can work in multiple mediums simultaneously. Someone’s practice might shift between the time they signed up and now. So we also send follow-up emails: “We think you’re a ceramicist in Washington. Is that right?” It creates another feedback loop where people can correct us.

Notice that this is a little unfair to online-only galleries. If you’re an online gallery, you don’t have a location, so you’re automatically starting from behind. We recognize that. But the data is clear: artists care deeply about physical locations. They want to see their work shown somewhere. So that’s the decision we made.

§The Vocabulary Problem Nobody Warned Us About

Here’s something we didn’t fully appreciate until we were deep in the data: there are effectively seven separate medium vocabularies in our system. Artists pick from 37 distinct artist-side mediums. Our extraction for call metadata outputs 26 call medium categories. We have synonym mappings trying to bridge the two. And there are dead ends on both sides: four artist mediums (Installation, Metalwork, Performance, Video) normalize to “Other” internally and can never produce a match. Several call mediums are effectively unreachable because no artist selection maps to them.

Netflix has a taxonomy team of 30 people whose entire job is maintaining genre tags. We had competing vocabularies that grew organically over years. It’s a real problem we’re still working through.

§“All Mediums Accepted” Doesn’t Count

One philosophical decision worth calling out: a call that says “all mediums welcome” is not a medium match. It goes into the general tier.

This was deliberate. If a call accepts everything, medium overlap tells you nothing about fit. “Perfect match” has to mean something. Popularity is not the same as relevance, and we didn’t want every ceramicist getting recommended a call just because the organizer checked every box.

§The Bigger Problem: Most Calls Have No Medium At All

Here’s the uncomfortable number: 85.4% of our active calls have no medium requirement specified whatsoever. That means for the vast majority of what’s in our inventory, the medium matching rule simply can’t fire. The algorithm falls back entirely to location.

This isn’t a scoring problem. It’s a data quality problem, and we’re working on it, both by improving how we collect medium info from galleries and by using AI extraction to infer it from call descriptions. But it’s worth being honest about: the medium layer of this algorithm is working with 15% of our active inventory right now.

§The Results

Between location and medium, we’re able to profile about 92% of our opted-in artists. There’s an 8% subsection who have a medium we couldn’t figure out, or who chose not to provide state information (mostly legacy users). About 99% had either a location or a medium. Not bad as a starting point.

—

§The Rules Engine

§V1: If/Then

The first version of the matching logic was pure if/then. If you’re in the same state, and if your medium overlaps, show the call. We built the MVP in about a day. It worked well enough to validate the concept.

The problem with if/then is that it doesn’t scale gracefully. Once you add a third condition, the nesting becomes hard to reason about. Once you add a fourth (city-level logic, medium specificity, deadline urgency, internal vs. external ranking) it collapses. The logic becomes a bug waiting to happen.

§V2: Points

We moved to a rules-based engine where each criterion fires independently and contributes to a total score:

| Rule | Points | When It Fires | |——|———|—————| | City Proximity | 10 | Within 50 miles of the artist’s metro | | State Match | 9 | Call is in one of the artist’s priority states | | Medium Match | 7 | At least one medium overlaps | | Deadline Urgency | 5 | Closing within 7 days |

Score thresholds:

• 16+ = “Great match” (state and medium both fire)
• 9+ = “Good match” (state alone)
• 5+ = “Match”

One critical design decision: the Deadline Urgency rule only fires if another rule already fired. A call that scores zero on location and medium cannot be boosted into your feed just because it closes soon. Urgency amplifies a match. It doesn’t manufacture one.

When two calls score equally, internal calls rank above scraped external ones. I’ll be honest about why: we control the application experience for internal calls, we earn revenue from them, and we get analytics that help us improve the algorithm. It’s a business decision embedded in the algorithm. I think it’s the right call, but I’d rather be transparent about it than pretend it’s purely algorithmic.

The big benefit of a rules engine is that it’s easy to extend. Want to add a rule for call type: museum vs. for-profit gallery vs. nonprofit? One new rule, clean implementation, no nested spaghetti. That extensibility has already paid off multiple times.

—

§Presentation and Transparency as a Feature

We surface recommendations in two places: a weekly email and the artist dashboard. Right now only a few thousand artists are opted into the weekly email, a number that’s grown steadily as more artists discover the feature and turn it on.

Along with the recommendations themselves, we show the reason for each one. “You match because you’re near Chicago.” “You match because you work in ceramics.” This is a feature, not a footnote. There are two reasons we do it.

One, we believe in transparency as a philosophy. People genuinely like seeing behind the curtain. When you let someone understand why you’re doing something, they trust it more.

Two, and more practically, it creates a feedback loop. If someone sees “You match because you’re near Chicago” and they actually live in Baltimore, they’ll tell us. Or they’ll go update their settings. Either way, the data gets better. Without the visible reasoning, we’d never find out we were wrong.

§The Identical Email Problem

Early on, we had no memory. The algorithm was deterministic: same inputs, same sorted output, same email every week. We discovered that roughly 90% of recipients would have gotten the exact same email on the second send as the first. The top recommended call was being sent to 75 different artists in a single send.

Harrison built a suppression system. We log every recommendation we make. If we’ve shown you the same call twice and you haven’t clicked or applied, we stop showing it. We assume you saw it and passed.

We also restructured the email into two sections: “Your top matches” (new calls, up to four) and “Still on your radar” (calls you’ve seen before but haven’t acted on). The algorithm now has memory.

§Avoiding Call Promotion

Some of our competitors take a similar route as us. Emailing artists about shows they should apply to. The biggest differentiator we have: we don’t do paid promotions. All of our competitors only do email blasts when they are paid to do so. Galleries may get a quick boost in how many applicants they get, that is for sure. But when we talk to galleries who pay for this, their universally say it’s almost never worth it. They either get applicants who are not a good fit, or they pay and get mixed in with other calls.

We are choosing to decline all payment attempts. Artists will see the calls that are the best for them.

—

§What We Discovered About Our Artists

While building this, we did a full behavioral segmentation of the artist base. What we found changed how we think about the algorithm’s job.

Among artists who have opted into recommendations:

| Segment | % | Behavior | |———|—|———-| | One-and-done | 41% | 1 entry, 1 gallery, stopped | | Never submitted | 18% | Opted in, never applied | | Captive Loyalist | 16% | Multiple entries, all to 1 gallery | | Narrow Explorer | 11% | 2-5 entries, 2 galleries | | Regular | 8% | 6-15 entries | | Active Discoverer | 5% | 2-5 entries, 3+ galleries | | Power | 1% | 16+ entries |

And zooming out to the full platform: of every artist who has ever submitted to anything on EntryThingy, 94.6% have only ever submitted to one gallery. Among the small slice who submitted more than once to that same gallery (our Captive Loyalists), the most prolific went 38 times, all to the same gallery.

These artists were recruited by that gallery (through a postcard, an email, word of mouth) and they never looked anywhere else. They don’t think of themselves as call-seekers. The algorithm’s job isn’t to find them a better medium+location match. It’s to introduce them to their second gallery.

That’s a harder problem than we initially thought, and it probably requires different messaging, not just better scoring. We saw evidence of this in the first send data. Captive Loyalists had a 71% open rate (they’re reading the email) but only a 15% click rate, the lowest of any segment. They’re reading it and moving on.

Overall numbers were strong: 76% open rate, 20% click rate. Exceptional for email. But the Captive Loyalist behavior is the signal that tells us we haven’t fully solved the problem yet.

—

§The Real Metric Is Submissions, Not Clicks

Opens and clicks are vanity metrics. The actual question is: did the artist apply to a show they found through our recommendation?

We track this with a 30-day attribution window. If someone clicks a recommended call and submits within 30 days, we count that as a conversion. Even 5 or 10 of those in a month is proof the flywheel is working. That’s 5 to 10 artists who found a show through us that they wouldn’t have found any other way. That’s the whole point of this.

We don’t have a lot of experimentation infrastructure. Every change is a decision doc, ship it, watch what happens. For a team our size, that’s the right call: we don’t have enough volume to reach statistical significance quickly on small variants. What we do have is directional signal, and directional signal is enough to keep improving.

—

§What’s Next

We have 99 gallery pairs in our data with three or more shared submitters (artists who showed at Gallery X also applied to Gallery Y). That’s a latent social graph we haven’t fully used yet.

The current algorithm says: “Here’s a call near you that accepts painting.” Our hypothesis is that the Captive Loyalist segment doesn’t need a better filter: they need social proof. The framing that might actually move them is: “Artists who show at your gallery also applied to this.” That’s a copy change, not an algorithm change. We’re going to test it.

There are also things we deliberately didn’t build:

• Fee filtering. Looked at the data. 95% of active artists mix free and paid-entry calls. Non-issue.
• Social signals like “other artists are applying to this.” Might add it eventually. For now it risks creating a popularity loop where we surface the same big calls over and over, which defeats the purpose.
• A/B testing infrastructure. For a team our size, it’s not worth the overhead. Ship and watch.

What we are adding: more rules based on what artists actually ask for. Call type, gallery reputation, more granular medium matching. The rules engine makes this easy: you don’t have to touch anything that’s already working.

The bigger data quality push is on the call side. 85.4% of active calls have no medium tag. Until we fix that, medium matching is a feature that only works for 1 in 7 calls. That’s the constraint that limits everything else.

—

§Artists Are Winning

Most of our artists are one-gallery artists. If we can move even a fraction of them to two or three galleries, everyone wins. Artists get more chances to show their work. Galleries get more applicants. We make more money: our revenue is transaction-based, so more submissions is more success.

The most meaningful feedback we’ve gotten has come through my email signature. Every recommendation email goes out signed by me, Myles. Artists reply. They say: “Thank you for sending me this show. I wouldn’t have found out about it any other way.”

We don’t have something perfect. We have something honest, extensible, and grounded in what artists actually care about: shows that are right for where they live and what they make. The vocabulary problem is real and still unsolved. The call coverage gap (85.4% with no medium tag) is the most pressing constraint on the algorithm improving. The Captive Loyalist segment is still mostly passing. The social proof hypothesis is unproven.

But the foundation works. And 164,266 artists can now receive recommendations through their dashboard and email that are, at minimum, better than nothing.

There is too much noise right now about which SaaS companies AI will disrupt. We have inherited, tested, and cut dozens of vendors. We have messy credit card statements filled with legacy applications, developer tools, and infrastructure costs. I went through every single line item, from the sub-$5 utilities to the massive cloud bills. Who will survive 2026?

When you look at the survivors, a pattern emerges. We aren’t replacing Expert Infrastructure (AWS, Postmark) or Expert Judgment (Lawyers, Accountants). They are safe.

We are killing middleware.

Middleware companies exist to make technical chores, setting up a server, scraping a page, monitoring uptime, slightly easier. They sell an “easy button.” But AI has made those hard things trivial enough that the premium no longer makes sense. In 2026, we are paying for assets, not wrappers:

—

§1. AI Replaceables

These tools are the walking dead to me. AI has lowered our barrier to entry so significantly that paying a subscription is now a tax on laziness. We can build internal versions more suited for us using pennies.

• Heroku: The biggest casualty. Heroku has been shaky, and PaaS fees are a bleed. In the past, managing a VPS was a headache. Now, we build our own solutions while leaning on AI to handle the configuration. Between the cost, the instability, and the likely shutdown, this decision was easy. We are migrating off. There is no reason for us to stay, and other PaaS have issues. Not to mention that with Heroku and some of these other companies that we’re moving off of, the only thing we really need to pick up from them is the config. And with LLMs and AI, it’s much easier to reproduce the config and have it be almost exactly the same, especially since all of these companies have good documentation. Their main offering is just configuration.
• Render & Vercel: Same story as Heroku. Great for initial prototyping a year ago, but as we scale, we are moving these workloads to our own bare-metal/VPS setup. It is not worth paying the markup when we can migrate an entire company in a single workday. For future prototyping, we will create a script with AI to get us set up.
• Framer: We used to pay Framer to build sites visually. We have replaced this with AI coding tools. Our developers can “visualize” and build websites so quickly now that the drag-and-drop abstraction is no longer a value-add. It is a limitation. Our frontend needs have evolved, and we are done with the guardrails of no-code.
• Yamm: We replaced this mail merge tool with AI agents. We still outsource the underlying mail servers, but the scripting and sending is cheaper, faster, and more customizable when we handle it ourselves.
• Better Stack, Binary Canary, & OnlineOrNot: We have specific preferences for on-call rotations. Instead of fighting a vendor’s feature set, we will build a simple internal uptime monitor and ping us. AI makes writing these utility scripts trivial. We prefer a custom solution that integrates directly with our workflow. These are all good tools on their own- but for what we want, we need something different.
• Ngrok: Replaced with a custom solution using Cloudflare tunnels. It is easy to implement, and we are already deep in the Cloudflare ecosystem. Using AI for this felt like a breeze. Cloudflare’s docs are OK, but they are well known enough to where it was easy to implement this.
• Hevo Data, Hex, & Mantle: We had a “modern data stack” that felt over-engineered. We are bringing data ingestion in-house. We used AI to pseudo-build the connections in preparation for these platforms; now we are just going to flesh them out and save the money. We learned a lot while building the connections here. So doing this will be extending what we already have documented. Mantle might be the most difficult to churn off of, simply because it connects to Shopify’s API which uses GraphQL, and GraphQL is annoying to replace. More on this
• Metabase: They are pushing features we don’t need. We prefer building lightweight, custom internal reporting tools. So we will. Especially when we bring data in-house. Visualization is already pretty easy to do. The main reason we liked Metabase is that it was easily connected to all of our other disparate data sources and made cross-visualization easier. We know the few things that we need to measure and getting fancy matters less to us now. We just don’t need to think about it as much.

—

§2. Death’s Doorstep

These vendors are effectively dead to us. The service has degraded, they are over-engineered, or they simply annoy us. We are just waiting for the contract to expire or the migration script to finish.

• GitHub: We are actively looking to leave. The platform has become unstable. We might spin up a self-hosted solution, but our spend here is dropping to zero. GitHub Actions is the only thing keeping us, and in 2026, there is a 40%+ chance an action will misfire. If we can get past our distaste for Docker, we will build our own solution rather than migrating to a competitor. Really, the biggest thing for us is that GitHub is the best place for us to host our Git and use Git appropriately. Git has been around for a long time, and there are a lot of good things about it, but there are also a lot of terrible things about it. Looking at large files and blobs, GitHub is specifically really bad at now, and they’ve gotten worse. I’ve been seeing some Git competitors pop up over the past few years, and even another one that came out today. I think we are likely, if we find a really good Git alternative, it will just become a no-brainer.
• Acquire.com: We used to source deals here, but the quality has tanked. We are returning to relationship-based sourcing. We continue to use AI to curate our deal flow, and so far it is significantly better than wading through the noise on Acquire. The amount of noise from a couple of years ago is staggering. Sellers didn’t want to listen to appropriate prices, dragged out the process, and had no one helping them figure out what made the most sense. The worst are tire kickers who don’t actually want to sell their companies. These are tough to deal with. The noise doesn’t make sense compared to what we could do: be more targeted with businesses, be more targeted with brokers, and continue having deal flow whenever people come to us to talk about selling—even if they’re not selling to us. Helping people is always better. It doesn’t make sense for us to be on Acquire. Building our own tools is much better.
• Notion: Ripped out entirely. We don’t use it. The search feature was always poor. With AI, we can search our own raw docs much faster.
• Fathom & Plausible Analytics: Removed. We moved everything to Seline Analytics and are happy there. By the nature of our company, having all our analytics is one place and then feeding them into our custom-reporting is so much easier than having to pull in analytics from a dozen sources.
• Cursor: We experimented with this AI IDE. The composer model is really good, and we like it a lot. We still use Cursor. But in a year, will it still be the best IDE? We are far from married to Cursor…
• Firecrawl: We use this to scrape websites into JSON. It works great today, but scraping is core to our business. In 24 months, we will have built our own internal, AI-driven scraping infrastructure. This is a ticking clock. Only because it is core, though.

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§3. Cruft

Digital debris. Legacy accounts, forgotten subscriptions, and one-time purchases that clutter the P&L. We aren’t replacing these with AI. We are straight cancelling.

• Linode (Akamai): Ripped out. No longer needed.
• Cloudinary: Legacy bloat. Cancelling and moving assets to AWS S3.
• IDrive: Legacy backup tool. Replacing with efficient, automated scripts.
• Intruder.io: I honestly don’t remember why we pay for this. Cancelled.
• Gumroad: One time cost.
• DNSimple: Consolidating domains to Cloudflare/AWS. No longer needed.
• BaseDash: Used briefly for visualization, but unnecessary.
• Tuple: No one on the team uses it.
• Accelerator Keys: A one-time purchase we aren’t renewing.
• Clearout: Used for a one-off email validation. We got the data; we’re done.
• GoDaddy & Namecheap: Consolidating where possible, though some domains remain.

*Note: Colin said “I didn’t even know that we had this cruft”. Bloat bloat bloat, all of which will be deleted.

—

§4. Unshakeable Cores

The bedrock. The AI revolution has zero impact on these because they sell commodities, not convenience. They are too cheap, too reliable, or too fundamental to replace.

• AWS: AI can write code, but it isn’t a physical server farm. S3, EC2, and CloudFront are incredibly inexpensive for what you get. We migrated one of our businesses off of EC2 and to Heroku last year. This was the right move in the moment, but knowing what I know now, we would have kept the box we have.
• Cloudflare: They run our DNS and edge. They are excellent. We keep them.
• PlanetScale: We love them. We have several databases here and no intention of moving. Great team, as well.
• Postmark & Buttondown: Email is deceptively hard. Buttondown is core to our workflows, and Postmark handles transactional deliverability. We have no interest in rebuilding email infrastructure. Let them do it and we will ride their co-tails.
• Linear: It’s good at what it does. We use it every day. Extensible enough to where we will think about replacing as we scale in five years, but we are happy with Linear today.
• Slack: We aren’t building a chat app. It stays.
• Sentry: Essential for error tracking. No reason to remove this. I am not a fan of some of their AI-based features and moves to telemetry, but they are good at error tracking and we find them useful.
• 1Password: Essential for security. Could build something, but just not worth it.
• Google Workspace & Microsoft: We need email and docs. We aren’t fighting this battle.
• QuickBooks: It’s accounting. It works. We aren’t disrupting tax compliance to save a few bucks.
• OpenPhone/Qua: Works well for our VoIP needs and 2FA.
• Zendesk: One of our businesses runs entirely on this. We can’t rip it out.
• Help Scout: It’s okay. We are building our own add-ons rather than upgrading, but keeping the core service. Similar to Linear in this regard.
• Snazzy Docs: A legacy deal makes this insanely cheap. Not worth the migration effort.
• Shopify, Squarespace, Wix: Necessary for specific business lines.
• Mercury: It’s our bank. We are considering switching due to service issues, but obviously, we can’t replace a bank with AI.

—

§5. Irreplaceable Experts

High-judgment partners. We use AI to assist them, but we won’t use AI to replace them.

• Legal Team: We are not replacing lawyers with AI. For high-stakes strategy and legal help, we need experts. However, for mechanical work (small contract tweaks), it doesn’t make sense for us to pay the hourly rate anymore.
• Tax Team: Compliance is not a place for “move fast and break things.” We keep our advisors and pay government fees as normal.
• Contractors: We still use humans where AI isn’t ready or where a personal touch is required. That human element is vital across several of our businesses. Our current roster is great, and we’re sticking with them. To us, all of these contractors fall in the expert category, and that is the only type of contractor we will continue to hire. For example, Karen has been in the art industry longer than I have been alive and has many irreplaceable connections. The same goes for Kristine. She is one of the best people we could have hired for social media. The same applies to Denisa. Although she is not an artist, I believe AI-generated articles will not match human-generated ones. She is a strong writer who puts in effort, knows what to write, conducts thorough research, and is excellent at expanding on topics we want to discuss. While she is not an expert in any of our businesses, she is an expert in writing, which is what we value.

“China is run by engineers; the U.S. is run by lawyers.” It’s a dense, unwieldy sentence. It feels true. And in 2025, it spread like wildfire. But Dan Wang’s Breakneck didn’t invent this theory…it re-packaged a narrative circulating for over a century.

In Beantown, a friend in wealth management pitched this exact theory to me. His bosses were using it to frame their investment strategy and how they thought about the East. However, two surprises for me:

• He didn’t know where the idea came from.
• His bosses seemed to pass this theory off as their own

Rather than pretend Dan Wang’s viral “Breakneck” is a serious academic, political, or anthropologic examination of China, I wanted to figure out the intellectual bedrock and lineage of this portable, pithy phrasing. And why this idea, popularized in the Roaring Twenties, was so compelling to readers a century later:

Two takeaways I had from this chart:

1. These ideas are decades old. Veblen (1920s) and Vogel (1980s) used this exact “Producer vs. Parasite” framing to critique the U.S. against rivals like Japan. The meme keeps being repurposed, swapping the rival nation but keeping the anxieties.

2. The players are watching each other. Dan Wang influences the Progress Studies movement; they influence him back. And there are many examples of this if you look into any time period and their contemporaries. It is a closed loop of validation.

Wang’s book was a major success, in part, because he solved a credibility problem. The “Progress Studies” community (Cowen, Collison, Thiel, et al) had the theory, that the U.S. has forgotten how to build, but lacked the “boots on the ground” authority to prove it. Wang provided the empirical evidence. His Chinese heritage, fluency, and lived experience gave him the “license” to speak. Educated in the West but living in the East for some time, he effectively translated complex Chinese industrial reality into a simplified narrative.

Yes, nuance was sacrificed. The “Engineer vs. Lawyer” binary ignores that China is increasingly run by security ideologues (shoutout to the Cosmos Club), not just pragmatic builders. Many Chinese don’t even realize that Xi was a Chemical Engineer at one point. But truthiness matters more than truth. The meme works because it offers a clear, actionable diagnostic for American frustration. Breakneck serves less as a window into Beijing and more as a mirror for San Francisco.

It’s not the bad ideas that do you in — it’s the good ideas. If a thing is bad idea, it’s hard to overdo it. But where there is a good idea with a core of essential and important truth, you can’t ignore it. And, then, it’s so easy to overdo it. So the good ideas are a wonderful way to suffer terribly if you overdo them

Charlie Munger on Ben Graham and good ideas

EntryThingy looks simple on its face. We help artists find shows; we help galleries manage juries. But under the surface, the infinite canvas of possibilities feels paralyzing. We could build e-commerce capabilities, run gallery websites, or generate marketing collateral for sculptors.

Our resources are finite. We have chosen to be bootstrapped, so capacity constraints dictate our decisions. Choice burdens us.

§The Algorithm

How do you choose between Red and Blue when both would work? How do you stare at the abyss of potential and not fall in?

I use a loop. It is not original…Bezos has preached versions of it…but this framework keeps me sane:

1. Experiment until you find what works.
2. Double down on the idea.
3. Kill the rest.
4. Repeat steps 2–3 until it stops working.
5. Return to step 1 when necessary.

Doubling down on what works is obviious. Less obvious is to keep doubling down long after you get bored.

§The Ceiling is Higher Than You Think

Most businesses are mediocre at a thousand things. The great ones take two or three factors and ride them to the extreme.

Costco identified two variables: limited SKUs and break-even pricing. They have been doubling down on those two variables for fifty years. Mediocre store aesthetics. Middling convenience. But they are rich because they ignored the rest of the canvas to paint one specific corner and perfect it.

At EntryThingy, one corner is notifications.

An artist signs up, applies to one show, and vanishes. We experimented to change this. Email beat every fancy new feature we tried.

So, instead of building a Shopify competitor (an “Infinite Canvas” if I ever heard of one), we are building a better notification engine. We are sending more emails. We are sending smarter emails. We are reminding artists about the contest they looked at three days ago but didn’t finish.

We have only begun to explore email. We will keep swinging at this specific ball until we hit a ceiling. My bet is the ceiling is miles above us. The key here is we should keep doubling down as many times as we can. Success stems from an underlying truth about your users. Find that truth. Don’t slow down just because you feel you’ve done enough. That is a fallacy.

In the oft-played game Battleship, if you get a “hit”, you know to double down. Keep shooting around the hit marker until you sink the ship. The difference is, in Battleship, the sizes of the ships are pre-determined and rather small. The aircraft carrier stretches a mere five spaces.

In entreprenuership, size of a ship goes further than we could ever fathom. You can just keep shooting and shooting and shooting and it would take multiple lifetimes to sink your Battleship.

§Capacity Limitations

The hardest choice in business is balancing the urge to double down with the need to experiment. Google manages this with “twenty-percent time”, a system that protects the capacity to find the next hit without distracting from the current one.

American Express illustrates the danger of getting this balance wrong. In the 1850s, Amex was a financial juggernaut. But they refused to follow the Gold Rush. While the “Wild West” exploded with potential, the Amex board doubled down on their “industrial east” corridor. They were too cautious to experiment with a new geography. Their founder headed west to start Wells Fargo.

By refusing to paint a new corner of the canvas, Amex handed a future empire to their competition. That caution was a trillion-dollar mistake.

Doubling down is the goal, but never spend one-hundred percent of your resources. Leave room to explore the edges. If you don’t experiment, you might perfect one corner of the canvas while the rest of the world moves to a different sheet

§Intelligent Borrowing

Once you know what to double down on (for us, notifications), you still have to decide how to do it.

Borrow from those smarter than you.

We don’t need to re-invent email. A/B testing on the best time to send the email is repeating work others have done. Somebody else, with a billion dollars and a thousand experiments already run, has already done this. If a competitor has an effective notification flow, study it. Ask: Does this fit my strategy? If yes, borrow it.

This buys me time to focus on the one thing I can’t borrow: the specific value we create for our users. The canvas might be infinite, but we need to paint one corner to perfection.

I caveat all of this by saying- the most rewarding of these books tend to be the one I revisit. Quantity is not quality, but I needed a place to put this list!

Here are all the books from your list, organized by the specific nature of your curiosity.

§Table of Contents

• The Mechanics of Winning, Domination & Retaining Control
• Serial Success: “How do they keep doing it?”
• Investing, Finance, & Market Mechanics
• Avoiding Disaster, Failure, & Bubbles
• Secrets, Hidden History & “Inside Baseball”
• Building, Engineering, & Tech History
• Dynasties, Families & Long-Term Power
• Personal Optimization: Mindset, Focus, & Skill
• History, Rulers, & Empires
• Business Biographies & Corporate Origins
• Philosophy, Culture, & The Human Condition
• Classic Thought, Literature & Arts

—

§The Mechanics of Winning, Domination & Retaining Control

• Against the Odds: An Autobiography by James Dyson – how did Dyson retain so much control and be capital efficient? How did he learn to experiment?
• Cattle King – how did he dominate an industry that was around forever?
• Limping on Water – why did Capital Cities win?
• One Win and Nine Losses – why is this one of the only new Japanese brands that became international?
• The Fastest Tortoise – how do you come into a new industry and dominate?
• American Icon: Alan Mulally and the Fight to Save Ford Motor Company – one of the only auto companies who never went broke
• Who Says Elephants Can’t Dance? – a true corporate turnaround with a colossal
• Michele Ferrero – how did he retain control for so long?
• Leonardo Del Vecchio – why did they dominate this field—despite there being competition that had consolidated for hundreds of years?
• Juan March – spanned a wide range of industries and political offices… I wonder how he did it
• Hidden Champions of the Twenty-First Century – how can you build a medium-size company and still have outstanding metrics without taking on a bunch of financing?
• Strategy by B.H. Liddell Hart – fighting without the upper hand
• Xiaomi’s Entrepreneurship – why did they win the market? So much competition and they didn’t seem to have a lot of connections
• The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger – creating a new technology in an old market and dominating. Also questions about why this was not invented before!
• I Love Capitalism! – how did he do it?
• The Reckoning by David Halberstam – Ford vs. Nissan and the prequel to American Icon — why did American auto decline while Japanese makers ascended?

§Serial Success: “How do they keep doing it?”

• Howard Jonas books – how does he keep doing it in industry after industry?
• Richard Branson books – how does he keep doing it in industry after industry?
• Wayne Huizenga books – how does he keep doing it in industry after industry?
• Peter Munk – one of the guys who can repeat success
• Capital Account by Edward Chancellor – read all his books, but why did he not blow up?
• Andrew Carnegie by David Nasaw – he didn’t work as much as he could have—why did he still outpace everybody else?

§Investing, Finance, & Market Mechanics

• A Zebra in Lion Country – what is the inside baseball of investing in Africa?
• Market Wizards – who are some of the best investors I have not heard of?
• Against the Gods – how has risk-taking evolved over time? What is the best way to take risk?
• Fortune’s Formula – position sizing is important yet underdiscussed
• The Alpha Masters – how do they think about position sizing?
• The Kelly Capital Growth Investment Criterion: Theory and Practice – the most popular betting criteria, and why sometimes it’s not ideal
• Masterclass with Super-Investors – who are the leading investors from India, and how does their market change things?
• Benjamin Graham on Investing – what else did he say that I don’t know about?
• Special Situations Investing by Brian J. Stark – how can I improve my special situations pattern matching?
• Big Deal: The Battle for Control of America’s Leading Corporations – what can I learn about mergers and what is always true vs. temporarily true?
• Deal Feelings – what is it like to have your company acquired? How can I be more empathetic?
• Nothing Down: How to Buy Real Estate with Little or No Money Down – unique financing strategies in a finance-heavy industry
• When Money Was in Fashion: Henry Goldman, Goldman Sachs, and the Founding of Wall Street – how did they incentivize their people and make sure they didn’t take hefty losses?
• The Zurich Axioms – how do the best bankers in the world do it?
• The Match King – inside ball on Swedish investing
• Money Masters of Our Time by John Train – more on Buffett
• The Way It Was: An Oral History of Finance 1967-1987 – what was it like to invest through that stretch, in the words of the people who lived it?
• The Deals of Warren Buffett – what can we learn about the control ones that he had a hand in?
• Financier: The Biography of André Meyer – can I see why this led to the Washington Post?
• What It Takes by Stephen Schwarzman – what is the origin of the asset management industry?
• M&A Titans – The Pioneers Who Shaped Wall Street’s Mergers and Acquisitions Industry
• Den of Thieves – why do people do stupid things like inside trade?
• The Rise of Carry – are we in decaying growth?
• Venture Deals by Brad Feld – what are the actual mechanics of venture capital deals?
• The Creature From Jekyll Island by G. Edward Griffin – the real history behind the Federal Reserve
• the protestant ethic and the Spirit of capitalism- a classic, apparently

§Avoiding Disaster, Failure, & Bubbles

• All the Rave: The Rise and Fall of Shawn Fanning’s Napster – could this failure have been avoided? What is the cultural significance?
• Philipp Brothers: The Rise and Fall of a Trading Giant – why did this fail?
• Power Failure: The Inside Story of the Collapse of Enron – one of the corporate blunders in my lifetime
• Towers of Debt – why did they fall? How come they didn’t protect themselves well enough from debt?
• When Money Dies – are we in parallel with our inflation? What is different?
• Boo Hoo: A Dot.com Story from Concept to Catastrophe – what was it really like in the dot-com bubble?
• Ubiquity by Mark Buchanan – how can I see and protect myself against catastrophes?
• Risk Game: Self Portrait of an Entrepreneur – why did he not blow up?
• Trimming the Fat by Robert J. Crutchfield – how can you deal with turmoil in a leaning organization?
• From Dawn to Decadence – how empires fall
• The Last Eunuch of China – what was the fall of the Chinese empire like?
• The Campaigns of Napoleon – what were his failures and why did he fail? How often did he overextend?
• The Bugatti Story – why did they not outcompete Ferrari?
• The Best and the Brightest by David Halberstam – how the smartest people in the room collectively got Vietnam catastrophically wrong — decision-making failure at the top

§Secrets, Hidden History & “Inside Baseball”

• Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future – Elon didn’t want this to come out. One of the great companies of our time
• Storeulv: An Autobiography – ruthless businessman who didn’t want this to be published
• Howard: The Amazing Mr. Hughes – why did Hughes not want this published?
• The World Is What It Is – why did he not want this published?
• The Diary of a Forty-Niner – why did they destroy nearly all the copies?
• Secret History by Procopius – what secrets did he tell?
• Records of the Grand Historian – what was the historical Chinese empire like from inside the court?
• Out of the Desert: My Journey From Nomadic Bedouin to the Heart of Global Oil – what do the insides of this regime look like, and how close are their ties to money?
• Martini Wonderland – what was Sidney Frank really like and why did he succeed after shooting himself in the foot hundreds of times?
• The ITT Wars: An Insider’s View of Hostile Takeovers – what were the early days of hostile takeovers like?
• Santa Monica Letters to Partners – what is some pattern recognition I can gain?
• Boone – what is different than my perception about him?
• Who Is Michael Ovitz? – how does Ovitz view himself compared to what I know?
• Psychology of Intelligence Analysis by Richards J. Heuer Jr. – how does the CIA think about cognitive biases and analytical thinking?
• Inside the Aquarium by Viktor Suvorov – what was it really like inside Soviet military intelligence?

§Building, Engineering, & Tech History

• Showstopper! The Breakneck Race to Create Windows NT – what learnings can we get from growing fast + new system + trying not to break things
• The Machine That Changed the World – lean production—can we use this in the software sense?
• How to Build a Car by Adrian Newey – what are the seemingly minor or inconsequential decisions that had to be made to accommodate supercars?
• Exactly: How Precision Engineers Created the Modern World – what is precision engineering and how does it work?
• Designing Visual Interfaces – how can I learn to be a better designer?
• The Making of Prince of Persia – early software development
• The Soul of a New Machine – important bit of computing history
• IBM’s Early Computers – how did IBM transition from tabulating machines to dominating early computing?
• Computer Associates’ Drive Wins Respect But Few Friends – what did they do and why?
• In the Company of Giants – what was mid-stage computing like as an industry, and what patterns emerge? Which of these companies died? And why?
• GEISCO to Test NEC’s First High-End CPU in U.S. – early computing history
• The Inevitable by Kevin Kelly – technological forces that will change everything over the next decades
• The Timeless Way of Building – how can you plan for grandeur yet disaster avoidance?
• Shoe Dog – bootstrapped success
• You Don’t Know Jack… or Jerry – how did their company evolve at different growth stages?
• The Operator: David Geffen Builds, Buys, and Sells the New Hollywood – what is entertainment like to invest in?
• The Barry Diller Story – why did he go into financing rather than anything else in entertainment? Why is entertainment a good business?
• How to Start and Run a Commercial Art Gallery by Edward Winkleman – the actual business mechanics of running a gallery
• What Tech Calls Thinking by Adrian Daub – where do Silicon Valley’s big ideas actually come from?
• Elements of Clojure by Zachary Tellman – how do you write software that stays comprehensible as it grows?

§Dynasties, Families & Long-Term Power

• The Davis Dynasty – how was the investing prowess able to be passed on generation after generation and be repeatable?
• The Warburgs – how did they keep everything in the family for so long?
• Partners in Banking (Brown Brothers Harriman) – how did they last so long?
• Kochland – how did the Koch brothers rise so quickly? How did they work together as family without blowing up?
• The Marmon Group – why did Marmon do so well, and how did the brothers work together?
• Nature’s Metropolis - how can we make cities and institutions last longer?
• Porsche: Cars Make Money – how did family dynamics affect the outcome of this company?
• The Last Tycoons: The Secret History of Lazard Frères & Co. – why did they last so long?
• Wallenberg: The Family That Shaped Sweden’s Economy – Swedish barons
• Morgenthau: Power, Privilege, and the Rise of an American Dynasty – dynasty of power brokers
• The Patriarch – founder of a political dynasty
• House of Morgan – an American banking dynasty
• The World We Have Lost – how were family relations in the medieval period?
• The Powers That Be by David Halberstam – CBS, Time, the LA Times, and the Washington Post as media dynasties — pairs with the Capital Cities thread and André Meyer’s role at the Post

§Personal Optimization: Mindset, Focus, & Skill

• Feeling Good by David Burns – some mind-bending tricks to be happy
• Learned Optimism – removing pity and helplessness from my system
• How to Stubbornly Refuse to Make Yourself Miserable about Anything – how can I have a better attitude?
• The Power of Focusing – how can I improve my ability to focus?
• Learn Faster, Perform Better – how to practice to make perfect
• Thinking in Systems – problem solving
• Get the Truth – how can I better interrogate and ask questions?
• Negotiation Genius – apparently one of the only good negotiation books
• Impro: Improvisation and the Theatre – how can I be better on my feet?
• The Education of a Bodybuilder – how can a bodybuilder maximize their time, WHILE having to do things like naturally rest? What can I take from this?
• Why Marriages Succeed or Fail – what are some common pitfalls I would expect myself to fall into?
• Range by David Epstein – how can a generalist do very well when we know specialization is a master key?
• The Pocket Oracle and Art of Prudence – what am I doing wrong, in terms of being polite?
• Mastering the Core Teachings of the Buddha by Daniel Ingram – a pragmatic, no-nonsense guide to meditation and awakening
• The Mind Illuminated by Culadasa – a systematic, stage-by-stage map for meditation practice
• Several Short Sentences About Writing by Verlyn Klinkenborg – how can I sharpen my writing?

§History, Rulers, & Empires

• Caesar: Life of a Colossus – it’s Caesar, I want to know everything
• The Twelve Caesars – the ones who didn’t get assassinated, why?
• Einhard: The Life of Charlemagne – what else can we learn from and about Charlemagne?
• Napoleon: A Life – one of the greatest generals ever, started at a young age
• The Mind of Napoleon – how did Napoleon write? How did he improve over time?
• How China works - why did china rise and what are it’s implications for today?
• Crassus: The First Tycoon – Rome’s richest man
• Endurance by Alfred Lansing – why did men go with him?
• A Time for Reflection – which institutions did he favor the most?
• Spanning the Century: The Life of W. Averell Harriman – what was his life like in politics compared to finance?
• Botswana History – they rose up out of poverty and should have stayed in there forever. Yet they persisted. How?
• City of Gold: Dubai and the Dream of Capitalism – why did Dubai turn to capitalism? Are they a bit more hybrid now?
• Riches Among the Ruins – what was Russia like post-Soviet fall?
• Mémoires of the Duc de Saint-Simon – what was early court life like in France?
• Mémoires of Cardinal de Retz – what was it like to have power struggles back then?
• The Journal of Jean Héroard – what is it like to be raised as a young king?
• Andrew Roberts Biographies – lots of political biographies here
• Democracy in America and Two Early Essays – how does this relate to French philosophy at the time?
• The Southern Backcountry During the American Revolution – is this what I would expect? Is the culture the same?
• Nuts and Bolts of the Past: A History of American Technology, 1776-1860 – early American history
• Heart of Europe: A History of the Holy Roman Empire – of course
• Medieval Technology and Social Change – name something cooler, and I’m wondering what parallels there are to today
• The Map That Changed the World – our geography has determined a lot of what has happened in the preceding centuries, and understanding its origins may explain a lot
• Mémoires d’Outre-Tombe by Chateaubriand – what was it like to live through the French Revolution and Napoleonic era?
• Napoleon: A Concise Biography by David A. Bell – a different lens on Napoleon
• The Autobiography of Charles Darwin – the mind behind natural selection, in his own words
• The Martyrdom of Man by Winwood Reade – a sweeping secular history of civilization—what patterns hold across all of it?

§Business Biographies & Corporate Origins

• John D.: The Founding Father of the Rockefellers – the most revealing bio of him yet
• Henry Villard and the Northern Pacific – why did he not die and his railroad live on unlike others?
• Memoirs of Henry Villard, Journalist and Financier – how did he run his companies?
• Villard: The Life and Times of an American Titan
• The Life and Work of Sir William Van Horne by Walter Vaughan – how did he build the Canadian Pacific Railway against impossible odds?
• Junk to Gold – why do they remain in power today?
• The Predators’ Ball – classic story
• Barbarians at the Gate – I heard it was a classic
• Storming the Magic Kingdom – how did Rainwater bring this together?
• Dark Genius of Wall Street – absolute hated robber baron
• Tiny Rowland: A Rebel Tycoon – The Observer owner
• When Money Is King – how did he do it?
• Kidman: The Forgotten King – a fantastic Australian entrepreneur
• George Soros: A Life in Full – fascinating character
• Net Worth: John Risley – I don’t know his story well enough
• Den Fujita: The Japanese Who Changed the World – what were the tensions with riding the McDonald’s wave?
• Men and Rubber: The Story of Business by Harvey S. Firestone – why did he do the franchise model?
• Neckermann – one of the original mail-order businesses
• The Richest Man Who Ever Lived: The Life and Times of Jacob Fugger – spanned multiple industries and made money in all of them, in a period where keeping your money was difficult to do
• The Merchant of Prato – one of the original holding companies
• Distant Force – how did Teledyne create value on the operating level?
• Dream Big (Sonho Grande): How the Brazilian Trio behind 3G Capital - Jorge Paulo Lemann, Marcel Telles and Beto Sicupira Acquired Anheuser-Busch, Burger King and Heinz
• Chapters In My Life by Frederick Taylor Gates – Rockefeller’s chief adviser—what was it like to operate at that level?
• Extracts from the Diary and Correspondence of the Late Amos Lawrence edited by William R. Lawrence – what did a 19th-century Boston merchant’s private reckoning with wealth and duty look like?

§Philosophy, Culture, & The Human Condition

• Adventures of a Bystander – what makes people curious?
• Man and His Symbols
• Phenomenology of Perception – how do we perceive?
• Trauma: A Genealogy – how trauma passes and manifests itself in people
• Why Should White Guys Have All the Fun? – what were the troubles a Black man had coming up in the business?
• The Theory of the Leisure Class – a social theory which may align with my philosophy
• Radical Markets – what does it look like if we bring parts of our system to the extreme?
• Post-Capitalist Desire – where does desire come from?
• Girard’s seminal books (Violence and the Sacred, Things Hidden Since the Foundation of the World, Deceit, Desire, and the Novel) – the source of the mimetic theory behind Wanting- worth going straight to the origin
• Simulacra and Simulation – what is real?
• The Art of Logic in an Illogical World
• Dialectic of Enlightenment – does this philosophy hold today?
• Against the Grain: A Deep History of the Earliest States – why did the corporation happen?
• Made in the USA by Vaclav Smil – is it a good thing American manufacturing is dying? What can we learn from this?
• The Rise and Fall of Alexandria – was Alexandria as important as we believe?
• The Right Stuff – the second NASA peak
• The Fugger Newsletters – how has writing evolved?
• Metaphors We Live By by George Lakoff & Mark Johnson – how do metaphors shape the way we think and perceive?
• Perfect Brilliant Stillness by David Carse – a radical perspective on non-duality and the nature of self
• The End of Your World by Adyashanti – how do you tell a genuine awakening from spiritual bypassing?
• Nihilism by Seraphim Rose – an Orthodox Christian diagnosis of the modern condition
• Hallucinations by Oliver Sacks – what can altered perception teach us about how the mind works?

§Classic Thought, Literature & Arts

• Meditations by Marcus Aurelius – classical Stoic work
• On the Shortness of Life by Seneca – classical Stoic work
• Confessions by Augustine of Hippo – classical Christian work
• City of God by Augustine of Hippo – classical Christian work
• Autobiography of a Yogi – what did Steve Jobs get from this?
• Bonifacius: An Essay to Do Good – Ben Franklin’s inspiration
• Michel de Montaigne – one of the first essayists
• Posthumous Memoirs of Brás Cubas – a masterclass in narrative
• Posthumous Memoirs of Brás Cubas – why posthumous?
• Brideshead Revisited
• The Razor’s Edge – trying to find meaning post the Great War
• The Myth of Sisyphus – absurdism
• Brunelleschi’s Dome – one of the greatest true patrons of arts
• The Lives of the Most Excellent Painters, Sculptors, and Architects – I want to learn more about art history
• The Art Dealers by Laura de Coppet
• Landscape with Figures: A History of Art Dealing in the United States
• Duveen: A Life in Art
• The Girl with the Gallery: Edith Gregor Halpert and the Making of the Modern Art Market
• Julian Levy: Portrait of an Art Gallery
• Leo and His Circle: The Life of Leo Castelli
• Marina Abramović: The Artist Is Present – an emotional exhibition
• The Autobiography of Benvenuto Cellini – what insights into life did he have?
• Subtle is the Lord: The Science and the Life of Albert Einstein – I know little about his life
• The Supper of the Lamb – what does Justin see in this book?
• Becoming C. S. Lewis – fantastic writer, I want to know more
• C. S. Lewis: A Life – fantastic writer, I want to know more
• The Stranger by Albert Camus – the companion to The Myth of Sisyphus—absurdism in fiction
• The Secret Teachings of All Ages by Manly P. Hall – an encyclopedic tour of ancient wisdom traditions
• Principia Mathematica by Isaac Newton – the foundation of modern physics—what was his actual reasoning?
• Reflections by Simone Weil – spiritual and philosophical meditations from one of the great mystic thinkers
• The Mystery of Providence by John Flavel – classic Puritan theology on divine sovereignty
• KLF: The Manual by Bill Drummond & Jimmy Cauty – a gonzo guide to the music industry’s hidden mechanics
• The Spectrum of Ecstasy
• Shock Amazement / Roaring Silence
• The Mahabharata

GreatMemos.com.

The repository starts in 112AD. There is a heavy tilt towards finance and investing, as memos are more commonplace, leak-able, and useful in those industries. My personal favorite is Completed Staff Work by Thomas Waston Jr. Buffett’s letter to the See’s Candy President is a close second. My first pass as the compilation, annotated, can be found here. Ideally, you will be able to see why I chose to select or neglect some memos.

If you have any memos you’d like to share, please shoot it over or contribute to the repository. Otherwise, I hope you enjoy.

If there is no public information, become an investigative analyst and find some[4]. The smaller you are, the better advantage you have to find great opportunities [5].

Start with the A’s [6]. After finding an inefficient area of the market, read everything. Go through every security one-by-one. Be prepared to look at thousands of pages…”turning over rocks”, before you find an obvious investment [7].

Load up on sure things. Concentration, if you know the situation well enough, is your friend. Don’t get married to any one company; recycle your capital frequently. Gravitate capital towards your best opportunities. Owning just six stocks is often the sweet spot [8]. Occasionally, load up on a big opportunity with little downside [9].

Use strategic leverage in “Work-outs.” Avoid borrowing more than 25% of your net worth [10]. When you do borrow, only do it against arbitrage or event-driven situations with high predictability—never against the general market. This is to boost your returns, not generate them.

Hunt for absurd valuations. Buy companies at wildly cheap “net-net” valuations—selling for less than their liquidation values, or P/E ratios below 3x [11, 12]

Work-outs are underrated. Buy after corporate events are announced. Protect your downside. Capture the spreads and look for catalysts [13].

§References & Buffett Quotes

[1] On the silence of the market:

“No one will tell you about these businesses. You have to find them.” — Student Visit, 2005

[2] On illiquidity (Western Insurance):

“I found Western Insurance in Fort Scott, Kansas… I ran an ad in the Fort Scott paper to buy that stock.” — Columbia Talk, 1993

[3] On obscure markets (Korea):

“A couple of years ago I got this investment guide on Korean stocks… It felt like 1974 all over again.” — Student Visit, 2007

[4] On investigative work (GEICO):

“I went down to Washington on a Saturday… I pounded on the door… finally a janitor came… [Lorimer Davidson] answered my questions for four hours.” — Various biographies / Annual Meeting comments

[5] On the structural advantage:

“It’s a huge structural advantage not to have a lot of money… Your universe expands – there are thousands of times as many options if you’re investing $10,000 rather than $100 billion.” — BusinessWeek, 1999 / Annual Meeting, 2007

[6] On where to start:

“Start with the A’s.” — Adam Smith Interview, 1993

[7] On the volume of research required:

“You have to turn over a lot of rocks to find those little anomalies… I went through [Moody’s Manuals] page by page.” — Student Visit, 2005 / Columbia Talk, 1993

[8] On concentration:

“We would hold the half-dozen stocks we liked best… Keep it in the few you know.” — Annual Meeting, 2009

[9] On betting big:

“With less capital, I could have put all my money into the most attractive issues and really creamed it.” — Student Visit, 2005

[10] On leverage limits:

Buffett strictly limited borrowing to 25% of the partnership’s net worth, noting he would never borrow against “Generals” (stocks dependent on market behavior). — Partnership Letters (Historical Context)

[11] On liquidation value (Union Street Railway):

“I found the Union Street Railway… selling at about $30 and, as I remember, had $100 a share in cash and no liabilities.” — Columbia Talk, 1993

[12] On low multiples (Daehan Flour):

“[Daehan Flour] was earning 18,000 won… the current price was 40,000 or 2 times earnings. In 4 hours I had found 20 companies like this.” — Student Visit, 2007

[13] On special situations (Work-outs):

“We found very mispriced bonds… You could make big returns but had to be of small size. I’d look in small stocks or specialized bonds.” — Annual Meeting, 2008

It isn’t because somebody has the same problems. History does not repeat, so this as a skill would be useless. Indeed, it is because the subject has a few frameworks on how they go about things, and reading is a way to get a miniture version of them on your shoulder.

For example- Elon Musk has a framework for engineering. Perhaps he is somebody to listen to, since he has successfully built facinating and relentlessly useful engineering organizations. He has taken this framework and applied it over and over and over again, to much success.

And to think, he talks about this formula multiple times, and you can therefore learn about its effectiveness and get a miniture Elon on your shoulder for $30!

Now, you can go and apply these same lessons to scenarios you might face.

This continues to beg the question - why biographies? Can you not get similar results from learning about organizational profiles or about historical events?

I think not.

Events and organizations have too many variables. Namely, people. Both internal to the subject and also external. There are so many variables going on, and it’s difficult to tell if the result was a fluke, or perhaps there was something more to be gleaned. There are too many false-positives, and not enough intimacy to truly uncover insights.

We are too determenistic, and it’s difficult to parse out why something succeeded or failed. Yes, we have shraed narratives. But there are so many factors and it’s impossible to extract and apply them elsewhere. The point of having somebody on your shoulder, whispering pretty nothings into your ear, is so you can take what they did and repeat it elsewhere. Think about it from a scientific perspective. Will this work in other contexts?

Peter Thiel’s favorite parlor game directs that great companies are built on secrets. Buried treasures you must unearth and hide from the ignorant masses.

But the question is a distraction. Secrets aren’t the primary driver of value. Great companies are built on visible truths that are undervalued.

A secret is a fragile, temporary advantage that often fails to capture value. True success comes from identifying an opportunity (often visible) that the market underestimates…an undervalued insight is far more defensible, repeatable, and rewarding than any errant secret. Pair this with a personal, execution-based advantage to exploit an opportunity everyone else sees but underestimates, and you’ve unlocked something far more valuable.

§Secrets are Fragile

A secret is useless on its own. Ideas have zero monetary value until they are paired with the machinery of execution.

Worse, secrets have a short half-life. Information travels fast. A “secret” lasts only seconds after you launch. If your only advantage is that competitors haven’t looked over the hedge yet, you are already dead.

Consider the crash of the Cleantech industry. Cleantech didn’t fail for lack of a secret; everyone agreed we needed a cleaner planet. It failed because the idea was overvalued. Investors flocked to it, capital flooded in, and companies with no operational edge slaughtered one another.

Today, Cleantech is profitable again. Did the founders discover a new secret twenty years later? No. The data is the same, if not more clear. But the market sentiment shifted. Investors decided Cleantech was a bad business and exited. The idea became undervalued, and the competition vanished.

If you rely on a secret, you are fragile. You must spend your energy hiding. If a competitor steals your file, you are finished.

But if you rely on an undervalued truth, you are antifragile. Coca-Cola does not care if you have their formula. You cannot replicate their distribution network or their brand. That is an edge. And they are trying to grow it every minute.

Trading the “Secret” for the “Undervalued,” helps you gain a superior shield. The key is to be dismissed, not invisible. You want competitors to look at you and think, “That market is too small,” or “That will never work.”

§Finding The Mispriced

There are few blank spots left on the map. Do not waste your time looking for places where brush hasn’t met canvas. Look for the spots on the map labeled “Not Worth Visiting.” Even better, look for “Here Be Dragons.”

It wasn’t a secret that people like status symbols. It was a mispriced insight that an electric car could be a luxury item rather than an eco-box. General Motors knew how to build electric cars. They just underappreciated the psychology of the buyer.

Sam Walton didn’t invent the discount store. Jeff Bezos didn’t invent the bookstore. There were no secrets. Anyone could walk into Walmart, measure the shelves, and interview the staff. The “secret” was visible to the naked eye.

Walton and Bezos won because they possessed an edge. They built logistics networks and cultures of customer obsession that competitors physically could not replicate.

§Creating the Edge

“I’ve thought about it [ the 1991 recession ]but I’ve chosen not to participate in it” - Sam Walton

Edges are earned from learned experiences, hard-fought lessons, and the peculiar makeup of a founder. The undervalued insight isn’t valuable because someone found it. It is valuable because you found it. A strategy is only a winning strategy if it fits your specific capabilities.

Edges start personal. They end up systemic. Your job is to eventually take that peculiar personal advantage and codify it into the company’s DNA so it survives without you.

Once you find an edge, move fast. The market operates in cycles. Ideas move from overvalued, to neutral, to undervalued, and back again. The pace of a cycle is impossible to predict, so press where you can.

You must expand so aggressively during the period of undervaluation that by the time the market catches up, you are impossible to catch. You aren’t looking to uncover a conspiracy in the shadows. You are looking to execute on an ignored truth so effectively that when the lights finally come on, you are the only one left standing. Or, at least, the only one good enough to exit the cycle.

This quote by Elon Musk, who was CEO of PayPal before being outsted, is as good of an explanation for their success as anything.

There was a high bar for talent, and you were expected to make quick, bold decisions.

This was a good book if you wanted to learn about the history of PayPal, or perhaps some of the players like Max Levchin and Peter Thiel.

Perhaps this is a case of “now is not the right time”. Returning to this book in a few years may yield some new insights, or perhaps I will have had more time to digest the ones I already read. But the largest “insights” are ones which have already been spread so much and have become so memetic to the internet startup industry, I find the nomenclature to be generous.

Either way- it is encouraging to think about Musk’s point of view with the scaling of artificial intelligence. Too much have I been not doing things myself. AI in various forms have been giving the first swipe at the situation. Sure, I come in and make some edits afterwords. I may even make some good edits. But the trial, error, and learning that comes from doing the hard thing with your own two hands has started to slip.

Charting my programming skills would look pitiful. Last year it was a steep slope, this year, less so. The same can be said with cooking. Perhaps this year I am a better cook in terms of the food which is produced. But the craft of cooking itself has been dulled. Last year, my forte was in saving dishes. Mess something up and I could look around a sparse kitchen, make the requisite cure, and apply it to the now-scrumshus morsel.

This has been avoided with using different artifical models. They give clear instructions, dummed down so not even I can make a mistake. And as they say, and ounce of prevention is worth a pound of cure.

To rectify this, I will need to start making mistakes again. The reduction of mistakes in my life has means I am not doing hard things. Either “I” am not doing them. Or the things are not hard. So, back to the drawing board to start doing hard things, failing, iterating, learning, and pushing myself to continue on the road to mastery.

For a concrete example, my next hurdle in cooking is presentation. The food being good isn’t enough anymore. It now needs to look good.

§Some quotes I liked

”At one point, the company’s office featured both an indicator called ‘The World Domination Index,’ which tracked the day’s users, and a banner bearing the words “Memento Mori,”

”This notion of you can tell a machine to do things in the future that you’re only going to know about later on was this profound realization”

”’But what does it do? What purpose does it serve?’ Banister asked. ‘What do you mean? It’s beautiful…I don’t know why. It’s cool?’”

”Nosek winkingly referred to these gatherings as the ‘billionaire’s breakfast club.’ ‘We all believed that the others were going to build big things’”

”To fill their empty Rolodex, they started cold-calling people they read about in the newspaper”

”At Google, you’re a cog. Whereas with me, you’re an instrumental piece of this great thing that we’ll build together”

”In Confinity’s early days, Levchin observed that the number of people in a room correlated positively to friction in basic communication”

”If you can’t tell me the four ways you fucked something up…before you got it right, you probably weren’t the person who worked on it”

”If there were two paths where we had to choose one thing or the other…we would just pick one and do it…oftentimes it’s better to just pick a path and do it rather than just vacillate endlessly on the choice”

While their competitors—backed by universities and governments—had more funding and more credentials, they were ultimately focused on solving the wrong problems. The pieces to solve flight had been available for decades, but it took two bicycle mechanics from Ohio, who tilted their heads a slightly different way, to see the path to man-made flight clearly.

Their victory was built on three core, non-obvious insights.

§1. They Solved for Control, Not Power

The “experts” were obsessed with the engine. They were trying to build a powerful motor and attach it to a set of wings, hoping brute force would achieve flight.

The Wrights, as cyclists, understood the problem differently. They knew practical transport isn’t about inherent stability (a bicycle falls over when left alone) but about controlling instability.

“My idea is merely to experiment and practice with a view to solving the problem of equilibrium… When once a machine is under proper control under all conditions, the motor problem will be quickly solved.”

§2. They Invented Their Own Data

The “experts” were working from flawed, “accepted” data. When the Wrights’ 1901 glider, built using the esteemed Otto Lilienthal’s tables, performed terribly, they had a crisis of faith.

Instead of quitting, they concluded the expert data was wrong.

“so many of the long-established, supposedly reliable calculations and tables… had proven to be wrong… The accepted tables were, in a word, ‘worthless.’”

Their solution was not only to find the data themselves, but to invent tools, machinery, and techniques to do so.

“They devised and built a small-scale wind tunnel—a wooden box 6 feet long and 16 inches square… For nearly two months the brothers tested some thirty-eight wing surfaces… ‘those metal models told us how to build.’”

Their lack of resources made them more inventive. They were forced to build their own engines, experiments, and even nails. It forced them into this cheap, iterative process of gliding, failing, and learning, while their rivals, like Samuel Langley, spent $70,000 on “all-or-nothing” tests that were catastrophic and taught them nothing.

§3. They Engineered the Entire System

The Wrights were the first true systems engineers of flight. When they couldn’t find a component that met their standards, they invented it from scratch.

• Propellers: They discovered that nobody knew how propellers worked, not even for ships.

“Much to their surprise, they could find no existing data on air propellers… after a hundred years in use the exact action of a screw propeller was still obscure. Once more they were left no choice but to solve the problem themselves.” They correctly theorized a propeller was a wing rotating vertically and, using their own wind tunnel data, designed propellers that were 80% efficient, a massive leap.

—

It was remarked after their success that their solution seemed so simple in hindsight. But the leading minds of the time were blinded by their expertise, focused on the wrong problem (power) using the wrong data.

“The best dividends on the labor invested,” they said, “have invariably come from seeking more knowledge rather than more power.”

§Some more quotes I liked

• “The best dividends on the labor invested have invariably come from seeking more knowledge rather than more power”
• “Too many people were beginning to believe that all of the world’s problems had been solved” —> imagine how much came after this quote in the early 1900s!
• “And yet it was so simple, Borglum wrote, that one wondered why in the world human beings had not built one long before”
• “In 1901, I said to my brother Orville that men would not fly for fifty years. Two years later, we ourselves were making flights” —> everybody is bad at predictions, even when you are the one creating change
• “Neither the impatience of waiting crowds, nor the sneers of rivals, nor the pressure of financial conditions not always easy, could induce him to hurry over any difficulty before he had done everything in his power to understand and overcome it” —> focus on the mission (flight), not on the crowd
• “Those who worked with him at the factory marveled at his meticulous craftsmanship, how he would make his own parts when needed, even a needle if necessary.”
• “Carelessness and overconfidence are usually more dangerous than deliberately accepted risks”
• “Dayton ranked first in the country relative to population in the creation of new patents”
• “Make business first, pleasure afterward, and that guarded. All the money anyone needs is just enough to prevent one from being a burden on others.”
• “Every mind should be true to itself—should think, investigate and conclude for itself”
• “After the accident, Wilbur remained a recluse, more or less homebound for fully 3 years, 3 years when he began reading as never before”

Good design does the pre-work to know your context, and is intelligent and clear enough to give you one of two options. Each option chosen should have a clear action for the user, or should provide you more context on the user.

Spreading the audience’s mind across multiple possible options is ineffective. Of course, not everybody can take the happy path, but you should make the happy path as obvious as possible.

The original iPhone had great design. A couple buttons, and it was clear at any one moment what each of the buttons would do:

They were separated so you had to intentionally press each button. The volume triggers were clear. You could navigate with your eyes closed. Everything you touched was done with intention, and it was hard to screw it up.

Good design also concerns your writing and copy.

If users are asking “what does that mean”, either:

1. They are the wrong users, and you should retarget
2. They are the right users, and you are wrong in how you do copy

Bad design produces questions. It creates unnecessary surprises. Keep it simple, keep it obvious.

Others had more funding, more engineers, and entire countries backing them. The Wright brothers achieved manned, powered flight with 1% of the budget of their rivals.

Their playbook was relentlessness and a focus on first principles.

I read Walter Isaacson’s biography of Elon Musk right after this book. There are so many similarities between how the Wright brothers and Elon Musk approached their respective challenges:

• Both set an audacious, almost impossible goals.
• Both assembled small, obsessed teams and pushed them to their limits.
• Both refused to outsource their thinking, running their own experiments and ignoring the “rules” set by supposed experts.
• Both were relentlessly resourceful , willing to build their own parts, like wind tunnels and needles, when off-the-shelf options failed or were too expensive.
• A focus on observing natural phenomena and adapting them to their needs, such as studying birds and insects for inspiration.

Many others who were chasing flight were either eccentrics or lacked the ingenuity of the brothers. The Wrights didn’t have any funding compared to their competitors. This allowed them to have spartan accommodations, and focus on what they could control: observation, experimentation, and detail.

Three words define their method: focus, focus, and focus.

They were immune to external pressure. They checked every part before every flight. They trusted their own data. They let the goal dictate the timeline. External pressures amounted to nothing.

The Wright brothers didn’t work in a vacuum. They had a great environment. Dayton, Ohio was an innovative city. That certainly helped in recruiting talent, finding people who could help them with their experiments, and encouraging them at a young age to pursue their own experiments and businesses.

This was a pretty good book. My biggest takeaways were:

• Isolation to protect your focus
• Run your own experiments, collect and trust your data

§Here are some quotes I liked:

• “The best dividends on the labor invested have invariably come from seeking more knowledge rather than more power”
• “Too many people were beginning to believe that all of the world’s problems had been solved” —> imagine how much came after this quote in the early 1900s!
• “And yet it was so simple, Borglum wrote, that one wondered why in the world human beings had not built one long before”
• “In 1901, I said to my brother Orville that men would not fly for fifty years. Two years later, we ourselves were making flights” —> everybody is bad at predictions, even when you are the one creating change
• “Neither the impatience of waiting crowds, nor the sneers of rivals, nor the pressure of financial conditions not always easy, could induce him to hurry over any difficulty before he had done everything in his power to understand and overcome it” —> focus on the mission (flight), not on the crowd
• “Those who worked with him at the factory marveled at his meticulous craftsmanship, how he would make his own parts when needed, even a needle if necessary.”
• “Carelessness and overconfidence are usually more dangerous than deliberately accepted risks”
• “Dayton ranked first in the country relative to population in the creation of new patents”
• “Make business first, pleasure afterward, and that guarded. All the money anyone needs is just enough to prevent one from being a burden on others.”
• “Every mind should be true to itself—should think, investigate and conclude for itself”
• “After the accident, Wilbur remained a recluse, more or less homebound for fully 3 years, 3 years when he began reading as never before”

The players wanted to get called up to a higher league. The coaches wanted to win games using statistics. It turns out, this is a tough combination. This is one of the lowest leagues in baseball. Any players the Stompers had access to were passed over by hundreds of scouts, coaches, and teams with more resources. Every player had something wrong with them. And it was up to the coaches to figure out what this issue was, and figure out if they wanted to live with the deficiency.

The players were misaligned by wanting to satisfy their dream of getting called up to a better league, or to satisfy their ego. Few cared about the Stompers. For every player, this was a quick stop before they got their big break. This could lead to ego-issues, losing players pre-maturely, and more problems.

The coaches wanted to win games, but they quickly realized stats were good enough for groundwork. But they needed more if they wished to compete on a shoestring budget. After accepting players into their club and compensating for their “why’s”, they had to become armchair psychologists and therapists for their players.

It turns out, players don’t like being called to the bench because it’s the statistically correct course of action. Nor do they like being pulled from the lineup, or told to play a different position. Turns out, everything is a people and coordination problem.

§Highlights

• And so we have a reason he’s here, which was important; without knowing the “why,” we’d only be waiting to discover his weakness, which would undoubtedly show up at some point.
• But when I send an exploratory email, I get the same response I received from Sportvision: Cool project. How can we help?
• Pointstreak, which handles data entry for many professional, semipro, and amateur leagues across the country. For a seasonal fee of $1,400—it should probably be more, but the Pacific Association cuts costs by buying one account for everyone instead of one per team—Pointstreak keeps track of pitch-level results for every game, compiling full-season stats that are accessible by anyone through a web portal. In theory, these results are accurate and complete. In practice, they’re imperfect.
• But I’m looking for reasons to say yes to him, rather than reasons to say no.
• But how does he get to this point in his life without anybody else seeing this, you know? How come no better team gave him a chance, no other league gave him a chance?” That’s the question. That’s always the question. Why is he available to us? Finding the right “whys” is what is going to separate us from the other teams in the league.
• The owners’ objective,” he tells me, “is basically this vision of a family of four leaving the game, the kids got to high-five the mascot, they got a foul ball, they’re walking to their car and saying, ‘What a fantastic night at the park. By the way, who won?’
• I see how heartbroken Theo is, knowing that, at this level, the player is responsible for his own, potentially expensive recovery—and that, if it takes too long, the player will likely have to leave the country.
• We should be asking it sincerely: What is this guy’s “why,” and does the “why” matter to us?
• If you’re so good, why are you writing to us? This is a terrible, fallacious bit of reasoning; every player we ultimately sign will be, by definition, available to us, and many of them, we hope, will be valuable parts of a winning team.
• It was a poor man’s college diet. I literally drove to Walmart every morning, bought discounted rotisserie chicken for $4.86, and a bag of iceberg lettuce, and one loaf of French bread. I had to make the bread last the whole week, and after three it would be no carbs. And then work out every day. It was a whole chicken, so it wasn’t like I was starving—I was eating well, but it was just good protein, good lean. And seven bucks.”
• And because our incentives aren’t aligned with those of the big league teams that went back for fortieths from this buffet before we were seated, we might unearth a few “one man’s trash is another man’s treasure” type
• Sam and I are guilty of these sins—not because we wouldn’t welcome the input of a seasoned on-site observer, but because we have no time, no travel budget, no scouting staff, and next to no video. Stats are our specialty, but they’re also our only resort.
• The first rule of child psychology is that it applies throughout all of life.
• Yes, we’re risking our reputations. But I’m more worried about how we’ll look if we don’t do this, if we show so little conviction in our tactics that we flee after one failure.
• This shouldn’t matter, but pitchers love the win. Taking it from them is like bait-and-switching a kid’s dessert at the end of the meal. This turns out to be a substantial obstacle to managers pulling pitchers as early as they should, but it can be avoided by manipulating the starter/reliever roles ever so slightly
• As I see it, there are four possibilities: 1. Santos wasn’t at his best because of a nineteen-day layoff after Southern’s conference-title game. 2. Santos is good, but Brook is a bad evaluator. 3. Santos isn’t good enough for the Frontier League, but he is good enough for the Pacific Association. 4. Santos sucks, and he somehow struck out twelve D1 batters per nine innings without any transferable skills.
• It wasn’t just my bosses. I’d grown tired of arguing, with my wife, with people on the Internet, with friends who thought that the Notorious B.I.G. was a better rapper than Ghostface Killah. Once I started trying to win an argument, I found myself rotating every fact to suit my position. This was true of the facts that came out of my mouth and also of facts that went into my ears, which I heard only deeply enough to deflate or reposition. Conversation became an exercise in bullshit.
• I read an article in the New Yorker that made me intensely happy to be argument-free. Its premise, based on the work of political scientists, was that the worst thing a president can do to advance his positions is to state them; as soon as he does, a huge number of people will position themselves in opposition, and “
• If you tell them they are wrong,” he wrote, “do you make them want to agree with you? Never! For you have struck a direct blow at their intelligence, judgment, pride and self-respect. That will make them want to strike back. But it will never make them want to change their minds. If you are going to prove anything, do it so subtly that no one will feel that you are doing it.”
• the only way our minds are changed is by slow absorption, the feeling that other people we respect all believe different things than we do. The best argument is, essentially, peer pressure.
• The problem, as I explain sheepishly when friends, colleagues, and podcast listeners come to games, is bandwidth. We hadn’t imagined how time-consuming writing preseries scouting reports would be. We hadn’t anticipated how many hours we would spend with tech support so that our pitch databases would be complete. Mostly, though, we hadn’t expected the entire season to be hijacked by a six-week struggle over the way we use our damned close
• I walk into Yoshi’s office and say I want to talk. Yes, he says, that’s great, because he wants to get my help on some things. I’m stunned. I’m losing my angry face. He pulls out that night’s lineup and asks what I think. I stare at it. Uhhhhhhhh. I say I’d rather see Taylor Eads that night instead of Daniel Baptista, with a lefty on the mound.
• This turns out to be one skill where Pacific Association pitchers can more or less match their big league role models. Some skills are like this. We’ve observed, for instance, that pitchers in our league often have MLB-quality pickoff moves—even better than MLB-quality, in some cases, because they can balk with near impunity. “
• You think that you’re this whole big screen, like a big rectangle,” he said. “But you’re actually a collection of all these little squares in here. And each one is a part of the game that you have to learn and polish. In affiliated ball, they start with the first square and they polish it until it’s perfect. Then they go on to the next square, and they polish that one. Eventually you’ve polished every spot and you’re a complete ballplayer, you know how to play the game. But nobody does that for you here
• But we’ve found that vastly oversimplifying things is the best way to make these cases.
• If pressed, I would have acknowledged on Opening Day that all our players had agreed to go out with us only to make better teams jealous. But as the season settled into a comfortable routine and we watched strangers become companions, their emotional states ebbing and flowing with our wins and losses, it was easy to convince ourselves that our players were happy to be here and that they were as invested as Sam and I in the Stompers’ success. Everyone we love eventually leaves us, if we don’t leave them first, but we’ve evolved to be good at forgetting painful facts. Hearing Isaac declare his ambition out loud was like discovering that your girlfriend has an active OkCupid profile or a malignant mole.
• decline in the team’s self-reported mood and self-confidence ratings, which we discover when we unlock the survey safe at the end of the season.
• Action feels good,” Theo says after that win. “So good,” I respond. “I can’t think of a single thing we’ve actually done this year that I regret. Only the things I haven’t done.” “We should do things.” “We should do things.” So we try. Anything to make tomorrow different from today.
• Factoring in playing time, Chavez’s offense was about 2.5 times more valuable than anyone else in our league, even though he missed the last 15 percent of the schedule. Yet the Barry Bonds of the Pacific Association was considered a borderline candidate for high-A, which is three levels below the big leagues. Baseball is hard.
• We would still make mistakes, but fewer that were driven by bad process, the front-office equivalent of throwing the ball to the wrong base. The next time, we’d know not to hire someone with whom we wouldn’t work well. We’d know not to rely only on our powers of persuasion to the total exclusion of our power to put our foot down. We’d know that our spreadsheets are probably more predictive for pitchers than for position players. We haven’t lost our belief that data can help people build better baseball teams. We’ve just gained a greater appreciation for how hard it can be to collect and communicate.
• But once we’d survived our first stumbles, the game got slower. In time, maybe we would get meaner, more aggressive, quicker to cut bait. “That may be the lesson I learned (or hope I learned) from this year,” Theo tells me months after our last loss. “I really wish I could go back in time to release Walker. Probably never even let him make the team.

To the Cynic, the world is a slot machine. The only winning move is to play the odds. They buy a thousand lottery tickets and send a thousand resumes into the void, believing every pull of the lever outputs a random result. Effort is pointless, the machine is unloving.

And the Cynic is right.

Their thousand applications land them a job at a company that also plays the numbers game…a high-turnover sales floor, a corporate behemoth looking for a warm body. The Cynic gets a job as impersonal as their application and is proven right. The machine is chaos.

To the Optimist, the world is a series of puzzles. The winning move is to change the odds through effort and creativity. They spend a month studying a company, hours crafting a single application, and write a cold email that shows they’ve already started doing the work.

And the Optimist is right.

Their effort lands them a job with a small, dedicated team that values craft. The recruiter read every line of their cover letter. Their future boss has their resume highlighted. The Optimist earns a job where effort is meaningful and is proven right. Effort matters, the machine loves you.

Optimism is a moral duty.

Your objective with every email is to make the reply effortless. The audience wants to react to the email. Write so they can respond with “Yes”, “No”, or “Got it”.

Which lands better?

“I’m sorry for the delayed response. Can I buy you coffee Thursday?”

Or:

“Can I buy you coffee Thursday?”

You think the apology is polite. It’s noise, and costs you authority. Delete it!

Actually, don’t ask to buy coffee Thursday. Be direct in what you are asking. Do you have a specific question you wish to have answered, and this person is the best one to ask? Then say so!. Be direct with your request. Keep it simple, make it obvious what you are asking, and cut everything else.

Readers scan. Guide their eye to what matters. Imagine if they can’t understand words, only shapes. Will they still know which parts of the email are important?

• Use bullet points
• Bold important bits
• Eliminate walls of text

Read out loud. Your ear will catch flawed rhythms your eye skips. If it bores you, rest assured it will bore them, and a bored reader is one who deletes. If it doesn’t sound right, rewrite it.

Your subject and first line exist for one reason. They must pitch the reader on finishing the rest of the email. Look at my first sentence. Did it accomplish its goal?

Two recurring themes that stuck out to me:

1. There are levels to this game.
2. There is a profound lack of introspection in art.

§1. There Are Levels to This Game

A winning streak is hard to forget, especially if it takes place over years. My basketball team was one of the best for our age group in Rhode Island, Connecticut, and Massachusetts. We dominated. It was perhaps my favorite time as an athlete, even though I was so young it should hardly count.

We would win the game at tipoff. Once tipped to my teammate, we had a couple of plays to generate points within seconds of the game starting. While the other teams wished to “ease in” and start playing, we just punched them in the face right away.

As soon as we scored, we ran a full-court press. Trapping, everywhere. On the slight chance you were able to get the ball past half-court, we would double-team you, trap you, and force you into chucking the ball up.

If fate were to have it, sometimes you could score. Then what would we do? Get the ball out of the net and rush it up court as fast as we could, generating more points and starting the “48 minutes of hell” all over again.

The first loss we took was against a local state team in Cumberland, Rhode Island. We had beaten them plenty of times before. We knew their players, and we could steamroll them. The one player we knew to watch out for was named Tyler.

No matter what we did, he lit us up. Double-team? Scored. Triple-team? Scored. We tried different matchups, different defenses; we threw all we had at him. And he still lit. Us. Up.

It reminded me that no matter how good our team was, there was always a level higher than us. We would play above our age group a few times, but at the end of the day, we were nothing. We were a local team. Despite our team success, none of our players would go on to play at a Division 1 or Division 2 school. What we didn’t understand at the time, and what I can say now, is that there are levels to this game. Tyler now plays for the New York Knicks. Last year, he averaged 2.0 points in 7.2 minutes.

Even when you are in the NBA, there are levels to this.

And art is no different.

This book did a great job exploring the top of the art world. The biggest galleries, the most famous current artists, the art dealers who shuttle millions of dollars of paintings to billionaires. But here’s the thing: that’s not our world. And frankly, it’s not the world we want to be in. Those “big boys” are way less fun.

Our world is the world of independent artists, community art centers, and regional galleries. This book’s focus on Art Basel is a great lens for understanding the stratosphere, but I keep finding myself itching to go back to my email to ask our users to sit in on their sessions, lest I forget that most of our shows’ prize money is backed by one comma, and not two.

We don’t want to be a “lite” tool for the mega-galleries. We want to be the best-in-class, dominant tool for our level. And our “48 minutes of hell” will start this month, when we release our new version of the platform.

§2. Lack of Introspection

A prevailing question in this book, one that punctured a through-line through every interview and every observation, was: “What is art?”

Of course, this Rorschach test is more useful for understanding the person who received this query than it is for conducting a thorough philosophical investigation into the nature of art. And boy, were there a ton of answers.

But truthfully, most people involved in the art world didn’t really care! Most of them would brush aside the question, giving a cursory or curt answer, and then go back to doing what they were doing. They didn’t spend much time introspecting on what they were up to or why they were doing art.

Many times, the artists would not understand their art until after it was done. They rarely went into something thinking about what it is and why that is the case. It was far more common for them to try explaining it, and only then garble together a couple of what could be considered sentences, and produce a barely coherent answer. And some artists would even reject the opportunity to explain themselves. Maybe it was because they were “anti-establishment” (ha!), or perhaps it was due to them not really knowing what they were doing.

Hitting the limelight can be scary for so many artists. Once you reach a certain level, there become more “rules” you have to adhere to. You have to enter in this way. You will get an invitation to this party, and it would be uncouth not to go. This sort of thing, you would be surprised, was a social handicap to many artists. Most would listen, happy to go along with the fame and magazines. When you are in this whirlwind, should you be taking the time to introspect?

As most artists and people in this world were busy creating, it was the writer, and sometimes the ignorant reader, who would take time away from the canvas to ask: “What is art?”

If our users (artists and gallery directors) are fundamentally doers , they need a tool built for doing.

We have heard users talk about how they need an “EntryThingy specialist” because the tool is so hard to use. That is unacceptable.

Our job isn’t to make our users introspect; our job is to facilitate action , not administration. An artist shouldn’t have to be a data-entry clerk to submit to a show. A gallery director shouldn’t need to be an IT manager to run one. We want to build a tool that you don’t dread using.

This essay deconstructs the source code of that success. We will move beyond the surface-level story to reveal a counter-intuitive operating system built on “earned secrets” and powerful constraints. You will not only understand how they did it, but also see a framework for how extreme discipline creates extraordinary value.

The founder’s genius, “hold forever”, and decentralized structure all pieces to the puzzle. The real engine is more counter-intuitive. Constellation’s returns are forged by a system of self-imposed constraints. These are not arbitrary rules; they are disciplines built upon hard-won, earned secrets about value, people, and time. By codifying these secrets into constraints, they built a perpetual value machine competitors, obsessed with upside, cannot replicate.

§Constraint #1: The Target (Good, Not Great)

The first earned secret: incumbent vertical market software (VMS) businesses possess profound durability. They enjoy monopoly-like dynamics, high margins, and deep customer lock-in. They are cash-rich and require little capital to defend their moats. The resulting constraint is a strict choice of prey. Constellation focuses on acquiring the top players in these tiny markets. Post-acquisition, the mission is not to chase hyper-growth. The mission is to fortify the moat and never stumble.

This creates a “first-world problem.” These cash-gushing monopolies have limited opportunities for internal reinvestment. What good are 40% margins if the cash has nowhere productive to go? This model opposes the classic ideal of a business able to reinvest large amounts of capital at high rates of return¹. This “flaw” is the catalyst for the entire model. It forces them to master a harder, scalable problem: how to become experts at reinvesting capital outside the business.

§Constraint #2: The People (Investors are Manufactured, Not Found)

The second earned secret: genius does not scale, but systems do. Relying on a once-in-a-generation talent is a strategy of hope, not a business model. Leonard’s true masterwork is building a factory for investors. The resulting constraint is the removal of individual “artistry” in favor of a rigid, scientific framework. Capital allocation is pushed to the lowest possible level, where M&A teams operate with quantifiable rules. Armed with proprietary data from over 1,000 acquisitions and ten times more they passed on, they refine their underwriting. And now you have enough data to check on the assumptions made to hit a 20% hurdle rate.

This turns capital allocation into a science. The excess cash from the “good, not great” businesses is reinvested to manufacture more capital allocators. They understood the incremental returns on a new, disciplined investor were higher than forcing cash into a mature product. They built a people-compounding machine.²

§Constraint #3: The Timeline (The Permanent Hold)

The final, most powerful earned secret is twofold: great value is unlocked over decades, and humans are wired to sell too soon. The temptation to cash in a winner is immense. Taking profits feels safe, a powerful impulse to overcome.A forced constraint, like a lock-up period³ in an excellent business, can be a hidden blessing, compelling owners to hold through volatility and into greater returns.

Plus, the added benefit of having an infinite timeline means you will see more opportunities, you can afford to spend a decade learning about, underwriting, and engaging with the management team of a software company. When the “sale” sign is put outside, CSI becomes an obvious suitor.

Constellation’s refusal to sell is a deliberate, system-wide version of a lock-up—an insurance policy against human weakness. It is built on this core thesis: the market—including themselves—undervalues the terminal value of an incumbent VMS business. Therefore, the only logical move is to pay a fair price and capture the massive, hidden value by refusing to sell. You cannot capture this value if you sell early.

They learned the cost of violating this rule the hard way. The only business they sold, a portion of their transit unit, earned on a standalone basis nearly eight times what Constellation sold it for a few years later. It was a disastrous, but invaluable, lesson.

§The Inevitable Trade-Offs

This constrained system requires sacrifices. These are not failures; they are the necessary price of admission.

• Stifled Organic Growth: A deliberate trade. They sacrifice entrepreneurial innovation within their companies for capital allocation excellence across their portfolio.
• Missed Opportunities: A rigid adherence to valuation is a guardrail against arrogance. Some trophies will get away, but it prevents catastrophic mistakes.
• The People Problem: The machine is designed to train investors, not to satisfy the ambitions of builders. This is the model’s primary, unresolved tension.⁴

§Why the Copycats Are Doomed to Fail

Understanding Constellation’s earned constraints makes it obvious why imitators fail. They copy the tactics but flinch from the painful discipline those tactics demand. They haven’t internalized the earned secrets.

• They overpay, lacking the rigid valuation framework built on decades of data.
• They centralize power with “gurus,” failing to build the scalable people factory.
• The critical flaw: they sell. Trapped in an unattractive structure, they are forced to exit, giving their thesis a different take than what Constellation does.

They see the upside of the model, but are unwilling to live with the limits.

Constellation Software is a type of Rorschach test. Understanding their model is easy. The hard part is confronting what it reveals about ourselves…our own appetite for glamour, impatience, and unwillingness to be boring.

—

§OK I’ve gotten a lot of questions from you all. In the case of a follow-up post. Please email in questions (mylesmarino1@gmail.com) or DM them on Twitter so I can consolidate them

The difference lies in their approach. An Autopsy of a Merger is a narrative, focusing on the people involved and their reactions to a massive corporate merger. It’s built on interviews and detailed accounts of conversations, which gives it a compelling story arc. However, this narrative focus made it a far cry from the tactical, hard-hitting insights I found so valuable in The Secret Weapon.

You could argue that this is simply a matter of timing. I’m currently focused on growing a company, not managing a billion-dollar merger. Maybe in a few years, one book will prove more useful than the other for a different reason.

§The Allure of Entertainment

There’s also the matter of how I found each book. The Secret Weapon is an obscure, out-of-print book that I stumbled upon by accident. It has no special status, and I’ve never heard anyone else talk about it. In contrast, An Autopsy of a Merger is well-known, especially in finance circles. Owning this rare, out-of-print book carries a certain prestige, and saying you read it, even moreso.

So why is the less useful book more popular? The answer is simple: it’s more entertaining.

When we look at media that endures for decades, it seems to need two key ingredients. First, it requires utility to get initial traction and draw people in. But to last for generations, it must have a strong dose of entertainment. This entertainment value is what makes people return to the work and feel comfortable recommending it to a wide audience.

This holds up when you look at some of the oldest texts. Many ancient myths and religious stories had a core of utility…for example, “don’t anger the gods” or “live a virtuous life.” However, it was their vast entertainment value that made them stick. The stories were compelling, made the storyteller sound wise, and became a kind of status symbol. This is why the most prolific writers in business or tech are often great entertainers, not just useful communicators.

§A Final Thought on Value

Ultimately, the marketplace often values entertainment more highly than pure utility. More people are drawn to something entertaining than something merely useful. This isn’t a new phenomenon, but it highlights a potential pitfall for non-fiction books, which are supposed to be factual and insightful. When they lean too far into entertainment, they risk losing their practical value.

It’s important to know what you’re getting into. Believing a book is educational when it’s primarily entertainment is just as problematic as thinking something is useful when it’s only meant to be a fun read.

An Autopsy of a Merger has lasted because its narrative style makes it an easy and interesting read for anyone. That doesn’t mean it lacks use, but its primary strength is its story. It offers a definitive compilation of one of the largest mergers in history, which is certainly valuable. But I wonder if people will still be talking about it in 50 years. Will it remain a finance classic, or will it be lost to time, much like its more practical but less famous counterpart?

§Part I: Rockefeller’s Secret Weapon

In the early days of the oil business, the key to dominance wasn’t drilling for oil, but controlling its transportation. While pioneers like Edwin L. Drake (who discovered how to drill for oil but died in poverty) laid the groundwork, Jacob Jay Vandergrift with his fleet of oil barges, built the first monopolies.

John D. Rockefeller perfected this strategy. His playbook was simple: achieve unmatched efficiency, undercut competitors on price until they failed, and then buy them out. He understood that in the oil business, transportation costs were everything.

His secret weapon was the Union Tank Car Company.

• Calculated Obscurity: Rockefeller built a massive, private fleet of tank cars. He then created an intentionally complex system of tariffs, rebates, mileage allowances, and manifests. The operation was so convoluted that journalists, Congress, and the public could tell Standard Oil had an unfair advantage, but they couldn’t prove exactly how. This confusion was by design.
• Leveraging Power: With the largest fleet, Rockefeller could force railroad companies to bid ferociously for his business, driving his transportation costs to rock-bottom levels that no competitor could match. He famously said he ascribed his success to “the merit and cheapness of its products,” but this cheapness was a direct result of his logistical supremacy.
• Forced Independence: After decades of scrutiny and antitrust pressure, the law finally caught up. UTC was formally split from Standard Oil. This was a blow to Rockefeller, but a boon for UTC, which now began its life as an independent company.

Rockefeller’s personal traits, his austerity, “economy of speech”, aversion to publicity, and intense focus on finance and costs, were perfectly suited to this endeavor. He was content to let others handle manufacturing and sales while he concentrated on dominating the numbers.

This was a great book, and you should read it if you want a better picture into building monopolies like Rockefeller.

§Part II: The Independent Years & The Pritzker Deal

As an independent company, UTC thrived. It became a Fortune 500 company and a financial powerhouse. After facing increased competition, it found a new sense of purpose supplying desperately needed oil to England during World War II. In a time of national crisis, the industry operated on gentlemanly handshake agreements, sharing data and cars to support the war effort.

Decades later, in the early 1980s, the company faced a new challenge. An anticipated change in tax law threatened to hurt UTC, which had too little taxable income. The company’s CEO, fearing the consequences, decided the best path forward was to sell the company.

This decision triggered the dramatic events detailed in Autopsy of a Merger.

• A Secret Deal: The CEO pursued a deal with the Pritzker family’s Marmon Group in complete secrecy. The board and employees were not upset by the price or the buyer, but by the fact they were completely shut out of the process.
• A Corporate Revolt: The secrecy led to a revolt. The board felt the company should have been properly shopped to other suitors (like GE or KKR). Key employees resigned in protest, and a reporter spreading rumors fueled the internal chaos. As morale and trust plummeted, the company’s financial performance began to deteriorate.
• The Pritzker Victory: Despite the turmoil, the Pritzkers prevailed. They acquired UTC, along with the massive debt incurred to finance the deal. Their first order of business was to implement drastic efficiency measures to start paying it down, a move that was unpopular with the remaining employees.

The story of the merger highlights how deals are ultimately driven by people, their motivations, and their communication…or lack thereof. The Pritzkers had to secure the deal, but the CEO had to convince them his team could pay off the debt within five years, a promise made more difficult by the internal collapse he had caused.

Pairing these two books reveals a fascinating narrative arc. The Union Tank Car Company spent its first half-century under intense public scrutiny as a tool of monopoly. After a period of quiet prosperity, it found itself in the public eye one last time, as the prize in a dramatic and messy corporate battle.

The sign of a truly great biography is universal praise with a sole voice of protest. You know you’re reading something vital when its subject tries to prevent its release, refuses to acknowledge its existence, or is publicly wounded by their portrayal.

Too many biographies today are little more than extended Wikipedia entries. They fail to conduct a serious inquiry into the core of a person. We need more biographies willing to publicly undress the figures they profile. The goal is to reveal the complex human being beneath the carefully constructed persona, not to embarrass.

This discomfort means you are on the right path. An individual rarely protests a biography that’s blatantly false; they lash out when it strikes a nerve, exposing a kernel of truth they’ve refused to acknowledge themselves. It may seem strange that someone lacks insight into their own character, but self-deception is a powerful force. We are all unreliable narrators of our own lives.

Consider Benjamin Franklin. His autobiography is a masterclass in legacy-building. But it’s a curated version of the man. Franklin downplays events whose importance we only recognize with centuries of hindsight. More importantly, he polishes his own myth, perhaps to hide his deepest insecurities or to project an image of unwavering patriotism for his Loyalist son.

A skilled biographer, however, acknowledges and ignores the myth. They can explore what Franklin truly believed, why he believed it, and who he was when no one was looking, including his complicated relationships with women and his own son. These insights only emerge when you place a critical biography alongside an autobiography. The biography’s purpose is to expose who Franklin was.

Capturing a person’s essence this way is incredibly difficult. But the next time you pick up a biography, ask the following:

If the person on these pages were reading over your shoulder, would they be resting easy? Or would they feel utterly, uncomfortably, and truthfully exposed?

I also spent a great deal of time at Third South Capital, getting to know my business partners. It started with Harrison taking me to lunch and floating the idea of my working as a contractor. One thing led to another, and soon I was spending every Sunday evening at Justin’s house, sharing meals while he talked about his experience in Big Tech, the latest in team organization, and Buttondown’s journey. These conversations were invaluable, as it built up my knowledge and also continued to build on the friendship we are forging. The amount of face-time I got with the Third South guys, whether in the office, on a walk, or even at Whole Foods, was something I enjoyed immensely. This will be the hardest part of leaving.

I spent countless hours walking around the city, especially in The Fan. There were so many beautiful walks, from my apartment all the way to the other side of Church Hill and back again. The walking was always pleasant. I could hear birds chirping, listen to people’s conversations, and see families and friends enjoying the day. It’s one of the most enjoyable places I’ve ever lived for walking, with streets lined with plants, flowers, trees, and animals. I will also miss the neighborhood cats that would walk up at night, meowing not for food but for a few pats on the head and belly scratches.

The Virginia Museum of Fine Arts (VMFA) was one of my favorite places to bring people. Not only is the permanent collection free, but it’s an incredible collection, remarkable in both its quality and quantity. There was no shortage of grand pieces whispering a story into my ear, sometimes for hours on end. My favorite is Scotch Whaler Working Through Ice. Oil never looked so good as it did in 1878. And I can’t fail to mention the Thursday Jazz Nights that bring the museum to life, the immaculate lawn outside in early spring, or the bottomless coffee refills in the café that fueled many weekend work sessions.

Richmond is perhaps at its best in the quiet moments. It was serene walking outside in the early morning before the city awoke, when dew was still on the trees and nocturnal animals were still out. The best time, however, was late at night, especially when it was raining. The smell of rain coming off the asphalt conjured images of Gotham City. Standing under the screeching and chugging of a passing Amtrak train in the dark, it sometimes felt like you weren’t that far off from confronting Falcone yourself.

Another great thing about Richmond was biking everywhere. There are so many little trails, paths, and enclaves that aren’t on any map, but were patiently waiting to be discovered. One of my favorite finds was a trail that led to an old mill. The rush of wind and the subsequent hike was incredible. It always felt like the city had these little nooks and crannies waiting to be found, and I found many of them. From small alleyways to parks hidden by looming apartments, Richmond had a lot to uncover for those willing to look.

As I plan my last days in Richmond, I want to go to the other side of the city one more time to see the view coming back over the James River. The view is undeniably beautiful, with the sun bouncing off skyscrapers, onto the rushing water eroding away rocks…Richmond is a lovely city, and I am glad this is how I remember it.

Thank you for all the support, comments, etc- I truly appreciate it.

But I want to take a step back for now.

Feel free to contact me on a 1-1 basis via mylesmarino1@gmail.com

- Myles

Teams : Masters of Business Administration Students (MBAs) vs Kindergartners

Challenge : Build the highest tower with the given materials

Winner : Kindergartners (if they did not eat everything first!)

Why did MBAs lose to 6-year-olds? Dharmesh Shah, HubSpot’s Co-Founder explained his success as:

“A combination of dreaming really big and iterating really small and having tight feedback loops” - Dharmesh, My First Million Podcast

He gave an example of this approach: The Marshmallow Challenge

Teams get a marshmallow, spaghetti, tape, string, and 18 minutes. Highest tower wins. Simple.

Why do MBA graduates perform poorly? What did they do in 18 minutes?

1. Introductions

2. Study the problem

3. Assign everyone tasks

4. Plan a structure design

5. Build their structure carefully

6. Start to run out of time and rush

7. Place marshmallow as the build falls

Compare this to Team Kindergarten:

1. Start building

2. Pick up any fallen pieces

3. Figure out what did not work

4. Consider eating the marshmallow

5. Repeat steps 1-4 until the timer rings

One team plans. The other team does.

Team Kindergarten had a tight feedback loop. They would start building. Then fail. Then build again. Do. Fail. Learn. Repeat.

10 minutes into the challenge- Team MBA have built zero towers. How many times do you think Team Kindergarten failed before Team MBA finished introductions?

Stop planning. Stop thinking. Start doing.

There is value in thinking ahead. But what if your plan stinks? Do not wait until the 17th minute to figure this out! Do. Fail. Learn. Repeat.

I have fallen into the trap. Constantly thinking. Constantly planning. But never doing.

For example, I have re-read Buffett’s letters multiple times. But did I get more value from reading the letters for the 6th time or from reading about a random industry?

There is value in listening to others. But that learning means nothing if I spend zero time applying it to businesses. Do not fall for the same trap that I did!

“The person that turns over the most rocks wins the game” - Peter Lynch

Anyways, back to rock flipping.

Why do the price fluctuate so widely when values can’t possibly? I will tell you the answer I have come up with: The answer is I don’t know and I don’t care. We could waste a lot of time about psychology but it always happens and it continues to happen - Joel Greenblatt

Split $1 into 4 quarters. Cut a sandwich in half. Slice a pizza into 8 pieces.

The underlying physiology does not change. Your wealth did not change. Your sandwich has the same calories. Your pizza has the same amount of cheese. Nobody has gained, and nobody has lost. Split, cut, and slice all you want. You still end up with the same result.

Forward stock splits are similar. Companies take their existing shares, and split them. Sometimes in half. Sometimes into 20s.

Today you own 100 shares at $10.
The company splits.
Now you own 200 shares at $5.

Either way- the underlying value of the business should not change.
The sandwich has the same calorie count. The pizza is as cheesy as ever. Your brokerage account still says $1,000. Just because you increased the amount of pieces does not mean that the whole has changed.

Right?

Academics would say otherwise. After decades of research, academics have concluded:

1. Stocks that split outperform by ~2% in the short term

2. Nobody can agree why

Satisfying, right?

As my Aunt alluded to in her request- several of the largest companies have recently announced stock splits. Amazon. Google. Tesla. Why?

C-suite executives often suggest that the reason for splitting is to lower their stock prices. This allows smaller investors to buy more shares. The argument is that these investors cannot participate in owning Berkshire Hathaway ($400,000+), NVR ($4,000+), or Autozone ($2,000+).

This tells us why managers split their stock. It does not explain the relative outperformance.

Instead of re-hashing a dozen academic papers (I fell asleep writing that)- a 2007 paper summarizes some of the theories. If you’re into that academic-type stuff…

All we know is that on average, splits outperform. We don’t know why. All going theories have mixed results and have either been refuted or outright disproven.

I will tell you the answer I have come up with: The answer is I don’t know and I don’t care. We could waste a lot of time about psychology but it always happens and it continues to happen

Joel Greenblatt makes it clear that sometimes you don’t need to know the underlying reason. Sometimes knowing that something happens without understanding why is necessary to make money. Fair enough, Joel.

On the other hand, if post-split companies start to underperform on average over the next 20 years- understanding the underlying reason suddenly becomes important.

We blindly trust and use without knowing much about the underlying all the time. Food. Your computer. Substack posts.

Is it easy to blindly trust? Yes. Is it smart? Maybe. Should you do this with stock splits? I’m not. Give me the underlying causes and then we will talk. Until then, see you all next time.

1. Most “technology” companies compensate employees with stock

2. These companies had abnormal sales in 2020 and 2021 (Thanks, COVID)

3. Most high-flying technology stocks are down ~40% since January 1, 20221

If you add up these factors together- what do you get? It seems like DocuSign is figuring that out right now. In a recent earnings call, the CEO was asked why so many sales reps are leaving. His response:

They kind of knew only one DocuSign, which was, quite frankly, achieving the sales success was a heck of a lot easier than it had been previously…From a compensation standpoint, they [sales reps] said, ‘I think I’d be better off trying some place new’

So the reason so many sales reps are leaving is:

1. A tougher sales environment

2. Seeing last year’s compensation cut by 30% rather quickly2

This is something I have been watching for a lot of companies lately. This talent drop will especially hurt companies that rely on attracting the most creative people in the world. If this is happening to DocuSign, which doesn’t rely on creativity, imagine what is happening to Netflix’s writers!

Year to date- the stock is down nearly 70%! 50% of Netflix’s compensation last year was in stock- so employees just lost 35% of their 2021 paycheck!

Of course, Netflix will “remedy” this by having to issue more stock as compensation to keep up with their falling stock price. IE if you give out $100 in compensation and have a $100 stock, then you give away one share. If the stock is now worth $50, now you need to give away two shares to match last year’s compensation. Ouch!

Be careful if some of your companies are falling into this viscous cycle of employees leaving and falling stock prices. This may get uglier!

1

Bloomberg screen: Companies that grew sales 40% in 2021 and had price/sales multiple of 10x are down an average and median of 38% and 43% YTD

2

~50% of compensation seems to be stock-based, and DOCU is down 60% this year

You run a business for the shareholders and for increasing shareholder value. If that means that the company gets sold and somebody walks in one day and says “this is something I want”- then great. But, you make the right decisions for shareholders to increase their value. Do not run a business to sell it. If you run a business to sell it- it will fail

Said Andrew Austin, energy entrepreneur in a recent In the Company of Mavericks interview. This mentality of building a business to increase its value and not to simply sell has been a consistent message of his for well over a decade now, and it is something I wish more took to heart. (For a contrasting philosophy of building to hold forever, see:Constellation Software and RockRose Energy)

Sometimes it is clear when a company puts the “for sale” sign up. Maybe they created a “strategic alternatives” committee. Maybe they hired “outside consultants”. Or maybe the CEO plainly says that they are looking for a strategic buyer in a conference call. Either way, I come across way too many companies that have one thing on their mind- an exit.

All of the above examples are from operators who typically have to be underhand about their desire to sell the company- lest they undermine hardworking employees. Investors, on the other hand, are more than free to talk about selling. Investors at all levels often seem obsessed with selling at the first opportunity! Who cares if the company is firing on all cylinders? Who cares if the company is creating more value for customers than anybody else? These questions are overshadowed by the big one: when can I sell?

I have talked to some investors who make it a point to position the company to sell from Day 1. The most blatant I have heard was one investor explaining that every board meeting- the first question they ask is “how are we going to sell this business”. This may seem like a shrewd question, but is that really the way a business should be run? Yes- this investor has limited partners that want a high return- but is making yourself “attractive” to a strategic buyer from Day 1 the best way to improve returns? From my perspective, time is better spent improving the product and finding new customers.

It is one thing to sell your company after building it for years and years- and finally a trustworthy buyer comes along and offers an attractive price. Sometimes selling the company is the right choice- but nobody can control if Google offers to buy you out. Instead of focusing on selling at the first opportunity, investors should be focusing on letting these operators build! If you ever catch me pushing a company for a sale- remind me to focus on what matters.

There is no risk, there is no uncertainty, no luck. Compare that to other games- such as basketball or investing. There is no “correct” move. Should you shoot this shot? What if you can get a better one off in a couple seconds? Should you short this company? What if they are about to announce an upcoming buyout? What information are you missing? What are other people doing and how will that affect your performance? You don’t know all the information- nobody does! Basketball and investing are dynamic games - very different from a static chess board (although Bobby Fischer has tried dynamic chess)!

No matter how good computers are- they will never be perfect at finding great investment opportunities, as they cannot have all the information in the world. Even the legendary computer scientists over at Jim Simon’s Renaissance Capital admit their algorithms are only right 51% of the time. Now that is a game that interests me! Chess on the other hand? Not a fan.

Or maybe I just suck at chess…yeah…that is probably it.

Daniel Kahneman wrote about the many cognitive biases where our mind becomes lazy and tries to take shortcuts- often to our detriment. There are plenty of biases which we surfer from, but the one I care about today are framing effects.

Framing effects are when the choice of a couple options are influenced more by how information is presented instead of the information itself. For example, would you rather get on a plane and hear that there were 176 flight casualties in 2021, or that 99.9999998% of people who flew in 2021 were safe? Clearly, one has a different framing perspective than another.

A lot of governments and news organizations play with the framing issue. My favorite example is how a Spanish broadcast framed Eden Hazard laughing with his previous team after his current team lost. You don’t even need to speak Spanish to feel this guy’s emotions. Compare that to BT Sports and you will see a world of difference!

Although that is a silly example, think about how one might frame a recent political victory:

Former Chief Secretary John Lee was elected with 99% of the votes cast

That is how Regina Ip Lau Suk Yee, a member of the Hong Kong Legislative Council Member framed a recent political victory. Another way of looking at this is that 99% of voters preferred John Lee to nobody. Was this really the people’s choice or an uncontested election?

Don’t get tripped up with how information is presented! This type of framing is dishonest and dangerous. There is often a reason one statistic is used over another. Keep a watchful eye!

When a friend mentioned this movie- I assumed that Bigfoot was a metaphor. I assumed that the movie would be about a man who peaked at a young age and was deluded into chasing the illusion that he could regain that feeling in his old age. I assumed wrong.

I talked about this decision [to not short the subprime mortgages]. He [Charlie Munger] said that if you made a lot of money by doing CDS, you may still be looking for the next one today. The opportunity of a big short. The nature of human beings is like this. - Li Lu

Who were some investors who peaked early- and later destroyed their businesses? My mind wandered to those who shorted subprime mortgages 14 years ago.

John Paulson founded his firm in 1994. By 2007, he became a celebrity by earning $15 billion for his investors by shorting the subprime mortgage market. His assets under management peaked at $38 billion shortly after. After predicting 5 more global financial crises from 2009-2018 , Paulson’s investors lost ½ of their money!

David Einhorn had great returns from 1996-2006, 10x his investors money! He recommended shorting companies that were manipulating numbers to fool regulators- such as Lehman Brothers. Over the next 13 years, David continued to short these companies- and his investors enjoyed a 2.6% annual return, while the S&P 500 returned 15% per year. There has not been a year where his firm outperformed the S&P 500 since 2009. Assets under management are now $1.7 billion, down from a peak of $12 billion.

Meredith Whitney became a celebrity overnight, after recommending to short various banks in 2007. Her best prediction was shorting Citigroup. Within days of her recommendation, Citigroups’ CEO resigned, and the company ran out of capital. What happened? Well, she continued to predict macro events, such as a meltdown in the municipal bond market that never happened. In 2015, she started a hedge fund and quickly closed after negative returns. She recently left Wall Street to focus on financial technology startups.

Steve Eisman bet against the subprime mortgage market, and quickly doubled his client’s money to $1.5 billion. In 2012, he started his own fund, but closed it in 2014 due to under-performance. He stated that individual stock picking was dead- and focuses on macro-events, like the 2008 bubble. Now he continues to manage money under a large investment manager as a portfolio manager.

Michael Burry, as usual, is the outlier here. He has seemed to fare just fine after the Global Financial Crisis. He made a ton of money for his investors (>4x!), and then closed his fund- defying industry convention. He stopped chasing the next “Big Short” , and continues to focus on individual companies. Sure, he lost his business, but his track record continues to impress!

If you do not let go of your past successes, then you will never be able to embrace the exciting future. Focus on what you can do today- not what you did a decade ago.

“Some old ones just…hang around” -The Man Who Killed Hitler, and then the Bigfoot

Recently, I wrote about Embecta (EMBC), a recent spinoff from the giant Becton Dickinson. Emebcta spun out at a price of $49, and quickly traded down to a low of $27. This is a predictable company that has 15% market share of insulin injection devices. There are supply chain and inflation pressures for the business, and the financials have a lot of noise in them. The business earns 70% return on capital with a normalized operating income of $360M/year. At an 8% earnings yield, the business is worth around $50/share. This is not the greatest opportunity on earth, but it is an interesting spinoff. Enjoy!

Embecta Post

I started reading his first book: How to Sell Anything to Anybody to find out! I will start off by saying that this was not a Bad Conference Read, but a sit-down-and-take-notes read. Normally, I am skeptical of guru-types writing books, but this one was fantastic!

Joe’s secret to selling over 13,000 cars was simple: he had to find repeat and referral business. At least, that was the outcome. His true secret was: get people to like and trust you. In this post, I will not go over how Joe got so many people to like + trust him. Instead I will go over Joe’s why it was important to get so many people to like and trust him.

It all started when Joe asked an undertaker and caterer how many guests they expect for a funeral and wedding:

It’s a matter of experience. You look in the book where people sign their names, and you count, and after a while you see that the average number of people who come is 250…About 250 from the bride’s side and 250 from the groom’s

Girard’s rule is such: every person knows 250 people important enough to invite to the wedding or funeral. This number can be disputed, as theories like Dunbar’s Number argue that we can only have 150 stable relationships at once. Either way- we can estimate that we each know ~200 people.

The second part of Girard’s theory is that people love to talk. About themselves, their experiences, and what they have been up to recently. I do not think that this needs much explaining- everybody has the same favorite topic: themselves.

So if we accept that

1. everybody knows 200 people and

2. people like to talk about their experiences

then we can conclude that every time Joe speaks with somebody, he is reaching 200 people! No interaction stops at one person. Now imagine if you talked to 9-10 customers per week- you would reach over 100,000 potential customers every year!

Knowing this, Joe made sure that every person he talked to would have an immensely positive experience with him- predisposing 200 people to liking + trusting him! If you take this in reverse, Joe knew that if he upset one customer, he would upset another 200 customers- losing tons of business in a few minutes!

So remember- for every person you talk to, 200 are listening. Did you make 200 friends or 200 enemies with your last conversation? The walls may not have ears- but everybody and their moms do! And yes, I am about to quote my great-grandmother in my own newsletter.

Kindness costs you nothing. Except maybe a smile - Rose Marino

What is briefly true today- and what is true forever? Most things that we know to be true become falsehoods (or vice versa!). Finding transitioning truths can provide lucrative opportunities, if done correctly. Although this post is finance-centric, this framework can be used outside of finance as well!

Here is a generally accepted truth: Apple is a great business. Below are some useful (pre-pandemic) metrics to back this up:

• Return on capital of 40% (most public companies do 10%)

• Growing 15%/year with plenty room to expand (most public companies do 10%)

• Gross margins of 40% (most public companies do 30%)

Now ask yourself- is the truth that Apple is a great business brief or permanent? I have talked to people who say that Apple’s competitive advantages are impenetrable! Apple is the best business in the world! Apple will be around forever!

Well- forever’s a mighty long time- and few things can evaporate quicker than a business model. Those metrics I just showed? They describe **Bed Bath & Beyond. **Yes, these numbers are indeed from Bed Bath & Beyond- albeit from 2011-2015. Interestingly, these numbers are similar to Apple’s metrics pre-pandemic!

If we take the same data and spread it out over a few more years, here is what happens to this Apple-like performer (the red toast-looking circle is what I showed you above):

• 3 year return on capital of ~3%

• Growing -9%/year and “downsizing” operations

• 3 year gross margins of 34% (still holding up!)

So what was once briefly true- that Bed Bath & Beyond was a great business by any metric, became a falsehood. Maybe they will one day recover to their former “glory”, but nobody is arguing that Bed Bath & Beyond is a great business.

Investors need to ask: when will Apple start declining? Even if Apple continues to dominate 100 years from now, there will surely be a time when Apple starts to deteriorate. Not knowing these signs will get any investor in trouble!

Other Brief Truths

• Service businesses are the best businesses

• Software is the best business model in the world

• Paying 20x revenue for companies is a good idea

I am sure you are questioning how this helps you. Well- the answer is that finding transitioning truths can be powerful. Tracking inflecting truths and falsehoods can make you a lot of money, if done right (which is the hard part!).

Share A Truth

12 failures. 3 wins. This does not scream “successful” by any measure. But these failures led to a celebrated President. How did he endure so many failures?

In the insightful A Lifetime of Observations , Wooden mentioned how one of his heroes constantly failed. He explained that Lincoln, Wooden’s hero, persisted despite constantly failing in his professional and personal life.

From failures of the heart to losing political positions, Lincoln carried on. This persistence eventually led to the reunification of the United States- which made Lincoln one of the most celebrated Presidents. When one of the greatest coaches ever tells you to focus on the now and shrug off failure- maybe we should listen!

So how did Lincoln persist despite failing 80% of the time? Since my Ouija board is in the mail- I cannot ask Lincoln himself. But I can guess!

Lincoln persisted because he loved his work & knew he could make a difference.

If you love what you are doing and can make a difference- why stop? Or as John Wooden would put it:

Success is never final, failure is never fatal, and it’s courage that counts.

Recently, I was asked about DWAC- the company merging with Trump’s “media” company. I knew about this transaction, but stayed away because the company was being valued at $15B and had revenue of $0. But, I was asked to look at this weird deal- so why not!

The general idea:

• Stock = $95

• Warrant to buy stock at $11.50 = $26

• Warrants should be $83.50 ($95-$11.50)

• Or stock should be $37.50 ($26+$11.50)

You should be able to short the stock and buy the warrants, which would provide a 150%+ return as the stock and warrants hit parity (hint: it’s never that easy). Not too shabby. I wrote the idea out, and created a spreadsheet that would show different payoffs depending on:

• Confidence of the merger closing

• Timing of merger close

• Cost to short the stock (to short, you borrow shares and pay interest)

After an hour or two, I looked at my overly-complicated spreadsheet and felt confident I had the answer. As I went to my friend to show the results- I noticed something wrong. One of the return figures seemed off. This threw the entire output off the rails. However, my overly-complicated spreadsheet was so convoluted- I could not find the mistake!

Like a caveman, I shamefully went to my notebook to write out the trade by hand. Stock price- check. Warrant price- check. Time to close the merger- check. Cost to short the stock- also check.

After about 5 minutes- I had my answer.. There was no need to have a complicated spreadsheet- all I needed was a pen, napkin, and some sense.

Complicating things is not necessary. Maybe overly-complicated spreadsheets made me feel smarter, but so what? The pen is mightier than Excel! I got so caught up in acting smart with overly-complicated spreadsheets- I completely forgot that it didn’t matter if I was smart or not- all that matters is if I can solve the problem!

Drop excel and pick up the pen!

§If you know about a weird deal- send it to mylesmarino1@gmail.com!

DWAC Write-Up

Every year the finance world pauses as we read theBerkshire Chairman Letter written by the greatest investor of all time: Warren Buffett. As always, the annual letter had fantastic insights and quotes. Some of my favorites are below (emphasis mine):

Charlie [Munger] and I are not stock-pickers; we are business-pickers

Berkshire’s total float has grown from $19 million when we entered the insurance business to $147 billion…So far, this float has cost us less than nothing

Absent our American home, however, Berkshire would never have come close to becoming what it is today. When you see the flag, say thanks.

My favorite snippet from this year was the following (emphasis mine):

Teaching, like writing, has helped me develop and clarify my own thoughts. Charlie calls this phenomenon the orangutan effect : If you sit down with an orangutan and carefully explain to it one of your cherished ideas , you may leave behind a puzzled primate, but will yourself exit thinking more clearly.

The orangutan effect is the reason why I publicly post investment ideas and this newsletter. The problem with orangutans is that they rarely write back - however I have been lucky enough to be contacted by some of you concerning my writings. Thank you!

Charlie Munger is 100% right in how explaining an idea to another helps to clarify thoughts. Recently, I saw a pitch of eBay as an investment opportunity. Although my thoughts were jumbled at the time, I could tell thatI instinctively disagreed with the idea. There were a few clear holes in the idea- but I was not thinking clearly enough at the time to make a convincing argument.

So, Friday I sat down to write a 1-page report on eBay in order to clarify my thoughts. After 6 pages of writing- I realized that although the argument made sense to me, it would never make sense to another person. So, I continued to delete unnecessary words, repetitive paragraphs, and irrelevant ideas in order to make the write-up coherent.

The final product is a streamlined product. Although far from perfect, my thoughts on eBay are clear. Hopefully you agree and don’t look like a puzzled primate as you read it!

Here is a cute orangutan

If you have not already tried it- I suggest writing out some thoughts and trying to explain your thinking to another person in simple terms. It really helps to find holes in your thought process- and it helps you find the “core” of your idea! My only caveat would be- don’t pitch a stock to an orangutan. You will get a weird look from the other patrons at the zoo. Talking to an actual person and receiving feedback is the way to go!

eBay Write-Up

For those of you who have checked out mylesmarino.com/books, I have added 3 of my most recent reads. Through this newsletter, I have already mentioned 2: (link) Aiming High and the Innovator’s Hypothesis. The third book is No guts No Glory- the story of Adolf Lundin.

Adolf Lundin was a Swedish entrepreneur, who built one of the biggest oil and mineral empires, exploring in countries that most cannot even pronounce! Below are the biggest ideas from this book:

Ego is important. Be constantly optimistic (yet calm) and competitive, even as you fail. Be more opportunistic and quicker than competitors. Never give up, no pain no gain, find good colleagues and let them share in profits. Have a loyal following.

But what does this have to do with improving my luck?

Well- I have been looking for this book for ages. It has been out of print for well over a decade. Paper copies are rare- and go for several hundred dollars. I tried to get this book through libraries, online PDFs, and even by emailing the Lundin Group- all of which were fruitless.

However, I replied to a twitter thread mentioning

If you want the cliff notes:

• The founder (Spikes) now knows Movie Pass’ strengths and weaknesses

• This could be an opportunity to revive the industry

• Going all-in on Web3

• Black Turtleneck!

§The Good

• Movie Pass as a Discovery Tool: Spikes mentioned a simple + different value proposition for Movie Pass: it is used primarily as a discovery tool for indie movies

• Leverage the cult: Movie Pass’ cult following gives a leg-up when it comes to the rebrand- and Spikes is fully leaning into that advantage

• Shouting out diverse founders: Spikes pointed out that in the Venture Capital industry, only 2.6% of VC funding has gone to women/minority founders - something that needs to change ASAP

• Returning engineers: Bringing back the founding engineering team is a testament to Spikes’ leadership and salesmanship ability

• Tiered plans: Something I thought Movie Pass was sorely missing in its first iteration is on the horizon :)

I think it is clear that the founding team knows that worked and what did not work in Movie Pass 1.0. From giving up control to understanding the true value proposition- there were plenty of lessons learned since 1.0 shutdown. Good on them!

§The Bad

• Movies != Sports Event: Spikes equated the theater to a live sporting event. I agree that seeing blockbusters (Dune, Endgame) can be a good “live” experience. However, for indie movies, the difference between watching at home or in the theater is negligable

• It’s not me- it’s you: It looks like a lot of the marketing, technology, and pricing will still be on the theteres to implement. Independent theteres will struggle with the “Web3” future that Movie Pass wants to exploit

Overselling the industry prospects and giving theteres more issues to deal with is a tough sell for me. This could get ugly!

Speaking of which…

§The Ugly

• Web3 Future: Movie Pass is staking its future on Web3. Maybe Web3 will be a success, but to stake your whole business on this does not seem wise

• Co-op Model: Apparently, there will opportunities for customers to invest in Movie Pass and receive benefits. Selling Movie Pass as an “investment opportunity” to raise money from your customers seems…yucky (note: business models that have done this well such as credit unions require little initial capital to grow!)

• Black Turtleneck! : Why do founders still do this??

Betting your business on Web3 and pitching yourself as a Steve-Jobs like figure (innovative technology, being ousted, Black Turtleneck!) is just plain ugly to me. What happens if Web3 fails? What happens if a co-op is not the right structure? What happens if Spikes stains the Black Tutleneck? Yuck!

§The Weird

• Product Placement: Maybe I hang out with the wrong people- but I have never heard them express interest in the product placement from a movie. Yet Spikes apparently has a notebook to write down what suit James Bond is wearing? That’s just weird, man

• Preshow: This feature will allow direct marketing- using facial detection to make sure you are watching the ad. Look away and the ad pauses! Although this is a big plus for advertisers- it just seems weird to me

Overall, this presentation was about what I expected. Take the lessons from Movie Pass’ blowup, throw in some Web3, and boom. What more can you ask for? Spikes even threw in a Black Turtleneck. Movie Pass is slated for beta use this summer - let’s see how this one plays out! Best of luck to Spikes and his team!

Previously, I wrote about thinking simple + different. Recently, I have been thinking about how I can apply this mentality to Kistos.

According to the most recent press-release:

Kistos is a trading company that has been established with the objective of creating value for its investors through the acquisition and management of companies or businesses in the energy sector.

Ew. Talk about corporate-speak. Management mind as well just spoken in Scottish. Maybe I would have laughed at least!

Here- let me translate:

Kistos buys and sometimes operates energy companies while thinking about the effects to the environment

This is the conventional way of describing Kistos. However, I do not think that this definition tells you much. How does Kistos buy companies? What does it mean to “sometimes” operate? How to they measure their effect on the environment? What type of energy assets are they limited to?

To be fair, I just came up with that description- so don’t blame management!

Although the above definitions describe Kistos, I think the following would be more accurate in capturing the essence of the company :

Kistos creates exit packages for energy companies. Kistos then focuses on maximizing acquired and maximizing their long-term cash flow- like a utility. At the same time, the company focuses on reducing their carbon emissions to a negligible amount.

To illustrate, the same team at Kistos used a similar strategy at RockRose, where they acquired Marathon Oil UK in 2019:

• Marathon Oil wanted to divest UK assets to focus on US assets

• UK assets had $110M in underfunded pensions (aka nobody wanted this)

• Andrew Austin & team bought the company for $140M

• Received $335M cash, 35M barrels of oil

• The pension was later sold for a profit

Marathon wanted to exit the area and RockRose put together a package for them so all sides could walk away happy. Employees got their pensions, Marathon exited the area, and RockRose shareholders were rewarded. After the transaction was completed, RockRose increased the oil reserves by 5M barrels of oil- an example of maximizing the assets like a utility company. Talk about a win-win-win!

So that is it: Kistos creates exit packages and maximizes their assets. Pretty simple to understand! Or- at least simpler than the corporate speak description.

Soon, I will post more about the Meta Game that VCs and Public Market investors play!

But this week, I will talk about the challenges of deal flow , where venture capitalists can only get deal flow through their brand, luck, or tolerance for bad deals. These dynamics are very different from public market investors who are swamped with potential opportunities. Enjoy!

§Deal flow for Venture Capitalists

To get deal flow as a venture capitalist, you need to have a brand, be lucky, or accept below-average deals. Usually, all 3 are at work, but most VCs will get their deal flow predominately from one of those factors.

Nobody comes to me to invest in their start-up, because I have no brand! If you want to be successful as a VC, you need a top-tier reputation, either as an industry specialist (Lux Capital) or add tons of value (a16z). Entrepreneurs have one job as it pertains to their business: don’t die. Most entrepreneurs know enough to look for VCs that will reduce their odds of death. This means that the best VCs are able to decrease the chances of the business failing via their investment. Truth be told, these types of VCs are rare!

The other avenue for deal flow is to get lucky. As in, you somehow found the investment and entrepreneur by pure luck- you raised them, they overheard you talking at a restaurant, etc. This can lead to owning .5% of Microsoft, but it can also lead to many failed investments. Luck is often not repeatable , nor does it guarantee good deal flow. As my brother would say, you have to know a guy.

If you do not have a top-tier reputation or luck, then you will only get deals that the best VCs have passed on. As in, you are the entrepreneurs last resort. They only came to because much better investors already said “no”. This may give the VC an advantage when structuring the deal, but if the company fails, you will most likely lose money despite any creative deal making. Good luck building a great track record with this type of deal flow!

Even if you have a reputation, luck, and are willing to buy into rounds other investors pass on- there is no guarantee the company will want you as an investor! The company has full autonomy to reject your investment.

§Deal flow for public market investors

Public market investors, on the other hand, have too much deal flow. If you are managing less than $1B, then you can probably invest in ~10,000 different companies. Almost none of which can deny you an investment. This leads to boiling the ocean.

Nobody can look at 10,000 companies deeply, and public market investors need to make sure they do not overwhelm themselves. This can be done with filters, which let an investor know if they should continue digging (IE only invest in US-technology companies). VCs have a similar filter, but it is often used to say “no” to companies that are already in their “deal funnel”.

Unless start-ups are stumbling over themselves for a 20-minute meeting with you, venture capitalists will almost always have a worse deal flow than public market investors. I know which game I would rather play!

Here are his first few years against the S&P 500:

Note that Joel’s performance was net his 30% fees!

There is a lot any investor can learn from Joel. From investing to philanthropy- his career has been filled with success. If you read through his works, there are plenty of insights- but my favorite is this:

There are lots of smarter people who can do better spread sheets than I can; there are lots of smarter analysts than me. I think the difference to how we have been able to do it is that we think simply and a little bit differently.

That’s his key to investing. Simple + Different.

As an example of thinking simply and differently:

Host Marriott had physical hotel properties and billions of debt. It was the smaller business to International (1/10th the size!) and was highly levered. For reference- they had $25/share in debt and $5/share in equity- that’s 5x leverage. Yikes!

Who would want this crappy over-levered hotel business over a beautiful income-producing management business?

Joel Greenblatt wants this crappy over-levered hotel business.

His thinking was as follows:

1. Host Marriott’s debt could easily be managed

2. Trump’s miracle CFO would be CFO of Host Marriott (Trump would have gone broke several times if not for this CFO)

3. A 15% move in the asset value would double the stock due to the leverage

4. Insiders owned 20% of Host Marriott’s stock

Simple and different. At the time, most institutions would dump this stock- believing it to be an annoying dumpster fire that would be difficult to explain in their quarterly portfolio review.

So, what happened? Within 4 months of the spinoff, Host Marriott tripled in price. Not bad.

Stepping away from the crowd and tilting your head slightly in a different direction than everybody else can be a huge advantage. Joel used this mindset to compound his money for decades. Many other great investors have simple theses- be simple, be different!

I was watching an interview with Andrew Austin, and he described his highly regulated business as this:

1. Own assets

2. Produce cash flow

3. Stretch assets out

4. Find more opportunities

5. Repeat

This just sounds like a utility business!

However, the business he was talking about was RockRose! If you Google RockRose, or look them up on any database- you will see that they are an oil and gas producer- not a utility.

You may also see this:

Is Andrew wrong? I do not think so. I think that he has a simple yet differentiated view into his business, which provides him with the ability to produce insights such as this!

I have not spent nearly as much time learning about Andrew Austin’s companies as the man himself, but this past week I may have had an insight of my own. Look out in a few weeks when I produce an updated write-up on Kistos, plc! Although this insight does not change my general thesis- it does change how I think about the business and its potential addressable market.

Some of you may be aware of mylesmarino.com/books. The idea behind this page is that most books can be simplified into a few big ideas.

Two large exceptions:

1. Entertaining Books should not be relegated to a single page. Don Quixote would be very boring if it were summarized on a single page.

2. Some non-fiction: Ben Franklin’s autobiography cannot and should not be put onto one page. That would be a grave injustice!

However, there are some books that can absolutely be put onto one page. Mostly because there is only one or two ideas, and the rest of the book is just fluff. Here is one example of such a book:

§The Innovator’s Hypothesis

§What’s the Big Idea?

The Innovator’s Hypothesis: How Cheap Experiments Are Worth More Than Good Ideas has some fantastic marketing ideas. The overarching idea is that you do not need to plan for years just to make a simple, yet profound, change to your business. Instead, it is more effective to throw as many cheap experiments on the wall as you can to see what sticks. When you find something that works- run with it!

The author proposes an actionable framework for companies to adopt- the 5X5 Framework. You give 5 people 5 days to make 5 experiments with a $5K budget that can be tested and rejected/validated in 5 weeks.

§I love this idea

If a company completes the framework once a month, they will have spent $60,000 in a year. What will they have gained? 60 different actionable ideas to grow the business while unleashing their team’s creative abilities! That is 60 “shots on goal”. With so many ideas being thrown around, finding 3 to invest further in is not difficult (Sergio Ramos is more likely to get a red card)!

Using the framework can spur innovation, increase morale, and have significant financial awards. And the best part is- the experiments are cheap!

However, I have a problem with this book. It is 254 pages. That is 253 more than necessary. The idea is introduced a few pages in, and the rest of the book is pure fluff. Here is an outline of the rest of the book:

• Why innovation ideas suck

• Repeat framework

• Warren Buffett uses this framework!!

• Jeff Bezos uses this framework!!

• Other great people use this idea

• Case study

• Repeat framework

• Case study x3

• Repeat framework

• Manufacturing innovation

• A guide to using the framework

• Hypotheses are hard

• Q&A

• This framework will impact the future

• Justify the framework with math

The first 2 chapters of the book are fine. They introduce the author, the problem of innovation, and the framework. But the rest of the book is just a pure slog. When reading, it felt like I was wading through mud and had sand in my mouth.

§What’s the Big Idea?

The other book I read recently was Aiming High: Masayoshi Son, SoftBank, and Disrupting Silicon Valley.

Now this book is totally different from the Innovator’s Hypothesis. Instead of putting the meat of the book in the first few pages and wasting my time with the next 250 pages, this book is 95% pure, uncut meat.

If you rip out 3 random pages in this book, then the next reader will likely miss out on 1 or 2 fantastic ideas that this book presents. There are a few recurring big ideas, but the biggest is probably in the title: aim high.

For example: Masa wanted to earn some money quickly, but did not have enough time to stop and think about a business. So he spent 5 minutes a day thinking creatively to try and build something (which ultimately netted him $1M after a few months/hours). Talk about ambition!

Overview of Book

• Childhood

• Early entrepreneurial adventures in America

• Japan entrepreneurial ventures & building SoftBank

• Today

That is the best I can do for an outline. This book is pretty tight, with few words wasted. I recommend this book, as Masa is a truly interesting character who is constantly in the news for blowing up and rebuilding!

For the uninitiated: Masa Son is a serial entrepreneur out of Japan. He is the CEO of SoftBank , a holding company that invests in technology companies. Masa was the first to invest in the internet at scale, a true visionary. He is mired in controversy (WeWork, Vision Fund, and more). This book does not give a good overview of his investments, but does show how SoftBank was built from a tiny office in Japan to a worldwide conglomerate holding some of tomorrow’s most important companies.

§Conclusion

The thing is- The Innovator’s Hypothesis has some useful information in it. So does Aiming High. However, one needs 250 pages while the other wants 250 pages. Why?

My theory is that The Innovator’s Hypothesis is meant for traveling businesspeople. IE, if you have a marketing conference that lasts 2 days, then this book can be read on the flight, at the hotel, and then on the flight back. This is a very specific demographic (“weekend conference readers”), where readers are supposed to read, digest, and contact the writer for a speaking event all within 48 hours.

Aiming High, on the other hand, does not have the same demographic. It is just a biography, not meant to lead to speaking roles, actionable advice, or anything else of that nature.

The Innovator’s Hypothesis has a totally understandable structure. This is a business, after all. However- it is still annoying to me. I have found that if I ever accidently get ahold of a “weekend conference” book like the Innovator’s Hypothesis - I read up until I get to the framework. That usually takes ~20 minutes, all in all. Then I move on and complain in my Substack.

Hate him or love him, you have to admit that Elon Musk has created significant value for others. His first startup was Zip2 (1995), where the company digitally mapped cities (novel at the time). His most recent ventures in Tesla and SpaceX have pushed the boundaries on electric cars and space exploration.

He has been involved in informational services, digital financial services, and space exploration. But which of these will be the most impactful? As I mentioned in a past post, $10,000,000,000 Yorkie Bars, it may be SpaceX. If humans are able to become multi-explanatory, then SpaceX will be Elon Musks’ largest contribution to humanity.

But what if we don’t become multi-planetary? What if Blue Origin is able to get us to Mars or some other planet first? What will have been Elon Musks’ largest value-creator?

In my mind, it will be getting millions of people inspired to dream bigger with science.

Since the 1990s, there has been a renaissance in computer engineering. However, what was the last moonshot in other areas of engineering- such as mechanical, design, or other? Musk has been directly involved in two breakthroughs (making electric cars cool and space travel) that could be considered moonshots (changing the carbon intensity of transportation and changing space travel).

Even if SpaceX does get us to Mars, Elon Musk inspiring millions may cascade into others becoming bigger and better than Musk. Imagine if in a generation or two, somebody who Musk directly inspired is able to create something as out of reach today as Mars was 100 years ago? Say- instantaneous teleportation? Even some of that could be credited to Musk if he was a direct inspiration. But that discussion is for another day.

There are plenty of things I do not like about Elon Musk- mainly his fraudulent activities. But, I cannot deny what may be his greatest contribution- encouraging humanity to dream bigger and better.

§The Power of Silence

Have you ever asked a question, received 20+ seconds of silence, and been completely OK with it? Well, in a recent interview with Elon Musk, there were two instances (27:42 and 1:00:38) where Lex Friedmen would ask Elon a question and would be met with a silent response, where Elon was thinking.

During these pauses, Lex did did not interrupt, seem upset, or even awkward. Later, Lex explained:

Silence is one of the most intimate things that two people can share with each other, because it’s having a trust that you’re on the same page

When was the last time one of us even took 20 seconds of silence to think about something for ourselves? What about in a conversation? When I ask a question- I almost always expect an instant answer - no matter how complex I expect the answer to be. The same can be seen when I am asked a question- I just answer without taking the requisite time to think in uninterrupted silence. This is a conversational norm that should change!

Yorkey Update

With the updated buyout price,

In the $10,000,000,000 Yorkie Bars post, I write about Yorkie Optical International (HK: 2788), saying that they were mispriced at $0.85/share, due to their pending buyout and underbooked real estate assets.

The independent valuation report came out on December 15th, pegging the net asset value to be $0.94/share- a price I vehemently disagree with. However, the acquisition price was marched up to $0.999/share- a price I still think is low.

However, it is unlikely the price will be increased again. As I write this, shares are traking at $0.97/share. Although I don’t consider this a massive success- it could have been much worse for shareholders!

Now it only takes 63 Yorkey shares to buy a Yorkie Bar!!

§Yorkey Writeup

§1: Sick

Harvard Business Review interviewed Jerry Seinfeld in early 2017, to talk about his most recent series, Comedians in Cars Getting Coffee. And yes, it is just what it sounds like. You can watch it on Netflix or YouTube.

This interview has several gems, such as the following back-and-forth:

Interviewer: Could McKinsey or someone have helped you find a better model [of writing Seinfeld to avoid burnout]?

Seinfeld: Who’s McKinsey?

I: It’s a consulting firm.

S: Are they funny?

I: No.

S: Then I don’t need them

But my favorite line comes from the beginning of the interview:

A big part of innovation is saying, “You know what I’m really sick of?”

As I have gone deeper into the world of startups, “web3”, and more- I have found that many successful creators have had the same sentiment.

You know what I am sick of? How difficult it is to accept payments online1.

Boom. Stripe. $700B+ in payments and $94B in market value created in 12 years.

You know what I am sick of? Centralized and non-programmable services2.

Boom. Ethereum. 3000 apps and $450B+ in market value created in 6 years.

You know what I am sick of? Boring talk shows3.

Boom. Comedians in Cars Getting Coffee. 11 seasons and 100M views in 9 years.

§Full Interview

§2: больной

Tinkoff, Russia’s leading digital bank, celebrated their 15-year anniversary by releasing a documentary about the company and its founder, Oleg. They are a 100% digital bank with nearly 20M users and a leading mobile app. They basically created digital banking in Russia- which grew the category and even helped their largest competitor Sberbank!

The story is fascinating- from learning how to reach 100% of Russian citizens by foot to realizing your vendors suck and building everything for yourself(you know what sucks? Our vendors).

This company has constantly innovated and created fantastic products for their customers. A lot of their innovation and iteration on their products is from direct customer feedback- either to Oleg himself or any of the business unit’s heads. They constantly learn what their customers need by asking “what sucks” and then improving on it!

I wrote this post because during the documentary, Oleg says (translated):

We made people realize that it wasn’t bloody worth it to go to branches and stand in line. The ability to take your phone, bam, open it and solve everything right there- that’s cool (1:37:30)

If you are looking for innovation- ask what you are sick of! Or hoard cash and stop innovating.

§Enjoy the new year!

1

https://techcrunch.com/2012/05/20/the-story-behind-payment-disruptor-stripe-com-and-its-founder-patrick-collison/

2

https://about.me/vitalik_buterin

3

https://hbr.org/2017/01/lifes-work-jerry-seinfeld

In my last post Nobody Has Original Thoughts- I presented Peter Thiel’s favorite interview question:

What important truth do very few people agree with you on?

Like all interview questions, this one sucks.

At least, it sucks if you are looking for a legitimate insight or answer. The premise behind this question is that being a contrarian is fundamentally good, which Peter Theil probably (?) does not believe.

What Peter Thiel is actually asking is “are you self-aware and an independent thinker”.

However, imagine an interview that goes like this:

OK now we are on to the two most important questions:

1. Are you self aware

2. Can you think independently?

The reflexive answer (if you want the job) to both of those is an immediate “YES”! However, what use is that? Even if you told a single story to go with that “yes”, there may be a million stories that prove that a truthful person would say “no”.

So, Peter Thiel’s question is necessary , despite it not directly asking the proper question. Plus, you will sometimes get interesting answers.

§2: The Bad Question

What makes a question bad?

To me, a bad question is one where the answer does not matter. As in, nobody’s thoughts or actions will (likely) change because of the answer.

Some questions are, of course, not meant to provoke anything but are instead pleasantries (how’s the weather, how are you).

Peter Thiel (pronounced Teal) is a legendary entrepreneur and investor. He co-founded PayPal (now worth $225B), Palantir ($38B), and was Facebook/Meta’s ($917B) first outside investor at a $5M valuation.

Peter Thiel is also great at not paying capital gains taxes! (You may recognize this article from a previous post)

In _From Zero to One, _Peter Thiel lays out his favorite interview question:

What important truth do very few people agree with you on?

§Before you continue reading- take a minute to think about this question!

Now ask:

Why is this a hard question to answer?

1. We are taught that truth is conventional , that everybody agrees on it!

2. A “correct” answer draws criticism & rejection- and people hate rejection!

3. We lack self-awareness in thinking our answer is unique

4. We have few original ideas

His answers:

1. All businesses are monopolies or in perfect competition(Competition is for Losers)

2. There are still secrets to be discovered (there are many great solvable questions)

3. The future will be defined by innovation not globalization (globalization is copying how others build wealth, technology creates new methods of wealth)

2: My Answer

I am not sure I have a great answer to this question. It is certainly a tough one for the reasons laid out above!

However, my immediate answer would be something along the lines of:

All actions, thoughts, and desires are not intrinsic- but are artificial reflections of other’s actions, thoughts, etc. The reason you or I do anything is simply us copying others.

In short, nobody inherently knows what they should desire- so we imitate others (who have imitated others). Our wants are not a reflection of the unique self - but are instead a reflection of our closest friends and family.

If my question caused immediate dismissal, disagreement, and rejection- then I have succeeded. If not- then back to the drawing board!

§What is your answer to the question Thiel poses?

So how did I use this framework recently?

When trying to start the student-run venture capital fund, I set out to find the core of William & Mary’s entrepreneurial network. Whoever was part of this core would have an outsized impact on this idea (more correct than I would know).

After asking around, I found this person- the core of entrepreneurship at William & Mary. He connected me to a few other people. One of them, Agustin O’Connell, has a start-up STG Visions. They use AI movement metrics to evaluate football players and give actionable suggestions for players, coaches, and recruiters.

Agustin recommended that utilize Twitter to connect with people- and surprise, surprise, some of you came from Twitter! Specifically, he recommended that I reach out to Mac the VC (MacConwell)- a venture capitalist who was once homeless and raised ~$10M on Twitter!

I started listening to Mac’s interviews, and came across a recent TwentyMinuteVC interview. In this episode, he mentions a name oh so briefly- Will Zell.

After sending a few messages back and forth- I was able to have a 30 minute call with Will.

Chinafrica is the idea that China and Africa are being coupled together- and that China will be

2: Implications of Chinafrica

Takes ugandan airpot

China:

https://www.wsj.com/articles/china-seeks-first-military-base-on-africas-atlantic-coast-u-s-intelligence-finds-11638726327?mod=itp_wsj&mod=djemITP_h

Nitya paper

§1: The Turkey Problem

Nassim Taleb in “ The Black Swan ” describes this problem (emphasis mine):

Consider a turkey that is fed every day. Every single feeding will firm up the bird’s belief that it is the general rule of life to be fed every day by friendly members of the human race ‘looking out for its best interests,’ as a politician would say. On the afternoon of the Wednesday before Thanksgiving, something unexpected will happen to the turkey. It will incur a revision of belief.

So to be a Turkey, you need a few elements:

1. A belief

2. The belief to be continually reinforced

3. An unexpected occurrence

4. Belief revision

§2: A Recent Turkey of Mine

There is no going around it- being a turkey sucks big time. However, at one point or another- we are all going to be a Turkey! And by that I do mean in both the goofball and the “fed until head is chopped off” way!

From what I have seen- the only way around this problem is to either

1. Leave the farm before the butcher comes or

2. Pray that there is an afterlife for turkeys

However, this presents a problem: How do you know that it is almost Thanksgiving and the butcher is coming?

I am not sure it is possible to really know when to shut something down. Recently, I have had to shut a few major projects down to focus down on what I really enjoy doing! Below is one recent turkey of mine.

1. I believed that I could start student-based venture capital fund

2. Every day I got feedback and tweaked the model, showing continuous progress that this could work

3. I came to the realization that this is not what I really wanted, and that this organization could not be structured to fit within my school

4. I revised my belief that I could start this, and decided to completely pivot my model

Have you been a Turkey recently? :)

Anti-Mimetic—New Ways of WantingPeter Thiel, Irresistible PariahA version of this essay was originally published in Unherd in September…Read more3 years ago · 9 likes · 4 comments · Luke Burgis

Model CitizenIs Crypto Bullshit?Read more3 years ago · 19 likes · 14 comments · Will Wilkinson

A couple months ago, I had the pleasure of having Mohnish Pabrai Zoom into William & Mary for Q&A with students! Mohnish is an entrepreneur, investor, and philanthropist.

Mohnish founded TransTech in 1991 with $100,000- and sold it in 2000 for $20M. In 1999, he started thePabrai Investment Funds, which has grown to over $600M in assets under management after compounding for north of 13% for the past few decades. In 2007- he was the catalyst for theDakshana Foundation, which takes the brightest and the poorest Indian children and prepares them for the IIT and Medical School exams (MITs of India with <1/2 the acceptance rate). Quite simply, he has been a fantastic business & social entreprenuer!

The Q&A was wide-ranging. From tips for any startup, avoiding self-pity, and how to invest in philanthropy, Mohnish touched every corner of his experience. This was a fun experience for me and I am glad that several students were able to come and enjoy it too!

§Watch Here!

After the Q&A- several people asked me about Pabrai’s holdings. I do not know all of them, but below is a list of the last reported holdings. There are some inaccuracies- such as the fact this is not updated to show his recent Prosus purchase (information here).

Also- this is not advice to buy any of these holdings. Do your own research!

2: Philanthropy Done Right

The Dakshana Foundation recently released its 2020 Annual Report, which gives a great overview of the foundation and the philosophy that Mohnish (and his partners) have of giving.

What have they accomplished in 14 years?

• IITs have accepted 2,732 Dakshana Scholars (61% success rate versus 2% acceptence rate)

• Medical Colleges accpeted 911 Medial Stream Scholars (67% success rate versus <1%)

This has been accomplished by constant experimentation and iteration on the model- with a relentless focus on measuring the ROI of their investments. It also helps that Dakshana is self-sustaining at this point!

The foundation has a clear focus on reducing costs to maximize their ROI for each scholar- with the average cost to produce an IITian or a Doctor being $4,000.

These scholars go on to work at Google, Amazon, Paytm, the Indian Government, or many other well-paying jobs. The average graduate makes $16,000 annually their first year out- and if we use that as a proxy for their contribution to society- then with 40 years of work at 5% annual salary growth, the average IITian contributes ~$2M to society- a 500x return over 40 years!

There is much more data out there on Dakshana- and I reccomend you check them out. They have a facinating philanthroptic model- and it’s working!

§Read Here

On 11/14/2021, I published a recent investment idea, Yorkey Optical International. No, they don’t make Yorkie bars. No, I will not buy you a Yorkie bar. Fun fact: it costs ~72 Yorkey Optical shares to buy a Yorkey bar!

The situation can be summed up as follows:

On October 15, 2021, the directors of Yorkey Optical agreed to sell the company to Asia Optical International, a 20%+ holder for $0.88/share. Shares can be bought for $0.85/share. The business is probably worth $1.10, and can be liquidated for $0.93. A large holder, who can single-handedly block the transaction, has a similar valuation- which means that a) the bid price will be raised or b) you are buying an OK business below liquidation value.

§Read the entire write-up here!

2: Thoughts

§$10,000,000,000

That is how much Meta (previously Facebook) will invest in the Metaverse over the next 12 months. $10 billion will be going towards their Reality Labs segment- which includes hardware, software, and content1.

Two Thoughts Here:

1. Think about this: how many people can really say that they are trusted enough by the people around them to spend 20% on a single bet that may not even pay off? T his shows the power of Zuck (and super-voting shares).

2. Is Meta showing their hand too soon? In a recent talk with Boston College students, Mohnish Pabrai mentioned something that Warren Buffett said to him:

A whale only gets harpooned after it surfaces

The idea is that nobody will compete with you if they do not know that you exist. Think Amazon Web Services. They gained significant market share in the cloud computing market, as Microsoft and Google just lollygagged. Then, in 2016, Jeff Bezos told the world that they hit $10 billion in revenue. Suddenly, Microsoft and Google started investing more in their cloud services businesses, making business even harder for Amazon!

I am nervous that Meta may have played their hand too early in revealing how big and how quick they are going into the Metaverse. Now, other companies will start investing in the Metaverse even more!

However, if the board can have this much trust in the Zuck, why shouldn’t I? He always seems trustworthy!

Dad- this is your cue to stop reading!!

§Will Moviepass Make a Return?

A running joke in my family is that my dad ruined Moviepass for everybody.

For about a year- my aunt talked about how Moviepass was the greatest invention on earth. For $10 a month, you could get unlimited movie tickets at most theaters! That is a fantastic deal for movie-goers! However, it was not a fantastic deal for shareholders:

The thing is, my aunt had been talking about this service at every opportunity- and my dad was clearly interested. Finally, he capitulated and bought Moviepass. You can see about where he bought Moviepass- the grey arrow in the picture.

As you can probably guess, Moviepass was too good to be true and promptly shut down after my dad joined- leaving the only explanation to be that my dad cursed the business! I don’t think my aunt can ever forgive him for such as curse.

However, it looks like Moviepass may make a comeback! The co-founder bought the business back in 2020- for less than $250,000. He plans on re-launching the service soon . For those of you who want to be notified when the service launches (@Aunt Amiee), **here is a link. **

For those of you reading, make sure that this information does not get back to my family. We cannot afford to lose Moviepass again!

§Full Article

1

Facebook Q3 2021 Earnings Call

2

https://www.usg.edu/galileo/skills/unit07/internet07_02.phtml

3

1983 IBM annual report

One customer complained that Pax’s point of sale systems were moving unauthorized data packets, and were either being used as a Trojan horse or were security-compromised. The stock fell 43%+ in one afternoon before trading was halted! Fun stuff.

The situation raises a lot of questions, but it is a serious concern if Pax is security-compromised. Management have reassured investors that there is no material breach in their system- and that this was a one-off issue. Many of Pax’s large customers in Latin America (Mercardo Libre and Stoneco) said that there was no reason to be alarmed, either.

It is never a good thing when the FBI show up at your door unannounced! Hopefully this is a one-off blimp. However, if this is a larger problem it has serious implications for the point of sale industry. Pax Global is the #3 player, and is gaining market share over competitors. They are security complaint in every country they operate in (which is most of the world). If there was malware either installed on-site or remotely, then there may be some major issues for all other point of sale devices worldwide!

Two Thoughts:

§Urgent/Important

Here is something that I have been using recently that really has helped productivity:

This is not only an exercise of productivity, but also one of discipline. Being brutally honest with what is important and what is not is tougher than it seems! I was recently able to ask Brad Martin (ex-CEO of Saks, philanthropist, and author of Myles’ Pesky Friends) a few questions, and he mentioned that:

In life, you can only have 4 or 5, maybe 6 priorities. Throw everything else away and focus on those. You will be amazed how much can be done in a couple years if you just focus on those.

When he was the interim President of the University of Memphis for 1 year, he attributed a lot of success to the fact that he laid out 6 priorities and worked only on those. He was told that as President, he had certain administrative duties (dinners, speeches, etc). However, this was not one of the 6 priorities. So, he delegated 99% of those responsibilites to the Chief of Staff!

Something to think about…I encourage all those reading to try out the urgent/important matrix and let me know what you think!

That’s So Meta

So…Facebook just changed their name to Meta to show their commitment to building the Metaverse platform. Wild stuff.

I have a ton of thoughts surrounding this change and Meta’s future plans. I watched the Keynote Presentation, which I thought was excellent. Expect more thoughts in the next few weeks on Meta, but I thought of this meme when I first heard the announcement:

“In final bid to avoid anti-trust regulation, Facebook changes name to Meta”

Anyways, here is a tweet I saw that shows what augmented reality can do even today. I expect to write more about the Metaverse considering how its such an interesting topic. The Keynote Speech gives a fantastic overview to what can happen, even if it is a bit cartoony. The implications of the Metaverse are exciting to even think about!

Greg Madison 🔜 AWE @GregMadisonWhen we stop to think about the future, beyond the limitations of any device, there will no longer be any AR, MR or even VR… There is only a sliding scale of perception, along the spectrum of realities.

[2:26 AM ∙ Oct 29, 2021

1,069Likes271Retweets](https://twitter.com/GregMadison/status/1453911010914422787)

After a few months, I finally made this write-up public. The thesis is as follows:

1. The unit economics are fantastic

2. The reserves are undervalued, especially considering gas prices

3. Management is fantastic

4. There is plenty of room to grow

5. Kistos will be an ESG beneficiary

§Click here for the write-up!

There have been plenty of updates regarding Kistos, and I will add those to the website shortly :). Stay tuned!

Two Thoughts

§ESG Paradox

What is the Environmental, Social, and Governance (ESG) movement trying to accomplish? I think the goal is to invest and uplift companies that make the world a better place.

However, we must keep in mind Newton’s Third Law:

For every action, there is an equal and opposite reaction

What does this mean in terms of ESG? Well, for every company that is uplifted, there must be a company that is suppressed. In practical terms, the companies that are being uplifted are the renewable and clean energy businesses of the world. Meanwhile, the companies that are suppressed are the comparatively dirty coal/oil businesses, which provide 2/3 of the world’s energy!

But what happens if you destroy the supply of coal, oil, and even gas?

In his most recent letter, David Einhorn states:

…It will be the poorer countries and citizens that go without. Inflation, in general, disproportionately affects those with the lowest incomes. The unpleasant truth is that often the goals of ESG run counter to the goals of reducing or eliminating poverty and wealth inequality.

This needs to be fixed!!

§Click this sentence if you want to read the full letter

§Mandate to Rule

In a previous post I wrote about the idea of a Mandate to Rule- how every leader can only rule contingent on they accomplish a few things for their people. I claimed

The Chinese Communist Party believes their mandate to rule comes from the continuous improvement of the entire society

Essentially, the Chinese Communist Party cannot afford stagnant or declining growth. In a recent interview with Zero Hedge, famed short seller Jim Chanos echoed my views, stating:

JC: Since we started following China at the end of ’09, this is the fourth time that they’ve attempted to slow the real estate market down, because they do know that this is going to be basically too big to deal with if it keeps growing at the rate it’s growing. But every time they’ve done it, the economy has hit stall speed very quickly, and they panicked. They went from hitting the breaks to hitting the accelerator. That’s why we’ve seen higher levels of real estate. The idea that “I can’t lose buying apartments” became ingrained with bankers, real estate speculators, and the public.

It should also be noted that many Chinese see buying another property as a “step up” in terms of wealth, even if the apartment does not produce significant income compared to price paid. What if the CCP tries to slow down the buying of apartments? Well…violating your mandate to rule has historically not been a wise course of action!

The whole interview is great, especially if you are interested in Asia/Evergrande and that whole fiasco. Read it here.

In April of 2021, I wrote up Cambria Automotive (an auto dealership collection), a merger arbitrage situation. The general idea was, the management buyout team did not have enough votes to take the company private, meaning they would have to raise their bid or let the public shareholders keep the company.

So what happened? The original buyout price was 80p. Management ended up increasing the offer to 82.5p OR participation in the private company. What I thought was going to be a relatively simple investment turned into a complicated story of misaligned executives.

The original price was too low. The real estate and cash ALONE the company owned was worth 75p+, and the actual business generated ~10p in earnings each year. For those of you old enough to remember 2020 and 2021, used car prices increased by ~50% in a year due to a variety of reasons, such as supply chain shortages, logistics difficulties during COVID, etc. So, with a higher gross profit, the business was probably generating $20M+ in earnings, making this super cheap!

However, management was completely misaligned. The management team who wanted to buy the company owned ~40% of the shares. However, they thought that the company should be run for themselves instead of the shareholders- this thought was conveyed through a few interviews.

Good management counts for something!

Two Thoughts:

§Is Bitcoin Working?

This question was inspired by this twitter thread, where the creator of Dodgecoin states their thoughts on what is wrong with the current Cryptocurrency market.

One of the main criticisms is that Cryptocurrency was supposed to alleviate some issues that rise with capitalism , such as corruption, fraud, and inequality. Instead, Crypto has these same issues but takes off the “guard rails” of regulation- which only exacerbates the above problems.

It kind of seems like a catch-22 to me. Maybe I just don’t understand crypto (yet)!

§Check Your Bingo Cards!

Who had Exxon’s management team winning the honest management awards in 2021? Not me!

Apparently Citigroup’s co-head of the new natural resources and clean energy transition group approached Exxon to suggest they commit to a net-zero emissions goal. Management (again) rejected this proposal, saying that they would not commit to a goal they know they cannot achieve. Unheard of in energy companies!

That is when the Citi investment banker said the following (emphasis mine):

“Most companies today who have committed to net zero don’t have a plan on how to get there , but they’re working to get there.”

So with many of the largest energy companies nowadays committing to net-zero emissions and not even being on track to hitting the goal, what will they do?

The quickest way for an oil major to reduce their emissions is to sell their assets. However that presents a major problem: selling assets does not change total emissions. It only moves the blame from an oil major to another company.

In addition to that, the only buyers of those assets would be organizations not concerned with emissions , as many of these properties are inherently high carbon emitters. How many organizations will not be concerned with emissions in 10 years? My guess is very few. So will we have forced sellers of major energy assets?

Putting this all together, it is possible that closer to 2030, we will start seeing many oil majors selling off their carbon-emitting assets at low prices. It is either that, or managements will have to revise their carbon goals. Which is more likely to happen?

Bloomberg Article

In August of 2020, I started my website: mylesmarino.com. The very first post(now deleted), was my thoughts on AFA Protective Systems’ business model and the challenges they face.

For a bit of background: AFA Protective Systems was founded in 1848, and was a telegraph operator until 1875, when they started to transmit fire alarm signals. Since then, they have undergone many mergers and acquisitions, creating a systems monitoring business (think fire alarms, security systems, etc).

I was critical of management, as I thought they were mis-managing what could have been a fantastic business. They seemed to perpetually under-earn, and continuously perused small municipal contracts instead of the more profitable commercial contracts (like the JFK airport). A lot of the problems I identified were, in my view, only there because of management’s failures.

So why write about this now? At the time I wrote up my criticisms (August 2020), the stock was at $190/share. On September 3rd, 2021, the stock closed at $720/share (+279%) , on the announcement that CTSI will acquire AFA Protective Systems for $743.50/share. Maybe I should keep my mouth shut next time and let management do what they are good at!

Two Thoughts:

§Universally Remembered

Here is a depressing thought: none of us reading (or writing) this will be remembered in the year 4021.

However, some people born in the last 200 years will be remembered 2000 years from now. Who, from 1821 onward, will be remembered 2000 years from now?

For reference, here are some people who lived ~2000 years ago who are universally remembered:

• Buddha (623 BC)

• Confucius (551 BC)

• Socrates (470 BC)

• Plato (428 BC)

• Aristotle (384 BC)

• Alexander the Great (356 BC)

• Julius Caesar (born 100 BC)

• Jesus (4 BC)

So: who, born within the last 200 years, will be remembered in the next 2000 years? Looking at the above, you either need to be the founder of western philosophy , a dominant religion’s leader , or an impactful conqueror.

If there was a new category for somebody to be remembered in 2000 years, then I would think that person would have to be inter-planetary. Somebody who played a large role in getting us off this rock and living on another planet.

Who qualifies then?

• Einstein (1879)

• Stephen Hawking (1942)

• Maybe: Jeff Bezos (1964)*

• Maybe: Elon Musk (1971)*

I would be interested in hearing some other opinions on this: who will be remembered in 4021? You can let me know who you think via email at mylesmarino1@gmail.com, or comment at the bottom of this post.

*contingent on if either of them lays the ultimate foundation for space travel

§Inspired by

§Glass House

I love this interview with Brunello Cucinelli. There are a ton of takeaways and quotes, but my favorite is this:

Mankind is becoming more ethical, but it is not happening because man has decided to become better than he was 100 years ago. It’s because we know we live in a glass house where everybody can see.

Now that data has become more accessible, we are finding out new things about each other(for better or worse)! The example Cucinelli brings up is how his father did not know if his employer had a villa on the sea- but today anybody can look at whoever house on Google Maps.

Cucinelli argues that this new age of information makes everybody act more authentic - because we implicitly know that if we are not authentic, our friends, family, and colleagues will find out!

The only thought I really have on this is that Cucinelli is probably right- but it is broader than just what our associates think of us. For example, scientists around the world can now collect, share, and collaborate on data on a scale that was impossible 100 years ago. The same thing goes for journalists, policy makers, and more. Living in a glass house has a lot of benefits!

§Inspired by

On December 2020, I wrote up Collector’s Universe. This was a great business getting better that had an activist investor. The card authentication market was growing rapidly, and everything looked great!

Then a take-over offer came. Fortunately, the take-over offer seemed like it would be rejected by shareholders due to the low-ball offer, which created an opportunity.

One thing I did not go over in my write-up was the corporate governance issues that plagued the company. If you’re interested in this topic, let me know and I can fill you in/write it up on my website. In the meantime, you can read the activist’s open letter to the board (June 18th, 2020).

§Collector’s Universe

Two Thoughts:

§Optimism

A fantastic article I read this past week:

Bad things happen fast, while good things take longer…So most news, in any media, even responsible ones, is bad news. If newspapers and websites were only updated every 50 years, they might report: literacy is up, longevity increased, violence is down.

Kevin Kelly: The Case for Optimism

Is Kevin Kelly on to something? Is the daily news override inherently bad? Should the interval in which we consume news be lengthened?

News does tend to have a short shelf life. What were the topics in newspapers 50 years ago?

• Complaints about Nixon’s wage & price controls

• Having fun at softball, despite the score

• News on mergers, tax changes, and factory orders, and more

• Dick Gerstenberg may become General Motor’s CEO

§The Case for Optimism

§Ted Weschler

No comments, except for “wow”

ProPublica released a story recently, revealing the amount invested in some of the largest tax shielded individual retirement accounts (IRA). Among the largest was Ted Weschler, who runs ~$10B of Berkshire Hathaway’s portfolio. His IRA grew from $70,000 in 1989 to $264,000,000 in 2018, a 33% annual return. A tremendous return, where every $1 invested turned into $9,000!

If you want to read more about him, I have a section on my website. He is in the second tab, all the way at the bottom. There are numerous articles & case studies about Ted! You could also Google him and find some of the articles about him and his IRA.

“Start early, maximize the (employer) match, invest 100 percent in equities, and ignore all the other noise.”

Ted Weschler

§Read More About Ted

RE: Software

A few weeks ago, I wrote about how software may be eating software over the next few years. The main idea was that there are so many software companies who offer basically the same service, and don’t add any true value.

I gave the example of there being tons of alarm clock apps on the app store, despite all smartphones coming with an alarm feature.

Last week, I saw this on my twitter timeline:

But not to worry- the multiplication function is free!

Background : In a previous post on my website, I wrote about Crossroads Systems ($CRSS), describing the business a year from now after their acquisition of a community bank closes.

The pandemic provided an opportunity for Crossroads’ to distribute PPP loans, resulting in an earnings boost of $50/share (a small increase over the typical $1/share in earnings). At the time of the original write up, I did not realize that this windfall was going to happen.

Since the company has changed a bit since the original post, I decided to write up the company again , with a new outlook and analysis. Take a look!

§Crossroads Systems | Updated

Two Thoughts:

§Mandate To Rule

Every leader has the same problem, whether they realize it or not. They need to justify their leadership. Just declaring “I am your leader” will not result in anybody following you- to stay in power, you need a reason. A justification.A mandate to rule.

The Mandate of Heaven is the political philosophy that legitimized many Chinese dynasties from 1046 BC. The idea was; Heaven blesses the current king of China to rule, until natural disasters start to occur. Once these disasters start happening, the ruler loses the Mandate of Heaven, and is considered unworthy. Once the leader is largely considered unworthy, the people are allowed to overthrow the current ruler and establish a new dynasty.

What are modern equivalents of the Mandates of Heaven?

Trump seems to believe that he could rule if the U.S. economy did reasonably well. The Chinese Communist Party believes their mandate to rule comes from the continuous improvement of the entire society**.** For Saudi Arabia, it is likely the continuedcontent of the middle class that allows the current political regime to stay in power.

Who is your winning coalition? What needs to be done to keep them from overthrowing the current leadership? If you don’t know the answers to the above questions…the Bronze Age Chinese might overthrow you!

§Software Eats…Software?

The past decade has seen the rise of software companies, as they “eat the world”. Will the next decade be defined as software eating software?

It has been 3,650 days since legendary entrepreneur and investor Marc Andreesen wrote the now famous article; Why Software Is Eating the World. The article is worth a read, at least to look at the parallels between August 2011 and August 2021. If you want the short version of the article: Software businesses are either replacing the biggest companies in the world by being better at solving problems.

Today it seems obvious- Marc was right! Software did eat the world! I challenge anybody reading this to not engage with software for 10 hours straight. It’s not possible! Software is constantly shaping the world around us, engaging people so often that it is often forgotten.

However, this poses a question- has software gone too far? It seems to me that there are at least 20 quality software options for…well…anything!

When I search for “alarm” on the Appstore, I saw 39 alarm apps in a row that were rated 4+ stars. All these apps have in-app purchases as well. Who pays for an alarm when your phone has a default one that works just fine? Too many solutions for one problem!

Banking. Railroads. Oil & Gas. Bikes. All major industries go through the same cycle- initial adopters lead to a breakthrough in technology which leads to a thriving industry and eventually consolidation. With all these software solutions, will software companies stop eating the world and start eating…each other?

If the major winners in the 2010s were software companies, will the major winners in the 2020s be software companies that acquire other software companies? Is the business getting saturated? Or are software companies adding value by drilling into different niches?

RE: IPOs

How much wealth can IPO investors capture? The results of a 2020 paper show that IPOs generally do not create wealth.

Since last week’s post about Robinhood’s IPO, I have found 2 few papers on IPOs. The first is titled: Lifetime Earnings, which provides an analysis of 10,129 domestic companies who had an IPO for the years 1975-2019. The IPO price is then compared to the cumulative earnings of the company (lifetime earnings) and the value of the company if it is acquired/merged.

In the aggregate, lifetime earnings roughly equal the IPO price, which means that on average, IPOs are priced correctly. However, the average is skewed , and these results are the result of a few companies carrying the load of the others (IE Facebook and Apple). Only 8% of stocks report enough earnings to cover their IPO price. That number jumps to 32% when the stocks are acquired/merged.

The average (median) ratio of lifetime earnings per share, including terminal value, to lifetime stock market wealth created per share is 0.61 (0.47). Thus, stock price-based wealth creation significantly overstates the underlying earnings-based value added.

So what? Well, this paper shows that most IPO investors will not recuperate their investment over a multi-year period. However, there is a small cohort of IPOs that pay off big time compared to the rest of the IPOs. The best way to make money from an IPO is to buy into a company that will be acquired/merged in the next 15 years. It’s either that or find the lucky 8% of IPOs that pay back in earnings!

_If you are interested in this stuff (you nerd), then I would recommend you read the full paper or at least the abstract. I only summarized the overarching conclusion, but there is a ton of more interesting data to be taken from this paper.Here is a paper that tries to summarize several other IPO-related papers. _

Graftech was an idea that I originally wrote up in 2019. I touted the idea around, and had an email chain with a friend, Abe, discussing the idea. He also had an investment idea (PAR Technology), that I was not a fan of. Since my initial write-up,**** $1000 invested in PAR would be worth $2,376, and $1000 invested in Graftech would be worth $937.Sorry Abe!

Looking back, Graftech was a bad investment. It was an OK company in an OK industry at an OK valuation. Not my best idea, but not my worst. However, it is important to revisit your mistakes, no matter how painful or embarrassing. Part of the reason I am writing this newsletter is so I can do just that! It will be interesting for me to look back in a few years and read my thoughts/opinions, thinking how dumb I was back in August of 2021.

Anyways, the Post-Mortem and original idea is linked below. If you have any other thoughts regarding Graftech/Post-Mortems, let me know!

§Graftech Post-Mortem

Two Thoughts:

Should Music Be Personal?

Recently, the Wu-Tang album that was owned by Martin Shkreli was sold by the U.S. government to an anonymous buyer for an undisclosed amount (if you happen to be that buyer, please call me ASAP). Unlike most (all?) other published music, there is only 1 copy of the album. No Wu-Tang member has heard the album in its entirety (except for RZA). As is on the album’s website, RZA writes:

Mass replication has fundamentally changed the way we view a piece of recorded music, while digital universality and vanishing physicality have broken our emotional bond with a piece of music as an artwork and a deeply personal treasure

If you don’t know about the album, I would recommend at least reading the wiki page. It is seriously cool.

Once Upon A Time in Shaolin

But I think RZA brings up a great point- would having less copies of music make the song more appealing to the listener? I am sure that there is some allure to having unique copies- but should art, if published in the public domain, be personal? And if yes, does mass music distribution really damage this personal connection?

Buying Initial Public Offerings (IPOs)

A friend recently texted me:

Invest in robinhood ipo? Thoughts? I am thinking I could ride the frenzy early. But I want your advice

As many of you know, I seldom (read: never) give advice on specific stocks. I do share my notes (see: mylesmarino.com) on some companies, but I rarely say if I think it provides a good investment opportunity. So, instead of answering the question, I side-stepped it!

Instead, I talked about how IPOs put the retail buyer at a substantial disadvantage. Whenever you buy shares in a company, you are implicitly saying that the person selling you Y stock at X price is wrong about its prospects.

Who is selling Robinhood stock?

Well the company itself, Robinhood, sold 52.3M shares, the two founders are selling 2.5M shares, and the CFO is selling 125K shares.

Who chose the price?

The management team in conjunction with J.P. Morgan and Goldman Sachs, where the #1 and #2 smartest investment bankers work (I’ll let you think about who is the #2 there!).

What does it matter?

If you buy this IPO (or any other large ones), you are saying that the management team, J.P. Morgan, and Goldman Sachs are drastically mispricing this company. That is a tough bet to make. Maybe you are right, maybe you are wrong. But typically, it pays more to be the seller in IPOs than the buyer.

Funnily enough, these dynamics are almost always flipped in spinoffs. No wonder why over a 3 year period, spinoffs as an investment class trounce IPOs!

That being said, money can be made by investing in IPOs. However, most success in this area require the investor to look out 3+ years (IE, past most investment bankers who are pricing the security), which is fundamentally difficult to do in many of these companies. If you want to read the Robinhood prospectus, here you go.

RE: Robinhood IPO

Fun fact, Robinhood IPO’d at $38/share, and is currently (9:48am at 8/4/2021) sitting at ~$73/share (not to mention trading was halted after a 40% surge, so it is actually above $73/share) :)

The most recent write up: Kaspi.Kz

Kaspi is the leading payments, marketplace, and fintech company in Kazakhstan, with plans to expand their Super App throughout Central Asia. The Super App serves as a single entry point into a variety of services (banking, P2P payments, shopping), that people use on a daily basis. The apps work together, creating a powerful business model that is tough to compete against.

I have been sitting on this write up for a while, and saw the opportunity to post due to a competition (which I unfortunately did not win. If you want to see the finalists, here is a link to their pitches). Kaspi is set to report earnings on 7/26/2021, so some of the most recent data may be a bit stale when you read this. (Q2 Update is…pretty good).

Kaspi Write-Up

Two Thoughts:

Why does social media have such horrible search features?

Using the in app search feature for many social media sites…suck. The best way to search for a specific post on Facebook, Twitter, or Reddit all seems to be just using Google. Why is that? All of the above companies have great tech teams and deep pockets, but they cannot seem to get search right!

Why doesn’t the West use Super Apps?

There are Super Apps throughout Asia, most notably in Kazachstan (Kaspi), Russia (Tinkoff), China (WeChat & Alipay), and Southeast Asia (Grab & Go-Jek). Out of 4.6 billion people in Asia, there are about 2.26 billion monthly active users using the above Super Apps.

We have nothing equivalent to that in the US or EU. Blackberry tried to make a Super App, but that did not work out. Facebook has tried something similar and will try again this decade, but there is so much regulatory scrutiny that it will be tough for them.

Website Update

Recently I was able to update my website to make it a bit more streamlined. I have reduced the number of pages that are available, and increased the usability of some of the pages. I will continue to make changes, and will probably continue to make posts (I have an upcoming update on Crossroads Systems).

I am coming up on having the website for one year, and I am glad that it has been received so well. Expect more updates soon!

Thanks for reading this first post. If you have any thoughts on the above, you can always comment on this post or send me an email (mylesmarino1@gmail.com). I am always open for feedback, and if there is something you think I should add to this writing style, let me know!

Myles

The honeymoon is over. The first draft was a thrill. Now, it’s a tombstone in the ‘review’ folder. Here’s how you ship:

1. Slay the Enemy. Your enemy is fear. You feel it now. A tightness in your stomach, the knot in your throat. The whisper of the critic: “This sucks. Everybody will call you out on it.” This is the fear of shipping the imperfect. This is the final battle.

2. Find the Reason. Find the real one. The story you cannot hold back. It’s explaining to Dad how seeking repulsion is the only way to break an addiction. It’s hoping for the text from Colin that just says, “I get it now.” It’s finally answering the question that haunts your Constellation notes: What can be stripped out? Find the reason. Find the person. Write for them. Let all others fade to black.

3. Isolate the Core. Walk Hanover St. to the VMFA. Dictate into Apple Notes until your throat is dry. Unearth the one idea your thoughts revolve around. One sentence on a yellow Post-it. Now, your job is to defend that core idea from every other word you wrote.

4. Wield Specificity. Forgettable is failure. Specificity is the weapon that makes words breathe. Don’t write “a sad man in a vehicle.” Write “Mr. Henderson cried into his lukewarm tea inside a dented, rust-colored Ford F-150.” One is noise. The other is a story.

5. Build the Engine. You are not filling a page. You are building a stripped-down motorcycle engine. All power, no frills. Every gear must turn. Every piston must fire. The Hook. The Setups. The Payoffs. The Landing. Cull the unnecessary.

6. Trust Your Ears. Sit in the silence of the Apple keyboard, the brown noise humming. Read your work out loud. Trust your ears, not your eyes. Your ear feels the music of the words. It catches the flawed rhythm, the sour note, and the clumsy phrase your eye skips. If it doesn’t swing, rewrite it.

7. Understand Your Role. You stare at the 2,147 words in Times New Roman. The file is named Constellation_Final_v9_DONE.md. You feel that tightness in your stomach and think, the honeymoon is over.

But you understand now. It was never a honeymoon. You were never the spouse.

The whole time, you were getting it ready. the ‘review’ folder was not a tombstone; it was the quiet room where you adjusted its veil, smoothed the folds of its dress, and whispered one last piece of advice before the doors swung open.

Shipping is the long walk down the aisle. It is the moment you place the hand of your work into the hand of the reader, who is waiting at the altar to begin their new life with it.

§You are only a witness now.

This manifesto is mine. Now make it yours. Fork it, rewrite it to fit your fears, names and places. A good tool is meant to be modified. Here are my previous drafts for inspiration:

In his article, he mentioned staring into the void…a concept I wanted to expand on here. Where the best time for an offsite is when the team needs to get together, and stare into the void:

"Staring into the void" sounds incredibly profound when Justin and Myles say it. While the phrase traditionally evokes confronting deep meaninglessness or existential despair, I've come to interpret it as: we must allow everyone to reside in discomfort, surface the true points of decision and disagreement, and do our best to come to focused answers.

The phrase comes from Nietzsche: if you gaze for long into an abyss, the abyss gazes also into you.” “ The void is the uncomfortable and unspoken truths. It’s the nagging feeling that your strategy is failing, the quiet dread that you don’t trust the numbers, or the deep-seated fear that your team isn’t truly aligned. Staring into the void means looking at these questions head on and solving them.

You know the feeling. You’re in a meeting and everyone is talking around the same central, unspoken fear. The team projects an image of competence, but underneath, those questions haunt you. You can try to address them in a normal meeting, but it’s like trying to have a serious conversation at a noisy party. The daily distractions and the pressure to maintain the status quo make it nearly impossible.

This is why offsites are necessary. It’s the deliberate choice to stop averting your gaze from the abyss. You sit in a quiet room, with no distractions, and you give the void your undivided attention. In that space, you feel the collective unease, and for the first time, you can acknowledge the problems together. This is a time to reflect on what you want, why, and how you should go about getting it.

This is the moment when the void “gazes back.” You realize the very thing you were avoiding has been quietly shaping your work and your team all along. An offsite provides the courage to face that void, and in that shared act, you find a new sense of purpose built on honesty and true alignment.

I’m an investor first, not a trader. But I’m not above learning from people who are smarter than me - even if they are playing a different game. Some of the lessons below are directly applicable to value investing, and some are not. Either way, these are some of the lessons that I’ve learned from these great traders, with a focus on where they intersect ideas.

The main takeaways don’t apply to trading, but are also applicable to life as a whole. If you don’t want to read the entire piece, here were my main takeaways:

• Listen to reality
• Avoid losing
• Average up on winners
• Believe in yourself

§Have a thesis, but don’t be afraid to kill it

All of these traders were not in love with their ideas. They respected the market and reality, and would avoid emotions getting the better of them.

In value investing, this would be ignoring Mr. Market, or feeling dispassionate in valuation. The difference here is that the traders would not stick their heads in the sand and only look at calculators, but they would watch the market price, actively find new information, and try to seriously destroy their ideas. You have to be able to kill your ideas.

§Avoid losing at all costs - emotional and financial

Warren Buffett often talks about the rule of never lose money. Joel Greenblatt says if you don’t lose money, the other alternatives are pretty good. All of these traders feel the same way.

Taking a loss can hurt, but it is a lot worse to get absolutely killed by a bad investment. Or even worse, have a loss take over your emotions and have an effect of hurting all of your other decisions. Bad bad bad. If something is eating at you, you need to get rid of it. It’s not worth it.

§Ride your winners hard

Don’t cut the roses to water the weeds. Winners average winners, and you want to be a winner.

When you have a winner, and you have conviction, you need to average up big time. Don’t get stuck in seeing a low cost base and not wanting to average up. As the possibilities tighten, you need to be able to invest more and increase your returns. Money comes from concentration and conviction, so you should earn both when possible. If not, kill it.

§The inner game

The most important elements of all the great investors is their inner abilities and skills to manage themselves.

You need to believe in yourself. That is the first step. If you can’t accomplish that, then what could you possibly do?

Make sure you are also playing your own game. Don’t copy others just because they are doing OK. You will fail that way. The only way to self-actualize and become great at anything is to stick to your guns.

§Notable Quotes:

“Nothing in this world can take the place of persistence.”

“You also have to follow your own light. Because I have so many friends who are talented traders, I often have to remind myself that if I try to trade their way, or on their ideas, I am going to lose.”

“When you’re right on something, you can’t own enough.”

“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.”

“My approach works not by making valid predictions but by allowing me to correct false ones.”

“Soros is also the best loss taker I have ever seen…If a trade doesn’t work, he’s confident enough about his ability to win on other trades that he can easily walk away from the position.”

“The way to build long-term returns is through preservation of capital and home runs.”

“I’m smart enough to realize that a slap is easier to recover from than a beating…”

“When you have tremendous conviction on a trade, you have to go for the jugular.”

• Jeff Bezos
• Peter Thiel
• Peter Barton
• John Malone
• Mark Leonard
• Adolf Lundin

Investor Resources

• Warren Buffett: Partnership Letters, Notre Dame, FAQ, 50%/year
• Joel Greenblatt: Capital Allocators, Class Notes, Case Studies, Knowledge Podcast
• Lei Zhang: Lecture
• Li Lu: Everything, Masterclass, Practice of Value Investing
• Andrew Rosenblum: Great Investing, Michigan
• Ted Weschler: IRA + Statement, Connecting the Dots, DVA Case, DVA Case 2, Health Care, Final Letter, WR Grace
• Chandler Brothers: Greatest Investors, Secrets of Sovereign
• Michael Burry: Case Studies, Letters to Investors
• Stanley Druckenmiller: Lost Tree Club, Toggle.AI
• Norbert Lou: Interview, VIC link
• Charlie Munger: Art of Stock Picking, Turning $2M to $2T
• Chuck Akre: Value Investor’s Odyssey
• Per Brillioth: Russian Oil to Global Tech
• Ben Graham: Lectures, Partnership
• Connor Haley: Value Hive, Planet Microcap
• Dennis Hong: Ecosystem Control
• Paul Lountzis: Scuttlebut
• Fred Odlum: Killing in 1929
• Thomas Phelps: 100 to 1
• Michael Price: Columbia Lecture
• Nick Sleep: Letters, Costco
• James Tisch: $5M test
• Compilations: Great Operators, Value Investing with Legends, Compilations, Finding Multibaggers

Investing Tools

• Conference Call Transcripts
• Free Valueline competitor
• Court Listener’s Litigation Information
• EDGAR Data Search
• Investor Alerts
• Business Encyclopedia
• Useful Throwback Files!
• Value Investors Club Writeups
• Webb Site HK Filings
• See how funds are structured
• SPIVA- see where others outperform

General Resources

• Boilerplate Legal Documents
• Free books
• PDF Tools
• SaaS Alternatives
• Free Document Tools

“What do you think happens after we die?”

Don’t say “people will miss me” or “I will be cremated”. That isn’t useful for this conversation.

What concrete answers do we possess about life after we take our last breath?

My hunch is that the afterlife is the experience of perpetual nothingness. Which is as close to no experience as there is, so…that cancels out?

Perhaps sitting in this pitch-black room is influencing that thought (I lost power today). There is little basis for my answer. But who has any sort of “basis” for understanding the afterlife?

Look Around. All Around. In Every Sea And Under Every Rock.

What trace of the afterlife do you see? We crawl, run, and limp our way through life. Dancing in bliss and smelling dying roses. Unbothered about our looming, inevitable, and mysterious journey.

If you were faced with an unsolvable, unknowable, yet inevitable problem: what would you do?

Ignoring uncharted waters can have merit, sure;

The afterlife gives people multiple reasons to escape this life. It is not a good thing.

But we shouldn’t ignore something we are all racing to in melanin-coated six-foot-two schooners. That is a recipe for hearing waves crashing all over. Ripping the boat in half, failing to spit out the nasty salt water until you drown.

Therefore, “this situation calls for an openness in approaching the big questions.” Perhaps we aren’t supposed to know what happens in our next life. But we can at least muse on it. Stretch it. Mold it. Like

Plato.

His Dialogues leave the reader with more questions than answers.

They’re meant to make you think. If you walk away “knowing” something new, then these books have failed.

Plato recognizes that ethical problems are unsolvable, unknowable, yet inevitable. So musing is a more reliable route than answering. When it comes to conversations: Dialogues are the beginning. Not the end.

David Eagleman, through Sum: Forty Tales From the Afterlives, takes the same path as Plato.

But With A Twist.

Dr. Eagleman stares down an unsolvable, unknowable, yet inevitable problem: the afterlife.

Instead of leading the reader to their own conclusions, he gives forty answers.

All contradicting. All probable enough.

And each distinct tale will affect you.

Some stories are “made of characters that reflect how I feel.” Others “read as if Drake tweeted them from a toilet at three am.”

But all will make you think.

Read for an ice-breaker for the afterlife. Sum: Forty Tales is the beginning. Not the end.

Where will you take the conversation?

Made with love and thoughtful contributions from Yingyue Xu, Peter Marino, and Justin Duke.

- Myles

Most people think that sales is about persuasion. It’s not. Successful sales is the practice of radical empathy.

And empathy starts with a simple question: Who sets your soul on fire?

Listen. Empathize. Keep going until it hurts. Surrender your own perspective and pre-conceived notions. Embody this other person and comprehend their feelings, thoughts, problems, and what they need. Stop talking. Was that interruption in service to them?

If your solution is the best in the world, you should be excited to lend a hand and alleviate their pain! Transcend from a “salesperson” to an ally.

Keep going until you find your people. The recognition will be instant. You’ll outsell every Dirtbag out there. But first, you have to become a terrible liar.

Much attention has been given to buying businesses below net cash. This has been a viable strategy for investors since the Great Depression, with a focus on public companies. Even today, there remain a few hundred opportunities to buy companies below cash in the public markets.

But what about the private markets? What do net-nets look like there?

If you want to achieve high returns in private markets and through structured deals, you need to deeply understand what the seller needs. In public markets, you don’t need to do any sort of value-add work to make the seller comfortable or happy. In most cases, you won’t even know who is on the other side of the trade. But in private markets, it’s as much of a people game as it is a financial game. Understanding what the other side needs is key to getting a great deal done. (Related:Understanding Deal Flow)

As a case in point, here’s the story of how Andrew Austin and the RockRose Energy team acquired Marathon Oil’s UK business in 2019 for $95MM.

Did I say $95MM? I meant NEGATIVE $250MM.

§Background

Rockrose Energy was founded in 2015, as an oil and gas holding company. Their strategy was to purchase smaller producing assets which were being end-of-lifed by the oil majors. They would use their operational expertise to extend the life of these assets. Their founder, Andrew Austin, previously worked in banking, and later founded IGas Energy, the largest UK gas producer. He would bring part of his executive team to RockRose.

Marathon Oil can trace its roots back to 1887 as the Ohio Oil Company. They became an independent exploration and production company in 2011. By 2019, Marathon Oil had decided to divest its UK business so they could focus on their “high margin, high return US resource plays”. This was in the wake of many of the oil majors focusing on North American shale instead of overseas resources. This presented RockRose with an opportunity, as majors such as Chevron and ConocoPhillips were divesting their North Sea portfolios in favor of their US shale fields.

Oil majors were running for the hills. Dumping these assets. There was nothing wrong with the North Sea. As a matter of fact, these are great oil and gas assets. However, the biggest companies in the world have no choice but to focus on the industry trends. If the oil and gas world was zigging towards shale, they couldn’t afford to zag. RockRose and other independent companies had no such restrictions.

§The Transaction

On February 25, 2019 RockRose Energy announced the agreement to purchase the UK assets of Marathon Oil. The reported price was $140MM. At the time, RockRose had a $120MM market cap, so this was considered a reverse takeover by the UK standards.

On July 1, 2019, the acquisition was completed. The final consideration payable was $95MM. This $50MM swing was due to cash build from operations in the past few months. So they were going to pay $95MM. What did RockRose ultimately get for this $95MM price tag?

• Operated interests in the Greater Brae area
• Infrastructure via the Brae Alpha platform and various pipeline systems
• Interest in a BP-operated Foinaven oil field
• Foinaven east interests (potential future development)
• $345MM in cash

Put another way, RockRose got paid $250MM to double their business and take over an excellent collection of assets.

For reference, in 2019 Marathon Oil reported 1,205 mmboe in total reserves. This was a tiny deal for them. It constituted a single paragraph in a footnote for their financial statements.

This is RockRose’s strategy. Buying “unloved producing assets”.

§Why was it cheap?

Marathon wanted out. They wanted to refocus on the US shale business, and also didn’t want to deal with nearly $1B in liabilities that their UK business had. About $760MM for decommissioning liabilities and $111MM for pensions.

RockRose won this deal because they were the only bidder who could offer the whole package. They were able to offer Marathon Oil:

• Exit from the UK, all liabilities and assets
• Quick transaction (closed in six months!)
• No significant holdbacks

Marathon wanted to get out, and this was the price for it.

§To reiterate, here is the playbook:

• Find assets nobody else cares about
• Figure out what the seller needs
• Give it to them

§Aftermath

RockRose took care of these liabilities quite well. They extended the life of the oil field, and were able to significantly reduce the decommissioning liabilities they acquired. For the fields they weren’t able to extend, they plugged them up and sold them for $1.

As for their pension liabilities, RockRose contributed an additional $62MM and sold off the obligations to an insurance company. This also created a deferred tax asset.

In one short year, they had reduced decommissioning liabilities by $500MM+, eliminated their pension liabilities, and acquired excellent assets. All while getting paid millions by the seller.

RockRose executed its strategy. It extended the half-life of the assets. They paid a fat dividend due to the new cash reserves. They made some other acquisitions. In 2020, they sold themselves for a total gain of 42x in 6 years. Not too shabby!

How to Make a Few Billion Dollars

• Show gratitude to people - and be sincere
• Stop beating yourself up mentally. Mistakes are overblown and present one perspective
• Have a fear of failure, and an optimistic mind. Realize the worst isn’t that bad
• You make money by finding and solving problems
• Be honest with yourself, recognize mistakes as soon as they surface, and course correct with no ego
• Money is made with big hairy deals with solvable problems
• Actions and feedback loops lead to rewards
• Block out the wins and losses and focus on the best thing to do right now
• Non judgemental concentration
• You have to get the big trends right
• Do deals where the downside scenario is still good and upside is off the charts
• Figure out the must haves in advance, and then say yes to everything else
• Intelligence, hunger, integrity, and collegiality are what matters in a candidate
• Go all in. It’s energizing. Make it the best work they’ve ever done

How to Buy a Great Business With No Cash Down

• You need money to make money, but it doesn’t have to be yours
• Companies fail because the financing was improperly structured
• The real enemy is procrastination, no cash down is a mentality. You can do it, but you have to believe it first
• You have to attract the right partners and know their incentives to do a no cash down deal
• What does the other side actually want? How can you get it to them? Address what they say they want, but work with them to get what they actually want
• The list is endless. Your job is to know the alternatives and decide on the financing blocks most likely to work for your deal.
• The best financing blocks allow the longest payback period with the lowest interest rates the lowest collateral and with no personal liabilities
• Leave no stones unturned. Out of sight is out of mind.
• Everything is negotiable
• Cash is so important, and never forgo profits in lieu of cash
• Buy for what the seller delivers, not on potential
• There are so many lead sources out there
• “Most experienced buyers agree that the best acquisition candidate is one that is operating at a small fraction of its true potential, can be acquired at a price consistent with its low present earnings, but can be rapidly energized into a money maker.”
• This gives so many insights into what different parties want and optimize for
• Separate the problems from the assets
• “No matter how many books on the subject you read, negotiation ultimately boils down to one objective: winning what you want from someone else while convincing him he’s getting what he wants.”
• Recommended: Starting Your Own Business With No Money, Nothing Down: How to Buy Real Estate with Little or No Money Down

Zero to One: Notes on Startups, or How to Build the Future - My post

• Durability comes from monopolies comes from secrets comes from recruiting a team and taking control of your future comes from focus
• Figure out what others don’t believe and are wrong to disbelieve and focus on that
• Durability is all that matters- you have to survive
• The best way to be durable is to have a monopoly
• You create your own future
• What if the opposite is true? There are often no rules
• Power laws should be the only thing you aim for
• Compelling is why you’re doing something important that no one else is going to get done.
• Recruiting: we cover the basics (health insurance and rent), and you have the opportunity to do irreplacable work on a unique problem alongside great people
• People should focus on one thing at a time- even in their jobs. Super defined roles
• Technology gives us the efficiency of a hyper scaled person who doesn’t want to compete with resources

Am I Being Too Subtle? - My post

• Be a long term partner
• Fierce tenacity and constantly opportunity-seeking
• Two things matter in deals: the downside and the fulcrum
• Supply, demand, and barriers to entry
• Micro opportunities in Macro events
• If you are not selling at this price you are buying
• Good assets below replacement cost from poor operators and fix them up

Sum: Forty Tales From the Afterlives - My post

• Not many useful or big ideas. Just a fun and interesting book
• What happens after we die?
• I love how each story is structured. Interesting concept, the good, then the bad, then the despair

Benjamin Franklin: An American Life:

• Self Improvement
• Focus, focus, focus
• Be practical and funny!
• Industry + Frugality
• Be curious and try any new thing
• Essence of America is ordinary people can do extraordinary things if given the chance

Meditations

• Be rational, temperate, virtuous, disciplined, wise, naturalistic, and have liberty from all passions
• Nothing external can harm us
• Be charitable in thought and action
• Have singular focus on the task at hand
• Stay clear-minded, right-minded, and high-minded
• Copy the best virtues; serene, dignified, industrious, sober, frugal, considerate, frank, temperate, and carry yourself with authority

Poor Charlie’s Almanack

• It is a moral duty to constantly learn and stay rational
• Keep things simple, but not more simple than necessary
• Use lessons from every discipline to learn and swing hard at the no-brainier decisions
• Tear down your own ideas, avoid envy, acknowledge cognitive biases, think in reverse, and never stop improving

Born Standing Up: A Comic’s Life

• 10 years learning, 4 years refining, 4 years with success
• Experimental and focus on what the audience loves
• Incremental steps + a few intuitive leaps + creation of luck
• Have delusion and valid inspiration
• Stand out, no matter what
• Indulging on enjoyment while performing would be a bad move. You lose your edge
• Fame came as a by-product of working really hard for two decades
• Worked like crazy. Every day was doing 10+ hours so got really good and retained mastery
• “perseverence is a great substitute for talent”
• “There is no harm in charging oneself up with delusiouns between moments of valid inspiration”
• Being great is a statistical phenomenom. Being good consistently over long periods is harder

On A Roll: How A Kid from the Bronx Started with Hot Dogs and Wound Up Making a Fortune

• Be relentless
• Just do it, always give back to others, constantly innovate & be creative
• Treat others right, self image and optimism is important, constantly reduce risk
• Never compartmentalize, catch the right waves early and ride them hard
• Partner with good people and find the key ideas
• Give people the freedom to have success
• Focus on solving problems and you will find the solution

Wooden: A Lifetime of Observations and Reflections

• Only be satisfied with reaching your potential
• Count your blessings often
• Happiness + freedom + peace of mind
• You are no better than others, just as good
• Make mistakes and learn forever
• Control only what you can. No more.
• Have a positive self-image
• I will do the best I am capable of doing today to bring out my best tomorrow

The Wright Brothers

• Create your own data and question others
• Relentlessly resourceful
• Focus and isolate when you can
• First principles and observing natural phenomena
• Experiment everything you can

Leonardo Da Vinci

• You don’t need to finish your paintings. Sometimes, beauty is enough
• Observe nature and figure out how things actually work
• Let your best ideas marinate. You don’t need to always be working on it

How to Get Rich by Felix Dennis

• Getting rich is a journey with a lot of sacrifices
• Be entrepreneurial and opportunistic
• You will have to constantly learn, keep your eye on the ball, and never fear failure
• Just keep pushing

Die With 0

• Stop delaying life pleasures
• How much are material things holding you back from experiences and life hours?
• Be deliberate, not on autopilot
• Realize that time is your enemy. Money utility decreases, and everything has a last time

Ergodicity

• Decisions have an implicit timeline assumption
• The best maximize performance AND survival. The later of which is more important
• Avoid things that are hard to reverse (0s). Death, injury, bankruptcy. Anything that eliminates the possibility of future returns.
• Ergodicity is the ability to take advantage of the law of large numbers instead of hitting “0”
• This is the difference between 1000 people playing Russian Roulette and one person playing 1000 times
• Over enough time, “unlikely” means “eventually”
• Resources tend to cluster
• Become irreplaceable and remember that most things can be replaced
• Centralization is only efficient to the central observer. Something can work on average and fail locally
• This book reminded me of the Howard Marks quote “never forget the 6ft man who drowned in the river that was an average of 5ft deep”

Influence: The Psychology of Persuasion

• Reciprocation, commitment/consistency bias, social proof, authority bias, liking tendency, and scarcity bias (and deprivation)
• We all have stimuli that triggers us to do certain, often dumb, things

Private Equity by Carrie Sun

• If you are going to be in the #1 hedge fund in the world, realize that it’s going to be intense
• There are levels to this game, and money can do a lot of wonder
• Always be listening to your employees and guaging how they feel
• “Carrie,” he said, “why would you give me a book you thought was only okay? Also, why would you give me a book that you haven’t even read?”
• “One of Boone’s refrains was “How you spend your days is how you live your life.” How you practiced was how you’d perform in the championship game. There was no task too small. No task too minor so as not to warrant maximum rigor, focus, and care.”
• “But there are the values we say we have, and the values we strive to have. There are also the values we believe we have in order to live, not to die of the horror of seeing a stranger in the mirror.”
• Stay above the fray
• Always push for faster, be prepared and you should be able to make decisions in that moment
• “Practice. That’s all it is. If you practice enough, you can sense things. You know where the open ice will be.”
• “For Carbon, the march was twofold: world-class investment efforts on a set number of well-selected companies each year alongside continuous improvement of the Firm’s culture and processes”
• “Compounding. Boone had a quote about it in his office. Stay in the market as much as possible. Have it, invest it. Wait out any panic and let it ride, let it grow. (Exponentially.) It gets easier to compound the richer you are. You can borrow to live. You never have to touch the principal. You never have to lock yourself into a price you don’t like.Risk/reward trade-off. Because the rich are so rich, they are able to risk a higher percentage of their net worth and invest in riskier assets. These two effects multiply and allow for the potential of much, much higher returns. This is why billionaires love crises. When others are sidetracked, they can scoop up assets on the cheap, take on extra risk at a time when everyone else is playing it safe, then wait for the world to return to a new normal”

On Writing Well

• Write simply and cleanly
• Be clear in the head and on the paper
• Be unexpected + refreshing
• Have humanity and warmth in your writing
• Be precise and tug the reader forward
• Get rid of the useless stuff and write when you think “that is interesting”

Getting to Yes

• Focus on everybody’s core interests
• Having an opinion puts you in a box
• Leverage/power comes from your Best Alternative to Negotiated Agreement
• Give others a stake in the decision
• Judge results with clear and pre-determined standards
• Ask why a lot to understand the other party

Am I Being Too Subtle?

• Be different and bold
• Always be opportunistic
• Empower great people to do interesting things for the long term
• Simplify everything and have tenacity
• Protect your downside and stay optimistic

The Little Book of Hygge

• Create safe, comfortable, and cozy environments
• Love natural and organic based materials
• Be silly + simple with others
• Savor the best in life

Trade Like Warren Buffett

• Workouts, merger arb, spinoffs, distressed debt, stubs
• Figure out who you should be the bat boy for
• Predictable earnings with temporary distress, underlying high quality
• Used borrowed money for workouts
• Personal portfolio has higher turnover and better returns

100 Baggers: Stocks That Return 100-1 and where to find them

• Find great companies at not-crazy valuations and hold on to them for dear life
• 100-baggers take time, but can come from anywhere
• Capital allocation is important, as is growth and returns on incremental capital invested
• Accelerating earnings + revenues with different business models

The Art of Execution

• The best investors are right 50% of the time
• adapt when losing (usually kill losers or average down aggressively)
• have a plan when losers and winners come
• stay around for the big winners
• concentrate in their best ideas
• stay liquid
• Losers take profits quickly
• Losers convince themselves they are right
• Losers stay with losers
• Losers widely diversify
• The long-term returns come from preservation of capital and a few home run investments.

The Intelligent Investor

• Stocks are part ownership in businesses
• Buy with a margin of safety
• Take advantage of Mr. Market when possible
• Develop your own discipline and courage

The Other Half of Macroeconomics and the Fate of Globalization

• Companies do not borrow because of balance sheet problems and lack of domestic reinvestment opportunities
• Many savers + no borrowers shrinks the economy ($ that would have been borrowed is sitting idle)
• Pre-industrial revolution: little reinvestment opportunities
• Urbanization was seen as the golden area for most countries as there was constant upward mobility
• Companies that went through urbanization are now going through being pursued

The Little Book That Beats the Market

• Remember that you own part of a company’s future earnings
• Buy high return on capital businesses for bargain prices, and stick to your strategy
• Try to make as little predictions as possible, find what works, save all the time
• Use the Magic Formula!

Margin of Safety

• Opportunity when people flow between fear and greed
• Avoidance of risk is margin of safety
• Understand institutional investors + their weaknesses
• Use every relevant valuation technique
• Be ready to change your mind
• Look for flaws

What Works on Wall Street

• Value, growth, 1-year momentum, and small-stuff works best in markets
• Combining multiple factors together can outperform the market even more than single-factor models
• The best strategy is something you are able to stick with and is a sound strategy

How to write an email

• Your job as a communicator is to remove all reason for distraction
• Build credibility as a reliable person and communicator before making moves
• Don’t make others work for the information you are giving them

Capital Returns: Investing Through the Capital Cycle

• Respect the capital cycle
• Everybody eventually falls to it, but fate can be cheated for a while
• Focus on good capital allocators and moats
• Supply side economics runs the capital cycle
• Your own case is not unique- look at relevant parallels
• Always remain skeptical, logical, and safe

Common Stocks and Uncommon Profits

• Buy great companies out of favor that have good long-term plans
• Scuttlebutt all the time, ask people questions: customers, competitors, suppliers
• Be forward looking, rational, and focus on management

Dear Chairman

• Activists should let managers manage, but focus on capital allocation
• Where is the company’s true value? Massive arbitrage between public market value and private value with a different management team
• Truly a messy space

Adolf Lundin: No Guts No Glory

• You need an ego
• Be constantly optimistic, yet calm and competitive
• Be more opportunistic than competitors
• Never give up
• No pain, no gain
• Find great partners and let them share in the profits

The Dhando Investor

• Find asymmetric risk/reward scenarios
• The best risk reward is 0 risk, unlimited reward. No brainers
• Heads I win, tails I don’t lose much
• Work hard and save all you can with equity
• Distress and uncertainty can provide returns

Inbound Marketing

• Use simple websites as a hub
• Be remarkable, not unique
• Write good niche content with calls to action
• Focus on being a hub, not an advertisement
• Focus on titles. Like, a lot

The Innovator’s Hypothesis - My post

• Cheap Experimental ideas are important
• Say: the team believes exploring X action will likely result in Y outcome. We will know this because Z metric changed
• Lean on testable ideas
• Be simple, fast, cheap, smart, lean, and important

Aiming High: Masa Son, Softbank, and Disrupting Silicon Valley - My post

• Be cartoonishly ambitious
• Show true enthusiasm
• Set a long term strategy for winning, have self-belief and constant persistence
• Make it easy for the other party to say yes, find the root of the problem, and tell a story
• Excuses are reprehensible because you still have the ability to act

Wanting: The Power of Mimetic Desire

• We are not sure what we want. So we look to others (models) and desire what they desire. We make many choices according to the desires of others.
• What have you helped others desire?
• Jealousy and conflict comes from mimetic desire
• The harder it is to get- the more we want it
• Everybody has models
• Hidden models show the illusion of autonomy
• Rivalry is a function of proximity. Eventually the object becomes moot

Zero to One

• Companies are monopolies or in perfect competition
• Focus on network effects, mimetic desire
• Focus on being bold and different
• Reduce the role of luck and take control

The Alchemy of Finance

• Bias thoughts influence action which influence results
• Market biases move markets
• Credit cycles matter above all else

The Autobiography of Charles Darwin

• Rationality + be focused on cognitive biases
• Take advantage of your luck
• Avoid controversy
• Highlight your contradictions/biases
• Take time to reflect
• Do not blindly follow others

The Only Rule Is It Has to Work - My post

• There are no problems, only people problems
• You can get a lot of cool stuff by doing cool things and asking nicely
• Get rid of your problem people early and head one- it will compound
• Understand why opportunities came to you, and what the downside might be

The Fish That Ate the Whale

• Take the low-hanging fruit, and what others are throwing away may be valuable
• Take a niche and take it hard
• Control the supply and diversify, have a good reputation, beware of debt, stay ambitious
• Run as lean as possible and trust the people on the ground- stay nimble

The Man Who Solved the Market

• Work with great people
• Don’t be afraid of doing something unconventional or odd- even when others think you are crazy!
• Give everybody compensated on overall success, and have a great infrastructure
• Share ideas and be intellectually honest with others
• Do something new, never give up, and hope for good luck!
• Bad ideas are good, good ideas are great, no ideas are terrible.

Chapters in My Life: Frederick Taylor Gates

• Anything is possible with brains, will, and energy
• Understand everybody’s incentives and how to get them ahead
• Have solid reasons with worthy ends
• Common sense diligently applied

The Autobiography of Andrew Carnegie

• Take advantage of any luck
• Concentrate in ideas, wealth, and partners

Man’s Search for Meaning

• Everybody has a unique task only they are able to fulfill
• Focus on what drives you
• Get your why and stick with it
• Why can change over time

First, A Dream

• Be industrious/entrepreneurial and ambitious
• Focus on customers
• Own an under-served niche
• Create win-win scenarios
• Great values are not taught
• Reputation across family, friends, customers, and employees is what matters

How to Sell Anything to Anybody

• Help the customer get what they want
• Keep your reputation pristine
• Keep personalized contact with customers
• Constantly market

Thinking Fast and Slow

• Our assumptions are usually wrong. We have lazy thinking
• Answer the easy questions first
• Study failures, be aware of cognitive biases (recency bias, exposure effect, uncertainty, halo effect, framing effects, anchoring bias, availability bias)

Thinking in Bets

• Focus on finding the correct processes, not the outcomes
• Quality of life = quality of bets + luck
• Acknowledge uncertainty- don’t be afraid to say “I’m not sure”
• Be skeptical of your beliefs
• Think long-term, backwards, and do postmortems

The Outsiders: Eight Unconventional CEOs

• Great owner-operators can create tremendous value over time
• Outsiders tend to be idiosyncratic, independent, analytical, understated, and versatile

Working with Contracts

• If you want to become not just a lawyer, but a trusted strategic advisor that clients request, you should read this book
• The majority of a transactional lawyer’s time is spent on structuring, advising on strategy, negotiating/drafting contracts, orchestrating closing, and keeping deals organized
• Your unique position as a negotiator requires mastering both client advocacy and bridge-building with opposing counsel
• Understand the inherent tension between buyers and sellers - each driven by different goals and incentives
• Master both technical foundations (reps & warranties, covenants, remedies) and strategic instincts/emotional intelligence
• Guide clients toward productive compromises while protecting their interests
• Be a master negotiator who understands what both sides are optimizing for

Seven Days in the Art World - My post

• There are levels to this game
• Real artists are focused on doing, not asking about what art is

End of the Line: The Rise and Fall of AT&T

• Mis-alignment of financial inflows and obligations created problems
• Giving up the good businesses for the sexy business killed them
• Succession and politic issues
• Management wanted form over function

Moneyball for the Money Set

• There are usually one or two key measures that can be used to predict long term success (eg strike out rate)
• “Being in the arena” does not mean knowledge
• Higher dispersion means more opportunities and a better outperformance pond
• Think carefuly about what it means to truly isolate noise
• Consistency + explosiveness, which hardly comes in pairs
• Sizing (or changing it) didn’t matter as much as getting into the position
• You can’t predict when you’ll produce alpha

Buffett’s Early Investments

• Returns most often came from activism, a highly concentrated portfolio, independent research, and a great filter
• Net nets had a temporary earnings and cash increase from WWII, but management was not great at allocating this cash. Returns came from changes in capital allocation (sometimes Buffett had to do it himself)
• Buffett kept debt always below 20% of assets. But, he usually used debt
• Buffett was better than many other investors at the time because he thought beyond the numbers and would “read the tea leaves” and truly understand the business and people behind it
• Tiny companies created more opportunities, but not everything was so small
• “The stock didn’t work because it was cheap- it worked because management returned capital to shareholders”
• Best recap of Philadelpha & Reading, which was the Berkshire blueprint
• Value > price + kicker + downside protection
• Buffett was so good of an investor, that selling these companies (Grief, Disney, American Express) decades ago for a quick gain was the right financial decision
• Lots of sharing of ideas and thoughts with other investors
• He knew all the little details, but focused on the essential ones
• Look for mis priced bets and load up on them!

Devil Take the Hindmost: A History of Financial Speculation

• Scams and speculation tend to be hyper-cyclical
• Europe’s first central bank was developed in the Netherlands, 1609. No interest on deposits no loans, issued notes only against its gold holdings
• Most manias have people placing orders with money they don’t have. Always hyper derivative
• Needs a scape-goat- Michael Milken John Law and more. Pilloried, stripped of wealth, imprisoned
• Carefully doing PR for your company was super important
• The gold the devil gives his paramours turns into excrement after his departure
• Post south sea bubble, the bankrupticies did not increase significantly and the economy was fine
• The south sea bubble was a technological revolution for converting government war debts into easy to exchange low interest long term securities
• bubbles are nearly always killed by raising interest rates or expecting delivery
• there were always arguments of the business cycle being removed

Lights Out: Pride, Delusion, and the Fall of General Electric

• Focus on cash flow, not reported earnings. GE got this backwards!
• At GE: bad news was not tolerated
• Make sure marketing does not get ahead of the products
• Board needs to provide consistent and adequate oversight and understanding of the business

Jack Welch & The GE Way

• Constant training + improvements
• Honest, open, candid
• Set clear rules + expectations
• Constant feedback loops

The Inner Game of Tennis

• Be natural and do not force actions
• Just do. Stop thinking
• Trust yourself fully
• Focus on the goal and let your body and unconscious mind do the work
• See reality and adapt
• Let go of your ego
• Keep it simple. Keep it natural

The Making of a Blockbuster: Wayne Huizenga

• Have an over-arching plan, but hustle to make sure all of the little details fit
• Focus on what matters/cut to the meat of the problem
• surround yourself with great partners who have skin in the game and want more than just money from you (treat all employees really well!)
• Reputation truly matters, so protect it with everything.

The Man From Zara

• Always stay close to the customer, constantly improve from their feedback
• Help people succeed and celebrate them in your organization
• Think outside of the box and make goals that others may think are impossible

Zeckendorf: The autobiography of the man who played a real-life game of Monopoly

• Be a connector
• Understand where the true power lies in a new system
• Public opinion is important to get large scale projects done
• Stay open to new ideas and expanding into new areas
• Do not overleverage and be caught out with different commitments
• Good investing and business creation is creative

The Big Rich

• Grit + luck leads to anything
• Texas oilman influence everything in their areas
• Bold will win and lose in new/budding industries

The Sleuth Investor

• Uncover information by asking questions
• Understand people, product, and peripheral functions
• Who works for the customers, company, or service providers
• Become fluent in the business. Ask why
• Who is the decision maker for the product? Who uses it? Who sends the check?
• Who is doing what to whom and why

The Black Swan

• Rare + extreme impact + predictable in retrospect
• Respect and adjust to unknowable unknowns
• People love narratives, no matter how flawed
• Do not accept status quo

Happy City: Transforming Through Design

• People want to be able to walk
• Have easy connections with others
• Ability to appreciate beauty in nature
• Private space for retreating when people get too much

I Will Teach You to be Rich

• This was one of the better personal finance books I have read
• This is now how to get rich- but how to take control of your financial life
• Focus on the big things that matter- not always the minute. Focus on the big picture first and be simple
• Spend a lot on things you love, be ruthless on those you do not love
• Online banks often have better rewards due to low overhead
• Automate everything so you do not have to think

The Millionaire Next Door

• Millionaires are low-key
• Millionaires are compulsive savers, investors, and business owners
• Millionaires are great at allocating time, energy, and money
• Millionaires are disciplined and willing to sacrifice for financial freedom

Why Nations Fail

• Countries are poor due to their institutions
• Dis-incentives for innovation and investment
• Avoiding accountability leads to weak institutions
• Increased education makes nations rich

How the Scots Invented the Modern World

• Much of the American revolution can be attributed to Scots or Scottish-born ideas
• Focus on the inner self instead of the outward form
• Emphasis on education and literacy for all
• Focus on survival and honor
• Goal of intellectual life was to understand in order to teach others and allow others to build on your work
• Being good means doing good for others. Make others happy
• Highlands felt lawless and impoverished. Super violent
• Wealth was created by pooling family risk and get capital from all over while cutting costs
• Social creatures have sympathy for others
• Division of labor means what we produce is no longer ours

Working Backwards: Insights, Stories, and Secrets from Inside Amazon

• customer obsession over competitor obsession
• a lot of the processes about Amazon have not persisted. Their scar tissue and feedback/learning process is why they have succeeded. You cannot import this
• you can’t tell which seeds will grow into an oak
• what is now possible that wasn’t before with this new technology and how can we dominate
• “it has to be perfect”. One bad customer experience would undo the goodwill of hundreds of perfect ones
• speed dominated a lot. high expectations mixed with speed
• “devestagintly effective at providing clarity”
• simplify + bias for action
• good intentions don’t work. mechanisms do
• if you don’t change teh underlying condition that created a problem, you should expect the problem to recur
• should only expect about 50% of goals should be achieved
• is this person adding or multiplying to the team
• always be generating feedback loops
• “while the growth in employees was linear, the number of their possible lines of communication grew exponentially”
• the natural extreme of speed —> none. eg the speediest communication isn’t 100 convos/second but 0
• don’t manage dependencies. figure out how to remove them
• the better you are at course correcting, the less painful being wrong is
• Bezos assumes each sentence he reads is wrong until he can prove otherwise
• didn’t focus on the what but the who and the how. that is more important predictor for success
• build a moat around your best customers

Dictators Without Borders

• Eastern dictators are enabled by western institutions
• It is never a good idea to work with a criminal
• Criminals are generally greedy and act irrationally

Wealth and Our Commonwealth

• Always look for the true facts
• Media distorts the truth
• Remain skeptical of all second hand data

State Capitalism: How the Return of Statism is Transforming the World

• Most countries have used or are using state capitalism to their advantage- but with varying success
• Blurring of lines between political action and commerce
• Some use State Owned Enterprises to buy loyalty, some use it for political weapons
• SOEs seem to succeed with good economics and political rules, and fail when governments act extractive
• SOEs spawn because of political regime change, or economic/market failures

Guns Germs and Steel

• Advantages come from starting circumstances (such as geography)
• Intelligence, drive, or divinity do not determine much if you are delt a bad/great hand
• Everybody is the same. Differences come from starting circumstances

The Power of Fastenal People

• your main job is to orient everybody to a common goal
• focus on how much others know. if you are smart, forget about it. your ego isn’t helpful
• believe and empower your people to make the best choices
• create tight feedback loops in everything you want to improve on

Firsting and Lasting

• Purposeful narratives are used to dislodge facts
• Catch 22s are great for dislodging facts
• Language creates a powerful image
• The native American struggle is ongoing and has been shaped by lies

Genghis Khan and the Making of the Modern World

• Copy from other cultures
• Take care of your best partners
• Discipline above all else. Even for your partners.
• Control public opinion/narrative for a competitive advantage
• Break another’s spirit before attacking
• Hire engineers

The Millennium: A Comedy of the Year 2000

• Mostly just talked about the breakdown of society and socialism is good
• People will abuse power given the chance, so you need checks
• Always treat people justly

Capital Allocation: The Financials of a New England Textile Mill 1955 - 1985

• Berkshire started with 3 failed companies
• Buffett remained super concentrated throughout his career- especially early on
• Financial companies could become more aggressive under Berkshire, as well as be more rational such as not taking unprofitable business

How do you know that people love your application?

When it’s down for thirty minutes, you get a flood of emails asking what happened.

Mission Critical Software, Baby!

Last week, multiple users reported they couldn’t access our application through Azure DevOps, though interestingly, GitHub and GitLab integrations remained unaffected. Which was a bit of a puzzle, but it could also be that because DevOps is some 40% of users, the Gits haven’t caught up yet.

This was a challenge to debug because:

1. It was an unfamiliar codebase. Even though we acquired GZ three months ago, I still haven’t been able to completely go through it as other things have taken precedence.
2. It was an unfamiliar language. ISS.NET deployment is very different from Heroku + Python!
3. There was no evidence of recent code changes being the issue.

Within an hour, I had a couple calls with affected uers so I could witness the problem. Users couldn’t refresh their authentication tokens. Our system is set up for a refresh every forty-five minutes. But the process was failing. When users tried to manually reset their authentication, they were met with error pages - effectively locked out of the system entirely. We had login credentials to Azure DevOps, AWS, and the remote server. But since these were systems that were only used a couple times before, I had no idea what I was looking for. Within a few more hours, I called in the Big Guns (jmduke). Justin found the root cause. Our ability to give users Azure tokens had expired, and was therefore revoked. The system had been silently carrying on until it hit this expiration date, at which point everything came crashing down. The solution involved generating a new token and updating our encrypted vault on the server. After a half-day outage, we were back online. We will need to refresh this token in the future, but I’m working on a way to programmically do this. What should we change going forward?

1. Documentation of Critical Infrastructure : During or after an acquisition, we should be documenting the critical infrastructure points extensively. This takes time but could save us in the long run. This should be done in conjunction with the previous owner, if possible.
2. Is it worth it to move things to our preferred infrastructure? On the priority of TSC things, is this in the top five? If we had unlimited capacity, this would be a no-brainer. But it wouldn’t be trivial to move GZ if we wanted. My contention would be moving things to the preferred architecture would allow for faster debugging and development.

That habit was the soundtrack to my day. The hiss-crack of the can, the sugary rush, the inevitable crash. Breaking a ritual woven so deeply into your life feels impossible. But I found a blueprint that works, a one-two punch of architecture and disgust.

§1. Architect Your Fortress.

You cannot win a war fighting on enemy territory. Your first move is to make your home, your car, and your office a sanctuary.

My fridge used to be a colored armory of temptation. I purged it. Now, it holds a single Brita filter, always full. I leave the house with a full bottle of water. There is a Hydro Flask on my desk right now. Make the good choice the path of least resistance. When thirst hits, the easiest option must be the one you want. Get the bad out of sight; keep the good within arm’s reach.

§2. Weaponize Disgust to Dismantle the Desire.

Architecture is the defense that gives you room to breathe. Disgust is the offense that wins the war for good.

I trained myself to see soda for what it truly is: liquid candy in a can. I would force myself to visualize the ten teaspoons of sugar mainlining into my bloodstream. I’d focus on the cloying, syrupy film it left on my teeth, a sticky residue that no amount of water could fully wash away. I’d sit with the fact that this liquid was engineered in a lab, optimized by chemists to be irresistibly, addictively sweet.

When you sear this reality into your mind, you don’t need willpower, because the desire itself withers and dies.

This isn’t about judging the person next to you ordering a Coke. This is a tool for your own liberation. The war is won in your home and in your head, not in a single skirmish at a restaurant. Disgust, when aimed at the things that hold you back, is a profound act of self-respect. Choose to hate wisely.

Post Script: Within hours of writing this, I had a medium Dutch Bros “Rebel”, which was 100g+ of sugar.

• Wyatt: Red Harbor Seafood ‘N Chicken
• Harrison: Hatch Kitchen (RIP)
• Myles: Full Kee’s Saturday Brunch/Dim Sum
• Aaron: Pho Tay Do
• Tyler: Enoteca Sogno
• Carolyn: Reedy Creek. South side. Sunrise. Preferably in the winter.
• Abi: Sauce & Toss AND 1717 E Cary St rooftop during sundown
• Rich: Tiki Tiki- get the Tiki Cocktails
• Will: The Pipeline Rapids
• Yunfei: Kuba Kuba
• Safraz: Will’s house (location undisclosed)
• Margaret: Sub Rosa Bakery
• Aaron: Fat Rabbit Bakery
• Adam: Y Tu Mama
• Alton: Libby Hill and the park in front of the Federal Reserve
• Will: Cafe Reveler Sundays 7-9 for Jazz

Q&A with Zack Oliva

• Zack’s Blog
• Serial Entrepreneur and Investor
• Founder of investment partnership focusing on deep value
• Founder of law firm focusing on oil and gas companies

Q&As with Mohnish Pabrai:

• 2022- Micron, non profits, and Excel
• 2021- Self Pity, Entrepreneurship, and investing 101
• This entrepreneur/investor made $100M. Ask him how. Nothing off limits.
• Founded Transtech with $30K and sold it for $20M
• Founded the Pabrai Investment Partnerships, grew assets from $1M to $700M
• Single man investment team beating his benchmarks over 2 decades
• Founded the Dakshana Foundation, enabling over 3,000 of India’s poorest to get a world-class education

A 1236% return in eleven years…Ted Weschler didn’t just beat the market: He crushed it. He killed the market with his strategy of helping high-quality companies in temporary distress. While his investors did well, the market lagged behind his performance, being flat.

Let’s look at one of Peninsula Advisor’s first investments, where a struggling asset-rich company became a decade-long investment yielding immense profits.

§Market Overview

While investors chased dotcoms, the real winners were the companies laying the groundwork. Fiber networks, wireless spectrum, and other infrastructure assets became great investments. American Tower and Level 3 are standouts in the value investing world.

Unlike internet companies, these investments worked because they were hard assets. Demand was falling off a cliff, but if you believed the internet would be used at all in the next ten years, these investments could work out. They already were built out and had the necessary capital expenditures spent, required little in the way of maintenance care, and had tons of operating leverage. Picking the winners and losers here would prove to be more fruitful than hunting for internet stocks.

Recognizing this opportunity, Ted Weschler placed several bets in this struggling industry. His fund had a bit of “dry powder”, having launched a couple years earlier, but wireless data and traffic were beginning to grow. There were signs of a recovery in the infrastructure destined to power the internet for decades to come.

Source: Cisco Blogs

§Situation Overview

In comes Advanced Radio Technologies, a troubled telecom provider who was founded in 1993. They raised $500MM to build out a wireless network focusing on 39Ghz connections. By 2001, they were forced to file Chapter 11 after overspending on operations and acquiring spectrum licenses.

By this point, they were a shell of a company. They owned over 700 FCC-granted licenses. They wound down all operations and let go of the employees.

Ted Weschler and a few other distressed investors came in, and bought up senior paper. They helped steer the company out of bankruptcy, and negotiated for what would become a 23% stake in the reorganized common stock, with warrants to purchase another 8.5%. Peninsula Advisors bought $38MM in distressed debt for just $18MM. In return, Weschler secured 6.32 million shares and warrants, bringing his cost basis to $2.85 per share.

Out of bankruptcy, the licenses held a $50MM valuation— less than half of their original price. In 2000, Advanced Radio Technologies’ chief rival Winstar bought 931 licenses for $161MM. Teligent, another competitor, was sold and had their licenses valued at $50MM. Common shareholders thought Advanced Radio Technologies’ licenses were worth closer to $150MM (based off of a discount to a Morgan Stanley report mentioned a $230MM number). From Weschler’s point of view, these licenses had downside protection with the optionality of monetization.

In 2004, First Avenue extended its advantage in wireless and began expanding operations by acquiring Teligent. Teligent had a similar block of licenses at a lower frequency, but also had equipment and customers. To finance this acquisition, First Avenue raised money via a private placement.

In 2006, FiberTower was brought into the mix via a stock-swap acquisition. They were a private company who was growing by aggregating spectrum assets, and re-selling to AT&T and T-Mobile. They were doing well, but didn’t have the national footprint First Avenue had. Through what a reverse merger, FiberTower and First Avenue Networks combined into a single entity.

Ted Weschler stepped down from the board of directors. The implied value of First Avenue Networks was $10.50/share, or $1.5B. A nice recovery from the bankruptcy five years earlier. Peninsula’s stake would have been valued at $67MM, and would grow from there.

To review, in 2001:

• The industry was in a freefall
• First Ave. was in bankruptcy
• There was no operating business

Over the next five years, Peninsula Advisors and Ted Weschler would reorganize this shell of a company into a rapidly growing telecom company worth over $1.5B.

§The aftermath

Over the next six years, Peninsula Capital did a lot of buying and selling. From 2006 to 2009, they sold a net of $25MM. From 2009 to 2011, they sold a net of $61MM. Notice I mention net. There were several times, such as in the depths of 2008 and late 2009, when Weschler increased Peninsula’s stake in the company. Ted knew the company’s strength and doubled down in a turbulent market.

However, in 2011, FiberTower ran into trouble.

Their main customer was AT&T. Being the monopolist, they decided to retract their business from FiberTower. AT&T and T-Mobile accounted for 63% of FiberTower’s revenue and wanted to upgrade their backhaul network to fiber while owning the infrastructure themselve. This sent the shares into a freefall. The shares went down 60% in a single day after they announced missed interest payments and a litany of board resignations. In 2012, FiberTower declared bankruptcy. By this time, Ted had moved on to Berkshire Hathaway.

AT&T later acquired the struggling company for pennies on the dollar.

§Weschler’s Strategy

First Avenue Networks is right out of the Weschler playbook:

1. Thematic disruptions
2. Find high quality assets
3. In distress
4. Stay local (First Avenue was relocated to McLean, VA)
5. Gain influence
6. Compound tax-efficiently

These guys used to do residential mortgages, but were basically shot by the GFC. In 2024, they issued 84MM new shares (now 190MM total out) to PhenixFN for $0.05/ea.

From Phenix, they acquired the Kemming Mines in Wyoming. This is an open pit mine that produces coal. They also have $21MM left on their outstanding seller side financing for the mine (from Phenix).

§Current buyers of the energy:

• Local power plant is converting from coal to natural gas by 2026 (Pacificorp)
• A cosmetics plant is being built1
• Ammonia plant is being built, 1.8MM tons/year2
• A highway is being built as well3, but this will take three years

§Financials:

• Mined 2.5MM tonnes last year4
• Sold these at a price of $50/unit5
• So $250MM annual revenues
• Call it 10-20% margins
• $25-50MM in profits
• At $0.07/share, we are talking $13MM market cap
• A 2019 bankruptcy bid valued the mine at $215MM
• There may be pension liabilities left, as there were some in 2011, but that is unclear right now.

§Notes

1. Utah company wants to make cosmetics from Wyoming coal
2. Kemmerer could become home to $2.5 billion coal-to-ammonia plant
3. Moving US 30 west to access coal reserves would cost $30 million
4. Production data
5. EIA coal price data

§Update: April 2026

They reported and it was ok. The mine continued to decline and did a little bit better than what I was expecting. They are continuing to let people go. Selling at $0.13/share. Good outcome. There could be more here given the shell, but happy where this is at.

Sam Zell had spent the previous few years building a property portfolio in the 1960s. However, he was starting to outgrow his market.

He was a recent graduate, and started working at a law firm while continuing to do deals on his side. After his experience in Toledo, Ohio, he would quit law and go all in on real estate.

After completing this deal, Sam Zell would create a playbook for his future deals. Avoid competition, raise rents. Repeat.

The following case is dominated by one theme: lack of competition. Sam Zell called this his most successful deal ever. The only reason why this was so successful is there was no competition. (For another example of monopoly-like dynamics, see:Constellation Software’s VMS strategy)

§There’s no substitute for limited competition

Toledo was not a popular place. It faced a shrinking population. The stigma of being car-manufacturing centric, and being called “the armpit of the nation”.

There were no other smart investors in Toledo. This created an opening for Sam Zell. The lack of competition led to the following:

• there were not many apartment buildings
• this was a student building, and he knew student housing
• was able to get an initial yield of 8-19%, and that he could raise rents

Despite the negative sentiment, Sam Zell stuck to his numbers. There was no competition in this market. Sam was the only buyer. This was such an empty lake, they claimed to still have no competition when they sold the property thirty years later.

§The Deal

He raised $280K from family and friends, and financed $720K. A total purchase price of $1MM, where he was expecting an initial yield of 8-19%. Compared to the 4-6% yields that his father was content with, this was a no-brainer.

In the first year, investors earned a 20% cash on cash return. This earned Sam Zell one-hundred-thousand in finders fees and profits. More than any of the senior partners at his law firm. He quit shortly after.

All of that before he renovated the apartments and raised rents.

Over the next few years, he would expand to Orlando, Tampa, and Reno. All places which had potential due to the lack of competition. He continued this strategy of low-competition markets for decades, and died with an estimated net worth of over five billion.

This was Sam Zell’s best deal. And he has seen thousands, and done hundreds. If the best deal he ever did was available due to a lack of competition, I encourage you to look to where you are fishing. Is it an empty lake?

§TECO - the original copy & paste

The first “clipboard” was developed in the programming language TECO. This stands for Text Editor and Corrector. TECO was created by a MIT student, Dan Murphy. It later became widespread in the 1960s. The original acronym was “Tape Editor and Corrector”. Because at the time, the punch tapes were the only way to store source code on the PDP-1s:

Image credit: Wikipedia

TECO was built around the usage of Quick Registers (still used today in some editors). Q-registers were temporary storage solutions that could hold text, numbers, or macros. The macros, or mini scripts, could be written to manipulate those registers. Oh, and these registers? They were limited to kilobyes due to hardware constraints.

for the EMACs users, your text editor was at first a bunch of TECO macros implemented in 1976!

These Q-registers allowed for a short term storage of multiple different items or commands for your machine and session. Although of course they would be erased after you completed your session (an issue many clipboards continue to have today!).

These macros and registers were of course not marketed as clipboards or anything of that sort. You would have to wait a few decades for that. But this was, as far as I can tell, the first way in which you could create a functioning digital clipboard.

The way you would do this is moving text from the main buffer into a Q-register (copying). Then you could insert that same text back into the current buffer (pasting). Here is how you would write “Hello, World!”, then create “Hello, WorldWorld!” in TECO: [code] @^A’Hello, World!’ 0l5k ! Go to start, move 5 chars forward (after Hello) ! MA ! Mark position A (end of Hello) ! 0l ! Go to start again ! MB ! Mark position B (start of Hello) ! QA:MBUA ! Store from B to A into QA ! l$ ! Move to end of buffer ! QA”AU ! Insert QA content here ! [/code]

I recommend you read, The Glorious Horror of TECO if you want some more examples on how crazy TECO can get…

§IBM Mainframe Editors

In the IBM /370s, copy and pasting expanded. It was also made easier. There were line-oriented editors, which allowed you to edit multiple areas and one temporary area. You could copy lines into this “temporary space” and then later paste them elsewhere. If you use VIM, this type of operation will seem familiar.

Image credit: IBM [code] # Assume lines 5 to 10 are to be copied 5-10 CUT A ← Cuts lines 5-10 into a named buffer A 15 PASTE A AFTER ← Pastes buffer A after line 15 [/code]

§Larry Tesler, the Clipboard Godfather

Inspired by Stanford’s Pentti Kanerva, who was using delete buffers to do copy and pasting, Larry would create the GUI version of a clipboard manager.

Larry and Tim Mott were working at Xerox palo Alto Research Center and they built Gypsy in 1973. This was one of the first graphical text editors with a copy and paste system.

Here is a tutorial by the man himself.

Image credit: Portland State University

§Apple has entered the chat

The Apple Lisa was the first system to officially name the temporary text storage solution as the clipboard.

Image credit: Computer History Museum

One of the great advantages of the Desktop Interface is its consistency: a user who learns one application already knows a good deal about other applications. For example, Command-X and Command-V mean Cut and Paste in all standard applications;

§What about today’s systems?

• Windows uses their user32.dll library to manage their clipboard. Their API allows for calls such as OpenClipboard() and GetClipboardData(). The Windows clipboard system supports multiple formats, and can be accessed via the command line, powershell, or their crappy clipboard app.
• macOS uses NSPasteboard in Cocoa.
• Linux uses selection buffers PRIMARY, SECONDARY, CLIPBOARD.
• Many modern browsers like to use something along the lines of navigator.clipboard

§Thanks, Larry!

Transfering text and data is one of the most common uses of computers. Think about how many times you have copied/pasted today! Larry is the pioneer in this field, and has had a massive impact on how we think about copy/pasting today. Larry, you are a legend.

Image credit: BBC News

CareCloud Pref A is at $10. The preferred As collapsed from $27 to $5 after the owners realized that they didn’t have change of control provisions. These are worth $25-$35. If they convert to common, pref holders are paying $1/share for $0.35 in earnings. If they don’t convert, the discount is no longer warranted.

1. The company is currently breakeven, with $1.5M in interest/year and $15M in preferred dividends.1
2. Management struck a deal to lower preferred dividend of the As to 8.75% and add convertibility in exchange for adding a change of control provision.2
3. Management likely plans to convert all preferred shares to common, reducing preferred interest expense from $13MM/yr to $3MM/yr.
4. At current prices, preferred shareholders are paying $1/share for common stock that will earn about $0.35/share post-conversion due to a cost cutting program.3
5. Even if they don’t convert the shares, the As will still be worth over $25 due to the dividend being twice covered.4

Putting it all together, I expect the company to make around $25MM in operating income from cost cutting and operations, and a conversion of As to common means $0.35/share in operating earnings.

You get that $0.35/share in earnings for the cost of $1/share ($10/share for pref A converted at a $2.50 stock price).

The security is trading at $10 and I think it is worth $25 in the case of non-conversion, as the dividend would be twice covered. Or worth $35 if they convert to shares. Some risks:

• The cost-cutting program may not achieve the projected $20M in FCF, or may destroy the company long term.
• Management owns no As, only commons, and may be hesitent to refinance the company or convert the A shares (diluting themselves)
• The company itself has some enterprise value, but is not a cash flow machine. It is a software company with a ton of financing and aggressive management.

Model

§Notes

1. 4.53MM pref A shares with 11% dividend yield, 1.48MM pref B with 8.75% dividend- both on $25 par means $2.75 and $2.19/share in dividends respectively.
2. Press Release
3. Common stock is at $2.50/share, and par for preferred is $25. That means preferred shareholders will get 10 shares for every 1 pref they own. Each pref costs $10. So $10/10 = $1/share cost basis
4. The dividend burden will be $13MM/year, and the company will make $25MM/year in EBITDA. Almost 2x coverage but who’s counting.

§Updates

0. April 2026 Closing position/updates

CCLDP: buying at $10/share would have netted you 7.34 common shares, which at today’s price of $3 would be worth $22/share
CCLDO: also had a good outcome, and was more protected from volatility etc. could have bought around $16/share and got a $27+ return

Good outcome!

1. April 2026: Redeemed B shares for $27.52/share
2. 2025-03-06: CareCloud announced they are converting all A preferreds to common at a 7.3358 rate. That is $15/share at the current stock price. Not a great outcome!
3. I’ve gotten some pushback on “the common will fall drastically post-conversion”. Here’s my perspective:
   • If all preferred shares are converted at $4 per common share, each preferred will receive approximately 7 shares.
   • At a $21 preferred A price, you are effectively paying $3 for each share of common.
   • With 6 million preferred shares outstanding, this conversion would result in an additional 42 million shares.
   • This would increase the total shares from 16 million to 58 million.
   • Assuming $20 million in free cash flow, each share would earn approximately $0.34.
   • Therefore, you are currently paying $3 per share for something that will earn $0.34+ per share and is growing.
   • Notice that with these assumptions, you are buying the common at a discount through the preferred.
4. 2025-01-21: Resumption of Preferred dividends. A’s have a redemtion value of $28.17. They are going to pay a mix of regular dividends and catch-ups
5. 2025-01-01: CareCloud hired co-CEOs internally
6. 2024-11-15: CareCloud proposed increasing authorized shares from 35MM to 85MM. “flexibility needed for strategic growth initiatives, including future acquisitions, and to enable the potential conversion of the Company’s outstanding Series A Preferred Stock to Common Stock”