We had just finished a 2-hour workout and got out of the gym.
—Now I was going to pick Mikael’s brain: was he going to head a new billion-dollar hedge fund, take one of the CEO positions he had been offered, or maybe become a full-time angel investor? It was not an easy decision to make. . .
. . . Our conversation drifted to value investing (mostly me asking questions and him answering), AI & robotics, the future job market, the Singularity, life-extension, and interplanetary civilization.
(These are some of Mikael’s favorite topics.)
When we got to his apartment, I asked Mikael to expand on his views regarding the financial system, and how it connects with the rest of the economy. This is a recurring topic between the two of us.
After a while, Mikael realized I had trouble keeping up with what he was saying. So he drew up one of his self-invented mental models for explaining how interest rates, central banks, investment firms, and public spending create (or destroy) societal wealth.
—It was a unique model, but it was still easy to understand.
I was amazed by Mikael’s ability to take these abstractions and break them down to concrete terms—in a way that even a child could understand (not that I am on the same level of intelligence as a child).
The model reminded me slightly of Ray Dalio’s “Economic Machine”—only it was much simpler and faster to illustrate.1
Mikael said he had considered including it in his upcoming book, “The Retard’s Playbook”.
What did I think?
—I said it would be a good idea, and suggested that it could also make for a good TED talk.
How I got to know Mikael Syding (and why I’m writing this long article)
I got to know Mikael Syding through a shared acquaintance.
The first time I met with Mikael in person was when I came over to his place. Since I was expecting him to be quite busy, I had prepared a short list of things I wanted to accomplish during the supposed hour or so that I figured we’d spend together.
But it turned out that I was WRONG , and. . .
. . . he wasn’t busy at all that day!
—So we ended up getting drunk on several bottles of champagne 2, on the roof of his penthouse apartment.
That was 1,5 years ago, and I’ve learned a hell of a lot from him since then.
In the rest of this (long, 6000 word) article you’ll find 15 of the most useful tips I’ve learned from Mikael Syding, divided across these 3 categories:
- Finance, Career and Success.
- Fitness & Health.
Summary of the 15 Lessons I’ve learned from Mikael Syding:
- Dare to be a contrarian (and disregard group-think).
- Check your emotions; be rational and abide by core values.
- Be patient, pounce on opportunity, and buy/sell 12,5 % of your position.
- Don’t believe your own hype; beware of survivorship bias, randomness, circumstance, and luck
- Embrace uncertainty; doubt is preferable to error.
- The importance of work ethic and sacrifice.
- Think long-term: Prevent problems before they happen and acquire positive, preventive habits
- Do mobility stretches to prevent poor posture and deformed hips.
- Balance your Omega-6/Omega-3 ratio ASAP in life.
- The trick Mikael taught me that increased my bench press by 31.5 %.
- Protect your teeth—in the gym too.
- Mikael’s motto: “Always be investing!”
- Know Thyself.
- Over-deliver results and honor commitments.
- Break out of homeostasis in different areas of life to improve adaptability and preserve youthfulness.
Mikael Syding on Finance, Career & Success:
I believe that a significant part of Mikael’s (financial) success can be ascribed to him doing his own thinking. This, in turn, can be broken down into three aspects: 1) Being an independent thinker; 2) Being a creative contrarian, and 3) Having intellectual rigor. 3
These three things are beneficially boosted by:
- Mikael having Mild Asperger Syndrome (which often leads to diminished social acuity but improved introspection and autonomy of mind).
- Mikael having grown up reading a ton of Sci-Fi and fantasy (which might have helped with creative thinking and imagination).
- Mikael having practiced his mental discipline from an early age (E.G, always being one week ahead of homework schedule in school).
In finance these are strengths that allow for original thinking, independent judgment, and accurate—(non-irrational)—valuation of assets.
Now then, on to the first lesson. . .
1) Dare to be a contrarian (and disregard group-think)
Mikael made most of his money not by following the advice of pundits, but by betting against the herd.
When others were either uninformed or afraid of IT companies, Mikael (who was only in his late twenties at the time) recommended purchasing many of their stocks.
This was before the Dot-com bubble, and Mikael was one of the first Swedish analysts to notice how undervalued many of these Internet technology companies were.
Because he was consistently right in his valuations of these companies—and helped investors make a lot of money—he was publicly acknowledged:
Then the “Dot-com era” came along. 4
Suddenly, most people had become head over heels in love with IT stocks for no good reason. The same people who had avoided Internet companies like the plague just a few years earlier, now flocked to them because they were “the popular thing”.
Mikael was able to remain even-keeled during a time when everyone else was high on greed, hope, and storytelling. Being one of the first to truly understand Internet companies, he realized that the valuations for many of these new, media-hyped companies were completely irrational. 5
Lots of people got carried away by the market euphoria—believing they could make a quick buck. This time it was different, they said.
But (surprise, surprise) it wasn’t different, it was just. . .
. . . another bubble!
Mikael was early to diagnose the bubble, went short, and made money.
While everyone else was going with the crowd and yelling: “INTERNET IS THE FUTURE!” like a bunch of cheering soccer hooligans, Mikael thought: “Just because you’re many, and you’re shouting loudly, doesn’t mean you’re right.”
—Amidst all this chaos, Mikael maintained his autonomy of mind, did his own thinking, and didn’t join a crowd.
It took a contrarian to do this.
Contrarian indeed. Who goes out to a club with this T-shirt?
2) Check your emotions; be rational and abide by core values
This ties in directly with lesson #1, and it’s probably the reason why Mikael was able to quit the ‘money-making game’ while he was still on top, in his prime, as opposed to—for example—Felix Dennis, who acquired billions out of homeostatic drive. . .
. . . and died regretting it!
While many of his peers got caught up in the rat-race, Mikael was able to keep his internal compass dialed correctly. This allowed him to work hard—as if on a mission—but to still retain sight of the end goal at all times.
This is definitely worth emulating. . . but how?
Mikael has spent a lot of time reflecting on his core values (freedom, autonomy, strength, mindfulness, and scientific interest). He has also avoided biases from taking root in his mind and clouding his thinking.
—You should do the same.
(More on these things in lesson #4.)
3) Be patient, pounce on opportunity, and buy/sell 12,5 % of your position
Easy come, easy go. Money-minds know this.
Mikael ascribes a significant portion of his success in investing to being a naturally calm and patient person.
A value investor at heart, Mikael tries to find great companies to invest in:
- He analyzes the company using financial models. 6
- He arrives at a valuation (what the company’s stock is worth).
- He minimizes risk by finding a margin of safety he feels comfortable with (this depends on the industry, among other things).
- He then considers macroeconomic factors before deciding.
If a company passes through Mikael’s rigorous financial gauntlet, he will buy it. But this is rare—especially in the current market (as many companies are overvalued).
In most cases, Mikael waits patiently—he can wait for YEARS before he decides to finally. . .
2) Pounce on the opportunity:
When the company or asset eventually meets Mikael’s criteria, he will start to accumulate a position.
3) Buy/sell 12,5 % of your position:
When Mikael accumulates a position, he has already—since long—decided how large the position will be (and how much of his portfolio will be made up of it). He then typically buys 12,5 % of the position at a time.
The reason for this7 is because:
- It allows him to get a more “even” price.
- It helps mitigate some of the risk related to timing.8
- It allows him to “keep his powder dry.”9
When it becomes time to cash in, Mikael typically uses the same strategy—in reverse—and sells 12,5% of the total position at a time. This gives him the same advantages as I just described above.10
4) Don’t believe your own hype; beware of survivorship bias, randomness, circumstance, and luck
The other day Mikael told me that:
. . . someone who uses a certain strategy and becomes successful with it, easily gets psychologically locked into that strategy. He starts believing that the strategy is essential to his success. He could be right about this. But even if he is, it still does not take external factors into account, like historical context, the changing dynamics of the environment, and. . .
Taken out of context, this probably sounds like one of those mysterious Yoda-like statements. But here’s how it translates into real life:
Success can make you mentally lazy!
- Success can create a psychological effect powerful enough to block accurate thinking.
- Because you’re successful, your brain wants to keep doing the same thing and it gets ‘arrogant’.
- This reduces the chance that you will think of alternate ideas, solutions, and strategies.
This makes it harder for you to adapt to change, and stay successful.11
Here’s another very important implication of this phenomenon. . .
Just because some strategy initially made you successful, does NOT mean that it will take you to the NEXT level of success!
. . . If you want to climb to the top of the ladder, you have to continually reinvent yourself, think bigger, and come up with something that cannibalizes your existing paradigm. 12
This is tricky enough to do on its own, and it sure doesn’t get any easier when you have to combat a lazy, hostile psychology.
Mikael has seen many highly successful people—especially money managers and top executives—make dreadful mistakes because of this psychological shortcoming. . .
. . . which caused them to lose mental flexibility, fail to keep up with the times, and not adapt quickly enough.
(Click here for a long example of how this ties in with trading): 13
5) Embrace uncertainty; doubt is preferable to error
Mikael says that the best people (at just about anything) are uncertain.
—This is because the more you know, the more you realize how little is truly knowable with full certainty.
I agree with this, but I think that many people do not understand this—and it produces an interesting ‘counter-phenomenon’. . .
Most people, who labor under the delusion that “being smart = being certain“, don’t understand why they can’t seem get a straight answer from the expert:
Average person: “Will company X’s stock go up or down?”
Expert: “I don’t have a crystal ball. There are many factors that. . .”
Average person: “But I thought you were an expert!?”
Expert: “I suppose I am, but. . .”
Average person: “Just tell me—yes or no?”
Expert: “. . . ”
Most people just want easy answers. They don’t want to have to do their own thinking, and navigate through the dichotomies to find the proper nuance. But there are no easy answers. As the saying goes:
Often in error, never in doubt.
The best people prefer doubt and uncertainty to error. 14
6) The importance of work ethic and sacrifice
One of Napoleon’s favorite sayings was that:
as a rule it is circumstances that make men.
Mikael believes this—and often dismisses his success as fluke and randomness. I don’t entirely agree, because his work ethic is beyond reproach.
During his 20s and much of his 30s, Mikael typically worked 16-hour days. He started at the bottom, delivering cheeseburgers for the higher-ups and doing dog work for the analysts. Within months he had earned his stripes and gotten promoted.
By proving himself in small matters, he was then given a chance at the bigger things. (In those days you really had to pay your dues.)
I asked Mikael how he managed—because it’s pretty damn hard to pull 16-hour days—and you know what he told me? He said that:
I was often so exhausted that I had to take naps in the weirdest places. One thing I would do a lot was to grip my briefcase tightly, and then collapse on a park bench or something like that, in the middle of the day. People would come up and ask me if I were OK. Some thought I was dead and shook me awake. One guy even tried to resuscitate me!
(Maybe something to consider the next time you’re thinking of complaining about having to work too hard?)
Mikael Syding on Fitness & Health:
Mikael’s stated goal is to live past singularity (and possibly forever).
For this reason, Mikael is devout in his physical and mental practices. He never skips a workout, he meditates and practices mindfulness, he does rigorous mobility workouts (inspired by Kelly Starrett), and he reads every day as a way to learn new things and keep his brain engaged.
7) Think long-term: Prevent problems before they happen and acquire positive, preventive habits
Mikael is one of the fittest 40-year olds you’ll ever meet (who is not a professional athlete). This is especially impressive from someone coming from the top brass of the finance industry; an industry notorious for its long hours of sedentary work.
Mikael has a knack for prevention mindset.
—He understands that (for success) in all areas of life it’s about thinking ahead of all the potential dangers, problems, and risks that might occur, and then preventing them from even getting started—while you’re young.
This is crucial for health, because, once a problem or an ailment has already begun, it is typically much harder to stop. And in some cases it cannot be gotten rid of.
Lessons #8 and #9 follow this mindset. . .
8) Start doing mobility stretching from a young age to prevent chronically poor posture (and other health issues)
Mikael told me about two billionaires that he knows—both of them have pot bellies and horrible posture. They cannot walk properly anymore, and have to take tiny steps, like babies learning to walk. Can you guess why?
—It’s because they sat behind their desks too much, for too long, without doing any regular physical exercise or thinking about the food they ate (which was typically consumed sitting by their desks).
If those billionaires had started doing mobility stretching —and had made it a habit while they were still young—they would be able to enjoy their wealth (and their health) a lot more.
When it comes to mobility stretching, Mikael emphasizes that you want to start doing the exercises BEFORE15 you need to!
—Again, this ties in with prevention mindset.
Note: My posture has improved a lot since that picture.
9) Balance your Omega-6/Omega-3 ratio as early as possible in life
A couple of months ago, this conversation took place:
Mikael: “How often do you eat fish?”
Me: “Maybe 1-2 times per week, including canned tuna.”
Mikael: “Do you take any fish oil supplements?”
Me: “Yeah, sure. Every day since I was 17-18 or so.”
Mikael: “What kind of supplements?”
Me: “Uh, I don’t know—normal capsules?”
Mikael: “I see. . .”
Me: “What? What do you mean?”
Mikael: “With most capsules you have to take 10-15 per day to reach an optimal dosage of Omega-3—which, by the way—is a LOT higher than what doctors and other medical authorities are allowed to prescribe or recommend officially.”
Me: “Oh crap. I’ve always taken the prescribed dosage. . . so, maybe 6 per day?”
Mikael: “I suppose that’s fine—if you want to be just average. But knowing you, I’d guess you want to be the best. Am I right?”
Me: “You are.”
Mikael: “Great. Here’s the thing: when you take capsules they’re typically not absorbed properly by the body, especially not Omega-3 concentrates.”
Me: “Double crap. That’s what I’ve been using!”
Mikael: “Good thing you found out early in life. I made this mistake for years before I wisened up. Another thing you might want to do is to test your fatty acids levels, especially your Omega-6/Omega-3 ratio and your Omega-3 Index.”
Me: “What are those things?”
Mikael: “Your Omega-6/Omega-3 ratio is just what it sounds like: it is your total amount of O6 divided by the total amount of O3. And your Omega-3 Index is the % of O3 measured in red blood cells. The numbers you want are 2:1 and 8%, respectively.”
Me: “Got it. Where can I do the test?”
Mikael: “I know a guy. . . [Picks up phone]”
Here’s what happened next:
- I did a diagnostic blood test to find out all my (27+) fatty acid levels.17
- Then I bought the exact same type of premium Omega-3 liquid fish oil that Mikael uses (no more cheap capsules or concentrates).
- I also bought some premium olive oil from the same brand. . .
And these were the results I got:
- After just 2 weeks of taking the increased dosage of the premium Omega-3 liquid fish oil I stopped being tired in the morning.
- After a month I noticed significant gains in the gym, faster recovery, and a slight improvement in mood.
- After 45 days I noticed that my concentration had improved, and that I was able to do an EXTRA 1-1,5 hours of work per day!
I have now come to believe that balancing your Omega-6/Omega-3 ratio is the most important thing for your health, next to fixing your stomach digestion (if it is not already good).
If you want to know more, you can read Mikael’s (rather exhaustive) article on the benefits of Omega-3.
— LudvigSunstrom (@LudvigSGM) September 11, 2015
10) The trick Mikael taught me that increased my bench press by 31.5 % (in 3 months)
The first time I went to the gym with Mikael was chest day.
Mikael can bench press 140 kg (308 lbs), so therefore I was interested to see just what he did differently from me.
—It turned out he had a much better technique than I did!
Naturally, I copied it!
I thought I had reached a plateau, but after learning Mikael’s technique, I BLASTED through that plateau on my second workout.
In 3 months I took my 1 rep max from 95 kg to 125 kg (and I weigh 71 kg).
I used to lie on my back flat-out like a fish, and only use my arms and chest. This is fine for medium lifts, but it’s not optimal for heavier lifts. Especially since my left arm is slightly longer than my right arm.
—With this new technique, the range of motion is slightly smaller, and it reduces the risk of injury for my left arm.
Notice how I arch my body—like a spring—to gain power and stability, all the way down from my feet:
Note: I’m not lifting 125 kg in this video. I think it’s 110 kg.
11) Protect your teeth—in the gym too
According to dentists—(and Mikael)—your teeth are NOT supposed to chafe against each other, except when chewing food.
When we were cavemen, we used to live only until about age 20-40 (and at that age our teeth are in decent shape regardless of what we do—with the exception of a cavity or two).
But when we get older, our teeth can deteriorate rapidly. Because of this, Mikael wants to minimize the risk of attracting serious dental problems.
To avoid contact between his teeth whilst lifting heavy weights in the gym, Mikael uses one of these plastic cable ties (see image above) as a teeth guard. . .
(Again, it’s all about prevention.)
Mikael Syding on Self-Development:
Mikael’s motto is to:
Always be investing!
—So he treats himself like a company. Even during the years he invested into building a successful career and making money, he never skimped on other important areas of his life—like health and learning.
Health is #1. Mikael says that:
if you’re going to spend money on yourself, start by eating healthy food—even if it’s more expensive.
Here are some of the foods he eats:
- Foods: Lots of fish, beans, leafy vegetables18, blueberries, and healthy spices—like turmeric, cinnamon, and ginger.
- Supplements: Premium Omega-3 in liquid form, Extra Virgin Olive Oil19 (with especially high polyphenol value), and Vitamin D.
- Coffee: He does not drink it every day, and when he does, he does it a few hours after waking up (cortisol levels are already elevated the first few hours upon waking up), usually prior to working out.
Trying some extra fancy #olive #oil from #ArcticMed. Bottle 130/1000 from this year's limited edition. Extra high polyphenols, and in particular the right #polyphenol types. I haven't had a cold since I started drinking #Omega3 oil from ArcticMed 7 years ago. This olive oil adds even more protection for the brain and the body.
Mikael’s biggest hobby is to learn new things, and he is well on his way to being a renaissance man. When he reads books he prefers actionable and scientific content, but he’s also read a good deal of Sci-Fi and the occasional novel (but never suspense, romance or detective stories).
12) Mikael’s motto: “Always be investing!”
This is an all-encompassing mindset that governs everything Mikael does.
Two important—general—aspects of how Mikael makes decisions include thinking in terms of ROI (return on investment) and considering opportunity costs.
1) Thinking in terms of ROI:
Before you do things you want to think about its ROI; whether that is money, productivity, time you can free up, or life quality/happiness. Almost every action follows a diminishing returns to scale, meaning that it’s only useful up until a certain point. . .
—Then its ROI goes down! 20
2) Considering opportunity costs:
In investing and decision-making, you must think not only about the results you’ll get with your intended action, but also about the results other actions might generate.
For example, people who are “dumsnåla” (Swedish for “dumb-cheap”) are only looking at cutting costs in making their decisions. As a result, they fail to take other factors into account.
If you are “dumsnål” you will happily spend an entire day riding your car to a flea market just so that you can purchase a a $500 sofa for $400.
—Sure, you’ll make a bargain on the price, but the real question is this:
Is your entire day only worth $100? 21
To become good at decision-making you have to consider multiple factors and alternative choices.
13) Know Thyself (and others)
One of the main reasons people make big mistakes—and don’t get what they want in life—is because they don’t know who they are.
I take it you have heard the fable of The Scorpion and the Frog? 22
If you do not know your nature, you will be doomed to failure and mediocrity; if you do not know the nature of other people, you’ll live in a state of perpetual disappointment (when they don’t act as you want them to—and perhaps sting you in the back).
For Mikael, the purpose of self-development is to know thyself.
This means that you understand your true nature—who you are, at the core. This requires that you engage in introspection and practice your meta-cognitive abilities, but it also takes life experience.
To know thyself might mean:
- To understand your genetic predispositions. 23
- To understand what your natural talents and—often corresponding—weaknesses are. 24
- To understand what character and personality traits you have. 25
To know thyself might mean that you do NOT:
- View yourself as you wish you were (as opposed to what you are).
- Underestimate or overestimate yourself (without good reason).
- Take on commitments you are unlikely to honor.
This takes us to lesson #14. . .
14) Over-delivering results and honoring commitments
Mikael told me that:
I am very careful about what type of commitments I take on. If I can predict within a 5-year period that—for whatever reason—I might be unreliable for the task in question, or that it seems likely I’ll be unable to honor my commitment, I will decline the offer.
—Because Mikael knows himself, he is very good at staying away from stuff where things can go wrong.
When it comes to agreements or business commitments, he is careful about setting the expectations right from the start, honoring what has been agreed to, and then making sure he over-delivers on results.
These are high standards to abide by, but this is why Mikael’s friends and associates implicitly trust him. . .
. . . Because they know that his word is bond.
15) Break out of homeostasis in different areas of life to improve adaptability and preserve youthfulness
The Roman soldier Archilocus said that:
We don’t rise to our expectations, we fall to the level of our training.
Since Mikael believes this, he always makes his “training” more challenging than the actual thing he’s training for.
When Mikael was in school he studied for his math tests inside a sauna heated to 100 degrees Celsius. This self-imposed difficulty made the real test easy in comparison, and he never had a single error on any math test.
There is a strong human tendency to “get into a rut”.
At first, this feels comfortable—(because we love predictability and ritualistic actions, as they save us energy and ‘free us’ from thinking)—but soon it becomes boring, unfulfilling, and downright unhealthy; for both the brain and the body!
—The best people break out of this “rut” often.
This “rut” is homeostasis —the body’s biological mechanism for saving energy, fleeing from pain, and avoiding change. 26
Homeostasis applies to just about everything we do. For simplicity’s sake, we can divide it into 3 categories:
- Physical—avoiding pain, cold or hot temperatures.27
- Mental—not wanting to think or experience uncertainty.28
- Psychological—getting addicted to emotional feedback loops.
A good (psychological) example of breaking out of homeostasis was when Mikael retired himself from his job as hedge fund manager.
Most other people would have kept working, and not been able to break away from the combinatory psychological hold of:
- Competition/Social proof
- Commitment tendency/Sunk cost
A quick explanation is in place:
When you have these (and more) psychological effects, it scrambles the human brain and 99% of people become VERY irrational. They get stuck in a super addictive emotional feedback loop and typically. . .
. . . never come out of it!
This psychological process keeps people chasing after stuff long after they need it (why most people cannot get out of the “rat-race”.)
—But Mikael did.
Here are some other ways that he breaks out of homeostasis:
- He takes cold showers from time to time.
- He sits in the sauna at high temperatures.
- He does intermittent fasting (16/8 version mostly).
- He walks barefoot (and with shorts during winter).
- He always does “just one more”29 when working out or running.
- He moves a lot in general (gym and long walks).
- He practices mindfulness, analytic thinking, and writing.
- He routinely experiments with new things and tries new activities (currently writing “The Retard’s Playbook”).
—And a few more secret things, which I’m not at liberty to disclose.30
These are some of the main things I’ve learned from Mikael Syding since first getting to know him.
I hope you enjoyed reading this article and that you were able to take away some useful stuff from it!
I asked Mikael, and he said he would make time to reply to comments for the first 24 hours. –So if you have any questions, ask away.
And, If you’re curious to learn more about Mikael, you can check out the stuff below. I’ve included links to what I consider to be some of his best content. . .
Additional Resources on Mikael Syding
You can find him here:
—And be sure to read his free Ebook (50 lessons from his career).
An incredibly valuable checklist (that can shave off years of trial and error for your investing activity):
Investment strategy made simple:
Why much of older/fundamental investment theory no longer applies:
How to live longer:
Books recommended by Mikael:
This article was originally published on LudvigSunstrom.com
(5 minutes vs 60 minutes) ↩
Mikael always keeps a stock of at least a few in his fridge. ↩
If you don’t know what I mean by this, don’t worry. You will by the time you have read the first 3-4 lessons. ↩
. . . and set in motion a trend of extremely overvalued (and typically also inaccurately valued) new Internet companies.
These were not the same companies Mikael had been recommending earlier—those companies had been solid businesses.
Some of these new Dot-com companies were created to be sold off ASAP, without even having established who their customer was, or where future profits would come from.
(The valuations were often based on loose metrics like “eyeballs” or future cash flow from products not yet created.) ↩
Some which only he knows. . . but here is a supervaluable article where he explains some of his tricks.↩
as opposed to buying the whole position at once.↩
E.g from sudden and unexpected fluctuations. ↩
(and buy more during irrational fluctuations, when others are selling for the wrong reasons)↩
I recently told Mikael that John D. Rockefeller–a fellow contrarian–used the exact same strategy. He didn’t know this.
—It’s interesting that they both independently came up with the same idea.↩
“What do I need to change for? I’m the best, damnit!”
It’s like in one of those fight movies (like Rocky) where the champ gets entitled and lazy. He thinks he’ll stay champ forever. Then some young, HUNGRY guy—(who wants to be champ more than anything else)—comes and beats the crap out of him.
True for self-development, business, finance, and more… ↩
Some people—especially young people—get into investing or trading during a bull market. They outperform the big funds and laugh at 5% annual returns. They laugh at the old veterans, who had worse results than they did (this year).
Then they get overconfident and start thinking that it’s easy to beat the market. They make bigger bets while doing less brain work and independent analysis, and then. . .
. . . THEY LOSE THEIR MONEY!
How do I know? It’s because I came very close to being one of those people. I got into finance when I was 16 years old, and made money speculating in stocks for 3 years straight.
I thought I was so smart.
—But I did nothing special. I just read the financial reports and balance sheets (and I was barely financially literate). I would take a bunch of stocks in the same industry, look at their charts going back 3-5 years, and compare their basic numbers.
Then I picked a company and bet on it, and typically, I won!
. . . Little did I know I was in a raging bull market.
I ascribed my “financial brilliance” to the profits I made and blamed bad luck for my losses. I knew next to nothing about economic/financial history, interest rates, the business cycle, or anything else.
Then I turned 20, and—realizing how little I knew—sold off most of my stocks. Many of those stocks declined in value rapidly just months after I had sold. Believing in a market crash, I boldly put most of my money into leveraged gold ETFs, which I then sold when the price of gold was around $1900.
I got lucky again.
After that I have stayed out of the market (for the most part), and reflected on my actions. And you know what I’ve concluded?
—That the smartest thing I did was to GET OUT of the market.
"people who think it (outsmarting other stock market players) can be easy overlook substantial nuance and complexity" -Howard Marks #memo
— Sprezzaturian (@TureMasing) September 18, 2015
Sometimes the smartest thing is to get out of the game while you’re still on top. Since meeting Mikael and learning from him, this has been reinforced in me strongly; it’s hard to beat the market consistently. An inexperienced teenager using rudimentary analysis is not supposed to be able to do it.
Was it that my brain’s pattern recognition somehow could predict stock valuations, or was I just lucky?
—This takes us to lesson #5. . .
To learn about randomness Mikael recommends reading Nassim Taleb’s books, and for more info on risk Mikael recommends reading Howard Marks’s essay “Risk Revisited” and the book “The Most Important Thing“.
I have read all three of the above and also recommend them.
(as in BEFORE your posture has become degraded and your body gotten weak!) ↩
(it looks a little funny, but if you want to live forever you should consider starting. . . immediately.) ↩
(broccoli, cauliflower, spinach, etc) ↩
see image below. ↩
which means you should start to consider opportunity costs, and look at other things to focus on. ↩
And what about the gas cost from driving your car to the flea market? And what if the sofa gets sold before you get there. And so on. . . You have to take these—and more things—into your calculations. ↩
—The frog helps the scorpion get across the river, only to be stung in the back and die from the sting. With his last breath, the frog asks,”Why did you do that?” to which the scorpion replies casually, “Because it’s in my nature to sting; I cannot help it.”↩
(Example: if you come from a family of obese people, keep away from unhealthy foods.) ↩
(Example: get into business with someone whose natural talents make up for your weaknesses.) ↩
(Example: and then place yourself in an environment where this can be advantageous.)↩
(since change typically involves both energy expenditure and pain).↩
When Mikael studied for his math tests in the sauna, he was breaking out of homeostasis.↩
The reason most people are unable to be contrarians; they lack mental pain tolerance and cannot handle ambiguity. ↩
I call this to “go 5 more minutes”—in the situations (like when doing work or in the gym) where you just want to quit.↩
(99% of people wouldn’t want to do them anyway). ↩