I’m Not An Investor

Commenter DYOW, on a Berkshire and Fairfax thread writes:

This applies to concentrated bets.  If you are diversified than i consider this closer to indexing and not investing – then i get it.
But I don’t understand how anyone can call a holding “an investment” and not look at all the filings, and at the least, go through every page of the 10K.


I thought quite a bit about this and I realized I am not an investor in the DYOW sense. And I don’t want to be. I refuse to waste my life holed up in a room reading financial statements. I have much better things to do.

But I have also come to realize that its pretty easy for a small investor to get excellent returns without doing much work. Net-nets are good example of a strategy that is highly effective and yet requires very little time and energy….certainly it does not require reading all disclosures.

In fact its an interesting question as to whether even Buffett himself needed to do the work he did to get the results he obtained. His early years were essentially deep value and in his later years he shifted to quality. I would argue that these asset allocations may have mattered a lot more than the particular stocks he picked.

How scientists come to agree on false facts

Lets say a bunch of different scientists around the world are measuring some factor X. And a bunch of different studies, using different methods come up with similar values. There is the common belief that the result must be right given the agreement between the different methods.

But this idea is false. Scientist can come to agreement even on things even if the fact is false. How does this happen? Lets say the first team to publish, Team T gets a result XT. The next team, Team U, tries their method and lets propose two counterfactual worlds. World A and World B.

In World A when Team U finishes their result is reasonably close to XT. Team U is pretty happy and publishes.

In World B, Team U’s result is very very different than  XT.  Team U is less happy and they therefore recheck the results again and again. They find some legitimate errors in their methods. They are now able to get a result less different than XT but still not in good agreement.

Now Team V enters the picture and when it does the world splits again. Again Team V is pressured to look for mistakes only when their results don’t agree with previously established ones. The more teams publish results the stronger the pressure and bias. Thus a scientific consensus is born.

A real world example of this phenomenon can be seen in a Nasa feature on the measurement of global ocean cooling by Josh Willis:

In 2006, he co-piloted a follow-up study led by John Lyman at Pacific Marine Environmental Laboratory in Seattle that updated the time series for 2003-2005. Surprisingly, the ocean seemed to have cooled

Not surprisingly, says Willis wryly, that paper got a lot of attention, not all of it the kind a scientist would appreciate. In speaking to reporters and the public, Willis described the results as a “speed bump” on the way to global warming,


Basically, I used the sea level data as a bridge to the in situ [ocean-based] data,” explains Willis, comparing them to one another figuring out where they didn’t agree. “First, I identified some new Argo floats that were giving bad data; they were too cool compared to other sources of data during the time period. It wasn’t a large number of floats, but the data were bad enough, so that when I tossed them, most of the cooling went away. But there was still a little bit, so I kept digging and digging.”

What I find amazing about this is that we have a NASA scientist admitting to throwing away data and its a feature on the NASA website. What is interesting about this is that he never bothered investigating the reason for the supposed “bad data”. And notice the one way nature of his corrections…he only threw away data that was “too cool”. And when he didn’t get agreement he kept digging and digging. This better than anything I have ever seen illustrates how scientists come to agreement on things.

Sometimes the ugly way is also the right way

In Episode 1 of Season 2 of Gotham, Bruce Wayne is trying to open a secret key code locked room his father created. He tries various combinations in vain. Finally he realizes that he can just use a bomb to blow the door open. Thus the title of this post:

Sometimes the ugly way is also the right way

As human beings we are used to living in a world of constraints and rules. And often we create these constraints ourselves. The ugly way violates our imposed constraints.

My good friend works at a place he hates. He often works from home because it would take him 2 hours to commute to the workplace. But he is unproductive at home and only does work at the last minute. As a result he is often rushing and sleeping late. This makes him too tired to search for jobs a new job.

He is stuck. He can’t leave his job because he is too tired to search. He can’t move closer to work because he knows he will soon switch jobs. And he doesn’t have the discipline to work from home.

Now I have suggested that he move closer to the job he hates. If only to give him the time he needs to search for a new job. He thinks this is stupid since he will only end up relocating once he finds a better job. He has imposed a set of constraints on himself that make his situation impossible to resolve.

I have found that some of my greatest ideas came to me because I started to questions the constraints I made up. Once I did this a solution was easy.

You get paid to do what other are unable to do

As an investor or for that matter in any situation generally you always get paid more to do what others won’t do. For instance, Michael Jordan got paid because he could play basketball in a way others were not.

Why might they not be doing what you are doing and getting paid more for? It could be because of lack of ability (intelligence, skill). It could be lack of resources (money, time). It could be an institutional constraint (scalability, career risk). It could be an agency problem. It could be for emotional or psychological reasons. It could be because they just don’t want to.

The trick in any situation is to find that area where you are able to take advantage of you ability to do something others can’t do and where you know your going to get paid more for it. Its even better if you suspect that they will never be able to do what you do and therefore the competition will always be limited.

Product over technology

There is this absolutely excellent video of Steve Job dealing with the technology equivalent of a heckler:


Jobs makes this incredibly insightful comment:

“The hardest thing is — how does that fit in to a cohesive larger vision, that’s going to allow you to sell — um — 8 billion dollars, 10 billion dollars of product a year.

And one of the things I’ve always found is that — you’ve got to start with the customer experience and work backwards to the technology. You can’t start with the technology and try to figure out where you’re going to try to sell it. And I’ve made this mistake probably more than anybody else in this room. And I’ve got the scar tissue to prove it. And I know that it’s the case.

And as we have tried to come up with a strategy, and a vision for Apple, um, it started with … what incredible benefits can we give to the customer? Where can we take the customer? Not starting with — let’s sit down with the engineers and figure out what awesome technology we have, and then how are we going to market that. Um … and I think that’s the right path to take.”

Its really quite amazing how often companies are often run in the manner of engineering solutions searching from problems instead of the other way around. Engineers often have the mindset: superior technology should always win. And Engineers also often end up thinking that whoever is the most technologically knowledgeable should essentially make decisions. Incidentally this strategy can work!!….just take a look at Google.

Of course it can also fail…just take a look at Samsung. Now Samsung does have many successes but Samsung should have achieved more. Its failures are largely due to the fact that they have an Engineers mindset. Thus they propose curved screens for cellphones and televisions. Who the fuck asked for curved screens?  No ones.

Samsung phones are filled with stupid features no one asked for. Like the phone detecting where your eyes are and scrolling based on your eyes.

The Engineering mindset has cost Google as well. Google basically invented a lot of cloud technologies, Big Data databases etc. Yet Amazon’s is crushing Google as a Cloud service provider. Why?

Islamism makes no sense

Its doesn’t take a large amount of critical thinking to understand that there are huge problems with Islamism.

Most Islamists believe in two incompatible ideas:

1) that all Muslims should live under Shariah law

2) That Mohammed’s life was perfect and that all Muslims should aspire to live as much like Mohammed as possible. This is why occasionally you will see some Muslim with an orange beard…because its believed Mohammed dyed is hair orange and that dying it black is forbidden.

The reason 1) and 2) are incompatible is simple…there was no Shariah in the time of Mohammed. So you cannot believe 2) while believing 1) since by following Shariah you are doing something that Mohammed was not doing.

To see this perform a thought experiment. Imagine that the closest person in your life believed you were incredible. So they wrote down every single thing you said. Then a religion was formed based on your life. Over hundreds of years numerous scholars debated you words, your ideas. They formed schools of thought, with principles, ideas, concepts and interpreted your life extensively through this theoretical structure. Then they spent hundreds of years codifying this into a set of laws. Finally at the end of this people started following these laws to the letter.

The question I would ask is at the end of this long complicated process, would the people living their lives according to these rules and laws be living a life that in anyway resembled yours?

The answer is of course no. The life of your future adherents would be much more rigid than yours and much less flexible. This is because rules in general tend to be rigid and inflexible. This has nothing to do with the nature of your life and everything to do with the nature of rules. Thus your adherents lives would be dominated by rules which is a different thing than living a life in a similar way to the one you lead or to the ideas you believed in.

Any rule based system has a certain type of structure and certain tendencies. For instance, rule based systems tend to resist exceptions. Exceptions in rule based systems always look ugly. They also resist inconsistencies. You can’t for instance have a rule saying you must not worship idols and another that says you must worship Mary. But a persons life is not like that. One day a person might do one thing and say one thing and the next day something else. If you try to examine this life and extract principles there is no reason that the principles have to be consistent. Thus a rule based structure encourages a logic, consistency and simplicity that simply does not exist in the chaos of the real world. It proposes a system of organization that does not match life.

Modern Muslims have more in common with other very ruled centered religions than they do with the religion Mohammed was preaching. In fact implicit in the very idea of Shariah is that Muslims can be more perfect than Mohammed himself. If I ask the rhetorical question: Why didn’t Mohammed follow Shariah law. The answer would have to be that he didn’t have the benefit of it but that Muslims have now progressed and been able to create a consistent set of rules. Are Islamists, not really saying, through Shariah we can be even more Islamic than Mohammed himself and is this not ridiculous.

A better medium for representing the practice of Islam might be art instead of rules. Stories, parables, fables, aphorisms, sayings, songs etc. Indeed this his how religion used to be transmitted. This is the content of most of the Bible and I believe most of the Koran.

Rules take on a life of their own and this is what has happened in Islam. Islamists are more interested in rules than they are in Islam. Both Islamists and Orthodox Jews should combine their religions together and call themselves rulists since their true God is Rules.

The elements of Fargo

The show Fargo is pretty great. Each season though is familiar though not the same as the other seasons. The stories are different. But there are common elements. What are the common elements?


Each episode is set in some smallish town in Minnesota. Last names are Swedish. Tonnes of snow. Minnesota accents and ways of talking. Minnesota here represents ordinary, simple, basic decency.



Usually one cop, always a local and often a woman. She is decent, very down to Earth and extremely family oriented. Half the time she is pregnant or someone in her family is. This sets up a very strong contrast between her and the violence and criminals that surround her. She is a symbol of decency, goodness and vulnerability amidst a dangerous, evil uncaring world and her ability to overcome this evil represent the ultimate triumph of ordinary goodness over extraordinary evil.

The Devil

Usually a man. Extremely intelligent psychopath with zero compunctions about using violence to achieve his ends. Often extremely proficient and very good at what he does. He is usually charming, seductive, brilliant, daring, deeply philosophical, violent and evil. A lot of the most interesting parts of the show are parts where the Devil is articulating his philosophy.

The Loser

A person who is basically a loser. In their marriage or in their life. They suck. They are usually the setup for almost all the action that later takes place.

Often they end up being involved in a crime of some sort. This sets up a sort of triangle and the action is between the Loser, the Devil and the Cop. The loser in this situation is pathetic, nervous, scared, desperate. He is a counterpoint to the Devil and to the Cop. Whereas the cop represent ordinary good, the devil extraordinary evil, the loser represents someone in the middle…a sort of ordinary evil. He doesn’t commit evil because he is fundamentally evil but rather out of pathetic desperation. As time goes on the Loser who doesn’t want to be involved in what’s happening becomes increasingly involved and commits increasingly desperate acts.


Usually there are a number of criminals involved and a lot of them are outsiders. The criminals are necessary to the plot because they basically add all the violence and death. The create the danger. They contrast hugely with the Minnesota setting which is normally boring, ordinary and simple.

The Devil is easily able to navigate this violent world and much of his obvious power is demonstrated in how he is able to manipulate any situation to his own advantage. The Loser, pathetic and desperate, is often able to figure out ways to survive but only by doing increasingly evil and dangerous things. We often end up rooting for him despite this because he is such an underdog.

The cop appears outmatched and its unclear how he/she who is just an ordinary good decent person can deal with a world of violence. A tremendous tension here is created by the extraordinary evil and the ordinary, simple decency of the cop. The cop in contrast to the brilliant devil and the desperate Loser is able to succeed not through daring acts or through becoming more more evil but instead by diligence, persistence, bravery and resoluteness.

The cop succeeds through ordinary good police work.

Liberal Stupidity: Insane Black Liberal Edition

It seems Andrew Sullivans explanation struck a cord. Salon’s clickbait comes from Chauncey DeVega.  DeVega’s explanation of Asian outperformance is basically a non-explanation. He dances around the topic but never really get in any blows. But what can you really expect from the poor man’s Ta-neshi Coates.

He trots out some liberal standards. Asians are not a monolith. Some Asians such as Cambodians are actually doing worse than the general population. Its really kind of hilarious. This fact doesn’t weaken the idea that culture explains success…it actually supports it.  I am really kind of amazed at this rhetorical jujitsu.

They way he managed to accomplish this feat is by first creating a strawman. He says that Andrew Sullivan is really supporting the model minority myth. He then tried to tear down the idea of model minorities by claiming Asians are not a monolith. He is right they aren’t. But the point that Andrew Sullivan was making was not that Asians are a monolith…his point was that culture matters. This point is made even stronger when you disaggregate large categories like Asian and look into  sub-components. You can do the same with Whites and Blacks.

With Blacks you will see African groups like the Nigerian Igbo’s consistently outperforming in schools regardless of where they immigrate. With whites you will see groups like the Azores Portuguese consistently failing in school. Andrew Sullivan used the short hand Asian but disaggregating into sub-groups, his argument is even stronger.

Chauncey DeVega isn’t the first to engage in this jijitsu. The best job of it was done by Stephen Steinberg. He tried to account for Russian Jewish success but in doing so he outline a series of advantages Russian Jews had due to their history, values and practices. For instance, Russian Jews lived in cities and so tended to have strong experience when it came to urban professions and so they tend to do well when they move to cities. Stephen Steinberg does not consider this to be part of their culture. Its a typical move, you construct a weak argument you say your opponent is making and then you try to destroy the weak argument.

But of course your opponent was never making that argument. In Stephen Steinberg case the weak argument is the idea that some groups like Russian Jews have some mystical grittiness and ambition the enables them to succeed in every possible environment.  This is of course ridiculous. But that was never the argument that conservatives like Thomas Sowell were making. Sowell was really saying that it was incorrect to presume that the differences between different ethnicities are the result of current racial discrimination. Instead different groups would have massive variations in their success due to historical circumstances, culture, values etc. Stephen Steinberg doesn’t actually weaken this point he massively strengthens it. He makes nearly the exact same argument as Sowell that Jewish economic success can be explained by their history in Eastern Europe: the skills they learned as primarily urban inhabitants and how well these skills matched the requirements in urban US cities, their relatively high rates of literacy etc.

This is exactly the point Sowell made. Its interesting that Steinberg fails to realize how massively his arguments weaken the idea that differences between ethnic groups can be explain by current discrimination. Steinberg doesn’t bother to even try to explain what happened to the Russian Jews by current discrimination. When your opponent in arguing against your point actually is forced to support your point with your exact arguments its a pretty strong indication that you are right.

How to develop a habit

A good habit is an amazing thing. It can enable a person to change their life without really even trying. Taking up exercise is a good example. But people find it tremendously difficult to start a good habit. I will start with general principles of successfully developing a habit and then I will translate this into practical suggestions.


Focus on Consistency

The most important principle of developing any habit is that consistency should be your number one goal. The number one enemy of consistency is AMBITION. The more ambitious you are with any habit, the greater your chance of failure. Don’t worry about how much you do. Don’t worry about the quality of what you do. Once a habit is developed those things will almost automatically improve.

Make it easy to Succeed

The reason you fail is because you set yourself up for failure. You made it too difficult. Do less not more.

Start Smaller and Grow very slowly

Whatever you had in mind its too much. Start smaller. Make your habit initially as small as possible. If you feel like its too easy…that’s a good sign. Only very very slowly grow your habit into something bigger. Be very comfortable with the feeling that you are essentially doing nothing.

Stop Before it Gets Hard

Lets say you are exercising as part of your daily habit. And it starts feeling hard. You start feeling pain where you don’t normally or you are tired or it feels like a long time. If you are beyond your minimum for the day, Stop!! Habits should never be hard. You should stop well before it even gets hard. Your minimum should be such that you should rarely feel an difficulty.

Eliminate Decisions and Options

Your habit should involve few decisions or options.  A choice of time…that’s an option. A choice of what to do…that’s an option. A choice of where to do it…that’s an option. Make your habit as structured and familiar as possible. Eliminate as many of these things as you can but not so many that you feel too constrained. Remember principle number one: Focus on consistency.

Use Social

Use people to help you with your habit. There are all sorts of ways of doing this but generally speaking people can be the most powerful means of ensuring you stick to a habit.

Use Environment

A change of environment and being consistent with this is powerful. If you always know you have to do X when you enter environment Y then you will have no difficulty.

Basically the whole idea of habits is to make things automatic. To exploit the fact that when it comes to certain things humans are like click…whirr machines. When they encounter a particular stimulus (click) they generate an automatic response (whirrr…or in our case a good habit).


The following is the set of techniques that are based on the above principles:

The Seinfeld calendar

A good way to optimize for consistency is the suggestion of Seinfeld. You setup a year long calendar and every time you do your habit you make a red X for that day. Pretty soon you have a chain of red X’s and your objective is to not break the chain. Again this is principle number 1: focus on consistency.

Minimum habits and the 15 minute rule

The consistency principle implies that when you start off your habit it should be as easy as possible. Because the easier it is the higher the likelihood you will do it. One way to do that is to start off by doing your habit for a very small amount of time. Even better make your habit a minimum one…meaning that you commit to do your habit for at least X minutes everyday. When I was learning to invest I made my minimum time 15 minutes. This had three advantages

  1. it was just enough time to get something meaningful done
  2. it was small enough that I could do even on my worst days
  3. it was just large enough that once I started doing it, it was easy for me to keep going. I would often spend more than 1 hour because once I got mentally involved I didn’t want to stop

I call this the 15 minute rule but really 15 minutes is arbitrary. In exercise I actually made it 7 minutes of running. The goal here is to create a minimum that you can commit to doing for the rest of your life…on your wedding day, when your depressed, when your girlfriend breaks up with you, when you are on vacation. Something like brushing your teeth.

Get a Partner

When I was forming my exercise habit I did it with my friend. This helps enormously. Its much much easier to do anything if you do it with a partner

Make a Bet or Other Social Commitment

Even with the 15 minute rule and Seinfeld Calendar I still repeatedly failed in my investing habit. The thing that worked for me was to make a $100 bet with by friend. If I didn’t invest for 1 day, I would pay him $100. This worked beautifully. I paid out once for New Years Eve.

Its best to make these bets unilateral. It should never be, I will bet $100 I will invest but only if you are willing to bet $100 you will quit smoking. This never works since you are let off the hook if your friend fails. Your bet is meant to make your habit stick…potentially paying your friend money is a small price to pay. 

Betting is one very strong form of social commitment. There are others: you can make a contract and sign it with friends as witnesses. You can make a public announcement. The whole idea generally is to make a social commitment. Bets work best since they are simultaneously a social commitment and a monetary penalty.

Social commitments aren’t rational but they work extremely well. Often the bet is never paid out but just the idea of the bet itself is often enough to spur one into action.

Jamelle Bouie’s Liberal Pathology

Slate just keeps getting dumber. Here is a fantastic example for Jamelle Bouie, Slate’s resident insane black liberal.

According to liberal religion any difference between races must be caused by racism: I will call this, “THE MAN DID IT” TMDI. But of course how to explain asian over-achievement. Or for that matter Jewish over-achievement? Liberals have tried various explanations. All of them are crap. I’ll destroy the standard ones later.

Jamelle Bouie’s article comments on this observation by Andrew Sullivan:

Asian-Americans, like Jews, are indeed a problem for the “social-justice” brigade. I mean, how on earth have both ethnic groups done so well in such a profoundly racist society? How have bigoted white people allowed these minorities to do so well — even to the point of earning more, on average, than whites? Asian-Americans, for example, have been subject to some of the most brutal oppression, racial hatred, and open discrimination over the years … Yet, today, Asian-Americans are among the most prosperous, well-educated, and successful ethnic groups in America.

What gives? It couldn’t possibly be that they maintained solid two-parent family structures, had social networks that looked after one another, placed enormous emphasis on education and hard work, and thereby turned false, negative stereotypes into true, positive ones, could it? It couldn’t be that all whites are not racists or that the American dream still lives?

Andrew Sullivan is basically right. His point is right. Racism is insufficient to explain differences in performance between different cultures. Asians and Jews are both examples. They have done tremendously well despite facing tremendous obstacles.

But Jamelle Bouie reached a new level of stupidity. He presents the explanation of a new liberal children’s story titled: “The Color of Success: Asian Americans and the Origins of the Model Minority”. According to this story,

The United States’ battles against fascism and then Communism meant that Asiatic Exclusion, like Jim Crow, was no longer tenable.

So basically America ended racism against Asians because they couldn’t afford the image problem. This has got to be the dumbest explanation I have ever heard. I have read about fascists criticizing the US. I have read about communists criticizing the US. Unfailingly they bring up the treatment of Black people. Occassionally they will talk about Native Indians…and even more occasionally Jews. The reason for this is straightforward, it was enormously well known that black people were treated like shit in America. So improving the situation for Asians would not help the US in the least…no one in the world gave a shit about how Asians in America were treated. They still don’t to this day. In fact I would say Asians themselves barely care either world wide or in America itself. For instance, Asians have done little to nothing to combat the tremendous discrimination they face in the Ivey League university system.

But there are still other problems with this moronic theory. Consider for instance the Chinese. Chinese don’t just do well in the US, they also do well as immigrants to other countries within Asia itself. For example, they do well in Thailand, Philippines, and Malaysia. I believe in all three, ethnic Chinese, most having immigrated to these countries within the last 150 years, control over 50% of the wealth despite being around 10% of the general population. So what happened then? Did not all the American but also the Filipino, Thai and Malaysian societies simultaneously make a decision that Chinese were to be successful? Is there a meeting where they all agreed to this? Are there meeting minutes? Can liberals provide us with any evidence of this meeting? If there wasn’t how did they co-ordinate among themselves to ensure Chinese success.

Does this make any sense. Why  would the Chinese succeed in 4 different countries in hugely different circumstances. And why would the formula for Chinese success be the same everywhere…basically study engineering. medicine or some lucrative profession.

My explanation is a single, simple one. Chinese are successful because they have a culture and values that enable them to be successful in the modern world. The liberal explanation is much more complicated one since it should be based on how the dominant society treats Chinese. But this requires 4 different explanations for 4 different countries and somehow magically all 4 different explanations must result in exactly same outcome in every country: Chinese economic success. As I said liberals are morons.

All liberal explanations must inevitably be convoluted because truth favors simple explanations. For liberals to get around the truth the have to invent increasingly ridiculous explanations.

An example is the proposed liberal explanation for the incredibly success of Russian Jews in America as being due to the fact that their entry into the United States coincided magically with a massive boom in the textile industry which they just so happened to enter at exactly the same time. This liberal theologian, Stephen Steinberg,  goes on to additionally credit Jewish success to multiple inventions the Jewish textile manufacturers just happened to stumble upon. And the entrepreneurial structure of the industry which Jews just happened to occupy. You see in liberal land, absolutely nothing you do can be credited to you…it all just a series of fortune coincidences. Its not based on choice you made, values you had, ideas you developed, work you did…no its all just accidental.

Self-selection effect

A typical liberal explanation is that immigrants are basically self-selected supermen who are better than people who don’t immigrate. Liberals propose this explanation all the time yet provide little to no evidence its true. I have met a lot of immigrants and I can tell you one thing about them… they are mostly losers. Not all. But many of them. They don’t leave their country because they were successful. They leave their country because it was shit and they were not successful when they lived there. I’ve met many immigrants and I have never said to myself..wow these guys are amazing. The strike me as pretty ordinary people who were doing so badly in their own country that the left it. There are few superstars.

And of course the selection effect ignores the tremendous obstacles immigrants face that the native born don’t. IMMIGRANTS DON’T SPEAK THE FUCKING LANGUAGE. Not all but most. This is a huge fucking disadvantage. 

And almost as bad as this is the fact that immigrants don’t have a social network. Not having a social network: friends you knew since university or high school, relatives, its fucking death if your trying to get a job. In North America all jobs are through connections. Not having those….shit I don’t know what I would do in that situation.

There are many additional points I could make like the fact that African immigrants are hugely successful. So successful in fact that a particular group, Nigerian Igbos, even outscores other ethnic model minorities such as Chinese and Indians. Interestingly the liberals typically say that Blacks failure on the SATs is due to the SATs being culturally biased. But biased against whose culture exactly? Black culture I guess.  I wonder then how children of African immigrants outscore whites on the SATs or white British on the GSCE. I guess African culture is not black culture.