Surf Report: Why nobody knows anything and that's okay
Issue 6: Nov 8, 2020 (Free Edition)
INTRODUCTION
November 8, 2020
Hi everyone! I’m so glad to have you here. What a week.
The presidential election is still rattling nerves on both sides of the aisle with recounts and resistance still looming, but one thing it hasn’t rattled: the stock market. At least, not in the ways people expected:
Stocks had two straight gains of gains during and following the election, a time when most expected a downturn
The VIX (volatility index), which represents the market’s expectations for swings and fluctuations over the coming 30 days, is down.
Yet the price of gold, a fear blanket that tends to rise along with uncertainty and panic isn’t down along with the VIX… it’s up
Bonds, which tend to rise in these conditions when interest rates are low… have been down
Everything’s out of whack. Nothing makes sense. Does anyone know anything? Well, no.
One of my favorite invariants of life is that nobody knows anything.
I like to look for invariants—the things that don’t change—when I find myself in new territory (see 📚 Invariances: The Structure of the Objective World and the great newsletter 📰 Investor Amnesia), and the opaqueness of the world is an important invariant to appreciate when it comes to everything from investing, product design, relationships, and news consumption.
Humans are famously terrible at knowing what we actually want or the true reason we actually want it. Polls are famously inconsistent indicators of outcomes (by election day, FiveThirtyEight founder and statistician Nate Silver even reduced his outcome odds down to the always accurate 50:50). But people love to have explanations for their thinking and decisions, even if they have to make up reasons subconsciously. This is the interplay between rationality and gut feel that we call “human behavior.” Investors will always have their theses and marketers will always have their proof points, because people like to have rational reasons for choosing something even if they’re not the true underlying reasons.
By appreciating the fundamental unknowability of things you can more easily resist the urge to predict or expect too strongly. The best traders place asymmetric bets assuming 50:50 odds and simply limit their downside. In fact, many of the lessons to take from history are actually arrows pointing to the invariant of randomness, which in a complex interconnected world is only growing stronger and more widespread, making events more susceptible to unpredictable occurrences and outcomes.
We may not be able to predict markets and voting patterns very well, but we’re great at telling stories about them along the way. Which, as long as it doesn’t lead to ruin or crippling anxiety, is what this whole game of marketing and markets is all about.
“What you should learn when you make a mistake because you did not anticipate something is that the world is difficult to anticipate. That’s the correct lesson to learn from surprises: that the world is surprising.” —Daniel Kahneman
—Mark
“How long are you going to wait before you demand the best for yourself?” —Epictetus
Breaking 🌊
Uber/Lyft drivers aren't employees after all, California voters say. The ruling held huge implications for the future of ridesharing in the state, driven by a $200 million campaign in support of the measure—the most expensive in state history. So What?: Uber and Lyft had threatened to leave California—or drastically cut back service—if they were forced to classify drivers as employees due to the incremental payroll and insurance costs they would have been forced to take on. A great example of startups forcing new rules rather than conforming to existing ones.
The SEC approved new crowdfunding rule amendments: Harmonizing, Simplifying and Improving the Exempt Offering Framework; Benefits to Small and Medium-Sized Business and Their Investors. So What?: This means companies can now raise $5 million—up from $1 million—per year via equity crowdfunding, as part of the recently popular “rolling funds” which are taking the startup world by storm. It’s good news that allows more people to take part in supporting (and having stake in) companies they’re rooting for.
Recreational marijuana has been legalized in New Jersey, and all ‘hard drugs’ have been decriminalized in Oregon. So What?: The measures are meant to reduce the number of petty incarcerations, but there are economic implications too. When something forbidden becomes permissible 3 things happen: new markets are born, new businesses form around them, and both start being taxed.
Square struck it big with bitcoin. The mobile payments company, run by Twitter CEO Jack Dorsey, stated in their earnings report that "Cash App generated $1.63 billion of bitcoin revenue and $32 million of bitcoin gross profit during the third quarter of 2020, up approximately 11x and 15x year over year, respectively." So What?: Dorsey’s recent addition of bitcoin to the company’s balance sheet was likely encouraged by this success the company has seen in allowing users to purchase it. It’s even more evidence that the legitimacy of the cryptocurrency is being accepted more than it’s being challenged.
Bitcoin soared well past $15k last week reaching a new 52-week high. As of Thursday is up 107% in 2020 😳. So What?:
From the Tweetbox 🐦
🔗 “Selling, is change management, not persuasion. Because the psychology of buying is the psychology of changing.” via @TheAvtoritet
🔗 “Don’t come to me with a problem. Come to me with 3 possible solutions and I’ll help you choose the best one.” via @roblabonne
For The Pros 😎
The stock that’s poised perfectly to benefit from a new media/retail collaboration. 🔗 (Link available to Pro subscribers)
The most concise and high-quality list of resources for getting up to speed on crypto if you’re just starting out. 🔗 (Link available to Pro subscribers)
Your first 10 employees will replicate themselves 10 times over, so it’s especially important to get the first hires right. 🔗 (Link available to Pro subscribers)
Worthwhile Long Read ☕️
🔗 How Discord (somewhat accidentally) invented the future of the internet. Turns out Discord's origin story is eerily similar to Slack's: a failed gaming company pivots to a chat tool.
Pairs well with Patrick O’Shaughnessy’s recent interview with Discord’s CEO, Jason Citron: 🔊 Building the Third Place – [Founder’s Field Guide, EP.4]
“It's pushing to turn the platform into a communication tool not just for gamers, but for everyone from study groups to sneakerheads to gardening enthusiasts. Five years in, Discord's just now realizing it may have stumbled into something like the future of the internet. Almost by accident.”
Check This Out 👀
Is Richer Than You is a fun little web experiment that’s also a study in behavioral economics, where people pay incrementally more money to be featured on the front page and knock the last person off:
It was created by @ede_marco and posted recently on MakerLog, an app (and community) around “building in public,” which I highly recommend. It’s a great group of people who are learning from each other’s attempts and building out loud for accountability. A solid strategy for hitting on something that works!
Tip ☝️
(h/t to the fine folks of Podcast Notes)
PNG 🖼
Here’s An Idea 💡
“The beginnings of all things are small.” —Cicero
Groms 🐣
🔗 A new female-focused wealth consultancy founded by @lottieleefe: The Dura Society. Riva Tez helped to highlight the key issue The Dura Society is trying to combat:
“Predatory financial services who put women's money into ETFs and charge higher fees than their competitors. Lottie instead educates on better capital management”
To put into context how bad the female-focused finance market is, Ellevest (which has less functionality than Wealthfront but tailors itself to women with woke marketing), charges 0.50% fees on managed assets compared to gender-neutral Wealthfront's 0.25%”
🔗 Hermeus, a company seeking to build a Mach 5 aircraft that would be capable of making the trip from New York to London in just 90 minutes, has raised a $16 million Series A round. While it’s expected to take decade of development before they produce a commercial passenger aircraft, it’s a rare counter example of something investor Any Hariharan wants to see more of, as she mentioned on a recent episode of Invest Like The Best:
“People are not doing the hard things.”
“Don’t tell me what you think, tell me what you have in your portfolio.” —Nassim Nicholas Taleb
Drop Ins 🏄
My latest investments & trades
Buy & Hold Investments (I will hold these forever)
This section is only available for contributing subscribers. If you’d like to trade and invest along with me, consider one of the paid tiers!
Swing Trades (1-3 month time horizon)
This section is only available for contributing subscribers. If you’d like to trade and invest along with me, consider one of the paid tiers!
Barrels 🎯
Portfolio Highlights
Winning Trade of the Week: $CVS, sold a portion @ $67.1746 for a 14% gain
Pods & Schools 🐬🐠
Podcast Reco: Modern Wisdom #241 - Seth Godin - Weaponise Your Creativity
“Is the purpose of our culture to enable capitalism, or is the purpose of capitalism to enable culture? I like to think it’s the latter.”
Book Reco:Never Split the Difference: Negotiating as if Your Life Depended on It by Chris Voss
“Negotiation is not an act of battle; it’s a process of discovery. The goal is to uncover as much information as possible.”
New Event:Twitch has officially announced GlitchCon, a digital convention in place of its annual TwitchCon conference. All streamers should mark their calendars for now: 11.14.20
Tools of the Trade ⚒
Products I use to make money
Wealthfront. ~25% of my portfolio is in Wealthfront, which since 2016 has netted me a time-weighted return of ~39% (~35% money-weighted) at the time of this writing, all while harvesting tax losses like the pros do.
Use this special link to get your first $5,000 managed for free: https://wlth.fr/2ephpyb
StockCharts. I easily make back the small monthly subscription fee with the superpowers it gives me.
Carrd. Use this link or referral code 892PYX69 to start your own web empire.
Cointracker. Track your coins like you track your stocks.
Hypefury. Easily the best tool out their for growing a quality Twitter following.
Validate Your Business Idea: Includes everything from researching, writing, getting attention, and engaging with people, plus a spreadsheet template for tracking subs. Surf Report subscribers get $5 off with the code: surfreport
SPONSOR
Sforzo Audace is my own company—lifestyle brand for renaissance men and creator of the Original Renaissance Bag. “One can do much.” Surf Report subscribers get an extra 20% off with the discount code SURFREPORT at checkout. 🔗 Get yours at renaissancebag.com
(I’m an advocate of ‘being your own sponsor,’ but if you want to advertise on here instead my DMs are open)
Disclaimer
Nothing in this email is intended to serve as financial advice. Do your own research.